Exhibit 10.3





Exhibit 10.3




ASSET PURCHASE AGREEMENT




by and among




Palm Harbor Homes, Inc., a Florida Corporation




and




The Other Sellers Listed on the Signature Pages Hereto




and




Palm Harbor Homes, Inc., a Delaware Corporation




Dated as of November 29, 2010




 


 









 







TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	Article I PURCHASE AND SALE
	 	 	2	 
	1.1 Assets to Be Transferred
	 	 	2	 
	1.2 Excluded Assets
	 	 	4	 
	1.3 Assumed Liabilities
	 	 	5	 
	1.4 Cure Costs
	 	 	5	 
	1.5 Excluded Liabilities
	 	 	5	 
	1.6 Purchase Price
	 	 	7	 
	1.7 Closing
	 	 	7	 
	1.8 Closing Deliveries by Sellers
	 	 	8	 
	1.9 Closing Deliveries by Purchaser
	 	 	8	 
	1.10 Assignment and Assumption of the Assumed Contracts
	 	 	9	 
	1.11 Base Price Adjustment
	 	 	9	 
	1.12 Valuation and Treatment of Uncollectable Accounts Receivable
	 	 	11	 
	1.13 Allocation of Proceeds
	 	 	12	 
	 
	 	 	 	 
	Article II CONVEYANCE OF OWNED REAL PROPERTY
	 	 	12	 
	 
	 	 	 	 
	2.1 Real Property Escrow
	 	 	12	 
	2.2 Real Property Escrow Opening and Closing Dates
	 	 	12	 
	2.3 Seller’s Real Property Transfer Documents
	 	 	13	 
	2.4 Purchaser’s Real Property Transfer Documents
	 	 	13	 
	2.5 Recording of Title
	 	 	13	 
	2.6 Title Commitments and Surveys
	 	 	14	 
	2.7 Title Policies
	 	 	14	 
	2.8 Real Property Escrow Cancellation Charges
	 	 	14	 
	2.9 Closing Costs and Recording Fees
	 	 	14	 
	2.10 Apportionments for Real Properties
	 	 	15	 
	 
	 	 	 	 
	Article III REPRESENTATIONS AND WARRANTIES OF SELLERS
	 	 	16	 
	 
	 	 	 	 
	3.1 Due Incorporation and Authority
	 	 	16	 
	3.2 No Conflicts
	 	 	16	 
	3.3 Organizational Documents; Meeting Minutes
	 	 	17	 
	3.4 Capitalization of Transferred Subsidiaries
	 	 	17	 
	 
	 	 	 	 





 


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(continued)





	 	 	 	 	 
	 	 	Page	 
	3.5 Transferred Subsidiary Financial Statements
	 	 	18	 
	3.6 Transferred Subsidiary Undisclosed Liabilities; Guaranties
	 	 	18	 
	3.7 Accounts Receivable
	 	 	19	 
	3.8 Compliance with Laws
	 	 	19	 
	3.9 Permits
	 	 	20	 
	3.10 Contracts
	 	 	21	 
	3.11 Insurance Business
	 	 	23	 
	3.12 Real Property
	 	 	24	 
	3.13 Environmental Matters
	 	 	26	 
	3.14 Intellectual Property
	 	 	26	 
	3.15 Litigation and Other Claims
	 	 	27	 
	3.16 Condition of Tangible Personal Property
	 	 	27	 
	3.17 Title to Assets; Possession
	 	 	28	 
	3.18 Sufficiency of Assets
	 	 	28	 
	3.19 Inventory
	 	 	28	 
	3.20 Employees
	 	 	28	 
	3.21 Employee Benefits
	 	 	29	 
	3.22 Tax Matters
	 	 	31	 
	3.23 Affiliated Transactions
	 	 	33	 
	3.24 Product Liability; Product Warranties
	 	 	34	 
	3.25 Insurance
	 	 	34	 
	3.26 Absence of Certain Developments
	 	 	34	 
	3.27 Prohibited Payments
	 	 	36	 
	3.28 Bank Accounts; Lock Boxes; Powers of Attorney
	 	 	36	 
	3.29 Brokers
	 	 	36	 
	3.30 Disclaimer
	 	 	36	 
	 
	 	 	 	 
	Article IV REPRESENTATIONS AND WARRANTIES OF PURCHASER
	 	 	37	 
	 
	 	 	 	 
	4.1 Due Incorporation and Authority
	 	 	37	 
	4.2 No Conflicts
	 	 	37	 





 


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TABLE OF CONTENTS

(continued)





	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	4.3 Litigation
	 	 	37	 
	4.4 Purchaser’s Financial Capability
	 	 	37	 
	4.5 Brokers
	 	 	38	 
	4.6 Acknowledgement of Sellers’ Disclaimer
	 	 	38	 
	4.7 Purchaser Disclaimer
	 	 	38	 
	 
	 	 	 	 
	Article V COVENANTS AND AGREEMENTS
	 	 	38	 
	 
	 	 	 	 
	5.1 Operation of the Business
	 	 	38	 
	5.2 Confidentiality
	 	 	39	 
	5.3 Expenses
	 	 	40	 
	5.4 Access to Information; Preservation of Records; Litigation Support
	 	 	40	 
	5.5 Regulatory and Other Authorizations; Consents
	 	 	41	 
	5.6 Further Actions
	 	 	41	 
	5.7 Bankruptcy Court Approval
	 	 	41	 
	5.8 Books and Records
	 	 	43	 
	5.9 Tax Matters
	 	 	43	 
	5.10 Notification of Certain Matters
	 	 	44	 
	5.11 Knowledge of Breach
	 	 	44	 
	5.12 Employment Arrangements
	 	 	45	 
	5.13 Insurance
	 	 	46	 
	5.14 Licensed Computer Software; Consents
	 	 	47	 
	5.15 Seller Release of Claims Against Transferred Subsidiaries
	 	 	47	 
	5.16 Change of Purchaser’s Name; Dissolution
	 	 	47	 
	 
	 	 	 	 
	Article VI PURCHASER’S CLOSING CONDITIONS
	 	 	48	 
	 
	 	 	 	 
	6.1 Representations and Warranties; Covenants
	 	 	48	 
	6.2 No Intervening Law
	 	 	48	 
	6.3 No Legal Proceedings
	 	 	48	 
	6.4 Bankruptcy Filing
	 	 	48	 
	6.5 Final Orders
	 	 	48	 
	6.6 Regulatory Approvals
	 	 	48	 





 


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TABLE OF CONTENTS

(continued)





	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	6.7 Closing Documents
	 	 	48	 
	6.8 No Purchaser Objection to Initial Price Adjustment
	 	 	49	 
	6.9 No Material Adverse Effect
	 	 	49	 
	 
	 	 	 	 
	Article VII SELLERS’ CLOSING CONDITIONS
	 	 	49	 
	 
	 	 	 	 
	7.1 Representations and Warranties; Covenants
	 	 	49	 
	7.2 No Intervening Law
	 	 	49	 
	7.3 Sale Approval Order
	 	 	49	 
	7.4 No Legal Proceedings
	 	 	49	 
	7.5 Bankruptcy Filing
	 	 	50	 
	7.6 Final Orders
	 	 	50	 
	7.7 Regulatory Approvals
	 	 	50	 
	7.8 Closing Documents
	 	 	50	 
	 
	 	 	 	 
	Article VIII TERMINATION OF AGREEMENT
	 	 	50	 
	 
	 	 	 	 
	8.1 Termination Prior to Closing
	 	 	50	 
	8.2 Break-up Fee; Expense Reimbursement
	 	 	51	 
	8.3 Survival After Termination
	 	 	52	 
	 
	 	 	 	 
	Article IX MISCELLANEOUS
	 	 	52	 
	 
	 	 	 	 
	9.1 Certain Definitions
	 	 	52	 
	9.2 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial
	 	 	62	 
	9.3 Notices
	 	 	63	 
	9.4 Entire Agreement
	 	 	64	 
	9.5 Non-Survival of Representations, Warranties and Covenants
	 	 	64	 
	9.6 Amendments
	 	 	64	 
	9.7 Waiver
	 	 	64	 
	9.8 Governing Law
	 	 	64	 
	9.9 Binding Effect; Assignment
	 	 	65	 
	9.10 Interpretation; Headings
	 	 	65	 
	9.11 Severability of Provisions
	 	 	65	 
	9.12 Counterparts
	 	 	65	 
	9.13 No Third Party Beneficiaries
	 	 	66	 






 


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TABLE OF CONTENTS




	 	 	 
	SCHEDULES	 	 
	 
	 
	Schedule 1.1(c)

	 	Tangible Personal Property
	Schedule 1.1(f)

	 	Assumed Contracts
	Schedule 1.1(g)

	 	Licensed Computer Software
	Schedule 1.1(i)

	 	Intellectual Property
	Schedule 1.1(j)

	 	Transferred Permits
	Schedule 1.1(l)

	 	Telephone, Fax Numbers and Email Accounts
	Schedule 2.6

	 	Owned Real Property Subject to Title Commitments
	Schedule 2.7

	 	Title Policy Amounts
	Schedule 3.4(a)

	 	Capitalization of Transferred Subsidiaries
	Schedule 3.6

	 	Transferred Subsidiary Liabilities
	Schedule 3.7

	 	Accounts Receivable
	Schedule 3.8

	 	Compliance With Laws
	Schedule 3.9(a)

	 	Permits
	Schedule 3.9(b)

	 	Required Consents for Permit Transfers
	Schedule 3.10(a)

	 	Seller and Transferred Subsidiary Contracts
	Schedule 3.10(b)

	 	Transferred Subsidiary Contracts
	Schedule 3.11(e)

	 	Insurance Subsidiary Liabilities
	Schedule 3.12(a)

	 	Owned Real Properties
	Schedule 3.12(b)

	 	Leased Real Properties
	Schedule 3.14(a)

	 	Intellectual Property
	Schedule 3.14(b)

	 	Intellectual Property Licenses, Sublicenses or other Arrangements
	Schedule 3.14(d)

	 	Intellectual Property Defaults
	Schedule 3.15

	 	Litigation and Other Claims
	Schedule 3.17

	 	Assets Possessed by Third Parties
	Schedule 3.20(b)

	 	Employee Disputes
	Schedule 3.20(c)

	 	Employment Agreements or Arrangements
	Schedule 3.20(d)

	 	Severance-Related Benefits
	Schedule 3.21(a)

	 	Employee Benefit Plan
	Schedule 3.21(g)

	 	Employment Contract Exceptions
	Schedule 3.22(c)

	 	Filed Tax Returns
	Schedule 3.22(j)

	 	Jurisdiction for Tax Returns
	Schedule 3.23

	 	Affiliated Transactions
	Schedule 3.24

	 	Product Compliance
	Schedule 3.25

	 	Insurance
	Schedule 3.26

	 	Absence of Certain Developments
	Schedule 3.28

	 	Powers of Attorney
	Schedule 9.1(a)

	 	Seller Plants





 


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TABLE OF CONTENTS

(continued)





	 	 	 
	EXHIBITS	 	 
	 
	 
	EXHIBIT A

	 	Form of Bill of Sale
	EXHIBIT B

	 	Form of Assignment and Assumption Agreement
	EXHIBIT C

	 	Form of Bidding Procedures Order
	EXHIBIT D

	 	Form of Sale Approval Order
	EXHIBIT E

	 	Product Warranties






 


-vi-









 







ASSET PURCHASE AGREEMENT




THIS ASSET PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of
November 29, 2010, by and among Palm Harbor Homes, Inc., a Florida 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 Palm Harbor
Homes, Inc., a Delaware corporation (the “Purchaser”). Initially capitalized terms used in
this Agreement are defined or cross-referenced in Section 9.1.



RECITALS




WHEREAS, Sellers are engaged in the business of the design, production, marketing, sale and
servicing of manufactured and modular homes (the “Home Business”), the Insurance
Subsidiaries are engaged in the business of underwriting, selling and servicing property and
casualty insurance for manufactured and modular homes (the “Insurance Business”), and the
Finance Subsidiaries are engaged in the business of providing financing to retail customers for the
purchase of site built, manufactured and modular homes (the “Finance Business”, and
collectively with the Home Business and the Insurance Business, the “Business”); and



WHEREAS, ParentCo and certain of its Affiliates intend to file 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 District of Delaware (the “Bankruptcy Court”), with
ParentCo’s bankruptcy case to be jointly administered with those of its Affiliates filing chapter
11 bankruptcy cases (ParentCo’s chapter 11 case, together with all cases so jointly administered,
being collectively referred to herein as the “Bankruptcy Case”); and



WHEREAS, in connection with the Bankruptcy Case, Sellers and Purchaser’s sole stockholder,
Fleetwood Homes, Inc., (“Fleetwood”), have entered into that certain Debtor In Possession
Revolving Credit Agreement dated concurrently herewith (the “DIP Facility”) for the
provision by Fleetwood to Sellers of up to $50,000,000 of debtor-in-possession debt financing,
which amount may be increased to $55,000,000 with Fleetwood’s consent.



WHEREAS, Purchaser desires to purchase substantially all of the assets of Sellers and to
assume certain specified Liabilities of Sellers, and Sellers desire to sell such assets to
Purchaser and to have Purchaser assume such specified Liabilities, 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; and



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



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


 


 









 





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:



ARTICLE I




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, Sellers shall sell, assign, transfer, convey and deliver (or cause
to be sold, assigned, transferred, conveyed and delivered) to Purchaser (or its specified
designee(s)), and Purchaser (or its specified designee(s)) shall purchase, assume and accept from
Sellers, free and clear of any Encumbrance, other than Permitted Encumbrances, all right, title and
interest in and to all of Sellers’ properties, assets and rights, 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, including the following:



(a) all outstanding shares of capital stock of Standard Casualty Co., a Texas corporation (the
“Standard Casualty Shares”), and Standard Insurance Agency, Inc., a Texas corporation (the
“Standard Insurance Shares”);



(b) all outstanding shares of capital stock of CountryPlace Acceptance Corp., a Nevada
corporation (the “CountryPlace Shares”);



(c) all machinery, tools, tooling, computer hardware and peripherals, telephony, office and
other equipment, parts, spare parts, vehicles, leasehold improvements, trade fixtures, signage,
furniture, furnishings, appliances, supplies and other 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, including those items listed on Schedule 1.1(c), except for any
such items on Schedule 1.1(c) disposed of in the ordinary course of business prior to the
Closing Date (collectively, the “Tangible Personal Property”);



(d) 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, except
for any such items disposed of in the ordinary course of business prior to the Closing Date (the
“Inventory”);



(e) all Owned Real Properties, together in each case with the applicable 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;



(f) all of the applicable Sellers’ rights under the Contracts listed on Schedule
1.1(f), to the extent assumed and assigned in accordance with Section 1.10
(collectively, the “Assumed Contracts”);


 


2









 





(g) subject to Section 5.14, the licensed Computer Software listed or described on
Schedule 1.1(g), solely to the extent assignable;



(h) all Purchase Orders existing and outstanding on the Closing Date and any additional
Contracts entered into by any Seller in the Ordinary Course of Business after the date hereof, as
contemplated by clause (iii) of Section 5.1(a);



(i) all Intellectual Property, including those items listed on Schedule 1.1(i),
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 Sellers’ possession or control (collectively, the “Transferred
IP”);



(j) all Permits and all pending applications therefor or renewals thereof, including those
listed on Schedule 1.1(j), in each case to the extent assignable or otherwise transferable
to Purchaser in accordance with their respective terms or under applicable Law (the
“Transferred Permits”);



(k) originals or copies of all data, databases and records (whether in print, electronic or
other format) related to the operation of the Business or the ownership or use of the Transferred
Assets, 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 Real Properties
(including OSHA reports and logs), service and warranty records, product recall or withdrawal
records, equipment logs, operating guides and manuals, correspondence files (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)), Transferred Permits, 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 Sellers described in Section 1.2(f) (the “Books and
Records”);



(l) the telephone (landline and mobile) and facsimile numbers and email accounts listed on
Schedule 1.1(l);



(m) all credits, rights to deposits paid by any Seller (including security or other deposits
under any Real Property Lease included in the Assumed Contracts), deposits paid by any customer or
other Person to any Seller, prepaid expenses, claims for refunds, investments and other similar
financial assets;


 


3









 






(n) all Accounts Receivable of Sellers, and all proceeds of the foregoing;



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




(p) all insurance policies of Sellers, and all Claims, proceeds and benefits due thereunder;



(q) all interests in and rights to any refund of Taxes and surviving federal and state loss
carrybacks and carryforwards; and



(r) all Claims of Sellers (or any of them) against any Person relating to the Transferred
Assets, the Assumed Liabilities or the Business;



1.2 Excluded Assets. Sellers are not selling, and 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 Sellers (including all of Sellers’ right, title and interest therein and thereto), all of
which shall be retained by the applicable Sellers (collectively, the “Excluded Assets”):



(a) except as provided in Section 1.1(m), all cash, bank deposits and cash
equivalents;




(b) all of Sellers’ bank accounts;




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




(d) except as provided in Section 1.1(r), all Pre-Closing Claims;



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



(f) all corporate books and records, Tax Returns, board minutes and organizational documents
of 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 Purchaser at Closing if such records would otherwise
constitute a Transferred Asset pursuant to Section 1.1(k)), all information held by any
Seller prohibited from being transferred or disclosed pursuant to applicable Law, all non-public
information primarily related to or prepared in connection with the Bankruptcy Case, and Sellers’
books and records relating to any Excluded Assets;



(g) all of the rights and claims of 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, and any related claims and actions
arising under such sections by operation of Law or otherwise, including any and all proceeds of the
foregoing;


 


4









 





(h) legal correspondence constituting privileged communication between any Seller and its
legal counsel; and




(i) the outstanding stock of, or other outstanding equity interests in, any Seller.



1.3 Assumed Liabilities. At the Closing, Purchaser shall assume and in due course
pay, discharge, perform or otherwise fully satisfy in accordance with their respective terms only
the following Liabilities of Sellers (the “Assumed Liabilities”):



(a) all Liabilities of Sellers under the Assumed Contracts, the other Contracts referred to in
Section 1.1(h) 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(h) or any Transferred Permit arising, occurring or existing before the Closing Date, other
than the Cure Costs that Purchaser agrees to pay pursuant to Section 1.4;




(b) the Assumed Warranty Liabilities; and




(c) the COBRA obligations that Purchaser agrees to assume pursuant to Section 5.12(f).



1.4 Cure Costs. At Closing and pursuant to section 365 of the Bankruptcy Code,
Sellers shall assume and assign to Purchaser the Assumed Contracts. The amounts, as determined by
the Bankruptcy Court, if any (the “Cure Costs”), necessary to cure all defaults of any
Seller, if any, and to pay all actual or pecuniary losses that have resulted from such defaults
under the Assumed Contracts, shall be paid by Purchaser, on or before Closing, and not by Sellers
and Sellers shall have no Liability therefor.



1.5 Excluded Liabilities. Notwithstanding anything in this Agreement to the contrary,
the parties expressly acknowledge and agree that Purchaser shall not assume or be liable or
responsible for any Liability of any Seller 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:



(a) any Liability under any Assumed Contract or any Contract referred to in Section
1.1(h) that arises from or relates to (i) any breach or violation of any Seller that occurred
on or before the Closing Date, or (ii) any outstanding obligation of any Seller that was required
to have been satisfied or performed by such Seller on or before the Closing Date, except in either
such case for 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(h);



(c) any account payable or other amount payable of any Seller;


 


5









 





(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 under applicable Law;



(f) any Environmental, Health and Safety Liability, including arising out of or relating to
Sellers’ ownership and operation of the Home Business on or prior to the Closing Date or the
leasing, ownership or operation of any asset (including any Real Property) by any Seller, whether
or not included in the Transferred Assets, including any Release (existing as of the Closing Date)
of any Hazardous Material;



(g) any Liability arising out of or relating to (i) the employment or performance of services,
or termination of employment or services by any Seller of any current or former employee or
director on or before the Closing Date (including, without limitation, wages or other compensation,
and plans, agreements or arrangements providing for bonus, incentive compensation, vacation, sick
days, personal days, severance benefits or other employee benefits), or (ii) workers’ compensation
Claims against any Seller, irrespective of whether such Claims are made prior to, on or after the
Closing Date, regardless, in either of the foregoing clauses (i) or (ii), of whether such employee
involved with such grievance is a Transferred Seller Employee;



(h) any Liability of any Seller with respect to any of its employees or directors or any
former employees or directors, including 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
Sellers or any predecessor or Affiliate thereof or any ERISA Affiliate, or with respect to which
any of Sellers or any predecessor or Affiliate thereof or any ERISA Affiliate has any Liability;



(i) except for the Liabilities specifically referred to in Section 1.3(b), 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;



(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;


 


6









 





(l) any Liability relating to any amount required to be paid or any action required to be
performed by any Seller hereunder; and



(m) any Liability of any Seller arising out of or resulting from non-compliance of such Seller
with any applicable Law (including, for the avoidance of doubt, any requirements and provisions of
any “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the
sale of any or all of the Transferred Assets to Purchaser; provided, however, that pursuant to
section 363(f) of the Bankruptcy Code, the transfer of the Transferred Assets shall be free and
clear of any Encumbrance arising under any bulk transfer laws, and the parties shall take such
steps as may be necessary or appropriate to so provide in the Sale Approval Order).



1.6 Purchase Price. Subject to the terms and conditions hereof, in full consideration
of the sale and purchase of the Transferred Assets and Sellers’ other covenants and obligations
hereunder, at the Closing, Purchaser shall (i) assume the Assumed Warranty Liabilities, which the
parties agree will be assigned an aggregate value of $6,500,000, the COBRA Liabilities referred to
in Section 5.12(f), which the parties agree will be assigned an aggregate value of
$1,000,000, and the other Assumed Liabilities, and (ii) pay to ParentCo, on behalf of and for the
account of Sellers, the greater of (A) $50,000,000 or (B) an amount equal to the outstanding
balance (including accrued and unpaid interest) under the DIP Facility as of the time of Closing
(the “Base Price”), minus the Accounts Receivable and Inventory Value Shortfall (if
any), and minus the amount of any Unauthorized Indebtedness, in each case as determined
pursuant to Section 1.11 (collectively, the “Purchase Price”). At the Closing,
Purchaser shall pay the Base Price, as adjusted downwards (as applicable) by the Initial Price
Adjustment referred to in Section 1.11(a) and by the Closing Apportionment payable to or by
Sellers (as determined in accordance with Section 2.10) (the “Closing Payment”) as
follows:



(a) first, to the extent of Purchaser’s interest as assignee of Fleetwood under the DIP
Facility, by way of credit and set-off against the outstanding balance of the DIP Facility as of
the time of Closing (provided, that if the Closing Payment is less than the total outstanding
balance of the DIP Facility as of the time of Closing, such outstanding balance and any subsequent
interest accruals thereon shall remain payable by Sellers in accordance with the provisions of the
DIP Facility); and



(b) second, to the extent the Closing Payment exceeds the outstanding balance of the DIP
Facility as of the time of Closing, by wire transfer of immediately available funds to a bank
account designated by written notice from ParentCo to Purchaser, such notice to be given at least
two (2) Business Days prior to the Closing Date.



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 ParentCo, 15303 Dallas Parkway, Suite 800, Addison,
Texas 75001 at 9:00 a.m., Central Standard Time, on the first (1st) Business Day
following the satisfaction or waiver of all conditions to the obligations of the parties set
forth in Article VI and Article VII (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 Purchaser may mutually agree upon in writing (the day on which the
Closing takes place being the “Closing Date”).


 


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




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




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



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



(d) duly executed assignments of Sellers’ Marks and other Intellectual Property in form and
substance reasonably acceptable to Purchaser;



(e) the stock certificates representing the Standard Casualty Shares and the Standard
Insurance Shares, each with a duly executed stock power, in form and substance reasonably
satisfactory to Purchaser, for the assignment and transfer of same to Purchaser;



(f) the stock certificate(s) representing all of the outstanding shares of Palm Harbor Ins.
Agency of Texas;



(g) a receipt, in form and substance reasonably satisfactory to Purchaser, for the payment of
the Purchase Price;



(h) a Tax clearance certificate (or equivalent document) from each state in respect of which
any Transferred Subsidiary is liable for the payment of Taxes;



(i) the corporate minute books or equivalent record books (including all contents thereof) for
each Transferred Subsidiary; and



(j) such other duly executed bills of sale, assignments and other instruments of assignment,
transfer or conveyance, in form and substance reasonably satisfactory to Purchaser, as 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 Purchaser and to
put Purchaser in actual possession or control of the Transferred Assets.



1.9 Closing Deliveries by Purchaser. At the Closing, unless otherwise waived in
writing by ParentCo, in addition to the Closing Payment to be made in accordance with
Section 1.6, Purchaser shall deliver or cause to be delivered to ParentCo or the other
applicable Persons specified herein:



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



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


 


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



(d) 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 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 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
1.5(a)), Purchaser shall assume and thereafter in due course pay, discharge, perform and
satisfy in accordance with their respective terms 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 Purchaser pursuant to
section 365 of the Bankruptcy Code.



1.11 Base Price Adjustment. The adjustment to the Base Price with respect to the
valuation of the Inventory and the Accounts Receivable of Sellers and any Unauthorized Indebtedness
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
Purchaser a report setting forth (i) a good faith estimate as of the Effective Time of the
Inventory and the Accounts Receivable of Sellers and any Unauthorized Indebtedness, based on
current information then reasonably available to 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 of Sellers and a report of all Inventory, with
such Accounts Receivable and Inventory reports being the most recently available accounts
receivable report and inventory report before such date of delivery by ParentCo) and, based
thereon, any downwards adjustment to be made to the Base Price for purposes of determining the
Closing Payment as contemplated by Section 1.6 (the “Initial Price Adjustment”).
The Initial Price Adjustment (or ParentCo’s determination that no Initial Price Adjustment is
required) shall be subject to the review and approval of Purchaser upon receipt, acting reasonably
and in good faith (which approval shall be for Closing purposes only and shall not constitute
Purchaser’s acceptance of the Initial Price Adjustment (or ParentCo’s determination that no Initial
Price Adjustment is required) as definitive), and Purchaser shall have two (2) Business Days to
submit to ParentCo any objection to the Initial Price Adjustment (or ParentCo’s determination that
no Initial Price Adjustment is required), provided that such objection must be submitted in writing
setting forth in reasonable detail 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 Price Adjustment, (ii) a deviation from available financial
information on which the Initial Price Adjustment is to be based, (iii) the failure of the
Initial Price Adjustment to be calculated in accordance with the requirements of this Agreement,
(iv) the failure of the Initial Price 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 two (2)-day period, ParentCo shall provide Purchaser and its Representatives
with access to the relevant books, records and personnel of Sellers and the Transferred
Subsidiaries reasonably requested by Purchaser to assist Purchaser in its review of the Initial
Price Adjustment.


 


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(b) Within ninety (90) days after the Closing Date, Purchaser shall deliver to ParentCo a
report showing (i) Purchaser’s determination, as of the Effective Time, of the Inventory and
Accounts Receivable of Sellers and any Unauthorized Indebtedness 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 of Sellers and a report of all Inventory, with such Accounts
Receivable and Inventory reports having been prepared as of the Effective Time) and, based thereon,
any downwards adjustment to be made to the Base Price for purposes of determining the Purchase
Price (the “Post-Closing Price Adjustment”). ParentCo shall have ten (10) days after its
receipt of the Post-Closing Price Adjustment to give written notice (an “Objection Notice”)
to Purchaser of any objection to the Post-Closing Price Adjustment. Any Objection Notice must
specify in reasonable detail the objections of ParentCo and may only be based on (i) the failure of
Purchaser to provide adequate back-up information or documentation for the Post-Closing Price
Adjustment, (ii) a deviation from available financial information on which the Post-Closing Price
Adjustment is to be based, (iii) the failure of the Post-Closing Price Adjustment to be calculated
in accordance with the requirements of this Agreement, (iv) the failure of the Post-Closing Price
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 ten (10)-day
period, Purchaser shall provide ParentCo and its Representatives with access to the relevant books,
records and personnel of Purchaser reasonably requested by ParentCo to assist ParentCo in its
review of the Post-Closing Price Adjustment.



(c) If, within the ten (10)-day 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
Purchaser, Representatives of ParentCo and Purchaser shall confer in good faith for up to ten (10)
days after the date of Purchaser’s receipt of the Objection Notice to resolve the objections raised
by ParentCo. If such Representatives are unable to resolve all such objections within such period,
then at any time thereafter, ParentCo or 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. 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.


 


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(d) Upon the first to occur of, (i) the written agreement between ParentCo and Purchaser as to
the Post-Closing Price 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 Price 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 Price Adjustment), or (iii) the determination of the Bankruptcy
Court of all matters that are the subject of an Objection Notice, the final adjustment to be made
to the Base Price based on the value, as of the Effective Time, of the Inventory and Accounts
Receivable of Sellers and any Unauthorized Indebtedness, as finally determined pursuant to one or
more of the foregoing (the “Final Price Adjustment”) shall be final, binding and conclusive
on the parties hereto.



(e) If the amount of the Final Price Adjustment is less than the amount of the Initial Price
Adjustment, then, within five (5) Business Days after the determination of the Final Price
Adjustment Amount, Purchaser shall pay to ParentCo, on behalf of Sellers, the amount of such excess
by wire transfer of immediately available funds to the bank account referred to in Section
1.6(b); provided, however, that in no event shall Purchaser be required to pay
more than the Base Price as the total Purchase Price due to Sellers. If the amount of the Final
Price Adjustment Amount exceeds the amount of the Initial Price Adjustment, then, within five (5)
Business Days after the determination of the Final Price Adjustment, ParentCo, on behalf of
Sellers, shall refund to Purchaser the amount of such shortfall by wire transfer of immediately
available funds to a bank account specified by Purchaser in writing to ParentCo.




1.12 Valuation and Treatment of Uncollectable Accounts Receivable.



(a) For purposes of calculating the Initial Price Adjustment, the Post-Closing Price
Adjustment and the Final Price Adjustment, and any adjustment to the Base Price as contemplated in
Section 1.11, the Accounts Receivable of Sellers 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, as of the Effective Time, such Account Receivable is aged
ninety (90) or less days from the earlier of (A) the date of issuance of the statement or invoice
therefor or (B) the date on which such Account Receivable first became payable; and



(ii) no value shall be given to any Account Receivable that, as of the Effective Time, is aged
more than ninety (90) days from the earlier of (A) the date of issuance of the statement or invoice
therefor or (B) the date on which such Account Receivable first became payable, or 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, Purchaser has been unable to collect
any Seller Account Receivable (or portion thereof) referred to in Section 1.12(a)(i),
Purchaser may, prior to or concurrently with its delivery to ParentCo of the Post-Closing Price
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 Price Adjustment, shall not be counted in the
current assets included in the calculation of the Post-Closing Price Adjustment and the Final
Price Adjustment.


 


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1.13 Allocation of Proceeds. 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 Tax Code (such
schedule, the “Allocation”). 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 Purchaser’s sole discretion. Purchaser and
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 Purchaser
nor 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 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. Purchaser and Sellers shall cooperate in the filing of any forms (including
Form 8594 under Section 1060 of the Tax Code) with respect to the Allocation.



ARTICLE II




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 Sellers’ conveyance of the Owned Real Properties to 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 Purchaser may agree,
Sellers and 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 Article II 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, or its specified designee(s), free and clear of all Encumbrances, other
than Permitted Encumbrances.


 


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2.3 Seller’s Real Property Transfer Documents. Subject to the Sale Approval Order
becoming a Final Order, on or before the Closing Date, Sellers shall deposit into the Real
Property Escrow for delivery to 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 Purchaser (acting reasonably) for conveyance by the applicable
Seller to 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 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 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 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 Purchaser in accordance with the terms
of this Agreement.



2.4 Purchaser’s Real Property Transfer Documents. Subject to the Sale Approval Order
becoming a Final Order, on or before the Closing Date, 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 Purchaser in accordance with the terms
of this Agreement.



2.5 Recording of Title. At the Closing, the Title Company shall, and Sellers shall
cause the Title Company to, 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.


 


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2.6 Title Commitments and Surveys. At least ten (10) days prior to the scheduled
Closing Date, ParentCo shall, at Sellers’ sole cost and expense, for each individual Owned Real
Property listed on Schedule 2.6, cause to be delivered to 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. 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 listed on Schedule 2.6. If any such Title Commitment or Survey shows any
Encumbrances on any such Owned Real Property, other than Permitted Encumbrances, Sellers shall be
obligated to cure and or remove of record such Encumbrances at or prior to the Closing so that
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 such Owned Real Property reveals any Encumbrance that is not
a Permitted Encumbrance, and it becomes apparent that Sellers cannot or shall not cure or remove of
record such Encumbrance at or prior to Closing, 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.



2.7 Title Policies. At the Closing, Sellers shall deliver to Purchaser an owner’s
ALTA policy (or applicable state required form) 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 listed on Schedule 2.6 (i.e., one such policy for each such Owned Real
Property) effective as of the Closing Date (collectively, the “Title Policies”), with each
Title Policy being in the amount specified on Schedule 2.7. The Title Policies shall
insure Purchaser that fee simple interest in and to such Owned Real Properties is vested in
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 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 Purchaser. 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 each such Owned
Real Property covered by such Title Policy in the same face amount, and Purchaser shall pay any
additional premium for the extended coverage and for any endorsement on such Title Policy requested
by Purchaser. Purchaser shall be solely responsible for satisfying, at its cost, any requirement
of the Title Company for any Title Policy endorsement requested by Purchaser.



2.8 Real Property Escrow Cancellation Charges. If the Closing does not occur because
of the termination of this Agreement by Sellers (or any of them) pursuant to Section 8.1(c)
or (e), 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 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 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
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 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 for Real Properties. The following apportionments shall be made
between Sellers and 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:



(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 or
Transferred Subsidiary and Purchaser and set forth on (i) the Closing Statement applicable to such
Owned Real Property, if owned by a Seller or (ii) for any Owned Real Property owned by a
Transferred Subsidiary or any Leased Real Property in respect of which the Real Property Lease is
included in the Assumed Contracts (each, an “Acquired Leased Real Property”), a written
statement agreed to by ParentCo and Purchaser. Sellers shall be responsible for all Taxes
attributable to the Owned Real Properties and Acquired Leased Real Properties through and including
the Closing Date and Purchaser shall be responsible for such Taxes attributable to the Owned Real
Properties and Acquired Leased Real Properties beginning the first day after the Closing Date. If
any current assessments, statements or other necessary information on any such amounts are not
available before the Closing Date, Sellers and Purchaser shall agree upon reasonable estimates of
such amounts based on prior amounts assessed against or paid by the applicable Sellers.



(b) Utilities. Purchaser and 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 Closing Date for electricity, water, gas and any
other utilities servicing the Owned Real Properties and Acquired Leased Real Properties, and for
separate billing to Purchaser for all such charges attributable to the period beginning on the day
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 and Acquired Leased Real Properties as of the Closing Date, 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 Sellers or Purchaser (as applicable) after combining such prorations shall be paid
concurrently with the payment due under Section 1.11(e) after determining the Final Price
Adjustment.


 


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(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 Tax Code.



ARTICLE III




REPRESENTATIONS AND WARRANTIES OF SELLERS




In order to induce Purchaser to enter into this Agreement and consummate the transactions
contemplated hereby, Sellers hereby jointly and severally represent and warrant to Purchaser as
follows:



3.1 Due Incorporation and Authority. Each Seller is a corporation, limited liability
company or limited partnership duly organized, validly existing and in good standing under the laws
of the state of its organization and has all necessary corporate, limited liability company or
limited partnership power and authority to own, lease and operate its assets and to carry on the
Home Business, the Insurance Business or the Finance Business (as applicable), as it is now being
conducted. Subject to the entry of the Sale Approval Order, (i) each Seller has all requisite
corporate, limited liability company or limited partnership power and authority to enter into this
Agreement, carry out its obligations hereunder and consummate the transactions contemplated hereby
and (ii) 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, limited
liability company 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 and the
Sale Approval Order becoming a Final Order (assuming the due authorization, execution and delivery
hereof by Purchaser and satisfaction of all conditions to the Closing), this Agreement shall
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. Except as a result of the Bankruptcy Case, and subject to the entry
of the Sale Approval Order and the Sale Approval Order becoming a Final Order, the execution and
delivery by Sellers of this Agreement, the consummation of the transactions contemplated hereby,
and the performance by Sellers of this Agreement in accordance with its terms shall not:



(a) violate the certificate of incorporation or by-laws or comparable organizational
instruments of any Seller or Transferred Subsidiary or contravene any resolution adopted by the
directors, managers, shareholders, members or partners of any Seller or Transferred Subsidiary;



(b) to the Knowledge of Sellers, violate any Law to which any Seller, any Transferred
Subsidiary, any part of the Business, any of the Transferred Assets, or any of the Transferred
Subsidiaries’ 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 any of the assets of any Transferred Subsidiary;
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 any Governmental Body) pursuant to, any Assumed Contract, Contract referred to in
Section 1.1(h), Purchase Order included in the Transferred Assets, Transferred Permit, any
Contract to which any Transferred Subsidiary is a party or by which it is bound, or any Permit held
by a Transferred Subsidiary, except for (i) consents, approvals or authorizations of, or
declarations or filings with, the Bankruptcy Court, (ii) required approvals from insurance
regulatory authorities, and (iii) required approvals from finance regulatory authorities.



3.3 Organizational Documents; Meeting Minutes. Sellers have delivered to Purchaser
prior to the date hereof true, accurate and complete copies of the certificate of incorporation and
bylaws, or comparable organizational instruments, of Sellers and the Transferred Subsidiaries as in
effect on the date hereof. Sellers have made available to Purchaser prior to the date hereof
copies of all minutes of meetings of directors, shareholders, members, managers and partners (as
applicable) of the Transferred Subsidiaries, including any actions undertaken or approved by
written consent in lieu of any meeting of such Persons.




3.4 Capitalization of Transferred Subsidiaries.



(a) Schedule 3.4(a) sets forth for each Transferred Subsidiary (i) its authorized
capital, (ii) the number of its shares of capital stock, limited liability company interests,
general partner interests and/or limited partner interests, as applicable, that are issued and
outstanding, and (iii) the record and beneficial owner(s) of such outstanding shares of capital
stock, limited liability company interests, general partner interests and/or limited partner
interests. All of such issued and outstanding shares of capital stock, limited liability company
interests, general partner interests and limited partner interests (i) have been issued in
compliance with all applicable Laws and the organizational instruments of the Transferred
Subsidiaries, (ii) are fully-paid and non-assessable, (iii) are of amounts equal to or exceeding
the minimum amounts required under applicable Laws, and (iv) except as disclosed on Schedule
3.4(a), are held by their record owners free and clear of any Encumbrance, other than Permitted
Encumbrances.



(b) There are no options, rights, warrants, notes, calls or other outstanding securities
convertible into or exercisable or exchangeable for shares of capital stock, limited liability
company interests, general partner interests, limited partner interests or any other equity
interest in any Transferred Subsidiary, nor any outstanding subscriptions, options, rights,
warrants, calls, rights of first refusal or offer, or other agreements or commitments (contingent
or otherwise) obligating any Transferred Subsidiary to issue or transfer from treasury any shares
of its capital stock, limited liability company interests, general partner interests, limited
partner interests or other equity interests, or to issue, grant or sell other securities
convertible into or exchangeable for shares of capital stock, limited liability company interests,
general partner interests, limited partner interests or any other equity interests. There are no
subscriptions, options, warrants, calls, rights, commitments or agreements of any character to
which any Seller
or Transferred Subsidiary is a party or by which it is bound obligating or permitting any
Transferred Subsidiary to purchase or otherwise acquire the securities of any other Person.


 


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(c) Except for Purchaser’s rights as provided in this Agreement, and except for the Virgo
Security Interest and the security interest granted under the Textron Facility, no Person has any
right (including any preemptive right, right of first offer or right of first refusal) to acquire
any interest in any of the outstanding shares of capital stock, limited liability company
interests, general partner interests or limited partner interests in any Transferred Subsidiary.
The transactions contemplated hereby shall vest in Purchaser at the Closing all legal and
beneficial right, title and interest in and to the Standard Casualty Shares, the Standard Insurance
Shares and the CountryPlace Shares free and clear of any Encumbrance other than the Virgo Security
Interest, and other than any security interest granted or agreed to in writing by Purchaser or an
Affiliate thereof.



(d) All certificates or other documents evidencing ownership of the CountryPlace Shares and
the other stock or equity interests in the other Finance Subsidiaries have been delivered by
ParentCo to, and to the Knowledge of Sellers, are in the possession of, Virgo Service Company LLC
for purposes of perfection of the Virgo Security Interest in the CountryPlace Shares and such other
stock and equity interests.



3.5 Transferred Subsidiary Financial Statements. To the extent prepared and
maintained by ParentCo or any of the Transferred Subsidiaries (separate from ParentCo’s
consolidated financial statements), Sellers have provided to Purchaser the following financial
statements with respect to the Transferred Subsidiaries: (i) annual statements filed with insurance
regulatory authorities for the fiscal years ended March 31, 2008, 2009 and 2010, annual reports
filed with finance regulatory authorities for the fiscal years ended March 31, 2008, 2009 and 2010,
and audited balance sheets and related statements of operations, stockholders’ equity, and cash
flows as of and for the fiscal years ended March 31, 2008, 2009 and 2010; (ii) unaudited balance
sheets and related statements of operations, stockholders’ equity, and cash flow as of and for the
three (3) and six (6)-month periods ended September 30, 2010, and (iii) unaudited balance sheets
and related statements of operations, stockholders’ equity, and cash flow as of and for the month
ended October 31, 2010 (the “Most Recent Financial Statements”). All of such financial
statements (including the notes thereto) have been prepared in accordance with statutory accounting
requirements or GAAP, as applicable, throughout the periods covered thereby and present fairly, in
all material respects, the respective financial positions of the Transferred Subsidiaries as of
such dates and the respective results of operations of the Transferred Subsidiaries for such
periods; provided, however, that the financial statements referred to in clauses
(ii) and (iii) above are subject to normal year-end adjustments, required schedules and lack
footnotes and other presentation items required by statutory accounting requirements or GAAP, as
applicable.



3.6 Transferred Subsidiary Undisclosed Liabilities; Guaranties. No Transferred
Subsidiary has any Liabilities other than those that (i) are reflected or reserved against in the
Most Recent Financial Statements or otherwise set forth in this Agreement (including any Schedule
hereto); (ii) have been incurred in the Ordinary Course of Business; (iii) are permitted or
contemplated by this Agreement; or (iv) shall have been discharged or paid off as of the date
immediately preceding the Closing Date. Except as disclosed on Schedule 3.6, no
Transferred
Subsidiary is a guarantor or otherwise responsible, whether as a co-obligor or contingently,
for any Liability (including Indebtedness) of any other Person (including any Seller or other
Transferred Subsidiary).


 


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3.7 Accounts Receivable. All Accounts Receivable of Sellers and the Transferred
Subsidiaries are valid receivables arising in the Ordinary Course of Business. Except as set forth
on Schedule 3.7, there is no contest, claim, defense or right of setoff with respect to
such Accounts Receivable with any account debtor of an account or note receivable relating to the
amount or validity of such account or note receivable, other than with respect to returns in the
Ordinary Course of Business of Sellers or cancellations of insurance policies issued or sold by any
of the Insurance Subsidiaries.




3.8 Compliance with Laws.



(a) The Business is and has been within the past five (5) years conducted in all material
respects in compliance with all applicable Laws. Except for the Bankruptcy Case and other matters
contained in the docket related thereto, within the past five (5) years, no Claim has been made in
writing by any Governmental Body to any Seller or Transferred Subsidiary to the effect that the
Business, any Transferred Asset or any Transferred Subsidiary has failed to comply in any material
respect with any Law, except as has been resolved to the satisfaction of such Governmental Body.



(b) Sellers have made available for inspection by Purchaser (i) true, complete and correct
copies of all annual reports, other periodic filings, material examination reports, correspondence,
reports of investigations, inquiries and other similar materials relating to the Transferred
Subsidiaries dating back to January 1, 2005 received by or submitted to any Governmental Body,
including any insurance or finance regulatory authority. Except as described on Schedule
3.8, there are no examinations, audits, formal inquiries or, to the Knowledge of Sellers,
investigations by any state insurance department examiner or any federal or state financial
services regulatory examiner in progress with respect to any Transferred Subsidiary, nor, to the
Knowledge of Sellers, is any such examination, audit, formal inquiry or investigation pending or
scheduled, except as may result from Sellers’ commencement of the Bankruptcy Case.



(c) Except as described on Schedule 3.8, there are no Contracts (including settlement
agreements), memoranda of understanding, commitment letters, commissioner’s orders, consent orders
or similar undertakings in effect between any Insurance Subsidiary and any Governmental Body, other
than any such agreement, understandings, commitments, undertakings or orders of general application
to insurers engaged in the property and casualty insurance business, that (i) specifically limit in
any material respect the ability of any Insurance Subsidiary to issue insurance policies under its
existing Permits, (ii) impose any specific requirements on any Insurance Subsidiary in respect of
risk-based capital requirements that materially increase or modify the risk-based capital
requirements imposed under applicable insurance Laws, or (iii) specifically relate to the ability
of any Insurance Subsidiary to pay dividends.


 


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(d) To the Knowledge of Sellers, since January 1, 2005, each agent, broker or other
representative of any Insurance Subsidiary that wrote or sold an insurance product for any
Insurance Subsidiary (any of which, an “Insurance Representative”) was at the time such
Insurance Representative wrote or sold such insurance product duly licensed and appointed as
required by applicable insurance Law, in the particular jurisdiction in which such Insurance
Representative wrote or sold insurance products. To the Knowledge of Sellers, no Insurance
Representative has been since January 1, 2005, or is currently, in violation (or with or without
notice or lapse of time or both, would be in violation) of any insurance Law applicable to the
writing, sale or production of insurance products for any Insurance Subsidiary, except where such
violations have not had and would not reasonably be expected to have a Material Adverse Effect. As
of the date of this Agreement, no Insurance Representative individually accounting for five percent
(5%) or more of the total gross premiums of the insurance business of the Insurance Subsidiaries
for their last completed fiscal year has indicated in writing to any Insurance Subsidiary that such
Insurance Representative shall be unable or unwilling to continue its relationship as a Producer
with such Insurance Subsidiary within twelve (12) months after the date hereof.




3.9 Permits.



(a) Schedule 3.9(a) sets forth a list of all of Sellers’ and the Transferred
Subsidiaries’ material licenses, franchises, permits, variances, exemptions, orders, approvals and
authorizations of Governmental Bodies, including any applications therefor, that are used for the
conduct of the Business (or any part thereof) as currently conducted (collectively, the
“Permits”). Each Seller and Transferred Subsidiary is in compliance, in all material
respects, with the terms of all material Permits held by it, and all such material Permits are
valid and in full force and effect. For any Permit that would expire within ninety (90) days of
the Closing Date, a renewal application has been prepared and filed with the applicable
Governmental Body.



(b) No Transferred Subsidiary has transacted business in any jurisdiction requiring it to have
a Permit to transact such business while it did not possess such Permit, except where the failure
to have such Permit would not interfere with the ability of such Transferred Subsidiary to conduct
its business as presently conducted. No Seller or Transferred Subsidiary is the subject of any
pending or, to the Knowledge of Sellers, threatened action or proceeding for or contemplating the
suspension, termination, modification, limitation, cancellation, revocation, nonrenewal or
impairment of any of its Permits. Except for the filing of the Bankruptcy Case, Sellers have no
Knowledge of any existing fact or circumstance that, individually or in the aggregate would be
reasonably likely to result in the suspension, termination, modification, limitation, cancellation,
revocation, nonrenewal or impairment of any Permit held by any of the Transferred Subsidiaries, and
provided that all consents described on Schedule 3.9(b) have been obtained, no Permit held
by any Transferred Subsidiary shall be suspended, terminated, modified, limited, cancelled,
revoked, not renewed or impaired or become suspended, terminated, modified, limited, cancelled,
revoked, not renewed or impaired, in whole or in part, as a result of the execution and delivery of
this Agreement, the commencement of the Bankruptcy Case or the consummation of the transactions
contemplated hereby.


 


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3.10 Contracts.



(a) Schedule 3.10(a) contains an accurate and complete list, and Sellers have
delivered or made available to Purchaser accurate and complete copies, of the following outstanding
Contracts (including all amendments and supplements thereto) to which any Seller or Transferred
Subsidiary is a party or by which any Seller or Transferred Subsidiary is bound:



(i) each Contract for the sale of goods or performance of services by any Seller or
Transferred Subsidiary having (or expected to have) an actual or anticipated value to such Seller
of at least $25,000 in any twelve (12)-month period, but excluding any Contract for the sale of
individual manufactured or modular homes to non-commercial and non-Governmental Body end-use
purchasers;



(ii) each Contract for the purchase of goods or services by any Seller or Transferred
Subsidiary from any vendor or supplier of the Business having (or expected to have) an actual or
anticipated cost to Sellers or the Transferred Subsidiaries (or any of them) of at least $25,000 in
any twelve (12)-month period;



(iii) each real property lease, sublease, license or other agreement pursuant to which any
Seller or Transferred Subsidiary grants to any other Person any right of possession or use of, or
access to, any Real Property;



(iv) each equipment lease, lease-purchase agreement, installment sale contract or other
similar contract or agreement relating to any Tangible Personal Property or any tangible personal
property used by any Transferred Subsidiary;



(v) each Contract relating to capital expenditures on any Real Property or with respect to any
other Transferred Asset or any asset of any Transferred Subsidiary under which any Seller or
Transferred Subsidiary has warranty, service or other similar rights;




(vi) each Hedging Contract; and



(vii) each management, consulting, advertising, marketing, promotion, technical services,
advisory or other Contract relating to the design, marketing, promotion, management or operation of
the Business, or any part thereof, having (or expected to have) an actual or anticipated cost to
any Seller or Transferred Subsidiary of at least $25,000 in any twelve (12)-month period.



(b) Schedule 3.10(b) contains an accurate and complete list, and Sellers have
delivered or made available to Purchaser accurate and complete copies, of the following outstanding
Contracts (including all amendments and supplements thereto) to which any Transferred Subsidiary is
a party or by which any Transferred Subsidiary is bound:



(i) each Contract restricting in any manner any Transferred Subsidiary’s (i)  right to compete
with any other Person, (ii) right to sell or purchase from any other Person or otherwise limiting
the right of any Transferred Subsidiary to engage in any line of business in any jurisdiction,
(iii) right to solicit any business, customer, or employee of another Person, other than
non-disclosure or confidentiality agreements entered into in the
ordinary course of business or (iv) restricting the right of any other Person to compete with
any Transferred Subsidiary or to solicit any business, customer or employee of any Transferred
Subsidiary, other than non-disclosure or confidentiality agreements entered into in the ordinary
course of business.


 


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(ii) each Contract containing any support, maintenance, service or other material obligation
on the part of any Transferred Subsidiary involving annual revenues or cost to such Transferred
Subsidiary in excess of $25,000 in any twelve (12)-month period;



(iii) each loan or credit agreement, pledge agreement, promissory note, security agreement,
mortgage, debenture, indenture, letter of credit, line of credit whether revolving or otherwise,
and guaranty;



(iv) each Contract containing guaranty, surety or indemnification obligations of any
Transferred Subsidiary, including those related to any undertaking of financial support or
contractual performance extended by any Transferred Subsidiary on behalf of or in support of any
other Person (including any Affiliate);



(v) each Contract providing for the indemnification of any past or present employee, director,
consultant or agent of any Transferred Subsidiary;



(vi) each Contract with any employee or director of any Transferred Subsidiary, other than
offer letters specifying that employment is on an “at will” basis or otherwise at such Transferred
Subsidiary’s discretion;



(vii) each partnership agreement, joint venture agreement, co-development agreement or other
similar agreement involving a sharing of profits, losses, costs (excluding recovery of costs in the
ordinary course of business) or Liabilities with any other Person;



(viii) each Contract to which any Governmental Body is a party or under which any Governmental
Body has any rights or obligations;



(ix) each Contract providing for the servicing of loans, including any such Contract with the
Federal National Mortgage Association (i.e., Fannie Mae), the Government National Mortgage
Association (i.e., Ginnie Mae) or any other similar government sponsored entity;



(x) each Contract providing for reinsurance either by any Insurance Subsidiary or by any third
party with respect to insurance policies issued or sold by any Insurance Subsidiary or for which
any Insurance Subsidiary is liable for the payment of benefits (any of which, a “Reinsurance
Contract”);



(xi) each brokerage, agency, managing general agent or other similar Contract for the
marketing and sale of any Transferred Subsidiary’s products or services;



(xii) each other Contract that involves a payment to or from any Transferred Subsidiary in
excess of $50,000 on its face in any individual case.


 


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(c) Each Assumed Contract is valid and binding on, and enforceable against, the applicable
Seller and, to the Knowledge of Sellers, the counterparties thereto, and is in full force and
effect, other than exceptions that shall be remedied or otherwise accounted for pursuant to the
Sale Approval Order. Each Contract to which any Transferred Subsidiary is a party or by which it
is bound is valid and binding on, and enforceable against, the applicable Transferred Subsidiary
and, to the Knowledge of Sellers, the counterparties thereto, and is in full force and effect. No
Seller that is party to or bound by an Assumed Contract and no Transferred Subsidiary that is a
party to any Contract is in material breach of, or default under, any such Assumed Contract or
other Contract and, to the Knowledge of Sellers, there is no valid basis for any claim of material
breach or default by any Seller under any such Assumed Contract or by any Transferred Subsidiary
under any other Contract, except in the case of any Assumed Contract to the extent that any such
breach, default or claim of breach or default is cured, remedied or otherwise accounted for
pursuant to the Sale Approval Order.




3.11 Insurance Business.



(a) Since January 1, 2005, and except for benefits relating to claims incurred but not yet
reported and reported claims being processed by the Insurance Subsidiaries as of the date hereof,
all benefits due and payable under the insurance Contracts issued by any of the Insurance
Subsidiaries have been paid in accordance, in all material respects, with the terms of the
insurance Contracts under which they arose, except for such benefits for which an Insurance
Subsidiary has reasonably determined, in the Ordinary Course of Business, that there is or was a
reasonable basis to deny or contest payment.



(b) All policies, binders, slips, certificates and Contracts of insurance, in effect as of the
date hereof (including all applications, supplements, endorsements, riders and ancillary Contracts
in connection therewith) that have been issued by any Insurance Subsidiary or for which any
Insurance Subsidiary is liable for the payment of benefits, and any and all marketing materials,
agent Contracts, broker Contracts or managing general agent Contracts are, to the extent required
under applicable insurance Law, on forms approved by applicable insurance-related Governmental
Bodies or which have been filed and not objected to by such insurance-related Governmental Bodies
within the period provided for objection, and such forms comply in all material respects with the
insurance Laws applicable thereto and, as to premium rates established by any Insurance Subsidiary
which are required to be filed with or approved by insurance-related Governmental Bodies, such
rates have been so filed or approved, the premiums charged conform thereto in all respects, and
such premiums comply in all material respects with the insurance Laws applicable thereto. Sellers
have provided or made available to Purchaser copies of all specimens (including specimen schedule
pages) of all insurance policies and Contracts issued by any Insurance Subsidiary since January 1,
2005.



(c) The reserves carried by the Insurance Subsidiaries are in compliance in all material
respects with the requirements for reserves established by the applicable Governmental Bodies in
the jurisdictions in which the Insurance Subsidiaries conduct business, have been determined in all
material respects in accordance with GAAP and statutory accounting standards (to the extent
applicable) as in effect at applicable times, consistently applied, and have been computed on the
basis of methodologies consistent in all material respects with those used in prior periods.


 


23









 





(d) Since January 1, 2005, none of the Insurance Subsidiaries has violated in any material
respect its underwriting guidelines in effect from time to time in connection with its issuance of
any insurance Contracts in any way that would adversely affect any Insurance Subsidiary’s rights
under any Reinsurance Contract.



(e) Except as set forth on Schedule 3.11(e), there are no material accrued and unpaid
or unreported Liabilities with respect to claims or assessments made against any Insurance
Subsidiary by any insurance guaranty association or similar organization in connection with such
association’s or organization’s insurance guaranty fund or similar program.



(f) There is no Contract or other arrangement in effect between any Insurance Subsidiary and
any third party reinsurer under a Reinsurance Contract that would under any circumstances reduce,
limit, mitigate or otherwise affect any actual or potential loss to any party under any such
Reinsurance Contract, other than as may be expressly provided in such Reinsurance Contract.
Neither Parent nor any Insurance Subsidiary has received any written notice to the effect that
(i) the financial condition of any third party to any Reinsurance Contract is materially impaired
with the result that a default thereunder may reasonably be anticipated or (ii) there is no dispute
with respect to any material amount recoverable or payable by any Insurance Subsidiary pursuant to
any Reinsurance Contract.




3.12 Real Property.



(a) Schedule 3.12(a) lists the street address (and references the legal description in
the Title Commitments) of each parcel of real property owned by any Seller or Transferred
Subsidiary (each, an “Owned Real Property” and collectively, the “Owned Real
Properties”), but excluding any REO real property purchased by any Seller or Transferred
Subsidiary from the Department of Housing and Urban Development or any lender and held for resale.
Subject to the entry of the Sale Approval Order and the Sale Approval Order becoming a Final Order,
at the Closing, the applicable Sellers shall have fee simple title to each Owned Real Property,
which shall be transferred to Purchaser at the Closing free and clear of all Encumbrances, other
than Permitted Encumbrances. The Owned Real Property owned by any Transferred Subsidiary is owned
by such Transferred Subsidiary in fee simple, free and clear of any Encumbrance, other than
Permitted Encumbrances.



(b) Schedule 3.12(b) lists (i) the street address of each parcel of real property or
portion thereof leased (as lessee) by any Seller or any Transferred Subsidiary (each, a “Leased
Real Property” and collectively, the “Leased Real Properties”, and together with the
Owned Real Properties, the “Real Properties”), and (ii) a description (including document
name, date, parties and any amendments) of each lease (each a “Real Property Lease”) in
effect with respect to each Leased Real Property.



(c) Sellers have delivered to Purchaser complete and accurate copies of all Real Property
Leases, including all addenda, amendments, extensions and supplements thereto and assignments
thereof. No Seller or Transferred Subsidiary has entered into any written Contract, arrangement or
understanding with any third party landlord that in any way alters or affects the express terms and
conditions of any Real Property Lease. Each Real Property Lease is valid and binding on the
applicable Seller or Transferred Subsidiary and, to the Knowledge of
Sellers, the counterparties thereto, and is in full force and effect. No Seller or
Transferred Subsidiary is in default under any Real Property Lease, other than a default that shall
be remedied or otherwise accounted for pursuant to the Sale Approval Order, and to the Knowledge of
Sellers, no other counterparty to any Real Property Lease is in default thereof.


 


24









 





(d) Sellers’ use of the Real Properties for the various purposes for which they are presently
being used are permitted as of right under all applicable Laws (including zoning laws), except
where any non-permitted use by any Seller would not interfere with such Seller’s conduct of its
business on such Real Property as presently conducted.



(e) To the Knowledge of Sellers, (i) all of the Real Properties, including buildings, fixtures
and other improvements thereon, are in good operating condition and repair, ordinary wear and tear
excepted, and no Owned Real Property is in need of repair other than as part of routine maintenance
in the ordinary course of business, and (ii) all buildings, structures, improvements and fixtures
on each of the Real Properties are in compliance in all material respects with all applicable Laws,
including Occupational Safety and Health Laws.



(f) Except as expressly provided in any Real Property Lease, in any public record or as set
forth on Schedule 3.12(f), no Seller or Transferred Subsidiary has (i) leased, subleased,
licensed or otherwise granted to any Person the current or future right to use or occupy any of the
Real Properties or any portion thereof, (ii) granted to any Person any option, right of first
refusal, offer, or other Contract or right to purchase, acquire, lease, sublease, assign or dispose
of any interest in any of the Real Properties, or (iii) collaterally assigned or granted any other
Encumbrance in or over any Real Property Lease or any interest therein.



(g) The Real Properties constitute all of the real property currently used by Seller and the
Transferred Subsidiaries in the conduct of the Business.



(h) There does not exist any actual or, to the Knowledge of Sellers, overtly threatened or
contemplated condemnation or eminent domain proceeding that affects or could be reasonably expected
to affect any Real Property or any part thereof, and no Seller or Transferred Subsidiary has
received any written notice of the intention of any Governmental Body to undertake any such
proceeding with respect to any of the Real Properties, or any part thereof.



(i) Except as may arise as a result of the Bankruptcy Case, no Transferred Subsidiary has any
ongoing dispute or disagreement with any landlord in respect of any obligation of such Transferred
Subsidiary or such landlord under the terms of any Real Property Lease or under applicable Law with
respect to any Leased Real Property.



(j) Except for the Real Properties of which the Transferred Subsidiaries are identified as
owners or tenants on Schedule 3.12(a), no Transferred Subsidiary has owned, leased (as
tenant), subleased (as subtenant) or occupied any other real property within the past five (5)
years.


 


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3.13 Environmental Matters. Except as disclosed on Schedule 3.13:



(a) Sellers and the Transferred Subsidiaries are currently, and since January 1, 2005 have
been, in compliance in all material respects with all applicable
Environmental Laws applicable to the Business, the Transferred Assets and the assets of the
Transferred Subsidiaries. There are no Claims pursuant to any Environmental Law pending or, to the
Knowledge of Sellers, threatened in writing against any Seller or Transferred Subsidiary in
connection with the conduct or operation of the Business or the ownership or use of any of the
Transferred Assets or any of the assets of the Transferred Subsidiaries. Within the past five (5)
years, no Seller or Transferred Subsidiary has received any actual or threatened order, notice or
other written communication from any Governmental Body or other Person of any actual or potential
violation or failure of any Seller or Transferred Subsidiary to comply with any Environmental Law
or of any actual or threatened obligation on the part of any Seller or Transferred Subsidiary to
undertake or bear the cost of any Environmental, Health and Safety Liabilities with respect to any
of the Real Properties, any other Transferred Asset or any asset of any of the Transferred
Subsidiaries, except has been adequately resolved to the satisfaction of such Governmental Body or
other Person.



(b) No Seller or Transferred Subsidiary is currently required to undertake any corrective or
remedial obligation under any Environmental Law with respect to the Business, any of the Real
Properties, any other Transferred Asset or any asset of any of the Transferred Subsidiaries.



(c) Sellers have made available to Purchaser all Phase I and Phase II, if any, environmental
reports, other engineering reports and any other material documents in Sellers’ possession relating
to any environmental or health or safety matters, relating to the Real Properties, any of the other
Transferred Assets or any of the assets of the Transferred Subsidiaries. Except to the extent
disclosed in such environmental and engineering reports, to the Knowledge of Sellers, there are no
Hazardous Materials present on or in the Environment at any of the Real Properties, including any
Hazardous Materials contained in barrels, aboveground or underground storage tanks, landfills, land
deposits, dumps, equipment (whether movable or fixed) or other containers, either temporary or
permanent, and deposited or located in land, water, sumps, or any other part of any of the Real
Properties, or incorporated into any structure therein or thereon, except in material compliance
with all applicable Environmental Laws.



(d) No Seller or Transferred Subsidiary has conducted or knowingly permitted any Hazardous
Activity on or with respect to any of the Real Properties.




3.14 Intellectual Property.



(a) Schedule 3.14(a) contains a complete and accurate list of the following items of
intellectual property of each Seller and Transferred Subsidiary: (i) all Patents; (ii) all Marks;
(iii) all registered Copyrights; and (iv) all licenses and sublicenses held by any Seller or
Transferred Subsidiary as licensee pertaining to Computer Software (excluding mass produced shrink
wrap license agreements) or other Intellectual Property of any other Person, including in the case
of such Patents, Marks and Registered Copyrights, details of registration and/or application
filings with the United States Patent and Trademark Office or similar Governmental Bodies in other
jurisdictions. No Seller or Transferred Subsidiary owns any proprietary Computer Software.


 


26









 





(b) Schedule 3.14(b) contains a complete and accurate list of all licenses,
sublicenses or other arrangements (written or oral, formal or informal) pursuant to which any
Seller or Transferred Subsidiary is currently granting any right of use of any Computer Software or
other Intellectual Property to any Person, including any other Seller or Transferred Subsidiary,
including in the case of any arrangement that is not documented under a written agreement, the
specific terms of such arrangement.



(c) Except as disclosed on Schedule 3.14(c), to the Knowledge of Sellers, (i) no item
of Intellectual Property used by any Seller or Transferred Subsidiary is currently being infringed
or overtly challenged or threatened in any way, (ii) none of the products or services sold or trade
secrets used by any Seller or Transferred Subsidiary infringes or has been alleged in any written
notice to any Seller or Transferred Subsidiary to infringe any intellectual property right of any
other Person, (iii) no Mark included in the Intellectual Property used by any Seller or Transferred
Subsidiary has been or is now involved in any opposition, invalidation or cancellation Claim, and
no such action is threatened with respect to any such Mark; and (iv) there is no potentially
interfering trademark or trademark application of any other Person in use or pending.



(d) Each license, sublicense or other arrangement referred to in Sections 3.14(a) and
(b) is valid and binding on, and enforceable against, the applicable Seller or Transferred
Subsidiary and, to the Knowledge of Sellers, the counterparties thereto, and is in full force and
effect. Except as disclosed on Schedule 3.14(d), no Seller or Transferred Subsidiary is in
default of its obligations under any license, sublicense or other arrangement referred to in
Section 3.14(a) or (b), except where such default is cured, remedied or otherwise
accounted for pursuant to the Sale Approval Order.



3.15 Litigation and Other Claims. Except for the Bankruptcy Case and other matters on
the docket related thereto (including information included in Sellers’ Schedules of Assets and
Liabilities and Statements of Financial Affairs filed with the Bankruptcy Court), and except as
otherwise disclosed on Schedule 3.15, (i) there are no material Claims (including with
respect to product liability Claims) pending or, to the Knowledge of Sellers, threatened against
any Seller or Transferred Subsidiary with respect to the Business (or any part thereof), any of the
Real Properties, any of the other Transferred Assets or any of the Assumed Liabilities, and (ii)
there are no Claims pending or, to the Knowledge of Sellers, threatened by or against any Seller or
Transferred Subsidiary that challenge the validity of this Agreement or any of the transactions
contemplated hereby or that, either individually or in the aggregate, would reasonably be expected
to prevent or delay the consummation by Sellers of the transactions contemplated by this Agreement.



3.16 Condition of Tangible Personal Property. The Tangible Personal Property and the
machinery, equipment, and other tangible assets owned or leased by the Transferred Subsidiaries and
necessary to conduct the Business as it is being conducted on the date hereof are in good operating
condition and repair, ordinary wear and tear excepted.


 


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3.17 Title to Assets; Possession. Upon (i) the entry of the Sale Approval Order and
the Sale Approval Order becoming a Final Order, and (ii) the receipt by Purchaser of all required
approvals from insurance-related Governmental Bodies and finance-related Governmental
Bodies applicable to the Transferred Subsidiaries, at the Closing, Sellers shall have good and
marketable title to the Transferred Assets, which shall be transferred to Purchaser free and clear
of all Encumbrances, other than Permitted Encumbrances. The Transferred Subsidiaries now have, and
as of the time of Closing shall have, good and marketable title to all of their assets, free and
clear of all Encumbrances, other than Permitted Encumbrances. Except for equipment leased (as
lessee) by any Seller or Transferred Subsidiary under a Contract disclosed in this Agreement, no
Seller or Transferred Subsidiary is in possession of any equipment or other tangible asset that is
owned by another Person. Except as disclosed on Schedule 3.17, no asset of any Seller or
Transferred Subsidiary having a value of more than $25,000 is in the possession or under the
control of any other Person.



3.18 Sufficiency of Assets. Except for the Excluded Assets, the Transferred Assets
constitute all of the assets, tangible and intangible, of any nature whatsoever, used by Seller to
operate the Home Business in the manner presently operated by Sellers.



3.19 Inventory. The Inventory substantially consists of, and as of the close of
business on the day immediately preceding the Closing Date the Inventory shall substantially
consist of, items which are, subject to inventory reserves set forth in Sellers’ (or their
Affiliate’s consolidated) financial statements, of a quality and quantity usable and salable in the
Ordinary Course of Business.




3.20 Employees.



(a) Sellers have provided to Purchaser a detailed list of all of their and the Transferred
Subsidiaries’ employees, segregated by each Seller and Transferred Subsidiary, including the
following information for each such employee: (i) name; (ii) part-time or full-time status; (iii)
title and/or job description; (iv) employment commencement date; (v) annual base salary or hourly
wage; (vi) available bonus or other contingent compensation; (vii) accrued and unused vacation
days; (viii) accrued and unused sick days; and (ix) if on leave, the status of such leave
(including reason for leave and expected return date).



(b) Except as set forth on Schedule 3.20(b), since January 1, 2008, with respect to
the employees of Seller and the Transferred Subsidiaries, there has not been, there is not
presently pending or existing, and, to the Knowledge of Sellers, there is not threatened in writing
any material charge, grievance proceeding or other claim against or affecting any Seller (or any
director, officer, manager or employee thereof) relating to the actual or alleged violation of any
applicable Law pertaining to labor relations or employment matters, including any charge or
complaint filed by an employee or union with the National Labor Relations Board, the Equal
Employment Opportunity Commission or any comparable Governmental Body.



(c) To the Knowledge of Sellers, all employees of Seller and the Transferred Subsidiaries are
legally qualified to work in the United States by virtue of being United States citizens,
documented resident aliens (i.e., “green card” holders) or holders of validly issued employment
visas or other applicable Permits. Except as set forth on Schedule 3.20(c), all employees
of the Transferred Subsidiaries are employed on an “at-will” (or equivalent) basis such that their
employment may be terminated at any time and for any reason (including no reason) without notice or
compensation paid in lieu thereof.


 


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(d) Schedule 3.20(d) sets forth, on a Person-by-Person basis, all severance
compensation and benefits, retention bonus and similar payment obligations of any Transferred
Subsidiary to any of its directors, employees, managers or other equivalent Persons whether under
written Contract or otherwise.



(e) All salaries, wages, commissions and other compensation and benefits payable to the
employees of each Transferred Subsidiary have been accrued and paid by the applicable Transferred
Subsidiary when due for all periods through the date hereof, and shall have been accrued and paid
by the applicable Transferred Subsidiary when due for all periods through the Closing Date, except
for stub period payroll obligations resulting from the Closing Date occurring between normal
paydays, which payroll obligations are or shall have been as of the Closing Date properly accounted
for in the financial records of the Transferred Subsidiaries.



(f) No Seller or Transferred Subsidiary has been, nor is it now, a party to any collective
bargaining agreement or other labor contract. Since January 1, 2008, there has not been, there is
not presently pending or existing, and to the Knowledge of Sellers, there is not threatened, any
strike, slowdown, picketing, work stoppage or employee grievance process involving any Seller or
Transferred Subsidiary. To the Knowledge of Sellers, there is no organizational activity or other
labor dispute against or affecting any Seller or Transferred Subsidiary, and no application or
petition for an election of or for certification of a collective bargaining agent is pending.
There is not currently in effect any lock-out, relating to a labor dispute, by any Seller or
Transferred Subsidiary of any employee (or group thereof), and no such action is contemplated by
any Seller or Transferred Subsidiary.




3.21 Employee Benefits.



(a) Schedule 3.21(a) lists each Employee Benefit Plan that any Transferred Subsidiary
maintains, to which it contributes, in which it participates or with respect to which it has any
Liability. No Transferred Subsidiary nor any ERISA Affiliate has any commitment to establish or
amend any new or existing Employee Benefit Plan or similar agreement for the benefit of employees
of any Transferred Subsidiary or any ERISA Affiliate except as otherwise required by applicable Law
or to conform with any such Employee Benefit Plan or similar agreement to any applicable Law. No
Transferred Subsidiary nor any ERISA Affiliate has ever maintained, sponsored, participated in, or
contributed to any Employee Pension Benefit Plan that is a “defined benefit plan” as defined in
ERISA §3(35).



(b) Each Employee Benefit Plan of any Transferred Subsidiary (and each related trust,
insurance contract, or fund) now and always has been maintained, funded and administered in
accordance with the terms of such Employee Benefit Plan and complies in form and in operation in
all material respects with the applicable requirements of ERISA and the Tax Code. There are no
pending or, to the Knowledge of Sellers, threatened audits, investigations or claims involving any
Employee Benefit Plan by any Governmental Body or other Person, other than routine claims for
benefits.



(c) All premiums or other payments that are due have been timely paid with respect to each
Employee Benefit Plan of any Transferred Subsidiary that is an Employee Welfare Benefit Plan.


 


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(d) Each Employee Benefit Plan of any Transferred Subsidiary that is intended to meet the
requirements of a ‘‘qualified plan’’ under Tax Code §401(a) and each trust intended to meet the
qualification requirements under Tax Code §501(a) has timely received a determination letter (or
opinion letter in the case of a prototype plan) from the IRS to the effect that it meets the
requirements of Tax Code §401(a), and no fact exists, including any amendment or failure to amend
any Employee Benefit Plan, that could reasonably be expected to cause the IRS to revoke such
favorable determination letter (or opinion letter).



(e) With respect to each Employee Benefit Plan of any Transferred Subsidiary, such Transferred
Subsidiary has made available to Purchaser (i) a copy of each Employee Benefit Plan (including all
amendments thereto), (ii) a copy of the annual report and actuarial report, if required under ERISA
or the Tax Code, with respect to each Employee Benefit Plan for the last two (2) plan years ending
prior to the date hereof, (iii) if the Employee Benefit Plan is funded through a trust or any
third-party funding vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements with respect to the last reporting period
ended immediately prior to the date thereof, (iv) a copy of the most recent “summary plan
description”, together with each “summary of material modifications”, if required under ERISA, and
(v) the most recent determination letter received from the IRS with respect to each Benefit Plan
that is intended to be qualified under §401(a).



(f) No Transferred Subsidiary nor any ERISA Affiliate has ever maintained, established,
sponsored, participated in, or contributed to any (i) Employee Benefit Plan which is subject to
Title IV of ERISA or Tax Code §412; (ii) “multiemployer plan” as defined in ERISA or the Tax Code;
(iii) “multiple employer plan” as defined in ERISA or the Tax Code; or (iv) a “funded welfare plan”
within the meaning of Tax Code §419.



(g) Except as may be provided in any written employment Contract currently in effect between
any Transferred Subsidiary and any employee or former employee, all of which agreements are set
forth on Schedule 3.21(g), the consummation of the transactions contemplated hereby shall
not (i) result in any payment becoming due, or increase the amount of compensation due, to any
current or former employee or current or former director of any Transferred Subsidiary, (ii)
increase any benefits payable under any Employee Benefit Plan, or (iii) accelerate the time of
payment or vesting, or increase the amount of, or otherwise enhance, any benefit due to any current
or former employee or current or former director of any Transferred Subsidiary. No such payment
shall result in the loss by reason of Tax Code §280G, of any federal Income Tax deduction by any
Transferred Subsidiary or Purchaser.



(h) No Employee Benefit Plan of any Transferred Subsidiary provides benefits, including death,
medical or retiree welfare benefits (whether or not insured), with respect to current or former
employees or current or former directors of any Transferred Subsidiary after retirement or other
termination of service other than (i) coverage mandated by ERISA §§ 601-608 and Tax Code §4980B(f)
or applicable state Laws, (ii) death benefits or retirement benefits under any Plan, (iii) benefits
the full cost of which is borne by the current or former employee or current or former director (or
his or her personal representatives or beneficiary), or (iv) severance or deferred compensation
benefits properly accrued as Liabilities on the books of such Transferred Subsidiary or an ERISA
Affiliate.


 


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(i) No Transferred Subsidiary, and no Seller on behalf of any Transferred Subsidiary, has made
any representation or communication, oral or written, with respect to the participation,
eligibility for benefits, vesting, benefit accrual or coverage under any Employee Benefit Plan to
any of its current or former employees or directors (or any of their respective personal
representatives or beneficiaries) which is not in accordance with the terms and conditions of such
Transferred Subsidiary’s Employee Benefit Plans.



(j) Each Transferred Subsidiary and ERISA Affiliate has complied in all material respects with
the notice and continuation coverage requirements of Tax Code §4980B and the regulations thereunder
with respect to each Employee Benefit Plan of any Transferred Subsidiary or any ERISA Affiliate
that is, or was during any taxable year of any Transferred Subsidiary or any ERISA Affiliate for
which the statute of limitations on the assessment of federal income Taxes remains open, by consent
or otherwise, a group health plan within the meaning of Tax Code §5000(b)(1).



(k) None of the Employee Benefit Plans of any Transferred Subsidiary or any ERISA Affiliate,
any trust created thereunder, any Transferred Subsidiary or any ERISA Affiliate, or any employee or
director of any of the foregoing, nor, to the Knowledge of Sellers, any trustee, administrator or
other fiduciary thereof, has engaged in a “prohibited transaction” (as such term is defined in Tax
Code §4975 or §406 of ERISA). To the Knowledge of Sellers, no sponsor, trustee or administrator of
any Employee Benefit Plan of any Transferred Subsidiary has engaged in a transaction or has taken
or failed to take any action with respect to such Employee Benefit Plan that would be reasonably
expected to subject any Transferred Subsidiary or an ERISA Affiliate to a civil penalty assessed
pursuant to §502(i) of ERISA or a Tax imposed pursuant to Tax Code §4975 or 4980B.



(l) No severance agreement or arrangement currently in effect between any Transferred
Subsidiary and any current or former employee or director (including the severance amounts payable
thereunder) has been amended since the date of its execution by such Transferred Subsidiary and the
applicable employee or director.




3.22 Tax Matters.



(a) Each Transferred Subsidiary has timely filed all Income Tax Returns and all other material
Tax Returns that it was required to file. All such Tax Returns are true, correct and complete in
all material respects, were prepared in substantial compliance with all applicable Laws and, as so
filed, disclose all Taxes required to be paid for the periods covered thereby. All Taxes due and
owing by any Transferred Subsidiary (whether or not shown on any Tax Return) have been paid when
due, other than Taxes being contested in good faith and for which adequate reserves have been
established in the Most Recent Financial Statements, and if not yet due, have been properly accrued
or otherwise adequately reserved in such Transferred Subsidiary’s financial records (all of which
have been made available to Purchaser) and shall be accrued on the books and records of such
Transferred Subsidiary in accordance with past custom and practice through the Closing Date. Each
Transferred Subsidiary has disclosed on each Tax Return filed by it all positions taken thereon
that could give rise to a substantial understatement penalty of federal Income Taxes within the
meaning of Tax Code §6662 or §6662A or any similar provision of any other Tax Law. No Transferred
Subsidiary is currently the beneficiary
of any extension of time within which to file any Tax Return. There are no Encumbrances for
Taxes (other than Permitted Encumbrances) upon any of the assets of any Transferred Subsidiary.
Each Transferred Subsidiary has complied in all material respects with all Laws relating to the
payment and withholding of Taxes (including Taxes required to be withheld, collected, deposited and
paid in connection with amounts paid or owing to any employee, independent contractor, creditor,
shareholder, member, partner or other third party), and all Forms W-2, 941 and 1099 and any other
applicable forms required with respect thereto have been properly completed and timely filed.


 


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(b) There is no pending or threatened material dispute or claim concerning any Tax Liability
of any Transferred Subsidiary either (i) claimed or raised by any Governmental Body in writing or
(ii) as to which Sellers have Knowledge; and no adjustment relating to any Tax Return of any
Transferred Subsidiary or of any Seller with respect to matters pertaining to any Transferred
Subsidiary has been proposed in writing which has not been paid, settled or otherwise resolved to
the satisfaction of the applicable Governmental Body. No Transferred Subsidiary, and no Seller
with respect to any Transferred Subsidiary, has received from any Governmental Body, informally or
in writing, any (x) notice indicating an intent to open an audit or other review with respect to
any Transferred Subsidiary, (y) request for information relating to Taxes of any Transferred
Subsidiary, or (z) notice of deficiency or proposed adjustment for any amount of Tax proposed,
asserted, or assessed against any Transferred Subsidiary which in any such case is still
outstanding or otherwise unresolved.



(c) Sellers have made available to Purchaser all federal, state, local, and foreign Tax
Returns filed with respect to each Transferred Subsidiary for taxable periods ended on or after
December 31 2005, indicates those Tax Returns that have been audited or otherwise subject to an
action or proceeding, and indicates those Tax Returns that currently are the subject of audit,
action or proceeding. No Seller or Transferred Subsidiary has waived any statute of limitations in
respect of Taxes of any Transferred Subsidiary or agreed to any extension of time with respect to a
Tax assessment or deficiency that remains outstanding.



(d) No Transferred Subsidiary is a party to any Contract, arrangement or plan that has
resulted or would result, separately or in the aggregate, in the actual or deemed payment by such
Transferred Subsidiary or Purchaser of any “excess parachute payment” within the meaning of Tax
Code §280G (or any corresponding provision of state, local, or foreign Tax Law) or of any other
payment that shall not be deductible under Tax Code §162(a), §162(m) or §404, or that could give
rise to any amounts subject to excise Tax under Tax Code §4999, as those provisions are currently
written. No Transferred Subsidiary has any obligation to pay compensation subject to Tax Code §
409A pursuant to a deferred compensation plan that does not comply with the requirements of Tax
Code §409A. No Transferred Subsidiary has been a United States real property holding corporation
within the meaning of Tax Code §897(c)(2) during the applicable period specified in Tax Code
§897(c)(1)(A)(ii). No Transferred Subsidiary is a party to or bound by any Tax allocation or Tax
sharing agreement that will remain in effect with respect to such Transferred Subsidiary after the
Closing Date. No Transferred Subsidiary (i) has been a member of an affiliated group filing a
consolidated federal Income Tax Return, other than the consolidated group the common parent of
which was ParentCo, nor (ii) has any Liability for the Taxes of any Person (other than such
Transferred Subsidiary) under Treasury Regulations §1.1502-6 (or any similar provision of state,
local, or non-U.S. Law), as a transferee
or successor, by contract, or otherwise, except with respect to the consolidated group the
common parent of which is ParentCo.


 


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(e) No Transferred Subsidiary shall be required to include any item of income in, or exclude
any item of deduction from, taxable income for any taxable period (or portion thereof) ending after
the Closing Date as a result of any (i) change in method of accounting for a taxable period ending
on or prior to the Closing Date, (ii) “closing agreement” as described in Tax Code §7121 (or any
corresponding or similar provision or agreement of state, local, or foreign income Tax Law or with
any Governmental Body) executed on or prior to the Closing Date, (iii) intercompany transactions or
any excess loss account described in the Treasury Regulations under Tax Code §1502 (or any
corresponding or similar provision of state, local, or foreign income Tax Law), (iv) installment
sale or open transaction disposition made on or prior to the Closing Date, (v) prepaid amount
received on or prior to the Closing Date, or (vi) deferral of income pursuant to Tax Code §108(i).



(f) No income under any arrangement or understanding to which any Transferred Subsidiary is a
party or by which it is bound shall be attributed to such Transferred Subsidiary which is not
represented by income to which such Transferred Subsidiary is legally entitled.



(g) No Transferred Subsidiary has distributed stock or other equity ownership interests of
another Person, or had its stock or other equity ownership interests distributed by another Person,
in a transaction that was purported or intended to be governed in whole or in part by Tax Code §355
or Tax Code §361.



(h) No Transferred Subsidiary is, nor has it been, a party to any “listed transaction”, as
defined in Tax Code §6707A(c)(2) and Treasury Regulations §1.6011-4(b)(2), and no Transferred
Subsidiary is, nor has it been, a party to any “reportable transaction” as defined in Tax Code
§6707A(c)(1) and Treasury Regulations §1.6011-4(b).



(i) No Transferred Subsidiary has any election in effect under Tax Code §§ 108, 441, 472,
1017, 1033 or 4797 (or any similar provision of state, local or foreign Tax Law).



(j) Schedule 3.22(j) lists each jurisdiction in which any Transferred Subsidiary files
any Tax Returns (with each such jurisdiction identified by the applicable Transferred Subsidiary).
No written notice or inquiry has been received by any Transferred Subsidiary from any jurisdiction
in which Tax Returns have not been filed by any Transferred Subsidiary to the effect that the
filing of Tax Returns may be required. The Transferred Subsidiaries have no operations or
permanent establishments outside the United States.



3.23 Affiliated Transactions. To the Knowledge of Sellers, except as set forth on
Schedule 3.23, no Insider has any interest in the Transferred Assets or any of the assets
or properties of any of the Transferred Subsidiaries or is a party to any Contract used in or
related to the Business, or any part thereof. To the Knowledge of Sellers, no Insider has (i) any
economic interest in any Person which engages in competition with any Seller or Transferred
Subsidiary,
or (ii) any economic interest in any Person that purchases from or sells or furnishes to any
Seller or Transferred Subsidiary any services or products.


 


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3.24 Product Liability; Product Warranties. Except as set forth on Schedule
3.24, to the Knowledge of Sellers, the products sold or manufactured by Sellers and the
services provided by Sellers have complied with and are in compliance with, in all material
respects, all applicable (i) Laws, (ii) industry and self-regulatory organization standards, (iii)
contractual commitments, and (iv) express or implied warranties. Except as set forth on
Schedule 3.24, Since January 1, 2005, no Seller has initiated or otherwise participated in
any product recall or withdrawal with respect to any product produced, manufactured, marketed,
distributed or sold in connection with the Business, whether voluntary or required by Law. To the
Knowledge of Sellers, there are not, and there have not been, any defects or deficiencies in any of
their products or services (including in the Inventory) that could reasonably be expected to give
rise to or serve as a basis for any product recall or withdrawal by any Seller.



3.25 Insurance. Schedule 3.25 lists all insurance policies (including
policies providing property, casualty, general liability, products liability, errors and omissions,
workers’ compensation, key man or other life insurance, bond and surety arrangements and directors
and officers’ liability) with respect to which any Seller or Transferred Subsidiary is covered as a
named or additional insured, or for which it is responsible for paying all or any portion of the
premiums thereof. With respect to each such insurance policy: (i) the policy is valid,
enforceable, and in full force and effect in all material respects, and (ii) no Seller or
Transferred Subsidiary is in material breach or default thereof (including with respect to the
payment of premiums or the giving of notices). Schedule 3.25 describes any material
self-insurance arrangements affecting Seller or any Transferred Subsidiary. Since January 1, 2005,
no Seller or Transferred Subsidiary has received (i) any notice of refusal of insurance coverage
that was applied for by or on behalf of any Transferred Subsidiary relating (in whole or in part)
to any Transferred Subsidiary, its business or assets, (ii) any notice of rejection of a claim
submitted by or on behalf of any Seller or Transferred Subsidiary to any of its insurers, or (iii)
any notice of cancellation of any policy of insurance previously issued to or for the benefit of
any Seller or Transferred Subsidiary. Schedule 3.25 also sets forth a complete summary
description for all applicable periods dating back to January 1, 2005 of (a) the loss experience
with respect to any Seller or Transferred Subsidiary under each such policy of insurance or any
prior existing policy of insurance, including a statement describing each claim having a value in
excess of $50,000, and (b) the loss experience with respect to any Seller or Transferred Subsidiary
for all claims during such period that were self-insured by any Seller or Transferred Subsidiary,
including the number and aggregate cost of such claims.



3.26 Absence of Certain Developments. Except as set forth on Schedule 3.26
and except as expressly contemplated by this Agreement, since March 31, 2010:



(a) no Seller or Transferred Subsidiary has suffered any theft, damage, destruction or
casualty loss in excess of $100,000 to any property or asset, whether or not covered by insurance,
or suffered any material damage to or destruction of its Books and Records;


 


34









 





(b) no Seller or Transferred Subsidiary has sold, leased, licensed, assigned or transferred to
any Person any property or asset, except for sales of Inventory in the Ordinary Course of Business,
or canceled without fair consideration any material debts or claims owing to or held by it, and no
Seller or Transferred Subsidiary has committed to do any of the foregoing;



(c) there has been no change in reserve, underwriting or claims handling policies or
procedures with respect to any of the Insurance Subsidiaries;



(d) no Insurance Subsidiary has effected or consented to a recapture under any Reinsurance
Contract;



(e) no Transferred Subsidiary has implemented any employee layoff requiring notice under the
Worker Adjustment and Retraining Notification Act of 1988, as amended (the “WARN Act”), or
any similar state or local Law;



(f) no Seller or Transferred Subsidiary has declared, set aside or paid any dividend or other
distribution of cash or other assets;



(g) no Seller or Transferred Subsidiary has repurchased, redeemed or otherwise acquired any of
its outstanding stock or other equity interests;



(h) except to the extent necessary to comply with GAAP, no Seller or Transferred Subsidiary
has made any material change in (i) any method of accounting or any of its accounting policies or
practices, or (ii) any Tax reporting policies, principles, methods or periods;



(i) no Seller or Transferred Subsidiary has waived, compromised or cancelled any account,
debt, right or claim having a value to any Seller or Transferred Subsidiary of more than $50,000,
other than in the Ordinary Course of Business consistent with past practice;



(j) no Seller or Transferred Subsidiary has instituted, been named as a defendant in, or
settled any material litigation;



(k) no Seller or Transferred Subsidiary has issued, created, incurred, assumed or guaranteed
any Indebtedness, other than (i) the Virgo Indebtedness, (ii) Indebtedness arising under the
Textron Facility, (iii) construction lending facilities entered into in the Ordinary Course of
Business by CountryPlace Mortgage, Ltd. with third party lenders, and (iv) Indebtedness arising
under the DIP Facility;



(l) the Transferred Subsidiaries have not made or undertaken any capital expenditure in excess
of $100,000 individually or $300,000 in the aggregate; and



(m) no Seller or Transferred Subsidiary has entered into any Contract or made any binding
commitment for any of the above-noted events to occur after the date of this Agreement.


 


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3.27 Prohibited Payments. To the Knowledge of Sellers, no Transferred Subsidiary nor
any of its directors, employees or agents, in each case, acting on behalf, for or associated
with such Transferred Subsidiary, has directly or indirectly (i) made any contribution gift,
bribe, rebate, payoff, influence payment, kickback or other payment to any Person, private or
public, regardless of form, whether in money, property, or services (A) to obtain favorable
treatment in securing business, (B) to pay for favorable treatment for business secured, (C) to
obtain special concessions or for special concessions already obtained, for or in respect of such
Transferred Subsidiary, or (D) in violation of any Law, or (ii) established or maintained any fund
or asset that has not been recorded in the books and records of such Transferred Subsidiary.



3.28 Bank Accounts; Lock Boxes; Powers of Attorney. Sellers have delivered to
Purchaser a complete and accurate list of all bank and other financial institution accounts and
lock boxes maintained by any Transferred Subsidiary, each identified by name and address of the
applicable bank or financial institution and account number, a list of Persons authorized to sign
or transact business on behalf of each Transferred Subsidiary with respect to each such account or
lock box and a list of Persons with authorized access to each such lock box. Schedule 3.28
sets forth a complete and accurate list of each Person who is currently the holder of a power of
attorney given by any Transferred Subsidiary.



3.29 Brokers. Except for the fees payable by Sellers to Raymond James & Associates,
Inc. (whose fees shall be payable solely by Sellers), Sellers have not paid or agreed to pay, or
received any Claim with respect to, any brokerage commissions, finders’ fees or similar
compensation in connection with the transactions contemplated hereby.



3.30 Disclaimer. THE REPRESENTATIONS AND WARRANTIES MADE BY SELLERS IN THIS AGREEMENT
(INCLUDING THE DISCLOSURE SCHEDULES) AND IN ANY AGREEMENT, DOCUMENT OR INSTRUMENT TO BE EXECUTED
AND DELIVERED BY SELLERS (OR ANY OF THEM) AT THE CLOSING ARE THE EXCLUSIVE REPRESENTATIONS AND
WARRANTIES MADE BY SELLERS. SELLERS HEREBY DISCLAIM ANY OTHER EXPRESS OR IMPLIED REPRESENTATIONS
AND WARRANTIES. SELLERS DO NOT MAKE, AND HEREBY DISCLAIM, ANY REPRESENTATIONS OR WARRANTIES
REGARDING PRO-FORMA FINANCIAL INFORMATION, FINANCIAL PROJECTIONS OR OTHER FORWARD-LOOKING
STATEMENTS OF THE BUSINESS, EXCEPT FOR ANY PRO-FORMA FINANCIAL STATEMENTS FILED WITH
INSURANCE-RELATED GOVERNMENTAL BODIES OR FINANCE-RELATED GOVERNMENTAL BODIES. EXCEPT AS EXPRESSLY
SET FORTH IN THIS AGREEMENT (INCLUDING THE DISCLOSURE SCHEDULES) OR IN ANY AGREEMENT, DOCUMENT OR
INSTRUMENT TO BE EXECUTED AND DELIVERED BY THE SELLERS (OR ANY OF THEM) AT THE CLOSING, (A) SELLERS
ARE SELLING THE TRANSFERRED ASSETS HEREUNDER ON AN “AS IS, WHERE IS, WITH ALL FAULTS” BASIS, AND
(B) THE SELLERS MAKE NO REPRESENTATIONS OR EXPRESS OR IMPLIED WARRANTIES AS TO THE BUSINESS, THE
TRANSFERRED ASSETS OR THE ASSUMED LIABILITIES, INCLUDING AS TO THEIR PHYSICAL CONDITION, USABILITY,
MERCHANTABILITY, PROFITABILITY OR FITNESS FOR ANY PURPOSE.


 


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ARTICLE IV




REPRESENTATIONS AND WARRANTIES OF PURCHASER




In order to induce Sellers to enter into this Agreement and consummate the transactions
contemplated hereby, Purchaser hereby represents and warrants to Sellers as follows:



4.1 Due Incorporation and Authority. Purchaser is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware and has all necessary
corporate power and authority to own, lease and operate its properties and to carry on its business
as now being conducted. Purchaser has all requisite corporate power and authority to enter into
this Agreement, carry out its obligations hereunder and consummate the transactions contemplated
hereby. The execution and delivery by Purchaser of this Agreement, the performance by Purchaser of
its obligations hereunder and the consummation by Purchaser of the transactions contemplated hereby
have been duly authorized by all requisite corporate action on the part of Purchaser. This
Agreement has been duly executed and delivered by Purchaser, and, assuming the due authorization,
execution and delivery hereof by Sellers, this Agreement constitutes the legal, valid and binding
obligation of Purchaser, enforceable against Purchaser 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).



4.2 No Conflicts. The execution and delivery by Purchaser of this Agreement, the
consummation of the transactions contemplated hereby, and the performance by Purchaser of this
Agreement in accordance with its terms shall not:



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




(b) violate any Law to which Purchaser or its assets are bound or subject; or



(c) violate, result in any breach of, constitute a default under, or require any consent of
any Person (including any Governmental Body) pursuant to any contract.



4.3 Litigation. There are no Claims pending or, to the knowledge of Purchaser,
threatened by or against Purchaser before any Governmental Body that, either individually or in the
aggregate, would reasonably be expected to prevent or delay the consummation by Purchaser of the
transactions contemplated by this Agreement.



4.4 Purchaser’s Financial Capability. Purchaser has, or as of the Closing Date shall
have, available funds necessary to consummate the transactions contemplated by this Agreement,
including payment of the Purchase Price and assumption of the Assumed Liabilities. Without
limiting the foregoing, Purchaser is (or, upon the Closing, shall be) capable of satisfying the
conditions contained in sections 365(b)(1)(C) and 365(f)(2)(B) of the Bankruptcy Code with respect
to each of the Assumed Contracts.


 


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4.5 Brokers. Purchaser has not paid or agreed to pay, or received any Claim with
respect to, any brokerage commissions, finders’ fees or similar compensation in connection with the
transactions contemplated hereby.



4.6 Acknowledgement of Sellers’ Disclaimer. PURCHASER REPRESENTS, WARRANTS AND
ACKNOWLEDGES THAT, EXCEPT AS SET FORTH IN THIS AGREEMENT (INCLUDING THE DISCLOSURE SCHEDULES) AND
IN ANY AGREEMENT, DOCUMENT OR INSTRUMENT TO BE EXECUTED AND DELIVERED BY SELLERS (OR ANY OF THEM)
AT THE CLOSING: (A) PURCHASER IS PURCHASING THE TRANSFERRED ASSETS ON AN “AS IS, WHERE IS, WITH
ALL FAULTS” BASIS BASED SOLELY ON PURCHASER’S OWN INVESTIGATION OF THE TRANSFERRED ASSETS AND (B)
NEITHER SELLERS NOR ANY OF THEIR REPRESENTATIVES HAVE MADE ANY REPRESENTATIONS, WARRANTIES OR
GUARANTEES, EXPRESS, IMPLIED OR STATUTORY, WRITTEN OR ORAL, WITH RESPECT TO THE TRANSFERRED ASSETS
(OR ANY PART THEREOF), THE FINANCIAL PERFORMANCE OF THE BUSINESS OR THE TRANSFERRED ASSETS, OR THE
PHYSICAL CONDITION OF THE TRANSFERRED ASSETS.



4.7 Purchaser Disclaimer. THE REPRESENTATIONS AND WARRANTIES MADE BY PURCHASER IN
THIS AGREEMENT AND IN ANY AGREEMENT, DOCUMENT OR INSTRUMENT TO BE EXECUTED AND DELIVERED BY
PURCHASER AT THE CLOSING ARE THE EXCLUSIVE REPRESENTATIONS AND WARRANTIES MADE BY PURCHASER.
PURCHASER HEREBY DISCLAIMS ANY OTHER EXPRESS OR IMPLIED REPRESENTATIONS AND WARRANTIES.



ARTICLE V




COVENANTS AND AGREEMENTS




5.1 Operation of the Business. Subject to any restrictions and obligations imposed by
the Bankruptcy Court, Sellers shall not, nor shall they cause or permit any Transferred Subsidiary
to, engage in any practice, take any action or enter into any transaction outside the Ordinary
Course of Business between the date hereof and the Closing Date. In particular (but without
limitation), between the date hereof and the earlier of the Closing Date or the date of termination
of this Agreement pursuant to Section 8.1, without the prior written consent of Purchaser:



(a) Sellers shall not, nor shall they cause or permit any Transferred Subsidiary to, (i) sell,
transfer, lease (as lessor), sublease (as sublessor), license (as licensor), encumber or otherwise
dispose of any property or asset or any interest therein, other than Inventory sold or disposed of
in the Ordinary Course of Business in the Home Business, insurance products sold in the Ordinary
Course of Business in the Insurance Business and mortgage finance products sold in the Ordinary
Course of Business in the Finance Business, and other than dispositions of Excluded Assets, (ii)
terminate or modify any Assumed Contract or any Contract to which any Transferred Subsidiary is a
party or by which it is bound, (iii) enter into any Contract that would cause the representation
and warranty contained in Section 3.10(a) or 3.10(b) to be untrue had such Contract
been entered into prior to the date hereof, other than any such Contract entered
into in the Ordinary Course of Business having a value or cost to any Seller or Transferred
Subsidiary of less than $50,000, (iv) except as approved by the Bankruptcy Court as part of a key
employee retention plan, make any change in the compensation payable or to become payable to any
director or employee of any Seller or Transferred Subsidiary, (v) make, declare or agree to any
dividend, distribution, loan or other disposition of cash or any other asset from any Transferred
Subsidiary to any Seller, or (vi) issue, sell, assign, transfer or grant any equity interest in any
Transferred Subsidiary or any option, warrant, right or other instrument providing for the right,
directly or indirectly, to purchase or otherwise acquire any equity interest in any Transferred
Subsidiary; and


 


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(b) Sellers shall and, as applicable, shall cause the Transferred Subsidiaries to, (i) use
commercially reasonable efforts to preserve intact the goodwill of the Business and the
relationships of Sellers and the Transferred Subsidiaries with their customers, vendors, suppliers,
creditors, agents, equipment lessors, service providers, employees and others having business
relations with Sellers, the Transferred Subsidiaries and the Business, (ii) continue to maintain,
service and protect the Transferred Assets and the assets of the Transferred Subsidiaries in the
same manner as maintained, serviced and protected on the date hereof, and in any event in a
commercially reasonable and prudent manner, (iii) continue to maintain the books and records
related to the Business, the Transferred Assets, the Assumed Liabilities and the assets and
Liabilities of the Transferred Subsidiaries on a basis consistent with Sellers’ and the Transferred
Subsidiaries’ past practice, and in any event in a commercially reasonable and prudent manner; (iv)
report periodically to Purchaser, as Purchaser may reasonably request, concerning the status of the
Business, the Transferred Assets, the Assumed Liabilities and the assets and Liabilities of the
Transferred Subsidiaries, (v) maintain compliance, in all material respects, with all Laws that
relate to the Business, the Transferred Assets, the Assumed Liabilities and the assets and
Liabilities of the Transferred Subsidiaries (other than the reporting requirements of the
Securities and Exchange Commission), and (vi) pay all debts and obligations (including all trade
payables) incurred by it in the Ordinary Course of the Business.




5.2 Confidentiality.



(a) Until the Closing Date, each party hereto shall hold in confidence, and shall cause its
respective Affiliates and Representatives to hold in confidence, all Confidential Information
obtained by any of them from any other party or its Affiliates or Representatives relating to such
other party or the transactions contemplated hereby. Notwithstanding the foregoing, the party
receiving Confidential Information from the party disclosing such Confidential Information may
disclose such Confidential Information: (i) to the extent that such disclosure was previously
authorized in writing by the disclosing party; (ii) to any Governmental Body, with valid and
competent jurisdiction thereof, if the receiving party is directed to disclose such Confidential
Information to and by such Governmental Body, provided that the receiving party shall
provide written notice of such disclosure to the disclosing party; (iii) to the receiving party’s
Affiliates and Representatives who have a need to know such information solely for purposes of
assisting in regard to this Agreement and the transactions contemplated hereby, and who are subject
to confidentiality obligations to the receiving party; (iv) to the extent that disclosure is
required under any applicable Law; or (v) to the Bankruptcy Court or to any Person in connection
with the Bankruptcy Case (such instances described in clauses (i)-(iv) above being referred to
herein as “Permitted Disclosures”). Except as otherwise set forth herein, no party
shall disclose or make use of, and each party shall cause its respective Affiliates and
Representatives not to disclose or make use of, the other party’s Confidential Information without
the prior written consent of such other party. In the event that this Agreement is terminated,
each party shall, and shall cause its respective Affiliates and Representatives to, promptly return
to the other party or destroy all documents (including all copies thereof) containing Confidential
Information obtained from such other party or its Affiliates or Representatives.


 


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(b) After the Closing, each Seller shall maintain as confidential and shall not use or
disclose (except as required by Law or as authorized in writing by Purchaser in its sole
discretion) any Confidential Information of Purchaser or any Confidential Information in any way
related to the Business, the Transferred Assets, the Assumed Liabilities or the assets and
Liabilities of the Transferred Subsidiaries, except for Permitted Disclosures.



(c) Each party hereto further agrees to take all appropriate steps (and to cause each of its
Affiliates to take all appropriate steps) to safeguard the Confidential Information of each other
party and to protect it against disclosure, misuse, espionage, loss and theft. Each party agrees
to be responsible for enforcing the terms of this Section 5.2 as to its Representatives and
to take such action, legal or otherwise, to the extent necessary to cause them to comply with the
terms and conditions of this Section 5.2 and thereby prevent any disclosure of the
Confidential Information by any of its Representatives (including all actions that such party would
take to protect its own trade secrets and confidential information); provided,
however, that the actual expenses of such action, legal or otherwise, shall be paid by the
party whose Confidential Information is being safeguarded in such action, unless such action is
precipitated by the failure of the party undertaking to protect such Confidential Information to
comply with its obligations under this Section 5.2(c). In the event any party is required
by Law to disclose any Confidential Information, such party shall promptly notify the other party
in writing, which notification shall include the nature of the legal requirement and the extent of
the required disclosure, and shall cooperate reasonably with such party to preserve the
confidentiality of such information consistent with applicable Law.



5.3 Expenses. Except as otherwise specifically provided herein (including the
Exhibits hereto), Purchaser and Sellers shall bear their respective expenses incurred in connection
with the preparation, execution and performance of this Agreement and the transactions contemplated
hereby, including all fees and expenses of their Representatives.




5.4 Access to Information; Preservation of Records; Litigation Support.



(a) From the date hereof until the earlier of the Closing or the termination of this Agreement
pursuant to Section 8.1, upon reasonable notice, Sellers shall, subject to ParentCo
approval, not to be unreasonably withheld, (i) afford the Representatives of Purchaser reasonable
access, during normal business hours, to the offices, plants, warehouses, properties, books and
records and employees of Sellers and the Transferred Subsidiaries, subject to applicable Law and
arrangements being made by and through one or more executive officers of ParentCo, and (ii) furnish
to the Representatives of Purchaser such additional financial and operating data and other
information regarding the operations of the Business as Purchaser may from time to time reasonably
request.


 


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(b) Following the Closing, Purchaser shall, and shall cause its Affiliates to, preserve and
keep the records (including the Books and Records) held by them relating to the Business prior to
the Closing for a period of four (4) years from the Closing Date (or longer if required by
applicable Law) and shall make such records and personnel available to Sellers as may be reasonably
requested by any Seller in connection with, among other things, the preparation of any Tax Returns,
the Bankruptcy Case, any insurance claims by, Claims or Tax audits against or governmental
investigations of, any Seller or any of their Affiliates.



(c) After the Closing, Purchaser shall have the right (but not the obligation) to have any
Claim made by or against or otherwise involving Purchaser related to any Warranty Liability
purported assumed by Purchaser pursuant to Section 1.3(b) to be adjudicated before the
Bankruptcy Court, notwithstanding any venue or other dispute resolution provision to the contrary
in the applicable warranty documents.




5.5 Regulatory and Other Authorizations; Consents.



(a) Each of the parties hereto shall use its commercially reasonable efforts to (i) take, or
cause to be taken, all appropriate action, and do, or cause to be done, all things necessary,
proper or advisable under any Law or otherwise to consummate and make effective the transactions
contemplated by this Agreement, (ii) obtain any consents, approvals or orders required to be
obtained or made in connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, and (iii) make all filings and give any
notice, and thereafter make any other submissions either required or reasonably deemed appropriate
by each of the parties, with respect to this Agreement and the transactions contemplated hereby
required under any applicable Law.



(b) The parties hereto shall work closely and cooperatively and consult with each other in
connection with the making of all such filings and notices, including by providing copies of all
such documents to the non-filing party and its advisors a reasonable period of time prior to filing
or the giving of notice. Each party hereto shall pay for its own filing fees and other charges
arising out of the actions taken under this Section 5.5.



5.6 Further Actions. Each of the parties hereto shall execute such documents and take
such further actions as may be reasonably required or desirable to carry out the provisions hereof
and give effect to the transactions contemplated hereby.




5.7 Bankruptcy Court Approval.



(a) Within five (5) days following the parties’ execution and delivery of this Agreement,
Sellers shall:



(i) make all applicable filings with the Bankruptcy Court and take all other applicable
actions to commence the Bankruptcy Case in the Bankruptcy Court;



(ii) file with the Bankruptcy Court a motion (in form and substance reasonably satisfactory to
Purchaser) seeking entry of an order of the Bankruptcy Court for interim approval of the DIP
Facility (the “Interim DIP Facility Order”) and a motion (in form
and substance reasonably satisfactory to Purchaser) seeking entry of an order of the
Bankruptcy Court for final approval of the DIP Facility;


 


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(iii) file with the Bankruptcy Court a motion or motions (in form and substance reasonably
satisfactory to Purchaser) (the “Bidding Procedures Motion”) seeking entry of an order of
the Bankruptcy Court (the “Bidding Procedures Order”) approving, among other things, (A)
Purchaser as the stalking horse bidder for the Transferred Assets, (B) notice and service
requirements to creditors and parties in interest with respect to the transactions contemplated
hereby, (C) the Break-Up Fee and the Expense Reimbursement (and deeming the Break-Up Fee an
administrative priority expense entitled to first priority under sections 503(b) and 507(a)(1) of
the Bankruptcy Code and which shall be a super-priority first priority Lien on the Transferred
Assets pursuant to section 364 of the Bankruptcy Code), and (D) the bidding procedures related to
the sale of the Transferred Assets pursuant to this Agreement (the “Bidding Procedures”),
including the ability of Purchaser, to the extent of its interest as assignee of Fleetwood under
the DIP Facility, to credit bid all outstanding amounts owing by Sellers under the DIP Facility,
which Bidding Procedures Order shall be substantially in the form of Exhibit C hereto (with
such changes thereto as Sellers and Purchaser may mutually approve, which approval shall not be
unreasonably withheld, conditioned or delayed); and



(iv) file with the Bankruptcy Court a motion or motions (in form and substance reasonably
satisfactory to Purchaser) seeking entry of an order of the Bankruptcy Court approving the sale of
the Transferred Assets pursuant to this Agreement (the “Sale Approval Order”), which Sale
Approval Order shall be substantially in the form of Exhibit D hereto (with such changes
thereto as Sellers and Purchaser may mutually approve, which approval shall not be unreasonably
withheld, conditioned or delayed).



(b) Sellers shall promptly take such actions as are reasonably requested by Purchaser,
including assisting with the filing of affidavits or other documents or information with the
Bankruptcy Court for purposes, among others, of (i) demonstrating that Purchaser is a “good faith”
purchaser under section 363(m) of the Bankruptcy Code, and (ii) establishing adequate assurance of
future performance within the meaning of section 365 of the Bankruptcy Code.



(c) Sellers shall cooperate with Purchaser and its representatives in connection with the Sale
Approval Order, the Bidding Procedures Order and the Bankruptcy Case proceedings in connection
therewith, which cooperation shall include consulting with Purchaser at its reasonable request
concerning the status of such proceedings and providing Purchaser with copies of requested
pleadings, notices, proposed orders and other documents relating to such proceedings as soon as
reasonably practicable prior to any submission thereof to the Bankruptcy Court.



(d) Sellers shall not submit any plan to the Bankruptcy Court for confirmation that shall
conflict with, supersede, abrogate, nullify or restrict the terms of this Agreement, or in any way
prevent or interfere with the consummation or performance of the transactions contemplated by this
Agreement, including any transaction contemplated by or approved pursuant to the Sale Approval
Order or the Bidding Procedures Order.


 


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5.8 Books and Records. If, in order to properly prepare documents required to be
filed with Governmental Bodies or its financial statements, it is necessary that any party hereto
or any successors thereto be furnished with additional information relating to the Business, the
Transferred Assets, the Assumed Liabilities or any of the assets or Liabilities of any Transferred
Subsidiary, and such information is in the possession of any other party hereto or any successor
thereto or any of their respective Affiliates, such party agrees to use commercially reasonable
efforts to furnish or cause to be furnished such information to such other party, at the reasonable
cost and expense of the party being furnished such information.




5.9 Tax Matters.




(a) Filing of Tax Returns; Payment of Taxes.



(i) The parties acknowledge and agree that the taxable year for all Transferred Subsidiaries
shall end on the Closing Date, and Sellers and Purchaser shall take all applicable actions and make
all applicable filings to reflect such taxable year end. Following the Closing Date (to the extent
not filed as of the Closing Date), ParentCo shall timely prepare or cause to be prepared all Tax
Returns that are required to be filed with respect to the Transferred Subsidiaries for all taxable
periods ending on the Closing Date. All such Tax Returns shall be prepared on a basis consistent
with past practice, procedures and accounting methods, expect to the extent otherwise required by
Law and except for the aforementioned taxable year end being the Closing Date. At least fifteen
(15) Business Days prior to filing any such Tax Return, ParentCo shall provide Purchaser with a
copy of such Tax Return (or applicable portion thereof) for Purchaser’s review and comment.
ParentCo shall cooperate reasonably with Purchaser to incorporate any change to any such Tax Return
(or applicable portion thereof) that Purchaser proposes in writing to ParentCo at least five (5)
Business Days before the filing date for such Tax Return and that is intended to correct or more
accurately reflect the Tax position or Liabilities of the Transferred Subsidiary with respect to
which such Tax Return applies. All Taxes payable by or with respect to any Transferred Subsidiary
for any taxable period ending on or before the Closing Date shall be payable by Sellers. Sellers
shall be entitled to all Tax refunds with respect to Taxes paid by any Transferred Subsidiary (or
by any Seller on behalf of or with respect to any Transferred Subsidiary) with respect to any
taxable period ending on or before the Closing Date.



(ii) Following the Closing Date, Purchaser shall timely prepare or cause to be prepared all
Tax Returns that are required to be filed with respect to the Transferred Subsidiaries for all
taxable periods (A) that begin on or before the Closing Date and end after the Closing Date, or (B)
that begin after the Closing Date. Subject to the provisions of Section 5.9(a)(i), all
Taxes payable by or with respect to any Transferred Subsidiary for any taxable period beginning on
or before the Closing Date and ending after the Closing Date shall be payable by Purchaser or the
applicable Transferred Subsidiary (it being understood and agreed by the parties hereto that, based
on the agreed upon Closing Date taxable year end referred to in Section 5.9(a)(i), such
Taxes shall not include any income Tax applicable to any Transferred Subsidiary for any period of
time up to and including the Closing Date). Purchaser shall be entitled to all Tax refunds with
respect to Taxes paid by Purchaser or any Transferred Subsidiary with respect to any taxable period
beginning on or before the Closing Date and ending after the Closing Date or with respect to any
taxable period that begins after the Closing Date.


 


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(b) Sales, Use and Other Transfer Taxes. Any sales, use, purchase, transfer, deed,
stamp, documentary stamp, use or other similar Taxes and recording charges due and which may be
payable by reason of the sale of the Transferred Assets or the assumption of the Assumed
Liabilities under this Agreement or the transactions contemplated herein shall be borne and timely
paid by Sellers. Sellers shall be responsible for all income, profit and similar Taxes incurred or
imposed with respect to the sale of the Transferred Assets by Sellers. Purchaser shall provide
Sellers with resale exemption certificates as are appropriate and available to Purchaser under
applicable Law. The parties hereto agree to cooperate in the filing of all necessary documentation
and all Tax Returns with respect to all such Taxes, including any available pre-sale filing
procedure.



(c) Cooperation. The parties hereto shall cooperate reasonably with each other and
with each other’s respective Representatives, including accounting firms and legal counsel, in
connection with the preparation or audit of any Tax Return(s) and any Tax claim or litigation in
respect of the Transferred Assets, the Assumed Liabilities or any of the assets or Liabilities of
any Transferred Subsidiary that include whole or partial taxable periods, activities, operations or
events on or prior to the Closing Date, which cooperation shall include making available employees,
if any, for the purpose of providing testimony and advice, or original documents, or either of
them; provided, however, that such cooperation shall be conditioned on the party
requesting such cooperation either directly paying or reimbursing the cooperating party or its
Affiliate for (i) reasonable compensation costs of employees who provide such cooperation, (ii)
travel costs of such employees incurred in connection with providing such cooperation, (iii)
reasonable costs of document retrieval, review and/or delivery incurred in providing such
cooperation, and (iv) any other reasonable costs incurred in providing such cooperation.



5.10 Notification of Certain Matters. Until the earlier of the Closing or the
termination of this Agreement pursuant to Section 8.1, each party hereto shall promptly
notify the other party in writing of any fact, change, condition, circumstance or occurrence or
nonoccurrence of any event of which it is aware that shall or is reasonably likely to result in any
of the conditions set forth in Article VI or Article VII becoming incapable of
being satisfied. In furtherance of the foregoing, ParentCo (on behalf of Sellers) shall give
prompt notice to Purchaser of (i) the occurrence or nonoccurrence of any event that would cause
either (A) any representation or warranty of Sellers contained in this Agreement to be untrue or
inaccurate in any material respect at any time after the date hereof, or (B) directly or
indirectly, any Material Adverse Effect, (ii) any material failure of Sellers to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by them hereunder, or
(iii) the termination of employment of any senior manager or the termination of employment or
furlough of any material number of employees of any Seller or Transferred Subsidiary.
Notwithstanding the foregoing, the delivery of any notice pursuant to this Section 5.10
shall not (x) be deemed to amend or supplement any Schedule to this Agreement, (y) be deemed to
cure any breach of any representation, warranty covenant or agreement or to satisfy any condition,
or (z) limit or otherwise affect the remedies available hereunder to the party receiving such
notice.



5.11 Knowledge of Breach. If prior to the Closing Purchaser shall have reason to
believe that any breach of a representation or warranty of Sellers has occurred (other than through
notice from ParentCo), Purchaser shall promptly so notify ParentCo, in reasonable
detail. Nothing in this Agreement, including this Section 5.11, shall imply that
Sellers are making any representation or warranty as of any date other than the date of this
Agreement and the Closing Date.


 


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5.12 Employment Arrangements.



(a) Future Employment. On the Closing Date, Purchaser may offer employment to those
of Sellers’ current employees as Purchaser shall determine in its sole discretion. All such offers
of employment shall be subject to such compensation and other terms of employment as Purchaser
shall determine in its sole discretion. Each such Seller employee who accepts Purchaser’s offer of
employment and is hired by Purchaser is referred to herein as a “Transferred Seller
Employee”. On the Closing Date, the applicable Sellers shall terminate the employment of each
Transferred Seller Employee and Purchaser shall commence its employment of such Transferred Seller
Employee. If Purchaser does not wish to offer employment to any employee of a Seller or if
Purchaser offers such employment but any employee of a Seller refuses to be employed by Purchaser,
the applicable Seller may elect to retain or terminate such employee, but such Seller shall be
solely liable for all costs of any retention or termination of such employee’s employment.



(b) No Right to Employment. Notwithstanding Section 5.12(a), nothing herein
expressed or implied shall confer upon any of the employees of any Seller or Transferred Subsidiary
or any Transferred Seller Employees any right to employment or continued employment for any
specified period, of any nature or kind whatsoever under or by reason of this Agreement.



(c) No Obligation. Neither Purchaser nor any of its Affiliates shall have any
Liability whatsoever for (i) any compensation or other obligations actually or purported to be
owing to any Transferred Seller Employee by any Seller, including any severance, separation pay,
change of control payments or benefits, retention payments or any other payments or benefits
arising in connection with such employee’s employment by, or termination of employment with, any
Seller before, on or after the Closing Date, or (ii) any Claim under the WARN Act or any similar
state or local Law by any past or present employee of any Seller (whether or not a Transferred
Seller Employee) in connection with Seller’s pre-Closing conduct of the Business or any other
business, including any plant closing or mass layoff.



(d) Sellers’ Cooperation in Review and Hiring of Employees. Subject to applicable Law
and prior approval and arrangements in advance by and through one or more executive officers of
ParentCo, not to be unreasonably withheld or delayed, Sellers shall cooperate with Purchaser and
shall permit Purchaser a reasonable period during normal business hours prior to the Closing Date,
(i) to meet with employees of Sellers and the Transferred Subsidiaries (including managers and
supervisors) at such times as Purchaser shall reasonably request, (ii) to speak with such
employees’ managers and supervisors (in each case with appropriate authorizations and releases from
such employees) who are being considered for employment (or in the case of the Transferred
Subsidiaries, continued employment) by Purchaser, (iii) to distribute to such employees such forms
and other documents relating to potential employment (or continued employment) after the Closing;
and (iv) subject to any
restrictions imposed under applicable Law, to permit Purchaser, upon request, to review
personnel files and other relevant employment information regarding such employees.


 


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(e) Post-Closing Cooperation on Employee Compensation and Benefits. Following the
Closing, Sellers and Purchaser shall cooperate reasonably with each other to provide an orderly
administrative transition to Purchaser of the Transferred Seller Employees and the employees of the
Transferred Subsidiaries, including (i) the provision by Sellers to Purchaser of all necessary or
appropriate documents, records, materials, accounting files and Tax information with respect to the
Transferred Seller Employees and the employees of the Transferred Subsidiaries, and (ii) Sellers’
causing their Employee Benefit Plan providers to assist in the conversion and rollover of employee
benefits for Transferred Seller Employees and the employees of the Transferred Subsidiaries to
Purchaser’s applicable Employee Benefit Plans, including medical, dental, short-term disability,
long-term disability, life insurance and 401(k) plans. ParentCo shall provide Purchaser with
Certificates of Credible Coverage for all health plan participants under any applicable Employee
Benefit Plan of Sellers and/or the Transferred Subsidiaries within thirty (30) days following the
Closing Date. Sellers and Purchaser agree to utilize the standard procedure set forth in IRS
Revenue Procedure 2004-53 with respect to wage reporting for Transferred Seller Employees, such
that Sellers shall be responsible for all reporting of wages and other compensation paid by it to
Transferred Seller Employees before the Closing Date (including furnishing and filing of Forms W-2
and W-3).



(f) Sellers to Retain COBRA Liability. At the Closing, to the extent required by
applicable Law, Purchaser shall assume Sellers’ obligations to provide health care continuation
coverage under Tax Code §4980B and ERISA §601 for all M&A Qualified Beneficiaries (as that term is
defined in Treasury Regulations Section 54.4980B-9, Q&A-4) of Sellers; provided,
however, that such assumption of Sellers’ obligations shall apply only to M&A Qualified
Beneficiaries who timely elect to receive COBRA coverage through Purchaser and only with respect to
claims incurred by such M&A Qualified Beneficiaries after the Closing Date (it being understood and
agreed by the parties hereto that any claim incurred (whether or not reported) by an M&A Qualified
Beneficiary on or before the Closing Date shall constitute an Excluded Liability).



5.13 Insurance. Between the date hereof and the earlier of the Closing Date or the
date of termination of this Agreement pursuant to Section 8.1, Sellers shall, and shall
cause the Transferred Subsidiaries to, at their cost, keep in effect and in good standing all
policies of insurance maintained by any of them to insure the Business, the Transferred Assets and
the assets of the Transferred Subsidiaries (collectively, the “Existing Insurance
Policies”). To the extent that any Existing Insurance Policy insures against any loss,
Liability, Claim, damage or expense resulting from, arising out of, based on or relating to
occurrences arising on or after the date hereof and prior to the Closing with respect to the
Business, the Transferred Assets or the assets of the Transferred Subsidiaries and permit claims to
be made thereunder with respect to such losses, Liabilities, claims, damages or expenses after the
Closing, Sellers shall use their commercially reasonable efforts to obtain an insurance certificate
naming Purchaser as an additional insured under the Existing Insurance Policies.


 


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5.14 Licensed Computer Software; Consents. Prior to and (if necessary) following the
Closing, to the extent requested by Purchaser, Sellers shall cooperate reasonably and in good
faith to assist Purchaser with obtaining any required third-party consent, waiver or approval
for (i) Sellers’ assignment and transfer to Purchaser of the licensed Computer Software to be
included in the Transferred Assets, and (ii) if applicable, the change of control of any
Transferred Subsidiary that is a party to any Computer Software license where such license provides
that a change of control constitutes a deemed assignment of such license requiring the consent of
the licensor or otherwise requires such licensor’s consent or would permit such licensor to
terminate such license; provided, however, that no Seller shall be required to pay
any transfer fee or similar payment to obtain any such consent, waiver or approval. If any such
consent, approval or waiver which is required in order to assign any licensed Computer Software to
be included in the Transferred Assets is not obtained prior to the Closing Date, or if an attempted
assignment would be ineffective or would adversely affect the ability of any Seller to convey its
interest in question to Purchaser, Sellers shall cooperate with Purchaser in good faith and in a
reasonable manner in any lawful arrangement to provide that Purchaser shall receive the interests
of any Seller in the benefits of such licensed Computer Software; provided,
however, that if such consent, waiver or approval is not obtained before the Closing Date,
it shall not be an impediment or condition to any party’s obligation to consummate the Closing
under this Agreement. For the avoidance of doubt, Purchaser shall be solely responsible for
obtaining any approvals, waivers or consents (and paying any fees or costs) related to the
assignment to (or permitted use by) Purchaser of any licensed Computer Software to be included in
the Transferred Assets.



5.15 Seller Release of Claims Against Transferred Subsidiaries. Effective as of the
time of Closing, Sellers hereby unconditionally waive, release and discharge each Transferred
Subsidiary from and against any and all Claims and Liabilities, whether or not known to Sellers (or
any of them) as of the Closing Date, including any Claim or Liability arising under the Bankruptcy
Code or any other applicable Law.



5.16 Change of Purchaser’s Name; Dissolution. Within two (2) Business Days following
the earlier of (i) the date on which Purchaser is not selected as the winning bidder in the sale
auction for the Transferred Assets contemplated by the Bidding Procedures and is not selected by
the Bankruptcy Court as the back-up purchaser for the Transferred Assets in the event that the
successful bidder in the sale auction fails to close its purchase of the Transferred Assets that it
agrees to purchase, or (ii) the date on which ParentCo notifies Purchaser in writing of the
completion of closing of the sale of Transferred Assets to either the third-party winning bidder in
the sale auction or another Person designated by the Bankruptcy Court as the back-up bidder,
Purchaser shall either change its name to a name that does not include the words “Palm Harbor
Homes” or any confusingly similar words or cause itself to be wound up and dissolved.


 


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ARTICLE VI




PURCHASER’S CLOSING CONDITIONS




The obligation of Purchaser to consummate the transactions contemplated by this Agreement is
subject to the fulfillment on or prior to the Closing Date of each of the following conditions, any
one or more of which (to the extent permitted by applicable Law) may be waived by Purchaser:



6.1 Representations and Warranties; Covenants. The representations and warranties of
Sellers contained in this Agreement that are qualified by materiality shall be true and correct and
the representations and warranties of Sellers contained in this Agreement that are not so qualified
shall be true and correct in all material respects, in each case on and as of the Closing Date with
the same effect as though made on the Closing Date, except for changes expressly contemplated by
this Agreement and except for any particular representation or warranty that specifically addresses
matters only as of a particular date (which shall remain true as of such date, to the extent
required above), except where such failure to be true and correct has been or shall be cured,
remedied or otherwise accounted for pursuant to the Sale Approval Order. The covenants and
agreements contained in this Agreement to be complied with by Sellers at or before the Closing
shall have been complied with in all material respects. At Closing, Purchaser shall have received
a certificate of Sellers (the “Sellers’ Certificate”) with respect to such truth and
correctness of Sellers’ representations and warranties and such compliance by Sellers with their
covenants and agreements hereunder signed by a duly authorized officer thereof.



6.2 No Intervening Law. No Governmental Body shall have enacted, issued, promulgated,
enforced or entered any Law (whether temporary, preliminary or permanent) which is in effect and
has the effect of making the transactions contemplated by this Agreement illegal or otherwise
restraining or prohibiting consummation of such transactions and which is not satisfied or resolved
or preempted by the Sale Approval Order.



6.3 No Legal Proceedings. No Claim by or before a Governmental Body (including any
proceeding over which the Bankruptcy Court has jurisdiction under 28 U.S.C. § 157(b) and (c)),
shall have been made, instituted or threatened against any Seller, Transferred Subsidiary or
Purchaser seeking to restrain or prohibit or to obtain substantial damages with respect to the
consummation of the transactions contemplated hereby.



6.4 Bankruptcy Filing. The Bankruptcy Case shall not have been dismissed or converted
to one or more proceedings under chapter 7 of the Bankruptcy Code, and no trustee or examiner shall
have been appointed for Sellers (or any of them), and the automatic stay under section 362 of the
Bankruptcy Code shall not have been lifted, modified or annulled as to any Transferred Assets
having a value, either individually or in the aggregate, of at least $1,000,000.



6.5 Final Orders. The Bankruptcy Court shall have entered the Sale Approval Order and
a final order approving the DIP Facility, and the Sale Approval Order and such order approving the
DIP Facility shall have become Final Orders.



6.6 Regulatory Approvals. All required approvals of Governmental Bodies for
Purchaser’s purchase of the Transferred Subsidiaries shall have been obtained by ParentCo, the
applicable Transferred Subsidiaries or Purchaser.



6.7 Closing Documents. Seller shall have delivered to Purchaser on the Closing Date
the documents required to be delivered pursuant to Sections 1.8 and 2.3.


 


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6.8 No Purchaser Objection to Initial Price Adjustment. If Purchaser shall have
timely delivered to ParentCo a good faith objection to the Initial Price Adjustment, as
contemplated in Section 1.11(a), such objection shall have been resolved or waived by
Purchaser in writing.



6.9 No Material Adverse Effect. No event, occurrence, fact, condition, change,
development or circumstance shall have arisen or occurred since the date of this Agreement which
has had or could reasonably be expected to have a Material Adverse Effect.



ARTICLE VII




SELLERS’ CLOSING CONDITIONS




The obligation of Sellers to consummate the transactions contemplated by this Agreement is
subject to the fulfillment on or prior to the Closing Date of each of the following conditions, any
one or more of which (to the extent permitted by applicable Law) may be waived by ParentCo (on
behalf of Sellers):



7.1 Representations and Warranties; Covenants. The representations and warranties of
Purchaser contained in this Agreement that are qualified by materiality shall be true and correct,
and the representations and warranties of Purchaser contained in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case at and as of the Closing
Date with the same effect as though made on the Closing Date, except for changes expressly
contemplated by this Agreement and except for any particular representation or warranty that
specifically addresses matters only as of a particular date (which shall remain true as of such
date, to the extent required above), except where such failure to be true and correct has been or
shall be cured, remedied or otherwise accounted for pursuant to the Sale Approval Order. The
covenants and agreements contained in this Agreement to be complied with by Purchaser at or before
the Closing shall have been complied with in all material respects. At Closing, ParentCo shall
have received a certificate of Purchaser (the “Purchaser’s Certificate”) with respect to
such truth and correctness of Purchaser’s representations and warranties and such compliance by
Purchaser with its covenants and agreements hereunder signed by a duly authorized officer thereof.



7.2 No Intervening Law. No Governmental Body shall have enacted, issued, promulgated,
enforced or entered any Law (whether temporary, preliminary or permanent) which is in effect and
has the effect of making the transactions contemplated by this Agreement illegal or otherwise
restraining or prohibiting consummation of such transactions and which is not satisfied or resolved
or preempted by the Sale Approval Order.



7.3 Sale Approval Order. The Bankruptcy Court shall have entered the Sale Approval
Order, and the Sale Approval Order shall have become a Final Order.



7.4 No Legal Proceedings. No Claim by or before a Governmental Body (including any
proceeding over which the Bankruptcy Court has jurisdiction under 28 U.S.C. § 157(b) and (c)),
shall have been made, instituted or threatened against any Seller, Transferred Subsidiary or
Purchaser seeking to restrain or prohibit or to obtain substantial damages with respect to the
consummation of the transactions contemplated hereby.


 


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7.5 Bankruptcy Filing. The Bankruptcy Case shall not have been dismissed or converted
to a proceeding under chapter 7 of the Bankruptcy Code and no trustee or examiner shall have been
appointed.



7.6 Final Orders. The Bankruptcy Court shall have entered the Sale Approval Order and
a final order approval the DIP Facility, and the Sale Approval Order and such order approval the
DIP Facility shall have become Final Orders.



7.7 Regulatory Approvals. All required approvals of Governmental Bodies for
Purchaser’s purchase of the Transferred Subsidiaries shall have been obtained by ParentCo, the
applicable Transferred Subsidiaries or Purchaser.



7.8 Closing Documents. Purchaser shall have delivered to ParentCo on the Closing Date
the documents and payments required to be delivered by it pursuant to Sections 1.9 and
2.4.



ARTICLE VIII




TERMINATION OF AGREEMENT




8.1 Termination Prior to Closing. Notwithstanding anything in this Agreement to the
contrary, this Agreement may be terminated, and the transactions contemplated by this Agreement
abandoned, at any time prior to the Closing, upon notice by the terminating party to the other
party as follows:




(a) by the mutual written consent of ParentCo (on behalf of Sellers) and Purchaser;



(b) by either ParentCo (on behalf of Sellers) or Purchaser if the Closing shall not have
occurred prior to the date that is one hundred fifty (150) days after the date hereof (the
“Termination Date”); provided, however, that the right to terminate this
Agreement under this Section 8.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement shall have been the cause of, or shall have resulted
in, the failure of the Closing to occur prior to such date;



(c) (i) by ParentCo (on behalf of Sellers), if Purchaser breaches or fails to perform in any
respect any of its representations, warranties or covenants contained in this Agreement and such
breach or failure to perform (A) would give rise to the failure of a condition set forth in
Article VII, (B) cannot be or has not been cured within ten (10) Business Days following
delivery of written notice of such breach or failure to perform, and (C) has not been waived by
ParentCo (on behalf of Sellers); or (ii) by Purchaser, if any Seller breaches or fails to perform
in any respect any of its representations, warranties or covenants contained in this Agreement and
such breach or failure to perform (X) would give rise to the failure of a condition set forth in
Article VI, (Y) cannot be or has not been cured within ten (10) Business Days following
delivery of written notice of such breach or failure to perform, and (Z) has not been waived by
Purchaser.


 


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(d) (i) by ParentCo (on behalf of Sellers), if any of the conditions set forth in Article
VII shall have become incapable of fulfillment prior to the Termination Date, or (ii) by
Purchaser, if any of the conditions set forth in Article VI shall have become
incapable of fulfillment prior to the Termination Date; provided, however, that the
right to terminate this Agreement pursuant to this Section 8.1(d) shall not be available if
the failure of the party so requesting termination to fulfill any obligation under this Agreement
shall have been the cause of the failure of such condition to be satisfied on or prior to the
Termination Date.



(e) by either ParentCo (on behalf of Sellers) or Purchaser, if the Bankruptcy Court approves a
sale, transfer or other disposition by Sellers to a Person (or group of Persons) other than
Purchaser of (i) all or substantially all of the Transferred Assets, (ii) the Standard Casualty
Shares and/or the Standard Insurance Shares or substantially all of the assets of the Insurance
Subsidiaries, or (iii) the CountryPlace Shares or substantially all of the assets of the Finance
Subsidiaries (any of which, a “Competing Transaction”); or



(f) by Purchaser (provided that Purchaser is not then in material breach of any provision of
this Agreement), if any of the following shall occur:



(i) the Bankruptcy Case is dismissed or converted to one or more proceedings under chapter 7
of the Bankruptcy Code, a trustee or examiner is appointed for Sellers (or any of them), or the
automatic stay under section 362 of the Bankruptcy Code is lifted, modified or annulled as to
Transferred Assets having a value, either individually or in the aggregate, of at least $1,000,000;



(ii) the Bankruptcy Court denies any portion of the Bidding Procedures Motion with respect to
any of (A) the Break-Up Fee, (B) the Expense Reimbursement, or (C) the ability of Purchaser, to the
extent of its interest as assignee of Fleetwood under the DIP Facility, to credit bid all
outstanding amounts owing by Sellers under the DIP Facility; or



(iii) the Bidding Procedures Order or the Sale Approval Order is modified in any material
respect without the consent of the Purchaser; or



(iv) the Sale Approval Order has not been entered by the Bankruptcy Court and become a Final
Order within ninety (90) days after the date hereof; provided, however, that
Purchaser shall not be entitled to exercise its rights under this clause (iv) later than five (5)
Business Days after such ninety (90) day period has expired or if the Sale Approval Order has been
entered by the Bankruptcy Court prior to Purchaser exercising such rights.




8.2 Break-up Fee; Expense Reimbursement.



(a) In the event that this Agreement is terminated under Section 8.1(e), and provided
that (i) Purchaser is not in material breach of any provision of this Agreement prior to such
termination and (ii) a Competing Transaction has been consummated, Seller shall pay to Purchaser,
in cash, the sum of $1,100,000 (the “Break-Up Fee”) at the time of the consummation of the
Competing Transaction.



(b) In the event that this Agreement is terminated under Section 8.1(e), and provided
that (i) Purchaser is not in material breach of any provision of this Agreement prior to such
termination and (ii) a Competing Transaction has been consummated, Seller shall reimburse
Purchaser for reasonable, documented out-of-pocket expenses actually incurred by Purchaser in
connection with this Agreement and the transactions contemplated hereby, the amount of which shall
not in the aggregate exceed $250,000 (the “Expense Reimbursement”), at the time of the
consummation of the Competing Transaction.


 


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(c) In the event that this Agreement is terminated under Section 8.1(e), the Break-Up
Fee and the Expense Reimbursement shall be Purchaser’s sole and exclusive remedy against Sellers
(and such remedies shall be available only if in accordance with this Section 8.2 and the
Bidding Procedures Order), in full satisfaction of all of Sellers’ obligations hereunder. For the
avoidance of doubt, in the event of a breach or violation of any representation and warranty or
covenant or agreement of any Seller under this Agreement, if this Agreement is terminated under
Section 8.1(e), Purchaser’s sole and exclusive remedy against Sellers or any Seller
(whether in contract or tort, under statute, rule, Law or otherwise) shall be to terminate this
Agreement in accordance with Section 8.1(e) and receive the Break-Up Fee and Expense
Reimbursement in accordance with this Section 8.2 and the Bidding Procedures Order.



8.3 Survival After Termination. If this Agreement is terminated pursuant to
Section 8.1 and the transactions contemplated hereby are not consummated, or if the
Bankruptcy Court does not approve this Agreement or the transactions contemplated hereby, this
Agreement shall become null and void and have no further force or effect, except that any such
termination shall be without prejudice to the rights of any party on account of the
non-satisfaction of the conditions set forth in Article VI and Article VII
resulting from fraud or intentional misconduct of another party under this Agreement.
Notwithstanding anything in this Agreement to the contrary, the provisions of Sections 5.2
(Confidentiality), 5.3 (Expenses), 8.2, this Section 8.3 and Article
IX shall survive any termination of this Agreement.



ARTICLE IX




MISCELLANEOUS





9.1 Certain Definitions.




(a) As used in this Agreement, the following terms have the following meanings:



“Accounts Receivable” means, with respect to any Person, all trade and other accounts
receivable and other rights to payment from past or present customers and other account debtors of
such Person (including any such account receivable or other right to payment due from any Affiliate
of such Person), and the full benefit of all security for such accounts or rights to payment,
including all trade, vendor and other accounts receivable representing amounts receivable in
respect of goods sold or services rendered to customers of such Person or in respect of amounts
refundable or otherwise due to such Person from vendors, suppliers or other Persons.



“Accounts Receivable and Inventory Value Shortfall” means the amount, if any, by which
the aggregate value of the Accounts Receivable and Inventory of Sellers as of the Effective Time is
less than 75% of Sellers’ reported aggregate Accounts Receivable and Inventory value as of October
29, 2010 (which, for added certainty, shall exclude any Account
Receivable of any Transferred Subsidiary), as such aggregate value is determined in accordance
with Section 1.12.


 


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“Affiliate” means, with respect to any specified Person, any other Person that
directly, or indirectly through one or more intermediaries, controls, is controlled by or is under
common control with such specified Person; with the term “control” (and its derivatives) meaning
the possession, directly or indirectly, of the power to direct or cause the direction of the
management and policies of such Person whether through the ownership of voting securities, contract
or otherwise.



“Assignment and Assumption Agreement” means the Assignment and Assumption Agreement
substantially in the form of Exhibit B hereto to be executed by Purchaser and the
applicable Sellers on the Closing Date.



“Assumed Warranty Liabilities” means Liabilities arising under express written
warranties issued by any Seller in connection with the sale of a Seller’s products produced in the
Ordinary Course of Business at any of the Seller plants listed on Schedule 9.1(a)(i), but
only to the extent of the warranty terms set forth in Exhibit E attached hereto. Assumed
Warranty Liabilities shall not include any Liability arising under any other written or oral
warranty given by any Seller or representative thereof or any other actual or purported warranty
obligation, including implied warranties (such as, but not limited to, implied warranties of
merchantability or fitness for particular purpose).



“Bill of Sale” means the Bill of Sale substantially in the form of Exhibit A
hereto to be executed by the applicable Sellers on the Closing Date.



“Business Day” means any day that is not a Saturday, Sunday or other day on which
banks located in Dallas, Texas or Phoenix, Arizona are authorized or obligated to close.



“Claim” means a suit, claim, action, proceeding, inquiry, investigation, litigation,
legal proceeding, written demand, charge, complaint, arbitration, indictment, information, or grand
jury subpoena, whether civil, criminal, administrative, judicial or investigative and whether
public or private, in each case, filed with, made by or conducted or heard before a Governmental
Body.




“COBRA” means the Consolidated Omnibus Reconciliation Act of 1985.



“Computer Software” means all computer software (including source code, executable
code, data, databases and documentation) owned by or licensed to any Sellers which is used in or
necessary for the conduct of the Business as it is conducted on the date hereof.



“Confidential Information” means all information regarding a party’s business or
affairs, including business concepts, processes, methods, trade secrets, systems, know-how,
devices, formulas, product specifications, marketing methods, prices, customer lists, supplier
lists, methods of operation or other information, whether in oral, written or electronic form, that
is either: (i) designated in writing (including by electronic mail) as confidential; (ii) is of a
nature such that a reasonable Person would know that it is confidential; or (iii) is disclosed
under circumstances such that a reasonable Person would know it is confidential. Notwithstanding
the
foregoing, the following information shall not be considered Confidential Information:
(A) information that is or becomes publicly available through no fault of the party obligated to
keep it confidential (or such party’s Affiliates or Representatives); (B) information with regard
to the other party that was rightfully known by a party prior to commencement of discussions
regarding the subject matter of this Agreement, as evidenced by documentation; (C) information that
was independently developed by a party without use of the Confidential Information, as evidenced by
documentation; and (D) information rightfully disclosed to a party by a third party without
continuing restrictions on its use or disclosure.


 


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“Contract” means any written or oral contract, agreement, arrangement, understanding,
lease, license, deed or instrument or other contractual or similar arrangement or commitment, but
excluding Purchase Orders.




“Effective Time” means 11:59 p.m. (Central Standard Time) on the Closing Date.



“Employee Benefit Plan” means any “employee benefit plan” as such term is defined in
ERISA §3(3)) and any other material employee benefit plan, program or arrangement.




“Employee Pension Benefit Plan” has the meaning set forth in ERISA §3(2).




“Employee Welfare Benefit Plan” has the meaning set forth in ERISA §3(1).



“Encumbrances” means all interests, Liens, Claims, conditional sales agreements,
rights of first refusal or options.



“Environmental, Health and Safety Liabilities” means any and all Claims, costs,
damages, expenses, Liabilities and/or other responsibility or potential responsibility arising from
or under any Environmental Law or Occupational Safety and Health Law (including compliance
therewith).



“Environmental Laws” means all applicable federal, state, local, and foreign Laws, all
judicial and administrative orders and determinations, and all common law concerning public health
and safety, worker health and safety, pollution, or protection of the environment, including all
those relating to the presence, use, production, generation, handling, transportation, treatment,
storage, disposal, distribution, labeling, testing, processing, discharge, release, threatened
release, control, exposure to, or cleanup of any hazardous materials, substances, wastes, chemical
substances, pesticides, pollutants, contaminants, toxic chemicals, petroleum products or
byproducts, asbestos, polychlorinated biphenyls, noise, odor, mold, or radiation, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; the
Resource Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq.; the Hazardous Materials
Transportation Act, 49 U.S.C. §§ 5101 et seq.; the Clean Water Act, 33 U.S.C. §§ 1251 et seq.; the
Toxic Substances Control Act, 15 U.S.C. §§ 2601 et seq.; the Clean Air Act, 42 U.S.C. §§ 7401 et
seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 300f et seq.; the Atomic Energy Act, 42 U.S.C. §§
2011 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136 et seq.; and
the Federal Food, Drug and Cosmetic Act, 21 U.S.C. §§ 301 et seq.


 


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“ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as amended,
together with the rules and regulations promulgated thereunder.



“ERISA Affiliate” means, with respect to any Person, any trade or business (whether or
not incorporated) (i) under common control within the meaning of section 4001(b)(1) of ERISA with
such Person, or (ii) which together with such Person is treated as a single employer under sections
414(b), (c), (m), (n) or (o) of the Tax Code.



“Final Order” means an order entered by the Bankruptcy Court or other court of
competent jurisdiction as to which: (i) no appeal, notice of appeal, motion for reconsideration,
motion to amend or make additional findings of fact, motion to alter or amend judgment, motion for
rehearing or motion for new trial has been timely filed; (ii) the time for instituting or filing an
appeal, motion for rehearing or motion for new trial shall have expired; and (iii) if an appeal has
been timely filed no stay pending an appeal is in effect and the time for requesting a stay pending
appeal shall have expired; provided, however, that the filing or pendency of a
motion under Federal Rule of Bankruptcy Procedure 9024 shall not cause an order not to be deemed a
“Final Order” unless such motion shall be filed within ten (10) days of the entry of the order at
issue.



“Finance Subsidiaries” means, collectively, CountryPlace Acceptance Corp., a Nevada
corporation, CountryPlace Acceptance GP, LLC, a Texas limited liability company, CountryPlace
Acceptance LP, LLC, a Delaware limited liability company, CountryPlace Mortgage, Ltd., a Texas
limited partnership, CountryPlace Title, Ltd., a Texas limited partnership, CountryPlace Mortgage
Holdings, LLC, a Delaware limited liability company, CountryPlace Funding, a Delaware corporation,
CountryPlace Securitization, LLC, a Delaware limited liability company, and CountryPlace Holdings,
LLC, a Delaware limited liability company.




“GAAP” means United States generally accepted accounting principles.



“Governmental Body” means a domestic or foreign national, federal, state, provincial,
or local governmental, regulatory or administrative authority, department, agency, commission,
court, tribunal, arbitral body or self-regulated entity.



“Hazardous Activity” means the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, release, storage, transfer,
transportation, treatment or use (including any withdrawal or other use of groundwater) of any
Hazardous Material in, on, under, about or from any Owned Real Property, whether or not in
connection with the conduct of the Business, except to the extent in material compliance with
applicable Environmental Law.



“Hazardous Material” means any substance, material or waste which is regulated by any
Environmental Law, including any material, substance or waste which is defined as a “hazardous
waste,” “hazardous material,” “hazardous substance,” “extremely hazardous waste,” “restricted
hazardous waste,” “contaminant,” “pollutant,” “toxic waste” or “toxic substance” under any
provision of Environmental Law, and including petroleum, petroleum product, asbestos, presumed
asbestos-containing material or asbestos-containing material, urea formaldehyde and polychlorinated
biphenyls.


 


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“Hedging Contract” means any interest rate, currency or commodity swap agreement, cap
agreement or collar agreement, and any other agreement or arrangement designed to protect a Person
against fluctuations in interest rates, currency exchange rates or commodity prices.



“Income Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Income Taxes, including any schedule or attachment
thereto, and including any amendment thereof.



“Indebtedness” means, with respect to any Person, without duplication: (a) any
indebtedness for borrowed money or issued in substitution for or exchange of indebtedness for
borrowed money, including principal, premium (if any), early or prepayment penalties, charges,
premiums, break fees or other similar charges, and accrued interest; (b) any indebtedness or
obligation evidenced by any bond, debenture, note, debt security, unfunded letter of credit or
other similar instrument, including principal, premium (if any), early or prepayment penalties,
charges, premiums, break fees or other similar charges, and accrued interest; (c) bank overdrafts
(excluding undrawn lines) and outstanding checks to the extent treated as bank overdrafts or
otherwise included as debt in the financial statements of such Person (without duplication) (it
being understood that only the amount of such bank overdraft or the portion of the check that is
treated as a bank overdraft or debt shall be treated as “Indebtedness”); (d) any Liability under
any sale and leaseback transaction, any synthetic lease or Tax ownership operating lease
transaction or under any lease recorded for accounting purposes by such Person as a capitalized
lease or a financing lease with respect to which such Person is liable, contingently or otherwise,
as obligor or otherwise; (e) any Liability of such Person under deferred compensation plans, stock
appreciation rights plan, phantom stock plans, severance or bonus plans or similar arrangements
made payable as a result of the consummation of the transactions contemplated by this Agreement or
with respect to periods ending on or prior to the Closing Date; (f) any off-balance sheet financing
of such Person (but excluding any leases recorded for accounting purposes by such Person as an
operating lease); (g) any dividends or distributions payable, or accrued for, by such Person; (h)
any Liability of such Person under any Hedging Contract; (i) all indebtedness of others referred to
in clauses (a) through (h) above guaranteed directly or indirectly in any manner by such Person, or
in effect guaranteed directly or indirectly by such Person through an agreement (i) to pay or
purchase such indebtedness or to advance or supply funds for the payment or purchase of such
indebtedness, (ii) to purchase, sell or lease (as lessee or lessor) property, or to purchase or
sell services, primarily for the purpose of enabling the debtor to make payment of such
indebtedness or to assure the holder of such indebtedness against loss, (iii) to supply funds to or
in any other manner invest in the debtor (including any agreement to pay for property or services
irrespective of whether such property is received or such services are rendered) or (iv) otherwise
to assure a creditor against loss, (k) all indebtedness referred to in clauses (a) through (i)
above secured by (or for which the holder of such Indebtedness has an existing right, contingent or
otherwise, to be secured by) any Encumbrance on any property owned by such Person, even though such
Person has not assumed or become liable for the payment of such indebtedness; and (k) any accrued
and unpaid interest on, and any prepayment premiums, penalties or similar contractual charges in
respect of, any of the foregoing Liabilities computed as though payment is being made in respect
thereof on the Closing Date; provided, however, that “Indebtedness” shall not
include (x) trade payables and accrued expenses to the extent such items are aged sixty (60) days
or less; or (y) prepaid or deferred revenue to the extent such revenue is reflected as a current
liability in the Most Recent Financial
Statements; or (z) purchase price holdbacks arising in the Ordinary Course of Business in
respect of a portion of the purchase prices of an asset to satisfy unperformed obligations of the
seller of such asset to the extent that holdbacks are reflected as a current liability in the Most
Recent Financial Statements.


 


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“Insider” means any executive officer, director, governing body member, majority
(i.e., greater than 50%) equity holder, partner in a partnership or Affiliate, as applicable, of
any Seller or Transferred Subsidiary or any predecessor or Affiliate of any Seller or Transferred
Subsidiary or any individual related by blood, marriage or adoption to any such individual.



“Insurance Subsidiaries” means, collectively, Standard Casualty Co., a Texas
corporation, Standard Insurance Agency, Inc., a Texas corporation, and Palm Harbor Ins. Agency of
Texas, a Texas corporation.



“Intellectual Property” means all of the following in any jurisdiction throughout the
world (i) trade names, trademarks and service marks, service names, brand names, logos, Internet
domain names, trade dress and similar rights, logos, slogans, and corporate names (and all
translations, adaptations, derivations and combinations of the foregoing), and general intangibles
of a like nature, together with all goodwill associated with each of the foregoing and all
registrations and applications to register any of the foregoing (“Marks”); (ii) patents,
patent applications and patent disclosures, together with all reissuances, divisionals,
continuations, continuations-in-part, revisions, reissues, extensions and reexaminations thereof
(“Patents”); (iii) copyrights (whether registered or unregistered) and applications for
registration and copyrightable works (“Copyrights”); (iv) confidential and proprietary
information, including trade secrets and know-how (including ideas, research and development,
engineering designs and related approvals of Governmental Bodies, self-regulatory organizations,
and trade associations, inventions, formulas, compositions, manufacturing and production processes
and techniques, designs, drawings and specifications; and (vi) all licenses and sublicenses held by
any Seller as licensee pertaining to intellectual property of any other Person; and for the
avoidance of doubt, “Intellectual Property” shall exclude Computer Software.



“Inventory” means all inventory of Seller, including raw and packing materials,
work-in-progress, finished goods, supplies, parts and similar items related to, used or held for
use in connection with the Business.




“IRS” means the United States Internal Revenue Service.



“Knowledge” means, when used to qualify any representation, warranty or other
statement of Sellers contained herein, the actual current knowledge of any of Larry H. Keener,
Kelly Tacke, Ron Powell (solely as to Palm Harbor Homes, Inc. and Nationwide Homes, Inc.), Gavin
Ryan (solely as to Standard Casualty Co. and its subsidiaries), Joe Kesterson (solely as to Palm
Harbor Homes, Inc.) or Greg Aplin (solely as to CountryPlace Acceptance Corporation and its
subsidiaries) after reasonable investigation or inquiry into the subject matter of the
representation, warranty or other statement to which such term is being applied.


 


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“Law” means any federal, state, local or foreign statute, law, rule, regulation,
order, writ, ordinance, judgment, governmental directive, injunction, decree or other requirement
of any Governmental Body (including the Bankruptcy Code).



“Liabilities” means any direct or indirect, primary or secondary, liability,
indebtedness, obligation, penalty, cost or expense (including costs of investigation, collection
and defense), claim, deficiency, guaranty or endorsement of or by any Person of any type, whether
known or unknown, accrued, absolute or contingent, liquidated or unliquidated, choate or inchoate,
matured or unmatured, disputed or undisputed, secured or unsecured, joint or several, due or to
become due, vested or unvested, executory, determined, determinable or otherwise. Without limiting
the foregoing, the term “Liabilities” includes and refers to all liabilities and obligations for or
with respect to Taxes, including liabilities for Taxes of any Person under Treasury Regulation
Section 1.1502 6 (or any similar provision of any applicable Law), as a transferee or successor, by
contract, or otherwise.



“Lien” means any security interest, mortgage, pledge, lien, encumbrance, charge or
claim (as defined in section 101(5) of the Bankruptcy Code).



“Material Adverse Effect” means any circumstance, occurrence, event or change that has
or could be reasonably expected to have a material adverse effect on (a) the Transferred Assets,
the Assumed Liabilities, the Business or the assets and Liabilities of the Transferred
Subsidiaries, in each case taken as a whole, or (b) the ability of Sellers to timely satisfy and
perform their obligations under this Agreement and consummate the transactions contemplated hereby;
provided, however, that in no event shall any of the following be deemed to
constitute, nor shall any of the following be taken into account in determining whether there has
been or shall be, a Material Adverse Effect: (i) general economic or business conditions or
changes therein, including changes in interest or currency rates, or acts of war, civil unrest or
terrorism; (ii) any change in Law; (iii) any occurrence or condition generally affecting the
industries in which the Business operates, including any change in such conditions; (iv) any
occurrence or condition arising out of the announcement of the transactions described in this
Agreement or the performance of the transactions contemplated hereby (including any occurrence or
condition arising out of the identity of or facts relating to Purchaser); and (v) any effect or
result of a breach of this Agreement by Purchaser; provided, further, that the
circumstances, changes, developments, events or states of facts set forth in clauses (i), (ii),
(iii) above shall be taken into account in determining whether a Material Adverse Effect has
occurred to the extent, and only to the extent, such circumstances, changes, developments, events
or states of facts have a disproportionately adverse effect on the Transferred Assets, the Assumed
Liabilities, the Business and the assets and Liabilities of the Transferred Subsidiaries, taken as
a whole, as compared to other participants in the industries in which Sellers and the Transferred
Subsidiaries operate.



“Occupational Safety and Health Law” means any applicable Law designed to provide safe
and healthful working conditions and to reduce occupational safety and health hazards, including
the Occupational Safety and Health Act, and any program, whether governmental or private (such as
those promulgated or sponsored by industry associations and insurance companies), designed to
provide safe and healthful working conditions.


 


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“Ordinary Course of Business” means the operation of the Business by Sellers and the
Transferred Subsidiaries in the usual and ordinary course in a manner substantially similar to the
manner in which Sellers and the Transferred Subsidiaries operated, including after the commencement
of the Bankruptcy Case and as permitted under the Bankruptcy Code and by the Bankruptcy Court.



“Permitted Encumbrance” means: (i) the Virgo Security Interest, (ii) the security
interest granted under the Textron Facility, (iii) Encumbrances for Taxes and assessments not yet
payable; (iv) Encumbrances that shall be released at or prior to the Closing; and
(v) (A) easements, rights-of-way, servitudes, permits, licenses, surface leases, ground leases to
utilities, municipal agreements, railway siding agreements and other similar rights, all as
reflected in the official records of the jurisdictions where any real property is located,
(B) conditions, covenants or other restrictions reflected in the official records of the
jurisdictions where any real property is located, and (C) easements for streets, alleys, highways,
telephone lines, gas pipelines, power lines, railways and other easements and rights-of-way on,
over or in respect of any real property, all as reflected in the official records of the
jurisdictions where any real property is located; in each case with respect to clauses (iii)
through (v) above, individually or in the aggregate, that do not or would not reasonably be
expected to materially and adversely affect the current use or value of the property subject
thereto or the operations of the Business as it is currently conducted by Sellers and the
Transferred Subsidiaries.



“Person” means any individual, corporation, partnership, limited liability company,
limited liability partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Body or other entity.



“Pre-Closing Claims” means (i) Claims asserted by or against a Seller prior to the
Closing Date, and (ii) counterclaims with respect to a Claim asserted by or against a Seller prior
to the Closing Date.



“Purchase Order” means (i) any open purchase order (or equivalent document) received
and accepted by any Seller from any customer of the Business in the Ordinary Course of Business for
the production and sale of any finished goods Inventory capable of being produced at any Real
Property (based on its current configuration), whether or not such purchase order or equivalent
document was originally intended for fulfillment at a Real Property, or (ii) any open purchase
order (or equivalent document) delivered by any Seller to any third party vendor or supplier for
the purchase by such Seller from such vendor or supplier in the Ordinary Course of Business of raw
materials, supplies or other similar Inventory intended for use in the production of finished goods
Inventory from any Real Property or for any other conduct of operations at any Real Property.



“Release” means any release, spill, emission, leaking, pumping, injection, deposit,
disposal, discharge, dispersal, or leaching into the indoor or outdoor environment, or into or out
of any property.



“Representative” means, with respect to a particular Person, any director, officer,
manager, partner, member, employee, agent, consultant, advisor or other representative of such
Person, including legal counsel, accountants, and financial advisors.


 


59









 





“Tax” or “Taxes” means all taxes, charges, fees, imposts, levies or other
assessments, including all net income, franchise, profits, gross receipts, capital, sales, use, ad
valorem, value added, transfer, transfer gains, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp, occupation, real or
personal property, and estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines, additions to tax or additional
amounts thereon, imposed by any taxing authority (federal, state, local or foreign) and shall
include any transferee Liability in respect of Taxes.




“Tax Code” means the Internal Revenue Tax Code of 1986, as amended.



“Tax Return” means any return, declaration, report, form, estimate, information return
or statement required to be filed in respect of any Taxes or to be supplied to a taxing authority
in connection with any Taxes.



“Textron Facility” means that certain Amended and Restated Agreement for Wholesale
Financing (Finished Goods – Shared Credit Facility) dated May 25, 2004, as amended, by and among
ParentCo, Palm Harbor Manufacturing, L.P., Palm Harbor Homes I, L.P., Palm Harbor Marketing, Inc.,
Textron Financial Corporation and the other “Lenders” named therein.



“Title Company” means First American Title Company, or such alternate title company as
ParentCo and Purchaser shall agree.



“Transferred Subsidiaries” means, collectively, the Finance Subsidiaries and the
Insurance Subsidiaries, and “Transferred Subsidiary” means any of them.



“Unauthorized Indebtedness” means, as of the Effective Time, any Indebtedness of any
Transferred Subsidiary other than (i) the Virgo Indebtedness and (ii) Indebtedness incurred under
construction lending facilities entered into in the Ordinary Course of Business by CountryPlace
Mortgage, Ltd. with third party lenders prior to the date hereof.



“Virgo Indebtedness” means any Indebtedness owing by CountryPlace Acceptance
Corporation, CountryPlace Mortgage, Ltd., CountryPlace Mortgage Holdings, LLC, ParentCo,
CountryPlace Acceptance G.P., LLC and CountryPlace Acceptance L.P., LLC to the “Lender” parties (or
their successors, assigns or nominees) under that certain Credit Agreement dated as of January 29,
2010 by and among CountryPlace Acceptance Corporation, CountryPlace Mortgage, Ltd., CountryPlace
Mortgage Holdings, LLC, ParentCo, CountryPlace Acceptance G.P., LLC, CountryPlace Acceptance L.P.,
LLC, the “Lenders” who are party to such Credit Agreement and Virgo Service Company LLC.



“Virgo Security Interest” means the security interest in certain collateral granted to
Virgo Service Company LLC as Administrative Agent and Collateral Agent under that certain Guaranty
and Security Agreement dated as of January 29, 2010 by and among CountryPlace Acceptance
Corporation, CountryPlace Mortgage, Ltd., CountryPlace Mortgage Holdings, LLC, ParentCo,
CountryPlace Acceptance G.P., LLC, CountryPlace Acceptance L.P., LLC and Virgo Service Company LLC.


 


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(b) The following capitalized terms are defined in the following Sections of this Agreement:



	 	 	 
	Definition	 	Location
	Acquired Leased Real Property

	 	2.10(a)
	Agreement

	 	Preamble
	Allocation

	 	1.13
	Assumed Contracts

	 	1.1(f)
	Assumed Liabilities

	 	1.3
	Bankruptcy Case

	 	Recitals
	Bankruptcy Code

	 	Recitals
	Bankruptcy Court

	 	Recitals
	Bankruptcy Court Approval

	 	5.7
	Base Price

	 	1.6
	Bidding Procedures

	 	5.7(a)(ii)
	Bidding Procedures Motion

	 	5.7(a)(ii)
	Bidding Procedures Order

	 	5.7(a)(ii)
	Books and Records

	 	1.1(k)
	Break-Up Fee

	 	8.2(a)
	Business

	 	Recitals
	Closing

	 	1.7
	Closing Apportionments

	 	2.10
	Closing Date

	 	1.7
	Closing Payment

	 	1.6
	Closing Statements

	 	2.3(a)
	Competing Transaction

	 	8.1(e)
	Cure Costs

	 	1.4
	Deeds

	 	2.3(b)
	DIP Facility
	 	Recitals
	Excluded Assets

	 	1.2
	Excluded Liabilities

	 	1.5
	Existing Insurance Policies

	 	5.13
	Expense Reimbursement

	 	8.2(b)
	Final Price Adjustment

	 	1.11(d)
	Finance Business

	 	Recitals
	Fleetwood

	 	Recitals
	Home Business

	 	Recitals
	Insurance Business

	 	Recitals
	Insurance Representative

	 	3.8(d)
	Interim DIP Facility Owner

	 	5.7(a)(i)
	Inventory

	 	1.1(d)
	Leased Real Property / Leased Real Properties

	 	3.12(b)
	Most Recent Financial Statements

	 	3.5
	Objection Notice

	 	1.11(b)
	Owned Real Property / Owned Real Properties

	 	3.12(a)
	ParentCo

	 	Preamble
	Permits

	 	3.9(a)





 


61









 






	 	 	 
	Definition	 	Location
	Permitted Disclosures

	 	5.2(a)
	Petition Date

	 	Recitals
	Post-Closing Price Adjustment

	 	1.11(b)
	Purchase Price

	 	1.6
	Purchaser

	 	Preamble
	Purchaser’s Certificate

	 	7.1
	Real Properties

	 	3.12(b)
	Real Property Lease

	 	3.12(b)
	Real Property Escrow

	 	2.1
	Reinsurance Contract

	 	3.10(b)(ix)
	Sale Approval Order

	 	5.7(a)(iii)
	Sellers

	 	Preamble
	Sellers’ Certificate

	 	6.1
	Standard Casualty Share

	 	1.1(a)
	Surveys

	 	2.6
	Tangible Personal Property

	 	1.1(c)
	Termination Date

	 	8.1(b)
	Title Commitment

	 	2.6
	Title Commitments

	 	2.6
	Title Policies

	 	2.7
	Transferred Assets

	 	1.1
	Transferred IP

	 	1.1(i)
	Transferred Permits

	 	1.1(j)
	Transferred Seller Employee

	 	5.12(a)
	WARN Act

	 	3.26(e)






9.2 Consent to Jurisdiction; Service of Process; Waiver of Jury Trial.



(a) The parties hereto irrevocably and unconditionally consent to submit to the jurisdiction
of the Bankruptcy Court for any litigation arising out of or relating to this Agreement and the
transactions contemplated hereby (and agree not to commence any litigation relating hereto except
in the Bankruptcy Court).



(b) Any and all service of process and any other notice in any such Claim shall be effective
against any party if given personally or by registered or certified mail, return receipt requested,
or by any other means of mail that requires a signed receipt, postage prepaid, mailed to such party
as herein provided. Nothing herein contained shall be deemed to affect the right of any party to
serve process in any manner permitted by Law or to commence legal proceedings or otherwise proceed
against any other party in any other jurisdiction.



(c) If any Claim is brought by any party hereto to enforce its rights or another party’s
obligations under this Agreement or any other agreement, document or instrument to be delivered by
such party at the Closing, the substantially prevailing party in such Claim shall be entitled to
recover its reasonable attorneys’ fees and expenses and other costs incurred in such Claim, in
addition to any other relief to which it may be entitled.


 


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(d) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY.



9.3 Notices. Any notice or other communication required or permitted hereunder shall
be in writing and shall be deemed to have been duly given (i) on the day of delivery if delivered
in person, (ii) on the day of delivery if delivered by facsimile upon confirmation of receipt
(provided that if delivery is completed after the close of business, then the next Business
Day), (iii) on the first (1st) Business Day following the date of dispatch if delivered using a
next-day service by a nationally recognized express courier service, or (iv) on the earlier of
confirmed receipt or the fifth (5th) Business Day following the date of mailing if delivered by
registered or certified mail, return receipt requested, postage prepaid. All notices hereunder
shall be delivered as set forth below, or pursuant to such other instructions as may be designated
by notice given in accordance with this Section 9.3 by the party to receive such notice:




	 	(a)	 	if to Purchaser, to:







Palm Harbor Homes, Inc.

c/o Cavco Industries, Inc.

1001 North Central Avenue, Suite 800

Phoenix, Arizona 85004-1935

Attention: James P. Glew, General Counsel

Facsimile: (602) 256-6189




and to:




Third Avenue Management

622 Third Avenue, 32nd Floor

New York, New York 10017

Attention: Robert Jordan, Sr. Managing Director, Corporate Counsel

Facsimile: (212) 735-0003




with a copy (which shall not constitute notice to Purchaser) to:




Snell & Wilmer L.L.P.

One Arizona Center

400 E. Van Buren

Phoenix, Arizona 85004

Attention: Garth D. Stevens

Facsimile: (602) 382-6070


 


63









 






	 	(b)	 	if to any of Sellers, to:







Palm Harbor Homes, Inc.

15303 Dallas Parkway, Suite 800

Addison, Texas 75001-4600

Attention: Larry H. Keener, Chairman, President & CEO

Facsimile: (972) 764-9020




with a copy (which shall not constitute notice to Sellers) to




Locke Lord Bissell & Liddell LLP

2200 Ross Avenue, Suite 2200

Dallas, Texas 75201

Attention: Gina E. Betts

Facsimile: (214) 756-8515



9.4 Entire Agreement. This Agreement (including the Exhibits and Schedules hereto),
the DIP Facility and any other ancillary agreements executed by the parties hereto in connection
with the consummation of the transactions contemplated by this Agreement and the DIP Facility
contain the entire agreement among the parties with respect to the subject matter hereof and
thereof and supersede all prior agreements, written or oral, with respect thereto.



9.5 Non-Survival of Representations, Warranties and Covenants. The respective
representations, warranties and covenants of Sellers and Purchaser contained in this Agreement and
any certificate delivered pursuant hereto shall terminate at, and not survive, the Closing;
provided, that this Section shall not limit any covenant or agreement of the parties that by its
terms requires performance after the Closing.



9.6 Amendments. This Agreement may be amended, superseded, canceled, renewed or
extended only by a written instrument signed by Purchaser and ParentCo (on behalf of Sellers).



9.7 Waiver. Each party hereto may (a) extend the time for the performance of any of
the obligations or other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any document delivered
pursuant hereto, (c) waive compliance with any of the agreements of the other party contained
herein, or (d) waive satisfaction of any condition to its obligations hereunder. Any such
extension or waiver shall be valid only if set forth in an instrument in writing signed by the
party to be bound thereby. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on the part of any
party of any such right, power or privilege, nor any single or partial exercise of any such right,
power or privilege, preclude any further exercise thereof or the exercise of any other such right,
power or privilege. All remedies, rights, undertakings, obligations, and agreements contained
herein shall be cumulative and not mutually exclusive.



9.8 Governing Law. This Agreement and all Claims with respect thereto shall be
governed by and construed in accordance with the federal bankruptcy law, to the extent applicable,
and, where state law is implicated, the laws of the State of Delaware without regard
to any conflict of laws rules thereof that might indicate the application of the laws of any
other jurisdiction.


 


64









 





9.9 Binding Effect; Assignment. This Agreement shall be binding upon and inure to the
benefit of the parties and their respective successors and assigns. This Agreement is not
assignable by any party without the prior written consent of each other party.



9.10 Interpretation; Headings. All pronouns and any variations thereof refer to the
masculine, feminine or neuter, singular or plural, as the context may require. All terms defined
in this Agreement in their singular or plural forms have correlative meanings when used herein in
their plural or singular forms, respectively. Unless otherwise expressly provided, the words
“include,” “includes” and “including” do not limit the preceding words or terms and shall be deemed
to be followed by the words “without limitation.” All references herein to “Sections” shall be
deemed references to such parts of this Agreement, unless the context shall otherwise require. All
references herein to “Schedules” and “Exhibits” shall mean the Schedules and Exhibits attached to
this Agreement and forming a part hereof. The Section headings in this Agreement are for reference
only and shall not affect the interpretation of this Agreement. The parties acknowledge and agree
that (a) each party and its counsel reviewed and negotiated the terms and provisions of this
Agreement and have contributed to its revision, (b) the rule of construction to the effect that any
ambiguities are resolved against the drafting party shall not be employed in the interpretation of
this Agreement, and (c) the terms and provisions of this Agreement shall be construed fairly as to
all parties, regardless of which party was generally responsible for the preparation of this
Agreement. Dates and times set forth in this Agreement for the performance of the parties’
respective obligations hereunder or for the exercise of their rights hereunder shall be strictly
construed, time being of the essence of this Agreement. If the date specified or computed under
this Agreement for the performance, delivery, completion or observance of a covenant, agreement,
obligation or notice by any party, or for the occurrence of any event provided for herein, is a day
other than a Business Day, then the date for such performance, delivery, completion, observance or
occurrence shall automatically be extended to the next Business Day following such date.



9.11 Severability of Provisions. If any provision or any portion of any provision of
this Agreement shall be held invalid or unenforceable, the remaining portion of such provision and
the remaining provisions of this Agreement shall not be affected thereby. If the application of
any provision or any portion of any provision of this Agreement to any Person or circumstance shall
be held invalid or unenforceable, the application of such provision or portion of such provision to
Persons or circumstances other than those as to which it is held invalid or unenforceable shall not
be affected thereby.



9.12 Counterparts. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be an original, but all such
counterparts together shall constitute one and the same instrument. Each counterpart may consist
of a number of copies hereof each signed by less than all, but together signed by all, of the
parties hereto.


 


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9.13 No Third Party Beneficiaries. Except as otherwise set forth in this Agreement,
no provision of this Agreement is intended to, or shall, confer any third party beneficiary or
other rights or remedies upon any Person other than the parties hereto.



Remainder of Page Intentionally Left Blank

Signature Page Follows



 


66









 





IN WITNESS WHEREOF, the parties have executed this Asset Purchase Agreement as of the date
first above written.



	 	 	 	 	 
	 	SELLERS:



Palm Harbor Homes, Inc., a Florida corporation

 	 
	 	By:  	/s/ Larry Keener
 	 
	 	 	Name:  	Larry H. Keener 	 
	 	 	Title:  	President and CEO 	 



	 	 	 	 	 
	 	Palm Harbor GenPar, LLC, a Nevada limited liability

company

 	 
	 	By:  	/s/ Larry Keener
 	 
	 	 	Name:  	Larry H. Keener 	 
	 	 	Title:  	President 	 



	 	 	 	 	 
	 	Palm Harbor Mfg., L.P., a Texas limited partnership

 	 
	 	By:  	/s/ Larry Keener
 	 
	 	 	Name:  	Larry H. Keener 	 
	 	 	Title:  	President 	 



	 	 	 	 	 
	 	Palm Harbor Real Estate, LLC, a Texas limited

liability company

 	 
	 	By:  	/s/ Larry Keener
 	 
	 	 	Name:  	Larry H. Keener 	 
	 	 	Title:  	President of Sole Member 	 



	 	 	 	 	 
	 	Nationwide Homes, Inc., a Delaware corporation

 	 
	 	By:  	              /s/ Larry Keener
 	 
	 	 	Name:  	Larry H. Keener 	 
	 	 	Title:  	Chairman 	 



Signature Page to Asset Purchase Agreement





 


 









 







	 	 	 	 	 
	 	Palm Harbor Albemarie, LLC, a Delaware corporation

 	 
	 	By:  	/s/ Larry Keener
 	 
	 	 	Name:  	Larry H. Keener 	 
	 	 	Title:  	President



	 



	 	 	 	 	 
	 	PURCHASER:



Palm Harbor Homes, Inc., a Delaware corporation

 	 
	 	By:  	/s/ Joseph H. Stegmayer
 	 
	 	 	Name:  	Joseph H. Stegmayer 	 
	 	 	Title:  	President 	 



Signature Page to Asset Purchase Agreement