Table of Contents

 

			Page
1.	Purchase and Sale		2
	1.1	Assets to Be Transferred	2
	1.2	Excluded Assets	4
	1.3	Assumed Liabilities	6
	1.4	Excluded Liabilities	6
	1.5	Deposit	8
	1.6	Purchase Price	8
	1.7	Closing	9
	1.8	Closing Deliveries by the Sellers	9
	1.9	Closing Deliveries by the Purchaser	9
	1.10	Assignment and Assumption of the Assumed Contracts	10
	1.11	Net Working Capital Adjustment	10
	1.12	Valuation and Treatment of Uncollectable Accounts Receivable	13
	1.13	Valuation of Inventory	13
	1.14	Allocation of Proceeds	13
	1.15	Debtor In Possession Accounts	14
2.	Conveyance of Owned Real Property		14
	2.1	Real Property Escrow	14
	2.2	Real Property Escrow Opening and Closing Dates	14
	2.3	Seller’s Real Property Transfer Documents	14
	2.4	Purchaser’s Real Property Transfer Documents	15
	2.5	Recording of Title	15
	2.6	Title Commitments and Surveys	15
	2.7	Title Policies	16
	2.8	Real Property Escrow Cancellation Charges	16
	2.9	Closing Costs and Recording Fees	16
	2.10	Apportionments	17
3.	Representations and Warranties of the Seller		17
	3.1	Due Incorporation and Authority	18
	3.2	No Conflicts	18
	3.3	Organizational Documents	19
	3.4	Compliance with Laws	19
	3.5	Permits	19
	3.6	Contracts	19
	3.7	Owned Real Property	20
	3.8	Environmental Matters	21
	3.9	Intellectual Property	22
	3.10	Litigation	22

 

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			Page
	3.11	Title to Assets	22
	3.12	Inventory	23
	3.13	Employees	23
	3.14	Affiliated Transactions	23
	3.15	Product Liability; Product Warranties	23
	3.16	Absence of Certain Developments	24
	3.17	Affiliate Ownership of Assets	24
	3.18	Brokers	24
	3.19	Disclaimer	24
4.	Representations and Warranties of the Purchaser		25
	4.1	Due Incorporation and Authority	25
	4.2	No Conflicts	25
	4.3	Litigation	25
	4.4	Purchaser’s Financial Capability	25
	4.5	Brokers	26
	4.6	Acknowledgement of Sellers’ Disclaimer	26
	4.7	Purchaser Disclaimer	26
5.	Covenants and Agreements		26
	5.1	Operation of the Business	26
	5.2	Confidentiality	27
	5.3	Expenses	28
	5.4	Access to Information; Preservation of Records; Litigation Support	28
	5.5	Regulatory and Other Authorizations; Consents	30
	5.6	Further Action; Additional Assignments of Transferred Intellectual Property	30
	5.7	Assignment of Internet Domain Names	30
	5.8	Bankruptcy Court Approval	31
	5.9	Books and Records	31
	5.10	Tax Matters	31
	5.11	Notification of Certain Matters	32
	5.12	Knowledge of Breach	32
	5.13	Employment Arrangements	32
	5.14	Insurance	34
	5.15	Licensed Computer Software; Consents	34
	5.16	IT System Configuration	34
	5.17	Co-Existence Agreement	35
6.	Conditions Precedent to the Obligation of the Purchaser to Close		35
	6.1	Representations and Warranties; Covenants	35
	6.2	No Intervening Law	35
	6.3	Bankruptcy Filing	35

 

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			Page
	6.4	Closing Documents	35
	6.5	No Purchaser Objection to Initial Net Working Capital Adjustment	35
	6.6	No Material Adverse Effect	36
7.	Conditions Precedent to the Obligation of the Sellers to Close		36
	7.1	Representations and Warranties; Covenants	36
	7.2	No Intervening Law	36
	7.3	Sale Approval Order	36
	7.4	Closing Documents	36
8.	Termination of Agreement		36
	8.1	Termination Prior to Closing	36
	8.2	Refund of Deposit	38
	8.3	Break-up Fee; Expense Reimbursement	38
	8.4	Purchaser Payment for Delay in Closing	39
	8.5	Survival After Termination	39
9.	Miscellaneous		39
	9.1	Certain Definitions	39
	9.2	Consent to Jurisdiction; Service of Process; Waiver of Jury Trial	47
	9.3	Notices	47
	9.4	Entire Agreement	48
	9.5	Non- survival of Representations, Warranties and Covenants	48
	9.6	Amendments	49
	9.7	Waiver	49
	9.8	Governing Law	49
	9.9	Binding Effect; Assignment	49
	9.10	Interpretation; Headings	49
	9.11	Severability of Provisions	50
	9.12	Counterparts	50
	9.13	No Third Party Beneficiaries	50

 

SCHEDULES

 

Schedule 1.1(a)	Assumed Contracts
Schedule 1.1(c)	Transferred IP
Schedule 1.1(d)	Equipment
Schedule 1.1(e)	Personal Property
Schedule 1.1(g)	Transferred Permits
Schedule 1.1(i)	Transferred IT and Telephone Systems

 

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Schedule 1.1(l)	Other Transferred Assets
Schedule 1.1(o)	Claims of Sellers Related to Transferred Assets and Assumed Liabilities
Schedule 1.1(p)	Transferred Licensed Computer Software
Schedule 1.2(c)	Certain Excluded Assets
Schedule 1.2(e)	Excluded IP
Schedule 1.3(b)	Pre-Petition Volume Incentive Program Accruals
Schedule 1.3(c)	Seller Plants
Schedule 2.7	Title Policies
DISCLOSURE SCHEDULES
Schedule 3.4	Compliance with Laws
Schedule 3.5	Permits
Schedule 3.6(a)	Specified Contracts
Schedule 3.7(a)	Owned Real Properties
Schedule 3.8	Environmental Matters
Schedule 3.9(a)	Specified Intellectual Property
Schedule 3.9(b)	Specified Licenses
Schedule 3.9(c)	Intellectual Property Infringement
Schedule 3.9(d)	Intellectual Property Defaults
Schedule 3.10	Litigation
Schedule 3.13(b)	Employee Grievances
Schedule 3.15	Product Liability; Product Warranties
Schedule 3.16	Absence of Certain Developments
Schedule 3.18	Brokers
EXHIBITS
Exhibit A	Form of Bill of Sale
Exhibit B	Form of Assignment and Assumption Agreement
Exhibit C	Form of Assignment of Intangible Property
Exhibit D	Form of Transition Services
Exhibit E	Co-Existence Assignment and Assumption Agreement
Exhibit F	Bidding Procedures Order
Exhibit G	Form of Sale Approval Order
Exhibit H	Product Warranties

 

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ASSET PURCHASE AGREEMENT

 

THIS ASSET PURCHASE AGREEMENT (this “ Agreement ”) is made and entered into as of July 21, 2009, by and between Fleetwood Enterprises, Inc., a Delaware corporation (“ ParentCo ” ), and each of its direct or indirect subsidiaries listed on the signature page(s) hereto (together with ParentCo, each a “ Seller ” and collectively the “ Sellers ”“), and FH Holding, Inc., a Delaware corporation (the “ Purchaser ”).  Capitalized terms used are defined or cross-referenced in Section 9.1 .

 

Recitals

 

WHEREAS, on March 10, 2009 (the “ Petition Date ”), ParentCo and certain of its Affiliates filed voluntary petitions for relief under chapter 11 of title 11 of the United States Code (the “ Bankruptcy Code ”) with the United States Bankruptcy Court for the Central District of California, Riverside Division (the “ Bankruptcy Court ”).  ParentCo’s bankruptcy case is being jointly administered with those of certain of its Affiliates under Case No. 09-14254-MJ (such case, together with all cases so jointly administered, being collectively referred to herein as the “ Bankruptcy Case ”);

 

WHEREAS, the Sellers are engaged in the business of the design, production, marketing, sale and servicing of manufactured homes (other than military homes), to the extent conducted at Sellers’ plants known as Plant 4, Plant 7, Plant 8, Plant 12-1, Plant 12-3/98, Plant 19-2, Plant 27-2 and Plant 48, each of which is more specifically described in Schedule 3.7(a)  (the “ Business ”);

 

WHEREAS, the Purchaser desires to purchase certain assets of the Sellers and to assume certain Liabilities of the Sellers, and the Sellers desire to sell such assets to the Purchaser and to assign such Liabilities to the Purchaser, all on the terms and conditions set forth in this Agreement and in accordance with sections 105, 363, 365 and other applicable provisions of the Bankruptcy Code;

 

WHEREAS, the Transferred Assets will be sold pursuant to an order of the Bankruptcy Court approving such sale under section 363 of the Bankruptcy Code, and such sale will include the assumption by the Seller and concurrent assignment to the Purchaser of the Assumed Contracts under section 365 of the Bankruptcy Code and the terms and conditions of this Agreement; and

 

WHEREAS, the Sellers desire to sell the Transferred Assets, including assigning the Assumed Contracts, to further their reorganization efforts and to enable them to consummate a plan of reorganization in the Bankruptcy Case.

 

NOW, THEREFORE, in consideration of the foregoing  and the representations, warranties and covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

 

Agreement

 

1.              Purchase and Sale

 

1.1            Assets to Be Transferred .  On the terms and subject to the conditions set forth in this Agreement, at the Closing, the Sellers shall sell, assign, transfer, convey and deliver (or cause to be sold, assigned, transferred, conveyed and delivered) to the Purchaser, and the Purchaser shall purchase, assume and accept from the Sellers, all right, title and interest in and to all of the Sellers’ properties, assets and rights specifically set forth below, other than the Excluded Assets (such rights, title and interests in and to such assets, properties and rights being collectively referred to herein as the “ Transferred Assets ”), in accordance with, and with all of the protections afforded by, sections 363 and 365 of the Bankruptcy Code:

 

(a)            all Contracts listed on Schedule 1.1(a) , to the extent assumed and assigned in accordance with Section 1.10 (collectively, the “ Assumed Contracts ”);

 

(b)            all Owned Real Properties, together in each case with the Sellers’ right, title and interest in and to all structures, facilities, fixtures and improvements located thereon and all easements, licenses, rights and appurtenances relating to the foregoing;

 

(c)            all Intellectual Property used exclusively in the Business or related exclusively to the Transferred Assets, to the extent assignable or otherwise transferable, to the extent listed on or described in Schedule 1.1(c) , together with all income, royalties, damages and payments due or payable to any Seller or Affiliate thereof as of the Closing Date or thereafter (including damages and payments for past, present or future infringements or misappropriations thereof, the right to sue and recover for past infringements or misappropriations thereof, and any and all corresponding rights that, now or hereafter, may be secured throughout the world) and all copies and tangible embodiments of any such Intellectual Property in the Sellers’ possession or control (collectively, the “ Transferred IP ”);

 

(d)            all machinery, tools, tooling, equipment, parts, spare parts, vehicles and similar tangible personal property, together with any express or implied warranty (to the extent transferable) given by any manufacturer or seller of any item or component part thereof and all maintenance records and other documents relating thereto), wherever located, used by any Seller exclusively in the conduct of the Business, including those items listed on Schedule 1.1(d) , except for any such items on Schedule 1.1(d)  disposed of in the ordinary course of business prior to the date hereof (the “ Equipment ”);

 

(e)            all leasehold improvements, trade fixtures, signage, furniture, furnishings, appliances, personal computer equipment and peripherals (excluding such equipment located at ParentCo’s corporate offices in Riverside, California, the transfer of which is exclusively governed by Section 1.1(i) ), office equipment and supplies and similar tangible personal property, together with any express or implied warranty (to the extent transferable), wherever located, used by any Seller exclusively in the conduct of the Business, including those items listed on Schedule 1.1(e) , except for any such items on Schedule 1.1(e)  disposed of in the ordinary course of business prior to the date hereof (together with the Equipment, the “ Tangible Personal Property ”);

 

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(f)             all raw materials, work-in-progress, finished goods and semi-finished goods, supplies, packaging materials and other inventories, wherever located, used or produced by any Seller, to the extent exclusively used in the conduct of the Business, as the same exists on the Closing Date (the “ Inventory ”);

 

(g)            all Permits and all pending applications therefor or renewals thereof relating exclusively to the Business or any of the Transferred Assets, to the extent listed on Schedule 1.1(g) , in each case to the extent assignable or otherwise transferable at Purchaser’s expense in accordance with their respective terms or under applicable Law (the “ Transferred Permits ”);

 

(h)            originals or copies of all data, databases and records (whether in print, electronic or other format) related primarily to the operation of the Business or the ownership or use of the Transferred Assets or the Assumed Liabilities, including all books of account, general, financial, accounting, engineering and legal records, unit and house files, invoices, customers’ and suppliers’ lists and records (including account histories), mailing lists, e-mail address lists, other distribution lists, inventory and supply managements records, engineering designs and related approvals of Governmental Bodies, self-regulatory organizations, and trade associations, billing records, sales and promotional literature, creative materials, research and development reports and records, production reports and records, employee health and safety records, reports and logs for the Owned Real Properties (including OSHA reports and logs), service and warranty records, product recall or withdrawal records, equipment logs, operating guides and manuals, correspondence files relating exclusively to the Business (including correspondence with customers, suppliers, landlords, tenants, licensors, licensees, Governmental Bodies and legal, accounting and other professional advisors (except, in the case of legal correspondence, any correspondence constituting privileged communication between any Seller and its legal counsel)), Permits included in the Transferred Assets, Purchase Orders (both those included in the Transferred Assets and, to the extent retained by any Seller, historic Purchase Orders) and Assumed Contracts, but excluding any records of the Sellers described in Section 1.2 (the “ Books and Records ”);

 

(i)             (i) the telephone (landline and mobile) and facsimile numbers listed under Part 1 of Schedule 1.1(i) , (ii) subject to Section 5.16 , all computer hardware and peripherals, telephone systems and data systems used by any Seller at any Owned Real Property exclusively in the conduct of the Business, including those items listed under Part 2 of Schedule 1.1(i) , except for any such items listed under Part 2 of Schedule 1.1(i)  disposed of in the ordinary course of business prior to the date hereof, and (iii) subject to Section 5.16 , the computer hardware and peripherals, telephone systems and data systems used by Sellers listed or described under Part 3 of Schedule 1.1(i) ;

 

(j)             all credits, deposits (including security or other deposits under any real property lease included in the Assumed Contracts), prepaid expenses, claims for refunds (excluding Tax refunds) and other similar financial assets, in each case, to the extent exclusively related to the Business and included in current assets for purposes of the Net Working Capital;

 

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(k)            any Account Receivable that is aged thirty (30) days or less from the date of invoice (or equivalent payment due notice) as of the Effective Time, and all proceeds of the foregoing, except for any such Account Receivable (and related proceeds) that is owing by an account debtor that is bankrupt, in receivership or insolvent or has ceased to conduct business or is disputing such Account Receivable;

 

(l)             all other properties, assets or rights of the Sellers or any of their Affiliates, if any, listed on Schedule 1.1(l) ;

 

(m)           going concern value and goodwill with respect to the Transferred Assets and the Business;

 

(n)            all insurance benefits, including rights and proceeds (i) to the extent relating to any damage to or destruction or other loss of any of the Transferred Assets or other event affecting the Business, in any such case occurring from and between the date hereof and the Closing Date, whether received or receivable by or on behalf of any Seller on or after the date hereof, unless expended on repairing or replacing any such Transferred Asset before the Closing Date, and (ii) paid or payable under any Seller insurance policy with respect to any Warranty Liabilities assumed by the Purchaser pursuant to Section 1.3(c) ;

 

(o)            claims of the Sellers (or any of them) against any Person relating to the Transferred Assets, the Assumed Liabilities or the Business, solely to the extent listed or described on Schedule 1.1(o)  and not constituting a Pre-Closing Claim;

 

(p)            subject to Section 5.15 , the licensed Computer Software listed or described on Schedule 1.1(p) , solely to the extent assignable at Purchaser’s sole expense; and

 

(q)            all Purchase Orders existing and outstanding on the Closing Date and any additional Contracts to be transferred to Purchaser pursuant to Section 5.1(a) .

 

1.2            Excluded Assets .  The Sellers are not selling, and the Purchaser is not purchasing, any assets other than those specifically set forth in Section 1.1 , and without limiting the generality of the foregoing, the term “Transferred Assets” shall expressly exclude the following assets of the Sellers (including all of the Sellers’ right, title and interest therein and thereto), all of which shall be retained by the Sellers (collectively, the “ Excluded Assets ”):

 

(a)            except as provided in Section 1.1(j) , all of the Sellers’ cash, bank deposits and cash equivalents;

 

(b)            all of the Sellers’ bank accounts;

 

(c)            all of the assets of the Sellers, if any, listed or described in Schedule 1.2(c) ;

 

(d)            all of the Contracts of any Seller, except the Assumed Contracts;

 

(e)            except as specifically listed or referred to in Schedule 1.1(c), all Intellectual Property not used exclusively in or related exclusively to the Business, including,

 

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but not limited to, all trademarks, service marks, logos, slogans, trade names, and corporate names (and all translations, adaptations, derivations and combinations of the foregoing) and internet domain names, incorporating “Fleetwood Motor Homes,” brand names of the ParentCo’s recreational vehicle products, “Fleetwood Enterprises” or “Fleetwood Travel Trailers” or products of the travel trailer division, or any derivations therefrom together with all income, royalties, damages and payments due or payable (and all goodwill associated with any of the foregoing), and any and all corresponding rights that, now or hereafter, may be secured throughout the world and all copies and tangible embodiments of any such Intellectual Property in the Sellers’ possession or control, including all Intellectual Property listed on or described in Schedule 1.2(e)  (the “ Excluded IP ”);

 

(f)             except as provided in Section 1.1(n)  or Section 5.14 , all insurance policies relating to the Business and rights, claims or causes of action thereunder;

 

(g)            all rights of the Sellers under this Agreement and any other Closing document entered into or executed by the Sellers (or any of them) in connection with the transactions contemplated hereby;

 

(h)            all IT Systems and Computer Software, except for any such items that (i) are referred to in Section 1.1(i) , or (ii) constitute a Transferred Asset pursuant to Section 1.1(p) ;

 

(i)             any interest or right to any refund of Taxes relating to the Business, the Transferred Assets or the Assumed Liabilities for, or applicable to, any taxable period (or portion thereof) ending prior to the Closing Date;

 

(j)             all corporate books and records, Tax Returns, board minutes and organizational documents of the Sellers, and any other records that any Seller is required to retain by Law (except that copies of such retained records shall be provided to the Purchaser at Closing if such records would otherwise constitute a Transferred Asset pursuant to Section 1.1(h) ), all information held by any Seller prohibited from being transferred or disclosed pursuant to applicable Law, all privileged communications or information of any Seller (including any attorney work product), all non-public information primarily related to or prepared in connection with the Bankruptcy Case, and the Sellers’ books and records relating to any Excluded Assets;

 

(k)            any Account Receivable that is aged more than thirty (30) days from the date of invoice (or equivalent payment due notice) as of the Effective Time or that is otherwise owing by an account debtor that is bankrupt, in receivership or insolvent or has ceased to conduct business or is disputing such Account Receivable;

 

(l)             all notes receivable due to any Seller that are not Accounts Receivable and that arose or arise out of the operation of the Business prior to the Closing, together with any unpaid interest or fees accrued thereon or other amounts due with respect thereto;

 

(m)           all of the rights and claims of the Sellers to avoidance actions available to any Seller under chapter 5 of the Bankruptcy Code, of whatever kind or nature, including avoidance actions under sections 544, 545, 547, 548, 549 and 553 of the Bankruptcy Code,

 

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and any related claims and actions arising under such sections by operation of law or otherwise, including any and all proceeds of the foregoing; and

 

(n)            the equity securities or other ownership interest of any Seller or the Sellers’ Affiliates.

 

1.3            Assumed Liabilities .  At the Closing, the Purchaser shall assume and in due course pay, discharge, perform or otherwise fully satisfy in accordance with their respective terms the following Liabilities of the Sellers exclusively arising out of, relating to or otherwise in respect of the Business or the Transferred Assets (the “ Assumed Liabilities ”):

 

(a)            all Liabilities of the Sellers under the Assumed Contracts, the other Contracts referred to in Section 1.1(q) and the Transferred Permits (to the extent assigned hereunder) to be performed on or after, or in respect of periods following, the Closing Date; provided , however, that such Liabilities shall not include any Liability based on or relating to any Seller’s breach or violation of any Assumed Contract, any Contract referred to in Section 1.1(q) or any Transferred Permit arising, occurring or existing before the Closing Date, other than the Cure Costs that the Purchaser agrees to pay pursuant to Section 1.3(d );

 

(b)            the amounts of pre-petition volume incentive program accruals of the Sellers set forth on  Schedule 1.3(b) , which amounts shall be paid by Purchaser to the third parties described in such schedule within thirty (30) days after the Closing Date, subject to the Sellers’s provision to the Purchaser of accurate and complete contact information for such third parties prior to or promptly following the Closing Date; provided , however , that the Purchaser’s assumed Liability under this Section 1.3(b)  for purposes of the Net Working Capital shall equal $250,000.00;

 

(c)            all Warranty Liabilities of the Sellers with respect to (and only with respect to) products produced at any of the Seller plants listed on Schedule 1.3(c)  (the “ Seller Plants ”); and

 

(d)            all pre- or post-Petition Date costs and expenses required by the Sale Approval Order to be paid to cure all monetary defaults under all applicable Assumed Contracts (the “ Cure Costs ”).

 

1.4            Excluded Liabilities .  Notwithstanding anything in this Agreement to the contrary, the parties expressly acknowledge and agree that the Purchaser shall not assume or be liable or responsible for any Liability of the Sellers related to the Business or the Transferred Assets, other than the Assumed Liabilities, except as required by applicable Law and not discharged in the Bankruptcy Case (such Liabilities being collectively referred to herein as the “ Excluded Liabilities ”).  Without limiting the generality of the foregoing, the Excluded Liabilities shall include (and shall not include Purchaser’s obligation to pay Cure Costs pursuant to Section 1.3(d) ):

 

(a)            any Liability under any Assumed Contract or any Contract referred to in Section 1.1(q)  that arises from or relates to (i) any breach or violation of any Seller that occurred before the Closing Date, or (ii) any outstanding obligation of any Seller that was

 

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required to have been satisfied or performed by such Seller before the Closing Date, except in either such case for the Purchaser’s obligation to pay Cure Costs;

 

(b)            any Liability under any Contract that is not an Assumed Contract or Contract referred to in Section 1.1(q) ;

 

(c)            any account payable of any Sellers or any predecessor or Affiliate of any Seller;

 

(d)            any Liability of any Seller under any note, loan, borrowing arrangement, debt financing, credit facility, capital lease (except as included in the Assumed Contracts), financial or performance guaranty, surety, indemnity or bond, or any security interest related to any of the foregoing;

 

(e)            except as expressly contemplated by this Agreement, any Liability for Taxes payable by or assessed against any Seller or Affiliate thereof under applicable Law;

 

(f)             any Environmental, Health and Safety Liability arising out of or relating to the Sellers’ operation of the Business prior to the Closing or the leasing, ownership or operation of any asset (including any real property) by any Seller or Affiliate thereof, whether or not included in the Transferred Assets;

 

(g)            any Liability arising out of or relating to any employee grievance or claim against any Seller (including any director, officer or other employee of such Seller), whether or not such employee involved with such grievance is a Transferred Employee;

 

(h)            any Liability of any Seller with respect to any of its employees or directors or any former employees or directors, including (i) any Liability arising under any Benefit Plan or any other employee program or arrangement at any time maintained, sponsored or contributed to by any of the Sellers or any predecessor or Affiliate thereof or any ERISA Affiliate, or with respect to which any of the Sellers or any predecessor or Affiliate thereof or any ERISA Affiliate has any Liability, and (ii) any Liability under any employment, severance, retention, termination or other similar agreement with any present or past employee or director of any Seller;

 

(i)             except for the Liabilities specifically referred to in Sections 1.3(b)  and (c) , any Liability relating to or arising from any Seller’s manufacture or sale of any product or performance of any service, including any Liability for death or injury to any Person or damage to property;

 

(j)             any Liability of any Seller to defend, indemnify, hold harmless or reimburse any Person, including any present or former employee, director, customer, vendor, contractor or agent of any Seller, except to the extent such Liability is expressly included in an Assumed Contract, and then only to the extent that such Liability arises in connection with acts, omissions, facts, events or circumstances first existing, accruing or arising on or after the Closing Date and not based on any breach or violation by any Seller prior to the Closing Date;

 

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(k)            any Liability of any Seller arising out of or relating to (i) any past Claim or any Claim underway or pending as of the Closing Date by or against any Seller, or (ii) any Claim commenced on or after the Closing Date that relates to any act, omission, occurrence or event happening, or any fact or circumstance existing, before the Closing Date, in each case to the extent that the Liability for such act, omission, occurrence, event, fact or circumstance is not expressly included in the Assumed Liabilities; and

 

(l)             any Liability of any Seller arising out of or resulting from non-compliance of such Seller or any of its Affiliates with any applicable Law.

 

1.5            Deposit .  Concurrently with the parties’ execution and delivery of this Agreement, the Purchaser shall pay to ParentCo by wire transfer of immediately available funds to an account designated in a written notice from ParentCo to the Purchaser the sum of $2,100,000.00 (the “ Deposit ”), which amount shall be credited towards payment of the Closing Payment at the Closing.  If the Closing does not occur and this Agreement is terminated, the Deposit shall be handled in the manner provided in Section 8.2 .  The Deposit shall be held by ParentCo in a segregated Debtor In Possession Account (the “ Deposit Escrow Account ”), until it is to be paid out in connection with the Closing or the termination of this Agreement, as applicable.

 

1.6            Purchase Price .  Subject to the terms and conditions hereof, in full consideration for the sale and purchase of the Transferred Assets, at the Closing, the Purchaser shall assume the Assumed Liabilities and shall pay to ParentCo, on behalf of the Sellers, $18,000,000.00 (the “ Base Price ”) plus the amount of positive Net Working Capital or minus the amount of negative Net Working Capital (as the case may be) as determined pursuant to Section 1.11 (collectively, the “ Purchase Price ”).  At the Closing, the Purchaser shall pay the Base Price, as adjusted upwards or downwards (as applicable) by the Initial Net Working Capital Adjustment referred to in Section 1.11(a)  and by the Closing Apportionment payable to or by the Sellers (as determined in accordance with Section 2.10 ) (the “ Closing Payment ”), as follows:

 

(a)            the sum of $1,000,000.00 shall be paid by wire transfer of immediately available funds to a segregated Debtor In Possession Account maintained by ParentCo (the “ Adjustment Escrow Account ”) to secure the Sellers’ obligation, if any, under Section 1.11(f)  to pay to the Purchaser a Final Net Working Capital Adjustment amount, which funds shall remain in the Adjustment Escrow Account until the earlier of (i) the determination of the Final Net Working Capital Adjustment under Section 1.11 and the associated payment by ParentCo or the Purchaser (as applicable) of the Final Net Working Capital Adjustment amount as provided under Section 1.11(f) , or (ii) one hundred five (105) days after the Closing Date (at which date such funds shall be paid to ParentCo, subject to Section 1.11(c) ; provided that any such payment shall not relieve ParentCo, on behalf of the Sellers, of its obligation to pay to the Purchaser any subsequently determined Final Net Working Capital Adjustment amount found to be due to the Purchaser in accordance with Section 1.11(f) ); and

 

(b)            the balance, net of the Deposit and net of any Closing Apportionment payable to or by the Sellers (as determined in accordance with Section 2.10 ), shall be paid by wire transfer of immediately available funds to a bank account (or accounts) designated in a written notice from ParentCo to the Purchaser at least two (2) Business Days prior to the Closing Date.

 

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In addition, at the Closing, ParentCo shall be entitled to release the Deposit from the Deposit Escrow Account and retain the Deposit for its own account as partial payment of the Closing Payment.

 

1.7            Closing .  Subject to the terms and conditions of this Agreement and the Sale Approval Order, the sale and purchase of the Transferred Assets and the assignment and assumption of the Assumed Liabilities contemplated by this Agreement shall take place at a closing (the “ Closing ”) to be held at the offices of Gibson, Dunn & Crutcher LLP, 3161 Michelson Drive, Irvine, California at 10:00 A.M., California time, on the first (1st) Business Day following the satisfaction or waiver of all conditions to the obligations of the parties set forth in Sections 6 and 7 (other than those conditions which by their nature can only be satisfied at the Closing), or at such other place or at such other time or on such other date as ParentCo and the Purchaser may mutually agree upon in writing (the day on which the Closing takes place being the “ Closing Date ”).

 

1.8            Closing Deliveries by the Sellers .  At the Closing, unless otherwise waived in writing by the Purchaser, the Sellers shall deliver or cause to be delivered to the Purchaser:

 

(a)            a duly executed Bill of Sale substantially in the form of Exhibit A hereto;

 

(b)            a duly executed counterpart to the Assignment and Assumption Agreement substantially in the form of Exhibit B hereto;

 

(c)            duly executed Assignment of Intangible Property substantially in the form of Exhibit C hereto;

 

(d)            a duly executed counterpart to the Transition Services Agreement substantially in the form of Exhibit D hereto;

 

(e)            a duly executed Sellers’ Certificate pursuant to Section 6.1 ;

 

(f)             a duly executed counterpart of the Co-Existence Assignment and Assumption Agreement substantially in the form of Exhibit E hereto;

 

(g)            a receipt for the payment of the Purchase Price; and

 

(h)            such other duly executed bills of sale, assignments and other instruments of assignment, transfer or conveyance, in form and substance reasonably satisfactory to the Purchaser, as the Purchaser may reasonably request or as may be otherwise necessary or desirable to evidence and effect the sale, assignment, transfer, conveyance and delivery of the Transferred Assets to the Purchaser and to put the Purchaser in actual possession or control of the Transferred Assets.

 

1.9            Closing Deliveries by the Purchaser .  At the Closing, unless otherwise waived in writing by ParentCo, the Purchaser shall deliver or cause to be delivered to ParentCo or the other applicable Persons specified herein:

 

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(a)           an amount equal to the Closing Payment, net of the Deposit and net of any Closing Apportionment payable to or by the Sellers (as determined in accordance with Section 2.10 ), by wire transfer of immediately available funds to the accounts referred to in Section 1.6 ;

 

(b)           a duly executed counterpart to the Assignment and Assumption Agreement substantially in the form of Exhibit B hereto;

 

(c)           a duly executed counterpart to the Transition Services Agreement substantially in the form of Exhibit D hereto;

 

(d)           a duly executed Purchaser’s Certificate pursuant to Section 7.1 ;

 

(e)           a duly executed counterpart of the Co-Existence Assignment and Assumption Agreement substantially in the form of Exhibit E hereto; and

 

(f)            such other duly executed documents and instruments, in form and substance reasonably satisfactory to ParentCo, as ParentCo may reasonably request or as may be otherwise necessary or desirable to evidence and effect the assumption by the Purchaser of the Assumed Liabilities.

 

1.10         Assignment and Assumption of the Assumed Contracts .  Without limiting Sections 1.1(a)  and 1.3(a) , (i) at the Closing, but effective as of the Effective Time, the applicable Seller(s) shall assume pursuant to section 365(a) of the Bankruptcy Code and concurrently assign to the Purchaser pursuant to sections 363(b), (f) and (m) and section 365(f) of the Bankruptcy Code each of the Assumed Contracts that may be assumed pursuant to the Sale Approval Order, and (ii) to the extent contemplated in Section 1.3(a)  (and subject to Section 1.4(a) ), the Purchaser shall assume and thereafter in due course pay, discharge, perform and fully satisfy all of the obligations under such Assumed Contracts pursuant to section 365 of the Bankruptcy Code from and after the Closing, and shall pay the Cure Costs so that all applicable Assumed Contracts may be assigned to the Purchaser pursuant to section 365 of the Bankruptcy Code.

 

1.11         Net Working Capital Adjustment .  The adjustment to the Base Price with respect to Net Working Capital shall be determined in accordance with the following provisions:

 

(a)           At least five (5) Business Days prior to the Closing Date, ParentCo shall deliver to the Purchaser a report setting forth (i) a good faith estimate of the Net Working Capital, based on current information then reasonably available to the Sellers and broken down on a line-item basis, together with reasonable documentation in support of such estimate (including at a minimum a complete aging report of all Accounts Receivable and a report of all Inventory, with such Accounts Receivable and Inventory reports being the most recently available weekly accounts receivable report and monthly inventory report before such date of delivery by ParentCo) and, based thereon, the upwards or downwards adjustment to be made to the Base Price for purposes of determining the Closing Payment (the “ Initial Net Working Capital Adjustment ”).  The Initial Net Working Capital Adjustment shall be subject to the review and approval of the Purchaser upon receipt, acting reasonably and in good faith (which approval shall be for Closing purposes only and shall not constitute

 

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the Purchaser’s acceptance of the Initial Net Working Capital Adjustment as the definitive determination of the Net Working Capital), and the Purchaser shall have two (2) Business Days to submit any objection to the Initial Net Working Capital Adjustment to ParentCo; provided that such objection must be submitted in writing setting forth in reasonable detail the Purchaser’s objection; and provided further that such objection may only be based on (i) the failure of ParentCo to provide adequate back-up information or documentation for the Initial Net Working Capital Adjustment, (ii) a deviation from available financial information on which the Initial Net Working Capital Adjustment is to be based, (iii) the failure of the Initial Net Working Capital Adjustment to be calculated in accordance with the requirements of this Agreement, (iv) the failure of the Initial Net Working Capital Adjustment to be calculated in accordance with GAAP (except as such failure is expressly permitted or required pursuant to this Agreement), or (v) calculation error.

 

(b)           Within forty-five (45) days after the Closing Date, the Purchaser shall deliver to ParentCo a report showing (i) the Purchaser’s determination of the actual Net Working Capital based on the Purchaser’s review of the Transferred Assets and Assumed Liabilities existing as of the Effective Time, which report shall be in reasonable detail and broken down on a line-item basis, together with reasonable documentation in support of such determination (including at a minimum a complete aging report of all Accounts Receivable and a report of all Inventory, with such Accounts Receivable and Inventory reports having been prepared as of the Effective Time) and, based thereon, the upwards or downwards adjustment to be made to the Base Price for purposes of determining the Purchase Price (the “ Post-Closing Net Working Capital Adjustment ”).  ParentCo shall have thirty (30) days (or more, if mutually agreed upon by ParentCo and Purchaser) after its receipt of the Post-Closing Net Working Capital Adjustment to give written notice (an “ Objection Notice “) to the Purchaser of any objection to the Post-Closing Net Working Capital Adjustment.  Any Objection Notice must specify in reasonable detail the objections of ParentCo and may only be based on (i) the failure of the Purchaser to provide adequate back-up information or documentation for the Post-Closing Net Working Capital Adjustment, (ii) a deviation from available financial information on which the Post-Closing Net Working Capital Adjustment is to be based, (iii) the failure of the Post-Closing Net Working Capital Adjustment to be calculated in accordance with the requirements of this Agreement, (iv) the failure of the Post-Closing Net Working Capital Adjustment to be calculated in accordance with GAAP (except as such failure is expressly permitted or required pursuant to this Agreement), or (v) calculation error.  During such thirty (30)-day (or more, if mutually agreed upon by ParentCo and Purchaser) period, the Purchaser shall provide ParentCo and its Representatives with access to the relevant books, records and personnel of the Purchaser reasonably requested by ParentCo to assist ParentCo in its review of the Post-Closing Net Working Capital Adjustment.

 

(c)           If, within the thirty (30)-day (or more, if mutually agreed upon by ParentCo and Purchaser) period referred to in Section 1.11(b) , an Objection Notice that meets the requirements of Section 1.11(b)  is delivered by ParentCo to the Purchaser, Representatives of ParentCo and the Purchaser shall confer in good faith for up to ten (10) days (or such longer period as they may agree) after the date of the Purchaser’s receipt of the Objection Notice to resolve the objections raised by ParentCo.  If such parties are unable to resolve all such objections within such period, then at any time thereafter, ParentCo or the

 

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Purchaser may require that the objection raised by ParentCo be immediately submitted to the Bankruptcy Court for resolution, whereupon the parties shall cooperate reasonably and in good faith to establish fast-track procedures for presenting their respective positions to the Bankruptcy Court.  In any such submission to the Bankruptcy Court, the Purchaser may request that the Bankruptcy Court toll the remainder of the one hundred five (105)-day time period for holding of funds in the Adjustment Escrow Account pending the Bankruptcy Court’s determination of the matter in question.  Any determination of the Bankruptcy Court with respect to the matters that are the subject of ParentCo’s objection shall be final, binding and conclusive on the parties hereto.

 

(d)           Upon the first (1 st ) to occur of, (i) the written agreement between ParentCo and the Purchaser as to the Post-Closing Net Working Capital Adjustment, including any amendment to be made thereto, (ii) the passage of the thirty (30)-day (or more, if mutually agreed upon by ParentCo and Purchaser) period after ParentCo has received the Post-Closing Net Working Capital Adjustment without ParentCo’s delivery of an Objection Notice (in which case ParentCo shall be deemed to have accepted and agreed to the Post-Closing Net Working Capital Adjustment), or (iii) the determination of the Bankruptcy Court of all matters that are the subject of an Objection Notice, the Net Working Capital, as finally determined pursuant to one or more of the foregoing (the “ Final Net Working Capital Adjustment ”) shall be final, binding and conclusive on the parties hereto.

 

(e)           For purposes of calculating the Initial Net Working Capital Adjustment, the Post-Closing Net Working Capital Adjustment and the Final Net Working Capital Adjustment, the Warranty Liabilities assumed by the Purchaser pursuant to Section 1.3(d) shall be deemed to constitute a current liability in an aggregate amount equal to the lesser of (A) such amount determined (in each case, based on and using the Sellers’ historical warranty information) (i) in accordance with GAAP and (ii) the accounting methodologies used to calculate warranty reserves by Cavco Industries, Inc., a Delaware corporation, and (B) $9,500,000.00, and the parties shall prepare and settle such adjustments using such lesser amount.

 

(f)            If the amount of the Final Net Working Capital Adjustment exceeds the amount of the Initial Net Working Capital Adjustment, then, within five (5) Business Days after the determination of the Final Net Working Capital Adjustment Amount, the Purchaser shall pay to ParentCo, on behalf of the Sellers, the amount of such excess by wire transfer of immediately available funds to the bank account to which the Purchaser wire transferred the portion of the Closing Payment referred to in Section 1.6(b) .  If the amount of the Final Net Working Capital Adjustment Amount is less than the amount of the Initial Net Working Capital Adjustment, then, within five (5) Business Days after the determination of the Final Net Working Capital Adjustment, ParentCo, on behalf of the Sellers, shall refund to the Purchaser the amount of such shortfall by wire transfer of immediately available funds to a bank account specified by the Purchaser in writing to ParentCo.  Such payment shall first be made by ParentCo from and up to the Adjustment Escrow Account, with any additional amount due not capable of being satisfied by funds in the Adjustment Escrow Account being paid directly by the Sellers.

 

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(g)           If, after final payment of amounts due under Section 1.11(f) , any funds remain in the Adjustment Escrow Account, ParentCo shall be entitled to release such funds from the Adjustment Escrow Account and retain them for its own account.

 

1.12         Valuation and Treatment of Uncollectable Accounts Receivable .

 

(a)           For purposes of calculating the Net Working Capital and any adjustment to the Base Price as contemplated in Section 1.11 , the Accounts Receivable included in the Transferred Assets shall be valued by the parties in the following manner:

 

(i)            subject to Section 1.12(a)(ii) , one hundred percent (100%) of the amount of any Account Receivable shall be counted if such Account Receivable is aged thirty (30) or less days from the date of issuance as of the Effective Time;

 

(ii)           no value shall be given to any Account Receivable that is owing by an account debtor that is bankrupt, in receivership or insolvent or has ceased to conduct business or is disputing such Account Receivable.

 

(b)           If, within thirty (30) days after the Closing Date, the Purchaser has been unable to collect any Account Receivable (or portion thereof) referred to in Section 1.12(a)(i) , the Purchaser may, prior to or concurrently with its delivery to ParentCo of the Post-Closing Net Working Capital Adjustment, assign such uncollected Account Receivable (or portion thereof) back to the applicable Seller.  The stated amount of any such uncollectible Account Receivable, to the extent included in the calculation of the Initial Net Working Capital Adjustment, shall not be counted in the current assets included in the calculation of the Post-Closing Net Working Capital Adjustment and the Final Net Working Capital Adjustment.

 

1.13         Valuation of Inventory .  For purposes of calculating the Net Working Capital and any adjustment to the Base Price as contemplated in Section 1.11 , the Inventory included in the Transferred Assets shall be valued by the parties at ninety percent (90%) of the GAAP value thereof.

 

1.14         Allocation of Proceeds .  The Purchaser shall within one hundred twenty (120) days after the Closing Date prepare and deliver to ParentCo a schedule reasonably allocating the Purchase Price among the Transferred Assets in accordance with Section 1060 of the Code (such schedule, the “ Allocation ”).  The Purchaser shall permit ParentCo to review and provide comments on the Allocation and shall consult with ParentCo with respect to any such comments.  However, the Allocation shall be finally determined in the Purchaser’s sole discretion.  The Purchaser and the Sellers shall report and file all Tax Returns (including amended Tax Returns and claims for refund) in all respects and for all purposes in a manner consistent with the Allocation.  Neither the Purchaser nor the Sellers shall take any position contrary thereto or inconsistent therewith (including in any audits or examinations by any Governmental Body or any other proceeding) unless otherwise required by applicable law; provided, however, that (i) each party to this Agreement shall notify the other parties in the event that any Governmental Body takes or proposes to take a position for Tax purposes that is inconsistent with such Allocation and (ii) ParentCo and its Affiliates shall not be bound by the Allocation for purposes

 

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of allocating the Purchase Price in connection with proceeds of the sale of the Transferred Assets and any claims related thereto under the Bankruptcy Case.  The Purchaser and the Sellers shall cooperate in the filing of any forms (including Form 8594 under Section 1060 of the Code) with respect to the Allocation.

 

1.15         Debtor In Possession Accounts .  The rights and claims of any Debtor In Possession lender to the Sellers in connection with the Bankruptcy Case with respect to the Debtor In Possession Accounts referred to in Sections 1.5 and 1.6 shall be subordinated in all respects to the rights of the Purchaser in such Debtor In Possession Accounts (and their contents) under this Agreement.

 

2.              Conveyance of Owned Real Property .  In addition to the Closing procedures and documentation referred to in Sections 1.7 through 1.10 , the following procedures and requirements set forth in this Section 2 shall apply to the Sellers’ conveyance of the Owned Real Properties to the Purchaser on the Closing Date.

 

2.1           Real Property Escrow .  Immediately after the Bankruptcy Court’s entry of the Sale Approval Order as a Final Order, or at such earlier time as ParentCo and the Purchaser may agree, the Sellers and the Purchaser shall establish an escrow (the “ Real Property Escrow ”) for the sale and purchase of the Owned Real Properties pursuant to this Agreement with the Title Company.  The provisions of this Section 2 shall constitute escrow instructions to the Title Company, and a copy of this Agreement shall be deposited with the Title Company for such purpose.

 

2.2           Real Property Escrow Opening and Closing Dates .  The Real Property Escrow shall be deemed open on the date on which a fully executed original copy of this Agreement shall have been delivered to the Title Company.  The Closing of the sale and purchase of the Owned Real Properties and the Real Property Escrow shall occur on the Closing Date and following the delivery to the Title Company of a copy of the Sale Approval Order as a Final Order.  At the Closing, the applicable Sellers shall transfer fee title to, and possession and control of, the Owned Real Properties to Purchaser free and clear of all Encumbrances other than Permitted Encumbrances.

 

2.3           Seller’s Real Property Transfer Documents .  Subject to the Bankruptcy Court’s entry of the Sale Approval Order as a Final Order, on or before the Closing Date, the Sellers shall deposit into the Real Property Escrow for delivery to the Purchaser at the Closing the following documents and instruments, each of which shall have been duly executed and, where appropriate, acknowledged:

 

(a)           an individual closing statement for each Owned Real Property, prepared by the Title Company and approved by the parties hereto (collectively, the “ Closing Statements ”);

 

(b)           a bargain and sale deed for Owned Real Property in Oregon, and special warranty deeds (or state law equivalent) for each other Owned Real Property (collectively, the “ Deeds ”) in form and substance satisfactory to the Purchaser (acting

 

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reasonably) for conveyance by the applicable Seller to the Purchaser of such Owned Real Property;

 

(c)           to the extent reasonably necessary or required by the Title Company to effectuate the conveyance of the Owned Real Property to the Purchaser, a Tax certificate with respect to each Owned Real Property obtained by the Title Company;

 

(d)           to the extent reasonably necessary or required by the Title Company to effectuate the conveyance of any Owned Real Property to the Purchaser, change of ownership certificates for such Owned Real Property, as required by applicable Law;

 

(e)           a non-foreign certification or affidavit from each applicable Seller, if and as required by applicable Law, in form and substance satisfactory to the Purchaser (acting reasonably); and

 

(f)            such other documents and instruments as may be necessary or appropriate for the applicable Sellers to transfer and convey the Owned Real Properties to the Purchaser in accordance with the terms of this Agreement; provided, however, that the Purchaser acknowledges and agrees that the Sellers shall have no obligation to provide the Purchaser or the Title Company any affidavit, certificate or similar instrument for purposes of removing the general survey exception from any of the Title Policies.

 

2.4           Purchaser’s Real Property Transfer Documents .  Subject to the Bankruptcy Court’s entry of the Sale Approval Order as a Final Order, on or before the Closing Date, the Purchaser shall deposit into the Real Property Escrow for delivery to the applicable Sellers at Closing the following documents and instruments, each of which shall have been duly executed and, where appropriate, acknowledged:

 

(a)           the Closing Statements;

 

(b)           an affidavit of value for each Owned Real Property, as required by applicable Law; and

 

(c)           such other documents and instruments as may be necessary or appropriate for the applicable Sellers to transfer and convey the Owned Real Properties to the Purchaser in accordance with the terms of this Agreement.

 

2.5           Recording of Title .  At the Closing, the Title Company shall record or file, as applicable, the Special Warranty Deeds in the office of the County Clerk or other applicable Governmental Body for each Owned Real Property.

 

2.6           Title Commitments and Surveys .  At least ten (10) days prior to the scheduled Closing Date, ParentCo shall, at the Purchaser’s sole cost and expense, for each individual Owned Real Property, cause to be delivered to the Purchaser a commitment for a policy of title insurance (each a “ Title Commitment ” and collectively, the “ Title Commitments ”), together with copies of all documents identified in such Title Commitment, issued by the Title Company.  The Purchaser shall also have the option of ordering a survey (each a “ Survey ” and collectively, the “ Surveys ”) to be performed at each Owned Real Property.  If the Title Commitments or the

 

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Surveys show any Encumbrances on any Owned Real Property, other than Permitted Encumbrances, the Sellers shall be obligated to cure and or remove of record such Encumbrances at or prior to the Closing so that the Purchaser shall be able to obtain a policy of title insurance from the Title Company at the Closing insuring title to such Owned Real Property in the condition required hereunder.  In the event that the Title Commitment or Survey for any Owned Real Property reveals any Encumbrance that is not a Permitted Encumbrance, and it becomes apparent that the Sellers cannot or will not cure or remove of record such Encumbrance at or prior to Closing, the Purchaser shall have the option to elect to consummate the transactions contemplated hereby with a downward adjustment to the Purchase Price in an amount necessary to cure or remove such Encumbrance at the Closing, which amount shall not in any event exceed, in the aggregate, $50,000 for such Encumbrances.

 

2.7           Title Policies .  At the Closing, the Sellers shall deliver to the Purchaser an owner’s ALTA policy of extended title insurance issued by the Title Company (or the unconditional commitment of the Title Company to issue such policy) for each Owned Real Property (i.e., one such policy for each Owned Real Property) effective as of the Closing Date (collectively, the “ Title Policies ”), with each Title Policy being in the amount specified in Schedule 2.7 .  The Title Policies shall insure the Purchaser that fee simple interest in and to the Owned Real Properties is vested in the Purchaser, subject only to the printed terms and provisions of such Title Policies (as such terms and provisions may be modified by endorsements purchased by the Purchaser), the Permitted Encumbrances expressly set forth on the final commitments for issuance of the Title Policies and any other matters approved in writing by the Purchaser.  The Sellers shall pay the portion of the premium for each Title Policy that would be equal to a standard owner’s policy of title insurance on the Owned Real Property covered by such Title Policy in the same face amount, and the Purchaser shall pay any additional premium for the extended coverage and for any endorsement on such Title Policy requested by the Purchaser. The Purchaser shall be solely responsible for satisfying, at its cost, any requirement of the Title Company for any Title Policy endorsement requested by the Purchaser.

 

2.8           Real Property Escrow Cancellation Charges .  If the Closing does not occur because of the termination of this Agreement by the Sellers (or any of them) pursuant to Section 8.1(c)  or (e) , the Purchaser shall be liable for all customary Real Property Escrow cancellation charges.  If the Closing does not occur because of the termination of this Agreement by the Purchaser pursuant to Section 8.1(c)  or (e) , ParentCo shall be liable for all customary Real Property Escrow cancellation charges.  If the Close of Escrow does not occur for any other reason, ParentCo and the Purchaser shall each be liable for one-half (1/2) of all customary Real Property Escrow cancellation charges.

 

2.9           Closing Costs and Recording Fees .  Upon the Closing, each of ParentCo and the Purchaser agrees to pay one-half (1/2) of all Real Property Escrow charges and recording fees, other than with respect to the Title Policies, which shall be paid for as described in Section 2.7 .  On or before the Closing Date, each of ParentCo and the Purchaser shall deposit with the Title Company cash in an amount sufficient to pay each such party’s share of Title Policy premiums and other Real Property Escrow-related costs; provided, however that ParentCo may instruct Purchaser to pay ParentCo’s share of such costs and deduct the same amount from the Closing Payment.

 

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2.10         Apportionments .  The following apportionments shall be made between the Sellers and the Purchaser as of the Effective Time (the “ Closing Apportionments ”) based on the latest available information, and the amounts derived therefrom shall be (as applicable) added to or deducted from the Closing Payment in accordance with Section 1.6(b) :

 

(a)           Taxes and Assessments .  Real estate Taxes, ad valorem Taxes, personal property Taxes, transaction privilege Taxes, and other similar Taxes related to the ownership and/or operation of each Owned Real Property shall be prorated between the applicable Seller and the Purchaser and set forth on the Closing Statement applicable to such Owned Real Property.  The Sellers shall be responsible for all Taxes attributable to the Owned Real Properties through and including the day immediately preceding the Closing Date and the Purchaser shall be responsible for such Taxes attributable to the Owned Real Properties from and after the Closing Date.  If any current assessments, statements or other necessary information on any such amounts are not available before the Closing Date, the Sellers and the Purchaser shall agree upon reasonable estimates of such amounts based on prior amounts assessed against or paid by the applicable Sellers.

 

(b)           Utilities .  The Purchaser and the Sellers agree to use their respective reasonable efforts to arrange, before the Closing Date, for separate billing to the applicable Sellers of all charges attributable to the period up to and including the date immediately preceding the Closing Date for electricity, water, gas and any other utilities servicing the Owned Real Properties, and for separate billing to the Purchaser for all such charges attributable to the period running from and after the Closing Date.  If any such separate billing cannot be arranged by the Closing Date, such charges shall be equitably prorated on the basis of the most recent ascertainable invoices or statements for such services.  With respect to any utilities in place and servicing the Owned Real Properties as of the Closing Date, the Sellers shall endeavor to have the respective utility providers read the meters for the utilities such that the prorations can be made based on such final meter readings.  If such meter readings cannot be obtained in such manner, charges for utilities shall be prorated by good faith estimation as of the Closing Date based on the per diem rate obtained by using the last available billing period and associated bills for such utilities.  Once all applicable utility billings have been delivered after the Closing Date and an accurate proration of utility charges can be determined therefrom, the net amount payable to the Sellers or the Purchaser (as applicable) after combining such prorations shall be paid concurrently with the payment due under Section 1.11(f)  after determining the Final Net Working Capital Adjustment.

 

(c)           Form 1099-B .  If applicable to the sale and purchase of the Owned Real Properties as contemplated herein, the Title Company is hereby authorized and instructed to file as the “Reporting Person” Internal Revenue Service Form 1099-B, Proceeds from Real Estate, Broker, and Barter Exchange Transactions, as required by § 6045(d) of the Internal Revenue Code of 1986, as amended.

 

3.              Representations and Warranties of the Seller .  Except as set forth in the Disclosure Schedules to this Agreement (the “ Disclosure Schedules ”) delivered by ParentCo, which shall specify the Section to which each exception or disclosure relates and shall be deemed to qualify the representations and warranties contained in such Section as well as all other representations and warranties in this Section 3 to which the applicability of such exception or disclosure is

 

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reasonably ascertainable on its face (regardless of whether such Disclosure Schedule is referenced in the applicable representation and warranty).  The Sellers jointly and severally represent and warrant to the Purchaser that each of the statements contained in this Section 3 are true and correct as of the date of this Agreement.  The specification of any dollar amount in the representation or warranties contained in this Agreement or the inclusion of any specific item in any Section of the Disclosure Schedules is not intended to imply that such amounts, or higher or lower amounts or the items so included or other items, are or are not material, or do or do not violate or breach, any applicable Law or Contract, and no party shall use the fact of the setting of any such amounts or the inclusion of any such item in any dispute or controversy as to whether any obligation, item or matter not described herein or included in the Disclosure Schedules is or is not material, or does or does not violate or breach, any applicable Law or Contract, for purposes of this Agreement.  In no event shall the inclusion of any item or other matter in the Disclosure Schedules be deemed or interpreted to broaden or otherwise amplify the Sellers’ representations and warranties or covenants or agreements contained in this Agreement.

 

3.1           Due Incorporation and Authority .  Each Seller is a corporation or a limited partnership duly organized, validly existing and in good standing under the laws of the State of its organization and has all necessary corporate or limited partnership power and authority to own, lease and operate the Transferred Assets such Seller owns and to carry on the Business as it is now being conducted by such Seller.  Subject to the entry of the Sale Approval Order, (a) each Seller has all requisite corporate or limited partnership power and authority to enter into this Agreement, carry out its obligations hereunder and consummate the transactions contemplated hereby and (b) the execution and delivery by such Seller of this Agreement, the performance by such Seller of its respective obligations hereunder and the consummation by such Seller of the transactions contemplated hereby have been duly authorized by all requisite corporate or limited partnership action on the part of such Seller.  This Agreement has been duly executed and delivered by each Seller, and, upon entry of the Sale Approval Order (assuming the due authorization, execution and delivery hereof by the Purchaser and satisfaction of all conditions to the Closing), this Agreement will constitute the legal, valid and binding obligation of each Seller, enforceable against each Seller in accordance with its terms, except to the extent enforceability may be limited by bankruptcy, insolvency, moratorium or other similar laws affecting creditors rights generally or by general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law).

 

3.2           No Conflicts .  Subject to the entry of the Sale Approval Order, the execution and delivery by the Sellers of this Agreement, the consummation of the transactions contemplated hereby, and the performance by the Sellers of this Agreement in accordance with its terms will not:

 

(a)           violate the certificate of incorporation or by-laws (or comparable instruments) of any Seller or contravene any resolution adopted by the directors or shareholders of any Seller;

 

(b)           violate any Law to which any of the Sellers, the Business or any of the Transferred Assets is bound or subject;

 

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(c)           result in the imposition or creation of any Encumbrance (other than a Permitted Encumbrance) on any of the Transferred Assets; or

 

(d)           violate, result in any breach of, constitute a default (or an event that, with notice or lapse of time or both, would become a default) under, or require any consent of any Person (including Governmental Bodies) pursuant to, any Assumed Contract, Contract referred to in Section 1.1(q) , Purchase Order included in the Transferred Assets or Transferred Permit, except for consents, approvals or authorizations of, or declarations or filings with, the Bankruptcy Court;

 

provided , however , that each of the cases set forth in clauses (b), (c) and (d) above is subject to exceptions that (i) would not reasonably be expected, either individually or in the aggregate, to prevent or materially delay the consummation by the Sellers of the transactions contemplated by this Agreement, (ii) arise as a result of any facts or circumstances relating to the Purchaser or any of its Affiliates or (iii) will be (or have been) remedied or otherwise accounted for pursuant to the Sale Approval Order.

 

3.3           Organizational Documents .  ParentCo has previously made available to the Purchaser true, accurate and complete copies of the certificate of incorporation and bylaws, or comparable instruments, of the Sellers as in effect on the date hereof.

 

3.4           Compliance with Laws .  To the Knowledge of the Sellers, the Business is and has been (within the past 2 years) conducted in all material respects in compliance with all applicable Laws.  To the Knowledge of Sellers, except for the Bankruptcy case and other matters contained in the docket related thereto, within the past two (2) years, no Claim has been made in writing by any Governmental Body to any Seller or Affiliate thereof to the effect that the Business or any Transferred Asset fails to comply in any material respect with any Law.

 

3.5           Permits .  Schedule 3.5 sets forth a list of all of the Sellers’ material licenses, franchises, permits, variances, exemptions, orders, approvals and authorizati