As filed with the Securities and Exchange Commission on February 24, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
UNITED DOMINION REALTY TRUST, INC.
(Exact name of registrant as specified in its charter)
Virginia 54-0857512
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
10 South 6th Street
Richmond, Virginia 23219-3802
(804)780-2691
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
KATHERYN E. SURFACE
Senior Vice President and General Counsel
United Dominion Realty Trust, Inc.
10 South 6th Street
Richmond, Virginia 23219-3802
(804) 780-2691
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
JAMES W. FEATHERSTONE, III
RANDALL S. PARKS
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
(804) 788-8267
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
<TABLE>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Title of Each Class of Amount Proposed Maximum Offering Proposed Maximum Aggregate Amount of
Securities to be Registered to be Registered Price Per Unit (1) Offering Price (1) Registration Fee
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<S> <C> <C> <C> <C>
Common stock,
$1.00 par value 130,416 shares $9.6250 $1,255,254 $349.00
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Rights to Purchase Series C
Junior Participating 130,416 rights N/A N/A N/A
Redeemable Preferred Stock,
no par value (2)
====================================================================================================================================
</TABLE>
(1) Determined pursuant to Rule 457(c).
(2) The rights will be attached to and trade with the common stock.
The registrant hereby amends this registration statement on such date
or dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933, or until the registration statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
<PAGE>
SUBJECT TO COMPLETION, DATED February 24, 1999
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The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
- --------------------------------------------------------------------------------
130,416 Shares
UNITED DOMINION REALTY TRUST, INC.
Common Stock
This Prospectus relates to the possible issuance of up to 130,416
shares of common stock to certain individuals and entities (the "Unitholders")
who sold 278 multi-family apartment homes to United Dominion Realty Trust, Inc.
("United Dominion") on February 5, 1998. As partial consideration for their
properties, the Unitholders received 130,416 units of limited partnership
interest in United Dominion Realty, L.P. United Dominion will issue the shares
of common stock to the Unitholders if
(1) the Unitholders choose to redeem their units, and
(2) United Dominion, as United Dominion Realty, L.P.'s general
partner, elects to purchase the units for shares of common stock.
The Unitholders will receive one share of common stock for each unit
they sell to United Dominion. The Unitholders will not pay, and United Dominion
will not receive, any cash for the shares of common stock.
The common stock is traded on the New York Stock Exchange under the
symbol "UDR."
So that United Dominion may qualify as a real estate investment trust
("REIT") under the Internal Revenue Code of 1986, as amended, United Dominion's
Amended Articles of Incorporation permit its Board of Directors
(1) to limit the number of shares of common stock that may be owned
by any single person or affiliated group and
(2) to restrict the transfer of shares of common stock if the
transfer would prevent United Dominion from qualifying as a REIT.
See "Restrictions on Transfer of Capital Stock."
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is February , 1999.
<PAGE>
TABLE OF CONTENTS
Page
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UNITED DOMINION REALTY TRUST, INC............................................2
RECENT DEVELOPMENTS..........................................................2
DESCRIPTION OF CAPITAL STOCK.................................................4
General...................................................................4
Common Stock..............................................................4
Preferred Stock...........................................................4
RESTRICTIONS ON TRANSFER OF CAPITAL STOCK....................................5
REDEMPTION OF UNITS..........................................................5
Redemption Rights.........................................................5
Comparison of Ownership of Units and Redemption Shares....................6
FEDERAL INCOME TAX CONSEQUENCES OF UNITED DOMINION'S STATUS AS A REIT.......11
Tax Consequences of Redemption..............................................12
Taxation of United Dominion.................................................14
Requirements for Qualification..............................................15
Income Tests.............................................................16
Asset Tests..............................................................18
Distribution Requirements................................................19
Recordkeeping Requirements...............................................20
Failure to Qualify.......................................................20
Taxation of Taxable U.S. Stockholders.......................................20
Taxation of U.S. Stockholders on the Disposition of the Common Stock.....21
Capital Gains and Losses.................................................21
Information Reporting Requirements and Backup Withholding................21
Taxation of Tax-Exempt Stockholders.........................................22
Taxation of Non-U.S. Stockholders...........................................22
Other Tax Consequences......................................................24
State and Local Taxes....................................................24
PLAN OF DISTRIBUTION........................................................24
EXPERTS.....................................................................24
LEGAL MATTERS...............................................................25
IF YOU WOULD LIKE ADDITIONAL INFORMATION....................................26
<PAGE>
UNITED DOMINION REALTY TRUST, INC.
United Dominion Realty Trust, Inc. ("United Dominion"), a Virginia
corporation headquartered in Richmond, Virginia, is a self-administered real
estate investment trust ("REIT"), whose business is the ownership and operation
of apartment communities located throughout the United States. United Dominion
is a fully integrated real estate company with acquisition, development and
property management capabilities. At December 31, 1998, United Dominion's
portfolio consisted of 326 communities containing 86,893 apartment homes. United
Dominion's apartment portfolio also included eight communities with 2,292
apartment homes under development (of which 662 were completed) and two
additions to existing communities with 316 apartment homes (none of which were
completed). United Dominion had approximately 2,800 employees as of December 31,
1998.
United Dominion operates as a REIT under the federal income tax laws.
To qualify as a REIT, United Dominion must meet certain tests which, among other
things, require that (1) its assets consist primarily of real estate, (2) its
income be derived primarily from real estate and (3) at least 95% of its taxable
income be distributed to its shareholders each year. Because United Dominion
qualifies as a REIT, it generally is not subject to federal income taxes.
RECENT DEVELOPMENTS
ASR Merger. Effective as of the close of business on March 27, 1998,
ASR Investments Corporation ("ASR"), a publicly traded, Tucson-based,
multifamily REIT that owned and operated 39 communities with 7,550 apartment
homes was merged into United Dominion (the "ASR Merger"). Pursuant to the ASR
Merger agreement, each share of ASR's common stock was exchanged for 1.575
shares of United Dominion's common stock. The ASR Merger was structured as a
tax-free transaction and was treated as a purchase for accounting purposes. In
connection with the ASR Merger, United Dominion acquired real estate assets
totaling $313.7 million. Consideration given by United Dominion included
7,742,839 shares of common stock valued at $14 per share for an aggregate equity
value of $108.4 million, plus the issuance of 1,529,990 operating partnership
units in Heritage Communities, L.P. valued at $21.4 million. In addition, United
Dominion assumed, at fair market value, mortgage debt totaling $179.4 million
and other liabilities of $13.6 million. The aggregate purchase price in the ASR
Merger was $323.1 million, including transaction costs.
AAC Merger. On December 7, 1998, United Dominion acquired American
Apartment Communities II, Inc. ("AAC"), a San Francisco-based private REIT, from
a fund managed by Lazard Freres Real Estate Investors LLC and other investors
(the "AAC Merger"). The AAC Merger included 53 properties with 14,001 apartment
homes and allowed United Dominion to enter growing markets in California,
improve economies of scale by increasing the number of its apartment homes in
the Seattle, Columbus, Tampa and South Florida markets, and position itself in
Oregon, Colorado, Michigan and Indiana. The AAC Merger was structured as a
tax-free merger and was treated as a purchase for accounting purposes. In
connection with the AAC Merger, United Dominion acquired primarily real estate
assets totaling $766.9 million. The aggregate purchase price consisted of the
following: (A) 8,000,000 shares of United Dominion's 7.5% Series D Convertible
Preferred Stock ($25 liquidation preference value) which is convertible into
shares of United Dominion's common stock at $16.25 per share, with a fair market
value of approximately $175 million, (B) the issuance of 5,614,035 operating
partnership units to holders of the 21% minority interest in American Apartment
Communities II, L.P. with an aggregate fair market value of approximately $67.4
million, (C) the assumption of approximately $457.7 million of secured notes
payable at fair value, (D) the assumption of other liabilities aggregating
approximately $27.8 million and (E) $59.8 million of cash. The aggregate
purchase price of the AAC Merger was $793.7 million, including transaction
costs. With the acquisition, United Dominion owns approximately 87,000 completed
apartments and operates nationally in 34 major U.S. markets.
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<PAGE>
Other Acquisitions. In addition to the ASR Merger and the AAC Merger,
during 1998, United Dominion acquired 24 communities with 6,959 apartment homes
at a total cost (including closing costs) of $314.7 million, or $45,200 per
home.
Disposition of Investments. During 1998, United Dominion sold 18
communities with 5,318 apartment homes and one shopping center at an aggregate
sales price of $156.6 million including the sale of one community on December
31, 1998.
Financing Activities. During the first quarter of 1998, United Dominion
entered into two separate transactions to sell its common stock to unit
investment trusts ("UITs"). In February 1998, United Dominion issued 1.7 million
shares of its common stock at a gross sales price of $14.31 per share to a UIT.
In March 1998, United Dominion issued 1.1 million shares of its common stock at
a gross sales price of $14.19 per share to a second UIT. The net proceeds from
the two UIT transactions aggregated $38.0 million and were primarily used to
repay bank debt.
During 1998, United Dominion issued 2,824,627 shares of its common
stock and received $36.6 million under its Dividend Reinvestment and Stock
Purchase Plan, which included $23.5 million in optional cash investments and
$13.1 million of reinvested distributions.
In order to reduce the interest rate risk associated with the
anticipated issuance of unsecured notes during 1998, United Dominion entered
into a $100 million (notional amount) fixed-pay, forward-starting swap agreement
(interest rate risk management agreement) with a major Wall Street investment
banking firm in July 1997. This interest rate risk management agreement had an
unfavorable position to United Dominion of $16.8 million at September 30, 1998.
United Dominion settled the interest rate risk management agreement on November
9, 1998, by paying $15.6 million to the counterparty. United Dominion elected
not to issue the unsecured notes contemplated by the interest rate risk
management agreement, and accordingly, the cost associated with the settlement
of this agreement was expensed during the fourth quarter of 1998.
Debt Offerings. On November 10, 1998, United Dominion sold an aggregate
$212.5 million of senior unsecured notes payable in two simultaneous public
offerings which consist of the following:
o $150 million of 8.125% Notes due November 15, 2000, and
o $62.5 million (including the over-allotment option) of 8.5%
Monthly Income Notes due November 15, 2008.
Net proceeds from the two offerings (net of underwriting discounts,
commissions and offering expenses) of approximately $207.6 million were used to
repay bank debt outstanding under United Dominion's various credit facilities
and to fund the acquisition of AAC.
In January and February 1999, United Dominion sold an aggregate of $150
million of medium-term notes payable in four offerings which consisted of:
o $70 million of three-year notes maturing January 25, 2002,
priced at 7.60%,
o $10 million of four-year notes maturing January 27, 2003,
priced at a floating rate that was swapped into a fixed rate
at 7.52%,
o $58 million of five-year notes maturing January 26, 2004,
priced at 7.67%, and
o $12 million of 7.22% Notes due February 19, 2003.
Net proceeds from the sale of the notes were used to repay bank debt
outstanding under United Dominion's various credit facilities and to repay
mortgage debt.
3
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
United Dominion is authorized to issue 150,000,000 shares of common
stock, $1.00 par value, and 25,000,000 shares of preferred stock, no par value.
At January ___, 1999, there were outstanding 103,639,117 shares of common stock
and 18,200,000 shares of preferred stock, consisting of 4,200,000 shares of
United Dominion's 9 1/4% Series A Cumulative Redeemable Preferred Stock (the
"Series A Preferred"), 6,000,000 shares of United Dominion's 8.60 % Series B
Cumulative Redeemable Preferred Stock (the "Series B Preferred"), 0 shares of
United Dominion's Series C Junior Participating Cumulative Redeemable Preferred
Stock (the "Series C Preferred) and 8,000,000 shares of United Dominion's 7.5%
Series D Convertible Preferred Stock (the "Series D Preferred"). The following
statements with respect to the capital stock of United Dominion are subject to
the detailed provisions of United Dominion'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 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 of which this
prospectus is a part.
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 United Dominion, holders of common stock are entitled to share
ratably in the distributable assets of United Dominion remaining after
satisfaction of the prior preferential rights of the preferred stock and the
satisfaction of all debts and liabilities of United Dominion. 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, the Series B Preferred, the Series C Preferred and the Series D
Preferred, as described in the description of United Dominion's preferred stock
contained in United Dominion's registration statements on Form 8-A, as amended,
filed pursuant to Section 12 of the Exchange Act on May 1, 1995, June 11, 1997
and February 4, 1998. The transfer agent for the common stock is Chase Mellon
Shareholder Services, L.L.C., Ridgefield Park, New Jersey.
Rights to Purchase Series C Preferred Stock
Each share of common stock has attached to it one right to purchase
from the Company one one-thousandth of a share of Series C Junior Participating
Cumulative Redeemable Preferred Stock (the "Series C Preferred Stock"). Each one
one-thousandth of a share of Series C Preferred Stock is structured to be the
equivalent of one share of common stock. The exercise price of the rights is
$45.00, subject to adjustment.
The rights will separate from the common stock and a distribution of
certificates evidencing the rights will occur upon the earlier of (i) 10
business days following a public announcement that a person or group of related
persons has acquired, or obtained the right to acquire, beneficial ownership of
more than 15% of the outstanding shares of common stock, or (ii) 10 business
days following the commencement of a tender offer or exchange offer that would
result in a person or group beneficially owning more than 15% of the outstanding
shares of common stock.
4
<PAGE>
The rights will expire at the close of business on February 4, 2008,
unless earlier redeemed or exchanged by the Company. A more complete description
of the rights and the Series C Preferred Stock is contained in United Dominion's
registration statement on Form 8-A, as amended, as filed on February 4, 1998.
Preferred Stock
The preferred stock is described in United Dominion's registration
statements on Form 8-A, as amended, filed pursuant to Section 12 of the Exchange
Act on May 1, 1995, June 11, 1997 and February 4, 1998.
RESTRICTIONS ON TRANSFER OF CAPITAL STOCK
For United Dominion to qualify as a REIT under federal income tax laws,
its shares of capital stock must be held by a minimum of 100 persons for at
least 335 days in each calendar year or during a proportionate part of a shorter
calendar year. In addition, at all times during the second half of each calendar
year, no more than 50% in value of the shares of capital stock of United
Dominion may be owned, directly or indirectly by five or fewer individuals (the
"5/50 Rule"). Because the Board of Directors believes it is essential for United
Dominion to continue to qualify as a REIT, the Articles permit the Board of
Directors to prevent an individual or individuals from directly or indirectly
owning shares to the extent that such ownership would disqualify United Dominion
as a REIT.
If the Board of Directors, in its good faith, determines that an
individual's or individuals' ownership of stock may disqualify United Dominion
as a REIT, the Board of Directors may call for a redemption (by lot or other
equitable means) to redeem a number of shares sufficient to maintain United
Dominion's REIT status. The redemption price per share shall be the closing sale
price on the NYSE as of the business day preceding the day on which notice of
redemption is given. In addition, United Dominion may stop any acquisition or
transfer of shares that would jeopardize United Dominion's REIT status.
REDEMPTION OF UNITS
Redemption Rights
Pursuant to the agreement governing the Partnership (the "Partnership
Agreement"), the limited partners of the Partnership generally have the right to
cause the redemption (the "Redemption Rights") of their interests in the
Partnership (the "Units"). Each limited partner may, subject to certain
limitations, require that the Partnership redeem all or a portion of his Units
at any time after one year from the date the Units were acquired by delivering a
notice of exercise of redemption right to the Partnership and United Dominion.
The form of notice is an exhibit to the Partnership Agreement. A limited partner
must request the redemption of at least 1,000 Units (or all of the Units held by
such holder, if less than 1,000 are so held).
Upon redemption, each limited partner generally will receive from the
Partnership cash equal to the value of the Units being redeemed. The value of
each Unit will be assumed to be equal to the market value of one share of common
stock. The market value of the common stock for this purpose will be equal to
the average of the closing trading prices of the common stock (or substitute
information, if no such closing prices are available) on the NYSE for the ten
consecutive trading days before the day on which the redemption notice was
received by United Dominion.
Instead of the Partnership redeeming the Units, United Dominion, in its
sole discretion, may elect to purchase the Units directly by paying to the
limited partner either (A) a number of shares of common stock equal to the
number of Units being redeemed ("Redemption Shares"), or (B) cash in an amount
equal to the cash value of the Units, as determined pursuant to the preceding
paragraph. If United Dominion exercises its right to purchase the Units, then
the Partnership has no obligation to redeem the Units.
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<PAGE>
United Dominion anticipates that it generally will elect to purchase
Units through the issuance of the Redemption Shares pursuant to this Prospectus.
Such an acquisition will be treated as a sale of the Units to United Dominion
for federal income tax purposes. See "-- Tax Consequences of Redemption." Upon
purchase or redemption, a limited partner will no longer have the right to
receive distributions with respect to the Units.
A limited partner may not redeem his Units if receipt of common stock
in exchange for those Units would (A) result in such partner or any other person
owning, directly or indirectly, more than 9.8% of the outstanding common stock,
(B) result in common stock being owned by fewer than 100 persons (determined
without reference to any rules of attribution), (C) result in United Dominion
being "closely held" under the federal income tax laws, (D) cause United
Dominion to own, actually or constructively, 10% or more of the ownership
interests in a tenant of United Dominion's or the Partnership's real property,
or (E) cause the acquisition of common stock by such partner to be "integrated"
with any other distribution of common stock for purposes of complying with the
registration provisions of the Securities Act of 1933, as amended. United
Dominion, in its sole discretion, may waive this restriction and permit a
limited partner to exercise its Redemption Rights, but only if the limited
partner receives cash in exchange for the Units.
Comparison of Ownership of Units and Redemption Shares
The information below highlights a number of the significant
differences between the Partnership and United Dominion and compares certain
legal rights associated with the ownership of Units and common stock,
respectively. These comparisons are intended to assist limited partners of the
Partnership in understanding how their investment will be changed if their Units
are redeemed for Redemption Shares. This discussion is summary in nature and
does not constitute a complete discussion of these matters. Holders of Units
should carefully review the balance of this Prospectus and the registration
statement of which this Prospectus is a part for additional important
information about United Dominion.
Form of Organization and Assets Owned. The Partnership is organized as
a Virginia limited partnership. United Dominion is a Virginia corporation.
United Dominion elected to be taxed as a REIT under the Code effective for its
taxable year ended December 31, 1972 and intends to maintain its qualification
as a REIT.
Length of Investment. The Partnership has a stated termination date of
December 31, 2051, although it may be terminated earlier under certain
circumstances. United Dominion has a perpetual term and intends to continue its
operations for an indefinite time period.
Additional Equity. The Partnership is authorized to issue Units and
other partnership interests to its partners or to other persons for such
consideration and on such terms and conditions as United Dominion, in its sole
discretion, may deem appropriate. In addition, United Dominion may cause the
Partnership to issue additional Units, or other partnership interests in one or
more different series or classes which may be senior to the Units, to United
Dominion. Consideration for additional partnership interests may be cash or
other property or other assets permitted by Virginia law.
Under the Articles, the total number of shares of all classes of stock
that United Dominion has the authority to issue is 150,000,000 shares of common
stock and 25,000,000 shares of preferred stock. As of the date of this
Prospectus, 18,200,000 shares of preferred stock are outstanding.
Management and Control. All management and control over the business of
the Partnership are vested in United Dominion, as general partner of the
Partnership, and no limited partner has any right to participate in or exercise
management or control over the business of the Partnership. Upon the occurrence
of an event of bankruptcy or the dissolution of United Dominion, United Dominion
shall be deemed to be removed as general partner; otherwise, United Dominion may
not be removed by the limited partners with or without cause.
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<PAGE>
The Board of Directors has exclusive control over United Dominion's
business and affairs subject to the restrictions in the Articles and Bylaws. The
Board of Directors has adopted certain policies with respect to acquisitions,
development, investing, financing and conflict of interest, but these policies
may be altered or eliminated without a vote of the shareholders. Accordingly,
except for their vote in the elections of directors, shareholders have no
control over the ordinary business policies of United Dominion.
Fiduciary Duties. Under Virginia law, United Dominion is accountable to
the Partnership as a fiduciary and, consequently, is required to exercise good
faith in all of its dealings with respect to partnership affairs. However, under
the Partnership Agreement, United Dominion is under no obligation to take into
account the tax consequences to any limited partner of any action taken by it,
and United Dominion will have no liability to a limited partner as a result of
any damages suffered by or benefits not derived by a limited partner as a result
of an action or inaction of United Dominion so long as United Dominion acted in
good faith.
Under Virginia law, United Dominion's directors must perform their
duties in good faith, in a manner that they believe to be in the best interests
of United Dominion and with the care an ordinarily prudent person in a like
situation would exercise under similar circumstances. Directors of United
Dominion who act in such a manner generally will not be liable to United
Dominion for monetary damages arising from their activities.
Management Limitation of Liability and Indemnification. The Partnership
Agreement generally provides that United Dominion will incur no liability for
monetary damages to the Partnership or any limited partner for losses sustained
as a result of errors in judgment or of any act or omission if United Dominion
acted in good faith. In addition, United Dominion is not responsible for any
misconduct or negligence on the part of its agents, provided United Dominion
appointed such agents in good faith. The Partnership Agreement also provides for
indemnification of United Dominion, the directors and officers of United
Dominion and such other persons as United Dominion may from time to time
designate, against any and all losses, claims, damages, liabilities (joint or
several), expenses (including reasonable legal fees and expenses), judgments,
fines, settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, whether civil, criminal, administrative or
investigative, that relate to the operations of the Partnership in which such
person may be involved, or is threatened to be involved. However, the
Partnership shall not indemnify any such person (A) for an act or omission of
such person that was material to the matter giving rise to the proceeding and
either was committed in bad faith or was the result of active and deliberate
dishonesty, (B) if such person actually received an improper benefit in money,
property or services or (C) in the case of any criminal proceeding, if such
person had reasonable cause to believe that the act or omission was unlawful.
Any indemnification will be made only out of assets of the Partnership.
United Dominion's Articles obligate it to indemnify and advance
expenses to present and former directors and officers to the maximum extent
permitted by Virginia law. The Virginia Stock Corporation Act ("VSCA") permits a
corporation to indemnify its present and former directors and officers, among
others, against judgments, settlements, penalties, fines or reasonable expenses
incurred with respect to a proceeding to which they may be made a party by
reason of their service in those or other capacities if (A) such persons
conducted themselves in good faith, (B) they reasonably believed, in the case of
conduct in their official capacities with the corporation, that their conduct
was in its best interests and, in all other cases, that their conduct was at
least not opposed to its best interests, and (C) in the case of any criminal
proceeding, they had no reasonable cause to believe that their conduct was
unlawful. Any indemnification by United Dominion pursuant to the provisions of
the Articles described above will be paid out of the assets of United Dominion
and will not be recoverable from the shareholders.
The VSCA permits the charter of a Virginia corporation to include a
provision eliminating or limiting the personal liability of its directors to the
corporation or its shareholders for monetary damages for breach of fiduciary
duty as a director, except that such provision cannot eliminate or limit the
liability of a director (A) for any breach of the director's duty of loyalty to
the corporation or its shareholders, (B) for acts or omissions not in good faith
or which involve intentional misconduct or a knowing violation of the law, or
(C) for unlawful distributions that exceed what could have been distributed
without violating the VSCA or the corporation's charter. United Dominion's
Articles contain a provision eliminating the personal liability of its directors
or officers to United Dominion or its shareholders for money damages to the
maximum extent permitted by Virginia law from time to time.
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Anti-Takeover Provisions. Except in limited circumstances, United
Dominion has exclusive management power over the business and affairs of the
Partnership. United Dominion may not be removed as general partner by the
limited partners with or without cause. Under the Partnership Agreement, United
Dominion may, in its sole discretion, prevent a limited partner from
transferring his interest or any rights as a limited partner. United Dominion
may exercise this right of approval to deter, delay or hamper attempts by
persons to acquire a controlling interest in the Partnership.
As described above under "Restrictions on Transfer of Capital Stock,"
United Dominion's Board of Directors may restrict the acquisition of shares of
common stock.
In addition, Virginia has enacted several statutory provisions to deter
takeovers of Virginia corporations. The VSCA generally requires that any merger,
share exchange or sale of substantially all of the assets of a corporation not
in the ordinary course of business be approved by at least two-thirds of the
votes entitled to be cast by each voting group entitled to vote, unless the
articles of incorporation provide for a greater or lesser vote (but in no event
less than a majority of votes cast by each such voting group at a meeting at
which a quorum of the voting group exists). United Dominion's Articles and
Bylaws do not provide for a greater or lesser vote for the approval of
extraordinary transactions.
The VSCA also contains provisions governing "Affiliated Transactions."
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. Affiliated Transactions subject to this approval requirement include
mergers, share exchanges, material dispositions of corporate assets not in the
ordinary course of business, any dissolution of the corporation proposed by or
on behalf of an Interested Shareholder, or any reclassification, including
reverse stock splits, recapitalization or merger of the corporation with its
subsidiaries which increases the percentage of voting shares owned beneficially
by an Interested Shareholder by more than five percent.
For three years following the time that an Interested Shareholder
becomes an owner of 10% of the outstanding voting shares of a corporation, the
corporation 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." A Disinterested Director means, with respect
to a particular Interested Shareholder, a member of the board of directors who
was (A) a member on the date on which an Interested Shareholder became an
Interested Shareholder and (B) recommended for election by, or was elected to
fill a vacancy and received the affirmative vote of, a majority of the
Disinterested Directors then on the board. 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.
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 statute. In general, the fair-price requirement provides
that in a two-step acquisition transaction, the Interested Shareholder must pay
the shareholders in the second step either the same amount of cash or the same
amount and type of consideration paid to acquire the Virginia corporation's
shares in the first step.
None of the foregoing limitations and special voting requirements
applies to a transaction with an Interested Shareholder (A) whose acquisition of
shares making such person an Interested Shareholder was approved by a majority
of the Virginia corporation's Disinterested Directors or (B) who was an
Interested Shareholder on the date the corporation became subject to these
provisions by virtue of its having 300 shareholders of record.
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In addition, the statute provides that, by affirmative vote of a
majority of the voting shares other than shares owned by any Interested
Shareholder, a corporation can adopt an amendment to its articles of
incorporation or bylaws providing that the Affiliated Transactions provisions
shall not apply to the corporation. United Dominion has not "opted out" of the
Affiliated Transactions provisions.
The VSCA also contains provisions regulating certain "control share
acquisitions," which are transactions causing the voting strength of any person
acquiring beneficial ownership of shares of a public corporation in Virginia to
meet or exceed certain threshold percentages (20%, 33 1/3% or 50%) of the total
votes entitled to be cast for the election of directors. Shares acquired in a
control share acquisition have no voting rights unless (A) the voting rights are
granted by a majority vote of all outstanding shares other than those held by
the acquiring person or any officer or employee director of the corporation, or
(B) the articles of incorporation or bylaws of the corporation provide that
these Virginia law provisions do not apply to acquisitions of its shares. The
acquiring person may require that a special meeting of the shareholders be held
to consider the grant of voting rights to the shares acquired in the control
share acquisition. United Dominion has not adopted an amendment to its Articles
or Bylaws making these provisions inapplicable to acquisition of its shares.
Voting Rights. Under the Partnership Agreement, the limited partners
have voting rights only as to the continuation of the Partnership in certain
circumstances and as to certain amendments of the Partnership Agreement, as
described more fully below. Otherwise, all decisions relating to the operation
and management of the Partnership are made by United Dominion. At February 22,
1999, United Dominion held approximately 79% of the outstanding interests in the
Partnership. As Units held by limited partners are redeemed, United Dominion's
percentage ownership of the Partnership will increase. If additional Units are
issued to third parties, United Dominion's percentage ownership of the
Partnership will decrease.
Shareholders of United Dominion have the right to vote on, among other
things, a merger or sale of substantially all of the assets of United Dominion,
certain amendments to the Articles and dissolution of United Dominion. All
shares of common stock have one vote, and the Articles permit the Board of
Directors to classify and issue preferred stock in one or more series having
voting power which may differ from that of the common stock. See "Description of
Capital Stock."
Amendment of the Partnership Agreement or the Articles. The Partnership
Agreement may be amended by United Dominion without the consent of the limited
partners in any respect, except that certain amendments affecting the
fundamental rights of a limited partner must be approved by consent of limited
partners (other than United Dominion or any subsidiary of United Dominion)
holding more than 50% of the Units. Such consent is required for any amendment
that would (A) affect the Redemption Rights, (B) adversely affect the rights of
limited partners to receive distributions payable to them under the Partnership
Agreement, (C) alter the Partnership's profit and loss allocations, (D) alter
the provisions relating to the amendment of the Partnership Agreement, or (E)
impose any obligation upon the limited partners to make additional capital
contributions to the Partnership.
The Articles may be amended by the affirmative vote of the holders of a
majority of the shares of each voting group entitled to vote on the amendment.
United Dominion's Bylaws may be amended by the Board of Directors or by vote of
the holders of a majority of the outstanding shares.
Vote Required to Dissolve the Partnership or United Dominion. At any
time prior to December 31, 2051 (upon which date the Partnership shall
terminate), United Dominion may elect to dissolve the Partnership in its sole
discretion. Such dissolution shall also occur upon (A) the bankruptcy,
dissolution or withdrawal of United Dominion (unless the limited partners
unanimously elect to continue the Partnership), (B) the passage of 90 days after
the sale or other disposition of all or substantially all the assets of the
Partnership or (C) the redemption of all of the outstanding Units (other than
those held by United Dominion or any subsidiary of United Dominion, if any).
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Under Virginia law, the Board of Directors generally must recommend and
the holders of two-thirds of the outstanding common stock entitled to vote must
approve any proposal in order to dissolve United Dominion.
Vote Required to Sell Assets or Merge. Under the Partnership Agreement,
the sale, exchange, transfer or other disposition of all or substantially all of
the Partnership's assets or merger or consolidation of the Partnership requires
only the consent of United Dominion. Under Virginia law, any merger or share
exchange of United Dominion requires the separate approval of the Board of
Directors and each group of shareholders entitled to vote on such matter by
two-thirds of all votes entitled to be cast by such group. Under Virginia law,
the sale of all or substantially all of the assets of United Dominion other than
in the normal course of business requires the approval of the Board of Directors
and holders of two-thirds of the outstanding shares of common stock. No approval
of the shareholders is required for the sale of United Dominion's assets in the
usual and regular course of business.
Compensation, Fees and Distributions. United Dominion does not receive
any compensation for its services as general partner of the Partnership. As a
partner in the Partnership, however, United Dominion has the same right to
allocations and distributions as other partners of the Partnership. In addition,
the Partnership will reimburse United Dominion for all expenses incurred
relating to the ongoing operation of the Partnership and any offering of
partnership interests in the Partnership or capital stock of United Dominion.
Liability of Investors. Under the Partnership Agreement and applicable
state law, the liability of the limited partners for the Partnership's debts and
obligations is generally limited to the amount of their investment in the
Partnership, and limited partners are generally not liable for any debts,
liabilities, contracts or obligations of the Partnership.
Under Virginia law, United Dominion's shareholders are not personally
liable for the debts or obligations of United Dominion.
Nature of Investments. The Units constitute equity interests entitling
each limited partner to his pro rata share of cash distributions made to the
limited partners of the Partnership. The Partnership generally intends to retain
and reinvest in its business proceeds of the sale of property or excess
refinancing proceeds.
The shares of common stock constitute equity interests in United
Dominion. United Dominion is entitled to receive its pro rata share of
distributions made by the Partnership with respect to the Units, and each
shareholder will be entitled to his pro rata share of any dividends or
distributions paid with respect to the common stock. The dividends payable to
the shareholders are not fixed in amount and are only paid if, when and as
declared by the Board of Directors. In order to qualify as a REIT, United
Dominion must distribute at least 95% of its annual taxable income (excluding
capital gains), and any taxable income (including capital gains) not distributed
will be subject to corporate income tax.
Potential Dilution of Rights. United Dominion is authorized, in its
sole discretion and without the consent of the limited partners, to cause the
Partnership to issue additional limited partnership interests and other equity
securities for any partnership purpose at any time to the limited partners or to
other persons on terms and conditions established by United Dominion.
The Board of Directors of United Dominion may issue, in its discretion,
additional shares of common stock and a variety of other equity securities of
United Dominion with such powers, preferences and rights as the Board of
Directors may designate. The issuance of additional shares of either common
stock or other similar or senior equity securities may result in the dilution of
the interests of the shareholders.
Liquidity. Subject to certain exceptions, a limited partner may not
transfer all or any portion of his Units without (A) obtaining the prior written
consent of United Dominion, which consent may be withheld in the sole and
absolute discretion of United Dominion, and (B) meeting certain other
requirements set forth in the Partnership Agreement. limited partners should
expect to hold their Units until they redeem them for cash or shares of common
stock, or until the Partnership terminates. The right of a transferee to become
a substituted limited partner also is subject to the consent of United Dominion,
which consent may be withheld in its sole and absolute discretion. If United
Dominion does not consent to the admission of a transferee, the transferee will
succeed to all economic rights and benefits attributable to such Units but will
not become a limited partner or possess any other rights of limited partners
(including the right to vote on or consent to actions of the Partnership).
United Dominion has the right to redeem any Units held by a transferee who does
not become a substituted limited partner within 20 business days of the
transfer. United Dominion may require, as a condition of any transfer, that the
transferring limited partner assume all costs incurred by the Partnership in
connection with such transfer.
Federal Income Taxation. The Partnership is not subject to federal
income taxes. Instead, each holder of an interest in the Partnership takes into
account its allocable share of the Partnership's taxable income or loss in
determining its federal income tax liability. As of January 1, 1999, the maximum
federal income tax rate for individuals was 39.6%. Income and loss from the
Partnership generally is subject to the "passive activity" limitations. Under
the "passive activity" rules, income and loss from the Partnership that is
considered "passive" income or loss generally can be offset against income and
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loss (including passive loss carry-forwards from prior years) from other
investments that constitute "passive activities" (unless the Partnership is
considered a "publicly traded partnership," in which case income and loss from
the Partnership can only be offset against other income and loss from the
Partnership). Income of the Partnership, however, that is attributable to
dividends or interest does not qualify as passive income and cannot be offset
with losses and deductions from a "passive activity." Cash distributions from
the Partnership are not taxable to a holder of Units except to the extent they
exceed such holder's basis in its Units (which will include such holder's
allocable share of the Partnership's debt). Each year, holders of Units will
receive a Schedule K-1 tax form containing detailed tax information for
inclusion in preparing their federal income tax returns. Holders of Units are
required in some cases to file state income tax returns and/or pay state income
taxes in the states in which the Partnership owns property, even if they are not
residents of those states, and in some such states the Partnership is required
to remit a withholding tax with respect to distributions to such nonresidents.
United Dominion elected to be taxed as a REIT effective for its taxable
year ended December 31, 1972. As long as it qualifies as a REIT, United Dominion
generally will be permitted to deduct distributions paid to its shareholders,
which effectively will reduce (or eliminate) the "double taxation" that
typically results when a corporation earns income and distributes that income to
its shareholders in the form of dividends. A REIT, however, is subject to
federal income tax on income that is not distributed and also may be subject to
federal income and excise taxes in certain circumstances. The maximum federal
income tax rate for corporations currently is 35% and for individuals is 39.6%.
Dividends paid by United Dominion will be treated as "portfolio" income and
cannot be offset with losses from "passive activities." Distributions made by
United Dominion to its taxable domestic shareholders out of current or
accumulated earnings and profits will be taken into account by them as ordinary
income. Distributions that are designated as capital gain dividends generally
will be taxed as long-term capital gain, subject to certain limitations.
Distributions in excess of current and accumulated earnings and profits will be
treated as a non-taxable return of capital to the extent of a shareholder's
adjusted basis in its common stock, and the excess over a shareholder's adjusted
basis will be taxed as capital gain. Each year, shareholders of United Dominion
(other than certain types of institutional investors) will receive IRS Form
1099, which is used by corporations to report dividends paid to their
shareholders. Shareholders who are individuals generally should not be required
to file state income tax returns and/or pay state income taxes outside of their
state of residence with respect to United Dominion's operations and
distributions. United Dominion may be required to pay state income and/or
franchise taxes in certain states.
FEDERAL INCOME TAX CONSEQUENCES
OF UNITED DOMINION'S STATUS AS A REIT
The following sections summarize the federal income tax issues that
you, as a redeeming limited partner and prospective shareholder of United
Dominion, may consider relevant. Because this section is a summary, it does not
address all of the tax issues that may be important to you. In addition, this
section does not address the tax issues that may be important to certain types
of shareholders that are subject to special treatment under the federal income
tax laws, such as insurance companies, tax-exempt organizations (except to the
extent discussed in "--Taxation of Tax-Exempt Stockholders" below), financial
institutions or broker-dealers, and non-U.S. individuals and foreign
corporations (except to the extent discussed in "--Taxation of Non-U.S.
Stockholders" below).
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The statements in this section are based on the current federal income
tax laws governing our qualification as a REIT. United Dominion cannot assure
you that new laws, interpretations thereof, or court decisions, any of which may
take effect retroactively, will not cause any statement in this section to be
inaccurate.
United Dominion urges you to consult your own tax advisor regarding the
specific tax consequences to you of redeeming your Units for common stock and of
United Dominion's election to be taxed as a REIT. Specifically, you should
consult your own tax advisor regarding the federal, state, local, foreign and
other tax consequences of such investment and election, and regarding potential
changes in applicable tax laws.
Tax Consequences of Redemption
The following discussion summarizes certain federal income tax
considerations that may be relevant to a limited partner who exercises his right
to require the redemption of his Units.
Tax Treatment of Redemption of Units. Upon a limited partner's exercise
of his redemption right, United Dominion may elect to purchase the Units. See
"--- Redemption Rights." If United Dominion assumes the redemption obligation
and purchases Units from a redeeming limited partner, the Partnership Agreement
provides that the redemption will be treated by United Dominion, the
Partnership, and the redeeming limited partner as a sale of Units by the limited
partner to United Dominion. The sale will be fully taxable to the redeeming
limited partner, and he will realize for tax purposes an amount equal to the sum
of the cash or the value of the common stock received in exchange for the Units,
plus the amount of any partnership liabilities allocable to the redeemed Units
at the time of the purchase.
If United Dominion does not elect to assume the obligation to redeem a
limited partner's Units, then the Partnership may either (A) redeem the Units
for cash that United Dominion contributes to the Partnership, or (B) redeem the
Units for cash that United Dominion does not contribute to the Partnership. If
the Partnership redeems the Units for cash contributed by United Dominion, the
redemption likely would be treated for tax purposes as a sale of such Units in a
fully taxable transaction. In that event, the redeeming partner will realize an
amount equal to the sum of the cash received in connection with the redemption,
plus the amount of any partnership liabilities allocable to the redeemed Units
at the time of the redemption. The determination of the amount of gain or loss
in the event of sale treatment is discussed more fully below.
If the Partnership chooses to redeem Units for cash that is not
contributed by United Dominion, the tax consequences would be the same as
described in the previous paragraph, except that if the Partnership redeems less
than all of the Units owned by a limited partner, the limited partner would not
be permitted to recognize any loss occurring on the transaction. The limited
partner will recognize taxable gain only to the extent that (A) the sum of the
cash and the amount of any partnership liabilities allocable to the redeemed
Units exceeds (B) his adjusted basis in all of his Units immediately before the
redemption.
Tax Treatment of Disposition of Units by Limited Partner Generally. If
a Unit is redeemed in a manner that is treated as a sale of the Unit, or if a
limited partner otherwise disposes of a Unit (other than in a transaction that
is treated as a redemption for tax purposes), the determination of gain or loss
from such sale or other disposition will be based on the difference between the
amount realized for tax purposes and the tax basis in such Unit. See "-- Basis
of Units."
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Upon the sale of a Unit, the "amount realized" will be measured by the
sum of the cash and fair market value of other property (e.g., shares of common
stock) received, plus the amount of any partnership liabilities allocable to the
Unit sold. To the extent that the amount realized exceeds the limited partner's
basis in the Unit sold, the limited partner will recognize gain. The amount of
gain recognized, or even the tax liability resulting from such gain, could
exceed the amount of cash and the value of any other property received during
the sale.
Except as described below, any gain recognized upon a sale or other
disposition of Units will be treated as gain attributable to the sale or
disposition of a capital asset. To the extent, however, that (A) the amount
realized upon the sale of a Unit that is attributable to a limited partner's
share of the Partnership's "unrealized receivables" (as defined in the federal
income tax laws) exceeds (B) the limited partner's basis attributable to those
assets, the excess will be treated as ordinary income. Unrealized receivables
include, to the extent not previously included in the Partnership's income, any
rights to payment for services rendered or to be rendered. Unrealized
receivables also include amounts that would be subject to recapture as ordinary
income if the Partnership had sold its assets at their fair market value at the
time of the transfer of a Unit.
Basis of Units. In general, if a limited partner received his Units
upon liquidation of a partnership, he will have an initial tax basis in his
Units ("Initial Basis") equal to his basis in his interest in the liquidated
partnership. Similarly, in general, if a limited partner received his Units in
exchange for a contribution of a partnership interest or other property to the
Partnership, he will have an Initial Basis equal to his basis in the contributed
partnership interest or other property.
A limited partner's Initial Basis generally is increased by (1) his
share of the Partnership's taxable income and (2) increases in his share of the
Partnership's liabilities (including any increase in his share of liabilities
occurring in connection with the transactions resulting in the issuance of the
Units).
Generally, a limited partner's basis in his Units is decreased (but not
below zero) by (1) his share of the Partnership's distributions, (2) decreases
in his share of the Partnership's liabilities (including any decrease in his
share of liabilities occurring in connection with the transactions resulting in
the issuance of the Units), (3) his share of the Partnership's losses and (4)
his share of the Partnership's nondeductible expenditures that are not
chargeable to capital.
Potential Application of Disguised Sale Regulations to a Redemption of
Units. There is a risk that a redemption of Units may cause the limited
partner's original transfer of property to the Partnership in exchange for Units
to be treated as a "disguised sale" of property.
Federal income tax law generally provides that, unless an exception
applies, if (A) a partner contributes property to a partnership and (B) the
partnership at the same time or afterwards transfers money or other
consideration (including the assumption of or taking subject to a liability) to
the partner, then the transaction will be treated as a "disguised sale," in
whole or in part, of the property by the partner to the partnership. In the
absence of an applicable exception, if money or other consideration is
transferred by a partnership to a partner within two years of the partner's
contribution of property to the partnership, the transactions will be, when
viewed together, presumed to be a sale of the contributed property unless the
facts and circumstances clearly establish that the transfers do not constitute a
sale. However, if two years have passed between the contribution of property and
the transfer of money or other consideration from the partnership to a partner,
the transactions will be presumed not to be a sale unless the facts and
circumstances clearly establish that the transfers constitute a sale.
Accordingly, if the Partnership redeems a Unit, the Internal Revenue
Service could argue that the transaction should be treated as a sale, because
the redeeming limited partner will receive cash after he has contributed
property to the Partnership. If the Internal Revenue Service were to make that
argument successfully, the original issuance of the Units could be taxable as a
disguised sale under the federal income tax laws. Any gain recognized thereby
may be eligible for installment reporting under Section 453 of the Code, subject
to certain limitations.
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Taxation of United Dominion
United Dominion elected to be taxed as a REIT under the federal income
tax laws commencing with its taxable year ended December 31, 1972. United
Dominion believes that it has operated in a manner intended to qualify as a REIT
since its election to be a REIT and it intends to continue to so operate. This
section discusses the laws governing the federal income tax treatment of a REIT
and its shareholders. These laws are highly technical and complex.
United Dominion's qualification as a REIT depends on its ability to
meet on a continuing basis certain qualification tests set forth in the federal
tax laws. Those qualification tests involve the percentage of income that United
Dominion earns from specified sources, the percentage of its assets that fall
within certain categories, the diversity of its share ownership, and the
percentage of its earnings that it distributes. The REIT qualification tests are
described in more detail below. For a discussion of the tax treatment of United
Dominion and its shareholders if United Dominion fails to qualify as a REIT, see
"--Failure to Qualify."
If United Dominion qualifies as a REIT, it generally will not be
subject to federal income tax on the taxable income that it distributes to its
shareholders. The benefit of that tax treatment is that it avoids the "double
taxation" (i.e., at both the corporate and stockholder levels) that generally
results from owning stock in a corporation. However, United Dominion will be
subject to federal tax in the following circumstances:
o United Dominion will pay federal income tax on taxable
income (including net capital gain) that it does not
distribute to its shareholders during, or within a specified
time period after, the calendar year in which the income is
earned.
o United Dominion may be subject to the "alternative minimum
tax" on any items of tax preference that it does not
distribute or allocate to its shareholders.
o United Dominion will pay income tax at the highest corporate
rate on (A) net income from the sale or other disposition of
property acquired through foreclosure ("foreclosure
property") that it holds primarily for sale to customers in
the ordinary course of business and (B) other non-qualifying
income from foreclosure property.
o United Dominion will pay a 100% tax on net income from
certain sales or other dispositions of property (other than
foreclosure property) that it holds primarily for sale to
customers in the ordinary course of business ("prohibited
transactions").
o If United Dominion fails to satisfy the 75% gross income
test or the 95% gross income test (as described below under
"--Requirements for Qualification--Income Tests"), and
nonetheless continues to qualify as a REIT because it meets
certain other requirements, it will pay a 100% tax on (A)
the gross income attributable to the greater of the amounts
by which it fails the 75% and 95% gross income tests,
multiplied by (B) a fraction intended to reflect its
profitability.
o If United Dominion fails to distribute during a calendar
year at least the sum of (A) 85% of its REIT ordinary income
for such year, (B) 95% of its REIT capital gain net income
for such year, and (C) any undistributed taxable income from
prior periods, it will pay a 4% excise tax on the excess of
such required distribution over the amount it actually
distributed.
o United Dominion may elect to retain and pay income tax on
its net long-term capital gain.
o If United Dominion acquires any asset from a C corporation
(i.e., a corporation generally subject to full
corporate-level tax) in a merger or other transaction in
which it acquires a basis in the asset that is determined by
reference to the C corporation's basis in the asset (or
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another asset)), it will pay tax at the highest regular
corporate rate applicable if it recognizes gain on the sale
or disposition of such asset during the 10-year period after
it acquires such asset. The amount of gain on which it will
pay tax is the lesser of (i) the amount of gain that it
recognizes at the time of the sale or disposition and (ii)
the amount of gain that it would have recognized if it had
sold the asset at the time it acquired the asset. The rule
described in this paragraph will apply assuming that United
Dominion makes an election under IRS Notice 88-19 upon its
acquisition of an asset from a C corporation.
Requirements for Qualification
A REIT is a corporation, trust, or association that meets the following
requirements:
1. it is managed by one or more trustees or directors;
2. its beneficial ownership is evidenced by transferable
shares, or by transferable certificates of beneficial
interest;
3. it would be taxable as a domestic corporation, but for
provisions of federal income tax law defining a REIT;
4. it is neither a financial institution nor an insurance
company subject to certain provisions of the federal income
tax law;
5. at least 100 persons are beneficial owners of its shares or
ownership certificates;
6. not more than 50% in value of its outstanding shares or
ownership certificates is owned, directly or indirectly, by
five or fewer individuals (as defined in the federal income
tax laws to include certain entities) during the last half
of any taxable year (the "5/50 Rule");
7. it elects to be a REIT (or has made such election for a
previous taxable year) and satisfies all relevant filing and
other administrative requirements established by the Service
that must be met to elect and maintain REIT status;
8. it uses a calendar year for federal income tax purposes and
complies with the recordkeeping requirements of the federal
income tax laws; and
9. it meets certain other qualification tests, described below,
regarding the nature of its income and assets.
United Dominion must meet requirements 1 through 4 during its entire
taxable year and must meet requirement 5 during at least 335 days of a taxable
year of 12 months, or during a proportionate part of a taxable year of less than
12 months. If United Dominion complies with all the requirements for
ascertaining the ownership of its outstanding shares in a taxable year and has
no reason to know that it violated the 5/50 Rule, it will be deemed to have
satisfied the 5/50 Rule for such taxable year. For purposes of determining share
ownership under the 5/50 Rule, an "individual" generally includes a supplemental
unemployment compensation benefits plan, a private foundation, or a portion of a
trust permanently set aside or used exclusively for charitable purposes. An
"individual," however, generally does not include a trust that is a qualified
employee pension or profit sharing trust under the federal income tax laws, and
beneficiaries of such a trust will be treated as holding shares of United
Dominion's capital stock in proportion to their actuarial interests in the trust
for purposes of the 5/50 Rule.
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United Dominion believes it has issued sufficient common stock with
sufficient diversity of ownership to satisfy requirements 5 and 6 set forth
above. In addition, United Dominion's Articles restrict the ownership and
transfer of the common stock so that United Dominion should continue to satisfy
requirements 5 and 6. The provisions of the Articles restricting the ownership
and transfer of the common stock are described in "Restrictions on Transfer of
Capital Stock."
United Dominion currently has several direct corporate subsidiaries and
may have additional corporate subsidiaries in the future. A corporation that is
a "qualified REIT subsidiary" is not treated as a corporation separate from its
parent REIT. All assets, liabilities, and items of income, deduction, and credit
of a "qualified REIT subsidiary" are treated as assets, liabilities, and items
of income, deduction, and credit of the REIT. A "qualified REIT subsidiary" is a
corporation, all of the capital stock of which is owned by the REIT. Thus, in
applying the requirements described herein, any "qualified REIT subsidiary" of
United Dominion will be ignored, and all assets, liabilities, and items of
income, deduction, and credit of such subsidiary will be treated as assets,
liabilities, and items of income, deduction, and credit of United Dominion.
United Dominion's corporate subsidiaries are qualified REIT subsidiaries.
Accordingly, they are not subject to federal corporate income taxation, though
they may be subject to state and local taxation.
In the case of a REIT that is a partner in a partnership, the REIT is
treated as owning its proportionate share of the assets of the partnership and
as earning its allocable share of the gross income of the partnership for
purposes of the applicable REIT qualification tests. Thus, United Dominion's
proportionate share of the assets, liabilities and items of income of the
Partnership and of any other partnership in which United Dominion has acquired
or will acquire an interest, directly or indirectly, are treated as assets and
gross income of United Dominion for purposes of applying the various REIT
qualification requirements.
Income Tests
United Dominion must satisfy two gross income tests annually to
maintain its qualification as a REIT. First, at least 75% of its gross income
(excluding gross income from prohibited transactions) for each taxable year must
consist of defined types of income that it derives, directly or indirectly, from
investments relating to real property or mortgages on real property or temporary
investment income (the "75% gross income test").
Qualifying income for purposes of the 75% gross income test includes:
o "rents from real property,"
o interest on debt secured by mortgages on real property or on
interests in real property, and
o dividends or other distributions on and gain from the sale
of shares in other REITs.
Second, at least 95% of its gross income (excluding gross income from
prohibited transactions) for each taxable year must consist of income that is
qualifying income for purposes of the 75% gross income test, dividends, other
types of interest, gain from the sale or disposition of stock or securities, or
any combination of the foregoing (the "95% gross income test"). The following
paragraphs discuss the specific application of these tests to United Dominion.
Rents and Interest. Rent that United Dominion receives from real
property that it owns and leases to tenants will qualify as "rents from real
property" (which is qualifying income for purposes of the 75% and 95% gross
income tests) only if the following conditions are met.
o First, the rent must not be based, in whole or in part, on
the income or profits of any person. However, "rents from
real property" generally does not exclude an amount solely
because it is based on a fixed percentage or percentages of
receipts or sales.
o Second, neither United Dominion nor a direct or indirect
owner of 10% or more of its stock may own, actually or
constructively, 10% or more of a tenant from whom it
receives rent.
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o Third, all of the rent received under a lease of real
property will not qualify as "rents from real property"
unless the rent attributable to the personal property leased
in connection with such lease is no more than 15% of the
total rent received under the lease.
o Finally, United Dominion generally must not operate or
manage its real property or furnish or render services to
its tenants, other than through an "independent contractor"
who is adequately compensated and from whom United Dominion
does not derive revenue. However, United Dominion need not
provide services through an "independent contractor," but
instead may provide services directly, if the services are
"usually or customarily rendered" in connection with the
rental of space for occupancy only and are not otherwise
considered "rendered to the occupant." In addition, United
Dominion may render a de minimis amount of "non-customary"
services to the tenants of a property, other than through an
independent contractor, as long as its income from the
services does not exceed 1% of its income from the related
property.
United Dominion does not receive any rent that is based on the income
or profits of any person. In addition, United Dominion does not own, directly or
indirectly, 10% or more of any tenant. Furthermore, United Dominion believes
that any personal property rented in connection with our apartment facilities is
well within the 15% restriction. Finally, United Dominion does not provide
services (other than within the 1% de minimis exception described above) to its
tenants that are not customarily furnished or rendered in connection with the
rental of the apartment units, other than through an independent contractor.
United Dominion, through the Partnership (which is not an independent
contractor), provides certain services with respect to the facilities and will
provide certain services with respect to any newly acquired apartment
facilities. Such services include (1) common area services, such as cleaning and
maintaining public entrances, exits, stairways, walkways, lobbies and rest
rooms, removing snow and debris, collecting trash, and painting the exteriors of
the facilities and common areas, (2) providing general security for the
facilities, (3) cleaning and repairing units at the facilities as tenants move
in and out, (4) at the request of the tenant, and without additional charge,
accepting delivery of goods from carriers or unlocking a particular unit when
goods are delivered to a facility (however, the Partnership does not otherwise
assist tenants in the storage or removal of goods or belongings from the units),
(5) permitting tenants to use the fax machine at a facility for occasional local
faxes without additional charge and for occasional long-distance faxes for a
nominal charge, (6) maintaining underground utilities and structural elements of
the facilities, and (7) paying real and personal property taxes or the cost of
replacing or refurbishing personal property with respect to real and personal
property owned by the Partnership at a facility. United Dominion believes that
the services provided by the Partnership are customarily furnished or rendered
in connection with the rental of space for occupancy only by apartment
facilities in the geographic areas in which its facilities are located.
United Dominion's investment, through the Partnership, in the
facilities in major part gives rise to rental income that is qualifying income
for purposes of the 75% and 95% gross income tests. Gains on sales of the
facilities (other than from prohibited transactions, as described below) or of
United Dominion's interest in the Partnership generally will be qualifying
income for purposes of the 75% and 95% gross income tests. United Dominion
anticipates that income on its other investments will not result in United
Dominion's failing the 75% or 95% gross income test for any year.
Prohibited Transaction Rules. A REIT will incur a 100% tax on the net
income derived from any "prohibited transaction." A "prohibited transaction"
generally is a sale or other disposition of property (other than foreclosure
property) that the REIT holds primarily for sale to customers in the ordinary
course of a trade or business. United Dominion believes that none of its or the
Partnership's assets is held for sale to customers and that a sale of any such
asset would not be in the ordinary course of its business. Whether a REIT holds
an asset "primarily for sale to customers in the ordinary course of a trade or
business" depends, however, on the facts and circumstances in effect from time
to time, including those related to a particular asset. Nevertheless, United
Dominion will attempt to comply with the terms of safe-harbor provisions in the
Code prescribing when an asset sale will not be characterized as a prohibited
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transaction. United Dominion cannot assure you, however, that United Dominion
can comply with such safe-harbor provisions or that United Dominion or the
Partnership will avoid owning property that may be characterized as property
that it holds "primarily for sale to customers in the ordinary course of a trade
or business."
Hedging Transactions. From time to time, United Dominion or the
Partnership may enter into hedging transactions with respect to one or more of
its assets or liabilities. Its hedging activities may include entering into
interest rate swaps, caps and floors (or options to purchase such items), and
futures and forward contracts. To the extent that United Dominion or the
Partnership enters into an interest rate swap or cap contract, option, futures
contract, forward rate agreement or any similar financial instrument to hedge
its indebtedness incurred to acquire or carry "real estate assets," any periodic
income or gain from the disposition of such contract should be qualifying income
for purposes of the 95% gross income test, but not the 75% gross income test. To
the extent that United Dominion or the Partnership hedges with other types of
financial instruments, or in other situations, it is not entirely clear how the
income from those transactions will be treated for purposes of the gross income
tests. United Dominion intends to structure any hedging transactions in a manner
that does not jeopardize its status as a REIT.
Failure to Qualify. If United Dominion fails to satisfy one or both of
the 75% and 95% gross income tests for any taxable year, it nevertheless may
qualify as a REIT for such year if it qualifies for relief under certain
provisions of the Code. Those relief provisions generally will be available if
its failure to meet such tests is due to reasonable cause and not due to willful
neglect, United Dominion attaches a schedule of the sources of its income to its
tax return, and any incorrect information on the schedule was not due to fraud
with intent to evade tax. United Dominion cannot predict, however, whether in
all circumstances it would qualify for the relief provisions. In addition, as
discussed above in "--Taxation of United Dominion," even if the relief
provisions apply, United Dominion would incur a 100% tax on the gross income
attributable to the greater of the amounts by which it fails the 75% and 95%
gross income tests, multiplied by a fraction intended to reflect its
profitability.
Asset Tests
To maintain its qualification as a REIT, United Dominion also must
satisfy two asset tests at the close of each quarter of each taxable year.
First, at least 75% of the value of its total assets must consist of cash or
cash items (including certain receivables), government securities, "real estate
assets," or qualifying temporary investments (the "75% asset test"). The term
"real estate assets" includes interests in real property, interests in mortgages
on real property and stock in other REITs. For purposes of the 75% asset test,
the term "interest in real property" includes an interest in mortgage loans or
land and improvements thereon, a leasehold of real property, and an option to
acquire real property (or a leasehold of real property). Qualifying temporary
investments are investments in stock or debt instruments during the one-year
period following United Dominion's receipt of new capital that it raises through
equity or long-term (at least five-year) debt offerings.
The second asset test has two components. First, of United Dominion's
investments not included in the 75% asset class, the value of its interest in
any one issuer's securities (which does not include its stock in other REITs,
the Partnership, or any qualified REIT subsidiary) may not exceed 5% of the
value of its total assets (the "5% asset test"). Second, United Dominion may not
own more than 10% of any one issuer's outstanding voting securities (which does
not include its stock in other REITs, the Partnership, or any qualified REIT
subsidiary) (the "10% asset test").
For purposes of the asset tests, United Dominion is deemed to own its
proportionate share of the assets of the Partnership, rather than its interest
in the Partnership. United Dominion has operate and intends to continue to
operate so that it has not acquired or disposed, and in the future will not
acquire or dispose, of assets in a way that would cause it to violate either
asset test.
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If United Dominion should fail to satisfy the asset tests at the end of
a calendar quarter, it would not lose its REIT status if (A) it satisfied the
asset tests at the close of the preceding calendar quarter and (B) the
discrepancy between the value of its assets and the asset test requirements
arose from changes in the market values of its assets and was not wholly or
partly caused by the acquisition of one or more non-qualifying assets. If United
Dominion did not satisfy the condition described in clause (B) of the preceding
sentence, it still could avoid disqualification as a REIT by eliminating any
discrepancy within 30 days after the close of the calendar quarter in which the
discrepancy arose.
Distribution Requirements
Each taxable year, United Dominion must distribute dividends (other
than capital gain dividends and deemed distributions of retained capital gain)
to its shareholders in an aggregate amount at least equal to:
o the sum of (A) 95% of its "REIT taxable income" (computed
without regard to the dividends paid deduction and its net
capital gain or loss) and (B) 95% of its net income (after
tax), if any, from foreclosure property,
o minus the sum of certain items of non-cash income.
United Dominion must pay such distributions in the taxable year to
which they relate, or in the following taxable year if it declares the
distribution before it timely files its federal income tax return for such year
and pays the distribution on or before the first regular dividend payment date
after such declaration.
United Dominion will pay federal income tax on taxable income
(including net capital gain) that it does not distribute to shareholders.
Furthermore, if it fails to distribute during a calendar year (or, in the case
of distributions with declaration and record dates falling in the last three
months of the calendar year, by the end of January following such calendar year)
at least the sum of:
o 85% of its REIT ordinary income for such year,
o 95% of its REIT capital gain income for such year, and
o any undistributed taxable income from prior periods,
it will incur a 4% nondeductible excise tax on the excess of such
required distribution over the amounts it actually distributed. United Dominion
may elect to retain and pay income tax on the net long-term capital gain it
receives in a taxable year. See "--Taxation of Taxable U.S. Stockholders." If it
so elects, it will be treated as having distributed any such retained amount for
purposes of the 4% excise tax described above. United Dominion has made, and
intends to continue to make, timely distributions sufficient to satisfy the
annual distribution requirements.
It is possible that, from time to time, United Dominion may experience
timing differences between (A) the actual receipt of income and actual payment
of deductible expenses and (B) the inclusion of that income and deduction of
such expenses in arriving at its REIT taxable income. For example, United
Dominion may not deduct recognized capital losses from its "REIT taxable
income." Further, it is possible that, from time to time, United Dominion may be
allocated a share of net capital gain attributable to the sale of depreciated
property that exceeds its allocable share of cash attributable to that sale. As
a result of the foregoing, United Dominion may have less cash than is necessary
to distribute all of its taxable income and thereby avoid corporate income tax
and the excise tax imposed on certain undistributed income. In such a situation,
it may need to borrow funds or issue preferred stock or additional common stock.
Under certain circumstances, United Dominion may be able to correct a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to its shareholders in a later year. United Dominion may include such
deficiency dividends in its deduction for dividends paid for the earlier year.
Although United Dominion may be able to avoid income tax on amounts distributed
as deficiency dividends, it will be required to pay interest to the Internal
Revenue Service based upon the amount of any deduction it takes for deficiency
dividends.
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Recordkeeping Requirements
United Dominion must maintain certain records in order to qualify as a
REIT. In addition, to avoid a monetary penalty, it must request on an annual
basis certain information from its shareholders designed to disclose the actual
ownership of its outstanding stock. United Dominion has complied, and intends to
continue to comply, with such requirements.
Failure to Qualify
If United Dominion failed to qualify as a REIT in any taxable year, and
no relief provision applied, it would be subject to federal income tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. In calculating its taxable income in a year in which it
failed to qualify as a REIT, United Dominion would not be able to deduct amounts
paid out to shareholders. In fact, United Dominion would not be required to
distribute any amounts to shareholders in such year. In such event, to the
extent of its current and accumulated earnings and profits, all distributions to
shareholders would be taxable as ordinary income. Subject to certain limitations
of the Code, corporate shareholders might be eligible for the dividends received
deduction. Unless United Dominion qualified for relief under specific statutory
provisions, it also would be disqualified from taxation as a REIT for the four
taxable years following the year during which it ceased to qualify as a REIT.
United Dominion cannot predict whether in all circumstances it would qualify for
such statutory relief.
Taxation of Taxable U.S. Stockholders
As long as United Dominion qualifies as a REIT, a taxable "U.S.
Stockholder" must take into account distributions out of United Dominion's
current or accumulated earnings and profits (and that it does not designate as
capital gain dividends or retained long-term capital gain) as ordinary income. A
U.S. Stockholder will not qualify for the dividends received deduction generally
available to corporations. As used herein, the term "U.S. Stockholder" means a
holder of United Dominion's common stock that for U.S. federal income tax
purposes is
o a citizen or resident of the United States,
o a corporation, partnership, or other entity created or
organized in or under the laws of the United States or of an
political subdivision thereof,
o an estate whose income from sources outside the United
States is includible in gross income for U.S. federal income
tax purposes regardless of its connection with the conduct
of a trade or business within the United States, or
o any trust with respect to which (A) a U.S. court is able to
exercise primary supervision over the administration of such
trust and (B) one or more U.S. persons have the authority to
control all substantial decisions of the trust.
A U.S. Stockholder will recognize distributions that United Dominion
designates as capital gain dividends as long-term capital gain (to the extent
they do not exceed United Dominion's actual net capital gain for the taxable
year) without regard to the period for which the U.S. Stockholder has held its
common stock. Subject to certain limitations, United Dominion will designate its
capital gain dividends as either 20% or 25% rate distributions. A corporate U.S.
Stockholder, however, may be required to treat up to 20% of certain capital gain
dividends as ordinary income.
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United Dominion may elect to retain and pay income tax on the net
long-term capital gain that it receives in a taxable year. In that case, a U.S.
Stockholder would be taxed on its proportionate share of United Dominion's
undistributed long-term capital gain. The U.S. Stockholder would receive a
credit or refund for its proportionate share of the tax United Dominion paid.
The U.S. Stockholder would increase the basis in its stock by the amount of its
proportionate share of United Dominion's undistributed long-term capital gain,
minus its share of the tax United Dominion paid.
A U.S. Stockholder will not incur tax on a distribution in excess of
United Dominion's current and accumulated earnings and profits if such
distribution does not exceed the adjusted basis of the U.S. Stockholder's common
stock. Instead, such distribution will reduce the adjusted basis of such common
stock. A U.S. Stockholder will recognize a distribution in excess of both United
Dominion's current and accumulated earnings and profits and the U.S.
Stockholder's adjusted basis in its common stock as long-term capital gain (or
short-term capital gain if the common stock has been held for one year or less),
assuming the common stock is a capital asset in the hands of the U.S.
Stockholder. In addition, if United Dominion declares a distribution in October,
November, or December of any year that is payable to a U.S. Stockholder of
record on a specified date in any such month, such distribution shall be treated
as both paid by United Dominion and received by the U.S. Stockholder on December
31 of such year, provided that United Dominion actually pays the distribution
during January of the following calendar year. United Dominion will notify U.S.
Stockholders after the close of its taxable year as to the portions of the
distributions attributable to that year that constitute ordinary income or
capital gain dividends.
Taxation of U.S. Stockholders on the Disposition of the Common Stock
In general, a U.S. Stockholder who is not a dealer in securities must
treat any gain or loss realized upon a taxable disposition of the common stock
as long-term capital gain or loss if the U.S. Stockholder has held the common
stock for more than one year and otherwise as short-term capital gain or loss.
However, a U.S. Stockholder must treat any loss upon a sale or exchange of
common stock held by such shareholder for six months or less (after applying
certain holding period rules) as a long-term capital loss to the extent of
capital gain dividends and other distributions from United Dominion that such
U.S. Stockholder treats as long-term capital gain. All or a portion of any loss
a U.S. Stockholder realizes upon a taxable disposition of the common stock may
be disallowed if the U.S. Stockholder purchases other shares of common stock
within 30 days before or after the disposition.
Capital Gains and Losses
A taxpayer generally must hold a capital asset for more than one year
for gain or loss derived from its sale or exchange to be treated as long-term
capital gain or loss. The highest marginal individual income tax rate is 39.6%.
The maximum tax rate on long-term capital gain applicable to non-corporate
taxpayers is 20% for sales and exchanges of assets held for more than one year.
The maximum tax rate on long-term capital gain from the sale or exchange of
"section 1250 property" (i.e., depreciable real property) is 25% to the extent
that such gain would have been treated as ordinary income if the property were
"section 1245 property." With respect to distributions that United Dominion
designates as capital gain dividends and any retained capital gain that it is
deemed to distribute, United Dominion may designate (subject to certain limits)
whether such a distribution is taxable to its non-corporate shareholders at a
20% or 25% rate. Thus, the tax rate differential between capital gain and
ordinary income for non-corporate taxpayers may be significant. In addition, the
characterization of income as capital gain or ordinary income may affect the
deductibility of capital losses. A non-corporate taxpayer may deduct capital
losses not offset by capital gains against its ordinary income only up to a
maximum annual amount of $3,000. A non-corporate taxpayer may carry forward
unused capital losses indefinitely. A corporate taxpayer must pay tax on its net
capital gain at ordinary corporate rates. A corporate taxpayer can deduct
capital losses only to the extent of capital gains, with unused losses being
carried back three years and forward five years.
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Information Reporting Requirements and Backup Withholding
United Dominion will report to its shareholders and to the Internal
Revenue Service the amount of distributions it pays during each calendar year,
and the amount of tax it withholds, if any. Under the backup withholding rules,
a shareholder may be subject to backup withholding at the rate of 31% with
respect to distributions unless such holder (A) is a corporation or comes within
certain other exempt categories and, when required, demonstrates this fact or
(B) provides a taxpayer identification number, certifies as to no loss of
exemption from backup withholding, and otherwise complies with the applicable
requirements of the backup withholding rules. A shareholder who does not provide
United Dominion with its correct taxpayer identification number also may be
subject to penalties imposed by the Internal Revenue Service. Any amount paid as
backup withholding will be creditable against the shareholder's income tax
liability. In addition, United Dominion may be required to withhold a portion of
capital gain distributions to any shareholders who fail to certify their
non-foreign status to United Dominion. The Treasury Department has issued final
regulations regarding the backup withholding rules as applied to Non-U.S.
Stockholders. Those regulations alter the current system of backup withholding
compliance and are effective for distributions made after December 31, 1999. See
"--Taxation of Non-U.S. Stockholders."
Taxation of Tax-Exempt Stockholders
Tax-exempt entities, including qualified employee pension and profit
sharing trusts and individual retirement accounts and annuities ("Exempt
Organizations"), generally are exempt from federal income taxation. However,
they are subject to taxation on their unrelated business taxable income
("UBTI"). While many investments in real estate generate UBTI, the Internal
Revenue Service has issued a published ruling that dividend distributions from a
REIT to an exempt employee pension trust do not constitute UBTI, provided that
the exempt employee pension trust does not otherwise use the shares of the REIT
in an unrelated trade or business of the pension trust. Based on that ruling,
amounts that United Dominion distributes to Exempt Organizations generally
should not constitute UBTI. However, if an Exempt Organization were to finance
its acquisition of the common stock with debt, a portion of the income that they
receive from United Dominion would constitute UBTI pursuant to the
"debt-financed property" rules. Furthermore, social clubs, voluntary employee
benefit associations, supplemental unemployment benefit trusts and qualified
group legal services plans that are exempt from taxation under paragraphs (7),
(9), (17), and (20), respectively, of Code section 501(c) are subject to
different UBTI rules, which generally will require them to characterize
distributions that they receive from United Dominion as UBTI. Finally, in
certain circumstances, a qualified employee pension or profit sharing trust that
owns more than 10% of United Dominion's stock is required to treat a percentage
of the dividends that it receives from United Dominion as UBTI (the "UBTI
Percentage"). The UBTI Percentage is equal to the gross income United Dominion
derives from an unrelated trade or business (determined as if it were a pension
trust) divided by its total gross income for the year in which it pays the
dividends. The UBTI rule applies to a pension trust holding more than 10% of
United Dominion's stock only if:
o the UBTI Percentage is at least 5%;
o United Dominion qualifies as a REIT by reason of the
modification of the 5/50 Rule that allows the beneficiaries
of the pension trust to be treated as holding United
Dominion's stock in proportion to their actuarial interests
in the pension trust; and
o United Dominion is a "pension-held REIT" (i.e., either (i)
one pension trust owns more than 25% of the value of its
stock or (ii) a group of pension trusts individually holding
more than 10% of the value of its stock collectively owns
more than 50% of the value of its stock).
Taxation of Non-U.S. Stockholders
The rules governing U.S. federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships, and other foreign
shareholders (collectively, "Non-U.S. Stockholders") are complex. This section
is only a summary of such rules. United Dominion urges Non-U.S. Stockholders to
consult their own tax advisors to determine the impact of federal, state, and
local income tax laws on ownership of the common stock, including any reporting
requirements.
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A Non-U.S. Stockholder that receives a distribution that is not
attributable to gain from United Dominion's sale or exchange of U.S. real
property interests (as defined below) and that United Dominion does not
designate as a capital gain dividend or retained capital gain will recognize
ordinary income to the extent that United Dominion pays such distribution out of
its current or accumulated earnings and profits. A withholding tax equal to 30%
of the gross amount of the distribution ordinarily will apply to such
distribution unless an applicable tax treaty reduces or eliminates the tax.
However, if a distribution is treated as effectively connected with the Non-U.S.
Stockholder's conduct of a U.S. trade or business, the Non-U.S. Stockholder
generally will be subject to federal income tax on the distribution at graduated
rates, in the same manner as U.S. Stockholders are taxed with respect to such
distributions (and also may be subject to the 30% branch profits tax in the case
of a Non-U.S. Stockholder that is a non-U.S. corporation). United Dominion plans
to withhold U.S. income tax at the rate of 30% on the gross amount of any such
distribution paid to a Non-U.S. Stockholder unless (i) a lower treaty rate
applies and the Non-U.S. Stockholder files the required form evidencing
eligibility for that reduced rate with United Dominion or (ii) the Non-U.S.
Stockholder files an IRS Form 4224 with United Dominion claiming that the
distribution is effectively connected income. The U.S. Treasury Department has
issued final regulations that modify the manner in which United Dominion will
comply with the withholding requirements. Those regulations are effective for
distributions made after December 31, 1999.
A Non-U.S. Stockholder will not incur tax on a distribution in excess
of United Dominion's current and accumulated earnings and profits if such
distribution does not exceed the adjusted basis of its common stock. Instead,
such a distribution will reduce the adjusted basis of such common stock. A
Non-U.S. Stockholder will be subject to tax on a distribution that exceeds both
United Dominion's current and accumulated earnings and profits and the adjusted
basis of its common stock, if the Non-U.S. Stockholder otherwise would be
subject to tax on gain from the sale or disposition of its common stock, as
described below. Because United Dominion generally cannot determine at the time
it makes a distribution whether or not the distribution will exceed its current
and accumulated earnings and profits, it normally will withhold tax on the
entire amount of any distribution at the same rate as it would withhold on a
dividend. However, a Non-U.S. Stockholder may obtain a refund of amounts that
United Dominion withholds if it later determines that a distribution in fact
exceeded its current and accumulated earnings and profits.
United Dominion must withhold 10% of any distribution that exceeds its
current and accumulated earnings and profits. Consequently, although it intends
to withhold at a rate of 30% on the entire amount of any distribution, to the
extent that it does not do so, it will withhold at a rate of 10% on any portion
of a distribution not subject to withholding at a rate of 30%.
For any year in which United Dominion qualifies as a REIT, a Non-U.S.
Stockholder will incur tax on distributions that are attributable to gain from
its sale or exchange of "U.S. real property interests" under the provisions of
the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). The term
"U.S. real property interests" includes certain interests in real property and
stock in corporations at least 50% of whose assets consists of interests in real
property, but excludes mortgage loans and mortgage-backed securities. Under
FIRPTA, a Non-U.S. Stockholder is taxed on distributions attributable to gain
from sales of U.S. real property interests as if such gain were effectively
connected with a U.S. business of the Non-U.S. Stockholder. A Non-U.S.
Stockholder thus would be taxed on such a distribution at the normal capital
gain rates applicable to U.S. Stockholders (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of a nonresident
alien individual). A non-U.S. corporate shareholder not entitled to treaty
relief or exemption also may be subject to the 30% branch profits tax on
distributions subject to FIRPTA. United Dominion must withhold 35% of any
distribution that it could designate as a capital gain dividend. A Non-U.S.
Stockholder may receive a credit against its FIRPTA tax liability for the amount
United Dominion withholds.
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A Non-U.S. Stockholder generally will not incur tax under FIRPTA on
gain from the sale of its common stock as long as United Dominion is a
"domestically controlled REIT." A "domestically controlled REIT" is a REIT in
which at all times during a specified testing period non-U.S. persons held,
directly or indirectly, less than 50% in value of the stock. However, a Non-U.S.
Stockholder that owned, actually or constructively, 5% or less of the common
stock at all times during a specified testing period will not incur tax under
FIRPTA if the common stock is "regularly traded" on an established securities
market. If the gain on the sale of the common stock were taxed under FIRPTA, a
Non-U.S. Stockholder would be taxed in the same manner as U.S. Stockholders with
respect to such gain (subject to applicable alternative minimum tax, a special
alternative minimum tax in the case of nonresident alien individuals, and the
possible application of the 30% branch profits tax in the case of non-U.S.
corporations). However, a Non-U.S. Stockholder will incur tax on gain not
subject to FIRPTA if:
o the gain is effectively connected with the Non-U.S.
Stockholder's U.S. trade or business, in which case the
Non-U.S. Stockholder will be subject to the same treatment
as U.S. Stockholders with respect to such gain, or
o the Non-U.S. Stockholder is a nonresident alien individual
who was present in the U.S. for 183 days or more during the
taxable year and has a "tax home" in the United States, in
which case the Non-U.S. Stockholder will incur a 30% tax on
his capital gains.
Other Tax Consequences
State and Local Taxes
United Dominion and/or you may be subject to state and local tax in
various states and localities, including those states and localities in which
United Dominion or you transact business, own property or reside. The state and
local tax treatment in such jurisdictions may differ from the federal income tax
treatment described above. Consequently, you should consult your own tax advisor
regarding the effect of state and local tax laws upon an investment in the
common stock.
PLAN OF DISTRIBUTION
This Prospectus relates to the possible issuance by United Dominion of
the Redemption Shares if, and to the extent that, the Unitholders tender such
Units for redemption and United Dominion elects to purchase the Units for shares
of common stock. United Dominion is registering the issuance of the Redemption
Shares to make it possible to provide the Unitholders with freely tradeable
securities upon redemption of their Units. However, registration of such shares
does not necessarily mean that any of such shares will be issued by United
Dominion or offered or sold by such Unitholder.
United Dominion may from time to time issue Redemption Shares upon
purchase of Units tendered for redemption. United Dominion will acquire Units in
exchange for any Redemption Shares that United Dominion issues in connection
with these acquisitions. Consequently, with each such redemption, United
Dominion's interest in the Partnership will increase.
EXPERTS
The consolidated financial statements and schedule of United Dominion
appearing in the annual report (Form 10-K) of United Dominion Realty Trust, Inc.
for the year ended December 31, 1997 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 and
schedule are incorporated herein by reference in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
24
<PAGE>
The consolidated financial statements and schedule of ASR
appearing in the annual report (Form 10-K) of ASR Investments Corporation for
the year ended December 31, 1997 have been audited by Deloitte & Touche LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements and
schedule 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 American Apartment Communities
II, Inc. and American Apartment Communities II, L.P., for the year ended
December 31, 1997, included in United Dominion's current report on Form 8-K
filed with the Securities and Exchange Commission on October 23, 1998, as
amended, incorporated herein by reference, have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
The statement of rental operations of Dogwood Creek Apartments and the
combined statement of rental operations of Trails at Mount Moriah Apartments,
Trails at Kirby Parkway Apartments, Cinnamon Trails Apartments, Audubon
Apartments, Carmel Apartments, Cimarron City Apartments, Grand Cypress
Apartments, Kenton Apartments, Peppermill Apartments, The Crest Apartments, and
Villages of Thousand Oaks Apartments, included in United Dominion's current
report on Form 8-K dated June 9, 1998, filed on June 24, 1998, as amended by
Amendment No. 1 on Form 8-K/A dated and filed on August 13, 1998, 1998,
incorporated by reference herein, has been incorporated herein in reliance upon
the reports dated May 1, 1998, May 8, 1998 and June 29, 1998 of L. P. Martin &
Company, P.C., independent auditors, also incorporated by reference herein, and
upon the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered
pursuant to this Prospectus will be passed upon for United Dominion by Hunton &
Williams.
25
<PAGE>
IF YOU WOULD LIKE ADDITIONAL INFORMATION
United Dominion files annual, quarterly and special reports, proxy
statements and other information with the U.S. Securities and Exchange
Commission ("SEC"). You may read and copy this information at the SEC's public
reference rooms, which are located at:
450 Fifth Street, NW 7 World Trade Center, Suite 1300
Washington, DC 20549 New York, NY 10048
500 West Madison Street, Suite 1400
Chicago, IL 60661-2511
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. This information is also available on-line through the
SEC's Electronic Data Gathering, Analysis, and Retrieval System (EDGAR), located
on the SEC's web site (http://www.sec.gov.).
Also, United Dominion will provide you (free of charge) with any of its
documents filed with the SEC. To get your free copies, please call or write:
United Dominion Realty Trust, Inc.
10 South 6th Street
Richmond, Virginia 23219-3802
(804) 780-2691
United Dominion has filed a Registration Statement with the SEC on Form
S-3 with respect to the Redemption Shares. This prospectus is a part of the
Registration Statement, but the prospectus does not repeat important information
that you can find in the Registration Statement, reports and other documents
that United Dominion filed with the SEC. The SEC allows United Dominion to
"incorporate by reference" those documents, which means that United Dominion can
disclose important information to you by referring you to other documents. The
documents that are incorporated by reference are legally considered to be a part
of this prospectus. The documents incorporated by reference are:
(1) Annual Report on Form 10-K for the year ended December 31,
1997, filed on March 31, 1998;
(2) Quarterly Report on Form 10-Q for the period ended March 31,
1998, filed on May 15, 1998; Quarterly Report on Form 10-Q
for the period ended June 30, 1998, filed on August 14,
1998; Quarterly Report on Form 10-Q for the period ended
September 30, 1998, filed on November 16, 1998;
(3) Current Report on Form 8-K dated January 27, 1998, filed on
February 4, 1998; Current Report on Form 8-K dated and filed
on February 13, 1998; Current Report on Form 8-K dated and
filed on February 17, 1998; Current Report dated March 27,
1998, filed on April 13, 1998, as amended by Amendment No. 1
on Form 8-K/A dated and filed on June 12, 1998; Current
Report on Form 8-K dated June 9, 1998, filed on June 24,
1998, as amended by Amendment No. 1 on Form 8-K/A dated and
filed on August 13, 1998; Current Report on Form 8-K dated
May 28, 1998, filed on October 19, 1998; Current Report on
Form 8-K dated September 11, 1998, filed on October 23,
1998, as amended by Amendment No. 1 on Form 8-K/A dated and
filed on December 21, 1998; Current Report on Form 8-K dated
and filed on October 28, 1998; Current Report on Form 8-K
dated November 2, 1998, filed on November 6, 1998; Current
Report on Form 8-K dated November 10, 1998, filed on
November 12, 1998; Current Report on Form 8-K dated December
7, 1998, filed on December 21, 1998; Current Report on Form
8-K dated and filed on January 20, 1999;
26
<PAGE>
(4) The description of the common stock and preferred stock
contained in United Dominion's Registration Statements on
Form 8-A dated April 9, 1990, May 1, 1995, June 10, 1997 and
February 4, 1998, filed under the Exchange Act, including
any amendments or reports filed for the purpose of updating
such descriptions;
(5) Any filings with the SEC pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act of 1934 between the date of
this prospectus and the termination of the offering of all
of the Redemption Shares.
As you read the above documents, you may find some inconsistencies in
information from one document to another. If you find inconsistencies between
the documents, or between a document and this prospectus, you should rely on the
statements made in the most recent document.
You should rely only on the information in this prospectus or incorporated by
reference. United Dominion has not authorized anyone to provide you with any
different information.
27
<PAGE>
Prospective investors may UNITED DOMINION REALTY TRUST, INC.
rely on the information contained
in this Prospectus. United Dominion
has not authorized anyone to
provide prospective investors with 130,416 SHARES
information different from that
contained in this Prospectus. This
Prospectus is not an offer to sell
nor is it seeking an offer to buy
these securities in any state where
the offer or sale is not permitted. COMMON STOCK
The information contained in this
Prospectus is correct only as of
the date of this Prospectus,
regardless of the time of the
delivery of this Prospectus or any
sale of these securities. ---------------
PROSPECTUS
---------------
February , 1999
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The estimated expenses in connection with the offering are as follows:
Securities and Exchange Commission registration fee ....... $ 349.00
Accounting fees and expenses............................... 5,000.00
Legal fees and expenses ................................... 2,500.00
Printing and postage expenses.............................. 500.00
Miscellaneous.............................................. 0.00
TOTAL ............................................ $8,349.00
Item 15. Indemnification of Officers and Directors
Directors and officers of United Dominion may be indemnified against
liabilities, fines, penalties, and claims imposed upon or asserted against them
as provided in the Virginia Stock Corporation Act and the Articles. Such
indemnification covers all costs and expenses reasonably incurred by a Director
or officer. The Board of Directors, by a majority vote of a quorum of
disinterested Directors or, under certain circumstances, independent counsel
appointed by the Board of Directors, must determine that the Director or officer
seeking indemnification was not guilty of willful misconduct or a knowing
violation of the criminal law. In addition, the Virginia Stock Corporation Act
and United Dominion's Articles may under certain circumstances eliminate the
liability of Directors and officers in a shareholder or derivative proceeding.
If the person involved is not a Director or officer of United Dominion,
the Board of Directors may cause United Dominion to indemnify to the same extent
allowed for Directors and officers of United Dominion such person who was or is
a party to a proceeding, by reason of the fact that he is or was an employee or
agent of United Dominion, or is or was serving at the request of United Dominion
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise.
Item 16 Exhibits
2(a) -- Agreement and Plan of Merger dated as of December 19, 1997,
between United Dominion, ASR Investments Corporation and ASR
Acquisition Sub, Inc. (filed as Exhibit 2(a) to United
Dominion's Form S-4 Registration Statement, filed with the
Commission on January 30, 1998 (File No. 333-45305), and
incorporated by reference herein)
2(b) -- Agreement and Plan of Merger dated as of October 1, 1996,
between United Dominion, United Sub, Inc. and South West
Property Trust Inc. (filed as Exhibit 2(a) to United
Dominion's Form S-4 Registration Statement, filed with the
Commission on October 9, 1996 (File No. 333-13745), and
incorporated by reference herein)
2(c) -- Agreement and Plan of Merger dated as of September 10, 1998,
between United Dominion and American Apartment Communities II,
Inc. including as exhibits thereto the proposed terms of the
Series D Preferred Stock and the proposed form of Investment
Agreement between United Dominion, United Dominion Realty,
L.P., American Apartment Communities II, Inc., American
Apartment Communities II, L.P., American Apartment Communities
Operating Partnership, L.P., Schnitzer Investment Corp., AAC
Management LLC and LF Strategic Realty Investors, L.P. (filed
as Exhibit 2(c) to United Dominion's Form S-3 Registration
Statement, filed with the Commission on September 25, 1998
(File No. 333-64281), and incorporated by reference herein)
II-1
<PAGE>
2(d) -- Partnership Interest Purchase and Exchange Agreement dated as
of September 10, 1998, between United Dominion, United
Dominion Realty, L.P., American Apartment Communities
Operating Partnership, L.P., AAC Management LLC, Schnitzer
Investment Corp, Fox Point Ltd. and James D. Klingbeil
including as an exhibit thereto the proposed form of the Third
Amended and Restated limited partnership Agreement of United
Dominion Realty, L.P. (filed as Exhibit 2(d) to United
Dominion's Form S-3 Registration Statement, filed with the
Commission on September 25, 1998 (File No. 333-64281), and
incorporated by reference herein)
4(a) -- Restated Articles of Incorporation of United Dominion (filed
as Exhibit 4(b) to United Dominion's Form S-3 Registration
Statement, filed with the Commission on January 16, 1998 (File
No. 333-44463), and incorporated by reference herein)
4(a)(i) -- Amendment of Articles of Incorporation of United Dominion
(filed as Exhibit 3 to United Dominion's Form 8-A Registration
Statement dated February 4, 1998 (File No. 1-10524), and
incorporated by reference herein)
4(a)(ii)-- Restated Articles of Incorporation of United Dominion, dated
January 21, 1999.
4(b) -- Restated Bylaws of United Dominion (filed as Exhibit 3(b) to
United Dominion's quarterly report on Form 10-Q for the
quarter ended March 31, 1997 (File No. 1-10524), and
incorporated by reference herein)
4(c) -- Specimen United Dominion common stock certificate (filed as
Exhibit 4(i) to United Dominion's Annual Report on Form 10-K
for the year ended December 31, 1993 (File No. 1-10524), and
incorporated by reference herein)
4(d)(i) -- Loan Agreement dated as of November 7, 1993, between United
Dominion and Aid Association for Lutherans (filed as Exhibit
6(c)(1) to United Dominion's Form 8-A Registration Statement
dated April 19, 1990 (File No. 10524), and incorporated by
reference herein)
4(d)(ii)-- Note Purchase Agreement dated as of January 15, 1993, between
United Dominion and CIGNA Property and Casualty Insurance
Company, Connecticut General Life Insurance Company,
Connecticut General Life Insurance Company on behalf of one or
more separate accounts, Insurance Company of North America,
Principal Mutual Life Insurance Company, and Aid Association
for Lutherans (filed as Exhibit 6(c)(5) to United Dominion's
Form 8-A Registration Statement dated April 19, 1990 (File No.
1-10524), and incorporated by reference herein)
4(e) -- Rights Agreement dated as of January 27, 1998, between United
Dominion and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent (filed as Exhibit 1 to United Dominion's Form 8-A
Registration Statement dated February 4, 1998 (File No.
1-10524) and incorporated by reference herein)
4(f) -- Form of Rights Certificate (included in Exhibit 4(e))
5 -- Opinion of Hunton & Williams
23(a) -- Consent of Ernst & Young LLP (to be filed by amendment)
23(b) -- Consent of L.P. Martin & Company, P.C. (to be filed by
amendment)
23(c) -- Consent of Deloitte & Touch LLP (to be filed by amendment)
II-2
<PAGE>
23(d) -- Consent of Arthur Andersen (to be filed by amendment)
23(e) -- Consent of Hunton & Williams (included in Exhibit 5)
24 -- Power of Attorney (see signature page)
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the
Registration Statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth in
the Registration Statement;
(iii) To include any material information with
respect to the plan of distribution not previously
disclosed in the Registration Statement or any
material change to such information in the
Registration Statement;
Provided, however, that paragraphs (a)(1)(i)
and (a)(1)(ii) do not apply if the information
required to be included in a post-effective
amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant
to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall
be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in this registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the registrant pursuant to the provisions of the Virginia Code, the Articles
of Incorporation or By-laws of the registrant or resolutions of the Board of
Directors of the registrant adopted pursuant thereto, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Richmond,
Commonwealth of Virginia on the 26th day of January, 1999.
UNITED DOMINION REALTY TRUST, INC.
By /s/ John P. McCann
--------------------------------
John P. McCann
Chief Executive Officer
Power of Attorney
Know All Men and Women By These Presents that each individual whose
signature appears below constitutes and appoints John P. McCann and Katheryn E.
Surface, and each of them, such individual's true and lawful attorneys-in-fact
and agents with full power of substitution, for such individual and in his or
her name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration statement
and any registration statement related to the offering contemplated by this
registration statement that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act of 1933, as amended, and to file the same, with
all exhibits thereto, and all documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or either of them, or their or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated on January 26, 1999.
<TABLE>
Signature Title & Capacity
--------- ----------------
<S> <C>
/s/ John P.McCann Chairman, Chief Executive Officer (Principal
- ---------------------------- Executive Officer) and Director
John P. McCann
/s/ Kevin W. Walsh Vice President, Finance (Principal Financial
- ---------------------------- Officer)
Kevin W. Walsh
/s/ Robin R. Flanagan Principal Accounting Officer
- ----------------------------
Robin R. Flanagan
/s/ Jeff C. Bane Director
- ----------------------------
Jeff C. Bane
/s/ R. Toms Dalton Director
- ----------------------------
R. Toms Dalton, Jr.
II-4
<PAGE>
/s/ Robert P. Freeman Director
- ----------------------------
Robert P. Freeman
/s/ Jon A. Grove Director
- ----------------------------
Jon A. Grove
/s/ Barry M. Kornblau Director
- ----------------------------
Barry M. Kornblau
/s/ James D. Klingbeil Director
- ----------------------------
James D. Klingbeil
/s/ Lynne B. Sagalyn Director
- ----------------------------
Lynne B. Sagalyn
/s/ Mark J. Sandler Director
- ----------------------------
Mark J. Sandler
/s/ Robert W. Scharar Director
- ----------------------------
Robert W. Scharar
/s/ John S. Schneider President and Director
- ----------------------------
John S. Schneider
/s/ C. Harmon Williams Director
- ----------------------------
C. Harmon Williams, Jr.
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Exhibit Document
- ------- --------
2(a) -- Agreement and Plan of Merger dated as of December 19, 1997,
between United Dominion, ASR Investments Corporation and ASR
Acquisition Sub, Inc. (filed as Exhibit 2(a) to United
Dominion's Form S-4 Registration Statement, filed with the
Commission on January 30, 1998 (File No. 333-45305), and
incorporated by reference herein)
2(b) -- Agreement and Plan of Merger dated as of October 1, 1996,
between United Dominion, United Sub, Inc. and South West
Property Trust Inc. (filed as Exhibit 2(a) to United
Dominion's Form S-4 Registration Statement, filed with the
Commission on October 9, 1996 (File No. 333-13745), and
incorporated by reference herein)
2(c) -- Agreement and Plan of Merger dated as of September 10, 1998,
between United Dominion and American Apartment Communities II,
Inc. including as exhibits thereto the proposed terms of the
Series D Preferred Stock and the proposed form of Investment
Agreement between United Dominion, United Dominion Realty,
L.P., American Apartment Communities II, Inc., American
Apartment Communities II, L.P., American Apartment Communities
Operating Partnership, L.P., Schnitzer Investment Corp., AAC
Management LLC and LF Strategic Realty Investors, L.P. (filed
as Exhibit 2(c) to United Dominion's Form S-3 Registration
Statement, filed with the Commission on September 25, 1998
(File No. 333-64281), and incorporated by reference herein)
2(d) -- Partnership Interest Purchase and Exchange Agreement dated as
of September 10, 1998, between United Dominion, United
Dominion Realty, L.P., American Apartment Communities
Operating Partnership, L.P., AAC Management LLC, Schnitzer
Investment Corp, Fox Point Ltd. and James D. Klingbeil
including as an exhibit thereto the proposed form of the Third
Amended and Restated limited partnership Agreement of United
Dominion Realty, L.P. (filed as Exhibit 2(d) to United
Dominion's Form S-3 Registration Statement, filed with the
Commission on September 25, 1998 (File No. 333-64281), and
incorporated by reference herein)
4(a) -- Restated Articles of Incorporation of United Dominion (filed
as Exhibit 4(b) to United Dominion's Form S-3 Registration
Statement, filed with the Commission on January 16, 1998 (File
No. 333-44463), and incorporated by reference herein)
4(a)(i) -- Amendment of Articles of Incorporation of United Dominion
(filed as Exhibit 3 to United Dominion's Form 8-A Registration
Statement dated February 4, 1998 (File No. 1-10524), and
incorporated by reference herein)
4(a)(ii)-- Restated Articles of Incorporation of United Dominion, dated
January 21, 1999.
4(b) -- Restated Bylaws of United Dominion (filed as Exhibit 3(b) to
United Dominion's quarterly report on Form 10-Q for the
quarter ended March 31, 1997 (File No. 1-10524), and
incorporated by reference herein)
4(c) -- Specimen United Dominion common stock certificate (filed as
Exhibit 4(i) to United Dominion's Annual Report on Form 10-K
for the year ended December 31, 1993 (File No. 1-10524), and
incorporated by reference herein)
4(d)(i) -- Loan Agreement dated as of November 7, 1993, between United
Dominion and Aid Association for Lutherans (filed as Exhibit
6(c)(1) to United Dominion's Form 8-A Registration Statement
dated April 19, 1990 (File No. 10524), and incorporated by
reference herein)
4(d)(ii)-- Note Purchase Agreement dated as of January 15, 1993, between
United Dominion and CIGNA Property and Casualty Insurance
Company, Connecticut General Life Insurance Company,
Connecticut General Life Insurance Company on behalf of one or
more separate accounts, Insurance Company of North America,
Principal Mutual Life Insurance Company, and Aid Association
for Lutherans (filed as Exhibit 6(c)(5) to United Dominion's
Form 8-A Registration Statement dated April 19, 1990 (File No.
1-10524), and incorporated by reference herein)
4(e) -- Rights Agreement dated as of January 27, 1998, between United
Dominion and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent (filed as Exhibit 1 to United Dominion's Form 8-A
Registration Statement dated February 4, 1998 (File No.
1-10524) and incorporated by reference herein)
4(f) -- Form of Rights Certificate (included in Exhibit 4(e))
5 -- Opinion of Hunton & Williams
23(a) -- Consent of Ernst & Young LLP (to be filed by amendment)
23(b) -- Consent of L.P. Martin & Company, P.C. (to be filed by
amendment)
23(c) -- Consent of Deloitte & Touch LLP (to be filed by amendment)
23(d) -- Consent of Arthur Andersen (to be filed by amendment)
23(e) -- Consent of Hunton & Williams (included in Exhibit 5)
24 -- Power of Attorney (see signature page)
UNITED DOMINION REALTY TRUST, INC.
ARTICLES OF RESTATEMENT
1. The name of the corporation is UNITED DOMINION REALTY TRUST, INC.
2. The text of the restated Articles of Incorporation is attached hereto and is
incorporated herein by reference.
3. The restatement does not contain an amendment to the Articles of
Incorporation requiring shareholder approval.
4. The Board of Directors of the corporation adopted the restatement by a
unanimous vote at its meeting held on December 8, 1998.
UNITED DOMINION REALTY TRUST, INC.
By: /s/ Katheryn E. Surface
-----------------------------------
Katheryn E. Surface
Senior Vice President and
Secretary
Dated: January 21, 1999
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
UNITED DOMINION REALTY TRUST, INC.
1. The name of the corporation is UNITED DOMINION REALTY TRUST, INC.
2. The purpose for which the corporation is organized is to qualify as a "real
estate investment trust," as defined in section 856(a) and related sections of
the Internal Revenue Code of 1954, as amended (together with the Treasury
Regulations promulgated pursuant thereto, the "Code"). Except as its business
may be limited by the purpose set forth above, the corporation may transact any
and all lawful business not required to be specifically stated in these Articles
for which corporations may be incorporated under the Virginia Stock Corporation
Act (the "Act").
3. The corporation shall have authority to issue 150,000,000 shares of common
stock having a par value of $1.00 per share and 25,000,000 shares of preferred
stock without par value. The Board of Directors of the corporation, by adoption
of an amendment of these Articles of Incorporation, may fix in whole or in part
the preferences, limitations and relative rights, within the limits set forth in
the Act, of any series within the preferred stock before the issuance of any
shares of that series. Stockholders shall not have preemptive rights to acquire
unissued shares of the corporation.
(a) 9 1/4% Series A Cumulative Redeemable Preferred Stock.
(1) Designation and Number. A series of the preferred stock,
designated the "9 1/4% Series A Cumulative Redeemable
Preferred Stock" (the "Series A Preferred"), is hereby
established. The number of shares of the Series A Preferred
shall be 4,200,000.
(2) Relative Seniority. In respect of rights to receive
dividends and to participate in distributions or payments in
the event of any liquidation, dissolution or winding up of the
corporation, the Series A Preferred shall rank senior to the
common stock and any other capital stock of the corporation
ranking, as to dividends and upon liquidation, junior to the
Series A Preferred (collectively, "Junior Stock").
(3) Dividends. The holders of the then outstanding Series A
Preferred shall be entitled to receive, when and as declared
by the Board of Directors out of any funds legally available
therefor, cumulative preferential cash dividends at the rate
of 9 1/4% of the liquidation preference of the Series A
Preferred (equivalent to $2.3125 per share) per annum, payable
quarterly in arrears in cash on the fifteenth day, or the next
succeeding business day, of January, April, July and October
in each year, beginning July 15, 1995 (each such day being
hereinafter called a "Dividend Payment Date" and each period
beginning on the day next following a Dividend Payment Date
and ending on the next following Dividend Payment Date being
hereinafter called a "Dividend Period"), to shareholders of
record at the close of business on the first day of the
calendar month in which the applicable Dividend Payment Date
falls on or such date as shall be fixed by the Board of
Directors at the time of declaration of the dividend (the
"Dividend Record Date"), which shall be not less than 10 nor
more than 30 days preceding the Dividend Payment Date. The
amount of any dividend payable for the initial Dividend Period
and for any other partial Dividend Period shall be computed on
the basis of a 360-day year consisting of twelve 30-day
months. Dividends on the shares of Series A Preferred shall
accrue and be cumulative from and including the date of
original issue thereof, whether or not (i) the corporation has
earnings, (ii) dividends on such shares are declared or (iii)
on any Dividend Payment Date there shall be funds legally
available for the payment of such dividends. When dividends
are not paid in full upon the shares of Series A Preferred and
the shares of any other series of preferred stock ranking on a
parity as to dividends with the Series A Preferred (or a sum
sufficient for such full payment is not set apart therefor),
all dividends declared upon shares of Series A Preferred and
any other series of preferred stock ranking on a parity as to
dividends with the Series A Preferred shall be declared pro
rata so that the amount of dividends declared per share on the
Series A Preferred and such other series of preferred stock
shall in all cases bear to each other the same ratio that
accrued dividends per share on the shares of Series A
Preferred and such other series of preferred stock bear to
each other.
Except as provided in the immediately preceding
paragraph, unless full cumulative dividends on the Series A
Preferred have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set
apart for payment on the Series A Preferred for all past
dividend periods and the then current dividend period, (i) no
dividends shall be declared or paid or set apart for payment
on the preferred stock of the corporation ranking, as to
dividends, on a parity with or junior to the Series A
Preferred for any period, and (ii) no dividends (other than in
Junior Stock) shall be declared or paid or set aside for
payment or other distribution or shall be declared or made
upon the Junior Stock or any other capital stock of the
corporation ranking on a parity with the Series A Preferred as
to dividends or upon liquidation ("Parity Stock"), nor shall
any Junior Stock or any Parity Stock be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be
paid to or made available for a sinking fund for the
redemption of any shares of Junior Stock or Parity Stock) by
the corporation (except by conversion into or exchange for
Junior Stock).
Any dividend payment made on shares of the Series A
Preferred shall first be credited against the earliest accrued
but unpaid dividend due with respect to such shares which
remains payable.
No dividends on shares of Series A Preferred shall be
declared by the Board of Directors of the corporation or paid
or set apart for payment by the corporation at such time as
the terms and provisions of any agreement of the corporation,
including any agreement relating to its indebtedness,
prohibits such declaration, payment or setting apart for
payment or provides that such declaration, payment or setting
apart for payment would constitute a breach thereof or a
default thereunder, or if such declaration or payment shall be
restricted or prohibited by law.
The amount of any dividends accrued on any shares of
Series A Preferred at any Dividend Payment Date shall be the
amount of any unpaid dividends accumulated thereon, to and
including such Dividend Payment Date, whether or not earned or
declared, and the amount of dividends accrued on any shares of
Series A Preferred at any date other than a Dividend Payment
Date shall be equal to the sum of the amount of any unpaid
dividends accumulated thereon, to and including the last
preceding Dividend Payment Date, whether or not earned or
declared, plus an amount calculated on the basis of the annual
dividend rate for the period after such last preceding
Dividend Payment Date to and including the date as of which
the calculation is made, based on a 360-day year of twelve
30-day months.
Accrued but unpaid dividends on the Series A
Preferred will not bear interest. Holders of the Series A
Preferred will not be entitled to any dividends in excess of
full cumulative dividends as described above.
Except as provided in these Articles, the Series A
Preferred shall not be entitled to participate in the earnings
or assets of the corporation.
(4) Liquidation Rights.
(A) Upon the voluntary or involuntary dissolution,
liquidation or winding up of the corporation, the holders of
shares of the Series A Preferred then outstanding shall be
entitled to receive and to be paid out of the assets of the
corporation legally available for distribution to its
shareholders, before any distribution shall be made to the
holders of common stock or any other capital stock of the
corporation ranking junior to the Series A Preferred upon
liquidation, a liquidation preference of $25.00 per share,
plus accrued and unpaid dividends thereon to the date of
payment.
(B) After the payment to the holders of the shares of
the Series A Preferred of the full liquidation preference
provided for in this paragraph (4), the holders of the Series
A Preferred as such shall have no right or claim to any of the
remaining assets of the corporation.
(C) If, upon any voluntary or involuntary
dissolution, liquidation, or winding up of the corporation,
the amounts payable with respect to the liquidation preference
of the shares of the Series A Preferred and any other shares
of stock of the corporation ranking as to any such
distribution on a parity with the shares of the Series A
Preferred are not paid in full, the holders of the shares of
the Series A Preferred and of such other shares will share
ratably in any such distribution of assets of the corporation
in proportion to the full respective liquidation preferences
to which they are entitled.
(D) Neither the sale, lease, transfer or conveyance
of all or substantially all the property or business of the
corporation, nor the merger or consolidation of the
corporation into or with any other corporation or the merger
or consolidation of any other corporation into or with the
corporation, shall be deemed to be a dissolution, liquidation
or winding up, voluntary or involuntary, for the purposes of
this paragraph (4).
(5) Redemption.
(A) Right of Optional Redemption. The Series A
Preferred is not redeemable prior to April 24, 2000. On and
after April 24, 2000, the corporation may, at its option,
redeem at any time all or, from time to time, part of the
Series A Preferred at a price per share (the "Series A
Redemption Price"), payable in cash, of $25.00, together with
all accrued and unpaid dividends to and including the date
fixed for redemption (the "Series A Redemption Date"), without
interest. In case of redemption of less than all shares of
Series A Preferred at the time outstanding, the shares of
Series A Preferred to be redeemed shall be selected pro rata
from the holders of record of such shares in proportion to the
number of shares of Series A Preferred held by such holders
(as nearly as may be practicable without creating fractional
shares) or by any other equitable method determined by the
corporation.
(B) Procedures for Redemption.
(i) Notice of any redemption will be (a) given by
publication in a newspaper of general circulation in the City
of New York, New York, such publication to be made once a week
for two successive weeks commencing not less than 30 nor more
than 60 days prior to the Series A Redemption Date, and (b)
mailed by the corporation, postage prepaid, not less than 30
nor more than 60 days prior to the Series A Redemption Date,
addressed to the respective holders of record of the Series A
Preferred to be redeemed at their respective addresses as they
appear on the stock transfer records of the corporation. No
failure to give such notice or any defect therein or in the
mailing thereof shall affect the validity of the proceedings
for the redemption of any Series A Preferred except as to the
holder to whom the corporation has failed to give notice or
except as to the holder to whom notice was defective. In
addition to any information required by law or by the
applicable rules of any exchange upon which Series A Preferred
may be listed or admitted to trading, such notice shall state:
(a) the Series A Redemption Date; (b) the Series A Redemption
Price; (c) the number of shares of Series A Preferred to be
redeemed; (d) the place or places where certificates for such
shares are to be surrendered for payment of the Series A
Redemption Price; and (e) that dividends on the shares to be
redeemed will cease to accumulate on the Series A Redemption
Date. If less than all the shares of Series A Preferred held
by any holder are to be redeemed, the notice mailed to such
holder shall also specify the number of shares of Series A
Preferred held by such holder to be redeemed.
(ii) If notice of redemption of any shares of Series
A Preferred has been published and mailed in accordance with
subparagraph (5)(B)(i) above and provided that on or before
the Series A Redemption Date specified in such notice all
funds necessary for such redemption shall have been
irrevocably set aside by the corporation, separate and apart
from its other funds in trust for the benefit of any holders
of the shares of Series A Preferred so called for redemption,
so as to be, and to continue to be available therefor, then,
from and after the Series A Redemption Date, dividends on such
shares of Series A Preferred shall cease to accrue, and such
shares shall no longer be deemed to be outstanding and shall
not have the status of Series A Preferred and all rights of
the holders thereof as shareholders of the corporation (except
the right to receive the Series A Redemption Price) shall
terminate. Upon surrender, in accordance with said notice, of
the certificates for any shares of Series A Preferred so
redeemed (properly endorsed or assigned for transfer, if the
corporation shall so require and the notice shall so state),
such shares of Series A Preferred shall be redeemed by the
corporation at the Series A Redemption Price. In case less
than all the shares of Series A Preferred represented by any
such certificate are redeemed, a new certificate or
certificates shall be issued representing the unredeemed
shares of Series A Preferred without cost to the holder
thereof.
(iii) The deposit of funds with a bank or trust
company for the purpose of redeeming Series A Preferred shall
be irrevocable except that:
(a) the corporation shall be entitled to
receive from such bank or trust company the interest
or other earnings, if any, earned on any money so
deposited in trust, and the holders of any shares
redeemed shall have no claim to such interest or
other earnings; and
(b) any balance of moneys so deposited by
the corporation and unclaimed by the holders of the
Series A Preferred entitled thereto at the expiration
of two years from the applicable Series A Redemption
Date shall be repaid, together with any interest or
other earnings earned thereon, to the corporation,
and after any such repayment, the holders of the
shares entitled to the funds so repaid to the
corporation shall look only to the corporation for
payment without interest or other earnings.
(C) Limitations on Redemption
(i) The Series A Redemption Price (other than the
portion thereof consisting of accrued and unpaid dividends)
shall be payable solely out of the sale proceeds of other
capital stock of the corporation and from no other source.
(ii) Unless full cumulative dividends on all shares
of Series A Preferred shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past Dividend
Periods and the then current Dividend Period, no Series A
Preferred shall be redeemed (unless all outstanding shares of
Series A Preferred are simultaneously redeemed) or purchased
or otherwise acquired directly or indirectly (except by
exchange for Junior Stock); provided, however, that the
foregoing shall not prevent the redemption of Series A
Preferred pursuant to Article 4 or the purchase or acquisition
of Series A Preferred pursuant to a purchase or exchange offer
made on the same terms to holders of all outstanding shares of
Series A Preferred.
(D) Rights to Dividends on Shares Called for
Redemption. If the Series A Redemption Date is after a
Dividend Record Date and before the related Dividend Payment
Date, the dividend payable on such Dividend Payment Date shall
be paid to the holder in whose name the shares of Series A
Preferred to be redeemed are registered at the close of
business on such Dividend Record Date notwithstanding the
redemption thereof between such Dividend Record Date and the
related Dividend Payment Date or the corporation's default in
the payment of the dividend due. Except as provided in this
paragraph (5), the corporation will make no payment or
allowance for unpaid dividends, whether or not in arrears, on
called Series A Preferred.
(6) Voting Rights. Except as required by the Virginia Stock
Corporation Act and except as otherwise provided in this
paragraph (6), the holders of the Series A Preferred shall not
be entitled to vote at any meeting of the shareholders for
election of directors or for any other purpose or otherwise to
participate in any action taken by the corporation or the
shareholders thereof, or to receive notice of any meeting of
shareholders.
(A) Whenever dividends on any shares of Series A
Preferred shall be in arrears for six or more consecutive
quarterly periods, the holders of such shares of Series A
Preferred (voting separately as a class with all other series
of preferred stock upon which like voting rights have been
conferred and are exercisable) will be entitled to vote for
the election of two additional directors of the corporation at
a special meeting called by the holders of record of at least
10% of the Series A Preferred or the holders of any other
series of preferred stock so in arrears (unless such request
is received less than 90 days before the date fixed for the
next annual or special meeting of the shareholders) or at the
next annual meeting of shareholders, and at each subsequent
annual meeting until all dividends accumulated on such shares
of Series A Preferred for the past Dividend Periods and the
then current Dividend Period shall have been fully paid or
declared and a sum sufficient for the payment thereof set
aside for payment. In such case, the entire Board of Directors
of the corporation will be increased by two directors.
(B) So long as any shares of Series A Preferred
remain outstanding, the corporation shall not, without the
affirmative vote of the holders of at least a majority of the
shares of the Series A Preferred outstanding at the time, (i)
authorize or create, or increase the authorized or issued
amount of, any class or series of capital stock ranking prior
to the Series A Preferred with respect to payment of dividends
or the distribution of assets upon liquidation, dissolution or
winding up or reclassify any authorized capital stock of the
corporation into any such shares, or create, authorize or
issue any obligation or security convertible into or
evidencing the right to purchase any such shares; or (ii)
amend, alter or repeal the provisions of these Articles,
whether by merger, consolidation or otherwise, so as to
materially and adversely affect any right, preference,
privilege or voting power of the Series A Preferred or the
holders thereof; provided, however, that any increase in the
amount of the authorized preferred stock or the creation or
issuance of any other series of preferred stock, or any
increase in the amount of authorized shares of such series, in
each case ranking on a parity with or junior to the Series A
Preferred with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers.
(C) The foregoing voting provisions will not apply
if, at or prior to the time when the act with respect to which
such vote would otherwise be required shall be effected, all
outstanding shares of Series A Preferred shall have been
redeemed or called for redemption upon proper notice and
sufficient funds shall have been deposited in trust to effect
such redemption.
(D) So long as the Series A Preferred is listed or
admitted to trading on the New York Stock Exchange, then
notwithstanding anything to the contrary in these Articles,
including without limitation Article 8, approval by the
holders of at least two-thirds of the outstanding shares of
the Series A Preferred shall be required for adoption of any
amendment of these Articles or of the bylaws of the
corporation that would materially affect the existing terms of
the Series A Preferred.
(7) Conversion of Series A Preferred. The Series A Preferred
is not convertible into or exchangeable for any other property
or securities of the corporation.
(b) 8.60% Series B Cumulative Redeemable Preferred Stock.
(1) Designation and Number. A series of the preferred stock,
designated the "8.60% Series B Cumulative Redeemable Preferred
Stock" (the "Series B Preferred"), is hereby established. The
number of shares of the Series B Preferred shall be 6,000,000.
(2) Relative Seniority. In respect of rights to receive
dividends and to participate in distributions or payments in
the event of any liquidation, dissolution or winding up of the
corporation, the Series B Preferred shall rank pari passu with
the Series A Preferred and senior to the common stock and any
other capital stock of the corporation ranking, as to
dividends and upon liquidation, junior to the Series A
Preferred (collectively, "Junior Stock").
(3) Dividends. The holders of the then outstanding Series B
Preferred shall be entitled to receive, when and as declared
by the Board of Directors out of any funds legally available
therefor, cumulative preferential cash dividends at the rate
of 8.60% of the liquidation preference of the Series B
Preferred (equivalent to $2.15 per share) per annum, payable
quarterly in arrears in cash on the last day, or the next
succeeding business day, of February, May, August and November
in each year, beginning August 31, 1997 (each such day being
hereinafter called a "Dividend Payment Date" and each period
beginning on the day next following a Dividend Payment Date
and ending on the next following Dividend Payment Date being
hereinafter called a "Dividend Period"), to shareholders of
record at the close of business on the fifteenth day of the
calendar month in which the applicable Dividend Payment Date
falls on or such date as shall be fixed by the Board of
Directors at the time of declaration of the dividend (the
"Dividend Record Date"), which shall be not less than 10 nor
more than 30 days preceding the Dividend Payment Date. The
amount of any dividend payable for the initial Dividend Period
and for any partial Dividend Period shall be computed on the
basis of a 360-day year consisting of twelve 30-day months.
Dividends on the shares of Series B Preferred shall accrue and
be cumulative from and including the date of original issue
thereof, whether or not (i) the corporation has earnings, (ii)
dividends on such shares are declared or (iii) on any Dividend
Payment Date there shall be funds legally available for the
payment of such dividends. When dividends are not paid in full
upon the shares of Series B Preferred and the shares of any
other series of preferred stock ranking on a parity as to
dividends with the Series B Preferred (or a sum sufficient for
such full payment is not set apart therefor), all dividends
declared upon shares of Series B Preferred and any other
series of preferred stock ranking on a parity as to dividends
with the Series B Preferred shall be declared pro rata so that
the amount of dividends declared per share on the Series B
Preferred and such other series of preferred stock shall in
all cases bear to each other the same ratio that accrued
dividends per share on the shares of Series B Preferred and
such other series of preferred stock bear to each other.
Except as provided in the immediately preceding
paragraph, unless full cumulative dividends on the Series B
Preferred have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set
apart for payment on the Series B Preferred for all past
dividend periods and the then current dividend period, (i) no
dividends shall be declared or paid or set apart for payment
on the preferred stock of the corporation ranking, as to
dividends, on a parity with or junior to the Series B
Preferred for any period, and (ii) no dividends (other than in
Junior Stock) shall be declared or paid or set aside for
payment or other distribution or shall be declared or made
upon the Junior Stock or any other capital stock of the
corporation ranking on a parity with the Series B Preferred as
to dividends or upon liquidation ("Parity Stock"), nor shall
any Junior Stock or any Parity Stock be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be
paid to or made available for a sinking fund for the
redemption of any shares of Junior Stock or Parity Stock) by
the corporation (except by conversion into or exchange for
Junior Stock).
Any dividend payment made on shares of the Series B
Preferred shall first be credited against the earliest accrued
but unpaid dividend due with respect to such shares which
remains payable.
No dividends on shares of Series B Preferred shall be
declared by the Board of Directors of the corporation or paid
or set apart for payment by the corporation at such time as
the terms and provisions of any agreement of the corporation,
including any agreement relating to its indebtedness,
prohibits such declaration, payment or setting apart for
payment or provides that such declaration, payment or setting
apart for payment would constitute a breach thereof or a
default thereunder, or if such declaration or payment shall be
restricted or prohibited by law.
The amount of any dividends accrued on any shares of
Series B Preferred at any Dividend Payment Date shall be the
amount of any unpaid dividends accumulated thereon, to and
including such Dividend Payment Date, whether or not earned or
declared, and the amount of dividends accrued on any shares of
Series B Preferred at any date other than a Dividend Payment
Date shall be equal to the sum of the amount of any unpaid
dividends accumulated thereon, to and including the last
preceding Dividend Payment Date, whether or not earned or
declared, plus an amount calculated on the basis of the annual
dividend rate for the period after such last preceding
Dividend Payment Date to and including the date as of which
the calculation is made, based on a 360-day year of twelve
30-day months.
Accrued but unpaid dividends on the Series B
Preferred will not bear interest. Holders of the Series B
Preferred will not be entitled to any dividends in excess of
full cumulative dividends as described above.
Except as provided in these Articles, the Series B
Preferred shall not be entitled to participate in the earnings
or assets of the corporation.
(4) Liquidation Rights.
(A) Upon the voluntary or involuntary dissolution,
liquidation or winding up of the corporation, the holders of
shares of the Series B Preferred then outstanding shall be
entitled to receive and to be paid out of the assets of the
corporation legally available for distribution to its
shareholders, before any distribution shall be made to the
holders of common stock or any other capital stock of the
corporation ranking junior to the Series B Preferred upon
liquidation, a liquidation preference of $25.00 per share,
plus accrued and unpaid dividends thereon to the date of
payment.
(B) After the payment to the holders of the shares of
the Series B Preferred of the full liquidation preference
provided for in this paragraph (4), the holders of the Series
B Preferred as such shall have no right or claim to any of the
remaining assets of the corporation.
(C) If, upon any voluntary or involuntary
dissolution, liquidation or winding up of the corporation, the
amounts payable with respect to the liquidation preference of
the shares of the Series B Preferred and any other shares of
stock of the corporation ranking as to any such distribution
on a parity with the shares of the Series B Preferred are not
paid in full, the holders of the shares of the Series B
Preferred and of such other shares will share ratably in any
such distribution of assets of the corporation in proportion
to the full respective liquidation preferences to which they
are entitled.
(D) Neither the sale, lease, transfer or conveyance
of all or substantially all the property or business of the
corporation, nor the merger or consolidation of the
corporation into or with any other corporation or the merger
or consolidation of any other corporation into or with the
corporation, shall be deemed to be a dissolution, liquidation
or winding up, voluntary or involuntary, for the purposes of
this paragraph (4).
(5) Redemption.
(A) Right of Optional Redemption. The Series B
Preferred is not redeemable prior to May 29, 2007. On and
after May 29, 2007, the corporation may, at its option, redeem
at any time all or, from time to time, part of the Series B
Preferred at a price per share (the "Series B Redemption
Price"), payable in cash, of $25.00, together with all accrued
and unpaid dividends to and including the date fixed for
redemption (the "Series B Redemption Date"), without interest.
In case of redemption of less than all shares of Series B
Preferred at the time outstanding, the shares of Series B
Preferred to be redeemed shall be selected pro rata from the
holders of record of such shares in proportion to the number
of shares of Series B Preferred held by such holders (as
nearly as may be practicable without creating fractional
shares) or by any other equitable method determined by the
corporation.
(B) Procedures for Redemption.
(i) Notice of any redemption will be (a) given by
publication in a newspaper of general circulation in the City
of New York, New York, such publication to be made once a week
for two successive weeks commencing not less than 30 nor more
than 60 days prior to the Series B Redemption Date, and (b)
mailed by the corporation, postage prepaid, not less than 30
nor more than 60 days prior to the Series B Redemption Date,
addressed to the respective holders of record of the Series B
Preferred to be redeemed at their respective addresses as they
appear on the stock transfer records of the corporation. No
failure to give such notice or any defect therein or in the
mailing thereof shall affect the validity of the proceedings
for the redemption of any Series B Preferred except as to the
holder to whom the corporation has failed to give notice or
except as to the holder to whom notice was defective. In
addition to any information required by law or by the
applicable rules of any exchange upon which Series B Preferred
may be listed or admitted to trading, such notice shall state:
(a) the Series B Redemption Date; (b) the Series B Redemption
Price; (c) the number of shares of Series B Preferred to be
redeemed; (d) the place or places where certificates for such
shares are to be surrendered for payment of the Series B
Redemption Price; and (e) that dividends on the shares to be
redeemed will cease to accumulate on the Series B Redemption
Date. If less than all the shares of Series B Preferred held
by any holder are to be redeemed, the notice mailed to such
holder shall also specify the number of shares of Series B
Preferred held by such holder to be redeemed.
(ii) If notice of redemption of any shares of Series
B Preferred has been published and mailed in accordance with
subparagraph (5)(B)(i) above and provided that on or before
the Series B Redemption Date specified in such notice all
funds necessary for such redemption shall have been
irrevocably set aside by the corporation, separate and apart
from its other funds in trust for the benefit of any holders
of the shares of Series B Preferred so called for redemption,
so as to be, and to continue to be available therefor, then,
from and after the Series B Redemption Date, dividends on such
shares of Series B Preferred shall cease to accrue, and such
shares shall no longer be deemed to be outstanding and shall
not have the status of Series B Preferred and all rights of
the holders thereof as shareholders of the corporation (except
the right to receive the Series B Redemption Price) shall
terminate. Upon surrender, in accordance with said notice, of
the certificates for any shares of Series B Preferred so
redeemed (properly endorsed or assigned for transfer, if the
corporation shall so require and the notice shall so state),
such shares of Series B Preferred shall be redeemed by the
corporation at the Series B Redemption Price. In case less
than all the shares of Series B Preferred represented by any
such certificate are redeemed, a new certificate or
certificates shall be issued representing the unredeemed
shares of Series B Preferred without cost to the holder
thereof.
(iii) The deposit of funds with a bank or trust
company for the purpose of redeeming Series B Preferred shall
be irrevocable except that:
(a) the corporation shall be entitled to
receive from such bank or trust company the interest
or other earnings, if any, earned on any money so
deposited in trust, and the holders of any shares
redeemed shall have no claim to such interest or
other earnings; and
(b) any balance of moneys so deposited by
the corporation and unclaimed by the holders of the
Series B Preferred entitled thereto at the expiration
of two years from the applicable Series B Redemption
Date shall be repaid, together with any interest or
other earnings earned thereon, to the corporation,
and after any such repayment, the holders of the
shares entitled to the funds so repaid to the
corporation shall look only to the corporation for
payment without interest or other earnings.
(C) Limitations on Redemption
(i) The Series B Redemption Price (other than the
portion thereof consisting of accrued and unpaid dividends)
shall be payable solely out of the sale proceeds of other
capital stock of the corporation and from no other source.
(ii) Unless full cumulative dividends on all shares
of Series B Preferred shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past Dividend
Periods and the then current Dividend Period, no Series B
Preferred shall be redeemed (unless all outstanding shares of
Series B Preferred are simultaneously redeemed) or purchased
or otherwise acquired directly or indirectly (except by
exchange for Junior Stock); provided, however, that the
foregoing shall not prevent the redemption of Series B
Preferred pursuant to Article 4 or the purchase or acquisition
of Series B Preferred pursuant to a purchase or exchange offer
made on the same terms to holders of all outstanding shares of
Series B Preferred.
(D) Rights to Dividends on Shares Called for
Redemption. If the Series B Redemption Date is after a
Dividend Record Date and before the related Dividend Payment
Date, the dividend payable on such Dividend Payment Date shall
be paid to the holder in whose name the shares of Series B
Preferred to be redeemed are registered at the close of
business on such Dividend Record Date notwithstanding the
redemption thereof between such Dividend Record Date and the
related Dividend Payment Date or the corporation's default in
the payment of the dividend due. Except as provided in this
paragraph (5), the corporation will make no payment or
allowance for unpaid dividends, whether or not in arrears, on
called Series B Preferred.
(6) Voting Rights. Except as required by the Virginia Stock
Corporation Act and except as otherwise provided in this
paragraph (6), the holders of the Series B Preferred shall not
be entitled to vote at any meeting of the shareholders for
election of directors or for any other purpose or otherwise to
participate in any action taken by the corporation or the
shareholders thereof, or to receive notice of any meeting of
shareholders.
(A) Whenever dividends on any shares of Series B
Preferred shall be in arrears for six or more consecutive
quarterly periods, the holders of such shares of Series B
Preferred (voting separately as a class with all other series
of preferred stock upon which like voting rights have been
conferred and are exercisable) will be entitled to vote for
the election of two additional directors of the corporation at
a special meeting called by the holders of record of at least
10% of the Series B Preferred or the holders of any other
series of preferred stock so in arrears (unless such request
is received less than 90 days before the date fixed for the
next annual or special meeting of the shareholders) or at the
next annual meeting of shareholders, and at each subsequent
annual meeting until all dividends accumulated on such shares
of Series B Preferred for the past Dividend Periods and the
then current Dividend Period shall have been fully paid or
declared and a sum sufficient for the payment thereof set
aside for payment. In such case, the entire Board of Directors
of the corporation will be increased by two directors.
(B) So long as any shares of Series B Preferred
remain outstanding, the corporation shall not, without the
affirmative vote of the holders of at least a majority of the
shares of the Series B Preferred outstanding at the time, (i)
authorize or create, or increase the authorized or issued
amount of, any class or series of capital stock ranking prior
to the Series B Preferred with respect to payment of dividends
or the distribution of assets upon liquidation, dissolution or
winding up or reclassify any authorized capital stock of the
corporation into any such shares, or create, authorize or
issue any obligation or security convertible into or
evidencing the right to purchase any such shares; or (ii)
amend, alter or repeal the provisions of these Articles,
whether by merger, consolidation or otherwise, so as to
materially and adversely affect any right, preference,
privilege or voting power of the Series B Preferred or the
holders thereof; provided, however, that any increase in the
amount of the authorized preferred stock or the creation or
issuance of any other series of preferred stock, or any
increase in the amount of authorized shares of such series, in
each case ranking on a parity with or junior to the Series B
Preferred with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers.
(C) The foregoing voting provisions will not apply
if, at or prior to the time when the act with respect to which
such vote would otherwise be required shall be effected, all
outstanding shares of Series B Preferred shall have been
redeemed or called for redemption upon proper notice and
sufficient funds shall have been deposited in trust to effect
such redemption.
(D) So long as the Series B Preferred is listed or
admitted to trading on The New York Stock Exchange, then
notwithstanding anything to the contrary in these Articles,
including without limitation Article 8, approval by the
holders of at least two-thirds of the outstanding shares of
the Series B Preferred shall be required for adoption of any
amendment of these Articles or of the bylaws of the
corporation that would materially affect the existing terms of
the Series B Preferred.
(7) Conversion of Series B Preferred. The Series B Preferred
is not convertible into or exchangeable for any other property
or securities of the corporation.
(c) Series C Junior Participating Redeemable Preferred Stock.
(1) Designation and Number. A series of the preferred stock,
designated the "Series C Junior Participating Cumulative
Redeemable Preferred Stock" (the "Series C Preferred"), is
hereby established. The number of shares of the Series C
Preferred shall be 1,000,000.
(2) Relative Seniority. In respect of rights to receive
dividends and to participate in distributions or payments in
the event of any liquidation, dissolution or winding up of the
corporation, the Series C Preferred shall rank junior to the
Series A Preferred, the Series B Preferred and
(notwithstanding anything to the contrary in paragraph (d)(2)
of this Article 3) the Series D Preferred, and senior to the
common stock and any other capital stock of the corporation
ranking, as to dividends and upon liquidation, junior to the
Series C Preferred (collectively, "Junior Stock").
(3) Dividends. The holders of the then outstanding Series C
Preferred shall be entitled to receive, when and as declared
by the Board of Directors out of any funds legally available
therefor, cumulative preferential cash dividends payable
quarterly on March 31, June 30, September 30 and December 31
(each such date being referred to herein as a "Quarterly
Dividend Payment Date" and each period beginning on the day
next following a Quarterly Dividend Payment date and ending on
the next following Quarterly Dividend Payment date being
referred to herein as a "Dividend Period"), commencing on the
first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series C Preferred, in an
amount per share (rounded to the nearest cent) equal to the
greater of (i) $.01 or (ii) subject to adjustment hereinafter
set forth, 1,000 times the aggregate per share amount of all
cash dividends, and 1,000 times the aggregate per share amount
(payable in kind) of all non-cash dividends or other
distributions (other than dividends payable in shares of
common stock, as constituted on the date of such payment),
declared on the common stock since the immediately preceding
Quarterly Dividend Payment Date, or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of
any share or fraction of a share of Series C Preferred.
In the event the corporation shall at any time after
February 4, 1998 (the "Rights Dividend Declaration Date"), (i)
declare any dividend on the common stock payable in shares of
common stock, (ii) subdivide the outstanding common stock, or
(iii) combine the outstanding shares of common stock into a
smaller number of shares, then in each such case the amount to
which holders of shares of the Series C Preferred were
entitled immediately prior to such event under clause (ii) of
the preceding paragraph shall be adjusted by multiplying such
amount by a fraction (the "Adjustment Factor"), the numerator
of which is the number of shares of common stock outstanding
immediately after such event and the denominator of which is
the number of shares of common stock outstanding immediately
prior to such event.
The corporation shall declare a dividend or
distribution on the Series C Preferred immediately after it
declares a dividend or distribution on the common stock (other
than a dividend payable in shares of common stock); provided
that, in the event no dividend or distribution shall have been
declared on the common stock during the period between any
Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend at the rate of
$.01 per share on the Series C Preferred shall nevertheless be
declared payable on such subsequent Quarterly Dividend Payment
Date.
Dividends on the shares of Series C Preferred shall
accrue and be cumulative from and including the Quarterly
Dividend Payment Date next preceding the date of issue of such
shares of Series C Preferred, unless the date of issue of such
shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which event dividends on such shares
shall accrue and be cumulative from and including the date of
issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Series C
Preferred entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which
events such dividends shall accrue and be cumulative from and
including such Quarterly Dividend Payment Date, whether or not
(i) the corporation has earnings, (ii) dividends on such
shares are declared or (iii) on any Quarterly Dividend Payment
Date there shall be funds legally available for the payment of
such dividends. When dividends are not paid in full upon the
shares of Series C Preferred and the shares of any other
series of preferred stock ranking on a parity as to dividends
with the Series C Preferred (or a sum sufficient for such full
payment is not set apart therefor), all dividends declared
upon shares of Series C Preferred and any other series of
preferred stock ranking on a parity as to dividends with the
Series C Preferred shall be declared pro rata so that the
amount of dividends declared per share on the Series C
Preferred and such other series of preferred stock shall in
all cases bear to each other the same ratio that accrued
dividends per share on the shares of Series C Preferred and
such other series of preferred stock bear to each other.
Except as provided in the immediately preceding
paragraph, unless full cumulative dividends on the Series C
Preferred have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set
apart for payment on the Series C Preferred for all past
dividend periods and the then current dividend period, (i) no
dividends shall be declared or paid or set apart for payment
on the preferred stock of the corporation ranking, as to
dividends, on a parity with or junior to the Series C
Preferred for any period, and (ii) no dividends (other than in
Junior Stock) shall be declared or paid or set aside for
payment or other distribution or shall be declared or made
upon the Junior Stock or any other capital stock of the
corporation ranking on a parity with the Series C Preferred as
to dividends or upon liquidation ("Parity Stock"), nor shall
any Junior Stock or any Parity Stock be redeemed, purchased or
otherwise acquired for any consideration (or any moneys be
paid to or made available for a sinking fund for the
redemption of any shares of Junior Stock or Parity Stock) by
the corporation (except by conversion into or exchange for
Junior Stock).
Any dividend payment made on shares of the Series C
Preferred shall first be credited against the earliest accrued
but unpaid dividend due with respect to such shares which
remains payable.
No dividends on shares of Series C Preferred shall be
declared by the Board of Directors of the corporation or paid
or set apart for payment by the corporation at such time as
the terms and provisions of any agreement of the corporation,
including any agreement relating to its indebtedness,
prohibits such declaration, payment or setting apart for
payment or provides that such declaration, payment or setting
apart for payment would constitute a breach thereof or a
default thereunder, or if such declaration or payment shall be
restricted or prohibited by law.
Accrued but unpaid dividends on the Series C
Preferred will not bear interest. Holders of the Series C
Preferred will not be entitled to any dividends in excess of
full cumulative dividends as described above.
Except as provided in these Articles, the Series C
Preferred shall not be entitled to participate in the earnings
or assets of the corporation.
The Board of Directors may fix a record date for the
determination of holders of shares of Series C Preferred
entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30
days prior to the date fixed for the payment thereof.
(4) Liquidation Rights.
(A) Upon the voluntary or involuntary dissolution,
liquidation or winding up of the corporation, the holders of
shares of the Series C Preferred then outstanding shall be
entitled to receive and to be paid out of the assets of the
corporation legally available for distribution to its
shareholders, before any distribution shall be made to the
holders of common stock or any other capital stock of the
corporation ranking junior to the Series C Preferred upon
liquidation, a liquidation preference of $1,000.00 per share,
plus accrued and unpaid dividends thereon to the date of
payment (the "Series C Preferred Liquidation Preference").
(B) After the payment to the holders of the shares of
the Series C Preferred of the full Series C Preferred
Liquidation Preference, the holders of the Series C Preferred
as such shall have no right or claim to any of the remaining
assets of the corporation until the holders of common stock
shall have received an amount per share (the "Common
Adjustment") equal to the quotient obtained by dividing (i)
the Series C Preferred Liquidation Preference by (ii) 1,000
(as appropriately adjusted as set forth in paragraph (D) below
to reflect such events as stock splits, stock dividends and
recapitalizations with respect to the common stock) (the
number determined pursuant to clause (ii) being hereinafter
referred to as the "Adjustment Number"). Following the payment
of the full amount of the Series C Preferred Liquidation
Preference in respect of all outstanding shares of Series C
Preferred, the full amount of any liquidation preference
payable to holders of any other shares of stock of the
corporation ranking as to any distribution upon any voluntary
or involuntary dissolution, liquidation or winding up of the
corporation on a parity with the shares of the Series C
Preferred and the full amount of the Common Adjustment,
respectively, holders of shares of Series C Preferred, holders
of such other shares and holders of shares of common stock
shall receive their ratable and proportionate share of the
remaining assets to be distributed in the ratio of the
Adjustment Number to 1 with respect to such shares of Series C
Preferred, such other shares and shares of common stock, on a
per share basis, respectively.
(C) If, upon any voluntary or involuntary
dissolution, liquidation or winding up of the corporation, the
amounts payable with respect to the Series C Preferred
Liquidation Preference and the liquidation preference of any
other shares of stock of the corporation ranking as to any
such distribution on a parity with the shares of the Series C
Preferred are not paid in full, the holders of the shares of
the Series C Preferred and of such other shares will share
ratably in any such distribution of assets of the corporation
in proportion to the full respective liquidation preferences
to which they are entitled. In the event, however, that there
are not sufficient assets available after payment in full of
the Series C Preferred Liquidation Preference and such other
liquidation preferences to permit payment in full of the
Common Adjustment, then the remaining assets shall be
distributed ratably to the holders of the common stock.
(D) In the event the corporation shall at any time
after the Rights Dividend Declaration Date (i) declare any
dividend on the common stock payable in shares of common
stock, (ii) subdivide the outstanding common stock, or (iii)
combine the outstanding shares of common stock into a smaller
number of shares, then in each such case the Adjustment Number
in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by the Adjustment Factor.
(E) Neither the sale, lease, transfer or conveyance
of all or substantially all the property or business of the
corporation, nor the merger or consolidation of the
corporation into or with any other corporation or the merger
or consolidation of any other corporation into or with the
corporation, shall be deemed to be a dissolution, liquidation
or winding up, voluntary or involuntary, for the purposes of
this paragraph (4).
(5) Redemption
(A) Right of Optional Redemption. The outstanding
shares of Series C Preferred may be redeemed at the option of
the Board of Directors as a whole, but not in part, at any
time, or from time to time, at a price per share (the "Series
C Redemption Price") equal to (i) 100% of the product of the
Adjustment Number times the Average Market Value (as such term
is hereinafter defined) of the Common Stock, plus (ii) all
accrued and unpaid dividends to and including the date fixed
for redemption (the "Series C Redemption Date"). The "Average
Market Value" is the average of the closing sale prices of a
share of the common stock during the 30-day period immediately
preceding the date before the redemption date quoted on the
Composite Tape for New York Stock Exchange Listed Stocks, or,
if the common stock is not quoted on the Composite Tape, on
The New York Stock Exchange, or, if the common stock is not
listed on such exchange, on the principal United States
securities exchange registered under the Securities Exchange
Act of 1934, as amended, on which the common stock is listed,
or, if the common stock is not listed on any such exchange,
the average of the closing bid quotations with respect to a
share of common stock during such 30-day period on The NASDAQ
Stock Market, or if no such quotations are available, the fair
market value of a share of common stock as determined by the
Board of Directors in good faith.
(B) Procedures for Redemption.
(i) Notice of any redemption will be (a) given by
publication in a newspaper of general circulation in the City
of New York, New York, such publication to be made once a week
for two successive weeks commencing not less than 30 nor more
than 60 days prior to the Series C Redemption Date, and (b)
mailed by the corporation, postage prepaid, not less than 30
nor more than 60 days prior to the Series C Redemption Date,
addressed to the respective holders of record of the Series C
Preferred to be redeemed at their respective addresses as they
appear on the stock transfer records of the corporation. No
failure to give such notice or any defect therein or in the
mailing thereof shall affect the validity of the proceedings
for the redemption of any Series C Preferred except as to the
holder to whom the corporation has failed to give notice or
except as to the holder to whom notice was defective. In
addition to any information required by law or by the
applicable rules of any exchange upon which Series C Preferred
may be listed or admitted to trading, such notice shall state:
(a) the Series C Redemption Date; (b) the Series C Redemption
Price; (c) the place or places where certificates for Series C
Preferred are to be surrendered for payment of the Series C
Redemption Price; and (d) that dividends on the Series C
Preferred will cease to accumulate on the Series C Redemption
Date.
(ii) If notice of redemption of the Series C
Preferred has been published and mailed in accordance with
subparagraph (5)(B)(i) above and provided that on or before
the Series C Redemption Date specified in such notice all
funds necessary for such redemption shall have been
irrevocably set aside by the corporation, separate and apart
from its other funds in trust for the benefit of the holders
of the Series C Preferred, so as to be, and to continue to be
available therefor, then, from and after the Series C
Redemption Date, dividends on the Series C Preferred shall
cease to accrue, and the Series C Preferred shall no longer be
deemed to be outstanding and all rights of the holders thereof
as shareholders of the corporation (except the right to
receive the Series C Redemption Price) shall terminate. Upon
surrender, in accordance with said notice, of the certificates
for the Series C Preferred (properly endorsed or assigned for
transfer, if the corporation shall so require and the notice
shall so state), the Series C Preferred shall be redeemed by
the corporation at the Series C Redemption Price.
(iii) The deposit of funds with a bank or trust
company for the purpose of redeeming Series C Preferred shall
be irrevocable except that:
(a) the corporation shall be entitled to
receive from such bank or trust company the interest
or other earnings, if any, earned on any money so
deposited in trust, and the holders of any shares
redeemed shall have no claim to such interest or
other earnings; and
(b) any balance of moneys so deposited by
the corporation and unclaimed by the holders of the
Series C Preferred entitled thereto at the expiration
of two years from the applicable Series C Redemption
Date shall be repaid, together with any interest or
other earnings earned thereon, to the corporation,
and after any such repayment, the holders of the
shares entitled to the funds so repaid to the
corporation shall look only to the corporation for
payment without interest or other earnings.
(C) Rights to Dividends on Shares Called for
Redemption. If the Series C Redemption Date is after a record
date for payment of dividends on the Series C Preferred and
before the related Quarterly Dividend Payment Date, the
dividend payable on such Quarterly Dividend Payment Date shall
be paid to the holders in whose name the shares of Series C
Preferred are registered at the close of business on such
record date notwithstanding the redemption thereof between
such record date and the related Quarterly Dividend Payment
Date or the corporation's default in the payment of the
dividend due. Except as provided in this paragraph (5), the
corporation will make no payment or allowance for unpaid
dividends, whether or not in arrears, on called Series C
Preferred.
(6) Voting Rights.
(A) Subject to the provision for adjustment
hereinafter set forth, each share of Series C Preferred shall
entitle the holder thereof to 1,000 votes on all matters
submitted to a vote of the shareholders of the corporation. In
the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on the common stock
payable in shares of common stock, (ii) subdivide the
outstanding common stock, or (iii) combine the outstanding
shares of common stock into a smaller number of shares, then
in each such case the number of votes per share to which
holders of shares of Series C Preferred were entitled
immediately prior to such event shall be adjusted by
multiplying such number by the Adjustment Factor. Except as
otherwise provided herein, in the Articles of Incorporation or
under applicable law, the holders of shares of Series C
Preferred and the holders of shares of common stock shall vote
together as one voting group on all matters submitted to a
vote of stockholders of the corporation.
(B) Whenever dividends on any shares of Series C
Preferred shall be in arrears for six or more consecutive
quarterly periods, the holders of such shares of Series C
Preferred (voting separately as a class with all other series
of preferred stock upon which like voting rights have been
conferred and are exercisable) will be entitled to vote for
the election of two additional directors of the corporation at
a special meeting called by the holders of record of at least
10% of the Series C Preferred or the holders of any other
series of preferred stock so in arrears (unless such request
is received less than 90 days before the date fixed for the
next annual or special meeting of the shareholders) or at the
next annual meeting of shareholders, and at each subsequent
annual meeting until all dividends accumulated on such shares
of Series C Preferred for the past Dividend Periods and the
then current Dividend Period shall have been fully paid or
declared and a sum sufficient for the payment thereof set
aside for payment. In such case, the entire Board of Directors
of the corporation will be increased by two directors.
(B) The foregoing voting provisions will not apply
if, at or prior to the time when the act with respect to which
such vote would otherwise be required shall be effected, all
outstanding shares of Series C Preferred shall have been
redeemed or called for redemption upon proper notice and
sufficient funds shall have been deposited in trust to effect
such redemption.
(C) In the event that the Series C Preferred is
listed or admitted to trading on The New York Stock Exchange,
then notwithstanding anything to the contrary in these
Articles, including without limitation Article 8, approval by
the holders of at least two-thirds of the outstanding shares
of the Series C Preferred shall be required for adoption of
any amendment of these Articles or of the bylaws of the
corporation that would materially affect the existing terms of
the Series C Preferred.
(7) Conversion of Series C Preferred. The Series C Preferred
is not convertible into or exchangeable for any other property
or securities of the corporation.
(8) Consolidation, Merger, Share Exchange, etc. In case the
corporation shall enter into any consolidation, merger, share
exchange, combination or other transaction in which the shares
of common stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any
such case the shares of Series C Preferred shall at the same
time be similarly exchanged or changed in an amount per share
(subject to the provision for adjustment hereinafter set
forth) equal to 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of
common stock is changed or exchanged. In the event the
corporation shall at any time after the Rights Dividend
Declaration Date (i) declare any dividend on the common stock
payable in shares of common stock, (ii) subdivide the
outstanding common stock, or (iii) combine the outstanding
shares of common stock into a smaller number of shares, then
in each such case the amount set forth in the preceding
sentence with respect to the exchange or change of shares of
Series C Preferred shall be adjusted by multiplying such
amount by the Adjustment Factor.
(9) Fractional Shares. Series C Preferred may be issued in
fractions of one one-thousandth of a share (and integral
multiples thereof) which shall entitle the holder, in
proportion to such holders' fractional shares, to exercise
voting rights, receive dividends, participate in distributions
and to have the benefit of all other rights of holders of
Series C Preferred.
(d) Series D Cumulative Convertible Preferred Stock.
(1) Designation and Number. A series of the preferred stock,
designated the "Series D Cumulative Convertible Redeemable
Preferred Stock" (the "Series D Preferred"), is hereby
established. The number of shares of the Series D Preferred
shall be 8,000,000.
(2) Relative Seniority. In respect of rights to receive
dividends and to participate in distributions or payments in
the event of any liquidation, dissolution or winding up of the
corporation, the Series D Preferred shall rank on a parity
with the Series A Preferred, the Series B Preferred and the
Series C Preferred and any other class or series of capital
stock of the corporation not constituting Junior Stock
(collectively, "Parity Stock"), and senior to the common stock
and any other class or series of capital stock of the
corporation ranking, as to dividends and upon liquidation,
junior to the Series D Preferred (collectively, "Junior
Stock").
(3) Dividends.
(A) The holders of the then outstanding Series D
Preferred shall be entitled to receive, when and as declared
by the Board of Directors out of any funds legally available
therefor, cumulative preferential cash dividends at the rate
of 7.5% of the Liquidation Preference of the Series D
Preferred (equivalent to $1.875 per share) per annum (subject
to adjustment as provided in subparagraph (F) of this
paragraph (3)), payable quarterly in arrears in cash on the
last day, or the next succeeding Business Day, of January,
April, July and October in each year, beginning February 1,
1999 (each such day being hereinafter called a "Dividend
Payment Date" and each period beginning on the day next
following a Dividend Payment Date and ending on the next
following Dividend Payment Date being hereinafter called a
"Dividend Period"), to shareholders of record at the close of
business on the Friday occurring between the tenth and
fifteenth days of the calendar month in which the applicable
Dividend Payment Date falls on or such date as shall be fixed
by the Board of Directors at the time of declaration of the
dividend (the "Dividend Record Date"), which shall be not less
than 10 nor more than 30 days preceding the Dividend Payment
Date. The amount of any dividend payable for the initial
Dividend Period and for any other partial Dividend Period
shall be computed on the basis of a 360-day year consisting of
twelve 30-day months. Dividends on the shares of Series D
Preferred shall accrue and be cumulative from and including
the date of original issue thereof (the "Issue Date"), whether
or not (i) the corporation has earnings, (ii) dividends on
such shares are declared or (iii) on any Dividend Payment Date
there shall be funds legally available for the payment of such
dividends. When dividends are not paid in full upon the shares
of Series D Preferred and the shares of any other series of
preferred stock ranking on a parity as to dividends with the
Series D Preferred (or a sum sufficient for such full payment
is not set apart therefor), all dividends declared upon shares
of Series D Preferred and any other series of preferred stock
ranking on a parity as to dividends with the Series D
Preferred shall be declared pro rata so that the amount of
dividends declared per share on the Series D Preferred and
such other series of preferred stock shall in all cases bear
to each other the same ratio that accrued dividends per share
on the shares of Series D Preferred and such other series of
preferred stock bear to each other. "Business Day" shall mean
any day, other than a Saturday or Sunday, that is neither a
legal holiday nor a day on which banking institutions in New
York City, New York are authorized or required by law,
regulation or executive order to close.
(B) Except as provided in subparagraph (A) of this
paragraph (3), unless full cumulative dividends on the Series
D Preferred have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof
set apart for payment on the Series D Preferred for all past
dividend periods and the then current dividend period, no
dividends (other than in Junior Stock) shall be declared or
paid or set aside for payment or other distribution or shall
be declared or made upon any Parity Stock or Junior Stock, nor
shall any Junior Stock or any Parity Stock be redeemed,
purchased or otherwise acquired for any consideration (or any
moneys be paid to or made available for a sinking fund for the
redemption of any shares of Junior Stock or Parity Stock) by
the corporation or any subsidiary of the corporation (except
by conversion into or exchange for Junior Stock).
(C) Any dividend payment made on shares of the Series
D Preferred shall first be credited against the earliest
accrued but unpaid dividend due with respect to such shares
which remains payable.
The amount of any dividends accrued on any shares of
Series D Preferred at any Dividend Payment Date shall be the
amount of any unpaid dividends accumulated thereon, to and
including such Dividend Payment Date, whether or not earned or
declared, and the amount of dividends accrued on any shares of
Series D Preferred at any date other than a Dividend Payment
Date shall be equal to the sum of the amount of any unpaid
dividends accumulated thereon, to and including the last
preceding Dividend Payment Date, whether or not earned or
declared, plus an amount calculated on the basis of the annual
dividend rate for the period after such last preceding
Dividend Payment Date to and including the date as of which
the calculation is made, based on a 360-day year of twelve
30-day months.
Accrued but unpaid dividends on the Series D
Preferred will not bear interest. Holders of the Series D
Preferred will not be entitled to any dividends in excess of
full cumulative dividends as described above.
(D) No dividends on shares of Series D Preferred
shall be declared by the Board of Directors of the corporation
or paid or set apart for payment by the corporation at such
time as the terms and provisions of any agreement of the
corporation, including any agreement relating to its
indebtedness, prohibits such declaration, payment or setting
apart for payment or provides that such declaration, payment
or setting apart for payment would constitute a breach thereof
or a default thereunder, or if such declaration or payment
shall be restricted or prohibited by law.
(E) Except as provided in these Articles, the Series
D Preferred shall not be entitled to participate in the
earnings or assets of the corporation.
(F) In the event that the per share cash dividends
declared on the common stock during any Dividend Period (the
"Current Common Dividend") shall be greater or less than the
per share cash dividends declared on the common stock during
the immediately preceding Dividend Period (the "Prior Common
Dividend"), then the dividend rate of the Series D Preferred
(as it may have previously been adjusted pursuant to this
subparagraph (F)) shall be automatically adjusted in the
proportion that the Current Common Dividend bears to the Prior
Common Dividend, such adjustment to be effective for the
Dividend Period during which the Current Common Dividend is
paid and all subsequent Dividend Periods until again adjusted
in accordance with this paragraph; provided, however, that in
no event shall the adjusted dividend rate of the Series D
Preferred be less than 7.5% of the Liquidation Preference of
the Series D Preferred per annum. No adjustment pursuant to
this subparagraph (F) shall be made on account of any special
common stock dividend or distribution declared for the purpose
of assuring continued qualification of the corporation as a
"real estate investment trust" under the Code.
(4) Liquidation Rights.
(A) Upon the voluntary or involuntary dissolution,
liquidation or winding up of the corporation, the holders of
shares of the Series D Preferred then outstanding shall be
entitled to receive and to be paid out of the assets of the
corporation legally available for distribution to its
shareholders, before any distribution shall be made to the
holders of common stock or any other capital stock of the
corporation ranking junior to the Series D Preferred upon
liquidation, a liquidation preference of $25.00 per share (the
"Liquidation Preference"), plus accrued and unpaid dividends
thereon to the date of payment.
(B) After the payment to the holders of the shares of
the Series D Preferred of the full Liquidation Preference
provided for in this paragraph (4), the holders of the Series
D Preferred as such shall have no right or claim to any of the
remaining assets of the corporation.
(C) If, upon any voluntary or involuntary
dissolution, liquidation, or winding up of the corporation,
the amounts payable with respect to the Liquidation Preference
and any other shares of stock of the corporation ranking as to
any such distribution on a parity with the shares of the
Series D Preferred are not paid in full, the holders of the
shares of the Series D Preferred and of such other shares will
share ratably in any such distribution of assets of the
corporation in proportion to the full respective liquidation
preferences to which they are entitled.
(D) Neither the sale, lease, transfer or conveyance
of all or substantially all the property or business of the
corporation, nor the merger or consolidation of the
corporation into or with any other corporation or the merger
or consolidation of any other corporation into or with the
corporation, shall be deemed to be a dissolution, liquidation
or winding up, voluntary or involuntary, for the purposes of
this paragraph (4).
(5) Redemption.
(A) Right of Optional Redemption. The Series D
Preferred is not redeemable prior to the fifth anniversary of
the Issue Date. On and after the fifth anniversary of the
Issue Date, the corporation may, at its option, redeem at any
time all or, from time to time, part of the Series D Preferred
at a price per share (the "Series D Redemption Price"),
payable in cash, of $25.00, together with all accrued and
unpaid dividends to and including the date fixed for
redemption (the "Series D Redemption Date"), without interest;
provided, however, that the corporation may not redeem any
Series D Preferred pursuant to this paragraph (5) unless the
Current Market Price of the common stock on each of the 20
consecutive Trading Days immediately preceding the Series D
Redemption Date shall at least equal the then current
Conversion Price, as defined in paragraph (7). "Current Market
Price" of the common stock or any other class of capital stock
or other security of the corporation or any other issuer for
any day shall mean the last reported sale price, regular way,
on such day or, if no sale takes place on such day, the
average of the reported closing bid and asked prices on such
day, regular way, in either case as reported on the New York
Stock Exchange ("NYSE") or, if such security is not listed or
admitted for trading on the NYSE, on the principal national
securities exchange on which such security is listed or
admitted for trading or, if not listed or admitted for trading
on any national securities exchange, on the NASDAQ National
Market or, if such security is not quoted on the NASDAQ
National Market, the average of the closing bid and asked
prices on such day in the over-the-counter market as reported
by NASDAQ or, if bid and asked prices for such security on
such day shall not have been reported through NASDAQ, the
average of the bid and asked prices on such day as furnished
by any NYSE member firm regularly making a market in such
security and selected for such purpose by the Board of
Directors. "Trading Day" in respect of any security shall mean
any day on which such security is traded on the NYSE, or if
such security is not listed or admitted for trading on the
NYSE, on the principal national securities exchange on which
such security is listed or admitted for trading, or if not
listed or admitted for trading on any national securities
exchange, on the NASDAQ National Market or, if such security
is not quoted on the NASDAQ National Market, in the applicable
securities market in which the security is traded.
In case of redemption of less than all shares of
Series D Preferred at the time outstanding, the shares of
Series D Preferred to be redeemed shall be selected pro rata
from the holders of record of such shares in proportion to the
number of shares of Series D Preferred held by such holders
(as nearly as may be practicable without creating fractional
shares) or by any other equitable method determined by the
corporation.
(B) Procedures for Redemption.
(i) Notice of any redemption will be mailed by the
corporation, postage prepaid, not less than 30 nor more than
60 days prior to the Series D Redemption Date, addressed to
the respective holders of record of the Series D Preferred to
be redeemed at their respective addresses as they appear on
the stock transfer records of the corporation. No failure to
give such notice or any defect therein or in the mailing
thereof shall affect the validity of the proceedings for the
redemption of any Series D Preferred except as to the holder
to whom the corporation has failed to give notice or except as
to the holder to whom notice was defective. In addition to any
information required by law, such notice shall state: (a) the
Series D Redemption Date; (b) the Series D Redemption Price;
(c) the number of shares of Series D Preferred to be redeemed;
(d) the place or places where certificates for such shares are
to be surrendered for payment of the Series D Redemption
Price; and (e) that dividends on the shares to be redeemed
will cease to accumulate on the Series D Redemption Date. If
less than all the shares of Series D Preferred held by any
holder are to be redeemed, the notice mailed to such holder
shall also specify the number of shares of Series D Preferred
held by such holder to be redeemed.
(ii) If notice of redemption of any shares of Series
D Preferred has been mailed in accordance with section (i) of
subparagraph (B) of this paragraph (5) above and provided that
on or before the Series D Redemption Date specified in such
notice all funds necessary for such redemption shall have been
irrevocably set aside by the corporation, separate and apart
from its other funds in trust for the benefit of any holders
of the shares of Series D Preferred so called for redemption,
so as to be, and to continue to be available therefor, then,
from and after the Series D Redemption Date, dividends on such
shares of Series D Preferred shall cease to accrue, and such
shares shall no longer be deemed to be outstanding and shall
not have the status of Series D Preferred and all rights of
the holders thereof as shareholders of the corporation (except
the right to receive the Series D Redemption Price) shall
terminate. Upon surrender, in accordance with said notice, of
the certificates for any shares of Series D Preferred so
redeemed (properly endorsed or assigned for transfer, if the
corporation shall so require and the notice shall so state),
such shares of Series D Preferred shall be redeemed by the
corporation at the Series D Redemption Price. In case less
than all the shares of Series D Preferred represented by any
such certificate are redeemed, a new certificate or
certificates shall be issued representing the unredeemed
shares of Series D Preferred without cost to the holder
thereof.
(iii) The deposit of funds with a bank or trust
company for the purpose of redeeming Series D Preferred shall
be irrevocable except that:
(a) the corporation shall be entitled to
receive from such bank or trust company the interest
or other earnings, if any, earned on any money so
deposited in trust, and the holders of any shares
redeemed shall have no claim to such interest or
other earnings; and
(b) any balance of moneys so deposited by
the corporation and unclaimed by the holders of the
Series D Preferred entitled thereto at the expiration
of two years from the applicable Series D Redemption
Date shall be repaid, together with any interest or
other earnings earned thereon, to the corporation,
and after any such repayment, the holders of the
shares entitled to the funds so repaid to the
corporation shall look only to the corporation for
payment without interest or other earnings.
(C) Limitations on Redemption
(i) The Series D Redemption Price (other than the
portion thereof consisting of accrued and unpaid dividends)
shall be payable solely out of the sale proceeds of other
capital stock of the corporation and from no other source.
(ii) Unless full cumulative dividends on all shares
of Series D Preferred shall have been or contemporaneously are
declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past Dividend
Periods and the then current Dividend Period, no Series D
Preferred shall be redeemed (unless all outstanding shares of
Series D Preferred are simultaneously redeemed) or purchased
or otherwise acquired directly or indirectly by the
corporation (except by exchange for Junior Stock); provided,
however, that the foregoing shall not prevent the redemption
of Series D Preferred pursuant to Article 4 or the purchase or
acquisition of Series D Preferred pursuant to a purchase or
exchange offer made on the same terms to holders of all
outstanding shares of Series D Preferred.
(iii) The corporation shall not redeem in any period
of 12 consecutive months a number of shares of Series D
Preferred having an aggregate Liquidation Preference of more
than $100,000,000, provided that this restriction shall lapse
and be of no further force or effect if in any such period any
holder of record of such number of shares of Series D
Preferred or shares of common stock issued on conversion of
such number of shares of Series D Preferred shall transfer
beneficial ownership of such number of shares of Series D
Preferred or such common stock, or a combination of shares of
Series D Preferred and such common stock representing such
number of shares of Series D Preferred, except (a) in a
distribution of such shares of Series D Preferred and/or
shares of common stock to the security holders of such holder
of record or (b) in a bona fide pledge to a bank or other
financial institution to secure obligations for borrowed
money, or as margin collateral, or upon foreclosure or private
sale under such pledge.
(D) Rights to Dividends on Shares Called for
Redemption. If the Series D Redemption Date is after a
Dividend Record Date and before the related Dividend Payment
Date, the dividend payable on such Dividend Payment Date shall
be paid to the holder in whose name the shares of Series D
Preferred to be redeemed are registered at the close of
business on such Dividend Record Date notwithstanding the
redemption thereof between such Dividend Record Date and the
related Dividend Payment Date or the corporation's default in
the payment of the dividend due. Except as provided in this
paragraph (5), the corporation will make no payment or
allowance for unpaid dividends, whether or not in arrears, on
called Series D Preferred.
(6) Voting Rights. Except as required by the Virginia Stock
Corporation Act and except as otherwise provided in this
paragraph (6), the holders of the Series D Preferred shall not
be entitled to vote at any meeting of the shareholders for
election of directors or for any other purpose or otherwise to
participate in any action taken by the corporation or the
shareholders thereof, or to receive notice of any meeting of
shareholders.
(A) Whenever dividends on any shares of Series D
Preferred shall be in arrears for any Dividend Period, the
holders of such shares of Series D Preferred shall have all
rights to notices and voting entitlements of holders of common
stock under the Virginia Stock Corporation Act and these
Articles, and the Series D preferred and the common stock
shall be a single voting group, until all dividends
accumulated on such shares of Series D Preferred for all past
Dividend Periods and the then current Dividend Period shall
have been fully paid or declared and a sum sufficient for the
payment thereof set aside for payment.
(B) So long as any shares of Series D Preferred
remain outstanding, the corporation shall not, without the
affirmative vote of the holders of at least a majority of the
shares of the Series D Preferred outstanding at the time, (i)
authorize or create, or increase the authorized or issued
amount of, any class or series of capital stock ranking prior
to the Series D Preferred with respect to payment of dividends
or the distribution of assets upon liquidation, dissolution or
winding up or reclassify any authorized capital stock of the
corporation into any such shares, or create, authorize or
issue any obligation or security convertible into or
evidencing the right to purchase any such shares; or (ii)
amend, alter or repeal the provisions of these Articles,
whether by merger, consolidation or otherwise, so as to
materially and adversely affect any right, preference,
privilege or voting power of the Series D Preferred or the
holders thereof; provided, however, that any increase in the
amount of the authorized preferred stock or the creation or
issuance of any other series of preferred stock, or any
increase in the amount of authorized shares of such series, in
each case ranking on a parity with or junior to the Series D
Preferred with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers.
(C) The foregoing voting provisions will not apply
if, at or prior to the time when the act with respect to which
such vote would otherwise be required shall be effected, all
outstanding shares of Series D Preferred shall have been
redeemed or called for redemption upon proper notice and
sufficient funds shall have been deposited in trust to effect
such redemption.
(7) Conversion of Series D Preferred.
(A) As used in this paragraph (7), the following
terms shall have the indicated meanings:
"Adjustment Factor," for purposes of any
determination provided for in this paragraph (7) requiring
reference to the Adjustment Factor, shall equal the Conversion
Price in effect on the determination date divided by $16.25.
"Conversion Price" shall mean the conversion price
per share of common stock at which the Series D Preferred is
convertible into common stock, as such Conversion Price may be
adjusted pursuant to subparagraph (E) of this paragraph (7).
The initial Conversion Price shall be $16.25.
"Conversion Rate" shall mean the rate at which the
Series D Preferred is convertible into common stock, as such
Conversion Rate may be adjusted pursuant to subparagraph (E)
of this paragraph (7). The initial Conversion Rate shall be
1.5385 shares of common stock for each share of Series D
Preferred.
"Fair Market Value," in the case of any security or
property not having a market value ascertainable by reference
to any quotation medium or other objective source, shall mean
the fair market value thereof as determined in good faith by
the Board of Directors, which determination shall be final,
conclusive and binding on all persons
"Transfer Agent" shall mean ChaseMellon Shareholder
Services, LLC, or such other agent or agents of the
corporation as may be designated by the Board of Directors as
the transfer agent for the Series D Preferred.
(B) Subject to and upon compliance with the
provisions of this paragraph (7), a holder of shares of Series
D Preferred shall have the right (the "Conversion Right"),at
his option, at any time and from time to time, to convert such
shares into the number of shares of fully paid and
nonassessable common stock obtained by dividing the aggregate
Liquidation Preference of such shares of Series D Preferred by
the Conversion Price (as in effect at the time and on the date
provided for in the last paragraph of subparagraph (C) of this
paragraph (7)) by surrendering such shares to be converted,
such surrender to be made in the manner provided in
subparagraph (C) of this paragraph (7); provided, however,
that the right to convert shares called for redemption
pursuant to paragraph (5) shall terminate at the close of
business on the Series D Redemption Date fixed for such
redemption, unless the corporation shall default in making
payment of any amounts payable upon such redemption under
paragraph (5).
(C) In order to exercise the Conversion Right, the
holder of each share of Series D Preferred to be converted
shall surrender the certificate evidencing such share, duly
endorsed or assigned to the corporation or in blank, at the
office of the Transfer Agent, accompanied by written notice to
the corporation that the holder thereof elects to convert such
share of Series D Preferred. Unless the certificate or
certificates for shares of common stock issuable on conversion
are to be registered in the same name as the name in which
such certificate for Series D Preferred is registered, each
certificate surrendered for conversion shall be accompanied by
instruments of transfer, in form satisfactory to the
corporation, duly executed by the holder or such holder's duly
authorized agent and an amount sufficient to pay any transfer
or similar tax (or evidence reasonably satisfactory to the
corporation demonstrating that such taxes have been paid).
Holders of Series D Preferred at the close of
business on a Dividend Record Date shall be entitled to
receive the dividend payable on the corresponding Dividend
Payment Date notwithstanding the conversion thereof following
such Dividend Record Date and prior to such Dividend Payment
Date. However, shares of Series D Preferred surrendered for
conversion during the period beginning with the close of
business on any Dividend Record Date and ending with the
opening of business on the corresponding Dividend Payment Date
(except shares converted after the issuance of a notice of
redemption specifying a Series D Redemption Date occurring
within such period or coinciding with such Dividend Payment
Date, such shares being entitled to such dividend on the
Dividend Payment Date) must be accompanied by payment of an
amount equal to the dividend payable on such shares on such
Dividend Payment Date. A holder of shares of Series D
Preferred on a Dividend Record Date who (or whose transferee)
surrenders any such shares for conversion into common stock
after the opening of business on the corresponding Dividend
Payment Date will receive the dividend payable by the
corporation on such Series D Preferred on such date, and the
converting holder need not include payment of the amount of
such dividend upon such surrender. The corporation shall make
further payment or allowance for, and a converting holder
shall be entitled to, unpaid dividends in arrears (excluding
the then-current quarter) on converted shares and for
dividends on the common stock issued upon such conversion.
As promptly as practicable after the surrender of
certificates for Series D Preferred as aforesaid, the
corporation shall issue and shall deliver at such office to
such holder, or on his written order, a certificate or
certificates for the number of full shares of common stock
issuable upon the conversion of such Series D Preferred in
accordance with the provisions of this paragraph (7), and any
fractional interest in respect of common stock arising upon
such conversion shall be settled as provided in subparagraph
(D) of this paragraph (7). Each conversion shall be deemed to
have been effected immediately prior to the close of business
on the date on which the certificates for Series D Preferred
shall have been surrendered and such notice (and if
applicable, payment of an amount equal to the dividend payable
on such shares) received by the corporation as aforesaid, and
the person or persons in whose name or names any certificate
or certificates for common stock shall be issuable upon such
conversion shall be deemed to have become the holder or
holders of record of the shares represented thereby at such
time on such date, and such conversion shall be at the
Conversion Price in effect at such time and on such date,
unless the share transfer books of the corporation shall be
closed on that date, in which event such person or persons
shall be deemed to have become such holder or holders of
record at the opening of business on the next succeeding day
on which such share transfer books are open, but such
conversion shall be at the Conversion Price in effect on the
date on which such certificates for Series D Preferred have
been surrendered and such notice received by the corporation.
(D) No fractional shares or scrip representing
fractions of common stock shall be issued upon conversion of
the Series D Preferred. In lieu of issuing a fractional
interest in common stock that would otherwise be deliverable
upon the conversion of a share of Series D Preferred, the
corporation shall pay to the holder of such share an amount in
cash based upon the Current Market Price of the common stock
on the Trading Day immediately preceding the date of
conversion. If more than one share of Series D Preferred shall
be surrendered for conversion at one time by the same holder,
the number of full shares of common stock issuable upon
conversion thereof shall be computed on the basis of the
aggregate number of shares of Series D Preferred so
surrendered.
(E) The Conversion Rate and Conversion Price shall be
adjusted from time to time as follows:
(i) If the corporation shall after the Issue Date (a)
declare and pay a dividend to holders of any class of capital
stock of the corporation payable in common stock, (b)
subdivide its outstanding common stock into a greater number
of shares, (c) combine its outstanding common stock into a
smaller number of shares or (d) reclassify its common stock,
the Conversion Rate shall be adjusted so that the holder of
any Series D Preferred thereafter surrendered for conversion
shall be entitled to receive the number of shares of common
stock that such holder would have owned or have been entitled
to receive after the happening of any of the events described
above had such shares been converted immediately prior to the
record date in the case of a dividend or the effective date in
the case of a subdivision, combination or reclassification. An
adjustment made pursuant to this section (i) shall become
effective immediately after the opening of business on the day
next following the record date (except as provided in
subparagraph (I) below) in the case of a dividend and shall
become effective immediately after the opening of business on
the day next following the effective date in the case of a
subdivision, combination or reclassification. Such
adjustment(s) shall be made successively whenever any of the
events listed above shall occur.
(ii) If the corporation shall issue after the Issue
Date rights, options or warrants to all holders of common
stock entitling them to subscribe for or purchase common stock
(or securities convertible into common stock) at a price per
share (or having a conversion price per share) less than 98%
of the Current Market Price of the common stock determined as
of the record date for the determination of shareholders
entitled to receive such rights, options or warrants, then the
Conversion Price shall be adjusted to equal the price
determined by multiplying (A) the Conversion Price in effect
immediately prior to the close of business on such record date
(B) a fraction, the numerator of which shall be the sum of (I)
the number of shares of common stock outstanding on the close
of business on such record date and (II) the number of shares
of common stock that could be purchased at the Current Market
Price on such record date with the aggregate proceeds to the
corporation from the exercise of such rights, options or
warrants (or the aggregate conversion price of the convertible
securities so offered), and the denominator of which shall be
the sum of (x) the number of shares of common stock
outstanding on the close of business on such record date and
(y) the number of shares of common stock issuable upon
exercise in full of such rights, options or warrants (or into
which the convertible securities so offered are convertible).
Such adjustment shall become effective immediately after the
opening of business on the day next following such record date
(except as provided in subparagraph (I) below). In determining
whether any rights, options or warrants entitle the holders of
common stock to subscribe for or purchase common stock at less
than 98% of the Current Market Price, there shall be taken
into account any consideration received by the corporation
upon issuance and upon exercise of such rights, options or
warrants, the value of such consideration, if other than cash,
to be determined by the Board of Directors, whose decision
shall be final, conclusive, and binding on all persons. Any
adjustment(s) made pursuant to this section (ii) shall be made
successively whenever any of the events listed above shall
occur.
(iii) If the corporation shall after the Issue Date
distribute to all holders of its common stock any shares of
capital stock of the corporation (other than common stock) or
evidence of its indebtedness or assets (including securities
or cash, but excluding cash dividends not exceeding in amount
current or accumulated funds from operations at the date of
declaration, determined on the basis of the corporation's most
recent annual or quarterly report to shareholders at the time
of the declaration of such dividends) or rights, options or
warrants to subscribe for or purchase any of its securities
(excluding rights, options or warrants referred to in section
(ii) above) (any of the foregoing being hereinafter in this
section (iii) called the "Securities"), then in each case the
Conversion Price shall be adjusted so that it shall equal the
price determined by multiplying (A) the Conversion Price in
effect immediately prior to the close of business on the
record date fixed for the determination of shareholders
entitled to receive such distribution by (B) a fraction, the
numerator of which shall be (I) the Current Market Price per
share of common stock on such record date or, if applicable,
the deemed record date described in the immediately following
paragraph, less (II) the then Fair Market Value of the
Securities or assets so distributed applicable to one share of
common stock, and the denominator of which shall be the
Current Market Price per share of common stock on such record
date or, if applicable, the record date described in the
immediately following paragraph. Such adjustment shall become
effective immediately at the opening of business on the
Business Day next following (except as provided in
subparagraph (I)) such record date.
For purposes of this section (iii), distribution of a
Security which is distributed not only to the holders of the
common stock on the record date fixed for the determination of
shareholders entitled to such distribution, but is also
delivered with each share of common stock issued upon
conversion of Series D Preferred after such record date, shall
not require an adjustment of the Conversion Price pursuant to
this section (iii); provided that on the date, if any, on
which such Security ceases to be deliverable with common stock
upon conversion of Series D Preferred (other than as a result
of the expiration or termination of all such Securities), a
distribution of such Securities shall be deemed to have
occurred, and the Conversion Price shall be adjusted as
provided in this section (iii) (and such date shall be deemed
for purposes of this section (iii) to be the "record date
fixed for the determination of shareholders entitled to
receive such distribution" and the "record date").
Adjustment(s) made pursuant to this section (iii)
shall be made successively whenever any of the events listed
above shall occur.
(iv) If after the Issue Date (i) the corporation
shall merge or consolidate with any other real estate
investment trust, corporation or other business entity and
shall not be the survivor in such transaction (without respect
to the legal structure of the transaction), (ii) the
corporation shall transfer or sell all or substantially all of
its assets other than to an affiliate or subsidiary of the
corporation or (iii) the corporation shall liquidate and
dissolve, and the consideration allocable to each share of
common stock in any such transaction shall not have a Fair
Market Value of at least $15 times the Adjustment Factor, the
Conversion Price in effect at the opening of business on the
date on which such transaction is consummated or effective, if
greater than $15 times the Adjustment Factor, shall be
adjusted effective at the opening of business on such date to
equal $15 times the Adjustment Factor.
(v) If the Current Market Price of the common stock
on at least 20 consecutive Trading Days during the period of
36 consecutive months beginning on the second anniversary of
the Issue Date is not at least $14 times the Adjustment
Factor, and the Conversion Price in effect at the opening of
business on the fifth anniversary of the Issue Date or the
next succeeding Business Day, if such fifth anniversary is not
a Business Day, is greater than $15.25 times the Adjustment
Factor, the Conversion Price shall be adjusted effective at
the opening of business on such fifth anniversary or the next
following Business Day, if such fifth anniversary is not a
Business Day, to equal $15.25 times the Adjustment Factor.
(vi) No adjustment in the Conversion Price shall be
required unless such adjustment would require a cumulative
increase or decrease of at least 1% in such price; provided,
however, that any adjustments that by reason of this section
(vi) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment until made;
and provided, further, that any adjustment shall be required
and made in accordance with the provisions of this paragraph
(7) (other than this section (vi)) not later than such time as
may be required in order to preserve the tax-free nature of a
dividend to the holders of common stock. Notwithstanding any
other provisions of this paragraph (7), the corporation shall
not be required to make any adjustment to the Conversion Price
for the issuance of any common stock pursuant to any plan
providing for the reinvestment of dividends or interest
payable on securities of the corporation and the investment of
additional optional amounts in common stock under such plan.
All calculations under this paragraph (7) shall be made to the
nearest cent (with $.005 being rounded upward) or to the
nearest one-tenth of a share (with .05 of a share being
rounded upward), as the case may be.
(F) If the corporation shall after the Issue Date be
a party to any transaction (including without limitation a
merger, consolidation, statutory share exchange, self tender
offer for all or substantially all of the outstanding common
stock, sale of all or substantially all of the corporation's
assets, recapitalization or reclassification of capital stock,
but excluding any transaction to which section (i) of
subparagraph (E) of this paragraph (7) applies (each of the
foregoing being referred to herein as a "Transaction"), in
each case upon consummation of which common stock shall be
converted into the right to receive shares, stock, securities
or other property (including cash) or any combination thereof
("Transaction Consideration"), each share of Series D
Preferred which is not itself converted into the right to
receive Transaction Consideration in connection with such
Transaction shall thereafter be convertible into the kind and
amount of Transaction Consideration payable upon the
consummation of such Transaction with respect to that number
of shares of common stock into which one share of Series D
Preferred was convertible immediately prior to such
Transaction. The corporation shall not be a party to any
Transaction unless the terms of such Transaction are
consistent with this subparagraph (F) and enable the holder of
each share of Series D Preferred that remains outstanding
after consummation of such Transaction to convert such share
at the Conversion Price in effect immediately prior to such
Transaction into the Transaction Consideration payable with
respect to the number of shares of common stock into which
such share of Series D Preferred is then convertible. The
provisions of this subparagraph (F) shall similarly apply to
successive Transactions.
(G) If after the Issue Date:
(i) the corporation shall declare dividends on the
common stock, excluding cash dividends not exceeding in amount
current or accumulated funds from operations at the date of
declaration, determined on the basis of the corporation's most
recent annual or quarterly report to shareholders at the time
of the declaration of such dividends; or
(ii) the corporation shall authorize the granting to
the holders of the common stock of rights, options or warrants
to subscribe for or purchase any shares of any class or any
other rights, options or warrants; or
(iii) there shall be any Transaction for which
approval of any shareholders of the corporation is required or
self tender for all or substantially all of the outstanding
common stock; or
(iv) there shall occur the voluntary or involuntary
liquidation, dissolution or winding up of the corporation;
then the corporation shall cause to be filed with the
Transfer Agent and shall cause to be mailed to the holders of
the Series D Preferred at their addresses as shown on the
share records of the corporation, as promptly as possible, but
at least 15 days prior to the earliest applicable date
hereinafter specified, a notice stating (A) the record date as
of which the holders of common stock entitled to receive such
dividend or grant of rights, options or warrants are to be
determined, provided, however, that no such notification need
be made in respect of a record date for a dividend or grant of
rights, options or warrants unless the corresponding
adjustment in the Conversion Price would be an increase or
decrease of at least 1%, or (B) the date on which such
Transaction, self tender, liquidation, dissolution or winding
up is expected to become effective, and the date as of which
it is expected that holders of common stock of record shall be
entitled to exchange their common stock for securities or
other property, if any, deliverable upon such Transaction,
self tender, liquidation, dissolution or winding up. Failure
to give such notice or any defect therein shall not affect the
legality or validity of the proceedings described in this
paragraph (7).
(H) Whenever the Conversion Price is adjusted as
herein provided, the corporation shall promptly file with the
Transfer Agent a certificate of its chief financial or chief
accounting officer setting forth the Conversion Price after
such adjustment and setting forth a brief statement of the
facts requiring such adjustment, which certificate shall be
conclusive evidence of the correctness of such adjustment
absent manifest error. Promptly after delivery of such
certificate, the corporation shall prepare a notice of such
adjustment of the Conversion Price setting forth the adjusted
Conversion Price and the effective date on which such
adjustment becomes effective and shall mail such notice of
such adjustment of the Conversion Price to the holder of each
share of Series D Preferred at such holder's last address of
record.
(I) In any case in which subparagraph (E) of this
paragraph (7) provides that an adjustment shall become
effective on the date next following the record date for an
event, the corporation may defer until the occurrence of such
event (i) issuing to the holder of any Series D Preferred
converted after such record date and before the occurrence of
such event the additional common stock issuable upon such
conversion by reason of the adjustment required by such event
over and above the common stock issuable upon such conversion
before giving effect to such adjustment and (ii)
fractionalizing any share of common stock into which Series D
Preferred is convertible and/or paying to such holder cash in
lieu of such fractional interest pursuant to subparagraph (D)
of this paragraph (7).
(J) There shall be no adjustment of the Conversion
Price in case of the issuance of any shares of capital stock
of the corporation in a reorganization, acquisition or other
similar transaction except as specifically set forth in this
paragraph (7).
(K) The corporation will at all times reserve and
keep available, free from preemptive rights, out of its
authorized but unissued common stock, for the purpose of
effecting conversion of the Series D Preferred, the full
number of shares of common stock deliverable upon the
conversion of all outstanding Series D Preferred not
theretofore converted. For purposes of this subparagraph (K),
the number of shares of common stock deliverable upon the
conversion of all outstanding shares of Series D Preferred
shall be computed as if at the time of computation all such
outstanding shares were held by a single holder.
(L) The corporation will pay any and all documentary
stamp or similar issue or transfer taxes payable in respect of
the issue or delivery of common stock or other securities or
property on conversion of the Series D Preferred pursuant
hereto; provided, however, that the corporation shall not be
required to pay any tax that may be payable in respect of any
transfer involved in the issue or delivery of common stock or
other securities or property in a name other than that of the
holder of the Series D Preferred to be converted, and no such
issue or delivery shall be made unless and until the person
requesting such issue or delivery has paid to the corporation
the amount of any such tax or has established, to the
reasonable satisfaction of the corporation, that such tax has
been paid.
In addition to the foregoing adjustments, the
corporation shall be entitled to make such reductions in the
Conversion Price, in addition to those required herein, as it
in its discretion considers to be advisable in order that any
share dividends, subdivisions of shares, reclassification or
combination of shares, dividend of rights, options, warrants
to purchase shares or securities, or a dividend of other
assets (other than cash dividends) will not be taxable or, if
that is not possible, to diminish any income taxes that are
otherwise payable because of such event.
(M) Definitions. Unless the context otherwise clearly
indicates, terms defined in any subdivision of this paragraph
(7) shall have the same meanings wherever used in this
paragraph (7).
4. If the Board of Directors of the corporation shall, at any time and in good
faith, be of the opinion that direct or indirect ownership of shares of the
corporation has or may become concentrated in any individual or individuals to
an extent which would disqualify the corporation as a "real estate investment
trust" under the requirements of the Code applicable of the qualification of
"real estate investment trusts" (the "REIT provisions'), then the corporation
shall have the power.
(a) to call for redemption by lot or other means deemed equitable by
the Board of Directors and to redeem a number of concentrated shares sufficient,
in the opinion of the Board of Directors, to maintain or bring the direct or
indirect ownership of shares of the corporation into conformity with the REIT
provisions; and
(b) to stop the transfer of its shares to any person whose acquisition
thereof would, in the opinion of the Board of Directors, result in such
disqualification.
The per share redemption price of any shares redeemed by the corporation
pursuant to paragraph (a) of this Article 4 shall be the highest closing bid
price quotation (if then traded over the counter) or the closing sale price (if
then listed on a national securities exchange) for the shares as of the business
day preceding the day on which notice of redemption is given as reported by any
source reasonably believed reliable by the Board of Directors, or, if no bid
price quotation or closing sale price for the shares is available, as determined
in good faith by the Board of Directors, From and after the date fixed for
redemption by the Board of Directors, the holder of any shares so called for
redemption shall cease to be entitled to dividends, voting rights and other
benefits with respect to such shares excepting only the right to payment of the
redemption price fixed as aforesaid. For the purpose of this Article 4, the
terms "individual" and "ownership" of shares shall be defined in accordance with
or by reference to the REIT provisions.
5. Holders of shares of the corporation shall upon demand disclose to the
corporation in writing such information with respect to direct and indirect
ownership thereof as the Board of Directors may deem necessary to enable the
corporation to comply with the REIT provisions or to comply with the
requirements of any other taxing authority.
6. The number of directors of the corporation shall be fixed by the bylaws or,
in the absence of a bylaw fixing such number, shall be three.
7. (a) To the full extent that the Act, as it exists on the date hereof or may
hereafter be amended, permits the limitation or elimination of the liability of
directors or officers, a director or officer of the corporation shall not be
liable to the corporation or its stockholders for monetary damages. In the event
that the Act shall be construed to require in any case in which such liability
may be so limited or eliminated, as a condition of limitation or elimination
thereof, specification in these Articles of an amount in dollars and/or cents as
the amount of the liability of directors or officers, such amount is hereby
specified at zero dollars and zero cents ($0.00), in cases in which such
liability may be eliminated, and at the minimum amount permitted by the Act,
expressed in dollars and/or cents, in cases in which such liability may be
limited.
(b) To the full extent permitted and in the manner prescribed by the
Act, as it exists on the date hereof or may hereafter be amended, and any other
applicable law, the corporation shall indemnify a director or officer of the
corporation who is or was a party to any proceeding by reason of the fact that
he is or was such a director or officer or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise. The Board of Directors is hereby empowered, by majority vote of a
quorum of disinterested directors, to contract in advance to indemnify any
director or officer.
(c) The Board of Directors is hereby empowered, by majority vote of a
quorum of disinterested directors, to cause the corporation to indemnify or
contract in advance to indemnify any person not specified in paragraph (b) of
this Article 7 who was or is a party to any proceeding, by reason of the fact
that he is or was an employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, to the same extent as if such person were required to be
indemnified by paragraph (b).
(d) The corporation may purchase and maintain insurance to indemnify it
against the whole or any portion of its liability under this Article 7 and may
also procure insurance, in such amounts as the Board of Directors may determine,
on behalf of any person who is or was a director, officer, employee or agent of
the corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise, against any liability
asserted against or incurred by such person in any such capacity or arising from
his status as such, whether or not the corporation would have power to indemnify
such person against such liability under the provisions of this Article 7.
(e) In the event there has been a change in the composition of a
majority of the Board of Directors after the date of the alleged act or omission
with respect to which indemnification is claimed, any determination as to
indemnification and advancement of expenses with respect to any claim for
indemnification made pursuant to paragraph (a) of this Article 7 shall be made
by special legal counsel agreed upon by the Board of Directors and the proposed
indemnitee. If the Board of Directors and the proposed indemnitee are unable to
agree upon such special legal counsel, the Board of Directors and the proposed
indemnitee each shall select a nominee, and the nominees shall select such
special legal counsel.
(f) The provisions of this Article 7 shall be applicable to all
actions, claims, suits or proceedings commenced after the adoption hereof by
stockholders, whether arising from any action taken or failure to act before or
after such adoption. No amendment or repeal of this Article 7 shall diminish the
rights provided hereby or diminish the right to indemnification with respect to
any claim, issue or matter in any then pending or subsequent proceeding that is
based in any material respect on any alleged action or failure to act prior to
such amendment or repeal.
(g) References herein to directors, officers, employees or agents shall
include former directors, officers, employees and agents and their respective
heirs, executors and administrators.
8. Except as otherwise required by the Act, by these Articles, or by the Board
of Directors acting pursuant to Subsection C of Section 13.1-707 of the Act, or
any successor provision, the vote required to approve an amendment or
restatement of these Articles, other than an amendment or restatement that
amends or affects the shareholder vote required by the Act to approve a merger,
share exchange, sale of all or substantially all of the corporation's assets or
the dissolution of the corporation, shall be a majority of all votes entitled to
be cast by each voting group entitled to vote on the amendment.
EXHIBIT 5
HUNTON & WILLIAMS
951 East Byrd Street
Riverfront Plaza, East Tower
Richmond, VA 23219
February 24, 1999
Board of Directors
United Dominion Realty Trust, Inc.
10 South 6th Street
Richmond, Virginia 23219-3802
Registration Statement on Form S-3
Ladies and Gentlemen:
We are acting as counsel for United Dominion Realty Trust, Inc. (the
"Company") in connection with its registration under the Securities Act of 1993
of up to 130,416 shares of its common stock (the "Shares"), which are proposed
to be offered and sold as described in the Company's Registration Statement on
Form S-3 (the "Registration Statement") to be filed today with the Securities
and Exchange Commission (the "Commission").
In rendering this opinion, we have relied upon, among other things, our
examination of such records of the Company and certificates of its officers and
of public officials as we have deemed necessary.
Based upon the foregoing, we are of the opinion that:
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the Commonwealth of Virginia.
2. The Shares have been duly authorized, and when the Shares are
offered and sold as described in the Registration Statement, they will be
legally issued fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement and reference to our firm under the
heading "Legal Matters" in the Registration Statement.
Very truly yours,
/s/Hunton & Williams