<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 23, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BRE PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 94-1722214
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
</TABLE>
ONE MONTGOMERY STREET
TELESIS TOWER, SUITE 2500
SAN FRANCISCO, CA 94104-5525
(415) 445-6530
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
LEROY E. CARLSON
CHIEF FINANCIAL OFFICER
BRE PROPERTIES, INC.
ONE MONTGOMERY STREET
TELESIS TOWER, SUITE 2500
SAN FRANCISCO, CA 94104-5525
(415) 445-6530
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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COPY TO:
<TABLE>
<S> <C>
MORGAN P. GUENTHER, ESQ. ERIC S. HAUETER, ESQ.
Farella Braun & Martel LLP Brown & Wood LLP
235 Montgomery Street 555 California Street
San Francisco, CA 94104-3159 San Francisco, CA 94104-1715
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT AS
DETERMINED BY MARKET CONDITIONS.
------------------------
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 of the 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 registration 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. /X/
(CONTINUED ON FOLLOWING PAGE)
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<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(1) PRICE(1)(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Debt Securities(3)(4)...................... --
Preferred Stock(5)......................... --
Depositary Shares(5)(6).................... $300,000,000 -- $300,000,000 $90,910
Common Stock Warrants(7)................... --
Common Stock(5)(8)(9)...................... --
</TABLE>
(1) Not specified as to each class of securities to be registered, pursuant to
General Instruction II.D of Form S-3. Securities registered hereby may be
offered for U.S. dollars or the equivalent thereof in foreign currencies,
currency units or composite currencies. Securities registered hereby may be
sold separately, together or in units with other securities registered
hereby.
(2) Estimated solely for purposes of computing the registration fee pursuant to
Rule 457(o). The proposed maximum offering price will be determined from
time to time by the Registrant in connection with the issuance by the
Registrant of the securities registered hereunder.
(3) If any Debt Securities are issued at an original issue discount, then such
greater amount as may be sold for an aggregate initial offering price of up
to the proposed maximum aggregate offering price set forth above.
(4) In addition to any Debt Securities that may be issued directly under this
Registration Statement, there is being registered hereunder such
indeterminate amount of Debt Securities as may be issued upon conversion or
exchange of other Debt Securities, Preferred Stock or Depositary Shares, for
which no consideration will be received by the Registrant.
(5) Such indeterminate number of shares of Preferred Stock and Common Stock, and
such indeterminate number of Depositary Shares, as may be issued from time
to time at indeterminate prices. In addition to any Preferred Stock,
Depositary Shares and Common Stock that may be issued directly under this
Registration Statement, there are being registered hereunder such
indeterminate number of shares of Preferred Stock and Common Stock, and such
indeterminate number of Depositary Shares, as may be issued upon conversion
or exchange of Debt Securities, Preferred Stock or Depositary Shares, as the
case may be, for which no separate consideration will be received by the
Registrant.
(6) Depositary Shares will represent fractional interests in shares of Preferred
Stock registered hereby.
(7) Common Stock Warrants will represent rights to purchase Common Stock
registered hereby.
(8) The shares of Common Stock being registered hereunder, if issued prior to
the termination by the Company of its Shareholder Rights Plan, shall include
Common Share Purchase Rights. Prior to the occurrence of certain events, the
Rights will not be exercisable or evidenced separately from the Common
Stock.
(9) The aggregate amount of Common Stock registered hereunder is limited, solely
for purposes of any at the market offerings, to that which is permissible
under Rule 415(a)(4) of the Securities Act of 1933, as amended.
------------------------
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 SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JANUARY 23, 1997
PROSPECTUS
BRE PROPERTIES, INC.
$300,000,000
DEBT SECURITIES, PREFERRED SHARES, DEPOSITARY SHARES,
COMMON STOCK WARRANTS AND COMMON SHARES
BRE Properties, Inc. (the "Company") may from time to time offer in one or
more series (i) its unsecured debt securities (the "Debt Securities"), which may
be senior debt securities ("Senior Debt Securities") or subordinated debt
securities ("Subordinated Debt Securities"), (ii) shares of its Preferred Stock,
$0.01 par value ("Preferred Shares"), (iii) depositary shares ("Depositary
Shares") representing fractional interests in Preferred Shares, (iv) warrants
("Common Stock Warrants") to purchase shares of its Common Stock, $0.01 par
value ("Common Shares"), or (v) Common Shares, with an aggregate public offering
price of up to $300,000,000, on terms to be determined at the time or times of
offering. The Debt Securities, Preferred Shares, Depositary Shares, Common Stock
Warrants and Common Shares (collectively, the "Offered Securities") may be
offered, separately or together, in separate classes or series, in amounts, at
prices and on terms 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, when applicable: (i) in the case of Debt
Securities, the specific title, aggregate principal amount, currency, form
(which may be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of the Company or
repayment at the option of the holder thereof, terms for sinking fund payments,
terms for conversion into Preferred Shares or Common Shares, and the public
offering price; (ii) in the case of Preferred Shares, the specific series, title
and stated value, any dividend, liquidation, redemption, conversion, voting and
other rights, and the public offering price; (iii) in the case of Depositary
Shares, the whole or fractional Preferred Shares represented by each such
Depositary Share and the public offering price; (iv) in the case of Common Stock
Warrants, the duration, public offering price, exercise price and detachability
features, if applicable; and (v) in the case of Common Shares, the public
offering price. 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, when
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered Securities
covered by that Prospectus Supplement.
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 agents or underwriters are involved in the sale of any of the Offered
Securities, their names and any applicable purchase price, fee, commission or
discount arrangement will be set forth in or will be calculable from the
information set forth in the applicable Prospectus Supplement. No Offered
Securities may be sold without delivery of the applicable Prospectus Supplement
describing the method and terms of the offering of those Offered Securities. SEE
"Plan of Distribution" for possible indemnification arrangements with
underwriters, dealers and agents.
------------------------
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 date of this Prospectus is , 1997
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR AN APPLICABLE PROSPECTUS
SUPPLEMENT AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER,
DEALER OR AGENT. THIS PROSPECTUS AND ANY APPLICABLE PROSPECTUS SUPPLEMENT DO NOT
CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES
OFFERED HEREBY OR THEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT NOR ANY SALE MADE
HEREUNDER OR THEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THEREOF.
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 in
accordance with the Exchange Act can be inspected and copied at the Commission's
Public Reference Section, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following regional offices of the Commission: Seven World Trade Center, 13th
Floor, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. In addition, the Commission maintains a Web site
that contains such information with respect to registrants that file
electronically such as the Company at http://www.sec.gov. The Company's Common
Stock is listed on the New York Stock Exchange and similar information
concerning the Company can be inspected and copied at the offices of the New
York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement (as the
same may be amended from time to time, the "Registration Statement") (of which
this Prospectus is a part) under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Offered Securities. This Prospectus does
not contain all of the information set forth in the Registration Statement,
certain portions of which have been omitted as permitted by the rules and
regulations of the Commission. Statements contained in this Prospectus as to the
contents of any contract or other document do not purport to be complete, and in
each instance reference is made to the copy of such contract or other document
filed or incorporated by reference as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference and the
exhibits and schedules thereto. For further information regarding the Company
and the Offered Securities, reference is hereby made to the Registration
Statement and such exhibits and schedules, which may be obtained from the
Commission at its principal office in Washington, D.C. upon payment of the fees
prescribed by the Commission.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company with the
Commission and are incorporated herein by reference:
a. Transition Report on Form 10-K for the five months ended December 31,
1995;
b. Quarterly Report on Form 10-Q for the fiscal quarter ended January 31,
1996;
c. Quarterly Report on Form 10-Q for the fiscal quarter ended April 30,
1996;
d. Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1996;
e. Quarterly Report on Form 10-Q for the fiscal quarter ended September 30,
1996;
f. Current Report on Form 8-K dated March 15, 1996;
g. Current Report on Form 8-K/A dated March 15, 1996;
h. Current Report on Form 8-K dated September 27, 1996;
i. Current Report on Form 8-K/A dated December 9, 1996; and
j. Current Report on Form 8-K dated December 31, 1996.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Offered Securities shall be deemed to be
incorporated by reference in this Prospectus and to be part hereof from the date
of filing of such documents.
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
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document 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.
The Company hereby undertakes to provide without charge to each person to
whom this Prospectus has been delivered, upon the written or oral request of
such person, a copy of any and all documents incorporated by reference in this
Prospectus (other than exhibits to such documents unless such exhibits are
specifically incorporated by reference in such documents). Requests for such
copies should be directed to BRE Properties, Inc., One Montgomery Street,
Telesis Tower, Suite 2500, San Francisco, California 94104-5524, Attn: Charles
Wingard, Director of Financial Reporting, telephone number (415) 445-6530.
3
<PAGE>
THE COMPANY
BRE Properties, Inc., a Maryland corporation (the "Company" or "BRE"), is a
self-administered and self-managed real estate investment trust which owns and
operates apartment communities and other income producing properties in the
Western United States. At December 31, 1996, BRE's portfolio consisted of 70
properties, including 54 apartment communities (aggregating 12,212 Company-owned
units), six shopping centers and 10 medical office, light industrial and
warehouse/distribution properties. Of these properties, 43 are located in
California, 17 in Arizona, five in Washington, three in Nevada and two in
Oregon. The 70 properties contain, in the aggregate, approximately 11.4 million
net rentable square feet of improvements owned by the Company on approximately
754 acres of land. In addition, the Company holds limited partnership interests
in two shopping centers located in Arizona and one apartment community located
in California. BRE's principal executive offices are located at One Montgomery
Street, Telesis Tower, Suite 2500, San Francisco, California 94104-5525, and its
telephone number is (415) 445-6530.
RATIO OF EARNINGS TO FIXED CHARGES
The Company's ratio of earnings to fixed charges for the nine months ended
September 30, 1996 was 3.39 and for the years ended December 31, 1995, 1994,
1993, 1992 and 1991 was 3.95, 4.96, 4.39, 3.36 and 3.38, respectively. For the
purposes of computing these ratios, earnings have been calculated by adding
fixed charges to income before net gains (losses) on sales of investments. Fixed
charges consist of interest costs, amortization of debt expense and one-third of
the rental expense, which is deemed to be the interest component of such rental
expense.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement for any
offering of securities, the Company intends to use the net proceeds from the
sale of the Offered Securities for general corporate purposes, which may include
the acquisition of properties or interests therein (including using the net
proceeds for possible portfolio or asset acquisitions or in business
combinations) as suitable opportunities arise, the expansion and improvement of
certain properties in the Company's portfolio and the repayment of certain
indebtedness.
4
<PAGE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be direct unsecured obligations of the Company and
may be either senior Debt Securities ("Senior Debt Securities") or subordinated
Debt Securities ("Subordinated Debt Securities"). The Debt Securities will be
issued under one or more indentures. Senior Debt Securities and Subordinated
Debt Securities will be issued pursuant to separate indentures (respectively, a
"Senior Indenture" and a "Subordinated Indenture"), in each case between the
Company and a trustee (a "Trustee"), which may be the same Trustee, and in the
respective forms that have been filed as exhibits to the Registration Statement
of which this Prospectus is a part, subject to such amendments or supplements as
may be adopted from time to time. The Senior Indenture and the Subordinated
Indenture, as amended or supplemented from time to time, are sometimes referred
to collectively as the "Indentures." The Indentures will be subject to and
governed by the Trust Indenture Act of 1939, as amended (the "TIA"). The
statements made under this heading relating to the Debt Securities and the
Indentures are summaries of certain anticipated provisions thereof, do not
purport to be complete and are qualified in their entirety by reference to the
forms of Indentures and such Debt Securities, which have been or will be
included or incorporated by reference to exhibits to the Registration Statement
of which this Prospectus is a part and are or will be available as described
above under "Available Information."
The following description of Debt Securities sets forth certain general
terms and provisions of the series of Debt Securities to which any Prospectus
Supplement may relate. Certain other specific terms of any particular series of
Debt Securities will be described in the applicable Prospectus Supplement. The
terms of the Debt Securities offered by any Prospectus Supplement may differ
from the terms set forth below.
Capitalized terms used herein and not defined shall have the meanings
assigned to them in the applicable form of Indenture. As used in this
"Description of Debt Securities," all references to the "Company" shall mean BRE
Properties, Inc., excluding, unless otherwise expressly stated or the context
shall otherwise require, its subsidiaries.
GENERAL
The Debt Securities will be direct, unsecured obligations of the Company.
Each Indenture will provide that the Debt Securities issued thereunder may be
issued without limit as to aggregate principal amount, in one or more series, in
each case as established from time to time in or pursuant to authority granted
by a resolution of the Board of Directors of the Company or as established in
one or more indentures supplemental to the applicable Indenture. The terms of
any Debt Securities within any series may differ from the terms of any other
Debt Securities in such series. All Debt Securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the Holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series. (SEE Section
301 of the forms of Indenture.) Any Trustee under either Indenture may resign or
be removed with respect to one or more series of Debt Securities issued under
such Indenture, and a successor Trustee may be appointed to act with respect to
such series.
Reference is made to each Prospectus Supplement for the specific terms of
the series of Debt Securities being offered thereby, including:
(1) The title of such Debt Securities and whether such Debt Securities
will be Senior Debt Securities or Subordinated Debt Securities;
(2) The aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) If other than 100% of the principal amount thereof, the portion of
the principal amount of such Debt Securities payable upon declaration of
acceleration of the maturity thereof or (if applicable) the portion of the
principal amount of such Debt Securities which is convertible into Common
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<PAGE>
Shares or other equity securities of the Company, or the method by which any
such portion shall be determined;
(4) If such Debt Securities are convertible, any limitation on the
ownership or transferability of the Common Shares or other equity securities
of the Company into which such Debt Securities are convertible in connection
with the preservation of the Company's status as a REIT;
(5) The date or dates, or the method for determining the date or dates,
on which the principal of such Debt Securities will be payable;
(6) The rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt Securities
will bear interest, if any;
(7) The date or dates, or the method for determining the date or dates,
from which any such interest will accrue, the Interest Payment Dates on
which any such interest will be payable, the Regular Record Dates for such
Interest, Payment Dates, or the method by which such Regular Record Dates
shall be determined, the Person to whom such interest, shall be payable, and
the basis upon which interest, shall be calculated if other than that of a
360-day year of twelve 30-day months;
(8) The place or places where (i) the principal of (and premium, if any)
or interest, if any, on such Debt Securities will be payable, (ii) such Debt
Securities may be surrendered for conversion (if applicable) or registration
of transfer or exchange, and (iii) notices or demands to or upon the Company
in respect of such Debt Securities and the applicable Indenture may be
served;
(9) The period or periods within which, the price or prices at which,
and the terms and conditions upon which, such Debt Securities may be
redeemed, as a whole or in part, at the option of the Company, if the
Company is to have such an option;
(10) The obligation, if any, of the Company to redeem, repay or purchase
such Debt Securities pursuant to any sinking fund or analogous provision or
at the option of a Holder thereof, and the period or periods within which,
the price or prices at which and the terms and conditions upon which such
Debt Securities will be redeemed, repaid or purchased, as a whole or in
part, pursuant to such obligation;
(11) If other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign currency
or units of two or more foreign currencies or a composite currency or
currencies, and the terms and conditions relating thereto;
(12) Whether the amount of payments of principal of (and premium, if any)
or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit
or units or composite currency or currencies) and the manner in which such
amounts shall be determined;
(13) Any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to the Events of Default or covenants set
forth in the applicable Indenture;
(14) Whether such Debt Securities will be issued in certificated or
book-entry form;
(15) Whether such Debt Securities will be in registered or bearer form or
both and, if and to the extent in registered form, the denominations thereof
if other than $1,000 and any integral multiple thereof and, if and to the
extent in bearer form, the denominations thereof and terms and conditions
relating thereto;
(16) The applicability, if any, of the defeasance and covenant defeasance
provisions of Article XIV of the applicable Indenture;
(17) The terms, if any, upon which such Debt Securities may be
convertible into Common Shares or other equity securities of the Company
(and the class thereof) and the terms and conditions upon which such
conversion will be effected, including, without limitation, the initial
conversion price or rate and the conversion period;
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<PAGE>
(18) Whether and under what circumstances the Company will pay Additional
Amounts on such Debt Securities in respect of any tax, assessment or
governmental charge and, if so, whether the Company will have the option to
redeem such Debt Securities in lieu of making such payment; and
(19) Any other terms of such Debt Securities.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Any material U.S. federal income tax,
accounting and other considerations applicable to Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
Except as hereinafter set forth under the captions "Certain
Covenants--Aggregate Debt Test," "-- Maintenance of Total Unencumbered Assets,"
"--Debt Service Test" and "--Secured Debt Test," which relate solely to the
Senior Indenture and the Senior Debt Securities issued thereunder, neither
Indenture will contain any provision that would limit the ability of the Company
to incur indebtedness or that will afford Holders of Debt Securities protection
in a highly leveraged or similar action involving the Company or in the event of
a change of control of the Company. However, certain restrictions on ownership
and transfers of the Company's Common Shares and the Company's other equity
securities designed to preserve its status as a REIT may act to prevent or
hinder a change of control. SEE "Description of Common Shares," "Description of
Preferred Shares" and "Description of Depositary Shares."
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof. (SEE Section 302 of the forms of Indenture.)
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest, if any, on any series of Debt
Securities will be payable at the corporate trust office of the applicable
Trustee or at the office of any transfer agent designated by the Company for
such purpose; provided that, at the option of the Company, payment of interest
may be made by check mailed to the address of the Person entitled thereto as it
appears in the Security Register or by wire transfer of funds to such Person at
an account maintained within the United States. (SEE Sections 301, 305, 306, 307
and 1002 of the forms of Indenture.)
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest ") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
applicable Trustee, notice of which shall be given to the Holder of such Debt
Security not less than 10 days prior to such Special Record Date, or may be paid
at any time in any other lawful manner, all as more completely described in the
applicable Indenture. (SEE Section 307 of the forms of Indenture.)
Subject to certain limitations applicable to Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the applicable Trustee. In
addition, subject to certain limitations applicable to Debt Securities issued in
book-entry form, the Debt Securities of any series may be surrendered for
conversion or registration of transfer thereof at the corporate trust office of
the applicable Trustee. Every Debt Security surrendered for conversion,
registration of transfer or exchange must be duly endorsed or accompanied by a
written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. (SEE Section 305 of the forms of
Indenture.) If the applicable Prospectus Supplement refers to any transfer agent
(in addition to the Trustee) initially designated by the Company with respect to
any series of Debt Securities,
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<PAGE>
the Company may at any time rescind the designation of any such transfer agent
or approve a change in the location at which any such transfer agent acts,
except that the Company will be required to maintain a transfer agent in each
Place of Payment for such series. The Company may at any time designate
additional transfer agents with respect to any series of Debt Securities. (SEE
Section 1002 of the forms of Indenture.)
Neither the Company nor any Trustee will be required (i) to issue, register
the transfer of or exchange Debt Securities of any series during a period
beginning at the opening of business 15 days before any selection of Debt
Securities of that series to be redeemed and ending at the close of business on
the day of mailing of the relevant notice of redemption; (ii) to register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed in
part; or (iii) to issue, register the transfer of or exchange any Debt Security
which has been surrendered for repayment at the option of the Holder, except the
portion, if any, of such Debt Security not to be so repaid. (SEE Section 305 of
the forms of Indenture.)
MERGER, CONSOLIDATION OR SALE
Each Indenture will provide that the Company will not, in any transaction or
series of related transactions, consolidate with, or sell, lease, assign,
transfer or otherwise convey all or substantially all of its assets to, or merge
with or into, any other Person unless (i) either the Company shall be the
continuing corporation, or the successor Person (if other than the Company)
formed by or resulting from any such consolidation or merger or which shall have
received the transfer of such assets is a corporation organized and existing
under the laws of the United States of America, any state thereof or the
District of Columbia and shall expressly assume, by supplemental indenture
delivered to the Trustee, the due and punctual payment of the principal of (and
premium, if any) and interest, if any, on all of the outstanding Debt Securities
issued under such Indenture and the due and punctual performance and observance
of all of the other covenants and conditions contained in such outstanding Debt
Securities and such Indenture; (ii) immediately after giving effect to such
transaction and treating any Debt (including Acquired Debt) which becomes an
obligation of the Company or any of its Subsidiaries as a result thereof as
having been incurred by the Company or such Subsidiary at the time of such
transaction, no Event of Default under the applicable Indenture, and no event
which, after notice or the lapse of time or both, would become such an Event of
Default, shall have occurred and be continuing, and (iii) an officers'
certificate and legal opinion concerning such conditions shall be delivered to
each Trustee. In the event that the Company is not the continuing corporation,
then, for purposes of clause (ii) of the preceding sentence, the successor
corporation shall be deemed to be the "Company" referred to in such clause (ii).
(SEE Sections 801 and 803 of the forms of Indenture).
Upon any such merger, consolidation, sale, assignment, transfer, lease or
conveyance in which the Company is not the continuing corporation, the successor
corporation formed by such consolidation or into which the Company is merged or
to which such sale, assignment, transfer, lease or other conveyance is made
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under the relevant Indenture with the same effect as if such
successor corporation had been named as the Company therein and thereafter
(except in the case of a lease) the Company shall be released from its
obligations under such Indenture and the Debt Securities.
CERTAIN COVENANTS
The Senior Indenture will contain the following covenants:
AGGREGATE DEBT TEST. The Company will not, and will not cause or permit any
of its Subsidiaries to, incur any Debt (including, without limitation, Acquired
Debt) if, immediately after giving effect to the incurrence of such Debt and the
application of the proceeds therefrom, the aggregate principal amount of all
outstanding Debt of the Company and its Subsidiaries (determined on a
consolidated basis in accordance with generally accepted accounting principles)
is greater than 60% of the sum of (without duplication) (i) the Total Assets of
the Company and its Subsidiaries as of the last day of the then most recently
ended fiscal quarter and (ii) the aggregate purchase price of any real estate
assets or mortgages
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receivable acquired, and the aggregate amount of any securities offering
proceeds received (to the extent such proceeds were not used to acquire real
estate assets or mortgages receivable or used to reduce Debt), by the Company or
any of its Subsidiaries since the end of such fiscal quarter, including the
proceeds obtained from the incurrence of such additional Debt, determined on a
consolidated basis in accordance with generally accepted accounting principles.
DEBT SERVICE TEST. The Company will not, and will not cause or permit any
of its Subsidiaries to, incur any Debt (including, without limitation, Acquired
Debt) if the ratio of Consolidated Income Available for Debt Service to the
Annual Debt Service Charge for the four consecutive fiscal quarters most
recently ended prior to the date on which such additional Debt is to be incurred
shall have been less than 1.5:1 on a pro forma basis after giving effect to the
incurrence of such Debt and the application of the proceeds therefrom, and
calculated on the assumption that (i) such Debt and any other Debt (including,
without limitation, Acquired Debt) incurred by the Company or any of its
Subsidiaries since the first day of such four-quarter period and the application
of the proceeds therefrom (including to repay other Debt), and the repayment or
retirement of any other Debt of the Company or any of its Subsidiaries since the
first day of such four-quarter period, had occurred on the first day of such
period (except that, in making such computation, the amount of Debt under any
revolving credit facility, line of credit or similar facility shall be computed
based upon the average daily balance of such Debt during such period); and (ii)
in the case of any acquisition or disposition by the Company or any of its
Subsidiaries of any asset or group of assets, in any such case with a fair
market value (determined in good faith by the Company's Board of Directors) in
excess of $1 million, since the first day of such four-quarter period, whether
by merger, stock purchase or sale or asset purchase or sale or otherwise, such
acquisition or disposition had occurred as of the first day of such period with
the appropriate adjustments with respect to such acquisition or disposition
being included in such pro forma calculation. If the Debt giving rise to the
need to make the foregoing calculation (the "Subject Debt") or any other Debt
incurred after the first day of the relevant four-quarter period bears interest
at a floating rate then, for purposes of calculating the Annual Debt Service
Charge, such Debt shall, for periods prior to the date on which such Debt was
incurred or, in the case of the Subject Debt, for the entire such four-quarter
period, be deemed to bear interest at a fixed rate per annum equal to the rate
of interest in effect on the date such Debt was incurred or, in the case of the
Subject Debt, the date of such calculation (except that, in the case of Debt
(other than the Subject Debt) under any revolving credit facility, line of
credit or similar facility, the interest rate used in calculating the Annual
Debt Service Charge for the entire such four-quarter period shall be the average
daily interest rate for each day on which any Debt was outstanding under such
revolving credit facility, line of credit or similar facility during such
four-quarter period).
SECURED DEBT TEST. The Company will not, and will not cause or permit any
of its Subsidiaries to, incur any Debt (including, without limitation, Acquired
Debt) secured by any Lien on any property or assets of the Company or any of its
Subsidiaries, whether owned on the date of the Indenture or thereafter acquired,
if, immediately after giving effect to the incurrence of such Debt and the
application of the proceeds therefrom, the aggregate principal amount
(determined on a consolidated basis in accordance with generally accepted
accounting principles) of all outstanding Debt of the Company and its
Subsidiaries which is secured by any Lien on any property or assets of the
Company or any of its Subsidiaries is greater than 40% of the sum of (without
duplication) (i) the Total Assets of the Company and its Subsidiaries as of the
last day of the then most recently ended fiscal quarter and (ii) the aggregate
purchase price of any real estate assets or mortgages receivable acquired, and
the aggregate amount of any securities offering proceeds received (to the extent
such proceeds were not used to acquire real estate assets or mortgages
receivable or used to reduce Debt), by the Company or any of its Subsidiaries
since the end of such fiscal quarter, including the proceeds obtained from the
incurrence of such additional Debt, determined on a consolidated basis in
accordance with generally accepted accounting principles.
MAINTENANCE OF TOTAL UNENCUMBERED ASSETS. The Company and its Subsidiaries
must have Total Unencumbered Assets of not less than 150% of the aggregate
principal amount of all outstanding
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Unsecured Debt of the Company and its Subsidiaries (determined on a consolidated
basis in accordance with generally accepted accounting principles.
The Subordinated Indenture will not contain any of the covenants described
above and will not contain any other limitation on the amount of Debt of any
kind which the Company or its Subsidiaries may incur. Neither Indenture will
limit the amount of dividends or other distributions which the Company may pay
to its shareholders.
Each Indenture will contain the following covenants:
EXISTENCE. Except as permitted under the provisions of such Indenture
described in "Merger, Consolidation or Sale" the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence, rights (charter and statutory) and franchises; provided,
however, that the Company will not be required to preserve any right or
franchise if it determines that the preservation thereof is no longer desirable
in the conduct of its business and that the loss thereof is not disadvantageous
in any material respect to the Holders of the Debt Securities outstanding under
the relevant Indenture.
MAINTENANCE OF PROPERTIES. The Company will cause all of its properties
used or useful in the conduct of its business or the business of any Subsidiary
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as in
the judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
PROVIDED, HOWEVER, that the Company and its Subsidiaries will not be prevented
from selling or otherwise disposing for value its properties in the ordinary
course of business.
INSURANCE. The Company will, and will cause each of its Subsidiaries to,
keep all of their respective insurable properties insured against loss or damage
in amounts at least equal to their then full insurable value with financially
sound and reputable insurance companies; provided that neither the Company nor
any of its Subsidiaries shall be required to maintain earthquake insurance
coverage with respect to any property so long as (i) the Board of Directors of
the Company reasonably determines (as evidenced by a resolution delivered to the
Trustee) that earthquake insurance coverage for such property is not available
on commercially reasonable terms, and (ii) not less frequently than every three
months thereafter, the Board of Directors of the Company reasonably determines
(as evidenced by a resolution delivered to the Trustee) that earthquake
insurance coverage for such property is not available on commercially reasonable
terms. In the event that the obligation to maintain earthquake insurance
coverage with respect to any property shall have been suspended pursuant to the
proviso to the preceding sentences by the Company shall thereafter fail to
comply with its obligations under clause (ii) of such proviso (including,
without limitation, because the Board of Directors shall have determined that
earthquake coverage is available on commercially reasonable terms), then the
obligation to maintain earthquake insurance coverage with respect to such
property shall be immediately and automatically reinstated, subject to the right
of the Company thereafter to cause such obligation to again be suspended by
complying with the terms of such proviso.
PAYMENT OF TAXES AND OTHER CLAIMS. The Company will pay or discharge or
cause to be paid or discharged, before the same shall become delinquent, (i) all
taxes, assessments and governmental charges levied or imposed upon it or any
Subsidiary or upon the income, profits or property of the Company or any
Subsidiary, and (ii) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a lien upon the property of the Company or any
Subsidiary, provided, however, that the Company will not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings.
PROVISION OF FINANCIAL INFORMATION. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13 or 15(d) if the Company
were so
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subject, on or prior to the respective dates (the "Required Filing Dates") by
which the Company would have been so required so to file such documents. The
Company will also in any event (x) within 15 days after each Required Filing
Date (i) transmit by mail to all Holders of Senior Debt Securities, as their
names and addresses appear in the Security Register, without cost to such
Holders, copies of the annual reports and quarterly reports which the Company
would have been required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act if the Company were subject to such Sections and (ii)
file with the applicable Trustee copies of the annual reports, quarterly reports
and other documents which the Company would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Company
were subject to such Sections and (y) if filing such documents by the Company
with the Commission is not permitted under the Exchange Act, promptly upon
written request and payment of the reasonable cost of duplication and delivery,
supply copies of such documents to any prospective Holder of Debt Securities
under the relevant Indenture.
DEFINITIONS. As used herein,
"Acquired Debt" means Debt of a Person (i) existing at the time such Person
is merged or consolidated with or into, or becomes a Subsidiary of, the Company
or (ii) assumed by the Company or any of its Subsidiaries in connection with the
acquisition of assets from such Person. Acquired Debt shall be deemed to be
incurred on the date the acquired Person is merged or consolidated with or into,
or becomes a Subsidiary of, the Company or the date of the related acquisition,
as the case may be.
"Annual Debt Service Charge" means, for any period of four consecutive
fiscal quarters, the interest expense of the Company and its Subsidiaries for
such period (including, without duplication, (i) all amortization of debt
discount, (ii) all accrued interest, (iii) all capitalized interest and (iv) the
interest component of capitalized lease obligations), determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income of the Company and its Subsidiaries for such period,
plus amounts which have been deducted and minus amounts which have been added
for (without duplication) (i) interest expense on Debt, (ii) provision for taxes
based on income, (iii) amortization of debt discount and deferred financing
costs, (iv) provisions for gains and losses on properties, (v) property
depreciation and amortization, (vi) the effect of any non-cash items resulting
from a change in accounting principles in determining Consolidated Net Income,
and (vii) amortization of deferred charges, all determined on a consolidated
basis in accordance with generally accepted accounting principles.
"Consolidated Net Income" for any period means the amount of net income (or
loss) of the Company and its Subsidiaries for such period, excluding (without
duplication) (i) gains and losses on sales of investments and extraordinary
items and (ii) the portion of net income (but not losses) of the Company and its
Subsidiaries allocable to minority interests in unconsolidated Persons to the
extent that cash dividends or distributions have not actually been received by
the Company or one of its Subsidiaries, all determined on a consolidated basis
in accordance with generally accepted accounting principles.
"Debt" means, with respect to any Person, any indebtedness of such Person,
whether or not contingent, in respect of (i) borrowed money or evidenced by
bonds, notes, debentures or similar instruments, (ii) indebtedness secured by
any Lien on any property or asset owned by such Person, but only to the extent
of the lesser of (x) the amount of indebtedness so secured and (y) the fair
market value (determined in good faith by the board of directors of such Person
or, in the case of the Company or a Subsidiary, by the Company's Board of
Directors) of the property subject to such Lien, (iii) reimbursement
obligations, contingent or otherwise, in connection with any letters of credit
actually issued or amounts representing the balance deferred and unpaid of the
purchase price of any property except any such balance that constitutes an
accrued expense or trade payable, or (iv) any lease of property by such Person
as lessee which is required to be reflected on such Person's balance sheet as a
capitalized lease in accordance with generally accepted accounting principles,
and also includes, to the extent not otherwise included, any obligation of such
Person to be liable for, or to pay, as obligor, guarantor or otherwise (other
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than for purposes of collection in the ordinary course of business), Debt of the
types referred to above of another Person (it being understood that Debt shall
be deemed to be incurred by such Person whenever such person shall create,
assume, guarantee or otherwise become liable in respect thereof).
"Lien" means any mortgage, deed of trust, lien, charge, pledge, security
interest or other encumbrance of any kind.
"Subsidiary" means (i) a corporation a majority of whose voting stock is at
the time, directly or indirectly, owned by the Company, by the Company and one
or more of its Subsidiaries, or by one or more Subsidiaries of the Company, and
(ii) any Person (other than a corporation) a majority of whose equity interests
are at the time, directly or indirectly, owned by the Company, by the Company
and one or more of its Subsidiaries, or by one or more Subsidiaries of the
Company.
"Total Assets" means the sum of (without duplication) (i) Undepreciated Real
Estate Assets and (ii) all other assets (excluding accounts receivable and
intangibles) of the Company and its Subsidiaries, all determined on a
consolidated basis in accordance with generally accepted accounting principles.
"Total Unencumbered Assets" means the sum of (without duplication) (i) those
Undepreciated Real Estate Assets which are not subject to a Lien securing Debt
and (ii) all other assets (excluding accounts receivable and intangibles) of the
Company and its Subsidiaries not subject to a Lien securing Debt, all determined
on a consolidated basis in accordance with generally accepted accounting
principles.
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Company and its
Subsidiaries on such date, before depreciation and amortization, all determined
on a consolidated basis in accordance with generally accepted accounting
principles.
"Unsecured Debt" means Debt of the Company or any of its Subsidiaries which
is not secured by a Lien on any property or assets of the Company or any of its
Subsidiaries.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the following events are "Events of Default" with
respect to any series of Debt Securities issued thereunder: (i) default for 30
days in the payment of any interest on or any Additional Amounts payable in
respect of any Debt Security of such series; (ii) default in the payment of any
principal of (or premium, if any, on) any Debt Security of such series at its
Maturity; (iii) default in making any sinking fund payment as required for any
Debt Security of such series; (iv) default in the performance of any other
covenant or warranty of the Company contained in the applicable Indenture (other
than a covenant or warranty included in such Indenture solely for the benefit of
a series of Debt Securities other than such series), continued for 60 days after
written notice as provided in such Indenture; (v) default under any evidence of
indebtedness of the Company or any mortgage, indenture or other instrument under
which such indebtedness is issued or by which such indebtedness is secured which
results in the acceleration of indebtedness in an aggregate principal amount
exceeding $20,000,000, but only if such indebtedness is not discharged or such
acceleration is not rescinded or annulled as provided in the applicable
Indenture; (vi) certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee, of the Company or of any
Significant Subsidiary or of the respective property of either; and (vii) any
other Event of Default provided with respect to that series of Debt Securities.
(SEE Section 501 of the forms of Indenture.) The term "Significant Subsidiary"
means each significant subsidiary (as defined in Regulation S-X promulgated
under the Securities Act as in effect on January 1, 1996) of the Company.
If an Event of Default under any Indenture with respect to Debt Securities
of any series issued thereunder at the time outstanding occurs and is
continuing, then in every such case the applicable Trustee or the Holders of not
less than 25% in principal amount of the Outstanding Debt Securities of that
series may declare the principal amount (or, if the Debt Securities of that
series are Original Issue Discount Securities or Indexed Securities, such
portion of the principal amount as may be specified in the terms
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thereof) of all of the Debt Securities of that series to be due and payable
immediately by written notice thereof to the Company (and to the applicable
Trustee if given by the Holders). However, at any time after such a declaration
of acceleration with respect to Debt Securities of such series has been made,
the Holders of not less than a majority in principal amount of Debt Securities
of such series may rescind and annul such declaration and its consequences if
(i) the Company shall have deposited with the applicable Trustee all required
payments of the principal of (and premium, if any) and interest, if any, on the
Debt Securities of such series, plus certain fees, expenses, disbursements and
advances of such Trustee and (ii) all Events of Default, other than the
nonpayment of accelerated principal (or specified portion thereof) with respect
to Debt Securities of such series have been cured or waived as provided in such
Indenture. (SEE Section 502 of the forms of Indenture.) The Indentures will also
provide that the Holders of not less than a majority in principal amount of the
Debt Securities of any series may waive any past default with respect to such
series and its consequences, except a default (x) in the payment of the
principal of (or premium, if any) or interest, if any, on any Debt Security of
such series or (y) in respect of a covenant or provision contained in the
applicable Indenture that cannot be modified or amended without the consent of
the Holder of each Outstanding Debt Security affected thereby. (SEE Section 513
of the forms of Indenture.)
The Indentures will require each Trustee to give notice to the Holders of
Debt Securities issued thereunder within 90 days of a default under the
applicable Indenture unless such default shall have been cured or waived;
provided, however, that such Trustee may withhold notice to the Holders of any
such series of Debt Securities of any default with respect to such series
(except a default in the payment of the principal of (or premium, if any) or
interest, if any, on any Debt Security of such series or in the payment of any
sinking fund installment in respect of any Debt Security of such series) if a
Responsible Officer of such Trustee considers such withholding to be in the
interest of such Holders. (SEE Section 601 of the forms of Indenture.)
The Indentures will provide that no Holder of Debt Securities of any series
issued thereunder may institute any proceeding, judicial or otherwise, with
respect to such Indenture or for any remedy thereunder, except in the case of
the failure of the applicable Trustee, for 60 days, to act after it has received
a written request to institute proceedings in respect of an Event of Default
from the Holders of not less than 25% in principal amount of the Outstanding
Debt Securities of such series, as well as an offer of reasonable indemnity.
(SEE Section 507 of the forms of Indenture.) This provision will not prevent,
however, any Holder of Debt Securities from instituting suit for the enforcement
of payment of the principal of (and premium, if any) and interest, if any, on
such Debt Securities held by that Holder at the respective due dates thereof.
(SEE Section 508 of the forms of Indenture.)
The Indentures will provide that, subject to provisions to each Indenture
relating to its duties in case of default, a Trustee thereunder is under no
obligation to exercise any of its rights or powers under an Indenture at the
request or direction of any Holders of any series of Debt Securities then
Outstanding under such Indenture, unless such Holders shall have offered to the
Trustee thereunder reasonable security or indemnity. (SEE Section 602 of the
forms of Indenture.) The Holders of not less than a majority in principal amount
of the Outstanding Debt Securities of any series shall have the right to direct
the time, method and place of conducting any proceeding for any remedy available
to such Trustee, or of exercising any trust or power conferred upon such
Trustee. However, a Trustee may refuse to follow any direction which is in
conflict with any law or the applicable Indenture, which may involve such
Trustee in personal liability or which may be unduly prejudicial to the Holders
of Debt Securities of such series not joining therein. (SEE Section 512 of the
forms of Indenture.)
Within 120 days after the close of each fiscal year, the Company must
deliver to each Trustee a certificate, signed by one of several specified
officers of the Company, stating whether or not such officer has knowledge of
any default under the applicable Indenture and, if so, specifying each such
default and the nature and status thereof. (SEE Section 1012 of the form of
Senior Indenture and Section 1004 of the form of Subordinated Indenture.)
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MODIFICATION OF THE FORMS OF INDENTURE
Modifications and amendments of an Indenture may be made only with the
consent of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities of each series issued thereunder which are affected
by such modification or amendment; provided, however, that no such modification
or amendment may, without the consent of the Holder of each such Debt Security
affected thereby, (i) change the Stated Maturity of the principal of, or any
installment of interest, if any, (or premium, if any) on, any such Debt
Security, (ii) reduce the principal amount of, or the rate or amount of interest
on, or any premium payable on any such Debt Security, or reduce the amount of
principal of an Original Issue Discount Security that would be due and payable
upon declaration of acceleration of the maturity thereof or would be provable in
bankruptcy, or adversely affect any right of repayment of the Holder of any such
Debt Security, (iii) change the Place of Payment, or the coin or currency, for
payment of principal of, or premium, if any, or interest, if any, on any such
Debt Security, (iv) impair the right to institute suit for the enforcement of
any payment on or with respect to any such Debt Security, (v) reduce the
percentage of Outstanding Debt Securities of any series necessary to modify or
amend the applicable Indenture with respect to such debt securities, to waive
compliance with certain provisions thereof or certain defaults and consequences
thereunder or to reduce the quorum or voting requirements set forth in the
applicable Indenture; or (vi) modify any of the foregoing provisions or any of
the provisions relating to the waiver of certain past defaults or certain
covenants, except to increase the required percentage to effect such action or
to provide that certain other provisions may not be modified or waived without
the consent of the Holder of such Debt Security. (SEE Section 902 of the forms
of Indenture.)
The Senior Indenture provides that the Holders of not less than a majority
in principal amount of Outstanding Debt Securities issued thereunder have the
right to waive compliance by the Company with certain covenants in the Senior
Indenture, including those described in the section of this Prospectus captioned
"Certain Covenants." (SEE Section 1014 of the Senior Indenture.)
Modifications and amendments of an Indenture may be made by the Company and
the applicable Trustee without the consent of any Holder of Debt Securities
issued thereunder for any of the following purposes: (i) to evidence the
succession of another Person to the Company as obligor under such Indenture;
(ii) to add to the covenants of the Company for the benefit of the Holders of
all or any series of Debt Securities issued thereunder or to surrender any right
or power conferred upon the Company in such Indenture; (iii) to add Events of
Default for the benefit of the Holders of all or any series of Debt Securities
issued thereunder; (iv) to add or change any provisions of such Indenture to
facilitate the issuance of, or to liberalize certain terms of, Debt Securities
issued thereunder in bearer form, or to permit or facilitate the issuance of
such Debt Securities in uncertificated form, provided that such action shall not
adversely affect the interests of the Holders of such Debt Securities of any
series in any material respect; (v) to change or eliminate any provision of such
Indenture, provided that no such change or elimination shall become effective
with respect to the Outstanding Debt Securities of any series issued thereunder
created prior thereto which are entitled to the benefit of such provision; (vi)
to secure the Debt Securities issued thereunder; (vii) to establish the form or
terms of Debt Securities of any series issued thereunder, including the
provisions and procedures, if applicable, for the conversion of such Debt
Securities into Common Shares or Preferred Shares of the Company; (viii) to
provide for the acceptance of appointment by a successor Trustee or to
facilitate the administration of the trusts under an Indenture by more than one
Trustee; (ix) to cure any ambiguity, defect or inconsistency in such Indenture,
provided that such action shall not adversely affect the interests of Holders of
Outstanding Debt Securities of any series issued thereunder in any material
respect; or (x) to supplement any of the provisions of an Indenture to the
extent necessary to permit or facilitate defeasance and discharge of any series
of such Debt Securities issued thereunder, provided that such action shall not
adversely affect the interests of the Holders of the Debt Securities of any
series issued thereunder in any material respect. (SEE Section 901 of the forms
of Indenture.)
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The Indentures will provide that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series issued
thereunder have given any request, demand, authorization, direction, notice,
consent or waiver thereunder or whether a quorum is present at a meeting of
Holders of such Debt Securities, (i) the principal amount of an Original Issue
Discount Security that shall be deemed to be Outstanding shall be the amount of
the principal thereof that would be due and payable as of the date of such
determination upon declaration of acceleration of the maturity thereof, (ii) the
principal amount of a Debt Security denominated in a Foreign Currency that shall
be deemed outstanding shall be the U.S. dollar equivalent, determined on the
issue date for such Debt Security, of the principal amount (or, in the case of
an Original Issue Discount Security, the U.S. dollar equivalent on the issue
date of such Debt Security of the amount determined as provided in (i) above),
(iii) the principal amount of an Indexed Security that shall be deemed
Outstanding shall be the principal face amount of such Indexed Security at
original issuance, unless otherwise provided with respect to such Indexed
Security pursuant to such Indenture, and (iv) Debt Securities owned by the
Company or any other obligor upon the Debt Securities or any Affiliate of the
Company or of such other obligor shall be disregarded. (SEE Section 101 of the
forms of Indenture)
The Indentures will contain provisions for convening meetings of the Holders
of Debt Securities of a series issued thereunder. (SEE Section 1501 of the forms
of Indenture.) A meeting may be called at any time by the applicable Trustee and
also, upon request, by the Company or the Holders of at least 10% in principal
amount of the Outstanding Debt Securities of such series, in any such case upon
notice given as provided in the applicable Indenture. (SEE Section 1502 of the
forms of Indenture.) Except for any consent that must be given by the Holder of
each Debt Security affected by certain modifications and amendments of such
Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the Holders of a majority in principal amount of the Outstanding Debt
Securities of that series; provided, however, that, except as referred to above,
any resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by the
Holders of a specified percentage, which is less than a majority, in principal
amount of the Outstanding Debt Securities of a series may be adopted at a
meeting or adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the Holders of such specified percentage in principal amount
of the Outstanding Debt Securities of that series. Any resolution passed or
decision taken at any meeting of Holders of Debt Securities of any series duly
held in accordance with the applicable Indenture will be binding on all Holders
of Debt Securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be Persons holding or
representing a majority in principal amount of the Outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the Holders of
not less than a specified percentage in principal amount of the Outstanding Debt
Securities of a series, the Persons holding or representing such specified
percentage in principal amount of the Outstanding Debt Securities of such series
will constitute a quorum. (SEE Section 1504 of the forms of Indenture.)
Notwithstanding the provisions described above, the Indentures will provide
that if any action is to be taken at a meeting of Holders of Debt Securities of
any series with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that the applicable Indenture expressly
provides may be made, given or taken by the Holders of a specified percentage in
principal amount of all Outstanding Debt Securities affected thereby, or of the
Holders of such series and one or more additional series: (i) there shall be no
minimum quorum requirement for such meeting and (ii) the principal amount of the
Outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under such Indenture. (SEE Section 1504 of the forms of
Indenture.)
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DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company will be permitted, at its option, to discharge certain obligations to
Holders of any series of Debt Securities issued under any Indenture that have
not already been delivered to the applicable Trustee for cancellation and that
either have become due and payable or will become due and payable within one
year (or are scheduled for redemption within one year) by irrevocably depositing
with such Trustee, in trust, funds in such currency or currencies, currency unit
or units or composite currency or currencies in which such Debt Securities are
payable in an amount sufficient to pay the entire indebtedness on such Debt
Securities in respect of principal (and premium, if any) and interest, if any,
to the date of such deposit (if such Debt Securities have become due and
payable) or to the Stated Maturity or Redemption Date, as the case may be. (SEE
Section 401 of the forms of Indenture.)
The Indentures provide that, unless otherwise provided in the applicable
Prospectus Supplement, the Company may elect either (i) to defease and be
discharged from any and all obligations (except, among other things, for the
obligation to pay Additional Amounts, if any, upon the occurrence of certain
events of tax, assessment or governmental charge with respect to payments on
such Debt Securities and the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of such Debt
Securities and to hold moneys for payment in trust) with respect to such Debt
Securities ("defeasance") (SEE Section 1402 of the forms of Indenture) or (ii)
to be released from its obligations relating to (a) with respect to Senior
Securities, the obligations under Sections 1004 to 1011, inclusive, of the forms
of Senior Indenture (being the restrictions described under the caption "Certain
Covenants") (except that the Company shall remain subject to the covenant to
preserve and keep in full force and effect its corporate existence, except as
permitted under the provisions described under "Consolidation, Merger or Sale")
and, if provided pursuant to Section 301 of the forms of Senior Indenture, its
obligations with respect to any other covenant contained in the Senior
Indenture, and (b) with respect to Subordinated Debt Securities, if provided
pursuant to Section 301 of the Subordinated Indenture, its obligations with
respect to any covenant contained in the Subordinated Indenture, and any
omission to comply with such obligations shall not constitute a default or an
Event of Default with respect to such Debt Securities ("covenant defeasance")
(SEE Section 1403 of the forms of Indenture), in either case upon the
irrevocable deposit by the Company with the applicable Trustee, in trust, of an
amount, in such currency or currencies, currency unit or units or composite
currency or currencies in which such Debt Securities are payable at Stated
Maturity, or Government Obligations (as defined below), or both, applicable to
such Debt Securities which through the scheduled payment of principal and
interest in accordance with their terms will provide money in an amount
sufficient to pay the principal of (and premium, if any) and interest, if any,
on such Debt Securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company has
delivered to the applicable Trustee an Opinion of Counsel (as specified in the
applicable Indenture) to the effect that the Holders of such Debt Securities
will not recognize income, gain or loss for U.S. federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance or covenant defeasance had not
occurred, and such Opinion of Counsel, in the case of defeasance, must refer to
and be based upon a ruling of the Internal Revenue Service or a change in
applicable United States federal income tax law occurring after the date of such
Indenture. (SEE Section 1404 of the forms of Indenture.)
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged, or (ii) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of
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America or such government which issued the Foreign Currency in which the Debt
Securities of such series are payable, the payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of America
or such other government, which, in either case, are not callable or redeemable
at the option of the issuer thereof, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such
Government Obligation or a specific payment of interest on or principal of any
such Government Obligation held by such custodian for the account of the holder
of a depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the custodian in
respect of the Government Obligation or the specific payment of interest on or
principal of the Government Obligation evidenced by such depository receipt.
(SEE Section 101 of the forms of Indenture.)
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(i) the Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to Section 301 of the applicable form of Indenture or the terms of such
Debt Security to receive payment in a currency, currency unit or composite
currency other than that in which such deposit has been made in respect of such
Debt Security, or (ii) a Conversion Event (as defined below) occurs in respect
of the currency, currency unit or composite currency in which such deposit has
been made, the indebtedness represented by such Debt Security shall be deemed to
have been, and will be, fully discharged and satisfied through the payment of
the principal of (and premium, if any) and interest, if any, on such Debt
Security as they become due out of the proceeds yielded by converting the amount
so deposited in respect of such Debt Security into the currency, currency unit
or composite currency in which such Debt Security becomes payable as a result of
such election or such cessation of usage based on the applicable market exchange
rate. (SEE Section 1405 of the forms of Indenture.) "Conversion Event" means the
cessation of use of (a) a currency, currency unit or composite currency both by
the government of the country which issued such currency and for the settlement
of actions by a central bank or other public institution of or within the
international banking community, (b) the ECU both within the European Monetary
System and for the settlement of transactions by public institutions of or
within the European Community or (c) any currency unit or composite currency
other than the ECU for the purposes for which it was established. Unless
otherwise described in the applicable Prospectus Supplement, all payments of
principal of (and premium, if any) and interest, if any, on any Debt Security
that are payable in a Foreign Currency that ceases to be used by its government
of issuance shall be made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default, (other than (i) with respect to Senior
Debt Securities, the Event of Default described in clause (iv) under "Events of
Default, Notice and Waiver" with respect to Sections 1004 to 1011, inclusive, of
the Senior Indenture (which Sections would no longer be applicable to such Debt
Securities) or (ii) with respect to all Debt Securities, the Event of Default
described in clause (vii) under "Events of Default, Notice and Waiver" with
respect to any other covenant as to which there has been covenant defeasance),
the amount of monies and Government Obligations deposited with the applicable
Trustee to effect such covenant defeasance may not be sufficient to pay amounts
due on such Debt Securities at the time of their Stated Maturity or at the time
of the acceleration resulting from such Event of Default. In any such event, the
Company would remain liable to make payment of such amounts due at the time of
acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
RANKING OF DEBT SECURITIES
The Senior Debt Securities will be unsecured unsubordinated obligations of
the Company and will rank on a parity in right of payment with all other
unsecured and unsubordinated indebtedness of the
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Company. The Subordinated Debt Securities will be unsecured obligations of the
Company and will be subordinated in right of payment to all existing and future
Senior Indebtedness (as defined below) of the Company. SEE "--Subordination of
Subordinated Debt Securities."
The Debt Securities are obligations exclusively of the Company. Although the
Company conducts most of its operations itself, rather than through
subsidiaries, a portion of its assets (amounting to less than 6% of its total
consolidated assets at September 30, 1996) are held by its subsidiaries.
Accordingly, the cash flow of the Company and the consequent ability to service
its debt, including the Debt Securities, are partially dependent on the earnings
of such subsidiaries and the Debt Securities will be effectively subordinated to
all existing and future indebtedness and other liabilities of such subsidiaries.
Although the Senior Indentures will, if any Senior Securities are issued, impose
limitations on the incurrence of additional indebtedness, both the Company and
its subsidiaries will retain the ability to incur substantial additional
indebtedness.
SUBORDINATION OF SUBORDINATED SECURITIES
The payment of the principal of (and premium, if any) and interest, if any,
on the Subordinated Debt Securities will be subordinated as set forth in the
Subordinated Indenture in right of payment to the prior payment of all Senior
Indebtedness of the Company whether outstanding on the date of the Subordinated
Indenture or thereafter incurred. (SEE Section 1701 of the Subordinated
Indenture.)
"Senior Indebtedness" is defined in the Subordinated Indenture to mean (i)
the principal of and premium, if any, and unpaid interest, if any, on
indebtedness for money borrowed or evidenced by a bond, note, debenture or
similar instrument, (ii) purchase money and similar obligations, (iii)
obligations under capital leases, (iv) guarantees, assumptions or purchase
commitments relating to, or other transactions as a result of which the Company
is responsible for the payment of, indebtedness and obligations of others of the
types referred to in clauses (i) through (iii) above, (v) renewals, extensions
and refunding of any such indebtedness or obligations, (vi) interest in respect
of any such indebtedness or obligations accruing after the commencement of any
insolvency or bankruptcy proceedings and (vii) obligations associated with
derivative products such as interest rate and currency exchange contracts,
foreign exchange contracts, commodity contracts, and similar arrangements,
unless, in each case, the instrument by which the Company incurred, assumed or
guaranteed the indebtedness or obligations described in clauses (i) through
(vii) expressly provides that such indebtedness or obligation is subordinate or
junior in right of payment to all other indebtedness of the Company or is not
senior in right of payment to the Subordinated Debt Securities or ranks pari
passu with or subordinate to the Subordinate Debt Securities in right of
payment. At December 31, 1996, the Company had approximately $197,000,000 of
Senior Debt outstanding. There are no restrictions in the Subordinated Indenture
upon the incurrence of additional Senior Indebtedness.
The Subordinated Indenture will provide that, in the event (i) of any
distribution of assets of the Company upon any dissolution, winding up,
liquidation or reorganization of the Company, whether in bankruptcy, insolvency,
reorganization or receivership proceeding or upon an assignment for the benefit
of creditors or any other marshaling of the assets and liabilities of the
Company or otherwise, except a distribution in connection with a merger or
consolidation or a conveyance or transfer of all or substantially all of the
properties of the Company which complies with the requirements of Article Eight
of the Subordinated Indenture (described above under "Merger, Consolidation or
Sale") or (ii) that a default shall have occurred and be continuing with respect
to the payment of principal of (or premium, if any) or interest on any Senior
Indebtedness, or (iii) that the principal of the Subordinated Debt Securities of
any series issued under the Subordinated Indenture (or in the case of Original
Issue Discount Securities, the portion of the principal amount thereof referred
to in Section 502 of the form of Subordinated Indenture) shall have been
declared due and payable pursuant to Section 502 of the form of Subordinated
Indenture, and such declaration shall not have been rescinded and annulled as
provided in said Section 502, then:
(1) in a circumstance described in the foregoing clause (i) or (ii), the
holders of all Senior Indebtedness, and in the circumstance described in the
foregoing clause (iii), the holders of all Senior
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Indebtedness outstanding at the time the principal of such Subordinated Debt
Securities issued under the Subordinated Indenture (or in the case of
Original Issue Discount Securities, such portion of the principal amount)
shall have been so declared due and payable, shall first be entitled to
receive payment of the full amount due thereon in respect of principal,
premium (if any), interest and Additional Amounts, or provision shall be
made for such payment in money or money's worth, before the Holders of any
of the Subordinated Debt Securities are entitled to receive any payment on
account of the principal of (or premium, if any) or interest, if any, on or
any Additional Amount in respect of the indebtedness evidenced by the
Subordinated Debt Securities;
(2) any payment by, or distribution of assets of, the Company of any
kind or character, whether in cash, property or securities (other than
certain subordinated debt securities of the Company issued in a
reorganization or readjustment), to which the Holder of any of the
Subordinated Debt Securities would be entitled except for the subordination
provisions of Article Seventeen of the Subordinated Indenture shall be paid
or delivered by the person making such payment or distribution directly to
the holders of Senior Indebtedness (as provided in clause (1) above), or on
their behalf, ratably according to the aggregate amount remaining unpaid on
account of such Senior Indebtedness, to the extent necessary to make payment
in full of all Senior Indebtedness (as provided in clause (1) above)
remaining unpaid after giving effect to any concurrent payment or
distribution (or provisions therefor) to the holders of such Senior
Indebtedness, before any payment or distribution is made to or in respect of
the Holders of the Subordinated Debt Securities; and
(3) in the event that, notwithstanding the foregoing, any payment by, or
distribution of assets of, the Company of any kind or character is received
by the Holders of any of the Subordinated Debt Securities issued under the
Subordinated Indenture before all Senior Indebtedness is paid in full such
payment or distribution shall be paid over to the holders of such Senior
Indebtedness or on their behalf, ratably as aforesaid, for application to
the payment of all such Senior Indebtedness remaining unpaid until all such
Senior Indebtedness shall have been paid in full, after giving effect to any
concurrent payment or distribution (or provisions therefor) to the holders
of such Senior Indebtedness.
By reason of such subordination in favor of the holders of Senior
Indebtedness in the event of insolvency, certain general creditors of the
Company, including holders of Senior Indebtedness, may recover more, ratably,
than the Holders of the Subordinated Debt Securities.
CONVERTIBLE DEBT SECURITIES
The following provisions will apply to Debt Securities that will be
convertible into Common Shares or other equity securities of the Company
("Convertible Debt Securities") unless otherwise described in the Prospectus
Supplement for such Convertible Debt Securities.
The Holder of any Convertible Debt Securities will have the right,
exercisable at any time during the time period specified in the applicable
Prospectus Supplement, unless previously redeemed by the Company, to convert
such Convertible Debt Securities into Common Shares or other equity securities
of the Company at the conversion price or rate for each $1,000 principal amount
of Convertible Debt Securities set forth in such Prospectus Supplement. The
Holder of any Convertible Debt Security may convert a portion thereof which is
$1,000 or any integral multiple of $1,000. (SEE Section 301 of the form of
Senior Indenture and Section 1602 of the form of Subordinated Indenture.) In the
case of Convertible Debt Securities called for redemption, conversion rights
will expire at the close of business on the date fixed for the redemption
specified in the Prospectus Supplement, except that, in the case of repayment at
the option of the applicable Holder, such right will terminate upon the
Company's receipt of written notice of the exercise of such option. (SEE Section
301 of the form of Senior Indenture and Section 1602 of the form of Subordinated
Indenture.)
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In certain events, the conversion price or rate will be subject to
adjustment as contemplated in the applicable Indenture. For Debt Securities
convertible into Common Shares, such events include the issuance of Common
Shares of the Company as a dividend; subdivisions and combinations of Common
Shares; the issuance to all holders of Common Shares of certain rights or
warrants entitling such holders to subscribe for a purchase of Common Shares at
a price per share less than the current market price per Common Stock; and the
distribution to all holders of Common Shares of shares of capital stock of the
Company (other than Common Shares), evidences of indebtedness or assets of the
Company (excluding cash dividends or distributions paid from retained earnings
of the Company or subscription rights or warrants other than those referred to
above). In any of such cases, no adjustment of the conversion price or rate will
be required unless an adjustment would require a cumulative increase or decrease
of at least 1% in such price or rate. (SEE Section 301 of the Senior Indenture
and Section 1605 of the Subordinated Indenture.) Fractional Common Shares will
not be issued upon conversion, but, in lieu thereof, the Company will pay cash
adjustments. (SEE Section 301 of the Senior Indenture and Section 1606 of the
Subordinated Indenture.) Unless otherwise specified in the applicable Prospectus
Supplement, Convertible Debt Securities surrendered for conversion between any
record date for an interest payment and the related interest payment date
(except such Convertible Debt Securities called for redemption on a redemption
date during such period) must be accompanied by payment of an amount equal to
the interest thereon to such interest payment date. (SEE Section 301 of the
Senior Indenture and Section 1604 of the Subordinated Indenture.)
To protect the Company's status as a REIT, a person may not own or convert
any Convertible Debt Security if as a result of such ownership or upon such
conversion such person would then be deemed to Beneficially Own (as defined in
the Indenture) more than 5.0% of the outstanding capital stock of the Company.
Common Shares or other equity securities of the Company that may be acquired
upon the conversion of Convertible Debt Securities directly or constructively
held by an investor, but not Common Shares or other equity securities of the
Company issuable with respect to the conversion of Convertible Debt Securities
held by others, are deemed to be outstanding (a) at the time of purchase of the
Convertible Debt Securities, and (b) prior to the conversion of the Convertible
Debt Securities, for purposes of determining the percentage ownership of Common
Shares or other equity securities of the Company held by such investor. SEE
"Federal Income Tax Considerations."
The adjustment provisions for Debt Securities convertible into equity
securities of the Company other than Common Shares will be determined at the
time of issuance of such Debt Securities and will be set forth in the applicable
Prospectus Supplement.
Except as set forth in the applicable Prospectus Supplement, any Convertible
Debt Securities called for redemption, unless surrendered for conversion on or
before the close of business on the redemption date, are subject to being
purchased from the Holder of such Convertible Debt Securities by one or more
investment bankers or other purchasers who may agree with the Company to
purchase such Convertible Debt Securities and convert them into Common Shares or
other equity securities of the Company, as the case may be. (SEE Section 1108 of
the forms of Indenture.)
Reference is made to the sections captioned "Description of Common Shares,"
"Description of Preferred Shares" and "Description of Depositary Shares" for a
general description of securities to be acquired upon the conversion of
Convertible Debt Securities, including a description of certain restrictions on
the ownership of the Common Shares and the Preferred Shares.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (each, a "Global Security") that will be
deposited with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC"), or such other depository as may be identified in the applicable
Prospectus Supplement. Global Securities may be issued in either registered or
bearer form and in either temporary or permanent form. Unless otherwise provided
in such Prospectus Supplement, Debt Securities
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that are represented by a Global Security will be issued in any authorized
denomination and will be issued in registered or bearer form.
The Company anticipates that any Global Securities will be deposited with,
or on behalf of DTC, and that such Global Securities will be registered in the
name of Cede & Co., DTC's nominee. The Company further anticipates that the
following provisions will apply to the depository arrangements with respect to
any such Global Securities. Any additional or differing terms of the depository
arrangements will be described in the Prospectus Supplement relating to a
particular series of Debt Securities issued in the form of Global Securities.
So long as DTC or its nominee is the registered owner of a Global Security,
DTC or its nominee, as the case may be, will be considered the sole Holder of
the Debt Securities represented by such Global Security for all purposes under
the applicable Indenture. Except as described below, owners of beneficial
interests in a Global Security will not be entitled to have Debt Securities
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities in certificated
form and will not be considered the owners or Holders thereof under the
applicable Indenture. The laws of some states require that certain purchasers of
securities take physical delivery of such securities in certificated form;
accordingly, such laws may limit the transferability of beneficial interests in
a Global Security.
Unless otherwise specified in the applicable Prospectus Supplement, each
Global Security will be exchangeable for certificated Debt Securities of the
same series only if (i) DTC notifies the Company that it is unwilling or unable
to continue as depository or DTC ceases to be a clearing agency registered under
the Securities Exchange Act of 1934 (if so required by applicable law or
regulation) and, in either case, a successor depository is not appointed by the
Company within 90 days after the Company receives such notice or becomes aware
of such unwillingness, inability or ineligibility, (ii) the Company in its sole
discretion determines that the Global Securities shall be exchangeable for
certificated Debt Securities or (iii) there shall have occurred and be
continuing an Event of Default under the Indenture with respect to the Debt
Securities of any series and beneficial owners representing a majority in
aggregate principal amount of such Debt Securities represented by Global
Securities advise DTC to cease acting as depository. Upon any such exchange,
owners of a beneficial interest in the Global Security or Securities will be
entitled to physical delivery of individual Debt Securities in certificated form
of like tenor, terms and rank, equal in principal amount to such beneficial
interest, and to have such Debt Securities in certificated form registered in
the names of the beneficial owners, which names shall be provided by DTC's
relevant Participants (as identified by DTC) to the applicable Trustee. Unless
otherwise described in the applicable Prospectus Supplement, Debt Securities so
issued in certificated form will be issued in denominations of $1,000 or any
integral multiple thereof, and will be issued in registered form only, without
coupons.
The following is based on information furnished to the Company:
DTC will act as securities depository for the Debt Securities. The Debt
Securities will be issued as fully registered securities registered in the name
of Cede & Co. (DTC's partnership nominee). One fully registered Debt Security
certificate will be issued with respect to each $200 million of principal amount
of the Debt Securities of a series, and an additional certificate will be issued
with respect to any remaining principal amount of such series.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers,
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banks, trust companies, clearing corporations and certain other organizations
("Direct Participants"). DTC
is owned by a number of its Direct Participants and by the New York Stock
Exchange, Inc., the American Stock Exchange, Inc. and the National Association
of Securities Dealers, Inc. Access to the DTC system is also available to
others, such as securities brokers and dealers, and banks and trust companies
that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Securities and
Exchange Commission.
Purchases of Debt Securities under the DTC system must be made by or through
Direct Participants, which will receive a credit for the Debt Securities on
DTC's records. The ownership interest of each actual purchaser of each Debt
Security ("Beneficial Owner") is in turn recorded on the Direct and Indirect
Participants' records. A Beneficial Owner does not receive written confirmation
from DTC of its purchase, but is expected to receive a written confirmation
providing details of the transaction, as well as periodic statements of its
holdings, from the Direct or Indirect Participant through which such Beneficial
Owner entered into the transaction. Transfers of ownership interests in Debt
Securities are accomplished by entries made on the books of Direct and Indirect
Participants acting on behalf of Beneficial Owners. Beneficial Owners do not
receive certificates representing their ownership interests in Debt Securities,
except under the circumstances described above.
To facilitate subsequent transfers, the Debt Securities are registered in
the name of DTC's partnership nominee, Cede & Co. The deposit of the Debt
Securities with DTC and their registration in the name of Cede & Co. will effect
no change in beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the Debt Securities; DTC records reflect only the identity of the
Direct Participants to whose accounts Debt Securities are credited, which may or
may not be the Beneficial Owners. The Participants remain responsible for
keeping account of their holdings on behalf of their customers.
Delivery of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners are governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede & Co. consents or votes with respect to the Debt
Securities. Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy")
to the issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the Debt Securities are credited on the record date (identified
on a list attached to the Omnibus Proxy).
Principal payments, premium payments, if any, and interest payments, if any,
on the Debt Securities will be made to DTC. DTC's practice is to credit Direct
Participants' accounts on the payment date in accordance with their respective
holdings as shown on DTC's records unless DTC has reason to believe that it will
not receive payment on the payment date. Payments by Direct and Indirect
Participants to Beneficial Owners are governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name" and are the
responsibility of such Direct and Indirect Participants and not of DTC, the
applicable Trustee or the Company, subject to any statutory or regulatory
requirements as may be in effect from time to time. Payment of principal,
premium, if any, and interest, if any, to DTC is the responsibility of the
Company or the applicable Trustee, disbursement of such payments to Direct
Participants is the responsibility of DTC, and disbursement of such payments to
the Beneficial Owners is the responsibility of Direct and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than
all of the Debt Securities of a series represented by Global Securities are
being redeemed, DTC's practice is to determine by lot the amount of the interest
of each Direct Participant in such issue to be redeemed.
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To the extent that any Debt Securities provide for repayment or repurchase
at the option of the Holders thereof, a Beneficial Owner shall give notice of
any option to elect to have its interest in the Global Security repaid by the
Company, through its Participant, to the applicable Trustee, and shall effect
delivery of such interest in a Global Security by causing the Direct Participant
to transfer the Participant's interest in the Global Security or Securities
representing such interest, on DTC's records, to such Trustee. The requirement
for physical delivery of Debt Securities in connection with a demand for
repayment will be deemed satisfied when the ownership rights in the Global
Security or Securities representing such Debt Securities are transferred by
Direct Participants on DTC's records.
DTC may discontinue providing its services as securities depository with
respect to the Debt Securities at any time by giving reasonable notice to the
Company or the applicable Trustee. Under such circumstances, in the event that a
successor securities depository is not appointed, Debt Security certificates are
required to be printed and delivered as described above.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Debt Security certificates will be printed and delivered as described above.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
None of the Company, the applicable Trustee or any applicable paying agent
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial interests in a Global Security, or
for maintaining, supervising or reviewing any records relating to such
beneficial interest.
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DESCRIPTION OF PREFERRED SHARES
The following description of Preferred Shares sets forth certain general
terms and provisions of the Preferred Shares to which any Prospectus Supplement
may relate and is qualified in its entirety by reference to the Company's
Amended and Restated Articles of Incorporation (the "Articles") and by the
provisions of the form of designating amendment pursuant to which the terms of
the Preferred Shares of any series will be established, which have been or will
be included or incorporated by reference as exhibits to the Registration
Statement of which this Prospectus is a part and are or will be available as
described above under "Available Information." Certain other specific terms will
be described in the applicable Prospectus Supplement. The terms of the Preferred
Shares offered in any Prospectus Supplement may differ from the terms set forth
below.
GENERAL
Under the Articles, the Board of Directors has the authority to issue up to
10,000,000 Preferred Shares, $0.01 par value per share. No Preferred Shares were
outstanding as of the date of this Prospectus. Preferred Shares may be issued
from time to time in one or more series, as authorized by the Board of Directors
of the Company and without any action or approval of shareholders of the
Company. Prior to the issuance of shares of such series, the Board of Directors
is required by the Maryland General Corporation Law and the Articles to fix for
each series, subject to the provisions of the Articles, the terms, rights,
restrictions and qualifications, including any preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms or conditions of redemption, as are permitted by Maryland law. The
Preferred Shares will, when issued, be fully paid and nonassessable and will
have no preemptive rights.
The issuance of Preferred Shares, while providing flexibility in connection
with possible financings, acquisitions and other corporate purposes, could,
among other things, adversely affect the voting powers and other rights and
interests of holders of Common Shares and, under certain circumstances, could
make it more difficult for a third party to gain control of the Company and
could have the effect of delaying or preventing an attempted takeover of the
Company.
TERMS
Reference is made to the Prospectus Supplement relating to the Preferred
Shares offered thereby for specific terms, including:
(1) The class, series and title of such Preferred Shares;
(2) The number of shares of such Preferred Shares offered, the
liquidation preference per share and the offering price of such Preferred
Shares;
(3) The dividend rate or rates, period or periods and payment date or
dates or method of calculation thereof applicable to such Preferred Shares,
and whether dividends will be cumulative or non-cumulative;
(4) The date from which dividends on such Preferred Shares shall accrue,
if applicable;
(5) The procedures for any auction or remarketing of such Preferred
Shares;
(6) The provision for any sinking fund for such Preferred Shares;
(7) The provision for redemption, if applicable, of such Preferred
Shares;
(8) Any listing of such Preferred Shares on any securities exchange;
(9) Any terms and conditions upon which such Preferred Shares will be
convertible into Common Shares of the Company, including the conversion
price (or manner of calculation thereof);
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(10) Whether interests in such Preferred Shares will be represented by
Depositary Shares;
(11) Any other specific terms, preferences, rights, limitations or
restrictions of or on such Preferred Shares;
(12) A discussion of federal income tax considerations applicable to such
Preferred Shares;
(13) The relative ranking and preferences of such Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company; and
(14) Any limitations on direct or beneficial ownership and restrictions
on transfer, in each case as may be appropriate to preserve the status of
the Company as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Shares will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Stock of the Company, and to all equity securities ranking
junior to such Preferred Shares with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company; (ii) on a parity with all
equity securities issued by the Company the terms of which specifically provide
that such equity securities rank on a parity with the Preferred Shares with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the Company; and (iii) junior to all equity securities issued by the Company
which the terms of such Preferred Shares specifically provide rank senior to the
Preferred Shares with respect to dividend rights or rights upon liquidation,
dissolution or winding up of the Company. The term "equity securities" does not
include convertible debt securities.
DIVIDENDS
Holders of the Preferred Shares of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of assets
of the Company legally available for payment, cash dividends at such rates and
on such dates as will be set forth in the applicable Prospectus Supplement. Each
such dividend shall be payable to holders of record as they appear on the share
transfer books of the Company on such record dates as shall be fixed by the
Board of Directors of the Company.
Dividends on any series of the Preferred Shares may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Shares for which dividends are non-cumulative, then the holders of
such series of the Preferred Shares will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Shares of any series are outstanding, no full dividends will be
declared or paid or set apart for payment on any capital stock of the Company of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Shares of such series for any period unless (i) if such series of
Preferred Shares has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Shares of
such series for all past dividend periods and the then current dividend period
or (ii) if such series of Preferred Shares does not have a cumulative dividend,
full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for such payment on the Preferred Shares of such
series. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon Preferred Shares of any series and the shares
of any other series of Preferred Shares ranking on a parity as to dividends with
the Preferred Shares of such series, all dividends declared upon Preferred
Shares of such
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series and any other series of Preferred Shares ranking on a parity as to
dividends with such Preferred Shares shall be declared pro rata so that the
amount of dividends declared per share of Preferred Shares of such series and
such other series of Preferred Shares shall in all cases bear to each other the
same ratio that accrued dividends per share on the Preferred Shares of such
series (which shall not include any accumulation in respect of unpaid dividends
for prior dividend periods if such Preferred Shares does not have a cumulative
dividend) and such other series of Preferred Shares bear to each other. No
interest, or sum of money in lieu of interest, shall be payable in respect of
any dividend payment or payments on Preferred Shares of such series which may be
in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends on the Preferred Shares of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Shares does not have a
cumulative dividend, full dividends on the Preferred Shares of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other shares of
capital stock ranking junior to the Preferred Shares of such series as to
dividends and upon liquidation, dissolution and winding up) shall be declared or
paid or set aside for payment nor shall any other distribution be declared or
made upon the Common Stock, or any other capital stock of the Company ranking
junior to or on a parity with the Preferred Shares of such series as to
dividends or upon liquidation, dissolution or winding up, nor shall any shares
of Common Stock, or any other shares of capital stock of the Company ranking
junior to or on a parity with the Preferred Shares of such series as to
dividends or upon liquidation, dissolution or winding up 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 such shares) by the
Company (except by conversion into or exchange for other capital stock of the
Company ranking junior to the Preferred Shares of such series as to dividends
and upon liquidation, dissolution and winding up).
Any dividend payment made on shares of a series of Preferred Shares shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Shares
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of shares of such
Preferred Shares 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 all accrued and unpaid dividends thereon (which
shall not, if such Preferred Shares do not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Shares of any series is payable only from the net
proceeds of the issuance of shares of capital stock of the Company, the terms of
such Preferred Shares may provide that, if no such shares of capital stock shall
have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Shares shall automatically and mandatorily be converted into the
applicable shares of capital stock of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
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Notwithstanding the foregoing, unless (i) if a series of Preferred Shares
has a cumulative dividend, full cumulative dividends on all shares of such
series of Preferred Shares 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, and
(ii) if a series of Preferred Shares does not have a cumulative dividend, full
dividends on all shares of the Preferred Shares of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current dividend period, no
shares of such series of Preferred Shares shall be redeemed unless all
outstanding shares of Preferred Shares of such series are simultaneously
redeemed; PROVIDED, HOWEVER, that the foregoing shall not prevent the purchase
or acquisition of Preferred Shares of such series to preserve the REIT status of
the Company or pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding shares of Preferred Shares of such series. In
addition, unless (i) if such series of Preferred Shares has a cumulative
dividend, full cumulative dividends on all outstanding shares of such series of
Preferred Shares 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, and (ii) if such
series of Preferred Shares does not have a cumulative dividend, full dividends
on the Preferred stock of such series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for the then current dividend period, the Company shall not
purchase or otherwise acquire directly or indirectly any shares of Preferred
Shares of such series (except by conversion into or exchange for capital shares
of the Company ranking junior to the Preferred Shares of such series as to
dividends and upon liquidation, dissolution and winding up); PROVIDED, HOWEVER,
that the foregoing shall not prevent the purchase or acquisition of shares of
Preferred Shares of such series to preserve the REIT status of the Company or
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding shares of Preferred Shares of such series.
If fewer than all of the outstanding shares of Preferred Shares of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
or for which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares), or by any other equitable manner determined by
the Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Shares of
any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Shares to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such Preferred
Shares are to be surrendered for payment of the redemption price; (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date; and (vi) the date upon which the holder's conversion rights, if any, as to
such shares shall terminate. If fewer than all the shares of Preferred Shares of
any series are to be redeemed, the notice mailed to each such holder thereof
shall also specify the number of shares of Preferred Shares to be redeemed from
each such holder. If notice of redemption of any Preferred Shares has been given
and if the funds necessary for such redemption have been set aside by the
Company in trust for the benefit of the holders of any Preferred Shares so
called for redemption, then from and after the redemption date dividends will
cease to accrue on such Preferred Shares, and all rights of the holders of such
shares will terminate, except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of capital
stock of the Company ranking junior to the Preferred Shares in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each
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series of Preferred Shares shall be entitled to receive out of assets of the
Company legally available for distribution to shareholders, liquidating
distributions in the amount of the liquidation preference per share, if any, set
forth in the applicable Prospectus Supplement, plus an amount equal to all
dividends accrued and unpaid thereon (which, in the case of Preferred Shares for
which dividends are noncumulative, shall not include any accumulation in respect
of unpaid dividends for prior dividend periods). After payment of the full
amount of the liquidating distributions to which they are entitled, the holders
of Preferred Shares will have no right or claim to any of the remaining assets
of the Company. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the Company are
insufficient to pay the amount of the liquidating distributions on all
outstanding shares of Preferred Shares and the corresponding amounts payable on
all shares of other classes or series of capital stock of the Company ranking on
a parity with the Preferred Shares in the distribution of assets, then the
holders of the Preferred Shares and all other such classes or series of capital
stock shall share ratably in any such distribution of assets in proportion to
the full liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Shares, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital stock ranking junior to
the Preferred Shares upon liquidation, dissolution or winding up, according to
their respective rights and preferences. For such purposes, the consolidation or
merger of the Company with or into any other corporation, trust or entity, or
the sale, lease or conveyance of all or substantially all of the property or
business of the Company, shall not be deemed to constitute a liquidation,
dissolution or winding up of the Company.
VOTING RIGHTS
Holders of the Preferred Shares will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Shares, so long as any
shares of Preferred Shares of such series remain outstanding, the Company will
not, without the affirmative vote or consent of the holders of at least
two-thirds of the shares of such series of Preferred Shares outstanding at the
time, given in person or by proxy, either in writing or at a meeting (such
series voting separately as a class), (i) authorize or create, or increase the
authorized or issued amount of, any class or series of capital stock ranking
prior to such series of Preferred Shares 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 Company into 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 the Articles or the designating amendment for such series of
Preferred Shares, whether by merger, consolidation or otherwise (an "Event"), so
as to materially and adversely affect any right, preference, privilege or voting
power of such series of Preferred Shares or the holders thereof, PROVIDED,
HOWEVER, that (x) any increase in the amount of the authorized Preferred Shares
or the creation or issuance of any other series of Preferred Shares, or (y) any
increase in the amount of authorized shares of such series or any other series
of Preferred Shares, in each case ranking on a parity with or junior to the
Preferred Shares of such series with respect to payment of dividends and the
distribution of assets upon liquidation, dissolution and winding up, shall not
be deemed to materially and adversely affect such rights, preferences,
privileges or voting powers.
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 such series of Preferred Shares shall
have been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
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CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Shares
is convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of shares of
Common Stock into which the shares of Preferred Shares are convertible, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Shares or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Shares.
RESTRICTIONS ON OWNERSHIP
The Preferred Shares are subject to certain restrictions on transfer, and
are subject to redemption (at redemption prices to be specified in the
applicable Prospectus Supplement) at the option of the Company, to the extent
the Board of Directors deems necessary to permit the Company to comply with the
real estate investment trust provisions of the Internal Revenue Code of 1986, as
amended. SEE "Restrictions on Transfer of Capital Stock." In addition, the
applicable Prospectus Supplement may set forth additional restrictions on
transfer and related provisions applicable to the Preferred Shares offered
thereby intended to permit the Company to comply with such provisions.
TRANSFER AGENT
The transfer agent and registrar for the Preferred Shares will be set forth
in the applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
The Company may issue receipts ("Depositary Receipts") for Depositary
Shares, each of which will represent a fractional interest of a share of a
particular series of Preferred Shares, as specified in the applicable Prospectus
Supplement. Preferred Shares represented by Depositary Shares will be deposited
under a separate Deposit Agreement (each, a "Deposit Agreement") among the
Company, the depositary named therein (such depositary or its successor, the
"Preferred Shares Depositary") and the holders from time to time of the
Depositary Receipts. Subject to the terms of the Deposit Agreement, each owner
of a Depositary Receipt will be entitled, in proportion to the fractional
interest of a share of the particular series of Preferred Shares represented by
the Depositary Shares evidenced by such Depositary Receipt, to all the rights
and preferences of the Preferred Shares represented by such Depositary Shares
(including dividend, voting, conversion, redemption and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the Preferred Shares by the Company to the Preferred Shares
Depositary, the Company will cause the Preferred Shares Depositary to issue, on
behalf of the Company, the Depositary Receipts. The following description of
certain terms of any Deposit Agreement and the related Depositary Shares and
Depositary Receipts does not purport to be complete, and is qualified in its
entirety by reference to the form of Deposit Agreement (including the form of
Depositary Receipt) which has been or will be filed or incorporated by reference
as an exhibit to the Registration Statement of which this Prospectus is a part
and is or will be available as described below under "Available Information."
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Shares Depositary will distribute all cash dividends or other
cash distributions received with respect to the Preferred Shares to the record
holders of the Depositary Receipts evidencing the
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related Depositary Shares in proportion to the number of such Depositary
Receipts owned by such holders, subject to certain obligations of holders to
file proofs, certificates and other information and to pay certain charges and
expenses to the Preferred Shares Depositary.
In the event of a distribution other than in cash, the Preferred Shares
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and expenses to the Preferred Shares Depositary, unless the Preferred Shares
Depositary determines that it is not feasible to make such distribution, in
which case the Preferred Shares Depositary may, with the approval of the
Company, sell such property and distribute the net proceeds from such sale to
such holders.
WITHDRAWAL OF SHARES
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Shares Depositary (unless the related Depositary Shares have
previously been called for redemption), the holder thereof will be entitled to
delivery at such office, to or upon such holder's order, of the number of whole
or fractional Preferred Shares and any money or other property represented by
the Depositary Shares evidenced by such Depositary Receipts. Holders of
Depositary Receipts will be entitled to receive whole or fractional shares of
the related Preferred Shares on the basis of the proportion of Preferred Shares
represented by each Depositary Share as specified in the applicable Prospectus
Supplement, but holders of such Preferred Shares will not thereafter be entitled
to receive Depositary Shares therefor. If the Depositary Receipts delivered by
the holder evidence a number of Depositary Shares in excess of the number of
Depositary Shares representing the number of Preferred Shares to be withdrawn,
the Preferred Shares Depositary will deliver to such holder at the same time a
new Depositary Receipt evidencing such excess number of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever the Company redeems Preferred Shares held by the Preferred Shares
Depositary, the Preferred Shares Depositary will redeem as of the same
redemption date the number of Depositary Shares representing the Preferred
Shares so redeemed, provided the Company shall have paid in full to the
Preferred Shares Depositary the redemption price of the Preferred Shares to be
redeemed plus an amount equal to any accrued and unpaid dividends (or, with
respect to Preferred Shares as to which dividends are non-cumulative, dividends
for the current dividend period only) thereon to the date fixed for redemption.
The redemption price per Depositary Share will be equal to the applicable
fraction of the redemption price and any other amounts per share payable with
respect to the Preferred Shares. If less than all the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be selected by the
Preferred Shares Depositary by lot or in such other manner as the Preferred
Share Depositary deems equitable.
After the date fixed for redemption, the Depositary Shares so called for
redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Receipts evidencing the Depositary Shares so called
for redemption will cease, except the right to receive any moneys payable upon
such redemption and any money or other property to which the holders of such
Depositary Receipts were entitled upon such redemption upon surrender thereof to
the Preferred Shares Depositary.
VOTING OF THE UNDERLYING PREFERRED SHARES
Upon receipt of notice of any meeting at which the holders of the Preferred
Shares are entitled to vote, the Preferred Shares Depositary will mail the
information contained in such notice of meeting to the record holders of the
Depositary Receipts evidencing the Depositary Shares which represent such
Preferred Shares. Each record holder of Depositary Receipts evidencing
Depositary Shares on the record
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date (which will be the same date as the record date for the Preferred Shares)
will be entitled to instruct the Preferred Shares Depositary as to the exercise
of the voting rights pertaining to the amount of Preferred Shares represented by
such holder's Depositary Shares. The Preferred Shares Depositary will vote the
amount of Preferred Shares represented by such Depositary Shares in accordance
with such instructions, and the Company will agree to take all reasonable action
which may be deemed necessary by the Preferred Shares Depositary in order to
enable the Preferred Shares Depositary to do so. The Preferred Shares Depositary
will abstain from voting the amount of Preferred Shares represented by such
Depositary Shares to the extent it does not receive specific instructions from
the holders of Depositary Receipts evidencing such Depositary Shares.
LIQUIDATION PREFERENCE
In the event of liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, each holder of a Depositary Receipt will be
entitled to the applicable fraction of the liquidation preference accorded each
Preferred Share represented by the Depositary Share evidenced by such Depositary
Receipt, as set forth in the applicable Prospectus Supplement.
CONVERSION OF PREFERRED SHARES
The Depositary Shares, as such, are not convertible into Common Shares or
any other securities or property of the Company. Nevertheless, if so specified
in the applicable Prospectus Supplement relating to an offering of Depositary
Shares, the Depositary Receipts may be surrendered by holders thereof to the
Preferred Shares Depositary with written instructions to the Preferred Shares
Depositary to instruct the Company to cause conversion of the Preferred Shares
represented by the Depositary Shares evidenced by such Depositary Receipts into
whole Common Shares, other Preferred Shares of the Company or other shares of
capital stock, and the Company has agreed that upon receipt of such instructions
and any amounts payable in respect thereof, it will cause the conversion thereof
utilizing the same procedures as those provided for delivery of Preferred Shares
to effect such conversion. If the Depositary Shares evidenced by a Depositary
Receipt are to be converted in part only, one or more new Depositary Receipts
will be issued for any Depositary Shares not to be converted. No fractional
Common Shares will be issued upon conversion, and if such conversion will result
in a fractional share being issued, an amount will be paid in cash by the
Company equal to the value of the fractional interest based upon the closing
price of the Common Shares on the last business day prior to the conversion.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares which
represent the Preferred Shares and any provision of the Deposit Agreement may at
any time be amended by agreement between the Company and the Preferred Shares
Depositary. However, any amendment that materially and adversely alters the
rights of the holders of Depositary Receipts will not be effective unless such
amendment has been approved by the existing holders of at least a majority of
the Depositary Shares evidenced by the Depositary Receipts then outstanding.
The Deposit Agreement may be terminated by the Company upon not less than 30
days' prior written notice to the Preferred Shares Depositary if (i) such
termination is to preserve the Company's status as a REIT or (ii) holders of a
majority of the outstanding Depositary Receipts issued thereunder consent to
such termination, whereupon the Preferred Shares Depositary shall deliver or
make available to each holder of Depositary Receipts, upon surrender of the
Depositary Receipts held by such holder, such number of whole or fractional
Preferred Shares as are represented by the Depositary Shares evidenced by such
Depositary Receipts. In addition, the Deposit Agreement will automatically
terminate if (i) all outstanding Depositary Shares shall have been redeemed,
(ii) there shall have been a final distribution in respect of the related
Preferred Shares in connection with any liquidation, dissolution or winding up
of the Company and such distribution shall have been distributed to the holders
of Depositary Receipts
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evidencing the Depositary Shares representing such Preferred Shares or (iii)
each related Preferred Share shall have been converted into capital stock of the
Company not so represented by Depositary Shares.
CHARGES OF PREFERRED SHARES DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Deposit Agreement. In addition, the
Company will pay the fees and expenses of the Preferred Shares Depositary in
connection with the performance of its duties under the Deposit Agreement.
However, holders of Depositary Receipts will pay the fees and expenses of the
Preferred Shares Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the Deposit
Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Preferred Shares 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 Preferred Shares Depositary, any such resignation or removal to take effect
upon the appointment of a successor Preferred Shares Depositary. A successor
Preferred Shares Depositary must be appointed within 60 days after delivery of
the notice of resignation or removal and must be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
MISCELLANEOUS
The Preferred Shares Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
the Preferred Shares Depositary with respect to the related Preferred Shares.
Neither the Preferred Shares Depositary nor the Company will be liable if,
by law or any circumstances beyond its control, it is prevented from or delayed
in performing its obligations under the Deposit Agreement. The obligations of
the Company and the Preferred Shares Depositary under the Deposit Agreement will
be limited to performing their duties thereunder in good faith and without gross
negligence or willful misconduct, and the Company and the Preferred Shares
Depositary will not be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Receipts, Depositary Shares or Preferred Shares
represented thereby unless reasonably satisfactory indemnity is furnished. The
Company and the Preferred Shares Depositary may rely on written advice of
counsel or accountants, or information provided by persons presenting Preferred
Shares represented thereby for deposit, holders of Depositary Receipts or other
persons believed to be competent to give such information, and on documents
believed to be genuine and signed by a proper party.
If the Preferred Shares Depositary shall receive conflicting claims,
requests or instructions from any holders of Depositary Receipts, on the one
hand, and the Company, on the other hand, the Preferred Shares Depositary shall
be entitled to act on such claims, requests or instructions received from the
Company.
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants for the purchase of Common
Shares. Common Stock Warrants may be issued independently or together with any
other Offered Securities offered by any Prospectus Supplement and may be
attached to or separate from such Offered Securities. Each series of Common
Stock Warrants will be issued under a separate warrant agreement (each, a
"Warrant Agreement") to be entered into between the Company and a warrant agent
specified in the applicable Prospectus Supplement (the "Warrant Agent"). The
Warrant Agent will act solely as an agent of the Company in connection with the
Common Stock Warrants of such series and will not assume any obligation or
relationship of agency or trust for or with any holders or beneficial owners of
Common Stock
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Warrants. The following sets forth certain general terms and provisions of the
Common Stock Warrants offered hereby. Further terms of the Common Stock Warrants
and the applicable Warrant Agreements will be set forth in the applicable
Prospectus Supplement.
The following description of certain terms of any Common Stock Warrants and
the related Warrant Agreement does not purport to be complete and is qualified
in its entirety by reference to the form of Warrant Agreement (including the
form of Common Stock Warrant) which has been or will be filed or incorporated by
reference as an exhibit to the Registration Statement of which this Prospectus
is a part and which is or will be available as described under "Available
Information."
The applicable Prospectus Supplement will describe the terms of the Common
Stock Warrants in respect of which such Prospectus Supplement is being
delivered, including, where applicable, the following: (i) the title of such
Common Stock Warrants; (ii) the aggregate number of such Common Stock Warrants;
(iii) the price or prices at which such Common Stock Warrants will be issued;
(iv) the number of Common Shares purchasable upon exercise of such Common Stock
Warrants; (v) the designation and terms of the other Offered Securities with
which such Common Stock Warrants are issued and the number of such Common Stock
Warrants issued with each such Offered Security; (vi) whether such Common Stock
Warrants will be attached to any other Offered Securities and the date, if any,
on and after which such Common Stock Warrants and the related Offered Securities
will be separately transferable; (vii) the price at which each Common Share
purchasable upon exercise of such Common Stock Warrants may be purchased; (viii)
the date on which the right to exercise such Common Stock Warrants shall
commence and the date on which such right shall expire; (ix) if applicable, the
minimum or maximum amount of such Common Stock Warrants which may be exercised
at any one time; (x) information with respect to book-entry procedures, if any;
and (xi) any other terms of such Common Stock Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such Common
Stock Warrants.
Reference is made to the section captioned "Description of Common Shares"
for a general description of the Common Shares to be acquired upon the exercise
of the Common Stock Warrants, including a description of certain restrictions on
the ownership of Common Shares. Common Shares that may be acquired upon the
exercise of Common Stock Warrants directly or constructively held by an investor
will be deemed by the Company to be outstanding (i) at the time of acquisition
of the Common Stock Warrants, and (ii) prior to the exercise of the Common Stock
Warrants, for purposes of determining the percentage ownership of Common Shares
held by such investor.
DESCRIPTION OF COMMON SHARES
GENERAL
The following description of the Common Shares sets forth certain general
terms and provisions of the Common Shares to which any Prospectus Supplement may
relate, including a Prospectus Supplement providing that Common Shares will be
issuable upon conversion of Debt Securities or Preferred Shares of the Company
or upon the exercise of Common Stock Warrants issued by the Company. The
statements below describing the Common Shares do not purport to be complete and
are in all respects subject to and qualified in their entirety by reference to
the applicable provisions of the Articles, the Bylaws and the Rights Agreement
dated as of August 14, 1989 (the "Rights Agreement") between the Company and
Chemical Mellon Shareholder Services (formerly Chemical Trust Company of
California ("Chemical")), as successor rights agent, as supplemented, copies of
which have been filed or incorporated by reference as exhibits to the
Registration Statement of which this Prospectus is a part and are available as
described above under "Available Information."
The Articles authorize the issuance of up to 50,000,000 Common Shares, $0.01
par value. As of December 31, 1996, there were 32,879,741 Common Shares issued
and outstanding. In addition, as of December 31, 1996, there were 967,336 Common
Shares reserved for issuance upon the exercise of options
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under the Company's stock option plans. The Common Shares are listed on the NYSE
under the symbol "BRE." Chemical is the transfer agent and registrar of the
Common Shares.
Holders of Common Shares are entitled to receive dividends ratably, when, as
and if declared by the Board of Directors of the Company, out of assets of the
Company legally available for payment, subject to any preferential rights of any
outstanding Preferred Shares. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the holders of Common
Shares are entitled to share ratably in any assets of the Company available for
distribution to shareholders after payment of or provision for all liabilities
of the Company and any amounts owing in respect of any outstanding Preferred
Shares. Common Shares do not have preemptive or conversion rights.
Holders of Common Shares are entitled to one vote for each share held on all
matters submitted to a vote of the holders of Common Shares and, except as
otherwise required by law or as provided by the express provisions of any series
of Preferred Shares, the holders of the Common Shares will exclusively possess
all voting power of the shareholders of the Company. Holders of Common Shares do
not have cumulative voting rights in the election of directors.
As described above under "Description of Preferred Shares," the Board of
Directors may, without the approval of the shareholders of the Company, from
time to time authorize the issuance of one or more series of Preferred Shares
with such rights, restrictions and other terms as may be determined by the Board
of Directors. The issuance of Preferred Shares, while providing flexibility in
connection with possible financings, acquisitions and other corporate purposes,
could, among other things, adversely affect the voting powers and other rights
and interests of holders of Common Shares and, under certain circumstances,
could make it more difficult for a third party to gain control of the Company
and could have the effect of delaying or preventing an attempted takeover of the
Company.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BYLAWS
Several provisions of the Articles and Bylaws may have the effect of
deterring a takeover of the Company. These provisions include (i) the
requirement that 70% of the outstanding shares of voting stock approve certain
mergers, sales of assets or other business combinations with shareholders owning
10% or more of then outstanding voting shares, unless the transaction is
recommended by a majority of the disinterested directors or meets certain fair
price criteria, (ii) a requirement that directors of the Company may be removed
by the shareholders only for "cause" and that vacancies in the Board of
Directors may be filled only by action of the remaining directors, (iii) the
establishment of a 70% vote to amend certain provisions of the Articles, (iv)
the classification of the Company's Board of Directors into three classes
serving staggered three-year terms, and (v) a prohibition on certain stock
repurchases by the Company from a holder of 5.0% or more of the outstanding
voting shares for a price exceeding fair market value unless certain conditions
are met.
Maryland law imposes certain restrictions on business combinations with a
greater than ten percent shareholder (a "Ten Percent Holder") unless a company's
charter states that it has elected not to be governed by such provisions. The
Company has made such an election in the Articles and therefore is not subject
to such provisions. These restrictions, when applicable, (a) impose a five-year
moratorium on such business combinations with a Ten Percent Holder in the
absence of Board of Directors approval preceding the date upon which such Ten
Percent Holder becomes a Ten Percent Holder, and (b) continue the moratorium,
following the expiration of the five-year period, unless (i) the transaction is
approved by 80% of all voting shares and 66.66% of all disinterested shares, or
(ii) (A) it satisfies certain fair pricing requirements, (B) no additional
shares were acquired by the Ten Percent Holder during the five-year period, and
(C) the company has not reduced its dividends with the approval of the Ten
Percent Holder during the five-year period.
Maryland law eliminates the voting rights of any shares of voting stock held
by a person to the extent such shares exceed 20% of the outstanding voting stock
of the company, and permits a company to redeem
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any such shares at the fair value of the stock, unless a company's charter
states that it has elected not to be governed by such provisions. The Company
has made such an election in the Articles and therefore is not subject to such
provisions.
SHAREHOLDER RIGHTS PLAN
On August 14, 1989, the Company's Board of Directors declared a dividend
distribution to shareholders of record on September 7, 1989 of one common share
purchase right (a "Right") for each outstanding Common Share. Each Right
entitles the holder to purchase from the Company one Common Share at a cash
purchase price of $90.00 per share, subject to adjustment. The terms of the
Rights are set forth in the Rights Agreement. The Rights are not exercisable
until the Distribution Date referred to below and will expire at the close of
business on September 7, 1999, unless earlier redeemed by the Company as
described below (the "Final Expiration Date").
Until the Distribution Date (or earlier redemption or expiration of the
Rights), (i) the Rights will be issued with newly issued Common Shares and (ii)
the Rights will be evidenced by the Common Share certificates and the transfer
of Common Share certificates will also constitute the transfer of the Rights
associated with such Common Shares. As soon as practicable after the
Distribution Date, Rights certificates will be mailed to holders of record of
the Common Shares as of the close of business on the Distribution Date.
The Rights will separate from the Common Shares and a Distribution Date (as
defined in the Rights Agreement) will occur, in general, upon the earlier of (i)
10 days following a public announcement that a person (an "Acquiring Person")
has acquired 32% or more of the outstanding Common Shares (the "Stock
Acquisition Date"), (ii) 10 business days following the commencement of a tender
or exchange offer for 40% or more of the outstanding Common Shares or (iii) 10
business days after the Board of Directors determines that a person has become
an "Adverse Person" (as defined in the Rights Agreement).
In the event that, among other things, (i) the Company survives a merger or
business combination with an Acquiring Person or an Adverse Person without any
exchange of its outstanding Common Shares for other securities, cash or
property, (ii) any person becomes the owner of 40% or more of the then
outstanding Common Shares, (iii) an Acquiring Person or an Adverse Person
engages in one of a number of self-dealing transactions set forth in the Rights
Agreement, or (iv) during such time as there is an Acquiring Person or an
Adverse Person, an event occurs which results in such person's ownership
interest being increased by more than 1%, each Right will entitle the holder to
receive, upon exercise, Common Shares having a value equal to two times the
exercise price of the Right. In the event that, at any time following the Stock
Acquisition Date or the date on which the Board of Directors determines that a
person is an Adverse Person, (i) the Company is acquired in a merger or other
business combination, (ii) the Company survives a merger or business combination
in which Common Shares are exchanged for other securities, cash or property or
(iii) 50% or more of the Company's assets or earning power is sold or
transferred, each Right will entitle the holder to receive, upon exercise,
common shares of the acquiring person having a value equal to two times the
exercise price of the Right.
In general, the Company may redeem the Rights in whole, but not in part, at
a price of $.01 per Right, at any time until ten days following the earlier of
the Stock Acquisition Date, the date on which a person is determined to be an
Adverse Person or the Final Expiration Date.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on redemption of the Rights by the Board of
Directors or on the acquisition by such person or group of a substantial number
of Rights.
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RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK; REDEMPTION
The Articles provide that any shareholder must, upon demand, disclose to the
Board of Directors of the Company in writing such information with respect to
direct and indirect ownership of the shares of the Company's stock as the Board
of Directors deems necessary to permit the Company to comply (or to verify
compliance) with the real estate investment trust ("REIT") provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
promulgated thereunder or the requirements of any other taxing authority. The
Articles further provide that, if the Board of Directors in good faith
determines that direct or indirect ownership of shares of the Company's stock
has or may become concentrated to an extent that would prevent the Company from
qualifying as a REIT (SEE "Certain Federal Income Tax Considerations"), the
Board of Directors is authorized to prevent the transfer of stock or to call for
redemption (by lot or by other means affecting one or more shareholders selected
in the sole discretion of the Board of Directors) of a number of shares of stock
sufficient in the opinion of the Board of Directors to maintain or bring the
direct or indirect ownership of the Company's stock into conformity with the
requirements for maintaining REIT status. If Common Shares are called for
redemption, the redemption price shall be (i) the last reported sale price of
the shares on the last business day prior to the redemption date on the
principal national securities exchange on which the shares are listed or
admitted to trading, (ii) if the shares are not so listed or admitted to trading
but are reported in the Nasdaq National Market ("NNM"), the last sale price on
such last business day prior to the redemption date, or if there is no sale on
such day then at the last bid price on such day as reported in the NNM, (iii) if
the shares are not so reported or listed or admitted to trading, the mean
between the highest bid and lowest asked prices on such last business day as
reported by the National Quotation Bureau Incorporated or a similar organization
selected by the Board of Directors for such purpose, or (iv) if not determined
by the foregoing methods, 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 of stock so called for redemption will cease to be entitled
to dividends, distributions, voting rights and other benefits with respect to
such shares, excepting only the right to payment of the redemption price without
interest.
The Bylaws provide that, whenever it is determined by the Board of Directors
to be reasonably necessary to protect the REIT tax status of the Company, the
Board of Directors may require a statement or affidavit from each holder or
proposed transferee of shares of stock setting forth the number of shares
already owned by such holder or transferee or any related person. The Bylaws
further provide that if, in the opinion of the Board of Directors, which will be
conclusive upon any proposed transferor or transferee of shares, any proposed
transfer would jeopardize the status of the Company as a REIT under the Code,
the Board of Directors may refuse to permit such transfer; that any attempt to
transfer as to which the Board of Directors has refused its permission will be
void and of no effect to transfer any legal or beneficial interest in the
shares; and that all contracts for the sale or other transfer of shares are
subject to these restrictions.
These provisions may have the effect of preventing acquisition of control of
the Company unless the Board of Directors determines that maintenance of REIT
status is no longer in the best interests of the Company.
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FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material federal income tax
considerations to the Company and its security holders relating to the Offered
Securities and the treatment of the Company as a REIT. It is not intended to
represent a detailed description of the federal income tax consequences
applicable to a particular shareholder of the Company in view of a shareholder's
particular circumstances, or to certain types of shareholders (including
insurance companies, tax-exempt organizations, financial institutions or
broker-dealers, foreign corporations and persons who are not citizens or
residents of the United States) subject to special treatment under the federal
income tax laws. The discussion in this section is based on current provisions
of the Code, current and proposed Treasury Regulations, court decisions and
other administrative rulings and interpretations, all of which are subject to
change either prospectively or retroactively. There can be no assurance that any
such change, future Code provision or other legal authority will not alter
significantly the tax considerations described herein.
EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT THE APPLICABLE PROSPECTUS
SUPPLEMENT, AS WELL AS HIS OWN TAX ADVISOR, REGARDING THE SPECIFIC TAX
CONSEQUENCES, IN VIEW OF SUCH PROSPECTIVE PURCHASER'S INDIVIDUAL CIRCUMSTANCES,
OF THE PURCHASE, OWNERSHIP AND SALE OF THE OFFERED SECURITIES, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE,
OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
GENERAL
The Company has elected to be taxed as a real estate investment trust under
Section 856 through 860 of the Code, commencing with its initial taxable year
ended since its formation on May 22, 1970. The Company believes that it is
organized and is operating in such a manner as to qualify for taxation as a REIT
under the Code. The Company intends to continue to operate in such a manner, but
no assurance can be given that it will operate in a manner so as to qualify or
remain qualified as a REIT.
In the opinion of Farella Braun & Martel LLP, based on certain assumptions
and representations, the Company was reorganized in Delaware in 1987 in
conformity with the requirements for qualification as a "Real Estate Investment
Trust" under the Code, and the Company has qualified as a REIT for its fiscal
years ending July 31, 1993, July 31, 1994, July 31, 1995, and its short taxable
year ending December 31, 1995 (the years, to the best knowledge of counsel, that
are still subject to audit by the Internal Revenue Service), and the Company is
organized and operates in a manner that will enable it to qualify to be taxed as
a REIT under the Code for its taxable year ending December 31, 1996 and
thereafter provided the Company continues to meet the asset composition, source
of income, shareholder diversification, distributions, record keeping, and other
requirements of the Code necessary for the Company to qualify as a REIT. It must
be emphasized that this opinion is based on various assumptions and is
conditioned upon certain representations made by the Company as to factual
matters including, but not limited to, those set forth below in this discussion
of "Federal Income Tax Considerations" and those concerning the Company's
business and properties as set forth in this Prospectus. Moreover, such
qualification and taxation as a REIT depends upon the Company's ability to meet,
through actual annual operating results, distribution levels and diversity of
stock ownership, the various qualification tests imposed under the Code
discussed below the results of which will not be reviewed by Farella Braun &
Martel LLP. Accordingly, no assurance can be given that the actual results of
the Company's operations for any particular taxable year will satisfy such
requirements. SEE "--Failure to Qualify."
TAXATION OF THE COMPANY
A REIT, such as the Company, generally will not be subject to federal
corporate income tax on its taxable income that is currently distributed to its
shareholders. This treatment substantially eliminates the
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"double taxation" (at the corporate and shareholder levels) that generally
results from an investment in a corporation. However, the Company will be
subject to federal income tax in several ways, including the following: First,
the Company will be taxed at regular corporate rates on any undistributed REIT
taxable income, including undistributed net capital gains. Second, under certain
circumstances, the Company may be subject to the "alternative minimum tax."
Third, if the Company has: (i) net income from the sale or other disposition of
"foreclosure property" which is held primarily for sale to customers in the
ordinary course of business or (ii) other non-qualifying income from foreclosure
property, it will be subject to tax on such income at the highest corporate
rate. Fourth, if the Company has net income from "prohibited transactions"
(which are, in general, certain sales or other dispositions of property held
primarily for sale to customers in the ordinary course of business other than
foreclosure property), such income will be subject to a 100% corporate level
tax. Fifth, if the Company should fail to satisfy the 75% gross income test or
the 95% gross income test (each discussed below) but has nonetheless maintained
its qualification as a REIT by satisfying certain other requirements, it will be
subject to a 100% tax on an amount equal to the gross income attributable to the
greater of the amount by which the Company fails the 75% or 95% test, multiplied
by a fraction intended to reflect the Company's profitability. Sixth, if the
Company should fail to distribute during each calendar year at least the sum of:
(i) 85% of its REIT ordinary income for such year, (ii) 95% of its REIT capital
gain net income for such year and (iii) any undistributed taxable income from
prior periods, it will be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. Seventh, if the
Company acquires any asset from a C corporation (i.e., generally a corporation
subject to full corporate-level tax) in a transaction in which the basis of the
asset in the Company's hands is determined by reference to the basis of the
asset (or any other property) in the hands of the C corporation, and the Company
recognizes gain on the disposition of such asset during the ten-year period
beginning on the date the asset was acquired by the Company, then the excess of
(i) the fair market value of such asset as of the beginning of such period over
(ii) the Company's adjusted basis in such asset as of the beginning of such
period will be subject to tax at the highest regular corporate tax rate.
REQUIREMENTS FOR QUALIFICATION
A REIT is defined in the Code as a corporation, trust or association: (i)
which is managed by one or more trustees or directors; (ii) the beneficial
ownership of which is evidenced by transferable shares or by transferable
certificates of beneficial interest; (iii) which would be taxable as a domestic
corporation, but for Sections 856 through 859 of the Code; (iv) which is neither
a financial institution nor an insurance company subject to certain provisions
of the Code; (v) the beneficial ownership of which is held by 100 or more
persons; (vi) not more than 50% in value of the outstanding stock of which is
owned during the last half of each taxable year, directly or indirectly, by or
for five or fewer individuals (as defined in the Code to include certain
entities); and (vii) which meets certain income and asset tests described below.
Conditions (i) through (iv) above must be met during the entire taxable year and
condition (v) must be met 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.
However, conditions (v) and (vi) do not apply until after the first taxable year
for which an election is made to be taxed as a REIT.
INCOME TESTS
In order to maintain qualification as a REIT, the Company annually must
satisfy three gross income requirements. First, at least 75% of the Company's
gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived directly or indirectly from investments relating to
real property or mortgages on real property (including "rents from real
property" and, in certain circumstances, interest ) or from certain types of
temporary investments. Second, at least 95% of the Company's gross income
(excluding gross income from prohibited transactions) for each taxable year must
be derived from such real property investments, dividends, interest and gain
from sale or disposition of stock or securities (or from any combination of the
foregoing). Third, short-term gain from the sale or other disposition of stock
or securities, gain from prohibited transactions and gain on the sale or other
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disposition of real property held for less than four years (apart from
involuntary conversions and sales of foreclosure property) must represent less
than 30% of the Company's gross income (including gross income from prohibited
transactions) for each taxable year.
Rents received by the Company will qualify as "rents from real property" in
satisfying the gross income requirements for a REIT described above only if
several conditions are met. First, the amount of rent must not be based in whole
or in part on the income or profits of any person. However, an amount received
or accrued generally will not be excluded from the term "rents from real
property" solely by reason of being based on a fixed percentage or percentages
of receipts or sales. Second, the Code provides that rents received from a
tenant will not qualify as "rents from real property" in satisfying the gross
income tests if the REIT, or an owner of 10% or more of the REIT, directly or
constructively owns 10% or more of such tenant (a "Related Party Tenant").
Third, if rent attributable to personal property leased in connection with a
lease of real property is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as "rents from real property." Finally, for rents received to qualify as
"rents from real property," the REIT generally must not operate or manage the
property or furnish or render services to the tenants of such property, other
than through an independent contractor from whom the REIT derives no income;
provided, however, the Company may directly perform certain services that are
"usually or customarily rendered" in connection with the rental of space for
occupancy only and are not otherwise considered "rendered to the occupant" of
the property. The Company does not and will not charge rent for any property
that is based in whole or in part on the income or profits of any person (except
by reason of being based on a percentage of receipts or sales, as described
above), and the Company does not and will not rent any personal property (other
than personal property leased in connection with the lease of real property, the
amount of which is less than 15% of the total rent received under the lease).
The Company directly performs services under certain of its leases, but such
services are not rendered to the occupant of the property.
Furthermore, these services are usual and customary management services
provided by landlords renting space for occupancy in the geographic areas in
which the Company owns property. To the extent that the performance of any
services provided by the Company would cause amounts received from its tenants
to be excluded from rents from real property, the Company will hire independent
contractors from whom the Company derives no revenue to perform such services.
The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based on a fixed percentage or percentages of receipts
or sales.
If the Company fails to satisfy one or both of the 75% or 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions generally will be available if the Company's failure to meet such
tests was attributable to reasonable cause and not to willful neglect, the
Company attaches a schedule of the sources of its income to its return, and any
incorrect information on the schedule was not attributable to fraud with intent
to evade tax. It is not possible, however, to determine whether, in all
circumstances, the Company would be entitled to the benefit of those relief
provisions. As discussed above in "-- General," even if those relief provisions
apply, a tax would be imposed with respect to excess net income.
ASSET TESTS
At the close of each quarter of its taxable year, the Company must also
satisfy three tests relating to the nature of its assets. First, at least 75% of
the value of the Company's total assets must be represented by interests in real
property, interests in mortgages on real property to the extent the mortgage
balance does not exceed the value of the associated real property, shares in
other REITs, cash, cash items, government securities and certain securities
attributable to temporary investment of new capital. Second,
39
<PAGE>
not more than 25% of the Company's total assets may be represented by securities
other than those in the 75% asset class. Third, of the investments included in
the 25% asset class, the value of any one issuer's securities owned by the
Company may not exceed 5% of the value of the Company's total assets and the
Company may not own more than 10% of any one issuer's outstanding voting
securities.
As set forth above, the ownership of more than 10% of the voting securities
of any one issuer by a REIT is prohibited by the asset tests. However, if the
Company owns stock in any subsidiaries that are "qualified REIT subsidiaries" as
defined in the Code, such subsidiaries will not be treated as separate
corporations for federal income tax purposes. Thus, the Company's ownership of
stock of a "qualified REIT subsidiary" will not cause the Company to fail the
asset tests.
ANNUAL DISTRIBUTION REQUIREMENTS
In order to qualify as a REIT, the Company is required to distribute
dividends (other than capital gain dividends) to its shareholders each year in
an amount at least equal to: (i) the sum of (a) 95% of the Company's "REIT
taxable income" (computed without regard to the dividends paid deduction and the
Company's net capital gain) and (b) 95% of the net income (after tax), if any,
from foreclosure property, minus (ii) the sum of certain items of non-cash
income. To the extent that the Company does not distribute all of its net
capital gain or distributes at least 95%, but less than 100%, of its "REIT
taxable income," as adjusted, it will be subject to tax thereon at regular
ordinary and capital gains corporate tax rates. Furthermore, if the Company
fails to distribute during each calendar year at least the sum of: (i) 85% of
its REIT ordinary income for such year, (ii) 95% of its REIT capital gain income
for such year and (iii) any undistributed taxable income from prior periods, the
Company will be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. The Company intends to make
timely distributions sufficient to satisfy these annual distribution
requirements.
It is possible that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement because of
timing differences between (i) the actual receipt of income and the actual
payment of deductible expenses and (ii) the inclusion of such income and
deduction of such expenses in arriving at the taxable income of the Company. In
the event that such timing differences occur, in order to meet the 95%
distribution requirement the Company may find it necessary to arrange for
short-term, or possibly long-term, borrowings or to pay dividends in the form of
taxable stock dividends.
Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement for a certain year by paying "deficiency
dividends" to shareholders in a later year, which may be included in the
Company's deduction for dividends paid for the earlier year. Thus, the Company
may be able to avoid being taxed on amounts distributed as deficiency dividends.
However, the Company will be required to pay interest based upon the amount of
any deduction taken for deficiency dividends.
FAILURE TO QUALIFY
If the Company fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable corporate alternative minimum tax) on its taxable
income at regular corporate rates. Distributions to shareholders in any year in
which the Company fails to qualify will not be deductible by the Company nor
will they be required to be made by the Company. In such event, to the extent of
current and accumulated earnings and profits, all distributions to shareholders
will be taxable as ordinary income, and, subject to certain limitations, a
corporate distributee may be eligible for the dividends received deduction.
Unless entitled to relief under specific statutory provisions, the Company will
also be disqualified from taxation as a REIT for the four taxable years
following the year during which qualification was lost. Whether the Company
would be entitled to such statutory relief cannot be foreseen.
40
<PAGE>
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS
As long as the Company qualifies as a REIT, distributions made to its
taxable domestic shareholders out of current or accumulated earnings and profits
(and not designated as capital gain dividends) will result in ordinary income to
such shareholders. Corporate shareholders will not be entitled to the "dividends
received" deduction. Distributions that are designated as capital gain dividends
will be taxed as long-term capital gains (to the extent they do not exceed the
Company's actual net capital gain for the taxable year) without regard to the
period for which the shareholder has held its shares. However, corporate
shareholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income. Distributions by the Company in excess of its
current and accumulated earnings and profits will not be taxable to a
shareholder to the extent that such distributions do not exceed the adjusted
basis of the shareholder's shares, but rather, will be a non-taxable reduction
in a shareholder's adjusted basis in such shares to the extent thereof and
thereafter will be taxed as capital gain.
Any dividend declared by the Company in October, November or December of any
year payable to a shareholder of record on a specified date in any such month
will be treated as both paid by the Company and received by the shareholder on
or before December 31 of such year, provided that the dividend is actually paid
by the Company by January 31 of the following calendar year.
Shareholders may not include any net operating losses or capital losses of
the Company in their individual income tax returns. In general, any loss upon
the sale or exchange of shares by a shareholder who has held such shares for six
months or less (after applying certain holding period rules) will be treated as
a long-term capital loss to the extent distributions from the Company are
required to be treated by such shareholder as long-term capital gain.
BACKUP WITHHOLDING
The Company will report to its domestic shareholders and to the IRS the
amount of dividends paid during each calendar year, and the amount of tax
withheld, if any. Under the backup withholding rules, a shareholder may be
subject to backup withholding at the rate of 31% with respect to dividends paid
unless such holder: (i) is a corporation or comes within certain other exempt
categories and, when required, demonstrates this fact, or (ii) provides a
taxpayer identification number, certifies to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. A shareholder that does not provide the Company with a
correct taxpayer identification number may also be subject to penalties imposed
by the IRS. Any amount paid as backup withholding will be creditable against the
shareholder's income tax liability. In addition, the Company may be required to
withhold a portion of capital gain distributions to any shareholders who fail to
certify their non-foreign status to the Company. SEE "--Taxation of Foreign
Shareholders."
TAXATION OF PENSION TRUSTS
For purposes of the "five or fewer" test described above, beneficiaries of a
domestic pension trust that owns shares in the Company generally will be treated
as owning such shares in proportion to their actuarial interests in the trust.
In addition, amounts distributed by the Company to a tax-exempt pension trust
generally do not constitute "unrelated business taxable income" ("UBTI") to such
trust unless the trust owns more than ten percent of the Company's Common
Shares, in which case a portion of such amounts distributed may be treated as
UBTI.
TAXATION OF FOREIGN SHAREHOLDERS
The rules governing United States federal income taxation of nonresident
alien individuals or foreign corporations, foreign partnerships and other
foreign shareholders (collectively, "Non-U.S. Shareholders") are complex and no
attempt is made herein to provide more than a summary of such rules. Prospective
Non-U.S. Shareholders should consult with their own tax advisors to determine
the impact of federal, state
41
<PAGE>
and local income tax laws with regard to an investment in the Common Shares,
including any reporting requirements.
It is currently anticipated that the Company will qualify as a "domestically
controlled REIT" (i.e., a REIT in which at all times during a specified testing
period less than 50% of the value of the capital stock of which is owned
directly or indirectly by Non-U.S. Shareholders) and therefore gain from the
sale of Common Shares by a Non-U.S. Shareholder generally will not be subject to
United States taxation unless such gain is treated as "effectively connected"
with the Non-U.S. Shareholder's United States trade or business.
Distributions that are not attributable to gain from the sale or exchange by
the Company of United States real property interests (and are not designated as
capital gain dividends) ("Non-Capital Distributions") will be treated as
dividends of ordinary income to the extent that they are made out of current or
accumulated earnings and profits of the Company. Such distributions generally
will be subject to a United States withholding tax equal to 30% of the gross
amount of the distribution, subject to reduction or elimination under an
applicable tax treaty. However, if dividends from the investment in the shares
are treated as "effectively connected" with the Non-U.S. Shareholder's conduct
of a United States trade or business, such dividends will be subject to regular
U.S. income taxation (foreign corporations may also be subject to the 30% branch
profits tax). The Company will withhold United States income tax at the rate of
30% on the gross amount of any Non-Capital Distributions paid to a Non-U.S.
Shareholder unless: (i) a lower treaty rate applies and the Non-U.S. Shareholder
files certain information evidencing its entitlement to such lower treaty rate,
or (ii) the Non-U.S. Shareholder files an IRS Form 4224 with the Company
claiming that the distribution is "effectively connected" income. Distributions
which exceed current and accumulated earnings and profits of the Company will
not be taxable to the extent that they do not exceed the adjusted basis of
shares, but rather will reduce (but not below zero) the adjusted basis of such
shares. To the extent that such distributions exceed the adjusted basis of a
Non-U.S. Shareholder's shares, they generally will give rise to United States
tax liability if the Non-U.S. Shareholder would otherwise be subject to tax on
gain from the sale or disposition of his shares in the Company, as described
above. Because the Company will withhold 30% (or lower treaty rate) of all
Non-Capital Distributions, to the extent the Company makes distributions in
excess of its earnings and profits, generally the amount withheld will exceed a
Non-U.S. Shareholder's U.S. tax liability on such distributions and such
shareholder can seek a refund from the IRS to the extent the amount withheld on
its distributions exceeds its U.S. tax liability.
Distributions by the Company to a Non-U.S. Shareholder that are attributable
to gain from sales or exchanges by the Company of a United States real property
interest are subject to income and withholding tax under the provisions of the
Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"). Under FIRPTA,
those distributions, if any, which are treated as gain recognized from the sale
of a United States real property interest, are taxed as income "effectively
connected" with a United States business. Non-U.S. Shareholders would thus be
taxed at the normal capital gain rates applicable to U.S. shareholders (subject
to the applicable alternative minimum tax and a special alternative minimum tax
for nonresident alien individuals). Also, distributions subject to FIRPTA may be
subject to a 30% branch profits tax in the hands of a foreign corporate
shareholder not entitled to treaty exemption. The Company will withhold 35% of
any distribution to a Non-U.S. Shareholder that could be designated by the
Company as a capital gain dividend. This amount is creditable against the
Non-U.S. Shareholder's FIRPTA tax liability. A refund may be available if the
amount withheld exceeds the Non-U.S. Shareholder's federal tax liability.
OTHER TAX CONSEQUENCES
The Company and its shareholders may be subject to state or local taxation
in various jurisdictions, including those in which it or they transact business
or reside. The state and local tax treatment of the Company and its shareholders
may not conform to the federal income tax consequences discussed above.
Prospective shareholders should consult their own tax advisors regarding the
effect of state and local tax laws on an investment in the Company.
42
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to one or more underwriters for
public offering and sale by them or may sell the Offered Securities to investors
directly or through agents or through dealers or through a combination of any
such methods of sale. Any such underwriter or agent involved in the offer and
sale of the Offered Securities will be named in the applicable Prospectus
Supplement.
Underwriters may offer and sell the Offered Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale or at prices related to the prevailing market prices at the
time of sale, or at negotiated prices. The Company also may, from time to time,
authorize agents to offer and sell the Offered Securities upon the terms and
conditions set forth in an applicable Prospectus Supplement. In connection with
the sale of Offered Securities, underwriters and agents may be deemed to have
received compensation from the Company in the form of discounts or commissions
and may also receive commissions from purchasers of Offered Securities for whom
they may act as agents. Underwriters may sell Offered Securities to or through
dealers, and such dealers may receive compensation in the form of discounts,
concessions from the underwriters or commissions from the purchasers for whom
they may act as agent.
Any compensation paid by the Company to underwriters or agents in connection
with the offering of Offered Securities and any discounts, concessions or
commissions allowed by underwriters to participating dealers will be set forth
in the applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Offered Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Offered Securities may be deemed to be
underwriting discounts and commissions under the Securities Act. Underwriters,
dealers and agents may be entitled, under agreements entered into with the
Company, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Offered Securities from the
Company pursuant to delayed delivery contracts ("Contracts") providing for
payment and delivery on such future date or dates stated in such Prospectus
Supplement. Each Contract will be for an amount not less than, and the aggregate
principal amount of Securities sold pursuant to Contracts shall be not less or
more than, the respective amounts stated in the applicable Prospectus
Supplement. Institutions with whom 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 Contracts 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) if the Offered Securities
are being sold to underwriters, the Company shall have sold to such underwriters
the total amount of the Offered Securities less the amount thereof covered by
Contracts.
Certain of the underwriters, dealers and agents and their affiliates may
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
EXPERTS
The financial statements of BRE Properties, Inc. incorporated by reference
in BRE Properties, Inc.'s Transition Report (Form 10-K) for the five months
ended December 31, 1995, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
herein by reference. The financial statements of Real Estate Investment Trust of
California appearing in BRE Properties, Inc.'s Current Report on Form 8-K dated
March 15, 1996 and the Statement of Gross Income and Direct Operating Expenses
of Foster's Landing Apartments appearing in BRE
43
<PAGE>
Properties, Inc.'s Current Report on Form 8-K/A dated December 9, 1996 have been
audited by Ernst & Young LLP, as set forth in their reports included therein and
incorporated herein by reference. All such financial statements referred to
above are incorporated herein by reference in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Offered Securities as well as certain legal matters
described under "Federal Income Tax Considerations" will be passed upon for the
Company by Farella Braun & Martel LLP, San Francisco, California. Brown & Wood
LLP, San Francisco, California, will act as counsel for any underwriters or
agents.
44
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table is an itemized listing of expenses to be incurred by BRE
Properties, Inc. (the "Company") in connection with the issuance of the Offered
Securities being registered hereby, other than commissions (all amounts, other
than the SEC Registration Fee, are estimates):
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 90,910
NYSE Listing Fee.................................................. 28,750
Printing and Engraving Costs...................................... 200,000
Legal Fees and Expenses........................................... 150,000
Blue Sky Fees and Expenses........................................ 20,000
Rating Agency Fees................................................ 25,000
Accounting Fees and Expenses...................................... 100,000
Miscellaneous..................................................... 5,340
---------
Total............................................................. $ 620,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As authorized by Section 2-418 of the General Corporation Law of the State
of Maryland (the "Maryland Corporation Law"), Article VI of the Company's Bylaws
provides that the Company shall indemnify any officer or director who was or is
a party to any threatened, pending or completed action, suit, proceeding or
investigation, and whether external or internal to the Company (other than an
action brought by or in the right of the Company) or brought by or in the right
of the Company to procure a judgment in its favor, by reason of the fact that he
or she is or was an officer or director, against all expenses, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes or
penalties and amounts to be paid or to be paid in settlement) actually and
reasonably incurred by the officer or director in connection with such action,
suit, proceeding or investigation, or any appeal therein. However, there will be
no such indemnification if it is established by adjudication that (i) the act or
omission of the officer or director was material to the matter giving rise to
the proceeding and (A) was committed in bad faith or (B) was the result of
active and deliberate dishonesty; (ii) the officer or director actually received
an improper personal benefit in money, property or services; or (iii) with
respect to any criminal action or proceeding, the officer or director had no
reasonable cause to believe that his or her conduct was unlawful.
Notwithstanding the foregoing, an officer or director may receive
indemnification where a court of appropriate jurisdiction determines that such
person is fairly and reasonably entitled to indemnity for any expense, liability
or loss which the court shall deem proper; provided, however, that no
indemnification for any liability or loss (other than expenses) shall in any
event be made to the extent that such person has been adjudged to have actually
received an improper personal benefit. Article VI of the Articles provides that,
to the fullest extent permitted by law, no director or officer of the Company
shall be personally liable to the Company, any subsidiary thereof or any of its
shareholders for money damages.
The Registrant maintains a directors' and officers' insurance policy which
insures the directors and officers of the Registrant from claims arising out of
an alleged wrongful act by such persons in their respective capacities as
directors and officers of the Registrant, subject to certain exceptions.
The Registrant has entered into indemnification agreements with its
directors and officers.
II-1
<PAGE>
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement (1)
4.1 Amended and Restated Articles of Incorporation (4)
4.2 Bylaws (5)
4.3 Rights Agreement between the Registrant and Bank of America, N.T. & S.A., dated as of August 14, 1989
(6)
4.4 Supplement to Rights Agreement between the Registrant and Chemical Trust Company of California dated as
of July 30, 1992
4.5 Form of Senior Indenture (2)
4.6 Form of Subordinated Indenture (2)
4.7 Form of Senior Debt Security (2)
4.8 Form of Subordinated Debt Security (2)
4.9 Form of Common Stock Warrant Agreement and Form of Warrant (1)
4.10 Specimen Certificate for Common Shares (7)
4.11 Form of Certificate for Preferred Shares (1)
4.12 Form of Designating Amendment for Preferred Shares (1)
4.13 Form of Deposit Agreement and Depositary Receipt (1)
5 Opinion of Farella Braun & Martel LLP regarding the validity of the securities being registered
8 Opinion of Farella Braun & Martel LLP regarding tax matters
12 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Farella Braun & Martel LLP (included as part of Exhibits 5 and 8)
23.2 Consent of Ernst & Young LLP
24 Power of Attorney (included on signature page)
25.1 Statement of Eligibility of the Senior Trustee on Form T-1 (3)
25.2 Statement of Eligibility of the Subordinated Trustee on Form T-1 (3)
</TABLE>
- ------------------------
(1) To be filed by amendment or as an exhibit to a document to be incorporated
by reference herein in connection with an offering of specific Offered
Securities.
(2) To be filed by amendment.
(3) To be filed in accordance with Section 305(b)(2) of the Trust Indenture Act
of 1939.
(4) Incorporated by reference to Exhibit 3.1 to the Registrant's Current Report
on Form 8-K dated March 15, 1996.
(5) Incorporated by reference to Exhibit 4.5 to the Registrant's Registration
Statement on Form S-4 (No. 33-65365), filed with the Securities and Exchange
Commission on December 22, 1995, as amended.
(6) Incorporated by reference to Exhibit 4.1 to the Registrant's Current Report
on Form 8-K dated August 14, 1989.
(7) Incorporated by reference to Exhibit 4.3 to the Registrant's Registration
Statement on Form S-3 (No. 33-58802), filed with the Securities and Exchange
Commission on February 22, 1993, as amended.
II-2
<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 of 1933, as amended (the "Securities Act");
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment hereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or
any material change to such information in this 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 with or furnished to
the Commission by the Company pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") that are
incorporated by reference in this 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 Company's
Annual Report pursuant to Section 13(a) or Section 15(d) of the Exchange Act
that is incorporated by reference into this Registration Statement shall be
deemed to be a new registration statement relating to the securities offered
herein, 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
Company pursuant to the foregoing provisions, or otherwise, the Company 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 Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company 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>
(d) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
Subsection (a) of Section 310 of the Trust Indenture Act (the "Act") in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, State of California, on the 23rd day
of January, 1997.
BRE PROPERTIES, INC.
By: /s/ FRANK C. MCDOWELL
-----------------------------------------
Frank C. McDowell
PRESIDENT AND CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Frank C. McDowell and LeRoy E. Carlson, and each
of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement and to sign any related registration
statements which may be filed under Rule 462(b) of the Securities Act of 1933,
and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be done,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorney-in-fact and agents or any of
them, or their or his substitutes or substitute, 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 the 23rd day of January, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------- --------------------------------------- -------------------
<C> <S> <C>
/s/ JOHN MCMAHAN
---------------------------------------- Director, Chairman of the Board January 23, 1997
John McMahan
/s/ FRANK C. MCDOWELL President, Chief Executive Officer and
---------------------------------------- Director (Principal Executive January 23, 1997
Frank C. McDowell Officer)
Executive Vice President, Chief
/s/ LEROY E. CARLSON Financial Officer and Secretary
---------------------------------------- (Principal Financial Officer and January 23, 1997
LeRoy E. Carlson Principal Accounting Officer)
/s/ WILLIAM E. BORSARI
---------------------------------------- Director January 23, 1997
William E. Borsari
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------- --------------------------------------- -------------------
<C> <S> <C>
/s/ C. PRESTON BUTCHER
---------------------------------------- Director January 23, 1997
C. Preston Butcher
/s/ L. MICHAEL FOLEY
---------------------------------------- Director January 23, 1997
L. Michael Foley
/s/ ROGER P. KUPPINGER
---------------------------------------- Director January 23, 1997
Roger P. Kuppinger
/s/ MALCOM R. RILEY
---------------------------------------- Director January 23, 1997
Malcom R. Riley
/s/ GREGORY M. SIMON
---------------------------------------- Director January 23, 1997
Gregory M. Simon
/s/ ARTHUR G. VON THADEN
---------------------------------------- Director January 23, 1997
Arthur G. von Thaden
</TABLE>
II-6
<PAGE>
BRE PROPERTIES, INC.
EXHIBIT INDEX
TO REGISTRATION STATEMENT ON FORM S-3
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT LOCATION
- ----------- ------------------------------------------------------------------------------ ----------------------
<C> <S> <C>
4.4 Supplement to Rights Agreement between the Registrant and Chemical Trust Contained herein
Company of California dated as of July 30, 1992.............................
5 Opinion of Farella Braun & Martel LLP regarding the validity of the securities Contained herein
being registered............................................................
8 Opinion of Farella Braun & Martel LLP regarding tax matters................... Contained herein
12 Computation of Ratio of Earnings to Fixed Charges............................. Contained herein
23.1 Consent of Farella Braun & Martel LLP......................................... Included as parts of
Exhibits 5 and 8
23.2 Consent of Ernst & Young LLP.................................................. Contained herein
24 Power of Attorney............................................................. Included on signature
page
</TABLE>
<PAGE>
EXHIBIT 4.4
SUPPLEMENT TO RIGHTS AGREEMENT
THIS SUPPLEMENT TO RIGHTS AGREEMENT, dated as of July 30, 1992 (the
"Supplement"), is entered into between BRE PROPERTIES, INC., a Delaware
corporation (the "Company") and CHEMICAL TRUST COMPANY OF CALIFORNIA
("Chemical").
BACKGROUND
1. Pursuant to the Rights Agreement dated as of August 14, 1989 (the
"Agreement"), between the Company and Bank of America, N.T. & S.A. ("BofA"), the
Board of Directors of the Company declared a dividend distribution of one common
share purchase right (a "Right") for each share of the Company's Class A common
stock ("Common Stock") outstanding at the close of business on September 7,
1989.
2. BofA has provided the Company with notice of its resignation as Rights
Agent under the Agreement, effective July 31, 1992. The Company has now agreed
to appoint Chemical as the successor to BofA under the Agreement.
NOW, THEREFORE, IT IS AGREED:
1. APPOINTMENT OF SUCCESSOR RIGHTS AGENT. Pursuant to Section 21 of the
Agreement, effective August 1, 1992 (the "Effective Date"), the Company hereby
appoints Chemical to act as successor Rights Agent for the Company and the
holders of the Rights in accordance with the terms of the Agreement, and
Chemical hereby accepts such appointment. From and after the Effective Date,
Chemical shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent under the
Agreement without further act or deed.
2. NOTICES. On or before the Effective Date, the Company shall file
written notice of the appointment of Chemical as successor Rights Agent with
BofA and with each transfer agent of the Common Stock. From and after the
Effective Date, legends placed on certificates representing shares of Common
Stock pursuant to Section 3 of the Agreement shall identify Chemical as the
Rights Agent.
3. EFFECT. The Agreement, as modified by this Supplement, is in all
respects ratified.
<PAGE>
IN WITNESS WHEREOF, the parties hereof have caused this Supplement to
Rights Agreement to be duly executed as of the day and year first above written.
BRE PROPERTIES, INC.
a Delaware corporation
By: /s/ Ellen G. Breslauer
-------------------------------
Its: Secretary and Treasurer
------------------------------
CHEMICAL TRUST COMPANY OF CALIFORNIA,
as successor Rights Agent
By: /s/ Frank Rico
-------------------------------
Its: Assistant Vice President
-------------------------------
<PAGE>
EXHIBIT 5
[Farella Braun & Martel LLP letterhead]
DIRECT: 415/954-4400
January 23, 1997
BRE Properties, Inc.
One Montgomery Street, Suite 2500
Telesis Tower
San Francisco, CA 94104
Re: Legality of Securities to be Registered
Under Registration Statement on Form S-3
----------------------------------------
Ladies and Gentlemen:
We have acted as counsel for BRE Properties, Inc., a Maryland
corporation (the "Company"), in connection with the Company's Registration
Statement on Form S-3 (the "Registration Statement") being filed with the
Securities and Exchange Commission under the Securities Act of 1933, as
amended, on or about the date hereof, with respect to the offering from time
to time by the Company of an aggregate of up to $300,000,000 of the
following: (i) its unsecured debt securities (the "Debt Securities"), which
may be senior debt securities or subordinated debt securities, (ii) shares of
its Preferred Stock, $0.01 par value ("Preferred Shares"), (iii) depositary
shares representing fractional interests in Preferred Shares, (iv) warrants
("Common Stock Warrants") to purchase shares of its Common Stock, $0.01 par
value ("Common Shares") or (v) Common Shares (the securities under
subsections (i) through (v) hereof being collectively referred to herein as
the "Securities"). All capitalized terms not defined herein shall have the
meanings ascribed to them in the Registration Statement.
We have examined the Articles of Incorporation of the Company, as amended
and restated to the date hereof and on file with the Maryland State Department
of Assessments and Taxation; the Bylaws of the Company; such records of
corporate proceedings of the Company as we deem appropriate for the purposes of
this opinion; and the Registration Statement and the exhibits thereto.
We express no opinion concerning the laws of any jurisdictions other than
the laws of the United States of America and the Maryland General Corporation
Law.
<PAGE>
BRE Properties, Inc.
January 23, 1997
Page 2
Based on the foregoing, we are of the opinion that, when specifically
authorized for issuance by the Company's Board of Directors or an authorized
committee thereof ("Authorizing Resolution") and when issued as described in the
Registration Statement and a Prospectus Supplement that is consistent with the
Authorizing Resolution, and upon receipt by the Company of the consideration
provided for in the Authorizing Resolution, the Securities will be legally
issued, fully paid and nonassessable, and in the case of Debt Securities,
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting the rights and remedies of creditors, and the
effect of general principles of equity, whether enforcement is considered in a
proceeding in equity or at law, and the discretion of the court before which any
proceeding therefor may be brought.
The foregoing assumes that all requisite steps will be taken to comply with
the requirements of the Securities Act and applicable requirements of state laws
regulating the offer and sale of securities.
We hereby consent to being named as counsel to the Company in the
Registration Statement, to the references therein to our firm under the caption
"Legal Matters" and to the inclusion of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ FARELLA BRAUN & MARTEL LLP
Farella Braun & Martel LLP
FBM:ks
<PAGE>
EXHIBIT 8
[Farella Braun & Martel LLP letterhead]
DIRECT: (415) 954-4465
January 23, 1997
BRE Properties, Inc.
One Montgomery Street
Telesis Tower, Suite 2500
San Francisco, CA 94104
Re: Form S-3 Shelf Registration of Securities of BRE
Properties, Inc. (the "Company")
--------------------------------
Ladies and Gentlemen:
In connection with the registration statement on Form S-3 being filed by
you on January 23, 1997, with the Securities and Exchange Commission (the
"Registration Statement"), you have requested our opinion regarding whether the
Company has been organized in conformity with the requirements for qualification
as a real estate investment trust ("REIT"), and whether its method of operation
has enabled the Company to meet, and will enable it to continue to meet, the
requirements for qualification and taxation as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"). This opinion is based on various
assumptions and is conditioned upon certain representations made by the Company
as to factual matters as set forth in the Registration Statement and the
registration statements on Forms S-3 and S-4 previously filed with the
<PAGE>
BRE Properties, Inc.
January 23, 1997
Page 2
Securities and Exchange Commission (the "Prior Registrations"). In addition,
the Company has provided a representation letter certifying, among other items,
that it has elected to be taxed as a REIT since its formation on May 22, 1970,
and that the Company has operated and will continue to operate in accordance
with the method of operation described in the Registration Statement and the
Prior Registrations.
Based on such assumptions and representations, it is our opinion that
the Company has qualified as a REIT for its fiscal years ending July 31,
1993, July 31, 1994, July 31, 1995, and its short taxable year ended December
31, 1995 (the years, to the best knowledge of counsel, that are still
subject to audit by the Internal Revenue Service), and the Company is
organized and operates in a manner that will enable it to qualify to be taxed
as a REIT under the Code for its taxable year ending December 31, 1996 and
thereafter provided the Company continues to meet the asset composition,
source of income, shareholder diversification, distributions, recordkeeping,
and other requirements of the Code necessary for the Company to qualify as a
REIT. No opinion is expressed as to any matter not discussed herein.
This opinion is based on various statutory provisions and regulations
promulgated thereunder, in effect on the date hereof, and the interpretations of
such provisions and regulations by the Internal Revenue Service and the courts
having jurisdiction over such matters, all of which are subject to change either
prospectively or retroactively. Also, any variation from the factual statements
set forth in the Registration Statement, the Prior Registrations or the written
representations made by the Company in connection with this opinion may affect
the conclusions stated herein. Moreover, the Company's qualification and
taxation as a REIT depends upon the
<PAGE>
BRE Properties, Inc.
January 23, 1997
Page 3
Company's ability to meet, through actual annual operating results, distribution
levels and diversity of stock ownership, the various qualification tests imposed
under the Code, the results of which will not be reviewed by Farella Braun &
Martel LLP. Accordingly, no assurance can be given that the actual results of
the Company's operations for any one taxable year will satisfy such
requirements. We wish to point out that our opinion is not binding on the
Internal Revenue Service and, without limiting our opinion, we note that there
can be no assurance that all of the requirements for qualification as a REIT for
any particular taxable year have in fact been met until the return for such
taxable year has been reviewed by the Internal Revenue Service or the period for
such review has expired.
This opinion is furnished to you solely for use in connection with the
Registration Statement. We hereby consent to the filing of this opinion as an
Exhibit to the Registration Statement.
Very truly yours,
/s/ FARELLA BRAUN & MARTEL LLP
Farella Braun & Martel LLP
BPD:cmc
<PAGE>
EXHIBIT 12
BRE PROPERTIES, INC.
STATEMENT OF COMPUTATION OF RATIOS
OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, -----------------------------------------------------
1996 1995 1994 1993 1992 1991
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net income before gains on sales and provision for
investment loss...................................... 27,003 23,789 22,566 19,531 14,538 15,079
Fixed charges:
Interest and principal............................... 11,219 7,973 5,599 5,656 6,074 6,253
Other................................................ 81 105 101 98 95 91
------ --------- --------- --------- --------- ---------
11,300 8,078 5,700 5,754 6,169 6,344
Net income before gains on sales and provision for
investment loss and fixed charges.................... 38,303 31,867 28,266 25,285 20,707 21,423
Divided by fixed charges............................... 11,300 8,078 5,700 5,754 6,169 6,344
Ratio of earnings to fixed charges..................... 3.39 3.95 4.96 4.39 3.36 3.38
</TABLE>
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of BRE Properties,
Inc. for the registration of $300,000,000 in Debt Securities, Preferred
Stock, Common Stock, Common Stock Warrants and Depositary Shares, and to the
incorporation by reference therein of our report dated August 9, 1996, with
respect to the financial statements of BRE Properties, Inc. included in its
Transition Report on Form 10-K for the five months ended December 31, 1995,
our report dated March 15, 1996 with respect to the financial statements of
Real Estate Investment Trust of California included in BRE Properties, Inc.'s
Current Report on Form 8-K/A dated March 15, 1996, and our report dated
December 9, 1996 with respect to the Statement of Gross Income and Direct
Operating Expenses of Foster's Landing Apartments including in BRE
Properties, Inc.'s Current Report on Form 8-K/A dated December 9, 1996, filed
with the Securities and Exchange Commission.
/s/Ernst & Young LLP
San Francisco, California
January 22, 1997
