SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9/A
(Amendment No. 1)
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------
CHATEAU PROPERTIES, INC.
(NAME OF SUBJECT COMPANY)
CHATEAU PROPERTIES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
------------------------
COMMON STOCK, $.01 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
161739 10
(CUSIP NUMBER OF CLASS SECURITIES)
------------------------
C. G. Kellogg
President and Chief Executive Officer
Chateau Properties, Inc.
19500 Hall Road
Clinton Township, MI 48038
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE
PERSON(S) FILING STATEMENT)
COPIES TO:
Arthur Fleischer, Jr., Esq.
Peter Golden, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
(212) 859-8000
Henry J. Brennan, III, Esq.
Charles W. Royer, Esq.
Timmis & Inman L.L.P.
300 Talon Centre
Detroit, MI 48207
(313) 396-4200
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
The subject company is Chateau Properties, Inc., a Maryland
corporation (the "Company"). The address of the principal executive offices of
the Company is 19500 Hall Road, Clinton Township, MI 48038. The title of the
class of equity securities to which this Statement relates is the common
stock, $.01 par value per share (the "Shares"), of the Company.
ITEM 2. TENDER OFFER OF MHC OP AND MHC.
This Statement relates to the tender offer previously announced
by MHC Operating Limited Partnership, a limited partnership formed under the
laws of the State of Illinois ("MHC OP"), the sole general partner of which is
Manufactured Home Communities, Inc., a Maryland corporation ("MHC"), to
purchase all outstanding Shares at a price per Share of $26.00, net to the
seller in cash, without interest (the "MHC Offer").
The address of the principal executive offices of MHC OP and
MHC is Suite 800, Two North Riverside Plaza, Chicago, Illinois 60606.
ITEM 3. IDENTITY AND BACKGROUND.
(a) Name and Business Address of Person Filing This
Statement.
The name and business address of the Company, which is the
person filing this Statement, are set forth in Item 1 above.
(b) (1) Arrangements with Executive Officers, Directors
or Affiliates of the Company.
Certain information with respect to certain contracts,
agreements, arrangements or understandings between the Company and certain of
its executive officers, directors and affiliates is set forth in pages 4-12 of
the Company's Notice of Annual Meeting of Shareholders and Proxy Statement
dated April 10, 1996 for the Company's 1996 Annual Meeting of Shareholders
held on May 16, 1996 (the "Proxy Statement"). Copies of the foregoing pages
are attached as Exhibit 99.3 to this Statement and are incorporated herein by
reference.
On September 12, 1996, the Board of Directors of the Company
amended the 1993 Long-Term Incentive Stock Plan (the "Plan") to provide that
the Plan and all other stock incentive plans the Company may have will be
-2-
<PAGE>
administered in accordance with the new Rule 16b-3 of the Securities and
Exchange Act of 1934, as in effect on August 15, 1996, and that the Plan will
be amended in such other ways as the Company's counsel may recommend in order
to comply with the requirements of Rule 16b-3. The Plan was also amended to
provide that, upon a change in control (as defined in the Plan and which would
include the consummation of the MHC Offer), all outstanding options awarded
under the Plan not previously exercisable and vested will become fully exercis-
able and vested, without regard to whether or not a surviving corporation
assumes or continues the outstanding awards. In addition, the Plan was amended
to provide that outstanding options previously granted to a participant whose
employment is terminated prior to a change in control but at the request of a
potential acquiror will also become fully exercisable and vested. As of
September 15, 1996, options to purchase 619,150 Shares at exercise prices
ranging from $19.50 to $24.25 per Share were outstanding, of which options to
purchase 148,038 Shares were fully exercisable and vested. If the ROC Merger
takes place on or before March 31, 1997 or such later date as approved by the
Board of Directors, and prior to a change in control, the options under the
Plan will not vest.
On September 16, 1996, the Company entered into severance
agreements (the "Severance Agreements"), a form of which is attached as
Exhibit 99.5, with each of the following officers of the Company: C. G.
Kellogg, Tamara D. Fischer, Lori A. Palazzolo, Darrel D. Swain and Pamela R.
Davis. Pursuant to these Severance Agreements, in the event the senior
executive is terminated without "cause" or if the officer terminates his or
her employment for "good reason," in each case, within two years following a
"change in control" (which would include the consummation of the MHC Offer),
the officer would be entitled to a lump sum payment of salary and bonus equal
to two times, in the case of Mr. Kellogg and Ms. Fischer, and one times, in
the case of Ms. Palazzolo, Mr. Swain and Ms. Davis, the officer's annual base
salary and bonus and to the continuation of health benefits for two years, in
the case of Mr. Kellogg and Ms. Fischer, and one year, in the case of Ms.
Palazzolo, Mr. Swain and Ms. Davis. All amounts payable as a result of a
change in control would be subject to a cap so that all payments to the
officers would be reduced so that no excise tax would be imposed on any of the
payments and the amounts payable would be fully deductible to the Company
under Section 280b of the Internal Revenue Code of 1986, as amended (the
"Code"). If the ROC Merger takes place on or before March 31, 1997 or such
later date as approved by the Board of Directors, and prior to a change in
control, the Severance Agreements will terminate immediately. In addition, the
Company amended the Employment Agreement dated October 27, 1993 between the
Company and Mr. Kellogg (the "Kellogg Employment Agreement") to provide that
in the event of a change in control followed by a termination of employment of
Mr. Kellogg, such that the benefits under his Severance Agreement become
applicable, the Kellogg Employment Agreement will terminate and
no longer be in full force or effect.
-3-
<PAGE>
On September 16, 1996, the Board of Directors of the Company
amended the Annual Bonus Plan (the "Bonus Plan") to provide that, upon a
change in control, each Bonus Plan participant who remains employed through
the end of the performance period during which a "change in control" (which
would include the consummation of the MHC Offer) occurs will receive a bonus
for that year equal to the bonus received in the previous fiscal year. The
Bonus Plan was amended further to provide that a participant whose employment
is terminated after a change in control but prior to the end of the applicable
performance period will receive a pro-rated bonus (calculated in accordance
with the preceding sentence). Finally, the Bonus Plan was amended to provide
that a participant whose employment is terminated prior to a change in control
but at the request of a potential acquiror will likewise receive a prorated
bonus, as calculated above. If the ROC Merger takes place on or before March
31, 1997 or such later date as approved by the Board of Directors and prior to
a change in control, the amendments to the Bonus Plan will not be applicable.
(b) (2) Arrangements with MHC OP, MHC and their Respective
Executive Officers, Directors or Affiliates.
There are no contracts, agreements, arrangements or
understandings or actual or potential conflicts of interest between the
Company, its directors, executive officers, and affiliates, on the one hand,
and MHC OP or MHC and their respective executive officers, directors and
affiliates, on the other hand.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Background and Recommendation.
On July 19, 1996, the Company and ROC Communities, Inc. ("ROC")
issued a press release announcing their agreement to merge (the "Old ROC
Merger") both companies into a new company to be called Chateau Communities,
Inc. ("Chateau Communities") through a tax-free exchange of stock. Pursuant to
the terms of the Old ROC Merger, ROC shareholders were to receive 1.042 shares
of the new company's common stock for every share they held in ROC and Company
shareholders were to receive one share of the new company's common stock for
every share they held in the Company. The exchange ratio was derived from the
average of the ratios of the daily closing stock prices of the two companies
during the second quarter of 1996.
-4-
<PAGE>
Concurrently with the execution and delivery of the merger
agreement between the Company and ROC relating to the Old ROC Merger (the "Old
ROC Merger Agreement"), the Company entered into a Stock Option Agreement (the
"Company Option Agreement") with ROC whereby the Company granted to ROC an
option to purchase up to 420,000 Shares, exercisable by ROC, in whole or in
part, at any time or from time to time after the Old ROC Merger Agreement
becomes terminable by ROC under circumstances which could entitle ROC to
receive certain break-up expenses or fees pursuant to the Old ROC Merger
Agreement, regardless of whether the Old ROC Merger Agreement is actually
terminated (any such event by which the Old ROC Merger Agreement becomes so
terminable by ROC being referred to herein as a "ROC Trigger Event"). The
exercise price of the option under the Company Option Agreement is equal to
$22.25 per Share, the closing price of the Shares on the date prior to the
announcement of the Old ROC Merger (i.e., July 17, 1996). The right of ROC to
exercise its option will terminate on the date which is 365 days after the
date that the Company shall notify ROC in writing of the occurrence of any ROC
Trigger Event. ROC also entered into a Stock Option Agreement (the "ROC Option
Agreement") with CP Limited Partnership ("CP") , whereby ROC granted CP an
option to purchase up to 420,000 shares of ROC common stock, exercisable by
CP, in whole or in part, at any time or from time to time after the Old ROC
Merger Agreement becomes terminable by the Company under circumstances which
could entitle CP to receive certain break-up expenses or fees pursuant to the
Old ROC Merger Agreement, regardless of whether the Old ROC Merger Agreement
is actually terminated (any such event by which the Old ROC Merger Agreement
becomes so terminable by the Company being referred to as a "Company Trigger
Event"). The exercise price of the option under the ROC Option Agreement is
equal to $22.00 per share, the closing price of ROC common stock on the date
prior to the announcement of the Old ROC Merger (i.e., July 17, 1996). The
right of CP to exercise its option terminates on the date which is 365 days
after the date that ROC notifies CP in writing of the occurrence of any
Company Trigger Event.
On August 14, 1996, Samuel Zell, Chairman of the Board of MHC,
and David Helfand, President and Chief Executive Officer of MHC, telephoned
John Boll, Chairman of the Board of the Company, and suggested that they meet.
On August 16, 1996, Messrs. Zell, Helfand and Boll met in
Detroit, Michigan. Also in attendance at such meeting were representatives of
the Company's legal and financial advisors. At the meeting, Mr. Zell
communicated MHC's offer to acquire the Company for $26.00 per Share in cash,
MHC common shares at a ratio of 1.15 MHC common shares for each Share or a
combination of cash at $26.00 per Share and MHC common shares at such ratio.
Mr. Boll asked a number of questions regarding MHC's offer and indicated that
MHC's offer would be considered by the Company's Board of Directors.
-5-
<PAGE>
On August 17, 1996, MHC delivered to Mr. Boll and the members
of the Board of Directors of the Company a letter setting forth a formal
proposal of the terms Mr. Zell communicated at the August 16th meeting.
MHC publicly announced its proposal in a press release dated
August 19, 1996. Also on August 19, 1996, the Company responded to MHC's
proposal by issuing a press release, which stated in part:
CHATEAU PROPERTIES ANNOUNCES AN UNSOLICITED
PROPOSAL FOR A TWO-TIER OFFER FROM
MANUFACTURED HOME COMMUNITIES, INC.
Chateau Properties, Inc. (NYSE: CPJ), a real estate investment
trust operating in the manufactured housing community industry,
announced today it had received an unsolicited proposal from
Manufactured Home Communities, Inc. (NYSE: MHC) in which MHC indicated
it was prepared to offer $26.00 in an all-cash transaction and/or 1.15
shares of MHC's common stock for each CPJ share outstanding, and was
prepared to make the same offer to holders of limited partnership
interests in Chateau's operating partnership, CP Limited Partnership.
Based an the closing price of MHC common stock on August 16, 1996 of
$18-1/8, the indicated value of the MHC shares offered for Chateau
shares was $20.84, compared to the closing price of Chateau stock of
$23-1/4 on August 16, 1996.
Chateau Properties is a party to a definitive Agreement and
Plan of Merger with ROC Communities, Inc. (NYSE: ROC) which provides
for the strategic combination of Chateau and ROC Communities. John
Boll, Chairman of Chateau Properties, Inc., reiterated that the
motivation for the merger with ROC Communities was based on the unique
and substantial opportunities presented by the combination of Chateau
and ROC. Chateau further noted that its Articles of Incorporation
prohibit a person from beneficially owning in excess of 7% of its
outstanding shares of common stock without Board approval.
On the same date, August 19, 1996, ROC issued a press release, which
stated in part:
-6-
<PAGE>
CHAIRMAN OF ROC COMMUNITIES, INC.,
MCDANIEL, RESPONDS TO INQUIRIES ABOUT MERGER
WITH CHATEAU PROPERTIES
In response to inquiries this morning regarding ROC Communities, Inc.'s (NYSE:
RCI) pending merger with Chateau Properties, Inc. (NYSE: CPJ), Chairman and
President of ROC Communities, Gary P. McDaniel stated, "The pending
transaction between Chateau Properties and ROC Communities is a merger of
equals and a strategic business combination which will create the substantial
long term benefits we have previously discussed. Neither company has been or
is for sale. We remain fully committed to completing the merger, which we
strongly believe is in the best interests of the shareholders of both
companies."
On August 21, 1996, the Company issued a press release
announcing an unsolicited stock for stock offer for the Company (the "Sun
Offer") from Sun Communities, Inc. ("Sun"), which stated in part:
CHATEAU PROPERTIES ANNOUNCED AN UNSOLICITED PROPOSAL FOR
STOCK FOR STOCK OFFER FROM SUN COMMUNITIES, INC.
Chateau Properties, Inc. (NYSE: CPJ), a real estate investment
trust operating in the manufactured housing community industry,
announced today it had received an unsolicited proposal from Sun
Communities, Inc. (NYSE: SUN) in which SUN indicated it was prepared
to offer .892 shares of SUN's common stock for each CPJ share
outstanding, and was prepared to make the same offer to holders of
limited partnership interests in Chateau's operating partnership, CP
Limited Partnership.
Chateau Properties in a party to a definitive Agreement and
Plan of Merger with ROC Communities, Inc. (NYSE: RCI) which provides
for the strategic combination of Chateau and ROC Communities.
Chateau stated that the SUN proposal, as well an the
unsolicited proposal previously received from Manufactured Home
Communities, Inc., will begin to be reviewed at the regularly
scheduled Board Meeting to be held August 22, 1996.
After Sun's announcement, MHC issued a press release on August
23, 1996 in which it reiterated its commitment to consummating a transaction
with the Company.
-7-
<PAGE>
Also on August 23, 1996, the Company announced that its
Board of Directors, at a regularly scheduled meeting on August 22, 1996, "had
begun to consider the unsolicited proposals recently received from Sun
Communities, Inc. (NYSE: SUI) and Manufactured Home Communities, Inc. (NYSE:
MHC) and will continue that review."
On August 27, 1996, John Boll sent a letter to Samuel Zell
stating that the Company and its advisors had not had an opportunity to fully
evaluate the proposals of MHC and Sun and would complete their assessment of
the proposals in the coming days.
On September 4, 1996, MHC issued a press release announcing the
commencement of the MHC Offer.
Also on September 4, 1996, MHC sent a letter to John Boll and
the members of the Board of Directors of the Company advising them of the MHC
Offer and requesting that they take actions to facilitate the MHC Offer as
described in MHC's Offer to Purchase dated September 4, 1996.
On September 4, 1996, Purchaser commenced the MHC Offer. MHC
stated in its Offer to Purchase dated September 4, 1996 that the purpose of
the MHC Offer is to acquire control of, and the entire equity interest in, the
Company and that MHC intended, as soon as practicable after and substantially
concurrent with, the consummation of the MHC Offer, to propose and seek to
have the Company consummate a merger or similar business combination with MHC
or a direct or indirect wholly owned subsidiary of MHC (the "Proposed MHC
Merger"), pursuant to which each outstanding Share (other than Shares owned by
MHC OP or MHC and Shares held by shareholders who perfect any available
appraisal rights under the Maryland General Corporation Law) would be
converted into the right to receive an amount in cash equal to the price per
Share paid pursuant to the MHC Offer.
On September 10, 1996, the Company received a letter from Sun
in which Sun reiterated its commitment to consummating a merger of the Company
and Sun. In its letter, Sun indicated that it was prepared to offer a cash
alternative, to the extent desired by the Company's shareholders, to its
previously announced stock proposal, which Sun believed would compare
favorably with the current offer of MHC. Additionally, Sun stated that such
cash alternative would not be subject to a financing contingency.
On September 18, 1996, the Company issued the following press
release with respect to the terms of a revised merger with ROC (the "ROC
Merger") pursuant to a revised merger agreement (the "ROC Merger Agreement"),
-8-
<PAGE>
the terms of a dividend of 3.16% of the outstanding Shares to be declared
by the Board and paid to holders of Shares (except for certain holders
("OP Unitholders") of limited partnership interests ("OP Units") in CP
participating in the OP Unit Exchange discussed below) prior to the ROC Merger
(the "Stock Dividend"), an agreement by OP Unitholders to assign and transfer
their OP Units to the Company for Shares and to assign to existing
shareholders of the Company the OP Unitholders' rights to the Stock Dividend
(the "OP Unit Exchange") and a Share repurchase program (the "Share Repurchase
Program") to be commenced by the Company and ROC prior to the consummation of
the ROC Merger:
CHATEAU BOARD APPROVES REVISED MERGER AGREEMENT WITH
ROC
AS BEST ALTERNATIVE FOR CHATEAU STOCKHOLDERS
--Revised Agreement Improves Exchange Ratio For Chateau Holders--
--Chateau Plans to Repurchase Up To 1.45 Million Of Its Shares--
--Rejects Proposals by MHC and Sun Communities--
CLINTON TOWNSHIP, MICHIGAN, SEPTEMBER 18, 1996 -- Chateau Properties,
Inc. (NYSE:CPJ), a real estate investment trust operating in the
manufactured housing community industry, today announced that its
Board of Directors has unanimously approved a revised merger
agreement with ROC Communities, Inc. (NYSE:RCI). In reaching its
decision, the Board determined, after thorough analyses and in
consultation with its independent financial and legal advisors, that
the revised merger agreement with ROC is the best alternative for
Chateau stockholders and represents the opportunity for both superior
long-term value and strategic and operational benefits. The Board also
rejected proposals to merge Chateau with Sun Communities, Inc. (NYSE:
SUI) and Manufactured Home Communities, Inc. (NYSE: MHC).
Under the revised merger agreement each outstanding share of Chateau
common stock will represent 1.0316 shares of the combined entity,
rather than one share as contemplated under the original agreement.
This improvement in the exchange ratio results from a payment by
Chateau of a stock and OP Unit dividend equal to 3.16% of the
outstanding Chateau common stock and OP Units prior to the effective
date of the merger, but contingent upon the merger having been
approved by a majority of Chateau stockholders. A further economic
-9-
<PAGE>
benefit may be realized if OP Unitholders elect to exchange into common
stock. Assuming that 70% of the OP Units were exchanged, for example,
the effective exchange ratio for Chateau stockholders would be
approximately 1.06. The exchange ratio for ROC stockholders remains
unchanged at 1.042.
In connection with the ROC merger, the Board also unanimously approved
a number of new initiatives designed to provide a balanced package of
long-term and short-term value that responds to stockholders with
different investment objectives and more accurately reflects the
Company's worth.
These initiatives include:
o A program to repurchase, either through open market purchases,
negotiated purchases, or a tender offer, up to 1.45 million of
the approximately 6.1 million shares of the Company's common
stock currently outstanding.
o In addition, ROC has indicated its intent to purchase, from
time to time, up to 350,000 shares of Chateau common stock
prior to the merger and Chateau has waived the restrictions of
its standstill agreement with ROC with respect to these
purchases.
o An opportunity for each holder of limited partnership interests
(OP Units) in the Company's operating partnership, CP Limited
Partnership, to exercise their existing right to exchange, on a
tax-efficient basis, their OP Units for one share of the
Company's common stock to be effected prior to the merger. In
recognition of this opportunity to exchange on a tax-efficient
basis, each OP Unit holder will be required to waive its right
to the OP Unit dividend, thus reallocating such dividend to the
existing Chateau common stockholders. Certain holders have
indicated their intention to exchange up to approximately
6 million OP Units into Chateau common stock, which as
described above will have the effect of transferring the
benefit of their OP Unit dividend to Chateau common
stockholders. If 70% of the approximately 8.8 million
outstanding OP Units were exchanged, the effective exchange
ratio to Chateau common stockholders would be increased to
approximately 1.06. In connection with the exchange, exchanging
OP Unitholders will be given the opportunity to purchase
common stock from Chateau and/or ROC at fair market value.
The Company said the share repurchase program will provide immediate
liquidity to those holders who wish to sell some or all of their
shares, while enabling continuing holders to benefit from the ongoing
growth of the Company after the merger.
The revised ROC merger will require the affirmative vote of a majority
of the Chateau common stock voting (provided that the total vote cast
represents over 50% in interest of the outstanding Chateau common
stock) and the affirmative vote of two-thirds of the outstanding ROC
common stock. Under the revised agreement, ROC will merge with a
subsidiary of Chateau.
-10-
<PAGE>
Procedurally, the ROC common stockholders will vote on the merger
first and, if the ROC common stockholders approve the merger, holders
of Chateau's OP Units will have the opportunity to exchange and
transfer their OP Units for an equal number of shares of Chateau common
stock to participate in the Chateau stockholder vote on the merger. OP
Unitholders including Messrs. John A. Boll, C.G. Kellogg, and Edward
R. Allen, a director of Chateau, and J. Peter Ministrelli have
indicated that they intend to exchange up to 6 million OP Units for
Chateau common stock. There are approximately 2.8 million additional
OP Units that will also have the opportunity to exchange their OP
Units.
The revised merger agreement, like the original merger agreement,
provides for a strategic "merger of equals" between ROC and
Chateau and not for an acquisition by Chateau of ROC or by ROC
of Chateau. As in the original merger agreement, the revised
merger agreement provides that the management teams of the two
companies will be combined following the merger. The Chairman of
the combined company will be John A. Boll, the current Chairman
of Chateau. The Chief Executive Officer of the combined company
will be Gary P. McDaniel, the current Chairman and CEO of ROC.
The President of the combined company will be C. G. "Jeff"
Kellogg, the current CEO and President of Chateau. The Chief
Financial Officer of the combined company will be Tamara D.
Fischer, the current CFO of Chateau. The Chief Operating Officer
of the combined company will be James B. Grange and the Executive
Vice President of Acquisitions for the combined company will be
Rees F. Davis, who both currently hold like positions with ROC.
It is expected that the combined company will be renamed Chateau
Communities, Inc., following the merger and will be headquartered
at ROC's current offices in Englewood, Colorado. The Board of
Directors of the combined company will consist of five
representatives from the current Board of Chateau and five
representatives from the current Board of ROC. An eleventh Board
member will be nominated by the Board and elected at the first annual
meeting of shareholders of the combined company.
John A. Boll, Chairman of Chateau Properties, said: "The revised
merger agreement with ROC offers attractive financial and operational
benefits to the stockholders of both companies and represents the best
path to long-term enterprise value through a strategic combination of
Chateau and ROC, two companies whose business plans and management
philosophies are highly complementary. The merger will significantly
increase the geographic diversity of the properties owned by Chateau
and reduce the Company's exposure to fluctuations in local economic
cycles.
"While the terms of the revised merger agreement are fairly complex,
we think those who take the time to understand them will recognize the
significant benefits this transaction offers to all of our
constituencies. We will now move ahead to consummate this mutually
beneficial strategic merger and urge all interested parties to respect
the Board's decision."
In connection with its decision to proceed with the revised merger
with ROC, the Chateau Board of Directors, after consultation with its
financial advisors, Goldman Sachs and Merrill Lynch, rejected the
unsolicited offer of MHC Operating Limited Partnership, the sole
general partner of Manufactured Home Communities, Inc. (NYSE:MHC), as
inadequate and reaffirmed its intent to pursue a strategic merger that
enables stockholders to continue to benefit from an equity
participation in the combined enterprise. A more complete statement of
the Board's position with respect to the MHC offer is set forth in
Chateau's Schedule 14D-9/A, which is being distributed to all Chateau
stockholders. THE CHATEAU BOARD OF DIRECTORS STRONGLY URGES ITS
STOCKHOLDERS NOT TENDER THEIR SHARES INTO THE MHC TENDER OFFER.
-11-
<PAGE>
Additionally, in reaching its determination to proceed with the ROC
merger, the Board also carefully considered, with the assistance of
its financial and legal advisors, the offer of Sun Communities, Inc.
(NYSE:SUN). The Board determined that the long-term benefits of a
combination with ROC were superior to a combination with Sun. This
conclusion was based on several factors, including a judgment
concerning Sun's property portfolio, the nature and compatibility of
the combined management teams, and the different acquisition practices
of the two companies.
In connection with the MHC tender offer, Chateau filed suit on
September 17, 1996, in the United States District Court for the
District of Maryland against MHC. In its complaint, Chateau alleges
that (i) the MHC offer has been made in violation of the federal
securities laws because it contains untrue statements of material fact
and fails to state material facts and (ii) MHC has begun a proxy
solicitation in opposition to Chateau's merger with ROC and has made
material misstatements of facts and failed to disclose other material
facts as part of that solicitation effort in violation of applicable
federal law, and seeks a declaratory judgement that: (i) the purchase
of Chateau common stock pursuant to the MHC offer would violate Article
VI of Chateau's articles of incorporation relating to share ownership
limitations; (ii) the second step merger proposed in MHC's offer would
be subject to the restrictions contained in the Maryland business
combination statute; and (iii) Chateau's Board of Directors is not
required to exempt the purchase of Chateau common stock pursuant to
the MHC offer from the ownership limitation contained in Chateau's
articles of incorporation or from the Maryland business combination
statute.
Separately, the company said a class action suit was filed on
September 12, 1996, in the Circuit Court for Montgomery County,
Maryland, against Chateau, alleging that Chateau's directors have
violated their fiduciary duties to stockholders by agreeing to a
business combination with ROC and refusing to endorse the MHC offer
and seeks injunctive relief and unspecified monetary damages. Chateau
believes the allegations are entirely lacking in merit and intends to
defend against this action.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS REJECT THE OFFER AND NOT TENDER THEIR SHARES PURSUANT
TO THE OFFER.
A copy of a letter to shareholders communicating the Board's
recommendation is filed as Exhibit 99.1 and is incorporated by reference.
-12-
<PAGE>
(b) Reasons for the Recommendation.
In reaching the conclusion that shareholders should reject the
MHC Offer, the Board of Directors considered numerous factors, including but
not limited to the following:
(i) The belief of the Board of Directors that the
interests of the Company's shareholders will best be served by a
strategy of continued growth in the size and number of properties
owned by the Company, management of the Company by a team with
superior talent, depth and experience which shares the Board's
strategic vision, and maintaining the Company's shareholders' ongoing
equity interest in the Company in order to permit them to share fully
in the anticipated benefits of this strategic plan. In that
connection, the Board noted:
o The MHC Offer contemplates that the Company's
shareholders will lose all their right to participate in
the financial benefits of the Company's businesses and
to share in the management of the Company through their
rights as the holders of voting securities.
o The ROC Merger is a superior strategic alternative as
compared to the MHC Offer based on the factors described
in (ii) below;
(ii) The expected benefits of the ROC Merger,
including:
o The improved economic terms for the Company's
shareholders, as compared to the original transaction,
which will result from the Stock Dividend and
effectively reduce the exchange ratio from 1.042 to no
greater than approximately 1.01 Share for each share of
ROC common stock.
o The ROC Merger would significantly increase the
geographic diversity of the properties owned by the
Company compared to the properties currently owned by
the Company. This increased diversification would reduce
exposure to the vagaries of local economic cycles.
o The ROC Merger would significantly increase the market
capitalization of the Company compared with the current
market capitalization of the Company and would result in
the Company having the largest market capitalization of
any REIT specializing in owning and operating
manufactured home communities. The Board believed that
the increased market capitalization of the Company after
the ROC Merger would enhance liquidity through increased
trading volumes and encourage investment in the Company
by institutional investors (which tend to favor
companies with larger market capitalizations). In
addition, the Board believed that increased
-13-
<PAGE>
institutional investor participation could lead to an
increase in the trading multiples and share price of the
Company compared to the current trading multiple and
share price of the Company.
o The Merger would effectively combine the senior
management teams of Chateau and ROC and create a company
with enhanced management depth and experience and an
ability to capitalize on the complementary expertise of
each other's management.
o After the ROC Merger, the Company would have improved
access to capital markets compared to the Company's
current access. The Board believed, based in part on
discussions with management and its advisors, that the
Company should maintain its investment grade credit
rating.
o The Company would realize the benefit of significant
synergies and on-going operational cost savings,
including general and administrative cost savings as a
result of consolidated operating and property management
functions and the elimination of duplicative expenses.
The Board believed that the Company's shareholders would
benefit from the aforementioned synergies and cost
savings and that these benefits should inure to the
Company's shareholders rather than to MHC.
o General industry, economic and market conditions, both
current and projected, the interests of the Company's
shareholders and the potential impact of the ROC Merger
upon the interests of the Company's employees,
suppliers, creditors and residents as well as the
possible impacts on the communities in which the Company
has operations.
(iii) The opinion of Goldman, Sachs & Co. ("Goldman
Sachs") that, as of September 17, 1996, the exchange ratio pursuant
to the ROC Merger Agreement is fair to the Company. A copy of the
written opinion dated September 17, 1996 of Goldman Sachs delivered
to the Board which sets forth the assumptions made, procedures
followed, matters considered and limits on its review is attached as
Annex A to this Schedule 14D-9/A and is incorporated by reference. THE
FULL TEXT OF SUCH OPINION SHOULD BE READ IN CONJUNCTION WITH THIS
STATEMENT;
(iv) The opinion of Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") that, as of September 17, 1996,
the proposed consideration to be paid by the Company in the ROC
Merger is fair to the Company and its shareholders (other than
ROC and its affiliates) from a financial point of view. A copy
of the written opinion dated September 17, 1996 of Merrill Lynch
delivered to the Board which sets forth the assumptions made,
procedures followed, matters considered and limits on its review is
attached as Annex B to this Schedule 14D-9/A and is incorporated by
reference. THE FULL TEXT OF SUCH OPINION SHOULD BE READ IN CONJUNCTION
WITH THIS STATEMENT;
(v) The conclusion of the Board of Directors that the
terms of the MHC Offer are inadequate from a financial point of view
based on a review of the Company's business, financial condition,
properties and prospects with the Company's management and financial
advisors;
-14-
<PAGE>
(vi) (a) The oral opinion of Goldman Sachs, co-financial
advisor to the Company, after reviewing with the Board of Directors
certain financial criteria customarily used in assessing an offer, that
the MHC Offer is inadequate; and (b) the oral opinion of Merrill Lynch,
co-financial advisor to the Company, after reviewing with the Board of
Directors certain financial criteria customarily used in assessing an
offer, that the MHC Offer is inadequate from a financial point of view;
(vii) Based on the factors noted in (ii) above, the
Board's conclusion that the ROC Merger provides both immediate and
long-term benefits to the Company's shareholders;
(viii) As part of the ROC Merger and pursuant to the OP
Unit Exchange, OP Unitholders will have the opportunity, on two
occasions, to assign and transfer their OP Units to the Company in
exchange for Shares on a substantially tax-free basis as opposed to a
taxable basis pursuant to the structure of the MHC Offer and the
Proposed MHC Merger. The Board observed that, in order to participate
in the OP Unit Exchange, an OP Unitholder would have to assign to
existing common shareholders of the Company the Stock Dividend
otherwise payable to them, thereby transferring value to the Company's
existing common shareholders. Since it is expected that the first OP
Unit Exchange will occur prior to the record date for determining
holders of Shares entitled to vote on the ROC Merger, OP Unitholders
exchanging at such time will be entitled to vote on the ROC Merger. If
the holders of OP Units exchange their OP Units for Shares, they are
expected to have sufficient voting power to assure shareholder
approval of the ROC Merger, which merger, as described above, the
Board believes is in the best interests of the Company and its
shareholders. (It is also expected that OP Unitholders receiving Shares
in the initial OP Unit Exchange will vote in favor of the ROC Merger
and thereby facilitate the ROC Merger because of the negative tax
consequences that would arise if the merger does not occur after the
exchange.) The Board believed that the OP Unit Exchange is
appropriate, in light of its fiduciary responsibility both to the
Company's shareholders and to the OP Unitholders as general partner of
CP, and took into account the fact that the OP Unitholders own
approximately 60% of the Company's equity on a fully diluted basis and
the OP Unitholders currently have the right to exchange their OP Units
for Shares. The Board also took into account the fact that, although
certain OP Unitholders had indicated their intention to exchange their
OP Units for Shares in connection with the ROC Merger and the OP Unit
Exchange, there is no commitment that they do so, except that it is a
condition to ROC's obligation to consummate the ROC Merger that OP
Unitholders (who, in the Company's judgment, will exchange a
sufficient number of OP Units to cause the OP Unit Exchange and the
ROC Merger to satisfy the requirements of Section 351 of the Code)
commit to ROC (prior to the later of 60 days after the execution of
the ROC Merger Agreement or 10 days after the clearance of the joint
proxy statement relating to the Company and ROC shareholder votes by
the Securities and Exchange Commission) to exchange their OP Units for
Shares. In connection with the OP Unit Exchange and the ROC Merger,
Section 351 of the Code provides tax-efficient treatment if OP
Unitholders and ROC shareholders, taken together, hold 80% of the
voting shares of the Company after the ROC Merger, the OP Unit
Exchange and the Share Repurchase Program. The Board further took into
account the possible impact of the shifting of unrecognized gain from
the OP Unitholders to the Company (including the probability and the
possible timing of any such gain), the relinquishment of the Stock
Dividend by the exchanging OP Unitholders and the fact that the OP Unit
Exchange facilitates the OP Unitholders achieving voting rights on a
tax-efficient basis.
(ix) The Board of Directors' belief that the Share
Repurchase Program will provide investors who desire to obtain
liquidity for their investment in the Company with an opportunity to
sell all or a portion of their investment in the Company, will
stabilize the Company's shareholder base and will enable long-term
shareholders to increase their proportionate interest in the Company.
(x) The Board of Directors took into account the
conditional nature of the MHC Offer, in that the MHC Offer is
conditioned on a condition the Board does not believe can be
-15-
<PAGE>
satisfied: MHC OP being satisfied, in its sole judgment, that after
consummation of the MHC Offer none of the Shares purchased by MHC OP
will be deemed Excess Stock (as defined in Article VI of the Company's
Articles of Amendment and Restatement (the "Articles")). In this
regard, the Company has commenced litigation seeking a declaratory
judgment as to the applicability to the MHC Offer of the provisions of
the Articles relating to Excess Stock (See Item 8);
(xi) The fact that the ROC Merger will be tax-free to
the Company's shareholders (except to the extent of any cash received
in lieu of fractional shares and except to the extent shareholders
sell their Shares in the Share Repurchase Program) while the MHC Offer
and Proposed MHC Merger would be taxable to the Company's
shareholders. The Board also noted that the MHC Offer contained no
provision for the OP Unitholders.
(xii) The possible additional economic benefit to the
holders of Shares resulting from the transfer of the benefit of the
Stock Dividend from OP Unitholders exchanging their OP Units to the
holders of Shares; and
(xiii) The confidence in the Company's strategic plan,
including the ROC Merger, demonstrated by the indicated willingness of
John Boll, Edward R. Allen, C. G. Kellogg and Joseph P. Ministrelli to
exchange all or a substantial portion of their OP Units at a discount
(by virtue of their giving up the benefit of the Stock Dividend).
The Board did not assign relative weights to the factors. The
Board based its determination and recommendation on the totality of the
information presented to and considered by it. Additionally, different
directors may have had different views on the foregoing factors and different
reasons for the Board's recommendation set forth in Item 4(a) above.
In light of all the above factors, the Board determined that
its fiduciary duties require that it not take steps to facilitate the MHC
Offer and the Proposed MHC Merger and not waive the provisions of the Maryland
Business Combination Law (as defined in Item 8 hereof), the Ownership Limit
(as defined in Item 8 hereof) or the Excess Stock provisions of the Articles
with respect to the MHC Offer or the Proposed MHC Merger.
In reaching its determination to proceed with the ROC Merger,
the Board of Directors also carefully considered, with the assistance of its
legal and financial advisers, the Sun Offer. The Board reached a conclusion,
based on several factors, including, among other things, a judgment concerning
the quality and location of Sun's property portfolio, the quality and
compatibility of the combined management teams, and the different development
and acquisition practices of the two companies, that consummating the ROC
Merger was a superior alternative to the Sun Offer.
-16-
<PAGE>
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement dated as of July 11, 1996, as
amended on September 11, 1996, Chateau has agreed to pay Merrill Lynch & Co.
("Merrill Lynch") (i) a retainer fee of $150,000 and a $500,000 fee for
delivery of its fairness opinion in connection with the Old ROC Merger (the
"Earned Fee"), with such amounts due and payable as set forth below, (ii) a
financial advisory fee of (a) $150,000 per month, commencing with the month of
September 1996 through and including the earlier of (1) the month in which a
merger or similar transaction is consummated and (2) June 1997 and (b) in the
event no merger or similar transaction is consummated on or before December
31, 1997, an additional financial advisory fee of $300,000 (the "Advisory
Fee") and (ii) if during the period Merrill Lynch is retained by the Company
or within two years thereafter (a) a merger or similar transaction is
consummated or (b) the Company enters into an agreement with any person
("Merger Candidate") which subsequently results in a merger or similar
transaction which the Company's Board of Directors has not recommended
against, a transaction fee (the "Transaction Fee") equal to 0.38% of the
aggregate value (with value defined as cash and/or shares paid for the
Company's equity plus all liabilities of the Company on the date such merger
or similar transaction closes) of such merger or similar transaction. However,
if a merger or similar transaction is not consummated and no agreement to
consummate a merger or similar transaction is entered into by the Company
during the period Merrill Lynch is retained by the Company, the Earned Fee of
$650,000 will be paid upon termination of Merrill Lynch's engagement if such
termination occurs on or prior to December 31, 1997. The $650,000 will be
credited against a Transaction Fee that subsequently becomes payable.
Notwithstanding the foregoing, the aggregate amount of the
Advisory Fee and the Transaction Fee payable to Merrill Lynch will be no less
than the fee payable to any other financial advisor. In addition, the
aggregate amount of the Advisory Fee and the Transaction Fee payable to
Merrill Lynch will not exceed $3,000,000 unless the fee payable to any other
financial advisor is in excess of $3,000,000, in which event the Transaction
Fee payable to Merrill Lynch will be no less than such fee.
In addition, the Company has agreed to reimburse Merrill Lynch
for its reasonable out-of-pocket expenses and to indemnify Merrill Lynch and
certain related persons against liabilities arising out of or in conjunction
with its rendering of services under its engagement, including certain
liabilities under the federal securities laws.
Pursuant to a letter agreement dated August 21, 1996, the
Company has retained Goldman, Sachs & Co. ("Goldman Sachs") as financial
advisor with respect to the MHC Offer, the Sun Offer and certain other
possible transactions. Pursuant to the letter agreement, the Company has
agreed to pay to Goldman Sachs:
(a) a fee of $375,000 payable on the date of the letter agreement;
-17-
<PAGE>
(b) if at least 20% or more of the outstanding Shares of the Company
is acquired by any person or group (except by ROC as provided for in
subparagraph (d) below or by the Company or current shareholders of the
Company or OP Unitholders in furtherance of a transaction with ROC), including
the Company, in one or a series of transactions, or if all or substantially
all of the assets of the Company are transferred, in one or a series of
transactions, a fee equal to 0.50% of the aggregate consideration paid in
respect of Shares and OP Units; less any fees paid pursuant to subparagraph
(a) above or (c), (d) or (e) below. This fee is payable only for transactions
that the Board is not recommending shareholders oppose. If at least 50% of the
outstanding Shares is acquired by any person or group (except by ROC as
provided for in subparagraph (d) below), including the Company, the aggregate
value shall be determined as if such acquisition were of 100% of the Shares
(including all contingently issuable shares);
(c) in the event the Company acquires securities or assets of another
company and no fee is payable with respect to such transaction pursuant to
subparagraph (b) above or (d) below, a fee of either 1.50% or 2.00% depending
on the size of the transaction, but in no event more than the amounts payable
under subparagraph (b) or (d) and less any fees paid pursuant to subparagraph
(a) or (e);
(d) in the event that the Company consummates a transaction with ROC
involving a stock or asset sale, tender offer, merger or other business
combination, a fee of $1 million if the transaction is consummated on or
before December 31, 1996 and 0.50% of aggregate consideration if consummated
after December 31, 1996, in either case, less any fees paid or payable
pursuant to subparagraph (a), (b) or (c) above and (e) below;
(e) in the event no transaction of the type described in subparagraphs
(b) or (d) is consummated on or before January 1, 1997, a financial advisory
fee in cash of $375,000 on January 1, 1997, and an additional $375,000 on each
subsequent April 1, 1997, July 1, 1997, October 1, 1997, and January 1, 1998;
and
(f) in the event that any party initiates a solicitation of the
Company's shareholders, by way of solicitation of proxies, written consents,
the initiation of a tender offer, exchange offer or otherwise, and a
transaction is consummated either with a party other than ROC or is
consummated after December 31, 1996 then the fees payable in subparagraphs (b)
and (d) above will be 0.70% of aggregate consideration.
The Company has also agreed to reimburse Goldman Sachs
periodically for its reasonable out-of-pocket expenses, including the fees and
disbursements of its attorneys, plus any sales, use or similar taxes arising
in connection with any matter referred to in the letter agreement. In
addition, the Company has agreed to indemnify Goldman Sachs against certain
liabilities, including liabilities under the federal securities laws.
The Company also has retained Kekst & Company as public
relations advisor and D.F. King & Co., Inc. to assist in shareholder and
related services in connection with the MHC Offer. The Company will pay
-18-
<PAGE>
Kekst & Company and D.F. King & Co., Inc. reasonable and customary fees for
their services, reimburse them for their reasonable expenses and provide
customary indemnification.
Except as described above, neither the Company nor any person
acting on its behalf has retained any other person to make solicitations or
recommendations to security holders on its behalf concerning the MHC Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO
SECURITIES.
(a) There have been no transactions in the Shares during the
past 60 days by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, none of its
executive officers, directors, affiliates or subsidiaries currently intends to
tender, pursuant to the MHC Offer, any Shares beneficially owned by such
persons or to sell any such Shares.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE
SUBJECT COMPANY.
(a) - (b) For the reasons discussed in Item 4 above, the Board
of Directors of the Company has concluded that the MHC Offer is inadequate and
not in the best interests of the Company and its shareholders and that the
interests of the Company's shareholders will be best served by the Company
consummating the ROC Merger. Except with respect to the ROC Merger, the OP
Unit Exchange, the Stock Dividend and the Share Repurchase Program, the
Company is not now engaged in any negotiations in response to the MHC Offer
that relate to or could result in one or more of the following or a
combination thereof: (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any of its subsidiaries; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or
any of its subsidiaries (other than the previously announced Oakwood
acquisition); (iii) a tender offer for or other acquisition of securities by
or of the Company; or (iv) any material change in the present capitalization
or dividend policy of the Company.
The Board of Directors may in the future engage in negotiations
in response to the MHC Offer that could have one of the effects specified in
the preceding paragraph and it has determined that disclosure with respect to
the parties to, and the possible terms of, any transactions or proposals of
the type referred to in the preceding paragraph might jeopardize any
discussions or negotiations that the Company may conduct. Accordingly, the
Board of Directors has adopted a resolution instructing management not to
disclose the possible terms of any such transactions or proposals, or the
-19-
<PAGE>
parties thereto, unless and until an agreement in principle relating thereto
has been reached or, upon the advice of counsel, as may otherwise be required
by law.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Excess Share Provisions Under the Company's Articles
Section 2 of Article VI ("Article VI") of the Company's
Articles provides that no "Person" (which is defined to include individuals,
corporations and partnerships) may Beneficially Own (as defined) Shares in
excess of the Ownership Limit (as defined in Article VI (currently 7%)). As
defined in the Company's Articles, "Beneficial Ownership" means ownership of
Shares by a Person who would be treated as an owner of such Shares under
Section 542(a)(2) of the Code, either directly or constructively through the
application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of
the Code. If there is a proposed transfer that would result in any Person
Beneficially Owning Shares in excess of the Ownership Limit, then these Shares
will constitute "Excess Stock" and be subject to the provisions of the
Company's Articles applicable to Excess Stock.
Under the Company's Articles, any transfer of Shares that, if
effective, would result in any Person Beneficially Owning Shares in excess of
the Ownership Limit will be void ab initio as to the transfer of Shares that
would otherwise be Beneficially Owned by such Person in excess of the
Ownership Limit.
Upon any purported transfer of Shares that results in Excess
Stock, the Excess Stock will be deemed to have been transferred to a trustee
(the "Trustee") of a trust for the exclusive benefit of one or more
organizations described in Sections 170(b)(1)(A) and 170(C) of the Code (the
"Beneficiary") (currently the Beneficiary is the United Foundation, a
charitable organization). The intended transferee will have no rights in such
Excess Stock as described below. While the Excess Stock is held in trust, the
intended transferee will not be entitled to any dividends or other
distributions (except upon liquidation) or voting rights with respect to the
Excess Stock. Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holder of Excess Stock will be entitled to the
lesser of (i) the price per Share which such intended transferee paid for such
Excess Stock and (ii) the amount per Share received by the Trustee in respect
of the Excess Stock in such liquidation, dissolution or winding up. The
Trustee may transfer shares of Excess Stock if the shares of Excess Stock
would not be Excess Stock in the hands of the transferee. If such a transfer
is made, the proceeds of the sale will be payable to the intended transferee
and the Beneficiary. The intended transferee will receive the lesser of (i)
the price per Share which the intended transferee paid for the Excess Stock
and (ii) the amount per Share received by the Trustee from the sale of such
Excess Stock. In addition, the Excess Stock is subject to purchase by the
Company at a purchase price equal to the lesser of (i) the price paid for the
Shares by the intended transferee and (ii) the last reported sales price
reported on the New York Stock Exchange on the trading day immediately
preceding the date the Company agrees to purchase such Shares.
-20-
<PAGE>
Pursuant to Section 4 of Article VI, if the Company's Board of
Directors at any time determines in good faith that a transfer of Shares has
taken place in violation of Section 2 of Article VI or that a Person intends
to acquire or has attempted to acquire beneficial ownership (determined
without reference to any rules of attribution) or Beneficial Ownership of any
Shares in violation of Section 2 of Article VI, the Board will take such
action as it deems advisable to refuse to give effect to or prevent this
transfer including refusing to give effect to this transfer on the books of
the Company. Pursuant to Section 8 of Article VI, in the case of any ambiguity
in the application of Article VI, the Board of Directors has the power
(subject to certain exceptions relating to the effect on transactions effected
by or through the New York Stock Exchange) to conclusively determine the
application of the provisions of Article VI.
The Company's Board of Directors, upon receipt of a ruling from
the IRS and upon such other conditions as the Company's Board of Directors may
determine, may exempt a proposed transferee from the Ownership Limit. For the
reasons discussed in Item 4 above, the Board of Directors of the Company has
determined not to exempt MHC OP and/or MHC from the Ownership Limit.
Maryland Business Combination Law
Under Subtitle 6 of Title 3 of the Maryland General Corporation
Law (the "Maryland Business Combination Law"), certain "business combinations"
(including a merger, consolidation, share exchange, or, in certain
circumstances an asset transfer or issuance or reclassification of equity
securities) between a Maryland corporation and any person who beneficially
owns 10% or more of the voting power of the corporation's shares or an
affiliate of the corporation who, at any time within the two-year period prior
to the date in question, was the beneficial owner of 10% or more of the voting
power of the then outstanding voting stock of the corporation (an "Interested
Shareholder") or an affiliate thereof are prohibited for five years after the
most recent date on which the Interested Shareholder became an Interested
Shareholder. Thereafter, any "business combination" must be recommended by the
board of directors of the corporation and approved by the affirmative vote of
at least (a) 80% of the votes entitled to be cast by holders of the
outstanding voting shares of the corporation and (b) 66-2/3% of the votes
entitled to be cast by holders of outstanding voting shares of the corporation
other than shares held by the Interested Shareholder with whom the business
combination is to be effected, unless, among other conditions, the
corporation's shareholders receive a minimum price (as defined under the
Maryland Business Combination Law) for their shares and the consideration is
received in cash or in the same form as previously paid by the Interested
Shareholder for its shares. The provisions of the Maryland Business Combination
Law do not apply, however, to business combinations that are (i) with respect
to specifically identified or unidentified existing or future Interested Share-
holders, approved or exempted by the board of directors of the corporation
prior to the time that the Interested Shareholder becomes an Interested
-21-
<PAGE>
Shareholder, or (ii) if the original articles of incorporation of the
corporation contain a provision expressly electing not to be governed by
Section 602 of the Maryland Business Combination Law or the shareholders of
the corporation adopt a charter amendment by a vote of at least 80% of the
voted entitled to be cast by outstanding shares of voting stock of the
corporation, voting together in a single group, and 66-2/3% of the votes
entitled to be cast by persons (if any) who are not Interested Shareholders.
The Board of Directors has exempted from the provisions of the Maryland
Business Combination Law, any business combination involving John Boll,
Chairman of the Board of the Company, Joseph P. Ministrelli, InterCoastal
Communities, Inc., a Florida corporation, and its affiliates and the Mass
manufactured home group, a group of Michigan partnerships affiliated with
Leonard Mass, each of which received OP Units in connection with the
contribution of properties to CP. For the reasons discussed in Item 4 above,
the Board of Directors of the Company has determined not to exempt MHC OP
and/or MHC from the Maryland Business Combination Law. The Company has
instituted litigation seeking a declaratory judgment that the Company's Board
of Directors need not exempt the MHC Offer from the Maryland Business
Combination Law (See "Litigation" below).
Litigation
On September 17, 1996, the Company filed suit in the United
States District Court for the District of Maryland against MHC OP and MHC. In
its complaint, the Company alleges that (i) the MHC Offer has been made in
violation of the federal securities laws because it contains untrue statements
of material fact and omits to state material facts and (ii) MHC has begun a
proxy solicitation in opposition to the ROC Merger and has made material
misstatements of facts and omitted to disclose other material facts as part of
that solicitation effort in violation of applicable federal law, and seeks
injunctive relief and monetary damages in respect thereof. In addition, the
complaint seeks a declaratory judgment that (i) the purchase of Shares
pursuant to the MHC Offer would violate Article VI, (ii) the second step
merger proposed in the MHC Offer would be subject to the restrictions
contained in the Maryland Business Combination Law, and (iii) the Company's
Board of Directors is not required to exempt the purchase of Shares pursuant
to the MHC Offer from the Ownership Limit or from the Maryland Business
Combination Law. A copy of the complaint is attached as Exhibit 99.7.
On September 12, 1996, a complaint was filed in the Circuit
Court for Montgomery County, Maryland by a shareholder of the Company
purportedly on behalf of itself and all other shareholders against the Company
and its directors. The complaint alleges, among other things, that the
Company's directors have violated their fiduciary duties to shareholders by
agreeing to a business combination with ROC and refusing to endorse the MHC
Offer and seeks, among other things, injunctive relief and unspecified
monetary damages. The Company believes the allegations are entirely lacking in
merit and intends to vigorously defend against this action.
-22-
<PAGE>
ITEM 9. MATERIALS TO BE FILED AS EXHIBITS.
Exhibit 99.1 Letter to Shareholders of the Company dated
September 18, 1996*
Exhibit 99.2 Text of Press Release dated September 18, 1996 issued by
the Company (See Item 4(a))**
Exhibit 99.3 Pages 4-12 of the Notice of Annual Meeting of
Shareholders and Proxy Statement dated April 10, 1996**
Exhibit 99.4 Employment Agreement, dated October 27, 1993, between
the Company and C. G. Kellogg, as amended
Exhibit 99.5 Form of Severance Agreement**
Exhibit 99.6 Amended and Restated Merger Agreement dated September
17, 1996 among the Company, R Acquisition Sub, Inc. and
ROC
Exhibit 99.7 Complaint in Chateau Properties, Inc. v. Manufactured
Home Communities, Inc. and MHC Operating Limited
Partnership**
- --------------------------------
* Included in copies mailed to shareholders
** Previously filed
-23-
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
By: /s/ C. G. Kellogg
-----------------------
Name: C. G. Kellogg
Title: President and Chief Executive Officer
Dated: September 18, 1996
-24-
<PAGE>
Annex A
[Letterhead of Goldman Sachs]
PERSONAL AND CONFIDENTIAL
September 17, 1996
Board of Directors
Chateau Properties, Inc.
19500 Hall Road
Clinton Township, MI 48038
Gentlemen:
You have requested our opinion as to the fairness to Chateau Properties,
Inc. (the "Company") of the Exchange Ratio (as hereafter defined) pursuant
to the Amended and Restated Agreement and Plan of Merger dated as of Septem-
ber 17, 1996 (the "Restated Agreement"), among the Company, ROC Communities,
Inc.("ROC") and R Acquisition Sub, Inc. ("R Sub"), a wholly-owned
subsidiary of the Company. Pursuant to the Restated Agreement, ROC will be
merged with R Sub (the "Merger") and each outstanding share of common
stock, par value $0.01 per share, of ROC (the "ROC Shares") will be
converted into the right to receive 1.042 shares of common stock, par value
$0.01 per share, of the Company (such shares are herein referred to as the
"Shares" and such exchange ratio is herein referred to as the "Exchange
Ratio"). The Restated Agreement permits the Company to declare a special
3.16% stock dividend to holders of Shares of record on any date on or prior
to the record date for the meeting of holders of Shares to approve the
issuance of Shares pursuant to the Merger, and we have assumed for purposes
of rendering our opinion, with your consent, that such special dividend
will, in fact, be declared and paid and that no shares of capital stock of
ROC will be issued in a cash transaction as permitted by section 4.1(b)(iv)
of the Restated Agreement.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and
other purposes. We are familiar with the Company having acted as its
financial advisor in connection with, and having participated in certain
negotiations leading to, the Restated Agreement.
In connection with this opinion, we have reviewed, among other things, the
Restated Agreement; Annual Reports to Stockholders and Annual Reports on
Form 10-K for the three years ended December 31, 1995 of the Company and
ROC, certain interim reports to stockholders and Quarterly Reports on Form
10-Q of the Company and ROC, certain other communications from the Company
and ROC to their respective stockholders and certain internal financial
analyses and forecasts for the Company and ROC prepared by the respective
managements of the Company and ROC, including analyses and forecasts of
certain cost synergies and revenue enhancements expected to be achieved as a
result of the Merger jointly prepared by the managements of the Company and
ROC. We also have held discussions with members of the senior management of
the Company and ROC regarding the past and current business operations,
financial condition and future prospects of their respective companies,
including the future prospects of the combined company after the Merger. In
addition, we have reviewed the reported price and trading activity for the
Shares and ROC Shares, compared certain financial and stock market information
for the Company and ROC with similar information for certain other companies
the securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations among real estate investment trusts, and
performed such other studies and analyses as we considered appropriate.
<PAGE>
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us
for purposes of this opinion. In that regard, we have assumed, with your
consent, that the forecasts referred to in the preceding paragraph have
been reasonably prepared on a basis reflecting the best currently available
judgments and estimates of the managements of the Company and ROC, as the
case may be, and that such forecasts will be realized in the amounts and at
the times contemplated thereby. Also in that regard, you have instructed us
to assume, and we have assumed, that the tax effects to the Company and the
holders of Shares, if any, resulting from the transactions contemplated by
the Restated Agreement are immaterial. In addition, we have not made an
independent evaluation or appraisal of the assets and liabilities of the
Company or ROC or any of their respective subsidiaries, and we have not
been furnished with any such evaluation or appraisal. Our opinion does not
address the relative merits of the Merger as compared to any alternative
business transactions that might be available to the Company. Our advisory
services and the opinion expressed herein are provided for the information
and assistance of the Board of Directors of the Company in connection with
its consideration of the transactions contemplated by the Restated
Agreement and does not constitute a recommendation to any stockholder as to
how such stockholder should vote on the issuance of Shares pursuant to the
proposed Merger.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Restated Agreement is fair to the Company.
Very truly yours,
GOLDMAN, SACHS & CO.
<PAGE>
Annex B
[ Letterhead of Merrill Lynch ]
Investment Banking
Corporate and Institutional
Client Group
World Financial Center
North Tower
New York, New York 10281-1330
[ Merrill Lynch Logotype ]
September 17, 1996
Board of Directors
Chateau Properties, Inc.
19500 Hall Road
Clinton Township, MI 48038
Gentlemen:
We understand that Chateau Properties, Inc. (the "Company"), ROC
Communities, Inc. (the "Partner") and R Acquisition Sub, Inc., a wholly
owned subsidiary of the Company (the "ROC Purchaser"), propose to amend and
restate the agreement and plan of merger (the "Original Agreement") among
the Company, the Partner, the ROC Purchaser and a company formed by the
Company and the Partner originally entered into on July 17, 1996 (as so
amended and restated, the "Restated Agreement"). Pursuant to the Restated
Agreement, the Partner will be merged with and into the ROC Purchaser in a
transaction (the "Merger") in which each share of the Partner's common
stock, par value $0.01 per share (the "Partner Shares"), will be converted
into the right to receive 1.042 shares of the Company's common stock, par
value $.01 per share (the "Shares"). We further understand that the
Restated Agreement provides that the Company may, and for purposes of
preparing our opinion below we have assumed with your consent that the
Company will, declare a special 3.16% common stock dividend payable in
Shares to shareholders of record on any date on or prior to the record
date established for the meeting of the Company's shareholders to approve
the issuance of the Shares pursuant to the Merger, which dividend shall be
payable subject to approval of the issuance of the Shares pursuant to the
Merger by the Company's shareholders. We have also assumed with your
consent that no shares of capital stock of the Partner will be issued
in a cash transaction as permitted under section 4.1(b)(iv) of the Restated
Agreement. The issuance of the Shares pursuant to the Merger and the
Merger are subject to the approval of the Company's and the Partner's
shareholders, respectively.
You have asked us whether, in our opinion, the proposed consideration
to be paid by the Company in the Merger is fair to the Company and its
shareholders from a financial point of view. We understand you have made
this request after having received letters from Sun Communities, Inc.
("Sun") proposing a merger in which each Share would be exchanged for 0.892
shares of Sun common stock and letters from Manufactured Home Communities,
Inc. ("MHC") proposing a merger in which each outstanding Share would be
exchanged for $26.00 in cash or, in the alternative, 1.15 shares of MHC
common stock, or some combination of the foregoing. As you are also aware,
an affiliate of MHC commenced a tender offer on September 4, 1996 for all
outstanding Shares at a price of $26.00 in cash.
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December
31, 1995 and the Company's Forms 10-Q and the related unaudited
financial information for the quarterly periods ending March 31,
1996 and June 30, 1996;
<PAGE>
(2) Reviewed the Partner's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December
31, 1995 and the Partner's Forms 10-Q and the related unaudited
financial information for the quarterly periods ending March 31,
1996 and June 30, 1996;
(3) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and
prospects of the Company and the Partner, furnished to us by the
Company and the Partner, respectively;
(4) Conducted discussions with members of senior management of the
Company and the Partner concerning their respective businesses
and prospects;
(5) Reviewed the historical market prices and trading activity for
the Shares and the Partner Shares and compared them with that of
certain publicly traded companies which we deemed to be
reasonably similar to the Company and the Partner, respectively;
(6) Compared the results of operations of the Company and the Partner
with that of certain companies which we deemed to be reasonably
similar to the Company and the Partner, respectively;
(7) Reviewed a draft of the Restated Agreement dated September 17,
1996; and
(8) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other
matters as we deemed necessary.
In preparing our opinion, we have relied on the accuracy and
completeness of all information supplied or otherwise made available to us
by the Company and the Partner, and we have not independently verified such
information or undertaken an independent appraisal or evaluation of the
assets or liabilities of the Company or the Partner. With respect to the
financial forecasts furnished by the Company and the Partner, we have
assumed that they have been reasonably prepared and reflect the best
currently available estimates and judgment of the Company's or the
Partner's management as to the expected future financial performance of the
Company or the Partner, as the case may be.
While we reviewed the financial terms of certain transactions
involving the purchase and sale of residential properties, we did not
identify any mergers or acquisitions that we deemed to be relevant for the
purpose of our analysis and, accordingly, did not undertake any analysis
comparing the financial terms of the Merger with other mergers or
acquisitions.
In connection with the Merger, we have not been authorized to, and did
not, solicit indications of interest from third parties to purchase the
outstanding Shares or otherwise enter into a business combination with the
Company. Our opinion expressed herein as to the fairness to the Company and
its shareholders from a financial point of view of the consideration to be
paid by the Company in the Merger addresses the ownership position in the
combined company to be received by the Company's shareholders pursuant to
the Merger on the terms set forth in the Restated Agreement based upon the
relative contributions of the Company and the Partner to the combined
company and we express no opinion as to prices at which the Shares will
trade following the consummation of the Merger or prices which could be
obtained for the Shares in a sale of the Company following the consummation
of the Merger. In addition, our opinion does not address the relative
merits of the Merger and alternative business combinations with third
parties, including Sun or MHC.
This opinion is addressed to the Board of Directors of the Company and
does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the issuance of Shares pursuant to the proposed
Merger.
<PAGE>
We have, in the past, provided financial advisory and financing
services to the Company and have received fees for the rendering of such
services. In the ordinary course of our business, we may actively trade in
the Shares and the Partner Shares for our own account and for the account
of our customers and, accordingly, may at any time hold a long or short
position in such securities.
On the basis of, and subject to the foregoing, we are of the opinion
that the proposed consideration to be paid by the Company in the Merger is
fair to the Company and its shareholders (other than the Partner and its
affiliates) from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
<PAGE>
EXHIBIT INDEX
Exhibit 99.1 Letter to Shareholders of the Company dated
September 18, 1996*
Exhibit 99.2 Text of Press Release dated September 18, 1996 issued by
the Company (See Item 4(a))**
Exhibit 99.3 Pages 4-12 of the Notice of Annual Meeting of
Shareholders and Proxy Statement dated April 10, 1996**
Exhibit 99.4 Employment Agreement, dated October 27, 1993, between
the Company and C. G. Kellogg, as amended
Exhibit 99.5 Form of Severance Agreement**
Exhibit 99.6 Amended and Restated Merger Agreement dated September
17, 1996 among the Company, R Acquisition Sub, Inc. and
ROC
Exhibit 99.7 Complaint in Chateau Properties, Inc. v. Manufactured
Home Communities, Inc. and MHC Operating Limited
Partnership**
- --------------------------------
* Included in copies mailed to shareholders
** Previously filed
-25-
Exhibit 99.1
[COMPANY LOGO]
September 18, 1996
Dear Stockholders:
After careful consideration and extensive consultation with its
independent financial and legal advisors, Chateau's Board of Directors has
unanimously voted to approve a revised merger agreement with ROC
Communities, Inc. under an improved exchange ratio and to reject the
unsolicited tender offer by MHC Operating Limited Partnership.
The effect of the revised merger agreement is that each outstanding
share of Chateau common stock will represent 1.0316 shares of the combined
entity, rather than one share as contemplated under the original agreement.
This improvement in the exchange ratio results from a payment by Chateau of a
stock and OP Unit dividend equal to 3.16% of the outstanding Chateau common
stock and units prior to the effective date of the merger, but contingent upon
the merger having been approved by a majority of Chateau stockholders. A
further economic benefit may be realized if OP Unitholders elect to exchange
into common stock. Assuming that 70% of the OP Units were exchanged, for
example, the effective exchange ratio for Chateau stockholders would be
approximately 1.06. The exchange ratio for ROC stockholders remains unchanged
at 1.042.
In connection with the ROC merger, the Board also unanimously approved
a number of new initiatives designed to provide a balanced package of
long-term and short-term value that responds to stockholders with different
investment objectives and more accurately reflects the Company's worth.
These initiatives include:
o A program to repurchase, either through open market purchases,
negotiated purchases, or a tender offer, up to 1.45 million of the
approximately 6.1 million shares of the Company's common stock
currently outstanding.
o In addition, ROC has indicated its intent to purchase, from time to
time, up to 350,000 shares of Chateau common stock prior to the
merger and Chateau has waived the restrictions of its standstill
agreement with ROC with respect to these purchases.
o An opportunity for each holder of limited partnership interests
(OP Units) in the Company's operating partnership, CP Limited
Partnership, to exercise their existing right to exchange, on a tax-
efficient basis, their OP Units for one share of the Company's
common stock to be effected prior to the merger. In recognition of
this opportunity to exchange on a tax-efficient basis, each OP
Unitholder will be required to waive its right to the OP Unit
dividend, thus reallocating such dividend to the existing Chateau
common stockholders. Certain holders have indicated their intention
to exchange up to approximately 6 million OP Units into Chateau
common stock, which as described above will have the effect of
transferring the benefit of their OP Unit dividend to Chateau
common stockholders. If 70% of the approximately 8.8 million
outstanding OP Units were exchanged, the effective exchange ratio
to Chateau common stockholders would be increased to approximately
1.06. In connection with the exchange, exchanging OP Unitholders
will be given the opportunity to purchase common stock from Chateau
and/or ROC at fair market value.
Importantly, the share repurchase program will provide immediate
liquidity to those holders who wish to sell some or all of their shares, while
enabling continuing holders to benefit from the ongoing growth of the Company
after the ROC merger.
<PAGE>
In reaching its decision, the Board determined that the revised
merger agreement with ROC offers attractive financial and operational benefits
and represents the best alternative for Chateau stockholders.
We believe that the merger with ROC Communities will significantly
increase the geographic diversity of the properties owned by the Company and
reduce exposure to fluctuation in local economic cycles.
In connection with its decision to proceed with the revised ROC
merger, the Company's Board of Directors, after consultation with its
financial advisors, Goldman Sachs and Merrill Lynch, rejected the MHC offer as
inadequate and reaffirmed its intent to pursue a strategic merger that enables
stockholders to continue to benefit from an equity participation in the
combined enterprise.
The Company's directors and officers do not intend to sell any shares
in connection with the repurchase program or to tender into the MHC offer.
YOUR BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT STOCKHOLDERS NOT TENDER THEIR
SHARES INTO THE MHC TENDER OFFER.
Additionally, in reaching its determination to proceed with the ROC
merger, the Board of Directors also carefully considered, with the assistance
of its legal and financial advisors, the offer of Sun Communities, Inc. The
Board determined that the long-term benefits of a combination with ROC were
superior to a combination with Sun. This conclusion was based on several
factors, including a judgment concerning Sun's property portfolio, the nature
and compatibility of the combined management teams and the acquisition
practices of the two companies.
We believe the steps we are announcing today, combined with the
continued implementation of our long-term strategic plan, will best protect
and enhance value for our stockholders and serve the interests of all of our
constituencies.
The enclosed Schedule 14D-9/A describes your Board's decision to reject
the MHC offer and contains other important information relating to its
decision. We urge you to read it carefully.
Your Board of Directors and I greatly appreciate your continued
support and encouragement.
Sincerely,
John A. Boll
Chairman of the Board
Exhibit 99.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT, entered into as of the 27th day of October, 1993 is by
and between CHATEAU PROPERTIES, INC., (hereinafter referred to as the
"Company"), a Maryland corporation with principal offices located at 19500
Hall Road, Clinton Township, Michigan 48038, and C.G. KELLOGG, an individual
residing at 48930 Pointe Lakeview, Chesterfield, Michigan 48047 (hereinafter
referred to as the "Executive").
WITNESSETH:
WHEREAS, the Executive has been previously employed in various capacities
by Chateau Estates, a predecessor to the Company; and
WHEREAS, the Company is in the process of making an initial public
offering of its common stock ("Public Offering") and, in connection therewith
desires to hire the Executive as President and Chief Executive Officer upon
the terms and conditions contained herein and the Executive is willing and
agrees to accept such employment upon such terms and conditions;
NOW, THEREFORE, in consideration of the premises and covenants set forth
herein, the parties hereto agree as follows:
1. EMPLOYMENT
A. The Company shall employ the Executive, and the Executive hereby
accepts such employment upon the terms and conditions hereinafter set forth.
B. The Executive will be employed by the Company in the capacity of
President and Chief Executive Officer and will have such responsibilities as
shall be assigned to him by the Board of Directors of the Company from time to
time. As used herein, the term "Company" shall mean Chateau Properties, Inc.,
CP Limited Partnership, a Maryland limited partnership of which the Company is
the general partner, and any other entity over which the Company has direct or
indirect control.
C. While employed by the Company, the Executive shall devote his full
time and exert his best efforts to perform his duties, and shall faithfully,
diligently and to the utmost of his ability and to the reasonable satisfaction
of the Company, perform all such management duties consistent with his
positions at the Company.
II. TERM
A. The employment of the Executive pursuant to the provisions of this
Agreement shall commence as of the date of the Public Offering and shall
continue for a period of three (3) years thereafter ("Initial Period").
Thereafter this Agreement shall automatically be renewed for successive one
(1) year periods ("Renewal Periods") unless terminated by either party by
delivering written notice to the other party at least 120 days prior to the
end of the Initial Period or any Renewal Period, or as otherwise provided in
paragraph E1 hereof. The Initial Period and each Renewal Period shall
collectively be referred to as the "Employment Period."
<PAGE>
B. Any termination of this Agreement shall not, however, effect the
provisions of paragraphs IV and V which shall survive such termination in
accordance with their terms.
III. COMPENSATION
A. Salary. In consideration of services rendered by the Executive
hereunder, the Company shall pay the Executive a salay during the
Employment Period at the rate of One Hundred Fifty Thousand ($150,000)
Dollars per year, payable in accordance with the Company's existing
payroll practices.
B. Bonus. The Executive shall receive an annual bonus in such
amount as shall be determined by the Board of Directors of the Company
in its sole discretion.
C. Other Benefits.
1. The Company shall provide the Executive during the
Employment Period with such other fringe benefits as the Company may
from time to time provide its executives, including life insurance,
health insurance, disability insurance, participation in any pension
or profit sharing plan then in effect, and vacation benefits. In
addition, the Company shall provide the Executive an automobile which
is commensurate with his position in the Company.
2. In addition, the Company will reimburse the Executive for
any and all travel and out-of-pocket expenses reasonably incurred by
the Executive for the purpose of performing his services hereunder,
such reimbursement to be made upon presentation to and approval by the
Company of receipts, vouchers and other evidence satisfactory in
itemizing such expenses in reasonable detail in accordance with the
Company's regular practice.
IV. COVENANT NOT TO COMPETE
A. The Executive hereby acknowledges and recognizes the highly
competitive nature of the business of the Company and accordingly agrees
for the consideration stated above that, during and for the period
commencing with the date hereof and ending on the later of the date of the
termination of the Employment Period hereunder, or the date on which the
Executive shall no longer be a director of the Company, ("Primary Non-
Compete Period") he will not other than on behalf of the Company, directly
or indirectly, in any state where the Company is then conducting business:
1. Conduct, engage in or have an interest in any person or entity
engaging in (whether as an owner, principal, agent, representative,
lender, stockholder, partner, employer, consultant, officer, director or
otherwise) any business, operation and/or service in any manner similar
to or related to the business of owing, acquiring, developing and/or
operating manufactured housing communities (except as a passive investor
in less than one (1%) percent of the outstanding capital stock of a
publicly traded corporation);
2. Directly or indirectly solicit, divert, take away, accept or
interfere with any business, customer (including former customers of
the Company) trade or patronage of the
2.
<PAGE>
Company; or
3. Directly or indirectly employ, attempt to employ or solicit
for employment any employee of the Company;
B. It is expressly understood and agreed that although the Executive
and the Company consider the restrictions contained above reasonable for the
purpose of preserving for the Company its good will and other proprietary
rights, if the aforesaid restrictive covenant is found by any court having
jurisdiction to be unreasonable because it is too broad in any extent, then
the restrictions herein contained shall nevertheless remain effective, but
shall be deemed amended as may be considered to be reasonable by such court,
and as so amended shall be enforced. If the Executive violates the provisions
hereof, the Company shall not, as a result of the time involved in obtaining
relief, be deprived of the benefit of the full period of the restrictive
covenant. Accordingly, in the event of such a violation, the term of this
covenant not to compete shall toll until the date relief is granted.
C. The Company shall have the right to elect to extend the term of
the non-compete for a period of one (1) year ("Extension Period") following
the end of the Primary Non-Compete Period, by giving written notice to the
Executive on or prior to the end of the Primary Non-Compete Period and by
paying the Executive an amount equal to the base salary earned by the
Executive during the last 12 months of the Employment Period, such amount
to be paid in 12 equal consecutive monthly payments, with the first payment
due at the end of the first month of the Extension Period. In the event the
Company so elects to extend the period of the non-compete, the Executive
agrees to be bound by the provisions of that paragraph IV A hereof for
such additional 12-month period.
V. CONFIDENTIALITY OF INFORMATION
The Executive acknowledges that the Company may have trade secrets and
confidential information concerning the operation of their real estate and
acquisition strategy which are valuable, special and unique assets of the
Company, access to and knowledge of which may be essential to the performance
of the Executive's duties hereunder ("Confidential Information"). In
recognition of this fact, the Executive agrees that he will not, during or
after the Employment Period, disclose any Confidential Information to any
person, firm, corporation, association or other entity for any reason or
purpose whatsoever, except as necessary in the performance of his duties as an
employee of the Company and then only under a written confidentiality
agreement in such form and content as requested by the Company from time to
time, nor shall the Executive make use of any Confidential Information (other
than information in the public domain) for his own purposes or for the benefit
of any person, firm, corporation or other entity (except the Company) under
any circumstances during or after the Employment Period.
VI. REMEDIES
In the event of a breach or threatened breach by the Executive of the
provisions of Paragraphs IV or V hereof, the Executive agrees that money
damages would be inadequate and that the Company shall be entitled to an
injunction restraining him from such breach and, at the election of the
Company, upon the failure of the Executive, to cure or correct such breach
within thirty days
3.
<PAGE>
after written notice thereof has been given to the Executive all rights of
the Executive under Paragraph III shall thereupon terminate. Nothing herein
contained shall be construed as prohibiting the Company from pursuing any
other remedies available to it for such breach or threatened breach.
VII. MISCELLANEOUS
A. Notices. Any notice required or permitted to be given under this
Agreement shall be deemed properly given if in writing and if mailed by
registered or certified mail, postage prepaid with return receipt requested,
to his residence in the case of the Executive, or, in the case of the Company,
to the principal office of the Company, to the attention of its Chairman of
the Board, with a copy to Timmis and Inman, 300 Talon Centre, Detroit,
Michigan 48207 or to any subsequent address as the parties may hereafter
provide.
B. Waiver of Breach. The waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be
construed as a waiver of any subsequent breach.
C. Assignment. This Agreement is personal in its nature and neither of
the parties hereto shall, without the consent of the other, assign or transfer
this Agreement or any rights or obligations hereunder, except that the Company
may assign or transfer this Agreement to a successor corporation in the event
of merger, consolidation or transfer or sale of all or substantially all of
the business and assets of the Company; provided that, in the case of any such
assignment or transfer, this Agreement shall, subject to the provisions
hereof, be binding upon and inure to the benefit of such successor corporation
and such successor corporation shall discharge and perform all the obligations
of the Company hereunder.
D. Entire Agreement. This Agreement supersedes any and all prior
understandings, oral or written, between the parties as to services to be
performed by the Executive for the Company, constitutes the entire agreement
between the parties and cannot be amended, supplemented, or modified except in
writing signed by both parties. Notwithstanding the foregoing, the parties
acknowledge that the Deferred Compensation Agreement shall continue in full
force and effect with respect to the compensation earned thereunder.
E. Termination of Employment.
1. The Executive's employment hereunder may be terminated at
any time during the Employment Period, for cause (as hereinafter
defined) by action of the Board of Directors of the Company upon
giving the Executive notice of such termination, which termination may
be effective immediately. As used herein, the term "Cause" shall mean
any of the following events:
(a) The Executive's conviction of or plea of guilty or nolo
contendere to a crime involving moral turpitude or a crime
providing for a term of imprisonment of one year or more;
(b) The Executive's (A) willful gross misconduct, or (B)
neglect of or inattention to duties which is not cured within
thirty (30) days after written notice thereof by the Company to
the Executive; or
4.
<PAGE>
(c) The violation by the Executive of any covenant or
provisions set forth in this Agreement.
2. If the Executive dies, his employment under Paragraph I
hereof shall be deemed to cease as of the date of his death.
3. Notwithstanding the provisions of cause (1) above, if the
Executive is incapacitated by accident, sickness or otherwise so as to
render him mentally or physically incapable of performing the services
required of him under Paragraph I for a period of one hundred eighty
(180) days during any twelve month period ("Total Disability"), upon
the expiration of such period or at any time thereafter, by action of
the Board of Directors of the Company, the Executive's employment
under Paragraph I may be terminated immediately upon giving him notice
to that effect, without any obligation to pay any severance pay as
otherwise provided in Paragraph VII E hereof, other than disability
payments made pursuant to any disability insurance policy maintained
by the Company.
F. Applicable Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Michigan, the principal place
of business of the Company.
G. Headings. The headings of the Paragraphs hereof are for convenience
only and shall not control or affect the meaning or construction or limit the
scope or intent of any of the provisions of this Agreement.
H. Public Offering. In the event the Public Offering is not consummated
on or before December 31, 1993, this Agreement shall be null and void and
neither party shall have any liability to the other hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
COMPANY:
CHATEAU PROPERTIES, INC.
/s/ John A. Boll
-------------------------
By: John A. Boll
Its: Chairman of the Board
EXECUTIVE:
/s/ C.G. Kellogg
-------------------------
By: C.G. Kellogg
5.
Exhibit 99.6
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER (the
"Agreement"), dated as of September 17, 1996, among CHATEAU PROPERTIES, INC.,
a Maryland corporation ("Chateau"), ROC COMMUNITIES, INC., a Maryland
corporation ("ROC"), and R ACQUISITION SUB, INC., a Maryland corporation and a
subsidiary of Chateau ("RSub").
RECITALS
(a) Certain terms used herein shall have the meanings
assigned to them in Article X.
(b) Pursuant to an agreement and plan of merger dated as of
July 17, 1996, among Chateau, ROC, RSub and Chateau Communities, Inc., a
Maryland corporation (the "Original Agreement"), the Boards of Directors of
Chateau and ROC determined that it was advisable and in the best interest of
their respective companies and their stockholders to consummate the strategic
business combination involving ROC and Chateau described in the Original
Agreement.
(c) The Boards of Directors of Chateau and ROC have
determined that it is advisable and in the best interest of their respective
companies and their stockholders to amend and restate the terms of the
Original Agreement and to proceed with the strategic business combination
involving the two companies on the terms described in this Agreement, pursuant
to which ROC will merge with RSub and will be the surviving corporation in
such merger (the "Merger") and each issued and outstanding share of common
stock, par value $.01 per share, of ROC (the "ROC Common Stock") and
non-voting redeemable stock, par value $.01 per share, of ROC (the "ROC
Non-Voting Stock" and, together with the ROC Common Stock, the "ROC Stock")
will be converted into the right to receive the Merger Consideration (as
defined below).
(d) In connection with the Merger, the following additional
transactions will be effected (the Merger, together with the other documents,
agreements and transactions contemplated by this Agreement, being referred to
collectively herein as the "Transactions"): (i) ROC, Chateau and CP Limited
Partnership, a Maryland limited partnership which is the operating partnership
of Chateau (the "Operating Partnership"), will enter into the Contribution
Agreement substantially in the form of Exhibit A hereto (the "Contribution
Agreement") and immediately following the Merger will perform their respective
obligations thereunder; (ii) the Amended and Restated Agreement of Limited
Partnership of the Operating Partnership (the "Operating Partnership
Agreement") will be amended and restated substantially as provided in the form
attached as Exhibit B hereto (the "Operating Partnership Agreement
Amendment"); and (iii) Chateau will enter into a Registration Rights Agreement
(the "Registration Rights Agreement"), in the form attached as Exhibit C
hereto with certain holders (after giving effect to the Merger) of the Common
Stock, par value $.01 per share, of Chateau (the "Common Stock"). In addition,
in connection
<PAGE>
with and as an integral part of the Merger, certain OP Unit holders shall
transfer at least that number of OP Units and other property to Chateau in
exchange for common stock of Chateau such that ROC stockholders and
transferring OP Unit holders will when taken together own at least 80% of the
issued and outstanding voting shares of Chateau immediately following the
consummation of the Merger.
(e) As a condition to, and simultaneously with the execution
of, the Original Agreement, there was executed and delivered (i) the Chateau
Stock Option Agreement pursuant to which Chateau granted to ROC an option
exercisable upon the occurrence of certain events and (ii) the ROC Stock
Option Agreement pursuant to which ROC granted to the Operating Partnership an
option exercisable upon the occurrence of certain events. As a condition to,
and simultaneously with the execution of, this Agreement, the Option
Agreements will be amended as provided in Exhibit D hereto. The Chateau Option
Agreement and the ROC Option Agreement as so amended are referred to herein as
the "Chateau Option Agreement" and the "ROC Option Agreement" and together as
the "Option Agreements."
(f) As a condition to, and simultaneously with the execution
of, the Original Agreement, Agreements and Irrevocable Proxies were executed
and delivered by the ROC Principals and the Chateau Principals (each as
defined in the Original Agreement). As a condition to, and simultaneously with
the execution of, this Agreement, the Agreements and Irrevocable Proxies will
be amended as provided in Exhibit E hereto. The Agreements and Irrevocable
Proxies executed by the ROC Principals as so amended are referred to herein as
the "ROC Principal Proxies" and the Agreements and Irrevocable Proxies
executed by the Chateau Principals as so amended are referred to herein as the
"Chateau Principal Proxies."
(g) As a condition to the willingness of each of Chateau and
ROC to enter into this Agreement, holders of units of limited partner interest
("OP Units") in the Operating Partnership holding in excess of 50% of the
outstanding OP Units have (i) consented to the Operating Partnership Agreement
Amendment, and (ii) expressed in writing to ROC their intent to exchange,
subject to certain conditions, certain of their OP Units for shares of Common
Stock on or prior to the record date for the Chateau Stockholders Meeting (as
hereinafter defined).
(h) For federal income tax purposes it is intended that the
Merger and the transfer of OP Units by the holders thereof be viewed as an
integrated transaction and together qualify as tax-free transfers by the
stockholders of ROC and the transferring OP Unit holders to Chateau in
exchange for shares of Common Stock pursuant to Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code").
(i) ROC, as the surviving corporation in the Merger with
RSub, intends that, following the Merger, it shall continue to be
2
<PAGE>
subject to taxation as a real estate investment trust (a "REIT") within the
meaning of the Code.
(j) The parties intend that this Agreement shall in all
respects amend, restate and supersede the Original Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
agree as follows:
ARTICLE I
The Merger
SECTION 1.1 The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Maryland
General Corporation Law (the "MGCL"), ROC shall be merged with RSub at the
Effective Time (as defined below). Following the Merger, the separate
corporate existence of RSub shall cease and ROC shall continue as the
surviving corporation and shall succeed to and assume all the rights and
obligations of RSub in accordance with the MGCL.
SECTION 1.2 Closing. The closing of the Merger will take
place at 10:00 a.m. Eastern Time on a date to be specified by the parties,
which (subject to satisfaction or waiver of the conditions set forth in
Sections 6.2 and 6.3) shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Section 6.1 (the
"Closing Date"), at the offices of Rogers & Wells, 200 Park Avenue, New York,
New York 10166, unless another date or place is agreed to in writing by the
parties hereto.
SECTION 1.3 Effective Time. As soon as practicable following
the satisfaction or waiver of the conditions set forth in Article VI, the
parties shall file the articles of merger or other appropriate documents for
the Merger (the "Articles of Merger") executed in accordance with Section
3-110 of the MGCL and shall make all other filings or recordings required
under the MGCL to effect the Merger. The Merger shall become effective at such
time as the Articles of Merger have been duly filed with the Department of
Assessments and Taxation of the State of Maryland, or at such other time as
Chateau and ROC shall specify in the Articles of Merger (the time and the day
the Merger become effective being, the "Effective Time" and the "Effective
Day"), it being understood that the parties shall cause the Effective Time to
occur on the Closing Date.
SECTION 1.4 Effects of the Merger. The Merger shall have the
effects set forth in the MGCL.
3
<PAGE>
SECTION 1.5 Charters and By-laws.
(a) Chateau. The Charter of Chateau shall not be affected by
the Merger (the "Charter"). The By-laws of Chateau as in effect as of the date
hereof shall be amended, effective at the Effective Time, as provided in
Exhibit F hereto.
(b) ROC. The Charter and By-laws of ROC as in effect at the
Effective Time shall be the Charter and By-laws of ROC upon consummation of
the Merger; provided, that, such Charter shall be amended such that following
the Merger, after giving effect thereto, the ownership of ROC Common Stock by
Chateau shall not violate the ownership limit described in the ROC Charter.
SECTION 1.6 Directors. Effective at the Effective Time, two
of the seven directors of Chateau then in office shall resign from the Chateau
Board of Directors and, in accordance with the By-law amendments specified in
Exhibit F, the remaining Chateau directors then in office shall increase the
size of the Chateau Board from seven to ten directors. The five vacancies on
the Chateau Board shall be filled by the vote of the remaining Chateau
directors then in office with five nominees selected by the ROC Board of
Directors such that such five nominees as well as the five directors of
Chateau then in office shall constitute all of the members of the Chateau
Board of Directors immediately following the Effective Time. Effective at the
Effective Time, the Board of Directors of ROC, as the surviving corporation to
the merger with RSub, will be configured as follows: three of the directors of
ROC shall resign and these vacancies shall be filled by the vote of the
remaining ROC directors with three nominees selected by the Chateau Board of
Directors.
SECTION 1.7 Officers. The officers of Chateau immediately
following the Effective Time shall be as follows:
Gary P. McDaniel Chief Executive Officer
C.G. ("Jeff") Kellogg President
James B. Grange Chief Operating Officer
Tamara D. Fischer Chief Financial Officer
Rees F. Davis, Jr. Executive Vice President -
Acquisitions
Each such officer shall, as of the Effective Time, be employed by Chateau
and/or the Operating Partnership pursuant to an employment agreement (the
"Employment Agreements") substantially in accordance with the terms outlined
in Exhibit G hereto. The officers of ROC following the Merger shall be chosen
by the Board of Directors of ROC as reconstituted by Chateau in accordance
with Section 1.6 above.
SECTION 1.8 Principal Executive Office. The principal
executive office of Chateau following the Effective Date shall be in
Englewood, Colorado.
4
<PAGE>
SECTION 1.9 Name. The Board of Directors of Chateau will, at
the first annual meeting of stockholders of Chateau following the Merger,
submit to a vote of the stockholders of Chateau, a proposal, which shall be
recommended by the Board, to change the name of the Company to "Chateau
Communities, Inc." If the stockholders of Chateau approve such name change,
Chateau will change its symbol on the New York Stock Exchange to appropriately
comport with the name change.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.1 Effect on Capital Stock. By virtue of the Merger
and without any action on the part of the holder of any shares of ROC Stock:
(a) Conversion of Stock.
(i) At the Effective Time, each issued and outstanding
share of ROC Stock shall be converted into the right to receive from Chateau
1.042 fully paid and nonassessable shares of Common Stock. At the Effective
Time, all such shares of ROC Stock shall no longer be outstanding and shall
automatically be canceled and retired and all rights with respect thereto
shall cease to exist, and each holder of a certificate representing any such
shares of ROC Stock shall cease to have any rights with respect thereto,
except the right to receive, upon surrender of such certificate in accordance
with Section 2.2(c), certificates representing the shares of Common Stock
required to be delivered under this Section 2.1(a) and any cash in lieu of
fractional shares of Common Stock to be issued or paid in consideration
therefor upon surrender of such certificate (the "Merger Consideration") and
any dividends or other distributions to which such holder is entitled pursuant
to Section 2.2(d), in each case, without interest and less any required
withholding taxes.
(ii) Notwithstanding the foregoing, the parties
understand that the rights of each stockholder of Chateau under this Section
2.1(a) will be subject to the ownership limitations and other related
provisions contained in the Chateau Charter.
(b) Conversion of Shares of Common Stock of RSub.
Immediately prior to the Effective Time, RSub shall have issued and
outstanding 10,000,120 shares of common stock ("RSub Common Stock"),
10,000,000 of which shares shall be owned by Chateau and 120 of which shares
shall be held by 120 separate individuals who are "accredited investors"
within the meaning of Rule 501(a) under the Securities Act of 1933, as amended
(the "Securities Act"). At the Effective Time, each issued and outstanding
share of RSub Common Stock shall be converted into one validly issued, fully
paid and non-assessable share of common stock of ROC, as the surviving
corporation in the Merger with RSub.
5
<PAGE>
SECTION 2.2 Exchange of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Chateau and
ROC shall jointly appoint a bank or trust company to act as exchange agent
(the "Exchange Agent") for the exchange of the Merger Consideration upon
surrender of certificates representing issued and outstanding ROC Stock.
(b) Provision of Shares. Chateau shall provide to the
Exchange Agent on or before the Effective Time, for the benefit of the holders
of ROC Stock, sufficient shares of Common Stock issuable in exchange for the
issued and outstanding shares of ROC Stock pursuant to Section 2.1.
(c) Exchange Procedure. As soon as reasonably practicable
after the Effective Time, the Exchange Agent shall mail to each holder of
record of a certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of ROC Stock (the "ROC
Certificates") whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 2.1, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the ROC Certificates shall pass, only upon delivery of the ROC
Certificates to the Exchange Agent and shall be in a form and have such other
provisions as Chateau may reasonably specify) and (ii) instructions for use in
effecting the surrender of the ROC Certificates in exchange for the Merger
Consideration. Upon surrender of a ROC Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be appointed by
Chateau, together with such letter of transmittal, duly executed, and such
other documents as may reasonably be required by the Exchange Agent, the
holder of such ROC Certificate shall be entitled to receive in exchange
therefor the Merger Consideration and any dividends or other distributions to
which such holder is entitled pursuant to Section 2.2(d), and the ROC
Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of ROC Stock which is not registered in the transfer
records of ROC, payment may be made to a person other than the person in whose
name the ROC Certificate so surrendered is registered if such ROC Certificate
shall be properly endorsed or otherwise be in proper form for transfer and the
person requesting such payment either shall pay any transfer or other taxes
required by reason of such payment being made to a person other than the
registered holder of such ROC Certificate or establish to the satisfaction of
Chateau that such tax or taxes have been paid or are not applicable. Until
surrendered as contemplated by this Section 2.2, each ROC Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive upon such surrender the Merger Consideration, without interest, into
which the shares theretofore represented by such ROC Certificate shall have
been converted pursuant to Section 2.1 and any dividends or other
distributions to which such holder is entitled pursuant to Section 2.2(d). No
interest will be paid or will accrue on the Merger Consideration upon the
surrender of any ROC Certificate or on any cash payable pursuant to Section
2.2(d) or Section 2.2(g).
6
<PAGE>
(d) Record Dates; Distributions with Respect to Unexchanged
Shares.
(i) From the date of this Agreement, ROC and Chateau
shall cooperate to establish and maintain record and payment dates for regular
quarterly cash dividends on their respective capital stock, such that the
record and payment dates, respectively, for each of ROC and Chateau occur on
the same calendar date.
(ii) No dividends or other distributions with respect to
ROC Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered ROC Certificate with respect to the shares
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.2(g), in each case until the
surrender of such ROC Certificate in accordance with this Article II. Subject
to the effect of applicable abandoned property, escheat or similar laws,
following surrender of any such ROC Certificate there shall be paid to the
holder of such ROC Certificate, without interest, (A) at the time of such
surrender, the amount of any cash payable in lieu of any fractional share of
Common Stock to which such holder is entitled pursuant to Section 2.2(g) and
(B) if such ROC Certificate is exchangeable for one or more whole shares of
Common Stock, (x) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
paid with respect to such whole shares of Common Stock and (y) at the
appropriate payment date, the amount of dividends or other distributions with
a record date after the Effective Time but prior to such surrender and with a
payment date subsequent to such surrender payable with respect to such whole
shares of Common Stock.
(e) No Further Ownership Rights in ROC Stock. All Merger
Consideration paid upon the surrender of ROC Certificates in accordance with
the terms of this Article II (and any cash paid pursuant to Section 2.2(g))
shall be deemed to have been paid in full satisfaction of all rights
pertaining to the shares of ROC Stock theretofore represented by such ROC
Certificates, subject, however, to the obligation of Chateau to pay, without
interest, any dividends or make any other distributions with a record date
prior to the Effective Time which may have been declared or made by ROC on
such shares in accordance with the terms of this Agreement or prior to the
date of this Agreement and which remain unpaid at the Effective Time and have
not been paid prior to such surrender, and there shall be no further
registration of transfers on the stock transfer books of ROC of the shares of
ROC Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, ROC Certificates are properly presented to Chateau
they shall be canceled and exchanged as provided in this Article II.
(f) No Liability. None of Chateau, ROC, RSub or the Exchange
Agent shall be liable to any person in respect of any Merger Consideration
delivered to a public official pursuant to any
7
<PAGE>
applicable abandoned property, escheat or similar law. Any portion of the
Merger Consideration delivered to the Exchange Agent pursuant to this
Agreement that remains unclaimed for six months after the Effective Time shall
be redelivered by the Exchange Agent to Chateau, upon demand, and any holders
of ROC Certificates who have not theretofore complied with Section 2.2(c)
shall thereafter look only to Chateau for delivery of the Merger
Consideration, subject to applicable abandoned property, escheat and other
similar laws.
(g) No Fractional Shares.
(i) No certificates or scrip representing fractional
shares of Common Stock shall be issued upon the surrender for exchange of ROC
Certificates, and such fractional share interests will not entitle the owner
thereof to vote, to receive dividends or to any other rights of a stockholder
of Chateau.
(ii) Notwithstanding any other provision of this
Agreement, each holder of shares of ROC Stock exchanged in the Merger who
would otherwise have been entitled to receive a fraction of a share of Common
Stock (after taking into account all ROC Certificates delivered by such
holder) shall receive, from the Exchange Agent in accordance with the
provisions of this Section 2.2(g), a cash payment in lieu of such fractional
share of Common Stock representing such holder's proportionate interest, if
any, in the net proceeds from the sale by the Exchange Agent in one or more
transactions (which sale transactions shall be made at such times, in such
manner and on such terms as the Exchange Agent shall determine in its
reasonable discretion) on behalf of all such holders of the aggregate of the
fractional shares of Common Stock which would otherwise have been issued (the
"Excess Shares"). The sale of the Excess Shares by the Exchange Agent shall be
executed on the New York Stock Exchange (the "NYSE") through one or more
member firms of the NYSE and shall be executed in round lots to the extent
practicable. Until the net proceeds of such sale or sales have been
distributed to the holders of Certificates, the Exchange Agent will hold such
proceeds in trust (the "Exchange Trust") for the holders of ROC Certificates.
Chateau shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange
Agent, incurred in connection with this sale of the Excess Shares. As soon as
practicable after the determination of the amount of cash, if any, to be paid
to holders of ROC Certificates in lieu of any fractional shares of Common
Stock, the Exchange Agent shall make available such amounts to such holders of
ROC Certificates without interest.
(h) Withholding Rights. Chateau or the Exchange Agent shall
be entitled to deduct and withhold from the Merger Consideration otherwise
payable pursuant to this Agreement to any holder of shares of Common Stock or
ROC Stock such amounts as Chateau or the Exchange Agent is required to deduct
and withhold with respect to the making of such payment under the Code, or any
8
<PAGE>
provision of state, local or foreign tax law. To the extent that amounts are
so withheld by Chateau or the Exchange Agent, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder
of the shares of ROC Stock, in respect of which such deduction and withholding
was made by Chateau or the Exchange Agent.
ARTICLE III
Representations and Warranties
SECTION 3.1 Representations and Warranties of ROC. ROC
represents and warrants to Chateau as follows:
(a) Organization, Standing and Corporate Power of ROC. ROC
is a corporation duly organized and validly existing under the laws of
Maryland and has the requisite corporate power and authority to carry on its
business as now being conducted. ROC is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of
its business or the ownership, leasing of its properties or management of
properties for others makes such qualification or licensing necessary, other
than in such jurisdictions where the failure to be so qualified or licensed,
individually or in the aggregate, would not have a material adverse effect on
the business, properties, assets, financial condition or results of operations
of ROC and the ROC Subsidiaries (as defined below) taken as a whole (a "ROC
Material Adverse Effect").
(b) ROC Subsidiaries. Schedule 3.1(b) to the ROC Disclosure
Letter (as defined below) sets forth each ROC Subsidiary and the ownership
interest therein of ROC. Except as set forth in Schedule 3.1(b) to the ROC
Disclosure Letter, (i) all the outstanding shares of capital stock of each ROC
Subsidiary that is a corporation have been validly issued and are fully paid
and nonassessable and are owned by ROC, by another ROC Subsidiary or by ROC
and another ROC Subsidiary, free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens") and (ii) all equity interests in each ROC Subsidiary
that is a partnership, limited liability company or trust are owned by ROC, by
another ROC Subsidiary or by ROC and another ROC Subsidiary, free and clear of
all Liens. Except for the capital stock of, or other equity interests in, the
ROC Subsidiaries and as provided in Section 4.1(e), ROC does not own, directly
or indirectly, any capital stock or other ownership interest, with a fair
market value as of the date of this Agreement greater than $250,000 in any
Person or which represents 10% or more of the outstanding capital stock or
other ownership interest of any class in any Person. Each ROC Subsidiary that
is a corporation is duly incorporated and validly existing under the laws of
its jurisdiction of incorporation and has the requisite corporate power and
authority to carry on its business as now being conducted and each ROC
Subsidiary that is a partnership, limited liability company or trust is duly
organized and validly
9
<PAGE>
existing under the laws of its jurisdiction of organization and has the
requisite power and authority to carry on its business as now being conducted.
Each ROC Subsidiary is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership, leasing of its properties or management of properties for others
makes such qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed, individually
or in the aggregate, would not have a ROC Material Adverse Effect.
(c) Capital Structure. The authorized capital stock of ROC
consists of 90,000,000 shares of ROC Common Stock, 158,017 shares of ROC
Non-Voting Stock and 9,841,983 shares of preferred stock, par value $.01 per
share (the "ROC Preferred Stock"). On the date hereof, (i) 12,423,500 shares
of ROC Common Stock, 158,017 shares of ROC Non-Voting Stock and no shares of
ROC Preferred Stock were issued and outstanding, (ii) 490,000 shares of ROC
Common Stock were available for issuance under ROC's Amended and Restated 1993
Stock Option and Stock Appreciation Rights Plan (the "1993 Stock Plan") and
(iii) 270,000 shares of ROC Common Stock were reserved for issuance upon
exercise of outstanding stock options to purchase shares of ROC Common Stock
granted to employees of ROC under the 1993 Stock Plan (the "ROC Stock
Options"). On the date of this Agreement, except as set forth above in this
Section 3.1(c), no shares of capital stock or other voting securities of ROC
were issued, reserved for issuance or outstanding. There are no outstanding
stock appreciation rights relating to the capital stock of ROC. All
outstanding shares of capital stock of ROC are duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
There are no bonds, debentures, notes or other indebtedness of ROC having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of ROC may vote. Except
(A) for the ROC Stock Options, (B) as set forth in Schedule 3.1(c) to the ROC
Disclosure Letter, and (C) as otherwise permitted under Section 4.1, there are
no outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which ROC or any ROC
Subsidiary is a party or by which such entity is bound, obligating ROC or any
ROC Subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock, voting securities or other ownership
interests of ROC or any ROC Subsidiary or obligating ROC or any ROC Subsidiary
to issue, grant, extend or enter into any such security, option, warrant,
call, right, commitment, agreement, arrangement or undertaking. Except as set
forth in Schedule 3.1(c) to the ROC Disclosure Letter, there are no
outstanding contractual obligations of ROC or any ROC Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital stock of ROC or
any capital stock, voting securities or other ownership interests in ROC or
any ROC Subsidiary or make any material investment (in the form of a loan,
capital contribution or otherwise) in any Person (other than a ROC
Subsidiary).
10
<PAGE>
(d) Authority; Noncontravention; Consents. ROC has the
requisite corporate power and authority to enter into this Agreement and,
subject to approval of the Merger, this Agreement and the other Transactions
contemplated hereby by the requisite vote of the holders of the ROC Common
Stock (the "ROC Stockholder Approvals"), to consummate the Transactions
contemplated by this Agreement to which ROC is a party. ROC has the requisite
corporate power and authority to enter into the ROC Option Agreement and to
consummate the Transactions contemplated thereby to which ROC is a party. The
execution and delivery of this Agreement and the ROC Option Agreement by ROC
and the consummation by ROC of the Transactions contemplated hereby and
thereby to which ROC is a party have been duly authorized by all necessary
corporate action on the part of ROC, subject to approval of this Agreement
pursuant to the ROC Stockholder Approvals. This Agreement and the ROC Option
Agreement have been duly executed and delivered by ROC and constitute valid
and binding obligations of ROC, enforceable against ROC in accordance with
their terms. The ROC Principal Proxies have been duly executed and delivered
by the ROC Principals and constitute valid and binding proxies of the ROC
Principals enforceable in accordance with their terms. Except as set forth in
Schedule 3.1(d) to the ROC Disclosure Letter, the execution and delivery of
this Agreement and the ROC Option Agreement by ROC do not, and the
consummation of the Transactions contemplated hereby and thereby to which ROC
is a party and compliance by ROC with the provisions of this Agreement and the
ROC Option Agreement will not, conflict with, or result in any violation of,
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of ROC or any ROC Subsidiary under, (i)
the Charter or By-laws of ROC or the comparable charter or organizational
documents or partnership or similar agreement (as the case may be) of any ROC
Subsidiary, each as amended or supplemented to the date of this Agreement,
(ii) any loan or credit agreement, note, bond, mortgage, indenture, reciprocal
easement agreement, lease or other agreement, instrument, permit, concession,
franchise or license applicable to ROC or any ROC Subsidiary or their
respective properties or assets or (iii) subject to the governmental filings
and other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation (collectively, "Laws")
applicable to ROC or any ROC Subsidiary, or their respective properties or
assets, other than, in the case of clause (ii) or (iii), any such conflicts,
violations, defaults, rights or Liens that individually or in the aggregate
would not (x) have a ROC Material Adverse Effect or (y) prevent the
consummation of the Transactions. No consent, approval, order or authorization
of, or registration, declaration or filing with, any federal, state or local
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency (a "Governmental Entity"), is required
by or with respect to ROC or any ROC Subsidiary in connection with the
execution and delivery of this Agreement or the ROC Option Agreement by ROC or
the consummation by ROC of the other Transactions contemplated hereby
11
<PAGE>
and thereby, except for (i) the filing with the Securities and Exchange
Commission (the "SEC") of (x) a joint proxy statement relating to the approval
by ROC stockholders of the Merger, this Agreement and the other Transactions
contemplated by this Agreement and the approval by Chateau stockholders of the
issuance of the Merger Consideration to the ROC stockholders (as amended or
supplemented from time to time, the "Proxy Statement") and a registration
statement relating to the issuance of the Merger Consideration (the
"Registration Statement") and (y) such reports under Section 13(a) and Section
14 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as
may be required in connection with this Agreement and the Transactions
contemplated by this Agreement, (ii) the filing of the Articles of Merger for
the Merger with the Department of Assessments and Taxation of the State of
Maryland, (iii) such filings as may be required in connection with the payment
of any Transfer and Gains Taxes (as defined below) and (iv) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings as are set forth in Schedule 3.1(d) to the ROC Disclosure Letter or
(A) as may be required under (x) federal, state, local or foreign
environmental laws or (y) the "blue sky" laws of various states or (B) which,
if not obtained or made, would not prevent or delay in any material respect
the consummation of any of the Transactions contemplated by this Agreement or
otherwise prevent ROC from performing its obligations under this Agreement in
any material respect or have, individually or in the aggregate, a ROC Material
Adverse Effect.
(e) SEC Documents; Financial Statements; Undisclosed
Liabilities. ROC has filed all required reports, schedules, forms, statements
and other documents with the SEC since August 18, 1993 (the "ROC SEC
Documents"). All of the ROC SEC Documents (other than preliminary material),
as of their respective filing dates, complied in all material respects with
all applicable requirements of the Securities Act and the Exchange Act and, in
each case, the rules and regulations promulgated thereunder applicable to such
ROC SEC Documents. None of the ROC SEC Documents at the time of filing
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except to the extent such statements have been modified or
superseded by later filed ROC SEC Documents. Other than as set forth in
Schedule 3.1(e) to the ROC Disclosure Letter, there is no unresolved
violation, criticism or exception by any Governmental Entity of which ROC has
received written notice with respect to any ROC report or statement which, if
resolved in a manner unfavorable to ROC, could have a ROC Material Adverse
Effect. The consolidated financial statements of ROC included in the ROC SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with generally accepted
accounting principles ("GAAP") (except, in the case of interim financial
statements, as permitted by Forms 10-Q or 8-K of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated in
the notes thereto) and
12
<PAGE>
fairly presented, in accordance with the applicable requirements of GAAP, the
consolidated financial position of ROC and the ROC Subsidiaries taken as a
whole, as of the dates thereof and the consolidated results of operations and
cash flows for the periods then ended (subject, in the case of interim
financial statements, to normal year-end adjustments). Except as set forth in
the ROC Filed SEC Documents (as defined below), in Schedule 3.1(e) to the ROC
Disclosure Letter or as permitted by Section 4.1 (for the purposes of this
sentence, as if Section 4.1 had been in effect since December 31, 1995),
neither ROC nor any ROC Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by GAAP
to be set forth on a consolidated balance sheet of ROC or in the notes thereto
and which, individually or in the aggregate, would have a ROC Material Adverse
Effect.
(f) Absence of Certain Changes or Events. Except as
disclosed in the ROC SEC Documents filed and publicly available prior to the
date of this Agreement (referred to collectively as the "ROC Filed SEC
Documents") or in Schedule 3.1(f) to the ROC Disclosure Letter, since the date
of the most recent financial statements included in the ROC Filed SEC
Documents (the "Financial Statement Date") and to the date of this Agreement,
ROC and the ROC Subsidiaries have conducted their business only in the
ordinary course and there has not been (i) any material adverse change in the
business, financial condition or results of operations of ROC and the ROC
Subsidiaries taken as a whole, that has resulted or would result, individually
or in the aggregate, in Economic Losses (as defined in Section 6.2 below) of
$5,000,000 or more (a "ROC Material Adverse Change"), nor has there been any
occurrence or circumstance that with the passage of time would reasonably be
expected to result in a ROC Material Adverse Change, (ii) except for regular
quarterly dividends not in excess of $.425 per share of ROC Stock, with
customary record and payment dates, any declaration, setting aside or payment
of any dividend or other distribution (whether in cash, stock or property)
with respect to any of ROC's capital stock, (iii) any split, combination or
reclassification of any of ROC's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for, or giving the right to acquire by exchange or
exercise, shares of its capital stock or any issuance of an ownership interest
in, any ROC Subsidiary except as permitted by Section 4.1, (iv) any damage,
destruction or loss, whether or not covered by insurance, that has or would
have a ROC Material Adverse Effect or (v) any change in accounting methods,
principles or practices by ROC or any ROC Subsidiary materially affecting its
assets, liabilities or business, except insofar as may have been disclosed in
the ROC Filed SEC Documents or required by a change in GAAP.
(g) Litigation. Except as disclosed in the ROC Filed SEC
Documents or in Schedule 3.1(g) to the ROC Disclosure Letter, and other than
personal injury and other routine tort litigation arising from the ordinary
course of operations of ROC and the ROC Subsidiaries which are covered by
adequate insurance, there is no
13
<PAGE>
suit, action or proceeding pending or, to the knowledge of ROC, threatened
against or affecting ROC or any ROC Subsidiary that, individually or in the
aggregate, could reasonably be expected to (i) have a ROC Material Adverse
Effect or (ii) prevent the consummation of any of the Transactions, nor is
there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against ROC or any ROC Subsidiary having, or
which, insofar as reasonably can be foreseen, in the future would have, any
such effect.
(h) Absence of Changes in Benefit Plans; ERISA Compliance.
(i) Except as disclosed in the ROC Filed SEC Documents
or in Schedule 3.1(h)(i) to the ROC Disclosure Letter and except as permitted
by Section 4.1 (for the purpose of this sentence, as if Section 4.1 had been
in effect since December 31, 1995), since the date of the most recent audited
financial statements included in the ROC Filed SEC Documents, there has not
been any adoption or amendment in any material respect by ROC or any ROC
Subsidiary of any bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical or other employee benefit plan, arrangement or
understanding (whether or not legally binding) providing benefits to any
current or former employee, officer or director of ROC or any ROC Subsidiary
or any person affiliated with ROC under Section 414(b), (c), (m) or (o) of the
Code (collectively, "ROC Benefit Plans").
(ii) Except as described in the ROC Filed SEC Documents
or in Schedule 3.1(h)(ii) to the ROC Disclosure Letter or as would not have a
ROC Material Adverse Effect, (A) all ROC Benefit Plans, including any such
plan that is an "employee benefit plan" as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), are in
compliance with all applicable requirements of law, including ERISA and the
Code, and (B) neither ROC nor any ROC Subsidiary has any liabilities or
obligations with respect to any such ROC Benefit Plan, whether accrued,
contingent or otherwise (other than obligations to make contributions and pay
benefits and administrative costs incurred in the ordinary course), nor to the
knowledge of ROC are any such liabilities or obligations expected to be
incurred. Except as set forth in Schedule 3.1(h)(ii) to the ROC Disclosure
Letter, the execution of, and performance of the Transactions contemplated in,
this Agreement will not (either alone or together with the occurrence of any
additional or subsequent events) constitute an event under any ROC Benefit
Plan, policy, arrangement or agreement, trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee or director. The only
severance agreements or severance policies applicable to ROC or the ROC
Subsidiaries are the agreement and
14
<PAGE>
policies specifically referred to in Schedule 3.1(h)(ii) to the ROC
Disclosure Letter.
(i) Taxes.
(i) Each of ROC and each ROC Subsidiary has timely
filed all Tax Returns and reports required to be filed by it (after giving
effect to any filing extension properly granted by a Governmental Entity
having authority to do so). Each such Tax Return is true, correct and complete
in all material respects. ROC and each ROC Subsidiary have paid (or ROC has
paid on their behalf), within the time and manner prescribed by law, all Taxes
that are due and payable. Except as disclosed in Schedule 3.1(i)(i) to the ROC
Disclosure Letter, the federal, state and local income, sales and franchise
tax returns of ROC and each ROC Subsidiary have not been audited by any
Governmental Entity responsible for tax matters (a "Taxing Authority"). There
are no Tax liens upon the assets of ROC or any ROC Subsidiary. The most recent
financial statements contained in the ROC Filed SEC Documents reflect an
adequate reserve for all material Taxes payable by ROC and by each ROC
Subsidiary for all taxable periods and portions thereof through the date of
such financial statements. Since the Financial Statement Date, ROC has
incurred no liability for Taxes under Section 857(b), 860(c) or 4981 of the
Code, and neither ROC nor any ROC Subsidiary has incurred any liability for
Taxes other than in the ordinary course of business. Except as set forth in
Schedule 3.1(i)(i) to the ROC Disclosure Letter, to the knowledge of ROC, no
event has occurred, and no condition or circumstance exists, which presents a
material risk that any material Tax described in the preceding sentence will
be imposed upon ROC. To the knowledge of ROC, no deficiencies for any Taxes
have been proposed, asserted or assessed against ROC or any of the ROC
Subsidiaries, and no requests for waivers of the time to assess any such Taxes
have been granted or are pending. As used in this Agreement, "Taxes" shall
mean any federal, state, local or foreign income, gross receipts, license,
payroll, employment withholding, property, sales, excise or other tax or
governmental charges of any nature whatsoever, together with any penalties,
interest or additions thereto and "Tax Return" shall mean any return,
declaration, report, claim for refund, or information return or statement
relating to Taxes, including any schedule or attachment thereto, and including
any amendment thereof.
(ii) ROC (A) for all of its taxable years commencing
with 1993 through the most recent December 31, has been subject to taxation as
a REIT within the meaning of the Code and has satisfied the requirements to
qualify as a REIT for such years, (B) has operated, and intends to continue to
operate, in such a manner as to qualify as a REIT for its tax year ending
December 31, 1996, and (C) has not taken or omitted to take any action which
could reasonably be expected to result in a challenge to its status as a REIT,
and, to ROC's knowledge, no such challenge is pending or threatened.
15
<PAGE>
(j) No Loans or Payments to Employees, Officers or
Directors. Except as set forth in Schedule 3.1(j) to the ROC Disclosure Letter
or as otherwise specifically provided for in this Agreement, there is no (i)
loan outstanding from or to any employee or director, (ii) employment or
severance contract, (iii) other agreement requiring payments to be made on a
change of control or otherwise as a result of the consummation of any of the
Transactions with respect to any employee, officer or director of ROC or any
ROC Subsidiary or (iv) any agreement to appoint or nominate any person as a
director of ROC or Chateau.
(k) Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than PaineWebber
Incorporated ("PaineWebber"), the fees and expenses of which, as set forth in
an amended letter agreement between ROC and PaineWebber, have previously been
disclosed to Chateau and will be paid by ROC, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of ROC or
any ROC Subsidiary.
(l) Compliance with Laws. Except as disclosed in the ROC
Filed SEC Documents and except as set forth in Schedule 3.1(l) to the ROC
Disclosure Letter, neither ROC nor any of the ROC Subsidiaries has violated or
failed to comply with any statute, law, ordinance, regulation, rule, judgment,
decree or order of any Governmental Entity applicable to its business,
properties or operations, except for violations and failures to comply that
would not, individually or in the aggregate, reasonably be expected to result
in a ROC Material Adverse Effect.
(m) Contracts; Debt Instruments.
(i) Neither ROC nor any ROC Subsidiary is in violation
of or in default under, in any material respect (nor does there exist any
condition which upon the passage of time or the giving of notice or both would
cause such a violation of or default under), any material loan or credit
agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise or license, or any agreement to acquire real property, or any other
material contract, agreement, arrangement or understanding, to which it is a
party or by which it or any of its properties or assets is bound, except as
set forth in Schedule 3.1(m)(i) to the ROC Disclosure Letter and except for
violations or defaults that would not, individually or in the aggregate,
result in a ROC Material Adverse Effect. The properties identified in Schedule
3.1(m) to the ROC Disclosure Letter are manufactured housing communities owned
by various entities affiliated with the Windsor Corporation (collectively the
"Windsor Entities") and managed by ROC pursuant to that certain Master
Property Management Agreement dated July 31, 1990 ("Windsor Agreement")
between the Windsor Entities and Windsor Asset Management, Inc. ("WAMI"), the
terms of which Windsor Agreement have been replaced by the terms of that
certain Master Agreement dated November 15, 1991 between ROC Properties, Inc.
and WAMI (the "Amended Windsor Agreement"), which
16
<PAGE>
Amended Windsor Agreement has an initial term through November 30, 1998 is
valid, binding and in full force and effect without amendment or modification
(except as set forth herein), and is enforceable against the Windsor Entities
and ROC in accordance with its terms.
(ii) Except for any of the following expressly
identified in the most recent financial statements contained in the ROC Filed
SEC Documents and except as permitted by Section 4.1, Schedule 3.1(m)(ii) to
the ROC Disclosure Letter sets forth (A) a list of all loan or credit
agreements, notes, bonds, mortgages, indentures and other agreements and
instruments pursuant to which any indebtedness of ROC or any of the ROC
Subsidiaries in an aggregate principal amount in excess of $2,000,000 per item
is outstanding or may be incurred and (B) the respective principal amounts
outstanding thereunder on June 30, 1996. For purposes of this Section
3.1(m)(ii) and Section 3.2(m)(ii), "indebtedness" shall mean, with respect to
any person, without duplication, (A) all indebtedness of such person for
borrowed money, whether secured or unsecured, (B) all obligations of such
person under conditional sale or other title retention agreements relating to
property purchased by such person, (C) all capitalized lease obligations of
such person, (D) all obligations of such person under interest rate or
currency hedging transactions (valued at the termination value thereof), (E)
all guarantees of such person of any such indebtedness of any other person and
(F) any agreements to provide any of the foregoing.
(iii) Schedule 3.1(m)(iii) to the ROC Disclosure Letter
sets forth a complete list of each consulting agreement between ROC and any
ROC Subsidiary, including the annual compensation payable thereunder and the
date as of which such consulting agreement expires.
(n) Environmental Matters. Except as disclosed in Schedule
3.1(n) to the ROC Disclosure Letter or in the environmental audits/reports
listed thereon, each of ROC and each ROC Subsidiary has obtained all licenses,
permits, authorizations, approvals and consents from Governmental Entities
which are required in respect of its business, operations, assets or
properties under any applicable Environmental Law (as defined below) and each
of ROC and each ROC Subsidiary is in compliance in all material respects with
the terms and conditions of all such licenses, permits, authorizations,
approvals and consents and with any applicable Environmental Law. Except as
disclosed in Schedule 3.1(n) to the ROC Disclosure Letter or in the
environmental audits/reports listed thereon:
(i) No Order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending
or threatened by any Governmental Entity with respect to any alleged failure
by ROC or any ROC Subsidiary to have any license, permit, authorization,
approval or consent from Governmental Entities required under any applicable
Environmental Law in connection with the conduct of the business or operations
of
17
<PAGE>
ROC or any ROC Subsidiary or with respect to any treatment, storage,
recycling, transportation, disposal or "release" as defined in 42 U.S.C. ss.
9601(22) ("Release"), by ROC or any ROC Subsidiary of any Hazardous Material
(as defined below).
(ii) Neither ROC nor any ROC Subsidiary nor any prior
owner or lessee of any property now or previously owned or leased by ROC or
any ROC Subsidiary has handled any Hazardous Material on any property now or
previously owned or leased by ROC or any ROC Subsidiary; and, without limiting
the foregoing, (A) no polychlorinated biphenyl is or has been present, (B) no
friable asbestos is or has been present, (C) there are no underground storage
tanks, active or abandoned and (D) no Hazardous Material has been Released in
a quantity reportable under, or in violation of, any Environmental Law, at, on
or under any property now or previously owned or leased by ROC or any ROC
Subsidiary, during any period that ROC or any ROC Subsidiary owned or leased
such property or, to the knowledge of ROC and its Subsidiaries, prior thereto.
(iii) Neither ROC nor any ROC Subsidiary has transported
or arranged for the transportation of any Hazardous Material to any location
which is the subject of any action, suit, arbitration or proceeding that could
be reasonably expected to lead to claims against ROC or any ROC Subsidiary for
clean-up costs, remedial work, damages to natural resources or personal injury
claims, including, but not limited to, claims under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
and the rules and regulations promulgated thereunder ("CERCLA").
(iv) No oral or written notification of a Release of a
Hazardous Material has been filed or should have been filed by or on behalf of
ROC or any ROC Subsidiary and no property now or previously owned or leased by
ROC or any ROC Subsidiary is listed or proposed for listing on the National
Priorities List promulgated pursuant to CERCLA or on any similar state list of
sites requiring investigation or clean-up.
(v) There are no Liens arising under or pursuant to any
Environmental Law on any real property owned or leased by ROC or any ROC
Subsidiary, and no action of any Governmental Entity has been taken or, to the
knowledge of ROC and its Subsidiaries, is in process which could subject any
of such properties to such Liens, and neither ROC nor any ROC Subsidiary would
be required to place any notice or restriction relating to the presence of
Hazardous Material at any such property owned by it in any deed to such
property.
(vi) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, or which are
in the possession of, ROC or any ROC Subsidiary in relation to any property or
facility now or previously owned, leased or managed by ROC or any ROC
Subsidiary which have not been listed in Schedule 3.1(n) to the ROC Disclosure
18
<PAGE>
Letter and made available to Chateau prior to the execution of this Agreement.
(vii) As used herein:
(A) "Environmental Law" means any Law of any
Governmental Entity relating to human health, safety or protection of
the environment or to emissions, discharges, releases or threatened
releases of pollutants, contaminants or Hazardous Materials in the
environment (including, without limitation, ambient air, surface
water, ground water, land surface or subsurface strata), or otherwise
relating to the treatment, storage, disposal, transport or handling
of any Hazardous Material; and
(B) "Hazardous Material" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form that
is or could reasonably be expected to become friable, urea
formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid containing levels of polychlorinated
biphenyls (PCBs); (B) any chemicals, materials, substances or wastes
which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous
materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants" or words of similar
import, under any Environmental Law; and (C) any other chemical,
material, substance or waste, exposure to which is now or hereafter
prohibited, limited or regulated by any Governmental Entity.
(o) Tangible Property and Assets. Except as disclosed in
Schedule 3.1(o) to the ROC Disclosure Letter, ROC and its Subsidiaries have
good and marketable fee simple title to, or have valid leasehold interests in,
those manufactured home communities described in Schedule 3.1(o) to the ROC
Disclosure Letter, free and clear of all Liens other than (i) any statutory
Lien arising in the ordinary course of business by operation of law with
respect to a liability that is not yet due or delinquent and (ii) any
easement, restriction or minor imperfection of title or similar Lien which
individually or in the aggregate with other such Liens does not materially
impair the value of the property or asset subject to such Lien or the use of
such property or asset in the conduct of the business of ROC or any such ROC
Subsidiary.
(p) Books and Records.
(i) The books of account and other financial records of
ROC and each ROC Subsidiary are in all material respects true, complete and
correct, have been maintained in accordance with good business practices, and
are accurately reflected in all material respects in the financial statements
included in the ROC Filed SEC Documents.
19
<PAGE>
(ii) ROC has previously delivered or made available to
Chateau true and correct copies of the Charter and By-laws of ROC, as amended
to date, and the charter, by-laws, organization documents, partnership
agreements and joint venture agreements of its Subsidiaries, and all
amendments thereto. All such documents are listed in Schedule 3.1(p)(iii) to
the ROC Disclosure Letter. ROC has also delivered to Chateau a copy of a
binder for its Director and Officer liability insurance policy.
(iii) The minute books and other records of corporate or
partnership proceedings of ROC and each ROC Subsidiary that had previously
been made available to Chateau in connection with the execution of the
Original Agreement, contained, as of the date of the Original Agreement, in
all material respects accurate records of all meetings and accurately reflect
in all material respects all other corporate action of the stockholders and
directors and any committees of the Board of Directors of ROC and the ROC
Subsidiaries which are corporations.
(q) Opinion of Financial Advisor. ROC has received the
opinion of PaineWebber, satisfactory to ROC, a signed version dated September
17, 1996 of which will be provided to Chateau, with regard to the fairness of
the Merger to the stockholders of ROC from a financial point of view.
(r) State Takeover Statutes. No Takeover Statute (as defined
below) of the State of Maryland, including, without limitation, the control
share acquisition provisions of Section 3-701 et seq. of the MGCL or the
business combination provisions of Section 3-601 et seq. of the MGCL, applies
or purports to apply to the Merger, this Agreement or any of the Transactions.
(s) Registration Statement. The information furnished by ROC
for inclusion in the Registration Statement will not, as of the effective date
of the Registration Statement, contain an untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading.
(t) Vote Required. The affirmative vote of at least
two-thirds of the outstanding shares of ROC Common Stock is the only vote of
the holders of any class or series of ROC's capital stock necessary (under
applicable law or otherwise) to approve the Merger, this Agreement and the
other Transactions contemplated hereby.
SECTION 3.2 Representations and Warranties of Chateau.
Chateau represents and warrants to ROC as follows:
(a) Organization, Standing and Corporate Power of Chateau.
Chateau is a corporation duly organized and validly existing under the laws of
Maryland and has the requisite corporate power and authority to carry on its
business as now being conducted. Chateau is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of
20
<PAGE>
its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such jurisdictions where
the failure to be so qualified or licensed, individually or in the aggregate,
would not have a material adverse effect on the business, properties, assets,
financial condition or results of operations of Chateau and the Chateau
Subsidiaries (as defined below), taken as a whole (a "Chateau Material Adverse
Effect").
(b) Chateau Subsidiaries. Schedule 3.2(b) to the Chateau
Disclosure Letter sets forth each Chateau Subsidiary (as defined below) and
the ownership interest therein of Chateau. Except as set forth in Schedule
3.2(b) to the Chateau Disclosure Letter, (i) all the outstanding shares of
capital stock of each Chateau Subsidiary that is a corporation have been
validly issued and are fully paid and nonassessable and are owned by Chateau,
by another Chateau Subsidiary or by Chateau and another Chateau Subsidiary,
free and clear of all Liens and (ii) all equity interests in each Chateau
Subsidiary that is a partnership (other than the Operating Partnership) or
limited liability company or trust are owned by Chateau or by Chateau and
another Chateau Subsidiary free and clear of all Liens. Except for the capital
stock of or other equity interests in the Chateau Subsidiaries and as provided
in Section 4.2(e), Chateau does not own, directly or indirectly, any capital
stock or other ownership interest, with a fair market value as of the date of
this Agreement greater than $250,000 in any Person or which represents 10% or
more of the outstanding capital stock or other ownership interest of any class
in any Person. Each Chateau Subsidiary that is a corporation is duly
incorporated and validly existing under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority to carry on
its business as now being conducted and each Chateau Subsidiary that is a
partnership, limited liability company or trust is duly organized and validly
existing under the laws of its jurisdiction of organization and has the
requisite power and authority to carry on its business as now being conducted.
Each Chateau Subsidiary is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so
qualified or licensed individually or in the aggregate, would not have a
Chateau Material Adverse Effect.
(c) Capital Structure. The authorized capital stock of
Chateau consists of 30,000,000 shares of Common Stock and 2,000,000 shares of
preferred stock, par value $.01 per share (the "Chateau Preferred Stock"). On
the date hereof, (i) 6,099,710 shares of Common Stock and no shares of Chateau
Preferred Stock were issued and outstanding, (ii) 366,600 shares of Common
Stock were available for grant under Chateau's 1993 Long Term Incentive Plan
(the "Chateau Plan"), (iii) 619,150 shares of Common Stock were reserved for
issuance upon exercise of outstanding stock options to purchase shares of
Common Stock granted to Chateau employees and directors under the Chateau Plan
(the "Chateau Stock Options"), and
21
<PAGE>
(iv) 8,836,310 shares of Common Stock were reserved for issuance upon exchange
of OP Units for shares of Common Stock pursuant to the Operating Partnership
Agreement. On the date of this Agreement, except as set forth in this Section
3.2(c), no shares of capital stock or other voting securities of Chateau were
issued, reserved for issuance or outstanding. There are no outstanding stock
appreciation rights relating to the capital stock of Chateau. All outstanding
shares of capital stock of Chateau are, and all shares which may be issued
pursuant to this Agreement will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and not subject to preemptive rights.
There are no bonds, debentures, notes or other indebtedness of Chateau having
the right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which stockholders of Chateau may vote.
Chateau's Percentage Interest (as defined in the Operating Partnership
Agreement) in the Operating Partnership is 40.84%. The OP Units consist of (i)
5,046,303 Exchangeable OP Units (as defined in the Operating Partnership
Agreement) which together represent a 33.79% Percentage Interest in the
Operating Partnership and are exchangeable for Common Stock on a one-for-one
basis into an aggregate of 5,046,303 shares of Common Stock in accordance with
the terms of the Operating Partnership Agreement, subject to adjustment as
provided in the Operating Partnership Agreement, and (ii) 3,720,182 Excess OP
Units (as defined in the Operating Partnership Agreement) which together
represent a 25.37% Percentage Interest in the Operating Partnership and are
not exchangeable except in accordance with the Operating Partnership
Agreement. Schedule 3.2(c) to the Chateau Disclosure Letter sets forth the
name, address, number of Exchangeable OP Units and Excess Units and the
Percentage Interest of each partner in the Operating Partnership. Except (A)
for the Chateau Stock Options and OP Units (which, subject to certain
restrictions, may be delivered to Chateau in exchange for Common Stock), (B)
as set forth in Schedule 3.2(c) to the Chateau Disclosure Letter, (C) as
otherwise permitted under Section 4.2, and (d) as contemplated under Chateau's
dividend reinvestment plan, as of the date of this Agreement there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Chateau or any
Chateau Subsidiary is a party or by which such entity is bound, obligating
Chateau or any Chateau Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock, voting
securities or other ownership interests of Chateau or of any Chateau
Subsidiary or obligating Chateau or any Chateau Subsidiary to issue, grant,
extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. Except (x) as set forth in
Schedule 3.2(c) to the Chateau Disclosure Letter and (y) as required under the
Operating Partnership Agreement, there are no outstanding contractual
obligations of Chateau or any Chateau Subsidiary to repurchase, redeem or
otherwise acquire any shares of capital stock or other ownership interests in
Chateau or any Chateau Subsidiary or make any material investment (in the form
of a loan, capital contribution or otherwise) in any Person other than the
Operating Partnership.
22
<PAGE>
(d) Authority; Noncontravention; Consents. Chateau has the
requisite corporate power and authority to enter into this Agreement and,
subject to approval by the requisite vote of the holders of the Common Stock
required to approve the issuance of the Merger Consideration to the ROC
stockholders (the "Chateau Stockholder Approvals" and, together with the ROC
Stockholder Approvals, the "Stockholder Approvals"), to consummate the
transactions contemplated by this Agreement to which Chateau is a party.
Chateau has the requisite corporate power and authority to enter into the
Chateau Option Agreement and to consummate the Transactions contemplated
thereby to which Chateau is a party. The execution and delivery of this
Agreement and the Chateau Option Agreement by Chateau and the consummation by
Chateau of the Transactions contemplated hereby and thereby to which Chateau
is a party have been duly authorized by all necessary corporate action on the
part of Chateau, subject to the approval of the issuance of the Merger
Consideration to the ROC stockholders pursuant to the Chateau Stockholder
Approvals. The execution and delivery of the Operating Partnership Agreement
Amendment has been duly authorized by Chateau and by all other necessary
partnership action, the Operating Partnership Agreement Amendment will
constitute a valid and binding obligation of the Operating Partnership,
enforceable against the Operating Partnership in accordance with its terms.
This Agreement and the Chateau Option Agreement have been duly executed and
delivered by Chateau and constitute valid and binding obligations of Chateau,
enforceable against Chateau in accordance with their terms. The Chateau
Principal Proxies have been duly executed and delivered by the Chateau
Principals and constitute valid and binding proxies of the Chateau Principals
enforceable in accordance with their terms. Except as set forth in Schedule
3.2(d) to the Chateau Disclosure Letter, the execution and delivery of this
Agreement and the Chateau Option Agreement by Chateau do not, and the
consummation of the Transactions contemplated hereby and thereby to which
Chateau is a party and compliance by Chateau with the provisions of this
Agreement and the Chateau Option Agreement will not, conflict with, or result
in any violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, or
result in the creation of any Lien upon any of the properties or assets of
Chateau or any Chateau Subsidiary under, (i) the Charter or By-laws of Chateau
or the comparable charter or organizational documents or partnership or
similar agreement (as the case may be) of any Chateau Subsidiary, each as
amended or supplemented to the date of this Agreement, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, reciprocal easement agreement,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to Chateau or any Chateau Subsidiary or their respective properties
or assets or (iii) subject to the governmental filings and other matters
referred to in the following sentence, any Laws applicable to Chateau or any
Chateau Subsidiary or their respective properties or assets, other than, in
the case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (x) have a
Chateau Material Adverse
23
<PAGE>
Effect or (y) prevent the consummation of the Transactions. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to Chateau or any
Chateau Subsidiary in connection with the execution and delivery of this
Agreement or the Chateau Option Agreement by Chateau or the consummation by
Chateau of any of the Transactions contemplated hereby and thereby, except for
(i) the filing with the SEC of (x) the Proxy Statement and the Registration
Statement and (y) such reports under Section 13(a) and Section 14 of the
Exchange Act as may be required in connection with this Agreement and the
Transactions contemplated by this Agreement, (ii) the filing of the Articles
of Merger for the Merger with the Department of Assessments and Taxation of
the State of Maryland, (iii) such filings as may be required in connection
with the payment of any Transfer and Gains Taxes and (iv) such other consents,
approvals, orders, authorizations, registrations, declarations and filings as
are set forth in Schedule 3.2(d) to the Chateau Disclosure Letter or (A) as
may be required under (x) federal, state or local environmental laws or (y)
the "blue sky" laws of various states or (B) which, if not obtained or made,
would not prevent or delay in any material respect the consummation of any of
the Transactions contemplated by this Agreement or otherwise prevent Chateau
from performing its obligations under this Agreement in any material respect
or have, individually or in the aggregate, a Chateau Material Adverse Effect.
(e) SEC Documents; Financial Statements; Undisclosed
Liabilities. Chateau has filed all required reports, schedules, forms,
statements and other documents with the SEC since November 16, 1993 and the
Operating Partnership has filed all required reports, schedules, forms,
statements, and other documents with the SEC since March 2, 1995
(collectively, the "Chateau SEC Documents"). All of the Chateau SEC Documents
(other than preliminary material), as of their respective filing dates,
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act and, in each case, the rules and
regulations promulgated thereunder applicable to such Chateau SEC Documents.
None of the Chateau SEC Documents at the time of filing contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, except
to the extent such statements have been modified or superseded by later filed
Chateau SEC Documents. Other than as set forth in Schedule 3.2(e) to the
Chateau Disclosure Letter, there is no unresolved violation, criticism or
exception by any Governmental Entity of which Chateau or the Operating
Partnership has received written notice with respect to any Chateau or
Operating Partnership report or statement which, if resolved in a manner
unfavorable to Chateau or the Operating Partnership, could have a Chateau
Material Adverse Effect. The consolidated financial statements of Chateau and
the Operating Partnership included in the Chateau SEC Documents complied as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with
24
<PAGE>
GAAP (except, in the case of interim financial statements, as permitted by
Forms 10-Q and 8-K of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
presented, in accordance with the applicable requirements of GAAP, the
consolidated financial position of Chateau and the Chateau Subsidiaries, taken
as a whole, as of the dates thereof and the consolidated results of operations
and cash flows for the periods then ended (subject, in the case of interim
financial statements, to normal year-end adjustments). Except as set forth in
the Chateau Filed SEC Documents (as defined below), in Schedule 3.2(e) to the
Chateau Disclosure Letter or as permitted by Section 4.2 (for the purposes of
this sentence, as if Section 4.2 had been in effect since December 31, 1995),
neither Chateau nor any Chateau Subsidiary has any liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise) required by
GAAP to be set forth on a consolidated balance sheet of Chateau or the
Operating Partnership or in the notes thereto and which, individually or in
the aggregate, would have a Chateau Material Adverse Effect.
(f) Absence of Certain Changes or Events. Except as
disclosed in the Chateau SEC Documents filed and publicly available prior to
the date of this Agreement (referred to collectively as the "Chateau Filed SEC
Documents") or in Schedule 3.2(f) to the Chateau Disclosure Letter, since the
date of the most recent financial statements included in the Chateau Filed SEC
Documents (the "Chateau Financial Statement Date") and to the date of this
Agreement, Chateau and the Chateau Subsidiaries have conducted their business
only in the ordinary course and there has not been (i) any material adverse
change in the business, financial condition or results of operations of
Chateau and the Chateau Subsidiaries taken as a whole, that has resulted or
would result, individually or in the aggregate, in Economic Losses (as defined
in Section 6.3 below) of $5,000,000 or more (a "Chateau Material Adverse
Change"), nor has there been any occurrence or circumstance that with the
passage of time would reasonably be expected to result in a Chateau Material
Adverse Change, (ii) except for (A) regular quarterly dividends (in the case
of Chateau) not in excess of $.425 per share of Common Stock, (B) regular
quarterly distributions (in the case of the Operating Partnership) not in
excess of $.425 per OP Unit and (C) any distributions by any Chateau
Subsidiaries (other than the Operating Partnership) to other Chateau
Subsidiaries or to Chateau, in each case with customary record and payment
dates, any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) with respect to any of
Chateau's capital stock or any OP Units, (iii) any split, combination or
reclassification of any of Chateau's capital stock or any issuance or the
authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for, or giving the right to acquire by exchange or
exercise, shares of its capital stock or any issuance of an ownership interest
in any Chateau Subsidiary, except as permitted by Section 4.2, (iv) any
damage, destruction or loss, whether or not covered by insurance, that has or
would have a Chateau Material Adverse Effect or (v) any change in accounting
methods, principles
25
<PAGE>
or practices by Chateau or any Chateau Subsidiary materially affecting its
assets, liabilities or business, except insofar as may have been disclosed in
the Chateau Filed SEC Documents or required by a change in GAAP.
(g) Litigation. Except as disclosed in the Chateau Filed SEC
Documents or in Schedule 3.2(g) of the Chateau Disclosure Letter, and other
than personal injury and other routine tort litigation arising from the
ordinary course of operations of Chateau or the Chateau Subsidiaries which are
covered by adequate insurance, there is no suit, action or proceeding pending
or, to the knowledge of Chateau, threatened against or affecting Chateau or
any Chateau Subsidiary that, individually or in the aggregate, could
reasonably be expected to (i) have a Chateau Material Adverse Effect or (ii)
prevent the consummation of any of the Transactions, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Chateau or any Chateau Subsidiary having, or
which, insofar as reasonably can be foreseen, in the future would have, any
such effect.
(h) Absence of Changes in Benefit Plans; ERISA Compliance.
(i) Except as disclosed in the Chateau Filed SEC
Documents or in Schedule 3.2(h)(i) to the Chateau Disclosure Letter and except
as permitted by Section 4.2 (for the purpose of this sentence, as if Section
4.2 had been in effect since December 31, 1995), since the date of the most
recent audited financial statements included in the Chateau Filed SEC
Documents, there has not been any adoption or amendment in any material
respect by Chateau or any Chateau Subsidiary of any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation, severance,
disability, death benefit, hospitalization, medical or other employee benefit
plan, arrangement or understanding (whether or not legally binding) providing
benefits to any current or former employee, officer or director of Chateau or
any Chateau Subsidiary or any person affiliated with Chateau under Section
414(b), (c), (m) or (o) of the Code (collectively, "Chateau Benefit Plans").
(ii) Except as described in the Chateau Filed SEC
Documents or in Schedule 3.2(h)(ii) to the Chateau Disclosure Letter or as
would not have a Chateau Material Adverse Effect, (A) all Chateau Benefit
Plans, including any such plan that is an "employee benefit plan" as defined
in Section 3(3) of ERISA, are in compliance with all applicable requirements
of law, including ERISA and the Code, and (B) neither Chateau nor any Chateau
Subsidiary has any liabilities or obligations with respect to any such Chateau
Benefit Plans, whether accrued, contingent or otherwise (other than
obligations to make contributions and pay benefits and administrative costs
incurred in the ordinary course), nor to the knowledge of Chateau are any such
liabilities or obligations expected to be incurred. Except as set forth in
Schedule 3.2(h)(ii) to the Chateau Disclosure Letter, the execution of, and
26
<PAGE>
performance of the Transactions contemplated in, this Agreement will not
(either alone or together with the occurrence of any additional or subsequent
events) constitute an event under any Chateau Benefit Plan, policy,
arrangement or agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any employee or director. The only severance
agreements or severance policies applicable to Chateau or the Chateau
Subsidiaries are the agreement and policies specifically referred to in
Schedule 3.2(h)(ii) to the Chateau Disclosure Letter.
(i) Taxes.
(i) Each of Chateau and each Chateau Subsidiary
(including the Operating Partnership) has timely filed with the appropriate
taxing authority all Tax Returns and reports required to be filed by it (after
giving effect to any filing extension properly granted by a Governmental
Entity having authority to do so). Each such Tax Return is true, correct and
complete in all material respects. Chateau and each Chateau Subsidiary
(including the Operating Partnership) have paid (or Chateau has paid on their
behalf), within the time and manner prescribed by law, all Taxes that are due
and payable. Except as disclosed in Schedule 3.2(i)(i) to the Chateau
Disclosure Letter, the federal, state and local income, sales and franchise
tax returns of Chateau and each Chateau Subsidiary have not been audited by
any Taxing Authority. There are no Tax liens upon the assets of Chateau or any
Chateau Subsidiary. The most recent financial statements contained in the
Chateau Filed SEC Documents reflect an adequate reserve for all material Taxes
payable by Chateau and by each Chateau Subsidiary for all taxable periods and
portions thereof through the date of such financial statements. Since the
Chateau Financial Statement Date, Chateau has incurred no liability for Taxes
under Section 857(b), 860(c) or 4981 of the Code, and neither Chateau nor any
Chateau Subsidiary has incurred any liability for Taxes other than in the
ordinary course of business. Except as set forth in Schedule 3.2(i)(i) to the
Chateau Disclosure Letter, to the knowledge of Chateau, no event has occurred,
and no condition or circumstance exists, which presents a material risk that
any material Tax described in the preceding sentence will be imposed upon
Chateau. To the knowledge of Chateau, no deficiencies for any Taxes have been
proposed, asserted or assessed against Chateau or any of the Chateau
Subsidiaries, and no requests for waivers of the time to assess any such Taxes
have been granted or are pending.
(ii) Chateau (A) for all of its taxable years commencing
with 1993 through the most recent December 31, has been subject to taxation as
a REIT within the meaning of the Code and has satisfied the requirements to
qualify as a REIT for such years, (B) has operated, and intends to continue to
operate, in such a manner as to qualify as a REIT for its tax year ending
December 31, 1996, and (C) has not taken or omitted to take any action which
could reasonably be expected to result in a challenge to its status
27
<PAGE>
as a REIT, and, to Chateau's knowledge, no such challenge is pending or
threatened. The Operating Partnership has at all times, and each other Chateau
Subsidiary which is a partnership or files Tax Returns as a partnership for
federal income tax purposes has since its acquisition by Chateau, been
classified for federal income tax purposes as a partnership and not as a
corporation or as an association taxable as a corporation.
(j) No Loans or Payments to Employees, Officers or
Directors. Except as set forth in Schedule 3.2(j) to the Chateau Disclosure
Letter or as otherwise specifically provided for in this Agreement, there is
no (i) loan outstanding from or to any employee or director, (ii) employment
or severance contract, (iii) other agreement requiring payments to be made on
a change of control or otherwise as a result of the consummation of any of the
Transactions with respect to any employee, officer or director of Chateau or
any Chateau Subsidiary or (iv) any agreement to appoint or nominate any person
as a director of Chateau.
(k) Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than Merrill Lynch
& Co. ("Merrill Lynch") and Goldman Sachs & Co. ("Goldman"), the fees and
expenses of which, as set forth in separate letter agreements between Chateau
and Merrill Lynch and Chateau and Goldman, respectively, have previously been
disclosed to ROC and will be paid by Chateau, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of Chateau
or any other Chateau Subsidiary.
(l) Compliance with Laws. Except as disclosed in the Chateau
Filed SEC Documents and except as set forth in Schedule 3.2(l) to the Chateau
Disclosure Letter, neither Chateau nor any of the Chateau Subsidiaries has
violated or failed to comply with any statute, law, ordinance, regulation,
rule, judgment, decree or order of any Governmental Entity applicable to its
business, properties or operations, except for violations and failures to
comply that would not, individually or in the aggregate, reasonably be
expected to result in a Chateau Material Adverse Effect.
(m) Contracts; Debt Instruments.
(i) Neither Chateau nor any Chateau Subsidiary is in
violation of or in default under, in any material respect (nor does there
exist any condition which upon the passage of time or the giving of notice or
both would cause such a violation of or default under), any material loan or
credit agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise or license, or any agreement to acquire real property, or any other
material contract, agreement, arrangement or understanding, to which it is a
party or by which it or any of its properties or assets is bound, except as
set forth in Schedule 3.2(m)(i) to the Chateau Disclosure Letter and except
for violations or defaults that would not, individually or in the aggregate,
result in a Chateau Material Adverse Effect.
28
<PAGE>
(ii) Except for any of the following expressly
identified in the most recent financial statements contained in the Chateau
Filed SEC Documents and except as permitted by Section 4.2, Schedule
3.2(m)(ii) to the Chateau Disclosure Letter sets forth (A) a list of all loan
or credit agreements, notes, bonds, mortgages, indentures and other agreements
and instruments pursuant to which any indebtedness of Chateau or any of the
Chateau Subsidiaries in an aggregate principal amount in excess of $2,000,000
per item is outstanding or may be incurred and (B) the respective principal
amounts outstanding thereunder on June 30, 1996.
(iii) Schedule 3.2(m)(iii) to the Chateau Disclosure
Letter sets forth a complete list of each agreement (including a description
thereof) made by Chateau and/or any Chateau Subsidiary with a limited partner
of the Operating Partnership relating to any commitment to maintain any
specific debt allocations or permit any such limited partner to take any
action to assure any debt allocation.
(iv) Schedule 3.2(m)(iv) to the Chateau Disclosure
Letter sets forth a complete list of each consulting agreement between Chateau
and any Chateau Subsidiary, including the annual compensation payable
thereunder and the date as of which such consulting agreement expires.
(n) Operating Partnership Agreement. The execution and
delivery of the Operating Partnership Agreement has been duly authorized,
executed and delivered by Chateau. Assuming due execution by the limited
partners of the Operating Partnership, the Operating Partnership Agreement
constitutes a valid and binding obligation of Chateau enforceable against
Chateau in accordance with its terms.
(o) Environmental Matters. Except as disclosed in Schedule
3.2(o) to the Chateau Disclosure Letter or in the environmental audits/reports
listed thereon, each of Chateau and each Chateau Subsidiary has obtained all
licenses, permits, authorizations, approvals and consents from Governmental
Entities which are required in respect of its business, operations, assets or
properties under any applicable Environmental Law, and each of Chateau and
each Chateau Subsidiary is in compliance in all material respects with the
terms and conditions of all such licenses, permits, authorizations, approvals
and consents and with any applicable Environmental Law. Except as disclosed in
Schedule 3.2(o) to the Chateau Disclosure Letter or in the environmental
audits/reports listed thereon:
(i) No Order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending
or threatened by any Governmental Entity with respect to any alleged failure
by Chateau or any Chateau Subsidiary to have any license, permit,
authorization, approval or consent from Governmental Entities required under
any applicable Environmental Law in connection with the conduct of the
business or operations of
29
<PAGE>
Chateau or any Chateau Subsidiary or with respect to any Release by Chateau or
any Chateau Subsidiary of any Hazardous Material.
(ii) Neither Chateau nor any Chateau Subsidiary nor any
prior owner or lessee of any property now or previously owned or leased by
Chateau or any Chateau Subsidiary has handled any Hazardous Material on any
property now or previously owned or leased by Chateau or any Chateau
Subsidiary; and, without limiting the foregoing, (A) no polychlorinated
biphenyl is or has been present, (B) no friable asbestos is or has been
present, (C) there are no underground storage tanks, active or abandoned and
(D) no Hazardous Material has been Released in a quantity reportable under, or
in violation of, any Environmental Law, at, on or under any property now or
previously owned or leased by Chateau or any Chateau Subsidiary, during any
period that Chateau or any Chateau Subsidiary owned or leased such property
or, to the knowledge of Chateau and its Subsidiaries, prior thereto.
(iii) Neither Chateau nor any Chateau Subsidiary has
transported or arranged for the transportation of any Hazardous Material to
any location which is the subject of any action, suit, arbitration or
proceeding that could be reasonably expected to lead to claims against Chateau
or any Chateau Subsidiary for clean-up costs, remedial work, damages to
natural resources or personal injury claims, including, but not limited to,
claims under CERCLA.
(iv) No oral or written notification of a Release of a
Hazardous Material has been filed or should have been filed by or on behalf of
Chateau or any Chateau Subsidiary and no property now or previously owned or
leased by Chateau or any Chateau Subsidiary is listed or proposed for listing
on the National Priorities List promulgated pursuant to CERCLA or on any
similar state list of sites requiring investigation or clean-up.
(v) There are no Liens arising under or pursuant to any
Environmental Law on any real property owned or leased by Chateau or any
Chateau Subsidiary, and no action of any Governmental Entity has been taken
or, to the knowledge of Chateau and its Subsidiaries, is in process which
could subject any of such properties to such Liens, and neither Chateau nor
any Chateau Subsidiary would be required to place any notice or restriction
relating to the presence of Hazardous Material at any such property owned by
it in any deed to such property.
(vi) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, or which are
in the possession of, Chateau or any Chateau Subsidiary in relation to any
property or facility now or previously owned or leased by Chateau or any
Chateau Subsidiary which have not been listed in Schedule 3.2(o) to the
Chateau Disclosure Letter and made available to ROC prior to the execution of
this Agreement.
(p) Tangible Property and Assets. Except as disclosed in
Schedule 3.2(p) to the Chateau Disclosure Letter, Chateau and
30
<PAGE>
its Subsidiaries have good and marketable fee simple title to, or have valid
leasehold interests in, those manufactured housing communities described in
the Chateau Disclosure Letter, free and clear of all Liens other than (i) any
statutory Lien arising in Schedule 3.2(p) to the ordinary course of business
by operation of law with respect to a liability that is not yet due or
delinquent and (ii) any easement, restriction or minor imperfection of title
or similar Lien which individually or in the aggregate with other such Liens
does not materially impair the value of the property or asset subject to such
Lien or the use of such property or asset in the conduct of the business of
Chateau or any such Chateau Subsidiary.
(q) Books and Records.
(i) The books of account and other financial records of
Chateau and each Chateau Subsidiary are in all material respects true,
complete and correct, have been maintained in accordance with good business
practices, and are accurately reflected in all material respects in the
financial statements included in the Chateau Filed SEC Documents.
(ii) Chateau has previously delivered or made available
to ROC true and correct copies of the Charter and By-laws of Chateau, as
amended to date, and the charter, by-laws, organization documents, partnership
agreements and joint venture agreement of its Subsidiaries, and all amendments
thereto. All such documents are listed in Schedule 3.2(q)(ii) to the Chateau
Disclosure Letter. Chateau has also delivered to ROC evidence of its Director
and Officer liability insurance policy.
(iii) The minute books and other records of corporate or
partnership proceedings of Chateau and each Chateau Subsidiary that had
previously been made available to ROC in connection with the execution of the
Original Agreement, contained, as of the date of the Original Agreement, in
all material respects accurate records of all meetings and accurately reflect
in all material respects all other corporate action of the stockholders and
directors and any committees of the Board of Directors of Chateau and the
Chateau Subsidiaries which are corporations.
(r) Opinion of Financial Advisors. Chateau has received the
opinion of each of Merrill Lynch and Goldman, satisfactory to Chateau, a
signed version of each of which will be provided to ROC, with regard to the
fairness of the Merger and the issuance of the Merger Consideration to the ROC
stockholders to Chateau and the stockholders of Chateau from a financial point
of view.
(s) State Takeover Statutes. No Takeover Statute of the
State of Maryland, including, without limitation, the control share
acquisition provisions of Section 3-701 et seq. of the MGCL or the business
combination provisions of Section 3-601 et seq. of the MGCL, applies or
purports to apply to the Merger, this Agreement or any of the Transactions.
31
<PAGE>
(t) Registration Statement. The information furnished by
Chateau for inclusion in the Registration Statement will not, as of the
effective date of the Registration Statement, contain an untrue statement of a
material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading.
(u) Vote Required. The affirmative vote of holders
representing a majority of the shares of Common Stock present (in person or
represented by proxy) at the Chateau Stockholders Meeting (as herein defined)
(assuming the total vote cast represents at least a majority of the
outstanding shares of Common Stock as of the record date for the Chateau
Stockholders Meeting) is the only vote of the holders of any class or series
of Chateau's capital stock necessary (under applicable law, rules of the NYSE
or otherwise) to approve the issuance of the Merger Consideration to the ROC
stockholders.
ARTICLE IV
Covenants
SECTION 4.1 Conduct of Business by ROC. During the period
from the date of this Agreement to the Effective Time, ROC shall, and shall
cause the ROC Subsidiaries each to, carry on its businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and, to the extent consistent therewith, use commercially reasonable
efforts to preserve intact its current business organization, goodwill,
ongoing businesses and its status as a REIT within the meaning of the Code.
Without limiting the generality of the foregoing, the following additional
restrictions shall apply: During the period from the date of this Agreement to
the Effective Time, except as set forth in Schedule 4.1 to the ROC Disclosure
Letter or as otherwise contemplated by this Agreement, ROC shall not and shall
cause the ROC Subsidiaries not to (and not to authorize or commit or agree
to):
(a) (i) except for regular quarterly dividends not in excess
of $.405 per share of ROC Stock (which may be increased to an amount not in
excess of $.425 per share of ROC Stock upon prior notice to Chateau) with
customary record and payment dates, declare, set aside or pay any dividends
on, or make any other distributions in respect of, any of ROC's capital stock
or stock in any ROC Subsidiary that is not directly or indirectly wholly owned
by ROC, (ii) except as permitted by Section 4.1(e), split, combine or
reclassify any capital stock or partnership interests or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of such capital stock or partnership interests or
(iii) except as permitted by Section 4.1(e), purchase, redeem or otherwise
acquire any shares of capital stock of ROC;
32
<PAGE>
(b) except (i) as permitted under Section 4.1(e), (ii) for
the adoption by ROC of a stockholder's rights plan (which plan can be
withdrawn upon consummation of the Merger and does not materially and
adversely affect, in the reasonable judgment of the ROC Board, the prospects
for consummation of the Merger and the other Transactions or the economic
impact of the Merger on the Chateau stockholders) and the issuance of rights
or securities by ROC under such plan, (iii) for the ROC Option Agreement and
the exercise of outstanding ROC Stock Options, or (iv) for the issuance of up
to 1,000,000 shares of capital stock by ROC in a cash transaction subject to
Section 5.21, issue, deliver or sell, or grant any option or other right, in
respect of, any shares of capital stock, any other voting or redeemable
securities of ROC or any ROC Subsidiary or any securities convertible into, or
any rights, warrants or options to acquire, any such shares, voting securities
or convertible or redeemable securities except to ROC or a ROC Subsidiary;
(c) except as otherwise contemplated by this Agreement or
amendments to the Charter or By-Laws of ROC that do not materially and
adversely affect, in the reasonable judgment of the ROC Board, the prospects
for consummation of the Merger and the other Transactions or the economic
impact of the Merger on the Chateau stockholders, amend the Charter, By-laws,
partnership agreement or other comparable charter or organizational documents
of ROC or any ROC Subsidiary;
(d) except as permitted by Section 4.1(e), in the case of
ROC or any of its Subsidiaries, merge or consolidate with any Person;
(e) (x) in a transaction involving capital, securities or
other assets or indebtedness of ROC or a ROC Subsidiary or any combination
thereof in excess of $10,000,000, without providing to Chateau in each case
reasonable prior written notice of and an opportunity to consult in connection
with such transaction or (y) in a transaction involving capital, securities,
other assets or obligations of ROC or a ROC Subsidiary or any combination
thereof in excess of $20,000,000, without obtaining the prior written consent
of Chateau, which consent shall not unreasonably be withheld or delayed: (i)
acquire or agree to acquire by merging or consolidating with, or by purchasing
all or a substantial portion of the equity securities or assets of, or by any
other manner, any business or any corporation, partnership, limited liability
company, joint venture, association, business trust or other business
organization or division thereof or interest therein or any assets; (ii)
mortgage or otherwise encumber or subject to any Lien or sell, lease or
otherwise dispose of any of its material properties or assets or assign or
encumber the right to receive income, dividends, distributions and the like or
agree to do any of the foregoing; or (iii) incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt securities of
ROC, guarantee any debt securities of another person, enter into any "keep
well" or other agreement to maintain any
33
<PAGE>
financial statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, prepay or refinance any
indebtedness or make any loans, advances or capital contributions to, or
investments in, any other person;
(f) engage in any transactions of the types described in
clauses (i), (ii) and (iii) of paragraph (e) above, whether or not related,
involving, in the aggregate, capital, securities or other assets or
indebtedness of ROC or a ROC Subsidiary or any combination thereof in excess
of $40,000,000, without obtaining the prior written consent of Chateau, which
may be withheld for any reason or no reason;
(g) make any tax election (unless required by law or
necessary to preserve ROC's status as a REIT);
(h) (i) change in any material manner any of its methods,
principles or practices of accounting in effect at the Financial Statement
Date, or (ii) make or rescind any express or deemed election relating to
taxes, settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes, except in
the case of settlements or compromises relating to taxes on real property in
an amount not to exceed, individually or in the aggregate, $500,000, or change
any of its methods of reporting income or deductions for federal income tax
purposes from those employed in the preparation of its federal income tax
return for the taxable year ending December 31, 1995, except, in the case of
clause (i), as may be required by the SEC, applicable law or GAAP and with
notice thereof to Chateau;
(i) except as provided in this Agreement, adopt any new
employee benefit plan, incentive plan, severance plan, bonus plan, stock
option or similar plan, grant new stock appreciation rights or amend any
existing plan or rights, or enter into or amend any employment agreement or
similar agreement or arrangement (other than as contemplated under Section
5.11(b)(iv)) or, except in the ordinary course consistent with past practice,
grant or become obligated to grant any increase in the compensation of
officers or employees, except such changes as are required by law or which are
not more favorable to participants than provisions presently in effect;
(j) settle any stockholder derivative or class action claims
arising out of or in connection with any of the Transactions; and
(k) enter into or amend or otherwise modify any agreement or
arrangement with persons that are affiliates or, as of the date hereof, are
officers, directors or employees of ROC or any ROC Subsidiary not approved by
a majority of the "independent" members of the Board of Directors of ROC.
SECTION 4.2 Conduct of Business by Chateau. During the
period from the date of this Agreement to the Effective Time,
34
<PAGE>
Chateau shall, and shall cause the Chateau Subsidiaries each to, carry on its
businesses in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent therewith, use
commercially reasonable efforts to preserve intact its current business
organization, goodwill, ongoing businesses and its status as a REIT within the
meaning of the Code. Without limiting the generality of the foregoing, the
following additional restrictions shall apply: During the period from the date
of this Agreement to the Effective Time, except as set forth in Schedule 4.2
to the Chateau Disclosure Letter or as otherwise contemplated by this
Agreement, Chateau shall not and shall cause the Chateau Subsidiaries not to
(and not to authorize or commit or agree to):
(a) (i) except (x) in the case of Chateau, for regular
quarterly dividends not in excess of $.405 per share of Common Stock (which
may be increased to an amount not in excess of $.425 per share of Common Stock
upon prior notice to ROC), and (y) in the case of the Operating Partnership,
for regular quarterly distributions to the general and limited partners of the
Operating Partnership not in excess of $.405 per OP Unit (which may be
increased to an amount not in excess of $.425 per OP Unit upon prior notice to
ROC), and (z) any distributions by any other wholly owned Chateau
Subsidiaries, in each case with customary record and payment dates, declare,
set aside or pay any dividends on, or make any other distributions in respect
of, any of Chateau's capital stock or the OP Units or partnership interests or
stock in any Chateau Subsidiary that is not directly or indirectly wholly
owned by Chateau, (ii) except for a one-time 3.16% Common Stock dividend (and
corresponding adjustment of outstanding OP Units in accordance with the
Operating Partnership Agreement) to be declared by Chateau to its stockholders
of record on any date on or prior to the record date established for the
Chateau Stockholders Meeting to approve the issuance of the Merger
Consideration to the ROC stockholders (the payment of which, however, being
conditioned on the Chateau Stockholder Approval having been obtained) or as
otherwise permitted by Section 4.2(e) or as contemplated under the exchange
provisions of the Operating Partnership Agreement, split, combine or
reclassify any capital stock or partnership interests or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of such capital stock or partnership interests or
(iii) except for the repurchase by Chateau of up to 1,500,000 shares of its
Common Stock or as contemplated under the exchange provisions of the Operating
Partnership Agreement or as permitted under Section 4.2(e), purchase, redeem
or otherwise acquire any shares of capital stock of Chateau or OP Units or any
options, warrants or rights to acquire, or security convertible into, shares
of capital stock of Chateau or such OP Units;
(b) except (i) as permitted under or required pursuant to
this Agreement, (ii) Chateau's dividend reinvestment plan, (iii) Section
4.2(e), (iv) the Chateau Option Agreement, (v) for the adoption (with the
consent of ROC which shall not be unreasonably withheld or delayed) by Chateau
of a stockholder's rights plan and
35
<PAGE>
the issuance of rights or securities by Chateau under such plan, (vi) the
issuance of shares of Common Stock by Chateau to its or its Subsidiaries'
existing equity owners of up to the number of shares, if any, that may be
repurchased by Chateau as permitted under Section 4.2(a)(ii) above (at an
average price per share at least equal to the average price per share paid on
such repurchase), (vii) the exercise of outstanding Chateau Stock Options or
(viii) as contemplated under the exchange provisions of the Operating
Partnership Agreement, issue, deliver or sell, or grant any option or other
right in respect of, any shares of capital stock, any other voting or
redeemable securities (including OP Units or other partnership interests) of
Chateau or any Chateau Subsidiary or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting securities or
convertible or redeemable securities except to Chateau or a Chateau
Subsidiary;
(c) except as otherwise contemplated by this Agreement or
except for By-law amendments that are consented to by ROC (which consent shall
not be unreasonably withheld or delayed), amend the Charter, By-laws,
partnership agreement or other comparable charter or organizational documents
of Chateau or any Chateau Subsidiary;
(d) except as permitted by Section 4.2(e), in the case of
Chateau, the Operating Partnership or any other Chateau Subsidiary, merge or
consolidate with any Person;
(e) (x) in a transaction involving capital, securities or
other assets or indebtedness of Chateau or a Chateau Subsidiary or any
combination thereof in excess of $10,000,000, without providing to ROC
reasonable prior written notice of and an opportunity to consult in connection
with such transaction or (y) in a transaction involving capital, securities,
other assets or indebtedness of Chateau or a Chateau Subsidiary or any
combination thereof in excess of $20,000,000, without obtaining the prior
written consent of ROC, which consent shall not unreasonably be withheld or
delayed: (i) acquire or agree to acquire by merging or consolidating with, or
by purchasing all or a substantial portion of the equity securities or assets
of, or by any other manner, any business or any corporation, partnership,
limited liability company, joint venture, association, business trust or other
business organization or division thereof or interest therein or any assets;
(ii) mortgage or otherwise encumber or subject to any Lien or sell, lease or
otherwise dispose of any of its material properties or assets or assign or
encumber the right to receive income, dividends, distributions and the like or
agree to do any of the foregoing; or (iii) incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt securities of
Chateau or any Chateau Subsidiary, guarantee any debt securities of another
person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into any arrangement
having the economic effect of any of the foregoing, prepay or refinance any
indebtedness or make
36
<PAGE>
any loans, advances or capital contributions to, or investments in,
any other person;
(f) engage in any transactions of the types described in
clauses (i), (ii) and (iii) of paragraph (e) above, whether or not related,
involving, in the aggregate, capital, securities or other assets or
obligations of Chateau or a Chateau Subsidiary or any combination thereof in
excess of $40,000,000, without obtaining the prior written consent of ROC,
which consent may be withheld for any reason or no reason;
(g) make any tax election (unless required by law or
necessary to preserve Chateau's status as a REIT or the status of the
Operating Partnership as a partnership for federal tax purposes);
(h) (i) change in any material manner any of its methods,
principles or practices of accounting in effect at the Chateau Financial
Statement Date, or (ii) make or rescind any express or deemed election
relating to taxes, settle or compromise any claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or controversy relating to
taxes, except in the case of settlements or compromises relating to taxes on
real property in an amount not to exceed, individually or in the aggregate,
$500,000, or change any of its methods of reporting income or deductions for
federal income tax purposes from those employed in the preparation of its
federal income tax return for the taxable year ending December 31, 1995,
except, in the case of clause (i), as may be required by the SEC, applicable
law or GAAP and with notice thereof to ROC;
(i) except as provided in this Agreement or by a severance
plan that, by its terms, terminates upon consummation of the Merger, adopt any
new employee benefit plan, incentive plan, severance plan, bonus plan, stock
option or similar plan, grant new stock appreciation rights or amend any
existing plan or rights, or enter into or amend any employment agreement or
similar agreement or arrangement (other than as contemplated under Section
5.11(b)(iv)) or, except in the ordinary course consistent with past practice,
grant or become obligated to grant any increase in the compensation of
officers or employees, except such changes as are required by law or which are
not more favorable to participants than provisions presently in effect;
(j) settle any stockholder derivative or class action claims
arising out of or in connection with any of the Transactions; and
(k) except as provided in this Agreement or by a severance
plan that, by its terms, terminates upon consummation of the Merger, enter
into or amend or otherwise modify any agreement or arrangement with persons
that are affiliates or, as of the date hereof, are officers, directors or
employees of Chateau or any Chateau Subsidiary not approved by a majority of
the "independent" members of the Board of Directors of Chateau.
37
<PAGE>
SECTION 4.3 Other Actions. Each of ROC and Chateau shall not
and shall cause its respective subsidiaries not to take any action that would
result in (i) any of the representations and warranties of such party (without
giving effect to any "knowledge" qualification) set forth in this Agreement
that are qualified as to materiality becoming untrue, (ii) any of such
representations and warranties (without giving effect to any "knowledge"
qualification) that are not so qualified becoming untrue in any material
respect or (iii) except as contemplated by Section 7.1, any of the conditions
to the Merger set forth in Article VI not being satisfied.
ARTICLE V
Additional Covenants
SECTION 5.1 Preparation of the Registration Statement and
the Proxy Statement; Stockholders Meetings.
(a) As soon as practicable following the date of this
Agreement, ROC and Chateau shall prepare and file with the SEC a preliminary
Proxy Statement in form and substance satisfactory to each of Chateau and ROC,
and ROC and Chateau will provide on a supplemental basis to the SEC the
Registration Statement, in which the Proxy Statement will be included as a
prospectus. Each of ROC and Chateau shall use its best efforts to (i) respond
to any comments of the SEC and (ii) have the Registration Statement declared
effective under the Securities Act and the rules and regulations promulgated
thereunder as promptly as practicable after such filing and to keep the
Registration Statement effective as long as is necessary to consummate the
Merger. ROC shall use its best efforts to mail the Proxy Statement to the ROC
stockholders as promptly as practicable after the Registration Statement is
declared effective; provided that ROC may delay the mailing of the Proxy
Statement to the ROC Stockholders until the condition specified in Section
6.3(i) has been satisfied. Further, Chateau shall establish a record date for
the Chateau Stockholders Meeting as soon as practicable following the
obtainment of the ROC Stockholder Approval at the ROC Stockholders Meeting and
use its best efforts to mail the Proxy Statement to the Chateau stockholders
as soon as practicable thereafter. Each party will notify the other promptly
of the receipt of any comments from the SEC and of any request by the SEC for
amendments or supplements to the Registration Statement or the Proxy Statement
or for additional information and will supply the other with copies of all
correspondence between such party or any of its representatives and the SEC
with respect to the Registration Statement or the Proxy Statement. The
Registration Statement and the Proxy Statement shall comply in all material
respects with all applicable requirements of Law. Whenever any event occurs
which is required to be set forth in an amendment or supplement to the
Registration Statement or the Proxy Statement, Chateau or ROC, as the case may
be, shall promptly inform the other of such occurrences and cooperate in
filing with the SEC, and Chateau shall file with the
38
<PAGE>
SEC and/or mailing to the stockholders of Chateau and the stockholders of ROC
such amendment or supplement in a form reasonably acceptable to Chateau and
ROC.
(b) Chateau covenants that the Proxy Statement shall include
the recommendation of the Board of Directors of Chateau in favor of the
issuance of the Merger Consideration to the ROC stockholders; provided that
the recommendation of Chateau may not be included or may be withdrawn,
modified or amended if Chateau shall approve or recommend a Superior Competing
Transaction (as defined below) or enter into an agreement with respect to such
Superior Competing Transaction and the Board of Directors of Chateau
determines in good faith that is in compliance with Section 7.1. ROC covenants
that the Proxy Statement shall include the recommendation of the Board of
Directors of ROC in favor of the approval of the Merger, this Agreement and
the other Transactions contemplated hereby; provided that the recommendation
of ROC may not be included or may be withdrawn, modified or amended if ROC
shall approve or recommend a Superior Competing Transaction (as defined below)
or enter into an agreement with respect to such Superior Competing Transaction
and the Board of Directors of ROC determines in good faith that is in
compliance with Section 7.1. Chateau shall furnish all information concerning
Chateau and the holders of Common Stock as may reasonably be requested in
connection with any action required to be taken under any applicable state
securities or "blue sky" laws in connection with the issuance of Common Stock
pursuant to the Merger, and ROC shall furnish all information concerning ROC
and the holders of ROC Stock as may be reasonably requested in connection with
any such action. Chateau and ROC will use their best efforts to obtain, prior
to the effective date of the Registration Statement, all necessary state
securities or "blue sky" permits or approvals required to carry out the Merger
and the other Transactions contemplated by this Agreement. In connection with
the preparation of the Proxy Statement and the Registration Statement, Chateau
shall use reasonable efforts to cause to be delivered to ROC, prior to the
mailing of such Proxy Statement to ROC's stockholders and Chateau's
stockholders, the opinion dated the date of the Proxy Statement of Timmis &
Inman, subject to certificates, letters and assumptions, reasonably
satisfactory to ROC, that (i) Chateau was organized and has operated in
conformity with the requirements for qualification as a REIT within the
meaning of the Code since 1993 and (ii) the Operating Partnership has been
during and since 1993 and each Chateau Subsidiary that is a partnership or
limited liability company has been since its acquisition, and following the
Merger shall be treated as of such date, for federal income tax purposes, as a
partnership and not as a corporation or an association taxable as a
corporation. In connection with the preparation of the Proxy Statement and the
Registration Statement, ROC shall use reasonable efforts to cause to be
delivered to Chateau, prior to the mailing of the Proxy Statement to ROC's
stockholders and Chateau's stockholders, the opinion dated the date of the
Proxy Statement of Rogers & Wells, subject to certificates, letters and
assumptions, reasonably satisfactory to Chateau, that (i) ROC was organized
and has operated in conformity with the requirements for qualification
39
<PAGE>
as a REIT within the meaning of the Code since 1993, (ii) the Financing
Partnership (as defined below), following the merger of the Financing Sub (as
defined below) with and into the Financing Partnership as contemplated by the
Contribution Agreement, will be treated as of such date for federal income tax
purposes as a partnership and not as a corporation or as an association
taxable as a corporation and (iii) following the Merger (after giving effect
thereto), Chateau's proposed method of operation will enable it to meet the
requirements for qualification and taxation as a REIT under the Code.
(c) ROC will, as soon as practicable following the date of
this Agreement, duly call, give notice of, convene and hold a meeting of its
stockholders (the "ROC Stockholders Meeting") for the purpose of obtaining the
ROC Stockholder Approvals. ROC will, through its Board of Directors, recommend
to its stockholders approval of the Merger, this Agreement and the other
Transactions contemplated by this Agreement; provided that prior to the ROC
Stockholders Meeting such recommendation may be withdrawn, modified or amended
if ROC shall approve or recommend a Superior Competing Transaction (as defined
below) or enter into an agreement with respect to such Superior Competing
Transaction and the Board of Directors of ROC determines in good faith that is
in compliance with Section 7.1.
(d) Chateau will, as soon as practicable following the
obtainment of the ROC Stockholder Approval, duly call, give notice of, convene
and hold a meeting of its stockholders (the "Chateau Stockholders Meeting")
for the purpose of obtaining the Chateau Stockholder Approvals. Chateau will,
through its Board of Directors, recommend to its stockholders approval of
issuance of the Merger Consideration to the ROC stockholders; provided that
prior to the Chateau Stockholders Meeting such recommendation may be
withdrawn, modified or amended if Chateau shall approve or recommend a
Superior Competing Transaction (as defined below) or enter into an agreement
with respect to such Superior Competing Transaction and the Board of Directors
of Chateau determines in good faith that is in compliance with Section 7.1.
SECTION 5.2 Access to Information; Confidentiality. Subject
to the requirements of confidentiality agreements with third parties, each of
ROC and Chateau shall, and shall cause each of its respective subsidiaries to,
afford to the other party and to the officers, employees, accountants,
counsel, financial advisors and other representatives of such other party,
reasonable access during normal business hours during the period prior to the
Effective Time to all their respective properties, books, contracts,
commitments, personnel and records and, during such period, each of ROC and
Chateau shall, and shall cause each of its respective subsidiaries to, furnish
promptly to the other party (a) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (b) all other information
concerning its business, properties and personnel as such other party may
reasonably request. Each of ROC and Chateau
40
<PAGE>
will hold, and will cause its respective subsidiaries' officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in confidence to the extent
required by, and in accordance with, and will comply with the provisions of
the letter agreement between ROC and Chateau dated as of June 4, 1996, as
amended to date (as so amended, the "Confidentiality Agreement").
SECTION 5.3 Best Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth
in this Agreement, each of Chateau and ROC agrees to use its best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and
to assist and cooperate with the other in doing, all things necessary, proper
or advisable to fulfill all conditions applicable to such party pursuant to
this Agreement and to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other Transactions contemplated hereby,
including (i) the obtaining of all necessary actions or nonactions, waivers,
consents and approvals from Governmental Entities and the making of all
necessary registrations and filings and the taking of all reasonable steps as
may be necessary to obtain an approval, waiver or exemption from, or to avoid
an action or proceeding by, any Governmental Entity, (ii) the obtaining of all
necessary consents, approvals, waivers or exemption from non-governmental
third parties; provided, however, that if either party is obliged to make
expenditures, or incur costs, expenses or other liabilities to obtain the
consent of any non-governmental party, it shall consult reasonably with the
other party upon reasonable notice prior to making payment of any such amount,
and in no event shall either ROC or Chateau make payment of any such amount in
excess of $500,000 in obtaining such consents without obtaining the prior
written consent of the other, which consent shall not unreasonably be withheld
or delayed, (iii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging the Merger, this Agreement or
the consummation of the Transactions, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the Transactions contemplated by and to
fully carry out the purposes of, this Agreement; provided, however, that a
party shall not be obligated to take any action pursuant to the foregoing if
the taking of such action or the obtaining of any waiver, consent, approval or
exemption is reasonably likely to result in the imposition of a condition or
restriction of the type referred to in Section 6.1(d). In connection with and
without limiting the foregoing, ROC, Chateau and their respective Boards of
Directors shall (i) take all action necessary so that no "fair price,"
"business combination," "moratorium," "control share acquisition" or any other
anti-takeover statute or similar statute enacted under state or federal laws
of the United States or similar statute or regulation (a "Takeover Statute")
is or becomes applicable to the Merger, this Agreement or any of the other
Transactions and (ii) if any Takeover Statute becomes applicable to the
Merger, this
41
<PAGE>
Agreement or any other Transaction, take all action necessary so that the
Merger and the other Transactions may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such Takeover Statute on the Merger and the other
Transactions.
(b) ROC shall give prompt notice to Chateau, and Chateau
shall give prompt notice to ROC, if (i) any representation or warranty made by
it contained in this Agreement that is qualified as to materiality becomes
untrue or inaccurate in any respect or any such representation or warranty
that is not so qualified becomes untrue or inaccurate in any material respect
or (ii) it fails to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement.
SECTION 5.4 Affiliates. Prior to the Closing Date, ROC shall
deliver to Chateau a list identifying all persons who are, at the time this
Agreement is submitted for approval to the stockholders of ROC, an "affiliate"
of ROC for purposes of Rule 145 under the Securities Act. ROC shall use its
best efforts to cause each of such affiliate to deliver on or prior to the
Closing Date a written agreement substantially in the form attached as Exhibit
H hereto.
SECTION 5.5 Tax Treatment. Each of Chateau and ROC shall use
its reasonable best efforts (a) to cause the Merger and the transfer of OP
Units and other property by the holders thereof to be viewed as an integrated
transaction and together to qualify for federal income tax purposes as
tax-free transfers by the stockholders of ROC and the transferring OP Unit
holders of their shares of ROC Stock and OP Units and other property to
Chateau in exchange for shares of Common Stock under Section 351 of the Code,
and (b) to obtain the opinion of counsel referred to in Section 6.3(e).
SECTION 5.6 No Solicitation of Transactions. Subject to
Section 7.1, each of Chateau and ROC shall not directly or indirectly, through
any officer, director, employee, agent, investment banker, financial advisor,
attorney, accountant, broker, finder or other representative, initiate or
solicit (including by way of furnishing nonpublic information or assistance)
any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Competing Transaction (as defined
below), or authorize or permit any of its officers, directors, employees or
agents, attorneys, investment bankers, financial advisors, accountants,
brokers, finders or other representatives to take any such action. Each of
Chateau and ROC shall notify the other in writing (as promptly as practicable)
of all of the relevant details relating to all inquiries and proposals which
it or any of its Subsidiaries or any such officer, director, employee, agent,
investment banker, financial advisor, attorney,
42
<PAGE>
accountant, broker, finder or other representative may receive relating to any
of such matters and if such inquiry or proposal is in writing, each of Chateau
and ROC shall deliver to the other a copy of such inquiry or proposal. For
purposes of this Agreement, "Competing Transaction" shall mean any of the
following (other than the Transactions contemplated by this Agreement): (i)
any merger, consolidation, share exchange, business combination, or similar
transaction involving Chateau (or any of its Subsidiaries) or ROC (or any of
its Subsidiaries), as the case may be; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of 30% or more of the assets
of Chateau and its Subsidiaries taken as a whole or ROC and its Subsidiaries
taken as a whole, as the case may be, in a single transaction or series of
related transactions, excluding any bona fide financing transactions which do
not, individually or in the aggregate, have as a purpose or effect the sale or
transfer of control of such assets; (iii) any tender offer or exchange offer
for 30% or more of the outstanding shares of capital stock of Chateau (or any
of its Subsidiaries) or ROC (or any of its Subsidiaries) or the filing of a
registration statement under the Securities Act in connection therewith; or
(iv) any public announcements of a proposal, plan or intention to do any of
the foregoing or any agreement to engage in any of the foregoing.
SECTION 5.7 Public Announcements. Chateau and ROC will
consult with each other before issuing, and provide each other the opportunity
to review and comment upon, any press release or other public statements with
respect to the Transactions, including the Merger, and shall not issue any
such press release or make any such public statement prior to such
consultation, except as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange. The parties agree that the initial press release to be issued with
respect to the Transactions will be in the form agreed to by the parties
hereto prior to the execution of this Agreement.
SECTION 5.8 Listing. Chateau will promptly prepare and
submit to the NYSE a supplemental listing application covering the Common
Stock issuable in the Merger. Prior to the Effective Time, Chateau shall use
its best efforts to have NYSE approve for listing, upon official notice of
issuance, the Common Stock to be issued in the Merger.
SECTION 5.9 Letters of Accountants.
(a) ROC shall use its reasonable best efforts to cause to be
delivered to Chateau and ROC "comfort" letters of Deloitte & Touche LLP, ROC's
independent public accountants, dated and delivered the date on which the
Registration Statement shall become effective and as of the Effective Time,
and addressed to Chateau and ROC, in form and substance reasonably
satisfactory to Chateau and ROC and reasonably customary in scope and
substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement.
43
<PAGE>
(b) Chateau shall use its reasonable best efforts to cause
to be delivered to ROC and Chateau "comfort" letters of Coopers & Lybrand
L.L.P., Chateau's independent public accountants, dated the date on which the
Registration Statement shall become effective and as of the Effective Time,
and addressed to ROC and Chateau, in form and substance reasonably
satisfactory to ROC and Chateau and reasonably customary in scope and
substance for letters delivered by independent public accountants in
connection with transactions such as those contemplated by this Agreement.
SECTION 5.10 Transfer and Gains Taxes. Chateau and ROC shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains (including, without limitation, any New York State Tax on
Gains Derived from Certain Real Property Transfers and New York State Real
Estate Transfer Tax), sales, use, transfer, value added stock transfer and
stamp taxes, any transfer, recording, registration and other fees and any
similar taxes which become payable in connection with the Transactions
(together with any related interests, penalties or additions to tax, "Transfer
and Gains Taxes"). From and after the Effective Time, Chateau shall cause the
Operating Partnership to pay or cause to be paid all Transfer and Gains Taxes.
SECTION 5.11 Benefit Plans and Other Employee Arrangements.
(a) Benefit Plans. Subject to subsections (b) and (c) below,
upon and after the Effective Time, Chateau or the Operating Partnership (or
their respective successors or assigns) shall provide benefits to former
employees of ROC and its Subsidiaries that are not materially less favorable
in the aggregate to such employees than those provided under the ROC Benefit
Plans, as in effect on the date of this Agreement. With respect to any Chateau
Benefit Plan which is an "employee benefit plan" as defined in Section 3(3) of
ERISA in which employees of ROC or its Subsidiaries may participate, solely
for purposes of determining eligibility to participate, vesting and
entitlement to benefits but not for purposes of accrual of pension benefits,
service with ROC or its Subsidiaries shall be treated as service with Chateau
or the Operating Partnership, as the case may be; provided, however, that such
service shall not be recognized to the extent that such recognition would
result in a duplication of benefits under both a ROC Benefit Plan or a Chateau
Benefit Plan, on the one hand, and a benefit plan of Chateau, on the other
hand (or is not otherwise recognized for such purposes under the benefit plans
of Chateau or the Operating Partnership).
(b) Stock Incentive Plans.
(i) Immediately prior to or as of the Effective Time and
solely with respect to individuals employed by ROC immediately prior to the
Effective Time, ROC shall cause the ROC Stock Options to be accelerated,
thereby causing the ROC Stock Options to be fully vested and immediately
exercisable and solely
44
<PAGE>
with respect to individuals employed by Chateau or the Operating Partnership
immediately prior to that date, Chateau shall cause the Chateau Stock Options
to be accelerated, thereby causing the Chateau Stock Options to be fully
vested and immediately exercisable.
(ii) As of the Effective Time, each outstanding ROC
Stock Option shall be assumed by Chateau and shall be deemed to constitute an
option to acquire, on the same terms and conditions as were applicable under
such ROC Stock Option, the same number of shares of Common Stock as the holder
of such ROC Stock Option would have been entitled to receive pursuant to the
Merger had such holder exercised such ROC Stock Option in full immediately
prior to the Effective Time at a price per share equal to the aggregate
exercise price for the shares subject to such ROC Stock Option divided by the
number of full shares of Common Stock deemed to be purchasable pursuant to
such ROC Stock Option; provided, however, that the number of shares of Common
Stock that may be purchased upon exercise of such ROC Stock Option shall not
include any fractional share but shall be rounded upward to the next whole
number of shares.
(iii) At the Effective Time, Chateau shall adopt a new
long-term stock incentive plan (the "1996 Chateau Plan") to be administered by
a committee appointed by the Board of Directors. The 1996 Chateau Plan shall
provide for grants of restricted stock, options and other incentive
compensation to key employees and directors of Chateau and its Subsidiaries
(after giving effect to the Merger as provided more fully in Exhibit G
hereto).
(c) Employment Agreements. Chateau shall prepare and execute
the Employment Agreements for the executive officers named in Section 1.6
prior to the Effective Time, which Employment Agreements shall provide that
they shall become effective at the Effective Time.
(d) Cooperation. ROC and Chateau shall cooperate in good
faith with respect to the effectuation of the covenants described in
subsections (b) and (c) above.
SECTION 5.12 Indemnification.
(a) (i) ROC shall, and, from and after the Effective Time,
Chateau shall, indemnify, defend and hold harmless each person who is now or
has been at any time prior to the date hereof or who becomes prior to the
Effective Time, an officer or director of ROC or any ROC Subsidiary (the "ROC
Indemnified Parties") against all losses, claims, damages, costs, expenses
(including attorneys' fees and expenses), liabilities or judgments or amounts
that are paid in settlement of, with the approval of the indemnifying party
(which approval shall not be unreasonably withheld), or otherwise in
connection with any threatened or actual claim, action, suit, proceeding or
investigation in connection with any threatened or actual claim, action, suit,
proceeding or investigation based on or arising out of the fact that such
person
45
<PAGE>
is or was a director or officer of ROC or any ROC Subsidiary at or prior to
the Effective Time, whether asserted or claimed prior to, or at or after, the
Effective Time ("ROC Indemnified Liabilities"), including all ROC Indemnified
Liabilities based on, or arising out of, or pertaining to this Agreement or
the Transactions, in each case to the full extent a corporation is permitted
under the MGCL to indemnify its own directors or officers, as the case may be
(and ROC or Chateau, as the case may be, will pay expenses in advance of the
final disposition of any such action or proceeding to each ROC Indemnified
Party to the full extent permitted by law subject to the limitations set forth
in Section 5.12(a)(iii)). Chateau shall, prior to and after the Effective
Time, indemnify, defend and hold harmless each person who is now or has been
at any time prior to the date hereof or who becomes prior to the Effective
Time, an officer or director of Chateau or any Chateau Subsidiary (the
"Chateau Indemnified Parties" and, together with the ROC Indemnified Parties,
the "Indemnified Parties") against all losses, claims, damages, costs,
expenses (including attorneys' fees and expenses), liabilities or judgments or
amounts that are paid in settlement of, with the approval of the indemnifying
party (which approval shall not be unreasonably withheld), or otherwise in
connection with any threatened or actual claim, action, suit, proceeding or
investigation in connection with any threatened or actual claim, action, suit,
proceeding or investigation based on or arising out of the fact that such
person is or was a director or officer of Chateau or any Chateau Subsidiary at
or prior to the Effective Time, whether asserted or claimed prior to, or at or
after, the Effective Time ("Chateau Indemnified Liabilities" and, together
with the ROC Indemnified Liabilities, the "Indemnified Liabilities"),
including all Chateau Indemnified Liabilities based on, or arising out of, or
pertaining to this Agreement or the Transactions, in each case to the full
extent a corporation is permitted under the MGCL to indemnify its own
directors or officers, as the case may be (and Chateau will pay expenses in
advance of the final disposition of any such action or proceeding to each
Chateau Indemnified Party to the full extent permitted by law subject to the
limitations set forth in Section 5.12(a)(iii)).
(ii) Any Indemnified Parties proposing to assert the
right to be indemnified under this Section 5.12 shall, promptly after receipt
of notice of commencement of any action against such Indemnified Parties in
respect of which a claim is to be made under this Section 5.12 against ROC
and/or Chateau (collectively, the "Indemnifying Parties"), notify the
Indemnifying Parties of the commencement of such action, enclosing a copy of
all papers served. If any such action is brought against any of the
Indemnified Parties and such Indemnified Parties notify the Indemnifying
Parties of its commencement, the Indemnifying Parties will be entitled to
participate in and, to the extent that they elect by delivering written notice
to such Indemnified Parties promptly after receiving notice of the
commencement of the action from the Indemnified Parties, to assume the defense
of the action and after notice from the Indemnifying Parties to the
Indemnified Parties of their election to assume the defense, the Indemnifying
Parties will not be liable to the Indemnified Parties for any legal or other
46
<PAGE>
expenses except as provided below and except for the reasonable costs of
investigation subsequently incurred by the Indemnified Parties in connection
with the defense. If the Indemnifying Parties assume the defense, the
Indemnifying Parties shall have the right to settle such action without the
consent of the Indemnified Parties; provided, however, that the Indemnifying
Parties shall be required to obtain such consent (which consent shall not be
unreasonably withheld) if the settlement includes any admission of wrongdoing
on the part of the Indemnified Parties or any decree or restriction on the
Indemnified Parties or their officers or directors; provided, further, that no
Indemnifying Parties, in the defense of any such action shall, except with the
consent of the Indemnified Parties (which consent shall not be unreasonably
withheld), consent to entry of any judgment or enter into any settlement that
does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Parties of a release from all liability with
respect to such action. The Indemnified Parties will have the right to employ
their own counsel in any such action, but the fees, expenses and other charges
of such counsel will be at the expense of such Indemnified Parties unless (i)
the employment of counsel by the Indemnified Parties has been authorized in
writing by the Indemnifying Parties, (ii) the Indemnified Parties have
reasonably concluded (based on advice of counsel) that there may be legal
defenses available to them that are different from or in addition to those
available to the Indemnifying Parties, (iii) a conflict or potential conflict
exists (based on advice of counsel to the Indemnified Parties) between the
Indemnified Parties and the Indemnifying Parties (in which case the
Indemnifying Parties will not have the right to direct the defense of such
action on behalf of the Indemnified Parties) or (iv) the Indemnifying Parties
have not in fact employed counsel to assume the defense of such action within
a reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the Indemnifying Parties.
(iii) It is understood that the Indemnifying Parties
shall not, in connection with any proceeding or related proceedings in the
same jurisdiction, be liable for the reasonable fees, disbursements and other
charges of more than one separate firm admitted to practice in such
jurisdiction at any one time for all such Indemnified Parties unless (a) the
employment of more than one counsel has been authorized in writing by the
Indemnifying Parties, (b) any of the Indemnified Parties have reasonably
concluded (based on advice of counsel) that there may be legal defenses
available to them that are different from or in addition to those available to
other Indemnified Parties or (c) a conflict or potential conflict exists
(based on advice of counsel to the Indemnified Parties) between any of the
Indemnified Parties and the other Indemnified Parties, in each case of which
the Indemnifying Parties shall be obligated to pay the reasonable fees and
expenses of such additional counsel or counsels.
47
<PAGE>
(iv) The Indemnifying Parties will not be liable for any
settlement of any action or claim effected without their written consent
(which consent shall not be unreasonably withheld).
(v) Chateau shall cause ROC's current officers' and
directors' liability insurance to be continuously maintained in full force and
effect without reduction of coverage for a period of four years after the
Effective Time (provided that Chateau may substitute therefor policies of at
least the same coverage and amounts containing terms and conditions which are
not materially less advantageous).
(b) The provisions of this Section 5.12 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party, his
or her heirs and his or her personal representatives and shall be binding on
all successors and assigns of Chateau and ROC.
SECTION 5.13 Operating Partnership Agreement Amendment.
Chateau hereby agrees that, immediately prior to the Effective Time, it shall
have duly executed and delivered the Operating Partnership Agreement
Amendment.
SECTION 5.14 By-laws Amendment. Chateau will, prior to the
Effective Time, adopt the By-law amendments to be effected at the Effective
Time, as contemplated by Exhibit F.
SECTION 5.15 Contribution Agreement. Immediately following
the Effective Time, Chateau, ROC and the Operating Partnership shall execute
and deliver the Contribution Agreement and shall perform their respective
obligations thereunder.
SECTION 5.16 Private Placement of Common Stock of RSub. ROC
shall use its best efforts to cause 120 "accredited investors" (as defined in
Rule 501(a) under the Securities Act) to purchase, on or prior to the
Effective Date, one share each of RSub Common Stock, at a purchase price of
$100 per share.
SECTION 5.17 Chateau Board of Directors. Chateau covenants
that, contemporaneously with the Effective Time, (i) two of the seven
directors of Chateau then in office shall resign from the Chateau Board of
Directors and, in accordance with the By-law amendments specified in Exhibit
F, the remaining Chateau directors then in office shall increase the size of
the Chateau Board from seven to ten directors, and (ii) the five vacancies on
the Chateau Board shall be filled by the vote of the remaining Chateau
directors then in office with five nominees selected by the ROC Board of
Directors such that such five nominees as well as the five directors of
Chateau then in office shall constitute all of the members of the Chateau
Board of Directors at the Effective Time.
SECTION 5.18 Provisions Relating to Certain ROC
Indebtedness. Notwithstanding any other provision of this Agreement, ROC and
Chateau shall be required to utilize reasonable efforts and to cooperate with
each other to cause the condition
48
<PAGE>
specified in Section 6.2(f) to be satisfied on or prior to the Closing Date.
SECTION 5.19 Exemptions from Certain Provisions of the MGCL.
Prior to the Effective Time, the Board of Directors of Chateau shall adopt an
irrevocable resolution to the effect that the ROC Principals and the present
or future affiliates or associates of any of the foregoing or any other person
acting in concert or as a group with any of the foregoing shall be exempted
from the business combination provisions of Section 3-601 et seq. and from the
control share provisions of Section 3-701 et seq. of the MGCL or any successor
or similar statutory provisions.
SECTION 5.20 Percentage Ownership. Chateau agrees that, upon
consummation of the Merger, stockholders of Chateau who had been or are then
holders of OP Units will not then represent more than 34.0% of the outstanding
shares of Common Stock.
SECTION 5.21 Share Issuance. (a) ROC agrees that prior to
January 17, 1997 and for the period during the term of this Agreement
occurring after the date of the ROC Stockholders Meeting, it will not issue
any shares of capital stock in a cash transaction as provided in Section
4.1(b)(iv) unless it first obtains the prior consent of Chateau (which consent
shall not be unreasonably withheld or delayed).
(b) Following January 17, 1997 (but only on a date that is
on or prior to the date of the ROC Stockholders Meeting), ROC may issue such
shares without obtaining the consent of Chateau. However, prior to effecting
such issuance, ROC shall notify Chateau of its intention to effect the
issuance, specifying in such notice (the "Issuance Notice") the number and
minimum price of the shares it proposes to issue, and such issuance may give
rise to termination rights in favor of Chateau as specified in Section 8.1(n).
ARTICLE VI
Conditions Precedent
SECTION 6.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligation of ROC and Chateau to effect the Merger
and to consummate the other Transactions contemplated to occur on the Closing
Date is subject to the satisfaction or waiver on or prior to the Effective
Time of the following conditions:
(a) Stockholder Approval. The Stockholder Approvals shall
have been obtained.
(b) Listing of Shares. The NYSE shall have approved for
listing the Common Stock to be issued in the Merger.
(c) Registration Statement. The Registration Statement shall
have become effective under the Securities Act and shall not
49
<PAGE>
be the subject of any stop order or proceedings by the SEC seeking a stop
order.
(d) No Injunctions or Restraints. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court
of competent jurisdiction or other legal restraint or prohibition preventing
the consummation of the Merger or any of the other Transactions shall be in
effect.
(e) Blue Sky Laws. Chateau shall have received all state
securities or "blue sky" permits and other authorizations necessary to issue
the shares of Common Stock comprising the Merger Consideration.
(f) Opinion Related to REIT Status. Chateau and ROC shall
have received an opinion dated as of the Closing Date of Timmis & Inman,
subject to certificates, letters and assumptions, reasonably satisfactory to
Chateau and ROC that following the Merger (after giving effect thereto),
Chateau's proposed method of operation will enable it to meet the requirements
for qualification and taxation as a REIT under the Code.
(g) The Investment Company Act Opinion. Chateau and ROC
shall have received an opinion dated as of the Closing Date of Rogers & Wells,
subject to certificates, letters and assumptions, reasonably satisfactory to
Chateau and ROC, to the effect that neither Chateau nor any of its
Subsidiaries is an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company Act
of 1940, as amended.
(h) Evidence of Completion of Private Placement. Each of ROC
and Chateau shall have received reasonably satisfactory evidence of the
completion of the Private Placement referred to in Section 5.16.
(i) Certain Actions and Consents. All material actions by or
in respect of or filings with any Governmental Entity required for the
consummation of the Transactions shall have been obtained or made.
SECTION 6.2 Conditions to Obligations of Chateau. The
obligations of Chateau to issue the Merger Consideration to the ROC
stockholders and to consummate the other Transactions contemplated to occur on
the Closing Date are further subject to the following conditions, any one or
more of which may be waived by Chateau:
(a) Representations and Warranties. The representations and
warranties of ROC (without giving effect to any "materiality" qualification or
limitation) set forth in this Agreement shall be true and correct as of the
Closing Date, as though made on and as of the Closing Date, except to the
extent the representation or warranty is expressly limited by its terms to
another date, and Chateau shall have received a certificate (which certificate
may be qualified by knowledge to the same extent as such representations
50
<PAGE>
and warranties are so qualified) signed on behalf of ROC by the chief
executive officer or the chief financial officer of ROC to such effect. This
condition shall be deemed satisfied notwithstanding any failure of a
representation or warranty of ROC to be true and correct as of the Closing
Date (without giving effect to any materiality qualification) if the aggregate
amount of Economic Losses (as defined below) that would reasonably be expected
to arise as a result of the failures of such representations and warranties to
be true and correct as of the Closing Date does not exceed $5,000,000 (such
amount to be calculated by counting in all cases from the first dollar of such
Economic Losses without giving effect to the $5,000,000 limitation set forth
in Section 3.1(f)). "Economic Losses," as used in this Section 6.2, shall mean
any and all net damage, net loss (including diminution in the value of
properties or assets which diminution, with regard to permanent cash flow
losses from any property or assets that produces cash flow, shall be measured
by multiplying the annual net cash flow produced by such property or asset
over the 12-month period preceding the date of the applicable loss by a factor
of 10), net liability or expense suffered by ROC and the ROC Subsidiaries
taken as a whole, but shall not include any claims, damages, loss, expense or
other liability resulting from any class action or stockholders' derivative
lawsuits relating to the Transactions against ROC, if any, filed subsequent to
the date of this Agreement or any amounts paid or expenses incurred by ROC in
obtaining non-governmental third party consents, as contemplated by Section
5.3 up to the amount of $500,000 provided therein.
(b) Performance of Obligations of ROC. ROC shall have
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Effective Time, and Chateau shall
have received a certificate signed on behalf of ROC by the chief executive
officer or the chief financial officer of ROC to such effect.
(c) Material Adverse Change. Since the date of this
Agreement, there has been no material adverse change in the business, results
of operations or financial condition of ROC and the ROC Subsidiaries, taken as
a whole, that have resulted or would result, individually or in the aggregate,
in Economic Losses of $5,000,000 or more. Chateau shall have received a
certificate of the chief executive officer or chief financial officer of ROC
to the effect that there has been no such material adverse change.
(d) Opinions Relating to REIT Status. Chateau shall have
received an opinion dated as of the Closing Date of Rogers & Wells, subject to
certificates, letters and assumptions, reasonably satisfactory to Chateau,
that (i) commencing with its taxable year ended December 31, 1993, ROC was
organized and has operated in conformity with the requirements for
qualification as a REIT within the meaning of the Code, (ii) following the
Merger (after giving effect thereto), ROC's proposed method of operation will
enable it to meet the requirements for qualification and taxation as a REIT
under the Code and (iii) following the Merger (after giving effect thereto),
the Financing Partnership will be treated for federal
51
<PAGE>
income tax purposes as a partnership and not as a corporation or an
association taxable as a corporation.
(e) Other Tax Opinion. Chateau shall have received an
opinion dated as of the Closing Date from Rogers & Wells, subject to
certificates, letters and assumptions, reasonably satisfactory to Chateau, to
the effect that the Merger will be treated for federal income tax purposes as
a tax-free transfer by the stockholders of ROC of their shares of ROC Stock to
Chateau in exchange for shares of Common Stock, and the transfer by holders of
OP Units pursuant to the CS Letter Agreement (as defined below) shall be
treated for federal income tax purposes as a tax-free transfer by such holders
of their OP Units in exchange for shares of Common Stock under Section 351 of
the Code, and no gain or loss will be recognized by ROC, its stockholders or
such holders who transfer OP Units pursuant to the CS Letter Agreement as a
result of such transfers, except to the extent provided in Sections 357(c) and
1245 of the Code.
(f) Consents. All consents and waivers from third parties
necessary in connection with the consummation of the Transactions shall have
been obtained, other than such consents and waivers from third parties, which,
if not obtained, would not result, individually or in the aggregate, in
Economic Losses of $5,000,000 or more.
(g) Certain ROC Indebtedness. The Specified Debt Obligations
(as herein defined) of ROC or any ROC Subsidiary that are outstanding
immediately prior to the Effective Time, and will remain outstanding and shall
be assumed by, or otherwise become the indebtedness of, the Operating
Partnership or the Financing Partnership, as the case may be, upon
consummation of the transactions contemplated by the Contribution Agreement,
will, following such transactions, provide by their respective terms to the
effect that neither ROC, Chateau nor any partner of the Financing Partnership
(other than the Operating Partnership) or the Operating Partnership will have
any liability for the repayment of the Specified Debt Obligations. For
purposes hereof, "Specified Debt Obligation" shall include the indebtedness
owed by ROC or any ROC Subsidiary under the Credit Agreement (Revolving) or
Credit Agreement (Term), dated as of May 2, 1996, with each of the lenders
named therein or under any credit agreements with Pacific Mutual Insurance
Company.
Notwithstanding the foregoing, Chateau shall not be
obligated to effect the Merger if the Economic Losses resulting from the
failure of one or more of the conditions set forth in Sections 6.2(a), 6.2(c)
and 6.2(f) to be satisfied (the determination of whether a failure of any of
such conditions has occurred for the purposes of this sentence being made
without giving effect to the $5,000,000 limitations set forth in such
sections), in the aggregate, but without duplication exceeds $5,000,000.
52
<PAGE>
SECTION 6.3 Conditions to Obligation of ROC. The obligation
of ROC to effect the Merger and to consummate the other Transactions
contemplated to occur on the Closing Date is further subject to the following
conditions, any one or more of which may be waived by ROC:
(a) Representations and Warranties. The representations and
warranties of Chateau (without giving effect to any "materiality"
qualification or limitation) set forth in this Agreement shall be true and
correct as of the Closing Date, as though made on and as of the Closing Date,
except to the extent the representation or warranty is expressly limited by
its terms to another date, and ROC shall have received a certificate (which
certificate may be qualified by knowledge to the same extent as such
representations and warranties are so qualified) signed on behalf of Chateau
by the chief executive officer or the chief financial officer of Chateau to
such effect. This condition shall be deemed satisfied notwithstanding any
failure of a representation or warranty of Chateau to be true and correct as
of the Closing Date (without giving effect to any materiality qualification)
if the aggregate amount of Economic Losses (as defined below) that would
reasonably be expected to arise as a result of the failures of such
representations and warranties to be true and correct as of the Closing Date
does not exceed $5,000,000 (such amount to be calculated by counting in all
cases from the first dollar of such Economic Losses without giving effect to
the $5,000,000 limitation set forth in Section 3.2(f)). "Economic Losses," as
used in this Section 6.3, shall mean any and all net damage, net loss
(including diminution in the value of properties or assets which diminution,
with regard to permanent cash flow losses from any property or assets that
produces cash flow, shall be measured by multiplying the annual net cash flow
produced by such property or asset over the 12-month period preceding the date
of the applicable loss by a factor of 10), net liability or expense suffered
by Chateau or the Chateau Subsidiaries taken as a whole, but shall not include
any claims, damages, loss, expense or other liability resulting from any class
action or stockholders' derivative lawsuits relating to the Transactions
against Chateau, if any, filed subsequent to the date of this Agreement or any
amounts paid or expenses incurred by Chateau in obtaining non-governmental
third party consents, as contemplated by Section 5.3 up to the amount of
$500,000 provided therein.
(b) Performance of Obligations of Chateau. Chateau shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time, and
ROC shall have received a certificate of Chateau signed on behalf of Chateau
by the chief executive officer or the chief financial officer of such party to
such effect.
(c) Material Adverse Change. Since the date of this
Agreement, there has been no material adverse change in the business, results
of operations or financial condition of Chateau, the Operating Partnership and
the other Chateau Subsidiaries taken as a whole, that have resulted or would
result, individually or in
53
<PAGE>
the aggregate, in Economic Losses of $5,000,000 or more. ROC shall have
received a certificate of the chief executive officer or chief financial
officer of Chateau to the effect that there has been no such material adverse
change.
(d) Opinions Relating to REIT and Partnership Status. ROC
shall have received an opinion dated as of the Closing Date of Timmis & Inman,
subject to certificates, letters and assumptions, reasonably satisfactory to
ROC, that (i) commencing with its taxable year ended December 31, 1993,
Chateau was organized and has operated in conformity with the requirements for
qualification as a REIT within the meaning of the Code and (ii) the Operating
Partnership has been at all times (and each Chateau Subsidiary organized as a
partnership, joint venture or limited liability company has since its
acquisition by Chateau) and, following the Merger (after giving effect
thereto), will be treated as a partnership for federal income tax purposes and
not as a corporation or an association taxable as a corporation.
(e) Other Tax Opinion. ROC shall have received an opinion
dated as of the Closing Date from Timmis & Inman, subject to certificates,
letters and assumptions, reasonably satisfactory to ROC, to the effect that
the Merger will be treated for federal income tax purposes as a tax-free
transfer by the stockholders of ROC of their shares of ROC Stock to Chateau in
exchange for shares of Common Stock, and the transfer by holders of OP Units
pursuant to the CS Letter Agreement shall be treated for federal income tax
purposes as a tax-free transfer by such holders of their OP Units in exchange
for shares of Common Stock, under Section 351 of the Code, and no gain or loss
will be recognized by ROC, its stockholders or holders who transfer OP Units
pursuant to the CS Letter Agreement as a result of such transfers, except to
the extent provided in Sections 357(c) or 1245 of the Code.
(f) Consents. All consents and waivers from third parties
necessary in connection with the consummation of the Transactions shall have
been obtained, other than such consents and waivers from third parties, which,
if not obtained, would not result, individually or in the aggregate, in
Economic Losses of $5,000,000 or more.
(g) Registration Rights Agreement. Chateau shall have duly
executed and delivered the Registration Rights Agreement substantially in the
form attached as Exhibit C hereto.
(h) Chateau By-laws and Related Matters. ROC shall be
reasonably satisfied that the Chateau By-laws, effective at the Effective
Time, have been amended substantially in accordance with the terms outlined in
Exhibit F hereto and that all of the other transactions contemplated by
Sections 1.5 and 1.6 hereof shall have been completed or will be completed
effective at the Effective Time.
(i) Chateau Securityholder Letter Agreement. Holders of OP
Units who, together with the ROC stockholders and other
54
<PAGE>
transferors, will satisfy the 80% test described below upon completion of the
Merger (such OP Unit holders being referred to herein as the "Transferring
Holders"), shall have entered into a letter agreement with ROC (the "CS Letter
Agreement"), pursuant to which such Transferring Holders will agree with ROC
to act with ROC, the ROC stockholders and other transferors specified in the
CS Letter Agreement to transfer to Chateau on or prior to the Effective Time a
sufficient number of OP Units and other property in exchange for shares of
Common Stock such that such shares when taken together with the number of
shares of Common Stock to be issued to the ROC stockholders pursuant to the
Merger and the number of shares of Common Stock owned by such Transferring
Holders and any other transferors making transfers pursuant to the CS Letter
Agreement will together constitute, based on the number of outstanding shares
of capital stock of Chateau expected by the Transferring Holders to be
outstanding at the Effective Time (which number shall be specified in the CS
Letter Agreement), at least 80% of the total combined voting power of all
classes of Chateau stock entitled to vote upon consummation of the Merger.
Each Transferring Holder shall agree in the CS Letter Agreement to exchange
(i) a specified number of OP Units at or prior to the record date for the
Chateau Stockholders Meeting and (ii) a specified number of OP Units on the
Effective Day of the Merger. The CS Letter Agreement shall provide that the
obligation of any Transferring Holder to transfer any OP Units to Chateau
shall be conditioned upon (x) the obtainment of the ROC Stockholder Approval
and (y) the delivery, prior to the date of exchange, of an opinion of Timmis &
Inman, subject to certificates, letters and assumptions deemed reasonably
appropriate by such counsel, to the effect that the transfer of OP Units
pursuant to the CS Letter Agreement shall be treated for federal income tax
purposes as a tax-free transfer by such transferors of such OP Units in
exchange for shares of Common Stock under Section 351 of the Code and no gain
or loss will be recognized as a result of such transfers, except to the extent
provided under Sections 357(c) or 1245 of the Code (an approved form of which
opinion shall be attached to the CS Letter Agreement). The CS Letter Agreement
shall further provide that the obligation of any Transferring Holder to
transfer any OP Units to Chateau on the Effective Day shall be conditioned
upon the concurrent consummation of the Merger. Further, John Boll, Edward
Allen and C.G. Kellogg shall agree in the CS Letter Agreement with Gary P.
McDaniel that, for a period of three years following the Effective Time, they
will vote all shares of Common Stock held by them in favor of the Group B
nominees as specified in the amendments to the By-laws to be adopted in
accordance with Exhibit F hereto.
Notwithstanding the foregoing, ROC shall not be obligated to
effect the Merger if the Economic Losses resulting from the failure of one or
more of the conditions set forth in Sections 6.3(a), 6.3(c) and 6.3(f) to be
satisfied (the determination of whether a failure of any of such conditions
has occurred for the purposes of this sentence being made without giving
effect to the $5,000,000 limitations set forth in such sections), in the
aggregate, but without duplication exceeds $5,000,000.
55
<PAGE>
ARTICLE VII
Board Actions
SECTION 7.1 Board Actions. Notwithstanding Section 5.7 or
any other provision of this Agreement to the contrary, to the extent required
by the fiduciary obligations of the Board of Directors of either Chateau or
ROC, as determined in good faith based on the advice of outside counsel,
either Chateau or ROC may:
(a) disclose to its stockholders and OP Unit holders any
information required to be disclosed under applicable law;
(b) in response to an unsolicited request therefor,
participate in discussions or negotiations with, or furnish information with
respect to itself pursuant to a confidentiality agreement no less favorable to
itself than the Confidentiality Agreement (as determined by its outside
counsel) to, any person in connection with a Competing Transaction proposed by
such person; and
(c) approve or recommend (and in connection therewith
withdraw or modify its approval or recommendation of (i) for ROC, this
Agreement and the Merger and (ii) for Chateau, the issuance of the Merger
Consideration to the ROC stockholders in the Merger) a Superior Competing
Transaction (as defined below) or enter into an agreement with respect to such
Superior Competing Transaction (for purposes of this Agreement, "Superior
Competing Transaction" means a bona fide proposal of a Competing Transaction
made by a third party which a majority of the members of the Board of
Directors of Chateau or ROC, as the case may be, determines in good faith
(based on the advice of its investment banking firm) to be more favorable to
its stockholders than the Merger, as the case may be.
ARTICLE VIII
Termination, Amendment and Waiver
SECTION 8.1 Termination. This Agreement may be terminated at
any time prior to the filing of the Articles of Merger for the Merger with the
Department of Assessments and Taxation of the State of Maryland, whether
before or after either of the Stockholder Approvals are obtained:
(a) by mutual written consent duly authorized by the
respective Boards of Directors of Chateau and ROC;
(b) by Chateau, upon a breach of any representation,
warranty, covenant or agreement on the part of ROC set forth in this
Agreement, or if any representation or warranty of ROC shall have become
untrue, in either case such that the conditions set forth in Section 6.2(a) or
Section 6.2(b), as the case may be,
56
<PAGE>
would be incapable of being satisfied by March 31, 1997 (as otherwise
extended);
(c) by ROC, upon a breach of any representation, warranty,
covenant or agreement on the part of Chateau set forth in this Agreement, or
if any representation or warranty of Chateau shall have become untrue, in
either case such that the conditions set forth in Section 6.3(a) or Section
6.3(b), as the case may be, would be incapable of being satisfied by March 31,
1997 (as otherwise extended);
(d) by either Chateau or ROC, if any judgment, injunction,
order, decree or action by any Governmental Entity of competent authority
preventing the consummation of the Merger shall have become final and
nonappealable;
(e) by either Chateau or ROC, if the Merger shall not have
been consummated before March 31, 1997; provided, however, that a party that
has willfully and materially breached a representation, warranty or covenant
of such party set forth in this Agreement shall not be entitled to exercise
its right to terminate under this Section 8.1(e);
(f) by either Chateau or ROC if, upon a vote at a duly held
ROC Stockholders Meeting or any adjournment thereof, the ROC Stockholder
Approvals shall not have been obtained as contemplated by Section 5.1;
(g) by either Chateau or ROC if, upon a vote at a duly held
Chateau Stockholders Meeting or any adjournment thereof, the Chateau
Stockholder Approvals shall not have been obtained as contemplated by Section
5.1;
(h) by ROC if prior to the ROC Stockholders Meeting, the
Board of Directors of ROC or any committee thereof shall have withdrawn or
modified in accordance with Section 7.1 hereof in any manner adverse to
Chateau its approval or recommendation of the Merger or this Agreement in
connection with the approval and recommendation of a Superior Competing
Transaction;
(i) by Chateau if (i) prior to the ROC Stockholders Meeting,
the Board of Directors of ROC or any committee thereof shall have withdrawn or
modified in any manner adverse to Chateau its approval or recommendation of
the Merger or this Agreement in connection with, or approved or recommended,
any Superior Competing Transaction, (ii) ROC shall have entered into any
agreement with respect to any Competing Transaction (other than a
confidentiality agreement as contemplated by Section 7.1(b)) or (iii) the
Board of Directors of ROC or any committee thereof shall have resolved to do
any of the foregoing;
(j) by Chateau if prior to the Chateau Stockholders Meeting,
the Board of Directors of Chateau or any committee thereof shall have
withdrawn or modified in accordance with Section 7.1 hereof in any manner
adverse to ROC its approval or recommendation
57
<PAGE>
of the issuance of the Merger Consideration to the ROC stockholders in
connection with the approval and recommendation of a Superior Competing
Transaction;
(k) by ROC if (i) prior to the Chateau Stockholders Meeting,
the Board of Directors of Chateau or any committee thereof shall have
withdrawn or modified in any manner adverse to ROC its approval or
recommendation of the issuance of the Merger Consideration to the ROC
stockholders in connection with, or approved or recommended, a Superior
Competing Transaction, (ii) Chateau shall have entered into any agreement with
respect to any Competing Transaction (other than a confidentiality agreement
as contemplated by Section 7.1(b)) or (iii) the Board of Directors of Chateau
or any committee thereof shall have resolved to do any of the foregoing;
(l) by ROC or Chateau if, over any consecutive 20-Trading
Day (as herein defined) period ending prior to the first date of the mailing
of the Proxy Statement to the respective stockholders of ROC and Chateau, the
average of the ratios determined by comparing the Closing Price (as herein
defined) of the ROC Common Stock to the Closing Price of the Common Stock on
each day over such period is more than 1.20 to one or less than 0.89 to one,
and the party desiring such termination provides notice to the other party
within three business days of the end of such consecutive 20-Trading Day
period but in no event later than the date of the mailing; provided, however,
that the right of either of Chateau or ROC to terminate this Agreement under
this Section 8.1(l) shall not be available if, at the time such party proposes
to exercise such termination right, such party has received a bona fide
proposal for a Competing Transaction. For purposes hereof, "Trading Day" shall
mean a day on which the NYSE is open for trading, and "Closing Price" shall
mean the last reported sale price per share of the ROC Common Stock or Common
Stock, as the case may be, as reported on the NYSE consolidated tape on the
Trading Day in question;
(m) by ROC if the condition specified in Section 6.3(i) has
not been satisfied on or prior to the later of November 16, 1996 or ten days
after the SEC has cleared the Proxy Statement for mailing, or if on or prior
to the record date for the Chateau Stockholders Meeting any of the
Transferring Holders that have executed the CS Letter Agreement has failed to
exchange the shares it has agreed to exchange under such agreement and such
shares have not been replaced by shares held by other OP Unit holders; and
(n) by Chateau if (i) within five business days after ROC
delivers the Issuance Notice as contemplated by Section 5.21, Chateau provides
written notice to ROC to the effect that if ROC proceeds with the issuance
contemplated by the Issuance Notice Chateau will terminate this Agreement,
(ii) ROC, in spite of such notice from Chateau, proceeds with the issuance,
and (iii) Chateau notifies ROC in writing of the termination of this Agreement
within five business days after ROC notifies Chateau of the closing of the
issuance.
58
<PAGE>
SECTION 8.2 Expenses.
(a) Except as otherwise specified in this Section 8.2 or
agreed in writing by the parties, all out-of-pocket costs and expenses
incurred in connection with this Agreement and the Transactions contemplated
hereby shall be paid by the party incurring such cost or expense.
(b) ROC agrees that if this Agreement shall be terminated
pursuant to Section 8.1(b), then ROC will pay to the Operating Partnership, or
as directed by the Operating Partnership, an amount equal to the Chateau
Break-Up Expenses (as defined below). In addition, ROC agrees that if this
Agreement shall be terminated pursuant to Section 8.1(b), (f), (h) or (i) and,
in the case of Section 8.1(b) or (f), following the date of the Original
Agreement and prior to termination of this Agreement, ROC shall have received
a proposal constituting a Competing Transaction and within 12 months following
termination ROC shall enter into a definitive agreement providing for a
Competing Transaction that is equally or more favorable from a financial point
of view to ROC's stockholders as the Merger, then ROC will pay as directed by
the Operating Partnership a fee in an amount equal to the Chateau Break-Up Fee
(as defined below). Payment of any of such amounts shall be made, as directed
by the Operating Partnership, by wire transfer of immediately available funds
promptly, but in no event later than two business days after the amount is due
as provided herein. The "Chateau Break-Up Fee" shall be an amount equal to the
lesser of (i) $10,000,000 (the "Base Amount") or (ii) the sum of (A) the
maximum amount that can be paid to the Operating Partnership without causing
Chateau to fail to meet the requirements of Sections 856(c)(2) and (3) of the
Code determined as if the payment of such amount did not constitute income
described in Sections 856(c)(2) and 856(3) of the Code ("Qualifying Income"),
as determined by independent accountants to Chateau and (B) in the event
Chateau receives a letter from outside counsel (the "Chateau Break-Up Fee Tax
Opinion") indicating that Chateau has received a ruling from the IRS holding
that the Operating Partnership's receipt of the Base Amount would either
constitute Qualifying Income as to Chateau with respect to Chateau's
proportionate share thereof or would be excluded from Chateau's gross income
for purposes of Sections 856(c)(2) and (3) of the Code (the "REIT
Requirements") or that the receipt by the Operating Partnership of the
remaining balance of the Base Amount following the receipt of and pursuant to
such ruling would not be deemed constructively received prior thereto, the
Base Amount less the amount payable under clause (A) above. In the event that
the Operating Partnership is not able to receive the full Base Amount, ROC
shall place the unpaid amount in escrow and shall not release any portion
thereof to the Operating Partnership unless and until ROC receives any one or
a combination of the following: (i) a letter(s) from Chateau's independent
accountants indicating the maximum amount that can be paid at that time to the
Operating Partnership without causing Chateau to fail to meet the REIT
Requirements or (ii) a Chateau Break-Up Fee Tax Opinion, in which event ROC
shall pay to the Operating Partnership the lesser of the
59
<PAGE>
unpaid Base Amount or the maximum amount stated in the letter(s) referred to
in (i) above from time to time. ROC's obligation to pay any unpaid portion of
the Chateau Break-Up Fee (provided ROC has otherwise complied with its
obligations under this provision) shall terminate (and any amount still held
in such escrow shall be released to ROC) on the date that is five years from
the date the Chateau Break-Up Fee first becomes due under this Agreement. In
addition, amounts held in escrow may be earlier released as provided in
Section 8.2(c). The "Chateau Break-Up Expenses" shall be an amount equal to
the lesser of (i) the Operating Partnership's out-of-pocket expenses incurred
in connection with the Original Agreement and this Agreement and the other
Transactions (including, without limitation, all attorneys', accountants' and
investment bankers' fees and expenses) but in no event in an amount greater
than $4,000,000 (such amount not to exceed such $4,000,000 being referred to
in this Section 8.2(b) or (c) as the "Expense Fee Base Amount") and (ii) the
sum of (A) the maximum amount that can be paid to the Operating Partnership
without causing Chateau to fail to meet the requirements of Sections 856(c)(2)
and (3) of the Code determined as if the payment of such amount did not
constitute Qualifying Income, as determined by independent accountants to
Chateau and (B) in the event Chateau receives a Chateau Break-Up Fee Tax
Opinion indicating that Chateau has received a ruling from the IRS holding
that the Operating Partnership's receipt of the Expense Fee Base Amount would
either constitute Qualifying Income as to Chateau with respect to Chateau's
proportionate share thereof or would be excluded from Chateau's gross income
for purposes of the REIT Requirements or that receipt by the Operating
Partnership of the remaining balance of the Expense Fee Base Amount following
the receipt of and pursuant to such ruling would not be deemed constructively
received prior thereto, the Expense Fee Base Amount less the amount payable
under clause (A) above. In the event that the Operating Partnership is not
able to receive the full amount of the Chateau Break-Up Expenses, ROC shall
place the unpaid amount in escrow and shall not release any portion thereof to
the Operating Partnership unless and until ROC receives any one or combination
of the following: (i) a letter(s) from Chateau's independent accountants
indicating the maximum amount that can be paid at that time to the Operating
Partnership without causing Chateau to fail to meet the REIT Requirements or
(ii) a Chateau Break-Up Fee Tax Opinion indicating that Chateau's receipt of
the Expense Fee Base Amount would satisfy in whole or in part the REIT
Requirements, in which event ROC shall pay to the Operating Partnership the
lesser of the unpaid Expense Fee Base Amount or the maximum amount stated in
the letter(s) referred to in (i) above from time to time. ROC's obligation to
pay any unpaid portion of the Chateau Break-Up Expenses (provided ROC has
otherwise complied with its obligations under this provision) shall terminate
(and any amount still held in such escrow shall be released to ROC) on the
date that is five years from the date the Chateau Break-Up Expenses first
become due under this Agreement. In addition, amounts held in escrow may be
earlier released as provided in Section 8.2(c).
(c) Notwithstanding anything to the contrary contained in
Section 8.2(b) above, if the Operating Partnership realizes any
60
<PAGE>
Total Profit pursuant to the ROC Option Agreement and at any time or from time
to time the sum of (i) the Total Profit realized by the Operating Partnership,
(ii) the Chateau Break-Up Fee paid to the Operating Partnership and (iii) the
amount of Chateau Break-Up Expenses paid to the Operating Partnership exceeds
the sum of (i) the Base Amount (which amount shall be counted as zero if ROC
has not become obligated to pay the Chateau Break-Up Fee under this Agreement)
and (ii) the Expense Fee Base Amount (which amount shall be counted as zero if
ROC has not become obligated to pay the Chateau Break-Up Expenses under this
Agreement), then the Chateau Break-Up Fee and/or Chateau Break-Up Expenses
shall be reduced (it being agreed that the allocation of the reduction between
the Chateau Break-Up Fee and the Chateau Break-Up Expenses shall be determined
in the discretion of Chateau) by such excess, and the amount, if any, still
held in escrow shall be released from the escrow account to ROC, and the
Operating Partnership shall promptly refund the balance of such excess to ROC.
(d) Chateau agrees that if this Agreement shall be
terminated by ROC pursuant to Section 8.1(m), then Chateau shall pay to ROC up
to $2,000,000 in out-of-pocket expenses incurred in connection with the
Original Agreement, this Agreement or the other Transactions (including,
without limitation, all attorneys', accountants' and investment banking fees
and expenses). Chateau agrees that if this Agreement shall be terminated
pursuant to Section 8.1(c), then Chateau will pay, as directed by ROC, an
amount equal to the ROC Break-Up Expenses (as defined below). In addition,
Chateau agrees that if this Agreement shall be terminated pursuant to Section
8.1(c), (g), (j), (k) or (m) and, in the case of Section 8.1(c), (g) or (m)
within 12 months following termination of this Agreement, Chateau shall enter
into a definitive agreement providing for a Competing Transaction that is
equally or more favorable from a financial point of view to Chateau's
stockholders as the Merger, then Chateau will pay as directed by ROC a fee in
an amount equal to the ROC Break-Up Fee (as defined below). Payment of any of
such amounts shall be made, as directed by ROC, by wire transfer of
immediately available funds promptly, but in no event later than two business
days after the amount is due as provided herein. The "ROC Break-Up Fee" shall
be an amount equal to the lesser of (i) $10,000,000 reduced by the amount, if
any, paid by Chateau to ROC in accordance with the first sentence of this
Section 8.2(d) (the "Base Amount") and (ii) the sum of (A) the maximum amount
that can be paid to ROC without causing it to fail to meet the requirements of
Sections 856(c)(2) and (3) of the Code determined as if the payment of such
amount did not constitute Qualifying Income, as determined by independent
accountants to ROC and (B) in the event ROC receives a letter from outside
counsel (the "ROC Break-Up Fee Tax Opinion") indicating that ROC has received
a ruling from the IRS holding that ROC's receipt of the Base Amount would
either constitute Qualifying Income or would be excluded from gross income for
purposes of Sections 856(c)(2) and (3) of the Code or that the receipt by ROC
of the remaining balance of the Base Amount following the receipt of and
pursuant to such ruling would not be deemed constructively received prior
thereto, the Base Amount less the amount payable
61
<PAGE>
under clause (A) above. In the event that ROC is not able to receive the full
Base Amount, Chateau shall place the unpaid amount in escrow and shall not
release any portion thereof to ROC unless and until Chateau receives any one
or a combination of the following: (i) a letter(s) from ROC's independent
accountants indicating the maximum amount that can be paid at that time to ROC
without causing ROC to fail to meet the REIT Requirements or (ii) a ROC
Break-Up Fee Tax Opinion, in which event Chateau shall pay to ROC the lesser
of the unpaid Base Amount or the maximum amount stated in the letter(s)
referred to in (i) above from time to time. Chateau's obligation to pay the
ROC Break-Up Fee (provided Chateau has otherwise complied with its obligations
under this provision) shall terminate (and any amount still held in such
escrow shall be released to Chateau) on the date that is five years from the
date the ROC Break-Up Fee first becomes due under this Agreement. In addition,
amounts held in escrow may be earlier released as provided in Section 8.2(e).
The "ROC Break-Up Expenses" shall be an amount equal to the lesser of (i)
ROC's out-of-pocket expenses (other than those expenses, if any, reimbursed
under the first sentence of this Section 8.2(d)) incurred in connection with
the Original Agreement and this Agreement and the other Transactions
(including, without limitation, all attorneys', accountants' and investment
bankers' fees and expenses) but in no event in an amount greater than
$4,000,000 (such amount not to exceed such $4,000,000 being referred to in
this Section 8.2(d) or (e) as the "Expense Fee Base Amount") and (ii) the sum
of (A) the maximum amount that can be paid to ROC without causing it to fail
to meet the requirements of Sections 856(c)(2) and (3) of the Code determined
as if the payment of such amount did not constitute Qualifying Income, as
determined by independent accountants to ROC and (B) in the event ROC receives
a ROC Break-Up Fee Tax Opinion indicating that ROC has received a ruling from
the IRS holding that ROC's receipt of the Expense Fee Base Amount would either
constitute Qualifying Income or would be excluded from gross income for
purposes of the REIT Requirements or that receipt by ROC of the remaining
balance of the Expense Fee Base Amount following the receipt of and pursuant
to such ruling would not be deemed constructively received prior thereto, the
Expense Fee Base Amount less the amount payable under clause (A) above. In the
event that ROC is not able to receive the full Expense Fee Base Amount,
Chateau shall place the unpaid amount in escrow and shall not release any
portion thereof to ROC unless and until Chateau receives any one or
combination of the following: (i) a letter(s) from ROC's independent
accountants indicating the maximum amount that can be paid at that time to ROC
without causing ROC to fail to meet the REIT Requirements or (ii) a ROC
Break-Up Fee Tax Opinion indicating that ROC's receipt of the Expense Fee Base
Amount would satisfy in whole or in part the REIT Requirements, in which event
Chateau shall pay to ROC the lesser of the unpaid Expense Fee Base Amount or
the maximum amount stated in the letter(s) referred to in (i) above from time
to time. Chateau's obligation to pay any unpaid portion of the ROC Break-Up
Expenses (provided Chateau has otherwise complied with its obligations under
this provision) shall terminate (and any amount still held in such escrow
shall be released to Chateau) on the date that is five years from the date the
ROC Break-Up Expenses first
62
<PAGE>
become due under this Agreement. In addition, amounts held in escrow may be
earlier released as provided in Section 8.2(e).
(e) Notwithstanding anything to the contrary contained in
Section 8.2(d) above, if ROC realizes any Total Profit pursuant to the Chateau
Option Agreement and at any time or from time to time the sum of (i) the Total
Profit, (ii) ROC Break-Up Fee and (iii) the amount of ROC Break-Up Expenses
exceeds the sum of (i) the Base Amount (which amount shall be counted as zero,
if Chateau has not become obligated to pay the ROC Break-Up Fee under this
Agreement) and (ii) the Expense Fee Base Amount (which amount shall be counted
as zero, if Chateau has not become obligated to pay the ROC Break-Up Expenses
under this Agreement), then the ROC Break-Up Fee and/or the ROC Break-Up
Expenses shall be reduced (it being agreed that the allocation of the
reduction shall be determined in the discretion of ROC) by such excess, and
the amount, if any, still held in escrow shall be released from the escrow
account to Chateau and ROC shall promptly refund the balance of such excess to
Chateau.
(f) In the event that Chateau, the Operating Partnership or
ROC is required to file suit to seek all or a portion of the amounts payable
under this Section 8.2, and such party prevails in such litigation, such party
shall be entitled to all expenses, including attorney's fees and expenses
which it has incurred in enforcing its rights hereunder; provided that such
expenses shall be considered part of out-of-pocket expenses incurred in
connection with this Agreement and the other Transactions within the
definition of Chateau Break-Up Expenses or ROC Break-Up Expenses, as the case
may be.
SECTION 8.3 Effect of Termination. In the event of
termination of this Agreement by either ROC or Chateau as provided in Section
8.1, this Agreement shall forthwith become void and have no effect, without
any liability or obligation on the part of Chateau, or ROC, other than the
last sentence of Section 5.2, Section 8.2, this Section 8.3 and Article IX and
except to the extent that such termination results from a willful breach by a
party of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
SECTION 8.4 Amendment. This Agreement may be amended by the
parties in writing by action of their respective Boards of Directors at any
time before or after any Stockholder Approvals are obtained and prior to the
filing of the Articles of Merger with the Department of Assessments and
Taxation of the State of Maryland; provided, however, that, after the
Stockholder Approvals are obtained, no such amendment, modification or
supplement shall alter the amount or change the form of the consideration to
be delivered to ROC's or Chateau's stockholders or alter or change any of the
terms or conditions of this Agreement if such alteration or change would
adversely affect ROC's stockholders or Chateau's stockholders.
63
<PAGE>
SECTION 8.5 Extension; Waiver. At any time prior to the
Effective Time, each of ROC and Chateau may (a) extend the time for the
performance of any of the obligations or other acts of the other party, (b)
waive any inaccuracies in the representations and warranties of the other
party contained in this Agreement or in any document delivered pursuant to
this Agreement or (c) subject to the proviso of Section 8.4, waive compliance
with any of the agreements or conditions of the other party contained in this
Agreement. Any agreement on the part of a party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party. Any waivers pursuant to clause (c) of the second
preceding sentence (i) of the provisions of Section 4.1(e) may be given in
writing by or on behalf of Chateau by the chief executive officer of Chateau
and (ii) of the provisions of Section 4.2(e) may be given in writing by or on
behalf of ROC by the chief executive officer of ROC. The failure of any party
to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE IX
General Provisions
SECTION 9.1 Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 9.1 shall not limit any covenant or agreement of the
parties which by its terms contemplates performance after the Effective Time.
SECTION 9.2 Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in writing and shall be
deemed given if delivered personally, sent by overnight courier (providing
proof of delivery) to the parties or sent by telecopy (providing confirmation
of transmission) at the following addresses or telecopy numbers (or at such
other address or telecopy number for a party as shall be specified by like
notice):
(a) if to Chateau or RSub, to
Chateau Properties, Inc.
19500 Hall Road
Clinton Township, MI 48038
Attn: C.G. ("Jeff") Kellogg
Fax: (810) 286-1496
with a copy to:
Timmis & Inman L.L.P.
300 Talon Centre
Detroit, MI 48207
Attn: Henry J. Brennan, III
Fax: (313) 396-4229
64
<PAGE>
and
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, NY 10004
Attn: Arthur Fleischer
Fax: (212) 859-4000
(b) if to ROC, to
ROC Communities, Inc.
6430 S. Quebec Street
Englewood, CO 80111
Attn: Gary P. McDaniel
Fax: (303) 741-3715
with a copy to:
Rogers & Wells
200 Park Avenue
New York, NY 10166
Attn: Jay L. Bernstein, Esq.
Fax: (212) 878-8375
SECTION 9.3 Interpretation. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. The table of contents and headings contained in
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation."
SECTION 9.4 Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
SECTION 9.5 Entire Agreement; No Third-Party Beneficiaries.
This Agreement, the Confidentiality Agreement and the other agreements entered
into in connection with the Transactions (a) constitute the entire agreement
and supersedes all prior agreements (including the Original Agreement) and
understandings, both written and oral, between the parties with respect to the
subject matter of this Agreement and, (b) except for the provisions of Article
II, Section 5.11(b) and (d) and Section 5.12, are not intended to confer upon
any person other than the parties hereto any rights or remedies.
SECTION 9.6 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF MARYLAND,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES
OF CONFLICT OF LAWS THEREOF.
65
<PAGE>
SECTION 9.7 Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned or
delegated, in whole or in part, by operation of law or otherwise by any of the
parties without the prior written consent of the other parties. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
SECTION 9.8 Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States located in the State of Maryland or in any Maryland State court,
this being in addition to any other remedy to which they are entitled at law
or in equity. In addition, each of the parties hereto (a) consents to submit
itself (without making such submission exclusive) to the personal jurisdiction
of any federal court located in the State of Maryland or any Maryland State
court in the event any dispute arises out of this Agreement or any of the
Transactions contemplated by this Agreement and (b) agrees that it will not
attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court.
ARTICLE X
Certain Definitions
SECTION 10.1 Certain Definitions. For purposes of this
Agreement:
An "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, such first person.
"Chateau Disclosure Letter" means the letter previously
delivered to ROC by Chateau disclosing certain information in
connection with the Original Agreement.
"Chateau Subsidiary" means the Operating Partnership and
each other Subsidiary of Chateau.
"Financing Partnership" means a newly organized financing
partnership into which the Financing Sub will merge pursuant to the terms of
the Contribution Agreement.
"Financing Sub" means ROCF, Inc., a Maryland corporation.
66
<PAGE>
"Knowledge" where used herein with respect to ROC shall mean
the knowledge of the persons named in Schedule 10 to the ROC Disclosure Letter
and where used with respect to Chateau shall mean the knowledge of the persons
named in Schedule 10 to the Chateau Disclosure Letter.
"Person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust, unincorporated
organization or other entity.
"ROC Disclosure Letter" means the letter previously
delivered to Chateau by ROC disclosing certain information in
connection with the Original Agreement.
"ROC Subsidiary" means each Subsidiary of ROC.
"Subsidiary" of any person means any corporation,
partnership, limited liability company, joint venture or other legal entity of
which such person (either directly or through or together with another
Subsidiary of such person) owns 50% or more of the voting stock or other
equity interests of such corporation, partnership, limited liability company,
joint venture or other legal entity.
67
<PAGE>
IN WITNESS WHEREOF, Chateau, ROC, and RSub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
CHATEAU PROPERTIES, INC.
By: __________________________________
Name:
Title:
ROC COMMUNITIES, INC.
By: __________________________________
Name: Gary P. McDaniel
Title: President and Chief
Executive Officer
R ACQUISITION SUB, INC.
By: __________________________________
Name: C.G. Kellogg
Title: President
68
