PRIVILEGED AND CONFIDENTIAL
CHATEAU COMMUNITIES, INC.
0000 XXXXX XXXXXXXX XXX
XXXXXXXXX XXXXXXX, XXXXXXXX 00000
(000) 000-0000
Hometown America, L.L.C.
000 Xxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxx
June 26, 2003
Ladies and Gentlemen:
We refer to the Agreement and Plan of Merger (the "MERGER AGREEMENT"), dated as
of May 29, 2003, by and among Hometown America, L.L.C. ("PURCHASER"), Hometown
America Holdings, L.L.C. ("PARENT," and with Purchaser, "HOMETOWN"), CP Limited
Partnership ("CHATEAU OP"), Chateau Communities, Inc. (the "REIT") and ROC
Communities, Inc. ("ROC," and with Chateau OP and the REIT, "CHATEAU"). Terms
used but not defined in this letter agreement have the respective meanings
ascribed to such terms in the Merger Agreement (including the Disclosure
Letter).
If Chateau does not refinance all of the outstanding $50,000,000 8.30% Senior
Notes, Series B, due October 1, 2021 referenced in the Second Amendment to the
PacLife Note Purchase Agreement (the "PACLIFE SERIES B NOTES") prior to June 25,
2003, Pacific Life Insurance Company ("PACLIFE") may be entitled to various
remedies, including but not limited to the right to require Chateau to repay all
of the outstanding PacLife Series B Notes (a "SERIES B PUT EVENT"). In Item IV
of Section 3.1(b)(vii) of the Disclosure Letter, Chateau described its intention
to refinance the PacLife Series B Notes in accordance with Exhibit A to the
Second Amendment to the PacLife Note Purchase Agreement (the "PACLIFE
REFINANCING").
Hometown and Chateau have determined and hereby agree that it is mutually
desirable for Chateau to, and Chateau shall, in lieu of consummating any PacLife
Refinancing with PacLife, refinance the indebtedness represented by the PacLife
Series B Notes and pay any penalties, costs or other liabilities relating
thereto with the proceeds of financing obtained from (A) Hometown on the terms
set forth on the term sheet attached as Exhibit A hereto (the "HOMETOWN
FINANCING"), which term sheet Hometown and Chateau are simultaneously herewith
entering into (such term sheet, together with the Loan Documents (as defined in
such term sheet) the parties shall negotiate in good faith and enter into
promptly reflecting such terms, the "HOMETOWN FINANCING TERMS AND DOCUMENTS") or
(B) if Hometown fails (other than as a result of a breach by Chateau of any of
its obligations hereunder or in the Hometown Financing Terms and Documents) to
provide such Hometown Financing in accordance with the Hometown Financing Terms
and Documents, a third party (provided that the terms of any such financing with
a third party must be reasonably satisfactory to and consented to (not to be
unreasonably withheld) in writing in advance by Hometown). The parties agree
that they will negotiate in good faith and execute the Loan Documents in
accordance with the term sheet attached hereto as Exhibit A no later than 29
days from the date hereof. Chateau represents and agrees that the funds
generated from such Hometown Financing or the financing with such third party
shall equal the amount referenced in the "Amount" section, and shall be used
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exclusively for the purpose referenced in the "Purpose" section, of the term
sheet attached hereto as Exhibit A. Hometown agrees that if Hometown fails to
provide such Hometown Financing pursuant to the terms and conditions in the
preceding sentence, then if Chateau seeks a financing with a third party
pursuant to clause (B) in the preceding sentence, and the terms and conditions
and documentation of such financing are substantially similar to those set forth
in the Hometown Financing Terms and Documents, Hometown shall be deemed to have
consented thereto.
In addition, the parties hereby agree that, notwithstanding anything to the
contrary contained in the Merger Agreement, provided that Chateau complies with
its obligations herein and in the Hometown Financing Terms and Documents,
including by making all required representations,
(1) the failure of Chateau to refinance the PacLife Series B Notes
pursuant to the PacLife Refinancing, and any penalties, costs or other
liabilities owing from Chateau to PacLife and directly arising from
and relating to such failure, including but not limited to the
occurrence of a Series B Put Event, shall not be considered, and shall
not contribute to, (a) a breach of any representation, warranty,
covenant or agreement contained in the Merger Agreement, or (b) any
Chateau Material Adverse Effect;
(2) Chateau shall be permitted, without breach of the Merger Agreement, to
refinance the indebtedness represented by the PacLife Series B Notes
and pay any penalties, costs or other liabilities relating thereto by
entering into the Hometown Financing in accordance with the Hometown
Financing Terms and Documents; and
(3) if Hometown fails (other than as a result of a breach of Chateau's
obligations hereunder or in the Hometown Financing Terms and
Documents) to provide the Hometown Financing in accordance with the
Hometown Financing Terms and Documents, Chateau shall be permitted,
without breach of the Merger Agreement, to refinance the indebtedness
represented by the PacLife Series B Notes and to pay any penalties,
costs or other liabilities relating thereto with a third party
(provided that the terms of any such financing with a third party must
be reasonably satisfactory to and consented to (not to be unreasonably
withheld) in writing in advance by Hometown).
This letter agreement and the other agreements and transactions entered
into in connection herewith, together with Section 7.5 and Article VIII of the
Merger Agreement (the provisions of which apply to this letter agreement,
MUTATIS MUTANDIS), constitute the entire agreement and supersede all prior
agreements, arrangements and understandings, both written and oral, between the
parties with respect to the subject matter of this letter agreement and are for
the sole benefit of Chateau and Hometown and are not intended to confer upon any
Person other than the parties hereto any rights or remedies. Nothing herein
express or implied shall give or be construed to give to any Person, other than
the parties hereto, any legal or equitable or other rights or benefits.
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If the foregoing correctly sets forth your understanding as to the matters set
forth above, please so indicate by signing in the space set forth below,
whereupon this letter shall become a binding agreement between us governed by,
and construed in accordance with, the laws of the State of Maryland without
regard to its choice of law principles.
Very truly yours,
Chateau Communities, Inc.
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Executive Vice President
CP Limited Partnership
By: Chateau Communities, Inc., its
general partner and ROC Communities, Inc.,
its other general partner
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Executive Vice President
ROC Communities, Inc.
By: /s/ Xxxxxx X. Xxxxxxx
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Name: Xxxxxx X. Xxxxxxx
Title: Executive Vice President
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Accepted and agreed to as of the date first set forth above:
Hometown America, L.L.C.
By: Hometown Residential Manager, L.L.C., Manager
By: /s/ Xxxxxxx X. Xxxxx, Xx.
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Name: Xxxxxxx X. Xxxxx, Xx.
Title: Manager
Hometown America Holdings, L.L.C.
By: Hometown Residential Manager, L.L.C., Manager
By: /s/ Xxxxxxx X. Xxxxx, Xx.
------------------------------
Name: Xxxxxxx X. Xxxxx, Xx.
Title: Manager
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