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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 1-12792
------------------------------------
SUMMIT PROPERTIES INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
Maryland 56-1857807
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
</TABLE>
212 S. Tryon Street, Suite 500, Charlotte, North Carolina 28281
(Address of principal executive offices -- zip code)
(704) 334-9905
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check 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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No __
------------------------------
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes
of common stock as of the latest practicable date.
22,389,955 shares outstanding as of October 28, 1996.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
SUMMIT PROPERTIES INC.
----------------------------------
INDEX
--------
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
- ------------------- -------------------------------------------------------- ----
<S> <C> <C>
Item 1 Financial Statements
Consolidated Balance Sheets as of September 30, 1996
(Unaudited) and December 31, 1995..................... 3
Consolidated Statements of Earnings for the three months
and nine months ended September 30, 1996 and 1995
(Unaudited)........................................... 4
Consolidated Statement of Stockholders' Equity
(Unaudited)........................................... 5
Consolidated Statements of Cash Flows for the nine
months ended September 30, 1996 and 1995
(Unaudited)........................................... 6
Notes to Consolidated Financial Statements.............. 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations................... 9
PART II OTHER INFORMATION
- ------------------- --------------------------------------------------------
Item 6 Exhibits Index and Reports on Form 8-K.................. 21
SIGNATURES........................................................ 22
</TABLE>
2 of 22
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUMMIT PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
(UNAUDITED)
ASSETS
Real estate assets:
Land and land improvements..................................... $ 99,735 $ 90,336
Buildings and improvements..................................... 457,157 399,057
Furniture, fixtures and equipment.............................. 41,313 36,336
-------- --------
598,205 525,729
Less: accumulated depreciation................................. (80,692) (67,884)
-------- --------
Operating real estate assets........................... 517,513 457,845
Construction in progress....................................... 74,429 59,300
Investment in real estate joint venture........................ -- 1,235
-------- --------
Net real estate assets................................. 591,942 518,380
Cash and cash equivalents........................................ 18,172 2,881
Restricted cash.................................................. 4,966 4,188
Deferred financing costs, net.................................... 4,721 5,398
Other assets..................................................... 4,233 2,405
-------- --------
Total assets..................................................... $ 624,034 $533,252
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable.................................................. $ 288,555 $297,010
Accrued interest payable....................................... 903 903
Accounts payable and accrued expenses.......................... 15,193 7,850
Dividends and distributions payable............................ 10,236 7,699
Security deposits and prepaid rents............................ 3,208 2,651
-------- --------
Total liabilities...................................... 318,095 316,113
-------- --------
Commitments......................................................
Minority interest................................................ 46,342 41,685
-------- --------
Stockholders' equity:
Common stock, $.01 par value -- 100,000,000 authorized,
22,385,923 and 16,500,789 shares issued and outstanding in
1996 and 1995, respectively................................. 224 165
Additional paid-in capital..................................... 342,446 247,064
Accumulated deficit............................................ (82,175) (71,775)
Unamortized restricted stock compensation...................... (898) --
-------- --------
Total stockholders' equity............................. 259,597 175,454
-------- --------
Total liabilities and stockholders' equity....................... $ 624,034 $533,252
======== ========
</TABLE>
See notes to consolidated financial statements.
3 of 22
<PAGE> 4
SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER
SEPTEMBER 30, 30,
--------------------------- ---------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Rental.............................. $ 23,143 $ 19,164 $ 65,097 $ 51,016
Other property income............... 1,293 884 3,461 2,404
Interest............................ 240 120 395 335
Other income........................ 95 99 310 275
----------- ----------- ----------- -----------
Total revenues.............. 24,771 20,267 69,263 54,030
----------- ----------- ----------- -----------
Expenses:
Property operating and maintenance:
Personnel........................ 2,191 1,876 6,315 4,820
Advertising and promotion........ 434 186 1,015 475
Utilities........................ 1,056 918 3,036 2,472
Building repairs and
maintenance.................... 2,022 1,768 5,456 4,467
Real estate taxes and
insurance...................... 2,258 1,875 6,744 5,087
Depreciation and amortization.... 4,682 4,090 13,249 10,944
Property supervision............. 576 497 1,632 1,322
Other operating expenses......... 690 619 1,943 1,644
----------- ----------- ----------- -----------
13,909 11,829 39,390 31,231
Interest............................ 4,292 3,606 13,346 10,902
General and administrative.......... 764 491 2,045 1,383
Loss (income) in equity investments:
Summit Management Company........ 66 (108) 161 (67)
Real estate joint venture........ -- (30) (1) (47)
----------- ----------- ----------- -----------
Total expenses.............. 19,031 15,788 54,941 43,402
----------- ----------- ----------- -----------
Income before minority interest of
unitholders in Operating Partnership
and extraordinary items............. 5,740 4,479 14,322 10,628
Minority interest of unitholders in
Operating Partnership............... (974) (846) (2,652) (1,939)
----------- ----------- ----------- -----------
Income before extraordinary items..... 4,766 3,633 11,670 8,689
Extraordinary items, net of minority
interest of unitholders in Operating
Partnership (Note 2)................ (516) -- (516) (63)
----------- ----------- ----------- -----------
Net income............................ $ 4,250 $ 3,633 $ 11,154 $ 8,626
=========== =========== =========== ===========
Per share data:
Income before extraordinary items... $ 0.24 $ 0.22 $ 0.66 $ 0.61
=========== =========== =========== ===========
Net income.......................... $ 0.21 $ 0.22 $ 0.63 $ 0.61
=========== =========== =========== ===========
Dividends declared.................. $ 0.39 $ 0.38 $ 1.16 $ 1.13
=========== =========== =========== ===========
Weighted average shares............. 20,040,578 16,440,242 17,742,425 14,227,007
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
4 of 22
<PAGE> 5
SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
UNAMORTIZED
ADDITIONAL RESTRICTED
COMMON PAID IN ACCUMULATED STOCK
STOCK CAPITAL DEFICIT COMPENSATION TOTAL
------- ----------- ------------ ------------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995........... $ 165 $ 247,064 $(71,775) $ 0 $175,454
Dividends.......................... -- -- (21,554) -- (21,554)
Proceeds of public offering, net of
underwriting discount, offering
costs and Shelf Registration
costs........................... 58 97,561 -- -- 97,619
Proceeds from Dividend Reinvestment
and Employee Stock Purchase
Plans........................... -- 1,262 -- -- 1,262
Conversion of units to shares...... -- 83 -- -- 83
Exercise of stock options.......... -- 224 -- -- 224
Issue of restricted stock grants... 1 1,045 -- (1,046)
Amortization of restricted stock
grants.......................... -- -- -- 148 148
Adjustment for minority interest in
operating partnership........... -- (4,793) -- -- (4,793)
Net income......................... -- -- 11,154 -- 11,154
---- ------- -------- ----- --------
Balance, September 30, 1996.......... $ 224 $ 342,446 $(82,175) $ (898) $259,597
==== ======= ======== ===== ========
</TABLE>
See notes to consolidated financial statements.
5 of 22
<PAGE> 6
SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1996 1995
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income........................................................ $ 11,154 $ 8,626
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary items............................................ 516 63
Gain (loss) on equity method investments....................... 160 (114)
Depreciation and amortization.................................. 13,994 11,570
Increase in restricted cash.................................... (610) (2,095)
Increase in other assets....................................... (1,747) (2,643)
Increase (decrease) in accrued interest payable................ (82) 126
Increase in accounts payable and accrued expenses.............. 4,114 3,359
Increase in security deposits and prepaid rents................ 557 149
Increase in minority interest of unitholders in Operating
Partnership................................................... 2,652 1,939
--------- --------
Net cash provided by operating activities................. 30,708 20,980
--------- --------
Cash flows from investing activities:
Construction of real estate assets and land acquisitions, net of
payables....................................................... (54,259) (32,824)
Capitalized interest.............................................. (2,884) (2,232)
Recurring capital expenditures.................................... (1,805) (1,785)
Non-recurring capital expenditures................................ (2,329) (373)
Purchase of Communities........................................... (6,360) (5,032)
--------- --------
Net cash used in investing activities..................... (67,637) (42,246)
--------- --------
Cash flows from financing activities:
Debt proceeds..................................................... 80,949 43,563
Debt repayments................................................... (103,751) (68,336)
Dividends and distributions to unitholders........................ (23,761) (18,465)
Payments of financing costs....................................... (322) (397)
Offering proceeds, net of underwriters discount, offering costs
and Shelf Registration costs................................... 97,619 65,994
Proceeds from Dividend Reinvestment and Employee Stock Purchase
Plans.......................................................... 1,262 136
Exercise of stock options......................................... 224 --
--------- --------
Net cash provided by financing activities................. 52,220 22,495
--------- --------
Net increase in cash and cash equivalents:.......................... 15,291 1,229
Cash and cash equivalents, beginning of period...................... 2,881 1,181
--------- --------
Cash and cash equivalents, end of period............................ $ 18,172 $ 2,410
========= ========
Supplemental disclosure of cash flow information -- Cash paid for
interest, net of capitalized interest............................. $ 12,643 $ 9,961
========= ========
</TABLE>
See notes to consolidated financial statements.
6 of 22
<PAGE> 7
SUMMIT PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared by the
management of Summit Properties Inc., (the "Company") in accordance with
generally accepted accounting principles for interim financial information and
in conformity with the rules and regulations of the Securities and Exchange
Commission. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
only of normal recurring adjustments) considered necessary for a fair
presentation have been included. The results of operations for the nine months
ended September 30, 1996 are not necessarily indicative of the results that may
be expected for the full year. These financial statements should be read in
conjunction with the Company's December 31, 1995 audited financial statements
and notes thereto included in the Company's Annual Report on Form 10-K.
2. 1996 EQUITY OFFERING, UNSECURED DEBT FINANCING AND LINE OF CREDIT
On August 4, 1996, the Company completed a private placement for $31.0 million
of unsecured debt financing consisting of a $15.0 million unsecured note with a
four year term and a $16.0 million unsecured note with a six year term. The
notes bear interest at 7.71% and 7.95%, respectively.
On August 7, 1996, the Company completed a public offering of 5,000,000 shares
of its Common Stock. In connection with the public offering, the Company granted
the underwriters an option to purchase additional shares to cover over
allotments. On August 12, 1996, the underwriters exercised their over-allotment
option and the Company issued an additional 750,000 shares. These transactions
are collectively referred to as the "1996 Equity Offering." The net proceeds of
the 1996 Equity Offering were approximately $97.6 million.
The proceeds from the 1996 Equity Offering and the $31.0 million unsecured debt
financing were used to repay $82.4 million of development loans and to repay
$15.3 million on the Company's existing $50.0 million line of credit (the
"Credit Facility"). The remaining proceeds will be used to fund future
development activity.
In September 1996, the Company received a commitment to replace its existing
Credit Facility with a new $150.0 million unsecured line of credit (the "New
Credit Facility"). The New Credit Facility has a three year term and is expected
to close in the fourth quarter of 1996.
The extraordinary item for the three and nine months ended September 30, 1996
resulted primarily from the write-off of unamortized deferred financing costs
relating to the development loans repaid with the 1996 Equity Offering and the
$31.0 million unsecured debt proceeds. The extraordinary item is net of minority
interest of unitholders in Summit Properties Partnership, L.P. (the "Operating
Partnership") of $110,000, which was calculated on the weighted average of
outstanding Units of the Operating Partnership.
3. RESTRICTED STOCK
In January 1996, the Company granted 56,046 shares of restricted stock to
employees under the Company's 1994 Stock Option and Incentive Plan. The market
value of the restricted stock grants totaled $1.1 million, which has been
recorded as unamortized restricted stock compensation and is shown as a separate
component of stockholders' equity. Unearned compensation is being amortized to
expense over the five year vesting period.
7 of 22
<PAGE> 8
SUMMIT PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- --------------------------------------------------------------------------------
4. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the nine months ended September
30, 1996 and 1995 are as follows:
A. The Company issued 106,330 Units of the Operating Partnership, valued at
$2.1 million at issuance, for the purchase of land during the nine months
ended September 30, 1996.
B. The Company accrued a dividend and distribution payable in the amount of
$10.2 million and $7.7 million at September 30, 1996 and 1995,
respectively.
C. During the nine months ended September 30, 1996, the Company issued
53,646 shares (net of 2,400 shares issued but subsequently retired) of
restricted stock valued at $1.0 million.
D. The Company purchased 13 apartment communities (the "Crosland
Acquisition Communities") in the second quarter of 1995 by assuming debt,
issuing approximately 1.5 million Units of the Operating Partnership,
assuming certain liabilities and current assets, and the payment of cash.
The recording of the purchase is summarized as follows (in thousands):
<TABLE>
<S> <C>
Fixed assets............................................................. $ 82,866
Restricted cash.......................................................... 1,427
Other assets............................................................. 93
Debt assumed............................................................. (52,576)
Current liabilities assumed.............................................. (996)
Minority interest........................................................ 407
Value of units issued.................................................... (26,189)
--------
Net cash paid............................................................ $ 5,032
========
</TABLE>
E. On April 1, 1996, the Company acquired its joint venture partner's
interest in the Summit Plantation (formerly Plantation Cove) apartment
community. The Company paid $6.4 million in cash for the remaining 75%
interest in this joint venture, which is now owned entirely by the
Company. The recording of the purchase is summarized as follows (in
thousands):
<TABLE>
<S> <C>
Fixed assets............................................................. $ 21,913
Current assets........................................................... 202
Deferred charges......................................................... 95
Debt assumed............................................................. (14,347)
Current liabilities assumed.............................................. (288)
Equity investment........................................................ (1,215)
-------
Net cash paid............................................................ $ 6,360
=======
</TABLE>
8 of 22
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Form 10-Q contains forward-looking statements including, without
limitation, statements relating to development activities of the Company within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. Although the Company believes that the
expectations reflected in such forward-looking statements are based on
reasonable assumptions, the Company's actual results and performance of
development Communities could differ materially from those set forth in the
forward-looking statements. Certain factors that might cause such a difference
include general economic conditions, local real estate conditions, construction
delays due to unavailability of materials, weather conditions or other delays
and those factors discussed in the section entitled "Certain Factors Affecting
the Performance of Development Communities" on page 18 of this Form 10-Q.
OVERVIEW
The following discussion should be read in conjunction with the Consolidated
Financial Statements of Summit Properties Inc. and the Notes thereto appearing
elsewhere herein.
As of September 30, 1996, there were 26,415,977 Units outstanding of the
Operating Partnership, of which 22,385,923, or 84.7% were owned by the Company
and 4,030,054, or 15.3% were owned by other partners (including certain officers
and directors of the Company).
HISTORICAL RESULTS OF OPERATIONS
The Company's net income is generated primarily from the operations of its
apartment communities (the "Communities"). The changes in operating results from
period to period reflect changes in existing community performance as well as
increases in the number of apartment homes due to the acquisition and
development of new Summit communities. Where appropriate, comparisons are made
on a "stabilized Communities," "acquisition Communities" and "Communities in
lease-up" basis in order to adjust for changes in the number of apartment homes.
A Community is deemed to be "stabilized" when it has attained either a physical
occupancy level of at least 93% or when construction has been completed for one
year in each of the comparable periods presented. The thirteen Crosland
Acquisition Communities acquired in the second quarter of 1995 are considered
"stabilized" for the three month periods presented and are considered
acquisition Communities for the nine month periods presented. In addition,
Summit Plantation, acquired April 1, 1996, is considered an acquisition
Community in the following comparisons. The Company also had six communities
with a total of 1,792 apartment homes in lease-up during the periods presented
in 1996. One of these lease-up Communities stabilized in the second quarter of
1996 and one of these Communities stabilized in the third quarter of 1996.
Results of Operations for the Three Months and Nine Months Ended September 30,
1996 and 1995
For the three and nine months ended September 30, 1996, income before minority
interest and extraordinary items increased $1.3 million and $3.7 million,
respectively, to $5.7 million and $14.3 million, respectively, from the three
and nine months ended September 30, 1995.
9 of 22
<PAGE> 10
OPERATING PERFORMANCE OF THE COMPANY'S PORTFOLIO OF COMMUNITIES
The operating performance of the Communities is summarized below (dollars in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER
30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------- -------------------------------
1996 1995 % CHANGE 1996 1995 % CHANGE
------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Property revenues:
Stabilized Communities(1)...... $20,695 $19,920 3.9% $50,081 $48,122 4.1%
Acquisition Communities(2)..... 736 -- 100.0% 12,455 5,170 140.9%
Development Communities(3)..... 3,005 128 2247.7% 6,022 128 4604.7%
------- ------- ------- -------
Total property revenues.......... 24,436 20,048 21.9% 68,558 53,420 28.3%
------- ------- ------- -------
Property operating and
maintenance expense(4):
Stabilized Communities......... 7,970 7,705 3.4% 19,004 18,157 4.7%
Acquisition Communities........ 254 -- 100.0% 4,849 2,096 131.3%
Development Communities........ 1,003 34 2850.0% 2,288 34 6629.4%
------- ------- ------- -------
Total property operating and
maintenance expense............ 9,227 7,739 19.2% 26,141 20,287 28.9%
------- ------- ------- -------
Property operating income........ $15,209 $12,309 23.6% $42,417 $33,133 28.0%
======= ======= ======= =======
Apartment homes, end of
period(5)...................... 12,140 10,465 16.0% 12,140 10,465 16.0%
======= ======= ======= =======
</TABLE>
- ---------------
(1) Includes Communities which were stabilized for each of the comparable
periods presented. Three month results include the Crosland Acquisition
Communities, which were acquired in the second quarter of 1995.
(2) Three month results are for Summit Plantation which was acquired April 1,
1996. Nine month results are for Summit Plantation as well as the Crosland
Acquisition Communities.
(3) Both three and nine month results are for six Communities in lease-up. As of
September 30, 1996, four of these Communities had completed construction
including two which were completed in the third quarter of 1996.
(4) Before real estate depreciation and amortization expense.
(5) Includes apartment homes in Communities still under construction but which
have begun leasing.
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<PAGE> 11
OPERATING PERFORMANCE OF THE COMPANY'S STABILIZED COMMUNITIES
The operating performance of the 45 and 32 Communities stabilized during the
entire period for the three and nine months ended September 30, 1996 and 1995,
respectively, are summarized below (dollars in thousands except average monthly
rental revenue):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER
30, NINE MONTHS ENDED SEPTEMBER 30,
------------------------------- -------------------------------
1996 1995 % CHANGE 1996 1995 % CHANGE
------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Property revenues:
Rental......................... $19,657 $19,051 3.2% $47,482 $45,876 3.5%
Other.......................... 1,038 869 19.4% 2,599 2,246 15.7%
------- ------- ------- -------
Total property revenues.......... 20,695 19,920 3.9% 50,081 48,122 4.1%
------- ------- ------- -------
Property operating and
maintenance expense(1):
Personnel...................... 1,907 1,866 2.2% 4,513 4,216 7.0%
Advertising and promotion...... 252 184 37.0% 501 419 19.6%
Utilities...................... 906 914 (0.9)% 2,274 2,251 1.0%
Building repairs and
maintenance................. 1,895 1,768 7.2% 4,152 3,984 4.2%
Real estate taxes and
insurance................... 1,949 1,867 4.4% 5,005 4,651 7.6%
Property supervision........... 513 493 4.1% 1,245 1,190 4.6%
Other operating expense........ 548 613 (10.6)% 1,314 1,446 (9.1)%
------- ------- ------- -------
Total property operating and
maintenance expense............ 7,970 7,705 3.4% 19,004 18,157 4.7%
------- ------- ------- -------
Property operating income........ $12,725 $12,215 4.2% $31,077 $29,965 3.7%
======= ======= ======= =======
Average physical occupancy(2).... 93.8% 95.1% (1.4)% 93.1% 94.0% (1.0)%
======= ======= ======= =======
Average monthly rental
revenue(3)..................... $ 700 $ 671 4.4% $ 712 $ 684 4.1%
======= ======= ======= =======
Number of apartment homes........ 10,086 10,086 8,061 8,061
======= ======= ======= =======
</TABLE>
- ---------------
(1) Before real estate depreciation and amortization expense.
(2) Average physical occupancy is defined as the number of apartment homes
occupied divided by the total number of apartment homes contained in the
Communities, expressed as a percentage. Average physical occupancy has been
calculated using the average of the midweek occupancy that existed during
each week of the period.
(3) Represents the average monthly net rental revenue per occupied apartment
home.
The 3.2% increase in rental revenue from stabilized Communities for the third
quarter of 1996 compared to the third quarter 1995 was primarily the result of
increases in average monthly net rental revenue per occupied apartment home of
4.4% offset by a 1.4% decrease in average physical occupancy levels. Property
operating and maintenance expense increased 3.4% for the third quarter of 1996
compared to the third quarter of 1995. The increases for the three months ended
September 30, 1996 compared to the three months ended September 30, 1995 were
due primarily to an increase in property and casualty insurance premiums
($73,000 or 39.4% ), an increase in advertising and promotion ($68,000 or 37.0%)
and higher building and repair costs.
11 of 22
<PAGE> 12
OPERATING PERFORMANCE OF THE COMPANY'S ACQUISITION COMMUNITIES
Acquisition Communities consist of both the Crosland Acquisition Communities
(2,025 apartment homes) and Summit Plantation (262 apartment homes) for the nine
month periods presented and only Summit Plantation for the three month periods
presented. The Crosland Acquisition Communities were acquired May 16, 1995,
except Summit at East Ridge which was acquired June 22, 1995. Summit Plantation
was acquired April 1, 1996. The operations of these Communities are summarized
as follows (dollars in thousands except average monthly rental revenue):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS ENDED
ENDED SEPTEMBER 30, SEPTEMBER 30,
----------------- --------------------
1996 1995 1996 1995
----- ----- ------- ------
<S> <C> <C> <C> <C>
Property revenues:
Rental revenues................................ $ 696 -- $12,026 $5,026
Other property revenue......................... 40 -- 429 144
---- ---- ------- ------
Total property revenues.......................... 736 -- 12,455 5,170
---- ---- ------- ------
Property operating and maintenance expense(1).... 254 -- 4,849 2,096
---- ---- ------- ------
Property operating income........................ $ 482 -- $ 7,606 $3,074
==== ==== ======= ======
Average physical occupancy(2).................... 92.4% -- 94.0% 96.8%
==== ==== ======= ======
Average monthly rental revenue(3)................ $ 958 -- $ 667 $ 626
==== ==== ======= ======
Number of apartment homes........................ 262 -- 2,287 2,025
==== ==== ======= ======
</TABLE>
- ---------------
(1) Before real estate depreciation and amortization expense.
(2) Average physical occupancy is defined as the number of apartment homes
occupied divided by the total number of apartment homes contained in the
Communities, expressed as a percentage. Average physical occupancy has been
calculated using the average of the midweek occupancy that existed during
each week of the period.
(3) Represents the average monthly net rental revenue per occupied apartment
home.
The unleveraged yield on an annualized basis for the nine months ended September
30, 1996 on the Crosland Acquisition Communities was 10.8% compared to a yield
of 9.9% for the period from acquisition (May 16, 1995, except Summit East Ridge
which was acquired June 22, 1995) to September 30, 1995.
12 of 22
<PAGE> 13
OPERATING PERFORMANCE OF THE COMPANY'S COMMUNITIES IN LEASE-UP
The Company had five Communities with a total of 1,585 apartment homes in
lease-up during the three months ended September 30, 1996. A lease-up community
is defined as one which has commenced rental operations but has not achieved
stabilization. In addition, the Company had one Community with a total of 207
apartment homes which stabilized at the end of the second quarter of 1996. In
order to evaluate the impact of developments and lease-ups on the Company's
operations, the amount of interest expensed on Communities in development and
lease-up is presented. The results of operations of these six Communities in
lease-up for the last four quarters, including interest expense incurred during
construction and lease-up, are summarized as follows (dollars in thousands
except average monthly rental revenue):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------------
SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31,
1996 1996 1996 1995
------------- -------- --------- ------------
<S> <C> <C> <C> <C>
Property revenues:
Rental revenues............................. $ 2,792 $1,756 $ 1,042 $511
Other property revenues..................... 213 135 84 48
------ ------ ------ ----
Total property revenues....................... 3,005 1,891 1,126 559
Property operating and maintenance
expense(1).................................. 1,003 762 523 160
------ ------ ------ ----
Property operating income..................... 2,002 1,129 603 399
Interest expense.............................. 1,400 999 662 416
------ ------ ------ ----
Property income (loss) after interest
expense..................................... $ 602 $ 130 $ (59) $(17)
====== ====== ====== ====
Average monthly rental revenue(2)............. $ 877 $ 876 $ 889 $832
====== ====== ====== ====
Number of apartment homes completed........... 1,526 1,178 870 576
====== ====== ====== ====
Number of apartment homes leased.............. 1,345 1,041 681 364
====== ====== ====== ====
Number of apartment homes occupied............ 1,242 895 539 291
====== ====== ====== ====
</TABLE>
- ---------------
(1) Before real estate depreciation, amortization and interest expense.
(2) Represents the average monthly net rental revenue per occupied apartment
home.
One of these Communities, Summit Aventura, was completed in the fourth quarter
of 1995 and was 97.4% leased on September 30, 1996. Two of these Communities,
Summit Hill II and Summit Green, were completed in the second quarter of 1996
and were 97.1% and 87.0% leased on September 30, 1996, respectively. One
Community, Summit River Crossing, was completed in the third quarter of 1996 and
was 81.8% leased at September 30, 1996. Summit Hill II stabilized in June 1996,
Summit Aventura stabilized in September 1996, and Summit Green and Summit River
Crossing are expected to stabilize in the fourth quarter of 1996. These four
Communities represent a total investment of $79.3 million.
The remaining two lease-up Communities, Summit Fairways and Summit on the River,
are still under construction, with completion anticipated in the fourth quarter
of 1996 and the second quarter of 1997, respectively. As of September 30, 1996,
the Company had leased: 40.6%, or 143 of the 352 apartment homes at Summit on
the River, which opened in May 1996; and 32.5%, or 78 of the 240 apartment homes
at Summit Fairways, which opened in July 1996. These two Communities are
expected to represent a total investment upon completion of $41.6 million.
13 of 22
<PAGE> 14
OPERATING PERFORMANCE OF SUMMIT MANAGEMENT COMPANY
The operating performance of Summit Management Company (the "Management
Company") and its wholly-owned subsidiary, Summit Apartment Builders Inc. (the
"Construction Company"), is summarized below (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------- -----------------
1996 1995 1996 1995
------ ------ ------ ------
<S> <C> <C> <C> <C>
Property management revenue............................. $1,228 $1,399 $3,526 $4,074
Construction company income............................. 148 92 324 189
Other management company income......................... 27 32 86 113
------ ------ ------ ------
Total revenue......................................... 1,403 1,523 3,936 4,376
Property management expenses:
Operating............................................. 1,138 1,137 3,287 3,441
Depreciation.......................................... 27 30 83 90
Amortization.......................................... 70 69 208 205
Interest.............................................. 75 75 225 225
------ ------ ------ ------
Total property management expenses.................... 1,310 1,311 3,803 3,961
Construction company expenses........................... 159 104 294 348
------ ------ ------ ------
Total expenses........................................ 1,469 1,415 4,097 4,309
------ ------ ------ ------
Net income (loss) of Summit Management Company.......... $ (66) $ 108 $ (161) $ 67
====== ====== ====== ======
</TABLE>
The decrease in property management revenue was the result of a reduction in the
average number of communities managed for third parties during the periods
presented in 1996 compared to 1995 offset by an increase in the average number
of the Company's Communities managed. Total third party apartment homes under
management were 7,850 and 11,975 at September 30, 1996 and 1995, respectively.
The decrease was primarily due to the termination of the Management Company's
contract to manage a portfolio of 4,050 apartment homes effective October 1,
1995. This contract was terminated as a result of the owner's decision to
provide its own property management for these apartment homes.
Property management fees include $604,000 and $881,000 of fees from third
parties for the three months ended September 30, 1996 and 1995, respectively,
and $1.7 million and $2.7 million of fees from third parties for the nine months
ended September 30, 1996 and 1995, respectively. Property management fees from
third parties as a percentage of total property management revenues decreased
from 66.6% in the nine months ended September 30, 1995 to 49.4% in the nine
months ended September 30, 1996.
Construction Company revenues and expenses increased in the third quarter of
1996 compared to the third quarter of 1995 primarily due to the increased number
of construction projects. The increase in construction projects was due to the
Construction Company relocating to Charlotte, North Carolina and increasing the
number of the Company's developments in which it serves as general contractor.
Included in Construction Company expenses is approximately $30,000 of
nonrecurring moving costs.
OTHER INCOME AND EXPENSES
Interest income increased $120,000 or 100% to $240,000 for the three months
ended September 30, 1996 compared to the same period in 1995, primarily due to
interest earned on the excess proceeds from the 1996 Equity Offering. The excess
proceeds will be used to fund future development activity.
14 of 22
<PAGE> 15
Interest expense increased $2.4 million or 22.4% to $13.3 million for the nine
months ended September 30, 1996 compared to the same period in 1995, primarily
due to interest on debt related to the Crosland Acquisition Communities and
interest on development projects in lease-up, offset by the Company's repayment
of debt in connection with a public offering of four million shares of Common
Stock in June 1995 (the "Second Offering") and in connection with a public
offering of 5.75 million shares of Common Stock in the 1996 Equity Offering in
August 1996. The Second and the 1996 Equity Offerings together resulted in
aggregate net proceeds of approximately $164 million.
General and administrative expense increased for the periods presented in 1996
and 1995 primarily due to increased compensation costs. The increase in
compensation cost includes the cost of the Company's restricted stock grants and
the cost of the Company's employee stock purchase plan. As a percentage of
revenues, general and administrative cost was 3.1% and 3.0% for the three and
nine months ended September 30, 1996, respectively, compared to 2.4% and 2.6%
for same periods in 1995, respectively.
The extraordinary item in the three and nine months ended September 30, 1996,
net of minority interest of $110,000, resulted primarily from the write-off of
deferred financing costs in conjunction with the repayment of development loans
with proceeds from the 1996 Equity Offering and the $31.0 million unsecured debt
financing.
LIQUIDITY AND CAPITAL RESOURCES
The Company's outstanding indebtedness at September 30, 1996 totaled $288.6
million. This amount includes approximately $194.2 million in fixed rate
conventional mortgages, $54.0 million of variable rate tax-exempt bonds, $31.0
million of senior unsecured notes, and $9.4 million of tax exempt fixed rate
loans.
In August 1996, the Company completed the sale of an additional 5.75 million
shares of Common Stock with net proceeds of $97.6 million. In addition, in
August 1996, the Company obtained $31.0 million of unsecured debt financing
consisting of a $15.0 million unsecured note with a four year term and a $16.0
million unsecured note with a six year term, which bear interest at 7.71% and
7.95%, respectively. Approximately $97.6 million of the proceeds from the
issuance of Common Stock and the unsecured debt financing were utilized to fully
repay the Company's Credit Facility and development loans. The remaining $30.9
million of the proceeds will be used to fund current development.
The Company's net cash provided by operating activities increased from $21.0
million for the nine months ended September 30, 1995 to $30.7 million for the
same period in 1996 primarily due to a $9.3 million increase in property
operating income, a $755,000 greater increase in accounts payable primarily due
to additional properties, and a $1.5 million smaller increase in restricted cash
due to the Company no longer escrowing certain property taxes, offset by a $2.4
million and a $662,000 increase in interest expense and general and
administrative expense, respectively, in 1996 compared to 1995. The increase in
interest expense was small relative to the increase in property operating income
due to the retirement of debt with the proceeds from the Second Offering in June
1995 and the 1996 Equity Offering in August 1996.
Net cash used in investing activities increased from $42.2 million for the nine
months ended September 30, 1995 to $67.6 million for the same period in 1996 due
to an increase in development of new properties, higher capital expenditures on
existing properties and an increase in acquisition of new properties.
Net cash provided by financing activities increased from $22.5 million for the
nine months ended September 30, 1995 to $52.2 million for the same period in
1996 primarily due to an increase in debt proceeds and offering proceeds, offset
by higher debt repayments and higher dividends and distributions to unitholders.
Except for the $31.0 million of proceeds from the unsecured debt financing in
August 1996, debt proceeds were used to finance the Company's development
activity in both 1996 and 1995.
15 of 22
<PAGE> 16
In September 1996, the Company received a commitment to replace its existing
$50.0 million Credit Facility with the New Credit Facility. The New Credit
Facility, which is expected to close in the fourth quarter of 1996, has a three
year term and initially bears interest at LIBOR + 135 basis points. The interest
rate will be reduced based upon the Company's achievement of an unsecured bond
rating as assigned by Standard and Poors (which rating must be accompanied by
the comparable senior unsecured bond rating from one of Moody's, Duff & Pheps or
Fitch) as follows:
<TABLE>
<CAPTION>
CREDIT RATING RATE
------------- -----------
<S> <C>
BBB- LIBOR + 110
BBB LIBOR + 95
BBB+ LIBOR + 80
</TABLE>
The New Credit Facility provides $25.0 million will be available for general
working capital purposes with the remainder available to finance new development
and acquisitions.
The Company expects to meet its short-term liquidity requirements generally
through its net cash provided by operations and borrowings under the New Credit
Facility. The Company believes that its net cash provided by operations will be
adequate to meet its operating requirements and to satisfy applicable REIT
dividend payment requirements in both the short-term and in the long-term.
Improvements and renovations at existing Communities are expected to be funded
from property operations.
The Company expects to meet its long-term liquidity requirements, such as future
developments, debt maturities, acquisitions, renovations and other non-recurring
capital improvements, with borrowings under its New Credit Facility, through the
issuance of long-term secured and unsecured debt securities and additional
equity securities of the Company, or in connection with the acquisition of land
or improved property, through the issuance of Units of the Operating
Partnership.
16 of 22
<PAGE> 17
The following table sets forth certain information regarding debt financing as
of September 30, 1996 and December 31, 1995:
<TABLE>
<CAPTION>
PRINCIPAL OUTSTANDING
INTEREST ------------------------------
RATE AS OF MATURITY SEPTEMBER 30, DECEMBER 31,
COMMUNITIES SEPTEMBER 30, 1996 DATE 1996 1995
- ------------------------------------- ------------------ -------- ------------- ------------
<S> <C> <C> <C> <C>
FIXED RATE DEBT
MORTGAGE LOAN(1)................... 5.88% 02/15/01 $ 123,579 $125,000
MORTGAGE LOAN(1)................... 7.71% 12/15/05 29,761 30,000
MORTGAGE LOAN(2)................... 8.00% 09/01/05 8,657 8,712
MORTGAGE NOTES
Unsecured Note.................. 7.95% 8/03/02 16,000 --
Unsecured Note.................. 7.71% 8/03/00 15,000 --
Summit Hollow I................. 8.00% 11/01/18 2,296 2,326
Summit Hollow II................ 7.75% 01/01/29 2,592 2,607
Summit Creekside................ 8.00% 06/01/22 2,886 2,914
Summit Old Town................. 8.00% 09/01/20 3,109 3,143
Summit Eastchester.............. 8.00% 05/01/21 3,885 3,925
Summit Foxcroft................. 8.00% 04/01/20 2,803 2,844
Summit Oak...................... 7.75% 12/01/23 2,593 2,615
Summit Sherwood................. 7.88% 03/01/29 3,335 3,353
Summit Radbourne................ 9.80% 03/01/02 8,702 8,758
TAX EXEMPT MORTGAGE NOTES
Summit Crossing................. 6.95% 11/01/25 4,226 4,261
Summit at East Ridge............ 7.25% 12/01/26 5,169 5,207
-------- --------
TOTAL FIXED RATE DEBT......... 234,593 205,665
-------- --------
VARIABLE RATE DEBT
NEW CREDIT FACILITY................ LIBOR + 135 10/30/99 -- --
CREDIT FACILITY(3)................. LIBOR + 100 02/15/97 -- 4,396
TAX EXEMPT BONDS
Summit Belmont.................. 4.95% 04/01/07 11,850 11,900
Summit Hampton.................. 4.95% 06/01/07 12,700 12,800
Summit Pike Creek............... 4.95% 08/15/20 13,322 13,545
Summit Gateway.................. 4.95% 07/01/07 7,300 7,700
Summit Stony Point.............. 4.95% 04/01/29 8,790 8,895
DEVELOPMENT LOANS(3)............... -- 32,109
-------- --------
TOTAL VARIABLE RATE DEBT...... 53,962 91,345
-------- --------
TOTAL OUTSTANDING INDEBTEDNESS.............................. $ 288,555 $297,010
======== ========
</TABLE>
- ---------------
(1) Mortgage Loans secured by fifteen Communities.
(2) Mortgage Loan secured by two Communities.
(3) Development loans and the Credit Facility were fully repaid with proceeds
from issuance of Common Stock and unsecured debt financing in August, 1996.
The Credit Facility will be replaced with the New Credit Facility in the
fourth quarter of 1996.
17 of 22
<PAGE> 18
DEVELOPMENT ACTIVITY
The Company's developments in process at September 30, 1996 are summarized as
follows (dollars in thousands):
<TABLE>
<CAPTION>
TOTAL ESTIMATED
ESTIMATED COST COST TO
COMMUNITY UNITS COST TO DATE COMPLETE
- ---------------------------------------------------- ----- --------- ------- ---------
<S> <C> <C> <C> <C>
Summit Russett -- Laurel, MD........................ 314 $ 22,100 $14,172 $ 7,928
Summit on the River -- Atlanta, GA.................. 352 23,900 17,826 6,074
Summit Fairways -- Orlando, FL...................... 240 17,720 16,383 1,337
Summit Ballantyne I -- Charlotte, NC................ 246 16,800 2,313 14,487
Summit Stonefield -- Yardley, PA.................... 216 18,370 6,267 12,103
Summit Lake I -- Raleigh, NC........................ 302 19,700 2,883 16,817
Summit Sedgebrook I -- Charlotte, NC................ 248 15,640 2,333 13,307
Summit Plantation II -- Plantation Cove, FL......... 240 21,000 5,493 15,507
Other development and construction costs............ -- -- 6,759 --
----- -------- ------- -------
TOTAL..................................... 2,158 $ 155,230 $74,429 $87,560
===== ======== ======= =======
</TABLE>
Certain Factors Affecting the Performance of Development Communities
As a result of the improved economic conditions and the demand for apartment
homes of comparable quality in its markets, the Company believes that the
operating prospects of the Communities currently under development remain
favorable. As with any development project, there are uncertainties and risks
associated with the development of the Communities described above. While the
Company has prepared development budgets and has estimated completion and
stabilization target dates based on what it believes are reasonable assumptions
in light of current conditions, there can be no assurance that actual costs will
not exceed current budgets or that the Company will not experience construction
delays due to the unavailability of materials, weather conditions or other
events. Other development risks include the possibility of incurring additional
cost or liability resulting from defects in construction materials and the
possibility that financing may not be available on favorable terms, or at all,
to pursue or complete development activities. Similarly, market conditions at
the time these Communities become available for leasing will affect the rental
rates that may be charged and the period of time necessary to achieve
stabilization, which could make one or more of the development communities
unprofitable or result in achieving stabilization later than currently
anticipated. In addition, the Company is conducting feasibility and other
pre-development work for six new Communities. The Company could abandon the
development of any one or more of these potential Communities in the event that
it determines that market conditions do not support development, financing is
not available on favorable terms or other circumstances prevent development.
Similarly, there can be no assurance that if the Company does pursue one or more
of these potential Communities that it will be able to complete construction
within the currently estimated development budgets or that construction can be
started at the time currently anticipated.
18 of 22
<PAGE> 19
CAPITALIZATION OF FIXED ASSETS AND PROPERTY IMPROVEMENTS
The Company has established a policy of capitalizing those expenditures relating
to acquiring new assets, materially enhancing the value of an existing asset, or
substantially extending the useful life of an existing asset. All expenditures
necessary to maintain a Community in ordinary operating condition (including
replacement carpets) are expensed as incurred.
Capitalized expenditures for the nine months ended September 30, 1996 and 1995
are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1996 1995
------- --------
<S> <C> <C>
Acquisition of new Communities(1)................................... $21,913 $ 82,866
Construction of new Communities(2).................................. 59,431 28,724
Capitalized interest................................................ 2,884 2,232
Non-recurring capital expenditures:
Construction of garages........................................... 720 16
Access gates...................................................... 133 --
New signage....................................................... 113 --
Water meters...................................................... 201 --
Washer/dryer units................................................ 96 --
Major improvements................................................ 1,037 --
Improvements at acquisition....................................... -- 357
Other............................................................. 29 --
------- --------
Total non-recurring....................................... 2,329 373
------- --------
Recurring capital expenditures:
Exterior painting................................................. 661 670
Other............................................................. 1,144 1,115
------- --------
Total recurring........................................... 1,805 1,785
------- --------
$88,362 $115,980
======= ========
</TABLE>
- ---------------
(1) Includes the assumption of $14.3 million and $52.6 million of debt in 1996
and 1995, respectively. In addition, includes conversion of equity
investment into fixed assets of $1.2 million in conjunction with the
purchase of Summit Plantation in 1996 and the issuance of 1.5 million Units
of the Operating Partnership with a value of $26.2 million in 1995.
(2) Includes the issuance of $2.1 million of Units in the Operating Partnership
for the acquisition of land in 1996.
Recurring capital expenditures per apartment home for the nine months ended
September 30, 1996 and 1995 were $167 and $197, respectively.
Construction of new Communities was funded primarily by development loans,
equity offering proceeds and borrowing under the Credit Facility. Other
additions and improvements were funded primarily by Community operations and the
Credit Facility.
INFLATION
Substantially all of the leases at the Communities are for a term of one year or
less, which, coupled with the relatively high occupancy rates, may enable the
Company to seek increased rents upon renewal of existing leases or commencement
of new leases. The Company's policy is to permit residents to terminate leases
upon 60 days' written notice and payment of two months' rent as compensation for
early termination. The short-term nature of these leases generally serves to
reduce the risk to the Company of the adverse effect of inflation.
19 of 22
<PAGE> 20
FUNDS FROM OPERATIONS
The Company generally considers Funds from Operations to be an appropriate
measure of performance of an equity REIT. Funds from Operations is defined by
the National Association of Real Estate Investment Trusts (NAREIT) as income
(loss) before minority interest of holders of Units in the Operating
Partnership, and excluding gains or losses from sales of assets or debt
restructuring, plus certain non-cash items, primarily real estate depreciation,
and after adjustments for unconsolidated partnerships and joint ventures.
Adjustments for all periods consisted only of real estate depreciation. Funds
Available for Distribution is defined as Funds from Operations less recurring
capital expenditures funded by operations. Funds from Operations and Funds
Available for Distribution should not be considered as an alternative to net
income (determined in accordance with generally accepted accounting principles),
as an indication of the Company's financial performance, or to cash flow from
operating activities (determined in accordance with generally accepted
accounting principles) as a measure of liquidity.
Funds from Operations and Funds Available for Distribution are calculated as
follows (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net income.................................. $ 4,250 $ 3,633 $ 11,154 $ 8,626
Minority Interest of Unitholders in
Operating Partnership..................... 974 846 2,652 1,939
Extraordinary items......................... 516 -- 516 63
Depreciation:
Operating Communities..................... 4,673 4,060 13,221 10,854
Summit Plantation......................... -- 26 33 38
----------- ----------- ----------- -----------
Funds from Operations....................... 10,413 8,565 27,576 21,520
Recurring capital expenditures.............. (402) (649) (1,805) (1,785)
----------- ----------- ----------- -----------
Funds Available for Distribution............ $ 10,011 $ 7,916 $ 25,771 $ 19,735
=========== =========== =========== ===========
Weighted average shares outstanding......... 20,040,578 16,440,242 17,742,425 14,227,007
=========== =========== =========== ===========
Weighted average shares and Units
outstanding............................... 24,070,632 20,378,171 21,769,807 17,399,947
=========== =========== =========== ===========
</TABLE>
The above Funds from Operations calculations in both 1996 and 1995 reflect
changes required by NAREIT for fiscal years beginning in 1996. The primary
effect of the changes on the Company's calculation of Funds from Operations was
that amortization of financing cost is no longer added back in arriving at Funds
from Operations. Funds from Operations under the previous calculation method
would have been $28.4 million and $22.4 million for the nine months ended
September 30, 1996 and 1995, respectively, and would have been $10.7 million and
$8.9 million for the three months ended September 30, 1996 and 1995,
respectively.
20 of 22
<PAGE> 21
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
1. Final Underwriting Agreement for 1996 Equity Offering.
10. $31,000,000 Loans From Wachovia Bank of North Carolina, N.A.
27. Financial Data Schedule (for SEC use only).
21 of 22
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUMMIT PROPERTIES INC.
October 28, 1996 /s/ Michael L. Schwarz
- ------------------------ --------------------------------------
(Date) Michael L. Schwarz,
Executive Vice President and Chief
Financial Officer
22 of 22
<PAGE> 1
SUMMIT PROPERTIES INC.
(a Maryland corporation)
Common Stock and Preferred Stock
UNDERWRITING AGREEMENT
August 1, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
World Financial Center
North Tower
New York, New York 10281-1305
Ladies and Gentlemen:
Summit Properties Inc., a Maryland corporation (the "Company"),
proposes to issue and sell shares of Common Stock, $.01 par value (the "Common
Stock") or shares of Preferred Stock, $.01 par value (the "Preferred Shares"),
from time to time, in one or more offerings on terms to be determined at the
time of sale. Each series of Preferred Shares 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, redemption provisions, sinking fund requirements, conversion or exchange
provisions and any other variable terms as set forth in the applicable articles
supplementary (each, the "Articles Supplementary") relating to such Preferred
Shares. As used herein, "Securities" shall mean the Common Stock and the
Preferred Shares, as applicable. As used herein, "you" and "your", unless the
context otherwise requires, shall mean the parties to whom this underwriting
agreement (this "Agreement") is addressed together with the other parties, if
any, identified in the applicable Terms Agreement (as defined herein) as
additional co-managers with respect to Underwritten Securities (as hereinafter
defined) purchased pursuant thereto.
The Company is the sole general partner, and the principal limited
partner, of Summit Properties Partnership, L.P., a Delaware limited partnership
(the "Operating Partnership"). The Company's business of owning and managing
multifamily apartment
<PAGE> 2
communities is conducted principally through the Operating Partnership. The
Company's third party management and certain construction and other business
are conducted through its subsidiaries, Summit Management Company, a Maryland
corporation (the "Management Company") and Summit Apartment Builders, Inc., a
Florida corporation (the "Building Company"). For the purposes of this
Agreement, each of the Operating Partnership, the Management Company, and the
Building Company is deemed a "Subsidiary" of the Company.
It is understood that the net proceeds of an offering of securities to
which this Agreement relates will be contributed to the Operating Partnership
in exchange for interests in the Operating Partnership ("Units").
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, if any, 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, designations,
liquidation preferences, conversion or exchange provisions, redemption
provisions and sinking fund requirements (in the case of Preferred Shares
only)). 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
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
2
<PAGE> 3
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 Commission (the
"Commission") a registration statement on Form S-3 (No. 33-90706) for the
registration of the 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 and the
prospectus constituting a part thereof, in each case as supplemented by a
prospectus supplement relating to the offering of Underwritten Securities (the
"Prospectus Supplement"), 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
collectively 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 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 the filing of
any document 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
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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.
33-90706) 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 and the Operating Partnership each jointly and
severally 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 (in each case, a "Representation Date"), as follows:
(i) The Registration Statement and the Prospectus, at
the time the Registration Statement became effective and at each time
thereafter on which the Company filed an Annual Report on Form 10-K
with the Commission, complied, and as of each Representation Date will
comply, in all material respects with the requirements of the 1933 Act
and the 1933 Act Regulations; the Registration Statement, at the time
the Registration Statement became effective and at each time
thereafter on which the Company filed an Annual Report on Form 10-K
with the Commission, did not, and at each time thereafter on which any
amendment to the Registration Statement becomes effective or the
Company files an Annual Report on Form 10-K with the Commission and as
of each Representation Date, and at the Closing Time (as hereinafter
defined), 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; and the
Prospectus, as of the date hereof, does not, and as of each
Representation Date 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
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 Prospectus.
(ii) The accountants who certified the financial
statements and supporting schedules included or incorporated
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by reference in the Registration Statement and the Prospectus are
independent public accountants as required by the 1933 Act and the
1933 Act Regulations; and there have been no disagreements with any
accountants or "reportable events" (as defined in Item 304 of
Regulation S-K promulgated by the Commission) required to be disclosed
in the Prospectus or elsewhere pursuant to such Item 304.
(iii) The historical financial statements of the Company
included or incorporated by reference in the Registration Statement
and the Prospectus present fairly the financial position of the
Company and its Subsidiaries taken as a whole as at the dates
indicated and the results of operations for the periods specified;
except as otherwise stated in the Registration Statement and the
Prospectus, said financial statements have been prepared in conformity
with generally accepted accounting principles applied (except, in the
case of interim financial results, for the notes thereto and ordinary
year-end adjustments) on a consistent basis and comply with the
applicable accounting requirements of the 1933 Act (including, without
limitation, Rule 3-14 and Rule 3-15 of Regulation S-X promulgated by
the Commission), and all adjustments necessary for a fair presentation
of the results for such periods have been made; the supporting
schedules included or incorporated by reference in the Registration
Statement and the Prospectus present fairly the information required
to be stated therein; and the selected financial data (both historical
and, if any, pro forma) included or incorporated by reference in the
Registration Statement and the Prospectus present fairly the
information shown therein and have been compiled on a basis consistent
with the related financial statements presented therein.
(iv) The historical summaries of revenue and certain
operating expenses included or incorporated by reference in the
Registration Statement and the Prospectus present fairly the revenue
and those operating expenses included in such summaries of the
properties related thereto for the periods specified in conformity
with generally accepted accounting principles; the pro forma
consolidated financial statements included or incorporated by
reference in the Registration Statement and the Prospectus, if any,
present fairly the pro forma financial position of the Company and its
Subsidiaries taken as a whole as of the dates indicated and the
results of operations for the periods specified; and any such pro
forma financial statements have been prepared in accordance with
generally accepted accounting principles applied on a basis consistent
with the audited financial statements of the Company and its
Subsidiaries included or incorporated by
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reference in the Registration Statement and the Prospectus, the
assumptions on which such pro forma financial statements have been
prepared were, when such pro forma financial statements were prepared,
reasonable and are summarized in the notes thereto, and any such pro
forma financial statements have been prepared, and the pro forma
adjustments set forth therein have been applied, in accordance with
the applicable accounting requirements of the 1933 Act and the 1933
Act Regulations (including, without limitation, Regulation S-X
promulgated by the Commission), and any such pro forma adjustments
have been properly applied to the historical amounts in the
compilation of such statements.
(v) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
there has not occurred any material adverse change, or any development
involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business affairs, business
prospects or operations of the Company and its Subsidiaries taken as a
whole from that set forth in the Prospectus.
(vi) Subsequent to the respective dates as of which
information is given in the Registration Statement and the Prospectus,
(1) neither the Company nor its Subsidiaries have incurred any
material liability or obligation, direct or contingent, nor entered
into any material transaction not in the ordinary course of business;
(2) neither the Company nor its Subsidiaries have purchased any of the
Company's outstanding Common Stock, nor declared, paid or otherwise
made any dividend or distribution of any kind on the Company's Common
Stock other than ordinary and customary dividends; and (3) there has
not been any material change in the capital, Common Stock, short-term
debt or long-term debt of either the Company or its Subsidiaries,
except in each case as described in or contemplated by the Prospectus.
(vii) The Operating Partnership has been duly formed, is
validly existing as a partnership in good standing under the laws of
the State of Delaware, has the partnership power and authority to own
its property and any property proposed to be acquired by it and
referred to in the Prospectus and to conduct its business as described
in the Prospectus and is duly qualified to transact such business, and
is in good standing in each jurisdiction in which the conduct of its
business or its ownership, management or leasing of property requires
such qualification except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its Subsidiaries taken as a whole.
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(viii) The Agreement of Limited Partnership of the
Operating Partnership (the "Agreement of Limited Partnership") has
been duly and validly authorized, executed and delivered by the
Company and, to its best knowledge, by the partners of the Operating
Partnership, including the Company in its capacity as sole general
partner of the Operating Partnership, and is a valid and binding
agreement of the Company and, to its best knowledge, of the partners
of the Operating Partnership, including the Company in its capacity as
sole general partner of the Operating Partnership, enforceable in
accordance with its terms.
(ix) Each of the Company, the Management Company and
the Building Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the jurisdiction
of its incorporation, has the corporate power and authority to own its
property and any property proposed to be acquired by it and referred
to in the Prospectus and to conduct its business as described in the
Prospectus and is duly qualified to transact such business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership, management or leasing of property requires
such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse
effect on the Company and its Subsidiaries taken as a whole; the
Company has the corporate power to enter into and perform its
obligations under this Agreement and the Terms Agreement; the Articles
Supplementary relating to the Preferred Shares, if applicable, will be
in full force and effect as of each applicable Representation Date
and, except as otherwise stated in the Prospectus, all of the issued
and outstanding capital stock or other ownership interests in the
Management Company and the Building Company have been validly issued
and are owned by the Operating Partnership, directly or through
subsidiaries, and by William F. Paulsen, free and clear of any
security interest, mortgage, pledge, lien, encumbrance, claim or
equity, except for security interests granted in respect of
indebtedness of the Company or any of its subsidiaries and described
in the Prospectus.
(x) Except as disclosed in the Registration Statement,
the Company has no material subsidiaries.
(xi) All shares of Common Stock and Preferred Stock
outstanding prior to the issuance of the Underwritten Securities have
been duly authorized and are validly issued, fully paid and
non-assessable.
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(xii) Each of the partnership and joint venture
agreements to which the Company and any of its Subsidiaries is a
party, and which relates to real property, has been duly authorized,
executed and delivered on the part of the Company and any of such
Subsidiaries by any of them that is a party thereto and constitutes
the valid agreement thereof, enforceable in accordance with its terms,
except as limited by (a) the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting the rights or remedies of creditors or
(b) the effect of general principles of equity, whether enforcement is
considered in a proceeding in equity or at law, and the discretion of
the court before which any proceeding therefor may be brought; and the
execution, delivery and performance of any of such agreements by the
Company and any of its Subsidiaries, as applicable, did not, at the
time of execution and delivery, and does not constitute a breach of,
or default under, the charter, by-laws, agreement of limited
partnership (or other organizational documents) of such party or any
material contract, lease or other instrument to which such party is a
party or by which its properties may be bound or any law,
administrative regulation or administrative or court decree.
(xiii) The authorized capital stock of the Company
conforms as to legal matters to the description thereof contained in
the Prospectus. The Company has duly reserved a sufficient number of
shares of Common Stock for issuance upon exchange of outstanding units
in the Operating Partnership.
(xiv) The Underwritten Securities being sold pursuant to
this Agreement and the applicable Terms Agreement have, as of each
applicable Representation Date, been duly authorized by the Company
and such Underwritten Securities have been duly authorized for
issuance and sale pursuant to this Agreement and such Terms Agreement
and such Underwritten Securities, when issued and delivered by the
Company pursuant to this Agreement against payment of the
consideration set forth in such Terms Agreement or any Delayed
Delivery Contract (as hereinafter defined), will be validly issued,
fully paid and non-assessable, and the issuance of such Underwritten
Securities will not be subject to preemptive rights; the Preferred
Shares, if applicable, conform to the provisions of the Articles
Supplementary; and the Underwritten Securities being sold pursuant to
the applicable Terms Agreement conform in all material respects to all
statements relating thereto contained in the Prospectus and will be in
substantially the form filed or
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incorporated by reference, as the case may be, as an exhibit to the
Registration Statement.
(xv) If applicable, the shares of Common Stock issuable
upon conversion of any of the Preferred Shares will have been duly and
validly authorized and reserved for issuance upon such conversion by
all necessary corporate action and such shares, when issued upon such
conversion, will be duly authorized and validly issued and will be
fully paid and non-assessable, and the issuance of such shares upon
conversion will not be subject to preemptive or other similar rights;
the shares of Common Stock issuable upon conversion of any of the
Preferred Shares, conform in all material respects to all statements
relating thereto contained in the Prospectus.
(xvi) The execution and delivery by each of the Company and
the Operating Partnership of this Agreement, the performance by each
of the Company and the Operating Partnership of its obligations under
this Agreement and the execution and delivery by the Company of the
applicable Terms Agreement will not contravene any provision of
applicable law or the articles of incorporation or bylaws of the
Company or the Agreement of Limited Partnership of the Operating
Partnership or any agreement or other instrument binding upon the
Company or any of its Subsidiaries that is material to the Company and
its Subsidiaries, taken as a whole, or any judgment, order or decree
of any governmental body, agency or court having jurisdiction over the
Company or any Subsidiary, and no consent, approval, authorization or
order of, or qualification with, any governmental body or agency is
required for the performance by each of the Company and the Operating
Partnership of its obligations under this Agreement and the applicable
Terms Agreement, except such as may be required by the securities or
Blue Sky laws of the various states in connection with the offer and
sale of the Underwritten Securities.
(xvii) The Company has since February 12, 1994 been
qualified as a real estate investment trust ("REIT") under Sections
856 through 860 of the Internal Revenue Code of 1986, as amended (the
"Code"), and has elected to be taxed as a REIT under the Code, and
will continue to be organized and operated in a manner so as to
qualify as a REIT.
(xviii) None of the Company, the Operating Partnership,
the Management Company or the Building Company is 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.
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(xix) There are no legal or governmental proceedings
pending or threatened to which the Company, any Subsidiary or any
Affiliate (as defined in Rule 12b-2 under the Exchange Act) of the
Company is a party or to which any of their properties or the
Communities (as that term is defined in the Prospectus) is subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations,
contracts or other documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as exhibits to
the Registration Statement that are not described or filed as
required.
(xx) The Company and its Subsidiaries own or possess
any trademarks, service marks, trade names or copyrights required in
order to conduct their respective businesses as described in the
Prospectus, other than those which the failure to possess or own 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.
(xxi) The Company and the Operating Partnership have all
necessary authorizations, approvals, permits and consents of any court
or governmental authority or agency necessary in connection with the
consummation by the Company or the Operating Partnership of the
transactions contemplated by this Agreement and the applicable Terms
Agreement, including such as may be required under the 1933 Act or the
1933 Act Regulations, state securities laws, real estate syndication
laws or under the rules and regulations of the National Association of
Securities Dealers, Inc.
(xxii) The Company and each Subsidiary has all necessary
consents, authorizations, approvals, orders, certificates and permits
of and from, and has made all declarations and filings with, all
federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals, to
own, lease, license and use its properties and assets and to conduct
its business in the manner described in the Prospectus, except to the
extent that the failure to obtain or file would not have a material
adverse effect on the Company and its subsidiaries taken as a whole.
(xxiii) The Company has full right, power and authority to
enter into this Agreement and the applicable Terms Agreement, and this
Agreement has been, and as of each Representation Date the applicable
Terms Agreement will have
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been, duly authorized, executed and delivered by the Company.
(xxiv) The Operating Partnership has full right, power
and authority to enter into this Agreement and this Agreement has been
duly authorized, executed and delivered by the Operating Partnership.
(xxv) The documents incorporated or deemed to be
incorporated by reference in the Prospectus, at the time they were or
hereafter are filed with the Commission, complied and will comply in
all material respects with 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
(as defined herein) 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 in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(xxvi) (i) The Company and its Subsidiaries have good and
marketable title in fee simple to all real property, free and clear of
all liens, in each case except such as are described in the Prospectus
or such as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made of
such property by the Company and by its Subsidiaries; (ii) any real
property and buildings held or proposed to be held under lease by the
Company and its Subsidiaries are, or will be, held by them under
valid, subsisting and enforceable leases with such exceptions as are
not material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and by its
Subsidiaries, in each case except as described in or contemplated by
the Prospectus; (iii) the construction, management and operation of
the buildings, fixtures and other improvements located on the
Communities as currently conducted or existing are not in violation of
any applicable building code, zoning ordinance or other law or
regulation except where such violation of any applicable building
code, zoning ordinance or other law or regulation would not, singly or
in the aggregate, have a material adverse effect on the Company and
its Subsidiaries taken as a whole, (iv) neither the Company, the
Operating Partnership nor the Management Company has received notice
of any proposed
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material special assessment or any proposed material change in any
property tax, zoning or land use laws or availability of water for
irrigation affecting all or any portion of the Communities; (v)
neither the Company nor the Operating Partnership is aware of, nor
reasonably should be aware of, any material delay with respect to the
construction of Communities referred to in the Prospectus, or any
material increase in the estimated cost of such construction, or any
other matter materially detrimental to the construction, or any factor
which may, through passage of time or otherwise, give rise to such
delay, cost increase or detriment; (vi) there do not exist any
material violations of any declaration of covenants, conditions and
restriction (the "CC&R's") with respect to any of the Communities, nor
is there any existing state of facts or circumstances or condition or
event which could, with the giving of notice or passage of time, or
both, constitute such a violation; and (vii) the improvements
comprising any portion of the Communities (the "Improvements") are
free of any and all material physical, mechanical, structural, design
and construction defects and the mechanical, electrical and utility
systems servicing the Improvements (including, without limitation, all
water, electric, sewer, plumbing, heating, ventilation, gas and air
conditioning) are in good condition and proper working order and are
free of material defects.
(xxvii) The Operating Partnership has an ALTA Extended
Coverage Owner's Policy of Title Insurance on all of the Communities
and such title insurance is in full force and effect.
(xxviii) The Company and each Subsidiary (i) is in
compliance with all applicable foreign, federal, state and local laws
and regulations relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants
or contaminants ("Environmental Laws), (ii) has received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) is
in compliance with all terms and conditions of any such permit,
license or approval, except with respect to clauses (i), (ii) and
(iii) above, where such noncompliance with Environmental Laws, failure
to receive required permits, licenses or other approvals or failure to
comply with the terms and conditions of such permits, licenses or
approvals are otherwise disclosed in the Prospectus or would not,
singly or in the aggregate, have a material adverse effect on the
Company and its subsidiaries taken as a whole.
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(xxix) There are no costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any related constraints on operating activities and any potential
liabilities to third parties) that would, singly or in the aggregate,
have a material adverse effect on the Company and its Subsidiaries
taken as a whole.
(xxx) The Company and its Subsidiaries are insured by
insurers of recognized financial responsibility against such losses
and risks and in such amounts as are customary in the businesses in
which they are engaged; neither the Company nor any Subsidiary has
been refused any insurance coverage sought or applied for, and neither
the Company nor any Subsidiary has any reason to believe that it will
not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers
as may be necessary to continue its business at a cost that would not
materially and adversely affect the condition, financial or otherwise,
or the earnings, business or operations of the Company and its
Subsidiaries taken as a whole, except as described in or contemplated
by the Prospectus.
(xxxi) The assets of the Company do not constitute "plan
assets" under the Employee Retirement Income Security Act of 1974, as
amended.
(xxxii) There is no default under any indenture, mortgage,
deed of trust, voting trust agreement, loan agreement, bond,
debenture, note agreement or other evidence of indebtedness, lease,
contract or other agreement or instrument relating to any of the
Communities, the violation of which would individually or in the
aggregate have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
(xxxiii) The mortgages and deeds of trust encumbering the
Communities are not cross-defaulted or cross-collateralized with any
other property not owned directly or indirectly by the Company or its
Subsidiaries.
(xxxiv) If applicable, the shares of Common Stock issued
pursuant to the applicable Terms Agreement or issuable upon conversion
of any Preferred Shares issued pursuant to the applicable Terms
Agreement have been approved for listing on the New York Stock
Exchange, subject to final notice of issuance.
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(b) Any certificate signed by any officer of the Company in such
capacity or as general partner of the Operating Partnership 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 or the Operating Partnership, as the case may be, to each Underwriter
participating in such offering as to the matters covered thereby on the date of
such certificate.
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. 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
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, date and place of payment and delivery for such Option
Securities. Any such time and date of delivery (a "Date of Delivery") shall be
determined by you, but shall not be later than three full business days and not
be earlier than two full business days after the exercise of said option,
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
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<PAGE> 15
in your discretion shall make to eliminate any sales or purchases of fractional
Initial 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, 57th 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 10:00 A.M., New York City time, on the third business day
(unless postponed in accordance with the provisions of Section 10) 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 being referred to as a "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 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 wire transfer of immediately available funds to a bank
account designated by the company, against delivery to you for the respective
accounts of the Underwriters 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 applicable 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 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
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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.
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 and the Operating Partnership.
Each of the Company and the Operating Partnership covenants with you, and with
each Underwriter participating in the offering of Underwritten Securities, as
follows:
(a) 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
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arrangements, and such other information as you and the Company deem
appropriate in connection with the offering of the Underwritten Securities; and
the Company will, by the close of business in New York on the second business
day immediately succeeding the date of the applicable Terms Agreement, 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, 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 the Underwriters may reasonably
request, and 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 or any document
to be filed pursuant to the 1934 Act relating to or affecting any Securities
offered or proposed to be offered by you or the Underwriters pursuant hereto,
(iii) the receipt of any comments from the Commission relating to or affecting
any Securities offered or proposed to be offered by you or the Underwriters
pursuant hereto, (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 relating to or affecting any Securities offered or
proposed to be offered by you or the Underwriters pursuant hereto, 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 relating to or affecting any Securities offered or proposed to be
offered by you or the Underwriters pursuant hereto. 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 a reasonable amount of time prior to
such proposed filing or preparation, as the case may be. The Company will not,
during such time, file or prepare 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 as many signed and
conformed copies of the Registration Statement as originally filed and of each
amendment thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated or deemed to be incorporated by
reference therein) as such Underwriter reasonably requests.
(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 reasonable opinion of counsel for the Underwriters or counsel
for the Company, 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
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 reasonable
opinion of either 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, and the Company will furnish to the
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<PAGE> 19
Underwriters a reasonable number of copies of such amendment or supplement.
(g) The Company will endeavor, in cooperation with the Underwriters,
to qualify the Underwritten Securities and shares of Common Stock issuable upon
conversion of the Preferred Shares, 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 to pay all
expenses (including reasonable fees and disbursements of counsel) in connection
with such qualification and in connection with any review of the offering of
the Underwritten Securities by the National Association of Securities Dealers,
Inc. In each jurisdiction in which the Underwritten Securities and shares of
Common Stock issuable upon conversion of the Preferred Shares, 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; provided, however, that the Company shall not be obligated to
qualify as a foreign corporation in any jurisdiction where it is not so
qualified or to take any action that would subject it to general service of
process in any jurisdiction where it is not so subject.
(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 Registration Statement.
(i) The Company will use its best efforts to meet the requirements to
qualify as a "real estate investment trust" under the Code for the taxable year
in which sales of the Underwritten Securities are to occur, subject to the good
faith exercise by the Company's Board of Directors of its power to manage the
business and affairs of the Company and the discharge of its legal duties.
(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 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, including any
available extensions or exemptions.
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(k) Neither the Company nor its executive officers and directors
will, 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 of the Company's or Operating
Partnership's equity securities (other than the Underwritten Securities which
are to be sold pursuant to such Terms Agreement), except for Common Stock
issued pursuant to this Agreement, pursuant to dividend reinvestment and/or
stock purchase plans, employee and director stock option plans or other
compensation or benefit plans.
(l) If the Preferred Shares are convertible into shares of Common
Stock, the Company will reserve and keep available at all times, free of
preemptive 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 Shares.
(m) If applicable, the Company will use its best efforts to list the
shares of Common Stock on the New York Stock Exchange or such other national
exchange on which the Company's shares of Common Stock are then listed.
(n) If Preferred Shares are convertible into shares of Common Stock,
the Company will use its best efforts to list the shares of Common Stock
issuable on Conversion of the Preferred Shares on the New York Stock Exchange
or such other national exchange on which the Company's shares of Common Stock
are then listed.
(o) The Company has complied and will comply with all of the
provisions of Florida H.B. 1771, Section 1, 17,130 of the Florida Securities
and Investors Act, and all regulations thereunder relating to issuers doing
business
with Cuba.
(p) The Company will apply the net proceeds from each sale of the
Underwritten Securities as set forth under "Use of Proceeds" in each applicable
Prospectus Supplement.
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 printing, reproduction and filing of this Agreement and the applicable
Terms Agreement, and such other documents as may be required in connection with
the offering, purchase, sale and delivery of the Underwritten Securities, (iii)
the preparation,
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<PAGE> 21
issuance and delivery of the Underwritten Securities and any certificates for
the Underwritten Securities to the Underwriters, (iv) the fees and
disbursements of the Company's counsel and accountants and other advisors or
agents (including transfer agents and registrars), (v) the qualification of the
Underwritten Securities and the shares of Common Stock issuable upon conversion
of Preferred Shares, if any, under securities laws and real estate syndication
laws in accordance with the provisions of Section 3(g), including filing fees
and the reasonable fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of the Blue Sky
Survey, (vi) the printing, reproduction and delivery to the Underwriters of
copies of the Blue Sky Survey, (vii) the printing and delivery to the
Underwriters of copies of the Registration Statement as originally filed and of
each amendment thereto, each preliminary prospectus and of the Prospectus and
any amendments or supplements thereto, (viii) any fees charged by nationally
recognized statistical rating organizations for the Rating of the Underwritten
Securities, if applicable, (ix) the fees and expenses, if any, incurred with
respect to the listing of the Underwritten Securities, or the shares of Common
Stock issuable on conversion of the Preferred Shares, if any, on any national
securities exchange, and (x) the filing fees, if any, incurred with respect to
any filing with the National Association of Securities Dealers, Inc.
If the applicable Terms Agreement is terminated by you in accordance
with the provisions of Section 5, Section 9(b)(i) or 9(b)(ii), 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 and the Operating Partnership
herein contained, to the accuracy of the statements of the Company's officers
on behalf of the Company, and on behalf of the Company in its capacity as
general partner of the Operating Partnership, made in any certificate pursuant
to the provisions hereof, to the performance by each of the Company and the
Operating Partnership 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, (ii) if
Preferred Shares are being
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<PAGE> 22
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 such rating organization have publicly announced that it has placed any
preferred stock of the Company on what is commonly termed a "watch list" for
possible downgrading, and (iii) there shall not have come to your attention any
facts that would cause you to believe that the Prospectus, together with the
applicable Prospectus Supplement, at the time it was required to be delivered
to purchasers of the Underwritten Securities, included an untrue statement of a
material fact or omitted to state a material fact necessary in order to make
the statements therein, in light of the circumstances existing at such time,
not misleading.
(b) At Closing Time, you shall have received:
(1) The favorable opinion, dated as of Closing Time, of
Goodwin, Procter & Hoar LLP, counsel for the Company and the
Subsidiaries, in form and substance satisfactory to counsel for the
Underwriters, to the effect that:
(i) The Operating Partnership has been duly formed,
is validly existing as a partnership in good standing under
the laws of the state of Delaware, has the partnership power
and authority to own its property and any property proposed to
be acquired by it and referred to in the Prospectus and is
duly qualified to transact such business and is in good
standing in each jurisdiction in which the conduct of its
business or its ownership, management or leasing of properties
requires such qualification except to the extent that the
failure to be so qualified or be in good standing would not
have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
(ii) Each of the Company, the Management Company and
the Building Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power
and authority to own its property and any property proposed to
be acquired by it and referred to in the Prospectus and to
conduct its business as described in the Prospectus and is
duly qualified to transact such business and is in good
standing in each jurisdiction in which the conduct of its
business or its ownership, management or leasing of property
requires such qualification, except to the extent that the
failure to be so qualified or be in
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<PAGE> 23
good standing would not have a material adverse effect
on the Company and its Subsidiaries taken as a whole.
(iii) The authorized Common Stock of the Company
conforms as to legal matters to the description thereof
contained in the Prospectus as of the date set forth therein.
(iv) Units owned by the Company are validly issued
and owned, directly or indirectly, by the Company, free and
clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity.
(v) 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.
(vi) This Agreement has been duly authorized,
executed and delivered by the Operating Partnership.
(vii) The execution and delivery by each of the
Company and the Operating Partnership of, and the performance
by each of the Company and the Operating Partnership of its
obligations under this Agreement, and by the Company under the
applicable Terms Agreement, will not contravene any provision
of applicable law or the articles of incorporation or bylaws
of the Company or the Agreement of Limited Partnership or, to
such counsel's knowledge after due inquiry, (a) any agreement
or other instrument binding upon the Company or any of its
Subsidiaries that is material to the Company and its
Subsidiaries, taken as a whole, or (b) any judgment, order or
decree of any governmental body, agency or court having
jurisdiction over the Company or any Subsidiary; and no
consent, approval, authorization or order of, or qualification
with, any governmental body or agency is required for the
performance by each of the Company and the Operating
Partnership of its obligations under this Agreement and by the
Company under the applicable Terms Agreement, except such as
may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the
Underwritten Securities.
(viii) The Underwritten Securities being sold
pursuant to this Agreement and the applicable Terms Agreement
have been duly and validly authorized by all
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<PAGE> 24
necessary corporate action on the part of the Company
and such Underwritten Securities have been duly authorized for
issuance and sale pursuant to this Agreement and such Terms
Agreement; and such Underwritten Securities, when issued and
delivered by the Company pursuant to this Agreement against
payment of the consideration set forth in such Terms Agreement
or any Delayed Delivery Contract, will be validly issued,
fully paid and non-assessable, and the issuance of such
Underwritten Securities will not be subject to preemptive
rights and, if applicable, the Preferred Shares, as the case
may be, conform to the provisions of the Articles
Supplementary.
(ix) If applicable, the shares of Common Stock
issuable upon conversion of any of the Preferred Shares have
been duly and validly authorized and reserved for issuance
upon such conversion or exercise by all necessary corporate
action on the part of the Company and such shares, when issued
upon such conversion in accordance with the charter of the
Company, the Terms Agreement and the Delayed Delivery
Contract, as the case may be, will be duly authorized and
validly issued and will be fully paid and non-assessable, and
the issuance of such shares upon such conversion will not be
subject to preemptive rights arising by operation of law or
the Company's Articles of Incorporation, as amended and
restated.
(x) If applicable, the relative rights, preferences,
interests and powers of the Preferred Shares are as set forth
in the Articles Supplementary relating thereto, and all such
provisions are valid under the Maryland General Corporation
Law.
(xi) The Registration Statement is effective under
the 1933 Act; any required filing of the Prospectus, and any
supplements thereto, pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b);
and to the best of their knowledge after due inquiry, no stop
order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof has been
issued under the 1933 Act and no proceedings therefor have
been initiated or threatened by the Commission.
(xii) Such counsel is of the opinion that each
document, if any, filed pursuant to the 1934 Act and
incorporated by reference in the Prospectus complies as
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<PAGE> 25
to form in all material respects with the 1934 Act and
the applicable rules and regulations of the Commission
thereunder.
(xiii) None of the Company, the Operating
Partnership, the Management Company, or the Building Company
is 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.
(xiv) Based, in part, on representations from the
Company relating to its asset composition, source of income,
shareholder diversification, distributions, record keeping and
other requirements and assumptions relating to the Company's
continued compliance with such representations, commencing
with the Company's first taxable year ended December 31, 1994,
the Company has been organized in conformity with the
requirements for qualification as a "real estate investment
trust" under the Code and its method of operation has enabled
it to and will enable it to continue to meet the requirements
for qualification as a real estate investment trust under the
Code.
(xv) The Common Stock conforms in all material
respects to the statements relating thereto contained in the
Prospectus.
(xvi) The statements set forth in the Prospectus
under the captions "The Company", "Description of Common
Stock", "Restrictions on Transfer of Capital Stock", and
"Federal Income Tax Considerations" in each case insofar as
such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present
the information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters
referred to therein.
(2) The favorable opinion, dated as of Closing Time, of
Kennedy Covington Lobdell & Hickman, special counsel for the Company
and the Subsidiaries, in form and substance satisfactory to counsel
for the Underwriters, to the effect that:
(i) To their knowledge after due inquiry, there are
no legal or governmental proceedings pending or threatened to
which the Company or any Subsidiary or
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<PAGE> 26
any Affiliate of the Company is a party or to which any
of their properties or the Communities is subject that are
required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes,
regulations, contracts or other documents that are required to
be described in the Registration Statement that are not
described or filed as required.
(ii) The Company and each Subsidiary has all
necessary consents, authorizations, approvals, orders,
certificates and permits of and from, and has made all
declarations and filings with, all federal, state, local and
other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, to own,
lease, license and use its properties and assets and to
conduct its business in the manner described in the
Prospectus, except to the extent that the failure to obtain or
file would not have a material adverse effect on the Company
and its Subsidiaries taken as a whole.
(iii) The Company and each Subsidiary (1) is in
compliance with any and all applicable federal, state and
local laws and regulations relating to the protection of human
health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants
("Environmental Laws"), (2) has received all permits, licenses
or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and
(3) is in compliance with all terms and conditions of any such
permit, license or approval, except where such non-compliance
with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals
are otherwise disclosed in the Prospectus or would not, singly
or in the aggregate, have a material adverse effect on the
Company and its Subsidiaries, taken as a whole.
(3) The favorable opinion, dated as of Closing Time, of Brown
& Wood LLP, counsel for the Underwriters, with respect to the matters
set forth in paragraphs (iii), (v), (vi), (viii), (ix) if applicable,
(x) if applicable and (xvi) of subsection (b)(1).
(4) In giving their opinions required by subsections (b)(1)
and (b)(2), respectively, of this section, Goodwin, Procter &
Hoar LLP, Kennedy Covington Lobdell & Hickman and Brown & Wood LLP
shall each additionally state that nothing
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<PAGE> 27
has come to their attention that would lead them to believe that the
Registration Statement or any amendment thereto, except for financial
statements and schedules and other financial and statistical data, as
to which counsel need make no statement, at the time it became
effective (or, if an amendment to the Registration Statement or an
Annual Report on Form 10-K has been filed by the Company with the
Commission subsequent to the effectiveness of the Registration
Statement, then at the time such amendment becomes effective or at the
time of the most recent filing of such Annual Report, as the case may
be) 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 in order to make the statements therein
not misleading or that the Prospectus or any amendment or supplement
thereto, except for financial statements and schedules and other
financial and statistical data, as to which counsel need make no
statement 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. In giving their opinions required by subsections
(b)(1) and (b)(2), respectively, of this Section, Goodwin, Procter &
Hoar LLP, Kennedy Covington Lobdell & Hickman and Brown & Wood LLP may
rely, (1) as to all matters of fact, upon certificates and written
statements of officers and employees of and accountants for the
Company and Operating Partnership, (2) with respect to certain other
matters, upon certificates of appropriate government officials in such
jurisdiction, and Brown & Wood LLP may additionally rely, as to
matters involving the laws of the State of Maryland, upon the opinion
of Goodwin, Procter & Hoar LLP (or other counsel reasonably
satisfactory to counsel for the Underwriters) in form and substance
satisfactory to counsel for the Underwriters.
(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 the earnings, business affairs or
business prospects of the Company and its Subsidiaries, taken as a whole, or
any of the Communities, whether or not arising in the ordinary course of
business; no proceedings shall be pending or, to the knowledge of the Company
or its Subsidiaries, threatened against the Company or its Subsidiaries or any
of the Communities before or by any Federal, state or other commission board or
administrative agency wherein an unfavorable decision, ruling or finding would
27
<PAGE> 28
materially and adversely affect the business, property, financial condition or
income of the Company and its Subsidiaries, taken as a whole, or any of the
Communities; and you shall have received a certificate of the President or
Chief Executive Officer or a Vice President of the Company and of the chief
financial or chief accounting officer of the Company in such capacity, and of
the general partner of the Operating Partnership, 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 a letter dated such date from Deloitte & Touche LLP, in
form and substance satisfactory to you, to the effect that (i) they are
independent public accountants with respect to the Company and its subsidiaries
within the meaning of the 1933 Act and the 1933 Act Regulations thereunder;
(ii) it is their opinion that the consolidated financial statements and
financial statement schedules of the Company and its subsidiaries included or
incorporated by reference in the Registration Statement and the Prospectus and
audited by them and covered by their opinions therein comply as to form in all
material respects with the applicable accounting requirements of the 1933 Act
and the 1933 Act Regulations; (iii) they have performed limited procedures, not
constituting an audit, including a reading of the latest available unaudited
interim consolidated financial statements of the Company, a reading of the
minute books of the Company, inquiries of certain officials of the Company who
have responsibility for financial and accounting matters and such other
inquiries and procedures as may be specified in such letter, and on the basis
of such limited review and procedures (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 Prospectus), nothing has come to their
attention which causes them to believe (A) that any material modifications
should be made to the unaudited condensed financial statements of the Company
and its subsidiaries included or incorporated by reference in the Prospectus
for them to be in conformity with generally accepted accounting principles or
that such unaudited financial statements do not comply as to form in all
material respects with the applicable accounting requirements of the 1934 Act
and the 1934 Act Regulations, (B) the unaudited
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<PAGE> 29
financial data of the Company in the Registration Statement and the Prospectus
under the caption "Selected Financial and Other Information" was not determined
on a basis substantially consistent with that used in determining the
corresponding amounts in the audited financial statements included or
incorporated by reference in the Registration Statement and the Prospectus, 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 consolidated mortgage notes, bonds and other loans
payable of the Company and its subsidiaries or any decrease in consolidated
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 April 1,
1996 through June 30, 1996, there were any decreases, as compared with the
corresponding period in the preceding year, in consolidated total revenues,
property operating income, funds from operations, net income or net income per
share of the Company and its subsidiaries, except in all instances for changes,
increases or decreases which the Registration Statement and the Prospectus
disclose have occurred or may occur; and (iv) in addition to the examination
referred to in their opinion 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 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.
(e) At Closing Time, you shall have received a letter, dated as of
Closing Time, from Deloitte & Touche LLP, 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 and the Operating Partnership in connection with the
issuance and sale of the Underwritten
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Securities as herein contemplated shall be satisfactory in form and substance
to you and counsel for the Underwriters.
(g) In the event that 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 and the Operating Partnership contained herein and the statements in
any certificates furnished by the Company and the Operating Partnership
hereunder shall be true and correct as of each applicable Date of Delivery and,
at the relevant Date of Delivery, you shall have received:
(1) A certificate, dated such Date of Delivery, of the
President and Chief Executive Officer or a Vice President of the
Company and of the chief financial or chief accounting officer of the
Company on behalf of the Company and on behalf of the Company in its
capacity as general partner of the Operating Partnership confirming
that the certificate delivered at the Closing Time pursuant to Section
5(c) hereof remains true and correct as of such Date of Delivery.
(2) The favorable opinions of Goodwin, Procter & Hoar LLP and
Kennedy Covington Lobdell & Hickman, counsels for the Company and the
Subsidiaries, in form and substance reasonably satisfactory to counsel
for the Underwriters, dated such Date of Delivery, relating to the
Option Securities to be purchased on such Date of Delivery and
otherwise to the same effect as the opinion required by Sections
5(b)(1) and 5(b)(3) hereof.
(3) The favorable opinion of Brown & Wood LLP, counsel for
the Underwriters, dated such Date of Delivery, relating to the Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Sections 5(b)(2) and
5(b)(3) hereof.
(4) A letter from Deloitte & Touche LLP, in form and
substance reasonably satisfactory to you and dated such Date of
Delivery, substantially the same in form 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 applicable Terms Agreement
may be terminated by you by notice to the Company at any time at or prior to
the Closing Time or Date of Delivery, as the case may be, and such termination
shall be
30
<PAGE> 31
without liability of any party to any other party except as provided in Section
4 hereof.
Section 6. Indemnification. (a) The Company and the Operating
Partnership, jointly and severally, hereby agree 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 untrue 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 contained in
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 any 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, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the indemnifying party; and
(3) against any and all expense whatsoever (including, the
reasonable fees and disbursements of counsel chosen by you) reasonably
incurred in investigating, 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 (i) to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in
31
<PAGE> 32
conformity with written information furnished to the Company by any Underwriter
through you expressly for use in the Registration Statement (or any amendment
thereto) and the Prospectus (or any amendment or supplement thereto) or (ii) if
(A) any such loss, liability, claim, damage or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in any of such documents, (B) such untrue statement or
alleged untrue statement or omission or alleged omission is corrected in any
amendment or supplement to the Registration Statement or the Prospectus and (C)
such Underwriter, having been furnished by or on behalf of the Company with
copies of the Prospectus as so amended or supplemented, thereafter fails to
deliver such amended or supplemented Prospectus prior to or concurrently with
the sale of Underwritten Securities to the person asserting such loss, claim,
damage or liability who purchased such Underwritten Securities from such
Underwriter.
(b) Each Underwriter severally agrees to indemnify and hold harmless
the Company and the Operating Partnership, the directors, each of the officers
who signed the Registration Statement and each person, if any, who controls the
Company or the Operating Partnership 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 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 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. If it so elects within a reasonable time after
receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it and approved by the indemnified parties
defendant in such action, unless such indemnified parties reasonably object to
such assumption on the ground that there may be legal defenses available to
them which are different from or in addition to those available to such
indemnifying party. If an indemnifying party assumes the defense
32
<PAGE> 33
of such action, the indemnifying parties shall not be liable for any fees and
expenses of counsel for the indemnified parties incurred thereafter in
connection with such action. In no event shall the indemnifying 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.
(d) For purposes of this Section 6, all references to the
Registration Statement, any preliminary prospectus or the Prospectus, or any
amendment or supplement to any of the foregoing, shall be deemed to include,
without limitation, any electronically transmitted copies thereof, including,
without limitation, any copies filed with the Commission pursuant to EDGAR.
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, the Operating
Partnership 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, the Operating Partnership 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
Prospectus in respect of such offering bears to the initial public offering
price appearing thereon and the Company and the Operating Partnership are
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, 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
33
<PAGE> 34
person, if any, who controls the Company or the Operating Partnership within
the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company and the Operating Partnership. The Underwriter's
obligations to contribute pursuant to this Section 7 are several in proportion
to their respective underwriting commitments and not joint. For purposes of
this Section 7, the Company, its subsidiaries and the Operating Partnership
shall be deemed one party jointly and severally liable for any obligations
hereunder.
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 and the Operating Partnership submitted pursuant
hereto, shall remain operative and in full force and effect, regardless of any
termination of this Agreement or the applicable Terms Agreement, or
investigation made by or on behalf of any Underwriter or any controlling
person, or by or on behalf of the Company or the Operating Partnership, and
shall survive delivery of and payment for the Underwritten Securities.
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, the Operating Partnership or by you upon the giving of 30 days'
written notice of such termination to the other parties hereto.
(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 or its Subsidiaries, taken as a whole,
whether or not arising in the ordinary course of business, or (ii) Preferred
Shares are being offered and 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 have been lowered since such date
or if any such rating organization shall have publicly announced that it has
placed any preferred stock of the Company on what is commonly termed at "watch
list" for possible downgrading; (iii) if there has occurred any material
adverse change in the financial markets in the United States or elsewhere or
any outbreak of hostilities or escalation thereof or other calamity or crisis
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 (iv) if trading in any of the securities of the
34
<PAGE> 35
Company has been suspended or limited 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 limited, 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 either Federal, New York or Maryland authorities. 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 24 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 24-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, severally and not jointly, 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
(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.
35
<PAGE> 36
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, Merrill Lynch World Headquarters, North Tower,
World Financial Center, New York, New York 10281-1305, attention of Mr. Tjarda
van S. Clagett, Managing Director; and notices to the Company shall be
directed to it at 212 South Tryon Street, Suite 500, Charlotte, N.C. 28211,
attention of Mr. William F. Paulsen, President and Chief Executive Officer.
Section 12. Parties. This Agreement and the applicable Terms
Agreement shall each inure to the benefit of and be binding upon you and the
Company, the Operating Partnership 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
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.
36
<PAGE> 37
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.
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof,
whereupon this instrument, along with all counterparts will become a binding
agreement between you, the Company and the Operating Partnership in accordance
with its terms.
Very truly yours,
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
-------------------------------
Name: William F. Paulsen
Title:
SUMMIT PROPERTIES PARTNERSHIP, L.P.
By: Summit Properties Inc.
(its general partner)
By: /s/ William F. Paulsen
-------------------------------
Name: William F. Paulsen
Title:
CONFIRMED AND ACCEPTED,
as of the date first
above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Tjarda van S. Clagett
---------------------------------
Authorized Signatory
37
<PAGE> 1
EXHIBIT 10
LOAN AGREEMENT
DATED AS OF
JULY 31, 1996
BETWEEN
SUMMIT PROPERTIES PARTNERSHIP, L.P.
AND
WACHOVIA BANK OF NORTH CAROLINA, N.A.
<PAGE> 2
TABLE OF CONTENTS
[Not a part of the Agreement]
<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Accounting Terms and Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
SECTION 1.03 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE II. THE LOAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.01. The Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.02. Promissory Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.03. Interest Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 2.04. Payment of Principle and Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 2.05. Prepayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE III. GENERAL PROVISIONS CONCERNING PAYMENTS AND FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.01 Commitment Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.02 General Provisions Concerning Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 3.03 Computation of Interest and Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE IV. CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4.01 Conditions to Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE V. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.01 Existence and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
SECTION 5.02 Power and Government Authorization: contravention . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.03 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.04 Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.05 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.06 Compliance with ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 5.07 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.08 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.09 Not an Investment Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.10 Ownership of Property: Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.11 No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.12 Full Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 5.13 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE VI. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.01 Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 6.02 Inspection of Property, Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 6.03 No Liens on the Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6.04 Ratio of Unencumbered Assets of Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
SECTION 6.05 Ratio of Debt to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6.06 Maximum Secured Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6.07 Debt Service Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6.08 Status of REIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6.09 Maintenance of Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6.10 Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SECTION 6.11 Consolidations, Mergers and Sales of Assets . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 6.12 Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 6.13 Compliance with Laws; Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 6.14 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 6.15 Change in Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.16 Maintenance of Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.17 Environmental Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.18 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 6.19 Environmental Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE VII. DEFAULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 7.02 Remedies on Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 8.02 No Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8.03 Expenses: Documentary Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8.04 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 8.05 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.06 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.07 Interest Limitation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.08 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.09 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.10 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 8.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 8.12 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
EXHIBIT A Form of $15,000,000 Note
EXHIBIT B Form of $16,000,000 Note
EXHIBIT C Form of Opinion of Counsel for the Borrower
EXHIBIT D Form of Guaranty Agreement
EXHIBIT E Description of Required Collateral
EXHIBIT F Form of Escrow Agreement
</TABLE>
-ii-
<PAGE> 4
LOAN AGREEMENT
THIS LOAN AGREEMENT, made as of the 31st day of July, 1996, by
and between SUMMIT PROPERTIES PARTNERSHIP, L.P., a Delaware limited partnership
(together with its successors, the "Borrower"), and WACHOVIA BANK OF NORTH
CAROLINA, N.A., a national banking association (together with endorsees,
successors and assigns, the "Bank").
BACKGROUND
The Borrower has requested the Bank to make two term loans to
the Borrower, one in the principal amount of $15,000,000.00 and the second in
the principal amount of $16,000,000.00, and the Bank is willing to do so on the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the
promises herein contained, and each intending to be legally bound hereby, the
parties agree as follows:
ARTICLE I. DEFINITIONS
SECTION 1.01. Definitions. The terms as defined in this
Section 1.01 shall, for all purposes of this Agreement and any amendment hereto
(except as herein otherwise expressly provided or unless the context otherwise
requires), have the meanings set forth herein (terms defined in the singular to
have the same meanings when used in the plural and vice versa):
"Affiliate" of any Person means (i) any other Person which
directly, or indirectly through one or more intermediaries, controls such
Person, (ii) any other Person which directly, or indirectly through one or more
intermediaries, is controlled by or is under common control with such Person,
or (iii) any other Person of which such Person owns, directly or indirectly,
50% or more of the common stock or equivalent equity interests. As used
herein, the term "control" means possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Applicable Term' has the meaning set forth in Section 2.05.
"Applicable Treasury Rate" has the meaning set forth in
Section 2.05.
"Assets" means the sum of (i) the Undepreciated Real Estate
Assets for all completed properties of the Borrower and the Guarantor plus (ii)
75% of the actual cost incurred for the properties of the Borrower and
Guarantor under development and land purchase plus (iii) the actual cost of all
other tangible assets of the Borrower and Guarantor on a consolidated basis.
"BBB Rated Period" means any period when the rating by S&P of
the Borrower's senior unsecured debt is BBB or better (and when the Borrower
has received a comparable rating by at least one of the following: Moody's,
Fitch or Duff & Phelps).
<PAGE> 5
"BBB-Rated Period" means any period when the rating by S&P of
the Borrower's senior unsecured debt is BBB- (and when the Borrower has
received a comparable rating by at least one of the following: Moody's, Fitch
or Duff & Phelps).
"Business Day" means any day except a Saturday, Sunday or
other day on which commercial banks in North Carolina are authorized by law to
close.
"CERCLA" means the Comprehensive Environmental Response
Compensation and Liability Act.
"CERCLIS" means the Comprehensive Environmental Response
Compensation and Liability Inventory System established pursuant to CERCLA.
"Change of Control" for purposes of this Agreement shall be
deemed to have occurred and shall mean when (i) any five or fewer Persons
acting in concert shall have acquired beneficial ownership (within the meaning
of Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 50% or more of the outstanding shares of the voting
stock of the Guarantor; or (ii) as of any date a majority of the Board of
Directors of the Guarantor consists of individuals who were not either (A)
directors of the Guarantor as of the corresponding date of the previous year,
(B) selected or nominated to become directors by the Board of Directors of the
Guarantor of which a majority consisted of individuals described in clause (A),
or (C) selected or nominated to become directors by the Board of Directors of
the Guarantor of which a majority consisted of individuals described in clause
(A) and individuals described in clause (B).
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor Federal tax code.
"Commitment Fee" has the meaning set forth in Section 3.01.
"Contract Interest Rate" means the interest rates set forth in
Section 2.03 (a) and (b).
"Controlled Group" means any and all members of a controlled
group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower, are
treated as a single employer under Section 414 of the Code.
"Debt" of any Person means at any date, without duplication,
(i) all obligations of such Person for borrowed money, (ii) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments,
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business, (iv) all obligations of such Person as lessee under capital
leases, (v) all obligations of such Person to reimburse any bank or other
Person in respect of amounts payable under a banker's acceptance, (vi) all
Redeemable Preferred Stock of such Person (in the event such Person is a
corporation), (vii) all obligations of such Person to reimburse any bank or
other Person in respect of amounts paid under a letter of credit or similar
instrument, (viii) all
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<PAGE> 6
Debt of others secured by a Lien on any asset of such Person, whether or not
such Debt is assumed by such Person, and (ix) all Debt of others Guaranteed by
such Person.
"Debt Service" means for any period principal and interest
scheduled to be paid by the Borrower and the Guarantor during such period in
respect of Debt.
"Debt Service Ratio" means the ratio of Net Operating Income
to Debt Service, calculated quarterly based on an annualization of the Fiscal
Quarter then ended.
"Default" means any condition or event which constitutes an
Event of Default or which with the giving of notice or lapse of time or both
would, unless cured or waived, become an Event of Default.
"Depreciation" means for any period the sum of all
depreciation expenses of the Borrower and the Guarantor for such period, as
determined in accordance with generally accepted accounting principles
consistently applied.
"Dollars" or "$" means dollars in lawful currency of the
United States of America.
"Duff & Phelps" means Duff & Phelps Credit Rating Co.
"Environmental Authorizations" means all licenses, permits,
orders, approvals, notices, registrations or other legal prerequisites for
conducting the business of the Borrower required by any Environmental
Requirement.
"Environmental Authority" means any foreign, federal, state,
local or regional government that exercises any form of jurisdiction or
authority under any Environmental Requirement.
"Environmental Judgments and Orders" means all judgments,
decrees or orders arising from or in any way associated with any Environmental
Requirements, whether or not entered upon consent or written agreements with an
Environmental Authority or other entity arising from or in any way associated
with any Environmental Requirement, whether or not incorporated in a judgment,
decree or order.
"Environmental Liabilities" means any liabilities, whether
accrued, contingent or otherwise, arising from and in any way associated with
any Environmental Requirements.
"Environmental Notice" means notice from any Environmental
Authority or by any other person or entity, of possible or alleged
noncompliance with any Environmental Requirement, including without limitation
any complaints, citations, demands or requests from any Environmental Authority
or from any other person or entity for correction of any violation of any
Environmental Requirement or any investigations concerning any violation of any
Environmental Requirement.
"Environmental Proceedings" means any judicial or
administrative proceedings arising from or in any way associated with any
Environmental Requirement.
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<PAGE> 7
"Environmental Releases" means releases as defined in CERCLA
or under any applicable state or local environmental law or regulation.
"Environmental Requirements" means any legal requirement
relating to health, safety or the environment and applicable to the Borrower,
any Subsidiary or the Properties, including but not limited to any such
requirement under CERCLA or similar state legislation.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, or any successor law, including any rules
or regulations promulgated thereunder. Any reference to any provision of ERISA
shall also be deemed to be a reference to any successor provision or provisions
thereof.
"Escrow Agent" means Chicago Title Insurance Company, 1465
Charlotte Plaza, Charlotte, North Carolina 28244.
"Escrow Agreement" means an Escrow agreement substantially in
the form of Exhibit F attached hereto executed by the Borrower, the Bank and
the Escrow Agent.
"Event of Default" has the meaning set forth in Section 7.01.
"$15,000,000 Note" has the meaning set forth in Section 2.02.
"First Maturity Date" means the fourth anniversary of the
Closing Date.
"Fiscal Quarter" means any fiscal quarter of the Borrower or
Guarantor, as the case may be.
"Fiscal Year" means any fiscal year of the Borrower or
Guarantor, as the case may be.
"Fitch" means Fitch Investors Service, Inc.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person and, without limiting the generality of the
foregoing, any obligation, direct or indirect, contingent or otherwise, of such
Person (i) to secure, purchase or pay (or advance or supply funds for the
purchase or payment of) such Debt or other obligation (whether arising by
virtue of partnership arrangements, by agreement to keep-well, to purchase
assets, goods, securities or services, to provide collateral security, to
take-or-pay, or to maintain financial statement conditions or otherwise) or
(ii) entered into for the purpose of assuring in any other manner the obligee
of such Debt or other obligation of the payment thereof or to protect such
obligee against loss in respect thereof (in whole or in part), provided that
the term Guarantee shall not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guarantor" means Summit Properties.
"Guaranty Agreement" means a Guaranty Agreement substantially
in the form of Exhibit D attached hereto executed by the Guarantor.
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<PAGE> 8
"Hazardous Materials" includes, without limitation, (a) solid
or hazardous waste, as defined in the Resource Conservation and Recovery Act of
1980, or in any applicable state or local law or regulation, (b) hazardous
substances, as defined in CERCLA, or in any applicable state or local law or
regulation, (c) gasoline, or any other petroleum product or by-product, (d)
toxic substances, as defined in the Toxic Substances Control Act of 1976, or in
any applicable state or local law or regulation or (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide, Fungicide,
and Rodenticide Act of 1975, or in any applicable state or local law or
regulation, as each such Act, statute or regulation may be amended from time to
time.
"Interest Payment Date" means the fifteenth day of each
January, April, July and October.
"Investment Grade Rating" means a rating by S&P of the
Borrower's senior unsecured debt of BBB- or better (and when the Borrower has
received a comparable rating by at least one of the following: Moody's, Fitch
or Duff & Phelps).
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, the Borrower or Guarantor shall be
deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"Loan" or "Loans" means, individually or collectively as the
context may require, the two term loans made by the Bank to the Borrower
pursuant to Article II hereof, one in the principal amount of $15,000,000.00
and the second in the principal amount of $16,000,000.00.
"Loan Documents" means this Agreement, the Notes, any other
document evidencing or securing the Loans.
"Margin Stock" means "margin stock" as defined in Regulations
G, T, U or X of the Board of Governors of the Federal Reserve System, as in
effect from time to time, together with all official rulings and
interpretations issued thereunder.
"Moody's" means Moody's Investors Service, a corporation
organized and existing under the laws of the State of Delaware, its legal
successors and assigns.
"Multiemployer Plan" has the meaning set forth in Section
4001(a)(3) of ERISA.
"Net Income" means, as applied to any Person for any period,
the aggregate amount of net income of such Person, after income taxes, for such
period, as determined in accordance with generally accepted accounting
principles consistently applied.
"Net Interest Rate Differential Percentage" has the meaning
set forth in Section 2.05.
"Net Operating Income" shall mean (i) the aggregate Net Income
of the Borrower and Guarantor, before minority interests and extraordinary
items, plus (ii) Depreciation and amortization, plus (iii) losses from sales or
joint ventures, plus (iv) increases in deferred taxes and other non-cash items,
minus
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<PAGE> 9
(v) gains from sales or joint ventures, minus (vi) decreases in deferred taxes
and other non-cash items, plus (vii) interest expense, plus (viii) income
taxes.
"Notes" means, collectively, the two promissory notes, either
as originally executed or as may from time to time be supplemented, modified,
amended, renewed or extended, executed by the Borrower and together evidencing
the Loans.
"Obligations" means all indebtedness, obligations and
liabilities to the Bank existing on the date of this Agreement or arising
thereafter, direct or indirect, joint or several, absolute or contingent,
matured or unmatured, liquidated or unliquidated, secured or unsecured, arising
by contract, operation of law or otherwise, of the Borrower under this
Agreement or any other Loan Document.
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means any individual, joint venture, corporation,
company, voluntary association, partnership, trust, joint stock company,
unincorporated organization, association, government, or any agency,
instrumentality, or political subdivision thereof, or any other form of entity
or organization.
"Plan" means at any time an employee pension benefit plan
which is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code and is either (i) maintained by a
member of the Controlled Group for employees of any member of the Controlled
Group or (ii) maintained pursuant to a collective bargaining agreement or any
other arrangement under which more than one employer makes contributions and to
which a member of the Controlled Group is then making or accruing an obligation
to make contributions or has within the preceding five plan years made
contributions.
"Prime Rate" means that interest rate so denominated and set
by Wachovia from time to time as an interest rate basis for borrowings. The
Prime Rate is but one of several interest rate bases used by Wachovia.
Wachovia lends at interest rates above and below the Prime Rate. A change in
the Prime Rate shall be effective on the date of such change.
"Properties" means all real property owned, leased or
otherwise used or occupied by the Borrower or any Subsidiary of the Borrower,
wherever located. The term "Properties" includes the Required Collateral.
"Redeemable Preferred Stock" of any Person means any preferred
stock issued by such Person which is at any time prior to the Second Maturity
Date either (i) mandatorily redeemable (by sinking fund or similar payments or
otherwise) or (ii) redeemable at the option of the holder thereof.
"Reportable Event" has the meaning set forth in Section
4043(b) of Title V of ERISA.
"Required Collateral" means those real estate assets of the
Borrower more particularly described in Exhibit E attached hereto.
"S&P" means Standard & Poor's Ratings Services, a Division of
the McGraw-Hill Companies, Inc., or its legal successors or assigns.
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<PAGE> 10
"Second Maturity Date" means the sixth anniversary of the
Closing Date.
"Secured Debt" means all Debt of the Borrower and the
Guarantor which is secured by a Lien on any real or personal property of the
Borrower or the Guarantor.
"$16,000,000 Note" has the meaning set forth in Section 2.02
hereof.
"Subsidiary" of a Person means any corporation or other entity
of which securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions are at the time directly or indirectly owned by such Person.
"Summit Properties" means Summit Properties Inc., a Maryland
corporation.
"Third Parties" means all lessees, sublessees, licensees and
other users of the Properties, excluding those users of the Properties in the
ordinary course of the Borrower's business and on a temporary basis.
"Undepreciated Real Estate Assets" means the cost (original
plus capital improvements, if any) of the real estate assets of the Borrower
and the Guarantor and their Wholly-Owned Subsidiaries, before Depreciation and
amortization, determined on a consolidated basis.
"Unrated Period" means any period when neither the Borrower
nor Summit Properties has an Investment Grade Rating.
"Wachovia" means Wachovia Bank of North Carolina, N.A., a
national banking association, together with its successors.
"Wholly Owned Subsidiary" means any Subsidiary all of the
shares of capital stock or other ownership interests of which (except
directors' qualifying shares) are at the time directly or indirectly owned by
the Borrower or by the Borrower and Guarantor together.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all terms of an accounting character used herein
shall be interpreted, all accounting determinations hereunder shall be made,
and all financial statements required to be delivered hereunder (other than any
monthly or quarterly balance sheets and operating statements of any of the
Required Collateral) shall be prepared in accordance with generally accepted
accounting principles as in effect from time to time, applied on a basis
consistent (except for changes concurred in by the Borrower's independent
public accountants) with the most recent audited financial statements of the
Borrower delivered to the Bank.
SECTION 1.03. References. Except as otherwise expressly
provided in this Agreement: the words "herein," "hereof," "hereunder" and
other words of similar import refer to this Agreement as a whole, including any
Schedule or Exhibit hereto which is a part hereof, and not to any particular
Section, Article, paragraph or other subdivision; the singular includes the
plural and the plural includes the singular; "or" is not exclusive; the words
"include," "includes" and "including" are not limiting; a reference to any
agreement or other contract includes past and future permitted supplements,
amendments, modifications and restatements thereto or thereof; a reference to
an Article, Section, paragraph or other subdivision is a reference to an
Article, Section, paragraph or other subdivision of this Agreement; a reference
to any law
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<PAGE> 11
includes any amendment or modification to such law and any rules and
regulations promulgated thereunder; a reference to a Person includes its
permitted successors and assigns; any right may be exercised at any time and
from time to time; and, except as otherwise expressly provided therein, all
obligations under any agreement or other contract are continuing obligations
throughout the term of such agreement or contract.
ARTICLE II. THE LOANS
SECTION 2.01. The Loans. (a) Subject to the terms and
conditions of this Agreement, on the Closing Date, the Bank agrees to lend to
the Borrower, and the Borrower agrees to borrow from the Bank, the aggregate
principal sum of $31,000,000 (the "Loans").
(b) The closing of the Loans hereunder shall take place at the
office of the Bank in Charlotte, North Carolina, or such other place as the
parties may agree, on the Closing Date. On or within three (3) Business Days
after the Closing Date as requested by the Borrower, upon receipt of the
documents required by, and satisfaction of the conditions specified in, Article
IV, the Bank will advance, in immediately available funds, the aggregate amount
of the Loans to the Borrower.
SECTION 2.02. Promissory Notes. The Loans shall be evidenced
by two promissory notes of the Borrower (the "Notes") in the aggregate
principal amount of Thirty-one Million and No/100 Dollars ($31,000,000.00), one
of such Notes to be for the principal sum of $15,000,000.00 and in the form of
Exhibit A hereto, with appropriate insertions, payable to the order of the Bank
and dated the Closing Date (the "$15,000,000 Note") and the other of said Notes
to be for the principal sum of $16,000,000.00 and in the form of Exhibit B
hereto, with appropriate insertions, payable to the order of the Bank and dated
the Closing Date (the "$16,000,000 Note").
SECTION 2.03. Interest Rates. (a) The $15,000,000 Note shall
bear interest from the Closing Date (or, if later, from the date of advancement
of the Loans to the Borrower) at a rate per annum equal to 7.71 % during any
Unrated Period, 7.61% during any BBB-Rated Period and 7.51% during any BBB
Rated Period.
(b) The $16,000,000 Note shall bear interest from the
Closing Date (or, if later, from the date of advancement of the Loans to the
Borrower) at a rate per annum equal to 7.95 % during any Unrated Period, 7.85%
during any BBB-Rated Period and 7.75% during any BBB Rated Period.
(c) Any overdue principal of, and to the extent permitted
by law, overdue interest on the Loans shall bear interest, payable on demand
for each day until paid at a rate per annum equal to 150% of the Prime Rate.
SECTION 2.04. Payment of Principal and Interest. The
Borrower promises and agrees to pay to the Bank the principal and interest on
the Loans and Notes as follows:
(a) Interest shall be payable quarterly in arrears on
each Interest Payment Date commencing with the first of such dates after the
Closing Date.
(b) The principal of the $15,000,000 Note shall be
payable in full on the First Maturity Date; and the principal of the
$16,000,000 Note shall be payable in full on the Second Maturity Date.
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<PAGE> 12
SECTION 2.05. Prepayment. The Borrower shall have the
privilege to prepay the principal amount of the Loans in full, but not in part,
subject to a prepayment premium calculated as follows:
The product (discounted back to a net present value at the Applicable
Treasury Rate) determined by multiplying the outstanding principal amount being
prepaid times the Net Interest Rate Differential Percentage times the number of
years (whole or partial) remaining until the First Maturity Date, if the
prepayment relates to the $15,000,000 Note, or until the Second Maturity Date,
if the prepayment relates to the $16,000,000 Note. The "Net Interest Rate
Differential Percentage" shall be the difference between the then applicable
Contract Interest Rate on the $15,000,000 Note or the $16,000,000 Note, as the
case may be, and the Applicable Treasury Rate. The "Applicable Treasury Rate"
shall mean the per annum spot rate adjusted to a constant maturity for a term
equal to the number of months from the date of prepayment to the First Maturity
Date, in the case of the $15,000,000 Note, or from the date of prepayment to
the Second Maturity Date, in the case of the $16,000,000 Note (the "Applicable
Term"), as of five (5) Business Days prior to the prepayment. The product
shall never be a negative amount.
<TABLE>
Example:
<S> <C>
Outstanding principal balance of applicable Loan: $1,000,000
Contract Interest Rate on such Loan: 8.25%
48 months remaining from the date
of prepayment until maturity of
such Loan (therefore, the "Applicable
Treasury Rate" is the 4 year Treasury Rate): 6.00%
Therefore:
Contract Interest Rate 8.25%
- Applicable Treasury Rate -6.00%
------------------------ -----
= Net Interest Rate Differential Percentage 2.25%
</TABLE>
Thus, the Net Interest Rate Differential Percentage times the
principal amount of such Loan to be prepaid times the number of years
(whole or partial) remaining from the date of prepayment until the
First Maturity Date or the Second Maturity Date, as the case may be =
prepayment premium for such Loan. Calculation: 2.25% X $1,000,000 X
4 years = $90,000 prepayment premium (which shall be discounted back
to a net present value at the Applicable Treasury Rate).
NOTWITHSTANDING the foregoing provisions of this paragraph,
the Borrower, without payment of any prepayment premium or penalty,
may (a) within the sixty (60) days period prior to the First Maturity
Date, repay in full but not in part the $15,000,000 Note and (b)
within the
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<PAGE> 13
sixty (60) days period prior to the Second Maturity Date, repay in
full but not in part the $16,000,000 Note.
ARTICLE III. GENERAL PROVISIONS CONCERNING PAYMENTS AND FEE
SECTION 3.01. Commitment Fee. On or before the Closing Date
the Borrower shall pay to the Bank a commitment fee (the "Commitment Fee")
equal to $155,000.00.
SECTION 3.02. General Provisions Concerning Payments. (a)
All payments and prepayments of principal of, or interest on, the Notes and of
the Commitment Fee shall be made in Federal or other funds immediately
available to the Bank at its office in Charlotte, North Carolina not later than
2:00 p.m., Charlotte, North Carolina time. Funds received after 2:00 p.m.
shall be deemed to have been paid on the next following Business Day.
(b) Whenever any payment of principal of, or interest on, the
Loans shall be due on a day which is not a Business Day, the date for payment
thereof shall be extended to the next succeeding Business Day. If the date for
any payment of principal is extended by operation of law or otherwise, interest
thereon shall be payable for such extended time.
SECTION 3.03. Computation of Interest and Fees. Interest
shall be computed on the basis of a year of 360 days and paid for the actual
number of days elapsed, calculated as to each interest period from and
including the first day thereof to but excluding the last day thereof.
ARTICLE IV. CONDITIONS PRECEDENT
SECTION 4.01. Conditions to Loans. The obligation of the
Bank to make the Loans is subject to the satisfaction of the following
conditions:
(a) receipt by the Bank from the Borrower of a duly executed
counterpart of this Agreement signed by the Borrower;
(b) receipt by the Bank of the duly executed Notes;
(c) receipt by the Bank of the duly executed Guaranty
Agreement and Escrow Agreement;
(d) receipt by the Bank of an opinion of counsel of Kennedy
Covington Lobdell & Hickman, L.L.P. counsel for the Borrower and
Guarantor, substantially in the form of Exhibit C hereto, and covering
such additional matters relating to the transactions contemplated
hereby as the Bank may reasonably request;
(e) receipt by the Bank of a certificate, dated the Closing
Date (or, if later, the date of advancement of the Loans), signed by
the general partner of the Borrower to the effect that (i) no Default
hereunder has occurred and is continuing on such date and (ii) the
representations and warranties of the Borrower contained in Article V
are true on and as of such date;
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<PAGE> 14
(f) receipt by the Bank of all documents which the Bank may
reasonably request relating to the existence of the Borrower and of
the Guarantor, the authority for and the validity of this Agreement,
the Notes, the other Loan Documents and any other matters relevant
hereto, all in form and substance satisfactory to the Bank, such
documents to include without limitation a copy of the Partnership
Agreement and Certificate of Limited Partnership of the Borrower and
copies of the Guarantor's Articles of Incorporation and By-laws;
(g) a certificate of the Secretary of State of Delaware as to
the existence of the Borrower as a limited partnership in such
jurisdiction and of the Secretary of State of North Carolina as to the
qualification of the Borrower to transact business in such
jurisdiction;
(h) a certificate of the Secretary of State of Maryland as to
the existence of the Guarantor as a corporation in such jurisdiction
and of the Secretary of State of the State of North Carolina as to the
qualification of the Guarantor to transact business in such
jurisdiction; and
(i) such other items as the Bank may reasonably require after
receipt and review of the documents and agreements referred to above.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 5.01. Existence and Power. The Borrower is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of Delaware, is duly qualified to transact business in every
jurisdiction where, by the nature of its business, such qualification is
necessary, and has all powers and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted.
SECTION 5.02. Power and Governmental Authorization;
Contravention. The execution, delivery and performance by the Borrower of this
Agreement, the Notes and the other Loan Documents (i) are within the Borrower's
powers, (ii) have been duly authorized by all necessary partnership action,
(iii) require no action by or in respect of, or filing with, any governmental
body, agency or official other than ordinary filings with the Securities and
Exchange Commission, (iv) do not contravene, or constitute a default under, any
provision of applicable law or regulation or of the Partnership Agreement or
Certificate of the Borrower or of any agreement, judgment, injunction, order,
decree or other instrument binding upon the Borrower, and (v) do not result in
the creation or imposition of any Lien on any asset of the Borrower.
SECTION 5.03. Binding Effect. This Agreement constitutes a
valid and binding agreement of the Borrower enforceable in accordance with its
terms, and the Notes and the other Loan Documents, when executed and delivered
in accordance with this Agreement, will constitute valid and binding
obligations of the Borrower enforceable in accordance with their respective
terms, provided that the enforceability hereof and thereof is subject in each
case to general principles of equity and to bankruptcy, insolvency and similar
laws affecting the enforcement of creditors' rights generally.
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<PAGE> 15
SECTION 5.04. Financial Information. (a) The financial
statements of the Borrower and its Subsidiaries as of December 31, 1995, and
the related statements of income, and cash flows for the Fiscal Year then
ended, audited by Deloitte & Touche LLP, copies of which have been delivered to
the Bank, and the unaudited financial statements of the Borrower and its
Subsidiaries for the interim period ended March 31, 1996, copies of which have
been delivered to the Bank, fairly present the financial position of the
Borrower and its Subsidiaries as of such dates and the Borrower's results of
operations and cash flows for such periods stated. Such annual financial
statements have been prepared in conformity with generally accepted accounting
principles.
(b) Since March 31, 1996, there has been no material adverse
change in the business, financial position, results of operations or prospects
of the Borrower and its Subsidiaries.
SECTION 5.05. Litigation. There is no action, suit or
proceeding pending, or to the knowledge of the Borrower threatened, against or
affecting the Borrower or any of its Subsidiaries before any court or
arbitrator or any governmental body, agency or official which could materially
adversely affect the business, consolidated financial position or consolidated
results of operations of the Borrower and its Subsidiaries, or which could
reasonably impair the ability of the Borrower to perform its obligations under,
this Agreement, the Notes or any of the other Loan Documents.
SECTION 5.06. Compliance with ERISA. (a) The Borrower and
each member of the Controlled Group have fulfilled their obligations under the
minimum funding standards of ERISA and the Code with respect to each Plan and
are in compliance in all material respects with the presently applicable
provisions of ERISA and the Code, and have not incurred any liability to the
PBGC or a Plan under Title IV of ERISA.
(b) Neither the Borrower nor any member of the Controlled
Group is or ever has been obligated to contribute to any Multiemployer Plan.
SECTION 5.07. Taxes. There have been filed on behalf of the
Borrower all Federal, state and local income, excise, property and other tax
returns which are required to be filed by it and any and all taxes due pursuant
to such returns or pursuant to any assessment received by or on behalf of the
Borrower have been paid, other than taxes being contested in good faith and
against which, if requested by the Bank, adequate reserves for the payment of
such taxes have been established by the Borrower. The charges, accruals and
reserves on the books of the Borrower in respect of taxes or other governmental
charges are, in the opinion of the Borrower, adequate.
SECTION 5.08. Subsidiaries. Each of the Borrower's
Subsidiaries is a corporation, partnership or limited liability company duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, and has all powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
SECTION 5.09. Not an Investment Company. The Borrower is not
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
SECTION 5.10. Ownership of Property; Liens. The Borrower has
title to its properties (including without limitation the Required Collateral)
sufficient for the conduct of its business, and none of the Required Collateral
is subject to any Lien.
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<PAGE> 16
SECTION 5.11. No Default. The Borrower is not in default
under or with respect to any agreement, instrument or undertaking to which it
is a party or by which it or any of its property is bound which will be
materially adverse to the business, operations, property or financial or other
condition of the Borrower, or which will materially adversely affect the
ability of the Borrower to perform its obligations under the Loan Documents.
No Default has occurred and is continuing.
SECTION 5.12. Full Disclosure. All information heretofore
furnished by the Borrower to the Bank for purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all such
information hereafter furnished by the Borrower to the Bank will be, true,
accurate and complete in every material respect or based on reasonable
estimates on the date as of which such information is stated or certified. The
Borrower has disclosed to the Bank in writing any and all facts which
materially and adversely affect or may affect (to the extent the Borrower can
now reasonably foresee), the business, operations, prospects or condition,
financial or otherwise, of the Borrower, the Guarantor and their Subsidiaries
or the ability of the Borrower to perform its obligations under this Agreement
or of the Guarantor to perform its obligations under the Guaranty Agreement.
SECTION 5.13. Environmental Matters. (a) To the best of the
knowledge of the Borrower, the Borrower is not subject to any Environmental
Liability which is likely to have a material adverse effect on the business,
financial position, results of operations or prospects of the Borrower and the
Borrower has not been designated as a potentially responsible party under
CERCLA or under any state statute similar to CERCLA. None of the Properties
have been identified on any current or proposed (i) National Priorities List
under 40 C.F.R. Section 300, (ii) CERCLIS list or (iii) any list arising from
a state statute similar to CERCLA.
(b) No Hazardous Materials have been or are being used,
produced, manufactured, processed, generated, stored, disposed of, managed at,
or shipped or transported to or from the Properties or are otherwise present
at, on, in or under the Properties, or, to the best of the knowledge of the
Borrower, at or from any adjacent site or facility, except for Hazardous
Materials, such as cleaning solvents, pesticides and other materials used,
produced, manufactured, processed, generated, stored, disposed of, and managed
in the ordinary course of business in compliance with all applicable
Environmental Requirements.
ARTICLE VI. COVENANTS
The Borrower agrees that, so long as the Commitment is in
effect hereunder or any amount payable under this Agreement remains unpaid:
SECTION 6.01. Information. The Borrower will deliver to the
Bank:
(a) as soon as available and in any event within 90 days
after the end of each Fiscal Year, a consolidated balance sheet of the
Borrower and its Subsidiaries as of the end of such Fiscal Year and
the related consolidated statements of income, shareholders' equity
and cash flows for such Fiscal Year, setting forth in each case in
comparative form the figures for the previous fiscal year, all in
accordance with generally accepted accounting principles and audited
and certified by Deloitte & Touche LLP or another independent
certified public accountant acceptable to the Bank, with such
certification to be free of exceptions and qualifications not
acceptable to Bank;
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<PAGE> 17
(b) as soon as available and in any event within 45 days
after the end of each of the first three Fiscal Quarters of each
Fiscal Year, a consolidated balance sheet of the Borrower and its
Subsidiaries as of the end of such Fiscal Quarter and the related
statement of income and statement of cash flows for such Fiscal
Quarter and for the portion of the Fiscal Year ended at the end of
such Fiscal Quarter, setting forth in each case in comparative form
the figures for the corresponding Fiscal Quarter and the corresponding
portion of the previous Fiscal Year, all certified (subject to normal
year-end adjustments) as to fairness of presentation and consistency
by the chief financial officer or the chief accounting officer of the
Borrower;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, a certificate of
the chief financial officer or the chief accounting officer of the
Borrower (i) setting forth in reasonable detail the calculations
required to establish whether the Borrower was in compliance with the
requirements of Sections 6.04 through 6.07, inclusive, on the date of
such financial statements and (ii) stating whether any Default exists
on the date of such certificate and, if any Default then exists,
setting forth the details thereof and the action which the Borrower is
taking or proposes to take with respect thereto;
(d) within five Domestic Business Days after the Borrower
becomes aware of the occurrence of any Default, a certificate of the
chief financial officer or the chief accounting officer of the
Borrower setting forth the details thereof and the action which the
Borrower is taking or proposes to take with respect thereto;
(e) promptly upon the mailing thereof to the partners of the
Borrower generally, copies of all financial statements, reports and
proxy statements so mailed;
(f) promptly upon the filing thereof, copies of any and all
registration statements (other than the exhibits thereto and any
registration statements on Form S-8 or its equivalent) and annual,
quarterly or monthly reports which the Borrower shall have filed with
the Securities and Exchange Commission;
(g) if and when any member of the Controlled Group (i) gives
or is required to give notice to the PBGC of any Reportable Event with
respect to any Plan which might constitute grounds for a termination
of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of
any such Reportable Event, a copy of the notice of such Reportable
Event given or required to be given to the PBGC; (ii) receives notice
of complete or partial withdrawal liability under Title IV of ERISA, a
copy of such notice; or (iii) receives notice from the PBGC under
Title IV of ERISA of an intent to terminate or appoint a trustee to
administer any Plan, a copy of such notice;
(h) within 30 days after the end of each Fiscal Quarter,
quarterly operating statements for each of the properties comprising
the Required Collateral; provided that this requirement shall
terminate at such time prior to the occurrence of a "Payment Default"
or "Covenant Violation" (as those terms are defined in the Escrow
Agreement) as the Borrower shall have received an Investment Grade
Rating.
(i) from time to time such additional information regarding
the financial position or business of the Borrower and its
Subsidiaries as the Bank may reasonably request.
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<PAGE> 18
SECTION 6.02. Inspection of Property, Books and Records. The
Borrower will keep, and will cause each of its Subsidiaries to keep, proper
books of record and account in which full, true and correct entries shall be
made of all dealings and transactions in relation to its business and
activities; and will permit, and will cause its Subsidiaries to permit,
representatives of the Bank at the Bank's expense prior to the occurrence of an
Event of Default and at the Borrower's expense after the occurrence of an Event
of Default to visit and inspect any of their respective properties (including
without limitation the Required Collateral), to examine and make abstracts from
any of their respective books and records and to discuss their respective
affairs, finances and accounts with their respective officers, employees and
independent public accountants. The Borrower agrees to cooperate and assist in
such visits and inspections, in each case at such reasonable times and as often
as may reasonably be desired; provided, however, that prior to the occurrence
of an Event of Default, the Bank shall give the Borrower not less than
twenty-four (24) hours' notice of any such visit or inspection.
SECTION 6.03. No Liens on the Collateral. The Borrower will
not place or permit to exist any lien on any of the Required Collateral except
those, if any, approved by the Bank in writing; provided, however, that this
covenant shall terminate at such time prior to the occurrence of a "Payment
Default" or "Covenant Violation" (as those terms are defined in the Escrow
Agreement) as the Borrower shall have received an Investment Grade Rating.
SECTION 6.04. Ratio of Unencumbered Assets to Debt. The
collective unencumbered Assets of the Borrower and Guarantor, tested as of the
last day of each Fiscal Quarter, shall at all times equal or exceed 150% of the
aggregate outstanding unsecured Debt of such entities.
SECTION 6.05. Ratio of Debt to Assets. The aggregate Debt of
the Borrower and the Guarantor, tested as of the last day of each Fiscal
Quarter, shall at no time exceed 60% of the total collective Assets of the
Borrower and the Guarantor.
SECTION 6.06. Maximum Secured Debt. The aggregate Secured
Debt of the Borrower and the Guarantor, tested as of the last day of each
Fiscal Quarter, shall at no time exceed the lesser of (i) $350,000,000 or (ii)
60% of total collective Assets of the Borrower and the Guarantor until the
earlier of (a) such time as the Borrower shall have received an Investment
Grade Rating or (b) June 30, 1997, at and after which time aggregate Secured
Debt of the Borrower and the Guarantor, tested as of the last day of each
Fiscal Quarter, shall not exceed 40% of total collective Assets of the Borrower
and the Guarantor.
SECTION 6.07. Debt Service Ratio. The Debt Service Ratio,
tested as of the last day of each Fiscal Quarter, shall at no time be less than
1.75 to 1.
SECTION 6.08. Status as REIT. The Borrower shall maintain at
all times its status as a real estate investment trust under the Code.
SECTION 6.09. Maintenance of Existence. The Borrower shall,
and shall cause each Subsidiary to, maintain its existence and carry on its
business in substantially the same manner and in substantially the same fields
as such business is now carried on and maintained; provided, however, that
nothing contained in this Section shall preclude the Borrower from dissolving a
Subsidiary of the Borrower so long as the assets of such Subsidiary have
theretofore been transferred to the Borrower or another Subsidiary of the
Borrower.
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<PAGE> 19
SECTION 6.10. Dissolution. Neither the Borrower nor any of
its Subsidiaries shall suffer or permit dissolution or liquidation either in
whole or in part or redeem or retire any shares of its own stock or any of its
own securities or other ownership interests or that of any Subsidiary, except
(a) through corporate reorganization to the extent permitted by Section 6.11
and (b) so long as after giving pro forma effect thereto, the Borrower will not
be in violation of the terms of this Agreement, pursuant to Section 8.6 of the
Agreement of Limited Partnership of the Borrower as amended through the Closing
Date or as amended subsequent to the Closing Date if the sole purpose of the
amendment is to specify a date through which a limited partner's ownership
interest must be held prior to such redemption; provided, however, that nothing
contained in this Section shall preclude the Borrower from dissolving a
Subsidiary of the Borrower so long as the assets of such Subsidiary have
theretofore been transferred to the Borrower or another Subsidiary of the
Borrower.
SECTION 6.11. Consolidations, Mergers and Sales of Assets.
The Borrower will not, nor will it permit any Subsidiary to, consolidate or
merge with or into, or sell, lease or otherwise transfer all or substantially
all of its assets to, any other Person, or discontinue or eliminate any
business line or segment, provided that
(a) the Borrower may merge with another Person if (i) such
Person was organized under the laws of the United States of America or one of
its states, (ii) the Borrower is the corporation surviving such merger and
(iii) immediately after giving effect to such merger, no Default shall have
occurred and be continuing, and
(b) Subsidiaries of the Borrower may merge with one another.
SECTION 6.12. Use of Proceeds. The proceeds of the Loans
will be used by the Borrower (i) to refinance existing indebtedness of the
Borrower, and (ii) for general business and working capital purposes. No
portion of the proceeds of the Loans will be used by the Borrower (a) in
connection with any tender offer for, or other acquisition of, stock of any
corporation with a view towards obtaining control of such other corporation,
(b) directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of purchasing or carrying any Margin Stock, or (c) for any purpose in
violation of any applicable law or regulation.
SECTION 6.13. Compliance with Laws; Payment of Taxes. The
Borrower will, and will cause each of its Subsidiaries and each member of the
Controlled Group to, comply with applicable laws (including but not limited to
ERISA), regulations and similar requirements of governmental authorities
(including but not limited to PBGC), except where the necessity of such
compliance is being contested in good faith through appropriate proceedings.
The Borrower will, and will cause each of its Subsidiaries to, pay promptly
when due all taxes, assessments, governmental charges, claims for labor,
supplies, rent and other obligations which, if unpaid, might become a lien
against the property of the Borrower or any Subsidiary, except liabilities
being contested in good faith and against which, if reasonably requested by the
Bank, the Borrower will set up reserves reasonably satisfactory to the Bank.
SECTION 6.14. Insurance. The Borrower will maintain, and
will cause each of its Subsidiaries to maintain (either in the name of the
Borrower or in such Subsidiary's own name), with financially sound and
reputable insurance companies, insurance on all its property in at least such
amounts and against at least such risks as are usually insured against in the
same general area by companies of established repute engaged in the same or
similar business.
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<PAGE> 20
SECTION 6.15. Change in Fiscal Year. The Borrower will not
change its Fiscal Year without the consent of the Bank.
SECTION 6.16. Maintenance of Property. The Borrower shall,
and shall cause each Subsidiary to, maintain all of its properties and assets
in good condition, repair and working order, ordinary wear and tear excepted.
SECTION 6.17. Environmental Notices. The Borrower shall
furnish to the Bank prompt written notice of all Environmental Liabilities,
pending, or, to the best knowledge of Borrower, threatened or anticipated
Environmental Proceedings, Environmental Notices, Environmental Judgments and
Orders, and Environmental Releases at, on, in, under or in any way affecting
the Properties or any adjacent property (to the extent Borrower has actual
knowledge with respect to such adjacent property), and all facts, events, or
conditions that could lead to any of the foregoing.
SECTION 6.18. Environmental Matters. The Borrower will not,
and will not permit any Third Party to, use, produce, manufacture, process,
generate, store, dispose of, manage at, or ship or transport to or from the
Properties any Hazardous Materials except for Hazardous Materials such as
cleaning solvents, pesticides and other similar materials used, produced,
manufactured, processed, generated, stored, disposed or managed in the ordinary
course of business in compliance with all applicable Environmental
Requirements.
SECTION 6.19. Environmental Release. The Borrower agrees
that upon the occurrence of an Environmental Release it will act immediately to
investigate the extent of, and to take appropriate remedial action to
eliminate, such Environmental Release, whether or not ordered or otherwise
directed to do so by any Environmental Authority.
ARTICLE VII. DEFAULTS
SECTION 7.01. Events of Default. The occurrence of any one
or more of the following events shall constitute an Event of Default by the
Borrower under this Agreement:
(a) the Borrower shall fail to pay when due any principal of
any Loan or shall fail to pay any interest on any Loan within five Domestic
Business Days after such interest shall become due, or shall fail to pay any
fee or other amount payable hereunder within five Domestic Business Days after
such fee or other amount becomes due; or
(b) the Borrower shall fail to observe or perform any
covenant contained in Sections 6.03 through 6.12, inclusive; or
(c) the Borrower shall fail to observe or perform any
covenant or agreement contained in this Agreement (other than those covered by
clause (a) or (b) above), and such failure shall not be cured within thirty
days after written notice thereof has been given to the Borrower by the Bank
(or such longer period of time as is reasonably necessary to cure such failure
if such failure is not possible to cure within such thirty (30) day period and
the Borrower is making a good faith diligent effort to cure, but in no event
more than sixty (60) days after such notice without the written consent of the
Bank); or
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<PAGE> 21
(d) any representation, warranty, certification or statement
made by the Borrower in Article V or in any certificate, financial statement or
other document delivered pursuant to this Agreement shall prove to have been
incorrect in any material respect when made (or deemed made); or
(e) the Borrower or Guarantor or any Subsidiary of the
Borrower or Guarantor shall fail to make any payment in respect of Debt
outstanding to the Bank when due or within any applicable grace period; or
(f) any event or condition shall occur which results either
(i) in the acceleration of the maturity of recourse Debt outstanding of the
Borrower, the Guarantor or any Subsidiary of the Borrower or Guarantor to any
Person other than the Bank or (ii) the required purchase of such recourse Debt
by the Borrower (or its designee), the Guarantor (or its designee) or such
Subsidiary (or its designee) prior to the scheduled maturity thereof;
(g) the Borrower and/or Guarantor shall default in any payment
in respect of or otherwise default with respect to non-recourse Debt in the
aggregate principal amount of $20,000,000 or more;
(h) a Change of Control shall occur;
(i) the Borrower, the Guarantor or any Subsidiary of the
Borrower or Guarantor shall commence a voluntary case or other proceeding
seeking liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part
of its property, or shall consent to any such relief or to the appointment of
or taking possession by any such official in an involuntary case or other
proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become
due, or shall take any corporate action to authorize any of the foregoing; or
(j) an involuntary case or other proceeding shall be
commenced against the Borrower, the Guarantor, or any Subsidiary of the
Borrower or Guarantor seeking liquidation, reorganization or other relief with
respect to it or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of 90 days; or an order for
relief shall be entered against the Borrower, the Guarantor, or any Subsidiary
of the Borrower or Guarantor under the federal bankruptcy laws as now or
hereafter in effect; or
(k) the Borrower or any member of the Controlled Group shall
fail to pay when due any material amount which it shall have become liable to
pay to the PBGC or to a Plan under Title IV of ERISA; or the PBGC shall
institute proceedings under Title IV of ERISA to terminate or to cause a
trustee to be appointed to administer any such Plan or Plans or a proceeding
shall be instituted by a fiduciary of any such Plan or Plans to enforce Section
515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed
within 60 days thereafter; or a condition shall exist by reason of which the
PBGC would be entitled to obtain a decree adjudicating that any such Plan or
Plans must be terminated; or
(l) one or more judgments or orders for the payment of money
in an aggregate amount in excess of $500,000.00 (not covered by insurance)
shall be rendered against the Borrower, the Guarantor,
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<PAGE> 22
or any Subsidiary of the Borrower or Guarantor and such judgment or order shall
not be appealed, shall become final and shall continue unsatisfied and unstayed
for a period of 30 days; or
(m) a federal tax lien shall be filed against the Borrower or
Guarantor under Section 6323 of the Code or a lien of the PBGC shall be filed
against the Borrower or Guarantor under Section 4068 of ERISA and in either
case such lien shall remain undischarged for a period of 25 days after the date
of filing; or
(n) the Guarantor shall fail to comply with the provisions of
the Guaranty Agreement or the Borrower shall fail to comply with the provisions
of the Escrow Agreement.
SECTION 7.02. Remedies on Default. Upon the occurrence of an
Event of Default, the Bank, in addition to having the rights and remedies given
it by this Agreement, the Escrow Agent and the other Loan Documents may, by
notice to the Borrower, declare the Notes (together with accrued interest
thereon) to be, and the Notes and all outstanding Loans shall thereupon become,
immediately due and payable without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by the Borrower; provided
that if any Event of Default specified in clause (i) or (j) above occurs with
respect to the Borrower or Guarantor, without any notice to the Borrower or any
other act by the Bank, the Notes and all outstanding Loans (together with
accrued interest thereon) and fees shall become immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby waived by the Borrower.
ARTICLE VIII. MISCELLANEOUS
SECTION 8.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
facsimile transmission or similar writing) and shall be given to such party at
its address or facsimile number set forth below or such other address or
facsimile number as such party may hereafter specify for the purpose by notice
to the other party:
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(a) If to the Borrower:
Summit Properties Partnership, L.P.
212 South Tryon Street
Charlotte, North Carolina 28281
Attention: Mr. Mike Malone,
Senior Vice President
Fax number: (704) 333-8340
(b) If to the Bank:
Wachovia Bank of North Carolina, N.A.
P. O. Box 31608
Charlotte, North Carolina 28231-6071
Attention: Wayne A. Osella,
Senior Vice President
Fax number: (704) 378-5181
Each such notice, request or other communication shall be effective (i) if
given by mail, 72 hours after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid or (ii) if given by any
other means, when delivered at the address specified in this Section.
SECTION 8.02. No Waivers. No failure or delay by the Bank in
exercising any right, power or privilege hereunder or under the Notes or other
Loan Documents shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 8.03. Expenses; Documentary Taxes. The Borrower
shall pay (i) all out-of-pocket expenses of the Bank, including reasonable fees
and disbursements of counsel for the Bank, in connection with the preparation
of this Agreement and the other Loan Documents, any waiver or consent hereunder
or any modification or amendment hereof or any Default hereunder and (ii) if an
Event of Default occurs, all out-of-pocket expenses incurred by the Bank,
including reasonable fees and disbursements of counsel, in connection with such
Event of Default and collection and other enforcement proceedings resulting
therefrom, including out-of-pocket expenses incurred in enforcing this
Agreement and the other Loan Documents. Reasonable fees and disbursements of
counsel shall mean actual fees and disbursements incurred by the Bank charged
to it by counsel at ordinary and customary rates and shall not be calculated on
the basis of the percentage of the outstanding balance of the Loans. The
Borrower shall indemnify the Bank against any transfer taxes, documentary
taxes, assessments or charges made by any governmental authority by reason of
the execution and delivery of this Agreement or the other Loan Documents.
SECTION 8.04. Amendments and Waivers. Any provision of this
Agreement, the Notes or any other Loan Documents may be amended or waived if,
but only if, such amendment or waiver is in writing and is signed by the
Borrower and the Bank.
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<PAGE> 24
SECTION 8.05. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement.
SECTION 8.06. Confidentiality. The Bank agrees to exercise
its best efforts to keep any information delivered or made available by the
Borrower, confidential from any one other than persons employed or retained by
the Bank who are or are expected to become engaged in evaluating, approving,
structuring or administering the Loans; provided, however, that nothing herein
shall prevent the Bank from disclosing such information (i) upon the order of
any court or administrative agency, (ii) upon the formal demand of any
regulatory agency or authority having jurisdiction over the Bank, (iii) which
has been publicly disclosed, (iv) to the extent reasonably required in
connection with any litigation to which the Bank or their respective Affiliates
may be a party, (v) to the extent reasonably required in connection with the
exercise of any remedy hereunder, and (vi) to the Bank's legal counsel and
independent auditors. The Bank, however, shall use reasonable efforts to
notify the Borrower regarding any proposed disclosure pursuant to clauses (i),
(ii) and (iv) of this Section (unless, in the case of clause (iv), such
litigation is between the Borrower and the Bank) prior to such proposed
disclosure so that the Borrower shall have an opportunity to contest such
proposed disclosure by proper means.
SECTION 8.07. Interest Limitation. Notwithstanding any other
term of this Agreement, the Notes or any other Loan Document, the maximum
amount of interest which may be charged to or collected from any person liable
hereunder or under the Notes by the Bank shall be absolutely limited to, and
shall in no event exceed, the maximum amount or interest which could lawfully
be charged or collected under applicable law (including, to the extent
applicable, the provisions of section 5197 of the Revised Statutes of the
United States of America, as amended, 12 U.S.C. Section 85, as amended), so
that the maximum of all amounts constituting interest under applicable law,
howsoever computed, shall never exceed as to any Person liable therefor such
lawful maximum, and any term of this Agreement, the Notes or any other Loan
Document which could be construed as providing for interest in excess of such
lawful maximum shall be and hereby is made expressly subject to and modified by
the provisions of this paragraph.
SECTION 8.08. Governing Law. This Agreement and the Notes
shall be construed in accordance with and governed by the law of the State of
North Carolina. This Agreement and the Notes are intended to be effective as
instruments executed under seal.
SECTION 8.09. Counterparts. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
SECTION 8.10. Consent to Jurisdiction. The Borrower (a)
submits to personal jurisdiction in the State of North Carolina, the courts
thereof and the United States District Courts sitting therein, for the
enforcement of this Agreement, the Notes and the other Loan Documents, (b)
waives any and all personal rights under the law of any jurisdiction to object
on any basis (including, without limitation, inconvenience of forum) to
jurisdiction or venue within the State of North Carolina for the purpose of
litigation to enforce this Agreement, the Notes or the other Loan Documents,
and (c) agrees that service of process may be made upon it in the manner
prescribed in Section 8.01 for the giving of notice to the Borrower. Nothing
herein contained, however, shall prevent the Bank from bringing any action or
exercising any rights against any security and against the Borrower personally,
and against any assets of the Borrower, within any other state or jurisdiction.
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<PAGE> 25
SECTION 8.11. Severability. If any provisions of this
Agreement shall be held invalid under any applicable laws, such invalidity
shall not affect any other provision of this Agreement that can be given effect
without the invalid provision, and, to this end, the provisions hereof are
severable.
SECTION 8.12. Captions. Captions in this Agreement are for
the convenience of reference only and shall not affect the meaning or
interpretation of the provisions hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the year and day first above written.
BORROWER:
SUMMIT PROPERTIES PARTNERSHIP, L.P.
a Delaware Limited Partnership
By: Summit Properties Inc.,
Sole General Partner
By: (SEAL)
-----------------------------
Michael G. Malone, Senior
Vice President
BANK:
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By:
-----------------------------------------
Title:
--------------------------------------
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<PAGE> 26
EXHIBIT A
TERM LOAN NOTE
$15,000,000.00 July 31, 1996
FOR VALUE RECEIVED, the undersigned SUMMIT PROPERTIES
PARTNERSHIP, L.P., a Delaware Limited Partnership (the "Borrower"), hereby
promises to pay to the order of WACHOVIA BANK OF NORTH CAROLINA, N.A., a
national banking association (together with its endorsees, successors and
assigns, the "Bank"), the principal sum of Fifteen Million and No/100th Dollars
($15,000,000.00), on the date or dates provided for in the Loan Agreement. The
Borrower promises to pay interest on the unpaid principal amount of this Note
on the dates and at the rate or rates provided for in the Loan Agreement.
Interest on any overdue principal of and, to the extent permitted by law,
overdue interest on the principal amount hereof shall bear interest at the rate
or rates as provided for in the Loan Agreement. All such payments of principal
and interest shall be made in lawful money of the United States in Federal or
other funds immediately available at the principal office of the Bank located
at Charlotte, North Carolina, or at such other location as the holder of this
Note may designate in writing.
This Note evidences indebtedness in respect of one of the
Loans made under, is the $15,000,000 Note referred to in and issued pursuant
to, and is subject to the terms and provisions of, the Loan Agreement, dated as
of even date herewith, between the Borrower and the Bank (as the same may be so
modified, amended, supplemented or restated, the "Loan Agreement") to which
Loan Agreement reference is hereby made for a statement of said terms and
provisions. This Note is entitled to the benefits of the Loan Agreement. Any
term used herein that is defined in the Loan Agreement shall have the meaning
afforded it in the Loan Agreement when used herein.
Upon the occurrence and during the continuation of any Event
of Default, the Bank may declare the entire unpaid principal balance hereunder
and all accrued interest to be immediately due and payable in the manner and
with the effect provided in the Loan Agreement, and may thereafter exercise any
of the remedies referred to in the Loan Agreement or existing under applicable
law.
This Note may be prepaid in whole or in part only on the terms
and conditions set forth in the Loan Agreement.
TIME IS OF THE ESSENCE OF THIS CONTRACT. In addition and not
in limitation of the foregoing and the provisions of the Loan Agreement, the
Borrower further agrees to pay all expenses of collection, including reasonable
attorneys' fees, if this Note shall be collected by law or through an attorney
at law, or in bankruptcy, receivership or other court proceedings. As used
herein, reasonable attorneys' fees shall mean actual fees and disbursements
incurred by the Bank charged to it by counsel at ordinary and customary rates
and shall not be calculated on the basis of the percentage of the outstanding
balance of this Note.
A-1
<PAGE> 27
This Note shall be governed by and construed under the
internal laws of the State of North Carolina, without giving effect to
principles of conflicts of laws. This Note is intended to be effective as an
instrument executed under seal.
PRESENTMENT, DEMAND, PROTEST AND NOTICE OF DISHONOR ARE HEREBY
WAIVED BY THE BORROWER.
Executed under hand and seal of the Borrower on the date first above written.
SUMMIT PROPERTIES PARTNERSHIP, L.P.,
a Delaware Limited Partnership (SEAL)
By: Summit Properties Inc.,
Sole General Partner
By: (SEAL)
----------------------------
Michael G. Malone, Senior
Vice President
Attest:
- --------------------------------
(Assistant) Secretary
[Corporate Seal]
A-2
<PAGE> 28
EXHIBIT B
TERM LOAN NOTE
$16,000,000.00 July 31, 1996
FOR VALUE RECEIVED, the undersigned SUMMIT PROPERTIES
PARTNERSHIP, L.P., a Delaware Limited Partnership (the "Borrower"), hereby
promises to pay to the order of WACHOVIA BANK OF NORTH CAROLINA, N.A., a
national banking association (together with its endorsees, successors and
assigns, the "Bank"), the principal sum of Sixteen Million and No/100th Dollars
($16,000,000.00), on the date or dates provided for in the Loan Agreement. The
Borrower promises to pay interest on the unpaid principal amount of this Note
on the dates and at the rate or rates provided for in the Loan Agreement.
Interest on any overdue principal of and, to the extent permitted by law,
overdue interest on the principal amount hereof shall bear interest at the rate
or rates as provided for in the Loan Agreement. All such payments of principal
and interest shall be made in lawful money of the United States in Federal or
other funds immediately available at the principal office of the Bank located
at Charlotte, North Carolina, or at such other location as the holder of this
Note may designate in writing.
This Note evidences indebtedness in respect of one of the
Loans made under, is the $16,000,000 Note referred to in and issued pursuant
to, and is subject to the terms and provisions of, the Loan Agreement, dated as
of even date herewith, between the Borrower and the Bank (as the same may be so
modified, amended, supplemented or restated, the "Loan Agreement") to which
Loan Agreement reference is hereby made for a statement of said terms and
provisions. This Note is entitled to the benefits of the Loan Agreement. Any
term used herein that is defined in the Loan Agreement shall have the meaning
afforded it in the Loan Agreement when used herein.
Upon the occurrence and during the continuation of any Event
of Default, the Bank may declare the entire unpaid principal balance hereunder
and all accrued interest to be immediately due and payable in the manner and
with the effect provided in the Loan Agreement, and may thereafter exercise any
of the remedies referred to in the Loan Agreement or existing under applicable
law.
This Note may be prepaid in whole or in part only on the terms
and conditions set forth in the Loan Agreement.
TIME IS OF THE ESSENCE OF THIS CONTRACT. In addition and not
in limitation of the foregoing and the provisions of the Loan Agreement, the
Borrower further agrees to pay all expenses of collection, including reasonable
attorneys' fees, if this Note shall be collected by law or through an attorney
at law, or in bankruptcy, receivership or other court proceedings. As used
herein, reasonable attorneys' fees shall mean actual fees and disbursements
incurred by the Bank charged to it by counsel at ordinary and customary rates
and shall not be calculated on the basis of the percentage of the outstanding
balance of this Note.
B-1
<PAGE> 29
This Note shall be governed by and construed under the
internal laws of the State of North Carolina, without giving effect to
principles of conflicts of laws. This Note is intended to be effective as an
instrument executed under seal.
PRESENTMENT, DEMAND, PROTEST AND NOTICE OF DISHONOR ARE HEREBY
WAIVED BY THE BORROWER.
Executed under hand and seal of the Borrower on the date first above written.
SUMMIT PROPERTIES PARTNERSHIP, L.P.,
a Delaware Limited Partnership (SEAL)
By: Summit Properties Inc.,
Sole General Partner
By: (SEAL)
---------------------------------
Michael G. Malone, Senior
Vice President
Attest:
- ---------------------------------
(Assistant) Secretary
[Corporate Seal]
B-2
<PAGE> 30
EXHIBIT C
OPINION OF BORROWER'S COUNSEL
to be provided by
KENNEDY COVINGTON LOBDELL & HICKMAN, L.L.P.
Based on form provided by Bank's counsel.
<PAGE> 31
EXHIBIT D
FORM OF GUARANTY AGREEMENT
<PAGE> 32
EXHIBIT E
DESCRIPTION OF REQUIRED COLLATERAL
1. Summit Highland (Raleigh): See Exhibit E-1 attached.
2. Summit Creek (Charlotte): See Exhibit E-2 attached.
3. Summit Hill (Durham): See Exhibit E-3 attached.
4. Summit Aventura (Florida) - See Exhibit E-4 attached.
<PAGE> 33
EXHIBIT F
FORM OF ESCROW AGREEMENT
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> SEP-30-1996
<CASH> 18,172
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 672,634
<DEPRECIATION> 80,692
<TOTAL-ASSETS> 624,034
<CURRENT-LIABILITIES> 0
<BONDS> 288,555
0
0
<COMMON> 224
<OTHER-SE> 305,715
<TOTAL-LIABILITY-AND-EQUITY> 624,034
<SALES> 68,558
<TOTAL-REVENUES> 69,263
<CGS> 0
<TOTAL-COSTS> 26,301
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,346
<INCOME-PRETAX> 14,322
<INCOME-TAX> 0
<INCOME-CONTINUING> 11,670
<DISCONTINUED> 0
<EXTRAORDINARY> 516
<CHANGES> 0
<NET-INCOME> 11,154
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0
</TABLE>
