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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
JULY 17, 1996
Date of Report (Date of earliest event reported)
ROC COMMUNITIES, INC.
(Exact Name of Registrant as Specified in its Charter)
<TABLE>
<S> <C> <C>
MARYLAND 001-12258 84-1226771
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(State of Organization) (Commission File Number) (IRS Employer Identification Number)
</TABLE>
6430 SO. QUEBEC STREET
ENGLEWOOD, CO 80111
(Address of Registrant's Principal Executive Office) (Zip Code)
(303) 741-3707
(Registrant's telephone number, including area code)
_________________________________________
(Former Name or Former Address, if Changed Since Last Report)
Page 1 of 4
Exhibit Index located at Page 4
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ITEM 5. OTHER EVENTS.
On July 18, 1996, the Registrant announced that it had signed an
Agreement and Plan of Merger, dated as of July 17, 1996, among the Registrant,
Chateau Properties, Inc., a Maryland corporation ("Chateau"), Chateau
Communities, Inc., a newly-formed Maryland corporation ("Chateau Communities")
organized by the Registrant and Chateau, and R Acquisition Sub, Inc., a
newly-formed Maryland corporation and a subsidiary of Chateau Communities
("RSub"), which contemplates a strategic business combination transaction
pursuant to which Chateau will merge with Chateau Communities, with Chateau
Communities surviving such merger (the "Chateau Merger"), and the Registrant
will merge with RSub, with the Registrant surviving such merger (the "ROC
Merger" and, together with the Chateau Merger, the "Mergers").
As a result of the Mergers, each outstanding share of common stock,
par value $.01 per share, of the Registrant ("ROC Common Stock") and non-voting
redeemable stock, par value $.01 per share, of the Registrant ("ROC Non-Voting
Stock") will be converted into 1.042 shares of common stock, par value $.0001
per share, of Chateau Communities ("Chateau Communities Common Stock"), and
each outstanding share of common stock, par value $.01 per share, of Chateau
("Chateau Common Stock") will be converted into one share of Chateau
Communities Common Stock. The Mergers are subject to a number of conditions,
as described in the Merger Agreement.
Concurrently with the execution and delivery of the Merger Agreement,
Chateau entered into a Stock Option Agreement (the "Chateau Option Agreement")
with the Registrant whereby Chateau has granted to the Registrant an option to
purchase up to 420,000 shares of Chateau Common Stock, exercisable by the
Registrant, in whole or in part, at any time or from time to time after the
Merger Agreement becomes terminable by the Registrant under circumstances which
could entitle the Registrant to receive certain break-up expenses or fees
pursuant to the Merger Agreement, regardless of whether the Merger Agreement is
actually terminated (any such event by which the Merger Agreement becomes so
terminable by the Registrant being referred to herein as a "ROC Trigger
Event"). The right of the Registrant to exercise its option shall terminate on
the date which is 365 days after the date that Chateau shall notify the
Registrant in writing of the occurrence of any ROC Trigger Event. The
Registrant has also entered into a Stock Option Agreement (the "ROC Option
Agreement" and, together with the Chateau Option Agreement, the "Reciprocal
Option Agreements") with CP Limited Partnership, a Maryland limited partnership
which is the operating partnership of Chateau (the "Operating Partnership"),
whereby the Registrant has granted the Operating Partnership an option to
purchase up to 420,000 shares of ROC Common Stock, exercisable by the Operating
Partnership, in whole or in part, at any time or from time to time after the
Merger Agreement becomes terminable by Chateau under circumstances which could
entitle the Operating Partnership to receive certain break-up expenses or fees
pursuant to the Merger Agreement, regardless of whether the Merger Agreement is
actually terminated (any such event by which the Merger Agreement becomes so
terminable by Chateau being referred to herein as a "Chateau Trigger Event").
The right of the Operating Partnership to exercise its option shall terminate
on the date which is 365 days after the date that the Registrant shall notify
the Operating Partnership in writing of the occurrence of any Chateau Trigger
Event. The Chateau Option Agreement and the ROC Option Agreement are attached
hereto as exhibits.
ITEM 7. EXHIBITS.
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<CAPTION>
Exhibit No. Description of Document
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<S> <C>
10.1 Stock Option Agreement, dated as of July 17, 1996, between Chateau Properties, Inc., as
issuer, and ROC Communities, Inc., as grantee.
10.2 Stock Option Agreement, dated as of July 17, 1996, between ROC Communities, Inc., as
issuer, and CP Limited Partnership, as grantee.
</TABLE>
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ROC COMMUNITIES, INC.
By: /s/ Gary P. McDaniel
Name: Gary P. McDaniel
Title: President and Chief Executive
Officer
Date: July 29, 1996
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EXHIBIT INDEX
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<CAPTION>
Exhibit Number Description Page No.
-------------- ----------- --------
<S> <C>
10.1 Stock Option Agreement, dated as of July 17, 1996,
between Chateau Properties, Inc., as issuer, and
ROC Communities, Inc. as grantee
10.2 Stock Option Agreement, dated as of July 17, 1996,
between ROC Communities, Inc., as issuer, and CP
Limited Partnership, as grantee
</TABLE>
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EXHIBIT 10.1
_______________________________________________________________________________
STOCK OPTION AGREEMENT
Dated as of July 17, 1996,
Between
CHATEAU PROPERTIES, INC.,
as Issuer,
And
ROC COMMUNITIES, INC.,
as Grantee
__________________________________________________________________
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STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 17, 1996, between ROC
COMMUNITIES, INC., a Maryland corporation ("GRANTEE"), and CHATEAU PROPERTIES,
INC., a Maryland corporation ("ISSUER").
RECITALS
(a) Grantee, Issuer, Chateau Communities, Inc., a Maryland
corporation organized by Grantee and Issuer ("CHATEAU COMMUNITIES"), and a
merger subsidiary of Chateau Communities have entered into an Agreement and
Plan of Merger dated as of the date hereof (the "MERGER AGREEMENT").
(b) As a condition to, and simultaneously with the execution
of the Merger Agreement and in consideration therefor and in consideration of
the option granted pursuant to the stock option agreement dated the date hereof
between Grantee, as issuer of such option, and CP Limited Partnership, a
Maryland limited partnership, as grantee of such option, Issuer has agreed to
grant Grantee the Option (as herein defined).
(c) Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Merger Agreement,
the parties hereto agree as follows:
1. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "OPTION") to purchase, subject to the terms hereof, up
to 420,000 fully paid and nonassessable shares of the common stock, $.01 par
value per share, of Issuer (the "COMMON STOCK"), at a price per share equal to
the last reported sale price per share of Common Stock as reported on the
consolidated tape for the NYSE on July 17, 1996 (such price being referred to
herein as the "OPTION PRICE"). The number of shares of Common Stock that may
be received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
2. (a) Subject to Section 2(h), the Option may be
exercised by Grantee, in whole or in part, at any time or from time to time
after the Merger Agreement becomes terminable by Grantee under circumstances
which could entitle Grantee to receive the ROC Break-Up Expenses or the ROC
Break-Up Fee under Section 8.2(d) of the Merger Agreement, regardless of
whether the Merger Agreement is actually terminated (any such event by which
the Merger Agreement
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becomes so terminable by Grantee being referred to herein as a "TRIGGER
EVENT").
(b) Issuer shall notify Grantee promptly in writing of
the occurrence of any Trigger Event, it being understood that the giving of
such notice by Issuer shall not be a condition to the right of Grantee to
exercise the Option.
(c) In the event Grantee is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "NOTICE DATE") specifying (i) the total
number of shares it will purchase pursuant to such exercise and (ii) a place
and date not earlier than three business days nor later than 60 business days
from the Notice Date for the closing of such purchase (the "CLOSING DATE").
Any exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
(d) At the closing referred to in Section 2(c), Grantee
shall (i) pay to Issuer the aggregate Option Price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not
preclude Grantee from exercising the Option and (ii) present and surrender this
Agreement to Issuer at its principal executive offices.
(e) At such closing, simultaneously with the delivery of
immediately available funds as provided in Section 2(d), Issuer shall deliver
to Grantee a certificate or certificates representing the number of shares of
Common Stock purchased hereunder, in the name of Grantee or its assignee,
transferee or designee, and, if the Option is being exercised in part only, a
new Option evidencing the rights of Grantee to purchase the balance of the
shares purchasable hereunder.
(f) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend substantially in the
following form:
"The shares represented by this certificate are subject to
certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising
under the Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
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It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933, as amended (the "1933 ACT"),
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the applicable holder thereof shall have delivered to
Issuer an opinion of counsel, in form and substance reasonably satisfactory to
Issuer, to the effect that such legend is not required for purposes of the 1933
Act; (ii) the reference to the provisions of this Agreement in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the above legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may
be required by law or the provisions of Issuer's Charter to the extent that
such Charter provisions apply generally to all shares of Common Stock issued by
Issuer.
(g) On the Closing Date provided for under Section 2(c)
and upon the tender of the applicable Option Price in immediately available
funds, Grantee shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such shares of Common Stock shall not then be actually delivered to Grantee.
Issuer shall pay all expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2 in
the name of Grantee or its assignee, transferee or designee.
(h) The right of Grantee to exercise the Option shall
terminate on the date which is 365 days after the date that Issuer shall notify
Grantee in writing of the occurrence of any Trigger Event as specified in
Section 2(b).
3. Issuer agrees: (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but unissued
shares of Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by Charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; and (iii) promptly to take all action as may from time to time be
required (including waivers of any ownership limitations or similar provisions
in Issuer's Charter) in order to permit Grantee to exercise the Option and
Issuer duly and effectively to issue shares of Common Stock pursuant hereto.
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4. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
5. Notwithstanding any contrary provisions contained in this
Agreement and without denigration of any restriction on Issuer contained in the
Merger Agreement, in the event of any change in the Common Stock of Issuer by
reason of stock dividends, splitups, mergers (other than the Mergers),
recapitalization, combinations, exchange of shares or the like (other than the
exercise or exchange of options outstanding as of the date hereof under the
Chateau Plan or exchangeable securities), the type and number of shares or
securities subject to the Option, and the Option Price per share provided in
Section 1, shall be adjusted appropriately to restore to Grantee its rights
hereunder, including the right to purchase from Issuer (or its successors)
shares of Common Stock representing 6.89% of the outstanding Common Stock for
the aggregate Option Price calculated as of the date of this Agreement as
provided in Section 1.
6. Upon the occurrence of a Trigger Event, Issuer shall,
at the request of Grantee delivered within 24 months following the occurrence
of such Trigger Event (whether on its own behalf or on behalf of any subsequent
holder of the Option (or part thereof) or any of the shares of Common Stock
issued pursuant hereto), promptly prepare, file and keep current a registration
statement under the 1933 Act covering any shares issued and issuable pursuant
to the Option ("REGISTRABLE SHARES") and shall use its best efforts to cause
such registration statement to become effective and remain current in order to
permit the sale or other disposition of any such Registrable Shares in
accordance with any plan of disposition requested by Grantee. Issuer will use
its best efforts to cause such registration statement first to become effective
and then to remain effective for such period not in excess of 365 days from the
day such registration statement first becomes effective or such shorter time as
may be reasonably necessary to effect such sales or other dispositions from
time to time on a continuous or delayed basis or otherwise as specified by
Grantee. Issuer shall bear the costs of such registrations (including, but not
limited to, Issuer's attorneys' fees, printing costs and filing fees, except
for underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Registrable Shares as provided above, Issuer provides to Grantee a
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writing, executed by its chief executive officer, to the effect that, in his
reasonable judgment, it would be seriously detrimental to Issuer and its
stockholders for the requested registration statement to be filed at the time
requested and it is therefore essential to defer the filing of such
registration statement, Issuer may delay the filing of such registration
statement for a period not to exceed 60 days, it being understood that such
right of delay may be exercised by Issuer not more than once in any 12- month
period. Grantee shall provide all information reasonably requested by Issuer
for inclusion in any registration statement to be filed hereunder. If
requested by Grantee in connection with such registration, Issuer shall become
a party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements for Issuer. Notwithstanding anything to the contrary
contained herein, in no event shall Issuer be obligated to effect more than
four registrations pursuant to this Section 6.
7. (a) At the request of Grantee by written notice (x)
at any time during the period that the Option is exercisable pursuant to
Section 2, Issuer (or any successor entity thereof) shall, if permitted by
applicable law and Issuer's Charter, repurchase from Grantee all or any portion
of the Option, at the price set forth in subparagraph (i) below, or (y) at any
time prior to the two-year anniversary of the date that the Option first
becomes exercisable pursuant to Section 2 hereof, Issuer (or any successor
entity thereof) shall, if permitted by applicable law and Issuer's Charter,
repurchase from Grantee all or any portion of the shares of Common Stock that
have been actually purchased by Grantee under the Option, at the price set
forth in subparagraph (ii) below:
(i) the difference between the Market/Offer Price
(as defined below) for shares of Common Stock as of the date (the
"REPURCHASE NOTICE DATE") Grantee gives notice of its intent to
exercise its rights under this Section 7 and the Option Price,
multiplied by the number of shares of Common Stock purchasable
pursuant to the Option (or portion thereof with respect to which
Grantee is exercising its rights under this Section 7), but only if
the Market/Offer Price is greater than the Option Price. For purposes
of this clause (i) "MARKET/OFFER PRICE" shall mean, as of any date,
the higher of (x) the price (or value of other consideration) per
share offered or agreed upon as of such date pursuant to any tender or
exchange offer or other agreed-upon price with respect to any merger,
consolidation, share exchange, business combination, or similar
transaction involving Issuer (each, a "BUSINESS COMBINATION
TRANSACTION"), which was made prior to such date and not terminated or
withdrawn as of such date and (y) the average last reported sale price
per share of Common
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Stock as reported on the NYSE consolidated tape over the five-Trading
Day period immediately preceding the Repurchase Notice Date.
(ii) the product of (x) the greater of (A) the
Option Price paid by Grantee per share of Common Stock acquired
pursuant to the Option and (B) the Offer Price (as defined below), and
(y) the number of shares of Common Stock to be repurchased pursuant to
this Section 7. For purposes of this clause (ii), the "OFFER PRICE"
shall be the highest price per share offered or agreed upon for Common
Stock pursuant to a Business Combination Transaction involving Issuer
after the date of this Agreement and prior to the Repurchase Notice
Date.
(b) In the event Grantee exercises its rights under this
Section 7, Issuer shall, within ten business days thereafter, pay the required
amount to Grantee in immediately available funds and Grantee shall surrender to
Issuer the Option or the certificate or certificates evidencing the shares of
Common Stock purchased by Grantee pursuant hereto, and Grantee shall warrant
that it owns the Option or such shares and that the Option or such shares are
then free and clear of all claims, liens, encumbrances and security interests.
8. (a) In the event that, after the date of this
Agreement and prior to or during the period that the Option is exercisable
hereunder, Issuer shall enter into an agreement (i) to consolidate with or
merge into any person, other than in accordance with the Merger Agreement, and
shall not be the continuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than Grantee or a Grantee Subsidiary,
to merge into Issuer or an Issuer Subsidiary and Issuer or such Issuer
Subsidiary shall be the continuing or surviving corporation, but, in connection
with such merger, the then outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other person or cash or
any other property or the then outstanding shares of Common Stock shall after
such merger represent less than 50% of the outstanding shares and share
equivalents of the merged company or Issuer, as the case may be, or (iii) to
sell or otherwise transfer all or substantially all of its or any of its
Subsidiaries' assets or deposits to any person, other than Grantee or a Grantee
Subsidiary, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the "SUBSTITUTE
OPTION"), at the election of Grantee, of either (x) the Acquiring Corporation
(as herein defined) or (y) any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
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(i) "ACQUIRING CORPORATION" shall mean (i) the
continuing or surviving corporation of a consolidation or merger with
Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer
is the continuing or surviving person, and (iii) the transferee of all
or substantially all of Issuer's assets or deposits (or the assets or
deposits of a Subsidiary of Issuer).
(ii) "SUBSTITUTE COMMON STOCK" shall mean the
common stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
(iii) "ASSIGNED VALUE" shall mean the
Market/Offer Price, as defined in Section 7.
(iv) "AVERAGE PRICE" shall mean the average last
reported sales price of a share of the Substitute Common Stock for one
year immediately preceding the consolidation, merger or sale in
question, but in no event higher than the closing price of the shares
of Substitute Common Stock on the day preceding such consolidation,
merger or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect to
a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as Grantee
may elect.
(c) The Substitute Option shall have the same terms as
the Option, provided that if the terms of the Substitute Option cannot, for
legal reasons, be the same as those of the Option, such terms shall be as
similar as possible and in no event less advantageous to Grantee. The issuer
of the Substitute Option shall also enter into an agreement with the Grantee of
the Substitute Option in substantially the same form as this Agreement, which
agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal to
the Option Price multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock for which the Option is then exercisable and
the denominator of which shall be the number of shares of Substitute Common
Stock for which the Substitute Option is exercisable.
(e) If the Acquiring Corporation shall qualify for
taxation as a REIT under the Code, then, notwithstanding any of the foregoing
provisions, the Substitute Option shall not be exercisable for more than 9.8%
of the shares of Substitute Common
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Stock outstanding prior to exercise of the Substitute Option. In the event
that the Substitute Option would be exercisable for more than 9.8% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "SUBSTITUTE OPTION
ISSUER") shall make a cash payment to Grantee equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in this
clause (e) over (ii) the value of the Substitute Option after giving effect to
the limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by
Grantee.
(f) Issuer shall not enter into any transaction described
in Section 8(a) unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. The period to exercise the Option and to cause the
Option to be repurchased or exchanged as specified herein shall be extended to
the extent necessary to avoid liability under Section 16(b) of the Securities
Exchange Act of 1934, as amended, by reason of such exercise.
10. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement or
to consummate the transactions so contemplated. This Agreement has been duly
and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its terms
will have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock at
any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
11. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option created hereunder to
any other person, without the express written consent of the other party,
except during the period that the Option is
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exercisable hereunder. During such period, Grantee shall have the right from
time to time to assign, without expense, all or a portion of the Option
hereunder to a third party that qualifies as an "accredited investor" within
the meaning of the 1933 Act upon the delivery to Issuer of (i) a written notice
specifying the name and address of the intended transferee and the total number
of shares such transferee will be permitted to purchase following the transfer,
(ii) evidence reasonably satisfactory to Issuer that the intended transferee is
an "accredited investor" within the meaning of the 1933 Act, (iii) a writing
executed by the intended transferee stating that the intended transferee agrees
to become a holder of the Option and to be bound by the terms and provisions of
this Agreement and (iv), if requested by Issuer within five days of the date of
the receipt of the written notice specified in clause (i), an opinion of
counsel, in form and substance reasonably satisfactory to Issuer, to the effect
that such transfer may be effected without registration under the 1933 Act. In
the case of any such transfer permitted hereunder, this Agreement (and the
Option granted hereby) shall be presented to Issuer at its principal executive
office, and Issuer shall reissue to Grantee and/or the transferee (as
applicable) other Agreements providing for Options entitling the respective
holders to purchase, on the same terms and subject to the same conditions as
are set forth herein, in the aggregate the number of shares of Common Stock
that each will be entitled to purchase following such transfer.
Notwithstanding the foregoing, (i) the decision to exercise registration rights
under Section 6 shall be made exclusively by Grantee (on behalf of itself or
other holders) following such transfer and (ii) the provisions of Section 13
hereof shall not apply to the Option issued to any transferee that is not
affiliated with Grantee and purchases the Option in an arm's-length transaction
for value and, in the case of transfers to affiliates of Grantee, the
provisions of Section 13 shall apply to Grantee and such affiliates as a group
as if such group were the sole holder of the Option.
12. Each of Grantee and Issuer will use its best efforts
to make all filings with, and to obtain consents of, all third parties and
Governmental Entities necessary to the consummation of the transactions
contemplated by this Agreement.
13. (a) Notwithstanding any other provision of this
Agreement, in no event shall Grantee's Total Profit (as herein defined) exceed
(i) the amount of the ROC Break-Up Expenses in circumstances, upon termination
of the Merger Agreement, that would allow Grantee to receive only ROC Break-Up
Expenses under the Merger Agreement, or (ii) $10,000,000 in circumstances, upon
termination of the Merger Agreement, that would allow Grantee to receive only
the ROC Break-Up Fee under the Merger Agreement, or (iii) the sum the of
amounts specified in clauses (i) and (ii) above in circumstances, upon
termination of the Merger Agreement, that would allow Grantee to receive both
ROC Break-Up Expenses and
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the ROC Break-Up Fee under the Merger Agreement; and, if the Total Profit
otherwise would exceed such applicable amounts, Grantee, at its sole election,
shall either (a) reduce the number of shares of Common Stock subject to the
Option, (b) deliver to Issuer for cancellation shares of Common Stock
previously purchased hereunder by Grantee, (c) pay cash to Issuer, or (d) any
combination thereof, so that Grantee's actually realized Total Profit shall not
exceed the applicable amount after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this
Agreement, the Option may not be exercised for a number of shares as would, as
of the date of exercise, result in a Notional Total Profit (as defined below)
of more than (i) the amount of the ROC Break-Up Expenses in circumstances, upon
termination of the Merger Agreement, that would allow Grantee to receive only
ROC Break-Up Expenses under the Merger Agreement, or (ii) $10,000,000 in
circumstances, upon termination of the Merger Agreement, that would allow
Grantee to receive only the ROC Break-Up Fee under the Merger Agreement, or
(iii) the sum of the amounts specified in clauses (i) and (ii) above in
circumstances, upon termination of the Merger Agreement, that would allow
Grantee to receive both ROC Break-Up Expenses and the ROC Break-Up Fee under
the Merger Agreement; provided that nothing in this sentence shall restrict any
exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "TOTAL PROFIT" shall mean
the aggregate amount (before taxes) of the following: (i) the amount received
by Grantee pursuant to Issuer's repurchase of the Option (or any portion
thereof) pursuant to Section 7, (ii) (x) the amount received by Grantee
pursuant to Issuer's repurchase of shares of Common Stock pursuant to Section
7, less (y) Grantee's purchase price for such shares, (iii) (x) the net cash
amounts received by Grantee pursuant to the sale of shares of Common Stock
purchased hereunder (or any other securities into which such shares are
converted or exchanged) to any unaffiliated third party, less (y) Grantee's
purchase price of such shares, (iv) any amounts received by Grantee on the
transfer of the Option (or any portion thereof) to any unaffiliated party that
acquires or receives the Option in an arm's length transaction for value and
(v) any equivalent amount with respect to the Substitute Option.
(d) As used herein, the term "NOTIONAL TOTAL PROFIT" with
respect to any number of shares as to which Grantee may propose to exercise the
Option shall be the Total Profit determined as of the date of such proposed
exercise assuming that the Option was exercised on such date for such number of
shares and assuming that such shares, together with all other shares of Common
Stock purchased by Grantee and its affiliates pursuant to this Agreement as of
such date, were sold for cash at the average last reported sale prices per
share of the Common Stock as reported on the NYSE consolidated tape over the
five-Trading Day period immediately
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<PAGE> 12
preceding the date of proposed exercise (less customary brokerage commissions).
14. 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 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.
15. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court determines
that Grantee is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1 hereof (as adjusted as provided herein), it is the
express intention of Issuer to allow Grantee to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
16. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be given in
accordance with the provisions of the Merger Agreement.
17. 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.
18. 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 both
parties and delivered to the other party.
19. Except as otherwise expressly provided herein, each
of the parties hereto shall bear and pay all costs and expenses
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<PAGE> 13
incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
20. Except as otherwise expressly provided herein or in
the Merger Agreement, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assignees. Nothing in this Agreement, expressed or implied, is intended to
confer upon any party, other than the parties hereto, and their respective
successors except as assignees, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
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<PAGE> 14
IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
CHATEAU PROPERTIES, INC. (Issuer)
By:/s/ John A. Boll
Name: John A. Boll
Title: Chairman of the Board
ROC COMMUNITIES, INC. (Grantee)
By:/s/ Gary P. McDaniel
Name: Gary P. McDaniel
Title: President and CEO
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<PAGE> 1
EXHIBIT 10.2
_____________________________________________________
STOCK OPTION AGREEMENT
Dated as of July 17, 1996,
Between
ROC COMMUNITIES, INC.,
as Issuer,
And
CP LIMITED PARTNERSHIP,
as Grantee
__________________________________________________________________
<PAGE> 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of July 17, 1996, between CP
LIMITED PARTNERSHIP, a Maryland limited partnership ("GRANTEE"), and ROC
COMMUNITIES, INC., a Maryland corporation ("ISSUER").
RECITALS
(a) Issuer, Chateau Properties, Inc., a Maryland Corporation
("CHATEAU"), Chateau Communities, Inc., a Maryland corporation organized by
Chateau and Issuer ("CHATEAU COMMUNITIES"), and a merger subsidiary of Chateau
Communities have entered into an Agreement and Plan of Merger dated as of the
date hereof (the "MERGER AGREEMENT").
(b) As a condition to, and simultaneously with the execution
of the Merger Agreement and in consideration therefor and in consideration of
the option granted pursuant to the stock option agreement dated the date hereof
between Chateau Properties, Inc., a Maryland corporation, as issuer of such
option, and Issuer, as grantee of such option, Issuer has agreed to grant
Grantee the Option (as herein defined).
(c) Capitalized terms used in this Agreement and not defined
herein shall have the meanings assigned thereto in the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements set forth herein and in the Merger Agreement,
the parties hereto agree as follows:
1. Issuer hereby grants to Grantee an unconditional,
irrevocable option (the "OPTION") to purchase, subject to the terms hereof, up
to 420,000 fully paid and nonassessable shares of the common stock, $.01 par
value per share, of Issuer (the "COMMON STOCK"), at a price per share equal to
the last reported sale price per share of Common Stock as reported on the
consolidated tape for the NYSE on July 17, 1996 (such price being referred to
herein as the "OPTION PRICE"). The number of shares of Common Stock that may
be received upon the exercise of the Option and the Option Price are subject to
adjustment as herein set forth.
2. (a) Subject to Section 2(h), the Option may be
exercised by Grantee, in whole or in part, at any time or from time to time
after the Merger Agreement becomes terminable by Chateau under circumstances
which could entitle Grantee to receive the Chateau Break-Up Expenses or the
Chateau Break-Up Fee under Section
<PAGE> 3
8.2(b) of the Merger Agreement, regardless of whether the Merger Agreement is
actually terminated (any such event by which the Merger Agreement becomes so
terminable by Chateau being referred to herein as a "TRIGGER EVENT").
(b) Issuer shall notify Grantee promptly in writing of
the occurrence of any Trigger Event, it being understood that the giving of
such notice by Issuer shall not be a condition to the right of Grantee to
exercise the Option.
(c) In the event Grantee is entitled to and wishes to
exercise the Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "NOTICE DATE") specifying (i) the total
number of shares it will purchase pursuant to such exercise and (ii) a place
and date not earlier than three business days nor later than 60 business days
from the Notice Date for the closing of such purchase (the "CLOSING DATE").
Any exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
(d) At the closing referred to in Section 2(c), Grantee
shall (i) pay to Issuer the aggregate Option Price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not
preclude Grantee from exercising the Option and (ii) present and surrender this
Agreement to Issuer at its principal executive offices.
(e) At such closing, simultaneously with the delivery of
immediately available funds as provided in Section 2(d), Issuer shall deliver
to Grantee a certificate or certificates representing the number of shares of
Common Stock purchased hereunder, in the name of Grantee or its assignee,
transferee or designee, and, if the Option is being exercised in part only, a
new Option evidencing the rights of Grantee to purchase the balance of the
shares purchasable hereunder.
(f) Certificates for Common Stock delivered at a closing
hereunder may be endorsed with a restrictive legend substantially in the
following form:
"The shares represented by this certificate are subject to
certain provisions of an agreement between the registered
holder hereof and Issuer and to resale restrictions arising
under the Securities Act of 1933, as amended. A copy of such
agreement is on file at the principal office of Issuer and
will be provided to the holder hereof without charge upon
receipt by Issuer of a written request therefor."
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<PAGE> 4
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act of 1933, as amended (the "1933 ACT"),
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the applicable holder thereof shall have delivered to
Issuer an opinion of counsel, in form and substance reasonably satisfactory to
Issuer, to the effect that such legend is not required for purposes of the 1933
Act; (ii) the reference to the provisions of this Agreement in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the above legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may
be required by law or the provisions of Issuer's Charter to the extent that
such Charter provisions apply generally to all shares of Common Stock issued by
Issuer.
(g) On the Closing Date provided for under Section 2(c)
and upon the tender of the applicable Option Price in immediately available
funds, Grantee shall be deemed to be the holder of record of the shares of
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such shares of Common Stock shall not then be actually delivered to Grantee.
Issuer shall pay all expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this Section 2 in
the name of Grantee or its assignee, transferee or designee.
(h) The right of Grantee to exercise the Option shall
terminate on the date which is 365 days after the date that Issuer shall notify
Grantee in writing of the occurrence of any Trigger Event as specified in
Section 2(b).
3. Issuer agrees: (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but unissued
shares of Common Stock so that the Option may be exercised without additional
authorization of Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Common Stock;
(ii) that it will not, by Charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; and (iii) promptly to take all action as may from time to time be
required (including waivers of any ownership limitations or similar provisions
in Issuer's Charter) in order to permit Grantee to exercise the Option and
Issuer duly and effectively to issue shares of Common Stock pursuant hereto.
3
<PAGE> 5
4. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
5. Notwithstanding any contrary provisions contained in this
Agreement and without denigration of any restriction on Issuer contained in the
Merger Agreement, in the event of any change in the Common Stock of Issuer by
reason of stock dividends, splitups, mergers (other than the Mergers),
recapitalization, combinations, exchange of shares or the like (other than the
exercise or exchange of options outstanding as of the date hereof under the
1993 Stock Plan), the type and number of shares or securities subject to the
Option, and the Option Price per share provided in Section 1, shall be adjusted
appropriately to restore to Grantee its rights hereunder, including the right
to purchase from Issuer (or its successors) shares of Common Stock representing
3.38% of the outstanding Common Stock for the aggregate Option Price calculated
as of the date of this Agreement as provided in Section 1.
6. Upon the occurrence of a Trigger Event, Issuer shall,
at the request of Grantee delivered within 24 months following the occurrence
of such Trigger Event (whether on its own behalf or on behalf of any subsequent
holder of the Option (or part thereof) or any of the shares of Common Stock
issued pursuant hereto), promptly prepare, file and keep current a registration
statement under the 1933 Act covering any shares issued and issuable pursuant
to the Option ("REGISTRABLE SHARES") and shall use its best efforts to cause
such registration statement to become effective and remain current in order to
permit the sale or other disposition of any such Registrable Shares in
accordance with any plan of disposition requested by Grantee. Issuer will use
its best efforts to cause such registration statement first to become effective
and then to remain effective for such period not in excess of 365 days from the
day such registration statement first becomes effective or such shorter time as
may be reasonably necessary to effect such sales or other dispositions from
time to time on a continuous or delayed basis or otherwise as specified by
Grantee. Issuer shall bear the costs of such registrations (including, but not
limited to, Issuer's attorneys' fees, printing costs and filing fees, except
for underwriting discounts or commissions, brokers' fees and the fees and
disbursements of Grantee's counsel related thereto). The foregoing
notwithstanding, if, at the time of any request by Grantee for registration of
Registrable Shares as provided above, Issuer provides to Grantee a writing,
executed by its chief executive officer, to the effect
4
<PAGE> 6
that, in his reasonable judgment, it would be seriously detrimental to Issuer
and its stockholders for the requested registration statement to be filed at
the time requested and it is therefore essential to defer the filing of such
registration statement, Issuer may delay the filing of such registration
statement for a period not to exceed 60 days, it being understood that such
right of delay may be exercised by Issuer not more than once in any 12-month
period. Grantee shall provide all information reasonably requested by Issuer
for inclusion in any registration statement to be filed hereunder. If
requested by Grantee in connection with such registration, Issuer shall become
a party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in such
underwriting agreements for Issuer. Notwithstanding anything to the contrary
contained herein, in no event shall Issuer be obligated to effect more than
four registrations pursuant to this Section 6.
7. (a) At the request of Grantee by written notice (x)
at any time during the period that the Option is exercisable pursuant to
Section 2, Issuer (or any successor entity thereof) shall, if permitted by
applicable law and Issuer's Charter, repurchase from Grantee all or any portion
of the Option, at the price set forth in subparagraph (i) below, or (y) at any
time prior to the two-year anniversary of the date that the Option first
becomes exercisable pursuant to Section 2 hereof, Issuer (or any successor
entity thereof) shall, if permitted by applicable law and Issuer's Charter,
repurchase from Grantee all or any portion of the shares of Common Stock that
have actually been purchased by Grantee under the Option, at the price set
forth in subparagraph (ii) below:
(i) the difference between the Market/Offer Price
(as defined below) for shares of Common Stock as of the date (the
"REPURCHASE NOTICE DATE") Grantee gives notice of its intent to
exercise its rights under this Section 7 and the Option Price,
multiplied by the number of shares of Common Stock purchasable
pursuant to the Option (or portion thereof with respect to which
Grantee is exercising its rights under this Section 7), but only if
the Market/Offer Price is greater than the Option Price. For purposes
of this clause (i) "MARKET/OFFER PRICE" shall mean, as of any date,
the higher of (x) the price (or value of other consideration) per
share offered or agreed upon as of such date pursuant to any tender or
exchange offer or other agreed-upon price with respect to any merger,
consolidation, share exchange, business combination, or similar
transaction involving Issuer (each, a "BUSINESS COMBINATION
TRANSACTION"), which was made prior to such date and not terminated or
withdrawn as of such date and (y) the average last reported sale price
per share of Common Stock as reported on the NYSE consolidated tape
over the five-
5
<PAGE> 7
Trading Day period immediately preceding the Repurchase Notice Date.
(ii) the product of (x) the greater of (A) the
Option Price paid by Grantee per share of Common Stock acquired
pursuant to the Option and (B) the Offer Price (as defined below), and
(y) the number of shares of Common Stock to be repurchased pursuant to
this Section 7. For purposes of this clause (ii), the "OFFER PRICE"
shall be the highest price per share offered or agreed upon for Common
Stock pursuant to a Business Combination Transaction involving Issuer
after the date of this Agreement and prior to the Repurchase Notice
Date.
(b) In the event Grantee exercises its rights under this Section 7,
Issuer shall, within ten business days thereafter, pay the required amount to
Grantee in immediately available funds and Grantee shall surrender to Issuer
the Option or the certificate or certificates evidencing the shares of Common
Stock purchased by Grantee pursuant hereto, and Grantee shall warrant that it
owns the Option or such shares and that the Option or such shares are then free
and clear of all claims, liens, encumbrances and security interests.
8. (a) In the event that, after the date of this
Agreement and prior to or during the period that the Option is exercisable
hereunder, Issuer shall enter into an agreement (i) to consolidate with or
merge into any person, other than in accordance with the Merger Agreement, and
shall not be the continuing or surviving corporation of such consolidation or
merger, (ii) to permit any person, other than Grantee or a Grantee Subsidiary,
to merge into Issuer or an Issuer Subsidiary and Issuer or such Issuer
Subsidiary shall be the continuing or surviving corporation, but, in connection
with such merger, the then outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other person or cash or
any other property or the then outstanding shares of Common Stock shall after
such merger represent less than 50% of the outstanding shares and share
equivalents of the merged company or Issuer, as the case may be, or (iii) to
sell or otherwise transfer all or substantially all of its or any of its
Subsidiaries' assets or deposits to any person, other than Grantee or a Grantee
Subsidiary, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set
forth herein, be converted into, or exchanged for, an option (the "SUBSTITUTE
OPTION"), at the election of Grantee, of either (x) the Acquiring Corporation
(as herein defined) or (y) any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
6
<PAGE> 8
(i) "ACQUIRING CORPORATION" shall mean (i) the
continuing or surviving corporation of a consolidation or merger with
Issuer (if other than Issuer), (ii) Issuer in a merger in which Issuer
is the continuing or surviving person, and (iii) the transferee of all
or substantially all of Issuer's assets or deposits (or the assets or
deposits of a Subsidiary of Issuer).
(ii) "SUBSTITUTE COMMON STOCK" shall mean the
common stock issued by the issuer of the Substitute Option upon
exercise of the Substitute Option.
(iii) "ASSIGNED VALUE" shall mean the
Market/Offer Price, as defined in Section 7.
(iv) "AVERAGE PRICE" shall mean the average last
reported sales price of a share of the Substitute Common Stock for one
year immediately preceding the consolidation, merger or sale in
question, but in no event higher than the closing price of the shares
of Substitute Common Stock on the day preceding such consolidation,
merger or sale; provided that if Issuer is the issuer of the
Substitute Option, the Average Price shall be computed with respect to
a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as Grantee
may elect.
(c) The Substitute Option shall have the same terms as
the Option, provided that if the terms of the Substitute Option cannot, for
legal reasons, be the same as those of the Option, such terms shall be as
similar as possible and in no event less advantageous to Grantee. The issuer
of the Substitute Option shall also enter into an agreement with the Grantee of
the Substitute Option in substantially the same form as this Agreement, which
agreement shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such
number of shares of Substitute Common Stock as is equal to the Assigned Value
multiplied by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the
Substitute Option per share of Substitute Common Stock shall then be equal to
the Option Price multiplied by a fraction, the numerator of which shall be the
number of shares of Common Stock for which the Option is then exercisable and
the denominator of which shall be the number of shares of Substitute Common
Stock for which the Substitute Option is exercisable.
(e) If the Acquiring Corporation shall qualify for
taxation as a REIT under the Code, then, notwithstanding any of the foregoing
provisions, the Substitute Option shall not be exercisable for more than 9.8%
of the shares of Substitute Common
7
<PAGE> 9
Stock outstanding prior to exercise of the Substitute Option. In the event
that the Substitute Option would be exercisable for more than 9.8% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "SUBSTITUTE OPTION
ISSUER") shall make a cash payment to Grantee equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in this
clause (e) over (ii) the value of the Substitute Option after giving effect to
the limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by
Grantee.
(f) Issuer shall not enter into any transaction described
in Section 8(a) unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. The period to exercise the Option and to cause the
Option to be repurchased or exchanged as specified herein shall be extended to
the extent necessary to avoid liability under Section 16(b) of the Securities
Exchange Act of 1934, as amended, by reason of such exercise.
10. Issuer hereby represents and warrants to Grantee as
follows:
(a) Issuer has full corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by the Board of Directors of Issuer and no other corporate
proceedings on the part of Issuer are necessary to authorize this Agreement or
to consummate the transactions so contemplated. This Agreement has been duly
and validly executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to
authorize and reserve and to permit it to issue, and at all times from the date
hereof through the termination of this Agreement in accordance with its terms
will have reserved for issuance upon the exercise of the Option, that number of
shares of Common Stock equal to the maximum number of shares of Common Stock at
any time and from time to time issuable hereunder, and all such shares, upon
issuance pursuant thereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and not subject to any preemptive rights.
11. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option created hereunder to
any other person, without the express written consent of the other party,
except during the period that the Option is
8
<PAGE> 10
exercisable hereunder. During such period, Grantee shall have the right from
time to time to assign, without expense, all or a portion of the Option
hereunder to a third party that qualifies as an "accredited investor" within
the meaning of the 1933 Act upon the delivery to Issuer of (i) a written notice
specifying the name and address of the intended transferee and the total number
of shares such transferee will be permitted to purchase following the transfer,
(ii) evidence reasonably satisfactory to Issuer that the intended transferee is
an "accredited investor" within the meaning of the 1933 Act, (iii) a writing
executed by the intended transferee stating that the intended transferee agrees
to become a holder of the Option and to be bound by the terms and provisions of
this Agreement and (iv), if requested by Issuer within five days of the date of
the receipt of the written notice specified in clause (i), an opinion of
counsel, in form and substance reasonably satisfactory to Issuer, to the effect
that such transfer may be effected without registration under the 1933 Act. In
the case of any such transfer permitted hereunder, this Agreement (and the
Option granted hereby) shall be presented to Issuer at its principal executive
office, and Issuer shall reissue to Grantee and/or the transferee (as
applicable) other Agreements providing for Options entitling the respective
holders to purchase, on the same terms and subject to the same conditions as
are set forth herein, in the aggregate the number of shares of Common Stock
that each will be entitled to purchase following such transfer.
Notwithstanding the foregoing, (i) the decision to exercise registration rights
under Section 6 shall be made exclusively by Grantee (on behalf of itself or
other holders) following such transfer and (ii) the provisions of Section 13
hereof shall not apply to the Option issued to any transferee that is not
affiliated with Grantee and purchases the Option in an arm's-length transaction
for value and, in the case of transfers to affiliates of Grantee, the
provisions of Section 13 shall apply to Grantee and such affiliates as a group
as if such group were the sole holder of the Option.
12. Each of Grantee and Issuer will use its best efforts
to make all filings with, and to obtain consents of, all third parties and
Governmental Entities necessary to the consummation of the transactions
contemplated by this Agreement.
13. (a) Notwithstanding any other provision of this
Agreement, in no event shall Grantee's Total Profit (as herein defined) exceed
(i) the amount of the Chateau Break-Up Expenses in circumstances, upon
termination of the Merger Agreement, that would allow Grantee to receive only
Chateau Break-Up Expenses under the Merger Agreement, or (ii) $10,000,000 in
circumstances, upon termination of the Merger Agreement, that would allow
Grantee to receive only the Chateau Break-Up Fee under the Merger Agreement, or
(iii) the sum of the amounts specified in clauses (i) and (ii) above in
circumstances, upon termination of the Merger Agreement, that would allow
Grantee to receive both Chateau Break-Up Expenses
9
<PAGE> 11
and the Chateau Break-Up Fee under the Merger Agreement; and, if the Total
Profit otherwise would exceed such applicable amounts, Grantee, at its sole
election, shall either (a) reduce the number of shares of Common Stock subject
to the Option, (b) deliver to Issuer for cancellation shares of Common Stock
previously purchased hereunder by Grantee, (c) pay cash to Issuer, or (d) any
combination thereof, so that Grantee's actually realized Total Profit shall not
exceed the applicable amount after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this
Agreement, the Option may not be exercised for a number of shares as would, as
of the date of exercise, result in a Notional Total Profit (as defined below)
of more than (i) the amount of the Chateau Break-Up Expenses in circumstances,
upon termination of the Merger Agreement, that would allow Grantee to receive
only Chateau Break-Up Expenses under the Merger Agreement, or (ii) $10,000,000
in circumstances, upon termination of the Merger Agreement, that would allow
Grantee to receive only the Chateau Break-Up Fee under the Merger Agreement, or
(iii) the sum of the amounts specified in clauses (i) and (ii) above in
circumstances, upon termination of the Merger Agreement, that would allow
Grantee to receive both Chateau Break-Up Expenses and the Chateau Break-Up Fee
under the Merger Agreement; provided that nothing in this sentence shall
restrict any exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "TOTAL PROFIT" shall mean
the aggregate amount (before taxes) of the following: (i) the amount received
by Grantee pursuant to Issuer's repurchase of the Option (or any portion
thereof) pursuant to Section 7, (ii) (x) the amount received by Grantee
pursuant to Issuer's repurchase of shares of Common Stock pursuant to Section
7, less (y) Grantee's purchase price for such shares, (iii) (x) the net cash
amounts received by Grantee pursuant to the sale of shares of Common Stock
purchased hereunder (or any other securities into which such shares are
converted or exchanged) to any unaffiliated third party, less (y) Grantee's
purchase price of such shares, (iv) any amounts received by Grantee on the
transfer of the Option (or any portion thereof) to any unaffiliated party that
acquires or receives the Option in an arm's-length transaction for value, and
(v) any equivalent amount with respect to the Substitute Option.
(d) As used herein, the term "NOTIONAL TOTAL PROFIT" with
respect to any number of shares as to which Grantee may propose to exercise the
Option shall be the Total Profit determined as of the date of such proposed
exercise assuming that the Option was exercised on such date for such number of
shares and assuming that such shares, together with all other shares of Common
Stock purchased by Grantee and its affiliates pursuant to this Agreement as of
such date, were sold for cash at the average last reported sale prices per
share of the Common Stock as reported on the NYSE
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consolidated tape over the five-Trading Day period immediately preceding the
date of proposed exercise (less customary brokerage commissions).
14. 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 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.
15. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
this Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court determines
that Grantee is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1 hereof (as adjusted as provided herein), it is the
express intention of Issuer to allow Grantee to acquire or to require Issuer to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof.
16. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be given in
accordance with the provisions of the Merger Agreement.
17. 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.
18. 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 both
parties and delivered to the other party.
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19. Except as otherwise expressly provided herein, each
of the parties hereto shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
20. Except as otherwise expressly provided herein or in
the Merger Agreement, this Agreement contains the entire agreement between the
parties with respect to the transactions contemplated hereunder and supersedes
all prior arrangements or understandings with respect thereof, written or oral.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and permitted
assignees. Nothing in this Agreement, expressed or implied, is intended to
confer upon any party, other than the parties hereto, and their respective
successors except as assignees, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
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IN WITNESS WHEREOF, each of the parties has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
CP LIMITED PARTNERSHIP (Grantee)
By: Chateau Properties, Inc.,
its General Partner
By:/s/ John A. Boll
Name: John A. Boll
Title: Chairman of the Board
ROC COMMUNITIES, INC. (Issuer)
By:/s/ Gary P. McDaniel
Name: Gary P. McDaniel
Title: President and CEO
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