<PAGE> 1
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 22, 1998)
4,000,000 Shares
Equity Office Properties Trust
8 5/8% SERIES C CUMULATIVE REDEEMABLE PREFERRED SHARES OF BENEFICIAL INTEREST
(Liquidation Preference $25 Per Share)
------------------------
DISTRIBUTIONS ON THE SERIES C PREFERRED SHARES WILL BE CUMULATIVE FROM THE DATE
OF ORIGINAL ISSUANCE AND WILL BE PAYABLE QUARTERLY AT THE RATE OF 8 5/8% OF THE
LIQUIDATION PREFERENCE PER ANNUM, STARTING MARCH 15, 1999. THE SERIES C
PREFERRED SHARES WILL NOT BE REDEEMABLE BEFORE DECEMBER 8, 2003. BEGINNING
DECEMBER 8, 2003, WE MAY REDEEM ANY SERIES C PREFERRED SHARE AT $25 PER SHARE
PLUS ACCUMULATED DISTRIBUTIONS.
------------------------
WE EXPECT TO LIST THE SERIES C PREFERRED SHARES ON THE NEW YORK STOCK EXCHANGE
AND EXPECT THAT TRADING WILL COMMENCE WITHIN 30 DAYS AFTER INITIAL DELIVERY OF
THE SERIES C PREFERRED SHARES.
------------------------
INVESTING IN THE SERIES C PREFERRED SHARES INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE S-7.
------------------------
PRICE $25 A SHARE
------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS COMPANY
-------- ------------- -----------
<S> <C> <C> <C>
Per Share............................. $25.00 $.7875 $24.2125
Total................................. $100,000,000 $3,150,000 $96,850,000
</TABLE>
------------------------
The Company has granted to the Underwriters the right to purchase up to an
additional 600,000 Series C Preferred Shares to cover overallotments.
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
Morgan Stanley & Co. Incorporated is acting as the bookrunner for the
offering of the Series C Preferred Shares. The Underwriters expect to deliver
the Series C Preferred Shares to purchasers on December 8, 1998.
------------------------
MORGAN STANLEY DEAN WITTER MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
PRUDENTIAL SECURITIES INCORPORATED
SALOMON SMITH BARNEY
December 1, 1998
<PAGE> 2
WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE A STATEMENT THAT DIFFERS FROM
WHAT IS IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. IF ANY
PERSON DOES MAKE A STATEMENT THAT DIFFERS FROM WHAT IS IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS, YOU SHOULD NOT RELY ON IT. THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS ARE NOT, TOGETHER OR INDIVIDUALLY, AN OFFER TO
SELL, NOR ARE THEY SEEKING AN OFFER TO BUY, THESE SECURITIES IN ANY JURISDICTION
WHERE THE OFFER OR SALE IS NOT PERMITTED. THE INFORMATION IN THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS IS COMPLETE AND ACCURATE AS OF ITS DATE, BUT THE
INFORMATION MAY CHANGE AFTER THAT DATE.
TABLE OF CONTENTS
<TABLE>
<S> <C>
PROSPECTUS SUPPLEMENT
PROSPECTUS SUPPLEMENT SUMMARY............................... S-3
The Company............................................... S-3
The Offering.............................................. S-3
Selected Financial Information............................ S-5
RISK FACTORS................................................ S-7
USE OF PROCEEDS............................................. S-7
CAPITALIZATION.............................................. S-8
DESCRIPTION OF SERIES C PREFERRED SHARES.................... S-9
General................................................... S-9
Distributions............................................. S-9
Liquidation Preference.................................... S-10
Redemption................................................ S-10
Voting Rights............................................. S-11
Conversion................................................ S-11
Restrictions on Ownership and Transfer.................... S-11
FEDERAL INCOME TAX CONSIDERATIONS........................... S-12
Taxation of Holders of Series C Preferred Shares.......... S-12
Recent Changes to Capital Gain Taxation................... S-13
UNDERWRITERS................................................ S-14
LEGAL MATTERS............................................... S-16
PROSPECTUS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS........... 2
AVAILABLE INFORMATION....................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 2
THE COMPANY................................................. 4
USE OF PROCEEDS............................................. 4
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED
SHARE DISTRIBUTIONS....................................... 4
DESCRIPTION OF COMMON SHARES................................ 4
DESCRIPTION OF PREFERRED SHARES............................. 6
DESCRIPTION OF WARRANTS..................................... 12
RESTRICTIONS ON OWNERSHIP AND TRANSFER...................... 13
PLAN OF DISTRIBUTION........................................ 15
EXPERTS..................................................... 16
LEGAL MATTERS............................................... 16
</TABLE>
S-2
<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
The following is only a summary. It should be read together with the more
detailed information elsewhere in this prospectus supplement and the
accompanying prospectus. In addition, important information, including
capitalized terms used but not defined in this prospectus supplement, is
incorporated by reference into the prospectus.
THE COMPANY
Equity Office Properties Trust, a Maryland REIT, is the nation's largest
publicly held owner and manager of office properties, with a national portfolio
of 281 buildings comprising 74.8 million square feet in 24 states and the
District of Columbia. We have an ownership presence in 36 Metropolitan
Statistical Areas and in 80 submarkets, enabling us to provide a wide range of
office solutions for local, regional and national customers.
THE OFFERING
Issuer........................ Equity Office Properties Trust
Securities Offered............ 4,000,000 8 5/8% Series C Preferred Shares. We
may sell up to 600,000 additional Series C
Preferred Shares to the Underwriters to cover
overallotments, if any.
Distributions................. You will receive cumulative distributions on
the Series C Preferred Shares at a rate of
8 5/8% of the liquidation preference of the
Series C Preferred Shares per annum (equivalent
to $2.15625 per annum per share). Our
distributions are payable quarterly each year
on March 15, June 15, September 15 and December
15. The first distribution is payable on March
15, 1999 and at that time you will be entitled
to receive the full amount of a quarterly
distribution, plus a prorated amount for the
period from the date of original issuance of
the Series C Preferred Shares (December 8,
1998) to but excluding December 15, 1998.
Maturity...................... We have not set a particular date to redeem the
Series C Preferred Shares. Accordingly, the
Series C Preferred Shares will remain
outstanding until such a date is set and
redemption occurs. In addition, we are not
setting aside funds to redeem the Series C
Preferred Shares at any time and we are not
required to redeem the Series C Preferred
Shares at any time unless we need to redeem
them to assist us in maintaining our
qualification as a REIT.
Optional Redemption........... We may not redeem the Series C Preferred Shares
prior to December 8, 2003. On or after December
8, 2003, at our option, we may redeem the
Series C Preferred Shares, in whole or in part,
for cash in the amount of $25.00 per share,
plus accumulated distributions to the date of
redemption. We may pay the redemption price
(other than the portion consisting of
accumulated distributions) only out of the sale
proceeds of other equity securities of the
Company, which may include other series of
preferred shares.
Liquidation Preference........ If we liquidate, dissolve or wind up the
Company, you and the other holders of the
Series C Preferred Shares will have a preferred
right to receive $25.00 per share, plus all
accumulated and unpaid distributions. See
"Description of Series C Preferred Shares --
Liquidation Preference."
S-3
<PAGE> 4
Ranking....................... We will pay distributions, and if we liquidate,
dissolve or wind up the Company we will make
liquidating distributions, to holders of the
Series C Preferred Shares and holders of any
other outstanding series of our preferred
shares on an equal basis before we make any
such payments to holders of our Common Shares.
Voting Rights................. If we do not pay distributions on the Series C
Preferred Shares for six or more quarterly
periods (whether or not consecutive), you and
the other holders of the Series C Preferred
Shares (voting separately as a class with all
other classes or series of equity securities of
the Company upon which like voting rights have
been conferred and are exercisable) will be
entitled to vote for the election of two
additional trustees to serve on our Board of
Trustees until we pay all distributions we owe
on the Series C Preferred Shares. You and the
other holders of the Series C Preferred Shares
will also be entitled to certain additional
voting rights described herein. See
"Description of Series C Preferred
Shares -- Voting Rights." Holders of our
outstanding Series A Preferred Shares and
Series B Preferred Shares have substantially
similar voting rights.
NYSE Listing.................. We expect to list the Series C Preferred Shares
on the NYSE and expect that trading will
commence within 30 days after initial delivery
of the Series C Preferred Shares. While the
Underwriters have advised us that they intend
to make a market in the Series C Preferred
Shares prior to commencement of trading on the
NYSE, they are under no obligation to do so. We
cannot assure you that a market for the Series
C Preferred Shares will exist prior to or upon
commencement of trading. See "Underwriters."
Ownership Limit............... To assist us in maintaining our qualification
as a REIT for federal income tax purposes, our
Declaration of Trust provides that neither you
nor anyone else may own more than 9.9% in value
or number (whichever is more restrictive) of
the Series C Preferred Shares.
Use of Proceeds............... We will use the net proceeds from the offering
of the Series C Preferred Shares to reduce
outstanding indebtedness under our credit
facility and for general corporate purposes.
S-4
<PAGE> 5
SELECTED FINANCIAL INFORMATION
We have set forth in the table below selected consolidated and combined
financial and operating information on an historical basis for the Company and
the Company's predecessors ("Equity Office Predecessors"). We recommend that you
read the following information in conjunction with all of the financial
statements and notes thereto included in our Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998 and our Annual Report on Form 10-K for the
year ended December 31, 1997, as amended, and our Forms 8-K filed on June 30,
1998, July 10, 1998, September 3, 1998 and September 30, 1998, which documents
are incorporated by reference into the prospectus. The selected combined
financial and operating information of Equity Office Predecessors at December
31, 1994 and 1993, and for the year ended December 31, 1993, has been derived
from the historical unaudited combined financial statements of Equity Office
Predecessors.
<TABLE>
<CAPTION>
COMPANY FOR COMPANY FOR COMPANY FOR
THE THE PERIOD THE PERIOD
NINE MONTHS JULY 11, 1997 FROM JULY 11,
ENDED TO 1997 TO
SEPTEMBER 30, SEPTEMBER 30, DECEMBER 31,
1998 1997 1997
------------- ------------- -------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental, parking and other......... $ 1,194,694 $ 162,290 $ 406,713
------------ ----------- -----------
Total revenues................. $ 1,210,697 $ 164,568 $ 412,968
------------ ----------- -----------
Expenses:
Interest.......................... $ 237,194 $ 25,793 $ 76,675
Depreciation and amortization..... 218,083 24,161 70,346
Property operating(1)............. 431,897 62,885 155,679
General and administrative........ 45,137 5,855 17,690
Provision for value impairment.... -- -- --
------------ ----------- -----------
Total expenses................. $ 932,311 $ 118,694 $ 320,390
------------ ----------- -----------
Income before (income) loss
allocated to minority interests,
income from investments in
unconsolidated joint ventures and
mortgage receivables, gain on
sales of real estate, and
extraordinary items............... $ 278,386 $ 45,874 $ 92,578
Minority interests allocation...... (27,944) (2,866) (7,799)
Income from investments in
unconsolidated joint ventures and
mortgage receivables.............. 8,155 1,426 3,173
Gain/(Loss) on sales of real estate
and extraordinary items........... (7,506) (12,930) (16,240)
------------ ----------- -----------
Net income before preferred
distributions..................... 251,091 31,504 71,712
Preferred distributions............ (23,130) -- (649)
------------ ----------- -----------
Net income available to Common
Shares............................ $ 227,961 $ 31,504 $ 71,063
============ =========== ===========
Net income available per weighted
average Share outstanding --
Basic............................. $ .91 $ .21 $ .44
============ =========== ===========
Net income available per weighted
average Share outstanding --
Diluted........................... $ .90 $ .21 $ .43
============ =========== ===========
Weighted average Shares outstanding
-- Basic.......................... 251,071,623 151,691,121 162,591,477
============ =========== ===========
Weighted average Shares outstanding
-- Diluted........................ 281,207,972 165,384,651 180,014,027
============ =========== ===========
BALANCE SHEET DATA (at end of
period):
Investment in real estate after
accumulated depreciation.......... $ 12,777,129 -- $10,976,319
Total assets....................... $ 13,631,834 -- $11,751,672
Mortgage debt, unsecured notes and
lines of credit................... $ 5,672,115 -- $ 4,284,317
Total liabilities.................. $ 6,145,194 -- $ 4,591,697
Minority interests................. $ 743,861 -- $ 754,818
Shareholders' Equity/Owners'
equity............................ $ 6,742,779 -- $ 6,405,157
OTHER DATA:
General and administrative expenses
as a percentage of total
revenues.......................... 3.7% 3.6% 4.3%
Number of Office Properties owned
at period end..................... 285 93 258
Net rentable square feet of Office
Properties........................ 74.1 33.4 65.3
Occupancy of Office Properties
owned at period end............... 95% 93% 94%
Number of Parking Facilities owned
at period end..................... 17 16 17
Number of spaces at Parking
Facilities owned at period end.... 16,749 16,037 16,749
Funds from Operations(2)........... $ 486,005 $ 70,148 $ 163,253
Cash flow from operating
activities........................ $ 506,140 $ 59,665 $ 190,754
Cash flow used for investing
activities........................ $ (1,926,369) $ (85,634) $(1,592,272)
Cash flow from/used for financing
activities........................ $ 1,331,732 $ 158,593 $ 1,630,346
<CAPTION>
EQUITY OFFICE PREDECESSORS (COMBINED HISTORICAL)
---------------------------------------------------------------
FOR THE
PERIOD FROM
JANUARY 1,
1997 TO FOR THE YEARS ENDED DECEMBER 31,
JULY 10, -------------------------------------------------
1997 1996 1995 1994 1993
----------- ---- ---- ---- ----
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rental, parking and other......... $ 327,017 $ 493,396 $ 356,959 $ 230,428 $ 150,315
--------- ---------- ---------- ---------- ----------
Total revenues................. $ 339,104 $ 508,124 $ 371,457 $ 240,878 $ 159,246
--------- ---------- ---------- ---------- ----------
Expenses:
Interest.......................... $ 80,481 $ 119,595 $ 100,566 $ 59,316 $ 36,755
Depreciation and amortization..... 66,034 96,237 74,156 46,905 29,752
Property operating(1)............. 127,285 201,067 151,488 107,412 74,028
General and administrative........ 17,201 23,145 21,987 15,603 12,012
Provision for value impairment.... -- -- 20,248 -- --
--------- ---------- ---------- ---------- ----------
Total expenses................. $ 291,001 $ 440,044 $ 368,445 $ 229,236 $ 152,547
--------- ---------- ---------- ---------- ----------
Income before (income) loss
allocated to minority interests,
income from investments in
unconsolidated joint ventures and
mortgage receivables, gain on
sales of real estate, and
extraordinary items............... $ 48,103 $ 68,080 $ 3,012 $ 11,642 $ 6,699
Minority interests allocation...... (912) (2,086) (2,129) 1,437 1,772
Income from investments in
unconsolidated joint ventures and
mortgage receivables.............. 1,982 2,093 2,305 1,778 --
Gain/(Loss) on sales of real estate
and extraordinary items........... 12,236 5,338 31,271 1,705 --
--------- ---------- ---------- ---------- ----------
Net income before preferred
distributions..................... 61,409 73,425 34,459 16,562 8,471
Preferred distributions............ -- -- -- -- --
--------- ---------- ---------- ---------- ----------
Net income available to Common
Shares............................ $ 61,409 $ 73,425 $ 34,459 $ 16,562 $ 8,471
========= ========== ========== ========== ==========
Net income available per weighted
average Share outstanding --
Basic.............................
Net income available per weighted
average Share outstanding --
Diluted...........................
Weighted average Shares outstanding
-- Basic..........................
Weighted average Shares outstanding
-- Diluted........................
BALANCE SHEET DATA (at end of
period):
Investment in real estate after
accumulated depreciation.......... -- $3,291,815 $2,393,403 $1,815,160 $1,220,268
Total assets....................... -- $3,912,565 $2,650,890 $2,090,933 $1,318,644
Mortgage debt, unsecured notes and
lines of credit................... -- $1,964,892 $1,434,827 $1,261,156 $ 798,897
Total liabilities.................. -- $2,174,483 $1,529,334 $1,350,552 $ 845,315
Minority interests................. -- $ 11,080 $ 31,587 $ 9,283 $ (15,298)
Shareholders' Equity/Owners'
equity............................ -- $1,727,002 $1,089,969 $ 731,098 $ 488,627
OTHER DATA:
General and administrative expenses
as a percentage of total
revenues.......................... 5.1% 4.6% 5.9% 6.5% 7.5%
Number of Office Properties owned
at period end..................... -- 83 73 63 48
Net rentable square feet of Office
Properties........................ -- 29.2 23.1 18.5 13.6
Occupancy of Office Properties
owned at period end............... -- 90% 86% 88% 80%
Number of Parking Facilities owned
at period end..................... -- 10 3 -- --
Number of spaces at Parking
Facilities owned at period end.... -- 7,321 3,323 -- --
Funds from Operations(2)........... $ 113,022 $ 160,460 $ 96,104 $ 60,372 --
Cash flow from operating
activities........................ $ 95,960 $ 165,975 $ 93,878 $ 73,821 --
Cash flow used for investing
activities........................ $(571,068) $ (924,227) $ (380,615) $ (513,965) --
Cash flow from/used for financing
activities........................ $ 245,851 $1,057,551 $ 276,513 $ 514,923 --
</TABLE>
S-5
<PAGE> 6
- -------------------------
(1) Includes property operating expenses, real estate taxes and insurance, as
well as repair and maintenance expenses.
(2) The White Paper on Funds from Operations approved by the Board of Governors
of the National Association of Real Estate Investment Trusts ("NAREIT") in
March 1995 defines Funds from Operations as net income (loss) (computed in
accordance with GAAP), excluding gains (or losses) from debt restructuring
and sales of properties, plus real estate related depreciation and
amortization and after adjustments for unconsolidated partnerships and joint
ventures. We believe that Funds from Operations is helpful to investors as a
measure of the performance of an equity REIT because, along with cash flow
from operating activities, financing activities and investing activities, it
provides investors with an indication of our ability to incur and service
debt, to make capital expenditures and to fund other cash needs. We compute
Funds from Operations in accordance with standards established by NAREIT,
which may not be comparable to Funds from Operations reported by other REITs
that do not define the term in accordance with the current NAREIT definition
or that interpret the current NAREIT definition differently than we do.
Funds from Operations does not represent cash generated from operating
activities in accordance with GAAP and should not be considered as an
alternative to net income (determined in accordance with GAAP) as an
indication of our financial performance or to cash flow from operating
activities (determined in accordance with GAAP) as a measure of our
liquidity, nor is it indicative of funds available to fund our cash needs,
including our ability to make cash distributions. For a reconciliation of
net income and Funds from Operations, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Funds from
Operations" in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997, as amended, and the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1998, which are incorporated into
the prospectus by reference.
S-6
<PAGE> 7
RISK FACTORS
Investing in the Series C Preferred Shares involves certain risks. As with
other publicly traded securities, the value of the Series C Preferred Shares
will depend on various market conditions and other factors which may change from
time to time. In particular, the market value of the Series C Preferred Shares
may fluctuate depending on market interest rates relative to the distribution
rate on the Series C Preferred Shares, the extent of investor interest in the
Company, our reputation and the reputation of REITs and office REITs generally,
and the market's perception of our growth potential. Specific factors which
could adversely affect our financial condition, our results of operations and
the market's perception of our Company and hence the market value of the Series
C Preferred Shares include the following:
- Our financial condition and results of operations are subject to all the
risks normally associated with the real estate industry, including risks
that we may be unable to renew leases or relet space at favorable rents
as leases expire, that new acquisitions may fail to perform as expected,
that competition for acquisitions could result in increased prices and,
because real estate is illiquid, that we may not be able to sell
properties when appropriate.
- Our financial condition and results of operations are subject to the
risks normally associated with debt financing, including the possibility
of increases in interest rates that would result in increased interest
expense and the possibility that we will not be able to refinance our
debt at maturity.
- To qualify as a REIT, we have to distribute at least 95% of our net
taxable income (excluding net capital gains). Consequently, to fund
future growth and capital needs, we are dependent on third-party sources
of capital, including from future equity offerings. Such capital may not
be available or may be available only on unfavorable terms. In fact,
recently the access of REITs to the capital markets has been limited.
- Our status as a REIT is dependent on compliance with complex tax rules
and regulations and various factual matters and circumstances that may
not be totally within our control. Our failure to qualify as a REIT would
likely have a significant adverse affect on the value of our outstanding
securities, including the Series C Preferred Shares.
For additional information about the foregoing risks and additional risk
factors relevant to an investment in the Series C Preferred Shares, we refer you
to the section captioned "Risk Factors" in our Annual Report on Form 10-K for
the year ended December 31, 1997, as amended, which is incorporated by reference
into the prospectus.
USE OF PROCEEDS
The net proceeds to the Company from the offering of the Series C Preferred
Shares, which are expected to be approximately $96.6 million, will be used by
the Company to reduce outstanding indebtedness under its credit facility and for
general corporate purposes. As of September 30, 1998, the outstanding amounts of
indebtedness to be repaid with the proceeds from this offering bore interest at
various floating rates, had a weighted average annual rate of 6.4% and had a
weighted average maturity of three years.
S-7
<PAGE> 8
CAPITALIZATION
The following table sets forth the actual capitalization of the Company (1)
as of September 30, 1998 and (2) as adjusted to give effect to the offering of
the Series C Preferred Shares, net of underwriting discounts and commissions of
$3,150,000 and other costs estimated at $250,000. Shareholders' equity is
further reduced by approximately $37,000 for SEC registration fees previously
incurred. The capitalization of the Company should be read in conjunction with
the Company's combined consolidated financial statements and the notes thereto
incorporated by reference into the prospectus.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1998
-------------------------------
ACTUAL AS ADJUSTED
------ -----------
UNAUDITED (IN THOUSANDS)
<S> <C> <C>
Debt:
Mortgage Debt............................................. $ 2,097,405 $ 2,097,405
Credit Facilities......................................... 1,115,312 1,018,712
Notes Payable............................................. 2,459,398 2,459,398
Minority Interest........................................... 743,861 743,861
Shareholders' Equity........................................ 6,742,779 6,839,342
----------- -----------
Total Capitalization................................... $13,158,755 $13,158,718
=========== ===========
</TABLE>
S-8
<PAGE> 9
DESCRIPTION OF SERIES C PREFERRED SHARES
This description of the particular terms of the Series C Preferred Shares
offered hereby supplements, and to the extent inconsistent therewith replaces,
the description of the general terms of the Preferred Shares set forth in the
accompanying Prospectus, to which description reference is hereby made. The
summary of the terms of the Series C Preferred Shares set forth below does not
purport to be complete and is subject to and qualified in its entirety by
reference to the Company's Declaration of Trust, the Articles Supplementary
relating to the Series C Preferred Shares ("Articles Supplementary") and the
Bylaws of the Company. Copies of the Declaration of Trust, the Articles
Supplementary and the Bylaws may be obtained from the Company.
GENERAL
The Declaration of Trust authorizes the Board of Trustees to issue 100
million Preferred Shares, to classify any unissued Preferred Shares and to
reclassify any previously classified but unissued Preferred Shares of any series
from time to time, in one or more series, as authorized by the Board of
Trustees. Prior to issuance of Preferred Shares of each series, the Board of
Trustees is required by the Maryland REIT law and the Declaration of Trust to
set, subject to the provisions of the Declaration of Trust regarding the
restriction on transfer of shares of beneficial interest, the terms,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to distributions or other dividends, qualifications and terms or
conditions of redemption for each such series. Thus, the Board could authorize
the issuance of Preferred Shares with terms and conditions which could have the
effect of delaying, deferring or preventing a transaction or a change in control
of the Company that might involve a premium price for holders of Preferred
Shares or Common Shares or otherwise be in the holders' best interest. As of the
date hereof, the Company has 8,000,000 shares of 8.98% Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest, liquidation preference
$25.00 per share (the "Series A Preferred Shares"), and 6,000,000 shares of
5.25% Series B Convertible, Cumulative Redeemable Preferred Shares, liquidation
preference $50.00 per share ("Series B Preferred Shares"), outstanding. See
"Description of Preferred Shares" in the accompanying Prospectus.
The Board of Trustees of the Company will adopt the Articles Supplementary
determining the terms of a series of Preferred Shares consisting of up to
4,600,000 shares, designated 8 5/8% Series C Cumulative Redeemable Preferred
Shares. The Series C Preferred Shares will rank on a parity with the Series A
Preferred Shares and the Series B Preferred Shares as to distributions and
amounts payable upon liquidation.
The registrar, transfer agent and dividends disbursing agent for the Series
C Preferred Shares will be Boston EquiServe LLP, an affiliate of First National
Bank of Boston.
We expect to list the Series C Preferred Shares on the NYSE and expect that
trading will commence within 30 days after initial delivery of the Series C
Preferred Shares. See "Underwriters."
DISTRIBUTIONS
Holders of the Series C Preferred Shares shall be entitled to receive, when
and as authorized by the Board of Trustees, out of funds legally available for
the payment of distributions, cumulative preferential cash distributions at the
rate of 8 5/8% of the liquidation preference per annum (equivalent to $2.15625
per Series C Preferred Share per year). Distributions on the Series C Preferred
Shares shall be cumulative from the date of original issuance (December 8, 1998)
and shall be payable quarterly in arrears on the fifteenth day of March, June,
September and December, or, if not a business day, the next succeeding business
day (each, a "Distribution Payment Date"). The initial distribution on the
Series C Preferred Shares, which will be paid on March 15, 1999, if authorized
by the Board of Trustees, will be for more than a full quarter. Such
distribution and any distribution payable on the Series C Preferred Shares for
any other partial distribution period will be computed on the basis of a 360-day
year consisting of twelve 30-day months. Distributions will be payable to
holders of records as they appear in the share records of the Company at the
close of business on the applicable record date, which shall be the first day of
the calendar month in which the applicable Distribution Payment Date falls or
such other date designated by the Board of Trustees of the Company for the
payment of distributions that is not more than 30 nor less than 10 days prior to
such Distribution Payment Date (each, a "Distribution Record Date").
S-9
<PAGE> 10
No distributions on the Series C Preferred Shares will be authorized by the
Board of Trustees or paid or set apart for payment if such authorization,
payment or setting apart for payment would violate any agreement of the Company
or is restricted or prohibited by law. Distributions on the Series C Preferred
Shares will, nonetheless, accumulate whether or not any of the foregoing
restrictions exist, whether or not there are funds legally available for the
payment thereof and whether or not they are declared, and accumulated but unpaid
distributions will accumulate as of the Distribution Payment Date on which they
first become payable.
Any distribution payment made on the Series C Preferred Shares shall first
be credited against the earliest accumulated but unpaid distribution due with
respect to such shares which remains payable.
LIQUIDATION PREFERENCE
In the event of any voluntary or involuntary liquidation, dissolution, or
winding up of the Company, the holders of any outstanding Series C Preferred
Shares will be entitled to receive out of the assets of the Company available
for distribution to shareholders remaining after payment or provision for
payment of all debts and other liabilities of the Company, before any
distribution is made in respect of the Company's Common Shares or any Preferred
Shares ranking junior to the Series C Preferred Shares as to such assets, a
liquidation preference of $25.00 per share, plus an amount equal to any
accumulated and unpaid distributions to the date of payment. If upon any
voluntary or involuntary liquidation, dissolution or winding up of the Company,
the assets of the Company are insufficient to make such full payments to holders
of Series C Preferred Shares and other Preferred Shares ranking on a parity with
the Series C Preferred Shares as to the distribution of assets upon liquidation,
dissolution or winding up of the Company, then holders of Series C Preferred
Shares and such other Preferred Shares shall share ratably in any distribution
of assets in proportion to the full liquidating distributions to which they
would otherwise be respectively entitled. After payment of the full amount of
the liquidating distributions to which they are entitled, the holders of Series
C Preferred Shares will not be entitled to any further participation in any
distribution of assets by the Company. Neither a consolidation or merger of the
Company with or into another corporation nor a merger of another corporation
with or into the Company nor a sale, lease or conveyance of all or substantially
all of the Company's property or business will be considered a liquidation,
dissolution or winding up of the Company.
REDEMPTION
Except in certain circumstances relating to the preservation of the
Company's status as a REIT for federal income tax purposes, the Series C
Preferred Shares will not be redeemable prior to December 8, 2003. On or after
December 8, 2003, the Company, at its option upon not less than 30 or more than
60 days' written notice, may redeem the Series C Preferred Shares, in whole or
in part, at any time or from time to time, at a redemption price of $25.00 per
share, plus all accumulated and unpaid distributions thereon to the date of
redemption (except as provided below), without interest, to the extent the
Company will have funds legally available therefor. The redemption price of the
Series C Preferred Shares (other than any portion thereof consisting of
accumulated and unpaid distributions) may be paid solely from the sale proceeds
of other equity securities of the Company and not from any other source. For
purposes of the preceding sentence, "equity securities," means any equity
securities (including common shares of beneficial interest and preferred shares
of beneficial interest), depositary shares, interests, participations, or other
ownership interests (however designated) and any rights (other than debt
securities convertible into or exchangeable for equity securities) or options to
purchase any of the foregoing. Holders of certificates evidencing Series C
Preferred Shares to be redeemed shall surrender such certificates at the place
designated in such notice and shall be entitled to the redemption price and any
accumulated and unpaid distributions payable upon such redemption following such
surrender. If notice of redemption of any Series C 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 Series C Preferred Shares
so called for redemption, then from and after the redemption date distributions
will cease to accumulate on such Series C Preferred Shares, such Series C
Preferred Shares shall no longer be deemed outstanding and all rights of the
holders of such shares will terminate, except the right to receive the
redemption price and all accumulated and unpaid distributions thereon. If fewer
than all of the outstanding Series C Preferred Shares are to be redeemed, the
Series C Preferred Shares to be redeemed shall be selected
S-10
<PAGE> 11
pro rata (as nearly as may be practicable without creating fractional Series C
Preferred Shares) or by lot or by any other equitable method determined by the
Company. See "Restrictions on Ownership and Transfer" in the accompanying
Prospectus.
Notice of redemption will be given by publication in a newspaper of general
circulation in The City of New York, such publication to be made once a week for
two successive weeks commencing not less than 30 nor more than 60 days prior to
the redemption date. A similar notice will be mailed by the Company, postage
prepaid, not less than 30 nor more than 60 days' prior to the redemption date,
to the respective holders of record of the Series C Preferred Shares to be
redeemed at their respective addresses as they appear on the Company's share
transfer records. No failure to give such notice or any defect thereto or in the
mailing thereof shall affect the validity of the proceedings for the redemption
of any Series C Preferred Shares except to the holder to whom notice was
defective or not given. Each notice shall state: (i) the redemption date; (ii)
the redemption price and all accumulated and unpaid distributions thereon; (iii)
the number of Series C Preferred Shares to be redeemed; (iv) the place or places
where the certificates evidencing the Series C Preferred Shares are to be
surrendered for payment of the redemption price; and (v) that distributions on
the shares to be redeemed will cease to accumulate on such redemption date. If
fewer than all the Series C Preferred Shares held by any holder are to be
redeemed, the notice mailed to such holder shall also specify the number of
Series C Preferred Shares to be redeemed from such holder.
The holders of record of Series C Preferred Shares at the close of business
on a Distribution Record Date will be entitled to receive the distribution
payable with respect to the Series C Preferred Shares held by such holders on
the corresponding Distribution Payment Date notwithstanding the redemption
thereof between such Distribution Record Date and the corresponding Distribution
Payment Date or the Company's default in the payment of the distributions due.
Except as provided above, the Company will make no payment or allowance for
unpaid distributions, whether or not in arrears, on Series C Preferred Shares to
be redeemed.
The Series C Preferred Shares will not have a stated maturity and will not
be subject to any sinking fund or mandatory redemption provisions (except as
provided under "Restrictions on Ownership and Transfer" in the accompanying
Prospectus).
VOTING RIGHTS
On any matter on which the Series C Preferred Shares are entitled to vote
(as expressly provided in the Articles Supplementary or as may be required by
law), including any action by written consent, each Series C Preferred Share
will be entitled to one vote, except that when shares of any other series of
Preferred Shares have the right to vote with the Series C Preferred Shares as a
single class on any matter, the Series C Preferred Shares and the shares of the
other series will have one vote for each $25.00 of liquidation preference.
For further information regarding the voting rights of the holders of the
Series C Preferred Shares, see "Description of Preferred Shares -- Voting
Rights" in the accompanying Prospectus.
CONVERSION
The Series C Preferred Shares are not convertible into or exchangeable for
any other property or securities of the Company at the option of the holder.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
The general restrictions on ownership and transferability described under
"Restrictions on Ownership Transfer" in the accompanying Prospectus apply to the
Series C Preferred Shares.
S-11
<PAGE> 12
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain federal income tax
considerations relating to the acquisition, ownership and disposition of the
Series C Preferred Shares. The following description is for general information
only, is not exhaustive of all possible tax considerations, and is not intended
to be and should not be construed as tax advice. For example, this summary does
not give a detailed discussion of any state, local or foreign tax consequences.
It does not discuss all aspects of federal income taxation that might be
relevant to a specific shareholder in light of its particular investment or tax
circumstances. The description does not purport to deal with aspects of taxation
that may be relevant to shareholders subject to special treatment under the
federal income tax laws. This discussion does not address the taxation of the
Company, the impact on the Company of its election to be taxed as a REIT or the
federal income tax considerations relevant to holders of Common Shares. Such
matters are addressed in the Company's annual report on Form 10-K, as amended,
for the year ended December 31, 1997, (the "Company's Annual Report") under the
caption "Federal Income Tax Considerations."
The information in this section is based on the Code, current, temporary
and proposed Treasury Regulations thereunder, the legislative history of the
Code, current administrative interpretations and practices of the IRS (including
its practices and policies as endorsed in private letter rulings, which are not
binding on the IRS except with respect to the taxpayer that receives such a
ruling), and court decisions, all as of the date hereof. No assurance can be
given that future legislation, Treasury Regulations, administrative
interpretations and court decisions will not significantly change current law or
adversely affect existing interpretations of current law. Any such change could
apply retroactively to transactions preceding the date of the change.
As used in this section, the term "the Company" refers solely to Equity
Office Properties Trust.
EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT WITH ITS OWN TAX ADVISOR
REGARDING THE SPECIFIC TAX CONSEQUENCES TO IT OF THE ACQUISITION, OWNERSHIP AND
SALE OF SERIES C PREFERRED SHARES IN LIGHT OF ITS SPECIFIC TAX AND INVESTMENT
SITUATIONS AND THE SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS
APPLICABLE TO IT.
TAXATION OF HOLDERS OF SERIES C PREFERRED SHARES
DIVIDENDS AND OTHER DISTRIBUTIONS; BACKUP WITHHOLDING. For a discussion of
the taxation of the Company, the treatment of dividends and other distributions
with respect to shares of the Company, and the backup withholding rules, see the
discussions in the Company's Annual Report under the captions "Federal Income
Tax Considerations -- Taxation of the Company as a REIT -- General" and
"--Taxation of Taxable U.S. Shareholders of the Company Generally." In
determining the extent to which a distribution on the Series C Preferred Shares
constitutes a dividend for tax purposes, the earnings and profits of the Company
will be allocated first to distributions with respect to the Series C Preferred
Shares, the Series B Preferred Shares and the Series A Preferred Shares, and
second to distributions with respect to the Company Common Shares.
REDEMPTION OF SERIES C PREFERRED SHARES FOR CASH. The treatment accorded to
any redemption by the Company of Series C Preferred Shares for cash can only be
determined on the basis of particular facts as to each holder of Series C
Preferred Shares ("Preferred Holder") at the time of redemption. In general, a
Preferred Holder will recognize capital gain or loss measured by the difference
between the amount received by the Preferred Holder upon the redemption (except
for any amount received which is attributable to declared dividends not
previously included in income, which will be taxable as dividend income to the
extent of current or accumulated earnings and profits, if any) and such holder's
adjusted tax basis in the Series C Preferred Shares redeemed (provided the
Series C Preferred Shares are held as a capital asset) if such redemption (i)
results in a "complete termination" of the Preferred Holder's interest in all
classes of stock of the Company under Section 302(b)(3) of the Code or (ii) is
"not essentially equivalent to a dividend" with respect to the Preferred Holder
within the meaning of Section 302(b)(1) of the Code. In general, a redemption is
"not essentially equivalent to a dividend" to a particular shareholder if the
redemption results in a "meaningful reduction" of the shareholder's
proportionate interest in the company. The determination of
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<PAGE> 13
whether a redemption is "not essentially equivalent to dividend" depends on the
facts and circumstances of each case. In applying the Section 302(b)(3) and
Section 302(b)(1) tests, there must be taken into account not only any Series C
Preferred Shares owned by the Preferred Holder, but also such Preferred Holder's
ownership of Common Shares, Series A Preferred Shares, Series B Preferred
Shares, and any options (including share purchase rights) to acquire any of the
foregoing. The Preferred Holder also must take into account any such securities
(including options) which are considered to be owned by such Preferred Holder by
reason of the constructive ownership rules set forth in Sections 318 and 302(c)
of the Code. If a particular Preferred Holder owns (actually or constructively)
no Common Shares, Series A Preferred Shares or Series B Preferred Shares, or an
insubstantial percentage of the outstanding Common Shares, Series A Preferred
Shares or Series B Preferred Shares, a redemption of a portion of the Preferred
Holder's Series C Preferred Shares is likely to qualify for sale or exchange
treatment because the redemption would not be "essentially equivalent to a
dividend." However, whether a distribution is "not essentially equivalent to a
dividend" depends on all of the facts and circumstances and a Preferred Holder
intending to rely on either of the Section 302(b)(3) or the Section 302(b)(1)
tests at the time of redemption should consult its own tax adviser to determine
their application to its particular situation.
If the redemption does not meet any of the tests under Section 302 of the
Code, then the proceeds received from the redemption of Series C Preferred
Shares will be treated as a dividend on the Series C Preferred Shares as
described under "Federal Income Tax Considerations -- Taxation of Taxable U.S.
Shareholders of the Company Generally" in the Company's Annual Report. If the
redemption proceeds are taxed as a dividend, the Preferred Holder's adjusted tax
basis in the Series C Preferred Shares redeemed will be transferred to any other
shareholdings of the Preferred Holder in the Company. If the Preferred Holder
owns no other shares of beneficial interest in the Company, under certain
circumstances, such basis may be transferred to a related person, or it may be
lost entirely.
SPECIAL CONSIDERATIONS FOR NON-U.S. SHAREHOLDERS. There are several special
considerations for prospective purchasers of Series C Preferred Shares who are
Non-U.S. Shareholders for U.S. federal tax purposes. For a description of these
special considerations, see "Federal Income Tax Considerations -- Taxation of
Non-U.S. Shareholders of the Company" in the Company's Annual Report.
RECENT CHANGES TO CAPITAL GAIN TAXATION
The Internal Revenue Service Restructuring and Reform Act of 1998, which
was signed into law on July 22, 1998, reduced the required holding period for
the application of the 20% and 25% capital gain tax rates from more than 18
months to more than 12 months for sales of capital gain assets on or after
January 1, 1998. It is expected that the IRS will issue clarifying guidance
(most likely applying the same principles set forth in IRS Notice 97-64)
regarding the application of the new holding period requirement to capital gain
dividend designations by REITs.
S-13
<PAGE> 14
UNDERWRITERS
Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters
named below, for whom Morgan Stanley & Co. Incorporated, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, PaineWebber Incorporated, Prudential Securities
Incorporated and Salomon Smith Barney Inc. are acting as representatives (the
"Representatives"), have severally agreed to purchase, and the Company has
agreed to sell to them, severally, the respective number of Series C Preferred
Shares set forth opposite the name of each such Underwriter. Morgan Stanley &
Co. Incorporated is acting as the bookrunner for the offering of the Series C
Preferred Shares.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ---- ----------------
<S> <C>
Morgan Stanley & Co. Incorporated........................... 570,400
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... 570,400
PaineWebber Incorporated.................................... 570,400
Prudential Securities Incorporated.......................... 570,400
Salomon Smith Barney Inc. .................................. 570,400
ABN AMRO Incorporated....................................... 46,000
Bear, Stearns & Co. Inc. ................................... 46,000
BT Alex. Brown Incorporated................................. 46,000
CIBC Oppenheimer Corp. ..................................... 46,000
A.G. Edwards & Sons, Inc. .................................. 46,000
Goldman, Sachs & Co. ....................................... 46,000
Schroder & Co. Inc. ........................................ 46,000
SG Cowen Securities Corporation............................. 46,000
Advest, Inc. ............................................... 20,000
Robert W. Baird & Co. Incorporated.......................... 20,000
William Blair & Company, L.L.C. ............................ 20,000
J. C. Bradford & Co. ....................................... 20,000
Craigie Incorporated........................................ 20,000
Crowell, Weedon & Co. ...................................... 20,000
D.A. Davidson & Co. Incorporated............................ 20,000
Dain Rauscher Wessels....................................... 20,000
Davenport & Company LLC..................................... 20,000
Fahnestock & Co. Inc. ...................................... 20,000
Ferris, Baker & Watts, Incorporated......................... 20,000
Fidelity Capital Markets, A Division of National Financial
Services Corp. ........................................... 20,000
Fifth Third/The Ohio Company................................ 20,000
First Albany Corporation.................................... 20,000
First of Michigan Corporation............................... 20,000
Fleet Securities, Inc. ..................................... 20,000
Gibraltar Securities Co. ................................... 20,000
J.J.B. Hilliard, W.L. Lyons, Inc. .......................... 20,000
Interstate/Johnson Lane Corporation......................... 20,000
Janney Montgomery Scott Inc. ............................... 20,000
Kirkpatrick, Pettis, Smith, Polian Inc. .................... 20,000
Legg Mason Wood Walker, Incorporated........................ 20,000
McDonald Investments Inc., A Keycorp Company................ 20,000
Mesirow Financial, Inc. .................................... 20,000
Morgan Keegan & Company, Inc. .............................. 20,000
Olde Discount Corporation................................... 20,000
Pershing/Division of Donaldson, Lufkin & Jenrette
Corporation............................................... 20,000
</TABLE>
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<PAGE> 15
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES
- ---- ----------------
<S> <C>
Piper Jaffray Inc. ......................................... 20,000
Raymond James & Associates, Inc. ........................... 20,000
The Robinson-Humphrey Company, LLC.......................... 20,000
Roney Capital Markets, A Division of First Chicago Capital
Markets, Inc. ............................................ 20,000
Charles Schwab & Co., Inc................................... 20,000
Scott & Stringfellow, Inc. ................................. 20,000
Southwest Securities, Inc. ................................. 20,000
Sterne, Agee & Leach, Inc. ................................. 20,000
Stifel, Nicolaus & Company, Incorporated.................... 20,000
Tucker Anthony Incorporated................................. 20,000
Wedbush Morgan Securities................................... 20,000
Wheat First Securities, Inc. ............................... 20,000
---------
Total.................................................. 4,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Series C Preferred Shares
offered hereby are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are obligated to take
and pay for all of the Series C Preferred Shares offered hereby (other than
those covered by the Underwriters' overallotment option described below) if any
such shares are taken.
The Underwriters initially propose to offer part of the Series C Preferred
Shares directly to the public at the public offering price set forth on the
cover page of this Prospectus Supplement and part to certain dealers at a price
that represents a concession not in excess of $.50 per share under the public
offering price. Any Underwriters may allow, and such dealers may reallow, a
concession not in excess of $.45 a share to other Underwriters or to certain
dealers. After the initial offering of the Series C Preferred Shares, the
offering price and other selling terms may from time to time be varied by the
Representatives.
The Company has agreed that, without the prior written consent of Morgan
Stanley & Co. Incorporated on behalf of the Underwriters, it will not, during
the period ending 30 days after the date of this Prospectus Supplement, (a)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend or otherwise transfer or dispose of, directly or indirectly, any
Series C Preferred Shares, or any shares of beneficial interest of the Company
which are substantially similar to the Series C Preferred Shares (other than
shares of beneficial interest which are convertible into Common Shares of the
Company) or any securities convertible into or exercisable or exchangeable for
Series C Preferred Shares or such shares of beneficial interest or (b) enter
into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership of any Series C Preferred
Shares, or any shares of beneficial interest of the Company which are
substantially similar to the Series C Preferred Shares (other than shares of
beneficial interest which are convertible into Common Shares of the Company) or
any securities convertible into or exercisable or exchangeable for Series C
Preferred Shares or such shares of beneficial interest, whether any such
transaction described in clause (a) or (b) of this sentence is to be settled by
delivery of Series C Preferred Shares, other securities, in cash or otherwise.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus Supplement, to purchase up to an aggregate
of 600,000 additional Series C Preferred Shares at the public offering price set
forth on the cover page hereof, less underwriting discounts and commissions. The
Underwriters may exercise such option solely for the purpose of covering
overallotments, if any, made in connection with the offering of the Series C
Preferred Shares offered hereby. To the extent such option is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional Series C Preferred Shares
as the number set forth next so such Underwriter's name in the preceding table
bears to the total number of Series C Preferred Shares set forth next to the
names of all Underwriters in the preceding table.
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<PAGE> 16
The Company expects to list the Series C Preferred Shares on the NYSE.
Trading of the Series C Preferred Shares on the NYSE, if listing is approved, is
expected to commence within 30 days after initial delivery of the Series C
Preferred Shares. The Underwriters have advised the Company that they intend to
make a market in the Series C Preferred Shares prior to the commencement of
trading on the NYSE. The Underwriters will have no obligation to make a market
in the Series C Preferred Shares, however, and may cease market-making
activities, if commenced, at any time.
In order to facilitate the offering of the Series C Preferred Shares, the
Underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the Series C Preferred Shares. Specifically, the
Underwriters may overallot in connection with the offering, creating a short
position in the Series C Preferred Shares for their own account. In addition, to
cover overallotments or to stabilize the price of the Series C Preferred Shares,
the Underwriters may bid for, and purchase, Series C Preferred Shares in the
open market. Finally, the underwriting syndicate may reclaim selling concessions
allowed to an Underwriter or a dealer for distributing the Series C Preferred
Shares in the offering, if the syndicate repurchases previously distributed
Series C Preferred Shares in transactions to cover syndicate short positions, in
stabilization transactions or otherwise. Any of these activities may stabilize
or maintain the market price of the Series C Preferred Shares above independent
market levels. The Underwriters are not required to engage in these activities,
and may end any of these activities at any time.
The Company and the Operating Partnership have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The legality of the Series C Preferred Shares will be passed upon for the
Company by Hogan & Hartson L.L.P., Washington, D.C. Certain tax matters will be
passed upon by Hogan & Hartson L.L.P., Washington D.C., special tax counsel for
the Company. Brown & Wood LLP, New York, New York will act as counsel to the
Underwriters.
S-16
<PAGE> 17
PROSPECTUS
$1,500,000,000
EQUITY OFFICE PROPERTIES TRUST
COMMON SHARES, PREFERRED SHARES,
COMMON SHARE WARRANTS AND PREFERRED SHARE WARRANTS
------------------------
We may from time to time offer in one or more series or classes (i) our
common shares of beneficial interest, par value $.01 per share ("Common
Shares"), (ii) our preferred shares of beneficial interest, par value $.01 per
share ("Preferred Shares"), which may be convertible into Preferred Shares or
Common Shares and (iii) our warrants exercisable for Common Shares ("Common
Warrants") or Preferred Shares ("Preferred Warrants," and together with Common
Warrants, "Warrants"), with an aggregate initial offering price of up to
$1,500,000,000 in amounts, at prices and on terms determined at the time of
offering. We may offer the Common Shares, Preferred Shares and Warrants
(collectively, the "Securities") separately or together, in separate series in
amounts, at prices and on terms described in one or more supplements to this
Prospectus (each, a "Prospectus Supplement").
We will deliver this Prospectus together with a Prospectus Supplement
setting forth the specific terms of the Securities we are offering. Such terms
will include, where applicable: (i) any initial public offering price of Common
Shares; (ii) the specific title and stated liquidation value, any distribution,
liquidation, redemption, conversion, voting and other rights, and any initial
public offering price of Preferred Shares; and (iii) the specific title and
aggregate number, and the issue price and exercise price and date(s) or
period(s) of Warrants. In addition, such terms shall include limitations on
direct or beneficial ownership and restrictions on transfer of the Securities,
in each case as may be appropriate to assist in maintaining our status as a real
estate investment trust for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
We may offer the Securities directly, through agents, or to or through
underwriters or dealers. If any agents or underwriters are involved in the sale
of any of the Securities, their names, and any applicable purchase price, fee,
commission or discount arrangement with them, will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution" on page 15. No Securities may be sold
without delivery of a Prospectus Supplement describing the method and terms of
the offering of those Securities.
------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OF THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. IT IS ILLEGAL FOR ANY PERSON TO TELL YOU OTHERWISE.
The date of this Prospectus is July 22, 1998.
<PAGE> 18
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Information contained in or incorporated by reference into this Prospectus
and the accompanying Prospectus Supplement contains "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"). We intend the forward-looking statements to be covered by the
safe harbor provisions for forward-looking statements contained in Section 27A
of the Securities Act. These forward-looking statements relate to, without
limitation, future economic performance, our plans and objectives for future
operations and projections of revenue and other financial items, which can be
identified by the use of forward-looking terminology such as "may," "will,"
"should," "expect," "anticipate," "estimate" or "continue" or the negative
thereof or other variations thereon or comparable terminology. The cautionary
statements incorporated by reference from our 1997 Annual Report on Form 10-K
under the caption "Risk Factors" and other similar statements contained in this
Prospectus or the accompanying Prospectus Supplement identify important factors
with respect to such forward-looking statements, including certain risks and
uncertainties, that could cause actual results to differ materially from those
in such forward-looking statements.
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, is required to file reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the Public
Reference Room of the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World
Trade Center, Suite 1300, New York, New York 10048. The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. Copies of the reports, proxy statements and other
information can be obtained from the Public Reference Room of the Commission,
Washington, D.C. 20549, upon payment of prescribed rates, or in certain cases by
accessing the Commission's World Wide Web site at http://www.sec.gov. The Common
Shares are listed on the NYSE under the symbol "EOP" and the Series A Preferred
Shares are listed on the NYSE under the symbol "EOPpfA." Such reports, proxy
statements and other information concerning the Company can be inspected at the
offices of the NYSE, 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on Form
S-3 (the "Registration Statement"), of which this Prospectus is a part, under
the Securities Act, with respect to the Securities offered hereby. 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 are not necessarily complete, and
in each instance, reference is made to the copy of such contract or document
filed 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 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. The
Commission maintains a "web site" that contains reports, proxy and information
statements and other information regarding issuers that file electronically with
the Commission. The address of such site is "http://www.sec.gov."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the
Exchange Act with the Commission and are incorporated herein by reference:
a. The Company's Annual Report on Form 10-K for the year ended December
31, 1997, as amended to date.
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<PAGE> 19
b. The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
c. The Company's Current Report on Form 8-K/A, filed with the Commission
on February 18, 1998 (amending the Company's Current Report on Form
8-K filed with the Commission on December 24, 1997) and the Company's
Current Report on Form 8-K filed with the Commission on June 30,
1998.
d. The Company's Registration Statement on Form 8-A, which incorporates
by reference a description of the Common Shares from the Company's
Registration Statement on Form S-11 (File No. 333-26629).
All documents filed by the Company pursuant to Sections 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 a particular offering of Securities to which this Prospectus
relates shall be deemed to be incorporated by reference in this Prospectus and
to be a part hereof from the date of filing 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 in the
Prospectus (in the case of a statement in a previously filed document
incorporated or deemed to be incorporated by reference herein), in any
applicable Prospectus Supplement relating to a specific offering of Securities,
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 or any accompanying
Prospectus Supplement. Subject to the foregoing, all information appearing in
this Prospectus and each accompanying Prospectus Supplement is qualified in its
entirety by the information appearing in the documents incorporated by
reference.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered upon written or oral request. Requests should be
directed to Equity Office Properties Trust, Two North Riverside Plaza, Suite
2200, Chicago, Illinois 60606, Attention: Diane Morefield (telephone number:
(312) 466-3300).
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<PAGE> 20
As used herein and in the accompanying Prospectus Supplement, "Company"
means Equity Office Properties Trust, a Maryland real estate investment trust,
and one or more of its subsidiaries (including EOP Operating Limited
Partnership, a Delaware limited partnership (the "Operating Partnership")), and
predecessors thereof (the "Equity Office Predecessors") or, as the context may
require, Equity Office Properties Trust only or the Operating Partnership only.
All references to the historical activities of the Company prior to July 11,
1997, refer to the activities of the Equity Office Predecessors.
THE COMPANY
The Company was formed to continue and expand the national office property
business organized by Samuel Zell, chairman of the Board of Trustees of the
Company. The Company, a self-administered and self-managed real estate
investment trust ("REIT"), is the managing general partner of the Operating
Partnership. The Company owns all of its assets and conducts substantially all
of its business through the Operating Partnership and its subsidiaries.
The Company's executive offices are located at Two North Riverside Plaza,
Suite 2200, Chicago, Illinois 60606, and its telephone number is (312) 466-3300.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement, the
Company intends to invest, contribute or otherwise transfer the net proceeds of
any sale of Securities to the Operating Partnership. The Operating Partnership
intends to use such net proceeds for general business purposes, including,
without limitation, the repayment of certain outstanding debt and the
acquisition or development of additional properties.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED SHARE DISTRIBUTIONS
The Company's ratios of earnings to combined fixed charges and preferred
share distributions are as follows:
<TABLE>
<CAPTION>
EQUITY OFFICE
THREE MONTHS PREDECESSORS EQUITY OFFICE PREDECESSORS
ENDED COMPANY (COMBINED (COMBINED HISTORICAL)
MARCH 31, (HISTORICAL) HISTORICAL) YEARS ENDED DECEMBER 31,
------------ JULY 11, 1997 TO JANUARY 1, 1997 TO --------------------------------
1998 1997 DECEMBER 31, 1997 JULY 10, 1997 1996 1995 1994 1993 1992
----- ----- ----------------- ------------------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Combined Fixed
Charges and
Preferred Share
Distributions....... 1.94 1.90 2.11 1.52 1.49 1.21 1.24 1.23 1.24
</TABLE>
The ratios of earnings to combined fixed charges and preferred share
distributions were computed by dividing earnings by fixed charges. For this
purpose, earnings consist of income (loss) before gains from sales of property
and extraordinary items plus fixed charges. Fixed charges consist of interest
expense (including interest costs capitalized), the amortization of debt
issuance costs, the portion of rental expense deemed to represent interest
expense and preferred share distributions.
DESCRIPTION OF COMMON SHARES
The following description sets forth the general terms of the Common Shares
which may be issued by the Company. The description set forth below and in any
Prospectus Supplement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, the Company's Articles of Amendment
and Restatement of Declaration of Trust (the "Declaration of Trust") which will
be made available as requested.
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<PAGE> 21
Pursuant to its Declaration of Trust, the Company is authorized to issue
750 million Common Shares. The Common Shares currently outstanding are listed
for trading on the New York Stock Exchange ("NYSE"). As of June 30, 1998,
252,580,792 Common Shares were issued and outstanding. The Company will apply to
the NYSE to list the additional Common Shares to be sold pursuant to any
Prospectus Supplement, and the Company anticipates that such shares will be so
listed.
All Common Shares will be, when issued against payment therefor, fully paid
and nonassessable. Subject to the preferential rights of any other shares of
beneficial interest and to the provisions of the Company's Declaration of Trust
regarding restrictions on transfers of shares of beneficial interest, holders of
Common Shares are entitled to receive distributions if, as and when authorized
and declared by the Board of Trustees out of assets legally available therefor
and to share ratably in the assets of the Company legally available for
distribution to its shareholders in the event of its liquidation, dissolution or
winding-up after payment of, or adequate provision for, all known debts and
liabilities of the Company. The rights of holders of Common Shares will be
subject to, and may be adversely affected by, the rights of holders of any
Preferred Shares that have been issued and may be issued in the future. The
Board of Trustees of the Company may cause Preferred Shares to be issued to
obtain additional financing, in connection with acquisitions, to officers,
trustees and employees of the Company pursuant to benefit plans or otherwise and
for other proper corporate purposes. The Company currently pays regular
quarterly distributions on the Common Shares, as well as on the Series A
Preferred Shares and the Series B Preferred Shares (as such terms are
hereinafter defined).
Subject to the provisions of the Company's Declaration of Trust regarding
restrictions on transfer of shares of beneficial interest, each outstanding
Common Share entitles the holder to one vote on all matters submitted to a vote
of shareholders, including the election of trustees, and, except as provided
with respect to any other class or series of shares of beneficial interest, the
holders of Common Shares will possess the exclusive voting power. There is no
cumulative voting in the election of trustees, which means that the holders of a
majority of the outstanding Common Shares can elect all of the trustees then
standing for election and the holders of the remaining shares of beneficial
interest, if any, will not be able to elect any trustees.
Holders of Common Shares have no preferences, conversion, sinking fund,
redemption rights or preemptive rights to subscribe for any securities of the
Company. Subject to the provisions of the Company's Declaration of Trust
regarding restrictions on ownership and transfer, Common Shares have equal
distribution, liquidation and other rights.
Pursuant to Title 8 of the Corporations and Associations Article of the
Annotated Code of Maryland, as amended from time to time (the "Maryland REIT
Law"), a Maryland real estate investment trust generally cannot dissolve, amend
its declaration of trust or merge, unless approved by the affirmative vote or
written consent of shareholders holding at least two-thirds of the shares
entitled to vote on the matter unless a lesser percentage (but not less than a
majority of all of the votes entitled to be cast on the matter) is set forth in
the trust's declaration of trust. The Company's Declaration of Trust contains
such a provision providing for a lesser percentage, a majority of outstanding
shares, with respect to transactions pursuant to which the Company's assets will
be combined with those of one or more other entities (whether by merger, sale or
other transfer of assets, consolidation or share exchange).
Under the Maryland REIT Law, a declaration of trust may permit the trustees
by a two-thirds vote to amend the declaration of trust from time to time to
qualify as a REIT under the Internal Revenue Code of 1986, as amended (the
"Code"), or the Maryland REIT Law without the affirmative vote or written
consent of the shareholders. The Company's Declaration of Trust permits such
action by the Board of Trustees. Also under the Maryland REIT Law, a declaration
of trust may permit the board of trustees to amend the declaration of trust to
increase the aggregate number of shares of beneficial interest or the number of
shares of any class without shareholder approval. The Company's Declaration of
Trust authorizes the Board of Trustees to increase or decrease the aggregate
number of shares of beneficial interest of the Company or the number of shares
of beneficial interest of any class of beneficial interest of the Company but
requires that such action be approved by the affirmative vote of a majority of
all the votes cast on the matter at a meeting of shareholders at which a quorum
is present.
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<PAGE> 22
The Company's Declaration of Trust authorizes the Board of Trustees to
reclassify any unissued Common Shares into other classes or series of beneficial
interest and to establish the number of shares in each class or series and to
set the preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications or terms or
conditions of redemption for each such class or series.
The transfer agent and registrar for the Common Shares is Boston EquiServe
LLP, an affiliate of First National Bank of Boston.
DESCRIPTION OF PREFERRED SHARES
The following description sets forth the general terms of the Preferred
Shares which may be issued by the Company. The description set forth below and
in any Prospectus Supplement does not purport to be complete and is subject to,
and is qualified in its entirety by reference to, the Company's Declaration of
Trust, the applicable Articles Supplementary to the Declaration of Trust
determining the terms of the related series of Preferred Shares (the "Articles
Supplementary"), and the Bylaws of the Company, each of which will be made
available as requested.
Pursuant to its Declaration of Trust, the Company is authorized to issue
100 million Preferred Shares, to classify any unissued Preferred Shares and to
reclassify any previously classified but unissued Preferred Shares of any series
from time to time, in one or more series, as authorized by the Board of
Trustees.
As of June 30, 1998, the Company had outstanding (i) 8,000,000 8.98% Series
A Cumulative Redeemable Preferred Shares, liquidation preference, $25.00 per
share ("Series A Preferred Shares") and (ii) 6,000,000 5.25% Series B
Convertible, Cumulative Redeemable Preferred Shares, liquidation preference of
$50.00 per share ("Series B Preferred Shares").
Series A Preferred Shares. The Series A Preferred Shares rank senior to
the Common Shares and on a parity with the Series B Preferred Shares with
respect to payment of distributions and distributions of assets upon
liquidation, dissolution or winding up of the Company. Holders of the Series A
Preferred Shares are entitled to receive, when and as authorized by the Company,
cumulative cash distributions at the rate of 8.98% of the $25.00 liquidation
preference per annum (equivalent to a fixed annual amount of $2.245 per share).
Such distributions are cumulative and are payable quarterly in arrears on or
before March 15, June 15, September 15 and December 15 of each year. The Series
A Preferred Shares are not convertible or entitled to the benefit of any sinking
fund. On and after June 15, 2002, the Company, at its option, may redeem the
Series A Preferred Shares, in whole or from time to time in part, for cash at a
redemption price of $25.00 per share, plus all accumulated and unpaid
distributions thereon to the date fixed for redemption. However, the redemption
price (other than the portion thereof consisting of accrued and unpaid
distributions) is payable solely out of the sale proceeds of other shares of
beneficial interest of the Company. Upon any voluntary or involuntary
liquidation, dissolution or winding up of the Company, the Series A Preferred
Shares are entitled to a liquidation preference of $25.00 per share, plus
accumulated and unpaid distributions to the date of payment, before any
distribution of assets is made to holders of Common Shares and any other class
or series of shares of the Company ranking junior to the Series A Preferred
Shares as to liquidation rights.
Series B Preferred Shares. The Series B Preferred Shares rank senior to
the Common Shares and on a parity with the Series A Preferred Shares with
respect to the payment of distributions and amounts upon liquidation,
dissolution or winding up of the Company. Distributions on the Series B
Preferred Shares are cumulative and are payable quarterly on or about the
fifteenth day of February, May, August and November of each year, at the rate of
5.25% of the $50.00 liquidation preference per annum (equivalent to $2.625 per
annum per share), subject to increase if the Company fails to satisfy certain
obligations to file a registration statement to register resales of the Series B
Preferred Shares and the Common Shares issuable upon redemption or conversion of
the Series B Preferred Shares and to file an application with the NYSE to list
the Series B Preferred Shares and Common Shares issuable upon redemption or
conversion of the Series B Preferred Shares on the NYSE, in each case, on or
before August 10, 1998. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the Series B Preferred Shares are
entitled to a
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<PAGE> 23
liquidation preference of $50.00 per share, plus accumulated and unpaid
distributions to the date of payment, before any distribution of assets is made
to holders of Common Shares and any other class or series of shares of the
Company ranking junior to the Series B Preferred Shares as to liquidation
rights.
The Series B Preferred Shares are convertible at any time, at the option of
the holder, unless previously redeemed, into Common Shares at a conversion price
of $35.70 per Common Share (equivalent to a conversion rate of 1.40056 Common
Shares for each Series B Preferred Share), subject to adjustment in certain
circumstances (the "Conversion Price"). The Series B Preferred Shares are
subject to mandatory redemption on February 15, 2008 at a price of $50.00 per
Series B Preferred Share, plus accumulated and unpaid distributions to the
redemption date. The Series B Preferred Shares are not redeemable prior to
February 15, 2003. On and after February 15, 2003, the Series B Preferred Shares
will be redeemable by the Company, in whole or from time to time in part, at the
option of the Company, for such number of Common Shares as are issuable at the
Conversion Price (the "Share Redemption Right"). The Company may exercise the
Share Redemption Right only if for 20 trading days within any period of 30
consecutive trading days, including the last day of such period, the closing
price of the Common Shares on the NYSE exceeds $41.055 per share, subject to
adjustment in certain circumstances. On and after February 15, 2003, the Series
B Preferred Shares may be redeemed at the option of the Company for cash (the
"Cash Redemption Right"), in whole or from time to time in part, initially at
$51.1667 per Series B Preferred Share and thereafter at prices declining to
$50.00 per Series B Preferred Share on and after February 15, 2007, plus in each
case accumulated and unpaid distributions, if any, to the redemption date. The
Company will not exercise its Cash Redemption Right unless the redemption price
(other than the portion thereof consisting of accumulated and unpaid
distributions) for the exercise of the Cash Redemption Right is paid solely out
of the sale proceeds of other shares of beneficial interest of the Company,
which may include other series of Preferred Shares, and from no other source. In
addition, in certain circumstances relating to the preservation of the Company's
status as a REIT for federal income tax purposes, the Company may redeem Series
B Preferred Shares at any time.
In connection with the offering of the Series B Preferred Shares, the Board
of Trustees determined that the Ownership Limit (as defined herein) with respect
to the Series B Preferred Shares means the greater of (i) 9.9% of the Series B
Preferred Shares (in value or number, whichever is more restrictive) or (ii)
such number of Series B Preferred Shares such that five Persons who are
considered individuals pursuant to Section 542 of the Code, as modified by
Section 856(h)(3) of the Code (taking into account all Excepted Holders (as
defined in the Declaration of Trust)), could not Beneficially Own (as defined in
the Declaration of Trust), in the aggregate, more than 49.5% of the value of the
outstanding shares of beneficial interest of the Company.
The Prospectus Supplement relating to any Preferred Shares offered thereby
will contain the specific terms thereof, including, without limitation:
(1) The title, series and stated value of the Preferred Shares;
(2) The number of Preferred Shares offered, the liquidation preference per
share and the initial offering price or prices of the Preferred
Shares;
(3) The distribution rate(s), period(s) and/or payment date(s) (or
method(s) of calculation thereof) applicable to the Preferred Shares;
(4) Whether distributions on the Preferred Shares are cumulative or
non-cumulative and, if cumulative, the dates from which distributions
will begin to accumulate;
(5) The procedures for auction and remarketing, if any, for the Preferred
Shares;
(6) The provisions for a sinking fund, if any, for the Preferred Shares;
(7) The provisions for redemption, if applicable, of the Preferred Shares;
(8) Any listing of the Preferred Shares on any securities exchange;
7
<PAGE> 24
(9) The terms and conditions, if applicable, upon which the Preferred
Shares will be convertible into Common Shares of the Company,
including the conversion price (or manner of calculation thereof);
(10) The relative ranking and preferences of the Preferred Shares as to
distribution rights and rights upon liquidation, dissolution or
winding up of the affairs of the Company if other than as described in
this Prospectus;
(11) Any limitations on issuance of any other series of Preferred Shares
ranking senior to or on a parity with Preferred Shares as to
distribution rights and rights upon liquidation, dissolution or
winding up of the affairs of the Company;
(12) 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.
(13) A discussion of all material federal income tax considerations, if
any, applicable to the Preferred Shares that are not discussed in this
Prospectus; and
(14) Any other specific terms, preferences, rights, limitations or
restrictions of the Preferred Shares (which shall not be inconsistent
with the provisions of the Company's Declaration of Trust or the
applicable Articles Supplementary).
Rank. Unless otherwise specified in the applicable Prospectus Supplement,
the Preferred Shares will, with respect to distribution rights and rights upon
liquidation, dissolution or winding up of the Company, rank (i) senior to all
classes or series of Common Shares of the Company and to all equity securities
the terms of which specifically provide that such equity securities rank junior
to such Preferred Shares; (ii) on a parity with all equity securities issued by
the Company other than referred to in clauses (i) and (iii); and (iii) junior to
all equity securities issued by the Company the terms of which specifically
provide that such equity securities rank senior to such Preferred Shares. The
term "equity securities" does not include convertible debt securities.
Distributions. Holders of the Preferred Shares of each series will be
entitled to receive, when, as and if declared by the Board of Trustees of the
Company, out of assets of the Company legally available for payment to
shareholders, cash distributions (or distributions in kind or in other property
if expressly permitted and described in the applicable Prospectus Supplement) at
such rates and on such dates as will be set forth in the applicable Prospectus
Supplement. Each such distribution 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 Trustees of the Company.
Distributions on any series of Preferred Shares, if cumulative, will be
cumulative from and after the date set forth in the applicable Prospectus
Supplement. If the Board of Trustees of the Company fails to declare a
distribution payable on a distribution payment date on any series of the
Preferred Shares for which distributions are non-cumulative, then the holders of
such series of the Preferred Shares will have no right to receive a distribution
in respect of the distribution period ending on such distribution payment date,
and the Company will have no obligation to pay the distribution accumulated for
such period, whether or not distributions on such series are declared payable on
any future distribution payment date.
Unless otherwise specified in the applicable Prospectus Supplement, if any
Preferred Shares of any series are outstanding, no full distributions shall be
declared or paid or set apart for payment on any shares of beneficial interest
of the Company of any other series ranking, as to distributions, 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 distribution, full
cumulative distributions have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such payment
on the Preferred Shares of such series for all past distribution periods and the
then current distribution period or (ii) if such series of Preferred Shares does
not have a cumulative distribution, full distributions for the then current
distribution period have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for such payment
on the Preferred Shares of such series. When distributions 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
8
<PAGE> 25
any other series of Preferred Shares ranking on a parity as to distributions
with the Preferred Shares of such series, all distributions declared upon
Preferred Shares of such series and any other series of Preferred Shares ranking
on a parity as to distributions with such Preferred Shares shall be declared pro
rata so that the amount of distributions 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 accumulated distributions per share on the
Preferred Shares of such series and such other series of Preferred Shares (which
shall not include any accumulation in respect of unpaid distributions for prior
distribution periods if such Preferred Shares do not have a cumulative
distribution) bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any distribution 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 distribution, full cumulative
distributions 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 set apart for payment for all past distribution periods and the
then current distribution period, and (ii) if such series of Preferred Shares
does not have a cumulative distribution, full distributions 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 set apart for payment for
the then current distribution period, no distributions (other than in Common
Shares or other shares of beneficial interest ranking junior to the Preferred
Shares of such series as to distributions and upon liquidation) shall be
declared or paid or set aside for payment or other distribution upon the Common
Shares, or any other shares of beneficial interest of the Company ranking junior
to or on a parity with the Preferred Shares of such series as to distributions
or upon liquidation, nor shall any Common Shares, or any other shares of
beneficial interest of the Company ranking junior to or on a parity with the
Preferred Shares of such series as to distributions or upon liquidation, 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 shares
of beneficial interest of the Company ranking junior to the Preferred Shares of
such series as to distributions and upon liquidation).
If, for any taxable year, the Company elects to designate as "capital gain
dividends" (as defined in Section 857 of the Code) any portion (the "Capital
Gains Amount") of the dividends (within the meaning of the Code) paid or made
available for the year to holders of all classes of shares of beneficial
interest (the "Total Dividends"), then the portion of the Capital Gains Amount
that will be allocable to the holders of Preferred Shares will be the Capital
Gains Amount multiplied by a fraction, the numerator of which will be the total
dividends (within the meaning of the Code) paid or made available to the holders
of the Preferred Shares for the year and the denominator of which shall be the
Total Dividends.
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, in 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 such Preferred Shares
that shall be redeemed by the Company on the date(s) or during the period(s) to
be specified, at a redemption price per share to be specified, together with an
amount equal to all accumulated and unpaid distributions thereon (which shall
not, if such Preferred Shares do not have a cumulative distribution, include any
accumulation in respect of unpaid distributions for prior distribution 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 beneficial interest of the Company, the
terms of such Preferred Shares may provide that, if no such shares of beneficial
interest 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 beneficial interest of the Company pursuant to
conversion provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred
Shares has a cumulative distribution, full cumulative distributions on all
Preferred Shares of such series have been or contemporaneously are
9
<PAGE> 26
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past distribution periods and the current distribution
period and (ii) if such series of Preferred Shares does not have a cumulative
distribution, full distributions 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 set apart for payment for the then current distribution
period, no Preferred Shares of any series shall be redeemed unless all
outstanding Preferred Shares of such series are simultaneously redeemed;
provided, however, that the foregoing shall not prevent the redemption, 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 Preferred Shares of such series. In addition,
unless (i) if such series of Preferred Shares has a cumulative distribution,
full cumulative distributions on all 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 all past distributions periods and
the then current distribution period, and (ii) if such series of Preferred
Shares does not have a cumulative distribution, full distributions 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 set apart for
payment for the then current distribution period, the Company shall not purchase
or otherwise acquire directly or indirectly any Preferred Shares of such series
(except by conversion into or exchange for shares of beneficial interest of the
Company ranking junior to the Preferred Shares of such series as to
distributions and upon liquidation); provided, however, that the foregoing shall
not prevent the redemption, purchase or acquisition of Preferred Shares of such
series to assist in maintaining the REIT status of the Company or pursuant to a
purchase or exchange offer made on the same terms to holders of all outstanding
Preferred Shares of such series.
If fewer than all of the outstanding 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 lot in a 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 share transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
and series of Preferred Shares to be redeemed; (iii) the place or places where
certificates for such Preferred Shares are to be surrendered for payment of the
redemption price; (iv) that distributions on the shares to be redeemed will
cease to accrue on such redemption date; and (v) the date upon which the
holders' conversion rights, if any, as to such shares shall terminate. If fewer
than all of the Preferred Shares of any series are to be redeemed, the notice
mailed to each such holder thereof shall also specify the number 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 distributions will cease to accumulate 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 Shares or any
other class or series of shares of beneficial interest 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
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 (set forth
in the applicable Prospectus Supplement), plus an amount equal to all
distributions accumulated and unpaid thereon (which shall not include any
accumulation in respect of unpaid distributions for prior distribution periods
if such Preferred Shares do not have a cumulative distribution). 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. If, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the Company are
insufficient to pay
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the amount of the liquidating distributions on all outstanding Preferred Shares
and the corresponding amounts payable on all shares of other classes or series
of shares beneficial interest 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 shares of beneficial
interest 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 shares of beneficial interest
ranking junior to the Preferred Shares upon liquidation, dissolution or winding
up, according to their respective rights and preferences and in each case
according to their respective number of shares. 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 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.
Whenever distributions on any Preferred Shares shall be in arrears for six
or more quarterly periods, the holders of such Preferred Shares (voting together
as a single class with all other series of Preferred Shares upon which like
voting rights have been conferred and are exercisable) will be entitled to vote
for the election of two additional Trustees of the Company at a special meeting
called by the holders of record of at least ten percent (10%) of any series of
Preferred Shares so in arrears (unless such request is received less than 90
days before the date fixed for the next annual or special meeting of the
shareholders) or at the next annual meeting of shareholders, and at each
subsequent annual meeting until (i) if such series of Preferred Shares has a
cumulative distribution, all distributions accumulated on such series of
Preferred Shares for the past distribution periods and the then current
distribution period shall have been fully paid or declared and a sum sufficient
for the payment thereof set aside for payment or (ii) if such series of
Preferred Shares do not have a cumulative distribution, four consecutive
quarterly distributions shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment. In such case, the
entire Board of Trustees of the Company will be increased by two Trustees.
Unless provided otherwise for any series of Preferred Shares, so long as
any Preferred Shares remain outstanding, the Company will not, without the
affirmative vote or consent of the holders of at least two-thirds of each series
of Preferred Shares outstanding at the time, given in person or by proxy, either
in writing or at a meeting (such series voting together as a single class), (i)
authorize or create, or increase the authorized or issued amount of, any class
or series of shares of beneficial interest ranking senior to such series of
Preferred Shares with respect to the payment of distributions or the
distribution of assets upon liquidation, dissolution or winding up or reclassify
any authorized shares of beneficial interest 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 Company's Declaration of Trust or the Articles
Supplementary 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, with respect to the
occurrence of any of the Events set forth in (ii) above, so long as the
Preferred Shares remain outstanding with the terms thereof materially unchanged,
taking into account that upon the occurrence of an Event, the Company may not be
the surviving entity, the occurrence of any such Event shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
powers of holders of Preferred Shares; and provided further 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 distributions and the distribution of
assets upon liquidation, dissolution or winding up of the Company, shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting powers.
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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 Preferred Shares of such series shall have been
converted or redeemed or called for redemption and sufficient funds shall have
been deposited in trust to effect such redemption.
Conversion Rights. The terms and conditions, if any, upon which any series
of Preferred Shares is convertible into Common Shares will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of Common Shares into which the Preferred Shares are convertible, the
conversion price (or manner of calculation thereof), the conversion date(s) or
period(s), 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.
Registrar and Transfer Agent. The registrar and transfer agent for the
Preferred Shares will be set forth in the applicable Prospectus Supplement.
DESCRIPTION OF WARRANTS
The Company may issue Common Warrants or Preferred Warrants for the
purchase of Common Shares or Preferred Shares, respectively. Warrants may be
issued independently or together with any other Securities offered by any
Prospectus Supplement and may be attached to or separate from such Securities.
Each series of 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 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 Warrants. The
following sets forth certain general terms and provisions of the Warrants
offered hereby. Further terms of the Warrants and the applicable Warrant
Agreements will be set forth in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the
Warrants in respect of which this Prospectus is being delivered, including,
where applicable, the following:
(1) The title of the Warrants;
(2) The aggregate number of the Warrants;
(3) The price or prices at which the Warrants will be issued;
(4) The designation, number and terms of the Common Shares or Preferred
Shares, as the case may be, purchasable upon exercise of the Warrants;
(5) The designation and terms of the other Securities offered thereby with
which the Warrants are issued and the number of the Warrants issued
with each such Security offered thereby:
(6) The date, if any, on and after which the Warrants and the related
Common Shares or Preferred Shares, as the case may be, will be
separately transferable;
(7) The price per share at which the Common Shares or Preferred Shares, as
the case may be, purchasable upon exercise of the Warrants may be
purchased;
(8) The date(s) on which or the period(s) during which the right to
exercise the Warrants will commence and the date on which the right
shall expire;
(9) The minimum or maximum number of Warrants which may be exercised at
any one time;
(10) Information with respect to book entry procedures, if any;
(11) A discussion of certain federal income tax considerations, if any; and
(12) Any other terms of the Warrants, including terms, procedures and
limitations relating to the exchange and exercise of the Warrants.
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RESTRICTIONS ON OWNERSHIP AND TRANSFER
For the Company to qualify as a REIT under the Code, no more than 50% in
value of its outstanding shares of beneficial interest may be owned, actually or
constructively, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year (other than the first
year for which an election to be treated as a REIT has been made) or during a
proportionate part of a shorter taxable year. In addition, if the Company, or an
owner of 10% or more of the Company, actually or constructively owns 10% or more
of a tenant of the Company (or a tenant of any partnership in which the Company
is a partner), the rent received by the Company (either directly or through any
such partnership) from such tenant will not be qualifying income for purposes of
the REIT gross income tests of the Code. A REIT's shares also must be
beneficially owned by 100 or more persons during at least 335 days of a taxable
year of 12 months or during a proportionate part of a shorter taxable year
(other than the first year for which an election to be treated as a REIT has
been made).
Because the Board of Trustees believes it is desirable for the Company to
qualify as a REIT, the Declaration of Trust, subject to certain exceptions as
discussed below, provides that no holder may own, or be deemed to own by virtue
of the attribution provisions of the Code, more than 9.9% in value or number
(whichever is more restrictive) of the Common Shares or of any series of the
Preferred Shares (the "Ownership Limit"). The ownership attribution rules under
the Code are complex and may cause Common Shares or any series of Preferred
Shares owned actually or constructively by a group of related individuals and/or
entities to be owned constructively by one individual or entity. As a result,
the acquisition of less than 9.9% of the Common Shares or any series of
Preferred Shares (or the acquisition of an interest in an entity that owns,
actually or constructively, Common Shares or any series of Preferred Shares) by
an individual or entity, could, nevertheless cause that individual or entity, or
another individual or entity, to own constructively in excess of 9.9% of the
outstanding Common Shares or the applicable series of Preferred Shares, as the
case may be, and thus subject such Common Shares or Preferred Shares to the
Ownership Limit. The Board of Trustees will grant an exemption from the
Ownership Limit with respect to one or more persons who would not be treated as
"individuals" for purposes of the Code if it is satisfied, based upon the advice
of counsel or a ruling from the IRS, that such ownership will not cause a person
who is an individual to be treated as owning Common Shares in excess of the
Ownership Limit, applying the applicable constructive ownership rules, and will
not otherwise jeopardize the Company's status as a REIT. As a condition of such
waiver, the Board of Trustees may require undertakings or representations from
the applicant with respect to preserving the REIT status of the Company. Under
certain circumstances, the Board of Trustees may, in its sole and absolute
discretion, grant an exemption for individuals to acquire Preferred Shares in
excess of the Ownership Limit, provided that certain conditions are met and any
representations and undertakings that may be required by the Board of Trustees
are made.
The Declaration of Trust permits the Board of Trustees to increase the
Ownership Limit with respect to any class or series of shares of beneficial
interest of the Company; provided, however, that, after giving effect to such
increase, five beneficial owners of Common Shares may not beneficially own in
the aggregate more than 49.5% of the outstanding Common Shares.
The Declaration of Trust further prohibits (a) any person from actually or
constructively owning shares of beneficial interest of the Company that would
result in the Company being "closely held" under Section 856(h) of the Code or
otherwise cause the Company to fail to qualify as a REIT and (b) any person from
transferring shares of beneficial interest of the Company if such transfer would
result in shares of beneficial interest of the Company being owned by fewer than
100 persons.
Any person who acquires or attempts or intends to acquire actual or
constructive ownership of shares of beneficial interest of the Company that will
or may violate any of the foregoing restrictions on transferability and
ownership is required to give notice immediately to the Company and provide the
Company with such other information as the Company may request in order to
determine the effect of such transfer on the Company's status as a REIT.
If any purported transfer of shares of beneficial interest of the Company
or any other event would otherwise result in any person violating the Ownership
Limit or the other restrictions in the Declaration of
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Trust, then any such purported transfer will be void and of no force or effect
with respect to the purported transferee (the "Prohibited Transferee") as to
that number of shares that exceeds the Ownership Limit (referred to as "excess
shares") and the Prohibited Transferee will acquire no right or interest (or, in
the case of any event other than a purported transfer, the person or entity
holding record title to any such shares in excess of the Ownership Limit (the
"Prohibited Owner") will cease to own any right or interest) in such excess
shares. Any such excess shares described above will be transferred
automatically, by operation of law, to a trust, the beneficiary of which will be
a qualified charitable organization selected by the Company (the "Beneficiary").
Such automatic transfer will be deemed to be effective as of the close of
business on the Business Day (as defined in the Declaration of Trust) prior to
the date of such violating transfer. Within 20 days of receiving notice from the
Company of the transfer of shares to the trust, the trustee of the trust (who
will be designated by the Company and be unaffiliated with the Company and any
Prohibited Transferee or Prohibited Owner) will be required to sell such excess
shares to a person or entity who could own such shares without violating the
Ownership Limit, and distribute to the Prohibited Transferee an amount equal to
the lesser of the price paid by the Prohibited Transferee for such excess shares
or the sales proceeds received by the trust for such excess shares. In the case
of any excess shares resulting from any event other than a transfer, or from a
transfer for no consideration (such as a gift), the trustee will be required to
sell such excess shares to a qualified person or entity and distribute to the
Prohibited Owner an amount equal to the lesser of the fair market value of such
excess shares as of the date of such event or the sales proceeds received by the
trust for such excess shares. In either case, any proceeds in excess of the
amount distributable to the Prohibited Transferee or Prohibited Owner, as
applicable, will be distributed to the Beneficiary. Prior to a sale of any such
excess shares by the trust, the trustee will be entitled to receive, in trust
for the Beneficiary, all dividends and other distributions paid by the Company
with respect to such excess shares, and also will be entitled to exercise all
voting rights with respect to such excess shares. Subject to Maryland law,
effective as of the date that such shares have been transferred to the trust,
the trustee will have the authority (at the trustee's sole discretion and
subject to applicable law) (i) to rescind as void any vote cast by a Prohibited
Transferee prior to the discovery by the Company that such shares have been
transferred to the trust and (ii) to recast such vote in accordance with the
desires of the trustee acting for the benefit of the Beneficiary. However, if
the Company has already taken irreversible corporate action, then the trustee
will not have the authority to rescind and recast such vote. Any dividend or
other distribution paid to the Prohibited Transferee or Prohibited Owner (prior
to the discovery by the Company that such shares had been automatically
transferred to a trust as described above) will be required to be repaid to the
trustee upon demand for distribution to the Beneficiary. If the transfer to the
trust as described above is not automatically effective (for any reason) to
prevent violation of the Ownership Limit, then the Declaration of Trust provides
that the transfer of the excess shares will be void.
In addition, shares of beneficial interest of the Company held in the trust
shall be deemed to have been offered for sale to the Company, or its designee,
at a price per share equal to the lesser of (i) the price per share in the
transaction that resulted in such transfer to the trust (or, in the case of a
devise or gift, the market value at the time of such devise or gift) and (ii)
the market value of such shares on the date of the Company, or its designee,
accepts such offer. The Company shall have the right to accept such offer until
the trustee has sold the shares of beneficial interest held in the Company. Upon
such a sale to the Company, the interest of the Beneficiary in the shares sold
shall terminate and the trustee shall distribute the net proceeds of the sale to
the Prohibited Owner.
The foregoing restrictions on transferability and ownership will not apply
if the Board of Trustees determines that it is no longer in the best interests
of the Company to attempt to qualify, or to continue to qualify, as a REIT.
All certificates representing shares of beneficial interest shall bear a
legend referring to the restrictions described above.
All persons who own, directly or by virtue of the attribution provisions of
the Code, more than 5% (or such other percentage between 1/2 of 1% and 5% as
provided in the rules and regulations promulgated under the Code) of the lesser
of the number or value of the outstanding shares of beneficial interest of the
Company must give a written notice to the Company by January 31 of each year. In
addition, each shareholder will,
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upon demand, be required to disclose to the Company in writing such information
with respect to the direct, indirect and constructive ownership of shares of
beneficial interest as the Board of Trustees deems reasonably necessary to
comply with the provisions of the Code applicable to a REIT, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.
These ownership limitations could have the effect of delaying, deferring or
preventing a takeover or other transaction in which holders of some, or a
majority, of the Company's shares of beneficial interest might receive a premium
for their shares over the then prevailing market price or which such holders
might believe to be otherwise in their best interest.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for public
offering and sale by them or may sell the Securities to investors directly or
through agents. Any such underwriter or agent involved in the offer and sale of
the Securities will be named in the applicable Prospectus Supplement.
The Company may offer and sell the Securities at a fixed price or prices,
which may be changed, at prices related to the prevailing market prices at the
time of sale or at negotiated prices for cash or assets in transactions that do
not constitute a business combination within the meaning of Rule 145 promulgated
under the Securities Act. The Company also may, from time to time, authorize
underwriters acting as the Company's agents to offer and sell the Securities
upon the terms and conditions as are set forth in the applicable Prospectus
Supplement. In connection with the sale of the Securities, underwriters may be
deemed to have received compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of the Securities for whom they may act as agent. Underwriters may
sell Securities to or through dealers, and such dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters
and/or commissions from the purchasers from whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of the 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 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 Securities may be deemed to be
underwriting discounts and commissions, under the Securities Act. Underwriters,
dealers and agents may be entitled, under agreements entered into with the
Company, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit offers by certain
institutions to purchase Securities from the Company at the public offering
price set forth in such Prospectus Supplement pursuant to Delayed Delivery
Contracts ("Contracts") providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each Contract will be for an amount not
less than, and the aggregate principal amount of Securities sold pursuant to
Contracts shall be not less nor 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 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 Securities are being sold to underwriters, the Company shall have sold to
such underwriters the total principal amount of the Securities less the
principal amount thereof covered by Contracts.
Certain of the underwriters and their affiliates may engage in transactions
with and perform services for the Company and its subsidiaries in the ordinary
course of business.
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EXPERTS
The consolidated financial statements of Equity Office Properties Trust
appearing in Equity Office Property Trust's Annual Report (Form 10-K, as amended
by Form 10-K/A) for the year ended December 31, 1997, have been audited by Ernst
& Young LLP, independent auditors, as set forth in their report thereon included
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Beacon Properties Corporation,
appearing in the Current Report on Form 8-K/A of Equity Office Properties Trust
filed with the Commission on February 18, 1998, have been audited by
PricewaterhouseCoopers LLP, independent auditors, as set forth in their reports
included therein and incorporated herein by reference. Such consolidated
financial statements 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 legality of the Securities will be passed upon for the Company by Hogan
& Hartson L.L.P., Washington, D.C. Certain tax matters will be passed upon by
Hogan & Hartson L.L.P., Washington, D.C., special tax counsel to the Company.
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