UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K405
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number 1-10524
UNITED DOMINION REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-0857512
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(State or other jurisdiction of (I.R.S. Employer
incorporation of organization) Identification No.
10 South Sixth Street, Richmond, Virginia 23219-3802
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(Address of principal executive offices - zip code)
(804) 780-2691
(Registrant's telephone number, including area code)
Securities registered pursuant to Section
12(b) of the Act:
Title of each class Name of exchange on which registered
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Common Stock, $1 par value New York Stock Exchange
9 1/4% Series A Cumulative Redeemable New York Stock Exchange
Preferred Stock
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months, and (2) has been subject to filing requirements
for at least the past 90 days.
Yes X No
Indicate by check mark if the disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained , to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference into Part III of this Form 10-K. (X)
The aggregate market value of the shares of common stock held by non-affiliates
(Based upon the closing sales price on the New York Stock Exchange) on March 14,
1997 was approximately $1.3 billion.* As of March 14, 1997, there were
86,288,728 shares of common stock, $1 par value, outstanding.
Part III incorporates certain information be reference from the definitive proxy
statement to be filed with respect to the Annual Meeting of Shareholders on May
6, 1997.
*In determining this figure, the Company has assumed that all of its officers &
directors, and persons known to the Company to be beneficial owners of more than
5% of the Company's shares, are affiliates. Such assumptions should not be
deemed conclusive for any other purpose.
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UNITED DOMINION REALTY TRUST, INC.
TABLE OF CONTENTS
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PART I.
Item 1. Business 3
Item 2. Properties 13
Item 3. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security-Holders 14
PART II.
Item 5. Market for Registrant's Common Equity and Related 16
Stockholder Matters
Item 6. Selected Financial Data 16
Item 7. Management's Discussion and Analysis of Financial 18
Condition and Results of Operation
Item 8. Financial Statements and Supplementary Data 29
Item 9. Changes in and Disagreements with Accountants on 29
Accounting and Financial Disclosure
PART III.
Item 10. Directors and Executive Officers of the Registrant 30
Item 11. Executive Compensation 30
Item 12. Security Ownership of Certain Beneficial Owners and 30
Management
Item 13. Certain Relationships and Related Transactions 30
PART IV.
Item 14. Exhibits, Financial Statement Schedule, and Reports 31
on Form 8-K
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Part I
Item 1. Business
The Company
General
United Dominion Realty Trust, Inc., a Virginia corporation,
(collectively with its subsidiaries, the "Company"), is a self-administered
equity real estate investment trust ("REIT"), formed in 1972 which acquires,
repositions, develops, manages and selectively sells apartment homes for its own
portfolio in the Sunbelt region of the United States. Effective at the close of
business on December 31, 1996, the Company acquired South West Property Trust,
Inc. ("South West") in a statutory merger ("Merger"). South West was a
Texas-based real estate investment trust that owned 44 apartment communities
containing 14,320 completed apartment homes and 675 under development, located
primarily in Texas. The South West apartment portfolio consists primarily of B
grade communities. The Merger provided several strategic and operational
benefits which include (i) operating efficiencies through economies of scale,
(ii) added development experience and capability, (iii) increased liquidity in
common stock and the potential to lower the Company's cost of capital, (iv)
geographic expansion which provided significant investment in several major
markets including Dallas, Houston, San Antonio and Phoenix, (v) additional
investment opportunities in the Sunbelt markets and (vi) broadening of the
Company's management. The Merger was accounted for under the purchase method
of accounting prescribed by Accounting Principles Board No. 16, and as
such, had no impact on the Company's results of operations for 1996.
Following the merger, at December 31, 1996, the Company owned 55,664 completed
apartment homes in 210 apartment communities and had 1,475 apartment homes under
development.
The Company is headquartered in Richmond, Virginia with divisional
offices in Richmond and Dallas plus regional offices in Richmond, Atlanta,
Georgia, Dallas, Texas and Orlando, Florida, and area offices in the previously
mentioned cities plus Columbia, Maryland, Raleigh, North Carolina, Charlotte,
North Carolina, Tampa, Florida, Nashville, Tennessee, San Antonio, Texas and
Phoenix, Arizona. The regional offices are responsible for the operation,
acquisition, construction and asset management activities in their respective
geographic regions. The Company had approximately 1,900 associates as of March
15, 1997.
The Company manages its properties directly, rather than through
outside property management firms. During 1996, the cost of internal property
management of the Company's apartment properties totaled approximately 2.4% of
rental revenue versus the 4-5% fee typically charged by independent fee
management companies in the Company's major markets. In determining its cost of
self management, the Company considers all direct and indirect costs associated
with the internal property management function.
The Company is operated so as to qualify as a real estate investment
trust under the applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Code"). To qualify, the Company must meet certain tests which,
among other things, require that its assets consist primarily of real estate,
its income be derived primarily from real estate, and at least 95% of its
taxable income be distributed to its common shareholders. Because the Company
qualifies as a REIT, it is generally not subject to Federal income taxes.
Apartments and Markets
At the end of 1996, the apartment portion of the Company's portfolio
included 210 apartment communities having a total of 55,664 completed apartment
homes and constituting 98% of the Company's real estate owned, at cost. The
Company operates in 21 major markets dispersed throughout a 15 state area from
Delaware to Nevada. (See Item 2, "Properties.") During 1996, 1995 and 1994, the
Company's apartment portfolio provided approximately 98%, 96% and 93%,
respectively of the Company's rental income. The Company's apartment communities
consist primarily of upper middle to moderate income garden and townhouse
communities which make up the broadest segment of the apartment market. Most of
the communities are considered to be B grade quality although the Company does
own class A properties that compete at or near the top of their respective
markets. Management believes that well located apartments offer the Company a
good combination of current income and longer term equity growth.
Although there is no known move toward rent control in any of the
markets in which the Company now owns apartments, should rent control
legislation be enacted, the Company's ability to raise rents to cover increases
in operating expenses might be impaired. While the Company has been largely
unaffected by military cutbacks and base closures, the effect of future defense
cuts on the Company's regions is unknown. As the Company has expanded, it has
attempted to avoid markets where the exposure to reduced defense spending is
believed to be high. The size and geographical diversification of the Company
can smooth the performance during natural real estate cycles.
Apartment markets in the Company's regions in 1994 and 1995 generally
benefitted from the combination of job growth which led to increases in the
number of renter households and only modest apartment construction. Physical
occupancy peaked in mid-1994 and remained above 95% through mid-1995 before
trending downward during the second half of 1995. During the first half of 1996,
most of the southeast apartment markets were in equilibrium with supply and
demand balanced but occupancy fell during the second half. This was due to a
combination of factors including slower job growth, an
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increase in the home ownership rate and an increase in the supply of new
apartments. Physical occupancy at the Company's apartment properties averaged
91.9% for December, 1996 compared with 93.9% for December, 1995. Despite this
market softness, the Company expects rent growth and other income growth to
remain strong over the next several years. It is anticipated that the Company
will benefit more from higher rent growth in 1997 and 1998 than from occupancy
gains. The Company expects to maintain rent growth in the 4% range and physical
occupancy in the 92% range during 1997. On December 31, 1996, the Company
acquired South West Property Trust Inc. and expanded its geographical markets.
Approximately 80% of the South West apartment portfolio is located in Texas,
with 50% in Dallas. Like the southeast markets, the southwest markets have
experienced population and job growth above the national average, strong young
household formation and growing demand for apartment homes. With the anticipated
increase in young household formation and immigration trends, the Company
believes there will be good long-term demand for B grade apartment communities
in the Sunbelt.
Business and Operating Strategies
The Company seeks to maximize shareholder value through increasing
its funds from operations ("FFO") and quarterly distributions to shareholders,
while building equity primarily through real estate appreciation. FFO is defined
as income before gains [losses] on investments, minority interest of unitholders
in operating partnership and extraordinary items [computed in accordance with
generally accepted accounting principles] plus real estate depreciation, less
preferred dividends and after adjustment for significant nonrecurring items, if
any).
The Company's current strategy is to be a major apartment owner in the
larger Sunbelt markets. Generally, the list of top 20 U.S. growth markets is
dominated by Sunbelt cities including cities in which the Company operates. The
Company operates primarily in 21 major markets dispersed throughout a 15 state
area from Delaware to Nevada. The Company believes that being a large or
dominant owner in a market has the following advantages:
o Being a local market leader.
o Obtaining economies of scale in use of personnel, advertising and
purchasing goods and services locally.
o Efficiently adding services to produce other sources of income.
o Benefitting from utility deregulation by purchasing utilities in bulk
and remarketing them to residents.
o Building stronger local and regional teams of associates.
To fully execute this strategy, the Company will continue to grow
principally through acquisitions. However, given its size, as well as its
objective to be a dominant owner in its larger Sunbelt markets, the Company's
development capability provides it with added flexibility to grow in its
existing markets.
Acquisitions
The Company's acquisition strategy focuses on acquiring two types of
apartment communities: (i) near Class A properties built since 1980 where the
investment (purchase price plus planned improvements) represents a significant
discount to replacement cost and (ii) well located older communities that can be
upgraded and repositioned for the longer term. When evaluating potential
acquisitions, the Company considers, among other things (i) the geographic
location, (ii)construction quality, condition and design of the property, (iii)
the current and projected cash flow of the property and the ability to increase
cash flows, (iv) the potential for rent increases, (v) the potential for
economic growth of the community in which the property is located, (vi)
occupancy demands for similar properties in the area, (vii) competition from
existing multifamily residential properties, and (viii) construction of new
properties in the area.
In addition to the Merger, during 1996, the Company purchased 30
apartment communities containing 7,712 apartment homes throughout the southeast
for approximately $321 million. These acquisitions occurred in 13 of the
Company's 21 major markets. This includes 18 apartment communities with 4,508
apartment homes located primarily in North Carolina and South Carolina acquired
in a portfolio purchase for approximately $183 million, including closing costs.
A geographic distribution of the Company's portfolio of apartment communities
held for investment is included in Item 2, "Properties". The Company expects to
acquire approximately 7,000 to 9,000 apartment homes for an aggregate purchase
price ranging from $300 million to $400 million during 1997.
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Merger
The real estate industry is in the midst of a consolidation phase which
began around 1990. Prior to 1990, the Company was the only major publicly held
REIT focusing predominantly on apartment investments. Since then, a number of
new multifamily REITs have been formed. According to the National Association of
Real Estate Investment Trusts (NAREIT), there were more than 31 apartment REITs
as of February 28, 1997. It is believed that some of these REITs may be forced
to seek to be acquired by larger, better capitalized REITs with superior access
to the capital markets, such as the Company. The Company has been a major
participant in this real estate consolidation, having acquired apartment
portfolios in each of the last three years and completing the Merger with South
West on December 31, 1996. The Company expects to continue to participate in the
consolidation process as an acquirer of other apartment portfolios and/or
apartment REITs when such transactions are accretive to FFO earnings, can
enhance dividend growth and shareholder value and can provide strategic and
operational benefits.
Development
Consistent with the Company's acquisition strategy, apartment home
development activity will be primarily focused in its major markets by investing
in good site locations for new development and additions to existing apartment
communities. The capability to develop provides the Company with added
flexibility to grow in its existing major markets. During 1996, the Company
completed the development of a second phase to an apartment community which
added 60 apartment homes in Wilmington, North Carolina, and began developing a
360 apartment home community in Nashville, Tennessee. The Merger provides the
Company with additional development capabilities as South West grew primarily
through development during the last few years. During 1996, South West completed
the development of three new apartment communities containing 1,194 apartment
homes and the second phase to another apartment community containing 246
apartment homes. As a result of the development projects started by both
companies during 1996, there were 1,580 apartment homes under construction, of
which 105 were completed, at December 31, 1996. At December 31, 1996, the
Company had $37.9 million of real estate under development with a total
estimated costs to complete of approximately $102 million. The Company expects
to fund in excess of $50 million on development activity during 1997 on these
development projects.
Existing Communities
The Company seeks to achieve income growth from its portfolio of mature
apartment communities by increasing rental revenues while maintaining occupancy
and controlling operating expenses. During 1996, the Company's mature apartment
communities (those communities acquired prior to January 1, 1995 and held
throughout the annual reporting period) experienced strong rent and other income
growth of 4.6% and 33%, respectively. Rental expenses at these mature
communities increased 8.1% as the Company experienced pressure in many of its
operating expense categories such as real estate taxes, insurance, salaries and
wages, security, maintenance and weather related expenses.
During 1996, the Company began the process of upgrading the interiors
of its older apartment communities, primarily by modernizing the kitchens and
bathrooms. The decision to upgrade the existing apartment portfolio is designed
to enhance rent growth and add value to the apartment communities. This program
which will take several years to complete, entails replacing or refurbishing
appliances, light fixtures, floor coverings, cabinets, countertops and shelving.
These improvements, which are considered revenue enhancing, contributed to
the 4.6% rent growth at the mature apartment communities during 1996 and will
continue to give these communities a competitive advantage in their respective
markets. The Company also began several initiatives
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in 1995 and 1996 that were designed to improve the property, grow occupancy,
reduce turnover, increase rents and reduce expenses which include: (i)
submetering of water and sewer to residents where local and state regulations
allow the cost to be passed on to the resident, (ii) gating and fencing of
apartment communities where feasible in order to control access into the
communities and promote a sense of privacy, (iii) installing monitoring devices
such as intrusion alarms or controlled access devices on the front doors of
enclosed hallways, (iv) enlarging fitness centers and (v) adding business
centers where computers, fax machines, copiers and meeting places are available
to residents. The Company expects to fund approximately $400 per unit on revenue
enhancing expenditures and $400 per unit on recurring capital expenditures
during 1997 to improve the interiors and exteriors of the Company's apartment
communities.
Sales
The Company continually assesses its real estate portfolio in order to
make hold, upgrade or sell decisions on each of its apartment communities. The
Company's strategy is to selectively sell certain apartment communities that no
longer meet long term investment objectives that have been established for its
apartment portfolio due to size, location, age or projected earnings potential.
During 1996, the Company sold four apartment communities, four shopping centers,
one industrial park and two parcels of undeveloped land for net cash proceeds of
approximately $33.8 million. The sale of the five commercial properties furthers
the Company's objective of disposing of its non-apartment portfolio. At December
31, 1996, the Company had six apartment communities, three shopping centers,
three other commercial properties and one parcel of undeveloped land classified
as "Real estate held for disposition" in its consolidated balance sheet
aggregating $39.6 million, net of accumulated depreciation and valuation
allowance. The Company hopes to dispose of these properties during the next
twelve months.
At December 31, 1996, commercial properties, primarily shopping
centers, constituted the remaining 2% of the Company's real estate owned at
cost. During 1996, 1995, and 1994, commercial properties provided 2%, 4%, and
7%, respectively, of the Company's rental income. The commercial portfolio has
become a non-material portion of the Company's total portfolio and will be
divested over time.
Financing Strategies
The Company is committed to maintaining a conservative capital
structure. Prior to 1996, the Company generally managed its debt levels at or
below 40% of total market capitalization (debt and equity). During 1996, the
Company modestly increased the proportion of debt in its capital structure as
interest rates were at historical lows. At December 31, 1996, total senior debt
equaled 43% of the Company's total market capitalization (debt and equity) of
$2.4 billion. The Company's senior debt is currently rated BBB+ by Standard &
Poor's and Baal by Moody's. As a result of its investment grade debt ratings,
the Company has used and expects to continue to use unsecured debt as its
primary debt funding source. Depending on the volume and timing of acquisition
and development activity during 1997, the Company anticipates raising additional
debt and equity capital during the next twelve months.
As a qualified REIT, the Company distributes a substantial portion of
its cash flow to its shareholders in the form of distributions. Over the past
several years, the Company has sought to retain a greater portion of its cash
flow. During 1996, the Company's cash flow from operating activities exceeded
cash distributions paid to common shareholders by approximately $26.4 million.
The Company funds new acquisitions, development activity, property renovations,
major capital improvements and balloon debt payments primarily through the
private and public sale of capital stock and the issuance of medium and
long-term unsecured notes payable. The Company has frequently utilized its bank
lines of credit to temporarily finance these expenditures and has subsequently
replaced the short-term bank debt with longer term debt or equity. In addition,
the Company may also fund its capital requirements through (i) sales of
properties, (ii) assumption of mortgage indebtedness, (iii) cash invested
through the Company's dividend reinvestment and stock purchase plan, (iv) the
issuance of operating partnership units and (v) retained cash flow.
At December 31, 1996, the Company had the following credit facilities
outstanding: (i) $70 million of revolving credit facilities with four commercial
banks, (ii) $33.5 million of additional available lines of credit with three of
its commercial banks, (iii) a $50 million interim credit facility with one of
its commercial banks and (iv) a $75 million unsecured revolving credit facility
assumed on December 31, 1996 in connection with the Merger which was repaid in
January, 1997. At December 31, 1996, the Company had $125.3 million of
borrowings outstanding under these credit facilities. The Company plans to
increase its current bank credit facilities from $103.5 million to $250 million
during
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1997.
Competition
In most of the Company's markets, the competition for residents among
properties is very intense. Some competing properties are larger and/or newer
than the Company's properties and offer features for prospective residents not
offered by properties owned by the Company. The competitive situation of each
property varies and intensifies as additional properties are constructed.
The Company expects to continue to aggressively acquire additional
apartment properties within the Sunbelt during 1997. When it is in the market
for new acquisitions, the Company competes with numerous other investors,
including other REITs, individuals, partnerships, corporations, pension funds,
insurance companies, foreign investors, and other real estate entities.
Management believes that the Company, in general, is well positioned in terms of
economic and other resources to compete effectively. Even though the Company has
certain advantages over some of its competitors because of its substantial
presence in the region and its access to capital, some competing investors are
larger than the Company in terms of assets and other investment resources and
may have a competitive advantage.
Environmental Regulations
To date, compliance with Federal, State, and local environmental
protection regulations has not had a material effect upon the capital
expenditures, earnings, or competitive position of the Company. However, over
the past few years, there have been increasing concerns raised regarding the
presence of asbestos and other hazardous materials in existing real estate
properties. In response to this, on March 1, 1991, the Company adopted a
property management plan for hazardous materials. As part of the plan, Phase I
environmental site investigation and reports have been completed for each
property owned by the Company and not previously inspected. In addition, all
proposed acquisitions are inspected prior to acquisition. The inspections are
conducted by qualified environmental consultants and the report issued is
reviewed by the Company prior to the purchase or development of any property.
Nevertheless, it is possible that the Company's environmental assessments will
not reveal all environmental liabilities or that there are material
environmental liabilities of which the Company is unaware. In some cases, the
Company has abandoned otherwise economically attractive acquisitions because the
costs of removal or control have been prohibitive and/or the Company has been
unwilling to accept the potential risks involved. The Company does not believe
it will be required to remediate any asbestos materials at any of its properties
as asbestos is managed in place in accordance with current environmental laws
and regulations. Management believes that through professional environmental
inspections and testing for asbestos and other hazardous materials, coupled with
a conservative posture toward accepting known risk, the Company can minimize its
exposure to potential liability associated with environmental hazards.
The Company is not aware of any environmental hazards at any of its
properties which individually or in the aggregate may have a material adverse
impact on its operations or financial position. The Company has not been
notified by any governmental authority, and is not otherwise aware, of any
material non-compliance, liability or claim relating to environmental
liabilities in connection with any of its properties. The Company does not
believe that the cost of continued compliance with applicable environmental laws
and regulations will have a material adverse effect on the Company or its
financial condition or results of operations. There can be no assurance,
however, that future environmental laws, regulations or ordinances will not
require additional remediation of existing conditions that are not currently
actionable, or impose more stringent requirements on the Company, the costs of
compliance with which could have a material adverse effect on the Company or its
financial condition. To the best of its knowledge, the Company is in compliance
with all applicable environmental rules and regulations.
Operating Partnership - United Dominion Realty Trust, L.P.
On October 23, 1995, the Company organized United Dominion Realty, L.P.
(the "Partnership") under the Virginia Revised Uniform Limited Partnership Act,
as amended (the "Partnership Act"). The Company is the sole General Partner of
the Partnership and currently holds a 97% interest therein and 1% is currently
held by UDRT of North Carolina, L.L.C., a wholly owned subsidiary of the
Company. The remaining 2% is held by outside parties. In 1995, the Company
acquired two apartment communities and land to develop an additional apartment
community using the Partnership and transferred seven of its Tennessee
properties into the Partnership. During 1996, the Company
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issued approximatley 136,000 operating partnership units valued at approximately
$2 million in connection with the acquisition of an apartment community. The
Partnership is intended to assist the Company in competing for the acquisition
of properties that meet the Company's investment strategies from seller
partnerships some or all of whose partners may wish to defer taxation of gain
realized on sale through an exchange of partnership interests.
The Partnership is organized under a First Amended and Restated
Agreement of Limited Partnership dated as of December 31, 1995 (the "Partnership
Agreement"). A summary of certain provisions of the Partnership Agreement is set
forth below. The summary does not purport to be complete and is subject to and
qualified in its entirety by reference to applicable provisions of the
Partnership Act and the complete Partnership Agreement, which is filed as an
exhibit to the Company's Annual Report on Form 10-K for the year ended December
31, 1995.
Admission of Limited Partners; Investment Agreements
The Company presently intends to limit admission to the Partnership to
Limited Partners who are "accredited investors," as defined in Rule 501(a) under
the Securities Act of 1933, as amended (the "Securities Act"). Limited Partners
will be admitted upon executing and delivering to the Company an Investment
Agreement (the "Investment Agreement") and delivering to the Partnership the
consideration prescribed therein. In the Investment Agreement, the prospective
Limited Partner makes representations as to his status as an accredited investor
and other representations and agreements regarding the Units, defined below, to
be issued to him, intended to assure compliance with the Securities Act. Any
rights to Securities Act registration of the Common Stock of the Company, if
any, issued to such Limited Partner upon redemption of his Units (see
"Redemption Rights" below), will also be set forth in the Investment Agreement.
Units
The interests in the Partnership of the Partnership's limited partners
(the "Limited Partners") are represented by units of limited partnership
interest (the "Units"). All holders of Units are entitled to share in cash
distributions from, and in the profits and losses of, the Partnership.
Distributions by the Partnership are made equally for each Unit outstanding. As
the Partnership's sole General Partner, the Company intends to make
distributions per Unit in the same amount as the cash dividends paid by the
Company on each share of Common Stock. However, because the Partnership
properties, which are the primary source of cash available for distribution to
Unit holders, are significantly fewer than the properties held directly by the
Company and may not perform as well, there can be no assurance that
distributions per Unit will always equal Common Stock dividends per share. A
distribution made to the Company to enable it to maintain its REIT status (see
"Management and Operations" below) may deplete cash otherwise distributable to
Unit holders. The Partnership may borrow from the Company for the purpose of
equalizing per Unit and per Common share distributions, but neither the
Partnership nor the Company is under any obligation regarding Partnership
borrowings for this or any other purpose.
The Limited Partners have the rights to which limited partners are
entitled under the Partnership Act. The Units are illiquid; they are not
registered for secondary sale under any securities laws, state or federal, and
cannot be transferred by a holder unless they are so registered or an exemption
from such registration is available. Neither the Partnership nor the Company is
under any obligation to effect any such registration or to establish any such
exemption. The Partnership Agreement imposes additional restrictions on the
transfer of Units, as described below under "Transferability of Interests."
Management and Operations
The Company, as the sole General Partner of the Partnership, has full,
exclusive and complete responsibility and discretion in the management and
control of the Partnership, and the Limited Partners have no authority to
transact business for, or participate in the management activities or decisions
of, the Partnership.
The Partnership Agreement requires that the Partnership be operated in
a manner that will enable the Company to satisfy the requirements for being
classified as a REIT and to avoid any federal income tax liability. The General
Partner is expressly directed, notwithstanding anything to the contrary in the
Partnership Agreement, to cause the Partnership to distribute amounts (including
proceeds of Partnership borrowings) sufficient to enable the Company to
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pay distributions to its shareholders required to maintain its REIT status and
avoid income tax or excise tax liability.
Ability to Engage in Other Businesses; Conflicts of Interest
The Company and other persons (including officers, directors,
employees, agents and other affiliates of the Company) are not prohibited under
the Partnership Agreement from engaging in other business activities, including
business activities substantially similar or identical to those of the
Partnership, and the Company will not be required to present any business
opportunities to the Partnership or to any Limited Partner.
Borrowing by the Partnership
The General Partner is authorized under the Partnership Agreement to
cause the Partnership to borrow money and to issue and guarantee debt as it
deems necessary for the conduct of the activities of the Partnership. Such debt
may be secured by mortgages, deeds of Company, pledges or other liens on the
assets of the Partnership.
Reimbursement of General Partner; Transactions with the General Partner and its
Affiliates
The General Partner will receive no compensation for its services as
General Partner of the Partnership. However, as a partner in the Partnership,
the General Partner has the same right to allocations of profit and loss and
distributions as other partners of the Partnership. In addition, the Partnership
will reimburse the General Partner for all expenses it incurs relating to the
ownership and operation of, or for the benefit of, the Partnership and any
offering of Units or other partnership interests, and for the pro rata share of
the expenses of any offering of securities of the Company some or all of the
proceeds of which are contributed to the Partnership.
Liability of General Partner and Limited Partners
The General Partner is liable for all general obligations of the
Partnership to the extent not paid by the Partnership. The General Partner is
not liable for the non-recourse obligations of the Partnership.
The Limited Partners are not required to make further capital
contributions to the Partnership after their respective initial contributions
are fully paid. Assuming that a Limited Partner acts in conformity with the
provisions of the Partnership Agreement, the liability of the Limited Partner
for obligations of the Partnership under the Partnership Agreement and
Partnership Act will be limited, subject to certain possible exceptions, to the
loss of the Limited Partner's investment in the Partnership.
The Partnership is qualified to conduct business in each state in which
it owns property and may qualify to conduct business in other jurisdictions.
Maintenance of limited liability may require compliance with certain legal
requirements of those jurisdictions and certain other jurisdictions. Limitations
on the liability of a limited partner for the obligations of a limited
partnership have not clearly been established in many states. Accordingly, if it
were determined that the right, or exercise of the right by the Limited
Partners, to make certain amendments to the Partnership Agreement or to take
other action pursuant to the Partnership Agreement constituted "control" of the
Partnership's business for the purposes of the statutes of any relevant state,
the Limited Partners might be held personally liable for the Partnership's
obligations. The Partnership will operate in a manner the General Partner deems
reasonable, necessary and appropriate to preserve the limited liability of the
Limited Partners.
Exculpation and Indemnification of the General Partner
The Partnership Agreement provides that the General Partner will incur
no liability for monetary damages to the Partnership or any Limited Partner for
losses sustained or liabilities incurred as a result of errors in judgment or of
any act or omission if the General Partner acted in good faith. In addition, the
General Partner is not responsible for any misconduct or negligence on the part
of its agents, provided the General Partner appointed such agents in good faith.
The Partnership Agreement also provides for indemnification of the
General Partner, the directors, officers and
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employees of the General Partner, and such other persons as the General Partner
may from time to time designate, against any and all losses, claims, damages,
liabilities (joint or several), expenses (including reasonable legal fees and
expenses), judgments, fines, settlements, and other amounts arising from any and
all claims, demands, actions, suits or proceedings, whether civil, criminal,
administrative or investigative, that relate to the operations of the
Partnership in which any such indemnitee may be involved, or is threatened to be
involved, unless it is established that (i) the act or omission of such
indemnitee was material to the matter giving rise to the proceeding and either
was committed in bad faith or was the result of active and deliberate
dishonesty, (ii) such indemnitee actually received an improper personal benefit
in money, property or services, or (iii) in the case of any criminal proceeding,
such indemnitee had reasonable cause to believe that the act or omission was
unlawful.
Sale of Assets
Under the Partnership Agreement, the General Partner generally has the
exclusive authority to determine whether, when and on what terms the assets of
the Partnership will be sold.
Removal of the General Partner; Transfer of General Partner's Interest
The Partnership Agreement does not authorize the Limited Partners to
remove the General Partner and the Limited Partners have no right to remove the
General Partner under the Partnership Act. The General Partner may not transfer
any of its interest as General Partner and withdraw as General Partner, except
(a) to a wholly-owned subsidiary of the General Partner or the owner of all the
ownership interests in the General Partner, (b) in connection with a merger or
sale of all or substantially all of the assets of the General Partner or (c) as
a result of the bankruptcy of the General Partner. A substitute or additional
General Partner may be admitted upon compliance with the applicable provisions
of the Partnership Agreement, including delivery by counsel for the Partnership
of an opinion that admission of such General Partner will not cause (i) the
Partnership to be classified other than as a partnership for federal income tax
purposes, or (ii) the loss of any Limited Partner's limited liability. The
General Partner may not sell all or substantially all of its assets, or enter
into a merger, unless the sale or merger includes the sale of all or
substantially all of the assets of, or the merger of, the Partnership and the
Limited Partners receive for each Unit substantially the same consideration as
the holder of one share of Common Stock.
Transferability of Interests
A Limited Partner may transfer his interest in the Partnership without
the consent of the General Partner, unless in the opinion of counsel for the
Partnership such transfer would require the registration of such interest under
the Securities Act or would otherwise violate any applicable federal or state
securities or blue sky law (including investment suitability standards) and
unless such transfer would have undesirable federal income tax consequences for
the Partnership. The General Partner may require, as a condition of any
transfer, that the transferring Limited Partner assume all costs incurred by the
Partnership in connection with such transfer.
Redemption Rights
Each Limited Partner has the right (the "Redemption Right"), subject to
the purchase right of the General Partner described below, to cause the
redemption of such Limited Partner's Units for cash in an amount per Unit equal
to the average of the closing sale prices of the Common Stock of the Company on
the New York Stock Exchange (the "NYSE") for the ten trading days immediately
preceding the date of receipt by the General Partner of notice of such Limited
Partner's exercise of the Redemption Right. Subject to certain restrictions
intended to prevent undesirable tax consequences and assure compliance with the
Securities Act, a Limited Partner may exercise the Redemption Right at any time
but not more than twice within the same calender year and not with respect to
less than 1,000 Units (or all Units owned by such Limited Partner, if less than
1,000). A Limited Partner that exercises the Redemption Right shall be deemed to
have offered to sell the Units to be redeemed to the General Partner, and the
General Partner may elect to purchase such Units by paying to such Limited
Partner either the redemption price in cash or by delivering to such Limited
Partner a number of shares of Common Stock of the Company equal to the product
of the number of such Units, multiplied by the "Conversion Factor," which is
1.0, subject to customary antidilution provisions in the event of stock
dividends on or subdivisions or combinations of the Common Stock subsequent to
issuance of such Units. Any Common Stock issued to the redeeming Limited Partner
will be listed on the NYSE and if and to the extent provided
10
<PAGE>
in such Redeeming Partner's Investment Agreement, registered under the
Securities Act and/or entitled to rights to Securities Act registration.
No Withdrawal of Capital by Limited Partners
No Limited Partner has the right to withdraw any part of his capital
contribution to the Partnership or to interest thereon or to receive any
distribution, except as provided in the Partnership Agreement.
Issuance of Additional Limited Partnership Interests and Other Partnership
Securities
The General Partner is authorized, without the consent of the Limited
Partners, to cause the Partnership to issue additional Units or other
Partnership securities to the partners or to other persons on such terms and
conditions and for such consideration, including cash or any property or other
assets permitted by the Partnership Act, as the General Partner deems
appropriate.
Meetings
The Partnership Agreement does not provide for annual meetings of the
Limited Partners, and the General Partner does not anticipate calling such
meetings.
Amendment of Partnership Agreement
Amendments to the Partnership Agreement may, with four exceptions, be
made by the General Partner without the consent of the Limited Partners. Any
amendment to the Partnership Agreement which would (i) affect the Conversion
Factor or the Redemption Rights of the Limited Partners, (ii) adversely affect
the rights of the Limited Partners to receive distributions payable to them
under the Partnership Agreement, (iii) alter the Partnership's profit and loss
allocations or (iv) impose any obligation upon the Limited Partners to make
additional capital contributions to the Partnership shall require the consent of
Limited Partners owning more than 50% of the percentage interests in the
Partnership.
Books and Reports
The General Partner is required to keep at the specified office of the
Partnership the Partnership's books and records, including copies of the
Partnership's federal, state and local tax returns, a list of the partners and
their last known business addresses, the Partnership Agreement, the Partnership
certificate and all amendments thereto and any other documents and information
required under Partnership Act. Any partner or his duly authorized
representative, upon paying duplicating, collection and mailing costs, is
entitled to inspect or copy such records during ordinary business hours.
The General Partner will furnish to each Limited Partner, as soon as
practicable after the close of each fiscal year, an annual report containing
financial statements of the Partnership (or the Company, if consolidated
financial statements including the Partnership are prepared) for such fiscal
year. The financial statements will be audited by accountants selected by the
General Partner. In addition, as soon as practicable after the close of each
fiscal quarter (other than the last quarter of the fiscal year), the General
Partner will furnish to each Limited Partner a quarterly report containing
unaudited financial statements of the Partnership (or the Company and the
Partnership, consolidated).
The General Partner will furnish to each Limited Partner, within 75
days after the close of each fiscal year of the Partnership, the tax information
necessary to file such Limited Partner's individual tax returns.
Loans to Partnership
The Partnership Agreement provides that the General Partner may borrow
additional Partnership funds for any Partnership purpose from the General
Partner or a subsidiary or subsidiaries of the General Partner or otherwise.
Adjustments of Capital Accounts and Percentage Interests
11
<PAGE>
A separate capital account will be established and maintained for each
Partner. If (i) a new or existing general or limited partner of the Partnership
(a "Partner" or collectively "Partners") acquires an additional interest in the
Partnership interest in exchange for more than a de minimis capital
contribution, (ii) the Partnership distributes to a Partner more than a de
minimis amount of Partnership property as consideration for a Partnership
interest, or (iii) the Partnership is liquidated for federal income tax
purposes, the General Partner shall revalue the property of the Partnership to
its fair market value (as determined by the General Partner, in its sole
discretion) in accordance with applicable federal income tax regulations. When
the Partnership's property is revalued by the General Partner, the capital
accounts of the partners shall be adjusted in accordance with such regulations,
which generally require such capital accounts to be adjusted to reflect the
manner in which the unrealized gain or loss inherent in such property (that has
not been reflected in the capital accounts previously) would be allocated among
the Partners pursuant to the Partnership Agreement if there were a taxable
disposition of such property for its fair market value on the date of the
revaluation.
If the number of outstanding Units increases or decreases during a
taxable year, each Partner's percentage interest in the Partnership shall be
adjusted by the General Partner effective as of the effective date of each such
increase or decrease to a percentage equal to the number of Units held by such
Partner divided by the aggregate number of Units outstanding after giving effect
to such increase or decrease, and profits and losses for the year will be
allocated among the Partners in a manner selected by the General Partner to give
appropriate effect to such adjustments.
Registration Rights
Limited Partners have no rights to Securities Act registration of any
Common Stock of the Company received in connection with redemption of Units
except as provided in their respective Investment Agreements.
Tax Matters; Profit and Loss Allocations
Pursuant to the Partnership Agreement, the General Partner is the tax
matters partner of the Partnership and, as such, has the authority to handle tax
audits and to make tax elections under the Code on behalf of the Partnership.
Profit and loss of the Partnership generally will be allocated among
the Partners in accordance with their respective interests in the Partnership
based on the number of Units held by the Partners.
Distributions
The Partnership Agreement provides that the General Partner shall
distribute cash quarterly, in amounts determined by the General Partner in its
sole discretion, to the partners in accordance with their respective percentage
interests in the Partnership, except that the amount of cash distributable to a
Limited Partner who has not been a Limited Partner for the full quarter for
which the distribution is paid is subject to pro rata reduction. Upon
liquidation of the Partnership, after payment of, or adequate provision for,
debts and obligations of the Partnership, including any Partner loans, any
remaining assets of the Partnership will be distributed to all Partners with
positive capital accounts in accordance with their respective positive capital
account balances. If the General Partner has a negative balance in its capital
account following a liquidation of the Partnership, it will be obligated to
contribute cash to the Partnership equal to the negative balance in its capital
account.
Term
The Partnership will continue until December 31, 2051, or until sooner
dissolved upon (i) the bankruptcy, dissolution, death or withdrawal of a General
Partner (unless the Limited Partners elect to continue the Partnership by
electing by unanimous consent a substitute General Partner within 90 days of
such occurrence), (ii) the passage of 90 days after the sale or other
disposition of all or substantially all the assets of the Partnership, (iii) the
redemption of all Limited Partners' interests in the Partnership, or (iv)
election by the General Partner. Upon dissolution of the Partnership, the
General Partner will proceed to liquidate the assets of the Partnership and
distribute the proceeds remaining after payment or adequate provision for
payment of all debts and obligations of the Partnership as provided in the
Partnership Agreement.
12
<PAGE>
Item 2. Properties
Real Estate Held for Investment
The table below sets forth a summary by major geographic market of the Company's
portfolio of apartment rental properties held for investment at December 31,
1996.
See also Notes 1 and 2 to the Consolidated Financial Statements and Schedule III
- - - Summary of Real Estate Owned.
<TABLE>
<CAPTION>
Number of Number of Percentage of
Apartment Apartment Apartment Real Estate
Major Geographic Markets Communities Homes Homes at Cost
- - ------------------------ ----------- --------- ------------ ------------
<S> <C>
Dallas, Texas 20 7,223 13% $262,153,110
Richmond, Virginia 12 3,541 7% 103,180,360
Columbia, South Carolina 12 3,534 6% 112,548,555
Raleigh, North Carolina 10 2,936 5% 116,867,387
Orlando, Florida 10 2,981 5% 111,047,090
Tampa, Florida 9 2,639 5% 90,214,349
Charlotte, North Carolina 13 2,501 5% 87,154,000
Atlanta, Georgia 8 2,226 4% 82,713,902
Eastern, North Carolina 9 2,150 4% 72,348,771
Greensboro, North Carolina 9 2,122 4% 82,712,500
San Antonio, Texas 5 1,983 4% 87,150,000
Baltimore, Maryland 8 1,746 3% 76,507,947
Greenville/Spartanburg, South Carolina 8 1,718 3% 58,273,183
Nashville, Tennessee 6 1,520 3% 52,775,890
Washington, DC 6 1,483 3% 64,316,263
Hampton Roads, Virginia 6 1,428 3% 45,436,578
Jacksonville, Florida 3 1,157 2% 47,711,857
Ft. Lauderdale, Florida 4 960 2% 59,616,216
Memphis, Tennessee 4 935 2% 32,566,185
Phoenix, Arizona 3 712 1% 36,550,000
Houston, Texas 2 514 1% 12,250,000
Other Maryland 4 784 1% 32,912,724
Other Texas 5 1,341 3% 38,675,000
Other Florida 5 1,172 2% 40,381,088
Other North Carolina 4 1,052 2% 45,900,338
Other Virginia 6 988 2% 32,836,159
Delaware 2 368 0% 16,604,565
Other Georgia 2 468 1% 20,593,877
Other South Carolina 2 408 1% 12,511,511
Arkansas 2 512 1% 20,500,000
Nevada 1 384 1% 20,000,000
Oklahoma 1 316 0% 9,775,000
Alabama 2 382 1% 13,527,559
New Mexico 1 210 0% 9,300,000
--------- ------ ------ --------------
Total 204 54,394 100% $2,007,611,964
========= ====== ====== ==============
</TABLE>
<TABLE>
<CAPTION>
Economic Average Monthly Rental Average
Cost Occupancy Rates for the Year Ended Unit Size
Major Geographic Markets Encumbrances per Unit Full Year 1996 December 31, 1996 * (Square Feet)
- - ------------------------ ------------ --------- -------------- ------------------------- -------------
<S> <C>
Dallas, Texas (d) $36,294 93.3% (a) $509 (a) 782
Richmond, Virginia $6,183,077 29,139 93.7% 520 944
Columbia, South Carolina 29,358,461 31,847 91.7% 484 860
Raleigh, North Carolina 11,800,000 39,805 98.2% 578 827
Orlando, Florida 27,700,000 37,252 91.8% 546 919
Tampa, Florida 8,103,979 34,185 92.8% 546 970
Charlotte, North Carolina 14,129,881 34,848 94.3% 560 828
Atlanta, Georgia 11,535,184 37,158 93.6% 554 949
Eastern, North Carolina 10,782,933 33,651 95.8% 508 790
Greensboro, North Carolina 14,323,909 38,979 90.2% 458 933
San Antonio, Texas (d) 43,949 89.1% (a) 512 (a) 847
Baltimore, Maryland 30,395,000 43,819 91.3% 636 865
Greenville/Spartanburg, South Carolina 20,416,000 33,919 90.9% 490 870
Nashville, Tennessee 5,183,402 34,721 93.9% 564 954
Washington, DC 11,357,182 43,369 89.0% 641 830
Hampton Roads, Virginia -- 31,818 91.0% 546 983
Jacksonville, Florida 22,454,958 41,238 92.3% 567 872
Ft. Lauderdale, Florida -- 62,100 91.3% 775 1,092
Memphis, Tennessee 5,805,000 34,830 93.1% 491 784
Phoenix, Arizona (d) 51,334 90.2% (a) 508 (a) 888
Houston, Texas (d) 23,833 87.3% (a) 462 (a) 686
Other Maryland -- 41,981 97.8% 602 935
Other Texas (d) 28,840 86.5% (a) 511 (a) 774
Other Florida 4,909,149 34,455 90.8% 536 810
Other North Carolina 23,493,161 43,632 88.6% (e) 889
Other Virginia 2,920,000 33,235 96.8% 529 848
Delaware -- 45,121 95.2% 591 893
Other Georgia 6,337,580 44,004 91.7% 625 1,140
Other South Carolina 2,200,000 30,665 84.6% 398 909
Arkansas 5,053,526 40,039 90.2% (a) 508 (a) 821
Nevada -- 52,083 (c) (c) 837
Oklahoma (d) 30,934 92.9% (a) 435 (a) 756
Alabama -- 35,412 87.4% 492 1,067
New Mexico (d) 44,286 89.8% (a) 575 (a) 729
------------ ------- ---------- --------- ------
Total $369,310,458 $36,909 92.9% (b) $548 (b) 870
============ ======= ========== ========= ======
</TABLE>
At December 31, 1996, the Company had six apartment properties, three shopping
centers, three other commercial properties and one parcel of undeveloped land
classified in the consolidated balance sheet as real estate held for
disposition in the amount of $39,556,055, net of accumulated depreciation in the
amount of $14,617,873 and impairment loss valuation allowance in the amount of
$290,000. These properties are not included in the above schedule.
* Average Monthly Rental Rates for the Year Ended December 31, 1996, represents
potential rent collections (gross potential rents less market adjustments),
which approximates net effective rents. These amounts exclude the 1996
acquisitions.
(a) These apartment communities were acquired on December 31, 1996 in connection
with the statutory merger (the "Merger") with South West Property Trust Inc.
("South West") and as such, this information is presented for informational
purposes only, as South West is not included in the Company's results of
operations for the year ended December 31, 1996.
(b) Excludes the South West apartment communities.
(c) This community was under major rehabilitation by South West during 1996 and
as such this information is excluded.
(d) In connection with the Merger, the Company assumed $94,868,076 of REMIC
Financings which encumber 27 of the apartment communities acquired.
(e) These properties were acquired during 1996, and as such, this information
is not available.
13
<PAGE>
Item 3. LEGAL PROCEEDINGS
Neither the Company nor any of its apartment communities is presently
subject to any material litigation nor, to the Company's knowledge, is any
litigation threatened against the Company or any of the communities, other than
routine actions arising in the ordinary course of business, some of which are
expected to be covered by liability insurance and all of which collectively are
not expected to have a material adverse effect on the business or financial
condition or results of operations of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On December 10, 1996, the Company held a special meeting of
shareholders. A total of 34,976,019 shares of common stock, representing 59% of
the 58,754,315 shares outstanding and entitled to vote as of the record date
(November 1, 1996) were represented in person or by proxy and constituted a
quorum.
At the meeting, the shareholders approved an Amended and Restated
Agreement and Plan of Merger (the "Merger Agreement") among the Company, United
Sub, Inc. ("Sub"), a wholly-owned subidiary of the Company and South West dated
as of October 1, 1996 pursuant to which: (i) South West would merge with and
into Sub; (ii) each outstanding shares of South West Common Stock $.01 par
value, would be converted into the right to receive 1.0833 shares of the
Company's Common Stock , $1.00 par value, with cash in lieu of the issuance of
any fractional share interest, (iii) the Articles of Incorporation of the
Company would be amended to increase the number of authorized shares of the
Company from 100,000,000 shares to 150,000,000 shares; and (iv) the Board of
Directors of the Company would increase from nine members to 13 members and four
persons designated by South West would become members of the Board of Directors
of the Company filling the vacancies created by the increase in the size of the
Board. The Merger Agreement received 34,123,357 shares, representing 58.1% of
the total number of shares entitled to vote at the meeting and 97.6% of the
shares voted.
Executive Officers of the Registrant
The executive officers of the Company, listed below, serve in their
respective capacities for approximate one year terms and are subject to
re-election annually by the Board of Directors, normally in May of each year.
<TABLE>
<CAPTION>
Name Age Office Since
- - ---- --- ------ -----
<S> <C>
John P. McCann 52 Chairman of the Board, 1974
President and Chief
Executive Officer
James Dolphin 47 Executive Vice President 1979
and Chief Financial Officer
John S. Schneider 58 Vice-Chairman of the Board 1996
and Executive Vice President
Barry M. Kornblau 47 Senior Vice President and 1991
Director of Apartment Operations/
Eastern Division
Richard A. Giannotti 41 Senior Vice President and Director 1985
of Acquisitions and Development/
Eastern Division
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
Robert F. Sherman 54 Senior Vice President and 1996
Director of Apartment Operations/
Western Division
David L. Johnston 52 Senior Vice President and Director 1996
of Acquisitions and Development/
Western Division
Katheryn E. Surface 38 Vice President, Corporate Secretary 1992
and General Counsel
Jerry A. Davis 34 Vice President and Corporate Controller 1989
</TABLE>
Mr. McCann has been the Company's managing Chief Excecutive Officer
since 1974. Mr. McCann was elected Chairman of the Board in 1996.
Mr. Schneider is the former Chief Executive Officer and Chairman of the
Board of South West. Mr. Schneider was employed with the investment banking
firm of Donaldson, Lufkin and Jenrette until from 1967 until 1973, when he
cofounded a predecessor firm to South West. Mr. Schneider was elected Vice
Chairman of the Board and Executive Vice President in 1996 in connction with the
Merger.
Mr. Dolphin was first employed by the Company in 1979 as Controller. He
was elected Vice President of Finance in 1985 and has served as the Company's
Chief Financial Officer since that time, Senior Vice President in 1987 and
Executive Vice President in 1996.
Mr. Kornblau joined the Company in 1991 as Senior Vice President and
Director of Apartment Operations.
Mr. Giannotti joined the Company as Director of Development and
Construction in September, 1985. He was elected Assistant Vice President in
1988, Vice President in 1989 and Senior Vice President in 1996.
Mr. Sherman is the former President and Chief Operating Officer of
South West. Mr. Sherman was in charge of South West's management division from
1973 until 1996. Mr. Sherman was elected Senior Vice President in 1996 in
connection with the Merger.
Mr. Johnston is the former Executive Vice President-Real Estate
Investments of South West, a position he held since joining South West in 1992.
From 1989 until 1992, Mr. Johnston was Senior Vice President of Property Company
of America.
Ms. Surface joined the Company in 1992 as Assistant Vice President and
Legal Counsel and in 1994 was elected General Counsel, Corporate Secretary and
Vice President. From 1986 to 1992, she was an attorney with the law firm of
Hunton & Williams, the Company's outside counsel.
Mr. Davis joined the Company in March, 1989 as Controller and was
subsequently elected Assistant Secretary. In 1991 he was elected Vice
President. He is a certified public accountant.
15
<PAGE>
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on the New York Stock Exchange
("NYSE") under the symbol "UDR". The following table sets forth the quarterly
high and low closing sale prices per share reported on the NYSE for each quarter
of the last two years. Distribution information reflects distributions declared
per share for each calender quarter and paid at the end of the following month.
Distributions
1995 High Low Declared
1st Quarter $ 14 5/8 $ 13 $ .225
2nd Quarter 15 3/8 13 1/2 .225
3rd Quarter 15 13 1/2 .225
4th Quarter 15 13 1/4 .225
1996
1st Quarter $ 15 5/8 $ 14 1/8 $ .24
2nd Quarter 15 1/4 14 1/8 .24
3rd Quarter 14 1/2 13 1/8 .24
4th Quarter 15 3/4 13 5/8 .24
The Company determined that, for Federal income tax purposes, approximately
63.8% of the distributions for each of the four quarters of 1996 represented
ordinary income to its shareholders, 30.7% represented return of capital to its
shareholders and there were no capital gains to its shareholders.
On March 14, 1997, the closing sale price of the Common Stock was $15.25 per
share on the NYSE. On March 14, 1997, there were 6,898 holders of record of the
86,288,728 shares of Common Stock.
The Company pays regular quarterly distributions to holders of shares of Common
Stock. Future distributions by the Company will be at the discretion of its
Board of Directors and will depend on the actual funds from operations of the
Company, the Company's financial condition and capital requirements, the annual
distribution requirements under the REIT provisions of the Internal Revenue Code
and such other factors as the Board of Directors deems relevant. The annual
distribution payment for calender year 1996 necessary for the Company to
maintain its status as a REIT was approximately $.61 per share. The Company
paid total distributions of $.945 per share for 1996.
The Company has a Dividend Reinvestment and Stock Purchase Plan under which
holders of Common and Preferred Stock may elect to automatically reinvest their
distributions and make additional cash payments to acquire additional shares of
the Company's Common Stock.
Item 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial and
other information for the Company as of and for each of the years in the five
year period ended December 31, 1996. The table should be read in conjunction
with the Consolidated Financial Statements of United Dominion Realty Trust, Inc.
and the Notes thereto included elsewhere herein.
16
<PAGE>
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Years ended December 31, 1996 1995 1994 1993 1992
- - -----------------------------------------------------------------------------------------------------------------------------------
In thousands, except per share data (a) and apartment homes owned
<S> <C>
Operating Data
Rental income $242,112 $195,240 $139,972 $89,084 $63,202
Income before gains (losses) on sales of investments, minority
interest of unitholders in operating partnership
and extraordinary item 33,726 28,037 19,118 11,286 6,577
Gains (losses) on sales of investments 4,346 5,090 108 (89) --
Extraordinary item - early extinguishment of debt (23) -- (89) -- (242)
Net income 37,991 33,127 19,137 11,197 6,335
Dividends to preferred shareholders 9,713 6,637 -- -- --
Net income available to common shareholders 28,278 26,490 19,137 11,197 6,335
Common distributions declared 55,493 48,610 37,539 27,988 23,271
Weighted average number of common shares outstanding 57,482 52,781 46,182 38,202 34,604
Per share:
Net income per common share $.49 $.50 $.41 $.29 $.18
Common distributions declared .96 .90 .78 .70 .66
- - -----------------------------------------------------------------------------------------------------------------------------------
Balance Sheet Data (b)
Real estate held for investment $2,007,612 $1,131,098 $1,007,599 $582,213 $454,115
Real estate under development 37,855 -- -- -- --
Real estate held for disposition 39,556 51,015 -- -- --
Total real estate owned 2,085,023 1,182,113 1,007,599 582,213 454,115
Accumulated depreciation 173,291 129,454 120,341 91,444 71,806
Total assets 1,966,904 1,080,616 911,913 505,840 390,365
Secured notes payable 376,560 180,481 158,449 72,862 76,516
Unsecured notes payable 668,275 349,858 368,215 156,558 104,605
Total debt 1,044,835 530,339 526,664 229,420 181,121
Shareholders' equity 850,379 516,389 356,968 259,963 197,677
Number of common shares outstanding 81,983 56,375 50,356 41,653 35,285
- - -----------------------------------------------------------------------------------------------------------------------------------
Other Data:
Cash Flow Data
Cash provided by operating activities $90,064 $66,428 $54,544 $33,939 $24,608
Cash used in investing activities (161,572) (183,930) (359,631) (130,064) (81,373)
Cash provided by financing activities 82,056 113,145 306,575 100,793 56,777
Funds from Operations (c)
Income before gains (losses) on sales of
investments, minority interest of
unitholders in operating partnership and
extraordinary item $33,726 $28,037 $19,118 $11,286 $6,577
Adjustments:
Real estate depreciation 47,410 38,939 28,729 19,516 15,557
Non-recurring items:
Impairment loss on real estate held
for disposition 290 1,700 -- -- --
Prior years' employment and other taxes (d) -- 395 -- -- --
Adoption of SFAS No. 112 "Employers'
Accounting for Postemployment Benefits" -- -- 450 -- --
Provision for possible investment losses -- -- -- -- 1,564
Dividends to preferred shareholders (9,713) (6,637) -- -- --
-----------------------------------------------------
Funds from operations $71,713 $62,434 $48,297 $30,802 $23,698
=====================================================
Apartment Homes Owned
Total apartment homes owned at December 31 55,664 34,224 29,282 17,914 13,832
Weighted average number of apartment homes owned during
the year 37,481 31,242 23,160 15,445 11,387
</TABLE>
(a) All share and per share information has been adjusted to give effect to a
2-for-1 stock split in May, 1993.
(b) Effective at the close of business on December 31, 1996, South West
Property Trust Inc. merged with and into a wholly-owned subsidiary of the
Company (the "Merger"). The Merger has been accounted for under the
purchase method of accounting in accordance with Accounting Principles
Board Opinion No. 16.
(c) Funds from operations ("FFO") is defined as income before gains (losses)
on sales of investments, minority interest of unitholders in operating
partnership and extraordinary item (computed in accordance with generally
accepted accounting principles) plus real estate depreciation, less
preferred dividends and after adjustment for significant non- recurring
items, if any. This definition conforms to the recommendations set forth
in a White Paper adopted by the National Association of Real Estate
Investment Trusts ("NAREIT") in early 1995. FFO for years prior to 1995
have been adjusted to conform to the NAREIT definition. The Company
considers FFO in evaluating property acquisitions and its operating
performance and believes that FFO should be considered along with, but not
as an alternative to, net income and cash flows as a measure of the
Company's operating performance and liquidity. FFO does not represent
cash generated from operating activities in accordance with generally
accepted accounting principles and is not necessarily indicative of cash
available to fund cash needs.
(d) Prior years' payroll tax liability resulting from an Internal Revenue
Service examination for the years 1993 and 1994.
17
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
The Company operates in 21 major markets dispersed throughout a 15 state
area extending from Delaware to Nevada. At December 31, 1996, the Company did
not own more than 13% of its apartment homes in any one market. The following
table summarizes the Company's major apartment market information for real
estate held for investment and excludes real estate held for disposition:
<TABLE>
<CAPTION>
As of December 31,1996 Year Ended December 31,1996
---------------------------------------------------------- ---------------------------
Number of Number of Percentage of Average Monthly
Apartment Apartment Apartment Cost Economic Rental
Market Communities Homes Homes (In thousands) Occupancy** Rates*
- - ------------------------------------------------------------------------------- ------------------------------
<S> <C>
Dallas, TX 20 7,223 13% $262,153 93.3% (A) $509 (A)
Richmond, VA 12 3,541 7% 103,180 93.7% 520
Columbia, SC 12 3,534 6% 112,549 91.7% 484
Raleigh, NC 10 2,936 5% 116,867 98.2% 578
Orlando, FL 10 2,981 5% 111,047 91.8% 546
Tampa, FL 9 2,639 5% 90,214 92.8% 546
Charlotte, NC 13 2,501 5% 87,154 94.3% 560
Atlanta, GA 8 2,226 4% 82,714 93.6% 554
Eastern NC 9 2,150 4% 72,349 95.8% 508
Greensboro, NC 9 2,122 4% 82,713 90.2% 458
San Antonio, TX 5 1,983 4% 87,150 89.1% (A) 512 (A)
Baltimore, MD 8 1,746 3% 76,508 91.3% 636
Greenville, SC 8 1,718 3% 58,273 90.9% 490
Nashville, TN 6 1,520 3% 52,776 93.9% 564
Washington, DC 6 1,483 3% 64,316 89.0% 641
Hampton Roads, VA 6 1,428 3% 45,437 91.0% 546
Jacksonville, FL 3 1,157 2% 47,712 92.3% 567
Ft. Lauderdale, FL 4 960 2% 59,616 91.3% 775
Memphis, TN 4 935 2% 32,566 93.1% 491
Phoenix, AZ 3 712 1% 36,550 90.2% (A) 508 (A)
Houston, TX 2 514 1% 12,250 87.3% (A) 462 (A)
Other 37 8,385 15% 313,518 92.8% 543
------------------------------------------------------- -----------------------
Total 204 54,394 100% $2,007,612 92.9% (B) $548 (B)
====================================================== =======================
</TABLE>
(A) These apartment communities were acquired on December 31, 1996 in
connection with the Merger and as such, this information is presented for
informational purposes only, as South West is not included in the Company's
results of operations for the year ended December 31, 1996.
(B) Excludes the South West apartment communities.
* Average Monthly Rental Rates for the Year Ended December 31, 1996,
represents potential rent collections (gross potential rents less market
adjustments), which approximates net effective rents. These figures exclude
1996 acquisitions.
18
<PAGE>
** Economic Occupancy is defined as rental income (gross potential rent less
vacancy loss, management units and credit loss) divided by potential
collections (gross potential rent less management units) for the period,
expressed as a percentage.
The following discussion should be read in conjunction with the
Consolidated Financial Statements and Notes thereto appearing elsewhere in this
report. This annual report contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1993, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. Such forward-looking
statements include, without limitation, statements concerning expected benefits
of the Merger, 1997 property acquisitions, 1997 development activity and
capital expenditures, 1997 capital raising activities, 1997 rent growth,
occupancy and rental expense growth. Such statements involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievement of the Company to be materially different from the
results of operations or plans expressed or implied by such forward-loo king
statements. Such factors include, among other things, unanticipated adverse
business developments affecting the Company, and/or its properties, adverse
changes in the real estate markets and general and local economies and business
conditions. Although the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore there can be no assurance that
such statements included in this report will prove to be acc1urate. In light of
the significant uncertainties inherent in the forward-looking statements
included herein, the inclusion of such information should not be regarded as
representation by the Company or any other person that the results or conditions
described in such statements or the objectives and plans of the Company will be
achieved.
At December 31, 1996, the Company owned 210 apartment communities
containing 55,664 completed apartment homes, including six apartment communities
containing 1,270 apartment homes included in real estate held for disposition.
During 1996, the Company acquired in separate transactions 7,712 apartment homes
in 30 communities at an aggregate cost of approximately $321 million which
includes a portfolio of 18 apartment communities (the "Carolina Portfolio") and
44 communities containing 14,320 completed apartment homes and 675 apartment
homes under development included in the Merger with South West Property Trust
Inc. ("South West") for an aggregate purchase price of approximately $572
million.
Effective at the close of business on December 31, 1996, the Company
purchased South West Property Trust Inc., in a statutory merger (the "Merger")
for total consideration of approximately $572 million. The Merger has been
accounted for as a purchase in accordance with Accounting Principles Board
Opinion No. 16. Assets and liabilities acquired were recorded at their estimated
fair values at December 31, 1996 and results of operations are included from the
date of acquisition. Accordingly, the results of operations for South West are
excluded from the Company's consolidated statements of operations for the year
ended December 31, 1996.
Prior to the Merger, the Company's investments had been concentrated in
the Mid-Atlantic and Southeast, however, the Merger added four new major markets
and expanded the Company's investment geography to include the entire Sunbelt.
The Company expects to achieve additional benefits from the Merger through
operating economies of scale, enhanced development capabilities, broadening of
the Company's management team and increased investment opportunities due to the
geographic expansion.
Liquidity and Capital Resources
As a qualified REIT, the Company distributes a substantial portion of
its cash flow to its shareholders in the form of quarterly distributions. The
Company seeks to retain sufficient cash to cover normal operating needs,
including routine replacements and to help fund additional acquisitions and
development activity. For the year ended December 31, 1996, the Company's cash
flow from operating activities exceeded cash distributions paid to preferred and
common shareholders by approximately $26.4 million. The Company utilizes a
variety of primarily external financing sources to fund portfolio growth, major
capital improvement programs and balloon debt payments. The Company's bank lines
of credit generally have been used to temporarily finance these expenditures and
subsequently this short-term bank debt has been replaced with longer term debt
or equity. The Company has, from time to time, used derivative instruments to
synthetically alter on-balance sheet liabilities or to hedge anticipated
financing transactions. Derivative contracts did not have a material impact on
results of operations during the years ended December 31, 1996 or 1995.
At December 31, 1996, the Company's outstanding indebtedness totaled
$1.0 billion with a weighted average interest rate of 7.4%. This amount includes
(i) secured notes payable aggregating $376.6 million with a weighted average
interest rate of 7.4%, (ii) unsecured notes payable aggregating $543.0 million
with a weighted average interest rate of 7.6 % and (iii) short-term bank
borrowings and credit facilities aggregating $125.3 million with a weighted
average interest rate of 6.3%. At December 31, 1996, total senior debt equaled
43% of the Company's total market capitalization (debt and equity) of $2.4
billion.
At the beginning of 1996, the Company had approximately $2.9 million
of cash and cash equivalents and $85.1 million of available and unused bank
lines of credit.
19
<PAGE>
For the year ended December 31, 1996, the Company's cash flow from
operating activities increased approximately $23.6 million over the same period
last year. This increase was the direct result of the significant expansion of
the Company's portfolio of apartment communities as discussed below and under
"Results of Operations".
During the year ended December 31, 1996, net cash used for investing
activities was approximately $161.6 million. During 1996, the Company acquired
in separate transactions 30 apartment communities containing 7,712 apartment
homes for a total cost, net of debt and liabilities assumed and common stock
issued of $137.2 million. In addition to these acquisitions, the Company funded
$53.1 million of capital improvements to its properties and funded $9.2 million
of development costs. The Company also received net cash proceeds of
approximately $33.8 million from the sales of real estate held for disposition
during 1996.
Excluding communities that were acquired during 1994 and which were
still undergoing rehabilitation in 1996, the remaining mature apartment homes
(those communities acquired prior to January 1, 1995 and held throughout the
annual reporting period) averaged $832 per unit in capital expenditures. This
includes the following: carpet and tile replacements ($233 /unit), appliances
($95/unit), HVAC equipment ($58/unit), various interior improvements
($202/unit), various exterior improvements including new roofs ($134/unit),
various land improvements including parking lots and site lighting ($89/unit)
and various other improvements ($21/ unit). Some of these capital expenditures
related to an upgrade program that began in 1996 to modernize the kitchens and
bathrooms at certain of the Company's older apartment communities. These
upgrades are believed to have enhanced rent growth in 1996.
Net cash provided by financing activities during 1996 was approximately
$82.1 million reflecting (i) the issuance of shares of common stock for an
aggregate equity value of $15.0 million, primarily through the Company's
dividend reinvestment and stock purchase plan, (ii) net proceeds from the
issuance of unsecured notes payable in the amount of $200.1 million, (iii) net
short-term bank borrowings of $37.8 million and (iv) net proceeds from the
issuance of tax-exempt bonds totaling $5.9 million. These cash inflows were
partially offset by (i) $63.7 million of cash distributions paid to common and
preferred shareholders, (ii) scheduled mortgage principal payments of $2.7
million and (iii) and principal note repayments aggregating $112.7 million.
In connection with the Merger, the Company acquired primarily real
estate assets totaling $559.6 million. Consideration given by the Company
included 22.8 million shares of the Company's common stock valued at $14.125 per
share for all of the outstanding common stock of South West for an aggregate
equity value of approximately $322.1 million. In addition, the Company assumed
debt and other liabilities totaling $248.8 million, including the following: (i)
a renegotiated unsecured line of credit with an investment bank in the amount of
$69.1 million with a weighted average interest rate of 6.3%, (ii) an unsecured
note payable in the amount of $55.9 million bearing interest of 7.0%, (iii) two
REMIC financings aggregating $94.9 million with a weighted average interest rate
of 7.76%, (iv) one mortgage note payable in the amount of $5.1 million bearing
interest of 8.5% and (v) other liabilities aggregating $23.8 million. The
renegotiated unsecured line of credit and the unsecured note were repaid in
January, 1997.
During 1996, the Company completed several significant financing
activities. On July 9, 1996, the Company issued $125 million of ten year
medium-term notes (MTN's) under its $200 million MTN program at an interest rate
of 7.95%. Net proceeds of approximately $124.2 million were used to (i) curtail
existing bank debt in the amount of $93.1 million, and (ii) repay a portion of a
9.57%, $35 million senior note that matured on July 15, 1996. In July, 1995, the
Company executed a forward starting interest rate swap with a notional amount of
$50 million which had the effect of fixing the interest rate on a 10-year
Treasury starting July 15, 1996 at 6.544%. In anticipation of implementing the
MTN program, the Company entered into a second interest rate hedge agreement for
$75 million (notional amount) on June 28, 1996 which allowed the Company to
lock-in a 10 year Treasury rate of 6.75%. The two interest rate hedge agreements
were terminated simultaneously with the issuance of the MTN's and the Company
received $3.0 million in cash which had the economic effect of reducing the
interest rate on the MTN's issued to approximately 7.61% over the ten year term.
On November 12, 1996, the Company issued the remaining $75 million of notes
under its MTN program which consisted of $25 million of ten year notes at a
20
<PAGE>
7.07% interest rate and $50 million of nine year notes at a 7.02% interest rate.
Net proceeds of approximately $74.5 million were used to curtail existing bank
debt of approximately $43.3 million, and to repay a $31.2 million variable-rate
credit facility which had been assumed in connection with the Carolina
Portfolio.
On August 15, 1996, the Company acquired the Carolina Portfolio
consisting of 18 apartment communities, located primarily in North Carolina and
South Carolina, at an aggregate cost of $182.6 million, including closing costs.
The Carolina Portfolio was financed with (i) borrowings under bank lines of
credit of $25.1 million, (ii) the assumption of secured debt aggregating
approximately $109.8 million, (iii) Seller financing of $25 million which
subsequently was repaid on December 31, 1996, and (iv) the issuance of
approximately 1.7 million shares of the Company's common stock valued at $22.7
million.
The Company's strategy is to selectively sell certain apartment
communities that no longer meet its long-term investment objectives due to size,
location, age or unsatisfactory projected earnings growth, with the intent of
reinvesting the proceeds in apartment acquisitions. During 1996, the Company
sold four apartment communities, four shopping centers, one industrial park and
two parcels of undeveloped land for an aggregate sales price of approximately
$41 million. In connection with the sales, the Company recognized an aggregate
$4.3 million financial reporting gain and received net cash proceeds of
approximately $33.8 million. Included in the December 31, 1996 consolidated
balance sheet as "Real estate held for disposition" are 12 properties in the
aggregate amount of $39.6 million.
The Company considers its cash provided by operating activities
adequate to meet its operating requirements and payments of distributions to
both common and preferred shareholders. During 1997, the Company expects to
complete the following: (i) the acquisition of approximately 7,000 to 9,000
apartment homes for an aggregate purchase price ranging from $300 to $400
million, (ii) the development of additional phases to existing apartment
communities and the completion of one apartment community which, in total, is
estimated to cost in excess of $50 million and (iii) capital expenditures of
approximately $400 per unit on revenue enhancing expenditures and $400 per unit
on recurring capital expenditures.
At December 31, 1996, the Company had 1,475 apartment homes under development as
outlined below (dollars in thousands):
<TABLE>
<CAPTION>
Construction Estimated Expected
Completed Costs Construction Completion
Property Location # Units Units to Date Total Cost Date
- - -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Apartment Communities
Providence Court Charlotte, NC 420 105 $ 22,047 $29,698 4Q `97
Dominion Franklin Nashville, TN 360 -- 2,567 22,090 4Q `98
-----------------------------------------------------
780 105 24,614 51,788
Additional Phases
England Run II Fredericksburg, VA 168 -- 1,901 10,830 2Q `97
Brantley Pines II Ft. Myers, FL 96 -- 3,384 6,668 2Q `97
Oak Park II Dallas, TX 80 -- 3,214 4,581 2Q `97
Oak Forest II Dallas, TX 260 -- 2,325 13,367 1Q `98
Steeplechase II Greensboro, NC 176 -- 1,223 11,705 2Q `97
Greenway Park II Phoenix, AZ 20 -- 441 2,612 4Q `97
Other -- 753 --
------------------------------------------------------
800 -- 13,241 49,763
------------------------------------------------------
1,580 105 $ 37,855 $ 101,551
==========================================================
</TABLE>
The Company's liquidity and capital resources are believed to be more
than adequate to meet its cash requirements for the next several years. The
Company expects to meet its short- and long-term liquidity requirements, such as
21
<PAGE>
balloon debt maturities, property acquisitions, development activity and
significant capital improvements primarily through the public and private sale
of capital stock and the issuance of medium and long-term unsecured notes
payable. The Company may also fund its capital requirements through (i) the
assumption of mortgage indebtedness, (ii) sales of properties, (iii) cash
invested through the Company's Dividend Reinvestment and Stock Purchase Plan,
(iv) retained operating cash flow and (v) the issuance of operating partnership
units. The Company's senior debt is currently rated BBB+ by Standard & Poor's
and Baa1 by Moody's. As a result of its investment grade debt ratings, the
Company expects to use unsecured debt as its primary debt funding source.
Depending upon the volume and timing of acquisition activity, the
Company anticipates raising additional debt and equity capital during the next
twelve months. In anticipation of the issuance of unsecured debt in early 1997,
the Company entered into a $100 million (notional amount) Treasury rate lock
agreement in November 1996. On January 27, 1997, the Company issued $125 million
of 7.25% Notes due January 15, 2007 under its $462.5 million shelf registration
statement. The Notes were priced to yield 7.31% which was 79 basis points over
the 10 year Treasury at the time of issuance. The interest rate protection
agreement was terminated simultaneously with the $125 million Note issuance and
the Company received $1.5 million in cash. This had the economic effect of
lowering the interest rate on the Notes to approximately 7.14%. Net proceeds of
approximately $124 million were used to curtail bank line debt. On January 28,
1997, the Company issued 4,000,000 shares of its common stock at $15.75 per
share for an aggregate value of approximately $63 million. Net proceeds of
approximately $59.7 million were used to repay an unsecured credit facility
assumed in connection with the Merger. The Company plans to increase its current
bank lines of credit from $103.5 million to $250 million during the first half
of 1997.
Funds from Operations
Funds from operations ("FFO") is defined as income before gains
(losses) on sales of investments, minority interest of unitholders in operating
partnership and extraordinary items (computed in accordance with generally
accepted accounting principles) plus real estate depreciation, less preferred
dividends and after adjustment for significant non-recurring items, if any. The
Company computes FFO in accordance with the recommendations set forth by the
National Association of Real Estate Investment Trusts ("NAREIT"). The Company
considers FFO in evaluating property acquisitions and its operating performance,
and believes that FFO should be considered along with, but not as an alternative
to, net income and cash flows as a measure of the Company's operating
performance and liquidity. FFO does not represent cash generated from operating
activities in accordance with generally accepted accounting principles and is
not necessarily indicative of cash available to fund cash needs.
For the year ended December 31, 1996, FFO increased 14.9% to $71.7
million, compared with $62.4 million or for the same period last year. The
increase in FFO was principally due to the increased net rental income from the
Company's 12,914 non-mature apartment homes in 52 apartment communities (those
acquired and developed subsequent to December 31, 1994 and four apartment
communities sold during this same period, excluding those acquired in the
Merger). During 1996, the Company employed more leverage than 1995 which
resulted in a smaller increase in FFO over the same period last year. For the
year ended December 31, 1995, FFO increased $14.1 million or 29.3% over the
prior year principally due to the increased net rental income from the Company's
then 16,308 non-mature apartment homes.
22
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
(In thousands) (In thousands)
(Unaudited) (Unaudited)
------------------------------------- --------------------------------------
1996 1995 % Change 1995 1994 % Change
-------------------------------------- ---------------------------------------
<S> <C>
Calculation of Funds from Operations:
Income before gains (losses) on sales of
investments, minority interest of
unitholders in operating partnership
and extraordinary item $ 33,726 $ 28,037 20.3% $ 28,037 $ 19,118 46.7%
Adjustments:
Real estate depreciation 47,410 38,939 21.8% 38,939 28,729 35.5%
Dividends to preferred
shareholders (9,713) (6,637) 46.3% (6,637)
Prior years' payroll tax
liability -- 395 -- 395 -- --
Adoption of SFAS No. 112
"Employers' Accounting for
Postemployment Benefits" -- -- -- -- 450 --
Impairment loss on real
estate held for disposition 290 1,700 -- 1,700 -- --
-------------------------------------- ------------------------------------------
Funds from Operations $71,713 $ 62,434 14.9% $ 62,434 $ 48,297 29.3%
====================================== ==========================================
</TABLE>
Results of Operations
The Company's net income is primarily generated from the operations of
its apartment communities. For purposes of evaluating the Company's comparative
operating performance, the Company categorizes its apartment communities into
two categories (i) mature--those communities acquired prior to January 1, 1995
and held throughout the annual reporting period and (ii) non-mature--those
communities acquired and developed subsequent to December 31, 1994 plus four
apartment communities sold during this same period.
For the year ended December 31, 1996, the Company reported increases
over the same period last year in rental income and income before gains (losses)
on sales of investments and minority interest of unitholders in operating
partnership and net income. Net income available to common shareholders
increased $1.8 million, with a decrease of $.01 per share compared to 1995.
Since the beginning of 1995, the Company acquired and developed a total of
12,914 apartment homes in 52 communities (excluding those acquired in the
Merger) representing a 44.1% expansion in the number of apartment homes owned
during that period. These non-mature apartment homes provided a substantial
portion of the aggregate reported increases.
All Communities
The operating performance for the Company's 166 apartment communities
containing 41,344 apartment homes (excluding those acquired in the Merger) and
the 141 apartment communities containing 34,224 apartment homes for the years
ended December 31, 1996 and 1995, respectively, is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
(In thousands) (In thousands)
--------------------------------------- ----------------------------------------
1996 1995 % Change 1995 1994 % Change
---------------------------------------- ----------------------------------------
<S> <C>
Rental income $ 237,543 $ 188,021 26.3% $188,021 $ 130,692 43.9%
Rental expenses (103,352) (80,274) 28.7% (80,274) (57,180) 40.4%
Real estate depreciation (47,316) (36,929) 28.1% (36,929) (26,371) 40.0%
--------------------------------------- ----------------------------------------
Net rental income (1) $ 86,875 $ 70,818 22.7% $ 70,818 $47,141 50.2%
======================================= =========================================
Weighted average number
of apartment homes 37,481 31,242 20.0% 31,242 23,160 34.9%
Economic occupancy (2) 92.9% 94.1% (1.2%) 94.1% 93.7% 0.4%
</TABLE>
23
<PAGE>
(1) Net rental income for an apartment community is defined as total rental
income, less rental expenses, less depreciation expense.
(2) Economic occupancy is defined as rental income (gross potential rent less
vacancy loss, management units and credit loss) divided by potential
collections (gross potential rent less management units) for the period,
expressed as a percentage.
1996-vs-1995
Due to the acquisition and development of 12,914 apartment homes since
January 1, 1995, the weighted average number of apartment homes increased 20% to
37,481 for the year ended December 31, 1996. As a result of the increase in the
number of apartment homes acquired since January 1, 1995, the Company has
experienced significant increases in rental income, rental expenses and real
estate depreciation for the year ended December 31, 1996.
The non-mature apartment homes (see discussion under "Non-Mature
Communities") provided the majority of the increases in rental income, rental
expenses and depreciation expense for the year ended December 31, 1996, however,
higher average rents at the Company's mature communities also contributed to the
increases in rental income. For the 41,344 apartment homes in the 166 apartment
communities owned at December 31, 1996, economic occupancy averaged 92.9% and
the operating expense ratio (ratio of rental expenses to rental income) averaged
43.5% during 1996.
The major markets in which the Company operates experienced rent growth
of 4.6% for the Company's mature apartment communities despite some declines in
occupancy, primarily attributable to increased home buying. The Company's mature
apartments experienced increases in most of the operating expense catagories
compared to the same period last year (see discussion under "Mature
Communities").
1995-vs-1994
Due to the acquisition of 16,308 apartment homes (net of sales) since
January 1, 1994, the weighted average number of apartment homes increased
approximately 35% to 31,242 for the year ended December 31, 1995. As a result of
the increase in the number of apartment homes acquired since January 1, 1994,
the Company has experienced significant increases in rental income, rental
expenses and real estate depreciation for the year ended December 31, 1995.
The non-mature apartment homes provided the majority of the increases
in rental income, rental expenses and depreciation expense for the year ended
December 31, 1995, however, higher average rents at the Company's mature
communities also contributed to the increases in rental income. For the 34,224
apartment homes in the 141 apartment communities owned at December 31, 1995,
economic occupancy averaged 94.1% and the operating expense ratio (ratio of
rental expenses to rental income) averaged 42.7% for the year ended December 31,
1995. For 1994, the 29,282 apartment homes then owned had economic occupancy of
93.7% and an expense ratio of 43.8% for that year.
Mature Communities
The operating performance for the Company's 114 mature apartment
communities containing 28,430 apartment homes for the year ended December 31,
1996 and the 74 mature apartment communities containing 17,916 apartment homes
for the year ended December 31, 1995 is summarized as follows:
<TABLE>
<CAPTION>
Year Ended December 31, Year Ended December 31,
(In thousands) (In thousands)
-------------------------------------- ------------------------------------
1996 1995 % Change 1995 1994 % Change
--------------------------------------- -----------------------------------
<S> <C>
Rental income $ 176,939 $ 169,969 4.1% $ 104,013 $ 99,094 4.9%
Rental expenses (78,836) (72,915) 8.1% (45,110) (44,009) 2.5%
Real estate depreciation (35,997) (33,796) 6.5% (21,354) (20,742) 3.0%
--------------------------------------- ----------------------------------
Net rental income $ 62,106 $ 63,258 (1.8%) $ 37,549 $ 34,343 9.3%
======================================= ===================================
Economic occupancy 92.8% 94.1% (1.3%) 94.8% 94.1% 0.7%
Average monthly
rental rates $ 540 $ 516 4.6% $ 499 $ 481 3.7%
</TABLE>
24
<PAGE>
1996-vs-1995
For the year ended December 31, 1996, the Company's mature communities
provided approximately 74% of the Company's apartment rental income and 71% of
its net rental income. Compared to the same period last year, total rental
income from these apartment homes grew 4.1%, or $7 million, reflecting an
increase in average monthly rents of 4.6% to $540 per month, or an increase of
$8.1 million. In addition, other income, primarily fee income, increased $1.6
million or 33%. The rental rate increases were offset by a $2.7 million decrease
attributable to a 1.3% decline in economic occupancy to 92.8%, which resulted
from a decrease in physical occupancy of 1.0% and an increase in credit loss of
.3%. The economic occupancy declined due to the weakening of certain major
markets during the last half of the year including Richmond, Columbia,
Greenville, Washington, DC and Hampton Roads. The Company attributes the market
softness primarily to increased home buying. The Company expects to maintain
rent growth in the 4% range and economic occupancy in the 92% range during 1997.
For the year ended December 31, 1996 rental expenses at these
communities increased 8.1%, or $ 5.9 million, resulting in an increase in the
operating expense ratio (the ratio of rental expenses to rental income) of 1.7%
to 44.6%. The increase in rental expenses is partly attributable to the severe
winter of 1996 compared to the relatively mild winter of 1995. Of the $5.9
million increase, approximately $400,000 was weather related which included
increases in gas, snow removal and repair labor expenses. During 1996, the
Company's mature apartments experienced increases in most of its operating
expense categories compared to the same period last year. Payroll and
payroll-related expenses increased approximately $1.1 million or 7% due to
several factors: (i) increased salaries and wages in 1996 as several positions
were re-priced, (ii) tightening in the labor markets and (iii) overtime
attributable to the upgrade process discussed below. Exterior painting and other
exterior improvements, such as striping and sealcoating parking lots, accounted
for almost $1.1 million of the increase. In addition, real estate taxes,
security and water and sewer expenses have increased $232,000, $427,000 and
$416,000, respectively, over the same period last year. For 1996, casualty
insurance expense increased approximately $406,000 over the same period last
year. Over the past several years, the Company experienced several large
casualty insurance claims relating to hurricane and storm damage which resulted
in a significant increase in insurance rates beginning with its July 1, 1996
policy year. The Company expects the rate of growth in rental expenses to
moderate during 1997 partly due to the high base of 1996 expenses. However, the
Company expects continuing pressure on certain expenses such as real estate
taxes, insurance and water/sewer rates.
In 1996, the Company began the process of upgrading certain of its
older apartment communities in order to enhance rent growth over the long term.
The upgrades relate primarily to the modernization of the kitchens and bathrooms
with new appliances, cabinets, light fixtures, ceiling fans, shelving,
countertops, doors and floor coverings. Although certain of these costs have
been capitalized, a portion has been expensed. The process of upgrading has also
contributed to higher turnover costs and an increase in repair labor costs.
Turnover (measured by move-outs) for 1996, was 61.7% at the mature communities
which is 4.8% higher than turnover last year.
For the year ended December 31, 1996, depreciation expense increased
$2.2 million or 6.5%, primarily as a result of capital expenditures. During
1996, the Company had significant capital expenditures on several apartment
communities acquired during 1994.
1995 -vs- 1994
For 1995, the Company's mature communities provided approximately
55% of the Company's rental income. Total rental income from these apartment
homes grew 4.9%, or $4.9 million in 1995, reflecting an increase in economic
occupancy to 94.8% from 94.1% for 1994, and growth in average rents and other
income of 4.4%. The improvement in occupancy reflected stronger apartment
markets throughout the Company's region. Occupancy peaked in mid-1994 and
remained above 95% through mid-1995 before trending downward slightly in the
second half of the year.
Rental expenses at these communities increased only 2.5%, or $1.1
million, resulting in an overall decrease in the operating expense ratio (the
ratio of rental expenses to rental income) of 1.0% to 43.4%. The increase in
rental
25
<PAGE>
expenses reflected increased repairs, real estate taxes and exterior painting
expenses. These increases were offset somewhat by lower gas, property
management, and promotional expenses caused primarily by the combination of
stronger occupancy and efficiencies of size. As a result of an Internal Revenue
Service examination, property management expenses for the 1995 period include a
$395,000 payment for employment and other taxes associated with employee
occupied apartment homes for the 1993 and 1994 tax years. In 1995, the Company
was able to internally manage its mature apartment communities at a cost of
approximately 2.6% of rental income versus 3.4% in 1994. This reduction was
achieved through economies of scale, as the Company acquired a significant
number of apartment communities over the past two years without a corresponding
increase in property management costs. Turnover (measured by move-outs) was 60%
at the mature communities for 1995 versus 59% in 1994.
For the year ended December 31, 1995, depreciation expense increased
$612,000 or 3.0%, primarily as a result of capital expenditures during this
period.
Non-Mature Communities
The operating performance for the year ended December 31, 1996 for
the Company's 52 non-mature apartment communities which includes (i) the 12,914
apartment homes acquired and developed since January 1, 1995 and (ii) the seven
apartment communities containing 919 apartment homes sold since December 31,
1994, and the Company's 67 non-mature communities containing 16,308 apartment
homes in 1995 is summarized as follows:
<TABLE>
<CAPTION
Year Ended December 31, Year Ended December 31,
(In thousands) (In thousands)
-------------------------------------- ----------------------------------------
1996 1995 $ Change 1995 1994 $ Change
-------------------------------------- ----------------------------------------
<S> <C>
Rental income $ 60,604 $ 18,052 $ 42,552 $ 84,008 $ 31,598 $ 52,410
Rental expenses (24,516) (7,359) (17,157) (35,164) (13,171) (21,993)
Real estate depreciation (11,319) (3,133) (8,186) (15,575) (5,629) (9,946)
---------------------------------------- ----------------------------------------
Net rental income $ 24,769 $ 7,560 $ 17,209 $ 33,269 $ 12,798 $ 20,471
======================================== ========================================
</TABLE>
1996 -vs- 1995
For the year ended December 31, 1996, the Company's non-mature
apartment communities provided approximately 26% of the Company's rental income
and 29% of its net rental income. Rental income, rental expenses and real estate
depreciation increased from 1995 to 1996 directly as a result of the increase in
the number of apartment homes acquired during 1995 and 1996. For the 12,914
apartments in the 52 non-mature communities acquired and developed since January
1, 1995, average economic occupancy was 93.1% and the operating expense ratio
was 40.5% during 1996. During 1996, these communities provided increases of
$42.6 million, $17.2 million and $17.2 million, respectively, in rental income,
rental expenses , and net rental income. For the year ended December 31, 1996
the 30 apartment communities containing 7,712 apartment homes which were
acquired during 1996, provided rental income, rental expenses and net rental
income of $27.1 million, $10.7 million and $11.6 million, respectively, and the
1995 acquisitions which consist of 42 apartment communities containing 5,142
apartment homes provided rental income, rental expenses and net rental income of
$30.4 million, $12.3 million and $11.6 million, respectively.
1995-vs-1994
For the year ended December 31, 1995, the Company's non-mature
apartment communities provided approximately 45% of the Company's apartment
rental income and 47% of its net rental income. For the 16,308 apartments in the
67 non-mature communities acquired since January 1, 1994 (net of sales), average
occupancy was 93.1% and the operating expense ratio was 41.9% during 1995.
Rental income, rental expenses and real estate depreciation increased from 1994
to 1995 directly as a result of the increase in the number of apartment homes
acquired during 1994 and 1995. These communities provided increases of $52.4
million, $22.0 million and $20.5 million, respectively, in rental income, rental
expenses and net rental income.
26
<PAGE>
Commercial Properties
Rental income, rental expenses and real estate depreciation from
commercial properties decreased $3.7 million, $762,000 and $2.9 million,
respectively during the year ended 1996 compared to the same period last year.
The decrease is directly attributable to the sale of eleven shopping centers and
one industrial park since the beginning of 1995. For 1995, rental income, rental
expenses and real estate depreciation from commercial properties decreased $1.8
million, $370,000 and $741,000, respectively since 1994, primarily due to the
sales of eight shopping centers during 1995 and 1994.
Interest Expense
For 1996, interest expense increased $10.2 million or $.10 per common
share over the same period last year. The weighted average amount of debt
employed during 1996 was higher than it was in 1995 ($647 million in 1996 versus
$512 million in 1995). The weighted average interest rate on this debt was
slightly lower in 1996 decreasing from 7.9% in 1995 to 7.6%. The lower interest
rate during 1996 reflected the fact that the weighted average interest rate on
short-term bank borrowings decreased compared to last year and the Company's
reliance on these lower rate short-term bank borrowings increased in 1996
compared to 1995 ($49.9 million weighted average outstanding in 1996 versus $8.2
million in 1995). The Company funded its 1996 acquisitions and development
activity primarily with debt compared to 1995 when a combination of debt and
equity was used.
For 1995, interest expense increased approximately $12.1 million over
1994. The Company used both debt and equity to finance its growth over the past
two years; however, the weighted average amount of debt employed was higher in
1995 than it was in 1994 ($512 million in 1995 versus $392 million in 1994). The
$.15 per common share increase in interest expense reflected this higher average
amount of outstanding debt in 1995 together with an increase in the weighted
average interest rate on this debt from 7.3% in 1994 to 7.9% in 1995. The rate
increase reflected the Company's increased reliance on lower rate short-term
bank borrowings in 1994 than in 1995 ($33.8 million weighted average outstanding
in 1994 versus $8.2 million in 1995).
General and Administrative
During 1996, general and administrative expenses increased by $553,000
over the same period last year. In 1996, the Company incurred increases in most
of its general and administrative expense categories. The largest increases
occurred in payroll expenses, investor relations expenses and office rent which
are directly related to the higher administrative costs associated with
increasing the size of the Company, however, general and administrative expense
as a percentage of rental revenues has remained relatively flat compared to last
year.
General and administrative expenses were relatively flat in 1995,
increasing by only $62,000 over 1994. General and administrative expense for
1994 included a $450,000 charge related to the adoption of SFAS No. 112,
"Employers' Accounting for Postemployment Benefits". In 1995, the Company
incurred increases in most of its general and administrative expense categories
with the largest percentage increase attributable to costs related to abandoned
acquisitions, including $204,000 associated with an unsuccessful business
combination with another apartment company.
Gains on Sales of Investments
During 1996, the Company recognized gains for financial reporting
purposes aggregating $4.3 million on the sale of four apartment communities,
four shopping centers, one industrial park and two parcels of undeveloped land.
Seven of the sales were structured to qualify as tax deferred exchanges which
enabled the Company to defer approximately $7.8 million of capital gains for
income tax purposes.
During 1995, the Company sold seven shopping centers and two apartment
communities and recognized gains for financial reporting purposes totaling $5.1
million. Four of the shopping centers were sold to First Washington Realty
Trust, Inc. on June 30, 1995. In connection with the sales, the Company received
cash and 358,000 shares of First Washington's 9.75% Series A Cumulative
Participating Convertible Preferred Stock having a fair value of $7.7 million on
the date of sale. Five of the shopping center sales during the year were
structured to qualify as tax deferred exchanges which enabled the Company to
defer approximately $4.5 million of capital gains for income tax purposes. The
27
<PAGE>
Company also sold two apartment communities, both of which were acquired as part
of the Clover Portfolio in 1994. No significant book gain or loss was recognized
on the sale of either property. The Company recorded a $1.7 million impairment
loss in 1995 associated with management's decision to sell a shopping center at
a discount as part of a portfolio transaction.
Inflation
The Company believes that the direct effects of inflation on the Company's
operations have been inconsequential.
28
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements and Schedule on page F-1
of this Annual Report on Form 10-K.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
29
<PAGE>
Part III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Incorporated herein by reference from the Company's definitive proxy
statement to be filed with respect to its Annual Meeting of Shareholders to be
held on May 6, 1997.
Information required by this item regarding the executive officers of
the Company is included in Part I of this Annual Report on Form 10-K in the
section entitled "Executive Officers of the Registrant".
Item 11. EXECUTIVE COMPENSATION
Incorporated herein by reference from the Company's definitive proxy
statement to be filed with respect to its Annual Meeting of Shareholders to be
held on May 6, 1997.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference from the Company's definitive proxy
statement to be filed with respect to its Annual Meeting of Shareholders to be
held on May 6, 1997.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference from the Company's definitive proxy
statement to be filed with respect to its Annual Meeting of Shareholders to be
held on May 6, 1997.
30
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1&2) See Index to Consolidated Financial Statements and
Schedule on page F-1 of this Annual Report on Form
10-K.
(3) Exhibits . The exhibits listed below are filed as
part of this annual report. References under the
caption "Location" to exhibits, forms, or other
filings indicate that the form or other filing has
been filed, that the indexed exhibit and the exhibit
referred to are the same and that the exhibit
referred to is incorporated by reference.
<TABLE>
<CAPTION>
Exhibit Description Location
- - ------- ----------- --------
<S> <C>
2(a) Agreement of Purchase and Sale dated Exhibit 2 to the Company's Current Report on Form
July 1, 1996 8-K dated August 15, 1996.
2(b) Definitive Agreement and Plan of Exhibit 2(b) to the Company's Form S-4 Registration
Merger dated as of October 1, 1996, Statement (Registration No. 333-13745) filed with
the between the Company, United Sub, Commission on October 9, 1996.
Inc. and South West Property Trust Inc.
3(a) Restated Articles of Incorporation Exhibit 4(i)(c) to the Company's Form S-3
Registration Statement (Registration No. 33-64275)
3(a)(i) Amended and Restated Articles of Exibit 6(a)(4) to the Company's Form 8-A
Incorporation Registration Statements dated April 19, 1990 and
April 24, 1995.
3(b) Restated By-Laws Filed herewith.
4(i)(a) Specimen Common Stock Exhibit 4(i) to the Company's Annual Report
Certificate on Form 10-K for the year ended December
31, 1993.
4(i)(b) Form of Certificate for Shares Exhibit 1(e) to the Company's Form 8-A
of 9 1/4% Series A Cumulative Registration Statement dated April 24, 1995.
Redeemable Preferred Stock
4(ii)(a) Loan Agreement dated as of Exhibit 6(c)(i) to the Company's Form 8-A
November 7, 1991, between the Registration Statement dated April 19, 1990.
Company and Aid Association for
Lutherans
4(ii)(e) Note Purchase Agreement dated Exhibit 6(c)(5) to the Company's Form 8-A
as of February 15, 1993, between Registration Statement dated April 19, 1990.
the Company and CIGNA Property
and Casualty Insurance Company,
Connecticut General Life Insurance
Company, Connecticut General Life
Insurance Company, on behalf of
31
<PAGE>
one or more separate accounts,
Insurance Company of North
America, Principal Mutual Life
Insurance Company and Aid
Association for Lutherans
4(ii)(f) Credit Agreement dated as of Exhibit 6 (c)(6) to the Company's
December 15, 1994 between the Form 8-A Registration Statement
Company and First Union National Bank dated April 19, 1990.
of Virginia
4(ii)(g)(1) Indenture dated as of April 1, 1994, Exhibit 4(ii)(f)(1) to
between the Company and First Union the Company's Quarterly
National Bank of Virginia, Report on Form 10-Q for
as Trustee. the quarter ended March 31, 1994.
4(ii)(g)(2) Resolution of the Board of Directors Exhibit 4(ii)(f)(2) to the Company's
of the Company establishing terms of Quarterly Report on Form 10-Q for
7 1/4% Notes due April 1, 1999 the quarter ended March 31, 1994.
4(ii)(g)(3) Form of 7 1/4% Notes due April 1, Exhibit 4(ii)(f)(3) to the Company's
1999 Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994.
4(ii)(g)(4) Resolution of the Board of Directors Exhibit 4 (ii)(f)(4) to the Company's
of the Company establishing terms of Quarterly Report on Form 10-Q for
the 8 1/2% Debentures due quarter ended September 30, 1994.
September 15, 2024
4(ii)(g)(5) Form of 8 1/2% Debentures Exhibit 4 (ii)(f)(5) to the Company's
due September 15, 2024 Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994.
4(ii)(h)(1) Indenture dated November 1, Exhibit 4(ii)(h)(1) to the Company's
1995, between the Company Quarterly Report on Form 10-Q for
And First Union National Bank the quarter ended June 30, 1996.
of Virginia, as Trustee
4(ii)(h)(2) Resolution of the Board of Directors Exhibit 4(ii)(h)(2) to the Company's
of the Company establishing the terms Quarterly Report on Form 10-Q for
of the Medium-Term Notes Due Nine the quarter ended June 30, 1996.
Months or More from Date of Issue
4(ii)(h)(3) Form of Medium-Term Exhibit 4(ii)(h)(3) to the Company's
Notes Due Nine Months or More Quarterly Report on Form 10-Q for
from the Date of Issue the quarter ended June 30, 1996.
4(ii)(h)(4) Resolution of the Board of Directors Filed herewith.
of the Company establishing the terms
of 7 1/4% Notes Due January 15, 2007
32
<PAGE>
</TABLE>
<TABLE>
<S> <C>
4(ii)(h)(5) Form of 7 1/4% Notes due January 15, 2007 Filed herewith.
</TABLE>
The Company agrees to furnish to the Commission on request a copy of
any instrument with respect to long-term debt of the Company or its subsidiaries
the total amount of securities authorized under which does not exceed 10% of the
total assets of the Company and its subsidiaries on a consolidated basis.
<TABLE>
<S> <C>
10(i) Employment Agreement between Exhibit 10(v)(i) to the Company's Annual Report on
the Company and John P. McCann Form 10-K for the year ended December 31, 1982.
dated October 29, 1982
10(ii) Employment Agreement between Exhibit 10(v)(ii) to the Comapny's Annual Report on
the Company and James Dolphin Form 10-K for the year ended December 31, 1982.
dated October 29, 1982.
10(iii) Employment Agreement between Exhibit 10(iii) to the Company's Annual
The Company and Barry M. Kornblau, Report on Form 10-K for the year December
dated February 1, 1991. 31, 1990.
10(iv) Employment Agreement between Filed herewith.
the Company and John S. Schneider
dated December 14, 1996
10(v) Employment Agreement between Filed herewith.
the Company and Robert F. Sherman
dated December 19, 1996
10(vi) Employment Agreement between Filed herewith.
the Company and David L. Johnston
dated December 19, 1996.
10(vii) 1985 Stock Option Plan, Exhibit A to the Company's definitive proxy
as amended. statement dated March 28, 1996.
10(vii) 1991 Stock Purchase and Loan Exhibit 10(v) to the Company's Annual Report on
Plan. Form 10-K for the year ended December 31, 1991.
10(ix) Amended and Restated Agreement Exhibit 10(vi) to the Company's Annual Report on
of Limited Partnership of Form 10-K for the year ended December 31, 1995.
United Dominion Realty, L.P.
Dated as of December 31, 1995
10(x) Underwriting Agreement dated Filed herewith.
January 22, 1997, between the Company
And Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith
Incorporated, and Scott and Stringfellow
relating to 4,000,000 shares of
Common Stock.
33
<PAGE>
</TABLE>
<TABLE>
<S> <C>
10(xi) Underwriting Agreement dated January Filed herewith.
22, 1997, between the Company and
Goldman Sachs & Co., J.P. Morgan
Securities Inc. And NationsBanc Capital
Markets, Inc. relating to $125 Million
7 1/4% Notes due January 15, 2007.
12 Computation of Ratio of Earnings Filed herewith.
to Fixed Charges
21 The Company has the following subsidiaries, all of which but
United Dominion Realty, L.P. are wholly owned. The Company
owns general and limited partnership interests in United
Dominion Realty, L.P., constituting 97.9% of the aggregate
partnership interest.
The Commons of Columbia, a Virginia corporation
UDRT of North Carolina, L.L.C., a North Carolina limited liability company
UDRT of Alabama, Inc., an Alabama corporation
UDR of Marble Hill, L.L.C., a Virginia limited liability company
United Dominion Realty, L.P., a Virginia limited partnership
United Dominion Residential, Inc., a Virginia corporation
UDRT of Virginia, Inc., a Virginia corporation
United Dominion, Sub, Inc., a Virginia corporation
UDR Western Residential, Inc., a Virginia corporation
UDR South Carolina Trust, a Maryland business trust
Cleary Court Property Owner's Association, Inc., a Florida non-profit corporation
SWP Properties, Inc., a Texas corporation
SWP Properties I, L.P., a Delaware limited partnership
SWP Woodscape Properties, Inc., a Texas corporation
SWP Woodscape Properties I, L.P., a Delaware limited partnership
SWP Creeks Properties, Inc., a Texas corporation
SWP Creeks Properties, I, L.P., a Delaware limited partnership
SWP REMIC Properties II, Inc., a Texas corporation
SWP REMIC properties II-A, L.P., a Delaware limited partnership
South West Properties, L.P., a Delaware limited partnership
SWP Arkansas Properties, Inc., an Arknasas corporation
South West Property Apartments, L.P., a Delaware limited partnership
MF-SWP Joint Venture, a Texas joint venture
High Ridge Investment Partners Joint Venture, a Texas joint venture
SWP Depositor, Inc., a Texas corporation
SWP Developers, Inc., a Texas corporation
SRL Amarillo Investors, Inc., a Texas corporation
SWPT II Arizona Properties, Inc., an Arizona corporation
South West REIT Holding, Inc., a Texas corporation
</TABLE>
23 Consent of Independent Filed herewith.
Auditors
Exhibits 10(i) through 10(viii) inclusive, are management contracts or
compensatory plans or arrangements required to be filed as an exhibit to this
Form 10-K pursuant to Item 14(c) of this report.
(b) Reports on Form 8-K
(i) A Form 8-K dated October 1, 1996 was filed with the
Securities and Exchange
34
<PAGE>
Commission on October 4, 1996. The filing reported
the Agreement and Plan of Merger dated as of October
1, 1996 between the Company, United Dominion Sub,
Inc., a wholly-owned subsidiary of the Company, and
South West Property Trust Inc.
(ii) A Form 8-K dated October 31, 1996 was filed with the
Securities and Exchange Commission on November 14,
1996. The filing reported the acquisition of two
apartment communities which in the aggregate were
deemed to be significant. The financial statements
filed as part of this report are the statements of
rental operations of Westland Park Apartments and
Steeplechase Apartments.
(iii) A Form 8-K dated December 31, 1996 was filed with the
Securities and Exchange Commission on January 15,
1997. The filing reported the acquisition by the
Company of South West Property Trust Inc. effective
at the close of business on December 31, 1996. This
Form 8-K was amended by a Form 8-K/A filed March 17,
1997. The financial statements filed as part of this
report were the consolidated financial statements and
notes thereto of South West Property Trust Inc. for
the year ended December 31, 1996
(iv) A Form 8-K dated January 21, 1997 was filed with the
Securities and Exchange Commission on January 21,
1997. The filing reported the pro forma results of
the Company for the nine months ended September 30,
1996 and the year ended December 31, 1995.
35
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this Annual Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
United Dominion Realty Company, Inc.
(registrant)
By /s/ James Dolphin
-----------------------
James Dolphin
Executive Vice President and Chief Financial Officer
March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 27, 1997 by the following persons on behalf of
the registrant and in the capacities indicated.
/s/ John P. McCann
- - ---------------------------- ---------------------------
John P. McCann R. Toms Dalton, Jr.
Chariman of the Board, President and Chief Director
Executive Officer
/s/ James Dolphin /s/ Jeff C. Bane
- - ----------------------------- ---------------------------
James Dolphin Jeff C. Bane
Director, Executive Vice President, Director
and Chief Financial Officer
/s/ Jerry A. Davis
- - ------------------------------ ---------------------------
Jerry A. Davis John C. Lanford
Vice President, Controller-Corporate Director
Accounting and Chief Accounting Officer
/s/ C. Harmon Williams, Jr. /s/ H. Franklin Minor
- - ------------------------------ ---------------------------
C. Harmon Williams, Jr. H. Franklin Minor
Director Director
/s/ Barry M. Kornblau
- - ------------------------------ ---------------------------
Barry M. Kornblau Ira T. Wender
Director, Senior Vice President and Director
Director of Apartments/Eastern Division
/s/John S. Schneider
- - ------------------------------- ---------------------------
John S. Schneider Lynne Sagalyn
Director, Vice Chairman of the Board and Director
Executive Vice President
- - ------------------------------- ---------------------------
Mark J. Sandler Robert W. Scharar
Director Director
36
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
UNITED DOMINION REALTY TRUST, INC.
<TABLE>
<CAPTION>
Page
----
<S> <C>
FINANCIAL STATEMENTS FILED AS PART OF THIS REPORT
Report of Ernst & Young LLP, Independent Auditors F-2
Consolidated Balance Sheets at December 31, 1996 F-3
and 1994
Consolidated Statements of Operations for each of F-4
the three years in the period ended December 31, 1996
Consolidated Statements of Cash Flows for each of F-5
the three years in the period ended December 31, 1996
Consolidated Statements of Shareholders' Equity for F-6
each of the three years in the period ended
December 31, 1996
Notes to Consolidated Financial Statements F-7
SCHEDULE FILED AS PART OF THIS REPORT
Schedule III - Summary of Real Estate Owned F-23
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the financial statements and
notes thereto.
F-1
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Shareholders
United Dominion Realty Trust, Inc.
We have audited the accompanying consolidated balance sheets of United Dominion
Realty Trust, Inc. and subsidiaries (the "Company") as of December 31, 1996 and
1995, and the related consolidated statements of operations, shareholders'
equity, and cash flows for each of the three years in the period ended December
31, 1996. Our audits also included the financial statement schedule listed in
the Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of United
Dominion Realty Trust, Inc. and subsidiaries at December 31, 1996 and 1995, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects, the
information set forth therein.
As discussed in Note 1 to the consolidated financial statements, in 1995 the
Company changed its method of accounting for impairment of long-lived assets and
long-lived assets held for disposition.
Ernst & Young LLP
Richmond, Virginia
March 5, 1997
F-2
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except for share data)
December 31, December 31,
1996 1995
----------- ------------
Assets
Real estate owned:
Real estate held for investment (Notes 2
and 3) $2,007,612 $1,131,098
Less: accumulated depreciation 173,291 129,454
--------- ----------
1,834,321 1,001,664
Real estate under development 37,855 --
Real estate held for disposition (Notes 1
and 2) 39,556 51,015
Cash and cash equivalents 13,452 2,904
Other assets 41,720 25,053
-------- ----------
Total assets $1,966,904 $1,080,616
========= ==========
Liabilities and shareholders' equity
Notes payable-secured (Note 4) $ 376,560 $ 180,481
Notes payable-unsecured (Note 5) 668,275 349,858
Distributions payable to common shareholders 19,699 12,695
Accounts payable, accrued expenses and
other liabilities 49,962 21,193
--------- --------
Total liabilities 1,114,496 564,227
Minority interest of unitholders in
operating partnership 2,029 --
Shareholders' equity (Notes 9 and 10):
Preferred stock, no par value; 25,000,000
shares authorized:
9 1/4% Series A Cumulative Redeemable
Preferred Stock (liquidation preference
of $25 per share), 4,200,000 shares
issued and outstanding 105,000 105,000
Common stock, $1 par value; 150,000,000
shares authorized 81,982,551 shares
issued and outstanding (56,375,333 in
1995) 81,983 56,375
Additional paid-in-capital 814,795 480,971
Notes receivable from officer-shareholders (5,926) (6,091)
Distributions in excess of net income (147,529) (120,314)
Unrealized gain on securities available-
for-sale 2,056 448
-------- -------
Total shareholders' equity 850,379 516,389
-------- -------
Total liabilities and shareholders'
equity $ 1,966,904 $1,080,616
=========== ==========
See accompanying notes.
F-3
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
</TABLE>
<TABLE>
<CAPTION>
Years ended December 31, 1996 1995 1994
- - ----------------------------------------------------------------------------------------------------
<S> <C>
Revenues
Rental income $242,112 $195,240 $139,972
Interest, dividend and other
non-property income 1,707 1,692 756
-------- --------- --------
243,819 196,932 140,728
Expenses
Rental expenses:
Utilities 17,735 14,464 11,206
Repairs and maintenance 40,665 30,374 21,216
Real estate taxes 17,348 14,058 9,658
Property management 5,575 5,300 4,645
Other operating expenses 23,510 17,446 12,141
Depreciation of real estate owned 47,410 38,939 28,729
Interest 50,843 40,646 28,521
General and administrative 5,418 4,865 4,803
Other depreciation and amortization 1,299 1,103 691
Impairment loss on real estate held
for disposition 290 1,700 --
-------- -------- --------
210,093 168,895 121,610
-------- -------- --------
Income before gains on sales of
investments, minority interest
of unitholders in operating partnership
and extraordinary item 33,726 28,037 19,118
Gains on sales of investments 4,346 5,090 108
-------- -------- --------
Income before minority interest of
unitholders in operating
partnership and extraordinary item 38,072 33,127 19,226
Minority interest of unitholders in
operating partnership (58) -- --
-------- -------- --------
Income before extraordinary item 38,014 33,127 19,226
Extraordinary item-early extinguishment
of debt (23) -- (89)
-------- -------- --------
Net income 37,991 33,127 19,137
Dividends to preferred shareholders (9,713) (6,637) --
-------- -------- --------
Net income available to common shareholders $28,278 $26,490 $19,137
======== ======== ========
Net income per common share $.49 $.50 $.41
======== ======== ========
Weighted average number of common
shares outstanding 57,482 52,781 46,182
</TABLE>
See accompanying notes.
F-4
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Years ended December 31, 1996 1995 1994
- - ------------------------- -------- ------ -----
<S> <C>
Operating Activities
Net income $ 37,991 $ 33,127 $ 19,137
Adjustments to reconcile net income to cash provided
by operating activities:
Depreciation and amortization 48,709 40,042 29,644
Minority interest of unitholders in operating partnership 58
Extraordinary item-early extinguishment of debt 23 -- 89
Impairment loss on real estate held for disposition 290 1,700
Gains on sales of investments (4,346) (5,090) (108)
Adoption of SFAS No. 112 "Employers' Accounting
for Postemployment Benefits" -- -- 450
Changes in operating assets and liabilities:
Increase in operating liabilities 8,899 763 6,680
Increase in operating assets (1,560) (4,114) (1,348)
----------- --------- --------
Net cash provided by operating activities 90,064 66,428 54,544
Investing Activities
Acquisition of real estate, net of debt and liabilities assumed (137,236) (173,937) (346,730)
Capital expenditures (53,087) (35,613) (19,154)
Development of real estate assets (9,229) -- --
Net proceeds from sales of investments 33,823 23,464 2,706
Proceeds from interest rate hedge transaction 3,025 -- 3,484
Net cash acquired in the acquisition of South West Property Trust Inc. 1,129 -- --
Net decrease in mortgage notes receivable 3 2,156 63
----------- --------- --------
Net cash used in investing activities (161,572) (183,930) (359,631)
Financing Activities
Net proceeds from the issuance of common stock 15,012 79,615 115,407
Net proceeds from the issuance of preferred stock -- 101,478 --
Net proceeds from the issuance of unsecured notes payable 200,111 10,000 250,000
Net proceeds from the issuance of secured notes payable 5,925 21,927 15,504
Net borrowings (repayments) of short-term bank borrowings 37,800 4,250 (14,500)
Cash distributions paid to preferred shareholders (9,713) (4,613) --
Cash distributions paid to common shareholders (53,979) (45,737) (35,005)
Scheduled mortgage principal payments (2,729) (1,932) (1,455)
Mortgage financing proceeds released from construction funds 3,627 2,457 24,866
Payments on unsecured notes (72,064) (32,259) (27,230)
Non-scheduled payments on secured notes payable (40,628) (21,463) (17,514)
Payment of financing costs (1,306) (578) (3,498)
----------- --------- --------
Net cash provided by financing activities 82,056 113,145 306,575
----------- --------- --------
Net increase (decrease) in cash and cash equivalents 10,548 (4,357) 1,488
Cash and cash equivalents, beginning of year 2,904 7,261 5,773
----------- --------- --------
Cash and cash equivalents, end of year $ 13,452 $ 2,904 $ 7,261
=========== ========= ========
Supplemental information:
Interest paid during the year $ 48,500 $ 39,568 $ 22,944
Non-cash transcations associated with the Merger of South West
Property Trust Inc.:
Real estate assets acquired 559,591 -- --
Issuance of common stock 322,110 -- --
Secured debt assumed 99,921 -- --
Unsecured debt assumed 125,035
Operating liabilities assumed 23,805 -- --
Non-cash transactions associated with the
acquisition of properties:
Issuance of common stock 22,739 --
Secured debt assumed 137,988 24,137 60,336
Unsecured seller financing 25,000 -- --
Issuance of operating partnership units 2,006 -- --
</TABLE>
See accompanying notes.
F-5
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Common Stock, $1 Par Value Preferred Stock
Number Number
Years ended December 31, 1996, 1995 and 1994 of Shares Amount of Shares Amount
- - ------------------------------------------------- ------------------------------------------------------------
<S> <C>
Balance at December 31, 1993 41,653,097 $41,653 - -
Common shares issued in public offering 8,479,400 8,479 - -
Exercise of share options 50,488 51 - -
Common shares purchased by officers, net of repayments 137,500 138 - -
Common shares issued through dividend reinvestment plan 35,155 35 - -
Net income - - - -
Common stock distributions declared ($.78 per share) - - - -
----------------------------------------------------------
Balance at December 31, 1994 50,355,640 50,356 - -
Common shares issued in direct institutional sale 1,360,000 1,360 - -
Preferred shares issued in public offering - - 4,200,000 $105,000
Common shares issued in public offering 4,550,000 4,550 - -
Exercise of share options 98,536 98 - -
Common shares purchased by officers, net of repayments 10,000 10 - -
Common shares issued through employee stock purchase plan 1,157 1 - -
Net income - - - -
Preferred stock distributions declared ($1.58 per share) - - - -
Common stock distributions declared ($.90 per share) - - - -
Unrealized gain on securities available-for-sale - - - -
----------------------------------------------------------
Balance at December 31, 1995 56,375,333 56,375 4,200,000 105,000
Common shares issued in connection with South
West Property Trust Inc. Merger 22,804,246 22,804 - -
Common shares issued in private placement 1,679,840 1,680 - -
Exercise of share options 148,220 148 - -
Common shares purchased by officers, net of repayments - - - -
Common shares issued through dividend reinvestment plan 970,718 972 - -
Common shares issued through employee stock purchase plan 4,194 4 - -
Net income - - - -
Preferred stock distributions declared ($2.31 per share) - - - -
Common stock distributions declared ($.96 per share) - - - -
Unrealized gain on securities available-for-sale - - - -
----------------------------------------------------------
Balance at December 31, 1996 81,982,551 $81,983 4,200,000 $105,000
===========================================================
</TABLE>
<TABLE>
<CAPTION>
Unrealized
Gain on
Additional Receivable Distributions Securities
Paid-in from Officer in Excess of Available-
Years ended December 31, 1996, 1995 and 1994 Capital Shareholders Net Income for-Sale
- - ------------------------------------------------- -------------------------------------------------------------------
<S> <C>
Balance at December 31, 1993 $302,486 $(4,384) $(79,792) -
Common shares issued in public offering 105,731 - - -
Exercise of share options 456 - - -
Common shares purchased by officers, net of repayments 1,652 (1,607) - -
Common shares issued through dividend reinvestment plan 472 - - -
Net income - - 19,137 -
Common stock distributions declared ($.78 per share) - - (37,539) -
-------------------------------------------------------------------
Balance at December 31, 1994 410,797 (5,991) (98,194) -
Common shares issued in direct institutional sale 16,452 - - -
Preferred shares issued in public offering (3,522) - - -
Common shares issued in public offering 56,376 - - -
Exercise of share options 717 - - -
Common shares purchased by officers, net of repayments 136 (100) - -
Common shares issued through employee stock purchase plan 15 - - -
Net income - - 33,127 -
Preferred stock distributions declared ($1.58 per share) - - (6,637) -
Common stock distributions declared ($.90 per share) - - (48,610) -
Unrealized gain on securities available-for-sale - - - $ 448
-------------------------------------------------------------------
Balance at December 31, 1995 480,971 (6,091) (120,314) 448
Common shares issued in connection with South
West Property Trust Inc. Merger 299,109 - - -
Common shares issued in private placement 21,059 - - -
Exercise of share options 1,382 - - -
Common shares purchased by officers, net of repayments - 165 - -
Common shares issued through dividend reinvestment plan 12,216 - - -
Common shares issued through employee stock purchase plan 58 - - -
Net income - - 37,991 -
Preferred stock distributions declared ($2.31 per share) - - (9,713) -
Common stock distributions declared ($.96 per share) - - (55,493) -
Unrealized gain on securities available-for-sale - - - 1,608
-------------------------------------------------------------------
Balance at December 31, 1996 $814,795 ($5,926) ($147,529) $2,056
===================================================================
</TABLE>
<TABLE>
<CAPTION>
Total
Shareholders'
Years ended December 31, 1996, 1995 and 1994 Equity
- - ------------------------------------------------- --------------------
<S> <C>
Balance at December 31, 1993 $259,963
Common shares issued in public offering 114,210
Exercise of share options 507
Common shares purchased by officers, net of repayments 183
Common shares issued through dividend reinvestment plan 507
Net income 19,137
Common stock distributions declared ($.78 per share) (37,539)
--------------------
Balance at December 31, 1994 356,968
Common shares issued in direct institutional sale 17,812
Preferred shares issued in public offering 101,478
Common shares issued in public offering 60,926
Exercise of share options 815
Common shares purchased by officers, net of repayments 46
Common shares issued through employee stock purchase plan 16
Net income 33,127
Preferred stock distributions declared ($1.58 per share) (6,637)
Common stock distributions declared ($.90 per share) (48,610)
Unrealized gain on securities available-for-sale 448
--------------------
Balance at December 31, 1995 516,389
Common shares issued in connection with South
West Property Trust Inc. Merger 321,913
Common shares issued in private placement 22,739
Exercise of share options 1,530
Common shares purchased by officers, net of repayments 165
Common shares issued through dividend reinvestment plan 13,188
Common shares issued through employee stock purchase plan 62
Net income 37,991
Preferred stock distributions declared ($2.31 per share) (9,713)
Common stock distributions declared ($.96 per share) (55,493)
Unrealized gain on securities available-for-sale 1,608
--------------------
Balance at December 31, 1996 $850,379
====================
</TABLE>
See accompanying notes.
F-6
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Organization United Dominion Realty Trust, Inc. (together with its subsidiaries,
the "Company"), a Virginia corporation, was formed in 1972. The Company is a
fully integrated real estate company that owns and operates income producing
real estate, primarily multifamily apartment communities. As of December 31,
1996, the Company owned 210 apartment communities containing 55,664 completed
apartment homes located in the Sunbelt states from Delaware to Nevada.
Basis of presentation The accompanying consolidated financial statements include
the accounts of the Company and its wholly owned subsidiaries (including United
Dominion Realty, L.P., its Operating Partnership). All significant inter-company
accounts and transactions have been eliminated in consolidation. The financial
statements of the Company include the minority interest of unitholders in the
operating partnership.
Effective December 31, 1996, the Company acquired South West Property Trust Inc.
("South West") in a statutory merger (the "Merger"). South West was a
Texas-based public real estate investment trust. The Merger has been accounted
for as a purchase in accordance with Accounting Principles Board Opinion No. 16.
Assets and liabilities acquired were recorded at their estimated fair values at
December 31, 1996 and results of operations are included from the date of
acquisition. Accordingly, the results of operations for South West have been
excluded from the Company's consolidated statements of operations for the year
ended December 31, 1996.
Use of estimates The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Federal income taxes The Company is operated as and annually elects to be taxed
as a real estate investment trust under the Internal Revenue Code of 1986, as
amended (the "Code"). Generally, a real estate investment trust, which complies
with the provisions of the Code and distributes at least 95% of its taxable
income to its shareholders, does not pay federal income taxes on its distributed
income. Accordingly, no provision has been made for federal income taxes.
Cash and cash equivalents All highly liquid investments with maturities of three
months or less, when purchased, are considered to be cash equivalents.
Real estate assets and depreciation On October 1, 1995, the Company adopted the
provisions of SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of". The statement requires impairment
losses to be recognized for long-lived assets used in operations when indicators
of impairment are present and the undiscounted future cash flows are not
sufficient to recover the asset's carrying value. If such indicators are
present, an impairment loss is recognized based on the excess of the carrying
amount of the impaired asset over its fair value.
For long-lived assets to be disposed of, impairment losses are recognized when
the fair value of the asset less estimated cost to sell is less than the
carrying value of the asset measured at the time management commits to a plan to
dispose of the asset. Real estate is classified as real estate held for
disposition when management has committed to sell and is actively marketing the
property. Real estate held for disposition is carried at the lower of cost or
fair value less cost to dispose, determined on an asset by asset basis.
Depreciation is not recorded during the period in which real estate is held for
disposition and gains(losses) from initial and subsequent adjustments to the
carrying value of the assets, if any, are recorded as a separate component of
income from continuing operations. Real estate held for disposition is reported
separately on the consolidated balance sheet, net of accumulated depreciation
and impairment loss valuation allowance.
F-7
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Ordinary repairs and maintenance costs are expensed as incurred; significant
improvements, renovations, and replacements are capitalized and depreciated over
their estimated useful lives.
Depreciation is computed on a straight-line basis over the estimated useful
lives of the related assets which is 35 years for buildings, 10 to 35 years for
major improvements, and 5 to 20 years for fixtures, equipment and other assets.
The cost of development properties includes interest, property taxes, insurance
and allocated development overhead during the construction period.
Revenue Recognition Residential rental properties are leased under operating
leases with terms generally of one year or less. Rental income is recognized as
it is earned, which is not materially different than on a straight-line basis.
Interest Interest is capitalized on accumulated expenditures relating to the
acquisition and development of certain qualifying properties. During 1996, 1995
and 1994, total interest capitalized was $541,000, $40,000 and $0, respectively.
Deferred financing costs Deferred financing costs are generally amortized over a
period not to exceed the term of the related debt. Amortization of deferred
financing costs is classified as interest expense and was included in the
consolidated statements of operations in the amounts of $1,319,000, $1,078,000
and $1,180,000, for 1996, 1995 and 1994, respectively.
Interest rate swap agreements The Company enters into interest rate swap
agreements to alter the interest rate characteristics of outstanding debt
instruments. The interest rate swaps involve the periodic exchange of payments
over the life of the related agreements. Amounts received or paid on the
interest rate swaps are recorded on an accrual basis as an adjustment to the
related interest expense of the outstanding debt. The related amounts payable to
and receivable from counterparties are included in other liabilities and other
assets, respectively. Changes in the fair value of the interest rate swap
agreements accounted for under the accrual method are not reflected in the
financial statements.
Interest rate protection agreements The Company enters into interest rate
futures contracts to hedge interest rate risk associated with anticipated debt
transactions. The Company follows SFAS No.80 "Accounting for Futures Contracts"
which permits hedge accounting for anticipatory transactions meeting certain
criteria. Gains and losses, if any, on these transactions are deferred as an
adjustment to the carrying amount of the outstanding debt and amortized over the
terms of the related debt as an adjustment to interest expense. The fair values
of interest rate protection agreements are not recognized in the financial
statements.At the time the anticipated transaction is no longer likely to occur,
the Company would mark the derivative instrument to market and would recognize
any adjustment in the consolidated statement of operations.
Net income per common share Primary net income per common share is calculated
using the weighted average number of common shares outstanding during each year.
Stock options and other potentially dilutive securities outstanding are not
included since their inclusion would not be materially dilutive.
Investment in marketable equity securities In connection with certain property
sales, the Company received marketable preferred stock with a fair value of $7.7
million on the date of receipt. These securities are classified as
available-for-sale and are included in other assets. Securities
available-for-sale are stated at fair value.
F-8
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unrealized gains and losses are reported as a separate component of
shareholders' equity and are not reported in earnings until realized or until a
decline in fair value is deemed to be other-than-temporary.
Minority Interest Capital contributions, distributions and profits and losses
are allocated to minority interests in accordance with the terms of the
individual partnership agreements. Net income allocated to minority interests
for 1996 aggregated approximately $58,000.
Stock Based Compensation In October, 1995, the Financial Accounting Standards
Board issued SFAS No. 123, "Accounting for Stock-Based Compensation" (Statement
123) which provides an alternative to APB Opinion No.25 in accounting for
stock-based compensation plans and is effective for fiscal years beginning after
December 31, 1995. The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related
Interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under Statement 123 requires use
of option valuation models that were not developed for use in valuing employee
stock options. Under APB 25, because the exercise price of the Company's
employee stock options equals the market price of the underlying stock on the
date of grant, no compensation cost has been recognized.
Reclassifications Certain previously reported amounts have been reclassified to
conform with the current financial statement presentation.
F-9
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Real Estate Owned
The Company operates primarily in 21 separate markets dispersed throughout a 15
state area. At December 31, 1996, the Company's largest apartment market was
Dallas, Texas, where it owned 13% of its apartment homes. Excluding Dallas,
Texas, the Company did not own more than 7% of its apartment homes in any one
market.
The following table summarizes real estate held for investment at December 31,
1996 and 1995:
Dollars in thousands 1996 1995
- - -------------------- ---- -----
Land and land improvements $ 353,092 $ 193,672
Buildings and improvements 1,537,387 864,331
Furniture, fixtures and equipment 115,308 72,576
Construction in progress 1,825 519
-------------- ------------
Real estate held for investment 2,007,612 1,131,098
Accumulated depreciation (173,291) (129,454)
------------- ----------
Real estate held for investment, net $ 1,834,321 $ 1,001,644
=========== ==========
The following is a summary of real estate owned at December 31, 1996 (dollars in
thousands):
Real Estate Held for Investment
(Excluding real estate under development)
<TABLE>
<CAPTION>
Initial
Number of Acquisition Carrying Accumulated
Properties Cost Value Depreciation Encumbrances
---------- ----------- -------- ------------ ------------
<S> <C>
Apartments
North Carolina 45 $361,593 $405,000 $ 48,219 $74,530
Texas 32 400,228 400,228 -- (A)
Florida 31 318,590 348,971 23,245 63,168
Virginia 30 203,981 245,769 51,462 20,460
South Carolina 22 154,078 183,330 21,098 51,974
Georgia 10 90,783 103,308 11,982 17,873
Maryland 12 99,981 109,421 8,776 30,395
Tennessee 10 75,546 85,342 6,380 10,989
Arizona 3 36,550 36,550 -- (A)
Alabama 2 12,012 13,528 1,146 --
Delaware 2 14,732 16,590 983 --
Nevada 1 20,000 20,000 -- --
New Mexico 1 9,300 9,300 -- (A)
Oklahoma 1 9,775 9,775 -- (A)
Arkansas 2 20,500 20,500 -- 5,053
--- --------- ---------- ---------- ---------
204 $1,827,649 $2,007,612 $173,291 $369,310
=== ========== ========== ======== ========
</TABLE>
F-10
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Real Estate Held for Disposition
Initial
Number of Acquisition Carrying Accumulated
Properties Cost Value* Depreciation Encumbrances
------------ ----------- -------- ----------- ------------
<S> <C>
Apartments
North Carolina 2 $5,758 $9,769 $4,547 --
Virginia 2 6,186 9,067 3,263 $3,900
South Carolina 1 1,918 1,924 10 --
Texas 1 8,000 8,000 -- (A)
Commercial
Virginia 4 6,870 14,270 3,909 $3,350
North Carolina 1 5,169 8,705 2,155 --
Tennessee 1 1,176 2,439 734 --
-------- ----- -------- ------- -----
12 $35,077 $ 54,174 $14,618 $7,250
======== ======= ======== ======= ======
</TABLE>
(A) In connection with the Merger on December 31, 1996, the Company
assumed two REMIC financings aggregating $94,868 which encumber 27
of the apartment communities acquired.
Real estate held for disposition contributed net rental income (rental income
less rental expenses and depreciation expense) in the aggregate amount of
approximately $3.9 million for the year ended December 31, 1996. The Company
expects to dispose of these properties within the next twelve months.
The following is a reconciliation of the carrying amount of real estate held for
investment (dollars in thousands):
1996 1995 1994
--------------- ---------------- ----------
Balance at January 1 $ 1,131,098 $ 1,007,599 $ 582,213
Real estate purchased 843,277 198,136 409,280
Improvements 49,434 35,682 18,857
Real estate sold (230) (34,031) (2,751)
Transferred to real estate
held for disposition (15,967) (76,288) --
--------------- ---------------- ------------
Balance at December 31 $ 2,007,612 $ 1,131,098 $ 1,007,599
=============== ================ ============
The following is a reconciliation of accumulated depreciation (dollars in
thousands):
1996 1995 1994
------------ ----------- --------
Balance at January 1 $ 129,454 $ 120,341 $ 91,444
Depreciation expense
for the year* 48,039 39,442 29,049
Transferred to real estate
held for disposition (4,202) (23,572) --
Real estate sold -- (6,757) (152)
--------------- ------------ -----------
Balance at December 31 $ 173,291 $ 129,454 $ 120,341
========== ========= =========
* Depreciation expense of $629,000, $503,000 and $320,000 for 1996, 1995 and
1994, respectively, is included in "Other depreciation and amortization" in
the consolidated statements of operations.
F-11
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Acquisitions
In connection with the Merger, the Company issued 22.8 million shares of its
common stock at $14.125 per share for total market equity of approximately $322
million, assumed debt and other liabilities of approximately $246 million and
incurred transaction costs of approximately $4 million for total consideration
of approximately $572 million. No goodwill was recorded in connection with this
transaction. In addition to the Merger, during 1996, the Company acquired 30
apartment communities containing 7,172 apartment homes in separate transactions
at a total cost of approximately $321 million, including closing costs. During
1995, the Company acquired 23 apartment communities containing 5,142 apartment
homes for a total cost of approximately $195 million, including closing costs.
Information concerning unaudited pro forma results of operations for the years
ended December 31, 1996 and 1995 are set forth below. For 1996, such pro forma
information assumes (i) the consummation of the Merger and (ii) the acquisition
of 20 apartment communities containing 5,157 apartment homes at a total cost of
approximately $213 million , as if the transactions had occurred on January 1,
1996. For 1995, such pro forma information assumes (i) the consummation of the
South West Merger, (ii) the acquisition of 20 apartment communities containing
5,157 apartment homes at a total cost of approximately $213 million and , (iii)
the acquisition of 13 apartment communities containing 2,417 units at a total
cost of approximately $99 million, as if the transactions had occurred on
January 1, 1995.
Pro Forma Pro Forma
Year Ended Year Ended
In thousands, except per share amounts Dec. 31, 1996 Dec. 31, 1995
- - --------------------------------------- ------------- -------------
(Unaudited)
Rental income $ 341,765 $ 301,106
Income before extraordinary item 53,650 49,402
Net income per common share before
extraordinary item $ .54 $ .54
The unaudited information is not necessarily indicative of what the Company's
consolidated results of operations would have been if the acquisitions had
occurred at the beginning of each period presented. Additionally, the pro forma
information does not purport to be indicative of the Company's results of
operations for future periods.
F-12
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Secured Notes Payable
Secured notes payable consist of the following:
(dollars in thousands)
<TABLE>
<CAPTION>
December 31,
1996 1995
------------ -----------
<S> <C>
Fixed-Rate Mortgage Notes Payable $ 101,221 $ 56,368
Fixed-Rate Tax-Exempt Secured Notes Payable 116,797 112,843
Fixed-Rate REMIC Financings 94,868 --
Fixed-Rate Secured Notes Payable 45,000 --
-------- ---------
Total Fixed-Rate Secured Notes Payable 357,886 169,211
Variable-Rate Secured Notes Payable 13,124 --
Variable-Rate Tax-Exempt Secured Notes Payable 5,550 11,270
--------- -----------
Total Variable-Rate Secured Notes Payable 18,674 11,270
--------- -----------
Total Secured Notes Payable $ 376,560 $ 180,481
========= ===========
</TABLE>
Fixed-Rate Mortgage Notes Payable Fixed-rate mortgage notes payable included 23
loans encumbering 18 properties at December 31, 1996, and 19 loans encumbering
13 properties at December 31, 1995. Fixed-rate mortgage notes payable are
generally due in monthly installments of principal and interest and mature at
various dates through 2008. At December 31, 1996 and 1995, this debt carried
interest rates ranging from 7.125% to 9.625% (8.3% weighted average) and 7.00%
to 9.625% (8.2% weighted average), respectively. During 1996, the Company
assumed six fixed-rate mortgage notes payable aggregating $53.6 million with a
weighted average interest rate of 8.4% in connection with the acquisition of
apartment communities, including $5.1 million assumed in connection with the
Merger.
Fixed-Rate Tax-Exempt Notes Payable At December 31, 1996, 17 properties were
encumbered by fixed-rate mortgage notes which secure related tax-exempt housing
bond issues. Interest on these notes is generally payable in semi-annual
installments and the notes mature at various dates through 2025. At December 31,
1996 and 1995, tax-exempt fixed-rate mortgage notes had interest rates ranging
from 6.00% to 8.50% (weighted average interest rate of 6.88%), and 5.98% to
8.50% (weighted average interest rate of 6.90%), respectively. During 1996, the
Company refunded one bond issue relating to a 1995 property acquisition in the
amount of $5.9 million bearing interest of 6.35%.
Fixed-Rate REMIC Secured Notes Payable In connection with the Merger, the
Company assumed two fixed-rate REMIC Financings in the aggregate amount of $94.9
million. The REMIC Financings encumber 27 apartment communities and have
interest rates of 7.01% and 8.5% (weighted average of 7.76%). Monthly principal
and interest payments in the amount of $821,893 are required. The first phase of
the REMIC financing matures on December 10, 2000 and the second phase of the
REMIC financing matures on February 10, 2001, the principal balances on the
maturity dates are expected to be $39.9 million and $41.7 million, respectively.
Fixed-Rate Secured Notes Payable In connection with the acquisition of an 18
apartment community portfolio on August 15, 1996, the Company assumed two
variable-rate construction notes payable and two variable-rate secured senior
credit facilities aggregating $89.5 million plus five related interest rate swap
agreements with an aggregate notional value of $45 million, all of which mature
in August, 1999. The Company repaid one of the secured senior credit facilities
in the amount of $31.2 million on November 12, 1996. Variable-rate secured notes
payable which have been effectively swapped to a fixed-rate at December 31, 1996
consist of a $40 million variable-rate secured senior credit facility which
encumbers six apartment communities and a variable-rate construction note
payable.
F-13
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The variable-rate secured notes payable bear interest at LIBOR + 1% or 6.61% at
December 31, 1996. The five interest rate swap agreements aggregate $45 million
under which the Company pays a fixed-rate of interest and receives a
variable-rate on the notional amounts. The interest rate swap agreements
effectively change the Company's interest rate exposure on $45 million from a
variable-rate to a weighted average fixed-rate of 7.29%.
Variable-Rate Secured Notes Payable Variable-rate secured notes payable at
December 31, 1996 consist of two variable-rate construction notes payable which
were assumed in connection with the acquisition of an 18 apartment community
portfolio on August 15, 1996, both of which mature in August, 1999. The
variable-rate secured notes payable bear interest at LIBOR + 1% or 6.61% at
December 31, 1996.
Variable-Rate Tax-Exempt Notes Payable At December 31, 1996 two of the Company's
properties were encumbered by variable-rate mortgage notes which secure
tax-exempt housing bond issues. Interest on these notes is generally payable in
semi-annual installments and the notes mature at various dates through 2010. At
December 31, 1996 and 1995, tax-exempt variable-rate notes had interest rates
ranging from 4.56% to 7.27% (weighted average interest rate of 6.20%) and
5.00% to 7.29% (weighted average interest rate of 5.80%), respectively.
The loan documents relating to the REMIC financing contain certain covenants,
which require among other things, that debt service coverage ratios on the
mortgaged properties be maintained at certain levels.
The aggregate maturities of secured notes payable for the five years subsequent
to December 31, 1996 were as follows (dollars in thousands):
Year Amount
---- ------
1997 $ 7,393
1998 22,382
1999 86,559
2000 57,917
2001 51,119
Thereafter 151,190
-------
$ 376,560
=======
F-14
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. Unsecured Notes Payable
A summary of unsecured notes payable at December 31, 1996 and 1995 is as
follows:
<TABLE>
<CAPTION>
Dollars in thousands 1996 1995
---- ----
<S> <C>
Commercial Banks
Borrowings outstanding under
revolving credit facilities (a) $ 125,250 $ 18,400
Insurance Companies--Senior Unsecured Notes
7.98% due March, 1997-2003(b) 52,000 52,000
9.57% due July, 1996 -- 35,000
7.89% due March, 1996 -- 10,000
8.72% due November, 1996-1998 (c) 4,000 6,000
--------- -------
56,000 103,000
Other (d) 6,040 3,458
Senior Unsecured Notes - Other
7.00% Unsecured Note due January 15, 1997 (e) 55,985 --
7.25% Notes due April 1, 1999 75,000 75,000
8.50% Debentures due September 15, 2024 (f) 150,000 150,000
7.95% Medium-Term Notes due July 12, 2006 125,000 --
7.07% Medium-Term Notes due November 15, 2006 25,000 --
7.02% Medium-Term Notes due November 15, 2005 50,000 --
-------- --------
480,985 225,000
------- -------
$ 668,275 $ 349,858
======= =======
</TABLE>
(a) Includes $69,050 outstanding under a renegotiated $75,000
unsecured revolving credit facility assumed on December 31, 1996
in connection with the Merger. The note was paid in full on
January 29, 1997.
(b) Payable in seven equal principal installments of $7.4 million.
(c) Payable in two equal annual principal installments of $2 million.
(d) Includes $5.6 million and $3.0 million at December 31, 1996 and
1995, respectively, of deferred gain from the termination of
interest rate hedge transactions.
(e) Represents an unsecured note assumed in connection with the Merger
on December 31, 1996. The note was paid in full on
January 3, 1997.
(f) Debentures include an investor put feature which grants the
debentureholder a one time option to redeem debentures at the end
of 10 years.
On January 27, 1997, the Company issued $125 million of 7.25% Notes due January
15, 2007 under its $462.5 million shelf registration statement. In November
1996, the Company entered into an interest rate protection agreement for a
notional amount of $100 million in anticipation of issuance of debt early in
1997. The interest rate protection agreement was terminated simultaneously with
the $125 million Note issuance and the Company received $1.5 million in cash on
the settlement. This had the economic effect of lowering the interest rate on
the Notes to approximately 7.14% over the ten year term of the Notes. Net
proceeds of approximately $124 million were used to curtail approximately $83.1
million of bank line debt and the remaining proceeds were temporarily invested
in short-term money market instruments and subsequently used to repay debt
assumed in connection with the Merger.
F-15
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Information concerning short-term bank borrowings is summarized in the table
that follows:
<TABLE>
<CAPTION>
In thousands 1996 1995 1994
- - -----------------------------------------------------------------------------------------------------
<S> <C>
Total revolving credit facilities
and lines of credit at December 31* $ 228,500 $103,500 $103,500
Borrowings outstanding at December 31 125,250 18,400 14,150
Weighted average daily borrowings
during the year 49,941 8,198 33,787
Maximum daily borrowings during
the year ** 73,900 35,300 79,300
Weighted average daily interest rate
during the year 6.0% 6.8% 5.1%
Weighted average daily interest rate
at December 31 6.3% 6.5% 6.5%
</TABLE>
* Includes a renegotiated $75 million unsecured revolving credit facility
assumed on December 31, 1996 in connection with the Merger.
** Maximum daily borrowings outstanding excludes the $69.1 million revolving
credit facility assumed on December 31, 1996.
The underlying loan agreements contain certain covenants which, among other
things, require the Company to maintain minimum consolidated tangible net worth,
as defined, and maintain certain financial ratios.
At December 31, 1996, the Company had $70 million of unsecured revolving credit
facilities with four commercial banks. At December 31, 1996, there was $45
million outstanding under the revolving credit facilities. These credit
agreements currently expire at dates between June 1997 and June 1998, but are
renewable annually by mutual agreement between the Company and each bank.
Interest on borrowings outstanding under these agreements are at varying rates
depending on the level of the Company's debt and the term of the borrowing.
Generally, loans for 30 days or more are priced at LIBOR plus 5/8% to 1%. Loans
of shorter duration are priced at spreads of 5/8% to 1.125% over the bank's
applicable base rate. The Company is obligated to pay a fee equal to 1/4% of 1%
per annum on the average daily amount of the unused portion of the commitment
during the revolving loan period. None of these agreements have compensating
balance requirements.
At December 31, 1996, the Company had unsecured lines of credit with three
commercial banks totaling $33.5 million. At December 1996, there was $11.2
million outstanding under the lines of credit. These credit facilities currently
expire on June 30, 1997, but are renewable annually by mutual agreement between
the Company and each bank. Each line is subject to periodic bank review and
requires the Company to maintain a depository relationship with the respective
bank, however, there are no formal compensating balance arrangements. Borrowings
bear interest generally at negotiated rates in line with borrowings under the
Company's revolving credit facilities.
At December 31, 1996, the Company had a $50 million interim credit agreement
expiring on May 31, 1997, with one of its commercial banks. Borrowings bear
interest generally at negotiated rates in line with borrowings under the
Company's revolving credit facilities negotiated by the Company. There were no
borrowings outstanding under this credit facility at December 31, 1996.
F-16
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Financial Instruments
Fair Value of Financial Instruments The following disclosures of estimated fair
value of financial instruments were determined by the Company using available
market information and appropriate valuation methodologies. Considerable
judgment is necessary to interpret market data and develop estimated fair value.
Accordingly, the estimates presented herein are not necessarily indicative of
the amounts that the Company could realize upon disposition of the financial
instruments. The use of different market assumptions and/or estimation
methodologies may have a material effect on the estimated fair value amounts.
The carrying amounts and estimated fair value of the Company's financial
instruments at December 31, 1996 and 1995, both on and off-balance sheet, are
summarized as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
------------------------------ ---------------------
In thousands Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C>
Investment in equity securities $ 9,771 $ 9,771 $ 8,144 $ 8,144
Secured notes payable 376,560 381,007 180,481 189,666
Unsecured notes payable 688,275 684,332 349,858 376,347
Interest rate swap agreements -- (589) -- --
Interest rate risk management agreements -- 934 -- (3,996)
</TABLE>
The following methods and assumptions were used by the Company in estimating the
fair values set forth above.
The carrying amount of cash and cash equivalents approximates fair value because
of the short-term nature of these instruments.
Investment in equity securities Securities available-for-sale are carried at
fair value based upon market quotations.
Notes payable Estimated fair value is based on mortgage rates and tax-exempt
bond rates believed to be available to the Company for issuance of debt with
similar terms and remaining maturities as of December 31, 1996 and 1995. The
carrying amount of the Company's variable-rate secured notes payable approximate
fair value at December 31, 1996 and 1995. The carrying amounts of the Company's
borrowings under short-term revolving credit agreements and lines of credit
approximate their fair values at December 31, 1996 and 1995 due to the short
term maturity of these instruments and the fact that they are variable-rate
instruments.
Interest rate swap agreements Fair value is based on external market quotations
from investment banks.
Interest rate risk management agreements Fair value is based on external market
quotations from investment banks.
Interest rate swap agreements At December 31, 1996, the Company had six interest
rate swap agreements outstanding with an aggregate notional amount of $122.2
million which effectively change the cost on certain debt instruments from a
variable-rate to a fixed-rate. Of this amount, $77.2 million was assumed in
connection with the Merger which fixes the interest rate on a portion of the
Company's variable-rate debt at 7.9% through April, 1997. The Company also
assumed a $45 million interest rate swap on August 15, 1996 in connection with a
portfolio acquisition which effectively fixes $45 million of the variable-rate
secured notes payable assumed to a weighted average fixed rate of 7.29%. The
Company's credit exposure on swaps is limited to the value of interest rate
swaps that are favorable to the Company at December 31, 1996. At December 31,
1996, the market value of interest rate swaps in a favorable value position was
$21,000, while the net fair value of all positions was unfavorable to the
Company at $589,000.
F-17
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
At December 31, 1995, there were no interest rate swap agreements outstanding,
nor were there any interest rate swap agreements during 1995. For all periods
presented, the Company had no deferred gains or losses relating to terminated
swap contracts.
Interest rate risk management agreements In June 1995, the Company entered into
a $50 million (notional amount) fixed pay forward starting swap agreement with a
major Wall Street investment banking firm in order to reduce the interest rate
risk associated with the anticipated refinancing of fixed-rate debt maturing in
1996. The transaction allowed the Company to lock-in a ten year Treasury rate of
6.544% on or before July, 15, 1996. In November, 1995, in anticipation of the
issuance of medium-term notes during 1996, the Company entered into a $50
million (notional amount) interest rate protection agreement with one of its
commercial banks which allowed the Company to lock-in a 10 year Treasury rate of
5.946% beginning on or before March 1, 1996. This transaction was terminated at
no cost to the Company in February 1997. In June, 1996, the Company entered into
a $75 million (notional amount) fixed pay forward starting swap agreement with a
major Wall Street investment banking firm in order to reduce the interest rate
risk associated with the anticipated issuance of medium-term notes during 1996.
This transaction allowed the Company to lock-in a ten year Treasury rate of
6.75%. In July, 1996, the Company issued $125 million of ten year notes under
this its $200 million medium-term note program (MTN's) at an interest rate of
7.95%. The two outstanding interest rate risk management agreements were
terminated simultaneously with the $125 million MTN's issuance and the Company
received $3.0 million in cash. This had the economic effect of reducing the
interest rate on the MTN's to approximately 7.61% over the ten year term.
In November 1996, the Company entered into a $100 million (notional amount)
fixed pay forward starting swap agreement with a major Wall Street investment
banking firm in order to reduce the interest rate risk associated with the
anticipated issuance of unsecured notes in January 1997. The transaction allowed
the Company to lock-in a ten year Treasury rate of 6.544% on or before January
21, 1997.
The Company has not obtained collateral or other security to support financial
instruments subject to credit risk but monitors the credit standing of
counterparties. While the Company is exposed to credit loss in the event of
nonperformance by the counterparty, such nonperformance is not anticipated as
the counterparties are highly rated, credit quality companies.
7. Income Taxes
The differences between net income available to common shareholders for
financial reporting purposes and taxable income before dividend deductions
relate primarily to temporary differences, principally real estate depreciation
and the deferral for tax purposes of certain gains on property sales.
All realized gains (losses) on sales of investments are distributed to
shareholders if and when recognized for income tax purposes. Since 1980, gains
aggregating approximately $19.4 million have been deferred for income tax
purposes and are undistributed at December 31, 1996.
For income tax purposes, distributions paid to common shareholders consist of
ordinary income, capital gains, return of capital or a combination thereof. For
the three years ended December 31, 1996, distributions paid per common share
were taxable as follows:
1996 1995 1994
---- ----- ------
Ordinary income $.638 $.715 $ .629
Capital gains --- .003 .004
Return of capital .307 .152 .127
------ ------ -------
$.945 $.870 $ .760
===== ===== ======
F-18
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
8. Profit Sharing Plan
The "United Dominion Realty Trust, Inc. Profit Sharing Plan" (the Plan) is a
defined contribution plan covering all eligible full-time employees. Under the
Plan the Company makes discretionary profit sharing and matching contributions
to the Plan as determined by the Compensation Committee of the Board of
Directors. Aggregate contributions, both matching and discretionary, which are
included in the Company's consolidated statements of operations for the three
years ended December 31, 1996, 1995 and 1994 were $600,000 $536,000 and
$350,000, respectively.
9. Stock Option Plan
The Company's 1985 Share Option Plan, (the "Plan") as amended, authorizes the
grant of options, at the discretion of the Board, to certain officers, directors
and key employees of the Company, for up to 4,200,000 shares of the Company's
common stock. The Plan generally provides, among other things, that options be
granted at exercise prices not lower than the market value of the shares on the
date of grant. Shares under options which subsequently expire or are canceled
are available for subsequent grant. For options granted prior to December 12,
1995, the optionee has up to five years from the date on which the options first
become exercisable during which to exercise the options. For all options granted
subsequent to December 12, 1995, the options have 10 year terms and vest on
December 31 of the year subsequent to grant.
Pro forma information regarding net income and earnings per share is required by
Statement 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of accounting as defined in
Statement 123. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following weighted
average assumptions for 1996 and 1995:
1996 1995
---- ----
Risk free interest rate 6.6% 6.5%
Dividend yields 6.1% 6.1%
Volatility factor .166 .166
Weighted average expected life (years) 8.6 8.6
For the options granted in 1995 and 1996, the contractual life is 10 years and
the stock price on the date of grant is equal to the exercise price. The
Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferrable. In addition, option valuation models require the input of highly
subjective assumptions, including the expected stock price volatility. The
Company's employee stock options are significantly different from traded options
and slight changes in the subjective input assumptions can materially affect the
fair value estimate. In management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its employee
stock options.
For purposes of the pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. Statement 123
is applicable only to options granted subsequent to December 31, 1994,
consequently, the pro forma effect will not be fully reflected until 1997. The
Company's pro forma information is as follows (in thousands, except per share
amounts):
1996 1995
---- ------
Net income available to
common shareholders As reported $ 28,278 $ 26,490
Pro forma 27,659 26,460
Earnings per common
share As reported $.49 $.50
Pro forma .48 .50
F-19
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the Company's stock option activity during the three years ended
December 31, 1996 is provided in the following table (in thousand of dollars,
except per share amounts).
<TABLE>
<CAPTION>
Options Outstanding
-----------------------------------------------------
Shares Available Weighted Average Range of
For Future Grant Options Exercise Price Exercise Prices
---------------- ---------- ---------------- ---------------
<S> <C>
Outstanding, December 31,
1993 1,307,900 934,600 $ 12.42 $ 7.44-$13.63
Granted (371,000) 371,000 13.13 13.13
Exercised -- (50,488) 10.33 7.44-11.56
Expired 23,240 (23,240) 12.41 11.56-13.63
----------- ----------- ------ -------------
Outstanding, December 31,
1994 960,140 1,231,872 11.42 7.44- 13.63
Granted (372,000) 372,000 14.63 14.63
Exercised -- (98,536) 8.27 7.44-13.63
Expired 14,700 (14,700) 12.86 11.56-13.63
--------- ------------ ------ ------------
Outstanding, December 31,
1995 602,840 1,490,636 12.41 7.44-14.63
Granted (472,000) 472,000 15.21 13.88-15.25
Exercised -- (148,220) 10.33 7.44-13.63
Expired 39,200 (39,200) 14.17 13.13-14.63
Additional shares authorized 1,800,000 -- -- --
----------- --------------- --------- --------------
Outstanding, December 31,
1996 1,970,040 1,775,216 $13.29 $ 7.44-$15.25
============ ========== ========= =============
Exercisable at December 31,
1994 720,500 $11.16 $7.44-$13.63
1995 785,156 11.46 7.44- 14.63
1996 713,791 11.94 7.44- 15.25
</TABLE>
Exercise prices for the options outstanding as of December 31, 1996, ranged from
$7.44 to $15.25. The weighted average remaining contractual life on all options
outstanding is 6.3 years. Approximately 817,000 of share options had exercise
prices between $14.00 and $15.25 and approximately 958,000 had exercise prices
between $11.50 and $13.99.
The weighted-average fair value of options granted during 1996 and 1995 was
$1.74 and $1.64, respectively.
10. Shareholders' Equity
Preferred Stock The preferred stock is redeemable on or after April 24, 2000 at
the sole option of the Company from the proceeds from the sale of additional
capital stock (common or preferred). The preferred stock has no voting rights,
no stated maturity, is not subject to any sinking fund or mandatory redemption
and is not convertible into any other securities of the Company.
Common Stock On January 28, 1997, the Company completed a public offering of
4,000,000 shares of its common stock at $15.75 per share. Net proceeds of the
offering after deducting underwriting commissions and direct offering costs,
aggregated approximately $59.7 million and were used to repay unsecured notes
payable.
Officers' Stock Purchase and Loan Plan At December 31, 1996, 585,500 shares of
common stock had been issued under the Officer Stock Purchase and Loan Plan.
Under the plan, certain officers have purchased common stock at the then current
market price with financing provided by the Company at 7% interest only. The
underlying notes mature beginning in November, 1998. A total of 14,500 shares
are available for future issuance under this Plan.
F-20
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dividend Reinvestment and Stock Purchase Plan The Company's Dividend
Reinvestment and Stock Purchase Plan (the "Plan") allows common and preferred
shareholders the opportunity to purchase, through reinvestment of cash
dividends, additional shares of the Company's common stock at 95% of Average
Market Value, as defined. Shareholders may make additional optional cash
payments of not less than $50 and not more than $25,000 per quarter, of the
Company's common stock at 97% of Average Market Value, as defined. As of
December 31, 1996, 1,063,262 shares of common stock had been issued under the
Company's Dividend Reinvestment and Stock Purchase Plan. Shares in the amount of
2,936,738 are reserved for further issuance under this plan. During 1996,
970,718 shares were issued under the Plan for a total market equity value of
approximately $13.2 million. All costs of administration of the Plan are paid by
the Company.
F-21
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. Unaudited Summarized Consolidated Quarterly Financial Data
Summarized consolidated quarterly financial data for the years ended December
31, 1996 and 1995 is as follows (In thousands, except per share information):
<TABLE>
<CAPTION>
Three Months Ended (Unaudited)
1996 March 31* June 30 September 30* December 31*
- - ---- ------------ -------------- ------------- -------------
<S> <C>
Rental income $ 54,839 $ 57,197 $ 63,083 $ 66,993
Income before gains on sales of
investments, minority interest
of unitholders in operating
partnership and extraordinary item 8,594 8,296 8,504 8,332
Net income 9,559 8,166 9,818 10,448
Preferred dividends 2,428 2,428 2,428 2,429
Net income available to
common shareholders 7,131 5,738 7,390 8,019
Per share:
Net income available to common
shareholders $ .13 $ .10 $ .13 $ .14
Weighted average number of common
shares outstanding 56,467 56,666 57,793 58,983
</TABLE>
* For the quarters ended March 31, 1996, September 30, 1996 and
December 31, 1996, the Company recognized $1.0 million, $1.3
million and $2.0 million, respectively, of aggregate book gains on
the sale of real estate held for disposition.
- - ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended (Unaudited)
1995 March 31 June 30** September 30*** December 31
- - ---- ----------- --------------- ---------------- ------------
<S> <C>
Rental income $ 45,493 $ 47,747 $ 49,842 $ 52,158
Income before gains on sales of
investments, minority interest
of unitholders in operating
partnership and extraordinary item 6,087 6,993 5,599 9,358
Net income 6,150 11,569 5,804 9,604
Preferred dividends -- 1,781 2,428 2,428
Net income available to
common shareholders 6,150 9,788 3,376 7,176
Per share:
Net income available to
common shareholders $ .12 $ .19 $ .07 $ .13
Weighted average number of
common shares outstanding 51,125 51,776 51,883 56,293
</TABLE>
** For the quarter ended June 30, 1995, the Company recognized a $4.6
million aggregate book gain on the sales of real estate owned.
*** For the quarter ended September 30, 1995, the Company recognized a
$1.7 million impairment loss on real estate held for disposition.
F-22
<PAGE>
SCHEDULE III.
Summary of Real Estate Owned
<TABLE>
<CAPTION>
Cost of
Improvements
Capitalized
Initial Cost Subsequent to
Land and Buildings Acquisition
Land and (Net of
Encumbrances Improvements Improvements Disposals)
------------ ------------ ------------ -------------
<S> <C>
Apartments:
Real estate held for investment
Alabama
Indian Hills/Anniston -- $338,335 $3,726,661 $495,133
Three Fountains/Montgomery -- 1,075,009 6,872,302 1,020,119
Arkansas
Shadow Lake/Little Rock -- 2,523,670 8,976,330 --
Turtle Creek/Little Rock $5,053,526 1,913,177 7,086,823 --
Arizona
Greenway Park/Phoenix c 1,622,700 5,727,300 --
Sierra Palms/Phoenix -- 4,638,950 17,361,050 --
Vista Point/Phoenix d 1,587,400 5,612,600 --
Delaware
Dover Country Club/Dover -- 2,007,878 6,365,053 1,476,968
Greens at Cedar Chase/Dover -- 1,528,667 4,830,738 395,261
Florida
Alafaya Woods/Orlando -- 1,653,000 9,042,256 1,171,509
Andover Place/Orlando 5,925,000 3,692,187 7,756,919 1,010,413
Bay Cove/Clearwater -- 2,928,847 6,578,257 1,412,218
Bay Meadow/Clearwater 8,103,979 2,892,526 9,253,525 10,474
Brantley Pines/Ft. Myers -- 841,400 5,914,766 1,081,022
Cleary Court/Ft. Lauderdale -- 2,399,848 7,913,450 529,978
Copperfield/Ft. Lauderdale -- 4,424,128 20,428,969 518,433
Dover Village/Orlando -- 2,894,702 6,456,100 1,903,940
Fisherman's Village/Orlando -- 2,387,368 7,458,897 1,080,112
Foxcroft/Tampa -- 749,400 3,927,644 783,318
Greentree Place/Jacksonville 12,455,000 1,634,330 11,226,990 1,897,412
Hunters Ridge/Plant City -- 2,461,548 10,942,434 777,587
Lake Washington Downs/Melbourne -- 1,434,450 4,940,166 1,124,359
Lakeside North/Orlando 12,440,000 1,532,700 11,076,062 1,777,081
Lakewood Place/Tampa -- 1,395,051 10,647,377 581,176
Los Altos/Orlando -- 2,803,805 12,348,464 58,302
Mallards of Wedgewood/Lakeland -- 959,284 6,864,666 1,170,167
Mediterranean Village/Miami -- 2,064,788 11,939,113 721,522
Orange Orlando/Orlando -- 1,233,151 2,177,417 1,159,485
Palm Grove/Tampa -- 616,121 5,268,814 687,891
Pinebrook/Clearwater -- 1,780,375 2,458,172 2,069,324
Regatta Shores/Orlando -- 757,008 6,607,367 1,380,153
Santa Barbara Landing/Naples 4,909,149 1,134,120 8,019,814 824,884
Seabrook/Orlando -- 1,845,853 4,155,275 908,858
Summit West/Tampa -- 2,176,500 4,709,970 1,427,337
The Antlers/Jacksonville 9,999,958 4,034,039 11,192,842 710,703
The Groves/Daytona Beach -- 789,953 4,767,055 514,982
University Club/Ft. Lauderdale -- 1,390,220 6,992,620 293,147
Village at Old Tampa Bay/Tampa -- 1,750,320 10,756,337 1,171,806
Vinyards/Orlando 9,335,000 1,840,230 11,571,625 1,306,851
Westland Park/Jacksonville -- 1,834,535 14,864,742 316,264
Georgia
Colony of Stone Mountain/Atlanta -- 3,160,000 5,641,646 3,379,547
Crescent Square/Atlanta -- 1,057,000 6,865,036 4,514,865
Dunwoody Pointe/Atlanta 5,953,313 2,763,324 6,902,996 750,913
Griffin Crossing/Atlanta -- 1,509,633 7,544,018 525,733
Gwinnett Square/Atlanta -- 1,924,325 7,376,454 757,602
Lake of the Woods/Atlanta -- 835,352 8,388,258 96,225
River Place/Macon -- 1,097,280 7,492,385 910,169
Riverwood/Atlanta 5,581,871 2,985,599 11,087,903 260,600
Royal Oaks/Savannah 6,337,580 533,100 9,926,017 634,926
Stanford Village/Atlanta -- 884,500 2,807,839 694,534
Maryland
Brittingham Square/Salisbury -- 650,143 4,962,246 249,046
Dominion at Eden Brook/Columbia 8,320,000 2,361,167 9,384,171 611,395
Dominion Constant Friendship/Balt. -- 903,122 4,668,956 289,574
Dominion Great Oaks/Baltimore -- 2,919,481 9,099,691 1,396,435
Dominion Kings Place/Columbia 4,875,000 1,564,942 7,006,574 415,502
Gatewater Landing/Glen Burnie -- 2,078,422 6,084,526 872,405
Greens at Cross Court/Easton -- 1,182,414 4,544,012 385,992
Greens at Hilton Run/Lexington Park -- 2,754,447 10,482,579 489,973
Greens at Schumaker Pond/Salisbury -- 709,559 6,117,582 384,731
Holly Tree Park/Waldorf -- 1,576,366 5,106,716 797,799
Twin Coves/Baltimore 3,710,000 912,771 2,904,304 736,997
Woodside/Baltimore 13,490,000 3,112,881 8,893,721 2,810,029
North Carolina
Beechwood/Greensboro -- 1,409,377 6,086,677 467,600
Bramblewood/Goldsboro -- 401,538 3,150,912 1,060,292
Brynn Marr/Jacksonville -- 432,974 3,821,508 1,194,526
Canterbury Woods/Charlotte -- 409,675 5,011,435 1,817,108
Cape Harbor/Wilmington 9,500,000 1,891,671 18,113,109 25,801
Chateau Village/Gastonia -- 1,046,610 6,979,555 53,362
Cinnamon Ridge/Raleigh 7,000,000 967,230 3,337,197 4,296,548
Clear Run/Wilmington -- 874,830 8,586,978 4,564,755
Colony Village/New Bern -- 346,330 3,036,956 1,128,131
Copper Mill/Durham -- 1,548,280 16,066,720 0
Cumberland Trace/Fayetteville -- 632,281 7,895,674 38,721
Deerwood Crossing/Winston-Salem -- 1,539,901 7,989,043 123,223
Dominion at Sharon/Charlotte 3,600,000 667,368 4,856,103 42,944
Dominion Courtney Place/Raleigh -- 1,114,600 5,119,259 1,374,559
Dominion Crown Point/Charlotte -- 1,115,261 8,648,865 532,745
Dominion Harris Pond/Charlotte 5,084,983 886,788 6,728,097 377,218
Dominion Mallard Creek/Charlotte 5,444,898 698,860 6,488,061 350,283
Dominion Mallard Green/Charlotte -- 329,300 2,772,449 187,981
Dominion on Lake Lynn/Raleigh -- 1,723,363 5,303,760 621,785
Dominion on Spring Forest/Raleigh -- 1,257,500 8,586,255 1,895,259
Dominion Park Green/Raleigh -- 500,000 4,321,872 880,230
Dominion Peppertree/Charlotte -- 1,546,267 7,699,221 742,936
Dominion Ramsgate/Carrboro 4,800,000 907,605 6,819,154 26,653
Dominion Walnut Creek/Raleigh -- 3,170,290 21,717,407 1,270,955
Dominion Walnut Ridge/Raleigh -- 1,791,215 11,968,852 1,280,839
Dutch Village/Winston-Salem -- 1,197,593 4,826,266 52,578
Emerald Bay/Charlotte -- 626,070 4,722,862 2,288,411
Forest Hills/Wilmington -- 1,028,000 5,420,478 850,950
Grand Oaks/Charlotte -- 446,075 4,463,344 2,592,916
Harbour Pointe/Raleigh -- 1,898,740 7,101,260 0
Lake Brandt/Greensboro -- 1,546,950 13,489,466 32,148
Liberty Crossing/Jacksonville 1,282,933 840,000 3,873,139 1,760,923
Mill Creek/Wilmington -- 597,248 4,618,561 850,650
Morganton Place/Fayetteville 8,623,694 819,090 13,217,086 10,054
Northwinds/Greensboro 5,600,000 1,072,996 7,454,959 83,735
Park Forest/Greensboro 4,274,909 679,671 5,770,413 39,534
Steeplechase/Greensboro -- 2,268,108 11,230,762 244,976
The Creek/Wilmington -- 417,500 2,506,206 954,805
The Highlands/Charlotte -- 321,400 2,830,346 2,149,703
The Ledges/Winston-Salem -- 492,283 1,561,947 4,701,951
Village At Cliffdale/Fayetteville 10,469,467 941,284 15,498,216 31,761
Westwinds/Greensboro 4,449,000 1,328,214 6,999,442 22,687
Windsor Harbor/Charlotte -- 475,000 3,928,113 2,321,268
Woodberry/Asheville 4,400,000 388,699 6,380,899 46,573
South Carolina
Colonial Villa/Columbia -- 1,014,181 5,100,269 1,236,090
Country Walk/Columbia -- 422,113 3,133,622 1,317,477
Crossroads/Columbia -- 2,074,800 13,760,014 2,068,062
Hunting Ridge/Greenville 3,265,000 449,500 2,246,908 926,709
Forestbrook/Columbia 5,000,000 395,516 2,902,040 1,376,562
Gable Hill/Columbia -- 824,847 5,307,194 778,819
Hampton Forest/Greenville -- 454,140 2,588,388 583,027
Hampton Greene/Columbia 7,567,790 1,363,046 10,118,453 460,796
Heatherwood/Greenville -- 354,566 3,234,105 743,302
Key Pines/Spartanburg -- 601,693 3,773,304 1,287,485
Overlook/Greenville -- 824,600 5,098,194 2,208,772
Patriot Place/Florence 2,200,000 212,500 1,600,757 5,401,626
Plum Chase/Columbia 7,000,000 802,750 3,149,607 4,864,858
Rivergate/Columbia 9,790,671 1,122,500 12,055,625 32,111
Riverwind/Spartanburg -- 802,484 6,386,212 520,553
Somerset/Charleston -- 485,160 4,072,780 738,688
Stonesthrow/Greenville 17,151,000 1,557,015 16,334,483 29,082
St. Andrews Commons/Columbia -- 1,428,826 9,371,378 628,338
St. Andrews/Columbia -- 976,192 6,884,502 746,963
The Landing/Greenville -- 685,000 5,640,176 943,485
The Park/Columbia -- 1,004,072 5,558,436 1,583,298
Waterford/Columbia -- 957,980 6,947,939 779,279
Tennessee
2131 Apartments/Nashville -- 869,860 9,155,185 2,153,807
Briar Club/Memphis -- 1,214,400 6,928,959 1,004,699
Brookridge/Nashville -- 707,508 5,461,251 233,066
Covington Crossing/Memphis -- 1,296,240 3,792,590 1,883,813
Harbour Town/Nashville -- 572,567 3,522,092 458,453
Hickory Run/Nashville -- 1,468,727 11,583,786 531,673
Hickory Pointe/Memphis -- 1,074,424 6,052,020 910,032
Hunters Trace/Memphis 5,805,000 888,440 6,676,552 844,016
Legacy Hill/Nashville 5,183,402 1,147,660 5,867,567 1,008,929
The Lakes/Nashville -- 1,285,657 5,980,197 767,905
Texas
Ashley Oaks/San Antonio c 4,590,782 16,809,218 0
Autumnwood/Dallas c 2,412,180 8,587,820 0
Bluffs/San Antonio d 1,901,146 6,898,854 0
Catalina/Dallas d 1,543,321 5,631,679 0
Chandler's Mill/Corpus Christ d 1,930,120 6,844,880 0
Citiscape/Dallas d 2,092,387 7,432,613 0
Cobblestone/Dallas c 2,925,372 10,527,738 0
Dove Park/Dallas -- 2,309,195 8,690,805 0
Foxfire/Amarillo d 2,240,530 6,259,470 0
Foxfire/Dallas -- 1,968,520 7,231,480 0
High Ridge/Dallas -- 2,370,206 8,829,794 0
Hunters Ridge/Ft. Worth -- 1,613,000 5,837,000 0
Lakeridge/Dallas c 1,631,350 5,668,650 0
Oak Forest/Dallas -- 5,630,740 20,969,260 0
Oak Park/Dallas -- 3,966,129 14,633,871 0
Park Trails/Houston d 1,144,750 4,105,250 0
Pavillion/Dallas -- 4,428,258 16,071,742 0
Pecan Grove/Austin d 1,406,750 5,193,250 0
Preston Oaks/Dallas d 1,783,626 6,416,374 0
Preston Trace/Dallas c 2,195,500 8,304,500 0
Promontory Pointe/San Antonio -- 7,548,219 28,051,781 0
Rock Creek/Dallas c 4,076,680 14,523,320 0
Ryan's Mill/El Paso c 1,522,900 5,277,100 0
Southern Oaks/Ft. Worth -- 1,565,000 5,335,000 0
Summergate/Dallas c 1,171,300 3,928,700 0
Sunflower/San Antonio -- 2,209,000 7,891,000 0
The Creeks/Austin c 1,758,065 6,241,935 0
Timbercreek/Dallas -- 6,860,979 25,089,021 0
Westlake Villas/San Antonio d 2,371,865 8,878,135 0
Wimbledon Court/Dallas c 2,464,600 9,235,400 0
Windridge/Dallas d 3,414,311 12,785,689 0
Woodtrail/Houston d 1,543,000 5,457,000 0
Virginia
Bayberry Commons/Portsmouth -- 516,800 3,485,645 1,249,117
Courthouse Green/Richmond -- 732,050 4,702,353 1,589,688
Craig Manor/Salem -- 282,200 2,419,570 663,635
Dominion English Hills/Richmond -- 1,979,174 11,524,313 3,656,425
Dominion Gayton Crossing/Richmond 3,224,416 825,760 5,147,968 703,698
Dominion Lake Ridge/Woodbridge -- 2,366,061 8,386,439 285,765
Dominion Laurel Springs/Richmond -- 464,480 3,119,716 653,065
Dominion Middle Ridge/Woodbridge -- 3,311,468 13,283,047 181,273
Dominion Olde West/Richmond -- 1,965,097 12,203,965 1,953,772
Dominion West End/ Richmond -- 2,059,252 15,049,088 780,530
Eastwind/Virginia Beach -- 155,000 5,316,738 1,530,234
Forest Lakes at Oyster Point/
Newport News -- 780,117 8,861,878 955,281
Greens at Falls Run/Fredericksburg -- 2,730,722 5,300,203 262,109
Greens at Hollymead/Charlottesville -- 965,114 5,250,374 221,259
Hampton Court/Alexandria -- 7,388,420 4,811,937 1,060,132
Heather Lake/Hampton -- 616,800 3,400,672 2,345,494
Kings Arms/Virginia Beach -- 1,823,983 4,106,710 136,622
Knolls at Newgate/Fairfax -- 1,725,725 3,530,134 973,864
Laurel Ridge/Roanoke 2,920,000 445,400 2,531,357 1,176,569
Manor at England Run/Fredericksburg -- 402,749 6,413,447 1,710,307
Meadow Run/Richmond -- 636,059 3,423,884 1,390,062
Meadowdale Lakes/Richmond 663,665 1,581,671 6,717,237 3,304,632
Northview/Salem -- 171,600 1,238,501 651,043
Parkwood Court/Alexandria 6,045,000 2,482,633 3,813,116 1,764,158
River Road/Ettrick -- 229,699 1,648,394 994,933
Rollingwood/Richmond 2,294,996 777,971 5,058,707 2,164,297
The Melrose/Dumfries 5,312,182 662,000 3,705,404 4,584,687
Timbercreek/Richmond -- 379,000 2,030,525 1,270,441
Twin Rivers/Hopewell -- 149,200 885,671 1,313,959
Woodscape/Newport News -- 798,700 7,209,525 2,260,887
Other
Alvarado/Albuquerque, NM d 1,930,229 7,369,771 0
Bluff Creek/Oklahoma City, OK c 2,172,063 7,602,937 0
Sunset Pointe/Las Vegas, NV -- 4,295,050 15,704,950 0
-----------------------------------------------------------------------
$369,310,458 $323,368,428 $1,504,280,566 $179,962,971
=======================================================================
Real estate under development
New apartment communities
Providence Court/Charlotte, NC -- $ 0 $22,047,803
Dominion Franklin/Nashville, TN -- 2,104,394 462,829
Additions to existing communities
Brantley Pines/Ft. Myers, FL -- 1,051,488 2,332,855
Clear Run/Wilmington, NC -- -- 153,624
Greenway Park II/Phoenix, AZ -- -- 443,500
Manor at England Run/
Fredericksburg, VA -- 1,307,728 593,017
Oak Forest II/Dallas, TX -- -- 2,324,662
Oak Park II/Dallas, TX -- -- 3,214,979
Steeplechase/Greensboro, NC -- 940,000 283,216
Wimbledon II/Dallas, TX -- -- 594,906
-----------------------------------------------------------------
$0 $5,403,610 $32,451,391
=================================================================
Real estate held for disposition
Apartments:
Azalea/Richmond, VA -- $272,522 $2,721,686 $1,130,308
Cedar Point/Raleigh, NC -- 75,400 4,514,435 3,041,472
Heritage Trace/Newport News, $3,900,000 880,000 2,312,285 1,734,353
Summit-on-Park/Charlotte, NC -- 147,000 1,021,602 984,668
Westgate/Spartanburg, SC -- 292,464 1,625,626 6,077
Woodscape/Houston c 1,836,600 6,163,400 --
Shopping Centers/Office &
Industrial Buildings:
Franklin St./Richmond, VA -- 67,900 282,173 60,843
Gloucester Exchange/Gloucester, VA -- 403,688 2,278,553 (2,519)
Hanover Village-Land/Richmond, VA -- 1,623,910 0 0
Meadowdale Office/Richmond, VA -- 240,563 359,913 93,342
The Village/Durham, NC -- 1,355,000 3,814,496 3,535,568
Tri-County Buildings/Bristol, TN -- 275,580 900,281 1,263,115
Willow Oaks/Hampton, VA 3,350,000 402,612 1,211,045 7,247,967
---------------------------------------------------------------------
$7,250,000 $7,873,239 $27,205,495 $19,095,194
=====================================================================
</TABLE>
SCHEDULE III.
Summary of Real Estate Owned
<TABLE>
<CAPTION>
Gross Amount at Which
Carried at Close of Period
Land and Buildings
Land and Total Accumulated
Improvements Improvements (a) Depreciation
------------ ------------ ------------ ------------
<S> <C>
Apartments:
Real estate held for investment
Alabama
Indian Hills/Anniston $455,323 $4,104,806 $4,560,129 $385,752
Three Fountains/Montgomery 1,101,964 7,865,466 8,967,430 760,262
Arkansas
Shadow Lake/Little Rock 2,523,670 8,976,330 11,500,000 b
Turtle Creek/Little Rock 1,913,177 7,086,823 9,000,000 b
Arizona
Greenway Park/Phoenix 1,622,700 5,727,300 7,350,000 b
Sierra Palms/Phoenix 4,638,950 17,361,050 22,000,000 b
Vista Point/Phoenix 1,587,400 5,612,600 7,200,000 b
Delaware
Dover Country Club/Dover 2,286,692 7,563,207 9,849,899 676,715
Greens at Cedar Chase/Dover 1,643,974 5,110,692 6,754,666 305,822
Florida
Alafaya Woods/Orlando 1,932,238 9,934,527 11,866,765 871,356
Andover Place/Orlando 3,837,349 8,622,170 12,459,519 333,951
Bay Cove/Clearwater 3,107,550 7,811,772 10,919,322 1,390,144
Bay Meadow/Clearwater 2,893,583 9,262,942 12,156,525 27,923
Brantley Pines/Ft. Myers 1,346,923 6,490,265 7,837,188 594,074
Cleary Court/Ft. Lauderdale 2,489,126 8,354,150 10,843,276 581,135
Copperfield/Ft. Lauderdale 4,502,470 20,869,060 25,371,530 1,515,170
Dover Village/Orlando 3,106,452 8,148,290 11,254,742 1,371,027
Fisherman's Village/Orlando 2,573,422 8,352,955 10,926,377 329,573
Foxcroft/Tampa 915,692 4,544,670 5,460,362 807,773
Greentree Place/Jacksonville 1,832,100 12,926,632 14,758,732 1,105,431
Hunters Ridge/Plant City 2,756,175 11,425,394 14,181,569 655,813
Lake Washington Downs/Melbourne 1,612,310 5,886,665 7,498,975 813,930
Lakeside North/Orlando 1,635,640 12,750,203 14,385,843 1,308,028
Lakewood Place/Tampa 1,524,190 11,099,414 12,623,604 1,174,795
Los Altos/Orlando 2,823,107 12,387,464 15,210,571 125,724
Mallards of Wedgewood/Lakeland 1,163,543 7,830,574 8,994,117 420,830
Mediterranean Village/Miami 2,232,762 12,492,661 14,725,423 960,157
Orange Orlando/Orlando 1,393,000 3,177,053 4,570,053 706,253
Palm Grove/Tampa 788,753 5,784,073 6,572,826 695,370
Pinebrook/Clearwater 1,868,577 4,439,294 6,307,871 759,933
Regatta Shores/Orlando 1,259,449 7,485,079 8,744,528 840,182
Santa Barbara Landing/Naples 1,437,007 8,541,811 9,978,818 796,626
Seabrook/Orlando 2,046,539 4,863,447 6,909,986 201,405
Summit West/Tampa 2,375,646 5,938,161 8,313,807 1,051,261
The Antlers/Jacksonville 4,094,879 11,842,705 15,937,584 313,917
The Groves/Daytona Beach 918,648 5,153,342 6,071,990 213,946
University Club/Ft. Lauderdale 1,479,721 7,196,266 8,675,987 350,257
Village at Old Tampa Bay/Tampa 1,989,172 11,689,291 13,678,463 1,449,168
Vinyards/Orlando 2,220,553 12,498,153 14,718,706 1,104,512
Westland Park/Jacksonville 1,890,261 15,125,280 17,015,541 375,573
Georgia
Colony of Stone Mountain/Atlanta 3,889,619 8,291,574 12,181,193 3,003,390
Crescent Square/Atlanta 1,350,612 11,086,289 12,436,901 3,790,830
Dunwoody Pointe/Atlanta 2,787,816 7,629,417 10,417,233 330,087
Griffin Crossing/Atlanta 1,621,096 7,958,288 9,579,384 832,230
Gwinnett Square/Atlanta 2,013,262 8,045,119 10,058,381 492,903
Lake of the Woods/Atlanta 845,305 8,474,530 9,319,835 137,034
River Place/Macon 1,416,470 8,083,364 9,499,834 981,570
Riverwood/Atlanta 2,999,124 11,334,978 14,334,102 242,178
Royal Oaks/Savannah 633,407 10,460,636 11,094,043 962,347
Stanford Village/Atlanta 1,058,379 3,328,494 4,386,873 1,209,213
Maryland
Brittingham Square/Salisbury 725,904 5,135,531 5,861,435 299,346
Dominion at Eden Brook/Columbia 2,448,284 9,908,449 12,356,733 1,521,311
Dominion Constant Friendship/
Baltimore 976,805 4,884,847 5,861,652 288,524
Dominion Great Oaks/Baltimore 3,178,195 10,237,412 13,415,607 1,066,340
Dominion Kings Place/Columbia 1,626,559 7,360,459 8,987,018 1,102,458
Gatewater Landing/Glen Burnie 2,120,940 6,914,413 9,035,353 1,142,730
Greens at Cross Court/Easton 1,271,600 4,840,818 6,112,418 307,384
Greens at Hilton Run/Lexington Park 2,916,420 10,810,579 13,726,999 639,171
Greens at Schumaker Pond/Salisbury 779,464 6,432,408 7,211,872 373,433
Holly Tree Park/Waldorf 1,715,724 5,765,157 7,480,881 538,616
Twin Coves/Baltimore 1,019,290 3,534,782 4,554,072 332,942
Woodside/Baltimore 3,394,353 11,422,278 14,816,631 1,164,162
North Carolina
Beechwood/Greensboro 1,563,539 6,400,115 7,963,654 781,034
Bramblewood/Goldsboro 535,559 4,077,183 4,612,742 1,931,969
Brynn Marr/Jacksonville 565,833 4,883,175 5,449,008 2,314,640
Canterbury Woods/Charlotte 549,477 6,688,741 7,238,218 2,910,481
Cape Harbor/Wilmington 1,898,231 18,132,350 20,030,581 294,385
Chateau Village/Gastonia 1,062,604 7,016,923 8,079,527 135,070
Cinnamon Ridge/Raleigh 1,268,513 7,332,462 8,600,975 3,146,897
Clear Run/Wilmington 1,194,874 12,831,689 14,026,563 909,611
Colony Village/New Bern 509,493 4,001,924 4,511,417 1,990,694
Copper Mill/Durham 1,548,280 16,066,720 17,615,000 b
Cumberland Trace/Fayetteville 632,281 7,934,395 8,566,676 120,822
Deerwood Crossing/Winston-Salem 1,544,293 8,107,874 9,652,167 143,019
Dominion at Sharon/Charlotte 673,103 4,893,312 5,566,415 77,845
Dominion Courtney Place/Raleigh 1,283,049 6,325,369 7,608,418 860,898
Dominion Crown Point/Charlotte 1,185,798 9,111,073 10,296,871 873,403
Dominion Harris Pond/Charlotte 960,874 7,031,229 7,992,103 615,204
Dominion Mallard Creek/Charlotte 791,565 6,745,639 7,537,204 586,773
Dominion Mallard Green/Charlotte 449,263 2,840,467 3,289,730 259,734
Dominion on Lake Lynn/Raleigh 1,869,072 5,779,836 7,648,908 1,174,624
Dominion on Spring Forest/Raleigh 1,413,358 10,325,656 11,739,014 2,716,500
Dominion Park Green/Raleigh 561,307 5,140,795 5,702,102 1,282,447
Dominion Peppertree/Charlotte 1,625,076 8,363,348 9,988,424 1,067,707
Dominion Ramsgate/Carrboro 916,463 6,836,949 7,753,412 97,293
Dominion Walnut Creek/Raleigh 3,459,239 22,699,413 26,158,652 2,253,480
Dominion Walnut Ridge/Raleigh 2,024,559 13,016,347 15,040,906 1,358,274
Dutch Village/Winston-Salem 1,197,593 4,878,844 6,076,437 91,957
Emerald Bay/Charlotte 1,169,926 6,467,417 7,637,343 2,397,123
Forest Hills/Wilmington 1,137,458 6,161,970 7,299,428 1,129,788
Grand Oaks/Charlotte 884,191 6,618,144 7,502,335 3,451,413
Harbour Pointe/Raleigh 1,898,740 7,101,260 9,000,000 b
Lake Brandt/Greensboro 1,569,960 13,498,604 15,068,564 215,749
Liberty Crossing/Jacksonville 1,190,846 5,283,216 6,474,062 1,875,524
Mill Creek/Wilmington 800,593 5,265,866 6,066,459 1,221,714
Morganton Place/Fayetteville 819,090 13,227,140 14,046,230 184,505
Northwinds/Greensboro 1,073,571 7,538,119 8,611,690 116,788
Park Forest/Greensboro 691,467 5,798,151 6,489,618 69,311
Steeplechase/Greensboro 2,303,522 11,440,324 13,743,846 334,631
The Creek/Wilmington 459,772 3,418,739 3,878,511 764,080
The Highlands/Charlotte 615,159 4,686,290 5,301,449 2,522,958
The Ledges/Winston-Salem 1,195,204 5,560,977 6,756,181 3,435,325
Village At Cliffdale/Fayetteville 949,855 15,521,406 16,471,261 218,910
Westwinds/Greensboro 1,328,214 7,022,129 8,350,343 114,937
Windsor Harbor/Charlotte 895,750 5,828,631 6,724,381 2,073,212
Woodberry/Asheville 388,699 6,427,472 6,816,171 97,915
South Carolina
Colonial Villa/Columbia 1,378,149 5,972,391 7,350,540 1,083,928
Country Walk/Columbia 686,979 4,186,233 4,873,212 1,269,676
Crossroads/Columbia 2,403,190 15,499,686 17,902,876 1,388,998
Hunting Ridge/Greenville 605,610 3,017,507 3,623,117 277,577
Forestbrook/Columbia 572,479 4,101,639 4,674,118 716,610
Gable Hill/Columbia 1,053,085 5,857,775 6,910,860 1,683,206
Hampton Forest/Greenville 593,097 3,032,458 3,625,555 332,004
Hampton Greene/Columbia 1,579,958 10,362,337 11,942,295 918,397
Heatherwood/Greenville 436,200 3,895,773 4,331,973 597,117
Key Pines/Spartanburg 708,961 4,953,521 5,662,482 1,022,918
Overlook/Greenville 1,305,749 6,825,817 8,131,566 675,388
Patriot Place/Florence 1,357,867 5,857,016 7,214,883 2,595,003
Plum Chase/Columbia 1,094,325 7,722,890 8,817,215 2,652,113
Rivergate/Columbia 1,125,594 12,084,642 13,210,236 179,753
Riverwind/Spartanburg 896,651 6,812,598 7,709,249 862,925
Somerset/Charleston 638,107 4,658,521 5,296,628 428,230
Stonesthrow/Greenville 1,557,015 16,363,565 17,920,580 261,795
St. Andrews Commons/Columbia 1,573,241 9,855,301 11,428,542 1,549,082
St. Andrews/Columbia 1,125,264 7,482,393 8,607,657 656,039
The Landing/Greenville 954,780 6,313,881 7,268,661 589,529
The Park/Columbia 1,354,416 6,791,390 8,145,806 618,013
Waterford/Columbia 1,198,194 7,487,004 8,685,198 739,911
Tennessee
2131 Apartments/Nashville 1,079,766 11,099,086 12,178,852 1,600,014
Briar Club/Memphis 1,370,069 7,777,989 9,148,058 732,908
Brookridge/Nashville 732,962 5,668,863 6,401,825 181,043
Covington Crossing/Memphis 1,705,278 5,267,365 6,972,643 543,841
Harbour Town/Nashville 703,367 3,849,745 4,553,112 515,874
Hickory Run/Nashville 1,590,842 11,993,344 13,584,186 431,403
Hickory Pointe/Memphis 1,428,838 6,607,638 8,036,476 503,547
Hunters Trace/Memphis 1,015,305 7,393,703 8,409,008 642,417
Legacy Hill/Nashville 1,212,143 6,812,013 8,024,156 259,426
The Lakes/Nashville 1,421,522 6,612,237 8,033,759 969,797
Texas
Ashley Oaks/San Antonio 4,590,782 16,809,218 21,400,000 b
Autumnwood/Dallas 2,412,180 8,587,820 11,000,000 b
Bluffs/San Antonio 1,901,146 6,898,854 8,800,000 b
Catalina/Dallas 1,543,321 5,631,679 7,175,000 b
Chandler's Mill/Corpus Christi 1,930,120 6,844,880 8,775,000 b
Citiscape/Dallas 2,092,387 7,432,613 9,525,000 b
Cobblestone/Dallas 2,925,372 10,527,738 13,453,110 b
Dove Park/Dallas 2,309,195 8,690,805 11,000,000 b
Foxfire/Amarillo 2,240,530 6,259,470 8,500,000 b
Foxfire/Dallas 1,968,520 7,231,480 9,200,000 b
High Ridge/Dallas 2,370,206 8,829,794 11,200,000 b
Hunters Ridge/Ft. Worth 1,613,000 5,837,000 7,450,000 b
Lakeridge/Dallas 1,631,350 5,668,650 7,300,000 b
Oak Forest/Dallas 5,630,740 20,969,260 26,600,000 b
Oak Park/Dallas 3,966,129 14,633,871 18,600,000 b
Park Trails/Houston 1,144,750 4,105,250 5,250,000 b
Pavillion/Dallas 4,428,258 16,071,742 20,500,000 b
Pecan Grove/Austin 1,406,750 5,193,250 6,600,000 b
Preston Oaks/Dallas 1,783,626 6,416,374 8,200,000 b
Preston Trace/Dallas 2,195,500 8,304,500 10,500,000 b
Promontory Pointe/San Antonio 7,548,219 28,051,781 35,600,000 b
Rock Creek/Dallas 4,076,680 14,523,320 18,600,000 b
Ryan's Mill/El Paso 1,522,900 5,277,100 6,800,000 b
Southern Oaks/Ft. Worth 1,565,000 5,335,000 6,900,000 b
Summergate/Dallas 1,171,300 3,928,700 5,100,000 b
Sunflower/San Antonio 2,209,000 7,891,000 10,100,000 b
The Creeks/Austin 1,758,065 6,241,935 8,000,000 b
Timbercreek/Dallas 6,860,979 25,089,021 31,950,000 b
Westlake Villas/San Antonio 2,371,865 8,878,135 11,250,000 b
Wimbledon Court/Dallas 2,464,600 9,235,400 11,700,000 b
Windridge/Dallas 3,414,311 12,785,689 16,200,000 b
Woodtrail/Houston 1,543,000 5,457,000 7,000,000 b
Virginia
Bayberry Commons/Portsmouth 724,027 4,527,535 5,251,562 1,746,690
Courthouse Green/Richmond 979,146 6,044,945 7,024,091 2,780,862
Craig Manor/Salem 355,236 3,010,169 3,365,405 1,135,241
Dominion English Hills/Richmond 2,496,645 14,663,267 17,159,912 3,490,178
Dominion Gayton Crossing/Richmond 890,069 5,787,357 6,677,426 316,643
Dominion Lake Ridge/Woodbridge 2,426,281 8,611,984 11,038,265 289,535
Dominion Laurel Springs/Richmond 564,660 3,672,601 4,237,261 955,472
Dominion Middle Ridge/Woodbridge 3,357,199 13,418,589 16,775,788 271,788
Dominion Olde West/Richmond 2,314,529 13,808,305 16,122,834 5,256,563
Dominion West End/ Richmond 2,179,987 15,708,883 17,888,870 569,999
Eastwind/Virginia Beach 324,361 6,677,611 7,001,972 2,437,239
Forest Lakes at Oyster Point/
Newport News 1,038,762 9,558,514 10,597,276 487,103
Greens at Falls Run/Fredericksburg 2,776,321 5,516,713 8,293,034 335,200
Greens at Hollymead/Charlotte 1,021,155 5,415,592 6,436,747 317,027
Hampton Court/Alexandria 7,587,189 5,673,300 13,260,489 933,132
Heather Lake/Hampton 911,499 5,451,467 6,362,966 3,509,340
Kings Arms/Virginia Beach 1,817,984 4,249,331 6,067,315 71,669
Knolls at Newgate/Fairfax 1,769,257 4,460,466 6,229,723 474,727
Laurel Ridge/Roanoke 655,267 3,498,059 4,153,326 1,526,049
Manor at England Run/Fredericksburg 1,766,331 6,760,172 8,526,503 364,865
Meadow Run/Richmond 846,340 4,603,665 5,450,005 2,317,191
Meadowdale Lakes/Richmond 2,204,827 9,398,713 11,603,540 4,823,658
Northview/Salem 229,844 1,831,300 2,061,144 1,158,754
Parkwood Court/Alexandria 2,610,009 5,449,898 8,059,907 818,352
River Road/Ettrick 326,726 2,546,300 2,873,026 1,495,191
Rollingwood/Richmond 1,054,957 6,946,018 8,000,975 3,517,823
The Melrose/Dumfries 1,336,997 7,615,094 8,952,091 3,638,135
Timbercreek/Richmond 536,692 3,143,274 3,679,966 1,854,180
Twin Rivers/Hopewell 359,092 1,989,738 2,348,830 1,356,394
Woodscape/Newport News 1,040,926 9,228,186 10,269,112 3,213,350
Other
Alvarado/Albuquerque, NM 1,930,229 7,369,771 9,300,000 b
Bluff Creek/Oklahoma City, OK 2,172,063 7,602,937 9,775,000 b
Sunset Pointe/Las Vegas, NV 4,295,050 15,704,950 20,000,000 b
---------------------------------------------------------------------
$353,213,069 $1,654,398,896 $2,007,611,965 $173,291,463
=====================================================================
Real estate under development
New apartment communities
Providence Court/Charlotte, NC $ 0 $22,047,803 $22,047,803 $ 0
Dominion Franklin/Nashville, TN 2,104,395 462,828 2,567,223 0
Additions to existing communities
Brantley Pines/ Fort Myers, FL 1,051,488 2,332,855 3,384,343 0
Clear Run/Wilmington, NC 0 153,624 153,624 0
Greenway Park II/Phoenix, AZ 0 443,500 443,500 0
Manor at England Run/Fredericksburg 1,307,728 593,017 1,900,745 0
Oak Forest II/Dallas, TX 0 2,324,662 2,324,662 0
Oak Park II/Dallas, TX 0 3,214,979 3,214,979 0
Steeplechase/Greensboro, NC 940,000 283,216 1,223,216 0
Wimbledon II/Dallas, TX 0 594,906 594,906 0
----------- ---------- ----------- ----------
5,403,611 32,451,390 37,855,001 0
========= ========== =========== ==========
Real estate held for disposition
Apartments:
Azalea/Richmond, VA $409,606 $3,714,910 $4,124,516 $1,650,368
Cedar Point/Raleigh, NC 236,422 7,394,885 7,631,307 3,455,287
Heritage Trace/Newport News, VA 1,200,782 3,725,856 4,926,638 1,612,957
Summit-on-Park/Charlotte, NC 246,626 1,906,644 2,153,270 1,091,746
Westgate/Spartanburg, SC 292,464 1,631,703 1,924,167 9,899
Woodscape/Houston 1,836,600 6,163,400 8,000,000 b
Shopping Centers/Office &
Industrial Buildings:
Franklin St./Richmond, VA 67,900 343,016 410,916 132,421
Gloucester Exchange/Gloucester 531,881 2,147,841 2,679,722 757,307
Hanover Village-Land/Richmond, VA 1,103,600 520,310 1,623,910 10,180
Meadowdale Office/Richmond, VA 258,144 435,674 693,818 300,034
The Village/Durham, NC 2,179,259 6,525,805 8,705,064 2,138,586
Tri-County Buildings/Bristol, TN 364,123 2,074,853 2,438,976 733,820
Willow Oaks/Hampton, VA 2,957,929 5,903,695 8,861,624 2,725,268
--------------------------------------------------------------------
$11,685,336 $42,488,592 $54,173,928 $14,617,873
====================================================================
</TABLE>
<TABLE>
<CAPTION>
Depreciable
Life of
Date of Date Building
Construction Acquired Component
------------ -------- -----------
<S> <C>
Apartments:
Real estate held for investment
Alabama
Indian Hills/Anniston 1975 07/01/94 35 yrs.
Three Fountains/Montgomery 1973 07/01/94 35 yrs.
Arkansas
Shadow Lake/Little Rock 1984 12/31/96 35 yrs.
Turtle Creek/Little Rock 1985 12/31/96 35 yrs.
Arizona
Greenway Park/Phoenix 1986 12/31/96 35 yrs.
Sierra Palms/Phoenix 1996 12/31/96 35 yrs.
Vista Point/Phoenix 1986 12/31/96 35 yrs.
Delaware
Dover Country Club/Dover 1970 07/01/94 35 yrs.
Greens at Cedar Chase/Dover 1988 05/04/95 35 yrs.
Florida
Alafaya Woods/Orlando 1988/90 10/21/94 35 yrs.
Andover Place/Orlando 1988 09/29/95 & 09/30/96 35 yrs.
Bay Cove/Clearwater 1972 12/16/92 35 yrs.
Bay Meadow/Clearwater 1985 12/09/96 35 yrs.
Brantley Pines/Ft. Myers 1986 08/11/94 35 yrs.
Cleary Court/Ft. Lauderdale 1984/85 11/30/94 35 yrs.
Copperfield/Ft. Lauderdale 1991 09/21/94 35 yrs.
Dover Village/Orlando 1981 03/31/93 35 yrs.
Fisherman's Village/Orlando 1984 12/29/95 35 yrs.
Foxcroft/Tampa 1972 01/28/93 35 yrs.
Greentree Place/Jacksonville 1986 07/22/94 35 yrs.
Hunters Ridge/Plant City 1992 06/30/95 35 yrs.
Lake Washington Downs/Melbourne 1984 09/24/93 35 yrs.
Lakeside North/Orlando 1984 04/14/94 35 yrs.
Lakewood Place/Tampa 1986 03/10/94 35 yrs.
Los Altos/Orlando 1990 10/31/96 35 yrs.
Mallards of Wedgewood/Lakeland 1985 07/27/95 35 yrs.
Mediterranean Village/Miami 1989 09/30/94 35 yrs.
Orange Orlando/Orlando 1971 01/21/93 35 yrs.
Palm Grove/Tampa 1969/71 04/15/94 35 yrs.
Pinebrook/Clearwater 1977 09/28/93 35 yrs.
Regatta Shores/Orlando 1988 06/30/94 35 yrs.
Santa Barbara Landing/Naples 1987 09/01/94 35 yrs.
Seabrook/Orlando 1984 02/20/96 35 yrs.
Summit West/Tampa 1972 12/16/92 35 yrs.
The Antlers/Jacksonville 1985 05/28/96 35 yrs.
The Groves/Daytona Beach 1989 12/13/95 35 yrs.
University Club/Ft. Lauderdale 1988 09/26/95 35 yrs.
Village at Old Tampa Bay/Tampa 1986 12/08/93 35 yrs.
Vinyards/Orlando 1984/86 10/31/94 35 yrs.
Westland Park/Jacksonville 1990 05/09/96 35 yrs.
Georgia
Colony of Stone Mountain/Atlanta 1970/72 06/12/90 35 yrs.
Crescent Square/Atlanta 1970 03/22/89 35 yrs.
Dunwoody Pointe/Atlanta 1980 10/24/95 35 yrs.
Griffin Crossing/Atlanta 1987/89 06/08/94 35 yrs.
Gwinnett Square/Atlanta 1985 03/29/95 35 yrs.
Lake of the Woods/Atlanta 1989 08/15/96 35 yrs.
River Place/Macon 1988 04/08/94 35 yrs.
Riverwood/Atlanta 1980 06/26/96 35 yrs.
Royal Oaks/Savannah 1980 07/01/94 35 yrs.
Stanford Village/Atlanta 1985 09/26/89 35 yrs.
Maryland
Brittingham Square/Salisbury 1991 05/04/95 35 yrs.
Dominion at Eden Brook/Columbia 1984 12/29/92 35 yrs.
Dominion Constant Friendship/Baltimore 1990 05/04/95 35 yrs.
Dominion Great Oaks/Baltimore 1974 07/01/94 35 yrs.
Dominion Kings Place/Columbia 1983 12/29/92 35 yrs.
Gatewater Landing/Glen Burnie 1970 12/16/92 35 yrs.
Greens at Cross Court/Easton 1987 05/04/95 35 yrs.
Greens at Hilton Run/Lexington 1988 05/04/95 35 yrs.
Greens at Schumaker Pond/Salisbury 1988 05/04/95 35 yrs.
Holly Tree Park/Waldorf 1973 07/01/94 35 yrs.
Twin Coves/Baltimore 1974 08/16/94 35 yrs.
Woodside/Baltimore 1966 08/16/94 35 yrs.
North Carolina
Beechwood/Greensboro 1985 12/22/93 35 yrs.
Bramblewood/Goldsboro 1980/82 12/31/84 35 yrs.
Brynn Marr/Jacksonville 1973/77 12/31/84 35 yrs.
Canterbury Woods/Charlotte 1968/70 12/18/85 35 yrs.
Cape Harbor/Wilmington 1996 08/15/96 35 yrs.
Chateau Village/Gastonia 1974 08/15/96 35 yrs.
Cinnamon Ridge/Raleigh 1968/70 12/01/89 35 yrs.
Clear Run/Wilmington 1987/89 07/22/94 35 yrs.
Colony Village/New Bern 1972/74 12/31/84 35 yrs.
Copper Mill/Durham 1997 12/31/96 35 yrs.
Cumberland Trace/Fayetteville 1973 08/15/96 35 yrs.
Deerwood Crossing/Winston-Salem 1973 08/15/96 35 yrs.
Dominion at Sharon/Charlotte 1984 08/15/96 35 yrs.
Dominion Courtney Place/Raleigh 1979/81 07/08/93 35 yrs.
Dominion Crown Point/Charlotte 1987 07/01/94 35 yrs.
Dominion Harris Pond/Charlotte 1987 07/01/94 35 yrs.
Dominion Mallard Creek/Charlotte 1989 08/16/94 35 yrs.
Dominion Mallard Green/Charlotte 1985 07/01/94 35 yrs.
Dominion on Lake Lynn/Raleigh 1986 12/01/92 35 yrs.
Dominion on Spring Forest/Raleigh 1978/81 05/21/91 35 yrs.
Dominion Park Green/Raleigh 1987 09/27/91 35 yrs.
Dominion Peppertree/Charlotte 1987 12/14/93 35 yrs.
Dominion Ramsgate/Carrboro 1988 08/15/96 35 yrs.
Dominion Walnut Creek/Raleigh 1985/86 05/17/94 35 yrs.
Dominion Walnut Ridge/Raleigh 1982/84 03/04/94 35 yrs.
Dutch Village/Winston-Salem 1970 08/15/96 35 yrs.
Emerald Bay/Charlotte 1972 02/06/90 35 yrs.
Forest Hills/Wilmington 1964/69 06/30/92 35 yrs.
Grand Oaks/Charlotte 1966/67 05/01/84 35 yrs.
Harbour Pointe/Raleigh 1984 12/31/96 35 yrs.
Lake Brandt/Greensboro 1995 08/15/96 35 yrs.
Liberty Crossing/Jacksonville 1972/74 11/30/90 35 yrs.
Mill Creek/Wilmington 1986 09/30/91 35 yrs.
Morganton Place/Fayetteville 1994 08/15/96 35 yrs.
Northwinds/Greensboro 1989 08/15/96 35 yrs.
Park Forest/Greensboro 1987 09/26/96 35 yrs.
Steeplechase/Greensboro 1990 03/07/96 35 yrs.
The Creek/Wilmington 1973 06/30/92 35 yrs.
The Highlands/Charlotte 1970 01/17/84 35 yrs.
The Ledges/Winston-Salem 1959 08/13/86 35 yrs.
Village At Cliffdale/Fayetteville 1992 08/15/96 35 yrs.
Westwinds/Greensboro 1986 08/15/96 35 yrs.
Windsor Harbor/Charlotte 1971 01/13/89 35 yrs.
Woodberry/Asheville 1987 08/15/96 35 yrs.
South Carolina
Colonial Villa/Columbia 1974 09/16/92 35 yrs.
Country Walk/Columbia 1974 12/19/91 35 yrs.
Crossroads/Columbia 1977/84 07/01/94 35 yrs.
Hunting Ridge/Greenville 1972 11/01/94 35 yrs.
Forestbrook/Columbia 1974 07/01/93 35 yrs.
Gable Hill/Columbia 1985 12/04/89 35 yrs.
Hampton Forest/Greenville 1968 08/16/94 35 yrs.
Hampton Greene/Columbia 1990 08/19/94 35 yrs.
Heatherwood/Greenville 1978 09/30/93 35 yrs.
Key Pines/Spartanburg 1974 09/25/92 35 yrs.
Overlook/Greenville 1976 07/01/94 35 yrs.
Patriot Place/Florence 1974 10/23/85 35 yrs.
Plum Chase/Columbia 1974 01/04/91 35 yrs.
Rivergate/Columbia 1989 08/15/96 35 yrs.
Riverwind/Spartanburg 1987 12/31/93 35 yrs.
Somerset/Charleston 1979 07/01/94 35 yrs.
Stonesthrow/Greenville 1993 08/15/96 35 yrs.
St. Andrews Commons/Columbia 1986 05/20/93 35 yrs.
St. Andrews/Columbia 1972 07/01/94 35 yrs.
The Landing/Greenville 1976 07/01/94 35 yrs.
The Park/Columbia 1975/77 07/01/94 35 yrs.
Waterford/Columbia 1985 07/01/94 35 yrs.
Tennessee
2131 Apartments/Nashville 1972 12/16/92 35 yrs.
Briar Club/Memphis 1987 10/14/94 35 yrs.
Brookridge/Nashville 1986 03/28/96 35 yrs.
Covington Crossing/Memphis 1974 10/14/94 35 yrs.
Harbour Town/Nashville 1974 12/10/93 35 yrs.
Hickory Run/Nashville 1989 12/29/95 35 yrs.
Hickory Pointe/Memphis 1985 02/10/95 35 yrs.
Hunters Trace/Memphis 1986 10/14/94 35 yrs.
Legacy Hill/Nashville 1977 11/06/95 35 yrs.
The Lakes/Nashville 1986 09/15/93 35 yrs.
Texas
Ashley Oaks/San Antonio 1993 12/31/96 35 yrs.
Autumnwood/Dallas 1984 12/31/96 35 yrs.
Bluffs/San Antonio 1978 12/31/96 35 yrs.
Catalina/Dallas 1982 12/31/96 35 yrs.
Chandler's Mill/Corpus Christi 1984 12/31/96 35 yrs.
Citiscape/Dallas 1973 12/31/96 35 yrs.
Cobblestone/Dallas 1984 12/31/96 35 yrs.
Dove Park/Dallas 1984 12/31/96 35 yrs.
Foxfire/Amarillo 1978 12/31/96 35 yrs.
Foxfire/Dallas 1978 12/31/96 35 yrs.
High Ridge/Dallas 1979 12/31/96 35 yrs.
Hunters Ridge/Ft. Worth 1992 12/31/96 35 yrs.
Lakeridge/Dallas 1984 12/31/96 35 yrs.
Oak Forest/Dallas 1996 12/31/96 35 yrs.
Oak Park/Dallas 1982 12/31/96 35 yrs.
Park Trails/Houston 1983 12/31/96 35 yrs.
Pavillion/Dallas 1979 12/31/96 35 yrs.
Pecan Grove/Austin 1984 12/31/96 35 yrs.
Preston Oaks/Dallas 1980 12/31/96 35 yrs.
Preston Trace/Dallas 1984 12/31/96 35 yrs.
Promontory Pointe/San Antonio 1997 12/31/96 35 yrs.
Rock Creek/Dallas 1979 12/31/96 35 yrs.
Ryan's Mill/El Paso 1985 12/31/96 35 yrs.
Southern Oaks/Ft. Worth 1982 12/31/96 35 yrs.
Summergate/Dallas 1984 12/31/96 35 yrs.
Sunflower/San Antonio 1974 12/31/96 35 yrs.
The Creeks/Austin 1975 12/31/96 35 yrs.
Timbercreek/Dallas 1977 12/31/96 35 yrs.
Westlake Villas/San Antonio 1985 12/31/96 35 yrs.
Wimbledon Court/Dallas 1983 12/31/96 35 yrs.
Windridge/Dallas 1980 12/31/96 35 yrs.
Woodtrail/Houston 1978 12/31/96 35 yrs.
Virginia
Bayberry Commons/Portsmouth 1973/74 04/07/88 35 yrs.
Courthouse Green/Richmond 1974/78 12/31/84 35 yrs.
Craig Manor/Salem 1975 11/06/87 35 yrs.
Dominion English Hills/Richmond 1969/76 12/06/91 35 yrs.
Dominion Gayton Crossing/Richmond 1973 09/28/95 35 yrs.
Dominion Lake Ridge/Woodbridge 1987 02/23/96 35 yrs.
Dominion Laurel Springs/Richmond 1972 09/06/91 35 yrs.
Dominion Middle Ridge/Woodbridge 1990 06/25/96 35 yrs.
Dominion Olde West/Richmond 1978/82/85/87 12/31/84 & 8/27/91 35 yrs.
Dominion West End/ Richmond 1989 12/28/95 35 yrs.
Eastwind/Virginia Beach 1970 04/04/88 35 yrs.
Forest Lakes at Oyster Point/
Newport News 1986 08/15/95 35 yrs.
Greens at Falls Run/Fredericksburg 1989 05/04/95 35 yrs.
Greens at Hollymead/Charlotte, NC 1990 05/04/95 35 yrs.
Hampton Court/Alexandria 1967 02/19/93 35 yrs.
Heather Lake/Hampton 1972/74 03/01/80 35 yrs.
Kings Arms/Virginia Beach 1966 08/15/96 35 yrs.
Knolls at Newgate/Fairfax 1972 07/01/94 35 yrs.
Laurel Ridge/Roanoke 1970/72 05/17/88 35 yrs.
Manor at England Run/Fredericksburg 1990 05/04/95 35 yrs.
Meadow Run/Richmond 1973/74 12/31/84 35 yrs.
Meadowdale Lakes/Richmond 1967/71 12/31/84 35 yrs.
Northview/Salem 1969 09/29/78 35 yrs.
Parkwood Court/Alexandria 1964 06/30/93 35 yrs.
River Road/Ettrick 1973/74 08/31/81 35 yrs.
Rollingwood/Richmond 1974/78 12/31/84 35 yrs.
The Melrose/Dumfries 1951 12/11/85 35 yrs.
Timbercreek/Richmond 1969 08/31/83 35 yrs.
Twin Rivers/Hopewell 1972 01/06/82 35 yrs.
Woodscape/Newport News 1974/76 12/29/87 35 yrs.
Other
Alvarado/Albuquerque, NM 1984 12/31/96 35 yrs.
Bluff Creek/Oklahoma City, OK 1984 12/31/96 35 yrs.
Sunset Pointe/Las Vegas, NV 1990 12/31/96 35 yrs.
Real estate under development
New apartment communities
Providence Court/Charlotte, NC
Dominion Franklin/Nashville, TN
Additions to existing communities
Brantley Pines/ Ft. Myers, FL
Clear Run/Wilmington, NC
Greenway Park II/Phoenix, AZ
Manor at England Run/Fredericksburg
Oak Forest II/Dallas, TX
Oak Park II/Dallas, TX
Steeplechase/Greensboro, NC
Wimbledon II/Dallas, TX
Real estate held for disposition
Apartments:
Azalea/Richmond, VA 1967 12/31/84 35 yrs.
Cedar Point/Raleigh, NC 1972 12/18/85 35 yrs.
Heritage Trace/Newport News, 1973 06/30/89 35 yrs.
Summit-on-Park/Charlotte, NC 1963 01/17/84 35 yrs.
Westgate/Spartanburg, SC 1976 08/15/96 35 yrs.
Woodscape/Houston 1980 12/31/96 35 yrs.
Shopping Centers/Office &
Industrial Buildings:
Franklin St./Richmond, VA 1890 07/01/86 35 yrs.
Gloucester Exchange/Gloucester 1974 11/12/87 35 yrs.
Hanover Village-Land/Richmond -- 06/30/86 35 yrs.
Meadowdale Office/Richmond, VA 1976/82 12/31/84 35 yrs.
The Village/Durham, NC 1965 08/28/86 35 yrs.
Tri-County Buildings/Bristol, TN 1976/79 01/21/81 35 yrs.
Willow Oaks/Hampton, VA 1968/74 08/01/84 35 yrs.
</TABLE>
(a) The aggregate cost for federal income tax purposes was approximately
$1.932 billion and $1.192 billion at December 31, 1996 and 1995,
respectively.
(b) These properties were purchased at the close of business on 12/31/96 in
connection with the statutory merger (the "Merger") with South West Property
Trust Inc. The Merger has been accounted for as a purchase in accordance
with Accounting Principles Board Opinion No. 16.
(c) Represents a $46,289,018 REMIC financing encumbering 13 apartment
communities assumed on December 31, 1996 in connection with the Merger.
(d) Represents a $48,579,058 REMIC financing encumbering 14 apartment
communities assumed on December 31, 1996 in connection with the Merger.
Exhibit 3(b)
AMENDED AND RESTATED BYLAWS
of
UNITED DOMINION REALTY TRUST, INC.
ARTICLE I
Stockholders' and Directors' Meetings
The annual meeting of the stockholders of the corporation shall be held
in May of each year on the date and at the time and place fixed by the Board of
Directors. The date, time and place of all meetings of stockholders shall be
stated in the notice of the meeting. Meetings of the stockholders shall be held
whenever called by the Chairman of the Board, the President, a majority of the
directors or stockholders holding at least 1/10 of the number of shares of stock
entitled to vote then outstanding.
The holders of a majority of the outstanding shares of stock entitled
to vote shall constitute a quorum at any meeting of the stockholders. Less than
a quorum may adjourn the meeting to a fixed time and place, no further notice of
any adjourned meting being required. Each stockholder shall be entitled to one
vote in person or by proxy for each share entitled to vote then outstanding in
his name on the books of the corporation.
The transfer books for shares of stock of the corporation may be closed
by order of the Board of Directors for not exceeding 70 days for the purpose of
determining stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof or entitled to receive payment of any
dividend or in order to make a determination of stockholders for any other
purpose. In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the record date for any such determination of
stockholders, such date to be not more than 70 days preceding the date on which
the particular action requiring such determination of the stockholders is to be
taken.
The Chairman of the Board shall preside over all meetings of the
stockholders. If he is not present, the Vice Chairman of the Board shall
preside. If neither the Chairman of the Board nor the Vice Chairman of the Board
is present, the President shall preside, or, if none be present, a Chairman
shall be elected by the meeting. The Secretary of the corporation shall act as
Secretary of all the meetings, if he be present. If he is not present, the
Chairman shall appoint a Secretary of the meeting. The Chairman of the meeting
may appoint one or more inspectors of the election to determine the
qualification of voters, the validity of proxies and the results of ballots.
1
<PAGE>
ARTICLE II
Board of Directors
The Board of Directors shall be chosen at the annual meeting of the
stockholders or any special meeting held in lieu thereof. The number of
directors shall be thirteen. This number may be increased or decreased at any
time by amendment of this Bylaws, but shall always be a number of not less than
three. Directors need not be stockholders. Directors shall hold office until
removed or until the next annual meeting of the stockholders or until their
successors are elected. A majority of the directors shall constitute a quorum.
Less than a quorum may adjourn the meeting to a fixed time and place, no further
notice of any adjourned meeting being required. A director may not sand for
re-election if he has attained age 70 on or before the date of the annual
meeting at which directors are elected.
The stockholders at any meeting, by a vote of the holders of a majority
of all the shares of stock at the time outstanding and having voting power, may
remove any director and fill the vacancy. Any vacancy arising among the
directors, including a vacancy resulting from an increase by not more than two
in the number of directors, may be filled by the remaining directors unless
sooner filed by the stockholders in meeting.
Meetings of the Board of Directors shall be held at times fixed by
resolution of the Board upon the call of the Chairman of the Board of Directors,
the President or a majority of the members of the Board. Notice of any meeting
not held at a time fixed by a resolution of the Board shall be given to each
director at least two days before the meeting at his residence or business
address or by delivering such notice to him or by telephoning or telegraphing it
to him at least one day before the meeting. Any such notice shall contain the
time and place of the meeting. Meetings may be held without notice if all of the
directors are present or those not present waive notice before or after the
meeting.
ARTICLE III
Executive Committee
The Board of Directors may designate by resolution adopted by a
majority of all the directors two or more of the directors to constitute an
Executive Committee. The Executive Committee, when the Board of Directors is not
in session, may to the extent permitted by law exercise all of the powers of the
Board of Directors. The Executive Committee may make rules for the holding and
conduct of its meetings, the notice thereof required and the keeping of its
records. Directors who are not members of the Executive committee shall be
entitled to notice of and to attend meetings of the Executive Committee but
shall not be entitled to vote or otherwise participate in the proceedings at
such meetings.
2
<PAGE>
ARTICLE IV
Officers
The Board of Directors, promptly after its election in each year, shall
appoint a Chairman of the Board of Directors, a Vice Chairman of the Board of
Directors and a President (all of whom shall be directors) and a Secretary, and
may appoint a Treasurer and one or more Vice Presidents and such other officers
or assistant officers as it may deem proper. Any officer may hold more than one
office. The term of an officer or assistant officer expires at the first meeting
of the Board of Directors held after the annual meeting of the stockholders next
following such officer's or assistant officer's appointment, but notwithstanding
expiration of his term, an officer or assistant officer continues to serve until
removed or until his successor is appointed. Any officer or assistant officer
may be removed at any time with or without cause by the Board of Directors.
Vacancies among the officers and assistant officers shall be filled by the Board
of Directors. The President shall be the chief executive officer of the
corporation. All officers and assistant officers shall have such duties as
generally pertain to their respective offices as well as such powers and duties
as from time to time may be delegated to them by the Board of Directors.
ARTICLE V
Stock Certificates
Each stockholder shall be entitled to a certificate or certificates of
stock in such form as may be approved by the Board of Directors, which shall be
signed manually or by facsimile by the Chairman of the Board, the President or a
Vice President and by the Secretary or an Assistant Secretary or the Treasurer
or an Assistant Treasurer, and which may bear the seal of the corporation or a
facsimile thereof.
All transfers of stock of the corporation shall be made upon its books
by surrender of the certificate for the shares transferred accompanied by an
assignment in writing by the holder and may be accomplished either by the holder
in person or by a duly authorized attorney in fact.
In case of the loss, mutilation or destruction of a certificate of
stock, a duplicate certificate may be issued upon such terms not in conflict
with law as the Board of Directors may prescribe.
The Board of Directors may also appoint one or more transfer agents and
registrars and may require stock certificates to be countersigned by a transfer
agent or registered by a registrar or may require stock certificates to be both
countersigned by a transfer agent and registered by a registrar. If certificates
for stock of the corporation are signed by a transfer agent or by a registrar
(other than the corporation itself or one of its employees), the signature
thereon of the officers of the corporation and the seal of the corporation
thereon may be facsimiles, engraved or printed. In case any officer or officers
who shall have signed, or whose facsimile signature or signatures shall have
been used on, any such certificate or certificates shall cease to be such
officer or officers of the corporation,
3
<PAGE>
whether because of death, resignation or otherwise, before such certificate or
certificates shall have been delivered by the corporation, such certificate or
certificates may nevertheless be issued and delivered as though the person or
persons who signed such certificate or certificates or whose facsimile signature
or signatures shall have been used thereon had not ceased to be such officer or
officers of the corporation.
ARTICLE VI
Seal
The seal of the corporation shall be a flat-faced circular die, of
which there may be any number of counterparts, with the word "SEAL" and the name
of the corporation engraved thereon.
ARTICLE VII
Voting of Stock Held
Unless otherwise provided by a vote of the Board of Directors, the
Chairman of the Board, the President or any Vice President may appoint attorneys
to vote any stock in any other corporation owned by the corporation or may
attend any meeting of the holders of stock of such corporation and vote such
shares in person.
ARTICLE VIII
Fiscal Year
The fiscal year of the corporation shall be the calendar year.
4
Exhibit 4(ii)(h)(4)
RESOLVED, that in accordance with Section 301 of the Indenture, the following
terms of the Notes are hereby established (terms used in these resolutions
having the same definitions as in the Indenture):
(1) The Notes shall constitute a series of Securities having
the title "7 1/4% Notes due January 15, 2007."
(2) The aggregate principal amount of the Notes that may be
authenticated and delivered under the Indenture (except for Notes
authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Notes pursuant to Sections 304, 305,
306, 906, 1107 or 1305 of the Indenture) shall be $125,000,000.
(3) The entire outstanding principal of the Notes shall be
payable on January 15, 2007, subject to prior redemption at the option
of the Company as described in paragraph (6).
(4) The rate at which the Notes shall bear interest shall be 7
1/4% per annum; the date from which such interest shall accrue shall be
January 15, 1997; the Interest Payment Dates on which such interest
will be payable shall be January 15 and July 15 in each year, beginning
July 15, 1997; the Regular Record Dates for the interest payable on the
Notes on any Interest Payment Date shall be the preceding January 1 (in
the case of interest payable on any January 15) and July 1 (in the case
of interest payable on any July 15); and the basis upon which interest
shall be calculated shall be that of a 360-day year consisting of
twelve 30-day months.
(5) The place in addition to the Borough of Manhattan, The
City of New York, where the principal of (and premium and Make-Whole
amount, if any) and interest on the Notes shall be payable and Notes
may be surrendered for registration of transfer or exchange shall be
the Corporate Trust Operations Office of the Trustee at 230 South Tryon
Street, Charlotte, North Carolina 28288. The place in addition to the
Borough of Manhattan, The City of New York, where notices or demands to
or upon the Company in respect of the Notes and this Indenture may be
served shall be the Corporate Trust Office of the Trustee at 901 East
Cary Street, Suite 1700, Richmond, Virginia 23219.
(6) The Notes shall be redeemable, in whole or in part, at the
option of the Company at any time at a Redemption Price equal to the
greater of (i) 100% of the principal amount of such Notes or (ii) as
determined by a Quotation Agent (as defined below), the sum of the
present values of the remaining scheduled payments of principal and
interest thereon discounted to the Redemption Date on a semiannual
basis (assuming a 360-day year consisting of twelve 30-day months) at
the Adjusted Treasury Rate, plus, in each case, accrued interest
thereon to the date of redemption.
<PAGE>
"Adjusted Treasury Rate" means, with respect to any Redemption
Date, the rate per annum equal to the semiannual equivalent yield to
maturity of the Comparable Treasury Issue, assuming a price for the
Comparable Treasury Issue (expressed as a percentage of the principal
amount) equal to the Comparable Treasury Price for such Redemption
Date, plus 0.15%
"Comparable Treasury Issue" means the United States Treasury
security selected by a Quotation Agent as having a maturity comparable
to the remaining term of the Notes to be redeemed that would be
utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of such Notes.
"Quotation Agent" means the Reference Treasury Dealer
appointed by the Trustee after consultation with the Company.
"Reference Treasury Dealer" means (i) Goldman, Sachs & Co. and their
respective successors; provided, however,that if the foregoing shall
cease to be a primary U.S. Government securities dealer in New York
City (a "Primary Treasury Dealer"), the Company shall substitute
therefor another Primary Treasury Dealer; and (ii) any other Primary
Treasury Dealer selected by the Trustee after consultation with the
Company.
"Comparable Treasury Price" means, with respect to any
Redemption Date, (A) the average of the Reference Treasury Dealer
Quotations for such Redemption Date, after excluding the highest and
lowest such Reference Treasury Dealer Quotations, or (B) if the Trustee
obtains fewer than three such Reference Treasury Dealer Quotations, the
average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to
each Reference Treasury Dealer and any Redemption Date, the average, as
determined by the Trustee, of the bid and asked prices for the
Comparable Treasury Issue (expressed in each case as a percentage of
its principal amount) quoted in writing to the Trustee by such
Reference Treasury Dealer at 5:00 p.m. on the third Business Day
preceding such Redemption Date.
(7) Except only to the extent provided in paragraph (6),
payments of neither principal of (and premium or Make-Whole Amount, if
any) nor interest on the Notes shall be determined with reference to an
index, formula or other method.
(8) Neither principal of (and premium or Make-Whole Amount, if
any) nor interest on the Notes shall be payable in a currency other
than that in which they are denominated.
(9) The Notes shall be issuable only as Registered Securities
in permanent global form (without coupons). Beneficial owners of
interests in the permanent global Note may exchange such interests for
Notes of like tenor of any authorized form and denomination only in the
manner provided in Section 305 of the Indenture. DTC shall be the
depositary with respect to the permanent global Note. The form of such
permanent global Note attached hereto as Exhibit A is hereby approved.
<PAGE>
(10) Interest on any Note shall be payable only to the Person
in whose name that Note (or one or more Predecessor Securities thereof)
is registered at the close of business on the Regular Record Date for
such interest.
(11) Sections 1402 and 1403 of the Indenture shall be
applicable to the Notes.
(12) The Notes shall not be issuable in definitive form except
under the circumstances described in Section 305 of the Indenture.
(13) The Company shall not pay Additional Amounts as
contemplated by Section 1011 of the Indenture on the Notes.
Exhibit 4(ii)(h)(5)
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $125,000,000
CUSIP No.: 910197AD4
UNITED DOMINION REALTY TRUST, INC.
7 1/4% NOTE DUE JANUARY 15, 2007
UNITED DOMINION REALTY TRUST, INC., a Virginia corporation (hereinafter
called the "Company," which term shall include any successor corporation under
the Indenture hereinafter referred to), for value received, hereby promises to
pay to CEDE & CO., or registered assigns, upon presentation, the principal sum
of ONE HUNDRED TWENTY FIVE MILLION DOLLARS on January 15, 2007, and to pay
interest on the outstanding principal amount thereon from January 15, 1997, or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, semi-annually in arrears on January 15 and July 15 in each
year, commencing July 15, 1997, at the rate of 7 1/4% per annum, until the
entire principal amount hereof is paid or made available for payment. The
interest so payable, and punctually paid or duly provided for on any Interest
Payment Date will, as provided in the Indenture, be paid to the Person in whose
name this Note (or one or more Predecessor Notes) is registered at the close of
business on the Regular Record Date for such interest which shall be the January
1 or July 1 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date, and may either be paid to the Person in whose name this Note (or
one or more Predecessor Notes) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Notes of this series
not more than 15 days and not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such
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<PAGE>
exchange, all as more fully provided in the Indenture. Payment of the principal
of and interest on this Note will be made at the office or agency of the Company
maintained for that purpose in the City of Richmond, State of Virginia, or
elsewhere as provided in the Indenture, in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts; provided, however, that at the option of the Company
payment of interest may be made by (i) check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register kept for
the Notes pursuant to Section 305 of the Indenture (the "Note Register") or (ii)
transfer to an account of the Person entitled thereto located inside the United
States.
This Note is one of a duly authorized issue of securities of the
Company (herein called the "Notes"), issued and to be issued in one or more
series under an Indenture, dated as of November 1, 1995 (herein called the
"Indenture"), between the Company and First Union National Bank of Virginia
(herein called the "Trustee," which term includes any successor trustee under
the Indenture with respect to the Notes), to which Indenture and all indentures
supplemental thereto reference is hereby made for a statement of the respective
rights, limitations of rights, duties and immunities thereunder of the Company,
the Trustee and the Holders of the Notes and of the terms upon which the Notes
are, and are to be, authenticated and delivered. This Note is one of the series
designated as the "7 1/4% Notes due January 15, 2007," limited in aggregate
principal amount to $125,000,000.
This Note is redeemable, in whole or in part, at the option of the
Company at any time at a Redemption Price equal to the greater of (i) 100% of
the principal amount hereof or (ii) as determined by a Quotation Agent (as
defined below), the sum of the present values of the remaining scheduled
payments of principal and interest hereon discounted to the Redemption Date on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at
the Adjusted Treasury Rate, plus, in each case, accrued interest hereon to the
date of redemption.
"Adjusted Treasury Rate" means, with respect to any Redemption Date,
the rate per annum equal to the semiannual equivalent yield to maturity of the
Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue
(expressed as a percentage of the principal amount) equal to the Comparable
Treasury Price for such Redemption Date, plus 0.15%
"Comparable Treasury Issue" means the United States Treasury security
selected by a Quotation Agent as having a maturity comparable to the remaining
term hereof that would be utilized, at the time of selection and in accordance
with customary financial practice, in pricing new issues of corporate debt
securities of comparable maturity to the remaining term hereof.
"Quotation Agent" means the Reference Treasury Dealer appointed by the
Trustee after consultation with the Company. "Reference Treasury Dealer" means
(i) Goldman, Sachs & Co. and their respective successors; provided, however,that
if the foregoing shall cease to be a primary U.S. Government securities dealer
in New York City (a "Primary Treasury Dealer"), the Company shall substitute
therefor another Primary Treasury Dealer, and (ii) any other Primary Treasury
Dealer selected by the Trustee after consultation with the Company.
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<PAGE>
"Comparable Treasury Price" means, with respect to any Redemption Date,
(A) the average of the Reference Treasury Dealer Quotations for such Redemption
Date, after excluding the highest and lowest such Reference Treasury Dealer
Quotations, or (B) if the Trustee obtains fewer than three such Reference
Treasury Dealer Quotations, the average of all such Quotations.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and any Redemption Date, the average, as determined by
the Trustee, of the bid and asked prices for the Comparable Treasury Issue
(expressed in each case as a percentage of its principal amount) quoted in
writing to the Trustee by such Reference Treasury Dealer at 5:00 p.m. on the
third Business Day preceding such Redemption Date.
Notice of each redemption shall be given in the manner provided in the
Indenture, not less than 30 days nor more than 60 days prior to the Redemption
Date, to the Holder hereof, but failure to give such notice, or any defect in
therein, shall not affect the validity of the proceedings for the redemption of
any other Note or portion thereof. Any notice that is mailed to the Holder
hereof in the manner provided in the Indenture shall be conclusively presumed to
have been duly given, whether or not such Holder receives the notice.
All notices of redemption shall state:
(1) the Redemption Date;
(2) the Redemption Price and accrued interest to the
Redemption Date;
(3) if less than all Outstanding Notes are to be redeemed, the
identification (and, in the case of partial redemption, the principal
amount) of the particular Note or Notes to be redeemed;
(4) in case any Note is to be redeemed in part only, that on
and after the Redemption Date, upon surrender of such Note, the holder
will receive, without a charge, a new Note or Notes of authorized
denominations for the principal amount thereof remaining unredeemed;
(5) that on the Redemption Date the Redemption Price and
accrued interest to the Redemption Date, if any, will become due and
payable upon each such Note, or the portion thereof, to be redeemed and
that interest thereon shall cease to accrue on and after said date;
(6) the Place or Places of Payment where such Notes are to be
surrendered for payment of the Redemption Price and accrued interest,
if any; and
(7) the CUSIP number of such Note.
On or prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent an amount of money sufficient to pay on the
Redemption Date the Redemption Price of, and (except if the Redemption Date
shall be an Interest Payment Date) accrued interest on, this Notes or portion
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<PAGE>
hereof which is to be redeemed on that date. Notice of redemption having been
given as aforesaid, this Note or such portion thereof shall, on the Redemption
Date, become due and payable at the Redemption Price (together with accrued
interest, if any, to the Redemption Date), and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest) this Notes or such portion thereof shall cease to bear interest. Upon
surrender of this Note for redemption in accordance with said notice, this Note
shall be paid by the Company at the Redemption Price, together with accrued
interest, if any, to the Redemption Date If this Note shall be so called for
redemption but shall not be so paid upon surrender thereof for redemption, the
principal shall, until paid, bear interest from the Redemption Date at the rate
borne by the Notes.
If this Note is to be redeemed only in part, it shall be surrendered
(with, if the Company or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder hereof or his attorney duly authorized in
writing) and the Company shall execute and the Trustee shall authenticate and
deliver to the Holder hereof without service charge a new Note or Notes, of any
authorized denomination as requested by such Holder in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
this Note.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Note and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Note.
If an Event of Default with respect to the Notes shall occur and be
continuing, the principal of the Notes may be declared due and payable in the
manner and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, the
Holder of this Note shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Notes, the Holders of not less than 25% in principal amount of the Notes at the
time Outstanding shall have made written request to the Trustee to institute
proceedings in respect of such Event of Default as Trustee and offered the
Trustee reasonable indemnity and the Trustee shall not have received from the
Holders of a majority in principal amount of the Notes at the time Outstanding a
direction inconsistent with such request, and shall have failed to institute any
such proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder of
this Note for the enforcement of any payment of principal hereof or any interest
on or after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Notes under the Indenture at any
time by the Company and the Trustee with the consent of the Holders
A - 4
<PAGE>
of not less than a majority in principal amount of the Outstanding Notes. The
Indenture also contains provisions permitting the Holders of specified
percentages in principal amount of the Notes at the time Outstanding, on behalf
of the Holders of all Notes, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the Holder of this Note shall
be conclusive and binding upon such Holder and upon all future Holders of this
Note and of any Note issued upon the registration of transfer hereof or in
exchange herefor or in lieu hereof, whether or not notation of such consent or
waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the times, places and rate, and in the coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note is registrable in the Note Register, upon
surrender of this Note for registration of transfer at the office or agency of
the Company in any Place of Payment where the principal of and interest on this
Note are payable, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar for the
Notes (the "Note Registrar") duly executed by, the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Notes of this series,
of authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
The Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Notes are
exchangeable for a like aggregate principal amount of Notes of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture or in this Note, or because of any indebtedness
evidenced thereby, shall be had against any promoter, as such or, against any
past, present or future shareholder, officer or director, as such, of the
Company or of any successor, either directly or through the Company or any
successor, under any rule of law, statute or constitutional provision or by the
enforcement of any assessment or by any legal or equitable proceeding or
otherwise, all such liability being expressly waived and released by the
A - 5
<PAGE>
acceptance of this Note by the Holder thereof and as part of the consideration
for the issue of the Notes.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE NOTES, INCLUDING THIS NOTE, SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE COMMONWEALTH OF VIRGINIA.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Notes as a convenience to the Holders of the Notes. No
representation is made as to the correctness or accuracy of such CUSIP numbers
as printed on the Notes, and reliance may be placed only on the other
identification numbers printed hereon.
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee by manual signature, this Note shall not be entitled to
any benefit under the Indenture or be valid or obligatory for any purpose.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal this 27th day of January, 1997.
UNITED DOMINION REALTY TRUST, INC.
By:_____________________________________
Name: James Dolphin
Title: Executive Vice President and
Chief Financial Officer
Attest:
By: _________________________________
Name: Katheryn E. Surface
Title: Vice President, Secretary
and General Counsel
[SEAL]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Notes of the series designated "7 1/4% Notes due
January 15, 2007" pursuant to the within-mentioned Indenture.
FIRST UNION NATIONAL BANK OF VIRGINIA,
as Trustee
By:_________________________________
Authorized Signatory
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<PAGE>
- - --------------------------------------------------------------------------------
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
[ ] ..................................................
................................................................................
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
................................................................................
the within Note of United Dominion Realty Trust, Inc., and irrevocably
constitutes and appoints
................................................................................
Attorney to transfer said Note on the books of the within-named Company with
full power of substitution in the premises.
Dated: . . . . . ....................................................
....................................................
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Note in every particular, without
alteration or enlargement or any change whatever.
- - --------------------------------------------------------------------------------
A - 8
Exhibit 10(iv)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), entered into this 14 day of December,
1996, between UNITED DOMINION REALTY TRUST, INC., a Virginia corporation (the
"Company") and JOHN S. SCHNEIDER (the "Executive"), recites and provides as
follows:
R E C I T A L S:
A. On October 1, 1996, the Company and South West Property Trust Inc., a
Maryland corporation ("South West"), and others entered into an Agreement and
Plan of Merger (the "Merger Agreement") pursuant to which South West would merge
with and into a wholly owned subsidiary of the Company.
B. The Executive and South West are parties to an Employment Agreement dated as
of January 1, 1995, and amended January l, 1996 (the "South West Employment
Agreement").
C. The South West Employment Agreement automatically terminates as the last day
of the month in which South West merges with another entity and South West is
not the survivor, and the Company and the Executive wish to replace the South
West Employment Agreement with this Agreement.
D. This Agreement is delivered pursuant to Section 3.2 of the Merger Agreement
and shall automatically terminate in the event the transactions contemplated by
the Merger Agreement are not consummated within the time set forth therein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing, and the mutual promises and
undertakings hereinafter set forth, and the payments to be made to the Executive
hereunder and as a result of the execution of the Merger Agreement, the parties
hereto agree as follows:
1. Position and duties.
a. The Company shall employ the Executive as Executive Vice President of the
Company, subject to the supervision of the President or the Board of Directors
of the Company (the "Board"). In this capacity, the Executive shall initially
also serve on the Executive and Investment Committees of the Company.
b. The Executive agrees to serve the Company as a full time executive officer
with duties and authority as set forth in the Company's by-laws or as otherwise
prescribed by the Board, the President, or such other senior officer prescribed
by the Board. The Executive shall devote such time, attention, skill, and
efforts to the performance of his duties as a Company executive as shall be
required therefore, all under the supervision and direction of the Board, the
President, or such other senior officer prescribed by the Board. The Executive
agrees that during the period of his employment he will not, without the consent
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<PAGE>
of the Board, have any other (i) real estate investment trust affiliations, or
(ii) corporate affiliations that interfere with the ability of the Executive to
perform his duties for the Company or comply with the covenants under this
Agreement.
2. Term of Agreement.
This Agreement will take effect as of the closing of the transaction
contemplated by the Merger Agreement and will continue for a period of one (1)
year unless sooner terminated in accordance with Section 4. This Agreement shall
automatically renew for successive one (1) year periods unless otherwise
terminated in accordance with Section 4.
3. Compensation and Benefits.
a. Base Salary. The Executive's pay will not be less than $25O,000 per year,
payable in accordance with the Company's regular payroll practices.
b. Incentive Compensation. The Executive will participate in the management
incentive plan adopted by the Compensation Committee of the Board (the
"Compensation Committee"), as may be modified from time to time, which plan is
currently tied to the annual performance of the Company as measured by the
increase in funds from operations per share from the prior year. The Executive
shall also be entitled to participate in any other bonus plan approved by the
Board, which may initially include a bonus that is based upon the Executive
meeting certain performance goals and objectives. The Executive acknowledges
that the Board may elect to terminate incentive compensation for all executives
at any time.
c. Benefit Plans. The Executive will be eligible to participate in any and all
the employee benefit plans, medical insurance plans, retirement plans, and other
benefit plans in effect for employees in similar positions at the Company (the
"Company Plans"). Such participation shall be subject to the terms of the
applicable plan documents and the Company's generally applied policies. In
addition, the Executive acknowledges that the Company may elect to terminate the
Company Plans. With respect to the 401(k) Plan and Profit Sharing Plan of the
Company, the Executive shall be credited with his time of employment with South
West or its predecessors.
d. Automobile. The Executive will receive an automobile allowance payable in
accordance with the Company's regular practices, which for 1997 for an Executive
Vice President of the Company is $8,300. The Executive's automobile allowance
shall be reviewed annually in accordance with the Company's policies. The
Executive acknowledges that the Company may elect to terminate the automobile
allowance for all executive officers at any time.
e. Option Plan. The Executive will be entitled to participate in the Company's
1982 Stock Option Plan on the same basis as similarly situated executive
officers of the Company. During 1997, the Executive will be granted options to
purchase 30,000 shares of common stock of the Company (the "Options"), which
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will vest as of December 31, 1997, provided the Executive has been employed
continuously through the initial term of this Agreement. The exercise price of
the Options shall be the closing sale price of shares of common stock of the
Company on the New York Stock Exchange on January 2, 1997.
f. Stock Loan Plan. The Executive will be entitled to participate in the
Company's 1991 Officers Stock Purchase and Loan Plan on the same basis as
similarly situated executive officers of the Company. During 1997, the Executive
will be offered the opportunity, to purchase up to 10,000 shares of common stock
of the Company, pursuant to the referenced Stock Purchase and Loan Plan. The
shares shall be granted at the closing sale price of common stock of the Company
on the New York Stock Exchange on January 2, 1997. The Executive acknowledges
that the purchase of shares pursuant to the referenced Stock Purchase and Loan
Plan is subject to shareholder approval, which shall be submitted for approval
at the 1997 annual meeting of shareholders of the Company.
g. Travel. It is contemplated that the Executive will be required to incur
travel and entertainment expense in the interests and on behalf of the Company
and in furtherance of its business. The Executive agrees to comply with the
travel and entertainment guidelines of the Company, which may be modified from
time to time. The Company at the end of each month during the period of this
Agreement will, upon submission of appropriate bills or vouchers, pay all such
expense incurred by the Executive during such month, such payment to be made
either directly to the payee named in such bills or vouchers, or to the extent
paid by the Executive, by reimbursement of the Executive: The Executive agrees
to maintain adequate records, in such detail as the Company may reasonably
request, of all expenses to be reimbursed by the Company hereunder and to make
such records available for inspection as and when reasonably requested by the
Company.
4 Termination of Agreement.
a. Change of Control. This Agreement may be terminated by either party, by
written notice to the other, in the event of (i) the merger or consolidation of
the Company with any other real estate investment trust, corporation or other
business entity, in which the Company is not the survivor, (ii) the transfer or
sale of all or substantially all of the assets of the Company other than to an
affiliate or subsidiary of the Company, (iii) the liquidation of the Company, or
(iv) the acquisition by any person or by a group of persons acting in concert,
of more than 25% of the outstanding voting securities of the Company, which
results in the resignation or addition of three (3) or more members of the
Board.
b. Incapacity; Death. This Agreement may be terminated by the Company, by notice
to the Executive or his personal representative given at least thirty (30) days
prior to the effective date specified therein, in the event that the Executive
shall be unable to perform his duties hereunder for a period of more than three
consecutive months as a result of illness or incapacity. This Agreement shall
terminate on the death of the Executive.
c. Without Cause. This Agreement may be terminated by the Company, without
cause, by notice given to the Executive on or before October 1, of each year,
with the effective date of such termination being December 31 of the same year.
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d. Severance Compensation. Upon termination of this Agreement pursuant to
Section 4 (a), 4(b) or 4(c), the Company shall pay to the Executive or his legal
representative, certain compensation (the "Severance Compensation") as follows:
(1) First Three Years. If the termination is prior to January 1, 2000, the
Executive shall be paid thirteen (13) weeks of base salary and automobile
allowance, and the Company shall continue in effect for a period of thirteen
(13) weeks after the effective date of the Executive's termination, all
health/life/disability insurance coverage provided to the Executive and his
immediate family on the day immediately prior to the date of notice of
termination or, if the Executive shall so elect, the Company shall pay to the
Executive an amount equal to the premium, or portion thereof allocable to the
Executive for providing such coverage, provided, however, if such coverage
cannot be continued by the Company, the Company shall pay to the Executive an
amount sufficient for the Executive to obtain substantially similar coverage for
a period of thirteen (13) weeks after the effective date of termination.
(2) Three to Ten Years. If the termination is after January 1, 2000 and prior to
January 1, 2007, the Executive shall be paid twenty-six (26) weeks of base
salary and automobile allowance, and the Company shall continue in effect for a
period of twenty-six (26) weeks after the effective date of the Executive's
termination, all health/life/disability insurance coverage provided to the
Executive and his immediate family on the day immediately prior to the date of
notice of termination or, if the Executive shall so elect, the Company shall pay
to the Executive an amount equal to the premium, or portion thereof allocable to
the Executive for providing such coverage, provided, however, if such coverage
cannot be continued by the Company, the Company shall pay to the Executive an
amount sufficient for the Executive to obtain substantially similar coverage for
a period of twenty-six (26) weeks after the effective date of termination.
(3) Ten or More Years. If the Termination is after January 1, 2007, the
Executive shall be paid fifty-two (52) weeks of base salary and automobile
allowance, and the Company shall continue in effect for a period of fifty-two
(52) weeks after the effective date of the Executive's termination, all
health/life/disability insurance coverage provided to the Executive and his
immediate family on the day immediately prior to the date of notice of
termination or, if the Executive shall so elect, the Company shall pay to the
Executive an amount equal to the premium, or portion thereof allocable to the
Executive for providing such coverage, provided, however, if such coverage
cannot be continued by the Company, the Company shall pay to the Executive an
amount sufficient for the Executive to obtain substantially similar coverage
for a period of fifty-two (52) weeks after the effective date of termination.
(4) Incentive Compensation. If the termination is on or after January 1, 1998,
the Executive shall also be entitled to a pro-rata portion of incentive
compensation, if any, earned by the Executive pursuant to the second sentence of
Section 3(b) of this Agreement, which compensation shall be paid no later than
forty-five (45) days after the end of the Company's fiscal year.
(5) Severance Compensation Reduction. In the event termination is pursuant to
Section 4 (b) of this Agreement, Severance Compensation shall be reduced by the
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amount of any life insurance proceeds or disability insurance payments, as
appropriate, payable to the Executive or his personal representative or other
beneficiary as provided by this Agreement.
(6) Timing. The Company shall pay to the Executive or his legal representative
the sums payable to such Executive or his legal representative on account of the
portion of Severance Compensation consisting of base salary and automobile
allowance within fifteen (15) days after the earlier to occur of (i) the
effective date of termination or (ii) the date the Executive is no longer
expected to perform full time duties for the Company.
e. By the Executive. This Agreement may be terminated by the Executive, upon
notice given at least ninety (90) days before the effective date of termination.
In such event, the Executive shall not be entitled to any compensation under
this Agreement for any period not worked after the termination date.
f. For Cause. The Company may terminate this Agreement with cause by providing a
written notice to the Executive. In such event, the Executive shall not be
entitled to any compensation under this Agreement for the period after the
termination date, and any compensation paid to the Executive shall be net of any
sums owed by the Executive to the Company as a result of the act for which the
employment of the Executive was terminated. The circumstances under which the
Company will be deemed to have cause to terminate this Agreement include the
following:
(1) The Executive is convicted of or pleads nolo contendere to any crime, other
than a traffic offense or misdemeanor not involving moral turpitude;
(2) The Executive shall commit, with respect to the Company, an act of fraud or
embezzlement or shall have been grossly negligent in the performance of his
duties hereunder;
(3) The Executive engages in gross dereliction of duties, refusal to perform
assigned duties consistent with his position, or repeated violation of the
Company's policies after written warning or
(4) The Executive engages in drug abuse.
g. Consulting Services. Upon termination of this Agreement, the Executive shall,
for a period of up to one year following the effective date of termination,
render such advisory or consulting services to the Company as it may reasonably
request, taking into account the Executive's health, business commitments,
geographical location and other relevant circumstances. The intent of this
paragraph is not to obligate the Executive to perform any day-to-day duties for
the Company following termination of his employment but only to assist
management in effecting a smooth transition of the functions or projects for
which the Executive was responsible while an employee of the Company. Should the
Executive fail to render such advisory or consulting services, after 30 days'
prior written notice to the Executive and the Executive's failure to commence
the rendering of such service, the Company's sole remedy shall be to terminate
any insurance coverages the Company is maintaining.
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h. Survival. Notwithstanding the termination of this Agreement, the Executive
acknowledges that he shall continue to be bound by the covenants in Sections 5
and 6 of this Agreement. The Executive shall not be entitled to any Severance
Compensation or benefits for any period he is in violation of the covenants in
Sections 5 or 6.
5. Covenant to Maintain Confidentiality.
a. The Executive acknowledges that because of his proposed employment with the
Company, he will be exposed to and learn a substantial amount of information
which is proprietary and confidential to the Company, whether or not he develops
or creates such information. The Executive further acknowledges that because of
his employment with South West, he was exposed to and learned a substantial
amount of information which is proprietary and confidential to South West,
whether or not he developed or created such information. The Executive
acknowledges that such proprietary and confidential information may include, but
is not limited to, acquisition or merger information; development projects;
business or investment opportunities; client lists; or any other information of
a similar nature made available to the Executive and not known in the trade in
which the Company is engaged, which, if misused or disclosed, could adversely
affect the business or standing of the Company. Confidential information shall
not include information that is generally known or generally available to the
public through no fault of the Executive.
b. The Executive agrees that except as required by law, he will not at any time
divulge to any person, agency, institution, company or other entity any
information which he knows or has reason to believe is proprietary or
confidential to the Company, including but not limited to the types of
information described in Section 5(a), or use such information to the
competitive disadvantage of the Company. The Executive agrees that his duties
and obligations under this Section 5 will continue for 12 months from the
termination of his employment or as long as such information remains proprietary
or confidential to the Company.
6. Non-Competition and Non-Solicitation Covenants
a. The Executive acknowledges that i) he will be employed as a high-level
employee in an executive and managerial capacity; ii) his employment with the
Company gives him access to confidential and proprietary information concerning
the Company; iii) his prior employment with South West gave him access to
confidential and proprietary information concerning South West; iv) the
agreements and covenants contained in this Section 6 (the "Covenants") are
essential to protect the business of the Company and to protect the Company's
investment in South West; and v) the Executive is to receive consideration
pursuant to this Agreement and the Merger Agreement.
b. During the period of the Executive's employment, the Executive agrees that he
will not, on behalf of anyone other than the Company, engage in any managerial,
executive, sales, or marketing activities related to any business in which the
Company is or becomes engaged during the Executive's employment. The Executive
acknowledges the competitive nature of the business and the extensive geographic
markets served by the Company. The Executive acknowledges that because of his
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position with the Company his duties will require him to perform, supervise, or
assist in performing work throughout the markets served by the Company. The
Executive further acknowledges that because of his position with the Company and
the broad scope of his duties, he will be in a position to cause substantial
harm to the Company were he to compete in the business of the Company or any
other business in which the Company is or becomes engaged during Executive's
employment in the Company's markets. Given the broad scope of Executive's
duties, he acknowledges that the geographic scope of the covenants in this
paragraph shall be limited to the continental United States.
c. Should the Executive (i) be terminated with or without cause following the
first 90 days of this Agreement, or (ii) resign from his employment or otherwise
terminate this Agreement at any time, he agrees that for a twelve (12) month
period following the termination of his employment with the Company, the
Executive shall not hire or solicit any employee of the Company employed at the
time of his termination, or encourage any such employee to leave such
employment.
d. If the Executive commits a material breach of, the Covenants, the Company
shall have the rights and remedy (in addition to, and not in lieu of, any other
rights and remedies available to the Company at law or in equity) to seek
injunctive relief, including permanent injunctions; (ii) to have the Covenants
specifically enforced by any court of competent jurisdiction (it being agreed
that any breach or threatened breach of the Covenants would cause irreparable
injury to the Company and that money damages would not provide an adequate
remedy to the Company; and (iii) to cease any severance payments or benefits
which the Executive or his eligible dependents may otherwise be due.
e. The Executive agrees that the Covenants are necessary for the reasonable and
proper protection of the Company and that the Covenants are reasonable in
respect of subject matter, length of time, and geographic scope. The Executive
further acknowledges that the Covenants will not unreasonably restrict him from
earning a livelihood following the termination of his employment with the
Company.
f. If any court of competent jurisdiction determines that the Covenants, or any
part thereof, are invalid or unenforceable, the remainder of the Covenants shall
not thereby be affected and shall be given full effect, without regard to the
invalid portions. In such event, the court shall have the power (and the parties
hereto request the court) to reduce or modify the duration or scope, or any
other unenforceable aspect of such provision, as the case may be, and, in its
reduced or modified form, enforce such provision to the maximum extent
permissible.
g. The provisions of this Section 6 so far as they relate to the period after
the end of the term of this Agreement shall continue to have effect and shall
operate as a separate agreement between the Company and the Executive, provided,
however, that the provisions of Section 6 (b) shall terminate.
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7. Successors and Assigns.
a. The Executive acknowledges and agrees that this Agreement is a contract for
his personal services, he is not entitled to assign, subcontract, or transfer
any of the obligations imposed or benefits provided under this Agreement.
b. This Agreement shall be binding on and will inure to the benefit of any
successors or assigns of the Company.
8. Construction of Agreement
a. This Agreement contains the complete agreement between the Executive and the
Company with respect to its subject matter. This Agreement supersedes all
previous and contemporaneous agreements, negotiations, commitments, writings,
and undertakings, and, effective as of the closing of the transactions
contemplated by the Merger Agreement, the South West Employment Agreement shall
terminate.
b. This Agreement shall be governed by and interpreted in accordance with the
laws of the Commonwealth of Virginia. Any dispute arising between the parties
related to or involving this Agreement will be litigated in a court having
jurisdiction in the Commonwealth of Virginia.
c. This Agreement may be modified or waived only by a writing signed by both
parties.
d. Any waiver of a breach of this Agreement will not constitute a waiver of any
future breach, whether of a similar or dissimilar nature.
e. The provisions of this Agreement shall be severable. If any court or agency
with authority to do so should determine that any part of this Agreement is
legally invalid, the remainder of this Agreement shall remain in effect. The
parties intend for this Agreement to be enforceable to the fullest extent
permitted by law.
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WE AGREE TO THIS:
UNITED DOMINION REALTY TRUST, INC.,
a Virginia corporation
By: /s/ John P. McCann
Its: President
EXECUTIVE
/s/ John S. Schneider
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John S. Schneider
Exhibit 10(v)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), entered into this 19th day of December,
1996, between UNITED DOMINION REALTY TRUST, INC., a Virginia corporation (the
"Company") and ROBERT F. SHERMAN (the "Executive"), recites and provides as
follows:
RECITALS:
A. On October 1, 1996, the Company and South West Property Trust Inc., a
Maryland corporation ("South West"), and others entered into an Agreement and
Plan of Merger (the "Merger Agreement") pursuant to which South West would merge
with and into a wholly owned subsidiary of the Company.
B. The Executive and South West are parties to an Employment Agreement dated as
of January l, 1995, and amended January l, 1996 (the "South West Employment
Agreement").
C. The South West Employment Agreement automatically terminates as the last day
of the month in which South West merges with another entity and South West is
not the survivor, and the Company and the Executive wish to replace the South
West Employment Agreement with this Agreement.
D. This Agreement is delivered pursuant to Section 3.2 of the Merger Agreement
and shall automatically terminate in the event the transactions contemplated by
the Merger Agreement are not consummated within the time set forth therein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing, and the mutual promises and
undertakings hereinafter set forth, and the payments to be made to the Executive
hereunder and as a result of the execution of the Merger Agreement, the parties
hereto agree as follows:
1. Position and Duties.
a. The Company shall employ the Executive as Senior Vice President of the
Company, subject to the supervision of the President of the Company, or such
other senior officer of the Company as may be prescribed by the Board of
Directors of the Company (the "Board"). In this capacity, the Executive shall
also initially serve on the Investment Committee of the Company.
b. The Executive agrees to serve the Company as a full time executive officer
with duties and authority as set forth in the Company's by-laws or as otherwise
prescribed by the President, an Executive Vice President, or such other senior
officer prescribed by the Board. The Executive shall devote such time,
attention, skill, and efforts to the performance of his duties as a Company
executive as shall be required therefore, all under the supervision and
direction of the Board, the President, or such other senior officer prescribed
by the Board. The Executive agrees that during the period of his employment he
will not, without the consent of the Board, have any other
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(i) real estate investment trust affiliations, or (ii) corporate affiliations
that interfere with the ability of the Executive to perform his duties for the
Company or comply with the covenants under this Agreement.
2. Term of Agreement.
This Agreement will take effect as of the closing of the transaction
contemplated by the Merger Agreement and will continue for a period of one (1)
year unless sooner terminated in accordance with Section 4. This Agreement shall
automatically renew for successive one (1) year periods unless otherwise
terminated in accordance with Section 4.
3. Compensation and Renefits.
a. Base Salary. The Executive's pay will not be less than $186,000 per year,
payable in accordance with the Company's regular payroll practices.
b. Incentive Compensation. The Executive will participate in the management
incentive plan adopted by the Compensation Committee of the Board (the
"Compensation Committee"), as may be modified from time to time, which plan is
currently tied to the annual performance of the Company as measured by the
increase in funds from operations per share from the prior year. The Executive
shall also be entitled to participate in any other bonus plan approved by the
Board, which may initially include a bonus that is based upon the Executive
meeting certain performance goals and objectives. The Executive acknowledges
that the Board may elect to terminate incentive compensation for all executives
at any time.
c. Benefit Plans. The Executive will be eligible to participate in any and all
the employee benefit plans, medical insurance plans, retirement plans, and other
benefit plans in effect for employees in similar positions at the Company (the
"Company Plans"). Such participation shall be subject to the terms of the
applicable plan documents and the Company's generally applied policies. In
addition, the Executive acknowledges that the Company may elect to terminate the
Company Plans. With respect to the 401(k) Plan and Profit Sharing Plan of the
Company, the Executive shall be credited with his time of employment with South
West or its predecessors.
d. Automobile. The Executive will receive an automobile allowance payable in
accordance with the Company's regular practices, which for 1997 for a Senior
Vice President of the Company is $8,300. The Executive's automobile allowance
shall be reviewed periodically in accordance with the Company's policies. The
Executive acknowledges that the Company may elect to terminate the automobile
allowance for all executive officers at any time.
e. Option Plan. The Executive will be entitled to participate in the Company's
1982 Stock Option Plan on the same basis as similarly situated executive
officers of the Company. During 1997, the Executive will be granted options to
purchase 30,000 shares of common stock of the Company (the "Options"), which
will vest as of December 31, 1997, provided the Executive has been employed
continuously through the initial term of this Agreement. The exercise price of
the
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Options shall be the closing sale price of shares of common stock Stock of the
Company on the New York Exchange on January 2, 1997.
f. Stock Loan Plan. The Executive will be entitled to participate in the
Company's 1991 Officers Stock Purchase and Loan Plan on the same basis as
similarly situated executive officers of the Company. During 1997, the Executive
will be offered the opportunity, to purchase up to 10,000 shares of common stock
of the Company, pursuant to the referenced Stock Purchase and Loan Plan. The
shares shall be granted at the closing sale price of common stock of the Company
on the New York Stock Exchange on January 2, 1997. The Executive acknowledges
that the purchase of shares pursuant to the referenced Stock Purchase and Loan
Plan is subject to shareholder approval, which shall be submitted for approval
at the 1997 annual meeting of shareholders of the Company.
g. Travel. It is contemplated that the Executive will be required to incur
travel and entertainment expense in the interests and on behalf of the Company
and in furtherance of its business. The Executive agrees to comply with the
travel and entertainment guidelines of the Company, which may be modified from
time to time. The Company at the end of each month during the period of this
Agreement will, upon submission of appropriate bills or vouchers, pay all such
expense incurred by the Executive during such month, such payment to be made
either directly to the payee named in such bills or vouchers, or to the extent
paid by the Executive, by reimbursement of the Executive. The Executive agrees
to maintain adequate records, in such detail as the Company may reasonably
request of all expenses to be reimbursed by the Company hereunder and to make
such records available for inspection as and when reasonably requested by the
Company.
4. Termination of Agreement.
a. Change of Control. This Agreement may be terminated by either party, by
written notice to the other, in the event of (i) the merger or consolidation of
the Company with any other real estate investment trust, corporation or other
business entity, in which the Company is not the survivor, (ii) the transfer or
sale of all or substantially all of the assets of the Company other than to an
affiliate or subsidiary of the Company, (iii) the liquidation of the Company, or
(iv) the acquisition by any person or by a group of persons acting in concert,
of more than 25% of the outstanding voting securities of the Company, which
results in the resignation or addition of three (3) or more members of the
Board.
b. Incapacity; Death. This Agreement may be terminated by the Company, by notice
to the Executive or his personal representative given at least thirty (30) days
prior to the effective date specified therein, in the event that the Executive
shall be unable to perform his duties hereunder for a period of more than three
consecutive months as a result of illness or incapacity. This Agreement shall
terminate on the death of the Executive.
c. Without Cause. This Agreement may be terminated by the Company, without
cause, by notice given to the Executive on or before October 1, of each year,
with the effective date of such termination being December 31 of the same year.
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d. Severance Compensation. Upon termination of this Agreement pursuant to
Section 4 (a), 4(b) or 4(c), the Company shall pay to the Executive or his legal
representative, certain compensation (the "Severance Compensation") as follows:
(1) First Three Years. If the termination is prior to January 1, 2000, the
Executive shall be paid thirteen (13) weeks of base salary and automobile
allowance, and the Company shall continue in effect for a period of thirteen
(13) weeks after the effective date of the Executive's termination, all
health/life/disability insurance coverage provided to the Executive and his
immediate family on the day immediately prior to the date of notice of
termination or, if the Executive shall so elect, the Company shall pay to the
Executive an amount equal to the premium, or portion thereof allocable to the
Executive for providing such coverage, provided, however, if such coverage
cannot be continued by the Company, the Company shall pay to the Executive an
amount sufficient for the Executive to obtain substantially similar coverage for
a period of thirteen (13) weeks after the effective date of termination.
(2) Three to Ten Years. If the termination is after January 1, 2000 and prior to
January 1, 2007, the Executive shall be paid twenty-six (26) weeks of base
salary and automobile allowance, and the Company shall continue in effect for a
period of twenty-six (26) weeks after the effective date of the Executive's
termination, all health/life/disability insurance coverage provided to the
Executive and his immediate family on the day immediately prior to the date of
notice of termination or, if the Executive shall so elect, the Company shall pay
to the Executive an amount equal to the premium, or portion thereof allocable to
the Executive for providing such coverage, provided, however, if such coverage
cannot be continued by the Company, the Company shall pay to the Executive an
amount sufficient for the Executive to obtain substantially similar coverage for
a period of twenty-six (26) weeks after the effective date of termination.
(3) Ten or More Years. If the Termination is after January 1, 2007, the
Executive shall be paid fifty-two (52) weeks of base salary and automobile
allowance, and the Company shall continue in effect for a period of fifty-two
(52) weeks after the effective date of the Executive's termination, all
health/life/disability insurance coverage provided to the Executive and his
immediate family on the day immediately prior to the date of notice of
termination or, if the Executive shall so elect, the Company shall pay to the
Executive an amount equal to the premium, or portion thereof allocable to the
Executive for providing such coverage, provided, however, if such coverage
cannot be continued by the Company, the Company shall pay to the Executive an
amount sufficient for the Executive to obtain substantially similar coverage for
a period of fifty-two (52) weeks after the effective date of termination.
(4) Incentive Compensation. If the termination is on or after January 1, 1998,
the Executive shall also be entitled to a pro-rata portion of incentive
compensation, if any, earned by the Executive pursuant to the second sentence of
Section 3(b) of this Agreement, which compensation shall be paid no later than
forty-five (45) days after the end of the Company's fiscal year.
(5) Severance Compensation Reduction. In the event termination is pursuant to
Section 4 (b) of this Agreement, Severance Compensation shall be reduced by the
amount of any life
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insurance proceeds or disability insurance payments, as appropriate, payable to
the Executive or his personal representative or other beneficiary as provided by
this Agreement.
(6) Timing. The Company shall pay to the Executive or his legal representative
the sums payable to such Executive or his legal representative on account of the
portion of Severance Compensation consisting of base salary and automobile
allowance within fifteen (15) days after the earlier to occur of (i) the
effective date of termination or (ii) the date the Executive is no longer
expected to perform full time duties for the Company.
e. By the Executive. This Agreement may be terminated by the Executive, upon
notice given at least forty-five (45) days before the effective date of
termination. In such event, the Executive shall not be entitled to any
compensation under this Agreement for any period not worked after the
termination date.
f. For Cause. The Company may terminate this Agreement with cause by providing a
written notice to the Executive. In such event, the Executive shall not be
entitled to any compensation under this Agreement for the period after the
termination date, and any compensation paid to the Executive shall be net of any
sums owed by the Executive to the Company as a result of the act for which the
employment of the Executive was terminated. The circumstances under which the
Company will be deemed to have cause to terminate this Agreement include the
following:
(1) The Executive is convicted of or pleads nolo contendere to any crime, other
than a traffic offense or misdemeanor not involving moral turpitude;
(2) The Executive shall commit, with respect to the Company, an act of fraud or
embezzlement or shall have been grossly negligent in the performance of his
duties hereunder;
(3) The Executive engages in gross dereliction of duties, refusal to perform
assigned duties consistent with his position, or repeated violation of the
Company's policies after written warning; or
(4) The Executive engages in drug abuse.
g. Consulting Services. Upon termination of this Agreement, the Executive shall,
for a period of up to one year following the effective date of termination,
render such advisory or consulting services to the Company as it may reasonably
request, taking into account the Executive's health, business commitments,
geographical location and other relevant circumstances. The intent of this
paragraph is not to obligate the Executive to perform any day-to-day duties for
the Company following termination of his employment but only to assist
management in effecting a smooth transition of the functions or projects for
which the Executive was responsible while an employee of the Company. Should the
Executive fail to render such advisory or consulting services, after 30 days'
prior written notice to the Executive and the Executive's failure to commence
the rendering of such service, the Company's sole remedy shall be to terminate
any insurance coverages the Company is maintaining.
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h. Survival. Notwithstanding the termination of this Agreement, the Executive
acknowledges that he shall continue to be bound by the covenants in Sections 5
and 6 of this Agreement. The Executive shall not be entitled to any Severance
Compensation or benefits for any period he is in violation of the covenants in
Sections 5 or 6.
5. Covenant to Maintain Confidentiality.
a. The Executive acknowledges that because of his proposed employment with the
Company, he will be exposed to and learn a substantial amount of information
which is proprietary and confidential to the Company, whether or not he develops
or creates such information. The Executive further acknowledges that because of
his employment with South West, he was exposed to and learned a substantial
amount of information which is proprietary and confidential to South West,
whether or not he developed or created such information. The Executive
acknowledges that such proprietary and confidential information may include, but
is not limited to, acquisition or merger information; development projects;
business or investment opportunities; client lists; or any other information of
a similar nature made available to the Executive and not known in the trade in
which the Company is engaged, which, if misused or disclosed, could adversely
affect the business or standing of the Company. Confidential information shall
not include information that is generally known or generally available to the
public through no fault of the Executive.
b. The Executive agrees that except as required by law, he will not at any time
divulge to any person, agency, institution, company or other entity any
information which he knows or has reason to believe is proprietary or
confidential to the Company, including but not limited to the types of
information described in Section 5(a), or use such information to the
competitive disadvantage of the Company. The Executive agrees that his duties
and obligations under this Section 5 will continue for 12 months from the
termination of his employment or as long as such information remains proprietary
or confidential to the Company.
6. Non-Competition and Non-Solicitation Covenants.
a. The Executive acknowledges that i) he will be employed as a high-level
employee in an executive and managerial capacity; ii) his employment with the
Company gives him access to confidential and proprietary information concerning
the Company; iii) his prior employment with South West gave him access to
confidential and proprietary information concerning South West; iv) the
agreements and covenants contained in this Section 6 (the "Covenants") are
essential to protect the business of the Company and to protect the Company's
investment in South West; and v) the Executive is to receive consideration
pursuant to this Agreement and the Merger Agreement.
b. During the period of the Executive's employment, the Executive agrees that he
will not, on behalf of anyone other than the Company, engage in any managerial,
executive, sales, or marketing activities related to any business in which the
Company is or becomes engaged during the Executive's employment. The Executive
acknowledges the competitive nature of the business and the extensive geographic
markets served by the Company. The Executive acknowledges that because of his
position with the Company his duties will require him to perform, supervise, or
assist in performing work throughout the markets served by the Company. The
Executive further
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acknowledges that because of his position with the Company and the broad scope
of his duties, he will be in a position to cause substantial harm to the Company
were he to compete in the business of the Company or any other business in which
the Company is or becomes engaged during Executive's employment in the Company's
markets. Given the broad scope of Executive's duties, he acknowledges that the
geographic scope of the covenants in this paragraph shall be limited to the
continental United States.
c. Should the Executive (i) be terminated with or without cause following the
first 90 days of this Agreement, or (ii) resign from his employment or otherwise
terminate this Agreement at any time, he agrees that for a twelve (12) month
period following the termination of his employment with the Company, the
Executive shall not hire or solicit any employee of the Company employed at the
time of his termination, or encourage any such employee to leave such
employment.
d. If the Executive commits a material breach of, the Covenants, the Company
shall have the rights and remedy (in addition to, and not in lieu of, any other
rights and remedies available to the Company at law or in equity) to seek
injunctive relief, including permanent injunctions; (ii) to have the Covenants
specifically enforced by any court of competent jurisdiction (it being agreed
that any breach or threatened breach of the Covenants would cause irreparable
injury to the Company and that money damages would not provide an adequate
remedy to the Company; and (iii) to cease any severance payments or benefits
which the Executive or his eligible dependents may otherwise be due.
e. The Executive agrees that the Covenants are necessary for the reasonable and
proper protection of the Company and that the Covenants are reasonable in
respect of subject matter, length of time, and geographic scope. The Executive
further acknowledges that the Covenants will not unreasonably restrict him from
earning a livelihood following the termination of his employment with the
Company.
f. If any court of competent jurisdiction determines that the Covenants, or any
part thereof, are invalid or unenforceable, the remainder of the Covenants shall
not thereby be affected and shall be given full effect, without regard to the
invalid portions. In such event, the court shall have the power (and the parties
hereto request the court) to reduce or modify the duration or scope, or any
other unenforceable aspect of such provision, as the case may be, and, in its
reduced or modified form, enforce such provision to the maximum extent
permissible.
g. The provisions of this Section 6 so far as they relate to the period after
the end of the term of this Agreement shall continue to have effect and shall
operate as a separate agreement between the Company and the Executive; provided,
however, that the provisions of Section 6 (b) shall terminate.
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7. Successors and Assigns.
a. The Executive acknowledges and agrees that this Agreement is a contract for
his personal services, he is not entitled to assign, subcontract, or transfer
any of the obligations imposed or benefits provided under this Agreement.
b. This Agreement shall be binding on and will inure to the benefit of any
successors or assigns of the Company.
8. Construction of Agreement.
a. This Agreement contains the complete agreement between the Executive and the
Company with respect to its subject matter. This Agreement supersedes all
previous and contemporaneous agreements, negotiations, commitments, writings,
and undertakings, and, effective as of the closing of the transactions
contemplated by the Merger Agreement, the South West Employment Agreement shall
terminate.
b. This Agreement shall be governed by and interpreted in accordance with the
laws of the Commonwealth of Virginia.. Any dispute arising between the parties
related to or involving this Agreement will be litigated in a court having
jurisdiction in the Commonwealth of Virginia.
c. This Agreement may be modified or waived only by a writing signed by both
parties.
d. Any waiver of a breach of this Agreement will not constitute a waiver of any
future breach, whether of a similar or dissimilar nature.
e. The provisions of this Agreement shall be severable. If any court or agency
with authority to do so should determine that any part of this Agreement is
legally invalid, the remainder of this Agreement shall remain in effect. The
parties intend for this Agreement to be enforceable to the fullest extent
permitted by law.
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WE AGREE TO THIS:
UNITED DOMINION REALTY TRUST, INC.,
a Virginia corporation
By: /s/ John P. McCann
----------------------------
Its: President
---------------------------
EXECUTIVE
/s/ Robert F. Sherman
- - ------------------------------
Robert F. Sherman
9
Exhibit 10(vi)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement"), entered into this 19 day of December,
1996, between UNITED DOMINION REALTY TRUST, INC., a Virginia corporation (the
"Company") and DAVID L. JOHNSTON (the "Executive"), recites and provides as
follows:
R E C I T A L S:
A. On October 1, 1996, the Company and South West Property Trust Inc., a
Maryland corporation ("South West"), and others entered into an Agreement and
Plan of Merger (the "Merger Agreement") pursuant to which South West would merge
with and into a wholly owned subsidiary of the Company.
B. The Executive and South West are parties to an Employment Agreement dated as
of January 1, 1995, and amended January l, 1996 (the "South West Employment
Agreement").
C. The South West Employment Agreement automatically terminates as the last day
of the month in which South West merges with another entity and South West is
not the survivor, and the Company and the Executive wish to replace the South
West Employment Agreement with this Agreement.
D. This Agreement is delivered pursuant to Section 3.2 of the Merger Agreement
and shall automatically terminate in the event the transactions contemplated by
the Merger Agreement are not consummated within the time set forth therein.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing, and the mutual promises and
undertakings hereinafter set forth, and the payments to be made to the Executive
hereunder and as a result of the execution of the Merger Agreement, the parties
hereto agree as follows:
1. Position and Duties.
a. The Company shall employ the Executive as Senior Vice President of the
Company, subject to the supervision of the President of the Company, or such
other senior officer of the Company as may be prescribed by the Board of
Directors of the Company (the "Board"). In this capacity, the Executive shall
also initially serve on the Investment Committee of the Company.
b. The Executive agrees to serve the Company as a full time executive officer
with duties and authority as set forth in the Company's by-laws or as otherwise
prescribed by the President, an Executive Vice President, or such other senior
officer prescribed by the Board. The Executive shall devote such time,
attention, skill, and efforts to the performance of his duties as a Company
executive as shall be required therefore, all under the supervision and
direction of the Board, the President, or such other senior officer prescribed
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by the Board. The Executive agrees that during the period of his employment he
will not, without the consent of the Board, have any other (i) real estate
investment trust affiliations, or (ii) corporate affiliations that interfere
with the ability of the Executive to perform his duties for the Company or
comply with the covenants under this Agreement.
2. Term of Agreement
This Agreement will take effect as of the closing of the transaction
contemplated by the Merger Agreement and will continue for a period of one (1)
year unless sooner terminated in accordance with Section 4. This Agreement shall
automatically renew for successive one (1) year periods unless otherwise
terminated in accordance with Section 4.
3. Compensation and Benefits.
a. Base Salary. The Executive's pay will not be less than $186,000 per year,
payable in accordance with the Company's regular payroll practices.
b. Incentive Compensation The Executive will participate in the management
incentive plan adopted by the Compensation Committee of the Board (the
"Compensation Committee"), as may be modified from time to time, which plan is
currently tied to the annual performance of the Company as measured by the
increase in funds from operations per share from the prior year. The Executive
shall also be entitled to participate in any other bonus plan approved by the
Board, which may initially include a bonus that is based upon the Executive
meeting certain performance goals and objectives. The Executive acknowledges
that the Board may elect to terminate incentive compensation for all executives
at any time.
c. Benefit Plans. The Executive will be eligible to participate in any and all
the employee benefit plans, medical insurance plans, retirement plans, and other
benefit plans in effect for employees in similar positions at the Company (the
"Company Plans'). Such participation shall be subject to the terms of the
applicable plan documents and the Company's generally applied policies. In
addition, the Executive acknowledges that the Company may elect to terminate the
Company Plans. With respect to the 401(k) Plan and Profit Sharing Plan of the
Company, the Executive shall be credited with his time of employment with South
West or its predecessors.
d. Automobile The Executive will receive an automobile allowance payable in
accordance with the Company's regular practices, which for 1997 for a Senior
Vice President of the Company is $8,300. The Executive's automobile allowance
shall be reviewed periodically in accordance with the Company's policies. The
Executive acknowledges that the Company may elect to terminate the automobile
allowance for all executive officers at any time.
e. Option Plan. The Executive will be entitled to participate in the Company's
1982 Stock Option Plan on the same basis as similarly situated executive
officers of the Company. During 1997, the Executive will be granted options to
purchase 30,000 shares of common stock of the Company (the "Options"), which
will vest as of December 31, 1997, provided the Executive has been employed
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continuously through the initial term of this Agreement. The exercise price of
the Options shall be the closing sale price of shares of common stock of the
Company on the New York Stock Exchange on January 2, 1997.
f. Stock Loan Plan. The Executive will be entitled to participate in the
Company's 1991 Officers Stock Purchase and Loan Plan on the same basis as
similarly situated executive officers of the Company. During 1997, the Executive
will be offered the opportunity, to purchase up to 10,000 shares of common stock
of the Company, pursuant to the referenced Stock Purchase and Loan Plan. The
shares shall be granted at the closing sale price of common stock of the Company
on the New York Stock Exchange on January 2, 1997. The Executive acknowledges
that the purchase of shares pursuant to the referenced Stock Purchase and Loan
Plan is subject to shareholder approval, which shall be submitted for approval
at the 1997 annual meeting of shareholders of the Company.
g. Travel. It is contemplated that the Executive will be required to incur
travel and entertainment expense in the interests and on behalf of the Company
and in furtherance of its business. The Executive agrees to comply with the
travel and entertainment guidelines of the Company, which may be modified from
time to time. The Company at the end of each month during the period of this
Agreement will, upon submission of appropriate bills or vouchers, pay all such
expense incurred by the Executive during such month, such payment to be made
either directly to the payee named in such bills or vouchers, or to the extent
paid by the Executive, by reimbursement of the Executive. The Executive agrees
to maintain adequate records, in such detail as the Company may reasonably
request, of all expenses to be reimbursed by the Company hereunder and to make
such records available for inspection as and when reasonably requested by the
Company.
4. Termination of Agreement
a. Change of Control. This Agreement may be terminated by either party, by
written notice to the other, in the event of (i) the merger or consolidation of
the Company with any other real estate investment trust, corporation or other
business entity, in which the Company is not the survivor, (ii) the transfer or
sale of all or substantially all of the assets of the Company other than to an
affiliate or subsidiary of the Company, (iii) the liquidation of the Company, or
(iv) the acquisition by any person or by a group of persons acting in concert,
of more than 25% of the outstanding voting securities of the Company, which
results in the resignation or addition of three (3) or more members of the
Board.
b. Incapacity; Death. This Agreement may be terminated by the Company, by notice
to the Executive or his personal representative given at least thirty (30) days
prior to the effective date specified therein, in the event that the Executive
shall be unable to perform his duties hereunder for a period of more than three
consecutive months as a result of illness or incapacity. This Agreement shall
terminate on the death of the Executive.
c. Without Cause. This Agreement may be terminated by the Company, without
cause, by notice given to the Executive on or before October 1, of each year,
with the effective date of such termination being December 31 of the same year.
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<PAGE>
d. Severance Compensation Upon termination of this Agreement pursuant to Section
4(a), 4(b) or 4(c), the Company shall pay to the Executive or his legal
representative, certain compensation (the "Severance Compensation") as follows:
(1) First Three Years. If the termination is prior to January 1, 2000, the
Executive shall be paid thirteen (13) weeks of base salary and automobile
allowance, and the Company shall continue in effect for a period of thirteen
(13) weeks after the effective date of the Executive's termination, all
health/life/disability insurance coverage provided to the Executive and his
immediate family on the day immediately prior to the date of notice of
termination or, if the Executive shall so elect, the Company shall pay to the
Executive an amount equal to the premium, or portion thereof allocable to the
Executive for providing such coverage, provided, however, if such coverage
cannot be continued by the Company, the Company shall pay to the Executive an
amount sufficient for the Executive to obtain substantially similar coverage for
a period of thirteen (13) weeks after the effective date of termination.
(2) Three to Ten Years. If the termination is after January 1, 2000 and prior to
January 1, 2007, the Executive shall be paid twenty-six (26) weeks of base
salary and automobile allowance, and the Company shall continue in effect for a
period of twenty-six (26) weeks after the effective date of the Executive's
termination, all health/life/disability insurance coverage provided to the
Executive and his immediate family on the day immediately prior to the date of
notice of termination or, if the Executive shall so elect, the Company shall pay
to the Executive an amount equal to the premium, or portion thereof allocable to
the Executive for providing such coverage, provided, however, if such coverage
cannot be continued by the Company, the Company shall pay to the Executive an
amount sufficient for the Executive to obtain substantially similar coverage for
a period of twenty-six (26) weeks after the effective date of termination.
(3) Ten or More Years. If the Termination is after January 1, 2007, the
Executive shall be paid fifty-two (52) weeks of base salary and automobile
allowance, and the Company shall continue in effect for a period of fifty-two
(52) weeks after the effective date of the Executive's termination, all
health/life/disability insurance coverage provided to the Executive and his
immediate family on the day immediately prior to the date of notice of
termination or, if the Executive shall so elect, the Company shall pay to the
Executive an amount equal to the premium, or portion thereof allocable to the
Executive for providing such coverage, provided, however, if such coverage
cannot be continued by the Company, the Company shall pay to the Executive an
amount sufficient for the Executive to obtain substantially similar coverage for
a period of fifty-two (52) weeks after the effective date of termination.
(4) Incentive Compensation. If the termination is on or after January 1, 1998,
the Executive shall also be entitled to a pro-rata portion of incentive
compensation, if any, earned by the Executive pursuant to the second sentence of
Section 3(b)) of this Agreement, which compensation shall be paid no later than
forty-five (45) days after the end of the Company's fiscal year.
(5) Severance Compensation Reduction. In the event termination is pursuant to
Section 4 (b) of this Agreement, Severance Compensation shall be reduced by the
4
<PAGE>
amount of any life insurance proceeds or disability insurance payments, as
appropriate, payable to the Executive or his personal representative or other
beneficiary as provided by this Agreement.
(6) Timing. The Company shall pay to the Executive or his legal representative
the sums payable to such Executive or his legal representative on account of the
portion of Severance Compensation consisting of base salary and automobile
allowance within fifteen (15) days after the earlier to occur of (i) the
effective date of termination or (ii) the date the Executive is no longer
expected to perform full time duties for the Company.
e. By the Executive. This Agreement may be terminated by the Executive, upon
notice given at least forty-five (45) days before the effective date of
termination. In such event, the Executive shall not be entitled to any
compensation under this Agreement for any period not worked after the
termination date.
f. For Cause. The Company may terminate this Agreement with cause by providing a
written notice to the Executive. In such event, the Executive shall not be
entitled to any compensation under this Agreement for the period after the
termination date, and any compensation paid to the Executive shall be net of any
sums owed by the Executive to the Company as a result of the act for which the
employment of the Executive was terminated. The circumstances under which the
Company will be deemed to have cause to terminate this Agreement include the
following:
(1) The Executive is convicted of or pleads nolo contendere to any crime, other
than a traffic offense or misdemeanor not involving moral turpitude;
(2) The Executive shall commit, with respect to the Company, an act of fraud or
embezzlement or shall have been grossly negligent in the performance of his
duties hereunder;
(3) The Executive engages in gross dereliction of duties, refusal to perform
assigned duties consistent with his position, or repeated violation of the
Company's policies after written warning; or
(4) The Executive engages in drug abuse.
g. Consulting Services. Upon termination of this Agreement, the Executive shall,
for a period of up to one year following the effective date of termination,
render such advisory or consulting services to the Company as it may reasonably
request, taking into account the Executive's health, business commitments,
geographical location and other relevant circumstances. The intent of this
paragraph is not to obligate the Executive to perform any day-to-day duties for
the Company following termination of his employment but only to assist
management in effecting a smooth transition of the functions or projects for
which the Executive was responsible while an employee of the Company. Should the
Executive fail to render such advisory or consulting services, after 30 days'
prior written notice to the Executive and the Executive's failure to commence
the rendering of such service, the Company's sole remedy shall be to terminate
any insurance coverages the Company is maintaining.
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h. Survival. Notwithstanding the termination of this Agreement, the Executive
acknowledges that he shall continue to be bound by the covenants in Sections 5
and 6 of this Agreement. The Executive shall not be entitled to any Severance
Compensation or benefits for any period he is in violation of the covenants in
Sections 5 or 6.
5. Covenant to Maintain Confidentiality.
a. The Executive acknowledges that because of his proposed employment with the
Company, he will be exposed to and learn a substantial amount of information
which is proprietary and confidential to the Company, whether or not he develops
or creates such information. The Executive further acknowledges that because of
his employment with South West, he was exposed to and learned a substantial
amount of information which is proprietary and confidential to South West,
whether or not he developed or created such information. The Executive
acknowledges that such proprietary and confidential information may include, but
is not limited to, acquisition or merger information; development projects;
business or investment opportunities; client lists; or any other information of
a similar nature made available to the Executive and not known in the trade in
which the Company is engaged, which, if misused or disclosed, could adversely
affect the business or standing of the Company. Confidential information shall
not include information that is generally known or generally available to the
public through no fault of the Executive.
b. The Executive agrees that except as required by law, he will not at any time
divulge to any person, agency, institution, company or other entity any
information which he knows or has reason to believe is proprietary or
confidential to the Company, including but not limited to the types of
information described in Section 5(a), or use such information to the
competitive disadvantage of the Company. The Executive agrees that his duties
and obligations under this Section 5 will continue for 12 months from the
termination of his employment or as long as such information remains proprietary
or confidential to the Company.
6. Non-Competition and Non-Solicitation Covenants.
a. The Executive acknowledges that i) he will be employed as a high-level
employee in an executive and managerial capacity; ii) his employment with the
Company gives him access to confidential and proprietary information concerning
the Company; iii) his prior employment with South West gave him access to
confidential and proprietary information concerning South West; iv) the
agreements and covenants contained in this Section 6 (the "Covenants") are
essential to protect the business of the Company and to protect the Company's
investment in South West; and v) the Executive is to receive consideration
pursuant to this Agreement and the Merger Agreement.
b. During the period of the Executive's employment, the Executive agrees that he
will not, on behalf of anyone other than the Company, engage in any managerial,
executive, sales, or marketing activities related to any business in which the
Company is or becomes engaged during the Executive's employment. The Executive
acknowledges the competitive nature of the business and the extensive geographic
markets served by the Company. The Executive acknowledges that because of his
position with the Company his duties will require him to perform, supervise, or
assist in performing work throughout the markets served by the Company. The
Executive further
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acknowledges that because of his position with the Company and the broad scope
of his duties, he will be in a position to cause substantial harm to the Company
were he to compete in the business of the Company or any other business in which
the Company is or becomes engaged during Executive's employment in the Company's
markets. Given the broad scope of Executive's duties, he acknowledges that the
geographic scope of the covenants in this paragraph shall be limited to the
continental United States.
c. Should the Executive (i) be terminated with or without cause following the
first 90 days of this Agreement, or (ii) resign from his employment or otherwise
terminate this Agreement at any time, he agrees that for a twelve (12) month
period following the termination of his employment with the Company, the
Executive shall not hire or solicit any employee of the Company employed at the
time of his termination, or encourage any such employee to leave such
employment.
d. If the Executive commits a material breach of, the Covenants, the Company
shall have the rights and remedy (in addition to, and not in lieu of, any other
rights and remedies available to the Company at law or in equity) to seek
injunctive relief, including permanent injunctions; (ii) to have the Covenants
specifically enforced by any court of competent jurisdiction (it being agreed
that any breach or threatened breach of the Covenants would cause irreparable
injury to the Company and that money damages would not provide an adequate
remedy to the Company; and (iii) to cease any severance payments or benefits
which the Executive or his eligible dependents may otherwise be due.
e. The Executive agrees that the Covenants are necessary for the reasonable and
proper protection of the Company and that the Covenants are reasonable in
respect of subject matter, length of time, and geographic scope. The Executive
further acknowledges that the Covenants will not unreasonably restrict him from
earning a livelihood following the termination of his employment with the
Company.
f. If any court of competent jurisdiction determines that the Covenants, or any
part thereof, are invalid or unenforceable, the remainder of the Covenants shall
not thereby be affected and shall be given full effect, without regard to the
invalid portions. In such event, the court shall have the power (and the parties
hereto request the court) to reduce or modify the duration or scope, or any
other unenforceable aspect of such provision, as the case may be, and, in its
reduced or modified form, enforce such provision to the maximum extent
permissible.
g. The provisions of this Section 6 so far as they relate to the period after
the end of the term of this Agreement shall continue to have effect and shall
operate as a separate agreement between the Company and the Executive; provided,
however, that the provisions of Section 6 (b) shall terminate.
7
7. Successors and Assigns.
a. The Executive acknowledges and agrees that this Agreement is a contract for
his personal services, he is not entitled to assign, subcontract, or transfer
any of the obligations imposed or benefits provided under this Agreement.
b. This Agreement shall be binding on and will inure to the benefit of any
successors or assigns of the Company.
8. Construction of Agreement.
a. This Agreement contains the complete agreement between the Executive and the
Company with respect to its subject matter. This Agreement supersedes all
previous and contemporaneous agreements, negotiations, commitments, writings,
and undertakings, and, effective as of the closing of the transactions
contemplated by the Merger Agreement, the South West Employment Agreement shall
terminate.
b. This Agreement shall be governed by and interpreted in accordance with the
laws of the Commonwealth of Virginia. Any dispute arising between the parties
related to or involving this Agreement will be litigated in a court having
jurisdiction in the Commonwealth of Virginia.
c. This Agreement may be modified or waived only by a writing signed by both
parties.
d. Any waiver of a breach of this Agreement will not constitute a waiver of any
future breach, whether of a similar or dissimilar nature.
e. The provisions of this Agreement shall be severable. If any court or agency
with authority to do so should determine that any part of this Agreement is
legally invalid, the remainder of this Agreement shall remain in effect. The
parties intend for this Agreement to be enforceable to the fullest extent
permitted by law.
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WE AGREE TO THIS:
UNITED DOMINION REALTY TRUST, INC.
a Virginia corporation
By: /s/ John P. McCann
-----------------------------
Its: President
-----------------------------
EXECUTIVE
/s/ DAVID L. JOHNSTON
- - --------------------------------
David L. Johnston
9
Exhibit 10(x)
UNITED DOMINION REALTY TRUST, INC.
(a Virginia corporation)
Common Stock and Preferred Stock
UNDERWRITING AGREEMENT
January 22, 1997
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
SCOTT & STRINGFELLOW, INC.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce Fenner & Smith
Incorporated
World Financial Center
North Tower
New York, New York 10281-1326
Dear Sirs:
United Dominion Realty Trust, Inc., a Virginia corporation (the
"Company"), proposes to issue and sell shares of common stock, par value $1.00
per share (the "Common Stock"), and shares of preferred stock without par value
(the "Preferred Stock") from time to time, in one or more offerings on terms to
be determined at the time of sale. Each series of Preferred Stock may vary as to
the specific number of shares, title, stated value, liquidation preference,
issuance price, ranking, dividend rate or rates (or method of calculation),
dividend payment dates, any redemption or sinking fund requirements, any
conversion provisions and any other variable terms as set forth in the
applicable Articles of Amendment to the Company's Articles of
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Incorporation (each, the "Articles of Amendment") relating to such series of
Preferred Stock. As used herein, "Securities" shall mean the Common Stock and
the Preferred Stock. As used herein, "you" and "your", unless the context
otherwise requires, shall mean the parties to whom this Agreement is addressed
together with the other parties, if any, identified in the applicable Terms
Agreement (as hereinafter defined) as additional co-managers with respect to
Underwritten Securities (as hereinafter defined) purchased pursuant thereto.
Whenever the Company determines to make an offering of Securities
through you or through an underwriting syndicate managed by you, the Company
will enter into an agreement (the "Terms Agreement") providing for the sale of
such Securities (the "Underwritten Securities") to, and the purchase and
offering thereof by, you and such other underwriters, if any, selected by you as
have authorized you to enter into such Terms Agreement on their behalf (the
"Underwriters", which term shall include you whether acting alone in the sale of
the Underwritten Securities or as a member of an underwriting syndicate and any
Underwriter substituted pursuant to Section 10 hereof). The Terms Agreement
relating to the offering of Underwritten Securities shall specify the number of
Underwritten Securities of each class or series to be initially issued (the
"Initial Underwritten Securities"), the names of the Underwriters participating
in such offering (subject to substitution as provided in Section 10 hereof), the
number of Initial Underwritten Securities which each such Underwriter severally
agrees to purchase, the names of such of you or such other Underwriters acting
as co-managers, if any, in connection with such offering, the price at which the
Initial Underwritten Securities are to be purchased by the Underwriters from the
Company, the initial public offering price, the time, date and place of delivery
and payment, any delayed delivery arrangements and any other variable terms of
the Initial Underwritten Securities (including, but not limited to, current
ratings (in the case of Preferred Stock only), designations, liquidation
preferences, conversion provisions, redemption provisions and sinking fund
requirements). In addition, each Terms Agreement shall specify whether the
Company has agreed to grant to the Underwriters an option to purchase additional
Underwritten Securities to cover over-allotments, if any, and the number of
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Underwritten Securities subject to such option (the "Option Securities"). As
used herein, the term "Underwritten Securities" shall include the Initial
Underwritten Securities and all or any portion of the Option Securities agreed
to be purchased by the Underwriters as provided herein, if any. The Terms
Agreement, which shall be substantially in the form of Exhibit A hereto, may
take the form of an exchange of any standard form of written telecommunication
between you and the Company. Each offering of Underwritten Securities through
you or through an underwriting syndicate managed by you will be governed by this
Agreement, as supplemented by the applicable Terms Agreement.
The Company has filed with the Securities and Exchange Com mission (the
"Commission") a registration statement on Form S-3 (No. 33-64275) for the
registration of the Securities (including the Underwritten Securities) and
certain of the Company's debt securities under the Securities Act of 1933, as
amended (the "1933 Act"), and the offering thereof from time to time in
accordance with Rule 415 of the rules and regulations of the Commission under
the 1933 Act (the "1933 Act Regulations"), and the Company has filed such
amendments thereto as may have been required prior to the execution of the
applicable Terms Agreement. Such registration statement (as amended, if
applicable) has been declared effective by the Commission. Such registration
statement (as amended, if applicable), on the one hand, and the prospectus
constituting a part thereof and each prospectus supplement relating to the
offering of Underwritten Securities provided to the Underwriters for use
(whether or not such prospectus supplement is required to be filed by the
Company pursuant to Rule 424(b) of the 1933 Act Regulations) (the "Prospectus
Supplement"), on the other hand, including in each case all documents
incorporated therein by reference, and the information, if any, deemed to be a
part thereof pursuant to Rule 430A(b) or Rule 434 of the 1933 Act Regulations,
as from time to time amended or supplemented pursuant to the 1933 Act, the
Securities Exchange Act of 1934, as amended (the "1934 Act"), or otherwise, are
referred to herein as the "Registration Statement" and the "Prospectus",
respectively; provided, however, that a Prospectus Supplement shall be deemed to
have supplemented the Prospectus only with respect to the offering of
Underwritten Securities to which it relates. All references in this Agreement
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to financial statements and schedules and other information which is
"contained," "included" or "stated" in the Registration Statement or the
Prospectus (and all other references of like import) shall be deemed to mean and
include all such financial statements and schedules and other information which
is or is deemed to be incorporated by reference in the Registration Statement or
the Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement or the Prospectus shall
be deemed to mean and include, without limitation, any document filed under the
1934 Act which is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be. If the Company
elects to rely on Rule 434 under the 1933 Act Regulations, all references to the
Prospectus shall be deemed to include, without limitation, the form of
prospectus and the abbreviated term sheet, taken together, provided to the
Underwriters by the Company in reliance on Rule 434 under the 1933 Act (the
"Rule 434 Prospectus"). If the Company files a registration statement to
register a portion of the Securities and relies on Rule 462(b) for such
registration statement to become effective upon filing with the Commission (the
"Rule 462 Registration Statement"), then any reference to "Registration
Statement" herein shall be deemed to be to both the registration statement
referred to above (No. 33-64275) and the Rule 462 Registration Statement, as
each such registration statement may be amended pursuant to the 1933 Act.
Section 1. Representations and Warranties.
(a) The Company represents and warrants to you, as of the date hereof,
and to you and each other Underwriter named in the applicable Terms Agreement,
as of the date thereof (such latter date being referred to herein as a
"Representation Date"), as follows:
(i) The Registration Statement and the Prospectus, at the time
the Registration Statement became effective, complied, and as of the
applicable Representation Date will comply, in all material respects
with the requirements of the 1933 Act and 1933 Act Regulations; the
Registration Statement, at the time the Registration Statement became
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effective, did not and as of the applicable Representation Date will
not, contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading; the Prospectus, as of the date
hereof does not, and as of the applicable Representation Date and at
Closing Time (as hereinafter defined) will not, include an untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
however, that the representations and warranties in this subsection
shall not apply to statements in or omissions from the Registration
Statement or the Prospectus made in reliance upon and in conformity
with information furnished to the Company in writing by any Underwriter
through you expressly for use in the Registration Statement or the
Prospectus.
(ii) The documents incorporated by reference in the Prospectus when
they became effective or were filed with the Commission, conformed in
all material respects to the requirements of the 1934 Act and the rules
and regulations of the Commission under the 1934 Act (the "1934 Act
Regulations"), and, when read together with the other information in
the Prospectus, at the time the Registration Statement became effective
and as of the applicable Representation Date or Closing Time or during
the period specified in Section 3(f), did not and will not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and any further documents so filed or incorporated by
reference in the Prospectus or any further amendment or supplement
thereto, when such documents become effective or are filed with the
Commission, as the case may be, will conform in all material respects
to the requirements of the 1934 Act and the rules and regulations of
the Commission thereunder and will not contain an untrue statement of a
material fact or omit to state a material fact required to
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be stated therein or necessary to make the statements therein not
misleading.
(iii) The accountants who certified the financial statements and
supporting schedules included in, or incorporated by reference in the
Prospectus are independent public accountants as required by the 1933
Act and the 1933 Act Regulations.
(iv) The financial statements and supporting schedules of the
Company and its subsidiaries included, or incorporated by reference in,
the Registration Statement and the Prospectus present fairly in all
material respects the financial position of the Company and its
subsidiaries as of the dates indicated and the results of their
operations for the periods specified; except as stated therein, said
financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis; and the
supporting schedules included or incorporated by reference in the
Registration Statement and the Prospectus present fairly in all
material respects the information required to be stated therein. Pro
forma financial statements of the Company and South West Property
Trust, Inc. ("South West") as adjusted as set forth therein and in the
notes thereto included in the Prospectus have been prepared in
accordance with the applicable requirements of the 1933 Act, the 1933
Act Regulations and AICPA guidelines with respect to pro forma
financial information and include all adjustments necessary to
summarize fairly the pro forma combined financial position of the
Company and Southwest at the dates indicated and the pro forma combined
results of their operations for the periods specified.
(v) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein, (A) there has been no material adverse change
or development involving a prospective material adverse change in or
affecting the condition, financial or otherwise, or in the earnings,
business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise, whether or
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not occurring in the ordinary course of business, (B) there have been
no transactions or acquisitions entered into by the Company or any of
its subsidiaries other than those arising in the ordinary course of
business, and (C) except for regular quarterly dividends on the
Company's shares of common stock, or dividends declared, paid or made
in accordance with the terms of any series of the Company's preferred
stock, there has been no dividend or distribution of any kind declared,
paid or made by the Company on any series of its common stock or
preferred stock.
(vi) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the Commonwealth of
Virginia, with full power and authority to own, lease and operate its
properties and conduct its business as described in the Prospectus; and
the Company is duly qualified to transact business in all jurisdictions
in which the conduct of its business requires such qualification except
where the failure to so qualify would not have a material adverse
effect on the condition, financial or otherwise, or the earnings,
business affairs or business prospects of the Company.
(vii) Each subsidiary of the Company has been duly organized and is
validly existing as a corporation, limited liability company, limited
partnership or real estate investment trust in good standing under the
laws of the jurisdiction of its incorporation or organization, with
power and authority to own, lease and operate its properties and
conduct its business as described in the Prospectus and is duly
qualified to transact business in all jurisdictions in which the
conduct of its business requires such qualification except where the
failure to so be in good standing would not have a material adverse
effect on the condition, financial or otherwise, or the earnings,
business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise; each such subsidiary is
duly qualified to transact business in all jurisdictions in which the
conduct of its business requires such qualification, or in which the
failure to qualify would have a materially adverse effect upon the
business of such
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subsidiary; all of the issued and outstanding shares of capital stock
of each such corporate subsidiary and all of the issued and outstanding
shares of beneficial interest of each such real estate investment trust
subsidiary have been duly authorized and validly issued, are fully paid
and non-assessable and are owned by the Company free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or
equity; and the Company and/or one such corporate subsidiary are the
only members or general partners of the Company's limited liability
company or limited partnership subsidiaries, as applicable, and own the
entire membership or general partnership interest in each such
subsidiary free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity.
(viii) The authorized, issued and outstanding shares of common and
preferred stock of the Company are as set forth in the Prospectus under
"Capitalization" (except for subsequent issuances, if any, pursuant to
reservations, agreements or the exercise of convertible securities
referred to in the Registration Statement including, without
limitation, exercise of stock options, granting of stock options or
issuance of shares pursuant to the dividend reinvestment plan); and
such shares of common stock and preferred stock of the Company have
been duly authorized and validly issued and are fully paid and
non-assessable and are not subject to preemptive or other similar
rights.
(ix) The applicable Underwritten Securities have been duly
authorized by the Company for issuance and sale pursuant to this
Agreement and, when issued and delivered pursuant to this Agreement
against payment of the consideration therefor specified in the
applicable Terms Agreement or any Delayed Delivery Contract (as
hereinafter defined), such Underwritten Securities will be duly and
validly issued, fully paid and non-assessable; the Preferred Stock, if
applicable, conforms to the provisions of the Articles of Amendment;
such Underwritten Securities conform in all material respects to all
statements relating thereto contained in the Prospectus; and the
issuance of such
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Underwritten Securities is not subject to preemptive
or other similar rights.
(x) If applicable, the shares of Common Stock issuable upon
conversion of any of the Preferred Stock will have been duly and
validly authorized and reserved for issuance upon such conversion or
exercise by all necessary corporate action and such shares, when issued
upon such conversion or exercise, will be duly and validly issued,
fully paid and non-assessable, and the issuance of such shares upon
such conversion or exercise will not be subject to preemptive or other
similar rights; the Common Stock so issuable conforms in all material
respects to all statements relating thereto contained in the
Prospectus.
(xi) Neither the Company nor any of its subsidiaries is in
violation of its Articles of Incorporation or By-Laws or in default in
the performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan
agreement, note, lease (other than as disclosed in the Prospectus) or
other instrument to which the Company or any of its subsidiaries is a
party or by which it or any of them may be bound, or to which any of
the property or assets of the Company or any of
its subsidiaries is subject and which default is of material
significance in respect of the business or financial condition of the
Company and its subsidiaries considered as one enterprise; and the
execution, delivery and performance of this Agreement and the
applicable Terms Agreement and the consummation of the transactions
contemplated herein and therein and compliance by the Company with its
obligations hereunder and thereunder have been duly authorized by all
necessary corporate action on the part of the Company, and will not
conflict with or constitute a breach of, or default under, or result in
the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its
9
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subsidiaries pursuant to any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which the Company or any
of its subsidiaries is a party or by which it or any of them may be
bound, or to which any property or assets of the Company or any of its
subsidiaries is subject, or result in any violation of the Articles of
Incorporation or By-Laws of the Company or any law, administrative
regulation or administrative or court decree.
(xii) With respect to all tax periods regarding which the
Internal Revenue Service is or will be entitled to assert any claim,
the Company has met the requirements for qualification as a real estate
investment trust under Sections 856 through 860 of the Internal Revenue
Code of 1986, as amended (the "Code"), and the Company's present and
contemplated operations, assets and income continue to meet such
requirements.
(xiii) The Company is not and, after giving effect to the
offering and sale of the Underwritten Securities, will not be an
"investment company" or an entity "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act").
(xiv) The conditions for use of registration statements on
Form S-3 set forth in the General Instructions on Form S-3 have been
satisfied and the Company is entitled to use such form for the
transaction contemplated herein and in any applicable Terms Agreement.
(xv) There is no action, suit or proceeding before or by any
court or governmental agency or body, domestic or foreign, now pending,
or, to the knowledge of the Company, threatened against the Company or
any of its subsidiaries which is required to be disclosed in the
Prospectus (other than as disclosed therein) or which might result in
any material adverse change in the condition, financial or
otherwise, or in the earnings, business affairs or business prospects
of the Company and its subsidiaries considered as one enterprise, or
which might materially and adversely affect the properties or assets
thereof or which might materially and adversely affect the consummation
of this Agreement or the applicable Terms Agreement or the transactions
contemplated herein and therein; all pending legal or governmental
proceedings to which the Company or
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any of its subsidiaries is a party or of which any of their respective
property is the subject which are not described in the Prospectus,
including ordinary routine litigation incidental to the business, are,
considered in the aggregate, not material; and there are no contracts
or documents of the Company or any of its subsidiaries which would be
required to be filed as exhibits to the Registration Statement by the
1933 Act or by the 1933 Act Regulations which have not been filed as
exhibits to the Registration Statement.
(xvi) No authorization, approval or consent of any
governmental authority or agency is necessary in connection with the
consummation by the Company of the transactions contemplated by this
Agreement or the applicable Terms Agreement, except such as may be
required under the 1933 Act or the 1933 Act Regulations or state
securities or Blue Sky laws.
(xvii) The Company has full right, power and authority to
enter into this Agreement, the applicable Terms Agreement and the
Delayed Delivery Contracts, if any, and this Agreement has been, and as
of the applicable Representation Date, the applicable Terms Agreement
and the Delayed Delivery Contracts, if any, will have been, duly
authorized, executed and delivered by the Company.
(xviii) The Company and its subsidiaries have good and
marketable title to, or valid and enforceable leasehold estates in, all
items of real and personal property referred to in the Prospectus as
owned or leased by them, in each case free and clear of all liens,
encumbrances, claims, security interests and defects, other than those
referred to in the Prospectus or which are not material in amount. Each
lease of real property by the Company or any of its subsidiaries as
lessor requiring annual lease payments in excess of $100,000 is the
legal, valid and binding obligation of the lessee in accordance with
its terms (except that the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to
equitable defenses and to the discretion of the
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court before which any proceeding therefor may be brought and to the
Bankruptcy Act) and the rents which at present have remained due and
unpaid for more than 30 days are not payable under leases such that,
were no further rental payments to be received under such leases, the
financial condition or results of operations of the Company and its
subsidiaries would be materially adversely affected thereby. The
Company has no reason to believe that the lessee under any lease
(excluding leases for which rent payments due for the remainder of such
lease are less than $500,000) calling for annual lease payments in
excess of $500,000 is not financially capable of performing its
obligations thereunder.
(xix) The Company has filed all Federal, local and foreign
income tax returns which have been required to be filed and has paid
all taxes indicated by said returns and all assessments received by it
to the extent that such taxes have become due and are not being
contested in good faith.
(xx) The Company and each of its subsidiaries hold all
material licenses, certificates and permits from governmental
authorities which are necessary to the conduct of their respective
businesses; and neither the Company nor any of its subsidiaries has
infringed any patents, patent rights, trade names, trademarks or
copyrights, which infringement is material to the business of the
Company or any of its subsidiaries.
(xxi) The Company has no knowledge of (a) the unlawful
presence of any hazardous substances, hazardous materials, toxic
substances or waste materials (collectively, "Hazardous Materials") on
any of the properties owned by it or any of its subsidiaries, or of (b)
any unlawful spills, releases, discharges or disposal of Hazardous
Materials that have occurred or are presently occurring off such
properties as a result of any construction on or operation and use of
such properties which presence or occurrence would materially adversely
affect the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company or any of its
subsidiaries. In
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connection with the construction on or operation and use of the
properties owned by the Company or any of its subsidiaries, the Company
represents that it has no knowledge of any material failure to comply
with all applicable local, state and federal environmental laws,
regulations, ordinances and administrative and judicial orders relating
to the generation, recycling, reuse, sale, storage, handling, transport
and disposal of any Hazardous Materials.
(b) Any certificate signed by any officer of the Company and delivered
to you or to counsel for the Underwriters in connection with the offering of the
Underwritten Securities shall be deemed a representation and warranty by the
Company to each Underwriter participating in such offering as to the matters
covered thereby on the date of such certificate and at each Representation Date
subsequent thereto.
Section 2. Purchase and Sale.
(a) The several commitments of the Underwriters to purchase the
Underwritten Securities pursuant to the applicable Terms Agreement shall be
deemed to have been made on the basis of the representations and warranties
herein contained and shall be subject to the terms and conditions herein set
forth.
(b) In addition, on the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company may grant, if so provided in the applicable Terms Agreement relating to
the Initial Underwritten Securities, an option to the Underwriters named in such
Terms Agreement, severally and not jointly, to purchase up to the number of
Option Securities set forth therein at the same price per Option Security as is
applicable to the Initial Underwritten Securities less an amount equal to any
dividend paid by the Company and payable on the Initial Underwritten Securities
and not payable on such Option Securities. Such option, if granted, will expire
30 days (or such lesser number of days as may be specified in the applicable
Terms Agreement) after the Representation Date relating to the
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Initial Underwritten Securities, and may be exercised in whole or in part from
time to time only for the purpose of covering over-allotments which may be made
in connection with the offering and distribution of the Initial Underwritten
Securities upon notice by you to the Company setting forth the number of Option
Securities as to which the several Underwriters are then exercising the option
and the time and date of payment and delivery for such Option Securities. Any
such time, date and place of delivery (a "Date of Delivery") shall be determined
by you, but shall not be later than seven full business days nor earlier than
two full business days after the exercise of said option, nor in any event prior
to Closing Time, unless otherwise agreed upon by you and the Company. If the
option is exercised as to all or any portion of the Option Securities, each of
the Underwriters, acting severally and not jointly, will purchase that
proportion of the total number of Option Securities then being purchased which
the number of Initial Underwritten Securities each such Underwriter has
severally agreed to purchase as set forth in the applicable Terms Agreement
bears to the total number of Initial Underwritten Securities (except as
otherwise provided in the applicable Terms Agreement), subject to such
adjustments as you in your discretion shall make to eliminate any sales or
purchases of fractional Underwritten Securities.
(c) Payment of the purchase price for, and delivery of, the
Underwritten Securities to be purchased by the Underwriters shall be made at the
office of Brown & Wood LLP, 58th Floor, One World Trade Center, New York, New
York 10048-0557, or at such other place as shall be agreed upon by you and the
Company, at 9:00 A.M., New York City time, on the third business day (unless
postponed in accordance with the provisions of Section 10 herein) following the
date of the applicable Terms Agreement or, if pricing takes place after 4:30
P.M., New York City time on the date of the applicable Terms Agreement, on the
fourth business day (unless postponed in accordance with the provisions of
Section 10) following the date of the applicable Terms Agreement or at such
other time as shall be agreed upon by you and the Company (each such time and
date of payment and delivery being referred to herein as the "Closing Time"). In
addition, in the event that any or all of the Option Securities are purchased by
the Underwriters, payment of the purchase price for, and delivery
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of certificates representing, such Option Securities, shall be made at the
above-mentioned offices of Brown & Wood LLP, or at such other place as shall be
agreed upon by you and the Company on each Date of Delivery as specified in the
notice from you to the Company. Unless otherwise specified in the applicable
Terms Agreement, payment shall be made to the Company by certified or official
bank check or checks in New York Clearing House funds payable to the order of
the Company against delivery to you for the respective accounts of the
Underwriters of the certificates for the Underwritten Securities to be purchased
by them. The Underwritten Securities shall be in such authorized denominations
and registered in such names as you may request in writing at least one business
day prior to the Closing Time or Date of Delivery, as the case may be. The
Underwritten Securities, which may be in temporary form, will be made available
for examination and packaging by you on or before 3:00 P.M. on the first
business day prior to the Closing Time or the Date of Delivery, as the case may
be.
If authorized by the applicable Terms Agreement, the Underwriters named
therein may solicit offers to purchase Underwritten Securities from the Company
pursuant to delayed delivery contracts ("Delayed Delivery Contracts")
substantially in the form of Exhibit B hereto with such changes therein as the
Company may approve. As compensation for arranging Delayed Delivery Contracts,
the Company will pay to you at Closing Time, for the respective accounts of the
Underwriters, a fee specified in the applicable Terms Agreement for each of the
Underwritten Securities for which Delayed Delivery Contracts are made at the
Closing Time as is specified in the applicable Terms Agreement. Any Delayed
Delivery Contracts are to be with institutional investors of the types described
in the Prospectus. At the Closing Time, the Company will enter into Delayed
Delivery Contracts (for not less than the minimum number of Underwritten
Securities per Delayed Delivery Contract specified in the applicable Terms
Agreement) with all purchasers proposed by the Underwriters and previously
approved by the Company as provided below, but not for an aggregate number of
Underwritten Securities in excess of that specified in the applicable Terms
Agreement. The Underwriters will not have any responsibility for the validity or
performance of Delayed Delivery Contracts.
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You shall submit to the Company, at least two business days prior to
the Closing Time, the names of any institutional investors with which it is
proposed that the Company will enter into Delayed Delivery Contracts and the
number of Underwritten Securities to be purchased by each of them, and the
Company will advise you, at least one business day prior to the Closing Time, of
the names of the institutions with which the making of Delayed Delivery
Contracts is approved by the Company and the number of Underwritten Securities
to be covered by each such Delayed Delivery Contract.
The number of Underwritten Securities agreed to be purchased by the
several Underwriters pursuant to the applicable Terms Agreement shall be reduced
by the number of Underwritten Securities covered by Delayed Delivery Contracts,
as to each Underwriter as set forth in a written notice delivered by you to the
Company; provided, however, that the total number of Underwritten Securities to
be purchased by all Underwriters shall be the total number of Underwritten
Securities covered by the applicable Terms Agreement, less the number of
Underwritten Securities covered by Delayed Delivery Contracts.
Section 3. Covenants of the Company. The Company covenants with you,
and with each Underwriter participating in the offering of Underwritten
Securities, as follows:
(a) If the Company does not elect to rely on Rule 434 under the 1933
Act Regulations, immediately following the execution of the applicable Terms
Agreement, the Company will prepare a Prospectus Supplement setting forth the
number of Underwritten Securities covered thereby and their terms not otherwise
specified in the Prospectus pursuant to which the Underwritten Securities are
being issued, the names of the Underwriters participating in the offering and
the number of Underwritten Securities which each severally has agreed to
purchase, the names of the Underwriters acting as co-managers in connection with
the offering, the price at which the Underwritten Securities are to be purchased
by the Underwriters from the Company, the initial public offering price, if any,
the selling concession and reallowance, if any, any delayed delivery
arrangements, and such other information as you and the Company deem appropriate
in
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connection with the offering of the Underwritten Securities; and the Company
will promptly transmit copies of the Prospectus Supplement to the Commission for
filing pursuant to Rule 424(b) of the 1933 Act Regulations and will furnish to
the Underwriters named therein as many copies of the Prospectus (including such
Prospectus Supplement) as you shall reasonably request. If the Company elects to
rely on Rule 434 under the 1933 Act Regulations, immediately following the
execution of the applicable Terms Agreement, the Company will prepare an
abbreviated term sheet that complies with the requirements of Rule 434 under the
1933 Act Regulations and will provide the Underwriters with copies of the form
of Rule 434 Prospectus, in such number as you shall reasonably request, and, if
necessary, promptly file or transmit for filing with the Commission the form of
Prospectus complying with Rule 434(c)(2) of the 1933 Act Regulations in
accordance with Rule 424(b) of the 1933 Act Regulations.
(b) The Company will notify you immediately, and confirm such notice in
writing, of (i) the effectiveness of any amendment to the Registration
Statement, (ii) the transmittal to the Commission for filing of any Prospectus
Supplement or other supplement or amendment to the Prospectus to be filed
pursuant to the 1934 Act, (iii) the receipt of any comments from the Commission,
(iv) any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for additional
information, and (v) the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose; and the Company will make every reasonable effort
to prevent the issuance of any such stop order and, if any stop order is issued,
to obtain the lifting thereof at the earliest possible moment.
(c) At any time when the Prospectus is required to be delivered under
the 1933 Act or the 1934 Act in connection with sales of the Underwritten
Securities, the Company will give you notice of its intention to file or prepare
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus, whether pursuant to the 1933 Act, 1934 Act or otherwise
(including any revised prospectus which the Company
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proposes for use by the Underwriters in connection with an offering of
Underwritten Securities which differs from the Prospectus on file at the
Commission at the time the Registration Statement first becomes effective,
whether or not such revised prospectus is required to be filed pursuant to Rule
424(b) of the 1933 Act Regulations, or any abbreviated term sheet prepared in
reliance on Rule 434 of the 1933 Act Regulations), and will furnish you with
copies of any such amendment or supplement or other documents proposed to be
filed or used a reasonable amount of time prior to such proposed filing and,
unless required by law, will not file or use any such amendment or supplement or
other documents in a form to which you or counsel for the Underwriters shall
reasonably object.
(d) The Company will deliver to each Underwriter a signed copy of the
Registration Statement as originally filed and of each amendment thereto
(including exhibits filed therewith and documents incorporated by reference
therein pursuant to Item 12 of Form S-3 under the 1933 Act) as you reasonably
request and will also deliver to each Underwriter a conformed copy of the
Registration Statement as originally filed and of each amendment thereto
(including documents incorporated by reference but without exhibits).
(e) The Company will furnish to each Underwriter, from time to time
during the period when the Prospectus is required to be delivered under the 1933
Act or the 1934 Act in connection with sales of the Underwritten Securities,
such number of copies of the Prospectus (as amended or supplemented) as such
Underwriter may reasonably request for the purposes contemplated by the 1933
Act, the 1933 Act Regulations, the 1934 Act or the 1934 Act Regulations.
(f) If at any time when the Prospectus is required to be delivered
under the 1933 Act or the 1934 Act in connection with sales of the Underwritten
Securities any event shall occur or condition exist as a result of which it is
necessary, in the opinion of counsel for the Underwriters, to amend or
supplement the Prospectus in order that the Prospectus will not include an
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein not
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misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend or supplement the Registration Statement or
the Prospectus in order to comply with the requirements of the 1933 Act or the
1933 Act Regulations, then the Company will promptly prepare and file with the
Commission such amendment or supplement, whether by filing documents pursuant to
the 1933 Act, the 1934 Act or otherwise, as may be necessary to correct such
untrue statement or omission or to make the Registration Statement and
Prospectus comply with such requirements.
(g) If necessary, the Company will endeavor, in cooperation
with the Underwriters, to qualify the Underwritten Securities and the Common
Stock issuable upon conversion of the Preferred Stock, if any, for offering and
sale under the applicable securities laws and real estate syndication laws of
such states and other jurisdictions of the United States as you may designate;
and in each jurisdiction in which the Underwritten Securities and the Common
Stock issuable upon conversion of the Preferred Stock, if any, have been so
qualified, the Company will file such statements and reports as may be required
by the laws of such jurisdiction to continue such qualification in effect for so
long as may be required for the distribution of the Underwritten Securities and
the Common Stock issuable upon conversion of the Preferred Stock, if any;
provided, however, that the Company shall not be obligated to qualify as a
foreign corporation in any jurisdiction where it is not so qualified.
(h) With respect to each sale of Underwritten Securities, the Company
will make generally available to its security holders as soon as practicable,
but not later than 90 days after the close of the period covered thereby, an
earnings statement (in form complying with the provisions of Rule 158 of the
1933 Act Regulations) covering a twelve month period beginning not later than
the first day of the Company's fiscal quarter next following the "effective
date" (as defined in such Rule 158) of the Regis tration Statement.
(i) The Company will continue to elect to qualify as a "real estate
investment trust" under the Code and will use its
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best efforts to continue to meet the requirements to qualify as a "real estate
investment trust."
(j) The Company, during the period when the Prospectus is required to
be delivered under the 1933 Act or the 1934 Act in connection with sales of the
Underwritten Securities, will file promptly all documents required to be filed
with the Commission pursuant to Section 13, 14 or 15 of the 1934 Act within the
time periods prescribed by the 1934 Act and the 1934 Act Regulations.
(k) The Company will not, during a period of 90 days from the date of
the applicable Terms Agreement, with respect to the Underwritten Securities
covered thereby, without your prior written consent, offer or sell, grant any
option for the sale of, or enter into any agreement to sell, any securities of
the same class or series or ranking on a parity with such Underwritten
Securities (other than the Underwritten Securities which are to be sold pursuant
to such Terms Agreement), or if such Terms Agreement relates to Preferred Stock
that is convertible into Common Stock, any Common Stock or any security
convertible into Common Stock (except for Common Stock issued for property
acquisitions or grants of options or issuance of shares upon exercise of options
or issuance under employee benefit plans), except as may otherwise be provided
in the applicable Terms Agreement.
(l) If the applicable Terms Agreement relates to Common Stock, the
Company will cause each officer of the Company who owns Common Stock to agree
not to offer for sale, sell or otherwise dispose of any shares of Common Stock
during the 90 days following the date of such Terms Agreement without your prior
written consent.
(m) If the Preferred Stock is convertible into Common Stock, the
Company will reserve and keep available at all times, free of preemptive rights
or other similar rights, a sufficient number of shares of Common Stock for the
purpose of enabling the Company to satisfy any obligations to issue such shares
upon conversion of the Preferred Stock.
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(n) If the Preferred Stock is convertible into Common Stock, the
Company will use its best efforts to list the shares of Common Stock issuable
upon conversion of the Preferred Stock on the New York Stock Exchange or such
other national exchange on which the Company's Common Stock is then listed.
(o) The Company will use its best efforts to list the Underwritten
Securities on the New York Stock Exchange.
(p) The Company will use the net proceeds received by it from the sale
of the Underwritten Securities in the manner specified in the Prospectus under
the caption "Use of Proceeds."
Section 4. Payment of Expenses. The Company will pay all expenses
incident to the performance of its obligations under this Agreement or the
applicable Terms Agreement, including (i) the printing and filing of the
Registration Statement as originally filed and of each amendment thereto, (ii)
the cost of printing, filing and distributing to the Underwriters copies of this
Agreement and the applicable Terms Agreement, (iii) the preparation, issuance
and delivery of the Underwritten Securities to the Underwriters, (iv) the fees
and disbursements of the Company's counsel and accountants, (v) if applicable,
the qualification of the Underwritten Securities and the Common Stock issuable
upon conversion of the Preferred Stock, if any, under securities laws and real
estate syndication laws in accordance with the provisions of Section 3(g),
including filing fees and the fees and disbursements of counsel for the
Underwriters in connection therewith and in connection with the preparation of
the Blue Sky Survey, if any, (vi) the printing and delivery to the Underwriters
of copies of the Registration Statement as originally filed and of each
amendment thereto, and of the Prospectus and any amendments or supplements
thereto, including each abbreviated term sheet delivered by the Company pursuant
to Rule 434 of the 1933 Act Regulations, (vii) the cost of reproducing and
distributing to the Underwriters copies of the Blue Sky Survey, if any, (viii)
any fees charged by nationally recognized statistical rating organizations for
the rating of the Underwritten Securities, (ix) the fees and expenses, if any,
incurred with respect to the listing of the Underwritten Securities or the
Common Stock issuable upon conversion of the
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Preferred Stock, if any, on any national securities exchange, and (x) the fees
and expenses, if any, incurred with respect to any filing with the National
Association of Securities Dealers, Inc.
If the applicable Terms Agreement is canceled or terminated by you in
accordance with the provisions of Section 5 or Section 9(b)(i), the Company
shall reimburse the Underwriters named in such Terms Agreement for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the Underwriters.
Section 5. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase Underwritten Securities pursuant to
the applicable Terms Agreement are subject to the accuracy of the
representations and warranties of the Company herein contained, to the accuracy
of the statements of the Company's officers made in any certificate pursuant to
the provisions hereof, to the performance by the Company of all of its covenants
and other obligations hereunder, and to the following further conditions:
(a) At Closing Time, (i) no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission and (ii) if
Preferred Stock is being offered, the rating assigned by any nationally
recognized statistical rating organization to any preferred stock of the Company
as of the date of the applicable Terms Agreement shall not have been lowered
since such date nor shall any such rating organization have publicly announced
that it has placed the Company on what is commonly termed a "watch list" for
possible downgrading.
(b) At Closing Time, you shall have received:
(1) The favorable opinion, dated as of Closing Time, of Hunton
& Williams, counsel for the Company, in form and substance satisfactory
to counsel for the Underwriters, to the effect that:
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(i) The Company has been duly organized and is validly
existing as a corporation and in good standing under the laws
of the Commonwealth of Virginia, with corporate power and
authority to own its properties and conduct its business as
described in the Prospectus as amended or supplemented.
(ii) The Company is duly qualified to transact business in
all jurisdictions in which the conduct of its business
requires such qualification, or in which the failure to
qualify would have a materially adverse effect upon the
business of the Company.
(iii) Each subsidiary of the Company has been duly
organized and is validly existing as a corporation, limited
liability company, limited partnership or real estate
investment trust in good standing under the laws of the
jurisdiction of its incorporation or organization, with power
and authority to own, lease and operate its properties and
conduct its business as described in the Prospectus and is
duly qualified to transact business in all jurisdictions in
which the conduct of its business requires such qualification
except where the failure to so be in good standing would not
have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business
prospects of the Company and its subsidiaries, considered as
one enterprise; each such subsidiary is duly qualified to
transact business in all jurisdictions in which the conduct of
its business requires such qualification, or in which the
failure to qualify would have a materially adverse effect upon
the business of such subsidiary; all of the issued and
outstanding shares of capital stock of each such corporate
subsidiary and all of the issued and outstanding shares of
beneficial interest of each such real estate investment trust
subsidiary have been duly authorized and validly issued, are
fully paid and non-assessable and are owned by the Company
free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; and the Company and/or
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one such corporate subsidiary are the only members or general
partners of the Company's limited liability company or limited
partnership subsidiaries, as applicable, and own the entire
membership or general partnership interest in each such
subsidiary free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity.
(iv) The Company has authorized and outstanding capital
stock as set forth in the Prospectus under "Capitalization"
(except for subsequent issuances, if any, pursuant to
reservations, agreements or the exercise of convertible
securities referred to in the Registration Statement
including, without limitation, exercise of stock options,
granting of stock options or issuance of shares pursuant to
the Company's dividend reinvestment plan); the authorized
capital stock of the Company has been duly authorized; and the
outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid and
non-assessable and are not subject to preemptive or other
similar rights arising by operation of law or, to the best of
such counsel's knowledge, otherwise.
(v) The applicable Underwritten Securities have been duly
authorized for issuance, offer and sale pursuant to this
Agreement and, when issued and delivered pursuant to the
provisions of this Agreement against payment of the
consideration therefor specified in the applicable Terms
Agreement or the Delayed Delivery Contracts, the applicable
Underwritten Securities will be validly issued, fully paid and
non-assessable; and the Preferred Stock, if applicable,
conforms to the provisions of the Articles of Amendment.
(vi) If applicable, the shares of Common Stock issuable upon
conversion of any of the Preferred Stock have been duly and
validly authorized and reserved for issuance upon such
conversion or exercise by all necessary corporate action and
such shares, when issued
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upon such conversion or exercise, will be duly and validly
issued and will be fully paid and non-assessable, and the
issuance of such shares upon such conversion or exercise will
not be subject to preemptive or other similar rights arising
by operation of law or, to the best of such counsel's
knowledge, otherwise.
(vii)Each of this Agreement, the applicable Terms
Agreement and the Delayed Delivery Contracts, if any, has been
duly authorized, executed and delivered by the Company.
(viii)The Registration Statement is effective under the
1933 Act and, to the best of such counsel's knowledge, no stop
order suspending the effectiveness of the Registration
Statement has been issued under the 1933 Act or proceedings
therefor initiated or threatened by the Commission.
(ix) The Registration Statement and the Prospectus,
excluding the documents incorporated by reference therein, as
of their respective effective or issue dates, comply as to
form in all material respects with the requirements of the
1933 Act and the 1933 Act Regulations; it being understood,
however, that no opinion need be rendered with respect to the
financial statements, schedules and other financial and
statistical data included or incorporated by reference in the
Registration Statement or the Prospectus. If applicable, the
Rule 434 Prospectus conforms in all material respects to the
requirements of Rule 434 under the 1933 Act Regulations.
(x) Each document filed pursuant to the 1934 Act (other
than the financial statements, schedules and other financial
and statistical data included therein, as to which no opinion
need be rendered) and incorporated or deemed to be
incorporated by reference in the Prospectus complied when so
filed (or as when amended prior to the Representation Date) as
to form in
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all material respects with the 1934 Act and the
1934 Act Regulations.
(xi) If applicable, the relative rights, preferences,
interests and powers of the Preferred Stock are as set forth
in the Articles of Amendment relating thereto, and all such
provisions are valid under applicable Virginia law; and the
form of certificate used to evidence the Preferred Stock is in
due and proper form under applicable Virginia law, and
complies in all material respects with all applicable
statutory requirements.
(xii) The Underwritten Securities and, if applicable, the
Common Stock issuable upon conversion of the Preferred Stock
conform in all material respects to the statements relating
thereto contained in the Prospectus.
(xiii) To the best of such counsel's knowledge and
information, there are no legal or governmental proceedings
pending or threatened which are required to be disclosed in
the Prospectus, other than those dis closed therein, and all
pending legal or governmental proceedings to which the Company
or any of its subsidiaries is a party or of which any of the
property of the Company or its subsidiaries is the subject
which are not described in the Prospectus, including ordinary
routine litigation incidental to the business, are, considered
in the aggregate, not material to the business of the Company
and its subsidiaries considered as one enterprise.
(xiv) To the best of such counsel's knowledge and
information, there are no contracts, indentures, mortgages,
loan agreements, notes, leases or other instruments required
to be described or referred to in the Registration Statement
or the Prospectus or to be filed as exhibits to the
Registration Statement other than those described or referred
to therein or filed as exhibits thereto, the descriptions
thereof or
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<PAGE>
references thereto are correct, and, to the best of
such counsel's knowledge and information, no default exists in
the due performance or observance of any obligation,
agreement, covenant or condition contained in any contract,
indenture, mortgage, loan agreement, note, lease or other
instrument so described, referred to or filed which would have
a material adverse effect on the condition, financial or
otherwise, or on the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as
one enterprise.
(xv) No authorization, approval or consent of any court or
governmental authority or agency is required that has not been
obtained in connection with the consummation by the Company of
the transactions contemplated by this Agreement and the
applicable Terms Agreement, except such as may be required
under the 1933 Act, the 1934 Act and state securities laws or
real estate syndication laws; and to the best of such
counsel's knowledge and information, the execution and
delivery of this Agreement and the applicable Terms Agreement
and the consummation of the transactions contemplated herein
and therein and compliance by the Company with its obligations
hereunder and thereunder will not conflict with or constitute
a breach of, or default under or result in the creation or
imposition of any lien, charge or encumbrance upon any
property or assets of the Company or any of its subsidiaries
pursuant to any contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which the Company or any of
its subsidiaries is a party or by which they may be bound or
to which any of the property or assets of the Company or any
of its subsidiaries is subject, nor will such action result in
violation of the provisions of the Articles of Incorporation
or ByLaws of the Company or any law, administrative regulation
or court decree.
(xvi) The Company is not required to be registered
under the 1940 Act.
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(xvii) The statements under the caption "Description of
Capital Stock" in the Prospectus, insofar as such statements
constitute a summary of documents referred to therein or
matters of law, are accurate summaries and fairly and
correctly present the information called for with respect to
such documents and matters.
(2) The favorable opinion, dated as of Closing Time, of Hunton
& Williams, counsel for the Company, in form and substance satisfactory
to counsel for the Underwriters, to the effect that the Company has
qualified to be taxed as a real estate investment trust pursuant to
Sections 856 through 860 of the Code for its most recently ended fiscal
year and for the four fiscal years immediately preceding such year, and
the Company's organization and contemplated method of operation are
such as to enable it to continue to so qualify for its current fiscal
year.
(3) The favorable opinion, dated as of the Closing Time, of
Brown & Wood LLP, counsel for the Underwriters, with respect to the
matters set forth in (i), (v) to (ix), inclusive, and (xii) of
subsection (b)(1) of this Section. In rendering their opinion, Brown &
Wood LLP may rely as to matters of Virginia law upon the opinion of
Hunton & Williams.
(4) In giving their opinions required by subsections (b)(1)
and (b)(3), respectively, of this Section, Hunton & Williams and Brown
& Wood LLP shall each additionally state that nothing has come to their
attention that would lead them to believe that the Registration
Statement or any amendment thereto (excluding the financial statements
and financial schedules included or incorporated by reference therein,
as to which such counsel need express no belief), at the time it became
effective or at the time an Annual Report on Form 10-K was filed by the
Company with the Commission (whichever is later), or at the
Representation Date, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that the
Prospectus or any amendment or
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<PAGE>
supplement thereto (excluding the financial statements and financial
schedules included or incorporated by reference therein, as to which
such counsel need express no belief), at the Representation Date or at
Closing Time, included or includes an untrue statement of a material
fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading.
(c) At Closing Time, there shall not have been, since the date of the
applicable Terms Agreement or since the respective dates as of which information
is given in the Prospectus, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise,
whether or not arising in the ordinary course of business; and you shall have
received a certificate of the President and Chief Executive Officer and the
Executive Vice President and Chief Financial Officer of the Company, dated as of
such Closing Time, to the effect that (i) there has been no such material
adverse change and (ii) the representations and warranties in Section 1 are true
and correct with the same force and effect as though such Closing Time were a
Representation Date. As used in this Section 5(c), the term "Prospectus" means
the Prospectus in the form first used to confirm sales of the Underwritten
Securities.
(d) At the time of execution of the applicable Terms Agreement, you
shall have received from Ernst & Young LLP a letter dated such date, in form and
substance satisfactory to you, to the effect that (i) they are independent
accountants with respect to the Company and its subsidiaries within the meaning
of the 1933 Act and the 1934 Act and the applicable published rules and
regulations thereunder; (ii) it is their opinion that the consolidated financial
statements and supporting schedules of the Company and its subsidiaries included
or incorporated by reference in the Registration Statement and the Prospectus
and covered by their opinions therein comply in form in all material respects
with the applicable accounting requirements of the 1933 Act and the 1934 Act and
the related published rules and regulations thereunder; (iii) based upon limited
procedures set
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forth in detail in such letter (which shall include, without limitation, the
procedures specified by the American Institute of Certified Public Accountants
for a review of interim financial information as described in SAS No. 71,
Interim Financial Information, with respect to the unaudited condensed
consolidated financial statements of the Company and its subsidiaries included
or incorporated by reference in the Registration Statement), nothing came to
their attention that caused them to believe that (A) any material modifications
should be made to the unaudited financial statements and financial statement
schedules of the Company and its subsidiaries included or incorporated by
reference in the Registration Statement and the Prospectus for them to be in
conformity with generally accepted accounting principles, (B) the unaudited
financial statements and financial statement schedules of the Company included
or incorporated by reference in the Registration Statement and the Prospectus do
not comply as to form in all material respects with the applicable accounting
requirements of the 1934 Act and the related published rules and regulations
thereunder, or (C) at a specified date not more than three days prior to the
date of the applicable Terms Agreement, there has been any change in the capital
stock of the Company or in the notes payable or mortgage notes payable of the
Company or any decrease in the total assets of the Company, as compared with the
amounts shown in the most recent consolidated balance sheet included or
incorporated by reference in the Registration Statement and the Prospectus or,
during the period from the date of the most recent consolidated statement of
operations included or incorporated by reference in the Registration Statement
and the Prospectus to a specified date not more than three days prior to the
date of the applicable Terms Agreement, there were any decreases, as compared
with the corresponding period in the preceding year, in rental income or in the
total or per share amounts of net income or income before gains (losses) on
investments and extraordinary items of the Company, except in all instances for
changes, increases or decreases which the Registration Statement and the
Prospectus disclose have occurred or may occur; (iv) they have compared the
information in the Prospectus under selected captions with the disclosure
requirements of Regulation S-K and on the basis of limited procedures specified
in such letter nothing came to their attention as a result of the foregoing
procedures that caused
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them to believe that this information does not conform in all material respects
with the disclosure requirements of Items 301, 402 and 503(d) of Regulation S-K;
(v) in addition to the audit referred to in their opinions and the limited
procedures referred to in clause (iii) above, they have carried out certain
specified procedures, not constituting an audit, with respect to certain
amounts, percentages and financial information which are included or
incorporated by reference in the Registration Statement and the Prospectus and
which are specified by you, and have found such amounts, percentages and
financial information to be in agreement with the relevant accounting, financial
and other records of the Company and its subsidiaries identified in such letter;
and (vi) they have read the unaudited pro forma financial statements which are
included in the Registration Statement and the Prospectus and have performed
specified procedures set forth in detail in such letter and found the amounts
set forth in such unaudited pro forma financial statements to be in agreement
with the corresponding historical financial statements and nothing has come to
their attention which causes them to believe that the unaudited pro forma
financial statements included in the Registration Statement and the Prospectus
which combine certain financial statements of the Company and South West with
certain transactions set forth in the notes to such pro forma statements, do not
comply as to form in all material respects with Article 11 of Regulation S-X
under the 1933 Act.
(e) At Closing Time, you shall have received from Ernst & Young LLP a
letter dated as of such Closing Time to the effect that they reaffirm the
statements made in the letter furnished pursuant to subsection (d) of this
Section, except that the "specified date" referred to shall be a date not more
than three days prior to such Closing Time.
(f) At Closing Time, counsel for the Underwriters shall have been
furnished with such documents and opinions as they may reasonably require for
the purpose of enabling them to pass upon the issuance and sale of the
Underwritten Securities as herein contemplated and related proceedings, or in
order to evidence the accuracy of any of the representations or warranties, or
the fulfillment of any of the conditions, herein contained; and all proceedings
taken by the Company in connection with the issuance
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and sale of the Underwritten Securities as herein contemplated shall be
satisfactory in form and substance to you and counsel for the Underwriters.
(g) In the event the Underwriters exercise their option provided in a
Terms Agreement as set forth in Section 2(b) hereof to purchase all or any
portion of the Option Securities, the representations and warranties of the
Company contained herein and the statements in any certificates furnished by the
Company hereunder shall be true and correct as of each Date of Delivery, and you
shall have received:
(1) A certificate, dated such Date of Delivery, of the
President and Chief Executive Officer and the Senior Vice President and
Chief Financial Officer of the Company, in their capacities as such,
confirming that the certificate delivered at Closing Time pursuant to
Section 5(c) hereof remains true and correct as of such Date of
Delivery.
(2) The favorable opinions of Hunton & Williams, counsel for
the Company, in form and substance satisfactory to counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities and otherwise substantially to the same effect as the
opinions required by Sections 5(b)(1) and 5(b)(2) hereof.
(3) The favorable opinion of Brown & Wood LLP, counsel for the
Underwriters, dated such Date of Delivery, relating to the Option
Securities and otherwise to the same effect as the opinion required by
Section 5(b)(3) hereof.
(4) A letter from Ernst & Young LLP, in form and substance
satisfactory to you and dated such Date of Delivery, substantially the
same in scope and substance as
the letter furnished to you pursuant to Section 5(e) hereof, except
that the "specified date" in the letter furnished pursuant to this
Section 5(g)(4) shall be a date not more than three days prior to such
Date of Delivery.
If any condition specified in this Section shall not have been
fulfilled when and as required to be fulfilled, the
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applicable Terms Agreement may be terminated by you by notice to the Company at
any time at or prior to the Closing Time, and such termination shall be without
liability of any party to any other party except as provided in Section 4
hereof.
Section 6. Indemnification. (a) The Company agrees to
indemnify and hold harmless each Underwriter and each person, if
any, who controls any Underwriter within the meaning of Section
15 of the 1933 Act as follows:
(1) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any un true statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), including the
information deemed to be part of the Registration Statement pursuant to
Rule 430A(b) or Rule 434 of the 1933 Act Regulations, if applicable, or
the omission or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue
statement of a material fact included in any preliminary prospectus or
the Prospectus (or any amendment or supplement thereto) or the
omission, or alleged omission therefrom, of a material fact necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(2) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any
claim whatsoever based upon any such untrue statement or omission
referred to in subsection (1) above, or any such alleged untrue
statement or omission, if such settlement is effected with the written
consent of the Company; and
(3) against any and all expense whatsoever, as incurred
(including, the fees and disbursements of counsel chosen by you),
reasonably incurred in investigating,
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preparing or defending against any litigation, or any investigation or
proceedings by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under (1) or
(2) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through you expressly for use in the Registration Statement (or any
amendment thereto) or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto).
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company, its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of Section 15 of the 1933 Act, against any and all loss, liability, claim,
damage and expense described in the indemnity contained in subsection (a) of
this Section, but only with respect to untrue statements or omissions, or
alleged untrue statements or omissions, made in the Registration Statement (or
any amendment thereto) or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by such Underwriter through you expressly
for use in the Registration Statement (or any amendment thereto) or any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this indemnity agreement. An
indemnifying party may participate at its own expense in the defense of such
action. In no event shall the indemnifying
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parties be liable for fees and expenses of more than one counsel (in addition to
any local counsel) separate from their own counsel for all indemnified parties
in connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances.
Section 7. Contribution. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
Section 6 is for any reason held to be unenforceable by the indemnified parties
although applicable in accordance with its terms, the Company and the
Underwriters with respect to the offering of the Underwritten Securities shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by said indemnity agreement incurred by the Company and
one or more of the Underwriters in respect of such offering, as incurred, in
such proportions that the Underwriters are responsible for that portion
represented by the percentage that the underwriting discount appearing on the
cover page of the applicable Prospectus Supplement in respect of such offering
bears to the initial public offering price appearing thereon and the Company is
responsible for the balance; provided, however, that no person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933
Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. Notwithstanding the provisions of this
Section 7, no Underwriter shall be required to contribute any amount in excess
of the amount by which the total price at which the Underwritten Securities
purchased by it pursuant to the applicable Terms Agreement and distributed to
the public were offered to the public exceeds the amount of any damages which
such Underwriter has otherwise been required to pay in respect of such losses,
liabilities, claims, damages and expenses. For purposes of this Section 7, each
person, if any, who controls an Underwriter within the meaning of Section 15 of
the 1933 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company.
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Section 8. Representations, Warranties and Agreements to Survive
Delivery. All representations, warranties and agreements contained in this
Agreement or the applicable Terms Agreement, or contained in certificates of
officers of the Company submitted pursuant hereto, shall remain operative and in
full force and effect, regardless of any termination of this Agreement, or
investigation made by or on behalf of any Underwriter or any controlling person,
or by or on behalf of the Company and shall survive delivery of and payment for
the Underwritten Securities to the Underwriters.
Section 9. Termination of Agreement. (a) This Agreement (excluding the
applicable Terms Agreement) may be terminated for any reason at any time by the
Company or by you upon the giving of 30 days' written notice of such termination
to the other party hereto; provided that this Agreement may not be terminated
prior to the Closing Time set forth in any applicable Terms Agreement.
(b) You may also terminate the applicable Terms Agreement,
by notice to the Company, at any time at or prior to the Closing Time (i) if
there has been, since the date of such Terms Agreement or since the respective
dates as of which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its subsidiaries considered as
one enterprise, whether or not arising in the ordinary course of business, or
(ii) if there has occurred any material adverse change in the financial markets
in the United States or any outbreak of hostilities or other calamity or crisis
or escalation of any existing hostilities, the effect of which is such as to
make it, in your judgment, impracticable to market the Underwritten Securities
or enforce contracts for the sale of the Underwritten Securities, or (iii) if
trading in any of the securities of the Company has been suspended by the
Commission or the New York Stock Exchange, or if trading generally on either the
New York Stock Exchange or the American Stock Exchange has been suspended, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices for securities have been required, by either of said exchanges or by
order of the Commission or any other governmental authority, or if a banking
moratorium has been declared by Federal, New York or Virginia
36
<PAGE>
authorities, or (iv) if Preferred Stock is being offered and the rating assigned
by any nationally recognized statistical rating organization to any preferred
stock or debt of the Company as of the date of the applicable Terms Agreement
shall have been lowered since such date or if any such rating organization shall
have publicly announced that it has placed any preferred stock or debt of the
Company on what is commonly termed a "watch list" for possible downgrading. As
used in this Section 9(b), the term "Prospectus" means the Prospectus in the
form first used to confirm sales of the Underwritten Securities.
(c) In the event of any such termination, (x) the covenants set forth
in Section 3 with respect to any offering of Underwritten Securities shall
remain in effect so long as any Underwriter owns any such Underwritten
Securities purchased from the Company pursuant to the applicable Terms Agreement
and (y) the covenant set forth in Section 3(h) hereof, the provisions of Section
4 hereof, the indemnity and contribution agreements set forth in Sections 6 and
7 hereof, and the provisions of Sections 8 and 13 hereof shall remain in effect.
Section 10. Default by One or More of the Underwriters. If one or more
of the Underwriters shall fail at the Closing Time to purchase the Underwritten
Securities which it or they are obligated to purchase under the applicable Terms
Agreement (the "Defaulted Securities"), then you shall have the right, within 48
hours thereafter, to make arrangements for one or more of the non-defaulting
Underwriters, or any other underwriters, to purchase all, but not less than all,
of the Defaulted Securities in such amounts as may be agreed upon and upon the
terms herein set forth; if, however, you shall not have completed such
arrangements within such 48-hour period, then:
(a) if the total number of Defaulted Securities does not exceed 10% of
the total number of Underwritten Securities to be purchased pursuant to such
Terms Agreement, the non-defaulting Underwriters named in such Terms Agreement
shall be obligated to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting Underwriters, or
37
<PAGE>
(b) if the total number of Defaulted Securities exceeds 10% of the
total number of Underwritten Securities to be purchased pursuant to such Terms
Agreement, the applicable Terms Agreement shall terminate without liability on
the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any defaulting
Underwriter from liability in respect of its default under this Agreement and
the applicable Terms Agreement.
In the event of any such default which does not result in a termination
of the applicable Terms Agreement, either you or the Company shall have the
right to postpone the Closing Time for a period not exceeding seven days in
order to effect any required changes in the Registration Statement or the
Prospectus or in any other documents or arrangements.
Section 11. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be directed c/o Merrill Lynch & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, North Tower, World Financial Center, New York, New
York, 10281, attention of Tjarda V. S. Clagett, Director; and notices to the
Company shall be directed to it at 10 South 6th Street, Suite 203, Richmond,
Virginia 23219, attention of John P.
McCann, President and Chief Executive Officer.
Section 12. Parties. This Agreement and the applicable Terms Agreement
shall inure to the benefit of and be binding upon you and the Company and any
Underwriter who becomes a party to such Terms Agreement, and their respective
successors. Nothing expressed or mentioned in this Agreement or the applicable
Terms Agreement is intended or shall be construed to give any person, firm or
corporation, other than those referred to in Sections 6 and 7 and their heirs
and legal representatives, any legal or equitable right, remedy or claim under
or in respect of this Agreement or such Terms Agreement or any provision herein
or therein contained. This Agreement and the applicable Terms Agreement and all
conditions and provisions hereof and thereof are intended to be for the sole and
exclusive benefit of the
38
<PAGE>
parties hereto and thereto and their respective successors and said controlling
persons and officers and directors and their heirs and legal representatives,
and for the benefit of no other person, firm or corporation. No purchaser of
Underwritten Securities from any Underwriter shall be deemed to be a successor
by reason merely of such purchase.
Section 13. Governing Law and Time. This Agreement and the applicable
Terms Agreement shall be governed by and construed in accordance with the laws
of the State of New York applicable to agreements made and to be performed in
said State. Specified times of day refer to New York City time.
Section 14. Counterparts. This Agreement and the applicable Terms
Agreement may be executed in one or more counterparts, and if executed in more
than one counterpart the executed counterparts shall constitute a single
instrument.
39
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counter part hereof,
whereupon this instrument along with all counter parts will become a binding
agreement between you and the Company in accordance with its terms.
Very truly yours,
UNITED DOMINION REALTY TRUST, INC.
By: ------------------------------
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first
above written:
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
SCOTT & STRINGFELLOW, INC.
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:----------------------------
Name:
Title:
40
<PAGE>
Exhibit A
[___________ Shares]
UNITED DOMINION REALTY TRUST, INC.
(a Virginia corporation)
[Title of Securities]
TERMS AGREEMENT
Dated: _____________, 199__
To: United Dominion Realty Trust, Inc.
10 South 6th Street, Suite 203
Richmond, Virginia 23219
Attention: President and Chief Executive Officer
Dear Sirs:
We (the "Representatives") understand that United Dominion Realty
Trust, Inc., a Virginia corporation (the "Company"), proposes to issue and sell
its [shares of common stock (the "Common Stock")] [shares of preferred stock
(the "Preferred Stock")] (such [Common Stock] [Preferred Stock] being
hereinafter referred to as the "Underwritten Securities"). Subject to the terms
and conditions set forth or incorporated by reference herein, the underwriters
named below (the "Underwriters") offer to purchase, severally and not jointly,
the respective numbers of shares of Initial Underwritten Securities (as defined
in the Underwriting Agreement dated _________ __, 199_ (the "Underwriting
Agreement")) set forth below opposite their respective names, and a
proportionate share of Option Securities (as defined in the Underwriting
Agreement) to the extent any are purchased, at the purchase price set forth
below.
A-1
<PAGE>
Number of Shares
of Initial
Underwriter Underwritten Securities
- - ----------- -----------------------
Total ----------
==========
The Underwritten Securities shall have the following terms:
[Common Stock] [Preferred Stock]
Title of Securities:
Number of Shares:
[Current Ratings:]
[Dividend Rate: [$ ] [ %], Payable:]
[Stated Value:]
[Liquidation Preference:]
[Ranking:]
Public Offering Price Per Share: $
[, plus accumulated dividends, if any,
from , 19 .]
Purchase Price Per Share:$ ;
[, plus accumulated dividends, if any,
from , 19 .]
[Conversion Provisions:]
[Redemption Provisions:]
[Sinking Fund Requirements:]
Number of Option Securities, if any, that may be purchased by the Underwriters:
Delayed Delivery Contracts: [authorized] [not authorized]
[Date of Delivery:
Minimum Contract:
Maximum Number of Shares:
Fee:]
Additional co-managers, if any:
Other terms:
Closing time, date and location:
All the provisions contained in the document attached as Annex A hereto
entitled "United Dominion Realty Trust, Inc.- Common Stock and Preferred
Stock-Underwriting Agreement" are hereby incorporated by reference in their
entirety herein and shall be deemed to be a part of this Terms Agreement to the
same extent as if such provisions had been set forth in full herein. Terms
defined in such document are used herein as therein defined.
A-2
<PAGE>
Please accept this offer no later than o'clock P.M. (New York
City time) on by signing a copy of this Terms Agreement in the space set
forth below and returning the signed copy to us.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
SCOTT & STRINGFELLOW, INC.
By: MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:______________________________________
Authorized Signatory
[Acting on behalf of themselves
and the other named Underwriters.]
Accepted:
UNITED DOMINION REALTY TRUST, INC.
By:_______________________________
Name:
Title:
A-3
<PAGE>
Exhibit B
UNITED DOMINION REALTY TRUST, INC.
(a Virginia corporation)
[Title of Securities]
DELAYED DELIVERY CONTRACT
_____________, 19__
United Dominion Realty Trust, Inc.
10 South 6th Street, Suite 203
Richmond, Virginia 23219
Attention: President and Chief Executive Officer
Dear Sirs:
The undersigned hereby agrees to purchase from United Dominion Realty
Trust, Inc. (the "Company"), and the Company agrees to sell to the undersigned
on __________, 19__ (the "Delivery Date"),
of the Company's [insert title of security] (the "Securities"), offered by the
Company's Prospectus dated __________, 19__, as supplemented by its Prospectus
Supplement dated ___________, 19__, receipt of which is hereby acknowledged, at
a purchase price of [$__________], on the Delivery Date, and on the further
terms and conditions set forth in this contract.
Payment for the Securities which the undersigned has agreed to purchase
on the Delivery Date shall be made to the Company or its order by certified or
official bank check in New York Clearing House funds at the office of
B-1
<PAGE>
, on the Delivery Date, upon delivery to
the undersigned of the Securities to be purchased by the undersigned in
definitive form and in such denominations and registered in such names as the
undersigned may designate by written or telegraphic communication addressed to
the Company not less than five full business days prior to the Delivery Date.
The obligation of the undersigned to take delivery of and make payment
for Securities on the Delivery Date shall be subject only to
the conditions that (1) the purchase of Securities to be made by the undersigned
shall not on the Delivery Date be prohibited under the laws of the jurisdiction
to which the undersigned is subject and (2) the Company, on or before
__________, 19__, shall have sold to the Underwriters of the Securities (the
"Underwriters") such principal amount of the Securities as is to be sold to them
pursuant to the Terms Agreement dated __________, 19__ between the Company and
the Underwriters. The obligation of the undersigned to take delivery of and make
payment for Securities shall not be affected by the failure of any purchaser to
take delivery of and make payments for Securities pursuant to other contracts
similar to this contract. The undersigned represents and warrants to you that
its investment in the Securities is not, as of the date hereof, prohibited under
the laws of any jurisdiction to which the undersigned is subject and which
govern such investment.
Promptly after completion of the sale to the Underwriters, the Company
will mail or deliver to the undersigned at its address set forth below notice to
such effect, accompanied by a copy of the opinion of counsel for the Company
delivered to the Underwriters in connection therewith.
By the execution hereof, the undersigned represents and warrants to the
Company that all necessary action for the due execution and delivery of this
contract and the payment for and purchase of the Securities has been taken by it
and no further authorization or approval of any governmental or other regulatory
authority is required for such execution, delivery, payment or purchase, and
that, upon acceptance hereof by the Company and mailing or delivery of a copy as
provided below, this contract will constitute a valid and binding agreement of
the undersigned in accordance with its terms.
B-2
<PAGE>
This contract will inure to the benefit of and be binding upon the
parties hereto and their respective successors, but will not be assignable by
either party hereto without the written consent of the other.
It is understood that the Company will not accept Delayed Delivery
Contracts for a number of Securities in excess of ________ and that the
acceptance of any Delayed Delivery Contract is in the Company's sole discretion
and, without limiting the foregoing, need not be on a first-come, first-served
basis. If this contract is acceptable to the Company, it is requested that the
Company sign the form of acceptance on a copy hereof and mail or deliver a
signed copy hereof to the undersigned at its address set forth below. This will
become a binding contract between the Company and the undersigned when such copy
is so mailed or delivered.
This Agreement shall be governed by the laws of the State of New York.
Yours very truly,
-----------------------------
(Name of Purchaser)
By:__________________________
(Title)
-----------------------------
-----------------------------
(Address)
Accepted as of the date first above written.
UNITED DOMINION REALTY TRUST, INC.
By:__________________________
(Title)
PURCHASER-PLEASE COMPLETE AT TIME OF SIGNING
B-3
<PAGE>
The name and telephone number of the representative of the Purchaser
with whom details of delivery on the Delivery Date may be discussed are as
follows: (Please print.)
Telephone No.
(including
Name Area Code)
B-4
<PAGE>
4,000,000 Shares
UNITED DOMINION REALTY TRUST, INC.
(a Virginia corporation)
Common Stock
TERMS AGREEMENT
Dated: January 22, 1997
To: United Dominion Realty Trust, Inc.
10 South 6th Street, Suite 203
Richmond, Virginia 23219
Attention: President and Chief Executive Officer
Dear Sirs:
We (the "Representatives") understand that United Dominion Realty
Trust, Inc., a Virginia corporation (the "Company"), proposes to issue and sell
its shares of common stock (the "Common Stock") (such Common Stock being
hereinafter referred to as the "Underwritten Securities"). Subject to the terms
and conditions set forth or incorporated by reference herein, the underwriters
named below (the "Underwriters") offer to purchase, severally and not jointly,
the respective numbers of shares of Initial Underwritten Securities (as defined
in the Underwriting Agreement dated January 22, 1997 (the "Underwriting
Agreement")) set forth below opposite their respective names, and a
proportionate share of Option Securities (as defined in the Underwriting
Agreement) to the extent any are purchased, at the purchase price set forth
below.
<PAGE>
Number of Shares
of Initial
Underwriter Underwritten Securities
Merrill Lynch, Pierce, Fenner & Smith
Incorporated 2,000,000
Scott & Stringfellow, Inc. 2,000,000
---------
Total 4,000,000
=========
The Underwritten Securities shall have the following terms:
Common Stock
Title of Securities: Common Stock, $1 par value
Number of Shares: 4,000,000
Public Offering Price Per Share: $15.75
Purchase Price Per Share: $14.925
Number of Option Securities, if any, that may be purchased by the
Underwriters: 600,000
Delayed Delivery Contracts: not authorized
Closing time, date and location: 9:00 A.M., January 28, 1997,
Hunton & Williams, Riverfront Plaza, 901 East Byrd Street,
Richmond, Virginia 23212-1535
All the provisions contained in the document attached as Annex A hereto
entitled "United Dominion Realty Trust, Inc.-Common Stock and Preferred
Stock-Underwriting Agreement" are hereby incorporated by reference in their
entirety herein and shall be deemed to be a part of this Terms Agreement to the
same extent as if such provisions had been set forth in full herein. Terms
defined in such document are used herein as therein defined.
<PAGE>
Please accept this offer no later than 7:00 o'clock P.M. (New York City
time) on January 22, 1997 by signing a copy of this Terms Agreement in the space
set forth below and returning the signed copy to us.
Very truly yours,
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
SCOTT & STRINGFELLOW, INC.
By: MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By:______________________________________
Authorized Signatory
Accepted:
UNITED DOMINION REALTY TRUST, INC.
By:_______________________________
Name:
Title:
Exhibit 10(xi)
United Dominion Realty Trust, Inc.
Debt Securities
UNDERWRITING AGREEMENT
January 22, 1997
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
NationsBanc Capital Markets, Inc.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
From time to time United Dominion Realty Trust, Inc., a Virginia
corporation (the "Company"), proposes to enter into one or more Pricing
Agreements (each a "Pricing A reement") in the form of Annex I hereto, with such
additions and deletions as the parties thereto may determine, and, subject to
the terms and conditions stated herein and therein, to issue and sell to the
firms named in Schedule I to the applicable Pricing Agreement (such firms
constituting the "Underwriters" with respect to such Pricing Agreement and the
securities specified therein) certain of its debt securities (the "Securities")
specified in Schedule II to such Pricing Agreement (with respect to such Pricing
Agreement, the "Designated Securities").
The terms and rights of any particular issuance of Designated Securities
shall be as specified in the Pricing Agreement relating thereto and in or
pursuant to the indenture (the "Indenture") identified in such Pricing
Agreement.
1. Particular sales of Designated Securities may be made from time to time
to the Underwriters of such Securities, for whom the firms designated as
representatives of the Underwriters of such
1
<PAGE>
Securities in the Pricing Agreement relating thereto will act as representatives
(the "Representatives"). The term "Representatives" also refers to a single firm
acting as sole representative of the Underwriters and to an Underwriter or
Underwriters who act without any firm being designated as its or their
representatives. This Underwriting Agreement shall not be construed as an
obligation of the Company to sell any of the Securities or as an obligation of
any of the Underwriters to purchase the Securities. The obligation of the
Company to issue and sell any of the Securities and the obligation of any of the
Underwriters to purchase any of the Securities shall be evidenced by the Pricing
Agreement with respect to the Designated Securities specified therein. Each
Pricing Agreement shall specify the aggregate principal amount of such
Designated Securities, the initial public offering price of such Designated
Securities, the purchase price to the Underwriters of such Designated
Securities, the names of the Underwriters of such Designated Securities, the
names of the Representatives of such Underwriters and the principal amount of
such Designated Securities to be purchased by each Underwriter and shall set
forth the date, time and manner of delivery of such Designated Securities and
payment therefor. The Pricing Agreement shall also specify (to the extent not
set forth in the Indenture and the registration statement and prospectus with
respect thereto) the terms of such Designated Securities. A Pricing Agreement
shall be in the form of an executed writing (which may be in counterparts), and
may be evidenced by an exchange of telegraphic communications or any other rapid
transmission device designed to produce a written record of communications
transmitted. The obligations of the Underwriters under this Agreement and each
Pricing Agreement shall be several and not joint.
2. The Company represents and warrants to, and agrees with, each of the
Underwriters that:
(a) A registration statement on Form S-3 (File No. 33-64275) (the
"Initial Registration Statement") in respect of the Securities has been
filed with the Securities and Exchange Commission (the "Commission");
the Initial Registration Statement and any post-effective amendment
thereto, each in the form heretofore delivered or to be delivered to
the Representatives and, excluding exhibits to such registration
2
<PAGE>
statement, but including all documents incorporated by reference in the
prospectus contained therein, to the Representatives for each of the
other Underwriters, have been declared effective by the Commission in
such form; other than a registration statement, if any, increasing the
size of the offering (a "Rule 462(b) Registration Statement"), filed
pursuant to Rule 462(b) under the Securities Act of 1933, as amended
(the "Act), which became effective upon filing, no other document with
respect to the Initial Registration Statement or document incorporated
by reference therein has heretofore been filed or transmitted for
filing with the Commission (other than prospectuses filed pursuant to
Rule 424(b) of the rules and regulations of the Commission under the
Act each in the form heretofore delivered to the Representatives); and
no stop order suspending the effectiveness of the Initial Registration
Statement, any post-effective amendment thereto or the Rule 462(b)
Registration Statement, if any, has been issued and no proceeding for
that purpose has been initiated or threatened by the Commission (any
preliminary prospectus included in the Initial Registration Statement
or filed with the Commission pursuant to Rule 424(a) under the Act, is
hereinafter called a "Preliminary Prospectus"; the various parts of the
Initial Registration Statement and the Rule 462(b) Registration
Statement, if any, including all exhibits thereto and the documents
incorporated by reference in the prospectus contained in the Initial
Registration Statement at the time such part of the registration
statement became effective but excluding Form T-1, each as amended at
the time such part of the Initial Registration Statement became
effective or such part of the Rule 462(b) Registration Statement, if
any, became or hereafter becomes effective, are hereinafter
collectively called the "Registration Statement"; the prospectus
relating to the Securities, in the form in which it has most recently
been filed, or transmitted for filing, with the Commission on or prior
to the date of this Agreement, is hereinafter called the "Prospectus";
any reference herein to any Preliminary Prospectus or the Prospectus
shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to the applicable form under the Act, as of
the date of such Preliminary Prospectus or Prospectus, as the case may
be; any reference to any amendment or supplement to any
3
<PAGE>
Preliminary Prospectus or the Prospectus shall be deemed to refer to
and include any documents filed after the date of such Preliminary
Prospectus or Prospectus, as the case may be, under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and incorporated
by reference in such Preliminary Prospectus or Prospectus, as the case
may be; any reference to any amendment to the Registration Statement
shall be deemed to refer to and include any annual report of the
Company filed pursuant to Sections 13(a) or 15(d) of the Exchange Act
after the effective date of the Registration Statement that is
incorporated by reference in the Registration Statement; any reference
to the Prospectus as amended or supplemented shall be deemed to refer
to the Prospectus as amended or supplemented in relation to the
applicable Designated Securities in the form in which it is filed with
the Commission pursuant to Rule 424(b) under the Act in accordance with
Section 5(a) hereof, including any documents incorporated by reference
therein as of the date of such filing; and if the Company elects to
rely on Rule 434 under the Act, any reference to the Prospectus shall
be deemed to include, without limitation, the form of prospectus and
the abbreviated term sheet, taken together, provided to the
Underwriters by the Company in reliance on Rule 434 under the Act (the
"Rule 434 Prospectus"));
(b) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case
may be, conformed in all material respects to the requirements of the
Act or the Exchange Act, as applicable, and the rules and regulations
of the Commission thereunder, and none of such documents contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and any further documents so filed and
incorporated by reference in the Prospectus or any further amendment or
supplement thereto, when such documents become effective or are filed
with the Commission, as the case may be, will conform in all material
respects to the requirements of the Act or the Exchange Act, as
applicable, and the rules and regulations of the Commission thereunder
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be
4
<PAGE>
stated therein or necessary to make the statements therein not
misleading; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon
and in conformity with information furnished in writing to the Company
by an Underwriter of Designated Securities through the Representatives
expressly for use in the Prospectus as amended or supplemented relating
to such Securities;
(c) The Registration Statement and the Prospectus conform, and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform, in all material respects to the requirements
of the Act and the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"), and the rules and regulations of the Commission
thereunder and do not and will not, as of the applicable effective date
as to the Registration Statement and any amendment thereto and as of
the applicable filing date as to the Prospectus and any amendment or
supplement thereto, contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information furnished in writing to the Company by an Underwriter of
Designated Securities through the Representatives expressly for use in
the Prospectus as amended or supplemented relating to such Securities;
(d) The Company has been duly organized and is validly existing as
a corporation in good standing under the laws of the Commonwealth of
Virginia, with full power and authority to own, lease and operate its
properties and conduct its business as described in the Prospectus; and
the Company is duly qualified to transact business in all jurisdictions
in which the conduct of its business requires such qualification except
where the failure to so qualify would not have a material adverse
effect on the condition, financial or otherwise, or the earnings,
business affairs or business prospects of the Company;
(e) Each subsidiary of the Company has been duly
5
<PAGE>
organized and is validly existing as a corporation, limited liability
company, limited partnership or real estate investment trust in good
standing under the laws of the jurisdiction of its incorporation or
organization, with power and authority to own, lease and operate its
properties and conduct its business as described in the Prospectus and
is duly qualified to transact business in all jurisdictions in which
the conduct of its business requires such qualification except where
the failure to so be in good standing would not have a material adverse
effect on the condition, financial or otherwise, or the earnings,
business affairs or business prospects of the Company and its
subsidiaries, considered as one enterprise; each such subsidiary is
duly qualified to transact business in all jurisdictions in which the
conduct of its business requires such qualification, or in which the
failure to qualify would have a materially adverse effect upon the
business of such subsidiary; all of the issued and outstanding shares
of capital stock of each such corporate subsidiary and all of the
issued and outstanding shares of beneficial interest of each such real
estate investment trust subsidiary have been duly authorized and
validly issued, are fully paid and non-assessable and are owned by the
Company free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; and the Company and/or one such
corporate subsidiary are the only members or general partners of the
Company's limited liability company or limited partnership
subsidiaries, as applicable, and own the entire membership or general
partnership interest in each such subsidiary free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or
equity;
(f) Neither the Company nor any of its subsidiaries has sustained
since the date of the latest audited financial statements included or
incorporated by reference in the Prospectus any material loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus; and, since the
respective dates as of which information is given in the Registration
Statement and the Prospectus, there has not been any change in the
capital stock, total assets or long-term
6
<PAGE>
debt of the Company or any of its subsidiaries or any material adverse
change, or any development involving a prospective material adverse
change, in or affecting the general affairs, management, financial
position, shareholders' equity or results of operations of the Company
and its subsidiaries, otherwise than as set forth or contemplated in
the Prospectus;
(g) The Company has an authorized capitalization as set forth in
the Prospectus, and all of the issued shares of capital stock of the
Company have been duly and validly authorized and issued and are fully
paid and non-assessable;
(h) The Securities have been duly and validly authorized, and, when
Designated Securities are issued and delivered pursuant to this
Agreement and the Pricing Agreement with respect to such Designated
Securities, such Designated Securities will have been duly executed,
authenticated, issued and delivered and will constitute valid and
legally binding obligations of the Company entitled to the benefits
provided by the Indenture, which will be substantially in the form
filed as an exhibit to the Registration Statement; the Indenture has
been duly authorized and duly qualified under the Trust Indenture Act
and, at the Time of Delivery for such Designated Securities (as defined
in Section 4 hereof), the Indenture will constitute a valid and legally
binding instrument, enforceable in accordance with its terms, subject,
as to enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general equity principles; and the Indenture conforms,
and the Designated Securities will conform, to the descriptions thereof
contained in the Prospectus as amended or supplemented with respect to
such Designated Securities;
(i) The issue and sale of the Securities and the compliance by the
Company with all of the provisions of the Securities, the Indenture,
this Agreement and any Pricing Agreement, and the consummation of the
transactions herein and therein contemplated will not conflict with or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to
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which the Company is a party or by which the Company is bound or to
which any of the property or assets of the Company is subject, nor will
such action result in any violation of the provisions of the Articles
of Incorporation or By-laws of the Company or any statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company or any of its properties; and no consent,
approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for the
issue and sale of the Securities or the consummation by the Company of
the transactions contemplated by this Agreement or any Pricing
Agreement or the Indenture, except such as have been, or will have been
prior to the Time of Delivery, obtained under the Act and the Trust
Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Underwriters;
(j) The statements set forth in the Prospectus under the captions
"Description of Debt Securities" and "Description of Notes", insofar as
they purport to constitute a summary of the terms of the Securities,
and under the captions "Description of Capital Stock," "Plan of
Distribution" and "Underwriting", insofar as they purport to describe
the provisions of the laws and documents referred to therein, are
accurate, complete and fair;
(k) Neither the Company nor any of its subsidiaries is in violation
of its Articles of Incorporation or By-laws or in default in the
performance or observance of any material obligation, agreement,
covenant or condition contained in any indenture, mortgage, deed of
trust, loan agreement, lease or other agreement or instrument to which
it is a party or by which it or any of its properties may be bound;
(l) Other than as set forth in the Prospectus, there are no legal
or governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any
of its subsidiaries is the subject which, if determined adversely to
the Company or any of its subsidiaries, would individually or in the
aggregate
8
<PAGE>
have a material adverse effect on the current or future consolidated
financial position, shareholders' equity or results of operations of
the Company and its subsidiaries; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(m) The financial statements together with related notes and
schedules of the Company and its subsidiaries as set forth or
incorporated by reference in the Registration Statement present fairly
the financial position and the results of operations of the Company and
its subsidiaries at the indicated dates and for the indicated periods.
Such financial statements have been prepared in accordance with
generally accepted principles of accounting, consistently applied
throughout the periods involved, and all adjustments necessary for a
fair presentation of results for such periods have been made. The
summary financial and statistical data included in the Prospectus
present fairly the information shown therein and have been compiled on
a basis consistent with the financial statements presented therein;
(n) The Company and its subsidiaries have good and marketable title
to, or valid and enforceable leasehold estates in, all items of real
and personal property referred to in the Prospectus as owned or leased
by them, in each case free and clear of all liens, encumbrances,
claims, security interests and defects, other than those referred to in
the Prospectus or which are not material in amount. Each lease of real
property by the Company or any of its subsidiaries as lessor requiring
annual lease payments in excess of $100,000 is the legal, valid and
binding obligation of the lessee in accordance with its terms (except
that the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be
brought and to the Bankruptcy Act) and the rents which at present have
remained due and unpaid for more than 30 days are not payable under
leases such that, were no further rental payments to be received under
such leases, the financial condition or results of operations of the
Company and its subsidiaries would be materially adversely affected
thereby. The Company has no
9
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reason to believe that the lessee under any lease (excluding leases for
which rent payments due for the remainder of such lease are less than
$500,000) calling for annual lease payments in excess of $500,000 is
not financially capable of performing its obligations thereunder;
(o) The Company has filed all Federal, local and foreign income tax
returns which have been required to be filed and has paid all taxes
indicated by said returns and all assessments received by it to the
extent that such taxes have become due and are not being contested in
good faith;
(p) The Company and each of its subsidiaries hold all material
licenses, certificates and permits from governmental authorities which
are necessary to the conduct of their respective businesses; and
neither the Company nor any of its subsidiaries has infringed any
patents, patent rights, trade names, trademarks or copyrights, which
infringement is material to the business of the Company or any of its
subsidiaries;
(q) With respect to all tax periods regarding which the Internal
Revenue Service is or will be entitled to assert any claim, the Company
has met the requirements for qualification as a real estate investment
trust under Sections 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code"), and the Company's present and
contemplated opera tions, assets and income continue to meet such
requirements;
(r) The conditions for use of registration statements on Form S-3
set forth in the General Instructions on Form S-3 have been satisfied
and the Company is entitled to use such form for the transaction
contemplated herein;
(s) The Company has no knowledge of (a) the unlawful presence of
any hazardous substances, hazardous materials, toxic substances or
waste materials (collectively, "Hazardous Materials") on any of the
properties owned by it or any of its subsidiaries, or of (b) any
unlawful spills, releases, discharges or disposal of Hazardous
Materials that have occurred or are presently occurring off such
properties as a result of any construction on or operation and use of
such
10
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properties which presence or occurrence would materially adversely
affect the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company or any of its
subsidiaries. In connection with the construction on or operation and
use of the properties owned by the Company or any of its subsidiaries,
the Company represents that it has no knowledge of any material failure
to comply with all applicable local, state and federal environmental
laws, regulations, ordinances and administrative and judicial orders
relating to the generation, recycling, reuse, sale, storage, handling,
transport and disposal of any Hazardous Materials;
(t) The Company is not and, after giving effect to the offering and
sale of the Securities, will not be an "investment company" or an
entity "controlled" by an "investment company", as such terms are
defined in the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and
(u) Ernst & Young LLP, who have certified certain financial
statements of the Company and its subsidiaries, and L.P. Martin &
Company, P.C. and Dixon, Odom & Co., L.L.P., who have certified certain
financial statements of certain of the Company's properties, are each
independent public accountants as required by the Act and the rules and
regulations of the Commission thereunder.
3. Upon the execution of the Pricing Agreement applicable to any Designated
Securities and authorization by the Representatives of the release of such
Designated Securities, the several Underwriters propose to offer such Designated
Securities for sale upon the terms and conditions set forth in the Prospectus as
amended or supplemented.
4. Designated Securities to be purchased by each Underwriter pursuant to
the Pricing Agreement relating thereto, in the form specified in such Pricing
Agreement, and in such authorized denominations and registered in such names as
the Representatives may request upon at least twenty-four hours' prior notice to
the Company, shall be delivered by or on behalf of the Company to the
Representatives for the account of such Underwriter, against
11
<PAGE>
payment by such Underwriter or on its behalf of the purchase price therefor by
certified or official bank check or checks, payable to the order of the Company
in the funds specified in such Pricing Agreement, all in the manner and at the
place and time and date specified in such Pricing Agreement or at such other
place and time and date as the Representatives and the Company may agree upon in
writing, such time and date being herein called the "Time of Delivery" for such
Securities.
5. The Company agrees with each of the Underwriters of any Designated
Securities:
(a) If the Company does not elect to rely on Rule 434 under the
Act, immediately following execution and delivery of the applicable
Pricing Agreement, to prepare the Prospectus as amended or supplemented
in relation to the applicable Designated Securities in a form approved
by the Representatives and to file such Prospectus pursuant to Rule
424(b) under the Act not later than the Commission's close of business
on the business day following the execution and delivery of the Pricing
Agreement relating to the applicable Designated Securities or, if
applicable, such earlier time as may be required by Rule 424(b), or if
the Company elects to rely on Rule 434 under the Act, immediately
following execution and delivery of the applicable Pricing Agreement,
to prepare an abbreviated term sheet relating to the Designated
Securities in a form approved by the Representatives that complies with
the requirements of Rule 434 under the Act and to file such form of
Rule 434 Prospectus complying with Rule 434(c)(2) of the Act pursuant
to Rule 424(b) under the Act not later than the Commission's close of
business on the business day following the execution and delivery of
the Pricing Agreement relating to the applicable Designated Securities
or if applicable, such earlier time as may be required by Rule 424(b);
to make no further amendment or any supplement to the Registration
Statement or Prospectus as amended or supplemented after the date of
the Pricing Agreement relating to such Securities and prior to the Time
of Delivery for such Securities which shall be disapproved by the
Representatives for such Securities promptly after reasonable notice
thereof; to advise the Representatives promptly of any such amendment
or supplement after such Time of Delivery and furnish the
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<PAGE>
Representatives with copies thereof; to file promptly all reports and
any definitive proxy or information statements required to be filed by
the Company with the Commission pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act for so long as the delivery of a prospectus
is required in connection with the offering or sale of such Securities,
and during such same period to advise the Representatives, promptly
after it receives notice thereof, of the time when any amendment to the
Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed
with the Commission, of the issuance by the Commission of any stop
order or of any order preventing or suspending the use of any
prospectus relating to the Securities, of the suspension of the
qualification of such Securities for offering or sale in any
jurisdiction, of the initiation or threatening of any proceeding for
any such purpose, or of any request by the Commission for the amending
or supplementing of the Registration Statement or Prospectus or for
additional information; and, in the event of the issuance of any such
stop order or of any such order preventing or suspending the use of any
prospectus relating to the Securities or suspending any such
qualification, to promptly use its best efforts to obtain the
withdrawal of such order;
(b) If necessary, promptly from time to time to take such action as
the Representatives may reasonably request to qualify such Securities
for offering and sale under the securities laws of such jurisdictions
as the Representatives may request and to comply with such laws so as
to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the
distribution of such Securities, provided that in connection therewith
the Company shall not be required to qualify as a foreign corporation
or to file a general consent to service of process in any jurisdiction;
(c) Prior to 10:00 a.m. New York City time on the New York business
day next succeeding the date of the applicable Pricing Agreement and
from time to time, to furnish the Underwriters with copies of the
Prospectus in New York City as amended or supplemented in such
quantities as the
13
<PAGE>
Representatives may reasonably request, and, if the delivery of a
prospectus is required at any time in connection with the offering or
sale of the Securities and if at such time any event shall have
occurred as a result of which the Prospectus as then amended or
supplemented would include an untrue statement of a material fact or
omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such Prospectus is delivered, not misleading, or, if for
any other reason it shall be necessary during such same period to amend
or supplement the Prospectus or to file under the Exchange Act any
document incorporated by reference in the Prospectus in order to comply
with the Act, the Exchange Act or the Trust Indenture Act, to notify
the Representatives and upon their request to file such document and to
prepare and furnish without charge to each Underwriter and to any
dealer in securities as many copies as the Representatives may from
time to time reasonably request of an amended Prospectus or a
supplement to the Prospectus which will correct such statement or
omission or effect such compliance;
(d) To make generally available to its securityholders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its
subsidiaries (which need not be audited) complying with Section 11(a)
of the Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158);
(e) During the period beginning from the date of the Pricing
Agreement for such Designated Securities and continuing to and
including the later of (i) the termination of trading restrictions for
such Designated Securities, as notified to the Company by the
Representatives and (ii) the Time of Delivery for such Designated
Securities, not to offer, sell, contract to sell or otherwise dispose
of any debt securities of the Company which mature more than one year
after such Time of Delivery and which are substantially similar to such
Designated Securities, without the prior written consent of the
Representatives;
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<PAGE>
(f) To use the net proceeds received by it from the sale of the
Securities in the manner specified in the Prospectus under the caption
"Use of Proceeds"; and
(g) To continue to elect to qualify as a "real estate investment
trust" under the Code, and to use its best efforts to continue to meet
the requirements to qualify as a "real estate investment trust".
6. The Company covenants and agrees with the several Underwriters that the
Company will pay or cause to be paid the following: (i) the fees, disbursements
and expenses of the Company's counsel and accountants in connection with the
registration of the Securities under the Act and all other expenses in
connection with the preparation, printing and filing of the Registration
Statement, any Preliminary Prospectus and the Prospectus and amendments and
supplements thereto (including each abbreviated term sheet delivered by the
Company pursuant to Rule 434 under the Act) and the mailing and delivering of
copies thereof to the Underwriters and dealers; (ii) the cost of printing or
producing any Agreement among Underwriters, this Agreement, any Pricing
Agreement, any Indenture, any Blue Sky and Legal Investment Surveys, closing
documents (including any compilation thereof) and any other documents in
connection with the offering, purchase, sale and delivery of the Securities;
(iii) all expenses, if any, in connection with the qualification of the
Securities for offering and sale under state securities laws as provided in
Section 5(b) hereof, including the fees and disbursements of counsel for the
Underwriters in connection with such qualification and in connection with the
Blue Sky and Legal Investment Surveys; (iv) any fees charged by securities
rating services for rating the Securities; (v) any filing fees incident to, and
the fees and disbursements of counsel for the Underwriters in connection with,
any required review by the National Association of Securities Dealers, Inc. of
the terms of the sale of the Securities; (vi) the cost of preparing the
Securities; (vii) the fees and expenses of any Trustee and any agent of any
Trustee and the fees and disbursements of counsel for any Trustee in connection
with any Indenture and the Securities; and (viii) all other costs and expenses
incident to the performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood, however, that,
except as provided in this
15
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Section, and Sections 8 and 11 hereof, the Underwriters will pay all of their
own costs and expenses, including the fees of their counsel, transfer taxes on
resale of any of the Securities by them, and any advertising expenses connected
with any offers they may make.
7. The obligations of the Underwriters of any Designated Securities under
the Pricing Agreement relating to such Designated Securities shall be subject,
in the discretion of the Representatives, to the condition that all
representations and warranties and other statements of the Company in or
incorporated by reference in the Pricing Agreement relating to such Designated
Securities are, at and as of the Time of Delivery for such Designated
Securities, true and correct, the condition that the Company shall have
performed all of its obligations hereunder theretofore to be performed, and the
following additional conditions:
(a) The Prospectus as amended or supplemented in relation to the
applicable Designated Securities shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time period
prescribed for such filing by the rules and regulations under the Act
and in accordance with Section 5(a) hereof; no stop order suspending
the effectiveness of the Registration Statement or any part thereof
shall have been issued and no proceeding for that purpose shall have
been initiated or threatened by the Commission; and all requests for
additional information on the part of the Commission shall have been
complied with to the Representatives' reasonable satisfaction;
(b) Brown & Wood LLP, counsel for the Underwriters, shall have
furnished to the Representatives such opinion or opinions, dated the
Time of Delivery for such Designated Securities, with respect to the
matters covered in paragraphs (i), (vi), (vii), (viii), (x), (xi) and
(xiv) of subsection (c) below as well as such other related matters as
the Representatives may reasonably request, and such counsel shall have
received such papers and information as they may reasonably request to
enable them to pass upon such matters;
(c) Hunton & Williams, counsel for the Company, shall
16
<PAGE>
have furnished to the Representatives their written opinion, dated the
Time of Delivery for such Designated Securities, in form and substance
satisfactory to the Representatives, to the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of
the Commonwealth of Virginia, with corporate power and
authority to own its properties and conduct its business as
described in the Prospectus as amended or supplemented;
(ii) The Company has an authorized capitalization as set
forth in the Prospectus as amended or supplemented and all of
the issued shares of capital stock of the Company have been
duly and validly authorized and issued and are fully paid and
non-assessable;
(iii) The Company is duly qualified to transact business
in all jurisdictions in which the conduct of its business
requires such qualification, or in which the failure to
qualify would have a materially adverse effect upon the
business of the Company;
(iv) Each subsidiary of the Company has been duly
organized and is validly existing as a corporation, limited
liability company, limited partnership or real estate
investment trust in good standing under the laws of the
jurisdiction of its incorporation or organization, with power
and authority to own its properties and conduct its business
as described in the Prospectus and is duly qualified to
transact business in all jurisdictions in which the conduct of
its business requires such qualification except where the
failure to so be in good standing would not have a material
adverse effect on the condition, financial or otherwise, or
the earnings, business affairs or business prospects of the
Company and its subsidiaries, considered as one enterprise;
each such subsidiary is duly qualified to transact business in
all jurisdictions in which the conduct of its business
requires such qualification, or in which the failure to
qualify would have a materially
17
<PAGE>
adverse effect upon the business of such subsidiary; all of
the issued and outstanding shares of capital stock of each
such corporate subsidiary and all of the issued and
outstanding shares of beneficial interest of each such real
estate investment trust subsidiary have been duly authorized
and validly issued, are fully paid and non-assessable and are
owned by the Company free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; and the
Company and/or one such corporate subsidiary are the only
members or general partners of the Company's limited liability
company or limited partnership subsidiaries, as applicable,
and own the entire membership or general partnership interest
in each such subsidiary free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or
equity;
(v) To the best of such counsel's knowledge and other than
as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any
of its subsidiaries is a party or of which any property of the
Company or any of its subsidiaries is the subject which, if
determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a
material adverse effect on the current or future consolidated
financial position, shareholders' equity or results of
operations of the Company and its subsidiaries; and, to the
best of such counsel's knowledge, no such proceedings are
threatened or contemplated by governmental authorities or
threatened by others;
(vi) This Agreement and the Pricing Agreement with respect
to the Designated Securities have been duly authorized,
executed and delivered by the Company;
(vii) The Designated Securities have been duly authorized,
executed, authenticated, issued and delivered and constitute
valid and legally binding obligations of the Company entitled
to the benefits provided by the Indenture; and the Designated
Securities and the Indenture conform to the descriptions
thereof in the Prospectus as amended or supplemented;
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<PAGE>
(viii) The Indenture has been duly authorized, executed
and delivered by the parties thereto and constitutes a valid
and legally binding instrument, enforceable in accordance with
its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general
applicability relating to or affecting creditors' rights and
to general equity principles; and the Indenture has been duly
qualified under the Trust Indenture Act;
(ix) The issue and sale of the Designated Securities being
delivered at such Time of Delivery and the compliance by the
Company with all of the provisions of the Designated
Securities, the Indenture, this Agreement and the Pricing
Agreement with respect to the Designated Securities and the
consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute
a default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to such
counsel to which the Company is a party or by which the
Company is bound or to which any of the property or assets of
the Company is subject, nor will such actions result in any
violation of the provisions of the Articles of Incorporation
or By-laws of the Company or any statute or any order, rule or
regulation known to such counsel of any court or governmental
agency or body having jurisdiction over the Company or any of
its properties;
(x) No consent, approval, authorization, order,
registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale
of the Designated Securities being delivered at such Time of
Delivery or the consummation by the Company of the
transactions contemplated by this Agreement or such Pricing
Agreement or the Indenture, except such as have been obtained
under the Act and the Trust Indenture Act and such consents,
approvals, authorizations, orders, registrations or
qualifications as may be required under
19
<PAGE>
state securities or Blue Sky laws in connection with the
purchase and distribution of the Designated Securities by the
Underwriters;
(xi) The statements set forth in the Prospectus under the
captions "Description of Debt Securities" and "Description of
Notes", insofar as they constitute a summary of documents
referred to therein or matters of law are accurate summaries
and fairly and correctly present the information called for
with respect to such documents and matters;
(xii) The Company is not required to be registered under
the Investment Company Act;
(xiii) The documents incorporated by reference in the
Prospectus as amended or supplemented (other than the
financial statements and related schedules therein, as to
which such counsel need express no opinion), when they became
effective or were filed with the Commission, as the case may
be, complied as to form in all material respects with the
requirements of the Act or the Exchange Act, as applicable,
and the rules and regulations of the Commission thereunder;
and they have no reason to believe that any of such documents,
when they became effective or were so filed, as the case may
be, contained, in the case of a registration statement which
became effective under the Act, an untrue statement of a
material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading, or, in the case of other documents which were
filed under the Act or the Exchange Act with the Commission,
an untrue statement of a material fact or omitted to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made when such documents were so filed, not misleading;
and
(xiv) The Registration Statement and the Prospectus as
amended or supplemented and any further amendments and
supplements thereto made by the Company prior to the Time of
Delivery for the Designated Securities (other than the
20
<PAGE>
financial statements and related schedules therein, as to
which such counsel need express no opinion) comply as to form
in all material respects with the requirements of the Act and
the Trust Indenture Act and the rules and regulations
thereunder; if applicable, the Rule 434 Prospectus complies as
to form in all material respects with the requirements of Rule
434 under the Act; although they do not assume any
responsibility for the accuracy, completeness or fairness of
the statements contained in the Registration Statement or the
Prospectus, except for those referred to in the opinion in
subsection (xi) of this Section 7(c), they have no reason to
believe that, as of its effective date, the Registration
Statement or any further amendment thereto made by the Company
prior to the Time of Delivery (other than the financial
statements and related schedules therein, as to which such
counsel need express no opinion) contained an untrue statement
of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or that, as of its date, the
Prospectus as amended or supplemented or any further amendment
or supplement thereto made by the Company prior to the Time of
Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion) contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading or that, as of the Time
of Delivery, either the Registration Statement or the
Prospectus as amended or supplemented or any further amendment
or supplement thereto made by the Company prior to the Time of
Delivery (other than the financial statements and related
schedules therein, as to which such counsel need express no
opinion) contains an untrue statement of a material fact or
omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading; and they do not know of
any amendment to the Registration Statement required to be
filed or any contracts or other documents of a character
required to be filed as an exhibit to the Registration
Statement or required to be
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<PAGE>
incorporated by reference into the Prospectus as amended or
supplemented or required to be described in the Registration
Statement or the Prospectus as amended or supplemented which
are not filed or incorporated by reference or described as
required;
(d) Hunton & Williams, counsel for the Company, shall have
furnished to the Representatives their written opinion, dated the Time
of Delivery for such Designated Securities, in form and substance
satisfactory to the Representatives, to the effect that the Company has
qualified to be taxed as a real estate investment trust pursuant to
Sections 856 through 860 of the Code for its most recently ended fiscal
year and for the four fiscal years immediately preceding such year, and
the Company's organization and contemplated method of operation are
such as to enable it to continue to so qualify for its current fiscal
year;
(e) On the date of the Pricing Agreement for such Designated
Securities at a time prior to the execution of the Pricing Agreement
with respect to such Designated Securities and at the Time of Delivery
for such Designated Securities, the independent accountants of the
Company who have certified the financial statements of the Company and
its subsidiaries included or incorporated by reference in the
Registration Statement shall have furnished to the Representatives a
letter, dated the effective date of the Registration Statement or the
date of the most recent report filed with the Commission containing
financial statements and incorporated by reference in the Registration
Statement, if the date of such report is later than such effective
date, and a letter dated such Time of Delivery, respectively, to the
effect set forth in Annex II hereto, and with respect to such letter
dated such Time of Delivery, as to such other matters as the
Representatives may reasonably request and in form and substance
satisfactory to the Representatives;
(f) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included or incorporated by reference in the Prospectus as amended
prior to the date of the Pricing Agreement relating to the Designated
Securities any loss or
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interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree, otherwise
than as set forth or contemplated in the Prospectus as amended prior to
the date of the Pricing Agreement relating to the Designated
Securities, and (ii) since the respective dates as of which information
is given in the Prospectus as amended prior to the date of the Pricing
Agreement relating to the Designated Securities there shall not have
been any change in the capital stock, total assets or long-term debt of
the Company or any of its subsidiaries or any change, or any
development involving a prospective change, in or affecting the general
affairs, management, financial position, shareholders' equity or
results of operations of the Company and its subsidiaries, otherwise
than as set forth or contemplated in the Prospectus as amended prior to
the date of the Pricing Agreement relating to the Designated
Securities, the effect of which, in any such case described in Clause
(i) or (ii), is in the judgment of the Representatives so material and
adverse as to make it impracticable or inadvisable to proceed with the
public offering or the delivery of the Designated Securities on the
terms and in the manner contemplated in the Prospectus as first amended
or supplemented relating to the Designated Securities;
(g) On or after the date of the Pricing Agreement relating to the
Designated Securities (i) no downgrading shall have occurred in the
rating accorded the Company's debt securities or preferred stock by any
"nationally recognized statistical rating organization", as that term
is defined by the Commission for purposes of Rule 436(g)(2) under the
Act, and (ii) no such organization shall have publicly announced that
it has under surveillance or review, with possible negative
implications, its rating of any of the Company's debt securities or
preferred stock;
(h) On or after the date of the Pricing Agreement relating to the
Designated Securities there shall not have occurred any of the
following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange; (ii) a suspension
or material limitation in trading in the Company's securities on the
New York Stock
23
<PAGE>
Exchange; (iii) a general moratorium on commercial banking activities
in New York declared by either Federal or New York State authorities;
or (iv) the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national emergency
or war, if the effect of any such event specified in this Clause (iv)
in the judgment of the Representatives makes it impracticable or
inadvisable to proceed with the public offering or the delivery of the
Designated Securities on the terms and in the manner contemplated in
the Prospectus as amended or supplemented;
(i) The Company shall have complied with the provisions of Section
5(c) hereof with respect to the furnishing of prospectuses on the New
York business day next succeeding the date of the applicable Pricing
Agreement; and
(j) The Company shall have furnished or caused to be furnished to
the Representatives at the Time of Delivery for the Designated
Securities a certificate or certificates of officers of the Company
satisfactory to the Representatives as to the accuracy of the
representations and warranties of the Company herein at and as of such
Time of Delivery, as to the performance by the Company of all of its
obligations hereunder to be performed at or prior to such Time of
Delivery, as to the matters set forth in subsections (a) and (f) of
this Section and as to such other matters as the Representatives may
reasonably request.
8. (a) The Company will indemnify and hold harmless each Underwriter
against any losses, claims, damages or liabilities, joint or several, to which
such Underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, any preliminary
prospectus supplement, the Registration Statement, the Prospectus as amended or
supplemented and any other prospectus relating to the Securities, or any
amendment or supplement thereto (including the information deemed to be a part
of the Registration Statement pursuant to Rule 434 under the Act, if
applicable), or arise out of or are based upon the omission or alleged omission
to
24
<PAGE>
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter for
any legal or other expenses reasonably incurred by such Underwriter in
connection with investigating or defending any such action or claim as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in any Preliminary Prospectus, any
preliminary prospectus supplement, the Registration Statement, the Prospectus as
amended or supplemented and any other prospectus relating to the Securities, or
any such amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter of Designated Securities
through the Representatives expressly for use in the Prospectus as amended or
supplemented relating to such Securities.
(b) Each Underwriter will indemnify and hold harmless the Company against
any losses, claims, damages or liabilities to which the Company may become
subject, under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, any preliminary prospectus supplement, the Registration
Statement, the Prospectus as amended or supplemented and any other prospectus
relating to the Securities, or any amendment or supplement thereto (including
the information deemed to be a part of the Registration Statement pursuant to
Rule 434 under the Act, if applicable), or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, in
each case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in any
Preliminary Prospectus, any preliminary prospectus supplement, the Registration
Statement, the Prospectus as amended or supplemented and any other prospectus
relating to the Securities, or any such amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by such
Underwriter through the Representatives expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably incurred by
25
<PAGE>
the Company in connection with investigating or defending any such action or
claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a) or
(b) above of notice of the commencement of any action, such indemnified party
shall, if a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the indemnifying party shall
not relieve it from any liability which it may have to any indemnified party
otherwise than under such subsection. In case any such action shall be brought
against any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof, with
counsel satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party), and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such subsection for any legal expenses of
other counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall, without the written consent
of the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action or
claim in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified party is an actual or potential party
to such action or claim) unless such settlement, compromise or judgment (i)
includes an unconditional release of the indemnified party from all liability
arising out of such action or claim and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of any
indemnified party.
(d) If the indemnification provided for in this Section 8 is unavailable to
or insufficient to hold harmless an indemnified party under subsection (a) or
(b) above in respect of any losses, claims, damages or liabilities (or actions
in respect thereof) referred to therein, then each indemnifying party shall
contribute
26
<PAGE>
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (or actions in respect thereof) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters of the Designated Securities on the
other from the offering of the Designated Securities to which such loss, claim,
damage or liability (or action in respect thereof) relates. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the notice required
under subsection (c) above, then each indemnifying party shall contribute to
such amount paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company on the one hand and the Underwriters of the Designated
Securities on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and such Underwriters on the
other shall be deemed to be in the same proportion as the total net proceeds
from such offering (before deducting expenses) received by the Company bear to
the total underwriting discounts and commissions received by such Underwriters.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or such Underwriters on the other and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if contribution
pursuant to this subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no
27
<PAGE>
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the applicable Designated Securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
obligations of the Underwriters of Designated Securities in this subsection (d)
to contribute are several in proportion to their respective underwriting
obligations with respect to such Securities and not joint.
(e) The obligations of the Company under this Section 8 shall be in
addition to any liability which the Company may otherwise have and shall extend,
upon the same terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any liability which
the respective Underwriters may otherwise have and shall extend, upon the same
terms and conditions, to each officer and director of the Company and to each
person, if any, who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation to purchase the
Designated Securities which it has agreed to purchase under the Pricing
Agreement relating to such Designated Securities, the Representatives may in
their discretion arrange for themselves or another party or other parties to
purchase such Designated Securities on the terms contained herein. If within
thirty-six hours after such default by any Underwriter the Representatives do
not arrange for the purchase of such Designated Securities, then the Company
shall be entitled to a further period of thirty-six hours within which to
procure another party or other parties satisfactory to the Representatives to
purchase such Designated Securities on such terms. In the event that, within the
respective prescribed period, the Representatives notify the Company that they
have so arranged for the purchase of such Designated Securities, or the Company
notifies the Representatives that it has so arranged for the purchase of such
Designated Securities, the Representatives or the Company shall have the right
28
<PAGE>
to postpone the Time of Delivery for such Designated Securities for a period of
not more than seven days, in order to effect whatever changes may thereby be
made necessary in the Registration Statement or the Prospectus as amended or
supplemented, or in any other documents or arrangements, and the Company agrees
to file promptly any amendments or supplements to the Registration Statement or
the Prospectus which in the opinion of the Representatives may thereby be made
necessary. The term "Underwriter" as used in this Agreement shall include any
person substituted under this Section with like effect as if such person had
originally been a party to the Pricing Agreement with respect to such Designated
Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Designated Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company as provided in subsection (a) above, the
aggregate principal amount of such Designated Securities which remains
unpurchased does not exceed one-eleventh of the aggregate principal amount of
the Designated Securities, then the Company shall have the right to require each
non-defaulting Underwriter to purchase the principal amount of Designated
Securities which such Underwriter agreed to purchase under the Pricing Agreement
relating to such Designated Securities and, in addition, to require each
non-defaulting Underwriter to purchase its pro rata share (based on the
principal amount of Designated Securities which such Underwriter agreed to
purchase under such Pricing Agreement) of the Designated Securities of such
defaulting Underwriter or Underwriters for which such arrangements have not been
made; but nothing herein shall relieve a defaulting Underwriter from liability
for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Designated Securities of a defaulting Underwriter or Underwriters by the
Representatives and the Company as provided in subsection (a) above, the
aggregate principal amount of Designated Securities which remains unpurchased
exceeds one-eleventh of the aggregate principal amount of the Designated
Securities, as referred to in subsection (b) above, or if the Company shall not
exercise the right described in subsection (b) above to require non-defaulting
Underwriters to purchase Designated Securities of a defaulting Underwriter or
Underwriters, then the Pricing Agreement relating to such Designated Securities
shall thereupon terminate, without liability on the part of any
29
<PAGE>
non-defaulting Underwriter or the Company, except for the expenses to be borne
by the Company and the Underwriters as provided in Section 6 hereof and the
indemnity and contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company and the several Underwriters, as set forth in
this Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of any
investigation (or any statement as to the results thereof) made by or on behalf
of any Underwriter or any controlling person of any Underwriter, or the Company,
or any officer or director or controlling person of the Company, and shall
survive delivery of and payment for the Securities.
11. If any Pricing Agreement shall be terminated pursuant to Section 9
hereof, the Company shall not then be under any liability to any Underwriter
with respect to the Designated Securities covered by such Pricing Agreement
except as provided in Section 6 and Section 8 hereof; but, if for any other
reason Designated Securities are not delivered by or on behalf of the Company as
provided herein, the Company will reimburse the Underwriters through the
Representatives for all out-of-pocket expenses approved in writing by the
Representatives, including fees and disbursements of counsel, reasonably
incurred by the Underwriters in making preparations for the purchase, sale and
delivery of such Designated Securities, but the Company shall then be under no
further liability to any Underwriter with respect to such Designated Securities
except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, the Representatives of the Underwriters of
Designated Securities shall act on behalf of each of such Underwriters, and the
parties hereto shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of any Underwriter made or given by such
Representatives jointly or by such of the Representatives, if any, as may be
designated for such purpose in the Pricing Agreement.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered
30
<PAGE>
or sent by mail, telex or facsimile transmission to the address of the
Representatives as set forth in the Pricing Agreement; and if to the Company
shall be delivered or sent by mail, telex or facsimile transmission to the
address of the Company set forth in the Registration Statement: Attention:
Secretary; provided, however, that any notice to an Underwriter pursuant to
Section 8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Underwriter at its address set forth in its Underwriters'
Questionnaire, or telex constituting such Questionnaire, which address will be
supplied to the Company by the Representatives upon request. Any such
statements, requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement and each Pricing Agreement shall be binding upon, and
inure solely to the benefit of, the Underwriters, the Company and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and each person who controls the Company or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement or any such Pricing Agreement. No purchaser of any of the Securities
from any Underwriter shall be deemed a successor or assign by reason merely of
such purchase.
14. Time shall be of the essence of each Pricing Agreement. As used herein,
"business day" shall mean any day when the Commission's office in Washington,
D.C. is open for business.
15. This Agreement and each Pricing Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
31
<PAGE>
16. This Agreement and each Pricing Agreement may be executed by any one or
more of the parties hereto and thereto in any number of counterparts, each of
which shall be deemed to be an original, but all such respective counterparts
shall together constitute one and the same instrument.
If the foregoing is in accordance with your understanding, please sign
and return to us six (6) counterparts hereof.
Very truly yours,
United Dominion Realty Trust, Inc.
By: ______________________________
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
NationsBanc Capital Markets, Inc.
By:_____________________________
(Goldman, Sachs & Co.)
32
<PAGE>
PRICING AGREEMENT
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
NationsBanc Capital Markets, Inc.
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
January 22, 1997
Ladies and Gentlemen:
United Dominion Realty Trust, Inc., a Virginia corporation (the "Company"),
proposes, subject to the terms and onditions stated herein and in the
Underwriting Agreement, dated January 22, 1997 (the "Underwriting Agreement"),
between the Company on the one hand and Goldman, Sachs & Co., J.P. Morgan
Securities Inc. and NationsBanc Capital Markets, Inc. on the other hand, to
issue and sell to the Underwriters named in Schedule I hereto (the
"Underwriters") the Securities specified in Schedule II hereto (the "Designated
Securities"). Each of the provisions of the Underwriting Agreement is
incorporated herein by reference in its entirety, and shall be deemed to be a
part of this Agreement to the same extent as if such provisions had been set
forth in full herein; and each of the representations and warranties set forth
therein shall be deemed to have been made at and as of the date of this Pricing
Agreement, except that each representation and warranty which refers to the
Prospectus in Section 2 of the Underwriting Agreement shall be deemed to be a
representation or warranty as of the date of the Underwriting Agreement in
relation to the Prospectus (as therein defined), and also a representation and
warranty as of the date of this Pricing Agreement in relation to the Prospectus
as amended or supplemented relating to the Designated Securities which are the
subject of this Pricing Agreement. Each reference to the Representatives herein
and in the
1
<PAGE>
provisions of the Underwriting Agreement so incorporated by reference shall be
deemed to refer to you. Unless otherwise defined herein, terms defined in the
Underwriting Agreement are used herein as therein defined. The Representatives
designated to act on behalf of the Representatives and on behalf of each of the
Underwriters of the Designated Securities pursuant to Section 12 of the
Underwriting Agreement and the address of the Representatives referred to in
such Section 12 are set forth at the end of Schedule II hereto.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
Subject to the terms and conditions set forth herein and in the
Underwriting Agreement incorporated herein by reference, the Company agrees to
issue and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at the time and place
and at the purchase price to the Underwriters set forth in Schedule II hereto,
the principal amount of Designated Securities set forth opposite the name of
such Underwriter in Schedule I hereto.
If the foregoing is in accordance with your understanding, please sign and
return to us six (6) counterparts hereof, and upon acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof,
including the provisions of the Underwriting Agreement incorporated herein by
reference, shall constitute a binding agreement between each of the Underwriters
and the Company. It is understood that your acceptance of this letter on behalf
of each of the Underwriters is or will be pursuant to the authority set forth in
a form of Agreement among Underwriters, the form of which shall be submitted to
the Company for examination upon request, but without warranty on the part of
the Representatives as to the authority of the signers thereof.
Very truly yours,
United Dominion Realty Trust,
Inc.
By: _________________________
Name:
Title:
2
<PAGE>
Accepted as of the date hereof:
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
NationsBanc Capital Markets, Inc.
________________________________
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
3
<PAGE>
SCHEDULE I
Principal
Amount of
Designated
Securities
to be
Underwriter Purchased
----------- -----------
Goldman, Sachs & Co. $50,000,000
J.P. Morgan Securities Inc. 37,500,000
NationsBanc Capital Markets, Inc. 37,500,000
-----------
Total $125,000,000
===========
4
<PAGE>
SCHEDULE II
TITLE OF DESIGNATED SECURITIES:
7 1/4% Notes due January 15, 2007 (the "Notes")
AGGREGATE PRINCIPAL AMOUNT:
$125,000,000
PRICE TO PUBLIC:
99.576% of the principal amount of the Notes, plus accrued interest
from January 15, 1997.
PURCHASE PRICE BY UNDERWRITERS:
98.926% of the principal amount of the Notes, plus accrued
interest from January 15, 1997.
FORM OF DESIGNATED SECURITIES:
Book-entry form only represented by a single global security deposited
with The Depositary Trust Company and registered in the name of its
nominee.
SPECIFIED FUNDS FOR PAYMENT OF PURCHASE PRICE:
Same-day funds
INDENTURE:
Indenture dated November 1, 1995, between the Company and First Union
National Bank of Virginia, as Trustee
MATURITY:
January 15, 2007
INTEREST RATE:
7 1/4%
1
<PAGE>
INTEREST PAYMENT DATES:
January 15 and July 15, commencing July 15, 1997.
REDEMPTION PROVISIONS:
The Notes may be redeemed, in whole or in part, at the option of the
Company under the circumstances described in the Prospectus Supplement.
SINKING FUND PROVISIONS:
No sinking fund provisions.
DEFEASANCE PROVISIONS:
The provisions of Article 14 of the Indenture relating to defeasance
and covenant defeasance will apply to the Notes.
TIME OF DELIVERY:
10 a.m., New York time, on January 27, 1997.
CLOSING LOCATION FOR DELIVERY OF SECURITIES:
Offices of Hunton & Williams, Riverfront Plaza, 901 East Byrd Street,
Richmond, Virginia 23212-1535.
NAMES AND ADDRESSES OF REPRESENTATIVES:
Designated Representatives:
Goldman, Sachs & Co.
J.P. Morgan Securities Inc.
NationsBanc Capital Markets, Inc.
Address for Notices, etc.:
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Attn: Fred Knecht, Vice President
2
EXHIBIT 12
Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends
<TABLE> Supplemental
<CAPTION> Pro forma
Years ended December 31, 1992 1993 1994 1995 1996 1996(a)
------------------------------------------------------------------------------------
<S> <C>
Income before extraordinary item $6,577 $11,197 $19,226 $33,127 $38,014 $ 53,650
Add:
Portion of rents representative
of the interest factor 126 143 177 201 257 355
Interest on indebtedness 11,777 17,237 28,521 40,646 50,843 70,941
Adoption of SFAS No. 112 "Employers'
Accounting for Postemployment Benefits" -- -- 450 -- -- --
------------------------------------------------------------------------------------
Earnings $18,480 $28,577 $48,374 $73,974 $89,114 $124,946
====================================================================================
Fixed charges and preferred stock dividend:
Interest on indebtedness $11,777 $17,237 $28,521 $40,646 $50,843 $ 70,941
Capitalized interest 73 -- -- 40 541 3,323
Portion of rents representative
of the interest factor 126 143 177 201 257 355
------------------------------------------------------------------------------------
Fixed charges 11,976 17,380 28,698 40,887 51,641 74,619
------------------------------------------------------------------------------------
Add:
Preferred stock dividend -- -- -- 6,637 9,713 9,713
------------------------------------------------------------------------------------
Combined fixed charges and preferred
stock dividend $11,976 $17,380 $28,698 $47,524 $61,354 $ 84,332
====================================================================================
Ratio of earnings to fixed charges 1.54x 1.64x 1.69x 1.81x 1.73x 1.67x
Ratio of earnings to combined fixed charges
and preferred stock dividend 1.54 1.64 1.69 1.56 1.45 1.48
</TABLE>
(a) Supplemental pro forma 1996 assumes (i) the consummation of the Merger and
(ii) the acquisition of 20 apartment communities containing 5,157 apartment
homes, as if the transactions had occurred on January 1, 1996.
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the following Registration
Statements of United Dominion Realty Trust, Inc. and in the related Prospectuses
of our report dated March 5, 1997, with respect to the consolidated financial
statements and schedule of United Dominion Realty Trust, Inc. included in this
Annual Report (Form 10-K) for the year ended December 31, 1996.
Registration Statement
Number Description
- - ---------------------- -----------
33-40433 Form S-3, pertaining to the private placement of
900,000 shares of the Company's common stock
in May, 1991.
33-32930 Form S-3, pertaining to the Company's Dividend
Reinvestment and Stock Purchase Plan.
33-47296 Form S-8, pertaining to the Company's Stock
Purchase and Loan Plan.
33-48000 Form S-8, pertaining to the Company's Stock
Option Plan.
33-58201 Form S-8, pertaining to the Employee's Stock
Purchase Plan.
33-55159 Form S-3, Shelf Registration Statement,
pertaining to $400 Million of Common Stock,
Preferred Stock and Debentures.
33-64275 Form S-3, Shelf Registration Statement,
pertaining to the registration of $462.3
million of Common Stock, Preferred Stock and
Debt Securities.
333-11207 Form S-3, Shelf Registration Statement,
pertaining to the private placement of
1,679,840 shares of the Company's Common
Stock in August, 1996.
333-15133 Form S-3, pertaining to the Company's Dividend
Reinvestment and Stock Purchase Plan.
Ernst & Young LLP
Richmond, Virginia
March 28, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 13,452
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 41,720
<PP&E> 2,085,023
<DEPRECIATION> 173,291
<TOTAL-ASSETS> 1,966,904
<CURRENT-LIABILITIES> 69,661
<BONDS> 1,044,835
0
105,000
<COMMON> 81,983
<OTHER-SE> 663,396
<TOTAL-LIABILITY-AND-EQUITY> 1,966,904
<SALES> 242,112
<TOTAL-REVENUES> 243,819
<CGS> 0
<TOTAL-COSTS> 104,833
<OTHER-EXPENSES> 54,417
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 50,843
<INCOME-PRETAX> 38,014
<INCOME-TAX> 0
<INCOME-CONTINUING> 38,014
<DISCONTINUED> 0
<EXTRAORDINARY> (23)
<CHANGES> 0
<NET-INCOME> 37,991
<EPS-PRIMARY> .49
<EPS-DILUTED> .49
</TABLE>
