SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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CHATEAU PROPERTIES, INC.
(NAME OF SUBJECT COMPANY)
CHATEAU PROPERTIES, INC.
(NAME OF PERSON(S) FILING STATEMENT)
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COMMON STOCK, $.01 PAR VALUE PER SHARE
(TITLE OF CLASS OF SECURITIES)
161739 10
(CUSIP NUMBER OF CLASS SECURITIES)
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C. G. Kellogg
President and Chief Executive Officer
Chateau Properties, Inc.
19500 Hall Road
Clinton Township, MI 48038
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF THE
PERSON(S) FILING STATEMENT)
COPIES TO:
Arthur Fleischer, Jr., Esq.
Peter Golden, Esq.
Fried, Frank, Harris, Shriver & Jacobson
One New York Plaza
New York, New York 10004
(212) 859-8000
Henry J. Brennan, III, Esq.
Charles W. Royer, Esq.
Timmis & Inman L.L.P.
300 Talon Centre
Detroit, MI 48207
(313) 396-4200
ITEM 1. SECURITY AND SUBJECT COMPANY.
The subject company is Chateau Properties, Inc., a Maryland
corporation (the "Company"). The address of the principal executive offices of
the Company is 19500 Hall Road, Clinton Township, MI 48038. The title of the
class of equity securities to which this Statement relates is the common
stock, $.01 par value per share (the "Shares"), of the Company.
ITEM 2. TENDER OFFER OF MHC OP AND MHC.
This Statement relates to the tender offer previously announced
by MHC Operating Limited Partnership, a limited partnership formed under the
laws of the State of Illinois ("MHC OP"), the sole general partner of which is
Manufactured Home Communities, Inc., a Maryland corporation ("MHC"), to
purchase all outstanding Shares at a price per Share of $26.00, net to the
seller in cash, without interest (the "MHC Offer").
The address of the principal executive offices of MHC OP and
MHC is Suite 800, Two North Riverside Plaza, Chicago, Illinois 60606.
ITEM 3. IDENTITY AND BACKGROUND.
(a) Name and Business Address of Person Filing This
Statement.
The name and business address of the Company, which is the
person filing this Statement, are set forth in Item 1 above.
(b) (1) Arrangements with Executive Officers, Directors
or Affiliates of the Company.
Certain information with respect to certain contracts,
agreements, arrangements or understandings between the Company and certain of
its executive officers, directors and affiliates is set forth in pages 4-12 of
the Company's Notice of Annual Meeting of Shareholders and Proxy Statement
dated April 10, 1996 for the Company's 1996 Annual Meeting of Shareholders
held on May 16, 1996 (the "Proxy Statement"). Copies of the foregoing pages
are attached as Exhibit 99.3 to this Statement and are incorporated herein by
reference.
On September 12, 1996, the Board of Directors of the Company
amended the 1993 Long-Term Incentive Stock Plan (the "Plan") to provide that
the Plan and all other stock incentive plans the Company may have will be
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administered in accordance with the new Rule 16b-3 of the Securities and
Exchange Act of 1934, as in effect on August 15, 1996, and that the Plan will
be amended in such other ways as the Company's counsel may recommend in order
to comply with the requirements of Rule 16b-3. The Plan was also amended to
provide that, upon a change in control (as defined in the Plan and which would
include the consummation of the MHC Offer), all outstanding options awarded
under the Plan not previously exercisable and vested will become fully exercis-
able and vested, without regard to whether or not a surviving corporation
assumes or continues the outstanding awards. In addition, the Plan was amended
to provide that outstanding options previously granted to a participant whose
employment is terminated prior to a change in control but at the request of a
potential acquiror will also become fully exercisable and vested. As of
September 15, 1996, options to purchase 619,150 Shares at exercise prices
ranging from $19.50 to $24.25 per Share were outstanding, of which options to
purchase 148,038 Shares were fully exercisable and vested. If the ROC Merger
takes place on or before March 31, 1997 or such later date as approved by the
Board of Directors, and prior to a change in control, the options under the
Plan will not vest.
On September 16, 1996, the Company entered into severance
agreements (the "Severance Agreements"), a form of which is attached as
Exhibit 99.5, with each of the following officers of the Company: C. G.
Kellogg, Tamara D. Fischer, Lori A. Palazzolo, Darrel D. Swain and Pamela R.
Davis. Pursuant to these Severance Agreements, in the event the senior
executive is terminated without "cause" or if the officer terminates his or
her employment for "good reason," in each case, within two years following a
"change in control" (which would include the consummation of the MHC Offer),
the officer would be entitled to a lump sum payment of salary and bonus equal
to two times, in the case of Mr. Kellogg and Ms. Fischer, and one times, in
the case of Ms. Palazzolo, Mr. Swain and Ms. Davis, the officer's annual base
salary and bonus and to the continuation of health benefits for two years, in
the case of Mr. Kellogg and Ms. Fischer, and one year, in the case of Ms.
Palazzolo, Mr. Swain and Ms. Davis. All amounts payable as a result of a
change in control would be subject to a cap so that all payments to the
officers would be reduced so that no excise tax would be imposed on any of the
payments and the amounts payable would be fully deductible to the Company
under Section 280b of the Internal Revenue Code of 1986, as amended (the
"Code"). If the ROC Merger takes place on or before March 31, 1997 or such
later date as approved by the Board of Directors, and prior to a change in
control, the Severance Agreements will terminate immediately. In addition, the
Company amended the Employment Agreement dated October 27, 1993 between the
Company and Mr. Kellogg (the "Kellogg Employment Agreement") to provide that
in the event of a change in control followed by a termination of employment of
Mr. Kellogg, such that the benefits under his Severance Agreement become
applicable, the Kellogg Employment Agreement will terminate and
no longer be in full force or effect.
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On September 16, 1996, the Board of Directors of the Company
amended the Annual Bonus Plan (the "Bonus Plan") to provide that, upon a
change in control, each Bonus Plan participant who remains employed through
the end of the performance period during which a "change in control" (which
would include the consummation of the MHC Offer) occurs will receive a bonus
for that year equal to the bonus received in the previous fiscal year. The
Bonus Plan was amended further to provide that a participant whose employment
is terminated after a change in control but prior to the end of the applicable
performance period will receive a pro-rated bonus (calculated in accordance
with the preceding sentence). Finally, the Bonus Plan was amended to provide
that a participant whose employment is terminated prior to a change in control
but at the request of a potential acquiror will likewise receive a prorated
bonus, as calculated above. If the ROC Merger takes place on or before March
31, 1997 or such later date as approved by the Board of Directors and prior to
a change in control, the amendments to the Bonus Plan will not be applicable.
(b) (2) Arrangements with MHC OP, MHC and their Respective
Executive Officers, Directors or Affiliates.
There are no contracts, agreements, arrangements or
understandings or actual or potential conflicts of interest between the
Company, its directors, executive officers, and affiliates, on the one hand,
and MHC OP or MHC and their respective executive officers, directors and
affiliates, on the other hand.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Background and Recommendation.
On July 19, 1996, the Company and ROC Communities, Inc. ("ROC")
issued a press release announcing their agreement to merge (the "Old ROC
Merger") both companies into a new company to be called Chateau Communities,
Inc. ("Chateau Communities") through a tax-free exchange of stock. Pursuant to
the terms of the Old ROC Merger, ROC shareholders were to receive 1.042 shares
of the new company's common stock for every share they held in ROC and Company
shareholders were to receive one share of the new company's common stock for
every share they held in the Company. The exchange ratio was derived from the
average of the ratios of the daily closing stock prices of the two companies
during the second quarter of 1996.
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Concurrently with the execution and delivery of the merger
agreement between the Company and ROC relating to the Old ROC Merger (the "Old
ROC Merger Agreement"), the Company entered into a Stock Option Agreement (the
"Company Option Agreement") with ROC whereby the Company granted to ROC an
option to purchase up to 420,000 Shares, exercisable by ROC, in whole or in
part, at any time or from time to time after the Old ROC Merger Agreement
becomes terminable by ROC under circumstances which could entitle ROC to
receive certain break-up expenses or fees pursuant to the Old ROC Merger
Agreement, regardless of whether the Old ROC Merger Agreement is actually
terminated (any such event by which the Old ROC Merger Agreement becomes so
terminable by ROC being referred to herein as a "ROC Trigger Event"). The
exercise price of the option under the Company Option Agreement is equal to
$22.25 per Share, the closing price of the Shares on the date prior to the
announcement of the Old ROC Merger (i.e., July 17, 1996). The right of ROC to
exercise its option will terminate on the date which is 365 days after the
date that the Company shall notify ROC in writing of the occurrence of any ROC
Trigger Event. ROC also entered into a Stock Option Agreement (the "ROC Option
Agreement") with CP Limited Partnership ("CP") , whereby ROC granted CP an
option to purchase up to 420,000 shares of ROC common stock, exercisable by
CP, in whole or in part, at any time or from time to time after the Old ROC
Merger Agreement becomes terminable by the Company under circumstances which
could entitle CP to receive certain break-up expenses or fees pursuant to the
Old ROC Merger Agreement, regardless of whether the Old ROC Merger Agreement
is actually terminated (any such event by which the Old ROC Merger Agreement
becomes so terminable by the Company being referred to as a "Company Trigger
Event"). The exercise price of the option under the ROC Option Agreement is
equal to $22.00 per share, the closing price of ROC common stock on the date
prior to the announcement of the Old ROC Merger (i.e., July 17, 1996). The
right of CP to exercise its option terminates on the date which is 365 days
after the date that ROC notifies CP in writing of the occurrence of any
Company Trigger Event.
On August 14, 1996, Samuel Zell, Chairman of the Board of MHC,
and David Helfand, President and Chief Executive Officer of MHC, telephoned
John Boll, Chairman of the Board of the Company, and suggested that they meet.
On August 16, 1996, Messrs. Zell, Helfand and Boll met in
Detroit, Michigan. Also in attendance at such meeting were representatives of
the Company's legal and financial advisors. At the meeting, Mr. Zell
communicated MHC's offer to acquire the Company for $26.00 per Share in cash,
MHC common shares at a ratio of 1.15 MHC common shares for each Share or a
combination of cash at $26.00 per Share and MHC common shares at such ratio.
Mr. Boll asked a number of questions regarding MHC's offer and indicated that
MHC's offer would be considered by the Company's Board of Directors.
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On August 17, 1996, MHC delivered to Mr. Boll and the members
of the Board of Directors of the Company a letter setting forth a formal
proposal of the terms Mr. Zell communicated at the August 16th meeting.
MHC publicly announced its proposal in a press release dated
August 19, 1996. Also on August 19, 1996, the Company responded to MHC's
proposal by issuing a press release, which stated in part:
CHATEAU PROPERTIES ANNOUNCES AN UNSOLICITED
PROPOSAL FOR A TWO-TIER OFFER FROM
MANUFACTURED HOME COMMUNITIES, INC.
Chateau Properties, Inc. (NYSE: CPJ), a real estate investment
trust operating in the manufactured housing community industry,
announced today it had received an unsolicited proposal from
Manufactured Home Communities, Inc. (NYSE: MHC) in which MHC indicated
it was prepared to offer $26.00 in an all-cash transaction and/or 1.15
shares of MHC's common stock for each CPJ share outstanding, and was
prepared to make the same offer to holders of limited partnership
interests in Chateau's operating partnership, CP Limited Partnership.
Based an the closing price of MHC common stock on August 16, 1996 of
$18-1/8, the indicated value of the MHC shares offered for Chateau
shares was $20.84, compared to the closing price of Chateau stock of
$23-1/4 on August 16, 1996.
Chateau Properties is a party to a definitive Agreement and
Plan of Merger with ROC Communities, Inc. (NYSE: ROC) which provides
for the strategic combination of Chateau and ROC Communities. John
Boll, Chairman of Chateau Properties, Inc., reiterated that the
motivation for the merger with ROC Communities was based on the unique
and substantial opportunities presented by the combination of Chateau
and ROC. Chateau further noted that its Articles of Incorporation
prohibit a person from beneficially owning in excess of 7% of its
outstanding shares of common stock without Board approval.
On the same date, August 19, 1996, ROC issued a press release, which
stated in part:
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CHAIRMAN OF ROC COMMUNITIES, INC.,
MCDANIEL, RESPONDS TO INQUIRIES ABOUT MERGER
WITH CHATEAU PROPERTIES
In response to inquiries this morning regarding ROC Communities, Inc.'s (NYSE:
RCI) pending merger with Chateau Properties, Inc. (NYSE: CPJ), Chairman and
President of ROC Communities, Gary P. McDaniel stated, "The pending
transaction between Chateau Properties and ROC Communities is a merger of
equals and a strategic business combination which will create the substantial
long term benefits we have previously discussed. Neither company has been or
is for sale. We remain fully committed to completing the merger, which we
strongly believe is in the best interests of the shareholders of both
companies."
On August 21, 1996, the Company issued a press release
announcing an unsolicited stock for stock offer for the Company (the "Sun
Offer") from Sun Communities, Inc. ("Sun"), which stated in part:
CHATEAU PROPERTIES ANNOUNCED AN UNSOLICITED PROPOSAL FOR
STOCK FOR STOCK OFFER FROM SUN COMMUNITIES, INC.
Chateau Properties, Inc. (NYSE: CPJ), a real estate investment
trust operating in the manufactured housing community industry,
announced today it had received an unsolicited proposal from Sun
Communities, Inc. (NYSE: SUN) in which SUN indicated it was prepared
to offer .892 shares of SUN's common stock for each CPJ share
outstanding, and was prepared to make the same offer to holders of
limited partnership interests in Chateau's operating partnership, CP
Limited Partnership.
Chateau Properties in a party to a definitive Agreement and
Plan of Merger with ROC Communities, Inc. (NYSE: RCI) which provides
for the strategic combination of Chateau and ROC Communities.
Chateau stated that the SUN proposal, as well an the
unsolicited proposal previously received from Manufactured Home
Communities, Inc., will begin to be reviewed at the regularly
scheduled Board Meeting to be held August 22, 1996.
After Sun's announcement, MHC issued a press release on August
23, 1996 in which it reiterated its commitment to consummating a transaction
with the Company.
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Also on August 23, 1996, the Company announced that its
Board of Directors, at a regularly scheduled meeting on August 22, 1996, "had
begun to consider the unsolicited proposals recently received from Sun
Communities, Inc. (NYSE: SUI) and Manufactured Home Communities, Inc. (NYSE:
MHC) and will continue that review."
On August 27, 1996, John Boll sent a letter to Samuel Zell
stating that the Company and its advisors had not had an opportunity to fully
evaluate the proposals of MHC and Sun and would complete their assessment of
the proposals in the coming days.
On September 4, 1996, MHC issued a press release announcing the
commencement of the MHC Offer.
Also on September 4, 1996, MHC sent a letter to John Boll and
the members of the Board of Directors of the Company advising them of the MHC
Offer and requesting that they take actions to facilitate the MHC Offer as
described in MHC's Offer to Purchase dated September 4, 1996.
On September 4, 1996, Purchaser commenced the MHC Offer. MHC
stated in its Offer to Purchase dated September 4, 1996 that the purpose of
the MHC Offer is to acquire control of, and the entire equity interest in, the
Company and that MHC intended, as soon as practicable after and substantially
concurrent with, the consummation of the MHC Offer, to propose and seek to
have the Company consummate a merger or similar business combination with MHC
or a direct or indirect wholly owned subsidiary of MHC (the "Proposed MHC
Merger"), pursuant to which each outstanding Share (other than Shares owned by
MHC OP or MHC and Shares held by shareholders who perfect any available
appraisal rights under the Maryland General Corporation Law) would be
converted into the right to receive an amount in cash equal to the price per
Share paid pursuant to the MHC Offer.
On September 10, 1996, the Company received a letter from Sun
in which Sun reiterated its commitment to consummating a merger of the Company
and Sun. In its letter, Sun indicated that it was prepared to offer a cash
alternative, to the extent desired by the Company's shareholders, to its
previously announced stock proposal, which Sun believed would compare
favorably with the current offer of MHC. Additionally, Sun stated that such
cash alternative would not be subject to a financing contingency.
On September 17, 1996, the Company issued the following press
release with respect to the terms of a revised merger with ROC (the "ROC
Merger") pursuant to a revised merger agreement (the "ROC Merger Agreement"),
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the terms of a dividend of 3.16% of the outstanding Shares to be declared
by the Board and paid to holders of Shares (except for certain holders
("OP Unitholders") of limited partnership interests ("OP Units") in CP
participating in the OP Unit Exchange discussed below) prior to the ROC Merger
(the "Stock Dividend"), an agreement by OP Unitholders to assign and transfer
their OP Units to the Company for Shares and to assign to existing
shareholders of the Company the OP Unitholders' rights to the Stock Dividend
(the "OP Unit Exchange") and a Share repurchase program (the "Share Repurchase
Program") to be commenced by the Company and ROC prior to the consummation of
the ROC Merger:
CHATEAU BOARD APPROVES REVISED MERGER AGREEMENT WITH
ROC
AS BEST ALTERNATIVE FOR CHATEAU STOCKHOLDERS
--Revised Agreement Improves Exchange Ratio For Chateau Holders--
--Chateau Plans to Repurchase Up To 1.45 Million Of Its Shares--
--Rejects Proposals by MHC and Sun Communities--
CLINTON TOWNSHIP, MICHIGAN, SEPTEMBER 18, 1996 -- Chateau Properties,
Inc. (NYSE:CPJ), a real estate investment trust operating in the
manufactured housing community industry, today announced that its
Board of Directors has unanimously approved a revised merger
agreement with ROC Communities, Inc. (NYSE:RCI). In reaching its
decision, the Board determined, after thorough analyses and in
consultation with its independent financial and legal advisors, that
the revised merger agreement with ROC is the best alternative for
Chateau stockholders and represents the opportunity for both superior
long-term value and strategic and operational benefits. The Board also
rejected proposals to merge Chateau with Sun Communities, Inc. (NYSE:
SUI) and Manufactured Home Communities, Inc. (NYSE: MHC).
Under the revised merger agreement each outstanding share of Chateau
common stock will represent 1.0316 shares of the combined entity,
rather than one share as contemplated under the original agreement.
This improvement in the exchange ratio results from a payment by
Chateau of a stock and OP Unit dividend equal to 3.16% of the
outstanding Chateau common stock and OP Units prior to the effective
date of the merger, but contingent upon the merger having been
approved by a majority of Chateau stockholders. A further economic
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benefit may be realized if OP Unitholders elect to exchange into common
stock. Assuming that 70% of the OP Units were exchanged, for example,
the effective exchange ratio for Chateau stockholders would be
approximately 1.06. The exchange ratio for ROC stockholders remains
unchanged at 1.042.
In connection with the ROC merger, the Board also unanimously approved
a number of new initiatives designed to provide a balanced package of
long-term and short-term value that responds to stockholders with
different investment objectives and more accurately reflects the
Company's worth.
These initiatives include:
o A program to repurchase, either through open market purchases,
negotiated purchases, or a tender offer, up to 1.45 million of
the approximately 6.1 million shares of the Company's common
stock currently outstanding.
o In addition, ROC has indicated its intent to purchase, from
time to time, up to 350,000 shares of Chateau common stock
prior to the merger and Chateau has waived the restrictions of
its standstill agreement with ROC with respect to these
purchases.
o An opportunity for each holder of limited partnership interests
(OP Units) in the Company's operating partnership, CP Limited
Partnership, to exercise their existing right to exchange, on a
tax-efficient basis, their OP Units for one share of the
Company's common stock to be effected prior to the merger. In
recognition of this opportunity to exchange on a tax-efficient
basis, each OP Unit holder will be required to waive its right
to the OP Unit dividend, thus reallocating such dividend to the
existing Chateau common stockholders. Certain holders have
indicated their intention to exchange up to approximately
6 million OP Units into Chateau common stock, which as
described above will have the effect of transferring the
benefit of their OP Unit dividend to Chateau common
stockholders. If 70% of the approximately 8.8 million
outstanding OP Units were exchanged, the effective exchange
ratio to Chateau common stockholders would be increased to
approximately 1.06. In connection with the exchange, exchanging
OP Unitholders will be given the opportunity to purchase
common stock from Chateau and/or ROC at fair market value.
The Company said the share repurchase program will provide immediate
liquidity to those holders who wish to sell some or all of their
shares, while enabling continuing holders to benefit from the ongoing
growth of the Company after the merger.
The revised ROC merger will require the affirmative vote of a majority
of the Chateau common stock voting (provided that the total vote cast
represents over 50% in interest of the outstanding Chateau common
stock) and the affirmative vote of two-thirds of the outstanding ROC
common stock. Under the revised agreement, ROC will merge with a
subsidiary of Chateau.
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Procedurally, the ROC common stockholders will vote on the merger
first and, if the ROC common stockholders approve the merger, holders
of Chateau's OP Units will have the opportunity to exchange and
transfer their OP Units for an equal number of shares of Chateau common
stock to participate in the Chateau stockholder vote on the merger. OP
Unitholders including Messrs. John A. Boll, C.G. Kellogg, and Edward
R. Allen, a director of Chateau, and J. Peter Ministrelli have
indicated that they intend to exchange up to 6 million OP Units for
Chateau common stock. There are approximately 2.8 million additional
OP Units that will also have the opportunity to exchange their OP
Units.
The revised merger agreement, like the original merger agreement,
provides for a strategic "merger of equals" between ROC and
Chateau and not for an acquisition by Chateau of ROC or by ROC
of Chateau. As in the original merger agreement, the revised
merger agreement provides that the management teams of the two
companies will be combined following the merger. The Chairman of
the combined company will be John A. Boll, the current Chairman
of Chateau. The Chief Executive Officer of the combined company
will be Gary P. McDaniel, the current Chairman and CEO of ROC.
The President of the combined company will be C. G. "Jeff"
Kellogg, the current CEO and President of Chateau. The Chief
Financial Officer of the combined company will be Tamara D.
Fischer, the current CFO of Chateau. The Chief Operating Officer
of the combined company will be James B. Grange and the Executive
Vice President of Acquisitions for the combined company will be
Rees F. Davis, who both currently hold like positions with ROC.
It is expected that the combined company will be renamed Chateau
Communities, Inc., following the merger and will be headquartered
at ROC's current offices in Englewood, Colorado. The Board of
Directors of the combined company will consist of five
representatives from the current Board of Chateau and five
representatives from the current Board of ROC. An eleventh Board
member will be nominated by the Board and elected at the first annual
meeting of shareholders of the combined company.
John A. Boll, Chairman of Chateau Properties, said: "The revised
merger agreement with ROC offers attractive financial and operational
benefits to the stockholders of both companies and represents the best
path to long-term enterprise value through a strategic combination of
Chateau and ROC, two companies whose business plans and management
philosophies are highly complementary. The merger will significantly
increase the geographic diversity of the properties owned by Chateau
and reduce the Company's exposure to fluctuations in local economic
cycles.
"While the terms of the revised merger agreement are fairly complex,
we think those who take the time to understand them will recognize the
significant benefits this transaction offers to all of our
constituencies. We will now move ahead to consummate this mutually
beneficial strategic merger and urge all interested parties to respect
the Board's decision."
In connection with its decision to proceed with the revised merger
with ROC, the Chateau Board of Directors, after consultation with its
financial advisors, Goldman Sachs and Merrill Lynch, rejected the
unsolicited offer of MHC Operating Limited Partnership, the sole
general partner of Manufactured Home Communities, Inc. (NYSE:MHC), as
inadequate and reaffirmed its intent to pursue a strategic merger that
enables stockholders to continue to benefit from an equity
participation in the combined enterprise. A more complete statement of
the Board's position with respect to the MHC offer is set forth in
Chateau's Schedule 14D-9, which is being distributed to all Chateau
stockholders. THE CHATEAU BOARD OF DIRECTORS STRONGLY URGES ITS
STOCKHOLDERS NOT TENDER THEIR SHARES INTO THE MHC TENDER OFFER.
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Additionally, in reaching its determination to proceed with the ROC
merger, the Board also carefully considered, with the assistance of
its financial and legal advisors, the offer of Sun Communities, Inc.
(NYSE:SUN). The Board determined that the long-term benefits of a
combination with ROC were superior to a combination with Sun. This
conclusion was based on several factors, including a judgment
concerning Sun's property portfolio, the nature and compatibility of
the combined management teams, and the different acquisition practices
of the two companies.
In connection with the MHC tender offer, Chateau filed suit on
September 17, 1996, in the United States District Court for the
District of Maryland against MHC. In its complaint, Chateau alleges
that (i) the MHC offer has been made in violation of the federal
securities laws because it contains untrue statements of material fact
and fails to state material facts and (ii) MHC has begun a proxy
solicitation in opposition to Chateau's merger with ROC and has made
material misstatements of facts and failed to disclose other material
facts as part of that solicitation effort in violation of applicable
federal law, and seeks a declaratory judgement that: (i) the purchase
of Chateau common stock pursuant to the MHC offer would violate Article
VI of Chateau's articles of incorporation relating to share ownership
limitations; (ii) the second step merger proposed in MHC's offer would
be subject to the restrictions contained in the Maryland business
combination statute; and (iii) Chateau's Board of Directors is not
required to exempt the purchase of Chateau common stock pursuant to
the MHC offer from the ownership limitation contained in Chateau's
articles of incorporation or from the Maryland business combination
statute.
Separately, the company said a class action suit was filed on
September 12, 1996, in the Circuit Court for Montgomery County,
Maryland, against Chateau, alleging that Chateau's directors have
violated their fiduciary duties to stockholders by agreeing to a
business combination with ROC and refusing to endorse the MHC offer
and seeks injunctive relief and unspecified monetary damages. Chateau
believes the allegations are entirely lacking in merit and intends to
defend against this action.
THE BOARD UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S
SHAREHOLDERS REJECT THE OFFER AND NOT TENDER THEIR SHARES PURSUANT
TO THE OFFER.
A copy of a letter to shareholders communicating the Board's
recommendation is filed as Exhibit 99.1 and is incorporated by reference.
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(b) Reasons for the Recommendation.
In reaching the conclusion that shareholders should reject the
MHC Offer, the Board of Directors considered numerous factors, including but
not limited to the following:
(i) The belief of the Board of Directors that the
interests of the Company's shareholders will best be served by a
strategy of continued growth in the size and number of properties
owned by the Company, management of the Company by a team with
superior talent, depth and experience which shares the Board's
strategic vision, and maintaining the Company's shareholders' ongoing
equity interest in the Company in order to permit them to share fully
in the anticipated benefits of this strategic plan. In that
connection, the Board noted:
o The MHC Offer contemplates that the Company's
shareholders will lose all their right to participate in
the financial benefits of the Company's businesses and
to share in the management of the Company through their
rights as the holders of voting securities.
o The ROC Merger is a superior strategic alternative as
compared to the MHC Offer based on the factors described
in (ii) below;
(ii) The expected benefits of the ROC Merger,
including:
o The improved economic terms for the Company's
shareholders, as compared to the original transaction,
which will result from the Stock Dividend and
effectively reduce the exchange ratio from 1.042 to no
greater than approximately 1.01 Share for each share of
ROC common stock.
o The ROC Merger would significantly increase the
geographic diversity of the properties owned by the
Company compared to the properties currently owned by
the Company. This increased diversification would reduce
exposure to the vagaries of local economic cycles.
o The ROC Merger would significantly increase the market
capitalization of the Company compared with the current
market capitalization of the Company and would result in
the Company having the largest market capitalization of
any REIT specializing in owning and operating
manufactured home communities. The Board believed that
the increased market capitalization of the Company after
the ROC Merger would enhance liquidity through increased
trading volumes and encourage investment in the Company
by institutional investors (which tend to favor
companies with larger market capitalizations). In
addition, the Board believed that increased
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institutional investor participation could lead to an
increase in the trading multiples and share price of the
Company compared to the current trading multiple and
share price of the Company.
o The Merger would effectively combine the senior
management teams of Chateau and ROC and create a company
with enhanced management depth and experience and an
ability to capitalize on the complementary expertise of
each other's management.
o After the ROC Merger, the Company would have improved
access to capital markets compared to the Company's
current access. The Board believed, based in part on
discussions with management and its advisors, that the
Company should maintain its investment grade credit
rating.
o The Company would realize the benefit of significant
synergies and on-going operational cost savings,
including general and administrative cost savings as a
result of consolidated operating and property management
functions and the elimination of duplicative expenses.
The Board believed that the Company's shareholders would
benefit from the aforementioned synergies and cost
savings and that these benefits should inure to the
Company's shareholders rather than to MHC.
o General industry, economic and market conditions, both
current and projected, the interests of the Company's
shareholders and the potential impact of the ROC Merger
upon the interests of the Company's employees,
suppliers, creditors and residents as well as the
possible impacts on the communities in which the Company
has operations.
(iii) The opinion of Goldman, Sachs & Co. ("Goldman
Sachs") that, as of September 17, 1996, the exchange ratio pursuant
to the ROC Merger Agreement is fair to the Company. A copy of the
written opinion dated September 17, 1996 of Goldman Sachs delivered
to the Board which sets forth the assumptions made, procedures
followed, matters considered and limits on its review is attached as
Annex A to this Schedule 14D-9 and is incorporated by reference. THE
FULL TEXT OF SUCH OPINION SHOULD BE READ IN CONJUNCTION WITH THIS
STATEMENT;
(iv) The opinion of Merrill Lynch, Pierce, Fenner &
Smith Incorporated ("Merrill Lynch") that, as of September 17, 1996,
the proposed consideration to be paid by the Company in the ROC
Merger is fair to the Company and its shareholders (other than
ROC and its affiliates) from a financial point of view. A copy
of the written opinion dated September 17, 1996 of Merrill Lynch
delivered to the Board which sets forth the assumptions made,
procedures followed, matters considered and limits on its review is
attached as Annex B to this Schedule 14D-9 and is incorporated by
reference. THE FULL TEXT OF SUCH OPINION SHOULD BE READ IN CONJUNCTION
WITH THIS STATEMENT;
(v) The conclusion of the Board of Directors that the
terms of the MHC Offer are inadequate from a financial point of view
based on a review of the Company's business, financial condition,
properties and prospects with the Company's management and financial
advisors;
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(vi) (a) The oral opinion of Goldman Sachs, co-financial
advisor to the Company, after reviewing with the Board of Directors
certain financial criteria customarily used in assessing an offer, that
the MHC Offer is inadequate; and (b) the oral opinion of Merrill Lynch,
co-financial advisor to the Company, after reviewing with the Board of
Directors certain financial criteria customarily used in assessing an
offer, that the MHC Offer is inadequate from a financial point of view;
(vii) Based on the factors noted in (ii) above, the
Board's conclusion that the ROC Merger provides both immediate and
long-term benefits to the Company's shareholders;
(viii) As part of the ROC Merger and pursuant to the OP
Unit Exchange, OP Unitholders will have the opportunity, on two
occasions, to assign and transfer their OP Units to the Company in
exchange for Shares on a substantially tax-free basis as opposed to a
taxable basis pursuant to the structure of the MHC Offer and the
Proposed MHC Merger. The Board observed that, in order to participate
in the OP Unit Exchange, an OP Unitholder would have to assign to
existing common shareholders of the Company the Stock Dividend
otherwise payable to them, thereby transferring value to the Company's
existing common shareholders. Since it is expected that the first OP
Unit Exchange will occur prior to the record date for determining
holders of Shares entitled to vote on the ROC Merger, OP Unitholders
exchanging at such time will be entitled to vote on the ROC Merger. If
the holders of OP Units exchange their OP Units for Shares, they are
expected to have sufficient voting power to assure shareholder
approval of the ROC Merger, which merger, as described above, the
Board believes is in the best interests of the Company and its
shareholders. (It is also expected that OP Unitholders receiving Shares
in the initial OP Unit Exchange will vote in favor of the ROC Merger
and thereby facilitate the ROC Merger because of the negative tax
consequences that would arise if the merger does not occur after the
exchange.) The Board believed that the OP Unit Exchange is
appropriate, in light of its fiduciary responsibility both to the
Company's shareholders and to the OP Unitholders as general partner of
CP, and took into account the fact that the OP Unitholders own
approximately 60% of the Company's equity on a fully diluted basis and
the OP Unitholders currently have the right to exchange their OP Units
for Shares. The Board also took into account the fact that, although
certain OP Unitholders had indicated their intention to exchange their
OP Units for Shares in connection with the ROC Merger and the OP Unit
Exchange, there is no commitment that they do so, except that it is a
condition to ROC's obligation to consummate the ROC Merger that OP
Unitholders (who, in the Company's judgment, will exchange a
sufficient number of OP Units to cause the OP Unit Exchange and the
ROC Merger to satisfy the requirements of Section 351 of the Code)
commit to ROC (prior to the later of 60 days after the execution of
the ROC Merger Agreement or 10 days after the clearance of the joint
proxy statement relating to the Company and ROC shareholder votes by
the Securities and Exchange Commission) to exchange their OP Units for
Shares. In connection with the OP Unit Exchange and the ROC Merger,
Section 351 of the Code provides tax-efficient treatment if OP
Unitholders and ROC shareholders, taken together, hold 80% of the
voting shares of the Company after the ROC Merger, the OP Unit
Exchange and the Share Repurchase Program. The Board further took into
account the possible impact of the shifting of unrecognized gain from
the OP Unitholders to the Company (including the probability and the
possible timing of any such gain), the relinquishment of the Stock
Dividend by the exchanging OP Unitholders and the fact that the OP Unit
Exchange facilitates the OP Unitholders achieving voting rights on a
tax-efficient basis.
(ix) The Board of Directors' belief that the Share
Repurchase Program will provide investors who desire to obtain
liquidity for their investment in the Company with an opportunity to
sell all or a portion of their investment in the Company, will
stabilize the Company's shareholder base and will enable long-term
shareholders to increase their proportionate interest in the Company.
(x) The Board of Directors took into account the
conditional nature of the MHC Offer, in that the MHC Offer is
conditioned on a condition the Board does not believe can be
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satisfied: MHC OP being satisfied, in its sole judgment, that after
consummation of the MHC Offer none of the Shares purchased by MHC OP
will be deemed Excess Stock (as defined in Article VI of the Company's
Articles of Amendment and Restatement (the "Articles")). In this
regard, the Company has commenced litigation seeking a declaratory
judgment as to the applicability to the MHC Offer of the provisions of
the Articles relating to Excess Stock (See Item 8);
(xi) The fact that the ROC Merger will be tax-free to
the Company's shareholders (except to the extent of any cash received
in lieu of fractional shares and except to the extent shareholders
sell their Shares in the Share Repurchase Program) while the MHC Offer
and Proposed MHC Merger would be taxable to the Company's
shareholders. The Board also noted that the MHC Offer contained no
provision for the OP Unitholders.
(xii) The possible additional economic benefit to the
holders of Shares resulting from the transfer of the benefit of the
Stock Dividend from OP Unitholders exchanging their OP Units to the
holders of Shares; and
(xiii) The confidence in the Company's strategic plan,
including the ROC Merger, demonstrated by the indicated willingness of
John Boll, Edward R. Allen, C. G. Kellogg and Joseph P. Ministrelli to
exchange all or a substantial portion of their OP Units at a discount
(by virtue of their giving up the benefit of the Stock Dividend).
The Board did not assign relative weights to the factors. The
Board based its determination and recommendation on the totality of the
information presented to and considered by it. Additionally, different
directors may have had different views on the foregoing factors and different
reasons for the Board's recommendation set forth in Item 4(a) above.
In light of all the above factors, the Board determined that
its fiduciary duties require that it not take steps to facilitate the MHC
Offer and the Proposed MHC Merger and not waive the provisions of the Maryland
Business Combination Law (as defined in Item 8 hereof), the Ownership Limit
(as defined in Item 8 hereof) or the Excess Stock provisions of the Articles
with respect to the MHC Offer or the Proposed MHC Merger.
In reaching its determination to proceed with the ROC Merger,
the Board of Directors also carefully considered, with the assistance of its
legal and financial advisers, the Sun Offer. The Board reached a conclusion,
based on several factors, including, among other things, a judgment concerning
the quality and location of Sun's property portfolio, the quality and
compatibility of the combined management teams, and the different development
and acquisition practices of the two companies, that consummating the ROC
Merger was a superior alternative to the Sun Offer.
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ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement dated as of July 11, 1996, as
amended on September 11, 1996, Chateau has agreed to pay Merrill Lynch & Co.
("Merrill Lynch") (i) a retainer fee of $150,000 and a $500,000 fee for
delivery of its fairness opinion in connection with the Old ROC Merger (the
"Earned Fee"), with such amounts due and payable as set forth below, (ii) a
financial advisory fee of (a) $150,000 per month, commencing with the month of
September 1996 through and including the earlier of (1) the month in which a
merger or similar transaction is consummated and (2) June 1997 and (b) in the
event no merger or similar transaction is consummated on or before December
31, 1997, an additional financial advisory fee of $300,000 (the "Advisory
Fee") and (ii) if during the period Merrill Lynch is retained by the Company
or within two years thereafter (a) a merger or similar transaction is
consummated or (b) the Company enters into an agreement with any person
("Merger Candidate") which subsequently results in a merger or similar
transaction which the Company's Board of Directors has not recommended
against, a transaction fee (the "Transaction Fee") equal to 0.38% of the
aggregate value (with value defined as cash and/or shares paid for the
Company's equity plus all liabilities of the Company on the date such merger
or similar transaction closes) of such merger or similar transaction. However,
if a merger or similar transaction is not consummated and no agreement to
consummate a merger or similar transaction is entered into by the Company
during the period Merrill Lynch is retained by the Company, the Earned Fee of
$650,000 will be paid upon termination of Merrill Lynch's engagement if such
termination occurs on or prior to December 31, 1997. The $650,000 will be
credited against a Transaction Fee that subsequently becomes payable.
Notwithstanding the foregoing, the aggregate amount of the
Advisory Fee and the Transaction Fee payable to Merrill Lynch will be no less
than the fee payable to any other financial advisor. In addition, the
aggregate amount of the Advisory Fee and the Transaction Fee payable to
Merrill Lynch will not exceed $3,000,000 unless the fee payable to any other
financial advisor is in excess of $3,000,000, in which event the Transaction
Fee payable to Merrill Lynch will be no less than such fee.
In addition, the Company has agreed to reimburse Merrill Lynch
for its reasonable out-of-pocket expenses and to indemnify Merrill Lynch and
certain related persons against liabilities arising out of or in conjunction
with its rendering of services under its engagement, including certain
liabilities under the federal securities laws.
Pursuant to a letter agreement dated August 21, 1996, the
Company has retained Goldman, Sachs & Co. ("Goldman Sachs") as financial
advisor with respect to the MHC Offer, the Sun Offer and certain other
possible transactions. Pursuant to the letter agreement, the Company has
agreed to pay to Goldman Sachs:
(a) a fee of $375,000 payable on the date of the letter agreement;
-17-
(b) if at least 20% or more of the outstanding Shares of the Company
is acquired by any person or group (except by ROC as provided for in
subparagraph (d) below or by the Company or current shareholders of the
Company or OP Unitholders in furtherance of a transaction with ROC), including
the Company, in one or a series of transactions, or if all or substantially
all of the assets of the Company are transferred, in one or a series of
transactions, a fee equal to 0.50% of the aggregate consideration paid in
respect of Shares and OP Units; less any fees paid pursuant to subparagraph
(a) above or (c), (d) or (e) below. This fee is payable only for transactions
that the Board is not recommending shareholders oppose. If at least 50% of the
outstanding Shares is acquired by any person or group (except by ROC as
provided for in subparagraph (d) below), including the Company, the aggregate
value shall be determined as if such acquisition were of 100% of the Shares
(including all contingently issuable shares);
(c) in the event the Company acquires securities or assets of another
company and no fee is payable with respect to such transaction pursuant to
subparagraph (b) above or (d) below, a fee of either 1.50% or 2.00% depending
on the size of the transaction, but in no event more than the amounts payable
under subparagraph (b) or (d) and less any fees paid pursuant to subparagraph
(a) or (e);
(d) in the event that the Company consummates a transaction with ROC
involving a stock or asset sale, tender offer, merger or other business
combination, a fee of $1 million if the transaction is consummated on or
before December 31, 1996 and 0.50% of aggregate consideration if consummated
after December 31, 1996, in either case, less any fees paid or payable
pursuant to subparagraph (a), (b) or (c) above and (e) below;
(e) in the event no transaction of the type described in subparagraphs
(b) or (d) is consummated on or before January 1, 1997, a financial advisory
fee in cash of $375,000 on January 1, 1997, and an additional $375,000 on each
subsequent April 1, 1997, July 1, 1997, October 1, 1997, and January 1, 1998;
and
(f) in the event that any party initiates a solicitation of the
Company's shareholders, by way of solicitation of proxies, written consents,
the initiation of a tender offer, exchange offer or otherwise, and a
transaction is consummated either with a party other than ROC or is
consummated after December 31, 1996 then the fees payable in subparagraphs (b)
and (d) above will be 0.70% of aggregate consideration.
The Company has also agreed to reimburse Goldman Sachs
periodically for its reasonable out-of-pocket expenses, including the fees and
disbursements of its attorneys, plus any sales, use or similar taxes arising
in connection with any matter referred to in the letter agreement. In
addition, the Company has agreed to indemnify Goldman Sachs against certain
liabilities, including liabilities under the federal securities laws.
The Company also has retained Kekst & Company as public
relations advisor and D.F. King & Co., Inc. to assist in shareholder and
related services in connection with the MHC Offer. The Company will pay
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Kekst & Company and D.F. King & Co., Inc. reasonable and customary fees for
their services, reimburse them for their reasonable expenses and provide
customary indemnification.
Except as described above, neither the Company nor any person
acting on its behalf has retained any other person to make solicitations or
recommendations to security holders on its behalf concerning the MHC Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO
SECURITIES.
(a) There have been no transactions in the Shares during the
past 60 days by the Company or, to the best of the Company's knowledge, by any
executive officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, none of its
executive officers, directors, affiliates or subsidiaries currently intends to
tender, pursuant to the MHC Offer, any Shares beneficially owned by such
persons or to sell any such Shares.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE
SUBJECT COMPANY.
(a) - (b) For the reasons discussed in Item 4 above, the Board
of Directors of the Company has concluded that the MHC Offer is inadequate and
not in the best interests of the Company and its shareholders and that the
interests of the Company's shareholders will be best served by the Company
consummating the ROC Merger. Except with respect to the ROC Merger, the OP
Unit Exchange, the Stock Dividend and the Share Repurchase Program, the
Company is not now engaged in any negotiations in response to the MHC Offer
that relate to or could result in one or more of the following or a
combination thereof: (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any of its subsidiaries; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or
any of its subsidiaries (other than the previously announced Oakwood
acquisition); (iii) a tender offer for or other acquisition of securities by
or of the Company; or (iv) any material change in the present capitalization
or dividend policy of the Company.
The Board of Directors may in the future engage in negotiations
in response to the MHC Offer that could have one of the effects specified in
the preceding paragraph and it has determined that disclosure with respect to
the parties to, and the possible terms of, any transactions or proposals of
the type referred to in the preceding paragraph might jeopardize any
discussions or negotiations that the Company may conduct. Accordingly, the
Board of Directors has adopted a resolution instructing management not to
disclose the possible terms of any such transactions or proposals, or the
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parties thereto, unless and until an agreement in principle relating thereto
has been reached or, upon the advice of counsel, as may otherwise be required
by law.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Excess Share Provisions Under the Company's Articles
Section 2 of Article VI ("Article VI") of the Company's
Articles provides that no "Person" (which is defined to include individuals,
corporations and partnerships) may Beneficially Own (as defined) Shares in
excess of the Ownership Limit (as defined in Article VI (currently 7%)). As
defined in the Company's Articles, "Beneficial Ownership" means ownership of
Shares by a Person who would be treated as an owner of such Shares under
Section 542(a)(2) of the Code, either directly or constructively through the
application of Section 544 of the Code, as modified by Section 856(h)(1)(B) of
the Code. If there is a proposed transfer that would result in any Person
Beneficially Owning Shares in excess of the Ownership Limit, then these Shares
will constitute "Excess Stock" and be subject to the provisions of the
Company's Articles applicable to Excess Stock.
Under the Company's Articles, any transfer of Shares that, if
effective, would result in any Person Beneficially Owning Shares in excess of
the Ownership Limit will be void ab initio as to the transfer of Shares that
would otherwise be Beneficially Owned by such Person in excess of the
Ownership Limit.
Upon any purported transfer of Shares that results in Excess
Stock, the Excess Stock will be deemed to have been transferred to a trustee
(the "Trustee") of a trust for the exclusive benefit of one or more
organizations described in Sections 170(b)(1)(A) and 170(C) of the Code (the
"Beneficiary") (currently the Beneficiary is the United Foundation, a
charitable organization). The intended transferee will have no rights in such
Excess Stock as described below. While the Excess Stock is held in trust, the
intended transferee will not be entitled to any dividends or other
distributions (except upon liquidation) or voting rights with respect to the
Excess Stock. Upon any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holder of Excess Stock will be entitled to the
lesser of (i) the price per Share which such intended transferee paid for such
Excess Stock and (ii) the amount per Share received by the Trustee in respect
of the Excess Stock in such liquidation, dissolution or winding up. The
Trustee may transfer shares of Excess Stock if the shares of Excess Stock
would not be Excess Stock in the hands of the transferee. If such a transfer
is made, the proceeds of the sale will be payable to the intended transferee
and the Beneficiary. The intended transferee will receive the lesser of (i)
the price per Share which the intended transferee paid for the Excess Stock
and (ii) the amount per Share received by the Trustee from the sale of such
Excess Stock. In addition, the Excess Stock is subject to purchase by the
Company at a purchase price equal to the lesser of (i) the price paid for the
Shares by the intended transferee and (ii) the last reported sales price
reported on the New York Stock Exchange on the trading day immediately
preceding the date the Company agrees to purchase such Shares.
-20-
Pursuant to Section 4 of Article VI, if the Company's Board of
Directors at any time determines in good faith that a transfer of Shares has
taken place in violation of Section 2 of Article VI or that a Person intends
to acquire or has attempted to acquire beneficial ownership (determined
without reference to any rules of attribution) or Beneficial Ownership of any
Shares in violation of Section 2 of Article VI, the Board will take such
action as it deems advisable to refuse to give effect to or prevent this
transfer including refusing to give effect to this transfer on the books of
the Company. Pursuant to Section 8 of Article VI, in the case of any ambiguity
in the application of Article VI, the Board of Directors has the power
(subject to certain exceptions relating to the effect on transactions effected
by or through the New York Stock Exchange) to conclusively determine the
application of the provisions of Article VI.
The Company's Board of Directors, upon receipt of a ruling from
the IRS and upon such other conditions as the Company's Board of Directors may
determine, may exempt a proposed transferee from the Ownership Limit. For the
reasons discussed in Item 4 above, the Board of Directors of the Company has
determined not to exempt MHC OP and/or MHC from the Ownership Limit.
Maryland Business Combination Law
Under Subtitle 6 of Title 3 of the Maryland General Corporation
Law (the "Maryland Business Combination Law"), certain "business combinations"
(including a merger, consolidation, share exchange, or, in certain
circumstances an asset transfer or issuance or reclassification of equity
securities) between a Maryland corporation and any person who beneficially
owns 10% or more of the voting power of the corporation's shares or an
affiliate of the corporation who, at any time within the two-year period prior
to the date in question, was the beneficial owner of 10% or more of the voting
power of the then outstanding voting stock of the corporation (an "Interested
Shareholder") or an affiliate thereof are prohibited for five years after the
most recent date on which the Interested Shareholder became an Interested
Shareholder. Thereafter, any "business combination" must be recommended by the
board of directors of the corporation and approved by the affirmative vote of
at least (a) 80% of the votes entitled to be cast by holders of the
outstanding voting shares of the corporation and (b) 66-2/3% of the votes
entitled to be cast by holders of outstanding voting shares of the corporation
other than shares held by the Interested Shareholder with whom the business
combination is to be effected, unless, among other conditions, the
corporation's shareholders receive a minimum price (as defined under the
Maryland Business Combination Law) for their shares and the consideration is
received in cash or in the same form as previously paid by the Interested
Shareholder for its shares. The provisions of the Maryland Business Combination
Law do not apply, however, to business combinations that are (i) with respect
to specifically identified or unidentified existing or future Interested Share-
holders, approved or exempted by the board of directors of the corporation
prior to the time that the Interested Shareholder becomes an Interested
-21-
Shareholder, or (ii) if the original articles of incorporation of the
corporation contain a provision expressly electing not to be governed by
Section 602 of the Maryland Business Combination Law or the shareholders of
the corporation adopt a charter amendment by a vote of at least 80% of the
voted entitled to be cast by outstanding shares of voting stock of the
corporation, voting together in a single group, and 66-2/3% of the votes
entitled to be cast by persons (if any) who are not Interested Shareholders.
The Board of Directors has exempted from the provisions of the Maryland
Business Combination Law, any business combination involving John Boll,
Chairman of the Board of the Company, Joseph P. Ministrelli, InterCoastal
Communities, Inc., a Florida corporation, and its affiliates and the Mass
manufactured home group, a group of Michigan partnerships affiliated with
Leonard Mass, each of which received OP Units in connection with the
contribution of properties to CP. For the reasons discussed in Item 4 above,
the Board of Directors of the Company has determined not to exempt MHC OP
and/or MHC from the Maryland Business Combination Law. The Company has
instituted litigation seeking a declaratory judgment that the Company's Board
of Directors need not exempt the MHC Offer from the Maryland Business
Combination Law (See "Litigation" below).
Litigation
On September 17, 1996, the Company filed suit in the United
States District Court for the District of Maryland against MHC OP and MHC. In
its complaint, the Company alleges that (i) the MHC Offer has been made in
violation of the federal securities laws because it contains untrue statements
of material fact and omits to state material facts and (ii) MHC has begun a
proxy solicitation in opposition to the ROC Merger and has made material
misstatements of facts and omitted to disclose other material facts as part of
that solicitation effort in violation of applicable federal law, and seeks
injunctive relief and monetary damages in respect thereof. In addition, the
complaint seeks a declaratory judgment that (i) the purchase of Shares
pursuant to the MHC Offer would violate Article VI, (ii) the second step
merger proposed in the MHC Offer would be subject to the restrictions
contained in the Maryland Business Combination Law, and (iii) the Company's
Board of Directors is not required to exempt the purchase of Shares pursuant
to the MHC Offer from the Ownership Limit or from the Maryland Business
Combination Law. A copy of the complaint is attached as Exhibit 99.7.
On September 12, 1996, a complaint was filed in the Circuit
Court for Montgomery County, Maryland by a shareholder of the Company
purportedly on behalf of itself and all other shareholders against the Company
and its directors. The complaint alleges, among other things, that the
Company's directors have violated their fiduciary duties to shareholders by
agreeing to a business combination with ROC and refusing to endorse the MHC
Offer and seeks, among other things, injunctive relief and unspecified
monetary damages. The Company believes the allegations are entirely lacking in
merit and intends to vigorously defend against this action.
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ITEM 9. MATERIALS TO BE FILED AS EXHIBITS.
Exhibit 99.1 Letter to Shareholders of the Company dated
September 17, 1996*
Exhibit 99.2 Text of Press Release dated September 17, 1996 issued by
the Company (See Item 4(a))
Exhibit 99.3 Pages 4-12 of the Notice of Annual Meeting of
Shareholders and Proxy Statement dated April 10, 1996
Exhibit 99.4 Employment Agreement, dated October 27, 1993, between
the Company and C. G. Kellogg, as amended**
Exhibit 99.5 Form of Severance Agreement
Exhibit 99.6 Amended and Restated Merger Agreement dated September
17, 1996 among the Company, R Acquisition Sub, Inc. and
ROC**
Exhibit 99.7 Complaint in Chateau Properties, Inc. v. Manufactured
Home Communities, Inc. and MHC Operating Limited
Partnership
- --------------------------------
* Included in copies mailed to shareholders
** To be filed by amendment
-23-
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
By: /s/ C. G. Kellogg
-----------------------
Name: C. G. Kellogg
Title: President and Chief Executive Officer
Dated: September 17, 1996
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Annex A
PERSONAL AND CONFIDENTIAL
September 17, 1996
Board of Directors
Chateau Properties, Inc.
19500 Hall Road
Clinton Township, MI 48038
Gentlemen:
You have requested our opinion as to the fairness to Chateau Properties,
Inc. (the "Company") of the Exchange Ratio (as hereafter defined) pursuant
to the Amended and Restated Agreement and Plan of Merger dated as of Septem-
ber 17, 1996 (the "Restated Agreement"), among the Company, ROC Communities,
Inc.("ROC") and R Acquisition Sub, Inc. ("R Sub"), a wholly-owned
subsidiary of the Company. Pursuant to the Restated Agreement, ROC will be
merged with R Sub (the "Merger") and each outstanding share of common
stock, par value $0.01 per share, of ROC (the "ROC Shares") will be
converted into the right to receive 1.042 shares of common stock, par value
$0.01 per share, of the Company (such shares are herein referred to as the
"Shares" and such exchange ratio is herein referred to as the "Exchange
Ratio"). The Restated Agreement permits the Company to declare a special
3.16% stock dividend to holders of Shares of record on any date on or prior
to the record date for the meeting of holders of Shares to approve the
issuance of Shares pursuant to the Merger, and we have assumed for purposes
of rendering our opinion, with your consent, that such special dividend
will, in fact, be declared and paid and that no shares of capital stock of
ROC will be issued in a cash transaction as permitted by section 4.1(b)(iv)
of the Restated Agreement.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and
other purposes. We are familiar with the Company having acted as its
financial advisor in connection with, and having participated in certain
negotiations leading to, the Restated Agreement.
In connection with this opinion, we have reviewed, among other things, the
Restated Agreement; Annual Reports to Stockholders and Annual Reports on
Form 10-K for the three years ended December 31, 1995 of the Company and
ROC, certain interim reports to stockholders and Quarterly Reports on Form
10-Q of the Company and ROC, certain other communications from the Company
and ROC to their respective stockholders and certain internal financial
analyses and forecasts for the Company and ROC prepared by the respective
managements of the Company and ROC, including analyses and forecasts of
certain cost synergies and revenue enhancements expected to be achieved as a
result of the Merger jointly prepared by the managements of the Company and
ROC. We also have held discussions with members of the senior management of
the Company and ROC regarding the past and current business operations,
financial condition and future prospects of their respective companies,
including the future prospects of the combined company after the Merger. In
addition, we have reviewed the reported price and trading activity for the
Shares and ROC Shares, compared certain financial and stock market information
for the Company and ROC with similar information for certain other companies
the securities of which are publicly traded, reviewed the financial terms of
certain recent business combinations among real estate investment trusts, and
performed such other studies and analyses as we considered appropriate.
We have relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by us
for purposes of this opinion. In that regard, we have assumed, with your
consent, that the forecasts referred to in the preceding paragraph have
been reasonably prepared on a basis reflecting the best currently available
judgments and estimates of the managements of the Company and ROC, as the
case may be, and that such forecasts will be realized in the amounts and at
the times contemplated thereby. Also in that regard, you have instructed us
to assume, and we have assumed, that the tax effects to the Company and the
holders of Shares, if any, resulting from the transactions contemplated by
the Restated Agreement are immaterial. In addition, we have not made an
independent evaluation or appraisal of the assets and liabilities of the
Company or ROC or any of their respective subsidiaries, and we have not
been furnished with any such evaluation or appraisal. Our opinion does not
address the relative merits of the Merger as compared to any alternative
business transactions that might be available to the Company. Our advisory
services and the opinion expressed herein are provided for the information
and assistance of the Board of Directors of the Company in connection with
its consideration of the transactions contemplated by the Restated
Agreement and does not constitute a recommendation to any stockholder as to
how such stockholder should vote on the issuance of Shares pursuant to the
proposed Merger.
Based upon and subject to the foregoing and based upon such other matters as
we consider relevant, it is our opinion that as of the date hereof the
Exchange Ratio pursuant to the Restated Agreement is fair to the Company.
Very truly yours,
GOLDMAN, SACHS & CO.
Annex B
[ Letterhead of Merrill Lynch ]
Investment Banking
Corporate and Institutional
Client Group
World Financial Center
North Tower
New York, New York 10281-1330
[ Merrill Lynch Logotype ]
September 17, 1996
Board of Directors
Chateau Properties, Inc.
19500 Hall Road
Clinton Township, MI 48038
Gentlemen:
We understand that Chateau Properties, Inc. (the "Company"), ROC
Communities, Inc. (the "Partner") and R Acquisition Sub, Inc., a wholly
owned subsidiary of the Company (the "ROC Purchaser"), propose to amend and
restate the agreement and plan of merger (the "Original Agreement") among
the Company, the Partner, the ROC Purchaser and a company formed by the
Company and the Partner originally entered into on July 17, 1996 (as so
amended and restated, the "Restated Agreement"). Pursuant to the Restated
Agreement, the Partner will be merged with and into the ROC Purchaser in a
transaction (the "Merger") in which each share of the Partner's common
stock, par value $0.01 per share (the "Partner Shares") will be converted
into the right to receive 1.042 shares of the Company's common stock, par
value $.01 per share (the "Shares"). We further understand that the
Restated Agreement provides that the Company may, and for purposes of
preparing our opinion below we have assumed with your consent that the
Company will, declare a special 3.16% common stock dividend payable in
Shares to shareholders of record on any date on or prior to the record
date established for the meeting of the Company's shareholders to approve
the issuance of the Shares pursuant to the Merger, which dividend shall be
payable subject to approval of the issuance of the Shares pursuant to the
Merger by the Company's shareholders. We have also assumed with your
consent that no shares of capital stock of the Partner will be issued
in a cash transaction as permitted by section 4.1(b)(iv) of the Restated
Agreement. The issuance of the Shares pursuant to the Merger and the
Merger are subject to the approval of the Company's and the Partner's
shareholders, respectively.
You have asked us whether, in our opinion, the proposed consideration
to be paid by the Company in the Merger is fair to the Company and its
shareholders from a financial point of view. We understand you have made
this request after having received letters from Sun Communities, Inc.
("Sun") proposing a merger in which each Share would be exchanged for 0.892
shares of Sun common stock and letters from Manufactured Home Communities,
Inc. ("MHC") proposing a merger in which each outstanding Share would be
exchanged for $26.00 in cash or, in the alternative, 1.15 shares of MHC
common stock, or some combination of the foregoing. As you are also aware,
an affiliate of MHC commenced a tender offer on September 4, 1996 for all
outstanding Shares at a price of $26.00 in cash.
In arriving at the opinion set forth below, we have, among other
things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December
31, 1995 and the Company's Forms 10-Q and the related unaudited
financial information for the quarterly periods ending March 31,
1996 and June 30, 1996;
(2) Reviewed the Partner's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December
31, 1995 and the Partner's Forms 10-Q and the related unaudited
financial information for the quarterly periods ending March 31,
1996 and June 30, 1996;
(3) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets and
prospects of the Company and the Partner, furnished to us by the
Company and the Partner, respectively;
(4) Conducted discussions with members of senior management of the
Company and the Partner concerning their respective businesses
and prospects;
(5) Reviewed the historical market prices and trading activity for
the Shares and the Partner Shares and compared them with that of
certain publicly traded companies which we deemed to be
reasonably similar to the Company and the Partner, respectively;
(6) Compared the results of operations of the Company and the Partner
with that of certain companies which we deemed to be reasonably
similar to the Company and the Partner, respectively;
(7) Reviewed a draft of the Restated Agreement dated September 17,
1996; and
(8) Reviewed such other financial studies and analyses and performed
such other investigations and took into account such other
matters as we deemed necessary.
In preparing our opinion, we have relied on the accuracy and
completeness of all information supplied or otherwise made available to us
by the Company and the Partner, and we have not independently verified such
information or undertaken an independent appraisal or evaluation of the
assets or liabilities of the Company or the Partner. With respect to the
financial forecasts furnished by the Company and the Partner, we have
assumed that they have been reasonably prepared and reflect the best
currently available estimates and judgment of the Company's or the
Partner's management as to the expected future financial performance of the
Company or the Partner, as the case may be.
While we reviewed the financial terms of certain transactions
involving the purchase and sale of residential properties, we did not
identify any mergers or acquisitions that we deemed to be relevant for the
purpose of our analysis and, accordingly, did not undertake any analysis
comparing the financial terms of the Merger with other mergers or
acquisitions.
In connection with the Merger, we have not been authorized to, and did
not, solicit indications of interest from third parties to purchase the
outstanding Shares or otherwise enter into a business combination with the
Company. Our opinion expressed herein as to the fairness to the Company and
its shareholders from a financial point of view of the consideration to be
paid by the Company in the Merger addresses the ownership position in the
combined company to be received by the Company's shareholders pursuant to
the Merger on the terms set forth in the Restated Agreement based upon the
relative contributions of the Company and the Partner to the combined
company and we express no opinion as to prices at which the Shares will
trade following the consummation of the Merger or prices which could be
obtained for the Shares in a sale of the Company following the consummation
of the Merger. In addition, our opinion does not address the relative
merits of the Merger and alternative business combinations with third
parties, including Sun or MHC.
This opinion is addressed to the Board of Directors of the Company and
does not constitute a recommendation to any shareholder as to how such
shareholder should vote on the issuance of Shares pursuant to the proposed
Merger.
We have, in the past, provided financial advisory and financing
services to the Company and have received fees for the rendering of such
services. In the ordinary course of our business, we may actively trade in
the Shares and the Partner Shares for our own account and for the account
of our customers and, accordingly, may at any time hold a long or short
position in such securities.
On the basis of, and subject to the foregoing, we are of the opinion
that the proposed consideration to be paid by the Company in the Merger is
fair to the Company and its shareholders (other than the Partner and its
affiliates) from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
EXHIBIT INDEX
Exhibit 99.1 Letter to Shareholders of the Company dated
September 17, 1996*
Exhibit 99.2 Text of Press Release dated September 17, 1996 issued by
the Company (See Item 4(a))
Exhibit 99.3 Pages 4-12 of the Notice of Annual Meeting of
Shareholders and Proxy Statement dated April 10, 1996
Exhibit 99.4 Employment Agreement, dated October 27, 1993, between
the Company and C. G. Kellogg, as amended**
Exhibit 99.5 Form of Severance Agreement
Exhibit 99.6 Amended and Restated Merger Agreement dated September
17, 1996 among the Company, R Acquisition Sub, Inc. and
ROC**
Exhibit 99.7 Complaint in Chateau Properties, Inc. v. Manufactured
Home Communities, Inc. and MHC Operating Limited
Partnership
- --------------------------------
* Included in copies mailed to shareholders
** To be filed by amendment
-25-
Exhibit 99.1
[COMPANY LOGO]
September 17, 1996
Dear Stockholders:
After careful consideration and extensive consultation with its
independent financial and legal advisors, Chateau's Board of Directors has
unanimously voted to approve a revised merger agreement with ROC
Communities, Inc. under an improved exchange ratio and to reject the
unsolicited tender offer by MHC Operating Limited Partnership.
The effect of the revised merger agreement is that each outstanding
share of Chateau common stock will represent 1.0316 shares of the combined
entity, rather than one share as contemplated under the original agreement.
This improvement in the exchange ratio results from a payment by Chateau of a
stock and OP Unit dividend equal to 3.16% of the outstanding Chateau common
stock and units prior to the effective date of the merger, but contingent upon
the merger having been approved by a majority of Chateau stockholders. A
further economic benefit may be realized if OP Unitholders elect to exchange
into common stock. Assuming that 70% of the OP Units were exchanged, for
example, the effective exchange ratio for Chateau stockholders would be
approximately 1.06. The exchange ratio for ROC stockholders remains unchanged
at 1.042.
In connection with the ROC merger, the Board also unanimously approved
a number of new initiatives designed to provide a balanced package of
long-term and short-term value that responds to stockholders with different
investment objectives and more accurately reflects the Company's worth.
These initiatives include:
o A program to repurchase, either through open market purchases,
negotiated purchases, or a tender offer, up to 1.45 million of the
approximately 6.1 million shares of the Company's common stock
currently outstanding.
o In addition, ROC has indicated its intent to purchase, from time to
time, up to 350,000 shares of Chateau common stock prior to the
merger and Chateau has waived the restrictions of its standstill
agreement with ROC with respect to these purchases.
o An opportunity for each holder of limited partnership interests
(OP Units) in the Company's operating partnership, CP Limited
Partnership, to exercise their existing right to exchange, on a tax-
efficient basis, their OP Units for one share of the Company's
common stock to be effected prior to the merger. In recognition of
this opportunity to exchange on a tax-efficient basis, each OP
Unitholder will be required to waive its right to the OP Unit
dividend, thus reallocating such dividend to the existing Chateau
common stockholders. Certain holders have indicated their intention
to exchange up to approximately 6 million OP Units into Chateau
common stock, which as described above will have the effect of
transferring the benefit of their OP Unit dividend to Chateau
common stockholders. If 70% of the approximately 8.8 million
outstanding OP Units were exchanged, the effective exchange ratio
to Chateau common stockholders would be increased to approximately
1.06. In connection with the exchange, exchanging OP Unitholders
will be given the opportunity to purchase common stock from Chateau
and/or ROC at fair market value.
Importantly, the share repurchase program will provide immediate
liquidity to those holders who wish to sell some or all of their shares, while
enabling continuing holders to benefit from the ongoing growth of the Company
after the ROC merger.
In reaching its decision, the Board determined that the revised
merger agreement with ROC offers attractive financial and operational benefits
and represents the best alternative for Chateau stockholders.
We believe that the merger with ROC Communities will significantly
increase the geographic diversity of the properties owned by the Company and
reduce exposure to fluctuation in local economic cycles.
In connection with its decision to proceed with the revised ROC
merger, the Company's Board of Directors, after consultation with its
financial advisors, Goldman Sachs and Merrill Lynch, rejected the MHC offer as
inadequate and reaffirmed its intent to pursue a strategic merger that enables
stockholders to continue to benefit from an equity participation in the
combined enterprise.
The Company's directors and officers do not intend to sell any shares
in connection with the repurchase program or to tender into the MHC offer.
YOUR BOARD OF DIRECTORS STRONGLY RECOMMENDS THAT STOCKHOLDERS NOT TENDER THEIR
SHARES INTO THE MHC TENDER OFFER.
Additionally, in reaching its determination to proceed with the ROC
merger, the Board of Directors also carefully considered, with the assistance
of its legal and financial advisors, the offer of Sun Communities, Inc. The
Board determined that the long-term benefits of a combination with ROC were
superior to a combination with Sun. This conclusion was based on several
factors, including a judgment concerning Sun's property portfolio, the nature
and compatibility of the combined management teams and the acquisition
practices of the two companies.
We believe the steps we are announcing today, combined with the
continued implementation of our long-term strategic plan, will best protect
and enhance value for our stockholders and serve the interests of all of our
constituencies.
The enclosed Schedule 14D-9 describes your Board's decision to reject
the MHC offer and contains other important information relating to its
decision. We urge you to read it carefully.
Your Board of Directors and I greatly appreciate your continued
support and encouragement.
Sincerely,
John A. Boll
Chairman of the Board
Exhibit 99.3
CLASS II. DIRECTORS
Edward R. Allen 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. Mr. Allen is a graduate of Cornell University.
C.G. "Jeff" Kellogg has been President and Chief Executive Officer and a
Director of the Company since its incorporation. For the five years preceding
the formation of the Company, Mr. Kellogg was President and Chief Operating
Officer of Chateau Estates. He is a past President of the Michigan Manufactured
Housing Association and served on the Manufactured Housing Institute's Community
Operations Committee. Mr. Kellogg is a graduate of Michigan Technological
University with a B. S. degree in Civil Engineering.
BOARD MEETINGS
The Board of Directors held five meetings during fiscal 1995.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee. The Audit Committee of the Board of Directors, consisting of
Messrs. Lane, Myers and Rudolph, held two meetings during fiscal 1995. 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.
Executive Committee. The Executive Committee of the Board of Directors,
consisting of Messrs. Boll and Kellogg, which may act on certain matters between
board meetings, held two meetings during fiscal 1995.
Executive Compensation Committee. The Executive Compensation Committee of the
Board of Directors, consisting of Messrs. Anton, Lane and Allen, held five
meetings during fiscal 1995. The Executive Compensation Committee administers
the Company's 1993 Long-Term Incentive Stock Plan, as amended. See "Compensation
Committee Report on Executive Compensation".
The Board of Directors has not established a separate committee of its
members to nominate candidates for election as directors of the Company.
DIRECTOR COMPENSATION
Each director is reimbursed for travel and other expenses related to
attendance at Board and committee meetings and, other than Mr. Kellogg who is an
officer of the Company, receives an annual director's fee of $12,000. Beginning
in 1996, the annual director's fee will be $14,000, plus a fee of $500 for each
Audit Committee and Executive Compensation Committee meeting attended, up to two
meetings per year. The directors also receive an annual grant of 5,000 options
to purchase the Company's Common Stock. On May 18, 1995 each of the Directors of
the Company, other than Mr. Kellogg, received an option on 5,000 shares of
common stock at an exercise price of $21.63 per share. On August 23, 1995 Mr.
Rudolph received an option on 5,000 shares of common stock at an exercise price
of $21.75 per share. Mr. Rudolph was elected to the Board after the other
members of the Board had received an option on 5,000 shares at an exercise price
of $20.00 per share. The options expire after 10 years and become exercisable at
a rate of 25 percent per year.
4
EXECUTIVE COMPENSATION
The following table sets forth the summary compensation for the period
since the Company's public offering for the Chief Executive Officer and the
other Executive Officers of the Company whose salary and bonus compensation for
the year ended December 31, 1995 exceeded $100,000:
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION ------------
NAME AND PRINCIPAL ------------------- STOCK ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS COMPENSATION
- ---------------------------------------- ---- -------- -------- ------------ ------------
C.G. Kellogg............................ 1995 $164,712 $160,000 90,000(1) $12,760(2)
President and Chief Executive Officer 1994 $147,135 $120,000 -- $18,499(2)
1993(3) $ 16,733 -- 36,000 $31,920(4)
Tamara D. Fischer....................... 1995 $109,887 $ 62,000 45,000(1) $12,760(2)
Executive Vice President, Treasurer & 1994 $ 99,987 $ 60,000 -- $12,619(2)
Chief Financial Officer 1993(3) $ 10,600 -- 24,000 $15,040(4)
Lori A. Palazzolo....................... 1995 $ 87,864 $ 17,000 15,000(1) $ 6,673(2)
Vice President Controller(5) 1994 -- -- -- --
1993 -- -- -- --
Darrel D. Swain......................... 1995 $ 74,907 $ 29,000 20,000(1) $ 7,741(2)
Regional Vice President 1994 $ 67,593 $ 25,000 -- $ 8,542(2)
1993(3) $ 10,448 -- 12,000 $10,989(4)
Michael V. Campbell..................... 1995 $112,335 -- 24,000 --
Executive Vice President -- Florida 1994 $128,184 $ 30,000 -- --
Operations(6) 1993(3) $ 14,576 18,000 $15,040(4)
- ---------------------
(1) On February 28, 1996, options on 45,000, 23,000, 10,000 and 10,000
additional shares were granted to Mr. Kellogg, Ms. Fischer, Ms. Palazzolo
and Mr. Swain, respectively, as part of their 1995 compensation review.
(2) Amount represents a contribution under the Company's 401(K)/Profit Sharing
Plan.
(3) Represents salary paid during the partial year following the Company's
public offering. No bonuses with respect to 1993 were paid.
(4) Amount represents a contribution of $2,200 and $949 under the Company's
profit sharing plan with respect to Mr. Kellogg and Mr. Swain, respectively,
and $29,720, $15,040, $10,040 and $15,040 for Mr. Kellogg, Ms. Fischer, Mr.
Swain and Mr. Campbell, respectively, in value of limited partnership
interests allocated to these officers by persons forming the Company.
(5) Ms. Palazzolo commenced employment with the Company during 1994 and was
elected Vice President -- Controller of the Company in May 1995.
(6) Mr. Campbell resigned from the Company effective September 29, 1995.
5
OPTION/SAR GRANTS DURING 1995
The following table sets forth information with respect to options granted
during 1995 to the Executive Officers named in the Summary Compensation Table.
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR OPTION
INDIVIDUAL GRANTS TERM
- ----------------------------------------------------------------------------------- -----------------------
(A) (B) (C) (D) (E) (F) (G)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION
NAME GRANTED (#) 1995 ($/SH) DATE 5% ($) 10% ($)
- --------------------------- ------------ ------------ ----------- ---------- ---------- ----------
C.G. Kellogg............... 90,000 32% $ 19.50 02/23/05 $1,103,706 $2,797,018
Tamara D. Fischer.......... 45,000 16% $ 19.50 02/23/05 $ 551,853 $1,398,509
Lori A. Palazzolo.......... 15,000 5% $ 19.50 02/23/05 $ 183,951 $ 466,170
Darrel D. Swain............ 20,000 7% $ 19.50 02/23/05 $ 245,268 $ 621,560
Michael V. Campbell(1)..... 24,000 8% $ 19.50 02/23/05 (1) (1)
- ---------------------
(1) Mr. Campbell resigned from the Company effective September 29, 1995. In
connection with Mr. Campbell's resignation from the Company, these options
were forfeited.
AGGREGATED OPTION/SAR EXERCISES DURING 1995
AND OPTION/SAR VALUES AT DECEMBER 31, 1995
The following table provides information with respect to the option
exercises during 1995 and the unexercised options held as of December 31, 1995
by the Executive Officers named in the Summary Compensation Table.
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY OPTIONS/
DECEMBER 31, 1995 SARS AT DECEMBER 31, 1995
SHARES ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------- --------------- -------- ----------- ------------- ----------- -------------
C.G. Kellogg............. -- -- 18,000 108,000 $45,000 $ 315,000
Tamara D. Fischer........ -- -- 12,000 57,000 $30,000 $ 165,000
Lori A. Palazzolo........ -- -- -- 15,000 -- $ 45,000
Darrel D. Swain.......... -- -- 6,000 26,000 $15,000 $ 75,000
Michael V. Campbell(1)... 4,500 $9,000 -- -- -- --
- ---------------------
(1) Mr. Campbell resigned from the Company effective September 29, 1995. In
connection with Mr. Campbell's resignation from the Company, his unexercised
options were forfeited.
Indebtedness of Management. The following table sets forth the Executive
Officers of the Company to whom loans in excess of $60,000 were made for
purchase of shares of the common stock of the Company, which 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%, 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,
6
or November 16, 2003. These notes are recourse to the respective officers and
collateralized by a pledge of the shares of common stock purchased.
NUMBER HIGHEST LOAN
OF SHARES BALANCE BALANCE AT
NAME PURCHASED DURING 1995 MARCH 31, 1996
- ---------------------------------------------------------- --------- ------------ --------------
C.G. Kellogg.............................................. 13,750 $273,134 $267,575
President and Chief Executive Officer
Tamara D. Fischer......................................... 6,875 $136,452 $133,841
Executive Vice President, Treasurer and CFO
Darrel D. Swain........................................... 4,500 $ 89,449 $ 87,733
Regional Vice President
Raymond R. Seigneurie..................................... 4,500 $ 89,449 $ 87,733
Regional Vice President
Michael V. Campbell....................................... 6,875 $136,674 --(1)
Executive Vice President -- Florida Operations
- ---------------------
(1) Mr. Campbell paid the entire balance of his loan in 1995 following his
resignation.
Employment and Consulting Agreements. Mr. Kellogg has an employment
agreement with the Company pursuant to which he serves as President and Chief
Executive Officer. The initial term of the agreement extends until November 30,
1996 and is automatically extended thereafter on a year to year basis (unless
notice of non-renewal is given by either the Company or Mr. Kellogg), subject to
termination by the Board of Directors for cause as defined in the agreement.
Mr. Newman, Executive Vice President -- North Central Operations,
beneficially owns approximately sixty percent of the shares in Newman, Herfurth
and Durand, Inc., which has a Consulting Agreement with the Company until
November 1997 pursuant to which it will be paid approximately $234,000 per year
in consulting fees for 1996 and thereafter may earn up to 120,000 OP units
depending on how many additional sites the Company acquires during the term in a
specific area of responsibility. This Consulting Agreement was entered into at
the time of the Company's acquisition of seven communities from partnerships of
which Mr. Newman was a general partner. During 1995 the Company paid
approximately $310,000 in consulting fees to Newman, Herfurth and Durand, Inc.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Executive Compensation Committee was formed in February 1995 by
broadening the responsibilities of the existing Incentive Stock Committee, which
is comprised of directors who are not employees of the Company. The Committee
annually reviews and approves recommendations from senior management and makes
recommendations to the Board of Directors, other than with respect to the
Company's Incentive Stock Plan (which the Committee administers directly),
regarding the policies and procedures that govern the various compensation
programs for the CEO and executives of the Company. It is the philosophy of the
Committee that the executive compensation program should align the financial
interests of the Company's executives with the long term interests of the
Company and its shareholders. 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 the
individual and Company's financial performance and equity participation through
stock options.
7
Although the Company does not believe compensation of any Executive Officer
will exceed $1,000,000 in any year, should it appear likely that this
compensation amount would be exceeded, the Company would seek shareholder
approval and/or a restructuring of the compensation in order to preserve the
deductibility of this compensation under new provisions of Internal Revenue Code
Section 162(m).
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 will also
take 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 industry. Salaries
normally are increased annually, based on market conditions and individual and
company performance factors. Salaries of the Executive Officers were increased
on January 1, 1996.
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 the individual and Company's overall performance. Eligible
executives were those determined to have a material effect on the Company's
performance. The bonus program has been designed so that an executive's share of
the bonus pool will be 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
executives' 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 1995
reflected in the Cash Compensation Table were awarded on February 28, 1996.
STOCK OPTIONS
Under the Company's Long-Term Incentive Stock Plan, the Committee may grant
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 received grants in December 1993, February 1995 and February
1996. No grants were made in 1994 to executive officers. The 1995 and 1996
option grants were awarded as part of the annual compensation review for 1994
and 1995, respectively. 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 CHIEF EXECUTIVE OFFICER'S 1995 COMPENSATION
The Committee's approach to Mr. Kellogg's compensation is consistent with
the Committee's approach to all other executive officers. Mr. Kellogg receives a
base salary based upon his responsibilities and experience and which the
Committee believes is somewhat lower than the base salaries of other chief
executive officers at similar companies based on a survey performed for the
Committee by an independent compensation consultant. Accordingly, the Committee
increased Mr. Kellogg's base salary by approximately 10 percent in 1995 in an
effort to bridge the gap between Mr. Kellogg's base salary and the average base
8
salary for CEO's in comparable companies in the industry. Mr. Kellogg is
eligible for the Company's 1996 bonus and stock option programs. Mr. Kellogg's
bonus is primarily tied to per share growth in the Company's funds from
operations. He is eligible to receive a bonus of up to 80 percent of the
average base salary for his position, as described above. Mr. Kellogg's 1995
bonus was paid in 1996. Given the Company's strong financial performance and
its accomplishments in 1995, the Committee believes the compensation package
for Mr. Kellogg is appropriate and consistent with pay practices in the
industry.
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.
CHATEAU PROPERTIES, INC. EXECUTIVE COMPENSATION COMMITTEE
James M. Lane
Gebran S. Anton, Jr.
Edward R. Allen
9
PERFORMANCE GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
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, 1995. The NAREIT Equity REIT Total
Return Index included 178 companies with a total market capitalization of $49.9
billion. The graph assumes that a shareholder invested $100 on November 16, 1993
in the Company Common Stock, the S&P Stock Index and the NAREIT Equity REIT
Total Return Index, and reinvestment of dividends.
Measurement Period NAREIT EQUITY
(Fiscal Year Covered) Chateau S&P 500 Index
Nov. 16, 1993 100.00 100.00 100.00
Dec. 31, 1993 109.38 99.94 99.83
Dec. 31, 1994 117.34 101.56 103.00
Dec. 31, 1995 129.73 140.31 118.72
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.
Chateau
Measurement Period Properties, NAREIT EQUITY
(Fiscal Year Covered) Inc. S&P 500 Index
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
10
HOLDERS OF COMMON STOCK
The following table sets forth certain information, with respect to the
beneficial ownership of shares of the Company's Common Stock as of March 31,
1996 by each person or entity known to the Company to be the beneficial owner of
more than 5% of the Common Stock. See the information presented in the table
under the heading "Election of Directors" with respect to the beneficial
ownership of shares by the Company's Directors and Executive Officers.
PERCENTAGE OF
OUTSTANDING
NAME AND ADDRESS NUMBER OF SHARES COMMON STOCK
OF BENEFICIAL OWNERS BENEFICIALLY OWNED AT MARCH 31, 1996
- ------------------------------------------------------------ ------------------ -----------------
John A. Boll................................................ 1,027,018(1) 14.42%
19500 Hall Road
Clinton Township, MI 48038
Edward R. Allen............................................. 766,076(2) 11.16%
1760 S.E. 10th Street
Fort Lauderdale, FL 33316
J. Peter Ministrelli........................................ 490,846(1) 7.45%
50445 Mountain Shadow Road
LaQuinta, CA 92253
Richard O. Kearns........................................... 759,826(2) 11.08%
2540 Del Lago Drive
Fort Lauderdale, FL 33316
LaSalle Advisors Limited Partnership ("LaSalle")............ 662,742(3) 10.87%
ABKB/LaSalle Securities Limited Partnership
("ABKB LaSalle")
11 S. LaSalle Street
Chicago, IL 60603
- ---------------------
(1) 1,019,958 of Mr. Boll's shares of Common Stock and all of Mr. Ministrelli's
shares of Common Stock shown as beneficially owned are OP Units which became
exchangeable for shares of Common Stock on December 1, 1994. Not included in
this number for Mr. Boll are 2,358,948 OP Units and for Mr. Ministrelli
1,870,073 OP Units ("Non-exchangeable OP Units") which are beneficially
owned by Messrs. Boll and Ministrelli respectively, but which will become
exchangeable for shares of Common Stock of Chateau only upon the receipt by
Chateau of a favorable ruling by the Internal Revenue Service that such
right to exchange will not affect Chateau's REIT election. Chateau requested
such a ruling on June 17, 1994. Upon receipt of a favorable ruling from the
Internal Revenue Service, the Non-Exchangeable OP Units will only be
exchangeable pursuant to a formula which would not allow the deemed
ownership percentage of Mr. Boll and Mr. Ministrelli in Chateau to increase
beyond the present level. Also included as shares of Common Stock
beneficially owned by Mr. Boll are 6,250 shares pursuant to options which
are currently exercisable or which become exercisable in the next sixty
days. These shares, although not outstanding, have been treated as
outstanding for purposes of calculating the ownership percentages set forth
in the table for each of these individuals. By virtue of his significant
beneficial ownership of common stock and position as a director and chairman
of the Board, Mr. Boll may be deemed to be a controlling person of the
Company.
(2) Includes 551,047 shares beneficially owned by certain affiliates of these
stockholders by virtue of their ownership of the same number of OP Units and
deemed beneficially owned by each of Mr. Allen and
11
Mr. Kearns. All shares shown as beneficially owned by Mr. Kearns and
759,826 shares shown as beneficially owned by Mr. Allen are OP Units which
became exchangeable for shares of Common Stock on December 1, 1994. These
shares, although not outstanding, have been treated as outstanding for
purposes of calculating the ownership percentages set forth in the table
for each of these individuals. Also included as shares of common stock
beneficially owned by Mr. Allen are 6,250 shares pursuant to options which
are currently exercisable or which become exercisable in the next sixty
days.
(3) Based on the combined Form 13G, filed by LaSalle and ABKB LaSalle, LaSalle
has sole voting and investment power over 195,200 shares, shared voting
power over 86,042 shares and shared investment power over 210,542 shares.
ABKB LaSalle has sole voting and investment power over 46,500 shares,
shared voting power over 115,250 shares and shared investment power over
210,500 shares. LaSalle is the limited partner of ABKB LaSalle and the
stockholder of the general partner of ABKB LaSalle. LaSalle and ABKB
LaSalle, investment advisors, disclaim any beneficial interest in these
shares.
CERTAIN TRANSACTIONS
The Company leases its executive 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 $107,000 and $93,000 for
the years ended December 31, 1995 and December 31, 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 Chateau's independent directors prior to renewal
or extension. Although not negotiated at arms-length, Chateau believes that the
terms and conditions of the lease were substantially the same as those then
available in this market.
Certain operations conducted by predecessors of the Company have not been
conducted by the Company since the IPO but the real estate constituting these
operations has been leased to GC Properties Inc. ("GCI"), a corporation wholly
owned by Mr. Boll, in order to permit Chateau's qualification as a REIT under
the Code. Prior to the IPO, these operations were made available to the tenants
of certain of the Properties, as well as to other persons, directly by such
predecessors. These operations include the following amenities and facilities:
four golf courses and one marina (the "Sports Facilities"). Following the IPO
and the acquisitions of certain communities in 1994, the Sports Facilities were
leased in accordance with separate ground leases between GCI and the Company.
Rent to the Company under these ground leases for 1995 was approximately
$695,000. For 1995, GCI bore all costs associated with the management and
operation of the Sports Facilities.
As a result of the acquisition of seven manufactured home communities on
November 1, 1994, from certain partnerships affiliated with Mr. Graydon K.
Newman, Jr., these partnerships were indebted to the Company during 1995. The
maximum amount of such indebtedness during 1995 was approximately $168,000,
which amount was repaid in 1995. No interest was paid or charged on this
indebtedness in 1995. The Company, through the operating partnership, reacquired
and retired 43,333 OP Units at approximately $20 per unit pursuant to the terms
of certain acquisition agreements entered into in 1994 (which was the same price
at which these OP units were issued). Following this acquisition, Mr. Newman was
elected an executive officer of the Company.
SECTION 16(A) 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 report copies as
it has received from persons
12
Exhibit 99.5
[FORM OF SEVERANCE PROTECTION AGREEMENT]
THIS AGREEMENT made as of the day of September, 1996, by and between
Chateau Properties, Inc. (the "Company") and ____________ (the "Executive").
WHEREAS, the Board of Directors of the Company (the "Board")
recognizes that the possibility of a Change in Control (as hereinafter
defined) exists and that the threat or the occurrence of a Change in Control
can result in significant distractions of its key management personnel because
of the uncertainties inherent in such a situation;
WHEREAS, the Board has determined that it is essential and in the
best interest of the Company and its stockholders to retain the services of
the Executive in the event of a threat or occurrence of a Change in Control
and to ensure his continued dedication and efforts in such event without undue
concern for his personal financial and employment security; and
WHEREAS, in order to induce the Executive to remain in the employ of
the Company, particularly in the event of a threat or the occurrence of a
Change in Control, the Company desires to enter into this Agreement with the
Executive to provide the Executive with certain benefits in the event his
employment is terminated as a result of, or in connection with, a Change in
Control and to provide the Executive with certain other benefits whether or
not the Executive's employment is terminated.
NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:
1. Term of Agreement. This Agreement shall commence as of the date hereof
and shall continue in effect until December 31, 1998; provided, however, that
on December 31, 1997 and on each anniversary thereof, the term of this
Agreement shall automatically be extended for one year unless either the
Company or the Executive shall have given written notice to the other prior
thereto that the term of this Agreement shall not be so extended; and
provided, further, however, that notwithstanding any such notice by the
Company not to extend, the term of this Agreement shall not expire prior to
the expiration of 24 months after the occurrence of a Change in Control.
2. Definitions.
2.1. Accrued Compensation. For purposes of this Agreement, "Accrued
Compensation" shall mean an amount which shall include all amounts earned
or accrued through the "Termination Date" (as hereinafter defined) but not
paid as of the Termination Date including (i) base salary, (ii)
reimbursement for reasonable and necessary expenses incurred by the
Executive on behalf of the Company during the period ending on the
Termination Date, (iii) vacation and sick leave pay (to the extent provided
by Company policy or applicable law), and (iv) bonuses and incentive
compensation (other than the "Pro Rata Bonus" (as hereinafter defined)).
2.2. Base Amount. For purposes of this Agreement, "Base Amount"
shall mean the greater of (a) the Executive's annual base salary at the
rate in effect immediately prior to the Change in Control and (b) the
Executive's annual base salary at the rate in effect on the Termination
Date, and shall include all amounts of his base salary that are deferred
under the qualified and non-qualified employee benefit plans of the
Company or any other agreement or arrangement.
2.3. Bonus Amount. For purposes of this Agreement, "Bonus Amount"
shall mean the Executive's annual bonus for the fiscal year prior to which
a Change in Control has occurred.
2.4. Cause. For purposes of this Agreement, a termination of
employment is for "Cause" if the Executive has been convicted of a felony
involving moral turpitude or the termination is evidenced by a resolution
adopted in good faith by two-thirds of the Board that the Executive (a)
intentionally and continually failed substantially to perform his
reasonably assigned duties with the Company (other than a failure
resulting from the Executive's incapacity due to physical or mental
illness or from the Executive's assignment of duties that would constitute
"Good Reason" as hereinafter defined) which failure continued for a period
of at least thirty days after a written notice of demand for substantial
performance has been delivered to the Executive specifying the manner in
which the Executive has failed substantially to perform, or (b)
intentionally engaged in conduct which is demonstrably and materially
injurious to the Company; provided, however, that no termination of the
Executive's employment shall be for Cause as set forth in clause (b) above
until (x) there shall have been delivered to the Executive a copy of a
written notice setting forth that the Executive was guilty of the conduct
set forth in clause (b) and specifying the particulars thereof in detail,
and (y) the Executive shall have been provided an opportunity to be heard
in person by the Board (with the assistance of the Executive's counsel if
the Executive so desires). Neither an act nor a failure to act, on the
Executive's part shall be considered "intentional" unless the Executive
has acted or failed to act with a lack of good faith and with a lack of
reasonable belief that the Executive's action or failure to act was in the
best interest of the Company. Notwithstanding anything contained in this
Agreement to the contrary, no failure to perform by the Executive after a
Notice of Termination is given by the Executive shall constitute Cause for
purposes of this Agreement.
2.5. Change in Control. For purposes of this Agreement, a "Change
in Control" shall mean any of the following events:
2
(a) An acquisition (other than directly from the Company) of
any voting securities of the Company (the "Voting Securities") by
any "Person" (as the term person is used for purposes of Section
13(d) or 14(d) of the Securities Exchange Act of 1934, as amended
(the "1934 Act")) immediately after which such Person has
"Beneficial Ownership" (within the meaning of Rule 13d-3
promulgated under the 1934 Act) of thirty percent or more of the
combined voting power of the Company's then outstanding Voting
Securities; provided, however, that in determining whether a Change
in Control has occurred, Voting Securities which are acquired in a
"Non-Control Acquisition" (as hereinafter defined) shall not
constitute an acquisition which would cause a Change in Control. A
"Non-Control Acquisition" shall mean an acquisition by (1) an
employee benefit plan (or a trust forming a part thereof)
maintained by (x) the Company or (y) any corporation or other
Person of which a majority of its voting power or its equity
securities or equity interest is owned directly or indirectly by
the Company (a "Subsidiary"), (2) the Company or any Subsidiary, or
(3) any Person in connection with a "Non-Control Transaction."
(b) The individuals who, as of the date hereof, are members of
the Board (the "Incumbent Board"), cease for any reason to
constitute at least two-thirds of the Board; provided, however,
that if the election, or nomination for election by the Company's
stockholders, of any new director was approved by a vote of at
least two-thirds of the then Incumbent Board, such new director
shall, for purposes of this Agreement, be considered as a member of
the Incumbent Board; provided, further, however, that no individual
shall be considered a member of the Incumbent Board if such
individual initially assumed office as a result of either an actual
or threatened "Election Contest" (as described in Rule 14a-11
promulgated under the 1934 Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest or Proxy
Contest; or
(c) Approval by stockholders of the Company of:
(1) A merger, consolidation or reorganization involving
the Company, unless
(A) the stockholders of the Company, immediately
before such merger, consolidation or reorganization, own,
directly or indirectly, immediately following such
merger, consolidation or reorganization, at least seventy
percent of the combined voting power of the outstanding
Voting Securities of the corporation resulting from such
merger or consolidation or reorganization (the "Surviving
Corporation") in substantially the same proportion as
their ownership of the Voting Securities immediately
before such merger, consolidation or reorganization, and
3
(B) the individuals who were members of the
Incumbent Board immediately prior to the execution of the
agreement providing for such merger, consolidation or
reorganization constitute at least two-thirds of the
members of the board of directors of the Surviving
Corporation or a corporation beneficially owning,
directly or indirectly, a majority of the Voting
Securities of the Surviving Corporation, and
(C) no Person (other than the Company, any
Subsidiary, any employee benefit plan (or any trust
forming a part thereof) maintained by the Company, the
Surviving Corporation or any Subsidiary, or any Person
who, immediately prior to such merger, consolidation or
reorganization had Beneficial Ownership of fifteen
percent or more of the then outstanding Voting
Securities) owns, directly or indirectly, fifteen percent
or more of the combined voting power of the Surviving
Corporation's then outstanding voting securities, or
(D) an agreement with ROC Communities, Inc. is
consummated on or before March 31, 1997 or such later
date as approved by the Board of Directors, and prior to
a Change in Control; and
(E) a transaction described in clauses (A) through
(D) shall herein be referred to as a "Non-Control
Transaction";
(2) A complete liquidation or dissolution of the Company;
or
(3) An agreement for the sale or other disposition of all
or substantially all of the assets of the Company to any
Person (other than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur solely because any Person (the "Subject Person") acquired Beneficial
Ownership of more than the permitted amount of the outstanding Voting
Securities as a result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities outstanding, increases the
proportional number of shares Beneficially Owned by the Subject Person,
provided that if a Change in Control would occur (but for the operation of
this sentence) as a result of the acquisition of Voting Securities by the
Company, and after such share acquisition by the Company, the Subject Person
becomes the Beneficial Owner of any additional Voting Securities which
increases the percentage of the then outstanding Voting Securities
Beneficially Owned by the Subject Person, then a Change in Control shall
occur.
4
(d) Notwithstanding anything contained in this Agreement to
the contrary, if the Executive's employment is terminated prior to
a Change in Control and the Executive reasonably demonstrates that
such termination (i) was at the request of a third party who has
indicated an intention or taken steps reasonably calculated to
effect a Change in Control and who effectuates a Change in Control
(a "Third Party") or (ii) otherwise occurred in connection with, or
in anticipation of, a Change in Control which actually occurs, then
for all purposes of this Agreement, the date of a Change in Control
with respect to the Executive shall mean the date immediately prior
to the date of such termination of the Executive's employment.
2.6. Company. For purposes of this Agreement, the "Company" shall
include the Company's "Successors and Assigns" (as hereinafter defined).
2.7. Disability. For purposes of this Agreement, "Disability" shall
mean a physical or mental infirmity which impairs the Executive's ability
to substantially perform his duties with the Company for a period of one
hundred eighty consecutive days and the Executive has not returned to his
full time employment prior to the Termination Date as stated in the
"Notice of Termination" (as hereinafter defined).
2.8. Good Reason. (a) For purposes of this Agreement, "Good Reason"
shall mean the occurrence after a Change in Control of any of the events
or conditions described in subsections (1) through (8) hereof:
(1) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in
the Executive's reasonable judgment, represents an adverse change
from his status, title, position or responsibilities as in effect at
any time within ninety days preceding the date of a Change in
Control or at any time thereafter; the assignment to the Executive
of any duties or responsibilities which, in the Executive's
reasonable judgment, are inconsistent with his status, title,
position or responsibilities as in effect at any time within ninety
days preceding the date of a Change in Control or at any time
thereafter; or any removal of the Executive from or failure to
reappoint or reelect him to any of such offices or positions, except
in connection with the termination of his employment for Disability,
Cause, as a result of his death or by the Executive other than for
Good Reason;
(2) a reduction in the Executive's base salary or any failure
to pay the Executive any compensation or benefits to which he is
entitled within five days of notice thereof;
(3) the Company's requiring the Executive to be based at any
place outside a 30-mile radius from Clinton Township, Michigan,
except for reasonably required travel on the Company's business
which is not materially greater than such travel requirements prior
to the Change in Control;
5
(4) the failure by the Company to provide the Executive with
compensation and benefits, in the aggregate, at least equal (in
terms of benefit levels and/or reward opportunities) to those
provided for under each other employee benefit plan, program and
practice in which the Executive was participating at any time within
ninety days preceding the date of a Change in Control or at any time
thereafter;
(5) the insolvency or the filing (by any party, including the
Company) of a petition for bankruptcy of the Company, which petition
is not dismissed within sixty days;
(6) any material breach by the Company of any provision of this
Agreement;
(7) any purported termination of the Executive's employment for
Cause by the Company which does not comply with the terms of Section
2.4; or
(8) the failure of the Company to obtain an agreement,
satisfactory to the Executive, from any Successors and Assigns to
assume and agree to perform this Agreement, as contemplated in
Section 7 hereof.
(b) Any event or condition described in Section 2.8(a)(1) through
(8) which occurs prior to a Change in Control but which the Executive
reasonably demonstrates (1) was at the request of a Third Party, or
(2) otherwise arose in connection with, or in anticipation of, a
Change in Control which actually occurs, shall constitute Good Reason
for purposes of this Agreement notwithstanding that it occurred prior
to the Change in Control.
(c) The Executive's right to terminate his employment pursuant to
this Section 2.8 shall not be affected by his incapacity due to a
Disability
2.9. Notice of Termination. For purposes of this Agreement,
following a Change in Control, "Notice of Termination" shall mean a
written notice of termination from the Company of the Executive's
employment which indicates the specific termination provision in this
Agreement relied upon and which sets forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
2.10. Pro Rata Bonus. For purposes of this Agreement, "Pro Rata
Bonus" shall mean an amount equal to the Bonus Amount multiplied by a
fraction, the numerator of which is the number of days in the Company's
fiscal year in which Executive's employment terminates through the
Termination Date and the denominator of which is 365.
6
2.11. Successors and Assigns. For purposes of this Agreement,
"Successors and Assigns" shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the Company
whether by operation of law or otherwise, and any affiliate of such
Successors and Assigns.
2.12. Termination Date. For purposes of this Agreement,
"Termination Date" shall mean (a) in the case of the Executive's death,
his date of death, (b) in the case of Good Reason, the last day of his
employment, and (b) in all other cases, the date specified in the Notice
of Termination; provided, however, that if the Executive's employment is
terminated by the Company for Cause or due to Disability, the date
specified in the Notice of Termination shall be at least 30 days from the
date the Notice of Termination is given to the Executive, provided that in
the case of Disability the Executive shall not have returned to the
full-time performance of his duties during such period of at least 30
days.
3. Termination of Employment. If, during the term of this Agreement, the
Executive's employment with the Company shall be terminated within twenty-four
months following a Change in Control, the Executive shall be entitled to the
following compensation and benefits:
(a) If the Executive's employment with the Company shall be
terminated (1) by the Company for Cause or Disability, (2) by reason
of the Executive's death, or (3) by the Executive other than for Good
Reason, the Company shall pay to the Executive the Accrued
Compensation and, if such termination is other than by the Company
for Cause, the Pro Rata Bonus.
(b) If the Executive's employment with the Company shall be
terminated for any reason other than as specified in Section 3.1(a),
the Executive shall be entitled to the following:
(1) the Company shall pay the Executive all Accrued
Compensation and a Pro-Rata Bonus;
(2) the Company shall pay the Executive as severance pay and
in lieu of any further compensation for periods subsequent to the
Termination Date, in a single payment an amount in cash equal to
[one][two] times the sum of (A) the Base Amount and (B) the Bonus
Amount.
(3) for a number of months equal to [12][24] (the
"Continuation Period"), the Company shall at its expense continue
on behalf of the Executive and his dependents and beneficiaries
the medical, dental and hospitalization benefits provided (x) to
the Executive at any time during the 90-day period prior to the
7
Change in Control or at any time thereafter or (y) to other
similarly situated executives who continue in the employ of the
Company during the Continuation Period. The coverage and benefits
(including deductibles and costs) provided in this Section
3.1(b)(iii) during the Continuation Period shall be no less
favorable to the Executive and his dependents and beneficiaries,
than the most favorable of such coverages and benefits during any
of the periods referred to in clauses (x) and (y) above. The
Company's obligation hereunder with respect to the foregoing
benefits shall be limited to the extent that the Executive obtains
any such benefits pursuant to a subsequent employer's benefit
plans, in which case the Company may reduce the coverage of any
benefits it is required to provide the Executive hereunder as long
as the aggregate coverages and benefits of the combined benefit
plans is no less favorable to the Executive than the coverages and
benefits required to be provided hereunder. This subsection (iii)
shall not be interpreted so as to limit any benefits to which the
Executive, his dependents or beneficiaries may be entitled under
any of the Company's employee benefit plans, programs or practices
following the Executive's termination of employment, including
without limitation, retiree medical and life insurance benefits;
(c) The amounts provided for in Sections 3.1(a) and 3.1(b)(i),
(ii) and (iv) shall be paid in a single lump sum cash payment within
five (5) days after the Executive's Termination Date (or earlier, if
required by applicable law).
(d) The Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other
employment or otherwise and no such payment shall be offset or
reduced by the amount of any compensation or benefits provided to the
Executive in any subsequent employment except as provided in Section
3.1(b)(iii).
(e) (1) The severance pay and benefits provided for in this
Section 3 shall be reduced by the amount of any other severance or
termination pay to which the Executive may be entitled under any
agreement with the Company or any of its Affiliates.
(2) The Executive's entitlement to any other compensation or
benefits or any indemnification shall be determined in accordance
with the Company's employee benefit plans and other applicable
programs, policies and practices or any indemnification agreement
then in effect.
4. Notice of Termination. Following a Change in Control, any purported
termination of the Executive's employment by the Company shall be communicated
by Notice of Termination to the Executive. For purposes of this Agreement, no
such purported termination shall be effective without such Notice of
Termination.
8
5. Excise Tax Limitation. (a) Notwithstanding anything contained in this
Agreement to the contrary, to the extent that the payments and benefits
provided under this Agreement and benefits provided to, or for the benefit of,
the Executive under any other Company plan or agreement (such payments or
benefits are collectively referred to as the "Payments") would be subject to
the excise tax (the "Excise Tax") imposed under Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), the Payments shall be reduced
(but not below zero) if and to the extent necessary so that no Payment to be
made or benefit to be provided to the Executive shall be subject to the Excise
Tax (such reduced amount is hereinafter referred to as the "Limited Payment
Amount"). Unless the Executive shall have given prior written notice
specifying a different order to the Company to effectuate the foregoing, the
Company shall reduce or eliminate the Payments, by first reducing or
eliminating the portion of the Payments which are not payable in cash and then
by reducing or eliminating cash payments, in each case in reverse order
beginning with payments or benefits which are to be paid the farthest in time
from the Determination (as hereinafter defined). Any notice given by the
Executive pursuant to the preceding sentence shall take precedence over the
provisions of any other plan, arrangement or agreement governing the
Executive's rights and entitlements to any benefits or compensation.
(b) The determination of whether the Payments shall be
reduced to the Limited Payment Amount pursuant to this Agreement and the
amount of such Limited Payment Amount shall be made, at the Company's
expense, by an accounting firm selected by the Company from among the six
largest accounting firms in the United States (the "Accounting Firm"). The
Accounting Firm shall provide its determination (the "Determination"),
together with detailed supporting calculations and documentation to the
Company and the Executive within ten days of the Termination Date, if
applicable, or at such other time as requested by the Company or by the
Executive (provided the Executive reasonably believes that any of the
Payments may be subject to the Excise Tax) and if the Accounting Firm
determines that no Excise Tax is payable by the Executive with respect to
the Payments, it shall furnish the Executive with an opinion reasonably
acceptable to the Executive that no Excise Tax will be imposed with
respect to any such Payments. The Determination shall be binding, final
and conclusive upon the Company and the Executive.
6. Successors; Binding Agreement.
6.1. This Agreement shall be binding upon and shall inure to the
benefit of the Company, its Successors and Assigns, and the Company shall
require any Successors and Assigns to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession or
assignment had taken place.
9
6.2. Neither this Agreement nor any right or interest hereunder
shall be assignable or transferable by the Executive, his beneficiaries or
legal representatives, except by will or by the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal personal representative.
7. Fees and Expenses. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by
the Executive as they become due as a result of (a) the Executive seeking to
obtain or enforce any right or benefit provided by this Agreement (including,
but not limited to, any such fees and expenses incurred in connection with the
Dispute, and (b) the Executive's hearing before the Board as contemplated in
Section 2.4 of this Agreement; provided, however, that the circumstances set
forth in clause (a) (other than as a result of the Executive's termination of
employment under circumstances described in Section 2.5(d)) occurred on or
after a Change in Control.
8. Notice. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, by overnight courier or by facsimile, addressed to the
respective addresses and facsimile numbers last given by each party to the
other, provided that all notices to the Company shall be directed to the
attention of the Board with a copy to the Secretary of the Company. All
notices and communications shall be deemed to have been received on the date
of delivery thereof or on the third business day after the mailing thereof,
except that notice of change of address shall be effective only upon receipt.
9. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit,
bonus, incentive or other plan or program provided by the Company (except for
any severance or termination policies, plans, programs or practices) and for
which the Executive may qualify, nor shall anything herein limit or reduce
such rights as the Executive may have under any other agreements with the
Company (except for any severance or termination agreement). Amounts which are
vested benefits or which the Executive is otherwise entitled to receive under
any plan or program of the Company shall be payable in accordance with such
plan or program, except as explicitly modified by this Agreement.
10. No Guaranteed Employment. The Executive and the Company acknowledge
that, except as may otherwise be provided under any other written agreement
between the Executive and the Company, the employment of the Executive by the
Company is "at will" and may be terminated by either the Executive or the
Company at any time.
11. Settlement of Claims. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any circumstances, including, without
10
limitation, any set-off, counterclaim, recoupment, defense or other right
which the Company may have against the Executive or others.
12. Mutual Non-Disparagement. The Company, its affiliates and subsidiaries
agree and the Company shall use its best efforts to cause their respective
executive officers and directors to agree, that they will not make or publish
any statement critical of the Executive, or in any way adversely affecting or
otherwise maligning the Executive's reputation. The Executive agrees that it
will not make or publish any statement critical of the Company, its affiliates
and their respective executive officers and directors, or in any way adversely
affecting or otherwise maligning the business or reputation of any member of
the Company, its affiliates and subsidiaries and their respective officers,
directors and employees.
13. Miscellaneous. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto of, or compliance
with, any condition or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreement or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly
set forth in this Agreement.
14. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Michigan without giving
effect to the conflict of laws principles thereof. Any action brought by any
party to this Agreement shall be brought and maintained in a court of
competent jurisdiction in Macomb County in the State of Michigan.
15. Severability. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.
16. Entire Agreement/ROC Communities, Inc. This Agreement constitutes the
entire agreement between the parties hereto and supersedes all prior
agreements, if any, understandings and arrangements, oral or written, between
the parties hereto with respect to the subject matter hereof other than any
agreements with ROC Communities, Inc. If the proposed merger between the
Company and ROC Communities, Inc. takes place on or before March 31, 1997, or
such later date as approved by the Board of Directors, and prior to a Change
in Control, this Agreement shall terminate immediately.
11
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer and the Executive has executed this
Agreement as of the day and year first above written.
CHATEAU PROPERTIES, INC.
ATTEST: By: _____________________________
Name:
Title:
By: _____________________________
Executive
12
Exhibit 99.7
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
(Northern Division)
CHATEAU PROPERTIES, INC. *
32 South Street
Baltimore, Maryland 21202 *
Plaintiff, *
v. * Civil Action No. _________
MANUFACTURED HOME COMMUNITIES, INC. *
11 East Chase Street
Baltimore, Maryland 21202 *
and *
MHC OPERATING LIMITED PARTNERSHIP *
2 Riverside Plaza
Chicago, Illinois 60606 *
Defendants. *
* * * * * * * * * * *
COMPLAINT
Plaintiff Chateau Properties, Inc. ("Chateau" or the
"Company"), by its undersigned attorneys, as and for its complaint against
Manufactured Home Communities, Inc. ("MHC") and MHC Operating Limited
Partnership ("MHCOLP"), alleges upon knowledge as to itself and its own acts,
and upon information and belief as to all other matters as follows:
1. Chateau brings this action for injunctive, declaratory
and monetary relief against MHC and MHCOLP (collectively "Defendants") because
Defendants have violated the federal securities laws by, among other things,
(i) commencing an illusory
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and deceptive tender offer for Chateau's common stock that they have no
ability to complete and (ii) attempting to pre-condition Chateau's equity
holders to favor its unsolicited offer over Chateau's agreement of merger with
ROC Communities, Inc. ("ROC") through unlawful and misleading proxy
solicitations. Chateau and its shareholders will be irreparably harmed unless
Defendants' violations are stopped. Chateau also seeks injunctive relief
against MHC's tender offer for all of Chateau's common stock since such an
acquisition would be in direct contravention of Chateau's charter which
prohibits the acquisition by any person, partnership or corporation of more
than 7% of Chateau's outstanding common stock. Chateau also seeks a
declaration (1) that Defendants' offer is illusory since two of its conditions
- -- (a) that the Maryland Business Combination Law be deemed not to apply to
MHC's proposed transaction and (b) that the 7% ownership limitation in
Chateau's Charter is inapplicable to MHC's Offer -- cannot be satisfied; and
(2) that Chateau's Board of Directors is not required to adopt a resolution
(a) exempting MHC's Offer from the 7% ownership limitation in Chateau's
Charter or (b) exempting a subsequent business combination between MHC's and
Chateau from the Maryland Business Combination Law.
PARTIES
2. Plaintiff Chateau is a Maryland corporation with its
principal place of business in Michigan. Chateau has approximately 6.1 million
common shares outstanding. In addition, there are currently outstanding
approximately 8.7 million partnership interests ("OP Units") in CP Limited
Partnership ("CPLP"), a Maryland limited partnership, which is the operating
partnership of Chateau and of which Chateau is the corporate general partner.
Approximately 4.5 million OP Units are currently exchangeable into Chateau
common shares on a one-for-one-basis. Chateau is in the business of operating
manufactured home communities through CPLP. Such communities resemble suburban
single-family developments and often include recreational amenities such as
clubhouses, swimming pools, tennis courts, and golf courses.
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3. Defendant MHC is a Maryland corporation with its
principal place of business in Illinois. MHC is a direct competitor of
Chateau.
4. Defendant MHCOLP is a limited partnership formed under
the laws of the State of Illinois, the sole general partner of which is
Defendant MHC.
JURISDICTION AND VENUE
5. This court has jurisdiction over this suit under Section
27 of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. 78aa
and 28 U.S.C. ss. 1331, because Counts I through IV arise under Sections
14(a), 14(d) and 14(e) of the Exchange Act and regulations promulgated
thereunder, specifically Rules 14a-3, 14a-6, and 14a-9, while jurisdiction
over Counts V through IX is proper by virtue of 28 U.S.C. ss. 1367 and the
principles of pendent jurisdiction.
6. Venue is proper pursuant to 15 U.S.C. ss. 78aa and under
28 U.S.C. ss. 1391(b). Acts complained of herein have occurred, are occurring
and unless enjoined will continue to occur in this District.
BACKGROUND
7. Chateau operates as a self-administered and self-managed
real estate investment trust ("REIT"). The common stock of Chateau is listed
and traded on the New York Stock Exchange.
8. Non-party ROC Communities, Inc. ("ROC") is a Maryland
corporation with its principal place of business in Colorado. Like Chateau,
ROC owns and operates manufactured housing communities. As of June 30, 1996,
ROC owned and operated 70 manufactured housing communities in 23 states.
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9. Chateau, ROC, and MHC are three of the country's four
leading, publicly held, owners and operators of manufactured housing
communities.
10. It has been Chateau's long-term corporate strategy
selectively to acquire well-located manufactured home communities which show
the potential for increased revenues and cash flows, to develop new
communities in attractive locations, and expand certain of its existing
communities. Upon acquiring or building properties, Chateau institutes
improved management practices to increase operating margins, coupling rent and
occupancy increases with expense controls. Chateau properties are continuously
maintained and upgraded, and on-site managers help foster a sense of community
for residents.
11. In the spring of 1995, Chateau's Chief Executive
Officer, in furtherance of Chateau's long-term corporate strategy, held
informal discussions with the Chief Executive Officer of ROC regarding a
potential business combination between their companies. Though the companies
had complementary business philosophies and property portfolios, these
negotiations did not advance beyond the conceptual stage.
12. In the spring of 1996, these negotiations were
reinitiated. Senior management of ROC and Chateau met many times during the
next four months, and the potential business combination advanced from the
conceptual stage to a signed agreement between the companies.
13. Even at the initial stage of these negotiations, Chateau
made plain that it was not interested in a transaction which would eliminate
Chateau shareholders' interest in the enterprise. Rather, both companies
recognized that a merger transaction would have unique long-term benefits for
their shareholders because of the synergies and opportunities for revenue
enhancement which it would create. Such a merger would combine Chateau's
outstanding development and expansion expertise with ROC's industry-leading
property management, administration, and acquisition skills. The
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company resulting from the merger would unquestionably be the leader in the
industry, would hold the largest portfolio of manufactured home communities in
the country, and would have lower costs of capital than its competitors.
14. By the middle of June 1996, Chateau and ROC had settled
upon the basic structure of the transaction and had agreed to an outline of
how the companies would be valued.
15. During the negotiations, Chateau's board of directors
was informed about the progress of the discussions, met to consider the
proposed transaction and its alternatives, and was advised by counsel and
financial advisers. The Company's financial advisor, Merrill Lynch, opined
that the proposed merger with ROC would be fair to Chateau's shareholders.
16. The negotiations culminated in a July 1996 agreement
designed to accomplish a merger of equals (the "Merger Of Equals"). Under the
terms of this agreement, shareholders of Chateau and ROC would receive shares
in the combined company in exchange for their current holdings, and the
managements of ROC and Chateau would be combined. The Merger Of Equals was
publicly announced on July 18, 1996.
17. The Merger Of Equals fulfills Chateau's business plan
and objectives to increase long-term shareholder value for the following
reasons, among many others:
18. First, Chateau and ROC have complementary management
capabilities, business philosophies, and strategic visions. The record of
ROC's management demonstrates that it would be an asset to Chateau. For
instance, ROC's management has consistently won industry awards for the
excellence of its communities, such as four consecutive "Operator of the Year"
awards from the National Manufactured Housing Industry Association.
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19. Second, ROC and Chateau have complementary asset
portfolios. ROC and Chateau properties are located in different, but not
overly dispersed geographic areas.
20. Third, the resulting company would be the largest in the
industry and would have lower costs of capital than either Chateau or ROC
standing alone.
MHC Announces An Unsolicited
Bid To Purchase Chateau
21. On August 16, 1996, MHC, which is a business rival of
both Chateau and ROC, announced that it intended to purchase Chateau outright
(the "MHC Proposal") and sought to defeat the Merger Of Equals. MHC had not
sought any business combination with Chateau until after the Merger Of Equals
was announced, and, upon information and belief, the MHC Offer was largely
motivated by a desire to block the Merger Of Equals, which would create a more
formidable business rival to MHC than either Chateau or ROC standing alone.
Indeed, the MHC proposal was contingent on numerous conditions being met; most
significantly that Chateau's publicly announced Merger Of Equals with ROC be
abandoned.
Defendants' Statements To Analysts And Written
Representations Are Solicitations Designed To
Obtain Shareholder Votes Against The Merger Of Equals
22. Even though they did not publicly announce until
September 4, 1996, their plan to "seek through a proxy contest proxies in
opposition to the proposed [Chateau]/ROC merger," (and have never filed the
required proxy disclosure documents with the Securities and Exchange
Commission), Defendants began their proxy solicitation well in advance. As
part of their effort to condition the market to favor the MHC Proposal over
the previously announced Merger Of Equals between Chateau and ROC, and as one
link in the chain leading up to a solicitation of proxies from Chateau's
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shareholders, Defendants organized a meeting with securities analysts held on
August 20, 1996.
23. At this meeting, Defendants attempted to sway
shareholder opinion in favor of their proposal and against the Merger Of
Equals. Among other things, Defendants told the analysts that their proposal
was "superior" to the Merger Of Equals and would "maximize" growth potential
(the "Statements To Analysts"). As part of this presentation and solicitation
effort, Defendants set forth an inaccurate, misleading and materially omissive
comparison of their proposal to the Merger Of Equals.
24. In addition, Defendants gave those attending the meeting
a written outline setting forth the purported benefits of the MHC Proposal and
why it was supposedly superior to the Merger Of Equals (the "Written
Representations").
25. Defendants have continued their proxy solicitation
efforts, including making a presentation to analysts and others at a meeting
held in late August in Baltimore, Maryland. In addition, Defendants have
solicited various of Chateau's OP Unit holders to induce them to oppose the
Merger of Equals with ROC.
Defendants' Statements To Analysts And
Written Representations Are False And Misleading
26. Rule 14a-9 of the Securities and Exchange Act prohibits
false and misleading solicitations such as the Statements To Analysts and
Written Representations (collectively the "Representations").
27. The Representations are false and misleading for several
reasons:
28. First, the Representations falsely assert that MHC can
buy more than seven percent of Chateau's common stock when, by its terms,
Chateau's Articles of Amendment and Restatement ("Chateau's Charter") does
not, except under enumerated exceptions not applicable here, allow a person,
corporation or partnership to own more than seven percent of Chateau's common
stock.
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29. Second, Defendants' Statements to Analysts contained
false financial information by choosing misleading time periods for the
comparison of the MHC Proposal to the Merger Of Equals and omitting to
disclose other critical and material information. For example, in its Written
Representations, Defendants state that MHC's "return on investment" ("ROI")
since its March 1993 initial public offering ("IPO") has been 10% and compares
this to ROC's ROI of 3%. This presentation is materially misleading and
omissive since it fails to also disclose that MHC's ROI since its secondary
offering in the fall of 1993 would show that the return for these MHC
investors has not only been below that achieved by ROC, but indeed would show
that these investors have lost money. In addition, Defendants' written
representations falsely state that MHC is "recognized for [its] high quality
portfolio" (when MHC actually has many lower quality properties) and that MHC
and Chateau have "complementary information systems" (when the systems are
totally different).
Chateau's Initial Consideration Of The MHC Proposal
30. On August 22, 1996, Chateau's board of directors met to
consider, among other things, MHC's proposal and to determine what action, if
any, it wanted to take in response to MHC's Proposal. At this board meeting
the directors discussed MHC's acquisition proposal, as well as another
acquisition proposal that had been made by Sun Communities, Inc. ("Sun"). At
that meeting, and following a detailed discussion of the acquisition
proposals, the board determined to reconvene on September 5, 1996 to further
consider MHC's proposal (as well as Sun's proposal and the Merger Of Equals
with ROC).
MHC's Misleading and Illusory Tender Offer
31. One day before Chateau's scheduled board meeting, on
September 4, 1996, MHC commenced an unsolicited tender offer for Chateau's
common shares ("MHC's Offer" or the "Offer"). Pursuant to the Offer, MHC,
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through MHCOLP, has offered to purchase all the outstanding common shares at a
price of $26.00 per share. MHC's Offer is misleading and materially omissive.
For example, while MHC's balance sheet does not indicate the ability to pay
for the Offer, the Offer fails to disclose the source or terms of the financing
for the Offer. Moreover, while the Offer indicates that MHC plans to effectuate
a merger or other business combination with Chateau if its tender offer is
successful, it does not indicate how it intends to treat Chateau's OP Unit
holders in any such merger or business combination.
32. Besides being misleading, MHC's Offer is also illusory.
The MHC Offer is conditioned upon, among other things, MHC "being satisfied in
its sole judgment" that (i) the restrictions contained in the Maryland
Business Combination Law will not apply to a proposed merger that MHC plans to
consummate with Chateau following its tender offer and (ii) that the
provisions of Article VI of Chateau's Articles of Amendment and Restatement
("Chateau's Charter") prohibiting any corporation or partnership from
acquiring more than 7% of Chateau's common stock will not apply to MHC's
Offer. Since neither of these conditions can be satisfied, MHC's Offer is
illusory and cannot be consummated. Indeed, upon information and belief, the
true purpose of MHC's Offer is to disrupt and derail the previously announced
Merger Of Equals between Chateau and ROC.
Chateau's Consideration Of The MHC Offer
33. As planned at the August 22, 1996 board meeting, the
Chateau Board of Directors met again on September 5, 1996 to further consider
the Merger of Equals, the Sun proposal, as well as the MHC Offer made the
prior day. Following a lengthy meeting, the board adjourned without taking any
formal action with respect to the MHC Offer, the Sun proposal, or the Merger
of Equals and agreed to reconvene again on September 16, 1996.
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34. On September 16 and 17, 1996, the Chateau board met once
again to consider the Merger of Equals with ROC, the Sun proposal, and the MHC
Offer. At this meeting, and following extensive deliberations and
presentations by the Company's advisors, the Chateau board, among other
things, unanimously took the following actions: (1) determined that it was in
the best interests of Chateau and its shareholders to go forward with the
previously announced Merger of Equals (as modified and improved so as to
further benefit Chateau's shareholders), (2) rejected the MHC Offer as
inadequate and not in the long-term interest of Chateau, its shareholders, and
CPLP and its Unit holders, to whom Chateau, as a corporate general partner,
owes a fiduciary duty, (3) determined that the MHC Offer constituted an
intention to acquire beneficial ownership of Chateau common stock in violation
of Chateau's Charter and, to prevent such unlawful action, authorized the
Company to institute proceedings to enjoin such unlawful action as provided in
Article VI, Section 4 of Chateau's Charter, and (4) determined to reject the
Sun proposal since the long term benefits to Chateau and its shareholders from
the Merger of Equals with ROC were superior to the Sun proposal.
The Irreparable Harm To Chateau
35. Chateau is being irreparably harmed by Defendants'
illusory tender offer and illegal proxy solicitation which are polluting the
market place with false and misleading information, in that, among other
things, Chateau's shareholders are being forced, on a daily basis, to make
investment decisions on the basis of false and misleading statements and
without the benefit of Congressionally mandated disclosures. This harm is
particularly acute here given that the volume of trading in Chateau shares
over the past month is over 2 million shares -- more than 500% of the normal
volume. So long as this deceptive and illusory tender offer is permitted to
pollute the investment market for Chateau's shares, Chateau's shareholders
will be unable to make rational and informed business decisions. MHC's
illusory offer is further causing irreparable harm by interfering with and
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disrupting Chateau's management from completing its agreed to Merger Of Equals
with ROC -- a transaction that the board of directors has determined is
advisable and in the best long term interests of Chateau and its shareholders.
In addition, MHC's illusory offer is causing irreparable harm to Chateau and
its relationships with its employees, customers, shareholders, suppliers and
others. In particular, Chateau is being hampered in its efforts to make
acquisitions of properties that are in the best interest of the Company.
36. In order to protect Chateau, its shareholders, and the
investing public, Defendants must be enjoined temporarily, preliminarily and
permanently from continuing to pursue their deceptive and illusory offer and
from making any additional false and misleading solicitations in furtherance
of MHC's Offer and against the Merger of Equals.
COUNT I
(Injunctive Relief Against Violations of Sections 14(d)
and 14(e) of the Securities Exchange Act of 1934)
37. Plaintiff repeats and realleges the allegations of
paragraphs 1 through 36 as if fully restated herein.
38. Section 14(d) of the Exchange Act and the regulations
promulgated thereunder provide that any person who proposes to make a tender
offer for more than five percent of any equity security of a company shall, at
the time copies of the tender offer are first published or sent to security
holders, file with the SEC a Schedule 14D-1 (which includes the Offer to
Purchase) setting forth, among other things, the background and identity of
all persons in the bidding group, their past contacts or transactions with the
target company, the source and amount of funds to be used in the tender offer,
the purpose or purposes of the tender offer, and plans or proposals with
respect to the target company, as well as information with regard to any
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contracts, arrangements or understanding with any person with respect to any
securities of the target company. In addition, such person is required to set
forth in the Schedule 14D-1 any additional information which may be necessary
to make the required statements, in light of the circumstances under which
they are made, not materially misleading.
39. Section 14(e) of the Exchange Act prohibits any person
from making any untrue statement of material fact or omitting to state any
material fact necessary in order to make the statements not misleading or from
engaging in any fraudulent, deceptive or manipulative acts in connection with
any tender offer. In pertinent part, Section 14(e) of the Exchange Act
provides:
It shall be unlawful for any person to make any untrue
statement of a material fact or omit to state any material
fact necessary in order to make the statements made, in the
light of the circumstances under which they are made, not
misleading, or to engage in any fraudulent, deceptive, or
manipulative acts or practices, in connection with any
tender offer or request or invitation for tenders, or any
solicitation of security holders in opposition to or in
favor of any such offer, request or invitation.
40. MHC has violated Sections 14(d) and 14(e) of the
Exchange Act, in that, as specified in this Complaint, its offer fails to make
disclosures required by law, contains untrue statements of material fact, and
omits to state material facts necessary in order to make the statements made,
in light of the circumstances under which they were made, not misleading. In
particular, the offer is deceptive and manipulative in that it fails to state
that it is entirely illusory, since the conditions concerning Chateau's
Charter and the Maryland Business Combination Law cannot be satisfied. In
addition, the Offer fails to disclose, among other things, (i) MHC's plans for
completing its second step "merger or similar business combination," (ii) how
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MHC plans on treating Chateau's OP Unitholders in any such second step merger,
and (iii) MHC's sources and terms of financing for the Offer.
41. Plaintiff has no adequate remedy of law.
COUNT II
(Injunctive Relief Against Violations of Section 14(a) of the
Securities Exchange Act of 1934 and Rules 14a-3 and 14a-6)
42. Plaintiff repeats and realleges the allegations of
paragraphs 1 through 41 as if fully restated herein.
43. Chateau's shares are securities registered under Section
12 of the Exchange Act.
44. The Representations made by MHC and MHCOLP were
communications to Shareholders reasonably calculated to result in the
procurement of a proxy. Consequently, the Representations constituted
solicitations within the meaning of Section 14(a) of the Securities and
Exchange Act and Rule 14a-1 promulgated thereunder.
45. Because the Representations were solicitations,
Defendants were required to meet the requirements of Rules 14a-3 and 14a-6.
Defendants did not provide Shareholders with a proxy statement and
consequently have violated Rules 14a-3 and 14a-6.
46. Plaintiff seeks injunctive relief against the
Defendants' unlawful solicitation, pursuant to Sections 14a-3 and 14a-6 of the
Securities and Exchange Act of 1934.
47. Plaintiff has no adequate remedy at law.
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COUNT III
(Injunctive Relief Against Violations of Section 14(a) of
the Securities Exchange Act of 1934 and Rule 14a-9)
48. Plaintiff repeats and realleges the allegations of
paragraphs 1 through 47 as if fully restated herein.
49. The Representations constitute solicitations within the
meaning of Section 14(a) of the Securities and Exchange Act of 1934 and Rule
14a- 1(1).
50. The Representations constitute false and misleading
statements regarding material facts relating to MHC's proposal and the Merger
Of Equals.
51. The Defendants knew that the Representations were false
and misleading at the time that they were issued, recklessly disregarded the
falsity of such statements, or were negligent in failing to investigate and
discover that the statements were false and misleading.
52. By virtue of its conduct detailed above, the Defendants
have violated Section 14a of the Securities and Exchange Act and Rule 14a-9
promulgated thereunder.
53. Plaintiff seeks injunctive relief against the
Defendants' violation of Section 14a-9 of the Securities and Exchange Act.
54. Plaintiff has no adequate remedy at law.
COUNT IV
(Damages For Violations of Section 14(a) of the Securities
Exchange Act of 1934 and Rules 14a-3, 14a-6 and 14a-9)
55. Plaintiff repeats and realleges the allegations of
paragraphs 1 through 54 as if fully restated herein.
56. As a result of Defendants' unlawful solicitations, which
violate Section 14(a) of the Securities and Exchange Act and Rules 14a-3,
14a-6 and 14a-9 promulgated thereunder, Plaintiff has suffered damages in an
amount to be determined at trial.
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COUNT V
(Declaratory Judgment That MHC's Purchase Of Common
Shares Would Violate Article VI Of Chateau's Charter)
57. Plaintiff repeats and alleges the allegations of
paragraphs 1 through 56 as if fully sets forth herein.
58. As set forth in the Offer, MHC (through MHCOLP) has
proposed to purchase 100% of Chateau's outstanding common shares. Should it
consummate its offer, MHC would be the owner of all outstanding common shares
of Chateau common stock. Such a transaction is expressly prohibited by Article
IV of Chateau's Articles of Amendment And Restatement, as amended (the
"Charter") which provides that no person, partnership or corporation can
beneficially own more than 7% of the common stock of Chateau.
59. Article VI, Section 2(i) of Chateau's Charter provides,
in relevant part, that "No Person (other than an Existing Holder with respect
to Common Stock) shall beneficially own shares of Common Stock . . . in excess
of the applicable Ownership Limit."
60. Article VI, Section 1 of Chateau's Charter defines
"Ownership Limit" to "mean, in the case of Common Stock, seven (7.0%) percent
in number of shares or value, of the outstanding common stock."
61. "Person" is defined in Article VI, Section 1 of
Chateau's Charter to mean, inter alia, an individual, corporation, [or]
partnership. Since MHC is a corporation and MHCOLP is a partnership both are
deemed to be a Person for purposes of Article VI of Chateau's Charter. In
addition, neither MHC nor MHCOLP is an Existing Holder as that term is defined
in Chateau's Charter.
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62. As the direct owner of Chateau's stock, MHCOLP would be
a "beneficial owner" of Chateau's stock. Accordingly MHCOLP (which is Person
under Article VI by virtue of being a partnership) would, should it purchase
common shares of Chateau in accordance with its announced Offer, be the
beneficial owner of those shares for purposes of Article VI of Chateau's
Charter.
63. Accordingly, should MHCOLP purchase more than 7% of
Chateau's outstanding common stock, much less the 100% it has offered to
purchase, such purchases would be in direct contravention of Chateau's
Charter.
64. Pursuant to Article VI, Section 2(ii) of Chateau's
Charter, any purchases of Chateau common stock above the 7% threshold would be
"void ab initio" and MHCOLP would "acquire no rights in such shares of common
stock".
65. Article VI, Section 4 of Chateau's Charter provides that
"[i]f the Board of Directors or its designees shall at any time determine in
good faith that . . . a Person intends to acquire or has attempted to acquire
beneficial ownership (determined without reference to any rules of
attribution) or Beneficial Ownership of Stock of the Corporation in violation
of Section 2 of this Article, the Board of Directors or its designees shall .
. . take such action as it deems advisable to refuse to give effect to or to
prevent such Transfer, including, but not limited to, refusing to give effect
to such Transfer of the books of the corporation or instituting proceedings to
enjoin such transfer." Pursuant to this Charter Provision the Board of
Directors has determined in its good faith judgment that MHC's Offer and the
other actions undertaken by MHC (e.g. its efforts to solicit support for its
proposal) constitute an "intent to acquire" beneficial ownership of more than
7% of the common shares of Chateau in direct violation and contravention of
Article VI of Chateau's Charter. The instant action is designed to prevent the
announced and intended violation of Chateau's Charter by MHC and MHCOLP.
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66. In light of the Offer and Defendants intention to
attempt to violate the provisions of Article VI at Chateau's Charter there
exists an actual controversy between the parties. To avoid the unlawful
acquisition of its common stock and the attendant harm to Chateau and its
shareholders, Chateau seeks a declaration that MHC's Offer is unlawful and
cannot be legally accomplished to the extent MHC or MHCOLP attempts to acquire
more than 7% of Chateau's outstanding shares of common stock.
67. Chateau has no adequate remedy at law.
COUNT VI
(Injunctive Relief For Violation Of Chateau's Charter)
68. Plaintiff repeats and realleges the allegations of
paragraphs 1 through 67 as it fully restated herein.
69. MHC's Offer to acquire more than 7% of Chateau's
outstanding common shares is in direct violation of Chateau's Charter.
70. MHC's stated intention to violate Chateau's Charter is
causing, and unless enjoined or otherwise declared to be unlawful, will
continue to cause irreparable harm to Chateau and its shareholders. MHC's
actions have caused unwarranted confusion and disruption to the trading in
Chateau's common stock by wrongfully leading Chateau's shareholders and the
investing public into believing that an actual offer, instead of an illusory
offer -- which cannot be consummated -- has been made. MHC's Offer is further
causing irreparable harm in that it is disrupting Chateau's previously
announced Merger Of Equals with ROC which was entered into to further
Chateau's long-standing business plan to enhance long-term shareholder value
for all of Chateau's shareholders. Moreover, Chateau shareholders may be
induced into transferring their shares to MHC in a transaction that will be
void ab initio. In addition, the diversion of corporate resources (both of
management time and attention, and money) caused by MHC's illegal and
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illusory offer has disrupted, and unless enjoined or declared unlawful, will
continue to disrupt Chateau's relationships with ROC as embodied in the Merger
Of Equals, as well as with its shareholders, customers, employees, suppliers,
and others. In particular, MHC's illusory offer has disrupted Chateau's
ability to consummate acquisitions for properties that would be in the best
interest of the Company.
71. Chateau has no adequate remedy at law.
COUNT VII
(Declaratory Judgment That Chateau's Board Of Directors
Is Not Required To Adopt A Resolution Exempting The
Offer From Article VI Of Chateau's Charter)
72. Plaintiff repeats and realleges the allegations of
paragraphs 1 through 71 as if fully restated herein.
73. MHC's Offer is conditioned upon, among other things, MHC
being satisfied, in its sole discretion, that the 7% common share ownership
limitation contained in Article VI of Chateau's Charter not be deemed
applicable to MHC's Offer. In its offering document, MHC states that it has
"requested [Chateau's] Board of Directors to adopt a resolution agreeing with
[MHCOLP's] and MHC's interpretation" that the limitation in Chateau's Charter
does not apply to MHC's Offer.
74. Article VI, Section at 12 of Chateau's Charter states:
Section 12. Exemptions by Board. The Board of
Directors, upon receipt of a ruling from the Internal
Revenue Service satisfactory to the Board of Directors
and upon at least 15 days written notice from a
Transferee prior to the proposed Transfer which, if
consummated, would result in the intended Transferee
owning shares in excess of the applicable Ownership
Limit or Existing Holder Limit, as the case may be, and
upon such other conditions at the Board of Directors may
direct, may, subject to the provisions contained in
Section 21 of this Article VI, exempt a Person from the
Ownership Limit or the Existing Holder Limit, as the
case may be.
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75. As the text of Section 12 makes plain, the board of
directors cannot even consider such a request until it has received the
requisite ruling from the Internal Revenue Service, which has not been
provided by MHC. Moreover, Section 12 is wholly discretionary, providing that
the board of directors, upon such "conditions as the board of directors may
direct, may . . . exempt a Person from the Ownership Limit . . ." Accordingly,
the decision as to whether to adopt the resolution requested by MHC is a
matter for the business judgment of the directors.
76. Chateau seeks a declaration that no resolution relating
to Chateau's Charter of the nature requested by MHC is required to be adopted
by the Chateau Board of Directors.
77. Chateau has no adequate remedy of law.
COUNT VIII
(Declaratory Judgment That MHC's Offer And Proposed
Merger Would Violate The Maryland Business Combination Act)
78. Plaintiff repeats and realleges the allegations in
paragraphs 1 through 77 as if fully set forth herein.
79. As set forth in the Offer, Defendants have proposed to
purchase 100% of Chateau's outstanding common shares. MHC has stated in its
offer that "it intends, as soon as practicable after, and substantially
concurrent with, the consummation of" its offer, to propose and seek to have
Chateau "consummate a merger or similar business combination with MHC" (the
"Second-Step Merger"). MHC further states that its offer is conditioned upon
MHC "being satisfied in its sole discretion" that the restrictions in the
Maryland Business Combination Act "will not apply to the [Second-Step
Merger]." This condition can not be satisfied because the proposed Second-Step
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Merger would violate the Maryland Business Combination Statue (Md. Corp. &
Assn. Code Ann. ss. 3-602).
80. ss. 3-602 of the Maryland Business Combination Statute
provides in pertinent part:
a corporation may not engage in any business combination
with any interested stockholder or any affiliate of the
interested stockholder for a period of 5 years following the
most recent date on which the interested stockholder becomes
an interested stockholder.
81. ss. 3-603 provides that the Business Combination Statute
does not apply to
business combinations that . . . have been approved or
exempted therefrom, in whole or in part, by resolution of
the board of directors of the corporation . . . (ii) if
involving transactions with a particular interested
stockholder or its existing future affiliates, at any time
prior to the determination date.
The "determination date" is the "most recent date on which the interested
stockholder became an interested stockholder."
82. Chateau's board of directors has not approved the Offer.
83. Pursuant to ss. 3-601(e) of the Business Combination
Statute, a "business combination" means, among other things:
(1) Unless the merger, consolidation, or share
exchange does not alter the contract rights of
the stock as expressly set forth in the charter
or change or convert in whole or in part the
outstanding shares of stock of the corporation,
any merger, consolidation, or share exchange of
the corporation or any subsidiary with (i) any
interested stockholder or (ii) any other
corporation (whether or not itself an interested
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stockholder) which is, or after the merger,
consolidation, or share exchange would be, an
affiliate of an interested stockholder that was an
interested stockholder prior to the transaction;
[or]
(3) The issuance or transfer by the corporation, or
any subsidiary, in one transaction or a series of
transactions, of any equity securities of the
corporation or any subsidiary which have an
aggregate market value of 5 percent or more of
the total market value of the outstanding stock
of the corporation to any interested stockholder
or any affiliate of any interested stockholder.
The Second-Step Merger would constitute a "business combination" under this
statute.
84. ss. 3-601(j) provides that an "interested stockholder"
means any person . . . that: "Is the beneficial owner, directly or indirectly,
of 10 percent or more of the voting power of the outstanding voting stock of
the corporation." MHC, which is a "corporation" under the Business Combination
Statute, would become an interested stockholder under this statute by virtue
of its Offer.
85. The proposed Second-Step Merger described in MHC's Offer
falls within the prohibition of ss. 3-602 of the Maryland Business Combination
Statute since (1) the Second-Step Merger is a "business combination" as
defined in ss. 3-601(e); (2) MHC would become an "interested stockholder " as
defined in ss. 3- 601(j); and (3) Chateau's board of directors has not
approved MHC's Offer. The Second-Step Merger is precisely the type of the
"combination" contemplated by the statute and thus, may not be accomplished
for a period of five years following the date MHC becomes an "interested
stockholder."
86. Accordingly, should MHC purchase more than 10% of
Chateau's outstanding common stock, much less than the 100% it has offered to
purchase, its planned Second Step Merger would be in direct contravention of
the Maryland Business Combination Statute.
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87. In light of MHC's Offer and its intention to attempt to
violate the Maryland Business Combination Statute, there exists an actual
controversy between the parties. To avoid the unlawful acquisition of its
common stock and the resulting harm to Chateau and its shareholders, Chateau
seeks a declaration that MHC's Offer cannot be legally accomplished because
the condition relating to the Maryland Business Combination Law can not be
met.
88. Chateau has no adequate remedy at law.
COUNT IX
(Declaratory Judgment That Chateau's Board Of Directors
Is Not Required To Adopt A Resolution Exempting MHC's
Offer From The Maryland Business Combination Act)
89. Plaintiff repeats and realleges the allegations of
paragraphs 1 through 88 as if fully set forth herein.
90. MHC's Offer is conditioned upon, among other things, MHC
being satisfied, in its sole discretion, that "the provisions of the Maryland
Business Combination Law are . . . inapplicable to the acquisition of shares
pursuant to the Offer and the [Second-step] Merger."
91. In its Offer, MHC states that it has "requested that the
Company's Board of Directors adopt a resolution . . . exempting from the
Maryland Business Combination Law a [Second-step Merger] between [Chateau] and
[MHCOLP] or any of its affiliates."
92. The decision as to whether to adopt such a resolution is
a matter for the business judgment of the directors.
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93. Chateau seeks a declaration that no resolution relating
to the Maryland Business Combination Law of the nature requested by MHC is
required to be adopted by the Chateau board of directors.
94. Chateau has no adequate remedy of law.
WHEREFORE, Plaintiff hereby requests judgment in its favor:
a. temporarily, preliminarily and permanently restraining
and enjoining Defendants from consummating and taking any actions in
furtherance of their deceptive and illusory tender offer;
b. temporarily, preliminarily and permanently restraining
and enjoining Defendants from issuing any solicitations with respect to the
MHC Offer or with respect to the Merger of Equals prior to providing
Shareholders with a proxy statement in accordance with Rules 14a-3 and 14a-6;
c. temporarily, preliminarily and permanently restraining
and enjoining Defendants from issuing any false and misleading solicitations
in violation of Rule 14a-9;
d. temporarily, preliminarily and permanently restraining
and enjoining Defendants from taking any further actions designed to acquire
more than 7% of Chateau's common stock in violation of Chateau's Charter;
e. declaring that Defendants' offer is in violation of
Chateau's Charter and cannot be consummated;
f. declaring that Defendants' Proposed Merger -- to be
consummated following the tender offer -- would be subject to the restrictions
of the Maryland Business Combination Law;
g. declaring that the Chateau Board of Directors is not
required to adopt resolutions exempting MHC's Offer from Article VI of
Chateau's Charter or MHC's proposed Second-Step Merger from the Maryland
Business Combination Law.
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h. awarding Plaintiff compensatory damages in an amount to
be determined at trial;
i. awarding Plaintiff the costs and expenses of this action,
including reasonable attorneys' fees; and
j. awarding Plaintiff such other and further relief as the
Court deems just and proper.
Dated: September 17, 1996
Respectfully submitted,
MILES & STOCKBRIDGE
A Professional Corporation
---------------------------------
By: Mark D. Gately #00134
John E. McCann, Jr. #10028
10 Light Street
Baltimore, Maryland 21202-1487
(410) 727-6464
OF COUNSEL:
Marc P. Cherno (applying pro hac vice)
Douglas H. Flaum (applying pro hac vice)
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
(A Partnership Including Professional Corporations)
One New York Plaza
New York, New York 10004-1980
(212) 859-8000
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