<PAGE>
Filed pursuant to
Rule 424(b)2
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED MAY 15, 1995
1,916,933 Shares
STORAGE USA, INC.
Common Stock
(par value $.01 per share)
All of the shares of Common Stock offered hereby are being sold directly
by Storage USA, Inc. (the "Company") pursuant to the terms of a Stock
Purchase Agreement, dated as of March 1, 1996, and amended July 1, 1996, by
and among Storage USA, Inc., Security Capital Holdings S.A. and Security
Capital U.S. Realty. The shares are being sold at a price of $31.30 per
share. The aggregate proceeds of $60 million will be used by the Company to
repay borrowings outstanding under the Company's revolving credit agreement,
bearing interest at a weighted average annual rate of 6.59%, and to finance
future acquisitions. Such borrowings were incurred in the past year to
finance the acquisition of self-storage facilities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS
TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
The date of this Prospectus Supplement is July 8, 1996.
<PAGE>
PROSPECTUS
$250,000,000
STORAGE USA, INC.
SECURITIES
-----------
Storage USA, Inc. (the "Company") intends to issue from time to time its (i)
shares of Preferred Stock, $.01 par value ("Preferred Stock"), (ii) depositary
shares representing entitlement to all rights and preferences of a fraction of a
share of Preferred Stock of a specified series and represented by depositary
receipts ("Depositary Shares") and (iii) shares of Common Stock, $.01 par value
("Common Stock"), having an aggregate initial public offering price not to
exceed $250,000,000, on terms to be determined at the time of sale. The
Preferred Stock, the Depositary Shares and the Common Stock offered hereby
(collectively, the "Offered Securities") may be offered, separately or as units
with other Offered Securities, in separate series, in amounts, at prices and on
terms to be determined at the time of sale and to be set forth in a supplement
to this Prospectus (a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable, (i) in the case of Preferred
Stock, the series designation and number of shares, the dividend, liquidation,
redemption, conversion, voting and other rights, the initial public offering
price and whether interests in the Preferred Stock will be represented by
Depositary Shares; (ii) in the case of Common Stock, the number of shares and
initial public offering price; and (iii) in the case of all Offered Securities,
whether such Offered Securities will be offered separately or as a unit with
other Offered Securities. In addition, such specific terms may include
limitations on direct or beneficial ownership and restrictions on transfer of
the Offered Securities, in each case as may be appropriate to preserve the
status of the Company as a real estate investment trust ("REIT") for federal
income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, concerning certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered thereby.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company, or to or through underwriters or dealers. If
any designated agents or any underwriters are involved in the sale of Offered
Securities, they will be identified and their compensation will be described in
the applicable Prospectus Supplement. See "Plan of Distribution." No Offered
Securities may be sold without delivery of the applicable Prospectus Supplement
describing such Offered Securities and the method and terms of the offering
thereof.
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
--------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED
ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
--------------
The date of this Prospectus is May 15, 1995.
<PAGE>
IN CONNECTION WITH AN OFFERING OF SECURITIES, THE UNDERWRITERS, IF ANY, FOR
SUCH OFFERING MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN
THE MARKET PRICES OF SUCH SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK
STOCK EXCHANGE OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED
AT ANY TIME.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
its Regional Offices at Suite 1400, Northwestern Atrium Center, 500 West Madison
Street, Chicago, Illinois 60661 and Suite 1300, 7 World Trade Center, New York,
New York 10048, and can also be inspected and copied at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of the prescribed
fees.
This Prospectus is part of a registration statement on Form S-3 (together
with all amendments and exhibits thereto, the "Registration Statement") filed by
the Company with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus does not contain all the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules of the Commission. For further information, reference
is made to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission under the
Exchange Act are hereby incorporated by reference in this Prospectus: (i) the
Company's Annual Report on Form 10-K for the period ended December 31, 1994,
(ii) the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995, (iii) the Company's Current Report on Form 8-K filed on April 18, 1995,
and (iv) the description of the Common Stock contained in the Company's
Registration Statement on Form 8-A filed on March 15, 1994, under the Exchange
Act, including any reports filed under the Exchange Act for the purpose of
updating such description. All documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of the offering of all of the Offered Securities shall be deemed to be
incorporated by reference herein.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein,
in any accompanying Prospectus Supplement relating to a specific offering of
Offered Securities or in any other subsequently filed document, as the case may
be, which also is or is deemed to be incorporated by reference herein, modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus or any accompanying Prospectus Supplement.
The Company will provide on request and without charge to each person to
whom this Prospectus is delivered a copy (without exhibits) of any or all
documents incorporated by reference into this Prospectus. Requests for such
copies should be directed to Storage USA, Inc., 10440 Little Patuxent Parkway,
Suite 1100, Columbia, Maryland 21044, Attention: Secretary (telephone
401/730-9500).
THE COMPANY
Storage USA, Inc. was formed in 1985 to own and operate self storage
facilities. On March 23, 1994, the Company completed an initial public offering
of its common stock and became a self-managed, self-advised real estate
investment trust engaged in the business of owning, managing, acquiring and
2
<PAGE>
developing self-storage facilities. The Company operates through SUSA
Partnership, L.P. (the "Operating Partnership"), in which it owned approximately
a 97% general partnership interest as of April 30, 1995, and SUSA Management,
Inc., which provides self-storage management and ancillary services to the
Operating Partnership and in which the Operating Partnership owns a 99% economic
interest.
At April 30, 1995, the Company owned 121 facilities containing 7.9 million
net rentable square feet in 23 states and the District of Columbia and managed
for others 31 facilities containing an additional 2.1 million net rentable
square feet. The weighted average physical and economic occupancy for the
facilities owned by the Company at April 30, 1995 were 87% and 80%,
respectively. The weighted average annual rent per square foot for these
facilities was $8.74.
The Company is incorporated in Tennessee. Its executive offices are located
at 10440 Little Patuxent Parkway, Suite 1100, Columbia, Maryland 21044, and its
telephone number is (410) 730-9500.
USE OF PROCEEDS
The Company will contribute the net proceeds of any sale of Offered
Securities to the Operating Partnership in exchange for additional units of
general partnership interest. Unless otherwise set forth in the applicable
Prospectus Supplement, the net proceeds from the sale of any Offered Securities
will be used by the Company and the Operating Partnership for general corporate
purposes, which may include repayment of indebtedness, making improvements to
properties and the acquisition of additional properties.
RATIOS OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the quarter ended March
31, 1995, was 23.63. The Company's pro forma ratio of earnings to fixed charges
for the year ended December 31, 1994, was 8.45. The pro forma results of
operations from which the ratio of earnings to fixed charged for 1994 is
calculated reflect the Company's annual results of operations and assume that
the Company's initial public offering and related transactions were completed on
January 1, 1994.
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For purposes of computing these ratios, earnings consist of
income before extraordinary items plus fixed charges other than capitalized
interest, and fixed charges consist of interest on borrowed funds (including
capitalized interest) and amortization of debt discount and expense. To date,
the Company has not issued any shares of Preferred Stock; therefore, the ratios
of earnings to combined fixed charges and preferred share dividends are the same
as the ratios of earnings to fixed charges.
Prior to completion of its initial public offering on March 23, 1994 and
intent to qualify as a REIT, the Company operated in a manner so as to minimize
net taxable income and was capitalized primarily with debt. As a result, the
Company had net losses for its fiscal years ended December 31, 1990 through
1992. Consequently, the computation of the ratio of earnings to fixed charges
for such periods indicates that earnings were inadequate to cover fixed charges
by approximately $4.6 million, $4.2 million and $3.0 million for the fiscal
years ended December 31, 1990, 1991 and 1992, respectively. The Company's ratio
of earnings to fixed charges for the year ended December 31, 1993 was 1.10. The
completion of the Company's initial public offering permitted the Company to
reduce indebtedness, resulting in an improved ratio of earnings to fixed charges
pro forma for the year ended December 31, 1994.
DESCRIPTION OF CAPITAL STOCK
GENERAL
The Company is authorized to issue 150,000,000 shares of Common Stock, $.01
par value, and 5,000,000 shares of Preferred Stock, $.01 par value. At April 30,
1995, there were 13,298,817 shares of Common Stock outstanding and no shares of
Preferred Stock outstanding.
3
<PAGE>
The following information with respect to the capital stock of the Company
is subject to the detailed provisions of the Company's Amended Charter (the
"Charter") and Amended and Restated Bylaws (the "Bylaws"), as currently in
effect. These statements do not purport to be complete, or to give full effect
to the provisions of statutory or common law, and are subject to, and are
qualified in their entirety by reference to, the terms of the Charter and
Bylaws, which are filed as exhibits to the Registration Statement.
COMMON STOCK
The holders of Common Stock are entitled to one vote per share on all
matters voted on by shareholders, including elections of directors. Except as
otherwise required by law or provided in any resolution adopted by the Board of
Directors with respect to any series of Preferred Stock, the holders of such
shares of Common Stock exclusively possess all voting power. The Charter does
not provide for cumulative voting in the election of directors. Subject to any
preferential rights of any outstanding series of Preferred Stock, the holders of
Common Stock are entitled to such distributions as may be declared from time to
time by the Board of Directors from funds available therefor, and upon
liquidation are entitled to receive pro rata all assets of the Company available
for distribution to such holders. All shares of Common Stock issued will be
fully paid and nonassessable, and the holders thereof will not have preemptive
rights. The preferential rights of any outstanding series of Preferred Stock may
materially limit or qualify the rights of holders of Common Stock, particularly
with respect to dividends, distributions upon liquidation and voting. See "--
Preferred Stock."
The Transfer Agent for the Common Stock is First Union National Bank of
North Carolina, Charlotte, North Carolina. The Common Stock is traded on the
NYSE under the symbol "SUS." The Company will apply to the NYSE to list the
additional shares of Common Stock to be sold pursuant to any Prospectus
Supplement, and the Company anticipates that such shares will be so listed.
PREFERRED STOCK
The following description of the terms of the Preferred Stock sets forth
certain general terms and provisions of the Preferred Stock to which a
Prospectus Supplement may relate. Specific terms of any series of Preferred
Stock offered by a Prospectus Supplement will be described in that Prospectus
Supplement. The description set forth below is subject to and qualified in its
entirety by reference to the Articles of Amendment to the Charter fixing the
preferences, limitations and relative rights of a particular series of Preferred
Stock.
GENERAL. Under the Charter, the Board of Directors of the Company is
authorized, without further shareholder action, to provide for the issuance of
up to 5,000,000 shares of Preferred Stock, in such series, with such
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications or other provisions, as may be fixed
by the Board of Directors.
The Preferred Stock will have the dividend, liquidation, redemption,
conversion and voting rights set forth below unless otherwise provided in the
Prospectus Supplement relating to a particular series of Preferred Stock.
Reference is made to the Prospectus Supplement relating to the particular series
of Preferred Stock offered thereby for specific terms, including: (i) the title
and liquidation preference per share of such Preferred Stock and the number of
shares offered; (ii) the price at which such series will be issued; (iii) the
dividend rate (or method of calculation), the dates on which dividends shall be
payable and the dates from which dividends shall commence to accumulate; (iv)
any redemption or sinking fund provisions of such series; (v) any conversion
provisions of such series; and (vi) any additional dividend, liquidation,
redemption, sinking fund and other rights, preferences, privileges, limitations
and restrictions of such series.
The Preferred Stock will, when issued, be fully paid and nonassessable.
Unless otherwise specified in the Prospectus Supplement relating to a particular
series of Preferred Stock, each series will rank on a parity as to dividends and
distributions in the event of a liquidation with each other series of Preferred
Stock and, in all cases, will be senior to the Common Stock.
DIVIDEND RIGHTS. Holders of Preferred Stock of each series will be entitled
to receive, when, as and if declared by the Board of Directors, out of assets of
the Company legally available therefor, cash
4
<PAGE>
dividends at such rates and on such dates as are set forth in the Prospectus
Supplement relating to such series of Preferred Stock. Such rate may be fixed or
variable or both and may be cumulative, noncumulative or partially cumulative.
If the applicable Prospectus Supplement so provides, as long as any shares
of Preferred Stock are outstanding, no dividends will be declared or paid or any
distributions be made on the Common Stock, other than a dividend payable in
Common Stock, unless the accrued dividends on each series of Preferred Stock
have been fully paid or declared and set apart for payment and the Company shall
have set apart all amounts, if any, required to be set apart for all sinking
funds, if any, for each series of Preferred Stock.
If the applicable Prospectus Supplement so provides, when dividends are not
paid in full upon any series of Preferred Stock and any other series of
Preferred Stock ranking on a parity as to dividends with such series of
Preferred Stock, all dividends declared upon such series of Preferred Stock and
any other series of Preferred Stock ranking on a parity as to dividends will be
declared pro rata so that the amount of dividends declared per share on such
series of Preferred Stock and such other series will in all cases bear to each
other the same ratio that accrued dividends per share on such series of
Preferred Stock and such other series bear to each other.
Each series of Preferred Stock will be entitled to dividends as described in
the Prospectus Supplement relating to such series, which may be based upon one
or more methods of determination. Different series of Preferred Stock may be
entitled to dividends at different dividend rates or based upon different
methods of determination. Except as provided in the applicable Prospectus
Supplement, no series of Preferred Stock will be entitled to participate in the
earnings or assets of the Company.
RIGHTS UPON LIQUIDATION. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of each
series of Preferred Stock will be entitled to receive out of the assets of the
Company available for distribution to shareholders the amount stated or
determined on the basis set forth in the Prospectus Supplement relating to such
series, which may include accrued dividends, if such liquidation, dissolution or
winding up is involuntary or may equal the current redemption price per share
(otherwise than for the sinking fund, if any, provided for such series) provided
for such series set forth in such Prospectus Supplement, if such liquidation,
dissolution or winding up is voluntary, and on such preferential basis as is set
forth in such Prospectus Supplement. If, upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the amounts payable with
respect to Preferred Stock of any series and any other shares of stock of the
Company ranking as to any such distribution on a parity with such series of
Preferred Stock are not paid in full, the holders of Preferred Stock of such
series and of such other shares will share ratably in any such distribution of
assets of the Company in proportion to the full respective preferential amounts
to which they are entitled or on such other basis as is set forth in the
applicable Prospectus Supplement. The rights, if any, of the holders of any
series of Preferred Stock to participate in the assets of the Company remaining
after the holders of other series of Preferred Stock have been paid their
respective specified liquidation preferences upon any liquidation, dissolution
or winding up of the Company will be described in the Prospectus Supplement
relating to such series.
REDEMPTION. A series of Preferred Stock may be redeemable, in whole or in
part, at the option of the Company, and may be subject to mandatory redemption
pursuant to a sinking fund, in each case upon terms, at the times, the
redemption prices and for the types of consideration set forth in the Prospectus
Supplement relating to such series. The Prospectus Supplement relating to a
series of Preferred Stock which is subject to mandatory redemption shall specify
the number of shares of such series that shall be redeemed by the Company in
each year commencing after a date to be specified, at a redemption price per
share to be specified, together with an amount equal to any accrued and unpaid
dividends thereon to the date of redemption.
If, after giving notice of redemption to the holders of a series of
Preferred Stock, the Company deposits with a designated bank funds sufficient to
redeem such Preferred Stock, then from and after such deposit, all shares called
for redemption will no longer be outstanding for any purpose, other than
5
<PAGE>
the right to receive the redemption price and the right to convert such shares
into other classes of stock of the Company. The redemption price will be stated
in the Prospectus Supplement relating to a particular series of Preferred Stock.
Except as indicated in the applicable Prospectus Supplement, the Preferred
Stock is not subject to any mandatory redemption at the option of the holder.
SINKING FUND. The Prospectus Supplement for any series of Preferred Stock
will state the terms, if any, of a sinking fund for the purchase or redemption
of that series.
CONVERSION RIGHTS. The Prospectus Supplement for any series of Preferred
Stock will state the terms, if any, on which shares of that series are
convertible into shares of Common Stock or another series of Preferred Stock.
The Preferred Stock will have no preemptive rights.
VOTING RIGHTS. Except as indicated in the Prospectus Supplement relating to
a particular series of Preferred Stock, or except as expressly required by
Tennessee law, a holder of Preferred Stock will not be entitled to vote. Except
as indicated in the Prospectus Supplement relating to a particular series of
Preferred Stock, in the event the Company issues full shares of any series of
Preferred Stock, each such share will be entitled to one vote on matters on
which holders of such series of Preferred Stock are entitled to vote.
Under Tennessee law, the affirmative vote of the holders of a majority of
the outstanding shares of all series of Preferred Stock entitled to vote, voting
as a separate voting group, will be required for (i) the authorization of any
class of stock ranking prior to or on a parity with Preferred Stock or the
increase in the number of authorized shares of any such stock, (ii) any increase
in the number of authorized shares of Preferred Stock and (iii) certain
amendments to the Articles that may be adverse to the rights of Preferred Stock
outstanding.
TRANSFER AGENT AND REGISTRAR. The transfer agent, registrar and dividend
disbursement agent for a series of Preferred Stock will be selected by the
Company and be described in the applicable Prospectus Supplement. The registrar
for shares of Preferred Stock will send notices to shareholders of any meetings
at which holders of Preferred Stock have the right to vote on any matter.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
The Company may, at its option, elect to offer fractional shares of
Preferred Stock, rather than full shares of Preferred Stock. In such event, the
Company will issue to the public receipts for Depositary Shares, each of which
will represent a fraction (to be set forth in the Prospectus Supplement relating
to a particular series of Preferred Stock) of a share of a particular series of
Preferred Stock as described below.
The shares of any series of Preferred Stock represented by Depositary Shares
will be deposited under a Deposit Agreement (the "Deposit Agreement") between
the Company and the depositary named in the applicable Prospectus Supplement
(the "Depositary"). Subject to the terms of the Deposit Agreement, each owner of
a Depositary Share will be entitled, in proportion to the applicable fraction of
a share of Preferred Stock represented by such Depositary Share, to all the
rights and preferences of the Preferred Stock represented thereby (including
dividend, voting, redemption and liquidation rights).
The Depositary Shares will be evidenced by depositary receipts issued
pursuant to the Deposit Agreement ("Depositary Receipts"). Depositary Receipts
will be distributed to those persons purchasing the fractional shares of
Preferred Stock in accordance with the terms of the offering. If Depositary
Shares are issued, copies of the forms of Deposit Agreement and Depositary
Receipt will be incorporated by reference in the Registration Statement of which
this Prospectus is a part, and the following summary is qualified in its
entirety by reference to such documents.
Pending the preparation of definitive engraved Depositary Receipts, the
Depositary may, upon the written order of the Company, issue temporary
Depositary Receipts substantially identical to (and
6
<PAGE>
entitling the holders thereof to all the rights pertaining to) the definitive
Depositary Receipts but not in definitive form. Definitive Depositary Receipts
will be prepared thereafter without unreasonable delay, and temporary Depositary
Receipts will be exchangeable for definitive Depositary Receipts at the
Company's expense.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of Depositary Shares relating to such Preferred Stock in proportion to the
number of such Depositary Shares owned by such holders. The Depositary shall
distribute only such amount, however, as can be distributed without attributing
to any holder of Depositary Shares a fraction of one cent, and the balance not
so distributed shall be added to and treated as part of the next sum received by
the Depositary for distribution to record holders of Depositary Shares.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares
entitled thereto, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may, with the approval of
the Company, sell such property and distribute the net proceeds from such sale
to such holders.
The Deposit Agreement will also contain provisions relating to the manner in
which any subscription or similar rights offered by the Company to holders of
the Preferred Stock shall be made available to the holders of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
If a series of Preferred Stock represented by Depositary Shares is subject
to redemption, the Depositary Shares will be redeemed from the proceeds received
by the Depositary resulting from the redemption, in whole or in part, of such
series of Preferred Stock held by the Depositary. The redemption price per
Depositary Share will be equal to the applicable fraction of the redemption
price per share payable with respect to such series of Preferred Stock. Whenever
the Company redeems shares of Preferred Stock held by the Depositary, the
Depositary will redeem as of the same redemption date the number of Depositary
Shares representing the shares of Preferred Stock so redeemed. If fewer than all
the Depositary Shares are to be redeemed, the Depositary Shares to be redeemed
will be selected by lot or pro rata as may be determined by the Depositary.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be outstanding and all rights of the holders of the
Depositary Shares will cease, except the right to receive the money, securities,
or other property payable upon such redemption and any money, securities, or
other property to which the holders of such Depositary Shares were entitled upon
such redemption upon surrender to the Depositary of the Depositary Receipts
evidencing such Depositary Shares.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of Preferred
Stock are entitled to vote, the Depositary will mail the information contained
in such notice of meeting to the record holders of the Depositary Shares
relating to such Preferred Stock. Each record holder of such Depositary Shares
on the record date (which will be the same date as the record date for the
Preferred Stock) will be entitled to instruct the Depositary as to the exercise
of the voting rights pertaining to the amount of Preferred Stock represented by
such holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote the amount of Preferred Stock represented by such
Depositary Shares in accordance with such instructions, and the Company will
agree to take all action which may be deemed necessary by the Depositary in
order to enable the Depositary to do so. The Depositary may abstain from voting
shares of Preferred Stock to the extent it does not receive specific
instructions from the holders of Depositary Shares representing such Preferred
Stock.
AMENDMENT AND TERMINATION OF THE DEPOSITARY AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares and any
provision of the Deposit Agreement may at any time be amended by agreement
between the Company and the Depositary.
7
<PAGE>
However, any amendment that materially and adversely alters the rights of the
holders of Depositary Shares will not be effective unless such amendment has
been approved by the holders of at least a majority of the Depositary Shares
then outstanding. The Deposit Agreement may be terminated by the Company or the
Depositary only if (i) all outstanding Depositary Shares have been redeemed or
(ii) there has been a final distribution in respect of the Preferred Stock in
connection with any liquidation, dissolution or winding up of the Company and
such distribution has been distributed to the holders of Depositary Receipts.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with the initial deposit of the
Preferred Stock and any redemption of the Preferred Stock. Holders of Depositary
Receipts will pay other transfer and other taxes and governmental charges and
such other charges, including a fee for the withdrawal of shares of Preferred
Stock upon surrender of Depositary Receipts, as are expressly provided in the
Deposit Agreement to be for their accounts.
MISCELLANEOUS
The Depositary will forward to holders of Depository Receipts all reports
and communications from the Company that are delivered to the Depositary and
that the Company is required to furnish to holders of Preferred Stock.
Neither the Depositary nor the Company will be liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Deposit Agreement. The obligations of the Company and the
Depositary under the Deposit Agreement will be limited to performance in good
faith of their duties thereunder and they will not be obligated to prosecute or
defend any legal proceeding in respect of any Depositary Shares or Preferred
Stock unless satisfactory indemnity is furnished. They may rely upon written
advice of counsel or accountants, or upon information provided by persons
presenting Preferred Stock for deposit, holders of Depositary Receipts or other
persons believed to be competent and on documents believed to be genuine.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Depositary may resign at any time by delivering to the Company notice of
its election to do so, and the Company may at any time remove the Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointment. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal.
RESTRICTIONS ON OWNERSHIP
In order to safeguard the Company against an inadvertent loss of REIT
status, the Deposit Agreement will contain provisions restricting the ownership
and transfer of Depositary Shares. Such restrictions will be described in the
applicable Prospectus Supplement and will be referenced on the applicable
Depositary Receipts.
RESTRICTIONS ON TRANSFER OF CAPITAL STOCK
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), shares of capital stock must be held by a minimum
of 100 persons for at least 335 days in each taxable year subsequent to 1994 or
during a proportionate part of a shorter taxable year. In addition, at all times
during the second half of each taxable year subsequent to 1994, no more than 50%
in value of the shares of beneficial interest of the Company may be owned,
directly or indirectly and by applying certain constructive ownership rules, by
five or fewer individuals (the "5/50 Rule"). Because the Board of Directors
believes it is essential for the Company to continue to qualify as a REIT, the
Charter restricts the acquisition of shares of Common Stock (the "Ownership
Limitation"). The Board of Directors intends to include in the Articles of
Amendment to the Charter with respect to any series of Preferred Stock
restrictions on the acquisition of shares of such series similar to those
applicable to Common Stock.
8
<PAGE>
The Ownership Limitation provides that, subject to certain exceptions
specified in the Charter, no shareholder may own, or be deemed to own by virtue
of the attribution provisions of the Code, more than 9.8% of the outstanding
shares of Common Stock. The Board of Directors in its sole discretion, may waive
the Ownership Limitation with respect to a particular shareholder. As a
condition of such waiver, the Board of Directors may require opinions of counsel
satisfactory to it or an undertaking from the applicant with respect to
preserving the REIT status of the Company. If shares in excess of the Ownership
Limitation, or shares which would cause the Company to be beneficially owned by
fewer than 100 persons, are issued or transferred to any person, such issuance
or transfer shall be null and void and the intended transferee will acquire no
rights to the shares.
The Ownership Limitation will not be automatically removed even if the REIT
provisions of the Code are changed so as to no longer contain any ownership
concentration limitation or if the ownership concentration limitation is
increased. Any change in the Ownership Limitation would require an amendment to
the Charter. In addition to preserving the Company's status as a REIT, the
Ownership Limitation may have the effect of precluding an acquisition of control
of the Company without the approval of the Board of Directors. All certificates
representing shares of capital stock will bear a legend referring to the
restrictions described above.
All persons who own, directly or by virtue of the attribution provisions of
the Code, 5% or more of the outstanding Common Stock and any shareholder
requested by the Company must file an affidavit with the Company containing the
information specified in the Charter with respect to their ownership of shares
within 30 days after January 1 of each year. In addition, each shareholder
shall, upon demand, be required to disclose to the Company in writing such
information with respect to the direct, indirect and constructive ownership of
shares as the Board of Directors deems necessary to comply with the provisions
of the Code applicable to a REIT or to comply with the requirements of any
taxing authority or governmental agency.
If any shareholder purports to transfer shares to a person and either the
transfer would result in the Company failing to qualify as a REIT, or the
transfer would cause the transferee to hold more than the applicable Ownership
Limitation, the purported transfer shall be void. In addition, if any person
holds shares in excess of the applicable Ownership Limitation (the "Excess
Shares"), such person will be deemed to hold the Excess Shares in trust, and
will not receive distributions with respect to such shares and will not be
entitled to vote such shares. At the Company's option, the person will be
required to sell the Excess Shares on terms determined by and at the direction
of the Company or the Company will redeem such shares for the lesser of the
amount paid for the shares and the closing price on the date the Company
exercises its right to redeem. Further, if, in the opinion of the Board of
Directors, (i) a transfer of shares would result in any shareholder or group of
shareholders acting together owning in excess of the Ownership Limitation or
(ii) a proposed transfer of shares may jeopardize the qualification of the
Company as a REIT under the Code, the Board of Directors may, in its sole
discretion, refuse to allow the shares to be transferred to the proposed
transferee. If any shareholder knowingly holds Excess Shares and the Company
loses its REIT qualification, the Company's Charter provides that such
shareholder must indemnify the Company for losses the Company suffers, including
increased taxes, attorneys' fees and administrative expenses. If the foregoing
transfer restrictions are determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the intended transferee of any
Excess Shares may be deemed, at the option of the Company, to have acted as an
agent on behalf of the Company in acquiring such Excess Shares and to hold them
in trust on behalf of the Company.
PLAN OF DISTRIBUTION
The Company may sell Offered Securities in or outside the United States to
or through underwriters or may sell Offered Securities to investors directly or
through designated agents. Any such underwriter or agent involved in the offer
and sale of the Offered Securities will be named in the applicable Prospectus
Supplement.
9
<PAGE>
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may, from time to time, authorize
underwriters acting as agents to offer and sell the Offered Securities upon the
terms and conditions set forth in any Prospectus Supplement. Underwriters may
sell Offered Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions (which may be
changed from time to time) from the underwriters and/or from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities and any discounts,
concessions or commissions allowed by underwriters to participating dealers will
be set forth in the applicable Prospectus Supplement. Underwriters, dealers and
agents participating in the distribution of the Offered Securities may be deemed
to be underwriters, and any discounts and commissions received by them from the
Company or from purchasers of Offered Securities and any profit realized by them
on resale of the Offered Securities may be deemed to be underwriting discounts
and commissions under the Securities Act. Underwriters, dealers and agents may
be entitled, under agreements entered into with the Company, to indemnification
against and contribution toward certain civil liabilities, including liabilities
under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Offered Securities from the Company at the public
offering price set forth in such Prospectus Supplement pursuant to Delayed
Delivery Contracts (the "Contracts") providing for payment and delivery on the
date or dates stated in such Prospectus Supplement. Each Contract will be for an
amount not less than, and the principal amount of Offered Securities sold
pursuant to Contracts shall not be less nor more than, the respective amounts
stated in such Prospectus Supplement. Institutions with which Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions and other institutions, but will in all cases be subject to the
approval of the Company. Contracts will not be subject to any conditions except
(i) the purchase by an institution of the Offered Securities covered by its
Contract shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject and (ii)
the Company shall have sold to such underwriters the total principal amount of
the Offered Securities less the principal amount thereof covered by Contracts. A
commission indicated in the Prospectus Supplement will be paid to agents and
underwriters soliciting purchases of Offered Securities pursuant to Contracts
accepted by the Company. Agents and underwriters shall have no responsibility in
respect of the delivery or performance of Contracts.
Certain of the underwriters and their affiliates may be customers of, engage
in transactions with, and perform services for, the Company in the ordinary
course of business.
LEGAL OPINIONS
The validity of the Offered Securities will be passed upon for the Company
by Hunton & Williams, Richmond, Virginia.
EXPERTS
The consolidated financial statements of the Company incorporated by
reference in its annual report on Form 10-K for the period ended December 31,
1994 have been audited by Coopers & Lybrand L.L.P., independent accountants, as
set forth in their report thereon included therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
10
