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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 21, 1997
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
------------------------
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CHATEAU PROPERTIES, INC.
--------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee paid previously with preliminary materials.
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CHATEAU PROPERTIES, INC.
6430 SOUTH QUEBEC STREET
ENGLEWOOD, COLORADO 80111
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 22, 1997
To the Stockholders of Chateau Properties, Inc.:
The Annual Meeting of the Stockholders of Chateau Properties, Inc., a
Maryland corporation (the "Company"), will be held at the Denver Hilton South on
Thursday, May 22, 1997, at 9:00 a.m., Mountain Daylight Time, for the following
purposes:
1. To elect four Class I directors to serve for a term of three years,
expiring at the 2000 Annual Meeting of Stockholders or until their
respective successors shall be elected and shall qualify; to elect two Class
II directors to serve for a term of one year, expiring at the 1998 Annual
Meeting of Stockholders or until their respective successors shall be
elected and shall qualify; and to elect two Class III directors to serve for
a term of two years, expiring at the 1999 Annual Meeting of Stockholders or
until their respective successors shall be elected and shall qualify;
2. To approve an amendment to the Company's Charter to change the
Company's corporate name to "Chateau Communities, Inc.";
3. To approve an amendment to Article IV of the Company's Charter to,
among other things, increase the number of authorized shares of common stock
to 90,000,000 shares;
4. To approve the Company's 1997 Equity Compensation Plan; and
5. To transact such other and further business as may properly come
before the meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on April 11, 1997 as
the record date for the determination of stockholders entitled to notice of and
to vote at such meeting and any adjournments thereof.
We hope all stockholders who can do so will attend the Annual Meeting in
person. Whether or not you plan to attend, we urge you to complete, date and
sign the enclosed proxy and return it promptly in the enclosed postage-prepaid
envelope provided for that purpose. By returning your proxy promptly you can
help the Company avoid the expense of further proxy solicitations. Prior to
being voted, the proxy may be withdrawn in the manner specified in the proxy
statement.
By Order of the Board of Directors,
John A. Boll, Chairman
April 21, 1997
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CHATEAU PROPERTIES, INC.
6430 SOUTH QUEBEC STREET
ENGLEWOOD, COLORADO 80111
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1997
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors (the "Board") of Chateau Properties, Inc. (the
"Company") for use at the Annual Meeting of Stockholders of the Company (the
"Annual Meeting") to be held at the Denver Hilton South on Thursday, May 22,
1997 at 9:00 a.m. Mountain Daylight Time, or at any adjournments thereof, for
the purposes set forth in the attached Notice of Meeting.
This Proxy Statement and the accompanying form of proxy are first being sent
to stockholders on or about April 21, 1997.
When proxies in the enclosed form are returned properly executed, the shares
represented thereby will be voted at the meeting and, where instructions have
been given by the stockholder, will be voted in accordance therewith. If the
stockholder does not otherwise specify, the stockholder's shares will be voted
FOR the election of the listed nominees for the Board, FOR the amendment of the
Company's Charter to change the Company's corporate name, FOR the amendment to
Article IV of the Company's Charter, FOR the approval of the Company's 1997
Equity Compensation Plan and in accordance with the best judgment of the proxy
holders with respect to any other matter which may properly come before the
Annual Meeting. Any person signing and mailing the enclosed proxy may,
nevertheless, revoke the proxy at any time before it is voted either by written
notice received by the Company (Attention: Tamara D. Fischer, Secretary) at its
address stated herein or at the Annual Meeting.
Only stockholders of record at the close of business on April 11, 1997 (the
"Record Date") will be entitled to notice of or to vote at the meeting. As of
the Record Date, there were 25,175,114 shares of common stock, $0.01 par value
("Common Stock"), outstanding and entitled to vote. Each outstanding share of
Common Stock is entitled to one vote. There is no cumulative voting with respect
to the election of directors. Presence in person or by proxy of holders of a
majority of outstanding shares of Company Common Stock will constitute a quorum
at the Annual Meeting. Broker non-votes and abstentions do not affect the
determination of whether a quorum is present.
On February 11, 1997, a wholly-owned subsidiary of the Company merged with
ROC Communities, Inc., a Maryland corporation ("ROC"), in a strategic merger of
equals ("the Merger") combining the businesses of the Company and ROC. The
Merger was effected pursuant to an Amended and Restated Agreement and Plan of
Merger, dated as of September 17, 1996, as amended by the Amendment thereto
dated as of December 20, 1996 (collectively, the "Merger Agreement"), by and
among the Company, ROC and such subsidiary. As a result of the Merger, the
Company became the largest owner and operator of manufactured home communities
in the United States.
PROPOSAL 1--ELECTION AND CONTINUATION OF DIRECTORS
As provided by the Merger Agreement, at the effective time of the Merger,
two of the seven directors of the Company resigned from the Board (Kenneth E.
Myers and Jay G. Rudolph). The remaining five directors of the Company (Messrs.
John A. Boll, C.G. ("Jeff") Kellogg, Edward R. Allen, Gebran S. Anton, Jr. and
James M. Lane (collectively, the "Group A Directors")) continued as directors,
with Mr. Boll remaining as Chairman of the Board. In addition, the size of the
Board was increased to ten directors, with the five vacancies being filled by
five nominees selected prior to the Merger by the Board of Directors
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of ROC (the five new members being Gary P. McDaniel, James M. Hankins, Donald E.
Miller, James L. Clayton and Steven G. Davis (collectively, the "Group B
Directors")).
The directors of the Company are divided into three classes, and one class
is elected at each Annual Meeting of the Stockholders for a term of three years.
Pursuant to the Merger Agreement, each of the five remaining Group A Directors
retained their existing classifications, as follows: Class I--Messrs. Anton and
Lane; Class II--Messrs. Allen and Kellogg; and Class III--Mr. Boll. In addition,
the five Group B Directors were appointed to serve as directors until the next
Annual Meeting of Stockholders of the Company following the Merger, at which
time it was expected that they would be renominated to serve as directors of the
Company in the following classes: Class I--Mr. McDaniel; Class II--Messrs.
Hankins and Miller; and Class III--Messrs. Clayton and Davis. On March 22, 1997,
the Board was increased to 11 members, with the additional slot being filled by
Rhonda G. Hogan, an additional independent director (the "Group C Director").
Ms. Hogan was appointed to serve as a director until the next Annual Meeting, at
which time it was also expected that she would be renominated to serve as a
Class I director. The nominees of the Board in each group described below have
been designated by the Nominating Committees of the Board, as described under
"BOARD MATTERS--Committees of the Board of Directors-- Nominating Committees,"
below.
CLASS I DIRECTORS
The following information is furnished regarding the nominees for election
as Class I directors (to serve until the Annual Meeting of the Stockholders to
be held in 2000 or until their respective successors are elected and qualified):
GARY P. MCDANIEL, 51, has been Chief Executive Officer and a director of the
Company since February 1997. He served as the Chairman of the Board, President
and Chief Executive Officer of ROC since 1993, has been a principal of ROC and
its predecessors since 1979, and has been active in the manufactured home
industry since 1972. Mr. McDaniel has been active in several state and national
manufactured home associations, including associations in Florida and Colorado.
In 1996, he was named "Industry Person of the Year" by the National Manufactured
Housing Industry Association. Mr. McDaniel is on the Board of Directors of the
Manufactured Housing Institute. He is a graduate of the University of Wyoming
and served as a Captain in the United States Air Force.
GEBRAN S. ANTON, JR., 64, first became a director of the Company in 1993. He
is the owner of Gebran Anton Development Co. and Anton, Zorn & Associates, Inc.,
a commercial and industrial real estate broker and former owner of Anton's, a
men's retail chain. He is an incorporator and Director of Community Central
Bank, and a former Chairman of the Board for First National Bank, St. Joseph
Hospital, and Downtown Development Committee. He is extremely active in
charitable organizations, including the March of Dimes, the American Cancer
Foundation and Variety Club International. Mr. Anton was awarded the March of
Dimes Macomb Citizen of the Year 1994, St. Joseph's Mercy Hospital Medallion
Award 1994, Mt. Clemens Business Citizen of the Year 1990 and Macomb
Distinguished Citizen 1985.
JAMES M. LANE, 67, first became a director of the Company in 1993. He has
recently retired as the Senior Vice President and Chief Investment Officer of
the Investment Management Division, NBD Bank, Detroit, where he served for
approximately thirteen years. Mr. Lane was associated with the Chase Manhattan
Corporation from 1953 to 1978, attaining the position of Executive Vice
President while also serving as President and Chief Executive Officer of Chase
Investors Management Corporation. He has a B.A. degree in economics from Wheaton
College and an MBA degree in finance from the University of Chicago. Mr. Lane
has served as trustee or director for several educational institutions and civic
organizations.
RHONDA G. HOGAN, 44, has served as a director of the Company since March
1997. Ms. Hogan is presently a partner of Tishman Speyer Properties. She
recently served on the Board of Directors and as President of The Water Club
Condominium Association, Inc. and is on the Silver Council of the Urban Land
Institute. In addition, she served on the Board of Directors of Barnett Bank of
South Florida, N.A.
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from 1986 to 1996. Ms. Hogan has also served or currently serves on several
other Boards of Directors and as a member of several councils or institutes
including appointments to State Boards by the Governor and Cabinet. She has been
honored for her achievements in business by national and local newspapers and
magazines. Ms. Hogan received her B.B.A. from the University of Iowa.
CLASS II DIRECTORS
The following information is furnished regarding the nominees for election
as Class II directors (to serve until the Annual Meeting of the Stockholders to
be held in 1998 or until their respective successors are elected and qualified):
JAMES M. HANKINS, 62, served as a director of ROC from August 1993 to
February 1997, and has served as a director of the Company since February 1997.
He is managing general partner of a partnership which owns and operates
destination RV resorts in Arizona. Prior to organizing the partnership in 1985,
Mr. Hankins was a founder of Mobile Home Communities, Inc. in 1969, and served
as President and Chief Executive Officer from 1973 to 1984. Mr. Hankins is a
director of several educational and charitable organizations. He holds a B.S.
from the University of South Carolina and an MBA from Harvard University, and
has served as a Captain in the United States Air Force.
DONALD E. MILLER, 66, served as a director of ROC from August 1993 to
February 1997, and has served as a director of the Company since February 1997.
In May 1994, Mr. Miller was appointed Vice Chairman of the Board of Directors of
The Gates Corporation. From 1987 to May 1994, he was President, Chief Operating
Officer and director of The Gates Corporation and The Gates Rubber Company,
which engage in the production and manufacture of rubber products, primarily for
automotive needs. Mr. Miller is a director/trustee of several educational and
charitable organizations and a graduate of the Colorado School of Mines.
The following information is provided regarding the continuing Class II
directors:
C.G. ("JEFF") KELLOGG, 53, has been President and a director of the Company
since its inception, and was Chief Executive Officer of the Company from its
inception to February 1997. For the five years preceding the formation of the
Company, Mr. Kellogg was President and Chief Operating Officer of Chateau
Estates. He is extremely active in local and national industry associations,
often in leadership positions. Mr. Kellogg is a past President of the Michigan
Manufactured Housing Association and served on the Manufactured Housing
Institute's Community Operations Committee. He is a graduate of Michigan
Technological University with a B.S. in Civil Engineering.
EDWARD R. ALLEN, 56, has served as a director of the Company since 1993. He
was, for the five years preceding the formation of the Company, Chairman and
Chief Executive Officer of InterCoastal Communities, Inc., a Florida corporation
which was engaged in operating seven manufactured home communities in Florida.
Prior to joining InterCoastal, Mr. Allen developed a chain of steak houses which
he and his partner sold in 1977 to Green Giant Corporation. He remained as
President for two years, and expanded the chain nearly doubling the number of
restaurants. Mr. Allen is currently active in educational and charitable
organizations, serving as Vice Chairman of the Board of Trustees at the Museum
of Discovery and Science in Fort Lauderdale, Florida and Vice Chairman of the
Board of the Directors of Channel 2 Public Television in Miami, Florida. He is a
graduate of Cornell University.
CLASS III DIRECTORS
The following information is furnished regarding the nominees for election
as Class III directors (to serve until the Annual Meeting of the Stockholders to
be held in 1999 or until their respective successors are elected and qualified):
JAMES L. CLAYTON, 63, served as a director of ROC from August 1993 until
February 1997 and as a director of the Company since February 1997. He is the
founder, and since 1966 has been the Chairman of the Board and Chief Executive
Officer of, Clayton Homes, Inc., a company engaged in the manufacture, sale,
financing and management of manufactured homes. Mr. Clayton is a director of
Dollar General
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Stores and Chairman of the Board of BankFirst. In 1991, Mr. Clayton was inducted
into the Horatio Alger Foundation, Washington, D.C. Mr. Clayton is a trustee or
board member of a number of charitable institutions. Mr. Clayton received an
undergraduate degree in electrical engineering and a law degree from the
University of Tennessee.
Steven G. Davis, 47, has served as a director of the Company since February
1997. He is currently the owner of East Silent Advisors, a real estate
consulting firm. He served as Chief Financial Officer, Executive Vice President
and a director of ROC from 1993 to 1997. From 1990 to 1993, Mr. Davis served as
an officer and director of The Windsor Group, an owner/operator of 42
manufactured home communities, and, from 1991 through March 1993, as that
company's President. Mr. Davis is currently on the advisory boards of Arlen
Capital Advisors and Leroc Partners, Inc. Mr. Davis is a Certified Public
Accountant and is a graduate of the University of San Diego.
In addition, the following information is provided regarding the continuing
Class III director:
John A. Boll, 67, has been Chairman of the Board of Directors of the Company
since its inception in 1993. Prior to the formation of the Company, Mr. Boll was
the co-founder, partner and Chief Executive Officer of Chateau Estates, which
was formed in 1966. He was inducted into the MH/RV Hall of Fame in 1992 for his
outstanding contributions to the manufactured housing industry. Mr. Boll was
appointed by the Governor of the State of Michigan to become the first Chairman
of the Michigan Mobile Home Commission, which is the principal Michigan
authority regulating manufactured housing, a position he held for six years. Mr.
Boll also serves on numerous boards of charitable organizations in Michigan and
Colorado.
REQUIRED VOTE AND RECOMMENDATION
Proxies will be voted for the election of all persons nominated to be a
director above unless contrary instructions are set forth on the proxy. In the
event any nominee should become unable or unwilling to serve as a director,
which the Board of Directors does not expect, the person named in the
accompanying proxy will vote for such nominee, if any, as may be recommended by
the Board of Directors.
Directors are elected by a plurality of the votes cast by the holders of
Common Stock. The individuals who receive the largest number of votes cast are
elected as directors; therefore, any shares not voted (whether due to abstention
or broker non-vote) do not affect the election of directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES.
PROPOSAL 2--PROPOSED AMENDMENT TO CHARTER
TO CHANGE THE COMPANY'S CORPORATE NAME
Article I of the Company's Articles of Amendment and Restatement (the
"Charter") presently provides that the name of the Company is "Chateau
Properties, Inc." The Board has unanimously approved an amendment to the
Company's Charter to change the name of the Company to "Chateau Communities,
Inc." (the "Name Amendment") and has directed that the Name Amendment be
submitted to the stockholders of the Company for approval. To effect such
change, Article I of the Charter will be amended to read in its entirety as
follows:
"NAME
The name of the corporation (the "Corporation") is:
Chateau Communities, Inc."
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REASONS FOR THE CHANGE OF CORPORATE NAME
Pursuant to Section 1.9 of the Merger Agreement, the Company is required to
submit to a vote of the stockholders, at the Annual Meeting, a proposal to
change the name of the Company as described above. Furthermore, the Board
believes that "Chateau Communities, Inc." best reflects the future identity and
vision of the Company.
REQUIRED VOTE AND RECOMMENDATION
Proxies will be voted for the Charter Amendment unless contrary instructions
are set forth on the proxy. Under applicable law and the Company's Charter, this
proposal requires the affirmative vote of the holders of two-thirds of all of
the issued and outstanding shares of Common Stock (16,783,409 shares).
Accordingly, abstentions and broker non-votes will have the effect of a vote
against this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE NAME AMENDMENT.
PROPOSAL 3--PROPOSED AMENDMENT TO ARTICLE IV OF THE CHARTER
Article IV of the Charter presently provides that the Company is authorized
to issue 32,000,000 shares, of which 30,000,000 shares are designated as Common
Stock and 2,000,000 shares are designated as Preferred Stock, $.01 par value per
share ("Preferred Stock"). Article IV of the Charter also presently provides
authority to the Board to reclassify any unissued shares of Preferred Stock, but
does not provide it with the authority to reclassify unissued shares of Common
Stock. The Board has unanimously approved an amendment to the Company's Charter
to increase the number of authorized shares of Common Stock to 90,000,000 and to
permit the Board to change the classification of any authorized but unissued
shares of capital stock, including Preferred Stock (the "Article IV Amendment").
The Board has directed that the Article IV Amendment be submitted to the
stockholders of the Company for approval. To effect such amendment, Sections 1
and 3 of Article IV of the Charter will be amended to read in its entirety as
follows:
Section 1. Authorized Shares. The total number of shares of stock that
the Corporation has authority to issue is 92,000,000 shares, of which
90,000,000 are shares of Common Stock, $.01 par value per share ("Common
Stock"), and 2,000,000 shares are shares of Preferred Stock, $.01 par value
per share ("Preferred Stock"). The aggregate par value of all authorized
shares of stock having par value is $920,000.00. The Board of Directors may
classify or reclassify any authorized but unissued shares of capital stock
by setting or changing in any one or more respects the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, qualifications or terms or conditions of redemption of such
shares of stock.
- - - -
Section 3. Issuance of Capital Stock. The power of the Board of
Directors to classify and reclassify any of the authorized but unissued
shares of capital stock shall include, without limitation, subject to the
express terms of any other class or series of capital stock outstanding at
the time and subject to the provisions of Article VI regarding Excess Stock,
authority to classify or reclassify any unissued shares of such stock into a
class or classes of preferred stock, preference stock, special stock or
other stock, to increase or decrease such shares once classified and to
issue such stock, from time to time, in one or more series as authorized by
the Board of Directors. Prior to issuance of shares of any class or series
of stock to be designated, the Board of Directors by resolution shall
designate that class or series to distinguish it from all other classes or
series of stock of the Corporation, shall specify the number of shares to be
included in the class or series and, subject to the express terms of any
other class or series of capital stock outstanding at time and subject to
the provisions of Article VI regarding Excess Stock, shall set the terms,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to ownership, dividends or other distributions,
qualifications and terms or conditions of redemption of the shares of such
class or series of capital stock.
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REASONS FOR THE AMENDMENT TO ARTICLE IV
The Company is presently authorized to issue 30,000,000 shares of Common
Stock, of which 25,175,114 were issued and outstanding at the close of business
on April 11, 1997. An additional 1,490,000 shares of Common Stock were reserved
for issuance at such date pursuant to the Company's stock option and incentive
plans. In addition, 2,756,057 shares of Common Stock were reserved for issuance
upon the conversion of outstanding units of limited partner interest ("OP
Units") in CP Limited Partnership, a Maryland limited partnership which is the
operating partnership of the Company, which OP Units are exchangeable on a
one-for-one basis for shares of the Company's Common Stock, subject to certain
limitations relating to the Company's ownership limit. Accordingly, at April 11,
1997, there were only 578,829 unissued and unreserved shares of Common Stock.
Furthermore, as a real estate investment trust ("REIT"), the Company is required
to distribute at least 95% of its annual earnings to stockholders and it
therefore expects, on a regular basis, to raise capital through the sale of
Common Stock or other equity securities.
The increased number of shares of Common Stock will allow the Company to
effect additional sales of such securities should the need arise in the future.
Future purposes for additional shares could include paying stock dividends or
effecting other distributions to stockholders, subdividing outstanding shares
through stock splits, effecting acquisitions of manufactured home communities,
securing additional financing for working capital or capital expenditures and
providing incentives through stock option or other incentive plans. The Company
has no plan, commitment or understanding at this time to issue any additional
shares other than the shares of Common Stock reserved for issuance as described
above. The Board of Directors believes, however, such additional authorized
shares of Common Stock will enable the Company to take advantage of the
availability of favorable opportunities without the delay and expense associated
with holding a special meeting of stockholders at the time such additional
shares are needed.
The additional shares of Common Stock for which authorization is sought
would be identical to the shares of Common Stock now authorized. The holders of
Common Stock do not presently have preemptive rights to subscribe for any of the
Company's securities and will not have any such rights to subscribe for the
additional Common Stock proposed to be authorized.
If the Article IV Amendment is approved, the increase in authorized shares
will not, by itself, have any effect on the rights of holders of presently
issued and outstanding shares of Common Stock. However, the issuance of
additional shares of Common Stock may, among other things, have a dilutive
effect on funds from operations per share and on the equity and voting rights of
the present holders of Common Stock.
Presently, Article IV of the Company's Charter permits the Board to
reclassify any unissued shares of any series of Preferred Stock. Maryland law
permits the Company to reclassify not only unissued shares of Preferred Stock,
but also any unissued shares of any class of capital stock of the Company
(including Preferred Stock and Common Stock). The Article IV Amendment will
therefore also give the Company the authority to reclassify stock to the full
extent permitted under Maryland law and will give additional flexibility to the
Board in assessing and implementing various financing options for the Company,
including those involving additional issuances of Preferred Stock and/or Common
Stock (although the Company has no current plans with respect to any such
additional issuances). The Board of Directors believes that additional shares of
Common Stock should be authorized and the Board should be permitted to
reclassify any unissued shares in order to ensure that authorized, unissued and
unreserved shares of capital stock will be available for proper corporate
purposes.
REQUIRED VOTE AND RECOMMENDATION
Proxies will be voted for the Article IV Amendment unless contrary
instructions are set forth on the proxy. Under applicable law and the Company's
Charter, this proposal requires the affirmative vote of the holders of
two-thirds of all of the issued and outstanding shares of Common Stock
(16,783,409 shares). Accordingly, abstentions and broker non-votes will have the
effect of a vote against this proposal.
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THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ARTICLE IV AMENDMENT.
PROPOSAL 4--APPROVAL OF THE 1997 EQUITY COMPENSATION PLAN
In accordance with Section 5.11 of the Merger Agreement, the Board has
adopted the 1997 Equity Compensation Plan (the "Plan"), subject to approval by
Stockholders at the Annual Meeting. The Plan provides equity-based incentives to
key employees, directors and key consultants of the Company and its subsidiaries
(in total, approximately 65 persons). The Plan authorizes the discretionary
grant by the Executive Compensation Committee of the Board (the "Committee") of
awards of options and restricted shares of Common Stock. Pursuant to the Plan,
950,000 shares of Common Stock, subject to anti-dilutive adjustment, will be
reserved for awards of options and restricted shares of Common Stock to
participants for the purpose of providing, through the grant of long-term
incentives, a means to attract and retain key personnel and to provide to
participating officers and other key employees long-term incentives for
sustained high levels of performance.
Certain terms and provisions of the Plan are summarized below. This summary,
however, does not purport to be a complete description of the Plan and this
description is qualified in its entirety by the terms of the Plan. Copies of the
actual Plan documents may be obtained by any stockholder upon written request to
the Secretary to the Company.
ADMINISTRATION
The Plan will be administered by the Committee.
SECURITIES SUBJECT TO THE EQUITY COMPENSATION PLAN
The shares issued under the Plan may consist of authorized but unissued
shares or Treasury shares of the Company. No more than an aggregate of 950,000
shares of Common Stock may be the subject of options or restricted stock grants
under the Plan.
ELIGIBILITY
Any key employee, director or key consultant of the Company or of a
subsidiary thereof may be eligible to receive an option or restricted stock
grant. In determining the eligibility of any employee director or key
consultant, the Committee may consider his or her position and responsibility,
the nature and value to the Company of the individual's services and
accomplishments whether directly or through its subsidiaries, his or her present
and potential contribution to the success of the Company whether directly or
through its subsidiaries and such other factors as the Committee may deem
relevant.
OPTIONS GRANTED UNDER THE PLAN
Options granted under the Plan may be either (i) incentive stock options
("Incentive Stock Options") within the meaning of Section 422(b) of the Internal
Revenue Code of 1986, as amended (the "Code") or (ii) non-qualified stock
options. Any options granted under the Plan will have exercise prices not less
than 100% of the fair market value (as defined in the Plan) of the Common Stock
at the date of grant. Unless otherwise provided by the particular option grant,
at the election of the optionee the exercise price may be paid, in whole or in
part, (i) by certified or cashier's check; (ii) with the proceeds of a Company
loan program or third-party sale program or a notice given as consideration
under such a program, in each case if permitted by the Committee; (iii) with
shares of previously owned Common Stock, if approved by the Committee; or (iv)
with shares of Common Stock withheld by the Company which the optionee would
otherwise have received, if approved by the Committee. As an alternative to
payment in full by the optionee of the exercise price, the Committee, in its
discretion, may allow an optionee, upon exercise of its option, to receive from
the Company shares of Common Stock and/or cash in an amount equal to the excess
of the fair market value of the Common Stock with respect to which the option is
being exercised over the aggregate option exercise price.
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The optionee will be able to exercise options from time to time as specified
in the particular option grant. The Committee shall determine the expiration
date of the options, which date will be no later than the tenth anniversary from
the date of grant or, in the case of certain Incentive Stock Options, no more
than five years from the date of grant. Except in certain circumstances, the
option must be exercised during the period the optionee is in the employ of the
Company. Upon and after the death of an optionee, the optionee's options, to the
extent otherwise exercisable, will be exercisable by the optionee's legal
representative. Subject to the above conditions, the exercise price and duration
of the options will be set by the Committee.
SPECIAL LIMITATIONS FOR INCENTIVE STOCK OPTIONS
The Plan imposes certain limitations upon the exercise of Incentive Stock
Options, including the following limitations:
(i) The aggregate fair market value (determined at the time the
Incentive Stock Options are granted) of the shares of Common Stock with
respect to which Incentive Stock Options under the Plan or any other plan
are exercisable for the first time by any optionee during any calendar year
shall not exceed $100,000.
(ii) If an Incentive Stock Option is to be granted to an employee who
immediately before such grant owned 10% or more of the total combined voting
power of all classes of stock of the Company or any subsidiary of the
Company, the exercise price per share of Common Stock shall be not less than
110% of the fair market value at the time of the grant of the Incentive
Stock Option, and the Incentive Stock Option shall expire not more than five
years from the date of grant.
STOCKHOLDER RIGHTS OF OPTIONEES
Neither the optionee nor any person entitled to exercise the optionee's
rights in the event of death shall have any rights of a stockholder with respect
to the shares of Common Stock subject to the option, except to the extent that a
certificate for such shares shall have been issued upon the exercise of the
option. To the extent permitted by the Committee, option grants may provide for
the payment of dividends to the optionee prior to exercise of the option.
FEDERAL TAX CONSEQUENCES OF OPTION GRANTS
In general, neither the grant nor the exercise of an Incentive Stock Option
will result in taxable income to an optionee or a deduction for the Company. To
receive special tax treatment as an Incentive Stock Option under the Code as to
shares acquired upon exercise of an Incentive Stock Option, an optionee must
neither dispose of such shares within two years after the Incentive Stock Option
is granted nor within one year after the transfer of the shares to the optionee
pursuant to exercise of the option. In addition, the optionee must be an
employee of the Company or a qualified Company subsidiary at all times between
the date of grant and the date three months (one year in the case of death or
disability) before exercise of the option. Special tax treatment as an Incentive
Stock Option under the Code generally allows the sale of Common Stock received
upon the exercise of an Incentive Stock Option to result in any gain being
treated as a capital gain to the optionee, but the Company will not be entitled
to a tax deduction. However, the exercise of an Incentive Stock Option (if the
holding period rules described in this paragraph are satisfied) will give rise
to income includable by the optionee in his or her alternative minimum taxable
income for purposes of the alternative minimum tax in an amount equal to the
excess of the fair market value of the stock acquired on the date of the
exercise of the option over the option price.
If the holding period rules noted above are not satisfied, gain recognized
on the disposition of the shares acquired upon the exercise of an Incentive
Stock Option will be characterized as ordinary income. Such gain will be equal
to the difference between the option price and the fair market value of the
shares at the time of exercise. (Special rules may apply to disqualifying
dispositions where the amount realized is less than the value at exercise.) The
Company will generally be entitled to a deduction equal to the amount
8
<PAGE>
of such gain included by an optionee as ordinary income. Any excess of the
amount realized upon such disposition over the fair market value at exercise
will generally be long-term or short-term capital gain depending on the holding
period involved. Notwithstanding the foregoing, in the event that exercise of
the option is permitted other than by cash payment of the exercise price,
various special tax rules may apply.
No income will be recognized by an optionee at the time a non-qualified
stock option is granted. Generally, ordinary income will, however, be recognized
by an optionee at the time a non-qualified stock option is exercised in an
amount equal to the excess of the fair market value of the underlying Common
Stock on the exercise date over the option price. The Company will generally be
entitled to a deduction for Federal income tax purposes in the same amount as
the amount included in ordinary income by the optionee with respect to his or
her non-qualified stock option.
Gain or loss on a subsequent sale or other disposition of the shares
acquired upon the exercise of a non-qualified stock option will be measured by
the difference between the amount realized on the disposition and the tax basis
of such shares, and will generally be long-term or short-term capital gain
depending on the holding period involved. The tax basis of the shares acquired
upon the exercise of any non-qualified stock option will be equal to the sum of
the option price of such non-qualified stock option and the amount included in
income with respect to such option. Notwithstanding the foregoing, in the event
that exercise of the option is permitted other than by cash payment of the
exercise price, various special tax rules may apply.
The foregoing tax discussion is a general description of certain expected
Federal income tax results
under current law, and does not purport to be a complete description of such
consequences.
RESTRICTED STOCK
Restricted stock granted under the Plan generally may not be disposed of by
the recipient until certain restrictions established by the Committee lapse.
Recipients of restricted stock are not generally expected to be required to
provide consideration other than the rendering of services or the payment of any
minimum amount required by law. The participant shall have, with respect to
restricted stock, all of the rights of a stockholder of the Company, including
the right to vote the shares, and the right to receive any cash dividends,
unless the Committee shall otherwise determine. Upon termination of employment
during the restriction period, all restricted stock shall be forfeited, subject
to exceptions that may be specified in a specific restricted stock grant.
AMENDMENT AND TERMINATION
The Plan may be amended by the Board at any time, except that no amendment
may adversely affect a participant with respect to options or restricted stock
previously granted unless such amendments are in compliance with applicable
laws; provided that no amendment shall be made that would, if such amendment
were not approved by the holders of the Common Stock, cause the Plan to fail to
comply with any requirement of applicable law or regulation if such amendment
were not so approved.
The Plan will terminate on, and no option or restricted stock will be
granted thereunder after, the ten-year anniversary of the earlier of the
approval of the Plan by (i) the Board or (ii) the date the Plan is approved by
the stockholders.
REQUIRED VOTE AND RECOMMENDATION
Proxies will be voted for the approval of the Plan unless contrary
instructions are set forth on the proxy. The Plan will be approved if a majority
of the votes cast by the holders of Common Stock are cast for Proposal 4,
provided that at least 50% of all of the issued and outstanding shares of Common
Stock entitled to vote are present and voting at the Annual Meeting.
Accordingly, assuming at least 50% of the outstanding shares of Common Stock
vote in person or by proxy on this matter, abstentions and broker non-votes will
not affect the outcome of this proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE PLAN.
9
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following information is presented with respect to the current executive
officers of the Company:
GARY P. MCDANIEL is the Chief Executive Officer and a director of the
Company. Biographical information on Mr. McDaniel may be found under "PROPOSAL
1--ELECTION AND CONTINUATION OF DIRECTORS--Class I Directors," above.
C.G. ("JEFF") KELLOGG is President and a director of the Company.
Biographical information on Mr. Kellogg may be found under "PROPOSAL 1--ELECTION
AND CONTINUATION OF DIRECTORS
- --Class II Directors," above.
JAMES B. GRANGE, 40, is Chief Operating Officer of the Company, having
served in such capacity since February 1997. He served as Executive Vice
President and Chief Operating Officer of ROC from 1993 to February 1997. Mr.
Grange served as Executive Vice President, Chief Operating Officer and a
director for ROC's predecessors from 1986 to 1993. He has been responsible for
property management at ROC since 1982, having started as a Regional Property
Manager overseeing ten properties in three states. He is currently a director of
the Colorado Chapter of the March of Dimes and is active in The Manufactured
Housing Institute. Mr. Grange is a graduate of the University of Montana.
TAMARA D. FISCHER, 41, is Executive Vice President, Chief Financial Officer
of the Company, having served in these roles since the Company's formation.
Prior to joining the Company, Ms. Fischer was employed by Coopers & Lybrand for
11 years and served on the Company's engagement team since 1986. Ms. Fischer is
a CPA and a graduate of Case Western Reserve University.
REES F. DAVIS, JR., 38, is Executive Vice President--Acquisitions of the
Company, having served in such capacity since February 1997. He served as
Executive Vice President of Acquisitions and Sales for ROC from 1993 to February
1997. Prior to that, Mr. Davis previously served as Vice President of
Acquisitions and Sales and a director for ROC's predecessors since 1986. From
1984 to 1986, Mr. Davis was active in property acquisitions for ROC's
predecessors, having previously acted as a Regional Property Manager. Mr. Davis
is a two-term past officer of the Colorado Manufactured Housing Association. He
is also an active member of The Manufactured Housing Institute and holds a
Colorado real estate broker license. Prior to entering into the manufactured
home industry, Mr. Davis was employed in the real estate department of Shell Oil
Company from 1981 to 1983. Mr. Davis is a graduate of Colorado State University.
10
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1997, certain information
regarding the beneficial ownership of the Company's Common Stock by (i) each of
the directors (nominated and continuing), (ii) executive officers of the Company
named in the Summary Compensation Table, (iii) all directors and executive
officers as a group and (iv) each person or entity known to the Company to be
the beneficial owner of more than 5% of the Common Stock. Directors are
designated by an asterisk.
<TABLE>
<CAPTION>
SHARES OF
STOCK
BENEFICIALLY
OWNED AS OF
MARCH 31, PERCENT
NAME 1997** OF CLASS
- ------------------------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
John A. Boll(1)*........................................................................... 3,620,731 14.1%
Gary P. McDaniel(2)*....................................................................... 452,427 1.8%
C.G. ("Jeff") Kellogg(3)*.................................................................. 324,897 1.3%
James B. Grange(4)......................................................................... 196,031 ***
Tamara D. Fischer(5)....................................................................... 139,624 ***
Rees F. Davis, Jr.(6)...................................................................... 195,146 ***
Edward R. Allen(7)*........................................................................ 879,186 3.5%
Gebran S. Anton, Jr.(8)*................................................................... 32,391 ***
James L. Clayton(9)*....................................................................... 215,081 ***
Steven G. Davis(10)*....................................................................... 173,664 ***
James M. Hankins(11)*...................................................................... 32,771 ***
Rhonda G. Hogan*........................................................................... 0 ***
James M. Lane(12)*......................................................................... 22,428 ***
Donald E. Miller(13)*...................................................................... 23,966 ***
All directors and executive officers as a group (14 persons)............................... 6,308,343 23.9%
J. Peter Ministrelli(14)................................................................... 2,626,157 10.3%
</TABLE>
- ------------------------
** For purposes of this table, a person is deemed to be the beneficial owner of
shares of Common Stock if that person has the right to acquire such shares
within 60 days by the exercise of any stock option or any other right to
convert or exchange outstanding securities. Certain persons named in the
table also hold OP Units in CP Limited Partnership, which is the operating
partnership of the Company. Such OP Units are exchangeable on a one-for-one
basis for shares of the Company's Common Stock, subject to certain
limitations relating to the Company's ownership limit. OP Units and stock
options held by a person (to the extent exchangeable or exerciseable within
such 60-day period) are deemed to have been exchanged or exercised for the
purpose of computing the percentage of outstanding shares of Common Stock
beneficially owned by such person, but shall not be deemed to have been
exchanged or exercised for the purpose of computing the percentage of
outstanding shares of Common Stock beneficially owned by any other person.
Additionally, for the purposes of this table, a person or entity shall be
deemed to be a beneficial owner of shares of Common Stock if such person or
entity has or shares either investment or voting power with respect to such
shares.
*** Shares owned in each case constitute less than 1% of the Company's
outstanding common stock.
(1) Reflects 3,098,800 shares of Common Stock, 500,571 OP Units exchangeable for
an equal number of shares of Common Stock and options to purchase 21,360
shares of Common Stock. Does not include 184,911 shares of Common Stock
which may be obtained on exchange of currently non-exchangeable OP Units.
(2) Reflects 392,512 shares of Common Stock and options to purchase 59,915
shares of Common Stock. 10,421 shares of Common Stock are held in
irrevocable trusts established for the benefit of Mr.
11
<PAGE>
McDaniel's two children. Mr. McDaniel disclaims beneficial ownership of the
Common Stock held in such trusts.
(3) Reflects 94,209 shares of Common Stock and options to purchase 230,688
shares of Common Stock.
(4) Reflects 136,116 shares of Common Stock and options to purchase 59,915
shares of Common Stock.
(5) Reflects 16,027 shares of Common Stock, 777 OP Units exchangeable for an
equal number of shares of Common Stock and options to purchase 122,820
shares of Common Stock.
(6) Reflects 135,231 shares of Common Stock and options to purchase 59,915
shares of Common Stock.
(7) Reflects 306,779 shares of Common Stock and options to purchase 21,360
shares of Common Stock. Common Stock beneficially owned by Mr. Allen
includes 551,047 shares beneficially owned by certain affiliates of Mr.
Allen.
(8) Reflects 11,031 shares of Common Stock and options to purchase 21,360 shares
of Common Stock.
(9) Reflects 194,241 shares of Common Stock and options to purchase 20,840
shares of Common Stock. Common Stock beneficially owned by Mr. Clayton
includes 182,779 shares of Common Stock owned by Clayton Homes, Inc. Mr.
Clayton disclaims beneficial ownership of the shares of Common Stock owned
by Clayton Homes, Inc. except to the extent of his approximate 30% equity
interest in Clayton Homes, Inc. Shares owned by Clayton Homes, Inc. are held
by its wholly-owned subsidiary CHM Parks, Inc.
(10) Reflects 115,312 shares of Common Stock and options to purchase 58,352
shares of Common Stock.
(11) Reflects 11,931 shares of Common Stock and options to purchase 20,840
shares of Common Stock. Common Stock beneficially owned by Mr. Hankins
includes 1,303 shares of Common Stock owned by Mr. Hankins' spouse, 2,605
shares of Common Stock held by Mr. Hankins' individual retirement account.
(12) Reflects 6,408 shares of Common Stock and options to purchase 16,020 shares
of Common Stock.
(13) Reflects 3,126 shares of Common Stock and options to purchase 20,840 shares
of Common Stock. Common Stock beneficially owned by Mr. Miller includes
1,042 shares of Common Stock owned by Mr. Miller's spouse.
(14) Reflects 2,287,640 shares of Common Stock and 338,517 OP Units exchangeable
for an equal number of shares of Common Stock. Mr. Ministrelli's address is
50-445 Mountain Shadow, La Quinta, CA 92253. Does not include 149,058 shares
of Common Stock which may be obtained on exchange of currently
non-exchangeable OP Units.
BOARD MATTERS
BOARD MEETINGS
The Board of Directors held 15 meetings during 1996.
COMMITTEES OF THE BOARD OF DIRECTORS
AUDIT COMMITTEE. The Audit Committee reviews and acts or reports to the
Board with respect to various auditing and accounting matters, including the
selection and fees of the Company's independent auditors, the scope of audit
procedures, the nature of services to be performed for the Company by the
independent auditors, and the accounting practices of the Company. During 1996,
the Audit Committee (which consisted of Messrs. Lane, Myers and Rudolph) held
two meetings. As of the effective time of the Merger, the membership of the
Audit Committee was changed to consist of Messrs. Allen, Hankins, Lane and
Miller.
12
<PAGE>
EXECUTIVE COMMITTEE. The Executive Committee may act on certain matters
between Board meetings. During 1996, the Executive Committee (which consisted of
Messrs. Boll and Kellogg) held two meetings. As of the effective time of the
Merger, the membership of the Executive Committee was changed to consist of
Messrs. Boll, McDaniel, Kellogg and Hankins.
EXECUTIVE COMPENSATION COMMITTEE. The Executive Compensation Committee
administers the Company's equity compensation plans, and it annually reviews and
approves recommendations from senior management and makes recommendations to the
Board regarding the policies and procedures that govern the various compensation
programs for the CEO and executives of the Company. During 1996, the Executive
Compensation Committee (which consisted of Messrs. Allen, Anton, and Lane) held
two meetings. As of the effective time of the Merger, the membership of the
Executive Compensation Committee was changed to consist of Messrs. Allen, Anton,
Clayton and S. Davis.
NOMINATING COMMITTEES. Pursuant to the Merger Agreement, the Company has
formed three nominating committees (the "Nominating Committees") to be the
exclusive nominating committees of the Board for director nominees. The three
Nominating Committees are a committee consisting exclusively of Group A
Directors, namely, Messrs. Boll and Allen (the "Group A Nominating Committee");
a committee consisting exclusively of Group B Directors, namely Messrs. McDaniel
and Hankins (the "Group B Nominating Committee"); and a committee consisting of
Mr. Boll (or, in the event that Mr. Boll is no longer a director, a Group A
Director selected by the Group A Directors) and two of his designees (the "Group
C Nominating Committee"). Under the By-laws of the Company, Board nominations to
replace a director who has retired or resigned from the Board or to reelect an
existing director may only be made by the Nominating Committee of which such
director is a part and such nomination must also be approved by at least
two-thirds of the directors then in office.
DIRECTOR COMPENSATION
Each director is reimbursed for travel and other expenses related to
attendance at Board and committee meetings and, other than Messrs. McDaniel and
Kellogg, receives an annual director's fee of $15,000. The independent directors
also receive an annual grant of options to purchase 5,000 shares of the Common
Stock which are vested on date of grant. On May 16, 1996, each of the
individuals who were then independent directors of the Company (Messrs. Boll,
Myers, Rudolph, Anton, Lane and Allen) received an option which, as adjusted for
the effective 0.068 stock dividend payable to holders of Company Common Stock in
the Merger, entitles each holder to purchase 5,340 shares of Common Stock at an
exercise price of $21.4185 per share.
13
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth the summary compensation for the last three
years for the Chief Executive Officer and the four most highly compensated other
executive officers of the Company whose salary and bonus compensation for the
year ended December 31, 1996 exceeded $100,000. The information presented in the
following three tables gives retroactive effect to the Merger and assumes that
the five individuals named below were employed in their current capacities by
the Company during each of 1994, 1995 and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
---------------
ANNUAL COMMON STOCK
COMPENSATION UNDERLYING
NAME AND PRINCIPAL ---------------------- STOCK ALL OTHER
POSITION YEAR SALARY(1)(2) BONUS OPTIONS(1)(2) COMPENSATION
--------------------- --------- ---------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Gary P. McDaniel.................................. 1996 $ 180,000 $72,000 26,050 $9,000(3)
Chief Executive Officer 1995 $ 150,000 $15,000 26,050
1994 $ 150,000 7,815
C.G. ("Jeff") Kellogg............................. 1996 $ 184,000 $ 169,000 96,120 $ 18,300 (3)
President 1995 $ 164,712 $ 160,000 96,120 $ 12,760
1994 $ 147,135 $ 120,000 -- $ 18,499
James B. Grange................................... 1996 $ 165,000 $66,000 26,050 $6,600 (3)
Chief Operating Officer 1995 $ 150,000 $15,000 26,050
1994 $ 125,000 7,815
Tamara D. Fischer................................. 1996 $ 141,000 $66,000 49,128 $ 18,300 (3)
Chief Financial Officer 1995 $ 109,887 $62,000 48,060 $ 12,760
1994 $99,987 $60,000 -- $ 12,619
Rees F. Davis, Jr. ............................... 1996 $ 140,000 $ 107,630 26,050 $6,600 (3)
Executive Vice President-- 1995 $ 125,000 $12,500 26,050
Acquisition 1994 $ 125,000 7,815
</TABLE>
- ------------------------
(1) Messrs. McDaniel, Grange and R. Davis were employed by ROC until the date of
the Merger, and their compensation was paid and their options were granted
by ROC prior to the Merger. At the effective time of the Merger, each
outstanding option of ROC was assumed by the Company and such options became
exercisable for the number of shares of Company Common Stock into which the
number of shares underlying the ROC options would have been exchangeable if
such shares had been outstanding at the effective time of the Merger.
Accordingly, the number of shares of Common Stock underlying the options of
Messrs. McDaniel, Grange and R. Davis is restated to give effect to the
exchange ratio in the Merger of 1.042 shares of Company Common Stock for
each share of ROC stock.
(2) Mr. Kellogg and Ms. Fischer were each employed by the Company prior to the
Merger and their compensation amounts reflect compensation they received
from the Company. In connection with the Merger, stockholders of the Company
received a stock dividend of 0.0326 shares of Common Stock per share. In
addition, certain holders of OP Units who exchanged their OP Units for
shares of Common Stock in connection with the Merger waived their right to
receive the shares of Common Stock that they would otherwise have received
from the Company as a result of the stock dividend with respect to the
exchanged OP Units for reallocation to the other Company stockholders, which
effectively increased the amount of the stock dividend to Company
stockholders to 0.068 shares of Common Stock for each share outstanding.
Accordingly, the number of shares of Common Stock
14
<PAGE>
underlying the options of Mr. Kellogg and Ms. Fischer has been adjusted to
give effect to the effective 0.068 stock dividend.
(3) Represents profit-sharing contributions and car allowances.
OPTION/SAR GRANTS DURING 1996
The following table sets forth information with respect to options granted
during 1996 to the executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE
INDIVIDUAL GRANTS AT ASSUMED ANNUAL
------------------------------ RATES OF
STOCK PRICE
(B) (C) (D) APPRECIATION FOR
------------- --------------- ------------- OPTION TERM
NUMBER OF % OF TOTAL WEIGHTED ----------------------------
SECURITIES OPTIONS/SARS AVERAGE (E)
(A) UNDERLYING GRANTED TO EXERCISE OR ----------- (F) (G)
- ---------------------------- OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION ------------ --------------
NAME GRANTED(1) 1996(2) ($/SH) DATE 5% ($) 10% ($)
- ---------------------------- ------------- --------------- ------------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Gary P. McDaniel............ 26,050 6.5% 23.64 11/22/06 $398,637 $1,051,190
C.G. Kellogg................ 96,120 23.2 % 22.59 (3 ) $ 1,404,895 $3,706,969
James B. Grange............. 26,050 6.5 % 23.64 11/22/06 $398,637 $1,051,190
Tamara D. Fischer........... 49,128 11.9 % 22.59 (3 ) $718,057 $1,894,673
Rees F. Davis, Jr........... 26,050 6.5 % 23.64 11/22/06 $398,637 $1,051,190
</TABLE>
- ------------------------
(1) See Note 1 and Note 2 to the Summary Compensation Table.
(2) Reflects grants to employees of both the Company and ROC.
(3) Half of the options granted to each of Mr. Kellogg and Ms. Fischer expire on
February 28, 2006, and the other half expire on November 19, 2006.
AGGREGATED OPTION/SAR EXERCISES DURING 1996
AND OPTION/SAR VALUES AT DECEMBER 31, 1996
The following table provides information with respect to the unexercised
options held as of December 31, 1996 by the executive officers named in the
Summary Compensation Table. There were no options exercised in 1996 by the
executive officers named in the Summary Compensation Table.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
DECEMBER 31, 1996(1) AT DECEMBER 31, 1996(1)
-------------------------- --------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Gary P. McDaniel.......................................... 8,336 51,579 $42,500 $ 169,875
C.G. Kellogg.............................................. 52,866 177,822 $ 333,000 $ 744,750
James B. Grange........................................... 8,336 51,579 $42,500 $ 169,875
Tamara D. Fischer......................................... 31,239 91,581 $ 195,750 $ 384,500
Rees F. Davis, Jr......................................... 8,336 51,579 $42,500 $ 169,875
</TABLE>
- ------------------------
(1) See Note 1 and Note 2 to the Summary Compensation Table.
EMPLOYMENT AGREEMENTS
Consistent with the goal of the Company to retain the skills and expertise
of certain members of senior management of the Company and ROC following the
Merger, the Merger Agreement provided for the Company to execute employment
agreements (each, an "Employment Agreement"), effective as of the
15
<PAGE>
Merger, with each of the following senior officers: Gary P. McDaniel, C.G.
("Jeff") Kellogg, James B. Grange, Tamara D. Fischer and Rees F. Davis, Jr. Mr.
Kellogg and Ms. Fischer were previously employed by the Company, and their
existing employment agreements with the Company were terminated upon
consummation of the Merger. Each Employment Agreement has an initial term of
three years with automatic one-year extensions commencing on the third
anniversary of the Merger unless notice of nonextension is given at least 180
days prior to such anniversary. Each Employment Agreement provides for: (i) a
base salary for Gary P. McDaniel ($225,000); C.G ("Jeff") Kellogg ($225,000);
James B. Grange ($190,000); Tamara D. Fischer ($175,000); and Rees F. Davis, Jr.
($160,000); (ii) an annual target bonus of up to 80% of such executive's base
salary upon the attainment of increases in funds from operations per share of
the Company (with the maximum bonus being earned for increases of at least 10%
and with the bonus for 1997 being calculated assuming the Merger had been
consummated on January 1, 1996); (iii) grants of stock options and shares of
restricted stock under the Company's 1997 Equity Participation Plan; and (iv)
benefits (including retirement, group life, medical, dental and disability
benefits) on a basis reasonably comparable in the aggregate to those provided to
the executive immediately prior to the Merger. Each Employment Agreement
provides that, if the executive's employment is terminated by the Company other
than for "cause," disability or death or by the executive for "good reason" or
if the Employment Agreement is not renewed, the executive will be entitled to
receive a payment equal to two times (or one and one-half times in the case of
non-renewal) the sum of the executive's annual base salary and bonus, the
continuation of welfare and pension benefits during the 24-month period (or
18-month period in the case of non-renewal) following termination and the
accelerated vesting of equity based incentives. If the employment of either Mr.
McDaniel or Mr. Kellogg is terminated as a result of a "change of control," "two
times" and "24 months" in the preceding sentence is replaced with "three times"
and "36 months." Further, if the executive's employment is terminated for any
other reason, other than for "cause," disability, death or non-renewal, "two
times" and "24 months" in such sentence is replaced by "one time" and "12
months."
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee annually reviews and approves
recommendations from senior management and makes recommendations to the Board of
Directors regarding the policies and procedures that govern the various
compensation programs for the CEO and executives of the Company. The Committee
also administers the Company's equity compensation plans. It is the philosophy
of the Committee that executive compensation should align the financial
interests of the Company's executives with the long term interests of the
Company and its stockholders. The Committee believes that a material portion of
the executive officers' pay should be linked to the Company's stated and
pre-determined goals. The Committee also believes that the Company should have a
sound and competitive compensation program to attract and retain key executives
to lead the Company toward the fulfillment of its goals. The key elements of the
Company's current program include a base salary, a bonus plan linked to
individual and Company financial performance and equity participation through
stock options.
The current compensation of the executive officers is based on each
officer's respective Employment Agreement, as described above. These Employment
Agreements were adopted in connection with the negotiation of the Merger
Agreement, and they were reviewed and approved by the Executive Compensation
Committee prior to the Merger. The following discussion reflects the Executive
Compensation Committee's general compensation philosophy and the basis on which
1996 compensation was determined for the Company's executive officers outside of
the negotiation of the Merger.
BASE SALARY
The Committee's policy with respect to salaries is to establish base
compensation levels for executives which are competitive in relation to other
companies of similar size within the Company's industry. The Committee also
takes into consideration the executive's responsibilities, experience level and
individual performance. To ensure that base salary is competitive, the Company's
salary structure is periodically benchmarked against other salaries for key
positions in other companies of similar size in the Company's
16
<PAGE>
industry. Salaries normally are increased annually, based on market conditions
and individual and company performance factors.
BONUS
In 1995, the Company initiated an annual bonus program for key executives
with the objective of providing a more direct link between executive
compensation and individual and Company overall performance. Eligible executives
were those determined to have a material effect on the Company's performance. An
executive's share of the bonus pool is generally based on that executive's
performance measured against specific objectives such as per share growth in the
Company's funds from operations, growth in net operating income for a given area
of responsibility, acquisitions of properties, or a combination of these
objectives. Each executive's performance relative to those specific objectives
is evaluated by the Committee. The Committee reserves the right to award only a
portion of the total bonus pool should individual objectives not be met. The
bonuses for 1996 reflected in the Summary Compensation Table for Mr. Kellogg and
Ms. Fischer, who were Company employees in 1996, were awarded in January 1997.
It is expected that the post-merger Committee will preserve the general
approach that has previously been adopted with respect to determination of
awards under the bonus program. In accordance with this approach, the Employment
Agreements for the executives named in the Summary Compensation Table provide
for the payments of bonuses of up to 80% of annual salary based on annual
increases in the Company's funds from operations per share with the maximum
bonus being earned for increases of at least 10%.
STOCK OPTIONS
The Committee grants options to purchase Common Stock to employees of the
Company (including executive officers). Option grants become exercisable over a
period of time determined by the Committee and generally have an exercise price
equal to the fair market value of the Common Stock on the grant date, creating
long term incentives to enhance the value of the Company's Common Stock. All of
the executive officers of the Company received grants in February 1996 and
November 1996. The 1996 option grants were awarded as part of the annual
compensation review for 1995. The awards were determined based on the executive
officer's performance of specific individual and Company objectives. The
Committee also considered the equity ownership by executive officers of similar
companies. The levels of these awards reflected the Committee's belief that
increasing management equity ownership will create long term incentives to
enhance the value of the Company's Common Stock.
The Committee believes that the above elements assist the Company in meeting
its short-term and long-term objectives and appropriately relate executive
compensation to the Company's performance. In connection with the Merger, the
Company adopted the 1997 Equity Compensation Plan which will, subject to
stockholder approval of the Plan at the 1997 Annual Meeting, authorize the
discretionary grant by the Executive Compensation Committee of awards of options
and restricted shares of Common Stock.
THE CHIEF EXECUTIVE OFFICER'S 1996 COMPENSATION
The Committee's approach to the compensation of Mr. Kellogg, who was the
Chief Executive Officer of the Company throughout 1996, has been consistent with
the Committee's approach to all other executive officers. Mr. Kellogg received a
base salary based upon his responsibilities and experience. Effective as of the
effective time of the Merger, Gary P. McDaniel became the Company's Chief
Executive Officer, and his current compensation, as described above under
"EXECUTIVE COMPENSATION," was determined in connection with the negotiation of
the Merger Agreement.
CHATEAU PROPERTIES, INC. EXECUTIVE COMPENSATION COMMITTEE
EDWARD R. ALLEN
GEBRAN S. ANTON, JR.
JAMES L. CLAYTON
STEVEN G. DAVIS
17
<PAGE>
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total stockholder
return on Company Common Stock with the cumulative total return of the S&P 500
Stock Index and the NAREIT Equity REIT Total Return Index for the period
commencing November 16, 1993 (the date the Company completed its public offering
of Common Stock) and ending December 31, 1996. The NAREIT Equity REIT Total
Return Index included 178 companies with a total market capitalization of $49.9
billion. The graph assumes that a stockholder invested $100 on November 16, 1993
in Company Common Stock, the S&P Stock Index and the NAREIT Equity REIT Total
Return Index, assuming reinvestment of dividends.
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CHATEAU PROPERTIES,
INC. S&P 500 NAREIT EQUITY INDEX
<S> <C> <C> <C>
November 16, 1993 $100.00 $100.00 $100.00
December 31, 1993 $109.38 $99.94 $99.83
December 31, 1994 $117.34 $101.56 $103.00
December 31, 1995 $129.73 $140.31 $118.72
December 31, 1996 $166.00 $173.34 $160.59
</TABLE>
The table below sets forth the value as of each of the dates indicated of $100
investments made on November 16, 1993 in the Company Common Stock, the S&P Stock
Index and the NAREIT Equity REIT Total Return Index, assuming reinvestment of
dividends.
<TABLE>
<CAPTION>
NOVEMBER 16, 1993 DECEMBER 31, 1993 DECEMBER 31, 1994 DECEMBER 31, 1995 DECEMBER 31, 1996
----------------- ----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Chateau
Properties,
Inc............ $ 100.00 $ 109.38 $ 117.34 $ 129.73 $ 166.00
S&P 500.......... $ 100.00 $99.94 $ 101.56 $ 140.31 $ 173.34
NAREIT Equity
Index.......... $ 100.00 $99.83 $ 103.00 $ 118.72 $ 160.59
</TABLE>
18
<PAGE>
CERTAIN TRANSACTIONS
The Company leases offices from a partnership of which Messrs. Boll, J.
Peter Ministrelli and Kellogg, among others, are partners. These offices consist
of approximately 6,200 square feet in a building in Clinton Township, Michigan.
The Company paid rent of $115,000, $107,000 and $93,000 for the years ended
December 31, 1996, 1995, and 1994, respectively. This lease continues for a
current term ending November 2001 and may continue beyond that date pursuant to
available options or negotiated extensions. The terms of this lease will be
approved by the Company's independent directors prior to renewal or extension.
Although not negotiated at arm's length, the Company believes that the terms and
conditions of the lease were substantially the same as those then available in
this market.
On January 10, 1997, ROC purchased, for $722,000 in cash, approximately
10,000 square feet of office space, leasehold improvements and telephone
equipment in Englewood, Colorado, which it had been leasing from 6426 Limited
Liability Company, a Colorado limited liability company. Messrs. McDaniel,
Grange and R. Davis are members of 6426 Limited Liability Company. The Company
believes that the terms of the sale are no less favorable to the Company than
those that could have been obtained from an independent third party seller at
the time the sale occurred. The purchase was approved with the unanimous consent
of ROC's disinterested directors.
In 1996, prior to the Merger, ROC acquired two manufactured home communities
from Redwood Partners Limited, a partnership having ROC GP Corp., and CMH Parks,
Inc., a wholly-owned subsidiary of Clayton Homes, Inc., as its sole partners.
ROC GP Corp. is a corporation wholly owned by Messrs. McDaniel, Grange and R.
Davis. Mr. Clayton, a director of the Company, owns an approximate 30% equity
interest in Clayton Homes, Inc. The acquisitions were part of ROC's plan to
consolidate the communities owned or controlled by ROC GP Corp. within ROC.
Prior to their acquisition, the communities had been managed by ROC and its
predecessors for a period of at least five years and were subject to purchase
options in favor of ROC which had been granted in connection with the closing of
ROC's initial public offering. The acquisition of the two communities was made
upon the unanimous decision of ROC's disinterested directors. The aggregate
purchase price paid for the two communities was $25,500,000, of which
$21,771,750 was paid in cash, part of which was used to repay the outstanding
mortgage debt on the communities (which was approximately $10,180,000 as of the
acquisition date), and the balance of which was applied in respect of the
interest in the properties held by Clayton Homes, Inc. The remaining $3,728,250
of the purchase price was paid in the form of the issuance of 158,017 shares of
non-voting redeemable stock of ROC to the stockholders of ROC GP Corp. The
purchase price for each community was based upon a 9.5% capitalization rate on
ROC's projection of such community's net income for the 12 months following the
acquisition. ROC GP Corp. continues to control two manufactured home communities
on which the Company has options to purchase.
In January 1997, as part of its plan to internalize sales and brokerage
activities being conducted at communities owned and managed by ROC, ROC
purchased all of the shares of preferred stock, as well as 5% of the common
stock, in Community Sales, Inc. ("CSI") for an aggregate purchase price of
approximately $929,000. Prior to such purchase, CSI, which was then owned by
Messrs. McDaniel, Grange, S. Davis and R. Davis and Clayton Homes, Inc., was
conducting sales and brokerage activities at ROC's communities. The preferred
stock entitles the holder thereof to receive 95% of all dividends paid by CSI,
with the balance of any dividends being paid to the holders of common stock. Out
of the proceeds from the stock purchase, approximately $600,000 was used by CSI
to redeem all of the shares of CSI held by Clayton Homes, Inc., and an aggregate
of approximately $329,000 was paid to Messrs. McDaniel, Grange, Steven Davis and
Rees Davis, which payments allowed them to pay income taxes arising from the
transaction. The CSI stock purchase was approved with the unanimous consent of
ROC's disinterested directors. ROC determined to proceed with the CSI stock
purchase in response to a favorable ruling received by the Company from the
Internal Revenue Service to the effect that the provision of sales and brokerage
services at the communities would not prevent rents from the communities from
constituting qualifying income that a REIT may receive under applicable
provisions of the Code.
19
<PAGE>
In connection with the negotiation of the Merger Agreement, three of the
Company's directors, John A. Boll, Edward R. Allen and C.G. ("Jeff") Kellogg,
who, as of March 31, 1997, held in the aggregate 4,050,835 shares of Common
Stock, have agreed that, for a period of three years following the effective
time of the Merger, they will vote all shares of Common Stock held by them in
favor of the election as directors of the nominees selected by the Group B
Nominating Committee as described above.
The Company has made loans to Mr. Kellogg and Ms. Fischer to allow them to
purchase shares of Company Common Stock. Such loans were evidenced by separate
promissory notes in the amount of the purchase price for such shares. These
notes provide for interest, payable quarterly, at a rate of 7% per annum, with
the principal balance payable on the earlier of the termination of the officer's
employment with the Company, other than by reason of death or disability, or
November 16, 2003. The notes are recourse to the respective officers and
collateralized by a pledge of the shares of Common Stock purchased. In
connection with these loans, Mr. Kellogg purchased 13,750 shares of Common
Stock, and the balance of his loan as of March 31, 1997 was $261,532 (with the
highest balance during 1996 being $268,922). Ms. Fischer purchased 6,875 shares
of Common Stock, and the balance of her loan as of March 31, 1997 was $130,808
(with the highest balance during 1996 being $134,517).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Directors and executive officers of the Company and beneficial owners of
more than 10% of its Common Stock are required to file initial reports of
ownership and reports of changes in ownership of Company securities pursuant to
Section 16(a) of the Securities Exchange Act of 1934 and to provide the Company
with copies of such reports. The Company has reviewed all such reports from
persons known to the Company to be subject to these Section 16(a) provisions.
Based solely on such review, the Company believes that for the year ended
December 31, 1996 all Section 16(a) filing requirements were met.
STOCKHOLDER PROPOSALS
Stockholder proposals, intended to be presented at the 1998 Annual Meeting
of Stockholders of the Company, must be received by the Company at its address
stated herein by December 23, 1997 to be considered for inclusion in the
Company's Proxy Statement and form of proxy relating to such meeting.
INDEPENDENT AUDITORS
It is not the Company's practice to submit to Stockholders a proposal for
the selection or ratification of the Company's independent certified public
accountants, and no such proposal is submitted hereby. Coopers & Lybrand L.L.P.
has acted in this capacity since the Company's initial public offering and is so
acting during the current year. Representatives of Coopers & Lybrand L.L.P. are
expected to be present and will be available to respond to appropriate questions
at the Annual Meeting.
PROXY SOLICITATION
The expense of this solicitation of proxies will be borne by the Company.
The Company has retained Georgeson & Company Inc., a proxy soliciting firm, to
assist in the solicitation of proxies. The Company anticipates that the cost of
such proxy soliciting firm to the Company, in aggregate, will not exceed $7,000,
plus expenses. The telephone number of Georgeson & Company Inc. is (212)
440-9800. In addition, if necessary, officers and regular employees of the
Company may also solicit proxies, without extra compensation, personally and by
telephone and other means of communication. The Company may also reimburse
brokers and other persons holding stock in their names or in the names of their
nominees, for their charges and expenses in forwarding proxies and proxy
material to the beneficial owners of such stock.
20
<PAGE>
OTHER MATTERS
The Board of Directors knows of no other matters to be voted upon at the
Annual Meeting. If any other matters properly come before the Annual Meeting, it
is the intention of the proxies named in the enclosed form of proxy to vote the
shares represented thereby with respect to such matters in accordance with their
best judgment.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The specified portions of the following documents filed by the Company with
the Securities and Exchange Commission ("SEC") are hereby incorporated by
reference in this Proxy Statement: (i) the sections of the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1996 (the "1996
10-K") under the captions "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Selected Financial Data"; and (ii) the
financial statements set forth in Item 8 of the 1996 10-K.
Stockholders may obtain without charge a copy of the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, filed with the SEC,
including the financial statements and schedules thereto, without the
accompanying exhibits, by writing to Cynthia Chase, Chateau Properties, Inc.,
6430 South Quebec Street, Englewood, Colorado 80111. A list of exhibits is
included in the 1996 10-K, and exhibits are available from the Company upon
payment to the Company of the costs of furnishing them.
By Order of the Board of Directors,
John A. Boll, Chairman
Englewood, Colorado
April 21, 1997
21
<PAGE>
CHATEAU PROPERTIES, INC.
6430 South Quebec Street
Englewood, Colorado 80111
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD MAY 22, 1997
The undersigned hereby appoints each of John A. Boll, Gary P. McDaniel and
C.G. ("Jeff") Kellogg, or any of them, as proxies, each with the power to
appoint his substitute, and authorizes each of them to represent and to vote, as
designated below, all shares of common stock of Chateau Properties, Inc.
("Chateau") held of record by the undersigned on April 11, 1997 at the Annual
Meeting of Stockholders of Chateau to be held on May 22, 1997, at 9:00 a.m.
Mountain Daylight Time, or any adjournment or adjournments thereof. This proxy
when properly executed will be voted in the manner directed herein by the
undersigned stockholder with respect to all shares of Chateau held of record by
the undersigned stockholder. If no direction is made, this proxy will be voted
in favor of the election of all listed nominees to the Board of Directors, FOR
each of the other items set forth on the proxy and in the best discretion of
such proxies upon such other business as may properly come before the meeting or
any adjournment or adjournments thereof.
<TABLE>
<S> <C> <C> <C> <C>
1. Election of Directors:
/ / FOR all nominees listed below (except as indicated to the / / WITHHOLD authority to vote for nominees listed below:
contrary)
Class I - Gary P. McDaniel, Gebran S. Anton Jr.,
James M. Lane and Rhonda G. Hogan
Class II - James M. Hankins and Donald E. Miller
Class III - James L. Clayton and Steven G. Davis
</TABLE>
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL WRITE THAT
NOMINEE'S NAME IN THE SPACE PROVIDED ABOVE.
2. To approve an amendment to Chateau's Charter to change Chateau's
corporate name to "Chateau Communities, Inc."
/ / FOR / / AGAINST / / ABSTAIN
To approve an amendment to Article IV of Chateau's Charter to, among
3. other things, increase the number of authorized shares of common stock
to 90,000,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
<PAGE>
4. To approve Chateau's 1997 Equity Compensation Plan.
/ / FOR / / AGAINST / / ABSTAIN
In their best discretion, the proxies are authorized to act and vote
5. upon such other business as may properly come before the Annual Meeting
or any adjournment thereof.
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Stockholders, dated April 21, 1997, and the Proxy Statement furnished
therewith. Please sign this proxy in the space provided below. When shares are
held by joint tenants, both should sign. Execution by stockholders who are not
individuals must be made by an authorized signatory. Executors, administrators,
trustees and other fiduciaries, and persons signing on behalf of corporations or
partnerships, should so indicate when signing.
Dated:
----------------------------------------
----------------------------------------
Name of Record Owner
----------------------------------------
Signature
----------------------------------------
Signature
Please sign, date and return this Proxy
promptly using the enclosed
envelope.
<PAGE>
CHATEAU PROPERTIES, INC.
1997 EQUITY COMPENSATION PLAN
<PAGE>
TABLE OF CONTENTS
Page
----
1. Definitions............................................................
2. Effective Date and Termination of Plan.................................
3. Administration of Plan.................................................
4. Eligibility for and Grant of Options and Restricted
Stock; Committee Authority.............................................
5. Number of Shares Subject to the Plan...................................
6. Options................................................................
7. Restricted Stock.......................................................
8. Regulations and Approvals..............................................
9. Interpretation and Amendments; Other Rules.............................
10. Changes in Capital Structure...........................................
11. Notices................................................................
12. Rights as Stockholder..................................................
13. Rights to Employment...................................................
14. Exculpation and Indemnification........................................
15. Captions...............................................................
16. Governing Law..........................................................
<PAGE>
CHATEAU PROPERTIES, INC.
1997 EQUITY COMPENSATION PLAN
Chateau Properties, Inc., a Maryland corporation, wishes to attract
key employees, directors and key consultants, to the Company and its
Subsidiaries and induce key employees, directors and key consultants, to remain
with the Company and its Subsidiaries, and to provide them with long-term
incentives for sustained high levels of performance. In furtherance thereof, the
Chateau Properties, Inc. 1997 Equity Compensation Plan is designed to provide
equity-based incentives to key employees, directors and key consultants, of the
Company and its Subsidiaries.
1. Definitions.
Whenever used herein, the following terms shall have the meanings
set forth below:
"Award Agreement" means a written agreement in a form approved by
the Committee to be entered into by the Company and the Optionee of an Option or
the Grantee of Restricted Stock, as applicable, as provided in Section 4, and
also refers, if applicable, to any employment agreement between the Company and
the Participant, the provisions of which relate to Options or Grants.
"Board" means the Board of Directors of the Company.
"Cause" means, unless otherwise provided in the Participant's Award
Agreement, (i) engaging in (A) willful or gross misconduct or (B) willful or
gross neglect, (ii) repeatedly failing to adhere to the directions of superiors
or the Board or the written policies and practices of the Company or its
Subsidiaries or its affiliates, (iii) the commission of a felony or a crime of
moral turpitude, or any crime involving the Company or its Subsidiaries, or any
affiliate thereof, (iv) fraud, insubordination, misappropriation or
embezzlement, (v) a material breach of the Participant's employment agreement
(if any) with the Company or its Subsidiaries or its affiliates, or (vi) any
illegal act detrimental to the Company or its Subsidiaries or its affiliates;
provided, however, that if the Participant is a party
<PAGE>
to an employment agreement with the Company or any of its Subsidiaries and such
agreement provides for termination for "Cause," "Cause" hereunder shall have the
same meaning ascribed to it in the employment agreement.
"Change in Control" means the occurrence of one of the following:
a. a "person" or "group" (within the meaning of sections 13(d)
and 14(d) of 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;
b. 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;
c. 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 Common Stock at such time),
where (A) the Company is not the surviving corporation, (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;
d. 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
2
<PAGE>
e. [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.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the Executive Compensation Committee of the Board.
"Common Stock" means the Company's Common Stock, par value $.01 per
share, either currently existing or authorized hereafter.
"Company" means Chateau Properties, Inc., a Maryland corporation.
"Disability" means the occurrence of an event which would entitle an
employee of the Company to the payment of disability income under one of the
Company's approved long-term disability income plans or a long-term disability
as determined by the Committee in its absolute discretion pursuant to any other
standard as may be adopted by the Committee; provided, however, that if the
Participant is a party to an employment agreement with the Company or any of its
Subsidiaries and such agreement provides for termination by reason of
"Disability," "Disability" hereunder shall have the same meaning ascribed to it
in the employment agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" per Share as of a particular date means (i) if
Shares are then listed on a national stock exchange, the closing sales price per
Share on the exchange for the last preceding date on which there was a sale of
Shares on such exchange, as determined by the Committee; (ii) if Shares are not
3
<PAGE>
then listed on a national stock exchange but are then traded on an
over-the-counter market, the average of the closing bid and asked prices for the
Shares in such over-the-counter market for the last preceding date on which
there was a sale of such Shares in such market, as determined by the Committee;
or (iii) if Shares are not then listed on a national stock exchange or traded on
an over-the-counter market, such value as the Committee in its discretion may in
good faith determine; provided that, where the Shares are so listed or traded,
the Committee may make discretionary determinations where the Shares have not
been traded for 10 trading days.
"Grantee" means an employee or director of, or key consultant to,
the Company to whom Restricted Stock is granted.
"Option" means the right to purchase, at a price and for the term
fixed by the Committee in accordance with the Plan, and subject to such other
limitations and restrictions in the Plan and the applicable Award Agreement, a
number of Shares determined by the Committee.
"Optionee" means an employee or director of, or key consultant to,
the Company to whom an Option is granted, or the Successors of the Optionee, as
the context so requires.
"Option Price" means the exercise price per Share.
"Participant" means an Optionee or a Grantee.
"Plan" means the Company's 1997 Equity Compensation Plan, as set
forth herein and as the same may from time to time be amended.
"Restricted Stock" means an award of Shares that are subject to
restrictions under Section 7.
"Retirement" means, unless otherwise provided by the Committee in
the Participant's Award Agreement, the termination (other than for Cause) of
employment (or other termination of service, in the case of key consultants or
directors) of a Participant on or after the Participant's attainment of age 65
or on or after the Participant's attainment of age 55 with five consecutive
years of service with the Company and or its Subsidiaries or its affiliates.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of Common Stock of the Company.
"Subsidiary" means any corporation (other than the Company) that is
a "subsidiary corporation" with respect to the Company under Section 424(f) of
the Code or, with respect to grants other than Incentive Stock Options (as
herein defined) Subsidiary
4
<PAGE>
means any other entity, a majority of whose equity interests is owned directly
or indirectly by the Company. In the event the Company becomes a subsidiary of
another company, the provisions hereof applicable to subsidiaries shall, unless
otherwise determined by the Committee, also be applicable to any Company that is
a "parent corporation" with respect to the Company under Section 424(e) of the
Code.
"Successor of the Optionee" means the legal representative of the
estate of a deceased Optionee or the person or persons who shall acquire the
right to exercise an Option by bequest or inheritance or by reason of the death
of the Optionee.
2. Effective Date and Termination of Plan.
The effective date of the Plan is that date on which the Plan is
approved by the Board of the Company. The Plan shall not become effective unless
and until it is so approved. The Plan shall terminate on, and no Option or
Restricted Stock shall be granted hereunder on or after, the 10-year anniversary
of the earlier of the approval of the Plan by (i) the Board or (ii) the
shareholders of the Company; provided, however, that the Board may at any time
prior to that date terminate the Plan.
3. Administration of Plan.
The Plan shall be administered by the Committee. The Committee shall
consist of at least two individuals each of whom shall be a "nonemployee
director" as defined in Rule 16b-3 as promulgated by the Securities and Exchange
Commission ("Rule 16b- 3") under the Exchange Act and shall, at such times as
the Company is subject to Section 162(m) of the Code, qualify as "outside
directors" for purposes of Section 162(m) of the Code. The acts of a majority of
the members present at any meeting of the Committee at which a quorum is
present, or acts approved in writing by a majority of the entire Committee,
shall be the acts of the Committee for purposes of the Plan; provided that the
otherwise
5
<PAGE>
applicable procedures of the Committee, to the extent inconsistent with the
provisions of this sentence, shall control. If and to the extent applicable, no
member of the Committee may act as to matters under the Plan specifically
relating to such member.
4. Eligibility for and Grant of Options and Restricted
Stock; Committee Authority.
Subject to the provisions of the Plan, the Committee shall, in its
discretion as reflected by the terms of the Award Agreements: (i) authorize the
granting of Options or Restricted Stock (or both) to key employees, directors
and key consultants of the Company and its Subsidiaries; (ii) determine and
designate from time to time those key employees, directors and key consultants
of the Company and its Subsidiaries to whom Options and Restricted Stock are to
be granted and the number of Shares to be optioned or granted (as applicable) to
each employee, director and key consultant; (iii) with respect to Options,
determine whether to grant incentive stock options ("Incentive Stock Options")
within the meaning of Section 422(b) of the Code, or non-qualified stock options
("Non-Qualified Stock Options"), or both (to the extent that any Option does not
qualify as an Incentive Stock Option, it shall constitute a separate
Non-Qualified Stock Option); (iv) determine the number of Shares subject to each
Option or Grant, as applicable; (v) determine the time or times when and the
manner and condition in which each Option shall be exercisable and the duration
of the exercise period, and the restrictions applicable to Restricted Stock; and
(vi) determine or impose other conditions to the grant or exercise of Options
and grant of Restricted Stock under the Plan as it may deem appropriate. In
determining the
6
<PAGE>
eligibility of an employee, director and key consultant to receive an Option or
Grant, as well as in determining the number of Shares to be optioned or granted
thereto, the Committee may consider his or her position and responsibilities,
the nature and value to the Company of his or her services and accomplishments
whether directly or through its Subsidiaries, his or her present and potential
contribution to the success of the Company whether directly or through its
Subsidiaries and such other factors as the Committee may deem relevant. The
Award Agreement shall contain such other terms, provisions and conditions not
inconsistent herewith as shall be determined by the Committee. The Participant
shall take whatever additional actions and execute whatever additional
documents the Committee may in its reasonable judgment deem necessary or
advisable in order to carry out or effect one or more of the obligations or
restrictions imposed on the Participant pursuant to the express provisions of
the Plan and the Award Agreement. The Committee shall cause each Option to be
designated as an Incentive Stock Option or a Non-Qualified Stock Option.
5. Number of Shares Subject to the Plan.
Subject to adjustments pursuant to Section 11, (i) no more than an
aggregate of 950,000 Shares may be the subject of Options or Grants.
Notwithstanding the foregoing provisions of this Section 5, Shares
7
<PAGE>
as to which an Option is granted under the Plan that remains unexercised at the
expiration, forfeiture or other termination of such Option and Shares of
Restricted Stock that are forfeited may be the subject of the grant of further
Options or Grants of a type for which the Shares were initially available.
Shares of Common Stock issued hereunder may consist, in whole or in part, of
authorized and unissued shares or treasury shares. The certificates for Shares
issued hereunder may include any legend which the Committee deems appropriate to
reflect any restrictions on transfer hereunder or under the Award Agreement, or
as the Committee may otherwise deem appropriate.
The aggregate Fair Market Value, determined as of the date an Option
is granted, of the Common Stock for which any optionee may be awarded Incentive
Stock Options which are first exercisable by the optionee during any calendar
year under the Plan (or any other stock option plan required to be taken into
account under Section 422(d) of the Code) shall not exceed $100,000.
6. Options.
A. Option Price.
The Option Price shall be determined by the Committee on the date
the Option is granted and reflected in the Award Agreement. Any particular Award
Agreement may provide for different exercise prices for specified amounts of
Shares subject to the Option. The Option Price with respect to each Incentive
Stock Option shall not be less than 100% (or 110%, in the case of an individual
described in Section 422(b)(6) of the Code (relating
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to certain 10% owners)) of the Fair Market Value of a Share on the day the
Option is granted.
B. Period of Option and Vesting.
(a) Unless earlier expired, forfeited or otherwise terminated, each
Option shall expire in its entirety upon the tenth anniversary of the date of
grant or shall have such other term as is set forth in the applicable Award
Agreement (except that, in the case of an individual described in Section
422(b)(6) of the Code (relating to certain 10% owners) who is granted an
Incentive Stock Option, the term of such Option shall be no more than five years
from the date of grant). The Option shall also expire, be forfeited and
terminate at such times and in such circumstances as otherwise provided
hereunder or under the Award Agreement.
(b) Each Option, to the extent that there has been no termination of
the Optionee's employment (or other service, if applicable) and the Option has
not otherwise lapsed, expired, terminated or been forfeited, shall first become
exercisable according to the terms and conditions set forth in the Award
Agreement, as determined by the Committee at the time of grant. Unless otherwise
provided in the Award Agreement or herein, no Option (or portion thereof) shall
ever be exercisable if the Optionee's employment or other service with the
Company and its Subsidiaries has terminated before the time at which such Option
would otherwise have become exercisable, and any Option that would otherwise
become exercisable after such termination shall not become exercisable and shall
be forfeited upon such termination. Notwithstanding the foregoing provisions of
this Section 6B(b),
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Options exercisable pursuant to the schedule set forth by the Committee at the
time of grant may be fully or more rapidly exercisable or otherwise vested at
any time in the discretion of the Committee. Upon and after the death of an
Optionee, such Optionee's Options, if and to the extent otherwise exercisable
hereunder or under the applicable Award Agreement after the Optionee's death,
may be exercised by the Successors of the Optionee.
C. Exercisability Upon and After Termination of
Optionee.
(a) The Committee shall provide in the Award Agreement the extent
(if any) to which any Option may be exercised upon the Optionee's termination of
employment (or other service).
(b) Except as may otherwise be expressly set forth in this Section
6C, and except as may otherwise be expressly provided under the Award Agreement,
no provision of this Section 6C is intended to or shall permit the exercise of
the Option to the extent the Option was not exercisable upon cessation of
employment or other service.
D. Exercise of Options.
(a) Subject to vesting and other restrictions provided for hereunder
or otherwise imposed in accordance herewith, an Option may be exercised, and
payment in full of the aggregate Option Price made, by an Optionee only by
written notice (in the form prescribed by the Committee) to the Company
specifying the number of Shares to be purchased.
(b) Without limiting the scope of the Committee's discretion
hereunder, the Committee may impose such other
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restrictions on the exercise of Incentive Stock Options (whether or not in the
nature of the foregoing restrictions) as it may deem necessary or appropriate.
E. Payment.
(a) The aggregate Option Price shall be paid in full upon the
exercise of the Option. Payment must be made by one of the following methods:
(i) a certified or bank cashier's check;
(ii) the proceeds of a Company loan program or third-party
sale program or a notice acceptable to the Committee given as
consideration under such a program, in each case if permitted by the
Committee in its discretion, if such a program has been established
and the Optionee is eligible to participate therein;
(iii) if approved by the Committee in its discretion, Shares
of previously owned Common Stock (not subject to restrictions
hereunder) having an aggregate Fair Market Value on the date of
exercise equal to the aggregate Option Price;
(iv) if approved by the Committee in its discretion, through
the written election of the Optionee to have Shares withheld by the
Company from the Shares otherwise to be received, with such withheld
Shares having an aggregate Fair Market Value on the date of exercise
equal to the aggregate Option Price; or
(v) by any combination of such methods of payment or any other
method acceptable to the Committee in its discretion.
(b) The Committee, in its discretion, may also permit the Optionee
to elect to exercise an Option by receiving a combination of Shares and cash,
or, in the discretion of the Committee, either Shares or solely in cash, with an
aggregate Fair Market Value (or, to the extent of payment in cash, in an amount)
equal to the excess of the Fair Market Value of the Shares with
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respect to which the Option is being exercised over the aggregate Option Price,
as determined as of the day the Option is exercised.
(c) Except in the case of Options exercised by certified or bank
cashier's check, the Committee may impose limitations and prohibitions on the
exercise of Options as it deems appropriate, including, without limitation, any
limitation or prohibition designed to avoid accounting consequences which may
result from the use of Common Stock as payment upon exercise of an Option. Any
fractional Shares resulting from an Optionee's election that are accepted by the
Company shall in the discretion of the Committee be paid in cash.
F. Tax Withholding -- Options.
The Committee may, in its discretion, require the Optionee to pay to
the Company at the time of exercise of any Option the amount that the Committee
deems necessary to satisfy the Company's obligation to withhold federal, state
or local income or other taxes incurred by reason of the exercise. Upon exercise
of the Option, the Optionee may, if approved by the Committee in its discretion,
make a written election to have Shares then issued withheld by the Company from
the Shares otherwise to be received, or to deliver previously owned Shares (not
subject to restrictions hereunder), in order to satisfy the liability for such
withholding taxes. In the event that the Optionee makes, and the Committee
permits, such an election, the number of Shares so withheld or delivered shall
have an aggregate Fair Market Value on the date of exercise sufficient to
satisfy the applicable withholding taxes. Where the exercise of an Option does
not give rise to an obligation
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by the Company to withhold federal, state or local income or other taxes on the
date of exercise, but may give rise to such an obligation in the future, the
Committee may, in its discretion, make such arrangements and impose such
requirements as it deems necessary or appropriate. Notwithstanding anything
contained in the Plan to the contrary, the Optionee's satisfaction of any
tax-withholding requirements imposed by the Committee shall be a condition
precedent to the Company's obligation as may otherwise be provided hereunder to
provide Shares to the Optionee, and the failure of the Optionee to satisfy such
requirements with respect to the exercise of an Option shall cause such Option
to be forfeited.
G. Exercise by Successors and Payment in Full.
An Option may be exercised, and payment in full of the aggregate
Option Price made, by the Successors of the Optionee only by written notice (in
the form prescribed by the Committee) to the Company specifying the number of
Shares to be purchased. Such notice shall state that the aggregate Option Price
will be paid in full, or that the Option will be exercised as otherwise provided
hereunder, in the discretion of the Company or the Committee, if and as
applicable.
H. Nontransferability of Option.
Each Option granted under the Plan shall by its terms be
nontransferable by the Optionee except by will or the laws of descent and
distribution of the state wherein the Optionee is domiciled at the time of his
death; provided, however, that the Committee may (but need not) permit other
transfers, where the
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Committee concludes that such transferability (i) does not result in accelerated
taxation, (ii) does not cause any Option intended to be an Incentive Stock
Option to fail to be described in Section 422(b) of the Code and (iii) is
otherwise appropriate and desirable.
7. Restricted Stock.
A. Certificates for Restricted Stock.
(a) Each Grantee shall be issued a stock certificate in respect of
Shares of Restricted Stock awarded under the Plan. Such certificate shall be
registered in the name of the Grantee, and (without limiting the provisions
relating to the legending of Share certificates contained in Section 5) shall
bear an appropriate legend referring to the terms, conditions, and restrictions
applicable to such award, substantially in the following form:
The transferability of this certificate and the shares of stock
represented hereby are subject to the terms and conditions
(including forfeiture) of the Corporation's Equity Participation
Plan and an Agreement entered into between the registered owner and
the Corporation. Copies of such Plan and Agreement are on file in
the offices of the Corporation.
(b) The Committee shall require that the stock certificates
evidencing such Shares be held in custody by the Company until the restrictions
thereon shall have lapsed, and that, as a condition of any Restricted Stock
award, the Grantee shall have delivered a stock power, endorsed in blank,
relating to the stock covered by such award. If and when such restrictions so
lapse, the stock certificates shall be delivered by the Company to the recipient
or his or her designee.
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B. Restrictions and Conditions.
The Shares of Restricted Stock awarded pursuant to the Plan shall be
subject to the following restrictions and conditions:
(i) Subject to the provisions of the Plan and the Award
Agreements, during a period set by the Committee commencing with
the date of such award and ending on a date established by the
Committee, the Grantee shall not be permitted voluntarily or
involuntarily to sell, transfer, pledge, anticipate, alienate,
encumber or assign Shares of Restricted Stock awarded under the
Plan (or have such shares attached or garnished). Unless otherwise
determined by the Committee, the restriction period with respect to
Shares issued to Grantees on account of their elections with the
consent of the Committee to receive all or a portion of their
annual bonuses under the Company's discretionary annual bonus
program in Shares of Restricted Stock hereunder shall be for a
period of three years from the date of grant.
(ii) Except as provided in the foregoing clause (i), the
Grantee shall have, in respect of the Shares of Restricted Stock,
all of the rights of a stockholder of the Company, including the
right to vote the Shares, and the right to receive any cash
dividends. Certificates for shares of Stock (not subject to
restrictions) shall be delivered to the Grantee promptly after, and
only after, the period of forfeiture shall expire without forfeiture
in respect of such Shares of Restricted Stock.
(iii) Subject to the provisions of the Award Agreement and
clause (iv) below, upon the termination of employment (or other
service, if applicable) with the Company and its Subsidiaries for
any reason or by the Grantee during the applicable restriction
period, all Shares still subject to restriction shall be forfeited
by the Grantee.
(iv) In the event the Grantee's employment with the Company
and its Subsidiaries terminates on account of death, Retirement or
Disability of the Grantee during the applicable restriction period,
if and to the extent provided in the Award Agreement restrictions
will immediately lapse subject to Section 7C on all Restricted
Stock granted pursuant to such Award Agreement.
C. Tax Withholding -- Restricted Stock.
The Committee may, in its discretion, require the Grantee to pay to
the Company at the time of vesting of any Restricted Stock (or other income
recognition event, such as election under
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Section 83(b) of the Code) the amount that the Committee deems necessary to
satisfy the Company's obligation to withhold federal, state or local income or
other taxes incurred by reason of the vesting (or other such event). Upon
vesting (or such other event), the Grantee may, if approved by the Committee in
its discretion, make a written election to have Shares withheld by the Company
from the Shares otherwise to be released from restriction, or to deliver
previously owned Shares (not subject to restrictions hereunder), in order to
satisfy the liability for such withholding taxes. In the event that the Optionee
makes, and the Committee permits, such an election, the number of Shares so
withheld or delivered shall have an aggregate Fair Market Value on the date of
exercise sufficient to satisfy the applicable withholding taxes. Notwithstanding
anything contained in the Plan to the contrary, the Grantee's satisfaction of
any tax-withholding requirements imposed by the Committee shall be a condition
precedent to the release of any restrictions as may otherwise be provided
hereunder, and the failure of the Grantee to satisfy such requirements with
respect to the vesting of Restricted Stock (or another income recognition event)
shall cause the applicable Restricted Stock to be forfeited.
8. Regulations and Approvals.
(a) The obligation of the Company to sell Shares with respect to
Options granted under the Plan shall be subject to all applicable laws, rules
and regulations, including all applicable federal and state securities laws, and
the obtaining of all such approvals by governmental agencies as may be deemed
necessary or appropriate by the Committee.
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(b) The Committee may make such changes to the Plan as may be
necessary or appropriate to comply with the rules and regulations of any
government authority or to obtain tax benefits applicable to stock options or
restricted stock.
(c) Each Option and grant of Restricted Stock is subject to the
requirement that, if at any time the Committee determines, in its discretion,
that the listing, registration or qualification of Shares issuable pursuant to
the Plan is required by any securities exchange or under any state or federal
law, or the consent or approval of any governmental regulatory body is necessary
or desirable as a condition of, or in connection with, the grant of an Option or
the issuance of Shares of Restricted Stock or other Shares, no Options shall be
granted or payment made or Shares issued or grant of Restricted Stock made, in
whole or in part, unless listing, registration, qualification, consent or
approval has been effected or obtained free of any conditions in a manner
acceptable to the Committee.
(d) In the event that the disposition of stock acquired pursuant to
the Plan is not covered by a then current registration statement under the
Securities Act, and is not otherwise exempt from such registration, such Shares
shall be restricted against transfer to the extent required under the Securities
Act, and the Committee may require any individual receiving Shares pursuant to
the Plan, as a condition precedent to receipt of such Shares, to represent to
the Company in writing that the Shares acquired by such individual are acquired
for investment only and not with a view to distribution and that such Shares
will be disposed of only
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if registered for sale under the Securities Act or if there is an available
exemption for such disposition.
9. Interpretation and Amendments; Other Rules.
The Committee may make such rules and regulations and establish such
procedures for the administration of the Plan as it deems appropriate. Without
limiting the generality of the foregoing, the Committee may (i) determine (A)
the conditions under which a Participant will be considered to have retired or
become disabled and (B) whether any Participant has done so; (ii) establish or
assist in the establishment of a program (which need not be administered in a
nondiscriminatory or uniform manner) under which the Company or a third party
may make bona-fide loans on arm's-length terms to any or all Optionees to assist
such Optionees with the satisfaction of any or all of the obligations that such
Optionees may have hereunder or under which third-party sales may be made for
such purpose (including, without limitation, a loan program under which the
Company or a third party would advance the aggregate Option Price to the
Optionee and be repaid with Option stock or the proceeds thereof and a sale
program under which funds to pay for Option stock are delivered by a third party
upon the third party's receipt from the Company of stock certificates); (iii)
determine the extent, if any, to which Options or Shares (whether or not Shares
of Restricted Stock) shall be forfeited (whether or not such forfeiture is
expressly contemplated hereunder); (iv) interpret the Plan and the Award
Agreements hereunder, with such interpretations to be conclusive and binding on
all persons and otherwise accorded the maximum deference
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permitted by law; and (v) take any other actions and make any other
determinations or decisions that it deems necessary or appropriate in
connection with the Plan or the administration or interpretation thereof. The
Committee may, in its discretion, establish a program under which, in each
case in which dividends (or, in the discretion of the Committee, certain
dividends) are payable with respect to an outstanding Share, an equivalent
amount with respect to each Share subject to an outstanding Option shall be (i)
paid currently to the applicable Optionee, (ii) deferred for eventual payment
to the Optionee (with or without interest or other deemed earnings), (iii)
credited as a reduction to the exercise price of the Option or (iv) any
combination of the foregoing. Unless otherwise expressly provided hereunder,
the Committee, with respect to any Option or Grant, may exercise its discretion
hereunder at the time of the award or thereafter. In the event of any dispute
or disagreement as to the interpretation of the Plan or of any rule, regulation
or procedure, or as to any question, right or obligation arising from or
related to the Plan, the decision of the Committee shall be final and binding
upon all persons. The Board may amend the Plan as it shall deem advisable,
except that no amendment may adversely affect a Participant with respect to
Options or Restricted Stock previously granted unless such amendments are in
connection with compliance with applicable laws; provided that the Board may
not make any amendment in the Plan that would, if such amendment were not
approved by the holders of the Common Stock, cause the Plan to fail to comply
with any requirement of applicable law or regulation, unless and until the
approval of the holders of such Common Stock is obtained. General 162(m)
provision -- Without limiting the generality of the foregoing, the Committee
may (subject to such considerations as may arise under Section 16 of the
Exchange Act, or under other corporate, securities or tax laws) take any steps
it deems appropriate, that are not inconsistent with the purposes and intent of
the Plan, to take into account the provisions of Section 162(m) of the Code.
10. Changes in Capital Structure.
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If (i) the Company or its Subsidiaries shall at any time be involved
in a merger, consolidation, dissolution, liquidation, reorganization, exchange
of shares, sale of all or substantially all of the assets or stock of the
Company or its Subsidiaries or a transaction similar thereto, (ii) any stock
dividend, stock split, reverse stock split, stock combination, reclassification,
recapitalization or other similar change in the capital structure of the Company
or its Subsidiaries, or any distribution to holders of Common Stock other than
cash dividends, shall occur or (iii) any other event shall occur which in the
judgment of the Committee necessitates action by way of adjusting the terms of
the outstanding Options and Restricted Stock, then the Committee may forthwith
take any such action as in its judgment shall be necessary to preserve to the
Participants rights substantially proportionate to the rights existing prior to
such event, and to maintain the continuing availability of Shares under Section
4 (if Shares are otherwise then available) in a manner consistent with the
intent hereof, including, without limitation, adjustments in (x) the number and
kind of shares subject to Options and Grants, (y) the Option Price, and (z) the
number and kind of shares available under Section 4. To the extent that such
action shall include an increase or decrease in the number of shares subject to
outstanding Options and Grants, the number of shares available under Section 4
above shall be increased or decreased, as the case may be, proportionately.
If a Change in Control shall occur, then the Committee may make such
adjustments as it, in its discretion, determines are
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necessary or appropriate in light of the Change in Control (including, without
limitation, the substitution of stock other than stock of the Company as the
stock optioned or granted (as applicable) hereunder, and the acceleration of the
exercisability of the Option or vesting of the Restricted Stock), provided that
the Committee determines that such adjustments do not have a substantial adverse
economic impact on the Participant as determined at the time of the adjustments.
The judgment of the Committee with respect to any matter referred to
in this Section 11 shall be conclusive and binding upon each Participant without
the need for any amendment to the Plan.
11. Notices.
All notices under the Plan shall be in writing, and if to the
Company, shall be delivered to the Board or mailed to its principal office,
addressed to the attention of the Board; and if to the Participant, shall be
delivered personally or mailed to the Participant at the address appearing in
the records of the Company. Such addresses may be changed at any time by written
notice to the other party given in accordance with this Section 12.
12. Rights as Stockholder.
Neither the Optionee nor any person entitled to exercise the
Optionee's rights in the event of death shall have any rights of a stockholder
with respect to the Shares subject to an Option, except to the extent that a
certificate for such Shares shall have been issued upon the exercise of the
Option as provided for herein.
13. Rights to Employment. Nothing in the Plan or in any Option or
Restricted Stock granted pursuant to the Plan shall
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confer on any individual any right to continue in the employ or other service of
the Company or its Subsidiaries or interfere in any way with the right of the
Company or its Subsidiaries and its shareholders to terminate the individual's
employment or other service at any time.
14. Exculpation and Indemnification.
To the maximum extent permitted by law, the Company shall indemnify
and hold harmless the members of the Board and the members of the Committee from
and against any and all liabilities, costs and expenses incurred by such persons
as a result of any act or omission to act in connection with the performance of
such person's duties, responsibilities and obligations under the Plan, other
than such liabilities, costs and expenses as may result from the gross
negligence, bad faith, willful misconduct or criminal acts of such persons.
15. Captions.
The use of captions in this Plan is for convenience. The captions
are not intended to provide substantive rights.
16. Governing Law.
THE PLAN SHALL BE GOVERNED BY THE LAWS OF MARYLAND, WITHOUT
REFERENCE TO PRINCIPLES OF CONFLICT OF LAWS.
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