Exhibit 99.6
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the
"Agreement"), dated as of September 17, 1996, among CHATEAU PROPERTIES, INC.,
a Maryland corporation ("Chateau"), ROC COMMUNITIES, INC., a Maryland
corporation ("ROC"), and R ACQUISITION SUB, INC., a Maryland corporation and a
subsidiary of Chateau ("RSub").
RECITALS
(a) Certain terms used herein shall have the meanings
assigned to them in Article X.
(b) Pursuant to an agreement and plan of merger dated as of
July 17, 1996, among Chateau, ROC, RSub and Chateau Communities, Inc., a
Maryland corporation (the "Original Agreement"), the Boards of Directors of
Chateau and ROC determined that it was advisable and in the best interest of
their respective companies and their stockholders to consummate the strategic
business combination involving ROC and Chateau described in the Original
Agreement.
(c) The Boards of Directors of Chateau and ROC have
determined that it is advisable and in the best interest of their respective
companies and their stockholders to amend and restate the terms of the
Original Agreement and to proceed with the strategic business combination
involving the two companies on the terms described in this Agreement, pursuant
to which ROC will merge with RSub and will be the surviving corporation in
such merger (the "Merger") and each issued and outstanding share of common
stock, par value $.01 per share, of ROC (the "ROC Common Stock") and
non-voting redeemable stock, par value $.01 per share, of ROC (the "ROC
Non-Voting Stock" and, together with the ROC Common Stock, the "ROC Stock")
will be converted into the right to receive the Merger Consideration (as
defined below).
(d) In connection with the Merger, the following additional
transactions will be effected (the Merger, together with the other documents,
agreements and transactions contemplated by this Agreement, being referred to
collectively herein as the "Transactions"): (i) ROC, Chateau and CP Limited
Partnership, a Maryland limited partnership which is the operating partnership
of Chateau (the "Operating Partnership"), will enter into the Contribution
Agreement substantially in the form of Exhibit A hereto (the "Contribution
Agreement") and immediately following the Merger will perform their respective
obligations thereunder; (ii) the Amended and Restated Agreement of Limited
Partnership of the Operating Partnership (the "Operating Partnership
Agreement") will be amended and restated substantially as provided in the form
attached as Exhibit B hereto (the "Operating Partnership Agreement
Amendment"); and (iii) Chateau will enter into a Registration Rights Agreement
(the "Registration Rights Agreement"), in the form attached as Exhibit C
hereto with certain holders (after giving effect to the Merger) of the Common
Stock, par value $.01 per share, of Chateau (the "Common Stock"). In addition,
in connection
with and as an integral part of the Merger, certain OP Unit holders shall
transfer at least that number of OP Units and other property to Chateau in
exchange for common stock of Chateau such that ROC stockholders and
transferring OP Unit holders will when taken together own at least 80% of the
issued and outstanding voting shares of Chateau immediately following the
consummation of the Merger.
(e) As a condition to, and simultaneously with the execution
of, the Original Agreement, there was executed and delivered (i) the Chateau
Stock Option Agreement pursuant to which Chateau granted to ROC an option
exercisable upon the occurrence of certain events and (ii) the ROC Stock
Option Agreement pursuant to which ROC granted to the Operating Partnership an
option exercisable upon the occurrence of certain events. As a condition to,
and simultaneously with the execution of, this Agreement, the Option
Agreements will be amended as provided in Exhibit D hereto. The Chateau Option
Agreement and the ROC Option Agreement as so amended are referred to herein as
the "Chateau Option Agreement" and the "ROC Option Agreement" and together as
the "Option Agreements."
(f) As a condition to, and simultaneously with the execution
of, the Original Agreement, Agreements and Irrevocable Proxies were executed
and delivered by the ROC Principals and the Chateau Principals (each as
defined in the Original Agreement). As a condition to, and simultaneously with
the execution of, this Agreement, the Agreements and Irrevocable Proxies will
be amended as provided in Exhibit E hereto. The Agreements and Irrevocable
Proxies executed by the ROC Principals as so amended are referred to herein as
the "ROC Principal Proxies" and the Agreements and Irrevocable Proxies
executed by the Chateau Principals as so amended are referred to herein as the
"Chateau Principal Proxies."
(g) As a condition to the willingness of each of Chateau and
ROC to enter into this Agreement, holders of units of limited partner interest
("OP Units") in the Operating Partnership holding in excess of 50% of the
outstanding OP Units have (i) consented to the Operating Partnership Agreement
Amendment, and (ii) expressed in writing to ROC their intent to exchange,
subject to certain conditions, certain of their OP Units for shares of Common
Stock on or prior to the record date for the Chateau Stockholders Meeting (as
hereinafter defined).
(h) For federal income tax purposes it is intended that the
Merger and the transfer of OP Units by the holders thereof be viewed as an
integrated transaction and together qualify as tax-free transfers by the
stockholders of ROC and the transferring OP Unit holders to Chateau in
exchange for shares of Common Stock pursuant to Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code").
(i) ROC, as the surviving corporation in the Merger with
RSub, intends that, following the Merger, it shall continue to be
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subject to taxation as a real estate investment trust (a "REIT") within the
meaning of the Code.
(j) The parties intend that this Agreement shall in all
respects amend, restate and supersede the Original Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
agree as follows:
ARTICLE I
The Merger
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Maryland
General Corporation Law (the "MGCL"), ROC shall be merged with RSub at the
Effective Time (as defined below). Following the Merger, the separate
corporate existence of RSub shall cease and ROC shall continue as the
surviving corporation and shall succeed to and assume all the rights and
obligations of RSub in accordance with the MGCL.
SECTION 1.2 Closing. The closing of the Merger will take
place at 10:00 a.m. Eastern Time on a date to be specified by the parties,
which (subject to satisfaction or waiver of the conditions set forth in
Sections 6.2 and 6.3) shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Section 6.1 (the
"Closing Date"), at the offices of Xxxxxx & Xxxxx, 000 Xxxx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000, unless another date or place is agreed to in writing by the
parties hereto.
SECTION 1.3 Effective Time. As soon as practicable following
the satisfaction or waiver of the conditions set forth in Article VI, the
parties shall file the articles of merger or other appropriate documents for
the Merger (the "Articles of Merger") executed in accordance with Section
3-110 of the MGCL and shall make all other filings or recordings required
under the MGCL to effect the Merger. The Merger shall become effective at such
time as the Articles of Merger have been duly filed with the Department of
Assessments and Taxation of the State of Maryland, or at such other time as
Chateau and ROC shall specify in the Articles of Merger (the time and the day
the Merger become effective being, the "Effective Time" and the "Effective
Day"), it being understood that the parties shall cause the Effective Time to
occur on the Closing Date.
SECTION 1.4 Effects of the Merger. The Merger shall have the
effects set forth in the MGCL.
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SECTION 1.5 Charters and By-laws.
(a) Chateau. The Charter of Chateau shall not be affected by
the Merger (the "Charter"). The By-laws of Chateau as in effect as of the date
hereof shall be amended, effective at the Effective Time, as provided in
Exhibit F hereto.
(b) ROC. The Charter and By-laws of ROC as in effect at the
Effective Time shall be the Charter and By-laws of ROC upon consummation of
the Merger; provided, that, such Charter shall be amended such that following
the Merger, after giving effect thereto, the ownership of ROC Common Stock by
Chateau shall not violate the ownership limit described in the ROC Charter.
SECTION 1.6 Directors. Effective at the Effective Time, two
of the seven directors of Chateau then in office shall resign from the Chateau
Board of Directors and, in accordance with the By-law amendments specified in
Exhibit F, the remaining Chateau directors then in office shall increase the
size of the Chateau Board from seven to ten directors. The five vacancies on
the Chateau Board shall be filled by the vote of the remaining Chateau
directors then in office with five nominees selected by the ROC Board of
Directors such that such five nominees as well as the five directors of
Chateau then in office shall constitute all of the members of the Chateau
Board of Directors immediately following the Effective Time. Effective at the
Effective Time, the Board of Directors of ROC, as the surviving corporation to
the merger with RSub, will be configured as follows: three of the directors of
ROC shall resign and these vacancies shall be filled by the vote of the
remaining ROC directors with three nominees selected by the Chateau Board of
Directors.
SECTION 1.7 Officers. The officers of Chateau immediately
following the Effective Time shall be as follows:
Xxxx X. XxXxxxxx Chief Executive Officer
C.G. ("Xxxx") Kellogg President
Xxxxx X. Xxxxxx Chief Operating Officer
Xxxxxx X. Xxxxxxx Chief Financial Officer
Xxxx X. Xxxxx, Xx. Executive Vice President -
Acquisitions
Each such officer shall, as of the Effective Time, be employed by Chateau
and/or the Operating Partnership pursuant to an employment agreement (the
"Employment Agreements") substantially in accordance with the terms outlined
in Exhibit G hereto. The officers of ROC following the Merger shall be chosen
by the Board of Directors of ROC as reconstituted by Chateau in accordance
with Section 1.6 above.
SECTION 1.8 Principal Executive Office. The principal
executive office of Chateau following the Effective Date shall be in
Englewood, Colorado.
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SECTION 1.9 Name. The Board of Directors of Chateau will, at
the first annual meeting of stockholders of Chateau following the Merger,
submit to a vote of the stockholders of Chateau, a proposal, which shall be
recommended by the Board, to change the name of the Company to "Chateau
Communities, Inc." If the stockholders of Chateau approve such name change,
Chateau will change its symbol on the New York Stock Exchange to appropriately
comport with the name change.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.1 Effect on Capital Stock. By virtue of the Merger
and without any action on the part of the holder of any shares of ROC Stock:
(a) Conversion of Stock.
(i) At the Effective Time, each issued and outstanding
share of ROC Stock shall be converted into the right to receive from Chateau
1.042 fully paid and nonassessable shares of Common Stock. At the Effective
Time, all such shares of ROC Stock shall no longer be outstanding and shall
automatically be canceled and retired and all rights with respect thereto
shall cease to exist, and each holder of a certificate representing any such
shares of ROC Stock shall cease to have any rights with respect thereto,
except the right to receive, upon surrender of such certificate in accordance
with Section 2.2(c), certificates representing the shares of Common Stock
required to be delivered under this Section 2.1(a) and any cash in lieu of
fractional shares of Common Stock to be issued or paid in consideration
therefor upon surrender of such certificate (the "Merger Consideration") and
any dividends or other distributions to which such holder is entitled pursuant
to Section 2.2(d), in each case, without interest and less any required
withholding taxes.
(ii) Notwithstanding the foregoing, the parties
understand that the rights of each stockholder of Chateau under this Section
2.1(a) will be subject to the ownership limitations and other related
provisions contained in the Chateau Charter.
(b) Conversion of Shares of Common Stock of RSub.
Immediately prior to the Effective Time, RSub shall have issued and
outstanding 10,000,120 shares of common stock ("RSub Common Stock"),
10,000,000 of which shares shall be owned by Chateau and 120 of which shares
shall be held by 120 separate individuals who are "accredited investors"
within the meaning of Rule 501(a) under the Securities Act of 1933, as amended
(the "Securities Act"). At the Effective Time, each issued and outstanding
share of RSub Common Stock shall be converted into one validly issued, fully
paid and non-assessable share of common stock of ROC, as the surviving
corporation in the Merger with RSub.
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SECTION 2.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Chateau and
ROC shall jointly appoint a bank or trust company to act as exchange agent
(the "Exchange Agent") for the exchange of the Merger Consideration upon
surrender of certificates representing issued and outstanding ROC Stock.
(b) Provision of Shares. Chateau shall provide to the
Exchange Agent on or before the Effective Time, for the benefit of the holders
of ROC Stock, sufficient shares of Common Stock issuable in exchange for the
issued and outstanding shares of ROC Stock pursuant to Section 2.1.
(c) Exchange Procedure. As soon as reasonably practicable
after the Effective Time, the Exchange Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of ROC Stock (the "ROC
Certificates") whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 2.1, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the ROC Certificates shall pass, only upon delivery of the ROC
Certificates to the Exchange Agent and shall be in a form and have such other
provisions as Chateau may reasonably specify) and (ii) instructions for use in
effecting the surrender of the ROC Certificates in exchange for the Merger
Consideration. Upon surrender of a ROC Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by
Chateau, together with such letter of transmittal, duly executed, and such
other documents as may reasonably be required by the Exchange Agent, the
holder of such ROC Certificate shall be entitled to receive in exchange
therefor the Merger Consideration and any dividends or other distributions to
which such holder is entitled pursuant to Section 2.2(d), and the ROC
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of ROC Stock which is not registered in the transfer
records of ROC, payment may be made to a person other than the person in whose
name the ROC Certificate so surrendered is registered if such ROC Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment either shall pay any transfer or other taxes
required by reason of such payment being made to a person other than the
registered holder of such ROC Certificate or establish to the satisfaction of
Chateau that such tax or taxes have been paid or are not applicable. Until
surrendered as contemplated by this Section 2.2, each ROC Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration, without interest, into
which the shares theretofore represented by such ROC Certificate shall have
been converted pursuant to Section 2.1 and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.2(d). No
interest will be paid or will accrue on the Merger Consideration upon the
surrender of any ROC Certificate or on any cash payable pursuant to Section
2.2(d) or Section 2.2(g).
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(d) Record Dates; Distributions with Respect to Unexchanged
Shares.
(i) From the date of this Agreement, ROC and Chateau
shall cooperate to establish and maintain record and payment dates for regular
quarterly cash dividends on their respective capital stock, such that the
record and payment dates, respectively, for each of ROC and Chateau occur on
the same calendar date.
(ii) No dividends or other distributions with respect to
ROC Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered ROC Certificate with respect to the shares
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.2(g), in each case until the
surrender of such ROC Certificate in accordance with this Article II. Subject
to the effect of applicable abandoned property, escheat or similar laws,
following surrender of any such ROC Certificate there shall be paid to the
holder of such ROC Certificate, without interest, (A) at the time of such
surrender, the amount of any cash payable in lieu of any fractional share of
Common Stock to which such holder is entitled pursuant to Section 2.2(g) and
(B) if such ROC Certificate is exchangeable for one or more whole shares of
Common Stock, (x) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of Common Stock and (y) at the
appropriate payment date, the amount of dividends or other distributions with
a record date after the Effective Time but prior to such surrender and with a
payment date subsequent to such surrender payable with respect to such whole
shares of Common Stock.
(e) No Further Ownership Rights in ROC Stock. All Merger
Consideration paid upon the surrender of ROC Certificates in accordance with
the terms of this Article II (and any cash paid pursuant to Section 2.2(g))
shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of ROC Stock theretofore represented by such ROC
Certificates, subject, however, to the obligation of Chateau to pay, without
interest, any dividends or make any other distributions with a record date
prior to the Effective Time which may have been declared or made by ROC on
such shares in accordance with the terms of this Agreement or prior to the
date of this Agreement and which remain unpaid at the Effective Time and have
not been paid prior to such surrender, and there shall be no further
registration of transfers on the stock transfer books of ROC of the shares of
ROC Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, ROC Certificates are properly presented to Chateau
they shall be canceled and exchanged as provided in this Article II.
(f) No Liability. None of Chateau, ROC, RSub or the Exchange
Agent shall be liable to any person in respect of any Merger Consideration
delivered to a public official pursuant to any
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applicable abandoned property, escheat or similar law. Any portion of the
Merger Consideration delivered to the Exchange Agent pursuant to this
Agreement that remains unclaimed for six months after the Effective Time shall
be redelivered by the Exchange Agent to Chateau, upon demand, and any holders
of ROC Certificates who have not theretofore complied with Section 2.2(c)
shall thereafter look only to Chateau for delivery of the Merger
Consideration, subject to applicable abandoned property, escheat and other
similar laws.
(g) No Fractional Shares.
(i) No certificates or scrip representing fractional
shares of Common Stock shall be issued upon the surrender for exchange of ROC
Certificates, and such fractional share interests will not entitle the owner
thereof to vote, to receive dividends or to any other rights of a stockholder
of Chateau.
(ii) Notwithstanding any other provision of this
Agreement, each holder of shares of ROC Stock exchanged in the Merger who
would otherwise have been entitled to receive a fraction of a share of Common
Stock (after taking into account all ROC Certificates delivered by such
holder) shall receive, from the Exchange Agent in accordance with the
provisions of this Section 2.2(g), a cash payment in lieu of such fractional
share of Common Stock representing such holder's proportionate interest, if
any, in the net proceeds from the sale by the Exchange Agent in one or more
transactions (which sale transactions shall be made at such times, in such
manner and on such terms as the Exchange Agent shall determine in its
reasonable discretion) on behalf of all such holders of the aggregate of the
fractional shares of Common Stock which would otherwise have been issued (the
"Excess Shares"). The sale of the Excess Shares by the Exchange Agent shall be
executed on the New York Stock Exchange (the "NYSE") through one or more
member firms of the NYSE and shall be executed in round lots to the extent
practicable. Until the net proceeds of such sale or sales have been
distributed to the holders of Certificates, the Exchange Agent will hold such
proceeds in trust (the "Exchange Trust") for the holders of ROC Certificates.
Chateau shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange
Agent, incurred in connection with this sale of the Excess Shares. As soon as
practicable after the determination of the amount of cash, if any, to be paid
to holders of ROC Certificates in lieu of any fractional shares of Common
Stock, the Exchange Agent shall make available such amounts to such holders of
ROC Certificates without interest.
(h) Withholding Rights. Chateau or the Exchange Agent shall
be entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of shares of Common Stock or
ROC Stock such amounts as Chateau or the Exchange Agent is required to deduct
and withhold with respect to the making of such payment under the Code, or any
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provision of state, local or foreign tax law. To the extent that amounts are
so withheld by Chateau or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder
of the shares of ROC Stock, in respect of which such deduction and withholding
was made by Chateau or the Exchange Agent.
ARTICLE III
Representations and Warranties
SECTION 3.1 Representations and Warranties of ROC. ROC
represents and warrants to Chateau as follows:
(a) Organization, Standing and Corporate Power of ROC. ROC
is a corporation duly organized and validly existing under the laws of
Maryland and has the requisite corporate power and authority to carry on its
business as now being conducted. ROC is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of
its business or the ownership, leasing of its properties or management of
properties for others makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a material adverse effect on
the business, properties, assets, financial condition or results of operations
of ROC and the ROC Subsidiaries (as defined below) taken as a whole (a "ROC
Material Adverse Effect").
(b) ROC Subsidiaries. Schedule 3.1(b) to the ROC Disclosure
Letter (as defined below) sets forth each ROC Subsidiary and the ownership
interest therein of ROC. Except as set forth in Schedule 3.1(b) to the ROC
Disclosure Letter, (i) all the outstanding shares of capital stock of each ROC
Subsidiary that is a corporation have been validly issued and are fully paid
and nonassessable and are owned by ROC, by another ROC Subsidiary or by ROC
and another ROC Subsidiary, free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") and (ii) all equity interests in each ROC Subsidiary
that is a partnership, limited liability company or trust are owned by ROC, by
another ROC Subsidiary or by ROC and another ROC Subsidiary, free and clear of
all Liens. Except for the capital stock of, or other equity interests in, the
ROC Subsidiaries and as provided in Section 4.1(e), ROC does not own, directly
or indirectly, any capital stock or other ownership interest, with a fair
market value as of the date of this Agreement greater than $250,000 in any
Person or which represents 10% or more of the outstanding capital stock or
other ownership interest of any class in any Person. Each ROC Subsidiary that
is a corporation is duly incorporated and validly existing under the laws of
its jurisdiction of incorporation and has the requisite corporate power and
authority to carry on its business as now being conducted and each ROC
Subsidiary that is a partnership, limited liability company or trust is duly
organized and validly
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existing under the laws of its jurisdiction of organization and has the
requisite power and authority to carry on its business as now being conducted.
Each ROC Subsidiary is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership, leasing of its properties or management of properties for others
makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed, individually
or in the aggregate, would not have a ROC Material Adverse Effect.
(c) Capital Structure. The authorized capital stock of ROC
consists of 90,000,000 shares of ROC Common Stock, 158,017 shares of ROC
Non-Voting Stock and 9,841,983 shares of preferred stock, par value $.01 per
share (the "ROC Preferred Stock"). On the date hereof, (i) 12,423,500 shares
of ROC Common Stock, 158,017 shares of ROC Non-Voting Stock and no shares of
ROC Preferred Stock were issued and outstanding, (ii) 490,000 shares of ROC
Common Stock were available for issuance under ROC's Amended and Restated 1993
Stock Option and Stock Appreciation Rights Plan (the "1993 Stock Plan") and
(iii) 270,000 shares of ROC Common Stock were reserved for issuance upon
exercise of outstanding stock options to purchase shares of ROC Common Stock
granted to employees of ROC under the 1993 Stock Plan (the "ROC Stock
Options"). On the date of this Agreement, except as set forth above in this
Section 3.1(c), no shares of capital stock or other voting securities of ROC
were issued, reserved for issuance or outstanding. There are no outstanding
stock appreciation rights relating to the capital stock of ROC. All
outstanding shares of capital stock of ROC are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
There are no bonds, debentures, notes or other indebtedness of ROC having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of ROC may vote. Except
(A) for the ROC Stock Options, (B) as set forth in Schedule 3.1(c) to the ROC
Disclosure Letter, and (C) as otherwise permitted under Section 4.1, there are
no outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which ROC or any ROC
Subsidiary is a party or by which such entity is bound, obligating ROC or any
ROC Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock, voting securities or other ownership
interests of ROC or any ROC Subsidiary or obligating ROC or any ROC Subsidiary
to issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking. Except as set
forth in Schedule 3.1(c) to the ROC Disclosure Letter, there are no
outstanding contractual obligations of ROC or any ROC Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock of ROC or
any capital stock, voting securities or other ownership interests in ROC or
any ROC Subsidiary or make any material investment (in the form of a loan,
capital contribution or otherwise) in any Person (other than a ROC
Subsidiary).
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(d) Authority; Noncontravention; Consents. ROC has the
requisite corporate power and authority to enter into this Agreement and,
subject to approval of the Merger, this Agreement and the other Transactions
contemplated hereby by the requisite vote of the holders of the ROC Common
Stock (the "ROC Stockholder Approvals"), to consummate the Transactions
contemplated by this Agreement to which ROC is a party. ROC has the requisite
corporate power and authority to enter into the ROC Option Agreement and to
consummate the Transactions contemplated thereby to which ROC is a party. The
execution and delivery of this Agreement and the ROC Option Agreement by ROC
and the consummation by ROC of the Transactions contemplated hereby and
thereby to which ROC is a party have been duly authorized by all necessary
corporate action on the part of ROC, subject to approval of this Agreement
pursuant to the ROC Stockholder Approvals. This Agreement and the ROC Option
Agreement have been duly executed and delivered by ROC and constitute valid
and binding obligations of ROC, enforceable against ROC in accordance with
their terms. The ROC Principal Proxies have been duly executed and delivered
by the ROC Principals and constitute valid and binding proxies of the ROC
Principals enforceable in accordance with their terms. Except as set forth in
Schedule 3.1(d) to the ROC Disclosure Letter, the execution and delivery of
this Agreement and the ROC Option Agreement by ROC do not, and the
consummation of the Transactions contemplated hereby and thereby to which ROC
is a party and compliance by ROC with the provisions of this Agreement and the
ROC Option Agreement will not, conflict with, or result in any violation of,
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of ROC or any ROC Subsidiary under, (i)
the Charter or By-laws of ROC or the comparable charter or organizational
documents or partnership or similar agreement (as the case may be) of any ROC
Subsidiary, each as amended or supplemented to the date of this Agreement,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, reciprocal
easement agreement, lease or other agreement, instrument, permit, concession,
franchise or license applicable to ROC or any ROC Subsidiary or their
respective properties or assets or (iii) subject to the governmental filings
and other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation (collectively, "Laws")
applicable to ROC or any ROC Subsidiary, or their respective properties or
assets, other than, in the case of clause (ii) or (iii), any such conflicts,
violations, defaults, rights or Liens that individually or in the aggregate
would not (x) have a ROC Material Adverse Effect or (y) prevent the
consummation of the Transactions. No consent, approval, order or authorization
of, or registration, declaration or filing with, any federal, state or local
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency (a "Governmental Entity"), is required
by or with respect to ROC or any ROC Subsidiary in connection with the
execution and delivery of this Agreement or the ROC Option Agreement by ROC or
the consummation by ROC of the other Transactions contemplated hereby
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and thereby, except for (i) the filing with the Securities and Exchange
Commission (the "SEC") of (x) a joint proxy statement relating to the approval
by ROC stockholders of the Merger, this Agreement and the other Transactions
contemplated by this Agreement and the approval by Chateau stockholders of the
issuance of the Merger Consideration to the ROC stockholders (as amended or
supplemented from time to time, the "Proxy Statement") and a registration
statement relating to the issuance of the Merger Consideration (the
"Registration Statement") and (y) such reports under Section 13(a) and Section
14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement and the Transactions
contemplated by this Agreement, (ii) the filing of the Articles of Merger for
the Merger with the Department of Assessments and Taxation of the State of
Maryland, (iii) such filings as may be required in connection with the payment
of any Transfer and Gains Taxes (as defined below) and (iv) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings as are set forth in Schedule 3.1(d) to the ROC Disclosure Letter or
(A) as may be required under (x) federal, state, local or foreign
environmental laws or (y) the "blue sky" laws of various states or (B) which,
if not obtained or made, would not prevent or delay in any material respect
the consummation of any of the Transactions contemplated by this Agreement or
otherwise prevent ROC from performing its obligations under this Agreement in
any material respect or have, individually or in the aggregate, a ROC Material
Adverse Effect.
(e) SEC Documents; Financial Statements; Undisclosed
Liabilities. ROC has filed all required reports, schedules, forms, statements
and other documents with the SEC since August 18, 1993 (the "ROC SEC
Documents"). All of the ROC SEC Documents (other than preliminary material),
as of their respective filing dates, complied in all material respects with
all applicable requirements of the Securities Act and the Exchange Act and, in
each case, the rules and regulations promulgated thereunder applicable to such
ROC SEC Documents. None of the ROC SEC Documents at the time of filing
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except to the extent such statements have been modified or
superseded by later filed ROC SEC Documents. Other than as set forth in
Schedule 3.1(e) to the ROC Disclosure Letter, there is no unresolved
violation, criticism or exception by any Governmental Entity of which ROC has
received written notice with respect to any ROC report or statement which, if
resolved in a manner unfavorable to ROC, could have a ROC Material Adverse
Effect. The consolidated financial statements of ROC included in the ROC SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") (except, in the case of interim financial
statements, as permitted by Forms 10-Q or 8-K of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto) and
12
fairly presented, in accordance with the applicable requirements of GAAP, the
consolidated financial position of ROC and the ROC Subsidiaries taken as a
whole, as of the dates thereof and the consolidated results of operations and
cash flows for the periods then ended (subject, in the case of interim
financial statements, to normal year-end adjustments). Except as set forth in
the ROC Filed SEC Documents (as defined below), in Schedule 3.1(e) to the ROC
Disclosure Letter or as permitted by Section 4.1 (for the purposes of this
sentence, as if Section 4.1 had been in effect since December 31, 1995),
neither ROC nor any ROC Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by GAAP
to be set forth on a consolidated balance sheet of ROC or in the notes thereto
and which, individually or in the aggregate, would have a ROC Material Adverse
Effect.
(f) Absence of Certain Changes or Events. Except as
disclosed in the ROC SEC Documents filed and publicly available prior to the
date of this Agreement (referred to collectively as the "ROC Filed SEC
Documents") or in Schedule 3.1(f) to the ROC Disclosure Letter, since the date
of the most recent financial statements included in the ROC Filed SEC
Documents (the "Financial Statement Date") and to the date of this Agreement,
ROC and the ROC Subsidiaries have conducted their business only in the
ordinary course and there has not been (i) any material adverse change in the
business, financial condition or results of operations of ROC and the ROC
Subsidiaries taken as a whole, that has resulted or would result, individually
or in the aggregate, in Economic Losses (as defined in Section 6.2 below) of
$5,000,000 or more (a "ROC Material Adverse Change"), nor has there been any
occurrence or circumstance that with the passage of time would reasonably be
expected to result in a ROC Material Adverse Change, (ii) except for regular
quarterly dividends not in excess of $.425 per share of ROC Stock, with
customary record and payment dates, any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property)
with respect to any of ROC's capital stock, (iii) any split, combination or
reclassification of any of ROC's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for, or giving the right to acquire by exchange or
exercise, shares of its capital stock or any issuance of an ownership interest
in, any ROC Subsidiary except as permitted by Section 4.1, (iv) any damage,
destruction or loss, whether or not covered by insurance, that has or would
have a ROC Material Adverse Effect or (v) any change in accounting methods,
principles or practices by ROC or any ROC Subsidiary materially affecting its
assets, liabilities or business, except insofar as may have been disclosed in
the ROC Filed SEC Documents or required by a change in GAAP.
(g) Litigation. Except as disclosed in the ROC Filed SEC
Documents or in Schedule 3.1(g) to the ROC Disclosure Letter, and other than
personal injury and other routine tort litigation arising from the ordinary
course of operations of ROC and the ROC Subsidiaries which are covered by
adequate insurance, there is no
13
suit, action or proceeding pending or, to the knowledge of ROC, threatened
against or affecting ROC or any ROC Subsidiary that, individually or in the
aggregate, could reasonably be expected to (i) have a ROC Material Adverse
Effect or (ii) prevent the consummation of any of the Transactions, nor is
there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against ROC or any ROC Subsidiary having, or
which, insofar as reasonably can be foreseen, in the future would have, any
such effect.
(h) Absence of Changes in Benefit Plans; ERISA Compliance.
(i) Except as disclosed in the ROC Filed SEC Documents
or in Schedule 3.1(h)(i) to the ROC Disclosure Letter and except as permitted
by Section 4.1 (for the purpose of this sentence, as if Section 4.1 had been
in effect since December 31, 1995), since the date of the most recent audited
financial statements included in the ROC Filed SEC Documents, there has not
been any adoption or amendment in any material respect by ROC or any ROC
Subsidiary of any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other employee benefit plan, arrangement or
understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of ROC or any ROC Subsidiary
or any person affiliated with ROC under Section 414(b), (c), (m) or (o) of the
Code (collectively, "ROC Benefit Plans").
(ii) Except as described in the ROC Filed SEC Documents
or in Schedule 3.1(h)(ii) to the ROC Disclosure Letter or as would not have a
ROC Material Adverse Effect, (A) all ROC Benefit Plans, including any such
plan that is an "employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), are in
compliance with all applicable requirements of law, including ERISA and the
Code, and (B) neither ROC nor any ROC Subsidiary has any liabilities or
obligations with respect to any such ROC Benefit Plan, whether accrued,
contingent or otherwise (other than obligations to make contributions and pay
benefits and administrative costs incurred in the ordinary course), nor to the
knowledge of ROC are any such liabilities or obligations expected to be
incurred. Except as set forth in Schedule 3.1(h)(ii) to the ROC Disclosure
Letter, the execution of, and performance of the Transactions contemplated in,
this Agreement will not (either alone or together with the occurrence of any
additional or subsequent events) constitute an event under any ROC Benefit
Plan, policy, arrangement or agreement, trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee or director. The only
severance agreements or severance policies applicable to ROC or the ROC
Subsidiaries are the agreement and
14
policies specifically referred to in Schedule 3.1(h)(ii) to the ROC
Disclosure Letter.
(i) Taxes.
(i) Each of ROC and each ROC Subsidiary has timely
filed all Tax Returns and reports required to be filed by it (after giving
effect to any filing extension properly granted by a Governmental Entity
having authority to do so). Each such Tax Return is true, correct and complete
in all material respects. ROC and each ROC Subsidiary have paid (or ROC has
paid on their behalf), within the time and manner prescribed by law, all Taxes
that are due and payable. Except as disclosed in Schedule 3.1(i)(i) to the ROC
Disclosure Letter, the federal, state and local income, sales and franchise
tax returns of ROC and each ROC Subsidiary have not been audited by any
Governmental Entity responsible for tax matters (a "Taxing Authority"). There
are no Tax liens upon the assets of ROC or any ROC Subsidiary. The most recent
financial statements contained in the ROC Filed SEC Documents reflect an
adequate reserve for all material Taxes payable by ROC and by each ROC
Subsidiary for all taxable periods and portions thereof through the date of
such financial statements. Since the Financial Statement Date, ROC has
incurred no liability for Taxes under Section 857(b), 860(c) or 4981 of the
Code, and neither ROC nor any ROC Subsidiary has incurred any liability for
Taxes other than in the ordinary course of business. Except as set forth in
Schedule 3.1(i)(i) to the ROC Disclosure Letter, to the knowledge of ROC, no
event has occurred, and no condition or circumstance exists, which presents a
material risk that any material Tax described in the preceding sentence will
be imposed upon ROC. To the knowledge of ROC, no deficiencies for any Taxes
have been proposed, asserted or assessed against ROC or any of the ROC
Subsidiaries, and no requests for waivers of the time to assess any such Taxes
have been granted or are pending. As used in this Agreement, "Taxes" shall
mean any federal, state, local or foreign income, gross receipts, license,
payroll, employment withholding, property, sales, excise or other tax or
governmental charges of any nature whatsoever, together with any penalties,
interest or additions thereto and "Tax Return" shall mean any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
(ii) ROC (A) for all of its taxable years commencing
with 1993 through the most recent December 31, has been subject to taxation as
a REIT within the meaning of the Code and has satisfied the requirements to
qualify as a REIT for such years, (B) has operated, and intends to continue to
operate, in such a manner as to qualify as a REIT for its tax year ending
December 31, 1996, and (C) has not taken or omitted to take any action which
could reasonably be expected to result in a challenge to its status as a REIT,
and, to ROC's knowledge, no such challenge is pending or threatened.
15
(j) No Loans or Payments to Employees, Officers or
Directors. Except as set forth in Schedule 3.1(j) to the ROC Disclosure Letter
or as otherwise specifically provided for in this Agreement, there is no (i)
loan outstanding from or to any employee or director, (ii) employment or
severance contract, (iii) other agreement requiring payments to be made on a
change of control or otherwise as a result of the consummation of any of the
Transactions with respect to any employee, officer or director of ROC or any
ROC Subsidiary or (iv) any agreement to appoint or nominate any person as a
director of ROC or Chateau.
(k) Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than PaineWebber
Incorporated ("PaineWebber"), the fees and expenses of which, as set forth in
an amended letter agreement between ROC and PaineWebber, have previously been
disclosed to Chateau and will be paid by ROC, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of ROC or
any ROC Subsidiary.
(l) Compliance with Laws. Except as disclosed in the ROC
Filed SEC Documents and except as set forth in Schedule 3.1(l) to the ROC
Disclosure Letter, neither ROC nor any of the ROC Subsidiaries has violated or
failed to comply with any statute, law, ordinance, regulation, rule, judgment,
decree or order of any Governmental Entity applicable to its business,
properties or operations, except for violations and failures to comply that
would not, individually or in the aggregate, reasonably be expected to result
in a ROC Material Adverse Effect.
(m) Contracts; Debt Instruments.
(i) Neither ROC nor any ROC Subsidiary is in violation
of or in default under, in any material respect (nor does there exist any
condition which upon the passage of time or the giving of notice or both would
cause such a violation of or default under), any material loan or credit
agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise or license, or any agreement to acquire real property, or any other
material contract, agreement, arrangement or understanding, to which it is a
party or by which it or any of its properties or assets is bound, except as
set forth in Schedule 3.1(m)(i) to the ROC Disclosure Letter and except for
violations or defaults that would not, individually or in the aggregate,
result in a ROC Material Adverse Effect. The properties identified in Schedule
3.1(m) to the ROC Disclosure Letter are manufactured housing communities owned
by various entities affiliated with the Windsor Corporation (collectively the
"Windsor Entities") and managed by ROC pursuant to that certain Master
Property Management Agreement dated July 31, 1990 ("Windsor Agreement")
between the Windsor Entities and Windsor Asset Management, Inc. ("WAMI"), the
terms of which Windsor Agreement have been replaced by the terms of that
certain Master Agreement dated November 15, 1991 between ROC Properties, Inc.
and WAMI (the "Amended Windsor Agreement"), which
16
Amended Windsor Agreement has an initial term through November 30, 1998 is
valid, binding and in full force and effect without amendment or modification
(except as set forth herein), and is enforceable against the Windsor Entities
and ROC in accordance with its terms.
(ii) Except for any of the following expressly
identified in the most recent financial statements contained in the ROC Filed
SEC Documents and except as permitted by Section 4.1, Schedule 3.1(m)(ii) to
the ROC Disclosure Letter sets forth (A) a list of all loan or credit
agreements, notes, bonds, mortgages, indentures and other agreements and
instruments pursuant to which any indebtedness of ROC or any of the ROC
Subsidiaries in an aggregate principal amount in excess of $2,000,000 per item
is outstanding or may be incurred and (B) the respective principal amounts
outstanding thereunder on June 30, 1996. For purposes of this Section
3.1(m)(ii) and Section 3.2(m)(ii), "indebtedness" shall mean, with respect to
any person, without duplication, (A) all indebtedness of such person for
borrowed money, whether secured or unsecured, (B) all obligations of such
person under conditional sale or other title retention agreements relating to
property purchased by such person, (C) all capitalized lease obligations of
such person, (D) all obligations of such person under interest rate or
currency hedging transactions (valued at the termination value thereof), (E)
all guarantees of such person of any such indebtedness of any other person and
(F) any agreements to provide any of the foregoing.
(iii) Schedule 3.1(m)(iii) to the ROC Disclosure Letter
sets forth a complete list of each consulting agreement between ROC and any
ROC Subsidiary, including the annual compensation payable thereunder and the
date as of which such consulting agreement expires.
(n) Environmental Matters. Except as disclosed in Schedule
3.1(n) to the ROC Disclosure Letter or in the environmental audits/reports
listed thereon, each of ROC and each ROC Subsidiary has obtained all licenses,
permits, authorizations, approvals and consents from Governmental Entities
which are required in respect of its business, operations, assets or
properties under any applicable Environmental Law (as defined below) and each
of ROC and each ROC Subsidiary is in compliance in all material respects with
the terms and conditions of all such licenses, permits, authorizations,
approvals and consents and with any applicable Environmental Law. Except as
disclosed in Schedule 3.1(n) to the ROC Disclosure Letter or in the
environmental audits/reports listed thereon:
(i) No Order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending
or threatened by any Governmental Entity with respect to any alleged failure
by ROC or any ROC Subsidiary to have any license, permit, authorization,
approval or consent from Governmental Entities required under any applicable
Environmental Law in connection with the conduct of the business or operations
of
17
ROC or any ROC Subsidiary or with respect to any treatment, storage,
recycling, transportation, disposal or "release" as defined in 42 U.S.C. ss.
9601(22) ("Release"), by ROC or any ROC Subsidiary of any Hazardous Material
(as defined below).
(ii) Neither ROC nor any ROC Subsidiary nor any prior
owner or lessee of any property now or previously owned or leased by ROC or
any ROC Subsidiary has handled any Hazardous Material on any property now or
previously owned or leased by ROC or any ROC Subsidiary; and, without limiting
the foregoing, (A) no polychlorinated biphenyl is or has been present, (B) no
friable asbestos is or has been present, (C) there are no underground storage
tanks, active or abandoned and (D) no Hazardous Material has been Released in
a quantity reportable under, or in violation of, any Environmental Law, at, on
or under any property now or previously owned or leased by ROC or any ROC
Subsidiary, during any period that ROC or any ROC Subsidiary owned or leased
such property or, to the knowledge of ROC and its Subsidiaries, prior thereto.
(iii) Neither ROC nor any ROC Subsidiary has transported
or arranged for the transportation of any Hazardous Material to any location
which is the subject of any action, suit, arbitration or proceeding that could
be reasonably expected to lead to claims against ROC or any ROC Subsidiary for
clean-up costs, remedial work, damages to natural resources or personal injury
claims, including, but not limited to, claims under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
and the rules and regulations promulgated thereunder ("CERCLA").
(iv) No oral or written notification of a Release of a
Hazardous Material has been filed or should have been filed by or on behalf of
ROC or any ROC Subsidiary and no property now or previously owned or leased by
ROC or any ROC Subsidiary is listed or proposed for listing on the National
Priorities List promulgated pursuant to CERCLA or on any similar state list of
sites requiring investigation or clean-up.
(v) There are no Liens arising under or pursuant to any
Environmental Law on any real property owned or leased by ROC or any ROC
Subsidiary, and no action of any Governmental Entity has been taken or, to the
knowledge of ROC and its Subsidiaries, is in process which could subject any
of such properties to such Liens, and neither ROC nor any ROC Subsidiary would
be required to place any notice or restriction relating to the presence of
Hazardous Material at any such property owned by it in any deed to such
property.
(vi) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, or which are
in the possession of, ROC or any ROC Subsidiary in relation to any property or
facility now or previously owned, leased or managed by ROC or any ROC
Subsidiary which have not been listed in Schedule 3.1(n) to the ROC Disclosure
18
Letter and made available to Chateau prior to the execution of this Agreement.
(vii) As used herein:
(A) "Environmental Law" means any Law of any
Governmental Entity relating to human health, safety or protection of
the environment or to emissions, discharges, releases or threatened
releases of pollutants, contaminants or Hazardous Materials in the
environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata), or otherwise
relating to the treatment, storage, disposal, transport or handling
of any Hazardous Material; and
(B) "Hazardous Material" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form that
is or could reasonably be expected to become friable, urea
formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated
biphenyls (PCBs); (B) any chemicals, materials, substances or wastes
which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants" or words of similar
import, under any Environmental Law; and (C) any other chemical,
material, substance or waste, exposure to which is now or hereafter
prohibited, limited or regulated by any Governmental Entity.
(o) Tangible Property and Assets. Except as disclosed in
Schedule 3.1(o) to the ROC Disclosure Letter, ROC and its Subsidiaries have
good and marketable fee simple title to, or have valid leasehold interests in,
those manufactured home communities described in Schedule 3.1(o) to the ROC
Disclosure Letter, free and clear of all Liens other than (i) any statutory
Lien arising in the ordinary course of business by operation of law with
respect to a liability that is not yet due or delinquent and (ii) any
easement, restriction or minor imperfection of title or similar Lien which
individually or in the aggregate with other such Liens does not materially
impair the value of the property or asset subject to such Lien or the use of
such property or asset in the conduct of the business of ROC or any such ROC
Subsidiary.
(p) Books and Records.
(i) The books of account and other financial records of
ROC and each ROC Subsidiary are in all material respects true, complete and
correct, have been maintained in accordance with good business practices, and
are accurately reflected in all material respects in the financial statements
included in the ROC Filed SEC Documents.
19
(ii) ROC has previously delivered or made available to
Chateau true and correct copies of the Charter and By-laws of ROC, as amended
to date, and the charter, by-laws, organization documents, partnership
agreements and joint venture agreements of its Subsidiaries, and all
amendments thereto. All such documents are listed in Schedule 3.1(p)(iii) to
the ROC Disclosure Letter. ROC has also delivered to Chateau a copy of a
binder for its Director and Officer liability insurance policy.
(iii) The minute books and other records of corporate or
partnership proceedings of ROC and each ROC Subsidiary that had previously
been made available to Chateau in connection with the execution of the
Original Agreement, contained, as of the date of the Original Agreement, in
all material respects accurate records of all meetings and accurately reflect
in all material respects all other corporate action of the stockholders and
directors and any committees of the Board of Directors of ROC and the ROC
Subsidiaries which are corporations.
(q) Opinion of Financial Advisor. ROC has received the
opinion of PaineWebber, satisfactory to ROC, a signed version dated September
17, 1996 of which will be provided to Chateau, with regard to the fairness of
the Merger to the stockholders of ROC from a financial point of view.
(r) State Takeover Statutes. No Takeover Statute (as defined
below) of the State of Maryland, including, without limitation, the control
share acquisition provisions of Section 3-701 et seq. of the MGCL or the
business combination provisions of Section 3-601 et seq. of the MGCL, applies
or purports to apply to the Merger, this Agreement or any of the Transactions.
(s) Registration Statement. The information furnished by ROC
for inclusion in the Registration Statement will not, as of the effective date
of the Registration Statement, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
(t) Vote Required. The affirmative vote of at least
two-thirds of the outstanding shares of ROC Common Stock is the only vote of
the holders of any class or series of ROC's capital stock necessary (under
applicable law or otherwise) to approve the Merger, this Agreement and the
other Transactions contemplated hereby.
SECTION 3.2 Representations and Warranties of Chateau.
Chateau represents and warrants to ROC as follows:
(a) Organization, Standing and Corporate Power of Chateau.
Chateau is a corporation duly organized and validly existing under the laws of
Maryland and has the requisite corporate power and authority to carry on its
business as now being conducted. Chateau is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of
20
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where
the failure to be so qualified or licensed, individually or in the aggregate,
would not have a material adverse effect on the business, properties, assets,
financial condition or results of operations of Chateau and the Chateau
Subsidiaries (as defined below), taken as a whole (a "Chateau Material Adverse
Effect").
(b) Chateau Subsidiaries. Schedule 3.2(b) to the Chateau
Disclosure Letter sets forth each Chateau Subsidiary (as defined below) and
the ownership interest therein of Chateau. Except as set forth in Schedule
3.2(b) to the Chateau Disclosure Letter, (i) all the outstanding shares of
capital stock of each Chateau Subsidiary that is a corporation have been
validly issued and are fully paid and nonassessable and are owned by Chateau,
by another Chateau Subsidiary or by Chateau and another Chateau Subsidiary,
free and clear of all Liens and (ii) all equity interests in each Chateau
Subsidiary that is a partnership (other than the Operating Partnership) or
limited liability company or trust are owned by Chateau or by Chateau and
another Chateau Subsidiary free and clear of all Liens. Except for the capital
stock of or other equity interests in the Chateau Subsidiaries and as provided
in Section 4.2(e), Chateau does not own, directly or indirectly, any capital
stock or other ownership interest, with a fair market value as of the date of
this Agreement greater than $250,000 in any Person or which represents 10% or
more of the outstanding capital stock or other ownership interest of any class
in any Person. Each Chateau Subsidiary that is a corporation is duly
incorporated and validly existing under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to carry on
its business as now being conducted and each Chateau Subsidiary that is a
partnership, limited liability company or trust is duly organized and validly
existing under the laws of its jurisdiction of organization and has the
requisite power and authority to carry on its business as now being conducted.
Each Chateau Subsidiary is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed individually or in the aggregate, would not have a
Chateau Material Adverse Effect.
(c) Capital Structure. The authorized capital stock of
Chateau consists of 30,000,000 shares of Common Stock and 2,000,000 shares of
preferred stock, par value $.01 per share (the "Chateau Preferred Stock"). On
the date hereof, (i) 6,099,710 shares of Common Stock and no shares of Chateau
Preferred Stock were issued and outstanding, (ii) 366,600 shares of Common
Stock were available for grant under Chateau's 1993 Long Term Incentive Plan
(the "Chateau Plan"), (iii) 619,150 shares of Common Stock were reserved for
issuance upon exercise of outstanding stock options to purchase shares of
Common Stock granted to Chateau employees and directors under the Chateau Plan
(the "Chateau Stock Options"), and
21
(iv) 8,836,310 shares of Common Stock were reserved for issuance upon exchange
of OP Units for shares of Common Stock pursuant to the Operating Partnership
Agreement. On the date of this Agreement, except as set forth in this Section
3.2(c), no shares of capital stock or other voting securities of Chateau were
issued, reserved for issuance or outstanding. There are no outstanding stock
appreciation rights relating to the capital stock of Chateau. All outstanding
shares of capital stock of Chateau are, and all shares which may be issued
pursuant to this Agreement will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
There are no bonds, debentures, notes or other indebtedness of Chateau having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of Chateau may vote.
Chateau's Percentage Interest (as defined in the Operating Partnership
Agreement) in the Operating Partnership is 40.84%. The OP Units consist of (i)
5,046,303 Exchangeable OP Units (as defined in the Operating Partnership
Agreement) which together represent a 33.79% Percentage Interest in the
Operating Partnership and are exchangeable for Common Stock on a one-for-one
basis into an aggregate of 5,046,303 shares of Common Stock in accordance with
the terms of the Operating Partnership Agreement, subject to adjustment as
provided in the Operating Partnership Agreement, and (ii) 3,720,182 Excess OP
Units (as defined in the Operating Partnership Agreement) which together
represent a 25.37% Percentage Interest in the Operating Partnership and are
not exchangeable except in accordance with the Operating Partnership
Agreement. Schedule 3.2(c) to the Chateau Disclosure Letter sets forth the
name, address, number of Exchangeable OP Units and Excess Units and the
Percentage Interest of each partner in the Operating Partnership. Except (A)
for the Chateau Stock Options and OP Units (which, subject to certain
restrictions, may be delivered to Chateau in exchange for Common Stock), (B)
as set forth in Schedule 3.2(c) to the Chateau Disclosure Letter, (C) as
otherwise permitted under Section 4.2, and (d) as contemplated under Chateau's
dividend reinvestment plan, as of the date of this Agreement there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Chateau or any
Chateau Subsidiary is a party or by which such entity is bound, obligating
Chateau or any Chateau Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock, voting
securities or other ownership interests of Chateau or of any Chateau
Subsidiary or obligating Chateau or any Chateau Subsidiary to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. Except (x) as set forth in
Schedule 3.2(c) to the Chateau Disclosure Letter and (y) as required under the
Operating Partnership Agreement, there are no outstanding contractual
obligations of Chateau or any Chateau Subsidiary to repurchase, redeem or
otherwise acquire any shares of capital stock or other ownership interests in
Chateau or any Chateau Subsidiary or make any material investment (in the form
of a loan, capital contribution or otherwise) in any Person other than the
Operating Partnership.
22
(d) Authority; Noncontravention; Consents. Chateau has the
requisite corporate power and authority to enter into this Agreement and,
subject to approval by the requisite vote of the holders of the Common Stock
required to approve the issuance of the Merger Consideration to the ROC
stockholders (the "Chateau Stockholder Approvals" and, together with the ROC
Stockholder Approvals, the "Stockholder Approvals"), to consummate the
transactions contemplated by this Agreement to which Chateau is a party.
Chateau has the requisite corporate power and authority to enter into the
Chateau Option Agreement and to consummate the Transactions contemplated
thereby to which Chateau is a party. The execution and delivery of this
Agreement and the Chateau Option Agreement by Chateau and the consummation by
Chateau of the Transactions contemplated hereby and thereby to which Chateau
is a party have been duly authorized by all necessary corporate action on the
part of Chateau, subject to the approval of the issuance of the Merger
Consideration to the ROC stockholders pursuant to the Chateau Stockholder
Approvals. The execution and delivery of the Operating Partnership Agreement
Amendment has been duly authorized by Chateau and by all other necessary
partnership action, the Operating Partnership Agreement Amendment will
constitute a valid and binding obligation of the Operating Partnership,
enforceable against the Operating Partnership in accordance with its terms.
This Agreement and the Chateau Option Agreement have been duly executed and
delivered by Chateau and constitute valid and binding obligations of Chateau,
enforceable against Chateau in accordance with their terms. The Chateau
Principal Proxies have been duly executed and delivered by the Chateau
Principals and constitute valid and binding proxies of the Chateau Principals
enforceable in accordance with their terms. Except as set forth in Schedule
3.2(d) to the Chateau Disclosure Letter, the execution and delivery of this
Agreement and the Chateau Option Agreement by Chateau do not, and the
consummation of the Transactions contemplated hereby and thereby to which
Chateau is a party and compliance by Chateau with the provisions of this
Agreement and the Chateau Option Agreement will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or
result in the creation of any Lien upon any of the properties or assets of
Chateau or any Chateau Subsidiary under, (i) the Charter or By-laws of Chateau
or the comparable charter or organizational documents or partnership or
similar agreement (as the case may be) of any Chateau Subsidiary, each as
amended or supplemented to the date of this Agreement, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, reciprocal easement agreement,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to Chateau or any Chateau Subsidiary or their respective properties
or assets or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any Laws applicable to Chateau or any
Chateau Subsidiary or their respective properties or assets, other than, in
the case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (x) have a
Chateau Material Adverse
23
Effect or (y) prevent the consummation of the Transactions. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to Chateau or any
Chateau Subsidiary in connection with the execution and delivery of this
Agreement or the Chateau Option Agreement by Chateau or the consummation by
Chateau of any of the Transactions contemplated hereby and thereby, except for
(i) the filing with the SEC of (x) the Proxy Statement and the Registration
Statement and (y) such reports under Section 13(a) and Section 14 of the
Exchange Act as may be required in connection with this Agreement and the
Transactions contemplated by this Agreement, (ii) the filing of the Articles
of Merger for the Merger with the Department of Assessments and Taxation of
the State of Maryland, (iii) such filings as may be required in connection
with the payment of any Transfer and Gains Taxes and (iv) such other consents,
approvals, orders, authorizations, registrations, declarations and filings as
are set forth in Schedule 3.2(d) to the Chateau Disclosure Letter or (A) as
may be required under (x) federal, state or local environmental laws or (y)
the "blue sky" laws of various states or (B) which, if not obtained or made,
would not prevent or delay in any material respect the consummation of any of
the Transactions contemplated by this Agreement or otherwise prevent Chateau
from performing its obligations under this Agreement in any material respect
or have, individually or in the aggregate, a Chateau Material Adverse Effect.
(e) SEC Documents; Financial Statements; Undisclosed
Liabilities. Chateau has filed all required reports, schedules, forms,
statements and other documents with the SEC since November 16, 1993 and the
Operating Partnership has filed all required reports, schedules, forms,
statements, and other documents with the SEC since March 2, 1995
(collectively, the "Chateau SEC Documents"). All of the Chateau SEC Documents
(other than preliminary material), as of their respective filing dates,
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and, in each case, the rules and
regulations promulgated thereunder applicable to such Chateau SEC Documents.
None of the Chateau SEC Documents at the time of filing contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
to the extent such statements have been modified or superseded by later filed
Chateau SEC Documents. Other than as set forth in Schedule 3.2(e) to the
Chateau Disclosure Letter, there is no unresolved violation, criticism or
exception by any Governmental Entity of which Chateau or the Operating
Partnership has received written notice with respect to any Chateau or
Operating Partnership report or statement which, if resolved in a manner
unfavorable to Chateau or the Operating Partnership, could have a Chateau
Material Adverse Effect. The consolidated financial statements of Chateau and
the Operating Partnership included in the Chateau SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with
24
GAAP (except, in the case of interim financial statements, as permitted by
Forms 10-Q and 8-K of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented, in accordance with the applicable requirements of GAAP, the
consolidated financial position of Chateau and the Chateau Subsidiaries, taken
as a whole, as of the dates thereof and the consolidated results of operations
and cash flows for the periods then ended (subject, in the case of interim
financial statements, to normal year-end adjustments). Except as set forth in
the Chateau Filed SEC Documents (as defined below), in Schedule 3.2(e) to the
Chateau Disclosure Letter or as permitted by Section 4.2 (for the purposes of
this sentence, as if Section 4.2 had been in effect since December 31, 1995),
neither Chateau nor any Chateau Subsidiary has any liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise) required by
GAAP to be set forth on a consolidated balance sheet of Chateau or the
Operating Partnership or in the notes thereto and which, individually or in
the aggregate, would have a Chateau Material Adverse Effect.
(f) Absence of Certain Changes or Events. Except as
disclosed in the Chateau SEC Documents filed and publicly available prior to
the date of this Agreement (referred to collectively as the "Chateau Filed SEC
Documents") or in Schedule 3.2(f) to the Chateau Disclosure Letter, since the
date of the most recent financial statements included in the Chateau Filed SEC
Documents (the "Chateau Financial Statement Date") and to the date of this
Agreement, Chateau and the Chateau Subsidiaries have conducted their business
only in the ordinary course and there has not been (i) any material adverse
change in the business, financial condition or results of operations of
Chateau and the Chateau Subsidiaries taken as a whole, that has resulted or
would result, individually or in the aggregate, in Economic Losses (as defined
in Section 6.3 below) of $5,000,000 or more (a "Chateau Material Adverse
Change"), nor has there been any occurrence or circumstance that with the
passage of time would reasonably be expected to result in a Chateau Material
Adverse Change, (ii) except for (A) regular quarterly dividends (in the case
of Chateau) not in excess of $.425 per share of Common Stock, (B) regular
quarterly distributions (in the case of the Operating Partnership) not in
excess of $.425 per OP Unit and (C) any distributions by any Chateau
Subsidiaries (other than the Operating Partnership) to other Chateau
Subsidiaries or to Chateau, in each case with customary record and payment
dates, any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) with respect to any of
Chateau's capital stock or any OP Units, (iii) any split, combination or
reclassification of any of Chateau's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for, or giving the right to acquire by exchange or
exercise, shares of its capital stock or any issuance of an ownership interest
in any Chateau Subsidiary, except as permitted by Section 4.2, (iv) any
damage, destruction or loss, whether or not covered by insurance, that has or
would have a Chateau Material Adverse Effect or (v) any change in accounting
methods, principles
25
or practices by Chateau or any Chateau Subsidiary materially affecting its
assets, liabilities or business, except insofar as may have been disclosed in
the Chateau Filed SEC Documents or required by a change in GAAP.
(g) Litigation. Except as disclosed in the Chateau Filed SEC
Documents or in Schedule 3.2(g) of the Chateau Disclosure Letter, and other
than personal injury and other routine tort litigation arising from the
ordinary course of operations of Chateau or the Chateau Subsidiaries which are
covered by adequate insurance, there is no suit, action or proceeding pending
or, to the knowledge of Chateau, threatened against or affecting Chateau or
any Chateau Subsidiary that, individually or in the aggregate, could
reasonably be expected to (i) have a Chateau Material Adverse Effect or (ii)
prevent the consummation of any of the Transactions, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Chateau or any Chateau Subsidiary having, or
which, insofar as reasonably can be foreseen, in the future would have, any
such effect.
(h) Absence of Changes in Benefit Plans; ERISA Compliance.
(i) Except as disclosed in the Chateau Filed SEC
Documents or in Schedule 3.2(h)(i) to the Chateau Disclosure Letter and except
as permitted by Section 4.2 (for the purpose of this sentence, as if Section
4.2 had been in effect since December 31, 1995), since the date of the most
recent audited financial statements included in the Chateau Filed SEC
Documents, there has not been any adoption or amendment in any material
respect by Chateau or any Chateau Subsidiary of any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other employee benefit
plan, arrangement or understanding (whether or not legally binding) providing
benefits to any current or former employee, officer or director of Chateau or
any Chateau Subsidiary or any person affiliated with Chateau under Section
414(b), (c), (m) or (o) of the Code (collectively, "Chateau Benefit Plans").
(ii) Except as described in the Chateau Filed SEC
Documents or in Schedule 3.2(h)(ii) to the Chateau Disclosure Letter or as
would not have a Chateau Material Adverse Effect, (A) all Chateau Benefit
Plans, including any such plan that is an "employee benefit plan" as defined
in Section 3(3) of ERISA, are in compliance with all applicable requirements
of law, including ERISA and the Code, and (B) neither Chateau nor any Chateau
Subsidiary has any liabilities or obligations with respect to any such Chateau
Benefit Plans, whether accrued, contingent or otherwise (other than
obligations to make contributions and pay benefits and administrative costs
incurred in the ordinary course), nor to the knowledge of Chateau are any such
liabilities or obligations expected to be incurred. Except as set forth in
Schedule 3.2(h)(ii) to the Chateau Disclosure Letter, the execution of, and
26
performance of the Transactions contemplated in, this Agreement will not
(either alone or together with the occurrence of any additional or subsequent
events) constitute an event under any Chateau Benefit Plan, policy,
arrangement or agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any employee or director. The only severance
agreements or severance policies applicable to Chateau or the Chateau
Subsidiaries are the agreement and policies specifically referred to in
Schedule 3.2(h)(ii) to the Chateau Disclosure Letter.
(i) Taxes.
(i) Each of Chateau and each Chateau Subsidiary
(including the Operating Partnership) has timely filed with the appropriate
taxing authority all Tax Returns and reports required to be filed by it (after
giving effect to any filing extension properly granted by a Governmental
Entity having authority to do so). Each such Tax Return is true, correct and
complete in all material respects. Chateau and each Chateau Subsidiary
(including the Operating Partnership) have paid (or Chateau has paid on their
behalf), within the time and manner prescribed by law, all Taxes that are due
and payable. Except as disclosed in Schedule 3.2(i)(i) to the Chateau
Disclosure Letter, the federal, state and local income, sales and franchise
tax returns of Chateau and each Chateau Subsidiary have not been audited by
any Taxing Authority. There are no Tax liens upon the assets of Chateau or any
Chateau Subsidiary. The most recent financial statements contained in the
Chateau Filed SEC Documents reflect an adequate reserve for all material Taxes
payable by Chateau and by each Chateau Subsidiary for all taxable periods and
portions thereof through the date of such financial statements. Since the
Chateau Financial Statement Date, Chateau has incurred no liability for Taxes
under Section 857(b), 860(c) or 4981 of the Code, and neither Chateau nor any
Chateau Subsidiary has incurred any liability for Taxes other than in the
ordinary course of business. Except as set forth in Schedule 3.2(i)(i) to the
Chateau Disclosure Letter, to the knowledge of Chateau, no event has occurred,
and no condition or circumstance exists, which presents a material risk that
any material Tax described in the preceding sentence will be imposed upon
Chateau. To the knowledge of Chateau, no deficiencies for any Taxes have been
proposed, asserted or assessed against Chateau or any of the Chateau
Subsidiaries, and no requests for waivers of the time to assess any such Taxes
have been granted or are pending.
(ii) Chateau (A) for all of its taxable years commencing
with 1993 through the most recent December 31, has been subject to taxation as
a REIT within the meaning of the Code and has satisfied the requirements to
qualify as a REIT for such years, (B) has operated, and intends to continue to
operate, in such a manner as to qualify as a REIT for its tax year ending
December 31, 1996, and (C) has not taken or omitted to take any action which
could reasonably be expected to result in a challenge to its status
27
as a REIT, and, to Chateau's knowledge, no such challenge is pending or
threatened. The Operating Partnership has at all times, and each other Chateau
Subsidiary which is a partnership or files Tax Returns as a partnership for
federal income tax purposes has since its acquisition by Chateau, been
classified for federal income tax purposes as a partnership and not as a
corporation or as an association taxable as a corporation.
(j) No Loans or Payments to Employees, Officers or
Directors. Except as set forth in Schedule 3.2(j) to the Chateau Disclosure
Letter or as otherwise specifically provided for in this Agreement, there is
no (i) loan outstanding from or to any employee or director, (ii) employment
or severance contract, (iii) other agreement requiring payments to be made on
a change of control or otherwise as a result of the consummation of any of the
Transactions with respect to any employee, officer or director of Chateau or
any Chateau Subsidiary or (iv) any agreement to appoint or nominate any person
as a director of Chateau.
(k) Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other xxxx Xxxxxxx Xxxxx
& Co. ("Xxxxxxx Xxxxx") and Xxxxxxx Xxxxx & Co. ("Goldman"), the fees and
expenses of which, as set forth in separate letter agreements between Chateau
and Xxxxxxx Xxxxx and Chateau and Goldman, respectively, have previously been
disclosed to ROC and will be paid by Chateau, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of Chateau
or any other Chateau Subsidiary.
(l) Compliance with Laws. Except as disclosed in the Chateau
Filed SEC Documents and except as set forth in Schedule 3.2(l) to the Chateau
Disclosure Letter, neither Chateau nor any of the Chateau Subsidiaries has
violated or failed to comply with any statute, law, ordinance, regulation,
rule, judgment, decree or order of any Governmental Entity applicable to its
business, properties or operations, except for violations and failures to
comply that would not, individually or in the aggregate, reasonably be
expected to result in a Chateau Material Adverse Effect.
(m) Contracts; Debt Instruments.
(i) Neither Chateau nor any Chateau Subsidiary is in
violation of or in default under, in any material respect (nor does there
exist any condition which upon the passage of time or the giving of notice or
both would cause such a violation of or default under), any material loan or
credit agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise or license, or any agreement to acquire real property, or any other
material contract, agreement, arrangement or understanding, to which it is a
party or by which it or any of its properties or assets is bound, except as
set forth in Schedule 3.2(m)(i) to the Chateau Disclosure Letter and except
for violations or defaults that would not, individually or in the aggregate,
result in a Chateau Material Adverse Effect.
28
(ii) Except for any of the following expressly
identified in the most recent financial statements contained in the Chateau
Filed SEC Documents and except as permitted by Section 4.2, Schedule
3.2(m)(ii) to the Chateau Disclosure Letter sets forth (A) a list of all loan
or credit agreements, notes, bonds, mortgages, indentures and other agreements
and instruments pursuant to which any indebtedness of Chateau or any of the
Chateau Subsidiaries in an aggregate principal amount in excess of $2,000,000
per item is outstanding or may be incurred and (B) the respective principal
amounts outstanding thereunder on June 30, 1996.
(iii) Schedule 3.2(m)(iii) to the Chateau Disclosure
Letter sets forth a complete list of each agreement (including a description
thereof) made by Chateau and/or any Chateau Subsidiary with a limited partner
of the Operating Partnership relating to any commitment to maintain any
specific debt allocations or permit any such limited partner to take any
action to assure any debt allocation.
(iv) Schedule 3.2(m)(iv) to the Chateau Disclosure
Letter sets forth a complete list of each consulting agreement between Chateau
and any Chateau Subsidiary, including the annual compensation payable
thereunder and the date as of which such consulting agreement expires.
(n) Operating Partnership Agreement. The execution and
delivery of the Operating Partnership Agreement has been duly authorized,
executed and delivered by Chateau. Assuming due execution by the limited
partners of the Operating Partnership, the Operating Partnership Agreement
constitutes a valid and binding obligation of Chateau enforceable against
Chateau in accordance with its terms.
(o) Environmental Matters. Except as disclosed in Schedule
3.2(o) to the Chateau Disclosure Letter or in the environmental audits/reports
listed thereon, each of Chateau and each Chateau Subsidiary has obtained all
licenses, permits, authorizations, approvals and consents from Governmental
Entities which are required in respect of its business, operations, assets or
properties under any applicable Environmental Law, and each of Chateau and
each Chateau Subsidiary is in compliance in all material respects with the
terms and conditions of all such licenses, permits, authorizations, approvals
and consents and with any applicable Environmental Law. Except as disclosed in
Schedule 3.2(o) to the Chateau Disclosure Letter or in the environmental
audits/reports listed thereon:
(i) No Order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending
or threatened by any Governmental Entity with respect to any alleged failure
by Chateau or any Chateau Subsidiary to have any license, permit,
authorization, approval or consent from Governmental Entities required under
any applicable Environmental Law in connection with the conduct of the
business or operations of
29
Chateau or any Chateau Subsidiary or with respect to any Release by Chateau or
any Chateau Subsidiary of any Hazardous Material.
(ii) Neither Chateau nor any Chateau Subsidiary nor any
prior owner or lessee of any property now or previously owned or leased by
Chateau or any Chateau Subsidiary has handled any Hazardous Material on any
property now or previously owned or leased by Chateau or any Chateau
Subsidiary; and, without limiting the foregoing, (A) no polychlorinated
biphenyl is or has been present, (B) no friable asbestos is or has been
present, (C) there are no underground storage tanks, active or abandoned and
(D) no Hazardous Material has been Released in a quantity reportable under, or
in violation of, any Environmental Law, at, on or under any property now or
previously owned or leased by Chateau or any Chateau Subsidiary, during any
period that Chateau or any Chateau Subsidiary owned or leased such property
or, to the knowledge of Chateau and its Subsidiaries, prior thereto.
(iii) Neither Chateau nor any Chateau Subsidiary has
transported or arranged for the transportation of any Hazardous Material to
any location which is the subject of any action, suit, arbitration or
proceeding that could be reasonably expected to lead to claims against Chateau
or any Chateau Subsidiary for clean-up costs, remedial work, damages to
natural resources or personal injury claims, including, but not limited to,
claims under CERCLA.
(iv) No oral or written notification of a Release of a
Hazardous Material has been filed or should have been filed by or on behalf of
Chateau or any Chateau Subsidiary and no property now or previously owned or
leased by Chateau or any Chateau Subsidiary is listed or proposed for listing
on the National Priorities List promulgated pursuant to CERCLA or on any
similar state list of sites requiring investigation or clean-up.
(v) There are no Liens arising under or pursuant to any
Environmental Law on any real property owned or leased by Chateau or any
Chateau Subsidiary, and no action of any Governmental Entity has been taken
or, to the knowledge of Chateau and its Subsidiaries, is in process which
could subject any of such properties to such Liens, and neither Chateau nor
any Chateau Subsidiary would be required to place any notice or restriction
relating to the presence of Hazardous Material at any such property owned by
it in any deed to such property.
(vi) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, or which are
in the possession of, Chateau or any Chateau Subsidiary in relation to any
property or facility now or previously owned or leased by Chateau or any
Chateau Subsidiary which have not been listed in Schedule 3.2(o) to the
Chateau Disclosure Letter and made available to ROC prior to the execution of
this Agreement.
(p) Tangible Property and Assets. Except as disclosed in
Schedule 3.2(p) to the Chateau Disclosure Letter, Chateau and
30
its Subsidiaries have good and marketable fee simple title to, or have valid
leasehold interests in, those manufactured housing communities described in
the Chateau Disclosure Letter, free and clear of all Liens other than (i) any
statutory Lien arising in Schedule 3.2(p) to the ordinary course of business
by operation of law with respect to a liability that is not yet due or
delinquent and (ii) any easement, restriction or minor imperfection of title
or similar Lien which individually or in the aggregate with other such Liens
does not materially impair the value of the property or asset subject to such
Lien or the use of such property or asset in the conduct of the business of
Chateau or any such Chateau Subsidiary.
(q) Books and Records.
(i) The books of account and other financial records of
Chateau and each Chateau Subsidiary are in all material respects true,
complete and correct, have been maintained in accordance with good business
practices, and are accurately reflected in all material respects in the
financial statements included in the Chateau Filed SEC Documents.
(ii) Chateau has previously delivered or made available
to ROC true and correct copies of the Charter and By-laws of Chateau, as
amended to date, and the charter, by-laws, organization documents, partnership
agreements and joint venture agreement of its Subsidiaries, and all amendments
thereto. All such documents are listed in Schedule 3.2(q)(ii) to the Chateau
Disclosure Letter. Chateau has also delivered to ROC evidence of its Director
and Officer liability insurance policy.
(iii) The minute books and other records of corporate or
partnership proceedings of Chateau and each Chateau Subsidiary that had
previously been made available to ROC in connection with the execution of the
Original Agreement, contained, as of the date of the Original Agreement, in
all material respects accurate records of all meetings and accurately reflect
in all material respects all other corporate action of the stockholders and
directors and any committees of the Board of Directors of Chateau and the
Chateau Subsidiaries which are corporations.
(r) Opinion of Financial Advisors. Chateau has received the
opinion of each of Xxxxxxx Xxxxx and Goldman, satisfactory to Chateau, a
signed version of each of which will be provided to ROC, with regard to the
fairness of the Merger and the issuance of the Merger Consideration to the ROC
stockholders to Chateau and the stockholders of Chateau from a financial point
of view.
(s) State Takeover Statutes. No Takeover Statute of the
State of Maryland, including, without limitation, the control share
acquisition provisions of Section 3-701 et seq. of the MGCL or the business
combination provisions of Section 3-601 et seq. of the MGCL, applies or
purports to apply to the Merger, this Agreement or any of the Transactions.
31
(t) Registration Statement. The information furnished by
Chateau for inclusion in the Registration Statement will not, as of the
effective date of the Registration Statement, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
(u) Vote Required. The affirmative vote of holders
representing a majority of the shares of Common Stock present (in person or
represented by proxy) at the Chateau Stockholders Meeting (as herein defined)
(assuming the total vote cast represents at least a majority of the
outstanding shares of Common Stock as of the record date for the Chateau
Stockholders Meeting) is the only vote of the holders of any class or series
of Chateau's capital stock necessary (under applicable law, rules of the NYSE
or otherwise) to approve the issuance of the Merger Consideration to the ROC
stockholders.
ARTICLE IV
Covenants
SECTION 4.1 Conduct of Business by ROC. During the period
from the date of this Agreement to the Effective Time, ROC shall, and shall
cause the ROC Subsidiaries each to, carry on its businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and, to the extent consistent therewith, use commercially reasonable
efforts to preserve intact its current business organization, goodwill,
ongoing businesses and its status as a REIT within the meaning of the Code.
Without limiting the generality of the foregoing, the following additional
restrictions shall apply: During the period from the date of this Agreement to
the Effective Time, except as set forth in Schedule 4.1 to the ROC Disclosure
Letter or as otherwise contemplated by this Agreement, ROC shall not and shall
cause the ROC Subsidiaries not to (and not to authorize or commit or agree
to):
(a) (i) except for regular quarterly dividends not in excess
of $.405 per share of ROC Stock (which may be increased to an amount not in
excess of $.425 per share of ROC Stock upon prior notice to Chateau) with
customary record and payment dates, declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of ROC's capital stock
or stock in any ROC Subsidiary that is not directly or indirectly wholly owned
by ROC, (ii) except as permitted by Section 4.1(e), split, combine or
reclassify any capital stock or partnership interests or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of such capital stock or partnership interests or
(iii) except as permitted by Section 4.1(e), purchase, redeem or otherwise
acquire any shares of capital stock of ROC;
32
(b) except (i) as permitted under Section 4.1(e), (ii) for
the adoption by ROC of a stockholder's rights plan (which plan can be
withdrawn upon consummation of the Merger and does not materially and
adversely affect, in the reasonable judgment of the ROC Board, the prospects
for consummation of the Merger and the other Transactions or the economic
impact of the Merger on the Chateau stockholders) and the issuance of rights
or securities by ROC under such plan, (iii) for the ROC Option Agreement and
the exercise of outstanding ROC Stock Options, or (iv) for the issuance of up
to 1,000,000 shares of capital stock by ROC in a cash transaction subject to
Section 5.21, issue, deliver or sell, or grant any option or other right, in
respect of, any shares of capital stock, any other voting or redeemable
securities of ROC or any ROC Subsidiary or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting securities
or convertible or redeemable securities except to ROC or a ROC Subsidiary;
(c) except as otherwise contemplated by this Agreement or
amendments to the Charter or By-Laws of ROC that do not materially and
adversely affect, in the reasonable judgment of the ROC Board, the prospects
for consummation of the Merger and the other Transactions or the economic
impact of the Merger on the Chateau stockholders, amend the Charter, By-laws,
partnership agreement or other comparable charter or organizational documents
of ROC or any ROC Subsidiary;
(d) except as permitted by Section 4.1(e), in the case of
ROC or any of its Subsidiaries, merge or consolidate with any Person;
(e) (x) in a transaction involving capital, securities or
other assets or indebtedness of ROC or a ROC Subsidiary or any combination
thereof in excess of $10,000,000, without providing to Chateau in each case
reasonable prior written notice of and an opportunity to consult in connection
with such transaction or (y) in a transaction involving capital, securities,
other assets or obligations of ROC or a ROC Subsidiary or any combination
thereof in excess of $20,000,000, without obtaining the prior written consent
of Chateau, which consent shall not unreasonably be withheld or delayed: (i)
acquire or agree to acquire by merging or consolidating with, or by purchasing
all or a substantial portion of the equity securities or assets of, or by any
other manner, any business or any corporation, partnership, limited liability
company, joint venture, association, business trust or other business
organization or division thereof or interest therein or any assets; (ii)
mortgage or otherwise encumber or subject to any Lien or sell, lease or
otherwise dispose of any of its material properties or assets or assign or
encumber the right to receive income, dividends, distributions and the like or
agree to do any of the foregoing; or (iii) incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt securities of
ROC, guarantee any debt securities of another person, enter into any "keep
well" or other agreement to maintain any
33
financial statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, prepay or refinance any
indebtedness or make any loans, advances or capital contributions to, or
investments in, any other person;
(f) engage in any transactions of the types described in
clauses (i), (ii) and (iii) of paragraph (e) above, whether or not related,
involving, in the aggregate, capital, securities or other assets or
indebtedness of ROC or a ROC Subsidiary or any combination thereof in excess
of $40,000,000, without obtaining the prior written consent of Chateau, which
may be withheld for any reason or no reason;
(g) make any tax election (unless required by law or
necessary to preserve ROC's status as a REIT);
(h) (i) change in any material manner any of its methods,
principles or practices of accounting in effect at the Financial Statement
Date, or (ii) make or rescind any express or deemed election relating to
taxes, settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes, except in
the case of settlements or compromises relating to taxes on real property in
an amount not to exceed, individually or in the aggregate, $500,000, or change
any of its methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of its federal income tax
return for the taxable year ending December 31, 1995, except, in the case of
clause (i), as may be required by the SEC, applicable law or GAAP and with
notice thereof to Chateau;
(i) except as provided in this Agreement, adopt any new
employee benefit plan, incentive plan, severance plan, bonus plan, stock
option or similar plan, grant new stock appreciation rights or amend any
existing plan or rights, or enter into or amend any employment agreement or
similar agreement or arrangement (other than as contemplated under Section
5.11(b)(iv)) or, except in the ordinary course consistent with past practice,
grant or become obligated to grant any increase in the compensation of
officers or employees, except such changes as are required by law or which are
not more favorable to participants than provisions presently in effect;
(j) settle any stockholder derivative or class action claims
arising out of or in connection with any of the Transactions; and
(k) enter into or amend or otherwise modify any agreement or
arrangement with persons that are affiliates or, as of the date hereof, are
officers, directors or employees of ROC or any ROC Subsidiary not approved by
a majority of the "independent" members of the Board of Directors of ROC.
SECTION 4.2 Conduct of Business by Chateau. During the
period from the date of this Agreement to the Effective Time,
34
Chateau shall, and shall cause the Chateau Subsidiaries each to, carry on its
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent therewith, use
commercially reasonable efforts to preserve intact its current business
organization, goodwill, ongoing businesses and its status as a REIT within the
meaning of the Code. Without limiting the generality of the foregoing, the
following additional restrictions shall apply: During the period from the date
of this Agreement to the Effective Time, except as set forth in Schedule 4.2
to the Chateau Disclosure Letter or as otherwise contemplated by this
Agreement, Chateau shall not and shall cause the Chateau Subsidiaries not to
(and not to authorize or commit or agree to):
(a) (i) except (x) in the case of Chateau, for regular
quarterly dividends not in excess of $.405 per share of Common Stock (which
may be increased to an amount not in excess of $.425 per share of Common Stock
upon prior notice to ROC), and (y) in the case of the Operating Partnership,
for regular quarterly distributions to the general and limited partners of the
Operating Partnership not in excess of $.405 per OP Unit (which may be
increased to an amount not in excess of $.425 per OP Unit upon prior notice to
ROC), and (z) any distributions by any other wholly owned Chateau
Subsidiaries, in each case with customary record and payment dates, declare,
set aside or pay any dividends on, or make any other distributions in respect
of, any of Chateau's capital stock or the OP Units or partnership interests or
stock in any Chateau Subsidiary that is not directly or indirectly wholly
owned by Chateau, (ii) except for a one-time 3.16% Common Stock dividend (and
corresponding adjustment of outstanding OP Units in accordance with the
Operating Partnership Agreement) to be declared by Chateau to its stockholders
of record on any date on or prior to the record date established for the
Chateau Stockholders Meeting to approve the issuance of the Merger
Consideration to the ROC stockholders (the payment of which, however, being
conditioned on the Chateau Stockholder Approval having been obtained) or as
otherwise permitted by Section 4.2(e) or as contemplated under the exchange
provisions of the Operating Partnership Agreement, split, combine or
reclassify any capital stock or partnership interests or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of such capital stock or partnership interests or
(iii) except for the repurchase by Chateau of up to 1,500,000 shares of its
Common Stock or as contemplated under the exchange provisions of the Operating
Partnership Agreement or as permitted under Section 4.2(e), purchase, redeem
or otherwise acquire any shares of capital stock of Chateau or OP Units or any
options, warrants or rights to acquire, or security convertible into, shares
of capital stock of Chateau or such OP Units;
(b) except (i) as permitted under or required pursuant to
this Agreement, (ii) Chateau's dividend reinvestment plan, (iii) Section
4.2(e), (iv) the Chateau Option Agreement, (v) for the adoption (with the
consent of ROC which shall not be unreasonably withheld or delayed) by Chateau
of a stockholder's rights plan and
35
the issuance of rights or securities by Chateau under such plan, (vi) the
issuance of shares of Common Stock by Chateau to its or its Subsidiaries'
existing equity owners of up to the number of shares, if any, that may be
repurchased by Chateau as permitted under Section 4.2(a)(ii) above (at an
average price per share at least equal to the average price per share paid on
such repurchase), (vii) the exercise of outstanding Chateau Stock Options or
(viii) as contemplated under the exchange provisions of the Operating
Partnership Agreement, issue, deliver or sell, or grant any option or other
right in respect of, any shares of capital stock, any other voting or
redeemable securities (including OP Units or other partnership interests) of
Chateau or any Chateau Subsidiary or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting securities or
convertible or redeemable securities except to Chateau or a Chateau
Subsidiary;
(c) except as otherwise contemplated by this Agreement or
except for By-law amendments that are consented to by ROC (which consent shall
not be unreasonably withheld or delayed), amend the Charter, By-laws,
partnership agreement or other comparable charter or organizational documents
of Chateau or any Chateau Subsidiary;
(d) except as permitted by Section 4.2(e), in the case of
Chateau, the Operating Partnership or any other Chateau Subsidiary, merge or
consolidate with any Person;
(e) (x) in a transaction involving capital, securities or
other assets or indebtedness of Chateau or a Chateau Subsidiary or any
combination thereof in excess of $10,000,000, without providing to ROC
reasonable prior written notice of and an opportunity to consult in connection
with such transaction or (y) in a transaction involving capital, securities,
other assets or indebtedness of Chateau or a Chateau Subsidiary or any
combination thereof in excess of $20,000,000, without obtaining the prior
written consent of ROC, which consent shall not unreasonably be withheld or
delayed: (i) acquire or agree to acquire by merging or consolidating with, or
by purchasing all or a substantial portion of the equity securities or assets
of, or by any other manner, any business or any corporation, partnership,
limited liability company, joint venture, association, business trust or other
business organization or division thereof or interest therein or any assets;
(ii) mortgage or otherwise encumber or subject to any Lien or sell, lease or
otherwise dispose of any of its material properties or assets or assign or
encumber the right to receive income, dividends, distributions and the like or
agree to do any of the foregoing; or (iii) incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt securities of
Chateau or any Chateau Subsidiary, guarantee any debt securities of another
person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, prepay or refinance any
indebtedness or make
36
any loans, advances or capital contributions to, or investments in,
any other person;
(f) engage in any transactions of the types described in
clauses (i), (ii) and (iii) of paragraph (e) above, whether or not related,
involving, in the aggregate, capital, securities or other assets or
obligations of Chateau or a Chateau Subsidiary or any combination thereof in
excess of $40,000,000, without obtaining the prior written consent of ROC,
which consent may be withheld for any reason or no reason;
(g) make any tax election (unless required by law or
necessary to preserve Chateau's status as a REIT or the status of the
Operating Partnership as a partnership for federal tax purposes);
(h) (i) change in any material manner any of its methods,
principles or practices of accounting in effect at the Chateau Financial
Statement Date, or (ii) make or rescind any express or deemed election
relating to taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
taxes, except in the case of settlements or compromises relating to taxes on
real property in an amount not to exceed, individually or in the aggregate,
$500,000, or change any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of its
federal income tax return for the taxable year ending December 31, 1995,
except, in the case of clause (i), as may be required by the SEC, applicable
law or GAAP and with notice thereof to ROC;
(i) except as provided in this Agreement or by a severance
plan that, by its terms, terminates upon consummation of the Merger, adopt any
new employee benefit plan, incentive plan, severance plan, bonus plan, stock
option or similar plan, grant new stock appreciation rights or amend any
existing plan or rights, or enter into or amend any employment agreement or
similar agreement or arrangement (other than as contemplated under Section
5.11(b)(iv)) or, except in the ordinary course consistent with past practice,
grant or become obligated to grant any increase in the compensation of
officers or employees, except such changes as are required by law or which are
not more favorable to participants than provisions presently in effect;
(j) settle any stockholder derivative or class action claims
arising out of or in connection with any of the Transactions; and
(k) except as provided in this Agreement or by a severance
plan that, by its terms, terminates upon consummation of the Merger, enter
into or amend or otherwise modify any agreement or arrangement with persons
that are affiliates or, as of the date hereof, are officers, directors or
employees of Chateau or any Chateau Subsidiary not approved by a majority of
the "independent" members of the Board of Directors of Chateau.
37
SECTION 4.3 Other Actions. Each of ROC and Chateau shall not
and shall cause its respective subsidiaries not to take any action that would
result in (i) any of the representations and warranties of such party (without
giving effect to any "knowledge" qualification) set forth in this Agreement
that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties (without giving effect to any "knowledge"
qualification) that are not so qualified becoming untrue in any material
respect or (iii) except as contemplated by Section 7.1, any of the conditions
to the Merger set forth in Article VI not being satisfied.
ARTICLE V
Additional Covenants
SECTION 5.1 Preparation of the Registration Statement and
the Proxy Statement; Stockholders Meetings.
(a) As soon as practicable following the date of this
Agreement, ROC and Chateau shall prepare and file with the SEC a preliminary
Proxy Statement in form and substance satisfactory to each of Chateau and ROC,
and ROC and Chateau will provide on a supplemental basis to the SEC the
Registration Statement, in which the Proxy Statement will be included as a
prospectus. Each of ROC and Chateau shall use its best efforts to (i) respond
to any comments of the SEC and (ii) have the Registration Statement declared
effective under the Securities Act and the rules and regulations promulgated
thereunder as promptly as practicable after such filing and to keep the
Registration Statement effective as long as is necessary to consummate the
Merger. ROC shall use its best efforts to mail the Proxy Statement to the ROC
stockholders as promptly as practicable after the Registration Statement is
declared effective; provided that ROC may delay the mailing of the Proxy
Statement to the ROC Stockholders until the condition specified in Section
6.3(i) has been satisfied. Further, Chateau shall establish a record date for
the Chateau Stockholders Meeting as soon as practicable following the
obtainment of the ROC Stockholder Approval at the ROC Stockholders Meeting and
use its best efforts to mail the Proxy Statement to the Chateau stockholders
as soon as practicable thereafter. Each party will notify the other promptly
of the receipt of any comments from the SEC and of any request by the SEC for
amendments or supplements to the Registration Statement or the Proxy Statement
or for additional information and will supply the other with copies of all
correspondence between such party or any of its representatives and the SEC
with respect to the Registration Statement or the Proxy Statement. The
Registration Statement and the Proxy Statement shall comply in all material
respects with all applicable requirements of Law. Whenever any event occurs
which is required to be set forth in an amendment or supplement to the
Registration Statement or the Proxy Statement, Chateau or ROC, as the case may
be, shall promptly inform the other of such occurrences and cooperate in
filing with the SEC, and Chateau shall file with the
38
SEC and/or mailing to the stockholders of Chateau and the stockholders of ROC
such amendment or supplement in a form reasonably acceptable to Chateau and
ROC.
(b) Chateau covenants that the Proxy Statement shall include
the recommendation of the Board of Directors of Chateau in favor of the
issuance of the Merger Consideration to the ROC stockholders; provided that
the recommendation of Chateau may not be included or may be withdrawn,
modified or amended if Chateau shall approve or recommend a Superior Competing
Transaction (as defined below) or enter into an agreement with respect to such
Superior Competing Transaction and the Board of Directors of Chateau
determines in good faith that is in compliance with Section 7.1. ROC covenants
that the Proxy Statement shall include the recommendation of the Board of
Directors of ROC in favor of the approval of the Merger, this Agreement and
the other Transactions contemplated hereby; provided that the recommendation
of ROC may not be included or may be withdrawn, modified or amended if ROC
shall approve or recommend a Superior Competing Transaction (as defined below)
or enter into an agreement with respect to such Superior Competing Transaction
and the Board of Directors of ROC determines in good faith that is in
compliance with Section 7.1. Chateau shall furnish all information concerning
Chateau and the holders of Common Stock as may reasonably be requested in
connection with any action required to be taken under any applicable state
securities or "blue sky" laws in connection with the issuance of Common Stock
pursuant to the Merger, and ROC shall furnish all information concerning ROC
and the holders of ROC Stock as may be reasonably requested in connection with
any such action. Chateau and ROC will use their best efforts to obtain, prior
to the effective date of the Registration Statement, all necessary state
securities or "blue sky" permits or approvals required to carry out the Merger
and the other Transactions contemplated by this Agreement. In connection with
the preparation of the Proxy Statement and the Registration Statement, Chateau
shall use reasonable efforts to cause to be delivered to ROC, prior to the
mailing of such Proxy Statement to ROC's stockholders and Chateau's
stockholders, the opinion dated the date of the Proxy Statement of Timmis &
Xxxxx, subject to certificates, letters and assumptions, reasonably
satisfactory to ROC, that (i) Chateau was organized and has operated in
conformity with the requirements for qualification as a REIT within the
meaning of the Code since 1993 and (ii) the Operating Partnership has been
during and since 1993 and each Chateau Subsidiary that is a partnership or
limited liability company has been since its acquisition, and following the
Merger shall be treated as of such date, for federal income tax purposes, as a
partnership and not as a corporation or an association taxable as a
corporation. In connection with the preparation of the Proxy Statement and the
Registration Statement, ROC shall use reasonable efforts to cause to be
delivered to Chateau, prior to the mailing of the Proxy Statement to ROC's
stockholders and Chateau's stockholders, the opinion dated the date of the
Proxy Statement of Xxxxxx & Xxxxx, subject to certificates, letters and
assumptions, reasonably satisfactory to Chateau, that (i) ROC was organized
and has operated in conformity with the requirements for qualification
39
as a REIT within the meaning of the Code since 1993, (ii) the Financing
Partnership (as defined below), following the merger of the Financing Sub (as
defined below) with and into the Financing Partnership as contemplated by the
Contribution Agreement, will be treated as of such date for federal income tax
purposes as a partnership and not as a corporation or as an association
taxable as a corporation and (iii) following the Merger (after giving effect
thereto), Chateau's proposed method of operation will enable it to meet the
requirements for qualification and taxation as a REIT under the Code.
(c) ROC will, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "ROC Stockholders Meeting") for the purpose of obtaining the
ROC Stockholder Approvals. ROC will, through its Board of Directors, recommend
to its stockholders approval of the Merger, this Agreement and the other
Transactions contemplated by this Agreement; provided that prior to the ROC
Stockholders Meeting such recommendation may be withdrawn, modified or amended
if ROC shall approve or recommend a Superior Competing Transaction (as defined
below) or enter into an agreement with respect to such Superior Competing
Transaction and the Board of Directors of ROC determines in good faith that is
in compliance with Section 7.1.
(d) Chateau will, as soon as practicable following the
obtainment of the ROC Stockholder Approval, duly call, give notice of, convene
and hold a meeting of its stockholders (the "Chateau Stockholders Meeting")
for the purpose of obtaining the Chateau Stockholder Approvals. Chateau will,
through its Board of Directors, recommend to its stockholders approval of
issuance of the Merger Consideration to the ROC stockholders; provided that
prior to the Chateau Stockholders Meeting such recommendation may be
withdrawn, modified or amended if Chateau shall approve or recommend a
Superior Competing Transaction (as defined below) or enter into an agreement
with respect to such Superior Competing Transaction and the Board of Directors
of Chateau determines in good faith that is in compliance with Section 7.1.
SECTION 5.2 Access to Information; Confidentiality. Subject
to the requirements of confidentiality agreements with third parties, each of
ROC and Chateau shall, and shall cause each of its respective subsidiaries to,
afford to the other party and to the officers, employees, accountants,
counsel, financial advisors and other representatives of such other party,
reasonable access during normal business hours during the period prior to the
Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, each of ROC and
Chateau shall, and shall cause each of its respective subsidiaries to, furnish
promptly to the other party (a) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (b) all other information
concerning its business, properties and personnel as such other party may
reasonably request. Each of ROC and Chateau
40
will hold, and will cause its respective subsidiaries' officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in confidence to the extent
required by, and in accordance with, and will comply with the provisions of
the letter agreement between ROC and Chateau dated as of June 4, 1996, as
amended to date (as so amended, the "Confidentiality Agreement").
SECTION 5.3 Best Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth
in this Agreement, each of Chateau and ROC agrees to use its best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other in doing, all things necessary, proper
or advisable to fulfill all conditions applicable to such party pursuant to
this Agreement and to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other Transactions contemplated hereby,
including (i) the obtaining of all necessary actions or nonactions, waivers,
consents and approvals from Governmental Entities and the making of all
necessary registrations and filings and the taking of all reasonable steps as
may be necessary to obtain an approval, waiver or exemption from, or to avoid
an action or proceeding by, any Governmental Entity, (ii) the obtaining of all
necessary consents, approvals, waivers or exemption from non-governmental
third parties; provided, however, that if either party is obliged to make
expenditures, or incur costs, expenses or other liabilities to obtain the
consent of any non-governmental party, it shall consult reasonably with the
other party upon reasonable notice prior to making payment of any such amount,
and in no event shall either ROC or Chateau make payment of any such amount in
excess of $500,000 in obtaining such consents without obtaining the prior
written consent of the other, which consent shall not unreasonably be withheld
or delayed, (iii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging the Merger, this Agreement or
the consummation of the Transactions, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the Transactions contemplated by and to
fully carry out the purposes of, this Agreement; provided, however, that a
party shall not be obligated to take any action pursuant to the foregoing if
the taking of such action or the obtaining of any waiver, consent, approval or
exemption is reasonably likely to result in the imposition of a condition or
restriction of the type referred to in Section 6.1(d). In connection with and
without limiting the foregoing, ROC, Chateau and their respective Boards of
Directors shall (i) take all action necessary so that no "fair price,"
"business combination," "moratorium," "control share acquisition" or any other
anti-takeover statute or similar statute enacted under state or federal laws
of the United States or similar statute or regulation (a "Takeover Statute")
is or becomes applicable to the Merger, this Agreement or any of the other
Transactions and (ii) if any Takeover Statute becomes applicable to the
Merger, this
41
Agreement or any other Transaction, take all action necessary so that the
Merger and the other Transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such Takeover Statute on the Merger and the other
Transactions.
(b) ROC shall give prompt notice to Chateau, and Chateau
shall give prompt notice to ROC, if (i) any representation or warranty made by
it contained in this Agreement that is qualified as to materiality becomes
untrue or inaccurate in any respect or any such representation or warranty
that is not so qualified becomes untrue or inaccurate in any material respect
or (ii) it fails to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
SECTION 5.4 Affiliates. Prior to the Closing Date, ROC shall
deliver to Chateau a list identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders of ROC, an "affiliate"
of ROC for purposes of Rule 145 under the Securities Act. ROC shall use its
best efforts to cause each of such affiliate to deliver on or prior to the
Closing Date a written agreement substantially in the form attached as Exhibit
H hereto.
SECTION 5.5 Tax Treatment. Each of Chateau and ROC shall use
its reasonable best efforts (a) to cause the Merger and the transfer of OP
Units and other property by the holders thereof to be viewed as an integrated
transaction and together to qualify for federal income tax purposes as
tax-free transfers by the stockholders of ROC and the transferring OP Unit
holders of their shares of ROC Stock and OP Units and other property to
Chateau in exchange for shares of Common Stock under Section 351 of the Code,
and (b) to obtain the opinion of counsel referred to in Section 6.3(e).
SECTION 5.6 No Solicitation of Transactions. Subject to
Section 7.1, each of Chateau and ROC shall not directly or indirectly, through
any officer, director, employee, agent, investment banker, financial advisor,
attorney, accountant, broker, finder or other representative, initiate or
solicit (including by way of furnishing nonpublic information or assistance)
any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Competing Transaction (as defined
below), or authorize or permit any of its officers, directors, employees or
agents, attorneys, investment bankers, financial advisors, accountants,
brokers, finders or other representatives to take any such action. Each of
Chateau and ROC shall notify the other in writing (as promptly as practicable)
of all of the relevant details relating to all inquiries and proposals which
it or any of its Subsidiaries or any such officer, director, employee, agent,
investment banker, financial advisor, attorney,
42
accountant, broker, finder or other representative may receive relating to any
of such matters and if such inquiry or proposal is in writing, each of Chateau
and ROC shall deliver to the other a copy of such inquiry or proposal. For
purposes of this Agreement, "Competing Transaction" shall mean any of the
following (other than the Transactions contemplated by this Agreement): (i)
any merger, consolidation, share exchange, business combination, or similar
transaction involving Chateau (or any of its Subsidiaries) or ROC (or any of
its Subsidiaries), as the case may be; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 30% or more of the assets
of Chateau and its Subsidiaries taken as a whole or ROC and its Subsidiaries
taken as a whole, as the case may be, in a single transaction or series of
related transactions, excluding any bona fide financing transactions which do
not, individually or in the aggregate, have as a purpose or effect the sale or
transfer of control of such assets; (iii) any tender offer or exchange offer
for 30% or more of the outstanding shares of capital stock of Chateau (or any
of its Subsidiaries) or ROC (or any of its Subsidiaries) or the filing of a
registration statement under the Securities Act in connection therewith; or
(iv) any public announcements of a proposal, plan or intention to do any of
the foregoing or any agreement to engage in any of the foregoing.
SECTION 5.7 Public Announcements. Chateau and ROC will
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any press release or other public statements with
respect to the Transactions, including the Merger, and shall not issue any
such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange. The parties agree that the initial press release to be issued with
respect to the Transactions will be in the form agreed to by the parties
hereto prior to the execution of this Agreement.
SECTION 5.8 Listing. Chateau will promptly prepare and
submit to the NYSE a supplemental listing application covering the Common
Stock issuable in the Merger. Prior to the Effective Time, Chateau shall use
its best efforts to have NYSE approve for listing, upon official notice of
issuance, the Common Stock to be issued in the Merger.
SECTION 5.9 Letters of Accountants.
(a) ROC shall use its reasonable best efforts to cause to be
delivered to Chateau and ROC "comfort" letters of Deloitte & Touche LLP, ROC's
independent public accountants, dated and delivered the date on which the
Registration Statement shall become effective and as of the Effective Time,
and addressed to Chateau and ROC, in form and substance reasonably
satisfactory to Chateau and ROC and reasonably customary in scope and
substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement.
43
(b) Chateau shall use its reasonable best efforts to cause
to be delivered to ROC and Chateau "comfort" letters of Coopers & Xxxxxxx
L.L.P., Chateau's independent public accountants, dated the date on which the
Registration Statement shall become effective and as of the Effective Time,
and addressed to ROC and Chateau, in form and substance reasonably
satisfactory to ROC and Chateau and reasonably customary in scope and
substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement.
SECTION 5.10 Transfer and Gains Taxes. Chateau and ROC shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains (including, without limitation, any New York State Tax on
Gains Derived from Certain Real Property Transfers and New York State Real
Estate Transfer Tax), sales, use, transfer, value added stock transfer and
stamp taxes, any transfer, recording, registration and other fees and any
similar taxes which become payable in connection with the Transactions
(together with any related interests, penalties or additions to tax, "Transfer
and Gains Taxes"). From and after the Effective Time, Chateau shall cause the
Operating Partnership to pay or cause to be paid all Transfer and Gains Taxes.
SECTION 5.11 Benefit Plans and Other Employee Arrangements.
(a) Benefit Plans. Subject to subsections (b) and (c) below,
upon and after the Effective Time, Chateau or the Operating Partnership (or
their respective successors or assigns) shall provide benefits to former
employees of ROC and its Subsidiaries that are not materially less favorable
in the aggregate to such employees than those provided under the ROC Benefit
Plans, as in effect on the date of this Agreement. With respect to any Chateau
Benefit Plan which is an "employee benefit plan" as defined in Section 3(3) of
ERISA in which employees of ROC or its Subsidiaries may participate, solely
for purposes of determining eligibility to participate, vesting and
entitlement to benefits but not for purposes of accrual of pension benefits,
service with ROC or its Subsidiaries shall be treated as service with Chateau
or the Operating Partnership, as the case may be; provided, however, that such
service shall not be recognized to the extent that such recognition would
result in a duplication of benefits under both a ROC Benefit Plan or a Chateau
Benefit Plan, on the one hand, and a benefit plan of Chateau, on the other
hand (or is not otherwise recognized for such purposes under the benefit plans
of Chateau or the Operating Partnership).
(b) Stock Incentive Plans.
(i) Immediately prior to or as of the Effective Time and
solely with respect to individuals employed by ROC immediately prior to the
Effective Time, ROC shall cause the ROC Stock Options to be accelerated,
thereby causing the ROC Stock Options to be fully vested and immediately
exercisable and solely
44
with respect to individuals employed by Chateau or the Operating Partnership
immediately prior to that date, Chateau shall cause the Chateau Stock Options
to be accelerated, thereby causing the Chateau Stock Options to be fully
vested and immediately exercisable.
(ii) As of the Effective Time, each outstanding ROC
Stock Option shall be assumed by Chateau and shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such ROC Stock Option, the same number of shares of Common Stock as the holder
of such ROC Stock Option would have been entitled to receive pursuant to the
Merger had such holder exercised such ROC Stock Option in full immediately
prior to the Effective Time at a price per share equal to the aggregate
exercise price for the shares subject to such ROC Stock Option divided by the
number of full shares of Common Stock deemed to be purchasable pursuant to
such ROC Stock Option; provided, however, that the number of shares of Common
Stock that may be purchased upon exercise of such ROC Stock Option shall not
include any fractional share but shall be rounded upward to the next whole
number of shares.
(iii) At the Effective Time, Chateau shall adopt a new
long-term stock incentive plan (the "1996 Chateau Plan") to be administered by
a committee appointed by the Board of Directors. The 0000 Xxxxxxx Xxxx shall
provide for grants of restricted stock, options and other incentive
compensation to key employees and directors of Chateau and its Subsidiaries
(after giving effect to the Merger as provided more fully in Exhibit G
hereto).
(c) Employment Agreements. Chateau shall prepare and execute
the Employment Agreements for the executive officers named in Section 1.6
prior to the Effective Time, which Employment Agreements shall provide that
they shall become effective at the Effective Time.
(d) Cooperation. ROC and Chateau shall cooperate in good
faith with respect to the effectuation of the covenants described in
subsections (b) and (c) above.
SECTION 5.12 Indemnification.
(a) (i) ROC shall, and, from and after the Effective Time,
Chateau shall, indemnify, defend and hold harmless each person who is now or
has been at any time prior to the date hereof or who becomes prior to the
Effective Time, an officer or director of ROC or any ROC Subsidiary (the "ROC
Indemnified Parties") against all losses, claims, damages, costs, expenses
(including attorneys' fees and expenses), liabilities or judgments or amounts
that are paid in settlement of, with the approval of the indemnifying party
(which approval shall not be unreasonably withheld), or otherwise in
connection with any threatened or actual claim, action, suit, proceeding or
investigation in connection with any threatened or actual claim, action, suit,
proceeding or investigation based on or arising out of the fact that such
person
45
is or was a director or officer of ROC or any ROC Subsidiary at or prior to
the Effective Time, whether asserted or claimed prior to, or at or after, the
Effective Time ("ROC Indemnified Liabilities"), including all ROC Indemnified
Liabilities based on, or arising out of, or pertaining to this Agreement or
the Transactions, in each case to the full extent a corporation is permitted
under the MGCL to indemnify its own directors or officers, as the case may be
(and ROC or Chateau, as the case may be, will pay expenses in advance of the
final disposition of any such action or proceeding to each ROC Indemnified
Party to the full extent permitted by law subject to the limitations set forth
in Section 5.12(a)(iii)). Chateau shall, prior to and after the Effective
Time, indemnify, defend and hold harmless each person who is now or has been
at any time prior to the date hereof or who becomes prior to the Effective
Time, an officer or director of Chateau or any Chateau Subsidiary (the
"Chateau Indemnified Parties" and, together with the ROC Indemnified Parties,
the "Indemnified Parties") against all losses, claims, damages, costs,
expenses (including attorneys' fees and expenses), liabilities or judgments or
amounts that are paid in settlement of, with the approval of the indemnifying
party (which approval shall not be unreasonably withheld), or otherwise in
connection with any threatened or actual claim, action, suit, proceeding or
investigation in connection with any threatened or actual claim, action, suit,
proceeding or investigation based on or arising out of the fact that such
person is or was a director or officer of Chateau or any Chateau Subsidiary at
or prior to the Effective Time, whether asserted or claimed prior to, or at or
after, the Effective Time ("Chateau Indemnified Liabilities" and, together
with the ROC Indemnified Liabilities, the "Indemnified Liabilities"),
including all Chateau Indemnified Liabilities based on, or arising out of, or
pertaining to this Agreement or the Transactions, in each case to the full
extent a corporation is permitted under the MGCL to indemnify its own
directors or officers, as the case may be (and Chateau will pay expenses in
advance of the final disposition of any such action or proceeding to each
Chateau Indemnified Party to the full extent permitted by law subject to the
limitations set forth in Section 5.12(a)(iii)).
(ii) Any Indemnified Parties proposing to assert the
right to be indemnified under this Section 5.12 shall, promptly after receipt
of notice of commencement of any action against such Indemnified Parties in
respect of which a claim is to be made under this Section 5.12 against ROC
and/or Chateau (collectively, the "Indemnifying Parties"), notify the
Indemnifying Parties of the commencement of such action, enclosing a copy of
all papers served. If any such action is brought against any of the
Indemnified Parties and such Indemnified Parties notify the Indemnifying
Parties of its commencement, the Indemnifying Parties will be entitled to
participate in and, to the extent that they elect by delivering written notice
to such Indemnified Parties promptly after receiving notice of the
commencement of the action from the Indemnified Parties, to assume the defense
of the action and after notice from the Indemnifying Parties to the
Indemnified Parties of their election to assume the defense, the Indemnifying
Parties will not be liable to the Indemnified Parties for any legal or other
46
expenses except as provided below and except for the reasonable costs of
investigation subsequently incurred by the Indemnified Parties in connection
with the defense. If the Indemnifying Parties assume the defense, the
Indemnifying Parties shall have the right to settle such action without the
consent of the Indemnified Parties; provided, however, that the Indemnifying
Parties shall be required to obtain such consent (which consent shall not be
unreasonably withheld) if the settlement includes any admission of wrongdoing
on the part of the Indemnified Parties or any decree or restriction on the
Indemnified Parties or their officers or directors; provided, further, that no
Indemnifying Parties, in the defense of any such action shall, except with the
consent of the Indemnified Parties (which consent shall not be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Parties of a release from all liability with
respect to such action. The Indemnified Parties will have the right to employ
their own counsel in any such action, but the fees, expenses and other charges
of such counsel will be at the expense of such Indemnified Parties unless (i)
the employment of counsel by the Indemnified Parties has been authorized in
writing by the Indemnifying Parties, (ii) the Indemnified Parties have
reasonably concluded (based on advice of counsel) that there may be legal
defenses available to them that are different from or in addition to those
available to the Indemnifying Parties, (iii) a conflict or potential conflict
exists (based on advice of counsel to the Indemnified Parties) between the
Indemnified Parties and the Indemnifying Parties (in which case the
Indemnifying Parties will not have the right to direct the defense of such
action on behalf of the Indemnified Parties) or (iv) the Indemnifying Parties
have not in fact employed counsel to assume the defense of such action within
a reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the Indemnifying Parties.
(iii) It is understood that the Indemnifying Parties
shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees, disbursements and other
charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such Indemnified Parties unless (a) the
employment of more than one counsel has been authorized in writing by the
Indemnifying Parties, (b) any of the Indemnified Parties have reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to them that are different from or in addition to those available to
other Indemnified Parties or (c) a conflict or potential conflict exists
(based on advice of counsel to the Indemnified Parties) between any of the
Indemnified Parties and the other Indemnified Parties, in each case of which
the Indemnifying Parties shall be obligated to pay the reasonable fees and
expenses of such additional counsel or counsels.
47
(iv) The Indemnifying Parties will not be liable for any
settlement of any action or claim effected without their written consent
(which consent shall not be unreasonably withheld).
(v) Chateau shall cause ROC's current officers' and
directors' liability insurance to be continuously maintained in full force and
effect without reduction of coverage for a period of four years after the
Effective Time (provided that Chateau may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are
not materially less advantageous).
(b) The provisions of this Section 5.12 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party, his
or her heirs and his or her personal representatives and shall be binding on
all successors and assigns of Chateau and ROC.
SECTION 5.13 Operating Partnership Agreement Amendment.
Chateau hereby agrees that, immediately prior to the Effective Time, it shall
have duly executed and delivered the Operating Partnership Agreement
Amendment.
SECTION 5.14 By-laws Amendment. Chateau will, prior to the
Effective Time, adopt the By-law amendments to be effected at the Effective
Time, as contemplated by Exhibit F.
SECTION 5.15 Contribution Agreement. Immediately following
the Effective Time, Chateau, ROC and the Operating Partnership shall execute
and deliver the Contribution Agreement and shall perform their respective
obligations thereunder.
SECTION 5.16 Private Placement of Common Stock of RSub. ROC
shall use its best efforts to cause 120 "accredited investors" (as defined in
Rule 501(a) under the Securities Act) to purchase, on or prior to the
Effective Date, one share each of RSub Common Stock, at a purchase price of
$100 per share.
SECTION 5.17 Chateau Board of Directors. Chateau covenants
that, contemporaneously with the Effective Time, (i) two of the seven
directors of Chateau then in office shall resign from the Chateau Board of
Directors and, in accordance with the By-law amendments specified in Exhibit
F, the remaining Chateau directors then in office shall increase the size of
the Chateau Board from seven to ten directors, and (ii) the five vacancies on
the Chateau Board shall be filled by the vote of the remaining Chateau
directors then in office with five nominees selected by the ROC Board of
Directors such that such five nominees as well as the five directors of
Chateau then in office shall constitute all of the members of the Chateau
Board of Directors at the Effective Time.
SECTION 5.18 Provisions Relating to Certain ROC
Indebtedness. Notwithstanding any other provision of this Agreement, ROC and
Chateau shall be required to utilize reasonable efforts and to cooperate with
each other to cause the condition
48
specified in Section 6.2(f) to be satisfied on or prior to the Closing Date.
SECTION 5.19 Exemptions from Certain Provisions of the MGCL.
Prior to the Effective Time, the Board of Directors of Chateau shall adopt an
irrevocable resolution to the effect that the ROC Principals and the present
or future affiliates or associates of any of the foregoing or any other person
acting in concert or as a group with any of the foregoing shall be exempted
from the business combination provisions of Section 3-601 et seq. and from the
control share provisions of Section 3-701 et seq. of the MGCL or any successor
or similar statutory provisions.
SECTION 5.20 Percentage Ownership. Chateau agrees that, upon
consummation of the Merger, stockholders of Chateau who had been or are then
holders of OP Units will not then represent more than 34.0% of the outstanding
shares of Common Stock.
SECTION 5.21 Share Issuance. (a) ROC agrees that prior to
January 17, 1997 and for the period during the term of this Agreement
occurring after the date of the ROC Stockholders Meeting, it will not issue
any shares of capital stock in a cash transaction as provided in Section
4.1(b)(iv) unless it first obtains the prior consent of Chateau (which consent
shall not be unreasonably withheld or delayed).
(b) Following January 17, 1997 (but only on a date that is
on or prior to the date of the ROC Stockholders Meeting), ROC may issue such
shares without obtaining the consent of Chateau. However, prior to effecting
such issuance, ROC shall notify Chateau of its intention to effect the
issuance, specifying in such notice (the "Issuance Notice") the number and
minimum price of the shares it proposes to issue, and such issuance may give
rise to termination rights in favor of Chateau as specified in Section 8.1(n).
ARTICLE VI
Conditions Precedent
SECTION 6.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of ROC and Chateau to effect the Merger
and to consummate the other Transactions contemplated to occur on the Closing
Date is subject to the satisfaction or waiver on or prior to the Effective
Time of the following conditions:
(a) Stockholder Approval. The Stockholder Approvals shall
have been obtained.
(b) Listing of Shares. The NYSE shall have approved for
listing the Common Stock to be issued in the Merger.
(c) Registration Statement. The Registration Statement shall
have become effective under the Securities Act and shall not
49
be the subject of any stop order or proceedings by the SEC seeking a stop
order.
(d) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or any of the other Transactions shall be in
effect.
(e) Blue Sky Laws. Chateau shall have received all state
securities or "blue sky" permits and other authorizations necessary to issue
the shares of Common Stock comprising the Merger Consideration.
(f) Opinion Related to REIT Status. Chateau and ROC shall
have received an opinion dated as of the Closing Date of Timmis & Xxxxx,
subject to certificates, letters and assumptions, reasonably satisfactory to
Chateau and ROC that following the Merger (after giving effect thereto),
Chateau's proposed method of operation will enable it to meet the requirements
for qualification and taxation as a REIT under the Code.
(g) The Investment Company Act Opinion. Chateau and ROC
shall have received an opinion dated as of the Closing Date of Xxxxxx & Xxxxx,
subject to certificates, letters and assumptions, reasonably satisfactory to
Chateau and ROC, to the effect that neither Chateau nor any of its
Subsidiaries is an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company Act
of 1940, as amended.
(h) Evidence of Completion of Private Placement. Each of ROC
and Chateau shall have received reasonably satisfactory evidence of the
completion of the Private Placement referred to in Section 5.16.
(i) Certain Actions and Consents. All material actions by or
in respect of or filings with any Governmental Entity required for the
consummation of the Transactions shall have been obtained or made.
SECTION 6.2 Conditions to Obligations of Chateau. The
obligations of Chateau to issue the Merger Consideration to the ROC
stockholders and to consummate the other Transactions contemplated to occur on
the Closing Date are further subject to the following conditions, any one or
more of which may be waived by Chateau:
(a) Representations and Warranties. The representations and
warranties of ROC (without giving effect to any "materiality" qualification or
limitation) set forth in this Agreement shall be true and correct as of the
Closing Date, as though made on and as of the Closing Date, except to the
extent the representation or warranty is expressly limited by its terms to
another date, and Chateau shall have received a certificate (which certificate
may be qualified by knowledge to the same extent as such representations
50
and warranties are so qualified) signed on behalf of ROC by the chief
executive officer or the chief financial officer of ROC to such effect. This
condition shall be deemed satisfied notwithstanding any failure of a
representation or warranty of ROC to be true and correct as of the Closing
Date (without giving effect to any materiality qualification) if the aggregate
amount of Economic Losses (as defined below) that would reasonably be expected
to arise as a result of the failures of such representations and warranties to
be true and correct as of the Closing Date does not exceed $5,000,000 (such
amount to be calculated by counting in all cases from the first dollar of such
Economic Losses without giving effect to the $5,000,000 limitation set forth
in Section 3.1(f)). "Economic Losses," as used in this Section 6.2, shall mean
any and all net damage, net loss (including diminution in the value of
properties or assets which diminution, with regard to permanent cash flow
losses from any property or assets that produces cash flow, shall be measured
by multiplying the annual net cash flow produced by such property or asset
over the 12-month period preceding the date of the applicable loss by a factor
of 10), net liability or expense suffered by ROC and the ROC Subsidiaries
taken as a whole, but shall not include any claims, damages, loss, expense or
other liability resulting from any class action or stockholders' derivative
lawsuits relating to the Transactions against ROC, if any, filed subsequent to
the date of this Agreement or any amounts paid or expenses incurred by ROC in
obtaining non-governmental third party consents, as contemplated by Section
5.3 up to the amount of $500,000 provided therein.
(b) Performance of Obligations of ROC. ROC shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and Chateau shall
have received a certificate signed on behalf of ROC by the chief executive
officer or the chief financial officer of ROC to such effect.
(c) Material Adverse Change. Since the date of this
Agreement, there has been no material adverse change in the business, results
of operations or financial condition of ROC and the ROC Subsidiaries, taken as
a whole, that have resulted or would result, individually or in the aggregate,
in Economic Losses of $5,000,000 or more. Chateau shall have received a
certificate of the chief executive officer or chief financial officer of ROC
to the effect that there has been no such material adverse change.
(d) Opinions Relating to REIT Status. Chateau shall have
received an opinion dated as of the Closing Date of Xxxxxx & Xxxxx, subject to
certificates, letters and assumptions, reasonably satisfactory to Chateau,
that (i) commencing with its taxable year ended December 31, 1993, ROC was
organized and has operated in conformity with the requirements for
qualification as a REIT within the meaning of the Code, (ii) following the
Merger (after giving effect thereto), ROC's proposed method of operation will
enable it to meet the requirements for qualification and taxation as a REIT
under the Code and (iii) following the Merger (after giving effect thereto),
the Financing Partnership will be treated for federal
51
income tax purposes as a partnership and not as a corporation or an
association taxable as a corporation.
(e) Other Tax Opinion. Chateau shall have received an
opinion dated as of the Closing Date from Xxxxxx & Xxxxx, subject to
certificates, letters and assumptions, reasonably satisfactory to Chateau, to
the effect that the Merger will be treated for federal income tax purposes as
a tax-free transfer by the stockholders of ROC of their shares of ROC Stock to
Chateau in exchange for shares of Common Stock, and the transfer by holders of
OP Units pursuant to the CS Letter Agreement (as defined below) shall be
treated for federal income tax purposes as a tax-free transfer by such holders
of their OP Units in exchange for shares of Common Stock under Section 351 of
the Code, and no gain or loss will be recognized by ROC, its stockholders or
such holders who transfer OP Units pursuant to the CS Letter Agreement as a
result of such transfers, except to the extent provided in Sections 357(c) and
1245 of the Code.
(f) Consents. All consents and waivers from third parties
necessary in connection with the consummation of the Transactions shall have
been obtained, other than such consents and waivers from third parties, which,
if not obtained, would not result, individually or in the aggregate, in
Economic Losses of $5,000,000 or more.
(g) Certain ROC Indebtedness. The Specified Debt Obligations
(as herein defined) of ROC or any ROC Subsidiary that are outstanding
immediately prior to the Effective Time, and will remain outstanding and shall
be assumed by, or otherwise become the indebtedness of, the Operating
Partnership or the Financing Partnership, as the case may be, upon
consummation of the transactions contemplated by the Contribution Agreement,
will, following such transactions, provide by their respective terms to the
effect that neither ROC, Chateau nor any partner of the Financing Partnership
(other than the Operating Partnership) or the Operating Partnership will have
any liability for the repayment of the Specified Debt Obligations. For
purposes hereof, "Specified Debt Obligation" shall include the indebtedness
owed by ROC or any ROC Subsidiary under the Credit Agreement (Revolving) or
Credit Agreement (Term), dated as of May 2, 1996, with each of the lenders
named therein or under any credit agreements with Pacific Mutual Insurance
Company.
Notwithstanding the foregoing, Chateau shall not be
obligated to effect the Merger if the Economic Losses resulting from the
failure of one or more of the conditions set forth in Sections 6.2(a), 6.2(c)
and 6.2(f) to be satisfied (the determination of whether a failure of any of
such conditions has occurred for the purposes of this sentence being made
without giving effect to the $5,000,000 limitations set forth in such
sections), in the aggregate, but without duplication exceeds $5,000,000.
52
SECTION 6.3 Conditions to Obligation of ROC. The obligation
of ROC to effect the Merger and to consummate the other Transactions
contemplated to occur on the Closing Date is further subject to the following
conditions, any one or more of which may be waived by ROC:
(a) Representations and Warranties. The representations and
warranties of Chateau (without giving effect to any "materiality"
qualification or limitation) set forth in this Agreement shall be true and
correct as of the Closing Date, as though made on and as of the Closing Date,
except to the extent the representation or warranty is expressly limited by
its terms to another date, and ROC shall have received a certificate (which
certificate may be qualified by knowledge to the same extent as such
representations and warranties are so qualified) signed on behalf of Chateau
by the chief executive officer or the chief financial officer of Chateau to
such effect. This condition shall be deemed satisfied notwithstanding any
failure of a representation or warranty of Chateau to be true and correct as
of the Closing Date (without giving effect to any materiality qualification)
if the aggregate amount of Economic Losses (as defined below) that would
reasonably be expected to arise as a result of the failures of such
representations and warranties to be true and correct as of the Closing Date
does not exceed $5,000,000 (such amount to be calculated by counting in all
cases from the first dollar of such Economic Losses without giving effect to
the $5,000,000 limitation set forth in Section 3.2(f)). "Economic Losses," as
used in this Section 6.3, shall mean any and all net damage, net loss
(including diminution in the value of properties or assets which diminution,
with regard to permanent cash flow losses from any property or assets that
produces cash flow, shall be measured by multiplying the annual net cash flow
produced by such property or asset over the 12-month period preceding the date
of the applicable loss by a factor of 10), net liability or expense suffered
by Chateau or the Chateau Subsidiaries taken as a whole, but shall not include
any claims, damages, loss, expense or other liability resulting from any class
action or stockholders' derivative lawsuits relating to the Transactions
against Chateau, if any, filed subsequent to the date of this Agreement or any
amounts paid or expenses incurred by Chateau in obtaining non-governmental
third party consents, as contemplated by Section 5.3 up to the amount of
$500,000 provided therein.
(b) Performance of Obligations of Chateau. Chateau shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time, and
ROC shall have received a certificate of Chateau signed on behalf of Chateau
by the chief executive officer or the chief financial officer of such party to
such effect.
(c) Material Adverse Change. Since the date of this
Agreement, there has been no material adverse change in the business, results
of operations or financial condition of Chateau, the Operating Partnership and
the other Chateau Subsidiaries taken as a whole, that have resulted or would
result, individually or in
53
the aggregate, in Economic Losses of $5,000,000 or more. ROC shall have
received a certificate of the chief executive officer or chief financial
officer of Chateau to the effect that there has been no such material adverse
change.
(d) Opinions Relating to REIT and Partnership Status. ROC
shall have received an opinion dated as of the Closing Date of Timmis & Xxxxx,
subject to certificates, letters and assumptions, reasonably satisfactory to
ROC, that (i) commencing with its taxable year ended December 31, 1993,
Chateau was organized and has operated in conformity with the requirements for
qualification as a REIT within the meaning of the Code and (ii) the Operating
Partnership has been at all times (and each Chateau Subsidiary organized as a
partnership, joint venture or limited liability company has since its
acquisition by Chateau) and, following the Merger (after giving effect
thereto), will be treated as a partnership for federal income tax purposes and
not as a corporation or an association taxable as a corporation.
(e) Other Tax Opinion. ROC shall have received an opinion
dated as of the Closing Date from Timmis & Xxxxx, subject to certificates,
letters and assumptions, reasonably satisfactory to ROC, to the effect that
the Merger will be treated for federal income tax purposes as a tax-free
transfer by the stockholders of ROC of their shares of ROC Stock to Chateau in
exchange for shares of Common Stock, and the transfer by holders of OP Units
pursuant to the CS Letter Agreement shall be treated for federal income tax
purposes as a tax-free transfer by such holders of their OP Units in exchange
for shares of Common Stock, under Section 351 of the Code, and no gain or loss
will be recognized by ROC, its stockholders or holders who transfer OP Units
pursuant to the CS Letter Agreement as a result of such transfers, except to
the extent provided in Sections 357(c) or 1245 of the Code.
(f) Consents. All consents and waivers from third parties
necessary in connection with the consummation of the Transactions shall have
been obtained, other than such consents and waivers from third parties, which,
if not obtained, would not result, individually or in the aggregate, in
Economic Losses of $5,000,000 or more.
(g) Registration Rights Agreement. Chateau shall have duly
executed and delivered the Registration Rights Agreement substantially in the
form attached as Exhibit C hereto.
(h) Chateau By-laws and Related Matters. ROC shall be
reasonably satisfied that the Chateau By-laws, effective at the Effective
Time, have been amended substantially in accordance with the terms outlined in
Exhibit F hereto and that all of the other transactions contemplated by
Sections 1.5 and 1.6 hereof shall have been completed or will be completed
effective at the Effective Time.
(i) Chateau Securityholder Letter Agreement. Holders of OP
Units who, together with the ROC stockholders and other
54
transferors, will satisfy the 80% test described below upon completion of the
Merger (such OP Unit holders being referred to herein as the "Transferring
Holders"), shall have entered into a letter agreement with ROC (the "CS Letter
Agreement"), pursuant to which such Transferring Holders will agree with ROC
to act with ROC, the ROC stockholders and other transferors specified in the
CS Letter Agreement to transfer to Chateau on or prior to the Effective Time a
sufficient number of OP Units and other property in exchange for shares of
Common Stock such that such shares when taken together with the number of
shares of Common Stock to be issued to the ROC stockholders pursuant to the
Merger and the number of shares of Common Stock owned by such Transferring
Holders and any other transferors making transfers pursuant to the CS Letter
Agreement will together constitute, based on the number of outstanding shares
of capital stock of Chateau expected by the Transferring Holders to be
outstanding at the Effective Time (which number shall be specified in the CS
Letter Agreement), at least 80% of the total combined voting power of all
classes of Chateau stock entitled to vote upon consummation of the Merger.
Each Transferring Holder shall agree in the CS Letter Agreement to exchange
(i) a specified number of OP Units at or prior to the record date for the
Chateau Stockholders Meeting and (ii) a specified number of OP Units on the
Effective Day of the Merger. The CS Letter Agreement shall provide that the
obligation of any Transferring Holder to transfer any OP Units to Chateau
shall be conditioned upon (x) the obtainment of the ROC Stockholder Approval
and (y) the delivery, prior to the date of exchange, of an opinion of Timmis &
Xxxxx, subject to certificates, letters and assumptions deemed reasonably
appropriate by such counsel, to the effect that the transfer of OP Units
pursuant to the CS Letter Agreement shall be treated for federal income tax
purposes as a tax-free transfer by such transferors of such OP Units in
exchange for shares of Common Stock under Section 351 of the Code and no gain
or loss will be recognized as a result of such transfers, except to the extent
provided under Sections 357(c) or 1245 of the Code (an approved form of which
opinion shall be attached to the CS Letter Agreement). The CS Letter Agreement
shall further provide that the obligation of any Transferring Holder to
transfer any OP Units to Chateau on the Effective Day shall be conditioned
upon the concurrent consummation of the Merger. Further, Xxxx Xxxx, Xxxxxx
Xxxxx and X.X. Xxxxxxx shall agree in the CS Letter Agreement with Xxxx X.
XxXxxxxx that, for a period of three years following the Effective Time, they
will vote all shares of Common Stock held by them in favor of the Group B
nominees as specified in the amendments to the By-laws to be adopted in
accordance with Exhibit F hereto.
Notwithstanding the foregoing, ROC shall not be obligated to
effect the Merger if the Economic Losses resulting from the failure of one or
more of the conditions set forth in Sections 6.3(a), 6.3(c) and 6.3(f) to be
satisfied (the determination of whether a failure of any of such conditions
has occurred for the purposes of this sentence being made without giving
effect to the $5,000,000 limitations set forth in such sections), in the
aggregate, but without duplication exceeds $5,000,000.
55
ARTICLE VII
Board Actions
SECTION 7.1 Board Actions. Notwithstanding Section 5.7 or
any other provision of this Agreement to the contrary, to the extent required
by the fiduciary obligations of the Board of Directors of either Chateau or
ROC, as determined in good faith based on the advice of outside counsel,
either Chateau or ROC may:
(a) disclose to its stockholders and OP Unit holders any
information required to be disclosed under applicable law;
(b) in response to an unsolicited request therefor,
participate in discussions or negotiations with, or furnish information with
respect to itself pursuant to a confidentiality agreement no less favorable to
itself than the Confidentiality Agreement (as determined by its outside
counsel) to, any person in connection with a Competing Transaction proposed by
such person; and
(c) approve or recommend (and in connection therewith
withdraw or modify its approval or recommendation of (i) for ROC, this
Agreement and the Merger and (ii) for Chateau, the issuance of the Merger
Consideration to the ROC stockholders in the Merger) a Superior Competing
Transaction (as defined below) or enter into an agreement with respect to such
Superior Competing Transaction (for purposes of this Agreement, "Superior
Competing Transaction" means a bona fide proposal of a Competing Transaction
made by a third party which a majority of the members of the Board of
Directors of Chateau or ROC, as the case may be, determines in good faith
(based on the advice of its investment banking firm) to be more favorable to
its stockholders than the Merger, as the case may be.
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.1 Termination. This Agreement may be terminated at
any time prior to the filing of the Articles of Merger for the Merger with the
Department of Assessments and Taxation of the State of Maryland, whether
before or after either of the Stockholder Approvals are obtained:
(a) by mutual written consent duly authorized by the
respective Boards of Directors of Chateau and ROC;
(b) by Chateau, upon a breach of any representation,
warranty, covenant or agreement on the part of ROC set forth in this
Agreement, or if any representation or warranty of ROC shall have become
untrue, in either case such that the conditions set forth in Section 6.2(a) or
Section 6.2(b), as the case may be,
56
would be incapable of being satisfied by March 31, 1997 (as otherwise
extended);
(c) by ROC, upon a breach of any representation, warranty,
covenant or agreement on the part of Chateau set forth in this Agreement, or
if any representation or warranty of Chateau shall have become untrue, in
either case such that the conditions set forth in Section 6.3(a) or Section
6.3(b), as the case may be, would be incapable of being satisfied by March 31,
1997 (as otherwise extended);
(d) by either Chateau or ROC, if any judgment, injunction,
order, decree or action by any Governmental Entity of competent authority
preventing the consummation of the Merger shall have become final and
nonappealable;
(e) by either Chateau or ROC, if the Merger shall not have
been consummated before March 31, 1997; provided, however, that a party that
has willfully and materially breached a representation, warranty or covenant
of such party set forth in this Agreement shall not be entitled to exercise
its right to terminate under this Section 8.1(e);
(f) by either Chateau or ROC if, upon a vote at a duly held
ROC Stockholders Meeting or any adjournment thereof, the ROC Stockholder
Approvals shall not have been obtained as contemplated by Section 5.1;
(g) by either Chateau or ROC if, upon a vote at a duly held
Chateau Stockholders Meeting or any adjournment thereof, the Chateau
Stockholder Approvals shall not have been obtained as contemplated by Section
5.1;
(h) by ROC if prior to the ROC Stockholders Meeting, the
Board of Directors of ROC or any committee thereof shall have withdrawn or
modified in accordance with Section 7.1 hereof in any manner adverse to
Chateau its approval or recommendation of the Merger or this Agreement in
connection with the approval and recommendation of a Superior Competing
Transaction;
(i) by Chateau if (i) prior to the ROC Stockholders Meeting,
the Board of Directors of ROC or any committee thereof shall have withdrawn or
modified in any manner adverse to Chateau its approval or recommendation of
the Merger or this Agreement in connection with, or approved or recommended,
any Superior Competing Transaction, (ii) ROC shall have entered into any
agreement with respect to any Competing Transaction (other than a
confidentiality agreement as contemplated by Section 7.1(b)) or (iii) the
Board of Directors of ROC or any committee thereof shall have resolved to do
any of the foregoing;
(j) by Chateau if prior to the Chateau Stockholders Meeting,
the Board of Directors of Chateau or any committee thereof shall have
withdrawn or modified in accordance with Section 7.1 hereof in any manner
adverse to ROC its approval or recommendation
57
of the issuance of the Merger Consideration to the ROC stockholders in
connection with the approval and recommendation of a Superior Competing
Transaction;
(k) by ROC if (i) prior to the Chateau Stockholders Meeting,
the Board of Directors of Chateau or any committee thereof shall have
withdrawn or modified in any manner adverse to ROC its approval or
recommendation of the issuance of the Merger Consideration to the ROC
stockholders in connection with, or approved or recommended, a Superior
Competing Transaction, (ii) Chateau shall have entered into any agreement with
respect to any Competing Transaction (other than a confidentiality agreement
as contemplated by Section 7.1(b)) or (iii) the Board of Directors of Chateau
or any committee thereof shall have resolved to do any of the foregoing;
(l) by ROC or Chateau if, over any consecutive 20-Trading
Day (as herein defined) period ending prior to the first date of the mailing
of the Proxy Statement to the respective stockholders of ROC and Chateau, the
average of the ratios determined by comparing the Closing Price (as herein
defined) of the ROC Common Stock to the Closing Price of the Common Stock on
each day over such period is more than 1.20 to one or less than 0.89 to one,
and the party desiring such termination provides notice to the other party
within three business days of the end of such consecutive 20-Trading Day
period but in no event later than the date of the mailing; provided, however,
that the right of either of Chateau or ROC to terminate this Agreement under
this Section 8.1(l) shall not be available if, at the time such party proposes
to exercise such termination right, such party has received a bona fide
proposal for a Competing Transaction. For purposes hereof, "Trading Day" shall
mean a day on which the NYSE is open for trading, and "Closing Price" shall
mean the last reported sale price per share of the ROC Common Stock or Common
Stock, as the case may be, as reported on the NYSE consolidated tape on the
Trading Day in question;
(m) by ROC if the condition specified in Section 6.3(i) has
not been satisfied on or prior to the later of November 16, 1996 or ten days
after the SEC has cleared the Proxy Statement for mailing, or if on or prior
to the record date for the Chateau Stockholders Meeting any of the
Transferring Holders that have executed the CS Letter Agreement has failed to
exchange the shares it has agreed to exchange under such agreement and such
shares have not been replaced by shares held by other OP Unit holders; and
(n) by Chateau if (i) within five business days after ROC
delivers the Issuance Notice as contemplated by Section 5.21, Chateau provides
written notice to ROC to the effect that if ROC proceeds with the issuance
contemplated by the Issuance Notice Chateau will terminate this Agreement,
(ii) ROC, in spite of such notice from Chateau, proceeds with the issuance,
and (iii) Chateau notifies ROC in writing of the termination of this Agreement
within five business days after ROC notifies Chateau of the closing of the
issuance.
58
SECTION 8.2 Expenses.
(a) Except as otherwise specified in this Section 8.2 or
agreed in writing by the parties, all out-of-pocket costs and expenses
incurred in connection with this Agreement and the Transactions contemplated
hereby shall be paid by the party incurring such cost or expense.
(b) ROC agrees that if this Agreement shall be terminated
pursuant to Section 8.1(b), then ROC will pay to the Operating Partnership, or
as directed by the Operating Partnership, an amount equal to the Chateau
Break-Up Expenses (as defined below). In addition, ROC agrees that if this
Agreement shall be terminated pursuant to Section 8.1(b), (f), (h) or (i) and,
in the case of Section 8.1(b) or (f), following the date of the Original
Agreement and prior to termination of this Agreement, ROC shall have received
a proposal constituting a Competing Transaction and within 12 months following
termination ROC shall enter into a definitive agreement providing for a
Competing Transaction that is equally or more favorable from a financial point
of view to ROC's stockholders as the Merger, then ROC will pay as directed by
the Operating Partnership a fee in an amount equal to the Chateau Break-Up Fee
(as defined below). Payment of any of such amounts shall be made, as directed
by the Operating Partnership, by wire transfer of immediately available funds
promptly, but in no event later than two business days after the amount is due
as provided herein. The "Chateau Break-Up Fee" shall be an amount equal to the
lesser of (i) $10,000,000 (the "Base Amount") or (ii) the sum of (A) the
maximum amount that can be paid to the Operating Partnership without causing
Chateau to fail to meet the requirements of Sections 856(c)(2) and (3) of the
Code determined as if the payment of such amount did not constitute income
described in Sections 856(c)(2) and 856(3) of the Code ("Qualifying Income"),
as determined by independent accountants to Chateau and (B) in the event
Chateau receives a letter from outside counsel (the "Chateau Break-Up Fee Tax
Opinion") indicating that Chateau has received a ruling from the IRS holding
that the Operating Partnership's receipt of the Base Amount would either
constitute Qualifying Income as to Chateau with respect to Chateau's
proportionate share thereof or would be excluded from Chateau's gross income
for purposes of Sections 856(c)(2) and (3) of the Code (the "REIT
Requirements") or that the receipt by the Operating Partnership of the
remaining balance of the Base Amount following the receipt of and pursuant to
such ruling would not be deemed constructively received prior thereto, the
Base Amount less the amount payable under clause (A) above. In the event that
the Operating Partnership is not able to receive the full Base Amount, ROC
shall place the unpaid amount in escrow and shall not release any portion
thereof to the Operating Partnership unless and until ROC receives any one or
a combination of the following: (i) a letter(s) from Chateau's independent
accountants indicating the maximum amount that can be paid at that time to the
Operating Partnership without causing Chateau to fail to meet the REIT
Requirements or (ii) a Chateau Break-Up Fee Tax Opinion, in which event ROC
shall pay to the Operating Partnership the lesser of the
59
unpaid Base Amount or the maximum amount stated in the letter(s) referred to
in (i) above from time to time. ROC's obligation to pay any unpaid portion of
the Chateau Break-Up Fee (provided ROC has otherwise complied with its
obligations under this provision) shall terminate (and any amount still held
in such escrow shall be released to ROC) on the date that is five years from
the date the Chateau Break-Up Fee first becomes due under this Agreement. In
addition, amounts held in escrow may be earlier released as provided in
Section 8.2(c). The "Chateau Break-Up Expenses" shall be an amount equal to
the lesser of (i) the Operating Partnership's out-of-pocket expenses incurred
in connection with the Original Agreement and this Agreement and the other
Transactions (including, without limitation, all attorneys', accountants' and
investment bankers' fees and expenses) but in no event in an amount greater
than $4,000,000 (such amount not to exceed such $4,000,000 being referred to
in this Section 8.2(b) or (c) as the "Expense Fee Base Amount") and (ii) the
sum of (A) the maximum amount that can be paid to the Operating Partnership
without causing Chateau to fail to meet the requirements of Sections 856(c)(2)
and (3) of the Code determined as if the payment of such amount did not
constitute Qualifying Income, as determined by independent accountants to
Chateau and (B) in the event Chateau receives a Chateau Break-Up Fee Tax
Opinion indicating that Chateau has received a ruling from the IRS holding
that the Operating Partnership's receipt of the Expense Fee Base Amount would
either constitute Qualifying Income as to Chateau with respect to Chateau's
proportionate share thereof or would be excluded from Chateau's gross income
for purposes of the REIT Requirements or that receipt by the Operating
Partnership of the remaining balance of the Expense Fee Base Amount following
the receipt of and pursuant to such ruling would not be deemed constructively
received prior thereto, the Expense Fee Base Amount less the amount payable
under clause (A) above. In the event that the Operating Partnership is not
able to receive the full amount of the Chateau Break-Up Expenses, ROC shall
place the unpaid amount in escrow and shall not release any portion thereof to
the Operating Partnership unless and until ROC receives any one or combination
of the following: (i) a letter(s) from Chateau's independent accountants
indicating the maximum amount that can be paid at that time to the Operating
Partnership without causing Chateau to fail to meet the REIT Requirements or
(ii) a Chateau Break-Up Fee Tax Opinion indicating that Chateau's receipt of
the Expense Fee Base Amount would satisfy in whole or in part the REIT
Requirements, in which event ROC shall pay to the Operating Partnership the
lesser of the unpaid Expense Fee Base Amount or the maximum amount stated in
the letter(s) referred to in (i) above from time to time. ROC's obligation to
pay any unpaid portion of the Chateau Break-Up Expenses (provided ROC has
otherwise complied with its obligations under this provision) shall terminate
(and any amount still held in such escrow shall be released to ROC) on the
date that is five years from the date the Chateau Break-Up Expenses first
become due under this Agreement. In addition, amounts held in escrow may be
earlier released as provided in Section 8.2(c).
(c) Notwithstanding anything to the contrary contained in
Section 8.2(b) above, if the Operating Partnership realizes any
60
Total Profit pursuant to the ROC Option Agreement and at any time or from time
to time the sum of (i) the Total Profit realized by the Operating Partnership,
(ii) the Chateau Break-Up Fee paid to the Operating Partnership and (iii) the
amount of Chateau Break-Up Expenses paid to the Operating Partnership exceeds
the sum of (i) the Base Amount (which amount shall be counted as zero if ROC
has not become obligated to pay the Chateau Break-Up Fee under this Agreement)
and (ii) the Expense Fee Base Amount (which amount shall be counted as zero if
ROC has not become obligated to pay the Chateau Break-Up Expenses under this
Agreement), then the Chateau Break-Up Fee and/or Chateau Break-Up Expenses
shall be reduced (it being agreed that the allocation of the reduction between
the Chateau Break-Up Fee and the Chateau Break-Up Expenses shall be determined
in the discretion of Chateau) by such excess, and the amount, if any, still
held in escrow shall be released from the escrow account to ROC, and the
Operating Partnership shall promptly refund the balance of such excess to ROC.
(d) Chateau agrees that if this Agreement shall be
terminated by ROC pursuant to Section 8.1(m), then Chateau shall pay to ROC up
to $2,000,000 in out-of-pocket expenses incurred in connection with the
Original Agreement, this Agreement or the other Transactions (including,
without limitation, all attorneys', accountants' and investment banking fees
and expenses). Chateau agrees that if this Agreement shall be terminated
pursuant to Section 8.1(c), then Chateau will pay, as directed by ROC, an
amount equal to the ROC Break-Up Expenses (as defined below). In addition,
Chateau agrees that if this Agreement shall be terminated pursuant to Section
8.1(c), (g), (j), (k) or (m) and, in the case of Section 8.1(c), (g) or (m)
within 12 months following termination of this Agreement, Chateau shall enter
into a definitive agreement providing for a Competing Transaction that is
equally or more favorable from a financial point of view to Chateau's
stockholders as the Merger, then Chateau will pay as directed by ROC a fee in
an amount equal to the ROC Break-Up Fee (as defined below). Payment of any of
such amounts shall be made, as directed by ROC, by wire transfer of
immediately available funds promptly, but in no event later than two business
days after the amount is due as provided herein. The "ROC Break-Up Fee" shall
be an amount equal to the lesser of (i) $10,000,000 reduced by the amount, if
any, paid by Chateau to ROC in accordance with the first sentence of this
Section 8.2(d) (the "Base Amount") and (ii) the sum of (A) the maximum amount
that can be paid to ROC without causing it to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code determined as if the payment of such
amount did not constitute Qualifying Income, as determined by independent
accountants to ROC and (B) in the event ROC receives a letter from outside
counsel (the "ROC Break-Up Fee Tax Opinion") indicating that ROC has received
a ruling from the IRS holding that ROC's receipt of the Base Amount would
either constitute Qualifying Income or would be excluded from gross income for
purposes of Sections 856(c)(2) and (3) of the Code or that the receipt by ROC
of the remaining balance of the Base Amount following the receipt of and
pursuant to such ruling would not be deemed constructively received prior
thereto, the Base Amount less the amount payable
61
under clause (A) above. In the event that ROC is not able to receive the full
Base Amount, Chateau shall place the unpaid amount in escrow and shall not
release any portion thereof to ROC unless and until Chateau receives any one
or a combination of the following: (i) a letter(s) from ROC's independent
accountants indicating the maximum amount that can be paid at that time to ROC
without causing ROC to fail to meet the REIT Requirements or (ii) a ROC
Break-Up Fee Tax Opinion, in which event Chateau shall pay to ROC the lesser
of the unpaid Base Amount or the maximum amount stated in the letter(s)
referred to in (i) above from time to time. Chateau's obligation to pay the
ROC Break-Up Fee (provided Chateau has otherwise complied with its obligations
under this provision) shall terminate (and any amount still held in such
escrow shall be released to Chateau) on the date that is five years from the
date the ROC Break-Up Fee first becomes due under this Agreement. In addition,
amounts held in escrow may be earlier released as provided in Section 8.2(e).
The "ROC Break-Up Expenses" shall be an amount equal to the lesser of (i)
ROC's out-of-pocket expenses (other than those expenses, if any, reimbursed
under the first sentence of this Section 8.2(d)) incurred in connection with
the Original Agreement and this Agreement and the other Transactions
(including, without limitation, all attorneys', accountants' and investment
bankers' fees and expenses) but in no event in an amount greater than
$4,000,000 (such amount not to exceed such $4,000,000 being referred to in
this Section 8.2(d) or (e) as the "Expense Fee Base Amount") and (ii) the sum
of (A) the maximum amount that can be paid to ROC without causing it to fail
to meet the requirements of Sections 856(c)(2) and (3) of the Code determined
as if the payment of such amount did not constitute Qualifying Income, as
determined by independent accountants to ROC and (B) in the event ROC receives
a ROC Break-Up Fee Tax Opinion indicating that ROC has received a ruling from
the IRS holding that ROC's receipt of the Expense Fee Base Amount would either
constitute Qualifying Income or would be excluded from gross income for
purposes of the REIT Requirements or that receipt by ROC of the remaining
balance of the Expense Fee Base Amount following the receipt of and pursuant
to such ruling would not be deemed constructively received prior thereto, the
Expense Fee Base Amount less the amount payable under clause (A) above. In the
event that ROC is not able to receive the full Expense Fee Base Amount,
Chateau shall place the unpaid amount in escrow and shall not release any
portion thereof to ROC unless and until Chateau receives any one or
combination of the following: (i) a letter(s) from ROC's independent
accountants indicating the maximum amount that can be paid at that time to ROC
without causing ROC to fail to meet the REIT Requirements or (ii) a ROC
Break-Up Fee Tax Opinion indicating that ROC's receipt of the Expense Fee Base
Amount would satisfy in whole or in part the REIT Requirements, in which event
Chateau shall pay to ROC the lesser of the unpaid Expense Fee Base Amount or
the maximum amount stated in the letter(s) referred to in (i) above from time
to time. Chateau's obligation to pay any unpaid portion of the ROC Break-Up
Expenses (provided Chateau has otherwise complied with its obligations under
this provision) shall terminate (and any amount still held in such escrow
shall be released to Chateau) on the date that is five years from the date the
ROC Break-Up Expenses first
62
become due under this Agreement. In addition, amounts held in escrow may be
earlier released as provided in Section 8.2(e).
(e) Notwithstanding anything to the contrary contained in
Section 8.2(d) above, if ROC realizes any Total Profit pursuant to the Chateau
Option Agreement and at any time or from time to time the sum of (i) the Total
Profit, (ii) ROC Break-Up Fee and (iii) the amount of ROC Break-Up Expenses
exceeds the sum of (i) the Base Amount (which amount shall be counted as zero,
if Chateau has not become obligated to pay the ROC Break-Up Fee under this
Agreement) and (ii) the Expense Fee Base Amount (which amount shall be counted
as zero, if Chateau has not become obligated to pay the ROC Break-Up Expenses
under this Agreement), then the ROC Break-Up Fee and/or the ROC Break-Up
Expenses shall be reduced (it being agreed that the allocation of the
reduction shall be determined in the discretion of ROC) by such excess, and
the amount, if any, still held in escrow shall be released from the escrow
account to Chateau and ROC shall promptly refund the balance of such excess to
Chateau.
(f) In the event that Chateau, the Operating Partnership or
ROC is required to file suit to seek all or a portion of the amounts payable
under this Section 8.2, and such party prevails in such litigation, such party
shall be entitled to all expenses, including attorney's fees and expenses
which it has incurred in enforcing its rights hereunder; provided that such
expenses shall be considered part of out-of-pocket expenses incurred in
connection with this Agreement and the other Transactions within the
definition of Chateau Break-Up Expenses or ROC Break-Up Expenses, as the case
may be.
SECTION 8.3 Effect of Termination. In the event of
termination of this Agreement by either ROC or Chateau as provided in Section
8.1, this Agreement shall forthwith become void and have no effect, without
any liability or obligation on the part of Chateau, or ROC, other than the
last sentence of Section 5.2, Section 8.2, this Section 8.3 and Article IX and
except to the extent that such termination results from a willful breach by a
party of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
SECTION 8.4 Amendment. This Agreement may be amended by the
parties in writing by action of their respective Boards of Directors at any
time before or after any Stockholder Approvals are obtained and prior to the
filing of the Articles of Merger with the Department of Assessments and
Taxation of the State of Maryland; provided, however, that, after the
Stockholder Approvals are obtained, no such amendment, modification or
supplement shall alter the amount or change the form of the consideration to
be delivered to ROC's or Chateau's stockholders or alter or change any of the
terms or conditions of this Agreement if such alteration or change would
adversely affect ROC's stockholders or Chateau's stockholders.
63
SECTION 8.5 Extension; Waiver. At any time prior to the
Effective Time, each of ROC and Chateau may (a) extend the time for the
performance of any of the obligations or other acts of the other party, (b)
waive any inaccuracies in the representations and warranties of the other
party contained in this Agreement or in any document delivered pursuant to
this Agreement or (c) subject to the proviso of Section 8.4, waive compliance
with any of the agreements or conditions of the other party contained in this
Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. Any waivers pursuant to clause (c) of the second
preceding sentence (i) of the provisions of Section 4.1(e) may be given in
writing by or on behalf of Chateau by the chief executive officer of Chateau
and (ii) of the provisions of Section 4.2(e) may be given in writing by or on
behalf of ROC by the chief executive officer of ROC. The failure of any party
to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE IX
General Provisions
SECTION 9.1 Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 9.1 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time.
SECTION 9.2 Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally, sent by overnight courier (providing
proof of delivery) to the parties or sent by telecopy (providing confirmation
of transmission) at the following addresses or telecopy numbers (or at such
other address or telecopy number for a party as shall be specified by like
notice):
(a) if to Chateau or RSub, to
Chateau Properties, Inc.
00000 Xxxx Xxxx
Xxxxxxx Xxxxxxxx, XX 00000
Attn: C.G. ("Xxxx") Xxxxxxx
Fax: (000) 000-0000
with a copy to:
Timmis & Xxxxx L.L.P.
000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, III
Fax: (000) 000-0000
64
and
Fried, Frank, Harris, Xxxxxxx & Xxxxxxxx
Xxx Xxx Xxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxxx Xxxxxxxxx
Fax: (000) 000-0000
(b) if to ROC, to
ROC Communities, Inc.
0000 X. Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxx X. XxXxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxx X. Xxxxxxxxx, Esq.
Fax: (000) 000-0000
SECTION 9.3 Interpretation. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation."
SECTION 9.4 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 9.5 Entire Agreement; No Third-Party Beneficiaries.
This Agreement, the Confidentiality Agreement and the other agreements entered
into in connection with the Transactions (a) constitute the entire agreement
and supersedes all prior agreements (including the Original Agreement) and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement and, (b) except for the provisions of Article
II, Section 5.11(b) and (d) and Section 5.12, are not intended to confer upon
any person other than the parties hereto any rights or remedies.
SECTION 9.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICT OF LAWS THEREOF.
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SECTION 9.7 Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned or
delegated, in whole or in part, by operation of law or otherwise by any of the
parties without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
SECTION 9.8 Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Maryland or in any Maryland State court,
this being in addition to any other remedy to which they are entitled at law
or in equity. In addition, each of the parties hereto (a) consents to submit
itself (without making such submission exclusive) to the personal jurisdiction
of any federal court located in the State of Maryland or any Maryland State
court in the event any dispute arises out of this Agreement or any of the
Transactions contemplated by this Agreement and (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court.
ARTICLE X
Certain Definitions
SECTION 10.1 Certain Definitions. For purposes of this
Agreement:
An "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person.
"Chateau Disclosure Letter" means the letter previously
delivered to ROC by Chateau disclosing certain information in
connection with the Original Agreement.
"Chateau Subsidiary" means the Operating Partnership and
each other Subsidiary of Chateau.
"Financing Partnership" means a newly organized financing
partnership into which the Financing Sub will merge pursuant to the terms of
the Contribution Agreement.
"Financing Sub" means ROCF, Inc., a Maryland corporation.
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"Knowledge" where used herein with respect to ROC shall mean
the knowledge of the persons named in Schedule 10 to the ROC Disclosure Letter
and where used with respect to Chateau shall mean the knowledge of the persons
named in Schedule 10 to the Chateau Disclosure Letter.
"Person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
"ROC Disclosure Letter" means the letter previously
delivered to Chateau by ROC disclosing certain information in
connection with the Original Agreement.
"ROC Subsidiary" means each Subsidiary of ROC.
"Subsidiary" of any person means any corporation,
partnership, limited liability company, joint venture or other legal entity of
which such person (either directly or through or together with another
Subsidiary of such person) owns 50% or more of the voting stock or other
equity interests of such corporation, partnership, limited liability company,
joint venture or other legal entity.
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IN WITNESS WHEREOF, Chateau, ROC, and RSub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
CHATEAU PROPERTIES, INC.
By: __________________________________
Name:
Title:
ROC COMMUNITIES, INC.
By: __________________________________
Name: Xxxx X. XxXxxxxx
Title: President and Chief
Executive Officer
R ACQUISITION SUB, INC.
By: __________________________________
Name: X.X. Xxxxxxx
Title: President
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