EXHIBIT 10.1
This Exhibit contains confidential information which has been omitted and filed
separately with the Securities and Exchange Commission pursuant to a
Confidential Treatment Request under Rule 24b-2 of the Securities and Exchange
Act of 1934. The confidential information on pages 8, 10, 11, 31, 35, 39, 71 (on
Exhibit C), 72 (on Exhibit C), 82 (on Exhibit E), 84 (on Exhibit E), 85 (on
Exhibit E), 94 (on Exhibit F), 95 (on Exhibit F) and 96 (on Exhibit F) has been
replaced with an asterisk.
MASTER TRANSACTION AGREEMENT
BY AND AMONG
MERITAGE CORPORATION,
MTH HOMES-TEXAS, L.P.,
HAMMONDS HOMES, LTD.,
CRYSTAL CITY LAND & CATTLE, LTD.,
HAMMONDS HOMES I, LLC,
CRYSTAL CITY I, LLC,
AND
RONNIE D. HAMMONDS
Dated June 12, 2002
MASTER TRANSACTION AGREEMENT
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS ...................................................... 1
1.1 Definitions .......................................................... 1
ARTICLE II PURCHASE AND SALE OF ASSETS ...................................... 7
2.1 Closing .............................................................. 7
2.2 Assets to be Purchased ............................................... 7
2.3 Assets Not Being Transferred ......................................... 8
2.4 Liabilities .......................................................... 8
2.5 Purchase Price; Holdback; Adjustment; and Warranty and Reserve
Administration ....................................................... 10
2.6 Allocation of Purchase Price ......................................... 12
2.7 Risk of Loss ......................................................... 12
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER ............... 12
3.1 Organization and Qualification ....................................... 12
3.2 Authority Relative to this Agreement ................................. 12
3.3 No Conflicts ......................................................... 13
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLING PARTIES ................ 13
4.1 Organization and Qualification ....................................... 13
4.2 Authority Relative to this Agreement ................................. 13
4.3 Legal Capacity and Authority of Selling Parties ...................... 13
4.4 No Conflicts ......................................................... 14
4.5 No Consents .......................................................... 14
4.6 Ownership Interests .................................................. 14
4.7 Financial Statements ................................................. 14
4.8 Absence of Undisclosed Liabilities ................................... 14
4.9 No Material Adverse Changes .......................................... 15
4.10 Absence of Certain Developments ...................................... 15
4.11 Permitted Liens; Good Title to and Condition of Acquired Assets ...... 16
4.12 Legal Descriptions of Real Property .................................. 17
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MASTER TRANSACTION AGREEMENT
TABLE OF CONTENTS
(CONTINUED)
PAGE
4.13 Real Property ........................................................ 17
4.14 Acquired Contracts ................................................... 20
4.15 Warranties ........................................................... 21
4.16 Environmental Matters ................................................ 21
4.17 Tax Matters .......................................................... 23
4.18 Restrictions on Business Activities .................................. 24
4.19 Intellectual Property ................................................ 24
4.20 Litigation ........................................................... 25
4.21 Employees ............................................................ 25
4.22 Employee Benefit Plans ............................................... 25
4.23 Insurance ............................................................ 26
4.24 Affiliate Transactions ............................................... 27
4.25 Compliance with Laws ................................................. 27
4.26 Permits .............................................................. 27
4.27 Membership Records; Minute Books ..................................... 28
4.28 Disclosure ........................................................... 28
ARTICLE V CONDUCT OF SELLER PENDING THE CLOSING ............................ 28
5.1 Conduct of Business Pending the Closing .............................. 28
5.2 Business Relationships ............................................... 29
5.3 Notification of Certain Matters ...................................... 30
5.4 Required Approvals ................................................... 30
ARTICLE VI ADDITIONAL AGREEMENTS ............................................ 30
6.1 Employment ........................................................... 30
6.2 Break-Up Fee ......................................................... 30
6.3 No Negotiations ...................................................... 31
6.4 Public Announcements ................................................. 31
6.5 Confidentiality ...................................................... 31
6.6 Further Assurances ................................................... 32
6.7 Right to Enter and Inspect ........................................... 32
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MASTER TRANSACTION AGREEMENT
TABLE OF CONTENTS
(CONTINUED)
PAGE
6.8 Tax on Prior Sales ................................................... 33
6.9 Transfer of Permits .................................................. 33
6.10 Landbanking .......................................................... 33
ARTICLE VII CONDITIONS ....................................................... 33
7.1 Conditions to Obligation of Selling Parties .......................... 33
7.2 Conditions to Obligations of Parent and Buyer ........................ 34
ARTICLE VIII CLOSING .......................................................... 37
8.1 Selling Parties' Obligations ......................................... 37
8.2 Parent's or Buyer's Obligations ...................................... 38
8.3 Transfer Fees, Title Costs, and Closing Costs and Other Fees;
Prorations ........................................................... 38
ARTICLE IX SURVIVAL AND INDEMNITIES ......................................... 39
9.1 Survival of Representations and Warranties ........................... 39
9.2 Nature of Statements ................................................. 39
9.3 Arbitration .......................................................... 39
9.4 Indemnification Agreement ............................................ 39
ARTICLE X TERMINATION/REMEDIES ............................................. 40
10.1 Termination .......................................................... 40
10.2 Effect of Termination ................................................ 40
10.3 Specific Performance ................................................. 40
ARTICLE XI GENERAL PROVISIONS ............................................... 40
11.1 Notices .............................................................. 40
11.2 Counterparts ......................................................... 41
11.3 Governing Law ........................................................ 41
11.4 Assignment ........................................................... 41
11.5 Gender and Number .................................................... 41
11.6 Schedules and Exhibits ............................................... 42
11.7 Waiver of Provisions ................................................. 42
11.8 Costs ................................................................ 42
11.9 Amendment ............................................................ 42
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MASTER TRANSACTION AGREEMENT
TABLE OF CONTENTS
(CONTINUED)
PAGE
11.10 Severability ......................................................... 42
11.11 Binding Effect ....................................................... 42
11.12 Construction ......................................................... 42
11.13 Time Periods ......................................................... 42
11.14 Headings ............................................................. 43
11.15 Commission ........................................................... 43
11.16 Access to Records .................................................... 43
11.17 Entire Agreement ..................................................... 43
11.18 Enforcement of Rights ................................................ 43
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MASTER TRANSACTION AGREEMENT
TABLE OF CONTENTS
(CONTINUED)
Exhibit A - Asset Agreement
Exhibit B - Real Property Agreement
Exhibit C - Indemnification Agreement
Exhibit D - Dispute Resolution
Exhibit E - Escrow Agreement
Exhibit F - Non-Disclosure and Non-Compete Agreement
Exhibit G - Special Warranty Deed
Exhibit H - Assignment and Assumption Agreement
Exhibit I - Bill of Sale and Assumption Agreement
MASTER TRANSACTION AGREEMENT SCHEDULES
Schedule 2.3C - Assets to be Written Off
Schedule 2.3D - Personal Assets
Schedule 2.4A(1) - Immaterial Breaches
Schedule 2.5C - Closing Balance Sheet
Schedule 2.6 - Allocation of Purchase Price
Schedule 4.4 - Conflicts
Schedule 4.5 - Consents
Schedule 4.6 - Ownership Interests
Schedule 4.7 - Financial Statements
Schedule 4.8 - Disclosed Liabilities
Schedule 4.9 - Material Adverse Changes
Schedule 4.10 - Certain Developments Since Date of Financial Statements
Schedule 4.11 - Permitted Liens
Schedule 4.12 - Legal Description of Real Property
Schedule 4.13 - Disclosure for Real Property
Schedule 4.14 - Disclosure on Acquired Contracts
Schedule 4.15 - Warranty Disclosure
Schedule 4.16 - Environmental Matters
Schedule 4.17 - Tax Matters
Schedule 4.19 - Intellectual Property
Schedule 4.20 - Litigation
Schedule 4.21 - Employee Information
Schedule 4.22 - Employee Benefit Plans
Schedule 4.23 - Insurance
Schedule 4.24 - Affiliate Transactions
Schedule 4.25 - Non-Compliance with Applicable Laws
Schedule 4.26 - Permits and Land Use Entitlements
Schedule 5.1 - Conduct Pending Closing
Schedule 7.2C - Required Consents
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REAL PROPERTY AGREEMENT SCHEDULES
Schedule 1.2 - Acquired Contracts
Schedule 5.2 - Real Property Assets; Title Binders; Surveys;
Disapproved Title Exceptions
ASSET AGREEMENT SCHEDULES
Schedule 1.2 - Assets to be Purchased
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MASTER TRANSACTION AGREEMENT
This MASTER TRANSACTION AGREEMENT (the "Agreement") is made as of June
12, 2002, by and among MERITAGE CORPORATION, a Maryland corporation ("MERITAGE
or PARENT"); MTH HOMES-TEXAS, L.P., a Texas limited partnership ("BUYER");
CRYSTAL CITY LAND & CATTLE, LTD., a Texas limited partnership ("CRYSTAL CITY");
HAMMONDS HOMES, LTD., a Texas limited partnership ("HAMMONDS HOMES," and
collectively with Crystal City, the "SELLER"); HAMMONDS HOMES I, LLC, a Texas
limited liability company ("HAMMONDS GP"); CRYSTAL CITY I, LLC, a Texas limited
liability company ("CRYSTAL GP," and collectively with Hammonds GP, the "GENERAL
PARTNERS"); and RONNIE D. HAMMONDS, an individual ("HAMMONDS"). Collectively,
Seller, General Partners, and Hammonds will be referred to herein as "SELLING
PARTIES."
RECITALS
1. Seller owns and operates the Hammonds Homes land development,
homebuilding, and sales operations (the "HAMMONDS BUSINESS").
2. Concurrently herewith, the parties are entering into that Agreement
of Purchase and Sale of Assets in the form attached as EXHIBIT A hereto ("ASSET
AGREEMENT"), that Agreement of Purchase and Sale of Real Property in the form
attached as EXHIBIT B hereto ("REAL PROPERTY AGREEMENT"), and that
Indemnification Agreement in the form attached as EXHIBIT C hereto (the
"INDEMNIFICATION AGREEMENT").
3. Although not a condition to Closing, Parent and Buyer anticipate
financing the acquisition of the assets of the Hammonds Business using the
proceeds of a public offering of Parent's common stock under its recently filed
Form S-3 Registration Statement (the "FINANCING").
4. Pursuant to this Agreement, the Asset Agreement, and the Real
Property Agreement, Buyer will acquire all or substantially all of the assets of
the Hammonds Business.
In consideration of the covenants and mutual agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in reliance upon the representations and
warranties contained herein, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. The following terms will have the meanings set forth
below where used in this Agreement and identified with initial capital letters.
"ABOVEGROUND STORAGE TANK" will have the meaning ascribed to such term
in Sections 6901, et seq., as amended, of RCRA, or any applicable state or local
statute, law, ordinance, code, rule, regulation, order ruling, or decree
governing Aboveground Storage Tanks.
"ACCOUNTING ARBITRATOR" will have the meaning set forth in Section 2.5.
"ACQUIRED ASSETS" will have the meaning set forth in Section 2.2.
"ACQUIRED CONTRACTS" will have the meaning set forth in Section 1.2 of
the Real Property Agreement and the Asset Agreement.
"ADJUSTED BOOK VALUE" will mean total equity of the Hammonds Business
as reflected on the Closing Balance Sheet and the Final Balance Sheet, as the
case may be, which are to be prepared in accordance with Adjusted GAAP.
"ADJUSTED GAAP" will have the meaning set forth in Section 2.5.
"AGREEMENTS" will have the meaning set forth in Section 11.17.
"APPLICABLE LAWS" will mean all federal, state, regional, local, or
other governmental or quasi-governmental statutes, laws, rules, regulations,
codes, ordinances, orders, plans, injunctions, decrees, rulings, or judicial or
administrative interpretations thereof, including without limitation
Environmental Laws, which are or may be applicable to Seller, Buyer, the
Hammonds Business, or the Acquired Assets or the use, development, or condition
thereof or otherwise related to any of the Acquired Assets.
"APPROVED TITLE EXCEPTIONS" will have the meaning set forth in Section
5.2 of the Real Property Agreement.
"ASSETS" will have the meaning set forth in Section 1.2 of the Asset
Agreement.
"ASSET AGREEMENT" will have the meaning set forth in the recitals.
"ASSUMED CONSTRUCTION CLAIMS" will have the meaning set forth in
Section 2.4.
"ASSUMED LIABILITIES" will have the meaning set forth in Section 2.4.
"ASSUMPTION AGREEMENT" will have the meaning set forth in Section 8.1.
"BILL OF SALE" will have the meaning set forth in Section 8.1.
"BONDS" will have the meaning set forth in Section 4.23.
"BREAK-UP FEE" will have the meaning set forth in Section 6.2.
"BUYER" will have the meaning set forth in the recitals.
"CLOSING" will have the meaning set forth in Section 2.1.
"CLOSING DATE" will have the meaning set forth in Section 2.1.
"CLOSING BALANCE SHEET" will mean a balance sheet, as of May 31, 2002
or such other date as provided in Section 7.2I(4), for the Hammonds Business,
prepared in accordance with Adjusted GAAP.
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"CODE" will mean the Internal Revenue Code of 1986, as amended.
"CONSTRUCTION CLAIMS" will mean all claims, including, without
limitation, claims for breach of contract, claims for breach of express or
implied warranty, construction defect claims, claims for lost profits,
consequential damages, and incidental damages (but not punitive damages) with
respect to Assumed Construction Claims, and all losses, costs and expenses
relating to any work which has been done, or any corrective work that is to be
done, on a completed Housing Unit or on streets, gradings, landscaping and
homeowners' association improvements and all other similar subdivision work.
"CONTRACT ASSIGNMENTS" will have the meaning set forth in Section 8.1.
"DEED" will have the meaning set forth in Section 8.1.
"DISCHARGE" will mean any manner of spilling, leaking, dumping,
discharging, releasing, or emitting, as any of such terms may further be defined
in any Environmental Law, into any medium including, without limitation, ground
water, surface water, soil, or air.
"DISPUTE" will have the meaning set forth in EXHIBIT D.
"DISPUTE NOTICE" will have the meaning set forth in EXHIBIT D.
"EFFECTIVE DATE" will mean June 30, 2002 or such other date as provided
in Section 7.2I(4).
"ENVIRONMENTAL LAW" or "ENVIRONMENTAL LAWS" will mean all federal,
state, regional, local, or other governmental or quasi-governmental statutes,
laws, Applicable Laws, rules, regulations, codes, ordinances, orders, plans,
injunctions, decrees, rulings, or judicial or administrative interpretations
thereof, as amended from time to time, which govern or relate to pollution,
protection of the environment, protection of endangered or threatened species of
flora or fauna, public health and safety, air emissions, water discharges,
hazardous or toxic substances, solid or hazardous waste, or occupational health
and safety, as any of these terms are or may be defined in such statutes, laws,
rules, regulations, codes, ordinances, orders, plans, injunctions, decrees,
rulings, or judicial or administrative interpretations thereof, including,
without limitation: the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendment and Reauthorization
Act of 1986, 42 U.S.C. Section 9601, et seq. (collectively "CERCLA"); the Solid
Waste Disposal Act, as amended by the Resource Conversation and Recovery Act of
1976 and subsequent Hazardous and Solid Waste Amendments of 1984, 42 U.S.C.
Sections 6901, et seq. (collectively "RCRA"); the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. Sections 1801, et seq.; the Clean
Water Act, as amended, 33 U.S.C. Section 1311, et seq.; the Clean Air Act, as
amended, 42 U.S.C. Section 7401-7642; the Toxic Substances Control Act, as
amended, 15 U.S.C. Sections 2601, et seq.; the Federal Insecticide, Fungicide,
and Rodenticide Act as amended, 7 U.S.C. Section 136-136y ("FIFRA"); the
Emergency Planning and Community Right-to-Know Act of 1986 as amended, 42 U.S.C.
Sections 11001, et seq. (Title III of SARA) ("EPCRA"); and the Occupational
Safety and Health Act of 1970, as amended, 29 U.S.C. Sections 651, et seq.
("OSHA").
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"ERISA" will mean Title IV of the Employee Retirement Income Security
Act of 1974, as amended.
"ESCROW" will have the meaning set forth in Section 5.1 of the Real
Property Agreement.
"ESCROW AGENT" will have the meaning set forth in Section 5.1 of the
Real Property Agreement.
"ESCROW AGREEMENT" will have the meaning set forth in Section 2.5B.
"EVALUATION INFORMATION" will have the meaning set forth in Section
6.5.
"EXCLUDED ASSETS" will have the meaning set forth in Section 2.3.
"EXCLUDED LIABILITIES" will have the meaning set forth in Section 2.4.
"FINAL BALANCE SHEET" will mean a balance sheet reflecting the closing
balances for the Hammonds Business, prepared in accordance with Adjusted GAAP,
as of June 30, 2002 or such other date as provided in Section 7.2I(4).
"FINANCIAL STATEMENTS" will have the meaning set forth in Section 4.7.
"FINANCING" will have the meaning set forth in the recitals to this
Agreement.
"GENERAL PARTNERS" will mean Hammonds Homes I, LLC and Crystal City I,
LLC.
"GAAP" will mean generally accepted accounting principles, consistently
applied with past practice.
"GOVERNMENTAL AUTHORITY" will mean any nation or government, any state
or other political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or pertaining
to government, including, without limitation, any government authority, agency,
department, board, commission, or instrumentality of the United States, any
State of the United States, or any political subdivision thereof, and any
tribunal or arbitrator(s) of competent jurisdiction, and any self-regulatory
organizations.
"HAMMONDS" will mean Ronnie D. Hammonds.
"HAMMONDS BUSINESS" will have the meaning set forth in the recitals.
"HANDLE" will mean any manner of generating, accumulating, storing,
treating, disposing of, transporting, transferring, labeling, handling,
manufacturing, or using, as any of such terms may further be defined in any
Environmental Law, of any Hazardous Substances or Waste.
"HAZARDOUS SUBSTANCES" will be construed broadly to include any toxic
or hazardous substance, material, or waste, and any other contaminant,
pollutant, or constituent thereof, whether liquid, solid, semi-solid, sludge,
and/or gaseous, including without limitation, chemicals, compounds, by-products,
pesticides, asbestos containing materials, petroleum or petroleum products, and
polychlorinated biphenyls, the presence of which requires or may require
-4-
investigation or remediation under any Environmental Laws or which are or become
regulated, listed, or controlled by, under, or pursuant to any Environmental
Laws, including, without limitation, RCRA, CERCLA, the Hazardous Materials
Transportation Act, the Toxic Substances Control Act, the Clean Air Act, the
Clean Water Act, FIFRA, EPCRA, and OSHA, or any similar state statute, or any
future amendments to, or regulations implementing such statutes, laws,
ordinances, codes, rules, regulations, orders, rulings, or decrees, or which has
been or will be determined or interpreted at any time by any Governmental
Authority to be a hazardous or toxic substance regulated under any other
statute, law, regulation, order, code, rule, order, or decree.
"HOLDBACK FUND" will have the meaning set forth in Section 2.5B.
"HOUSING UNIT" will mean a residential dwelling constructed or to be
constructed on a lot, together with the associated lot.
"INDEMNIFICATION AGREEMENT" will have the meaning set forth in the
recitals.
"INTELLECTUAL PROPERTY" will have the meaning set forth in Section 1.2
of the Real Property Agreement and the Asset Agreement.
"LAND USE ENTITLEMENTS" will have the meaning set forth in Section
4.26.
"LEASE ASSIGNMENTS" will have the meaning set forth in Section 8.1.
"NON-DISCLOSURE AND NON-COMPETE AGREEMENT" will have the meaning set
forth in Section 7.2.
"NOTICES" will have the meaning set forth in Section 4.16.
"OPENING DATE" will have the meaning set forth in Section 5.1 of the
Real Property Agreement.
"OPTIONED REAL PROPERTY" will have the meaning set forth in Section 1.2
of the Real Property Agreement.
"OWNED REAL PROPERTY" will have the meaning set forth in Section 1.2 of
the Real Property Agreement.
"PARENT" will mean Meritage Corporation.
"PERMITS" will have the meaning set forth in Section 4.26.
"PERMITTED LIENS" will have the meaning set forth in Section 4.11.
"PERMITTED MATERIALS" will mean (a) reasonable amounts of gasoline, and
oil or other vehicle lubricants stored in the vehicles and equipment used on the
Real Property, (b) reasonable amounts of fertilizers, herbicides and/or
pesticides, and ordinary, everyday painting and cleaning supplies, used only in
the ordinary course of completing and maintaining the buildings,
-5-
landscaping and improvements on the Real Property, and (c) standard building
components and materials which are properly and lawfully installed in or
incorporated into the improvements and may lawfully remain therein in accordance
with Applicable Laws, taking into account the nature, purpose and intended use
and occupancy thereof; provided that in all cases all such components,
materials, substances and other items referred to in clauses (a) through (c),
above, are stored, transported, used, installed, incorporated and disposed of,
in accordance with all Applicable Laws.
"PERSON" will mean any natural person, corporation, general or limited
partnership, limited liability company, trust, sole proprietorship, or other
entity, organization or association of any kind.
"PROCEEDINGS" will mean claims, suits, actions, arbitrations, dispute
resolution proceedings, judgments, penalties, fines or administrative or
judicial investigations or proceedings.
"PROPERTY LEASES" will have the meaning set forth in Section 4.14.
"PURCHASE PRICE" will have the meaning set forth in Section 2.5.
"REAL PROPERTY" will have the meaning set forth in Section 1.2 of the
Real Property Agreement.
"REAL PROPERTY ASSETS" will have the meaning set forth in Section 1.2
of the Real Property Agreement.
"REAL PROPERTY AGREEMENT" will have the meaning set forth in the
recitals.
"RESERVES" will mean the reserves for Unassumed Construction Claims.
"SEC" will mean the Securities and Exchange Commission.
"SELLER" will mean collectively Hammonds Homes, Ltd. and Crystal City
Land & Cattle, Ltd.
"SELLING PARTIES" will mean Hammonds, Seller, and General Partners.
"SUPPLEMENTAL TITLE REVIEW PERIOD" will have the meaning set forth in
Section 5.2 of the Real Property Agreement.
"SURVEY" will have the meaning set forth in Section 5.2 of the Real
Property Agreement.
"TAXES" will mean any and all federal, state, local or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, payroll, employment, recapture,
disability, real property, personal property, sales, use, transfer,
registration, value-added, alternative or add-on minimum, estimated,
"roll-back," any other taxes, assessments, or
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government charges of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"TAX RETURNS" will mean any return, declaration, report, claim to
refund, or information return or statement relating to Taxes, including any
schedule or attachment thereto, and including any amendment thereof.
"TITLE BINDER" will have the meaning set forth in Section 5.2 of the
Real Property Agreement.
"TITLE COMPANY" will have the meaning set forth in Section 5.1 of the
Real Property Agreement.
"TITLE POLICY" will have the meaning set forth in Section 5.2 of the
Real Property Agreement.
"TITLE SUPPLEMENT" will have the meaning set forth in Section 5.2 of
the Real Property Agreement.
"UNASSUMED CONSTRUCTION CLAIMS" will have the meaning set forth in
Section 2.4.
"UNDERGROUND STORAGE TANK" will have the meaning ascribed to such term
in Section 6901 et seq., as amended, of RCRA, or any applicable state or local
statute, law, ordinance, code, rule, regulation, order ruling, or decree
governing Underground Storage Tanks.
"WASTE" will be construed broadly to include any abandoned or disposed
agricultural wastes, biomedical wastes, biological wastes, bulky wastes,
construction and demolition debris, garbage, household wastes, industrial solid
wastes, liquid wastes, recyclable materials, sludge, solid wastes, special
wastes, used oils, white goods, and yard trash as those terms are defined under
any applicable Environmental Laws.
ARTICLE II
PURCHASE AND SALE OF ASSETS
2.1 Closing. The closing of the purchase and sale of the Acquired
Assets (the "CLOSING") will take place at 10:00 A.M. local time on the 20th day
of June, 2002 at the offices of Snell & Wilmer L.L.P., One Arizona Center, 400
E. Van Buren, Phoenix, AZ 85004 or such other time and place as provided in
Section 7.2I(4) or as Parent may establish by written notice to Seller no less
than three business days prior to an anticipated Closing. The day on which the
Closing actually occurs is herein sometimes referred to as the "CLOSING DATE."
2.2 Assets to be Purchased. Upon the terms and subject to the
conditions set forth herein, and in reliance on the respective representations
and warranties of the parties contained herein and in the Asset Agreement and
the Real Property Agreement, at the Closing, Seller agrees to sell, convey,
grant, assign, and transfer to Buyer and Buyer agrees to purchase and acquire
from Seller all of the Real Property Assets, the Assets and any other assets,
properties, or rights of every nature, kind, description, tangible and
intangible, whether real, personal or mixed, whether accrued, contingent or
otherwise and whether now existing or hereinafter acquired
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relating in any way to or used or held for use in connection with the Hammonds
Business, including, but not limited to, the assets of Crystal City's
wholly-owned subsidiaries, whether directly or indirectly owned (other than the
Excluded Assets) (the "ACQUIRED ASSETS").
2.3 Assets Not Being Transferred. Seller will retain and Buyer will not
purchase the following ("EXCLUDED ASSETS"):
A. All of Seller's right, title and interest under or related
to this Agreement, the Real Property Agreement or the Asset Agreement,
including, without limitation, the consideration delivered pursuant to
this Agreement;
B. Minute books, stock transfer ledgers and membership ledgers
of the Seller;
C. Any deferred tax assets and any other assets that, as a
result of the acquisition, will be written off by Buyer, as identified
on SCHEDULE 2.3C, which will be prepared by Buyer;
D. The personal assets set forth on SCHEDULE 2.3D; and
E. To the extent provided in Section 2.5A, any cash or cash
equivalents.
2.4 Liabilities.
A. Assumed Liabilities; Loan Payments. Upon the terms and
subject to the conditions of this Agreement, at the Closing, Buyer will
assume from and after the Closing Date, and perform and pay when due,
only the following liabilities and no others (the "ASSUMED
LIABILITIES"):
(1) The obligations under the Acquired Contracts
solely to the extent arising out of events occurring on or
after the Closing Date (excluding any breaches thereof that
began prior to the Closing Date, the exclusion for which will
continue until Buyer has notice thereof and opportunity to
cure, other than (x) immaterial breaches disclosed on SCHEDULE
2.4A(1) and accepted in writing by Buyer prior to or at the
Closing; provided that any damages, settlements, expenses, or
costs incurred by Buyer or Parent in respect thereof will
count against the [*] deductible set forth in Section 4C of
the Indemnification Agreement or (y) breaches arising from
the failure of Seller to have timely purchased lots);
(2) Any Construction Claim that arises out of or is
related to any Housing Unit acquired hereunder that closes
after the Closing (the "ASSUMED CONSTRUCTION CLAIMS"); in each
case other than Construction Claims pending or, to the
Knowledge of Selling Parties, threatened on or prior to the
Closing; and
(3) All liabilities or obligations reflected on the
Closing Balance Sheet.
[*] Confidential information on this page has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a Confidential
Treatment Request.
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B. Excluded Liabilities. Notwithstanding any other provision
of this Agreement, neither Parent nor Buyer will assume, acquire, or be
responsible for any liabilities, obligations or expenses, whether fixed
or contingent, known or unknown, matured or unmatured, executory or
non-executory, to the extent such liability or obligations arise out of
occurrences on or prior to the Closing Date, even if they do not become
known until after such date, relating to or consisting of
(collectively, the "EXCLUDED LIABILITIES"):
(1) Liabilities and obligations not reflected on the
Closing Balance Sheet;
(2) All liabilities, obligations and expenses
(including Taxes) of Selling Parties under this Agreement or
with respect to or arising out of the consummation of the
transactions contemplated by this Agreement;
(3) (a) Any Taxes (including deferred Tax
liabilities) applicable to Seller, the Hammonds Business, or
the Acquired Assets (except for property taxes for property of
Seller that has not closed prior to the Closing Date); (b) any
liabilities or obligations or expenses of the Seller related
to pending or threatened litigation against Seller, Hammonds
Business or the Acquired Assets; (c) any liabilities,
obligations, or expenses arising from or relating to or
consisting of any lien, encumbrance or claim affecting the
title to the Acquired Assets, other than Permitted Liens; (d)
any liabilities, obligations, or expenses under any contracts
arising or relating to the period prior to the Closing Date;
(e) any liabilities, obligations or expenses relating to any
environmental matter or condition; and (f) any liability or
obligation to or in respect of any employees or former
employees of Seller, including without limitation: (i) any
employment agreement, whether or not written, between a Seller
and any person; (ii) under any employee plan at any time
maintained, contributed to or required to be contributed to by
or with respect to Seller or under which Seller may incur
liability, or any contributions, benefits or liabilities
therefor, or any liability with respect to Seller's withdrawal
or partial withdrawal from or termination of any employee
plan; or (iii) with respect to any claim of an unfair labor
practice, or any claim under any state unemployment
compensation or worker's compensation law or regulation or
under any federal or state employment discrimination law or
regulation, except as to (d), (e), and (f), the extent set
forth on the Closing Balance Sheet; and
(4) Any Construction Claim that is not an Assumed
Construction Claim ("UNASSUMED CONSTRUCTION CLAIMS").
Anything contained in this Agreement to the contrary
notwithstanding, Buyer will not assume the Excluded Liabilities, which
Excluded Liabilities will at and after the Closing remain the exclusive
responsibility of Seller. Seller will, and each of the Selling Parties
agrees to cause Seller to, discharge all Excluded Liabilities in
accordance with their terms (subject to Seller's right to contest
obligations believed in good faith not to be then due) and Applicable
Law.
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2.5 Purchase Price; Holdback; Adjustment; and Warranty and Reserve
Administration.
A. Purchase Price. At Closing, in addition to assuming the
Assumed Liabilities, Parent will cause Buyer to pay to Seller, for the
Acquired Assets and in immediately available funds, $46,364,000
("PURCHASE PRICE"), less the Holdback Fund. At Closing, Seller will
have an Adjusted Book Value of at least $23,182,000. In the event of
any shortfall or excess from these amounts as of the Closing Date or
Effective Date, then, (i) in the case of a shortfall in Adjusted Book
Value, Selling Parties will make a contribution of cash as is necessary
to make up the shortfall, and (ii) in the case of any excess Adjusted
Book Value, Buyer will remit the excess in cash to Seller. Such
payments will be made, as appropriate, at Closing and upon resolution
of final Adjusted Book Value as of the Effective Date pursuant to
Section 2.5C below. Buyer may, in lieu of paying cash for the cash of
Seller, allow Seller to distribute its cash to the partners thereof.
B. Holdback. At the Closing, Buyer will deliver to a
designated escrow account, pursuant to the terms of an escrow agreement
with Compass Bank, Houston, Texas, substantially in the form of EXHIBIT
E attached hereto (the "ESCROW AGREEMENT") to be executed among Parent,
Buyer, Seller, and the designated escrow agent, [*] of the Purchase
Price payable to Seller, in cash by wire transfer of immediately
available funds (the "HOLDBACK FUND"). The Holdback Fund will be held
in an interest-bearing escrow account to satisfy indemnification claims
of the Parent or Buyer that may arise under the Indemnification
Agreement, as provided therein..
(1) The Holdback Fund, including interest earned on
amounts to be distributed from the Holdback Fund, will be
delivered by the designated escrow agent to Seller or its
designee as follows:
(a) on the first anniversary of the Closing
Date, an initial distribution, in an amount equal to
[*], less any amount that Parent or Buyer are
entitled to retain under the provisions of the
Indemnification Agreement, and less any amount that
is disputed and subject to the dispute-resolution
provisions of EXHIBIT D;
(b) on the second anniversary of the Closing
Date, an additional distribution, in an amount equal
to [*], less any amount that Parent or Buyer are
entitled to retain under the provisions of the
Indemnification Agreement, and less any amount that
is disputed and subject to the dispute-resolution
provisions of EXHIBIT D; and
(c) on the third anniversary of the Closing
Date, the remaining balance of the Holdback Fund,
less any amount that Parent or Buyer are entitled to
retain under the provisions of the Indemnification
Agreement, and less any amount that is disputed and
subject to the dispute-resolution provisions of
EXHIBIT D.
[*] Confidential information on this page has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a Confidential
Treatment Request.
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(2) [*] Subject only to the limitations of the
Indemnification Agreement, Parent and Buyer may proceed
against any of the parties to the Indemnification Agreement.
C. Adjustment.
(1) For the purpose of making an initial
determination of Adjusted Book Value, Seller will deliver to
Parent, at least five days prior to the Closing, a Closing
Balance Sheet, prepared in accordance with Adjusted GAAP
consistent with SCHEDULE 2.5C. At Closing, subject to review
and tentative approval of the Closing Balance Sheet by Parent
and Buyer, any adjustment required by Section 2.5A will be
made (i.e., any necessary contributions of capital by Selling
Parties, or any necessary remittance by Seller of any excess
capital). For purposes of this Agreement and the transactions
contemplated hereby, the term "ADJUSTED GAAP" will mean GAAP,
including, without limitation, appropriate accruals for
warranty and other reserves, and bonuses, and except that (x)
Excluded Assets and Excluded Liabilities will be omitted; (y)
any profit or loss on the sale of real property to landbankers
or model homes to investors under Section 6.10 or Section 7.2Q
will be disregarded; and (z) any write off of the deposit
related to the Fry and West Little York property resulting
from Parent's failure to consent to its acquisition under
SECTION 5.1 shall be disregarded.
(2) No later than one month after the Effective Date,
Parent will deliver to Seller a balance sheet reflecting the
actual closing balances for the Hammonds Business, prepared in
accordance with Adjusted GAAP, as of the Effective Date (the
"FINAL BALANCE SHEET").
(3) The Final Balance Sheet will become final and
binding on the parties unless within 15 business days
following delivery thereof to Seller, Seller notifies Parent
in writing that Seller objects thereto. If Seller objects to
the Final Balance Sheet, and after good faith consultation
with respect to the objection, the parties are unable to reach
an agreement within 15 days, then the parties will resolve the
dispute in the manner provided in EXHIBIT D; PROVIDED,
HOWEVER, that the arbitrator will be an accounting firm of
national repute (other than the firms currently serving as
auditor for Parent or Seller) as may be mutually agreed upon
by Parent and Seller (the "ACCOUNTING ARBITRATOR"). The
determination of the Accounting Arbitrator will be final and
binding on all parties, and judgment on the arbitration award
may be enforced in any court having jurisdiction over the
subject matter of the controversy. Buyer and Seller will each
pay the cost of their own accounting and other professionals
and will bear equally the fees and expenses of the Accounting
Arbitrator.
D. Warranty and Reserve Administration. Subject to the
following, Parent and Buyer will administer all construction claims to
the extent of the Reserves included on the Closing Balance Sheet or as
otherwise paid for by Seller in accordance with their
[*] Confidential information on this page has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a Confidential
Treatment Request.
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standard procedures. However, Parent and Buyer are only obligated to
administer and discharge Unassumed Construction Claims (but not to
defend litigation in respect thereof) to the extent that the costs of
those claims are less than the Reserves attributable to those claims.
In the event that the costs attributable to any Unassumed Construction
Claims exceed the Reserves attributable to those claims, Selling
Parties will reimburse Parent or Buyer for the difference as an
Excluded Liability under the Indemnification Agreement. On the second
anniversary of the Closing, Parent or Buyer will deliver to Seller any
amount of Reserves that remain except with respect to any Construction
Claims that have been asserted and remain unresolved as of that date.
Parent and Buyer will seek Seller's consent to the settlement of any
Unassumed Construction Claim that exceeds, with respect to any single
Housing Unit, $10,000. If Seller does not so consent, it will be
responsible for addressing such claim. Parent will provide Seller with
a quarterly report of warranty administration and the status of the
Reserves.
2.6 Allocation of Purchase Price. The Purchase Price and the Assumed
Liabilities will be allocated among the Acquired Assets in accordance with
Section 197 and 1060 of the Code and the regulations thereunder. Such allocation
will be reported consistently by Buyer and Seller on Internal Revenue Service
Form 8594, Asset Acquisition Statement, which will be filed with Buyer's and
Seller's Federal income tax returns for the tax year that includes the Closing
Date. No party makes any representation or warranty as to the tax treatment of
this transaction to any other party. SCHEDULE 2.6 sets forth an estimated
allocation as of March 31, 2002. A final allocation will be prepared at or as
soon as practicable after the Closing, consistent with SCHEDULE 2.6, and after
giving effect to the actual Purchase Price and Final Balance Sheet
2.7 Risk of Loss. All risk of loss with respect to the Acquired Assets
on or before the Closing Date will remain the sole risk of Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
As of the date hereof and as of the Closing Date, Parent and Buyer
hereby represent and warrant to Seller, the following:
3.1 Organization and Qualification. Each of Parent and Buyer is a
corporation or partnership duly organized, validly existing, and in good
standing under the laws of the jurisdiction of incorporation or formation and
has the requisite power and authority to own and operate its properties and to
carry on its business as now conducted in every jurisdiction where the failure
to do so would have a material adverse effect on its business, properties, or
ability to conduct the business currently conducted by it.
3.2 Authority Relative to this Agreement. Each of Parent and Buyer has
the requisite power and authority to enter into this Agreement and to carry out
its obligations hereunder. The execution and delivery of this Agreement by
Parent and Buyer and the consummation by Parent and Buyer of the transactions
contemplated hereby have been duly authorized by each of them, and no other
actions or proceedings, corporate or otherwise, on the part of Parent and Buyer
are necessary to authorize this Agreement and such transactions. This Agreement
has been duly executed and delivered by each of Parent and Buyer and constitutes
a valid and binding
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obligation of each of them, enforceable in accordance with its terms, except as
the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, or other similar laws relating to the enforcement of creditors'
rights generally and by general principles of equity.
3.3 No Conflicts. Parent and Buyer are not subject to nor obligated
under (i) any provision of their articles of incorporation, bylaws, articles of
organization, partnership agreement, or other organizational documents, as the
case may be; (ii) any material agreement, arrangement, or understanding (other
than lending arrangements); (iii) any material license, franchise, or permit; or
(iv) any law, regulation, order, judgment, or decree, which would be breached or
violated, or in respect of which a right of termination or acceleration would
arise, or pursuant to which any encumbrance on any of their assets would be
created, by its execution, delivery, and performance of this Agreement and the
consummation by it of the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF SELLING PARTIES
For Purposes of this Article IV, the term "Knowledge of Selling
Parties" means that no facts or information have come to the attention of
Hammonds after reasonable inquiry that would make him aware of any inaccuracy of
the representations or warranties of Selling Parties set forth in this
Agreement. As of the date hereof and as of the Closing Date, Selling Parties
hereby represent, warrant, and agree as follows, to and for the benefit of
Parent and Buyer:
4.1 Organization and Qualification. Seller and General Partners are
duly organized, validly existing, and in good standing under the laws of Texas
and have the requisite power and authority to own and operate their properties
and to carry on its business as now conducted.
4.2 Authority Relative to this Agreement. Each of the Selling Parties
has the requisite power and authority to enter into this Agreement and to carry
out their respective obligations hereunder. The execution and delivery of this
Agreement by Selling Parties and the consummation by Selling Parties of the
transactions contemplated hereby have been duly authorized, and no actions or
proceedings, corporate or otherwise, on the part of Selling Parties are
necessary to authorize this Agreement and such transactions. This Agreement has
been duly executed and delivered by each of the Selling Parties and constitutes
a valid and binding obligation of each Selling Party enforceable in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, or other similar laws relating to the
enforcement of creditors' rights generally and by general principles of equity.
4.3 Legal Capacity and Authority of Selling Parties. Each of the
Selling Parties possesses the legal capacity to execute and deliver each
document to which they are each a party, to perform their respective obligations
thereunder, and to consummate the transactions contemplated thereby. With
respect to each document contemplated by this Agreement to which Selling Parties
are, or should be, a party, each Selling Party has or will duly execute and
deliver such documents, which will be a valid, legal and binding obligation of
each Selling Party enforceable against Each Selling Party in accordance with its
terms, as the case may be.
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4.4 No Conflicts. Except as set forth in SCHEDULE 4.4, Selling Parties
are not subject to nor obligated under (i) any provision of their articles of
incorporation, bylaws, articles of organization, operating agreement,
partnership agreement, or other organizational documents, as the case may be;
(ii) any agreement, arrangement, or understanding; (iii) any license, franchise,
or permit; or (iv) any law, regulation, order, judgment, or decree, which would
be breached or violated, or in respect of which a right of termination or
acceleration would arise, or pursuant to which any encumbrance on any of their
assets would be created, by its execution, delivery, and performance of this
Agreement and the consummation by it of the transactions contemplated hereby.
4.5 No Consents. Except as set forth in SCHEDULE 4.5, no authorization,
consent, or approval of, or filing with, any public body, court, or authority or
pursuant to any Acquired Contract is necessary on the part of Selling Parties
for the consummation by Selling Parties of the transactions contemplated by this
Agreement.
4.6 Ownership Interests. Except as disclosed in SCHEDULE 4.6, Seller
does not own any stock, partnership interest, joint venture interest, or any
other security issued by or equity interest in any other corporation,
organization, association, or entity whose business is real estate related.
4.7 Financial Statements. Seller has provided: (a) the audited
financial statements of the Hammonds Business for and as of the fiscal years
ended December 31, 2001, 2000 and 1999 and (b) the unaudited consolidated
financial statements of the Hammonds Business for and as of the period ended
March 31, 2002 (the "FINANCIAL STATEMENTS"). The Financial Statements have been
prepared in accordance with GAAP on a consistent basis throughout the periods
involved and fairly present the financial position of the Hammonds Business as
of the dates thereof and the results of its operations and cash flows for the
periods then ended; provided that the March 31, 2002 Financial Statements have
been prepared in accordance with Adjusted GAAP. The Financial Statements are
attached hereto as SCHEDULE 4.7.
4.8 Absence of Undisclosed Liabilities.
A. There are no obligations or liabilities relating to or
affecting the Hammonds Business or the Acquired Assets (whether
accrued, absolute, contingent, liquidated, unliquidated, or otherwise,
whether due or to become due and regardless of when asserted), except:
(i) liabilities reflected in the Financial Statements or disclosed in
the notes thereto, (ii) liabilities which have arisen in the ordinary
course of business after the date of the Financial Statements, (iii)
liabilities specifically disclosed in SCHEDULE 4.8, and (iv) Excluded
Liabilities.
B. As of the Closing, in accordance with Section 2.5C, Seller
will have delivered the Closing Balance Sheet, prepared in accordance
with Adjusted GAAP. There will be no obligations or liabilities
relating to or affecting the Hammonds Business or the Acquired Assets
(whether accrued, absolute, contingent, liquidated, unliquidated, or
otherwise, whether due or to become due and regardless of when
asserted), except: (i) liabilities reflected in the Closing Balance
Sheet, (ii) liabilities which have arisen in the
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ordinary course of business after the date of the Closing Balance
Sheet, (iii) liabilities specifically disclosed in SCHEDULE 4.8, and
(iv) Excluded Liabilities.
4.9 No Material Adverse Changes. Except as set forth in SCHEDULE 4.9,
since the date of the Financial Statements, there has not been any material
adverse change in the assets, financial condition, or operating results,
customer, employee, or supplier relations, business condition or prospects, or
financing arrangements related to the Hammonds Business or the Acquired Assets.
4.10 Absence of Certain Developments. Except as set forth in SCHEDULE
4.10 or except as contemplated in and consistent with the terms of this
Agreement, the Asset Agreement or the Real Property Agreement, since the date of
the Financial Statements, Seller has not, in respect of the Hammonds Business:
A. Changed its accounting methods or practices (including any
change in depreciation or amortization policies or rates) or revalued
any of its assets;
B. Other than distributions necessary for Seller or its
ultimate owners to pay taxes in respect of Seller, declared or paid any
dividend or distributions;
C. Borrowed any amount under existing lines of credit, or
otherwise incurred or become subject to any indebtedness, except in the
ordinary course of business and in a manner and in amounts that are in
keeping with historical practice;
D. Discharged or satisfied any lien (other than property taxes
and assessments, business and personal property taxes, mechanic's liens
and similar items discharged in the ordinary course of business
consistent with past practices) or encumbrance;
E. Except as is reasonably necessary for the ordinary
operation of the Hammonds Business and in a manner and in amounts that
are in keeping with historical practice, mortgaged, pledged, or
subjected to any lien, charge, or other encumbrance, any of its assets
with a fair market value in excess of $25,000, except liens for current
property taxes not yet due and payable;
F. Sold, assigned, or transferred (including, without
limitation, transfers to any employees, shareholders, or affiliates)
any assets or canceled any debts or claims, except in the ordinary
course of business and consistent with past practices;
G. Sold, assigned, or transferred any patents, trademarks,
trade names, copyrights, trade secrets, or other intangible assets, or
disclosed any proprietary or confidential information to any person
other than Parent or Buyer;
H. Suffered any extraordinary loss or waived any material
right or claim, including any write-off or compromise of any contract
or other account receivable;
I. Taken any other action or entered into any other
transaction other than in the ordinary course of business and in
accordance with past custom and practice, or
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entered into any transaction with an employee, shareholder, member,
partner or officer of Seller or any other entity associated with the
Hammonds Business;
J. Suffered any theft, damage, destruction, or loss of or to
any property or properties owned or used by it, whether or not covered
by insurance;
K. Increased the annualized level of compensation of or
granted any extraordinary bonuses, benefits, or other forms of direct
or indirect compensation to any employee, officer, director, or
consultant that aggregate in excess of $25,000, or increased,
terminated, or amended or otherwise modified any plans for the benefit
of employees;
L. Except as is reasonably necessary for the ordinary
operation of the Hammonds Business and in a manner and in amounts that
are in keeping with historical practice, made any capital expenditures
or commitments for property, plant and equipment that aggregate in
excess of $25,000;
M. Engaged or agreed to engage in any extraordinary
transactions or distributions, or except as is reasonably necessary for
the ordinary operation of the Hammonds Business and in keeping with
historical practice, entered into any contract, written or oral, that
involves consideration or performance by it of a value exceeding
$25,000 or a term exceeding one year;
N. Made any loans or advances to, or guarantees for the
benefit of, any persons; or
O. Made charitable contributions or pledges, which in the
aggregate exceed $10,000.
4.11 Permitted Liens; Good Title to and Condition of Acquired Assets.
Seller's title to the Acquired Assets is free and clear of all liens and
encumbrances other than those listed on SCHEDULE 4.11 and Approved Title
Exceptions (collectively, the "PERMITTED Liens"). All of the Acquired Assets are
in good condition and repair, ordinary wear and tear excepted, and are usable in
the ordinary course of business. The Acquired Assets represent all of the assets
of the Hammonds Business and all of the assets necessary or required by Buyer to
continue to operate the Hammonds Business as conducted prior to the Closing.
Seller owns, or leases under valid leases, all property, machinery, equipment,
and other tangible and intangible assets necessary for the conduct of the
Hammonds Business. None of the assets attributable to, or necessary to the
operation of, the Hammonds Business, as conducted immediately prior to the
Closing, are held or owned by an entity other than Seller. There are no members,
shareholders, partners, or affiliates of Seller, including Hammonds or any other
Selling Party, that own any assets, licenses, permits or other authorizations
relating to the Acquired Assets or the Hammonds Business.
4.12 Legal Descriptions of Real Property. SCHEDULE 4.12 sets forth a
Title Binder that contains a complete and accurate legal description for each
parcel of Owned Real Property owned or controlled by Seller.
4.13 Real Property. Except as set forth on SCHEDULE 4.13:
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A. With respect to any agreements, arrangements, contracts,
leases, licenses, covenants, conditions, deeds, deeds of trust,
rights-of-way, easements, mortgages, restrictions, surveys, title
insurance policies, and other documents granting to Seller title to or
an interest in or otherwise affecting the Real Property, no breach or
event of default exists, and no condition or event has occurred that
with the giving of notice, the lapse of time, or both would constitute
a breach or event of default, by Seller or any other person.
B. The Real Property has all necessary access to and from
public highways, streets, and roads and no pending or, to the Knowledge
of Selling Parties, threatened proceeding or other fact or condition
exists that could limit or result in the termination of such access.
C. Electric, gas (if applicable), sewage, telephone, and water
utility facilities are available for connection and service to homes
constructed or being constructed on the Real Property, which facilities
are in compliance in all respects with all Applicable Laws, subject to
such installation and connection charges with respect thereto which in
the ordinary course of business are payable upon issuance of
certificates of occupancy which have not yet been procured.
D. No condemnation, eminent domain, or similar proceeding
exists, is pending or, to the Knowledge of Selling Parties, is
threatened with respect to, or that could affect, any of the Real
Property.
E. Any buildings and improvements on the Real Property to the
extent installed or constructed by Seller are in compliance with all
Applicable Laws and do not violate, in any respect, (i) any set-back,
(ii) zoning law, ordinance, regulation, or statute, or other
governmental restriction in the nature thereof, or (iii) any
restrictive covenant affecting any such Real Property.
F. There are no parties in possession of any portion of the
Real Property as lessees, tenants at sufferance, or trespassers.
G. Except as incurred in the ordinary course of business after
the date of the Financial Statements, there are no unpaid charges,
debts, liabilities, claims, or obligations arising from the
construction, occupancy, ownership, use, or operation of the Real
Property. No Real Property is subject to any condition or obligation to
any Governmental Authority or other person requiring the owner or any
transferee thereof to donate land, money or other property or to make
off-site public improvements.
H. Except as set forth on SCHEDULE 4.7 or 4.12, no
developer-related fees, charges or assessments for public improvements
or otherwise made against the Real Property or any lots included
therein are due and unpaid, including without limitation those for
construction of sewer lines, water lines, storm drainage systems,
electric lines, natural gas lines, streets (including perimeter
streets), roads and curbs other than as may be required in the ordinary
course of completing such project from its current (incomplete) status
or as may be contemplated in the conditions of approval and contained
in the Land Use Entitlements for such projects.
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I. There is no moratorium applicable to any of the Real
Property on (1) the issuance of building permits for the construction
of houses, or certificates of occupancy therefor, or (2) the purchase
of sewer or water taps.
J. Each of the lots included in the Real Property is stable
and otherwise suitable for the construction of a residential structure
suitable to the soil conditions thereon, as set forth in the soil
report related to each such subdivision.
K. Except as set forth in the Title Binders, Surveys or plats,
the Real Property does not contain "wetlands," as defined, or subject
to regulation by, the Army Corps of Engineers or the Environmental
Protection Agency, or, to the Knowledge of Selling Parties, a level of
radon above action levels of the U.S. Environmental Protection Agency
and is not located within a "critical", "preservation", "conservation,"
"habitat conservation area," or similar type of area subject to
regulation under any Environmental Laws. No portion of the Real
Property is situated within a "noise cone" such that the Federal
Housing Administration will not approve mortgages due to the noise
level classification of such real property.
L. The Real Property has not been used as a gravesite,
landfill, or waste disposal area.
M. No Proceeding is pending or, to the Knowledge of Selling
Parties, threatened which involves any of the Real Property, or against
Seller with respect to any of the Real Property; all of the developed
Real Property and the lots included therein are in compliance with all
Applicable Laws, including without limitation, zoning and subdivision
laws and ordinances and the Real Property is zoned to permit single
family home construction; none of the development-site preparation and
construction work performed on the Real Property has concentrated or
diverted surface water or percolating water improperly onto or from the
Real Property or caused or resulted in a release of any Hazardous
Substance in violation of any Environmental Law.
N. Seller has not granted to any person any contract or other
right to the use of any portion of the Real Property or to the
furnishing or use of any facility or amenity on or relating to the Real
Property.
O. Seller is not a "foreign person" within the meaning of
Sections 1445 and 7701 of the Code.
P. Subject to the Reserves, to the extent installed or
constructed by Seller or its agents or affiliates, all of the Housing
Units, improvements and buildings on the Real Property were constructed
in a good and workmanlike manner, substantially comply with Applicable
Laws, are structurally sound, are in good and proper working condition
and repair, normal wear and tear, normal maintenance and normal
warranty and customer services matters excepted, and are useful for
their intended purposes.
Q. Any improvements and buildings included within the Real
Property are located within the boundary lines of the Real Property and
do not encroach upon the land of any adjacent owner; no improvements of
any third Person encroach upon the Real
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Property; and no Person has any unrecorded right, title or interest in
the real property constituting the Real Property, whether by right of
adverse possession, prescriptive easement or otherwise.
R. The recorded easements, rights-of-way, covenants, and other
title exceptions and survey matters do not adversely affect the current
beneficial use of the Real Property. The Real Property is being
developed and used in compliance with all covenants, easements, and
restrictions affecting the Real Property, and all obligations of Seller
on the Real Property with regard to such covenants, easements, and
restrictions have been and are being performed in a proper and timely
manner.
S. Except as set forth on SCHEDULE 4.16:
(1) To the Knowledge of Selling Parties, all property
adjacent to the Real Property is free from Hazardous
Substances (other than Permitted Materials), and is not in
violation of any Environmental Law.
(2) No environmental lien in favor of any
Governmental Authority has attached to any of the Real
Property.
T. There are no historical or archeological materials or
artifacts of any kind or any Indian ruins of any kind located on the
Real Property.
U. No part of the Real Property is "critical habitat" as
defined in the Federal Endangered Species Act, 16 U.S.C. Sections 1531
et seq., as amended, or in regulations promulgated thereunder, nor are
any "endangered species" or "threatened species" located on the Real
Property, as defined therein, or under any similar state or local
Environmental Law.
V. The Real Property is not within a flood plain, flood way or
flood control district as reflected in the currently adopted 100-year
flood plain of the Federal Emergency Management Agency.
W. Selling Parties do not have any liability for any Taxes, or
any interest or penalty in respect thereof, of any nature that may be
assessed against Parent or Buyer or that are or may become a lien
against the Real Property, other than the lien for current real
property taxes, special taxes and assessments paid with taxes not yet
delinquent.
X. All work performed on or about the Real Property or to any
improvements located thereon within six months prior to the date of
this Agreement has been paid for or will be reflected in the Closing
Balance Sheet.
4.14 Acquired Contracts.
A. SCHEDULE 1.2 of the Real Property Agreement lists as of the
date hereof all of the Acquired Contracts. The provisions of this
Section 4.14 will also apply to all Acquired Contracts entered into
following the date of this Agreement.
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B. Each of the Acquired Contracts is valid, binding, and in
full force and effect on Seller and, to the Knowledge of Selling
Parties, is valid, binding, and in full force and effect on the other
parties to the Acquired Contracts. Except as set forth on SCHEDULE 4.14
to this Agreement, if applicable, no Acquired Contract has been amended
or supplemented in any way and Seller has not and no party thereto has,
assigned any of its rights or delegated any of its duties thereunder.
True and complete copies of the Acquired Contracts have been delivered
to Parent.
C. Except as set forth on SCHEDULE 4.14, no breach or default
exists under any Acquired Contract and no event has occurred with
respect thereto that with the lapse of time or action or inaction by
Seller or, to the Knowledge of Selling Parties, any other party
thereto, would result in a breach thereof or a default thereunder.
D. Except as specifically disclosed in SCHEDULE 4.14, (1)
since the date of the Financial Statements, no supplier or materialman
has indicated that it will stop or decrease the rate of business done
with Seller, except for changes in the ordinary course of the Hammonds
Business; (2) Seller has performed in all respects the obligations
which were or are now required to be performed by each in connection
with the Acquired Contracts and Seller has not been advised of or
received any claim of default under any Acquired Contract; (3) Seller
has no present expectation or intention of not fully performing any
obligation pursuant to any Acquired Contract; and (4) there has been no
breach and, to the Knowledge of Selling Parties, there is no
anticipated breach by any other party to any Acquired Contract.
E. Upon the assignment of each Acquired Contract to Buyer
pursuant hereto, and subject to any consent requirements contained
therein, all rights of Seller with respect to each Acquired Contract
will inure to Buyer and each Acquired Contract will be enforceable by
Buyer in the same manner as such Acquired Contract is enforceable by
Seller.
F. The assignment to Buyer of all of Seller's right, title,
and interest in, to and under each Acquired Contract pursuant hereto
will be free and clear of any lien except for Permitted Liens.
G. Except as set forth in SCHEDULE 4.14, as of the Closing
Date, Seller will not owe any amount (whether absolute, contingent, or
otherwise) with respect to any Acquired Contract other than amounts
properly recorded in the Closing Balance Sheet in accordance with GAAP.
H. Except as disclosed on SCHEDULE 4.14, no Acquired Contract
(1) requires any Seller to make purchases or pay for services in excess
of the requirements of the Hammonds Business, or (2) guarantees any
obligation of another person.
I. Seller has paid all rental and other payments due under
each personal property lease and real property lease (collectively, the
"PROPERTY LEASES") under which Seller is the lessee in accordance with
its terms. With respect to each such Property Lease, Seller has been in
peaceable possession of the buildings, equipment, machinery,
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Real Property, vehicles, or other tangible property covered thereby
since the commencement of the original term of such Property Lease. No
indulgence, postponement, or waiver of Seller's obligations under any
such Property Lease has been granted by the lessor. Subject to the
terms of the Property Leases, Seller possesses full right and power to
occupy or possess, as the case may be, all of the buildings, equipment,
machinery, real property, vehicles, and other tangible property covered
by such Property Leases.
J. With respect to any written or oral agreement, arrangement,
commitment, contract, or lease that either Seller entered into, after
the date hereof, such agreement, arrangement, commitment, contract, or
lease will satisfy all the representations and warranties set forth in
this Section 4.14.
4.15 Warranties. Except as set forth on SCHEDULE 4.15, Seller has not
given or made any other express warranties to third parties with respect to any
property or products sold or services performed by Seller and there are no facts
or the occurrence of any event forming the basis of any present claim against
Seller for liabilities due to any express or implied warranty. SCHEDULE 4.15
includes forms of Seller's residential sales contracts containing applicable
guaranty, warranty, and indemnity provisions.
4.16 Environmental Matters.
A. Seller has at all times been in compliance with all
Environmental Laws governing the Hammonds Business, properties, and
assets, including, without limitation: (1) all requirements relating to
the Discharge and Handling of Hazardous Substances; (2) all
requirements relating to notice, record keeping, and reporting; (3) all
requirements relating to obtaining and maintaining Permits for the
ownership of its properties and assets and the operation of its
business, including Permits relating to the Handling and Discharge of
Hazardous Substances; or (4) all applicable writs, orders, judgments,
injunctions, governmental communications, decrees, informational
requests, or demands issued pursuant to, or arising under, any
Environmental Laws.
B. Except as set forth on SCHEDULE 4.16, there are no, and, to
the Knowledge of Selling Parties, there is no basis for, any orders,
warning letters, notices of violation (collectively "NOTICES") or
Proceedings against or involving the Seller, the Hammonds Business or
the Acquired Assets issued by any Governmental Authority or third party
with respect to any Environmental Laws or Permits issued to a Seller
thereunder in connection with, related to, or arising out of the
ownership by Seller of their properties or assets or the operation of
their business which have not been resolved to the satisfaction of the
issuing Governmental Authority or third party in a manner that would
not impose any obligation, burden, or continuing liability on Buyer in
the event that the transactions contemplated by this Agreement are
consummated, or which could have an adverse effect on the Hammonds
Business, the Acquired Assets or Seller's financial condition, or
results of operations including, without limitation: (i) Notices or
Proceedings related to Seller being potentially responsible parties for
a federal or state environmental cleanup site or for corrective action
under any applicable Environmental Laws; (ii) Notices or Proceedings in
connection with any federal or state environmental cleanup site, or in
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connection with any of the real property or premises where Seller has
transported, transferred, or disposed of Hazardous Substances; (iii)
Notices or Proceedings relating to Seller being responsible to
undertake any response or remedial actions or clean-up actions of any
kind; or (iv) Notices or Proceedings related to Seller being liable
under any Environmental Laws for personal injury, property damage,
natural resource damage, or clean up obligations.
C. Except for the Permitted Materials and except as set forth
on SCHEDULE 4.16, Seller has not Handled or Discharged, nor allowed or
arranged for any third party to Handle or Discharge, Hazardous
Substances to, at, or upon: (1) any location other than a site lawfully
permitted to receive such Hazardous Substances; (2) any of the Real
Property; or (3) any site which: (a) pursuant to CERCLA or any similar
state law has been placed on the National Priorities List or its state
equivalent; or (b) with respect to which the Environmental Protection
Agency or the relevant state agency or other Governmental Authority has
notified Seller that such governmental authority has proposed or is
proposing to place on the National Priorities List or its state
equivalent. There has not occurred, nor is there presently occurring, a
Discharge, or, to the Knowledge of Selling Parties, threatened
Discharge, of any Hazardous Substance on, into, or beneath the surface
of, or adjacent to, any of the Real Property in an amount or otherwise
requiring a Notice or report to be made to a Governmental Authority or
in violation of any applicable Environmental Laws.
D. SCHEDULE 4.16 identifies the operations and activities, and
locations thereof, if any, which have been conducted and are being
conducted by Seller on any of the Real Property which have involved the
Handling or Discharge of Hazardous Substances, other than Permitted
Materials.
E. Except as set forth on SCHEDULE 4.16, Seller does not use,
and has never used, any Aboveground Storage Tanks or Underground
Storage Tanks, and there are not now nor, to the Knowledge of Selling
Parties, have there ever been any Underground Storage Tanks beneath any
of the Real Property that are required to be registered and/or upgraded
under applicable Environmental Laws.
F. SCHEDULE 4.16 identifies (i) all environmental audits,
assessments, or occupational health studies undertaken by Seller or
their agents or, to the Knowledge of Selling Parties, undertaken by any
Governmental Authority or any third party, relating to or affecting
Seller or any of the Real Property; (ii) the results of any ground,
water, soil, air, or asbestos monitoring undertaken by Seller or their
agents or, and to the extent available or made known to Seller,
undertaken by any Governmental Authority or any third party, relating
to or affecting Seller or any of the Real Property, which indicate the
presence of Hazardous Substances at levels requiring a notice or report
to be made to a governmental authority or in violation of any
applicable Environmental Laws; (iii) all material written
communications between Seller and any Governmental Authority arising
under or related to Environmental Laws; and (iv) all outstanding
citations issued under OSHA, or similar state or local statutes, laws,
ordinances, codes, rules, regulations, orders, rulings, or decrees,
relating to or affecting either Seller or any of the Real Property.
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4.17 Tax Matters.
A. Except for current filings, which are the subject of
extensions under applicable procedures and which are identified in
SCHEDULE 4.17, Seller has filed all Tax Returns that Seller was
required to file prior to the date hereof. All such Tax Returns were
correct and complete in all respects. Except as set forth in SCHEDULE
4.17, all Taxes owed by Seller or owed by Selling Parties in respect of
Seller (whether or not shown on any Tax Return), the due date of which
preceded the date hereof, have been paid. Except as set forth in
SCHEDULE 4.17, all other Taxes due and payable by Seller or owed by
Selling Parties in respect of Seller, with respect to periods ending on
or as of the date of the Closing (whether or not a Tax Return is due on
such date) have been paid or are accrued on the applicable Financial
Statements or will be accrued on the Closing Balance Sheet.
B. Except as set forth on SCHEDULE 4.17, with respect to each
taxable period for Seller ending prior to the date hereof or prior to
the date of the Closing, (1) except for taxable periods which are open
either such taxable period has been audited by the relevant taxing
authority or the time for assessing or collecting Taxes with respect to
each such taxable period has closed and each taxable period is not
subject to review by any relevant taxing authority; (2) no deficiency
or proposed adjustment which has not been settled or otherwise resolved
for any amount of Taxes has been asserted or assessed by any taxing
authority against Seller; (3) Seller has not consented to extend the
time in which any Taxes may be assessed or collected by any taxing
authority; (4) Seller has not requested or been granted an extension of
the time for filing any Tax Return to a date later than the Closing;
(5) there is no action, suit, taxing authority proceeding, or audit or
claim for refund now in progress, pending or, to the Knowledge of the
Selling Parties, threatened against or with respect to Seller regarding
Taxes; (6) Seller has not made an election or filed a consent under
Section 341(f) of the Code (or any corresponding provision of state,
local or foreign law); (7) there are no liens on the assets of Seller
relating or attributable to Taxes (other than liens for sales and
payroll Taxes not yet due and payable and liens for non-delinquent
current real property taxes, special taxes, and assessments paid with
real property taxes), and, to the Knowledge of the Selling Parties,
there is no reasonable basis for the assertion of any claim relating or
attributable to Taxes which, if adversely determined, would result in
any such lien (other than those noted in the preceding parenthetical)
on the assets of Seller; (8) to the Knowledge of Selling Parties,
Seller will not be required (a) as a result of a change in method of
accounting for a taxable period ending on or prior to the date of the
Closing, to include any adjustment under Section 481 of the Code (or
any corresponding provision of state, local or foreign law) in taxable
income for any taxable period (or portion thereof) beginning after the
date of the Closing or (b) as a result of any "closing agreement," as
described in Section 7121 of the Code (or any corresponding provision
of state, local or foreign law), to include any item of income or
exclude any item of deduction from any taxable period (or portion
thereof) beginning after the date of the Closing; (9) Seller has not
been members of an affiliated group (as defined in Section 1504 of the
Code) or filed or been included in a combined, consolidated or unitary
income Tax Return; (10) Seller is not a party to or bound by any tax
allocation or tax sharing agreement and has no current or potential
contractual or other obligation to indemnify any other person with
respect to Taxes; (11)
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to the Knowledge of Selling Parties, no taxing authority will claim or
assess any additional Taxes against Seller for any period for which Tax
Returns have been filed; (12) no claim has ever been made by a taxing
authority in a jurisdiction where Seller does not file Tax Returns that
Seller is or may be subject to Taxes assessed by such jurisdiction;
(13) Seller does not have a permanent establishment in any foreign
country, as defined in the relevant tax treaty between the United
States of America and such foreign country; (14) true, correct and
complete copies of all income and sales Tax Returns filed by or with
respect to Seller for the past three years have been furnished or made
available to Parent; (15) Seller has disclosed on each Tax Return filed
by Seller all positions taken thereon that could give rise to a
substantial understatement of penalty of federal income Taxes within
the meaning of Code Section 6662; and (16) except as set forth on
SCHEDULE 4.17, no sales or use Tax will be payable by Seller as a
result of this transaction, and there will be no non-recurring
intangible tax, documentary stamp tax, or other excise tax (or
comparable tax imposed by an Governmental Authority) as a result of
this transaction.
C. Except as set forth on SCHEDULE 4.17, there is no
"roll-back" Tax pertaining to or affecting the Real Property that is
being conveyed to Buyer that would be owed by, or become an obligation
of, Buyer or Parent.
4.18 Restrictions on Business Activities. With respect to the Acquired
Assets, there are no agreements (non-compete or otherwise), arrangements,
commitments, judgments, injunctions, orders, or decrees to which Seller is party
or otherwise binding on Seller, the Hammonds Business or the Acquired Assets
that has or reasonably could be expected to have the effect of prohibiting or
impairing the conduct necessary or required by Buyer to continue to operate the
Hammonds Business as conducted prior to the Closing.
4.19 Intellectual Property. SCHEDULE 4.19 sets forth a description of
the Intellectual Property for which Seller has rights to use in the conduct of
the Hammonds Business. The conduct of the Hammonds Business as presently
conducted and the conduct and the use and exploitation of the Intellectual
Property do not infringe or misappropriate any rights held or asserted by any
person, and no person is infringing on the Intellectual Property. Except as set
forth in the Acquired Contracts, no payments are required for the continued use
of the Intellectual Property. None of the Intellectual Property has ever been
declared invalid or unenforceable, or is the subject of any pending or
threatened action for opposition, cancellation, declaration, infringement,
invalidity, unenforceability, or misappropriation or like claim, action, or
proceeding. Except as set forth on SCHEDULE 4.19, all house plans used by the
Hammonds Business are owned outright by Seller or are licensed to Seller without
payment of any fee, and may be assigned without cost to Buyer.
4.20 Litigation. Except as set forth on SCHEDULE 4.20, there are no
suits, claims, actions, arbitrations, investigations, or proceedings entered
against, now pending, or, to the Knowledge of Selling Parties, threatened
against Seller, the Hammonds Business or the Acquired Assets or any other party
before any court, arbitration, administrative or regulatory body, or any
governmental agency which may result in any judgment, order, award, decree,
liability, or other determination which will or could reasonably be expected to
have any effect upon Seller, the Acquired Assets, or the Hammonds Business.
Except as set forth on SCHEDULE 4.20, neither
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Seller nor any other party is subject to any continuing court or administrative
order, writ, injunction, or decree applicable to the Hammonds Business, the
Acquired Assets, or to their property or employees, and neither Seller nor any
other party is in default with respect to any order, writ, injunction, or decree
of any court or federal, state, municipal, or other governmental department,
commission, board, agency, or instrumentality applicable to the Hammonds
Business.
4.21 Employees. Attached as SCHEDULE 4.21 is a list of names, current
annual rates of salary, bonus, employee benefits, accrued vacation and sick
time, sick pay, and other compensation and benefits and perquisites, including
the provision of company owned automobiles, of all the employees and agents of
Seller whose work relates, directly or indirectly, to the Hammonds Business. To
the Knowledge of Selling Parties, no key employee of Seller, and no group of
Seller's employees, has any plans to terminate his, her, or its employment.
Seller is not a party to any collective bargaining agreement with any labor
union or association. There are no discussions, negotiations, demands, or
proposals that are pending or that have been conducted or made with or by any
labor union or association, and there are no pending or, to the Knowledge of
Selling Parties, threatened labor disputes, strikes, or work stoppages that may
affect Seller, the Acquired Assets, or the Hammonds Business. Seller is in
compliance with all federal and state laws respecting employment and employment
practices, terms and conditions of employment, and wages and hours, and are not
engaged in any unfair labor practices. Except as accrued on the Closing Balance
Sheet or as set forth in SCHEDULE 4.21, Seller may terminate any employee, with
or without cause, without liability or obligation, other than for salary and
bonuses accrued through the date of any such termination and for the obligations
of Seller referred to in Section 4.22 below.
4.22 Employee Benefit Plans.
A. With respect to all employees and former employees of
Seller, except as set forth in SCHEDULE 4.22, Seller does not presently
maintain, contribute to, or have any liability (including current or
potential multi-employer plan withdrawal liability under ERISA) under
any: (1) non-qualified deferred compensation or retirement plan or
arrangement which is an "employee pension benefit plan" as such term is
defined in Section 3(2) of ERISA; (2) defined contribution retirement
plan or arrangement designed to satisfy the requirements of section
401(a) of the Code, which is an employee pension benefit plan, (3)
defined benefit pension plan or arrangement designed to satisfy the
requirements of Section 401(a) of the Code, which is an employee
pension benefit plan; (4) "multi-employer plan" as such term is defined
in Section 3(37) of ERISA; (5) unfunded or funded medical, health, or
life insurance plan or arrangement for present or future retirees or
present or future terminated employees which is an "employee welfare
benefit plan" as such term is defined in Section 3(1) of ERISA, except
as required by Section 4980B of the Code or Sections 601 through 609 of
ERISA; or (6) any other employee welfare benefit plan.
B. With respect to each of the employee benefit plans listed
in SCHEDULE 4.22, Seller has furnished to Buyer true and complete
copies of: (1) the plan documents (including any related trust
agreements); (2) the most recent determination letter received from the
Internal Revenue Service; (3) the latest actuarial valuation; (4) the
latest
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financial statement; (5) the last Form 5500 Annual Report; and (6) all
related trust agreements, insurance contracts, or other funding
agreements which implement such employee benefit plan. Neither Seller,
nor any of their respective officers, partners, employees or any other
"fiduciary", as such term is defined in Section 3(21) of ERISA, has any
liability for failure to comply with ERISA or the Code for any action
or failure to act in connection with the administration or investment
of such plans.
C. With respect to each plan listed in SCHEDULE 4.22: (1)
Seller has performed all obligations required to be performed by it
under each such plan and each such plan has been established and
maintained in accordance with its terms and in compliance with all
applicable laws, statutes, rules, and regulations, including but not
limited to the Code and ERISA; (2) there are no actions, suits, or
claims pending or threatened or anticipated (other than routine claims
for benefits) against any such plan; (3) each such plan can be amended
or terminated after the Closing in accordance with its terms, without
liability to Seller, Parent, or Buyer; and (4) there are no inquiries
or proceedings pending or threatened by the Internal Revenue Service or
the Department of Labor with respect to any such plan.
D. With respect to the insurance contracts or funding
agreements which implement any of the employee benefit plans listed in
SCHEDULE 4.22, such insurance contracts or funding agreements are fully
insured or the reserves under such contracts are sufficient to pay
claims incurred.
E. Each plan listed in SCHEDULE 4.22 that is intended to be
qualified under Section 401(a) of the Code has been determined by the
Internal Revenue Service to so qualify and each trust created
thereunder has been determined by the Internal Revenue Service to be
exempt from tax under Section 501(a) of the Code and nothing has
occurred since the date of the most recent determination that would be
reasonably likely to cause any such plan or trust to fail to qualify
under Section 401(a) of the Code.
4.23 Insurance. SCHEDULE 4.23 lists and briefly describes each
insurance policy and fidelity bond, including performance improvement bonds,
maintenance bonds, labor and material bonds and other bonds related to the Real
Property (collectively, the "BONDS"), maintained by Seller with respect to their
properties or business, and sets forth the date of expiration of each such
insurance policy. All of such insurance policies and Bonds are in full force and
effect and Seller is not in default with respect to its obligations under any of
such insurance policies or Bonds. Except as set forth on SCHEDULE 4.23, there is
no claim of Seller pending under any of such policies or Bonds as to which
coverage has been questioned, denied, or disputed by the underwriters of such
policies or Bonds and there has been no threatened termination of, or material
premium increase with respect to, any of such policies. The insurance coverage
of Seller is customary for entities of similar size engaged in similar lines of
business.
4.24 Affiliate Transactions. Except as set forth on SCHEDULE 4.24,
neither Seller nor any employee, officer, member, shareholder or affiliate
thereof, or any member of their immediate family, or any entity in which any of
such persons owns any beneficial interest (other than a publicly held
corporation whose stock is traded on a national securities exchange or in the
over-the-counter market and less than 1% of the stock of which is beneficially
owned by any of
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such persons) has any agreement with Seller or any interest in any property
(real, personal, or mixed, tangible or intangible) used in or pertaining to the
Hammonds Business. For purposes of the preceding sentence, the members of the
immediate family of a person will consist of the spouse, parents, children,
siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers-
and sisters-in-law of such person.
4.25 Compliance with Laws. Selling Parties and their respective
officers, agents, employees, members, shareholders and affiliates have complied
with all Applicable Laws, which affect the Hammonds Business or the Acquired
Assets. No claims have been filed against Seller alleging a violation of any
Applicable Laws, except as set forth in SCHEDULE 4.25. Without limiting the
generality of the foregoing, Seller has not violated, or received a notice or
charge asserting any violation of, OSHA, or any other state or federal acts
(including rules and regulations thereunder) regulating or otherwise affecting
employee health and safety. Seller has not given or agreed to give any money,
gift, or similar benefit (other than incidental gifts of articles of nominal
value) to any actual or potential customer, supplier, governmental employee, or
any other person in a position to assist or hinder Seller in connection with any
actual or proposed transaction.
4.26 Permits.
A. Seller possesses all approvals, authorizations,
certificates, consents, franchises, licenses, and permits necessary for
the lawful conduct of their business (collectively, the "PERMITS").
SCHEDULE 4.26 sets forth a list of Permits (including the expiration
dates of the Permits for Parent's review). Such Permits are in full
force and effect, no violations have occurred with respect thereto, and
to the Knowledge of Selling Parties, no basis exists for any
limitation, revocation or withdrawal thereof.
B. Seller also possesses (or there have been granted by the
applicable governmental authorities with respect to the Real Property)
the subdivision, development, construction and sale permits, and other
authorizations, approvals, and entitlements set forth in SCHEDULE 4.26
(collectively "LAND USE ENTITLEMENTS"). With respect to the Real
Property, no approvals are required as of the Closing from any
Governmental Authority to complete the development and construction of
homes and the sale thereof in the respective Real Property, there are
in full force and effect validly issued building permits for each home
under construction or completed and Seller has no notice of any pending
or threatened moratorium or other restriction that would preclude the
obtaining of building permits for any homes on such Real Property not
yet under construction or for which building permits have not been
obtained. No decision-making body has denied or withheld any Land Use
Entitlements.
4.27 Membership Records; Minute Books. The minute books of Seller made
available to Parent are the only minute books of Seller and contain an accurate
summary of all meetings of directors (or committees thereof) and members or
shareholders or actions by written consent since the time of incorporation of
Seller.
4.28 Disclosure. Neither this Agreement nor any of the Schedules or
Exhibits hereto contains any untrue statement of a material fact or, to the
Knowledge of Selling Parties, omits to
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state a material fact necessary to make the statements contained herein or
therein, in light of the circumstances in which they were made, not misleading,
and there is no fact which has not been disclosed to Parent or Buyer which
materially adversely affects or could reasonably be anticipated to materially
adversely affect the financial condition, results of operations, customer,
employee or supplier relations, business condition, or prospects of Seller, the
Hammonds Business or the Acquired Assets.
ARTICLE V
CONDUCT OF SELLER PENDING THE CLOSING
Seller hereby covenants and agrees that from the date hereof to the
Closing Date:
5.1 Conduct of Business Pending the Closing. Except as specifically
contemplated in SCHEDULE 5.1, Seller will take no action except in, the ordinary
course, on an arm's length basis, and in accordance with all Applicable Laws and
past custom and practice, and Seller will not, directly or indirectly, do and
Selling Parties will not permit to occur any of the following, without the prior
written consent of Parent:
A. Cancel or terminate or permit to be canceled or terminated
Seller's current insurance (or reinsurance) policies or permit any of
the coverage thereunder to lapse, unless simultaneous with such
termination, cancellation, or lapse, replacement policies providing
coverage equal to or greater than the coverage under the canceled,
terminated, or lapsed policies for substantially similar premiums are
in full force and effect;
B. Sell, lease, encumber, or otherwise dispose of any of the
Acquired Assets other than, in the case of lots and homes held for sale
in the ordinary course, the sale of such lots or homes in the ordinary
course of Hammonds Business as previously conducted;
C. Acquire or enter into any option or other agreement to
acquire any Real Property or other Acquired Assets (except, after any
extension under Section 7.2I(4), in the ordinary course of business) or
exercise its right to the purchase of the Fry and West Little York
property;
D. Default under any material contract, agreement, commitment,
or undertaking;
E. Violate or fail to comply with any Applicable Laws;
F. Fail to maintain and repair the Acquired Assets in
accordance with good standards of maintenance and as required in any
leases or other agreements pertaining thereto;
G. Enter into or modify any employment, severance, or similar
agreements or arrangements with, or adopt or amend any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred
compensation, employment, or other benefit plan, trust, fund, or group
arrangement for the benefit or welfare of any officers, directors,
employees, or consultants.
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H. Except in the ordinary course of business, consistent with
historical practices, modify or terminate any of the Acquired Contracts
or enter into any new contracts that would become Acquired Contracts;
I. Acquire (by merger, exchange, consolidation, acquisition of
stock or assets, or otherwise) any corporation, partnership, joint
venture, or other business organization or division or material assets
thereof;
J. Issue or create any additional shares, membership units, or
partnership or other ownership interests in Seller or issue or create
any warrants, obligations, subscriptions, options, or other commitments
under which any additional shares, membership units, or partnership or
other ownership interests in Seller might be authorized, issued, or
transferred;
K. Incur any indebtedness for borrowed money or issue any debt
securities except the borrowing of working capital in the ordinary
course of business and consistent with past practice;
L. Except in the ordinary course of business, consistent with
historical practices, pay any obligation or liability, fixed or
contingent, other than current liabilities;
M. Waive or compromise any right or claim (other than as
required to resolve any pending or threatened litigation disclosed in
the Schedules attached hereto) or warranty claims (except, after any
extension under Section 7.2I(4), in the ordinary course of business);
N. Start more than 45 "spec" homes in any single month;
O. Commit any act or permit the occurrence of any event or the
existence of any condition of the type described in Section 4.10;
P. Except for distributions necessary for Seller or its
ultimate owners to pay Taxes in respect of the Hammonds Business, pay
any dividends or make any distributions; or
Q. Agree to do any of the actions described in the preceding
clauses A through O.
5.2 Business Relationships. Selling Parties will exercise their best
efforts to:
A. Preserve intact the Acquired Assets and any assets
associated with the Hammonds Business;
B. Maintain all facilities and equipment in good condition,
ordinary wear and tear excepted;
C. Keep available the services of Seller's officers and
employees as a group; and
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D. Maintain satisfactory relationships with suppliers,
distributors, customers, and others having business relationships with
Seller.
5.3 Notification of Certain Matters. Selling Parties will:
A. Confer on a regular basis with representatives of Parent
and Buyer and report operational matters and the general status of
ongoing operations;
B. Notify Parent of any material adverse change in the normal
course of its business or in the operation of its properties and of any
governmental or third party complaints, investigations, or hearings (or
communications indicating that the same may be contemplated);
C. Not take any action which would render, or which reasonably
may be expected to render, any representation or warranty made by it in
this Agreement untrue at, or at any time prior to, the Closing; and
D. Promptly notify Parent if Selling Parties will discover
that any representation or warranty made by such party in this
Agreement was when made, or has subsequently become, untrue.
5.4 Required Approvals. As promptly as practicable after the date of
this Agreement, Parent, Buyer, and Seller will cooperate in making all filings
required by Applicable Laws in order to consummate the transactions contemplated
by this Agreement. The parties also will cooperate with each other in obtaining
all material consents in accordance with Section 7.2C.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Employment. Seller will be responsible for any severance and/or
other payments, including, but not limited to, other compensation, benefits, and
perquisites, incurred in connection therewith and during the period prior to the
Closing Date. Subject to Section 7.2, immediately after the Closing, Buyer will
agree to hire such employees of Seller on an "at will" basis as it determines
are necessary after consultation with Parent and in its sole discretion, and
Seller will cooperate with Buyer to that end.
6.2 Break-Up Fee.
A. If the transactions contemplated by this Agreement are not
consummated due to the following: (x) a material breach of any
representation, warranty, or covenant of the Selling Parties as
contained herein, (y) the Seller fails to close the transaction without
cause, or (z) a Selling Party breaches Section 6.3 and, with respect to
clause (z) only, prior to June 30, 2003, agrees to a term sheet, letter
of intent or definitive agreement, whether oral or in writing, relating
to the acquisition of the Acquired Assets, or any assets associated
with the Hammonds Business, in whole or in part, whether through
purchase, merger, consolidation, or other business combination (other
than sales of inventory or immaterial portions of Seller's assets in
the ordinary course) and such transaction is ultimately consummated,
then immediately upon the occurrence of any such event,
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subject to Section 10.3, Selling Parties will pay to Parent the sum of
[*] (the "BREAK-UP FEE").
B. If the transactions contemplated by this Agreement are not
consummated due to the following: (x) a material breach of any
representation, warranty, or covenant of the Parent or Buyer as
contained herein or (y) the Parent or Buyer fails to close the
transaction without cause then immediately upon the occurrence of any
such event, subject to Section 10.3, Parent will pay to Seller the
Break-Up Fee.
6.3 No Negotiations. Selling Parties will not, directly or indirectly,
through any officer, director, agent, member, shareholder, affiliate or
otherwise, solicit, initiate, or encourage submission of any proposal or offer
from any person or entity (including any of its officers, directors, partners,
employees, or agents) relating to any liquidation, dissolution,
recapitalization, merger, consolidation, or acquisition or purchase of all or
part of the Acquired Assets, or any assets associated with the Hammonds
Business, or any equity interest in Seller, or other similar transaction or
business combination involving Selling Parties or such assets or business, or
participate in any negotiations regarding, or furnish to any other person any
information with respect to, or otherwise cooperate in any way with, or assist,
participate in, facilitate, or encourage, any effort or attempt by any other
person or entity to do or seek any of the foregoing. Selling Parties will
promptly notify Parent if any such proposal or offer, or any inquiry from or
contact with any person with respect thereto, is made and will promptly provide
Parent with such information regarding such proposal, offer, inquiry, or contact
as Parent may request.
6.4 Public Announcements. The parties hereto will not issue any press
release or public announcement, including announcements by any party for general
reception by or dissemination to employees, agents, or customers, with respect
to this Agreement and the other transactions contemplated by this Agreement
without the prior written consent of the other parties hereto (which consent
will not be withheld unreasonably); PROVIDED, HOWEVER, that Parent may make any
disclosure or announcement that, in the opinion of its counsel, it is obligated
to make pursuant to applicable law or regulation of the New York Stock Exchange
or any national securities exchange, as applicable; PROVIDED FURTHER, that, upon
execution of this Agreement, Parent may make a public announcement of such
occurrence in a press release.
6.5 Confidentiality. Except as otherwise required by law or the rules
of any exchange on which any securities of a party will be listed, all
information marked confidential concerning a party provided to the other party
(oral, written or otherwise) in connection with this Agreement and the
transactions contemplated hereby, including all documents and copies of
documents or papers containing proprietary information ("EVALUATION
INFORMATION") will be kept in confidence by the receiving party. The party
receiving such Evaluation Information will take reasonable steps necessary to
ensure the confidentiality of the Evaluation Information by itself, its
employees, agents, consultants, advisors, members, shareholders and affiliates.
Evaluation Information does not include information that (i) is or becomes
generally available to the public other than as a result of an unauthorized
disclosure by the receiving party or its affiliates or representatives; (ii) was
within or comes into the receiving party's possession, provided that the source
of such information was not known by the receiving party to be bound by a
confidentiality agreement with, or other contractual, legal, or fiduciary
obligation of confidentiality to the party providing the information; (iii) is
disclosed by the receiving party to
[*] Confidential information on this page has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a Confidential
Treatment Request.
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others with the consent of the other party; (iv) is required to be disclosed to
any lender under existing credit facilities, or (v) is independently developed
by the receiving party. All Evaluation Information will be returned to the
appropriate party or destroyed if the Closing does not occur. Nothing in this
Section 6.5 will preclude either party from competing with the other party.
6.6 Further Assurances. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper, or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, the Asset Agreement and the Real
Property Agreement, including obtaining all necessary waivers, consents, and
approvals and effecting all necessary registrations and filings and submissions
of information requested by governmental authorities. Selling Parties agree that
they, at any time before or after the Closing, will execute, acknowledge, and
deliver any further consents, deeds, assignments, conveyances, other assurances,
documents, and instruments of transfer either necessary to consummating the
sale, transfer, assignment, grant, and conveyance of the Acquired Assets as
contemplated in this Agreement, the Asset Agreement and the Real Property
Agreement or as reasonably requested by Parent, and will take any other action
consistent with the terms of this Agreement, the Asset Agreement or the Real
Property Agreement that may reasonably be requested by Parent, for the purpose
of assigning, transferring, granting, conveying, and confirming to Buyer, or
reducing to possession, any or all property to be conveyed and transferred by
this Agreement, the Asset Agreement or the Real Property Agreement. If requested
by Parent or Buyer, Selling Parties further agree to prosecute or otherwise
enforce in their name for the benefit of Parent or Buyer, any claims, rights, or
benefits that are transferred to Buyer by this Agreement and that require
prosecution or enforcement in their name. Any prosecution or enforcement of
claims, rights, or benefits under this Section will be solely at Selling
Parties' expense. After the Closing and for a period of six months, the parties
will cooperate in good faith and use commercially reasonable efforts to resolve
any issues which may arise in the transition of the Hammonds Business.
6.7 Right to Enter and Inspect. From time to time prior to the Closing,
Parent or Buyer may enter the Real Property and other property of Seller with
Parent's or Buyer's representatives, contractors, and agents to examine the Real
Property and the Acquired Assets, conduct soil tests, environmental studies,
engineering feasibility studies, and other tests and studies, and otherwise to
evaluate, inspect and examine the Acquired Assets and the Hammonds Business and
affairs of Seller. Selling Parties will make available to Parent or Buyer, at
Parent's or Buyer's request and expense for copying by Parent or Buyer at any
reasonable time after the Closing Date, any and all books and records of Selling
Parties relating, directly or indirectly, to the Hammonds Business or the
Acquired Assets which are reasonably necessary with respect to Parent's or
Buyer's ongoing operations for inspection. Nothing herein will be construed as
imposing upon Parent or Buyer any obligation or liability for the fact of its
discovery or required disclosure of any defect or problem with any of the
Acquired Assets or Real Property.
6.8 Tax on Prior Sales. To the extent such certificates are prepared by
the applicable state taxing authority, if applicable, Selling Parties agree to
furnish to Buyer certificates from the state taxing authorities and any related
certificates that Buyer may reasonably request as evidence that all sales and
use tax liabilities of Seller accruing before the Closing Date have been fully
satisfied or provided for.
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6.9 Transfer of Permits. Selling Parties will use their best efforts to
assist Buyer to effect the assignment or other transfer of Permits and Bonds, to
the extent such Permits are transferable, from Seller to Buyer as of or as soon
as practicable after the Closing Date.
6.10 Landbanking. Seller will use its best efforts to sell to such
landbankers or property investors, approved by Parent, any real property or
model homes designated by Parent on terms and conditions acceptable to Parent.
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligation of Selling Parties. The obligations of
Selling Parties to close this transaction are subject to the satisfaction, in
their sole and absolute discretion (or waiver by them in writing), of the
following conditions on and as of the Closing:
A. Absence of Certain Actions and Events. There will not be
threatened, instituted, or pending any action or proceeding, before any
court or Governmental Authority or agency, domestic or foreign: (1)
challenging or seeking to make illegal, or to delay or otherwise
directly or indirectly to restrain or prohibit, the consummation of the
transactions contemplated hereby, or seeking to obtain damages in
connection therewith; or (2) invalidating or rendering unenforceable
any material provision of this Agreement (including without limitation
any of the Exhibits or Schedules hereto); and there will not be any
action taken, or any statute, rule, regulation, judgment, order, or
injunction proposed, enacted, entered, enforced, promulgated, issued,
or deemed applicable to the transactions contemplated hereby by any
federal, state, or foreign court, government, or Governmental Authority
or agency, which may, directly or indirectly, result in any of the
consequences referred to in clauses (1) and (2) or otherwise prohibit
consummation of the transactions contemplated hereby.
B. Truthfulness of Representations and Warranties. The
representations and warranties of Parent and Buyer set forth in Article
3 will be true and correct in all material respects as of the Closing
Date as if made at and as of the Closing Date.
C. Compliance. Parent and Buyer will in all material respects
have performed each obligation and agreement and complied with each
covenant to be performed and complied with by it hereunder at or prior
to the Closing.
D. Asset Agreement and Real Property Agreement. The Asset
Agreement and the Real Property Agreement will have been executed and
performed by each of the parties thereto.
7.2 Conditions to Obligations of Parent and Buyer. Parent's and Buyer's
obligations to close this transaction are subject to the satisfaction, in
Parent's sole and absolute discretion (or waiver by Parent in writing), of the
following conditions on and as of the Closing:
A. Financial Statements; Auditors Cooperation. Seller will
have delivered to Parent the financial statements of the Hammonds
Business, required to be included by Parent in its filings with the
Securities Exchange Commission (the "SEC"), which
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financial statements will comply with GAAP and Regulation S-X
promulgated by the SEC, and Seller's auditors shall have agreed to (1)
include consents to their reports in Parent's filings with the SEC, and
(2) agreed to provide any necessary comfort letters in respect of
financings by Parent or Buyer.
B. Schedules. Seller will have delivered updated Schedules to
Parent immediately prior to Closing.
C. Consents and Approvals. Seller will have obtained all
consents and approvals set forth in SCHEDULE 4.5 hereto, provided,
however, that (a) it need not obtain consents to the transfers of the
loans identified thereon as not being owed (and being paid off) by
Buyer or Parent, and (b) it need only obtain consents of 75% of lots
under its option contracts as of the Closing Date, provided that in all
events consents in respect of the transfer of rights to all lots in the
projects set forth in SCHEDULE 7.2C must be obtained and all such
consents must include an estoppel certificate acceptable to Parent.
D. Absence of Material Adverse Developments. After the date
hereof, neither Parent nor Buyer will have discovered any fact or
circumstance not disclosed herein regarding the Hammonds Business, the
Acquired Assets, or the properties, condition (financial or otherwise),
results of operations, or prospects of Seller which is or could be,
individually or in the aggregate with other such facts and
circumstances, materially adverse to the Hammonds Business or the
Acquired Assets.
E. No Damage or Destruction. After the date hereof, there will
have been no damage, destruction, or loss of or to any property or
properties owned or used by Seller, whether or not covered by
insurance, which in the aggregate may have a material adverse effect on
the Hammonds Business, the Acquired Assets or the financial condition,
or results of operations of Seller.
F. Environmental Matters. Parent will be satisfied with the
results of all environmental assessments made under the Real Property
Agreement.
G. Title Insurance or Title Binders. Title Company will have
delivered all Title Binders and will be prepared to issue each Title
Policy (and an endorsement thereto) as required by Section 5.2 of the
Real Property Agreement.
H. Closing Balance Sheet. Parent will have received, at least
five days prior to the Closing, the Closing Balance Sheet, which will
comply with Section 2.5.
I. Absence of Certain Actions and Events.
(1) There will not be threatened, instituted, or
pending any action or proceeding, before any court or
Governmental Authority or agency, domestic or foreign: (a)
challenging or seeking to make illegal, or to delay or
otherwise directly or indirectly to restrain or prohibit, the
consummation of the transactions contemplated hereby, or
seeking to obtain damages in connection therewith; (b) seeking
to prohibit direct or indirect ownership or operation by Buyer
of all or a material portion of the Hammonds Business or the
Acquired Assets, or to compel
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Parent or Buyer or any of their subsidiaries to divest of or
to hold separately all or a material portion of the business
or the Acquired Assets as a result of the transactions
contemplated hereby; (c) seeking to impose or confirm
limitations on the ability of Parent or Buyer effectively to
exercise directly or indirectly full rights of ownership of
any of the Acquired Assets; (d) seeking or causing any
material diminution in the direct or indirect benefits
expected to be derived by Parent or Buyer as a result of the
transactions contemplated by this Agreement; (e) invalidating
or rendering unenforceable any material provision of this
Agreement (including without limitation any of the Exhibits or
Schedules hereto); or (f) which otherwise might materially
adversely affect Parent or Buyer or any of their subsidiaries
as determined by Parent;
(2) There will not be any action taken, or any
statute, rule, regulation, judgment, order, or injunction
proposed, enacted, entered, enforced, promulgated, issued, or
deemed applicable to the transactions contemplated hereby by
any federal, state, or foreign court, government, or
Governmental Authority or agency, which may, directly or
indirectly, prohibit consummation of the transactions
contemplated hereby;
(3) There will not have occurred any of the following
events having a material adverse effect on Parent or Buyer:
(a) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or any
limitation by United States authorities on the extension of
credit by lending institutions; (b) a commencement of war,
armed hostilities, terrorist attack, or other international or
national calamity directly or indirectly involving the United
States; or (c) in the case of any of the foregoing existing at
the date hereof, a material acceleration or worsening thereof;
and
(4) There will not have occurred any suspension of
trading of Parent's common stock or a 15% or greater drop in
the Dow Jones Industrial Average (1,428 points). In such
event, Buyer may: (x) terminate this Agreement without
liability to Parent or Buyer or (y) extend the anticipated
Closing Date for up to 60 days, upon the payment of [*] and
the consent of Seller. If the Closing is extended pursuant to
this Section, then within such 60-day extension period, Buyer
may: (a) terminate this Agreement without liability (except
for the payment already made) to Parent or Buyer; (b) close on
this Agreement; or (c) extend the Closing for an additional 30
days upon payment of [*] and consent of the Seller. If Seller
does not agree to either of the extensions, then this
Agreement will terminate without any liability to any party.
If the Closing is extended and a Closing subsequently occurs,
the Effective Date will be deemed to be the end of the month
in which the Closing actually occurs; the Closing Balance
Sheet will be a balance sheet prepared in accordance with
Adjusted GAAP as of the end of the month preceding the Closing
Date; and the Final Balance Sheet will be a balance sheet
prepared in accordance with Adjusted GAAP as of the Effective
Date. Any payment made by Buyer or Parent under this Section
will, if the transaction closes, be credited against the
Purchase Price.
[*] Confidential information on this page has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a Confidential
Treatment Request.
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J. Truthfulness of Representations and Warranties. The
representations and warranties of Selling Parties in this Agreement and
in any certificate or other instrument delivered pursuant to the
provisions hereof or in connection with the transactions contemplated
hereby will be true and correct in all material respects as of the
Closing Date as if made at and as of the Closing Date.
K. Compliance. Selling Parties will in all material respects
have performed each obligation and agreement and complied with each
covenant to be performed and complied with them hereunder at or prior
to the Closing.
L. Non-Compete Agreement. Parent will have received a
Non-Disclosure and Non-Compete Agreement executed by Ronnie D. Hammonds
and Seller in the form of EXHIBIT F attached hereto (the
"NON-DISCLOSURE AND NON-COMPETE AGREEMENT").
M. Releases. Parent will have received releases of all loans
paid off in form and substance acceptable to Parent.
N. Asset Agreement. Parent will have received the Asset
Agreement executed by all parties thereto and all conditions to Closing
and closing deliveries thereto will be satisfied or made as the case
may be.
O. Real Property Agreement. Parent will have received the Real
Property Agreement executed by all parties thereto and all conditions
to Closing and closing deliveries thereto will be satisfied or made as
the case may be.
P. Opinion of Counsel. Parent will have received a legal
opinion from Seller's counsel, in form and substance satisfactory to
Parent and Parent's counsel to the effect that Section 9 of the
Indemnification Agreement, with respect to the availability of the
assets of Hammonds' Wife and the Hammonds Management Trust to satisfy
the indemnification obligations identified therein, is enforceable
under Texas law.
ARTICLE VIII
CLOSING
8.1 Selling Parties' Obligations. In addition to any other documents
required to be delivered by Selling Parties at Closing, Selling Parties will
deliver to Parent at Closing the following documents, all in form and substance
reasonably satisfactory in all respects to Parent and its counsel:
A. Deed. A Special Warranty Deed ("DEED") for each parcel
comprising the Real Property owned by Seller in fee, in form
substantially similar to EXHIBIT G hereto, and an Assignment and
Assumption Agreement ("ASSUMPTION AGREEMENT") for each parcel
comprising the Real Property in which Seller has an optionee's
interest, in form substantially similar to EXHIBIT H hereto, subject to
no defects, exceptions, easements, encumbrances, covenants, conditions,
restrictions, mining claims or liens, except the Approved Title
Exceptions.
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B. FIRPTA Affidavit. An Affidavit, signed and acknowledged by
Seller under penalties of perjury, certifying that Seller is not a
nonresident alien, foreign corporation, foreign partnership, foreign
trust, foreign estate, or other foreign person within the meaning of
Section 1445 and 7701 of the Internal Revenue Code of 1986, as amended,
and the associated Treasury Regulations.
C. Bill of Sale. An executed Bill of Sale and Assumption
Agreement ("BILL OF SALE") dated as of the Closing Date, conveying to
Buyer all of Selling Parties' right, title, and interest in and to the
Acquired Assets in the form attached hereto as EXHIBIT I will have been
delivered by each Selling Party.
D. Acquired Contracts. Executed assignments of all Acquired
Contracts (with consents if required) (the "CONTRACT ASSIGNMENTS").
E. Lease Assignments. Lease assignments (the "LEASE
ASSIGNMENTS") with respect to each parcel of real estate or any item of
personal property which is leased by Seller and which is to be assumed
by Buyer hereunder, properly executed and acknowledged by Seller, and
accompanied by all consents and estoppels of lessors required by this
Agreement and the Property Leases and other leases being assigned.
F. Permits. Executed assignments of all assignable Permits
issued to Seller by any Governmental Authority or vendor, to the extent
assignable.
G. Books and Records. All books, records, and other data
relating to the Hammonds Business and/or Acquired Assets.
H. Resolutions. Copies of the texts of the resolutions by
which the corporate action on the part of Seller and its partners
necessary to approve this Agreement and the transactions contemplated
hereby were taken and certificates executed on behalf of Seller by its
corporate secretary certifying to Parent and Buyer that such copies are
true, correct and complete copies of such corporate action or
resolutions and that such corporate action and resolutions were duly
adopted and have not been amended or rescinded.
I. Legal Opinion. Parent and Buyer will have received an
opinion from Sack & Harris, P.C., addressed to Parent and Buyer, in a
form reasonably acceptable to Parent and its counsel.
J. Consents. The consents contemplated by Section 7.2.
K. Title Policies and Title Binders. The Title Policies and
Title Binders contemplated by the Real Property Agreement.
L. Other Documents. Such other documents as Parent or Buyer or
its counsel or any lender of Parent or Buyer may reasonably request in
order to effectuate the transactions contemplated under this Agreement.
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8.2 Parent's or Buyer's Obligations. Parent or Buyer will deliver to
Seller at Closing the following, all in form and substance reasonably
satisfactory in all respects to Seller and Seller's counsel:
A. Purchase Price. The Purchase Price contemplated by Section
2.5, to the extent payable at Closing.
B. Other Documents. Such other documents as Seller or Seller's
counsel may reasonably request in order to effectuate the transactions
contemplated under this Agreement.
8.3 Transfer Fees, Title Costs, and Closing Costs and Other Fees;
Prorations.
A. Title Policy Fees. Seller will pay the standard form
premium for each Title Policy and Parent and Buyer will pay the costs
of extended coverage and special endorsements as set forth in Section
5.2 of the Real Property Agreement.
B. Documentary Taxes and Transfer Taxes. Selling Parties will
pay any documentary transfer tax, stamp tax, real estate conveyance tax
or similar tax or fee due and payable in connection with this
transaction.
C. Recording and Other Fees. Recording fees for each Deed,
rollup or catch up tax, if any, will be paid by Selling Parties.
Selling Parties will also pay all fees and expenses, including
assumption and transfer fees actually incurred by Selling Parties in
obtaining any consents and approvals required to be obtained by Selling
Parties under this Agreement or otherwise in consummating the
transactions contemplated by this Agreement.
D. Prorations.
(1) Taxes and Assessments. Real estate ad valorem
taxes and general and special assessments, utilities, rents,
and payments on Acquired Contracts will be prorated as of the
Closing Date, based upon the most current information then
available. If, at the Closing, actual tax or assessment
information is not available, then, following the Closing and
within 20 days of receipt by either Parent, Buyer or Selling
Parties of the actual tax or assessment information, Parent,
Buyer and Selling Parties will re-prorate real estate taxes
and assessments among themselves and make any necessary
adjusting payments.
(2) Basis of Prorations. All prorations and/or
adjustments called for in this Agreement will be made on the
basis of a 30-day month unless otherwise specifically
instructed in writing by Seller and Parent.
E. Taxes. Selling Parties will pay any sales or similar taxes
or assessments relating to the sale of the Acquired Assets by Seller to
Buyer.
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F. Other Fees. Subject to Section 6.2 and except as otherwise
specifically provided in this Agreement, each party will bear its own
legal and accounting fees and other expenses relating to the
transactions contemplated by this Agreement.
ARTICLE IX
SURVIVAL AND INDEMNITIES
9.1 Survival of Representations and Warranties. Regardless of any
investigation at any time made by or on behalf of any party hereto, or of any
information any party may have in respect thereof, all representations, and
warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby will survive the Closing and execution,
delivery, and recordation of the Special Warranty Deed for a period of [*].
Notwithstanding the foregoing, any claims based upon or arising out of fraud or
intentional misstatement will survive until [*].
9.2 Nature of Statements. All statements contained herein, in any
Schedule or Exhibit hereto, or in any certificate or other written instrument
delivered by or on behalf of Seller, Parent or Buyer pursuant to this Agreement,
or in connection with the transactions contemplated hereby, will be deemed
representations and warranties by Seller, Parent or Buyer, as the case may be.
9.3 Arbitration. Except as provided in Section 2.5, any other dispute,
controversy or claim, whether contractual or non-contractual, between Parent,
Buyer and Seller arising directly or indirectly out of or connected with this
Agreement, relating to the breach or alleged breach of any representation,
warranty, agreement, or covenant under this Agreement or otherwise relating to
this Agreement, unless mutually settled by Parent, Buyer and Seller, will be
resolved in accordance with the Dispute Resolution Procedures attached as
EXHIBIT D.
9.4 Indemnification Agreement. Except as provided in Article X, the
sole remedies for breach of this Agreement, the Real Property Agreement, or the
Asset Agreement are specified in the Indemnification Agreement.
ARTICLE X
TERMINATION/REMEDIES
10.1 Termination. This Agreement will be considered terminated at any
time:
A. By mutual written consent of duly authorized officers of
Parent and Buyer and Seller;
B. By Buyer, pursuant to Section 5.2 of the Real Property
Agreement; or
C. By either Parent and Buyer or Seller if the other party
breaches any of its material representations, warranties, or covenants
contained herein.
D. After June 30, 2002, if not closed by then, unless extended
pursuant to Section 7.2I(4) or by either party in the event of a breach
by the other party, to give such party an opportunity to cure.
[*] Confidential information on this page has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a Confidential
Treatment Request.
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10.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 10.1, this Agreement will become void and there
will be no liability or further obligation hereunder on the part of Parent,
Buyer or Seller or their respective shareholders, members, officers, or
directors, except (i) each party will remain obligated for its obligations under
Section 6.5 for a period of one year, and (ii) each party will remain obligated
for its obligations set forth in Section 6.2, to the extent applicable.
10.3 Specific Performance.
A. Subject to Section 10.3B, the parties to this Agreement
will have the right to obtain specific performance of the other
parties' obligations to close in the event that such parties fail to
close this Agreement in accordance with the provisions of Section 2.1.
The party who is entitled to specific performance must file and serve
an action within 10 business days of the Closing Date or waive any
right to seek specific performance.
B. The right to the Break-Up Fee under Section 6.2 and the
right to specific performance under Section 10.3A will be mutually
exclusive, and a party may seek to enforce only one such right or
remedy, all others being waived upon such election.
ARTICLE XI
GENERAL PROVISIONS
11.1 Notices. All notices, consents, and other communications hereunder
will be in writing and deemed to have been duly given when (a) delivered by
hand, (b) sent by telecopier (with receipt confirmed), provided that a copy is
mailed by registered mail, postage pre-paid return receipt requested, or (c)
when received by the addressee, if sent by Express Mail, Federal Express, or
other express delivery service (postage pre-paid return receipt requested), in
each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate as
to itself by notice to the other):
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If to Buyer: Meritage Corporation
6613 North Scottsdale Road,
Suite 200
Scottsdale, Arizona 85250
Phone: (602) 998-8700
FAX: (602) 998-9162
Attn: Chief Financial Officer
With a copy to: Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Phone: (602) 382-6252
FAX: (602) 382-6070
Attn: Steven D. Pidgeon, Esq.
If to Selling Parties Hammonds Homes, Ltd.
7171 Highway 6 North
Suite 201
Houston, TX 77095
Attn: Ronnie D. Hammonds
With a copy to: Sack & Harris, P.C.
8270 Greensboro Drive, Suite 630
McLean, Virginia 22101
Attn: James Sack, Esq.
11.2 Counterparts. The Agreements, as defined in Section 11.17, may be
executed in any number of counterparts, and each counterpart will constitute an
original instrument, but all such separate counterparts will constitute one and
the same agreement.
11.3 Governing Law. The validity, construction, and enforceability of
this Agreement will be governed in all respects by the laws of the State of
Texas, without regard to its conflict of laws rules.
11.4 Assignment. This Agreement will not be assigned by operation of
law or otherwise, except that Buyer may assign all or any portion of its rights
under this Agreement to any wholly owned subsidiary, but no such assignment will
relieve Parent or Buyer or their successors of their primary liability for all
obligations of Parent or Buyer hereunder, and except that this Agreement may be
assigned by operation of law to any corporation or entity with or into which
Parent or Buyer may be merged or consolidated or to which Parent or Buyer
transfer all or substantially all of their assets, and such corporation or
entity assumes this Agreement and all obligations and undertakings of Parent or
Buyer, as the case may be, hereunder. Any assignment in violation of the
provisions of this Agreement will be null and void.
11.5 Gender and Number. The masculine, feminine, or neuter pronouns
used herein will be interpreted without regard to gender, and the use of the
singular or plural will be deemed to include the other whenever the context so
requires.
-41-
11.6 Schedules and Exhibits. The Schedules and Exhibits referred to in
this Agreement and attached to this Agreement are incorporated in this Agreement
by such reference as if fully set forth in the text of this Agreement.
11.7 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time to require performance of any provisions hereof will, in no manner,
affect the right at a later date to enforce the same. No waiver by any party of
any condition, or breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, will be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation, or warranty of this Agreement.
11.8 Costs. If any legal action or any arbitration or other proceeding
is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party or parties will
be entitled to recover reasonable attorneys' fees, accounting fees, and other
costs incurred in that action or proceeding, in addition to any other relief to
which it or they may be entitled.
11.9 Amendment. This Agreement may not be amended except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto.
11.10 Severability. If any term, provision, covenant, or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement will remain in full force and effect and will in
no way be affected, impaired, or invalidated and the court will modify this
Agreement or, in the absence thereof, the parties will negotiate in good faith
to modify this Agreement to preserve each party's anticipated benefits under
this Agreement.
11.11 Binding Effect. Subject to the provisions and restrictions of
Section 11.4, the provisions of this Agreement are binding upon and will inure
to the benefit of the parties and their respective heirs, personal
representatives, successors and assigns. No person shall become a third party
beneficiary of this Agreement.
11.12 Construction. References in this Agreement to "Sections",
"Articles", "Exhibits", and "Schedules" are to the Sections and Articles in, and
the Exhibits and Schedules to, this Agreement, unless otherwise noted.
11.13 Time Periods. Except as expressly provided for in this Agreement,
the time for performance of any obligation or taking any action under this
Agreement will be deemed to expire at 5:00 o'clock p.m. (Phoenix, Arizona time)
on the last day of the applicable time period provided for in this Agreement. If
the time for the performance of any obligation or taking any action under this
Agreement expires on a Saturday, Sunday or legal holiday, the time for
-42-
performance or taking such action will be extended to the next succeeding day
which is not a Saturday, Sunday or legal holiday.
11.14 Headings. The headings of this Agreement are for purposes of
reference only and will not limit or define the meaning of any provision of this
Agreement.
11.15 Commission. Upon the Closing of the transactions contemplated
hereby, Seller will pay a commission to Michael P. Kahn & Associates, LLC in the
amount due.
11.16 Access to Records. Buyer will provide Seller with reasonable
access to books, records, and documents transferred to Buyer pursuant to Section
1.2 of the Asset Agreement for a period of three years or such longer period of
time as Seller may need for tax purposes from the Closing Date, provided Seller
notifies Buyer of such extended requirement within 90 days of the end of the
three-year period, at which time Seller will have the opportunity to reclaim
such books, records, and documents (or copies thereof if still used by Buyer)
with the assistance of Buyer. Buyer will use reasonable efforts to assist Seller
in locating requested documents but will not be responsible for the failure to
locate such documents.
11.17 Entire Agreement. This Agreement, the Asset Agreement, the Real
Property Agreement and the Indemnification Agreement, and all certificates,
schedules and other documents attached to or deliverable under such agreements
(collectively, the "AGREEMENTS") constitute the entire agreement, including with
respect to representations and warranties, between the parties pertaining to the
subject matter contained in the Agreements. All prior and contemporaneous
agreements, representations and understandings of the parties, oral or written,
are superseded by and merged in the Agreements. No supplement, modification or
amendment of the Agreements will be binding unless in writing and executed by
the parties to the Agreements.
11.18 Enforcement of Rights. Parent's and Buyer's rights under, and the
remedies to enforce, this Agreement are joint and several as to the Selling
Parties. Parent and Buyer are completely free to enforce any or all of their
rights under this Agreement against any of the Selling Parties with or without
the concurrence or joinder of any other Selling Party.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers thereunder
duly authorized.
MERITAGE CORPORATION,
a Maryland corporation
/s/ John R. Landon
---------------------------------
By: John R. Landon
Its: Co-Chief Executive Officer
MTH HOMES-TEXAS, L.P.,
a Texas limited partnership
By: MTH-Texas GP II, Inc., an Arizona corporation
Its: General Partner
/s/ John R. Landon
---------------------------------
By: John R. Landon
Its: President
HAMMONDS HOMES, LTD.,
a Texas limited partnership
By: Hammonds Homes I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
/s/ Ronnie D. Hammonds
---------------------------------
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO MASTER AGREEMENT]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers thereunder
duly authorized.
HAMMONDS HOMES I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
/s/ Ronnie D. Hammonds
---------------------------------
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY LAND & CATTLE, LTD.,
a Texas limited partnership
By: Crystal City I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
/s/ Ronnie D. Hammonds
---------------------------------
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
/s/ Ronnie D. Hammonds
---------------------------------
By: Ronnie D. Hammonds
Its: Trustee
RONNIE D. HAMMONDS
/s/ Ronnie D. Hammonds
---------------------------------
[SIGNATURE PAGE TO MASTER AGREEMENT]
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EXHIBIT A
ASSET AGREEMENT
-46-
AGREEMENT OF PURCHASE AND SALE OF ASSETS
BY AND AMONG
MERITAGE CORPORATION,
MTH HOMES-TEXAS, L.P.,
HAMMONDS HOMES, LTD.,
CRYSTAL CITY LAND & CATTLE, LTD.,
HAMMONDS HOMES I, LLC,
CRYSTAL CITY I, LLC,
AND
RONNIE D. HAMMONDS
Dated June 12, 2002
-47-
AGREEMENT OF PURCHASE AND SALE OF ASSETS
This AGREEMENT OF PURCHASE AND SALE OF ASSETS (the "AGREEMENT") is made
as of June 12, 2002, by and among MERITAGE CORPORATION, a Maryland corporation
("MERITAGE or PARENT"); MTH HOMES-TEXAS, L.P., a Texas limited partnership
("BUYER"); CRYSTAL CITY LAND & CATTLE, LTD., a Texas limited partnership
("CRYSTAL CITY"); HAMMONDS HOMES, LTD., a Texas limited partnership ("HAMMONDS
HOMES," and collectively with Crystal City, the "SELLER"); HAMMONDS HOMES I,
LLC, a Texas limited liability company ("HAMMONDS GP"); CRYSTAL CITY I, LLC, a
Texas limited liability company ("CRYSTAL GP," and collectively with Hammonds
GP, the "GENERAL PARTNERS"); and RONNIE D. HAMMONDS, an individual ("HAMMONDS").
Collectively, Seller, General Partners, and Hammonds will be referred to herein
as "SELLING PARTIES."
RECITALS
1. Pursuant to this Agreement, Buyer will acquire all or substantially
all of the non-real property assets of the Hammonds Business.
2. Although not a condition to Closing, Parent and Buyer anticipate
financing the acquisition of the non-real property assets of the Hammonds
Business using the proceeds of a public offering of Parent's common stock under
its recently filed Form S-3 Registration Statement.
3. The parties to this Agreement have concurrently entered into a
Master Transaction Agreement ("MASTER AGREEMENT"), Agreement of Purchase and
Sale of Real Property ("REAL PROPERTY AGREEMENT"), and Indemnification
Agreement, all described in the Master Agreement. All capitalized terms
contained herein but not otherwise defined will have the meaning ascribed to it
in the Master Agreement.
In consideration of the covenants and mutual agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in reliance upon the representations and
warranties contained herein, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
1.1 Agreement. This Agreement, together with the Master Agreement and
Indemnification Agreement, each incorporated herein by reference, will
constitute a binding contract on the part of Seller to sell and Buyer to
purchase certain assets of the Hammonds Business unrelated to real property.
1.2 Assets to be Purchased. Upon the terms and subject to the
conditions set forth herein and in the Master Agreement, and in reliance on the
respective representations and warranties of the parties contained herein and in
the Master Agreement, at the Closing, Seller agrees to sell, convey, grant,
assign, and transfer to Buyer and Buyer agrees to purchase and acquire from
Seller all of the Assets, held by Seller. The term "ASSETS" will mean:
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A. All assets disclosed on the Closing Balance Sheet, except for the
Real Property Assets (as defined in the Real Property Agreement);
B. Any cash and cash equivalents (subject to Section 2.5A of the Master
Agreement), current assets, accounts receivable and notes receivable;
C. All prepaid expenses, the right to refunds, buyins or deposits
relating to utilities and infrastructure improvements, deposits or assets
relating to performance bonds, a list and description of which is set forth on
SCHEDULE 1.2;
D. All equipment, furniture, furnishings, inventory, machinery,
software, supplies, tools, vehicles, and other personal property owned or leased
by Seller, in connection with the Hammonds Business and as listed and described
on SCHEDULE 1.2;
E. All rights and benefits in all (1) processes, know-how, technical
data, and other trade secrets; (2) sales forms and promotional and advertising
materials; (3) copyrights, patents, trademarks, and applications, registrations,
and renewals with respect thereto; (4) customer, supplier and contractor lists,
(5) software licensing and equipment rental agreements associated with computers
or data processing, and (6) goodwill associated therewith. Additionally, Seller
hereby grants to Buyer an exclusive perpetual license to use the names "Hammonds
Homes," "Hammonds Homes and Design," "Texas Big and Design," and "Texas Big" and
all variations of or derivations from such names and any and all logos used in
connection therewith; PROVIDED, HOWEVER, that the license will terminate if
Parent and Buyer do not use the name for at least two years. The foregoing is
hereinafter referred to as the "INTELLECTUAL PROPERTY;"
F. All of the books, instruments, papers, and records of whatever
nature and wherever located, whether in written form or another storage medium,
including without limitation (1) accounting and financial records; (2) property
records and reports; (3) environmental records and reports; (4) personnel and
labor relations records; and (5) property, sales, or transfer tax records and
returns; PROVIDED, HOWEVER, that such books, instruments, papers, and records
will exclude any documents relating exclusively to the Excluded Assets;
G. To the extent transferable, all the right, title, and interest in
all approvals, authorizations, certificates, consents, franchises, licenses,
permits, rights, variances, subdivision maps, plans, entitlements, and waivers
acquired, being acquired, applied for, or used, and all agreements with, and any
waivers, licenses, permits, and approvals from or to any governmental or
quasi-governmental agency, department, board, commission, bureau or any other
entity or instrumentality, and other authorities in the nature thereof, all as
related to the Assets, a list and description of which is set forth on SCHEDULE
1.2;
H. All rights and benefits in, to and under all vendor, supplier and
equipment lessor agreements concerning any supplies, services, equipment and
furniture utilized for office purposes; and
I. The interests in the projects (and related joint venture,
partnership, or other interests).
-49-
1.3 Purchase Price. The Purchase Price to be paid by Buyer for the
Assets will be as provided in Section 2.5 of the Master Agreement.
1.4 Closing. Articles VII and VIII of the Master Agreement are
incorporated herein by reference as applicable.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
2.1 Incorporation by Reference. The representations and warranties
contained in Article III of the Master Agreement are incorporated herein by
reference.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLING PARTIES
3.1 Incorporation by Reference. The representations and warranties
contained in Article IV of the Master Agreement are incorporated herein by
reference.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper, or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including obtaining all necessary
waivers, consents, and approvals and effecting all necessary registrations and
filings and submissions of information requested by governmental authorities.
Seller agrees that it, at any time before or after the Closing, will execute,
acknowledge, and deliver any further deeds, assignments, conveyances, and other
assurances, documents, and instruments of transfer reasonably requested by
Parent, and will take any other action consistent with the terms of this
Agreement that may reasonably be requested by Parent, for the purpose of
assigning, transferring, granting, conveying, and confirming to Buyer, or
reducing to possession, any or all property to be conveyed and transferred by
this Agreement. If requested by Parent or Buyer, Seller further agrees to
prosecute or otherwise enforce in its name for the benefit of Parent or Buyer,
any claims, rights, or benefits that are transferred to Buyer by this Agreement
and that require prosecution or enforcement in its name. After the Closing and
for a period of six months, the parties will cooperate in good faith and use
commercially reasonable efforts to resolve any issues that may arise in the
transition of the Hammonds Business.
ARTICLE V
GENERAL PROVISIONS
5.1 Notices. All notices, consents, and other communications hereunder
will be in writing and deemed to have been duly given when (a) delivered by
hand, (b) sent by telecopier (with receipt confirmed), provided that a copy is
mailed by registered mail, postage pre-paid return receipt requested, or (c)
when received by the addressee, if sent by Express Mail, Federal Express, or
other express delivery service (postage pre-paid return receipt requested), in
each
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case to the appropriate addresses and telecopier numbers set forth below (or to
such other addresses and telecopier numbers as a party may designate as to
itself by notice to the other):
If to Buyer: Meritage Corporation
6613 North Scottsdale Road,
Suite 200
Scottsdale, Arizona 85250
Phone: (602) 998-8700
FAX: (602) 998-9162
Attn: Chief Financial Officer
With a copy to: Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Phone: (602) 382-6252
FAX: (602) 382-6070
Attn: Steven D. Pidgeon, Esq.
If to Seller: Hammonds Homes, Ltd.
7171 Highway 6 North
Suite 201
Houston, TX 77095
Attn: Ronnie D. Hammonds
With a copy to: Sack & Harris, P.C.
8270 Greensboro Drive, Suite 630
McLean, Virginia 22101
Attn: James Sack, Esq.
5.2 Counterparts. This Agreement may be executed in any number of
counterparts, and each counterpart will constitute an original instrument, but
all such separate counterparts will constitute one and the same agreement.
5.3 Governing Law. The validity, construction, and enforceability of
this Agreement will be governed in all respects by the laws of the State of
Texas, without regard to its conflict of laws rules.
5.4 Assignment. This Agreement will not be assigned by operation of law
or otherwise, except that Parent or Buyer may assign all or any portion of their
rights under this Agreement to any wholly owned subsidiary, parent, or sister
entity, but no such assignment will relieve Buyer or its successor of its
primary liability for all obligations of Buyer hereunder, and except that this
Agreement may be assigned by operation of law to any corporation or entity with
or into which Buyer may be merged or consolidated or to which Buyer transfer all
or substantially all of their assets, and such corporation or entity assumes
this Agreement and all obligations and undertakings of Buyer hereunder. Any
assignment in violation of the provisions of this Agreement will be null and
void.
-51-
5.5 Gender and Number. The masculine, feminine, or neuter pronouns used
herein will be interpreted without regard to gender, and the use of the singular
or plural will be deemed to include the other whenever the context so requires.
5.6 Schedules and Exhibits. The Schedules and Exhibits referred to in
this Agreement and attached to this Agreement are incorporated in this Agreement
by such reference as if fully set forth in the text of this Agreement.
5.7 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time to require performance of any provisions hereof will, in no manner,
affect the right at a later date to enforce the same. No waiver by any party of
any condition, or breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, will be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation, or warranty of this Agreement.
5.8 Costs. If any legal action or any arbitration or other proceeding
is brought for the enforcement of this Agreement, or because of an alleged
dispute, breach, default, or misrepresentation in connection with any of the
provisions of this Agreement, the successful or prevailing party or parties will
be entitled to recover reasonable attorneys' fees, accounting fees, and other
costs incurred in that action or proceeding, in addition to any other relief to
which it or they may be entitled.
5.9 Amendment. This Agreement may not be amended except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto.
5.10 Severability. If any term, provision, covenant, or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement will remain in full force and effect and will in
no way be affected, impaired, or invalidated and the court will modify this
Agreement or, in the absence thereof, the parties will negotiate in good faith
to modify this Agreement to preserve each party's anticipated benefits under
this Agreement.
5.11 Binding Effect. Subject to the provisions and restrictions of
Section 5.4, the provisions of this Agreement are binding upon and will inure to
the benefit of the parties and their respective heirs, personal representatives,
successors and assigns.
5.12 Construction. References in this Agreement to "Sections,"
"Articles," "Exhibits," and "Schedules" are to the Sections and Articles in, and
the Exhibits and Schedules to, this Agreement, unless otherwise noted.
5.13 Time Periods. Except as expressly provided for in this Agreement,
the time for performance of any obligation or taking any action under this
Agreement will be deemed to expire at 5:00 o'clock p.m. (Phoenix, Arizona time)
on the last day of the applicable time period provided for in this Agreement. If
the time for the performance of any obligation or taking any
-52-
action under this Agreement expires on a Saturday, Sunday or legal holiday, the
time for performance or taking such action will be extended to the next
succeeding day which is not a Saturday, Sunday or legal holiday.
5.14 Headings. The headings of this Agreement are for purposes of
reference only and will not limit or define the meaning of any provision of this
Agreement.
5.15 Entire Agreement. This Agreement, the Real Property Agreement, the
Master Agreement, and the Indemnification Agreement and all certificates,
schedules and other documents attached to or deliverable under such agreements
(collectively, the "AGREEMENTS") constitute the entire agreement, including with
respect to representations and warranties, between the parties pertaining to the
subject matter contained in the Agreements. All prior and contemporaneous
agreements, representations and understandings of the parties, oral or written,
are superseded by and merged in the Agreements. No supplement, modification or
amendment of the Agreements will be binding unless in writing and executed by
the parties to the Agreements.
5.16 Arbitration. Any disputes arising hereunder will be resolved
pursuant to the dispute resolution provisions of EXHIBIT D to the Master
Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers thereunder
duly authorized.
MERITAGE CORPORATION,
a Maryland corporation
--------------------------------
By: John R. Landon
Its: Co-Chief Executive Officer
MTH HOMES-TEXAS, L.P.,
a Texas limited partnership
By: MTH-Texas GP II, Inc., an Arizona corporation
Its: General Partner
--------------------------------
By: John R. Landon
Its: President
HAMMONDS HOMES, LTD.,
a Texas limited partnership
By: Hammonds Homes I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
--------------------------------
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO ASSET AGREEMENT]
-54-
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers thereunder
duly authorized.
HAMMONDS HOMES I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
___________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY LAND & CATTLE, LTD.,
a Texas limited partnership
By: Crystal City I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
___________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
___________________________________________
By: Ronnie D. Hammonds
Its: Trustee
RONNIE D. HAMMONDS
___________________________________________
[SIGNATURE PAGE TO ASSET AGREEMENT]
55
EXHIBIT B
REAL PROPERTY AGREEMENT
56
AGREEMENT OF PURCHASE AND SALE OF REAL PROPERTY
BY AND AMONG
MERITAGE CORPORATION,
MTH HOMES-TEXAS, L.P.,
HAMMONDS HOMES, LTD.,
CRYSTAL CITY LAND & CATTLE, LTD.,
HAMMONDS HOMES I, LLC,
CRYSTAL CITY I, LLC,
AND
RONNIE D. HAMMONDS
Dated June 12, 2002
57
AGREEMENT OF PURCHASE AND SALE OF REAL PROPERTY
This AGREEMENT OF PURCHASE AND SALE OF REAL PROPERTY (the "AGREEMENT")
is made as of June 12, 2002, by and among MERITAGE CORPORATION, a Maryland
corporation ("MERITAGE or PARENT"); MTH HOMES-TEXAS, L.P., a Texas limited
partnership ("BUYER"); CRYSTAL CITY LAND & CATTLE, LTD., a Texas limited
partnership ("CRYSTAL CITY"); HAMMONDS HOMES, LTD., a Texas limited partnership
("HAMMONDS HOMES," and collectively with Crystal City, the "SELLER"); HAMMONDS
HOMES I, LLC, a Texas limited liability company ("HAMMONDS GP"); CRYSTAL CITY I,
LLC, a Texas limited liability company ("CRYSTAL GP," and collectively with
Hammonds GP, the "GENERAL PARTNERS"); and RONNIE D. HAMMONDS, an individual
("HAMMONDS"). Collectively, Seller, General Partners, and Hammonds will be
referred to herein as "SELLING PARTIES."
RECITALS
1. Pursuant to this Agreement, Buyer will acquire all or
substantially all of the real property assets of the Hammonds Business.
2. Although not a condition to Closing, Parent and Buyer
anticipate financing the acquisition of the real property assets of the Hammonds
Business using the proceeds of a public offering of Parent's common stock under
its recently filed Form S-3 Registration Statement.
3. The parties to this Agreement have concurrently entered into a
Master Transaction Agreement ("MASTER AGREEMENT"), Agreement of Purchase and
Sale of Assets ("ASSET AGREEMENT"), and Indemnification Agreement, all described
in the Master Agreement. All capitalized terms contained herein but not
otherwise defined will have the meaning ascribed to them in the Master
Agreement.
In consideration of the covenants and mutual agreements set forth
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, and in reliance upon the representations and
warranties contained herein, the parties agree as follows:
ARTICLE I
PURCHASE AND SALE OF REAL PROPERTY
1.1 Agreement. This Agreement, together with the Master Agreement
and Indemnification Agreement, each incorporated herein by reference, will
constitute a binding contract on the part of Seller to sell and Buyer to
purchase certain real property assets of the Hammonds Business.
1.2 Real Property Assets to be Purchased. Upon the terms and
subject to the conditions set forth herein and in the Master Agreement, and in
reliance on the respective representations and warranties of the parties
contained herein and in the Master Agreement, at the Closing, Seller agrees to
sell, convey, grant, assign, and transfer to Buyer and Buyer agrees to purchase
and acquire from Seller all of the Real Property Assets. The "REAL PROPERTY
ASSETS" will include, but are not limited to the following:
58
A. All real property assets, whether or not disclosed on
the Closing Balance Sheet, including all (1) land and buildings,
fixtures, and improvements located thereon or attached thereto; (2)
lots under development and finished lots, and all houses under
development, completed homes, and model homes (collectively, those
assets under Clauses (1) and (2) are the "OWNED REAL PROPERTY"); (3)
leases, purchase contracts, and option agreements for the purchase of
lots or land for development and related escrow instructions and
deposits (the "OPTIONED REAL PROPERTY"); and (4) easements, franchises,
licenses, permits, and rights-of-way appurtenant to or otherwise
benefiting, and all development rights, mineral rights, water rights,
utility capacity reservations, and other rights and appurtenances
affecting or pertaining to, the items described in Clauses (1), (2) and
(3) (collectively, with the Owned Real Property and the Optioned Real
Property, the "REAL PROPERTY"). SCHEDULE 5.2 as referenced in Section
5.2 sets forth the Title Binder or a listing of the Title Binders in
respect of the Real Property;
B. All rights and benefits in, to and under all (1) the
contracts referred to in A(3) above (2) sale agreements or other
contracts and related escrow instructions and escrow deposits relating
to the sale of lots, homes or other aspects of the Real Property; (3)
contracts with suppliers, materialmen, contractors, subcontractors and
others furnishing any work or materials to or for any of the Real
Property; (4) reimbursement and indemnity agreements pertaining to or
of any improvement, performance, payment, maintenance, fidelity, lien
release, or other bonds, undertakings or similar sureties; (5)
contracts with architects, designers, engineers, planners,
environmental consultants, surveyors, and other consultants; (6)
commission, listing and brokerage agreements; (7) office and storage
leases; (8) management service and construction supervisor contracts or
agreements; and (9) model home furniture, fixtures and equipment leases
and any model home lease or sale agreements (collectively, the
"ACQUIRED CONTRACTS"). SCHEDULE 1.2 sets forth a listing of the
Acquired Contracts;
C. All rights and benefits in all (1) architectural,
building, and engineering designs, drawings, specifications, and plans;
(2) all proprietary information or rights including any and all plans,
and other project related information of prior and currently active
real estate projects; (3) copyrights, patents, trademarks, and
applications, registrations, and renewals with respect thereto; and (4)
goodwill associated therewith. The foregoing is hereinafter referred to
as the "INTELLECTUAL PROPERTY;"
D. To the extent transferable, all the right, title, and
interest in all approvals, authorizations, certificates, consents,
franchises, licenses, permits, rights, variances, subdivision maps,
plans, entitlements, and waivers acquired, being acquired, applied for,
or used, and all agreements with, all environmental, feasibility,
archeological, engineering, soils and other reports of tests or
inspections in respect of the Real Property and any waivers, licenses,
permits, and approvals from or to any governmental or
quasi-governmental agency, department, board, commission, bureau or any
other entity or instrumentality, and other authorities in the nature
thereof, all as related to the Real Property, a list and description of
which is set forth on SCHEDULE 1.2; and
59
E. All rights and benefits under any manufacturer's,
subcontractor's, supplier's, merchant's, repairmen's, or other
third-party warranties, guarantees, and service or replacement programs
relating to Assumed Construction Claims.
1.3 Purchase Price. The purchase price to be paid by Buyer for the
Real Property Assets will be as provided in Section 2.5 of the Master Agreement.
1.4 Closing. Articles VII and VIII of the Master Agreement are
incorporated herein by reference as applicable.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PARENT AND BUYER
2.1 Incorporation by Reference. The representations and warranties
contained in Article III of the Master Agreement are incorporated herein by
reference.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF SELLING PARTIES
3.1 Incorporation by Reference. The representations and warranties
contained in Article IV of the Master Agreement are incorporated herein by
reference.
ARTICLE IV
CONDUCT OF SELLER PENDING THE CLOSING
4.1 Section 5.1 of the Master Agreement is incorporated herein by
reference as applicable.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Escrow. An escrow for the Real Property portion of this
transaction (the "ESCROW") will be established with Stewart Title in Houston and
Dallas and Alamo Title in Austin (the "ESCROW AGENT" or "TITLE COMPANY"). The
date that the executed copies of this Agreement and Master Agreement are
delivered to Escrow Agent is referred to in this Agreement as the "OPENING
DATE." This Agreement and the provisions of the Master Agreement referenced
herein constitute escrow instructions to Escrow Agent. If Escrow Agent requires
the execution of its standard form printed escrow instructions, Seller and Buyer
agree to execute those instructions; HOWEVER, those instructions will be
construed as applying only to Escrow Agent's engagement. If there are conflicts
between the terms of this Agreement or the Master Agreement and the terms of the
printed escrow instructions, the terms of this Agreement or the Master Agreement
will control.
5.2 Title Matters.
A. Title Binders. SCHEDULE 5.2 sets forth the current
preliminary title commitment (Form No. T-7) (a "TITLE BINDER") prepared
by Escrow Agent or its title
60
insurer for the status of title to each parcel or parcels of Real
Property. SCHEDULE 5.2 also lists each survey (the "SURVEY") of any
unsubdivided Real Property, which is acceptable to the Title Company or
its title insurer for the issuance of the extended coverage Title
Policy for such unsubdivided Real Property in accordance with Section
5.2D of this Agreement.
B. Title Supplements. If, prior to Closing, Escrow Agent
or its title insurer issues a supplemental Title Binder showing
additional exceptions to title, other than exceptions arising due to
acts or omissions of Parent or Buyer or as set forth on any prior Title
Binder (a "TITLE BINDER SUPPLEMENT"), Parent will have 10 days (a
"SUPPLEMENTAL TITLE REVIEW PERIOD") from the date of receipt of the
Title Binder Supplement and a copy of each document referred to in the
Title Binder Supplement in which to give notice of dissatisfaction as
to any additional exceptions to Seller. If Parent is dissatisfied with
any additional exceptions shown in the Title Binder Supplement, then
Parent may either (i) terminate this Agreement, the Asset Agreement and
the Master Agreement, (ii) accept title subject to such additional
exceptions or (iii) exclude the Real Property subject to the Title
Binder Supplement, in which case the Purchase Price will be adjusted
accordingly. If Parent has not notified Seller of its election prior to
the close of business on the 10th day following Parent's receipt of the
Title Binder Supplement, Parent and Buyer will be deemed to have
accepted title subject to such additional exceptions.
C. Approved Title Exceptions. Except for the list of
title or survey objections shown by Parent or Buyer on SCHEDULE 5.2
(the "DISAPPROVED TITLE EXCEPTIONS"), the exceptions to title disclosed
by Schedule B in each Title Binder, and in any Title Binder Supplement
accepted by Parent pursuant to Section 5.2B, are referred to in this
Agreement as the "APPROVED TITLE EXCEPTIONS." In any event the
Disapproved Title Exceptions, whether or not specifically listed on
SCHEDULE 5.2, will include all monetary liens or encumbrances (other
than liens for year 2002 property taxes, existing improvement district
liens, specific assessments not due and payable when the Closing occurs
or liens relating to debt to be assumed by Buyer as determined by
Parent). If, prior to Closing, any of the Disapproved Title Exceptions
are not cured by Seller to the reasonable satisfaction of Parent, then
Parent may either (i) terminate this Agreement, the Asset Agreement and
the Master Agreement, (ii) accept title subject to the Disapproved
Title Exceptions, or (iii) exclude the Real Property subject to the
Disapproved Title Exceptions, in which case the Purchase Price will be
adjusted accordingly. If Parent has not notified Seller of its election
prior to the Closing, Parent and Buyer will be deemed to have accepted
title subject to the Disapproved Title Exceptions.
D. Title Policies. At Closing, Seller will cause the
Title Company or its title insurer to provide Parent and Buyer with a
standard coverage owner's title policy (a "TITLE POLICY") for
subdivided Owned Real Property, and with an extended coverage owner's
title insurance policy (also a "TITLE POLICY") for any unsubdivided
Owned Real Property, issued by the Title Company or its title insurer
effective as of the Closing, naming Buyer as insured in the amount of
that portion of the Purchase Price allocated to the Real Property,
insuring that the estate or interest described by Schedule A, Section
2, of each Title Binder (or of each Title Binder Supplement acceptable
to Parent) to the Real Property is vested in Buyer, subject only to the
Approved Title Exceptions, and to any
61
other matters approved in writing by Parent. The cost of a standard
form title policy, as well as the costs of the endorsements listed in
the following sentence will be paid 50% by Seller and 50% by Buyer or
Parent up to an aggregate cost of $150,000 and 100% by Buyer or Parent
for costs in excess of $150,000. The Title Policy will include such
endorsements issued by the Title Company as Parent may reasonably
require, including without limitation a survey endorsement, a patent
endorsement, access endorsement, surface water right endorsement and
successor interest endorsement, the cost of which endorsements will be
borne by Seller. The costs of any other endorsements will be borne by
Buyer. Seller, at its expense, will use reasonable good faith efforts
to satisfy all of the Title Company's customary requirements for the
issuance of such Title Policy and endorsements, other than those, if
any, within Buyer's control.
E. Title Binders. At Closing, Seller will cause the
Title Company or its title insurer to provide Parent and Buyer with
Title Binders for all Optioned Real Property, which will include a
commitment to issue an owners title policy naming Buyer as the insured
in the amount of the purchase price for the Optioned Real Property
under its respective contract, insuring that the estate or interest
described by Schedule A, Part II, of each Binder (or of each Title
Binder Supplement acceptable to the Parent) to the Optioned Real
Property will become vested in Buyer, subject only to the Approved
Title Exceptions, and to any other matters approved in writing by
Parent.
5.3 Additional Agreements. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper,
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including obtaining all necessary
waivers, consents, and approvals and effecting all necessary registrations and
filings and submissions of information requested by governmental authorities.
Seller agrees that they, at any time before or after the Closing, will execute,
acknowledge, and deliver any further deeds, assignments, conveyances, and other
assurances, documents, and instruments of transfer reasonably requested by
Parent, and will take any other action consistent with the terms of this
Agreement that may reasonably be requested by Parent, for the purpose of
conveying, assigning, transferring, granting, conveying, and confirming to
Buyer, or reducing to possession, any or all property to be conveyed and
transferred by this Agreement. If requested by Parent or Buyer, Seller further
agrees to prosecute or otherwise enforce in their name for the benefit of Parent
or Buyer, any claims, rights, or benefits that are transferred to Buyer by this
Agreement and that require prosecution or enforcement in its name. After the
Closing and for a period of six months, the parties will cooperate in good faith
and use commercially reasonable efforts to resolve any issues that may arise in
the transition of the Hammonds Business.
ARTICLE VI
GENERAL PROVISIONS
6.1 Notices. All notices, consents, and other communications
hereunder will be in writing and deemed to have been duly given when (a)
delivered by hand, (b) sent by telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, postage pre-paid return receipt
requested, or (c) when received by the addressee, if sent by Express Mail,
Federal Express, or other express delivery service (postage pre-paid return
receipt requested), in each
62
case to the appropriate addresses and telecopier numbers set forth below (or to
such other addresses and telecopier numbers as a party may designate as to
itself by notice to the other):
If to Buyer: Meritage Corporation
6613 North Scottsdale Road,
Suite 200
Scottsdale, Arizona 85250
Phone: (602) 998-8700
FAX: (602) 998-9162
Attn: Chief Financial Officer
With a copy to: Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Phone: (602) 382-6252
FAX: (602) 382-6070
Attn: Steven D. Pidgeon, Esq.
If to Seller Hammonds Homes, Ltd.
7171 Highway 6 North
Suite 201
Houston, TX 77095
Attn: Ronnie D. Hammonds
With a copy to: Sack & Harris, P.C.
8270 Greensboro Drive, Suite 630
McLean, Virginia 22101
Attn: James Sack, Esq.
6.2 Counterparts. This Agreement may be executed in any number of
counterparts, and each counterpart will constitute an original instrument, but
all such separate counterparts will constitute one and the same agreement.
6.3 Governing Law. The validity, construction, and enforceability
of this Agreement will be governed in all respects by the laws of the State of
Texas, without regard to its conflict of laws rules.
6.4 Assignment. This Agreement will not be assigned by operation
of law or otherwise, except that Parent or Buyer may assign all or any portion
of their rights under this Agreement to any wholly owned subsidiary, parent or
sister entities, but no such assignment will relieve Buyer or its successor of
its primary liability for all obligations of Buyer hereunder, and except that
this Agreement may be assigned by operation of law to any corporation or entity
with or into which Buyer may be merged or consolidated or to which Buyer
transfers all or substantially all of its assets, and such corporation or entity
assumes this Agreement and all obligations and undertakings of Buyer hereunder.
Any assignment in violation of the provisions of this Agreement will be null and
void.
63
6.5 Gender and Number. The masculine, feminine, or neuter pronouns
used herein will be interpreted without regard to gender, and the use of the
singular or plural will be deemed to include the other whenever the context so
requires.
6.6 Schedules and Exhibits. The Schedules and Exhibits referred to
in this Agreement and attached to this Agreement are incorporated in this
Agreement by such reference as if fully set forth in the text of this Agreement.
6.7 Waiver of Provisions. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time to require performance of any provisions hereof will, in no manner,
affect the right at a later date to enforce the same. No waiver by any party of
any condition, or breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, will be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation, or warranty of this Agreement.
6.8 Costs. If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
will be entitled to recover reasonable attorneys' fees, accounting fees, and
other costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled.
6.9 Amendment. This Agreement may not be amended except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto.
6.10 Severability. If any term, provision, covenant, or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement will remain in full force and effect and will in
no way be affected, impaired, or invalidated and the court will modify this
Agreement or, in the absence thereof, the parties will negotiate in good faith
to modify this Agreement to preserve each party's anticipated benefits under
this Agreement.
6.11 Binding Effect. Subject to the provisions and restrictions of
Section 6.4, the provisions of this Agreement are binding upon and will inure to
the benefit of the parties and their respective heirs, personal representatives,
successors and assigns.
6.12 Construction. References in this Agreement to "Sections,"
"Articles," "Exhibits," and "Schedules" are to the Sections and Articles in, and
the Exhibits and Schedules to, this Agreement, unless otherwise noted.
6.13 Time Periods. Except as expressly provided for in this
Agreement, the time for performance of any obligation or taking any action under
this Agreement will be deemed to expire at 5:00 o'clock p.m. (Phoenix, Arizona
time) on the last day of the applicable time period provided for in this
Agreement. If the time for the performance of any obligation or taking any
64
action under this Agreement expires on a Saturday, Sunday or legal holiday, the
time for performance or taking such action will be extended to the next
succeeding day which is not a Saturday, Sunday or legal holiday.
6.14 Headings. The headings of this Agreement are for purposes of
reference only and will not limit or define the meaning of any provision of this
Agreement.
6.15 Entire Agreement. This Agreement, the Asset Agreement, the
Master Agreement and the Indemnification Agreement and all certificates,
schedules and other documents attached to or deliverable under such agreements
(collectively, the "AGREEMENTS") constitute the entire agreement, including with
respect to representations and warranties, between the parties pertaining to the
subject matter contained in the Agreements. All prior and contemporaneous
agreements, representations and understandings of the parties, oral or written,
are superseded by and merged in the Agreements. No supplement, modification or
amendment of the Agreements will be binding unless in writing and executed by
the parties to the Agreements.
6.16 Arbitration. Any disputes arising hereunder will be resolved
pursuant to the dispute resolution provisions of EXHIBIT D to the Master
Agreement.
65
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers thereunder
duly authorized.
MERITAGE CORPORATION,
a Maryland corporation
________________________________________
By: John R. Landon
Its: Co-Chief Executive Officer
MTH HOMES-TEXAS, L.P.,
a Texas limited partnership
By: MTH-Texas GP II, Inc., an Arizona corporation
Its: General Partner
________________________________________
By: John R. Landon
Its: President
HAMMONDS HOMES, LTD.,
a Texas limited partnership
By: Hammonds Homes I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO REAL PROPERTY AGREEMENT]
66
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers thereunder
duly authorized.
HAMMONDS HOMES I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY LAND & CATTLE, LTD.,
a Texas limited partnership
By: Crystal City I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
________________________________________
By: Ronnie D. Hammonds
Its: Trustee
RONNIE D. HAMMONDS
________________________________________
[SIGNATURE PAGE TO REAL PROPERTY AGREEMENT]
67
EXHIBIT C
INDEMNIFICATION AGREEMENT
68
INDEMNIFICATION AGREEMENT
THIS AGREEMENT is made as of June 12, 2002, by and among MERITAGE
CORPORATION, a Maryland corporation ("MERITAGE or PARENT"); MTH HOMES-TEXAS,
L.P., a Texas limited partnership ("BUYER"); CRYSTAL CITY LAND & CATTLE, LTD., a
Texas limited partnership ("CRYSTAL CITY"); HAMMONDS HOMES, LTD., a Texas
limited partnership ("HAMMONDS HOMES," and collectively with Crystal City, the
"SELLER"); HAMMONDS HOMES I, LLC, a Texas limited liability company ("HAMMONDS
GP"); CRYSTAL CITY I, LLC, a Texas limited liability company ("CRYSTAL GP," and
collectively with Hammonds GP, the "GENERAL PARTNERS"); and RONNIE D. HAMMONDS,
an individual (the "HAMMONDS"). Collectively, Seller, General Partners, and
Hammonds will be referred to herein as "SELLING PARTIES."
RECITALS:
A. As of the date hereof, Parent, Buyer and Selling Parties
entered into a Master Transaction Agreement (the "MASTER AGREEMENT"), pursuant
to which Buyer has agreed to purchase from Seller and Seller has agreed to sell
to Buyer the assets of the Hammonds Business. Capitalized terms not otherwise
defined shall have the meanings ascribed to them in the Master Agreement.
B. As a material condition to the consummation of the Master
Agreement, Selling Parties, Buyer and Parent are willing to enter into this
Indemnification Agreement.
AGREEMENT:
NOW THEREFORE, for valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, Selling Parties, Parent and Buyer agree as
follows:
1. INDEMNIFICATION OF PARENT AND BUYER BY SELLING PARTIES.
Subject to the limitations set forth in Section 4 of this Agreement, and without
giving effect to materiality, Selling Parties will indemnify and defend Parent
and Buyer and their direct and indirect parent companies, subsidiaries, and
affiliates, and their respective officers, directors, shareholders, successors
and assigns, from and against any and all costs, expenses, losses, damages,
fines, penalties, or liabilities (including, without limitation, interest which
may be imposed in connection therewith, court costs, litigation expenses, and
reasonable attorneys' and accounting fees) (collectively, "Losses") incurred by
them, directly or indirectly, with respect to, in connection with, arising from,
or alleged to result from, arise out of, or be in connection with:
A. A breach by any Selling Party of any representation,
warranty, covenant, restriction or agreement made by any Selling Party
and contained in the Master Agreement or in any certificate or other
document delivered by such parties to Parent or Buyer thereunder;
B. Any Excluded Liabilities; or
C. Any other claim, contingency, debt, suit, cause of
action, investigation, or proceeding of any kind whatsoever, including
those listed on any disclosure schedule
69
pursuant to the Master Agreement other than Assumed Liabilities,
whether instituted or commenced prior to or after the Closing Date and
which relates to or arises from the Hammonds Business or Acquired
Assets on or before the Closing Date.
2. INDEMNIFICATION OF SELLING PARTIES BY BUYER AND PARENT. Buyer
and Parent each, jointly and severally, will indemnify and defend Selling
Parties and their direct and indirect parent companies, subsidiaries and
affiliates, and their respective officers, directors, shareholders, successors
and assigns from and against any Losses incurred by them, directly or
indirectly, with respect to, in connection with, arising from, or alleged to
result from, arise out of, or be in connection with:
A. A breach by the Buyer of any representation,
warranty, covenant, restriction or agreement made by Buyer and
contained in the Master Agreement or in any certificate or other
document delivered by Buyer to the Selling Parties thereunder;
B. Any Assumed Liabilities;
C. Any other claim, contingency, debt, suit, cause of
action, investigation, or proceeding of any kind whatsoever instituted
or commenced after the Closing Date which relates to or arises from
Buyer's operation of the Hammonds Business after the Closing Date
(except for any claims arising out of Selling Parties' liabilities to
Buyer or obligations to Buyer under the Master Agreement, Asset
Agreement or Real Property Agreement).
3. PROCEDURE FOR INDEMNIFICATION.
A. The party which is entitled to be indemnified
hereunder (the "Indemnified Party") shall promptly give notice
hereunder to the party required to indemnify (the "Indemnifying Party")
after obtaining written notice of any claim as to which recovery may be
sought against the indemnifying party because of the indemnity in
Section 1 and Section 2 hereof and, if such indemnity shall arise from
the claim of a third party, shall permit the Indemnifying Party to
assume the defense of any such claim and any litigation resulting from
such claim, provided that, Parent or Buyer may, in their discretion,
undertake, at Seller's cost and expense, the defense of any claim for
which Seller is responsible hereunder with respect to any lots, land,
rights to purchase lots or land, project or subdivision purchased by
Buyer from Seller. Notwithstanding the foregoing, the right to
indemnification hereunder shall not be affected by any failure of an
Indemnified Party to give such notice, or delay by an Indemnified Party
in giving such notice, unless, and then only to the extent that, the
rights and remedies of the Indemnifying Party shall have been
prejudiced as a result of the failure to give, or delay in giving, such
notice. Failure by an Indemnifying Party to notify an Indemnified Party
of its election to defend any such claim or action by a third party
within 10 days after notice thereof shall have been given to the
Indemnifying Party shall be deemed a waiver by the Indemnifying Party
of its right to defend such claim or action.
B. If the Indemnifying Party assumes the defense of such
claim or litigation, the Indemnifying Party shall take all steps
necessary in the defense or settlement of such
70
claim or litigation, and will hold the Indemnified Party harmless from
and against any and all damages caused by or arising out of any
settlement approved by the Indemnifying Party or any judgment in
connection with such claim or litigation. The Indemnifying Party shall
not, in the defense of such claim or any litigation resulting
therefrom, consent to entry of any judgment (other than a judgment of
dismissal on the merits without costs) except with the written consent
of the Indemnified Party, or enter into any settlement (except with the
written consent of the Indemnified Party) which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff
to the Indemnified Party of a release from all liability in respect of
such claim or litigation.
C. If the Indemnifying Party does not assume the defense
of any such claim by a third party or litigation after receipt of
notice from the Indemnified Party to do so, the Indemnified Party may
defend against such claim or litigation in such manner as it deems
appropriate, and unless the Indemnifying Party shall deposit with the
Indemnified Party a sum equivalent to the total amount demanded in such
claim or litigation plus the Indemnified Party's estimate of the costs
of defending the same, the Indemnified Party may settle such claim or
litigation on such terms as it may deem appropriate and the
Indemnifying Party shall promptly reimburse the Indemnified Party for
the amount of such settlement and for all damages incurred by the
Indemnified Party in connection with the defense against or settlement
of such claim or litigation.
D. The Indemnifying Party shall promptly reimburse the
Indemnified Party for the amount of any judgment rendered with respect
to any claim or litigation by a third party in such litigation and for
all damage incurred by the Indemnified Party in connection with the
defense against such claim or litigation, whether or not resulting
from, arising out of, or incurred with respect to, the act of a third
party.
E. Anything in this Section 3 to the contrary
notwithstanding, the party not primarily responsible for the defense of
a claim or litigation may, with counsel of its choice and at its
expense, participate in the defense of any such claim or litigation.
4. LIMITS ON INDEMNITY; CERTAIN PROCEDURES AND PROVISIONS.
A. For purposes of the indemnification pursuant to
Section 1, any qualifications relating to materiality, material adverse
changes or the like will be disregarded.
B. The parties agree that the indemnification obligation
of the Selling Parties under Section 1 will be capped at a total amount
of [*]; provided, however, that notwithstanding anything in this
paragraph to the contrary, the [*] cap will not apply (i) in the event
of fraud or intentional misstatement, or (ii) to breach of the
Non-Disclosure and Non-Compete Agreement.
C. Selling Parties will have no obligation to indemnify
Parent or Buyer from and against any Losses resulting from, arising out
of, relating to or caused by breach of any representation, warranty,
covenant, restriction or agreement of the other party until the
aggregate Losses suffered by reason of all such breaches is in excess
of [*], and
[*] Confidential information on this page has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a Confidential
Treatment Request.
71
then only for such loss in excess of [*]. Notwithstanding anything in
this paragraph to the contrary, the [*] deductible will not apply to
(i) Construction Claims brought by home owners of Housing Units for
which Seller remains liable, (ii) any Excluded Liability, (iii) any
indemnification obligation arising as a result of a breach of any
warranty regarding title to the Acquired Assets, including Intellectual
Property; or (iv) any indemnification obligation arising as the result
of fraud or intentional misstatement.
D. Any amounts due hereunder may be satisfied from the
Holdback Fund; provided, however, that, subject to Section 2.5D of the
Master Agreement, Parent or Buyer shall notify the Selling Parties of
any single settlement in excess of [*] made by Parent or Buyer for the
account of Selling Parties, and Selling Parties may contest such
settlement within 10 days of such notice pursuant to the procedures set
forth in Section 6.
E. Nothing herein shall modify or change the Seller's
obligation to discharge the Excluded Liabilities.
5. AGREEMENT TO BE BOUND. Selling Parties will use reasonable
best efforts to ensure that the Seller comply with all representations and
warranties, covenants and agreements contained in or contemplated by the Master
Agreement and satisfy all conditions to the Closing, and they further agree that
Selling Parties shall be bound by the covenants and agreements contained in
Sections 2.5, 2.6, 6.3, 6.4, 6.5, 6.6, and Article 11 of the Master Agreement,
as if a signatory thereto.
6. ARBITRATION. Any dispute, controversy or claim, whether
contractual or non-contractual, between Parent, Buyer and Selling Parties
arising directly or indirectly out of or connected with the Master Agreement,
relating to the breach or alleged breach of any representation, warranty,
agreement, or covenant under the Master Agreement, Asset Agreement or Real
Property Agreement or otherwise relating to the indemnification obligations set
forth under this Agreement, unless mutually settled by Parent and Selling
Parties, shall be resolved in accordance with the dispute resolution procedures
attached as EXHIBIT D to the Master Agreement, incorporated herein by this
reference.
7. NOTICES. All notices, consents, and other communications
hereunder shall be in writing and deemed to have been duly given when (a)
delivered by hand, (b) sent by telecopier (with receipt confirmed), provided
that a copy is mailed by registered mail, postage pre-paid return receipt
requested, or (c) when received by the addressee, if sent by Express Mail,
Federal Express, or other express delivery service (postage pre-paid return
receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate as to itself by notice to the other):
If to Parent or Buyer: Meritage Corporation
6613 North Scottsdale Road,
Suite 200
Scottsdale, Arizona 85250
Phone: (602) 998-8700
[*] Confidential information on this page has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a Confidential
Treatment Request.
72
FAX: (602) 998-9162
Attn: Chief Financial Officer
With a copy to: Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004-0001
Phone: (602) 382-6252
FAX: (602) 382-6070
Attn: Steven D. Pidgeon, Esq.
If to Selling Parties Hammonds Homes, Ltd.
7171 Highway 6 North
Suite 201
Houston, Texas 77995
Attn: Ronnie D. Hammond
With a copy to: Sack & Harris, P.C.
8270 Greensboro Drive, Suite 630
McLean, Virginia 22101
Attn: James Sack, Esq.
8. ENFORCEMENT OF RIGHTS. Parent's and Buyer's rights under, and
the remedies to enforce, this Agreement are joint and several as to the Selling
Parties. Parent and Buyer are completely free to enforce any or all of their
rights under this Agreement against any of the Selling Parties with or without
the concurrence or joinder of any other Selling Party. Selling Parties
acknowledge and agree that all assets of Ronnie D. Hammonds, Nancy Lee Hammonds,
wife of Ronnie D. Hammonds, and the Hammonds Management Trust, or their
successors or assignees, will be available to support the indemnification
obligations set forth in Section 4B of this Agreement (except as to Nancy Lee
Hammonds' sole and separate property to the extent that such property does not
relate to the Hammonds Business or the cash proceeds from the sale of the
Hammonds business) in the event that the Holdback Fund is insufficient. Parent
and Buyer will seek any monetary recourse first against such fund before
pursuing other monetary remedies. Further, nothing in this Agreement will
preclude Parent or Buyer from seeking injunctive or other equitable relief to
enforce any covenant not to compete, confidentiality provision, or other breach;
including without limitation, the right to seek specific performance under the
Master Agreement or the Non-Compete Agreement.
9. ASSIGNMENT. This Agreement will not be assigned by operation
of law or otherwise, except that Buyer may assign all or any portion of its
rights under this Agreement to any wholly owned subsidiary, but no such
assignment will relieve Buyer or their successor of their primary liability for
all obligations of Buyer hereunder, and except that this Agreement may be
assigned by operation of law to any corporation or entity with or into which
Buyer may be merged or consolidated or to which Buyer transfer all or
substantially all of their assets, and such corporation or entity assumes this
Agreement and all obligations and undertakings of Buyer hereunder. Any
assignment in violation of the provisions of this Agreement will be null and
void.
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10. CONSTRUCTION. Captions and References in this Agreement to
"Sections," "Exhibits," and "Schedules" are to the Sections and Articles in, and
the Exhibits and Schedules to, this Agreement, unless otherwise noted.
11. GENDER AND NUMBER. The masculine, feminine, or neuter pronouns
used herein will be interpreted without regard to gender, and the use of the
singular or plural will be deemed to include the other whenever the context so
requires.
12. ENTIRE AGREEMENT. This Agreement, the Asset Agreement, the
Real Property Agreement and the Master Agreement, and all certificates,
schedules and other documents attached to or deliverable under such agreements
(collectively, the "AGREEMENTS") constitute the entire agreement, including with
respect to representations and warranties, between the parties pertaining to the
subject matter contained in the Agreements. All prior and contemporaneous
agreements, representations and understandings of the parties, oral or written,
are superseded by and merged in the Agreements. No supplement, modification or
amendment of the Agreements will be binding unless in writing and executed by
the parties to the Agreements.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each counterpart will constitute an original instrument, but
all such separate counterparts will constitute one and the same agreement.
14. GOVERNING LAW. The validity, construction, and enforceability
of this Agreement will be governed in all respects by the laws of the State of
Texas, without regard to its conflict of laws rules.
15. WAIVER OF PROVISIONS. The terms, covenants, representations,
warranties, and conditions of this Agreement may be waived only by a written
instrument executed by the party waiving compliance. The failure of any party at
any time to require performance of any provisions hereof will, in no manner,
affect the right at a later date to enforce the same. No waiver by any party of
any condition, or breach of any provision, term, covenant, representation, or
warranty contained in this Agreement, whether by conduct or otherwise, in any
one or more instances, will be deemed to be or construed as a further or
continuing waiver of any such condition or of the breach of any other provision,
term, covenant, representation, or warranty of this Agreement.
16. COSTS. If any legal action or any arbitration or other
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default, or misrepresentation in connection with any of
the provisions of this Agreement, the successful or prevailing party or parties
will be entitled to recover reasonable attorneys' fees, accounting fees, and
other costs incurred in that action or proceeding, in addition to any other
relief to which it or they may be entitled.
17. AMENDMENT. This Agreement may not be amended except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto.
18. SEVERABILITY. If any term, provision, covenant, or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void, or unenforceable, the remainder of
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the terms, provisions, covenants, and restrictions of this Agreement will remain
in full force and effect and will in no way be affected, impaired, or
invalidated and the court will modify this Agreement or, in the absence thereof,
the parties will negotiate in good faith to modify this Agreement to preserve
each party's anticipated benefits under this Agreement.
19. BINDING EFFECT. Subject to the provisions and restrictions of
Section 10, the provisions of this Agreement are binding upon and will inure to
the benefit of the parties and their respective heirs, personal representatives,
successors and assigns.
20. HEADINGS. The headings of this Agreement are for purposes of
reference only and will not limit or define the meaning of any provision of this
Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers thereunder
duly authorized.
MERITAGE CORPORATION,
a Maryland corporation
_________________________________________
By: John R. Landon
Its: Co-Chief Executive Officer
MTH HOMES-TEXAS, L.P.,
a Texas limited partnership
By: MTH-Texas GP II, Inc., an Arizona corporation
Its: General Partner
_________________________________________
By: John R. Landon
Its: President
HAMMONDS HOMES, LTD.,
a Texas limited partnership
By: Hammonds Homes I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the date first written above by their respective officers thereunder
duly authorized.
HAMMONDS HOMES I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
_________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY LAND & CATTLE, LTD.,
a Texas limited partnership
By: Crystal City I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
_________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
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WITH RESPECT TO SECTION 9 ONLY RONNIE D. HAMMONDS
AND NANCY LEE HAMMONDS, AS INDIVIDUALS, AND RONNIE
D. HAMMONDS, AS TRUSTEE OF THE HAMMONDS MANAGEMENT
TRUST, SET FORTH THERE SIGNATURES BELOW TO SIGNIFY
AGREEMENT THERETO:
RONNIE D. HAMMONDS
_________________________________________
NANCY LEE HAMMONDS
_________________________________________
HAMMONDS MANAGEMENT TRUST
_________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO INDEMNIFICATION AGREEMENT]
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EXHIBIT D
DISPUTE RESOLUTION PROCEDURES
All claims, disputes and other matters in controversy (herein called
"DISPUTE") arising directly or indirectly out of or related to this Agreement,
or the breach thereof, whether contractual or noncontractual, and whether during
the term or after the termination of such Agreement, will be resolved
exclusively according to the procedures set forth in this EXHIBIT D.
A. Negotiation. The parties will attempt to settle disputes
arising out of or relating to the Agreement or the breach thereof by a meeting
of two designated representatives of each party within five days after a request
by either of the parties to the other party asking for the same.
B. Mediation. If such dispute cannot be settled at such meeting
either party within five (5) days of such meeting may give a written notice (a
"DISPUTE NOTICE") to the other party setting forth the nature of the dispute.
The parties will attempt in good faith to resolve the dispute by mediation in
Dallas, Texas under the Commercial Mediation Rules of the American Arbitration
Association ("AAA") in effect on the date of the Dispute Notice. The parties
will select a person who will act as the mediator under this Paragraph B within
60 days of the date of the Agreement. If the dispute has not been resolved by
mediation as provided above within thirty (30) days after delivery of the
Dispute Notice, then the dispute will be determined by arbitration in accordance
with the provisions of Paragraph C hereof.
C. Arbitration. Any dispute that is not settled through mediation
as provided in Paragraph B above will be resolved by arbitration in Dallas,
Texas, governed by the Federal Arbitration Act, 9 U.S.C. Section 1 et seq., and
administered by the AAA under its Commercial Arbitration Rules in effect on the
date of the Dispute Notice, as modified by the provisions of this Section C, by
a single arbitrator. The arbitrator selected, in order to be eligible to serve,
will be a lawyer with at least 15 years experience specializing in business
matters. In the event the parties cannot agree on a mutually acceptable single
arbitrator from the list submitted by the AAA, the AAA will appoint the
arbitrator who will meet the foregoing criteria. The arbitrator will base the
award on applicable law and judicial precedent and, unless both parties agree
otherwise, will include in such award the findings of fact and conclusions of
law upon which the award is based. Judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.
Notwithstanding the foregoing:
(a) Upon the application by either party to a court for
an order confirming, modifying or vacating the award, the court will have the
power to review whether, as a matter of law based on the findings of fact
determined by the arbitrator, the award should be confirmed, modified or vacated
in order to correct any errors of law made by the arbitrator. In order to
effectuate such judicial review limited to issues of law, the parties agree (and
will stipulate to the court) that the findings of fact made by the arbitrator
will be final and binding on the parties and
79
will serve as the facts to be submitted to and relied on by the court in
determining the extent to which the award should be confirmed, modified or
vacated.
(b) Either party will have the right to apply to any
court for an order to enforce any of the ownership and confidentiality
provisions contained in the Agreement.
D. Costs and Attorneys' Fees. If either party fails to proceed
with mediation or arbitration as provided herein or unsuccessfully seeks to stay
such mediation or arbitration, or fails to comply with any arbitration award, or
is unsuccessful in vacating or modifying the award pursuant to a petition or
application for judicial review, the other party will be entitled to be awarded
costs, including reasonable attorneys' fees, paid or incurred by such other
party in successfully compelling such arbitration or defending against the
attempt to stay, vacate or modify such arbitration award and/or successfully
defending or enforcing the award.
E. Tolling of Statute of Limitations. All applicable statutes of
limitations and defenses based upon the passage of time will be tolled while the
procedures specified in this EXHIBIT D are pending. The parties will take such
action, if any, required to effectuate such tolling.
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EXHIBIT E
ESCROW AGREEMENT
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ESCROW AGREEMENT
This ESCROW AGREEMENT (this "ESCROW AGREEMENT") dated as of July 1, 2002
(the "EFFECTIVE DATE") by and among Meritage Corporation, a Maryland corporation
("PARENT"), MTH Homes-Texas, L.P., a Texas limited partnership (the "BUYER")
Hammonds Homes, Ltd., a Texas limited partnership and Crystal City Land & Cattle
Ltd., a Texas limited partnership (collectively "SELLER"), and Compass Bank, as
escrow agent only (along with any and all successor escrow agents, the "ESCROW
AGENT").
WHEREAS, pursuant to (i) the Master Transaction Agreement, dated June 12,
2002 (the "MASTER AGREEMENT"), by and among Parent, the Buyer, and Seller; (ii)
the Agreement of Purchase and Sale of Real Property, dated June 12, 2002, by and
among Parent, the Buyer, and the Seller; (iii) the Agreement of Purchase and
Sale of Assets, dated June 12, 2002, by and among Parent, the Buyer and the
Seller; and (iv) the Indemnification Agreement, dated June 12, 2002 (the
"INDEMNIFICATION AGREEMENT"), by and among Parent, the Buyer and the Seller, the
Buyer has purchased and the Seller has sold certain assets of the Seller;
WHEREAS, the Buyer has delivered to the Seller all of the Purchase Price
(as defined in the Master Agreement) pursuant to the terms of Section 2.5 of the
Master Agreement, other than the sum of [*] (the "ESCROW AMOUNT");
WHEREAS, under the terms of the Master Agreement and the Indemnification
Agreement, the Seller has agreed to protect Parent and the Buyer against certain
matters including, but not limited to, breaches of representations, warranties,
covenants and agreements made by them thereunder;
WHEREAS, the Buyer has agreed to deliver the Escrow Amount to the Escrow
Agent to be held, subject to the terms and conditions hereinafter set forth, to
satisfy claims against the Seller;
WHEREAS, the parties have agreed that, to the extent that the Escrow
Amount is not required to satisfy such claims, any balance of the Escrow Amount
will be paid to the Seller as part of the Purchase Price subject to and in
accordance with the terms and conditions hereinafter set forth; and
WHEREAS, the Escrow Agent has agreed to act as Escrow Agent hereunder in
accordance with the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises of the parties and
other good and valuable consideration, the parties agree as follows:
Section 1. Appointment of Escrow Agent. Parent and the Buyer hereby
appoint and designate the Escrow Agent as escrow agent to receive, hold and
disburse the Escrow Fund (as such term is defined in Section 2), and the Escrow
Agent hereby accepts such appointment and designation.
Section 2. Establishment of Escrow Fund. The Buyer will deposit with the
Escrow Agent and, upon receipt, the Escrow Agent will acknowledge receipt of the
Escrow Amount
[*] Confidential information on this page has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a Confidential
Treatment Request.
82
(such amount, together with investment income earned thereon pursuant to the
terms hereof, collectively, the "ESCROW FUND"). The Escrow Fund will be
segregated from other assets of the Escrow Agent. The Escrow Agent agrees to
hold and administer the Escrow Fund subject to the terms of this Escrow
Agreement.
Section 3. Investment of Escrow Fund. The Escrow Agent will invest the
Escrow Fund, as directed in writing by the Seller received by the Escrow Agent
from time to time, only in one or more of the following: (a) direct, short-term
obligations of the United States Government or its instrumentalities; (b) mutual
funds which invest all or substantially all of their assets in direct,
short-term obligations of the United States Government (including those offered
by the Escrow Agent); (c) variable rate certificates of deposit (including those
of the Escrow Agent); (d) short-term investments in money market accounts of one
or more United States banks (which may include the Escrow Agent if it is a bank)
having total assets in excess of $100,000,000, in each case having maturities of
not more than 90 days; or (e) municipal or corporate bonds having a credit
rating of A (Moody's or Standard & Poors) or better. The maximum maturity of any
single issue will not exceed 90 days. The total amount of income that is
credited to the Escrow Fund from the date of the establishment of the Escrow
Fund will be referred to as the "ACCUMULATED INCOME." The Escrow Agent will have
no liability for any investment losses on investments permitted under this
Section 3, including any losses on any investment required to be liquidated
prior to maturity in order to make a payment required hereunder. Investments
pursuant to such investment instructions described above will in all instances
be subject to availability (including any time-of-day requirements). In no
instance will the Escrow Agent have any obligation to provide investment advice
of any kind. All Accumulated Income will be credited to, and will become a part
of the Escrow Fund (and any losses on such investments will be debited to the
Escrow Fund).
Section 4. Payments from Escrow Fund; Actions on Escrow Assets.
(a) At any time or times subsequent to the Closing Date (as defined in the
Master Agreement) and prior to the Termination Date (as defined in Section 5
hereof), an Indemnified Party (as defined in the Indemnification Agreement) may
make claims against the Escrow Fund for reimbursement for claims pursuant to the
Master Agreement and the Indemnification Agreement. Such claims will be made by
an Indemnified Party by giving written notice to the Seller and the Escrow Agent
of each such claim, specifying in reasonable detail the amount and basis
thereof, which may be updated at a later time (a "NOTICE OF CLAIM") and causing
joint written instructions to be sent to Escrow Agent by the Indemnified Party
and Seller.
(b) If the Seller will dispute such claim (or a portion thereof) (a
"DISPUTED CLAIM"), it will give written notice of such objection to the Escrow
Agent and the Indemnified Party at any time within 10 business days after the
Indemnified Party's provision of the Notice of Claim (a "DISPUTE NOTICE"). All
such notices will be delivered as provided in Section 13 hereof. Absent the
Seller giving a Dispute Notice to a Disputed Claim and the receipt by the Escrow
Agent thereof within such time period, such claim will be deemed to have been
approved as a valid claim in the full amount thereof (an "ACCEPTED CLAIM").
(c) If the Seller will dispute a claim (or portion thereof) of the
Indemnified Party as above provided, then the Escrow Agent will retain a portion
of the Escrow Fund sufficient to pay
83
said Disputed Claim in full, together with the Allocable Income Amount (as that
term is hereinafter defined) and will make no distribution thereof (except for
the amount of any Accepted Claim as set forth above) unless and until the Escrow
Agent receives joint written instructions from the Indemnified Party and the
Seller or a notice of dispute resolution rendered pursuant to the Dispute
Resolution Procedures attached to the Master Agreement as Exhibit D (the
"DISPUTE RESOLUTION PROCEDURES") indicating the amount and recipient of such
distribution, at which point such Disputed Claim will be deemed an "ACCEPTED
CLAIM" for purposes of this Escrow Agreement.
(d) All Accepted Claims will be paid promptly from the Escrow Fund upon
receipt by the Escrow Agent of joint written instructions from the Indemnified
Party and the Seller; provided, however, that the Escrow Agent will not be
obligated to release or distribute amounts sooner than two business days after
the Escrow Agent has received the requisite notice or paperwork in good form.
All payments will be made by the Escrow Agent to the Indemnified Party by
delivery of an amount equal to the sum of: (i) the amount of the applicable
Accepted Claim (the "SUBJECT AMOUNT"); plus (ii) the Allocable Income Amount
earned to the last day of the month preceding the month in which payment is
made. However, in no event will the total amount of payments (the aggregate of
the Subject Amounts and the Allocable Income Amounts) to the Indemnified Party
on all Accepted Claims exceed the amount originally deposited in the Escrow Fund
and the Accumulated Income at the date of such release or distribution. For
purposes of this Escrow Agreement, the term "ALLOCABLE INCOME AMOUNT" with
respect to a claim, distribution, or any amounts to be retained in escrow
pursuant to Section 4(c) will mean the amount of income (including reinvestment
income), if any, that has been earned on the amount of any such payment (equal
to the Subject Amount) from the date of the commencement of the Escrow Fund.
Section 5. Release and Termination of Escrow Fund.
(a) This Escrow Agreement will terminate 36 months following the Closing
Date (as defined in the Master Agreement) with such Closing Date certified in
writing to the Escrow Agent by Parent (the "TERMINATION DATE"); provided,
however, that if there are otherwise outstanding claims on the Termination Date
made pursuant to the terms of the Master Agreement and the Indemnification
Agreement and as to which the Escrow Agent has before such date received a
Notice of Claim pursuant to Section 4 of this Escrow Agreement, this Escrow
Agreement will continue in effect until all such claims are resolved.
(b) The Escrow Fund will be delivered by the Escrow Agent to the Seller as
the Seller will direct in writing as follows:
(i) On the first anniversary of the Closing Date (the "FIRST
ANNIVERSARY"), an initial distribution, in an amount equal to [*], less an
amount adequate to cover the sum of amounts specified in all Notices of Claim
received by the Escrow Agent prior to the First Anniversary and which remain
outstanding without having been paid or otherwise resolved will be held by the
Escrow Agent together with the Allocable Income Amount with respect thereto to
the extent such amount remains available;
[*] Confidential information on this page has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a Confidential
Treatment Request.
84
(ii) On the second anniversary of the Closing Date (the
"SECOND ANNIVERSARY"), an additional distribution, in an amount equal to [*],
less an amount adequate to cover the sum of amounts specified in all Notices of
Claim received by the Escrow Agent prior to the Second Anniversary and which
remain outstanding without having been paid or otherwise resolved will be held
by the Escrow Agent together with the Allocable Income Amount with respect
thereto to the extent such amount remains available; and
(iii) On the third anniversary of the Closing Date (the "THIRD
ANNIVERSARY"), the remaining balance of the Escrow Fund less an amount adequate
to cover the sum of amounts specified in all Notices of Claim received by the
Escrow Agent prior to the Third Anniversary and which remain outstanding without
having been paid or otherwise resolved will be held by the Escrow Agent together
with the Allocable Income Amount with respect thereto (the "HOLDBACK") to the
extent such amount remains available. At such time as all such remaining claims
hereunder have been paid or otherwise resolved pursuant to Section 4 (unless the
Aggregate Amount of such pending claims not paid or otherwise resolved exceeds
the Holdback), the Escrow Agent will distribute the remaining Escrow Fund, if
any, (or such excess portion of the Holdback, as the case may be) to the Seller.
(c) Notwithstanding anything herein to the contrary, the Escrow Agent will
promptly dispose of all or any part of the Escrow Fund as directed by a writing
signed jointly by the Seller and Parent. The Escrow Agent will be entitled to
rely on the instructions received from the Seller and Parent, jointly, and will
have no liability to the Seller, Parent or the Buyer for any and all payments
made in accordance with such instructions.
Section 6. Duties and Responsibilities of Escrow Agent.
(a) Parent and the Buyer acknowledge and agree that the Escrow Agent: (i)
will not be responsible for any of the agreements (other than those agreements
made by Escrow Agent) referred to herein but will be obligated only for the
performance of such duties as are specifically set forth in this Escrow
Agreement on its part to be performed, each of which are ministerial (and will
not be construed to be fiduciary) in nature, and no implied duties or
obligations will be read into this Agreement against or on the part of the
Escrow Agent; (ii) will not be obligated to take any legal or other action
hereunder which might in its judgment involve any expense or liability unless it
will have been furnished with indemnification acceptable to it in its sole
discretion; (iii) may rely on and will be protected in acting or refraining from
acting upon any written notice, instruction (including, without limitation, wire
transfer instructions, whether incorporated herein or provided in a separate
written instruction), instrument, statement, request or document furnished to it
hereunder and believed by it to be genuine and to have been signed or presented
by the proper person, and will have no responsibility for determining the
accuracy thereof; and (iv) may consult counsel satisfactory to it, including
in-house counsel, if it reasonably determines that such consultation is
necessary and the opinion or advice of such counsel in any instance will be full
authorization and protection in respect of any action taken, suffered or omitted
by the Escrow Agent in good faith and in accordance with the opinion or advice
of such counsel.
(b) Neither the Escrow Agent nor any of its directors, officers or
employees will be liable to anyone for any action taken or omitted to be taken
by it or any of its directors, officers, or employees hereunder except in the
case of gross negligence, bad faith or willful misconduct.
[*] Confidential information on this page has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a Confidential
Treatment Request.
85
Parent and the Buyer, jointly and severally, covenant and agree to indemnify the
Escrow Agent (and its directors, officers and employees) and hold it (and its
directors, officers and employees) harmless without limitation from and against
any claim, loss, liability or expense of any nature incurred by the Escrow Agent
arising out of or in connection with this Agreement or with the administration
of its duties hereunder, including but not limited to reasonable legal fees and
other costs and expenses of defending or preparing to defend against any claim
or liability hereunder, and payment of any legal fees and expenses incurred by
the Escrow Agent in connection with resolution of any claim by any party
hereunder, unless such loss, liability or expense will be caused by the Escrow
Agent's gross negligence, bad faith, or willful misconduct. In no event will the
Escrow Agent be liable for indirect, punitive, special or consequential damages.
(c) The Escrow Agent will have no responsibility or liability on account
of any action or omission of any book-entry depository or subescrow agent
employed by the Escrow Agent, except to the extent that such action or omission
of any book-entry depository or subescrow agent was caused by the Escrow Agent's
own gross negligence, bad faith or willful misconduct.
(d) Parent and the Buyer each agree, jointly and severally, to pay or
reimburse the Escrow Agent for legal fees incurred in connection with the
preparation of this Escrow Agreement and to pay the Escrow Agent's reasonable
compensation for its normal services hereunder in accordance with the fee
schedule attached hereto as SCHEDULE A. The Escrow Agent will be entitled to
reimbursement by Parent and the Buyer (and Parent and the Buyer hereby agree,
jointly and severally to pay) on demand for all reasonable costs and expenses
incurred in connection with the administration of this Escrow Agreement or the
Escrow Fund created hereby which are in excess of its compensation for normal
services.
(e) The provisions of this Section 6 will survive termination of this
Escrow Agreement as well as resignation or removal of the Escrow Agent.
Section 7. Resignation of Escrow Agent. The Escrow Agent may resign at any
time upon giving 60 days written notice to the other parties hereto. Parent
agrees that it will appoint a successor escrow agent within 30 days after
receipt of such notice, and the Escrow Agent hereby agrees that, upon receiving
written instructions from Parent, it will turn over and deliver to such
successor Escrow Agent the Escrow Fund and other amounts held by it pursuant to
this Escrow Agreement in accordance with the terms of such written instructions
(as well as all applicable records and a list of disbursements) and render an
accounting as required by Section 10 hereof.
Section 8. Removal of Escrow Agent. The parties will have the right to
remove the Escrow Agent hereunder by giving notice in writing to the Escrow
Agent, specifying the date upon which such removal will take effect. In the
event of such removal, the parties agree that they will appoint a successor
Escrow Agent within 30 days after the giving of such notice, and the Escrow
Agent hereby agrees that, upon receiving written instructions from the parties
it will turn over and deliver to such successor Escrow Agent the Escrow Fund and
other amounts held by it pursuant to this Escrow Agreement in accordance with
the terms of such written instructions (as well as all applicable records and a
list of disbursements) and render an accounting as required by Section 10
hereof.
86
Section 9. Successor Escrow Agent. Upon receipt of the Escrow Fund
pursuant to this Escrow Agreement, the successor Escrow Agent will thereupon be
bound by all of the provisions hereof and the term "ESCROW AGENT" as used herein
will mean such a successor Escrow Agent.
Section 10. Accounting. In the event of the resignation or removal of the
Escrow Agent, upon the termination of the Escrow Fund or the termination of this
Escrow Agreement or upon written request by Parent under reasonable
circumstances, the Escrow Agent will render to Parent and to the successor
Escrow Agent, if any, a written accounting of its management of the Escrow Fund
and all distributions thereof.
Section 11. Assignability. This Agreement will be binding upon and inure
to the benefit of the parties hereto and their respective representatives,
successors and assigns. Neither this Agreement nor any rights, duties or
obligations hereunder will be assigned by any party hereto without the prior
written consent of the parties hereto, except that the Buyer may assign its
rights and obligations under this Agreement to the same extent it is permitted
to assign its rights and obligations under the Master Agreement.
Section 12. Law Governing. This Escrow Agreement will be governed by and
construed in accordance with the laws of the State of Texas (other than choice
of law provisions thereof).
Section 13. Notices.
(a) Any notice or other communication in connection with this Escrow
Agreement will be deemed to be delivered if in writing (or in the form of a
telegram or facsimile transmission, receipt telephonically communicated)
addressed as provided below and if either: (i) actually delivered electronically
or physically at said address (provided that if said address is a business,
delivery is made during normal business hours); or (ii) in the case of a letter,
three (3) business days will have elapsed after the same will have been
deposited in the United States mail, postage prepaid and registered or
certified, return receipt requested; or (iii) 48 hours will have elapsed after
the same will have been sent by nationally recognized overnight receipted
courier:
If to the Escrow Agent:
Compass Bank
P.O. Box 4886
Houston, TX 77210-4886
Telephone: (713) 831-5791
Facsimile: (713) 831-5746
Attn: John J. Kutac
If to Parent or the Buyer:
Meritage Corporation
6613 North Scottsdale Road, Suite 200
Scottsdale, Arizona 85250
Telephone: (480) 998-8700
87
Facsimile: (480) 998-9162
Attn: Chief Financial Officer
with a copy to:
Snell & Wilmer L.L.P.
One Arizona Center
Phoenix, Arizona 85004
Telephone: (602) 382-6000
Facsimile: (602) 382-6070
Attn: Steven D. Pidgeon, Esq.
If to Selling Parties
Hammonds Homes, Ltd.
7171 Highway 6 North
Suite 201
Houston, TX 77095
Attn: Ronnie D. Hammonds
with a copy to:
Sack & Harris, P.C.
8270 Greensboro Drive, Suite 630
McLean, Virginia 22101
Attn: James Sack, Esq.
or to such other address, which any party may be certified or registered mail
notify the other.
(b) Wiring Instructions. Any funds to be paid to or by the Escrow Agent
hereunder will be sent pursuant to such method of payment and pursuant to such
instruction as may be given in writing to the Escrow Agent, as the case may be,
in accordance with Section 13(a) above.
Section 14. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be an original, but all of which together will
constitute one and the same agreement.
Section 15. Dispute Resolution. It is understood and agreed that should
any dispute arise with respect to the delivery, ownership, right of possession,
and/or disposition of the Escrow Fund, or should any claim be made upon the
Escrow Agent or the Escrow Fund by a third party, the Escrow Agent upon receipt
of notice of such dispute or claim is authorized and will be entitled (at its
sole option and election) to retain in its possession, without liability to
anyone, all or any of said Escrow Fund until such dispute will have been settled
in accordance with the Dispute Resolution Procedures either by the mutual
written agreement of the parties involved or by a final order, decree or
judgment of a court in the United States of America, the time for perfection of
an appeal of such order, decree or judgment having expired. The Escrow Agent
88
may, but will be under no duty whatsoever to, institute or defend any legal
proceedings, which relate to the Escrow Fund.
Section 16. Force Majeure. Neither Parent nor the Buyer nor the Escrow
Agent will be responsible for delays or failures in performance resulting from
acts beyond its control. Such acts will include but not be limited to acts of
God, strikes, lockouts, riots, acts of war, epidemics, governmental regulations
superimposed after the fact, fire, communication line failures, computer
viruses, power failures, earthquakes or other disasters.
Section 17. Modifications. This Agreement may not be altered or modified
without the express written consent of the parties hereto. No course of conduct
will constitute a waiver of any of the terms and conditions of this Escrow
Agreement, unless such waiver is specified in writing, and then only to the
extent so specified. A waiver of any of the terms and conditions of this Escrow
Agreement on one occasion will not constitute a waiver of the other terms of
this Escrow Agreement, or of such terms and conditions on any other occasion.
Section 18. Entire Agreement, Severability and Further Assurances. This
Escrow Agreement together with all schedules hereto constitutes the entire
agreement among the parties, and all promises, representations, undertakings,
warranties and agreements with reference to the subject matter hereof and
inducements to the making of this Escrow Agreement relied upon by any party
hereto, have been expressed herein or in the documents incorporated herein by
reference. The invalidity or unenforceability of any provision of this Escrow
Agreement will not affect the validity or enforceability of any other provision
hereof. Each of the parties will, at the reasonable request of another party,
deliver to the requesting party all further documents or other assurances as may
reasonably be necessary or desirable in connection with this Escrow Agreement.
[SIGNATURE PAGE FOLLOWS]
89
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement or
caused the same to be executed by their duly authorized representatives, as of
the date first stated hereinabove.
COMPASS BANK
By: __________________________________
Name: __________________________________
Title:__________________________________
MERITAGE CORPORATION,
a Maryland corporation
________________________________________
By: Larry W. Seay
Its: Chief Financial Officer
MTH HOMES-TEXAS, L.P.,
a Texas limited partnership
By: MTH-Texas GP II, Inc., an Arizona
corporation
Its: General Partner
________________________________________
By: Larry W. Seay
Its: Vice President
HAMMONDS HOMES, LTD.,
a Texas limited partnership
By: Hammonds Homes I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO ESCROW AGREEMENT]
90
IN WITNESS WHEREOF, the parties have executed this Escrow Agreement or
caused the same to be executed by their duly authorized representatives, as of
the date first stated hereinabove.
HAMMONDS HOMES I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY LAND & CATTLE, LTD.,
a Texas limited partnership
By: Crystal City I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO ESCROW AGREEMENT]
91
SCHEDULE A
ESCROW AGENT FEES
$3,000 at initial funding
$3,000 on first anniversary date of closing
$3,000 on second anniversary date of closing
Plus-
$25.00 for handling each undisputed claim.
$50.00 for handling each disputed claim.
92
EXHIBIT F
NON-DISCLOSURE AND NON-COMPETE AGREEMENT
93
NON-DISCLOSURE AND NON-COMPETE AGREEMENT
This AGREEMENT (the "AGREEMENT"), is made as of July 1, 2002, by and among
MERITAGE CORPORATION, a Maryland corporation ("MERITAGE or PARENT"); MTH
HOMES-TEXAS, L.P., a Texas limited partnership ("BUYER"); CRYSTAL CITY LAND &
CATTLE, LTD., a Texas limited partnership ("CRYSTAL CITY"); HAMMONDS HOMES,
LTD., a Texas limited partnership ("HAMMONDS HOMES," and collectively with
Crystal City, the "SELLER"); HAMMONDS HOMES I, LLC, a Texas limited liability
company ("HAMMONDS GP"); CRYSTAL CITY I, LLC, a Texas limited liability company
("CRYSTAL GP," and collectively with Hammonds GP, the "GENERAL PARTNERS"); and
RONNIE D. HAMMONDS, an individual (the "HAMMONDS"). Collectively, Seller,
General Partners, and Hammonds will be referred to herein as "SELLING PARTIES."
R E C I T A L S
1. Seller owns and operates a homebuilding and home sales business (the
"HAMMONDS BUSINESS").
2. The assets of the Hammonds Business will be acquired by Buyer pursuant
to a certain Master Transaction Agreement dated as of June 12, 2002 (the "MASTER
AGREEMENT"). Capitalized terms not otherwise defined shall have the meanings
ascribed to them in the Master Agreement.
3. To induce Meritage and the Buyer to enter into the Master Agreement,
the Selling Parties have agreed to execute this Agreement.
4. For purposes of Sections 1 and 2 hereof, the term "COMPANY" shall mean
all joint ventures (50% or more owned directly or indirectly), subsidiaries and
parent companies of Meritage (whether corporate, partnership or in other form).
In consideration of the premises, the mutual promises and covenants of the
parties set forth herein, and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Selling Parties, intending
to be legally bound, agree as follows:
1. NONCOMPETITION. For the period beginning on the Effective Date and
ending on the [*] anniversary thereof (the "RESTRICTION PERIOD"), the Selling
Parties, their affiliates, subsidiaries and parent companies, and their
respective owners, partners, members, officers, directors, employees, agents, or
family members will not, directly or indirectly, either as a joint venturer,
partner, member, shareholder, owner, lender, director, advisor or consultant or
in any similar capacity:
(i) engage in the homebuilding or home sales business in any county
currently served by the Company (a "COMPETING BUSINESS");
(ii) except as set forth on SCHEDULE 1(ii), recruit, hire or discuss
employment with any person who is, or within the six month period preceding the
date of such
[*] Confidential information on this page has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a Confidential
Treatment Request.
94
activity was, an employee of the Company (other than as a result of a general
solicitation for employment); or
(iii) subject to the proviso below, solicit any customer or supplier
of the Company for a Competing Business or otherwise attempt to induce any such
customer or supplier to discontinue its relationship with the Company.
(iv) Nothing herein will preclude Selling Parties from engaging in
land banking activities or lot development activities, provided that neither
they nor any of their affiliates, subsidiaries and parent companies, and their
respective owners, partners, members, officers, directors, or then current
employees or agents, or family members will engage in the sale of finished lots
unless, at least 10 business days prior to any offer to a third party, the lots
are offered to Buyer, and if the Buyer determines to purchase the property, the
applicable selling party negotiates a sale in good faith. If no such sale is
then consummated, then the applicable selling party may pursue a sale with a
third party. If the terms of such third-party sale are different than the offer
made to Buyer, Buyer will have the right of first refusal to purchase the lots
within three business days of notice of the proposed sale to such a third party.
This notice must contain the specific terms and conditions thereof and the
proposed buyer. If Buyer does not respond to the right of first offer within 10
days or the right of first refusal within three days, Buyer will be deemed to
have waived the applicable right. Buyer can substitute cash for any non-cash
consideration (at the fair market value thereof). This right will arise again if
the third party offer is modified or amended.
(v) Notwithstanding any other provision of this Agreement, nothing
herein will be construed to limit the ability of Ronnie D. Hammonds' adult
children to engage in a Competing Business provided that the Selling Parties do
not directly or indirectly provide support in any capacity for such Competing
Business during the Restriction Period or solicit employees, agents. customers
or suppliers on their behalf during such period.
2. PROTECTION OF INFORMATION. Selling Parties recognize and acknowledge
that the Company's trade secrets and all other confidential and proprietary
information of a business, financial or other nature, including without
limitation, proprietary information of the Company, as it exists from time to
time (collectively, "CONFIDENTIAL INFORMATION"), are valuable and unique assets
of the Company and therefore agrees that, during the Restriction Period, it will
not, and will use its best efforts to ensure that its directors, officers,
employees, advisers, agents and consultants do not, disclose any Confidential
Information concerning the Company, to any person, firm, corporation,
association or other entity, for any reason whatsoever, unless previously
authorized in writing to do so by the Company. It is understood that
Confidential Information shall not include any information that is or becomes
generally available to the public other than as a result of an unauthorized
disclosure by Selling Parties, that is disclosed by Selling Parties in
accordance with the terms of a prior written consent of Meritage, or that is
owned jointly with the Company. For the purpose of enforcing this provision, the
Company may resort to any remedy available to it under the law.
3. SEVERABILITY. In the event that a court of competent jurisdiction
determines that the Restriction Period is unenforceable, the Restriction Period
shall mean the period ending [*]
[*] Confidential information on this page has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a Confidential Treatment
Request.
95
[*] after the Effective Date of this Agreement, whichever longest period is
enforceable. Additionally, if any other provision of this Agreement is held to
be illegal, invalid or unenforceable under any applicable law, then such
provision will be deemed to be modified to the minimum extent necessary to
render it legal, valid and enforceable, and if no such modification will render
it legal, valid and enforceable, then this Agreement will be construed as if not
containing the provision held to be invalid, and the rights and obligations of
the parties will be construed and enforced accordingly.
4. WAIVER. The waiver by either party of a breach of any provision of this
Agreement by the other shall not operate or be construed as a waiver of any
subsequent breach.
5. INJUNCTIVE RELIEF. The Selling Parties acknowledge and agree that the
Company would be irreparably harmed by any violation of the Selling Parties'
obligations under Sections 1 and 2 hereof and that, in addition to all other
rights or remedies available at law or in equity, the Company will be entitled
to injunctive and other equitable relief to prevent or enjoin any such
violation. The prevailing party in any litigation hereunder agrees to pay any
and all reasonable costs and expenses, including attorneys' fees, incurred by
the other party.
6. ASSIGNMENT BY MERITAGE OR THE COMPANY. Nothing in this Agreement shall
preclude Meritage, Buyer or the Company from consolidating or merging into or
with, or transferring all or substantially all of their assets to, another
corporation or entity that assumes this Agreement and all obligations and
undertakings hereunder. Upon such consolidation, merger or transfer of assets
and assumption, the term "Company" as used herein shall mean such other
corporation or entity, as appropriate, and this Agreement shall continue in full
force and effect.
7. ENTIRE AGREEMENT. This Agreement embodies the complete agreement of the
parties hereto with respect to the subject matter hereof and supersedes any
prior written, or prior or contemporaneous oral, understandings or agreements
between the parties that may have related in any way to the subject matter
hereof. This Agreement may be amended only in writing executed by Meritage and
the Selling Parties.
8. GOVERNING LAW. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement, shall be governed by and
construed in accordance with the internal laws, and not the law of conflicts, of
the State of Texas.
9. NOTICE. Any notice required or permitted under this Agreement must be
in writing and will be deemed to have been given when delivered personally or by
overnight courier service or three days after being sent by mail, postage
prepaid, at the address indicated below or to such changed address as such
person may subsequently give such notice of:
if to Meritage or the Company: Meritage Corporation
6613 North Scottsdale Road,
Suite 200
Scottsdale, Arizona 85250
Attention: Chief Financial Officer
[*] Confidential information on this page has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a Confidential Treatment
Request.
96
if to Hammonds,
Hammonds Homes or Crystal City: Hammonds Homes, Ltd.
7171 Highway 6 South
Suite 201
Houston, Texas 77095
Attention: Ronnie D. Hammonds
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
97
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the date first written above by their respective officers thereunder duly
authorized.
MERITAGE CORPORATION,
a Maryland corporation
__________________________________________
By: Larry W. Seay
Its: Chief Financial Officer
MTH HOMES-TEXAS, L.P.,
a Texas limited partnership
By: MTH-Texas GP II, Inc., an Arizona
corporation
Its: General Partner
__________________________________________
By: Larry W. Seay
Its: Vice President
HAMMONDS HOMES, LTD.,
a Texas limited partnership
By: Hammonds Homes I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
__________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO NON-DISCLOSURE AND NON-COMPETE AGREEMENT]
98
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the date first written above by their respective officers thereunder duly
authorized.
HAMMONDS HOMES I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
__________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY LAND & CATTLE, LTD.,
a Texas limited partnership
By: Crystal City I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
__________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
__________________________________________
By: Ronnie D. Hammonds
Its: Trustee
RONNIE D. HAMMONDS
__________________________________________
[SIGNATURE PAGE TO NON-DISCLOSURE AND NON-COMPETE AGREEMENT]
99
EXHIBIT G
When Recorded Return to:
________________________________________
________________________________________
________________________________________
________________________________________________________________________________
SPECIAL WARRANTY DEED
STATE OF TEXAS }
} KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF _______ }
FOR THE CONSIDERATION of Ten Dollars ($10.00), and other valuable consideration,
Hammonds Homes, Ltd., a Texas limited partnership, Crystal City Land & Cattle,
Ltd., a Texas limited partnership, CCLC Development, LLC, a Texas limited
liability company, RH Development/Park West CC, Ltd., a Texas limited
partnership, RH Development Company, Ltd., a Texas limited partnership, Avery R.
Development, Ltd., a Texas limited partnership, Gleannloch Lot Ltd., a Texas
limited partnership and Ashford Lot Development, Ltd., a Texas limited
partnership (each a "Grantor," and collectively "Grantors"), hereby grant, sell,
and, convey to MTH Homes-Texas, L.P., a Texas limited partnership ("Grantee"),
the real property ("Land") situated in ________________ Counties, Texas, and
more particularly described on Exhibit "A" attached hereto and made a part
hereof, together with any and all improvements situated thereon and all rights
and appurtenances pertaining or appertaining thereto, including, without
limitation, any and all rights, title and interests of Grantors in and to (a)
any easements, leases, rights-of-way, rights of ingress or egress or other
interests in, on or to any land, highway, street, road or avenue, open or
proposed, in, on, in front of, abutting, adjoining, or benefiting the Land (b)
oil, gas and other mineral rights and interest pertaining to the Land, and (c)
any utilities, sewage treatment capacity and water capacity serving or which
will serve the Land, including, without limitation, all reservations, credit
commitments or letters covering any such use in the future (the Land,
improvements, appurtenances and all of the foregoing set forth in clauses (a)
through (c) are hereinafter collectively referred to as the "Property").
This conveyance and the warranties of title herein are expressly made
subject only to the Approved Title Exceptions as shown on Exhibit "B" attached
hereto.
TO HAVE AND TO HOLD the Property (subject as aforesaid) unto Grantee and
Grantee's successors and assigns forever, and Grantors do hereby bind Grantors
and Grantors' successors and assigns to WARRANT and FOREVER DEFEND, all and
singular, the Property
100
(subject as aforesaid) unto Grantee and Grantee's successors and assigns,
against every person whomsoever lawfully claiming or to claim the same or any
part thereof, by through or under Grantors, but not otherwise.
Dated this 1st day of July, 2002.
HAMMONDS HOMES, LTD.,
a Texas limited partnership
By: Hammonds Homes I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_____________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY LAND & CATTLE, LTD.,
a Texas limited partnership
By: Crystal City I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_____________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO SPECIAL WARRANTY DEED]
101
HAMMONDS HOMES I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
_____________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
_____________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CCLC DEVELOPMENT, LLC,
a Texas limited liability company
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_____________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO SPECIAL WARRANTY DEED]
102
RH DEVELOPMENT/PARK WEST CC, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_____________________________________________
By: Ronnie D. Hammonds
Its: Trustee
RH DEVELOPMENT COMPANY, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_____________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO SPECIAL WARRANTY DEED]
103
AVERY R. DEVELOPMENT, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_____________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO SPECIAL WARRANTY DEED]
104
GLEANNLOCH LOT, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_____________________________________________
By: Ronnie D. Hammonds
Its: Trustee
ASHFORD LOT DEVELOPMENT, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_____________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO SPECIAL WARRANTY DEED]
105
STATE OF TEXAS )
) ss.
County of _________ )
On this, the _______ day of __________, 2002, before me, the
undersigned Notary Public, personally appeared Ronnie D. Hammonds, who
acknowledges himself to be the authorized signatory and Trustee on behalf of
Hammonds Management Trust, the sole Member of Hammonds Homes I, LLC, and Crystal
City I, LLC, each a Texas limited liability company, and that he, being
authorized so to do, and with the ability and intention to bind these entities
and their respective partnerships, corporations, and joint ventures executed the
forgoing instrument for the purposes therein contained by signing by himself as
such authorized Trustee and signatory.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
_____________________________________
Notary Public
My Commission Expires:
_____________________________
106
EXHIBIT "A"
LEGAL DESCRIPTION OF THE LAND
107
EXHIBIT "B"
APPROVED TITLE EXCEPTIONS
108
EXHIBIT H
ASSIGNMENT AND ASSUMPTION AGREEMENT
DATE: July 1, 2002
ASSIGNOR: Hammonds Homes, Ltd., Crystal City Land & Cattle, Ltd.,
CCLC Development, LLC, RH Development/Park West CC, Ltd.,
RH Development Company, Ltd., Avery R. Development, Ltd.,
Gleannloch Lot, Ltd., Ashford Lot Development, Ltd.,
each, c/o
Hammonds Homes, Ltd.
7171 Highway 6 North
Suite 201
Houston, Texas 77095
ASSIGNEE: MTH Homes-Texas, L.P.,
c/o Meritage Corporation
6613 North Scottsdale Road, Suite 200
Scottsdale, AZ 85250
RECITALS:
A. Assignor, as optionee, is party to those certain agreements, (the
"Option Agreements"), with the optionors ("Optionors") and as of the dates set
forth on Exhibit "A" attached hereto concerning such matters as, among other
matters, Assignor's option to purchase certain real property described on
Exhibit "B" attached hereto and made a part hereof (the "Property").
B. Assignor desires to assign all of its right, title and interest in, to
and under the Option Agreements and the Property to Assignee, and Assignee
desires to acquire the same and to assume the remaining obligations thereunder,
in accordance with the terms and conditions of this Assignment and Assumption
Agreement (the "Assignment").
109
COVENANTS:
FOR VALUABLE CONSIDERATION, it is agreed as follows:
1. Assignment. Effective as of July 1, 2002 (the "Effective Date"),
Assignor hereby assigns and conveys to Assignee, subject to the
other terms and conditions of this Assignment, all of Assignor's
right, title and interest in, to and under the Option Agreements and
the Property.
2. Assumption. Assignee hereby assumes and agrees to be bound by all of
Assignor's obligations under the Option Agreements, subject to the
terms and conditions of this Assignment, arising after the Effective
Date.
3. Consent of Optionor. The validity and enforceability of this
Assignment is contingent upon the execution by the Optionors, on or
before the Effective Date, of the Consent of Optionor, in the form
attached hereto and made a part hereof, or other form acceptable to
Assignee and its counsel.
4. Representations and Warranties of Assignor. Assignor represents and
warrants to Assignee, as of the Effective Date, as follows:
(a) The copies of the Option Agreements attached to this
Assignment are true and complete copies of the only agreements
between Assignor and the Optionors pertaining to the Property,
or the subject matter thereof.
(b) Assignor is the holder of the entire optionee's right, title
and interest under the Option Agreements ("Optionee's
Interests"), and Optionee's Interests have not been and will
not be assigned, encumbered, pledged or otherwise transferred
in any manner whatsoever, nor be subject to the interest of
any third person or entity, except to Assignee pursuant to
this Assignment.
(c) To the knowledge of Assignor (and with no duty of Assignor to
investigate or make inquiries), neither the Optionors nor
Assignor are in default under the Option Agreements nor has
any event occurred which would result in a default by the
Optionors or Assignor under the Option Agreements, nor has any
notice of default under the Option Agreements been given by
Optionors or Assignor to the other.
5. Further Instruments and Documents. Each party hereto will, promptly
upon the request of the other party, or Optionors, acknowledge and
deliver to the other party or Optionors, any and all further
instruments, deeds, and assurances reasonably requested or
appropriate to evidence or give effect to the provisions of this
Assignment or to satisfy Optionors' requirements in connection with
this Assignment.
110
6. Recordation. In lieu of recording this Assignment in any public
records, a Memorandum of Assignment in substantially the same form
attached hereto shall be executed before a notary public by Assignor
and Assignee, and recorded on the Effective Date in the
___________________________.
7. Successors and Assigns. This Assignment shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns.
111
IN WITNESS WHEREOF, the parties hereto have executed this Assignment as of
the day and year first above set forth.
ASSIGNOR: ASSIGNEE:
HAMMONDS HOMES, LTD., MTH HOMES-TEXAS, L.P.,
A TEXAS LIMITED PARTNERSHIP A TEXAS LIMITED PARTNERSHIP
By: Hammonds Homes I, LLC By: MTH-Texas GP II, Inc.
Its: General Partner Its: General Partner
By: Hammonds Management Trust
Its: sole Member By: John R. Landon
Its: President
By: Ronnie D. Hammonds
Its: Trustee
ASSIGNOR:
CRYSTAL CITY LAND & CATTLE, LTD.,
a Texas limited partnership
By: Crystal City I, LLC, a Texas
limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT]
112
ASSIGNOR:
HAMMONDS HOMES I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
_____________________________________
By: Ronnie D. Hammonds
Its: Trustee
ASSIGNOR:
CRYSTAL CITY I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
_____________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT]
113
ASSIGNOR:
CCLC DEVELOPMENT, LLC,
a Texas limited liability company
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_____________________________________
By: Ronnie D. Hammonds
Its: Trustee
ASSIGNOR:
RH DEVELOPMENT/PARK WEST CC, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Rust
Its: sole Member
_____________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT]
114
ASSIGNOR:
RH DEVELOPMENT COMPANY, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_____________________________________
By: Ronnie D. Hammonds
Its: Trustee
ASSIGNOR:
AVERY R. DEVELOPMENT, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_____________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT]
115
ASSIGNOR:
GLEANNLOCH LOT, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_____________________________________
By: Ronnie D. Hammonds
Its: Trustee
ASSIGNOR:
ASHFORD LOT DEVELOPMENT, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
_____________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT]
116
EXHIBIT "A"
ASSIGNED CONTRACTS
117
EXHIBIT "B"
REAL PROPERTY
118
CONSENT OF OPTIONOR
119
EXHIBIT I
BILL OF SALE AND ASSUMPTION AGREEMENT
KNOW ALL MEN BY THESE PRESENTS, that Hammonds Homes, Ltd., a Texas limited
partnership, Crystal City Land & Cattle, Ltd., a Texas limited partnership, CCLC
Development, LLC, a Texas limited liability company, RH Development/Park West
CC, Ltd., a Texas limited partnership, RH Development Company, Ltd., a Texas
limited partnership, Avery R. Development, Ltd., a Texas limited partnership,
Gleannloch Lot, Ltd., a Texas limited partnership and Ashford Lot Development,
Ltd., a Texas limited partnership (collectively, "Seller") do hereby sell,
convey, transfer, assign and set over unto MTH Homes-Texas, L.P., a Texas
limited partnership ("Buyer"), and its successors and assigns, all of Seller's
rights, title, and interest in and to the Acquired Assets as that term is
defined in that certain Master Transaction Agreement by and among Meritage
Corporation, a Maryland corporation ("Parent"), Buyer, Hammonds GP's, Hammonds,
and Seller dated June 12, 2002 ("Master Agreement"). Capitalized terms used
herein and not otherwise defined will have the same meaning as set forth in the
Master Agreement.
As provided in the Master Agreement, Seller represents, warrants and
covenants that it is the lawful owner of the Acquired Assets, free from all
liens, claims and encumbrances except as provided in the Master Agreement and
the schedules thereto. Seller will warrant and defend the same to Parent and
Buyer and their successors and assigns in accordance with the terms and
provisions of the Master Agreement and the Indemnification Agreement.
Seller hereby constitutes and appoints Buyer, its successors and assigns,
the true and lawful attorneys of Seller, with full power of substitution, for
Seller and in its name and stead or otherwise, by and on behalf and for the
benefit of Buyer, its successors and assigns, to demand and receive from time to
time any and all of the Acquired Assets and to give receipts and releases for or
in respect of the same and any part thereof, and from time to time to institute
and prosecute in the name of Seller or otherwise, but at the expense and for the
benefit of Parent and Buyer, their successors and assigns, any and all
proceedings at law, in equity, or otherwise which Parent or Buyer, their
successors and assigns, may deem proper in order to collect, assert, or enforce
any claim, right, or title of any kind in or to the Acquired Assets and to
defend or compromise any and all actions, suits, or proceedings in respect of
any of the Acquired Assets and to do all such acts and things in relation
thereto as Buyer, its successors or assigns, deem desirable. Seller hereby
declares that the appointment made and the powers hereby granted are coupled
with an interest and are and will be irrevocable by Seller in any manner or for
any reason.
Seller covenants with Parent and Buyer that it will do, execute, and
deliver or cause to be done, executed, and delivered all such further acts,
documents, or things, including without limitation, transfers, assignments,
conveyances, powers of attorney, and assurances for better assuring, conveying,
and confirming unto Parent and Buyer, their successors and assigns, all and
singular, the entire right, title, and interest of Seller throughout the world
in, to, and under the Acquired Assets as Parent and Buyer, their successors and
assigns, reasonably require.
120
This Bill of Sale and Assumption Agreement will inure to the benefit of,
and will bind Seller and Buyer and their respective successors and assigns.
IN WITNESS WHEREOF, the undersigned parties have executed this Bill of
Sale and Assumption Agreement to be effective as of the 1st of July, 2002.
HAMMONDS HOMES, LTD.,
a Texas limited partnership
By: Hammonds Homes I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_______________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CRYSTAL CITY LAND & CATTLE, LTD.,
a Texas limited partnership
By: Crystal City I, LLC, a Texas limited
liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_______________________________________________
By: Ronnie D. Hammonds
Its: Trustee
HAMMONDS HOMES I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
_______________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO BILL OF SALE AND ASSUMPTION AGREEMENT]
121
CRYSTAL CITY I, LLC,
a Texas limited liability company
By: Hammonds Management Trust
Its: sole Member
_______________________________________________
By: Ronnie D. Hammonds
Its: Trustee
CCLC DEVELOPMENT, LLC,
a Texas limited liability company
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_______________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO BILL OF SALE AND ASSUMPTION AGREEMENT]
122
RH DEVELOPMENT/PARK WEST CC, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
RH DEVELOPMENT COMPANY, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_______________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO BILL OF SALE AND ASSUMPTION AGREEMENT]
123
AVERY R. DEVELOPMENT, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_______________________________________________
By: Ronnie D. Hammonds
Its: Trustee
GLEANNLOCH LOT, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_______________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO BILL OF SALE AND ASSUMPTION AGREEMENT]
124
ASHFORD LOT DEVELOPMENT, LTD.,
a Texas limited partnership
By: CCLC Development, LLC,
a Texas limited liability company
Its: General Partner
By: Crystal City Land & Cattle, Ltd.,
a Texas limited partnership
Its: sole Member
By: Crystal City I, LLC, a Texas
limited liability company
Its: General Partner
By: Hammonds Management Trust
Its: sole Member
_______________________________________________
By: Ronnie D. Hammonds
Its: Trustee
[SIGNATURE PAGE TO BILL OF SALE AND ASSUMPTION AGREEMENT]
125