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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission file number 1-12792
SUMMIT PROPERTIES INC.
(Exact name of registrant as specified in its charter)
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<TABLE>
<S> <C>
MARYLAND 56-1857807
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
212 SOUTH TRYON STREET
SUITE 500
CHARLOTTE, NORTH CAROLINA 28281
(Address of principal executive offices) (Zip Code)
</TABLE>
(704) 334-9905
(Registrant's telephone number, including area code)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<S> <C>
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
(Title of each class) (Name of each exchange on which registered)
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 __
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ____
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant, as of March 4, 1998 was $479,920,238.
The number of shares of the Registrant's Common Stock, par value $.01 per
share, outstanding as of March 4, 1998 was 24,178,765.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the 1998 Proxy Statement for the Registrant's Annual Meeting of
Stockholders, to be filed with the Securities and Exchange Commission within 120
days after the end of the year covered by this Form 10-K, are incorporated by
reference herein as portions of Part III of this Form 10-K.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM PAGE
---- ----
<S> <C> <C>
PART I
1. Business.................................................... 3
2. Properties.................................................. 8
3. Legal Proceedings........................................... 11
4. Submission of Matters to a Vote of Security Holders......... 11
PART II
5. Market for Registrant's Common Equity and Related
Stockholder Matters....................................... 12
6. Selected Financial Data..................................... 13
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 15
8. Financial Statements and Supplementary Data................. 29
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 29
PART III
10. Directors and Executive Officers of the Registrant.......... 30
11. Executive Compensation...................................... 30
12. Security Ownership of Certain Beneficial Owners and
Management................................................ 30
13. Certain Relationships and Related Transactions.............. 30
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 31
</TABLE>
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PART I
ITEM 1. BUSINESS
THE COMPANY
Summit Properties Inc. (the "Company") is one of the largest developers and
operators of luxury garden apartment communities (the "Communities") in the
southeastern and mid-atlantic United States. The Company's current portfolio
consists of 61 apartment Communities with 14,462 apartment homes, including
Summit Foxcroft in which the Company has a 75% managing general partner
interest. The Company also has nine apartment Communities with 2,251 apartment
homes under construction or in lease-up.
The Communities are located in six states throughout the southeastern and
mid-atlantic United States, as well as in Delaware, Ohio, Pennsylvania and
Indiana. For the year ended December 31, 1997, the average physical occupancy
rate of the Company's Communities that were stabilized in both 1996 and 1997 was
93.2%, and the average monthly rental revenue for these Communities was $717 per
apartment home. A Community is considered to be stabilized at the earlier of its
attainment of 93.0% physical occupancy or one year from the completion of
construction. In addition, the Company has acquisition Communities, stabilized
development Communities (i.e., stabilized in 1997 but not in 1996) and
Communities in lease-up. In 1997, average physical occupancy rates were 92.4%
and 92.0% and average monthly rental revenue were $847 and $883 per apartment
home for acquisition Communities and stabilized development Communities,
respectively. Yearly averages for Communities in lease-up are not meaningful as
the Communities were in various stages of construction/lease-up during the year.
The Company also manages approximately 4,000 apartment homes for unrelated third
parties. The Company is a fully integrated organization with multifamily
development, construction, acquisition and management expertise which employs
approximately 550 individuals.
The Company's business is conducted principally through Summit Properties
Partnership, L.P., a Delaware limited partnership (the "Operating Partnership"),
of which the Company is the sole general partner and an 85.3% economic owner as
of December 31, 1997. The Company's third party management and certain
construction and other businesses are conducted through its subsidiaries, Summit
Management Company, a Maryland corporation (the "Management Company"), and
Summit Apartment Builders, Inc., a Florida corporation (the "Construction
Company"). Except where otherwise explicitly noted, the "Company" shall mean
Summit Properties Inc. and its subsidiaries on an aggregate basis.
The Company has chosen to focus its efforts on the following ten high growth
core markets: Charlotte, North Carolina; Tampa/Sarasota, Florida; Washington,
D.C.; Raleigh/Central, North Carolina; South Florida; Atlanta, Georgia;
Richmond, Virginia; Orlando, Florida; Indianapolis, Indiana and Columbus, Ohio.
In keeping with this strategy, the Company has established city operating
offices in Charlotte, North Carolina; Tampa, Florida; Reston, Virginia; Atlanta,
Georgia; Fort Lauderdale, Florida and Raleigh, North Carolina. These city
offices have direct responsibility for selecting and overseeing new developments
and for managing the Communities in their geographic areas. This decentralized
structure enables corporate management to maintain tight controls and allows the
Company to compete effectively in its core markets, while efficiently allocating
development and acquisition capital to those markets that will yield the highest
risk-adjusted return.
OPERATING PHILOSOPHY
The Company seeks to maximize the economic return from its Communities by
optimizing the trade-off between increasing rental rates and maintaining high
occupancy levels. Consistent with this strategy, the Company is among the rental
rate leaders in its markets. Although this strategy may result in slightly lower
occupancy rates, the Company believes that the dynamic tension created by this
balancing strategy maximizes operating income at the property level and improves
growth in the Company's cash flow over the long term. Generally, the Company has
found that it is not maximizing property operating income per apartment home
when occupancies are above 95%.
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Historically, the Company has been able to charge market leading rents to its
residents while maintaining high occupancy rates due to: the upscale features of
its Communities, the comprehensive service provided by its on-site management
and its favorable mix of apartment homes. The Company's geographic market focus
and decentralized structure further promote income growth.
GROWTH STRATEGIES
The Company's objective is to create long term value through five strategies:
maximizing cash flow from existing Communities, targeting ten major growth
markets in the Southeast, Mid-Atlantic, and Midwest, development activity,
acquisitions of additional Communities and dedication to customer service.
Maximizing Cash Flow From Existing Communities. The Company seeks to maximize
the economic return from its Communities by optimizing the trade-off between
increasing rental rates and maintaining high occupancy levels. Consistent with
this strategy, the Company is among the rental rate leaders in its markets. The
Company's affluent resident profile, well-trained property management staff and
management information systems support this strategy. For the year ended
December 31, 1997, average rent per apartment home for the Company's Communities
that were stabilized during the comparable period in 1996 increased 2.1%, and
property operating income from these Communities increased 2.4% for the same
period. Average occupancy, rental revenue and property operating income levels
for the Company's Communities that were stabilized during the comparable periods
are as follows for the years set forth below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Average Physical Occupancy(1)............................... 93.2% 93.1% 94.0%
Average Monthly Rental Revenue per Apartment Home(1)........ $ 717 $ 714 $ 682
Average Monthly Rental Revenue per Apartment Home Growth
Rate...................................................... 2.1% 3.8% 4.9%
Property Operating Income Growth Rate(2).................... 2.4% 3.1% 6.6%
Number of Communities(1).................................... 44 32 27
</TABLE>
(1) The Company also has six acquisition Communities, four stabilized
development Communities (i.e., stabilized in 1997 but not in 1996) and nine
Communities in lease-up. In 1997, average physical occupancy rates were
92.4% and 92.0% and average monthly rental revenue were $847 and $883 per
apartment home for acquisition Communities and stabilized development
Communities, respectively. Yearly averages for Communities in lease-up are
not meaningful as the Communities were in various stages of
construction/lease-up during the year.
(2) Property Operating Income is defined as total rental and other property
revenues less property operating and maintenance expense (excluding
depreciation and amortization).
The supply of new multifamily communities in the past several years has
increased nationwide and in the Company's markets. This supply has limited the
Company's ability to raise rental rates at the same rate experienced in 1995.
Targeting Ten Major Growth Markets. The Company's existing portfolio and plans
for growth focus on ten core markets that are expected to generate new
employment at a significantly faster rate than the national average. The ten
high growth core markets are as follows: Charlotte, North Carolina;
Tampa/Sarasota, Florida; Washington, D.C.; Raleigh, North Carolina; South
Florida; Atlanta, Georgia; Richmond, Virginia; Orlando, Florida; Indianapolis,
Indiana and Columbus, Ohio. The Company's strategy provides geographic
diversification that protects it against an economic downturn in any one market,
while at the same time benefiting from a tightly targeted focus on a limited
number of attractive markets. By focusing only on these ten markets, the Company
gains better brand recognition, builds local expertise and improves operating
efficiencies.
Within each market there are numerous housing alternatives that compete with the
Communities in attracting residents. The Communities compete directly with other
rental apartments, condominiums and single-family homes that are available for
rent or sale in the markets in which the Communities are located. In addition,
various entities, including insurance companies, pension and investment funds,
partnerships, investment
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companies and other multifamily REITs, compete with the Company for the
acquisition of existing properties and the development of new properties, some
of which may have greater resources than the Company. The Company has not
identified any dominant competitor, nor is it currently the dominant competitor,
in its markets.
Development. Since its initial public offering in 1994, the Company has
increased the size of its property portfolio by almost 110% to 14,462 apartment
homes. Development of new communities has been the foundation of the Company's
growth. Of its 61 Communities, 40 have been developed by the Company or its
predecessors. The Company attributes much of its historical cash flow growth to
the quality of the apartment Communities it has developed over the years.
The Company maintains an active new-community development program which provides
it with a predictable and consistent stream of new revenues. Focusing on
new-community development allows the Company to build desirable properties that
generate premium rents. It also provides returns which generally exceed those
achieved on acquisitions. The Company's development goal is to provide its
residents with a community that feels like single-family housing, with front
yards, open floor plans, abundant square footage, generous storage and both
attached and detached garages. The Company enters into leases with its residents
which include provisions which are usual and customary for apartment leases,
such as the payment of rent monthly, advance notice in the event of a
termination, provision of a security deposit and the imposition by the Company
of a charge for rent paid after the fifth day of the month. The leases are
predominantly for a term of one year.
The Company employs a combination of local autonomy and centralized oversight in
its development process. Development officers live in their respective markets,
so that critical decision-making is kept local. Regional development officers
report to a corporate development executive, a process that is designed to
ensure consistency in design, building materials and quality. The Company
utilizes the Construction Company in addition to third-party general
contractors. Of the 2,251 apartment homes in development at December 31, 1997,
85.1% are being built by the Construction Company, which has resulted in higher
quality construction, improved timeliness and cost savings.
In 1997, the Company completed development of six Communities, adding 1,454
apartment homes to the Company's portfolio. These six Communities represent a
total investment of approximately $104.6 million. The Communities completed in
1997 are Summit on the River, Summit Russett, Summit Sedgebrook I, Summit
Ballantyne I, Summit Plantation II and Summit Norcroft II.
As of December 31, 1997, the Company had nine apartment Communities (two of
which are also in lease-up) containing 2,251 apartment homes, with a budgeted
cost of $170.2 million, under construction. The following provides summary
information regarding the nine Communities under construction as of December 31,
1997 (dollars in thousands):
<TABLE>
<CAPTION>
TOTAL ESTIMATED ANTICIPATED
APARTMENT ESTIMATED COST TO COST TO CONSTRUCTION
COMMUNITY HOMES COSTS DATE COMPLETE COMPLETION
- ----------------------------------------- --------- --------- ------- --------- ------------
<S> <C> <C> <C> <C> <C>
Summit Stonefield -- Yardley, PA......... 216 $ 19,640 $18,324 $ 1,316 Q1 1998
Summit Lake I -- Raleigh, NC............. 302 19,700 17,380 2,320 Q2 1998
Summit Ballantyne II -- Charlotte, NC.... 154 10,100 2,792 7,308 Q3 1998
Summit Sedgebrook II -- Charlotte, NC.... 120 7,500 963 6,537 Q3 1998
Summit Doral -- Miami, Florida........... 192 17,000 3,186 13,814 Q1 1999
Summit Fair Lakes I -- Fairfax, VA....... 370 32,900 12,458 20,442 Q1 1999
Summit Governor's Village -- Chapel Hill,
NC..................................... 242 16,400 3,696 12,704 Q1 1999
Summit New Albany I -- Columbus, OH...... 301 22,600 10,223 12,377 Q1 1999
Summit Westwood -- Raleigh, NC........... 354 24,400 3,016 21,384 Q2 1999
Other development and construction
costs.................................. -- -- 10,294 --
-------- -------- ------- -------
2,251 $170,240 $82,332 $98,202
======== ======== ======= =======
</TABLE>
The Company is optimistic about the operating prospects of the Communities under
construction even with the increased supply of newly constructed apartment homes
of comparable quality in many of its markets. As
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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.
Similarly, market conditions at the time these Communities become available for
leasing will affect rental rates and the period of time necessary to achieve
stabilization and could result in achieving stabilization later than currently
anticipated.
The Company is also conducting feasibility and other pre-development work for
eleven new Communities. The Company either owns or holds options to purchase the
land for each of these potential developments (dollars in millions):
<TABLE>
<CAPTION>
ANTICIPATED
APARTMENT DEVELOPMENT CONSTRUCTION
COMMUNITIES IN PRE-DEVELOPMENT HOMES BUDGETS START
- ----------------------------------------------------- --------- ----------- ------------
<S> <C> <C> <C>
Summit Lake II -- Raleigh, NC........................ 144 $ 10.0 1Q98
Summit Fair Lakes II -- Fairfax, VA.................. 160 14.2 2Q98
Summit Crest -- Raleigh, NC.......................... 378 25.5 3Q98
Summit Deep Run -- Richmond, VA...................... 304 22.7 3Q98
Summit Grandview -- Charlotte, NC.................... 217 25.2 3Q98
Summit New Albany II -- Columbus, OH................. 127 9.5 3Q98
Summit Pembroke -- Pembroke, FL...................... 328 28.2 3Q98
Summit Strathmoor -- Charlotte, NC................... 496 35.4 3Q98
Summit Devin -- Atlanta, GA.......................... 296 22.5 4Q98
Summit Largo -- Largo, MD............................ 217 17.6 4Q98
Summit Russett II -- Laurel, MD...................... 130 10.1 4Q98
-------- ---------
2,797 $ 220.9
======== =========
</TABLE>
For each of these potential Communities, the Company is only in the
pre-development phase, and there can be no assurance that all or any one of
these Communities will be completed. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Development Activity" for a
discussion of uncertainties and risks associated with the Company's development
activity.
Acquisitions and Disposition. While the Company has emphasized development of
new apartment communities as one of its strategies for growth, it also has
successfully capitalized on expansion opportunities through the strategic
acquisition of properties that meet the Company's investment criteria. The
Company has acquired more than 4,800 apartment homes since its formation in
1994. These properties were successfully acquired at prices below their
replacement cost and cumulatively have achieved a total unleveraged average
yield of 9.8% in 1997. Acquisitions are concentrated in the Company's ten
targeted core markets in order to further strengthen brand identity and
operational efficiencies. The Company's extensive local-market knowledge and
development expertise give it an advantage in identifying and underwriting
acquisition opportunities which the Company believes will generate shareholder
value. The Company has acquired the following Communities in 1997 (dollars in
thousands):
<TABLE>
<CAPTION>
ACQUISITION APARTMENT PURCHASE YEAR
COMMUNITY DATE HOMES PRICE BUILT
- ------------------------------------------- ----------- --------- --------- -----
<S> <C> <C> <C> <C>
Summit Portofino -- Broward County, FL..... 1/6/97 322 $ 28,000 1995
Summit Mayfaire -- Raleigh, NC............. 1/15/97 144 9,650 1995
Summit Sand Lake -- Orlando, FL............ 2/20/97 416 26,798 1995
Summit Windsor II -- Frederick, MD......... 7/18/97 306 17,100 1988
Summit Fair Oaks -- Fairfax, VA............ 12/31/97 246 21,200 1990
------ ---------
1,434 $ 102,748
====== =========
</TABLE>
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Additionally, the Company has commenced a disposition program targeting those
Communities within its portfolio which do not align with the Company's long term
strategic plan and growth objectives. One such Community was sold in 1997 for
$9.5 million. Currently, one Community is subject to a Sale and Purchase
Agreement with a qualified buyer and the Company is in the initial stages of
marketing another Community. The Company does not expect to incur any losses
related to the sale of these Communities.
Dedication to Customer Service. Proactive property management has allowed the
Company to maximize cash flow from its portfolio by encouraging local
decision-making and rewarding performance, initiative and innovation. The
Company's localized property-management system, with offices strategically
located in six key cities, gives the Company a distinct advantage in better
responding to the needs of each market. The Company has long stressed the
importance of developing strong customer relationships with its residents. The
Company's total commitment to resident satisfaction is further evidenced by its
"Sundown Policy" which mandates a response by the appropriate employee to any
resident inquiry or complaint no later than "sundown" of the day on which the
inquiry or complaint was received. The Company has sought to provide its
residents with experienced, well-trained and attentive management staffs. Every
Community employee enters into a comprehensive training program when he or she
is hired. This training program ensures that employees have a clear
understanding of their job responsibilities, the high standards of performance
expected of them and the Company's operating philosophies. On-going training
following each employee's initial employment period further enhances employee
productivity. The Company believes that this training regimen along with a
proven hiring process has produced a higher quality management staff, evidenced
by higher resident satisfaction at the Communities and lower employee turnover.
COMPANY HISTORY
The Company was formed in 1993 to continue and expand the multifamily
development, construction, acquisition, operation, management and leasing
businesses of the predecessor entities through which the Company historically
conducted operations prior to the Initial Offering (as defined below) (the
"Summit Entities"). The Summit Entities were founded by the Company's Chairman
of the Board, William B. McGuire, Jr., in 1972. In 1981, William F. Paulsen
joined the predecessor to the Company as Chief Executive Officer and shepherded
the growth of its multifamily development and management activities.
The Company organized itself as a real estate investment trust (a "REIT") and
completed its initial public offering (the "Initial Offering") of 10,000,000
shares of common stock, par value $0.01 per share (the "Common Stock"), on
February 15, 1994 and sold an additional 1,500,000 shares upon exercise of the
underwriters' over-allotment option on March 4, 1994. On June 2, 1995, the
Company completed a follow-on public offering (the "1995 Offering") of 4,000,000
shares of Common Stock. A second follow-on public offering (the "1996 Offering")
of 5,000,000 shares of the Company's Common Stock was completed on August 7,
1996, with an additional 750,000 shares sold upon exercise of the underwriters'
over-allotment option on August 12, 1996. On August 12, 1997, the Operating
Partnership completed a $125 million senior unsecured debt offering. On December
17, 1997, the Operating Partnership completed an additional $30 million senior
unsecured debt offering.
The Company, a Maryland corporation, is a self-administered and self-managed
REIT. The Company's Common Stock is listed on the New York Stock Exchange (the
"NYSE") under the symbol "SMT". The executive offices of the Company are located
at 212 South Tryon Street, Suite 500, Charlotte, North Carolina 28281. The
Company's telephone number is (704) 334-9905 and its facsimile number is (704)
333-8340. The Company also maintains offices in Atlanta, Georgia; Tampa,
Florida; Reston, Virginia; Ft. Lauderdale, Florida and Raleigh, North Carolina.
THE OPERATING PARTNERSHIP
The Operating Partnership was formed on January 14, 1994, and is the entity
through which principally all of the Company's business is conducted. The
Company controls the Operating Partnership as the sole general partner and as
the holder of an 85.3% economic and voting interest in the Operating Partnership
as of December 31, 1997. As the sole general partner of the Operating
Partnership, the Company has the exclusive power to manage and conduct the
business of the Operating Partnership, subject to certain voting rights of
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holders (including the Company) of the units of limited partnership interest
("Units"), including the consent of holders (including the Company) of 85% of
the Units in connection with a sale, transfer or other disposition of all or
substantially all of the assets of the Operating Partnership, or any other
transaction which would result in the recognition of a significant taxable gain
to the holders of Units. The Company's general and limited partnership interests
in the Operating Partnership entitle it to share in 85.3% of the cash
distributions from, and in the profits and losses of, the Operating Partnership.
Each Unit may be redeemed by the holder thereof for cash equal to the fair
market value of a share of the Company's Common Stock or, at the option of the
Company, an equivalent number of shares of Common Stock. The Company presently
anticipates that it will elect to issue shares of Common Stock in connection
with redemptions of Units rather than paying cash. With each redemption of Units
for Common Stock, the Company's percentage ownership interest in the Operating
Partnership will increase. In addition, whenever the Company issues shares of
Common Stock for cash, the Company will contribute any net proceeds therefrom to
the Operating Partnership and the Operating Partnership will issue an equivalent
number of Units to the Company.
The Operating Partnership cannot be terminated, except in connection with a sale
of all or substantially all of the assets of the Company, for a period of 99
years without a vote of the limited partners of the Operating Partnership.
ITEM 2. PROPERTIES
THE COMMUNITIES
The Company owns and manages through the Operating Partnership 61 completed
Communities and two Communities which are currently under construction and are
in lease-up consisting of 14,980 apartment homes. Thirty-five of the Communities
have been completed since January 1, 1990 and, as of December 31, 1997, the
average age of the completed Communities was approximately 7 1/2 years. The
following is a summary of Communities by market:
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
NUMBER OF APARTMENT APARTMENT
COMMUNITIES HOMES HOMES
----------- --------- -----------
<S> <C> <C> <C>
Charlotte, North Carolina............................ 14 2,498 16.7%
Tampa/Sarasota, Florida.............................. 9 2,248 15.0
Washington, DC....................................... 8 2,173 14.5
Raleigh/Central North Carolina....................... 11 2,143 14.3
South Florida........................................ 6 1,759 11.7
Other non core markets............................... 5 1,098 7.3
Atlanta, Georgia..................................... 4 1,229 8.2
Richmond, Virginia................................... 3 862 5.8
Orlando, Florida..................................... 2 656 4.4
Indianapolis, Indiana................................ 1 314 2.1
---------- -------- ---------
63 14,980 100.0%
========== ======== =========
</TABLE>
Other non-core markets consist of two Communities in Greenville, South Carolina,
two Communities in Cincinnati, Ohio and one Community in Yardley, Pennsylvania.
All of the Communities target middle to upper income apartment renters as
customers and have amenities, apartment home sizes and mixes consistent with the
desires of this resident population. The Communities are owned in fee simple and
are located in six states throughout the southeastern and mid-atlantic United
States (Florida, Georgia, Maryland, North Carolina, South Carolina and Virginia)
as well as in Delaware, Ohio, Indiana and Pennsylvania. The following table
highlights certain information regarding the Communities.
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<TABLE>
<CAPTION>
AVERAGE AVERAGE
AVERAGE AVERAGE MONTHLY MONTHLY
AVERAGE PHYSICAL PHYSICAL RENTAL RENTAL
NUMBER OF YEAR APARTMENT OCCUPANCY OCCUPANCY REVENUE REVENUE
MARKET AREA/COMMUNITY LOCATION APARTMENTS COMPLETED SIZE 1997(1) 1996(1) 1997(2) 1996(2)
--------------------- ------------------- ---------- --------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
ATLANTA
Summit Glen................... Atlanta, GA 242 1992 983 92.8 91.9 $ 838 $ 847
Summit Springs................ Norcross, GA 312 1990 934 92.0 92.6 699 708
Summit Village................ Marietta, GA 323 1991 984 91.5 91.8 728 735
---------- --------- --------- --------- ------- -------
ATLANTA WEIGHTED AVERAGE........................... 877 966 92.0 92.1 748 756
CHARLOTTE
Summit Arbors................. Charlotte, NC 120 1986 944 94.7 94.8 790 748
Summit Creek.................. Charlotte, NC 260 1983 910 92.6 92.7 638 624
Summit Crossing............... Charlotte, NC 128 1985 978 93.5 96.3 664 649
Summit Fairview............... Charlotte, NC 135 1983 1,036 95.7 93.6 751 726
Summit Foxcroft(4)............ Charlotte, NC 156 1979 940 93.2 93.4 660 643
Summit Hollow................. Charlotte, NC 232 1978 949 94.1 94.5 684 656
Summit Norcroft............... Charlotte, NC 162 1991 1,112 93.2 94.0 765 805
Summit Radbourne.............. Charlotte, NC 225 1991 1,006 93.3 92.0 773 786
Summit Simsbury............... Charlotte, NC 100 1985 874 94.0 93.6 743 734
Summit Touchstone............. Charlotte, NC 132 1986 899 92.3 94.0 700 677
---------- --------- --------- --------- ------- -------
CHARLOTTE WEIGHTED AVERAGE......................... 1,650 966 93.5 93.7 711 701
RALEIGH/CENTRAL NORTH CAROLINA
Summit Creekside.............. Hickory, NC 118 1981 1,006 95.7 96.2 596 566
Summit Eastchester............ High Point, NC 172 1981 947 93.7 96.1 593 559
Summit Highland............... Raleigh, NC 172 1987 986 93.8 94.5 708 703
Summit Hill................... Chapel Hill, NC 204 1991 904 92.2 93.3 769 774
Summit Oak.................... Goldsboro, NC 100 1982 918 96.1 96.7 551 532
Summit Old Town............... Winston-Salem, NC 172 1979 954 92.4 90.9 572 542
Summit Sherwood............... Winston-Salem, NC 190 1968 1,028 94.9 95.2 561 526
Summit Square................. Durham, NC 362 1990 925 91.8 92.1 761 763
---------- --------- --------- --------- ------- -------
RALEIGH/CENTRAL NORTH CAROLINA WEIGHTED AVERAGE....
1,490 954 93.4 93.9 662 647
RICHMOND
Summit Breckenridge........... Glen Allen, VA 300 1987 928 95.3 95.1 742 706
Summit Stony Point............ Richmond, VA 250 1986 1,045 95.7 93.2 760 724
Summit Waterford.............. Midlothian, VA 312 1990 995 93.7 91.4 705 685
---------- --------- --------- --------- ------- -------
RICHMOND WEIGHTED AVERAGE.......................... 862 986 94.8 93.2 734 704
SOUTH FLORIDA
Summit Del Ray................ Delray Beach, FL 252 1993 968 94.8 91.5 852 852
Summit Palm Lake.............. W. Palm Beach, FL 304 1992 919 95.2 96.7 764 743
---------- --------- --------- --------- ------- -------
SOUTH FLORIDA WEIGHTED AVERAGE..................... 556 941 95.0 94.3 804 792
TAMPA/SARASOTA
Summit Gateway................ St. Petersburg, FL 212 1987 828 95.6 93.7 644 626
Summit Hampton................ Bradenton, FL 352 1988 933 89.7 93.0 625 630
Summit Heron's Run............ Sarasota, FL 274 1990 863 90.7 92.5 674 653
Summit Lofts.................. Palm Harbour, FL 200 1990 1,045 93.2 90.8 689 690
Summit McIntosh............... Sarasota, FL 212 1990 855 89.5 93.9 696 684
Summit Perico................. Bradenton, FL 256 1990 911 89.2 93.5 671 657
Summit Providence............. Brandon, FL 444 1991 952 91.0 93.0 649 659
Summit Station................ Tampa, FL 230 1990 902 92.1 92.6 634 619
Summit Walk................... Tampa, FL 68 1993 1,614 94.5 95.9 1,098 1,052
---------- --------- --------- --------- ------- -------
TAMPA/SARASOTA WEIGHTED AVERAGE.................... 2,248 936 91.3 93.0 670 663
WASHINGTON, D.C.
Summit Belmont................ Fredricksburg, VA 300 1987 881 94.9 90.2 633 622
Summit Meadow................. Columbia, MD 178 1990 1,020 95.4 93.6 900 864
Summit Pike Creek............. Newark, DE 264 1988 899 94.1 95.8 838 800
Summit Reston................. Reston, VA 418 1987 854 94.0 93.9 965 917
Summit Windsor................ Frederick, MD 147 1989 903 90.7 92.7 686 681
---------- --------- --------- --------- ------- -------
WASHINGTON, D.C. WEIGHTED AVERAGE.................. 1,307 897 94.0 93.2 823 792
OTHER
Summit Blue Ash............... Blue Ash, OH 242 1992 1,158 94.8 95.6 827 769
Summit Park................... Forest Park, OH 316 1989 963 92.0 91.7 633 602
Summit Beacon Ridge........... Greenville, SC 144 1988 1,046 93.6 91.9 657 653
Summit East Ridge............. Greenville, SC 180 1986 959 95.1 92.0 565 568
---------- --------- --------- --------- ------- -------
OTHER WEIGHTED AVERAGE............................. 882 1,029 93.7 92.9 676 649
---------- --------- --------- --------- ------- -------
TOTAL WEIGHTED AVERAGE OF
COMMUNITIES STABILIZED IN
1997 AND 1996..................................... 9,872 954 93.2 93.3 717 702
========== ========= ========= ========= ======= =======
<CAPTION>
MORTGAGE
NOTES
PAYABLE AT
DECEMBER 31,
1997
MARKET AREA/COMMUNITY (IN THOUSANDS)
--------------------- --------------
<S> <C>
ATLANTA
Summit Glen................... (3)
Summit Springs................ (3)
Summit Village................ (3)
ATLANTA WEIGHTED AVERAGE......
CHARLOTTE
Summit Arbors................. --
Summit Creek.................. --
Summit Crossing............... $4,162
Summit Fairview............... --
Summit Foxcroft(4)............ 2,728
Summit Hollow................. 4,809
Summit Norcroft............... (3)
Summit Radbourne.............. 8,599
Summit Simsbury............... (5)
Summit Touchstone............. (5)
CHARLOTTE WEIGHTED AVERAGE....
RALEIGH/CENTRAL NORTH CAROLINA
Summit Creekside.............. 2,837
Summit Eastchester............ 3,814
Summit Highland............... (3)
Summit Hill................... --
Summit Oak.................... 2,553
Summit Old Town............... 3,048
Summit Sherwood............... 3,303
Summit Square................. (3)
RALEIGH/CENTRAL NORTH CAROLINA WEIGHTED AVERAGE
RICHMOND
Summit Breckenridge........... --
Summit Stony Point............ (6)
Summit Waterford.............. (3)
RICHMOND WEIGHTED AVERAGE.....
SOUTH FLORIDA
Summit Del Ray................ (3)
Summit Palm Lake.............. (3)
SOUTH FLORIDA WEIGHTED AVERAGE
TAMPA/SARASOTA
Summit Gateway................ (6)
Summit Hampton................ (6)
Summit Heron's Run............ (3)
Summit Lofts.................. --
Summit McIntosh............... --
Summit Perico................. (3)
Summit Providence............. (3)
Summit Station................ --
Summit Walk................... --
TAMPA/SARASOTA WEIGHTED AVERAGE
WASHINGTON, D.C.
Summit Belmont................ (6)
Summit Meadow................. (3)
Summit Pike Creek............. (6)
Summit Reston................. --
Summit Windsor................ (3)
WASHINGTON, D.C. WEIGHTED AVERAGE
OTHER
Summit Blue Ash............... (3)
Summit Park................... --
Summit Beacon Ridge........... --
Summit East Ridge............. 5,100
OTHER WEIGHTED AVERAGE........
TOTAL WEIGHTED AVERAGE OF
COMMUNITIES STABILIZED IN
1997 AND 1996................
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
AVERAGE AVERAGE
AVERAGE AVERAGE MONTHLY MONTHLY
AVERAGE PHYSICAL PHYSICAL RENTAL RENTAL
NUMBER OF YEAR APARTMENT OCCUPANCY OCCUPANCY REVENUE REVENUE
MARKET AREA/COMMUNITY LOCATION APARTMENTS COMPLETED SIZE 1997(1) 1996(1) 1997(2) 1996(2)
--------------------- ------------------ ---------- --------- --------- --------- --------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
DEVELOPED COMMUNITIES(7)
Summit Aventura............... Aventura, FL 379 1995 1,106 91.7 78.8 1,083 1,033
Summit Green.................. Charlotte, NC 300 1996 997 90.9 60.1 777 825
Summit Hill II................ Chapel Hill, NC 207 1996 1,023 92.2 75.1 769 774
Summit River Crossing......... Indianapolis, IN 314 1996 1,060 93.3 48.8 817 781
---------- ---------
1,200 1,052
ACQUISITION COMMUNITIES
Summit Mayfaire(9)............ Raleigh, NC 144 1995 1,047 92.8 N/A 770 N/A
Summit Sand Lake(9)........... Orlando, FL 416 1995 1,035 93.8 N/A 775 N/A
Summit Plantation(10)......... Plantation, FL 262 1995 1,283 91.7 93.1 1,034 993
Summit Portofino(9)........... Broward County, FL 322 1995 1,307 93.7 N/A 977 N/A
Summit Windsor II(9).......... Frederick, MD 306 1988 903 90.2 N/A 679 N/A
Summit Fair Oaks(9)........... Fairfax, VA 246 1990 938 N/A N/A N/A N/A
---------- ---------
1,696 1,088
---------- ---------
TOTAL WEIGHTED AVERAGE OF
COMPLETED COMMUNITIES............................ 12,768 981
COMMUNITIES IN LEASE-UP(8)
Summit Fairways............... Orlando, FL 240 1996 1,302 81.3 11.1 891 834
Summit on the River........... Atlanta, GA 352 1997 1,103 71.2 14.7 792 801
Summit Russett I.............. Laurel, MD 314 1997 958 58.7 0.8 883 866
Summit Ballantyne I........... Charlotte, NC 246 1997 1,124 18.7 N/A 865 N/A
Summit Sedgebrook I........... Charlotte, NC 248 1997 1,017 16.7 N/A 717 N/A
Summit Plantation II.......... Plantation, FL 240 1997 1,173 19.5 N/A 1,036 N/A
Summit Norcroft II............ Charlotte, NC 54 1997 1,168 8.2 N/A 816 N/A
Summit Lake I................. Raleigh, NC 302 1998 1,048 4.7 N/A 735 N/A
Summit Stonefield............. Yardley, PA 216 1998 1,022 20.4 N/A 1,101 N/A
---------- ---------
2,212 1,090
---------- ---------
TOTAL COMMUNITIES............. 14,980 997
========== =========
<CAPTION>
MORTGAGE
NOTES
PAYABLE AT
DECEMBER 31,
1997
MARKET AREA/COMMUNITY (IN THOUSANDS)
--------------------- --------------
<S> <C>
DEVELOPED COMMUNITIES(7)
Summit Aventura............... --
Summit Green.................. --
Summit Hill II................ --
Summit River Crossing......... --
ACQUISITION COMMUNITIES
Summit Mayfaire(9)............ --
Summit Sand Lake(9)........... 14,985
Summit Plantation(10)......... --
Summit Portofino(9)........... --
Summit Windsor II(9).......... --
Summit Fair Oaks(9)........... --
TOTAL WEIGHTED AVERAGE OF
COMPLETED COMMUNITIES........
COMMUNITIES IN LEASE-UP(8)
Summit Fairways............... --
Summit on the River........... --
Summit Russett I.............. --
Summit Ballantyne I........... --
Summit Sedgebrook I........... --
Summit Plantation II.......... --
Summit Norcroft II............ --
Summit Lake I................. --
Summit Stonefield............. --
TOTAL COMMUNITIES.............
</TABLE>
(1) 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 midweek occupancy that existed during each week of the
period.
(2) Represents the average monthly net rental revenue per occupied apartment
home.
(3) Collateral for fixed rate mortgages of $149.6 million.
(4) Summit Foxcroft is held by a partnership in which the Company is a 75%
managing general partner.
(5) Collateral for a fixed rate mortgage of $8.6 million.
(6) Collateral for letters of credit in an aggregate amount of $54.1 million
which serve as collateral for $52.9 million in tax exempt bonds.
(7) Communities that were stabilized in 1997 but were not stabilized in 1996.
(8) Communities that were in lease-up during 1997. These Communities have and
are leasing at a rate consistent with the Company's expectations. As with
any community in lease-up, there are uncertainties and risks associated
with the Company's communities in lease-up. While the Company has estimated
completion and stabilization budgets and 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 delays in reaching stabilization of
such communities.
(9) Community acquired in 1997. Summit Fair Oaks was acquired on December 31,
1997 and, accordingly, no average occupancy or average rent information is
available.
(10) Community acquired April 1, 1996.
10
<PAGE> 11
Information with respect to total debt secured by thirty-three of the Company's
communities having an aggregate net book value of $320.7 million as of December
31, 1997, is as follows (in thousands):
<TABLE>
<CAPTION>
FIXED RATE VARIABLE RATE
-------------- -------------
<S> <C> <C>
Total principal........................... $ 214,088 $ 52,852
Interest rates range from................. 5.88% to 9.80% 5.65%(1)
Weighted average interest rate............ 6.69% 5.65%(1)
Annual debt service....................... $ 18,431 $ 3,703(2)
</TABLE>
Scheduled annual maturities:
<TABLE>
<S> <C>
1998........................................................ $ 5,208
1999........................................................ 5,537
2000........................................................ 5,856
2001(3)..................................................... 114,648
2002........................................................ 11,248
Thereafter.................................................. 124,443
--------
Total....................................................... $266,940
========
</TABLE>
(1) Interest rate as of December 31, 1997.
(2) Annual debt service for variable rate loans represents 1997 costs and
includes letter of credit fees and other bond related costs.
(3) Year 2001 maturities include a $111.4 million balloon payment on the 5.88%
fixed rate mortgage loan from The Northwestern Mutual Life Insurance
Company.
Each Community has many of the following features: swimming pools, tennis,
racquetball and volleyball courts, saunas, whirlpools, fitness facilities,
picnic areas, large clubhouses and convenient parking facilities. Most of the
apartment homes offer amenities that include spacious open living areas,
sunrooms, patios or balconies, sunken living rooms, fireplaces, built-in shelves
or entertainment centers, large storage areas or walk-in closets, vaulted
ceilings, ceiling fans and separate in-home laundry facilities or laundry
hook-ups. In addition to these physical amenities, each Community has its own
highly trained and experienced on-site management and maintenance staff to
ensure that courteous and responsive service is provided to its residents.
COMMUNITY MANAGEMENT
Each of the Communities is managed by the Company's property management staff.
The community management team for each Community includes supervision by a
regional vice-president and regional property manager, as well as on-site
management, maintenance personnel and an off-site support staff. Community
management teams perform leasing and rent collection functions and coordinate
resident services. All personnel are extensively trained and experienced and are
encouraged to continue their education through both Company-designed and outside
courses.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of the Communities is presently subject to any
material litigation nor, to the Company's knowledge, is any litigation
threatened against the Company or any of the Communities, other than routine
actions for negligence or other claims and administrative proceedings arising in
the ordinary course of business, some of which are expected to be covered by
liability insurance and all of which collectively are not expected to have a
material adverse effect on the business or financial condition or results of
operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock began trading on the NYSE on February 8, 1994 under
the symbol "SMT". The following table sets forth the quarterly high and low
sales prices per share reported on the NYSE.
<TABLE>
<CAPTION>
1997 1996
------------------ ------------------
QUARTER HIGH LOW HIGH LOW
- -------------------------------------------------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
January 1 through March 31........................ $21.88 $19.75 $21.25 $19.00
April 1 through June 30........................... 21.00 19.63 20.50 18.50
July 1 through September 30....................... 22.06 19.50 20.13 18.00
October 1 through December 31..................... 22.38 19.94 22.50 19.13
</TABLE>
On March 4, 1998 the last reported sale price of the Common Stock on the NYSE
was $20.375. On March 4, 1998 there were 1,135 holders of record of 24,178,765
shares of the Company's Common Stock.
The Company declared a dividend of $0.3975 per share of Common Stock for each of
the four quarters in 1997, which was paid on May 15, 1997 for the first quarter,
August 15, 1997 for the second quarter, November 17, 1997 for the third quarter,
and February 14, 1998 for the fourth quarter.
The Company declared a dividend of $0.3875 per share of Common Stock for each of
the four quarters in 1996, which was paid on May 15, 1996 for the first quarter,
August 15, 1996 for the second quarter, November 15, 1996 for the third quarter,
and February 14, 1997 for the fourth quarter.
On October 23, 1997, the Company issued 4,772 shares of Common Stock (valued at
approximately $102,300 at the time of issuance) to a limited partner of the
Operating Partnership. Such shares of the Company's Common Stock were issued in
reliance on an exemption from registration under Section 4(2) of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder.
In light of information obtained by the Company in connection with such
transaction, management of the Company believes that the Company may rely on
such exemption.
The Company intends to continue to make regular quarterly dividends to holders
of shares of Common Stock. Future dividends will be declared at the discretion
of the Board of Directors and will depend on actual cash flow of the Company,
its financial condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Internal Revenue Code, and such
other factors as the Board of Directors may deem relevant. The Board of
Directors may modify the Company's dividend policy from time to time.
In November, 1997 the Company put in place a dividend reinvestment and direct
stock purchase program which provides both current owners of Common Stock and
interested new investors with a convenient and attractive method of investing
cash dividends and optional cash payments of $100 to $10,000 per month (or such
larger amounts as may be approved by the Company) in shares of Common Stock at a
discount from the Market Price (as defined in the program documents) and without
payment of any brokerage commission or service charge. To fulfill its
obligations under this program, the Company may either issue additional shares
of Common Stock or repurchase Common Stock in the open market.
12
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial and other
information on a consolidated historical basis for the Company and its
predecessors, the Summit Entities, as of and for each of the years in the five-
year period ended December 31, 1997. This table should be read in conjunction
with the Consolidated Financial Statements of Summit Properties Inc. and the
Notes thereto included elsewhere herein.
SELECTED FINANCIAL DATA
SUMMIT PROPERTIES INC. (HISTORICAL)(1)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY
INFORMATION)
<S> <C> <C> <C> <C> <C>
OPERATING INFORMATION:
Revenue
Rental..................................... $ 109,827 $ 88,864 $ 70,773 $ 54,198 $ 45,561
Property management(2)..................... -- -- -- 536 4,102
Interest and other......................... 6,850 5,625 4,221 3,700 3,779
--------- --------- --------- --------- ---------
Total............................... 116,677 94,489 74,994 58,434 53,442
--------- --------- --------- --------- ---------
Property operating and maintenance expense
(before depreciation and amortization)..... 42,032 35,226 28,012 21,502 18,991
Property management expenses(2).............. -- -- -- 366 2,799
Interest expense............................. 21,959 17,138 14,802 14,067 26,400
Depreciation and amortization................ 22,652 18,208 15,141 11,700 9,735
REIT formation costs......................... -- -- -- 457 --
General and administrative expense........... 2,740 2,557 1,949 1,756 1,375
(Income) loss from equity investments........ (274) 173 39 59 --
--------- --------- --------- --------- ---------
Total............................... 89,109 73,302 59,943 49,907 59,300
--------- --------- --------- --------- ---------
Income (loss) before gain on sale of real
estate assets, extraordinary items and
minority interest of unitholders in
Operating Partnership...................... 27,568 21,187 15,051 8,527 (5,858)
Gain on sale of real estate assets........... 4,366 -- -- -- --
--------- --------- --------- --------- ---------
Income (loss) before extraordinary items and
minority interest of unitholders in
Operating Partnership...................... $ 31,934 $ 21,187 $ 15,051 $ 8,527 $ (5,858)
========= ========= ========= ========= =========
Net income (loss)............................ $ 27,116 $ 16,948 $ 11,819 $ 14,032 $ (3,408)
========= ========= ========= ========= =========
Income per share before extraordinary items
-- basic and diluted....................... $ 1.17 $ .92 $ .83 $ .64 N/A
========= ========= ========= ========= =========
Net income per share -- basic and diluted.... $ 1.17 $ .90 $ .80 $ 1.28 N/A
========= ========= ========= ========= =========
Dividends per share.......................... $ 1.59 $ 1.55 $ 1.51 $ 1.29 N/A
========= ========= ========= ========= =========
Weighted average shares outstanding --
basic...................................... 23,146 18,888 14,750 10,992 N/A
========= ========= ========= ========= =========
Weighted average shares and units outstanding
-- basic................................... 27,258 22,914 18,112 13,390 N/A
========= ========= ========= ========= =========
OTHER INFORMATION:
Cash flow provided by (used in):
Operating activities....................... $ 55,947 $ 41,176 $ 30,994 $ 17,525 $ 8,712
Investing activities....................... (175,907) (103,971) (63,734) (113,741) (2,092)
Financing activities....................... 119,858 63,579 34,440 88,993 (9,141)
Funds from Operations(3)..................... $ 50,201 $ 39,391 $ 30,148 $ 20,120 $ 3,777
Total completed communities (at end of
period).................................... 61 51 46 32 27
Total apartment homes developed(4)........... 1,454 1,061 379 -- 320
Total apartment homes acquired............... 1,434 262 2,025 1,332 --
Total apartment homes (at end of
period)(5)................................. 14,462 11,788 10,465 8,061 6,729
Ratio of earnings to fixed charges(6)(7)..... 1.93 1.78 1.65 1.52 0.77
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND PROPERTY
INFORMATION)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION:
Real estate, before accumulated
depreciation............................... $ 913,033 $ 704,779 $ 586,264 $ 439,025 $ 317,374
Total assets................................. 825,293 634,991 533,252 397,945 297,670
Total long-term debt......................... 474,673 309,933 297,010 249,009 315,847
Stockholders' equity (deficiency)............ 265,839 257,214 175,454 115,525 (38,127)
</TABLE>
(1) For purposes of the Selected Financial Data, historical information is
presented both for the Company and its predecessors, the Summit Entities,
provided that historical financial information for its predecessors only
includes information relating to the Communities held by the Company
immediately following the Initial Offering and the entities which provided
property and general management services for those Communities.
(2) Consists of revenues and expenses from property management services provided
to Communities owned by unrelated third parties and by certain predecessor
partnerships prior to the Initial Offering. Since the Initial Offering,
these services have been performed by the Management Company, which is
accounted for under the equity method of accounting.
(3) The White Paper on Funds from Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts ("NAREIT") in
March 1995 (the "White Paper") defines Funds from Operations as net income
(loss) (computed in accordance with generally accepted accounting principles
("GAAP"), excluding gains (or losses) from debt restructuring and sales of
property, plus real estate related depreciation and amortization and after
adjustments for unconsolidated partnerships and joint ventures. The Company
believes Funds from Operations is helpful to investors as a measure of the
performance of an equity REIT because, along with cash flows from operating
activities, financing activities and investing activities, it provides
investors with an understanding of the ability of the Company to incur and
service debt and make capital expenditures. The Company computes Funds from
Operations in accordance with the standards established by the White Paper,
which may differ from the methodology for calculating Funds from Operations
utilized by other equity REITs, and, accordingly, may not be comparable to
such other REITs. Further, Funds from Operations does not represent amounts
available for management's discretionary use because of needed capital
replacement or expansion, debt service obligations, property acquisitions,
development, dividends and distributions or other commitments and
uncertainties. Funds from Operations should not be considered as an
alternative to net income (determined in accordance with GAAP) as an
indication of the Company's financial performance or to cash flows from
operating activities (determined in accordance with GAAP) as a measure of
the Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including its ability to make dividends/distributions.
Funds from Operations is calculated as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Income (loss) before gain on sale of
real estate assets, minority interest
of unitholders in Operating
Partnership and extraordinary items... $27,568 $21,187 $15,051 $ 8,527 $(5,858)
Real estate depreciation................ 22,633 18,204 15,097 11,593 9,635
------- ------- ------- ------- -------
Funds from Operations................... $50,201 $39,391 $30,148 $20,120 $ 3,777
======= ======= ======= ======= =======
</TABLE>
(4) Represents the total number of apartment homes in Communities completed and
owned by the Company during the period.
(5) Represents the total number of apartment homes in Communities completed and
owned by the Company at the end of the period.
14
<PAGE> 15
(6) The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations plus fixed charges (excluding capitalized interest).
Fixed charges consist of interest expense (whether expensed or capitalized),
the estimated interest component of rent expense, and the amortization of
debt issuance costs. To date, the Company has not issued any preferred
stock; therefore, the ratios of earnings to combined fixed charges and
preferred stock dividend requirements are the same as the ratios of earnings
to fixed charges presented.
(7) Prior to the completion of the Initial Offering, the Company maintained a
different capital structure. As a result, although the original properties
have historically generated positive net cash flow, the financial statements
of the Company show net losses for the fiscal year ended December 31, 1993.
Consequently, the computation of the ratio of earnings to fixed charges for
such period indicates that earnings were inadequate to cover fixed charges
by approximately $6.0 million for the fiscal year ended December 31, 1993.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This Form 10-K contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including without limitation statements relating to the
operating performance of stabilized communities and to development activities of
the Company. The Company intends such forward-looking statements to be covered
by the safe harbor provisions for forward-looking statements contained in the
Private Securities Reform Act of 1995, and is including this statement for
purposes of complying with these safe harbor provisions. Forward-looking
statements, which are based on certain assumptions and describe future plans,
strategies and expectations of the Company are generally identifiable by use of
the words "believe," "expect," "intend," "anticipate," "estimate," "project" or
similar expressions. The Company's ability to predict results or the actual
effect of future plans or strategies is inherently uncertain. 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 stabilized and development Communities could differ materially
from those set forth in the forward-looking statements. Factors which could have
a material adverse effect on the operations and future prospects of the Company
include, but are not limited to, changes in: economic conditions generally and
the real estate market specifically, legislative/regulatory changes (including
changes to laws governing the taxation of real estate investment trusts
("REITs")), availability of capital, interest rates, construction delays due to
unavailability of materials, weather conditions or other delays, competition,
supply and demand for apartment communities in the Company's current and
proposed market areas, general accounting principles, policies and guidelines
applicable to REITs, and those factors discussed in the section entitled
"Development Activity -- Certain Factors Affecting the Performance of
Development Communities" on page 26 of this Form 10-K. These risks and
uncertainties should be considered in evaluating forward-looking statements and
undue reliance should not be placed on such statements.
As of December 31, 1997, there were 27,438,400 Units outstanding of the
Operating Partnership, of which 23,411,086 or 85.3% were owned by the Company
and 4,027,314 or 14.7% were owned by other partners (including certain officers
and directors of the Company).
The following discussion should be read in conjunction with the Consolidated
Financial Statements of Summit Properties Inc. and the Notes thereto appearing
elsewhere herein.
HISTORICAL RESULTS OF OPERATIONS
The Company's net income is generated primarily from the operations of its
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 Communities. Where
appropriate, comparisons are made on a "stabilized Communities," "acquisition
Communities," "stabilized development Communities" and "Communities in lease-up"
basis in order to adjust for changes in the
15
<PAGE> 16
number of apartment homes. A Community is deemed to be "stabilized" at the
earlier of when it has attained a physical occupancy level of at least 93% or
when construction has been completed for one year in each of the comparable
periods presented. A Community is deemed to be a "stabilized development" when
stabilized in the entire current period presented, but was in lease-up in the
prior period presented.
Results of Operations for the Years Ended December 31, 1997, 1996 and 1995
Income before minority interest of unitholders in the Operating Partnership,
gain on sale of real estate assets and extraordinary items increased from 1995
($15.1 million) to 1996 ($21.2 million) and from 1996 to 1997 ($27.6 million)
primarily due to increased property operating income at stabilized Communities,
as well as new sources of income associated with acquisition Communities and
Communities in lease-up, partially offset by an increase in depreciation and
interest expense.
OPERATING PERFORMANCE OF THE COMPANY'S PORTFOLIO OF COMMUNITIES
The operating performance of the Communities is summarized below (dollars in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
------------------------------- -------------------------------
1997 1996 % CHANGE 1996 1995 % CHANGE
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Property revenues:
Stabilized Communities(1).... $ 81,668 $ 80,296 1.7% $ 65,553 $ 63,255 3.6%
Acquisition Communities(2)... 12,467 2,250 454.1% 16,993 8,716 95.0%
Stabilized Development
Communities............... 12,375 8,762 41.2% 8,762 767 1042.4%
Communities in lease-up...... 8,977 818 997.4% 818 -- 100.0%
Community sold............... 519 1,421 (63.5%) 1,421 1,391 2.2%
-------- -------- -------- --------
Total property revenues........ 116,006 93,547 24.0% 93,547 74,129 26.2%
-------- -------- -------- --------
Property operating and
maintenance expense(3):
Stabilized Communities....... 30,709 30,555 0.5% 24,717 23,687 4.3%
Acquisition Communities...... 4,336 606 615.5% 6,444 3,492 84.5%
Stabilized Development
Communities............... 3,955 3,069 28.9% 3,069 275 1016.0%
Communities in lease-up...... 2,821 411 586.4% 411 -- 100.0%
Community sold............... 211 585 (63.9%) 585 558 4.8%
-------- -------- -------- --------
Total property operating and
maintenance expense.......... 42,032 35,226 19.3% 35,226 28,012 25.8%
-------- -------- -------- --------
Property operating income...... $ 73,974 $ 58,321 26.8% $ 58,321 $ 46,117 26.5%
======== ======== ======== ========
Apartment homes, end of
period....................... 14,980 12,454 20.3% 12,454 11,286 10.3%
======== ======== ======== ========
</TABLE>
(1) Includes Communities which were stabilized during the entire period for each
of the comparable periods presented.
(2) The 1997 and 1996 comparison includes the Communities acquired in 1997 and
1996. The 1996 and 1995 comparison includes Communities acquired in 1996 and
1995.
(3) Before real estate depreciation and amortization expense.
16
<PAGE> 17
A summary of the Company's apartment homes for the years ended December 31,
1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Apartment homes at the beginning of the year................ 12,454 11,286 8,061
Acquisitions................................................ 1,434 262 2,025
Developments which began rental operations during the
year...................................................... 1,306 906 1,200
Sale of apartment homes..................................... (214) -- --
------ ------ ------
Apartment homes at the end of the year...................... 14,980 12,454 11,286
====== ====== ======
</TABLE>
OPERATING PERFORMANCE OF THE COMPANY'S STABILIZED COMMUNITIES
The operating performance of the Communities stabilized during the entire period
in both of the comparable periods presented is summarized below (dollars in
thousands except average monthly rental revenue):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------------- -----------------------------
1997 1996 % CHANGE 1996 1995 % CHANGE
------- ------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Property revenues:
Rental $77,788 $76,443 1.8% $62,177 $60,256 3.2%
Other 3,880 3,853 0.7% 3,376 2,999 12.6%
------- ------- ------- -------
Total property revenues 81,668 80,296 1.7% 65,553 63,255 3.6%
------- ------- ------- -------
Property operating and
maintenance expense (1):
Personnel...................... 6,905 7,289 (5.3%) 5,723 5,420 5.6%
Advertising and promotion...... 1,085 866 25.3% 649 540 20.2%
Utilities...................... 3,657 3,567 2.5% 2,987 2,982 0.2%
Building repairs and
maintenance................. 6,967 6,997 (0.4%) 5,484 5,121 7.1%
Real estate taxes and
insurance................... 7,676 7,609 0.9% 6,501 6,166 5.4%
Property supervision........... 2,043 2,001 2.1% 1,635 1,567 4.3%
Other operating expense........ 2,376 2,226 6.7% 1,738 1,891 (8.1%)
------- ------- ------- -------
Total property operating and
maintenance expense............ 30,709 30,555 0.5% 24,717 23,687 4.3%
------- ------- ------- -------
Property operating income........ $50,959 $49,741 2.4% $40,836 $39,568 3.2%
======= ======= ======= =======
Average physical occupancy (2)... 93.2% 93.3% (0.1%) 93.1% 94.2% (1.2%)
======= ======= ======= =======
Average monthly rental revenue
(3)............................ $ 717 $ 702 2.1% $ 720 $ 693 3.9%
======= ======= ======= =======
Number of apartment homes........ 9,872 9,872 7,847 7,847
======= ======= ======= =======
Number of apartment
communities.................... 44 44 31 31
======= ======= ======= =======
</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.
Rental and other revenue increased from 1996 to 1997 due to higher rental rates
partially offset by a decrease in occupancy. The 1.7% property revenue growth
rate was lower than the prior year rate of growth primarily as a result of a new
supply of competing multi-family communities in the markets in which the Company
operates. In 1998 the Company expects the rate of growth to be similar to the
growth rate in 1997 as the supply of new multi-family Communities continues to
increase somewhat balanced by the continued strength of the local economies in
which the Company operates. The lower growth rate was especially noticeable in
the
17
<PAGE> 18
Tampa/Sarasota and Atlanta markets. The Company believes its expectations
relative to property revenue growth are based on reasonable assumptions as to
future economic conditions and the quantity of competitive multi-family
communities in the markets in which the Company does business. However, there
can be no assurance that actual results will not differ from these assumptions,
which could result in a lower property revenue growth rate.
Property operating and maintenance expenses were relatively stable from 1996 to
1997. Increased advertising and promotion costs were offset by lower personnel
costs. The significant percentage increase in advertising and promotion was in
response to increased competition caused by the new supply of competing
multi-family communities. As a percentage of total property revenues, property
operating and maintenance expense decreased to 37.6% from 38.1% for the years
ended December 31, 1997 and 1996, respectively.
Rental and other revenue increased from 1995 to 1996 due to higher rental rates
offset by decreased occupancy. The increase in property operating and
maintenance expenses from 1995 to 1996 was primarily due to increased insurance
costs ($240,000 or a 40% increase), higher advertising costs and higher building
and repair costs. The increase in insurance expense was due to higher insurance
rates in the Company's Florida markets, caused by the significant storm damage
expenses incurred in the past years by the insurance industry. Included in the
building repairs and maintenance costs was a $148,000 or a 14% increase for
replacement of carpets.
OPERATING PERFORMANCE OF THE COMPANY'S ACQUISITION COMMUNITIES
Acquisition Communities consist of Summit Mayfaire, Summit Portofino, Summit
Sand Lake and Summit Windsor II acquired in 1997 (1,188 apartment homes), Summit
Plantation (262 apartment homes) acquired in 1996 and the twelve Communities and
a 75% interest in another Community, all of which were owned by the Crosland
Group, Inc. and its affiliates (2,025 apartment homes), acquired in 1995. Summit
Fair Oaks (246 apartment homes), was acquired on December 31, 1997 and
accordingly, its rental operations for 1997 are not reflected in the Company's
financial statements. The operations of these Communities are summarized as
follows (dollars in thousands except average monthly rental revenue):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------- -----------------------
1997 1996 1995 1995
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Property revenues:
Rental....................................... $11,686 $2,134 $16,401 $8,467
Other........................................ 781 116 592 249
------- ------ ------- ------
Total property revenues........................ 12,467 2,250 16,993 8,716
Property operating and maintenance
expense(1)................................... 4,336 606 6,444 3,492
------- ------ ------- ------
Property operating income...................... $ 8,131 $1,644 $10,549 $5,224
======= ====== ======= ======
Average physical occupancy(2).................. 92.4% 93.1% 94.0% 96.1%
======= ====== ======= ======
Average monthly rental revenue(3).............. $ 847 $ 993 $ 672 $ 592
======= ====== ======= ======
Number of apartment homes:
1995 Acquisitions............................ -- -- 2,025 2,025
1996 Acquisitions............................ 262 262 262 --
1997 Acquisitions............................ 1,188 -- -- --
------- ------ ------- ------
Total number of apartment homes................ 1,450 262 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.
18
<PAGE> 19
The decrease in the average monthly rental revenue for the year ended December
31, 1997 as compared to the corresponding period in 1996 is attributable to
lower average monthly rental revenue on the 1997 acquisition Communities in
comparison to the 1996 acquisition community. Average monthly rental revenue for
the year ended December 31, 1997 for the 1997 acquisitions alone was $806.
The unleveraged yield for the 1997 and 1996 acquisitions, defined as property
operating income on an annualized basis over total acquisition cost, for the
year ended December 31, 1997 was 9.0%. The unleveraged yield for the four
Communities acquired in 1997 only for the year ended December 31, 1997 was 8.9%.
OPERATING PERFORMANCE OF THE COMPANY'S STABILIZED DEVELOPMENT COMMUNITIES
The Company had four Communities with 1,200 apartment homes, (Summit Aventura,
Summit Hill II, Summit Green, and Summit River Crossing), which were stabilized
during the entire year ended December 31, 1997 but were still in
lease-up/construction in the year ended December 31, 1996. The operating
performance of these four stabilized development Communities is summarized below
(dollars in thousands except average monthly rental revenue):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
----------------------- -----------------------
1997 1996 1996 1995
--------- -------- --------- --------
<S> <C> <C> <C> <C>
Property revenues:
Rental....................................... $11,580 $8,183 $ 8,183 $ 693
Other........................................ 795 579 579 74
------- ------ ------- ------
Total property revenues........................ 12,375 8,762 8,762 767
------- ------ ------- ------
Property operating and maintenance
expense(1)................................... 3,955 3,069 3,069 275
------- ------ ------- ------
Property operating income...................... $ 8,420 $5,693 $ 5,693 $ 492
======= ====== ======= ======
Average physical occupancy(2).................. 92.0% 65.6% 65.6% 9.1%
======= ====== ======= ======
Average monthly rental revenue(3).............. $ 883 $ 871 $ 871 $ 852
======= ====== ======= ======
</TABLE>
(1) Before real estate depreciation 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 these four stabilized development Communities, defined
as property operating income over total development cost, for the year ended
December 31, 1997 was 10.5%.
19
<PAGE> 20
OPERATING PERFORMANCE OF THE COMPANY'S COMMUNITIES IN LEASE-UP
The Company had nine Communities in lease-up during the year ended December 31,
1997. A Community in lease-up is defined as one which has commenced rental
operations but has not reached stabilization. The following is a summary of the
nine Communities in lease-up (dollars in thousands):
<TABLE>
<CAPTION>
TOTAL ACTUAL/ % LEASED
NUMBER OF ACTUAL/ ANTICIPATED ACTUAL/ AVERAGE AS OF
APARTMENT ESTIMATED CONSTRUCTION ANTICIPATED OCCUPANCY DECEMBER 31,
COMMUNITY HOMES COST COMPLETION STABILIZATION 1997 1997
- -------------------------- --------- --------- ------------ ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
Summit Fairways........... 240 $ 17,775 Q4 1996 Q3 1997 81.27% 95.80%
Summit on the River....... 352 23,922 Q2 1997 Q4 1997 71.23% 96.60%
Summit Russett I.......... 314 23,203 Q3 1997 Q3 1997 58.71% 96.20%
Summit Stonefield......... 216 19,640 Q1 1998 Q1 1998 20.42% 88.90%
Summit Ballantyne I....... 246 16,400 Q4 1997 Q2 1998 18.69% 67.10%
Summit Sedgebrook I....... 248 16,400 Q4 1997 Q2 1998 16.71% 64.10%
Summit Plantation II...... 240 21,400 Q4 1997 Q2 1998 19.54% 79.60%
Summit Norcroft II........ 54 3,700 Q4 1997 Q1 1998 8.21% 85.20%
Summit Lake I............. 302 19,700 Q2 1998 Q3 1998 4.69% 37.40%
--------- --------
2,212 $162,140
========= ========
</TABLE>
Property operating income (loss) after interest expense was $1.1 million and
($109,000) for the nine Communities in lease-up for the years ended December 31,
1997 and 1996, respectively. These nine Communities in lease-up had no 1995
operations.
OPERATING PERFORMANCE OF SUMMIT MANAGEMENT COMPANY
The operating performance of the Management Company and its wholly-owned
subsidiary, the Construction Company, is summarized below (dollars in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
-------------------------- --------------------------
1997 1996 % CHANGE 1996 1995 % CHANGE
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Revenue.............................. $6,102 $5,364 13.8% $5,364 $5,632 (4.8)%
Expenses:
Operating.......................... 5,039 4,849 3.9% 4,849 5,018 (3.4)%
Depreciation....................... 185 110 68.2% 110 120 (8.3)%
Amortization....................... 304 278 9.4% 278 274 1.5 %
Interest........................... 300 300 0.0% 300 300 0.0 %
------ ------ ------ ------
Total expenses..................... 5,828 5,537 5.3% 5,537 5,712 (3.1)%
------ ------ ------ ------
Net income (loss) of Summit
Management Company................. $ 274 $ (173) 258.4% $ (173) $ (80) (116.3)%
====== ====== ====== ======
</TABLE>
The change in revenue was a result of higher revenues from managing the
Company's Communities and higher revenues from construction activity, offset by
lower revenues for managing third party Communities in each of the years 1995
compared to 1996 and 1996 compared to 1997. The change in operating expenses was
a result of higher construction activity costs offset by lower costs of managing
the Communities in each of the years 1995 compared to 1996 and 1996 compared to
1997.
Total average third party apartment homes under management were 5,164, 7,919 and
10,927 during the years ended December 31, 1997, 1996 and 1995, respectively.
The decrease from 1996 to 1997 was primarily due to the termination of the
Management Company's contract to manage a portfolio of 1,422 apartment homes
effective December 31, 1996. The contract was terminated as a result of a change
in ownership of the apartment communities. The decrease from 1995 to 1996 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.
20
<PAGE> 21
Property management fees include $1.7 million, $2.3 million and $3.3 million of
fees from third parties for the years ended December 31, 1997, 1996 and 1995,
respectively. Property management fees from third parties as a percentage of
total property management revenues were 35.2%, 48.1% and 62.9% for the years
ended December 31, 1997, 1996 and 1995, respectively. The Company expects third
party management revenue as a percentage of total property management revenues
to continue to decline as revenues from the Company's Communities continue to
increase.
Construction Company revenues and expenses increased in 1997 compared to 1996
and in 1996 compared to 1995 primarily as a result of the Company's decision to
expand its in-house construction operations in the state of Florida to cover the
entire geographic area in which the Company operates. All of the Construction
Company's income for the years ended December 31, 1997, 1996 and 1995 is from
contracts with the Company, except for the contract to build Summit Plantation
in 1995. The Company owned a 25% interest in the Summit Plantation joint venture
during construction. The Construction Company is currently building 85.1% of the
Company's Communities under construction. It is the Company's intention to
increase this percentage over time in order to lower construction costs and
continuously improve the quality of its apartment communities.
OTHER INCOME AND EXPENSES
Interest income decreased by $166,000 to $392,000 in 1997 compared to 1996,
primarily due to interest earned in 1996 on the proceeds from the 1996 Offering
prior to using the proceeds to fund development activity.
Depreciation expense increased $4.4 million or 24.4% to $22.7 million in 1997
compared to 1996, primarily due to depreciation expense related to the Company's
1997 acquisitions and increased depreciation of Communities in lease-up.
Depreciation expense increased $3.1 million or 20.3% to $18.2 million in 1996
compared to 1995 due to an increase in depreciation expense related to the 1995
acquisitions and Communities in lease-up.
Interest expense increased $4.8 million, or 28.1%, in 1997 compared to 1996,
primarily due to financing the Company's 1997 acquisitions and the Communities
in lease-up. Interest expense increased $2.3 million, or 15.8%, to $17.1 million
in 1996 compared to 1995, primarily due to interest on debt related to the
Company's 1995 acquisitions and an increase in interest expense related to the
Communities in lease-up, partially offset by the Company's repayment of debt in
connection with the 1995 and 1996 Offerings. The 1995 and 1996 Offerings
together resulted in aggregate net proceeds of approximately $163.0 million.
Weighted average interest rates of all debt for the years ended December 31,
1997, 1996 and 1995 were 6.68%, 6.44% and 6.18%, respectively.
General and administrative expense increased in 1997 compared to 1996 as a
result of the Company's overall growth. The increase in 1996 compared to 1995
was primarily due to increased compensation costs and professional fees. The
increase in compensation in 1996 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 expenses were 2.3%, 2.7% and
2.6% for the years ended December 31, 1997, 1996 and 1995, respectively.
The gain on sale of assets in 1997 resulted from the sale of a community
formerly known as Summit Charleston in May 1997.
The extraordinary items in 1996 and 1995 resulted primarily from the write-off
of deferred financing costs in conjunction with the repayment of debt with the
proceeds from the 1996 and 1995 Offerings and with the proceeds of the $31.0
million unsecured debt financing received in August 1996.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
The Company's net cash provided by operating activities increased from $41.2
million for the year ended December 31, 1996 to $55.9 million for the same
period in 1997 primarily due to a $15.7 million increase in property operating
income, offset by a $1.5 million increase in interest cost paid.
21
<PAGE> 22
Net cash used in investing activities increased from $104.0 million for the year
ended December 31, 1996 to $175.9 million for the same period in 1997 due to an
increase in the number of acquisition Communities, an increase in the
development of Communities and higher capital expenditures on existing
properties, partially offset by the proceeds from the sale of a Community.
Net cash provided by financing activities increased from $63.6 million for the
year ended December 31, 1996 to $119.9 million for the same period in 1997,
primarily due to an increase in net debt proceeds, partially offset by a
decrease in equity offering proceeds and by higher dividends and distributions
to unitholders.
The Company has elected to be taxed as a REIT under Sections 856 and 860 of the
Internal Revenue Code of 1986, as amended. REITs are subject to a number of
organizational and operational requirements, including a requirement that they
currently distribute 95% of their ordinary taxable income. As a REIT, the
Company generally will not be subject to federal income tax on net income.
The Company's outstanding indebtedness at December 31, 1997 totaled $474.7
million. This amount includes approximately $204.8 million in fixed rate
conventional mortgages, $52.9 million of variable rate tax-exempt bonds, $186.0
million of unsecured notes, $9.3 million of tax-exempt fixed rate loans, and
$21.7 million under the Unsecured Credit Facility (as hereinafter defined).
The Company expects to meet its short-term liquidity requirements (i.e.,
liquidity requirements arising within 12 months) generally through its net cash
provided by operations and borrowings under the Unsecured 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 also be funded from property
operations.
The Company expects to meet its long-term liquidity requirements (i.e.,
liquidity requirements arising after 12 months), such as current and future
developments, debt maturities, acquisitions, renovations and other non-recurring
capital expenditures, with borrowings under its Unsecured 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.
Lines of Credit
The Company's working capital is primarily provided by operations and an
unsecured $150 million credit facility (the "Unsecured Credit Facility"). The
Unsecured Credit Facility has a three year term and currently bears interest at
the London Interbank Offered Rate ("LIBOR") + 110 basis points based upon the
Company's credit rating of BBB- by Standard & Poor's Rating Services. The
interest rate will be reduced in the event an upgrade of the Company's unsecured
credit rating as assigned by Standard & Poor's Rating Services (which rating
must be accompanied by the comparable senior unsecured bond rating from one of
Moody's Investors Service, Duff & Phelps or Fitch) is obtained.
The Company has a commitment for a new syndicated unsecured line of credit (the
"New Unsecured Credit Facility") in the amount of $175 million which will
replace the existing Unsecured Credit Facility. The New Unsecured Credit
Facility will provide funds for new development, acquisitions and general
working capital purposes and is expected to close in March 1998. The New
Unsecured Credit Facility will have a three year term with two one-year
extension options and will initially bear interest at LIBOR + 90 basis points
based upon the Company's current credit rating of BBB- by Standard & Poor's
Rating Services and Baa3 by Moody's Investors Service. The interest rate will be
reduced in the event an upgrade of the Company's unsecured credit rating is
obtained. The New Unsecured Credit Facility also provides a bid option
sub-facility equal to a maximum of fifty percent of the total facility ($87.5
million). This sub-facility provides the Company with the option to place
borrowings in a fixed LIBOR contract up to 180 days.
Senior Unsecured Debt Offerings
On August 12, 1997, the Company completed a $125 million senior unsecured debt
offering comprised of three tranches. The first tranche, $25 million of 6.80%
Notes due August 15, 2002, was priced at 99.940% to
22
<PAGE> 23
yield 6.81%, or 73 basis points over the rate on U.S. Treasury securities with a
comparable maturity (the "2002 Notes"). The second tranche, $50 million of 6.95%
Notes due August 15, 2004, was priced at 99.764% to yield 6.99% or 81 basis
points over the rate on U.S. Treasury securities with a comparable maturity (the
"2004 Notes"). The third tranche, $50 million of 7.20% Notes due August 15,
2007, was priced at 99.830% to yield 7.22% or 104 basis points over the rate on
U.S. Treasury securities with a comparable maturity (the "2007 Notes" and,
together with the 2002 Notes and the 2004 Notes, the "August 1997 Notes"). The
proceeds from the August 1997 Notes were used to pay down the Unsecured Credit
Facility.
On December 17, 1997, the Company completed a $30 million senior unsecured debt
offering of 6.625% Notes due December 15, 2003. The Notes were priced at 99.786%
to yield 6.67%, or 95 basis points over the rate of U.S. Treasury securities
with a comparable maturity (the "December 1997 Notes"). The proceeds of the
December 1997 Notes were used to pay down the Unsecured Credit Facility.
In August 1996, the Company obtained $31.0 million of unsecured debt financing
from a bank 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
7.61% and 7.85%, respectively.
Common Stock Offering
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. Approximately $97.6
million of the aggregate proceeds from the issuance of Common Stock and the $31
million unsecured bank debt financing were utilized to fully repay the
outstanding balance under the Unsecured Credit Facility and development loans.
The remaining $30.9 million of the proceeds were used to fund current
development.
Dividend Reinvestment and Direct Stock Purchase Plan
In November 1997, the Company replaced its existing dividend reinvestment plan
with a new dividend reinvestment and direct stock purchase plan (the "Plan").
The Plan provides that shares of the Company's Common Stock can be purchased
directly from the Company at a discount from the market price (as defined in the
Plan document) without brokerage commissions or service charges. Purchases are
generally limited to the reinvestment of the Company's dividends and optional
cash purchases of $100 to $10,000 (or any greater amount approved by the
Company) per month. In December 1997, the Company received $6.5 million under
the Plan for shares issued January 2, 1998.
23
<PAGE> 24
Schedule of Debt
The following table sets forth certain information regarding debt financing as
of December 31, 1997 and 1996 (dollars in thousands):
<TABLE>
<CAPTION>
PRINCIPAL OUTSTANDING
INTEREST DECEMBER 31,
RATE AS OF MATURITY ----------------------
DECEMBER 31, 1997 DATE(1) 1997 1996
----------------- -------- --------- ---------
<S> <C> <C> <C> <C>
FIXED RATE DEBT
MORTGAGE LOAN(2)(3)..................... 5.88% 2/15/01 $120,379 $122,950
MORTGAGE LOAN(2)(3)..................... 7.71% 12/15/05 29,214 29,653
MORTGAGE LOAN (4)....................... 8.00% 9/1/05 8,557 8,638
MORTGAGE NOTES
Summit Hollow I...................... 8.00% 11/1/18 2,243 2,286
Summit Hollow II..................... 7.75% 1/1/29 2,566 2,587
Summit Creekside..................... 8.00% 6/1/22 2,837 2,877
Summit Old Town...................... 8.00% 9/1/20 3,048 3,097
Summit Eastchester................... 8.00% 5/1/21 3,814 3,872
Summit Foxcroft...................... 8.00% 4/1/20 2,728 2,788
Summit Oak........................... 7.75% 12/1/23 2,553 2,585
Summit Sherwood...................... 7.88% 3/1/29 3,303 3,329
Summit Radbourne..................... 9.80% 3/1/02 8,599 8,683
Summit Sand Lake..................... 7.88% 2/15/06 14,985 --
TAX EXEMPT MORTGAGE NOTES
Summit Crossing...................... 6.95% 11/1/25 4,162 4,213
Summit East Ridge.................... 7.25% 12/1/26 5,100 5,156
-------- --------
TOTAL MORTGAGE DEBT............. 214,088 202,714
-------- --------
UNSECURED NOTES
6.80% Notes due 2002................. 6.80% 8/15/02 25,000 --
6.63% Notes due 2003................. 6.63% 12/15/03 30,000 --
6.95% Notes due 2004................. 6.95% 8/15/04 50,000 --
7.20% Notes due 2007................. 7.20% 8/15/07 50,000 --
Bank Note............................ 7.85% 8/3/02 16,000 16,000
Bank Note............................ 7.61% 8/3/00 15,000 15,000
-------- --------
TOTAL UNSECURED NOTES........... 186,000 31,000
-------- --------
TOTAL FIXED RATE DEBT........... 400,088 233,714
VARIABLE RATE DEBT
UNSECURED CREDIT FACILITY............... LIBOR + 110 9/30/99 21,733 22,357
TAX EXEMPT BONDS(5)
Summit Belmont....................... 5.65% 4/1/07 11,650 11,850
Summit Hampton....................... 5.65% 6/1/07 12,490 12,700
Summit Pike Creek.................... 5.65% 8/15/20 13,022 13,262
Summit Gateway....................... 5.65% 7/1/07 7,100 7,300
Summit Stony Point................... 5.65% 4/1/29 8,590 8,750
-------- --------
TOTAL TAX EXEMPT BONDS............. 52,852 53,862
-------- --------
TOTAL VARIABLE RATE DEBT........... 74,585 76,219
-------- --------
TOTAL OUTSTANDING INDEBTEDNESS................................. $474,673 $309,933
======== ========
</TABLE>
(1) With the exception of the Mortgage Loans referred to in Note 3 below, all
the secured debt can be prepaid at any time. Prepayment of such debt is
generally subject to penalty or premium; however, the tax exempt mortgage
notes can be prepaid at any time without penalty or premium.
24
<PAGE> 25
(2) Mortgage Loan secured by the following Communities:
<TABLE>
<S> <C> <C>
Summit Glen Summit Blue Ash Summit Heron's Run
Summit Springs Summit Square Summit Perico
Summit Village Summit Waterford Summit Providence
Summit Highland Summit Del Ray Summit Meadow
Summit Norcroft Summit Palm Lake Summit Windsor I
</TABLE>
(3) The Company may elect to extend the maturity of these Mortgage Loans for a
period of up to two years by providing six months' written notice. These
Mortgage Loans generally may not be prepaid in whole or in part during their
original term, but may be prepaid in whole or in part at any time during
applicable extension periods, if any, with premium or penalty.
(4) Mortgage Loan secured by Summit Simsbury and Summit Touchstone Communities.
(5) The tax exempt bonds (the "Bonds") bear interest at various rates set by a
remarketing agent at the demand note index plus 0.50%, set weekly, or the
lowest percentage of prime which allows the resale at a price of par. The
Bonds are enhanced by letters of credit from financial institutions (the
"Credit Enhancements"), each of which Credit Enhancements will terminate
prior to the maturity dates of the related Bonds. In the event such Credit
Enhancements are not renewed or replaced upon termination, the related loan
obligations will be accelerated.
The LIBOR rate at December 31, 1997 was 5.69%.
The Company's outstanding indebtedness had an average maturity of 8.0 years as
of December 31, 1997. The aggregate maturities of all outstanding debt as of
December 31, 1997 for each of the years ended after December 31, 1997 are as
follows (in thousands):
<TABLE>
<S> <C>
1998........................................................ $ 5,208
1999........................................................ 27,270
2000........................................................ 20,855
2001........................................................ 114,648
2002........................................................ 52,249
Thereafter.................................................. 254,443
--------
$474,673
========
</TABLE>
Of the significant maturities in the above table, $21.7 million relates to the
expiration of the Unsecured Credit Facility in 1999; $15.0 million and $16.0
million relate to the unsecured bank notes that mature in 2000 and 2002,
respectively; $111.4 million relates to a mortgage loan balloon payment in 2001;
and $25 million relates to unsecured notes due in 2002.
ACQUISITIONS AND DISPOSITION
On January 6, 1997, the Company purchased Summit Portofino (formerly Portofino
Place), a 322 apartment community located in Broward County, Florida. Summit
Portofino, built in 1995, was purchased for $28.0 million in cash. Concurrently
with the purchase, the Company sold 315,029 shares of Common Stock to the public
for cash to fund a portion of the purchase.
On January 15, 1997, the Company purchased Summit Mayfaire (formerly The
Mayfaire), a 144 apartment community located in Raleigh, North Carolina. Summit
Mayfaire, built in 1995, was purchased for $9.65 million in cash.
On February 20, 1997, the Company purchased Summit Sand Lake (formerly The
Vining at Sand Lake), a 416 apartment community located in Orlando, Florida.
Summit Sand Lake, built in 1995, was purchased for $26.8 million. The Company
issued to the sellers 243,608 shares of Common Stock and 194,495 Units, assumed
$15.2 million in debt and paid the remaining $2.7 million balance in cash.
25
<PAGE> 26
On July 18, 1997, the Company purchased Summit Windsor II (formerly Avalon
Farms), a 306 apartment community located in Frederick, Maryland. Summit Windsor
II, which was developed by a predecessor entity of the Company in 1988, was
purchased for $17.1 million in cash. The Summit Windsor II purchase was
partially funded by the proceeds from the sale of the Summit Charleston
Community in May 1997. Summit Charleston was sold for $9.5 million and a gain on
the sale of approximately $4.4 million was recognized.
On December 31, 1997, the Company purchased Summit Fair Oaks (formerly Fair Oaks
Gables), a 246 apartment community located in Fairfax, Virginia. Summit Fair
Oaks, built in 1990, was purchased for $21.2 million in cash.
Effective March 1, 1998, the Company purchased Summit St. Clair, a 336 apartment
community located in Atlanta, Georgia. Summit St. Clair completed construction
in 1997 and reached rental stabilization prior to purchase. The total purchase
price was approximately $26.3 million.
DEVELOPMENT ACTIVITY
The Company's developments in process at December 31, 1997 are summarized as
follows (dollars in thousands):
<TABLE>
<CAPTION>
TOTAL ESTIMATED ANTICIPATED
APARTMENT ESTIMATED COST TO COST TO CONSTRUCTION
COMMUNITY HOMES COSTS DATE COMPLETE COMPLETION
- --------------------------------------------- --------- --------- ------- --------- ------------
<S> <C> <C> <C> <C> <C>
Summit Stonefield -- Yardley, PA............. 216 $ 19,640 $18,324 $ 1,316 Q1 1998
Summit Lake I -- Raleigh, NC................. 302 19,700 17,380 2,320 Q2 1998
Summit Ballantyne II -- Charlotte, NC........ 154 10,100 2,792 7,308 Q3 1998
Summit Sedgebrook II -- Charlotte, NC........ 120 7,500 963 6,537 Q3 1998
Summit Doral -- Miami, Florida............... 192 17,000 3,186 13,814 Q1 1999
Summit Fair Lakes I -- Fairfax, VA........... 370 32,900 12,458 20,442 Q1 1999
Summit Governor's Village -- Chapel Hill,
NC......................................... 242 16,400 3,696 12,704 Q1 1999
Summit New Albany I -- Columbus, OH.......... 301 22,600 10,223 12,377 Q1 1999
Summit Westwood -- Raleigh, NC............... 354 24,400 3,016 21,384 Q2 1999
Other development and construction costs..... -- -- 10,294 --
--------- -------- ------- -------
2,251 $170,240 $82,332 $98,202
========= ======== ======= =======
</TABLE>
Estimated cost to complete the development Communities represents substantially
all of the Company's material commitments for capital expenditures at December
31, 1997.
Certain Factors Affecting the Performance of Development Communities
The Company is optimistic about the operating prospects of the Communities under
construction even with the increased supply of newly constructed apartment homes
of comparable quality in many of its markets. As with any development Community,
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 eleven
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
26
<PAGE> 27
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.
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.
The Company has a capital expenditure replacement program whereby various
physical components are replaced as to maintain the Communities in normal
operating condition. Certain physical components may be replaced other than at
regular inspection intervals when extraordinary wear has occurred. The Company
also makes capital expenditures for new physical components if these
expenditures will produce sufficient revenue enhancements as to achieve
acceptable returns on invested capital. There are currently no material
commitments relative to renovation or improvements at existing facilities.
Capitalized expenditures for the years ended December 31, 1997, 1996 and 1995
are summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Acquisition of Communities(1).............................. $104,469 $ 21,913 $ 82,935
Construction of Communities(2)............................. 95,909 88,064 58,104
Capitalized interest....................................... 5,873 4,266 3,110
Non-recurring capital expenditures......................... 4,653 2,973 864
Recurring capital expenditures:
Exterior painting........................................ 1,556 1,131 810
Other.................................................... 3,030 2,160 1,370
-------- -------- --------
Total recurring capital expenditures............. 4,586 3,291 2,180
-------- -------- --------
$215,490 $120,507 $147,193
======== ======== ========
</TABLE>
(1) Includes the assumption of $15.2 million, $14.3 million and $52.6 million of
debt in 1997, 1996 and 1995, respectively. Includes the issuance of Units of
the Operating Partnership and shares of Common Stock with a value of $8.9
million in 1997. 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 and $896,000 of Units in the Operating
Partnership for the acquisition of land in 1996 and 1995, respectively.
Construction of Communities was funded primarily by development loans, equity
offering proceeds and borrowings under the credit facilities. Other additions
and improvements were funded primarily by Community operations and the credit
facilities.
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 short-term nature of these leases generally serves to reduce
the risk to the Company of the adverse effect of inflation.
27
<PAGE> 28
YEAR 2000
The Year 2000 compliance issue concerns the inability of computerized
information systems to accurately calculate, store or use a date after 1999.
This could result in a system failure or miscalculations causing disruptions of
operations.
The Company's primary uses of software systems are its corporate accounting and
property on site software. The Company's corporate accounting system is widely
used in the real estate industry. A version upgrade, scheduled to be installed
in the second quarter of 1998, is designed to be Year 2000 compliant. The
Company is replacing its current property on site software with a new software
system designed to be Year 2000 compliant. This new software is also widely used
in the real estate industry. The implementation of the new on site software
system started in the first quarter of 1998 and is expected to be completed by
the fourth quarter of 1998. Both the corporate accounting system upgrade and the
new property on site system were planned changes that would have been done
regardless of Year 2000 compliance issues. The Company believes that the risk of
Year 2000 compliance issues having a material impact on its operations is not
significant. The primary cost of Year 2000 compliance will be the cost of the
new property on site software installation which is estimated to be
approximately $300,000. However, if the Company's efforts to upgrade its
corporate accounting software and to replace its current property on site
software are not completed on time, or if the costs associated therewith exceed
the Company's current estimates, the Year 2000 issue could have a material
impact on the Company's ability to meet its financial and reporting requirements
and/or on its financial results. Further, no estimates can be made as to any
potential adverse impact resulting from the failure of residents or third-party
service providers and vendors to prepare for the Year 2000. The cost and timing
of third-party Year 2000 compliance is not within the Company's control and no
assurances can be given with respect to the cost or timing of such efforts or
the potential effects of any failure to comply.
FUNDS FROM OPERATIONS
The White Paper on Funds from Operations approved by the Board of Governors of
NAREIT in March 1995 defines Funds from Operations as net income (loss)
(computed in accordance with generally accepted accounting principles ("GAAP"),
excluding gains (or losses) from debt restructuring and sales of property, plus
real estate related depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures. The Company computes Funds from
Operations in accordance with the standards established by the White Paper,
which may differ from the methodology for calculating Funds from Operations
utilized by other equity REITs, and, accordingly, may not be comparable to such
other REITs. Funds Available for Distribution is defined as Funds from
Operations less capital expenditures funded by operations. The Company's
methodology for calculating Funds Available for Distribution may differ from the
methodology for calculating Funds Available for Distribution utilized by other
REITs, and accordingly, may not be comparable to other REITs. Funds from
Operations and Funds Available for Distribution do not represent amounts
available for management's discretionary use because of needed capital
replacement or expansion, debt service obligations, property acquisitions,
development, dividends and distributions or other commitments and uncertainties.
Funds from Operations and Funds Available for Distribution should not be
considered as alternatives to net income (determined in accordance with GAAP) as
an indication of the Company's financial performance or to cash flows from
operating activities (determined in accordance with GAAP) as a measure of the
Company's liquidity, nor are they indicative of funds available to fund the
Company's cash needs, including its ability to make dividends/distributions. The
Company believes Funds from Operations and Funds Available for Distribution are
helpful to investors as measures of the performance of the Company because,
along with cash flows from operating activities, financing activities and
investing activities, they provide investors with an understanding of the
ability of the Company to incur and service debt and make capital expenditures.
28
<PAGE> 29
Funds from Operations and Funds Available for Distribution are calculated as
follows (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Net income............................................ $ 27,116 $ 16,948 $ 11,819
Extraordinary items, net of minority interest......... -- 516 439
Minority interest of Unitholders in Operating
Partnership......................................... 4,818 3,723 2,793
Net gain on sale of assets............................ (4,366)
----------- ----------- -----------
Adjusted net income................................. 27,568 21,187 15,051
Depreciation:
Real estate assets.................................. 22,633 18,171 15,021
Summit Plantation................................... -- 33 76
----------- ----------- -----------
Funds from Operations................................. 50,201 39,391 30,148
Recurring capital expenditures(1)(3)................ (4,586) (3,291) (2,180)
----------- ----------- -----------
Funds Available for Distribution...................... $ 45,615 $ 36,100 $ 27,968
=========== =========== ===========
Non-recurring capital expenditures(2)(3).............. $ 4,653 $ 2,973 $ 864
=========== =========== ===========
Cash Flow Provided By (Used In):
Operating Activities................................ $ 55,947 $ 41,176 $ 30,994
Investing Activities................................ (175,907) (103,971) (63,734)
Financing Activities................................ 119,858 63,579 34,440
Weighted average shares outstanding -- basic.......... 23,145,881 18,887,744 14,749,682
=========== =========== ===========
Weighted average shares and units
outstanding -- basic................................ 27,257,637 22,914,068 18,112,009
=========== =========== ===========
Weighted average shares outstanding -- diluted........ 23,182,302 18,914,674 14,754,337
=========== =========== ===========
Weighted average shares and units
outstanding -- diluted.............................. 27,294,058 22,940,998 18,116,664
=========== =========== ===========
</TABLE>
(1) Recurring capital expenditures include exterior paint in the amount of $1.6
million, $1.1 million and $810,000 in 1997, 1996 and 1995, respectively.
(2) Non-recurring capital expenditures include major renovations, primarily at
eight Communities, in the amount of $4.0 million in 1997 and $1.7 million in
1996; additional garages in the amount of $250,000, $578,000 and $153,000 in
1997, 1996 and 1995, respectively; and access gates, water meters and
washer/dryers of $395,000 in 1997 and $413,000 in 1996. In addition, 1995
included $706,000 of improvements at acquisition Communities.
(3) Recurring capital expenditures are expected to be funded from operations and
consist primarily of exterior painting, new appliances, vinyl, blinds, tile,
and wallpaper. In contrast, non-recurring capital expenditures, such as
major improvements, new garages and access gates, are expected to be funded
by financing activities and therefore are not included in the calculation of
Funds Available for Distribution.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary data are contained on the pages indicated
on the Index to Financial Statements and Supplementary Data on page 36 of this
Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
29
<PAGE> 30
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
Incorporated herein by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after the
end of the year covered by this Form 10-K with respect to its Annual Meeting of
Stockholders to be held on May 12, 1998.
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after the
end of the year covered by this Form 10-K with respect to its Annual Meeting of
Stockholders to be held on May 12, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Incorporated herein by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after the
end of the year covered by this Form 10-K with respect to its Annual Meeting of
Stockholders to be held on May 12, 1998.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the Company's definitive proxy statement to
be filed with the Securities and Exchange Commission within 120 days after the
end of the year covered by this Form 10-K with respect to its Annual Meeting of
Stockholders to be held on May 12, 1998.
30
<PAGE> 31
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements and Financial Statement Schedule
The consolidated financial statements and financial statement schedule of the
Company are listed in the Index to Financial Statements and Supplementary Data
on page 36 of this Report.
(b) Reports on Form 8-K
On December 16, 1997, the Company filed a Current Report on Form 8-K relating to
the Operating Partnership's $30 million senior unsecured debt offering
underwritten by J.P. Morgan & Co., and a Form 8-K/A-1 was filed on December 17,
1997 to amend such Form 8-K to include certain definitive exhibits.
(c) Exhibits
As noted below, certain of the exhibits required by Item 601 of Regulation S-K
have been filed with previous reports by the Company and are incorporated by
reference herein.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
3.1 Articles of Incorporation of the Company. (Incorporated by
reference to Exhibit 3.1 to the Company's Registration
Statement on Form S-11, Registration No. 33-90706).
3.2 Bylaws of the Company. (Incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-11,
Registration No. 33-90706).
4.1 Indenture dated as of August 7, 1997 between the Operating
Partnership and First Union National Bank, relating to the
Operating Partnership's Senior Debt Securities.
(Incorporated by reference to Exhibit 4.1 to the Operating
Partnership's Current Report on Form 8-K filed on August 11,
1997, File No. 000-22411).
4.2 Supplemental Indenture No. 1, dated as of August 12, 1997
between the Operating Partnership and First Union National
Bank. (Incorporated by reference to Exhibit 4.1 to the
Operating Partnership's Amended Current Report on Form
8-K/A-1 filed on August 18, 1997, File No. 000-22411).
4.3 Supplemental Indenture No. 2, dated as of December 17, 1997
between the Operating Partnership and First Union National
Bank. (Incorporated by reference to Exhibit 4.1 to the
Operating Partnership's Amended Current Report on Form
8-K/A-1 filed on December 17, 1997, File No. 000-22411).
4.4 The Operating Partnership's 6.80% Note due 2002, dated
August 12, 1997. (Incorporated by reference to Exhibit 4.2
to the Operating Partnership's Amended Current Report on
Form 8-K/A-1 filed on August 18, 1997, File No. 000-22411).
4.5 The Operating Partnership's 6.95% Note due 2004, dated
August 12, 1997. (Incorporated by reference to Exhibit 4.3
to the Operating Partnership's Amended Current Report on
Form 8-K/A-1 filed on August 18, 1997, File No. 000-22411).
4.6 The Operating Partnership's 7.20% Note due 2007, dated
August 12, 1997. (Incorporated by reference to Exhibit 4.4
to the Operating Partnership's Amended Current Report on
Form 8-K/A-1 filed on August 18, 1997, File No. 000-22411).
4.7 The Operating Partnership's 6.63% Note due 2003, dated
December 17, 1997. (Incorporated by reference to Exhibit 4.2
to the Operating Partnership's Amended Current Report on
Form 8-K/A-1 filed on December 17, 1997, File No.
000-22411).
10.1.1 Agreement of Limited Partnership of the Operating
Partnership, as amended. (Incorporated by reference to
Exhibit 3.1 to the Operating Partnership's Registration
Statement on Form 10, dated April 21, 1997, filed pursuant
to the Securities Exchange Act of 1934, as amended, File No.
000-22411).
10.1.2 Tenth Amendment to the Agreement of Limited Partnership of
the Operating Partnership. (Incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 30, 1997, File No.
001-12792).
</TABLE>
31
<PAGE> 32
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
10.2 Articles of Incorporation of Summit Management Company.
(Incorporated by reference to Exhibit 10.3 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993, File No. 001-12792).
10.3 Bylaws of Summit Management Company. (Incorporated by
reference to Exhibit 10.4 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, File
No. 001-12792).
10.4 Summit Properties Inc. 1994 Stock Option and Incentive Plan.
(Incorporated by reference to Exhibit 10.6 to the Company's
Registration Statement on Form S-11, Registration No. 33-
90706).
10.5 Summit Properties Inc. 1996 Non-Qualified Employee Stock
Purchase Plan. (Incorporated by reference to Exhibit 10.5 to
the Company's Registration Statement on Form S-8,
Registration No. 333-00078).
10.6 Indemnification Agreement, dated January 29, 1994, among the
Company, the Operating Partnership and the individuals named
therein. (Incorporated by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, File No. 001-12792).
10.7.1 Employment Agreement between the Company and William F.
Paulsen (filed herewith).
10.7.2 Employment Agreement between the Company and William B.
McGuire, Jr. (filed herewith).
10.7.3 Employment Agreement between the Company and Raymond V.
Jones (filed herewith).
10.7.4 Employment Agreement between the David F. Tufaro (filed
herewith).
10.7.5 Employment Agreement between the Company and John C. Moore
(filed herewith).
10.7.6 Employment Agreement between the Company and Michael G.
Malone (filed herewith).
10.7.7 Employment Agreement between the Company and Keith L.
Downey. (Incorporated by reference to Exhibit 10.12.4 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, File No. 001-12792).
10.7.8 Employment Agreement between the Company and Christopher A.
Hughes. (Incorporated by reference to Exhibit 10.12.3 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, File No. 001-12792).
10.7.9 Employment Agreement between the Company and William B.
Hamilton (filed herewith).
10.7.10 Employment Agreement between the Company and Michael L.
Schwarz (filed herewith).
10.8.1 Noncompetition Agreement between the Company and William F.
Paulsen (filed herewith).
10.8.2 Noncompetition Agreement between the Company and William B.
McGuire, Jr. (filed herewith).
10.8.3 Noncompetition Agreement between the Company and Raymond V.
Jones (filed herewith).
10.8.4 Noncompetition Agreement between the Company and Keith H.
Kuhlman (filed herewith).
10.8.5 Noncompetition Agreement between the Company and David F.
Tufaro (filed herewith).
10.8.6 Noncompetition Agreement between the Company and John T.
Gray (filed herewith).
10.8.7 Noncompetition Agreement between the Company and John C.
Moore (filed herewith).
10.8.8 Noncompetition Agreement between the Company and Michael G.
Malone (filed herewith).
10.8.9 Noncompetition Agreement between the Company and William B.
Hamilton (filed herewith).
10.8.10 Noncompetition Agreement between the Company and Michael L.
Schwarz (filed herewith).
10.9.1 Executive Severance Agreement between the Company and
William F. Paulsen (filed herewith).
10.9.2 Executive Severance Agreement between the Company and
William B. McGuire, Jr. (filed herewith).
10.9.3 Executive Severance Agreement between the Company and
Michael L. Schwarz (filed herewith).
10.9.4 Executive Severance Agreement between the Company and
Raymond V. Jones (filed herewith).
</TABLE>
32
<PAGE> 33
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
10.9.5 Executive Severance Agreement between the Company and
William B. Hamilton (filed herewith).
10.10 $2,500,000 Promissory Note, dated February 15, 1994 and
maturing on February 15, 2004, between Summit Management
Company and Old Summit Management Company. (Incorporated by
reference to Exhibit 10.17 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1993, File
No. 001-12792).
10.11.1 $125,000,000 Promissory Note, dated February 15, 1994 and
maturing on February 15, 2001, between the Company and The
Northwestern Mutual Life Insurance Company. (Incorporated by
reference to Exhibit 10.18.1 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993,
File No. 001-12792).
10.11.2 Mortgage and Security Agreement and Financing Statement,
dated February 15, 1994, between the Company and The
Northwestern Mutual Life Insurance Company. (Incorporated by
reference to Exhibit 10.18.2 to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1993,
File No. 001-12792).
10.11.3 $30,000,000 Promissory Note, dated December 21, 1995 between
the Operating Partnership and The Northwestern Mutual Life
Insurance Company (filed herewith).
10.12 $31,000,000 Loan Agreement, dated July 31, 1996, between the
Operating Partnership and Wachovia Bank of North Carolina,
N.A. (Incorporated by reference to Exhibit 10.34 to the
Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1996, File No. 001-12792).
10.13.1 $150,000,000 Credit Agreement, dated November 18, 1996,
among the Operating Partnership, First Union National Bank
of North Carolina and Wachovia Bank of North Carolina, N.A.
(Incorporated by reference to Exhibit 10.35 to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, file No. 001-12792).
10.13.2 First Amendment to $150,000,000 Credit Agreement dated July
24, 1997, among the Operating Partnership, First Union
National Bank of North Carolina and Wachovia Bank of North
Carolina, N.A. (Incorporated by reference to the Operating
Partnership's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1997, File No. 000-22411).
10.14.1 Promissory Note and Security Agreement, dated January 28,
1998 between the Company and Michael L. Schwarz (filed
herewith).
10.14.2 Promissory Note and Security Agreement, dated January 28,
1998 between the Company and William B. Hamilton (filed
herewith).
10.14.3 Form of Promissory Note and Security Agreement between the
Company and the employees named in the Schedule thereto
(filed herewith).
10.15.1 Registration Rights Agreement, dated October 12, 1994
between the Company and PK Partners, L.P. (filed herewith).
10.15.2 Registration Rights Agreement, dated February 8, 1994,
between the Company and the Continuing Investors named
therein. (Incorporated by reference to Exhibit 10.2 to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1993, File No. 001-12792).
10.15.3 Registration Rights Agreement, dated December 11, 1995,
between the Company and Bissell Ballantyne, LLC.
(Incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-3, Registration No.
333-24669).
10.15.4 Registration Rights Agreement, dated January 10, 1996, among
the Company, Joseph H. Call and Gary S. Cangelosi.
(Incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form S-3, Registration No.
333-24669).
</TABLE>
33
<PAGE> 34
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<S> <C> <C>
10.15.5 Registration Rights Agreement, dated February 20, 1997,
among the Company, The Northwestern Mutual Life Insurance
Company, J. Ronald Terwilliger, J. Ronald Terwilliger
Grantor Trust, Crow Residential Realty Investors, L.P.,
Douglas A. Hoeksema, Randy J. Pace, Clifford A. Breining,
TCF Residential Partnership, Ltd. and Trammell S. Crow.
(Incorporated by reference to Exhibit 10.2 to the Company's
Registration Statement on Form, Registration No. 333-24669).
10.15.6 Registration Rights Agreement, dated May 16, 1995, between
the Company and the individuals named therein executed in
connection with the Crosland Acquisition (filed herewith).
10.16 Agreement to Contribute, dated February 13, 1995, between
the Company, the Operating Partnership and Crosland
Partnerships. (Incorporated by reference to Exhibit 2.1 to
the Company's Current Report on Form 8-K dated May 16, 1995,
File No. 001-12792).
12.1 Statement Regarding Calculation of Ratios of Earnings to
Fixed Charges for the Years Ended December 31, 1997, 1996,
1995, 1994 and 1993 (filed herewith).
21.1 Subsidiaries of the Company (filed herewith).
23.1 Consent of Deloitte & Touche LLP. (Included in the
Independent Auditors' Report dated January 21, 1998 on page
37 of this Annual Report on Form 10-K for the fiscal year
ended December 31, 1997 File No. 001-12792).
27 Financial Data Schedule (filed herewith).
</TABLE>
34
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Summit Properties Inc. certifies that it has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized,
in Charlotte, North Carolina on March 16, 1998.
SUMMIT PROPERTIES INC.
/s/ WILLIAM F. PAULSEN
--------------------------------------
William F. Paulsen,
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following persons in the capacities and on the dates
indicated.
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ WILLIAM B. MCGUIRE, JR. Chairman of the Board of March 16, 1998
- ----------------------------------------------------- Directors
William B. McGuire, Jr.
/s/ WILLIAM F. PAULSEN President, Chief Executive March 16, 1998
- ----------------------------------------------------- Officer and Director
William F. Paulsen (Principal Executive
Officer)
/s/ MICHAEL L. SCHWARZ Chief Financial Officer March 16, 1998
- ----------------------------------------------------- (Principal Financial
Michael L. Schwarz Officer and Principal
Accounting Officer)
/s/ JOHN CROSLAND, JR. Director March 16, 1998
- -----------------------------------------------------
John Crosland, Jr.
/s/ HENRY H. FISHKIND Director March 16, 1998
- -----------------------------------------------------
Henry H. Fishkind
/s/ JAMES H. HANCE, JR. Director March 16, 1998
- -----------------------------------------------------
James H. Hance, Jr.
/s/ NELSON SCHWAB, III Director March 16, 1998
- -----------------------------------------------------
Nelson Schwab, III
</TABLE>
35
<PAGE> 36
INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements of the Company required to be included in
Item 14(a)(1) are listed below:
SUMMIT PROPERTIES INC.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report................................ 37
Consolidated Balance Sheets as of December 31, 1997 and
1996...................................................... 38
Consolidated Statements of Earnings for the Years Ended
December 31, 1997, 1996 and 1995.......................... 39
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1997, 1996 and 1995.............. 40
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1997, 1996 and 1995.......................... 41
Notes to Consolidated Financial Statements.................. 42
The following financial statement supplementary data of the
Company required to be included in Item 14(a)(2) is listed
below:
Schedule III -- Real Estate and Accumulated Depreciation.... 54
</TABLE>
All other schedules are omitted because they are not applicable or not required.
36
<PAGE> 37
INDEPENDENT AUDITORS' REPORT
Board of Directors
Summit Properties Inc.
Charlotte, North Carolina
We have audited the accompanying consolidated balance sheets of Summit
Properties Inc. as of December 31, 1997 and 1996, and the related consolidated
statements of earnings, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1997. Our audits also included the
financial statement schedule listed in the Index at Item 14. These financial
statements and financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 1997
and 1996, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
We consent to the incorporation by reference of the above report in Registration
Statement Nos. 33-90704, 33-24669, 33-93540, 333-25575, and 333-38369 on Form
S-3, and Registration Statement Nos. 33-88202 and 333-78 on Form S-8 of Summit
Properties Inc.
DELOITTE & TOUCHE LLP
Charlotte, North Carolina
January 21, 1998
(March 6, 1998 as to Note 7)
37
<PAGE> 38
SUMMIT PROPERTIES INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
Real estate assets:
Land and land improvements................................ $133,316 $102,605
Buildings and improvements................................ 643,812 472,996
Furniture, fixtures and equipment......................... 53,573 43,021
-------- --------
830,701 618,622
Less: accumulated depreciation............................ (105,979) (85,651)
-------- --------
Operating real estate assets...................... 724,722 532,971
Construction in progress.................................. 82,332 86,157
-------- --------
Net real estate assets............................ 807,054 619,128
Cash and cash equivalents................................... 3,563 3,665
Restricted cash............................................. 3,180 4,121
Investment in Summit Management Company..................... 1,212 687
Deferred financing costs, net of accumulated amortization of
$3,495 and $2,441 in 1997 and 1996, respectively.......... 7,378 4,675
Other assets................................................ 2,906 2,715
-------- --------
Total assets................................................ $825,293 $634,991
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Notes payable............................................. $474,673 $309,933
Accrued interest payable.................................. 4,916 1,318
Accounts payable and accrued expenses..................... 19,945 7,257
Dividends and distributions payable....................... 11,030 10,244
Security deposits and prepaid rents....................... 3,561 3,196
-------- --------
Total liabilities................................. 514,125 331,948
-------- --------
Commitments and contingencies
Minority interest........................................... 45,329 45,829
Stockholders' equity:
Common stock, $.01 par value -- 100,000,000 authorized,
23,411,086 and 22,409,638 shares issued and outstanding
in 1997 and 1996, respectively......................... 234 224
Additional paid-in capital................................ 361,731 342,872
Accumulated deficit....................................... (95,120) (85,068)
Unamortized restricted stock compensation................. (1,006) (814)
-------- --------
Total stockholders' equity........................ 265,839 257,214
-------- --------
Total liabilities and stockholders' equity.................. $825,293 $634,991
======== ========
</TABLE>
See notes to consolidated financial statements.
38
<PAGE> 39
SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Revenues:
Rental............................................ $ 109,827 $ 88,864 $ 70,773
Other property income............................. 6,179 4,683 3,356
Interest.......................................... 392 558 461
Other income...................................... 279 384 404
----------- ----------- -----------
Total revenues............................ 116,677 94,489 74,994
----------- ----------- -----------
Expenses:
Property operating and maintenance:
Personnel...................................... 9,278 8,368 6,640
Advertising and promotion...................... 2,095 1,417 698
Utilities...................................... 5,033 4,115 3,432
Building repairs and maintenance............... 8,790 7,547 6,116
Real estate taxes and insurance................ 10,721 8,823 6,965
Depreciation................................... 22,652 18,208 15,141
Property supervision........................... 2,783 2,240 1,848
Other operating expenses....................... 3,332 2,716 2,313
----------- ----------- -----------
64,684 53,434 43,153
Interest.......................................... 21,959 17,138 14,802
General and administrative........................ 2,740 2,557 1,949
Loss (income) on equity investments:
Summit Management Company...................... (274) 173 80
Real estate joint venture...................... -- -- (41)
----------- ----------- -----------
Total expenses............................ 89,109 73,302 59,943
----------- ----------- -----------
Income before gain on sale of real estate assets,
minority interest of unitholders in Operating
Partnership and extraordinary items............... 27,568 21,187 15,051
Gain on sale of real estate assets................ 4,366 -- --
----------- ----------- -----------
Income before minority interest of unitholders in
Operating Partnership and extraordinary items..... 31,934 21,187 15,051
Minority interest of unitholders in Operating
Partnership....................................... (4,818) (3,723) (2,793)
----------- ----------- -----------
Income before extraordinary items................... 27,116 17,464 12,258
Extraordinary items, net of minority interest of
unitholders in Operating Partnership.............. -- (516) (439)
----------- ----------- -----------
Net income.......................................... $ 27,116 $ 16,948 $ 11,819
=========== =========== ===========
Per share data:
Income before extraordinary items -- basic and
diluted........................................ $ 1.17 $ 0.92 $ 0.83
=========== =========== ===========
Net income -- basic and diluted................... $ 1.17 $ 0.90 $ 0.80
=========== =========== ===========
Dividends declared................................ $ 1.59 $ 1.55 $ 1.51
=========== =========== ===========
Weighted average shares -- basic.................. 23,145,881 18,887,744 14,749,682
=========== =========== ===========
Weighted average shares -- diluted................ 23,182,302 18,914,674 14,754,337
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
39
<PAGE> 40
SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNAMORTIZED
ADDITIONAL RESTRICTED
COMMON PAID IN ACCUMULATED STOCK
STOCK CAPITAL DEFICIT COMPENSATION TOTAL
------- ----------- ------------ ------------ ---------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995............. $ 124 $ 175,670 $ (60,269) $ 115,525
Dividends.......................... -- -- (23,325) (23,325)
Proceeds of public offering, net of
underwriting discount and
offering costs.................. 40 65,897 -- 65,937
Proceeds from dividend plan........ -- 240 -- 240
Conversion of units to shares...... 1 1,013 -- 1,014
Issuance of stock grants........... -- 28 -- 28
Adjustment for minority interest of
unitholders in Operating
Partnership..................... -- 4,216 -- 4,216
Net income......................... -- -- 11,819 11,819
------- ----------- ------------ ------------ ---------------
Balance, December 31, 1995........... 165 247,064 (71,775) 175,454
Dividends.......................... -- -- (30,241) (30,241)
Proceeds of public offering, net of
underwriting discount and
offering costs.................. 58 97,576 -- 97,634
Proceeds from dividend and stock
purchase plans.................. -- 1,597 -- 1,597
Conversion of units to shares...... -- 167 -- 167
Exercise of stock options.......... -- 287 -- 287
Issuance of restricted stock
grants.......................... 1 1,015 -- $ (1,016) --
Amortization of restricted stock
grants.......................... -- -- -- 202 202
Adjustment for minority interest of
unitholders in Operating
Partnership..................... -- (4,834) -- -- (4,834)
Net income......................... -- -- 16,948 -- 16,948
------- ----------- ------------ ------------ ---------------
Balance, December 31, 1996........... 224 342,872 (85,068) (814) 257,214
Dividends.......................... -- -- (37,168) -- (37,168)
Issuance of stock.................. 6 11,740 -- -- 11,746
Costs of shelf registrations....... -- (616) -- -- (616)
Proceeds from dividend and stock
purchase plans.................. 2 3,605 -- -- 3,607
Conversion of units to shares...... 2 3,911 -- 3,913
Exercise of stock options.......... -- 851 -- 851
Issuance of restricted stock
grants.......................... 546 -- (546) --
Amortization of restricted stock
grants.......................... -- -- -- 354 354
Adjustment for minority interest of
unitholders in Operating
Partnership..................... -- (1,178) -- -- (1,178)
Net income......................... -- -- 27,116 -- 27,116
------- ----------- ------------ ------------ ---------------
Balance, December 31, 1997........... $ 234 $ 361,731 $ (95,120) $ (1,006) $ 265,839
======= =========== ============ ============ ===============
</TABLE>
See notes to consolidated financial statements.
40
<PAGE> 41
SUMMIT PROPERTIES INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $ 27,116 $ 16,948 $ 11,819
Adjustments to reconcile net income to net cash provided
by operating activities:
Extraordinary items.................................... -- 516 439
(Income) loss on equity investments.................... (274) 173 39
Gain on sale of real estate assets..................... (4,366) -- --
Depreciation and amortization.......................... 23,897 19,183 15,978
Decrease in restricted cash............................ 941 235 575
Increase in other assets............................... (162) (866) (992)
Increase (decrease) in accrued interest payable........ 3,581 333 (47)
Increase in accounts payable and accrued expenses...... 517 386 209
Increase (decrease) in security deposits and prepaid
rents................................................ (121) 545 181
Increase in minority interest of unitholders in
Operating Partnership................................ 4,818 3,723 2,793
--------- -------- ---------
Net cash provided by operating activities......... 55,947 41,176 30,994
--------- -------- ---------
Cash flows from investing activities:
Construction of real estate assets and land acquisitions,
net of payables........................................ (91,665) (87,081) (52,499)
Purchase of Communities................................... (78,870) (6,360) (5,081)
Proceeds from sale of Community........................... 9,209 -- --
Capitalized interest...................................... (5,873) (4,266) (3,110)
Recurring capital expenditures............................ (4,586) (3,291) (2,180)
Non-recurring capital expenditures, net of payables....... (4,122) (2,973) (864)
--------- -------- ---------
Net cash used in investing activities............. (175,907) (103,971) (63,734)
--------- -------- ---------
Cash flows from financing activities:
Debt proceeds, net of underwriters discount, offering and
related costs.......................................... 302,240 89,359 97,075
Debt repayments........................................... (156,533) (90,783) (101,650)
Dividends and distributions to unitholders................ (42,971) (34,000) (26,157)
Payment of financing costs................................ (32) (515) (1,033)
Issuance of stock......................................... 6,812 -- --
Exercise of stock options................................. 851 287 --
Common stock offering proceeds, net of underwriters
discount and related costs............................. -- 97,634 65,937
Advance proceeds from direct stock purchase plan.......... 6,500 -- --
Shelf registration costs.................................. (616) -- --
Proceeds from dividend and stock purchase plans........... 3,607 1,597 268
--------- -------- ---------
Net cash provided by financing activities......... 119,858 63,579 34,440
--------- -------- ---------
Net increase (decrease) in cash and cash equivalents........ (102) 784 1,700
Cash and cash equivalents, beginning of year................ 3,665 2,881 1,181
--------- -------- ---------
Cash and cash equivalents, end of year...................... $ 3,563 $ 3,665 $ 2,881
========= ======== =========
Supplemental disclosure of cash flow information -- Cash
paid for interest, net of capitalized interest............ $ 17,321 $ 15,780 $ 13,762
========= ======== =========
</TABLE>
See notes to consolidated financial statements.
41
<PAGE> 42
SUMMIT PROPERTIES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND FORMATION OF THE COMPANY
Summit Properties Inc. (the "Company") was initially organized as a Maryland
real estate investment trust on December 1, 1993 under the Maryland Real Estate
Investment Trust Act. The Company became a Maryland corporation under the
General Corporation Law of Maryland on January 13, 1994. On February 15, 1994,
the Company completed an Initial Public Offering ("Initial Offering"). In
connection with the Initial Offering, the Company consummated a business
combination involving the Partnerships (the "Property Partnerships") which owned
the 27 communities (the "Communities") and the affiliated entities which
provided development, construction, management and leasing services to each of
the Communities prior to the Initial Offering (collectively, "Summit Entities").
A portion of the proceeds from the Initial Offering was used to acquire an
economic and voting interest in Summit Properties Partnership, L.P. (the
"Operating Partnership"), which was formed to succeed to substantially all of
the interests of the Property Partnerships in the Communities and the operations
of Summit Entities (the "Formation"). The Company became the sole general
partner and the majority owner of the Operating Partnership upon completion of
the Initial Offering and, accordingly, reports its investment in the Operating
Partnership on a consolidated basis.
In June 1995, the Company completed the sale of 4 million shares of Common
Stock, ("1995 Offering"). In August 1996, the Company completed the sale of 5.75
million shares of Common Stock, ("1996 Offering"). The net proceeds of $65.9
million and $97.6 million from the 1995 and 1996 Offerings, respectively, were
used to repay mortgage debt and to fund the construction of development
communities.
2. BASIS OF PRESENTATION
In conjunction with the Initial Offering, construction, management and leasing
activities for third parties were transferred to Summit Management Company (the
"Management Company") and its wholly-owned subsidiary, Summit Apartment Builders
(the "Construction Company"). The Operating Partnership has a 99% economic
interest in the Management Company but controls only 1% of the voting stock. The
remaining 99% of the voting stock is held by an executive officer of the
Company, which stock is subject to certain restrictions on transfer designed to
ensure that the holder of the Management Company's voting stock will have
interests aligned with those of the Company. Because of the Company's ability to
exercise significant influence, the Management Company is accounted for on the
equity method of accounting.
As a result of the Formation, the partners and owners of the entities comprising
the Summit Entities have either retained their existing ownership interests,
received shares of Common Stock or received limited partnership interests
("Units") in the Operating Partnership. Purchase accounting was applied to the
acquisition of all non-controlled interests in which cash consideration was
paid. The acquisition of all other interests was accounted for as a
reorganization of entities under common control and, accordingly, was reflected
at historical cost in a manner similar to that in pooling of interests
accounting.
All significant intercompany accounts and transactions have been eliminated in
consolidation. The financial statements of the Company have been adjusted for
the minority interest of unitholders in the Operating Partnership. Minority
interest of unitholders in the Operating Partnership is calculated at the
balance sheet date based upon the percentage of Units outstanding owned by
partners other than the Company to the total number of Units outstanding.
Minority interest of unitholders in Operating Partnership earnings is calculated
based on the weighted average Units outstanding during the period. Units can be
exchanged for cash, or at the option of the Company, for shares of Common Stock
on a one-to-one basis. It is the Company's prior practice and current intention
to redeem Units only for shares of Common Stock on a one-for-one basis. With
respect to Units issued in conjunction with the initial formation of the Company
as a REIT, the redemption of Units for shares of Common Stock is recorded at
book value. With respect to Units issued subsequent to that date, the redemption
of Units for shares of Common Stock is accounted for as the purchase of a
minority interest and, therefore, recorded at the fair market value of the
shares of Common Stock issued at the date of the redemption.
42
<PAGE> 43
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REAL ESTATE ASSETS AND DEPRECIATION -- Real estate assets are stated at
depreciated cost reduced for any estimated impairment in value of which
management believes there is none at December 31, 1997 and 1996.
Expenditures directly related to the acquisition, development and improvement of
real estate assets are capitalized at cost as land, buildings and improvements.
Improvements are broken down into recurring capital expenditures and
non-recurring capital expenditures. Non-recurring capital expenditures primarily
consist of the cost of improvements such as new garages, water submeters and
improvements made in conjunction with acquisitions and major renovations. All
other improvements are deemed as recurring capital expenditures.
Ordinary repairs and maintenance, including carpet replacements and interior
painting, are expensed as incurred; major replacements and betterments are
capitalized and depreciated over their estimated useful lives. Depreciation is
computed on a straight-line basis over the estimated useful lives of the
properties (buildings -- 40 years; land improvements -- 15 years; furniture,
fixtures and equipment -- 5 to 7 years).
The Company records its real estate assets at cost less accumulated depreciation
and adjusts carrying value in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed Of", which the Company adopted in 1996.
SFAS No. 121 requires that long-lived assets such as real estate assets be
reviewed whenever events or changes in circumstances indicate that the book
value of the asset may not be recoverable. If the sum of the estimated future
net cash flows (undiscounted and without interest charges) from an asset to be
held and used is less than the book value of the asset, an impairment loss must
be recognized in the amount of the difference between book value and fair value
as opposed to the difference between book value and net realizable value under
the previous accounting standard. For long-term assets like apartment
communities, the determination of whether there is an impairment loss is
dependent primarily on the Company's estimates on occupancy, rent and expense
increases, which involves numerous assumptions and judgments as to future events
over a period of many years. Assets to be disposed of are reported at the lower
of carrying value or fair value less costs to sell. At December 31, 1997 the
Company does not hold any assets that meet the impairment criteria of SFAS No.
121.
RENTAL REVENUE RECOGNITION -- The Company leases its residential properties
under operating leases with terms generally one year or less. Rental revenue is
recognized on the accrual method of accounting as earned.
PROPERTY MANAGEMENT -- The Management Company provides property management
services for both Company owned properties as well as properties owned by third
parties and recognizes revenue when earned, as the services are provided.
CASH AND CASH EQUIVALENTS -- For purposes of the statement of cash flows, the
Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.
RESTRICTED CASH -- Restricted cash is comprised primarily of resident security
deposits, bond repayment escrows and replacement reserve escrows.
DEFERRED FINANCING COSTS -- Deferred financing costs include fees and costs
incurred in conjunction with long-term financings and are amortized on the
straight-line method over the terms of the related debt. Such amortization is
included in interest expense in the accompanying consolidated statements of
earnings.
INTEREST AND REAL ESTATE TAXES -- Interest and real estate taxes incurred during
the construction period are capitalized and depreciated over the lives of the
constructed assets. Interest capitalized was $5.9 million, $4.3 million and $3.1
million for the years ended December 31, 1997, 1996 and 1995, respectively.
ADVERTISING COSTS -- The Company expenses advertising costs as incurred.
INCOME TAXES -- The Company elected to be taxed as a real estate investment
trust ("REIT") under the Internal Revenue Code of 1986, as amended (the "Code").
As a result, the Company generally will not be subject to federal and state
income taxation at the corporate level to the extent it distributes annually at
least 95% of its taxable income, as defined in the Code, to its stockholders and
satisfies certain other
43
<PAGE> 44
requirements. Accordingly, no provision has been made for federal and state
income taxes in the accompanying consolidated financial statements.
Financial Accounting Standard No. 109, "Accounting for Income Taxes" requires a
public enterprise to disclose the aggregate difference in the basis of its net
assets for financial and tax reporting purposes. The carrying value reported in
the Company's consolidated financial statements exceeded the tax basis by
approximately $25.3 million and $24.1 million, as of December 31, 1997 and 1996,
respectively. The change between December 31, 1997 and 1996 was primarily due to
financial depreciation exceeding tax depreciation by approximately $6.2 million,
offset by the financial reporting basis exceeding the tax basis by $7.2 million
for the Company's 1997 Acquisitions and certain property improvements.
A portion of the Company's dividends is deemed as return of capital for
shareholder income tax purposes. The percentage of dividends that was return of
capital was 25%, 21% and 26% for each of the years ended December 31, 1997, 1996
and 1995, respectively.
PER SHARE DATA -- Basic earnings per share with respect to the Company for the
years ended December 31, 1997, 1996 and 1995 are computed based upon the
weighted average number of shares outstanding during the period. In February
1997, The Financial Accounting Standards Board issued Statement of Financial
Accounting Standard No. 128 "Earnings Per Share." This pronouncement specifies
the computation, presentation and disclosure requirements for earnings per
share. The new standard had no impact on the Company's financial statements as
the "basic" and "diluted" earnings per share disclosure required by the
pronouncement were the same as "primary" earnings per share previously required.
The only difference in "basic" and "diluted" weighted average shares is the
dilutive effect of the Company's stock options outstanding (36,421, 26,930 and
4,655 shares added to weighted shares outstanding in 1997, 1996 and 1995,
respectively).
ESTIMATES -- The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4. PROPERTY MANAGEMENT AND RELATED PARTY TRANSACTIONS
In conjunction with the Formation, construction, management and leasing
activities for third parties were transferred to the Management Company and the
Construction Company, which is accounted for using the equity method of
accounting.
The Management Company provides management services to the Company. Total fees
for management services were $3.1 million, $2.4 million and $1.9 million for the
years ended December 31, 1997, 1996 and 1995, respectively.
In addition, the Management Company provides management services to apartment
communities in which executive officers and certain directors of the Company are
general partners. The Management Company received management fees of
approximately $214,000, $267,000 and $294,000 for the performance of such
services for the years ended December 31, 1997, 1996 and 1995, respectively.
Construction Company revenue consists of contracts with the Company. Revenue
from contracts with the Company was $1.1 million, $524,000 and $311,000 for the
years ended December 31, 1997, 1996 and 1995, respectively. The Company has a
$4.6 million and $1.3 million construction contract payable to the Construction
Company as of December 31, 1997 and 1996, respectively.
44
<PAGE> 45
The Company's investment in the Management Company as of December 31, 1997 and
1996, reported on the equity method, includes the amounts shown below. The
Company's investment in the Management Company is not considered material to the
consolidated financial statements of the Company taken as a whole (in
thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Equity investment........................................... $ 242 $ (32)
Note receivable............................................. 2,500 2,500
Deferred gain on sale of third party contract rights........ (1,530) (1,781)
------- -------
$ 1,212 $ 687
======= =======
</TABLE>
5. NOTES PAYABLE
Notes payable consist of the following (in thousands):
<TABLE>
<CAPTION>
INTEREST PRINCIPAL OUTSTANDING
RATE AS OF DECEMBER 31,
DECEMBER 31, ----------------------
1997 1997 1996
------------ --------- ---------
<S> <C> <C> <C>
FIXED RATE DEBT
- -----------------
Mortgage Loan..................................... 5.88% $120,379 $122,950
Mortgage Loan..................................... 7.71% 29,214 29,653
Mortgage Loan..................................... 8.00% 8,557 8,638
Mortgage Notes.................................... 7.75%-9.80% 46,676 32,104
Tax Exempt Mortgage Notes......................... 6.95%-7.25% 9,262 9,369
-------- --------
Total Mortgage Debt....................... 214,088 202,714
Unsecured Debt:
6.80% Notes due 2002........................... 6.80% 25,000 --
6.63% Notes due 2003........................... 6.63% 30,000 --
6.95% Notes due 2004........................... 6.95% 50,000 --
7.20% Notes due 2007........................... 7.20% 50,000 --
Bank Note due 2002............................. 7.85% 16,000 16,000
Bank Note due 2000............................. 7.61% 15,000 15,000
-------- --------
Total Unsecured Debt...................... 186,000 31,000
-------- --------
Total Fixed Rate Debt..................... 400,088 233,714
VARIABLE RATE DEBT
- --------------------
Unsecured Credit Facility......................... LIBOR + 110 21,733 22,357
Tax Exempt Bonds.................................. 5.65% 52,852 53,862
-------- --------
Total Variable Rate Debt.................. 74,585 76,219
-------- --------
Total Outstanding Indebtedness...................... $474,673 $309,933
======== ========
</TABLE>
The London Interbank Offered Rate (LIBOR) at December 31, 1997 was 5.69%.
MORTGAGE LOANS -- The 5.88% fixed rate Mortgage Loan requires monthly principal
and interest payments on a 24-year amortization schedule with a balloon payment
due at maturity in February, 2001. The Company has an option to extend the final
maturity date for a period of up to two years at an interest rate equal to the
then current year treasury rate plus a predetermined spread.
The 7.71% fixed rate Mortgage Loan requires monthly principal and interest
payments on a 25-year amortization schedule with a balloon payment due at
maturity in December, 2005.
The 8.00% Mortgage Loan requires monthly principal and interest payments on a
30-year amortization schedule with a balloon payment due at maturity in
September, 2005.
45
<PAGE> 46
MORTGAGE NOTES -- The Mortgage Notes bear interest at fixed rates ranging from
7.75% to 9.80% and require monthly interest and principal payments over the life
of the notes which range from the year 2002 to 2029. The weighted average
interest rate and debt maturity at December 31, 1997 for these nine Mortgage
Notes were 8.26% and 15.9 years, respectively.
TAX EXEMPT MORTGAGE NOTES -- The Tax Exempt Mortgage Notes bear interest at
fixed rates ranging from 6.95% to 7.25% and require monthly interest and
principal payments over the life of the notes. The weighted average interest
rate and debt maturity at December 31, 1997 for these two mortgage notes were
7.12% and 28.5 years, respectively.
UNSECURED NOTES -- The unsecured notes consist of $25.0 million of notes due
2002, $30.0 million of notes due 2003, $50.0 million of notes due 2004 and $50.0
million of notes due 2007 (collectively, the "Unsecured Notes"). The Unsecured
Notes required semi-annual interest payments until the end of the respective
terms.
UNSECURED BANK NOTES -- The unsecured bank debt financing consists of a $16.0
million note due 2002 and a $15.0 million note due 2000 (collectively, the
"Unsecured Bank Notes"). The notes require quarterly interest only payments
until the end of the respective terms.
UNSECURED CREDIT FACILITY -- The $150 million unsecured credit facility
("Unsecured Credit Facility") had an original three-year term and currently
bears interest at LIBOR + 110 basis points. The interest rate can be reduced
based upon an upgrade in the Company's unsecured credit rating. The Unsecured
Credit Facility provides $25 million for general working capital purposes with
the remainder available to finance development projects and acquisitions. The
Unsecured Credit Facility is repayable monthly on an interest-only basis with
the balance of all principal and accrued interest due no later than September
30, 1999. The Unsecured Credit Facility had an average interest rate of 6.73%
and 6.46% and an average balance outstanding of $53.9 million and $9.4 million
during the years ended December 31, 1997 and 1996, respectively. In addition,
the maximum outstanding during 1997 and 1996 was $121.9 million and $22.4
million, respectively.
The Company has a commitment for a new syndicated unsecured line of credit (the
"New Unsecured Credit Facility") in the amount of $175 million which will
replace the existing Unsecured Credit Facility. The New Unsecured Credit
Facility will provide funds for new development, acquisitions and general
working capital purposes. The New Unsecured Credit Facility will have a three
year term with two one-year extension options and will initially bear interest
at LIBOR + 90 basis points based upon the Company's current credit rating of
BBB- by Standard & Poor's Rating Services and Baa3 by Moody's Investors Service.
The interest rate will be reduced in the event of an upgrade of the Company's
unsecured credit rating. The New Unsecured Credit Facility is repayable monthly
on an interest only basis with principal due at maturity.
The New Unsecured Credit Facility also provides a bid option sub-facility equal
to a maximum of fifty percent of the total facility ($87.5 million). This
sub-facility provides the Company with the option to place borrowings in fixed
LIBOR contract periods of thirty, sixty, ninety and one hundred eighty days. The
Company may have up to seven fixed LIBOR contracts outstanding at any one time.
Upon proper notifications, all lenders in the New Unsecured Credit Facility may,
but are not obligated, to participate in a competitive bid auction for these
fixed LIBOR contracts.
The Unsecured Credit Facility and the Unsecured Notes require the Company to
comply with certain affirmative and negative covenants including the
requirements: (i) that the Company maintain its qualification as a REIT; (ii)
that the ratio of unencumbered assets to debt equal or exceed 150%; (iii) that
the ratio of debt to assets not exceed 60%; (iv) that the maximum secured debt
not exceed $350 million or 40% of assets; (v) that the Company maintain a debt
service ratio of not less than 1.75 to 1; and (vi) that the Company maintain a
ratio of adjusted funds flow, as defined, to debt of greater than .15 to 1.
VARIABLE RATE TAX EXEMPT BONDS -- The effective interest rate of the Variable
Rate Tax Exempt Bonds was 5.05% for the year ended December 31, 1997. These
bonds bear interest at various rates set by a remarketing agent at the demand
note index plus 0.50%, set weekly, or the lowest percentage of prime which
allows the resale at a price of par. The bonds contain covenants which require
that the Company lease or hold for lease 20% (or 25% under certain state or
local requirements) of the apartment homes for moderate-income residents. The
bonds require maintenance of letters of credit or surety bonds (credit
enhancements)
46
<PAGE> 47
aggregating $54.1 million. The credit enhancements on four of the five tax
exempt bonds ($45.2 million of debt) provide for a principal amortization
schedule which approximates a 25-year term during the term of the credit
enhancement.
Real estate assets with a net book value of $320.7 million serve as collateral
for the various debt agreements.
The aggregate maturities of all debt for each of the years ending December 31
are as follows (in thousands):
<TABLE>
<CAPTION>
FIXED RATE FIXED RATE FIXED RATE TAX EXEMPT UNSECURED
MORTGAGE MORTGAGE UNSECURED VARIABLE CREDIT
LOANS NOTES NOTES RATE BONDS FACILITY TOTAL
---------- ---------- ---------- ---------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
1998.................... $ 3,287 $ 866 $ 1,055 $ 5,208
1999.................... 3,497 935 1,105 $21,733 27,270
2000.................... 3,718 1,007 $ 15,000 1,130 -- 20,855
2001.................... 112,407 1,091 -- 1,150 -- 114,648
2002.................... 765 9,214 41,000 1,270 -- 52,249
Thereafter.............. 34,476 42,825 130,000 47,142 -- 254,443
-------- ------- -------- ---------- ------- --------
$158,150 $55,938 $186,000 $ 52,852 $21,733 $474,673
======== ======= ======== ========== ======= ========
</TABLE>
EXTRAORDINARY ITEMS -- The 1996 extraordinary item resulted from the write-off
of deferred financing costs on development loans repaid with the proceeds from
the 1996 Offering and with the proceeds of the $31.0 million Unsecured Notes.
The extraordinary item is net of $110,000 which was allocated to the minority
interest of the unitholders in the Operating Partnership, calculated on the
weighted average number of units outstanding.
The 1995 extraordinary items resulted from the write-off of deferred financing
costs on variable rate mortgage debt repaid with the proceeds from the 1995
Offering and with the proceeds of the $30 million Mortgage Loan, and from the
write-off of deferred financing costs related to the refunding of two variable
rate tax exempt bonds. The extraordinary items are net of $100,000 which was
allocated to the minority interest of the unitholders in the Operating
Partnership, calculated on the weighted average number of units outstanding.
6. MINORITY INTEREST
Minority interest consists of the following at December 31, 1997 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Minority interest of unitholders in Operating Partnership... $45,731 $46,202
Minority interest in one operating Community................ (402) (373)
------- -------
$45,329 $45,829
======= =======
</TABLE>
As of December 31, 1997, there were 27,438,400 Units outstanding of the
Operating Partnership, of which 23,411,086, or 85.3% were owned by the Company
and 4,027,314, or 14.7% were owned by other partners (including certain officers
and directors of the Company).
Proceeds from Common Stock issued by the Company are contributed to the
Operating Partnership for an equivalent number of Units. The following is a
summary of significant Units issued and the Company's ownership percentage
before and after each transaction for the years ended December 31, 1997 and
1996:
<TABLE>
<CAPTION>
COMPANY'S
OWNERSHIP AS A
PERCENTAGE OF THE
OPERATING
PARTNERSHIP
NUMBER OF PRICE PER DOLLAR VALUE ------------------
YEAR DESCRIPTION UNITS UNIT (IN THOUSANDS) BEFORE AFTER
- ---- ------------------------------ --------- --------- -------------- ------- -------
<C> <S> <C> <C> <C> <C> <C>
1996 Purchase of land.............. 106,330 $ 19.75 $ 2,100 80.77% 80.35%
1996 Issuance of stock............. 5,750,000 18.00 103,500 80.49% 84.74%
1997 Issuance of stock............. 315,029 21.62 6,813 84.81% 84.99%
1997 Summit Sand Lake purchase..... 438,103 20.25 8,872 85.02% 84.54%
</TABLE>
47
<PAGE> 48
In addition to the amounts in the above table, the Company issued shares of
Common Stock in exchange for Units owned by other partners on a one-for-one
basis. An aggregate of 192,463 shares and 9,474 shares were issued for Units in
1997 and 1996, respectively. The shares exchanged were valued based upon the
Company's market price per share and had an aggregate value of $3.9 million and
$167,000 in 1997 and 1996, respectively.
Units issued for land and the Summit Sand Lake purchase were valued based upon
the Company's market value price per share of Common Stock as the Units can be
exchanged for shares on a one-to-one basis. In addition, of the 438,103 Units
issued for the Summit Sand Lake purchase, 243,608 Units were issued to the
Company in exchange for the Company issuing 243,608 shares of Common Stock to
the seller of Summit Sand Lake.
7. ACQUISITIONS AND DISPOSITION
On April 1, 1996, the Company acquired its joint venture partner's interest in
Summit Plantation (formerly Plantation Cove), a 262 apartment community located
in Plantation, Florida. The Company paid $6.4 million in cash for the remaining
75% interest in the joint venture.
On January 6, 1997, the Company purchased Summit Portofino (formerly Portofino
Place), a 322 apartment community located in Broward County, Florida. Summit
Portofino, built in 1995, was purchased for $28.0 million in cash. Concurrently
with the purchase, the Company sold 315,029 shares of Common Stock to the public
for cash to fund a portion of the purchase.
On January 15, 1997, the Company purchased Summit Mayfaire (formerly The
Mayfaire), a 144 apartment community located in Raleigh, North Carolina. Summit
Mayfaire, built in 1995, was purchased for $9.65 million in cash.
On February 20, 1997, the Company purchased Summit Sand Lake (formerly The
Vining at Sand Lake), a 416 apartment community located in Orlando, Florida.
Summit Sand Lake, built in 1995, was purchased for $26.8 million. The Company
issued the seller 243,608 shares of Common Stock and 194,495 Units in the
Operating Partnership, assumed $15.2 million in debt and paid the remaining $2.7
million balance in cash.
On July 18, 1997, the Company purchased Summit Windsor II (formerly Avalon
Farms), a 306 apartment community located in Frederick, Maryland. Summit Windsor
II, which was developed by a predecessor entity of the Company in 1988, was
purchased for $17.1 million in cash. The Summit Windsor II purchase was
partially funded by the proceeds from the sale of Summit Charleston in May of
1997. Summit Charleston was sold for $9.5 million and a gain on the sale of
approximately $4.4 million was recognized.
On December 31, 1997, the Company purchased Summit Fair Oaks (formerly Fair Oaks
Gables), a 246 apartment community located in Fairfax, Virginia. Summit Fair
Oaks, built in 1990, was purchased for $21.2 million in cash.
The following summary of unaudited pro forma results of operations for the years
ended December 31, 1997 and 1996 presents information as if the Company's 1997
acquisitions and the 1996 acquisition had occurred at January 1, 1996. The pro
forma information for the years ended December 31, 1997 and 1996 is provided for
informational purposes only and is not indicative of results which would have
occurred or which may occur in the future.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Net revenues................................................ $121,208 $108,561
Income before extraordinary items........................... 26,709 16,911
Net income.................................................. 26,709 16,395
Earnings per share -- basic:
Income before extraordinary items......................... 1.15 .87
Net income................................................ 1.15 .84
</TABLE>
48
<PAGE> 49
Effective March 1, 1998, the Company purchased Summit St. Clair, a 336 apartment
community located in Atlanta, Georgia. Summit St. Clair completed construction
in 1997 and reached rental stabilization prior to purchase. The total purchase
price was approximately $26.3 million.
8. COMMITMENTS
The estimated cost to complete nine development projects currently under
construction was approximately $98.2 million at December 31, 1997. Anticipated
construction completion dates of the projects range from the first quarter of
1998 to the second quarter of 1999.
The Company rents office space in several locations. Rental expense for the
years ended December 31, 1997, 1996 and 1995 amounted to $101,000, $109,000 and
$125,000, respectively, ($347,000 in 1997, $376,000 in 1996 and $405,000 in 1995
including amounts recorded at the Management Company). Future minimum rental
payments for the next five years for those operating leases (including the
Management Company) that have initial or remaining non-cancelable lease terms in
excess of one year are as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31:
- ------------------------
<S> <C>
1998........................................................ $ 431
1999........................................................ 432
2000........................................................ 145
2001........................................................ 72
2002........................................................ 2
------
$1,082
======
</TABLE>
The Company has employment agreements with six executive officers. Five of these
agreements will expire on February 15, 1999 unless otherwise extended, and may
be terminated by the officer after giving 180 days prior written notice, without
breaching such agreements. One of these agreements provided for an original term
through February 16, 1996, and has been automatically extended until such time
as terminated pursuant to the terms of such executive officers' employment
agreement.
Each of the executive officers and the Chairman of the Board have
non-competition agreements with the Company which prohibit them, without the
prior written consent of the Board of Directors, from competing with the Company
for a period of the latter of (1) one year from the termination of their
employment with the Company, or (2) any period during which such individuals
receive severance payments.
The Company is obligated to redeem each Unit of interest in the Operating
Partnership at the request of the holder thereof for cash equal to the fair
market value of one share of Common Stock, except that the Company may elect to
acquire each Unit presented for redemption for one share of Common Stock. The
Company presently anticipates that it will elect to issue Common Stock in
connection with such redemption, rather than pay cash.
9. EMPLOYEE BENEFIT PLANS
PROFIT SHARING PLAN
The Company has a defined contribution plan pursuant to Section 401(k) of the
Internal Revenue Code which covers all employees with one year or greater
service. The Company's contributions are equal to one-half of each employee's
contribution up to a maximum of 3% of each employee's compensation. Aggregate
contributions of approximately $217,000, $223,000 and $191,000 were made for the
years ended December 31, 1997, 1996 and 1995, respectively.
STOCK OPTION PLAN
In 1994, the Company established the 1994 Stock Option Plan under which
1,000,000 shares of the Company's Common Stock were reserved for issuance. The
plan provides that the option price shall not be less than the fair market value
of the shares at the date of grant. The options vest in three or five annual
installments on the anniversaries of the date of grant except for shares granted
to independent directors of the Company, which vest on the date of grant.
49
<PAGE> 50
A summary of changes in common stock options for the three years ended December
31, 1997 is as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
OPTIONS EXERCISE PRICE
------- ----------------
<S> <C> <C>
Outstanding at January 1, 1995.............................. 429,900 $19.14
Year ended December 31, 1995
- ---------------------------------
Granted to employees...................................... 130,000 17.13
Forfeited................................................. (20,800) 19.72
-------
Outstanding at December 31, 1995....................... 539,100 18.64
Year ended December 31, 1996
- ---------------------------------
Granted to employees...................................... 28,000 19.30
Exercised................................................. (15,073) 19.04
Forfeited................................................. (53,381) 19.22
-------
Outstanding at December 31, 1996....................... 498,646 18.60
Year ended December 31, 1997
- ---------------------------------
Exercised................................................. (45,900) 18.55
Forfeited................................................. (36,350) 17.74
-------
Outstanding at December 31, 1997....................... 416,396 18.86
=======
</TABLE>
Exercise prices for options outstanding as of December 31, 1997 ranged from
$17.13 to $20.75. The weighted average remaining contractual life of those
options is 6.5 years.
As of December 31, 1997, 1996 and 1995 options to purchase 359,218, 283,228 and
132,784 shares, respectively, of Common Stock were exercisable. The weighted
average exercise price for the shares exercisable as of December 31, 1997, 1996
and 1995 was $18.86, $18.36 and $19.03, respectively.
The estimated weighted average fair value of options granted were $2.10 per
share in 1996 and $1.61 per share in 1995 (none granted in 1997). The Company
applies Accounting Principal Board Opinion No. 25 and related interpretations in
accounting for its stock options. Accordingly, no compensation cost has been
recognized for its stock options. Had compensation cost for the Company's stock
options been determined based on the fair value at the grant dates, consistent
with the method of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", the Company's net income and net
income per share for the years ended December 31, 1996 and 1995 would have
changed to the pro forma amounts indicated below (dollars in thousands except
per share amounts):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Pro forma net income........................................ $16,898 $11,808
Pro forma net income per share -- basic and diluted......... .89 .80
</TABLE>
The fair value of options granted during 1996 and 1995 were estimated on the
date of grant using the Binomial option-pricing model with the following
weighted-average assumptions: dividend yields ranging from 7.80% to 8.82%,
expected volatility of 16%, risk free interest rate of 6.52%, and expected lives
of ten years.
In addition, the plan provides for the issuance of stock grants to employees.
The Company granted 26,528 shares of restricted stock grants under the plan in
1997. The market value of the restricted stock grants totaled $546,000, which
was 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. Restricted stock grants
of 56,046 shares with a market value of $1.0 million were granted in the year
ended December 31, 1996. The Company recognized $292,000 and $223,000 of expense
in the statement of earnings in the years ended December 31, 1997 and 1996,
respectively, relative to the stock grants.
EMPLOYEE STOCK PURCHASE PLAN
In 1996, the Company established a non-qualified employee stock purchase plan.
The plan allows Company employees to purchase up to $100,000 per year of the
Company's Common Stock. The price of the shares of
50
<PAGE> 51
the Common Stock purchased will be the lesser of 85 percent of the closing price
of such shares either on (a) the first day of each six month purchase period, or
(b) the last day of each six month purchase period. Total shares issued under
the plan in 1997 and 1996 were 62,117 and 44,362 with a market value of $1.3
million and $871,000, respectively. An additional 18,525 shares with a market
value of $391,000 were issued in January, 1998 under the plan. The Company
recognized $265,000 and $151,000 of expense in the statement of earnings in the
years ended December 31, 1997 and 1996, respectively, relative to the employee
stock purchase plan.
10. DIVIDEND REINVESTMENT AND DIRECT STOCK PURCHASE PLAN
In November 1997, the Company replaced its existing dividend reinvestment plan
with a new dividend reinvestment and direct stock purchase plan. The plan
provides that shares of the Company's Common Stock can be purchased directly
from the Company at a discount from the market price (as defined in the plan
document) without brokerage commissions or service charges. Purchases are
generally limited to the reinvesting of the Company's dividends and optional
cash purchases of $100 to $10,000 (or any greater amount approved by the
Company) per month. On December 31, 1997, the Company received $6.5 million
under the plan for shares issued January 2, 1998. These proceeds are included in
accounts payable and accrued expenses at December 31, 1997.
11. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the years ended December 31,
1997, 1996 and 1995 are as follows:
A. In the year ended December 31, 1997, the Company purchased five
Communities (Summit Mayfaire, Summit Portofino, Summit Sand Lake, Summit
Windsor II and Summit Fair Oaks). The Company completed the purchase of
the five Communities by assuming debt, issuing 194,495 Operating
Partnership Units, issuing 243,608 shares of Common Stock, assuming
certain liabilities and current assets, and the payment of cash. The
recording of the purchases is summarized as follows (in thousands):
<TABLE>
<S> <C>
Fixed Assets................................................ $104,469
Current Assets.............................................. 30
Debt assumed................................................ (15,226)
Current liabilities assumed................................. (1,531)
Value of Operating Partnership Units issued................. (3,939)
Value of Common Stock issued................................ (4,933)
--------
Cash invested............................................... $ 78,870
========
</TABLE>
B. 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)
Minority interest........................................... (1,215)
--------
Net cash paid............................................... $ 6,360
========
</TABLE>
C. In the second quarter of 1995, the Company completed the acquisition of
twelve apartment Communities and 75% interest in another Community. The
Company purchased the communities by assuming debt, issuing
approximately 1.5 million Operating Partnership Units, assuming certain
51
<PAGE> 52
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................................................ $ 82,935
Restricted cash............................................. 1,427
Other assets................................................ 93
Debt assumed................................................ (52,576)
Current liabilities assumed................................. (996)
Minority interest........................................... 388
Value of units issued....................................... (26,190)
--------
Net cash paid............................................... $ 5,081
========
</TABLE>
D. The Company issued 26,528 and 52,086 (net of 3,960 shares issued but
subsequently retired) of restricted stock grants in 1997 and 1996 valued
at $546,000 and $1.0 million, respectively.
E. The Company accrued a dividend and distribution payable of $11.0
million, $10.2 million and $7.7 million at December 31, 1997, 1996 and
1995, respectively.
F. The Company issued 106,330 Units of the Operating Partnership, valued at
$2.1 million at issuance, for the purchase of land in 1996.
G. The Company issued 45,359 Units of interest in the Operating
Partnership, valued at $896,000 at issuance, for the purchase of land in
1995.
12. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
The following disclosures of estimated fair value were determined by management
using available market information and appropriate valuation methodologies.
However, considerable judgment is necessary to interpret market data and develop
the related estimates of fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts that could be realized upon
disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
Cash and cash equivalents, rents receivable, accounts payable, accrued expenses,
security deposits, other liabilities, tax-exempt bond indebtedness and the
credit facility are carried at amounts which reasonably approximate their fair
values at December 31, 1997.
Fixed rate mortgage debt and unsecured notes with a carrying value of $400
million have an estimated aggregate fair value of approximately $399.4 million
at December 31, 1997. Rates currently available to the Company for debt with
similar terms and maturities were used to estimate the fair value of this debt.
The fair value estimates presented herein are based on information available to
management as of December 31, 1997. Although management is not aware of any
factors that would significantly affect the estimated fair value amounts, such
amounts have not been comprehensively re-valued for purposes of these financial
statements since that date, and current estimates of fair value may differ
significantly from the amounts presented herein.
52
<PAGE> 53
13. GEOGRAPHIC CONCENTRATION
The Company's completed Communities are concentrated in three major regions as
follows:
<TABLE>
<CAPTION>
NUMBER APARTMENT
OF HOMES -- % OF
APARTMENT % 1997
MARKET HOMES OF PORTFOLIO REVENUES
- ------ --------- ------------ --------
<S> <C> <C> <C>
I-85 Corridor (Raleigh, NC to Atlanta, GA).............. 5,892 41% 38%
Central/South Florida................................... 4,663 33% 35%
Washington, DC/Virginia................................. 2,789 20% 20%
Other................................................... 872 6% 7%
--------- ------------ --------
14,216 100% 100%
========= ============ ========
</TABLE>
The above table does not include Summit Fair Oaks which was acquired on December
31, 1997.
14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly financial information for the years 1997 and 1996 are as follows (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues.................................................. $27,249 $28,103 $30,068 $31,257
Income before gain on sale of real estate
assets and minority interest of unitholders
in Operating Partnership................................ 6,928 6,856 6,948 6,836
Gain on sale of real estate assets........................ -- 4,366 -- --
Minority interest of unitholders in
Operating Partnership................................... (1,052) (1,729) (1,031) (1,006)
Net income................................................ 5,876 9,493 5,917 5,830
Net income per share -- basic and diluted................. 0.26 0.41 0.25 0.25
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues.................................................. $21,430 $23,062 $24,771 $25,226
Income before minority interest of unitholders
in Operating Partnership and
extraordinary items..................................... 4,237 4,345 5,740 6,865
Minority interest of unitholders in
Operating Partnership................................... (828) (850) (974) (1,071)
Extraordinary items....................................... -- -- (516) --
Net income................................................ 3,409 3,495 4,250 5,794
Income per share:
Income before extraordinary items -- basic
and diluted............................................. 0.21 0.21 0.24 0.26
Net income -- basic and diluted......................... 0.21 0.21 0.21 0.26
</TABLE>
53
<PAGE> 54
SUMMIT PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION SCHEDULE III
DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COSTS COSTS CARRIED AT CLOSE OF PERIOD
-------------------------- CAPITALIZED -------------------------------------
BUILDINGS SUBSEQUENT BUILDINGS
RELATED AND TO AND
APARTMENTS ENCUMBRANCES LAND IMPROVEMENTS(6) ACQUISITION LAND IMPROVEMENTS(6) TOTAL(1)
---------- ------------ -------- --------------- ----------- -------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Summit Arbors............ $ 780 $ 5,066 $ 210 $ 780 $ 5,276 $ 6,056
Summit Aventura.......... 6,367 25,075 6,368 25,074 31,442
Summit Ballantyne........ 2,060 14,171 2,060 14,171 16,231
Summit Beacon Ridge...... 1,053 5,839 1,154 5,738 6,892
Summit Belmont........... (4) 974 11,107 984 11,097 12,081
Summit Blue Ash.......... (2) 2,033 11,765 2,169 11,629 13,798
Summit Breckenridge...... 812 12,061 812 12,061 12,873
Summit Creek............. 1,430 9,125 258 1,430 9,383 10,813
Summit Creekside......... 2,837 414 3,614 382 414 3,996 4,410
Summit Crossing.......... 4,162 768 5,174 206 768 5,380 6,148
Summit Del Ray........... (2) 3,120 14,796 5,402 12,514 17,916
Summit East Ridge........ 5,100 900 6,303 267 910 6,560 7,470
Summit Eastchester....... 3,814 912 4,699 168 912 4,867 5,779
Summit Fair Oaks......... 4,356 17,215 0 4,356 17,215 21,571
Summit Fairview.......... 404 4,441 537 4,308 4,845
Summit Fairways.......... 2,819 15,088 2,819 15,088 17,907
Summit Foxcroft.......... 2,728 925 3,797 241 925 4,038 4,963
Summit Gateway........... (4) 1,738 10,431 2,256 9,913 12,169
Summit Glen.............. (2) 3,652 12,837 3,693 12,796 16,489
Summit Green............. 1,970 16,624 1,970 16,624 18,594
Summit Hampton........... (4) 2,577 13,223 2,972 12,828 15,800
Summit Heron's Run....... (2) 3,154 10,730 3,192 10,692 13,884
Summit Highland.......... (2) 1,374 6,249 1,374 6,249 7,623
Summit Hill.............. 2,698 8,500 10,014 2,698 18,514 21,212
Summit Hollow............ 4,809 1,470 7,463 442 1,472 7,903 9,375
Summit Lofts............. 1,800 7,337 667 1,800 8,004 9,804
Summit Mayfaire.......... 936 8,897 4 936 8,901 9,837
Summit McIntosh.......... 1,862 10,168 1,943 10,087 12,030
Summit Meadow............ (2) 2,313 8,483 2,539 8,257 10,796
Summit Norcroft.......... (2) 1,072 7,083 1,253 6,902 8,155
Summit Norcroft II....... 381 3,315 381 3,315 3,696
Summit Oak............... 2,553 400 3,065 32 400 3,097 3,497
Summit Old Town.......... 3,048 774 4,693 137 774 4,830 5,604
<CAPTION>
DEPRECIABLE
ACCUMULATED DATE OF DATE LIVES
APARTMENTS DEPRECIATION CONSTRUCTION ACQUIRED YEARS
---------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C>
Summit Arbors............ $ (528) 1986(5) 5/95 5-40 years
Summit Aventura.......... (1,791) 6/94-12/95 12/93 5-40 years
Summit Ballantyne........ (147) 7/96-12/97 12/95 5-40 years
Summit Beacon Ridge...... (1,882) 1/88-7/88 1/88 5-40 years
Summit Belmont........... (3,947) 1/86-5/87 1/86 5-40 years
Summit Blue Ash.......... (2,336) 1/92-5/92 1/91 5-40 years
Summit Breckenridge...... (4,346) 7/85-5/87 6/85 5-40 years
Summit Creek............. (1,402) 1983(5) 9/94 5-40 years
Summit Creekside......... (432) 1981(5) 5/95 5-40 years
Summit Crossing.......... (566) 1985(5) 5/95 5-40 years
Summit Del Ray........... (2,522) 1/92-2/93 1/92 5-40 years
Summit East Ridge........ (660) 1986(5) 6/95 5-40 years
Summit Eastchester....... (593) 1981(5) 5/95 5-40 years
Summit Fair Oaks......... - 1990(5) 12/97 5-40 years
Summit Fairview.......... (2,009) 3/82-3/83 3/82 5-40 years
Summit Fairways.......... (626) 9/95-12/96 8/95 5-40 years
Summit Foxcroft.......... (479) 1979(5) 5/95 5-40 years
Summit Gateway........... (3,215) 1/86-1/87 12/85 5-40 years
Summit Glen.............. (2,561) 5/90-8/92 4/90 5-40 years
Summit Green............. (991) 1/95-6/96 12/94 5-40 years
Summit Hampton........... (4,524) 11/86-3/88 10/86 5-40 years
Summit Heron's Run....... (2,817) 7/89-10/90 6/89 5-40 years
Summit Highland.......... (2,451) 3/86-1/87 11/85 5-40 years
Summit Hill.............. (1,883) 11/94-6/96 6/94 5-40 years
Summit Hollow............ (941) 1976(5) 5/95 5-40 years
Summit Lofts............. (1,270) 1990(5) 10/94 5-40 years
Summit Mayfaire.......... (292) 1995(5) 1/97 5-40 years
Summit McIntosh.......... (2,848) 7/89-6/90 1/89 5-40 years
Summit Meadow............ (2,317) 8/89-8/90 2/89 5-40 years
Summit Norcroft.......... (1,841) 2/90-3/91 12/89 5-40 years
Summit Norcroft II....... (15) 3/97-11/97 8/96 5-40 years
Summit Oak............... (357) 1982(5) 5/95 5-40 years
Summit Old Town.......... (576) 1979(5) 5/95 5-40 years
</TABLE>
54
<PAGE> 55
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH
INITIAL COSTS COSTS CARRIED AT CLOSE OF PERIOD
-------------------------- CAPITALIZED -------------------------------------
BUILDINGS SUBSEQUENT BUILDINGS
RELATED AND TO AND
APARTMENTS ENCUMBRANCES LAND IMPROVEMENTS(6) ACQUISITION LAND IMPROVEMENTS(6) TOTAL(1)
---------- ------------ -------- --------------- ----------- -------- --------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Summit On the River...... 3,212 20,734 3,212 20,734 23,946
Summit Palm Lake......... (2) 4,949 16,868 5,084 16,733 21,817
Summit Park.............. 1,680 11,078 1,921 10,837 12,758
Summit Perico............ (2) 1,588 11,939 2,174 11,353 13,527
Summit Pike Creek........ (4) 1,132 10,950 1,259 10,823 12,082
Summit Plantation........ 3,428 18,485 7 3,428 18,492 21,920
Summit Plantation II..... 4,012 17,292 4,012 17,292 21,304
Summit Portofino......... 3,864 24,504 15 3,864 24,519 28,383
Summit Providence........ (2) 3,043 17,362 3,391 17,014 20,405
Summit Radbourne......... 8,599 1,395 12,607 366 1,395 12,973 14,368
Summit Reston............ 5,434 26,255 499 5,434 26,754 32,188
Summit River Crossing.... 2,562 16,664 2,636 16,589 19,225
Summit Russett........... 3,995 19,217 3,995 19,217 23,212
Summit Sand Lake......... 14,985 4,160 22,979 72 4,160 23,051 27,211
Summit Sedgebrook........ 1,696 14,559 1,696 14,559 16,255
Summit Sherwood.......... 3,303 1,102 4,863 100 1,106 4,959 6,065
Summit Simsbury.......... (3) 650 4,570 163 650 4,733 5,383
Summit Springs........... (2) 2,575 12,297 2,667 12,205 14,872
Summit Square............ (2) 2,757 15,067 3,775 14,049 17,824
Summit Station........... 1,688 10,294 1,988 9,994 11,982
Summit Stony Point....... (4) 1,638 13,041 373 1,638 13,413 15,052
Summit Touchstone........ (3) 766 5,568 172 766 5,740 6,506
Summit Village........... (2) 3,212 14,069 3,653 13,628 17,281
Summit Walk.............. 568 237 5,462 983 5,284 6,267
Summit Waterford......... (2) 1,568 14,368 1,949 13,987 15,936
Summit Windsor........... (2) 644 6,329 969 6,004 6,973
Summit Windsor II........ 3,060 14,497 9 3,060 14,506 17,566
-------- -------- -------- -------- -------- --------
Total $124,676 $242,554 $462,838 $133,315 $696,749 $830,068
======== ======== ======== ======== ======== ========
<CAPTION>
DEPRECIABLE
ACCUMULATED DATE OF DATE LIVES
APARTMENTS DEPRECIATION CONSTRUCTION ACQUIRED YEARS
---------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C>
Summit On the River...... (687) 8/95-6/97 10/94 5-40 years
Summit Palm Lake......... (3,846) 3/90-2/92 1/90 5-40 years
Summit Park.............. (3,317) 4/88-4/89 1/88 5-40 years
Summit Perico............ (3,069) 1/89-2/90 8/88 5-40 years
Summit Pike Creek........ (3,724) 11/86-2/88 4/86 5-40 years
Summit Plantation........ (1,036) 1/94-7/95 4/96 5-40 years
Summit Plantation II..... (153) 10/96-11/97 9/96 5-40 years
Summit Portofino......... (763) 1995(5) 1/97 5-40 years
Summit Providence........ (4,886) 9/88-2/91 4/88 5-40 years
Summit Radbourne......... (1,098) 1991(5) 5/95 5-40 years
Summit Reston............ (3,872) 1987(5) 4/94 5-40 years
Summit River Crossing.... (915) 3/95-9/96 10/94 5-40 years
Summit Russett........... (393) 7/95-9/97 11/94 5-40 years
Summit Sand Lake......... (722) 1995(5) 2/97 5-40 years
Summit Sedgebrook........ (65) 6/96-12/97 1/96 5-40 years
Summit Sherwood.......... (592) 1968(5) 5/95 5-40 years
Summit Simsbury.......... (495) 1985(5) 5/95 5-40 years
Summit Springs........... (3,607) 12/88-4/90 12/88 5-40 years
Summit Square............ (3,613) 3/89-8/90 2/89 5-40 years
Summit Station........... (2,402) 10/89-9/90 9/89 5-40 years
Summit Stony Point....... (2,154) 1986(5) 2/94 5-40 years
Summit Touchstone........ (594) 1986(5) 5/95 5-40 years
Summit Village........... (3,413) 9/89-1/91 8/89 5-40 years
Summit Walk.............. (852) 4/92-2/93 4/92 5-40 years
Summit Waterford......... (3,756) 1/89-6/90 11/88 5-40 years
Summit Windsor........... (1,860) 8/88-8/89 3/95 5-40 years
Summit Windsor II........ (263) 1988(5) 7/97 5-40 years
---------
Total $(105,313)
=========
</TABLE>
(1) The aggregate cost for federal income tax purposes at December 31, 1997 is
$765.6 million.
(2) Encumbered by fixed rate mortgages of $149.6 million.
(3) Encumbered by fixed rate mortgage of $8.6 million.
(4) Collateral for $54.1 million of letters of credit which serve as collateral
for $52.9 million in tax exempt bonds.
(5) Property purchased by Company. Date reflects date construction completed.
(6) Includes furniture, fixtures and equipment.
55
<PAGE> 56
SCHEDULE III
SUMMIT PROPERTIES INC.
REAL ESTATE AND ACCUMULATED DEPRECIATION
(DOLLARS IN THOUSANDS)
A summary of activity for real estate assets and accumulated depreciation is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
REAL ESTATE ASSETS(1):
Balance at beginning of year............................. $618,102 $524,772 $407,707
-------- -------- --------
Acquisitions............................................. 104,469 21,913 82,935
Improvements............................................. 9,823 4,780 2,560
Developments............................................. 104,897 66,637 31,570
Disposition of property.................................. (7,223) -- --
-------- -------- --------
211,966 93,330 117,065
-------- -------- --------
Balance at end of year................................... $830,068 $618,102 $524,772
======== ======== ========
ACCUMULATED DEPRECIATION(1):
Balance at beginning of year............................. $ 85,031 $ 66,978 $ 51,957
Depreciation............................................. 22,610 18,053 15,021
Disposition of property.................................. (2,328) -- --
-------- -------- --------
Balance at end of year................................... $105,313 $ 85,031 $ 66,978
======== ======== ========
</TABLE>
(1) Includes only apartment communities and does not include fixed assets used
in property development, construction and management of apartment
communities.
56
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
on this 13th day of January, 1994, by and between WILLIAM F. PAULSEN, an
individual resident of the State of North Carolina (the "Executive"), SUMMIT
PROPERTIES INC., a Maryland corporation, and SUMMIT MANAGEMENT COMPANY, a
Maryland corporation. Summit Properties Inc. and Summit Management Company are
referred to herein collectively as the "Company";
W I T N E S S E T H:
WHEREAS, Executive has been employed by the Company or its affiliates
or certain of their predecessors for approximately twelve (12) years; and
WHEREAS, Executive will continue to be employed by the Company and one
or more of its affiliates after the initial public offering of the Common Stock
of Summit Properties Inc.; and
WHEREAS, the Company also desires to employ Executive, and Executive
desires to be employed by the Company on the terms and conditions contained in
this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement,
intending to be legally bound, hereby agree as follows:
Section 1. Employment.
Subject to the terms of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts such employment with the Company.
Executive initially shall serve as an officer of the Company in the
capacity(ies) of President and Chief Executive Officer of Summit Properties Inc.
and Vice President of Summit Management Company and initially shall have the
duties, rights and responsibilities normally associated with such position(s)
consistent with the Bylaws of summit Properties Inc. and Summit Management
Company, respectively, together with such other reasonable duties relating to
the operation of the business of the Company and its affiliates as may be
assigned to him from time to time by the Board of Directors of Summit Properties
Inc. (the "Board") or as may otherwise be provided in such Bylaws. Executive
shall devote his full business time, skills and best efforts to rendering
services on behalf of the Company and its affiliates and shall exercise such
care as is customarily required by executives undertaking similar duties for
entities similar to the Company.
<PAGE> 2
Section 2. Compensation; Expenses
2.1 Base Salary. Commencing on the Effective Date (as defined in ss.
3.1), the Company shall pay Executive during the term of Executive's employment
under this Agreement, a base salary equal to Two Hundred Twenty-Five Thousand
Dollars ($225,000) per annum (the "Base Salary"), which amount shall be subject
to adjustment, if any, in accordance with this ss. 2.1. The Compensation
Committee of the Board (the "Committee") shall review Executive's Base Salary on
an annual basis, and the Committee upon such review and in its sole discretion,
may increase or decrease Executive's Base Salary by an amount which the
Committee deems appropriate in light of the Company's and Executive's
performance during the period covered by such review; provided, however, that
Executive's Base Salary shall not be reduced below Two Hundred Twenty-Five
Thousand Dollars ($225,000) per annum. The Base Salary, less all applicable
withholding taxes, shall be paid to Executive in accordance with the payroll
procedures in effect with respect to officers of the Company.
2.2 Incentive Compensation. In addition to the Base Salary payable to
Executive pursuant to S 2.1 and any special compensatory arrangements which the
Committee provides for Executive, effective as of the Effective Date, Executive
shall be entitled to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Company, with the criteria for
Executive's participation in such plans to be established by the Committee in
its sole discretion.
2.3 Stock Options. Executive shall be entitled to participate in
employee stock option plans from time to time established for the benefit of
employees of the Company in accordance with the terms and conditions of such
plans.
2.4 Expenses. Executive shall be reimbursed for all reasonable
business-related expenses incurred by Executive at the request of or on behalf
of the Company.
2.5 Participation in Employee Benefit Plans. Executive shall be
entitled to participate in such medical, dental, disability, hospitalization,
life insurance, profit sharing and other benefit plans as the Company shall
maintain from time to time for the benefit of executive officers of the Company,
on the terms and subject to the conditions set forth in such plans. In addition,
during the term of this Agreement, Executive shall be entitled to a
comprehensive annual physical performed, at the Company's expense, by the
physician or medical group of Executive's choosing.
2.6 Vacation. In addition to Company holidays, Executive shall receive
such paid vacation time each year during the term of this Agreement consistent
with vacation policies of the Company for its executive officers. Any unused
vacation days in any year may not be carried over to subsequent years, and
Executive shall receive no additional compensation for any unused vacation days.
2
<PAGE> 3
2.7 Perquisites. Executive shall be entitled to be reimbursed for such
dining club dues and to receive such individual perquisites as are consistent
with the Company's policies applicable to its executive officers.
Section 3. Term of Employment
3.1 Term of Employment. Unless earlier terminated in accordance with
ss. 3.2, the employment of Executive under this Agreement shall commence as of
the date (the "Effective Date") Summit Properties Inc. successfully consummates
an initial public offering of its Common Stock, and shall continue up to, but
not including, the fifth anniversary of such date. Thereafter, Executives
employment under this Agreement shall be extended for such period, if any, as
agreed to by Executive and the Company.
3.2 Termination. Executive's employment under this Agreement may be
terminated
(a) by the Company upon the death of Executive (which shall be
referred to as a "Death Termination") or total disability of Executive
(total disability meaning the inability of Executive to perform his
normal required services under this Agreement for a period of six
consecutive months during the term of this Agreement by reason of
Executive's mental or physical disability, as determined by the Board
in good faith in its sole discretion) (which shall be referred to as a
"Disability Termination"); or
(b) by the Company for "cause," which shall exist only upon
the occurrence of one or more of the following: (i) Executive is
convicted of, pleads guilty to, or confesses to any felony or any act
of fraud, misappropriation or embezzlement which has an immediate and
materially adverse effect on the Company, as determined by the Board in
good faith in its sole discretion, (ii) Executive engages in a
fraudulent act to the material damage or prejudice of the Company or
any affiliate of the company or in conduct or activities materially
damaging to the property, business or reputation of the Company or any
affiliate of the Company, all as determined by the Board in good faith
in its sole discretion, (iii) any material act or omission by Executive
involving malfeasance or negligence in the performance of Executive's
duties to the Company to the material detriment of the Company, as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of any such act or omission, (iv) failure by
Executive to comply in any material respect with the terms of this
Agreement or any written policies or directives of the Board as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of such failure, or (v) material breach by
Executive of that certain noncompetition agreement between Executive
and the Company of even date herewith (the "Noncompetition Agreement")
as determined by the Board in good faith in its sole discretion (which
shall be referred to individually and collectively as a "For Cause
Termination"); or
3
<PAGE> 4
(c) by the Company for any reason other than a For Cause
Termination, Death Termination or Disability Termination and after
giving 180 days' prior written notice to Executive (which shall be
referred to as a "No Cause Termination"); or
(d) by Executive voluntarily for any reason other than an
Employee-Initiated Termination (as defined in ss. 3.2(e)) at any time
on or after the third anniversary of the Effective Date and after
giving 180 days' prior written notice to the Company (which shall be
referred to as a "Voluntary Termination"); or
(e) by Executive for "cause", which shall exist upon the
occurrence of either of the following, provided that in either case the
Board has not corrected such material reduction described below within
thirty (30) days after written notice by Executive of such material
reduction: (i) there is a material reduction in Executive's duties,
rights or responsibilities under this Agreement without his consent, or
(ii) there is a material decrease in the aggregate value of Executive's
compensation and benefits package from the Company without his consent,
other than a reduction in Executive's Base Salary that is permitted
under the provisions of 5 2.1 and other than a reduction in
compensation and/or benefits affecting a broad group of employees of
the Company as determined by the Board in good faith in its sole
discretion (which shall be referred to as an "Employee-Initiated
Termination").
Section 4. Result of Termination
4.1 Termination As Result of Voluntary Termination or For Cause
Termination. If Executive's employment under this Agreement is terminated as a
result of a Voluntary Termination or a For Cause Termination, Executive shall
not thereafter be entitled to receive any Base Salary for periods following such
termination; provided, however, that Executive shall be entitled to receive any
Base Salary which may be owed to Executive but is unpaid as of the date on which
Executive's employment is terminated.
4.2 Termination As Result of No Cause Termination or Employee-Initiated
Termination. If Executive's employment under this Agreement is terminated as a
result of a No Cause Termination or an Employee-Initiated Termination, Executive
shall be entitled to receive (i) any Base Salary which may be owed to Executive
but is unpaid as of the date on which Executive's employment is terminated and
(ii) his Base Salary as in effect on the date of such termination for the period
up to, but not including, the fifth anniversary of the Effective Date or, if
later, through the remainder of his term of employment under any extension of
this Agreement. The payment of such Base Salary pursuant to clause (ii) of the
preceding sentence shall be made at such intervals in accordance with the
Company's payroll procedures in effect from time to time with respect to
officers of the Company but no less frequently than monthly. In addition, in the
event of Executive's death following a No Cause Termination or an
Employee-Initiated Termination, any Base Salary payable to Executive under this
Section 4.2 and not yet paid on the date of Executive's death shall be paid to
Executive's designated beneficiary, if any, or if none, his surviving spouse or,
if none, his estate (collectively, the
4
<PAGE> 5
"Beneficiary"). Such payments shall be made to the Beneficiary at such times as
would otherwise have been payable to Executive under this Section 4.2; provided,
however, that the Company may in its discretion pay such Base Salary to the
Beneficiary in a lump sum payment in an amount determined in accordance with the
methodology set forth in subsection (B) of Section 4.3.
4.3 Termination as a Result of a Death Termination or a Disability
Termination. If Executive's employment under this Agreement is terminated as a
result of a Death Termination or a Disability Termination, (i) Executive (or, in
the case of a Death Termination, Executive's Beneficiary as defined in Section
4.2) shall be entitled to receive any Base Salary which may be owed to Executive
but is unpaid as of that date on which Executive's employment is terminated, and
(ii) Executive (or, in the case of a Death Termination, Executive's Beneficiary
as defined in Section 4.2) shall continue to receive Executive's Base Salary for
the period up to, but not including, the fifth anniversary of the Effective Date
or, if later, through the remainder of his term of employment under any
extension of this Agreement. In addition, the following provisions shall apply:
(A) If payment of Base Salary is to be made under clause
(ii) of this Section 4.3 due to a Disability
Termination, such Base Salary shall be paid at such
intervals in accordance with the Company's payroll
procedures in effect from time to time with respect
to officers of the Company but no less frequently
than monthly, and such Base Salary shall be offset by
any amounts payable to Executive under any long-term
disability plan sponsored by the Company or its
affiliates. In the event of Executive's death
following a Disability Termination, any Base Salary
payable to Executive under this Section 4.3 (taking
into account the offset described above, if any) and
not yet paid on the date of Executive's death shall
be paid to Executive's Beneficiary. Such payments
shall be made to the Beneficiary at such times as
would otherwise have been payable to Executive under
this subsection (A); provided, however, that the
Company may in its discretion pay such Base Salary to
the Beneficiary in a lump sum payment in an amount
determined in accordance with the methodology set
forth in subsection (B) of this Section 4.3.
(B) In the event of a Death Termination, payments to the
Beneficiary shall be made in a single lump sum as
soon as practical after Executive's's death. The
amount of such lump sum shall be equal to the present
value, determined using a 9% interest rate, of the
total amount of Base Salary payable to the
Beneficiary pursuant to this Section 4.3 and not yet
paid on the date of Executive's death.
4.4 Employee-Benefit Plans and Incentive Compensation and Other
Compensatory Arrangements. The benefits, if any, payable to or on behalf of
Executive upon his termination of employment from the Company under any employee
benefit plan or incentive compensation
5
<PAGE> 6
or other compensatory arrangement shall be governed by the terms and conditions
for benefit payments set forth in such plans and arrangements.
Section 5. Miscellaneous
5.1 Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon Executive and his executor, administrator, heirs, personal
representative and assigns, and the Company and its successors and assigns;
provided, however, that Executive shall not be entitled to assign or delegate
any of his rights or obligations hereunder without the prior written consent of
Company; and further provided that the Company shall not be entitled to assign
or delegate any of its rights or obligations hereunder except to a corporation,
partnership or other business entity that is, directly or indirectly, controlled
by or under common control with Summit Properties Inc.
5.2 Construction of Agreement. No provision of this Agreement or any
related document shall be construed against or interpreted to the disadvantage
of any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or drafted such
provision.
5.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
5.4 Survival of Agreements. All covenants and agreements made herein
shall survive the execution and delivery of this Agreement and the termination
of Executive's employment hereunder for any reason.
5.5 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.6 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to be given when delivered
personally or mailed first class, registered or certified mail, postage prepaid,
in either case, addressed as follows:
(a) If to Executive:
William F. Paulsen
2144 Rolston Drive
Charlotte, North Carolina 28207
6
<PAGE> 7
(b) If to the Company, addressed to:
Summit Properties Inc.
212 South Tryon Street, Suite 500
Charlotte, North Carolina 28281
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5.8 Entire Agreement. This Agreement, together with the Noncompetition
Agreement, constitutes the entire agreement of the parties with respect to the
subject matter hereof and upon the Effective Date, will supersede and replace
all prior agreements, written and oral, between the parties hereto or with
respect to the subject matter hereof. This Agreement may be modified only by a
written instrument signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
----------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
----------------------------------
Name: John T. Gray
Title: President
Collectively, the "Company"
/s/ William F. Paulsen [SEAL]
--------------------------------
William F. Paulsen
"Executive"
7
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
on this 13th day of January, 1994, by and between WILLIAM B. McGUIRE, JR., an
individual resident of the State of North Carolina (the "Executive"), SUMMIT
PROPERTIES INC., a Maryland corporation, and SUMMIT MANAGEMENT COMPANY, a
Maryland corporation. Summit Properties Inc. and Summit Management Company are
referred to herein collectively as the "Company";
W I T N E S S E T H:
WHEREAS, Executive has been employed by the Company or its affiliates
or certain of their predecessors for approximately twenty-one (21) years; and
WHEREAS, Executive will continue to be employed by the Company and one
or more of its affiliates after the initial public offering of the Common Stock
of Summit Properties Inc.; and
WHEREAS, the Company also desires to employ Executive, and Executive
desires to be employed by the Company on the terms and conditions contained in
this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement,
intending to be legally bound, hereby agree as follows:
Section 1. Employment.
Subject to the terms of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts such employment with the Company.
Executive initially shall serve as an officer of the Company in the
capacity(ies) of Chairman of the Board of Directors (the "Board") of Summit
Properties Inc. and Vice President of the Board of Directors of Summit
Management Company and initially shall have the duties, rights and
responsibilities normally associated with such position(s) consistent with the
Bylaws of summit Properties Inc. and Summit Management Company, respectively,
together with such other reasonable duties relating to the operation of the
business of the Company and its affiliates as may be assigned to him from time
to time by the Board or as may otherwise be provided in such Bylaws. Executive
shall devote his full business time, skills and best efforts to rendering
services on behalf of the Company and its affiliates and shall exercise such
care as is customarily required by executives undertaking similar duties for
entities similar to the Company.
Section 2. Compensation; Expenses
2.1 Base Salary. Commencing on the Effective Date (as defined in ss.
3.1), the Company shall pay Executive during the term of Executive's employment
under this
<PAGE> 2
Agreement, a base salary equal to One Hundred Twelve Thousand Five Hundred
Dollars ($112,500) per annum (the "Base Salary"), which amount shall be subject
to adjustment, if any, in accordance with this ss. 2.1. The Compensation
Committee of the Board (the "Committee") shall review Executive's Base Salary on
an annual basis, and the Committee upon such review and in its sole discretion,
may increase or decrease Executive's Base Salary by an amount which the
Committee deems appropriate in light of the Company's and Executive's
performance during the period covered by such review; provided, however, that
Executive's Base Salary shall not be reduced below One Hundred Twelve Thousand
Five Hundred Dollars ($112,500) per annum. The Base Salary, less all applicable
withholding taxes, shall be paid to Executive in accordance with the payroll
procedures in effect with respect to officers of the Company.
2.2 Incentive Compensation. In addition to the Base Salary payable to
Executive pursuant to S 2.1 and any special compensatory arrangements which the
Committee provides for Executive, effective as of the Effective Date, Executive
shall be entitled to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Company, with the criteria for
Executive's participation in such plans to be established by the Committee in
its sole discretion.
2.3 Stock Options. Executive shall be entitled to participate in
employee stock option plans from time to time established for the benefit of
employees of the Company in accordance with the terms and conditions of such
plans.
2.4 Expenses. Executive shall be reimbursed for all reasonable
business-related expenses incurred by Executive at the request of or on behalf
of the Company.
2.5 Participation in Employee Benefit Plans. Executive shall be
entitled to participate in such medical, dental, disability, hospitalization,
life insurance, profit sharing and other benefit plans as the Company shall
maintain from time to time for the benefit of executive officers of the Company,
on the terms and subject to the conditions set forth in such plans. In addition,
during the term of this Agreement, Executive shall be entitled to a
comprehensive annual physical performed, at the Company's expense, by the
physician or medical group of Executive's choosing.
2.6 Vacation. In addition to Company holidays, Executive shall receive
such paid vacation time each year during the term of this Agreement consistent
with vacation policies of the Company for its executive officers. Any unused
vacation days in any year may not be carried over to subsequent years, and
Executive shall receive no additional compensation for any unused vacation days.
2.7 Perquisites. Executive shall be entitled to be reimbursed for such
dining club dues and to receive such individual perquisites as are consistent
with the Company's policies applicable to its executive officers.
2
<PAGE> 3
Section 3. Term of Employment
3.1 Term of Employment. Unless earlier terminated in accordance with
ss. 3.2, the employment of Executive under this Agreement shall commence as of
the date (the "Effective Date") Summit Properties Inc. successfully consummates
an initial public offering of its Common Stock, and shall continue up to, but
not including, the fifth anniversary of such date. Thereafter, Executives
employment under this Agreement shall be extended for such period, if any, as
agreed to by Executive and the Company.
3.2 Termination. Executive's employment under this Agreement may be
terminated
(a) by the Company upon the death of Executive (which shall be
referred to as a "Death Termination") or total disability of Executive
(total disability meaning the inability of Executive to perform his
normal required services under this Agreement for a period of six
consecutive months during the term of this Agreement by reason of
Executive's mental or physical disability, as determined by the Board
in good faith in its sole discretion) (which shall be referred to as a
"Disability Termination"); or
(b) by the Company for "cause," which shall exist only upon
the occurrence of one or more of the following: (i) Executive is
convicted of, pleads guilty to, or confesses to any felony or any act
of fraud, misappropriation or embezzlement which has an immediate and
materially adverse effect on the Company, as determined by the Board in
good faith in its sole discretion, (ii) Executive engages in a
fraudulent act to the material damage or prejudice of the Company or
any affiliate of the company or in conduct or activities materially
damaging to the property, business or reputation of the Company or any
affiliate of the Company, all as determined by the Board in good faith
in its sole discretion, (iii) any material act or omission by Executive
involving malfeasance or negligence in the performance of Executive's
duties to the Company to the material detriment of the Company, as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of any such act or omission, (iv) failure by
Executive to comply in any material respect with the terms of this
Agreement or any written policies or directives of the Board as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of such failure, or (v) material breach by
Executive of that certain noncompetition agreement between Executive
and the Company of even date herewith (the "Noncompetition Agreement")
as determined by the Board in good faith in its sole discretion (which
shall be referred to individually and collectively as a "For Cause
Termination"); or
(c) by the Company for any reason other than a For Cause
Termination, Death Termination or Disability Termination and after
giving 180 days' prior written notice to Executive (which shall be
referred to as a "No Cause Termination"); or
3
<PAGE> 4
(d) by Executive voluntarily for any reason other than an
Employee-Initiated Termination (as defined in ss. 3.2(e)) at any time
on or after the third anniversary of the Effective Date and after
giving 180 days' prior written notice to the Company (which shall be
referred to as a "Voluntary Termination"); or
(e) by Executive for "cause", which shall exist upon the
occurrence of either of the following, provided that in either case the
Board has not corrected such material reduction described below within
thirty (30) days after written notice by Executive of such material
reduction: (i) there is a material reduction in Executive's duties,
rights or responsibilities under this Agreement without his consent, or
(ii) there is a material decrease in the aggregate value of Executive's
compensation and benefits package from the Company without his consent,
other than a reduction in Executive's Base Salary that is permitted
under the provisions of 5 2.1 and other than a reduction in
compensation and/or benefits affecting a broad group of employees of
the Company as determined by the Board in good faith in its sole
discretion (which shall be referred to as an "Employee-Initiated
Termination").
Section 4. Result of Termination
4.1 Termination As Result of Voluntary Termination or For Cause
Termination. If Executive's employment under this Agreement is terminated as a
result of a Voluntary Termination or a For Cause Termination, Executive shall
not thereafter be entitled to receive any Base Salary for periods following such
termination; provided, however, that Executive shall be entitled to receive any
Base Salary which may be owed to Executive but is unpaid as of the date on which
Executive's employment is terminated.
4.2 Termination As Result of No Cause Termination or Employee-Initiated
Termination. If Executive's employment under this Agreement is terminated as a
result of a No Cause Termination or an Employee-Initiated Termination, Executive
shall be entitled to receive (i) any Base Salary which may be owed to Executive
but is unpaid as of the date on which Executive's employment is terminated and
(ii) his Base Salary as in effect on the date of such termination for the period
up to, but not including, the fifth anniversary of the Effective Date or, if
later, through the remainder of his term of employment under any extension of
this Agreement. The payment of such Base Salary pursuant to clause (ii) of the
preceding sentence shall be made at such intervals in accordance with the
Company's payroll procedures in effect from time to time with respect to
officers of the Company but no less frequently than monthly. In addition, in the
event of Executive's death following a No Cause Termination or an
Employee-Initiated Termination, any Base Salary payable to Executive under this
Section 4.2 and not yet paid on the date of Executive's death shall be paid to
Executive's designated beneficiary, if any, or if none, his surviving spouse or,
if none, his estate (collectively, the "Beneficiary"). Such payments shall be
made to the Beneficiary at such times as would otherwise have been payable to
Executive under this Section 4.2; provided, however, that the Company may in its
discretion pay such Base Salary to the Beneficiary in a lump sum payment
4
<PAGE> 5
in an amount determined in accordance with the methodology set forth in
subsection (B) of Section 4.3.
4.3 Termination as a Result of a Death Termination or a Disability
Termination. If Executive's employment under this Agreement is terminated as a
result of a Death Termination or a Disability Termination, (i) Executive (or, in
the case of a Death Termination, Executive's Beneficiary as defined in Section
4.2) shall be entitled to receive any Base Salary which may be owed to Executive
but is unpaid as of that date on which Executive's employment is terminated, and
(ii) Executive (or, in the case of a Death Termination, Executive's Beneficiary
as defined in Section 4.2) shall continue to receive Executive's Base Salary for
the period up to, but not including, the fifth anniversary of the Effective Date
or, if later, through the remainder of his term of employment under any
extension of this Agreement. In addition, the following provisions shall apply:
(A) If payment of Base Salary is to be made under clause
(ii) of this Section 4.3 due to a Disability
Termination, such Base Salary shall be paid at such
intervals in accordance with the Company's payroll
procedures in effect from time to time with respect
to officers of the Company but no less frequently
than monthly, and such Base Salary shall be offset by
any amounts payable to Executive under any long-term
disability plan sponsored by the Company or its
affiliates. In the event of Executive's death
following a Disability Termination, any Base Salary
payable to Executive under this Section 4.3 (taking
into account the offset described above, if any) and
not yet paid on the date of Executive's death shall
be paid to Executive's Beneficiary. Such payments
shall be made to the Beneficiary at such times as
would otherwise have been payable to Executive under
this subsection (A); provided, however, that the
Company may in its discretion pay such Base Salary to
the Beneficiary in a lump sum payment in an amount
determined in accordance with the methodology set
forth in subsection (B) of this Section 4.3.
(B) In the event of a Death Termination, payments to the
Beneficiary shall be made in a single lump sum as
soon as practical after Executive's's death. The
amount of such lump sum shall be equal to the present
value, determined using a 9% interest rate, of the
total amount of Base Salary payable to the
Beneficiary pursuant to this Section 4.3 and not yet
paid on the date of Executive's death.
4.4 Employee-Benefit Plans and Incentive Compensation and Other
Compensatory Arrangements. The benefits, if any, payable to or on behalf of
Executive upon his termination of employment from the Company under any employee
benefit plan or incentive compensation or other compensatory arrangement shall
be governed by the terms and conditions for benefit payments set forth in such
plans and arrangements.
5
<PAGE> 6
Section 5. Miscellaneous
5.1 Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon Executive and his executor, administrator, heirs, personal
representative and assigns, and the Company and its successors and assigns;
provided, however, that Executive shall not be entitled to assign or delegate
any of his rights or obligations hereunder without the prior written consent of
Company; and further provided that the Company shall not be entitled to assign
or delegate any of its rights or obligations hereunder except to a corporation,
partnership or other business entity that is, directly or indirectly, controlled
by or under common control with Summit Properties Inc.
5.2 Construction of Agreement. No provision of this Agreement or any
related document shall be construed against or interpreted to the disadvantage
of any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or drafted such
provision.
5.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
5.4 Survival of Agreements. All covenants and agreements made herein
shall survive the execution and delivery of this Agreement and the termination
of Executive's employment hereunder for any reason.
5.5 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.6 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to be given when delivered
personally or mailed first class, registered or certified mail, postage prepaid,
in either case, addressed as follows:
(a) If to Executive:
William B. McGuire
1227 Scotland Avenue
Charlotte, North Carolina 28207
(b) If to the Company, addressed to:
Summit Properties Inc.
212 South Tryon Street, Suite 500
Charlotte, North Carolina 28281
6
<PAGE> 7
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5.8 Entire Agreement. This Agreement, together with the Noncompetition
Agreement, constitutes the entire agreement of the parties with respect to the
subject matter hereof and upon the Effective Date, will supersede and replace
all prior agreements, written and oral, between the parties hereto or with
respect to the subject matter hereof. This Agreement may be modified only by a
written instrument signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
---------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
---------------------------------
Name: John T. Gray
Title: President
Collectively, the "Company"
/s/ William B. McGuire [SEAL]
-------------------------------
William B. McGuire
"Executive"
7
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
on this 13th day of January, 1994, by and between RAYMOND V. JONES, an
individual resident of the State of North Carolina (the "Executive"), SUMMIT
PROPERTIES INC., a Maryland corporation, and SUMMIT MANAGEMENT COMPANY, a
Maryland corporation. Summit Properties Inc. and Summit Management Company are
referred to herein collectively as the "Company";
W I T N E S S E T H:
WHEREAS, Executive has been employed by the Company or its affiliates
or certain of their predecessors for approximately nine (9) years; and
WHEREAS, Executive will continue to be employed by the Company and one
or more of its affiliates after the initial public offering of the Common Stock
of Summit Properties Inc.; and
WHEREAS, the Company also desires to employ Executive, and Executive
desires to be employed by the Company on the terms and conditions contained in
this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement,
intending to be legally bound, hereby agree as follows:
Section 1. Employment.
Subject to the terms of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts such employment with the Company.
Executive initially shall serve as an officer of the Company in the
capacity(ies) of Executive Vice President and Chief Operating Officer/Charlotte
of Summit Properties Inc. and Vice President of Summit Management Company and
initially shall have the duties, rights and responsibilities normally associated
with such position(s) consistent with the Bylaws of summit Properties Inc. and
Summit Management Company, respectively, together with such other reasonable
duties relating to the operation of the business of the Company and its
affiliates as may be assigned to him from time to time by the Board of Directors
of Summit Properties Inc. (the "Board") or as may otherwise be provided in such
Bylaws. Executive shall devote his full business time, skills and best efforts
to rendering services on behalf of the Company and its affiliates and shall
exercise such care as is customarily required by executives undertaking similar
duties for entities similar to the Company.
<PAGE> 2
Section 2. Compensation; Expenses
2.1 Base Salary. Commencing on the Effective Date (as defined in ss.
3.1), the Company shall pay Executive during the term of Executive's employment
under this Agreement, a base salary equal to One Hundred Fifty Thousand Dollars
($150,000) per annum (the "Base Salary"), which amount shall be subject to
adjustment, if any, in accordance with this ss. 2.1. The Compensation Committee
of the Board (the "Committee") shall review Executive's Base Salary on an annual
basis, and the Committee upon such review and in its sole discretion, may
increase or decrease Executive's Base Salary by an amount which the Committee
deems appropriate in light of the Company's and Executive's performance during
the period covered by such review; provided, however, that Executive's Base
Salary shall not be reduced below One Hundred Fifty Thousand Dollars ($150,000)
per annum. The Base Salary, less all applicable withholding taxes, shall be paid
to Executive in accordance with the payroll procedures in effect with respect to
officers of the Company.
2.2 Incentive Compensation. In addition to the Base Salary payable to
Executive pursuant to S 2.1 and any special compensatory arrangements which the
Committee provides for Executive, effective as of the Effective Date, Executive
shall be entitled to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Company, with the criteria for
Executive's participation in such plans to be established by the Committee in
its sole discretion.
2.3 Stock Options. Executive shall be entitled to participate in
employee stock option plans from time to time established for the benefit of
employees of the Company in accordance with the terms and conditions of such
plans.
2.4 Expenses. Executive shall be reimbursed for all reasonable
business-related expenses incurred by Executive at the request of or on behalf
of the Company.
2.5 Participation in Employee Benefit Plans. Executive shall be
entitled to participate in such medical, dental, disability, hospitalization,
life insurance, profit sharing and other benefit plans as the Company shall
maintain from time to time for the benefit of executive officers of the Company,
on the terms and subject to the conditions set forth in such plans. In addition,
during the term of this Agreement, Executive shall be entitled to a
comprehensive annual physical performed, at the Company's expense, by the
physician or medical group of Executive's choosing.
2.6 Vacation. In addition to Company holidays, Executive shall receive
such paid vacation time each year during the term of this Agreement consistent
with vacation policies of the Company for its executive officers. Any unused
vacation days in any year may not be carried over to subsequent years, and
Executive shall receive no additional compensation for any unused vacation days.
2
<PAGE> 3
2.7 Perquisites. Executive shall be entitled to be reimbursed for such
dining club dues and to receive such individual perquisites as are consistent
with the Company's policies applicable to its executive officers.
Section 3. Term of Employment
3.1 Term of Employment. Unless earlier terminated in accordance with
ss. 3.2, the employment of Executive under this Agreement shall commence as of
the date (the "Effective Date") Summit Properties Inc. successfully consummates
an initial public offering of its Common Stock, and shall continue up to, but
not including, the fifth anniversary of such date. Thereafter, Executives
employment under this Agreement shall be extended for such period, if any, as
agreed to by Executive and the Company.
3.2 Termination. Executive's employment under this Agreement may be
terminated
(a) by the Company upon the death of Executive (which shall be
referred to as a "Death Termination") or total disability of Executive
(total disability meaning the inability of Executive to perform his
normal required services under this Agreement for a period of six
consecutive months during the term of this Agreement by reason of
Executive's mental or physical disability, as determined by the Board
in good faith in its sole discretion) (which shall be referred to as a
"Disability Termination"); or
(b) by the Company for "cause," which shall exist only upon
the occurrence of one or more of the following: (i) Executive is
convicted of, pleads guilty to, or confesses to any felony or any act
of fraud, misappropriation or embezzlement which has an immediate and
materially adverse effect on the Company, as determined by the Board in
good faith in its sole discretion, (ii) Executive engages in a
fraudulent act to the material damage or prejudice of the Company or
any affiliate of the company or in conduct or activities materially
damaging to the property, business or reputation of the Company or any
affiliate of the Company, all as determined by the Board in good faith
in its sole discretion, (iii) any material act or omission by Executive
involving malfeasance or negligence in the performance of Executive's
duties to the Company to the material detriment of the Company, as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of any such act or omission, (iv) failure by
Executive to comply in any material respect with the terms of this
Agreement or any written policies or directives of the Board as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of such failure, or (v) material breach by
Executive of that certain noncompetition agreement between Executive
and the Company of even date herewith (the "Noncompetition Agreement")
as determined by the Board in good faith in its sole discretion (which
shall be referred to individually and collectively as a "For Cause
Termination"); or
3
<PAGE> 4
(c) by the Company for any reason other than a For Cause
Termination, Death Termination or Disability Termination and after
giving 180 days' prior written notice to Executive (which shall be
referred to as a "No Cause Termination"); or
(d) by Executive voluntarily for any reason other than an
Employee-Initiated Termination (as defined in ss. 3.2(e)) at any time
on or after the third anniversary of the Effective Date and after
giving 180 days' prior written notice to the Company (which shall be
referred to as a "Voluntary Termination"); or
(e) by Executive for "cause", which shall exist upon the
occurrence of either of the following, provided that in either case the
Board has not corrected such material reduction described below within
thirty (30) days after written notice by Executive of such material
reduction: (i) there is a material reduction in Executive's duties,
rights or responsibilities under this Agreement without his consent, or
(ii) there is a material decrease in the aggregate value of Executive's
compensation and benefits package from the Company without his consent,
other than a reduction in Executive's Base Salary that is permitted
under the provisions of 5 2.1 and other than a reduction in
compensation and/or benefits affecting a broad group of employees of
the Company as determined by the Board in good faith in its sole
discretion (which shall be referred to as an "Employee-Initiated
Termination").
Section 4. Result of Termination
4.1 Termination As Result of Voluntary Termination or For Cause
Termination. If Executive's employment under this Agreement is terminated as a
result of a Voluntary Termination or a For Cause Termination, Executive shall
not thereafter be entitled to receive any Base Salary for periods following such
termination; provided, however, that Executive shall be entitled to receive any
Base Salary which may be owed to Executive but is unpaid as of the date on which
Executive's employment is terminated.
4.2 Termination As Result of No Cause Termination or Employee-Initiated
Termination. If Executive's employment under this Agreement is terminated as a
result of a No Cause Termination or an Employee-Initiated Termination, Executive
shall be entitled to receive (i) any Base Salary which may be owed to Executive
but is unpaid as of the date on which Executive's employment is terminated and
(ii) his Base Salary as in effect on the date of such termination for the period
up to, but not including, the fifth anniversary of the Effective Date or, if
later, through the remainder of his term of employment under any extension of
this Agreement. The payment of such Base Salary pursuant to clause (ii) of the
preceding sentence shall be made at such intervals in accordance with the
Company's payroll procedures in effect from time to time with respect to
officers of the Company but no less frequently than monthly. In addition, in the
event of Executive's death following a No Cause Termination or an
Employee-Initiated Termination, any Base Salary payable to Executive under this
Section 4.2 and not yet paid on the date of Executive's death shall be paid to
Executive's designated beneficiary, if any, or if none, his surviving spouse or,
if none, his estate (collectively, the
4
<PAGE> 5
"Beneficiary"). Such payments shall be made to the Beneficiary at such times as
would otherwise have been payable to Executive under this Section 4.2; provided,
however, that the Company may in its discretion pay such Base Salary to the
Beneficiary in a lump sum payment in an amount determined in accordance with the
methodology set forth in subsection (B) of Section 4.3.
4.3 Termination as a Result of a Death Termination or a Disability
Termination. If Executive's employment under this Agreement is terminated as a
result of a Death Termination or a Disability Termination, (i) Executive (or, in
the case of a Death Termination, Executive's Beneficiary as defined in Section
4.2) shall be entitled to receive any Base Salary which may be owed to Executive
but is unpaid as of that date on which Executive's employment is terminated, and
(ii) Executive (or, in the case of a Death Termination, Executive's Beneficiary
as defined in Section 4.2) shall continue to receive Executive's Base Salary for
the period up to, but not including, the fifth anniversary of the Effective Date
or, if later, through the remainder of his term of employment under any
extension of this Agreement. In addition, the following provisions shall apply:
(A) If payment of Base Salary is to be made under clause
(ii) of this Section 4.3 due to a Disability
Termination, such Base Salary shall be paid at such
intervals in accordance with the Company's payroll
procedures in effect from time to time with respect
to officers of the Company but no less frequently
than monthly, and such Base Salary shall be offset by
any amounts payable to Executive under any long-term
disability plan sponsored by the Company or its
affiliates. In the event of Executive's death
following a Disability Termination, any Base Salary
payable to Executive under this Section 4.3 (taking
into account the offset described above, if any) and
not yet paid on the date of Executive's death shall
be paid to Executive's Beneficiary. Such payments
shall be made to the Beneficiary at such times as
would otherwise have been payable to Executive under
this subsection (A); provided, however, that the
Company may in its discretion pay such Base Salary to
the Beneficiary in a lump sum payment in an amount
determined in accordance with the methodology set
forth in subsection (B) of this Section 4.3.
(B) In the event of a Death Termination, payments to the
Beneficiary shall be made in a single lump sum as
soon as practical after Executive's's death. The
amount of such lump sum shall be equal to the present
value, determined using a 9% interest rate, of the
total amount of Base Salary payable to the
Beneficiary pursuant to this Section 4.3 and not yet
paid on the date of Executive's death.
4.4 Employee-Benefit Plans and Incentive Compensation and Other
Compensatory Arrangements. The benefits, if any, payable to or on behalf of
Executive upon his termination of employment from the Company under any employee
benefit plan or incentive compensation
5
<PAGE> 6
or other compensatory arrangement shall be governed by the terms and conditions
for benefit payments set forth in such plans and arrangements.
Section 5. Miscellaneous
5.1 Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon Executive and his executor, administrator, heirs, personal
representative and assigns, and the Company and its successors and assigns;
provided, however, that Executive shall not be entitled to assign or delegate
any of his rights or obligations hereunder without the prior written consent of
Company; and further provided that the Company shall not be entitled to assign
or delegate any of its rights or obligations hereunder except to a corporation,
partnership or other business entity that is, directly or indirectly, controlled
by or under common control with Summit Properties Inc.
5.2 Construction of Agreement. No provision of this Agreement or any
related document shall be construed against or interpreted to the disadvantage
of any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or drafted such
provision.
5.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
5.4 Survival of Agreements. All covenants and agreements made herein
shall survive the execution and delivery of this Agreement and the termination
of Executive's employment hereunder for any reason.
5.5 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.6 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to be given when delivered
personally or mailed first class, registered or certified mail, postage prepaid,
in either case, addressed as follows:
(a) If to Executive:
Raymond V. Jones
2122 Cloister Drive
Charlotte, North Carolina 28211
6
<PAGE> 7
(b) If to the Company, addressed to:
Summit Properties Inc.
212 South Tryon Street, Suite 500
Charlotte, North Carolina 28281
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5.8 Entire Agreement. This Agreement, together with the Noncompetition
Agreement, constitutes the entire agreement of the parties with respect to the
subject matter hereof and upon the Effective Date, will supersede and replace
all prior agreements, written and oral, between the parties hereto or with
respect to the subject matter hereof. This Agreement may be modified only by a
written instrument signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
-----------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
-----------------------------------
Name: John T. Gray
Title: President
Collectively, the "Company"
/s/ Raymond V. Jones [SEAL]
---------------------------------
Raymond V. Jones
"Executive"
7
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
on this 13th day of February, 1994, by and between DAVID F. TUFARO, an
individual resident of the State of Maryland (the "Executive"), SUMMIT
PROPERTIES INC., a Maryland corporation, and SUMMIT MANAGEMENT COMPANY, a
Maryland corporation. Summit Properties Inc. and Summit Management Company are
referred to herein collectively as the "Company";
W I T N E S S E T H:
WHEREAS, Executive has been employed by the Company or its affiliates
or certain of their predecessors for approximately nine (9) years; and
WHEREAS, Executive will continue to be employed by the Company and one
or more of its affiliates after the initial public offering of the Common Stock
of Summit Properties Inc.; and
WHEREAS, the Company also desires to employ Executive, and Executive
desires to be employed by the Company on the terms and conditions contained in
this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement,
intending to be legally bound, hereby agree as follows:
Section 1. Employment.
Subject to the terms of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts such employment with the Company.
Executive initially shall serve as an officer of the Company in the
capacity(ies) of Executive Vice President and Chief Operating Officer/Baltimore
of Summit Properties Inc. and Vice President of Summit Management Company and
initially shall have the duties, rights and responsibilities normally associated
with such position(s) consistent with the Bylaws of summit Properties Inc. and
Summit Management Company, respectively, together with such other reasonable
duties relating to the operation of the business of the Company and its
affiliates as may be assigned to him from time to time by the Board of Directors
of Summit Properties Inc. (the "Board") or as may otherwise be provided in such
Bylaws. Executive shall devote his full business time, skills and best efforts
to rendering services on behalf of the Company and its affiliates and shall
exercise such care as is customarily required by executives undertaking similar
duties for entities similar to the Company.
<PAGE> 2
Section 2. Compensation; Expenses
2.1 Base Salary. Commencing on the Effective Date (as defined in ss.
3.1), the Company shall pay Executive during the term of Executive's employment
under this Agreement, a base salary equal to One Hundred Fifty Thousand Dollars
($150,000) per annum (the "Base Salary"), which amount shall be subject to
adjustment, if any, in accordance with this ss. 2.1. The Compensation Committee
of the Board (the "Committee") shall review Executive's Base Salary on an annual
basis, and the Committee upon such review and in its sole discretion, may
increase or decrease Executive's Base Salary by an amount which the Committee
deems appropriate in light of the Company's and Executive's performance during
the period covered by such review; provided, however, that Executive's Base
Salary shall not be reduced below One Hundred Fifty Thousand Dollars ($150,000)
per annum. The Base Salary, less all applicable withholding taxes, shall be paid
to Executive in accordance with the payroll procedures in effect with respect to
officers of the Company.
2.2 Incentive Compensation. In addition to the Base Salary payable to
Executive pursuant to S 2.1 and any special compensatory arrangements which the
Committee provides for Executive, effective as of the Effective Date, Executive
shall be entitled to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Company, with the criteria for
Executive's participation in such plans to be established by the Committee in
its sole discretion.
2.3 Stock Options. Executive shall be entitled to participate in
employee stock option plans from time to time established for the benefit of
employees of the Company in accordance with the terms and conditions of such
plans.
2.4 Expenses. Executive shall be reimbursed for all reasonable
business-related expenses incurred by Executive at the request of or on behalf
of the Company.
2.5 Participation in Employee Benefit Plans. Executive shall be
entitled to participate in such medical, dental, disability, hospitalization,
life insurance, profit sharing and other benefit plans as the Company shall
maintain from time to time for the benefit of executive officers of the Company,
on the terms and subject to the conditions set forth in such plans. In addition,
during the term of this Agreement, Executive shall be entitled to a
comprehensive annual physical performed, at the Company's expense, by the
physician or medical group of Executive's choosing.
2.6 Vacation. In addition to Company holidays, Executive shall receive
such paid vacation time each year during the term of this Agreement consistent
with vacation policies of the Company for its executive officers. Any unused
vacation days in any year may not be carried over to subsequent years, and
Executive shall receive no additional compensation for any unused vacation days.
2
<PAGE> 3
2.7 Perquisites. Executive shall be entitled to be reimbursed for such
dining club dues and to receive such individual perquisites as are consistent
with the Company's policies applicable to its executive officers.
Section 3. Term of Employment
3.1 Term of Employment. Unless earlier terminated in accordance with
ss. 3.2, the employment of Executive under this Agreement shall commence as of
the date (the "Effective Date") Summit Properties Inc. successfully consummates
an initial public offering of its Common Stock, and shall continue up to, but
not including, the second anniversary of such date (the "Original Term").
Following the Original Term, the employment relationship under this Agreement
shall automatically continue unless and until terminated in accordance with
ss.3.2.
3.2 Termination. Executive's employment under this Agreement may be
terminated
(a) by the Company upon the death of Executive (which shall be
referred to as a "Death Termination") or total disability of Executive
(total disability meaning the inability of Executive to perform his
normal required services under this Agreement for a period of six
consecutive months during the term of this Agreement by reason of
Executive's mental or physical disability, as determined by the Board
in good faith in its sole discretion) (which shall be referred to as a
"Disability Termination"); or
(b) by the Company for "cause," which shall exist only upon
the occurrence of one or more of the following: (i) Executive is
convicted of, pleads guilty to, or confesses to any felony or any act
of fraud, misappropriation or embezzlement which has an immediate and
materially adverse effect on the Company, as determined by the Board in
good faith in its sole discretion, (ii) Executive engages in a
fraudulent act to the material damage or prejudice of the Company or
any affiliate of the company or in conduct or activities materially
damaging to the property, business or reputation of the Company or any
affiliate of the Company, all as determined by the Board in good faith
in its sole discretion, (iii) any material act or omission by Executive
involving malfeasance or negligence in the performance of Executive's
duties to the Company to the material detriment of the Company, as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of any such act or omission, (iv) failure by
Executive to comply in any material respect with the terms of this
Agreement or any written policies or directives of the Board as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of such failure, or (v) material breach by
Executive of that certain noncompetition agreement between Executive
and the Company of even date herewith (the "Noncompetition Agreement")
as determined by the Board in good faith in its sole discretion (which
shall be referred to individually and collectively as a "For Cause
Termination"); or
3
<PAGE> 4
(c) by the Company for any reason other than a For Cause
Termination, Death Termination or Disability Termination and after
giving 180 days' prior written notice to Executive (which shall be
referred to as a "No Cause Termination"); or
(d) by Executive voluntarily for any reason other than an
Employee-Initiated Termination (as defined in ss. 3.2(e)) at any time
on or after the third anniversary of the Effective Date and after
giving 180 days' prior written notice to the Company (which shall be
referred to as a "Voluntary Termination"); or
(e) by Executive for "cause", which shall exist upon the
occurrence of either of the following, provided that in either case the
Board has not corrected such material reduction described below within
thirty (30) days after written notice by Executive of such material
reduction: (i) there is a material reduction in Executive's duties,
rights or responsibilities under this Agreement without his consent, or
(ii) there is a material decrease in the aggregate value of Executive's
compensation and benefits package from the Company without his consent,
other than a reduction in Executive's Base Salary that is permitted
under the provisions of 5 2.1 and other than a reduction in
compensation and/or benefits affecting a broad group of employees of
the Company as determined by the Board in good faith in its sole
discretion (which shall be referred to as an "Employee-Initiated
Termination").
Section 4. Result of Termination
4.1 Termination As Result of Voluntary Termination or For Cause
Termination. If Executive's employment under this Agreement is terminated as a
result of a Voluntary Termination or a For Cause Termination, Executive shall
not thereafter be entitled to receive any Base Salary for periods following such
termination; provided, however, that Executive shall be entitled to receive any
Base Salary which may be owed to Executive but is unpaid as of the date on which
Executive's employment is terminated.
4.2 Termination As Result of No Cause Termination or Employee-Initiated
Termination. If Executive's employment under this Agreement is terminated as a
result of a No Cause Termination or an Employee-Initiated Termination, Executive
shall be entitled to receive (i) any Base Salary which may be owed to Executive
but is unpaid as of the date on which Executive's employment is terminated and
(ii) his Base Salary as in effect on the date of such termination for the period
up to, but not including, the fifth anniversary of the Effective Date or, if
later, through the remainder of his term of employment under any extension of
this Agreement. The payment of such Base Salary pursuant to clause (ii) of the
preceding sentence shall be made at such intervals in accordance with the
Company's payroll procedures in effect from time to time with respect to
officers of the Company but no less frequently than monthly. In addition, in the
event of Executive's death following a No Cause Termination or an
Employee-Initiated Termination, any Base Salary payable to Executive under this
Section 4.2 and not yet paid on the date of Executive's death shall be paid to
Executive's designated beneficiary, if any, or if none, his surviving spouse or,
if none, his estate (collectively, the
4
<PAGE> 5
"Beneficiary"). Such payments shall be made to the Beneficiary at such times as
would otherwise have been payable to Executive under this Section 4.2; provided,
however, that the Company may in its discretion pay such Base Salary to the
Beneficiary in a lump sum payment in an amount determined in accordance with the
methodology set forth in subsection (B) of Section 4.3.
4.3 Termination as a Result of a Death Termination or a Disability
Termination. If Executive's employment under this Agreement is terminated as a
result of a Death Termination or a Disability Termination, (i) Executive (or, in
the case of a Death Termination, Executive's Beneficiary as defined in Section
4.2) shall be entitled to receive any Base Salary which may be owed to Executive
but is unpaid as of that date on which Executive's employment is terminated, and
(ii) Executive (or, in the case of a Death Termination, Executive's Beneficiary
as defined in Section 4.2) shall continue to receive Executive's Base Salary for
the period up to, but not including, the fifth anniversary of the Effective Date
or, if later, through the remainder of his term of employment under any
extension of this Agreement. In addition, the following provisions shall apply:
(A) If payment of Base Salary is to be made under clause
(ii) of this Section 4.3 due to a Disability
Termination, such Base Salary shall be paid at such
intervals in accordance with the Company's payroll
procedures in effect from time to time with respect
to officers of the Company but no less frequently
than monthly, and such Base Salary shall be offset by
any amounts payable to Executive under any long-term
disability plan sponsored by the Company or its
affiliates. In the event of Executive's death
following a Disability Termination, any Base Salary
payable to Executive under this Section 4.3 (taking
into account the offset described above, if any) and
not yet paid on the date of Executive's death shall
be paid to Executive's Beneficiary. Such payments
shall be made to the Beneficiary at such times as
would otherwise have been payable to Executive under
this subsection (A); provided, however, that the
Company may in its discretion pay such Base Salary to
the Beneficiary in a lump sum payment in an amount
determined in accordance with the methodology set
forth in subsection (B) of this Section 4.3.
(B) In the event of a Death Termination, payments to the
Beneficiary shall be made in a single lump sum as
soon as practical after Executive's's death. The
amount of such lump sum shall be equal to the present
value, determined using a 9% interest rate, of the
total amount of Base Salary payable to the
Beneficiary pursuant to this Section 4.3 and not yet
paid on the date of Executive's death.
4.4 Employee-Benefit Plans and Incentive Compensation and Other
Compensatory Arrangements. The benefits, if any, payable to or on behalf of
Executive upon his termination of employment from the Company under any employee
benefit plan or incentive compensation
5
<PAGE> 6
or other compensatory arrangement shall be governed by the terms and conditions
for benefit payments set forth in such plans and arrangements.
Section 5. Miscellaneous
5.1 Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon Executive and his executor, administrator, heirs, personal
representative and assigns, and the Company and its successors and assigns;
provided, however, that Executive shall not be entitled to assign or delegate
any of his rights or obligations hereunder without the prior written consent of
Company; and further provided that the Company shall not be entitled to assign
or delegate any of its rights or obligations hereunder except to a corporation,
partnership or other business entity that is, directly or indirectly, controlled
by or under common control with Summit Properties Inc.
5.2 Construction of Agreement. No provision of this Agreement or any
related document shall be construed against or interpreted to the disadvantage
of any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or drafted such
provision.
5.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
5.4 Survival of Agreements. All covenants and agreements made herein
shall survive the execution and delivery of this Agreement and the termination
of Executive's employment hereunder for any reason.
5.5 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.6 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to be given when delivered
personally or mailed first class, registered or certified mail, postage prepaid,
in either case, addressed as follows:
(a) If to Executive:
David F. Tufaro
216 Edgevale Road
Baltimore, Maryland 21210
6
<PAGE> 7
(b) If to the Company, addressed to:
Summit Properties Inc.
212 South Tryon Street, Suite 500
Charlotte, North Carolina 28281
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5.8 Entire Agreement. This Agreement, together with the Noncompetition
Agreement, constitutes the entire agreement of the parties with respect to the
subject matter hereof and upon the Effective Date, will supersede and replace
all prior agreements, written and oral, between the parties hereto or with
respect to the subject matter hereof. This Agreement may be modified only by a
written instrument signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
---------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
---------------------------------
Name: John T. Gray
Title: President
Collectively, the "Company"
/s/ David F. Tufaro [SEAL]
-------------------------------
David F. Tufaro
"Executive"
7
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
on this 13th day of January, 1994, by and between JOHN C. MOORE, an individual
resident of the State of North Carolina (the "Executive"), SUMMIT PROPERTIES
INC., a Maryland corporation, and SUMMIT MANAGEMENT COMPANY, a Maryland
corporation. Summit Properties Inc. and Summit Management Company are referred
to herein collectively as the "Company";
W I T N E S S E T H:
WHEREAS, Executive has been employed by the Company or its affiliates
or certain of their predecessors for approximately twelve (12) years; and
WHEREAS, Executive will continue to be employed by the Company and one
or more of its affiliates after the initial public offering of the Common Stock
of Summit Properties Inc.; and
WHEREAS, the Company also desires to employ Executive, and Executive
desires to be employed by the Company on the terms and conditions contained in
this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement,
intending to be legally bound, hereby agree as follows:
Section 1. Employment.
Subject to the terms of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts such employment with the Company.
Executive initially shall serve as an officer of the Company in the
capacity(ies) of Senior Vice President, Treasurer and Controller of Summit
Properties Inc. and Treasurer and Controller of Summit Management Company and
initially shall have the duties, rights and responsibilities normally associated
with such position(s) consistent with the Bylaws of summit Properties Inc. and
Summit Management Company, respectively, together with such other reasonable
duties relating to the operation of the business of the Company and its
affiliates as may be assigned to him from time to time by the Board of Directors
of Summit Properties Inc. (the "Board") or as may otherwise be provided in such
Bylaws. Executive shall devote his full business time, skills and best efforts
to rendering services on behalf of the Company and its affiliates and shall
exercise such care as is customarily required by executives undertaking similar
duties for entities similar to the Company.
<PAGE> 2
Section 2. Compensation; Expenses
2.1 Base Salary. Commencing on the Effective Date (as defined in ss.
3.1), the Company shall pay Executive during the term of Executive's employment
under this Agreement, a base salary equal to $110,000 per annum (the "Base
Salary"), which amount shall be subject to adjustment, if any, in accordance
with this ss. 2.1. The Compensation Committee of the Board (the "Committee")
shall review Executive's Base Salary on an annual basis, and the Committee upon
such review and in its sole discretion, may increase or decrease Executive's
Base Salary by an amount which the Committee deems appropriate in light of the
Company's and Executive's performance during the period covered by such review.
The Base Salary, less all applicable withholding taxes, shall be paid to
Executive in accordance with the payroll procedures in effect with respect to
officers of the Company.
2.2 Incentive Compensation. In addition to the Base Salary payable to
Executive pursuant to S 2.1 and any special compensatory arrangements which the
Committee provides for Executive, effective as of the Effective Date, Executive
shall be entitled to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Company, with the criteria for
Executive's participation in such plans to be established by the Committee in
its sole discretion.
2.3 Stock Options. Executive shall be entitled to participate in
employee stock option plans from time to time established for the benefit of
employees of the Company in accordance with the terms and conditions of such
plans.
2.4 Expenses. Executive shall be reimbursed for all reasonable
business-related expenses incurred by Executive at the request of or on behalf
of the Company.
2.5 Participation in Employee Benefit Plans. Executive shall be
entitled to participate in such medical, dental, disability, hospitalization,
life insurance, profit sharing and other benefit plans as the Company shall
maintain from time to time for the benefit of executive officers of the Company,
on the terms and subject to the conditions set forth in such plans. In addition,
during the term of this Agreement, Executive shall be entitled to a
comprehensive annual physical performed, at the Company's expense, by the
physician or medical group of Executive's choosing.
2.6 Vacation. In addition to Company holidays, Executive shall receive
such paid vacation time each year during the term of this Agreement consistent
with vacation policies of the Company for its executive officers. Any unused
vacation days in any year may not be carried over to subsequent years, and
Executive shall receive no additional compensation for any unused vacation days.
2.7 Perquisites. Executive shall be entitled to be reimbursed for such
dining club dues and to receive such individual perquisites as are consistent
with the Company's policies applicable to its executive officers.
2
<PAGE> 3
Section 3. Term of Employment
3.1 Term of Employment. Unless earlier terminated in accordance with
ss. 3.2, the employment of Executive under this Agreement shall commence as of
the date (the "Effective Date") Summit Properties Inc. successfully consummates
an initial public offering of its Common Stock, and shall continue up to, but
not including, the first anniversary of such date (the "Original Term").
Following the Original Term, the employment relationship under this Agreement
shall automatically continue unless and until terminated in accordance with
ss. 3.2.
3.2 Termination. Executive's employment under this Agreement may be
terminated
(a) by the Company upon the death of Executive (which shall be
referred to as a "Death Termination") or total disability of Executive
(total disability meaning the inability of Executive to perform his
normal required services under this Agreement for a period of six
consecutive months during the term of this Agreement by reason of
Executive's mental or physical disability, as determined by the Board
in good faith in its sole discretion) (which shall be referred to as a
"Disability Termination"); or
(b) by the Company for "cause," which shall exist only upon
the occurrence of one or more of the following: (i) Executive is
convicted of, pleads guilty to, or confesses to any felony or any act
of fraud, misappropriation or embezzlement which has an immediate and
materially adverse effect on the Company, as determined by the Board in
good faith in its sole discretion, (ii) Executive engages in a
fraudulent act to the material damage or prejudice of the Company or
any affiliate of the company or in conduct or activities materially
damaging to the property, business or reputation of the Company or any
affiliate of the Company, all as determined by the Board in good faith
in its sole discretion, (iii) any material act or omission by Executive
involving malfeasance or negligence in the performance of Executive's
duties to the Company to the material detriment of the Company, as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of any such act or omission, (iv) failure by
Executive to comply in any material respect with the terms of this
Agreement or any written policies or directives of the Board as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of such failure, or (v) material breach by
Executive of that certain noncompetition agreement between Executive
and the Company of even date herewith (the "Noncompetition Agreement")
as determined by the Board in good faith in its sole discretion (which
shall be referred to individually and collectively as a "For Cause
Termination"); or
(c) by the Company for any reason other than a For Cause
Termination, Death Termination or Disability Termination and after
giving 90 days' prior written notice to Executive (which shall be
referred to as a "No Cause Termination"); or
3
<PAGE> 4
(d) by Executive voluntarily for any reason other than an
Employee-Initiated Termination (as defined in ss. 3.2(e)) at any time
after the Original Term and after giving 90 days' prior written
notice to the Company (which shall be referred to as a "Voluntary
Termination"); or
(e) by Executive for "cause", which shall exist upon the
occurrence of either of the following, provided that in either case the
Board has not corrected such material reduction described below within
thirty (30) days after written notice by Executive of such material
reduction: (i) there is a material reduction in Executive's duties,
rights or responsibilities under this Agreement without his consent, or
(ii) there is a material decrease in the aggregate value of Executive's
compensation and benefits package from the Company without his consent,
other than a reduction in Executive's Base Salary that is permitted
under the provisions of 5 2.1 and other than a reduction in
compensation and/or benefits affecting a broad group of employees of
the Company as determined by the Board in good faith in its sole
discretion (which shall be referred to as an "Employee-Initiated
Termination").
Section 4. Result of Termination
4.1 For Cause Termination or Termination Following Original Term. If
Executive's employment under this Agreement is terminated (i) as a result of a
For Cause Termination during the Original Term or (ii) for any reason following
the Original Term, Executive shall not thereafter be entitled to receive any
Base Salary for periods following such termination; provided, however, that
Executive shall be entitled to receive any Base Salary which may be owed to
Executive but is unpaid as of the date on which Executive's employment is
terminated.
4.2 Termination As Result of No Cause Termination or Employee-Initiated
Termination During Original Term. If Executive's employment under this Agreement
is terminated as a result of a No Cause Termination or an Employee-Initiated
Termination, Executive shall be entitled to receive (i) any Base Salary which
may be owed to Executive but is unpaid as of the date on which Executive's
employment is terminated and (ii) his Base Salary as in effect on the date of
such termination for the period up to the end of the Original Term. The payment
of such Base Salary pursuant to clause (ii) of the preceding sentence shall be
made at such intervals in accordance with the Company's payroll procedures in
effect from time to time with respect to officers of the Company but no less
frequently than monthly. In addition, in the event of Executive's death
following a No Cause Termination or an Employee-Initiated Termination, any Base
Salary payable to Executive under this Section 4.2 and not yet paid on the date
of Executive's death shall be paid to Executive's designated beneficiary, if
any, or if none, his surviving spouse or, if none, his estate (collectively, the
"Beneficiary"). Such payments shall be made to the Beneficiary at such times as
would otherwise have been payable to Executive under this Section 4.2; provided,
however, that the Company may in its discretion pay such Base Salary to the
Beneficiary in a lump sum payment
4
<PAGE> 5
in an amount determined in accordance with the methodology set forth in
subsection (B) of Section 4.3.
4.3 Termination as a Result of a Death Termination or a Disability
Termination During the Original Term. If Executive's employment under this
Agreement is terminated as a result of a Death Termination or a Disability
Termination during the Original Term, (i) Executive (or, in the case of a Death
Termination, Executive's Beneficiary as defined in Section 4.2) shall be
entitled to receive any Base Salary which may be owed to Executive but is unpaid
as of that date on which Executive's employment is terminated, and (ii)
Executive (or, in the case of a Death Termination, Executive's Beneficiary as
defined in Section 4.2) shall continue to receive Executive's Base Salary for
the period up to the end of the Original Term. In addition, the following
provisions shall apply:
(A) If payment of Base Salary is to be made under clause
(ii) of this Section 4.3 due to a Disability
Termination, such Base Salary shall be paid at such
intervals in accordance with the Company's payroll
procedures in effect from time to time with respect
to officers of the Company but no less frequently
than monthly, and such Base Salary shall be offset by
any amounts payable to Executive under any long-term
disability plan sponsored by the Company or its
affiliates. In the event of Executive's death
following a Disability Termination, any Base Salary
payable to Executive under this Section 4.3 (taking
into account the offset described above, if any) and
not yet paid on the date of Executive's death shall
be paid to Executive's Beneficiary. Such payments
shall be made to the Beneficiary at such times as
would otherwise have been payable to Executive under
this subsection (A); provided, however, that the
Company may in its discretion pay such Base Salary to
the Beneficiary in a lump sum payment in an amount
determined in accordance with the methodology set
forth in subsection (B) of this Section 4.3.
(B) In the event of a Death Termination, payments to the
Beneficiary shall be made in a single lump sum as
soon as practical after Executive's death. The
amount of such lump sum shall be equal to the present
value, determined using a 9% interest rate, of the
total amount of Base Salary payable to the
Beneficiary pursuant to this Section 4.3 and not yet
paid on the date of Executive's death.
4.4 Employee-Benefit Plans and Incentive Compensation and Other
Compensatory Arrangements. The benefits, if any, payable to or on behalf of
Executive upon his termination of employment from the Company under any employee
benefit plan or incentive compensation or other compensatory arrangement shall
be governed by the terms and conditions for benefit payments set forth in such
plans and arrangements.
5
<PAGE> 6
Section 5. Miscellaneous
5.1 Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon Executive and his executor, administrator, heirs, personal
representative and assigns, and the Company and its successors and assigns;
provided, however, that Executive shall not be entitled to assign or delegate
any of his rights or obligations hereunder without the prior written consent of
Company; and further provided that the Company shall not be entitled to assign
or delegate any of its rights or obligations hereunder except to a corporation,
partnership or other business entity that is, directly or indirectly, controlled
by or under common control with Summit Properties Inc.
5.2 Construction of Agreement. No provision of this Agreement or any
related document shall be construed against or interpreted to the disadvantage
of any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or drafted such
provision.
5.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
5.4 Survival of Agreements. All covenants and agreements made herein
shall survive the execution and delivery of this Agreement and the termination
of Executive's employment hereunder for any reason.
5.5 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.6 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to be given when delivered
personally or mailed first class, registered or certified mail, postage prepaid,
in either case, addressed as follows:
(a) If to Executive:
John C. Moore
2336 Hembly Place
Charlotte, North Carolina 28270
(b) If to the Company, addressed to:
Summit Properties Inc.
212 South Tryon Street, Suite 500
Charlotte, North Carolina 28281
6
<PAGE> 7
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5.8 Entire Agreement. This Agreement, together with the Noncompetition
Agreement, constitutes the entire agreement of the parties with respect to the
subject matter hereof and upon the Effective Date, will supersede and replace
all prior agreements, written and oral, between the parties hereto or with
respect to the subject matter hereof. This Agreement may be modified only by a
written instrument signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
-----------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
-----------------------------------
Name: John T. Gray
Title: President
Collectively, the "Company"
/s/ John C. Moore [SEAL]
---------------------------------
John C. Moore
"Executive"
7
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
on this 13th day of January, 1994, by and between MICHAEL G. MALONE, an
individual resident of the State of Florida (the "Executive"), SUMMIT PROPERTIES
INC., a Maryland corporation, and SUMMIT MANAGEMENT COMPANY, a Maryland
corporation. Summit Properties Inc. and Summit Management Company are referred
to herein collectively as the "Company";
W I T N E S S E T H:
WHEREAS, Executive has been employed by the Company or its affiliates
or certain of their predecessors for approximately six (6) years; and
WHEREAS, Executive will continue to be employed by the Company and one
or more of its affiliates after the initial public offering of the Common Stock
of Summit Properties Inc.; and
WHEREAS, the Company also desires to employ Executive, and Executive
desires to be employed by the Company on the terms and conditions contained in
this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement,
intending to be legally bound, hereby agree as follows:
Section 1. Employment.
Subject to the terms of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts such employment with the Company.
Executive initially shall serve as an officer of the Company in the
capacity(ies) of Senior Vice President, Secretary and General Counsel of Summit
Properties Inc. and Secretary of Summit Management Company and initially shall
have the duties, rights and responsibilities normally associated with such
position(s) consistent with the Bylaws of summit Properties Inc. and Summit
Management Company, respectively, together with such other reasonable duties
relating to the operation of the business of the Company and its affiliates as
may be assigned to him from time to time by the Board of Directors of Summit
Properties Inc. (the "Board") or as may otherwise be provided in such Bylaws.
Executive shall devote his full business time, skills and best efforts to
rendering services on behalf of the Company and its affiliates and shall
exercise such care as is customarily required by executives undertaking similar
duties for entities similar to the Company.
<PAGE> 2
Section 2. Compensation; Expenses
2.1 Base Salary. Commencing on the Effective Date (as defined in ss.
3.1), the Company shall pay Executive during the term of Executive's employment
under this Agreement, a base salary equal to $100,000 per annum (the "Base
Salary"), which amount shall be subject to adjustment, if any, in accordance
with this ss. 2.1. The Compensation Committee of the Board (the "Committee")
shall review Executive's Base Salary on an annual basis, and the Committee upon
such review and in its sole discretion, may increase or decrease Executive's
Base Salary by an amount which the Committee deems appropriate in light of the
Company's and Executive's performance during the period covered by such review.
The Base Salary, less all applicable withholding taxes, shall be paid to
Executive in accordance with the payroll procedures in effect with respect to
officers of the Company.
2.2 Incentive Compensation. In addition to the Base Salary payable to
Executive pursuant to S 2.1 and any special compensatory arrangements which the
Committee provides for Executive, effective as of the Effective Date, Executive
shall be entitled to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Company, with the criteria for
Executive's participation in such plans to be established by the Committee in
its sole discretion.
2.3 Stock Options. Executive shall be entitled to participate in
employee stock option plans from time to time established for the benefit of
employees of the Company in accordance with the terms and conditions of such
plans.
2.4 Expenses. Executive shall be reimbursed for all reasonable
business-related expenses incurred by Executive at the request of or on behalf
of the Company.
2.5 Participation in Employee Benefit Plans. Executive shall be
entitled to participate in such medical, dental, disability, hospitalization,
life insurance, profit sharing and other benefit plans as the Company shall
maintain from time to time for the benefit of executive officers of the Company,
on the terms and subject to the conditions set forth in such plans. In addition,
during the term of this Agreement, Executive shall be entitled to a
comprehensive annual physical performed, at the Company's expense, by the
physician or medical group of Executive's choosing.
2.6 Vacation. In addition to Company holidays, Executive shall receive
such paid vacation time each year during the term of this Agreement consistent
with vacation policies of the Company for its executive officers. Any unused
vacation days in any year may not be carried over to subsequent years, and
Executive shall receive no additional compensation for any unused vacation days.
2.7 Perquisites. Executive shall be entitled to be reimbursed for such
dining club dues and to receive such individual perquisites as are consistent
with the Company's policies applicable to its executive officers.
2
<PAGE> 3
Section 3. Term of Employment
3.1 Term of Employment. Unless earlier terminated in accordance with
ss. 3.2, the employment of Executive under this Agreement shall commence as of
the date (the "Effective Date") Summit Properties Inc. successfully consummates
an initial public offering of its Common Stock, and shall continue up to, but
not including, the first anniversary of such date (the "Original Term").
Following the Original Term, the employment relationship under this Agreement
shall automatically continue unless and until terminated in accordance with
ss. 3.2.
3.2 Termination. Executive's employment under this Agreement may be
terminated
(a) by the Company upon the death of Executive (which shall be
referred to as a "Death Termination") or total disability of Executive
(total disability meaning the inability of Executive to perform his
normal required services under this Agreement for a period of six
consecutive months during the term of this Agreement by reason of
Executive's mental or physical disability, as determined by the Board
in good faith in its sole discretion) (which shall be referred to as a
"Disability Termination"); or
(b) by the Company for "cause," which shall exist only upon
the occurrence of one or more of the following: (i) Executive is
convicted of, pleads guilty to, or confesses to any felony or any act
of fraud, misappropriation or embezzlement which has an immediate and
materially adverse effect on the Company, as determined by the Board in
good faith in its sole discretion, (ii) Executive engages in a
fraudulent act to the material damage or prejudice of the Company or
any affiliate of the company or in conduct or activities materially
damaging to the property, business or reputation of the Company or any
affiliate of the Company, all as determined by the Board in good faith
in its sole discretion, (iii) any material act or omission by Executive
involving malfeasance or negligence in the performance of Executive's
duties to the Company to the material detriment of the Company, as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of any such act or omission, (iv) failure by
Executive to comply in any material respect with the terms of this
Agreement or any written policies or directives of the Board as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of such failure, or (v) material breach by
Executive of that certain noncompetition agreement between Executive
and the Company of even date herewith (the "Noncompetition Agreement")
as determined by the Board in good faith in its sole discretion (which
shall be referred to individually and collectively as a "For Cause
Termination"); or
(c) by the Company for any reason other than a For Cause
Termination, Death Termination or Disability Termination and after
giving 90 days' prior written notice to Executive (which shall be
referred to as a "No Cause Termination"); or
3
<PAGE> 4
(d) by Executive voluntarily for any reason other than an
Employee-Initiated Termination (as defined in ss. 3.2(e)) at any time
after the Original Term and after giving 90 days' prior written
notice to the Company (which shall be referred to as a "Voluntary
Termination"); or
(e) by Executive for "cause", which shall exist upon the
occurrence of either of the following, provided that in either case the
Board has not corrected such material reduction described below within
thirty (30) days after written notice by Executive of such material
reduction: (i) there is a material reduction in Executive's duties,
rights or responsibilities under this Agreement without his consent, or
(ii) there is a material decrease in the aggregate value of Executive's
compensation and benefits package from the Company without his consent,
other than a reduction in Executive's Base Salary that is permitted
under the provisions of 5 2.1 and other than a reduction in
compensation and/or benefits affecting a broad group of employees of
the Company as determined by the Board in good faith in its sole
discretion (which shall be referred to as an "Employee-Initiated
Termination").
Section 4. Result of Termination
4.1 For Cause Termination or Termination Following Original Term. If
Executive's employment under this Agreement is terminated (i) as a result of a
For Cause Termination during the Original Term or (ii) for any reason following
the Original Term, Executive shall not thereafter be entitled to receive any
Base Salary for periods following such termination; provided, however, that
Executive shall be entitled to receive any Base Salary which may be owed to
Executive but is unpaid as of the date on which Executive's employment is
terminated.
4.2 Termination As Result of No Cause Termination or Employee-Initiated
Termination During Original Term. If Executive's employment under this Agreement
is terminated as a result of a No Cause Termination or an Employee-Initiated
Termination, Executive shall be entitled to receive (i) any Base Salary which
may be owed to Executive but is unpaid as of the date on which Executive's
employment is terminated and (ii) his Base Salary as in effect on the date of
such termination for the period up to the end of the Original Term. The payment
of such Base Salary pursuant to clause (ii) of the preceding sentence shall be
made at such intervals in accordance with the Company's payroll procedures in
effect from time to time with respect to officers of the Company but no less
frequently than monthly. In addition, in the event of Executive's death
following a No Cause Termination or an Employee-Initiated Termination, any Base
Salary payable to Executive under this Section 4.2 and not yet paid on the date
of Executive's death shall be paid to Executive's designated beneficiary, if
any, or if none, his surviving spouse or, if none, his estate (collectively, the
"Beneficiary"). Such payments shall be made to the Beneficiary at such times as
would otherwise have been payable to Executive under this Section 4.2; provided,
however, that the Company may in its discretion pay such Base Salary to the
Beneficiary in a lump sum payment
4
<PAGE> 5
in an amount determined in accordance with the methodology set forth in
subsection (B) of Section 4.3.
4.3 Termination as a Result of a Death Termination or a Disability
Termination During the Original Term. If Executive's employment under this
Agreement is terminated as a result of a Death Termination or a Disability
Termination, (i) Executive (or, in the case of a Death Termination, Executive's
Beneficiary as defined in Section 4.2) shall be entitled to receive any Base
Salary which may be owed to Executive but is unpaid as of that date on which
Executive's employment is terminated, and (ii) Executive (or, in the case of a
Death Termination, Executive's Beneficiary as defined in Section 4.2) shall
continue to receive Executive's Base Salary for the period up to the end of the
Original Term. In addition, the following provisions shall apply:
(A) If payment of Base Salary is to be made under clause
(ii) of this Section 4.3 due to a Disability
Termination, such Base Salary shall be paid at such
intervals in accordance with the Company's payroll
procedures in effect from time to time with respect
to officers of the Company but no less frequently
than monthly, and such Base Salary shall be offset by
any amounts payable to Executive under any long-term
disability plan sponsored by the Company or its
affiliates. In the event of Executive's death
following a Disability Termination, any Base Salary
payable to Executive under this Section 4.3 (taking
into account the offset described above, if any) and
not yet paid on the date of Executive's death shall
be paid to Executive's Beneficiary. Such payments
shall be made to the Beneficiary at such times as
would otherwise have been payable to Executive under
this subsection (A); provided, however, that the
Company may in its discretion pay such Base Salary to
the Beneficiary in a lump sum payment in an amount
determined in accordance with the methodology set
forth in subsection (B) of this Section 4.3.
(B) In the event of a Death Termination, payments to the
Beneficiary shall be made in a single lump sum as
soon as practical after Executive's death. The
amount of such lump sum shall be equal to the present
value, determined using a 9% interest rate, of the
total amount of Base Salary payable to the
Beneficiary pursuant to this Section 4.3 and not yet
paid on the date of Executive's death.
4.4 Employee-Benefit Plans and Incentive Compensation and Other
Compensatory Arrangements. The benefits, if any, payable to or on behalf of
Executive upon his termination of employment from the Company under any employee
benefit plan or incentive compensation or other compensatory arrangement shall
be governed by the terms and conditions for benefit payments set forth in such
plans and arrangements.
5
<PAGE> 6
Section 5. Miscellaneous
5.1 Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon Executive and his executor, administrator, heirs, personal
representative and assigns, and the Company and its successors and assigns;
provided, however, that Executive shall not be entitled to assign or delegate
any of his rights or obligations hereunder without the prior written consent of
Company; and further provided that the Company shall not be entitled to assign
or delegate any of its rights or obligations hereunder except to a corporation,
partnership or other business entity that is, directly or indirectly, controlled
by or under common control with Summit Properties Inc.
5.2 Construction of Agreement. No provision of this Agreement or any
related document shall be construed against or interpreted to the disadvantage
of any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or drafted such
provision.
5.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
5.4 Survival of Agreements. All covenants and agreements made herein
shall survive the execution and delivery of this Agreement and the termination
of Executive's employment hereunder for any reason.
5.5 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.6 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to be given when delivered
personally or mailed first class, registered or certified mail, postage prepaid,
in either case, addressed as follows:
(a) If to Executive:
Michael G. Malone
4107 Corona Street
Tampa, Florida 33629
(b) If to the Company, addressed to:
Summit Properties Inc.
212 South Tryon Street, Suite 500
Charlotte, North Carolina 28281
6
<PAGE> 7
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5.8 Entire Agreement. This Agreement, together with the Noncompetition
Agreement, constitutes the entire agreement of the parties with respect to the
subject matter hereof and upon the Effective Date, will supersede and replace
all prior agreements, written and oral, between the parties hereto or with
respect to the subject matter hereof. This Agreement may be modified only by a
written instrument signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
----------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
----------------------------------
Name: John T. Gray
Title: President
Collectively, the "Company"
/s/ Michael G. Malone [SEAL]
--------------------------------
Michael G. Malone
"Executive"
7
<PAGE> 1
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
on this 5th day of December, 1996, ("Effective Date") by and between WILLIAM
B. HAMILTON, an individual resident of the State of Georgia (the "Executive"),
SUMMIT PROPERTIES INC., a Maryland corporation, and SUMMIT MANAGEMENT COMPANY, a
Maryland corporation. Summit Properties Inc. and Summit Management Company are
referred to herein collectively as the "Company";
W I T N E S S E T H:
--------------------
WHEREAS, the Company desires to employ Executive, and Executive desires
to be employed by the Company on the terms and conditions contained in this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement,
intending to be legally bound, hereby agree as follows:
SECTION 1.
Employment
----------
Subject to the terms of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts such employment with the Company.
Executive initially shall serve as an officer of the Company in the
capacity(ies) of Executive Vice President, Property Services of Summit
Properties Inc. and President of Summit Management Company and initially shall
have the duties, rights and responsibilities normally associated with such
positions consistent with the Bylaws of Summit Properties Inc. and Summit
Management Company, respectively, together with such other reasonable duties
relating to the operation of the business of the Company and its affiliates as
may be assigned to him from time to time by the Board of Directors of Summit
Properties Inc. (the "Board") or as may otherwise be provided in such Bylaws.
Executive shall devote his full business time, skills and best efforts to
rendering services on behalf of the Company and its affiliates and shall
exercise such care as is customarily required by executives undertaking similar
duties for entities similar to the Company.
<PAGE> 2
SECTION 2.
Compensation; Expenses
----------------------
2.1 Base Salary. Commencing on the Effective Date, the Company shall
pay Executive during the term of Executive's employment under this Agreement, a
base salary equal to $173,000.00 per annum (the "Base Salary"), which amount
shall be subject to adjustment, if any, in accordance with this Section 2.1. The
Compensation Committee of the Board (the "Committee") shall review Executive's
Base Salary on an annual basis, and the Committee upon such review and in its
sole discretion, may increase or decrease Executive's Base Salary by an amount
which the Committee deems appropriate in light of the Company's and Executive's
performance during the period covered by such review; provided, however, that
Executive's Base Salary shall not be reduced below One Hundred Seventy-Three
Thousand Dollars ($173,000) per annum. The Base Salary, less all applicable
withholding taxes, shall be paid to Executive in accordance with the payroll
procedures in effect with respect to officers of the Company.
2.2 Incentive Compensation. In addition to the Base Salary payable to
Executive pursuant to Section 2.1 and any special compensatory arrangements
which the Committee provides for Executive, effective as of the Effective Date,
Executive shall be entitled to participate in any incentive compensation plans
in effect with respect to senior executive officers of the Company, with the
criteria for Executive's participation in such plans to be established by the
Committee in its sole discretion.
2.3. Stock Options. Executive shall be entitled to participate in
employee stock option plans from time to time established for the benefit of
employees of the Company in accordance with the terms and conditions of such
plans.
2.4 Expenses. Executive shall be reimbursed for all reasonable
business-related expenses incurred by Executive at the request of or on behalf
of the Company, including but not limited to reimbursement of those relocation
expenses incurred by Executive as set forth on the attached Exhibit "A" hereto.
2.5. Participation in Employee Benefit Plans. Executive shall be
entitled to participate in such medical, dental, disability, hospitalization,
life insurance, profit sharing and other benefit plans as the Company shall
maintain from time to time for the benefit of executive officers of the Company,
on the
2
<PAGE> 3
terms and subject to the conditions set forth in such plans. In addition, during
the term of this Agreement, Executive shall be entitled to a comprehensive
annual physical performed, at the company's expense, by the physician or medical
group of Executive's choosing.
2.6. Vacation. In addition to Company holidays, Executive shall receive
such paid vacation time each year during the term of this Agreement consistent
with vacation policies of the Company for its executive officers. Said paid
vacation time shall initially be three weeks. Any unused vacation days in any
year may not be carried over to subsequent years, and Executive shall receive no
additional compensation for any unused vacation days.
2.7. Perquisites. Executive shall be entitled to receive such
individual perquisites as are consistent with the Company's policies applicable
to its executive officers.
SECTION 3.
Term of Employment
------------------
3.1. Term of Employment. Unless earlier terminated in accordance with
Section 3.2, the employment of Executive under this Agreement shall commence as
of the Effective Date, and shall continue up to, but not including, the second
anniversary of such date (the "Original Term"). Following the Original Term, the
employment relationship under this Agreement shall automatically continue unless
terminated in accordance with Section 3.2.
3.2 Termination. Executive's employment under this Agreement may be
terminated
(a) by the Company upon the death of Executive (which shall be
referred to as a "Death Termination") or total disability of Executive
(total disability meaning the inability of Executive to perform his
normal required services under this Agreement for a period of six
consecutive months during the term of this Agreement by reason of
Executive's mental or physical disability, as determined by the Board
in good faith in its sole discretion) (which shall be referred to as a
"Disability Termination"); or
3
<PAGE> 4
(b) by the Company for "cause," which shall exist only upon
the occurrence of one or more of the following: (i) Executive is
convicted of, pleads guilty to, or confesses to any felony or any act
of fraud, misappropriation or embezzlement which has an immediate and
materially adverse effect on the Company, as determined by the Board in
good faith in its sole discretion, (ii) Executive engages in a
fraudulent act to the material damage or prejudice of the Company or
any affiliate of the Company or in conduct or activities materially
damaging to the property, business or reputation of the Company or any
affiliate of the Company, all as determined by the Board in good faith
in its sole discretion, (iii) any material act or omission by Executive
involving malfeasance or negligence in the performance of Executive's
duties to the Company to the material detriment of the Company, as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of any such act or omission, (iv) failure by
Executive to comply in any material respect with the terms of this
Agreement or any written policies or directives of the Board as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of such failure, or (v) material breach by
Executive of that certain noncompetition agreement between Executive
and the Company of even date herewith (the "Noncompetition Agreement")
as determined by the Board in good faith in its sole discretion (which
shall be referred to individually and collectively as a "For Cause
Termination"); or
(c) by the Company for any reason other than a For Cause
Termination, Death Termination or Disability Termination and after
giving 90 days' prior written notice to Executive (which shall be
referred to as a "No Cause Termination"); or
(d) by Executive voluntarily for any reason other than an
Employee-Initiated Termination (as defined in Section 3.2(e)) at any
time after the Original Term and after giving 90 days' prior written
notice to the Company (which shall be referred to as a "Voluntary
Termination"); or
(e) by Executive for "cause", which shall exist upon the
occurrence of either of the following, provided that in either case the
Board has not corrected such material reduction described below within
thirty (30) days after
4
<PAGE> 5
written notice by Executive of such material reduction: (i) there is a
material reduction in Executive's duties, rights or responsibilities
under this Agreement without his consent, or (ii) there is a material
decrease in the aggregate value of Executive's compensation and
benefits package from the Company without his consent, other than a
reduction in Executive's Base Salary that is permitted under the
provisions of Section 2.1 and other than a reduction in compensation,
including but not limited to a reduction in Base Salary as permitted
under the provisions of Section 2.1, and/or benefits affecting a broad
group of employees of the Company as determined by the Board in good
faith in its sole discretion (which shall be referred to as an
"Employee-Initiated Termination").
SECTION 4.
Result of Termination
---------------------
4.1. For Cause Termination or Termination Following Original Term. If
Executive's employment under this Agreement is terminated as a result of a For
Cause Termination, Executive shall not thereafter be entitled to receive any
Base Salary for periods following such termination; provided, however, that
Executive shall be entitled to receive any Base Salary which may be owed to
Executive but is unpaid as of the date on which Executive's employment is
terminated.
4.2 Termination As Result of No Cause Termination or Employee-Initiated
Termination During Original Term. If Executive's employment under this Agreement
is terminated as a result of a No Cause Termination or an Employee-Initiated
Termination during the Original Term, Executive shall be entitled to receive (i)
any Base Salary which may be owed to Executive but is unpaid as of the date on
which Executive's employment is terminated and (ii) his Base Salary as in effect
on the date of such termination for a twelve month period. If Executive's
employment under this agreement is terminated as a result of a No Cause
termination or an employee initiated termination, subsequent to the Original
Term, Executive shall be entitled to receive (i) any base salary which may be
owed to Executive that was unpaid as of the date on which Executive's employment
is terminated, and (ii) his base salary as in effect on the date of such
termination for a six month period. The payment of such Base Salary pursuant to
clause (ii) of the preceding sentences shall be made at such intervals in
accordance with the Company's payroll procedures in effect from time to time
with respect to
5
<PAGE> 6
officers of the Company but no less frequently than monthly. In addition, in the
event of Executive's death following a No Cause Termination or an
Employee-Initiated Termination, any Base Salary payable to Executive under this
Section 4.2 and not yet paid on the date of Executive's death shall be paid to
Executive's designated beneficiary, if any, or if none, his surviving spouse or,
if none, his estate (collectively, the "Beneficiary"). Such payments shall be
made to the Beneficiary at such times as would otherwise have been payable to
Executive under this Section 4.2; provided, however, that the Company may in its
discretion pay such Base Salary to the Beneficiary in a lump sum payment in an
amount determined in accordance with the methodology set forth in subsection (B)
of Section 4.3.
4.3. Termination as a Result of a Death Termination or a Disability
Termination During Original Term. If Executive's employment under this Agreement
is terminated as a result of a Death Termination or Disability Termination
during the Original Term, (i) Executive (or, in the case of a Death Termination,
Executive's Beneficiary as defined in Section 4.2) shall be entitled to receive
any Base Salary which may be owed to Executive but is unpaid as of that date on
which Executive's employment is terminated, and (ii) Executive (or, in the case
of a Death Termination, Executive's Beneficiary as defined in Section 4.2) shall
continue to receive Executive's Base Salary for a period up to, but not
including, the fifth anniversary of the Effective Date or, if later, through the
remainder of his term of employment under any extension of this Agreement. In
addition, the following provisions shall apply:
(A) If payment of Base Salary is to be made under clause (ii) of
this Section 4.3 due to a Disability Termination, such Base
Salary shall be paid at such intervals in accordance with the
Company's payroll procedures in effect from time to time with
respect to officers of the Company but no less frequently than
monthly, and such Base Salary shall be offset by any amounts
payable to Executive under any long-term disability plan
sponsored by the Company or its affiliates. In the event of
Executive's death following a Disability Termination, any Base
Salary payable to Executive under this Section 4.3 (taking
into account the offset described above, if any) and not yet
paid on the date of Executive's death shall be paid to
Executive's Beneficiary. Such payments shall be made to the
Beneficiary at such times as would otherwise have been payable
to Executive under this subsection (A); provided,
6
<PAGE> 7
however, that the Company may in its discretion pay such Base
Salary to the Beneficiary in a lump sum payment in an amount
determined in accordance with the methodology set forth in
subsection (B) of this Section 4.3.
(B) In the event of a Death Termination, payments to the
Beneficiary shall be made in a single lump sum as soon as
practical after Executive's death. The amount of such lump sum
shall be equal to the present value, determined using a 9%
interest rate, of the total amount of Base Salary payable to
the Beneficiary pursuant to this Section 4.3 and not yet paid
on the date of Executive's death.
4.4. Employee Benefit Plans and Incentive Compensation and Other
Compensatory Arrangements. The benefits, if any, payable to or on behalf of
Executive upon his termination of employment from the Company under any employee
benefit plan or incentive compensation or other compensatory arrangement shall
be governed by the terms and conditions for benefit payments set forth in such
plans and arrangements.
SECTION 5.
Miscellaneous
-------------
5.1. Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon Executive and his executor, administrator, heirs, personal
representative and assigns, and the Company and its successors and assigns;
provided, however, that Executive shall not be entitled to assign or delegate
any of his rights or obligations hereunder without the prior written consent of
Company; and further provided that the Company shall not be entitled to assign
or delegate any of its rights or obligations hereunder except to a corporation,
partnership or other business entity that is, directly or indirectly, controlled
by or under common control with Summit Properties Inc.
5.2. Construction of Agreement. No provision of this Agreement or any
related document shall be construed against or interpreted to the disadvantage
or any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or drafted such
provision.
7
<PAGE> 8
5.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
5.4. Survival of Agreements. All covenants and agreements made herein
shall survive the execution and delivery of this Agreement and the termination
of Executive's employment hereunder for any reason.
5.5 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.6 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to be given when delivered
personally or mailed first class, registered or certified mail, postage prepaid,
in either case, addressed as follows:
(a) If to Executive:
William B. Hamilton
300 Powers Place
Marietta, GA 30067
(b) If to the Company, addressed to:
Summit Properties Inc.
212 South Tryon Street, Suite 500
Charlotte, North Carolina 28281
Attn: Michael G. Malone
5.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5.8. Entire Agreement. This Agreement, together with the Noncompetition
Agreement, constitutes the entire agreement of the parties with respect to the
subject matter hereof and upon the Effective Date, will supersede and replace
all prior agreements, written and oral, between the parties hereto or with
respect to the subject matter hereof other than that letter agreement from
William F. Paulsen to William B. Hamilton dated November 25, 1996 attached
hereto as Exhibit "B". This Agreement
8
<PAGE> 9
may be modified only by a written instrument signed by each of the parties
hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
--------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ William F. Paulsen
--------------------------
Name: William F. Paulsen
Title: Vice President
Collectively, the "Company"
/s/ William B. Hamilton [SEAL]
-----------------------------
William B. Hamilton
"Executive"
9
<PAGE> 10
EXHIBIT "A"
September 10, 1996
SUMMIT PROPERTIES
EXECUTIVE RELOCATION POLICY FOR TRANSFERRED EMPLOYEES AND NEW HIRES
1. Summit will pay the broker's fee for selling the employee's home. The
remaining closing costs are the responsibility of the employee. In the
event an employee experiences a loss on the sale of a home, the Company
will reimburse the employee up to $5,000.
2. Summit will pay the origination fee for a new mortgage loan up to a
maximum of 1%. All other costs for obtaining a loan or purchasing a new
home is the responsibility of the employee.
3. Summit will provide a rental home (if employee has two children or
more) or an apartment (if employee has one child or less) and
associated expenses (electric, phone, cable TV, water/sewer fees) in
the new city:
a. First six (6) months paid 100%;
b. Second five (5) months paid 50%;
The objective of this policy is for the employee to
only be responsible for one household expense. If the
home is not sold after six (6) months, the employee
will only receive 1/2 of the new rental's operating
expenses. After 12 months, the employee will be
responsible for 100% of his housing expense in the
new location.
c. Summit will pay for two (2) trips for the employee
and his/her spouse to search for a new home -
Airfare, Car, Meals, Hotel, etc. If employee drives
to new city for house hunting, five (5) trips will be
reimbursable.
All moving expenses will be paid by Summit. The Company will pay for moving
expenses from your existing home to a new home or to a rental in the new
location, and from that rental to your new home once it is purchased. if the
employee goes past 12 months and still hasn't found a home, even though the new
rental's expenses are no longer covered, one more move is still reimbursable by
the Company. Employee shall receive at least two (2) bids for packing and
moving.
If the employee is still renting at the end of 12 months, even though the rental
expenses are no longer covered, the expenses for one more move is still
reimbursable by the Company.
<PAGE> 11
EXHIBIT "B"
Summit Properties
[Letterhead]
November 25, 1996
Mr. William B. Hamilton
Summit Properties Inc.
212 S. Tryon Street, #500
Charlotte, NC 28281
RE: RESTRICTED STOCK GRANTS
Dear Bill:
This letter will substantiate my commitment to you regarding your restricted
grant of stock of Summit Properties Inc. (the "Company").
Restricted stock grants such as this, which are awarded pursuant to the
company's 1994 Stock Option and Incentive Plan, must be approved by the
Compensation Committee, which consists of the independent directors of the Board
of Directors of the Company. It is my intention to obtain this approval for your
restricted stock grant in the amount of 8,200 shares from the Compensation
Committee when it meets at the next meting of the Board of Directors on December
9, 1996. These shares would vest in three equal amounts on January 1, 1998;
January 1, 1999; and January 1, 2000.
The grant of this same quantity of restricted shares had already been allocated
and approved by the committee for your predecessor. The three-year total vesting
period for your shares is, however, somewhat shorter than the vesting period
attached to the pending grant to your predecessor. However, I don't believe this
will be perceived by the Compensation Committee to be a material change and,
therefore, since these shares have already been allocated, I believe that the
Compensation Committee will approve the award of a restricted stock grant in the
amount of 8,200 vesting over three years. Upon such approval, your restricted
stock grant, as well as several other pending and approved restricted stock
grants, would become effective as of January, 2, 1997.
In the unlikely event that the Compensation Committee would not approve this
award to you as described above, I personally will convey to you any shortfall
between the 8,200 share amount and the amount of shares the Compensation
Committee actually approves, as well as any shortfall in the vesting of those
shares should the Compensation Committee approve the restricted stock grant,
however over a longer vesting period. My conveyance of these shares to you
would, of course, be subject to the same terms and conditions as would have
existed had you received these shares directly from the company pursuant to
approval by the Compensation Committee, including the specific terms and
conditions of the 1994 Stock Option and Incentive
<PAGE> 12
Plan.
If the Compensation Committee does, in fact, approve the award to you of 8,200
shares of restricted stock of the Company over a three year vesting period as
outlined above, my commitment to you as contained in this letter would be of no
further effect as of the date of that approval by the Compensation Committee.
Bill, I hope my commitment to you as contained in this letter reflects not only
how much the Company, but also I personally, value your role in the executive
management team that will make Summit an outstanding success.
Sincerely yours,
/s/ William F. Paulsen
William F. Paulsen
President and Chief executive Officer
<PAGE> 1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement"), is made and entered into
on this 16th day of February, 1994, by and between MICHAEL L. SCHWARZ, an
individual resident of the State of Georgia (the "Executive"), SUMMIT
PROPERTIES INC., a Maryland corporation, and SUMMIT MANAGEMENT COMPANY, a
Maryland corporation. Summit Properties Inc. and Summit Management Company are
referred to herein collectively as the "Company";
W I T N E S S E T H:
WHEREAS, the Company desires to employ Executive, and Executive desires
to be employed by the Company on the terms and conditions contained in this
Agreement;
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Agreement,
intending to be legally bound, hereby agree as follows:
Section 1. Employment.
Subject to the terms of this Agreement, the Company hereby employs
Executive, and Executive hereby accepts such employment with the Company.
Executive initially shall serve as an officer of the Company in the
capacity(ies) of Executive Vice President and Chief Financial Officer of Summit
Properties Inc. and Vice President of Summit Management Company and initially
shall have the duties, rights and responsibilities normally associated with such
position(s) consistent with the Bylaws of summit Properties Inc. and Summit
Management Company, respectively, together with such other reasonable duties
relating to the operation of the business of the Company and its affiliates as
may be assigned to him from time to time by the Board of Directors of Summit
Properties Inc. (the "Board") or as may otherwise be provided in such Bylaws.
Executive shall devote his full business time, skills and best efforts to
rendering services on behalf of the Company and its affiliates and shall
exercise such care as is customarily required by executives undertaking similar
duties for entities similar to the Company.
Section 2. Compensation; Expenses
2.1 Base Salary. Commencing on the Effective Date (as defined in ss.
3.1), the Company shall pay Executive during the term of Executive's employment
under this Agreement, a base salary equal to $150,000 per annum (the "Base
Salary"), which amount shall be subject to adjustment, if any, in accordance
with this ss. 2.1. The Compensation Committee of the Board (the "Committee")
shall review Executive's Base Salary on an annual basis, and the Committee upon
such review and in its sole discretion, may increase or decrease Executive's
Base Salary by an amount which the Committee deems appropriate in light of the
Company's and Executive's performance during the period covered by such review.
The Base
<PAGE> 2
Salary, less all applicable withholding taxes, shall be paid to Executive in
accordance with the payroll procedures in effect with respect to officers of the
Company.
2.2 Incentive Compensation. In addition to the Base Salary payable to
Executive pursuant to S 2.1 and any special compensatory arrangements which the
Committee provides for Executive, effective as of the Effective Date, Executive
shall be entitled to participate in any incentive compensation plans in effect
with respect to senior executive officers of the Company, with the criteria for
Executive's participation in such plans to be established by the Committee in
its sole discretion.
2.3 Stock Options. Executive shall be entitled to participate in
employee stock option plans from time to time established for the benefit of
employees of the Company in accordance with the terms and conditions of such
plans.
2.4 Expenses. Executive shall be reimbursed for all reasonable
business-related expenses incurred by Executive at the request of or on behalf
of the Company.
2.5 Participation in Employee Benefit Plans. Executive shall be
entitled to participate in such medical, dental, disability, hospitalization,
life insurance, profit sharing and other benefit plans as the Company shall
maintain from time to time for the benefit of executive officers of the Company,
on the terms and subject to the conditions set forth in such plans. In addition,
during the term of this Agreement, Executive shall be entitled to a
comprehensive annual physical performed, at the Company's expense, by the
physician or medical group of Executive's choosing.
2.6 Vacation. In addition to Company holidays, Executive shall receive
such paid vacation time each year during the term of this Agreement consistent
with vacation policies of the Company for its executive officers. Any unused
vacation days in any year may not be carried over to subsequent years, and
Executive shall receive no additional compensation for any unused vacation days.
2.7 Perquisites. Executive shall be entitled to be reimbursed for such
dining club dues and to receive such individual perquisites as are consistent
with the Company's policies applicable to its executive officers.
Section 3. Term of Employment
3.1 Term of Employment. Unless earlier terminated in accordance with
ss. 3.2, the employment of Executive under this Agreement shall commence as of
the date (the "Effective Date") Summit Properties Inc. successfully consummates
an initial public offering of its Common Stock, and shall continue up to, but
not including, the second anniversary of such date (the "Original Term").
Following the Original Term, the employment relationship under this Agreement
shall automatically continue unless and until terminated in accordance with
ss.3.2.
2
<PAGE> 3
3.2 Termination. Executive's employment under this Agreement may be
terminated
(a) by the Company upon the death of Executive (which shall be
referred to as a "Death Termination") or total disability of Executive
(total disability meaning the inability of Executive to perform his
normal required services under this Agreement for a period of six
consecutive months during the term of this Agreement by reason of
Executive's mental or physical disability, as determined by the Board
in good faith in its sole discretion) (which shall be referred to as a
"Disability Termination"); or
(b) by the Company for "cause," which shall exist only upon
the occurrence of one or more of the following: (i) Executive is
convicted of, pleads guilty to, or confesses to any felony or any act
of fraud, misappropriation or embezzlement which has an immediate and
materially adverse effect on the Company, as determined by the Board in
good faith in its sole discretion, (ii) Executive engages in a
fraudulent act to the material damage or prejudice of the Company or
any affiliate of the company or in conduct or activities materially
damaging to the property, business or reputation of the Company or any
affiliate of the Company, all as determined by the Board in good faith
in its sole discretion, (iii) any material act or omission by Executive
involving malfeasance or negligence in the performance of Executive's
duties to the Company to the material detriment of the Company, as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of any such act or omission, (iv) failure by
Executive to comply in any material respect with the terms of this
Agreement or any written policies or directives of the Board as
determined by the Board in good faith in its sole discretion, which has
not been corrected by Executive within thirty (30) days after written
notice from the Company of such failure, or (v) material breach by
Executive of that certain noncompetition agreement between Executive
and the Company of even date herewith (the "Noncompetition Agreement")
as determined by the Board in good faith in its sole discretion (which
shall be referred to individually and collectively as a "For Cause
Termination"); or
(c) by the Company for any reason other than a For Cause
Termination, Death Termination or Disability Termination and after
giving 90 days' prior written notice to Executive (which shall be
referred to as a "No Cause Termination"); or
(d) by Executive voluntarily for any reason other than an
Employee-Initiated Termination (as defined in ss. 3.2(e)) at any time
after the Original Term and after giving 90 days' prior written
notice to the Company (which shall be referred to as a "Voluntary
Termination"); or
(e) by Executive for "cause", which shall exist upon the
occurrence of either of the following, provided that in either case the
Board has not corrected such material reduction described below within
thirty (30) days after written notice by Executive of such material
reduction: (i) there is a material reduction in Executive's duties,
rights or
3
<PAGE> 4
responsibilities under this Agreement without his consent, or (ii)
there is a material decrease in the aggregate value of Executive's
compensation and benefits package from the Company without his consent,
other than a reduction in Executive's Base Salary that is permitted
under the provisions of 5 2.1 and other than a reduction in
compensation and/or benefits affecting a broad group of employees of
the Company as determined by the Board in good faith in its sole
discretion (which shall be referred to as an "Employee-Initiated
Termination").
Section 4. Result of Termination
4.1 Termination As Result of Voluntary Termination or For Cause
Termination. If Executive's employment under this Agreement is terminated as a
result of a Voluntary Termination or a For Cause Termination, Executive shall
not thereafter be entitled to receive any Base Salary for periods following such
termination; provided, however, that Executive shall be entitled to receive any
Base Salary which may be owed to Executive but is unpaid as of the date on which
Executive's employment is terminated.
4.2 Termination As Result of No Cause Termination or Employee-Initiated
Termination During Original Term. If Executive's employment under this Agreement
is terminated as a result of a No Cause Termination or an Employee-Initiated
Termination, Executive shall be entitled to receive (i) any Base Salary which
may be owed to Executive but is unpaid as of the date on which Executive's
employment is terminated and (ii) his Base Salary as in effect on the date of
such termination for the period up to the end of the first consecutive
twelve-month period of the Original Term. If Executive's employment under this
Agreement is terminated as a result of a No Cause Termination or an
Employee-Initiated Termination during the second consecutive twelve-month period
of the Original Term, Executive shall be entitled to receive (i) any Base Salary
which may be owed to Executive but is unpaid as of the date on which Executive's
employment is terminated and (ii) his Base Salary as in effect on the date of
such termination for the period up to the end of the second consecutive
twelve-month period of the Original Term. The payment of such Base Salary
pursuant to clause (ii) of the preceding sentence shall be made at such
intervals in accordance with the Company's payroll procedures in effect from
time to time with respect to officers of the Company but no less frequently than
monthly. In addition, in the event of Executive's death following a No Cause
Termination or an Employee-Initiated Termination, any Base Salary payable to
Executive under this Section 4.2 and not yet paid on the date of Executive's
death shall be paid to Executive's designated beneficiary, if any, or if none,
his surviving spouse or, if none, his estate (collectively, the "Beneficiary").
Such payments shall be made to the Beneficiary at such times as would otherwise
have been payable to Executive under this Section 4.2; provided, however, that
the Company may in its discretion pay such Base Salary to the Beneficiary in a
lump sum payment in an amount determined in accordance with the methodology set
forth in subsection (B) of Section 4.3.
4.3 Termination as a Result of a Death Termination or a Disability
Termination During Original Term. If Executive's employment under this Agreement
is terminated as a result of a Death Termination or a Disability Termination,
(i) Executive (or, in the case of a Death Termination, Executive's Beneficiary
as defined in Section 4.2) shall be entitled to receive any Base Salary which
may be owed to Executive but is unpaid as of that date on which Executive's
employment is terminated, and (ii) Executive (or, in the case of a Death
Termination, Executive's Beneficiary as defined in Section 4.2) shall continue
to receive Executive's Base Salary for the period up
4
<PAGE> 5
to the end of the Original Term. In addition, the following provisions shall
apply:
(A) If payment of Base Salary is to be made under clause
(ii) of this Section 4.3 due to a Disability
Termination, such Base Salary shall be paid at such
intervals in accordance with the Company's payroll
procedures in effect from time to time with respect
to officers of the Company but no less frequently
than monthly, and such Base Salary shall be offset by
any amounts payable to Executive under any long-term
disability plan sponsored by the Company or its
affiliates. In the event of Executive's death
following a Disability Termination, any Base Salary
payable to Executive under this Section 4.3 (taking
into account the offset described above, if any) and
not yet paid on the date of Executive's death shall
be paid to Executive's Beneficiary. Such payments
shall be made to the Beneficiary at such times as
would otherwise have been payable to Executive under
this subsection (A); provided, however, that the
Company may in its discretion pay such Base Salary to
the Beneficiary in a lump sum payment in an amount
determined in accordance with the methodology set
forth in subsection (B) of this Section 4.3.
(B) In the event of a Death Termination, payments to the
Beneficiary shall be made in a single lump sum as
soon as practical after Executive's death. The
amount of such lump sum shall be equal to the present
value, determined using a 9% interest rate, of the
total amount of Base Salary payable to the
Beneficiary pursuant to this Section 4.3 and not yet
paid on the date of Executive's death.
4.4 Employee-Benefit Plans and Incentive Compensation and Other
Compensatory Arrangements. The benefits, if any, payable to or on behalf of
Executive upon his termination of employment from the Company under any employee
benefit plan or incentive compensation or other compensatory arrangement shall
be governed by the terms and conditions for benefit payments set forth in such
plans and arrangements.
Section 5. Miscellaneous
5.1 Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon Executive and his executor, administrator, heirs, personal
representative and assigns, and the Company and its successors and assigns;
provided, however, that Executive shall not be entitled to assign or delegate
any of his rights or obligations hereunder without the prior written consent of
Company; and further provided that the Company shall not be entitled to assign
or delegate any of its rights or obligations hereunder except to a corporation,
partnership or other business entity that is, directly or indirectly, controlled
by or under common control with Summit Properties Inc.
5
<PAGE> 6
5.2 Construction of Agreement. No provision of this Agreement or any
related document shall be construed against or interpreted to the disadvantage
of any party hereto by any court or other governmental or judicial authority by
reason of such party having or being deemed to have structured or drafted such
provision.
5.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
5.4 Survival of Agreements. All covenants and agreements made herein
shall survive the execution and delivery of this Agreement and the termination
of Executive's employment hereunder for any reason.
5.5 Headings. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
5.6 Notices. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to be given when delivered
personally or mailed first class, registered or certified mail, postage prepaid,
in either case, addressed as follows:
(a) If to Executive:
Michael L. Schwarz
2039 Coniston Place
Charlotte, North Carolina 28207
(b) If to the Company, addressed to:
Summit Properties Inc.
212 South Tryon Street, Suite 500
Charlotte, North Carolina 28281
Attn: Michael G. Malone
5.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5.8 Entire Agreement. This Agreement, together with the Noncompetition
Agreement, constitutes the entire agreement of the parties with respect to the
subject matter hereof and upon the Effective Date, will supersede and replace
all prior agreements, written and oral, between the parties hereto or with
respect to the subject matter hereof. This Agreement may be modified only by a
written instrument signed by each of the parties hereto.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
--------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
--------------------------------
Name: John T. Gray
Title: President
Collectively, the "Company"
/s/ Michael L. Schwarz [SEAL]
------------------------------
Michael L. Schwarz
"Executive"
7
<PAGE> 1
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into as of January 13, 1994 by
and between WILLIAM F. PAULSEN ("Executive"), SUMMIT PROPERTIES INC., a Maryland
corporation, and SUMMIT MANAGEMENT COMPANY, a Maryland corporation.
WHEREAS, on the date hereof, the Company (as defined below) is entering
into a series of related transactions pursuant to which it will acquire, among
other things, substantially all of the interests of Executive and certain others
in a portfolio of multi-family rental properties located in the eastern United
States; and
WHEREAS, as a condition to the consummation of the transactions
described above, the parties hereto desire to enter into certain agreements
restricting the activities of Executive in an effort to eliminate potential
conflicts of interest that may arise in the future, to protect the Company's
legitimate business interests, i.e., the value of its business and its good
will, and for other business purpose;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein shall have the meanings
set forth below:
"Affiliate" means (i) any entity directly or indirectly cont rolling
(including without limitation an entity for which Executive serves as an
officer, director, employee, consultant or other agent), controlled by, or under
common control with Executive, and (ii) each other entity in which Executive,
directly or indirectly, owns any controlling interest or of which Executive
serves as a general partner.
"Agreement" means this Noncompetition Agreement, any amendments hereto
made in accordance with paragraph 8(d) hereof.
"Company" means (i) Summit Management Company, (ii) Summit Properties
Inc., (iii) any corporation, partnership or other business entity that is,
directly or indirectly, controlled by or under common control with Summit
Properties Inc. and (iv) their respective successors.
"Company Project" means any Multifamily Property that the Company owns,
operates or manages as of the date of Executive's termination of employment with
the Company or that the Company has in any manner taken steps to acquire,
develop, construct, operate, manage or lease (including without limitation
making market surveys of a site, talking to the owner or his agent concerning
the purchase or joint venture of a site, optioning or contracting to buy a site
or discussions with the owner or his agent regarding managing or leasing a
property) during the twelve (12) month period immediately preceding Executive's
termination of employment with the Company.
<PAGE> 2
"Covenant Period" means the period beginning on the date of termination
of Executive's employment with the Company and ending on the latest of the
following:
(i) either (A) for purposes of paragraph 3(a), a period
of two (2) years immediately following the
termination of Executive's employment with the
Company, or (B) for purposes of paragraphs 3(b), 3(c)
and 3(d), a period of one (1) year immediately
following the termination of Executive's employment
with the Company,
(ii) a period of three (3) years immediately following the
Effective Date, or
(iii) the period of time immediately following Executive's
termination of employment with the Company during
which Executive is receiving payments of "Base
Salary" in accordance with Sections 4.2 and 4.3 of
that certain Employment Agreement between Executive,
Summit Properties Inc. and Summit Management Company
of even date herewith (the "Employment Agreement").
"Effective Date" means the date of the closing of the initial public
offering of common stock of Summit Properties Inc.
"Multifamily Property" means any real property on which multifamily
residential-use development has been constructed or is now or hereafter proposed
to be constructed (for example, and not by way of limitation, a property of the
type managed by the Company).
2. Executive's Obligations While Employed by the Company.
(a) Sole Employment. Subject to the provisions of paragraph
2(b) below, Executive agrees to devote his full time during the customary
business hours of the Company and give his best efforts to the business of the
Company and, during the period of his employment by the Company, Executive shall
not engage in any manner, whether as an officer, employee, owner, partner,
stockholder, director, consultant or otherwise -- directly or indirectly -- in
any business other than on behalf of the Company without the prior written
approval of the Board of Directors of Summit Properties Inc., and Executive
shall not accept any other employment whatsoever from any other person, firm,
corporation or entity.
(b) Exceptions. Notwithstanding the provisions of paragraph
2(a) above to the contrary, Executive may during the term of his employment by
the Company and at any time thereafter (i) acquire an interest in any
corporation, partnership, venture or other business entity so long as (A) any
such interest is a passive investment of Executive not exceeding ten percent
(10%) of the total ownership interest in such entity, (B) such interest does not
afford Executive the power to influence in any material fashion the decision
making processes of the entity in which such interest is held and (C) Executive
is not the sponsor, promoter or similar initiator of such entity and (ii)
continue (A) to serve as a general or limited partner of each of the limited
2
<PAGE> 3
partnerships identified on Schedule A, attached hereto and incorporated by this
reference, and as an officer, director and shareholder of each of the
corporations identified on said Schedule A, and (B) to discharge Executive's
fiduciary and contractual duties and obligations with respect thereto, even
though such limited partnerships and corporations (or any partnership of which
any such limited partnership or corporation is a general or limited partner) may
directly compete with the Company.
3. Executive's Obligations Following Termination of Employment with the
Company.
(a) Anti-Pirating of Employees. During the Covenant Period,
Executive agrees not to hire, directly or indirectly, or entice or participate
in any efforts to entice to leave the Company's employ, any person who was or is
a "key employee" (as hereinafter defined) of the Company at any time during the
twelve (12) month period immediately preceding the termination date of
Executive's employment with the Company. For purposes of this Agreement, "key
employee" means an employee who has an annualized rate of base salary equaling
or exceeding fifty thousand dollars ($50,000).
(b) Anti-Pirating of Company Projects. During the Covenant
Period, Executive agrees not to engage in any manner, whether as an officer,
employee, owner, partner, stockholder, director, consultant or otherwise --
directly or indirectly -- in any business which engages or attempts to engage,
directly or indirectly, in the acquisition, development, construction,
operation, management or leasing of any Company Project.
(c) Noncompetition. During the Covenant Period, Executive
agrees not to engage in any manner, whether as an officer, employee, owner,
partner, stockholder, director, consultant or otherwise -- directly or
indirectly -- in any business which engages or attempts to engage, directly or
indirectly, in the acquisition, development, construction, operation, management
or leasing of any Multifamily Property within a 30-mile radius of any Company
Project.
(d) Trade Secrets and Confidential Information. Executive
hereby agrees that he will hold in a fiduciary capacity for the benefit of the
Company, and shall not directly or indirectly use or disclose any Trade Secret,
as defined hereinafter, that Executive may have acquired during the term of his
employment by the Company for so long as such information remains a Trade
Secret. The term "Trade Secret" as used in this Agreement shall mean information
including, but not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing, a
process, financial data, financial plans, product plans, or a list of actual or
potential customers or suppliers which:
derives economic value, actual or potential from not being
generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value
from its disclosure or use; and is the subject of reasonable
efforts by the Company to maintain its secrecy.
3
<PAGE> 4
In addition to the foregoing and not in limitation thereof, Executive
agrees that during the period of his employment by the Company and the Covenant
Period, he will hold in a fiduciary capacity for the benefit of the Company and
shall not directly or indirectly use or disclose, any Confidential or
Proprietary Information, as defined hereinafter, that Executive may have
acquired (whether or not developed or compiled by Executive and whether or not
Executive was authorized to have access to such Information) during the term of,
in the course of or as a result of his employment by the Company. The term
"Confidential or Proprietary Information" as used in this Agreement means any
secret, confidential or proprietary information of the Company not otherwise
included in the definition of "Trade Secret" above. The term "Confidential and
Proprietary Information" does not include information that has become generally
available to the public by the act of one who has the right to disclose such
information without violating any right of the Company.
(e) Exceptions. Notwithstanding any provision of paragraphs
3(b) or 3(c) to the contrary, Executive shall not be restricted at any time
after his termination of employment with the Company from engaging in any
activities for which Executive would not be restricted from performing during
the term of his employment with the Company as set forth in paragraph 2(b)
above.
4. Reasonable and Necessary Restrictions. Executive acknowledges that
the restrictions, prohibitions and other provisions hereof, including without
limitation the 30-mile radius set forth in paragraph 3(c) and the Covenant
Period, are reasonable, fair and equitable in scope, terms and duration, are
necessary to protect the legitimate business interests of the Company, and are a
material inducement to the Company to enter into the transactions contemplated
in the recitals hereto. Executive covenants that he will not challenge the
enforceability of this Agreement nor will he raise any equitable defense to its
enforcement.
5. Restrictions In Addition to Employment Agreement. Executive
acknowledges that the restrictions, prohibitions and other provisions hereof
shall be in addition to and not in substitution of the restrictions,
prohibitions and other provisions of the Employment Agreement, as such agreement
shall be amended and supplemented from time to time.
6. Specific Performance. Executive acknowledges that the obligations
undertaken by him pursuant to this Agreement are unique and that the Company
likely will have no adequate remedy at law if Executive shall fail to perform
any of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the Company. Accordingly, in
addition to any other remedies that the Company may have at law or in equity,
the Company shall have the right to have all obligations, covenants, agreements
and other provisions of this Agreement specifically performed by Executive, and
the Com any shall have the right to obtain preliminary and permanent injunctive
relief to secure specific performance and to prevent a breach or contemplated
breach of this Agreement by Executive, and Executive submits to the jurisdiction
of the courts of the State of North Carolina for this purpose.
4
<PAGE> 5
7. Operations of Affiliates. Executive agrees that he will refrain from
(i) authorizing any Affiliate to perform or (ii) assisting in any manner any
Affiliate in performing any activities that would be prohibited by the terms of
this Agreement if they were performed by Executive. Notwithstanding anything to
the contrary contained in this paragraph 7 (or in any other paragraph of this
Agreement), Executive shall not be required by the terms of this Agreement to
violate any fiduciary or contractual duty he owes as a director or officer of a
corporation, as a partner of a partnership or as a trustee of a trust, which
position he holds not in violation of this Agreement or the Employment
Agreement.
8. Miscellaneous Provisions.
(a) Binding Effect. Subject to any provisions hereof
restricting assignment, all covenants and agreements in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors, assigns, heirs, and personal representatives. None of the
parties hereto may assign any of its rights under this Agreement or attempt to
have any other person or entity assume any of its obligations hereunder.
(b) Severability. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the limit
of validity prescribed by law, then the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision contained
in this Agreement operates or would operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein contained, and the remain-der of this Agreement shall
remain operative and in full force and effect.
(c) Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto shall be
governed by and construed in accordance with the laws of the State of North
Carolina, not including the choice-of-law rules thereof.
(d) Amendment: Waiver. Except as otherwise expressly provided
in this Agreement, no amendment, modification or discharge of this Agreement
shall be valid or binding unless set forth in writing and duly executed by each
of the parties hereto. Any waiver by any party or consent by any party to any
variation from any provision of this Agreement shall be valid only if in writing
and only in the specific instance in which it is given, and such waiver or
consent shall not be construed as a waiver of any other provision or as a
consent with respect to any similar instance or circumstance.
(e) Headings. Paragraph and subparagraph headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
5
<PAGE> 6
(f) Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or entity may require.
(g) Arbitration. Any dispute or controversy arising out of or
relating to this Agreement shall be settled finally and exclusively by
arbitration in Charlotte, North Carolina in accordance with the rules of the
American Arbitration Association then in effect. Such arbitration shall be
conducted by an arbitrators appointed by the American Arbitration Association in
accordance with its rules and any finding by such arbitrators shall be final and
binding upon the parties. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction thereof, and the parties consent
to the jurisdiction of the courts of the State of North Carolina for this
purpose. Nothing contained in this paragraph 8(g) shall be construed to preclude
the Company from obtaining injunctive or other equitable relief to secure
specific performance or to otherwise prevent a breach or contemplated breach of
this Agreement by Executive as provided in paragraph 6 hereof.
(h) Execution in Counterparts. This Agreement may be executed
in two or more counterparts, none of which need contain the signatures of all
parties hereto and each of which shall be deemed an original.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first set forth above.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
--------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
--------------------------------
Name: John T. Gray
Title: President
/s/ William F. Paulsen [SEAL]
------------------------------
William F. Paulsen
6
<PAGE> 7
SCHEDULE A
WILLIAM F. PAULSEN
OakRidge/McGuire Partners
Waverly Place McGuire Partners
Cobblestones/Summit L.P.
McAlpine Place/Summit L.P.
Sterling Place/Summit L.P.
Union Station/Summit L.P.
Brittain Woods L.P. and Tuttle Crossing/Summit L.P.
North Olmstead L.P. and Butternut Ridge/Summit L.P.
Audubon Parc Apartments Inc. and Summit/Audubon Parc L.P.
Asbury Square/Summit L.P.
Jefferson Point/McGuire Partners
Buckingham/Summit Partners L.P. and Buckingham Associates
Midlothian Partners
Ashton Woods/Summit Partners and Ashton Woods Associates L.P.
Shirlington/Summit Partners and Shirlington Associates L.P.
Country Commons Associates L.P. and Country Commons/Summit L.P.
Doylestown/Summit Partners
Daniels Run Associates L.P. and Daniels Run/Summit L.P.
Ashton Park/Summit Partners and Ashton Park/L.P.
Sabal Walk/Summit L.P. and Wekiva/Summit L.P.
Summit/Simmons Partners
The Following Are Added For Purposes of Winding Them Up:
Summit/Paulsen
Summit/Jones
Summit/Hotaling
Summit/Tufaro
Summit/Kuhlman
Summit Building Corp.
7
<PAGE> 1
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into as of January 13, 1994 by
and between WILLIAM B. McGUIRE, JR. ("Executive"), SUMMIT PROPERTIES INC., a
Maryland corporation, and SUMMIT MANAGEMENT COMPANY, a Maryland corporation.
WHEREAS, on the date hereof, the Company (as defined below) is entering
into a series of related transactions pursuant to which it will acquire, among
other things, substantially all of the interests of Executive and certain others
in a portfolio of multi-family rental properties located in the eastern United
States; and
WHEREAS, as a condition to the consummation of the transactions
described above, the parties hereto desire to enter into certain agreements
restricting the activities of Executive in an effort to eliminate potential
conflicts of interest that may arise in the future, to protect the Company's
legitimate business interests, i.e., the value of its business and its good
will, and for other business purpose;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein shall have the meanings
set forth below:
"Affiliate" means (i) any entity directly or indirectly cont rolling
(including without limitation an entity for which Executive serves as an
officer, director, employee, consultant or other agent), controlled by, or under
common control with Executive, and (ii) each other entity in which Executive,
directly or indirectly, owns any controlling interest or of which Executive
serves as a general partner.
"Agreement" means this Noncompetition Agreement, any amendments hereto
made in accordance with paragraph 8(d) hereof.
"Company" means (i) Summit Management Company, (ii) Summit Properties
Inc., (iii) any corporation, partnership or other business entity that is,
directly or indirectly, controlled by or under common control with Summit
Properties Inc. and (iv) their respective successors.
"Company Project" means any Multifamily Property that the Company owns,
operates or manages as of the date of Executive's termination of employment with
the Company or that the Company has in any manner taken steps to acquire,
develop, construct, operate, manage or lease (including without limitation
making market surveys of a site, talking to the owner or his agent concerning
the purchase or joint venture of a site, optioning or contracting to buy a site
or discussions with the owner or his agent regarding managing or leasing a
property) during the twelve (12) month period immediately preceding Executive's
termination of employment with the Company.
<PAGE> 2
"Covenant Period" means the period beginning on the date of termination
of Executive's employment with the Company and ending on the latest of the
following:
(i) either (A) for purposes of paragraph 3(a), a period
of two (2) years immediately following the
termination of Executive's employment with the
Company, or (B) for purposes of paragraphs 3(b), 3(c)
and 3(d), a period of one (1) year immediately
following the termination of Executive's employment
with the Company,
(ii) a period of three (3) years immediately following the
Effective Date, or
(iii) the period of time immediately following Executive's
termination of employment with the Company during
which Executive is receiving payments of "Base
Salary" in accordance with Sections 4.2 and 4.3 of
that certain Employment Agreement between Executive,
Summit Properties Inc. and Summit Management Company
of even date herewith (the "Employment Agreement").
"Effective Date" means the date of the closing of the initial public
offering of common stock of Summit Properties Inc.
"Multifamily Property" means any real property on which multifamily
residential-use development has been constructed or is now or hereafter proposed
to be constructed (for example, and not by way of limitation, a property of the
type managed by the Company).
2. Executive's Obligations While Employed by the Company.
During the term of Executive's employment with the Company, Executive
agrees not to engage in any manner, whether as an officer, employee, owner,
partner, stockholder, director, consultant or otherwise -- directly or
indirectly -- in the acquisition, development, construction, operation,
management or leasing of any Multifamily property other than on behalf of the
Company; provided, however that Executive may during the term of his employment
with the Company (i) acquire an interest in such entity so long as (A) any such
interest is a passive investment of Executive not exceeding ten percent (10%) of
the total ownership interest in such entity, (B) such interest does not afford
Executive the power to influence in any material fashion the decision making
processes of the entity in which such interest is held and (C) Executive is not
the sponsor, promoter or similar initiator of such entity and (ii) continue (A)
to serve as a general or limited partner of each of the limited
2
<PAGE> 3
partnerships identified on Schedule A, attached hereto and incorporated by this
reference, and as an officer, director and shareholder of each of the
corporations identified on said Schedule A, and (B) to discharge Executive's
fiduciary and contractual duties and obligations with respect thereto, even
though such limited partnerships and corporations (or any partnership of which
any such limited partnership or corporation is a general or limited partner) may
directly compete with the Company. Except as provided in the foregoing, and
subject to Executive's obligations under the Employment Agreement, Executive
shall not be restricted in engaging in any other business activities during the
term of his employment with the Company.
3. Executive's Obligations Following Termination of Employment with the
Company.
(a) Anti-Pirating of Employees. During the Covenant Period,
Executive agrees not to hire, directly or indirectly, or entice or participate
in any efforts to entice to leave the Company's employ, any person who was or is
a "key employee" (as hereinafter defined) of the Company at any time during the
twelve (12) month period immediately preceding the termination date of
Executive's employment with the Company. For purposes of this Agreement, "key
employee" means an employee who has an annualized rate of base salary equaling
or exceeding fifty thousand dollars ($50,000).
(b) Anti-Pirating of Company Projects. During the Covenant
Period, Executive agrees not to engage in any manner, whether as an officer,
employee, owner, partner, stockholder, director, consultant or otherwise --
directly or indirectly -- in any business which engages or attempts to engage,
directly or indirectly, in the acquisition, development, construction,
operation, management or leasing of any Company Project.
(c) Noncompetition. During the Covenant Period, Executive
agrees not to engage in any manner, whether as an officer, employee, owner,
partner, stockholder, director, consultant or otherwise -- directly or
indirectly -- in any business which engages or attempts to engage, directly or
indirectly, in the acquisition, development, construction, operation, management
or leasing of any Multifamily Property within a 30-mile radius of any Company
Project.
(d) Trade Secrets and Confidential Information. Executive
hereby agrees that he will hold in a fiduciary capacity for the benefit of the
Company, and shall not directly or indirectly use or disclose any Trade Secret,
as defined hereinafter, that Executive may have acquired during the term of his
employment by the Company for so long as such information remains a Trade
Secret. The term "Trade Secret" as used in this Agreement shall mean information
including, but not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing, a
process, financial data, financial plans, product plans, or a list of actual or
potential customers or suppliers which:
derives economic value, actual or potential from not being
generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value
from its disclosure or use; and is the subject of reasonable
efforts by the Company to maintain its secrecy.
3
<PAGE> 4
In addition to the foregoing and not in limitation thereof, Executive
agrees that during the period of his employment by the Company and the Covenant
Period, he will hold in a fiduciary capacity for the benefit of the Company and
shall not directly or indirectly use or disclose, any Confidential or
Proprietary Information, as defined hereinafter, that Executive may have
acquired (whether or not developed or compiled by Executive and whether or not
Executive was authorized to have access to such Information) during the term of,
in the course of or as a result of his employment by the Company. The term
"Confidential or Proprietary Information" as used in this Agreement means any
secret, confidential or proprietary information of the Company not otherwise
included in the definition of "Trade Secret" above. The term "Confidential and
Proprietary Information" does not include information that has become generally
available to the public by the act of one who has the right to disclose such
information without violating any right of the Company.
(e) Exceptions. Notwithstanding any provision of paragraphs
3(b) or 3(c) to the contrary, Executive shall not be restricted at any time
after his termination of employment with the Company from engaging in any
activities for which Executive would not be restricted from performing during
the term of his employment with the Company as set forth in paragraph 2(b)
above.
4. Reasonable and Necessary Restrictions. Executive acknowledges that
the restrictions, prohibitions and other provisions hereof, including without
limitation the 30-mile radius set forth in paragraph 3(c) and the Covenant
Period, are reasonable, fair and equitable in scope, terms and duration, are
necessary to protect the legitimate business interests of the Company, and are a
material inducement to the Company to enter into the transactions contemplated
in the recitals hereto. Executive covenants that he will not challenge the
enforceability of this Agreement nor will he raise any equitable defense to its
enforcement.
5. Restrictions In Addition to Employment Agreement. Executive
acknowledges that the restrictions, prohibitions and other provisions hereof
shall be in addition to and not in substitution of the restrictions,
prohibitions and other provisions of the Employment Agreement, as such agreement
shall be amended and supplemented from time to time.
6. Specific Performance. Executive acknowledges that the obligations
undertaken by him pursuant to this Agreement are unique and that the Company
likely will have no adequate remedy at law if Executive shall fail to perform
any of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the Company. Accordingly, in
addition to any other remedies that the Company may have at law or in equity,
the Company shall have the right to have all obligations, covenants, agreements
and other provisions of this Agreement specifically performed by Executive, and
the Com any shall have the right to obtain preliminary and permanent injunctive
relief to secure specific performance and to prevent a breach or contemplated
breach of this Agreement by Executive, and Executive submits to the jurisdiction
of the courts of the State of North Carolina for this purpose.
4
<PAGE> 5
7. Operations of Affiliates. Executive agrees that he will refrain from
(i) authorizing any Affiliate to perform or (ii) assisting in any manner any
Affiliate in performing any activities that would be prohibited by the terms of
this Agreement if they were performed by Executive. Notwithstanding anything to
the contrary contained in this paragraph 7 (or in any other paragraph of this
Agreement), Executive shall not be required by the terms of this Agreement to
violate any fiduciary or contractual duty he owes as a director or officer of a
corporation, as a partner of a partnership or as a trustee of a trust, which
position he holds not in violation of this Agreement or the Employment
Agreement.
8. Miscellaneous Provisions.
(a) Binding Effect. Subject to any provisions hereof
restricting assignment, all covenants and agreements in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors, assigns, heirs, and personal representatives. None of the
parties hereto may assign any of its rights under this Agreement or attempt to
have any other person or entity assume any of its obligations hereunder.
(b) Severability. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the limit
of validity prescribed by law, then the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision contained
in this Agreement operates or would operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein contained, and the remain-der of this Agreement shall
remain operative and in full force and effect.
(c) Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto shall be
governed by and construed in accordance with the laws of the State of North
Carolina, not including the choice-of-law rules thereof.
(d) Amendment: Waiver. Except as otherwise expressly provided
in this Agreement, no amendment, modification or discharge of this Agreement
shall be valid or binding unless set forth in writing and duly executed by each
of the parties hereto. Any waiver by any party or consent by any party to any
variation from any provision of this Agreement shall be valid only if in writing
and only in the specific instance in which it is given, and such waiver or
consent shall not be construed as a waiver of any other provision or as a
consent with respect to any similar instance or circumstance.
(e) Headings. Paragraph and subparagraph headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
5
<PAGE> 6
(f) Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or entity may require.
(g) Arbitration. Any dispute or controversy arising out of or
relating to this Agreement shall be settled finally and exclusively by
arbitration in Charlotte, North Carolina in accordance with the rules of the
American Arbitration Association then in effect. Such arbitration shall be
conducted by an arbitrators appointed by the American Arbitration Association in
accordance with its rules and any finding by such arbitrators shall be final and
binding upon the parties. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction thereof, and the parties consent
to the jurisdiction of the courts of the State of North Carolina for this
purpose. Nothing contained in this paragraph 8(g) shall be construed to preclude
the Company from obtaining injunctive or other equitable relief to secure
specific performance or to otherwise prevent a breach or contemplated breach of
this Agreement by Executive as provided in paragraph 6 hereof.
(h) Execution in Counterparts. This Agreement may be executed
in two or more counterparts, none of which need contain the signatures of all
parties hereto and each of which shall be deemed an original.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first set forth above.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
-------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
-------------------------------
Name: John T. Gray
Title: President
/s/ William B. McGuire, Jr. [SEAL]
-----------------------------
William B. McGuire, Jr.
6
<PAGE> 7
SCHEDULE A
W.B. McGUIRE, JR.
McGuire Associates
Greentree Associates
McGuire Investment Group #3
Carolinas Real Estate Fund
Oak Ridge/McGuire Partners
Cobblestones/Summit L.P.
McAlpine Place/Summit L.P.
Sterling Place/Summit L.P.
Union Station/Summit L.P.
Brittain Woods L.P. and Tuttle Crossing/Summit L.P.
North Olmstead L.P. and Butternut Ridge/Summit L.P.
Audubon Parc Apartments Inc. and Summit/Audubon Parc L.P.
Asbury Square/Summit L.P.
Jefferson Point/McGuire Partners
Buckingham/Summit Partners L.P. and Buckingham Associates
Midlothian Partners
Ashton Woods/Summit Partners and Ashton Woods Associates L.P.
Shirlington/Summit Partners and Shirlington Associates L.P.
Country Commons Associates L.P. and Country Commons/Summit L.P.
Doylestown/Summit Partners
Daniels Run Associates L.P. and Daniels Run/Summit L.P.
Ashton Park/Summit Partners and Ashton Park/L.P.
Sabal Walk/Summit L.P. and Wekiva/Summit L.P.
Summit/Simmons Partners
The Following Are Added For Purposes of Winding Them Up:
Summit/Paulsen
Summit/Jones
Summit/Hotaling
Summit/Tufaro
Summit/Kuhlman
Summit/Building Corp.
7
<PAGE> 1
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into as of January 13, 1994 by
and between RAYMOND V. JONES ("Executive"), SUMMIT PROPERTIES INC., a Maryland
corporation, and SUMMIT MANAGEMENT COMPANY, a Maryland corporation.
WHEREAS, on the date hereof, the Company (as defined below) is entering
into a series of related transactions pursuant to which it will acquire, among
other things, substantially all of the interests of Executive and certain others
in a portfolio of multi-family rental properties located in the eastern United
States; and
WHEREAS, as a condition to the consummation of the transactions
described above, the parties hereto desire to enter into certain agreements
restricting the activities of Executive in an effort to eliminate potential
conflicts of interest that may arise in the future, to protect the Company's
legitimate business interests, i.e., the value of its business and its good
will, and for other business purpose;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein shall have the meanings
set forth below:
"Affiliate" means (i) any entity directly or indirectly cont rolling
(including without limitation an entity for which Executive serves as an
officer, director, employee, consultant or other agent), controlled by, or under
common control with Executive, and (ii) each other entity in which Executive,
directly or indirectly, owns any controlling interest or of which Executive
serves as a general partner.
"Agreement" means this Noncompetition Agreement, any amendments hereto
made in accordance with paragraph 8(d) hereof.
"Company" means (i) Summit Management Company, (ii) Summit Properties
Inc., (iii) any corporation, partnership or other business entity that is,
directly or indirectly, controlled by or under common control with Summit
Properties Inc. and (iv) their respective successors.
"Company Project" means any Multifamily Property that the Company owns,
operates or manages as of the date of Executive's termination of employment with
the Company or that the Company has in any manner taken steps to acquire,
develop, construct, operate, manage or lease (including without limitation
making market surveys of a site, talking to the owner or his agent concerning
the purchase or joint venture of a site, optioning or contracting to buy a site
or discussions with the owner or his agent regarding managing or leasing a
property) during the twelve (12) month period immediately preceding Executive's
termination of employment with the Company.
<PAGE> 2
"Covenant Period" means the period beginning on the date of termination
of Executive's employment with the Company and ending on the latest of the
following:
(i) either (A) for purposes of paragraph 3(a), a period
of two (2) years immediately following the
termination of Executive's employment with the
Company, or (B) for purposes of paragraphs 3(b), 3(c)
and 3(d), a period of one (1) year immediately
following the termination of Executive's employment
with the Company,
(ii) a period of three (3) years immediately following the
Effective Date, or
(iii) the period of time immediately following Executive's
termination of employment with the Company during
which Executive is receiving payments of "Base
Salary" in accordance with Sections 4.2 and 4.3 of
that certain Employment Agreement between Executive,
Summit Properties Inc. and Summit Management Company
of even date herewith (the "Employment Agreement").
"Effective Date" means the date of the closing of the initial public
offering of common stock of Summit Properties Inc.
"Multifamily Property" means any real property on which multifamily
residential-use development has been constructed or is now or hereafter proposed
to be constructed (for example, and not by way of limitation, a property of the
type managed by the Company).
2. Executive's Obligations While Employed by the Company.
(a) Sole Employment. Subject to the provisions of paragraph
2(b) below, Executive agrees to devote his full time during the customary
business hours of the Company and give his best efforts to the business of the
Company and, during the period of his employment by the Company, Executive shall
not engage in any manner, whether as an officer, employee, owner, partner,
stockholder, director, consultant or otherwise -- directly or indirectly -- in
any business other than on behalf of the Company without the prior written
approval of the Board of Directors of Summit Properties Inc., and Executive
shall not accept any other employment whatsoever from any other person, firm,
corporation or entity.
(b) Exceptions. Notwithstanding the provisions of paragraph
2(a) above to the contrary, Executive may during the term of his employment by
the Company and at any time thereafter (i) acquire an interest in any
corporation, partnership, venture or other business entity so long as (A) any
such interest is a passive investment of Executive not exceeding ten percent
(10%) of the total ownership interest in such entity, (B) such interest does not
afford Executive the power to influence in any material fashion the decision
making processes of the entity in which such interest is held and (C) Executive
is not the sponsor, promoter or similar initiator of such entity and (ii)
continue (A) to serve as a general or limited partner of each of the limited
2
<PAGE> 3
partnerships identified on Schedule A, attached hereto and incorporated by this
reference, and as an officer, director and shareholder of each of the
corporations identified on said Schedule A, and (B) to discharge Executive's
fiduciary and contractual duties and obligations with respect thereto, even
though such limited partnerships and corporations (or any partnership of which
any such limited partnership or corporation is a general or limited partner) may
directly compete with the Company.
3. Executive's Obligations Following Termination of Employment with the
Company.
(a) Anti-Pirating of Employees. During the Covenant Period,
Executive agrees not to hire, directly or indirectly, or entice or participate
in any efforts to entice to leave the Company's employ, any person who was or is
a "key employee" (as hereinafter defined) of the Company at any time during the
twelve (12) month period immediately preceding the termination date of
Executive's employment with the Company. For purposes of this Agreement, "key
employee" means an employee who has an annualized rate of base salary equaling
or exceeding fifty thousand dollars ($50,000).
(b) Anti-Pirating of Company Projects. During the Covenant
Period, Executive agrees not to engage in any manner, whether as an officer,
employee, owner, partner, stockholder, director, consultant or otherwise --
directly or indirectly -- in any business which engages or attempts to engage,
directly or indirectly, in the acquisition, development, construction,
operation, management or leasing of any Company Project.
(c) Noncompetition. During the Covenant Period, Executive
agrees not to engage in any manner, whether as an officer, employee, owner,
partner, stockholder, director, consultant or otherwise -- directly or
indirectly -- in any business which engages or attempts to engage, directly or
indirectly, in the acquisition, development, construction, operation, management
or leasing of any Multifamily Property within a 30-mile radius of any Company
Project.
(d) Trade Secrets and Confidential Information. Executive
hereby agrees that he will hold in a fiduciary capacity for the benefit of the
Company, and shall not directly or indirectly use or disclose any Trade Secret,
as defined hereinafter, that Executive may have acquired during the term of his
employment by the Company for so long as such information remains a Trade
Secret. The term "Trade Secret" as used in this Agreement shall mean information
including, but not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing, a
process, financial data, financial plans, product plans, or a list of actual or
potential customers or suppliers which:
derives economic value, actual or potential from not being
generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value
from its disclosure or use; and is the subject of reasonable
efforts by the Company to maintain its secrecy.
3
<PAGE> 4
In addition to the foregoing and not in limitation thereof, Executive
agrees that during the period of his employment by the Company and the Covenant
Period, he will hold in a fiduciary capacity for the benefit of the Company and
shall not directly or indirectly use or disclose, any Confidential or
Proprietary Information, as defined hereinafter, that Executive may have
acquired (whether or not developed or compiled by Executive and whether or not
Executive was authorized to have access to such Information) during the term of,
in the course of or as a result of his employment by the Company. The term
"Confidential or Proprietary Information" as used in this Agreement means any
secret, confidential or proprietary information of the Company not otherwise
included in the definition of "Trade Secret" above. The term "Confidential and
Proprietary Information" does not include information that has become generally
available to the public by the act of one who has the right to disclose such
information without violating any right of the Company.
(e) Exceptions. Notwithstanding any provision of paragraphs
3(b) or 3(c) to the contrary, Executive shall not be restricted at any time
after his termination of employment with the Company from engaging in any
activities for which Executive would not be restricted from performing during
the term of his employment with the Company as set forth in paragraph 2(b)
above.
4. Reasonable and Necessary Restrictions. Executive acknowledges that
the restrictions, prohibitions and other provisions hereof, including without
limitation the 30-mile radius set forth in paragraph 3(c) and the Covenant
Period, are reasonable, fair and equitable in scope, terms and duration, are
necessary to protect the legitimate business interests of the Company, and are a
material inducement to the Company to enter into the transactions contemplated
in the recitals hereto. Executive covenants that he will not challenge the
enforceability of this Agreement nor will he raise any equitable defense to its
enforcement.
5. Restrictions In Addition to Employment Agreement. Executive
acknowledges that the restrictions, prohibitions and other provisions hereof
shall be in addition to and not in substitution of the restrictions,
prohibitions and other provisions of the Employment Agreement, as such agreement
shall be amended and supplemented from time to time.
6. Specific Performance. Executive acknowledges that the obligations
undertaken by him pursuant to this Agreement are unique and that the Company
likely will have no adequate remedy at law if Executive shall fail to perform
any of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the Company. Accordingly, in
addition to any other remedies that the Company may have at law or in equity,
the Company shall have the right to have all obligations, covenants, agreements
and other provisions of this Agreement specifically performed by Executive, and
the Com any shall have the right to obtain preliminary and permanent injunctive
relief to secure specific performance and to prevent a breach or contemplated
breach of this Agreement by Executive, and Executive submits to the jurisdiction
of the courts of the State of North Carolina for this purpose.
4
<PAGE> 5
7. Operations of Affiliates. Executive agrees that he will refrain from
(i) authorizing any Affiliate to perform or (ii) assisting in any manner any
Affiliate in performing any activities that would be prohibited by the terms of
this Agreement if they were performed by Executive. Notwithstanding anything to
the contrary contained in this paragraph 7 (or in any other paragraph of this
Agreement), Executive shall not be required by the terms of this Agreement to
violate any fiduciary or contractual duty he owes as a director or officer of a
corporation, as a partner of a partnership or as a trustee of a trust, which
position he holds not in violation of this Agreement or the Employment
Agreement.
8. Miscellaneous Provisions.
(a) Binding Effect. Subject to any provisions hereof
restricting assignment, all covenants and agreements in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors, assigns, heirs, and personal representatives. None of the
parties hereto may assign any of its rights under this Agreement or attempt to
have any other person or entity assume any of its obligations hereunder.
(b) Severability. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the limit
of validity prescribed by law, then the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision contained
in this Agreement operates or would operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein contained, and the remain-der of this Agreement shall
remain operative and in full force and effect.
(c) Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto shall be
governed by and construed in accordance with the laws of the State of North
Carolina, not including the choice-of-law rules thereof.
(d) Amendment: Waiver. Except as otherwise expressly provided
in this Agreement, no amendment, modification or discharge of this Agreement
shall be valid or binding unless set forth in writing and duly executed by each
of the parties hereto. Any waiver by any party or consent by any party to any
variation from any provision of this Agreement shall be valid only if in writing
and only in the specific instance in which it is given, and such waiver or
consent shall not be construed as a waiver of any other provision or as a
consent with respect to any similar instance or circumstance.
(e) Headings. Paragraph and subparagraph headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
5
<PAGE> 6
(f) Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or entity may require.
(g) Arbitration. Any dispute or controversy arising out of or
relating to this Agreement shall be settled finally and exclusively by
arbitration in Charlotte, North Carolina in accordance with the rules of the
American Arbitration Association then in effect. Such arbitration shall be
conducted by an arbitrators appointed by the American Arbitration Association in
accordance with its rules and any finding by such arbitrators shall be final and
binding upon the parties. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction thereof, and the parties consent
to the jurisdiction of the courts of the State of North Carolina for this
purpose. Nothing contained in this paragraph 8(g) shall be construed to preclude
the Company from obtaining injunctive or other equitable relief to secure
specific performance or to otherwise prevent a breach or contemplated breach of
this Agreement by Executive as provided in paragraph 6 hereof.
(h) Execution in Counterparts. This Agreement may be executed
in two or more counterparts, none of which need contain the signatures of all
parties hereto and each of which shall be deemed an original.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first set forth above.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
-------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
-------------------------------
Name: John T. Gray
Title: President
/s/ Raymond V. Jones [SEAL]
-----------------------------
Raymond V. Jones
6
<PAGE> 7
SCHEDULE A
RAYMOND V. JONES
OakRidge/McGuire Partners
Waverly Place McGuire Partners
Cobblestones/Summit L.P.
McAlpine Place/Summit L.P.
Sterling Place/Summit L.P.
Union Station/Summit L.P.
Brittain Woods L.P. and Tuttle Crossing/Summit L.P.
North Olmstead L.P. and Butternut Ridge/Summit L.P.
Audubon Parc Apartments Inc. and Summit/Audubon Parc L.P.
Asbury Square/Summit L.P.
The Following Are Added For Purposes of Winding Them Up:
Summit/Jones
Summit/Hotaling
7
<PAGE> 1
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into as of January 13, 1994 by
and between KEITH H. KUHLMAN ("Executive"), SUMMIT PROPERTIES INC., a Maryland
corporation, and SUMMIT MANAGEMENT COMPANY, a Maryland corporation.
WHEREAS, on the date hereof, the Company (as defined below) is entering
into a series of related transactions pursuant to which it will acquire, among
other things, substantially all of the interests of Executive and certain others
in a portfolio of multi-family rental properties located in the eastern United
States; and
WHEREAS, as a condition to the consummation of the transactions
described above, the parties hereto desire to enter into certain agreements
restricting the activities of Executive in an effort to eliminate potential
conflicts of interest that may arise in the future, to protect the Company's
legitimate business interests, i.e., the value of its business and its good
will, and for other business purpose;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein shall have the meanings
set forth below:
"Affiliate" means (i) any entity directly or indirectly cont rolling
(including without limitation an entity for which Executive serves as an
officer, director, employee, consultant or other agent), controlled by, or under
common control with Executive, and (ii) each other entity in which Executive,
directly or indirectly, owns any controlling interest or of which Executive
serves as a general partner.
"Agreement" means this Noncompetition Agreement, any amendments hereto
made in accordance with paragraph 8(d) hereof.
"Company" means (i) Summit Management Company, (ii) Summit Properties
Inc., (iii) any corporation, partnership or other business entity that is,
directly or indirectly, controlled by or under common control with Summit
Properties Inc. and (iv) their respective successors.
"Company Project" means any Multifamily Property that the Company owns,
operates or manages as of the date of Executive's termination of employment with
the Company or that the Company has in any manner taken steps to acquire,
develop, construct, operate, manage or lease (including without limitation
making market surveys of a site, talking to the owner or his agent concerning
the purchase or joint venture of a site, optioning or contracting to buy a site
or discussions with the owner or his agent regarding managing or leasing a
property) during the twelve (12) month period immediately preceding Executive's
termination of employment with the Company.
<PAGE> 2
"Covenant Period" means the period beginning on the date of termination
of Executive's employment with the Company and ending on the latest of the
following:
(i) either (A) for purposes of paragraph 3(a), a period
of two (2) years immediately following the
termination of Executive's employment with the
Company, or (B) for purposes of paragraphs 3(b), 3(c)
and 3(d), a period of one (1) year immediately
following the termination of Executive's employment
with the Company,
(ii) a period of three (3) years immediately following the
Effective Date, or
(iii) the period of time immediately following Executive's
termination of employment with the Company during
which Executive is receiving payments of "Base
Salary" in accordance with Sections 4.2 and 4.3 of
that certain Employment Agreement between Executive,
Summit Properties Inc. and Summit Management Company
of even date herewith (the "Employment Agreement").
"Effective Date" means the date of the closing of the initial public
offering of common stock of Summit Properties Inc.
"Multifamily Property" means any real property on which multifamily
residential-use development has been constructed or is now or hereafter proposed
to be constructed (for example, and not by way of limitation, a property of the
type managed by the Company).
2. Executive's Obligations While Employed by the Company.
(a) Sole Employment. Subject to the provisions of paragraph
2(b) below, Executive agrees to devote his full time during the customary
business hours of the Company and give his best efforts to the business of the
Company and, during the period of his employment by the Company, Executive shall
not engage in any manner, whether as an officer, employee, owner, partner,
stockholder, director, consultant or otherwise -- directly or indirectly -- in
any business other than on behalf of the Company without the prior written
approval of the Board of Directors of Summit Properties Inc., and Executive
shall not accept any other employment whatsoever from any other person, firm,
corporation or entity.
(b) Exceptions. Notwithstanding the provisions of paragraph
2(a) above to the contrary, Executive may during the term of his employment by
the Company and at any time thereafter (i) acquire an interest in any
corporation, partnership, venture or other business entity so long as (A) any
such interest is a passive investment of Executive not exceeding ten percent
(10%) of the total ownership interest in such entity, (B) such interest does not
afford Executive the power to influence in any material fashion the decision
making processes of the entity in which such interest is held and (C) Executive
is not the sponsor, promoter or similar initiator of such entity and (ii)
continue (A) to serve as a general or limited partner of each of the limited
2
<PAGE> 3
partnerships identified on Schedule A, attached hereto and incorporated by this
reference, and as an officer, director and shareholder of each of the
corporations identified on said Schedule A, and (B) to discharge Executive's
fiduciary and contractual duties and obligations with respect thereto, even
though such limited partnerships and corporations (or any partnership of which
any such limited partnership or corporation is a general or limited partner) may
directly compete with the Company.
3. Executive's Obligations Following Termination of Employment with the
Company.
(a) Anti-Pirating of Employees. During the Covenant Period,
Executive agrees not to hire, directly or indirectly, or entice or participate
in any efforts to entice to leave the Company's employ, any person who was or is
a "key employee" (as hereinafter defined) of the Company at any time during the
twelve (12) month period immediately preceding the termination date of
Executive's employment with the Company. For purposes of this Agreement, "key
employee" means an employee who has an annualized rate of base salary equaling
or exceeding fifty thousand dollars ($50,000).
(b) Anti-Pirating of Company Projects. During the Covenant
Period, Executive agrees not to engage in any manner, whether as an officer,
employee, owner, partner, stockholder, director, consultant or otherwise --
directly or indirectly -- in any business which engages or attempts to engage,
directly or indirectly, in the acquisition, development, construction,
operation, management or leasing of any Company Project.
(c) Noncompetition. During the Covenant Period, Executive
agrees not to engage in any manner, whether as an officer, employee, owner,
partner, stockholder, director, consultant or otherwise -- directly or
indirectly -- in any business which engages or attempts to engage, directly or
indirectly, in the acquisition, development, construction, operation, management
or leasing of any Multifamily Property within a 30-mile radius of any Company
Project.
(d) Trade Secrets and Confidential Information. Executive
hereby agrees that he will hold in a fiduciary capacity for the benefit of the
Company, and shall not directly or indirectly use or disclose any Trade Secret,
as defined hereinafter, that Executive may have acquired during the term of his
employment by the Company for so long as such information remains a Trade
Secret. The term "Trade Secret" as used in this Agreement shall mean information
including, but not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing, a
process, financial data, financial plans, product plans, or a list of actual or
potential customers or suppliers which:
derives economic value, actual or potential from not being
generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value
from its disclosure or use; and is the subject of reasonable
efforts by the Company to maintain its secrecy.
3
<PAGE> 4
In addition to the foregoing and not in limitation thereof, Executive
agrees that during the period of his employment by the Company and the Covenant
Period, he will hold in a fiduciary capacity for the benefit of the Company and
shall not directly or indirectly use or disclose, any Confidential or
Proprietary Information, as defined hereinafter, that Executive may have
acquired (whether or not developed or compiled by Executive and whether or not
Executive was authorized to have access to such Information) during the term of,
in the course of or as a result of his employment by the Company. The term
"Confidential or Proprietary Information" as used in this Agreement means any
secret, confidential or proprietary information of the Company not otherwise
included in the definition of "Trade Secret" above. The term "Confidential and
Proprietary Information" does not include information that has become generally
available to the public by the act of one who has the right to disclose such
information without violating any right of the Company.
(e) Exceptions. Notwithstanding any provision of paragraphs
3(b) or 3(c) to the contrary, Executive shall not be restricted at any time
after his termination of employment with the Company from engaging in any
activities for which Executive would not be restricted from performing during
the term of his employment with the Company as set forth in paragraph 2(b)
above.
4. Reasonable and Necessary Restrictions. Executive acknowledges that
the restrictions, prohibitions and other provisions hereof, including without
limitation the 30-mile radius set forth in paragraph 3(c) and the Covenant
Period, are reasonable, fair and equitable in scope, terms and duration, are
necessary to protect the legitimate business interests of the Company, and are a
material inducement to the Company to enter into the transactions contemplated
in the recitals hereto. Executive covenants that he will not challenge the
enforceability of this Agreement nor will he raise any equitable defense to its
enforcement.
5. Restrictions In Addition to Employment Agreement. Executive
acknowledges that the restrictions, prohibitions and other provisions hereof
shall be in addition to and not in substitution of the restrictions,
prohibitions and other provisions of the Employment Agreement, as such agreement
shall be amended and supplemented from time to time.
6. Specific Performance. Executive acknowledges that the obligations
undertaken by him pursuant to this Agreement are unique and that the Company
likely will have no adequate remedy at law if Executive shall fail to perform
any of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the Company. Accordingly, in
addition to any other remedies that the Company may have at law or in equity,
the Company shall have the right to have all obligations, covenants, agreements
and other provisions of this Agreement specifically performed by Executive, and
the Com any shall have the right to obtain preliminary and permanent injunctive
relief to secure specific performance and to prevent a breach or contemplated
breach of this Agreement by Executive, and Executive submits to the jurisdiction
of the courts of the State of North Carolina for this purpose.
4
<PAGE> 5
7. Operations of Affiliates. Executive agrees that he will refrain from
(i) authorizing any Affiliate to perform or (ii) assisting in any manner any
Affiliate in performing any activities that would be prohibited by the terms of
this Agreement if they were performed by Executive. Notwithstanding anything to
the contrary contained in this paragraph 7 (or in any other paragraph of this
Agreement), Executive shall not be required by the terms of this Agreement to
violate any fiduciary or contractual duty he owes as a director or officer of a
corporation, as a partner of a partnership or as a trustee of a trust, which
position he holds not in violation of this Agreement or the Employment
Agreement.
8. Miscellaneous Provisions.
(a) Binding Effect. Subject to any provisions hereof
restricting assignment, all covenants and agreements in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors, assigns, heirs, and personal representatives. None of the
parties hereto may assign any of its rights under this Agreement or attempt to
have any other person or entity assume any of its obligations hereunder.
(b) Severability. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the limit
of validity prescribed by law, then the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision contained
in this Agreement operates or would operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein contained, and the remain-der of this Agreement shall
remain operative and in full force and effect.
(c) Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto shall be
governed by and construed in accordance with the laws of the State of North
Carolina, not including the choice-of-law rules thereof.
(d) Amendment: Waiver. Except as otherwise expressly provided
in this Agreement, no amendment, modification or discharge of this Agreement
shall be valid or binding unless set forth in writing and duly executed by each
of the parties hereto. Any waiver by any party or consent by any party to any
variation from any provision of this Agreement shall be valid only if in writing
and only in the specific instance in which it is given, and such waiver or
consent shall not be construed as a waiver of any other provision or as a
consent with respect to any similar instance or circumstance.
(e) Headings. Paragraph and subparagraph headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
5
<PAGE> 6
(f) Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or entity may require.
(g) Arbitration. Any dispute or controversy arising out of or
relating to this Agreement shall be settled finally and exclusively by
arbitration in Charlotte, North Carolina in accordance with the rules of the
American Arbitration Association then in effect. Such arbitration shall be
conducted by an arbitrators appointed by the American Arbitration Association in
accordance with its rules and any finding by such arbitrators shall be final and
binding upon the parties. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction thereof, and the parties consent
to the jurisdiction of the courts of the State of North Carolina for this
purpose. Nothing contained in this paragraph 8(g) shall be construed to preclude
the Company from obtaining injunctive or other equitable relief to secure
specific performance or to otherwise prevent a breach or contemplated breach of
this Agreement by Executive as provided in paragraph 6 hereof.
(h) Execution in Counterparts. This Agreement may be executed
in two or more counterparts, none of which need contain the signatures of all
parties hereto and each of which shall be deemed an original.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first set forth above.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
-------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
-------------------------------
Name: John T. Gray
Title: President
/s/ Keith H. Kuhlman [SEAL]
-----------------------------
Keith H. Kuhlman
6
<PAGE> 7
SCHEDULE A
KEITH H. KUHLMAN
Ashton Park/Summit Partners and Ashton Park/L.P.
Sabal Walk/Summit L.P. and Wekiva/Summit L.P.
Summit/Simmons Partners
The Following Are Added For Purposes of Winding Them Up:
Summit/Kuhlman
Summit Building Corp.
7
<PAGE> 1
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into as of January 13, 1994 by
and between DAVID F. TUFARO ("Executive"), SUMMIT PROPERTIES INC., a Maryland
corporation, and SUMMIT MANAGEMENT COMPANY, a Maryland corporation.
WHEREAS, on the date hereof, the Company (as defined below) is entering
into a series of related transactions pursuant to which it will acquire, among
other things, substantially all of the interests of Executive and certain others
in a portfolio of multi-family rental properties located in the eastern United
States; and
WHEREAS, as a condition to the consummation of the transactions
described above, the parties hereto desire to enter into certain agreements
restricting the activities of Executive in an effort to eliminate potential
conflicts of interest that may arise in the future, to protect the Company's
legitimate business interests, i.e., the value of its business and its good
will, and for other business purpose;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein shall have the meanings
set forth below:
"Affiliate" means (i) any entity directly or indirectly cont rolling
(including without limitation an entity for which Executive serves as an
officer, director, employee, consultant or other agent), controlled by, or under
common control with Executive, and (ii) each other entity in which Executive,
directly or indirectly, owns any controlling interest or of which Executive
serves as a general partner.
"Agreement" means this Noncompetition Agreement, any amendments hereto
made in accordance with paragraph 8(d) hereof.
"Company" means (i) Summit Management Company, (ii) Summit Properties
Inc., (iii) any corporation, partnership or other business entity that is,
directly or indirectly, controlled by or under common control with Summit
Properties Inc. and (iv) their respective successors.
"Company Project" means any Multifamily Property that the Company owns,
operates or manages as of the date of Executive's termination of employment with
the Company or that the Company has in any manner taken steps to acquire,
develop, construct, operate, manage or lease (including without limitation
making market surveys of a site, talking to the owner or his agent concerning
the purchase or joint venture of a site, optioning or contracting to buy a site
or discussions with the owner or his agent regarding managing or leasing a
property) during the twelve (12) month period immediately preceding Executive's
termination of employment with the Company.
<PAGE> 2
"Covenant Period" means the period beginning on the date of termination
of Executive's employment with the Company and ending on the latest of the
following:
(i) either (A) for purposes of paragraph 3(a), a period
of two (2) years immediately following the
termination of Executive's employment with the
Company, or (B) for purposes of paragraphs 3(b), 3(c)
and 3(d), a period of one (1) year immediately
following the termination of Executive's employment
with the Company,
(ii) a period of three (3) years immediately following the
Effective Date, or
(iii) the period of time immediately following Executive's
termination of employment with the Company during
which Executive is receiving payments of "Base
Salary" in accordance with Sections 4.2 and 4.3 of
that certain Employment Agreement between Executive,
Summit Properties Inc. and Summit Management Company
of even date herewith (the "Employment Agreement").
"Effective Date" means the date of the closing of the initial public
offering of common stock of Summit Properties Inc.
"Multifamily Property" means any real property on which multifamily
residential-use development has been constructed or is now or hereafter proposed
to be constructed (for example, and not by way of limitation, a property of the
type managed by the Company).
2. Executive's Obligations While Employed by the Company.
(a) Sole Employment. Subject to the provisions of paragraph
2(b) below, Executive agrees to devote his full time during the customary
business hours of the Company and give his best efforts to the business of the
Company and, during the period of his employment by the Company, Executive shall
not engage in any manner, whether as an officer, employee, owner, partner,
stockholder, director, consultant or otherwise -- directly or indirectly -- in
any business other than on behalf of the Company without the prior written
approval of the Board of Directors of Summit Properties Inc., and Executive
shall not accept any other employment whatsoever from any other person, firm,
corporation or entity.
(b) Exceptions. Notwithstanding the provisions of paragraph
2(a) above to the contrary, Executive may during the term of his employment by
the Company and at any time thereafter (i) acquire an interest in any
corporation, partnership, venture or other business entity so long as (A) any
such interest is a passive investment of Executive not exceeding ten percent
(10%) of the total ownership interest in such entity, (B) such interest does not
afford Executive the power to influence in any material fashion the decision
making processes of the entity in which such interest is held and (C) Executive
is not the sponsor, promoter or similar initiator of such entity and (ii)
continue (A) to serve as a general or limited partner of each of the limited
2
<PAGE> 3
partnerships identified on Schedule A, attached hereto and incorporated by this
reference, and as an officer, director and shareholder of each of the
corporations identified on said Schedule A, and (B) to discharge Executive's
fiduciary and contractual duties and obligations with respect thereto, even
though such limited partnerships and corporations (or any partnership of which
any such limited partnership or corporation is a general or limited partner) may
directly compete with the Company.
3. Executive's Obligations Following Termination of Employment with the
Company.
(a) Anti-Pirating of Employees. During the Covenant Period,
Executive agrees not to hire, directly or indirectly, or entice or participate
in any efforts to entice to leave the Company's employ, any person who was or is
a "key employee" (as hereinafter defined) of the Company at any time during the
twelve (12) month period immediately preceding the termination date of
Executive's employment with the Company. For purposes of this Agreement, "key
employee" means an employee who has an annualized rate of base salary equaling
or exceeding fifty thousand dollars ($50,000).
(b) Anti-Pirating of Company Projects. During the Covenant
Period, Executive agrees not to engage in any manner, whether as an officer,
employee, owner, partner, stockholder, director, consultant or otherwise --
directly or indirectly -- in any business which engages or attempts to engage,
directly or indirectly, in the acquisition, development, construction,
operation, management or leasing of any Company Project.
(c) Noncompetition. During the Covenant Period, Executive
agrees not to engage in any manner, whether as an officer, employee, owner,
partner, stockholder, director, consultant or otherwise -- directly or
indirectly -- in any business which engages or attempts to engage, directly or
indirectly, in the acquisition, development, construction, operation, management
or leasing of any Multifamily Property within a 30-mile radius of any Company
Project.
(d) Trade Secrets and Confidential Information. Executive
hereby agrees that he will hold in a fiduciary capacity for the benefit of the
Company, and shall not directly or indirectly use or disclose any Trade Secret,
as defined hereinafter, that Executive may have acquired during the term of his
employment by the Company for so long as such information remains a Trade
Secret. The term "Trade Secret" as used in this Agreement shall mean information
including, but not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing, a
process, financial data, financial plans, product plans, or a list of actual or
potential customers or suppliers which:
derives economic value, actual or potential from not being
generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value
from its disclosure or use; and is the subject of reasonable
efforts by the Company to maintain its secrecy.
3
<PAGE> 4
In addition to the foregoing and not in limitation thereof, Executive
agrees that during the period of his employment by the Company and the Covenant
Period, he will hold in a fiduciary capacity for the benefit of the Company and
shall not directly or indirectly use or disclose, any Confidential or
Proprietary Information, as defined hereinafter, that Executive may have
acquired (whether or not developed or compiled by Executive and whether or not
Executive was authorized to have access to such Information) during the term of,
in the course of or as a result of his employment by the Company. The term
"Confidential or Proprietary Information" as used in this Agreement means any
secret, confidential or proprietary information of the Company not otherwise
included in the definition of "Trade Secret" above. The term "Confidential and
Proprietary Information" does not include information that has become generally
available to the public by the act of one who has the right to disclose such
information without violating any right of the Company.
(e) Exceptions. Notwithstanding any provision of paragraphs
3(b) or 3(c) to the contrary, Executive shall not be restricted at any time
after his termination of employment with the Company from engaging in any
activities for which Executive would not be restricted from performing during
the term of his employment with the Company as set forth in paragraph 2(b)
above.
4. Reasonable and Necessary Restrictions. Executive acknowledges that
the restrictions, prohibitions and other provisions hereof, including without
limitation the 30-mile radius set forth in paragraph 3(c) and the Covenant
Period, are reasonable, fair and equitable in scope, terms and duration, are
necessary to protect the legitimate business interests of the Company, and are a
material inducement to the Company to enter into the transactions contemplated
in the recitals hereto. Executive covenants that he will not challenge the
enforceability of this Agreement nor will he raise any equitable defense to its
enforcement.
5. Restrictions In Addition to Employment Agreement. Executive
acknowledges that the restrictions, prohibitions and other provisions hereof
shall be in addition to and not in substitution of the restrictions,
prohibitions and other provisions of the Employment Agreement, as such agreement
shall be amended and supplemented from time to time.
6. Specific Performance. Executive acknowledges that the obligations
undertaken by him pursuant to this Agreement are unique and that the Company
likely will have no adequate remedy at law if Executive shall fail to perform
any of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the Company. Accordingly, in
addition to any other remedies that the Company may have at law or in equity,
the Company shall have the right to have all obligations, covenants, agreements
and other provisions of this Agreement specifically performed by Executive, and
the Com any shall have the right to obtain preliminary and permanent injunctive
relief to secure specific performance and to prevent a breach or contemplated
breach of this Agreement by Executive, and Executive submits to the jurisdiction
of the courts of the State of North Carolina for this purpose.
4
<PAGE> 5
7. Operations of Affiliates. Executive agrees that he will refrain from
(i) authorizing any Affiliate to perform or (ii) assisting in any manner any
Affiliate in performing any activities that would be prohibited by the terms of
this Agreement if they were performed by Executive. Notwithstanding anything to
the contrary contained in this paragraph 7 (or in any other paragraph of this
Agreement), Executive shall not be required by the terms of this Agreement to
violate any fiduciary or contractual duty he owes as a director or officer of a
corporation, as a partner of a partnership or as a trustee of a trust, which
position he holds not in violation of this Agreement or the Employment
Agreement.
8. Miscellaneous Provisions.
(a) Binding Effect. Subject to any provisions hereof
restricting assignment, all covenants and agreements in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors, assigns, heirs, and personal representatives. None of the
parties hereto may assign any of its rights under this Agreement or attempt to
have any other person or entity assume any of its obligations hereunder.
(b) Severability. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the limit
of validity prescribed by law, then the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision contained
in this Agreement operates or would operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein contained, and the remain-der of this Agreement shall
remain operative and in full force and effect.
(c) Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto shall be
governed by and construed in accordance with the laws of the State of North
Carolina, not including the choice-of-law rules thereof.
(d) Amendment: Waiver. Except as otherwise expressly provided
in this Agreement, no amendment, modification or discharge of this Agreement
shall be valid or binding unless set forth in writing and duly executed by each
of the parties hereto. Any waiver by any party or consent by any party to any
variation from any provision of this Agreement shall be valid only if in writing
and only in the specific instance in which it is given, and such waiver or
consent shall not be construed as a waiver of any other provision or as a
consent with respect to any similar instance or circumstance.
(e) Headings. Paragraph and subparagraph headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
5
<PAGE> 6
(f) Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or entity may require.
(g) Arbitration. Any dispute or controversy arising out of or
relating to this Agreement shall be settled finally and exclusively by
arbitration in Charlotte, North Carolina in accordance with the rules of the
American Arbitration Association then in effect. Such arbitration shall be
conducted by an arbitrators appointed by the American Arbitration Association in
accordance with its rules and any finding by such arbitrators shall be final and
binding upon the parties. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction thereof, and the parties consent
to the jurisdiction of the courts of the State of North Carolina for this
purpose. Nothing contained in this paragraph 8(g) shall be construed to preclude
the Company from obtaining injunctive or other equitable relief to secure
specific performance or to otherwise prevent a breach or contemplated breach of
this Agreement by Executive as provided in paragraph 6 hereof.
(h) Execution in Counterparts. This Agreement may be executed
in two or more counterparts, none of which need contain the signatures of all
parties hereto and each of which shall be deemed an original.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first set forth above.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
-----------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
-----------------------------------
Name: John T. Gray
Title: President
/s/ David F. Tufaro [SEAL]
---------------------------------
David F. Tufaro
6
<PAGE> 7
SCHEDULE A
DAVID F. TUFARO
Jefferson Point/McGuire Partners
Buckingham/Summit Partners L.P. and Buckingham Associates
Midlothian Partners
Ashton Woods/Summit Partners and Ashton Woods Associates L.P.
Shirlington/Summit Partners and Shirlington Associates L.P.
Country Commons Associates L.P. and Country Commons/Summit L.P.
Doylestown/Summit Partners
Daniels Run Associates L.P. and Daniels Run/Summit L.P.
The Following Is Added For Purposes of Winding Them Up:
Summit/Tufaro
7
<PAGE> 1
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into as of January 13, 1994 by
and between JOHN T. GRAY ("Executive"), SUMMIT PROPERTIES INC., a Maryland
corporation, and SUMMIT MANAGEMENT COMPANY, a Maryland corporation.
WHEREAS, on the date hereof, the Company (as defined below) is entering
into a series of related transactions pursuant to which it will acquire, among
other things, substantially all of the interests of Executive and certain others
in a portfolio of multi-family rental properties located in the eastern United
States; and
WHEREAS, as a condition to the consummation of the transactions
described above, the parties hereto desire to enter into certain agreements
restricting the activities of Executive in an effort to eliminate potential
conflicts of interest that may arise in the future, to protect the Company's
legitimate business interests, i.e., the value of its business and its good
will, and for other business purpose;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein shall have the meanings
set forth below:
"Affiliate" means (i) any entity directly or indirectly cont rolling
(including without limitation an entity for which Executive serves as an
officer, director, employee, consultant or other agent), controlled by, or under
common control with Executive, and (ii) each other entity in which Executive,
directly or indirectly, owns any controlling interest or of which Executive
serves as a general partner.
"Agreement" means this Noncompetition Agreement, any amendments hereto
made in accordance with paragraph 8(d) hereof.
"Company" means (i) Summit Management Company, (ii) Summit Properties
Inc., (iii) any corporation, partnership or other business entity that is,
directly or indirectly, controlled by or under common control with Summit
Properties Inc. and (iv) their respective successors.
"Company Project" means any Multifamily Property that the Company owns,
operates or manages as of the date of Executive's termination of employment with
the Company or that the Company has in any manner taken steps to acquire,
develop, construct, operate, manage or lease (including without limitation
making market surveys of a site, talking to the owner or his agent concerning
the purchase or joint venture of a site, optioning or contracting to buy a site
or discussions with the owner or his agent regarding managing or leasing a
property) during the twelve (12) month period immediately preceding Executive's
termination of employment with the Company.
<PAGE> 2
"Covenant Period" means the period beginning on the date of termination
of Executive's employment with the Company and ending on the latest of the
following:
(i) either (A) for purposes of paragraph 3(a), a period
of two (2) years immediately following the
termination of Executive's employment with the
Company, or (B) for purposes of paragraphs 3(b), 3(c)
and 3(d), a period of one (1) year immediately
following the termination of Executive's employment
with the Company,
(ii) a period of three (3) years immediately following the
Effective Date, or
(iii) the period of time immediately following Executive's
termination of employment with the Company during
which Executive is receiving payments of "Base
Salary" in accordance with Sections 4.2 and 4.3 of
that certain Employment Agreement between Executive,
Summit Properties Inc. and Summit Management Company
of even date herewith (the
"Employment Agreement").
"Effective Date" means the date of the closing of the initial public
offering of common stock of Summit Properties Inc.
"Multifamily Property" means any real property on which multifamily
residential-use development has been constructed or is now or hereafter proposed
to be constructed (for example, and not by way of limitation, a property of the
type managed by the Company).
2. Executive's Obligations While Employed by the Company.
(a) Sole Employment. Subject to the provisions of paragraph
2(b) below, Executive agrees to devote his full time during the customary
business hours of the Company and give his best efforts to the business of the
Company and, during the period of his employment by the Company, Executive shall
not engage in any manner, whether as an officer, employee, owner, partner,
stockholder, director, consultant or otherwise -- directly or indirectly -- in
any business other than on behalf of the Company without the prior written
approval of the Board of Directors of Summit Properties Inc., and Executive
shall not accept any other employment whatsoever from any other person, firm,
corporation or entity.
(b) Exceptions. Notwithstanding the provisions of paragraph
2(a) above to the contrary, Executive may during the term of his employment by
the Company and at any time thereafter (i) acquire an interest in any
corporation, partnership, venture or other business entity so long as (A) any
such interest is a passive investment of Executive not exceeding ten percent
(10%) of the total ownership interest in such entity, (B) such interest does not
afford Executive the power to influence in any material fashion the decision
making processes of the entity in which such interest is held and (C) Executive
is not the sponsor, promoter or similar initiator of such entity and (ii)
continue (A) to serve as a general or limited partner of each of the limited
2
<PAGE> 3
partnerships identified on Schedule A, attached hereto and incorporated by this
reference, and as an officer, director and shareholder of each of the
corporations identified on said Schedule A, and (B) to discharge Executive's
fiduciary and contractual duties and obligations with respect thereto, even
though such limited partnerships and corporations (or any partnership of which
any such limited partnership or corporation is a general or limited partner) may
directly compete with the Company.
3. Executive's Obligations Following Termination of Employment with the
Company.
(a) Anti-Pirating of Employees. During the Covenant Period,
Executive agrees not to hire, directly or indirectly, or entice or participate
in any efforts to entice to leave the Company's employ, any person who was or is
a "key employee" (as hereinafter defined) of the Company at any time during the
twelve (12) month period immediately preceding the termination date of
Executive's employment with the Company. For purposes of this Agreement, "key
employee" means an employee who has an annualized rate of base salary equaling
or exceeding fifty thousand dollars ($50,000).
(b) Anti-Pirating of Company Projects. During the Covenant
Period, Executive agrees not to engage in any manner, whether as an officer,
employee, owner, partner, stockholder, director, consultant or otherwise --
directly or indirectly -- in any business which engages or attempts to engage,
directly or indirectly, in the acquisition, development, construction,
operation, management or leasing of any Company Project.
(c) Noncompetition. During the Covenant Period, Executive
agrees not to engage in any manner, whether as an officer, employee, owner,
partner, stockholder, director, consultant or otherwise -- directly or
indirectly -- in any business which engages or attempts to engage, directly or
indirectly, in the acquisition, development, construction, operation, management
or leasing of any Multifamily Property within a 30-mile radius of any Company
Project.
(d) Trade Secrets and Confidential Information. Executive
hereby agrees that he will hold in a fiduciary capacity for the benefit of the
Company, and shall not directly or indirectly use or disclose any Trade Secret,
as defined hereinafter, that Executive may have acquired during the term of his
employment by the Company for so long as such information remains a Trade
Secret. The term "Trade Secret" as used in this Agreement shall mean information
including, but not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing, a
process, financial data, financial plans, product plans, or a list of actual or
potential customers or suppliers which:
derives economic value, actual or potential from not being
generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value
from its disclosure or use; and is the subject of reasonable
efforts by the Company to maintain its secrecy.
3
<PAGE> 4
In addition to the foregoing and not in limitation thereof, Executive
agrees that during the period of his employment by the Company and the Covenant
Period, he will hold in a fiduciary capacity for the benefit of the Company and
shall not directly or indirectly use or disclose, any Confidential or
Proprietary Information, as defined hereinafter, that Executive may have
acquired (whether or not developed or compiled by Executive and whether or not
Executive was authorized to have access to such Information) during the term of,
in the course of or as a result of his employment by the Company. The term
"Confidential or Proprietary Information" as used in this Agreement means any
secret, confidential or proprietary information of the Company not otherwise
included in the definition of "Trade Secret" above. The term "Confidential and
Proprietary Information" does not include information that has become generally
available to the public by the act of one who has the right to disclose such
information without violating any right of the Company.
(e) Exceptions. Notwithstanding any provision of paragraphs
3(b) or 3(c) to the contrary, Executive shall not be restricted at any time
after his termination of employment with the Company from engaging in any
activities for which Executive would not be restricted from performing during
the term of his employment with the Company as set forth in paragraph 2(b)
above.
4. Reasonable and Necessary Restrictions. Executive acknowledges that
the restrictions, prohibitions and other provisions hereof, including without
limitation the 30-mile radius set forth in paragraph 3(c) and the Covenant
Period, are reasonable, fair and equitable in scope, terms and duration, are
necessary to protect the legitimate business interests of the Company, and are a
material inducement to the Company to enter into the transactions contemplated
in the recitals hereto. Executive covenants that he will not challenge the
enforceability of this Agreement nor will he raise any equitable defense to its
enforcement.
5. Restrictions In Addition to Employment Agreement. Executive
acknowledges that the restrictions, prohibitions and other provisions hereof
shall be in addition to and not in substitution of the restrictions,
prohibitions and other provisions of the Employment Agreement, as such agreement
shall be amended and supplemented from time to time.
6. Specific Performance. Executive acknowledges that the obligations
undertaken by him pursuant to this Agreement are unique and that the Company
likely will have no adequate remedy at law if Executive shall fail to perform
any of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the Company. Accordingly, in
addition to any other remedies that the Company may have at law or in equity,
the Company shall have the right to have all obligations, covenants, agreements
and other provisions of this Agreement specifically performed by Executive, and
the Com any shall have the right to obtain preliminary and permanent injunctive
relief to secure specific performance and to prevent a breach or contemplated
breach of this Agreement by Executive, and Executive submits to the jurisdiction
of the courts of the State of North Carolina for this purpose.
4
<PAGE> 5
7. Operations of Affiliates. Executive agrees that he will refrain from
(i) authorizing any Affiliate to perform or (ii) assisting in any manner any
Affiliate in performing any activities that would be prohibited by the terms of
this Agreement if they were performed by Executive. Notwithstanding anything to
the contrary contained in this paragraph 7 (or in any other paragraph of this
Agreement), Executive shall not be required by the terms of this Agreement to
violate any fiduciary or contractual duty he owes as a director or officer of a
corporation, as a partner of a partnership or as a trustee of a trust, which
position he holds not in violation of this Agreement or the Employment
Agreement.
8. Miscellaneous Provisions.
(a) Binding Effect. Subject to any provisions hereof
restricting assignment, all covenants and agreements in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors, assigns, heirs, and personal representatives. None of the
parties hereto may assign any of its rights under this Agreement or attempt to
have any other person or entity assume any of its obligations hereunder.
(b) Severability. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the limit
of validity prescribed by law, then the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision contained
in this Agreement operates or would operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein contained, and the remain-der of this Agreement shall
remain operative and in full force and effect.
(c) Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto shall be
governed by and construed in accordance with the laws of the State of North
Carolina, not including the choice-of-law rules thereof.
(d) Amendment: Waiver. Except as otherwise expressly provided
in this Agreement, no amendment, modification or discharge of this Agreement
shall be valid or binding unless set forth in writing and duly executed by each
of the parties hereto. Any waiver by any party or consent by any party to any
variation from any provision of this Agreement shall be valid only if in writing
and only in the specific instance in which it is given, and such waiver or
consent shall not be construed as a waiver of any other provision or as a
consent with respect to any similar instance or circumstance.
(e) Headings. Paragraph and subparagraph headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
5
<PAGE> 6
(f) Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or entity may require.
(g) Arbitration. Any dispute or controversy arising out of or
relating to this Agreement shall be settled finally and exclusively by
arbitration in Charlotte, North Carolina in accordance with the rules of the
American Arbitration Association then in effect. Such arbitration shall be
conducted by an arbitrators appointed by the American Arbitration Association in
accordance with its rules and any finding by such arbitrators shall be final and
binding upon the parties. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction thereof, and the parties consent
to the jurisdiction of the courts of the State of North Carolina for this
purpose. Nothing contained in this paragraph 8(g) shall be construed to preclude
the Company from obtaining injunctive or other equitable relief to secure
specific performance or to otherwise prevent a breach or contemplated breach of
this Agreement by Executive as provided in paragraph 6 hereof.
(h) Execution in Counterparts. This Agreement may be executed
in two or more counterparts, none of which need contain the signatures of all
parties hereto and each of which shall be deemed an original.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first set forth above.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
------------------------------
Name: John T. Gray
Title: President
/s/ John T. Gray [SEAL]
---------------------------
John T. Gray
6
<PAGE> 7
SCHEDULE A
JOHN T. GRAY
McGuire Investment Group #3
Carolinas Real Estate Fund
Waverly Place McGuire Partners
Cobblestones/Summit L.P.
McAlpine Place/Summit L.P.
Sterling Place/Summit L.P.
Union Station/Summit L.P.
Brittain Woods L.P. and Tuttle Crossing/Summit L.P.
North Olmstead L.P. and Butternut Ridge/Summit L.P.
Audubon Parc Apartments Inc. and Summit/Audubon Parc L.P.
Asbury Square/Summit L.P.
Buckingham/Summit Partners L.P. and Buckingham Associates
Ashton Woods/Summit Partners and Ashton Woods Associates L.P.
Shirlington/Summit Partners and Shirlington Associates L.P.
Country Commons Associates L.P. and Country Commons/Summit L.P.
Doylestown/Summit Partners
Daniels Run Associates L.P. and Daniels Run/Summit L.P.
Ashton Park/Summit Partners and Ashton Park/L.P.
Sabal Walk/Summit L.P. and Wekiva/Summit L.P.
Summit/Simmons Partners
7
<PAGE> 1
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into as of January 13, 1994 by
and between JOHN C. MOORE ("Executive"), SUMMIT PROPERTIES INC., a Maryland
corporation, and SUMMIT MANAGEMENT COMPANY, a Maryland corporation.
WHEREAS, on the date hereof, the Company (as defined below) is entering
into a series of related transactions pursuant to which it will acquire, among
other things, substantially all of the interests of Executive and certain others
in a portfolio of multi-family rental properties located in the eastern United
States; and
WHEREAS, as a condition to the consummation of the transactions
described above, the parties hereto desire to enter into certain agreements
restricting the activities of Executive in an effort to eliminate potential
conflicts of interest that may arise in the future, to protect the Company's
legitimate business interests, i.e., the value of its business and its good
will, and for other business purpose;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein shall have the meanings
set forth below:
"Affiliate" means (i) any entity directly or indirectly cont rolling
(including without limitation an entity for which Executive serves as an
officer, director, employee, consultant or other agent), controlled by, or under
common control with Executive, and (ii) each other entity in which Executive,
directly or indirectly, owns any controlling interest or of which Executive
serves as a general partner.
"Agreement" means this Noncompetition Agreement, any amendments hereto
made in accordance with paragraph 8(d) hereof.
"Company" means (i) Summit Management Company, (ii) Summit Properties
Inc., (iii) any corporation, partnership or other business entity that is,
directly or indirectly, controlled by or under common control with Summit
Properties Inc. and (iv) their respective successors.
"Company Project" means any Multifamily Property that the Company owns,
operates or manages as of the date of Executive's termination of employment with
the Company or that the Company has in any manner taken steps to acquire,
develop, construct, operate, manage or lease (including without limitation
making market surveys of a site, talking to the owner or his agent concerning
the purchase or joint venture of a site, optioning or contracting to buy a site
or discussions with the owner or his agent regarding managing or leasing a
property) during the twelve (12) month period immediately preceding Executive's
termination of employment with the Company.
<PAGE> 2
"Effective Date" means the date of the closing of the initial public
offering of common stock of Summit Properties Inc.
"Multifamily Property" means any real property on which multifamily
residential-use development has been constructed or is now or hereafter proposed
to be constructed (for example, and not by way of limitation, a property of the
type managed by the Company).
2. Executive's Obligations While Employed by the Company.
(a) Sole Employment. Subject to the provisions of paragraph
2(b) below, Executive agrees to devote his full time during the customary
business hours of the Company and give his best efforts to the business of the
Company and, during the period of his employment by the Company, Executive shall
not engage in any manner, whether as an officer, employee, owner, partner,
stockholder, director, consultant or otherwise -- directly or indirectly -- in
any business other than on behalf of the Company without the prior written
approval of the Board of Directors of Summit Properties Inc., and Executive
shall not accept any other employment whatsoever from any other person, firm,
corporation or entity.
(b) Exceptions. Notwithstanding the provisions of paragraph
2(a) above to the contrary, Executive may during the term of his employment by
the Company and at any time thereafter (i) acquire an interest in any
corporation, partnership, venture or other business entity so long as (A) any
such interest is a passive investment of Executive not exceeding ten percent
(10%) of the total ownership interest in such entity, (B) such interest does not
afford Executive the power to influence in any material fashion the decision
making processes of the entity in which such interest is held and (C) Executive
is not the sponsor, promoter or similar initiator of such entity and (ii)
continue (A) to serve as a general or limited partner of each of the limited
2
<PAGE> 3
partnerships identified on Schedule A, attached hereto and incorporated by this
reference, and as an officer, director and shareholder of each of the
corporations identified on said Schedule A, and (B) to discharge Executive's
fiduciary and contractual duties and obligations with respect thereto, even
though such limited partnerships and corporations (or any partnership of which
any such limited partnership or corporation is a general or limited partner) may
directly compete with the Company.
3. Executive's Obligations Following Termination of Employment with the
Company.
(a) Anti-Pirating of Employees. For a two (2) year period
immediately following the termination of Executive's employment with the
Company, Executive agrees not to hire, directly or indirectly, or entice or
participate in any efforts to entice to leave the Company's employ, any person
who was or is a "key employee" (as hereinafter defined) of the Company at any
time during the twelve (12) month period immediately preceding the termination
date of Executive's employment with the Company. For purposes of this Agreement,
"key employee" means an employee who has an annualized rate of base salary
equaling or exceeding fifty thousand dollars ($50,000).
(b) Anti-Pirating of Company Projects. For a period of one (1)
year immediately following the termination of Executive's employment with the
Company, Executive agrees not to engage in any manner, whether as an officer,
employee, owner, partner, stockholder, director, consultant or otherwise --
directly or indirectly -- in any business which engages or attempts to engage,
directly or indirectly, in the acquisition, development, construction,
operation, management or leasing of any Company Project.
(c) Trade Secrets and Confidential Information. Executive
hereby agrees that he will hold in a fiduciary capacity for the benefit of the
Company, and shall not directly or indirectly use or disclose any Trade Secret,
as defined hereinafter, that Executive may have acquired during the term of his
employment by the Company for so long as such information remains a Trade
Secret. The term "Trade Secret" as used in this Agreement shall mean information
including, but not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing, a
process, financial data, financial plans, product plans, or a list of actual or
potential customers or suppliers which:
derives economic value, actual or potential from not being
generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value
from its disclosure or use; and is the subject of reasonable
efforts by the Company to maintain its secrecy.
3
<PAGE> 4
In addition to the foregoing and not in limitation thereof, Executive
agrees that during the period of his employment by the Company and the Covenant
Period, he will hold in a fiduciary capacity for the benefit of the Company and
shall not directly or indirectly use or disclose, any Confidential or
Proprietary Information, as defined hereinafter, that Executive may have
acquired (whether or not developed or compiled by Executive and whether or not
Executive was authorized to have access to such Information) during the term of,
in the course of or as a result of his employment by the Company. The term
"Confidential or Proprietary Information" as used in this Agreement means any
secret, confidential or proprietary information of the Company not otherwise
included in the definition of "Trade Secret" above. The term "Confidential and
Proprietary Information" does not include information that has become generally
available to the public by the act of one who has the right to disclose such
information without violating any right of the Company.
(e) Exceptions. Notwithstanding any provision of paragraphs
3(b) or 3(c) to the contrary, Executive shall not be restricted at any time
after his termination of employment with the Company from engaging in any
activities for which Executive would not be restricted from performing during
the term of his employment with the Company as set forth in paragraph 2(b)
above.
4. Reasonable and Necessary Restrictions. Executive acknowledges that
the restrictions, prohibitions and other provisions hereof, including without
limitation the restrictions set forth in paragraphs 3(a), 3(b) and 3(c), are
reasonable, fair and equitable in scope, terms and duration, are necessary to
protect the legitimate business interests of the Company, and are a material
inducement to the Company to enter into the transactions contemplated in the
recitals hereto. Executive covenants that he will not challenge the
enforceability of this Agreement nor will he raise any equitable defense to its
enforcement.
5. Restrictions In Addition to Employment Agreement. Executive
acknowledges that the restrictions, prohibitions and other provisions hereof
shall be in addition to and not in substitution of the restrictions,
prohibitions and other provisions of the Employment Agreement, as such agreement
shall be amended and supplemented from time to time.
6. Specific Performance. Executive acknowledges that the obligations
undertaken by him pursuant to this Agreement are unique and that the Company
likely will have no adequate remedy at law if Executive shall fail to perform
any of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the Company. Accordingly, in
addition to any other remedies that the Company may have at law or in equity,
the Company shall have the right to have all obligations, covenants, agreements
and other provisions of this Agreement specifically performed by Executive, and
the Company shall have the right to obtain preliminary and permanent injunctive
relief to secure specific performance and to prevent a breach or contemplated
breach of this Agreement by Executive, and Executive submits to the jurisdiction
of the courts of the State of North Carolina for this purpose.
4
<PAGE> 5
7. Operations of Affiliates. Executive agrees that he will refrain from
(i) authorizing any Affiliate to perform or (ii) assisting in any manner any
Affiliate in performing any activities that would be prohibited by the terms of
this Agreement if they were performed by Executive. Notwithstanding anything to
the contrary contained in this paragraph 7 (or in any other paragraph of this
Agreement), Executive shall not be required by the terms of this Agreement to
violate any fiduciary or contractual duty he owes as a director or officer of a
corporation, as a partner of a partnership or as a trustee of a trust, which
position he holds not in violation of this Agreement or the Employment
Agreement.
8. Miscellaneous Provisions.
(a) Binding Effect. Subject to any provisions hereof
restricting assignment, all covenants and agreements in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors, assigns, heirs, and personal representatives. None of the
parties hereto may assign any of its rights under this Agreement or attempt to
have any other person or entity assume any of its obligations hereunder.
(b) Severability. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the limit
of validity prescribed by law, then the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision contained
in this Agreement operates or would operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein contained, and the remain-der of this Agreement shall
remain operative and in full force and effect.
(c) Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto shall be
governed by and construed in accordance with the laws of the State of North
Carolina, not including the choice-of-law rules thereof.
(d) Amendment: Waiver. Except as otherwise expressly provided
in this Agreement, no amendment, modification or discharge of this Agreement
shall be valid or binding unless set forth in writing and duly executed by each
of the parties hereto. Any waiver by any party or consent by any party to any
variation from any provision of this Agreement shall be valid only if in writing
and only in the specific instance in which it is given, and such waiver or
consent shall not be construed as a waiver of any other provision or as a
consent with respect to any similar instance or circumstance.
(e) Headings. Paragraph and subparagraph headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
5
<PAGE> 6
(f) Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or entity may require.
(g) Arbitration. Any dispute or controversy arising out of or
relating to this Agreement shall be settled finally and exclusively by
arbitration in Charlotte, North Carolina in accordance with the rules of the
American Arbitration Association then in effect. Such arbitration shall be
conducted by an arbitrators appointed by the American Arbitration Association in
accordance with its rules and any finding by such arbitrators shall be final and
binding upon the parties. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction thereof, and the parties consent
to the jurisdiction of the courts of the State of North Carolina for this
purpose. Nothing contained in this paragraph 8(g) shall be construed to preclude
the Company from obtaining injunctive or other equitable relief to secure
specific performance or to otherwise prevent a breach or contemplated breach of
this Agreement by Executive as provided in paragraph 6 hereof.
(h) Execution in Counterparts. This Agreement may be executed
in two or more counterparts, none of which need contain the signatures of all
parties hereto and each of which shall be deemed an original.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first set forth above.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
--------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
--------------------------------
Name: John T. Gray
Title: President
/s/ John C. Moore [SEAL]
------------------------------
John C. Moore
6
<PAGE> 7
SCHEDULE A
JOHN C. MOORE
Midlothian Partners
OakRidge/McGuire Partners
Waverly Place McGuire Partners
Cobblestones/Summit L.P.
McAlpine Place/Summit L.P.
Sterling Place/Summit L.P.
Union Station/Summit L.P.
Brittain Woods L.P. and Tuttle Crossing/Summit L.P.
North Olmstead L.P. and Butternut Ridge/Summit L.P.
Audubon Parc Apartments Inc. and Summit/Audubon Parc L.P.
Asbury Square/Summit L.P.
Jefferson Point/McGuire Partners
Buckingham/Summit Partners L.P. and Buckingham Associates
Ashton Woods/Summit Partners and Ashton Woods Associates L.P.
Shirlington/Summit Partners and Shirlington Associates L.P.
Country Commons Associates L.P. and Country Commons/Summit L.P.
Doylestown/Summit Partners
Daniels Run Associates L.P. and Daniels Run/Summit L.P.
Ashton Park/Summit Partners and Ashton Park/L.P.
Sabal Walk/Summit L.P. and Wekiva/Summit L.P.
Summit/Simmons Partners
7
<PAGE> 1
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into as of January 13, 1994 by
and between MICHAEL G. MALONE ("Executive"), SUMMIT PROPERTIES INC., a Maryland
corporation, and SUMMIT MANAGEMENT COMPANY, a Maryland corporation.
WHEREAS, on the date hereof, the Company (as defined below) is entering
into a series of related transactions pursuant to which it will acquire, among
other things, substantially all of the interests of Executive and certain others
in a portfolio of multi-family rental properties located in the eastern United
States; and
WHEREAS, as a condition to the consummation of the transactions
described above, the parties hereto desire to enter into certain agreements
restricting the activities of Executive in an effort to eliminate potential
conflicts of interest that may arise in the future, to protect the Company's
legitimate business interests, i.e., the value of its business and its good
will, and for other business purpose;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein shall have the meanings
set forth below:
"Affiliate" means (i) any entity directly or indirectly cont rolling
(including without limitation an entity for which Executive serves as an
officer, director, employee, consultant or other agent), controlled by, or under
common control with Executive, and (ii) each other entity in which Executive,
directly or indirectly, owns any controlling interest or of which Executive
serves as a general partner.
"Agreement" means this Noncompetition Agreement, any amendments hereto
made in accordance with paragraph 8(d) hereof.
"Company" means (i) Summit Management Company, (ii) Summit Properties
Inc., (iii) any corporation, partnership or other business entity that is,
directly or indirectly, controlled by or under common control with Summit
Properties Inc. and (iv) their respective successors.
"Company Project" means any Multifamily Property that the Company owns,
operates or manages as of the date of Executive's termination of employment with
the Company or that the Company has in any manner taken steps to acquire,
develop, construct, operate, manage or lease (including without limitation
making market surveys of a site, talking to the owner or his agent concerning
the purchase or joint venture of a site, optioning or contracting to buy a site
or discussions with the owner or his agent regarding managing or leasing a
property) during the twelve (12) month period immediately preceding Executive's
termination of employment with the Company.
<PAGE> 2
"Effective Date" means the date of the closing of the initial public
offering of common stock of Summit Properties Inc.
"Multifamily Property" means any real property on which multifamily
residential-use development has been constructed or is now or hereafter proposed
to be constructed (for example, and not by way of limitation, a property of the
type managed by the Company).
2. Executive's Obligations While Employed by the Company.
(a) Sole Employment. Subject to the provisions of paragraph
2(b) below, Executive agrees to devote his full time during the customary
business hours of the Company and give his best efforts to the business of the
Company and, during the period of his employment by the Company, Executive shall
not engage in any manner, whether as an officer, employee, owner, partner,
stockholder, director, consultant or otherwise -- directly or indirectly -- in
any business other than on behalf of the Company without the prior written
approval of the Board of Directors of Summit Properties Inc., and Executive
shall not accept any other employment whatsoever from any other person, firm,
corporation or entity.
(b) Exceptions. Notwithstanding the provisions of paragraph
2(a) above to the contrary, Executive may during the term of his employment by
the Company and at any time thereafter (i) acquire an interest in any
corporation, partnership, venture or other business entity so long as (A) any
such interest is a passive investment of Executive not exceeding ten percent
(10%) of the total ownership interest in such entity, (B) such interest does not
afford Executive the power to influence in any material fashion the decision
making processes of the entity in which such interest is held and (C) Executive
is not the sponsor, promoter or similar initiator of such entity and (ii)
continue (A) to serve as a general or limited partner of each of the limited
2
<PAGE> 3
partnerships identified on Schedule A, attached hereto and incorporated by this
reference, and as an officer, director and shareholder of each of the
corporations identified on said Schedule A, and (B) to discharge Executive's
fiduciary and contractual duties and obligations with respect thereto, even
though such limited partnerships and corporations (or any partnership of which
any such limited partnership or corporation is a general or limited partner) may
directly compete with the Company.
3. Executive's Obligations Following Termination of Employment with the
Company.
(a) Anti-Pirating of Employees. For a two (2) year period
immediately following the termination of Executive's employment with the
Company, Executive agrees not to hire, directly or indirectly, or entice or
participate in any efforts to entice to leave the Company's employ, any person
who was or is a "key employee" (as hereinafter defined) of the Company at any
time during the twelve (12) month period immediately preceding the termination
date of Executive's employment with the Company. For purposes of this Agreement,
"key employee" means an employee who has an annualized rate of base salary
equaling or exceeding fifty thousand dollars ($50,000).
(b) Anti-Pirating of Company Projects. For a period of one (1)
year immediately following the termination of Executive's employment with the
Company, Executive agrees not to engage in any manner, whether as an officer,
employee, owner, partner, stockholder, director, consultant or otherwise --
directly or indirectly -- in any business which engages or attempts to engage,
directly or indirectly, in the acquisition, development, construction,
operation, management or leasing of any Company Project.
(c) Trade Secrets and Confidential Information. Executive
hereby agrees that he will hold in a fiduciary capacity for the benefit of the
Company, and shall not directly or indirectly use or disclose any Trade Secret,
as defined hereinafter, that Executive may have acquired during the term of his
employment by the Company for so long as such information remains a Trade
Secret. The term "Trade Secret" as used in this Agreement shall mean information
including, but not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing, a
process, financial data, financial plans, product plans, or a list of actual or
potential customers or suppliers which:
derives economic value, actual or potential from not being
generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value
from its disclosure or use; and is the subject of reasonable
efforts by the Company to maintain its secrecy.
3
<PAGE> 4
In addition to the foregoing and not in limitation thereof, Executive
agrees that during the period of his employment by the Company and the Covenant
Period, he will hold in a fiduciary capacity for the benefit of the Company and
shall not directly or indirectly use or disclose, any Confidential or
Proprietary Information, as defined hereinafter, that Executive may have
acquired (whether or not developed or compiled by Executive and whether or not
Executive was authorized to have access to such Information) during the term of,
in the course of or as a result of his employment by the Company. The term
"Confidential or Proprietary Information" as used in this Agreement means any
secret, confidential or proprietary information of the Company not otherwise
included in the definition of "Trade Secret" above. The term "Confidential and
Proprietary Information" does not include information that has become generally
available to the public by the act of one who has the right to disclose such
information without violating any right of the Company.
(e) Exceptions. Notwithstanding any provision of paragraphs
3(b) or 3(c) to the contrary, Executive shall not be restricted at any time
after his termination of employment with the Company from engaging in any
activities for which Executive would not be restricted from performing during
the term of his employment with the Company as set forth in paragraph 2(b)
above.
4. Reasonable and Necessary Restrictions. Executive acknowledges that
the restrictions, prohibitions and other provisions hereof, including without
limitation the various periods of restrictions set forth in paragraphs 3(a),
3(b) and 3(c), are reasonable, fair and equitable in scope, terms and duration,
are necessary to protect the legitimate business interests of the Company, and
are a material inducement to the Company to enter into the transactions
contemplated in the recitals hereto. Executive covenants that he will not
challenge the enforceability of this Agreement nor will he raise any equitable
defense to its enforcement.
5. Restrictions In Addition to Employment Agreement. Executive
acknowledges that the restrictions, prohibitions and other provisions hereof
shall be in addition to and not in substitution of the restrictions,
prohibitions and other provisions of the Employment Agreement, as such agreement
shall be amended and supplemented from time to time.
6. Specific Performance. Executive acknowledges that the obligations
undertaken by him pursuant to this Agreement are unique and that the Company
likely will have no adequate remedy at law if Executive shall fail to perform
any of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the Company. Accordingly, in
addition to any other remedies that the Company may have at law or in equity,
the Company shall have the right to have all obligations, covenants, agreements
and other provisions of this Agreement specifically performed by Executive, and
the Company shall have the right to obtain preliminary and permanent injunctive
relief to secure specific performance and to prevent a breach or contemplated
breach of this Agreement by Executive, and Executive submits to the jurisdiction
of the courts of the State of North Carolina for this purpose.
4
<PAGE> 5
7. Operations of Affiliates. Executive agrees that he will refrain from
(i) authorizing any Affiliate to perform or (ii) assisting in any manner any
Affiliate in performing any activities that would be prohibited by the terms of
this Agreement if they were performed by Executive. Notwithstanding anything to
the contrary contained in this paragraph 7 (or in any other paragraph of this
Agreement), Executive shall not be required by the terms of this Agreement to
violate any fiduciary or contractual duty he owes as a director or officer of a
corporation, as a partner of a partnership or as a trustee of a trust, which
position he holds not in violation of this Agreement or the Employment
Agreement.
8. Miscellaneous Provisions.
(a) Binding Effect. Subject to any provisions hereof
restricting assignment, all covenants and agreements in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors, assigns, heirs, and personal representatives. None of the
parties hereto may assign any of its rights under this Agreement or attempt to
have any other person or entity assume any of its obligations hereunder.
(b) Severability. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the limit
of validity prescribed by law, then the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision contained
in this Agreement operates or would operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein contained, and the remain-der of this Agreement shall
remain operative and in full force and effect.
(c) Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto shall be
governed by and construed in accordance with the laws of the State of North
Carolina, not including the choice-of-law rules thereof.
(d) Amendment: Waiver. Except as otherwise expressly provided
in this Agreement, no amendment, modification or discharge of this Agreement
shall be valid or binding unless set forth in writing and duly executed by each
of the parties hereto. Any waiver by any party or consent by any party to any
variation from any provision of this Agreement shall be valid only if in writing
and only in the specific instance in which it is given, and such waiver or
consent shall not be construed as a waiver of any other provision or as a
consent with respect to any similar instance or circumstance.
(e) Headings. Paragraph and subparagraph headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
5
<PAGE> 6
(f) Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or entity may require.
(g) Arbitration. Any dispute or controversy arising out of or
relating to this Agreement shall be settled finally and exclusively by
arbitration in Charlotte, North Carolina in accordance with the rules of the
American Arbitration Association then in effect. Such arbitration shall be
conducted by an arbitrators appointed by the American Arbitration Association in
accordance with its rules and any finding by such arbitrators shall be final and
binding upon the parties. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction thereof, and the parties consent
to the jurisdiction of the courts of the State of North Carolina for this
purpose. Nothing contained in this paragraph 8(g) shall be construed to preclude
the Company from obtaining injunctive or other equitable relief to secure
specific performance or to otherwise prevent a breach or contemplated breach of
this Agreement by Executive as provided in paragraph 6 hereof.
(h) Execution in Counterparts. This Agreement may be executed
in two or more counterparts, none of which need contain the signatures of all
parties hereto and each of which shall be deemed an original.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first set forth above.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
--------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
--------------------------------
Name: John T. Gray
Title: President
/s/ Michael G. Malone [SEAL]
------------------------------
Michael G. Malone
6
<PAGE> 7
SCHEDULE A
MICHAEL G. MALONE
Sabal Walk/Summit L.P. and Wekiva/Summit L.P.
Summit/Simmons Partners
7
<PAGE> 1
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into as of December 5th, 1996
("Effective Date") by and between WILLIAM B. HAMILTON ("Executive"), SUMMIT
PROPERTIES INC., a Maryland corporation, and SUMMIT MANAGEMENT COMPANY, a
Maryland corporation.
WHEREAS, on the date hereof, as a condition to the consummation of the
employment of Executive by the Company, the parties hereto desire to enter into
certain agreements restricting the activities of Executive in an effort to
eliminate potential conflicts of interest that may arise in the future, to
protect the Company's legitimate business interests, i.e., the value of its
business and its good will, and for other business purpose;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein shall have the meanings
set forth below:
"Affiliate" means (i) any entity directly or indirectly controlling
(including without limitation an entity for which Executive serves as an
officer, director, employee, consultant or other agent), controlled by, or under
common control with Executive, and (ii) each other entity in which Executive,
directly or indirectly, owns any controlling interest or of which Executive
serves as a general partner.
"Agreement" means this Noncompetition Agreement, including any
amendments hereto made in accordance with paragraph 8(d) hereof.
"Company" means (i) Summit Management Company, (ii) Summit Properties
Inc., (iii) any corporation, partnership or other business entity that is,
directly or indirectly, controlled by or under common control with Summit
Properties Inc. and (iv) their respective successors.
"Company Project" means any Multifamily Property that the Company owns,
operates or manages as of the date of Executive's termination of employment with
the Company or that the Company has in any manner taken steps to acquire,
develop, construct, operate, manage or lease (including without limitation
making market surveys of a site, talking to a owner or his agent
<PAGE> 2
concerning the purchase or joint venture of a site, optioning or contracting to
buy a site or discussions with the owner or his agent regarding managing or
leasing a property) during the twelve (12) month period immediately preceding
Executive's termination of employment with the Company.
"Multifamily Property" means any real property on which multifamily
residential-use development has been constructed or is now or hereafter proposed
to be constructed (for example, and not by way of limitation, a property of the
type managed by the Company).
2. Executive's Obligations While Employed by the Company.
(a) Sole Employment. Subject to the provisions of paragraph 2(b) below,
Executive agrees to devote his full time during the customary business hours of
the Company and give his best efforts to the business of the Company and, during
the period of his employment by the Company, Executive shall not engage in any
manner, whether as an officer, employee, owner, partner, stockholder, director,
consultant or otherwise -- directly or indirectly -- in any business other than
on behalf of the Company without the prior written approval of the President of
Summit Management Company, and Executive shall not accept any other employment
whatsoever from any other person, firm, corporation or entity.
(b) Exceptions. Notwithstanding the provisions of paragraph 2(a) above
to the contrary, Executive may during the term of his employment by the Company
and at any time thereafter (i) acquire an interest in any corporation,
partnership, venture or other business entity so long as (A) any such interest
is a passive investment of Executive not exceeding ten percent (10%) of the
total ownership interest in such entity, (B) such entity does not afford
Executive the power to influence in any material fashion the decision making
processes of the entity in which such interest is held and (C) Executive is not
the sponsor, promoter or similar initiator of such entity.
3. Executive's Obligations Following Termination of Employment with the
Company.
(a) Anti-Pirating of Employees. For a two (2) year period immediately
following the termination of Executive's employment with the Company, Executive
agrees not to hire, directly or indirectly, or entice or participate in any
efforts
2
<PAGE> 3
to entice to leave the Company's employ, any person who was or is a "key
employee" (as hereinafter defined) of the Company at any time during the twelve
(12) month period immediately preceding the termination date of Executive's
employment with the Company. For purposes of this Agreement, "key employee"
means an employee who has an annualized rate of base salary equaling or
exceeding fifty thousand dollars ($50,000).
(b) Anti-Pirating of Company Projects. For a period of one (1) year
immediately following the termination of Executive's employment with the
Company, Executive agrees not to engage in any manner, whether as an officer,
employee, owner, partner, stockholder, director, consultant or otherwise --
directly or indirectly -- in any business which engages or attempts to engage,
directly or indirectly, in the acquisition, development, construction,
operation, management or leasing of any Company Project.
(c) Trade Secrets and Confidential Information. Executive hereby agrees
that he will hold in a fiduciary capacity for the benefit of the Company, and
shall not directly or indirectly use or disclose any Trade Secret, as defined
hereinafter, that Executive may have acquired during the term of his employment
by the Company for so long as such information remains a Trade Secret. The term
"Trade Secret" as used in this Agreement shall mean information including, but
not limited to, technical or nontechnical data, a formula, a pattern, a
compilation, a program, a device, a method, a technique, a drawing, a process,
financial data, financial plans, product plans, or a list of actual or potential
customers or suppliers which:
derives economic value, actual or potential from not being
generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value
from its disclosure or use; and is the subject of reasonable
efforts by the Company to maintain its secrecy.
In addition to the foregoing and not in limitation thereof,
Executive agrees that during the period of his employment by the Company and for
a period of one (1) year thereafter, he will hold in a fiduciary capacity for
the benefit of the Company and shall not directly or indirectly use or disclose,
any Confidential or Proprietary Information, as defined hereinafter, that
Executive may have acquired (whether or not
3
<PAGE> 4
developed or compiled by Executive and whether or not Executive was authorized
to have access to such Information) during the term of, in the course of or as a
result of his employment by the Company. The term "Confidential or Proprietary
Information" as used in this Agreement means any secret, confidential or
proprietary information of the Company not otherwise included in the definition
of "Trade Secret" above. The term "Confidential and Proprietary Information"
does not include information that has become generally available to the public
by the act of one who has the right to disclose such information without
violating any right of the Company.
(d) Exceptions. Notwithstanding any provision of paragraph 3(b) to the
contrary, Executive shall not be restricted at any time after his termination of
employment with the Company from engaging in any activities for which Executive
would not be restricted from performing during the term of his employment with
the Company as set forth in paragraph 2(b) above.
4. Reasonable and Necessary Restrictions. Executive acknowledges that
the restrictions, prohibitions and other provisions hereof, including without
limitation the various periods of restrictions set forth in paragraphs 3(a),
3(b) and 3(c), are reasonable, fair and equitable in scope, terms and duration,
are necessary to protect the legitimate business interests of the Company, and
are a material inducement to the Company to enter into the transactions
contemplated in the recitals hereto. Executive covenants that he will not
challenge the enforceability of this Agreement nor will he raise any equitable
defense to its enforcement.
5. Restrictions In Addition to Employment Agreement. Executive
acknowledges that the restrictions, prohibitions and other provisions hereof
shall be in addition to and not in substitution of the restrictions,
prohibitions and other provisions of that certain employment agreement between
Executive, Summit Properties Inc. and Summit Management Company of even date
herewith, as such agreement shall be amended and supplemented from time to time
(the "Employment Agreement").
6. Specific Performance. Executive acknowledges that the obligations
undertaken by him pursuant to this Agreement are unique and that the Company
likely will have no adequate remedy at law if Executive shall fail to perform
any of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the Company.
4
<PAGE> 5
Accordingly, in addition to any other remedies that the Company may have at law
or in equity, the Company shall have the right to have all obligations,
covenants, agreements and other provisions of this Agreement specifically
performed by Executive, and the Company shall have the right to obtain
preliminary and permanent injunctive relief to secure specific performance and
to prevent a breach or contemplated breach of this Agreement by Executive, and
Executive submits to the jurisdiction of the courts of the State of North
Carolina for this purpose. Said permanent injunctive relief shall have a term
which coincides with the respective periods of Executive's obligations pursuant
to the covenants, agreements and other provisions of this agreement.
7. Operations of Affiliates. Executive agrees that he will refrain from
(i) authorizing any Affiliate to perform or (ii) assisting in any manner any
Affiliate in performing any activities that would be prohibited by the terms of
this Agreement if they were performed by Executive. Notwithstanding anything to
the contrary contained in this paragraph 7 (or in any other paragraph of this
Agreement), Executive shall not be required by the terms of this Agreement to
violate any fiduciary or contractual duty he owes as a director or officer of a
corporation, as a partner of a partnership or as a trustee of a trust, which
position he holds not in violation of this Agreement or the Employment
Agreement.
8. Miscellaneous Provisions.
(a) Binding Effect. Subject to any provisions hereof restricting
assignment, all covenants and agreements in this Agreement by or on behalf of
any of the parties hereto shall bind and inure to the benefit of the respective
successors, assigns, heirs, and personal representatives. None of the parties
hereto may assign any of its rights under this Agreement or attempt to have any
other person or entity assume any of its obligations hereunder.
(b) Severability. If fulfillment of any provision of this Agreement, at
the time such fulfillment shall be due, shall transcend the limit of validity
prescribed by law, then the obligation to be fulfilled shall be reduced to the
limit of such validity; and if any clause or provision contained in this
Agreement operates or would operate to invalidate this Agreement, in whole or in
part, then such clause or provision only shall be held ineffective, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect.
5
<PAGE> 6
(c) Governing Law. This Agreement, the rights and obligations of the
parties hereto, and any claims or disputes relating thereto shall be governed
by and construed in accordance with the laws of the State of North Carolina,
not including the choice-of-law rules thereof.
(d) Amendment; Waiver. Except as otherwise expressly provided in this
Agreement, no amendment, modification or discharge of this Agreement shall be
valid or binding unless set forth in writing and duly executed by each of the
parties hereto. Any waiver by any party or consent by any party to any variation
from any provision of this Agreement shall be valid only if in writing and only
in the specific instance in which it is given, and such waiver or consent shall
not be construed as a waiver of any other provision or as a consent with respect
to any similar instance or circumstance.
(e) Headings. Paragraph and subparagraph headings contained in this
Agreement are inserted for convenience of reference only, shall not be deemed to
be a part of this Agreement for any purpose, and shall not in any way define or
affect the meaning, construction or scope of any of the provisions hereof.
(f) Pronouns. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine, neuter, singular or plural, as the identity
of the person or entity may require.
(g) Arbitration. Any dispute or controversy arising out of or relating
to this Agreement shall be settled finally and exclusively by arbitration in
Charlotte, North Carolina in accordance with the rules of the American
Arbitration Association then in effect. Such arbitration shall be conducted by
an arbitrator(s) appointed by the American Arbitration Association in accordance
with its rules and any finding by such arbitrator(s) shall be final and binding
upon the parties. Judgment upon any award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof, and the parties consent to the
jurisdiction of the courts of the State of North Carolina for this purpose.
Nothing contained in this paragraph 8(g) shall be construed to preclude the
Company from obtaining injunctive or other equitable relief to secure specific
performance or to otherwise prevent a breach or contemplated breach of this
Agreement by Executive as provided in paragraph 6 hereof.
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<PAGE> 7
(h) Execution in Counterparts. This Agreement may be executed in two or
more counterparts, none of which need contain the signatures of all parties
hereto and each of which shall be deemed an original.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first set forth above.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
---------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ William F. Paulsen
---------------------------
Name: William F. Paulsen
Title: Vice President
/s/ William B. Hamilton [SEAL]
------------------------------
William B. Hamilton
"Executive"
7
<PAGE> 1
NONCOMPETITION AGREEMENT
THIS NONCOMPETITION AGREEMENT is entered into as of February 16, 1994
by and between MICHAEL L. SCHWARZ ("Executive"), SUMMIT PROPERTIES INC., a
Maryland corporation, and SUMMIT MANAGEMENT COMPANY, a Maryland corporation.
WHEREAS, on the date hereof, the Company (as defined below) is entering
into a series of related transactions pursuant to which it will acquire, among
other things, substantially all of the interests of Executive and certain others
in a portfolio of multi-family rental properties located in the eastern United
States; and
WHEREAS, as a condition to the consummation of the transactions
described above, the parties hereto desire to enter into certain agreements
restricting the activities of Executive in an effort to eliminate potential
conflicts of interest that may arise in the future, to protect the Company's
legitimate business interests, i.e., the value of its business and its good
will, and for other business purpose;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto agree as follows:
1. Definitions. Capitalized terms used herein shall have the meanings
set forth below:
"Affiliate" means (i) any entity directly or indirectly cont rolling
(including without limitation an entity for which Executive serves as an
officer, director, employee, consultant or other agent), controlled by, or under
common control with Executive, and (ii) each other entity in which Executive,
directly or indirectly, owns any controlling interest or of which Executive
serves as a general partner.
"Agreement" means this Noncompetition Agreement, any amendments hereto
made in accordance with paragraph 8(d) hereof.
"Company" means (i) Summit Management Company, (ii) Summit Properties
Inc., (iii) any corporation, partnership or other business entity that is,
directly or indirectly, controlled by or under common control with Summit
Properties Inc. and (iv) their respective successors.
"Company Project" means any Multifamily Property that the Company owns,
operates or manages as of the date of Executive's termination of employment with
the Company or that the Company has in any manner taken steps to acquire,
develop, construct, operate, manage or lease (including without limitation
making market surveys of a site, talking to the owner or his agent concerning
the purchase or joint venture of a site, optioning or contracting to buy a site
or discussions with the owner or his agent regarding managing or leasing a
property) during the twelve (12) month period immediately preceding Executive's
termination of employment with the Company.
<PAGE> 2
"Effective Date" means the date of the closing of the initial public
offering of common stock of Summit Properties Inc.
"Multifamily Property" means any real property on which multifamily
residential-use development has been constructed or is now or hereafter proposed
to be constructed (for example, and not by way of limitation, a property of the
type managed by the Company).
2. Executive's Obligations While Employed by the Company.
(a) Sole Employment. Subject to the provisions of paragraph
2(b) below, Executive agrees to devote his full time during the customary
business hours of the Company and give his best efforts to the business of the
Company and, during the period of his employment by the Company, Executive shall
not engage in any manner, whether as an officer, employee, owner, partner,
stockholder, director, consultant or otherwise -- directly or indirectly -- in
any business other than on behalf of the Company without the prior written
approval of the President of Summit Properties Inc., and Executive shall not
accept any other employment whatsoever from any other person, firm, corporation
or entity.
(b) Exceptions. Notwithstanding the provisions of paragraph
2(a) above to the contrary, Executive may during the term of his employment by
the Company and at any time thereafter (i) acquire an interest in any
corporation, partnership, venture or other business entity so long as (A) any
such interest is a passive investment of Executive not exceeding ten percent
(10%) of the total ownership interest in such entity, (B) such interest does not
afford Executive the power to influence in any material fashion the decision
making processes of the entity in which such interest is held and (C) Executive
is not the sponsor, promoter or similar initiator of such entity.
2
<PAGE> 3
3. Executive's Obligations Following Termination of Employment with the
Company.
(a) Anti-Pirating of Employees. For a two (2) year period
immediately following the termination of Executive's employment with the
Company, Executive agrees not to hire, directly or indirectly, or entice or
participate in any efforts to entice to leave the Company's employ, any person
who was or is a "key employee" (as hereinafter defined) of the Company at any
time during the twelve (12) month period immediately preceding the termination
date of Executive's employment with the Company. For purposes of this Agreement,
"key employee" means an employee who has an annualized rate of base salary
equaling or exceeding fifty thousand dollars ($50,000).
(b) Anti-Pirating of Company Projects. For a period of one (1)
year immediately following the termination of Executive's employment with the
Company, Executive agrees not to engage in any manner, whether as an officer,
employee, owner, partner, stockholder, director, consultant or otherwise --
directly or indirectly -- in any business which engages or attempts to engage,
directly or indirectly, in the acquisition, development, construction,
operation, management or leasing of any Company Project.
(c) Trade Secrets and Confidential Information. Executive
hereby agrees that he will hold in a fiduciary capacity for the benefit of the
Company, and shall not directly or indirectly use or disclose any Trade Secret,
as defined hereinafter, that Executive may have acquired during the term of his
employment by the Company for so long as such information remains a Trade
Secret. The term "Trade Secret" as used in this Agreement shall mean information
including, but not limited to, technical or nontechnical data, a formula, a
pattern, a compilation, a program, a device, a method, a technique, a drawing, a
process, financial data, financial plans, product plans, or a list of actual or
potential customers or suppliers which:
derives economic value, actual or potential from not being
generally known to, and not being readily ascertainable by
proper means by, other persons who can obtain economic value
from its disclosure or use; and is the subject of reasonable
efforts by the Company to maintain its secrecy.
3
<PAGE> 4
In addition to the foregoing and not in limitation thereof, Executive
agrees that during the period of his employment by the Company and the Covenant
Period, he will hold in a fiduciary capacity for the benefit of the Company and
shall not directly or indirectly use or disclose, any Confidential or
Proprietary Information, as defined hereinafter, that Executive may have
acquired (whether or not developed or compiled by Executive and whether or not
Executive was authorized to have access to such Information) during the term of,
in the course of or as a result of his employment by the Company. The term
"Confidential or Proprietary Information" as used in this Agreement means any
secret, confidential or proprietary information of the Company not otherwise
included in the definition of "Trade Secret" above. The term "Confidential and
Proprietary Information" does not include information that has become generally
available to the public by the act of one who has the right to disclose such
information without violating any right of the Company.
(e) Exceptions. Notwithstanding any provision of paragraphs
3(b) or 3(c) to the contrary, Executive shall not be restricted at any time
after his termination of employment with the Company from engaging in any
activities for which Executive would not be restricted from performing during
the term of his employment with the Company as set forth in paragraph 2(b)
above.
4. Reasonable and Necessary Restrictions. Executive acknowledges that
the restrictions, prohibitions and other provisions hereof, including without
limitation the various periods of restrictions set forth in paragraphs 3(a),
3(b) and 3(c), are reasonable, fair and equitable in scope, terms and duration,
are necessary to protect the legitimate business interests of the Company, and
are a material inducement to the Company to enter into the transactions
contemplated in the recitals hereto. Executive covenants that he will not
challenge the enforceability of this Agreement nor will he raise any equitable
defense to its enforcement.
5. Restrictions In Addition to Employment Agreement. Executive
acknowledges that the restrictions, prohibitions and other provisions hereof
shall be in addition to and not in substitution of the restrictions,
prohibitions and other provisions of the Employment Agreement, as such agreement
shall be amended and supplemented from time to time.
6. Specific Performance. Executive acknowledges that the obligations
undertaken by him pursuant to this Agreement are unique and that the Company
likely will have no adequate remedy at law if Executive shall fail to perform
any of his obligations hereunder, and Executive therefore confirms that the
Company's right to specific performance of the terms of this Agreement is
essential to protect the rights and interests of the Company. Accordingly, in
addition to any other remedies that the Company may have at law or in equity,
the Company shall have the right to have all obligations, covenants, agreements
and other provisions of this Agreement specifically performed by Executive, and
the Company shall have the right to obtain preliminary and permanent injunctive
relief to secure specific performance and to prevent a breach or contemplated
breach of this Agreement by Executive, and Executive submits to the jurisdiction
of the courts of the State of North Carolina for this purpose.
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<PAGE> 5
7. Operations of Affiliates. Executive agrees that he will refrain from
(i) authorizing any Affiliate to perform or (ii) assisting in any manner any
Affiliate in performing any activities that would be prohibited by the terms of
this Agreement if they were performed by Executive. Notwithstanding anything to
the contrary contained in this paragraph 7 (or in any other paragraph of this
Agreement), Executive shall not be required by the terms of this Agreement to
violate any fiduciary or contractual duty he owes as a director or officer of a
corporation, as a partner of a partnership or as a trustee of a trust, which
position he holds not in violation of this Agreement or the Employment
Agreement.
8. Miscellaneous Provisions.
(a) Binding Effect. Subject to any provisions hereof
restricting assignment, all covenants and agreements in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors, assigns, heirs, and personal representatives. None of the
parties hereto may assign any of its rights under this Agreement or attempt to
have any other person or entity assume any of its obligations hereunder.
(b) Severability. If fulfillment of any provision of this
Agreement, at the time such fulfillment shall be due, shall transcend the limit
of validity prescribed by law, then the obligation to be fulfilled shall be
reduced to the limit of such validity; and if any clause or provision contained
in this Agreement operates or would operate to invalidate this Agreement, in
whole or in part, then such clause or provision only shall be held ineffective,
as though not herein contained, and the remain-der of this Agreement shall
remain operative and in full force and effect.
(c) Governing Law. This Agreement, the rights and obligations
of the parties hereto, and any claims or disputes relating thereto shall be
governed by and construed in accordance with the laws of the State of North
Carolina, not including the choice-of-law rules thereof.
(d) Amendment: Waiver. Except as otherwise expressly provided
in this Agreement, no amendment, modification or discharge of this Agreement
shall be valid or binding unless set forth in writing and duly executed by each
of the parties hereto. Any waiver by any party or consent by any party to any
variation from any provision of this Agreement shall be valid only if in writing
and only in the specific instance in which it is given, and such waiver or
consent shall not be construed as a waiver of any other provision or as a
consent with respect to any similar instance or circumstance.
(e) Headings. Paragraph and subparagraph headings contained in
this Agreement are inserted for convenience of reference only, shall not be
deemed to be a part of this Agreement for any purpose, and shall not in any way
define or affect the meaning, construction or scope of any of the provisions
hereof.
5
<PAGE> 6
(f) Pronouns. All pronouns and any variations thereof shall be
deemed to refer to the masculine, feminine, neuter, singular or plural, as the
identity of the person or entity may require.
(g) Arbitration. Any dispute or controversy arising out of or
relating to this Agreement shall be settled finally and exclusively by
arbitration in Charlotte, North Carolina in accordance with the rules of the
American Arbitration Association then in effect. Such arbitration shall be
conducted by an arbitrators appointed by the American Arbitration Association in
accordance with its rules and any finding by such arbitrators shall be final and
binding upon the parties. Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction thereof, and the parties consent
to the jurisdiction of the courts of the State of North Carolina for this
purpose. Nothing contained in this paragraph 8(g) shall be construed to preclude
the Company from obtaining injunctive or other equitable relief to secure
specific performance or to otherwise prevent a breach or contemplated breach of
this Agreement by Executive as provided in paragraph 6 hereof.
(h) Execution in Counterparts. This Agreement may be executed
in two or more counterparts, none of which need contain the signatures of all
parties hereto and each of which shall be deemed an original.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement, or caused this Agreement to be duly executed on its behalf, as of the
date first set forth above.
SUMMIT PROPERTIES INC.
By: /s/ William F. Paulsen
-------------------------------
Name: William F. Paulsen
Title: President
SUMMIT MANAGEMENT COMPANY
By: /s/ John T. Gray
-------------------------------
Name: John T. Gray
Title: President
/s/ Michael L. Schwarz [SEAL]
-----------------------------
Michael L. Schwarz
6
<PAGE> 1
EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT made as of this 2nd day of April, 1997 by and between Summit
Properties Inc., a Maryland corporation with its principal place of business in
Charlotte, North Carolina (the "Company"), and William F. Paulsen of Charlotte,
North Carolina (the "Executive").
1. Purpose. The Company considers it essential to the best interests of
its stockholders to foster the continuous employment of key management
personnel. The Board of Directors of the Company (the "Board") recognizes,
however, that, as is the case with many publicly held corporations, the
possibility of a Change in Control or a Combination Transaction (as defined in
Section 2 hereof) exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
stockholders. Therefore, the Board has determined that appropriate steps should
be taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control or a Combination
Transaction. Nothing in this Agreement shall be construed as creating an express
or implied contract of employment or any right to be retained in the employ of
the Company. The Company and the Executive have entered into an Employment
Agreement dated January 13, 1994 (as such agreement may be in effect from time
to time, and including any replacement employment agreement, the "Employment
Agreement") that provides for compensation to the Executive under certain
circumstances in the event that the Executive's employment is terminated. This
Agreement is intended to supplement the Employment Agreement without duplicating
payments in the event of the termination of the Executive's employment.
2. Change in Control and Combination Transactions.
(a) A "Change in Control" shall be deemed to have occurred in any one
of the following events:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Act") (other than
the Company, Summit Properties Partnership, L.P. (together with any
other subsidiaries of the Company, the "Subsidiaries"), or any trustee,
fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Company or any of its
Subsidiaries), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 40% or more of either (A) the combined voting power of the
Company's then outstanding securities having the right to vote in an
election of the Board ("Voting Securities") or (B) the then outstanding
shares of stock of the Company ("Stock"), in either such case other
than as a result of an acquisition of securities directly from the
Company; or
<PAGE> 2
(ii) persons who, as of the date hereof, constitute the Board
(the "Incumbent Directors") cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent
to the date hereof whose election or nomination for election was
approved by a vote of at least a majority of the Incumbent Directors
shall, for purposes of this Agreement, be considered an Incumbent
Director; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
stockholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate fifty
percent (50%) or more of the voting shares of the corporation issuing
cash or securities in the consolidation or merger (or of its ultimate
parent corporation, if any), (B) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated
or arranged by any party as a single plan) of all or substantially all
of the assets of the Company or (C) any plan or proposal for the
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred for purposes of the foregoing clause (i) solely as the result of an
acquisition of securities by the Company which, by reducing the number of shares
of Stock or other Voting Securities outstanding, increases (x) the proportionate
number of shares of Stock beneficially owned by any person to 40% or more of the
shares of Stock then outstanding or (y) the proportionate voting power
represented by the Voting Securities beneficially owned by any person to 40% or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any person referred to in clause (x) or (y) of this
sentence shall thereafter become the beneficial owner of any additional shares
of Stock or other Voting Securities (other than pursuant to a stock split, stock
dividend, or similar transaction), then a "Change in Control" shall be deemed to
have occurred for purposes of the foregoing clause (i).
(b) A "Combination Transaction" shall be deemed to have occurred if the
Company shall consummate any consolidation or merger of the Company or any
Subsidiary where the stockholders of the Company, immediately prior to the
consolidation or merger, would not, immediately after the consolidation or
merger, beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 75% or more of
either (i) the combined voting power of the Company's then outstanding Voting
Securities or (ii) the then outstanding shares of Stock.
(c) For purposes of determining whether a Change in Control or a
Combination Transaction has occurred, all outstanding options, warrants and
other convertible securities that are then exchangeable or convertible into
Voting Securities of the Company, including, without limitation, all partnership
units of any Subsidiary that are convertible into Voting
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<PAGE> 3
Securities of the Company at the option of the holder or the Company, shall be
deemed to have been converted into the applicable number of shares of Voting
Securities of the Company immediately prior to making such determination.
3. Terminating Event. A "Terminating Event" shall mean any of the
following events:
(a) termination occurring subsequent to a Change of Control or a
Combination Transaction by the Company of the employment of the Executive with
the Company for any reason other than:
(i) the death of the Executive (which shall be referred to as
a "Death Termination") or total disability of the Executive
(total disability meaning the inability of the Executive to
perform his normal required services under this Agreement for
a period of six consecutive months during the term of this
Agreement by reason of the Executive's mental or physical
disability, as determined by the Board in good faith in its
sole discretion) (which shall be referred to as a "Disability
Termination") or the retirement of the Executive;
(ii) if the Executive is convicted of, pleads guilty to, or
confesses to any felony or any act of fraud, misappropriation
or embezzlement which has an immediate and materially adverse
effect on the Company, any Subsidiary or any affiliate of the
Company, as determined by the Board in good faith in its sole
discretion;
(iii) if the Executive engaged in a fraudulent act to the
material damage or prejudice of the Company, any Subsidiary or
any affiliate of the Company or in conduct or activities
materially damaging to the property, business or reputation of
the Company, any Subsidiary or any affiliate of the Company,
all as determined by the Board in good faith in its sole
discretion;
(iv) in the event of any material act or omission by the
Executive involving malfeasance or negligence in the
performance of the Executive's duties to the Company to the
material detriment of the Company, any Subsidiary or any
affiliate of the Company, as determined by the Board in good
faith in its sole discretion, which has not been corrected by
the Executive within thirty (30) days after written notice
from the Company of any such act or omission;
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<PAGE> 4
(v) failure by the Executive to comply in any material respect
with the terms of the Employment Agreement or any written
policies or directives of the Board as determined by the Board
in good faith in its sole discretion, which has not been
corrected by the Executive within thirty (30) days after
written notice from the Company of such failure; or
(vi) a material breach by the Executive of that certain
Noncompetition agreement between the Executive and the Company
dated January 13, 1994 (the "Noncompetition Agreement") as
determined by the Board in good faith in its sole
discretion.
Each of the events described in the foregoing clauses (ii) through (vi) shall be
referred to individually and collectively as a "For Cause Termination."
Notwithstanding any other provision of this Section 3(a), a Terminating Event
shall not be deemed to have occurred pursuant to this Section 3(a) solely as a
result of the Executive being an employee of any direct or indirect successor to
the business or assets of the Company, rather than continuing as an employee of
the Company following a Change in Control or a Combination Transaction. For
purposes of clause (i) of this Section 3(a), "retirement" shall mean termination
of the Executive's employment in accordance with the Company's normal retirement
policy, generally applicable to its salaried employees, as in effect immediately
prior to the Change in Control or a Combination Transaction, or in accordance
with any retirement arrangement established with respect to the Executive with
the Executive's express written consent; or
(b) termination occurring subsequent to a Change in Control or a
Combination Transaction by the Executive of the Executive's employment with the
Company for Good Reason. "Good Reason" shall mean the occurrence of either of
the following, provided that in either case the Board has not corrected such
material reduction described below within thirty (30) days after written notice
by the Executive of such material reduction: (i) there is a material reduction
in the Executive's duties, rights or responsibilities under the Employment
Agreement without his consent, or (ii) there is a material decrease in the
aggregate value of the Executive's compensation and benefits package from the
Company under the Employment Agreement without his consent, other than a
reduction in the Executive's base salary that is permitted under the Employment
Agreement and other than a reduction in compensation and/or benefits affecting a
broad group of employees of the Company as determined by the Board in good faith
in its sole discretion; or
(c) termination occurring subsequent to a Change of Control by the
Executive of the Executive's employment with the Company for any reason, unless
an event that would constitute grounds for a For Cause Termination of the
Executive's employment has occurred.
4. Severance Payment. In the event that either a Terminating Event
described in Section 3(a), 3(b) or 3(c) occurs within twelve (12) months after a
Change in Control, or a
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<PAGE> 5
Terminating Event described in Section 3(a) or 3(b) occurs within twelve (12)
months after a Combination Transaction:
(a) the Company shall pay to the Executive an amount equal to the
difference between (i) three (3) times the Executive's salary and cash bonus
paid (including amounts that were deferred by the Executive but would have been
paid in the absence of such deferral) with respect to the fiscal year
immediately preceding the year in which the Terminating Event occurred and (ii)
any amount of severance or other cash compensation paid to the Executive
pursuant to the Employment Agreement as a result of the termination of the
Executive's employment. Said amount shall be paid in one lump sum payment no
later than thirty-one (31) days following the Date of Termination (as such term
is defined in Section 8(b)); and
(b) the Company shall pay to the Executive all reasonable legal and
arbitration fees and expenses incurred by the Executive in obtaining or
enforcing any right or benefit provided by this Agreement, except in cases
involving frivolous or bad faith litigation.
5. Additional Benefits.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (the
"Severance Payments"), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") such
that the net amount retained by the Executive, after deduction of any Excise Tax
on the Severance Payments, any Federal, state and local income tax, employment
tax and Excise Tax upon the payment provided by this subsection, and any
interest and/or penalties assessed with respect to such Excise Tax, shall be
equal to the Severance Payments.
(b) Subject to the provisions of Section 5(c), all determinations
required to be made under this Section 5, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by the
Company's independent certified public accounting firm (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the Date of Termination, if applicable, or
at such earlier time as is reasonably requested by the Company or the Executive.
For purposes of determining the amount of the Gross-Up Payment, the Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individuals for the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rates of individual taxation in the state and locality of the
Executive's residence on the Date of Termination, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
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<PAGE> 6
local taxes. The initial Gross-Up Payment, if any, as determined pursuant to
this Section 5(b), shall be paid to the Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, the Company shall
furnish the Executive with an opinion of counsel that failure to report the
Excise Tax on the Executive's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty. Any determination
by the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (an "Underpayment"). In the event that the Company
exhausts its remedies pursuant to Section 5(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred, consistent with the
calculations required to be made hereunder, and any such Underpayment, and any
interest and penalties imposed on the Underpayment and required to be paid by
the Executive in connection with the proceedings described in Section 5(c),
shall be promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive knows of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which he
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim; provided, however that the Company shall bear and pay
directly all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or
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<PAGE> 7
income tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 5(c), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issues raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 5(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
6. Term. This Agreement shall take effect on the date first set forth
above and shall terminate upon the earlier of (a) immediately prior to a For
Cause Termination by the Company of the employment of the Executive, (b) the
termination of employment of the Executive by the Company or the Executive for
any reason prior to a Change in Control or a Combination Transaction, (c) the
resignation of the Executive other than for Good Reason after a Combination
Transaction, but prior to a Change in Control, or (d) immediately prior to the
resignation of the Executive after a Change in Control if any event that would
constitute grounds for a For Cause Termination of the Executive's employment has
occurred.
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<PAGE> 8
7. Withholding. All payments made by the Company under this Agreement
shall be net of any tax or other amounts required to be withheld by the Company
under applicable law.
8. Notice and Date of Termination; Disputes; Etc.
(a) Notice of Termination. After a Change in Control or Combination
Transaction and during the term of this Agreement, any purported termination of
the Executive's employment (other than by reason of a Death Termination) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with this Section 8. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and the Date of
Termination.
(b) Date of Termination. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control or
Combination Transaction and during the term of this Agreement, shall mean (i) if
there is a Disability Termination, thirty (30) days after Notice of Termination
is given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period) and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination. In the case of a termination by the
Company other than a For Cause Termination (which may be effective immediately),
the Date of Termination shall not be less than thirty (30) days after the Notice
of Termination is given. In the case of a termination by the Executive, the Date
of Termination shall not be less than fifteen (15) days from the date such
Notice of Termination is given. Notwithstanding Section 3(a) of this Agreement,
in the event that the Executive gives a Notice of Termination to the Company,
the Company may unilaterally accelerate the Date of Termination and such
acceleration shall not result in a Terminating Event for purposes of Section
3(a) of this Agreement.
(c) No Mitigation. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Sections
4(a) and (b) hereof. Further, the amount of any payment provided for in this
Agreement shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, but shall be subject to reduction
by certain amounts received under the Employment Agreement as provided in
Section 4(a) hereof.
(d) Settlement and Arbitration of Disputes. Any controversy or claim
arising out of or relating to this Agreement or the breach thereof shall be
settled exclusively by arbitration in accordance with the laws of the State of
North Carolina by three arbitrators, one of whom shall be appointed by the
Company, one by the Executive and the third by the first two arbitrators. If the
first two arbitrators cannot agree on the appointment of a third arbitrator,
then the third arbitrator shall be appointed by the American Arbitration
Association in the City of Charlotte, North Carolina. Such arbitration shall be
conducted in the City of Charlotte, North Carolina
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<PAGE> 9
in accordance with the rules of the American Arbitration Association for
commercial arbitrations, except with respect to the selection of arbitrators
which shall be as provided in this Section 8(d). Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
9. Assignment; Prior Agreements. Neither the Company nor the Executive
may make any assignment of this Agreement or any interest herein, by operation
of law or otherwise, without the prior written consent of the other party, and
without such consent any attempted transfer shall be null and void and of no
effect. This Agreement shall inure to the benefit of and be binding upon the
Company and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns. In the event of the Executive's
death after a Terminating Event but prior to the completion by the Company of
all payments due to him under Section 4(a) and (b) of this Agreement, the
Company shall continue such payments to the Executive's beneficiary designated
in writing to the Company prior to his death (or to his estate, if the Executive
fails to make such designation).
10. Enforceability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
11. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Company, or to the Company at its main office, attention of the Board.
13. Effect on Other Plans. An election by the Executive to resign after
a Change in Control under the provisions of this Agreement shall not be deemed a
voluntary termination of employment by the Executive for the purpose of
interpreting the provisions of any of the Company's benefit plans, programs or
policies. Nothing in this Agreement shall be construed to limit the rights of
the Executive under the Company's benefit plans, programs or policies except as
otherwise provided in Section 5 hereof, and except that the Executive shall have
no rights to any severance benefits under any severance pay plan other than cash
amounts specifically set forth in the Employment Agreement or this Agreement.
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<PAGE> 10
14. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of the Company.
15. Governing Law. This Agreement shall be construed under and be
governed in all respects by the laws of the State of North Carolina.
16. Obligations of Successors. In addition to any obligations imposed
by law upon any successor to the Company, the Company will use its best efforts
to require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place.
17. Confidential Information. The Executive shall never use, publish or
disclose in a manner adverse to the Company's interests, any proprietary or
confidential information relating to (a) the business, operations or properties
of the Company or any Subsidiary or other affiliate of the Company, or (b) any
materials, processes, business practices, technology, know-how, research,
programs or other information used in the business of the Company or any
Subsidiary or other affiliate of the Company; provided, however, that no breach
or alleged breach of this Section 17 shall entitle the Company to fail to comply
fully and in a timely manner with any other provision hereof. Nothing in this
Agreement shall preclude the Company from seeking money damages, or equitable
relief by injunction or otherwise without the necessity of proving actual damage
to the Company, for any breach by the Executive hereunder.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company by its duly authorized officer, and by the Executive,
as of the date first above written.
SUMMIT PROPERTIES INC.
By: /s/ Michael G. Malone
----------------------------
Name: Michael G. Malone
Title: Senior Vice President and General
Counsel
/s/ William F. Paulsen
-------------------------------
William F. Paulsen
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<PAGE> 1
EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT made as of this 2nd day of April, 1997 by and between Summit
Properties Inc., a Maryland corporation with its principal place of business in
Charlotte, North Carolina (the "Company"), and William B. McGuire, Jr. of
Charlotte, North Carolina (the "Executive").
1. Purpose. The Company considers it essential to the best interests of
its stockholders to foster the continuous employment of key management
personnel. The Board of Directors of the Company (the "Board") recognizes,
however, that, as is the case with many publicly held corporations, the
possibility of a Change in Control or a Combination Transaction (as defined in
Section 2 hereof) exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
stockholders. Therefore, the Board has determined that appropriate steps should
be taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control or a Combination
Transaction. Nothing in this Agreement shall be construed as creating an express
or implied contract of employment or any right to be retained in the employ of
the Company. The Company and the Executive have entered into an Employment
Agreement dated January 13, 1994 (as such agreement may be in effect from time
to time, and including any replacement employment agreement, the "Employment
Agreement") that provides for compensation to the Executive under certain
circumstances in the event that the Executive's employment is terminated. This
Agreement is intended to supplement the Employment Agreement without duplicating
payments in the event of the termination of the Executive's employment.
2. Change in Control and Combination Transactions.
(a) A "Change in Control" shall be deemed to have occurred in any one
of the following events:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Act") (other than
the Company, Summit Properties Partnership, L.P. (together with any
other subsidiaries of the Company, the "Subsidiaries"), or any trustee,
fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Company or any of its
Subsidiaries), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 40% or more of either (A) the combined voting power of the
Company's then outstanding securities having the right to vote in an
election of the Board ("Voting Securities") or (B) the then outstanding
shares of stock of the Company ("Stock"), in either such case other
than as a result of an acquisition of securities directly from the
Company; or
<PAGE> 2
(ii) persons who, as of the date hereof, constitute the Board
(the "Incumbent Directors") cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent
to the date hereof whose election or nomination for election was
approved by a vote of at least a majority of the Incumbent Directors
shall, for purposes of this Agreement, be considered an Incumbent
Director; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
stockholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate fifty
percent (50%) or more of the voting shares of the corporation issuing
cash or securities in the consolidation or merger (or of its ultimate
parent corporation, if any), (B) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated
or arranged by any party as a single plan) of all or substantially all
of the assets of the Company or (C) any plan or proposal for the
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred for purposes of the foregoing clause (i) solely as the result of an
acquisition of securities by the Company which, by reducing the number of shares
of Stock or other Voting Securities outstanding, increases (x) the proportionate
number of shares of Stock beneficially owned by any person to 40% or more of the
shares of Stock then outstanding or (y) the proportionate voting power
represented by the Voting Securities beneficially owned by any person to 40% or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any person referred to in clause (x) or (y) of this
sentence shall thereafter become the beneficial owner of any additional shares
of Stock or other Voting Securities (other than pursuant to a stock split, stock
dividend, or similar transaction), then a "Change in Control" shall be deemed to
have occurred for purposes of the foregoing clause (i).
(b) A "Combination Transaction" shall be deemed to have occurred if the
Company shall consummate any consolidation or merger of the Company or any
Subsidiary where the stockholders of the Company, immediately prior to the
consolidation or merger, would not, immediately after the consolidation or
merger, beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 75% or more of
either (i) the combined voting power of the Company's then outstanding Voting
Securities or (ii) the then outstanding shares of Stock.
(c) For purposes of determining whether a Change in Control or a
Combination Transaction has occurred, all outstanding options, warrants and
other convertible securities that are then exchangeable or convertible into
Voting Securities of the Company, including, without limitation, all partnership
units of any Subsidiary that are convertible into Voting
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<PAGE> 3
Securities of the Company at the option of the holder or the Company, shall be
deemed to have been converted into the applicable number of shares of Voting
Securities of the Company immediately prior to making such determination.
3. Terminating Event. A "Terminating Event" shall mean any of the
following events:
(a) termination occurring subsequent to a Change of Control or a
Combination Transaction by the Company of the employment of the Executive with
the Company for any reason other than:
(i) the death of the Executive (which shall be referred to as
a "Death Termination") or total disability of the Executive
(total disability meaning the inability of the Executive to
perform his normal required services under this Agreement for
a period of six consecutive months during the term of this
Agreement by reason of the Executive's mental or physical
disability, as determined by the Board in good faith in its
sole discretion) (which shall be referred to as a "Disability
Termination") or the retirement of the Executive;
(ii) if the Executive is convicted of, pleads guilty to, or
confesses to any felony or any act of fraud, misappropriation
or embezzlement which has an immediate and materially adverse
effect on the Company, any Subsidiary or any affiliate of the
Company, as determined by the Board in good faith in its sole
discretion;
(iii) if the Executive engaged in a fraudulent act to the
material damage or prejudice of the Company, any Subsidiary or
any affiliate of the Company or in conduct or activities
materially damaging to the property, business or reputation of
the Company, any Subsidiary or any affiliate of the Company,
all as determined by the Board in good faith in its sole
discretion;
(iv) in the event of any material act or omission by the
Executive involving malfeasance or negligence in the
performance of the Executive's duties to the Company to the
material detriment of the Company, any Subsidiary or any
affiliate of the Company, as determined by the Board in good
faith in its sole discretion, which has not been corrected by
the Executive within thirty (30) days after written notice
from the Company of any such act or omission;
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<PAGE> 4
(v) failure by the Executive to comply in any material respect
with the terms of the Employment Agreement or any written
policies or directives of the Board as determined by the Board
in good faith in its sole discretion, which has not been
corrected by the Executive within thirty (30) days after
written notice from the Company of such failure; or
(vi) a material breach by the Executive of that certain
Noncompetition agreement between the Executive and the Company
dated January 13, 1994 (the "Noncompetition Agreement") as
determined by the Board in good faith in its sole
discretion.
Each of the events described in the foregoing clauses (ii) through (vi) shall be
referred to individually and collectively as a "For Cause Termination."
Notwithstanding any other provision of this Section 3(a), a Terminating Event
shall not be deemed to have occurred pursuant to this Section 3(a) solely as a
result of the Executive being an employee of any direct or indirect successor to
the business or assets of the Company, rather than continuing as an employee of
the Company following a Change in Control or a Combination Transaction. For
purposes of clause (i) of this Section 3(a), "retirement" shall mean termination
of the Executive's employment in accordance with the Company's normal retirement
policy, generally applicable to its salaried employees, as in effect immediately
prior to the Change in Control or a Combination Transaction, or in accordance
with any retirement arrangement established with respect to the Executive with
the Executive's express written consent; or
(b) termination occurring subsequent to a Change in Control or a
Combination Transaction by the Executive of the Executive's employment with the
Company for Good Reason. "Good Reason" shall mean the occurrence of either of
the following, provided that in either case the Board has not corrected such
material reduction described below within thirty (30) days after written notice
by the Executive of such material reduction: (i) there is a material reduction
in the Executive's duties, rights or responsibilities under the Employment
Agreement without his consent, or (ii) there is a material decrease in the
aggregate value of the Executive's compensation and benefits package from the
Company under the Employment Agreement without his consent, other than a
reduction in the Executive's base salary that is permitted under the Employment
Agreement and other than a reduction in compensation and/or benefits affecting a
broad group of employees of the Company as determined by the Board in good faith
in its sole discretion; or
(c) termination occurring subsequent to a Change of Control by the
Executive of the Executive's employment with the Company for any reason, unless
an event that would constitute grounds for a For Cause Termination of the
Executive's employment has occurred.
4. Severance Payment. In the event that either a Terminating Event
described in Section 3(a), 3(b) or 3(c) occurs within twelve (12) months after a
Change in Control, or a
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<PAGE> 5
Terminating Event described in Section 3(a) or 3(b) occurs within twelve (12)
months after a Combination Transaction:
(a) the Company shall pay to the Executive an amount equal to the
difference between (i) three (3) times the Executive's salary and cash bonus
paid (including amounts that were deferred by the Executive but would have been
paid in the absence of such deferral) with respect to the fiscal year
immediately preceding the year in which the Terminating Event occurred and (ii)
any amount of severance or other cash compensation paid to the Executive
pursuant to the Employment Agreement as a result of the termination of the
Executive's employment. Said amount shall be paid in one lump sum payment no
later than thirty-one (31) days following the Date of Termination (as such term
is defined in Section 8(b)); and
(b) the Company shall pay to the Executive all reasonable legal and
arbitration fees and expenses incurred by the Executive in obtaining or
enforcing any right or benefit provided by this Agreement, except in cases
involving frivolous or bad faith litigation.
5. Additional Benefits.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (the
"Severance Payments"), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") such
that the net amount retained by the Executive, after deduction of any Excise Tax
on the Severance Payments, any Federal, state and local income tax, employment
tax and Excise Tax upon the payment provided by this subsection, and any
interest and/or penalties assessed with respect to such Excise Tax, shall be
equal to the Severance Payments.
(b) Subject to the provisions of Section 5(c), all determinations
required to be made under this Section 5, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by the
Company's independent certified public accounting firm (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the Date of Termination, if applicable, or
at such earlier time as is reasonably requested by the Company or the Executive.
For purposes of determining the amount of the Gross-Up Payment, the Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individuals for the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rates of individual taxation in the state and locality of the
Executive's residence on the Date of Termination, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
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<PAGE> 6
local taxes. The initial Gross-Up Payment, if any, as determined pursuant to
this Section 5(b), shall be paid to the Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, the Company shall
furnish the Executive with an opinion of counsel that failure to report the
Excise Tax on the Executive's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty. Any determination
by the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (an "Underpayment"). In the event that the Company
exhausts its remedies pursuant to Section 5(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred, consistent with the
calculations required to be made hereunder, and any such Underpayment, and any
interest and penalties imposed on the Underpayment and required to be paid by
the Executive in connection with the proceedings described in Section 5(c),
shall be promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive knows of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which he
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim; provided, however that the Company shall bear and pay
directly all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or
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<PAGE> 7
income tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 5(c), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issues raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 5(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
6. Term. This Agreement shall take effect on the date first set forth
above and shall terminate upon the earlier of (a) immediately prior to a For
Cause Termination by the Company of the employment of the Executive, (b) the
termination of employment of the Executive by the Company or the Executive for
any reason prior to a Change in Control or a Combination Transaction, (c) the
resignation of the Executive other than for Good Reason after a Combination
Transaction, but prior to a Change in Control, or (d) immediately prior to the
resignation of the Executive after a Change in Control if any event that would
constitute grounds for a For Cause Termination of the Executive's employment has
occurred.
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<PAGE> 8
7. Withholding. All payments made by the Company under this Agreement
shall be net of any tax or other amounts required to be withheld by the Company
under applicable law.
8. Notice and Date of Termination; Disputes; Etc.
(a) Notice of Termination. After a Change in Control or Combination
Transaction and during the term of this Agreement, any purported termination of
the Executive's employment (other than by reason of a Death Termination) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with this Section 8. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and the Date of
Termination.
(b) Date of Termination. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control or
Combination Transaction and during the term of this Agreement, shall mean (i) if
there is a Disability Termination, thirty (30) days after Notice of Termination
is given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period) and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination. In the case of a termination by the
Company other than a For Cause Termination (which may be effective immediately),
the Date of Termination shall not be less than thirty (30) days after the Notice
of Termination is given. In the case of a termination by the Executive, the Date
of Termination shall not be less than fifteen (15) days from the date such
Notice of Termination is given. Notwithstanding Section 3(a) of this Agreement,
in the event that the Executive gives a Notice of Termination to the Company,
the Company may unilaterally accelerate the Date of Termination and such
acceleration shall not result in a Terminating Event for purposes of Section
3(a) of this Agreement.
(c) No Mitigation. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Sections
4(a) and (b) hereof. Further, the amount of any payment provided for in this
Agreement shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, but shall be subject to reduction
by certain amounts received under the Employment Agreement as provided in
Section 4(a) hereof.
(d) Settlement and Arbitration of Disputes. Any controversy or claim
arising out of or relating to this Agreement or the breach thereof shall be
settled exclusively by arbitration in accordance with the laws of the State of
North Carolina by three arbitrators, one of whom shall be appointed by the
Company, one by the Executive and the third by the first two arbitrators. If the
first two arbitrators cannot agree on the appointment of a third arbitrator,
then the third arbitrator shall be appointed by the American Arbitration
Association in the City of Charlotte, North Carolina. Such arbitration shall be
conducted in the City of Charlotte, North Carolina
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<PAGE> 9
in accordance with the rules of the American Arbitration Association for
commercial arbitrations, except with respect to the selection of arbitrators
which shall be as provided in this Section 8(d). Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
9. Assignment; Prior Agreements. Neither the Company nor the Executive
may make any assignment of this Agreement or any interest herein, by operation
of law or otherwise, without the prior written consent of the other party, and
without such consent any attempted transfer shall be null and void and of no
effect. This Agreement shall inure to the benefit of and be binding upon the
Company and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns. In the event of the Executive's
death after a Terminating Event but prior to the completion by the Company of
all payments due to him under Section 4(a) and (b) of this Agreement, the
Company shall continue such payments to the Executive's beneficiary designated
in writing to the Company prior to his death (or to his estate, if the Executive
fails to make such designation).
10. Enforceability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
11. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Company, or to the Company at its main office, attention of the Board.
13. Effect on Other Plans. An election by the Executive to resign after
a Change in Control under the provisions of this Agreement shall not be deemed a
voluntary termination of employment by the Executive for the purpose of
interpreting the provisions of any of the Company's benefit plans, programs or
policies. Nothing in this Agreement shall be construed to limit the rights of
the Executive under the Company's benefit plans, programs or policies except as
otherwise provided in Section 5 hereof, and except that the Executive shall have
no rights to any severance benefits under any severance pay plan other than cash
amounts specifically set forth in the Employment Agreement or this Agreement.
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<PAGE> 10
14. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of the Company.
15. Governing Law. This Agreement shall be construed under and be
governed in all respects by the laws of the State of North Carolina.
16. Obligations of Successors. In addition to any obligations imposed
by law upon any successor to the Company, the Company will use its best efforts
to require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place.
17. Confidential Information. The Executive shall never use, publish or
disclose in a manner adverse to the Company's interests, any proprietary or
confidential information relating to (a) the business, operations or properties
of the Company or any Subsidiary or other affiliate of the Company, or (b) any
materials, processes, business practices, technology, know-how, research,
programs or other information used in the business of the Company or any
Subsidiary or other affiliate of the Company; provided, however, that no breach
or alleged breach of this Section 17 shall entitle the Company to fail to comply
fully and in a timely manner with any other provision hereof. Nothing in this
Agreement shall preclude the Company from seeking money damages, or equitable
relief by injunction or otherwise without the necessity of proving actual damage
to the Company, for any breach by the Executive hereunder.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company by its duly authorized officer, and by the Executive,
as of the date first above written.
SUMMIT PROPERTIES INC.
By: /s/ Michael G. Malone
---------------------------------
Name: Michael G. Malone
Title: Senior Vice President and General
Counsel
/s/ William B. McGuire, Jr.
------------------------------------
William B. McGuire
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<PAGE> 1
EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT made as of this 2nd day of April, 1997 by and between Summit
Properties Inc., a Maryland corporation with its principal place of business in
Charlotte, North Carolina (the "Company"), and Michael L. Schwarz of Charlotte,
North Carolina (the "Executive").
1. Purpose. The Company considers it essential to the best interests of
its stockholders to foster the continuous employment of key management
personnel. The Board of Directors of the Company (the "Board") recognizes,
however, that, as is the case with many publicly held corporations, the
possibility of a Change in Control or a Combination Transaction (as defined in
Section 2 hereof) exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
stockholders. Therefore, the Board has determined that appropriate steps should
be taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control or a Combination
Transaction. Nothing in this Agreement shall be construed as creating an express
or implied contract of employment or any right to be retained in the employ of
the Company. The Company and the Executive have entered into an Employment
Agreement dated February 16, 1994 (as such agreement may be in effect from time
to time, and including any replacement employment agreement, the "Employment
Agreement") that provides for compensation to the Executive under certain
circumstances in the event that the Executive's employment is terminated. This
Agreement is intended to supplement the Employment Agreement without duplicating
payments in the event of the termination of the Executive's employment.
2. Change in Control and Combination Transactions.
(a) A "Change in Control" shall be deemed to have occurred in any one
of the following events:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Act") (other than
the Company, Summit Properties Partnership, L.P. (together with any
other subsidiaries of the Company, the "Subsidiaries"), or any trustee,
fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Company or any of its
Subsidiaries), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 40% or more of either (A) the combined voting power of the
Company's then outstanding securities having the right to vote in an
election of the Board ("Voting Securities") or (B) the then outstanding
shares of stock of the Company ("Stock"), in either such case other
than as a result of an acquisition of securities directly from the
Company; or
<PAGE> 2
(ii) persons who, as of the date hereof, constitute the Board
(the "Incumbent Directors") cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent
to the date hereof whose election or nomination for election was
approved by a vote of at least a majority of the Incumbent Directors
shall, for purposes of this Agreement, be considered an Incumbent
Director; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
stockholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate fifty
percent (50%) or more of the voting shares of the corporation issuing
cash or securities in the consolidation or merger (or of its ultimate
parent corporation, if any), (B) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated
or arranged by any party as a single plan) of all or substantially all
of the assets of the Company or (C) any plan or proposal for the
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred for purposes of the foregoing clause (i) solely as the result of an
acquisition of securities by the Company which, by reducing the number of shares
of Stock or other Voting Securities outstanding, increases (x) the proportionate
number of shares of Stock beneficially owned by any person to 40% or more of the
shares of Stock then outstanding or (y) the proportionate voting power
represented by the Voting Securities beneficially owned by any person to 40% or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any person referred to in clause (x) or (y) of this
sentence shall thereafter become the beneficial owner of any additional shares
of Stock or other Voting Securities (other than pursuant to a stock split, stock
dividend, or similar transaction), then a "Change in Control" shall be deemed to
have occurred for purposes of the foregoing clause (i).
(b) A "Combination Transaction" shall be deemed to have occurred if the
Company shall consummate any consolidation or merger of the Company or any
Subsidiary where the stockholders of the Company, immediately prior to the
consolidation or merger, would not, immediately after the consolidation or
merger, beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 75% or more of
either (i) the combined voting power of the Company's then outstanding Voting
Securities or (ii) the then outstanding shares of Stock.
(c) For purposes of determining whether a Change in Control or a
Combination Transaction has occurred, all outstanding options, warrants and
other convertible securities that are then exchangeable or convertible into
Voting Securities of the Company, including, without limitation, all partnership
units of any Subsidiary that are convertible into Voting
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<PAGE> 3
Securities of the Company at the option of the holder or the Company, shall be
deemed to have been converted into the applicable number of shares of Voting
Securities of the Company immediately prior to making such determination.
3. Terminating Event. A "Terminating Event" shall mean any of the
following events:
(a) termination occurring subsequent to a Change of Control or a
Combination Transaction by the Company of the employment of the Executive with
the Company for any reason other than:
(i) the death of the Executive (which shall be referred to as
a "Death Termination") or total disability of the Executive
(total disability meaning the inability of the Executive to
perform his normal required services under this Agreement for
a period of six consecutive months during the term of this
Agreement by reason of the Executive's mental or physical
disability, as determined by the Board in good faith in its
sole discretion) (which shall be referred to as a "Disability
Termination") or the retirement of the Executive;
(ii) if the Executive is convicted of, pleads guilty to, or
confesses to any felony or any act of fraud, misappropriation
or embezzlement which has an immediate and materially adverse
effect on the Company, any Subsidiary or any affiliate of the
Company, as determined by the Board in good faith in its sole
discretion;
(iii) if the Executive engaged in a fraudulent act to the
material damage or prejudice of the Company, any Subsidiary or
any affiliate of the Company or in conduct or activities
materially damaging to the property, business or reputation of
the Company, any Subsidiary or any affiliate of the Company,
all as determined by the Board in good faith in its sole
discretion;
(iv) in the event of any material act or omission by the
Executive involving malfeasance or negligence in the
performance of the Executive's duties to the Company to the
material detriment of the Company, any Subsidiary or any
affiliate of the Company, as determined by the Board in good
faith in its sole discretion, which has not been corrected by
the Executive within thirty (30) days after written notice
from the Company of any such act or omission;
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<PAGE> 4
(v) failure by the Executive to comply in any material respect
with the terms of the Employment Agreement or any written
policies or directives of the Board as determined by the Board
in good faith in its sole discretion, which has not been
corrected by the Executive within thirty (30) days after
written notice from the Company of such failure; or
(vi) a material breach by the Executive of that certain
Noncompetition agreement between the Executive and the Company
dated January 13, 1994 (the "Noncompetition Agreement") as
determined by the Board in good faith in its sole
discretion.
Each of the events described in the foregoing clauses (ii) through (vi) shall be
referred to individually and collectively as a "For Cause Termination."
Notwithstanding any other provision of this Section 3(a), a Terminating Event
shall not be deemed to have occurred pursuant to this Section 3(a) solely as a
result of the Executive being an employee of any direct or indirect successor to
the business or assets of the Company, rather than continuing as an employee of
the Company following a Change in Control or a Combination Transaction. For
purposes of clause (i) of this Section 3(a), "retirement" shall mean termination
of the Executive's employment in accordance with the Company's normal retirement
policy, generally applicable to its salaried employees, as in effect immediately
prior to the Change in Control or a Combination Transaction, or in accordance
with any retirement arrangement established with respect to the Executive with
the Executive's express written consent; or
(b) termination occurring subsequent to a Change in Control or a
Combination Transaction by the Executive of the Executive's employment with the
Company for Good Reason. "Good Reason" shall mean the occurrence of either of
the following, provided that in either case the Board has not corrected such
material reduction described below within thirty (30) days after written notice
by the Executive of such material reduction: (i) there is a material reduction
in the Executive's duties, rights or responsibilities under the Employment
Agreement without his consent, or (ii) there is a material decrease in the
aggregate value of the Executive's compensation and benefits package from the
Company under the Employment Agreement without his consent, other than a
reduction in the Executive's base salary that is permitted under the Employment
Agreement and other than a reduction in compensation and/or benefits affecting a
broad group of employees of the Company as determined by the Board in good faith
in its sole discretion; or
(c) termination occurring subsequent to a Change of Control by the
Executive of the Executive's employment with the Company for any reason, unless
an event that would constitute grounds for a For Cause Termination of the
Executive's employment has occurred.
4. Severance Payment. In the event that either a Terminating Event
described in Section 3(a), 3(b) or 3(c) occurs within twelve (12) months after a
Change in Control, or a
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<PAGE> 5
Terminating Event described in Section 3(a) or 3(b) occurs within twelve (12)
months after a Combination Transaction:
(a) the Company shall pay to the Executive an amount equal to the
difference between (i) three (3) times the Executive's salary and cash bonus
paid (including amounts that were deferred by the Executive but would have been
paid in the absence of such deferral) with respect to the fiscal year
immediately preceding the year in which the Terminating Event occurred and (ii)
any amount of severance or other cash compensation paid to the Executive
pursuant to the Employment Agreement as a result of the termination of the
Executive's employment. Said amount shall be paid in one lump sum payment no
later than thirty-one (31) days following the Date of Termination (as such term
is defined in Section 8(b)); and
(b) the Company shall pay to the Executive all reasonable legal and
arbitration fees and expenses incurred by the Executive in obtaining or
enforcing any right or benefit provided by this Agreement, except in cases
involving frivolous or bad faith litigation.
5. Additional Benefits.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (the
"Severance Payments"), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") such
that the net amount retained by the Executive, after deduction of any Excise Tax
on the Severance Payments, any Federal, state and local income tax, employment
tax and Excise Tax upon the payment provided by this subsection, and any
interest and/or penalties assessed with respect to such Excise Tax, shall be
equal to the Severance Payments.
(b) Subject to the provisions of Section 5(c), all determinations
required to be made under this Section 5, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by the
Company's independent certified public accounting firm (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the Date of Termination, if applicable, or
at such earlier time as is reasonably requested by the Company or the Executive.
For purposes of determining the amount of the Gross-Up Payment, the Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individuals for the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rates of individual taxation in the state and locality of the
Executive's residence on the Date of Termination, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
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<PAGE> 6
local taxes. The initial Gross-Up Payment, if any, as determined pursuant to
this Section 5(b), shall be paid to the Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, the Company shall
furnish the Executive with an opinion of counsel that failure to report the
Excise Tax on the Executive's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty. Any determination
by the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (an "Underpayment"). In the event that the Company
exhausts its remedies pursuant to Section 5(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred, consistent with the
calculations required to be made hereunder, and any such Underpayment, and any
interest and penalties imposed on the Underpayment and required to be paid by
the Executive in connection with the proceedings described in Section 5(c),
shall be promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive knows of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which he
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim; provided, however that the Company shall bear and pay
directly all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or
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<PAGE> 7
income tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 5(c), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issues raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 5(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
6. Term. This Agreement shall take effect on the date first set forth
above and shall terminate upon the earlier of (a) immediately prior to a For
Cause Termination by the Company of the employment of the Executive, (b) the
termination of employment of the Executive by the Company or the Executive for
any reason prior to a Change in Control or a Combination Transaction, (c) the
resignation of the Executive other than for Good Reason after a Combination
Transaction, but prior to a Change in Control, or (d) immediately prior to the
resignation of the Executive after a Change in Control if any event that would
constitute grounds for a For Cause Termination of the Executive's employment has
occurred.
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7. Withholding. All payments made by the Company under this Agreement
shall be net of any tax or other amounts required to be withheld by the Company
under applicable law.
8. Notice and Date of Termination; Disputes; Etc.
(a) Notice of Termination. After a Change in Control or Combination
Transaction and during the term of this Agreement, any purported termination of
the Executive's employment (other than by reason of a Death Termination) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with this Section 8. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and the Date of
Termination.
(b) Date of Termination. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control or
Combination Transaction and during the term of this Agreement, shall mean (i) if
there is a Disability Termination, thirty (30) days after Notice of Termination
is given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period) and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination. In the case of a termination by the
Company other than a For Cause Termination (which may be effective immediately),
the Date of Termination shall not be less than thirty (30) days after the Notice
of Termination is given. In the case of a termination by the Executive, the Date
of Termination shall not be less than fifteen (15) days from the date such
Notice of Termination is given. Notwithstanding Section 3(a) of this Agreement,
in the event that the Executive gives a Notice of Termination to the Company,
the Company may unilaterally accelerate the Date of Termination and such
acceleration shall not result in a Terminating Event for purposes of Section
3(a) of this Agreement.
(c) No Mitigation. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Sections
4(a) and (b) hereof. Further, the amount of any payment provided for in this
Agreement shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, but shall be subject to reduction
by certain amounts received under the Employment Agreement as provided in
Section 4(a) hereof.
(d) Settlement and Arbitration of Disputes. Any controversy or claim
arising out of or relating to this Agreement or the breach thereof shall be
settled exclusively by arbitration in accordance with the laws of the State of
North Carolina by three arbitrators, one of whom shall be appointed by the
Company, one by the Executive and the third by the first two arbitrators. If the
first two arbitrators cannot agree on the appointment of a third arbitrator,
then the third arbitrator shall be appointed by the American Arbitration
Association in the City of Charlotte, North Carolina. Such arbitration shall be
conducted in the City of Charlotte, North Carolina
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<PAGE> 9
in accordance with the rules of the American Arbitration Association for
commercial arbitrations, except with respect to the selection of arbitrators
which shall be as provided in this Section 8(d). Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
9. Assignment; Prior Agreements. Neither the Company nor the Executive
may make any assignment of this Agreement or any interest herein, by operation
of law or otherwise, without the prior written consent of the other party, and
without such consent any attempted transfer shall be null and void and of no
effect. This Agreement shall inure to the benefit of and be binding upon the
Company and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns. In the event of the Executive's
death after a Terminating Event but prior to the completion by the Company of
all payments due to him under Section 4(a) and (b) of this Agreement, the
Company shall continue such payments to the Executive's beneficiary designated
in writing to the Company prior to his death (or to his estate, if the Executive
fails to make such designation).
10. Enforceability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
11. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Company, or to the Company at its main office, attention of the Board.
13. Effect on Other Plans. An election by the Executive to resign after
a Change in Control under the provisions of this Agreement shall not be deemed a
voluntary termination of employment by the Executive for the purpose of
interpreting the provisions of any of the Company's benefit plans, programs or
policies. Nothing in this Agreement shall be construed to limit the rights of
the Executive under the Company's benefit plans, programs or policies except as
otherwise provided in Section 5 hereof, and except that the Executive shall have
no rights to any severance benefits under any severance pay plan other than cash
amounts specifically set forth in the Employment Agreement or this Agreement.
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<PAGE> 10
14. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of the Company.
15. Governing Law. This Agreement shall be construed under and be
governed in all respects by the laws of the State of North Carolina.
16. Obligations of Successors. In addition to any obligations imposed
by law upon any successor to the Company, the Company will use its best efforts
to require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place.
17. Confidential Information. The Executive shall never use, publish or
disclose in a manner adverse to the Company's interests, any proprietary or
confidential information relating to (a) the business, operations or properties
of the Company or any Subsidiary or other affiliate of the Company, or (b) any
materials, processes, business practices, technology, know-how, research,
programs or other information used in the business of the Company or any
Subsidiary or other affiliate of the Company; provided, however, that no breach
or alleged breach of this Section 17 shall entitle the Company to fail to comply
fully and in a timely manner with any other provision hereof. Nothing in this
Agreement shall preclude the Company from seeking money damages, or equitable
relief by injunction or otherwise without the necessity of proving actual damage
to the Company, for any breach by the Executive hereunder.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company by its duly authorized officer, and by the Executive,
as of the date first above written.
SUMMIT PROPERTIES INC.
By: /s/ Michael G. Malone
----------------------------------
Name: Michael G. Malone
Title: Senior Vice President and General
Counsel
/s/ Michael L. Schwarz
-------------------------------------
Michael L. Schwarz
10
<PAGE> 1
EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT made as of this 2nd day of April, 1997 by and between Summit
Properties Inc., a Maryland corporation with its principal place of business in
Charlotte, North Carolina (the "Company"), and Raymond V. Jones of Charlotte,
North Carolina (the "Executive").
1. Purpose. The Company considers it essential to the best interests of
its stockholders to foster the continuous employment of key management
personnel. The Board of Directors of the Company (the "Board") recognizes,
however, that, as is the case with many publicly held corporations, the
possibility of a Change in Control or a Combination Transaction (as defined in
Section 2 hereof) exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
stockholders. Therefore, the Board has determined that appropriate steps should
be taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control or a Combination
Transaction. Nothing in this Agreement shall be construed as creating an express
or implied contract of employment or any right to be retained in the employ of
the Company. The Company and the Executive have entered into an Employment
Agreement dated January 13, 1994 (as such agreement may be in effect from time
to time, and including any replacement employment agreement, the "Employment
Agreement") that provides for compensation to the Executive under certain
circumstances in the event that the Executive's employment is terminated. This
Agreement is intended to supplement the Employment Agreement without duplicating
payments in the event of the termination of the Executive's employment.
2. Change in Control and Combination Transactions.
(a) A "Change in Control" shall be deemed to have occurred in any one
of the following events:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Act") (other than
the Company, Summit Properties Partnership, L.P. (together with any
other subsidiaries of the Company, the "Subsidiaries"), or any trustee,
fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Company or any of its
Subsidiaries), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 40% or more of either (A) the combined voting power of the
Company's then outstanding securities having the right to vote in an
election of the Board ("Voting Securities") or (B) the then outstanding
shares of stock of the Company ("Stock"), in either such case other
than as a result of an acquisition of securities directly from the
Company; or
<PAGE> 2
(ii) persons who, as of the date hereof, constitute the Board
(the "Incumbent Directors") cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent
to the date hereof whose election or nomination for election was
approved by a vote of at least a majority of the Incumbent Directors
shall, for purposes of this Agreement, be considered an Incumbent
Director; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
stockholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate fifty
percent (50%) or more of the voting shares of the corporation issuing
cash or securities in the consolidation or merger (or of its ultimate
parent corporation, if any), (B) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated
or arranged by any party as a single plan) of all or substantially all
of the assets of the Company or (C) any plan or proposal for the
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred for purposes of the foregoing clause (i) solely as the result of an
acquisition of securities by the Company which, by reducing the number of shares
of Stock or other Voting Securities outstanding, increases (x) the proportionate
number of shares of Stock beneficially owned by any person to 40% or more of the
shares of Stock then outstanding or (y) the proportionate voting power
represented by the Voting Securities beneficially owned by any person to 40% or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any person referred to in clause (x) or (y) of this
sentence shall thereafter become the beneficial owner of any additional shares
of Stock or other Voting Securities (other than pursuant to a stock split, stock
dividend, or similar transaction), then a "Change in Control" shall be deemed to
have occurred for purposes of the foregoing clause (i).
(b) A "Combination Transaction" shall be deemed to have occurred if the
Company shall consummate any consolidation or merger of the Company or any
Subsidiary where the stockholders of the Company, immediately prior to the
consolidation or merger, would not, immediately after the consolidation or
merger, beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 75% or more of
either (i) the combined voting power of the Company's then outstanding Voting
Securities or (ii) the then outstanding shares of Stock.
(c) For purposes of determining whether a Change in Control or a
Combination Transaction has occurred, all outstanding options, warrants and
other convertible securities that are then exchangeable or convertible into
Voting Securities of the Company, including, without limitation, all partnership
units of any Subsidiary that are convertible into Voting
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<PAGE> 3
Securities of the Company at the option of the holder or the Company, shall be
deemed to have been converted into the applicable number of shares of Voting
Securities of the Company immediately prior to making such determination.
3. Terminating Event. A "Terminating Event" shall mean any of the
following events:
(a) termination occurring subsequent to a Change of Control or a
Combination Transaction by the Company of the employment of the Executive with
the Company for any reason other than:
(i) the death of the Executive (which shall be referred to as
a "Death Termination") or total disability of the Executive
(total disability meaning the inability of the Executive to
perform his normal required services under this Agreement for
a period of six consecutive months during the term of this
Agreement by reason of the Executive's mental or physical
disability, as determined by the Board in good faith in its
sole discretion) (which shall be referred to as a "Disability
Termination") or the retirement of the Executive;
(ii) if the Executive is convicted of, pleads guilty to, or
confesses to any felony or any act of fraud, misappropriation
or embezzlement which has an immediate and materially adverse
effect on the Company, any Subsidiary or any affiliate of the
Company, as determined by the Board in good faith in its sole
discretion;
(iii) if the Executive engaged in a fraudulent act to the
material damage or prejudice of the Company, any Subsidiary or
any affiliate of the Company or in conduct or activities
materially damaging to the property, business or reputation of
the Company, any Subsidiary or any affiliate of the Company,
all as determined by the Board in good faith in its sole
discretion;
(iv) in the event of any material act or omission by the
Executive involving malfeasance or negligence in the
performance of the Executive's duties to the Company to the
material detriment of the Company, any Subsidiary or any
affiliate of the Company, as determined by the Board in good
faith in its sole discretion, which has not been corrected by
the Executive within thirty (30) days after written notice
from the Company of any such act or omission;
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<PAGE> 4
(v) failure by the Executive to comply in any material respect
with the terms of the Employment Agreement or any written
policies or directives of the Board as determined by the Board
in good faith in its sole discretion, which has not been
corrected by the Executive within thirty (30) days after
written notice from the Company of such failure; or
(vi) a material breach by the Executive of that certain
Noncompetition agreement between the Executive and the Company
dated January 13, 1994 (the "Noncompetition Agreement") as
determined by the Board in good faith in its sole
discretion.
Each of the events described in the foregoing clauses (ii) through (vi) shall be
referred to individually and collectively as a "For Cause Termination."
Notwithstanding any other provision of this Section 3(a), a Terminating Event
shall not be deemed to have occurred pursuant to this Section 3(a) solely as a
result of the Executive being an employee of any direct or indirect successor to
the business or assets of the Company, rather than continuing as an employee of
the Company following a Change in Control or a Combination Transaction. For
purposes of clause (i) of this Section 3(a), "retirement" shall mean termination
of the Executive's employment in accordance with the Company's normal retirement
policy, generally applicable to its salaried employees, as in effect immediately
prior to the Change in Control or a Combination Transaction, or in accordance
with any retirement arrangement established with respect to the Executive with
the Executive's express written consent; or
(b) termination occurring subsequent to a Change in Control or a
Combination Transaction by the Executive of the Executive's employment with the
Company for Good Reason. "Good Reason" shall mean the occurrence of either of
the following, provided that in either case the Board has not corrected such
material reduction described below within thirty (30) days after written notice
by the Executive of such material reduction: (i) there is a material reduction
in the Executive's duties, rights or responsibilities under the Employment
Agreement without his consent, or (ii) there is a material decrease in the
aggregate value of the Executive's compensation and benefits package from the
Company under the Employment Agreement without his consent, other than a
reduction in the Executive's base salary that is permitted under the Employment
Agreement and other than a reduction in compensation and/or benefits affecting a
broad group of employees of the Company as determined by the Board in good faith
in its sole discretion; or
(c) termination occurring subsequent to a Change of Control by the
Executive of the Executive's employment with the Company for any reason, unless
an event that would constitute grounds for a For Cause Termination of the
Executive's employment has occurred.
4. Severance Payment. In the event that either a Terminating Event
described in Section 3(a), 3(b) or 3(c) occurs within twelve (12) months after a
Change in Control, or a
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<PAGE> 5
Terminating Event described in Section 3(a) or 3(b) occurs within twelve (12)
months after a Combination Transaction:
(a) the Company shall pay to the Executive an amount equal to the
difference between (i) three (3) times the Executive's salary and cash bonus
paid (including amounts that were deferred by the Executive but would have been
paid in the absence of such deferral) with respect to the fiscal year
immediately preceding the year in which the Terminating Event occurred and (ii)
any amount of severance or other cash compensation paid to the Executive
pursuant to the Employment Agreement as a result of the termination of the
Executive's employment. Said amount shall be paid in one lump sum payment no
later than thirty-one (31) days following the Date of Termination (as such term
is defined in Section 8(b)); and
(b) the Company shall pay to the Executive all reasonable legal and
arbitration fees and expenses incurred by the Executive in obtaining or
enforcing any right or benefit provided by this Agreement, except in cases
involving frivolous or bad faith litigation.
5. Additional Benefits.
(a) Anything in this Agreement to the contrary notwithstanding, in the
event it shall be determined that any payment or distribution by the Company to
or for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (the
"Severance Payments"), would be subject to the excise tax imposed by Section
4999 of the Internal Revenue Code of 1986, as amended (the "Code"), or any
interest or penalties are incurred by the Executive with respect to such excise
tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") such
that the net amount retained by the Executive, after deduction of any Excise Tax
on the Severance Payments, any Federal, state and local income tax, employment
tax and Excise Tax upon the payment provided by this subsection, and any
interest and/or penalties assessed with respect to such Excise Tax, shall be
equal to the Severance Payments.
(b) Subject to the provisions of Section 5(c), all determinations
required to be made under this Section 5, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by the
Company's independent certified public accounting firm (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the Date of Termination, if applicable, or
at such earlier time as is reasonably requested by the Company or the Executive.
For purposes of determining the amount of the Gross-Up Payment, the Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individuals for the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rates of individual taxation in the state and locality of the
Executive's residence on the Date of Termination, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
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<PAGE> 6
local taxes. The initial Gross-Up Payment, if any, as determined pursuant to
this Section 5(b), shall be paid to the Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, the Company shall
furnish the Executive with an opinion of counsel that failure to report the
Excise Tax on the Executive's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty. Any determination
by the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (an "Underpayment"). In the event that the Company
exhausts its remedies pursuant to Section 5(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred, consistent with the
calculations required to be made hereunder, and any such Underpayment, and any
interest and penalties imposed on the Underpayment and required to be paid by
the Executive in connection with the proceedings described in Section 5(c),
shall be promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the payment by
the Company of the Gross-up Payment. Such notification shall be given as soon as
practicable but no later than 10 business days after the Executive knows of such
claim and shall apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which he
gives such notice to the Company (or such shorter period ending on the date that
any payment of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that it desires
to contest such claim, the Executive shall:
(i) give the Company any information reasonably requested by
the Company relating to such claim,
(ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim; provided, however that the Company shall bear and pay
directly all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or
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<PAGE> 7
income tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 5(c), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issues raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5(c), the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 5(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto). If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 5(c), a determination is made that
the Executive shall not be entitled to any refund with respect to such claim and
the Company does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
6. Term. This Agreement shall take effect on the date first set forth
above and shall terminate upon the earlier of (a) immediately prior to a For
Cause Termination by the Company of the employment of the Executive, (b) the
termination of employment of the Executive by the Company or the Executive for
any reason prior to a Change in Control or a Combination Transaction, (c) the
resignation of the Executive other than for Good Reason after a Combination
Transaction, but prior to a Change in Control, or (d) immediately prior to the
resignation of the Executive after a Change in Control if any event that would
constitute grounds for a For Cause Termination of the Executive's employment has
occurred.
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<PAGE> 8
7. Withholding. All payments made by the Company under this Agreement
shall be net of any tax or other amounts required to be withheld by the Company
under applicable law.
8. Notice and Date of Termination; Disputes; Etc.
(a) Notice of Termination. After a Change in Control or Combination
Transaction and during the term of this Agreement, any purported termination of
the Executive's employment (other than by reason of a Death Termination) shall
be communicated by written Notice of Termination from one party hereto to the
other party hereto in accordance with this Section 8. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and the Date of
Termination.
(b) Date of Termination. "Date of Termination", with respect to any
purported termination of the Executive's employment after a Change in Control or
Combination Transaction and during the term of this Agreement, shall mean (i) if
there is a Disability Termination, thirty (30) days after Notice of Termination
is given (provided that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day period) and
(ii) if the Executive's employment is terminated for any other reason, the date
specified in the Notice of Termination. In the case of a termination by the
Company other than a For Cause Termination (which may be effective immediately),
the Date of Termination shall not be less than thirty (30) days after the Notice
of Termination is given. In the case of a termination by the Executive, the Date
of Termination shall not be less than fifteen (15) days from the date such
Notice of Termination is given. Notwithstanding Section 3(a) of this Agreement,
in the event that the Executive gives a Notice of Termination to the Company,
the Company may unilaterally accelerate the Date of Termination and such
acceleration shall not result in a Terminating Event for purposes of Section
3(a) of this Agreement.
(c) No Mitigation. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Sections
4(a) and (b) hereof. Further, the amount of any payment provided for in this
Agreement shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, but shall be subject to reduction
by certain amounts received under the Employment Agreement as provided in
Section 4(a) hereof.
(d) Settlement and Arbitration of Disputes. Any controversy or claim
arising out of or relating to this Agreement or the breach thereof shall be
settled exclusively by arbitration in accordance with the laws of the State of
North Carolina by three arbitrators, one of whom shall be appointed by the
Company, one by the Executive and the third by the first two arbitrators. If the
first two arbitrators cannot agree on the appointment of a third arbitrator,
then the third arbitrator shall be appointed by the American Arbitration
Association in the City of Charlotte, North Carolina. Such arbitration shall be
conducted in the City of Charlotte, North Carolina
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in accordance with the rules of the American Arbitration Association for
commercial arbitrations, except with respect to the selection of arbitrators
which shall be as provided in this Section 8(d). Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
9. Assignment; Prior Agreements. Neither the Company nor the Executive
may make any assignment of this Agreement or any interest herein, by operation
of law or otherwise, without the prior written consent of the other party, and
without such consent any attempted transfer shall be null and void and of no
effect. This Agreement shall inure to the benefit of and be binding upon the
Company and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns. In the event of the Executive's
death after a Terminating Event but prior to the completion by the Company of
all payments due to him under Section 4(a) and (b) of this Agreement, the
Company shall continue such payments to the Executive's beneficiary designated
in writing to the Company prior to his death (or to his estate, if the Executive
fails to make such designation).
10. Enforceability. If any portion or provision of this Agreement shall
to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
11. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Company, or to the Company at its main office, attention of the Board.
13. Effect on Other Plans. An election by the Executive to resign after
a Change in Control under the provisions of this Agreement shall not be deemed a
voluntary termination of employment by the Executive for the purpose of
interpreting the provisions of any of the Company's benefit plans, programs or
policies. Nothing in this Agreement shall be construed to limit the rights of
the Executive under the Company's benefit plans, programs or policies except as
otherwise provided in Section 5 hereof, and except that the Executive shall have
no rights to any severance benefits under any severance pay plan other than cash
amounts specifically set forth in the Employment Agreement or this Agreement.
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14. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of the Company.
15. Governing Law. This Agreement shall be construed under and be
governed in all respects by the laws of the State of North Carolina.
16. Obligations of Successors. In addition to any obligations imposed
by law upon any successor to the Company, the Company will use its best efforts
to require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business or
assets of the Company to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place.
17. Confidential Information. The Executive shall never use, publish or
disclose in a manner adverse to the Company's interests, any proprietary or
confidential information relating to (a) the business, operations or properties
of the Company or any Subsidiary or other affiliate of the Company, or (b) any
materials, processes, business practices, technology, know-how, research,
programs or other information used in the business of the Company or any
Subsidiary or other affiliate of the Company; provided, however, that no breach
or alleged breach of this Section 17 shall entitle the Company to fail to comply
fully and in a timely manner with any other provision hereof. Nothing in this
Agreement shall preclude the Company from seeking money damages, or equitable
relief by injunction or otherwise without the necessity of proving actual damage
to the Company, for any breach by the Executive hereunder.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company by its duly authorized officer, and by the Executive,
as of the date first above written.
SUMMIT PROPERTIES INC.
By: /s/ Michael G. Malone
----------------------------------
Name: Michael G. Malone
Title: Senior Vice President and General
Counsel
/s/ Raymond V. Jones
-------------------------------------
Raymond V. Jones
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EXHIBIT 10.9.5
EXECUTIVE SEVERANCE AGREEMENT
AGREEMENT made as of this 1st day of April, 1997 by and between Summit
Properties Inc., a Maryland corporation with its principal place of business in
Charlotte, North Carolina (the "Company"), and William B. Hamilton of Charlotte,
North Carolina (the "Executive").
1. Purpose. The Company considers it essential to the best
interests of its stockholders to foster the continuous employment of key
management personnel. The Board of Directors of the Company (the "Board")
recognizes, however, that, as is the case with many publicly held corporations,
the possibility of a Change in Control or a Combination Transaction (as defined
in Section 2 hereof) exists and that such possibility, and the uncertainty and
questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
stockholders. Therefore, the Board has determined that appropriate steps should
be taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control or a Combination
Transaction. Nothing in this Agreement shall be construed as creating an express
or implied contract of employment or any right to be retained in the employ of
the Company. The Company and the Executive have entered into an Employment
Agreement dated December 5, 1996 (as such agreement may be in effect from time
to time, and including any replacement employment agreement, the "Employment
Agreement") that provides for compensation to the Executive under certain
circumstances in the event that the Executive's employment is terminated. This
Agreement is intended to supplement the Employment Agreement without duplicating
payments in the event of the termination of the Executive's employment.
2. Change in Control and Combination Transactions.
(a) A "Change in Control" shall be deemed to have occurred in any
one of the following events:
(i) any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Act") (other than
the Company, Summit Properties Partnership, L.P. (together with any
other subsidiaries of the Company, the "Subsidiaries"), or any trustee,
fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Company or any of its
Subsidiaries), together with all "affiliates" and "associates" (as such
terms are defined in Rule 12b-2 under the Act) of such person, shall
become the "beneficial owner" (as such term is defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing 40% or more of either (A) the combined voting power of the
Company's then outstanding securities having the right to vote in an
election of the Board ("Voting Securities") or (B) the then outstanding
shares of stock of the Company ("Stock"), in either such case other
than as a result of an acquisition of securities directly from the
Company; or
<PAGE> 2
(ii) persons who, as of the date hereof, constitute the Board
(the "Incumbent Directors") cease for any reason, including, without
limitation, as a result of a tender offer, proxy contest, merger or
similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent
to the date hereof whose election or nomination for election was
approved by a vote of at least a majority of the Incumbent Directors
shall, for purposes of this Agreement, be considered an Incumbent
Director; or
(iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the
stockholders of the Company, immediately prior to the consolidation or
merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate fifty
percent (50%) or more of the voting shares of the corporation issuing
cash or securities in the consolidation or merger (or of its ultimate
parent corporation, if any), (B) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated
or arranged by any party as a single plan) of all or substantially all
of the assets of the Company or (C) any plan or proposal for the
liquidation or dissolution of the Company.
Notwithstanding the foregoing, a "Change in Control" shall not be deemed to have
occurred for purposes of the foregoing clause (i) solely as the result of an
acquisition of securities by the Company which, by reducing the number of shares
of Stock or other Voting Securities outstanding, increases (x) the proportionate
number of shares of Stock beneficially owned by any person to 40% or more of the
shares of Stock then outstanding or (y) the proportionate voting power
represented by the Voting Securities beneficially owned by any person to 40% or
more of the combined voting power of all then outstanding Voting Securities;
provided, however, that if any person referred to in clause (x) or (y) of this
sentence shall thereafter become the beneficial owner of any additional shares
of Stock or other Voting Securities (other than pursuant to a stock split, stock
dividend, or similar transaction), then a "Change in Control" shall be deemed to
have occurred for purposes of the foregoing clause (i).
(b) A "Combination Transaction" shall be deemed to have occurred
if the Company shall consummate any consolidation or merger of the Company or
any Subsidiary where the stockholders of the Company, immediately prior to the
consolidation or merger, would not, immediately after the consolidation or
merger, beneficially own (as such term is defined in Rule 13d-3 under the Act),
directly or indirectly, shares representing in the aggregate 75% or more of
either (i) the combined voting power of the Company's then outstanding Voting
Securities or (ii) the then outstanding shares of Stock.
(c) For purposes of determining whether a Change in Control or a
Combination Transaction has occurred, all outstanding options, warrants and
other convertible securities that are then exchangeable or convertible into
Voting Securities of the Company, including, without limitation, all partnership
units of any Subsidiary that are convertible into Voting
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Securities of the Company at the option of the holder or the Company, shall be
deemed to have been converted into the applicable number of shares of Voting
Securities of the Company immediately prior to making such determination.
3. Terminating Event. A "Terminating Event" shall mean any of the
following events:
(a) termination occurring subsequent to a Change of Control or a
Combination Transaction by the Company of the employment of the Executive with
the Company for any reason other than:
(i) the death of the Executive (which shall be referred to as
a "Death Termination") or total disability of the Executive
(total disability meaning the inability of the Executive to
perform his normal required services under this Agreement for
a period of six consecutive months during the term of this
Agreement by reason of the Executive's mental or physical
disability, as determined by the Board in good faith in its
sole discretion) (which shall be referred to as a "Disability
Termination") or the retirement of the Executive;
(ii) if the Executive is convicted of, pleads guilty to, or
confesses to any felony or any act of fraud, misappropriation
or embezzlement which has an immediate and materially adverse
effect on the Company, any Subsidiary or any affiliate of the
Company, as determined by the Board in good faith in its sole
discretion;
(iii) if the Executive engaged in a fraudulent act to the
material damage or prejudice of the Company, any Subsidiary or
any affiliate of the Company or in conduct or activities
materially damaging to the property, business or reputation of
the Company, any Subsidiary or any affiliate of the Company,
all as determined by the Board in good faith in its sole
discretion;
(iv) in the event of any material act or omission by the
Executive involving malfeasance or negligence in the
performance of the Executive's duties to the Company to the
material detriment of the Company, any Subsidiary or any
affiliate of the Company, as determined by the Board in good
faith in its sole discretion, which has not been corrected by
the Executive within thirty (30) days after written notice
from the Company of any such act or omission;
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<PAGE> 4
(v) failure by the Executive to comply in any material respect
with the terms of the Employment Agreement or any written
policies or directives of the Board as determined by the Board
in good faith in its sole discretion, which has not been
corrected by the Executive within thirty (30) days after
written notice from the Company of such failure; or
(vi) a material breach by the Executive of that certain
Noncompetition agreement between the Executive and the Company
dated January 13, 1994 (the "Noncompetition Agreement") as
determined by the Board in good faith in its sole discretion.
Each of the events described in the foregoing clauses (ii) through (vi) shall be
referred to individually and collectively as a "For Cause Termination."
Notwithstanding any other provision of this Section 3(a), a Terminating Event
shall not be deemed to have occurred pursuant to this Section 3(a) solely as a
result of the Executive being an employee of any direct or indirect successor to
the business or assets of the Company, rather than continuing as an employee of
the Company following a Change in Control or a Combination Transaction. For
purposes of clause (i) of this Section 3(a), "retirement" shall mean termination
of the Executive's employment in accordance with the Company's normal retirement
policy, generally applicable to its salaried employees, as in effect immediately
prior to the Change in Control or a Combination Transaction, or in accordance
with any retirement arrangement established with respect to the Executive with
the Executive's express written consent; or
(b) termination occurring subsequent to a Change in Control or a
Combination Transaction by the Executive of the Executive's employment with the
Company for Good Reason. "Good Reason" shall mean the occurrence of either of
the following, provided that in either case the Board has not corrected such
material reduction described below within thirty (30) days after written notice
by the Executive of such material reduction: (i) there is a material reduction
in the Executive's duties, rights or responsibilities under the Employment
Agreement without his consent, or (ii) there is a material decrease in the
aggregate value of the Executive's compensation and benefits package from the
Company under the Employment Agreement without his consent, other than a
reduction in the Executive's base salary that is permitted under the Employment
Agreement and other than a reduction in compensation and/or benefits affecting a
broad group of employees of the Company as determined by the Board in good faith
in its sole discretion; or
(c) termination occurring subsequent to a Change of Control by the
Executive of the Executive's employment with the Company for any reason, unless
an event that would constitute grounds for a For Cause Termination of the
Executive's employment has occurred.
4. Severance Payment. In the event that either a Terminating
Event described in Section 3(a), 3(b) or 3(c) occurs within twelve (12) months
after a Change in Control, or a
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Terminating Event described in Section 3(a) or 3(b) occurs within twelve (12)
months after a Combination Transaction:
(a) the Company shall pay to the Executive an amount equal to the
difference between (i) three (3) times the Executive's salary and cash bonus
paid (including amounts that were deferred by the Executive but would have been
paid in the absence of such deferral) with respect to the fiscal year
immediately preceding the year in which the Terminating Event occurred and (ii)
any amount of severance or other cash compensation paid to the Executive
pursuant to the Employment Agreement as a result of the termination of the
Executive's employment. Said amount shall be paid in one lump sum payment no
later than thirty-one (31) days following the Date of Termination (as such term
is defined in Section 8(b)); and
(b) the Company shall pay to the Executive all reasonable legal
and arbitration fees and expenses incurred by the Executive in obtaining or
enforcing any right or benefit provided by this Agreement, except in cases
involving frivolous or bad faith litigation.
5. Additional Benefits.
(a) Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or distribution by the
Company to or for the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (the "Severance Payments"), would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any interest or penalties are incurred by the Executive with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") such
that the net amount retained by the Executive, after deduction of any Excise Tax
on the Severance Payments, any Federal, state and local income tax, employment
tax and Excise Tax upon the payment provided by this subsection, and any
interest and/or penalties assessed with respect to such Excise Tax, shall be
equal to the Severance Payments.
(b) Subject to the provisions of Section 5(c), all determinations
required to be made under this Section 5, including whether a Gross-Up Payment
is required and the amount of such Gross-Up Payment, shall be made by the
Company's independent certified public accounting firm (the "Accounting Firm"),
which shall provide detailed supporting calculations both to the Company and the
Executive within 15 business days of the Date of Termination, if applicable, or
at such earlier time as is reasonably requested by the Company or the Executive.
For purposes of determining the amount of the Gross-Up Payment, the Executive
shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individuals for the calendar year in which
the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rates of individual taxation in the state and locality of the
Executive's residence on the Date of Termination, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
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<PAGE> 6
local taxes. The initial Gross-Up Payment, if any, as determined pursuant to
this Section 5(b), shall be paid to the Executive within five days of the
receipt of the Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, the Company shall
furnish the Executive with an opinion of counsel that failure to report the
Excise Tax on the Executive's applicable federal income tax return would not
result in the imposition of a negligence or similar penalty. Any determination
by the Accounting Firm shall be binding upon the Company and the Executive. As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (an "Underpayment"). In the event that the Company
exhausts its remedies pursuant to Section 5(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred, consistent with the
calculations required to be made hereunder, and any such Underpayment, and any
interest and penalties imposed on the Underpayment and required to be paid by
the Executive in connection with the proceedings described in Section 5(c),
shall be promptly paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross- up Payment. Such notification shall be
given as soon as practicable but no later than 10 business days after the
Executive knows of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim; provided, however that the Company shall bear and pay
directly all costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or
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<PAGE> 7
income tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 5(c), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issues raised by the Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 5(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company's complying with the requirements of Section 5(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by the
Executive of an amount advanced by the Company pursuant to Section 5(c), a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of 30 days after such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.
6. Term. This Agreement shall take effect on the date first set
forth above and shall terminate upon the earlier of (a) immediately prior to a
For Cause Termination by the Company of the employment of the Executive, (b) the
termination of employment of the Executive by the Company or the Executive for
any reason prior to a Change in Control or a Combination Transaction, (c) the
resignation of the Executive other than for Good Reason after a Combination
Transaction, but prior to a Change in Control, or (d) immediately prior to the
resignation of the Executive after a Change in Control if any event that would
constitute grounds for a For Cause Termination of the Executive's employment has
occurred.
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7. Withholding. All payments made by the Company under this
Agreement shall be net of any tax or other amounts required to be withheld by
the Company under applicable law.
8. Notice and Date of Termination; Disputes; Etc.
(a) Notice of Termination. After a Change in Control or
Combination Transaction and during the term of this Agreement, any purported
termination of the Executive's employment (other than by reason of a Death
Termination) shall be communicated by written Notice of Termination from one
party hereto to the other party hereto in accordance with this Section 8. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and the Date of Termination.
(b) Date of Termination. "Date of Termination", with respect to
any purported termination of the Executive's employment after a Change in
Control or Combination Transaction and during the term of this Agreement, shall
mean (i) if there is a Disability Termination, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period) and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination. In the case of a
termination by the Company other than a For Cause Termination (which may be
effective immediately), the Date of Termination shall not be less than thirty
(30) days after the Notice of Termination is given. In the case of a termination
by the Executive, the Date of Termination shall not be less than fifteen (15)
days from the date such Notice of Termination is given. Notwithstanding Section
3(a) of this Agreement, in the event that the Executive gives a Notice of
Termination to the Company, the Company may unilaterally accelerate the Date of
Termination and such acceleration shall not result in a Terminating Event for
purposes of Section 3(a) of this Agreement.
(c) No Mitigation. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Sections
4(a) and (b) hereof. Further, the amount of any payment provided for in this
Agreement shall not be reduced by any compensation earned by the Executive as
the result of employment by another employer, but shall be subject to reduction
by certain amounts received under the Employment Agreement as provided in
Section 4(a) hereof.
(d) Settlement and Arbitration of Disputes. Any controversy or
claim arising out of or relating to this Agreement or the breach thereof shall
be settled exclusively by arbitration in accordance with the laws of the State
of North Carolina by three arbitrators, one of whom shall be appointed by the
Company, one by the Executive and the third by the first two arbitrators. If the
first two arbitrators cannot agree on the appointment of a third arbitrator,
then the third arbitrator shall be appointed by the American Arbitration
Association in the City of Charlotte, North Carolina. Such arbitration shall be
conducted in the City of Charlotte, North Carolina
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in accordance with the rules of the American Arbitration Association for
commercial arbitrations, except with respect to the selection of arbitrators
which shall be as provided in this Section 8(d). Judgment upon the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof.
9. Assignment; Prior Agreements. Neither the Company nor the
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party, and without such consent any attempted transfer shall be null and void
and of no effect. This Agreement shall inure to the benefit of and be binding
upon the Company and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns. In the event of the Executive's
death after a Terminating Event but prior to the completion by the Company of
all payments due to him under Section 4(a) and (b) of this Agreement, the
Company shall continue such payments to the Executive's beneficiary designated
in writing to the Company prior to his death (or to his estate, if the Executive
fails to make such designation).
10. Enforceability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
11. Waiver. No waiver of any provision hereof shall be effective
unless made in writing and signed by the waiving party. The failure of any party
to require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
12. Notices. Any notices, requests, demands and other
communications provided for by this Agreement shall be sufficient if in writing
and delivered in person or sent by registered or certified mail, postage
prepaid, to the Executive at the last address the Executive has filed in writing
with the Company, or to the Company at its main office, attention of the Board.
13. Effect on Other Plans. An election by the Executive to resign
after a Change in Control under the provisions of this Agreement shall not be
deemed a voluntary termination of employment by the Executive for the purpose of
interpreting the provisions of any of the Company's benefit plans, programs or
policies. Nothing in this Agreement shall be construed to limit the rights of
the Executive under the Company's benefit plans, programs or policies except as
otherwise provided in Section 5 hereof, and except that the Executive shall have
no rights to any severance benefits under any severance pay plan other than cash
amounts specifically set forth in the Employment Agreement or this Agreement.
9
<PAGE> 10
14. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of the Company.
15. Governing Law. This Agreement shall be construed under and be
governed in all respects by the laws of the State of North Carolina.
16. Obligations of Successors. In addition to any obligations
imposed by law upon any successor to the Company, the Company will use its best
efforts to require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
or assets of the Company to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that the Company would be required to
perform if no such succession had taken place.
17. Confidential Information. The Executive shall never use,
publish or disclose in a manner adverse to the Company's interests, any
proprietary or confidential information relating to (a) the business, operations
or properties of the Company or any Subsidiary or other affiliate of the
Company, or (b) any materials, processes, business practices, technology,
know-how, research, programs or other information used in the business of the
Company or any Subsidiary or other affiliate of the Company; provided, however,
that no breach or alleged breach of this Section 17 shall entitle the Company to
fail to comply fully and in a timely manner with any other provision hereof.
Nothing in this Agreement shall preclude the Company from seeking money damages,
or equitable relief by injunction or otherwise without the necessity of proving
actual damage to the Company, for any breach by the Executive hereunder.
IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Company by its duly authorized officer, and by the Executive,
as of the date first above written.
SUMMIT PROPERTIES INC.
By: /s/ Michael G. Malone
---------------------------------
Name: Michael G. Malone
Title: Senior Vice President
and General Counsel
/s/ William B. Hamilton
---------------------------------
William B. Hamilton
10
<PAGE> 1
EXHIBIT 10.11.3
$30,000,000.00 PROMISSORY NOTE
$30,000,000.00 Charlotte, North Carolina December 21, 1995
For value received, the undersigned, whether one or more in number and
if more than one, then jointly and severally, herein called "Borrower,"
promise(s) to pay to the order of THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY, a Wisconsin corporation, 720 E. Wisconsin Avenue, Milwaukee, WI 53202,
herein called "Lender," (or, at the option of the legal holder of this note (the
"Note"), at such other place as Lender shall designate in writing), in coin or
currency which, at the time or times of payment, is legal tender for public and
private debts in the United states, the principal sum of THIRTY MILLION DOLLARS
($30,000,000.00) or so much thereof as shall have been advanced from time to
time plus interest on the outstanding principal balance at the rate of and
payable as follows:
Interest shall accrue from the date of advance until maturity
at the rate of seven and seventy-one hundredths percent (7.71%) per
annum (the "Interest Rate").
Accrued interest only shall be paid on the fifteenth day of
the month following the date of advance (the "Initial Amortization
Date") and on the fifteenth day of each month thereafter until February
15, 1996. Beginning on the fifteenth day of March, 1996 and on the
fifteenth day of each and every month thereafter until the Maturity
Date (as hereinafter defined), installments of principal and interest
shall be paid in the amount of $225,811.00. All installments to be
applied first in payment of interest and the remainder of each
installment to be applied on principal. The entire unpaid principal
balance plus accrued interest thereon shall be due and payable on
December 15, 2005 (the "Maturity Date").
Notwithstanding the above, upon written request from Borrower to Lender
given not less than 180 days prior to the Maturity Date, Borrower has the option
to extend the Maturity Date for an additional two (2) year term at an interest
rate equal to 300 basis points (3%) over the then ten (10) year treasury rate
"on the run" in effect on a date which is 180 days prior to the original
Maturity Date. During the extended term, if any, the Note may be prepaid at any
time without Prepayment Privilege Fee (defined below), upon not less than 90
days prior written notice.
This Note may not be prepaid in part or in full except: (a) if the
Maturity Date of the Note is extended as set forth above; (b) during the last
thirty (30) days before the Maturity Date, provided the Borrower is note in
default under any provision contained in the Loan Documents (as defined in
Master Lien Instrument (defined below)); or (c) at any time during the initial
term of the Senior Note (defined below) when the Senior Note is prepayable or at
the initial maturity date of the Senior Note, or, in the event that the Senior
Note is extended, at any time during the extended term of the Senior Note. In
the case of (b), allowed prepayments shall be at par, without Prepayment
Privilege Fee. In the case of (c), the Note shall be
<PAGE> 2
prepayable only if the Senior Note is paid in full, and Borrower shall have the
right, upon thirty days written notice, of paying the Note in full with a
Prepayment Privilege Fee. In addition, prepayment(s) prior to Maturity Date or
during any period when the Maturity Date has been extended due to (i)
condemnation or (ii) insurance loss proceeds not applied to restoration of the
property securing the Note shall be without a Prepayment Privilege Fee.
In the event of a default under this Note, the Senior Note, or the
Master Lien Instrument followed by acceleration of the whole indebtedness,
payment of the amount necessary to satisfy the entire indebtedness evidenced by
this Note will constitute an evasion of the prepayment prohibition hereunder and
be deemed to be a voluntary prepayment hereof and such payment will, to the
extent permitted by law, include a fee in an amount equal to the greater of
Yield Maintenance (as defined below) or 2% of the outstanding principal balance
of this Note to compensate Lender for its loss of contractual benefit. This fee,
the "Prepayment Privilege Fee," represents consideration to Lender for loss of
yield and reinvestment costs.
As used herein, "Senior Note" means that certain promissory note dated
February 15, 1994, in the original principal amount of $125,000,000.00 made by
Borrower and payable to Lender.
As used herein, "Yield Maintenance" means the amount, if any, by which
(i) the present value of the Then Remaining Payments (as hereinafter defined)
calculated using a periodic discount rate (corresponding to the payment
frequency under this Note) which , when compounded for such number of payment
periods in a year, equals the per annum effective yield of the Most Recently
Auctioned United States Treasury Obligation (as hereinafter defined) having a
maturity date equal to the Maturity Date (or, if there is no such equal maturity
date, then the linearly interpolated per annum effective yield of the two Most
Recently Auctioned United States Treasury Obligations having maturity dates most
nearly equivalent to the Maturity Date) as reported by the Wall Street Journal
five business days prior to the date of prepayment exceeds (ii) the outstanding
principal balance of this Note (exclusive of all accrued interest).
If such United States Treasury obligation yield shall not be reported
as of such time or the yields reported as of such time shall not be
ascertainable, then the periodic discount rate shall be equal to the Treasury
Constant Maturity Series yields reported, for the latest day for which such
yields shall have been so reported, as of five business days preceding the
prepayment date, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded United States Treasury
obligations having a constant maturity most nearly equivalent to the Maturity
Date.
As used herein, "Then Remaining Payments" means payments in such amount
and at such times as would have been payable subsequent to the date of such
prepayment in accordance with the terms of this Note.
2
<PAGE> 3
As used herein, "Most Recently Auctioned United States Treasury
Obligations" shall mean the bonds and notes with maturities of 30 years, 10
years, 7 years, 5 years, 4 years, 3 years and 2 years which, as of the date the
Prepayment Privilege Fee is calculated, were most recently auctioned by the
United States Treasury.
Borrower acknowledges and agrees that the Interest Rate hereunder shall
be increased if certain financial statements and other reports are not furnished
to Lender, all as described in more detail in the provision of the Master Lien
Instrument entitled "Financial Statements".
This Note is secured by a Master Lien Instrument dated February 15,
1994 as amended by a First Amendment to master Lien Instrument of date even
herewith (the "Master Lien Instrument") executed by SUMMIT PROPERTIES
PARTNERSHIP, L.P. to THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY OR TRUSTEES
FOR THE BENEFIT THEREOF encumbering the following properties:
(i) the "Summit Perico Property," formerly known as the "Bristol
Bay Property" in Bradenton, Manatee County, Florida;
(ii) the "Summit Heron's Run Property," formerly known as the
"Heron's Run Property" in Sarasota, Sarasota County, Florida;
(iii) the "Summit Del Ray Property," formerly known as the "Palm
Cove Property" in Delray Beach, Palm Beach County, Florida;
(iv) the "Summit Palm Lake Property," formerly known as the "Palm
Lake Property" in West Palm Beach, Palm Beach County, Florida;
(v) the "Summit Providence Property," formerly known as the
"Providence Place Property" in Brandon, Hillsborough County,
Florida;
(vi) the "Summit Blue Ash Property," formerly known as "Regents
Square Property" in Blue Ash, Hamilton County, Ohio;
(vii) the "Summit Glen Property," formerly known as the "Asbury Glen
Property" in Atlanta, Fulton County, Georgia;
(viii) the "Summit Springs Property," formerly known as the "Asbury
Park Property" in Norcross, Gwinnett County, Georgia;
(ix) the "Summit Village Property," formerly known as the "Asbury
Village Property" in Marietta, Cobb County, Georgia;
(x) the "Summit Meadow Property," formerly known as the "Ashton
Meadow Property" in Columbia, Howard County, Maryland;
3
<PAGE> 4
(xi) the "Summit Windsor Property," formerly known as the "Windsor
Farm Property" in Frederick, Frederick County, Maryland;
(xii) the "Summit Charleston Property," formerly known as the
"Charleston Place Property" in Charlotte, Mecklenburg County,
North Carolina;
(xiii) the "Summit Norcroft property," formerly known as the
"Norcroft Property" in Charlotte, Mecklenburg County, North
Carolina;
(xiv) the "Summit Square Property," formerly known as the "Summit
Property" in Durham, Durham County, North Carolina;
(xv) the "Summit Waterford Property," formerly known as the
"Waterford Property" in Midlothian, Chesterfield County,
Virginia;
The Master Lien Instrument encumbers the Summit Perico Property, the
Summit Heron's Run Property, the Summit Del Ray Property, the Summit Palm Lake
Property, the Summit Providence Property as a Mortgage and Security Agreement
and Financing Statement; the Summit Blue Ash Property as an Open-End Mortgage
and Security Agreement and Financing Statement; the Summit Glen Property, the
Summit Springs Property, the Summit Village Property as a Deed to Secure a Debt,
Security Agreement and Financing Statement; the Summit Meadow Property, the
Summit Windsor Property, the Summit Charleston Property, the Summit Norcroft
Property, the Summit Square Property, and the Summit Waterford property as a
Deed of Trust, Security Agreement and Financing Statement. Property and
Properties as used herein shall have the meaning ascribed to them in the Master
Lien Instrument.
Upon the occurrence of an Event of Default (as defined in the Master
Lien Instrument), the whole unpaid principal and accrued interest shall, at the
option of Lender, to be exercised at any time, become due and payable at once
without notice, notice of the exercise of, and the intent to exercise, such
notice being hereby expressly waived.
All persons or corporations now or at any time liable, whether
primarily or secondarily, for payment of indebtedness hereby evidenced, for
themselves, their heirs, legal representatives, successors and assigns,
respectively, expressly waive presentment for payment, notice of dishonor,
protest, notice of protest, and diligence in collection, and consent that the
time of said payments or any part thereof may be extended by Lender and further
consent that the real or collateral security or any part thereof may be released
by lender, without in any way modifying, altering, releasing, affecting, or
limiting their respective liability or the lien of said Master Lien Instrument,
and agree to pay reasonable attorney's fees actually incurred (based on the
actual number of hours worked by legal counsel and paralegals multiplied by
their usual and customary hourly rate then in effect) and actual out of pocket
expenses of collection in case this Note is placed in the hands of an attorney
for collection or suit or suits are brought thereon.
4
<PAGE> 5
Any principal, interest or other amounts payable under this Note, the
Master Lien Instrument or other instruments securing payment hereof, not paid
when due (without regard to any notice and/or cure provisions contained herein
or in any of the other loan documents executed in connection with this Note),
including principal becoming due by reason of acceleration by Lender of the
entire unpaid balance of this Note, shall bear interest from the due date
thereof until paid at the Default Rate, as hereinafter defined. The term
"Default Rate" is defined as the lower of a rate equal to the interest rate in
effect at the time of the default as herein provided plus 5% per annum or the
maximum rate permitted by law.
No provision of this Note shall require the payment or permit the
collection of interest, including any fees paid which are construed under
applicable law to be interest, in excess of the maximum permitted by law. If any
such excess interest is collected or herein provided for, or shall be
adjudicated to have been collected or be so provided for herein, the provisions
of this paragraph shall govern, and Borrower shall not be obligated to pay the
amount of such interest to the extent that it is in excess of the amount
permitted by law and any such excess collected shall, at the option of Lender,
unless otherwise required by applicable law, be immediately refunded to Borrower
or credited on the principal of this Note immediately upon Lender's awareness of
the collection of such excess.
Notwithstanding any provision contained herein or in the Master Lien
Instrument to the contrary, if Lender shall take action to enforce the
collection of the indebtedness evidenced hereby or secured by the Master Lien
Instrument (collectively, the "Indebtedness"), its recourse shall, except as
provided below, be limited to the proceeds from the sale of the Properties and
the proceeds realized by Lender in exercising its rights and remedies (i) under
the Absolute Assignment (as defined in the Master Lien Instrument), (ii) under
the Guarantee of Recourse Obligations of even date herewith executed by Summit
Properties Partnership, L.P. and Summit Properties Inc. (the "Guarantor") for
the benefit of Lender and under other separate guarantees, if any, (iii) under
any of the other Loan Documents (as defined in the Master Lien Instrument) and
(iv) in any other collateral securing the Indebtedness. If such proceeds are
insufficient to pay the Indebtedness, lender will never institute any action,
suit, claim or demand in law or in equity against Borrower or its partners for
or on account of such deficiency; provided, however, that the provisions
contained in this paragraph shall not in any way affect or impair the validity
or enforceability of the Indebtedness or the Master Lien Instrument; and
provided, further, that the provisions contained in this paragraph shall not
prevent Lender from seeking and obtaining a judgment against Borrower or any
general partner of Borrower to the extent of any loss or damage to Lender
resulting from any or all of the Recourse Obligations, and Borrower and any
general partner of Borrower shall be personally liable, for the Recourse
Obligations. As used herein, the term "Recourse Obligations" means
(a) rents and other income from the Properties actually collected
by Borrower from and after the date of any default under the
Loan Documents remaining uncured on the date of the
foreclosure sale of any of the Properties pursuant to the
5
<PAGE> 6
Master Lien Instrument or the conveyance of any of the
Properties to Lender in lieu of foreclosure.
(b) amounts necessary to repair any damage to the Properties
caused by the intentional acts or omissions of Borrower or its
agents,
(c) insurance loss and condemnation proceeds actually collected by
Borrower but not applied in accordance with any agreement
between Borrower and Lender as to their application,
(d) amounts necessary to pay costs of investigation and clean-up
of hazardous materials and toxic substances on or affecting
the Properties, including groundwater or soils contamination,
provided, the liability of Borrower and Guarantor shall be
limited to claims arising by reason of events which occurred
prior to resale of any of the Properties by Lender, except for
expenditures due to overt actions of Lender or its agents
while in possession, and provided further, that Lender shall
take no action against Borrower or any Guarantor with respect
to such matters as long as Borrower or any Guarantor is
proceeding to remediate in such manner as is recommended by
applicable governmental authorities, or is proceeding to
contest any requirement imposed with respect to such violation
in good faith and in a manner that does not expose Lender, in
its reasonable judgment, to liability for such matters,
(e) damages suffered by any Lender as a result of fraud or willful
misrepresentation in connection with the Indebtedness by
Borrower or any other person or entity acting on behalf of
Borrower,
(f) amounts necessary to pay real estate taxes, special
assessments and insurance premiums with respect to the
Properties (accrued through the date Lender or its assigns
acquires any of the Properties) either paid by lender and not
reimbursed prior to, or remaining due or delinquent on, either
(i) the later of (A) the date of a foreclosure sale of any of
the properties pursuant to the Master Lien Instrument or (B)
the date on which Borrower's statutory right of redemption, if
any, shall expire or be waived or (ii) the date of the
conveyance of any of the Properties to lender in lieu of
foreclosure, and
(g) amounts necessary to correct or repair any deficiencies or
defects in the design and construction of the Improvements (as
described in the Loan Commitment dated December 1, 1995 by and
between The Northwestern Mutual Life Insurance Company and
Summit Properties partnership, L.P.), whether now known or
unknown, in Lender's reasonable discretion, which, by way of
illustration, would include but not be limited to deficiencies
or defects arising from: (A) any legal requirements imposed by
the federal Fair Housing Act, (B) the use of Fire-Retardant
Treated plywood ("FRT plywood") in the construction
6
<PAGE> 7
of the Improvements, or (C) the use of polybutylene piping in
the construction of the Improvements.
Time is of the essence with regard to each provision of this
instrument. This instrument shall be interpreted, construed, and enforced in
accordance with the laws of the State of North Carolina. If any provision of
this instrument shall be invalid or unenforceable to any extent, the remainder
of this instrument and the application of such provisions to other circumstances
shall not be affected thereby and shall be enforced to the greatest extent
permitted by law.
IN WITNESS WHEREOF, this instrument has been executed by the Borrower
as of the day and year first above written, under seal.
SUMMIT PROPERTIES PARTNERSHIP, L.P.,
a Delaware limited partnership
By: Summit Properties Inc., a Maryland
corporation, general partner
By: /s/ Michael G. Malone
-----------------------------
Attest: /s/ Judith M. Roller
-------------------------
(corporate seal)
Florida Documentary Stamps on this Note in the amount of $38,850.00 have been
paid and affixed to the Master Lien Instrument, as amended, securing this Note
and cancelled.
7
<PAGE> 8
LN-331899 / Georgia
Counterpart 11 of 13 for
recording in Fulton
County, Georgia
RECORDING REQUESTED BY
- -------------------------------------
SPACE ABOVE THIS LINE FOR RECORDER'S USE
- --------------------------------------------------------------------------------
FIRST AMENDMENT TO MASTER LIEN INSTRUMENT
(Georgia Cover Sheet)
This instrument was prepared by Robert J. Berdan, Attorney, for The Northwestern
Mutual Life Insurance Company, 720 E. Wisconsin Avenue, Milwaukee, WI 53202.
FIRST AMENDMENT TO
DEED TO SECURE A DEBT, SECURITY AGREEMENT AND FINANCING STATEMENT
from
Summit Properties Partnership, L.P.
Grantor
to
The Northwestern Mutual Life Insurance Company, Trustee
for the benefit of
The Northwestern Mutual Life Insurance Company
Grantee
- --------------------------------------------------------------------------------
MULTI-STATE LEGEND
The First Amendment to Master Lien Instrument has been executed in 13
counterparts for recordation in 13 counties in six states and is collateral
security for a Promissory Note dated as of February 15, 1994, in the Original
Principal Amount of $125,000,000.00, and a Promissory Note of date even herewith
in the Original Principal Amount of $30,000,000.00. The fair market value
attributed to the three properties located in Cobb County, Fulton County and
Gwinnett County in the State of Georgia is as set forth in the Intangibles Tax
Affidavit which allocates the indebtedness, for intangible tax purposes, between
Georgia and the other states and among Cobb, Fulton and Gwinnett Counties. This
First Amendment to Master Lien Instrument amends the Master Lien Instrument
dated February 15, 1994 and recorded February 18, 1994 in the Fulton County,
Georgia Clerk's Office in Book 17822, page 069; recorded February 21, 1994 in
the Gwinnett County, Georgia Clerk's Office in Book 10025, page 1 as Document
No. 025858; and recorded February 18, 1994 in the Cobb County, Georgia Clerk's
Office in Book 8042, page 0403.
8
<PAGE> 9
Investment No. A-331899
Georgia, Fulton County
RECORDING REQUESTED BY
- -------------------------------------
SPACE ABOVE THIS LINE FOR RECORDER'S USE
- --------------------------------------------------------------------------------
This instrument was prepared by Robert J. Berdan, Attorney, for The Northwestern
Mutual Life Insurance Company, 720 East Wisconsin Avenue, Milwaukee, WI 53202.
FIRST AMENDMENT TO
ABSOLUTE ASSIGNMENT OF LEASES AND RENTS
(With License Back)
THIS FIRST AMENDMENT TO ABSOLUTE ASSIGNMENT OF LEASES AND RENTS ("First
Amendment") is made as of the 21st day of December, 1995, by and between SUMMIT
PROPERTIES PARTNERSHIP, L.P., a Delaware limited partnership, c/o Summit
Properties Inc., Suite 800, 212 South Tryon Street, Charlotte, North Carolina
28281, (herein called "Borrower") and THE NORTHWESTERN MUTUAL LIFE INSURANCE
COMPANY, a Wisconsin corporation, whole mailing address is c/o Real Estate
Department, 720 East Wisconsin Avenue, Milwaukee, Wisconsin 53202, (herein
called "Lender").
WHEREAS, Lender is the owner of a certain Promissory Note (the "Note")
dated February 15, 1994 in the original principal amount of $125,000,000.00 made
by Borrower and payable to Lender, secured by that certain Master Lien
Instrument covering certain real and personal property located at the properties
described in Exhibits "A-1" to "A-15" attached hereto and made a part hereof;
and
WHEREAS, in connection with making the loan evidenced by the Note,
Borrower and Lender entered into that certain Absolute Assignment of Leases and
Rents (the "Absolute Assignment") dated as of February 15, 1994 and recorded
February 18, 1994 in the Fulton County, Georgia Clerk's Office in Book 17822,
page 137; and
WHEREAS, on or about this date, Lender is making a second loan to
Borrower as evidenced by a promissory note of date even with this First
Amendment in the original principal amount of thirty million dollars
($30,000,000.00) (the "$30,000,000.00 Note") executed by Borrower in favor of
Lender; and
WHEREAS, as a condition to making such loan, Lender has required that
the Absolute Assignment be amended as provided herein;
9
<PAGE> 1
PROMISSORY NOTE AND SECURITY AGREEMENT
$42,258.38 January 28, 1998
FOR VALUE RECEIVED, Michael L. Schwarz who resides at 2039 Coniston
Place, Charlotte, N.C. (hereinafter referred to as the "Employee") hereby
promises to pay to the order of Summit Properties Inc., a Maryland corporation
with its principal place of business at 212 South Tryon Street, Suite 500,
Charlotte, North Carolina (hereinafter referred to as the "Company"), the
principal amount of $42,258.38 together with interest thereon as provided below
subject to the terms and conditions set forth herein.
1. Purpose and Authority. This Promissory Note and Security Agreement
(the "Note") is entered into for the purpose of financing the Employee's annual
tax liability or other expenses related to the vesting of shares of common
stock, par value $0.01 per share, of the Company ("Common Stock") which
constitute a portion of a Restricted Stock Award granted to Employee under the
Company's 1994 Stock Option and Incentive Plan (the "1994 Plan") pursuant to and
subject to the terms and conditions of (i) the Company's Statement of Company
Policy on Loans to Executive Officers and Qualified Employees to Purchase the
Company Stock as adopted by the Board of Directors of the Company on September
8, 1997, as amended from time to time, and (ii) the Company's 1994 Plan, as
amended from time to time.
2. Security. The Employee hereby grants the Company a security interest
in any and all shares of Common Stock purchased by the Employee with the
proceeds of this Note (hereinafter referred to as the "Collateral Stock") and in
any and all distributions and dividends which may from time to time be, paid or
payable on the Collateral Stock (each, a "Distribution"). Employee agrees to
take all such actions and execute all such documents as may from time to time be
reasonably requested by the Company to perfect and maintain the validity and
priority of any security interest granted to the Company pursuant to this Note.
Employee also agrees that a carbon, photographic or other reproduction of this
Promissory Note and Security Agreement may be filed as a financing statement to
the extent that the Company determines that such filing is necessary for the
Company to establish or maintain its security interest in the Collateral Stock.
The Employee shall cause the Collateral Stock to be delivered to the Company and
the Company may retain possession of the Collateral Stock until such time as the
Note has been paid in full.
3. Payment. All Distributions received by the Company in cash shall be
applied toward repayment of this Note. Each such payment shall first be applied
to the payment of interest accrued as of the date of such payment and the
remainder thereof, if any, shall then be applied to the payment of outstanding
principal. The Note will bear interest at the rate
<PAGE> 2
provided in Section 4 hereof. The entire principal balance and all accrued and
unpaid interest and other charges as may be due hereunder shall be due and
payable on or before the tenth anniversary of the date of this Note (the
"Maturity Date").
4. Interest. Interest on this Note will be computed on a simple
interest basis and will accrue on the unpaid principal balance due under the
Note until maturity, whether by reason of Default (as defined below) and
acceleration, lapse of time or otherwise ("Maturity"), at the rate of Six and
13/100 percent (6.13%) per annum. Prior to Maturity interest shall be payable
solely from Distributions.
5. Prepayment. The Employee may prepay the whole or any part of the
principal amount of this Note from time to time without premium or penalty.
6. Default. (a) The occurrence of any of the following events shall
constitute a Default under this Note:
(i) the failure by the Employee to deliver or cause to be
delivered the Collateral Stock to the Company within three business
days after the purchase of any Collateral Stock;
(ii) retention by the Employee of any Distribution, which
retention continues for a period of ten (10) days;
(iii) the failure by the Employee to pay the entire
outstanding balance of this Note and all accrued interest within one
hundred and twenty (120) days after termination of the Employee's
employment with the Company; or
(iv) the failure by the Employee to pay the entire outstanding
balance of this Note and all accrued interest on or before the Maturity
Date.
(b) Upon the occurrence of a Default under this Note, the
outstanding principal balance hereof, together with all reasonable costs of
collection and/or enforcement of the Note, including reasonable attorney's fees,
shall at the option of the Company become immediately due and payable.
(c) If the Employee is in Default hereunder, the Company may,
except as otherwise provided herein, exercise the rights and remedies accorded a
secured party by the Uniform Commercial Code as enacted in the State of
Maryland.
7. Personal Liability. Except in the case of fraud, willful
misrepresentation or retention of a Distribution by Employee, the Company agrees
that the Employee's personal liability on this Note shall be limited to Ten
Thousand Five Hundred Sixty Four and 60/100 Dollars ($10,564.60) due hereunder
for any deficiency which may arise upon a foreclosure and
2
<PAGE> 3
sale or other disposition of the Collateral Stock; provided that, this provision
shall not diminish in any way the powers of the Company to foreclose on the
Collateral Stock and to apply the full value of the Collateral Stock and all
related Distributions to the amount outstanding under this Note in the event of
a Default.
8. Modification. Neither this Note nor any provision hereof may be
modified, altered, or amended in any manner or form except by an agreement in
writing, executed by a duly authorized officer of the Company and the Employee,
which writing shall make specific reference hereto.
9. Transfer by Employee. Employee will not sell, assign, transfer or
otherwise dispose of, directly or indirectly, nor grant any option with respect
to, or pledge or grant any security interest in or otherwise encumber any of the
Collateral Stock or any interest therein, except for the security interest
provided for in this Note.
10. Severability. If for any reason any provision or provisions hereof
are determined to be invalid, unenforceable or contrary to any existing or
future law, such invalidity or unenforcability shall not impair the operation or
affect those portions of this Note which are valid.
11. Usury, etc. All agreements between the Employee and the Company are
hereby expressly limited so that in no contingency or event whatsoever, whether
by reason Maturity of the indebtedness or otherwise, shall the amount paid or
agreed to be paid to the holder for the use, forbearance or detention of the
indebtedness evidenced hereby exceed the maximum amount which the holder is
permitted to receive under applicable law. If, from any circumstances
whatsoever, fulfillment of any provision of this Note, at the time performance
of such provision shall be due, shall involve payments exceeding such amount,
then the obligation to be fulfilled shall automatically be reduced to the limit
of such maximum amount, and if from any circumstances the holder should ever
receive as interest an amount which would exceed such maximum amount, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. As
used herein, the term "applicable law" shall mean the law in effect as of the
date hereof; provided, however, that in the event that there is a change in the
law which results in a higher permissible rate of interest, then this Note shall
be governed by such new law as of its effective date. This provision shall
control every other provision of this Note.
12. Valuation: Manner of Disposition. Employee acknowledges and agrees
that the Company may not be able to effect a public sale of the Collateral Stock
and, accordingly, agrees that in the event of any sale, collection, realization
or other disposition of or upon the Collateral Stock by the Company, in lieu of
such public sale, the Company may transfer all or any portion of the Collateral
Stock to itself and apply the value of such shares (at a price per share equal
to the average of the daily high and low sales prices, computed to three decimal
places, of the Company's stock as reported on the New York Stock Exchange (the
"NYSE")
3
<PAGE> 4
for the ten (10) days on which the NYSE is open and for which trades in the
Company stock are reported immediately preceding the date of such action by the
Company or, if one or more of such days is not a day on which the NYSE is open
or the Company's stock is not traded on the NYSE for the ten (10) days
immediately preceding said action for which the trades are reported) to the
amounts due under or in connection with this Note.
13. Governing Law. The execution, delivery and performance of this Note
shall be governed by, construed, and enforced in accordance with the laws of the
State of Maryland.
14. Waivers. The failure of the Company at any time to exercise any
option or right hereunder shall not constitute a waiver of the Company's right
to exercise such option or right at any other time.
[Remainder of page intentionally left blank]
4
<PAGE> 5
IN WITNESS WHEREOF, this Note has been executed and delivered as a
sealed instrument as of the date first set forth above.
/s/ Michael L. Schwarz
-------------------------
Michael L. Schwarz
Executed, sealed and
delivered in the
presence of:
/s/ Michael G. Malone
- ----------------------------------
Name of Witness: Michael G. Malone
5
<PAGE> 1
PROMISSORY NOTE AND SECURITY AGREEMENT
$58,417.88 January 28, 1998
FOR VALUE RECEIVED, William B. Hamilton who resides at 18605 Reflection
Rock Circle, Davidson, N.C. (hereinafter referred to as the "Employee") hereby
promises to pay to the order of Summit Properties Inc., a Maryland corporation
with its principal place of business at 212 South Tryon Street, Suite 500,
Charlotte, North Carolina (hereinafter referred to as the "Company"), the
principal amount of $58,417.88 together with interest thereon as provided below
subject to the terms and conditions set forth herein.
1. Purpose and Authority. This Promissory Note and Security Agreement
(the "Note") is entered into for the purpose of financing the Employee's annual
tax liability or other expenses related to the vesting of shares of common
stock, par value $0.01 per share, of the Company ("Common Stock") which
constitute a portion of a Restricted Stock Award granted to Employee under the
Company's 1994 Stock Option and Incentive Plan (the "1994 Plan") pursuant to and
subject to the terms and conditions of (i) the Company's Statement of Company
Policy on Loans to Executive Officers and Qualified Employees to Purchase the
Company Stock as adopted by the Board of Directors of the Company on September
8, 1997, as amended from time to time, and (ii) the Company's 1994 Plan, as
amended from time to time.
2. Security. The Employee hereby grants the Company a security interest
in any and all shares of Common Stock purchased by the Employee with the
proceeds of this Note (hereinafter referred to as the "Collateral Stock") and in
any and all distributions and dividends which may from time to time be, paid or
payable on the Collateral Stock (each, a "Distribution"). Employee agrees to
take all such actions and execute all such documents as may from time to time be
reasonably requested by the Company to perfect and maintain the validity and
priority of any security interest granted to the Company pursuant to this Note.
Employee also agrees that a carbon, photographic or other reproduction of this
Promissory Note and Security Agreement may be filed as a financing statement to
the extent that the Company determines that such filing is necessary for the
Company to establish or maintain its security interest in the Collateral Stock.
The Employee shall cause the Collateral Stock to be delivered to the Company and
the Company may retain possession of the Collateral Stock until such time as the
Note has been paid in full.
3. Payment. All Distributions received by the Company in cash shall be
applied toward repayment of this Note. Each such payment shall first be applied
to the payment of interest accrued as of the date of such payment and the
remainder thereof, if any, shall then be applied to the payment of outstanding
principal. The Note will bear interest at the rate
<PAGE> 2
provided in Section 4 hereof. The entire principal balance and all accrued and
unpaid interest and other charges as may be due hereunder shall be due and
payable on or before the tenth anniversary of the date of this Note (the
"Maturity Date").
4. Interest. Interest on this Note will be computed on a simple
interest basis and will accrue on the unpaid principal balance due under the
Note until maturity, whether by reason of Default (as defined below) and
acceleration, lapse of time or otherwise ("Maturity"), at the rate of Six and
13/100 percent (6.13%) per annum. Prior to Maturity interest shall be payable
solely from Distributions.
5. Prepayment. The Employee may prepay the whole or any part of the
principal amount of this Note from time to time without premium or penalty.
6. Default. (a) The occurrence of any of the following events shall
constitute a Default under this Note:
(i) the failure by the Employee to deliver or cause to be
delivered the Collateral Stock to the Company within three business
days after the purchase of any Collateral Stock;
(ii) retention by the Employee of any Distribution, which
retention continues for a period of ten (10) days;
(iii) the failure by the Employee to pay the entire
outstanding balance of this Note and all accrued interest within one
hundred and twenty (120) days after termination of the Employee's
employment with the Company; or
(iv) the failure by the Employee to pay the entire outstanding
balance of this Note and all accrued interest on or before the Maturity
Date.
(b) Upon the occurrence of a Default under this Note, the
outstanding principal balance hereof, together with all reasonable costs of
collection and/or enforcement of the Note, including reasonable attorney's fees,
shall at the option of the Company become immediately due and payable.
(c) If the Employee is in Default hereunder, the Company may,
except as otherwise provided herein, exercise the rights and remedies accorded a
secured party by the Uniform Commercial Code as enacted in the State of
Maryland.
7. Personal Liability. Except in the case of fraud, willful
misrepresentation or retention of a Distribution by Employee, the Company agrees
that the Employee's personal liability on this Note shall be limited to Fourteen
Thousand Six Hundred Four and 47/100 Dollars ($14,604.47) due hereunder for any
deficiency which may arise upon a foreclosure and
2
<PAGE> 3
sale or other disposition of the Collateral Stock; provided that, this provision
shall not diminish in any way the powers of the Company to foreclose on the
Collateral Stock and to apply the full value of the Collateral Stock and all
related Distributions to the amount outstanding under this Note in the event of
a Default.
8. Modification. Neither this Note nor any provision hereof may be
modified, altered, or amended in any manner or form except by an agreement in
writing, executed by a duly authorized officer of the Company and the Employee,
which writing shall make specific reference hereto.
9. Transfer by Employee. Employee will not sell, assign, transfer or
otherwise dispose of, directly or indirectly, nor grant any option with respect
to, or pledge or grant any security interest in or otherwise encumber any of the
Collateral Stock or any interest therein, except for the security interest
provided for in this Note.
10. Severability. If for any reason any provision or provisions hereof
are determined to be invalid, unenforceable or contrary to any existing or
future law, such invalidity or unenforcability shall not impair the operation or
affect those portions of this Note which are valid.
11. Usury, etc. All agreements between the Employee and the Company are
hereby expressly limited so that in no contingency or event whatsoever, whether
by reason Maturity of the indebtedness or otherwise, shall the amount paid or
agreed to be paid to the holder for the use, forbearance or detention of the
indebtedness evidenced hereby exceed the maximum amount which the holder is
permitted to receive under applicable law. If, from any circumstances
whatsoever, fulfillment of any provision of this Note, at the time performance
of such provision shall be due, shall involve payments exceeding such amount,
then the obligation to be fulfilled shall automatically be reduced to the limit
of such maximum amount, and if from any circumstances the holder should ever
receive as interest an amount which would exceed such maximum amount, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. As
used herein, the term "applicable law" shall mean the law in effect as of the
date hereof; provided, however, that in the event that there is a change in the
law which results in a higher permissible rate of interest, then this Note shall
be governed by such new law as of its effective date. This provision shall
control every other provision of this Note.
12. Valuation: Manner of Disposition. Employee acknowledges and agrees
that the Company may not be able to effect a public sale of the Collateral Stock
and, accordingly, agrees that in the event of any sale, collection, realization
or other disposition of or upon the Collateral Stock by the Company, in lieu of
such public sale, the Company may transfer all or any portion of the Collateral
Stock to itself and apply the value of such shares (at a price per share equal
to the average of the daily high and low sales prices, computed to three decimal
places, of the Company's stock as reported on the New York Stock Exchange (the
"NYSE")
3
<PAGE> 4
for the ten (10) days on which the NYSE is open and for which trades in the
Company stock are reported immediately preceding the date of such action by the
Company or, if one or more of such days is not a day on which the NYSE is open
or the Company's stock is not traded on the NYSE for the ten (10) days
immediately preceding said action for which the trades are reported) to the
amounts due under or in connection with this Note.
13. Governing Law. The execution, delivery and performance of this Note
shall be governed by, construed, and enforced in accordance with the laws of the
State of Maryland.
14. Waivers. The failure of the Company at any time to exercise any
option or right hereunder shall not constitute a waiver of the Company's right
to exercise such option or right at any other time.
[Remainder of page intentionally left blank]
4
<PAGE> 5
IN WITNESS WHEREOF, this Note has been executed and delivered as a
sealed instrument as of the date first set forth above.
/s/ William B. Hamilton
-------------------------
William B. Hamilton
Executed, sealed and
delivered in the
presence of:
/s/ Michael G. Malone
- ----------------------------------
Name of Witness: Michael G. Malone
5
<PAGE> 1
PROMISSORY NOTE AND SECURITY AGREEMENT
$ [AMOUNT] [DATE]
FOR VALUE RECEIVED, [EXECUTIVE/EMPLOYEE] who resides at [address]
(hereinafter referred to as the "Employee") hereby promises to pay to the order
of Summit Properties Inc., a Maryland corporation with its principal place of
business at 212 South Tryon Street, Suite 500, Charlotte, North Carolina
(hereinafter referred to as the "Company"), the principal amount of [$________]
together with interest thereon as provided below subject to the terms and
conditions set forth herein.
1. Purpose and Authority. This Promissory Note and Security Agreement
(the "Note") is entered into for the purpose of financing the Employee's
purchase of shares of common stock, par value $0.01 per share, of the Company
("Common Stock") pursuant to and subject to the terms and conditions of (i) the
Company's Statement of Company Policy on Loans to Executive Officers and
Qualified Employees to Purchase the Company Stock as adopted by the Board of
Directors of the Company on September 8, 1997, as amended from time to time, and
(ii) the Company's 1994 Stock Option and Incentive Plan, as amended from time to
time.
2. Security. The Employee hereby grants the Company a security interest
in any and all shares of Common Stock purchased by the Employee with the
proceeds of this Note (hereinafter referred to as the "Collateral Stock") and in
any and all distributions and dividends which may from time to time be, paid or
payable on the Collateral Stock (each, a "Distribution"). Employee agrees to
take all such actions and execute all such documents as may from time to time be
reasonably requested by the Company to perfect and maintain the validity and
priority of any security interest granted to the Company pursuant to this Note.
Employee also agrees that a carbon, photographic or other reproduction of this
Promissory Note and Security Agreement may be filed as a financing statement to
the extent that the Company determines that such filing is necessary for the
Company to establish or maintain its security interest in the Collateral Stock.
The Employee shall cause the Collateral Stock to be delivered to the Company and
the Company may retain possession of the Collateral Stock until such time as the
Note has been paid in full.
3. Payment. All Distributions received by the Company in cash shall be
applied toward repayment of this Note. Each such payment shall first be applied
to the payment of interest accrued as of the date of such payment and the
remainder thereof, if any, shall then be applied to the payment of outstanding
principal. The Note will bear interest at the rate provided in Section 4 hereof.
The entire principal balance and all accrued and unpaid interest and other
charges as may be due hereunder shall be due and payable on or before the tenth
anniversary of the date of this Note (the "Maturity Date").
<PAGE> 2
4. Interest. Interest on this Note will be computed on a simple
interest basis and will accrue on the unpaid principal balance due under the
Note until maturity, whether by reason of Default (as defined below) and
acceleration, lapse of time or otherwise ("Maturity"), at the rate of
[APPLICABLE FEDERAL RATE] percent (___%) per annum. Prior to Maturity interest
shall be payable solely from Distributions.
5. Prepayment. The Employee may prepay the whole or any part of the
principal amount of this Note from time to time without premium or penalty.
6. Default. (a) The occurrence of any of the following events shall
constitute a Default under this Note:
(i) the failure by the Employee to deliver or cause to be
delivered the Collateral Stock to the Company within three business
days after the purchase of any Collateral Stock;
(ii) retention by the Employee of any Distribution, which
retention continues for a period of ten (10) days;
(iii) the failure by the Employee to pay the entire
outstanding balance of this Note and all accrued interest within one
hundred and twenty (120) days after termination of the Employee's
employment with the Company; or
(iv) the failure by the Employee to pay the entire outstanding
balance of this Note and all accrued interest on or before the Maturity
Date.
(b) Upon the occurrence of a Default under this Note, the
outstanding principal balance hereof, together with all reasonable costs of
collection and/or enforcement of the Note, including reasonable attorney's fees,
shall at the option of the Company become immediately due and payable.
(c) If the Employee is in Default hereunder, the Company may,
except as otherwise provided herein, exercise the rights and remedies accorded a
secured party by the Uniform Commercial Code as enacted in the State of
Maryland.
7. Personal Liability. Except in the case of fraud, willful
misrepresentation or retention of a Distribution by Employee, the Company agrees
that the Employee's personal liability on this Note shall be limited to [INSERT
AMOUNT EQUAL TO 25% OF PRINCIPAL AMOUNT OF THE NOTE] ($________) due hereunder
for any deficiency which may arise upon a foreclosure and sale or other
disposition of the Collateral Stock; provided that, this provision shall not
diminish in any way the powers of the Company to foreclose on the Collateral
Stock and to apply the full value of the Collateral Stock and all related
Distributions to the amount outstanding under this Note in the event of a
Default.
2
<PAGE> 3
8. Modification. Neither this Note nor any provision hereof may be
modified, altered, or amended in any manner or form except by an agreement in
writing, executed by a duly authorized officer of the Company and the Employee,
which writing shall make specific reference hereto.
9. Transfer by Employee. Employee will not sell, assign, transfer or
otherwise dispose of, directly or indirectly, nor grant any option with respect
to, or pledge or grant any security interest in or otherwise encumber any of the
Collateral Stock or any interest therein, except for the security interest
provided for in this Note.
10. Severability. If for any reason any provision or provisions hereof
are determined to be invalid, unenforceable or contrary to any existing or
future law, such invalidity or unenforcability shall not impair the operation or
affect those portions of this Note which are valid.
11. Usury, etc. All agreements between the Employee and the Company are
hereby expressly limited so that in no contingency or event whatsoever, whether
by reason Maturity of the indebtedness or otherwise, shall the amount paid or
agreed to be paid to the holder for the use, forbearance or detention of the
indebtedness evidenced hereby exceed the maximum amount which the holder is
permitted to receive under applicable law. If, from any circumstances
whatsoever, fulfillment of any provision of this Note, at the time performance
of such provision shall be due, shall involve payments exceeding such amount,
then the obligation to be fulfilled shall automatically be reduced to the limit
of such maximum amount, and if from any circumstances the holder should ever
receive as interest an amount which would exceed such maximum amount, such
amount which would be excessive interest shall be applied to the reduction of
the principal balance evidenced hereby and not to the payment of interest. As
used herein, the term "applicable law" shall mean the law in effect as of the
date hereof; provided, however, that in the event that there is a change in the
law which results in a higher permissible rate of interest, then this Note shall
be governed by such new law as of its effective date. This provision shall
control every other provision of this Note.
12. Valuation: Manner of Disposition. Employee acknowledges and agrees
that the Company may not be able to effect a public sale of the Collateral Stock
and, accordingly, agrees that in the event of any sale, collection, realization
or other disposition of or upon the Collateral Stock by the Company, in lieu of
such public sale, the Company may transfer all or any portion of the Collateral
Stock to itself and apply the value of such shares (at a price per share equal
to the average of the daily high and low sales prices, computed to three decimal
places, of the Company's stock as reported on the New York Stock Exchange (the
"NYSE") for the ten (10) days on which the NYSE is open and for which trades in
the Company stock are reported immediately preceding the date of such action by
the Company or, if one or more of such days is not a day on which the NYSE is
open or the Company's stock is not traded on the NYSE for the ten (10) days
immediately preceding said action for which the trades are reported) to the
amounts due under or in connection with this Note.
3
<PAGE> 4
13. Governing Law. The execution, delivery and performance of this Note
shall be governed by, construed, and enforced in accordance with the laws of the
State of Maryland.
14. Waivers. The failure of the Company at any time to exercise any
option or right hereunder shall not constitute a waiver of the Company's right
to exercise such option or right at any other time.
[Remainder of page intentionally left blank]
4
<PAGE> 5
IN WITNESS WHEREOF, this Note has been executed and delivered as a
sealed instrument as of the date first set forth above.
-------------------------
Name of Employee:
Executed, sealed and
delivered in the
presence of:
- -------------------------
Name of Witness:
5
<PAGE> 1
EXHIBIT 10.15.1
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
This Registration Rights and Lock-up Agreement (this "Agreement") is
entered into as of October 12, 1994 by and among Summit Properties Inc., a
Maryland corporation (the "Company"), PK Partners, L.P., an Indiana limited
partnership ("PK Partners"), which contemporaneously herewith is to become a
partner of Summit Properties Partnership, L.P., a Delaware limited partnership
(the "Partnership"), and its successors and assigns (together with PK Partners,
the "Holders," or individually, a "Holder").
WHEREAS, PK Partners is to receive contemporaneously herewith units of
limited partnership interest in the Partnership, issued without registration
under the Securities Act of 1933, as amended (the "Securities Act"), in
consideration for its sale to the Partnership of land pursuant to that certain
Contract for Purchase of Real Estate between the Company and PK Partners dated
as of February 8, 1994 and amendment thereto dated October 12, 1994
(collectively, the "Acquisition Agreement");
WHEREAS, such Units may be redeemed for shares of the Company's common
stock, par value $.01 per share ("Common Stock"), issued without registration
under the Securities Act;
WHEREAS, pursuant to that certain Lock-up Agreement among the Company
and those underwriters named therein dated February 8, 1994, the Company agreed
that it would not offer or sell any of its shares of Common Stock or Units until
February 8, 1995 without the prior written consent of Morgan Stanley & Co.
Incorporated ("Morgan Stanley"); and
WHEREAS, it is a condition precedent to the closing of the Acquisition
Agreement that the Company provide PK Partners with the registration rights set
forth in Section 3 hereof.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
and agreements set forth herein, and other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto hereby
agree as follows:
1. Certain Definitions.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Person" shall mean an individual, partnership, corporation, trust, or
unincorporated organization, or a government or agency or political subdivision
thereof.
<PAGE> 2
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, as amended or supplemented by
any prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Shares covered by such Registration Statement, and by
all other amendments and supplements to such prospectus, including
post-effective amendments, and in each case including all material incorporated
by reference therein.
"Registrable Shares" shall mean the Shares, excluding (i) Shares for
which a Registration Statement relating to the sale thereof shall have become
effective under the Securities Act and which have been disposed of under such
Registration Statement, (ii) Shares sold pursuant to Rule 144 under the
Securities Act or (iii) Shares eligible for sale pursuant to Rule 144(k) under
the Securities Act.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance with this Agreement, including, without limitation:
(i) all SEC, stock exchange or NASD registration and filing fees; (ii) all fees
and expenses incurred in connection with compliance with state securities or
"blue sky" laws (including reasonable fees and disbursements of counsel in
connection with "blue sky" qualification of any of the Registrable Shares and
the preparation of a Blue Sky Memorandum) and compliance with the rules of the
NASD; (iii) all expenses of any Persons in preparing or assisting in preparing,
word processing, printing and distributing any Registration Statement, any
Prospectus, certificates and other documents relating to the performance of and
compliance with this Agreement; (iv) all fees and expenses incurred in
connection with the listing, if any, of any of the Registrable Shares on any
securities exchange or exchanges pursuant to Section 5 hereof; and (v) the fees
and disbursements of counsel for the Company and of the independent public
accountants of the Company, including the expenses of any special audit or "cold
comfort" letters required by or incident to such performance and compliance.
Registration Expenses shall specifically exclude underwriting discounts and
commissions relating to the sale or disposition of Registrable Shares by a
selling Holder, the fees and disbursements of counsel representing a selling
Holder, and transfer taxes, if any, relating to the sale or disposition of
Registrable Shares by a selling Holder, all of which shall be borne by such
Holder in all cases.
"Registration Statement" shall mean any registration statement of the
Company and any other entity required to be a registrant with respect to such
registration statement pursuant to the requirements of the Securities Act which
covers any of the Registrable Shares on an appropriate form, and all amendments
and supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all materials incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shares" shall mean the shares of Common Stock issued or to be issued
to the Holder(s) upon redemption or in exchange for its or their Units.
2
<PAGE> 3
2. Lock-up Agreement.
(a) Each Holder hereby agrees that, except as set forth in
Section 2(b) below, for one year from the date hereof (the "Lock-up Period"),
without the prior written consent of the Company, (and until February 8, 1995,
without the prior written consent of Morgan Stanley) it will not offer, sell,
contract to sell, hypothecate, pledge, grant an option, right or warrant to
purchase or otherwise dispose of, directly or indirectly (collectively "Sell"),
any Shares or Units (the "Lock-up").
(b) The following Sales of Shares and/or Units shall not be
subject to the Lock-up set forth in Section 2(a):
(i) a Holder who is a natural person may Sell his
or her Shares or Units to his or her spouse, siblings, parents
or any natural or adopted children or other descendants or to
any personal trust in which any such family member or Holder
retains the entire beneficial interest;
(ii) a Holder that is a corporation, partnership,
joint venturer or other business entity may Sell its Shares or
Units to one or more Persons who have an ownership interest in
such Holder or to one or more other entities that are
wholly-owned and controlled, legally and beneficially, by such
Holder or by one or more of the Persons who have an ownership
interest in such Holder;
(iii) a Holder may Sell his or her Shares or Units
to his or her estate, executor, administrator or personal
representative or to his or her beneficiaries pursuant to a
devise or bequest or by laws of descent and distribution;
(iv) a Holder may Sell Shares or Units as a gift or
other transfer without consideration; and
(v) the Holder may Sell Shares or Units pursuant to
a pledge, grant of security interest or other encumbrance
effected in a bona fide transaction with an unrelated and
unaffiliated pledgee;
provided, however, that in the case of any transfer of Shares or Units pursuant
to clauses (i), (ii), (iv) and (v), the transferring Holder shall, at the
request of the Company, provide evidence satisfactory to the Company that the
transfer is exempt from the registration requirements of the Securities Act.
In the event any Holder Sells any Shares or Units pursuant to Section 2(b), such
Shares or Units shall remain subject to this Agreement and, as a condition of
the validity of such disposition, the transferee shall be required to execute
and deliver a counterpart of this Agreement (except that a pledgee shall not be
required to execute and deliver a counterpart of
3
<PAGE> 4
this Agreement until it forecloses upon such Shares or Units). Thereafter, such
transferee shall be deemed to be a Holder for purposes of this Agreement.
3. Registration.
(a) Demand Registration. Subject to the conditions set forth in
this Agreement, at any time after the later of (i) one year from the date of the
closing of the Acquisition Agreement, or (ii) the date as of which the Company
first becomes eligible to use a Form S-3 Registration Statement to register any
outstanding Registrable Shares, the Company shall, at the written request of a
Holder who is unable to sell its Registrable Shares pursuant to Rule 144(k)
under the Securities Act, cause to be filed as soon as practicable after the
date of such request by such Holder a Registration Statement under Rule 415
under the Securities Act relating to the sale by the Holder of all of the
Registrable Shares held by such Holder in accordance with the terms hereof, and
shall use reasonable efforts to cause such Registration Statement to be declared
effective by the SEC as soon as practicable thereafter. The Company may, in its
sole discretion, elect to file the Registration Statement before receipt of
notice from any Holder. The Company agrees to use reasonable efforts to keep the
Registration Statement continuously effective until the earlier of (i) six (6)
months thereafter, or (ii) the date on which such Holder no longer holds any
Registrable Shares.
(b) Piggyback Registration. If at any time while any Registrable
Shares or Units are outstanding (without any obligation to do so) the Company
proposes to file a registration statement under the Securities Act with respect
to an offering of Common Stock solely for cash (other than a registration
statement (i) on Form S-8 or any successor form to such Form or in connection
with any employee or director welfare, benefit or compensation plan, (ii) on
Form S-4 or any successor form to such Form or in connection with an exchange
offer, (iii) in connection with a rights offering exclusively to existing
holders of Common Stock, (iv) in connection with an offering solely to employees
of the Company or its subsidiaries, or (v) relating to a transaction pursuant to
Rule 145 of the Securities Act), whether or not for its own account, the Company
shall give prompt written notice of such proposed filing to each Holder. The
notice referred to in the preceding sentence shall offer each Holder the
opportunity to register any amount of Registrable Shares as such Holder may
request (a "Piggyback Registration"). Subject to the provisions of Section 4
below, the Company shall include in such Piggyback Registration, in the
registration and qualification for sale under the blue sky or securities laws of
the various states and in any underwriting in connection therewith, all
Registrable Shares for which the Company has received written requests for
inclusion therein within fifteen (15) calendar days after the notice referred to
above has been given by the Company to each Holder. Each Holder of Registrable
Shares shall be permitted to withdraw all or part of its Registrable Shares from
a Piggyback Registration at any time prior to the effective date of such
Piggyback Registration. If a Piggyback Registration is an underwritten primary
registration on behalf of the Company and the managing underwriter advises the
Company that the total number of shares of Common Stock requested to be included
in such registration exceeds the number of shares of Common Stock which can be
4
<PAGE> 5
sold in such offering, the Company will include in such registration in the
following priority: (i) first, all shares of Common Stock the Company proposes
to sell, (ii) second, up to the full number of shares of Common Stock requested
to be included in such registration by certain stockholders of the Company
pursuant to that certain Continuing Investor Registration Rights Agreement among
the Company and the stockholders named therein dated February 8, 1994, and (iii)
third, up to the full number of Registrable Shares requested to be included in
such registration by any Holders which, in the case of clauses (ii) and (iii),
in the opinion of such managing underwriter, can be sold without adversely
affecting the price range or probability of success of such offering (with
Registrable Shares allocated pro rata among the Holders on the basis of the
total number of Registrable Shares requested to be included in such registration
by all such Holders).
(c) The Company shall notify each Holder of the effectiveness of
any Registration Statement and shall furnish to each Holder the number of copies
of such Registration Statement (including any amendments, supplements and
exhibits), the Prospectus contained therein (including each preliminary
prospectus and all related amendments and supplements) and any documents
incorporated by reference in such Registration Statement or such other documents
as such Holder may reasonably request in order to facilitate its sale of the
Registrable Shares in the manner described in such Registration Statement.
(d) The Company shall prepare and file with the SEC from time to
time such amendments and supplements to any Registration Statement and
Prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all the Registrable Shares
until the earlier of (i) such time as all of the Registrable Shares have been
disposed of in accordance with the intended methods of disposition by the
Holders as set forth in such Registration Statement or (ii) the date on which
such Registration Statement ceases to be effective in accordance with the terms
of this Section 3. Upon five (5) business days' notice, the Company shall file
any supplement or post-effective amendment to such Registration Statement with
respect to the plan of distribution or such Holder's ownership interests in
Registrable Shares that is reasonably necessary to permit the sale of the
Holder's Registrable Shares pursuant to the Registration Statement. The Company
shall file any necessary listing applications or amendments to the existing
applications to cause the Shares registered under any Registration Statement to
be then listed or quoted on the primary exchange or quotation system on which
the Common Stock is then listed or quoted.
(e) The Company shall promptly notify each Holder of, and confirm
in writing, (i) the receipt by the Company of any request by the SEC for
amendments or supplements to any Registration Statement or the Prospectus
related thereto or for additional information, and (ii) the filing of any
Registration Statement or any Prospectus, amendment or supplement related
thereto or any post-effective amendment to any Registration Statement and the
effectiveness of any post-effective amendment.
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<PAGE> 6
(f) At any time when a Prospectus relating to a Registration
Statement is required to be delivered under the Securities Act, the Company
shall immediately notify each Holder of the happening of any event as a result
of which the Prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. In such event, the Company shall promptly prepare and furnish to
each Holder a reasonable number of copies of a supplement to or an amendment of
such Prospectus as may be necessary so that, as thereafter delivered to the
purchasers of Registrable Shares, such Prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Company will, if
necessary, amend the Registration Statement of which such Prospectus is a part
to reflect such amendment or supplement.
4. State Securities Laws. Subject to the conditions set forth in
this Agreement, the Company shall, in connection with the filing of any
Registration Statement hereunder, file such documents as may be necessary to
register or qualify the Registrable Shares under the securities or "Blue Sky"
laws of such states as any Holder may reasonably request, and the Company shall
use its best efforts to cause such filings to become effective; provided,
however, that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such state in which it is not
then qualified or to file any general consent to service of process in any such
state. Once effective, the Company shall use its best efforts to keep such
filings effective until the earlier of (a) such time as all of the Registrable
Shares have been disposed of in accordance with the intended methods of
disposition by the Holder as set forth in the Registration Statement, (b) in the
case of a particular state, a Holder has notified the Company that it no longer
requires an effective filing in such state in accordance with its original
request for filing or (c) the date on which the Registration Statement ceases to
be effective in accordance with Section 3. The Company shall promptly notify
each Holder of, and confirm in writing, the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Shares for sale under the securities or "Blue Sky" laws of any
jurisdiction or the initiation or threat of any proceeding for such purpose.
5. Expenses. The Company shall bear all Registration Expenses
incurred in connection with the registration of the Registrable Shares pursuant
to this Agreement, except that each Holder shall be responsible for any
brokerage or underwriting commissions and taxes of any kind (including, without
limitation, transfer taxes) with respect to any disposition, sale or transfer of
Registrable Shares sold by it and for any legal, accounting and other expenses
incurred by it.
6. Indemnification by the Company. The Company agrees to
indemnify each Holder and its respective officers, directors, employees, agents,
representatives and affiliates, and each person or entity, if any, that controls
such Holder within the meaning of the
6
<PAGE> 7
Securities Act, and each other person or entity, if any, subject to liability
because of his, her or its connection with such Holder, and any underwriter and
any person who controls the underwriter within the meaning of the Securities Act
(each an "Indemnitee") against any and all losses, claims, damages, actions,
liabilities, costs and expenses (including without limitation reasonable fees,
expenses and disbursements of attorneys and other professionals), joint or
several, arising out of or based upon any violation by the Company of any rule
or regulation promulgated under the Securities Act applicable to the Company and
relating to any action or inaction required of the Company in connection with
any Registration Statement or Prospectus, or upon any untrue or alleged untrue
statement of material fact contained in the Registration Statement or any
Prospectus, or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, provided
that the Company shall not be liable to such Indemnitee or any person who
participates as an underwriter in the offering or sale of Registrable Shares or
any other person, if any, who controls such underwriter within the meaning of
the Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof), cost or expense
arises out of or is based upon (i) an untrue statement or alleged untrue
statement or omission or alleged omission made in such Registration Statement,
any such preliminary prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with information regarding such
Indemnitee or its plan of distribution or ownership interests which was
furnished to the Company for use in connection with the Registration Statement
or the Prospectus contained therein by such Indemnitee or (ii) such Indemnitee's
failure to send or give a copy of the final prospectus furnished to it by the
Company through no fault of the Company at or prior to the time such action is
required by the Securities Act to the person claiming an untrue statement or
alleged untrue statement or omission or alleged omission if such statement or
omission was corrected in such final prospectus.
7. Covenants of Holder(s). Each Holder hereby agrees (a) to
cooperate with the Company and to furnish to the Company all such information
concerning its plan of distribution and ownership interests with respect to its
Registrable Shares in connection with the preparation of the Registration
Statement and any filings with any state securities commissions as the Company
may reasonably request, (b) to deliver or cause delivery of the Prospectus
contained in the Registration Statement to any purchaser of the shares covered
by the Registration Statement from the Holder and (c) to indemnify the Company,
its officers, directors, employees, agents, representatives and affiliates, and
each person, if any, who controls the Company within the meaning of the
Securities Act, and each other person, if any, subject to liability because of
his connection with the Company, against any and all losses, claims, damages,
actions, liabilities, costs and expenses arising out of or based upon (i) any
untrue statement or alleged untrue statement of material fact contained in
either a Registration Statement or the Prospectus contained therein, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, if and to the extent
that such statement or omission occurs from reliance upon and in conformity with
written
7
<PAGE> 8
information regarding the Holder, its plan of distribution or its ownership
interests, which was furnished to the Company by the Holder expressly for use
therein unless such statement or omission was corrected in writing to the
Company not less than five (5) business days prior to the date of the final
prospectus (as supplemented or amended, as the case may be) or (ii) the failure
by the Holder to deliver or cause to be delivered the Prospectus contained in
the Registration Statement (as amended or supplemented, if applicable) furnished
by the Company to the Holder to any purchaser of the shares covered by the
Registration Statement from the Holder through no fault of the Company.
8. Suspension of Registration Requirement.
(a) The Company shall promptly notify each Holder of, and confirm
in writing, the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any proceedings
for that purpose. The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement at the earliest possible moment.
(b) Notwithstanding anything to the contrary set forth in this
Agreement, the Company's obligation under this Agreement to use its best efforts
to cause the Registration Statement and any filings with any state securities
commission to become effective or to amend or supplement the Registration
Statement shall be suspended in the event and during such period as unforeseen
circumstances exist (including without limitation (i) an underwritten primary
offering by the Company if the Company is advised by the underwriters that sale
of Registrable Shares under the Registration Statement would have a material
adverse effect on the primary offering or (ii) pending negotiations relating to,
or consummation of, a transaction or the occurrence of an event that would
require additional disclosure of material information by the Company in the
Registration Statement or such filing, as to which the Company has a bona fide
business purpose for preserving confidentiality or which renders the Company
unable to comply with SEC requirements) (such unforeseen circumstances being
hereinafter referred to as a "Suspension Event") that would make it impractical
or unadvisable to cause the Registration Statement or such filings to become
effective or to amend or supplement the Registration Statement, but such
suspension shall continue only for so long as such event or its effect is
continuing but in no event will that suspension exceed ninety (90) days. The
Company shall notify each Holder of the existence and, in the case of
circumstances referred to in clause (i) of this Section 8(b), nature of any
Suspension Event.
(c) Each Holder of Registrable Shares whose Registrable Shares are
covered by a Registration Statement filed pursuant to Section 3 agrees, if
requested by the Company in the case of a Company-initiated nonunderwritten
offering or if requested by the managing underwriter or underwriters in a
Company-initiated underwritten offering, not to effect any public sale or
distribution of any of the securities of the Company of any class included in
such Registration Statement, including a sale pursuant to Rule 144 or Rule 144A
under the Securities Act (except as part of such Company-initiated
registration), during the 15-day period
8
<PAGE> 9
prior to, and during the 60-day period beginning on, the date of effectiveness
of each Company-initiated offering made pursuant to such Registration Statement,
to the extent timely notified in writing by the Company or the managing
underwriters; provided, however, that such 60-day period shall be extended by
the number of days from and including the date of the giving of any notice
pursuant to Section 3(e) or (f) hereof to and including the date when each
seller of Registrable Shares covered by such Registration Statement shall have
received the copies of the supplemented or amended Prospectus contemplated by
Section 3(f) hereof.
9. Black-Out Period. Following the effectiveness of the
Registration Statement and the filings with any state securities commissions,
each Holder agrees that it will not effect any sales of the Registrable Shares
pursuant to the Registration Statement or any such filings at any time after it
has received notice from the Company to suspend sales as a result of the
occurrence or existence of any Suspension Event or so that the Company may
correct or update the Registration Statement or such filing. Each Holder may
recommence effecting sales of the Shares pursuant to the Registration Statement
or such filings following further notice to such effect from the Company, which
notice shall be given by the Company not later than five (5) days after the
conclusion of any such Suspension Event.
10. Additional Shares. The Company, at its option, may register,
under any registration statement and any filings with any state securities
commissions filed pursuant to this Agreement, any number of unissued shares of
Common Stock of the Company or any shares of Common Stock of the Company owned
by any other stockholder(s) of the Company.
11. Contribution. If the indemnification provided for in Sections
6 and 7 is unavailable to an indemnified party with respect to any losses,
claims, damages, actions, liabilities, costs or expenses referred to therein or
is insufficient to hold the indemnified party harmless as contemplated therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, actions, liabilities, costs or expenses
in such proportion as is appropriate to reflect the relative fault of the
Company, on the one hand, and the Indemnitee, on the other hand, in connection
with the statements or omissions which resulted in such losses, claims, damages,
actions, liabilities, costs or expenses as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
Indemnitee, on the other hand, shall be determined by reference to, among other
factors, whether the untrue or alleged untrue statement of a material fact or
omission to state a material fact relates to information supplied by the Company
or by the Indemnitee and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, however, that in no event shall the obligation of any indemnifying
party to contribute under this Section 11 exceed the amount that such
indemnifying party would have been obligated to pay by way of indemnification if
the indemnification provided for under Sections 6 or 7 hereof had been available
under the circumstances.
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<PAGE> 10
The Company and each of the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 11 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph.
Notwithstanding the provisions of this Section 11, no Holder shall be
required to contribute any amount in excess of the amount by which the gross
proceeds from the sale of shares exceeds the amount of any damages that the
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission. No indemnified party guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any indemnifying party who was not guilty
of such fraudulent misrepresentation.
12. No Other Obligation to Register. Except as otherwise expressly
provided in this Agreement, the Company shall have no obligation to the Holders
to register the Registrable Shares under the Securities Act.
13. Amendments and Waivers. The provisions of this Agreement may
not be amended, modified, or supplemented or waived without the prior written
consent of the Company and the Holders of in excess of fifty percent (50%) of
the aggregate of all Registrable Shares and, in the case of Sections 2 and 20
hereof, without the prior written consent of Morgan Stanley.
14. Notices. Except as set forth below, all notices and other
communications provided for or permitted hereunder shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by telex or
telecopier, registered or certified mail (return receipt requested), postage
prepaid or courier or overnight delivery service to the respective parties at
the following addresses (or at such other address for any party as shall be
specified by like notice, provided that notices of a change of address shall be
effective only upon receipt thereof), and further provided that in case of
directions to amend the Registration Statement pursuant to Section 3(d) or
Section 7, a Holder must confirm such notice in writing by overnight express
delivery with confirmation of receipt:
If to the Company: Summit Properties Inc.
212 South Tryon Street, Suite 500
Charlotte, North Carolina 28281
Attn: Michael G. Malone, Esq.,
Senior Vice President,
Secretary and General Counsel
Telecopy: (704) 333-6114
with a copy to: Goodwin, Procter & Hoar
Exchange Place
Boston, MA 02109
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<PAGE> 11
Attn: Gilbert G. Menna, P.C.
Telecopy: (617) 523-1231
If to the Holders: As listed on the applicable
Holder Signature Page
In addition to the manner of notice permitted above, notices given pursuant to
Sections 3, 8 and 9 hereof may be effected telephonically and confirmed in
writing thereafter in the manner described above.
15. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns. This Agreement may not be assigned by any Holder and any attempted
assignment hereof by any Holder will be void and of no effect and shall
terminate all obligations of the Company hereunder; provided that any Holder may
assign its rights hereunder to any person to whom such Holder may Sell Shares
and/or Units pursuant to Section 2(b) hereof.
16. Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
17. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland applicable to
contracts made and to be performed wholly within said State.
18. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
19. Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be the complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to such subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
20. Third Party Beneficiary. Morgan Stanley shall be a third party
beneficiary or intended beneficiary to the agreement made by the Holders
pursuant to Section 2 hereof and shall have the right to enforce such agreement
directly to the extent it deems such enforcement necessary or desirable to
protect its rights hereunder.
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<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
SUMMIT PROPERTIES INC.
By: /s/ Michael G. Malone
---------------------------------
Name: Michael G. Malone
Title: Senior Vice President
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<PAGE> 13
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
HOLDER SIGNATURE PAGE
Holder:
PK PARTNERS, L.P.
By: /s/ Phillip N. Larman
---------------------------------
Address for Notice:
PK Partners
156 East Market Street, #1212
Indianapolis, Indiana 46254
Attn: Phillip N. Larman
--------------------------------
Phone Number:
(317) 635-8888
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REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
HOLDER SIGNATURE PAGE
Holder:
--------------------------------------
Print Name:
Address for Notice:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Phone Number:
--------------------------------------
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<PAGE> 1
EXHIBIT 10.15.6
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement"), dated as of May
16, 1995, is entered into by Summit Properties Inc., a Maryland corporation (the
"Company") for the benefit of each of the parties listed hereto in Schedule 1
and their Permitted Assignees (as defined below) (each a "Holder" and
collectively the "Holders").
WHEREAS, the Holders are to receive units ("Units") of limited
partnership interest in Summit Properties Partnership, L.P., a Delaware limited
partnership (the "Operating Partnership"), pursuant to that certain Agreement to
Contribute of even date herewith among the Company, the Operating Partnership,
the Owners listed on Schedule 1 thereto and the Crosland Partnerships listed on
Schedule 2 thereto (the "Contribution Agreement");
WHEREAS, the Holders' Units may be redeemed for cash, or at the option
of the Company, for an equivalent number of shares ("Shares") of the Company's
common stock, $.01 par value per share ("Common Stock"), pursuant to the
Operating Partnership's Agreement of Limited Partnership dated January 29, 1994
(the "Partnership Agreement"); and
WHEREAS, to induce certain of the Holders to enter into the
Contribution Agreement, the Company has agreed to provide the registration
rights set forth in this Agreement for the benefit of the Holders.
NOW, THEREFORE, in consideration of the foregoing, the mutual premises
and agreements set forth herein, and other valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Company hereby agrees as
follows:
1. Certain Definitions. As used in this Agreement, the following
capitalized terms not elsewhere defined shall have the following meanings:
"Closing Date" shall mean the date upon which the transactions
contemplated by the Contribution Agreement will close.
"Prospectus" shall mean the prospectus included in a Registration
Statement, as amended or supplemented, including any preliminary prospectus,
prospectus supplement and post-effective amendment, and in each case including
all material incorporated by reference therein.
"Registrable Shares" shall mean the Shares, excluding (i) Shares for
which a Registration Statement relating to the sale thereof shall have become
effective under the Securities Act of 1933, as amended (the "Securities Act"),
and which shall have been disposed of under such Registration Statement, (ii)
Shares sold pursuant to Rule 144 under the Securities Act and (iii) Shares
eligible for sale pursuant to Rule 144(k) under the Securities Act. "Registrable
Shares" shall include Units eligible to be redeemed in exchange for Shares.
"Registration Statement" shall mean any registration statement of the
Company, and any other entity required to be a registrant with respect to such
registration statement pursuant to the
<PAGE> 2
requirements of the Securities Act, which statement covers any of the
Registrable Shares on an appropriate form, including, without limitation, the
Initial Shelf Registration Statement, any Subsequent Shelf Registration
Statement, and any Demand Shelf Registration Statement, and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all materials incorporated by reference therein.
2. Registration.
(a) Initial Shelf Registration Statement. Subject to the
conditions set forth in this Agreement, the Company shall use reasonable efforts
to cause to be filed with the Securities and Exchange Commission (the "SEC"),
within thirty (30) days of the Closing Date, a registration statement (the
"Initial Shelf Registration Statement") under Rule 415 of the Securities Act
relating to the original issuance by the Company of shares of Common Stock in
connection with the redemption of Holders' Units, or in the alternative if the
registration of such original issuance is not practicable, the sale by Holders
of Registrable Shares in the form of the Common Stock to be received in
connection with the redemption of Holders' Units, all in accordance with the
terms hereof, and shall use reasonable efforts to cause the Initial Shelf
Registration Statement to be declared effective by the SEC. The Company agrees
to use reasonable efforts to keep the Initial Shelf Registration Statement
continuously effective until the earliest of (i) the date on which the Holders
no longer hold any Registrable Shares, or (ii) five (5) years from the Closing
Date (the "Initial Shelf Registration Expiration Date") . The time between the
date on which the Initial Shelf Registration. Statement first becomes effective
and the Initial Shelf Registration Expiration Date is hereinafter referred to as
the "Initial Shelf Period."
(b) Demand Registration.
(i) At any time in the Initial Shelf Period during
which the Initial Shelf Registration Statement is not effective for a continuous
period of at least thirty (30) days (other than under the circumstances and
periods permitted by Sections 8 and 9) (an "Initial Shelf Failure"), and at any
time after the Initial Shelf Registration Expiration Date and prior to the tenth
(10th) anniversary of the Closing Date, any Holder of Registrable Shares may
request in writing that the Company cause to be filed a registration statement
(a "Demand Shelf Registration Statement") under Rule 415 of the Securities Act
relating to the sale by the Holder of all or part of such Holders Registrable
Shares; provided, however, that the Company shall have no obligation pursuant to
this Section 2(b)(i) unless the conditions set forth in Section 2(b)(ii), and
elsewhere in this Agreement, are satisfied. Upon the Company's determination
that such conditions have been satisfied, the Company shall give written notice
of the proposed registration to all Holders of Registrable Shares. Subject to
the conditions set forth below, each such Holder shall have the right, by giving
written notice to the Company, within fifteen (15) days after the notice
referred to in the preceding sentence has been given by the Company, to elect to
have included in the Demand Shelf Registration Statement all or part of such
Holder's Registrable Shares. Thereupon, the Company shall use reasonable efforts
to cause such Demand Shelf Registration Statement to be filed with, and be
declared effective by, the SEC. The Company agrees to use reasonable
2
<PAGE> 3
efforts to keep such Demand Shelf Registration Statement continuously effective
until the earliest of (A) the date on which the Holders no longer hold any
Registrable Shares registered under such Demand Shelf Registration Statement,
(B) the date on which the Company has caused to be delivered to the Holders an
opinion of counsel, which counsel must be reasonably acceptable to each Holder,
stating that the Registrable Shares may be sold during a single period of ninety
(90) days by the Holders pursuant to Rule 144 promulgated under the Securities
Act without regard to any volume limitations and that the Company has, on the
date of such opinion, satisfied the necessary informational requirements under
Rule 144, or (C) ninety (90) days from the date such Demand Shelf Registration
Statement first becomes effective.
(ii) The Company shall have no obligation under
Section 2(b)(i) unless the following conditions are satisfied:
(A) A Holder who requests that the
Company cause to be filed a Demand Shelf Registration Statement pursuant to
Section 2(b)(i) must provide to the Company a certificate (the "Authorizing
Certificate") substantially in the form of Exhibit A hereto, that is signed by
the Holders of at least ten (10) percent of the aggregate number of all
Registrable Shares, at the time such request is made. The Authorizing
Certificate shall set forth (i) the name of each Holder signing such Authorizing
Certificate, (ii) the number of Registrable Shares held by each such Holder and,
if different, the number of Registrable Shares such Holder would like to have
registered, and (iii) a certification from each such Holder that it is
requesting the registration of only those shares of Common Stock received by
such Holder upon the redemption of its Units pursuant to the Partnership
Agreement. Any Holder whose Registrable Shares have become eligible for sale
pursuant to Rule 144(k) promulgated under the Securities Act shall not be
included for purposes of calculating the percentage of Holders required to sign
an Authorizing Certificate. If the Company determines that a Holder's Shares
have become eligible for sale pursuant to Rule 144(k), the Company shall, at the
request of such Holder, deliver to the Holder an opinion of counsel to such
effect.
(B) A Holder may only request that the
Company register those Registrable Shares of Common Stock received by such
Holder from the Company upon the redemption of some or all of such Holder's
Units.
(C) The Company shall be obligated to
file only one Demand Shelf Registration Statement during any twelve (12) month
period during which no Registration Statement has been in effect.
(c) Piggyback Registration. If at any time during an
Initial Shelf Failure or after the Shelf Registration Expiration Date, while any
Registrable Shares are outstanding and no Demand Shelf Registration Statement is
in effect, the Company (without any obligation to do so) proposes to file a
registration statement under the Securities Act with respect to an offering of
Common Stock solely for cash (other than a registration statement (i) on Form
S-8 or any successor form to such Form or in connection with any employee or
director welfare, benefit or compensation plan, (ii) on Form S-4 or any
successor form to such Form or in connection with
3
<PAGE> 4
an exchange offer, (iii) in connection with a rights offering exclusively to
existing holders of Common Stock, (iv) in connection with an offering solely to
employees of the Company or its affiliates, or (v) relating to a transaction
pursuant to Rule 145 of the Securities Act), whether or not for its own account,
the Company shall give prompt written notice of such proposed filing to the
Holders. The notice referred to in the preceding sentence shall offer each
Holder the opportunity to register such amount of its Registrable Shares of
Common Stock received from the Company upon the redemption of some or all of its
Units, as such Holder may request (a "Piggyback Registration"). Subject to the
provisions of Section 2 below, the Company shall include in such Piggyback
Registration, in the registration and qualification for sale under the
securities or "Blue Sky" laws of the various states and in any underwriting in
connection therewith all such Registrable Shares for which the Company has
received written requests for inclusion therein within fifteen (15) calendar
days after the notice referred to above has been given by the Company to the
Holders. A Holder of such Registrable Shares shall be permitted to withdraw all
or part of such Holder's Registrable Shares from a Piggyback Registration at any
time prior to the effective date of such Piggyback Registration. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company
and the managing underwriter advises the Company that the total number of shares
of Common Stock requested to be included in such registration exceeds the number
of shares of Common Stock which can be sold in such offering, the Company will
include in such registration in the following priority: (i) first all shares of
Common Stock the Company proposes to sell; (ii) second, up to the full number of
applicable Registrable Shares requested to be included in such registration
which, in the opinion of such managing underwriter, can be sold without
adversely affecting the price range or probability of success of such offering,
allocated among the Holders requesting registration on a pro rata basis and
(iii) third, if such Piggyback Registration Statement is being used to register
shares of the Company's Common Stock held by other holders of registration
rights, up to the full number of applicable Registrable Shares and such other
shares of Common Stock, other than the underwritten primary shares of Common
Stock requested to be included in such registration, which, in the opinion of
such managing underwriter, can be sold without adversely affecting the price
range or profitability of success of such offering, allocated among the holders
of registration rights requesting registration on a pro rata basis.
(d) Subsequent Shelf Registration Statement. Subject to
the conditions set forth in this Agreement, for the period following the Initial
Shelf Registration Expiration Date and prior to the tenth (10th) anniversary of
the Closing Date the Company shall use reasonable efforts to cause to be filed
with the SEC within thirty (30) days following a taxable sale or other taxable
disposition of a Direct Project or underlying Project, as those terms are
defined in the Contribution Agreement (each a "Project"), a registration
statement (the "Subsequent Shelf Registration Statement") under Rule 415 of the
Securities Act relating to the original issuance by the Company of shares of
Common Stock in connection with the redemption of all or any portion of those
Holders' Units who have recognized "Pre-Contribution Gain" in connection with
such taxable sale or other taxable disposition, or in the alternative if the
registration of such original issuance is not practicable, the sale by such
Holders of Registrable Shares in the form of the Common Stock to be received in
connection with the redemption of such Holders' Units, all in accordance with
the terms hereof, and shall use reasonable efforts to cause such Subsequent
Shelf Registration
4
<PAGE> 5
Statement to be declared effective by the SEC. The Company agrees to use
reasonable efforts to keep the Subsequent Shelf Registration Statement
continuously effective until the earliest of (i) the date on which such Holders
hold Registrable Shares, or (ii) one hundred and eighty (180) days from the date
such Subsequent Shelf Registration Statement first became effective. For
purposes of this Section 2(d), the term "Pre-Contribution Gain" shall mean, with
respect to each Project, any gain recognized under Section 704(c) of the
Internal Revenue Code of 1986, as amended. This Section 2(d) shall inure to the
benefit of only those Holders who recognize Pre-Contribution Gain in connection
with the sale or other disposition of a Project.
(e) The Company shall notify each Holder of the
effectiveness of any Registration Statement and shall furnish to each Holder
such number of copies of the Registration Statement (including any amendments,
supplements and exhibits), the Prospectus contained therein (including each
preliminary prospectus and all related amendments and supplements) and any
documents incorporated by reference in the Registration Statement or such other
documents as the Holder may reasonably request in order to facilitate its sale
of the Registrable Shares in the manner described in the Registration Statement.
(f) The Company shall prepare and file with the SEC from
time to time such amendments and supplements to any Registration Statement and
Prospectus used in connection therewith as may be necessary to keep such
Registration Statement effective and to comply with the provisions of the
Securities Act with respect to the disposition of all the Registrable Shares
until the earlier of (i) such time as all of the Registrable Shares have been
disposed of in accordance with the intended methods of disposition by the
Holders as set forth in the Registration Statement, or (ii) the date on which
the Registration Statement ceases to be effective in accordance with the terms
of this Section 2. Upon five (5) business days' notice, the Company shall file
any supplement or post-effective amendment to the Registration Statement with
respect to the plan of distribution or such Holder's ownership interests in
Registrable Shares that is reasonably necessary to permit the sale of the
Holder's Registrable Shares pursuant to the Registration Statement. The Company
shall file any necessary listing applications or amendments to the existing
applications to cause the Shares registered under any Registration Statement to
be then listed or quoted on the primary exchange or quotation system on which
the shares of Common Stock are then listed or quoted.
(g) The Company shall promptly notify each Holder of, and
confirm in writing, any request by the SEC for amendments or supplements to any
Registration Statement or the Prospectus related thereto or for additional
information. In addition, the company shall promptly notify each Holder of, and
confirm in writing, the filing of any Registration Statement or any Prospectus,
amendment or supplement related thereto or any post-effective amendment to such
Registration Statement and the effectiveness of any post-effective amendment.
(h) At any time when a Prospectus relating to any
Registration Statement is required to be delivered under the Securities Act, the
Company shall immediately notify each Holder of the happening of any event as a
result of which the Prospectus included in the Registration Statement, as then
in effect, includes an untrue statement of a material fact or omits
5
<PAGE> 6
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. In such event, the Company shall promptly prepare and
furnish to each Holder a reasonable number of copies of a supplement to or an
amendment of such Prospectus as may be necessary so that, as thereafter
delivered to the purchasers of Registrable Shares, such Prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading. The
Company will, if necessary, amend the Registration Statement of which such
Prospectus is a part to reflect such amendment or supplement.
3. State Securities Laws. Subject to the conditions set forth in
this Agreement, the Company shall, in connection with the filing of any
Registration Statement hereunder, file such documents as may be necessary to
register or qualify the Registrable Shares under the securities or 'Blue Sky'
laws of such states as any Holder may reasonably request, and the Company shall
use its best efforts to cause such filings to become effective; provided,
however, that the Company shall not be obligated to qualify as a foreign
corporation to do business under the laws of any such state in which it is not
then qualified or to file any general consent to service of process-in any such
state. Once effective, the Company shall use its best efforts to keep such
filings effective until the earlier of (a) such time as all of the Registrable
Shares have been disposed of in accordance with the intended methods of
disposition by the Holder as set forth in the Registration Statement, (b) in the
case of a particular state, a Holder has notified the Company that it no longer
requires an effective filing in such state in accordance with its original
request for filing, or (c) the date on which the Registration Statement ceases
to be effective. The Company shall promptly notify each Holder of, and confirm
in writing, the receipt by the Company of any notification with respect to the
suspension of the qualification of the Registrable Shares for sale under the
securities or "Blue Sky" laws of any jurisdiction or the initiation or threat of
any proceeding for such purpose.
4. Expenses. The Company shall bear all expenses incurred in
connection with the registration of Registrable Shares pursuant to Sections 2
(a), 2 (b) and 2 (d) of this Agreement and the Holders shall bear a portion of
all expenses incurred by the Company in connection with the registration in
which the Holders are included pursuant to Section 2(c) of this Agreement based
on the ratio of Registrable Shares included to the total number of shares of
Common Stock so registered. Such expenses shall include, without limitation, all
printing, legal and accounting expenses incurred by the Company and all
registration and filing fees imposed by the SEC, any state securities commission
or the New York Stock Exchange or, if the Common Stock is not then listed on the
New York Stock Exchange, the principal national securities exchange or national
market system on which the Common Stock is then traded or quoted. In addition,
Holders shall be responsible for any brokerage or underwriting commissions and
taxes of any kind (including, without limitation, transfer taxes) with respect
to any disposition, sale or transfer of Registrable Shares and for any legal,
accounting and other expenses incurred by them.
5. Indemnification by the Company. The Company agrees to
indemnify each of the Holders and their respective officers, directors,
employees, agents, representatives and affiliates,
6
<PAGE> 7
and each person or entity if any, that controls a Holder within the meaning of
the Securities Act, and each other person or entity, if any, subject to
liability because of his, her or its connection with a Holder, and any
underwriter and any person who controls the underwriter within the meaning of
the Securities Act (each an "Indemnitee") against any and all losses, claims,
damages, actions, liabilities, costs and expenses (including without limitation
reasonable fees, expenses and disbursements of attorneys and other professionals
documented in writing), joint or several, arising out of or based upon any
violation by the Company of any rule or regulation promulgated under the
Securities Act applicable to the Company and relating to action or inaction
required of the Company in connection with any Registration Statement or
Prospectus, or upon any untrue or alleged untrue statement of material fact
contained in the Registration Statement or any Prospectus, or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, provided, that the Company shall not be
liable to such Indemnitee or any person who participates as an underwriter in
the offering or sale of Registrable Shares or any other person, if any, who
controls such underwriter within the meaning of the Securities Act, in any such
case to the extent that any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense arises out of or is based upon (a) an
untrue statement or alleged untrue statement or omission or alleged omission
made in such Registration Statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with information regarding such Indemnitee or its plan of
distribution or ownership interests which was furnished to the Company for use
in connection with the Registration Statement or the Prospectus contained
therein by such Indemnitee, or (b) such Indemnitee's failure to send or give a
copy of the final prospectus furnished to it by the Company through no fault of
the Company at or prior to the time such action is required by the Securities
Act to the person claiming an untrue statement or alleged untrue statement or
omission or alleged omission if such statement or omission was corrected in such
final prospectus.
6. Conditions to Holders Rights Hereunder. As a condition to the
availability of the registration rights hereunder each Holder shall (a)
cooperate with the Company and furnish to the Company all such information
concerning its plan of distribution and ownership interests with respect to its
Registrable Shares in connection with the preparation of any Registration
Statement and any filings with any state securities commissions as the Company
may reasonably request, (b) deliver or cause delivery of the Prospectus
contained in any Registration Statement to any purchaser of the shares covered
by such Registration Statement from the Holder, and (c) indemnify the Company,
its officers, directors, employees, agents, representatives and affiliates, and
each person,. if any, who controls the Company within the meaning of the
Securities Act, and each other person, if any, subject to liability because of
his connection with the Company, against any and all losses, claims, damages,
actions, liabilities, costs and expenses arising out of or based upon (i) any
untrue statement or alleged untrue statement of material fact contained in
either a Registration Statement or the Prospectus contained therein, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, if and to the extent
that such statement or omission occurs from reliance upon and in conformity with
written information regarding the Holder, its plan of distribution or its
ownership interests, which was
7
<PAGE> 8
furnished to the Company by the Holder expressly for use therein unless such
statement or omission was corrected in writing to the Company, not less than
five (5) business days prior to the date of the final prospectus (as
supplemented or amended, as the case may be), or (ii) the failure by the Holder
to deliver or cause to be delivered the Prospectus contained in any Registration
Statement (as amended. or supplemented, if applicable) furnished by the Company
to the Holder to any purchaser of the shares covered by such Registration
Statement from the Holder through no fault of the Company.
7. Suspension of Registration Requirement.
(a) The Company shall promptly notify each Holder of, and
confirm n writing, the issuance by the SEC of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose. The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of such Registration
Statement at the earliest possible moment.
(b) Notwithstanding anything to the contrary set forth
in this Agreement, the company's obligation under this Agreement to use its best
efforts to cause a Registration Statement and any filings with any state
securities commission to become effective or to amend or supplement a
Registration Statement shall be suspended in the event and during such period as
unforeseen circumstances exist (including without limitation (i) an underwritten
primary offering by the Company if the Company is advised by the underwriters
that the sale of Registrable Shares under a Registration Statement would have a
material adverse effect on the primary offering, or (ii) pending negotiations
relating to, or consummation of, a transaction or the occurrence of an event
that would require additional disclosure of material information by the Company
in a Registration Statement or such filing, as to which the Company has a bona
fide business purpose for preserving confidentiality or which renders the
Company unable to comply with SEC requirements) (such unforeseen circumstances
being hereinafter referred to as a "Suspension Event") that would make it
impractical or unadvisable to cause a Registration Statement or such filings to
become effective or to amend or supplement such Registration Statement, but such
suspension shall continue only for so long as such event or its effect is
continuing but in no event will that suspension exceed ninety (90) days. The
Company shall notify the Holder of the existence and, in the case of
circumstances ref erred to in clause (i) of this Section 7 (b), the nature of
any Suspension Event.
(c) As a condition to the availability of the
registration rights hereunder, each Holder of Registrable Shares whose
Registrable Shares are covered by a Registration Statement filed pursuant to
Section 2 hereof shall, if requested by the Company in the case of a
Company-initiated nonunderwritten offering or if requested by the managing
underwriter or underwriters in a company-initiated underwritten offering, not
effect any public sale or distribution of any of the securities of the Company
of any class included in such Registration Statement, including a sale pursuant
to Rule 144 or Rule 144A under the Securities Act (except as part of such
Company-initiated registration), during the 15-day period prior to, and during
the 60-day period beginning on, the date of effectiveness of each
Company-initiated offering made Pursuant
8
<PAGE> 9
to such Registration Statement, to the extent timely notified in writing by the
Company or the managing underwriters; provided, however, that such 60-day period
shall be extended by the number of days from and including the date of the
giving of any notice pursuant to Section 2(g) or (h) hereof to and including the
date when each seller of Registrable Shares covered by such Registration
Statement shall have received the copies of the supplemented or amended
Prospectus contemplated by Section 2(h) hereof.
8. Black-Out Period. Following the effectiveness of a
Registration Statement and the filings with any state securities commissions, as
a condition to the availability of the registration rights hereunder, the
Holders shall not effect any sales or exchanges of Registrable Shares pursuant
to such Registration Statement or any such filings at any time after they have
received notice from the Company to suspend sales or exchanges as a result of
the occurrence or existence of any Suspension Event so that the Company may
correct or update the Registration Statement or such filing. The Holder may
recommence effecting sales of the Shares pursuant to the Registration Statement
or such filings following further notice to such effect from the Company, which
notice shall be given by the Company not later than five (5) business days after
the conclusion of any such Suspension Event. The Company agrees that notice to
the Holders to suspend sales pursuant to this Section shall be given no more
than one (1) time within any six (6) month period.
9. Additional Shares. The Company, at its option, may register,
under any Registration Statement and any filings with any state securities
commissions filed pursuant to this Agreement, any. number of unissued shares of
Common Stock of the Company or any Common Stock of the Company owned by any
other shareholders of the Company.
10. Contribution. If the indemnification provided for in Sections
5 and 6 is unavailable to an indemnified party with respect to any losses,
claims, damages, actions, liabilities, costs or expenses referred to therein or
is insufficient to hold the indemnified party harmless as contemplated therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, actions, liabilities, costs or expenses
in such proportion as is appropriate to reflect the relative fault of the
Company, on the one hand, and the Indemnitee, on the other hand, in connection
with the statements or omissions which resulted in such losses, claims, damages,
actions, liabilities, costs or expenses as well as any other relevant equitable
considerations. The relative fault of the Company, on the one hand, and of the
Indemnitee, on the other hand, shall be determined by reference to, among other
factors, whether the untrue or alleged untrue statement of a material fact or
omission to state a material fact relates to information supplied by the Company
or by the Indemnitee and the Parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, however, that in no event shall the obligation of any indemnifying
party to contribute under this Section 10 exceed the amount that such
indemnifying party would have been obligated to pay by way of indemnification if
the indemnification provided for under Sections 5 or 6 hereof had been available
under the circumstances.
9
<PAGE> 10
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this Section 10 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph.
Notwithstanding the provisions of this Section 10, no Holder shall be
required to contribute any amount in excess of the amount by which the gross
proceeds from the sale of Shares exceeds the amount of any damages that the
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission. No indemnified party guilty of fraudulent
misrepresentation (within the meaning of section 11(f) of the Securities Act)
shall be entitled to contribution from any indemnifying party who was not guilty
of such fraudulent misrepresentation.
11. No Other Obligation to Register. Except as otherwise expressly
provided in this Agreement, the Company shall have no obligation to the Holders
to register the Registrable Shares under the Securities Act.
12. Amendments and Waivers. The provisions of this Agreement may
not be amended, modified, or supplemented or waived without the prior written
consent of the Company and the Holders holding in excess of sixty-six and two
thirds (66 2/3%) percent of the aggregate number of all Registrable Shares.
13. Notices. Except as set forth below, all notices and other
communications provided for or permitted hereunder shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by telex or
telecopier, registered or certified mail (return receipt requested), postage
prepaid or courier or overnight delivery service to the respective parties at
the addresses known by the Company from the records transmitted to it pursuant
to the Contribution Agreement (or at such other address for any party as shall
be specified by like notice, provided that notices of a change of address shall
be effective only upon receipt thereof), and further provided that in case of
directions to amend the Registration Statement pursuant to Section 2(f) or
Section 6, a Holder must confirm such notice in writing by overnight express
delivery with confirmation of receipt:
If to the Company: Summit Properties Inc.
212 South Tryon Street
Charlotte, NC 28281
Attn: Michael G. Malone, Esq.
Telecopy: (704) 333-8340
Telephone: (704) 334-9905
If to the Holders: At the address known to the Company
pursuant to this Section 13
In addition to the manner of notice permitted above, notices given pursuant to
Sections 2, 7 and 8 hereof may be effected telephonically and confirmed in
writing thereafter in the manner described above. only those Holders who
initially respond to the Company requesting registration
10
<PAGE> 11
of their Registrable Shares shall be entitled to receive further notification
relating to the Registration Statement that is the subject of the initial
notification.
14. Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company. This
Agreement may not be assigned by any Holder and any attempted assignment hereof
by any Holder will be void and of no effect; provided, however, that any Holder
may assign its rights hereunder to any individual, partnership, corporation,
trust or other legal entity to whom such Holder has transferred any of its Units
or Shares (each a "Permitted Assignee"). If any transferee of any Holder shall
acquire Registrable Shares in any manner, whether by operation of law or
otherwise, such Registrable Shares shall be held subject to all of the terms of
this Agreement, and by taking and holding such Registrable Shares such
transferee shall be conclusively deemed to have agreed to be bound by and to
perform all of the terms and provisions of this Agreement and such person shall
be entitled to receive the benefits hereof.
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Maryland applicable to
contracts made and to be performed wholly within said State.
16. Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in any way
impaired thereby, it being intended that all of the rights and privileges of the
parties hereto shall be enforceable to the fullest extent permitted by law.
17. Entire Agreement. This Agreement is intended by the parties
as a final expression of their agreement and intended to be the complete and
exclusive statement of the agreement and under-standing of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to such subject matter. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
11
<PAGE> 12
IN WITNESS WHEREOF, the Company has executed this Agreement as of the
date first written above.
SUMMIT PROPERTIES INC.
By: /s/ Michael G. Malone
-------------------------------
Name: Michael G. Malone
Title: Senior Vice President
12
<PAGE> 13
SCHEDULE 1
<PAGE> 14
CEDAR RIDGE I
Dr. Gerson Asrael
6508 Trenton Place
Charlotte, NC 28211
Rebecca H. Gordon
9219 Hampton Oaks Lane
Charlotte, NC 28270-0452
Eloise Y. Spangler
926 Elizabeth Road
Shelby, NC 28150
Dr. Andrew P. Collins
3115 Academy Road
Durham, NC 27707
Richard E. Killough
16112 Weatherly Way
Huntersville, NC 28078
Franz J. Zimmer
12033 Lazy Willow Lane
Charlotte, NC 28217
John G. Golding
3913 Beresford Road
Charlotte, NC 28211
Earl W. Spangler
P.O. Box 2492
Shelby, NC 28150
Sadler H. Barnhardt
2123 Hastings Dr.
Charlotte, NC 28207
Donald H. Jones
3101 Valencia Terrace
Charlotte, NC 28211
Bernard A. Zimmer
1324 Waxhaw-Marvin Rd.
Waxhaw, NC 28110
Dr. Robert H. Gaither
602 East Street
Albemarle, NC 28001
P.V. Phillips
1406 Brenner Park Drive
Venice, FL 34292
Thomas Barnhardt, III
600 Llewellyn Place
Charlotte, NC 28207
Dr. Richard D. Hill
8405 Rego Street
Charlotte, NC 28216
Owen H. Whitfield
2523 Red Fox Trail
Charlotte, NC 28211
Betty S. Dedmon
P.O. Box 1526
Shelby, NC 28151
Frederick C. Meekins
621 Westbury Road
Charlotte, NC 28211
James H. Barnhardt 3/31/87 Trust
Mr. James H. Barnhardt, Jr.
Barnhardt Manufacturing
P.O. Box 34276
Charlotte, NC 28234
W. M. Herndon
P.O. Box 1608
Kings Mtn., NC 28086
H. Allen Tate, Jr.
Alta Builders, Inc.
6620 Fairview Road
Charlotte, NC 28210
James P. Crews
6440 Brandonwood Court
Charlotte, NC 28226
Terry G. Link
421 Hempstead Place
Charlotte, NC 28207
John Crosland, Jr.
135 Scaleybark Rd.
Charlotte, NC 28209
<PAGE> 15
PARTNER DETAIL LISTING BY PARTNERSHIP
<TABLE>
<CAPTION>
PARTNER NAME PARTNER TYPE PERCENTAGE CONTROL
CEDAR RIDGE APARTMENT INVESTORS - FORMED 8/3/77
<S> <C> <C> <C>
CGI GEN 1.005000
Clark, Molly C. 15.214568
Crosland, J. III 15.214568
Crosland, J. Jr. 57.167343
Crosland, Lillian Trust f/b/o JCIII 6.201760
Crosland, Lillian Trust f/b/o MCC 6.201761
100.000000
Cedar Ridge Investors Various LTD 88.768000
Crosland, J. Jr. LTD 6.000000
Tate, A. 4.227000
CEDAR RIDGE APARTMENT INVESTORS NO. 2 - FORMED 12/1/93
CGI LTD 49.000000
Clark, Molly C. 15.214568
Crosland, J. III 15.214568
Crosland, J. Jr. 57.167343
Crosland, Lillian Trust f/b/o JCIII 6.201760
Crosland, Lillian Trust f/b/o MCC 6.201761
100.000000
CGI GP GEN 1.000000
Crosland, J. Jr. LTD 1.000000 N
JMJ Associates Limited Partnership LTD 49.000000
Clark, Molly C. 33.500000
Crosland, J. III 33.500000
Crosland, J. Jr. 33.000000
100.000000
</TABLE>
<PAGE> 16
CREEKSIDE ASSOCIATES
John Crosland, Jr.
135 Scaleybark Rd.
Charlotte, NC 28209
Gerald Strait Workman
P.O. Box 1325
Manteo, NC 27954
J. Frank Newton
5241 Haynes Hall Place
Charlotte, NC 28270
Bailey Patrick, Jr.
352 Eastover Rd.
Charlotte, NC 28207
Robert W. Donaldson, Jr.
2531 Forest Drive
Charlotte, NC 28211
The Crosland Group, Inc.
135 Scaleybark Rd.
Charlotte, NC 28209
Douglas L. Boone
4508 Grandfather's Lane
Charlotte, NC 28216
Roy H. Michaux, Jr.
4234 Belkap Rd.
Charlotte, NC 28211
B. D. Farmer, III
3810 Silverbell Drive
Charlotte, NC 28211
Paul R. Leonard, Jr.
150 Prestwood Lane
Mooresville, NC 28115
<PAGE> 17
PARTNER DETAIL LISTING BY PARTNERSHIP
<TABLE>
<CAPTION>
PARTNER NAME PARTNER TYPE PERCENTAGE CONTROL
CREEKSIDE ASSOCIATES - FORMED 1/1/81
<S> <C> <C> <C>
CGI 15.000000
Clark, Molly C. 15.214568
Crosland, J. III 15.214568
Crosland, J. Jr. 57.167343
Crosland, Lillian Trust f/b/o JCIII 6.201760
Crosland, Lillian Trust f/b/o MCC 6.201761
100.000000
Creekside Various 35.000000
Crosland, J. Jr. 50.000000
</TABLE>
<PAGE> 18
CROSS CREEK ASSOCIATES
Mr. Charles C. Bollinger
Northwest Blvd.
Newton, NC 28658
Mr. Timothy A. Braswell
5433 Challisford Lane
Charlotte, NC 28226
Dr. W. Lainar Harrell, Jr.
1237 Brookwood Dr.
Shelby, NC 28150
Dr. James Forrester
P.O. Box 457
Stanley, NC 28164
Mr. David E. Harrold
209 E. Lakeshore Dr., Studio E
Chicago, IL 60611
David R. Boozer
107 Shoreline Drive
Stanley, NC 28164
Mr. L. Gordon Pfefferkorn 333
Pine Valley Dr.
Winston-Salem, NC 27104
Mr. Charles H. Griffin
S. Elm Street
Marshville, NC 28103
Mr. John Crosland, Jr.
135 Scaleybark Rd.
Charlotte, NC 28209
B.D. Farmer, III
3810 Silver Bell Dr.
Charlotte, NC 28211
Mr. William A. Allen
200 Colville Rd.
Charlotte, NC 28207
Mr. L.L. Mack
2011 Fromby Court
Charlotte, NC 28211
Mr. Leroy Robinson
2127 Cortelyou Rd.
Charlotte, NC 28211
Ms. Jean H. Lamb
R.J. McEwen & Son, Inc.
P.O. Box 23070
Charlotte, NC 28212
Dr. Richard D. Hill
8405 Rego St.
Charlotte, NC 28216
Mr. T. Carl Dedmon
P.O. Box 1146
Shelby, NC 28151
Mr. Carl L. Morrison
1422 S. Morgan St.
Shelby, NC 28150
Mr. William F. Mabry
P.O. Box 280
Shelby, NC 28150
The Crosland Group, Inc.
135 Scaleybark Rd.
Charlotte, NC 28209
Cross Creek Associates
Ms. Hazel Sterrett Allen
200 Colville Rd.
Charlotte, NC 28207
Mr. Albert F. Sloan
3826 Silverbell Rd.
Charlotte, NC 28211
James H. Barnhardt 3/31/87 Trust
Mr. James H. Barnhardt, Jr.
Barnhardt Manufacturing Co.
P.O. Box 34276
Charlotte, NC 28234
Estate of Mrs. Frances M. Hunter
c/o Mr. William S. Lowndes
Horack, Talley, Pharr & Lowndes
2600 One First Union Center
Charlotte, NC 28202-6038
Mr. Kenneth M. Bames
3516 Brunswick Court
Winston-Salem, NC 27104
Mr. Jack R. Miller
2411 Valencia Terrace
Charlotte, NC 28226
Mr. Brant R. Snavely, Jr.
City Center West, Suite 200
633 W. Fourth St.
Winston-Salem, NC 27104
Mr. Earl W. Spangler
P.O. Box 2492
Shelby, NC 28150
Mr. Paul R. Leonard, Jr.
150 Prestwood Lane
Mooresville, NC 28115
Mr. B.D. Farmer III
3810 Silver Bell Drive
Charlotte, NC 28211
<PAGE> 19
PARTNER DETAIL LISTING BY PARTNERSHIP
<TABLE>
<CAPTION>
PARTNER NAME PARTNER TYPE PERCENTAGE CONTROL
CROSS CREEK ASSOCIATES - FORMED 8/22/78
<S> <C> <C> <C> <C>
CGI GEN 1.000000
Clark, Molly C. 15.214568
Crosland, J. III 15.214568
Crosland, J. Jr. 57.167343
Crosland, Lillian Trust f/b/o JCIII 6.201760
Crosland, Lillian Trust f/b/o MCC 6.201761
100.000000
Crosland, J. Jr. LTD 4.500000 N
Cross Creek Various LTD 94.500000
</TABLE>
<PAGE> 20
HAMILTON RIDGE ASSOCIATES
John & Patricia Ackerman
1818 Manor Hill
St. Louis, MO 63141
Eugene E. Brucker
4 Clayprice Ct.
St. Louis, MO 63124
James H. Donnewald
P.O. Box 187
1220 Walnut St.
Breese, IL 62230
Francis J. Intagliata
10666 Mentz Hill Acres
St. Louis, MO 63128
Kenneth M. Murphy
1603 N. Mattis
Champaign, IL 61820
Raymond E. Rowland
Revocable Trust
710 S. Hamley Apt 21A
Clayton, MO 63105
Emil A. Stange
Rt. 3 Box 382
Rogersville, MO 65742
Ruthanne Jones Wise
407 Yacht Club Drive
Rockwall, TX 75087
Mr. Martin J. Katz
1035 Pear St., 5th Floor
Boulder, CO 80302
Sam J. Apichai
1444 Post Court
Decatur, IL 62521
Crosland Group, Inc.
125 Scaleybark Rd.
Charlotte, NC 28209
William & Cornelia Frank
7 Chatfield Place
St. Louis, MO 631411
Dr. Duncan A. Killen
1909 W. 70th St.
Shawnee Miss., KS 66208
Eugene V. Rankin
230 Pebble Acres Drive
St. Louis, MO 63141
Robert W. Sauer Grantor Trust
c/o Robert W. Sauer, Trustee
14300 Conway Meadows Ct.,
East Chesterfield, MO 63107
Roberta K. Symonds
2495 W. Highway 161
Nelleville, IL 62221
Ramond E. Rowland, Jr.
30 Clermont-Lane
St. Louis, MO 63124
Mr. Aron B. Katz
1035 Pear St., 5th Floor
Boulder, CO 80302
James & Sybil Blumenberg
2 Kehrsboro Ct.
Chesterfield, MO 63017
Mrs. Alvina Donnewald
1071 Randolph
Carlyle, IL, 62231
Harvey & Cynthia P. Frohlichstein
140 Executive Estates
St. Louis, MO 63141
Jack Krause
433 Baker Avenue
Webster Groves, MO 63119
Sam J. Rosenbloom
14241 Forest Crest Dr.
Chesterfield, MO 63017
Audrey F. Smith
c/o Larry Williams
The Boatmen's Trust Co.
P.O. Box 14737
St. Louis, MO 63178
Nick Tacony
9433 Firebush Dr.
St. Louis, MO 63126
Dr. John B. Summers
12658 Alswell Lane
St. Louis, MO 63128
Ms. Margaret E. Katz
1035 Pear St., 5th Floor
Boulder, CO 80302
Phyllis A. Katz
1035 Pear St., 5th Floor
Boulder, CO 80302
<PAGE> 21
PARTNER DETAIL LISTING BY PARTNERSHIP
<TABLE>
<CAPTION>
PARTNER NAME PARTNER TYPE PERCENTAGE CONTROL
HAMILTON (EASTCHESTER) RIDGE ASSOCS. - FORMED 3/17/80
<S> <C> <C> <C> <C>
CGI 20.000000
Clark, Molly C. 15.214568
Crosland, J. III 15.214568
Crosland, J. Jr. 57.167343
Crosland, Lillian Trust f/b/o JCIII 6.201760
Crosland, Lillian Trust f/b/o MCC 6.201761
100.000000
Hamilton (Eastchester) Various LTD 80.000000 N
</TABLE>
<PAGE> 22
SCHEDULE 3
to Agreement to Contribute
Dated as of February 13, 1995
by and among
the Owners, the Crosland Partnerships,
Summit Properties Partnership, L.P.,
Summit Properties Inc., and
The Title Company of North Carolina, Inc.
PARTNER OWNERS
<TABLE>
<CAPTION>
PROJECT PARTNER OWNERS
<S> <C>
The Arbors General:
Crosland Arbors Associates Limited Partnership3
Limited:
N/A
Cedar Ridge (Phase II) General:
(i) The Crosland Group, Inc.
Limited:
(i) The Crosland Group, Inc.
(ii) John Crosland, Jr.
(iii) JMJ Associates Limited Partnership
Foxcroft East General:
(i) The Crosland Group, Inc.
Limited:
N/A
Oak Creek General:
(i) The Crosland Group, Inc.
Limited:
(i) The Crosland Group, Inc.
(ii) JMJ Associates Limited Partnership
Sherwood Colony General:
(i) The Crosland Group, Inc.
Limited:
(i) The Crosland Group, Inc.
(ii) JMJ Associates Limited Partnership
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
PROJECT PARTNER OWNERS
<S> <C>
Simsbury General:
(i) Crosland-Erwin & Associates, No. VI4
Limited:
N/A
Westbury Lake General:
(i) Crosland Investors, Inc.
Limited:
(i) JMJ Associates Limited Partnership
(ii) Roger M. Lewis
(iii) Charles E. Teal
(iv) Justin F. Little
</TABLE>
- ------------------------
3. In addition to Crosland Arbors Associates Limited Partnership, Summit
Arbors Apartments Limited Partnership ("SAALP") owns an interest in the
entity which owns The Arbors. Pursuant to Section 3.19 of the
Agreement, The Crosland Group, Inc., or an affiliate, will
simultaneously with closing attempt to acquire all of SAALP's interest
and convey same to the Partnership at the same cash price for such
interest as set forth in Section 2.1 of the Agreement.
4. In addition to Crosland-Erwin & Associates, No. VI, Nationwide Life
Ins. Co. ("Nationwide") owns an interest in the entity which owns
Simsbury. Pursuant to Section 3.19 of the Agreement, The Crosland
Group, Inc., or an affiliate, will simultaneously with closing attempt
to acquire all of Nationwide's interest and convey same to the
Partnership at the same cash price for such interest as set forth in
Section 2.1 of the Agreement.
<PAGE> 24
SCHEDULE 4
to Agreement to Contribute
Dated as of February 13, 1995
by and among
the Owners, the Crosland Partnerships,
Summit Properties Partnership, L.P.,
Summit Properties Inc., and
The Title Company of North Carolina, Inc.
DIRECT OWNERS
<TABLE>
<CAPTION>
PROJECT OWNERS
<S> <C>
Cedar Ridge (Phase I) Cedar Ridge Apartment Investors, a North Carolina
Limited Partnership
Creekside Creekside Associates, a North Carolina Limited
Partnership
Cross Creek Cross Creek Associates, a North Carolina Limited
Partnership
Eastchester Ridge Hamilton Ridge Associates, a North Carolina Limited
Partnership
Westbury Park Westbury Park Associates, a North Carolina Limited
Partnership
Westbury Woods Westbury Woods Associates, a North Carolina
Limited Partnership
</TABLE>
<PAGE> 25
EXHIBIT A
[DATE]
FORM OF AUTHORIZING CERTIFICATE
Each of the undersigned Holders, together holding at least ten percent
(10%) of the aggregate number of all of the Holders' Registrable Shares, hereby
certifies that:
1. Such Holder's name is set forth below, and the number of
Registrable Shares held by such Holder and the number of Registrable Shares, if
different, such Holder would like to have registered is set forth opposite such
Holder's name.
<TABLE>
<CAPTION>
NUMBER OF REGISTRABLE SHARES NUMBER OF REGISTRABLE SHARES DESIRED TO
BE REGISTERED
<S> <C>
</TABLE>
2. Such Holder is requesting the registration of only those
shares of Common Stock received by such Holder upon the redemption of its Units
pursuant to the Partnership Agreement.
EXECUTED as of the date set forth above.
[Signature of Holders]
<PAGE> 1
EXHIBIT 12
Summit Properties Inc.
Calculation of Ratios of Earnings to Fixed Charges
(Dollars In Thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C>
Income (loss) before minority interest of
unitholders in Operating Partnership and
extraordinary items $31,934 $21,187 $15,051 $ 8,527 ($ 5,858)
Interest:
Expense incurred 20,902 16,113 13,715 13,006 25,286
Amortization of deferred financing costs 1,057 1,025 1,087 1,061 1,114
------- ------- ------- ------- --------
Total $53,893 $38,325 $29,853 $22,594 $ 20,542
======= ======= ======= ======= ========
Fixed charges:
Interest expense $20,902 $16,113 $13,715 $13,006 $ 25,286
Interest capitalized 5,876 4,266 3,110 686 0
Rental fixed charges 115 124 134 124 123
Amortization of deferred financing costs 1,057 1,025 1,087 1,061 1,114
------- ------- ------- ------- --------
Total $27,950 $21,528 $18,046 $14,877 $ 26,523
======= ======= ======= ======= ========
Ratio of earnings to fixed charges $ 1.93 $ 1.78 $ 1.65 $ 1.52 $ 0.77
======= ======= ======= ======= ========
</TABLE>
<PAGE> 1
EXHIBIT 21.1
Subsidiaries of Summit Properties Inc.
1. Summit Properties Partnership, L.P., a North Carolina limited partnership
2. Summit Financing, Inc., a North Carolina corporation
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,563
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 913,033
<DEPRECIATION> 105,979
<TOTAL-ASSETS> 825,293
<CURRENT-LIABILITIES> 0
<BONDS> 474,673
0
0
<COMMON> 234
<OTHER-SE> 310,934
<TOTAL-LIABILITY-AND-EQUITY> 825,293
<SALES> 116,006
<TOTAL-REVENUES> 116,677
<CGS> 0
<TOTAL-COSTS> 41,758
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,959
<INCOME-PRETAX> 27,116
<INCOME-TAX> 0
<INCOME-CONTINUING> 27,116
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,116
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.17
</TABLE>
