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:
( ) Preliminary Proxy Statement ( ) Confidential, for Use of the
Commission Only (as permitted
by Rule 14a-6(e)(2))
(X) Definitive Proxy Statement
( ) Definitive Additional Materials
( ) Soliciting Material Pursuant to 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) No fee required
( ) 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>
[UNITED DOMINION LOGO]
March 31, 1997
Fellow Shareholders:
Please accept my personal invitation to attend the Annual
Meeting of Shareholders to be held on Tuesday, May 6, 1997, 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 1996, 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 execute and return their
proxies promptly in order to avoid costly proxy solicitation.
Therefore, in order to save the unnecessary expense of further
proxy solicitation, even if you plan to attend the Annual
Meeting, please complete, date and promptly return the
enclosed proxy card in the 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.
/s/ JOHN P. MCCANN
--------------------------------
JOHN P. MCCANN
PRESIDENT AND CHAIRMAN OF THE BOARD
10 SOUTH SIXTH STREET, RICHMOND, VIRGINIA 23219-3802 / 804-780-2691
<PAGE>
[UNITED DOMINION LOGO]
March 31, 1997
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON TUESDAY, MAY 6, 1997
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 6, 1997 at 4:00 p.m., for the following purposes:
1. To elect twelve directors to serve for the ensuing year.
2. To consider and vote upon amendments of the Company's 1991 Stock Purchase and
Loan Plan which will (i) allow participation by key employees, in addition to
officers of the Company, (ii) increase the number of shares of Common Stock that
can be issued from 600,000 shares to 1,400,000 shares, (iii) provide that
neither shares fully paid for by a participant nor shares purchased by a
participant and reacquired by the Company from that participant shall be counted
in any determination of the number of shares issued under the Stock Purchase
Plan, and (iv) extend the termination date from 2001 to 2010.
3. To consider and vote upon amendments of the Company's 1985 Stock Option Plan
which will allow independent directors leaving the Board with over 10 years of
service to exercise stock options upon the earlier to occur of (i) the date of
termination of the stock options or (ii) the second anniversary of termination
of service on the Board.
4. 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 14, 1997 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
/s/ KATHERYN E. SURFACE
---------------------------------
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 31, 1997
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 6, 1997 (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, FOR approval of the
amendments to the 1991 Stock Purchase and Loan Plan (the "Stock Purchase Plan"),
and FOR approval of the amendments to the 1985 Stock Option Plan (the "Stock
Option Plan"), as each is described herein. This proxy statement and the
enclosed proxy were mailed beginning March 31, 1997 to shareholders of record at
the close of business on March 14, 1997 (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, 1996.
At the close of business on the Record Date, the Company had 86,288,728
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 approve amendment of the Stock Purchase Plan and the
Stock Option Plan, provided the total number of shares voted is a majority of
the shares outstanding and entitled to vote. 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, 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, 1996, INCLUDING FINANCIAL STATEMENTS
AND SCHEDULES THERETO, ON WRITTEN REQUEST TO THE MAILING ADDRESS SET FORTH
ABOVE, ATTENTION: INVESTOR SERVICES.
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 or her spouse and minor children, if any.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED (1)
---------------------------------------------
IMMEDIATELY THROUGH OPTIONS (2)
--------------------- -------------------
NAME NUMBER PERCENT NUMBER PERCENT
- ------------------------------------------------ --------- ------- ------- -------
<S> <C> <C> <C> <C>
Jeff C. Bane.................................... 105,820(3) 0.1 8,000 --
Richard B. Chess (6)............................ 65,650 0.1 87,000 0.1
R. Toms Dalton, Jr.............................. 33,740 -- 6,000 --
James Dolphin................................... 142,410(4) 0.2 92,353(5) 0.1
Richard A. Giannotti............................ 56,446 0.1 48,748(5) 0.1
David L. Johnston............................... 112,663 0.1 --(5) --
Barry M. Kornblau............................... 257,940 0.3 43,241(5) 0.1
John C. Lanford................................. 12,323 -- 8,000 --
John P. McCann.................................. 360,614(3)(4) 0.4 297,811(5) 0.3
H. Franklin Minor............................... 64,900 0.1 8,000 --
Lynne B. Sagalyn................................ 1,000 -- 7,000 --
Mark J. Sandler................................. 51,030 0.1 -- --
Robert W. Scharar............................... 33,172 -- -- --
John S. Schneider............................... 572,802(7) 0.7 --(5) --
Robert F. Sherman............................... 182,347(7) 0.2 --(5) --
Ira T. Wender................................... 37,325 -- --(8) --
C. Harmon Williams, Jr.......................... 98,668(3) 0.1 8,000 --
All directors and officers as a group
(36 persons).................................. 2,354,611(4) 2.7 903,388(5) 1.0
</TABLE>
- ---------------
(1) Includes shares beneficially owned by officers and directors elected in
connection with the merger (the "South West Merger") with South West
Property Trust Inc. ("South West") approved by the shareholders at the
special meeting on December 10, 1996 (the "1996 Special Meeting").
(2) Assumes exercise in full of all options exercisable within 60 days.
(3) Includes, in the case of Messrs. McCann, Bane and Williams and all directors
and officers as a group, 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.
(4) Includes 10,000 shares held by the Profit Sharing Plan of the Company (the
"Profit Sharing Plan") of which Messrs. McCann and Dolphin are trustees and
under which they share voting and investment powers as to such shares.
(5) Does not include 97,815 shares, 68,252 shares, 30,000 shares, 92,071 shares,
136,525 shares, 30,000 shares, 30,000 shares and 661,628 shares issuable
upon exercise of options granted to Messrs. Dolphin, Giannotti, Johnston,
Kornblau, McCann, Schneider and Sherman and all directors and officers as a
group, respectively, which are not exercisable within 60 days.
(6) Effective December 31, 1996, Mr. Chess was no longer employed by the
Company.
(7) Includes 10,000 shares purchased pursuant to the Stock Purchase Plan subject
to shareholder approval of the proposed amendments of the Stock Purchase
Plan. These shares cannot be voted until such approval is obtained. See
"Proposed Amendment of 1991 Stock Purchase and Loan Plan -- Sales of Shares
Pursuant to Stock Purchase Plan."
2
<PAGE>
ELECTION OF DIRECTORS
At the Annual Meeting twelve 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 are now members of the Board of Directors and,
except for Messrs. Sandler, Scharar and Schneider, were elected at the 1996
Annual Meeting of Shareholders. Messrs. Sandler, Scharar and Schneider were
elected to fill the vacancies in the Board created when the Company's Bylaws
were amended to increase the Board from nine to thirteen members at the 1996
Special Meeting. Ira T. Wender, who was also elected at the 1996 Special
Meeting, has reached mandatory retirement age and will be retiring from the
Board at the Annual Meeting. Effective upon Mr. Wender's retirement, the
Company's Bylaws will again be amended to reduce the Board from thirteen to
twelve members.
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, 67, 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., 64, is a partner with Allen & Carwile, Waynesboro,
Virginia, attorneys. He is a director of First Virginia Bank of Augusta,
Waynesboro, Virginia. He was first elected to the Board in 1973.
James Dolphin, 47, is Executive Vice President and Chief Financial Officer
of the Company. He was first elected to the Board in 1988.
Barry M. Kornblau, 47, is Senior Vice President and Director of
Apartments/Eastern Division of the Company. He is also a director of Commerce
Bank and Community Bankshares, each of Richmond, Virginia. He was first elected
to the Board in 1993.
John C. Lanford, 66, is President and Chief Executive Officer of Adams
Construction Co., Inc., Roanoke, Virginia, general contractors. He was first
elected to the Board in 1973.
John P. McCann, 52, is President, Chief Executive Officer and Chairman of
the Board of Directors 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.
Lynne B. Sagalyn, 49, 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. She was first elected to the Board in 1996.
Mark J. Sandler, 54, was a senior managing director of Bear, Stearns & Co.,
Inc., an investment banking firm, in charge of its real estate operations from
prior to 1987 until his retirement in October 1988. Since that
3
<PAGE>
time, Mr. Sandler has managed his personal and family investments. Mr. Sandler
was a director of South West, and he was elected to the Board of the Company at
the 1996 Special Meeting.
Robert W. Scharar, 48, is President and a director of FCA Corp., a
registered investment advisor which he founded in 1983. He is also president and
a director of FCA Investment Company, a small business investment company, and
serves as a trustee of First Commonwealth Mortgage Trust and of United Investors
Realty Trust, both of which are REITs. Mr. Scharar is also past president of the
American Association of Attorneys -- CPAs. Mr. Scharar was a director of South
West, and he was elected to the Board of the Company at the 1996 Special
Meeting.
John S. Schneider, 58, is an Executive Vice President and Vice Chairman of
the Board of the Company. He is the former Chief Executive Officer and Chairman
of the Board of South West. Mr. Schneider graduated from the Harvard Business
School in 1967 and was employed by the investment banking firm of Donaldson,
Lufkin and Jenrette until 1973, when he cofounded a predecessor firm to South
West. Mr. Schneider was elected to the Board at the 1996 Special Meeting.
C. Harmon Williams, Jr., 65, is a real estate broker in Charlottesville,
Virginia. He was first elected to the Board in 1972 and served as Chairman of
the Board from 1977 until 1996.
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 1996,
Messrs. Dolphin, McCann and Williams were the members of the Executive
Committee. The Compensation Committee sets directors' fees, the compensation of
the President and approves the compensation of the Executive and Senior Vice
Presidents (the "Named Executives"). It also administers the contributions and
awards, if any, under employee benefit plans and management incentive programs,
and other management compensation, if any. Additionally, the Compensation
Committee approves the calculation of incentive/bonus compensation under the
employment agreements described in "Employment Agreements" below. The members of
the Compensation Committee during 1996 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 and Minor and Dr. Sagalyn were the members of the Audit Committee
during 1996.
During 1996, the Board held 16 meetings (including 8 special meetings), the
Compensation Committee held two meetings and the Audit Committee held two
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 or she was assigned.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1996, the Compensation Committee consisted of Messrs. Dalton,
Lanford and Williams. As described under "Compensation Committee Report on
Executive Compensation," Mr. McCann recommends the base and incentive
compensation of the Company's other Named Executives.
4
<PAGE>
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 Stock
Purchase Plan. The table indicates the largest amount of the indebtedness
outstanding since the beginning of fiscal year 1996 and the amount outstanding
at March 31, 1997. As provided in the Stock Purchase Plan, such indebtedness
bears interest at 7% per annum.
<TABLE>
<CAPTION>
MAXIMUM INDEBTEDNESS MAXIMUM
SINCE JANUARY 1, INDEBTEDNESS
NAME 1996 AT MARCH 31, 1997
- ------------------------------------------------ -------------------- -----------------
<S> <C> <C>
John P. McCann.................................. $1,500,690 $ 1,464,254
John S. Schneider............................... 156,345 156,345
James Dolphin................................... 684,030 668,952
Barry M. Kornblau............................... 679,391 663,392
Richard A. Giannotti............................ 472,625 462,413
Richard B. Chess................................ 468,821 458,360
Robert F. Sherman............................... 156,345 156,345
</TABLE>
COMPENSATION OF DIRECTORS
For 1996, directors were paid retainer fees of $12,000 plus $1,000 for each
regular meeting attended. During 1996, the directors as a group (other than
Messrs. McCann, Dolphin and Kornblau, who received no additional compensation
for serving as directors) received fees of $141,000. Each independent director
also receives an automatic annual grant of 2,000 stock options. In March of
1997, the Board, upon recommendation of the Compensation Committee, approved a
proposal to amend the Stock Option Plan to extend the deadline for exercise of
options by any independent director leaving the Board after at least ten years
of service. The proposal to amend the 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. Also, any independent director
retiring from the Board after at least twenty years of service will receive
$5,000 per year for five years after retirement.
5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
The following table presents information relating to total compensation
during the fiscal years ended December 31, 1996, 1995 and 1994, of the chief
executive officer and the other Named Executives whose total salary and bonus
exceeded $100,000 for the 1996 calendar year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ---------------------
NAME AND ----------------------- SECURITIES UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR BASE SALARY BONUS OPTIONS COMPENSATION (1)
- --------------------------------- ---- ----------- ------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
John P. McCann 1996 $ 335,000 $53,626 65,000 $2,590
President and Chief 1995 320,000 83,904 60,000 2,887
Executive Officer 1994 290,000 95,700 70,000 2,634
James Dolphin 1996 186,000 35,000 32,500 2,590
Executive Vice President 1995 176,000 46,147 30,000 2,887
and Chief Financial Officer 1994 160,000 52,800 30,000 2,634
Barry M. Kornblau 1996 186,000 19,850 32,500 2,590
Senior Vice President 1995 176,000 46,147 30,000 2,887
and Director of Apartments 1994 160,000 52,800 30,000 2,634
Richard B. Chess 1996 130,000(2) 18,873 -- 2,590
Vice President and 1995 120,000 31,464 22,500 2,887
Director of Acquisitions 1994 107,000 44,310 22,500 2,634
Richard A. Giannotti 1996 127,000 21,053 30,000 2,590
Vice President and 1995 108,000 28,318 22,500 2,887
Director of Construction 1994 98,000 37,340 22,500 2,634
</TABLE>
- ---------------
(1) Represents contributions to the Profit Sharing Plan for each of the Named
Executives. Messrs. McCann and Dolphin are trustees and participants in the
Profit Sharing Plan.
(2) Does not include severance compensation paid to Mr. Chess in 1997.
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 the
Company. 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 base compensation terms, provide
annual base salaries for the executives, subject to increase at the discretion
of the Board of Directors. The annual base salaries for the executives for 1996
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 33%
of base salary. Except in the case of Mr. McCann, incentive/bonuses, as a
percent of base salary, are equal to twice the percentage increase in FFO per
share, so that, for example, a 10% increase in FFO per share will result in an
incentive/bonus of 20% of base salary. Therefore, the maximum incentive/bonus is
achieved when FFO per share increases by 16.5%. In December of 1996, the
Compensation
6
<PAGE>
Committee agreed that Mr. McCann's incentive/bonus, as a percentage of base
salary, would equal three times the percentage increase in FFO per share, with a
maximum incentive bonus of 50% of base salary. 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 executive 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 executive 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.
In December of 1996, the Company entered into employment agreements with
Messrs. Johnston, Schneider and Sherman, subject to the successful completion of
the South West Merger. The employment agreements, which expire annually on
December 31 but renew automatically for successive one year periods unless
sooner terminated are on substantially similar terms except for base
compensation terms and provide annual base salaries for the executives, subject
to increase at the discretion of the Board of Directors. The agreements also
provide for the payment of an incentive/bonus based upon individual and
corporate performance objectives and for participation in the Stock Purchase
Plan and the Stock Option Plan. Either the Company or the executive may
terminate the agreement if the Company is merged, sold or consolidated and the
Company is not the survivor, the Company is otherwise liquidated or there is
another change of control. The agreements may also be terminated (i) by the
executive by the giving of 45 days prior notice (90 days in the case of Mr.
Schneider), or (ii) by the Company prior to October 1 of each year, with the
effective date being December 31 of such year. The executive is entitled to
severance compensation equal to (i) 13 weeks of his then current annual base
salary if the termination is prior to January 1, 2000, which increases to 26
weeks on January 1, 2000, and 52 weeks on January 1, 2007, plus (ii) a pro rata
portion of incentive/bonus compensation if the termination is after January 1,
1998. The Company may terminate the agreements at any time for cause, in which
event the executive is not entitled to any severance compensation.
The 1997 base salaries of the Named Executives with employment agreements
are:
<TABLE>
<CAPTION>
NAME BASE SALARY
- ------------------------------------------------------------------------------ -----------
<S> <C>
John P. McCann................................................................ $ 355,000
John S. Schneider............................................................. 250,000
James Dolphin................................................................. 215,000
Barry M. Kornblau............................................................. 200,000
Robert F. Sherman............................................................. 186,000
David L. Johnston............................................................. 186,000
</TABLE>
7
<PAGE>
STOCK OPTIONS
The following tables present information concerning stock options granted
to and exercised by the chief executive officer and the other Named Executives
of the Company during 1996. The Company does not grant stock appreciation
rights.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR (NOTE 1)
---------------------------------------------------------------------------- POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED ANNUAL
NUMBER OF SECURITIES PERCENT OF TOTAL RATES OF SHARE PRICE
UNDERLYING OPTIONS/SARS GRANTED APPRECIATION FOR OPTION
OPTIONS/SAR'S TO EMPLOYEES IN EXERCISE OR TERM
GRANTED (#) FISCAL YEAR BASE PRICE EXPIRATION ------------------------
NAME (1) (2) ($/SHARE) DATE 5% ($) 10% ($)
- ----------------------- -------------------- -------------------- ----------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
John P. McCann 65,000 13.77% $15.250 12/10/06 $ 546,504 $ 1,346,066
James Dolphin 32,500 6.89% 15.250 12/10/06 273,252 673,033
Barry M. Kornblau 32,500 6.89% 15.250 12/10/06 273,252 673,033
Richard B. Chess -- 0.00% 15.250 12/10/06 -- --
Richard A. Giannotti 30,000 6.36% 15.250 12/10/06 252,233 621,261
</TABLE>
- ---------------
(1) Stock options granted to employees on December 10, 1996, were granted at an
exercise price of $15.25, which was the fair market value as of the date of
the grant. The options vest as of December 31, 1997 and may not be exercised
until, at the earliest, January 1, 1998, and expire on December 10, 2006
(the tenth anniversary of the date of grant).
(2) A total of 472,000 employee stock options were granted during 1996.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUE
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED VALUE AT FISCAL YEAR END (1) AT FISCAL YEAR END (2)
NAME ON EXERCISE REALIZED (2) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ----------------------- ----------- ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
John P. McCann 13,444 $ 99,990 231,204/203,132 $824,800/$479,846
James Dolphin 26,888 199,980 60,542/129,626 344,448/ 274,874
Barry M. Kornblau 5,188 14,591 25,586/109,726 100,745/ 173,452
Richard B. Chess 11,700 72,656 87,000/ -- 238,500/ --
Richard A. Giannotti 10,000 60,427 41,012/ 75,988 161,485/ 84,515
</TABLE>
- ---------------
(1) Includes unvested options for 65,000 shares, 32,500 shares, 32,500 shares
and 30,000 shares granted to Messrs. McCann, Dolphin, Kornblau 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 31, 1996, as appropriate.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Board has delegated to the Compensation Committee responsibility for
developing and applying programs for compensating certain of the Company's
executive officers. During 1996, 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.
8
<PAGE>
Executive compensation consists of four components: base salary,
performance compensation, incentive compensation, and long term compensation.
Each component is discussed below.
The President consults with the Compensation Committee as to the amount of
his proposed base salary and that of the other Named Executives that were
employed by the Company in 1996 (the "UDR Named Executives"). After consulting
with the President and considering the factors discussed below, the Compensation
Committee sets the base salaries. The compensation of the Named Executives not
employed by the Company in 1996 (the "SWP Named Executives") is set forth in the
employment agreements described under the heading "Employment Agreements," which
were approved by the Compensation Committee based upon the recommendation of,
and after consultation with, the President. The 1997 base salaries of the
President and all Named Executives with employment agreements appear in the
table under that heading.
Factors considered by the Compensation Committee in setting base salaries
include the performance of the Company, measured by both financial and
non-financial objectives, 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. 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, investment strategy, completed financings,
execution of management's plan and objectives for the Company and other measures
in assessing the Company's performance for the year, with the growth in FFO per
share being an 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 1996 was a below average year for
the Company in terms of financial results as measured by same property net
operating income ("NOI") growth and FFO per share growth, and an above-average
year in terms of execution of management's plan for the Company. Rent and other
income growth exceeded expectations in 1996, but same property NOI growth was
below projections. In addition to the South West Merger on December 31, 1996,
the Company acquired 30 apartment communities containing 7,712 apartment homes,
which included a portfolio of 18 apartment communities at a total cost of $321
million during 1996. The Company also implemented a $200 million medium-term
note program in 1996. The Compensation Committee believed these accomplishments
positively positioned the Company for succeeding years and were considered in
setting base salaries for 1997.
Performance compensation, in the form of incentive/bonuses, is provided for
in the employment agreements of the President, the Executive and Senior Vice
Presidents (other than Mr. Giannotti) summarized above under "Employment
Agreements." For 1996, Messrs. Chess, Dolphin, Giannotti and Kornblau received
performance compensation. This performance compensation, as a percentage of base
salary, is a multiple of the percentage increase in FFO per share for the
current year over the prior year, up to a maximum of 33% of base salary. Based
upon the 5.3% per share increase in FFO, Mr. McCann earned performance
compensation of 15.9% of his base salary, which was three times the rate of FFO
per share growth. The other Named Executives earned performance compensation of
10.6% of their respective base salaries for 1996. The Compensation Committee
also granted the President the discretion to award additional bonuses of up to
9.4% of base salary for special performance in 1996.
9
<PAGE>
As a result, Mr. Dolphin was awarded an additional bonus of 9.4% of base salary
because of his work on the long-term financing plan of the Company in
implementing a medium term note program, the financing terms negotiated on the
purchase of a portfolio of 18 properties and his work with the rating agencies.
Messrs. Chess and Giannotti also received discretionary bonuses of $5,000 each
for their work on the 18 property portfolio referenced above and the due
diligence in connection with the South West Merger.
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 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, Jr. John C. Lanford C. Harmon
Williams, Jr.
PRESIDENT
John P. McCann
PROPOSED AMENDMENT OF 1991 STOCK PURCHASE AND LOAN PLAN
The Board has adopted and recommends that shareholders approve amendments
of the Stock Purchase Plan which will (i) allow participation by key employees,
in addition to officers of the Company, (ii) increase the number of shares that
can be purchased from 600,000 to 1,400,000, (iii) provide that neither shares
fully paid for by a participant nor shares purchased by a participant and
reacquired by the Company from that participant shall be counted in any
determination of the number of shares issued under the Stock Purchase Plan, and
(iv) extend the termination date from 2001 to 2010.
Currently, the Stock Purchase Plan provides that only officers of the
Company are eligible for participation. The Board believes that the Stock
Purchase Plan, like the Stock Option Plan, is an effective incentive and long
term compensation vehicle which is critical in motivating and retaining key
employees by aligning their interests with those of the shareholders. The
Company has grown substantially within the past three years, and the Board
believes the goal of motivating and retaining key employees with ability and
initiative, in addition to officers, is important to the future success of the
Company.
The Stock Purchase Plan currently authorizes the sale of 600,000 shares of
Common Stock and terminates on October 29, 2001. Prior to the South West Merger,
585,500 shares had been sold. In December of 1996, the Board approved the sale
of 30,000 shares to the SWP Named Executives as part of their compensation
package, subject to shareholder approval. The Board believes that the Stock
Purchase Plan is an effective incentive and long term compensation vehicle which
is critical in motivating and retaining key employees by aligning their interest
with those of the shareholders. Increasing the number of shares available for
issuance will assure an adequate reservation for issuance of shares until the
Stock Purchase Plan terminates. The Board also believes that eliminating shares
purchased and fully paid for and shares reacquired from participants in
determining the number of shares subject to the Stock Purchase Plan will
stabilize the maximum number of such shares and make it unnecessary to seek
shareholder approval of an increase in the maximum number for the forseeable
future. Finally, the Board believes that extending the termination date of the
Stock Purchase Plan, as proposed, will
10
<PAGE>
allow the Stock Purchase Plan to continue to be used as a mechanism to
compensate key employees for a reasonable time. The increase in the number of
shares is commensurate with the increase in the size of the Company since the
adoption of the Stock Purchase Plan.
ELIGIBILITY
Any officer of the Company who is selected by the Compensation Committee
and is not a member of the Compensation Committee is eligible to participate in
the Stock Purchase Plan. The proposed amendments would allow key employees
selected by the Compensation Committee to participate in the Stock Purchase
Plan.
ADMINISTRATION
The Stock Purchase Plan is administered by the Compensation Committee,
which has complete authority to interpret all provisions of the Stock Purchase
Plan; to prescribe the form of agreements with participants; to adopt, amend,
and rescind rules and regulations pertaining to the administration of the Stock
Purchase Plan; and to make all other determinations necessary or advisable for
its administration of the Stock Purchase Plan. Any decision made, or action
taken, by the Compensation Committee or in connection with the administration of
the Stock Purchase Plan shall be final and conclusive.
GENERAL DESCRIPTION
The Stock Purchase Plan currently authorizes the sale of 600,000 shares of
Common Stock subject to adjustment in the event of stock dividends, stock splits
or similar changes in the number of outstanding shares of Common Stock) to
participants selected by the Compensation Committee at a price per share equal
to the closing sale price of the Common Stock on the New York Stock Exchange
(the "NYSE") on the date on which a participant executes and delivers an
agreement to purchase shares pursuant to the Stock Purchase Plan (an
"Agreement"), or, if the NYSE shall be closed on such date, the next preceding
date on which the NYSE shall have been open. The proposed amendments would
increase the number of authorized shares to 1,400,000 and provide that shares
fully paid for by a participant and shares purchased by a participant and
reacquired by the Company from that participant will not be counted in any
determination of the number of shares issued under the Stock Purchase Plan until
they are again purchased by the same or another participant.
At the option of the participant, payment of the purchase price of Common
Stock acquired under the Stock Purchase Plan shall be made in full in cash or a
cash equivalent acceptable to the Compensation Committee, at the time of
execution and delivery of the participant's Agreement, or by delivery to the
Company of a note
(a "Note") in principal amount equal to the purchase price of the shares covered
by the Agreement, less any partial cash payment made at the time of execution
and delivery or for the full purchase price if no such partial cash payment is
made, provided that the initial principal amount of the Note may in no event
exceed the "Good Faith Loan Value" of such Common Stock. "Good Faith Loan Value"
means "good faith loan value" as defined in Section 207.2(e) of Regulation G of
the Board of Governors of the Federal Reserve System, 12 CFR 207.2(e).
Each Note shall be executed and delivered by the participant and the
participant's spouse, if any; shall be due and payable seven years after the
date of purchase; shall bear interest payable quarterly on the first day of each
February, May, August and November at the rate of 7% per annum, or such other
rate determined by the Compensation Committee; shall become due and payable on
the 90th day following cessation of the participant's employment by the Company;
and shall be secured by a pledge of all Common Stock purchased by the
participant pursuant to the Stock Purchase Plan. In the discretion of the
Compensation Committee and on such terms and conditions as it may specify,
pledged shares of Common Stock may be released from such pledge, provided
11
<PAGE>
that such release shall not cause the principal amount of the Note then
outstanding to exceed the Good Faith Loan Value of the remaining pledged shares.
Until a default under the Note, all pledged Common Stock shall be
registered in the participant's name and the participant shall have all rights
of a shareholder of the Company with respect to such Common Stock. The
participant shall agree to remit to the Company all dividends paid on such
Common Stock, to be applied first towards payment of interest on the Note
accrued to the dividend payment date, and then towards reduction of principal of
the Note. Any balance of any applied dividend payment remaining after prepayment
of the Note in full shall be delivered to the participant.
Before the second anniversary of the Note, no partial prepayment of the
Note shall be deemed payment in full of the purchase price of any Common Stock
purchased pursuant to the Stock Purchase Plan, entitling the participant to
release of any Common Stock from the pledge thereof securing the Note, but each
such prepayment shall be deemed a PRO RATA partial payment of the purchase price
of all such Common Stock. A partial prepayment after the second anniversary of
the Note which is attributable to a source other than remitted dividend payments
may at the discretion of the participant be deemed payment in full for the
number of whole shares of pledged Common Stock obtained by dividing the amount
of such prepayment allocable to reduction of principal of the Note by the
quotient obtained by dividing the principal amount of the Note outstanding
before giving effect to such prepayment by the number of shares pledged, and at
the request of the participant, shares deemed paid for in full shall be released
from pledge, but only if the principal amount of the Note then outstanding will
not exceed the Good Faith Loan Value of the remaining pledged Common Stock.
Covenants in certain of the Company's loan agreements limit the aggregate
number of shares of Common Stock that may be sold pursuant to the Stock Purchase
Plan and the aggregate amount of all extensions of credit thereunder. The
Company may be required to obtain waivers from the lender parties to the
agreements in connection with sales pursuant to the amended Stock Purchase Plan.
12
<PAGE>
SHARES SOLD PURSUANT TO THE STOCK PURCHASE PLAN
Shares have been purchased pursuant to the Stock Purchase Plan since its
inception as follows:
<TABLE>
<CAPTION>
NUMBER OF AGGREGATE AGGREGATE
SHARES PURCHASE PRICE MARKET VALUE (1)
--------- -------------- ----------------
<S> <C> <C> <C>
John P. McCann, President and Chief Executive Officer
and Chairman of the Board of Directors............................ 135,000 $1,496,875 $2,058,750
James Dolphin, Executive Vice President, Chief Financial
Officer and Director.............................................. 60,000 680,625 915,000
Barry M. Kornblau, Senior Vice President, Director of
Apartments/Eastern Division and Director.......................... 60,000 680,625 915,000
Richard A. Giannotti, Senior Vice President
and Director of Acquisitions/Eastern Division..................... 41,250 470,156 629,063
Richard B. Chess, Vice President.................................... 41,250 470,156 629,063
John S. Schneider, Executive Vice President
and Vice Chairman of the Board of Directors....................... 10,000 153,750 152,500
Robert F. Sherman, Senior Vice President
and Director of Apartments/Western Division....................... 10,000 153,750 152,500
All Named Executives as a group..................................... 357,500 4,105,937 5,451,875
All employees as a group............................................ 585,500 7,062,750 8,928,875
</TABLE>
- ---------------
(1) Based on the closing sale price of the Common Stock on March 14, 1997.
AMENDMENT OF THE STOCK PURCHASE PLAN
The Board of Directors may amend the Stock Purchase Plan from time to time;
provided that shareholder approval is required for any amendment that would
increase the number of shares of Common Stock that may be sold pursuant to the
Stock Purchase Plan or change the class of individuals eligible to participate.
SALES OF SHARES PURSUANT TO THE STOCK PURCHASE PLAN
As of December 31, 1996, 585,500 shares of Common Stock had been sold
pursuant to the Plan to 21 participants at various sale prices per share. On
January 2, 1997, 20,000 shares were sold to two participants at the NYSE closing
sale price per share of $15.375 (the "1997 Participants"). The shares and the
Notes of the 1997 Participants were delivered in escrow providing that if the
shareholders approve the amendments to the Stock Purchase Plan, (i) the shares
will be delivered to the Company as security for the payment of the Notes, (ii)
the Notes will be delivered to the Company, (iii) any Note payments made by the
participants will be delivered, without interest, to the Company and credited
against the participants' obligations under the Notes, and (iv) any dividends
paid on the shares will be remitted, without interest, to the Company and
credited against the participants' obligations under the Notes, or, if the
shareholders fail to approve the Stock Purchase Plan amendments, (i) the Notes
will be delivered to the participants, (ii) any Note payments made by the
participants will be delivered, without interest, to the participants, (iii) the
shares will be delivered to the Company for cancellation, and (iv) any dividends
paid on the shares will be remitted, without interest, to the Company. While the
shares are held in escrow, they may not be voted by the participants.
13
<PAGE>
Participants who purchased shares in the 1997 transactions include Messrs.
Schneider and Sherman, who purchased 10,000 shares each at $15.375 per share.
PROPOSED AMENDMENT OF 1985 STOCK OPTION PLAN
The Board has adopted and recommends that the shareholders approve
amendments of the Stock Option Plan, which will allow independent directors
leaving the Board with over ten years of service to exercise stock options upon
the earlier to occur of (i) the date of termination of the stock options, or
(ii) the second anniversary of termination of service on the Board.
Currently, options granted automatically to independent directors 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. Key employees who participate in the Stock Option Plan are allowed
an extended period of time to exercise options after 10 years of service. This
amendment will amend the Stock Option Plan to allow independent directors
leaving the Board who have served on the Board for at least 10 years the same
exercise period with respect to their options. Since long-term independent
directors are as critical to the success of the Company as long-term key
employees, the Board believes the treatment of the two groups should be the
same.
GENERAL
The Stock Option Plan reserves a total of 4,200,000 shares of Common Stock
(subject to adjustment pursuant to customary antidilution provisions) for
issuance upon exercise of options granted under the Stock Option Plan. The
Company has issued 454,744 options previously granted and options for 1,916,716
shares are outstanding, leaving 1,828,540 (138,140 of the options being
terminated and reallocated to the Stock Option Plan as provided by Article V of
the Stock Option Plan) shares currently available for options. The market value
of the shares subject to outstanding options and reserved for future options
under the Stock Option Plan was $57,115,154 based on the closing sale price of
the Common Stock on the NYSE on March 14, 1997. Unless sooner terminated by the
Board, the Stock Option Plan will terminate on December 31, 2002.
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." Options granted under
the Stock Option Plan may be incentive stock options ("ISOs") qualifying for
favorable federal income tax treatment under Section 422A of the Internal
Revenue Code of 1981, as amended, or nonqualified stock options ("NQOs"), 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.
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."
14
<PAGE>
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.
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 options 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. If a director is first elected to the Board
as a result of an acquisition of assets, by merger or otherwise, options will
not be granted upon first being elected but options to purchase 2,000 shares of
Common Stock will be granted upon re-election to the Board.
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.
If the proposed amendments to the Stock Option Plan are approved by the
shareholders, options held by directors leaving the Board after at
15
<PAGE>
least ten years of service on the Board will terminate upon the earlier to occur
of (i) the stated termination date of the option, or (ii) the second anniversary
of termination of service on the Board.
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
independent 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.
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.
16
<PAGE>
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 as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES (1)
----------
<S> <C>
John P. McCann, President and Chief Executive Officer
and Chairman of the Board of Directors............................................................. 515,000
James Dolphin, Executive Vice President, Chief Financial
Officer and Director............................................................................... 230,500
Barry M. Kornblau, Senior Vice President, Director of
Apartments/Eastern Division and Director........................................................... 176,500
Richard A. Giannotti, Senior Vice President
and Director of Acquisitions/Eastern Division...................................................... 145,000
Richard B. Chess, Vice President..................................................................... 113,000
John S. Schneider, Executive Vice President
and Vice Chairman of the Board of Directors........................................................ 30,000
David L. Johnston, Senior Vice President
and Director of Acquisitions/Western Division...................................................... 30,000
Robert F. Sherman, Senior Vice President
and Director of Apartments/Western Division........................................................ 30,000
All Named Executives as a group...................................................................... 1,270,000
All non-employee directors as a group................................................................ 69,000
All employees as a group............................................................................. 2,440,600
</TABLE>
- ---------------
(1) For additional information, see "Ownership of Equity Securities" and "Stock
Options."
INDEPENDENT PUBLIC ACCOUNTANTS
The Company from its inception has engaged the firm of Ernst & Young, LLP
as its independent public accountants, and the Board selected Ernst & Young, LLP
as auditors for 1997.
Representatives of Ernst & Young, LLP will be present at the meeting, will
be given the opportunity to make any statement they desire to make and will be
available to respond to questions.
17
<PAGE>
The following graph indicates appreciation of $100 invested on December 31,
1991, 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.
PERFORMANCE GRAPH
[GRAPH]
1991 1992 1993 1994 1995 1996
NAREIT EQUITY 100 114.59 137.11 141.46 163.06 220.56
S&P 500 100 107.67 118.43 119.97 164.88 202.79
UDR 100 130.11 154.22 164.29 182.44 201.36
The NAREIT Equity REIT Total Return Index (excluding health care) is
published by the National Association of Real Estate Investment Trusts, 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, 1996, this Index included 159 equity REITs with a total
market capitalization of $73.59 billion.
MATTERS TO BE PRESENTED AT THE 1998 ANNUAL MEETING OF SHAREHOLDERS
Any qualified shareholder wishing to make a proposal to be acted upon at
the Annual Meeting of Shareholders in 1998 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.
18
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EXHIBIT A
UNITED DOMINION REALTY TRUST, INC.
1991 Stock Purchase and Loan Plan
ARTICLE I
DEFINITIONS
1.01. Affiliate means any "subsidiary" or "parent corporation" (within the
meaning of Section 425 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 pursuant to which the Participant
agrees to purchase Common Stock pursuant to this Plan.
1.03. Board means the Board of Directors of the Company.
1.04. Code means 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. Escrow Agreement means a written agreement (including any amendment or
supplement thereto) between the Company, a Participant and an escrow agent
effecting the escrow contemplated by Article XIII.
1.08. 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, the next preceding date on which the NYSE shall have been open.
1.09. Good Faith Loan Value means "good faith loan value" as defined in
Section 207.2(e) of Regulation G of the Board of Governors of the Federal
Reserve System, 12 CFR 207.2(e).
1.10. Note means the Participant's promissory note evidencing his obligation to
pay for Common Stock as provided in Section 7.01.
1.11. Note Year means any period of one year beginning with the date of the Note
or any anniversary of such date.
1.12. NYSE means the New York Stock Exchange.
1.13. Participant means an employee of the Company or of an Affiliate who
satisfies the requirements of Article IV and is selected by the Committee to
participate in the Plan.
1.14. Plan means the United Dominion Realty Trust, Inc. 1991 Stock Purchase and
Loan Plan.
1.15. Plan Documents means the Plan, the Note, the Agreement and the Escrow
Agreement.
1.16. Pledged Shares means all shares of Common Stock which at the time of
determination are pledged to secure the Note.
1.17. Company means United Dominion Realty Trust, Inc.
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ARTICLE II
PURPOSES
The Plan is intended to assist the Company in recruiting and retaining key
employees with ability and initiative by enabling 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 and its
shareholders through the purchase of Common Stock. The proceeds received by the
Company from the sale of Common Stock pursuant to this 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 sell Common Stock to Participants upon such terms (not inconsistent
with the provisions of this Plan) as the Committee may consider appropriate.
Such terms may include, but are not limited to, conditions (in addition to those
contained in this Plan) relating to the obligation of a Participant to sell, or
of the Company to purchase, Common Stock upon the Participant's termination of
employment with the Company and its Affiliates or upon the Participant's death.
In addition, the Committee shall have complete authority to interpret all
provisions of this Plan; to prescribe the form of Agreements; to adopt, amend,
and rescind rules and regulations pertaining to the administration of this Plan.
The express grant in the Plan of any specific power to the Committee shall not
be construed as limiting any power or authority of the Committee. Any decision
made, or action taken, by the Committee or in connection with the administration
of this Plan shall be final and conclusive. No member of the Committee shall be
liable for any act done in good faith with respect to this Plan or any
Agreement. All expenses of administering this Plan shall be borne by the
Company.
ARTICLE IV
ELIGIBILITY
4.01. General. Any key employee of the Company or of any Affiliate (including
any corporation that becomes an Affiliate after the adoption of this Plan) who
is selected by the Committee may purchase Common Stock pursuant to this Plan. A
person who is a member of the Committee may not participate in this Plan.
4.02. Offers. The Committee will specify the number of shares of Common Stock
that each Participant may purchase under this Plan and the terms and conditions
of each purchase. In determining the number of shares of Common Stock that each
Participant may purchase, the Committee shall take into account the Fair Market
Value of the Common Stock. Each sale of Common Stock under this Plan shall be
evidenced by an Agreement which shall be subject to applicable provisions of
this Plan and to such other provisions not inconsistent with this Plan as the
Committee may approve for the particular sale transaction.
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ARTICLE V
NUMBER OF SHARES AVAILABLE FOR PURCHASE
The maximum aggregate number of shares of Common Stock that may be issued under
this Plan is 1,400,000, subject to adjustment as provided in Article VIII.
Neither (a) shares purchased and fully paid for by a Participant nor (b) shares
purchased by a Participant and reacquired by the Company (until and unless they
are again purchased by the same or another Participant) from that Participant
will be counted in any determination of the number of shares issued under this
Plan.
ARTICLE VI
PURCHASE PRICE
The price per share for Common Stock purchased by a Participant under this Plan
shall be the Fair Market Value on the date the Participant executes and delivers
an Agreement.
ARTICLE VII
PAYMENT OF PURCHASE PRICE
7.01. Payment. At the option of the Participant, payment of the purchase price
of Common Stock acquired under this Plan shall be made in full in cash or a cash
equivalent acceptable to the Committee, at the time of execution and delivery of
the Participant's Agreement, or by delivery to the Company of a Note in
principal amount equal to the purchase price of the shares covered by the
Agreement, less any partial cash payment made at the time of execution and
delivery, or for the full purchase price if no such partial cash payment is
made, provided that the initial principal amount of the Note may in no event
exceed the Good Faith Loan Value of such Common Stock.
7.02. Terms of Note. Each Note shall be in substantially the form of Exhibit 1
hereto, with such variations conforming to this paragraph as shall be
appropriate under the circumstances. Each Note shall be executed and delivered
by the Participant and the Participant's spouse, if any; shall be due and
payable seven years after the date of purchase; shall bear interest payable
quarterly on the first day of each February, May, August and November; and shall
be secured by a pledge of all Common Stock purchased by the Participant pursuant
to the Plan. In the discretion of the Committee and on such terms and conditions
as it may specify, Pledged Shares may be released from such pledge, provided
that such release shall not cause the principal amount of the Note then
outstanding to exceed the Good Faith Loan Value of the remaining Pledged Shares.
7.03. Shareholder Rights in Pledged Shares. Until a default under the Note, all
Pledged Shares shall be registered in the Participant's name and the Participant
shall have all rights of a shareholder of the Company with respect to such
Pledged Shares.
7.04. Dividends on Pledged Shares. The Participant shall agree to remit to the
Company all dividends paid on the Pledged Shares, to be applied first towards
payment of interest on the Note accrued to the dividend payment date, and then
towards reduction of principal of the Note. Any balance of any applied dividend
payment remaining after prepayment of the Note in full shall be delivered to the
Participant.
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7.05. Effect of Prepayment of Note. During the first two Note Years, no partial
prepayment of the Note shall be deemed payment in full of the purchase price of
any Common Stock purchased pursuant to this Plan, entitling the Participant to
release of any Pledged Shares from the pledge thereof securing the Note, but
each such prepayment shall be deemed a pro rata partial payment of the purchase
price of all such Common Stock. A partial prepayment after the second Note Year
which is attributable to a source other than dividend payments remitted pursuant
to Section 7.04 may at the discretion of the Participant be deemed payment in
full for the number of whole Pledged Shares obtained by dividing the amount of
such prepayment allocable to reduction of principal of the Note by the quotient
of division of the principal amount of the Note outstanding before giving effect
to such prepayment by the number of Pledged Shares, and at the request of the
Participant, Pledged Shares deemed paid for in full shall be released from
pledge, but only if the principal amount of the Note then outstanding will not
exceed the Good Faith Loan Value of the remaining Pledged Shares.
ARTICLE VIII
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, then this Plan shall continue to apply to the number and kind of
securities which a holder of the number of shares of Common Stock then subject
to this Plan immediately before the effective time of such change in
capitalization would hold immediately thereafter.
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, this Plan.
ARTICLE IX
COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
No Common Stock shall be issued, no certificates for shares of Common Stock
shall be delivered, and no payment shall be made under this Plan except in
compliance with all applicable federal and state laws and regulations
(including, without limitation, withholding tax requirements) and the rules of
all domestic stock exchanges on which the Company's shares may be listed. The
Company shall have the right to rely on an opinion of its counsel as to such
compliance. Any share certificate issued to evidence Common Stock purchased
under this Plan may bear such legends and statements as the Committee may deem
advisable to assure compliance with federal and state laws and regulations. No
Common Stock shall be issued, no certificate for shares shall be delivered, and
no payment shall be made under this Plan until the Company has obtained such
consent or approval as the Committee may deem advisable from regulatory bodies
having jurisdiction over such matters.
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ARTICLE X
GENERAL PROVISIONS
10.01. Effect on Employment. Neither the adoption of this Plan, its operation,
nor any documents describing or referring to this Plan (or any part thereof)
shall confer upon any individual any right to continue in the employ of the
Trust or an Affiliate or in any way affect any right and power of the Trust or
an Affiliate to terminate the employment of any employee at any time with or
without assigning a reason therefor.
10.02. Unfunded Plan. The Plan shall be unfunded and the Company shall not be
required to segregate any assets at any time for purposes of this Plan. Any
liability of the Company to any person under this Plan shall be based solely
upon any contractual obligations that may be created pursuant to this Plan. No
such obligation of the Company shall be deemed to be secured by any pledge of,
or other encumbrances on, any property of the Company.
10.03. Rules of Construction. Headings are given to the articles and sections of
this 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 XI
AMENDMENT
The Board may amend from time to time or terminate this Plan; provided, however,
that no amendment may become effective until shareholder approval is obtained if
the amendment (i) increases the aggregate number of shares of Common Stock
that may be sold pursuant to this Plan or (ii) changes the class of
individuals eligible to become Participants.
ARTICLE XII
DURATION OF PLAN
No Common Stock may be sold under this Plan after December 31, 2010.
ARTICLE XIII
EFFECTIVE DATE OF PLAN
Shares of Common Stock in excess of those authorized under this Plan may be sold
upon its adoption by the Board, provided that no such sale shall be effective
unless this Plan is approved by a majority of the votes entitled to be case by
the Company's shareholders, voting either in person or by proxy, at a duly held
shareholders' meeting within twelve months of such adoption. If Common Stock is
sold following the adoption by the Board but before the requisite shareholder
approval is obtained, the certificates evidencing such Common Stock and the
purchase price (including all Notes) and any dividends payable on such shares
shall be held in escrow until the earlier of (i) the date the requisite
shareholder approval is obtained or (ii) the anniversary of the Plan's action
by the Board.
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Exhibit 1
PROMISSORY NOTE
$ Richmond, Virginia
FOR VALUE RECEIVED, the undersigned (The "Participant" or the "Maker") and, if
the Participant is married at the date of execution of this Note, the
undersigned spouse of the Participant (also a "Maker"), promises (or if there
shall be two Makers, both jointly and severally promise) to pay to the order of
UNITED DOMINION REALTY TRUST, INC. (the "Company"), on , , at the
principal office of the Company in Richmond, Virginia, or at such other place as
the holder hereof may designate in writing, in lawful money of the United States
of America, the sum of Dollars ($ ), with interest thereon
payable in arrears on the first days of each February, May, August and November
until this Note is paid in full, at the rate of __% per annum.
Optional Prepayment. The Maker (or if there shall be two Makers, each
Maker) shall have the right to prepay this Note in whole at any time or in part
from time to time without penalty on any amount so prepaid.
Mandatory Prepayment. This Note has been executed and delivered in
payment of the purchase price of shares of Common Stock of the Company (the
"Shares") purchased by the Participant pursuant to the Company's 1991 Stock
Purchase and Loan Plan. If at any time before payment of this Note in full, the
Participant shall sell any of the Shares, the Maker agrees (or if there shall be
two Makers, both jointly and severally agree) to prepay this Note immediately
upon receipt of the net proceeds of such sale in an amount equal to the lesser
of 100% of such net proceeds or the outstanding principal of this Note and
accrued interest to the date of such prepayment.
All prepayments, mandatory or optional, shall be applied first to
payment of accrued interest and then to reduction of outstanding principal.
If any payment under this Note is not made when due, all unpaid
principal and accrued interest under this Note may, at the option of the holder,
be declared immediately due and payable. If the Participant ceases to be
employed by the Company or by any "subsidiary" or "parent corporation" (within
the meaning of Section 425 of the Internal Revenue Code of 1986, as amended) of
the Company, all such principal and accrued interest shall become due and
payable on the 90th day following cessation of such employment without
declaration or notice of any kind. If proceedings under the federal Bankruptcy
Code or under any other law, state or federal, for the relief of debtors are
filed by or against the Maker (or if there shall be two Makers, either Maker)
and not dismissed within 60 days after filing, all such principal and accrued
interest shall become immediately due and payable without declaration or notice
of any kind. No failure by the holder of this Note to exercise any right
hereunder shall be or be deemed to be a waiver of such right or of any remedy
consequent thereon.
Presentment, demand and notice of dishonor are hereby waived, and the
Maker agrees (or if there shall be two Makers, both jointly and severally agree)
to be bound for the payment hereof notwithstanding any agreement for the
extension of the due date of any payment made by the holder after the maturity
thereof.
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The Maker agrees (or if there shall be two Makers, both jointly and
severally agree) to pay all collection expenses, court costs and reasonable
attorneys' fees incurred in collection of this Note or any part hereof.
References to the Maker or Makers shall include the Maker or Makers and all
endorsers, sureties, guarantors and other obligors hereon.
This Note is secured by a pledge of the Shares pursuant to the terms of
the Plan. Dividends on the Shares shall be applied towards prepayment hereof,
and Shares shall or may be released from such pledge, all as provided in the
Plan.
_________________________________ (SEAL)
_________________________________ (SEAL)
A-7
<PAGE>
EXHIBIT B
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.
<PAGE>
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 Stated Termination Date means the date specified in or determined pursuant
to an Agreement on which the Option which is the subject of such Agreement
terminates.
1.17 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
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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.
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.
Notwithstanding anything to the contrary in this Section 4.03, a Director first
elected to the Board pursuant to any agreement relating to the acquisition, by
merger or otherwise, of assets by the Company or any Affiliate or to the sale by
the Company of its securities will not be granted Options upon being first
elected, but such Director will be granted Options to purchase 2,000 shares of
Common Stock as provided herein upon being re-elected to the Board.
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.
Notwithstanding the foregoing, if, at the date of such resignation or removal or
at the date of such annual meeting of shareholders, as the case may be, such
Director has completed at least ten (10) years of service on the Board
(including, as such service, service as a director of a corporation whose assets
are acquired by the Company, by merger or otherwise), Options held by such
Director on such date will terminate upon the earlier of (i) the second
anniversary of such date or (ii) the Termination Date of such Options.
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.
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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.
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.
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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.
B-6
<PAGE>
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.
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.
B-7
<PAGE>
Proxy Solicited by the Shares of Common Stock
Board of Directors
United Dominion Realty Trust, Inc.
ANNUAL MEETING OF SHAREHOLDERS
May 6, 1997
The undersigned hereby appoints John P. McCann and John S. Schneider as
proxies, each with the power to appoint his substitute, and hereby authorizes
them to represent and to vote all shares of Common Stock of the undersigned in
United Dominion Realty Trust, Inc. at the Annual Meeting of Shareholders to be
held on May 6, 1997, and at any and all adjournments thereof:
(Please date and sign on the reverse side)
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder. If no direction is made, this proxy will be voted
FOR election of all nominees for the Board of Directors who are listed, and FOR
the amendments to the 1991 Stock Purchase Plan and the 1985 Stock Option Plan.
<PAGE>
1. ELECTION OF DIRECTORS
FOR all nominees listed (excepted as written to the contrary) [ ]
Vote Witheld for all nominees listed [ ]
Nominees: Jeff C. Bane, R. Toms Dalton, Jr., James Dolphin, Barry M.
Kornblau, John C. Lanford, John P. McCann, H. Franklin Minor, Lynne B.
Sagalyn, Mark J. Sandler, Robert W. Scharar, John S. Schneider and C.
Harmon Williams, Jr.
(INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below.)
- ----------------------------------------------------------------------
2. AMENDMENTS TO STOCK PURCHASE PLAN FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. AMENDMENTS TO STOCK OPTION PLAN FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Dated: ___________________________________ , 1997
- -------------------------------------------------
- -------------------------------------------------
(Signature)
Please sign exactly as your name(s) appear(s) on this proxy. Only one owner of
jointly owned shares need sign. When signing in a representative capacity,
please give title. PLEASE MARK, SIGN, DATE AND PROMPTLY RETURN THIS PROXY USING
THE ENCLOSED ENVELOPE.
