SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant (X)
Filed by a Party other than the Registrant ( )
Check the appropriate box:
(X) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
( ) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
UNITED DOMINION REALTY TRUST, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
(X) $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
( ) $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
( ) Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
( ) Fee paid previously with preliminary materials.
( ) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
<PAGE>
March 29, 1996
Fellow Shareholders:
Please accept my personal invitation to attend the Annual Meeting of
Shareholders to be held on Tuesday, May 7, 1995, at 4:00 p.m. at the Omni
Richmond Hotel, 12th and Cary Streets, Richmond, Virginia. The business to be
conducted at the meeting is set forth in the formal notice that follows. At the
meeting, management will review 1995, report on recent financial results and
discuss expectations for the future. The directors and senior management will be
available to answer any questions from the floor. After the meeting, there will
be a reception and you will have the opportunity to speak informally with the
directors, officers and other management of the Company.
We rely upon all shareholders to promptly execute and return their
proxies in order to avoid costly proxy solicitation. Therefore, in order to save
the unnecessary expense of further proxy solicitation, I ask that you promptly
sign and return the enclosed proxy card in the return envelope provided. If you
attend the Annual Meeting, as I hope you do, you may withdraw your proxy at the
meeting and vote your shares in person from the floor. Your vote is important to
the Company.
Sincerely,
UNITED DOMINION REALTY TRUST, INC.
JOHN P. MCCANN
President
10 SOUTH SIXTH STREET, SUITE 203 / RICHMOND, VIRGINIA 23219-3802 / 804-780-2691
<PAGE>
March 29, 1996
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, MAY 7, 1996
The Annual Meeting of Shareholders of United Dominion Realty Trust,
Inc. will be held at the Omni Richmond Hotel, 12th and Cary Streets, Richmond,
Virginia, on Tuesday, May 7, 1996 at 4:00 p.m., for the following purposes:
1. To elect nine directors to serve for the ensuing year.
2. To consider and vote upon amendments of the Company's 1985
Stock Option Plan which will (i) establish the number and
other terms of options to be granted annually to directors who
are not employees of the Company, (ii) increase the number of
shares of Common Stock dedicated for options from 2,400,000 to
4,200,000 and (iii) extend the termination date from December
31, 1997 to December 31, 2002.
3. To transact such other business as may properly come before
the meeting.
The holders of shares of Common Stock of record at the close of
business on March 15, 1996 are entitled to vote at the meeting. If you are
present at the meeting, you may vote in person even though you have previously
delivered your proxy.
By Order of the Board of Directors
Katheryn E. Surface
Corporate Secretary
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN, DATE AND
RETURN THE ENCLOSED PROXY. IF YOU ATTEND THE MEETING, YOU MAY WITHDRAW YOUR
PROXY AND VOTE IN PERSON.
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
PROXY STATEMENT
MARCH 29, 1996
GENERAL
The enclosed proxy is solicited by the directors of United Dominion
Realty Trust, Inc. (the "Company") for the Annual Meeting of Shareholders to be
held at the Omni Richmond Hotel, 12th and Cary Streets, Richmond, Virginia, at
4:00 p.m. on Tuesday, May 7, 1996 (the "Annual Meeting"). The proxy may be
revoked at any time prior to voting thereof by notifying the persons named
therein of intention to revoke or by conduct inconsistent with continued
effectiveness of the proxy, such as delivery of a later dated proxy or
appearance at the meeting and voting in person the shares to which the proxy
relates. Shares represented by executed proxies will be voted, unless a
different specification is made therein, FOR election as directors of the
persons named therein and FOR approval of the amendments to the 1985 Stock
Option Plan, as each is described herein. This proxy statement and the enclosed
proxy were mailed beginning March 29, 1996 to shareholders of record at the
close of business on March 15, 1996 (the "Record Date"). The Company has mailed
each shareholder of record as of the Record Date an Annual Report that includes
audited financial statements for the year ended December 31, 1995.
At the close of business on the Record Date, the Company had
shares outstanding and entitled to vote. Each share has one vote on all
matters including those to be acted upon at the Annual Meeting. The holders of a
majority of such shares present at the Annual Meeting in person or represented
by proxies will constitute a quorum. If a quorum is present, the affirmative
vote of (i) a plurality of the shares voting at the Annual Meeting is required
to elect directors, and (ii) a majority of the shares voting at the Annual
Meeting is required to amend the 1985 Stock Option Plan. Shareholders who wish
to abstain from voting on any matter to be voted on at the Annual Meeting may do
so by specifying that their vote on such matter be withheld in the manner
provided in the enclosed proxy, and the shares otherwise votable by such
shareholders will not be included in determining the number of shares voted on
such matter. The Company will comply with instructions in a proxy executed by a
broker or other nominee shareholder that less than all of the shares of which
such shareholder is the holder of record on the Record Date are to be voted on a
particular matter. All such shares which are not voted ("broker non-votes") will
be treated as shares as to which vote has been withheld.
The mailing address of the Company is 10 South Sixth Street, Suite 203,
Richmond, Virginia 23219-3802. Notices of revocation of proxies should be sent
to that address.
THE COMPANY WILL PROVIDE SHAREHOLDERS, WITHOUT CHARGE, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR THE YEAR ENDED DECEMBER 31, 1995, INCLUDING FINANCIAL STATEMENTS
AND SCHEDULES THERETO, ON WRITTEN REQUEST TO KATHERYN E. SURFACE, SECRETARY OF
THE COMPANY, AT THE MAILING ADDRESS SET FORTH ABOVE.
OWNERSHIP OF EQUITY SECURITIES
"Beneficial ownership" as used herein has been determined in accordance
with the rules and regulations of the Securities and Exchange Commission (the
"Commission") and is not to be construed as an admission that any of such shares
are in fact beneficially owned by any person. As of the Record Date, there are
no shareholders known to the Company who own beneficially 5% or more of the
outstanding shares of Common Stock.
1
<PAGE>
Beneficial ownership of shares as of the Record Date by directors and
officers of the Company and nominees for election at the Annual Meeting,
including shares deemed owned as a consequence of ownership of stock options
exercisable within 60 days, is indicated in the table below. Except as otherwise
indicated in the footnotes, each person named in the table and included in the
director/officer group has sole voting and investment powers as to such shares,
or shares such powers with his spouse and minor children, if any.
<TABLE>
<CAPTION>
Shares Beneficially Owned
Immediately Through Options (1)
Name Number Percent Number Percent
---- ------ ------- ------ -------
<S> <C> <C> <C> <C>
Jeff C. Bane............................... 0.1 6,000 --
Robert P. Buford........................... 129,000 0.2 6,000 --
Richard B. Chess........................... 57,650 0.1 52,263(4) 0.1
R. Toms Dalton, Jr......................... 33,740 0.1 4,000 --
James Dolphin.............................. 140,310(3) 0.2 60,542(4) 0.1
Richard A. Giannotti....................... 49,250 0.1 51,012(4) 0.1
Barry M. Kornblau.......................... 218,499(5) 0.4 30,774(4) 0.1
John C. Lanford............................ 12,323(6) -- 6,000 --
John P. McCann............................. 358,164(2)(3) 0.6 231,204(4) 0.4
H. Franklin Minor.......................... 64,900 0.1 6,000 --
Lynne B. Sagalyn........................... 0 -- 0(7) --
C. Harmon Williams, Jr..................... 61,168(2) 0.1 6,000 --
All directors and officers as a group* 1,398,836(2)(3)(5) 2.5 691,779(4) 1.2
*(24 persons)
</TABLE>
(1) Assumes exercise in full of all options exercisable within 60
days.
(2) Includes, in the case of Mr. McCann and all directors and
officers as a group and does not include in the case of
Messrs. Bane and Williams, 37,500 shares owned by Planned
Property Realty Corp., of which Mr. McCann is President and
50% shareholder and of which Messrs. Bane and Williams are
each 25% shareholders. The Form 3 of Mr. Bane was amended by
a Form 5 for 1995 to report ownership of shares by Planned
Property Realty Corp.
(3) Includes 8,000 shares held by the Profit Sharing Plan of the
Company (the "Plan") of which Messrs. McCann and Dolphin are
trustees and under which they share voting and investment
powers as to such shares.
(4) Does not include 44,737 shares, 97,126 shares, 45,988 shares,
77,226 shares, 138,132 and 516,925 shares issuable upon
exercise of options granted to Messrs. Chess, Dolphin,
Giannotti, Kornblau, McCann and all directors and officers as
a group, respectively, which are not exercisable within 60
days.
2
<PAGE>
(5) Does not include a total of 1,263,708 shares beneficially
owned by Mr. Kornblau's parents, beneficial ownership of which
is disclaimed by Mr. Kornblau.
(6) Includes 1,323 shares in Mr. Lanford's self-directed IRA
account, the purchase of which in June of 1993 was not
reported to the Commission on a timely basis, but was reported
on Mr. Lanford's Form 5 for 1995.
(7) In the event Ms. Sagalyn is elected to the Board at the Annual
Meeting and the proposed amendments to the 1985 Stock Option
Plan are approved, she will be granted 7,000 stock options.
ELECTION OF DIRECTORS
At the Annual Meeting nine directors are to be elected, each to hold
office until the next Annual Meeting of Shareholders and until his or her
successor is duly elected and qualified, except in the event of death,
resignation or removal. Unless otherwise specified, proxies solicited hereby
will be voted FOR election of the nominees listed below, except that in the
event any of those named should not continue to be available for election,
discretionary authority may be exercised to vote for a substitute. No
circumstances are presently known that would render any nominee named herein
unavailable. All of the nominees, except Ms. Sagalyn, are now members of the
Board of Directors and were elected at the 1995 Annual Meeting of Shareholders.
The nominees, their ages, the year of election of each to the Board,
their principal occupations during the past five years or more, and
directorships of each in other companies, are as follows:
Jeff C. Bane, 66, is President of Blake & Bane Inc., Richmond,
Virginia, real estate brokers. He is a director of F&M Bank, Richmond,
Virginia. He was first elected to the Board in 1972.
R. Toms Dalton, Jr., 63, is a partner with Allen & Carwile, Waynesboro,
Virginia, attorneys. He is a director of First Virginia Bank of
Augusta, Wayneboro, Virginia. He was first elected to the Board in
1973.
James Dolphin, 46, is Senior Vice President and Chief Financial Officer
of the Company. He was first elected to the Board in 1988.
Barry M. Kornblau, 46, is Senior Vice President and Director of
Apartments of the Company. Mr. Kornblau joined the Company in 1991, in
connection with the acquisition by the Company of the management of its
apartment properties from Summit Realty Group, Inc., which had managed
them since 1985. Mr. Kornblau has been President of Summit Realty
Group, Inc., since 1984. He is also a director of Commerce Bank of
Virginia, Richmond, Virginia. He was first elected to the Board in
1993.
John C. Lanford, 65, is President of Adams Construction Co., Inc.,
Roanoke, Virginia, general contractors. He was first elected to the
Board in 1973.
John P. McCann, 51, is President and Chief Executive Officer of the
Company. He is a director of Crestar Bank, Capitol Region, Richmond,
Virginia, and Storage USA, Inc., Columbia, Maryland. He was first
elected to the Board in 1978.
H. Franklin Minor, 63, is an attorney-at-law and real estate broker in
Richmond, Virginia. He was first elected to the Board in 1974.
3
<PAGE>
Lynne B. Sagalyn, 48, has been a professor and the coordinator of the
Real Estate Program at the Columbia University Graduate School of
Business since 1992. From 1991 to 1992, she was a visiting professor at
Columbia. From 1987 to 1991, she was an associate professor of Planning
and Real Estate Development at Massachusetts Institute of Technology.
She is also on the faculty of the Homer Hoyt Institute for Advanced
Studies in Real Estate and Land Economics. Ms. Sagalyn is a director of
The Nature Conservancy, National Real Estate Advisory Board and The
Retail Initiative.
C. Harmon Williams, Jr., 65, is a real estate broker in
Charlottesville, Virginia. He was first elected to the Board in 1972
and has served as Chairman of the Board since 1977.
COMMITTEES OF THE BOARD
The Board has established an Executive Committee, a Compensation
Committee and an Audit Committee as its standing committees. The Executive
Committee has, to the extent permitted by law, all powers vested in the Board of
Directors except such powers specifically denied it by the full Board. During
1995, Messrs. Buford, Dolphin, McCann and Williams were the members of the
Executive Committee. The Compensation Committee sets directors' fees, the
salaries of the President, Senior Vice Presidents and two Vice Presidents who
also head departments of the Company (the "Named Executives"), contributions and
awards, if any, under employee benefit plans and management incentive plans, and
other management compensation, if any. Additionally, the Compensation Committee
reviews the calculation of incentive/bonus compensation under the employment
agreements described in "Employment Agreements" below. The members of the
Compensation Committee during 1995 are identified below under "Compensation
Committee Interlocks and Insider Participation." The Audit Committee reviews the
financial reporting practices of the Company and the external audit function.
Messrs. Bane, Buford and Minor were the members of the Audit Committee during
1995. Mr. Buford, who will retire from the Board at the Annual Meeting, is
senior counsel to Hunton & Williams, which has been the Company's counsel since
its inception.
During 1995, the Board held 18 meetings (including 11 special
meetings), the Compensation Committee held 3 meetings and the Audit Committee
held 2 meetings. The Executive Committee did not meet during the year. Each
director attended at least 75% of the meetings of the Board and of the committee
to which he was assigned.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, the Compensation Committee consisted of Messrs. Dalton,
Lanford and Williams. As described under "Compensation Committee Report on
Executive Compensation," Mr. McCann participates in establishing the base
compensation of the Company's other Named Executives.
INDEBTEDNESS OF OFFICERS TO COMPANY
The executive officers of the Company listed in the table below are
indebted to the Company for Common Stock purchased pursuant to the 1991 Stock
Purchase and Loan Plan (the "Stock Purchase and Loan Plan") approved by the
shareholders at the 1992 Annual Meeting. The table indicates the largest amount
of the indebtedness outstanding since the beginning of fiscal year 1995 and the
amount outstanding at March 31, 1996. As provided in the Stock Purchase and Loan
Plan, such indebtedness bears interest at 7% per annum.
4
<PAGE>
Maximum Indebtedness
Name Since January 1, 1995 at March 31, 1996
---- --------------------- -----------------
John P. McCann $1,492,278 $1,474,671
James Dolphin 679,060 672,170
Barry M. Kornblau 674,899 667,612
Richard A. Giannotti 469,114 464,431
Richard B. Chess 465,684 460,693
COMPENSATION OF DIRECTORS
For 1995, directors were paid retainer fees of $9,000 plus $1,000 for
each regular meeting attended. During 1995, the directors as a group (other than
Messrs. McCann, Dolphin and Kornblau, who received no additional compensation
for serving as directors) received fees of $94,000. In December of 1995, the
Board, upon recommendation of the Compensation Committee: (i) adopted a
retirement policy whereby any director retiring from the Board after at least
twenty years' service on the Board as an independent director will receive
$5,000 per year for five years payable in January of each year, and (ii)
approved a proposal to amend the 1985 Stock Option Plan to provide, among other
things, for an automatic annual grant of 2,000 stock options for each outside
director. The proposal to amend the 1985 Stock Option Plan is described in more
detail in "Proposed Amendment of 1985 Stock Option Plan," and is to be voted
upon by the shareholders at the Annual Meeting.
COMPENSATION OF EXECUTIVE OFFICERS
The following table presents information relating to total compensation
during the fiscal years ended December 31, 1995, 1994 and 1993, of the chief
executive officer and the other Named Executives whose total salary and bonus
exceeded $100,000 for the 1995 calendar year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Name and Annual Compensation Awards All Other
Principal Position Year Salary Bonus Options Compensation(1)
<S> <C> <C> <C> <C> <C>
John P. McCann 1995 $ 320,000 $83,904 60,000 $ 2,887
President and Chief 1994 290,000 95,700 70,000 2,634
Executive Officer 1993 232,500 76,725 -- 2,574
James Dolphin 1995 176,000 46,147 30,000 2,887
Senior Vice President 1994 160,000 52,800 30,000 2,634
and Chief Financial Officer 1993 140,000 46,200 -- 2,574
Barry M. Kornblau 1995 176,000 46,147 30,000 2,887
Senior Vice President 1994 160,000 52,800 30,000 2,634
and Director of Apartments 1993 146,000 48,180 -- 2,574
Richard B. Chess 1995 120,000 31,464 22,500 2,887
Vice President and 1994 107,000 44,310 22,500 2,634
Director of Acquisitions 1993 95,000 34,170 -- 2,574
Richard A. Giannotti 1995 108,000 28,318 22,500 2,887
Vice President and 1994 98,000 37,340 22,500 2,634
Director of Construction 1993 86,000 28,380 -- 2,574
</TABLE>
(1) Represents contributions to the Plan for each of the Named Executives.
Messrs. McCann and Dolphin are trustees and participants in the Plan.
5
<PAGE>
OTHER TRANSACTIONS
C. Harmon Williams, Jr., is a 49% owner of Northforty Commercial
Properties, Inc. ("Northforty"), a commercial real estate brokerage firm. In
1995, Northforty acted as a broker on three transactions involving the Company
(two purchases and one sale) and was paid aggregate commissions of $166,605.
With respect to the purchase transactions, the commissions were paid by the
seller.
EMPLOYMENT AGREEMENTS
In October, 1982, the Company entered into employment agreements with
Messrs. McCann and Dolphin and on January 1, 1991, entered into an employment
agreement with Mr. Kornblau, who had not previously been employed by it. The
employment agreements, which expire annually on December 31 but renew
automatically for successive one year periods unless sooner terminated and are
on substantially similar terms except for compensation terms, provide annual
base salaries for the employees, subject to increase at the discretion of the
Board of Directors. The annual base salaries for the employees for 1995 are
disclosed above in the Summary Compensation Table. The agreements also provide
for annual incentive/bonus compensation, calculated as a percentage of base
salary for the year, based upon the increase in funds from operations ("FFO")
per share, the primary performance measurement of the Company, for the current
year over the prior year, up to a maximum incentive/bonus equal to 50% of base
salary for Mr. McCann and 33% of base salary for Messrs. Dolphin and Kornblau.
Incentive/bonuses, as a percent of base salary, are equal to twice the
percentage increase in FFO, so that, for example, a 10% increase in FFO will
result in an incentive bonus of 20% of base salary. Therefore, the maximum
incentive bonus is achieved when FFO increases by 16.5%. The maximum incentive
bonus for Mr. McCann will be paid when FFO per share increases by 16.5%;
percentage increases of less than 16.5% result in incentive/bonus of a
percentage of base salary equal to twice the amount of the percentage increase.
No incentive/bonus compensation will be payable under any employment agreement
if the increase for the year in FFO per share is less than 5%. Either the
Company or the employee may terminate the agreement by 90 days' notice or in the
event that the Company is sold, merged or otherwise liquidated. The agreements
with Messrs. McCann and Dolphin provide that, in either case, the employee is
entitled to severance pay equal to his then current annual base salary plus a
pro-rata portion of any incentive/bonus compensation payable for that year. The
agreement with Mr. Kornblau provides that he is entitled to such severance pay
only in the event that the Company is sold, merged or otherwise liquidated.
The following tables present information concerning stock options exercised
by the chief executive officer and the other Named Executives of the Company.
The Company does not grant stock appreciation rights.
OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUE
<TABLE>
<CAPTION>
Value of Unexercised
Unexercised Options In-the-Money Options
Shares at Fiscal Year at Fiscal Year
Acquired Value End(1) Exercisable End(2) Exercisable
Name on Exercise Realized(2) /Unexercisable /Unexercisable
<S> <C> <C> <C> <C>
John P. McCann 47,220 $298,076 244,648/138,132 $810,868/$394,530
James Dolphin 10,444 $ 67,233 87,430/ 97,126 $517,518/$218,186
Barry M. Kornblau 5,472 $ 29,754 30,774/ 77,226 $105,786/$126,715
Richard B. Chess 4,500 $ 32,281 53,963/ 44,737 $215,849/$ 50,132
Richard A. Giannotti 12,000 $ 86,250 51,012/ 45,988 $199,104/$ 54,021
</TABLE>
6
<PAGE>
(1) Includes unvested options for 60,000 shares, 30,000 shares, 30,000 shares,
22,500 shares and 22,500 shares granted to Messrs. McCann, Dolphin, Kornblau,
Chess and Giannotti, respectively.
(2) These values are calculated based on the difference between the exercise
price(s) and the fair market value of the stock, as determined by reference to
the closing sale prices on the New York Stock Exchange (the "NYSE") as of the
exercise date(s) or December 29, 1995, as appropriate.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board has delegated to the Compensation Committee responsibility for
developing and applying programs for compensating the Company's executive
officers. During 1995, the Compensation Committee consisted of three outside
directors. In addition, as described below, John P. McCann, President of the
Company, participates in establishing executive officer compensation for other
Named Executives.
Executive compensation consists of four components: base salary,
performance compensation, incentive compensation, and long term compensation.
Each component is discussed below.
With respect to base salary, the President consults with the Compensation
Committee as to the amount of his proposed base salary and that of the other
Named Executives. After consulting with the President and considering the
factors discussed below, the Compensation Committee sets the base salaries of
the Named Executives.
Factors considered by the Compensation Committee in setting base salaries
include the performance of the Company, individual accomplishments, any planned
change of responsibility for the forthcoming year, salaries paid for similar
positions within the real estate and REIT industry as published in industry
statistical surveys and proposed base salary relative to that of other Named
Executives. The predominating factor is the performance of the Company. The
application of the remaining factors is subjective, with no particular factor
being given more weight than the others. For the President, the Compensation
Committee's perception of his performance is a factor. For the other Named
Executives, the President's perception of their performance is also a factor.
Industry awards are also considered. During each of the past six years, the
President has received outstanding CEO awards from various publications. The
Compensation Committee believes that these awards reflect not only the
performance of the President, but also the other Named Executives. The market
value of the Common Stock is not considered in setting base salaries.
The performance of the Company is the most important factor in setting base
salary. The Compensation Committee considers growth in FFO per share, the volume
and quality of acquisitions, completed financings, execution of management's
plan for the Company and other measures in assessing the Company's performance
for the year, with the growth in FFO per share being the most important factor.
The Compensation Committee also considers how the accomplishments of the current
year position the Company for succeeding years.
The Compensation Committee believed that 1995 was a good year for the
Company. FFO increased 13% per share, mature apartment net operating income
increased 7%, 1995 acquisitions performed above projections, apartment
development and sales programs were initiated, and the Company successfully
completed a variety of financings believed to be attractive over the long term.
These accomplishments were considered in setting base salaries for 1996.
Performance compensation, in the form of incentive bonuses, is provided for
in the employment agreements of the President and the Senior Vice Presidents
summarized above under "Employment Agreements." For 1995, the other two Named
7
<PAGE>
Executives received performance compensation on the same basis as the President
and Senior Vice Presidents. This performance compensation, as a percentage of
base salary, is equal to twice the percentage increase in FFO per share for the
current year over the prior year, up to a maximum of 50% of base salary for Mr.
McCann and 33% of base salary for the other Named Executives. Based upon the 13%
per share increase in FFO, the President and the other Named Executives earned
performance compensation of 26% of their respective base salaries for 1995.
Incentive and long term compensation are designed to attract, motivate and
retain executives critical to the long term success of the Company, by promoting
the alignment of executive interests and the interests of shareholders. Stock
options and participation in the Stock Purchase and Loan Plan are the principal
incentive and long term compensation vehicles. In selecting recipients and the
size of their awards, their positions with the Company, their long term
potential and prior awards are considered. The Compensation Committee believes
option grants should either be made annually or vest annually on a generally
consistent basis.
Compensation Committee
R. Toms Dalton John C. Lanford C. Harmon Williams, Jr.
President
John P. McCann
PROPOSED AMENDMENT OF 1985 STOCK OPTION PLAN
The Board has adopted and recommends that the shareholders approve
amendments of the 1985 Stock Option Plan, as amended to date (the "Stock Option
Plan"), which will (i) establish the number of options to be granted to
directors who are not employees of the Company and fix other terms of such
options, (ii) increase the number of shares of Common Stock dedicated for
issuance upon exercise of options granted thereunder from 2,400,000 (as adjusted
to give effect to the stock split which occurred in 1993) to 4,200,000, and
(iii) extend the Stock Option Plan termination date from December 31, 1997 to
December 31, 2002.
Under the amendments applicable to options granted to directors who are
not employees, each such director will be granted options to purchase 2,000
shares of Common Stock, on each date each director is elected or re-elected to
the Board. The option price of such options will be "Fair Market Value", as
defined in the Stock Option Plan, of the Common Stock on the date of grant, and
it may be paid only in cash. Such options will be exercisable for a period of
ten years from the date of grant (subject to earlier termination as described
below) and will be immediately exercisable in whole or from time to time in
part. In addition, on the date of his or her first being elected to the Board, a
non-employee director will be granted options to purchase 5,000 shares of Common
Stock at the Fair Market Value of the Common Stock on the date of grant. The
purchase price of such options will be payable only in cash; such options will
be exercisable for a period of five years from the date of grant (subject to
earlier termination as described below) and will be immediately exercisable in
whole or from time to time in part.
Currently options are granted to non-employee directors who are not
Compensation Committee members in the discretion of the Compensation Committee.
The Board believes that changing the basis of award of options to such directors
from a discretionary basis to a basis fixed by the terms of the Stock Option
Plan will eliminate a conflict of interest inherent in administration of the
Stock Option Plan. The amendments also make Compensation Committee members
eligible for options and provide that the provisions of the Stock Option Plan
relating to options to be granted to non-employee directors cannot be amended
more than once
8
<PAGE>
every six months, other than to comport with changes in the Internal Revenue
Code, the Employees Retirement Income Security Act or the rules thereunder. Any
amendment of such provisions that would materially increase the number of
options granted to non-employee directors must be approved by the Company's
shareholders.
The Company currently employs approximately 1,100 persons, including
three who are also directors, who are potential participants in the Stock Option
Plan. There are six directors who are not employed by the Company to whom
options will be granted annually under the proposed amendments. If the proposed
amendments had been in effect for the last fiscal year, these directors would
have been granted options on May 2, 1995, for a total of 12,000 shares of Common
Stock at a price of $14 per share. If Ms. Sagalyn, a nominee for election to the
Board at the Annual Meeting, had been elected on May 2, 1995 and the proposed
amendments had then been in effect, she would have been granted options to
purchase 7,000 shares of Common Stock at a price of $14 per share on May 2,
1995.
Options granted to a non-employee director will terminate 30 days after
the director resigns or is removed rom the Board, or 30 days after the annual
meeting of shareholders at which the director's term expires, if the director
does not stand or is not nominated for re-election or retires at that meeting.
With respect to the remaining proposed amendments to the Stock Option
Plan, options for 1,896,100 shares have been granted since the adoption of the
Stock Option Plan in 1985, leaving only 602,840 (98,940 of the options being
terminated and reallocated to the Plan as provided by Article V of the Plan)
available for future options, while the number of potential optionees has grown
substantially, primarily as a result of increase in the number of employees,
from approximately 445 in February of 1993 to approximately 1,100 in February of
1996. The Board believes that the Stock Option Plan is an effective incentive
and long term compensation vehicle for key employees which is critical in
motivating and retaining key employees by aligning their interest with those of
the shareholders. Increasing the number of shares reserved for the Stock Option
Plan will assure an adequate reservation for annual grant of options to key
employees until the Stock Option Plan terminates. The Board also believes that
extending the termination date of the Stock Option Plan as proposed will allow
for the Stock Option Plan to continue to be used as a mechanism to compensate
key employees.
A copy of the Stock Option Plan, giving effect to the proposed
amendments, is attached to this Proxy Statement as Exhibit A. The following
discussion is only a summary of the Stock Option Plan and is qualified in its
entirety by reference to Exhibit A.
GENERAL
The Stock Option Plan reserves an adjusted total of 2,400,000 shares of
Common Stock (subject to further adjustment pursuant to customary antidilution
provisions) for issuance upon exercise of options granted under the Stock Option
Plan. The Company has issued 383,056 shares on exercise of options
previously granted and options for 1,896,000 shares are outstanding, leaving
602,840 (98,940 of the options being terminated and reallocated to the Plan as
provided by Article V of the Plan) shares currently available for options.
Approval of the proposed amendments will increase the number of shares reserved
for options to 4,200,000, thus increasing the number of shares currently
available for options to approximately 2,400,000. The aggregate market
value of the shares subject to outstanding options and reserved for
future options under the proposed amendments, based upon the closing sale
price of the Common Stock on the NYSE on April _, 1995, was $__. Unless sooner
terminated by the Board, the Stock Option Plan will terminate on December 31,
1997. Approval of the proposed amendments will extend this date to December
31, 2002.
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The Stock Option Plan is intended to assist the Company in recruiting
and retaining directors and key employees with ability and initiative by
enabling directors and employees who contribute significantly to the Company to
participate in its future success and to associate their interests with those of
the Company. The Compensation Committee designates employees, including
employees who are directors, to whom options are to be granted. Non-employee
directors are granted options upon first being elected to the Board and annually
as described under "Options - Non-employee Directors." An option granted under
the Stock Option Plan may be an incentive stock option ("ISO") qualifying for
favorable income tax treatment under Section 422A of the Internal Revenue Code
of 1981, as amended, or a nonqualified stock option ("NQO"), as determined by
the Compensation Committee. Only NQOs may be granted to directors who are not
also employees. All options granted under the Stock Option Plan are evidenced by
agreements ("Option Agreements") between the Company and the Stock Option Plan
participants that specify the terms and conditions of the options consistent
with the provisions of the Stock Option Plan. Options cannot be granted after
December 31, 1997. Approval of the proposed amendments will extend this date to
December 31, 2002.
ADMINISTRATION
The Compensation Committee administers the Stock Option Plan. Members
of the Compensation Committee, like other members of the Board who are not
employees, will be granted options as described under "Options - Non-employee
Directors."
OPTIONS
Options granted under the Stock Option Plan are not transferable except
at death. Options may be exercised in accordance with the Stock Option Plan and
such other terms and conditions not prescribed by the Stock Option Plan as the
Compensation Committee may prescribe in Option Agreements. No option will be
exercisable after 10 years from the date the option was granted.
Employees. Any employee of the Company, including any executive officer
of the Company and any employee who is a director, who, in the judgment of the
Compensation Committee, has contributed or can be expected to contribute to the
profits or growth of the Company, may be granted one or more options under the
Stock Option Plan. The Compensation Committee determines the number of shares
subject to each option granted by it.
The price per share payable upon exercise of any option granted to an
employee under the Stock Option Plan will be determined by the Compensation
Committee but in the case of an ISO will not be less than the "Fair Market
Value" of the Common Stock on the date of grant, which is the closing sale price
of the Common Stock on the NYSE on such date, or, if the NYSE shall be closed on
such date, or if the Common Stock is not traded on such date, the next preceding
date on which the NYSE shall have been open and the Common Stock traded thereon.
If an ISO is granted to an employee who owns, directly or by attribution, more
than ten percent of the total combined voting power of all classes of stock of
the Company, the option price per share may not be less than 110% of the per
share fair market value of the Common Stock on the date of grant.
An employee may not be granted ISOs that first become exercisable in a
calendar year for Common Stock with a fair market value (determined as of the
date of grant) that exceeds $100,000.
An employee exercising an option may pay the purchase price in cash or
a cash equivalent acceptable to the Compensation Committee. If the Option
Agreement so provides, payment of all or part of the option price also may be
made by surrendering shares of Common Stock to the Company provided the shares
surrendered have a fair market value that is not less than the option price or
part thereof in payment of which such shares are surrendered.
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Non-employee Directors. Each director who is not an employee of the
Company will be granted options to purchase 2,000 shares of Common Stock on each
date each director is elected or re-elected to the Board. The option price will
in each case be the "Fair Market Value," as defined in the Stock Option Plan, of
the Common Stock on the date of grant, and will be payable only in cash. Such
options will be exercisable for a period of ten years from the date of grant
(subject to earlier termination as described below) and will be immediately
exercisable in whole or from time to time in part.
In addition, on the date of his or her first being elected to the
Board, a non-employee director will be granted the option to purchase 5,000
shares of Common Stock at the Fair Market Value of the Common Stock on the date
of grant. The option price of such options will be payable only in cash; such
options will be exercisable for a period of five years from the date of grant
(subject to earlier termination as described below) and will be immediately
exercisable in whole or from time to time in part.
Options granted to a non-employee director will terminate 30 days after
the director resigns or is removed from the Board, or 30 days after the annual
meeting of shareholders at which the director's term expires, if the director
does not stand or is not nominated for re-election or retires at that meeting.
AMENDMENT OF THE STOCK OPTION PLAN
The Board may amend the Stock Option Plan in such respects as it deems
advisable, but the shareholders must approve any amendment that would (i)
increase the aggregate number of shares that may be issued under options, (ii)
change the class of persons eligible to participate in the Stock Option Plan, or
(iii) otherwise materially increase the benefits accruing to participants in the
Stock Option Plan. The provisions applicable to options to be granted to
non-employee directors cannot be amended more than once every six months, other
than to comport with changes in the Internal Revenue Code, the Employees
Retirement Income Security Act or the rules thereunder. In addition, without a
participant's consent, no amendment may adversely affect the rights of such
participant under any option outstanding at the time the amendment is made.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the Company's understanding of the
more significant federal income tax consequences associated with the Stock
Option Plan.
The Company has been advised by counsel that, for federal income tax
purposes, no income will be recognized by a participant when an option is
granted. If an option is exercised, the federal income tax consequences will
depend upon whether the option is an ISO or an NQO.
No income will be recognized by a participant upon the exercise of an
ISO (although the difference between the fair market value of the Common Stock
on the date of exercise and the option price is an adjustment to income for
purposes of determining the participant's alternative minimum taxable income). A
participant will recognize income if and when he disposes of the shares acquired
under the ISO. If the disposition occurs more than two years after the grant of
the ISO and more than one year after the shares were transferred to him (the
"ISO holding period"), the gain realized on such disposition will be
characterized as long-term capital gain (which under current law is taxed at the
same rate as ordinary income). If the disposition occurs prior to expiration of
the ISO holding period, the participant will recognize, as ordinary income, the
difference between the fair market value of the Common Stock on the date of
exercise and the market price.
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The Company will not be entitled to a federal income tax deduction with
respect to the grant or exercise of an ISO unless the participant disposes of
Common Stock acquired thereunder prior to the expiration of the ISO holding
period. In that event, the Company generally will be entitled to a deduction
equal to the amount of ordinary income recognized by the participant.
Upon the exercise of an NQO, the participant will recognize, as
ordinary income, the difference between the option price and the fair market
value of the Common Stock on the date the option is exercised. If the
participant is then subject to the reporting requirements of Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act"), the recognition of this
income will be deferred for six months from the date of grant of the option. In
such case, the ordinary income recognized at the end of that period will include
any increase (or reflect any decrease) in the fair market value of the stock
during that period. A person who is subject to the reporting requirements of
Section 16 of the Exchange Act may elect to recognize income and have the amount
of income determined as of the date of exercise by filing an "83(b) election"
within thirty days of exercise.
Any gain or loss that a participant realizes on a subsequent
disposition of Common Stock acquired upon the exercise of an NQO will be treated
as long-term or short-term capital gain or loss, depending on the period during
which the participant held such shares.
The exercise of an NQO will entitle the Company to claim a federal
income tax deduction equal to the amount of income recognized by the
participant.
A participant's tax basis in Common Stock acquired under an ISO or NQO
will equal the sum of (i) the option price that is paid to acquire such stock
and (ii) any amount that the participant is required to include in income upon
the exercise of such right.
OPTIONS GRANTED PURSUANT TO THE STOCK OPTION PLAN
Options have been granted pursuant to the Stock Option Plan since its
inception are as follows:
NUMBERS OF
SHARES(1)
John P. McCann, President and Chief Executive Officer
and Director....................................................450,000
James Dolphin, Senior Vice President, Chief Financial
Officer and Director............................................198,000
Barry M. Kornblau, Senior Vice President, Director of
Apartments and Director.........................................144,000
Richard B. Chess, Vice President and Director of Acquisitions............113,000
Richard A. Giannotti, Vice President and Director of Construction........115,000
All executive officers as a group......................................1,020,000
All directors who are not Company employees as a group....................52,000
All employees as a group...............................................1,844,100
(1) For current information on the status of options held by officers
and directors as a group, see the table labeled "Shares Beneficially
Owned."
PERFORMANCE GRAPH
1996 PROXY PERFORMANCE GRAPH COORDINATES
Equity S&P 500 UDR
100.0 100.00 100.00
135.70 130.55 148.78
155.49 140.56 193.58
186.06 154.60 229.45
191.95 156.63 244.43
221.26 215.25 271.46
Indicates appreciation of $100 invested on December 31, 1990, in
Company common stock (UDR) and S&P 500 and NAREIT Equity REIT Total Return Index
securities (excluding health care), assuming full reinvestment of dividends.
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The NAREIT Equity REIT Total Return Index (excluding health care) is
published by the National Association of Real Estate Investment Companys, Inc.
Index data reflect monthly reinvestment of dividends and are based upon the
monthly closing prices of shares of all tax-qualified equity REITs (real estate
investment trusts at least 75% of whose gross invested assets are invested in
real estate equities, excluding health care), including the Company, listed on
the NYSE and the American Stock Exchange and traded in NASDAQ National Market
System. At December 31, 1995, this Index included 219 equity REITs with a total
market capitalization of $57.5 billion.
MATTERS TO BE PRESENTED AT THE 1997 ANNUAL MEETING OF SHAREHOLDERS
Any qualified shareholder wishing to make a proposal to be acted upon at
the Annual Meeting of Shareholders in 1997 must submit such proposal, to be
considered by the Company for inclusion in the proxy statement, to the Company
at its principal office in Richmond, Virginia, no later than December 15, 1997.
OTHER MATTERS
Management knows of no matters other than those stated above likely to be
brought before the Annual Meeting. However, if any matters not now known come
before the Annual Meeting, the persons named in the enclosed proxy are expected
to vote the shares represented by such proxy on such matters in accordance with
their best judgment.
THE COMPANY DEPENDS UPON ALL SHAREHOLDERS PROMPTLY SIGNING AND RETURNING
THE ENCLOSED PROXY TO AVOID COSTLY SOLICITATION. YOU CAN SAVE THE COMPANY
CONSIDERABLE EXPENSE BY SIGNING AND RETURNING YOUR PROXY AT ONCE.
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EXHIBIT A
UNITED DOMINION REALITY TRUST, INC. 1985 STOCK OPTION PLAN
ARTICLE I
DEFINITIONS
1.01 Affiliate means any "subsidiary" or "parent" corporation (within
the meaning of Section 422A of the Code) of the Company.
1.02 Agreement means a written agreement (including any amendment or
supplement thereto) between the Company and a Participant specifying the terms
and conditions of an Option granted to such Participant.
1.03 Board means the Board of Directors of the Company.
1.04 Code means the Internal Revenue Code of 1954, as amended, and the
Internal Revenue Code of 1986, as amended.
1.05 Committee means the Compensation Committee of the Board.
1.06 Common Stock means the common stock of the Company.
1.07 Company means United Dominion Realty Trust, Inc.
1.08 Director means a member of the Board who is not employed by the
Company or an Affiliate.
1.09 Director Option means an Option granted to a Director.
1.10 ERISA means the Employee Retirement Income Security Act of 1974,
as amended.
1.11 Fair Market Value means, on any given date, the closing sale price
of the Common Stock on the NYSE on such date, or, if the NYSE shall be closed on
such date, or if the Common Stock is not traded on the NYSE on such date, the
next preceding date on which the NYSE shall have been open and the Common Stock
traded thereon.
1.12 NYSE means the New York Stock Exchange.
1.13 Option means a stock option that entitles the holder to purchase
from the Company a stated number of shares of Common Stock, at the price set
forth in an Agreement.
1.14 Participant means an employee of the Company or an Affiliate,
including such an employee who is also a member of the Board, who satisfies
requirements of Article IV and is selected by the Committee to receive an
Option.
1.15 Plan means the United Dominion Realty Trust, Inc. 1985 Stock
Option Plan.
1.16 Ten Percent Shareholder means any individual owning more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or of an Affiliate. An individual shall be considered to own any voting
stock owned (directly or indirectly) by or for brothers, sisters, spouse,
ancestors or lineal descendants and shall be considered to own proportionately
any voting stock owned (directly or indirectly) by or for a corporation,
partnership, estate or trust of which such individual is a shareholder, partner
or beneficiary.
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ARTICLE II
PURPOSES
The Plan is intended to assist the Company in recruiting and retaining
Directors and key employees with ability and initiative by enabling Directors
and employees who contribute significantly to the Company or an Affiliate to
participate in its future success and to associate their interests with those of
the Company. It is further intended that Options granted under the Plan shall
constitute "incentive stock options" within the meaning of Section 422A of the
Code, but no Option shall be invalid for failure to qualify as an incentive
stock option. The proceeds received by the Company from the sale of Common Stock
pursuant to the Plan shall be used for general corporate purposes.
ARTICLE III
ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall
have authority to grant Options upon such terms (not inconsistent with the
provisions of the Plan) as it may consider appropriate. Such terms may include
conditions (in addition to those contained in the Plan) upon the exercisability
of all or any part of an Option. Notwithstanding any such conditions, the
Committee, in its discretion, may accelerate the time at which any Option, other
than a Director Option, may be exercised; provided, however, that no
acceleration shall affect the applicability of Section 7.04 (relating to the
order in which incentive stock options may be exercised) or Section 4.02
(relating to the maximum number of shares for which an incentive stock option
may be exercisable in any calendar year). In addition, the Committee shall have
complete authority to interpret all provisions of the Plan; to prescribe the
form of Agreements; to adopt, amend, and rescind rules and regulations
pertaining to the administration of the Plan; and to make all other
determinations necessary or advisable for the administration of the Plan. The
express grant in the Plan of any specific power to the Committee shall not be
construed as limiting the power or authority of the Committee. Any decision
made, or action taken, by the Committee in connection with the administration of
the Plan shall be final and conclusive. No member of the Committee shall be
liable for any act done in good faith with respect to the Plan or any Agreement
or Option. All expenses of administering the Plan shall be borne by the Company.
ARTICLE IV
ELIGIBILITY
4.01 General. Any employee (including an employee who is a member of
the Board) of the Company or of any Affiliate (including any corporation that
becomes an Affiliate after the adoption of the Plan) who, in the judgment of the
Committee, has contributed or can be expected to contribute to the profits or
growth of the Company or such Affiliate may, and each Director will, be granted
one or more Options. All Options granted under the Plan shall be evidenced by
Agreements that shall be subject to applicable provisions of the Plan and to
such other provisions consistent with the Plan as the Committee may adopt. No
Participant may be granted incentive stock options (under all incentive stock
option plans of the Company and Affiliates) which are first exercisable in any
calendar year for stock having an aggregate fair market value (determined as of
the date an option is granted) exceeding $100,000.
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4.02 Grants to Employees. The Committee will designate employees to
whom Options are to be granted and will specify the number of shares of Common
Stock subject to each grant.
4.03 Director Options. Each Director will be granted Options to
purchase 2,000 shares of Common Stock on each date each director is elected or
re-elected to the Board. The option price of such Director Options will in each
case be the Fair Market Value on the date of grant and will be payable only in
cash. Such Director Options will be exercisable for a period of ten (10) years
from the date of grant (subject to earlier termination as described below) and
will be immediately exercisable in whole or from time to time in part.
In addition, on the date of his or her first being elected to the
Board, a Director will be granted options to purchase 5,000 shares of Common
Stock at the Fair Market Value on the date of grant. The option price of such
Director Options will be payable only in cash; such Director Options will be
exercisable for a period of five (5) years from the date of grant (subject to
earlier termination as described below) and will be immediately exercisable in
whole or from time to time in part.
The provisions of this Section 4.03 will control in the event of any
inconsistency with other provisions of the Plan and may not be varied by the
Committee in any Agreement.
Options granted to a Director will terminate 30 days after the Director
resigns or is removed from the Board, or 30 days after the annual meeting of
shareholders at which the Director's term expires, if the Director does not
stand or is not nominated for re-election or retires at that meeting.
ARTICLE V
STOCK SUBJECT TO OPTIONS
The maximum aggregate number of shares of Common Stock that may be
issued pursuant to Options granted under the Plan is 4,200,000 subject to
adjustment as provided in Article IX. If an Option is terminated, in whole or in
part, for any reason other than its exercise, the number of shares of Common
Stock allocated to the Option or portion thereof may be reallocated to other
Options to be granted under the Plan.
ARTICLE VI
OPTION PRICE
The price per share for Common Stock purchased by the exercise of any
Option granted under the Plan shall be determined by the Committee on the date
the Option is granted; provided, however, that the price per share shall not be
less than the Fair Market Value on the date of grant in the case of Option that
is an incentive stock option, and that in the case of a Director Option the
price per share shall be the Fair Market Value. In addition, the price per share
shall not be less than 110% of such Fair Market Value in the case of an Option
that is an incentive stock granted to a Participant who is a Ten Percent
Shareholder on the date the Option is granted.
ARTICLE VII
EXERCISE OF OPTIONS
7.01 Maximum Option Period. No Option shall be exercisable after the
expiration of ten years from the date the Option was granted. The terms of any
Option not prescribed by the Plan may provide that it is exercisable for a
period less than such maximum period.
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7.02 Nontransferability. Any Option granted under the Plan shall be
nontransferable except by will or by the laws of descent and distribution and,
during the lifetime of the Participant to whom the Option is granted, may be
exercised only by the Participant. No right or interest of a Participant in any
Option shall be liable for, or subject to, any lien, obligation, or liability of
such Participant.
7.03 Employee Status. For purposes of determining the applicability of
Section 422A of the Code and Section 7.01, the Board may decide in each case to
what extent leaves of absence for governmental or military service, illness,
temporary disability, or other reasons shall not be deemed interruptions of
continuous employment.
7.04 Nonexercisability While Previously Granted Option Outstanding. No
Option which is an incentive stock option and which was granted before January
1, 1987 shall be exercisable by a Participant while that Participant has
outstanding (within the meaning of Subsection 422A(c)(7) of the Code) any option
which was granted before the Option was granted and which is an incentive stock
option to purchase stock in the Company, in a corporation that (at the time the
Option was granted) was an Affiliate, or in a predecessor of any of such
corporations.
ARTICLE VIII
METHOD OF EXERCISE
8.01 Exercise. Subject to the provisions of Articles VII and X, an
Option other than a Director Option may be exercised in whole at any time or in
part from time to time at such times and in compliance with such requirements as
the Committee shall determine. An Option granted under the Plan may be exercised
with respect to any number of whole shares less than the full number for which
the Option could be exercised. Such partial exercise of an Option shall not
affect the right to exercise the Option from time to time in accordance with the
Plan with respect to remaining shares subject to the Option.
8.02 Payment. Payment of the Option price shall be made in cash or, in
the case of Options other than Director Options, a cash equivalent acceptable to
the Committee. If the Agreement provides, payment of all or a part of the Option
price may be made by surrendering shares of Common Stock to the Company. If
Common Stock is used to pay all or part of the Option price, the shares
surrendered must have a Fair Market Value (determined as of the day preceding
the date of exercise) that is not less than such price or part thereof.
8.03 Shareholders' Rights. No Participant shall, as a result of
receiving any Option, have any rights as a shareholder until the date he
exercises such Option.
ARTICLE IX
ADJUSTMENT UPON CHANGE IN COMMON STOCK
Should the Company effect one or more stock dividends, stock split-ups,
subdivisions or consolidations of shares, or other similar changes in
capitalization, the maximum number of shares as to which Options may be granted
under the Plan shall be proportionately adjusted and the terms of options shall
be adjusted as the Board shall determine to be equitably required. Any
determination made under this Article IX by the Board shall be final and
conclusive.
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The issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property
or for labor or services, either upon direct sale or upon the exercise of
rights or warrants to subscribe therefor, or upon conversion of shares or
obligations of the Company convertible into such shares or other securities,
shall not affect, and no adjustment by reason thereof shall be made with respect
to, Options.
ARTICLE X
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Option shall be exercisable, no Common Stock shall be issued, no
certificates for shares of Common Stock shall be delivered, and no payment shall
be made under the Plan except in compliance with all applicable federal and
state laws and regulations and rules of all domestic stock exchanges on which
the Common Stock may be listed. The Company shall have the right to rely on the
opinion of its counsel as to such compliance. Any share certificate issued to
evidence Common Stock for which an Option is exercised may bear such legends and
statements as the Board may deem advisable to assure compliance with federal and
state laws and regulations. No Option shall be exercised, no Common Stock shall
be issued, no certificate for shares shall be delivered, and no payment shall be
made under the Plan until the Company has obtained such consent or approval as
the Board may deem advisable from regulatory bodies having jurisdiction over
such matters.
ARTICLE XI
GENERAL PROVISIONS
11.01 Effect on Employment. Neither the adoption of the Plan, its
operation, nor any documents describing or referring to the Plan (or any part
thereof) shall confer upon any Board member any right to continue on the Board
or to confer upon any employee any right to continue in the employ of the
Company or an Affiliate or in any way affect any right and power of the Company
or an Affiliate to remove any Board member or terminate the employment of any
employee at any time with or without assigning a reason thereof.
11.02 Unfunded Plan. The Plan, insofar as it provides for grants, shall
be unfunded, and the Company shall not be required to segregate any assets that
may at any time be represented by grants under the Plan. Any liability of the
Company to any person with respect to any grant under the Plan shall be based
solely upon any contractual obligations that may be created pursuant to the
Plan. No such obligation of the Company shall be deemed to be secured by any
pledge of, or other encumbrance on, any property of the Company.
11.03 Rules of Construction. Headings are given to the articles and
sections of the Plan solely as a convenience to facilitate reference. The
reference to any statute, regulation or other provision of law shall be
construed to refer to any amendment to or successor of such provision of law.
ARTICLE XII
AMENDMENT
The Board may amend or terminate the Plan from time to time; provided,
however, that no amendment may become effective until shareholder approval is
obtained if the amendment (i) increases the aggregate number of shares that may
be issued under Options or (ii) changes the class of persons eligible to become
Participants or (iii) otherwise materially increase the benefits accruing to
Participants. Section 4.03 may not be amended more than once every six months,
other than to comport with changes in the Code, ERISA or the rules thereunder.
No amendment shall, without a Participant's consent, adversely affect any rights
of such Participant under any Option outstanding at the time such amendment is
made.
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ARTICLE XIII
DURATION OF PLAN
No Option may be granted under the Plan after December 31, 2002.
Options granted before such date shall remain valid in accordance with their
terms.
ARTICLE XIV
EFFECTIVE DATE OF PLAN
Options may be granted under the Plan upon its adoption by the Board,
provided that no Option will be effective unless the Plan is approved (at a duly
held shareholders' meeting within twelve months of such adoption) by
shareholders holding a majority of the Company's outstanding voting stock.
19
