EXHIBIT 2.1
PRIVILEGED AND CONFIDENTIAL
---------------------------
Conformed Execution Copy
TRANSACTION AGREEMENT
Dated as of October 14, 2003
by and among
HOMETOWN AMERICA, L.L.C.
AFFORDABLE RESIDENTIAL COMMUNITIES IV, LP
and
ARC IV REIT, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I
THE SALE
Section 1.1 First Deposit Payment; ARC Promissory Note; Purchase and Sale of the Portfolio; IPO Success Fee.1
Section 1.2 Closing; Additional Deposit Payments............................................................2
Section 1.3 Deliveries at the Closing.......................................................................3
Section 1.4 Portfolio.......................................................................................4
Section 1.5 Excluded Assets.................................................................................4
Section 1.6 Assumption of Liabilities.......................................................................5
Section 1.7 Excluded Liabilities............................................................................6
Section 1.8 As Is, Where Is.................................................................................7
Section 1.9 Proration.......................................................................................7
Section 1.10 Deferred Closings...............................................................................8
Section 1.11 Change in Transaction Structure.................................................................9
Section 1.12 Capital Improvements............................................................................9
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of Seller........................................................9
(a) Organization, Standing and Corporate Power of Seller...........................................10
(b) Authority; No Violations; Consents and Approval................................................10
(c) Absence of Certain Changes or Events...........................................................11
(d) No Default.....................................................................................11
(e) Compliance with Applicable Laws................................................................12
(f) Litigation.....................................................................................12
(g) Benefits.......................................................................................12
(h) Labor and Employment Matters...................................................................13
(i) Intangible Property............................................................................13
(j) Environmental Matters..........................................................................13
(k) Properties.....................................................................................15
(l) Insurance......................................................................................16
(m) Brokers........................................................................................17
(n) Contracts......................................................................................17
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PAGE
(o) No Other Representations or Warranties.........................................................17
Section 2.2 Representations and Warranties of Purchaser and Parent.........................................18
(a) Organization, Standing and Corporate Power of Purchaser and Parent.............................18
(b) Authority; No Violations; Consents and Approvals...............................................18
(c) Litigation.....................................................................................20
(d) Transaction Financing..........................................................................20
(e) Brokers........................................................................................20
ARTICLE III
COVENANTS RELATING TO CONDUCT OF BUSINESS PENDING THE SALE
Section 3.1 Conduct of Business by Seller..................................................................20
Section 3.2 Conduct of Business by Parent and Purchaser....................................................23
ARTICLE IV
ADDITIONAL COVENANTS
Section 4.1 Access to Information; Confidentiality.........................................................23
Section 4.2 Reasonable Efforts.............................................................................23
Section 4.3 Tax Matters....................................................................................24
(a) Purchase Price Allocation......................................................................24
(b) Tax Treatment of the Sale......................................................................24
Section 4.4 Public Announcements...........................................................................24
Section 4.5 Certain Costs..................................................................................25
Section 4.6 Execution and Delivery of Transfer Documents...................................................25
Section 4.7 Transfer and Gains Taxes.......................................................................25
Section 4.8 No Conflict with or Rights under Merger Agreement..............................................26
Section 4.9 Required Financing.............................................................................26
Section 4.10. Casualty or Condemnation.......................................................................26
Section 4.11. Access to Books and Records Post-Closing.......................................................26
Section 4.12. Employee Matters...............................................................................27
Section 4.13 Advice of Changes..............................................................................27
Section 4.14 Exclusive Negotiations.........................................................................27
Section 4.15 Financial Statements...........................................................................27
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PAGE
Section 4.16 Post-Closing Billing Migration and Support.....................................................28
Section 4.17 Assistance.....................................................................................28
Section 4.18 Accounts Receivable............................................................................28
Section 4.19 Claims.........................................................................................28
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 Conditions to Each Party's Obligation to Effect the Sale.......................................29
(a) No Injunctions or Restraints...................................................................29
(b) Closing of the Mergers.........................................................................30
Section 5.2 Conditions to Obligations of Purchaser.........................................................30
(a) Representations and Warranties.................................................................30
(b) Performance of Obligations of Seller...........................................................30
(c) Material Adverse Change........................................................................30
(e) FIRPTA Certificates............................................................................30
Section 5.3 Conditions to Obligations of Seller............................................................30
(a) Representations and Warranties.................................................................30
(b) Performance of Obligations of Parent and Purchaser.............................................31
(c) Material Adverse Change........................................................................31
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
Section 6.1 Termination....................................................................................31
Section 6.2 Effect of Termination..........................................................................32
Section 6.3 Amendment......................................................................................32
Section 6.4 Extension; Waiver..............................................................................32
Section 6.5 Treatment of Deposit Payments and ARC Promissory Note..........................................32
Section 6.6 Failure to Close...............................................................................33
Section 6.7 Guarantee......................................................................................33
ARTICLE VII
GENERAL PROVISIONS
Section 7.1 Nonsurvival of Representations and Warranties; Survival of Certain Covenants...................34
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PAGE
Section 7.2 Notices........................................................................................34
Section 7.3 Interpretation.................................................................................35
Section 7.4 Counterparts...................................................................................36
Section 7.5 Entire Agreement; No Third-Party Beneficiaries.................................................36
Section 7.6 Governing Law; Waiver of Jury Trial............................................................36
Section 7.7 Assignment.....................................................................................36
Section 7.8 Enforcement....................................................................................36
Section 7.9 Exhibits; Disclosure Letter....................................................................37
ARTICLE VIII
CERTAIN DEFINITIONS
Section 8.1 Certain Definitions............................................................................37
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EXHIBITS
A Financing Description.........................................................................A-1
B Xxxx of Sale..................................................................................B-1
C Form of Assignment and Assumption Agreement...................................................C-1
D Information Request...........................................................................D-1
E FIRPTA Certificate............................................................................E-1
F Form of Special Warranty Deed.................................................................F-1
G ARC Promissory Note...........................................................................G-1
DISCLOSURE LETTERS
Seller Disclosure Letter
Purchaser Disclosure Letter
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INDEX OF DEFINED TERMS
Accountant.........................................24
Affiliate..........................................37
Agreement...........................................1
Allocable Consideration............................24
ARC Promissory Note.................................1
Assigned Contracts..................................4
Assumed Liabilities.................................5
Assumed Loans.......................................2
Cap.................................................4
CERCLA.............................................13
Claims.............................................29
Closing.............................................2
Closing Date........................................3
Code...............................................37
Confidentiality Agreement..........................23
Decision Date.......................................9
Deeds...............................................3
Deferral Closing....................................9
Deferral Closing Date...............................8
Deferral Event......................................8
Deposit Payments...................................37
Determination......................................24
Employee Liabilities...............................37
Environmental Claims...............................14
Environmental Law..................................13
Environmental Permit...............................14
ERISA..............................................12
ERISA Affiliate....................................13
Exchange Act.......................................37
Excluded Liabilities................................6
Fifth Deposit Payment...............................3
Financing..........................................20
FIRPTA Certificate.................................37
First Deposit Payment...............................1
First Management Deposit Payment...................22
Five Seasons Note...................................2
Five Seasons Note Amount............................2
Fourth Deposit Payment..............................3
GAAP...............................................37
Governmental Entity................................37
Guarantee..........................................33
Hazardous Material.................................13
Homes...............................................1
Homes Amount........................................1
Hometown Portfolio Property........................38
Indebtedness.......................................38
IPO.................................................2
IPO Success Fee.....................................2
IPO Success Fee Period..............................2
Knowledge..........................................38
Law................................................38
Liability..........................................38
Lien...............................................11
Loan Amount.........................................2
Management Agreement...............................21
Management Deposit Payments........................22
Management Election................................22
Management Start Date..............................21
Management Termination.............................22
Material Contracts.............................17, 19
Merger Agreement...................................38
Merger Transaction Consummation....................30
Non-Portfolio Employees............................37
Notes...............................................1
Notes Amount........................................1
100 Oaks Liability.................................39
Parent..............................................1
PCBs...............................................14
Permitted Lien.....................................15
Person.............................................38
Portfolio...........................................4
Portfolio Employees................................13
Portfolio Material Adverse Effect..................10
Portfolio Property.................................15
Prepayable Debt....................................25
Purchase Price Balance..............................2
Purchaser...........................................1
Purchaser Disclosure Letter........................38
Purchaser Material Adverse Effect..................18
Purchaser Materiality Qualifier....................30
Purchaser Operating Agreements.....................18
Purchaser Outside Date.............................31
Purchaser Subsidiary...............................38
Release............................................14
Rent Roll..........................................15
Right to Retain....................................33
Sale................................................1
SEC................................................38
Second Deposit Payment..............................3
Second Management Deposit Payment..................22
Securities Act.....................................38
Seller..............................................1
Seller Disclosure Letter...........................38
Seller Employee Benefit Plan.......................12
Seller Intangible Property.........................13
Seller LLC Agreement...............................10
Seller Materiality Qualifier.......................30
Seller Outside Date................................32
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Seller Permits.....................................12
Seller Property Restrictions.......................15
Seller Representative..............................39
Seller SEC Documents...............................39
Seller Severance Agreements........................13
Seller Subsidiary..................................39
Seller's Financing.................................39
Subsidiary.........................................39
Tax................................................39
Tax Protected Properties...........................26
Tax Return.........................................39
Third Deposit Payment...............................3
Transaction Document...............................10
Transfer and Gains Taxes...........................26
Transfer Documents.................................25
Transferred Employees..............................27
Voting Debt........................................39
WARN Act...........................................27
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THIS TRANSACTION AGREEMENT (this "Agreement"), dated as of October 14,
2003, is by and among HOMETOWN AMERICA, L.L.C., a Delaware limited liability
company ("Seller"), AFFORDABLE RESIDENTIAL COMMUNITIES IV, LP, a Delaware
limited partnership ("Purchaser"), and ARC IV REIT, INC., a Maryland corporation
("Parent").
RECITALS
Seller desires to sell to Purchaser, and Purchaser desires to purchase from
Seller, the Portfolio (as defined herein), upon the terms and subject to the
conditions set forth herein; and
Parent, Purchaser and Seller desire to make certain representations,
warranties and agreements in connection with the Sale (as defined herein).
AGREEMENT
In consideration of the premises and the mutual representations,
warranties, covenants and agreements contained in this Agreement, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, intending to be legally bound, the parties hereto hereby agree as
follows:
ARTICLE I
THE SALE
Section 1.1 First Deposit Payment; ARC Promissory Note; Purchase and Sale
of the Portfolio; IPO Success Fee.
(a) (1) By 12:00 noon New York time on Wednesday, October 15, 2003,
Purchaser will deliver to Seller by wire transfer of immediately available funds
to an account or accounts specified by Seller cash in the aggregate amount of
twelve million five hundred thousand dollars ($12,500,000) (the "First Deposit
Payment") and (2) simultaneously with the execution of this Agreement, Purchaser
has delivered to Seller, and Seller has received, a no-interest promissory note
in the form attached with an aggregate principal amount of two million five
hundred thousand dollars (the "ARC Promissory Note").
(b) Upon the terms and subject to the conditions set forth in this
Agreement, on the Closing Date (as defined herein), Seller shall sell, convey,
transfer and assign, or cause its Subsidiaries to sell, convey, transfer and
assign, to Purchaser, and Purchaser shall purchase from Seller or its
Subsidiaries, as the case may be (including Purchaser's assumption of the
Assumed Liabilities (as defined herein), the "Sale"), any and all of Seller's
and its Subsidiaries' right, title and interest in and to the Portfolio for an
aggregate cash purchase price equal to the sum of (A) five hundred sixty four
million six hundred eleven thousand dollars ($564,611,000), plus (B) an
additional amount (the "Homes Amount") for any and all manufactured homes (the
"Homes") located in communities that are part of the Portfolio Properties and
owned as of the Closing Date by Seller or any of its Subsidiaries (which amount
shall equal Seller's aggregate cost basis, as reflected on the consolidated
books and records of Seller and its Subsidiaries as of the Closing Date with
respect to such homes as are set forth on Section 1.1(B) of the Seller
Disclosure Letter), plus (C) an additional amount (the "Notes Amount") for the
promissory notes or consumer installment sales contracts or other similar
agreements payable to Seller or any of its Subsidiaries and secured by one or
more manufactured homes located on any of the Portfolio Properties (the "Notes")
as are set forth on Section 1.1(C) of the Seller Disclosure Letter (which amount
shall equal the aggregate outstanding and unpaid principal amount plus any
accrued but unpaid interest (provided, however, that if such accrued but unpaid
interest is 60 days or more past due with respect to any Note, then the amount
with respect to such Note shall equal the aggregate outstanding and unpaid
principal amount only) and other indebtedness, as reflected on the consolidated
books and records of Seller and its Subsidiaries as of the Closing Date, under
such notes) plus (D) the amount payable pursuant to Section 1.1(c), plus (E) the
Five Seasons Note Amount, minus (F) the aggregate amount of Deposit Payments
that have been received by Seller pursuant hereto, minus (G) the aggregate
amount (the "Loan Amount") of all outstanding and unpaid principal and all
accrued but unpaid interest, as of the Closing Date, with respect to the Assumed
Loans (as defined herein), such sum being subject to further adjustment as
provided in Sections 1.9, 1.10 and 1.12 (such sum, as may be so adjusted, the
"Purchase Price Balance"), payable as set forth in Section 1.3. Notwithstanding
anything to the contrary herein, the Purchase Price Balance shall not be reduced
by the amount of any pre-payment penalties or costs of assumption of
Indebtedness (other than the amount of Assumed Loans at Closing) relating to the
Portfolio or for any other reason.
(c) In the event that, on or prior to the later of March 31, 2004 or the
date that is thirty days after the Closing (the period through such later date,
the "IPO Success Fee Period"), Parent completes an initial public offering of
common stock (the "IPO"), then, on the Closing Date (or, if such IPO is
consummated after the Closing Date, on such date of the consummation of such
IPO), Purchaser shall deliver seven million five hundred thousand dollars
($7,500,000) to Seller by wire transfer of immediately available funds to an
account or accounts specified by Seller (the "IPO Success Fee"). Purchaser and
Parent hereby covenant (which covenant shall survive the Closing) that only
Parent, and no Subsidiary of Parent (including Purchaser) and no other Person
that, directly or indirectly, owns all or substantially all of the assets of
Parent or Purchaser, shall launch or consummate an initial public offering
during the IPO Success Fee Period.
(d) Seller represents that prior to the date hereof it has delivered to
Purchaser a true and correct copy of the promissory note with respect to the
Five Seasons Cedar Falls property in Cedar Falls, Iowa (the "Five Seasons Note")
and the mortgage related thereto. At the Closing, Purchaser shall purchase the
Five Seasons Note for an amount (the "Five Seasons Note Amount") equal to the
aggregate outstanding and unpaid principal amount plus accrued but unpaid
interest, as reflected on the consolidated books and records of Seller and its
Subsidiaries as of the Closing Date, under such Five Seasons Note; provided,
however, that Purchaser shall not be required to purchase such Five Seasons Note
and the Five Seasons Note Amount shall be zero unless at the Closing Seller
shall deliver to Purchaser a certificate signed on behalf of Seller by the Chief
Executive Officer or Chief Financial Officer or its managing member certifying
that the Five Seasons Note (i) is not more than 30 days delinquent in payment of
principal or interest or in default with respect to any other material
provision, and (ii) has not been amended, supplemented or otherwise modified
without the prior written consent of Purchaser.
(e) Seller represents that, as of the date of this Agreement, each of the
Portfolio Properties set forth on Section 1.1(e) of the Seller Disclosure Letter
(and no other Portfolio Properties) is encumbered by a lien or liens securing
indebtedness as of the date of this Agreement in the amount (including accrued
and unpaid interest) indicated on Section 1.1(e) of the Seller Disclosure Letter
with respect to such Portfolio Property (such indebtedness is referred to herein
as the "Assumed Loans").
(f) Seller represents that Section 1.1(f) of the Seller Disclosure Letter
sets forth any "intercompany" obligations that are Assumed Liabilities.
Section 1.2 Closing; Additional Deposit Payments. The closing of the Sale
(the "Closing") shall take place commencing at 10:00 a.m., local time, on the
date to be specified by the parties, which shall be, subject to the immediately
following sentence, no later than the third business day after satisfaction or
waiver of the conditions set forth in Article V (other than those conditions
that by their nature are to be satisfied or waived at the Closing, but subject
to the satisfaction or waiver of those conditions) (the "Closing Date"), at the
offices of Wachtell, Lipton, Xxxxx & Xxxx, 00 Xxxx 00xx Xxxxxx,
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Xxx Xxxx, XX 00000, unless another date or place is agreed to in writing by the
parties hereto; provided, however, that the Closing Date shall be no earlier
than the earliest of (i) the day of the consummation of the IPO, and (ii) the
day prior to the Purchaser Outside Date (as it may be extended from time to time
pursuant to this Section 1.2, subject to Purchaser's payment to Seller of all
Deposit Payments due Seller hereunder and delivery of the ARC Promissory Note
pursuant hereto), unless another date or place is agreed to in writing by the
parties hereto. In the event that (A) this Agreement has not been terminated in
accordance with its terms and the Closing has not occurred by November 13, 2003
then, in such event, Purchaser shall deliver by wire transfer of immediately
available funds to an account or accounts specified by Seller, and Seller shall
receive, two million five hundred thousand dollars ($2,500,000) on or prior to
November 14, 2003 (the "Second Deposit Payment"), (B) this Agreement has not
been terminated in accordance with its terms and the Closing has not occurred by
January 2, 2004 then, in such event, Purchaser shall deliver by wire transfer of
immediately available funds to an account or accounts specified by Seller, and
Seller shall receive, two million five hundred thousand dollars ($2,500,000) on
or prior to January 5, 2004 (the "Third Deposit Payment"), (C) this Agreement
has not been terminated in accordance with its terms and the Closing has not
occurred by January 31, 2004 then, in such event, Purchaser shall have the
right, by written election to Seller, to elect to extend the Purchaser Outside
Date (as defined herein) from January 31, 2004 to February 29, 2004, provided
that (1) Purchaser delivers by wire transfer of immediately available funds to
an account or accounts specified by Seller, and Seller receives, five million
dollars ($5,000,000) on or prior to February 5, 2004 (the "Fourth Deposit
Payment") and (2) Purchaser shall be responsible for any incremental costs
(including extension costs and exit fees) incurred by Seller with respect to
Seller's Financing as a result of or otherwise in connection with Purchaser's
election to extend the Purchaser Outside Date and the extension of the Purchaser
Outside Date, which costs shall not exceed two million five hundred thousand
dollars ($2,500,000) and (D) the Purchaser Outside Date has been extended
pursuant to clause (C) above, this Agreement has not been terminated in
accordance with its terms and the Closing has not occurred by February 29, 2004
then, in such event, Purchaser shall have the right, by written election to
Seller, to elect to extend the Purchaser Outside Date (as defined herein and as
extended by clause (C) immediately above) from February 29, 2004 to March 31,
2004, provided that (1) Purchaser delivers by wire transfer of immediately
available funds to an account or accounts specified by Seller, and Seller
receives, five million dollars ($5,000,000) on or prior to March 1, 2004 (the
"Fifth Deposit Payment") and (2) Purchaser shall be responsible for any
incremental costs (including extension costs and exit fees) incurred by Seller
with respect to Seller's Financing as a result of or otherwise in connection
with Purchaser's election to extend the Purchaser Outside Date and the extension
of the Purchaser Outside Date, which costs shall not exceed two million five
hundred thousand dollars ($2,500,000).
Section 1.3 Deliveries at the Closing.
(a) At the Closing, Seller, or its Subsidiaries, as applicable, will (i)
execute, acknowledge (if appropriate) and deliver to Purchaser (1) such
appropriately executed specialty warranty deeds (the "Deeds") in the form
attached hereto as Exhibit F (with such changes and modifications as are
required under applicable state law in respect of special or limited warranty
deeds, provided that such changes and modifications do not materially increase
the scope of the warranties contained in the deeds or Seller's or its
Subsidiaries' liability or obligations under such deeds) and (2) other
instruments of sale, assignment, transfer and conveyance in the form attached
hereto as Exhibit B (including a xxxx of sale with respect to personal property
owned by Seller and located on a Portfolio Property) and Exhibit C (an
assignment and assumption of leases and security deposits and an assignment and
assumption of the Assumed Loans and Assigned Contracts and tenant and utility
letters) evidencing and effecting the sale and transfer to Purchaser of the
Portfolio, and such other documents as are specifically required to be executed
by Seller by this Agreement (it being understood that all such instruments and
other documents (other than the Deeds delivered at Closing and any Deferral
Closing) shall be in the nature of "quitclaim" deeds and assignments and shall
not require Seller or any other Person to make any representations, warranties
or
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covenants (other than that Purchaser is assuming the Assumed Liabilities),
including as to matters of title, express or implied); (ii) deliver to Purchaser
the certificates required pursuant to Sections 5.2(a), 5.2(b) and 5.2(c); (iii)
execute and deliver to Purchaser the FIRPTA Certificate; (iv) deliver to
Purchaser possession of the Properties, subject to the Permitted Liens; and (v)
deliver such other documents as are required to be delivered by Seller at the
Closing pursuant to the terms hereof (subject to the limitations as to
representations, warranties and covenants set forth in clause (i)(2) above) to
effect the Sale and the other transactions contemplated hereby. Notwithstanding
the warranties in the Deeds delivered by Seller or the applicable Subsidiary of
Seller that holds title to any Portfolio Property immediately prior to the
Closing, Purchaser and Parent agree that in no event shall Seller or its
Subsidiaries have any liability whatsoever under or in connection with such
warranties or Deeds unless and until the grantee under such Deeds and such
grantee's successors and assigns and anyone otherwise claiming through such
grantee shall have first diligently pursued and exhausted all other available
remedies against third parties (including insurance companies), and, in any
event, Seller's and its Subsidiaries' aggregate liability under all such
warranties and Deeds shall not exceed (the "Cap") the lesser of (x) any damages
not recoverable from third parties through diligent exercise of such other
remedies or (y) $4,500,000; provided, further that Purchaser shall fully and
forever indemnify and defend Seller and each Seller Subsidiary, and hold Seller
and each Seller Subsidiary harmless, from and against any and all such liability
in excess of the Cap.
(b) At the Closing, Purchaser will (i) deliver to Seller by wire transfer
to the bank account or bank accounts per the wire transfer instructions on
Section 1.3(b) of the Seller Disclosure Letter, immediately available funds in
an aggregate amount equal to the Purchase Price Balance; (ii) execute,
acknowledge (if appropriate) and deliver to Seller instruments of assumption in
the form attached hereto as Exhibit C (including an assignment and assumption of
leases and security deposits and an assignment and assumption of the Assumed
Loans and Assigned Contracts) evidencing and effecting the assumption by
Purchaser of the Assumed Liabilities, and such other documents as are required
to be executed by Purchaser and Parent by this Agreement (it being understood
that such instruments shall not require Purchaser or any other Person to make
any representations or warranties or covenants (other than that Purchaser is
assuming the Assumed Liabilities), express or implied); (iii) deliver to Seller
the certificates required pursuant to Sections 5.3(a), 5.3(b) and 5.3(c); (iv)
deliver evidence reasonably satisfactory to Seller that it has been named as an
insured party, as its interest may appear, on all of Purchaser's insurance
policies relating to the Portfolio Properties (Purchaser hereby covenanting
(which covenant shall survive the Closing) that Seller shall remain a named
insured under such insurance policies (or, if such policies are replaced with
comparable policies reasonably satisfactory to Seller, such replacement
insurance policies of Purchaser relating to the Portfolio Properties) for a
period of at least one year from the Closing), and that Purchaser shall use
reasonable best efforts to provide Seller thirty days' notice of termination or
cancellation or replacement of any such insurance policies (or, if thirty days'
notice is not practicable, as much notice as is reasonably practicable); and (v)
deliver such other documents as are required to be delivered by Purchaser and
Parent at the Closing pursuant to the terms hereof to effect the Sale and the
other transactions contemplated hereby.
Section 1.4 Portfolio. The capitalized term "Portfolio" shall mean all
right, title and interest of Seller in and to (a) the communities and other
assets listed on Section 1.4 of the Seller Disclosure Letter and (b) the Homes
and the Notes. Any leases, agreements, commitments, licenses and other contracts
listed on Section 1.4 of the Seller Disclosure Letter shall at the Closing be
assigned to, and assumed by, Purchaser as part of the Sale (such contracts, the
"Assigned Contracts").
Section 1.5 Excluded Assets. The Portfolio shall not include, and the
Purchaser shall have no claim or entitlement to, any property or asset other
than the assets specifically listed or described in Section 1.4, and, without
limiting the generality of the foregoing, shall expressly exclude the assets
listed or described in Section 1.5(A) of the Seller Disclosure Letter and rights
to trade names or any other
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names that may be used by Seller or any of its Subsidiaries in the operation of
their businesses or that may otherwise be used in the operation of the Portfolio
(except the names listed on Section 1.5(B) of the Seller Disclosure Letter other
than any such names that include references to "Chateau," "Chateau Communities,"
"ROC," "ROC Communities" or "CP Limited Partnership").
Section 1.6 Assumption of Liabilities. Upon the terms and subject to the
conditions of this Agreement, Purchaser shall unconditionally assume on the
Closing Date and shall unconditionally pay, perform and discharge when due, and
Purchaser shall fully and forever indemnify and defend Seller and each Seller
Representative, and hold Seller and each Seller Representative harmless, from
and against any and all debts, obligations and other Liabilities (including
reasonable out-of-pocket attorney's and other professional fees, including any
related to the enforcement of this Agreement) of whatever kind and nature,
primary or secondary, direct or indirect, absolute or contingent, known or
unknown, accrued or unaccrued, whether relating to or arising prior to, at or
after the Closing, in each case, to the extent resulting from, arising out of or
relating to the Portfolio (except with respect to the Excluded Liabilities (as
defined herein), which Seller is retaining and shall be solely responsible for),
including the following (collectively, the "Assumed Liabilities"):
(a) all Indebtedness secured by any asset included in the Portfolio,
including any Liabilities to lenders under or in connection with the Assumed
Loans or the Prepayable Debt;
(b) all Liabilities with respect to or otherwise in connection with all
pending, threatened or other actions, suits, proceedings, investigations or
other claims that relate to the Portfolio or any asset in the Portfolio, at Law,
in equity or otherwise, or any tort or other claims relating to or arising from
the Portfolio or any asset in the Portfolio or any matter, fact, circumstance or
condition relating to the Portfolio or any asset in the Portfolio;
(c) all Liabilities relating to or arising from the ownership, operation,
possession or management of the Portfolio or any asset in the Portfolio,
including (1) accounts payable and trade obligations and (2) to the extent set
forth in Section 1.1(f) of the Seller Disclosure Letter, inter-company
obligations;
(d) all Liabilities under or in connection with the leases, agreements,
commitments, licenses or other contracts, including any Assigned Contracts,
included in the Portfolio or relating to any asset in the Portfolio;
(e) all Liabilities for any violation arising in connection with or related
to the Portfolio or any asset of the Portfolio under any Law, ordinance, rule or
regulation relating to zoning, environmental matters, health, safety or any
other matter;
(f) all Liabilities relating to the condition of the Portfolio or any asset
in the Portfolio or the presence thereon of any Hazardous Materials or otherwise
arising under any Environmental Law or constituting an Environmental Claim in
relation to the Portfolio or any asset in the Portfolio;
(g) all items of income and expense that are assumed by Purchaser pursuant
to Section 1.9; and
(h) all other Liabilities in any way resulting from, arising out of or
relating to the Portfolio or any asset in or activity resulting from, arising
out of or relating to the Portfolio.
Purchaser's obligations under this Section 1.6 shall not be subject to offset or
reduction by reason of any actual or alleged breach of any representation,
warranty or covenant contained in this Agreement or any
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document delivered in connection herewith or any right or alleged right to
indemnification hereunder. Notwithstanding anything to the contrary contained
herein, Seller shall assign to Purchaser at the Closing, subject to Purchaser
complying with its obligations under this Section 1.6 to indemnify and defend
Seller and each Seller Representative, and hold Seller and each Seller
Representative harmless, from and against any and all Assumed Liabilities, all
proceeds Seller or any Subsidiary thereof may be entitled to after the date
hereof with respect of any insurance policy held at any time prior to the
Closing by Seller or any subsidiary thereof with respect to any Portfolio
Property to the extent related to an Assumed Liability, such assignment to be
effected by an instrument mutually acceptable to Purchaser and Seller.
Section 1.7 Excluded Liabilities. Notwithstanding anything to the contrary
in this Agreement, Purchaser shall not assume or be liable for any of the
following obligations or liabilities of Seller and its Subsidiaries
(collectively, the "Excluded Liabilities"), and Seller and its Subsidiaries
shall retain, and shall continue to be responsible after the Closing Date for,
and shall forever indemnify and defend Purchaser and its Affiliates and hold
them harmless from and against all of the Excluded Liabilities:
(a) any and all inter- and intra-company payables (except for such
payables set forth in Section 1.1(f) of the Seller Disclosure Letter);
(b) the 100 Oaks Liability;
(c) any and all Liabilities for (x) Taxes of Seller or any Affiliate
thereof or (y) Taxes that are imposed by any taxing authority with
respect to taxable periods ending on or prior to the Closing Date that
result from, arise out of or relate to the Portfolio, in all cases
except as otherwise provided in Section 1.9 (in respect of certain
prorated items for the calendar year in which the Closing occurs as
provided therein) and Section 4.7 (Transfer and Gains Taxes);
(d) subject to Sections 3.1(d) and 4.12, any and all Employee Liabilities;
(e) any and all obligations or other Liabilities to the extent resulting
from, arising out of, or relating to the Tax Protection Agreement (as
defined in the Merger Agreement) and any obligation of Seller or any
of its Affiliates to indemnify any Person for Taxes;
(f) any and all obligations and other Liabilities arising out of or in
connection with any negligent action or negligent omission that
results in a breach of any of Seller's covenants or agreements set
forth in either (i) clause (1) of Section 3.1(a) or (ii) Section
3.1(b) (except during the time when Purchaser is managing, pursuant to
Section 3.1(d), the relevant Portfolio Property and such action or
omission was among the responsibilities of Purchaser pursuant to the
Management Agreement);
(g) any and all obligations and other Liabilities arising out of or in
connection with Seller's violation of Section 3.1(a) or Section 3.1(b)
to the extent that such violation results from Seller's or any of its
Subsidiaries' (x) failure to pay Taxes, debts or other obligations
when due, (y) incurrence of new indebtedness with respect to any
Portfolio Property or (z) sales or other dispositions or transfers of
any Portfolio Property;
(h) all items of income and expense that are assumed by Seller pursuant to
Section 1.9; and
(i) any other Liabilities that do not result from, arise out of or relate
to the Portfolio except as otherwise specifically provided herein.
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Section 1.8 As Is, Where Is. Purchaser has been afforded the opportunity to
conduct, and has conducted, a due diligence investigation and review of the
Portfolio. Purchaser acknowledges that Seller makes no representations or
warranties, other than those set forth in Sections 1.1(d), 1.1(e), 1.1(f) and
2.1, in connection with this transaction (or otherwise), and that Seller's
Affiliates make no representations, warranties or covenants whatsoever in
connection with this transaction (or otherwise). Purchaser accepts, and will at
Closing accept, the Portfolio on an as is, where is basis, without any
representations or warranties, express or implied, of any kind or nature
whatsoever (except as provided in the Deeds). None of Seller's representations
or warranties which relate to the Portfolio or matters which arise in connection
with the Portfolio shall survive the Closing (except to the extent specifically
provided herein), and Purchaser shall not have any right or remedy after the
Closing for or in connection with any breach thereof (except to the extent
specifically provided herein).
Section 1.9 Proration. Notwithstanding Sections 1.6 and 1.7, immediately
prior to the Closing Date, the Purchase Price Balance shall be adjusted to
account for the following items of income and expense, which shall be prorated
(as applicable) on a per diem basis as if Seller owned the Portfolio for the
entire day on the Closing Date:
(a) All real estate and personal property taxes due and payable in or for
the calendar year in which the Closing occurs and installments of special
assessments due and payable prior to the Closing Date. If at the time of
Closing, the tax rate or the assessed valuation for the year in which the
Closing occurs has not yet been fixed, real estate and personal property taxes
shall be prorated based upon the tax rate and the assessed valuation established
for the previous tax year. Except for errors made in calculation or in the use
of incorrect data, the proration of real estate and personal property taxes at
Closing shall be final and no subsequent adjustments for variances in the actual
tax rate or assessed valuation shall be made.
(b) All installments of special assessments not yet due and payable shall
be paid by Purchaser.
(c) Current rents, advance rentals, and other charges payable by tenants
under the Leases; premiums under assigned insurance policies (if any) and
utility charges and deposits made by Seller with respect to common area
utilities. Notwithstanding the foregoing sentence, any security deposits held by
Seller or its Affiliates with respect to the Portfolio Properties shall be, at
Seller's election, either (i) transferred to Purchaser at Closing or (ii)
applied against the Purchase Price Balance payable pursuant to Section 1.1;
provided, however, that if Seller makes the election pursuant to clause (ii),
Seller shall provide Purchaser with a schedule setting forth the name of each
tenant who has a security deposit and the amount of such deposit.
(d) Section 1.9(d)(i) of the Seller Disclosure Letter sets forth a list as
of the date hereof of all tenant receivables related to the Portfolio Properties
less than 60 days past due. Section 1.9(d)(ii) of the Seller Disclosure Letter
sets forth a list as of the date hereof of all tenant receivables related to the
Portfolio Properties 60 days or more past due. Each of Section 1.9(d)(i) and
1.9(d)(ii) of the Seller Disclosure Letter shall be updated immediately prior to
the Closing to reflect tenant receivables related to the Portfolio Properties
less than 60 days past due as of the Closing Date and tenant receivables 60 days
or more past due, in each case, as reflected on the consolidated books and
records of Seller and its Subsidiaries as of the Closing Date. Notwithstanding
anything to the contrary herein, Purchaser shall acquire all such tenant
receivables referred to on Section 1.9(d)(i) and 1.9(d)(ii) of the Seller
Disclosure Letter but shall only pay at the Closing to Seller (by wire transfer
to the bank account or bank accounts per the wire transfer instructions on
Section 1.3(b) of the Seller Disclosure Letter in immediately available funds)
an amount equal to the aggregate amount of the tenant receivables referred to on
Section 1.9(d)(i) of the Seller Disclosure Letter as updated as of the Closing
Date and provided further that,
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notwithstanding anything to the contrary herein, no tenant receivables shall,
other than pursuant to Section 1.9(c) and this Section 1.9(d), be subject to any
proration whatsoever or any adjustments to proration.
(e) All other items of accrued or prepaid income and expenses shall be
prorated on an accrual basis as of the Closing Date on the basis of the most
recent ascertainable amounts of or other reliable information in respect to each
such item of income and expenses.
(f) Refundable cash or other refundable deposits posted with utility
companies or other entities in connection with the Portfolio which are
assignable and which are assumed by Purchaser shall be credited to Seller at
Closing, or at Seller's option, Seller shall be entitled to receive and retain
such refundable cash and deposits.
(g) To the extent any of the above prorations (other than pursuant to
Section 1.9(d)) are based on estimates or are later (but in no event more than
90 days after the Closing) determined to be inaccurate, Purchaser and Seller
shall appropriately adjust the prorations as soon as practicable after actual
income and expenses have been ascertained, but in any event no later than ninety
days after the Closing Date (with Seller responsible for paying any amounts
determined to be owing to Purchaser as a result of such adjustment and Purchaser
responsible for paying any amounts determined to be owing to Seller as a result
of such adjustment). During such ninety-day period, each of Seller and Purchaser
shall cooperate reasonably with the other in connection with such adjustment.
There shall be no prorations or adjustments to the Purchase Price Balance except
as specified in this Section 1.9 or elsewhere in this Agreement, and the
provisions of this Section 1.9 shall survive the Closing for purposes of this
Section 1.9(g) for such ninety-day period, after the end of such period, this
Section 1.9 shall terminate and no further prorations shall be made.
(h) Except as otherwise expressly provided in this Agreement, all
prorations provided for herein shall be final.
Section 1.10 Deferred Closings. If the Closing occurs, in the event that a
consent of a third party lender is required for Purchaser to assume an Assumed
Loan pursuant hereto and such consent has not been obtained by the Closing (a
"Deferral Event"), then (1) at the Closing, such Assumed Loan shall not be
assumed, and the Portfolio Property securing such Assumed Loan and any Homes
located on such Portfolio Property and any Notes related thereto shall not be
acquired, by Purchaser from Seller (or its Subsidiaries), (2) at the Closing,
the Purchase Price Balance shall be adjusted accordingly to reflect clause (1)
by (x) subtracting from the Purchase Price Balance an aggregate amount equal to
the sum of (i) the gross value allocated to such Portfolio Property on Section
1.10 of the Seller Disclosure Letter, plus (ii) the Homes Amount with respect to
such Homes, plus (iii) the Notes Amount with respect to such Notes and (y)
deeming the Loan Amount as of the Closing Date with respect to such Assumed Loan
to be zero, (3) Purchaser shall not assume any Assumed Liabilities with respect
to any such Portfolio Property and (4) the parties shall at Purchaser's cost and
expense use reasonable best efforts to obtain such consent as promptly as
practicable. On the first business date after such consent is obtained (such
date, a "Deferral Closing Date") (A) such Assumed Loan shall be assumed, and the
Portfolio Property relating to such Assumed Loan and such Homes and Notes shall
be acquired, by Purchaser from Seller (or its Subsidiaries), (B) Purchaser shall
deliver to Seller by wire transfer to the bank account or bank accounts per the
wire transfer instructions on Section 1.3(b) of the Seller Disclosure Letter,
immediately available funds in an aggregate amount equal to the sum of (i) the
gross value allocated to such Portfolio Property on Section 1.10 of the Seller
Disclosure Letter, plus (ii) the Homes Amount with respect to such Homes, plus
(iii) the Notes Amount with respect to such Notes, as of such Deferral Closing
Date, minus (iv) the Loan Amount with respect to such Assumed Loan, subject to
adjustment to account for the items of income and expense referred to in Section
1.9 prorated (as applicable) on a per diem basis as if Seller
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owned the applicable Portfolio Properties and Homes and Notes and Assumed Loans
for the entire date on the Deferral Closing Date (with the terms of such Section
1.9 applying hereto mutatis mutandis) (C) Purchaser shall assume any Assumed
Liabilities with respect to any such Portfolio Property and (D) the parties
hereto shall comply with the terms and conditions of this Agreement and close
the assignment to and assumption by Purchaser of such Assumed Loan and sale to
and acquisition by Purchaser of such related Portfolio Property, Homes and Notes
(a "Deferral Closing") on such Deferral Closing Date; provided, however, that
if, by or on the date that is ninety days (the "Decision Date") after the
Closing Date any such consent has not been obtained, then Purchaser must elect
either (1) to assume all Assumed Loans and Assumed Liabilities not yet assumed
and acquire all related Portfolio Properties and Homes and Notes and to
otherwise comply with the provisions of clauses (A), (B), (C) and (D)
immediately above effective as of the Decision Date or (2) to not so assume (and
relinquish any further rights to) such Assumed Loans and Assumed Liabilities
related thereto and not so acquire (and relinquish any further rights to) such
related Portfolio Properties and Homes and Notes and instead to deliver, and
Purchaser shall deliver on the Decision Date, to Seller by wire transfer to the
bank account or bank accounts per the wire transfer instructions on Section
1.3(b) of the Seller Disclosure Letter, immediately available funds in an
aggregate amount equal to the product of (x) $200,000 multiplied by (y) the
number of Portfolio Properties not so acquired by Purchaser as of the Decision
Date.
Section 1.11 Change in Transaction Structure. If and to the extent that
Seller and Purchaser mutually determine that it would be beneficial to effect
the transactions contemplated by this Agreement in part or in whole by means of
a sale of equity interests in entities that own Portfolio Properties, then
Seller and Purchaser shall mutually cooperate in good faith to change the
structure hereof by effecting the transactions contemplated hereby by means of a
sale from Seller to Purchaser of the equity interests of the entities that own
Portfolio Properties rather than a direct sale of the Portfolio Properties from
Seller to Purchaser; provided, however, that no such change in the structure
shall (i) alter or change the amount or kind of consideration to be issued to,
or rights or obligations of, Seller, (ii) adversely affect the tax treatment to
Seller or Purchaser as a result of such change, (iii) otherwise adversely affect
Seller or Purchaser or the Portfolio Properties, (iv) reasonably be expected to
impede or delay the consummation of the transactions contemplated hereby or (v)
constitute a waiver of any condition to the transactions provided herein.
Section 1.12 Capital Improvements. Notwithstanding anything to the contrary
herein (including anything in Section 3.1) but subject to the last sentence of
this Section 1.12, Seller shall be permitted to make the capital improvements
described on Section 1.12 of the Seller Disclosure Letter and the Purchase Price
Balance shall be increased by an amount equal to the costs and out-of-pocket
expenses incurred by Seller and its Affiliates in connection with or otherwise
with respect to such capital improvements; provided, however, that such costs
and out-of-pocket expenses per Portfolio Property shall not exceed the amounts
set forth on such Section 1.12 of the Seller Disclosure Letter without the prior
written consent of Purchaser. Prior to the Closing, Seller shall provide
Purchaser with a schedule setting forth all such costs and out-of-pocket
expenses.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of Seller. Except as set forth
in the Seller Disclosure Letter, Seller, with respect to the Portfolio and the
Assumed Liabilities, represents and warrants to Purchaser and Parent as follows:
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(a) Organization, Standing and Corporate Power of Seller. Seller is a
limited liability company duly formed, validly existing and in good standing
under the Laws of the State of Delaware and has the requisite power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Seller is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the nature of the business it
is conducting, or the ownership, operation or leasing of its properties or the
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 or would not
reasonably be expected to have a Portfolio Material Adverse Effect. For the
purposes of this Agreement, a "Portfolio Material Adverse Effect" is any event,
change, circumstance or effect which would have or would reasonably be expected
to have a material adverse effect on (i) the business, assets, liabilities,
properties, condition (financial or otherwise) or results of operation of the
Portfolio taken as a whole, or (ii) the ability of Seller or any of its
Subsidiaries to perform any of its or their obligations hereunder or consummate
any of the transactions contemplated hereby, provided that a Portfolio Material
Adverse Effect shall not include any change with respect to the Portfolio,
Seller or any Seller Subsidiary or the Assumed Liabilities resulting from or
attributable to (i) general national, international or regional economic or
financial conditions, (ii) the announcement, pendency or consummation of this
Agreement or the other Transaction Documents or the transactions contemplated
hereby and thereby, or (iii) conditions generally affecting the industries in
which Seller and the Seller Subsidiaries operate. Seller has heretofore made
available to Purchaser complete and correct copies of the Certificate of
Formation and Limited Liability Company Agreement of Seller (including all
amendments thereto through the date hereof and, collectively, the "Seller LLC
Agreement"), which are the organizational documents for Seller as of the date
hereof, and all of which are listed on Section 2.1(a) of the Seller Disclosure
Letter. Each jurisdiction in which Seller is qualified or licensed to do
business and each assumed name under which it conducts business in any
jurisdiction are identified in Section 2.1(a) of the Seller Disclosure Letter.
(b) Authority; No Violations; Consents and Approval.
(i) Seller has all requisite power and authority to execute and
deliver this Agreement and all other documents to be executed by Seller in
connection with the transactions contemplated hereby and thereby (each, a
"Transaction Document" and collectively, the "Transaction Documents") and
to consummate the transactions contemplated hereby and thereby. Each Seller
Subsidiary that is a party to any Transaction Document has all requisite
power and authority to enter into such Transaction Document and to
consummate the transactions contemplated thereby. The execution and
delivery of the Transaction Documents and the consummation of the
transactions contemplated hereby or thereby have been duly authorized by
all necessary action on the part of Seller and each applicable Seller
Subsidiary. Except for the approval of the members of Seller and approval
of the Advisory Board of Seller's majority member (both of which approvals
have been obtained), no vote of, or consent by, the holders of limited
liability company interests of Seller or of any class of capital stock of
any Seller Subsidiary is necessary to authorize the execution and delivery
by Seller of this Agreement and the other Transaction Documents, or the
consummation by it of the transactions contemplated hereby and thereby. The
Transaction Documents have been duly executed and delivered by Seller and
each applicable Seller Subsidiary and, assuming the due and valid
authorization, execution and delivery thereof by Parent, Purchaser and any
Purchaser Subsidiary that is a party thereto, each such Transaction
Document constitutes the valid and binding obligation of Seller and such
applicable Seller Subsidiary enforceable in accordance with their terms,
subject, as to enforceability, to bankruptcy, insolvency, reorganization,
moratorium and other Laws of general applicability relating to or affecting
creditors' rights and to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
Law).
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(ii) Except as set forth in Section 2.1(b)(ii) of the Seller
Disclosure Letter, the execution and delivery of the Transaction Documents
by Seller and each applicable Seller Subsidiary does not, and the
consummation by Seller and each applicable Seller Subsidiary of the
transactions contemplated hereby or thereby, and compliance by Seller and
each applicable Seller Subsidiary with the provisions hereof or thereof,
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 material obligation, or
give rise to a right of purchase under, result in the creation of any
pledges, claims, liens, charges, encumbrances and security interests of any
kind or nature whatsoever (each, a "Lien") upon any of the properties or
assets of the Portfolio under, require any filing with or consent or
approval of any third party or otherwise result in a material detriment or
default to the Portfolio under, any provision of (A) the Seller LLC
Agreement or any provision of the comparable charter or organizational
documents of any of the Seller Subsidiaries, (B) any Material Contract (as
defined herein), or (C) assuming the consents, approvals, authorizations or
permits and filings or notifications referred to in Section 2.1(b)(iii) are
duly and timely obtained or made, any judgment, order, decree, statute,
Law, ordinance, rule or regulation applicable to Seller or any of the
Seller Subsidiaries to the extent relating to the Portfolio, other than, in
the case of clauses (B) or (C), any such conflicts, violations, defaults,
rights, Liens or detriments that, individually or in the aggregate, would
not reasonably be expected to have a Portfolio Material Adverse Effect.
(iii) Except as set forth in Section 2.1(b)(iii) of the Seller
Disclosure Letter, no consent, approval, order or authorization of, or
registration, declaration or filing with, or permit from any Governmental
Entity, is required by or with respect to Seller or any of the Seller
Subsidiaries in connection with the execution and delivery of the
Transaction Documents by Seller or each of the applicable Seller
Subsidiaries or the consummation by Seller or the applicable Seller
Subsidiaries of the transactions contemplated hereby or thereby, except
for: (A) such filings and approvals as may be required by any applicable
state takeover Laws or Environmental Laws (as defined herein) as more
specifically described in Section 2.1(b)(iii) of the Seller Disclosure
Letter; and (B) any such consent, approval, order, authorization,
registration, declaration, filing or permit that the failure to obtain or
make (1) individually or in the aggregate, would not reasonably be expected
to have a Portfolio Material Adverse Effect or (2) individually or in the
aggregate, would not reasonably be expected to prevent or delay in any
material respect the consummation of any of the transactions contemplated
hereby.
(c) Absence of Certain Changes or Events. Except as disclosed or reflected
in the Seller SEC Documents filed with the SEC prior to the date of this
Agreement or as disclosed in Section 2.1(c) of the Seller Disclosure Letter,
since June 30, 2003, to the Knowledge of Seller, there has not been any material
adverse change in the condition (financial or otherwise) of the Portfolio taken
as a whole. Except as disclosed in the Seller SEC Documents filed prior to the
date hereof, or as disclosed in Section 2.1(c) of the Seller Disclosure Letter,
from June 30, 2003, (i) Seller and the Seller Subsidiaries have conducted their
businesses with respect to the Portfolio in the ordinary course consistent with
past practice, and (ii) to the Knowledge of Seller, there has not been any
Portfolio Material Adverse Effect.
(d) No Default. Except as set forth in Section 2.1(d) of the Seller
Disclosure Letter, neither Seller nor any of the Seller Subsidiaries is, with
respect to the Portfolio, in default or violation (and no event has occurred
which, with notice or the lapse of time or both, would constitute a default or
violation) of, and no notice of any default or acceleration of Indebtedness has
been received from any lender in connection with, any term, condition or
provision of (i) the Seller LLC Agreement or the comparable charter or
organizational documents of any of the Seller Subsidiaries, (ii) any Material
Contract (as defined herein), or (iii) any order, writ, injunction, decree,
statute, rule or regulation applicable to Seller or any of the Seller
Subsidiaries to the extent relating to the Portfolio, except in the case of
(iii) for
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defaults or violations which, individually or in the aggregate, would not
reasonably be expected to have a Portfolio Material Adverse Effect.
(e) Compliance with Applicable Laws. Seller and the Seller Subsidiaries
hold all certificates, permits, licenses, variances (including building permits
and certificates of occupancy), exemptions, orders, franchises and approvals of
all Governmental Entities necessary for the lawful conduct of their respective
businesses and the occupancy and operation of the Portfolio Properties (the
"Seller Permits"), except where the failure so to hold such Seller Permits,
individually or in the aggregate, would not reasonably be expected to have a
Portfolio Material Adverse Effect. Seller and the Seller Subsidiaries are in
compliance with the terms of the Seller Permits, except where the failure to so
comply, individually or in the aggregate, would not reasonably be expected to
have a Portfolio Material Adverse Effect. Except as disclosed in the Seller SEC
Documents, the businesses of Seller and the Seller Subsidiaries to the extent
relating to the Portfolio are not being conducted in violation of any Law,
except for violations which, individually or in the aggregate, would not
reasonably be expected to have a Portfolio Material Adverse Effect. No notice,
charge, claim, action or assertion has been received by Seller or any of its
Subsidiaries or, to the knowledge of Seller, threatened against Seller or any of
its Subsidiaries, in each case, with respect to the Portfolio, alleging any
violation of Law, except for any such notice, charge, claim, action or assertion
which, individually or in the aggregate, would not reasonably be expected to
have a Portfolio Material Adverse Effect.
(f) Litigation. Except as disclosed in the Seller SEC Documents or as set
forth in Section 2.1(f) of the Seller Disclosure Letter and except for routine
litigation arising from the ordinary course of business of Seller and the Seller
Subsidiaries which are adequately covered by insurance and which, individually
or in the aggregate, would not reasonably be expected to have a Portfolio
Material Adverse Effect, there is no suit, claim, investigation, action or other
proceeding (including any mortgage foreclosure proceeding) pending or, to the
Knowledge (as defined herein) of Seller, threatened against or affecting or
relating to or involving any of the Portfolio Properties. Except as disclosed in
the Seller SEC Documents or in Section 2.1(f) of the Seller Disclosure Letter,
neither Seller nor any of the Seller Subsidiaries, nor any of their respective
properties or assets, is subject to any order, writ, judgment, injunction,
decree, determination or award which has or is reasonably likely to have a
Portfolio Material Adverse Effect. Section 2.1(f) of the Seller Disclosure
Letter sets forth a list of material claims, to Seller's knowledge, with respect
to the Portfolio.
(g) Benefits.
(i) Each Seller Employee Benefit Plan (as defined herein), related
trust (or other funding or financing arrangement, if applicable) and all
amendments thereto are listed in Section 2.1(g)(i) of the Seller Disclosure
Letter, true and complete copies of which have been made available to
Purchaser, as have the most recent summary plan descriptions and Form
5500s. "Seller Employee Benefit Plan" shall mean any "pension" plan (within
the meaning of Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), each profit-sharing or other employee
benefit, bonus, incentive compensation, equity compensation, deferred
compensation, retirement, supplemental retirement, thrift, savings,
incentive, vacation, severance or "welfare" plan (within the meaning of
Section 3(1) of ERISA) and each other employee benefit plan, program,
policy fund, program or other or arrangement maintained or sponsored by, or
with respect to which contributions are made, or are required to be made
by, Seller or its Subsidiaries, or by any trade or business, whether or not
incorporated (an "ERISA Affiliate"), that together with Seller or any
Seller Subsidiary would be deemed a "single employer" within the meaning of
Section 4001(b) of ERISA, or to which Seller or any Seller Subsidiary or
any ERISA Affiliate is a party, whether written or oral, for the benefit of
any current or former Portfolio Employee. For purposes of this Agreement,
"Portfolio Employees" means the individuals (i) whose employment primarily
consists of performing services in
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connection with the Portfolio Properties, (ii) whose location of employment
is one or more of the Portfolio Properties (except for required business
travel) and (iii) whose names are set forth on Section 2.1(g)(i) of the
Seller Disclosure Letter. Section 2.1(g)(i) of the Seller Disclosure Letter
shall be updated to Purchaser by Seller immediately prior to the Management
Start Date or, if the Management Election is not exercised or a Management
Termination occurs, immediately prior to the Closing.
(ii) All individual employment, termination, severance, change in
control, retention bonus, post-employment and other compensation agreements
existing prior to the execution of this Agreement or which will exist prior
to the Closing, which are between Seller or a Seller Subsidiary and any
Portfolio Employee are listed in Section 2.1(g)(ii) of the Seller
Disclosure Letter (collectively, the "Seller Severance Agreements").
(h) Labor and Employment Matters. Neither Seller nor any of the Seller
Subsidiaries is a party to any collective bargaining agreement or other current
labor agreement with any labor union or organization with respect to any of the
Portfolio Employees.
(i) Intangible Property. Seller and the Seller Subsidiaries own, possess or
have adequate rights to use all trademarks, trade names, patents, service marks,
brand marks, brand names, computer programs, databases, industrial designs and
copyrights necessary for the operation of the Portfolio (collectively, the
"Seller Intangible Property"), except where the failure to possess or have
adequate rights to use such properties, individually or in the aggregate, would
not reasonably be expected to have a Portfolio Material Adverse Effect. All of
the Seller Intangible Property is owned or licensed by Seller or the Seller
Subsidiaries free and clear of any and all Liens, except those that,
individually or in the aggregate, would not reasonably be expected to have a
Portfolio Material Adverse Effect, and neither Seller nor any such Seller
Subsidiary has forfeited or otherwise relinquished any Seller Intangible
Property which forfeiture, individually or in the aggregate, has resulted in or
would reasonably be expected to result in a Portfolio Material Adverse Effect.
To the Knowledge of Seller, the use of Seller Intangible Property by Seller or
the Seller Subsidiaries does not conflict with, infringe upon, violate or
interfere with or constitute an appropriation of any right, title, interest or
goodwill, including any intellectual property right, trademark, trade name,
patent, service xxxx, brand xxxx, brand name, computer program, database,
industrial design, copyright or any pending application therefor, of any other
Person, and there have been no claims made, and neither Seller nor any of the
Seller Subsidiaries has received any notice of any claim or otherwise knows that
any of the Seller Intangible Property is invalid or conflicts with the asserted
rights of any other Person or has not been used or enforced or has failed to
have been used or enforced in a manner that would result in the abandonment,
cancellation or unenforceability of any of the Seller Intangible Property,
except for any such conflict, infringement, violation, interference, claim,
invalidity, abandonment, cancellation or unenforceability that, individually or
in the aggregate, would not reasonably be expected to have a Portfolio Material
Adverse Effect.
(j) Environmental Matters. For purposes of this Agreement, (x)
"Environmental Law" means any Law of any Governmental Entity relating to
pollution, human health, safety or protection of the environment or natural
resources, including the federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA") and the Resource Conservation
and Recovery Act of 1976, (y) "Hazardous Material" means (A) any petroleum or
petroleum products, radioactive materials, asbestos-containing materials, urea
formaldehyde foam insulation, and transformers and other equipment that contain
dielectric fluid containing greater than 50 parts per million polychlorinated
biphenyls ("PCBs"); and (B) any chemicals, materials, substances or wastes which
are 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 applicable Environmental Law, and (z)
"Environmental Claims" means all actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, notices of Liability or
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potential Liability, investigations, proceedings, consent orders or consent
agreements relating to any Environmental Law, any Environmental Permit or the
Release of any Hazardous Materials. Except as disclosed in Section 2.1(j) of the
Seller Disclosure Letter and except as would not have a Portfolio Material
Adverse Effect, to the Knowledge of Seller:
(i) Neither Seller nor any of the Seller Subsidiaries has received
written notice that any administrative or compliance order has been issued
that is still in effect, any complaint has been filed that remains
unresolved, any penalty has been assessed that has not been paid or any
investigation or review is pending or threatened by any Governmental Entity
with respect to any alleged failure, to the extent relating to the
Portfolio, by Seller or any Seller Subsidiary to have any permit, approval,
identification number, license or other authorization required under any
applicable Environmental Law (an "Environmental Permit") or with respect to
any treatment, storage, recycling, transportation, disposal or "release"
(as defined in 42 U.S.C. ss. 9601(22) ("Release")) by Seller or any Seller
Subsidiary of any Hazardous Material in violation of any Environmental Law.
(ii)(A) Except in compliance with applicable Environmental Laws there
are no asbestos-containing materials present on any Portfolio Property
owned or operated by Seller or any Seller Subsidiary, (B) there are no
regulated levels of PCBs present on any Portfolio Property owned or
operated by Seller or any Seller Subsidiary, and (C) there are no
underground storage tanks, active or abandoned, used for the storage of
Hazardous Materials currently present on any Portfolio Property owned or
operated by Seller or any Seller Subsidiary.
(iii) Neither Seller nor any Seller Subsidiary has received written
or, to the knowledge of Seller or any of the Seller Subsidiaries, oral
notice of a claim, that has not been resolved, (A) to the effect that it is
liable to a third party, including a Governmental Entity, as a result of a
Release of a Hazardous Material into the environment in violation of any
Environmental Law at any Portfolio Property, (B) asserting a violation of
applicable Environmental Laws relating to any of the Portfolio Properties,
or (C) asserting that Seller or any of the Seller Subsidiaries or the
operation or condition of any of the Portfolio Properties is in violation
of any Environmental Law.
(iv) No Portfolio Property is listed on the National Priorities List
promulgated pursuant to CERCLA or on any similar state list of sites where
such listing requires active investigation or clean-up.
(v) Seller and the Seller Subsidiaries are, with respect to the
Portfolio Properties, in compliance with all applicable Environmental Laws
and all Environmental Permits.
(vi) Neither Seller nor any of the Seller Subsidiaries has Released
Hazardous Materials on any of the Portfolio Properties, except in
compliance with applicable Environmental Laws; and there is no condition
(x) at any Portfolio Property or (y) to the Knowledge of Seller and the
Seller Subsidiaries, caused by Seller or any of the Seller Subsidiaries at
any Portfolio Property, that in the case of either (x) or (y) is in
violation of Environmental Laws or would reasonably be expected to give
rise to an Environmental Claim.
(vii) There are no Environmental Claims relating to any of the
Portfolio Properties pending, or to the Knowledge of Seller or the Seller
Subsidiaries threatened, against Seller or any of the Seller Subsidiaries
or any of the Portfolio Properties.
(viii) Neither Seller nor any Seller Subsidiary currently has a duty
under any applicable Environmental Law to place any restriction relating to
the presence of Hazardous Material at any Portfolio Property.
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(k) Properties. To the Knowledge of Seller:
(i) Except as listed in Section 2.1(k)(i) of the Seller Disclosure
Letter, Seller or a Seller Subsidiary owns good and marketable fee simple
or leasehold title to each of the real properties (including any and all
improvements located on such properties) as identified in Section 2.1(k)(i)
of the Seller Disclosure Letter (each, a "Portfolio Property" and
collectively, the "Portfolio Properties"), which are all of the real estate
properties of the Portfolio owned or leased by Seller and the Seller
Subsidiaries, free and clear of Liens, easements, rights of way, rights of
first refusal, covenants, conditions, restrictions, title defects, written
agreements, Laws, ordinances and regulations affecting building use or
occupancy (including zoning regulations and building codes), or
reservations of an interest in title (collectively, "Seller Property
Restrictions") except for (1) debt and other matters identified on Section
2.1(k)(i) of the Seller Disclosure Letter, (2) inchoate Liens imposed for
construction work in progress or otherwise incurred in the ordinary course
of business for amounts not yet delinquent or which are being contested in
good faith by appropriate proceedings and, in each case, with respect to
which adequate reserves or other appropriate provisions are being
maintained by Seller or a Seller Subsidiary, (3) mechanics', workmen's and
repairmen's Liens (other than inchoate Liens for work in progress) which
have heretofore been bonded or insured, (4) Seller Property Restrictions
imposed or promulgated by Law or by any Governmental Entity which are
customary and typical for similar properties and all matters disclosed on
the existing title policies identified in Section 2.1(k)(i)(B) of the
Seller Disclosure Letter, (5) leases to residents and other customary third
parties disclosed in the Rent Roll (as defined below) or which are typical
for similar properties, and (6) real estate Taxes and special assessments
that are not yet delinquent or that are being contested in good faith by
appropriate proceedings and, in each case, with respect to which adequate
reserves or other appropriate provisions are being maintained by Seller or
a Seller Subsidiary (each, a "Permitted Lien"). To the Knowledge of Seller
and the Seller Subsidiaries, (A) none of the matters described in clauses
(2), (3) and (5) in the immediately preceding sentence (including matters
disclosed on any existing title policies identified in Section 2.1(k)(i)(A)
of the Seller Disclosure Letter) has or would reasonably be expected to
have, individually or in the aggregate, a Portfolio Material Adverse
Effect; (B) except as listed in Section 2.1(k)(i)(B) of the Seller
Disclosure Letter or as would not reasonably be expected to have a
Portfolio Material Adverse Effect, neither Seller nor any Seller Subsidiary
has received written notice to the effect that there are (or, with respect
to any Hometown Portfolio Properties as of the date hereof, otherwise has
knowledge that with respect thereto there are) any (1) condemnation or
rezoning or proceedings or any utility service moratoriums or other
moratoriums that are pending or, to the Knowledge of Seller and the Seller
Subsidiaries, threatened with respect to any material portion of any of the
Portfolio Properties or (2) zoning, building or similar Laws or orders that
are presently being violated or will be violated by the continued
maintenance, operation or use of any buildings or other improvements on any
of the Portfolio Properties or by the continued maintenance, operation or
use of the parking areas; and (C) except as listed in Section 2.1(k)(i)(C)
of the Seller Disclosure Letter or as would not reasonably be expected to
have a Portfolio Material Adverse Effect, neither Seller nor any Seller
Subsidiary has received written notice that it is currently in default or
violation of any Seller Property Restrictions applicable to any of the
Portfolio Properties.
(ii) Section 2.1(k)(ii) of the Seller Disclosure Letter sets forth the
rent roll for each of the Portfolio Properties (the "Rent Roll") as of the
date therein. Except as disclosed in Section 2.1(k)(ii) of the Seller
Disclosure Letter, the information set forth in the Rent Roll is true,
correct and complete in all material respects as of the date thereof.
(iii) Except as would not, individually or in the aggregate,
reasonably be expected to have a Portfolio Material Adverse Effect, no
tenants or other third parties have been granted options to purchase or
rights of first refusal which would require consent to, or be triggered by,
the Sale.
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(iv) Section 2.1(k)(iv) of the Seller Disclosure Letter contains a
list of any unfunded capital improvements being conducted by Seller or any
Seller Subsidiary in excess of $100,000 at any one Portfolio Property.
(v) Except as set forth in Section 2.1(k)(v) of the Seller Disclosure
Letter or as would not reasonably be expected to have a Portfolio Material
Adverse Effect, the water serving each Portfolio Property is potable water
furnished by the local municipality in which each such Portfolio Property
is located; provided, however, that if the water system is privately owned
or operated, (with respect to any such system serving such Portfolio
Property that is a Hometown Portfolio Property as of the date hereof, it
has been operated in accordance with applicable state and federal law) and
neither Seller nor any Seller Subsidiary has received any uncured written
notice that there is a requirement that it be connected to the municipal,
county or other public system serving such Portfolio Property.
(vi) Except as set forth in Section 2.1(k)(vi) of the Seller
Disclosure Letter or as would not reasonably be expected to have a
Portfolio Material Adverse Effect, the sanitary sewer (waste removal)
system for each Portfolio Property is operated by the municipality in which
each such Property is located, and neither Seller nor any Seller Subsidiary
has received an uncured written notice that such sanitary sewer (waste
removal) system is not in compliance with applicable laws and regulations;
provided, however, that if any such system is privately owned or operated
(i) with respect to any such system for each Portfolio Property that is a
Hometown Portfolio Property as of the date hereof, such system has been
licensed, maintained, operated and tested in accordance with applicable
state and federal law, and has, in the two (2) year period prior to the
Closing, passed all tests with respect to water quality, and (ii) neither
Seller nor any Seller Subsidiary has received any uncured notice that there
is a requirement that it be connected to the municipal, county or other
public system serving such Portfolio Property.
(vii) Except as disclosed in Section 2.1(k)(vii) of the Seller
Disclosure Letter, a reputable title insurance company has issued policies
of title insurance insuring the fee simple or leasehold, as applicable,
title of Seller and the Seller Subsidiaries with respect to all of the
Portfolio Properties in amounts at least equal to the original cost
thereof, and, to Seller's Knowledge, such policies are valid and in full
force and effect and no claim has been made under any such policy.
(viii) Except as disclosed in Section 2.1(k)(viii) of the Seller
Disclosure Letter, or except as would not reasonably be expected to have a
Portfolio Material Adverse Effect, to the Knowledge of Seller and the
Seller Subsidiaries, no portion of any Portfolio Property lies in any flood
plain or includes any wetlands or vegetation or species protected by any
applicable laws.
(ix) Except as set forth in Section 2.1(k)(ix) of the Seller
Disclosure Letter, the gas and electrical system servicing each Portfolio
Property that is a Hometown Portfolio Property as of the date hereof is
owned and operated by a third party provider; provided, however, that if
any such gas or electrical system is privately owned or operated, such
system has been constructed, licensed, maintained, operated and tested in
accordance with applicable state and federal law.
(x) To the extent in Seller's possession as of the date hereof, Seller
has delivered with respect to the properties listed on Exhibit D hereto the
information specified on Exhibit D hereto.
(l) Insurance. Section 2.1(l) of the Seller Disclosure Letter sets forth an
insurance schedule of Seller with respect to the Portfolio and the Portfolio
Employees and all pending claims thereunder. Seller and each of the Seller
Subsidiaries maintains insurance on the Portfolio Properties with financially
responsible insurers in such amounts and covering such risks as are in
accordance with normal industry practice for companies engaged the ownership and
operation of manufactured housing communities
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(taking into account the cost and availability of such insurance). Except as set
forth in Section 2.1(l) of the Seller Disclosure Letter, neither Seller nor any
of the Seller Subsidiaries has received any written notice of cancellation or
termination with respect to any existing material insurance policy of Seller or
any of the Seller Subsidiaries relating to the Portfolio.
(m) Brokers. No broker, investment banker or other Person is entitled to
any broker's, finder's or other similar fee or commission in connection with the
transactions contemplated by the Transaction Documents based upon arrangements
made by or on behalf of Seller.
(n) Contracts.
(i) Section 2.1(n)(i) of the Seller Disclosure Letter lists all
Material Contracts of Seller and each Seller Subsidiary relating to the
Portfolio. Except as set forth on Section 2.1(n)(i) of the Seller
Disclosure Letter or in the Seller SEC Documents, each Material Contract is
valid, binding and enforceable and in full force and effect. For purposes
of this Agreement, with respect to Seller and each Seller Subsidiary,
"Material Contracts" shall mean, to the extent relating to the Portfolio,
(i) any loan or credit agreement, indenture, note, bond, debenture or any
other document or agreement evidencing a capitalized lease obligation or
other Indebtedness to any Person, including any such Indebtedness that may
be incurred pursuant to an agreement already executed, other than
Indebtedness in a principal amount less than $225,000 in the aggregate,
(ii) each ground lease (under which Seller or a Seller Subsidiary is
lessee), (iii) each material commitment, contractual obligation, borrowing,
capital expenditure, agreement to acquire real property, or transaction
entered into by Seller or any Seller Subsidiary which may result in total
payments by or liability of Seller or any Seller Subsidiary in excess of
$225,000, (iv) any other agreements filed or required to be filed as
exhibits to the Seller SEC Documents pursuant to Item 601(b)(10) of
Regulation S-K of Title 17, Part 229 of the Code of Federal Regulations,
(v) all contracts or arrangements between Seller or any Seller Subsidiary,
on the one hand, and any director, officer, employee, equityholder or
affiliate of Seller (or any of their respective affiliates), on the other
hand, (vi) all change in control or similar agreements or (vii) all other
contracts and agreements that are material to Seller and the Seller
Subsidiaries, taken as a whole, or the conduct of the business of Seller
and the Seller Subsidiaries, taken as a whole, or the absence of which
would, in the aggregate, have a Portfolio Material Adverse Effect.
(ii) All mortgages (and deeds of trust) on any of the assets of the
Portfolio are listed in Section 2.1(n)(ii) of the Seller Disclosure Letter
hereto.
(iii) Except as set forth in Section 2.1(n)(iii) of the Seller
Disclosure Letter, there is no confidentiality agreement, non-competition
agreement or other contract or agreement that contains covenants that
restrict Seller's ability to conduct its business in any location in a
manner that is material to the Portfolio.
(iv) Except as set forth in Section 2.1(n)(iv) of the Seller
Disclosure Letter, there are no indemnification agreements entered into by
and between Seller and any director or officer of Seller or any of the
Seller Subsidiaries relating to the Portfolio.
(o) No Other Representations or Warranties. Except for the representations
and warranties contained in this Section 2.1, the Deeds delivered at Closing or
any Deferral Closing or Sections 1.1(d), 1.1(e) and 1.1(f), neither Seller nor
any of its agents, Affiliates or representatives, nor any other Person, makes or
shall be deemed to make any representation or warranty to Purchaser or Parent,
express or implied, at law or in equity, on behalf of Seller, and Seller hereby
disclaims any such representation or warranty whether by Seller or any of its
officers, directors, employees, agents or representatives or any other Person,
with respect to the Portfolio or the execution and delivery of any of this
Agreement, any of
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the other Transaction Documents or the transactions contemplated hereby,
notwithstanding the delivery or disclosure to Purchaser or Parent or any of
their officers, directors, employees, agents or representatives or any other
Person of any documentation or other information by Seller or any of its
officers, directors, employees, agents or representatives or any other Person
with respect to any one or more of the foregoing. Without limiting the
generality of the foregoing, Seller makes no representation or warranty
regarding any assets other than the Portfolio and any Liabilities other than the
Assumed Liabilities, and none shall be implied at law or in equity.
Section 2.2 Representations and Warranties of Purchaser and Parent. Except
as set forth in the Purchaser Disclosure Letter, Purchaser and Parent, jointly
and severally, represent and warrant to Seller as follows:
(a) Organization, Standing and Corporate Power of Purchaser and Parent.
Each of Parent and Purchaser is a corporation and a limited partnership,
respectively, duly formed, validly existing and in good standing under the laws
of the State of Maryland and the State of Delaware, respectively. Each of Parent
and Purchaser is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the nature of their businesses or the ownership,
operation or leasing of their 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 ability of Parent, Purchaser or any Purchaser Subsidiary to
perform any of its or their obligations hereunder or consummate any of the
transactions contemplated hereby (a "Purchaser Material Adverse Effect").
Purchaser has heretofore made available to Seller complete and correct copies of
the certificate of formation and limited partnership agreement of Purchaser
(including all amendments thereto through the date hereof) and the charter and
bylaws of Parent (including all amendments thereto through the date hereof), all
of which are listed on Section 2.2(a) of the Purchaser Disclosure Letter
(collectively, the "Purchaser Operating Agreements"), which are the
organizational documents for Purchaser and Parent, respectively, as of the date
hereof. Parent beneficially owns a majority of the issued and outstanding
partnership interests of Purchaser.
(b) Authority; No Violations; Consents and Approvals.
(i) Each of Parent, Purchaser and the Purchaser Subsidiaries has all
requisite power and authority to enter into the Transaction Documents to
which they are parties and to consummate the transactions contemplated
hereby or thereby. The execution and delivery of the Transaction Documents
and the consummation of the transactions contemplated hereby or thereby
have been duly authorized by all necessary action on the part of Parent,
Purchaser and the Purchaser Subsidiaries. Each of Parent and Purchaser has
received unanimous approval from its Board of Directors and general
partner, respectively, to approve (other than the approval of any member of
Parent's Board of Directors not present (in person or otherwise) at the
meeting of the Board of Directors of Parent to vote to approve) this
Agreement, the Sale, the Transaction Documents and the transactions
contemplated hereby and thereby and no consent or approval of Parent's
shareholders or Purchaser's limited partners, respectively, is required for
any of this Agreement, the Sale, the Transaction Documents and any such
transactions.
(ii) The Transaction Documents to which Parent, Purchaser and the
Purchaser Subsidiaries are or will be parties have been or will be duly
executed and delivered by each of Parent, Purchaser and the Purchaser
Subsidiaries, as the case may be, and, assuming the Transaction Documents
to which Seller or any of the Seller Subsidiaries is a party constitute the
valid and binding obligation of Seller or such Seller Subsidiary, as the
case may be, constitute or will constitute a valid and binding obligation
of each of Parent, Purchaser and the Purchaser Subsidiaries, as the case
may be, enforceable in accordance with its terms, subject as to
enforceability, to bankruptcy, insolvency,
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reorganization, moratorium and other Laws of general applicability relating
to or affecting creditors' rights and to general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at Law).
(iii) Except as set forth in Section 2.2(b) of the Purchaser
Disclosure Letter, the execution and delivery by each of Parent, Purchaser
and each Purchaser Subsidiary of the Transaction Documents to which it is a
party do not, and the consummation by each of Parent, Purchaser and each
Purchaser Subsidiary of the transactions contemplated hereby or thereby,
and compliance by each of Parent, Purchaser and each Purchaser Subsidiary
with the provisions hereof or thereof, 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 material obligation, or give rise to a right of
purchase under, result in the creation of any Lien upon any of the
properties or assets of Parent or Purchaser or any of the Purchaser
Subsidiaries under, require the consent or approval of any third-party
lender or otherwise result in a material detriment to Parent or Purchaser
or any of the Purchaser Subsidiaries under, any provision of (A) the
charter and bylaws of Parent or certificate of formation or limited
partnership agreement of Purchaser or any provision of the comparable
charter or organizational documents of any of the Purchaser Subsidiaries,
(B) any Material Contract applicable to Parent or Purchaser or any of the
Purchaser Subsidiaries, the respective properties or assets of Parent or
Purchaser, or any guarantee by Parent or Purchaser or any of the Purchaser
Subsidiaries, (C) any joint venture or other ownership arrangement or (D)
assuming the consents, approvals, authorizations or permits and filings or
notifications referred to in Section 2.2(b)(iv) are duly and timely
obtained or made, any judgment, order, decree or Law applicable to Parent
or Purchaser or any of the Purchaser Subsidiaries or any of their
respective properties or assets, other than, in the case of clauses (B),
(C) and (D), any such conflicts, violations, defaults, rights, Liens or
detriments that, individually or in the aggregate, would not reasonably be
expected to materially impair the ability of Parent, Purchaser or any
Purchaser Subsidiary to perform its obligations hereunder or thereunder or
prevent the consummation of any of the transactions contemplated hereby or
thereby or otherwise result in a Purchaser Material Adverse Effect. For
purposes of this Agreement, with respect to Parent, Purchaser and each
Purchaser Subsidiary, "Material Contracts" shall mean (i) any loan or
credit agreement, indenture, note, bond, debenture or any other document or
agreement evidencing a capitalized lease obligation or other Indebtedness
to any Person, including any such Indebtedness that may be incurred
pursuant to an agreement already executed, other than Indebtedness in a
principal amount less than $225,000 in the aggregate, (ii) each ground
lease (under which Parent, Purchaser or a Purchaser Subsidiary is lessee),
(iii) each material commitment, contractual obligation, borrowing, capital
expenditure, agreement to acquire real property, or transaction entered
into by Parent, Purchaser or a Purchaser Subsidiary which may result in
total payments by or Liability of Parent, Purchaser or any Purchaser
Subsidiary in excess of $225,000, (iv) contracts or arrangements between
Parent, Purchaser or a Purchaser Subsidiary, on the one hand, and any
director, officer, employee, equityholder or affiliate of Parent (or any of
their respective affiliates), on the other hand, (v) all change in control
or similar agreements or (vi) all other contracts and agreements that are
material to Parent, Purchaser and the Purchaser Subsidiaries, taken as a
whole, or the conduct of the business of Parent, Purchaser and the
Purchaser Subsidiaries, taken as a whole, or the absence of which would, in
the aggregate, have a Purchaser Material Adverse Effect.
(iv) No consent, approval, order or authorization of, or registration,
declaration or filing with, or permit from any Governmental Entity is
required by or with respect to Parent or Purchaser or any of the Purchaser
Subsidiaries in connection with the execution and delivery by Parent,
Purchaser or any Purchaser Subsidiary of the Transaction Documents to which
Purchaser, Parent or any Purchaser Subsidiary is a party or the
consummation by Purchaser, Parent or any Purchaser Subsidiary of the
transactions contemplated hereby or thereby, except for any such consent,
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approval, order, authorization, registration, declaration, filing or permit
that the failure to obtain or make would not reasonably be expected to
result in a Purchaser Material Adverse Effect.
(c) Litigation. There is no suit, action or proceeding pending, or, to the
Knowledge of Parent or Purchaser, threatened against or affecting Parent,
Purchaser or any other Purchaser Subsidiary that would have or would reasonably
be expected to have a Purchaser Material Adverse Effect.
(d) Transaction Financing. Each of Purchaser and any applicable Purchaser
Subsidiary has or will have at Closing, all funds necessary to fund its
obligations under this Agreement and the other Transaction Documents.
Notwithstanding that the availability of such financing is not a condition to
the obligations of Parent or Purchaser hereunder, attached hereto as Exhibit A
is a description of the financing currently anticipated to be used by Purchaser
to complete the Sale and the other transactions contemplated hereby (the
"Financing").
(e) Brokers. Except for any broker's fees and expenses which shall be borne
and paid solely by Parent and Purchaser, no broker, investment banker or other
Person is entitled to any broker's, finder's or other similar fee or commission
in connection with the transactions contemplated by the Transaction Documents
based upon arrangements made by or on behalf of Purchaser or Parent.
ARTICLE III
COVENANTS RELATING TO CONDUCT OF BUSINESS PENDING THE SALE
Section 3.1 Conduct of Business by Seller.
(a) Subject to Sections 1.12, 3.1(d) and 3.1(e), during the period from the
date of this Agreement to the Closing, Seller shall, and shall cause each of the
Seller Subsidiaries to, (1) carry on its businesses to the extent relating to
the Portfolio in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted and consistent with past practice and (2)
use commercially reasonable efforts to maintain the Hometown Portfolio
Properties (and, after the Merger Transaction Consummation, the other Portfolio
Properties), ordinary wear and tear excepted, and (3) use commercially
reasonable efforts to preserve intact its current business organization,
goodwill, assets, ongoing businesses, in each case, to the extent relating to
the Portfolio. Seller will promptly notify Purchaser of any litigation pending
or threatened having, to the knowledge of Seller, potential liability to Seller
or any of the Seller Subsidiaries, to the extent relating to the Portfolio, in
excess of $100,000 or any complaint, investigation or hearing, of which Seller
has Knowledge, by a Governmental Entity involving Seller or any of the Seller
Subsidiaries, to the extent relating to the Portfolio.
(b) Subject to Sections 1.12, 3.1(d) and 3.1(e), without limiting the
generality of the foregoing, during the period from the date of this Agreement
to the earlier of the termination of this Agreement or the Closing, except as
set forth in Section 3.1(b) of the Seller Disclosure Letter, as otherwise
contemplated by this Agreement or to the extent consented to in writing in
advance by Purchaser, Seller shall not, and shall not cause each Seller
Subsidiary not to engage in, authorize or agree to any of the following, in each
case, with respect to Hometown Portfolio Properties (and, after the Merger
Transaction Consummation, the other Portfolio Properties):
(i) take any action that would prevent or delay the consummation of
the transactions contemplated by this Agreement or the other Transaction
Documents;
(ii) except as set forth in Section 3.1(e) and except for transfers to
wholly owned Subsidiaries of Seller (provided that such transfer shall not
increase the Assumed Liabilities), sell,
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transfer, assign, mortgage, lease, subject to Lien or otherwise encumber or
dispose of any of the Portfolio Properties (other than Permitted Liens), or
assign or encumber the right to receive income, dividends, distributions
and the like to the extent relating to the Portfolio or pledge or grant a
security interest in any of the Portfolio Properties in connection with the
borrowing of money or for the deferred purchase of any Portfolio Property
or agree to do any of the foregoing, except as referred to in or
contemplated by Section 3.1(b)(ii) of the Seller Disclosure Letter;
(iii) take any actions with respect to the development of the
Portfolio Properties, including applying for, pursuing, accepting or
obtaining any permits, approvals or other development entitlements from any
governmental or other regulatory entities or finalizing or entering into
any agreements relating thereto without the prior written consent of
Purchaser (which consent shall not be unreasonably withheld), except as the
same may be required in the ordinary course of Seller's operation of the
Portfolio Properties;
(iv) enter into any new service, property management or employment
contract or amend, extend, renew or replace any existing service, property
management or employment contract, in each case in respect of any of the
Portfolio Properties without Purchaser's prior written consent (which
consent shall not be unreasonably withheld), unless the same shall be
cancelable without penalty or premium, upon not more than thirty (30) days'
notice from the owner of such Portfolio Property, except as the same may be
required in the ordinary course of Seller's operation of the Portfolio
Properties;
(v) originate or make any loans, or amend or modify the terms of or
extend or renew any existing loans, or purchase or otherwise acquire any
Homes, in each case without Purchaser's prior written consent (which
consent shall not be unreasonably withheld) except in the ordinary course
of Seller's business consistent with past practice and on current market
terms; or
(vi) take, permit or cause any action or omission inconsistent with
any of the foregoing.
(c) During the period from the date of this Agreement to the Closing,
Seller shall, and shall cause each of the Seller Subsidiaries to, consult and
cooperate with Purchaser with respect to all real estate tax reassessments and
tax certiorari matters, to the extent relating to the Portfolio.
(d) Purchaser shall within seven days after the date hereof notify Seller
in writing whether or not Purchaser elects to manage the Portfolio Properties
starting from the first business date immediately after the Merger Transaction
Consummation (the "Management Start Date") through the earlier of the Closing
Date and any termination of this Agreement, subject to the receipt of any lender
or other consents to the extent required to permit Purchaser to manage the
Portfolio Properties and subject to the execution by Seller and Purchaser of a
mutually acceptable management agreement (the "Management Agreement"); provided,
however, that notwithstanding any such election, Seller shall retain
responsibility for accounting, receivables and payables and all rent and other
income or revenues shall be deposited into Seller's accounts and Seller shall
have the right at any time for any reason to terminate in a writing to Purchaser
both such Management Agreement and Purchaser's right to manage the Portfolio
Properties subject to Seller's immediate return to Purchaser of the First
Management Deposit Payment and the Second Management Deposit Payment, in each
case, to the extent received by Seller prior to such termination (a "Management
Termination"). Subject to the immediately preceding sentence, in the event
Purchaser so elects to manage the Portfolio Properties (the "Management
Election"), the parties shall use reasonable best efforts to obtain any such
required consents as promptly as practicable and upon receipt of any such
required consents with respect to the applicable Portfolio Property (1)
Purchaser shall manage such Portfolio Property from the Management Start Date
(or, if such consent is required, from the later of
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the Management Start Date and the date of receipt of such consent) through the
earlier of the Closing Date or the termination of this Agreement in the same
manner, and subject to the same terms and conditions, applicable to Seller
pursuant to this Section 3.1 (provided that each reference in Section 3.1 to the
consent of Purchaser shall instead be deemed to refer to the consent of Seller);
provided, however, that Purchaser shall not, nor shall it permit any of its
Affiliates to, make or cause to be made any capital improvements with respect to
any of the Portfolio without the prior written consent of Seller, (2) Purchaser
shall deliver by wire transfer of immediately available funds to an account or
accounts specified by Seller (a) two million five hundred thousand dollars
($2,500,000) by or on December 15, 2003 (the "First Management Deposit Payment")
and (b) two million five hundred thousand dollars ($2,500,000) by or on January
15, 2004 (the "Second Management Deposit Payment" and, with the First Management
Deposit Payment, the "Management Deposit Payments"), in each case with respect
to clauses (a) and (b) immediately above, only if a Management Termination has
not occurred on or prior to the date such Management Deposit Payment is due, (3)
any liabilities or obligations with respect to such Portfolio Property incurred
from the Management Start Date (or, if such consent is required, from the later
of the Management Start Date and the date of receipt of such consent) through
the earlier of the Closing Date or the termination of this Agreement (or a
Management Termination) or any breaches of Seller's representations and
covenants caused as a result of the operation or management of such Portfolio
Property from the Management Start Date (or, if such consent is required, from
the later of the Management Start Date and the date of receipt of such consent)
through the earlier of the Closing Date or termination of this Agreement (or a
Management Termination) shall be ignored for purposes of Sections 5.2(a), 5.2(b)
and 5.2(c), (4) notwithstanding anything contained herein, all references to the
"Closing Date" in Section 4.12 and in the definition herein of "Employee
Liabilities" shall be deemed to refer to the "Management Start Date" and
Purchaser shall comply with Section 4.12 as of the Management Start Date (or, if
such consent is required, from the later of Management Start Date and the date
of receipt of such consent) (provided that, with respect to Portfolio Properties
that are not Hometown Portfolio Properties and Portfolio Employees that are not
employees of Hometown or its Subsidiaries as of the date hereof, such references
shall be to the later of the Management Start Date (or, if such consent is
required, from the later of Management Start Date and the date of receipt of
such consent the date such consent is obtained) and the date of the Merger
Transaction Consummation, and Purchaser shall comply with Section 4.12 as of the
later of the Management Start Date (or, if such consent is required, from the
later of Management Start Date and the date of receipt of such consent the date
such consent is obtained) and the date of the Merger Transaction Consummation);
provided that Purchaser shall comply with Section 4.12 pursuant to this clause
(4) only for so long as a Management Termination shall not have occurred; and
provided further that the Management Agreement shall provide, among other
things, that Purchaser shall be reimbursed by Seller for all costs and expenses
reasonably incurred in connection with the performance of this clause (4), and
(5) except for facts, information or circumstances existing as of, and to
Seller's Knowledge as of, the date hereof that have not been disclosed to
Purchaser in the Seller Disclosure Letter, no other facts, information or
circumstances arising out of or related to Purchaser's management of the
Portfolio Properties, or obtained or discovered by Purchaser or any of its
Affiliates as a result of, arising from or relating to its management of, or in
its capacity as manager of, Portfolio Properties, during the period it manages
such Portfolio Properties shall be considered, or shall in any way contribute
to, (a) a breach of any representation, warranty, covenant or agreement of
Seller or any of its Subsidiaries contained herein or (b) a Portfolio Material
Adverse Effect.
(e) Notwithstanding anything to the contrary herein, Seller may transfer
Portfolio Properties to Subsidiaries of Seller that are special purpose entities
that are Seller Subsidiaries in connection with Seller's Financing, encumber
Portfolio Properties with mortgages and other instruments securing Seller's
Financing and otherwise take actions required to consummate Seller's Financing;
provided, however, that any such action shall not increase the Assumed
Liabilities.
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Section 3.2 Conduct of Business by Parent and Purchaser.
(a) Without limiting the generality of the foregoing, during the period
from the date of this Agreement to the earlier of the termination of this
Agreement or the Closing, except as set forth in Section 3.2(a) of the Purchaser
Disclosure Letter, as otherwise contemplated by this Agreement or to the extent
consented to by Seller, which consent shall not be unreasonably withheld,
neither Parent nor Purchaser shall engage in or authorize or agree to any of the
following:
(i) take any action that would prevent or materially delay the
consummation of the transactions contemplated by this Agreement or the
other Transaction Documents; or
(ii) agree in writing or otherwise to take any action inconsistent
with any of the foregoing.
ARTICLE IV
ADDITIONAL COVENANTS
Section 4.1 Access to Information; Confidentiality. Seller shall, and shall
cause each of the Seller Subsidiaries to, afford to Parent and its officers,
employees, accountants, counsel, financial advisors and other representatives,
reasonable access upon reasonable prior notice and during normal business hours
and without disruption to the business or operations of Seller and its
Subsidiaries during the period prior to the Closing to all the Portfolio
Properties, and books, contracts, commitments, personnel and records to the
extent relating thereto and, during such period, Seller shall, and shall cause
each of the Seller Subsidiaries to, (a) furnish promptly to Parent 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 Law, to the
extent relating to the Portfolio and (b) use reasonable best efforts to furnish
promptly to Parent all other information concerning the Portfolio as Parent may
reasonably request. Purchaser shall have no right to access to, and shall not
seek access to or visit, any Portfolio Property owned as of the date hereof by
Chateau Communities, Inc. or its subsidiaries until the Merger Transaction
Consummation without the prior written consent of Seller in its sole discretion.
No investigation under this Section 4.1 or otherwise shall affect any of
Seller's representations or warranties contained in this Agreement or any
condition to the obligations of the parties under this Agreement. Each of Seller
and Parent and Purchaser will hold, and will cause its respective 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 Chateau Communities, Inc. and Purchaser dated as of
April 29, 2003, as amended, including by adding Seller as a beneficiary thereof,
on August 14, 2003 (as amended, the "Confidentiality Agreement"). Nothing in
this Agreement or the Confidentiality Agreement shall prohibit the disclosure of
the tax treatment and tax structure, each as defined in Treasury Regulations
Section 1.6011-4, of the Sale or other transactions contemplated hereby (but no
other details about the matters covered by this Agreement, including the
identities of the parties) from and after the earliest to occur of (i) the date
of the public announcement of discussions relating to the Sale, (ii) the date of
the public announcement of the Sale, or (iii) the date of the execution of an
agreement (with or without conditions) to enter into the Sale (it being
understood by the parties that a "public announcement of discussions" shall mean
a public announcement permitted by this agreement (or otherwise permitted by
agreement of the parties) as distinguished from a third party announcement or a
leak).
Section 4.2 Reasonable Efforts. Upon the terms and subject to the
conditions set forth in this Agreement, each of Parent and Seller agrees to use
its reasonable 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
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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 Sale and the other transactions
contemplated by the Transaction Documents, including the execution and delivery
of any additional instruments necessary or desirable to consummate the
transactions contemplated by, and to fully carry out the purposes of, this
Agreement. Purchaser and Parent shall, with Seller's good faith, cooperation and
assistance (i) obtain all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities or other Persons, and make all necessary
registrations and filings and take all reasonable steps as may be necessary or
desirable to obtain an approval, waiver or exemption from any Governmental
Entity or other Person and (ii) obtain all necessary consents, approvals,
waivers or exemption from non-governmental third parties. In addition, each of
Parent, Purchaser and Seller agrees to use their reasonable best efforts to
defend any lawsuits or other legal proceedings, whether judicial or
administrative, challenging the Sale, this Agreement or the transactions
contemplated by the Transaction Documents, including seeking to have any stay,
temporary restraining order, injunction, or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated by the Transaction Documents entered by any court or other
Governmental Entity vacated or reversed. If, at any time after the Closing, any
further action is necessary or desirable to carry out the purpose of this
Agreement, the proper officers and directors of Seller, Parent and Purchaser
shall take all such necessary action.
Section 4.3 Tax Matters.
(a) Purchase Price Allocation.
(i) On or at least 10 business days prior to the Closing Date, Seller
and Purchaser shall reach agreement as to the manner in which the
consideration to be paid pursuant to this agreement, together with any
Assumed Liabilities (the "Allocable Consideration") shall be allocated
among the assets of Portfolio. Such allocation shall be made in the manner
required by Section 1060 of the Code and the regulations promulgated
thereunder. In making such allocation the fair market values as reasonably
determined by the parties shall apply. Seller and Purchaser hereby agree
that IRS Form 8594 will be timely filed based on such fair market values,
except as may be required by a Determination as defined under Section
1313(a) of the Code ("Determination").
(ii) If Seller and Purchaser are unable to reach an agreement within
10 days prior to the Closing Date, the dispute shall be resolved and the
such allocation shall be determined by an independent, nationally
recognized firm of accountants mutually selected by the parties (the
"Accountant"). Such allocation, as agreed upon by Seller and Purchaser
and/or determined under this Section 4.3(a), shall be final and binding
upon the parties. Each of Seller and Purchaser shall bear all fees and
costs incurred by it in connection with the determination of such
allocation, except that the parties shall each pay one-half (50%) of the
fees and expenses of such Accountant.
(b) Tax Treatment of the Sale. Except as may be required by a
Determination, the parties shall treat the Sale for all income tax purposes as a
taxable purchase of assets by Purchaser in exchange for the allocable Purchase
Price Balance for all income tax purposes, including filing Seller final Tax
Returns consistent with such treatment, and no party shall take any position
inconsistent with such treatment.
Section 4.4 Public Announcements. Seller and Parent shall consult with each
other before issuing, or permitting their respective Affiliates to issue, any
press release or otherwise making any public statements with respect to this
Agreement or any of the transactions contemplated by the Transaction Documents
and shall not issue any such press release or make any such public statement
without the prior consent of the other party; provided, however, that Parent
shall be permitted to describe the material terms
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of this Agreement in a Registration Statement on Form S-11 filed with the SEC
with the prior consent of Seller, with such consent not to be unreasonably
withheld.
Section 4.5 Certain Costs. Seller shall pay and be responsible for its
legal fees relating to this Agreement and the transactions contemplated hereby.
Purchaser shall pay and be responsible for all other closing, transaction and/or
due diligence costs or expenses relating to the transactions contemplated
hereunder, including (i) all assumption fees required to be paid under the
relevant loan documents of the Assumed Loans relating to the Portfolio in order
to permit Purchaser to assume the mortgages secured by assets included in the
Portfolio (ii) all prepayment fees required to be paid under the relevant loan
documents relating to the Portfolio in connection with Purchaser's repayment of
any mortgages secured by assets included in the Portfolio (the "Prepayable
Debt") (including lenders' attorneys' fees), (iii) all costs and expenses
associated with obtaining any title commitments, title policies, title
insurance, surveys, environmental reports and other due diligence reports with
respect to the Portfolio ordered at Purchaser's request or referred to on
Section 4.5 of the Seller Disclosure Letter (which Section 4.5 of the Seller
Disclosure Letter shall set forth the aggregate costs and expenses incurred with
respect thereto), (iv) all recording fees relating to any deeds and other
instruments of conveyance and any mortgage or deed of trust recording taxes or
fees in connection with Purchaser's assuming the Assumed Loans, and (v) all of
Purchaser's legal fees (including Purchaser's legal fees relating to repayment
of the Prepayable Debt and the assumption of the Assumed Loans), the fees of its
financial advisors and all its other professional fees relating to this
Agreement and the transactions contemplated hereby. The Purchase Price Balance
will not be reduced by any amount in connection with the assumption fees or
prepayment fees or other Closing or other costs, expenses or fees paid by
Purchaser.
Section 4.6 Execution and Delivery of Transfer Documents.
(a) Following the execution of this Agreement, Seller and the Purchaser
shall prepare and, at the Closing, Seller and Purchaser shall execute any
conveyances, bills of sale, deeds, assignments, assurances, certificates,
notices, consents, transfers of letter of credit, transfers of security
interests, transfers of mortgage interests and other instruments and documents
in form and substance mutually agreed upon (collectively, the "Transfer
Documents") required in order to effect or evidence the transfer of the
Portfolio and Assumed Liabilities from Seller to Purchaser (it being understood
that, except with respect to Deeds delivered at the Closing, all such
instruments and other documents shall not require Seller, Purchaser or any other
Person to make any representations, warranties or covenants (other than with
respect to Purchaser's assumption of the Assumed Liabilities) including as to
matters of title, express or implied). Purchaser shall be responsible for the
filing and recording of any such Transfer Documents that are required under
applicable Law to be recorded or filed to effect or evidence the transfer of the
Portfolio. All reasonable out-of-pocket expenses relating to this Section
4.6(a), including filing and recording fees, shall be borne by Purchaser.
(b) At the Closing, each of Purchaser and Seller shall, and shall cause its
Subsidiaries to, execute and deliver to the other party such instruments and
documents as the other party may reasonably request to effect or evidence the
purchase of the Portfolio and the assumption of the Assumed Liabilities by
Purchaser (it being understood that all such instruments and other documents
shall not require Seller, Purchaser or any other Person to make any
representations, warranties or covenants (other than with respect to Purchaser's
assumption of the Assumed Liabilities), including as to matters of title,
express or implied).
Section 4.7 Transfer and Gains Taxes. Purchaser shall, with Seller's good
faith cooperation and assistance, prepare, execute and file, or cause to be
prepared, executed and filed, all returns, questionnaires, applications or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added stock transfer and stamp Taxes, any transfer, recording,
registration and other fees
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and any similar Taxes which become payable in connection with the transactions
contemplated by this Agreement (together, with any related interests, penalties
or additions to Tax, "Transfer and Gains Taxes"). From and after the Closing,
Purchaser shall pay or cause to be paid all Transfer and Gains Taxes without
deductions withheld from any amounts payable to Seller.
Section 4.8 No Conflict with or Rights under Merger Agreement. The parties
hereto agree that (A) this Agreement and the Sale contemplated hereby are wholly
separate and independent from the Merger Agreement and the transactions
contemplated thereby, subject only to the closing of the transactions
contemplated by the Merger Agreement as a pre-condition to the closing of the
Sale and (B) Purchaser acknowledges that it will have no rights whatsoever of
any kind with respect to the Merger Agreement and the transactions thereunder,
including, but not limited to, no rights in any "break-up" fees or expenses or
to assert any claims on Seller's or its own behalf with respect thereto. The
sale of the properties listed on Section 4.8 of the Seller Disclosure Letter
(the "Tax Protected Properties"), shall be structured as part of the Sale
hereunder, provided that any liabilities incurred by Seller or its Subsidiaries
under the Tax Protection Agreement as a result of such Sale shall be borne 75%
by Seller and 25% by Purchaser; provided, however, that Purchaser's obligation's
relating thereto shall in no event exceed $750,000 in the aggregate.
Section 4.9 Required Financing. Notwithstanding that the availability of
financing is not a condition to the obligations of Parent or Purchaser
hereunder, Purchaser and Parent agree to arrange the Financing (as defined
herein) and to satisfy the conditions set forth in the agreements relating to
the Financing. Purchaser shall keep Seller informed of the status of its
arrangements with respect to the Financing. Purchaser shall provide notice to
Seller within 24 hours of any material developments affecting the status of the
Financing.
Section 4.10 Casualty or Condemnation. The occurrence of any casualty,
condemnation or other event at any one or more Portfolio Properties shall not
relieve Purchaser of its obligations hereunder or entitle Purchaser to reduce
the Purchase Price Balance, notwithstanding any contrary provision hereof,
custom or provision of Law; provided, however, that at Closing Seller shall
assign to Purchaser, and Purchaser shall be entitled to receive the benefits of,
any and all claims and proceeds Seller may have with respect to any casualty
insurance policies or condemnation awards with respect to any Portfolio Property
which related to a casualty or condemnation occurring after the date of this
Agreement but prior to the Closing, and Purchaser shall have the right to
proceed against any insurance company or condemning authority to recover any
such items. Seller shall promptly after learning of same notify Purchaser in
writing of the occurrence of any casualty, condemnation or similar event at any
one or more Portfolio Properties.
Section 4.11 Access to Books and Records Post-Closing. At the Closing,
Seller shall deliver to Purchaser copies or originals of all of Seller's records
and files relating to the Portfolio Properties, and Seller shall be entitled to
retain copies of all such records and files. After the Closing, for a period of
seven years, Purchaser shall permit Seller and Seller shall permit Purchaser to
have reasonable access to and the right to make copies of all their respective
books, records and files relating to the Portfolio, for any reasonable purpose,
such as for use in litigation, financial reporting, tax return preparation, or
tax compliance matters. Each of Seller and Purchaser agrees to preserve and keep
all of its books and records relating to the Portfolio for a period of not less
than five (5) years after the Closing, or for any longer period as may be
required for financial or tax purposes or otherwise by any governmental
authority, by any Law or in connection with any ongoing litigation, suit or
proceeding. Prior to disposing of any such information, Purchaser shall afford
Seller a reasonable opportunity to segregate, remove or copy such books, records
and files as Seller may select.
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Section 4.12 Employee Matters.
(a) Offers of Employment. Effective as of the Closing Date, Purchaser shall
make an offer of employment to each Portfolio Employee who is actively employed
by Seller immediately prior to Closing. Each such offer shall initially (i) be
for a position comparable to such Portfolio Employee's position on the Closing
Date, (ii) be for a position at the same work location as such Portfolio
Employee's work location on the Closing Date, (iii) provide a work status (full-
or part-time) that is not changed from that in effect on the Closing Date, (iv)
provide a base salary comparable to such Portfolio Employee's base salary as of
immediately prior to the Closing, as more fully described on Section 4.12 of the
Seller Disclosure Letter. Each Portfolio Employee who accepts Purchaser's offer
of employment and commences active employment with Purchaser is referred to
herein as a "Transferred Employee." Purchaser's employment of the Transferred
Employees shall be deemed to commence on the Closing Date (or, if later, the
date on which the applicable Transferred Employee commences active employment
with Purchaser and its Affiliates).
(b) Termination of Employment with Seller. As of the Closing Date, the
Transferred Employees shall be terminated by Seller and its Affiliates and cease
active participation in each Seller Employee Benefit Plan.
(c) Transferred Employees' Benefits. Each Transferred Employee shall be
treated as a newly hired employee of Purchaser for purposes of compensation and
employee benefit plan coverage. No Transferred Employee shall receive service
credit for any periods of employment with Seller or Seller Subsidiaries for any
purpose whatsoever, including, but not limited to, eligibility, vesting, amount
of benefits and benefit accruals under any employee benefit plan.
(d) WARN Act. Purchaser shall be responsible for providing a timely
notification or pay in lieu of notice if required by the United States Federal
Worker Adjustment and Retraining Notification Act of 1988, any successor United
States federal law, and any other applicable plant closing, mass layoff or
termination pay or notification law (collectively, the "WARN Act") for any
terminations or layoffs of a Transferred Employee after the Closing Date.
Section 4.13 Advice of Changes. Seller shall promptly advise Purchaser of
any change or event (i) having a Portfolio Material Adverse Effect or (ii) that
Seller believes would or would be reasonably likely to cause or constitute a
material breach of any of Seller's representations, warranties or covenants
contained herein and Purchaser shall promptly advise Seller of any change or
event (i) having a Purchaser Material Adverse Effect or (ii) that Purchaser
believes would or would be reasonably likely to cause or constitute a material
breach of any of its representations, warranties or covenants contained herein;
provided, however, that, notwithstanding anything to the contrary herein,
Seller's failure to comply with the obligations of this Section 4.13 shall not
provide Purchaser a right not to effect the transactions contemplated by this
Agreement, and Purchaser's failure to comply with the obligations of this
Section 4.13 shall not afford Seller the right not to effect the transactions
contemplated by this Agreement except, in each case, to the extent such failure
individually would independently afford such right.
Section 4.14 Exclusive Negotiations. Prior to the Closing, Seller shall
cease soliciting the sale of, and shall not sell, the Portfolio Properties.
Section 4.15 Financial Statements. In the event that during the period
prior to the Closing, in connection with any proposed offering of securities,
Purchaser or any of its Affiliates is required pursuant to applicable legal or
regulatory requirements (including the rules of the Securities and Exchange
Commission) to have available audited financial statement with respect to any of
the Portfolio Properties
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and/or the other assets and liabilities comprising part of the Portfolio
(including audited financial statements with respect to the Portfolio Properties
pursuant to Rule 3.14 under Regulation S-X of the Securities Act), and the date
by which such audited financial statements must be available requires that their
preparation (including the related audit or audits) be commenced prior to the
Closing Date, subject to Seller's consent (not to be unreasonably withheld),
Seller shall, at the written request of, and at the sole expense of, the
Purchaser, use reasonable efforts to engage Purchaser's auditor for such sole
purpose or shall otherwise at the Purchaser's expense use reasonable efforts to
cooperate with the Purchaser's auditor with respect to such proposed offering;
provided, however, that such efforts occur during normal business hours and do
not and would not be expected to disrupt the business or operations of Seller
and its Subsidiaries. Prior to Closing Date, in connection with any offering,
sale or distribution of securities (whether registered or otherwise) made by
Purchaser or any of its Affiliates or the Purchaser's or any of its Affiliate's
efforts to comply with any applicable legal or regulatory requirements, subject
to Seller's consent (not to be unreasonably withheld), Seller further agrees, at
the written request of, and at the sole expense of, the Purchaser, to use
reasonable efforts to (i) make available on a timely basis such financial
information of the Portfolio Properties and the Assumed Liabilities as is
readily available and may reasonably be requested and (ii) cooperate with
reasonable requests for other information concerning the Portfolio Properties
and the Assumed Liabilities; provided, however, that such efforts occur during
normal business hours and do not and would not be expected to disrupt the
business or operations of Seller and its Subsidiaries.
Section 4.16 Post-Closing Billing Migration and Support. Following the
Closing, subject to Seller's consent (not to be unreasonably withheld), Seller
will, at the written request of, and at the sole expense of, Purchaser: (1) use
reasonable efforts to cooperate, and (2) use its reasonable efforts to cause its
third party contractors to cooperate, in each case, with Purchaser in migrating
the resident information and billing process with respect to the Portfolio to
Purchaser's system, including providing billing support to Purchaser following
the Closing, for a period not to exceed 90 days; provided, however, that such
efforts and provision of billing support occur during normal business hours and
do not and would not be expected to disrupt the business or operations of Seller
and its Subsidiaries.
Section 4.17 Assistance. From and after the date of this Agreement, if
Purchaser requests, at Purchaser's sole cost and expense, and no additional
liabilities to Seller or its Affiliates, Seller and its Subsidiaries shall
cooperate, and shall use their commercially reasonable efforts to cause Seller's
attorneys, accountants and other representatives to cooperate, in all reasonable
respects in connection with any Financing efforts of Purchaser or its Affiliates
(including providing reasonable assistance in the preparation of one or more
offering circulars, private placement memoranda, registration statements or
other offering documents relating to equity financing) and any other filings
that may be made by Purchaser or its Affiliates, including, if applicable, with
the SEC. From and after the date of this Agreement, if Purchaser requests, at
Purchaser's sole cost and expense, and no additional liabilities to Seller or
its Affiliates, Seller shall reasonably cooperate with Purchaser in obtaining
surveys, title commitments or policies, engineering reports, estoppel
certificates, environmental reports and appraisals with respect to the Portfolio
Properties and in otherwise satisfying any of Purchaser's mortgage lenders'
requirements.
Section 4.18 Accounts Receivable. Subject to Sections 1.6, 1.7 and 1.9,
Seller shall promptly forward to Purchaser any and all proceeds from accounts
receivables relating to the Portfolio that are received by Seller or any of its
Affiliates after the Closing Date and that belong to Purchaser under the terms
hereof.
Section 4.19 Claims. As of the Closing, (1) Seller and each of its
Subsidiaries shall assign, transfer, convey and deliver to Purchaser, all right,
title and interest which each may have in and to any and all Claims and (2)
Seller will, and will cause its Subsidiaries to, cause an authorized officer to
execute
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on its behalf and deliver to Purchaser, an instrument of assignment of the
Claims without recourse against it or any of its Subsidiaries, as the case may
be, at the Closing, and deliver promptly, from time to time, any other
instrument mutually acceptable to Seller and Purchaser with respect to any such
Claim which, in the good faith opinion of Purchaser after consultation with
outside counsel, is necessary or desirable in order to effect or document the
assignment and transfer of such Claim to Purchaser, in each case, subject to
Purchaser's compliance with its obligations pursuant to Section 1.6. Following
the Closing, if for any reason Purchaser is not able to pursue any such Claim as
the real party in interest, Seller shall use reasonable best efforts to, and use
reasonable best efforts to cause its Subsidiaries to, as the case may be, pursue
such Claim upon the written direction of Purchaser and at Purchaser's sole cost
and expense and with no liability to Seller or any of its Affiliates, and
promptly remit all recoveries, collections and amounts paid with respect thereto
to Purchaser in such manner as Purchaser shall reasonably provide, in each case,
subject to Purchaser's complying with its obligations pursuant to Section 1.6.
Following the Closing, Seller shall use reasonable best efforts to, and use
reasonable best efforts to cause, give Purchaser prompt written notice of the
occurrence of any events, facts or circumstances within Seller's knowledge
relevant to the pursuit of the Claims assigned to Purchaser, provided that
neither Seller or its Subsidiaries nor any Person acting on its behalf, shall
have any obligation whatsoever to conduct any investigation or other due
diligence with respect thereto. Following the Closing, for a period of seven
years (or such longer period of time as may be reasonably necessary with respect
to claims initiated prior to the expiration of such seven year period), with
respect to any Claim, Seller will, and will cause its Subsidiaries to, provide
representatives of Purchaser access (at reasonable times and locations during
normal business hours) to (i) its officers, directors and employees and (ii) its
books and records reasonably requested by such representatives with respect to
such Claim, subject to Purchaser's compliance with Section 1.6. Following the
Closing, Seller will, and will cause its Subsidiaries to, provide
representatives of Purchaser with such copies of such books and records as they
may reasonably request to the extent with respect to such Claim. For purposes of
this Section 4.19, "Claims" (whether or not they are the subject of litigation
filed as of the Closing) shall mean any and all claims of whatever type which
Seller or any of its Subsidiaries may have against any other Person not
Affiliated with Seller or its Subsidiaries whose action or inaction relates to
any Assumed Liability, regardless of when such claims are discovered. Following
the Closing, Purchaser will grant Seller and its representatives similar access
(at reasonable times and locations during normal business hours) to (i)
Purchaser's officers, directors and employees and (ii) its books and records
reasonably requested by such representatives to the extent with respect to
Excluded Liabilities, subject to Seller's compliance with Section 1.7. Following
the Closing, if for any reason Seller is not able to pursue any claim with
respect to an Excluded Liability as the real party in interest, Purchaser will,
and will cause its Subsidiaries to, as the case may be, pursue such claim upon
the written direction of Seller and at Seller's sole cost and expense and with
no liability to Purchaser or any of its Affiliates, and promptly remit all
recoveries, collections and amounts paid with respect thereto to Seller in such
manner as Seller shall reasonably provide, in each case, subject to Seller's
complying with its obligations pursuant to Section 1.7.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.1 Conditions to Each Party's Obligation to Effect the Sale. The
respective obligations of Seller and Purchaser to effect the Sale and to
consummate the other transactions contemplated by the Transaction Documents on
the Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a) No Injunctions or Restraints. No temporary restraining order, statute,
rule, regulation, decree, ruling, preliminary or permanent injunction or other
order issued by any court of competent
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jurisdiction or other legal restraint or prohibition enacted, entered,
promulgated, issued or enforced by any Governmental Entity preventing the
consummation of the Sale or any of the other transactions or agreements
contemplated by the Transaction Documents shall be in effect.
(b) Closing of the Mergers. The Merger (as defined in the Merger Agreement)
and the Partnership Merger (as defined in the Merger Agreement) shall have been
consummated in accordance with their terms (the "Merger Transaction
Consummation").
Section 5.2 Conditions to Obligations of Purchaser. The obligations of
Purchaser to effect the Sale and to consummate the other transactions
contemplated by the Transaction Documents on the Closing Date are further
subject to the following conditions, any one or more of which may be waived by
Purchaser:
(a) Representations and Warranties. Each of the representations and
warranties of Seller set forth in this Agreement shall be true and correct
(without giving effect to any materiality, Portfolio Material Adverse Effect or
any similar qualification or limitation in any representation and warranty (any
such qualification or limitation, a "Seller Materiality Qualifier")) as of the
date of this Agreement and on and as of the Closing Date, as though made on and
as of the Closing Date (except to the extent any representation or warranty is
expressly limited by its terms to a specified date, the accuracy of which will
be determined as of such specified date), except where the failure of such
representations and warranties in the aggregate to be true and correct (without
giving effect to any Seller Materiality Qualifier) would not have and would not
reasonably be expected to have a Portfolio Material Adverse Effect. Purchaser
shall have received a certificate signed on behalf of Seller by the Chief
Executive Officer or the Chief Financial Officer of Seller or its managing
member to such effect.
(b) Performance of Obligations of Seller. Seller shall have performed or
complied in all material respects with all obligations required to be performed
or complied with by it under this Agreement at or prior to the Closing and
Purchaser shall have received a certificate signed on behalf of Seller by the
Chief Executive Officer or the Chief Financial Officer of Seller or its managing
member to such effect.
(c) Material Adverse Change. Since the date of this Agreement, no Portfolio
Material Adverse Effect shall have occurred. Purchaser shall have received a
certificate signed on behalf of Seller by the Chief Executive Officer and the
Chief Financial Officer of Seller to such effect.
(d) FIRPTA Certificates. Purchaser shall have received a FIRPTA Certificate
signed on behalf of Seller by the Chief Executive Officer and the Chief
Financial Officer of Seller.
Section 5.3 Conditions to Obligations of Seller. The obligations of Seller
to effect the Sale and to consummate the other transactions contemplated by the
Transaction Documents on the Closing Date are further subject to the following
conditions, any one or more of which may be waived by Seller:
(a) Representations and Warranties. Each of the representations and
warranties of Parent and Purchaser set forth in this Agreement shall be true and
correct (without giving effect to any materiality, Purchaser Material Adverse
Effect or any similar qualification or limitation in any representation and
warranty (any such qualification or limitation, a "Purchaser Materiality
Qualifier")) as of the date hereof and on and as of the Closing Date, as though
made on and as of the Closing Date (except to the extent any representation or
warranty is expressly limited by its terms to a specified date, the accuracy of
which will be determined as of such specified date), except where the failure of
such representations and warranties to be in the aggregate true and correct
(without giving effect to any Purchaser Materiality Qualifier) would not or
would not reasonably be likely to have a Purchaser Material
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Adverse Effect, and Seller shall have received a certificate signed on behalf of
Purchaser by a duly authorized representative of Purchaser, in such capacity, to
such effect.
(b) Performance of Obligations of Parent and Purchaser. Parent and
Purchaser shall have performed or complied in all material respects with all
obligations required to be performed or complied with by them under this
Agreement at or prior to the Closing, and Seller shall have received a
certificate signed on behalf of Parent and Purchaser by the Chief Executive
Officer and the Chief Financial Officer of Parent and Purchaser to such effect.
(c) Material Adverse Change. Since the date of this Agreement, there shall
have occurred no Purchaser Material Adverse Effect. Seller shall have received a
certificate signed on behalf of Parent and Purchaser by the Chief Executive
Officer and Chief Financial Officer of Parent and Purchaser to such effect.
ARTICLE VI
TERMINATION, AMENDMENT AND WAIVER
Section 6.1 Termination. Subject to Section 6.2, this Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written consent duly authorized by the Advisory Board of
Seller and the Board of Directors of Purchaser;
(b) by Purchaser, upon a breach of any representation, warranty, covenant
or agreement on the part of Seller set forth in this Agreement, or if any
representation or warranty of Seller shall have become untrue, in either case
such that the conditions set forth in Section 5.2(a) or (b), as the case may be,
would be incapable of being satisfied by January 31, 2004 (as otherwise extended
by mutual written agreement by Seller and Purchaser or pursuant to Section 1.2,
the "Purchaser Outside Date");
(c) by Seller, (x) upon a breach of any representation, warranty, covenant
or agreement on the part of Parent or Purchaser set forth in this Agreement, or
if any representation or warranty of Parent or Purchaser, shall have become
untrue, in either case such that the conditions set forth in Section 5.3(a) or
(b), as the case may be, would be incapable of being satisfied by the earliest
of (1) the Purchaser Outside Date, (2) March 1, 2004, if the Closing has not
occurred, and Seller has not received the First Management Deposit Payment by or
on December 15, 2003 (if Purchaser has made the Management Election and a
Management Termination has not occurred on or prior to such date), the Second
Management Deposit Payment by or on January 15, 2004 (if Purchaser has made the
Management Election and a Management Termination has not occurred on or prior to
such date), the Second Deposit Payment by or on November 14, 2003, the Third
Deposit Payment by or on January 5, 2004, the Fourth Deposit Payment by or on
February 5, 2004 and the Fifth Deposit Payment by or on March 1, 2004 and (3)
February 5, 2004 if the Closing has not occurred, and Seller has not received
the First Management Deposit Payment by or on December 15, 2003 (if Purchaser
has made the Management Election and a Management Termination has not occurred
on or prior to such date), the Second Management Deposit Payment by or on the
January 15, 2004 (if Purchaser has made the Management Election and a Management
Termination has not occurred on or prior to such date), the Second Deposit
Payment by or on November 14, 2003, the Third Deposit Payment by or on January
5, 2004 and the Fourth Deposit Payment by or on February 5, 2004 (as otherwise
extended by mutual written agreement by Seller and Purchaser, the "Seller
Outside Date"), or (y) if Purchaser fails to pay when due any Deposit Payment;
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(d) by either Purchaser or Seller, if any judgment, injunction, order,
decree or action by any Governmental Entity of competent authority preventing
the consummation of the Sale shall have become final and nonappealable;
(e) by Purchaser, if the Sale shall not have been consummated on or before
the Purchaser Outside Date;
(f) by Seller, if the Sale shall not have been consummated on or before the
Seller Outside Date; or
(g) by either Purchaser or Seller, upon a termination of the Merger
Agreement in accordance with its terms.
A terminating party shall provide written notice of termination to the
other parties specifying with particularity the reason for such termination. If
more than one provision in this Section 6.1 is available to a terminating party
in connection with a termination, a terminating party may rely on any and all
available provisions in this Section 6.1 for any such termination.
Section 6.2 Effect of Termination. In the event of termination of this
Agreement by either Seller or Purchaser as provided in Section 6.1, this
Agreement shall forthwith become void and have no effect, without any Liability
on the part of Purchaser or Seller, other than the third, fourth and fifth
sentences of Section 4.1, Section 4.4, Section 4.5, this Section 6.2, Section
6.5 and Article VII 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 or a failure or refusal by such party
to consummate the transactions contemplated hereby when such party was obligated
to do so in accordance with the terms hereof.
Section 6.3 Amendment. This Agreement may be amended by the parties only in
a writing signed by each of Seller, Parent and Purchaser.
Section 6.4 Extension; Waiver. At any time prior to the Closing, each of
Seller and Purchaser 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
provisions of Section 6.3, 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. 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.
Section 6.5 Treatment of Deposit Payments and ARC Promissory Note.
(a) If (i) this Agreement is validly terminated pursuant to Sections
6.1(b), 6.1(d) or 6.1(g) or (ii) Seller willfully breaches this Agreement by
refusing to consummate the Closing notwithstanding being obligated to do so in
accordance with the terms hereof, then the Deposit Payments received by Seller
shall be refunded promptly (but in no event more than three (3) business days
after any such termination or willful breach) by Seller to the Purchaser and the
ARC Promissory Note shall be automatically cancelled. In all other
circumstances, and notwithstanding anything to the contrary herein, any and all
Deposit Payments shall be non-refundable and shall, together with the ARC
Promissory Note, be retained by Seller without any deduction or offset. In the
event the Closing does not occur and Seller retains the ARC Promissory Note and
all Deposit Payments received by it pursuant to the immediately
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preceding sentence (in which event Seller shall be deemed to have the "Right to
Retain"), such ARC Promissory Note and Deposit Payments shall constitute
liquidated damages as described in Section 6.5(b). In the event that Purchaser,
directly or indirectly, seeks to recover any such Deposit Payments received by
Seller and cancel or otherwise terminate the ARC Promissory Note, in each case,
in circumstances other than those described in clauses (i) and (ii) of this
Section 6.5 (or if Purchaser, directly or indirectly, seeks to recover any such
Deposit Payments received by Seller or cancel or otherwise terminate the ARC
Promissory Note, in each case, in circumstances described in clauses (i) and
(ii) of this Section 6.5(a) and a court of competent jurisdiction makes a
non-appealable determination that Purchaser is not entitled to recover such
Deposit Payments or to cancel or terminate such ARC Promissory Note (or makes a
determination that Purchaser is not entitled to recover such Deposit Payments or
cancel or terminate such ARC Promissory Note which determination Purchaser does
not appeal)), Purchaser shall be liable for (x) attorneys' fees and other costs
and expenses incurred by Seller and its Affiliates in defending against or
otherwise in connection with any such action by or on behalf of Purchaser or its
Affiliates and (y) any and all damages incurred by Seller and its Affiliates,
including any consequential, incidental, special, exemplary, punitive or other
special or indirect damages or losses, resulting from such wrongful action by or
on behalf of Purchaser or its Affiliates.
(B) IF SELLER HAS THE RIGHT TO RETAIN PURSUANT TO SECTION 6.5(A), THEN, IN
THE EVENT THAT THE SALE FAILS TO CLOSE AS A RESULT OF THE DEFAULT OF PURCHASER
IN THE PERFORMANCE OF ANY OF ITS COVENANTS OR OBLIGATIONS UNDER THIS AGREEMENT,
PURCHASER AND SELLER AGREE THAT SELLER'S ACTUAL DAMAGES WOULD BE IMPRACTICABLE
OR EXTREMELY DIFFICULT TO FIX AND THE PARTIES THEREFORE AGREE THAT IN SUCH
EVENT, SELLER, AS SELLER'S SOLE AND EXCLUSIVE REMEDY, IS ENTITLED TO LIQUIDATED
DAMAGES IN THE AMOUNT OF THE DEPOSIT PAYMENTS AND THE ARC PROMISSORY NOTE.
SELLER AND PURCHASER BY EXECUTION OF THE SIGNATURE PAGE HERETO ACKNOWLEDGE THAT
THEY HAVE READ AND UNDERSTAND THE PROVISIONS OF THIS SECTION 6.5 AND AGREE TO BE
BOUND BY ITS TERMS.
Section 6.6 Failure to Close. In the event that the Sale does not close
under circumstances where all of the conditions to Closing set forth in Article
V have been satisfied or waived and Purchaser is prepared to close, but Seller
is not prepared to close or otherwise fails to close, Purchaser shall be
entitled to exercise the remedy of specific performance, this being in addition
to any other remedy to which Purchaser is entitled in Law or in equity.
Section 6.7 Guarantee.
(a) Parent irrevocably, absolutely and unconditionally guarantees (the
"Guarantee") each and every representation, warranty, covenant, agreement and
other obligation of Purchaser, and/or any of its permitted assigns (and where
any such representation or warranty is made to the knowledge of Purchaser, such
representation or warranty shall be deemed made to the knowledge of Parent), and
the full and timely performance of their respective obligations under the
provisions of this Agreement and the other Transaction Documents. This is a
guarantee of payment and performance, and not of collection, and Parent
acknowledges and agrees that this guarantee is full and unconditional, and no
discharge, release or extinguishment of Purchaser's Liabilities (other than in
accordance with the terms of this Agreement), whether by decree in any
insolvency, bankruptcy, reorganization or other similar proceeding or otherwise,
and no change in the corporate existence, structure or ownership of any of the
parties hereto or any of their Affiliates and no assignment, pledge or other
transfer (whether voluntary, involuntary or by operation of law) of any of the
rights, interests or obligations of the parties hereto under this Agreement or
the other Transaction Documents, shall affect the continuing validity and
enforceability of this Guarantee, as well as any provision requiring or
contemplating performance by Parent.
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(b) Parent hereby waives, for the benefit of Seller, (i) any right to
require Seller as a condition of payment or performance by Parent, to proceed
against Purchaser or pursue any other remedy whatsoever and (ii) to the fullest
extent permitted by Law, any defenses or benefits that may be derived from or
afforded by Law which limit the Liability of or exonerate Parent or sureties,
except to the extent that any such defense is available to Purchaser.
(c) Without limiting in any way the foregoing Guarantee, Parent covenants
and agrees to take all actions to enable Purchaser to adhere to each provision
of this Agreement and the other Transaction Documents which requires an act or
omission on the part of Parent or any of its subsidiaries to enable Purchaser to
comply with its obligations under this Agreement.
(d) Parent understands that Seller is relying on this Guarantee in entering
into this Agreement and the other Transaction Documents and may, to the extent
Parent is not a party to any such other Transaction Document, enforce this
Guarantee as if Parent were a party thereto.
(e) Notwithstanding anything to the contrary contained in this Section 6.7,
Seller acknowledges and agrees that in the event the Closing does not occur and
Seller retains all Deposit Payments received by it and the ARC Promissory Note
pursuant to its Right to Retain as described in Section 6.5, such Deposit
Payments and ARC Promissory Note shall constitute liquidated damages and Seller
shall have no recourse against Parent or any of its Affiliates pursuant to this
Section 6.7.
ARTICLE VII
GENERAL PROVISIONS
Section 7.1 Nonsurvival of Representations and Warranties; Survival of
Certain Covenants. None of the representations and warranties in this Agreement
or in any instrument delivered pursuant to this Agreement (other than the Deeds)
shall survive the Closing (provided that in the event of a Deferral Event,
Sections 3.1 and 6.7 and Articles I, IV and VII shall survive, with respect to
such Portfolio Property and Assumed Loan subject to the Deferral Event until the
Deferral Closing). Notwithstanding the foregoing sentence or anything to the
contrary elsewhere herein, this Section 7.1 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Closing; provided, however, that no party shall assert (nor shall any party be
liable for) any claim with respect to any such covenant or agreement or any
other provision of this Agreement, or any breach thereof, after the Closing
except with respect to clause (iv) of Section 1.3(b), Sections 1.9, 1.10, the
third, fourth and fifth sentences of Section 4.1, Section 4.4, Section 4.5,
Section 4.16, Section 4.17, Section 4.18, Section 4.19, Section 6.5 and Article
VII. Seller and Purchaser shall each be entitled to rely on and enforce any
provision of Article IV to the extent such provision contains any obligation
relating to the period after the Closing, which such provisions shall survive
the Closing.
Section 7.2 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):
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(a) if to Seller, to:
Hometown America, L.L.C.
000 Xxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx X. Xxxxxx
Fax: (000) 000-0000
with a copy to:
Wachtell, Lipton, Xxxxx & Xxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxxx, Esq.
Fax: (000) 000-0000
and
Pircher, Xxxxxxx & Xxxxx
000 X. Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxx Xxxxx, Esq.
Fax: (000) 000-0000
(b) if to Parent or Purchaser to:
Affordable Residential Communities IV, LP
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Fax: (000) 000-0000
with a copy to:
Affordable Residential Communities IV, LP
000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
Fax: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxx III, Esq.
Fax: (000) 000-0000
Section 7.3 Interpretation. When a reference is made in this Agreement to a
Section or Exhibit, such reference shall be to a Section of or Exhibit to this
Agreement unless otherwise indicated.
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The table of contents and headings contained in this Agreement or in any Exhibit
hereto 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." The terms defined in the singular
shall have a comparable meaning when used in the plural, and vice versa. This
Agreement shall be construed without regard to any presumption or rule requiring
construction or interpretation against the party drafting or causing any
instrument to be drafted. The phrases "the date of this Agreement," "the date
hereof" and terms of similar import, unless the context otherwise requires,
shall be deemed to refer to the date set forth in the first paragraph of this
Agreement. The words "hereof," "hereby," "herein," "hereunder" and similar terms
in this Agreement shall refer to this Agreement as a whole and not any
particular Section or Article in which such words appear. The term "dollars"
shall refer to United States dollars.
Section 7.4 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 7.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement,
the Confidentiality Agreement, the letter agreement by and between Seller and
Purchaser dated August 16, 2003, and the other agreements entered into in
connection with the transactions (i) constitute the entire agreement and
supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter of this Agreement and
(ii) are not intended to confer upon any Person other than the parties hereto
any rights or remedies.
Section 7.6 Governing Law; Waiver of Jury Trial. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK. EACH PARTY HERETO IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF SUCH
PARTY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT THEREOF.
Section 7.7 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; provided, however, that
Purchaser may assign all or a portion of its rights under this Agreement to any
wholly owned Subsidiary of Purchaser without Seller's prior written consent;
provided further, however, that such assignment (1) is in a writing by and
between Purchaser and such Subsidiary for the benefit of Seller and Seller
receives a copy of such assignment at least 24 hours prior to the effectiveness
of such assignment and (2) provides that such Subsidiary agrees with and shall
comply with the terms and conditions of this Agreement and that Purchaser shall
be liable for any non-performance by such Subsidiary. 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 7.8 Enforcement. Seller agrees that irreparable damage would occur
in the event that any of its covenants in this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that Purchaser shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement by Seller and to enforce
specifically the terms and provisions of this Agreement exclusively in any court
of the United States located in the State of New York or in any New York State
court, in each case, located in New York City, 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 (i) consents to submit itself exclusively to the personal
jurisdiction of the United States District Court in the
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Xxxxxxxx Xxxxxxxx of New York or any New York State court in New York City as
well as the jurisdiction of any court from which an appeal may be taken from
such courts in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, including for the purpose of any
litigation, proceeding or other action arising out of such party's obligations
under or with respect to this Agreement and the transactions contemplated hereby
and (ii) agrees that it will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court and
expressly waives any and all objections such party may have to venue in such
courts.
Section 7.9 Exhibits; Disclosure Letter. All Exhibits and Schedules
attached herein and the Seller Disclosure Letter and Purchaser Disclosure Letter
are intended to be and hereby are specifically made a part of this Agreement. An
item disclosed in the Seller Disclosure Letter or the Purchaser Disclosure
Letter shall be deemed to be disclosed in any other relevant sections of the
Seller Disclosure Letter or the Purchaser Disclosure Letter, as the case may be,
and of this Agreement.
ARTICLE VIII
CERTAIN DEFINITIONS
Section 8.1 Certain Definitions.
"Affiliate" of any Person shall mean another Person that directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such first Person.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Deposit Payments" shall mean, collectively, the First Deposit Payment, the
Second Deposit Payment, the Third Deposit Payment, the Fourth Deposit Payment,
the Fifth Deposit Payment, the First Management Deposit Payment and the Second
Management Deposit Payment.
"Employee Liabilities" shall mean (i) all Liabilities relating to any
employee or former employee, independent contractor or former independent
contractor of, or other individual providing services to, Seller or any of its
Affiliates or Seller Subsidiaries (or individual who applied for employment with
Seller or any of its Affiliates or Seller Subsidiaries) (x) who is not a
Portfolio Employee (as defined herein) (each, a "Non-Portfolio Employee") or (y)
who does not become a Transferred Employee, whether accruing or arising from
facts or circumstances occurring before, on or following the Closing Date, (ii)
any debts, obligations and other Liabilities relating to any Portfolio Employee
accruing or arising from facts or circumstances occurring prior to the Closing
Date, (iii) any accrued but unused vacation, personal days and floating holidays
relating to periods of service prior to the Closing Date, and (iv) any
Liabilities under any Seller Employee Benefit Plan or Seller Severance
Agreement.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.
"FIRPTA Certificate" shall mean a certificate in the form of Exhibit E
hereto, duly executed and acknowledged certifying facts that would exempt from
any withholding requirement under Section 1445 of the Code any consideration
distributed in or in connection with the Sale for any United States real
property interests being transferred pursuant to this Agreement.
"GAAP" shall mean generally accepted accounting principles in the United
States.
"Governmental Entity" shall mean any federal, state or local government or
agency or any court, regulatory or administrative agency or commission or other
governmental authority or instrumentality.
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"Hometown Portfolio Property" shall mean any Portfolio Property that as of
the date hereof is owned by Hometown America, L.L.C. or any of its Subsidiaries
(and shall be deemed to exclude any Portfolio Property that as of the date
hereof is owned by Chateau Communities, Inc. or any of its Subsidiaries).
"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 such conditional sale or
other title retention agreements relating to property purchased by such Person,
(c) all lease obligations (capital or other) 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.
"Knowledge" where used herein with respect to Seller and any Seller
Subsidiary shall mean the actual (and not constructive or imputed) knowledge,
after reasonable investigation, of Xxxxxxx X. Xxxxx, Xx., Xxxxxx X. Xxxxxx, Xxxx
Xxxxxxx and Xxxxxxx X. Xxxxx and where used with respect to Parent and Purchaser
shall mean the actual (and not constructive or imputed) knowledge, after
reasonable investigation, of the persons named in Section 8.1 of the Purchaser
Disclosure Letter.
"Law" shall mean any applicable statute, law, regulation, rule, order,
decree, code, judgment, ordinance (including zoning law or building code) or any
other applicable requirement of any Governmental Entity.
"Liability" shall mean any and all debts, liabilities, commitments, claims,
allegations, demands and obligations, of whatever kind and nature, primary or
secondary, direct or indirect, whether fixed, contingent or absolute, matured or
unmatured, liquidated or unliquidated, accrued or not accrued, known or unknown,
whenever or however arising (including whether arising out of any contract or
tort based on negligence or strict liability) and whether or not the same would
be required by GAAP to be reflected in financial statements or disclosed in the
notes thereto.
"Merger Agreement" means the Agreement and Plan of Merger, dated as of May
29, 2003, by and among Seller, Hometown America Holdings, L.L.C., a Delaware
limited liability company and a member of Seller, CP Limited Partnership, a
Maryland limited partnership, Chateau Communities, Inc., a Maryland corporation
and a general partner of CP Limited Partnership, and ROC Communities, Inc., a
Maryland corporation and the other general partner of CP Limited Partnership.
"Person" shall mean an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity.
"Purchaser Disclosure Letter" shall mean the disclosure letter dated as of
the date of this Agreement and delivered by Purchaser and Parent to Seller in
connection with the execution hereof.
"Purchaser Subsidiary" shall mean any Subsidiary of Purchaser.
"SEC" shall mean the U.S. Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Seller Disclosure Letter" shall mean the disclosure letter dated as of the
date of this Agreement and delivered by Seller to Purchaser and Parent in
connection with the execution hereof.
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"Seller Representative" shall mean any Affiliate of Seller and each of
Seller's or any such Affiliates' officers, directors, employees and agents and
each of the heirs, executors, successors and assigns of the foregoing.
"Seller SEC Documents" shall mean each report, schedule and registration
statement filed by Seller or Chateau Communities, Inc. or any Subsidiary of
Chateau Communities, Inc. with the SEC since January 1, 2001.
"Seller Subsidiary" shall mean each Subsidiary (as defined herein) of
Seller.
"Seller's Financing" shall mean the financing transactions entered into by
Seller and its Subsidiaries in connection with the transactions contemplated by
the Merger Agreement.
"Subsidiary" of any Person shall mean 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, value of or other equity interests (voting
or non-voting) of such corporation, partnership, limited liability company,
joint venture or other legal entity.
"Tax" or "Taxes" shall mean any tax of any kind, including any federal,
state, local and foreign income, gross receipts, license, withholding, property,
recording, stamp, sales, use, franchise, employment, payroll, excise,
environmental and other taxes, tariffs or governmental charges of any nature
whatsoever, together with penalties, interest or additions thereto, whether
disputed or not.
"Tax Return" shall mean any return, declaration, report, claim for refund,
or information return or statement filed or required to be filed relating to
Taxes, including any schedule or attachment thereto, and including any amendment
thereof.
"Voting Debt" shall mean bonds, debentures, notes or other Indebtedness
having the right to vote (or convertible into, or exchangeable for, securities
having the right to vote) on any matters on which holders of equity interests in
Seller, any Seller Subsidiary, Parent, Purchaser or any Purchaser Subsidiary, as
applicable, may vote.
"100 Oaks Liability" shall have the meaning set forth on Section 8.1 of the
Seller Disclosure Letter.
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IN WITNESS WHEREOF, Hometown America, LLC, Affordable Residential
Communities IV, LP and ARC IV REIT, INC. have caused this Agreement to be signed
by their respective officers thereunto duly authorized, all as of the date first
written above.
HOMETOWN AMERICA, L.L.C.
By: Hometown Residential Manager, L.L.C.,
a Delaware limited liability company,
Manager
By: /s/ Xxxxxxx X. Xxxxx, Xx.
---------------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
Title: Manager
AFFORDABLE RESIDENTIAL COMMUNITIES IV, LP
By: ARC IV REIT, Inc., a Maryland corporation,
its general partner
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman and Chief Executive Officer
ARC IV REIT, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman and Chief Executive Officer
