<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 18, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
PAN PACIFIC RETAIL PROPERTIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS GOVERNING INSTRUMENTS)
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1631-B SOUTH MELROSE DRIVE
VISTA, CALIFORNIA 92083
(760) 727-1002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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<TABLE>
<S> <C> <C>
STUART A. TANZ
MARYLAND 1631-B SOUTH MELROSE DRIVE
(STATE OR OTHER JURISDICTION VISTA, CALIFORNIA 92083 33-0752457
OF INCORPORATION OR ORGANIZATION) (760) 727-1002 (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
(NAME AND ADDRESS OF AGENT FOR SERVICE)
</TABLE>
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Copies to:
WILLIAM J. CERNIUS
MARK W. SENECA
LATHAM & WATKINS
650 TOWN CENTER DRIVE, 20TH FLOOR
COSTA MESA, CALIFORNIA 92626
(714) 540-1235
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time after the effective date of this Registration Statement as
determined by market conditions.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [ X ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement of the same offering. [ ] ________________
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] _________________
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
TITLE OF SECURITIES TO BE REGISTERED(1) REGISTERED(2) PER UNIT(2) PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities (3)
Common Stock, $.01 par value per share (4)
Preferred Stock, $.01 par value per share (5)
Depositary Shares representing Preferred
Stock (6)
Warrants (7)
Total ....................................... $400,000,000 (8) $400,000,000 $118,000(9)
=================================================================================================================================
(Footnotes on following page)
</TABLE>
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
(Footnotes from previous page)
(1) This Registration Statement also covers contracts which may be issued by
the Registrant under which the counterparty may be required to purchase
Debt Securities, Common Stock, Preferred Stock or Depository Shares.
(2) In no event will the aggregate maximum offering price of all securities
registered under this Registration Statement exceed $400,000,000. Any
securities registered hereunder may be sold separately or as units with
other securities registered hereunder.
(3) Subject to footnote (2), there are being registered hereunder an
indeterminate number of Debt Securities as may be sold from time to time by
Pan Pacific Retail Properties, Inc. (the "Company").
(4) Subject to footnote (2), there are being registered hereunder shares of
Common Stock as may be sold, from time to time, by the Company. There is
also being registered hereunder an indeterminate number of shares of Common
Stock that may be issued upon conversion, as applicable, of Preferred Stock
or Depository Shares registered hereunder or upon exercise of Warrants
registered hereunder, as the case may be.
(5) Subject to footnote (2), there are being registered hereunder shares of
Preferred Stock, as may be sold, from time to time, by the Company or as
may be issued upon the exercise of Warrants registered hereunder.
(6) To be represented by Depository Receipts representing an interest in all or
a specified portion of a share of Preferred Stock.
(7) Subject to footnote (2), there are being registered hereunder Warrants
representing rights to purchase Preferred Stock or Common Stock (as shall
be designated by the Company at the time of any such offering) registered
hereunder.
(8) The proposed maximum offering price per unit (a) has been omitted pursuant
to Instruction II.D. of Form S-3, and (b) will be determined, from time to
time, by the Registrant in connection with the issuance by the Registrant
of the securities registered hereunder.
(9) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act of 1933, as amended.
<PAGE> 3
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION -- DATED SEPTEMBER 18, 1998
PROSPECTUS
$400,000,000
PAN PACIFIC RETAIL PROPERTIES, INC.
Debt Securities, Common Stock, Preferred Stock,
Depositary Shares and Warrants
Pan Pacific Retail Properties, Inc., a Maryland corporation (the
"Company"), may from time to time offer in one or more series or classes (i) its
debt securities (the "Debt Securities"), (ii) shares of its Common Stock, $.01
par value per share (the "Common Stock"), (iii) shares of its Preferred Stock,
$.01 par value per share (the "Preferred Stock"), (iv) shares of Preferred Stock
represented by Depositary Shares (the "Depositary Shares"), and (v) warrants to
purchase Common Stock or Preferred Stock (the "Warrants") in amounts, at prices
and on terms to be determined at the time of offering, with an aggregate public
offering price of up to $400,000,000 (or its equivalent in another currency
based on the exchange rate at the time of sale). The Debt Securities, the Common
Stock, the Preferred Stock, the Depositary Shares and the Warrants
(collectively, the "Offered Securities") may be offered, separately or together,
in separate series, in amounts, at prices and on terms to be set forth in one or
more supplements to this Prospectus (each, a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Debt
Securities, the specific title, aggregate principal amount, currency, form
(which may be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner and calculation thereof) and time of
payment of interest, terms for redemption at the Company's option or repayment
at the holder's option, terms for sinking fund payments, terms for conversion
into shares of Preferred Stock or Common Stock, covenants and any initial public
offering price; (ii) in the case of Common Stock, the specific title and stated
value and any initial public offering price, (iii) in the case of Preferred
Stock, the specific designation, preferences, conversion and other rights,
voting powers, restrictions, limitations as to transferability, dividends and
other distributions and terms and conditions of redemption and any initial
public offering price; (iv) in the case of the Depositary Shares, the fractional
share of Preferred Stock represented by each such Depositary Share; and (v) in
the case of Warrants, the duration, offering price, exercise price and
detachability. In addition, such specific terms may include limitations on
actual, beneficial or constructive ownership and restrictions on transfer of the
Offered Securities, in each case as may be appropriate to preserve the status of
the Company as a real estate investment trust ("REIT") for federal income tax
purposes. See "Restrictions on Ownership and Transfer of Capital Stock."
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 Offered Securities
covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents
designated from time to time by the Company, or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
Offered Securities, their names, and any applicable purchase price, fee,
commission or discount arrangement between or among them, will be set forth, or
will be calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such series of Offered Securities.
----------------
See "Risk Factors" beginning on page 6 for certain factors relevant to an
investment in the Offered Securities.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------------------------------------
The date of this Prospectus is September , 1998
<PAGE> 4
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 the Company files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy statements and other information filed can be inspected and
copied at the Commission's Public Reference Section, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional offices of the Commission:
Seven World Trade Center, 13th Floor, New York, New York 10048, and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such
material can be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Commission also maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants, such as the
Company, that file electronically with the Commission. The address of the
Commission's site is http://www.sec.gov. In addition, the Company's Common Stock
is listed on the New York Stock Exchange and similar information concerning the
Company can be inspected and copied at the offices of the New York Stock
Exchange, Inc., 20 Broad Street, New York, New York 10005.
The Company has filed with the Commission a registration statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") (of which this Prospectus is a part) under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Offered Securities. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain portions of which have been omitted
as permitted by the rules and regulations of the Commission. Statements
contained in this Prospectus, in any Prospectus Supplement or in any document
incorporated by reference herein or therein, 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 other document filed as an exhibit to,
or incorporated by reference in, the Registration Statement, each such statement
being qualified in all respects by such reference and the exhibits and schedules
thereto. For further information regarding the Company and the Offered
Securities, reference is hereby made to the Registration Statement and such
exhibits and schedules which may be obtained from the Commission at its
principal office in Washington, D.C., upon payment of the fees prescribed by the
Commission.
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<PAGE> 5
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;
(b) The Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998;
(c) The Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1998; and
(d) The description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A (No. 001-13243),
including any subsequently filed amendments and reports filed
for the purpose of updating such description.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Registration Statement and
prior to the filing of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be a part of it from the respective dates of
filing such documents. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained 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 Registration Statement.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference in such documents) will be provided without charge to
each person, including any beneficial owner, to whom this Prospectus and the
applicable Prospectus Supplement are delivered upon written or oral request.
Requests should be directed to the Chief Financial Officer, Pan Pacific Retail
Properties, Inc., 1631-B South Melrose Drive, Vista, California 92083, telephone
number (760) 727-1002.
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<PAGE> 6
THE COMPANY
GENERAL
Pan Pacific Retail Properties, Inc., a Maryland corporation (the
"Company"), is a self-administered and self-managed real estate investment trust
("REIT") formed in April 1997 to continue and expand the acquisition, ownership,
management, leasing and development business of Pan Pacific Development (U.S.)
Inc. ("PPD") and its affiliates. The Company's portfolio consists principally of
community and neighborhood shopping centers predominantly located in four key
western U.S. markets. As of September 1, 1998, the Company owned or controlled a
portfolio of 45 shopping center properties of which 41 are located in the
western United States including 11 in Northern California, 9 in Southern
California, 6 in Las Vegas, Nevada and 15 in the Pacific Northwest (Washington
and Oregon).
The Company employs personnel in the areas of administration,
accounting services, property management, maintenance, design, leasing,
acquisitions and business development. The Company's executive offices are
located at 1631-B South Melrose Drive, Vista, California, and its telephone
number is (760) 727-1002. In addition to personnel located at its executive
offices, the Company operates regional offices in Las Vegas, Nevada; Kent,
Washington; Chino, California; and Sacramento, California. Each of the regional
offices is responsible for property maintenance, management and leasing.
The Company was incorporated as a Maryland corporation in April 1997
and in August 1997 completed its initial public offering of Common Stock, which
is listed on the New York Stock Exchange under the symbol "PNP."
BUSINESS STRATEGIES
The Company's business strategies involve three fundamental practices:
(i) owning and operating shopping centers in select key markets with strong
economic and demographic characteristics in order to establish and maintain a
portfolio of real estate assets with stable income and the potential for
long-term growth; (ii) developing local and regional market expertise through
the hands-on participation of senior management in property operations and
leasing in order to capitalize on market trends, retailing trends and
acquisition opportunities; and (iii) establishing and maintaining a diversified
and complementary tenant mix with an emphasis on tenants that provide day-to-day
consumer necessities in order to provide steady rental revenue.
Through its regional offices, the Company implements its business
strategies by (i) its on-going analysis of regional and submarket demographic,
economic and retailing trends; (ii) developing and maintaining relationships
with key retailers, real estate brokers and financial institutions; (iii)
emphasizing tenant satisfaction and retention through its proactive
communication with tenants, community oriented marketing activities and
comprehensive maintenance programs; and (iv) applying aggressive cost control
practices and by capitalizing on cost reduction and economy of scale
opportunities arising from the size and proximity of its properties within each
region.
GROWTH STRATEGIES
The Company seeks to continue to utilize its in-depth market knowledge
within its four key markets to pursue its strategy of opportunistic acquisitions
of shopping centers for long-term investment. The Company believes that
significant opportunities exist within these markets to acquire shopping center
properties that are consistent with its existing portfolio in terms of quality
of construction, positive submarket demographics and location attributes and
that provide attractive initial capitalization rates with potential for growth
in cash flow. The Company further believes it has certain competitive advantages
which enhance its ability to identify and capitalize on acquisition
opportunities, including: (i) long-standing relationships with institutional and
other owners of shopping center properties in the Company's four primary
regions; (ii) fully integrated real estate operations which enable the Company
to respond quickly to acquisition opportunities and to capitalize on the
resulting economies of scale; and (iii) access to capital as a public company.
4
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USE OF PROCEEDS
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Offered Securities
for general corporate purposes including, without limitation, the acquisition
and development of additional properties and the repayment of indebtedness. Net
proceeds from the sale of the Offered Securities initially may be temporarily
invested in short-term securities.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth ratios of earnings to fixed charges for
the periods shown. The year ended December 31, 1997 and the six months ended
June 30, 1998 are for the Company. The results of operations used to compute the
ratio for the years ended December 31, 1996, 1995, 1994 and 1993 are the
combined historical results of operations of Pan Pacific Development Properties,
which is not a legal entity, but consists solely of the accounts of PPD related
to the ownership, management and leasing of its neighborhood and community
shopping centers and medical office building. All of the accounts of PPD
unrelated to these activities have been excluded from the combined historical
financial statements of Pan Pacific Development Properties.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30, 1998 YEAR ENDED DECEMBER 31,
------------------- ------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
2.25x 1.64x 1.01x 0.89x 0.68x 0.99x
</TABLE>
The ratios of earnings to fixed charges were computed by dividing
earnings by fixed charges. For this purpose, earnings consist of net income
before extraordinary items plus fixed charges (excluding interest costs
capitalized). Fixed charges consist of interest costs, whether expensed or
capitalized, and the amortization of debt issuance costs. To date, the Company
has not issued any Preferred Stock; therefore, the ratios of earnings to fixed
charges and preferred share dividends are the same as the ratios presented
above.
5
<PAGE> 8
This Prospectus contains statements which constitute "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
When used in this Prospectus, the words "may", "will", "expect", "anticipate,"
"continue", "estimate", "project", "intend" and similar expressions are intended
to identify forward-looking statements regarding events, conditions, and
financial trends that may affect the Company's future plans of operations,
business strategy, results of operations and financial position. Prospective
investors are cautioned that any forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties, and that
actual results may differ materially from those included within the
forward-looking statements as a result of various factors.
RISK FACTORS
In addition to the other information contained or incorporated by
reference in this Prospectus (including the information contained in the
Company's Annual Report on Form 10-K under the heading "Certain Cautionary
Statements") or in any accompanying Prospectus Supplement, prospective investors
should carefully consider the following factors before investing in the
securities offered hereby.
EFFECT ON COMMON STOCK PRICE OF FUTURE SALES OF PLEDGED SHARES
Sales of a substantial number of shares of Common Stock, or the
perception that such sales could occur, could adversely affect prevailing market
prices of the Common Stock. As of September 1, 1998, PPD and its subsidiaries,
affiliates of the Company, own 10,808,012 shares of Common Stock (the "Pledged
Shares"), representing approximately 51.1% of the Company's total outstanding
shares of Common Stock as of that date, which have been pledged to Prudential
Securities Credit Corporation ("Lender") to secure revolving credit loans
extended to PPD pursuant to a credit agreement with the Lender (the "Credit
Agreement") in connection with the formation of the Company and the completion
of its initial public offering in August 1997 (the "IPO"). There are a number of
restrictions, however, on the ability of PPD and its subsidiaries to sell their
respective shares of Common Stock.
First, pursuant to contractual agreements with the Lender, PPD and its
subsidiaries have agreed not to sell the Pledged Shares until their respective
obligations under the Credit Agreement have been satisfied. The revolving credit
loans extended to PPD and its subsidiaries by Lender pursuant to the Credit
Agreement mature on August 13, 2000.
Second, PPD has agreed pursuant to a lock-up agreement with the
underwriters of the Company's IPO in August 1997 (the "Lock-up Agreement") not
to, directly or indirectly, without the prior written consent of Prudential
Securities Incorporated (the lead underwriter of the IPO), offer, sell, offer to
sell, contract to sell, pledge (except to the Lender pursuant to the Credit
Agreement), grant any option to purchase or otherwise sell or dispose of any
shares of Common Stock of the Company until August 2000 (three years after the
consummation of the IPO); provided, however, that the Lock-up Agreement applies
to only 4,162,702 shares of Common Stock owned by PPD (representing
approximately 38.5% of PPD's interest in the Company as of September 1, 1998)
due to certain tax considerations affecting the Company. Prudential Securities
Incorporated may, in its sole discretion, at any time and without notice,
release all or any portion of the shares of Common Stock subject to the Lock-up
Agreement.
Third, the shares of Common Stock owned by PPD are "restricted"
securities under the meaning of Rule 144 promulgated under the Securities Act
("Rule 144"). Therefore, so long as PPD remains an affiliate of the Company, PPD
may only sell its shares of Common Stock in accordance with the volume
limitations, manner of sale provisions, public information requirements and
notice requirements specified in Rule 144 or pursuant to a registration
statement covering the resale of such shares. Generally speaking, the number of
shares of Common Stock which may be sold pursuant to Rule 144 during any
consecutive three month period shall not exceed the greater of (i) 1% of the
shares of Common Stock outstanding, or (ii) the average weekly trading volume in
such shares of Common Stock reported on all national securities exchanges and/or
reported through the automated
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<PAGE> 9
quotation system of a registered securities association for the four calendar
weeks specified in Rule 144. In addition to the foregoing, PPD holds certain
registration rights granted by the Company in connection with its IPO which
obligate the Company to file and generally keep continuously effective,
beginning in August 2000 (three years after the completion of the IPO and
following the termination of the Lock-up Agreement), a registration statement
permitting the resale by PPD of shares of Common Stock it then owns.
Prior to the satisfaction by PPD and its subsidiaries of their
obligations under the Credit Agreement and in the event there is an uncured
default by PPD and its subsidiaries thereunder, the Lender may sell all or any
portion of the Pledged Shares as its remedy for such default. Resales of Pledged
Shares by the Lender, however, are not subject to any restrictions under the
Lock-up Agreement.
No prediction can be made about the effect that future sales, if any,
of the Pledged Shares by either the Lender or PPD in accordance with the
foregoing will have on the market price of the Common Stock.
7
<PAGE> 10
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities will be direct obligations of the Company, which
may be secured or unsecured, and which may be senior or subordinated
indebtedness of the Company. The Debt Securities may be issued under one or more
indentures, each dated as of a date on or before the issuance of the Debt
Securities to which it relates and in the form that has been filed as an exhibit
to the Registration Statement of which this Prospectus is a part or incorporated
by reference herein by means of a post-effective amendment to the Registration
Statement or a Form 8-K, subject to such amendments or supplements as may be
adopted from time to time. Each such indenture (collectively, the "Indenture")
will be entered into between the Company and a trustee (the "Trustee"), which
may be the same Trustee. The Indenture will be subject to, and governed by, the
Trust Indenture Act of 1939, as amended. The statements made hereunder relating
to the Indenture and the Debt Securities are summaries of certain anticipated
provisions thereof, do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all provisions of the Indenture and
such Debt Securities. Capitalized terms used but not defined herein shall have
the respective meanings set forth in the Indenture.
TERM
The particular terms of the Debt Securities offered by a Prospectus
Supplement will be described in the particular Prospectus Supplement, along with
any applicable modifications of or additions to the general terms of the Debt
Securities as described herein and in the applicable Indenture. Accordingly, for
a description of the terms of any series of Debt Securities, reference must be
made to both the Prospectus Supplement relating thereto and the description of
the Debt Securities set forth in this Prospectus. To the extent that any
particular terms of the Debt Securities described in a Prospectus Supplement
differ from any of the terms described herein, then such terms described herein
shall be deemed to have been superseded by such Prospectus Supplement.
Except as set forth in any Prospectus Supplement, the Debt Securities
may be issued without limit as to aggregate principal amount, in one or more
series, in each case as established from time to time by the Company's Board of
Directors or as set forth in the applicable Indenture or one or more indentures
supplemental to the Indenture. All Debt Securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series.
Each Indenture will provide that the Company may, but need not,
designate more than one Trustee thereunder, each with respect to one or more
series of Debt Securities. Any Trustee under an Indenture may resign or be
removed with respect to one or more series of Debt Securities, and a successor
Trustee may be appointed to act with respect to such series. If two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the applicable
Indenture separate and apart from the trust administered by any other Trustee
and, except as otherwise indicated herein, any action described herein to be
taken by a Trustee may be taken by each such Trustee with respect to, and only
with respect to, the one or more series of Debt Securities for which it is
Trustee under the applicable Indenture.
The following summaries set forth certain general terms and provisions
of the Indenture and the Debt Securities. The Prospectus Supplement relating to
the series of Debt Securities being offered will contain further terms of such
Debt Securities, including the following specific terms:
(1) the title of such Debt Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(3) the price (expressed as a percentage of the principal amount
thereof) at which such Debt Securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof
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<PAGE> 11
payable upon declaration of acceleration of the maturity thereof, or (if
applicable) the portion of the principal amount of such Debt Securities that is
convertible into Common Stock or Preferred Stock, or the method by which any
such portion shall be determined;
(4) if convertible, the terms on which such Debt Securities are
convertible, including the initial conversion price or rate and conversion
period and, in connection with the preservation of the Company's status as a
REIT, any applicable limitations on the ownership or transferability of the
Common Stock or the Preferred Stock into which such Debt Securities are
convertible;
(5) the date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the
method by which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(7) the date or dates, or the method for determining such date or
dates, from which any interest will accrue, the dates upon which any such
interest will be payable, the record dates for payment of such interest, or the
method by which any such dates shall be determined, the persons to whom such
interest shall be payable, and the basis upon which interest shall be calculated
if other than that of a 360-day year of twelve 30-day months;
(8) the place or places where the principal of (and premium, if
any) and interest, if any, on such Debt Securities will be payable, where such
Debt Securities may be surrendered for conversion or registration of transfer or
exchange and where notices or demands to or upon the Company in respect of such
Debt Securities and the Indenture may be served;
(9) the period or periods, if any, within which, the price or
prices at which and the terms and conditions upon which such Debt Securities may
be redeemed, as a whole or in part, at the Company's option;
(10) the obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or periods within
which, the price or prices at which and the terms and conditions upon which such
Debt Securities will be redeemed, repaid or purchased, as a whole or in part,
pursuant to such obligation;
(11) if other than U.S. dollars, the currency or currencies in
which such Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency or
currencies, and the terms and conditions relating thereto;
(12) whether the amount of payments of principal of (and premium,
if any) or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or method
may, but need not, be based on a currency, currencies, currency unit or units or
composite currency or currencies) and the manner in which such amounts shall be
determined;
(13) whether such Debt Securities will be issued in certificated
and/or book-entry form, and, if so, the identity of the depositary for such Debt
Securities;
(14) whether such Debt Securities will be in registered or bearer
form and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof and terms and conditions relating thereto;
(15) the applicability, if any, of the defeasance and covenant
defeasance provisions described herein or set forth in the applicable Indenture,
or any modification thereof;
(16) any deletions from, modifications of or additions to the
events of default or covenants of the Company with respect to such Debt
Securities;
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(17) whether and under what circumstances the Company will pay any
Additional Amounts on such Debt Securities in respect of any tax, assessment or
governmental charge and, if so, whether the Company will have the option to
redeem such Debt Securities in lieu of making such payment;
(18) the subordination provisions, if any, relating to such Debt
Securities;
(19) the provisions, if any, relating to any security provided for
such Debt Securities; and
(20) any other terms of such Debt Securities.
If so provided in the applicable Prospectus Supplement, the Debt
Securities may be issued at a discount below their principal amount and provide
for less than the entire principal amount thereof to be payable upon declaration
of acceleration of the maturity thereof ("Original Issue Discount Securities").
In such cases, any material U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof. Unless otherwise described in the applicable
Prospectus Supplement, the principal of (and premium, if any) and interest on
any series of Debt Securities will be payable at the applicable Trustee's
corporate trust office, the address of which will be set forth in the applicable
Prospectus Supplement; provided, however, that, unless otherwise provided in the
applicable Prospectus Supplement, at the Company's option, payment of interest
may be made by check mailed to the address of the person entitled thereto as it
appears in the applicable register for such Debt Securities or by wire transfer
of funds to such person at an account maintained within the United States.
Subject to certain limitations imposed on Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt Securities
at the office of any transfer agent designated by the Company for such purpose.
In addition, subject to certain limitations imposed on Debt Securities issued in
book-entry form, the Debt Securities of any series may be surrendered for
conversion or registration of transfer thereof at the office of any transfer
agent designated by the Company for such purpose. Every Debt Security
surrendered for conversion, registration of transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer and the person
requesting such transfer must provide evidence of title and identity
satisfactory to the Company and the applicable transfer agent. No service charge
will be made for any registration of transfer or exchange of any Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith. The Company
may at any time rescind the designation of any transfer agent appointed with
respect to the Debt Securities of any series or approve a change in the location
through which any such transfer agent acts, except that the Company will be
required to maintain a transfer agent in each place of payment for such series.
The Company may at any time designate additional transfer agents with respect to
any series of Debt Securities.
Neither the Company nor any Trustee shall be required to (a) issue,
register the transfer of or exchange Debt Securities of any series if such Debt
Security may be among those selected for redemption during a period beginning at
the opening of business 15 days before the mailing or first publication, as the
case may be, of notice of redemption of such Debt Securities and ending at the
close of business on (i) if the Debt Securities of such series are issuable only
in registered form, the day of mailing of the relevant notice of redemption or
(ii) if the Debt Securities of such series are issuable in bearer form, the day
of the first publication of the relevant notice of redemption or, if such Debt
Securities are also issuable in registered form and there is no such
publication, the day of mailing of the relevant notice of redemption; (b)
register the transfer of or exchange any Debt Security in registered form, or
portion thereof, so selected for redemption, in whole or in part, except the
unredeemed portion of any Debt Security being redeemed in part; or (c) exchange
any Debt Security in bearer form so selected for redemption, except in exchange
for a Debt Security of such series in registered form that is simultaneously
surrendered for redemption; or
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(d) issue, register the transfer of or exchange any Debt Security that has been
surrendered for repayment at the holder's option, except the portion, if any, of
such Debt Security not to be so repaid.
MERGER, CONSOLIDATION OR SALE OF ASSETS
Each Indenture will provide that the Company will not consolidate with,
or sell, lease or convey all or substantially all of its assets to, or merge
with or into, any person unless (a) either the Company shall be the continuing
entity, or the successor person (if other than the Company) formed by or
resulting from any such consolidation or merger or which shall have received the
transfer of such assets shall be a corporation organized and existing under the
laws of the United States or any State thereof and shall expressly assume the
Company's obligation to pay the principal of (and premium, if any) and interest
on all the Debt Securities issued under such Indenture and the due and punctual
performance and observance of all the covenants and conditions contained in such
Indenture and in such Debt Securities; (b) immediately after giving effect to
such transaction and treating any indebtedness that becomes an obligation of the
Company or any Subsidiary as a result thereof as having been incurred, and any
liens on any property or assets of the Company or any Subsidiary that are
incurred, created or assumed as a result thereof as having been created,
incurred or assumed, by the Company or such Subsidiary at the time of such
transaction, no event of default under the Indenture, and no event that, after
notice or the lapse of time, or both, would become such an event of default,
shall have occurred and be continuing; and (c) an officers' certificate and
legal opinion covering such conditions shall be delivered to the Trustee.
CERTAIN COVENANTS
EXISTENCE. Except as permitted under "--Merger, Consolidation or Sale
of Assets," each Indenture will require the Company to do or cause to be done
all things necessary to preserve and keep in full force and effect its corporate
existence, all material rights (by charter, by-laws and statute) and all
material franchises; provided, however, that the Company shall not be required
to preserve any right or franchise if its Board of Directors determines that the
preservation thereof is no longer desirable in the conduct of its business.
MAINTENANCE OF PROPERTIES. Each Indenture will require the Company to
cause all of its material properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and to cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the Company's judgment may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that the
Company and its Subsidiaries shall not be prevented from selling or otherwise
disposing of their properties for value in the ordinary course of business.
INSURANCE. Each Indenture will require the Company to, and to cause
each of its Subsidiaries to, keep in force upon all of its properties and
operations policies of insurance carried with responsible companies in such
amounts and covering all such risks as shall be customary in the industry in
accordance with prevailing market conditions and availability.
PAYMENT OF TAXES AND OTHER CLAIMS. Each Indenture will require the
Company to pay or discharge or cause to be paid or discharged, before the same
shall become delinquent, (a) all taxes, assessments and governmental charges
levied or imposed on it or any Subsidiary or on the income, profits or property
of the Company or any Subsidiary and (b) all lawful claims for labor, materials
and supplies that, if unpaid, might by law become a lien upon the property of
the Company or any Subsidiary; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings.
PROVISION OF FINANCIAL INFORMATION. Whether or not the Company is
subject to Section 13 or 15(d) of the Exchange Act, each Indenture will require
the Company, within 15 days after each of the respective dates by which the
Company would have been required to file annual reports, quarterly reports and
other documents with the Commission if the Company were so subject, (a) to
transmit by mail to all holders of Debt Securities issued under such Indenture,
as their names and addresses appear in the applicable register for such Debt
Securities, without cost to such holders, copies of the annual reports,
quarterly reports and other documents that the Company would have
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been required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act if the Company were subject to such Sections, (b) to file with the
applicable Trustee copies of the annual reports, quarterly reports and other
documents that the Company would have been required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act if the Company were subject
to such Sections, and (c) to supply, promptly upon written request and payment
of the reasonable cost of duplication and delivery, copies of such documents to
any prospective holder of such Debt Securities.
Except as may otherwise be provided in the Prospectus Supplement
relating to any series of Debt Securities, the term "Subsidiary", as used in the
Indenture, means with respect to the Company, any other Person of which more
than 50% of (i) the equity or other ownership interests or (ii) the total voting
power of shares of capital stock or other ownership interests entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers, trustees or general or managing partners thereof is at the
time owned by the Company or one or more of the other Subsidiaries of the
Company or a combination thereof.
ADDITIONAL COVENANTS. Any additional covenants of the Company with
respect to any of the series of Debt Securities will be set forth in the
Prospectus Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the applicable Indenture, each Indenture
will provide that the following events are "events of default" with respect to
any series of Debt Securities issued thereunder: (a) default for 30 days in the
payment of any installment of interest on any Debt Security of such series; (b)
default in the payment of the principal of (or premium, if any, on) any Debt
Security of such series when due, whether at stated maturity or by declaration
of acceleration, notice of redemption, notice of option to elect repayment or
otherwise; (c) default in making any sinking fund payment as required for any
Debt Security of such series; (d) default in the performance of any other
covenant of the Company contained in the Indenture (other than a covenant added
to the Indenture solely for the benefit of a series of Debt Securities issued
thereunder other than such series), continued for 60 days after written notice
to the Company by the Trustee or the holders of at least 25% in principal amount
of the outstanding Debt Securities of such series; (e) a default under any bond,
debenture, note or other evidence of indebtedness for money borrowed by the
Company or any of its Subsidiaries (including obligations under leases required
to be capitalized on the balance sheet of the lessee under generally accepted
accounting principles, but not including any indebtedness or obligations for
which recourse is limited to property purchased) in an aggregate principal
amount in excess of $25,000,000 or under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured or evidenced
any indebtedness for money borrowed by the Company or any of its Subsidiaries
(including such leases, but not including such indebtedness or obligations for
which recourse is limited to property purchased) in an aggregate principal
amount in excess of $25,000,000, whether such indebtedness exists at the date of
the relevant Indenture or shall thereafter be created, which default shall have
resulted in such indebtedness becoming or being declared due and payable prior
to the date on which it would otherwise have become due and payable or such
obligations being accelerated, without such acceleration having been rescinded
or annulled; (f) certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the Company or any
Significant Subsidiary of the Company; and (g) any other Event of Default
provided with respect to a particular series of Debt Securities. The term
"Significant Subsidiary" has the meaning ascribed to such term in Regulation S-X
promulgated under the Securities Act.
If an event of default under any Indenture with respect to Debt
Securities of any series at the time outstanding occurs and is continuing, then
in every such case the applicable Trustee or the holders of not less than 25% in
principal amount of the outstanding Debt Securities of that series may declare
the principal amount (or, if the Debt Securities of that series are Original
Issue Discount Securities or Indexed Securities, such portion of the principal
amount as may be specified in the terms thereof) of all the Debt Securities of
that series to be due and payable immediately by written notice thereof to the
Company (and to the applicable Trustee if given by the holders). However, at any
time after such a declaration of acceleration with respect to Debt Securities of
such series has been made, but before a judgment or decree for payment of the
money due has been obtained by the applicable Trustee, the holders of not less
than a majority of the principal amount of the outstanding Debt Securities of
such series may rescind and annul such declaration and its consequences if (a)
the Company shall have deposited with the
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applicable Trustee all required payments of the principal of (and premium, if
any) and interest on the Debt Securities of such series (other than principal
and premium, if any, and interest which have become due solely as a result of
such acceleration), plus certain fees, expenses, disbursements and advances of
the applicable Trustee and (b) all events of default, other than the nonpayment
of accelerated principal (or specified portion thereof), premium, if any, and
interest with respect to Debt Securities of such series have been cured or
waived as provided in the Indenture. Each Indenture will also provide that the
holders of not less than a majority in principal amount of the outstanding Debt
Securities of any series may waive any past default with respect to such series
and its consequences, except a default (y) in the payment of the principal of
(or premium, if any) or interest on any Debt Security of such series or (z) in
respect of a covenant or provision contained in such Indenture that cannot be
modified or amended without the consent of the holder of each outstanding Debt
Security of such series affected thereby.
Each Indenture will require each Trustee to give notice to the holders
of Debt Securities within 90 days of a default under the Indenture unless such
default shall have been cured or waived, subject to certain exceptions;
provided, however, that such Trustee may withhold notice to the holders of any
series of Debt Securities of any default with respect to such series (except a
default in the payment of the principal of (or premium, if any) or interest on
any Debt Security of such series or in the payment of any sinking fund
installment in respect of any Debt Security of such series) if specified
Responsible Officers of the Trustee consider such withholding to be in such
holders' interest.
Each Indenture will provide that no holders of Debt Securities of any
series may institute any proceedings, judicial or otherwise, with respect to the
Indenture or for any remedy thereunder, except in the case of failure of the
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an event of default from the holders of not
less than 25% in principal amount of the outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it, and no
direction inconsistent with such written request has been given to the Trustee
during such 60-day period by holders of a majority in principal amount of the
outstanding Debt Securities of such series. This provision will not prevent,
however, any holder of Debt Securities from instituting suit for the enforcement
of payment of the principal of (and premium, if any) and interest on such Debt
Securities at the respective due dates thereof.
Each Indenture will provide that, subject to provisions in the Trust
Indenture Act of 1939 relating to its duties in case of default, the Trustee is
under no obligation to exercise any of its rights or powers under the Indenture
at the request or direction of any holders of any series of Debt Securities then
outstanding under the Indenture, unless such holders shall have offered to the
Trustee reasonable security or indemnity. The holders of not less than a
majority in principal amount of the outstanding Debt Securities of any series
shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or of exercising any trust
or power conferred upon the Trustee; provided that such direction shall not
conflict with any rule of law or the Indenture and the Trustee may refuse to
follow any direction that may involve the Trustee in personal liability or that
may be unduly prejudicial to the holders of Debt Securities of such series not
joining therein.
Within 120 days after the close of each fiscal year, the Company will
be required to deliver to the Trustee a certificate, signed by one of several
specified officers, stating whether or not such officer has knowledge of any
default under the Indenture and, if so, specifying each such default and the
nature and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of any Indenture will be permitted with
the consent of the holders of not less than a majority in principal amount of
all outstanding Debt Securities of each series issued under such Indenture
affected by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the holder of each Debt
Security affected thereby, (a) change the stated maturity of the principal of,
or any installment of principal, interest (or premium, if any) on, any such Debt
Security; (b) reduce the principal amount of, or the rate or amount of interest
on, or any premium payable on redemption of, any such Debt Security, or reduce
the amount of principal of an Original Issue Discount Security that would be due
and payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment at the option
of the holder of any Debt Security (or reduce the amount of premium payable upon
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any such repayment); (c) change the place of payment, or the coin or currency,
for payment of principal of (or premium, if any) or interest on any such Debt
Security; (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any such Debt Security when due; (e) reduce the
above-stated percentage of outstanding Debt Securities of any series necessary
to modify or amend the Indenture, to waive compliance with certain provisions
thereof or certain defaults and consequences thereunder or to reduce the quorum
or voting requirements set forth in the Indenture; or (f) modify any of the
foregoing provisions or any of the provisions relating to the waiver of certain
past defaults or certain covenants, except to increase the required percentage
to effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the holder of each outstanding Debt
Security affected thereby.
The holders of a majority in aggregate principal amount of outstanding
Debt Securities of any series may, on behalf of all holders of Debt Securities
of that series waive, insofar as that series is concerned, compliance by the
Company with certain restrictive covenants in the applicable Indenture.
Modifications and amendments of an Indenture will be permitted to be
made by the Company and the Trustee without the consent of any holder of Debt
Securities for any of the following purposes: (a) to evidence the succession of
another person to the Company as obligor under the Indenture; (b) to add to the
covenants of the Company for the benefit of the holders of all or any series of
Debt Securities or to surrender any right or power conferred upon the Company in
the Indenture; (c) to add events of default for the benefit of the holders of
all or any series of Debt Securities; (d) to add or change any provisions of the
Indenture to facilitate the issuance of, or to liberalize certain terms of, Debt
Securities in bearer form, or to permit or facilitate the issuance of Debt
Securities in uncertificated form, provided that such action shall not adversely
affect the interests of the holders of the Debt Securities of any series in any
material respect; (e) to change or eliminate any provisions of the Indenture,
provided that any such change or elimination does not apply to any outstanding
Debt Securities of a series created prior to the date of such amendment or
supplement that are entitled to the benefit of such provision; (f) to secure the
Debt Securities; (g) to establish the form or terms of Debt Securities of any
series, including the provisions and procedures, if applicable, for the
conversion of such Debt Securities into Common Stock or Preferred Stock; (h) to
provide for the acceptance of appointment by a successor Trustee or facilitate
the administration of the trusts under the Indenture by more than one Trustee;
(i) to cure any ambiguity, defect or inconsistency in the Indenture or to make
any other provisions with respect to matters or questions arising under the
Indenture provided, however, that such action shall not adversely affect the
interests of holders of Debt Securities of any series in any material respect;
or (j) to supplement any of the provisions of the Indenture to the extent
necessary to permit or facilitate defeasance, covenant defeasance and discharge
of any series of such Debt Securities, provided, however, that such action shall
not adversely affect the interests of the holders of the Debt Securities of any
series in any material respect.
Each Indenture will provide that in determining whether the holders of
the requisite principal amount of outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (a) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (b) the principal amount of
any Debt Security denominated in a foreign currency that shall be deemed
outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (a) above), (c) the
principal amount of an Indexed Security that shall be deemed outstanding shall
be the principal face amount of such Indexed Security at original issuance,
unless otherwise provided with respect to such Indexed Security in the
applicable Indenture, and (d) Debt Securities owned by the Company or any other
obligor upon the Debt Securities or any affiliate of the Company or of such
other obligor shall be disregarded.
Each Indenture will contain provisions for convening meetings of the
holders of Debt Securities of a series. A meeting may be permitted to be called
at any time by the Trustee, and also, upon request, by the Company or the
holders of at least 10% in principal amount of the outstanding Debt Securities
of such series, in any such case upon notice given as provided in the Indenture.
Except for any consent or waiver that must be given by the holder of each Debt
Security affected thereby, any resolution presented at a meeting or adjourned
meeting duly reconvened at
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which a quorum is present may be adopted by the affirmative vote of the holders
of a majority in principal amount of the outstanding Debt Securities of that
series; provided, however, that, except as referred to above, any resolution
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the holders of a
specified percentage, which is less than a majority, in principal amount of the
outstanding Debt Securities of a series may be adopted at a meeting or adjourned
meeting duly reconvened at which a quorum is present by the affirmative vote of
the holders of such specified percentage in principal amount of the outstanding
Debt Securities of that series. Any resolution passed or decision taken at any
meeting of holders of Debt Securities of any series duly held in accordance with
the Indenture will be binding on all holders of Debt Securities of that series.
The persons holding or representing a majority in principal amount of the
outstanding Debt Securities of a series shall constitute a quorum for a meeting
of holders of such series; provided, however, that if any action is to be taken
at such meeting with respect to a consent or waiver that may be given by the
holders of not less than a specified percentage in principal amount of the
outstanding Debt Securities of a series, the persons holding or representing
such specified percentage in principal amount of the outstanding Debt Securities
of such series will constitute a quorum.
Notwithstanding the foregoing provisions, each Indenture will provide
that if any action is to be taken at a meeting of holders of Debt Securities of
any series with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that the Indenture expressly provides
may be made, given or taken by the holders of such series and one or more
additional series: (a) there shall be no minimum quorum requirement for such
meeting and (b) the principal amount of the outstanding Debt Securities of all
such series that are entitled to vote in favor of such request, demand,
authorization, direction, notice, consent, waiver or other action shall be taken
into account in determining whether such request, demand, authorization,
direction, notice, consent, waiver or other action has been made, given or taken
under the Indenture.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement,
upon request of the Company any Indenture shall cease to be of further effect
with respect to any series of Debt Securities issued thereunder specified in
such Company request (except as to certain limited provisions of such Indenture
which shall survive) when either (i) all Debt Securities of such series have
been delivered to the Trustee for cancellation or (ii) all Debt Securities of
such series have become due and payable or will become due and payable within
one year (or are scheduled for redemption within one year) and the Company has
irrevocably deposited with the applicable Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on such Debt Securities in respect of principal (and
premium, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the stated maturity or redemption
date, as the case may be.
Each Indenture will provide that, unless otherwise indicated in the
applicable Prospectus Supplement, the Company may elect either to (a) defease
and be discharged from any and all obligations with respect to any series of
Debt Securities (except for the obligation to pay Additional Amounts, if any,
upon the occurrence of certain events of tax with respect to payments on such
Debt Securities and the obligations to register the transfer or exchange of such
Debt Securities, to replace temporary or mutilated, destroyed, lost or stolen
Debt Securities, to maintain an office or agency in respect of such Debt
Securities and to hold money for payment in trust) ("defeasance") or (b) be
released from its obligations with respect to certain covenants (which will be
described in the relevant Prospectus Supplement) applicable to such Debt
Securities under the applicable Indenture (which may include, subject to a
limited exception, the covenants described under "--Certain Covenants"), and any
omission to comply with such obligations shall not constitute a default or an
event of default with respect to such Debt Securities ("covenant defeasance"),
in either case upon the irrevocable deposit by the Company with the applicable
Trustee, in trust, of an amount, in such currency or currencies, currency unit
or units or composite currency or currencies in which such Debt Securities are
payable at stated maturity, or Government Obligations (as defined below), or
both, applicable to such Debt Securities that through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any) and interest on
such Debt Securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled due dates therefor.
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Such a trust may only be established if, among other things, the
Company has delivered to the applicable Trustee an opinion of counsel (as
specified in the applicable Indenture) to the effect that the holders of such
Debt Securities will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such opinion of counsel, in the case of
defeasance, must refer to and be based on a ruling of the Internal Revenue
Service (the "IRS") or a change in applicable U.S. federal income tax law
occurring after the date of the applicable Indenture. In the event of such
defeasance, the holders of such Debt Securities would thereafter be able to look
only to such trust fund for payment of principal (and premium, if any) and
interest.
"Government Obligations" means securities that are (a) direct
obligations of the United States of America or the government which issued the
foreign currency in which the Debt Securities of a particular series are
payable, for the payment of which its full faith and credit is pledged, or (b)
obligations of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the foreign currency in which the Debt Securities of such series are payable,
the payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or such other government, which, in
either case, are not callable or redeemable at the option of the issuer thereof,
and shall also include a depository receipt issued by a bank or trust company as
custodian with respect to any such Government Obligation or a specific payment
of interest on or principal of any such Government, provided, however, that
(except as required by law) such custodian is not authorized to make any
deduction from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the Government Obligation or
the specific payment of interest on or principal of the Government Obligation
evidenced by such depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if
after the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(a) the holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the applicable Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security or (b)
a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security will be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or Conversion
Event based on the applicable market exchange rate. "Conversion Event" means the
cessation of use of (i) a currency, currency unit or composite currency both by
the government of the country which issued such currency and for the settlement
of transactions by a central bank or other public institution of or within the
international banking community, (ii) the ECU both within the European Monetary
System and for the settlement of transactions by public institutions of or
within the European Communities, or (iii) any currency unit or composite
currency other than the ECU for the purposes for which it was established.
Unless otherwise provided in the applicable Prospectus Supplement, all
payments of principal of (and premium, if any) and interest on any Debt Security
that is payable in a foreign currency that ceases to be used by its government
of issuance shall be made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to
any Debt Securities and such Debt Securities are declared due and payable
because of the occurrence of any event of default, other than the event of
default described in clause (d) under "--Events of Default, Notice and Waiver"
with respect to the specified sections of the applicable Indenture (which
sections would no longer be applicable to such Debt Securities) or clause (g)
thereunder with respect to any other covenant as to which there has been
covenant defeasance, the amount in such currency, currency unit or composite
currency in which such Debt Securities are payable, and Government Obligations
on deposit with the applicable Trustee, may not be sufficient to pay amounts due
on such Debt Securities at the time of the acceleration resulting from such
event of default. The Company would, however, remain liable to make payment of
such amounts due at the time of acceleration. The applicable Prospectus
Supplement may further describe the provisions, if any, permitting such
defeasance or covenant defeasance,
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including any modifications to the provisions described above, with respect to
the Debt Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Stock or Preferred
Stock, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the holders
or the Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities and any restrictions on conversion, including restrictions directed
at maintaining the Company's REIT status.
UNCLAIMED PAYMENTS
All amounts paid by the Company to a paying agent or a Trustee for the
payment of the principal of or any premium or interest on any Debt Security that
remain unclaimed at the end of two years after such principal, premium or
interest has become due and payable will be repaid to the Company, and the
holder of such Debt Security thereafter may look only to the Company for payment
thereof.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in
the form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
DESCRIPTION OF COMMON STOCK
The following summary of the terms of the Company's capital stock does
not purport to be complete and is subject to and qualified in its entirety by
reference to the Company's Charter and Bylaws, copies of which are on file with
the Commission as exhibits to registration statements previously filed by the
Company. See "Available Information."
The Company has authority to issue 100,000,000 shares of Common Stock,
$.01 par value per share: As of September 1, 1998, the Company had outstanding
21,162,012 shares of Common Stock.
GENERAL
The following description of the Common Stock sets forth certain
general terms and provisions of the Common Stock to which any Prospectus
Supplement may relate, including a Prospectus Supplement providing that shares
of Common Stock will be issuable upon conversion of Debt Securities, Preferred
Stock or Depository Shares or upon the exercise of Warrants issued by the
Company.
TERMS
Each outstanding share of Common Stock entitles the holder to one vote
on all matters presented to stockholders for a vote, including the election of
directors, and, except as otherwise required by law and except as now or later
provided in the Charter, the holders of such shares will possess the exclusive
voting power, subject to the provisions of the Charter regarding the ownership
of shares of Common Stock in excess of the Ownership Limit, or such other limit
as provided in the Charter or as otherwise permitted by the Board of Directors
described below. Holders of shares of Common Stock have no preference,
conversion, exchange, sinking fund, redemption or appraisal rights and, with the
exception of PPD's proportional participation rights, have no preemptive rights
to
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subscribe for any securities of the Company or cumulative voting rights in the
election of directors. All shares of Common Stock issued and outstanding are
duly authorized, fully paid and nonassessable. Subject to the preferential
rights of any other shares or series of stock and to the provisions of the
Charter regarding ownership of shares of Common Stock in excess of the Ownership
Limit, or such other limit as provided in the Charter or as otherwise permitted
by the Board of Directors described below, distributions are paid to the holders
of shares of Common Stock if and when authorized by the Board of Directors of
the Company out of assets legally available therefor.
If the Company is liquidated, subject to the right of any holders of
Preferred Stock to receive preferential distributions, each outstanding share of
Common Stock will be entitled to participate pro rata in the assets remaining
after payment of, or adequate provision for, all known debts and liabilities of
the Company.
Subject to the provisions of the Charter regarding the ownership of
shares of Common Stock in excess of the Ownership Limit, or such other limit as
provided in the Charter or as otherwise permitted by the Board of Directors as
described below, all shares of Common Stock will have equal distribution,
liquidation and voting rights, and will have no preference or exchange rights.
See "Restrictions on Ownership and Transfer of Capital Stock."
Under the Maryland General Corporation Law (the "MGCL"), a Maryland
corporation generally cannot dissolve, amend its charter, merge, sell all or
substantially all of its assets, engage in a share exchange or engage in similar
transactions outside the ordinary course of business unless approved by the
affirmative vote of stockholders 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 corporation's charter. The phrase "substantially all of the assets" is not
defined in the MGCL and is, therefore, subject to interpretation by courts
applying Maryland law in the context of the facts and circumstances of any
particular case. The Charter of the Company provides that each of these matters
may be approved by the stockholders by a majority of all the votes entitled to
be cast on the matter.
The Charter authorizes the Board of Directors to reclassify any
unissued shares of Common Stock into other classes or series of classes of stock
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 and restrictions on ownership, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption for each
such class or series.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code'), subject to certain exceptions, no more than 50%
in value of the Company's outstanding shares of stock may be owned, actually or
constructively, by five or fewer individuals (defined in the Code to include
certain entities) during the last half of a taxable year. To assist the Company
in meeting this requirement and certain other requirements relating to its tax
status as a REIT, the Company may take certain actions to limit the actual,
beneficial or constructive ownership by a single person or entity of the
Company's outstanding equity securities. See "Restrictions on Ownership and
Transfer of Capital Stock."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The Bank of
New York.
DESCRIPTION OF PREFERRED STOCK
The Company is authorized to issue 30,000,000 shares of Preferred
Stock, $.01 par value per share, of which no shares were outstanding as of
September 1, 1998.
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GENERAL
Preferred Stock may be issued from time to time, in one or more series,
as authorized by the Board of Directors. No Preferred Stock is currently issued
or outstanding. Prior to the issuance of shares of each series, subject to the
provisions of the Charter regarding the restrictions on transfer of stock, the
Board of Directors is required by the MGCL and the Charter to fix for each
series the terms, preferences, conversion or other rights, voting powers,
restrictions, limitations as to distributions, qualifications and terms or
conditions of redemption, as permitted by Maryland law. Because the Board of
Directors has the power to establish the preferences, powers and rights of each
series of Preferred Stock, it may afford the holders of any series of Preferred
Stock preferences, powers and rights, voting or otherwise, senior to the rights
of holders of shares of Common Stock. The issuance of Preferred Stock could have
the effect of delaying or preventing a transaction or a change of control of the
Company that might involve a premium price for holders of Common Stock or
otherwise be in their best interest. The Board of Directors has no present plans
to issue any Preferred Stock.
Preferred Stock, upon issuance against full payment of the purchase
price therefor, will be fully paid and nonassessable. The specific terms of a
particular class or series of Preferred Stock will be described in the
Prospectus Supplement relating to that class or series, including a Prospectus
Supplement providing that Preferred Stock may be issuable upon the exercise of
Warrants issued by the Company. The description of Preferred Stock set forth
below and the description of the terms of a particular class or series of
Preferred Stock set forth in a Prospectus Supplement do not purport to be
complete and are qualified in their entirety by reference to the articles
supplementary relating to that class or series.
The preferences and other terms of the Preferred Stock of each class or
series will be fixed by the articles supplementary relating to such class or
series. A Prospectus Supplement, relating to each class or series, will specify
the terms of the Preferred Stock as follows:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the offering price of
such Preferred Stock;
(3) The dividend rate(s), period(s), and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred
Stock;
(4) Whether such Preferred Stock is cumulative or not and, if
cumulative, the date from which dividends on such Preferred
Stock shall accumulate;
(5) The provision for a sinking fund, if any, for such Preferred
Stock;
(6) The provision for redemption, if applicable, of such Preferred
Stock;
(7) Any listing of such Preferred Stock on any securities
exchange;
(8) The terms and conditions, if applicable, upon which such
Preferred Stock will be converted into Common Stock of the
Company, including the conversion price (or manner of
calculation thereof);
(9) A discussion of any material federal income tax considerations
applicable to such Preferred Stock;
(10) Any limitations on actual and constructive ownership and
restrictions on transfer, in each case as may be appropriate
to preserve the status of the Company as a REIT;
(11) The relative ranking and preferences of such Preferred Stock
as to dividend rights and rights upon liquidation, dissolution
or winding up of the affairs of the Company;
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(12) Any limitations on issuance of any class or series of
preferred stock ranking senior to or on a parity with such
class or series of Preferred Stock as to dividend rights and
rights upon liquidation, dissolution or winding up of the
affairs of the Company;
(13) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock; and
(14) Any voting rights of such Preferred Stock.
RANK
Unless otherwise specified in the applicable Prospectus Supplement, the
Preferred Stock will, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of the Company, rank (i) senior to all
classes or series of common stock of the Company, and to all equity securities
ranking junior to such Preferred Stock with respect to dividend rights and
rights upon liquidation, dissolution or winding up of the Company; (ii) on a
parity with all equity securities issued by the Company the terms of which
specifically provide that such equity securities rank on a parity with the
Preferred Stock with respect to dividends rights or rights upon liquidation,
dissolution or winding up of the Company; and (iii) junior to all equity
securities issued by the Company the terms of which specifically provide that
such equity securities rank senior to the Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up of the
Company. For these purposes, the term "equity securities" does not include
convertible debt securities.
DIVIDENDS
Holders of shares of the Preferred Stock of each series or class shall
be entitled to receive, when, as and if authorized and declared by the Company's
Board of Directors, out of the Company's assets legally available for payment,
cash dividends at such rates and on such dates as will be set forth in the
applicable Prospectus Supplement. Each such dividend shall be payable to holders
of record as they appear on the Company's stock transfer books on such record
dates as shall be fixed by the Company's Board of Directors.
Dividends on any series or class of Preferred Stock may be cumulative
or noncumulative, as provided in the applicable Prospectus Supplement.
Dividends, if cumulative, will be cumulative from and after the date set forth
in the applicable Prospectus Supplement. If the Company's Board of Directors
fails to authorize a dividend payable on a dividend payment date on any series
or class of Preferred Stock for which dividends are noncumulative, then the
holders of such series or class of Preferred Stock will have no right to receive
a dividend in respect of the dividend period ending on such dividend payment
date, and the Company will have no obligation to pay the dividend accrued for
such period, whether or not dividends on such series or class are declared or
paid for any future period.
If any shares of Preferred Stock of any series or class are
outstanding, no full dividends shall be authorized or paid or set apart for
payment on the Preferred Stock of any other series or class ranking, as to
dividends, on a parity with or junior to the Preferred Stock of such series or
class for any period unless (a) if such series or class of Preferred Stock has a
cumulative dividend, then full cumulative dividends have been or
contemporaneously are authorized and paid or authorized and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Stock of such
series or class for all past dividend periods and the then current dividend
period or (b) if such series or class of Preferred Stock does not have a
cumulative dividend, then full dividends for the then current dividend period
have been or contemporaneously are authorized and paid or authorized and a sum
sufficient for the payment thereof is set apart for such payment on the
Preferred Stock of such series or class. When dividends are not paid in full (or
a sum sufficient for such full payment is not so set apart) upon the shares of
Preferred Stock of any series or class and the shares of any other series or
class of Preferred Stock ranking on a parity as to dividends with the Preferred
Stock of such series or class, then all dividends authorized on shares of
Preferred Stock of such series or class and any other series or class of
Preferred Stock ranking on a parity as to dividends with such Preferred Stock
shall be authorized pro rata so that the amount of dividends authorized per
share on the Preferred Stock of such series or class and such other series or
class of Preferred Stock shall in all cases bear to each other the same
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ratio that accrued dividends per share on the shares of Preferred Stock of such
series or class (which shall not include any accumulation in respect of unpaid
dividends for prior dividend periods if such Preferred Stock does not have a
cumulative dividend) and such other series or class of Preferred Stock bear to
each other. No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments on Preferred Stock of such series
or class that may be in arrears.
Except as provided in the immediately preceding paragraph, unless (a)
if such series or class of Preferred Stock has a cumulative dividend, full
cumulative dividends on the Preferred Stock of such series or class have been or
contemporaneously are authorized and paid or authorized and a sum sufficient for
the payment thereof is set apart for payment for all past dividend periods and
the then current dividend period and (b) if such series or class of Preferred
Stock does not have a cumulative dividend, full dividends on the Preferred Stock
of such series or class have been or contemporaneously are authorized and paid
or authorized and a sum sufficient for the payment thereof is set apart for
payment for the then current dividend period, then no dividends (other than in
the Common Stock or other stock of the Company ranking junior to the Preferred
Stock of such series or class as to dividends and upon liquidation) shall be
authorized or paid or set aside for payment nor shall any other distribution be
authorized or made on the Common Stock or any other stock of the Company ranking
junior to or on a parity with the Preferred Stock of such series or class as to
dividends or upon liquidation, nor shall the Common Stock or any other stock of
the Company ranking junior to or on a parity with the Preferred Stock of such
series or class as to dividends or upon liquidation be redeemed, purchased or
otherwise acquired for any consideration (or any amounts be paid to or made
available for a sinking fund for the redemption of any shares of any such stock)
by the Company (except by conversion into or exchange for other stock of the
Company ranking junior to the Preferred Stock of such series or class as to
dividends and upon liquidation).
Any dividend payment made on shares of a series or class of Preferred
Stock shall first be credited against the earliest accrued but unpaid dividend
due with respect to shares of such series or class that remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the shares of
Preferred Stock will be subject to mandatory redemption or redemption at the
Company's option, as a whole or in part, in each case on the terms, at the times
and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series or class of Preferred
Stock that is subject to mandatory redemption will specify the number of shares
of such Preferred Stock that shall be redeemed by the Company in each year
commencing after a date to be specified, at a redemption price per share to be
specified, together with an amount equal to all accumulated and unpaid dividends
thereon (which shall not, if such Preferred Stock does not have a cumulative
dividend, include any accumulation in respect of unpaid dividends for prior
dividend periods) to the date of redemption. The redemption price may be payable
in cash or other property, as specified in the applicable Prospectus Supplement.
If the redemption price for Preferred Stock of any series or class is payable
only from the net proceeds of the issuance of stock of the Company, the terms of
such Preferred Stock may provide that, if no such stock shall have been issued
or to the extent the net proceeds from any issuance are insufficient to pay in
full the aggregate redemption price then due, such Preferred Stock shall
automatically and mandatorily be converted into shares of the applicable stock
of the Company pursuant to conversion provisions specified in the applicable
Prospectus Supplement.
Notwithstanding the foregoing, unless (a) if such series or class of
Preferred Stock has a cumulative dividend, full cumulative dividends on all
shares of such series or class of Preferred Stock have been or contemporaneously
are authorized and paid or authorized and a sum sufficient for the payment
thereof is set apart for payment for all past dividend periods and the then
current dividend period and (b) if such series or class of Preferred Stock does
not have a cumulative dividend, full dividends on the Preferred Stock of such
series or class have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof is set apart for payment
for the then current dividend period, then no shares of such series or class of
Preferred Stock shall be redeemed unless all outstanding shares of Preferred
Stock of such series or class are simultaneously redeemed; provided, however,
that the foregoing shall not prevent the purchase or acquisition of shares of
Preferred Stock of such series or class to preserve the Company's REIT status or
pursuant to a purchase or exchange offer
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made on the same terms to holders of all outstanding shares of Preferred Stock
of such series or class. In addition, unless (i) if such series or class of
Preferred Stock has a cumulative dividend, full cumulative dividends on all
outstanding shares of such series or class of Preferred Stock have been or
contemporaneously are authorized and paid or authorized and a sum sufficient for
the payment thereof is set apart for payment for all past dividend periods and
the then current dividend period and (ii) if such series or class of Preferred
Stock does not have a cumulative dividend, full dividends on the Preferred Stock
of such series or class have been or contemporaneously are authorized and paid
or authorized and a sum sufficient for the payment thereof is set apart for
payment for the then current dividend period, the Company shall not purchase or
otherwise acquire directly or indirectly any shares of Preferred Stock of such
series or class (then except by conversion into or exchange for stock of the
Company ranking junior to the Preferred Stock of such series or class as to
dividends and upon liquidation); provided, however, that the foregoing shall not
prevent the purchase or acquisition of shares of Preferred Stock of such series
or class to preserve the Company's REIT status or pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
Preferred Stock of such series or class.
If fewer than all the outstanding shares of Preferred Stock of any
series or class 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
by such holders (with adjustments to avoid redemption of fractional shares) or
any other equitable method determined by the Company.
Notice of redemption will be mailed at least 30, but not more than 60,
days before the redemption date to each holder of record of a share of Preferred
Stock of any series or class to be redeemed at the address shown on the
Company's stock transfer books. Each notice shall state: (a) the redemption
date; (b) the number of shares and series or class of the Preferred Stock to be
redeemed; (c) the redemption price; (d) the place or places where certificates
for such Preferred Stock are to be surrendered for payment of the redemption
price; (e) that dividends on the shares to be redeemed will cease to accumulate
on such redemption date; and (f) the date on which the holder's conversion
rights, if any, as to such shares shall terminate. If fewer than all the shares
of Preferred Stock of any series or class are to be redeemed, the notice mailed
to each such holder thereof shall also specify the number of shares of Preferred
Stock to be redeemed from each such holder and, upon redemption, a new
certificate shall be issued representing the unredeemed shares without cost to
the holder thereof. If notice of redemption of any shares of Preferred Stock 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 shares of Preferred
Stock so called for redemption, then from and after the redemption date
dividends will cease to accrue on such shares of Preferred Stock, such shares of
Preferred Stock 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. In order to facilitate the redemption of shares of Preferred
Stock of any series or class, the Board of Directors may fix a record date for
the determination of shares of such series or class of Preferred Stock to be
redeemed.
Subject to applicable law and the limitation on purchases when
dividends on a series or class of Preferred Stock are in arrears, the Company
may, at any time and from time to time, purchase any shares of such series or
class of Preferred Stock in the open market, by tender or by private agreement.
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 the Common Stock or any other series or class of stock
of the Company ranking junior to any series or class of the Preferred Stock in
the distribution of assets upon any liquidation, dissolution or winding up of
the affairs of the Company, the holders of such series or class of Preferred
Stock 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 dividends accrued and unpaid
thereon (which shall not include any accumulation in respect of unpaid dividends
for prior dividend periods if such Preferred Stock does not have a cumulative
dividend). After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Preferred Stock 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 legally available
assets of the
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Company are insufficient to pay the amount of the liquidating distributions on
all outstanding shares of any series or class of Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of stock
of the Company ranking on a parity with such series or class of Preferred Stock
in the distribution of assets upon liquidation, dissolution or winding up, then
the holders of such series or class of Preferred Stock and all other such
classes or series of capital stock shall share ratably in any such distribution
of assets in proportion to the full liquidating distributions to which they
would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all
holders of any series or class of Preferred Stock, the remaining assets of the
Company shall be distributed among the holders of any other classes or series of
stock ranking junior to such series or class of Preferred Stock 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
entity, or the sale, lease, transfer or conveyance of all or substantially all
of the Company's property or business, shall not be deemed to constitute a
liquidation, dissolution or winding up of the affairs of the Company.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except
as set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series or class of Preferred Stock,
so long as any shares of Preferred Stock of a series or class remain
outstanding, the Company shall not, without the affirmative vote or consent of
the holders of at least a majority of the shares of such series or class of
Preferred Stock outstanding at the time, given in person or by proxy, either in
writing or at a meeting (such series or class voting separately as a class), (a)
authorize or create, or increase the authorized or issued amount of, any class
or series of stock ranking prior to such series or class of Preferred Stock with
respect to payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up or reclassify any authorized stock of the Company into
any such shares, or create, authorize or issue any obligation or security
convertible into or evidencing the right to purchase any such shares; or (b)
amend, alter or repeal the provisions of the Charter or the Articles
Supplementary for such series or class of Preferred Stock, whether by merger,
consolidation or otherwise, so as to materially and adversely affect any right,
preference, privilege or voting power of such series or class of Preferred Stock
or the holders thereof; provided, however, that any increase in the amount of
the authorized Preferred Stock or the creation or issuance of any other series
or class of Preferred Stock, or any increase in the amount of authorized shares
of such series or class or any other series or class of Preferred Stock, in each
case ranking on a parity with or junior to the Preferred Stock of such series or
class with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of such series or class of Preferred
Stock shall have been redeemed or called for redemption upon proper notice and
sufficient funds shall have been deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any shares of any class or
series of Preferred Stock are convertible into Common Stock will be set forth in
the applicable Prospectus Supplement relating thereto. Such terms will include
the number of shares of Common Stock into which the shares of Preferred Stock
are convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option of
the holders of such class or series of Preferred Stock or the Company, the
events requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such class or series of Preferred
Stock.
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RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, subject to certain
exceptions, no more than 50% in value of the Company's outstanding shares of
stock may be owned, actually or constructively, by five or fewer individuals
(defined in the Code to include certain entities) during the last half of a
taxable year. To assist the Company in meeting this requirement and certain
other requirements relating to its tax status as a REIT, the Company may take
certain actions to limit the actual, beneficial or constructive ownership by a
single person or entity of the Company's outstanding equity securities. See
"Restrictions on Ownership and Transfer of Capital Stock."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for any series or class of Preferred
Stock will be set forth in the applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES
GENERAL
The Company may issue Depositary Shares, each of which will represent a
fractional interest of a share of a particular class or series of Preferred
Stock, as specified in the applicable Prospectus Supplement. Shares of a class
or series of Preferred Stock represented by Depositary Shares will be deposited
under a separate Deposit Agreement (each, a "Deposit Agreement") among the
Company, the depositary named therein (the "Preferred Stock Depositary") and the
holders from time to time of the depositary receipts issued by the Preferred
Stock Depositary which will evidence the Depositary Shares ("Depositary
Receipts"). Subject to the terms of the Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest of
a share of a particular class or series of Preferred Stock represented by the
Depositary Shares evidenced by such Depositary Receipt, to all the rights and
preferences of the class or series of the Preferred Stock represented by such
Depositary Shares (including dividend, voting, conversion, redemption and
liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the Preferred Stock by the Company to a Preferred Stock
Depositary, the Company will cause such Preferred Stock Depositary to issue, on
behalf of the Company, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from the Company upon
request, and the statements made hereunder relating to the Deposit Agreement and
the Depositary Receipt to be issued thereunder are summaries of certain
anticipated provisions thereof and do not purport to be complete and are subject
to, and qualified in their entirety by reference to, all of the provisions of
the applicable Deposit Agreement and related Depositary Receipts.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Stock Depositary will distribute all cash dividends or
other cash distributions received in respect of a class or series of Preferred
Stock to the record holders of Depositary Receipts evidencing the related
Depositary Shares in proportion to the number of such Depositary Receipts owned
by such holders, subject to certain obligations of holders to file proofs,
certificates and other information and to pay certain charges and expenses to
such Preferred Stock Depositary.
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and expenses to the Preferred Stock Depositary, unless such Preferred Stock
Depositary determines that it is not feasible to make such distribution, in
which case the Preferred Stock Depositary may, with the approval of the Company,
sell such property and distribute the net proceeds from such sale to such
holders.
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No distribution will be made in respect of any Depositary Share to the
extent that it represents any class or series of Preferred Stock converted into
shares in excess of the Ownership Limit or otherwise converted or exchanged.
WITHDRAWAL OF STOCK
Upon surrender of the Depositary Receipts at the corporate trust office
of the Preferred Stock Depositary (unless the related Depositary Shares have
previously been called for redemption or converted or converted into Excess
Shares or otherwise), the holders thereof will be entitled to delivery at such
office, to or upon each such holder's order, of the number of whole or
fractional shares of the class or series of Preferred Stock and any money or
other property represented by the Depositary Shares evidenced by such Depositary
Receipts. Holders of Depositary Receipts will be entitled to receive whole or
fractional shares of the related class or series of Preferred Stock on the basis
of the proportion of Preferred Stock represented by each Depositary Share as
specified in the applicable Prospectus Supplement, but holders of such shares of
Preferred Stock will not thereafter be entitled to receive Depositary Shares
therefor. If the Depositary Receipts delivered by the holder evidence a number
of Depositary Shares in excess of the number of Depositary Shares representing
the number of shares of Preferred Stock to be withdrawn, the Preferred Stock
Depositary will deliver to such holder at the same time a new Depositary
Receipt evidencing such excess number of Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES
Whenever the Company redeems shares of Preferred Stock held by the
Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of the
same redemption date the number of the Depositary Shares representing shares of
such class or series of Preferred Stock so redeemed, provided the Company shall
have paid in full to the Preferred Stock Depositary the redemption price of the
Preferred Stock to be redeemed plus an amount equal to any accrued and unpaid
dividends thereon to the date fixed for redemption. The redemption price per
Depositary Share will be equal to the corresponding portion of the redemption
price and any other amounts per share payable with respect to such class or
series of Preferred Stock. If fewer than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected pro rata (as
nearly as may be practicable without creating fractional Depositary Shares) or
by any other equitable method determined by the Company that will not result in
the issuance of any Excess Shares.
From and after the date fixed for redemption, all dividends in respect
of the shares of a class or series of Preferred Stock so called for redemption
will cease to accrue, the Depositary Shares so called for redemption will no
longer be deemed to be outstanding and all rights of the holders of the
Depositary Receipts evidencing the Depositary Shares so called for redemption
will cease, except the right to receive any moneys payable upon such redemption
and any money or other property to which the holders of such Depositary Receipts
were entitled upon such redemption upon surrender thereof to the Preferred Stock
Depositary.
VOTING OF THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of a class
or series of Preferred Stock deposited with the Preferred Stock Depositary are
entitled to vote, the Preferred Stock Depositary will mail the information
contained in such notice of meeting to the record holders of the Depositary
Receipts evidencing the Depositary Shares which represent such class or series
of Preferred Stock. Each record holder of Depositary Receipts evidencing
Depositary Shares on the record date (which will be the same date as the record
date for such class or series of Preferred Stock) will be entitled to instruct
the Preferred Stock Depositary as to the exercise of the voting rights
pertaining to the amount of Preferred Stock represented by such holder's
Depositary Shares. The Preferred Stock Depositary will vote the amount of such
class or series of Preferred Stock represented by such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do so. The
Preferred Stock Depositary will abstain from voting the amount of Preferred
Stock represented by such Depositary Shares to the extent it does not receive
specific instructions from the holders of Depositary Receipts evidencing such
Depositary Shares. The Preferred Stock Depositary will not be responsible for
any failure to carry
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out any instruction to vote, or for the manner or effect of any such vote made,
as long as any such action or non-action is in good faith and does not result
from negligence or willful misconduct of the Preferred Stock Depositary.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, the holders of each Depositary
Receipt will be entitled to the fraction of the liquidation preference accorded
each such share of Preferred Stock represented by the Depositary Share evidenced
by such Depositary Receipt as set forth in the applicable Prospectus Supplement.
CONVERSION OF PREFERRED STOCK
The Depositary Shares, as such, will not be convertible into Common
Stock or any other securities or property of the Company, except in connection
with certain exchanges in connection with the preservation of the Company's
status as a REIT. See "Description of Common Stock -- Restrictions on
Ownership." Nevertheless, if so specified in the applicable Prospectus
Supplement relating to an offering of Depositary Shares, the Depositary Receipts
may be surrendered by holders thereof to the applicable Preferred Stock
Depositary with written instructions to the Preferred Stock Depositary to
instruct the Company to cause conversion of a class or series of Preferred Stock
represented by the Depositary Shares evidenced by such Depositary Receipts into
whole shares of Common Stock, other shares of a class or series of Preferred
Stock (including Excess Shares) of the Company or other shares of stock, and the
Company has agreed that upon receipt of such instructions and any amounts
payable in respect thereof, it will cause the conversion thereof utilizing the
same procedures as those provided for delivery of Preferred Stock to effect such
conversion. If the Depositary Shares evidenced by a Depositary Receipt are to be
converted in part only, a Depositary Receipt or Receipts will be issued for any
Depositary Shares not to be converted. No fractional shares of Common Stock will
be issued upon conversion, and if such conversion will result in a fractional
share being issued, an amount will be paid in cash by the Company equal to the
value of the fractional interest based upon the closing price of the Common
Stock on the last business day prior to the conversion.
AMENDMENT AND TERMINATION OF A DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing Depositary Shares which
represent the Preferred Stock and any provision of the Deposit Agreement may at
any time be amended by agreement between the Company and the Preferred Stock
Depositary. However, any amendment that materially and adversely alters the
rights of the holders of Depositary Receipts or that would be materially or
adversely inconsistent with the rights granted to the holders of the related
Preferred Stock will not be effective unless such amendment has been approved by
the existing holders of at least two-thirds of the applicable Depositary Shares
evidenced by the applicable Depositary Receipts then outstanding. No amendment
shall impair the right, subject to certain anticipated exceptions in the Deposit
Agreements, of any holder of Depositary Receipts to surrender any Depositary
Receipt with instructions to deliver to the holder the related class or series
of Preferred Stock and all money and other property, if any, represented
thereby, except in order to comply with law. Every holder of an outstanding
Depositary Receipt at the time any such amendment becomes effective shall be
deemed, by continuing to hold such Depositary Receipt, to consent and agree to
such amendment and to be bound by the applicable Deposit Agreement as amended
thereby.
The Deposit Agreement may be terminated by the Company upon not less
than 30 days' prior written notice to the Preferred Stock Depositary if (i) such
termination is necessary to preserve the Company's status as a REIT or (ii) a
majority of each class or series of Preferred Stock subject to such Deposit
Agreement consents to such termination, whereupon the Preferred Stock Depositary
will deliver or make available to each holder of Depositary Receipts, upon
surrender of the Depositary Receipts held by such holder, such number of whole
or fractional shares of each Preferred Stock as are represented by the
Depositary Shares evidenced by such Depositary Receipts together with any other
property held by Preferred Stock Depositary with respect to such Depositary
Receipts. The Company has agreed that if the Deposit Agreement is terminated to
preserve the Company's status as a REIT, then the Company will use its best
efforts to list each class or series of Preferred Stock issued upon surrender of
the related Depositary Shares. In addition, the Deposit Agreement will
automatically terminate if (i) all outstanding Depositary Shares shall have been
redeemed, (ii) there shall have been a final distribution in respect of each
class or
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series of Preferred Stock in connection with any liquidation, dissolution or
winding up of the Company and such distribution shall have been distributed to
the holders of the Depositary Receipts evidencing the Depositary Shares
representing such class or series of Preferred Stock or (iii) each share of the
related Preferred Stock shall have been converted into stock of the Company not
so represented by Depositary Shares.
CHARGES OF A PREFERRED STOCK DEPOSITARY
The Company will pay all transfer and other taxes and governmental
charges arising solely from the existence of the Deposit Agreement. In addition,
the Company will pay the fees and expenses of the Preferred Stock Depositary in
connection with the performance of its duties under the Deposit Agreement.
However, holders of Depositary Receipts will pay the fees and expenses of the
Preferred Stock Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the Deposit
Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Preferred Stock Depositary may resign at any time by delivering to
the Company notice of its election to do so, and the Company may at any time
remove the Preferred Stock Depositary, any such resignation or removal to take
effect upon the appointment of a successor Preferred Stock Depositary. A
successor Preferred Stock Depositary must be appointed within 60 days after
delivery of the notice of resignation or removal and must be a bank or trust
company having its principal office in the United States and having a combined
capital and surplus of at least $50,000,000.
MISCELLANEOUS
The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
the Preferred Stock Depositary with respect to the related Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable
if it is prevented from or delayed in, by law or any circumstances beyond its
control, performing its obligations under the Deposit Agreement. the obligations
of the Company and the Preferred Stock Depositary under the Deposit Agreement
will be limited to performing their duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of a class or
series of Preferred Stock represented by the Depositary Shares), gross
negligence or willful misconduct, and the Company and the Preferred Stock
Depositary will not be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Receipts, Depositary Shares or shares of a class or
series of Preferred Stock represented thereby unless satisfactory indemnity is
furnished. The Company and the Preferred Stock Depositary may rely on written
advice of counsel or accountants, or information provided by persons presenting
shares of Preferred Stock represented thereby for deposit, holders of Depositary
Receipts or other persons believed in good faith to be competent to give such
information, and on documents believed in good faith to be genuine and signed by
a proper party.
In the event a Preferred Stock Depositary shall receive conflicting
claims, requests or instructions from any holders of Depositary Receipts, on the
one hand, and the Company, on the other hand, the Preferred Stock Depositary
shall be entitled to act on such claims, requests or instructions received by
the Company.
DESCRIPTION OF WARRANTS
The Company currently has no Warrants outstanding (other than options
issued under the Company's stock option plan). The Company may issue Warrants
for the purchase of Common Stock or Preferred Stock. Warrants may be issued
independently or together with any other Offered Securities offered by any
Prospectus Supplement and may be attached to or separate from such Offered
Securities. Each series of 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
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relationship of agency or trust for or with any 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 such Warrants; (2) the
aggregate number of such Warrants; (3) the price or prices at which such
Warrants will be issued; (4) the designation, terms and number of shares of
Preferred Stock or Common Stock purchasable upon exercise of such Warrants; (5)
the designation and terms of the Offered Securities, if any, with which such
Warrants are issued and the number of such Warrants issued with each such
Offered Security; (6) the date, if any, on and after which such Warrants and the
related Preferred Stock or Common Stock will be separately transferable,
including any limitations on ownership and transfer of such warrants as may be
appropriate to preserve the status of the Company as a REIT; (7) the price at
which each share of Preferred Stock or Common Stock purchasable upon exercise of
such Warrants may be purchased; (8) the date on which the right to exercise such
Warrants shall commence and the date on which such right shall expire; (9) the
minimum or maximum amount of such 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; and (12) any other
terms of such Warrants, including terms, procedures and limitations relating to
the exchange and exercise of such Warrants.
RESTRICTIONS ON OWNERSHIP AND TRANSFER OF CAPITAL STOCK
For the Company to qualify as a REIT under the Code, subject to certain
exceptions, no more than 50% in value of the Company's outstanding shares of
stock 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). 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 stock must also be beneficially owned by 100
or more persons during at least 335 days of a taxable year of twelve 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).
The Charter prohibits (i) any person from actually or constructively
owning shares of stock 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 (ii) any person from transferring shares of
stock of the Company if such transfer would result in shares of stock of the
Company being owned by fewer than 100 persons. The Charter contains restrictions
on the ownership and transfer of Common Stock which are intended to assist the
Company in enforcing these prohibitions. The ownership limit set forth in the
Charter (the "Ownership Limit") provides that, subject to certain specified
exceptions, no person or entity may own, or be deemed to own by virtue of the
applicable constructive ownership provisions of the Code, more than 6.25% (by
number or value, whichever is more restrictive) of the outstanding shares of
Common Stock. The constructive ownership rules of the Code are complex, and may
cause shares of Common Stock owned actually or constructively by a group of
related individuals and/or entities to be constructively owned by one individual
or entity. As a result, the acquisition of less than 6.25% of the shares of
Common Stock (or the acquisition of an interest in an entity, such as Revenue
Properties Company Limited ("Revenue Properties") or Acktion Corporation that
owns, actually or constructively, Common Stock) by an individual or entity,
could, nevertheless cause that individual or entity, or another individual or
entity, to own constructively in excess of 6.25% of the outstanding Common Stock
and thus violate the Ownership Limit, or such other limit as provided in the
Charter or as otherwise permitted by the Board of Directors. For example, an
increase in the proportionate ownership interest in Revenue Properties held by
Mark Tanz, Stuart Tanz or any other Tanz family members (collectively, the "Tanz
Family"), or some other individual or entity, could cause one or more members of
the Tanz Family or such other individual or entity to violate the Ownership
Limit, or such other limit as provided in the Charter or as otherwise permitted
by the Board of Directors. The Board of Directors may, but in no event will be
required to, waive the Ownership Limit with respect to a particular stockholder
if it determines that such ownership will not jeopardize the Company's status as
a REIT and the Board of Directors otherwise decides
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such action would be in the best interest of the Company. As a condition of such
waiver, the Board of Directors may require an opinion of counsel satisfactory to
it and/or undertakings or representations from the applicant with respect to
preserving the REIT status of the Company. The Board of Directors has obtained
such undertakings and representations from PPD and, as a result, has waived the
Ownership Limit with respect to PPD and its affiliates and has permitted PPD to
own up to 55.0% of the outstanding Common Stock. The Board of Directors has also
obtained such undertakings and representations from the Tanz Family and, as a
result, has waived the Ownership Limit with respect to the Tanz Family and has
permitted the Tanz Family to own, in the aggregate, actually or constructively
(including through the ownership of stock of PPD or Revenue Properties), up to
24.0% (by number of shares or value, whichever is more restrictive) of the
outstanding Common Stock (the "Tanz Family Ownership Limit"). Further, the Board
of Directors has waived the Ownership Limit with respect to Acktion Corporation
and certain entities affiliated with such corporation, and has permitted such
entity to actually or constructively own up to 10.5% (by number of shares or
value, whichever is more restrictive) of the outstanding Common Stock (the
"Acktion Ownership Limit").
Any person who acquires or attempts or intends to acquire actual or
constructive ownership of shares of stock of the Company (including by acquiring
shares of PPD or Revenue Properties) 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. The foregoing restrictions on
transferability and ownership will not apply if the Board of Directors
determines that it is no longer in the best interest of the Company to attempt
to qualify, or to continue to qualify, as a REIT. Except as otherwise described
above, any change in the Ownership Limit would require an amendment to the
Charter. Amendments to the Charter require the affirmative vote of a majority of
all votes entitled to be cast on that matter.
Pursuant to the Charter, if any purported transfer of Common Stock of
the Company or any other event would otherwise result in any person violating
the Ownership Limit or such other limit as provided in the Charter or as
otherwise permitted by the Board of Directors (including, but not limited to,
the PPD Ownership Limit, the Tanz Family Ownership Limit and the Acktion
Ownership Limit), 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 in excess of the Ownership Limit or such other limit
(the "Excess Shares"), and the Prohibited Transferee shall 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 Excess Shares (the "Prohibited
Owner") shall cease to own any right or interest) in such Excess Shares.
Furthermore, an acquisition or increase in the actual or constructive ownership
of stock in Revenue Properties, PPD or Acktion Corporation by one or more
members of the Tanz Family, or some other individual or entity, or the actual or
constructive acquisition by PPD or Acktion Corporation of additional shares of
Common Stock, could result in the disqualification of the Company as a REIT (the
"Violative Indirect Transfer"). In such circumstances, pursuant to the Charter,
the Company will treat PPD or Acktion Corporation, as applicable, as a
Prohibited Owner with respect to the number of shares (the "Excess PPD Shares")
of Common Stock owned by it which, if divested, would permit the Company to
continue to maintain its REIT status. Any such Excess Shares or Excess PPD
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 shall be
deemed to be effective as of the close of business on the business day prior to
the date of such violative transfer (including any Violative Indirect Transfer).
Within 20 days of receiving notice from the Company of the transfer of shares to
the trust, the trustee of the trust (who shall 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, or such other limit
as provided in the Charter or as otherwise permitted by the Board of Directors,
and distribute to the Prohibited Transferee or Prohibited Owner an amount equal
to the lesser of the price paid by the Prohibited Transferee or Prohibited Owner
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 (such as a Violative Indirect Transfer), or from a transfer for
no consideration (such as a gift), the trustee will be required to sell such
Excess Shares (or Excess PPD Shares) to a qualified person or entity and
distribute to the Prohibited Owner an amount equal to the lesser of the fair
market value (as defined in the Charter) of such Excess Shares (or Excess PPD
Shares) as of the date of such event (including the date of a Violative Indirect
Transfer) or the sales proceeds received by the trust for
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such Excess Shares (or Excess PPD 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 (or Excess PPD 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 (or Excess
PPD Shares), and also will be entitled to exercise all voting rights with
respect to such Excess Shares (or Excess PPD Shares). Subject to Maryland law,
effective as of the date that such shares have been transferred to the trust,
the trustee shall have the authority (at the trustee's sole discretion) (i) to
rescind as void any vote cast by a Prohibited Transferee or Prohibited Owner, as
applicable, 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
shall 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. In the event that the
transfer to the trust as described above is not automatically effective (for any
reason) to prevent violation of the Ownership Limit or such other limit as
provided in the Charter or as otherwise permitted by the Board of Directors,
then the Charter provides that the transfer of the Excess Shares will be void
or, in the case of a Violative Indirect Transfer, the Excess PPD Shares will be
redeemable by the Company at its sole option at a price equal to the fair market
value of such shares at the time of the Violative Indirect Transfer.
In addition, shares of stock 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, gift or
Violative Indirect Transfer, the fair market value at the time of such devise,
gift or transfer) and (ii) the fair market value on the date 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 stock held in the trust. 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 Transferee or Prohibited Owner.
If any purported transfer of shares of Common Stock would cause the
Company to be beneficially owned by fewer than 100 persons, such transfer will
be null and void in its entirety and the intended transferee will acquire no
rights to the stock.
All certificates representing shares of Common Stock will bear a legend
referring to the restrictions described above. The foregoing ownership
limitations could delay, defer or prevent a transaction or a change in control
of the Company that might involve a premium price for the Common Stock or
otherwise be in the best interest of stockholders.
Pursuant to the Charter, each stockholder shall upon demand be required
to disclose to the Company in writing such information as the Company may
request in order to determine the effect, if any, of such stockholder's actual
and constructive ownership of Common Stock on the Company's status as a REIT and
to ensure compliance with the Ownership Limit, or such other limit as provided
in the Charter or as otherwise permitted by the Board of Directors.
CERTAIN PROVISIONS OF MARYLAND LAW AND OF
THE COMPANY'S CHARTER AND BYLAWS
The following paragraphs summarize certain provisions of the MGCL and
the Company's Charter and Bylaws. The summary does not purport to be complete
and is subject to and qualified in its entirety by reference to the MGCL and to
the Company's Charter and Bylaws, copies of which are on file with the
commission as exhibits to registration statements previously filed by the
Company. See "Available Information."
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BOARD OF DIRECTORS
The Charter provides that the number of directors of the Company shall
be established by the Bylaws but shall not be less than the minimum number
required by the MGCL. Pursuant to the Charter, the Board of Directors is divided
into three classes as nearly equal in size as practicable. One class held office
initially for a term expiring at the annual meeting of stockholders held in June
1998, another class holds office initially for a term expiring at the annual
meeting of stockholders to be held in 1999 and another class holds office
initially for a term expiring at the annual meeting of stockholders to be held
in 2000. As the term of each class expires, directors in that class will be
elected for a term of three years and until their successors are duly elected
and qualified and the directors in the other two classes will continue in
office. The Company believes that classification of the Board of Directors will
help to assure the continuity and stability of the Company's business strategies
and policies as determined by the Board of Directors.
The classified director provision could have the effect of making the
removal of incumbent directors more time consuming and difficult, which could
discourage a third party from making a tender offer or otherwise attempting to
obtain control of the Company, even though such an attempt might be beneficial
to the Company and its stockholders. At least two annual meetings of
stockholders, instead of one, will generally be required to effect a change in a
majority of the Board of Directors. Thus, the classified board provision could
increase the likelihood that incumbent directors will retain their positions.
Holders of shares of Common Stock will have no right to cumulative voting for
the election of directors. Consequently, at each annual meeting of stockholders,
the holders of a majority of the shares of Common Stock will be able to elect
all of the successors of the class of directors whose term expires at that
meeting.
PPD has the right to nominate two persons for election to the Board of
Directors of the Company so long as PPD and its affiliates collectively
beneficially own at least 25% of the outstanding shares of Common Stock.
Any vacancy on the Board of Directors will be filled, at any regular
meeting or at any special meeting called for that purpose, by a majority of the
remaining directors or, in the case of a vacancy resulting from an increase in
the number of directors, by a majority of the entire Board of Directors. In
addition, a vacancy resulting from removal may be filled by the stockholders at
the next annual meeting of stockholders or at a special meeting of the
stockholders called for that purpose. The Charter provides that a majority of
the Board must be Independent Directors.
REMOVAL OF DIRECTORS
While the MGCL and the Charter empower the stockholders to fill
vacancies in the Board of Directors that are caused by the removal of a
director, the Charter precludes stockholders from removing incumbent directors
except for cause and upon a substantial affirmative vote. Specifically, the
Charter provides that a director may be removed only for cause (as defined in
the Charter) and only by the affirmative vote of at least a majority of the
votes entitled to be cast in the election of directors. This provision, when
coupled with the provision in the Bylaws authorizing the Board of Directors to
fill vacant directorships, precludes stockholders from removing incumbent
directors except for cause and upon a substantial affirmative vote and filling
the vacancies created by such removal with their own nominees.
BUSINESS COMBINATIONS
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange, or, in certain circumstances, an asset transfer
or issuance or reclassification of equity securities) between the Company and an
Interested Stockholder or an affiliate thereof are prohibited for five years
after the most recent date on which the person who beneficially owns 10% or more
of the voting power of the Company's then outstanding shares or an affiliate of
the Company which, at any time within the two-year period prior to the date in
question, was the beneficial owner of 10% or more of the voting power of the
Company's then outstanding shares (an "Interested Stockholder") became an
Interested Stockholder. Thereafter, any such business combination must be
recommended by the Board of Directors and approved by the affirmative vote of at
least (i) 80% of the votes entitled to be cast by
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holders of outstanding shares of the Company's voting stock and (ii) two-thirds
of the votes entitled to be cast by holders of outstanding shares of the
Company's voting stock other than shares held by the Interested Stockholder with
whom the business combination is to be effected, unless, among other things, the
Company's stockholders receive a minimum price (as defined in the MGCL) for
their shares of stock and the consideration is received in cash or in the same
form as previously paid by the Interested Stockholder for its shares. These
provisions of the MGCL do not apply, however, to business combinations that are
approved or exempted by the Board of Directors prior to the time that the
Interested Stockholder becomes an Interested Stockholder. The Company has opted
out of the business combinations provisions of the MGCL. Therefore, an
Interested Stockholder would be able to effect a "business combination" without
complying with the requirements set forth above. Stockholder approval is
required to opt back in to such provisions.
CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of the Company acquired in a
"control share acquisition" have no voting rights except to the extent approved
by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares owned by the acquiror or by officers or directors who are
employees of the Company. "Control shares" are voting shares of stock which, if
aggregated with all other such shares of stock previously acquired by the
acquiror, or in respect of which the acquiror is able to exercise or direct the
exercise of voting power (except solely by revocable proxy), would entitle the
acquiror to exercise voting power in electing directors within one of the
following ranges of voting power: (i) one-fifth or more but less than one-
third; (ii) one-third or more but less than a majority; or (iii) a majority of
all voting power. Control shares do not include shares of stock the acquiring
person is then entitled to vote as a result of having previously obtained
stockholder approval. A "control share acquisition" means the acquisition of
control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition,
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel the Board of Directors to call a special meeting of
stockholders to be held within 50 days of demand to consider voting rights for
the shares. If no request for a meeting is made, the Company may itself present
the question at any stockholders' meeting.
If voting rights are not approved at the stockholders' meeting or if
the acquiring person does not deliver an acquiring person statement as required
by the MGCL, then, subject to certain conditions and limitations, the Company
may redeem any or all of the control shares (except those for which voting
rights have previously been approved) for fair value determined, without regard
to the absence of voting rights for the control shares, as of the date of the
last control share acquisition by the acquiror or of any meeting of stockholders
at which the voting rights of such shares are considered and not approved. If
voting rights for control shares are approved at a stockholders' meeting and the
acquiror becomes entitled to vote a majority of the shares of stock entitled to
vote, all other stockholders may exercise appraisal rights. The fair value of
the shares of stock as determined for purposes of such appraisal rights may not
be less than the highest price per share paid by the acquiror in the control
share acquisition, and certain limitations and restrictions otherwise applicable
to the exercise of dissenters' rights do not apply in the context of a control
share acquisition.
The control share acquisition statute does not apply to shares acquired
in a merger, consolidation or share exchange if the Company is a party to the
transaction, or to acquisitions approved or exempted by the Charter or Bylaws
and adopted at any time before the acquisition of shares. The Bylaws of the
Company contain a provision exempting from the control share acquisition statute
any and all acquisitions by any person of the Company's shares of stock. Such
provision of the Bylaws may only be amended with stockholder approval. There can
be no assurance that such provision will not be amended or eliminated at any
time in the future. As a result of the Company's decision to opt out of the
"control share acquisition" provisions of the MGCL, stockholders who acquire a
substantial block of Common Stock are not precluded from exercising full voting
rights with respect to their shares on all matters without first obtaining the
approval of other stockholders entitled to vote. This may have the effect of
making it easier for any such control share stockholder to effect a business
combination with the Company. However, no assurance can be given that any such
business combination would be consummated or, if consummated, would result in a
purchase of shares of Common Stock from any stockholder at a premium.
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AMENDMENT TO THE CHARTER AND BYLAWS
The Charter provides that the Charter may be amended by the affirmative
vote of a majority of all votes entitled to be cast on the matter. The Bylaws
may be amended by the affirmative vote of a majority of the Board of Directors
or the affirmative vote of the holders of not less than a majority of the shares
of the Company's stock entitled to vote thereon.
MEETINGS OF STOCKHOLDERS
The Bylaws provide for annual meetings of stockholders to elect the
Board of Directors and transact such other business as may properly be brought
before the meeting. Special meetings of stockholders may be called by the
President, the Chief Executive Officer or the Board of Directors and shall be
called at the request in writing of the holders of shares entitled to cast not
less than a majority of all the votes entitled to be cast at such meeting.
ADVANCE NOTICE OF DIRECTOR NOMINATIONS AND NEW BUSINESS
The Bylaws provide that (i) with respect to an annual meeting of
stockholders, nominations of persons for election to the Board of Directors and
the proposal of business to be considered by stockholders may be made only (a)
pursuant to the Company's notice of the meeting, (b) by or at the direction of
the Board of Directors or (c) by a stockholder who is entitled to vote at the
meeting and has complied with the advance notice procedures set forth in the
Bylaws, and (ii) with respect to special meetings of stockholders, only the
business specified in the Company's notice of meeting may be brought before the
meeting of stockholders, or provided that the Board of Directors has determined
that directors shall be elected at such meeting, nominations of persons for
election to the Board of Directors may be brought by a stockholder who is
entitled to vote at the meeting and has complied with the advance notice
provisions set forth in the Bylaws.
The provisions in the Charter on classification of the Board of
Directors and the advance notice provisions of the Bylaws could have the effect
of discouraging a takeover or other transaction in which holders of some, or a
majority, of the shares of Common Stock might receive a premium for their shares
of Common Stock over the then prevailing market price or which such holders
might believe to be otherwise in their best interests.
DISSOLUTION OF THE COMPANY
Under the MGCL and the Charter, the voluntary dissolution of the
Company must be approved by (i) the affirmative vote of a majority of the entire
Board of Directors declaring such dissolution to be advisable and directing that
the proposed dissolution be submitted for consideration at any annual or special
meeting of stockholders, and (ii) upon proper notice, the affirmative vote of
the holders of a majority of the total number of shares of stock outstanding and
entitled to vote thereon.
LIMITATION OF LIABILITY AND INDEMNIFICATION FOR DIRECTORS AND OFFICERS
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter contains
such a provision which eliminates such liability to the maximum extent permitted
by Maryland law. This provision does not limit the right of the Company or its
stockholders to obtain other relief, such as an injunction or rescission.
The Charter of the Company authorizes it, to the maximum extent
permitted by Maryland law, to obligate itself to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any present or former director or officer or (b) any individual who, while a
director of the Company and at the request of the Company, serves or has served
another corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or any other enterprise as a director, officer,
partner or trustee of such corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise
from and against any claim or liability to which such person may incur by reason
of his or her stature as a present or
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former stockholder, director or officer of the Company. The Bylaws of the
Company obligate it, to the maximum extent permitted by Maryland law, to
indemnify and to pay or reimburse reasonable expenses in advance of final
disposition of a proceeding to (a) any present or former director or officer who
is made a party to the proceeding by reason of his service in that capacity or
(b) any individual who, while a director of the Company and at the request of
the Company, serves or has served another corporation, real estate investment
trust, partnership, joint venture, trust, employee benefit plan or any other
enterprise as a director, officer, partner or trustee of such corporation, real
estate investment trust, partnership, joint venture, trust, employee benefit
plan or other enterprise and who is made party to the proceeding by reason of
his service in that capacity against any claim or liability to which he may
become subject by reason of such service. The Charter and Bylaws also permit the
Company to indemnify and advance expenses to any person who served a predecessor
of the Company in any of the capacities described above and to any employee or
agent of the Company or a predecessor of the Company.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Company's Charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (a) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) the director or officer actually received an improper personal
benefit in money, property or services, or (c) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, a Maryland corporation may not indemnify for
an adverse judgment in a suit by or in the right of the corporation or for a
judgment of liability on the basis that personal benefit was improperly
received, unless in either case a court orders indemnification and then only for
expenses. In addition, the MGCL permits a corporation to advance reasonable
expenses to a director or officer upon the corporation's receipt of (a) a
written affirmation by the director or officer of his good faith belief that he
has met the standard of conduct necessary for indemnification by the Company as
authorized by the Bylaws and (b) a written undertaking by him or on his behalf
to repay the amount paid or reimbursed by the corporation if it shall ultimately
be determined that the standard of conduct was not met.
The inclusion of the above provisions in the Charter and Bylaws may
have the effect of reducing the likelihood of stockholder derivative suits
against directors and may discourage or deter shareholders or management from
bringing a lawsuit against directors for breach of their duty of care, even
though such an action, if successful, might otherwise have benefitted the
Company and its stockholders.
The Company has entered into indemnification agreements with each of
its executive officers and directors. The indemnification agreements require,
among other matters, that the Company indemnify its executive officers and
directors to the fullest extent permitted by law and advance to the executive
officers and directors all related expenses, subject to reimbursement if it is
subsequently determined that indemnification is not permitted. Under the
indemnification agreements, the Company must also indemnify and advance all
expenses incurred by executive officers and directors seeking to enforce their
rights under the indemnification agreements and may cover executive officers and
directors under the Company's directors' and officers' liability insurance.
Although the form of indemnification agreement offers substantially the same
scope of coverage afforded by law, it provides greater assurance to directors
and executive officers that indemnification will be available, because, as a
contract, it cannot be modified unilaterally in the future by the Board of
Directors or the stockholders to eliminate the rights it provides.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO THE COMPANY OF ITS REIT ELECTION
The following summary of material federal income tax consequences
regarding the Company is based on current law, is for general information only
and is not tax advice. The tax treatment of a holder of any of the Offered
Securities will vary depending upon the terms of the specific securities
acquired by such holder, as well as his or her particular situation, and the
summary below does not attempt to address any aspects of federal income
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taxation relating to holders of Offered Securities. Certain federal income tax
considerations relevant to holders of the Offered Securities will be provided in
the applicable Prospectus Supplement relating thereto. The information set forth
below, to the extent that it constitutes matters of law, summaries of legal
matters or legal conclusions, is the opinion of Latham & Watkins, tax counsel to
the Company. The summary below does not consider the effect of any foreign,
state, local or other tax laws that may be applicable to the Company.
The information in this section is based on the Code, current,
temporary and proposed Treasury Regulations promulgated thereunder, the
legislative history of the Code, current administrative interpretations and
practices of the Internal Revenue Service (the "IRS") (including its practices
and policies as expressed in certain private letter rulings which are not
binding on the IRS except with respect to the particular taxpayers who requested
and received such rulings), and court decisions, all as of the date hereof. No
assurance can be given that future legislation, Treasury Regulations,
administrative interpretations and practices and/or court decisions will not
alter the Code or existing interpretations thereof, and any such change could
apply retroactively to transactions preceding the date of the change. The
Company has not requested, and does not plan to request, any ruling from the IRS
concerning the tax treatment of the Company. Thus, no assurance can be provided
that the statements set forth herein (which are, in any event, not binding on
the IRS or courts) will not be challenged by the IRS or will be sustained by a
court if so challenged.
EACH INVESTOR IS ADVISED TO CONSULT THE APPLICABLE PROSPECTUS
SUPPLEMENT, AS WELL AS HIS OR HER TAX ADVISOR, REGARDING THE TAX CONSEQUENCES TO
HIM OR HER OF THE ACQUISITION, OWNERSHIP AND SALE OF THE OFFERED SECURITIES,
INCLUDING THE FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH
ACQUISITION, OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN THE APPLICABLE TAX
LAWS.
TAXATION OF THE COMPANY
General.
The Company has elected to be taxed as a REIT under Sections 856
through 860 of the Code commencing with its taxable year ending December 31,
1997. The Company believes that, commencing with its taxable year ending
December 31, 1997, it has been organized and has operated in such a manner as to
qualify for taxation as a REIT under the Code commencing with such taxable year,
and the Company intends to continue to operate in such a manner, but no
assurance can be given that it has operated or will continue to operate in such
a manner so as to qualify or remain qualified.
These sections of the Code and the corresponding Treasury Regulations
are highly technical and complex. The following sets forth the material aspects
of the sections that govern the federal income tax treatment of a REIT. This
summary is qualified in its entirety by the applicable Code provisions, rules
and regulations promulgated thereunder, and administrative and judicial
interpretations thereof.
As a condition to the closing of each offering of Offered Securities,
other than as specified in the applicable Prospectus Supplement, tax counsel to
the Company will render an opinion to the underwriters of such offering to the
effect that, commencing with the Company's taxable year ended December 31, 1997,
the Company has been organized and operated in conformity with the requirements
for qualification as a REIT, and its proposed method of operation will enable it
to continue to meet the requirements for qualification and taxation as a REIT
under the Code. It must be emphasized that each such opinion will be based on
various factual assumptions relating to the organization and operation of the
Company, and will be conditioned upon certain representations to be made by the
Company as to factual matters, and that such tax counsel to the Company
undertakes no obligation hereby to update any such opinion subsequent to its
date. In addition, such opinions will be based upon the factual representations
of the Company as set forth in this Prospectus and any applicable Prospectus
Supplement or Supplements, and assume that the actions described in this
Prospectus and any such Supplement or Supplements will be completed by the
Company in a timely fashion. Moreover, such qualification and taxation as a REIT
depends upon the Company's ability to meet (through actual annual operating
results, asset composition, distribution levels and diversity of stock
ownership) the various qualification tests imposed under the Code and discussed
below, the results of which have not been and will not be reviewed by such tax
counsel to the Company. Accordingly, no assurance can be given
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that the actual results of the Company's operation during any particular taxable
year will satisfy such requirements. See "--Failure to Qualify." Further, the
anticipated income tax treatment described in the Prospectus or in any
Prospectus Supplement or Supplements may be changed, perhaps retroactively, by
legislation, administrative or judicial action at any time.
If the Company qualifies for taxation as a REIT, it generally will not
be subject to federal corporate income taxes on its net income that is currently
distributed to stockholders. This treatment substantially eliminates the "double
taxation" (at the corporate and stockholder levels) that generally results from
investment in a regular corporation. However, the Company will be subject to
federal income tax as follows. First, the Company will be taxed at regular
corporate rates on any undistributed "REIT taxable income," including
undistributed net capital gains (although stockholders may receive an offsetting
credit against their own Federal income tax liability for Federal income taxes
paid by the Company with respect to any such undistributed net capital gains).
Second, under certain circumstances, the Company may be subject to the
"alternative minimum tax" on its items of tax preference. Third, if the Company
has (i) net income from the sale or other disposition of "foreclosure property"
(i.e., generally, property acquired by the Company by foreclosure or otherwise
upon default of a loan secured by the property) which is held primarily for sale
to customers in the ordinary course of business or (ii) other nonqualifying
income from foreclosure property, it will be subject to tax at the highest
corporate rate on such income. Fourth, if the Company has net income from
prohibited transactions (which are, in general, certain sales or other
dispositions of property, other than foreclosure property, held primarily for
sale to customers in the ordinary course of business), such income will be
subject to a 100% tax. Fifth, if the Company should fail to satisfy the 75%
gross income test or the 95% gross income test (as discussed below), but has
nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on an amount equal
to (a) the gross income attributable to the greater of the amount by which the
Company fails the 75% or 95% gross income tests multiplied by (b) a fraction
intended to reflect the Company's profitability. Sixth, if the Company should
fail to distribute during each calendar year at least the sum of (i) 85% of its
REIT ordinary income for such year, (ii) 95% of its REIT capital gain net income
for such year, and (iii) any undistributed taxable income from prior years, the
Company would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. Seventh, with respect to any
asset (a "Built-In Gain Asset") acquired by the Company from a corporation which
is or has been a C corporation (i.e., generally a corporation subject to full
corporate-level tax) in a transaction in which the basis of the Built-In Gain
Asset in the hands of the Company is determined by reference to the basis of the
asset in the hands of the C corporation (such as the mergers of certain PPD
subsidiaries into subsidiaries of the Company) and such basis is less than the
fair market value of such asset at the time of such acquisition (with the excess
of such fair market value over such basis amount being referred to as the
"Built-In Gain"), if the Company recognizes any Built-In Gain on the disposition
of such Built-In Gain Asset during the ten-year period (the "Recognition
Period") beginning on the date on which such asset was acquired by the Company,
then, such Built-In Gain will be subject to tax at the highest regular corporate
rate applicable pursuant to Treasury Regulations that have not yet been
promulgated. The results described above with respect to the recognition of
Built-In Gain assume that the Company will have made an election pursuant to IRS
Notice 88-19 and that the availability or nature of such election is not
modified as proposed in President Clinton's 1999 Federal Budget Proposal.
Requirements for Qualification
The Code defines a REIT as a corporation, trust or association (i)
which is managed by one or more trustees or directors; (ii) the beneficial
ownership of which is evidenced by transferable shares, or by transferable
certificates of beneficial interest; (iii) which would be taxable as a domestic
corporation, but for Sections 856 through 859 of the Code; (iv) which is neither
a financial institution nor an insurance company subject to certain provisions
of the Code; (v) the beneficial ownership of which is held by 100 or more
persons; (vi) during the last half of each taxable year not more than 50% in
value of the outstanding stock of which is owned, actually or constructively, by
five or fewer individuals (as defined in the Code to include certain entities);
and (vii) which meets certain other tests, described below, regarding the nature
of its income and assets and the level of its distributions. The Code provides
that conditions (i) to (iv), inclusive, must be met during the entire taxable
year and that condition (v) must be met during at least 335 days of a taxable
year of twelve months, or during a proportionate part of a taxable year of less
than twelve months. Conditions (v) and (vi) will not apply until after the first
taxable year for
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which an election is made to be taxed as a REIT. For purposes of conditions (v)
and (vi), pension funds and certain other tax-exempt entities are treated as
individuals, subject to a "look-through" exception in the case of condition
(vi).
The Company believes that the conditions set forth in (i) through (vii)
above have been satisfied. The Company also believes that it has issued
sufficient shares of Common Stock with sufficient diversity of ownership to
allow it to satisfy conditions (v) and (vi). In addition, the Company's Charter
provides for restrictions regarding the transfer and ownership of shares, which
restrictions are intended to assist the Company in continuing to satisfy the
share ownership requirements described in (v) and (vi) above. Such ownership and
transfer restrictions are described in "Description of Capital
Stock--Restrictions on Ownership and Transfer." These restrictions, however, may
not ensure that the Company will, in all cases, be able to satisfy the share
ownership requirements described above, in which case the Company would no
longer be qualified as a REIT; provided, however, beginning January 1, 1998, if
the Company complies with the rules contained in the applicable Treasury
Regulations requiring the Company to attempt to ascertain the actual ownership
of its shares, and the Company does not know, and would not have known through
the exercise of reasonable diligence, whether it failed to meet the requirement
set forth in condition (vi) above, the Company will be treated as having met
such requirement. In addition, approximately 51.1% of the Company's stock is
currently owned by PPD, which is itself a wholly-owned subsidiary of Revenue
Properties, and certain of PPD's affiliates. There are no ownership or transfer
restrictions of the type described above in effect with respect to Revenue
Properties' stock. Approximately 31.2% of Revenue Properties' outstanding shares
of common stock are currently owned by the Tanz Family and approximately an
additional 19.8% are owned by Acktion Corporation. If the ownership
concentration of the Tanz Family or Acktion Corporation (or some other party) in
Revenue Properties were to increase, then the Company might no longer satisfy
conditions (v) and (vi) above, and therefore, might no longer be qualified as a
REIT. See "--Failure to Qualify" below. However, the Company's Charter permits
the Company to cause the transfer of such number of shares of Common Stock owned
by PPD to a trust having a charitable beneficiary so as to avoid REIT
disqualification.
In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. From its inception, the Company has had a
calendar taxable year.
Ownership of Partnership Interests
The Company owns and operates one or more properties through
partnerships or limited liability companies (in the following discussion of
Certain Federal Income Tax Consequences to the Company of its REIT Election,
references to partnerships and their partners shall include limited liability
companies and their members). In the case of a REIT which is a partner in a
partnership, Treasury Regulations provide that the REIT will be deemed to own
its proportionate share of the assets of the partnership and will be deemed to
be entitled to the income of the partnership attributable to such share. In
addition, the character of the assets and gross income of the partnership shall
retain the same character in the hands of the REIT for purposes of Section 856
of the Code, including satisfying the gross income tests and the asset tests.
Thus, the Company's proportionate share of the assets and items of income of any
partnership in which the Company is a partner (including the partnership's share
of such items of any subsidiary partnerships) will be treated as assets and
items of income of the Company for purposes of applying the requirements
described herein. A discussion of some aspects of the federal income taxation of
partnerships and their partners is provided below in "--Tax Risks Associated
with Partnerships." The Company has direct control of all partnerships in which
it is a partner and intends to operate such partnerships in a manner consistent
with the requirements for qualification as a REIT.
Ownership of Subsidiaries
The Company owns and operates a number of properties through its
wholly-owned subsidiaries (each a "QRS"). The Company will have owned 100% of
the stock of each of the QRSs at all times that each of the QRSs has been in
existence. As a result, the QRSs will be treated as "qualified REIT
subsidiaries" under the Code. A corporation which is a qualified REIT subsidiary
shall not be treated as a separate corporation, and all assets, liabilities and
items of income, deduction and credit of a qualified REIT subsidiary shall be
treated as assets, liabilities and items of income, deduction and credit (as the
case may be) of the REIT for all purposes under the
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Code (including all REIT qualification tests). Thus, in applying the
requirements described herein, the QRSs will be ignored, and all assets,
liabilities and items of income, deduction and credit of such QRSs will be
treated as assets, liabilities and items of income, deduction and credit the
Company. A qualified REIT subsidiary will not be subject to federal income tax
and the Company's ownership of the voting stock of such a subsidiary will not
violate the restrictions against ownership of securities of any one issuer which
constitute more than 10% of such issuer's voting securities, nor will the
Company's ownership of 100% of such subsidiary's stock violate the restriction
against the Company's ownership of any one issuer's securities, the value of
which constitutes more than 5% of the value of the Company's total assets,
described below under "--Asset Tests."
Income Tests
In order to maintain qualification as a REIT, the Company annually must
satisfy three gross income requirements. First, at least 75% of the Company's
gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived directly or indirectly from investments relating to
real property or mortgages on real property (including "rents from real
property" and, in certain circumstances, interest) or from certain types of
temporary investments. Second, at least 95% of the Company's gross income
(excluding gross income from prohibited transactions) for each taxable year must
be derived from such real property investments, dividends, interest and gain
from the sale or disposition of stock or securities (or from any combination of
the foregoing). Third, for taxable years beginning prior to August 5, 1997,
short-term gain from the sale or other disposition of stock or securities, gain
from prohibited transactions and gain on the sale or other disposition of real
property held for less than four years (apart from involuntary conversions and
sales of foreclosure property) must represent less than 30% of the Company's
gross income (including gross income from prohibited transactions) for each
taxable year. The 30% gross income test has been repealed and will not apply
beginning with the Company's 1998 taxable year.
Rents received by the Company will qualify as "rents from real
property" in satisfying the gross income requirements for a REIT described above
only if several conditions are met. First, the amount of rent must not be based
in whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "rents from
real property" solely by reason of being based on a fixed percentage or
percentages of receipts or sales. Second, the Code provides that rents received
from a tenant will not qualify as "rents from real property" in satisfying the
gross income tests if the REIT, or an owner of 10% or more of the REIT, actually
or constructively owns 10% or more of such tenant (a "Related Party Tenant").
Third, if rent attributable to personal property, leased in connection with a
lease of real property, is greater than 15% of the total rent received under the
lease, then the portion of rent attributable to such personal property will not
qualify as "rents from real property." Finally, for rents received to qualify as
"rents from real property," the REIT generally must not operate or manage the
property or furnish or render services to the tenants of such property (subject
to a 1% de minimis exception applicable to the Company for its taxable year
beginning on or after January 1, 1998), other than through an independent
contractor from whom the REIT derives no revenue. The REIT may, however,
directly perform certain services that are "usually or customarily rendered" in
connection with the rental of space for occupancy only and are not otherwise
considered "rendered to the occupant" of the property. The Company does not and
will not (except as provided below), (i) charge rent for any property that is
based in whole or in part on the income or profits of any person (except by
reason of being based on a percentage of receipts or sales, as described above),
(ii) rent any property to a Related Party Tenant, (iii) derive rental income
attributable to personal property (other than personal property leased in
connection with the lease of real property, the amount of which is less than 15%
of the total rent received under the lease), or (iv) perform services considered
to be rendered to the occupant of the property, other than through an
independent contractor from whom the Company derives no revenue. Notwithstanding
the foregoing, the Company may take one or more of the actions described in the
preceding sentence if, based on the advice of counsel, the Company determines
that such action or actions will not have an adverse effect on the Company's
status as a REIT.
The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based
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on a fixed percentage or percentages of receipts or sales. The Company has not
derived and does not expect to derive any interest which would fail to qualify
under the 75% and 95% gross income tests.
If the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
These relief provisions will be generally available if the Company's failure to
meet such tests was due to reasonable cause and not due to willful neglect, the
Company attaches a schedule of the sources of its income to its federal income
tax return, and any incorrect information on the schedule was not due to fraud
with intent to evade tax. It is not possible, however, to state whether in all
circumstances the Company would be entitled to the benefit of these relief
provisions. For example, if the Company fails to satisfy the gross income tests
because nonqualifying income that the Company intentionally incurs exceeds the
limits on such income, the IRS could conclude that the Company's failure to
satisfy the tests was not due to reasonable cause. If these relief provisions
are inapplicable to a particular set of circumstances involving the Company, the
Company will not qualify as a REIT. As discussed above in "Taxation of the
Company--General," even if these relief provisions apply, a tax would be imposed
with respect to the excess net income. No similar mitigation provision provides
relief if the Company fails the 30% income test (which test, however, has been
repealed beginning with the Company's 1998 taxable year), in which case the
Company would cease to qualify as a REIT.
Any gain realized by the Company on the sale of any property held (or
deemed to be held) as inventory or other property held (or deemed to be held)
primarily for sale to customers in the ordinary course of business (including
the Company's share of any such gain realized by any partnership in which the
Company is a partner or any qualified REIT subsidiary of the Company) will be
treated as income from a prohibited transaction that is subject to a 100% tax.
Under existing law, whether property is held as inventory or primarily for sale
to customers in the ordinary course of a trade or business is a question of fact
that depends on all the facts and circumstances with respect to the particular
transaction. The Company intends to hold the Properties for investment with a
view to long-term appreciation, to engage in the business of acquiring,
developing, owning, and operating the Properties (and other properties) and to
make such occasional sales of the Properties as are consistent with the
Company's investment objectives (and in a manner so as to minimize the risk that
such sales would be treated as prohibited transactions subject to the 100%
penalty tax). There can be no assurance, however, that the IRS might not contend
that one or more of such sales should be treated as prohibited transactions
subject to the 100% penalty tax.
Asset Tests
The Company, at the close of each quarter of its taxable year, must
also satisfy three tests relating to the nature of its assets. First, at least
75% of the value of the Company's total assets (including assets held by the
Company's qualified REIT subsidiaries and the Company's allocable share of the
assets held by partnerships in which the Company owns an interest) must be
represented by real estate assets, including (i) its allocable share of real
estate assets held by partnerships in which the Company owns an interest and
(ii) stock or debt instruments held for not more than one year purchased with
the proceeds of a stock offering or long-term (i.e., at least five years) debt
offering of the Company, cash, cash items and government securities. Second, not
more than 25% of the Company's total assets (including assets held by the
Company's qualified REIT subsidiaries and the Company's allocable share of the
assets held by partnerships in which the Company owns an interest) may be
represented by securities other than those in the 75% asset class. Third, of the
investments included in the 25% asset class, the value of any one issuer's
securities owned by the Company may not exceed 5% of the value of the Company's
total assets (including assets held by the Company's qualified REIT subsidiaries
and the Company's allocable share of the assets held by partnerships in which
the Company owns an interest) and the Company may not own more than 10% of any
one issuer's outstanding voting securities.
The Company currently holds 100% of the stock of each of the QRSs. As
set forth above, the assets tests provide that a REIT may not own securities of
any one issuer which constitute more than 10% of such issuer's voting securities
or more than 5% of the value of the REIT's total assets. However, since the QRSs
are "qualified REIT subsidiaries" as defined in the Code, such subsidiaries will
not be treated as separate corporations for federal income tax purposes, and the
Company's ownership of the stock of the QRSs will not cause the Company to fail
any of the foregoing asset tests.
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After initially meeting the foregoing asset tests at the close of any
quarter, the Company will not lose its status as a REIT for failure to satisfy
the asset tests at the end of a later quarter solely by reason of changes in
asset values. If the failure to satisfy the asset tests results from an
acquisition of securities or other property during a quarter (including as a
result of the Company increasing its interest in any partnership in which the
Company is a partner), the failure can be cured by disposition of sufficient
nonqualifying assets within 30 days after the close of that quarter. The Company
has maintained and intends to continue to maintain adequate records of the value
of its assets to ensure compliance with the asset tests and to take such other
actions within 30 days after the close of any quarter as may be required to cure
any noncompliance. If the Company fails to cure any noncompliance with the asset
tests within such time period, the Company would cease to qualify as a REIT.
Annual Distribution Requirements
The Company, in order to qualify as a REIT, is required to distribute
dividends (other than capital gain dividends) to its stockholders in an amount
at least equal to (i) the sum of (a) 95% of the Company's "REIT taxable income"
(computed without regard to the dividends paid deduction and the Company's net
capital gain) and (b) 95% of the net income (after tax), if any, from
foreclosure property, minus (ii) the excess of the sum of certain items of
noncash income (i.e., income attributable to leveled stepped rents, original
issue discount or purchase money debt, or a like-kind exchange that is later
determined to be taxable) over 5% of the "REIT taxable income" as described in
clause (i)(a) above. In addition, if the Company disposes of any Built-In Gain
Asset during its Recognition Period, the Company will be required, pursuant to
Treasury Regulations which have not yet been promulgated, to distribute at least
95% of the Built-In Gain (after tax), if any, recognized on the disposition of
such asset (together with the preceding sentence, the "95% distribution
requirement"). Such distributions must be paid in the taxable year to which they
relate, or in the following taxable year if declared before the Company timely
files its tax return for such year and if paid on or before the first regular
dividend payment after such declaration. Such distributions are taxable to
holders of Common Stock (other than tax-exempt entities, as discussed below) in
the year in which paid, even though such distributions relate to the prior year
for purposes of the Company's 95% distribution requirement. The amount
distributed must not be preferential (i.e., each holder of shares of Common
Stock must receive the same distribution per share). To the extent that the
Company does not distribute all of its net capital gain or distributes at least
95%, but less than 100%, of its "REIT taxable income," as adjusted, it will be
subject to tax on the undistributed amount at regular ordinary and capital gains
corporate tax rates. Furthermore, if the Company should fail to distribute (or
is not otherwise deemed to have distributed) during each calendar year (or, in
the case of distributions with dividend declaration and record dates falling in
the last three months of the calendar year, by the end of January immediately
following such year) at least the sum of (i) 85% of its REIT ordinary income for
such year, (ii) 95% of its REIT capital gain income for such year, and (iii) any
undistributed taxable income from prior periods, the Company would be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. Any REIT taxable income and net capital gain on which this
excise tax is imposed for any year is treated as an amount distributed that year
for purposes of calculating such tax. The Company believes that it has made, and
intends to continue to make, timely distributions sufficient to satisfy these
annual distribution requirements and to avoid or minimize the amount of any
liability for corporate income or excise taxes.
The Company's REIT taxable income has been and is expected to continue
to be less than its cash flow due to the allowance of depreciation and other
non-cash charges in computing REIT taxable income. Accordingly, the Company
anticipates that it will generally have sufficient cash or liquid assets to
enable it to satisfy the distribution requirements described above. It is
possible, however, that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet these distribution requirements due to
timing differences between (i) the actual receipt of income and actual payment
of deductible expenses and (ii) the inclusion of such income and deduction of
such expenses in arriving at taxable income of the Company. In the event that
such timing differences occur, in order to meet the distribution requirements,
the Company may find it necessary to arrange for short-term, or possibly
long-term, borrowings or to pay dividends in the form of taxable stock
dividends.
Under certain circumstances, the Company may be able to rectify a
failure to meet the 95% Distribution Requirement for a year by paying
"deficiency dividends" to stockholders in a later year, which may be included in
the Company's deduction for dividends paid for the earlier year. Thus, the
Company may be able to avoid being
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taxed on amounts distributed as deficiency dividends; however, the Company will
be required to pay interest to the IRS based upon the amount of any deduction
taken for deficiency dividends.
FAILURE TO QUALIFY
If the Company fails to qualify for taxation as a REIT in any taxable
year, and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which the
Company fails to qualify will not be deductible by the Company nor will they be
required to be made. As a result, the Company's failure to maintain its
qualification as a REIT would reduce the cash available for distribution by the
Company to its stockholders. In addition, if the Company fails to qualify as a
REIT, all distributions to stockholders will be taxable as ordinary income, to
the extent of the Company's current and accumulated earnings and profits, and,
subject to certain limitations of the Code, corporate distributees may be
eligible for the dividends received deduction. Unless entitled to relief under
specific statutory provisions, the Company will also be disqualified from
taxation as a REIT for the four taxable years following the year during which
qualification was lost. It is not possible to state whether in all circumstances
the Company would be entitled to such statutory relief. In addition, President
Clinton's 1999 Federal Budget Proposal contains a provision which, if enacted in
its present form, would result in the immediate taxation of all gain inherent in
a C corporation's assets upon an election by the corporation to become a REIT in
taxable years beginning after January 1, 1999, and thus could effectively
preclude the Company from re-electing to be taxed as a REIT following a loss of
REIT status.
CONSEQUENCES OF THE FORMATION TRANSACTIONS ON THE COMPANY'S QUALIFICATION AS A
REIT--EARNINGS AND PROFITS DISTRIBUTION REQUIREMENT
A REIT is not permitted to have accumulated earnings and profits
attributable to non-REIT years. A REIT has until the close of its first taxable
year in which it has non-REIT earnings and profits to distribute all such
earnings and profits (the "E&P Distribution Rule"). Failure to do so would
result in the loss of the Company's REIT status. See "--Failure to Qualify." As
part of the transactions consummated in connection with the Company's formation
and IPO in August 1997 (the "Formation Transactions"), the Company may have
acquired earnings and profits attributable to non-REIT years from certain of
PPD's wholly-owned subsidiaries. While not free from doubt, the Company
believes, and intends to take the position, that the earnings and profits of the
PPD subsidiaries remained with the PPD affiliated group and were not acquired by
the Company in the Formation Transactions. For purposes of applying the E&P
Distribution Rule, however, the Company has assumed that the earnings and
profits of the PPD subsidiaries (the "PPD Earnings") did carry over to the
Company and therefore the Company had distributed (or had been deemed to have
distributed) any such earnings and profits prior to the end of 1997 (the year in
which the Formation Transactions occurred) in order to avoid REIT
disqualification for 1997. The calculation of the amount of PPD Earnings, and
whether the PPD Earnings were acquired by the Company in the Formation
Transactions and thereafter distributed, are subject to challenge by the IRS.
However, even if the IRS should challenge such items the Company believes that
it did not have earnings and profits attributable to non-REIT years as of the
close of 1997 and therefore that the Company qualified as a REIT for 1997. See
"--Failure to Qualify."
TAX RISKS ASSOCIATED WITH PARTNERSHIPS
The Company currently owns interests in several partnerships, and may
own interests in additional partnerships in the future. The ownership of an
interest in a partnership involves special tax risks, including the possible
challenge by the IRS of (i) allocations of income and expense items, which could
affect the computation of taxable income of the Company, and (ii) the status of
a partnership as a partnership (as opposed to an association taxable as a
corporation) for federal income tax purposes. This partnership status risk
should be substantially diminished by Treasury Regulations that were issued on
December 17, 1996 and which are effective January 1, 1997. With respect to the
Company's existing partnership investments, these regulations provide that (1)
previously claimed partnership status, if supported by a reasonable basis for
classification, will generally be respected for all periods prior to January 1,
1997; and (2) previously claimed partnership status will generally be retained
after January 1, 1997, unless an entity elects to change its status by filing a
formal election. The Company believes that it has a reasonable basis for the
classification of the partnerships in which it owns interests as partnerships
for federal income tax purposes and has neither filed nor caused to be filed,
nor will it file (or cause to be filed), an election to
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<PAGE> 44
be treated otherwise. If a partnership elected to be treated as, or was
otherwise deemed to be, an association taxable as a corporation for federal
income tax purposes, it would be treated as a taxable entity. In such a
situation, if the Company owned more than 10% of the outstanding voting
securities of such partnership, or if the value of such securities exceeded 5%
of the value of the Company's assets, the Company would fail to satisfy the
asset tests described above, and would therefore fail to qualify as a REIT.
Further, distributions from such partnership to the Company would be treated as
dividends that are not taken into account in satisfying the 75% gross income
test described above, which would make it more difficult for the Company to
satisfy that test. Moreover, the interest in any such partnership held by the
Company would not qualify as a "real estate asset," which would make it more
difficult for the Company to meet 75% asset test described above. In addition,
the Company would not be able to deduct its share of any losses generated by
such a partnership in computing its taxable income, which might adversely affect
the Company's ability to comply with the REIT distribution requirements. See
"--Failure to Qualify" for a discussion of the effect of the Company's failure
to meet any one or more of these tests for a taxable year.
The Company believes that the partnerships in which it owns interests
have been and will continue to be treated as a partnerships (rather than as
associations taxable as corporations) for federal income tax purposes. The
Company's position in this respect is not binding on the IRS and no assurance
can be given that the IRS will not successfully challenge the status of any
partnership as a partnership for federal income tax purposes.
RECENTLY PROPOSED LEGISLATION
As set forth above, PPD, which is a wholly-owned subsidiary of Revenue
Properties, currently holds in excess of 50% of the voting power and value of
the stock of the Company. President Clinton's 1999 Federal Budget Proposal
contains language which, if enacted in its present form, would impose as an
additional requirement for REIT qualification that no person (defined to include
certain entities such as corporations) be permitted to own stock possessing more
than 50 percent of the total combined voting power of all classes of voting
stock or more than 50 percent of the total value of shares of all classes of
stock. It is not possible to predict with certainty whether this portion of the
President's Budget Proposal will ultimately be enacted into law, the character
and details of the provisions which would be included in any legislation so
enacted and whether and to what extent such legislation would affect the Company
and the stockholders or whether any such effect would be adverse. Depending upon
the final language of any legislation actually enacted, it is possible that PPD
could be required to dispose of a sufficient number of shares of Common Stock to
preserve the Company's status as a REIT, or, pursuant to the Company's Charter,
such shares would be transferred to a trust for the benefit of a charitable
beneficiary. See "Description of Capital Stock--Restrictions on Ownership and
Transfer."
OTHER TAX CONSEQUENCES
As discussed above, the Company acquired a number of properties through
the merger of the Merger Subsidiaries with and into the Company or the QRSs.
These transactions were intended to qualify as tax free reorganizations under
the Code. One consequence of having acquired such properties in this manner is
that the initial tax basis of the Company in the properties is equal to the tax
basis the Merger Subsidiaries had in the properties. As a result, the Company's
initial tax basis in such properties was less than the fair market value of the
properties at the time of acquisition. The lower tax basis reduces the amount of
depreciation deductions the Company is permitted to take, and will increase the
amount of taxable gain (or reduce the amount of tax loss) recognized by the
Company on the disposition of such properties. In addition, any net operating
losses of such Merger Subsidiaries carried over to the Company and, subject to
certain limitations, are available to the Company to offset the taxable income,
if any, of the Company. As a result, any such net operating losses could reduce
the amount of distributions to stockholders which the Company is required to
make.
The Company may be subject to state or local taxation in various state
or local jurisdictions, including those in which it transacts business or
resides. The state and local tax treatment of the Company may not conform to the
federal income tax consequences discussed above. Consequently, prospective
stockholders should consult their own tax advisors regarding the effect of state
and local tax laws on an investment in the Company.
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PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to one or more underwriters
for public offering and sale by them or may sell the Offered Securities to
investors directly or through agents, which agents may be affiliated with the
Company. Any such underwriter or agent involved in the offer and sale of the
Offered Securities will be named in the applicable Prospectus Supplement.
Sales of Offered Securities offered pursuant to any applicable
Prospectus Supplement may be effected from time to time in one or more
transactions 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.
The Company also may, from time to time, authorize underwriters acting as the
Company's agents to offer and sell the Offered Securities upon the terms and
conditions as set forth in the applicable Prospectus Supplement. In connection
with the sale of Offered Securities, underwriters may be deemed to have received
compensation from the Company in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Offered
Securities for whom they may act as agent. Underwriters may sell Offered
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or
agents in connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Offered Securities may be
deemed to be underwriters, and any discounts and commissions received by them
and any profit realized by them on resale of the Offered Securities may be
deemed to be underwriting discounts and commissions under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements entered into
with the Company, to indemnification against and contribution toward certain
civil liabilities, including liabilities under the Securities Act. Any such
indemnification agreements will be described in the applicable Prospectus
Supplement.
Unless otherwise specified in the related Prospectus Supplement, each
series of Offered Securities will be a new issue with no established trading
market, other than the Common Stock which is listed on the New York Stock
Exchange. Any shares of Common Stock sold pursuant to a Prospectus Supplement
may be listed on such exchange, subject to official notice of issuance. The
Company may elect to list any other series of Preferred Stock and any series of
Debt Securities, Depository Shares or Warrants on any exchange, but neither is
obligated to do so. It is possible that one or more underwriters may make a
market in a series of Offered Securities, but will not be obligated to do so and
may discontinue any market making at any time without notice. Therefore, no
assurance can be given as to the liquidity of the trading market for the Offered
Securities.
If so indicated in the applicable Prospectus Supplement, the Company
may authorize dealers acting as the Company's agents to solicit offers by
certain institutions to purchase Offered Securities from the Company Partnership
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 Offered
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, as the case may be. Contracts will not be
subject to any conditions except (i) the purchase by an institution of the
Offered Securities covered by its Contracts shall not at the time of delivery be
prohibited under the laws of any jurisdiction in the United States to which such
institution is subject, and (ii) if the Offered Securities are being sold to
underwriters, the Company, as the case may be, shall have sold to such
underwriters the total principal amount of the Offered Securities less the
principal amount thereof covered by Contracts.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for, the Company in the
ordinary course of business.
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LEGAL MATTERS
The validity of the Debt Securities offered hereby will be passed upon
for the Company by Latham & Watkins, and the validity of the Common Stock,
Preferred Stock, Depositary Shares and Warrants offered hereby will be passed
upon for the Company by Ballard Spahr Andrews & Ingersoll, LLP, Baltimore,
Maryland.
In addition, the description of federal income tax consequences
contained in this Prospectus under the heading "Certain Federal Income Tax
Consequences to the Company of its REIT Election" is based upon the opinion of
Latham & Watkins. Latham & Watkins will rely upon the opinion of Ballard Spahr
Andrews & Ingersoll, LLP, as to certain matters of Maryland law.
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PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses, other than underwriting discounts and commissions, in
connection with the offering of the securities being registered are set forth
below. All of such expenses are estimates, except the Securities Act
registration fee.
<TABLE>
<S> <C>
Registration Fee - Securities and Exchange Commission ......... $ 118,000
NASD Fee ...................................................... *
New York Stock Exchange Listing Fee ........................... *
Transfer Agent and Registrar's Fees ........................... *
Printing and Engraving Expenses ............................... *
Legal Fees and Expenses (other than Blue Sky) ................. *
Accounting Fees and Expenses .................................. *
Blue Sky Fees and Expenses .................................... *
Trustee Fees and Expenses ..................................... *
Fees of Rating Agencies ....................................... *
Miscellaneous Expenses ........................................ *
-----------
Total ..................................................... $
===========
</TABLE>
- ---------------------
* To be completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The MGCL permits a Maryland corporation to include in its charter a
provision limiting the liability of its directors and officers to the
corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
final judgment as being material to the cause of action. The Charter contains
such a provision which eliminates such liability to the maximum extent permitted
by Maryland law.
The Charter of the Company authorizes it, to the maximum extent
permitted by Maryland law, to obligate itself to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any present or former director or officer or (b) any individual who, while a
director of the Company and at the request of the Company, serves or has served
another corporation, real estate investment trust, partnership, joint venture,
trust, employee benefit plan or any other enterprise as a director, officer,
partner or trustee of such corporation, real estate investment trust,
partnership, joint venture, trust, employee benefit plan or other enterprise
from and against any claim or liability to which such person may incur by reason
of his or her stature as a present or former stockholder, director or officer of
the Company. The Bylaws of the Company obligate it, to the maximum extent
permitted by Maryland law, to indemnify and to pay or reimburse reasonable
expenses in advance of final disposition of a proceeding to (a) any present or
former director or officer who is made a party to the proceeding by reason of
his service in that capacity or (b) any individual who, while a director of the
Company and at the request of the Company, serves or has served another
corporation, real estate investment trust, partnership, joint venture, trust,
employee benefit plan or any other enterprise as a director, officer, partner or
trustee of such corporation, real estate investment trust, partnership, joint
venture, trust, employee benefit plan or other enterprise and who is made party
to the proceeding by reason of his service in that capacity against any claim or
liability to which he may become subject by reason of such service. The Charter
and Bylaws also permit the Company to indemnify and advance expenses to any
person who served a predecessor of the Company in any of the capacities
described above and to any employee or agent of the Company or a predecessor of
the Company.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Company's Charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties,
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<PAGE> 48
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or omission of the director or officer was material to the matter giving
rise to the proceeding and (i) was committed in bad faith or (ii) was the result
of active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services, or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the MGCL permits a
corporation to advance reasonable expenses to a director or officer upon the
corporation's receipt of (a) a written affirmation by the director or officer of
his good faith belief that he has met the standard of conduct necessary for
indemnification by the Company as authorized by the Bylaws and (b) a written
undertaking by him or on his behalf to repay the amount paid or reimbursed by
the corporation if it shall ultimately be determined that the standard of
conduct was not met.
The inclusion of the above provisions in the Charter and Bylaws may
have the effect of reducing the likelihood of stockholder derivative suits
against directors and may discourage or deter shareholders or management from
bringing a lawsuit against directors for breach of their duty of care, even
though such an action, if successful, might otherwise have benefitted the
Company and its stockholders.
The Company has entered into indemnification agreements with each of
its executive officers and directors. The indemnification agreements require,
among other matters, that the Company indemnify its executive officers and
directors to the fullest extent permitted by law and advance to the executive
officers and directors all related expenses, subject to reimbursement if it is
subsequently determined that indemnification is not permitted. Under the
indemnification agreements, the Company must also indemnify and advance all
expenses incurred by executive officers and directors seeking to enforce their
rights under the indemnification agreements and may cover executive officers and
directors under the Company's directors' and officers' liability insurance.
Although the form of indemnification agreement offers substantially the same
scope of coverage afforded by law, it provides greater assurance to directors
and executive officers that indemnification will be available, because, as a
contract, it cannot be modified unilaterally in the future by the Board of
Directors or the stockholders to eliminate the rights it provides.
ITEM 16. EXHIBITS
1.1* Form of Underwriting Agreement between the Company and the
Representatives
1.2* Form of Debt Underwriting Agreement
4.1* Form of Indenture
4.2* Form of Warrant Agreement
4.3* Form of Deposit Agreement
5.1* Opinion of Ballard Spahr Andrews & Ingersoll, LLP
regarding the validity of the securities being registered
8.1* Opinion of Latham & Watkins regarding tax matters
12.1* Calculation of Ratio of Earnings to Fixed Charges
23.1* Consent of KPMG Peat Marwick LLP
23.2* Consent of Ballard Spahr Andrews & Ingersoll, LLP
(contained in Exhibit 5.1)
II-2
<PAGE> 49
23.3* Consent of Latham & Watkins (contained in Exhibit 8.1)
24.1 Power of Attorney (included on signature page to the
Registration Statement)
25.1* Statement of Eligibility of Trustee
---------------------
*To be filed by amendment or incorporated by reference in connection
with the offering of the applicable Offered Securities.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 15 above, or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering price may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate the
changes in volume and price represent no more than 20 percent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this registration
statement or any material change to such information in this
registration statement;
Provided, however, that subparagraphs (i) and (ii) do not
apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in the periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in
this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-3
<PAGE> 50
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The undersigned Registrant hereby further undertakes that, for the
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual reports pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in this registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned Registrant hereby further undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom the prospectus
is sent or given, the latest annual report to security holders that is
incorporated by reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act;
and, where interim financial information required to be presented by Article 3
of Regulation S-X is not set forth in the Prospectus, to deliver, or cause to be
delivered to each person to whom the prospectus is sent or given, the latest
quarterly report that is specifically incorporated by reference in the
prospectus to provide such interim financial information.
The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance under Rule 430A and contained in a form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4), or
497(h) under the Securities Act of 1933 shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
If and when applicable, the undersigned Registrant, hereby further
undertakes to file an application for the purpose of determining the eligibility
of the Trustee to act under subsection (a) of Section 310 of the Trust Indenture
Act in accordance with the rules and regulations prescribed by the Commission
under Section 305(b)(2) of the Act.
II-4
<PAGE> 51
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Vista, State of California, on the eighteenth day of
September, 1998.
PAN PACIFIC RETAIL PROPERTIES, INC.
By: /s/ STUART A. TANZ
-------------------------------------
Stuart A. Tanz
Chief Executive Officer and President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Stuart A. Tanz or David L. Adlard
or any one of them, his attorneys-in-fact and agents, each with full power of
substitution and resubstitution for him in any and all capacities, to sign any
or all amendments or post-effective amendments to this Registration Statement or
any related registration statement prepared in accordance with Rule 462 of the
Securities Act of 1933, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto each of such attorneys-in-fact and agents full power and authority
to do and perform each and every act and thing requisite and necessary in
connection with such matters and hereby ratifying and confirming all that each
of such attorneys-in-fact and agents or his or her substitutes may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated on September 18, 1998.
<TABLE>
<CAPTION>
Title
-----
<S> <C>
/s/STUART A. TANZ Director, Chief Executive Officer and President
- ----------------------------------------
Stuart A. Tanz
/s/DAVID L. ADLARD Executive Vice President, Chief Financial Officer,
- ---------------------------------------- Treasurer and Secretary
David L. Adlard
/s/LAURIE A. SNEVE Vice President and Controller
- ----------------------------------------
Laurie A. Sneve
/s/PAUL D. CAMPBELL Director
- ----------------------------------------
Paul D. Campbell
/s/MARK J. RIEDY Director
- ----------------------------------------
Mark J. Riedy
/s/BERNARD M. FELDMAN Director
- ----------------------------------------
Bernard M. Feldman
/s/MELVIN S. ADESS Director
- ----------------------------------------
Melvin S. Adess
</TABLE>
II-5
<PAGE> 52
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
- ------- ----
<S> <C> <C>
1.1* Form of Underwriting Agreement between the Company and the Representatives
1.2* Form of Debt Underwriting Agreement
4.1* Form of Indenture
4.2* Form of Warrant Agreement
4.3* Form of Deposit Agreement
5.1* Opinion of Ballard Spahr Andrews & Ingersoll, LLP regarding the validity of the securities being
registered
8.1* Opinion of Latham & Watkins regarding tax matters
12.1* Calculation of Ratio of Earnings to Fixed Charges
23.1* Consent of KPMG Peat Marwick LLP
23.2* Consent of Ballard Spahr Andrews & Ingersoll, LLP (contained in Exhibit 5.1)
23.3* Consent of Latham & Watkins (contained in Exhibit 8.1)
24.1 Power of Attorney (included on signature page to the Registration Statement)
25.1* Statement of Eligibility of Trustee
</TABLE>
- -----------------
* To be filed by amendment or incorporated by reference in connection with the
offering of the applicable Offered Securities.
