FILED PURSUANT TO RULE 424(B)(2)
FILE NUMBER 333-27221
PROSPECTUS SUPPLEMENT
(to Prospectus dated May 22, 1997)
1,057,269 Shares
UNITED DOMINION REALTY TRUST, INC.
Common Stock
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All of the 1,057,269 shares of Common Stock, par value $1.00 per share
(the "Common Stock"), of United Dominion Realty Trust, Inc. (the "Company")
offered hereby are being offered by the Company. The Common Stock is listed on
the New York Stock Exchange (the "NYSE"). On March 24, 1998, the last reported
sale price of the Common Stock on the NYSE was $14.1875 per share.
Wheat First Securities, Inc. (the "Underwriter") has agreed to purchase
the Common Stock offered hereby from the Company at a price of $13.4781 per
share, resulting in aggregate proceeds to the Company of $14,225,003.74, after
deducting estimated expenses of $25,000 payable by the Company, subject to the
terms and conditions set forth in the Underwriting Agreement. The Underwriter
intends to sell the Common Stock to Van Kampen American Capital for an aggregate
price of $14,400,003.78. Van Kampen American Capital intends to deposit the
Common Stock, together with the common stock of other entities also acquired
from the Underwriter, into Wheat First Union REIT Income and Growth Trust,
Series 1 (the "Trust"), in exchange for Units in the Trust. The Company has
agreed to indemnify the Underwriter against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities Act").
See "Underwriting."
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The shares of Common Stock are offered by the Underwriter, subject to
prior sale, when, as and if delivered to and accepted by it. It is expected that
delivery of the shares will be made in Richmond, Virginia on or about March 27,
1998.
----------------
WHEAT FIRST UNION
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The date of this Prospectus Supplement is March 24, 1998
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
COMMON STOCK, INCLUDING PURCHASES OF THE COMMON STOCK TO STABILIZE THEIR MARKET
PRICES. FOR A DESCRIPTION OF THESE ACTIVITIES SEE "PLAN OF DISTRIBUTION" IN THE
ACCOMPANYING PROSPECTUS.
THE COMPANY
United Dominion Realty Trust, Inc. (the "Company"), a Virginia
corporation headquartered in Richmond, Virginia, is a self-administered equity
real estate investment trust, whose business is the ownership and operation of
apartment communities located primarily in the Sunbelt region of the United
States. The Company is a fully integrated real estate company with acquisition,
development and property management capabilities. At December 31, 1997, the
Company's portfolio consisted of 225 apartment communities containing 62,789
apartment homes, four other properties and one parcel of undeveloped land. The
Company's apartment portfolio also included three apartment communities
containing 836 apartment homes under development and two additions to existing
apartment communities that, when completed, will add an additional 228 apartment
homes to its portfolio. Its Common Stock is listed on the NYSE under the symbol
"UDR."
RECENT DEVELOPMENTS
ASR Merger. The Company has entered into an agreement to acquire ASR
Investments Corporation ("ASR") in a statutory merger (the "ASR Merger") for
approximately 8,413,000 shares of Common Stock. ASR is a REIT headquartered in
Tucson, Arizona, and has apartment communities located in the Southwest and
Pacific Northwest. The transaction, which has a value, including debt of ASR to
be acquired in the ASR Merger, of approximately $335 million, is subject to
approval of ASR's stockholders, and if approved is expected to be consummated in
late March of 1998. The ASR Merger is subject to customary closing conditions
and there is no guaranty that the ASR Merger will be consummated.
Acquisitions. During 1997, the Company acquired 28 apartment
communities containing 8,524 apartment homes (net of one resold) at a total cost
of approximately $342 million, including closing costs.
Development Activity. At December 31, 1997, the Company had three
apartment communities (836 apartment homes) under development and two additions
(440 apartment homes, 212 of which were completed) to existing apartment
communities under development.
The developments are located in Nashville, Tennessee (360 apartment
homes), Fort Myers, Florida (260 apartment homes) and Houston, Texas (216
apartment homes). The two additions are located in Dallas, Texas (260 apartment
homes, 212 of which were completed as of December 31, 1997) and Wilmington,
North Carolina (180 apartment homes).
There can be no assurance that these proposed developments and
additions will be completed as planned.
Dispositions. During 1997, the Company sold 12 apartment communities
containing 2,570 apartment homes and one shopping center at an aggregate sales
price of $68.4 million.
Financings. During 1997, the Company completed the following financing
activities: (i) the issuance of 4,000,000 shares of its common stock at $15.75
per share, raising net proceeds of $59.4 million which was used to repay an
unsecured credit facility, (ii) the issuance of $125 million of 7.25% Notes due
January 15, 2007, the net proceeds of which were used to curtail bank debt and
purchase apartment communities, and (iii) the sale of 6,000,000 shares of 8.60%
Series B Redeemable Preferred Stock at $25 per share, netting proceeds of $145.1
million which was primarily used to repay short-term bank debt. In addition, the
Company received approximately $39.7 million of proceeds under its Dividend
Reinvestment and Stock Purchase Plan.
On August 4, 1997, the Company closed on a new $200 million three year
unsecured revolving credit facility (the "Credit Facility"), a $50 million one
year unsecured line of credit (the "Line of Credit") and a $15 million
uncommitted line of credit with a major U.S. financial institution. Under the
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Credit Facility, pricing is based upon the higher of the Company's senior
unsecured debt ratings from S&P and Moody's, which are currently BBB+ and Baal,
respectively. The Credit Facility also includes a $100 million competitive bid
option that allows the Company to solicit bids from participating banks at rates
below the contractual rate. The Credit Facility and Line of Credit are subject
to customary financial covenants and limitations.
FASB 128. In the fourth quarter of 1997, the Company adopted Financial
Accounting Standards Board Statement No. 128 "Earnings per Share" ("FASB 128"),
and accordingly, its financial presentation for that period, year end 1997 and
all subsequent periods will include disclosures of basic and diluted earnings
per common share. Basic and diluted earnings per common share computed in
accordance with FASB 128 do not differ materially from net income per common
share as presented for all periods presented in documents incorporated by
reference in the Prospectus.
USE OF PROCEEDS
The net cash proceeds to the Company from the sale of the shares of
Common Stock offered hereby are estimated to be approximately $14,225,003.74,
after deducting the estimated expenses of $25,000 payable by the Company. The
Company intends to use the proceeds for repayment of indebtedness, the
acquisition of properties and general corporate purposes. Pending such
application, the Company will invest the net proceeds in short-term money market
instruments bearing interest at market rates.
UNDERWRITING
Subject to the terms and conditions contain in an Underwriting
Agreement dated March 24, 1998 (the "Underwriting Agreement"), between the
Company and Wheat First Securities, Inc. (the "Underwriter"), the Company has
agreed to sell to the Underwriter and the Underwriter has agreed to purchase
from the Company, 1,057,269 shares of Common Stock. The Underwriting Agreement
provides that the Underwriter's obligation to purchase the Common Stock is
subject to the satisfaction of certain conditions, including the receipt of
certain legal opinions. The nature of the Underwriter's obligation is such that
it is committed to purchase all of the shares of Common Stock if any shares are
purchased.
The Underwriter intends to sell the Common Stock to Van Kampen American
Capital, which intends to deposit the Common Stock, along with the common stock
of other entities purchased from the Underwriter, with the Trustee of the Trust
in exchange for units in the Trust. The Underwriter is not an affiliate of Van
Kampen American Capital or the Trust. The Underwriter intends to sell the Common
Stock to Van Kampen American Capital at an aggregate purchase price of
$14,400,003.78. It is anticipated that the Underwriter will also participate in
the distribution of the units in the Trust and will receive compensation of
3.25% of the public offering price of the units sold by it.
Pursuant to the Underwriting Agreement, the Company has agreed to
indemnify the Underwriter against certain liabilities, including liabilities
under the Securities Act, or to contribute to payments the Underwriter may be
required to make in respect thereof.
In the ordinary course of business, the Underwriter may from time to
time provide investment banking, financial advisory and commercial banking
services to the Company and its affiliates for which customary compensation will
be received.
LEGAL MATTERS
The legality of the Common Shares offered hereby will be passed upon
for the Company by Hunton & Williams, Richmond, Virginia, and for the
Underwriter by Chapman and Cutler. Chapman and Cutler will rely on the opinion
of Hunton & Williams as to certain matters of Virginia law.
S-3
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PROSPECTUS
$674,842,500
[LOGO]
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
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United Dominion Realty Trust, Inc. (the "Company") intends to issue from
time to time its (i) unsecured senior or subordinated debt securities (the "Debt
Securities"), (ii) shares of Preferred Stock, no par value ("Preferred Stock"),
and (iii) shares of Common Stock, $1 par value ("Common Stock"), having an
aggregate initial public offering price not to exceed $674,842,500 or the
equivalent thereof in one or more foreign currencies or composite currencies,
including European Currency Units, on terms to be determined at the time of
sale. The Debt Securities, the Preferred Stock and the Common Stock offered
hereby (collectively, the "Offered Securities") may be offered, separately or as
units with other Offered Securities, in separate series in amounts, at prices
and on terms to be determined at the time of sale and to be set forth in a
supplement to this Prospectus (a "Prospectus Supplement").
The Debt Securities will be direct unsecured obligations of the Company and
may be either senior Debt Securities ("Senior Securities") or subordinated Debt
Securities ("Subordinated Securities"). The Senior Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Company. The
Subordinated Securities will be subordinated to all existing and future Senior
Debt of the Company, as defined. See "Description of Debt Securities."
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable, (i) in the case of Debt
Securities, the specific designation, aggregate principal amount, currency,
denominations, maturity, priority, interest rate, time of payment of interest,
terms of redemption at the option of the Company or repayment at the option of
the holder or for sinking fund payments, terms for conversion into or exchange
for other Offered Securities and the initial public offering price; (ii) in the
case of Preferred Stock, the series designation and number of shares and the
dividend, liquidation, redemption, conversion, voting and other rights and the
initial public offering price; (iii) in the case of Common Stock, the initial
public offering price; and (iv) in the case of all Offered Securities, whether
such Offered Securities will be offered separately or as a unit with other
Offered Securities. In addition, such specific terms may include limitations on
direct or beneficial ownership and restrictions on transfer of the Offered
Securities, in each case as may be appropriate to preserve the status of the
Company as a qualified real estate investment trust ("REIT") under the Internal
Revenue Code of 1986, as amended (the "Code").
The applicable Prospectus Supplement will also contain information, where
applicable, concerning certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered thereby.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company or to or through underwriters or dealers. If
any designated agents or any underwriters are involved in the sale of Offered
Securities, they will be identified and their compensation will be described in
the applicable Prospectus Supplement. See "Plan of Distribution." No Offered
Securities may be sold without delivery of the applicable Prospectus Supplement
describing such Offered Securities and the method and terms of the offering
thereof.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------------------
THE DATE OF THIS PROSPECTUS IS MAY 22, 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
its Regional Offices at Suite 1400, 500 West Madison Street, Chicago, Illinois
60661 and Suite 1300, 7 World Trade Center, New York, New York 10048, and can
also be inspected and copied at the offices of The New York Stock Exchange (the
"NYSE"), 20 Broad Street, New York, New York 10005. Copies of such material can
be obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of the prescribed fees. The
Commission maintains a Web site that contains reports, proxy and information
statements and other information regarding the Company and other registrants
that file electronically with the Commission. The address of such site is
http://www.sec.gov.
This Prospectus is part of a registration statement on Form S-3 (together
with all amendments and exhibits, the "Registration Statement") filed by the
Company with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules of the Commission. For further information, reference
is made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents (File No. 1-10524) filed by the Company with the
Commission under the Exchange Act are hereby incorporated by reference in this
Prospectus: (i) the Company's annual report on Form 10-K for the year ended
December 31, 1996, filed on March 31, 1997; (ii) the Company's quarterly report
on Form 10-Q for the quarter ended March 31, 1997, filed on May 15, 1997; (iii)
the Company's current report on Form 8-K dated August 15, 1996, filed on August
30, 1996; (iv) the Company's current report on Form 8-K dated October 31, 1996,
filed on November 15, 1996; (v) the Company's current report on Form 8-K dated
December 31, 1996, filed on January 15, 1997, including the Company's Form 8K/A
No. 1 filed on March 17, 1997; (vi) the Company's current report on Form 8-K
dated January 21, 1997, filed on January 21, 1997; and (vii) the descriptions of
the Common Stock and the Preferred Stock contained in the Company's registration
statements on Form 8-A dated April 19, 1990 and April 24, 1995, respectively,
filed under the Exchange Act, including any amendment or reports filed for the
purpose of updating such descriptions. All documents filed by the Company
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of the offering of all of the Offered Securities shall be deemed to
be incorporated by reference herein.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
in any accompanying Prospectus Supplement relating to a specific offering of
Offered Securities or in any other subsequently filed document, as the case may
be, which also is or is deemed to be incorporated by reference herein, modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any accompanying Prospectus Supplement.
The Company will provide on request and without charge to each person to
whom this Prospectus is delivered a copy (without exhibits) of any or all
documents incorporated by reference into this Prospectus. Requests for such
copies should be directed to United Dominion Realty Trust, Inc., 10 South 6th
Street, Richmond, Virginia 23219-3802, Attention: Investor Relations (telephone
804/780-2691).
THE COMPANY
United Dominion Realty Trust, Inc. is a self-administered equity REIT
formed in 1972 which acquires, repositions, develops, manages and selectively
sells apartment homes for its own portfolio in the Sunbelt region of the United
States.
The Company is an owner and operator of primarily middle income apartment
communities across the Sunbelt region, which it believes will enjoy population
and job growth above the national average. The Company operates in 22 major
markets, dispersed throughout a 15-state area extending from Delaware to Nevada,
where it seeks to be a market leader by operating a sufficiently sized portfolio
of apartments within each market. The Company believes this market
diversification increases investment opportunities and decreases the risks
associated with concentration in cyclical local markets. At May 9,
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1997, the Company's largest apartment market was Dallas, Texas, where it owned
13% of its apartment homes. Excluding Dallas, Texas, the Company did not own
more than 6% of its apartment homes in any one market. At May 9, 1997, the
Company owned 217 apartment communities containing 59,021 completed apartment
homes (including 11 apartment communities containing 2,556 apartment homes
classified as real estate held for disposition) and 1,196 apartment homes under
development.
The Company has experienced significant growth during the past several
years, increasing the number of apartment homes owned by 327% since 1992. During
1996, the Company completed a record number of apartment acquisitions, adding a
total of 22,032 apartment homes at a total cost of approximately $881 million.
The 1996 acquisitions included the statutory merger with South West Property
Trust Inc. (the "South West Merger"), which added 44 apartment communities
containing 14,320 completed apartment homes and 675 under development, at an
aggregate cost of approximately $560 million. Another acquisition added a
portfolio of 18 apartment communities containing 4,508 apartment homes, at an
aggregate cost of approximately $182 million.
The Company's current objective is to be a major apartment owner in the
larger Sunbelt markets by focusing on the following strategies:
ACQUISITIONS. The Company's investment strategy hinges on acquiring
apartment communities where it can add value. The Company focuses on
acquiring two types of apartment communities: (i) Class B+ to near Class A
properties built since 1980 where the investment (purchase price plus
planned improvements) represents a significant discount to replacement
cost; and (ii) well located, pre-1980s communities that can be upgraded and
repositioned for the longer term.
PORTFOLIO ACQUISITIONS AND MERGERS. The Company has been a major
participant in consolidation within the apartment industry, having acquired
apartment portfolios in each of the last three years and completed the
South West Merger on December 31, 1996. The Company expects to continue to
participate in the consolidation process as an acquirer of other apartment
portfolios and/or apartment REITs when such transactions are accretive to
earnings and can enhance dividend growth and shareholder value.
DEVELOPMENT. Consistent with the Company's acquisition strategy,
apartment home development activity will be primarily focused in its major
markets through investments in site locations favorable for new development
and additions to existing apartment communities. The capability to develop
is another resource for growth in the Company's major markets.
EXISTING COMMUNITIES. The Company seeks to achieve income growth from
its portfolio of mature apartment communities by increasing rental revenues
while maintaining occupancy and controlling operating expenses. The Company
also has a program to upgrade its older apartment communities. These
upgrades are designed to enhance rent growth and add value to the apartment
communities.
SALES. The Company continually assesses its real estate portfolio in
order to make hold, upgrade or sell decisions on each of its apartment
communities. The Company's strategy is to selectively sell certain
apartment communities that no longer meet the long term investment
objectives that have been established for its apartment portfolio due to
size, location, age or projected earnings potential.
FINANCINGS. The Company intends to maintain what management believes
is a conservative capital structure. Prior to 1996, the Company generally
managed its debt at levels at or below 40% of total market capitalization
(debt and equity). However, in 1996, management decided to increase the
proportion of debt in its capital structure to approximately 45% in order
to take advantage of long term borrowing rates which were at historical
lows.
In 1995, the Company organized United Dominion Realty, L.P. (the "Operating
Partnership") to assist the Company in competing for acquisitions of properties
that meet the Company's investment strategies from seller partnerships, some or
all of whose partners may wish to defer taxation of gain realized on sale
through an exchange of partnership interests. As of May 15. 1997, the Company
had acquired three apartment communities and land to develop an additional
apartment community using the Operating Partnership and had transferred seven of
its Tennessee properties into the Operating Partnership, and the Operating
Partnership was 98% owned by the Company.
The Company has an Eastern Division and a Western Division to divide
apartment operations, acquisitions and development geographically. Because the
company operated only in the Southeast and Mid-Atlantic prior to the South West
Merger, its Eastern Division today represents approximately 75% of its revenues
and apartment homes. The Eastern Division is divided into three regions,
Northern, Southern and Florida, respectively headquartered in Richmond, Atlanta
and Orlando.
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Management believes that a region can operate approximately 30,000 apartment
homes. The largest region today, the Northern Region, operates approximately
18,000 apartment homes. The management team in each region includes a director
of apartment operations, a manager of property improvements, an asset manager
and a senior acquisitions analyst. Regional teams were first organized in 1995
to move decision making closer to the community and customer level. The Company
believes that the regional concept can allow the Company to effectively operate
200,000 apartment homes or more. As the Western Division grows, it will also be
divided into regions.
The Company seeks to provide its shareholders with regularly increasing
distributions and stock price appreciation. The Company has paid quarterly
distributions to its shareholders continuously since 1973 and has increased
common stock distributions each year for the past 21 years. The declared common
stock distribution was last increased in March 1997, and the current indicated
annual distribution is $1.01 per share. In past years, a portion of the
Company's distribution to its shareholders has been designated a non-taxable
return of capital for income tax purposes. During the past 15 years, the Company
provided its shareholders with an average annual return of 20%.
The Company, a Virginia corporation, has its principal office at 10 South
6th Street, Richmond, Virginia 23219-3802. Its telephone number is (804)
780-2691 and its E-mail address is [email protected]. Unless the context indicates
otherwise, the term "Company," as used herein, includes the Company and its
subsidiaries.
USE OF PROCEEDS
Unless otherwise set forth in the applicable Prospectus Supplement, the net
proceeds from the sale of the Offered Securities will be used for general
corporate purposes, which may include repayment of indebtedness, making
improvements to properties and the acquisition and development of additional
properties.
CERTAIN RATIOS
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges and earnings to combined fixed charges and Preferred
Stock dividends for the periods shown and for the year ended December 31, 1996
supplemental pro forma.
<TABLE>
<CAPTION>
SUPPLEMENTAL
YEAR ENDED DECEMBER 31, PRO FORMA(1)
---------------------------------------- ------------ THREE MONTHS ENDED
1992 1993 1994 1995 1996 1996 MARCH 31, 1997
---- ---- ---- ---- ---- ------------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.......... 1.54x 1.64x 1.69x 1.81x 1.73x 1.67x 1.84x
Ratio of earnings to combined fixed charges
and Preferred Stock dividends............. 1.54 1.64 1.69 1.56 1.45 1.48 1.64
</TABLE>
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(1) Assumes (i) the consummation of the South West Merger and (ii) the
acquisition of 20 apartment communities containing 5,157 apartment homes, as
if the transactions had occurred on January 1, 1996.
The ratio of earnings to fixed charges was computed by dividing earnings by
fixed charges. The ratio of earnings to combined fixed charges and Preferred
Stock dividends was computed by dividing earnings by the total of fixed charges
and Preferred Stock dividends. For purposes of computing these ratios, earnings
consist of income before extraordinary items plus fixed charges other than
capitalized interest, and fixed charges consist of interest on borrowed funds
(including capitalized interest) and amortization of debt discount and expense.
The Company did not issue any shares of Preferred Stock until April 1995;
therefore, only the ratios of earnings to combined fixed charges and Preferred
Stock dividends for the years ended December 31, 1995 and 1996, the year ended
December 31, 1996 supplemental pro forma and the three months ended March 31,
1996 and 1997 include Preferred Stock dividends.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Senior Securities are to be issued under an indenture dated as of
November 1, 1995, as supplemented from time to time (the "Senior Indenture"),
between the Company and First Union National Bank of Virginia (the "Senior
Indenture Trustee"), and the Subordinated Securities are to be issued under an
indenture dated as of August 1, 1994, as supplemented from time to time (the
"Subordinated Indenture"), between the Company and Crestar Bank (the
"Subordinated Indenture Trustee"). The term "Trustee," as used herein, shall
refer to the Senior Indenture Trustee or the Subordinated Indenture
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Trustee, as appropriate. The forms of the Senior Indenture and the Subordinated
Indenture (being sometimes referred to herein collectively as the "Indentures"
and individually as an "Indenture") are filed as exhibits to the Registration
Statement and will be respectively available for inspection at the Corporate
Trust Office (as such term is defined in the Indentures) of the Senior Indenture
Trustee and the Subordinated Indenture Trustee, or as described under "Available
Information." The Indentures are subject to, and governed by, the Trust
Indenture Act of 1939, as amended (the "TIA"). The statements made hereunder
relating to the Indentures and the Debt Securities are summaries of certain
provisions thereof, do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all provisions of the Indentures
and the Debt Securities. All section references appearing herein are to sections
of the Indentures, and capitalized terms used but not defined herein have the
respective meanings set forth in the Indentures and the Debt Securities.
TERMS
The Debt Securities will be direct, unsecured obligations of the Company.
The indebtedness represented by the Senior Securities will rank equally with all
other unsecured and unsubordinated indebtedness of the Company. The indebtedness
represented by the Subordinated Securities will be subordinated in right of
payment to the prior payment in full of the Senior Debt of the Company, as
described under "Subordination."
Each Indenture provides that the Debt Securities may be issued without
limit as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Directors of the Company or as established in one or
more indentures supplemental to such Indenture. Debt Securities may be issued
with terms different from those of Debt Securities previously issued. All Debt
Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the Holders
of the Debt Securities of such series, for issuances of additional Debt
Securities of such series (Section 301 of each Indenture).
Each Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
either Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Trustee may be appointed to act with respect to
such series (Section 608 of each Indenture). In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the applicable
Indenture separate and apart from the trust administered by any other Trustee
(Sections 101 and 609 of each Indenture), and, except as otherwise indicated
herein, any action described herein to be taken by the Company may be taken by
each such Trustee with respect to, and only with respect to, the one or more
series of Debt Securities for which it is Trustee under the applicable
Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities and whether such Debt Securities
are Senior Securities or Subordinated Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such principal amount;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of such Debt Securities that is convertible into Capital
Stock of the Company, or the method by which any such portion will be
determined;
(4) if convertible, in connection with the preservation of the
Company's status as a REIT, any applicable limitations on the ownership or
transferability of the Capital Stock of the Company into which such Debt
Securities are convertible;
(5) the date or dates, or the method by which such date or dates will
be determined, on which the principal of such Debt Securities will be
payable and the amount of principal payable thereon;
(6) the rate or rates (which may be fixed or variable) at which such
Debt Securities will bear interest, if any, or the method by which such
rate or rates will be determined, the date or dates from which such
interest will accrue or the method by which such date or dates will be
determined, the Interest Payment Dates on which any such interest will be
payable and the Regular Record Dates for such Interest Payment Dates or the
method by which such Dates will be determined, and the basis upon which
interest will be calculated if other than that of a 360-day year consisting
of twelve 30-day months;
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(7) the place or places where the principal of (and premium or
Make-Whole Amount (as defined in each Indenture), if any), interest, if
any, on, and Additional Amounts, if any, payable in respect of, such Debt
Securities will be payable, where such Debt Securities may be surrendered
for registration of transfer or exchange and where notices or demands to or
upon the Company in respect of such Debt Securities and the applicable
Indenture may be served;
(8) the period or periods within which, the price or prices (including
premium or Make-Whole Amount, if any) at which, the currency or currencies,
currency unit or units or composite currency or currencies in which and
other terms and conditions upon which such Debt Securities may be redeemed
in whole or in part, at the option of the Company, if the Company is to
have the option;
(9) the obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a Holder thereof, and the period or periods
within which or the date or dates on which, the price or prices at which,
the currency or currencies, currency unit or units or composite currency or
currencies in which, and other terms and conditions upon which such Debt
Securities will be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation;
(10) whether such Debt Securities will be in registered or bearer form
and terms and conditions relating thereto, and, if other than $1,000 and
any integral multiple thereof, the denominations in which any registered
Debt Securities will be issuable and, if other than $5,000, the
denomination or denominations in which any bearer Debt Securities will be
issuable;
(11) if other than United States dollars, the currency or currencies
in which such Debt Securities will be denominated and payable, which may be
a foreign currency or units of two or more foreign currencies or a
composite currency or currencies;
(12) whether the amount of payments of principal of (and premium or
Make-Whole Amount, if any) or interest, if any, on such Debt Securities may
be determined with reference to an index, formula or other method (which
index, formula or method may be based, without limitation, on one or more
currencies, currency units, composite currencies, commodities, equity
indices or other indices), and the manner in which such amounts will be
determined;
(13) whether the principal of (and premium or Make-Whole Amount, if
any) or interest or Additional Amounts, if any, on such Debt Securities are
to be payable, at the election of the Company or a Holder thereof, in a
currency or currencies, currency unit or units or composite currency or
currencies other than that in which such Debt Securities are denominated or
stated to be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made, and the time and manner
of, and identity of the exchange rate agent with responsibility for,
determining the exchange rate between the currency or currencies, currency
unit or units or composite currency or currencies in which such Debt
Securities are denominated or stated to be payable and the currency or
currencies, currency unit or units or composite currency or currencies in
which such Debt Securities are to be so payable;
(14) provisions, if any, granting special rights to the Holders of
such Debt Securities upon the occurrence of such events as may be
specified;
(15) any deletions from, modifications of or additions to the Events
of Default or covenants of the Company with respect to such Debt
Securities, whether or not such Events of Default or covenants are
consistent with the Events of Default or covenants set forth in the
applicable Indenture;
(16) whether such Debt Securities will be issued in certificated or
book-entry form;
(17) the applicability, if any, of the defeasance and covenant
defeasance provisions of Article Fourteen of the applicable Indenture;
(18) whether and under what circumstances the Company will pay
Additional Amounts as contemplated in the applicable Indenture on such Debt
Securities in respect of any tax, assessment or governmental charge and, if
so, whether the Company will have the option to redeem such Debt Securities
rather than pay such Additional Amounts (and the terms of any such option);
and
(19) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture (Section 301 of each Indenture).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities") (Section 502 of each Indenture). Special
United
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States federal income tax, accounting and other considerations applicable to
Original Issue Discount Securities will be described in the applicable
Prospectus Supplement.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise specified in the applicable Prospectus Supplement, the
Debt Securities of any series issued in registered form will be issuable in
denominations of $1,000 and integral multiples thereof. Unless otherwise
specified in the applicable Prospectus Supplement, the Debt Securities of any
series issued in bearer form will be issuable in denominations of $5,000
(Section 302 of each Indenture).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium or Make-Whole Amount, if any) and interest on any
series of Senior Securities will be payable at the corporate trust office of the
Senior Indenture Trustee located at 230 South Tryon Street, Charlotte, North
Carolina 28288 and the principal of (and premium or Make-Whole Amount, if any)
and interest on any series of Subordinated Securities will be payable at the
corporate trust office of the Subordinated Indenture Trustee located at 919 East
Main Street, Richmond, Virginia 23219; provided that at the option of the
Company payment of interest on any series of Debt Securities may be made by
check mailed to the address of the Person entitled thereto as it appears in the
Security Register for such series or by wire transfer of funds to such Person at
an account maintained within the United States (Sections 301, 305, 306, 307 and
1002 of each Indenture).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the Person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
Company, notice whereof shall be given to the Holder of such Debt Security not
less than 10 days prior to such Special Record Date, or may be paid at any time
in any other lawful manner, all as more completely described in the applicable
Indenture (Section 307 of each Indenture).
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the applicable Trustee referred
to above. In addition, subject to certain limitations imposed upon Debt
Securities issued in book-entry form, the Debt Securities of any series may be
surrendered for conversion or registration of transfer thereof at the corporate
trust office of the applicable Trustee referred to above. Every Debt Security
surrendered for conversion, registration of transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer. No service charge
will be made for any registration or transfer or exchange of any Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith (Section 305 of
each Indenture). If the applicable Prospectus Supplement refers to any transfer
agent (in addition to the applicable Trustee) initially designated by the
Company with respect to any series of Debt Securities, the Company may at any
time rescind the designation of any such transfer agent or approve a change in
the location through which such transfer agent acts, except that the Company
will be required to maintain a transfer agent in each Place of Payment for such
series. The Company may at any time designate additional transfer agents with
respect to any series of Debt Securities (Section 1002 of each Indenture).
Neither the Company nor either Trustee shall be required to (i) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption; (ii) register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed in
part; or (iii) issue, register the transfer of or exchange any Debt Security
which has been surrendered for repayment at the option of the Holder, except the
portion, if any, of such Debt Security not to be so repaid (Section 305 of each
Indenture).
MERGER, CONSOLIDATION OR SALE
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other entity,
provided that (a) either the Company shall be the continuing entity, or the
successor entity (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received the transfer of such
assets is a Person organized and existing under the laws of the United States or
any State thereof and shall expressly assume payment of the principal of (and
premium or Make-Whole Amount, if any) and interest on all of the Debt Securities
and the due and punctual performance and observance of all of the covenants and
conditions contained in each Indenture; (b) immediately after giving effect to
such transaction and treating any indebtedness which becomes an obligation of
the Company or
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any Subsidiary as a result thereof as having been incurred by the Company or
such Subsidiary at the time of such transaction, no Event of Default under an
Indenture, and no event which, after notice or the lapse of time, or both, would
become such an Event of Default, shall have occurred and be continuing; and (c)
an Officers' Certificate and legal opinion covering such conditions shall be
delivered to the Company (Sections 801 and 803 of each Indenture).
CERTAIN COVENANTS
SENIOR INDENTURE LIMITATIONS ON INCURRENCE OF DEBT. The Senior Indenture
provides that the Company will not, and will not permit any Subsidiary to, incur
any Debt (as defined below) if, immediately after giving effect to the
incurrence of such Debt and the application of the proceeds thereof, the
aggregate principal amount of all outstanding Debt of the Company and its
Subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles is greater than 60% of the sum of (without
duplication) (i) the Company's Total Assets as of the end of the calendar
quarter covered in the Company's Annual Report on Form 10-K or Quarterly Report
on Form 10-Q, as the case may be, most recently filed with the Commission (or,
if such filing is not permitted under the Exchange Act, with the Company) prior
to the incurrence of such additional Debt and (ii) the purchase price of any
real estate assets or mortgages receivable acquired, and the amount of any
securities offering proceeds received (to the extent such proceeds were not used
to acquire real estate assets or mortgages receivable or used to reduce Debt),
by the Company or any Subsidiary since the end of such calendar quarter,
including those proceeds obtained in connection with the incurrence of such
additional Debt (Section 1004 of the Senior Indenture). The Subordinated
Indenture does not limit the incurrence of Debt.
In addition to the foregoing limitation on the incurrence of Debt, the
Senior Indenture provides that the Company will not, and will not permit any
Subsidiary to, incur any Debt secured by any mortgage, lien, charge, pledge,
encumbrance or security interest of any kind upon any of the property of the
Company or any Subsidiary if, immediately after giving effect to the incurrence
of such Debt and the application of the proceeds thereof, the aggregate
principal amount of all outstanding Debt of the Company and its Subsidiaries on
a consolidated basis which is secured by any mortgage, lien, charge, pledge,
encumbrance or security interest on property of the Company or any Subsidiary is
greater than 40% of the Company's Total Assets (Section 1004 of the Senior
Indenture).
In addition to the foregoing limitations on the incurrence of Debt, the
Senior Indenture provides that the Company will not, and will not permit any
Subsidiary to, incur any Debt if the ratio of Consolidated Income Available for
Debt Service (as defined below) to the Annual Service Charge (as defined below)
for the four consecutive fiscal quarters most recently ended prior to the date
on which such additional Debt is to be incurred shall have been less than 1.5,
on a pro forma basis after giving effect thereto and to the application of the
proceeds therefrom, and calculated on the assumption that (i) such Debt and any
other Debt incurred by the Company and its Subsidiaries since the first day of
such four-quarter period and the application of the proceeds therefrom,
including to refinance other Debt, had occurred at the beginning of such period;
(ii) the repayment or retirement of any other Debt by the Company and its
Subsidiaries since the first day of such four-quarter period had been incurred,
repaid or retired at the beginning of such period (except that, in making such
computation, the amount of Debt under any revolving credit facility shall be
computed based upon the average daily balance of such Debt during such period);
(iii) in the case of Acquired Debt (as defined below) or Debt incurred in
connection with any acquisition since the first day of such four-quarter period,
the related acquisition had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition being included in such
pro forma calculation; and (iv) in the case of any acquisition or disposition by
the Company or its Subsidiaries of any asset or group of assets since the first
day of such four-quarter period, whether by merger, stock purchase or sale, or
asset purchase or sale, such acquisition or disposition or any related repayment
of Debt had occurred as of the first day of such period with the appropriate
adjustments with respect to such acquisition or disposition being included in
such pro forma calculation (Section 1004 of the Senior Indenture).
As used herein,
"ACQUIRED DEBT" means Debt of a Person (i) existing at the time such Person
becomes a Subsidiary or (ii) assumed in connection with the acquisition of
assets from such Person, in each case, other than Debt incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary or such
acquisition. Acquired Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Subsidiary.
"ANNUAL SERVICE CHARGE" as of any date means the maximum amount which is
payable in any period for interest on, and original issue discount of, Debt of
the Company and its Subsidiaries and the amount of dividends which are payable
in respect of any Disqualified Stock (as defined below).
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"CAPITAL STOCK" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
"CONSOLIDATED INCOME AVAILABLE FOR DEBT SERVICE" for any period means Funds
from Operations (as defined below) of the Company and its Subsidiaries plus
amounts which have been deducted for interest on Debt of the Company and its
Subsidiaries.
"DEBT" of the Company or any Subsidiary means any indebtedness of the
Company, or any Subsidiary, whether or not contingent, in respect of (without
duplication) (i) borrowed money or evidenced by bonds, notes, debentures or
similar instruments, (ii) indebtedness secured by any mortgage, pledge, lien,
charge, encumbrance or any security interest existing on property owned by the
Company or any Subsidiary, (iii) the reimbursement obligations, contingent or
otherwise, in connection with any letters of credit actually issued or amounts
representing the balance deferred and unpaid of the purchase price of any
property or services, except any such balance that constitutes an accrued
expense or trade payable, or all conditional sale obligations or obligations
under any title retention agreement, (iv) the principal amount of all
obligations of the Company or any Subsidiary with respect to redemption,
repayment or other repurchase of any Disqualified Stock or (v) any lease of
property by the Company or any Subsidiary as lessee which is reflected on the
Company's consolidated balance sheet as a capitalized lease in accordance with
generally accepted accounting principles to the extent, in the case of items of
indebtedness under (i) through (iii) above, that any such items (other than
letters of credit) would appear as a liability on the Company's consolidated
balance sheet in accordance with generally accepted accounting principles, and
also includes, to the extent not otherwise included, any obligation of the
Company or any Subsidiary to be liable for, or to pay, as obligor, guarantor or
otherwise (other than for purposes of collection in the ordinary course of
business), Debt of another Person (other than the Company or any Subsidiary) (it
being understood that Debt shall be deemed to be incurred by the Company or any
Subsidiary whenever the Company or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"DISQUALIFIED STOCK" means, with respect to any Person, any Capital Stock
of such Person which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, (ii)
is convertible into or exchangeable or exercisable for Debt or Disqualified
Stock or (iii) is redeemable at the option of the holder thereof, in whole or in
part, in each case on or prior to the Stated Maturity of the series of Debt
Securities.
"FUNDS FROM OPERATIONS" for any period means income before gains (losses)
on investments and extraordinary items plus amounts which have been deducted,
and minus amounts which have been added, for the following items (without
duplication): (a) provision for Preferred Stock dividends, (b) provision for
property depreciation and amortization and (c) the effect of any adjustments for
significant non-recurring items, including any noncash charge resulting from a
change in accounting principles in determining income before gains (losses) on
investments and extraordinary items for such period, as reflected in the
financial statements of the Company and its Subsidiaries for such period
determined on a consolidated basis in accordance with generally accepted
accounting principles.
"TOTAL ASSETS" as of any date means the sum of (i) the Company's
Undepreciated Real Estate Assets and (ii) all other assets of the Company
determined in accordance with generally accepted accounting principles (but
excluding intangibles).
"UNDEPRECIATED REAL ESTATE ASSETS" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Company and its
Subsidiaries on such date, before depreciation and amortization determined on a
consolidated basis in accordance with generally accepted accounting principles.
Except as described above, the Indentures do not contain any provisions
that would limit the ability of the Company to incur indebtedness or that would
afford Holders of the Debt Securities protection in the event of a highly
leveraged or similar transaction involving the Company or in the event of a
change of control. However, the Articles of Incorporation of the Company include
provisions for mandatory redemption and stopping transfer of its Common Stock
designed to preserve the Company's status as a REIT. The Code provides that
concentration of more than 50% in value of direct or indirect ownership of
Common Stock in five or fewer individual shareholders during the last six months
of any year will result in disqualification of the Company as a REIT.
Enforcement of the provisions of the Company's Articles of Incorporation would
prevent such concentration and, therefore, prevent or hinder a change of
control. Reference is made to the applicable Prospectus Supplement for
information with respect to any deletions from, modifications of or additions to
the Events of Default or
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covenants of the Company that are described herein, including any addition of a
covenant or other provision providing event risk or similar protection.
EXISTENCE. Except as described above under " -- Merger, Consolidation or
Sale," the Company will do or cause to be done all things necessary to preserve
and keep in full force and effect the existence, rights (charter and statutory)
and franchises of the Company and its Subsidiaries; provided, however, that the
Company shall not be required to preserve any right or franchise if it
determines that the preservation thereof is no longer desirable in the conduct
of the business of the Company and its Subsidiaries as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders of the
Debt Securities of any series (Section 1005 of each Indenture).
MAINTENANCE OF PROPERTIES. The Company will cause all of its properties
used or useful in the conduct of its business or the business of any Subsidiary
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that the Company and its Subsidiaries shall not be prevented
from selling or otherwise disposing of for value their properties in the
ordinary course of business (Section 1006 of each Indenture).
INSURANCE. The Company will, and will cause each of its Subsidiaries to,
keep all of its insurable properties insured against loss or damage in an amount
at least equal to their then full insurable value with financially sound and
reputable insurance companies (Section 1007 of each Indenture).
PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or discharge or
cause to be paid or discharged, before the same become delinquent, (i) all
taxes, assessments and governmental charges levied or imposed upon it or any
Subsidiary or upon the income, profits or property of the Company or any
Subsidiary, and (ii) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Company or any
Subsidiary; provided, however, that the Company shall not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings (Section 1008 of each Indenture).
PROVISION OF FINANCIAL INFORMATION. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13 and 15(d) if the Company
were so subject, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so subject. The
Company will also in any event (x) within 15 days of each Required Filing Date
(i) transmit by mail to all Holders of Debt Securities, as their names and
addresses appear in the Security Register, without cost to such Holders, copies
of the annual reports and quarterly reports which the Company would have been
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act if the Company were subject to such Sections and (ii) file with the
Company copies of the annual reports, quarterly reports and other documents
which the Company would have been required to file with the Commission pursuant
to Section 13 or 15(d) of the Exchange Act if the Company were subject to such
Sections and (y) if filing such documents by the Company with the Commission is
not permitted under the Exchange Act, promptly upon written request and payment
of the reasonable cost of duplication and delivery, supply copies of such
documents to any prospective Holder (Section 1009 of each Indenture).
EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default for
30 days in the payment of any installment of interest or Additional Amounts
payable on any Debt Security of such series; (b) default in the payment of the
principal of (or premium or Make-Whole Amount, if any, on) any Debt Security of
such series at its Maturity; (c) default in making any sinking fund payment as
required for any Debt Security of such series; (d) default in the performance of
any other covenant of the Company contained in the Indenture (other than a
covenant added to the Indenture solely for the benefit of a series of Debt
Securities issued thereunder other than such series), continued for 60 days
after written notice as provided in the Indenture; (e) default under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company (or by any Subsidiary, the repayment of which the
Company has guaranteed or for which the Company is directly responsible or
liable as obligor or guarantor) having an aggregate principal amount outstanding
of at least $10,000,000, whether such indebtedness now exists or shall hereafter
be created, which default shall
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have resulted in such indebtedness being declared due and payable prior to the
date on which it would otherwise have become due and payable, without such
acceleration having been rescinded or annulled within 10 days after written
notice as provided in the Indenture; (f) the entry by a court of competent
jurisdiction of one or more judgments, orders or decrees against the Company or
any Subsidiary in an aggregate amount (excluding amounts fully covered by
insurance) in excess of $10,000,000 and such judgments, orders or decrees remain
undischarged, unstayed and unsatisfied in an aggregate amount (excluding amounts
fully covered by insurance) in excess of $10,000,000 for a period of 30
consecutive days; (g) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of the
Company or any Significant Subsidiary or for all or substantially all of either
of its property; and (h) any other Event of Default provided with respect to
such series of Debt Securities (Section 501 of each Indenture). The term
"Significant Subsidiary" means each significant subsidiary (as defined in
Regulation S-X promulgated under the Securities Act) of the Company.
If an Event of Default under either Indenture with respect to Debt
Securities of any series at the time Outstanding occurs and is continuing, then
in every such case the Company or the Holders of not less than 25% in principal
amount of the Outstanding Debt Securities of that series may declare the
principal amount (or, if the Debt Securities of that series are Original Issue
Discount Securities or Indexed Securities, such portion of the principal amount
as may be specified in the terms thereof) of, and premium or Make-Whole Amount,
if any, on, all of the Debt Securities of that series to be due and payable
immediately by written notice thereof to the Company (and to the Company if
given by the Holders). However, at any time after such declaration of
acceleration with respect to Debt Securities of such series (or of all Debt
Securities then Outstanding under the applicable Indenture, as the case may be)
has been made, but before a judgment or decree for payment of the money due has
been obtained by the Company, the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of such series (or of all
Debt Securities then Outstanding under the applicable Indenture, as the case may
be) may rescind and annul such declaration and its consequences if (a) the
Company shall have deposited with the Company all required payments of the
principal of (and premium or Make-Whole Amount, if any) and interest, and any
Additional Amounts, on the Debt Securities of such series (or of all Debt
Securities then Outstanding under the applicable Indenture, as the case may be),
plus certain fees, expenses, disbursements and advances of the Company and (b)
all Events of Default, other than the nonpayment of accelerated principal (or
specified portion thereof and the premium or Make-Whole Amount, if any) or
interest, with respect to the Debt Securities of such series (or of all Debt
Securities then Outstanding under the applicable Indenture, as the case may be)
have been cured or waived as provided in the Indenture (Section 502 of each
Indenture). Each Indenture also provides that the Holders of not less than a
majority in principal amount of the Outstanding Debt Securities of any series
(or of all Debt Securities then Outstanding under the applicable Indenture, as
the case may be) may waive any past default with respect to such series and its
consequences, except a default (x) in the payment of the principal of (or
premium or Make-Whole Amount, if any) or interest or Additional Amounts payable
on any Debt Security of such series or (y) in respect of a covenant or provision
contained in the applicable Indenture that cannot be modified or amended without
the consent of the Holder of each Outstanding Debt Security affected thereby
(Section 513 of each Indenture).
Each Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the applicable Indenture; provided, however,
that such Trustee may withhold notice to the Holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium or Make-Whole Amount, if any) or
interest or Additional Amounts payable on any Debt Security of such series or in
the payment of any sinking fund installment in respect of any Debt Security of
such series) if the Responsible Officers of such Trustee consider such
withholding to be in the interest of such Holders (Section 601 of each
Indenture).
Each Indenture provides that no Holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to such
Indenture or for any remedy thereunder, except in the case of failure of the
Company, for 60 days, to act after it has received a written request to
institute proceedings in respect of an Event of Default from the Holders of not
less than 25% in principal amount of the Outstanding Debt Securities of such
series, as well as an offer of reasonable indemnity (Section 507 of each
Indenture). This provision will not prevent, however, any Holder of Debt
Securities from instituting suit for the enforcement of payment of the principal
of (and premium or Make-Whole Amount, if any), interest on and Additional
Amounts payable with respect to, such Debt Securities at the respective due
dates thereof (Section 508 of each Indenture).
MODIFICATION OF THE INDENTURES
Modifications and amendments of either Indenture may be made with the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities issued under such Indenture that are affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the Holder of
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each such Debt Security affected thereby, (a) change the Stated Maturity of the
principal of (or premium or Make-Whole Amount, if any), or any installment of
principal of or interest or Additional Amounts payable on, any such Debt
Security; (b) reduce the principal amount of, or the rate or amount of interest
on, or any premium or Make-Whole Amount payable on redemption of, or any
Additional Amounts payable with respect to, any such Debt Security, or reduce
the amount of principal of an Original Issue Discount Security or Make-Whole
Amount, if any, that would be due and payable upon declaration of acceleration
of the maturity thereof or would be provable in bankruptcy, or adversely affect
any right of repayment of the Holder of any such Debt Security; (c) change the
Place of Payment, or the coin or currency, for payment of principal of (and
premium or Make-Whole Amount, if any), or interest on, or any Additional Amounts
payable with respect to, any such Debt Security; (d) impair the right to
institute suit for the enforcement of any payment on or with respect to any such
Debt Security; (e) reduce the percentage of Outstanding Debt Securities of any
series necessary to modify or amend the applicable Indenture, to waive
compliance with certain provisions thereof or certain defaults and consequences
thereunder or to reduce the quorum or voting requirements set forth in the
Indenture; or (f) modify any of the foregoing provisions or any of the
provisions relating to the waiver of certain past defaults or certain covenants,
except to increase the required percentage to effect such action or to provide
that certain other provisions may not be modified or waived without the consent
of the Holder of such Debt Security (Section 902 of each Indenture).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities issued under either Indenture have the right to waive compliance
by the Company with certain covenants in such Indenture (Section 1012 of each
Indenture).
SUBORDINATION
Upon any distribution to creditors of the Company in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
the Subordinated Securities will be subordinated to the extent provided in the
Subordinated Indenture in right of payment to the prior payment in full of all
Senior Debt (Sections 1601 and 1602 of the Subordinated Indenture), but the
obligation of the Company to make payment of the principal and interest on the
Subordinated Securities will not otherwise be affected (Section 1608 of the
Subordinated Indenture). No payment of principal or interest may be made on the
Subordinated Securities at any time if a default on Senior Debt exists that
permits the holders of such Senior Debt to accelerate its maturity and the
default is the subject of judicial proceedings or the Company receives notice of
the default (Section 1603 of the Subordinated Indenture). After all Senior Debt
is paid in full and until the Subordinated Securities are paid in full, holders
will be subrogated to the rights of holders of Senior Debt to the extent that
distributions otherwise payable to holders have been applied to the payment of
Senior Debt (Section 1607 of the Subordinated Indenture). By reason of such
subordination, in the event of a distribution of assets upon insolvency, certain
general creditors of the Company may recover more, ratably, than holders of the
Subordinated Securities.
Senior Debt is defined in the Subordinated Indenture as the principal of
and interest on, or substantially similar payments to be made by the Company in
respect of, the following, whether outstanding at the date of execution of the
Subordinated Indenture or thereafter incurred, created or assumed: (a)
indebtedness of the Company for money borrowed or represented by purchase-money
obligations, (b) indebtedness of the Company evidenced by notes, debentures, or
bonds, or other securities issued under the provisions of an indenture, fiscal
agency agreement or other instrument, (c) obligations of the Company as lessee
under leases of property either made as part of any sale and leaseback
transaction to which the Company is a party or otherwise, (d) indebtedness of
partnerships and joint ventures that is included in the consolidated financial
statements of the Company, (e) indebtedness, obligations and liabilities of
others in respect of which the Company is liable contingently or otherwise to
pay or advance money or property or as guarantor, endorser or otherwise or which
the Company has agreed to purchase or otherwise acquire, and (f) any binding
commitment of the Company to fund any real estate investment or to fund any
investment in any entity making such real estate investment, in each case other
than (1) any such indebtedness, obligation or liability referred to in clauses
(a) through (f) above as to which, in the instrument creating or evidencing the
same pursuant to which the same is outstanding, it is provided that such
indebtedness, obligation or liability is not superior in right of payment to the
Subordinated Securities or ranks pari passu with the Subordinated Securities,
(2) any such indebtedness, obligation or liability which is subordinated to
indebtedness of the Company to substantially the same extent as or to a greater
extent than the Subordinated Securities are subordinated and (3) the
Subordinated Securities (Section 101 of the Subordinated Indenture). At March
31, 1997, Senior Debt aggregated approximately $1.1 billion. There are no
restrictions in the Subordinated Indenture upon the creation of additional
Senior Debt. However, the Senior Indenture contains limitations on incurrence of
indebtedness by the Company. See " -- Certain Covenants -- Senior Indenture
Limitations on Incurrence of Debt."
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DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Under each Indenture, the Company may discharge certain obligations to
Holders of any series of Debt Securities issued thereunder that have not already
been delivered to the applicable Trustee for cancellation and that either have
become due and payable or will become due and payable within one year (or
scheduled for redemption within one year) by irrevocably depositing with the
applicable Trustee, in trust, funds in such currency or currencies, currency
unit or units or composite currency or currencies in which such Debt Securities
are payable in an amount sufficient to pay the entire indebtedness on such Debt
Securities in respect of principal (and premium or Make-Whole Amount, if any)
and interest and any Additional Amounts payable to the date of such deposit (if
such Debt Securities have become due and payable) or to the Stated Maturity or
Redemption Date, as the case may be (Section 401 of each Indenture).
Each Indenture provides that, if the provisions of Article Fourteen thereof
are made applicable to the Debt Securities of or within any series pursuant to
Section 301 of such Indenture, the Company may elect either (a) to defease and
be discharged from any and all obligations with respect to such Debt Securities
(except for the obligation to pay Additional Amounts, if any, upon the
occurrence of certain events of tax, assessment or governmental charge with
respect to payments on such Debt Securities and the obligations to register the
transfer or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") (Section 1402 of each Indenture) or (b) to be released from its
obligations with respect to such Debt Securities under provisions of each
Indenture described under " -- Certain Covenants," or, if provided pursuant to
Section 301 of each Indenture, its obligations with respect to any other
covenant, and any omission to comply with such obligations shall not constitute
a default or an Event or Default with respect to such Debt Securities ("covenant
defeasance") (Section 1403 of each Indenture), in either case upon the
irrevocable deposit by the Company with the applicable Trustee, in trust, of an
amount, in such currency or currencies, currency unit or currency units or
composite currency or currencies in which such Debt Securities are payable at
Stated Maturity, or Government Obligations (as defined below), or both,
applicable to such Debt Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium or Make-Whole Amount, if
any) and interest on such Debt Securities, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company
has delivered to the applicable Trustee an Opinion of Counsel (as specified in
each Indenture) to the effect that the Holders of such Debt Securities will not
recognize income, gain or loss for United States federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to United
States federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or covenant defeasance
had not occurred, and such Opinion of Counsel, in the case of defeasance, must
refer to and be based upon a ruling of the Internal Revenue Service or a change
in applicable United States federal income tax laws occurring after the date of
such Indenture (Section 1404 of each Indenture).
"GOVERNMENT OBLIGATIONS" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a Person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt (Section 101 of each Indenture).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(a) the Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to Section 301 of either Indenture or the terms of such Debt Security
to receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal
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of (and premium or Make-Whole Amount, if any) and interest on such Debt Security
as they become due out of the proceeds yielded by converting the amount so
deposited in respect of such Debt Security into the currency, currency unit or
composite currency in which such Debt Security becomes payable as a result of
such election or such cessation of usage based on the applicable market exchange
rate (Section 1405 of each Indenture). "Conversion Event" means the cessation of
use of (i) a currency, currency unit or composite currency (other than the ECU
or other currency unit) both by the government of the country that issued such
currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community, (ii) the
ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities or
(iii) any currency unit or composite currency other than the ECU for the
purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium or
Make-Whole Amount, if any) and interest on any Debt Security that is payable in
a Foreign Currency that ceases to be used by its government of issuance shall be
made in United States dollars (Section 101 of each Indenture).
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than the Event of Default described
in clause (d) under " -- Events of Default, Notice and Waiver" with respect to
Sections 1004 to 1009, inclusive, of either Indenture (which Sections would no
longer be applicable to such Debt Securities) or described in clause (g) under
"Events of Default, Notice and Waiver" with respect to a covenant as to which
there has been covenant defeasance, the amount in such currency, currency unit
or composite currency in which such Debt Securities are payable, and Government
Obligations on deposit with the Company, will be sufficient to pay amounts due
on such Debt Securities at the time of their Stated Maturity but may not be
sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such Event of Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Capital Stock of the Company will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Capital Stock of the Company,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the Holders or the
Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities.
BOOK-ENTRY SYSTEM
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of a depository (the "Depository") identified in
the Prospectus Supplement relating to such series. Global Securities, if any,
are expected be deposited with The Depository Trust Company, as Depository.
Global Securities may be issued in fully registered form and may be issued in
either temporary or permanent form. Unless and until it is exchanged in whole or
in part for the individual Debt Securities represented thereby, a Global
Security may not be transferred except as a whole by the Depository for such
Global Security to a nominee of such Depository or by a nominee of such
Depository to such Depository or another nominee of such Depository or by such
Depository or any nominee of such Depository to a successor Depository or any
nominee of such successor.
The specific terms of the depository arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company expects that unless otherwise indicated in the
applicable Prospectus Supplement the following provisions will apply to
depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depository ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Company if such Debt Securities are offered directly by the
Company. Ownership of beneficial interests in such Global Security will be
limited to Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Security
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will be shown on, and the transfer of that ownership will be effected only
through, records maintained by the Depository for such Global Security or its
nominee (with respect to beneficial interests of Participants) and records of
Participants (with respect to beneficial interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and laws may impair the ability to own, pledge or transfer beneficial
interest in a Global Security.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as described below or in the applicable Prospectus
Supplement, owners of beneficial interest in a Global Security will not be
entitled to have any of the individual Debt Securities represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Debt Securities in definitive form and
will not be considered the owners or holders thereof under the applicable
Indenture.
Payments of principal of, any premium or Make-Whole Amount and any interest
on, or any Additional Amounts payable with respect to, individual Debt
Securities represented by a Global Security registered in the name of a
Depository or its nominee will be made to the Depository or its nominee, as the
case may be, as the registered owner of the Global Security. None of the
Company, the Trustee, any Paying Agent or the Security Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Security for such Debt Securities or for maintaining,
supervising or reviewing any records relating to such beneficial ownership
interests.
The Company expects that the Depository for any Debt Securities or its
nominee, upon receipt of any payment of principal, premium, Make-Whole Amount,
interest or Additional Amounts in respect of the Global Security representing
such Debt Securities will immediately credit Participants' accounts with
payments in amounts proportionate to their respective beneficial interests in
the principal amount of such Global Security as shown on the records of such
Depository or its nominee. The Company also expects that payments by
Participants to owners of beneficial interests in such Global Security held
through such Participants will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in street name. Such payments will be the
responsibility of such Participants.
If a Depository for any Debt Securities is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not appointed
by the Company within 90 days, the Company will issue individual Debt Securities
in exchange for the Global Security representing such Debt Securities. In
addition, the Company may at any time and in its sole discretion, subject to any
limitations described in the Prospectus Supplement relating to such Debt
Securities, determine not to have any of such Debt Securities represented by one
or more Global Securities and in such event will issue individual Debt
Securities in exchange for the Global Security or Securities representing such
Debt Securities. Individual Debt Securities so issued will be issued in
denominations of $1,000 and integral multiples thereof.
TRUSTEES
First Union National Bank of Virginia is the Trustee under the Senior
Indenture. Crestar Bank is the Trustee under the Subordinated Indenture. Both
First Union National Bank of Virginia and Crestar Bank have lending
relationships with the Company.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue 150,000,000 shares of Common Stock, $1
par value, and 25,000,000 shares of Preferred Stock, no par value. At May 9,
1997, there were outstanding 86,484,586 shares of Common Stock and 4,200,000
shares of Preferred Stock, consisting exclusively of the Company's 9 1/4% Series
A Cumulative Redeemable Preferred Stock (the "Series A Preferred").
The following statements with respect to the capital stock of the Company
are subject to the detailed provisions of the Company's Restated Articles of
Incorporation, as amended (the "Articles"), and bylaws (the "Bylaws") as
currently in effect. These statements do not purport to be complete, or to give
full effect to the terms of the provisions of statutory or common
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law, and are subject to, and are qualified in their entirety by reference to,
the terms of the Articles and Bylaws, which are filed as exhibits to the
Registration Statement.
COMMON STOCK
Holders of Common Stock are entitled to receive dividends when and as
declared by the Board of Directors after payment of, or provision for, full
cumulative dividends on and any required redemptions of shares of Preferred
Stock then outstanding. Holders of Common Stock have one vote per share and
non-cumulative voting rights, which means that holders of more than 50% of the
shares voting can elect all of the directors if they choose to do so, and, in
such event, the holders of the remaining shares will not be able to elect any
directors. In the event of any voluntary or involuntary liquidation or
dissolution of the Company, holders of Common Stock are entitled to share
ratably in the distributable assets of the Company remaining after satisfaction
of the prior preferential rights of the Preferred Stock and the satisfaction of
all debts and liabilities of the Company. Holders of Common Stock do not have
preemptive rights.
The dividend and liquidation rights of holders of the Common Stock are
specifically limited by the terms of the Series A Preferred as described below
in " -- Series A Preferred."
The transfer agent for the Common Stock is ChaseMellon Shareholder
Services, L.L.C., Ridgefield Park, New Jersey. The Common Stock is traded on the
NYSE under the symbol "UDR."
PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which a
Prospectus Supplement may relate. Specific terms of any series of Preferred
Stock offered by a Prospectus Supplement will be described in that Prospectus
Supplement. The description set forth below is subject to and qualified in its
entirety by reference to the Articles of Amendment to the Articles fixing the
preferences, limitations and relative rights of a particular series of Preferred
Stock.
GENERAL. Under the Articles, the Board of Directors of the Company is
authorized, without further shareholder action, to provide for the issuance of
up to 25,000,000 shares of Preferred Stock, in one or more series, with such
voting powers and with such designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions, as the Board of Directors shall approve.
The Preferred Stock will have the dividend, liquidation, redemption,
conversion and voting rights set forth below unless otherwise provided in the
Prospectus Supplement relating to a particular series of Preferred Stock.
Reference is made to the Prospectus Supplement relating to the particular series
of Preferred Stock offered thereby for specific terms, including: (i) the title
and liquidation preference per share of such Preferred Stock and the number of
shares offered; (ii) the price at which such series will be issued; (iii) the
dividend rate (or method of calculation), the dates on which dividends shall be
payable and the dates from which dividends shall commence to accumulate; (iv)
any redemption or sinking fund provisions of such series; (v) any conversion
provisions of such series; and (vi) any additional dividend, liquidation,
redemption, sinking fund and other rights, preferences, privileges, limitations
and restrictions of such series.
The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the Prospectus Supplement relating to a particular
series of Preferred Stock, each series will rank on a parity as to dividends and
distributions in the event of a liquidation with each other series of Preferred
Stock and, in all cases, will be senior to the Common Stock.
DIVIDEND RIGHTS. Holders of Preferred Stock of each series will be entitled
to receive, when, as and if declared by the Board of Directors, out of assets of
the Company legally available therefor, cash dividends at such rates and on such
dates as are set forth in the Prospectus Supplement relating to such series of
Preferred Stock. Such rate may be fixed or variable or both and may be
cumulative, noncumulative or partially cumulative.
If the applicable Prospectus Supplement so provides, as long as any shares
of Preferred Stock are outstanding, no dividends will be declared or paid or any
distributions be made on the Common Stock, other than a dividend payable in
Common Stock, unless the accrued dividends on each series of Preferred Stock
have been fully paid or declared and set apart for payment and the Company shall
have set apart all amounts, if any, required to be set apart for all sinking
funds, if any, for each series of Preferred Stock.
If the applicable Prospectus Supplement so provides, when dividends are not
paid in full upon any series of Preferred Stock and any other series of
Preferred Stock ranking on a parity as to dividends with such series of
Preferred Stock, all
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dividends declared upon such series of Preferred Stock and any other series of
Preferred Stock ranking on a parity as to dividends will be declared pro rata so
that the amount of dividends declared per share on such series of Preferred
Stock and such other series will in all cases bear to each other the same ratio
that accrued dividends per share on such series of Preferred Stock and such
other series bear to each other.
Each series of Preferred Stock will be entitled to dividends as described
in the Prospectus Supplement relating to such series, which may be based upon
one or more methods of determination. Different series of Preferred Stock may be
entitled to dividends at different dividend rates or based upon different
methods of determination. Except as provided in the applicable Prospectus
Supplement, no series of Preferred Stock will be entitled to participate in the
earnings or assets of the Company.
RIGHTS UPON LIQUIDATION. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of each
series of Preferred Stock will be entitled to receive out of the assets of the
Company available for distribution to shareholders the amount stated or
determined on the basis set forth in the Prospectus Supplement relating to such
series, which may include accrued dividends, if such liquidation, dissolution or
winding up is involuntary or may equal the current redemption price per share
(otherwise than for the sinking fund, if any, provided for such series) provided
for such series set forth in such Prospectus Supplement, if such liquidation,
dissolution or winding up is voluntary, and on such preferential basis as is set
forth in such Prospectus Supplement. If, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the amounts payable with
respect to Preferred Stock of any series and any other shares of stock of the
Company ranking as to any such distribution on a parity with such series of
Preferred Stock are not paid in full, the holders of Preferred Stock of such
series and of such other shares will share ratably in any such distribution of
assets of the Company in proportion to the full respective preferential amounts
to which they are entitled or on such other basis as is set forth in the
applicable Prospectus Supplement. The rights, if any, of the holders of any
series of Preferred Stock to participate in the assets of the Company remaining
after the holders of other series of Preferred Stock have been paid their
respective specified liquidation preferences upon any liquidation, dissolution
or winding up of the Company will be described in the Prospectus Supplement
relating to such series.
REDEMPTION. A series of Preferred Stock may be redeemable, in whole or in
part, at the option of the Company, and may be subject to mandatory redemption
pursuant to a sinking fund, in each case upon terms, at the times, the
redemption prices and for the types of consideration set forth in the Prospectus
Supplement relating to such series. The Prospectus Supplement relating to a
series of Preferred Stock which is subject to mandatory redemption shall specify
the number of shares of such series that shall be redeemed by the Company in
each year commencing after a date to be specified, at a redemption price per
share to be specified, together with an amount equal to any accrued and unpaid
dividends thereon to the date of redemption.
If, after giving notice of redemption to the holders of a series of
Preferred Stock, the Company deposits with a designated bank funds sufficient to
redeem such Preferred Stock, then from and after such deposit, all shares called
for redemption will no longer be outstanding for any purpose, other than the
right to receive the redemption price and the right to convert such shares into
other classes of capital stock of the Company. The redemption price will be
stated in the Prospectus Supplement relating to a particular series of Preferred
Stock.
Except as indicated in the applicable Prospectus Supplement, the Preferred
Stock is not subject to any mandatory redemption at the option of the holder.
SINKING FUND. The Prospectus Supplement for any series of Preferred Stock
will state the terms, if any, of a sinking fund for the purchase or redemption
of that series.
CONVERSION RIGHTS. The Prospectus Supplement for any series of Preferred
Stock will state the terms, if any, on which shares of that series are
convertible into shares of Common Stock or another series of Preferred Stock.
The Preferred Stock will have no preemptive rights.
VOTING RIGHTS. Except as indicated in the Prospectus Supplement relating to
a particular series of Preferred Stock, or except as expressly required by
Virginia law, a holder of Preferred Stock will not be entitled to vote. Except
as indicated in the Prospectus Supplement relating to a particular series of
Preferred Stock, in the event the Company issues full shares of any series of
Preferred Stock, each such share will be entitled to one vote on matters on
which holders of such series of Preferred Stock are entitled to vote.
Under Virginia law, the affirmative vote of the holders of a majority of
the outstanding shares of all series of Preferred Stock, voting as a separate
voting group, will be required for (i) the authorization of any class of stock
ranking prior to or on parity with Preferred Stock or the increase in the number
of authorized shares of any such stock, (ii) any increase in the
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number of authorized shares of Preferred Stock and (iii) certain amendments to
the Articles that may be adverse to the rights of Preferred Stock outstanding.
TRANSFER AGENT AND REGISTRAR. The transfer agent, registrar and dividend
disbursement agent for a series of Preferred Stock will be selected by the
Company and be described in the applicable Prospectus Supplement. The registrar
for shares of Preferred Stock will send notices to shareholders of any meetings
at which holders of Preferred Stock have the right to vote on any matter.
SERIES A PREFERRED
The Board of Directors has designated 4,200,000 shares of Preferred Stock
as the "9 1/4% Series A Cumulative Redeemable Preferred Stock," all of which
were outstanding at March 31, 1997. The Board of Directors may redesignate any
unissued shares of Series A Preferred as all or a part of a different series of
Preferred Stock. Holders of shares of Series A Preferred are entitled to
receive, when and as declared by the Board of Directors, out of funds legally
available for the payment of dividends, cumulative preferential cash dividends
at the rate of 9 1/4% of the liquidation preference per annum (equivalent to
$2.3125 per share). In the event of any liquidation, dissolution or winding up
of the Company, the holders of shares of Series A Preferred are entitled to be
paid out of the assets of the Company legally available for distribution to its
stockholders a liquidation preference of $25.00 per share, plus an amount equal
to any accrued and unpaid dividends to the date of payment, before any
distribution of assets is made to holders of Common Stock or any other capital
stock that ranks junior to the Series A Preferred as to liquidation rights. The
Series A Preferred is not redeemable prior to April 24, 2000. On and after April
24, 2000, the Company, at its option upon not less than 30 nor more than 60
days' written notice, may redeem shares of the Series A Preferred, in whole or
in part, at any time or from time to time, for cash at a redemption price of
$25.00 per share, plus accrued dividends. The Series A Preferred has no stated
maturity and will not be subject to any sinking fund or mandatory redemption
(except as provided under "Description of Capital Stock -- Redemption and
Restrictions on Transfer").
The transfer agent, registrar and dividend disbursing agent for the Series
A Preferred is ChaseMellon Shareholder Services, L.L.C., Ridgefield Park, New
Jersey. The Series A Preferred is traded on the NYSE under the symbol "UDRpfA."
DIVIDEND RESTRICTIONS
Covenants in its loan agreements with certain lenders restrict the payment
of distributions in excess of the sum of (i) current "cash flow," (ii) varying
additional amounts and (iii) the proceeds of capital stock offerings subsequent
to various dates, all as defined in the particular loan agreement. The covenants
do not prohibit the Company from paying distributions in order to continue its
qualification as a REIT under the Code.
AFFILIATED TRANSACTIONS
The Virginia Stock Corporation Act contains provisions governing
"Affiliated Transactions" designed to deter uninvited takeovers of Virginia
corporations. These provisions, with several exceptions discussed below, require
approval of material acquisition transactions between a Virginia corporation and
any holder of more than 10% of any class of its outstanding voting shares (an
"Interested Shareholder") by the holders of at least two-thirds of the remaining
voting shares. For three years following the time that the Interested
Shareholder becomes an owner of 10% of the outstanding voting shares, Virginia
corporations cannot engage in an Affiliated Transaction with such Interested
Shareholder without approval of two-thirds of the voting shares other than those
shares beneficially owned by the Interested Shareholder, and majority approval
of the "Disinterested Directors." At the expiration of the three year period,
the statute requires approval of Affiliated Transactions by two-thirds of the
voting shares other than those beneficially owned by the Interested Shareholder
absent an exception. The principal exceptions to the special voting requirement
apply to transactions proposed after the three year period has expired and
require either that the transaction be approved by a majority of the
corporation's Disinterested Directors or that the transaction satisfy the
fair-price requirements of the law.
The Virginia Stock Corporation Act also provides that shares acquired in a
transaction that would cause the acquiring person's voting strength to cross any
of three thresholds (20%, 33% or 50%) have no voting rights unless granted by a
majority vote of shares not owned by the acquiring person or any officer or
employee-director of the Company. An acquiring person may require the Company to
hold a special meeting of shareholders to consider the matter within 50 days of
its request.
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REDEMPTION AND RESTRICTIONS ON TRANSFER
In order to preserve the Company's status as a REIT as defined in the Code,
the Company can redeem or stop the transfer of its shares. The Articles provide
that the Company is organized to qualify as a REIT. Because the Code provides
that the concentration of more than 50% in value of the direct or indirect
ownership of its shares in five or fewer individual shareholders during the last
six months of any year would result in the disqualification of the Company as a
REIT, the Articles provide that the Company shall have the power (i) to redeem
that number of concentrated shares sufficient in the opinion of the Board of
Directors of the Company to maintain or bring the direct or indirect ownership
of shares into conformity with the requirements of the Code, and (ii) to stop
the transfer of shares to any person whose acquisition thereof would, in the
opinion of the Company's Board of Directors, result in such disqualification.
The per share redemption price of any shares redeemed by the Company pursuant to
this provision shall be the last reported sale price for the shares as of the
business day preceding the day on which notice of redemption is given. The Board
of Directors of the Company can require shareholders to disclose in writing to
the Company such information with respect to ownership of its shares as it deems
necessary to comply with the REIT provisions of the Code.
REIT QUALIFICATION
The Company operates in a manner intended to qualify for treatment as a
REIT under the Code. In general, a REIT which distributes to its shareholders at
least 95% of its taxable income (other than net capital gain) for a taxable year
and which meets certain other conditions will not be subject to federal income
taxation on income (including net capital gain) distributed for that year. If
the Company fails to qualify in any taxable year, it will be taxed for federal
income tax purposes as a corporation for that year and distributions to
shareholders will not be deductible by the Company in computing its taxable
income. Under such circumstances, the Company also will be disqualified from
being treated as a REIT under the Code for the ensuing four fiscal years.
Failure to qualify could result in the Company's incurring indebtedness and
perhaps liquidating investments in order to pay the resultant taxes.
PLAN OF DISTRIBUTION
The Company may sell Offered Securities to or through underwriters or may
sell Offered Securities to investors directly or through designated agents. Any
such underwriter or agent involved in the offer and sale of the Offered
Securities will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may, from time to time, authorize
underwriters acting as agents to offer and sell the Offered Securities upon the
terms and conditions set forth in any Prospectus Supplement. In connection with
the sale of Offered Securities, underwriters may be deemed to have received
compensation from the Company in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Offered
Securities for whom they may act as agent. Underwriters may sell Offered
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions (which may be changed from
time to time) from the underwriters and/or from the purchasers for whom they may
act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities and any discounts,
concessions or commissions allowed by underwriters to participating dealers will
be set forth in the applicable Prospectus Supplement. Underwriters, dealers and
agents participating in the distribution of the Offered Securities may be deemed
to be underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the Offered Securities may be deemed to be
underwriting discounts and commissions under the Securities Act. Underwriters,
dealers and agents may be entitled, under agreements entered into with the
Company, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to Delayed
Delivery Contracts ("Contracts") providing for payment and delivery on the date
or dates stated in such Prospectus Supplement. Each Contract will be for an
amount not less than, and the principal amount of Offered Securities sold
pursuant to Contracts shall not be less nor more than, the respective amounts
stated in such Prospectus Supplement. Institutions with which Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions, but will in all cases be subject to the
approval of the Company. Contracts will not be subject to any
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<PAGE>
conditions except (i) the purchase by an institution of the Offered Securities
covered by its Contract shall not at the time of delivery be prohibited under
the laws of any jurisdiction in the United States to which such institution is
subject and (ii) the Company shall have sold to such underwriters the total
principal amount of the Offered Securities less the principal amount thereof
covered by Contracts. A commission indicated in the Prospectus Supplement will
be paid to agents and underwriters soliciting purchases of Offered Securities
pursuant to Contracts accepted by the Company. Agents and underwriters shall
have no responsibility in respect of the delivery or performance of Contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company in the ordinary
course of business.
LEGAL OPINIONS
The validity of the Offered Securities will be passed upon for the Company
by Hunton & Williams, Richmond, Virginia. Brown & Wood LLP, New York, New York,
will act as counsel to any underwriters, dealers or agents.
EXPERTS
The consolidated financial statements and schedule of the Company appearing
in the annual report (Form 10-K) of United Dominion Realty Trust, Inc. for the
year ended December 31, 1996 have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. Such consolidated financial statements are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of South West Property Trust Inc. at
December 31, 1996 and 1995, and for each of the three years ended in the period
ended December 31, 1996, appearing in the Company's current report on Form 8-K
dated December 31, 1996, incorporated herein by reference, have been audited by
Ernst & Young LLP, independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The statements of rental operations of Steeplechase Apartments and Westland
Park Apartments, included in the Company's current report on Form 8-K, dated
October 31, 1996, incorporated herein by reference, have been incorporated
herein in reliance upon the reports respectively dated June 20, 1996 and June
18, 1996 of L. P. Martin & Company, P.C., independent auditors, also
incorporated herein by reference, and upon the authority of such firm as experts
in accounting and auditing.
The combined statement of rental operations of the Properties, included in
the Company's Current Report on Form 8-K, dated August 15, 1996, incorporated
herein by reference, has been incorporated herein in reliance upon the report
dated May 16, 1996, of Dixon, Odom & Co., L.L.P., independent public
accountants, also incorporated herein by reference, and upon the authority of
such firm as experts in accounting and auditing.
20
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<S> <C>
No dealer, salesperson or other individual has 1,057,269 Shares
been authorized to give any information or to make any
representations other than those contained or
incorporated by reference in this Prospectus
Supplement or Prospectus and, if given or made, such
information or representations must not be relied upon
as having been authorized by the Company or the
Underwriter. This Prospectus Supplement and the
Prospectus do not constitute an offer or solicitation UNITED DOMINION
by anyone in any state in which such offer or REALTY TRUST, INC.
solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to
do so or to anyone to whom it is unlawful to make such
offer or solicitation. Neither the delivery of this
Prospectus Supplement or the Prospectus nor any sale
made hereunder and thereunder shall, under any
circumstance, create an implication that there has
been no change in the facts set forth in this
Prospectus Supplement or in the Prospectus or in the Common Stock
affairs of the Company since the date hereof.
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TABLE OF CONTENTS ----------------------
Prospectus Supplement PROSPECTUS SUPPLEMENT
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The Company.......................................S-2
Recent Developments...............................S-2
Use Of Proceeds...................................S-3
Underwriting......................................S-3
Legal Matters.....................................S-3
PROSPECTUS WHEAT FIRST UNION
Available Information ..............................2
Incorporation of Certain Documents by Reference.....2
The Company.........................................2
Use of Proceeds.....................................4
Certain Ratios......................................4
Description of Debt Securities......................4
Description of Capital Stock.......................15 MARCH 24, 1998
Plan of Distribution...............................19
Legal Opinions.....................................20
Experts............................................20
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