<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X Quarterly report pursuant to Section 13 or 15(d) of the
- ----- Securities Exchange Act of 1934
For the quarterly period ended March 31, 1997
--------------
OR
Transition report pursuant to Section 13 or 15(d) of
- ----- the Securities Exchange Act of 1934
Commission file number 1-12496
---------
CHATEAU PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
MARYLAND 38-3132038
(State or other jurisdiction (IRS Employer
of incorporation or organization) (Identification No.)
6430 South Quebec Street, Englewood, CO 80111
(Address of principal executive offices, including zip code)
(303) 741-3707
(Registrant's telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act
and listed on the New York Stock Exchange:
COMMON STOCK, $0.01 PAR VALUE
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares outstanding of the Registrant's Common Stock on May 11,
1997 was 25,188,366 shares.
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CHATEAU PROPERTIES, INC.
FORM 10-Q
INDEX
Page Number
-----------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed Consolidated Statements of Income for the
Three Months Ended March 31, 1997 and 1996 2
Condensed Consolidated Balance Sheets as of March 31,
1997 and December 31, 1996 3
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1997 and 1996 4
Notes to Consolidated Financial Statements 5 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 10
Item 3. Quantitative and Qualitative Disclosures About
Market Risks 10
PART II. OTHER INFORMATION 11 - 12
SIGNATURES 13
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHATEAU PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996.
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED
MARCH 31
-------------------
1997 1996
------- -------
Revenues:
Rental income $28,881 $16,350
Management fee, interest and other income 495 41
------- -------
29,376 16,391
Expenses:
Property operating and maintenance 8,008 4,163
Real estate taxes 2,129 1,185
Depreciation and amortization 6,677 2,768
Administrative 1,546 911
Interest and related amortization 5,428 3,043
------- -------
23,788 12,070
------- -------
Income before minority interest 5,588 4,321
Minority interest in Operating Partnership 1,133 2,551
------- -------
Net income $ 4,455 $ 1,770
------- -------
------- -------
Net income per share $ .24 $ .29
------- -------
------- -------
Dividend/distribution declared per common
share/OP unit outstanding $ .43 $ .405
------- -------
------- -------
Weighted average common shares
outstanding 18,720 6,097
------- -------
------- -------
Weighted average common shares
and OP units outstanding 23,480 14,887
------- -------
------- -------
The accompanying notes are an integral
part of the financial statements.
2
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CHATEAU PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
MARCH 31, DECEMBER 31,
1997 1996
-------- --------
ASSETS
Rental property:
Land $110,651 $ 33,821
Land and improvements for expansion sites 11,836 1,988
Depreciable property 682,342 264,822
-------- --------
804,829 300,631
Less accumulated depreciation 87,881 81,293
-------- --------
716,948 219,338
Cash and cash equivalents 120 586
Receivables 7,813 5,403
Notes receivable 10,317 90
Prepaid expenses and other assets 9,529 6,649
-------- --------
Total assets $744,727 $232,066
-------- --------
-------- --------
LIABILITIES
Debt $329,694 $168,315
Accounts payable and accrued expenses 27,942 10,285
Tenants' security deposits and rents received
in advance 6,899 4,852
Accrued dividends and distributions 12,007 5,871
-------- --------
Total liabilities 376,542 189,323
Limited partners' interest in Operating Partnership 36,420 26,552
SHAREHOLDERS' EQUITY
Preferred stock, $.01 par value, 2 million shares
authorized; no shares issued or outstanding
Common stock; $.01 par value, 30 million shares
authorized; 25,167,851 and 5,660,960 shares issued
and outstanding at March 31, 1997 and December 31,
1996, respectively 252 57
Additional paid-in capital 349,929 28,187
Dividends in excess of accumulated earnings (17,598) (11,233)
Notes receivable from officers, 43,125 shares (818) (820)
-------- --------
Total shareholders' equity 331,765 16,191
-------- --------
Total liabilities and shareholders' equity $744,727 $232,066
-------- --------
-------- --------
The accompanying notes are an integral
part of the financial statements.
3
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CHATEAU PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996.
(DOLLARS IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1996
-------- -------
Cash Flows From Operating Activities:
Net income $ 4,455 $ 1,770
Adjustments to reconcile net income to net cash
provided by operating activities:
Income attributable to limited partners' interest 1,133 2,551
Depreciation and amortization 6,677 2,768
Amortization of deferred financing costs 108 105
Decrease (increase) in operating assets (6,555) (472)
Increase (decrease) in operating liabilities 3,663 (1,041)
-------- -------
Net cash from operating activities 9,481 5,681
Cash flows from financing activities:
Net borrowing (payments) on line of credit (4,485) 3,700
Mortgage principal payments (267) (216)
Dividends/distributions to shareholders/OP unit holders (5,871) (5,954)
Common shares/OP units reacquired and retired (19,851) -
Proceeds from the issuance of common shares 25,477 -
Other financing activities 669 55
-------- -------
Net cash provided by (used in) financing activities (4,328) (2,415)
Cash flows from investing activities:
Acquisition of rental properties - (3,416)
Additions to rental property (3,303) (611)
Payment of deferred merger costs (2,316) -
-------- -------
Net cash used in investing activities (5,619) (4,027)
-------- -------
Decrease in cash and cash equivalents (466) (761)
Cash and cash equivalents, beginning of period 586 944
-------- -------
Cash and cash equivalents, end of period $ 120 $ 183
-------- -------
-------- -------
Supplemental cash flow information:
OP Units issued in connection with the acquisition
of rental properties $ 98
--------
--------
The accompanying notes are an integral
part of the financial statements.
4
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CHATEAU PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND FORMATION OF COMPANY:
The accompanying unaudited condensed consolidated financial statements
of Chateau Properties, Inc. (the "Company"), a Real Estate Investment
Trust (REIT), have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
considered necessary for a fair presentation have been included, and
such adjustments are of a normal recurring nature. The year-end
condensed consolidated balance sheet was derived from audited
consolidated financial statements, but does not include all disclosures
required by generally accepted accounting principles. For further
information, refer to the consolidated financial statements and
footnotes thereto included in the Company's annual report on Form 10-K
for the year ended December 31, 1996.
On November 23, 1993, the Company completed a public offering of
5,700,000 shares of $.01 par value common stock (the "Equity Offering").
Simultaneous with the Equity Offering, the Company contributed the net
proceeds from the Equity Offering and was admitted as the sole general
partner in an operating partnership (the "Operating Partnership")
representing the successor owner of manufactured housing community
properties. As a result of the Company's unilateral control and
complete responsibility for management of the Operating Partnership as
the sole general partner, the consolidated financial statements include
the accounts of Chateau Properties, Inc. and the Operating Partnership.
All significant inter-entity balances and transactions have been
eliminated in consolidation.
2. MERGER WITH ROC COMMUNITIES, INC.
In February 1997, the Company completed its merger with ROC Communities,
Inc. (the "Merger"). The Merger and related transactions were accounted
for using the purchase method of accounting in accordance with generally
accepted accounting principles. Accordingly, the assets and liabilities
of ROC were adjusted to fair value for financial accounting purposes and
the results of operations of ROC are included in the results of
operations of the Company beginning February 1, 1997.
In connection with the Merger, the following related transactions
occurred:
- The Company repurchased and retired 1,200,000 shares of
its common stock in late 1996 and early 1997.
- ROC purchased 350,000 shares of Chateau common stock,
which was retired at the time of the Merger.
- The Company issued 1.042 shares of its common stock for
each 1.0 share of ROC stock outstanding.
- The Company paid a stock dividend equal to .0326 shares
of Company common stock per common share/OP Unit outstanding.
5
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- Certain OP Unitholders converted 6,170,908 OP Units
into common shares. These Unitholders waived their
right to receive the above dividend and as a result it
was re-allocated to the existing shareholders
resulting in an effective distribution to the common
shareholders of .068 shares of common stock.
- Certain OP Unitholders purchased 984,423 additional
shares of common stock from the Company at $25.88 per
share.
In connection with the Merger, the Company issued common stock valued at
approximately $351 million, including the costs incurred to complete the
Merger, which was allocated as follows:
Rental property $ 501.3
Net working capital 15.8
Debt assumed (166.1)
-------
$ 351.0
-------
-------
Following the Merger, the Company owns 128 communities with an aggregate
42,986 residential homesites. In addition, it fee manages 6,953 residential
homesites in 34 communities.
The following unaudited pro forma income statement information has been
prepared as if the Merger and related transactions had occurred on January 1,
1996. In addition, the pro forma information is presented as if the
acquisition of 13 properties made in 1996 by the Company and ROC had occurred
on January 1, 1996. The pro forma income statement information is not
necessarily indicative of the results which actually would have occurred if
the Merger had been consummated on January 1, 1996.
(In thousands, except per share data)
Three Months Ended
March 31,
----------------
1997 1996
------- -------
Revenues $35,128 $32,610
Expenses:
Property, operating, maintenance and
administrative 13,873 12,830
Depreciation and amortization 8,536 8,473
Interest and related amortization 6,701 6,273
------- -------
Total expenses 29,110 27,576
------- -------
Income before minority interest 6,018 5,034
------- -------
Per share* $ .22 $ .18
------- -------
------- -------
Weighted average common shares and OP
Units outstanding 27,896 27,874
------- -------
------- -------
*Assumes all OP Units are exchanged for common stock.
6
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3. COMMON STOCK AND RELATED TRANSACTIONS:
On March 20, 1997, the Company declared a cash dividend/distribution of
$.43 per share/OP unit to shareholders and OP unit holders of record as
of March 31, 1997. The dividend/distribution was paid on April 14, 1997
and is included in accrued dividends and distributions in the
accompanying condensed consolidated balance sheet as of March 31, 1997.
On November 13, 1996, the Company declared a cash dividend/distribution
of $.405 per share/OP unit to shareholders and OP unit holders of record
as of December 31, 1996. The dividend/distribution was paid on January
15, 1997 and is included in accrued dividends and distributions in the
accompanying condensed consolidated balance sheet as of December 31,
1996.
4. DEBT:
The following table sets forth certain information regarding debt at
March 31, 1997.
Weighted
Interest Rate Maturity Date Principal Balance
------------- ------------- -----------------
Fixed Rate Mortgage Debt 7.95% 1998-2011 $116,215
Unsecured Senior Notes 8.16% 2000-2003 145,000
Unsecured Lines of Credit 7.23% 1/99 66,349
Other notes payable various 1997 2,130
--------
$329,694
--------
--------
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis of interim results of operations and
financial condition covers the quarter ended March 31, 1997 and 1996 and
should be read in conjunction with the Condensed Consolidated Financial
Statements and Notes thereto included in this report.
In February 1997, the Company completed its merger with ROC Communities, Inc.
("ROC") (the "Merger"). The historical results include the results of
operations of ROC for two months. The pro forma discussion cover the
quarters ended March 31, 1997 and 1996 assuming the Merger and related
transactions had occurred on January 1, 1996. This pro forma discussion
should be read in conjunction with note 2 to the financial statements of the
Company included elsewhere herein.
HISTORICAL RESULTS OF OPERATIONS
COMPARISON OF QUARTER ENDED MARCH 31, 1997 TO QUARTER ENDED MARCH 31, 1996
For the quarter ended March 31, 1997, income before minority interest was
$5,588,000, an increase of $1,267,000 from the quarter ended March 31, 1996.
The increase was due primarily to the Company's merger with ROC in February
1997, increased net operating income from communities owned by the Company on
April 1, 1996 (the "Core 1996 Portfolio") and to a lesser extent, the
acquisition of two communities in the second quarter of 1996. The increase
in net operating income from the Company's Core 1996 Portfolio was due to
increased occupancy and rental increases partially offset by general
operating expense increases.
Rental revenue in the first quarter 1997 was $29,376,000, an increase of
$12,985,000 or 79 percent from first quarter 1996. Approximately 90 percent
of the increase was due to the merger. The remaining increase was due to an
approximate 4.2 percent increase in average rents and 1.7 percent in
occupancy of the Company's Core 1996 Portfolio. Management fee, interest and
other income increased approximately $454,000 due to the Merger in 1997 from
1996.
Property operating and maintenance expense for the quarter ended March 31,
1997 increased by $3,845,000 or 92 percent from the same period a year ago.
Approximately 88 percent of the increase was due to the Merger. The
remaining increase was due to increases in the Company's Core 1996 Portfolio.
Real estate taxes for the quarter ended March 31, 1997, increased by $944,000
or 80 percent from the quarter ended March 31, 1996. Approximately 92
percent of the increase is due to the Merger. The remaining increase is due
primarily to acquisitions and expansions of communities and general
increases. Real estate taxes may increase or decrease due to inflation,
expansions and improvements of communities, as well as changes in taxation in
the tax jurisdictions in which the Company operates.
Administrative expense for the first quarter of 1997 increased due to the
Merger. Administrative expense in 1997 was 5.3 percent of revenues as
compared to 5.6 percent in 1996.
Interest and related amortization costs increased for the first quarter ended
March 31, 1997 by $2,385,000, as compared with the quarter ended March 31,
1996. The increase is attributable to the indebtedness incurred in
connection with the Merger and to finance the 1996 acquisitions. Interest
expense as a percentage of average debt outstanding decreased to
approximately 7.6 percent in 1997 from approximately 8.7 percent in 1996.
The decrease is due primarily to the ROC debt assumed in the Merger having a
lower average interest rate as well as much of the financing in connection
with the Company's Merger and the 1996 acquisitions being done with the
Company's lines of credit which have a lower average interest rate.
8
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Depreciation expense for the quarter ended March 31, 1997, increased
$3,909,000 from the same period a year ago. The increase is directly
attributable to the Merger. Depreciation expense as a percentage of average
depreciable rental property in 1997 remained relatively unchanged from 1996.
PRO FORMA RESULTS OF OPERATIONS
PRO FORMA QUARTER ENDED MARCH 31, 1997 COMPARED TO PRO FORMA QUARTER ENDED
MARCH 31, 1996
Total revenues increased $2,518,000 or 7.7 percent in 1997 over 1996 due to
increased occupancy and rental increases in communities owned by the Company
on April 1, 1996 as well as the acquisition of four communities in January
1997 with a total of 550 sites.
Property, operating, maintenance and administrative expense increased
$1,043,000 or 8.0 percent in 1997 as compared to 1996. This increase is due
to the increased number of occupied sites, the acquisition of four
communities in January 1997, as well as general increases.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $9,481,000 for the quarter
ended March 31, 1997, compared to $5,681,000 for the quarter ended March 31,
1996. The increase in cash provided by operating activities was due
primarily to the increase in net operating income.
Net cash used in financing activities for the quarter ended March 31, 1997
was $4,328,000. Use of cash included distributions made to shareholders/OP
Unitholders of $5,871,000; net payments on the lines of credit of $4,485,000
and the payment of $19,851,000 to repurchase and retire 750,000 shares of the
Company's common stock in connection with the Merger. The shares were
repurchased in February 1997 at an average price of approximately $26.47 per
share. This use of cash was offset partially by proceeds of $25,477,000 from
the issuance of 984,423 shares of the Company's common stock at approximately
$25.88 per share.
Net cash used in investing activities for the quarter ended March 31, 1997
was $5,619,000. This amount represented joint venture investments, capital
expenditures and construction and development costs. For the quarter ended
March 31, 1997, construction and development costs, including joint ventures,
approximated $688,000, while recurring property capital expenditures, other
than construction and development costs, were approximately $520,000.
Recurring property capital expenditures in 1997 increased due to the merger.
Capital expenditures have historically been financed with funds from
operations and it is the Company's intention that such future expenditures
will be financed with funds from operations.
Future acquisitions of communities and land for development of sites will be
financed through borrowings on the line of credit, the issuance of additional
equity or debt securities, assumption of existing secured or unsecured
indebtedness or the issuance of OP units. The development of expansion sites
will be financed primarily by cash flow from operations and borrowings on the
line of credit. The Company has two available credit facilities aggregating
$100 million, each of which is unsecured and bears interest at 150 basis
points over LIBOR. As of March 31, 1997, there was $66.3 million outstanding
under the lines of credit.
The Company expects to meet its short-term liquidity requirements through
cash flow from operations and, if necessary, borrowings under its line of
credit.
The Company anticipates meeting its long-term liquidity requirements from
borrowings under its line of credit, from the issuance of additional debt or
equity securities and cash flows from operations.
9
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OTHER
Funds from operations ("FFO") is defined by the National Association of Real
Estate Investment Trusts ("NAREIT") as net income excluding gains (or losses)
from debt restructuring and sales of property plus rental property
depreciation and amortization. Management believes that FFO is an important
and widely used measure of the operating performance of REIT's which provides
a relevant basis for comparison among REITs. FFO (i) does not represent cash
flow from operations as defined by generally accepted accounting principles;
(ii) should not be considered as an alternative to net income as a measure of
operating performance or to cash flows from operating, investing and
financing activities; and (iii) is not an alternative to cash flows as a
measure of liquidity. FFO is calculated as follows:
For the Quarter
ended March 31,
-------------------
1997 1996
------- -------
Income before extraordinary item $ 5,588 $ 4,321
Depreciation of rental property 6,544 2,747
Amortization of other intangibles 77 -
------- -------
Funds from operations $12,209 $ 7,068
------- -------
------- -------
On a pro forma basis, FFO is calculated as follows:
For the Quarter
ended March 31,
-------------------
1997 1996
------- -------
Income before minority interest $ 6,018 $ 5,034
Depreciation of rental property 8,347 8,298
Amortization of other intangibles 116 123
------- -------
Funds from operations $14,481 $13,455
------- -------
------- -------
ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Not Applicable.
10
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Three separate purported class actions have been filed against the Company
and its directors in the Circuit Court of Montgomery County, Maryland
alleging breaches of fiduciary duty for agreeing to the Merger with ROC and
refusing to endorse alternative transactions proposed by Manufactured Home
Communities, Inc. or Sun Communities, Inc.
The three class actions are entitled HARBOR FINANCE PARTNERS V. CHATEAU
PROPERTIES, ET AL. (Case No. 157467), NILES V. CHATEAU PROPERTIES, ET AL.
(Case No. 158284) and ZSA ASSET ALLOCATION FUND V. BOLL, ET AL. (Case No.
158652) and were filed on or about September 12, 1996, September 27, 1996 and
October 4, 1996, respectively.
The Company believes that such litigation (which has been consolidated) is
entirely without merit and intends to vigorously defend such litigation if
pursued.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters for a Vote of Security Holders
On February 11, 1997, the Company held a special meeting of
shareholders. The following matters were voted upon at the
meeting:
1) The Proposal to issue 13,109,941 shares of common stock of Chateau
in connection with the Merger with ROC. The results of the proposal
appear below:
Abstentions
Votes for Votes Against and Broker Non-Votes
--------- ------------- --------------------
5,372,753 804,242 145,678
2) The Proposal to issue and sell an aggregate of between 975,000
and 1,000,000 shares of Common Stock of Chateau to OPUnit holders
in CP United Partnership. The results of the proposal appear below:
11
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Abstentions
Votes for Votes Against and Broker Non-Votes
--------- ------------- --------------------
5,361,097 814,881 146,695
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
1. Amended and Restated By-Laws of the Company effective
February 11, 1997
2. Employment Agreement dated as of February 11, 1997 between the
Company and Gary P. McDaniel
3. Employment Agreement dated as of February 11, 1997 between the
Company and C.G. Kellogg
4. Employment Agreement dated as of February 11, 1997 between the
Company and James B. Grange
5. Employment Agreement dated as of February 11, 1997 between the
Company and Tamara D. Fischer
6. Employment Agreement dated as of February 11, 1997 between the
Company and Rees F. Davis, Jr.
The Company's Form 8-K dated February 11, 1997 was filed with the
Commission on February 26, 1997
12
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, and in the
capacities indicated, on the 14th day of May, 1997.
CHATEAU PROPERTIES, INC.
By: /s/ Tamara D. Fischer
----------------------------------
Tamara D. Fischer
Executive Vice President
and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)
13
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Exhibit
Index
Exhibit Number
(Referenced to Item 601
of Regulation S-K)
Sequential
Exhibit Description Page Number
------------------- -----------
1 By-Laws of the Company effective February 11, 1997
2 Employment Agreement dated as of February 11, 1997 between the
Company and Gary P. McDaniel
3 Employment Agreement dated as of February 11, 1997 between the
Company and C.G. Kellogg
4 Employment Agreement dated as of February 11, 1997 between the
Company and James B. Grange
5 Employment Agreement dated as of February 11, 1997 between the
Company and Tamara D. Fischer
6 Employment Agreement dated as of February 11, 1997 between the
Company and Rees F. Davis, Jr.
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of February 11, 1997, by and between
CHATEAU PROPERTIES, INC., a Maryland corporation (hereinafter referred to as the
"COMPANY"), and Gary P. McDaniel (hereinafter referred to as the "EXECUTIVE").
WHEREAS, the Amended and Restated Agreement and Plan of Merger, dated
as of September 17, 1996, as amended, among ROC COMMUNITIES, INC., a Maryland
corporation ("ROC"), the Company, and R ACQUISITION SUB, INC., a Maryland
corporation and a direct subsidiary of the Company contemplates that the Company
enter into an employment agreement with the Executive;
WHEREAS, the Company wishes to offer employment to the Executive, and
the Executive wishes to accept such offer, on the terms set forth below;
Accordingly, the parties hereto agree as follows:
1. TERM. The Company hereby employs the Executive, and the
Executive hereby accepts such employment for an initial term commencing as of
the date hereof and ending on December 31, 1999, unless sooner terminated in
accordance with the provisions of Section 4 or Section 5 (the period during
which the Executive is employed hereunder being hereinafter referred to as the
"TERM").
2. DUTIES. The Executive, in his capacity as Chief Executive
Officer of the Company shall faithfully perform for the Company the duties of
said office and shall perform such other duties of an executive, managerial
or administrative nature as
<PAGE>
shall be specified and designated from time to time by the Board of Directors
of the Company (the "BOARD") (including the performance of services for, and
serving on the Board of Directors of, any subsidiary of the Company without
any additional compensation). The Company shall use its best efforts to have
the Executive elected to the Board, and the Executive agrees to serve on the
Board during the Term without any additional compensation. The Executive
shall devote substantially all of the Executive's business time and effort to
the performance of the Executive's duties hereunder, provided that in no
event shall this sentence prohibit the Executive from performing (i) services
for ROC GP Corp. (provided that the activities of the Executive and ROC GP
Corp. do not materially increase from the level as of the date of this
Agreement) and other activities related to the business of ROC, the Company
and their affiliates and (ii) personal and charitable activities and any
other activities approved by the Board, so long as such activities do not
interfere with the Executive's duties for the Company.
3. COMPENSATION.
3.1 SALARY. The Company shall pay the Executive during the Term
a salary at the rate of $225,000 per annum (the "ANNUAL SALARY"), in accordance
with the customary payroll practices of the Company applicable to senior
executives generally. Annual Salary will increase annually on January 1 of each
year by a percentage equal to the percentage that represents the average salary
increase for all employees of the Company, or such higher amount as may be
approved by the Board, with such increase to be
2
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effective on the date salary increases are effective for employees of the
Company generally and, upon such increase, the increased amount shall
thereafter be deemed to be the "Annual Salary."
3.2 BONUS. The Executive will be eligible to participate in the
Chateau Communities, Inc. Annual Bonus Program (the "Bonus Plan"), the terms of
which will be established by the Executive Compensation Committee of the
Company.
3.3 BENEFITS - IN GENERAL. The Executive shall be permitted
during the Term to participate in any group life, hospitalization or disability
insurance plans, health programs, pension and profit sharing plans and similar
benefits (but not stock option or other equity-based plans, which are provided
for under Section 3.4) that may be available to other senior executives of the
Company generally, on the same terms as may be applicable to such other
executives, in each case to the extent that the Executive is eligible under the
terms of such plans or programs.
3.4 EQUITY-BASED BENEFITS - IN GENERAL. The Executive will be
eligible to participate in the Company's 1997 Equity Compensation Plan which as
of the date hereof is in the form attached hereto as Exhibit A.
3.5 VACATION. The Executive shall be entitled to vacation of 20
days per year.
3.6 AUTOMOBILE. The Company will provide the Executive a
monthly allowance of $1,000 for the use of an automobile. At the option of the
Company, in lieu of providing such allowance, the Company will provide the
Executive with an automobile of suitable standard to the Executive's position.
3
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3.7 DISABILITY BENEFITS AND LIFE INSURANCE. The Executive shall
be entitled to long-term disability benefits and life insurance benefits from
the Company each of which shall be reasonably commensurate with benefits
provided to similarly situated senior executives of comparable companies.
3.8 EXPENSES. The Company shall pay or reimburse the Executive
for all ordinary and reasonable out-of-pocket expenses actually incurred (and,
in the case of reimbursement, paid) by the Executive during the Term in the
performance of the Executive's services under this Agreement; provided that the
Executive submits such expenses in accordance with the policies applicable to
senior executives of the Company generally.
4. TERMINATION UPON DEATH OR DISABILITY. If the Executive dies
during the Term, the obligations of the Company to or with respect to the
Executive shall terminate in their entirety except as otherwise provided under
this Section 4. If the Executive becomes eligible for disability benefits under
the Company's long-term disability plans and arrangements (or, if none apply,
would have been so eligible under the most recent plan or arrangement), the
Company shall have the right, to the extent permitted by law, to terminate the
employment of the Executive upon notice in writing to the Executive; provided
that the Company will have no right to terminate the Executive's employment if,
in the opinion of a qualified physician reasonably acceptable to the Company, it
is reasonably certain that the Executive will be able to resume the Executive's
duties on a regular full-time basis within 30 days of the date the Executive
receives notice of such
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termination. Upon death or other termination of employment by virtue of
disability, (i) the Executive (or the Executive's estate or beneficiaries in
the case of the death of the Executive) shall have no right to receive any
compensation or benefit hereunder on and after the effective date of the
termination of employment other than Annual Salary and other benefits (but
excluding any bonuses except as provided in the Bonus Plan) earned and
accrued under this Agreement prior to the date of termination (and
reimbursement under this Agreement for expenses incurred prior to the date of
termination); and (ii) this Agreement shall otherwise terminate upon such
death or other termination of employment and there shall be no further rights
with respect to the Executive hereunder (except as provided in Section 7.14).
5. CERTAIN TERMINATIONS OF EMPLOYMENT.
5.1 TERMINATION FOR CAUSE; TERMINATION OF EMPLOYMENT BY THE
EXECUTIVE WITHOUT GOOD REASON.
(a) For purposes of this Agreement, "CAUSE" shall mean
(i) the Executive's conviction for (or pleading nolo contendere
to) any felony, or a misdemeanor involving moral turpitude;
(ii) the Executive's commission of an act of fraud, theft or
dishonesty related to the performance of the Executive's duties
hereunder;
(iii) the willful and continuing failure or habitual neglect by
the Executive to perform the Executive's duties hereunder after
reasonable notice and affording the Executive a reasonable
opportunity to cease such failure or neglect;
(iv) any material violation by the Executive of the covenants
contained in Section 6; or
(v) the Executive's willful and continuing material breach of
this Agreement after reasonable
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notice and affording the Executive a reasonable opportunity to
cure such breach;
provided that Cause shall in no event be deemed to exist except upon a finding
reflected in a resolution of a majority of the directors of the Board, excluding
the Executive for these purposes, at a meeting to which the Executive (and the
Executive's counsel) shall be invited upon proper notice.
(b) For purposes of this Agreement, "GOOD REASON" shall mean, unless
otherwise consented to by the Executive,
(i) the material reduction of the Executive's authority, duties
and responsibilities, or the assignment to the Executive of
duties materially inconsistent with the Executive's position or
positions with the Company and its subsidiaries;
(ii) a reduction in Annual Salary of the Executive or the failure
to provide for the increases in Annual Salary required by this
Agreement;
(iii) the failure by the Company to obtain an agreement in form
and substance reasonably satisfactory to the Executive from any
successor to the business of the Company to assume and agree to
perform this Agreement;
(iv) the failure of the Executive to be nominated and recommended
by the Board for election by the stockholders; or
(v) the Company's material and willful breach of this Agreement.
Notwithstanding the foregoing, if there exists (without regard to this sentence)
an event or condition that constitutes Good Reason under clause (i), (ii) or (v)
above, the Company shall have 30 days from the date such notice is given to cure
such event or condition and, if the Company does so, such event or condition
shall not constitute Good Reason hereunder.
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(c) The Company may terminate the Executive's employment hereunder for
Cause. If the Company terminates the Executive for Cause (other than in the
circumstances set forth in Section 5.3), (i) the Executive shall have no right
to receive any compensation or benefit hereunder on and after the effective date
of the termination of employment other than Annual Salary and other benefits
(but excluding any bonuses except as provided in the Bonus Plan) earned and
accrued under this Agreement prior to the effective date of the termination of
employment (and reimbursement under this Agreement for expenses incurred prior
to the effective date of the termination of employment); and (ii) this Agreement
shall otherwise terminate upon such termination of employment and the Executive
shall have no further rights hereunder (except as provided in Section 7.14).
(d) The Executive may terminate his employment without Good Reason.
If the Executive terminates the Executive's employment with the Company
without Good Reason (other than in the circumstances set forth in Section
5.3), and such termination is not covered by Section 5.2 by virtue of the
last sentence thereof, (i) the Executive shall have no right to receive any
compensation or benefit hereunder on and after the effective date of the
termination of employment other than Annual Salary and other benefits (but
excluding any bonuses except as provided in the Bonus Plan or in clause (ii)
below) earned and accrued under this Agreement prior to the effective date of
the termination of employment (and reimbursement under this Agreement for
expenses incurred prior to the effective date of the termination of
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employment); (ii) the Executive shall be entitled to receive (A) a cash
payment equal to the sum of (x) the Executive's Annual Salary (as in effect
on the effective date of such termination) payable no later than 30 days
after such termination and (y) the "TERMINATION BONUS," which shall be the
average of the two previous annual bonuses received by the Executive as
provided for in the Bonus Plan, or, in the event the Executive has received
only one annual bonus pursuant to the Bonus Plan at the time of such
termination, the Termination Bonus shall be equal to the amount of such
annual bonus, or, in the event the Executive has not received any annual
bonuses pursuant to the Bonus Plan at the time of such termination, the
Termination Bonus shall be equal to the annual bonus the Executive would have
received under the Bonus Plan if the Executive would have remained employed
through the period required to be entitled to receive the annual bonus,
payable no later than 30 days after such termination (or, if later, as soon
as practicable, but in no event more than 30 days after, the amount of the
Termination Bonus is known) and (B) for a period of one year after
termination of employment such continuing health benefits (including any
medical, vision or dental benefits), under the Company's health plans and
programs applicable to senior executives of the Company generally as the
Executive would have received under this Agreement (and at such costs to the
Executive) as would have applied in the absence of such termination (but not
taking into account any post-termination increases in Annual Salary that may
otherwise have occurred without regard to such termination and that may have
favorably affected such benefits); it being expressly understood
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and agreed that nothing in this clause (ii) shall restrict the ability of the
Company to amend or terminate such plans and programs from time to time in
its sole discretion; provided, however, that the Company shall in no event be
required to provide such coverage after such time as the Executive becomes
entitled to receive health benefits from another employer or recipient of the
Executive's services (and provided, further, that such entitlement shall be
determined without regard to any individual waivers or other arrangements);
and (iii) this Agreement shall otherwise terminate upon such termination of
employment and the Executive shall have no further rights hereunder (except
as provided in Section 7.14).
5.2 TERMINATION WITHOUT CAUSE; TERMINATION FOR GOOD REASON. The
Company may terminate the Executive's employment at any time for any reason
or no reason and the Executive may terminate the Executive's employment with
the Company for Good Reason. If the Company or the Executive terminates the
Executive's employment, and such termination is not described in Section 4 or
Section 5.1, (other than in the circumstances set forth in Section 5.3), (i)
the Executive shall have no right to receive any compensation or benefit
hereunder on and after the effective date of the termination of employment
other than Annual Salary and other benefits (but excluding any bonuses except
as provided in the Bonus Plan or in clause (ii) below) earned and accrued
under this Agreement prior to the effective date of the termination of
employment (and reimbursement under this Agreement for expenses incurred
prior to the effective date of the termination of
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employment); (ii) the Executive shall receive (A) a cash payment equal to two
times the sum of (x) the Executive's Annual Salary (as in effect on the
effective date of such termination) payable no later than 30 days after such
termination and (y) the Termination Bonus payable no later than 30 days after
such termination (or, if later, as soon as practicable, but in no event more
than 30 days after, the amount of the Termination Bonus is known) and (B) for
a period of two years after termination of employment such continuing health
benefits (including any medical, vision or dental benefits), under the
Company's health plans and programs applicable to senior executives of the
Company generally as the Executive would have received under this Agreement
(and at such costs to the Executive) as would have applied in the absence of
such termination (but not taking into account any post-termination increases
in Annual Salary that may otherwise have occurred without regard to such
termination and that may have favorably affected such benefits); it being
expressly understood and agreed that nothing in this clause (ii) shall
restrict the ability of the Company to amend or terminate such plans and
programs from time to time in its sole discretion; provided, however, that
the Company shall in no event be required to provide such coverage after such
time as the Executive becomes entitled to receive health benefits from
another employer or recipient of the Executive's services (and provided,
further, that such entitlement shall be determined without regard to any
individual waivers or other arrangements); (iii) all outstanding unvested
options and restricted stock held by the Executive shall vest and all options
shall remain exercisable for two years (or, if
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longer, the balance of the regular term of the options); and (iv) this
Agreement shall otherwise terminate upon such termination of employment and
the Executive shall have no further rights hereunder (except as provided in
Section 7.14). For purposes of this Section 5, if the Executive's employment
is not terminated under Section 4 or this Section 5 before the Term would
otherwise expire under Section 1, then a termination of employment at the
expiration of the Term, which termination is not covered by Section 4 or 5.3,
shall be covered under this Section 5.2 rather than under Section 5.1(c);
provided, however, that, in such event, "two times" in clause (ii)(A) above
shall be replaced with "one and one-half times" and "two years" in clause
(ii)(B) above shall be replaced with "18 months".
5.3 TERMINATION AFTER CHANGE OF CONTROL.
(a) For purposes of this Agreement, "Change of Control" means the
occurrence of one of the following:
(i) a "person" or "group" (within the meaning of sections 13(d)
and 14(d) of the Securities and Exchange Act of 1934 (the
"EXCHANGE ACT")) becomes the "beneficial owner" (within the
meaning of Rule 13d-3 under the Exchange Act) of securities of
the Company (including options, warrants, rights and convertible
and exchangeable securities) representing 50% or more of the
combined voting power of the Company's then outstanding
securities in any one or more transactions; provided, however,
that purchases by employee benefit plans of the Company and by
the Company or its affiliates shall be disregarded;
(ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the operating assets of the Company;
(iii) the execution and delivery of a definitive agreement by the
Company that provides for a merger or consolidation, or a
transaction having a similar
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effect (unless such merger, consolidation or similar
transaction is with a subsidiary of the Company or with
another company, a majority of whose outstanding capital stock
is owned by the same persons or entities who own a majority of
the Company's outstanding common stock (the "Common Stock") at
such time), where (A) the Company is not the surviving
corporation and a majority of the Common Stock of the Company
is no longer held by stockholders of the Company immediately
prior to the transaction, (B) the majority of the Common Stock
of the Company is no longer held by the stockholders of the
Company immediately prior to the transaction, or (C) the
Company's Common Stock is converted into cash, securities or
other property (other than the common stock of a company into
which the Company is merged); provided, however, that, in the
event that the contemplated merger, consolidation or similar
transaction is not consummated, then any rights that may arise
under this Section 5.3(a) by virtue of such Change of Control
shall cease to apply;
(iv) at a time when the Common Stock is registered under Section
12 of the Exchange Act, a person other than the Company makes a
tender or exchange offer for 50% or more of the Common Stock
pursuant to which purchases of any amount of Common Stock are
made; or
(v) a majority of the members of the Board are not persons who
(A) had been directors of the Company for at least the preceding
24 consecutive months or (B) when they initially were elected to
the Board, (I) were nominated (if they were elected by the
stockholders) or elected (if they were elected by the directors)
with the affirmative vote of two-thirds of the directors who were
Continuing Directors (as defined below) at the time of the
nomination or election by the Board and (II) were not elected as
a result of an actual or threatened solicitation of proxies or
consents by a person other than the Board or an agreement
intended to avoid or settle such a proxy solicitation (the
directors described in clauses (A) and (B) being "CONTINUING
DIRECTORS").
Notwithstanding the foregoing, a "Change of Control" shall not include an
offering of any class of shares of common stock of the Company or any of its
affiliates under the Securities Act of 1933, as amended.
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(b) Notwithstanding Section 5.1 or 5.2, in the event of a termination
of the Executive by the Company or the Executive for any reason other than as
described in Section 4 within the one-year period following a Change of Control,
(i) the Executive shall have no right to receive any compensation or benefit
hereunder on and after the effective date of the termination of employment other
than Annual Salary and other benefits (but excluding any bonuses except as
provided in the Bonus Plan or in clause (ii) below) earned and accrued under
this Agreement prior to the effective date of the termination of employment (and
reimbursement under this Agreement for expenses incurred prior to the effective
date of the termination of employment); (ii) the Executive shall receive (A) a
cash payment equal to three times the sum of (x) the Executive's Annual Salary
(as in effect on the effective date of such termination) payable no later than
30 days after such termination and (y) the Termination Bonus payable no later
than 30 days after such termination (or, if later, as soon as practicable, but
in no event more than 30 days after, the amount of the Termination Bonus is
known) and (B) for a period of three years after termination of employment (x)
such continuing health benefits (including any medical, vision or dental
benefits), under the Company's health plans and programs applicable to senior
executives of the Company generally as the Executive would have received under
this Agreement (and at such costs to the Executive) as would have applied in the
absence of such termination (but not taking into account any post-termination
increases in Annual Salary that may otherwise have occurred without regard to
such termination and that may have
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<PAGE>
favorably affected such benefits); it being expressly understood and agreed
that nothing in this clause (ii) shall restrict the ability of the Company to
amend or terminate such plans and programs from time to time in its sole
discretion; provided, however, that the Company shall in no event be required
to provide such coverage after such time as the Executive becomes entitled to
receive health benefits from another employer or recipient of the Executive's
services (and provided, further, that such entitlement shall be determined
without regard to any individual waivers or other arrangements) and (y) an
amount reasonably equivalent economically to the pension benefits the
Executive would have received if the Executive remained employed for such
three-year period; (iii) all outstanding unvested options and restricted
stock held by the Executive shall vest and all options shall remain
exercisable for two years (or, if longer, the balance of the regular term of
the options); and (iv) this Agreement shall otherwise terminate upon such
termination of employment and the Executive shall have no further rights
hereunder (except as provided in Section 7.14).
6. COVENANTS OF THE EXECUTIVE.
6.1 COVENANT AGAINST COMPETITION; OTHER COVENANTS. The Executive
acknowledges that (i) the principal business of the Company is the owning,
acquiring, developing or operating of manufactured housing communities (such
businesses, and any and all other businesses that after the date hereof, and
from time to time during the Term, become material and substantial with respect
to the Company's then-overall business, herein being collectively
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referred to as the "BUSINESS"); (ii) the Company knows of a limited number of
persons who have developed the Company's Business; (iii) the Company's
Business is, in part, national in scope; (iv) the Executive's work for the
Company and its subsidiaries (and the predecessors of either) has given and
will continue to give the Executive access to the confidential affairs and
proprietary information of the Company; (v) the covenants and agreements of
the Executive contained in this Section 6 are essential to the business and
goodwill of the Company; and (vi) the Company would not have entered into
this Agreement but for the covenants and agreements set forth in this Section
6. In light of the foregoing, during the Term and for a period of one year
thereafter (and, as to Section 6.1(b) and (d), at any time during and after
the Executive's employment with the Company and its subsidiaries (and the
predecessors of either)):
(a) Except for such affiliation with ROC GP Corp. and its
affiliates (provided that the activities of the Executive and ROC GP Corp. do
not materially increase from the level as of the date of this Agreement), the
Executive shall not, directly or indirectly, own, manage, control or participate
in the ownership, management, or control of, or be employed or engaged by or
otherwise affiliated or associated as an employee, employer, consultant, agent,
principal, partner, stockholder, corporate officer, director or in any other
individual or representative capacity, engage or participate in any business
that is in competition in any manner whatsoever with the business of the Company
in any county of any state in which the Company owns or
15
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leases manufactured home communities. In the case of a termination by the
Company without Cause or by the Executive for Good Reason, the preceding
covenant shall expire on the date of termination; provided, however, that,
notwithstanding the foregoing, the Executive may invest in securities of any
entity, solely for investment purposes and without participating in the
business thereof, if (i) such securities are traded on any national
securities exchange or the National Association of Securities Dealers, Inc.
Automated Quotation System, (ii) the Executive is not a controlling person
of, or a member of a group which controls, such entity and (iii) the
Executive does not, directly or indirectly, own one percent or more of any
class of securities of such entity; provided that this Section 6.1(a) shall
not apply in the event of and effective upon a Change of Control.
(b) The Executive shall keep secret and retain in strictest
confidence, and shall not use for his benefit or the benefit of others, except
in connection with the business and affairs of the Company and its affiliates,
all confidential matters relating to the Company's Business and the business of
any of its affiliates and to the Company and any of its affiliates, learned by
the Executive heretofore or hereafter directly or indirectly from the Company or
any of its subsidiaries (or any predecessor of either) (the "CONFIDENTIAL
COMPANY INFORMATION"), including, without limitation, information with respect
to the Business and any aspect thereof, profit or loss figures, and the
Company's or its affiliates' (or any of their predecessors') properties, and
shall not disclose such Confidential Company Information to anyone
16
<PAGE>
outside of the Company except with the Company's express written consent and
except for Confidential Company Information which (i) at the time of receipt
or thereafter becomes publicly known through no wrongful act of the
Executive, (ii) is clearly obtainable in the public domain, (iii) was not
acquired by the Executive in connection with the Executive's employment or
affiliation with the Company, (iv) was not acquired by the Executive from the
Company or its representatives, or (v) is required to be disclosed by rule of
law or by order of a court or governmental body or agency.
(c) The Executive shall not, without the Company's prior
written consent, directly or indirectly, (i) knowingly solicit or encourage to
leave the employment or other service of the Company or any of its affiliates,
any employee thereof or hire (on behalf of the Executive) or any other person or
entity) any employee who has left the employment or other service of the Company
or any of its affiliates (or any predecessor of either) within one year of the
termination of such employee's or independent contractor's employment or other
service with the Company and its affiliates, or (ii) whether for the Executive's
own account or for the account of any other person, firm, corporation or other
business organization, intentionally interfere with the Company's or any of its
affiliates' relationship with, or endeavor to entice away from the Company or
any of its affiliates, any person who during the Executive's employment with the
Company and its affiliates (or the predecessors of either) is or was a customer
or client of the Company or any of its affiliates (or any
17
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predecessor of either); provided that this Section 6.1(c) shall not apply in
the event of and effective upon a Change of Control.
(d) All memoranda, notes, lists, records, property and any
other tangible product and documents (and all copies thereof) made, produced or
compiled by the Executive or made available to the Executive concerning the
Business of the Company and its affiliates shall be the Company's property and
shall be delivered to the Company at any time on request.
6.2 RIGHTS AND REMEDIES UPON BREACH. The Executive acknowledges and
agrees that any breach by him of any of the provisions of Section 6.1 (the
"RESTRICTIVE COVENANTS") would result in irreparable injury and damage for which
money damages would not provide an adequate remedy. Therefore, if the Executive
breaches, or threatens to commit a breach of, any of the Restrictive Covenants,
the Company and its affiliates shall have the right and remedy to have the
Restrictive Covenants specifically enforced (without posting bond and without
the need to prove damages) by any court having equity jurisdiction, including,
without limitation, the right to an entry against the Executive of restraining
orders and injunctions (preliminary, mandatory, temporary and permanent) against
violations, threatened or actual, and whether or not then continuing, of such
covenants. This right and remedy shall be in addition to, and not in lieu of,
any other rights and remedies available to the Company and its affiliates under
law or in equity (including, without limitation, the recovery of damages). The
existence of any claim or cause of action by the Executive, whether predicated
on this Agreement or otherwise, shall
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not constitute a defense to the enforcement of the Restrictive Covenants.
7. OTHER PROVISIONS.
7.1 SEVERABILITY. The Executive acknowledges and agrees that
(i) the Executive has had an opportunity to seek advice of counsel in connection
with this Agreement and (ii) the Restrictive Covenants are reasonable in
geographical and temporal scope and in all other respects. If it is determined
that any of the provisions of this Agreement, including, without limitation, any
of the Restrictive Covenants, or any part thereof, is invalid or unenforceable,
the remainder of the provisions of this Agreement shall not thereby be affected
and shall be given full effect, without regard to the invalid portions.
7.2 DURATION AND SCOPE OF COVENANTS. If any court or other
decision-maker of competent jurisdiction determines that any of the Executive's
covenants contained in this Agreement, including, without limitation, any of the
Restrictive Covenants, or any part thereof, are unenforceable because of the
duration or geographical scope of such provision, then, after such determination
has become final and unappealable, the duration or scope of such provision, as
the case may be, shall be reduced so that such provision becomes enforceable
and, in its reduced form, such provision shall then be enforceable and shall be
enforced.
7.3 ENFORCEABILITY; JURISDICTIONS. The Company and the
Executive intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope of
the Restrictive Covenants. If the
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courts of any one or more of such jurisdictions hold the Restrictive
Covenants wholly unenforceable by reason of breadth of scope or otherwise it
is the intention of the Company and the Executive that such determination not
bar or in any way affect the Company's right, or the right of any of its
affiliates, to the relief provided above in the courts of any other
jurisdiction within the geographical scope of such Restrictive Covenants, as
to breaches of such Restrictive Covenants in such other respective
jurisdictions, such Restrictive Covenants as they relate to each
jurisdiction's being, for this purpose, severable, diverse and independent
covenants, subject, where appropriate, to the doctrine of RES JUDICATA. Any
controversy or claim arising out of or relating to this Agreement or the
breach of this Agreement that is not resolved by the Executive and the
Company (or its affiliates, where applicable), other than those arising under
Section 6, to the extent necessary for the Company (or its affiliates, where
applicable) to avail itself of the rights and remedies provided under Section
6.2, shall be submitted to arbitration in Denver, Colorado in accordance with
Colorado law and the procedures of the American Arbitration Association. The
determination of the arbitrator(s) shall be conclusive and binding on the
Company (or its affiliates, where applicable) and the Executive and judgment
may be entered on the arbitrator(s)' award in any court having jurisdiction.
7.4 ATTORNEYS' FEES. In the event of any legal proceeding
(including an arbitration proceeding) relating to this Agreement or any term or
provision thereof in which the Executive
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is the prevailing party, the Company shall be responsible to pay or reimburse
the Executive for all reasonable attorneys' fees incurred by the Executive in
connection with such proceeding.
7.5 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, five days after the date of deposit in the United
States mails as follows:
(i) If to the Company, to:
6430 South Quebec Street
Englewood, Colorado 80111
(ii) If to the Executive, to:
Gary P. McDaniel
32023 County Road 15
Elizabeth, Colorado 80107
with a copy in either case to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Jay L. Bernstein, Esq.
and
Timmis & Inman L.L.P.
300 Talon Centre
Detroit, Michigan 48207
Attention: Henry J. Brennan, III, Esq.
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Any such person may by notice given in accordance with this Section to the other
parties hereto designate another address or person for receipt by such person of
notices hereunder.
7.6 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with the Company or its
subsidiaries (or any predecessor of either).
7.7 WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the parties or, in the case of a waiver,
by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege nor any single or partial exercise of any such right, power or
privilege, preclude any other or further exercise thereof or the exercise of any
other such right, power or privilege.
7.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
7.9 ASSIGNMENT. This Agreement, and the Executive's rights and
obligations hereunder, may not be assigned by the Executive; any purported
assignment by the Executive in violation hereof shall be null and void. In the
event of any sale, transfer or other disposition of all or substantially all of
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the Company's assets or business, whether by merger, consolidation or otherwise,
the Company may assign this Agreement and its rights hereunder.
7.10 WITHHOLDING. The Company shall be entitled to withhold from
any payments or deemed payments any amount of withholding required by law. No
other taxes, fees, impositions, duties or other charges or offsets of any kind
shall be deducted or withheld from amounts payable hereunder, unless otherwise
required by law.
7.11 NO DUTY TO MITIGATE. The Executive shall not be required
to mitigate damages or the amount of any payment provided for under this
Agreement by seeking other employment or otherwise, nor will any payments
hereunder be subject to offset in the event the Executive does mitigate.
7.12 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, permitted
assigns, heirs, executors and legal representatives.
7.13 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original but all such counterparts together shall constitute one and
the same instrument. Each counterpart may consist of two copies hereof each
signed by one of the parties hereto.
7.14 SURVIVAL. Anything contained in this Agreement to the
contrary notwithstanding, the provisions of Sections 6, 7.3, 7.4 and 7.10 and
the other provisions of this Section 7 (to the
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extent necessary to effectuate the survival of Sections 6, 7.3, 7.4 and 7.10)
shall survive termination of this Agreement and any termination of the
Executive's employment hereunder.
7.15 EXISTING AGREEMENTS. Executive represents to the Company
that the Executive is not subject or a party to any employment or consulting
agreement, non-competition covenant or other agreement, covenant or
understanding which might prohibit him from executing this Agreement or limit
the Executive's ability to fulfill the Executive's responsibilities hereunder.
7.16 HEADINGS. The headings in this Agreement are for reference
only and shall not affect the interpretation of this Agreement.
7.17 PARACHUTE PROVISIONS. If any amount payable to or other
benefit receivable by the Executive pursuant to this Agreement is deemed to
constitute a Parachute Payment (as defined below), alone or when added to any
other amount payable or paid to or other benefit receivable or received by
the Executive which is deemed to constitute a Parachute Payment (whether or
not under an existing plan, arrangement or other agreement), and would result
in the imposition on the Executive of an excise tax under Section 4999 of the
Internal Revenue Code, then, in addition to any other benefits to which the
Executive is entitled under this Agreement, the Executive shall be paid by
the Company an amount in cash equal to the sum of the excise taxes payable by
the Executive by reason of receiving Parachute Payments plus the amount
necessary to put the Executive in the same after-tax position (taking into
account any and all applicable federal, state and local excise, income or
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other taxes at the highest applicable rates on such Parachute Payments and on
any payments under this Section 7.17) and if no excise taxes had been imposed
with respect to Parachute Payments. The amount of any payment under this
Section 7.17 shall be computed by a certified public accounting firm mutually
and reasonably acceptable to the Executive and the Company, the computation
expenses of which shall be paid by the Company. "Parachute
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Payment" shall mean any payment deemed to constitute a "parachute payment" as
defined in Section 280G of the Internal Revenue Code.
IN WITNESS WHEREOF, the parties hereto have signed their names as of
the day and year first above written.
Chateau Properties, Inc.
By: /s/John A. Boll
----------------------
its Chairman
/s/Gary P. McDaniel
----------------------
Gary P. McDaniel
26
<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of February 11, 1997, by and between
CHATEAU PROPERTIES, INC., a Maryland corporation (hereinafter referred to as
the "COMPANY"), and C.G. Kellogg (hereinafter referred to as the "EXECUTIVE").
WHEREAS, the Amended and Restated Agreement and Plan of Merger,
dated as of September 17, 1996, as amended, among ROC COMMUNITIES, INC., a
Maryland corporation ("ROC"), the Company, and R ACQUISITION SUB, INC., a
Maryland corporation and a direct subsidiary of the Company contemplates that
the Company enter into an employment agreement with the Executive;
WHEREAS, the Company wishes to offer employment to the Executive,
and the Executive wishes to accept such offer, on the terms set forth below;
Accordingly, the parties hereto agree as follows:
1. TERM. The Company hereby employs the Executive, and the
Executive hereby accepts such employment for an initial term commencing as of
the date hereof and ending on December 31, 1999, unless sooner terminated in
accordance with the provisions of Section 4 or Section 5 (the period during
which the Executive is employed hereunder being hereinafter referred to as
the "TERM").
2. DUTIES. The Executive, in his capacity as President of the
Company shall faithfully perform for the Company the duties of said office and
shall perform such other duties of an executive, managerial or administrative
nature as shall be specified and
<PAGE>
designated from time to time by the Board of Directors of the Company (the
"BOARD") (including the performance of services for, and serving on the Board
of Directors of, any subsidiary of the Company without any additional
compensation). The Company shall use its best efforts to have the Executive
elected to the Board, and the Executive agrees to serve on the Board during
the Term without any additional compensation. The Executive shall devote
substantially all of the Executive's business time and effort to the
performance of the Executive's duties hereunder, provided that in no event
shall this sentence prohibit the Executive from performing personal and
charitable activities and any other activities approved by the Board, so long
as such activities do not interfere with the Executive's duties for the
Company.
3. COMPENSATION.
3.1 SALARY. The Company shall pay the Executive during the Term
a salary at the rate of $225,000 per annum (the "ANNUAL SALARY"), in accordance
with the customary payroll practices of the Company applicable to senior
executives generally. Annual Salary will increase annually on January 1 of each
year by a percentage equal to the percentage that represents the average salary
increase for all employees of the Company, or such higher amount as may be
approved by the Board, with such increase to be effective on the date salary
increases are effective for employees of the Company generally and, upon such
increase, the increased amount shall thereafter be deemed to be the "Annual
Salary."
3.2 BONUS. The Executive will be eligible to participate in the
Chateau Communities, Inc. Annual Bonus Program
2
<PAGE>
(the "Bonus Plan"), the terms of which will be established by the Executive
Compensation Committee of the Company.
3.3 BENEFITS - IN GENERAL. The Executive shall be permitted
during the Term to participate in any group life, hospitalization or disability
insurance plans, health programs, pension and profit sharing plans and similar
benefits (but not stock option or other equity-based plans, which are provided
for under Section 3.4) that may be available to other senior executives of the
Company generally, on the same terms as may be applicable to such other
executives, in each case to the extent that the Executive is eligible under the
terms of such plans or programs.
3.4 EQUITY-BASED BENEFITS - IN GENERAL. The Executive will be
eligible to participate in the Company's 1997 Equity Compensation Plan which as
of the date hereof is in the form attached hereto as Exhibit A.
3.5 VACATION. The Executive shall be entitled to vacation of 20
days per year.
3.6 AUTOMOBILE. The Company will provide Executive with an
automobile of suitable standard to the Executive's position. At the option of
the Company, in lieu of providing such automobile, the Company will provide the
Executive with a monthly allowance of $1,000 for the use of an automobile.
3.7 DISABILITY BENEFITS AND LIFE INSURANCE. The Executive shall
be entitled to long-term disability benefits and life insurance benefits from
the Company each of which shall be reasonably commensurate with benefits
provided to similarly situated senior executives of comparable companies.
3
<PAGE>
3.8 EXPENSES. The Company shall pay or reimburse the
Executive for all ordinary and reasonable out-of-pocket expenses actually
incurred (and, in the case of reimbursement, paid) by the Executive during
the Term in the performance of the Executive's services under this Agreement;
provided that the Executive submits such expenses in accordance with the
policies applicable to senior executives of the Company generally.
4. TERMINATION UPON DEATH OR DISABILITY. If the Executive dies
during the Term, the obligations of the Company to or with respect to the
Executive shall terminate in their entirety except as otherwise provided
under this Section 4. If the Executive becomes eligible for disability
benefits under the Company's long-term disability plans and arrangements (or,
if none apply, would have been so eligible under the most recent plan or
arrangement), the Company shall have the right, to the extent permitted by
law, to terminate the employment of the Executive upon notice in writing to
the Executive; provided that the Company will have no right to terminate the
Executive's employment if, in the opinion of a qualified physician reasonably
acceptable to the Company, it is reasonably certain that the Executive will
be able to resume the Executive's duties on a regular full-time basis within
30 days of the date the Executive receives notice of such termination. Upon
death or other termination of employment by virtue of disability, (i) the
Executive (or the Executive's estate or beneficiaries in the case of the
death of the Executive) shall have no right to receive any compensation or
benefit hereunder on and after the effective date of the termination of
employment other
4
<PAGE>
than Annual Salary and other benefits (but excluding any bonuses except as
provided in the Bonus Plan) earned and accrued under this Agreement prior to
the date of termination (and reimbursement under this Agreement for expenses
incurred prior to the date of termination); and (ii) this Agreement shall
otherwise terminate upon such death or other termination of employment and
there shall be no further rights with respect to the Executive hereunder
(except as provided in Section 7.14).
5. CERTAIN TERMINATIONS OF EMPLOYMENT.
5.1 TERMINATION FOR CAUSE; TERMINATION OF EMPLOYMENT BY THE
EXECUTIVE WITHOUT GOOD REASON.
(a) For purposes of this Agreement, "CAUSE" shall mean
(i) the Executive's conviction for (or pleading nolo
contendere to) any felony, or a misdemeanor involving
moral turpitude;
(ii) the Executive's commission of an act of fraud, theft or
dishonesty related to the performance of the Executive's duties
hereunder;
(iii) the willful and continuing failure or habitual neglect by
the Executive to perform the Executive's duties hereunder after
reasonable notice and affording the Executive a reasonable
opportunity to cease such failure or neglect;
(iv) any material violation by the Executive of the covenants
contained in Section 6; or
(v) the Executive's willful and continuing material breach of
this Agreement after reasonable notice and affording the
Executive a reasonable opportunity to cure such breach;
provided that Cause shall in no event be deemed to exist except upon a finding
reflected in a resolution of a majority of the directors of the Board, excluding
the Executive for these purposes,
5
<PAGE>
at a meeting to which the Executive (and the Executive's counsel) shall be
invited upon proper notice.
(b) For purposes of this Agreement, "GOOD REASON" shall mean, unless
otherwise consented to by the Executive,
(i) the material reduction of the Executive's authority,
duties and responsibilities, or the assignment to the
Executive of duties materially inconsistent with the
Executive's position or positions with the Company and
its subsidiaries;
(ii) a reduction in Annual Salary of the Executive or the
failure to provide for the increases in Annual Salary required
by this Agreement;
(iii) the failure by the Company to obtain an agreement in form
and substance reasonably satisfactory to the Executive from any
successor to the business of the Company to assume and agree to
perform this Agreement;
(iv) the failure of the Executive to be nominated and
recommende by the Board for election by the stockholders; or
(v) the Company's material and willful breach of this
Agreement.
Notwithstanding the foregoing, if there exists (without regard to this sentence)
an event or condition that constitutes Good Reason under clause (i), (ii) or (v)
above, the Company shall have 30 days from the date such notice is given to cure
such event or condition and, if the Company does so, such event or condition
shall not constitute Good Reason hereunder.
(c) The Company may terminate the Executive's employment hereunder for
Cause. If the Company terminates the Executive for Cause (other than in the
circumstances set forth in Section 5.3), (i) the Executive shall have no right
to receive any compensation or benefit hereunder on and after the effective date
of the termination of employment other than Annual Salary and other
6
<PAGE>
benefits (but excluding any bonuses except as provided in the Bonus Plan)
earned and accrued under this Agreement prior to the effective date of the
termination of employment (and reimbursement under this Agreement for
expenses incurred prior to the effective date of the termination of
employment); and (ii) this Agreement shall otherwise terminate upon such
termination of employment and the Executive shall have no further rights
hereunder (except as provided in Section 7.14).
(d) The Executive may terminate his employment without Good Reason.
If the Executive terminates the Executive's employment with the Company without
Good Reason (other than in the circumstances set forth in Section 5.3), and such
termination is not covered by Section 5.2 by virtue of the last sentence
thereof, (i) the Executive shall have no right to receive any compensation or
benefit hereunder on and after the effective date of the termination of
employment other than Annual Salary and other benefits (but excluding any
bonuses except as provided in the Bonus Plan or in clause (ii) below) earned and
accrued under this Agreement prior to the effective date of the termination of
employment (and reimbursement under this Agreement for expenses incurred prior
to the effective date of the termination of employment); (ii) the Executive
shall be entitled to receive (A) a cash payment equal to the sum of (x) the
Executive's Annual Salary (as in effect on the effective date of such
termination) payable no later than 30 days after such termination and (y) the
"TERMINATION BONUS," which shall be the average of the two previous annual
bonuses received by the Executive as provided for in the Bonus
7
<PAGE>
Plan, or, in the event the Executive has received only one annual bonus
pursuant to the Bonus Plan at the time of such termination, the Termination
Bonus shall be equal to the amount of such annual bonus, or, in the event the
Executive has not received any annual bonuses pursuant to the Bonus Plan at
the time of such termination, the Termination Bonus shall be equal to the
annual bonus the Executive would have received under the Bonus Plan if the
Executive would have remained employed through the period required to be
entitled to receive the annual bonus, payable no later than 30 days after
such termination (or, if later, as soon as practicable, but in no event more
than 30 days after, the amount of the Termination Bonus is known) and (B) for
a period of one year after termination of employment such continuing health
benefits (including any medical, vision or dental benefits), under the
Company's health plans and programs applicable to senior executives of the
Company generally as the Executive would have received under this Agreement
(and at such costs to the Executive) as would have applied in the absence of
such termination (but not taking into account any post-termination increases
in Annual Salary that may otherwise have occurred without regard to such
termination and that may have favorably affected such benefits); it being
expressly understood and agreed that nothing in this clause (ii) shall
restrict the ability of the Company to amend or terminate such plans and
programs from time to time in its sole discretion; provided, however, that
the Company shall in no event be required to provide such coverage after such
time as the Executive becomes entitled to receive health benefits from
another employer or recipient of the
8
<PAGE>
Executive's services (and provided, further, that such entitlement shall be
determined without regard to any individual waivers or other arrangements);
and (iii) this Agreement shall otherwise terminate upon such termination of
employment and the Executive shall have no further rights hereunder (except
as provided in Section 7.14).
5.2 TERMINATION WITHOUT CAUSE; TERMINATION FOR GOOD REASON. The
Company may terminate the Executive's employment at any time for any reason or
no reason and the Executive may terminate the Executive's employment with the
Company for Good Reason. If the Company or the Executive terminates the
Executive's employment, and such termination is not described in Section 4 or
Section 5.1, (other than in the circumstances set forth in Section 5.3), (i) the
Executive shall have no right to receive any compensation or benefit hereunder
on and after the effective date of the termination of employment other than
Annual Salary and other benefits (but excluding any bonuses except as provided
in the Bonus Plan or in clause (ii) below) earned and accrued under this
Agreement prior to the effective date of the termination of employment (and
reimbursement under this Agreement for expenses incurred prior to the effective
date of the termination of employment); (ii) the Executive shall receive (A) a
cash payment equal to two times the sum of (x) the Executive's Annual Salary (as
in effect on the effective date of such termination) payable no later than 30
days after such termination and (y) the Termination Bonus payable no later than
30 days after such termination (or, if later, as soon as practicable, but in no
event more than 30 days
9
<PAGE>
after, the amount of the Termination Bonus is known) and (B) for a period of
two years after termination of employment such continuing health benefits
(including any medical, vision or dental benefits), under the Company's
health plans and programs applicable to senior executives of the Company
generally as the Executive would have received under this Agreement (and at
such costs to the Executive) as would have applied in the absence of such
termination (but not taking into account any post-termination increases in
Annual Salary that may otherwise have occurred without regard to such
termination and that may have favorably affected such benefits); it being
expressly understood and agreed that nothing in this clause (ii) shall
restrict the ability of the Company to amend or terminate such plans and
programs from time to time in its sole discretion; provided, however, that
the Company shall in no event be required to provide such coverage after such
time as the Executive becomes entitled to receive health benefits from
another employer or recipient of the Executive's services (and provided,
further, that such entitlement shall be determined without regard to any
individual waivers or other arrangements); (iii) all outstanding unvested
options and restricted stock held by the Executive shall vest and all options
shall remain exercisable for two years (or, if longer, the balance of the
regular term of the options); and (iv) this Agreement shall otherwise
terminate upon such termination of employment and the Executive shall have no
further rights hereunder (except as provided in Section 7.14). For purposes
of this Section 5, if the Executive's employment is not terminated under
Section 4 or this Section 5 before the Term would otherwise expire under
10
<PAGE>
Section 1, then a termination of employment at the expiration of the Term,
which termination is not covered by Section 4 or 5.3, shall be covered under
this Section 5.2 rather than under Section 5.1(c); provided, however, that,
in such event, "two times" in clause (ii)(A) above shall be replaced with
"one and one-half times" and "two years" in clause (ii)(B) above shall be
replaced with "18 months".
5.3 TERMINATION AFTER CHANGE OF CONTROL.
(a) For purposes of this Agreement, "Change of Control" means the
occurrence of one of the following:
(i) a "person" or "group" (within the meaning of sections 13(d)
and 14(d) of the Securities and Exchange Act of 1934 (the
"EXCHANGE ACT")) becomes the "beneficial owner" (within the
meaning of Rule 13d-3 under the Exchange Act) of securities of
the Company (including options, warrants, rights and convertible
and exchangeable securities) representing 50% or more of the
combined voting power of the Company's then outstanding
securities in any one or more transactions; provided, however,
that purchases by employee benefit plans of the Company and by
the Company or its affiliates shall be disregarded;
(ii) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the operating assets of the Company;
(iii) the execution and delivery of a definitive agreement by
the Company that provides for a merger or consolidation, or a
transaction having a similar effect (unless such merger,
consolidation or similar transaction is with a subsidiary of the
Company or with another company, a majority of whose outstanding
capital stock is owned by the same persons or entities who own a
majority of the Company's outstanding common stock (the "Common
Stock") at such time), where (A) the Company is not the surviving
corporation and a majority of the Common Stock of the Company is
no longer held by stockholders of the Company immediately prior
to the transaction, (B) the majority of the Common Stock of the
Company is no longer held by the
11
<PAGE>
stockholders of the Company immediately prior to the
transaction, or (C) the Company's Common Stock is converted
into cash, securities or other property (other than the common
stock of a company into which the Company is merged);
provided, however, that, in the event that the contemplated
merger, consolidation or similar transaction is not
consummated, then any rights that may arise under this Section
5.3(a) by virtue of such Change of Control shall cease to
apply;
(iv) at a time when the Common Stock is registered under
Section 12 of the Exchange Act, a person other than the
Company makes a tender or exchange offer for 50% or more of
the Common Stock pursuant to which purchases of any amount of
Common Stock are made; or
(v) a majority of the members of the Board are not persons who
(A) had been directors of the Company for at least the preceding
24 consecutive months or (B) when they initially were elected to
the Board, (I) were nominated (if they were elected by the
stockholders) or elected (if they were elected by the directors)
with the affirmative vote of two-thirds of the directors who were
Continuing Directors (as defined below) at the time of the
nomination or election by the Board and (II) were not elected as
a result of an actual or threatened solicitation of proxies or
consents by a person other than the Board or an agreement
intended to avoid or settle such a proxy solicitation (the
directors described in clauses (A) and (B) being "CONTINUING
DIRECTORS").
Notwithstanding the foregoing, a "Change of Control" shall not include an
offering of any class of shares of common stock of the Company or any of its
affiliates under the Securities Act of 1933, as amended.
(b) Notwithstanding Section 5.1 or 5.2, in the event of a termination
of the Executive by the Company or the Executive for any reason other than as
described in Section 4 within the one-year period following a Change of Control,
(i) the Executive shall have no right to receive any compensation or benefit
hereunder on and after the effective date of the termination of employment other
12
<PAGE>
than Annual Salary and other benefits (but excluding any bonuses except as
provided in the Bonus Plan or in clause (ii) below) earned and accrued under
this Agreement prior to the effective date of the termination of employment (and
reimbursement under this Agreement for expenses incurred prior to the effective
date of the termination of employment); (ii) the Executive shall receive (A) a
cash payment equal to three times the sum of (x) the Executive's Annual Salary
(as in effect on the effective date of such termination) payable no later than
30 days after such termination and (y) the Termination Bonus payable no later
than 30 days after such termination (or, if later, as soon as practicable, but
in no event more than 30 days after, the amount of the Termination Bonus is
known) and (B) for a period of three years after termination of employment (x)
such continuing health benefits (including any medical, vision or dental
benefits), under the Company's health plans and programs applicable to senior
executives of the Company generally as the Executive would have received under
this Agreement (and at such costs to the Executive) as would have applied in the
absence of such termination (but not taking into account any post-termination
increases in Annual Salary that may otherwise have occurred without regard to
such termination and that may have favorably affected such benefits); it being
expressly understood and agreed that nothing in this clause (ii) shall restrict
the ability of the Company to amend or terminate such plans and programs from
time to time in its sole discretion; provided, however, that the Company shall
in no event be required to provide such coverage after such time as the
Executive becomes entitled to
13
<PAGE>
receive health benefits from another employer or recipient of the Executive's
services (and provided, further, that such entitlement shall be determined
without regard to any individual waivers or other arrangements) and (y) an
amount reasonably equivalent economically to the pension benefits the
Executive would have received if the Executive remained employed for such
three-year period; (iii) all outstanding unvested options and restricted
stock held by the Executive shall vest and all options shall remain
exercisable for two years (or, if longer, the balance of the regular term of
the options); and (iv) this Agreement shall otherwise terminate upon such
termination of employment and the Executive shall have no further rights
hereunder (except as provided in Section 7.14).
6. COVENANTS OF THE EXECUTIVE.
6.1 COVENANT AGAINST COMPETITION; OTHER COVENANTS. The Executive
acknowledges that (i) the principal business of the Company is the owning,
acquiring, developing or operating of manufactured housing communities (such
businesses, and any and all other businesses that after the date hereof, and
from time to time during the Term, become material and substantial with respect
to the Company's then-overall business, herein being collectively referred to as
the "BUSINESS"); (ii) the Company knows of a limited number of persons who have
developed the Company's Business; (iii) the Company's Business is, in part,
national in scope; (iv) the Executive's work for the Company and its
subsidiaries (and the predecessors of either) has given and will continue to
give the Executive access to the confidential affairs and proprietary
14
<PAGE>
information of the Company; (v) the covenants and agreements of the Executive
contained in this Section 6 are essential to the business and goodwill of the
Company; and (vi) the Company would not have entered into this Agreement but for
the covenants and agreements set forth in this Section 6. In light of the
foregoing, during the Term and for a period of one year thereafter (and, as to
Section 6.1(b) and (d), at any time during and after the Executive's employment
with the Company and its subsidiaries (and the predecessors of either)):
(a) The Executive shall not, directly or indirectly, own,
manage, control or participate in the ownership, management, or control of, or
be employed or engaged by or otherwise affiliated or associated as an employee,
employer, consultant, agent, principal, partner, stockholder, corporate officer,
director or in any other individual or representative capacity, engage or
participate in any business that is in competition in any manner whatsoever with
the business of the Company in any county of any state in which the Company owns
or leases manufactured home communities. In the case of a termination by the
Company without Cause or by the Executive for Good Reason, the preceding
covenant shall expire on the date of termination; provided, however, that,
notwithstanding the foregoing, the Executive may invest in securities of any
entity, solely for investment purposes and without participating in the business
thereof, if (i) such securities are traded on any national securities exchange
or the National Association of Securities Dealers, Inc. Automated Quotation
System, (ii) the Executive is not
15
<PAGE>
a controlling person of, or a member of a group which controls, such entity
and (iii) the Executive does not, directly or indirectly, own one percent or
more of any class of securities of such entity; provided that this Section
6.1(a) shall not apply in the event of and effective upon a Change of Control.
(b) The Executive shall keep secret and retain in
strictest confidence, and shall not use for his benefit or the benefit of
others, except in connection with the business and affairs of the Company and
its affiliates, all confidential matters relating to the Company's Business
and the business of any of its affiliates and to the Company and any of its
affiliates, learned by the Executive heretofore or hereafter directly or
indirectly from the Company or any of its subsidiaries (or any predecessor of
either) (the "CONFIDENTIAL COMPANY INFORMATION"), including, without
limitation, information with respect to the Business and any aspect thereof,
profit or loss figures, and the Company's or its affiliates' (or any of their
predecessors') properties, and shall not disclose such Confidential Company
Information to anyone outside of the Company except with the Company's
express written consent and except for Confidential Company Information which
(i) at the time of receipt or thereafter becomes publicly known through no
wrongful act of the Executive, (ii) is clearly obtainable in the public
domain, (iii) was not acquired by the Executive in connection with the
Executive's employment or affiliation with the Company, (iv) was not acquired
by the Executive from the Company or its representatives, or (v) is required
to be disclosed by rule of law or by order of a court or governmental body or
agency.
16
<PAGE>
(c) The Executive shall not, without the Company's prior
written consent, directly or indirectly, (i) knowingly solicit or encourage to
leave the employment or other service of the Company or any of its affiliates,
any employee thereof or hire (on behalf of the Executive) or any other person or
entity) any employee who has left the employment or other service of the Company
or any of its affiliates (or any predecessor of either) within one year of the
termination of such employee's or independent contractor's employment or other
service with the Company and its affiliates, or (ii) whether for the Executive's
own account or for the account of any other person, firm, corporation or other
business organization, intentionally interfere with the Company's or any of its
affiliates' relationship with, or endeavor to entice away from the Company or
any of its affiliates, any person who during the Executive's employment with the
Company and its affiliates (or the predecessors of either) is or was a customer
or client of the Company or any of its affiliates (or any predecessor of
either); provided that this Section 6.1(c) shall not apply in the event of and
effective upon a Change of Control.
(d) All memoranda, notes, lists, records, property and any
other tangible product and documents (and all copies thereof) made, produced or
compiled by the Executive or made available to the Executive concerning the
Business of the Company and its affiliates shall be the Company's property and
shall be delivered to the Company at any time on request.
6.2 RIGHTS AND REMEDIES UPON BREACH. The Executive acknowledges and
agrees that any breach by him of any of the
17
<PAGE>
provisions of Section 6.1 (the "RESTRICTIVE COVENANTS") would result in
irreparable injury and damage for which money damages would not provide an
adequate remedy. Therefore, if the Executive breaches, or threatens to
commit a breach of, any of the Restrictive Covenants, the Company and its
affiliates shall have the right and remedy to have the Restrictive Covenants
specifically enforced (without posting bond and without the need to prove
damages) by any court having equity jurisdiction, including, without
limitation, the right to an entry against the Executive of restraining orders
and injunctions (preliminary, mandatory, temporary and permanent) against
violations, threatened or actual, and whether or not then continuing, of such
covenants. This right and remedy shall be in addition to, and not in lieu
of, any other rights and remedies available to the Company and its affiliates
under law or in equity (including, without limitation, the recovery of
damages). The existence of any claim or cause of action by the Executive,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement of the Restrictive Covenants.
7. OTHER PROVISIONS.
7.1 SEVERABILITY. The Executive acknowledges and agrees that
(i) the Executive has had an opportunity to seek advice of counsel in connection
with this Agreement and (ii) the Restrictive Covenants are reasonable in
geographical and temporal scope and in all other respects. If it is determined
that any of the provisions of this Agreement, including, without limitation, any
of the Restrictive Covenants, or any part thereof, is invalid
18
<PAGE>
or unenforceable, the remainder of the provisions of this Agreement shall not
thereby be affected and shall be given full effect, without regard to the
invalid portions.
7.2 DURATION AND SCOPE OF COVENANTS. If any court or other
decision-maker of competent jurisdiction determines that any of the Executive's
covenants contained in this Agreement, including, without limitation, any of the
Restrictive Covenants, or any part thereof, are unenforceable because of the
duration or geographical scope of such provision, then, after such determination
has become final and unappealable, the duration or scope of such provision, as
the case may be, shall be reduced so that such provision becomes enforceable
and, in its reduced form, such provision shall then be enforceable and shall be
enforced.
7.3 ENFORCEABILITY; JURISDICTIONS. The Company and the
Executive intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope of
the Restrictive Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants wholly unenforceable by reason of
breadth of scope or otherwise it is the intention of the Company and the
Executive that such determination not bar or in any way affect the Company's
right, or the right of any of its affiliates, to the relief provided above in
the courts of any other jurisdiction within the geographical scope of such
Restrictive Covenants, as to breaches of such Restrictive Covenants in such
other respective jurisdictions, such Restrictive Covenants as they relate to
each jurisdiction's being, for this purpose, severable, diverse and
19
<PAGE>
independent covenants, subject, where appropriate, to the doctrine of RES
JUDICATA. Any controversy or claim arising out of or relating to this
Agreement or the breach of this Agreement that is not resolved by the
Executive and the Company (or its affiliates, where applicable), other than
those arising under Section 6, to the extent necessary for the Company (or
its affiliates, where applicable) to avail itself of the rights and remedies
provided under Section 6.2, shall be submitted to arbitration in Denver,
Colorado in accordance with Colorado law and the procedures of the American
Arbitration Association. The determination of the arbitrator(s) shall be
conclusive and binding on the Company (or its affiliates, where applicable)
and the Executive and judgment may be entered on the arbitrator(s)' award in
any court having jurisdiction.
7.4 ATTORNEYS' FEES. In the event of any legal proceeding
(including an arbitration proceeding) relating to this Agreement or any term or
provision thereof in which the Executive is the prevailing party, the Company
shall be responsible to pay or reimburse the Executive for all reasonable
attorneys' fees incurred by the Executive in connection with such proceeding.
7.5 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
20
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transmission or, if mailed, five days after the date of deposit in the United
States mails as follows:
(i) If to the Company, to:
6430 South Quebec Street
Englewood, Colorado 80111
(ii) If to the Executive, to:
C.G. Kellogg
c/o Chateau Communities, Inc.
6430 South Quebec Street
Englewood, Colorado 80111
with a copy in either case to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Jay L. Bernstein, Esq.
and
Timmis & Inman L.L.P.
300 Talon Centre
Detroit, Michigan 48207
Attention: Henry J. Brennan, III, Esq.
Any such person may by notice given in accordance with this Section to the other
parties hereto designate another address or person for receipt by such person of
notices hereunder.
7.6 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with the Company or its
subsidiaries (or any predecessor of either).
21
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7.7 WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the parties or, in the case of a waiver,
by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege nor any single or partial exercise of any such right, power or
privilege, preclude any other or further exercise thereof or the exercise of any
other such right, power or privilege.
7.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
7.9 ASSIGNMENT. This Agreement, and the Executive's rights and
obligations hereunder, may not be assigned by the Executive; any purported
assignment by the Executive in violation hereof shall be null and void. In the
event of any sale, transfer or other disposition of all or substantially all of
the Company's assets or business, whether by merger, consolidation or otherwise,
the Company may assign this Agreement and its rights hereunder.
7.10 WITHHOLDING. The Company shall be entitled to withhold from
any payments or deemed payments any amount of withholding required by law. No
other taxes, fees, impositions, duties or other charges or offsets of any kind
shall be deducted or
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withheld from amounts payable hereunder, unless otherwise required by law.
7.11 NO DUTY TO MITIGATE. The Executive shall not be required
to mitigate damages or the amount of any payment provided for under this
Agreement by seeking other employment or otherwise, nor will any payments
hereunder be subject to offset in the event the Executive does mitigate.
7.12 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, permitted
assigns, heirs, executors and legal representatives.
7.13 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original but all such counterparts together shall constitute one and
the same instrument. Each counterpart may consist of two copies hereof each
signed by one of the parties hereto.
7.14 SURVIVAL. Anything contained in this Agreement to the
contrary notwithstanding, the provisions of Sections 6, 7.3, 7.4 and 7.10 and
the other provisions of this Section 7 (to the extent necessary to effectuate
the survival of Sections 6, 7.3, 7.4 and 7.10) shall survive termination of this
Agreement and any termination of the Executive's employment hereunder.
7.15 EXISTING AGREEMENTS. Executive represents to the Company
that the Executive is not subject or a party to any employment or consulting
agreement, non-competition covenant or other agreement, covenant
or understanding which might prohibit him
23
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from executing this Agreement or limit the Executive's ability to fulfill the
Executive's responsibilities hereunder.
7.16 HEADINGS. The headings in this Agreement are for reference
only and shall not affect the interpretation of this Agreement.
7.17 PARACHUTE PROVISIONS. If any amount payable to or other
benefit receivable by the Executive pursuant to this Agreement is deemed to
constitute a Parachute Payment (as defined below), alone or when added to any
other amount payable or paid to or other benefit receivable or received by the
Executive which is deemed to constitute a Parachute Payment (whether or not
under an existing plan, arrangement or other agreement), and would result in the
imposition on the Executive of an excise tax under Section 4999 of the Internal
Revenue Code, then, in addition to any other benefits to which the Executive is
entitled under this Agreement, the Executive shall be paid by the Company an
amount in cash equal to the sum of the excise taxes payable by the Executive by
reason of receiving Parachute Payments plus the amount necessary to put the
Executive in the same after-tax position (taking into account any and all
applicable federal, state and local excise, income or other taxes at the highest
applicable rates on such Parachute Payments and on any payments under this
Section 7.17) and if no excise taxes had been imposed with respect to Parachute
Payments. The amount of any payment under this Section 7.17 shall be computed
by a certified public accounting firm mutually and reasonably acceptable to the
Executive and the Company, the computation expenses of which shall be paid by
the Company. "Parachute
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<PAGE>
Payment" shall mean any payment deemed to constitute a
"parachute payment" as defined in Section 280G of the Internal Revenue Code.
IN WITNESS WHEREOF, the parties hereto have signed their names as of
the day and year first above written.
Chateau Properties, Inc.
By: /s/ JOHN A. BOLL
-----------------------------
its Chairman
/s/ C.G. KELLOGG
-----------------------------
C.G. Kellogg
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of February 11, 1997, by and between
CHATEAU PROPERTIES, INC., a Maryland corporation (hereinafter referred to as the
"COMPANY"), and James B. Grange (hereinafter referred to as the "EXECUTIVE").
WHEREAS, the Amended and Restated Agreement and Plan of Merger, dated
as of September 17, 1996, as amended, among ROC COMMUNITIES, INC., a Maryland
corporation ("ROC"), the Company, and R ACQUISITION SUB, INC., a Maryland
corporation and a direct subsidiary of the Company contemplates that the Company
enter into an employment agreement with the Executive;
WHEREAS, the Company wishes to offer employment to the Executive, and
the Executive wishes to accept such offer, on the terms set forth below;
Accordingly, the parties hereto agree as follows:
1. TERM. The Company hereby employs the Executive, and the
Executive hereby accepts such employment for an initial term commencing as of
the date hereof and ending on December 31, 1999, unless sooner terminated in
accordance with the provisions of Section 4 or Section 5 (the period during
which the Executive is employed hereunder being hereinafter referred to as the
"TERM").
2. DUTIES. The Executive, in his capacity as Chief Operating
Officer of the Company shall faithfully perform for the Company the duties of
said office and shall perform such other duties of an executive, managerial or
administrative nature as
<PAGE>
shall be specified and designated from time to time by the Board of Directors
of the Company (the "BOARD"), the Chief Executive Officer or the President of
the Company (including the performance of services for, and serving on the
Board of Directors of, any subsidiary of the Company without any additional
compensation). The Executive shall devote substantially all of the
Executive's business time and effort to the performance of the Executive's
duties hereunder, provided that in no event shall this sentence prohibit the
Executive from performing (i) services for ROC GP Corp. (provided that the
activities of the Executive and ROC GP Corp. do not materially increase from
the level as of the date of this Agreement) and other activities related to
the business of ROC, the Company and their affiliates and (ii) personal and
charitable activities and any other activities approved by the Board, so long
as such activities do not interfere with the Executive's duties for the
Company.
3. COMPENSATION.
3.1 SALARY. The Company shall pay the Executive during the Term
a salary at the rate of $190,000 per annum (the "ANNUAL SALARY"), in accordance
with the customary payroll practices of the Company applicable to senior
executives generally. Annual Salary will increase annually on January 1 of each
year by a percentage equal to the percentage that represents the average salary
increase for all employees of the Company, or such higher amount as may be
approved by the Board, with such increase to be effective on the date salary
increases are effective for employees
2
<PAGE>
of the Company generally and, upon such increase, the increased amount shall
thereafter be deemed to be the "Annual Salary."
3.2 BONUS. The Executive will be eligible to participate in the
Chateau Communities, Inc. Annual Bonus Program (the "Bonus Plan"), the terms of
which will be established by the Executive Compensation Committee of the
Company.
3.3 BENEFITS - IN GENERAL. The Executive shall be permitted
during the Term to participate in any group life, hospitalization or disability
insurance plans, health programs, pension and profit sharing plans and similar
benefits (but not stock option or other equity-based plans, which are provided
for under Section 3.4) that may be available to other senior executives of the
Company generally, on the same terms as may be applicable to such other
executives, in each case to the extent that the Executive is eligible under the
terms of such plans or programs.
3.4 EQUITY-BASED BENEFITS - IN GENERAL. The Executive will be
eligible to participate in the Company's 1997 Equity Compensation Plan which as
of the date hereof is in the form attached hereto as Exhibit A.
3.5 VACATION. The Executive shall be entitled to vacation of 20
days per year.
3.6 AUTOMOBILE. The Company will provide the Executive a
monthly allowance of $750 for the use of an automobile. At the option of the
Company, in lieu of providing such allowance, the Company will provide the
Executive with an automobile of suitable standard to the Executive's position.
3
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3.7 DISABILITY BENEFITS AND LIFE INSURANCE. The Executive shall
be entitled to long-term disability benefits and life insurance benefits from
the Company each of which shall be reasonably commensurate with benefits
provided to similarly situated senior executives of comparable companies.
3.8 EXPENSES. The Company shall pay or reimburse the Executive
for all ordinary and reasonable out-of-pocket expenses actually incurred (and,
in the case of reimbursement, paid) by the Executive during the Term in the
performance of the Executive's services under this Agreement; provided that the
Executive submits such expenses in accordance with the policies applicable to
senior executives of the Company generally.
4. TERMINATION UPON DEATH OR DISABILITY. If the Executive dies
during the Term, the obligations of the Company to or with respect to the
Executive shall terminate in their entirety except as otherwise provided under
this Section 4. If the Executive becomes eligible for disability benefits under
the Company's long-term disability plans and arrangements (or, if none apply,
would have been so eligible under the most recent plan or arrangement), the
Company shall have the right, to the extent permitted by law, to terminate the
employment of the Executive upon notice in writing to the Executive; provided
that the Company will have no right to terminate the Executive's employment if,
in the opinion of a qualified physician reasonably acceptable to the Company, it
is reasonably certain that the Executive will be able to resume the Executive's
duties on a regular full-time basis within 30 days of the date the Executive
receives notice of such
4
<PAGE>
termination. Upon death or other termination of employment by virtue of
disability, (i) the Executive (or the Executive's estate or beneficiaries in
the case of the death of the Executive) shall have no right to receive any
compensation or benefit hereunder on and after the effective date of the
termination of employment other than Annual Salary and other benefits (but
excluding any bonuses except as provided in the Bonus Plan) earned and
accrued under this Agreement prior to the date of termination (and
reimbursement under this Agreement for expenses incurred prior to the date of
termination); and (ii) this Agreement shall otherwise terminate upon such
death or other termination of employment and there shall be no further rights
with respect to the Executive hereunder (except as provided in Section 7.14).
5. CERTAIN TERMINATIONS OF EMPLOYMENT.
5.1 TERMINATION FOR CAUSE; TERMINATION OF EMPLOYMENT BY THE
EXECUTIVE WITHOUT GOOD REASON.
(a) For purposes of this Agreement, "CAUSE" shall mean
(i) the Executive's conviction for (or pleading nolo contendere
to) any felony, or a misdemeanor involving moral turpitude;
(ii) the Executive's commission of an act of fraud, theft or
dishonesty related to the performance of the Executive's duties
hereunder;
(iii) the willful and continuing failure or habitual neglect by
the Executive to perform the Executive's duties hereunder after
reasonable notice and affording the Executive a reasonable
opportunity to cease such failure or neglect;
(iv) any material violation by the Executive of the covenants
contained in Section 6; or
(v) the Executive's willful and continuing material breach of
this Agreement after reasonable
5
<PAGE>
notice and affording the Executive a reasonable opportunity to
cure such breach.
(b) For purposes of this Agreement, "GOOD REASON" shall mean, unless
otherwise consented to by the Executive,
(i) the material reduction of the Executive's authority, duties
and responsibilities, or the assignment to the Executive of
duties materially inconsistent with the Executive's position or
positions with the Company and its subsidiaries;
(ii) a reduction in Annual Salary of the Executive or the failure
to provide for the increases in Annual Salary required by this
Agreement;
(iii) the failure by the Company to obtain an agreement in form
and substance reasonably satisfactory to the Executive from any
successor to the business of the Company to assume and agree to
perform this Agreement; or
(iv) the Company's material and willful breach of this Agreement.
Notwithstanding the foregoing, if there exists (without regard to this sentence)
an event or condition that constitutes Good Reason under clause (i), (ii) or
(iv) above, the Company shall have 30 days from the date such notice is given to
cure such event or condition and, if the Company does so, such event or
condition shall not constitute Good Reason hereunder.
(c) The Company may terminate the Executive's employment hereunder for
Cause. If the Company terminates the Executive for Cause, (i) the Executive
shall have no right to receive any compensation or benefit hereunder on and
after the effective date of the termination of employment other than Annual
Salary and other benefits (but excluding any bonuses except as provided in the
Bonus Plan) earned and accrued under this Agreement prior to the effective date
of the termination of employment (and reimbursement
6
<PAGE>
under this Agreement for expenses incurred prior to the effective date of the
termination of employment); and (ii) this Agreement shall otherwise terminate
upon such termination of employment and the Executive shall have no further
rights hereunder (except as provided in Section 7.14).
(d) The Executive may terminate his employment without Good Reason.
If the Executive terminates the Executive's employment with the Company without
Good Reason and such termination is not covered by Section 5.2 by virtue of the
last sentence thereof, (i) the Executive shall have no right to receive any
compensation or benefit hereunder on and after the effective date of the
termination of employment other than Annual Salary and other benefits (but
excluding any bonuses except as provided in the Bonus Plan or in clause (ii)
below) earned and accrued under this Agreement prior to the effective date of
the termination of employment (and reimbursement under this Agreement for
expenses incurred prior to the effective date of the termination of employment);
(ii) the Executive shall be entitled to receive (A) a cash payment equal to the
sum of (x) the Executive's Annual Salary (as in effect on the effective date of
such termination) payable no later than 30 days after such termination and (y)
the "TERMINATION BONUS," which shall be the average of the two previous annual
bonuses received by the Executive as provided for in the Bonus Plan, or, in the
event the Executive has received only one annual bonus pursuant to the Bonus
Plan at the time of such termination, the Termination Bonus shall be equal to
the amount of such annual bonus, or, in the event the Executive has not received
any annual
7
<PAGE>
bonuses pursuant to the Bonus Plan at the time of such termination, the
Termination Bonus shall be equal to the annual bonus the Executive would have
received under the Bonus Plan if the Executive would have remained employed
through the period required to be entitled to receive the annual bonus,
payable no later than 30 days after such termination (or, if later, as soon
as practicable, but in no event more than 30 days after, the amount of the
Termination Bonus is known) and (B) for a period of one year after
termination of employment such continuing health benefits (including any
medical, vision or dental benefits), under the Company's health plans and
programs applicable to senior executives of the Company generally as the
Executive would have received under this Agreement (and at such costs to the
Executive) as would have applied in the absence of such termination (but not
taking into account any post-termination increases in Annual Salary that may
otherwise have occurred without regard to such termination and that may have
favorably affected such benefits); it being expressly understood and agreed
that nothing in this clause (ii) shall restrict the ability of the Company to
amend or terminate such plans and programs from time to time in its sole
discretion; provided, however, that the Company shall in no event be required
to provide such coverage after such time as the Executive becomes entitled to
receive health benefits from another employer or recipient of the Executive's
services (and provided, further, that such entitlement shall be determined
without regard to any individual waivers or other arrangements); and (iii)
this Agreement shall otherwise terminate upon such termination of employment
and the Executive
8
<PAGE>
shall have no further rights hereunder (except as provided in Section 7.14).
5.2 TERMINATION WITHOUT CAUSE; TERMINATION FOR GOOD REASON. The
Company may terminate the Executive's employment at any time for any reason or
no reason and the Executive may terminate the Executive's employment with the
Company for Good Reason. If the Company or the Executive terminates the
Executive's employment, and such termination is not described in Section 4 or
Section 5.1, (i) the Executive shall have no right to receive any compensation
or benefit hereunder on and after the effective date of the termination of
employment other than Annual Salary and other benefits (but excluding any
bonuses except as provided in the Bonus Plan or in clause (ii) below) earned and
accrued under this Agreement prior to the effective date of the termination of
employment (and reimbursement under this Agreement for expenses incurred prior
to the effective date of the termination of employment); (ii) the Executive
shall receive (A) a cash payment equal to two times the sum of (x) the
Executive's Annual Salary (as in effect on the effective date of such
termination) payable no later than 30 days after such termination and (y) the
Termination Bonus payable no later than 30 days after such termination (or, if
later, as soon as practicable, but in no event more than 30 days after, the
amount of the Termination Bonus is known) and (B) for a period of two years
after termination of employment such continuing health benefits (including any
medical, vision or dental benefits), under the Company's health plans and
programs applicable to senior executives of the Company generally as the
Executive would have
9
<PAGE>
received under this Agreement (and at such costs to the Executive) as would
have applied in the absence of such termination (but not taking into account
any post-termination increases in Annual Salary that may otherwise have
occurred without regard to such termination and that may have favorably
affected such benefits); it being expressly understood and agreed that
nothing in this clause (ii) shall restrict the ability of the Company to
amend or terminate such plans and programs from time to time in its sole
discretion; provided, however, that the Company shall in no event be required
to provide such coverage after such time as the Executive becomes entitled to
receive health benefits from another employer or recipient of the Executive's
services (and provided, further, that such entitlement shall be determined
without regard to any individual waivers or other arrangements); (iii) all
outstanding unvested options and restricted stock held by the Executive shall
vest and all options shall remain exercisable for two years (or, if longer,
the balance of the regular term of the options); and (iv) this Agreement
shall otherwise terminate upon such termination of employment and the
Executive shall have no further rights hereunder (except as provided in
Section 7.14). For purposes of this Section 5, if the Executive's employment
is not terminated under Section 4 or this Section 5 before the Term would
otherwise expire under Section 1, then a termination of employment at the
expiration of the Term, which termination is not covered by Section 4, shall
be covered under this Section 5.2 rather than under Section 5.1(c); provided,
however, that, in such event, "two times" in clause (ii)(A) above shall be
replaced with "one and one-half times" and
10
<PAGE>
"two years" in clause (ii)(B) above shall be replaced with "18 months".
6. COVENANTS OF THE EXECUTIVE.
6.1 COVENANT AGAINST COMPETITION; OTHER COVENANTS. The Executive
acknowledges that (i) the principal business of the Company is the owning,
acquiring, developing or operating of manufactured housing communities (such
businesses, and any and all other businesses that after the date hereof, and
from time to time during the Term, become material and substantial with respect
to the Company's then-overall business, herein being collectively referred to as
the "BUSINESS"); (ii) the Company knows of a limited number of persons who have
developed the Company's Business; (iii) the Company's Business is, in part,
national in scope; (iv) the Executive's work for the Company and its
subsidiaries (and the predecessors of either) has given and will continue to
give the Executive access to the confidential affairs and proprietary
information of the Company; (v) the covenants and agreements of the Executive
contained in this Section 6 are essential to the business and goodwill of the
Company; and (vi) the Company would not have entered into this Agreement but for
the covenants and agreements set forth in this Section 6. In light of the
foregoing, during the Term and for a period of one year thereafter (and, as to
Section 6.1(b) and (d), at any time during and after the Executive's employment
with the Company and its subsidiaries (and the predecessors of either)):
(a) Except for such affiliation with ROC GP Corp. and its
affiliates (provided that the activities of the
11
<PAGE>
Executive and ROC GP Corp. do not materially increase from the level as of
the date of this Agreement), the Executive shall not, directly or indirectly,
own, manage, control or participate in the ownership, management, or control
of, or be employed or engaged by or otherwise affiliated or associated as an
employee, employer, consultant, agent, principal, partner, stockholder,
corporate officer, director or in any other individual or representative
capacity, engage or participate in any business that is in competition in any
manner whatsoever with the business of the Company in any county of any state
in which the Company owns or leases manufactured home communities. In the
case of a termination by the Company without Cause or by the Executive for
Good Reason, the preceding covenant shall expire on the date of termination;
provided, however, that, notwithstanding the foregoing, the Executive may
invest in securities of any entity, solely for investment purposes and
without participating in the business thereof, if (i) such securities are
traded on any national securities exchange or the National Association of
Securities Dealers, Inc. Automated Quotation System, (ii) the Executive is
not a controlling person of, or a member of a group which controls, such
entity and (iii) the Executive does not, directly or indirectly, own one
percent or more of any class of securities of such entity.
(b) The Executive shall keep secret and retain in strictest
confidence, and shall not use for his benefit or the benefit of others, except
in connection with the business and affairs of the Company and its affiliates,
all confidential matters
12
<PAGE>
relating to the Company's Business and the business of any of its affiliates
and to the Company and any of its affiliates, learned by the Executive
heretofore or hereafter directly or indirectly from the Company or any of its
subsidiaries (or any predecessor of either) (the "CONFIDENTIAL COMPANY
INFORMATION"), including, without limitation, information with respect to the
Business and any aspect thereof, profit or loss figures, and the Company's
or its affiliates' (or any of their predecessors') properties, and shall not
disclose such Confidential Company Information to anyone outside of the
Company except with the Company's express written consent and except for
Confidential Company Information which (i) at the time of receipt or
thereafter becomes publicly known through no wrongful act of the Executive,
(ii) is clearly obtainable in the public domain, (iii) was not acquired by
the Executive in connection with the Executive's employment or affiliation
with the Company, (iv) was not acquired by the Executive from the Company or
its representatives, or (v) is required to be disclosed by rule of law or by
order of a court or governmental body or agency.
(c) The Executive shall not, without the Company's prior
written consent, directly or indirectly, (i) knowingly solicit or encourage to
leave the employment or other service of the Company or any of its affiliates,
any employee thereof or hire (on behalf of the Executive) or any other person or
entity) any employee who has left the employment or other service of the Company
or any of its affiliates (or any predecessor of either) within one year of the
termination of such employee's or independent contractor's employment or other
service with the
13
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Company and its affiliates, or (ii) whether for the Executive's own account
or for the account of any other person, firm, corporation or other business
organization, intentionally interfere with the Company's or any of its
affiliates' relationship with, or endeavor to entice away from the Company or
any of its affiliates, any person who during the Executive's employment with
the Company and its affiliates (or the predecessors of either) is or was a
customer or client of the Company or any of its affiliates (or any
predecessor of either).
(d) All memoranda, notes, lists, records, property and
any other tangible product and documents (and all copies thereof) made,
produced or compiled by the Executive or made available to the Executive
concerning the Business of the Company and its affiliates shall be the
Company's property and shall be delivered to the Company at any time on
request.
6.2 RIGHTS AND REMEDIES UPON BREACH. The Executive acknowledges and
agrees that any breach by him of any of the provisions of Section 6.1 (the
"RESTRICTIVE COVENANTS") would result in irreparable injury and damage for which
money damages would not provide an adequate remedy. Therefore, if the Executive
breaches, or threatens to commit a breach of, any of the Restrictive Covenants,
the Company and its affiliates shall have the right and remedy to have the
Restrictive Covenants specifically enforced (without posting bond and without
the need to prove damages) by any court having equity jurisdiction, including,
without limitation, the right to an entry against the Executive of restraining
orders and injunctions (preliminary, mandatory,
14
<PAGE>
temporary and permanent) against violations, threatened or actual, and
whether or not then continuing, of such covenants. This right and remedy
shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company and its affiliates under law or in equity
(including, without limitation, the recovery of damages). The existence of
any claim or cause of action by the Executive, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement of
the Restrictive Covenants.
7. OTHER PROVISIONS.
7.1 SEVERABILITY. The Executive acknowledges and agrees that
(i) the Executive has had an opportunity to seek advice of counsel in connection
with this Agreement and (ii) the Restrictive Covenants are reasonable in
geographical and temporal scope and in all other respects. If it is determined
that any of the provisions of this Agreement, including, without limitation, any
of the Restrictive Covenants, or any part thereof, is invalid or unenforceable,
the remainder of the provisions of this Agreement shall not thereby be affected
and shall be given full effect, without regard to the invalid portions.
7.2 DURATION AND SCOPE OF COVENANTS. If any court or other
decision-maker of competent jurisdiction determines that any of the Executive's
covenants contained in this Agreement, including, without limitation, any of the
Restrictive Covenants, or any part thereof, are unenforceable because of the
duration or geographical scope of such provision, then, after such determination
has become final and unappealable, the duration or
15
<PAGE>
scope of such provision, as the case may be, shall be reduced so that such
provision becomes enforceable and, in its reduced form, such provision shall
then be enforceable and shall be enforced.
7.3 ENFORCEABILITY; JURISDICTIONS. The Company and the
Executive intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope
of the Restrictive Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants wholly unenforceable by reason
of breadth of scope or otherwise it is the intention of the Company and the
Executive that such determination not bar or in any way affect the Company's
right, or the right of any of its affiliates, to the relief provided above in
the courts of any other jurisdiction within the geographical scope of such
Restrictive Covenants, as to breaches of such Restrictive Covenants in such
other respective jurisdictions, such Restrictive Covenants as they relate to
each jurisdiction's being, for this purpose, severable, diverse and
independent covenants, subject, where appropriate, to the doctrine of RES
JUDICATA. Any controversy or claim arising out of or relating to this
Agreement or the breach of this Agreement that is not resolved by the
Executive and the Company (or its affiliates, where applicable), other than
those arising under Section 6, to the extent necessary for the Company (or
its affiliates, where applicable) to avail itself of the rights and remedies
provided under Section 6.2, shall be submitted to arbitration in Denver,
Colorado in accordance with Colorado law and the procedures of the American
Arbitration Association. The determination of the
16
<PAGE>
arbitrator(s) shall be conclusive and binding on the Company (or its
affiliates, where applicable) and the Executive and judgment may be entered
on the arbitrator(s)' award in any court having jurisdiction.
7.4 ATTORNEYS' FEES. In the event of any legal proceeding
(including an arbitration proceeding) relating to this Agreement or any term or
provision thereof in which the Executive is the prevailing party, the Company
shall be responsible to pay or reimburse the Executive for all reasonable
attorneys' fees incurred by the Executive in connection with such proceeding.
7.5 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, five days after the date of deposit in the United
States mails as follows:
(i) If to the Company, to:
6430 South Quebec Street
Englewood, Colorado 80111
(ii) If to the Executive, to:
James B. Grange
6830 East Costilla Circle
Englewood, Colorado 80112
with a copy in either case to:
Rogers & Wells
200 Park Avenue
17
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New York, New York 10166
Attention: Jay L. Bernstein, Esq.
and
Timmis & Inman L.L.P.
300 Talon Centre
Detroit, Michigan 48207
Attention: Henry J. Brennan, III, Esq.
Any such person may by notice given in accordance with this Section to the other
parties hereto designate another address or person for receipt by such person of
notices hereunder.
7.6 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with the Company or its
subsidiaries (or any predecessor of either).
7.7 WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be waived,
only by a written instrument signed by the parties or, in the case of a waiver,
by the party waiving compliance. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any such right, power
or privilege nor any single or partial exercise of any such right, power or
privilege, preclude any other or further exercise thereof or the exercise of any
other such right, power or privilege.
7.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
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7.9 ASSIGNMENT. This Agreement, and the Executive's rights and
obligations hereunder, may not be assigned by the Executive; any purported
assignment by the Executive in violation hereof shall be null and void. In the
event of any sale, transfer or other disposition of all or substantially all of
the Company's assets or business, whether by merger, consolidation or otherwise,
the Company may assign this Agreement and its rights hereunder.
7.10 WITHHOLDING. The Company shall be entitled to withhold from
any payments or deemed payments any amount of withholding required by law. No
other taxes, fees, impositions, duties or other charges or offsets of any kind
shall be deducted or withheld from amounts payable hereunder, unless otherwise
required by law.
7.11 NO DUTY TO MITIGATE. The Executive shall not be required
to mitigate damages or the amount of any payment provided for under this
Agreement by seeking other employment or otherwise, nor will any payments
hereunder be subject to offset in the event the Executive does mitigate.
7.12 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors, permitted
assigns, heirs, executors and legal representatives.
7.13 COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all such counterparts together shall
constitute one and the same instrument.
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Each counterpart may consist of two copies hereof each signed by one of the
parties hereto.
7.14 SURVIVAL. Anything contained in this Agreement to the
contrary notwithstanding, the provisions of Sections 6, 7.3, 7.4 and 7.10 and
the other provisions of this Section 7 (to the extent necessary to effectuate
the survival of Sections 6, 7.3, 7.4 and 7.10) shall survive termination of this
Agreement and any termination of the Executive's employment hereunder.
7.15 EXISTING AGREEMENTS. Executive represents to the Company
that the Executive is not subject or a party to any employment or consulting
agreement, non-competition covenant or other agreement, covenant or
understanding which might prohibit the Executive from executing this Agreement
or limit the Executive's ability to fulfill the Executive's responsibilities
hereunder.
7.16 HEADINGS. The headings in this Agreement are for reference
only and shall not affect the interpretation of this Agreement.
7.17 PARACHUTE PROVISIONS. If any amount payable to or other
benefit receivable by the Executive pursuant to this Agreement is deemed to
constitute a Parachute Payment (as defined below), alone or when added to any
other amount payable or paid to or other benefit receivable or received by the
Executive which is deemed to constitute a Parachute Payment (whether or not
under an existing plan, arrangement or other agreement), and would result in the
imposition on the Executive of an excise tax under Section 4999 of the Internal
Revenue Code, then, in addition to any other benefits to which the Executive is
entitled under this Agreement,
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the Executive shall be paid by the Company an amount in cash equal to the sum
of the excise taxes payable by the Executive by reason of receiving Parachute
Payments plus the amount necessary to put the Executive in the same after-tax
position (taking into account any and all applicable federal, state and local
excise, income or other taxes at the highest applicable rates on such
Parachute Payments and on any payments under this Section 7.17) and if no
excise taxes had been imposed with respect to Parachute Payments. The amount
of any payment under this Section 7.17 shall be computed by a certified
public accounting firm mutually and reasonably acceptable to the Executive
and the Company, the computation expenses of which shall be paid by the
Company. "Parachute
21
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Payment" shall mean any payment deemed to constitute a "parachute payment" as
defined in Section 280G of the Internal Revenue Code.
IN WITNESS WHEREOF, the parties hereto have signed their names as of
the day and year first above written.
Chateau Properties, Inc.
By: /s/ John A. Boll
-----------------------------
its Chairman
/s/ James B. Grange
--------------------------------
James B. Grange
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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of February 11, 1997, by and between
CHATEAU PROPERTIES, INC., a Maryland corporation (hereinafter referred to as
the "COMPANY"), and Tamara D. Fischer (hereinafter referred to as the
"EXECUTIVE").
WHEREAS, the Amended and Restated Agreement and Plan of Merger,
dated as of September 17, 1996, as amended, among ROC COMMUNITIES, INC., a
Maryland corporation ("ROC"), the Company, and R ACQUISITION SUB, INC., a
Maryland corporation and a direct subsidiary of the Company contemplates that
the Company enter into an employment agreement with the Executive;
WHEREAS, the Company wishes to offer employment to the Executive,
and the Executive wishes to accept such offer, on the terms set forth below;
Accordingly, the parties hereto agree as follows:
1. TERM. The Company hereby employs the Executive, and the
Executive hereby accepts such employment for an initial term commencing as of
the date hereof and ending on December 31, 1999, unless sooner terminated in
accordance with the provisions of Section 4 or Section 5 (the period during
which the Executive is employed hereunder being hereinafter referred to as
the "TERM").
2. DUTIES. The Executive, in her capacity as Chief Financial
Officer of the Company shall faithfully perform for the Company the duties of
said office and shall perform such other duties of an executive, managerial
or administrative nature as
<PAGE>
shall be specified and designated from time to time by the Board of Directors
of the Company (the "BOARD"), the Chief Executive Officer or the President of
the Company (including the performance of services for, and serving on the
Board of Directors of, any subsidiary of the Company without any additional
compensation). The Executive shall devote substantially all of the
Executive's business time and effort to the performance of the Executive's
duties hereunder, provided that in no event shall this sentence prohibit the
Executive from performing personal and charitable activities and any other
activities approved by the Board, so long as such activities do not interfere
with the Executive's duties for the Company.
3. COMPENSATION.
3.1 SALARY. The Company shall pay the Executive during the
Term a salary at the rate of $175,000 per annum (the "ANNUAL SALARY"), in
accordance with the customary payroll practices of the Company applicable to
senior executives generally. Annual Salary will increase annually on January
1 of each year by a percentage equal to the percentage that represents the
average salary increase for all employees of the Company, or such higher
amount as may be approved by the Board, with such increase to be effective on
the date salary increases are effective for employees of the Company
generally and, upon such increase, the increased amount shall thereafter be
deemed to be the "Annual Salary."
3.2 BONUS. The Executive will be eligible to participate in the
Chateau Communities, Inc. Annual Bonus Program
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(the "Bonus Plan"), the terms of which will be established by the Executive
Compensation Committee of the Company.
3.3 BENEFITS - IN GENERAL. The Executive shall be permitted
during the Term to participate in any group life, hospitalization or
disability insurance plans, health programs, pension and profit sharing plans
and similar benefits (but not stock option or other equity-based plans, which
are provided for under Section 3.4) that may be available to other senior
executives of the Company generally, on the same terms as may be applicable
to such other executives, in each case to the extent that the Executive is
eligible under the terms of such plans or programs.
3.4 EQUITY-BASED BENEFITS - IN GENERAL. The Executive will
be eligible to participate in the Company's 1997 Equity Compensation Plan
which as of the date hereof is in the form attached hereto as Exhibit A.
3.5 VACATION. The Executive shall be entitled to vacation of
20 days per year.
3.6 AUTOMOBILE. The Company will provide Executive with an
automobile of suitable standard to the Executive's position. At the option
of the Company, in lieu of providing such automobile, the Company will
provide the Executive with a monthly allowance of $750 for the use of an
automobile.
3.7 DISABILITY BENEFITS AND LIFE INSURANCE. The Executive
shall be entitled to long-term disability benefits and life insurance
benefits from the Company each of which shall be reasonably commensurate with
benefits provided to similarly situated senior executives of comparable
companies.
2
<PAGE>
3.8 EXPENSES. The Company shall pay or reimburse the
Executive for all ordinary and reasonable out-of-pocket expenses actually
incurred (and, in the case of reimbursement, paid) by the Executive during
the Term in the performance of the Executive's services under this Agreement;
provided that the Executive submits such expenses in accordance with the
policies applicable to senior executives of the Company generally.
4. TERMINATION UPON DEATH OR DISABILITY. If the Executive dies
during the Term, the obligations of the Company to or with respect to the
Executive shall terminate in their entirety except as otherwise provided
under this Section 4. If the Executive becomes eligible for disability
benefits under the Company's long-term disability plans and arrangements (or,
if none apply, would have been so eligible under the most recent plan or
arrangement), the Company shall have the right, to the extent permitted by
law, to terminate the employment of the Executive upon notice in writing to
the Executive; provided that the Company will have no right to terminate the
Executive's employment if, in the opinion of a qualified physician reasonably
acceptable to the Company, it is reasonably certain that the Executive will
be able to resume the Executive's duties on a regular full-time basis within
30 days of the date the Executive receives notice of such termination. Upon
death or other termination of employment by virtue of disability, (i) the
Executive (or the Executive's estate or beneficiaries in the case of the
death of the Executive) shall have no right to receive any compensation or
benefit hereunder on and after the effective date of the termination of
employment other
4
<PAGE>
than Annual Salary and other benefits (but excluding any bonuses except as
provided in the Bonus Plan) earned and accrued under this Agreement prior to
the date of termination (and reimbursement under this Agreement for expenses
incurred prior to the date of termination); and (ii) this Agreement shall
otherwise terminate upon such death or other termination of employment and
there shall be no further rights with respect to the Executive hereunder
(except as provided in Section 7.14).
5. CERTAIN TERMINATIONS OF EMPLOYMENT.
5.1 TERMINATION FOR CAUSE; TERMINATION OF EMPLOYMENT BY THE
EXECUTIVE WITHOUT GOOD REASON.
(a) For purposes of this Agreement, "CAUSE" shall mean
(i) the Executive's conviction for (or pleading nolo contendere
to) any felony, or a misdemeanor involving moral turpitude;
(ii) the Executive's commission of an act of fraud, theft or
dishonesty related to the performance of the Executive's duties
hereunder;
(iii) the willful and continuing failure or habitual neglect by
the Executive to perform the Executive's duties hereunder after
reasonable notice and affording the Executive a reasonable
opportunity to cease such failure or neglect;
(iv) any material violation by the Executive of the covenants
contained in Section 6; or
(v) the Executive's willful and continuing material breach of
this Agreement after reasonable notice and affording the
Executive a reasonable opportunity to cure such breach.
(b) For purposes of this Agreement, "GOOD REASON" shall mean,
unless otherwise consented to by the Executive,
(i) the material reduction of the Executive's authority, duties
and responsibilities, or the assignment to the Executive of
duties materially
5
<PAGE>
inconsistent with the Executive's position or positions with
the Company and its subsidiaries;
(ii) a reduction in Annual Salary of the Executive or the failure
to provide for the increases in Annual Salary required by this
Agreement;
(iii) the failure by the Company to obtain an agreement in form
and substance reasonably satisfactory to the Executive from any
successor to the business of the Company to assume and agree to
perform this Agreement; or
(iv) the Company's material and willful breach of this Agreement.
Notwithstanding the foregoing, if there exists (without regard to this
sentence) an event or condition that constitutes Good Reason under clause
(i), (ii) or (iv) above, the Company shall have 30 days from the date such
notice is given to cure such event or condition and, if the Company does so,
such event or condition shall not constitute Good Reason hereunder.
(c) The Company may terminate the Executive's employment hereunder
for Cause. If the Company terminates the Executive for Cause, (i) the
Executive shall have no right to receive any compensation or benefit
hereunder on and after the effective date of the termination of employment
other than Annual Salary and other benefits (but excluding any bonuses except
as provided in the Bonus Plan) earned and accrued under this Agreement prior
to the effective date of the termination of employment (and reimbursement
under this Agreement for expenses incurred prior to the effective date of the
termination of employment); and (ii) this Agreement shall otherwise terminate
upon such termination of employment and the Executive shall have no further
rights hereunder (except as provided in Section 7.14).
6
<PAGE>
(d) The Executive may terminate her employment without Good Reason.
If the Executive terminates the Executive's employment with the Company
without Good Reason and such termination is not covered by Section 5.2 by
virtue of the last sentence thereof, (i) the Executive shall have no right to
receive any compensation or benefit hereunder on and after the effective date
of the termination of employment other than Annual Salary and other benefits
(but excluding any bonuses except as provided in the Bonus Plan or in clause
(ii) below) earned and accrued under this Agreement prior to the effective
date of the termination of employment (and reimbursement under this Agreement
for expenses incurred prior to the effective date of the termination of
employment); (ii) the Executive shall be entitled to receive (A) a cash
payment equal to the sum of (x) the Executive's Annual Salary (as in effect
on the effective date of such termination) payable no later than 30 days
after such termination and (y) the "TERMINATION BONUS," which shall be the
average of the two previous annual bonuses received by the Executive as
provided for in the Bonus Plan, or, in the event the Executive has received
only one annual bonus pursuant to the Bonus Plan at the time of such
termination, the Termination Bonus shall be equal to the amount of such
annual bonus, or, in the event the Executive has not received any annual
bonuses pursuant to the Bonus Plan at the time of such termination, the
Termination Bonus shall be equal to the annual bonus the Executive would have
received under the Bonus Plan if the Executive would have remained employed
through the period required to be entitled to receive the annual bonus,
payable no later than 30 days
7
<PAGE>
after such termination (or, if later, as soon as practicable, but in no event
more than 30 days after, the amount of the Termination Bonus is known) and
(B) for a period of one year after termination of employment such continuing
health benefits (including any medical, vision or dental benefits), under the
Company's health plans and programs applicable to senior executives of the
Company generally as the Executive would have received under this Agreement
(and at such costs to the Executive) as would have applied in the absence of
such termination (but not taking into account any post-termination increases
in Annual Salary that may otherwise have occurred without regard to such
termination and that may have favorably affected such benefits); it being
expressly understood and agreed that nothing in this clause (ii) shall
restrict the ability of the Company to amend or terminate such plans and
programs from time to time in its sole discretion; provided, however, that
the Company shall in no event be required to provide such coverage after such
time as the Executive becomes entitled to receive health benefits from
another employer or recipient of the Executive's services (and provided,
further, that such entitlement shall be determined without regard to any
individual waivers or other arrangements); and (iii) this Agreement shall
otherwise terminate upon such termination of employment and the Executive
shall have no further rights hereunder (except as provided in Section 7.14).
5.2 TERMINATION WITHOUT CAUSE; TERMINATION FOR GOOD REASON. The
Company may terminate the Executive's employment at any time for any reason
or no reason and the Executive may
8
<PAGE>
terminate the Executive's employment with the Company for Good Reason. If
the Company or the Executive terminates the Executive's employment, and such
termination is not described in Section 4 or Section 5.1, (i) the Executive
shall have no right to receive any compensation or benefit hereunder on and
after the effective date of the termination of employment other than Annual
Salary and other benefits (but excluding any bonuses except as provided in
the Bonus Plan or in clause (ii) below) earned and accrued under this
Agreement prior to the effective date of the termination of employment (and
reimbursement under this Agreement for expenses incurred prior to the
effective date of the termination of employment); (ii) the Executive shall
receive (A) a cash payment equal to two times the sum of (x) the Executive's
Annual Salary (as in effect on the effective date of such termination)
payable no later than 30 days after such termination and (y) the Termination
Bonus payable no later than 30 days after such termination (or, if later, as
soon as practicable, but in no event more than 30 days after, the amount of
the Termination Bonus is known) and (B) for a period of two years after
termination of employment such continuing health benefits (including any
medical, vision or dental benefits), under the Company's health plans and
programs applicable to senior executives of the Company generally as the
Executive would have received under this Agreement (and at such costs to the
Executive) as would have applied in the absence of such termination (but not
taking into account any post-termination increases in Annual Salary that may
otherwise have occurred without regard to such termination and that may have
favorably affected such benefits); it being
9
<PAGE>
expressly understood and agreed that nothing in this clause (ii) shall
restrict the ability of the Company to amend or terminate such plans and
programs from time to time in its sole discretion; provided, however, that
the Company shall in no event be required to provide such coverage after such
time as the Executive becomes entitled to receive health benefits from
another employer or recipient of the Executive's services (and provided,
further, that such entitlement shall be determined without regard to any
individual waivers or other arrangements); (iii) all outstanding unvested
options and restricted stock held by the Executive shall vest and all options
shall remain exercisable for two years (or, if longer, the balance of the
regular term of the options); and (iv) this Agreement shall otherwise
terminate upon such termination of employment and the Executive shall have no
further rights hereunder (except as provided in Section 7.14). For purposes
of this Section 5, if the Executive's employment is not terminated under
Section 4 or this Section 5 before the Term would otherwise expire under
Section 1, then a termination of employment at the expiration of the Term,
which termination is not covered by Section 4, shall be covered under this
Section 5.2 rather than under Section 5.1(c); provided, however, that, in
such event, "two times" in clause (ii)(A) above shall be replaced with "one
and one-half times" and "two years" in clause (ii)(B) above shall be replaced
with "18 months".
6. COVENANTS OF THE EXECUTIVE.
6.1 COVENANT AGAINST COMPETITION; OTHER COVENANTS. The
Executive acknowledges that (i) the principal business of the
10
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Company is the owning, acquiring, developing or operating of manufactured
housing communities (such businesses, and any and all other businesses that
after the date hereof, and from time to time during the Term, become material
and substantial with respect to the Company's then-overall business, herein
being collectively referred to as the "BUSINESS"); (ii) the Company knows of
a limited number of persons who have developed the Company's Business; (iii)
the Company's Business is, in part, national in scope; (iv) the Executive's
work for the Company and its subsidiaries (and the predecessors of either)
has given and will continue to give the Executive access to the confidential
affairs and proprietary information of the Company; (v) the covenants and
agreements of the Executive contained in this Section 6 are essential to the
business and goodwill of the Company; and (vi) the Company would not have
entered into this Agreement but for the covenants and agreements set forth in
this Section 6. In light of the foregoing, during the Term and for a period
of one year thereafter (and, as to Section 6.1(b) and (d), at any time during
and after the Executive's employment with the Company and its subsidiaries
(and the predecessors of either)):
(a) The Executive shall not, directly or indirectly,
own, manage, control or participate in the ownership, management, or control
of, or be employed or engaged by or otherwise affiliated or associated as an
employee, employer, consultant, agent, principal, partner, stockholder,
corporate officer, director or in any other individual or representative
capacity, engage or participate in any business that is in
11
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competition in any manner whatsoever with the business of the Company in any
county of any state in which the Company owns or leases manufactured home
communities. In the case of a termination by the Company without Cause or by
the Executive for Good Reason, the preceding covenant shall expire on the
date of termination; provided, however, that, notwithstanding the foregoing,
the Executive may invest in securities of any entity, solely for investment
purposes and without participating in the business thereof, if (i) such
securities are traded on any national securities exchange or the National
Association of Securities Dealers, Inc. Automated Quotation System, (ii) the
Executive is not a controlling person of, or a member of a group which
controls, such entity and (iii) the Executive does not, directly or
indirectly, own one percent or more of any class of securities of such entity.
(b) The Executive shall keep secret and retain in
strictest confidence, and shall not use for her benefit or the benefit of
others, except in connection with the business and affairs of the Company and
its affiliates, all confidential matters relating to the Company's Business
and the business of any of its affiliates and to the Company and any of its
affiliates, learned by the Executive heretofore or hereafter directly or
indirectly from the Company or any of its subsidiaries (or any predecessor of
either) (the "CONFIDENTIAL COMPANY INFORMATION"), including, without
limitation, information with respect to the Business and any aspect thereof,
profit or loss figures, and the Company's or its affiliates' (or any of their
predecessors') properties, and
12
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shall not disclose such Confidential Company Information to anyone outside of
the Company except with the Company's express written consent and except for
Confidential Company Information which (i) at the time of receipt or
thereafter becomes publicly known through no wrongful act of the Executive,
(ii) is clearly obtainable in the public domain, (iii) was not acquired by
the Executive in connection with the Executive's employment or affiliation
with the Company, (iv) was not acquired by the Executive from the Company or
its representatives, or (v) is required to be disclosed by rule of law or by
order of a court or governmental body or agency.
(c) The Executive shall not, without the Company's prior
written consent, directly or indirectly, (i) knowingly solicit or encourage
to leave the employment or other service of the Company or any of its
affiliates, any employee thereof or hire (on behalf of the Executive) or any
other person or entity) any employee who has left the employment or other
service of the Company or any of its affiliates (or any predecessor of
either) within one year of the termination of such employee's or independent
contractor's employment or other service with the Company and its affiliates,
or (ii) whether for the Executive's own account or for the account of any
other person, firm, corporation or other business organization, intentionally
interfere with the Company's or any of its affiliates' relationship with, or
endeavor to entice away from the Company or any of its affiliates, any person
who during the Executive's employment with the Company and its affiliates (or
the predecessors of either) is or was a customer
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<PAGE>
or client of the Company or any of its affiliates (or any predecessor of
either).
(d) All memoranda, notes, lists, records, property and
any other tangible product and documents (and all copies thereof) made,
produced or compiled by the Executive or made available to the Executive
concerning the Business of the Company and its affiliates shall be the
Company's property and shall be delivered to the Company at any time on
request.
6.2 RIGHTS AND REMEDIES UPON BREACH. The Executive acknowledges
and agrees that any breach by her of any of the provisions of Section 6.1
(the "RESTRICTIVE COVENANTS") would result in irreparable injury and damage
for which money damages would not provide an adequate remedy. Therefore, if
the Executive breaches, or threatens to commit a breach of, any of the
Restrictive Covenants, the Company and its affiliates shall have the right
and remedy to have the Restrictive Covenants specifically enforced (without
posting bond and without the need to prove damages) by any court having
equity jurisdiction, including, without limitation, the right to an entry
against the Executive of restraining orders and injunctions (preliminary,
mandatory, temporary and permanent) against violations, threatened or actual,
and whether or not then continuing, of such covenants. This right and remedy
shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company and its affiliates under law or in equity
(including, without limitation, the recovery of damages). The existence of
any claim or cause of action by the Executive, whether predicated on this
Agreement or otherwise, shall
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not constitute a defense to the enforcement of the Restrictive Covenants.
7. OTHER PROVISIONS.
7.1 SEVERABILITY. The Executive acknowledges and agrees that
(i) the Executive has had an opportunity to seek advice of counsel in
connection with this Agreement and (ii) the Restrictive Covenants are
reasonable in geographical and temporal scope and in all other respects. If
it is determined that any of the provisions of this Agreement, including,
without limitation, any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the provisions of this Agreement
shall not thereby be affected and shall be given full effect, without regard
to the invalid portions.
7.2 DURATION AND SCOPE OF COVENANTS. If any court or other
decision-maker of competent jurisdiction determines that any of the
Executive's covenants contained in this Agreement, including, without
limitation, any of the Restrictive Covenants, or any part thereof, are
unenforceable because of the duration or geographical scope of such
provision, then, after such determination has become final and unappealable,
the duration or scope of such provision, as the case may be, shall be reduced
so that such provision becomes enforceable and, in its reduced form, such
provision shall then be enforceable and shall be enforced.
7.3 ENFORCEABILITY; JURISDICTIONS. The Company and the
Executive intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope
of the Restrictive Covenants. If the
15
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courts of any one or more of such jurisdictions hold the Restrictive
Covenants wholly unenforceable by reason of breadth of scope or otherwise it
is the intention of the Company and the Executive that such determination not
bar or in any way affect the Company's right, or the right of any of its
affiliates, to the relief provided above in the courts of any other
jurisdiction within the geographical scope of such Restrictive Covenants, as
to breaches of such Restrictive Covenants in such other respective
jurisdictions, such Restrictive Covenants as they relate to each
jurisdiction's being, for this purpose, severable, diverse and independent
covenants, subject, where appropriate, to the doctrine of RES JUDICATA. Any
controversy or claim arising out of or relating to this Agreement or the
breach of this Agreement that is not resolved by the Executive and the
Company (or its affiliates, where applicable), other than those arising under
Section 6, to the extent necessary for the Company (or its affiliates, where
applicable) to avail itself of the rights and remedies provided under Section
6.2, shall be submitted to arbitration in Denver, Colorado in accordance with
Colorado law and the procedures of the American Arbitration Association. The
determination of the arbitrator(s) shall be conclusive and binding on the
Company (or its affiliates, where applicable) and the Executive and judgment
may be entered on the arbitrator(s)' award in any court having jurisdiction.
7.4 ATTORNEYS' FEES. In the event of any legal proceeding
(including an arbitration proceeding) relating to this Agreement or any term
or provision thereof in which the Executive
16
<PAGE>
is the prevailing party, the Company shall be responsible to pay or reimburse
the Executive for all reasonable attorneys' fees incurred by the Executive in
connection with such proceeding.
7.5 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, five days after the date of deposit in the United
States mails as follows:
(i) If to the Company, to:
6430 South Quebec Street
Englewood, Colorado 80111
(ii) If to the Executive, to:
Tamara D. Fischer
5811 S. Forest Street
Greenwood Village, Colorado 80121
with a copy in either case to:
Rogers & Wells
200 Park Avenue
New York, New York 10166
Attention: Jay L. Bernstein, Esq.
and
Timmis & Inman L.L.P.
300 Talon Centre
Detroit, Michigan 48207
Attention: Henry J. Brennan, III, Esq.
17
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Any such person may by notice given in accordance with this Section to the
other parties hereto designate another address or person for receipt by such
person of notices hereunder.
7.6 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with the Company or its
subsidiaries (or any predecessor of either).
7.7 WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be
waived, only by a written instrument signed by the parties or, in the case of
a waiver, by the party waiving compliance. No delay on the part of any party
in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such
right, power or privilege nor any single or partial exercise of any such
right, power or privilege, preclude any other or further exercise thereof or
the exercise of any other such right, power or privilege.
7.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
7.9 ASSIGNMENT. This Agreement, and the Executive's rights
and obligations hereunder, may not be assigned by the Executive; any
purported assignment by the Executive in violation hereof shall be null and
void. In the event of any sale, transfer or other disposition of all or
substantially all of the
18
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Company's assets or business, whether by merger, consolidation or otherwise,
the Company may assign this Agreement and its rights hereunder.
7.10 WITHHOLDING. The Company shall be entitled to withhold
from any payments or deemed payments any amount of withholding required by
law. No other taxes, fees, impositions, duties or other charges or offsets
of any kind shall be deducted or withheld from amounts payable hereunder,
unless otherwise required by law.
7.11 NO DUTY TO MITIGATE. The Executive shall not be
required to mitigate damages or the amount of any payment provided for under
this Agreement by seeking other employment or otherwise, nor will any
payments hereunder be subject to offset in the event the Executive does
mitigate.
7.12 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors,
permitted assigns, heirs, executors and legal representatives.
7.13 COUNTERPARTS. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original but all such counterparts together shall
constitute one and the same instrument. Each counterpart may consist of two
copies hereof each signed by one of the parties hereto.
7.14 SURVIVAL. Anything contained in this Agreement to the
contrary notwithstanding, the provisions of Sections 6, 7.3, 7.4 and 7.10 and
the other provisions of this Section 7 (to the
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extent necessary to effectuate the survival of Sections 6, 7.3, 7.4 and 7.10)
shall survive termination of this Agreement and any termination of the
Executive's employment hereunder.
7.15 EXISTING AGREEMENTS. Executive represents to the Company
that the Executive is not subject or a party to any employment or consulting
agreement, non-competition covenant or other agreement, covenant or
understanding which might prohibit the Executive from executing this
Agreement or limit the Executive's ability to fulfill the Executive's
responsibilities hereunder.
7.16 HEADINGS. The headings in this Agreement are for
reference only and shall not affect the interpretation of this Agreement.
7.17 PARACHUTE PROVISIONS. If any amount payable to or other
benefit receivable by the Executive pursuant to this Agreement is deemed to
constitute a Parachute Payment (as defined below), alone or when added to any
other amount payable or paid to or other benefit receivable or received by
the Executive which is deemed to constitute a Parachute Payment (whether or
not under an existing plan, arrangement or other agreement), and would result
in the imposition on the Executive of an excise tax under Section 4999 of the
Internal Revenue Code, then, in addition to any other benefits to which the
Executive is entitled under this Agreement, the Executive shall be paid by
the Company an amount in cash equal to the sum of the excise taxes payable by
the Executive by reason of receiving Parachute Payments plus the amount
necessary to put the Executive in the same after-tax position (taking into
account any and all applicable federal, state and local excise, income or
20
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other taxes at the highest applicable rates on such Parachute Payments and on
any payments under this Section 7.17) and if no excise taxes had been imposed
with respect to Parachute Payments. The amount of any payment under this
Section 7.17 shall be computed by a certified public accounting firm mutually
and reasonably acceptable to the Executive and the Company, the computation
expenses of which shall be paid by the Company. "Parachute
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Payment" shall mean any payment deemed to constitute a "parachute payment" as
defined in Section 280G of the Internal Revenue Code.
IN WITNESS WHEREOF, the parties hereto have signed their names as
of the day and year first above written.
Chateau Properties, Inc.
By: /s/John A. Boll
--------------------------
its Chairman
/s/Tamara D. Fischer
--------------------------
Tamara D. Fischer
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<PAGE>
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of February 11, 1997, by and between
CHATEAU PROPERTIES, INC., a Maryland corporation (hereinafter referred to as the
"COMPANY"), and Rees F. Davis, Jr. (hereinafter referred to as the "EXECUTIVE").
WHEREAS, the Amended and Restated Agreement and Plan of Merger, dated
as of September 17, 1996, as amended, among ROC COMMUNITIES, INC., a Maryland
corporation ("ROC"), the Company, and R ACQUISITION SUB, INC., a Maryland
corporation and a direct subsidiary of the Company contemplates that the Company
enter into an employment agreement with the Executive;
WHEREAS, the Company wishes to offer employment to the Executive, and
the Executive wishes to accept such offer, on the terms set forth below;
Accordingly, the parties hereto agree as follows:
1. TERM. The Company hereby employs the Executive, and the
Executive hereby accepts such employment for an initial term commencing as of
the date hereof and ending on December 31, 1999, unless sooner terminated in
accordance with the provisions of Section 4 or Section 5 (the period during
which the Executive is employed hereunder being hereinafter referred to as the
"TERM").
2. DUTIES. The Executive, in his capacity as Executive Vice
President - Acquisitions and Sales of the Company shall faithfully perform for
the Company the duties of said office including, without limitation, the
supervision of acquisitions and
<PAGE>
sales and shall perform such other duties of an executive, managerial or
administrative nature as shall be specified and designated from time to time
by the Board of Directors of the Company (the "BOARD"), the Chief Executive
Officer or the President of the Company (including the performance of
services for, and serving on the Board of Directors of, any subsidiary of the
Company without any additional compensation). The Executive shall devote
substantially all of the Executive's business time and effort to the
performance of the Executive's duties hereunder, provided that in no event
shall this sentence prohibit the Executive from performing (i) services for
ROC GP Corp. (provided that the activities of the Executive and ROC GP Corp.
do not materially increase from the level as of the date of this Agreement)
and other activities related to the business of ROC, the Company and their
affiliates and (ii) personal and charitable activities and any other
activities approved by the Board, so long as such activities do not interfere
with the Executive's duties for the Company.
3. COMPENSATION.
3.1 SALARY. The Company shall pay the Executive during the Term
a salary at the rate of $160,000 per annum (the "ANNUAL SALARY"), in accordance
with the customary payroll practices of the Company applicable to senior
executives generally. Annual Salary will increase annually on January 1 of each
year by a percentage equal to the percentage that represents the average salary
increase for all employees of the Company, or such higher amount as may be
approved by the Board, with such increase to be effective on the date salary
increases are effective for employees
2
<PAGE>
of the Company generally and, upon such increase, the increased amount shall
thereafter be deemed to be the "Annual Salary."
3.2 BONUS. The Executive will be eligible to participate in the
Chateau Communities, Inc. Annual Bonus Program (the "Bonus Plan"), the terms of
which will be established by the Executive Compensation Committee of the
Company.
3.3 BENEFITS - IN GENERAL. The Executive shall be permitted
during the Term to participate in any group life, hospitalization or
disability insurance plans, health programs, pension and profit sharing plans
and similar benefits (but not stock option or other equity-based plans, which
are provided for under Section 3.4) that may be available to other senior
executives of the Company generally, on the same terms as may be applicable
to such other executives, in each case to the extent that the Executive is
eligible under the terms of such plans or programs.
3.4 EQUITY-BASED BENEFITS - IN GENERAL. The Executive will be
eligible to participate in the Company's 1997 Equity Compensation Plan which as
of the date hereof is in the form attached hereto as Exhibit A.
3.5 VACATION. The Executive shall be entitled to vacation of 20
days per year.
3.6 AUTOMOBILE. The Company will provide the Executive a
monthly allowance of $750 for the use of an automobile. At the option of the
Company, in lieu of providing such allowance, the Company will provide the
Executive with an automobile of suitable standard to the Executive's
position.
3
<PAGE>
3.7 DISABILITY BENEFITS AND LIFE INSURANCE. The Executive
shall be entitled to long-term disability benefits and life insurance
benefits from the Company each of which shall be reasonably commensurate with
benefits provided to similarly situated senior executives of comparable
companies.
3.8 EXPENSES. The Company shall pay or reimburse the
Executive for all ordinary and reasonable out-of-pocket expenses actually
incurred (and, in the case of reimbursement, paid) by the Executive during
the Term in the performance of the Executive's services under this Agreement;
provided that the Executive submits such expenses in accordance with the
policies applicable to senior executives of the Company generally.
4. TERMINATION UPON DEATH OR DISABILITY. If the Executive dies
during the Term, the obligations of the Company to or with respect to the
Executive shall terminate in their entirety except as otherwise provided
under this Section 4. If the Executive becomes eligible for disability
benefits under the Company's long-term disability plans and arrangements (or,
if none apply, would have been so eligible under the most recent plan or
arrangement), the Company shall have the right, to the extent permitted by
law, to terminate the employment of the Executive upon notice in writing to
the Executive; provided that the Company will have no right to terminate the
Executive's employment if, in the opinion of a qualified physician reasonably
acceptable to the Company, it is reasonably certain that the Executive will
be able to resume the Executive's duties on a regular full-time basis within
30 days of the date the Executive receives notice of such
4
<PAGE>
termination. Upon death or other termination of employment by virtue of
disability, (i) the Executive (or the Executive's estate or beneficiaries in
the case of the death of the Executive) shall have no right to receive any
compensation or benefit hereunder on and after the effective date of the
termination of employment other than Annual Salary and other benefits (but
excluding any bonuses except as provided in the Bonus Plan) earned and
accrued under this Agreement prior to the date of termination (and
reimbursement under this Agreement for expenses incurred prior to the date of
termination); and (ii) this Agreement shall otherwise terminate upon such
death or other termination of employment and there shall be no further rights
with respect to the Executive hereunder (except as provided in Section 7.14).
5. CERTAIN TERMINATIONS OF EMPLOYMENT.
5.1 TERMINATION FOR CAUSE; TERMINATION OF EMPLOYMENT BY THE
EXECUTIVE WITHOUT GOOD REASON.
(a) For purposes of this Agreement, "CAUSE" shall mean
(i) the Executive's conviction for (or pleading nolo contendere
to) any felony, or a misdemeanor involving moral turpitude;
(ii) the Executive's commission of an act of fraud, theft or
dishonesty related to the performance of the Executive's duties
hereunder;
(iii) the willful and continuing failure or habitual neglect by
the Executive to perform the Executive's duties hereunder after
reasonable notice and affording the Executive a reasonable
opportunity to cease such failure or neglect;
(iv) any material violation by the Executive of the covenants
contained in Section 6; or
(v) the Executive's willful and continuing material breach of
this Agreement after reasonable
5
<PAGE>
notice and affording the Executive a reasonable opportunity to
cure such breach.
(b) For purposes of this Agreement, "GOOD REASON" shall mean, unless
otherwise consented to by the Executive,
(i) the material reduction of the Executive's authority, duties
and responsibilities, or the assignment to the Executive of
duties materially inconsistent with the Executive's position or
positions with the Company and its subsidiaries;
(ii) a reduction in Annual Salary of the Executive or the failure
to provide for the increases in Annual Salary required by this
Agreement;
(iii) the failure by the Company to obtain an agreement in form
and substance reasonably satisfactory to the Executive from any
successor to the business of the Company to assume and agree to
perform this Agreement; or
(iv) the Company's material and willful breach of this Agreement.
Notwithstanding the foregoing, if there exists (without regard to this
sentence) an event or condition that constitutes Good Reason under clause
(i), (ii) or (iv) above, the Company shall have 30 days from the date such
notice is given to cure such event or condition and, if the Company does so,
such event or condition shall not constitute Good Reason hereunder.
(c) The Company may terminate the Executive's employment hereunder for
Cause. If the Company terminates the Executive for Cause, (i) the Executive
shall have no right to receive any compensation or benefit hereunder on and
after the effective date of the termination of employment other than Annual
Salary and other benefits (but excluding any bonuses except as provided in the
Bonus Plan) earned and accrued under this Agreement prior to the effective date
of the termination of employment (and reimbursement
6
<PAGE>
under this Agreement for expenses incurred prior to the effective date of the
termination of employment); and (ii) this Agreement shall otherwise terminate
upon such termination of employment and the Executive shall have no further
rights hereunder (except as provided in Section 7.14).
(d) The Executive may terminate his employment without Good Reason.
If the Executive terminates the Executive's employment with the Company
without Good Reason and such termination is not covered by Section 5.2 by
virtue of the last sentence thereof, (i) the Executive shall have no right to
receive any compensation or benefit hereunder on and after the effective date
of the termination of employment other than Annual Salary and other benefits
(but excluding any bonuses except as provided in the Bonus Plan or in clause
(ii) below) earned and accrued under this Agreement prior to the effective
date of the termination of employment (and reimbursement under this Agreement
for expenses incurred prior to the effective date of the termination of
employment); (ii) the Executive shall be entitled to receive (A) a cash
payment equal to the sum of (x) the Executive's Annual Salary (as in effect
on the effective date of such termination) payable no later than 30 days
after such termination and (y) the "TERMINATION BONUS," which shall be the
average of the two previous annual bonuses received by the Executive as
provided for in the Bonus Plan, or, in the event the Executive has received
only one annual bonus pursuant to the Bonus Plan at the time of such
termination, the Termination Bonus shall be equal to the amount of such
annual bonus, or, in the event the Executive has not received any annual
7
<PAGE>
bonuses pursuant to the Bonus Plan at the time of such termination,
the Termination Bonus shall be equal to the annual bonus the Executive would
have received under the Bonus Plan if the Executive would have remained employed
through the period required to be entitled to receive the annual bonus, payable
no later than 30 days after such termination (or, if later, as soon as
practicable, but in no event more than 30 days after, the amount of the
Termination Bonus is known) and (B) for a period of one year after termination
of employment such continuing health benefits (including any medical, vision or
dental benefits), under the Company's health plans and programs applicable to
senior executives of the Company generally as the Executive would have received
under this Agreement (and at such costs to the Executive) as would have applied
in the absence of such termination (but not taking into account any post-
termination increases in Annual Salary that may otherwise have occurred without
regard to such termination and that may have favorably affected such benefits);
it being expressly understood and agreed that nothing in this clause (ii) shall
restrict the ability of the Company to amend or terminate such plans and
programs from time to time in its sole discretion; provided, however, that the
Company shall in no event be required to provide such coverage after such time
as the Executive becomes entitled to receive health benefits from another
employer or recipient of the Executive's services (and provided, further, that
such entitlement shall be determined without regard to any individual waivers or
other arrangements); and (iii) this Agreement shall otherwise terminate upon
such termination of employment and the Executive
8
<PAGE>
shall have no further rights hereunder (except as provided in Section 7.14).
5.2 TERMINATION WITHOUT CAUSE; TERMINATION FOR GOOD REASON. The
Company may terminate the Executive's employment at any time for any reason
or no reason and the Executive may terminate the Executive's employment with
the Company for Good Reason. If the Company or the Executive terminates the
Executive's employment, and such termination is not described in Section 4 or
Section 5.1, (i) the Executive shall have no right to receive any
compensation or benefit hereunder on and after the effective date of the
termination of employment other than Annual Salary and other benefits (but
excluding any bonuses except as provided in the Bonus Plan or in clause (ii)
below) earned and accrued under this Agreement prior to the effective date of
the termination of employment (and reimbursement under this Agreement for
expenses incurred prior to the effective date of the termination of
employment); (ii) the Executive shall receive (A) a cash payment equal to two
times the sum of (x) the Executive's Annual Salary (as in effect on the
effective date of such termination) payable no later than 30 days after such
termination and (y) the Termination Bonus payable no later than 30 days after
such termination (or, if later, as soon as practicable, but in no event more
than 30 days after, the amount of the Termination Bonus is known) and (B) for
a period of two years after termination of employment such continuing health
benefits (including any medical, vision or dental benefits), under the
Company's health plans and programs applicable to senior executives of the
Company generally as the Executive would have
9
<PAGE>
received under this Agreement (and at such costs to the Executive) as would
have applied in the absence of such termination (but not taking into account
any post-termination increases in Annual Salary that may otherwise have
occurred without regard to such termination and that may have favorably
affected such benefits); it being expressly understood and agreed that
nothing in this clause (ii) shall restrict the ability of the Company to
amend or terminate such plans and programs from time to time in its sole
discretion; provided, however, that the Company shall in no event be required
to provide such coverage after such time as the Executive becomes entitled to
receive health benefits from another employer or recipient of the Executive's
services (and provided, further, that such entitlement shall be determined
without regard to any individual waivers or other arrangements); (iii) all
outstanding unvested options and restricted stock held by the Executive shall
vest and all options shall remain exercisable for two years (or, if longer,
the balance of the regular term of the options); and (iv) this Agreement
shall otherwise terminate upon such termination of employment and the
Executive shall have no further rights hereunder (except as provided in
Section 7.14). For purposes of this Section 5, if the Executive's employment
is not terminated under Section 4 or this Section 5 before the Term would
otherwise expire under Section 1, then a termination of employment at the
expiration of the Term, which termination is not covered by Section 4, shall
be covered under this Section 5.2 rather than under Section 5.1(c); provided,
however, that, in such event, "two times" in clause (ii)(A) above shall be
replaced with "one and one-half times" and
10
<PAGE>
"two years" in clause (ii)(B) above shall be replaced with "18 months".
6. COVENANTS OF THE EXECUTIVE.
6.1 COVENANT AGAINST COMPETITION; OTHER COVENANTS. The
Executive acknowledges that (i) the principal business of the Company is the
owning, acquiring, developing or operating of manufactured housing
communities (such businesses, and any and all other businesses that after the
date hereof, and from time to time during the Term, become material and
substantial with respect to the Company's then-overall business, herein being
collectively referred to as the "BUSINESS"); (ii) the Company knows of a
limited number of persons who have developed the Company's Business; (iii)
the Company's Business is, in part, national in scope; (iv) the Executive's
work for the Company and its subsidiaries (and the predecessors of either)
has given and will continue to give the Executive access to the confidential
affairs and proprietary information of the Company; (v) the covenants and
agreements of the Executive contained in this Section 6 are essential to the
business and goodwill of the Company; and (vi) the Company would not have
entered into this Agreement but for the covenants and agreements set forth in
this Section 6. In light of the foregoing, during the Term and for a period
of one year thereafter (and, as to Section 6.1(b) and (d), at any time during
and after the Executive's employment with the Company and its subsidiaries
(and the predecessors of either)):
(a) Except for such affiliation with ROC GP Corp. and its
affiliates (provided that the activities of the
11
<PAGE>
Executive and ROC GP Corp. do not materially increase from the level as of
the date of this Agreement), the Executive shall not, directly or indirectly,
own, manage, control or participate in the ownership, management, or control
of, or be employed or engaged by or otherwise affiliated or associated as an
employee, employer, consultant, agent, principal, partner, stockholder,
corporate officer, director or in any other individual or representative
capacity, engage or participate in any business that is in competition in any
manner whatsoever with the business of the Company in any county of any state
in which the Company owns or leases manufactured home communities. In the
case of a termination by the Company without Cause or by the Executive for
Good Reason, the preceding covenant shall expire on the date of termination;
provided, however, that, notwithstanding the foregoing, the Executive may
invest in securities of any entity, solely for investment purposes and
without participating in the business thereof, if (i) such securities are
traded on any national securities exchange or the National Association of
Securities Dealers, Inc. Automated Quotation System, (ii) the Executive is
not a controlling person of, or a member of a group which controls, such
entity and (iii) the Executive does not, directly or indirectly, own one
percent or more of any class of securities of such entity.
(b) The Executive shall keep secret and retain in strictest
confidence, and shall not use for his benefit or the benefit of others, except
in connection with the business and affairs of the Company and its affiliates,
all confidential matters
12
<PAGE>
relating to the Company's Business and the business of any of its affiliates
and to the Company and any of its affiliates, learned by the Executive
heretofore or hereafter directly or indirectly from the Company or any of its
subsidiaries (or any predecessor of either) (the "CONFIDENTIAL COMPANY
INFORMATION"), including, without limitation, information with respect to the
Business and any aspect thereof, profit or loss figures, and the Company's
or its affiliates' (or any of their predecessors') properties, and shall not
disclose such Confidential Company Information to anyone outside of the
Company except with the Company's express written consent and except for
Confidential Company Information which (i) at the time of receipt or
thereafter becomes publicly known through no wrongful act of the Executive,
(ii) is clearly obtainable in the public domain, (iii) was not acquired by
the Executive in connection with the Executive's employment or affiliation
with the Company, (iv) was not acquired by the Executive from the Company or
its representatives, or (v) is required to be disclosed by rule of law or by
order of a court or governmental body or agency.
(c) The Executive shall not, without the Company's prior
written consent, directly or indirectly, (i) knowingly solicit or encourage to
leave the employment or other service of the Company or any of its affiliates,
any employee thereof or hire (on behalf of the Executive) or any other person or
entity) any employee who has left the employment or other service of the Company
or any of its affiliates (or any predecessor of either) within one year of the
termination of such employee's or independent contractor's employment or other
service with the
13
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Company and its affiliates, or (ii) whether for the Executive's own account
or for the account of any other person, firm, corporation or other business
organization, intentionally interfere with the Company's or any of its
affiliates' relationship with, or endeavor to entice away from the Company or
any of its affiliates, any person who during the Executive's employment with
the Company and its affiliates (or the predecessors of either) is or was a
customer or client of the Company or any of its affiliates (or any
predecessor of either).
(d) All memoranda, notes, lists, records, property and
any other tangible product and documents (and all copies thereof) made,
produced or compiled by the Executive or made available to the Executive
concerning the Business of the Company and its affiliates shall be the
Company's property and shall be delivered to the Company at any time on
request.
6.2 RIGHTS AND REMEDIES UPON BREACH. The Executive acknowledges and
agrees that any breach by him of any of the provisions of Section 6.1 (the
"RESTRICTIVE COVENANTS") would result in irreparable injury and damage for which
money damages would not provide an adequate remedy. Therefore, if the Executive
breaches, or threatens to commit a breach of, any of the Restrictive Covenants,
the Company and its affiliates shall have the right and remedy to have the
Restrictive Covenants specifically enforced (without posting bond and without
the need to prove damages) by any court having equity jurisdiction, including,
without limitation, the right to an entry against the Executive of restraining
orders and injunctions (preliminary, mandatory,
14
<PAGE>
temporary and permanent) against violations, threatened or actual, and
whether or not then continuing, of such covenants. This right and remedy
shall be in addition to, and not in lieu of, any other rights and remedies
available to the Company and its affiliates under law or in equity
(including, without limitation, the recovery of damages). The existence of
any claim or cause of action by the Executive, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement of
the Restrictive Covenants.
7. OTHER PROVISIONS.
7.1 SEVERABILITY. The Executive acknowledges and agrees that
(i) the Executive has had an opportunity to seek advice of counsel in
connection with this Agreement and (ii) the Restrictive Covenants are
reasonable in geographical and temporal scope and in all other respects. If
it is determined that any of the provisions of this Agreement, including,
without limitation, any of the Restrictive Covenants, or any part thereof, is
invalid or unenforceable, the remainder of the provisions of this Agreement
shall not thereby be affected and shall be given full effect, without regard
to the invalid portions.
7.2 DURATION AND SCOPE OF COVENANTS. If any court or other
decision-maker of competent jurisdiction determines that any of the
Executive's covenants contained in this Agreement, including, without
limitation, any of the Restrictive Covenants, or any part thereof, are
unenforceable because of the duration or geographical scope of such
provision, then, after such determination has become final and unappealable,
the duration or
15
<PAGE>
scope of such provision, as the case may be, shall be reduced so that such
provision becomes enforceable and, in its reduced form, such provision shall
then be enforceable and shall be enforced.
7.3 ENFORCEABILITY; JURISDICTIONS. The Company and the
Executive intend to and hereby confer jurisdiction to enforce the Restrictive
Covenants upon the courts of any jurisdiction within the geographical scope
of the Restrictive Covenants. If the courts of any one or more of such
jurisdictions hold the Restrictive Covenants wholly unenforceable by reason
of breadth of scope or otherwise it is the intention of the Company and the
Executive that such determination not bar or in any way affect the Company's
right, or the right of any of its affiliates, to the relief provided above in
the courts of any other jurisdiction within the geographical scope of such
Restrictive Covenants, as to breaches of such Restrictive Covenants in such
other respective jurisdictions, such Restrictive Covenants as they relate to
each jurisdiction's being, for this purpose, severable, diverse and
independent covenants, subject, where appropriate, to the doctrine of RES
JUDICATA. Any controversy or claim arising out of or relating to this
Agreement or the breach of this Agreement that is not resolved by the
Executive and the Company (or its affiliates, where applicable), other than
those arising under Section 6, to the extent necessary for the Company (or
its affiliates, where applicable) to avail itself of the rights and remedies
provided under Section 6.2, shall be submitted to arbitration in Denver,
Colorado in accordance with Colorado law and the procedures of the American
Arbitration Association. The determination of the
16
<PAGE>
arbitrator(s) shall be conclusive and binding on the Company (or its
affiliates, where applicable) and the Executive and judgment may be entered
on the arbitrator(s)' award in any court having jurisdiction.
7.4 ATTORNEYS' FEES. In the event of any legal proceeding
(including an arbitration proceeding) relating to this Agreement or any term
or provision thereof in which the Executive is the prevailing party, the
Company shall be responsible to pay or reimburse the Executive for all
reasonable attorneys' fees incurred by the Executive in connection with such
proceeding.
7.5 NOTICES. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, five days after the date of deposit in the United
States mails as follows:
(i) If to the Company, to:
6430 South Quebec Street
Englewood, Colorado 80111
(ii) If to the Executive, to:
Rees F. Davis, Jr.
7137 South Locust
Englewood, Colorado 80112
with a copy in either case to:
Rogers & Wells
200 Park Avenue
17
<PAGE>
New York, New York 10166
Attention: Jay L. Bernstein, Esq.
and
Timmis & Inman L.L.P.
300 Talon Centre
Detroit, Michigan 48207
Attention: Henry J. Brennan, III, Esq.
Any such person may by notice given in accordance with this Section to the
other parties hereto designate another address or person for receipt by such
person of notices hereunder.
7.6 ENTIRE AGREEMENT. This Agreement contains the entire
agreement between the parties with respect to the subject matter hereof and
supersedes all prior agreements, written or oral, with the Company or its
subsidiaries (or any predecessor of either).
7.7 WAIVERS AND AMENDMENTS. This Agreement may be amended,
superseded, canceled, renewed or extended, and the terms hereof may be
waived, only by a written instrument signed by the parties or, in the case of
a waiver, by the party waiving compliance. No delay on the part of any party
in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any such
right, power or privilege nor any single or partial exercise of any such
right, power or privilege, preclude any other or further exercise thereof or
the exercise of any other such right, power or privilege.
7.8 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF COLORADO WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAW.
18
<PAGE>
7.9 ASSIGNMENT. This Agreement, and the Executive's rights
and obligations hereunder, may not be assigned by the Executive; any
purported assignment by the Executive in violation hereof shall be null and
void. In the event of any sale, transfer or other disposition of all or
substantially all of the Company's assets or business, whether by merger,
consolidation or otherwise, the Company may assign this Agreement and its
rights hereunder.
7.10 WITHHOLDING. The Company shall be entitled to withhold
from any payments or deemed payments any amount of withholding required by
law. No other taxes, fees, impositions, duties or other charges or offsets
of any kind shall be deducted or withheld from amounts payable hereunder,
unless otherwise required by law.
7.11 NO DUTY TO MITIGATE. The Executive shall not be
required to mitigate damages or the amount of any payment provided for under
this Agreement by seeking other employment or otherwise, nor will any
payments hereunder be subject to offset in the event the Executive does
mitigate.
7.12 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors,
permitted assigns, heirs, executors and legal representatives.
7.13 COUNTERPARTS. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original but all such counterparts together shall constitute one and
the same instrument.
19
<PAGE>
Each counterpart may consist of two copies hereof each signed by one of the
parties hereto.
7.14 SURVIVAL. Anything contained in this Agreement to the
contrary notwithstanding, the provisions of Sections 6, 7.3, 7.4 and 7.10 and
the other provisions of this Section 7 (to the extent necessary to effectuate
the survival of Sections 6, 7.3, 7.4 and 7.10) shall survive termination of
this Agreement and any termination of the Executive's employment hereunder.
7.15 EXISTING AGREEMENTS. Executive represents to the Company
that the Executive is not subject or a party to any employment or consulting
agreement, non-competition covenant or other agreement, covenant or
understanding which might prohibit the Executive from executing this
Agreement or limit the Executive's ability to fulfill the Executive's
responsibilities hereunder.
7.16 HEADINGS. The headings in this Agreement are for
reference only and shall not affect the interpretation of this Agreement.
7.17 PARACHUTE PROVISIONS. If any amount payable to or other
benefit receivable by the Executive pursuant to this Agreement is deemed to
constitute a Parachute Payment (as defined below), alone or when added to any
other amount payable or paid to or other benefit receivable or received by
the Executive which is deemed to constitute a Parachute Payment (whether or
not under an existing plan, arrangement or other agreement), and would result
in the imposition on the Executive of an excise tax under Section 4999 of the
Internal Revenue Code, then, in addition to any other benefits to which the
Executive is entitled under this Agreement,
20
<PAGE>
the Executive shall be paid by the Company an amount in cash equal to the sum
of the excise taxes payable by the Executive by reason of receiving Parachute
Payments plus the amount necessary to put the Executive in the same after-tax
position (taking into account any and all applicable federal, state and local
excise, income or other taxes at the highest applicable rates on such
Parachute Payments and on any payments under this Section 7.17) and if no
excise taxes had been imposed with respect to Parachute Payments. The amount
of any payment under this Section 7.17 shall be computed by a certified
public accounting firm mutually and reasonably acceptable to the Executive
and the Company, the computation expenses of which shall be paid by the
Company. "Parachute
21
<PAGE>
Payment" shall mean any payment deemed to constitute a "parachute payment" as
defined in Section 280G of the Internal Revenue Code.
IN WITNESS WHEREOF, the parties hereto have signed their names as of
the day and year first above written.
Chateau Properties, Inc.
By: /s/John A. Boll
---------------------
its Chairman
/s/Rees F. Davis, Jr.
------------------------------
Rees F. Davis, Jr.
22
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME FOUND ON PAGES
AND OF THE COMPANY'S 10Q FOR THE QUARTER END AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 120
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 804,829
<DEPRECIATION> 87,881
<TOTAL-ASSETS> 744,727
<CURRENT-LIABILITIES> 0
<BONDS> 329,694
0
0
<COMMON> 0
<OTHER-SE> 252
<TOTAL-LIABILITY-AND-EQUITY> 744,727
<SALES> 0
<TOTAL-REVENUES> 29,376
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 23,788
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,428
<INCOME-PRETAX> 4,455
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,455
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
