<PAGE> 1
Filed pursuant to Rule 424(b)5
Registration No: 33-59215
PROSPECTUS SUPPLEMENT TO PROSPECTUS DATED JUNE 1, 1995
$200,000,000
[MEDITRUST LOGO]
MEDIUM-TERM NOTES
DUE FROM 9 MONTHS TO 30 YEARS FROM DATE OF ISSUE
-------------------
Meditrust, a Massachusetts business trust, may offer from time to time its
Medium-Term Notes due from nine months to 30 years from the date of issue, as
selected by the purchaser and agreed to by the Company at an aggregate initial
public offering price not to exceed $200,000,000.
The Notes will be denominated in U.S. dollars. The principal amount payable
at maturity, or the amount of interest payable on any interest payment date with
respect to the Notes may be determined by the relationship between a specified
currency and another currency, by the difference in price of a specified
commodity on certain dates, or by some other index. The specific index (if any),
interest rate or rates (if any), issue price and maturity date of any Note will
be set forth in the related Pricing Supplement to this Prospectus Supplement.
Unless otherwise specified in the applicable Pricing Supplement, interest on
the Fixed Rate Notes will be payable on each March 1 and September 1 and at
maturity or redemption or repayment, if any. Interest on the Floating Rate Notes
will be payable on the dates specified therein and in the applicable Pricing
Supplement. Interest on the Floating Rate Notes may be determined by reference
to the Commercial Paper Rate, Prime Rate, LIBOR, Treasury Rate, CMT Rate,
Certificate of Deposit Rate or Federal Funds Rate, as adjusted by the Spread or
Spread Multiplier, if any. Notes may also be issued with original issue
discount, and such Notes may or may not bear interest.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. If provided in the applicable Pricing
Supplement, the Notes may be subject to redemption, in whole or in part, prior
to their Stated Maturity at the option of the Company, or through operation of a
sinking fund or analogous provisions. Unless otherwise specified in the
applicable Pricing Supplement, the redemption price shall equal the sum of (i)
the principal amount of the Notes being redeemed plus accrued interest thereon
to the redemption date and (ii) with respect to Fixed Rate Notes, the Make-Whole
Amount (as defined herein), if any. If provided in an applicable Pricing
Supplement, the Notes will be subject to repayment, in whole or in part, prior
to their stated maturity at the option of the Holders thereof in accordance with
the terms of such Notes on their respective optional repayment dates, if any.
Unless otherwise specified in the applicable Pricing Supplement, the Notes
offered hereby will be issued only in global form in minimum denominations of
$1,000. A global Note representing Book-Entry Notes will be registered in the
name of the nominee of The Depository Trust Company, which will act as
Depositary. Interests in Book-Entry Notes will be shown on, and transfers
thereof will be effected only through records maintained by the Depositary and
its participants. Except as described herein under "Description of
Notes -- Book-Entry Notes", owners of beneficial interests in a global Note will
not be considered the Holders thereof and will not be entitled to receive
physical delivery of Notes in definitive form, and no global note will be
exchangeable except for another global Note of like denomination and terms to be
registered in the name of the Depositary or its nominee. See "Description of
Notes".
-------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
-------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
-------------------
<TABLE>
<CAPTION>
PRICE TO AGENTS' PROCEEDS TO
PUBLIC (1) COMMISSIONS(2) COMPANY(2)(3)
------------ ---------------------- ----------------------------
<S> <C> <C> <C>
Per Note..................................... 100% 0.125% to 0.750% 99.875% to 99.250%
Total........................................ $200,000,000 $250,000 to $1,500,000 $199,750,000 to $198,500,000
<FN>
- ---------------
(1) Unless otherwise specified in an applicable Pricing Supplement, the Notes
will be issued at 100% of their principal amount.
(2) The Company will pay the Agents a commission of from 0.125% to 0.750%,
depending on maturity, of the principal amount of any Notes sold through
them as agents (or sold to such Agents as principal in circumstances in
which no other discount is agreed). The Company has agreed to indemnify the
Agents against certain liabilities, including liabilities under the
Securities Act of 1933. See "Supplemental Plan of Distribution".
(3) Before deducting expenses payable by the Company estimated at $125,000,
including expenses of the Agents to be reimbursed by the Company.
-------------------
</TABLE>
Offers to purchase Notes are being solicited, on a reasonable efforts basis,
from time to time by the Agents on behalf of the Company. Notes may be sold to
the Agents on their own behalf at negotiated discounts. The Company reserves the
right to sell Notes directly on its own behalf. The Company also reserves the
right to withdraw, cancel or modify the offering contemplated hereby without
notice. The Company or the Agents may reject any order as a whole or in part.
See "Supplemental Plan of Distribution".
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
NATWEST CAPITAL MARKETS LIMITED
SMITH BARNEY INC.
-------------------
The date of this Prospectus Supplement is August 10, 1995.
<PAGE> 2
[CHARTS GO HERE SEE APPENDIX FOR DESCRIPTION OF THE CHARTS AND
GRAPHS THAT APPEAR ON THIS PAGE]
IN CONNECTION WITH THE DISTRIBUTION OF THE NOTES, THE AGENTS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS IN THE NOTES WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE NOTES AT LEVELS OTHER THAN THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus its
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1995 and its
Current Report on Form 8-K dated July 13, 1995, which shall be deemed to be a
part hereof.
THE COMPANY
Meditrust, established in 1985, is the largest dedicated health care real
estate investment trust in the United States, based on its gross real estate
investments of $1.7 billion as of June 30, 1995. The Company invests in high
quality health care facilities that are managed by experienced operators and
attempts to achieve diversity in its property portfolio by sector of the health
care industry, geographic location, operator and form of investment.
As of June 30, 1995, the Company had investments in 285 facilities,
consisting of 240 long-term care facilities, 23 rehabilitation hospitals, six
psychiatric hospitals, five retirement living facilities, two alcohol and
substance abuse facilities, eight medical office buildings and one acute care
hospital. The properties are located in 34 different states and are operated by
33 health care companies. Of the 33 different operators, seven are, or are owned
by, publicly-traded companies (Sun Healthcare Group, Inc., Continental Medical
Systems, Inc. (a subsidiary of Horizon Healthcare Corp.), Geriatric and Medical
Centers, Inc., OrNda Healthcorp., Integrated Health Services, Inc., HealthSouth
Corporation and Mariner Health Group, Inc.), and constitute 44% of the Company's
gross real estate investments.
During the first six months of 1995, the Company committed $243 million to
new real estate investments, of which $172 million was funded. Of these amounts,
$126 million was committed and $55 million was funded during the quarter ended
June 30, 1995.
The Company's real estate investments are either owned by the Company or
secured by a mortgage lien. As of June 30, 1995, permanent mortgage loans
constituted 56%, sale/leaseback transactions constituted 40%, and development
mortgage financing constituted 4% of the Company's portfolio as measured by
gross real estate investments. The leases and mortgages provide for rental or
interest rates which generally range from 9.5% to 13.5% per annum of the
acquisition price or mortgage amount. The leases and mortgages generally provide
for an initial term of 10 years, with the leases having one or more five-year
renewal options. The leases and mortgages also provide for either additional
rent and interest, which are generally based upon a percentage of increased
revenues over specific base period revenues of the related properties, or fixed
increases in rent or interest payments.
In addition, the Company usually obtains guarantees from the parent
corporation, if any, of the operator or affiliates or individual principals of
the operator. Many obligations are backed by letters of credit or pledges of
certificates of deposit which cover from three to twelve months of lease or
mortgage payments. In addition, the Company's permanent and development mortgage
loans and leases generally are cross-defaulted and where appropriate
cross-collateralized with other mortgage and development loans, leases or other
agreements between the Company and the same operator or any affiliated
operators. With respect to development mortgage loans, the Company generally
requires guaranteed maximum price construction contracts, performance completion
bonds or guarantees. The Company enters into a development mortgage loan when
the Company will also be the permanent owner or mortgage lender.
In making its investment decisions, the Company reviews, among other
criteria, the operational viability of the facility, the experience and
competency of the operator and the financial strength of the guarantor. From
time to time, the Company enters into transactions with related parties. As of
June 30, 1995, the Company had total commitments of $101 million, of which $37
million was funded, to companies in which Abraham D. Gosman, the Company's Chief
Executive Officer, has an ownership interest. The Company expects to enter into
additional transactions with related parties in
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<PAGE> 4
the future. All of the terms and conditions of such transactions are subject to
approval by the independent Trustees of the Company. The Board of Trustees
believes that the terms of the transactions which the Company has entered into
with related parties are not less favorable to the Company than those prevailing
at the time for comparable transactions with unrelated persons.
The Company was organized to qualify, and intends to continue to operate,
as a real estate investment trust in accordance with Federal tax laws and
regulations. So long as the Company so complies, with limited exceptions, the
Company will not be taxed under Federal income tax laws on that portion of its
taxable income that it distributes to its shareholders. The Company has
distributed, and intends to continue to distribute, substantially all of its
real estate investment trust taxable income to shareholders.
In order to meet its ongoing capital requirements for additional
investments, the Company may raise additional capital through the sale of
Shares, Debt Securities, Share Warrants or Debt Securities Warrants, or draw
against its revolving bank lines of credit.
The Company is a self-administered real estate investment trust, with its
principal executive offices at 197 First Avenue, Needham Heights, Massachusetts
02194. Its telephone number is (617) 433-6000.
HEALTH CARE REFORM AND REGULATION
Many of the operators with which the Company does business rely on
government reimbursement, primarily Medicare and Medicaid, for a significant
portion of their operating revenues. During a recent session of the United
States Congress, there was active consideration of various proposals for
national health care reform, including the administration's proposal to cap
national health care spending and the future growth of Medicare and Medicaid
funding. No such legislation was passed during the 1994 session of Congress.
Such legislation may be reintroduced during current or future sessions of
Congress, although it is not possible to predict whether and when health care
reform legislation will be passed by Congress and, if passed, what features such
legislation will contain or the effect it may have on the nursing home, assisted
living care or rehabilitation care industries, the reimbursements levels
available to health care providers or on the health care industry in general.
From time to time, Medicaid, Medicare and other governmental payers have
reviewed the billing practices of many health care facilities operators
including certain of the operators with which the Company does business. It is
unclear what impact such reviews may have on these operators. The Company does
not believe, however, that any adverse findings against these operators would
materially affect the Company's financial position.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Notes
offered hereby for general business purposes, including investments in
additional health care facilities and the repayment of indebtedness under the
Company's revolving bank lines of credit. Such indebtedness bears interest at
the lenders' respective prime rates or LIBOR plus 1.00% per annum and matures on
June 30, 1997.
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<PAGE> 5
<TABLE>
MANAGEMENT
The Company's officers have significant experience in the health care
field, and a majority of them have been part of the Company's management team
for over eight years. The officers and trustees of the Company are:
<CAPTION>
NAME AGE OFFICE
---- ---- ------
<S> <C> <C>
66 Chief Executive Officer; Trustee
Abraham D. Gosman..........
46 President; Trustee
David F. Benson............
38 Chief Operating Officer
Michael F. Bushee..........
38 Senior Vice President, Secretary and Corporate Counsel
Michael S. Benjamin........
31 Vice President and Treasurer
Lisa P. McAlister..........
58 Vice President
Stephen H. Press...........
54 Controller
Keith E. Grant.............
75 Trustee; Partner, O'Connor & Hannan, Washington, DC
Edward W. Brooke...........
76 Trustee; Executive Vice President, W.R. Grace & Co.
Hugh L. Carey..............
70 Trustee; President, Sheldon Corporation, Lexington, MA
Robert Cataldo.............
77 Trustee; Principal, Philip L. Lowe and Associates, Boston, MA
Philip L. Lowe.............
53 Trustee; Principal, Nationwide Financial Corp., Far Hills, NJ
Thomas J. Magovern.........
66 Trustee; Chief Executive Officer, Delta Life Corp., Memphis,
TN
Gerald Tsai, Jr............
60 Trustee; Consultant; Retired Officer of Chrysler, RJR Nabisco
and IBM
Frederick W. Zuckerman.....
</TABLE>
S-5
<PAGE> 6
<TABLE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company (i) as of June 30, 1995 and (ii) as adjusted to reflect (a) the sale on
July 26, 1995 of $125 million of 7.375% Notes due July 15, 2000 and $80 million
of 7.60% Notes due July 15, 2001 (the 7.375% Notes were priced at 99.82% to
yield 7.418% to the buyers and the 7.60% Notes were priced at 99.948% to yield
7.61% to the buyers), (b) the sale on July 31, 1995 of $43,334,000 principal
amount of 8.54% Series A Convertible Notes due May 1, 2000 and $51,666,000
principal amount of 8.56% Series B Convertible Senior Notes due May 1, 2002 to
certain institutional investors and (c) the application of the net proceeds of
approximately $296,600,000 from those offerings to repay indebtedness. As a
result of this prepayment, the Company replaced indebtedness bearing interest at
rates of 10% to 10.86% with indebtedness bearing interest at rates of 7.375% to
8.56%, incurred estimated prepayment penalties of approximately $33 million and
wrote off against earnings approximately $2 million of unamortized debt issuance
costs with respect to such indebtedness. The Company expects to account for the
prepayment penalties and write off as an extraordinary item in its statement of
income. The capitalization table should be read in conjunction with the
Company's financial statements and related notes incorporated by reference in
this Prospectus Supplement and the accompanying Prospectus.
<CAPTION>
JUNE 30, 1995
--------------------------
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Indebtedness and other liabilities:
7.375% Notes................................................. $ 0 $ 125,000
7.60% Notes.................................................. 0 80,000
8.54% Convertible notes...................................... 0 43,334
8.56% Convertible notes...................................... 0 51,666
Other senior unsecured notes payable......................... 275,000 0
Senior mortgage notes payable................................ 21,800 0
Bonds and mortgages payable.................................. 58,923 58,923
9% Convertible debentures.................................... 14,473 14,473
7% Convertible debentures.................................... 36,589 36,589
6.875% Convertible debentures................................ 86,250 86,250
7.5% Convertible debentures.................................. 90,000 90,000
Bank notes payable........................................... 75,000 75,000
Deferred income.............................................. 13,974 13,974
Accrued expenses and other liabilities....................... 40,233 40,233
Shareholders' equity:
Shares of beneficial interest without par value: unlimited
Shares authorized, 49,230,000 Shares issued and
Outstanding at 6/30/95, 49,230,000 Shares as adjusted...... 1,039,777 1,039,777
---------- ----------
Total capitalization............................... $1,752,019 $ 1,755,219
========== ==========
</TABLE>
S-6
<PAGE> 7
<TABLE>
SELECTED FINANCIAL DATA
The following table presents selected financial information with respect to
the Company for the five years ended December 31, 1994 and the six-month periods
ended June 30, 1994 and 1995. This financial information has been derived from
financial statements included in the Company's Annual Reports on Form 10-K and
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995
and should be read in conjunction with those financial statements and
accompanying footnotes.
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------------------------- --------------------
1990 1991 1992 1993 1994 1994 1995
-------- -------- ---------- ---------- ---------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues........................... $89,121 $112,910 $132,394 $150,375 $172,993 $83,373 $101,370
------- -------- -------- ------- ------- ------- --------
Expenses:
Interest expense................. 43,494 56,886 58,159 62,193 67,479 33,044 33,724
Depreciation and amortization.... 10,821 13,185 14,032 16,277 17,171 8,995 8,807
General and administrative
expenses....................... 5,824 4,930 8,845 8,269 7,883 4,621 3,727
------- -------- -------- -------- -------- ------- --------
Total expenses....................... 60,139 75,001 81,036 86,739 92,533 46,660 46,258
Net income before extraordinary
item............................... 28,982 37,909 51,358 63,636 80,460 36,713 55,112
Loss on prepayment of debt........... 3,684
------- -------- -------- -------- -------- ------- --------
Net Income........................... $28,982 $ 34,225 $ 51,358 $ 63,636 $ 80,460 $36,713 $ 55,112
======= ======== ======== ======== ======== ======= ========
OTHER DATA:
Shares of beneficial interest
(weighted average)............... 18,409 21,710 26,360 31,310 35,314 33,817 44,917
Cash flow from operating activities
available for distribution(1).... $44,110 $ 53,950 $ 67,942 $ 84,831 $100,513 $47,231 $ 65,751
PER SHARE:
Net income before extraordinary
item............................. $ 1.57 $ 1.75 $ 1.95 $ 2.03 $ 2.28 $ 1.09 $ 1.23
Net income......................... 1.57 1.58 1.95 2.03 2.28 1.09 1.23
Dividends paid(2).................. 2.33 2.38 2.46 2.54 2.62 1.30 1.34
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
---------------------------------------------------------- ----------
1990 1991 1992 1993 1994 1995
-------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Real estate investments, net....... $746,517 $842,518 $1,021,630 $1,214,308 $1,484,229 $1,631,579
Total assets....................... 821,741 928,254 1,094,941 1,310,401 1,595,130 1,744,611
Indebtedness....................... 512,010 463,695 606,585 658,245 765,752 650,627
Total liabilities.................. 548,378 500,736 663,458 724,606 824,983 704,834
Total shareholders' equity......... 273,363 427,518 431,483 585,795 770,147 1,039,777
<FN>
- ---------------
(1) Consists of net income plus depreciation, amortization of debt issuance
costs, provision for losses, loss on prepayment of debt, partnership
distributions in excess of income, and deferred income received in cash net
of amortization of deferred income, and less gain on sale of real estate and
mortgage prepayments.
(2) Dividends, used in this context, may include distributions in excess of
current or accumulated net income.
</TABLE>
<TABLE>
RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
YEAR ENDED DECEMBER 31, SIX-MONTH
----------------------------------------- PERIOD ENDED
1990 1991 1992 1993 1994 JUNE 30, 1995
----- ----- ----- ----- ----- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio.................................. 1.67 1.60 1.88 2.02 2.19 2.63
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges for
the years ended December 31, 1990, 1991, 1992, 1993 and 1994 and for the
six-month period ended June 30, 1995, net income has been added to interest
expense and that sum has been divided by such interest expense.
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<PAGE> 8
DESCRIPTION OF THE NOTES
The following description of the particular terms of the Notes offered
hereby supplements and, to the extent inconsistent therewith, replaces the
description of the general terms and provisions of the Debt Securities set forth
in the accompanying Prospectus, to which description reference is hereby made.
Unless different terms or additional terms are specified in the applicable
Pricing Supplement, the Notes will have the terms described below. References to
interest payments and interest related information do not apply to original
issue discount Notes which do not pay interest.
The Notes are to be issued as a series of Debt Securities under an
indenture dated as of July 26, 1995 between the Company and Fleet National Bank,
as trustee (the "Trustee"), a form of which has been filed as an exhibit to the
Registration Statement of which this Prospectus Supplement is a part and a
supplemental indenture dated as of August 10, 1995 (collectively, the
"Indenture"). The Trustee is the administrative agent under one of the Company's
revolving credit facilities and the trustee with respect to the Company's 7.60%
Notes, 7.375% Notes, 7% Convertible Debentures, 6.875% Convertible Debentures,
9% Convertible Debentures, 8.54% Convertible Notes and 8.56% Convertible Notes.
The following statements relating to the Notes and the Indenture are summaries
of certain provisions of the Notes and the Indenture and do not purport to be
complete, and where particular provisions of the Notes and of the Indenture are
referred to, such summaries are qualified in their entirety by reference to such
provisions. Capitalized terms used but not defined herein have the meanings
given to them in the Indenture or the Notes, as the case may be. The term "Debt
Securities," as used under this caption, refers to all securities issued and
issuable from time to time under the Indenture and includes the Notes.
GENERAL
The Notes to be issued under the Indenture will be unsecured and
unsubordinated obligations of the Company and will rank equally with all other
unsecured and unsubordinated indebtedness of the Company from time to time
outstanding. The Notes constitute a separate series for purposes of the
Indenture. The Indenture does not limit, other than through the operation of
applicable covenants, if any, the aggregate principal amount of Debt Securities
which may be issued thereunder and provides that the Debt Securities may be
issued in one or more series up to the aggregate principal amount which may be
authorized from time to time by the Company. The Company may, from time to time,
without the consent of the holders of the Notes, provide for the issuance of
Notes or other Debt Securities under the Indenture in addition to the
$200,000,000 aggregate initial offering price of Notes authorized as of the date
of this Prospectus Supplement.
The Notes are currently limited to $200,000,000 aggregate initial offering
price. The Notes will be offered on a continuing basis and will mature on a day
nine months or more from the date of issue, as selected by the purchaser and
agreed to by the Company. Each interest bearing Note will bear interest at
either (a) a fixed rate of interest ("Fixed Rate Notes"), or (b) a rate
determined by reference to the specified Base Rate or two or more specified Base
Rates, which may in either case be adjusted by a Spread and/or Spread Multiplier
(as defined herein) ("Floating Rate Notes"). Notes may be issued at significant
discounts from their principal amount payable at Stated Maturity (or on any
prior date on which the principal or an installment of principal of a Note
becomes due and payable, whether by the declaration of acceleration, call for
redemption at the option of the Company, repayment at the option of the holder
or otherwise) (each such date, a "Maturity") ("Original Issue Discount Notes")
and some Notes may not bear interest.
Interest rates, interest rate formulae and other variable terms of the
Notes are subject to change by the Company from time to time, but no such change
will affect any Note already issued or as to which an offer to purchase has been
accepted by the Company. Interest rates offered by the Company with respect to
the Notes may differ depending upon, among other things, the aggregate principal
amount of the Notes purchased in any single transaction.
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<PAGE> 9
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or definitive form (a "Definitive Note"), in denominations of $1,000 and
integral multiples thereof, unless otherwise specified in the applicable Pricing
Supplement. Book-Entry Notes may be transferred or exchanged only through a
participating member of The Depository Trust Company (or such other depositary
as is identified in an applicable Pricing Supplement) (the "Depositary"). See
"Book-Entry Notes". Registration of transfer of Definitive Notes will be made at
the Corporate Trust Office of the Trustee. No service charge will be made by the
Company, the Trustee or the Security Registrar for any such registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith (other than exchanges pursuant to the Indenture, not involving any
transfer).
Payments of principal of, and premium and interest, if any, on Book-Entry
Notes will be made by the Company through the Trustee to the Depositary. See
"Book-Entry Notes". In the case of Definitive Notes, payment of principal or
premium, if any, at the Maturity of each Definitive Note will be made in
immediately available funds upon presentation of the Definitive Note at the
Corporate Trust Office of the Trustee in Providence, Rhode Island, or at such
other place as the Company may designate. Payment of interest due at Maturity
will be made to the person to whom payment of the principal of the Definitive
Note shall be made. Payment of interest due on Definitive Notes other than at
Maturity will be made at the Corporate Trust Office of the Trustee or, at the
option of the Company, may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Note register.
Notwithstanding the foregoing, a holder of $10,000,000 or more in aggregate
principal amount of Definitive Notes having the same Interest Payment Dates (as
defined herein) will be entitled to receive interest payments (other than at
Maturity) by wire transfer of immediately available funds if appropriate wire
transfer instructions have been received in writing by the Trustee not less than
15 days prior to the applicable Interest Payment Date.
As used herein, "Business Day" means, unless otherwise specified in the
applicable Pricing Supplement, any day other than a Saturday or Sunday or any
other day on which banks in Providence, Rhode Island or Boston, Massachusetts
are generally authorized or obligated by law or executive order to close and,
with respect to Notes as to which LIBOR is an applicable Base Rate, is also a
London Business Day. As used herein, "London Business Day" means any day on
which dealings in deposits in United States dollars are transacted in the London
interbank market.
REDEMPTION
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. If provided in the applicable Pricing
Supplement, the Notes may be subject to redemption, in whole or in part, prior
to their stated Maturity at the option of the Company, or through operation of a
sinking fund or analogous provisions. Such Pricing Supplement will set forth the
terms of such redemption, including, but not limited to, the dates on which
redemption may be elected and the price (including premium, if any) at which
such Notes may be redeemed. Unless otherwise specified in the applicable Pricing
Supplement, the redemption price shall equal the sum of (i) the principal amount
of the Notes being redeemed plus accrued interest thereon to the redemption date
and (ii) with respect to Fixed Rate Notes, the Make-Whole Amount, if any, with
respect to such Notes (the "Redemption Price").
From and after notice has been given as provided in the Indenture, if funds
for the redemption of any Notes called for redemption shall have been made
available on such redemption date, such Notes will cease to bear interest on the
date fixed for such redemption specified in such notice and the only right of
the Holders of the Notes will be to receive payment of the Redemption Price.
Notice of any optional redemption of any Notes will be given to Holders at
their addresses, as shown in the Note register, not more than 60 nor less than
30 days prior to the date fixed for redemption. The notice of redemption will
specify, among other items, the Redemption Price and the principal amount of the
Notes held by such Holder to be redeemed.
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<PAGE> 10
The Company will notify the Trustee at least 60 days prior to the
redemption date (or such shorter period as satisfactory to the Trustee) of the
aggregate principal amount of Notes to be redeemed and the redemption date. If
less than all the Notes of any series are to be redeemed at the option of the
Company, the Trustee shall select, pro rata or by lot, Notes of such series to
be redeemed in whole or in part. Notes may be redeemed in part in the minimum
authorized denomination for Notes or in any integral multiple thereof.
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Note, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of any interest accrued to the date of redemption or accelerated payment) that
would have been payable in respect of such dollar if such redemption or
accelerated payment had not been made, determined by discounting, on a
semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Notes being redeemed or paid.
"Reinvestment Rate" means 0.25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities or, if such statistical release is
not published at the time of any determination under the Indenture, then such
other reasonably comparable index which shall be designated by the Company.
REPAYMENT
If provided in an applicable Pricing Supplement, the Notes will be subject
to repayment, in whole or in part, on a given day or days prior to their stated
Maturity at the option of the holders thereof in accordance with the terms of
such Notes on their respective optional repayment dates, if any, as agreed upon
by the Company and the purchasers thereof at the time of such sale (each, an
"Optional Repayment Date"). Such Pricing Supplement will set forth the terms of
such repayment, including, but not limited to, the dates on which repayment may
be effected and the price at which such Notes may be repaid. Unless otherwise
provided in the applicable Pricing Supplement, such Notes will be repaid upon
notice given not less than 30 nor more than 60 days prior to the related
Optional Repayment Date. If no Optional Repayment Date is indicated with respect
to a Note, such Note will not be repayable at the option of the holder thereof
prior to its stated Maturity.
COVENANTS
The Notes will not be secured by mortgage, pledge or other lien. The
Company will covenant in the Indenture not to pledge or otherwise subject to any
lien any property or assets of the Company or its subsidiaries unless the Notes
are secured by such pledge or lien equally and ratably with all other
obligations secured thereby so long as such obligations shall be so secured;
provided,
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however, that such covenant will not apply to liens securing obligations which
do not in the aggregate at any one time outstanding exceed 10% of Consolidated
Net Tangible Assets (as defined below) of the Company and its consolidated
subsidiaries and in addition will not apply to:
(1) Any lien or charge on any property, tangible or intangible, real
or personal, existing at the time of acquisition or construction of such
property (including acquisition through merger or consolidation) or given
to secure the payment of all or any part of the purchase or construction
price thereof or to secure any indebtedness incurred prior to, at the time
of, or within one year after, the acquisition or completion of construction
thereof for the purpose of financing all or any part of the purchase or
construction price thereof;
(2) Any liens securing the performance of any contract or undertaking
of the Company not directly or indirectly in connection with the borrowing
of money, obtaining of advances or credit or the securing of debts, if made
and continuing in the ordinary course of business;
(3) Any lien in favor of the United States or any state thereof or the
District of Columbia, or any agency, department or other instrumentality
thereof, to secure progress, advance, or other payments pursuant to any
contract or provision of any statute;
(4) Mechanics', materialmen's, carriers', or other like liens arising
in the ordinary course of business (including construction of facilities)
in respect of obligations which are not due or which are being contested in
good faith;
(5) Any lien arising by reason of deposits with, or the giving of any
form of security to, any governmental agency or any body created or
approved by law or governmental regulations, which is required by law or
governmental regulation as a condition to the transaction of any business,
or the exercise of any privilege, franchise or license;
(6) Any liens for taxes, assessments or governmental charges or levies
not yet delinquent, or liens for taxes, assessments or governmental charges
or levies already delinquent but the validity of which is being contested
in good faith;
(7) Liens (including judgment liens) arising in connection with legal
proceedings so long as such proceedings are being contested in good faith
and in the case of judgment liens, execution thereof is stayed;
(8) Liens relating to secured indebtedness of the Company outstanding
as of June 30, 1995; and
(9) Any extension, renewal or replacement (or successive extensions,
renewals or replacements), as a whole or in part, of any lien referred to
in the foregoing clauses (1) to (9) inclusive, provided, however, that the
amount of any and all obligations and indebtedness secured thereby shall
not exceed the amount thereof so secured immediately prior to the time of
such extension, renewal or replacement and that such extension, renewal or
replacement shall be limited to all or a part of the property which secured
the charge or lien so extended, renewed or replaced (plus improvements on
such property).
"Consolidated Net Tangible Assets" means the aggregate amount of assets
(less applicable reserves and other properly deductible items) less (i) all
current liabilities and (ii) all goodwill, trade names, trademarks, patents,
unamortized debt discount and expenses and other like intangibles of the Company
and its consolidated subsidiaries, all as set forth on the most recent balance
sheet of the Company and its consolidated subsidiaries prepared in accordance
with generally accepted accounting principles.
The Company also covenants in the Indenture that it will not create,
assume, incur, or otherwise become liable in respect of, any
(a) Senior Debt (as defined below) unless the aggregate outstanding
principal amount of Senior Debt of the Company will not, at the time of
such creation, assumption or incurrence and
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after giving effect thereto and to any concurrent transactions, exceed the
greater of (i) 150% of Capital Base (as defined below), or (ii) 225% of
Tangible Net Worth (as defined below); and
(b) Non-Recourse Debt (as defined below) unless the aggregate
outstanding principal amount of Senior Debt and Non-Recourse Debt of the
Company will not, at the time of such creation, assumption or incurrence
and after giving effect thereto and to any concurrent transactions, exceed
225% of Capital Base.
For the purposes of this limitation as to borrowing money, "Senior Debt"
means all Debt other than Non-Recourse Debt and Subordinated Debt; "Debt", with
respect to any Person, means (i) its indebtedness, secured or unsecured, for
borrowed money; (ii) Liabilities secured by any existing lien on property owned
by such Person; (iii) Capital Lease Obligations, and the present value of all
payments due under any arrangement for retention of title (discounted at a rate
per annum equal to the average interest borne by all outstanding Debt Securities
determined on a weighted average basis and compounded semi-annually) if such
arrangement is in substance an installment purchase or an arrangement for the
retention of title for security purposes; and (iv) guarantees of obligations of
the character specified in the foregoing clauses (i), (ii) and (iii), to the
full extent of the liability of the guarantor (discounted to present value, as
provided in the foregoing clause (iii), in the case of guarantees of title
retention arrangements); "Capital Lease" means at any time any lease of
property, real or personal, which, in accordance with generally accepted
accounting principles, would at such time be required to be capitalized on a
balance sheet of the lessee; "Capital Lease Obligation" means at any time the
amount of the liability in respect of a Capital Lease which, in accordance with
generally accepted accounting principles, would at such time be required to be
capitalized on a balance sheet of the lessee; "Person" means an individual,
partnership, corporation, joint venture, association, joint stock company,
trust, limited liability company, unincorporated organization, or a government
or agency or political subdivision thereof; "Non-Recourse Debt" with respect to
any Person, means any Debt secured by, and only by, property on or with respect
to which such Debt is incurred where the rights and remedies of the holder of
such Debt in the event of default do not extend to assets other than the
property constituting security therefor; "Subordinated Debt" means any unsecured
Debt of the Company which is issued or assumed pursuant to, or evidenced by, an
indenture or other instrument which contains provisions for the subordination of
such other Debt (to which appropriate reference shall be made in the instruments
evidencing such other Debt if not contained therein) to the Debt Securities
(and, at the option of the Company, if so provided, to other Debt of the
Company, either generally or as specifically designated); "Capital Base" means,
at any date, the sum of Tangible Net Worth and Subordinated Debt; "Tangible Net
Worth" means, at any date, the net book value (after deducting related
depreciation, obsolescence, amortization, valuation, and other proper reserves)
of the tangible assets of the Company at such date, minus the amount of its
Liabilities at such date; and "Liabilities" means, at any date, the items shown
as liabilities on the balance sheet of the Company, except any items of deferred
income, including capital gains.
INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement, each Note
will bear interest from the date of issue at the rate per annum or, in the case
of a Floating Rate Note, pursuant to the Base Rate or interest rate formula,
stated therein until the principal thereof is paid or made available for
payment. Unless otherwise specified in an applicable Pricing Supplement,
interest payments shall be the amount of interest accrued from and including the
next preceding Interest Payment Date in respect of which interest has been paid
(or from and including the date of issue if no interest has been paid with
respect to such Note), to but excluding the Interest Payment Date or Maturity
(an "Interest Accrual Period"), as the case may be.
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Interest will be payable in arrears on each date specified in the
applicable Pricing Supplement on which an installment of interest is due and
payable (each, an "Interest Payment Date") and at Maturity. Interest will be
payable to the person in whose name a Note is registered at the close of
business on the Regular Record Date next preceding each Interest Payment Date;
provided, however, that interest payable at Maturity will be payable to the
person to whom principal shall be payable. Unless otherwise specified in an
applicable Pricing Supplement, if the original issue date of a Note is between a
Regular Record Date and the related Interest Payment Date, the initial interest
payment will be made on the Interest Payment Date following the next succeeding
Regular Record Date to the registered holder on such next succeeding Regular
Record Date. Unless otherwise specified in the applicable Pricing Supplement,
the "Regular Record Date" will be the date 15 calendar days (whether or not a
Business Day) immediately preceding the related Interest Payment Date.
Fixed Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, interest
on Fixed Rate Notes will be payable semiannually on each March 1 and September 1
and at Maturity or redemption or repayment, if any. If any Interest Payment Date
or Maturity of a Fixed Rate Note falls on a day that is not a Business Day, the
related payment of principal, premium, if any, and interest will be made on the
next succeeding Business Day as if it were made on the date such payment was due
and no interest shall accrue on the amount so payable for the period from and
after such Interest Payment Date or Maturity, as the case may be. Unless
otherwise specified in an applicable Pricing Supplement, interest on each Fixed
Rate Note will be calculated on the basis of a 360-day year of twelve 30-day
months.
Floating Rate Notes
Unless otherwise specified in an applicable Pricing Supplement, Floating
Rate Notes will be issued as described below. Interest on Floating Rate Notes
will be determined by reference to a "Base Rate," which may be one or more of
(a) the Certificate of Deposit Rate, in which case such Note will be a
"Certificate of Deposit Rate Note;" (b) the Commercial Paper Rate, in which case
such Note will be a "Commercial Paper Rate Note;" (c) the CMT Rate, in which
case such Note will be a "CMT Rate Note"; (d) the Federal Funds Rate, in which
case such Note will be a "Federal Funds Rate Note;" (e) LIBOR, in which case
such Note will be a "LIBOR Note;" (f) the Prime Rate, in which case such Note
will be a "Prime Rate Note;" (g) the Treasury Rate, in which case such Note will
be a "Treasury Rate Note;" or (h) such other Base Rate or interest rate formula
as may be set forth in the applicable Pricing Supplement. In addition, a
Floating Rate Note may bear interest by reference to two or more Base Rates
determined in the same manner as the Base Rates are determined for the types of
Notes described above.
The applicable Pricing Supplement and the related Note will specify the
Base Rate or Rates and the Spread and/or Spread Multiplier, if any, and the
maximum or minimum interest rate limitation, if any, applicable to each Floating
Rate Note. In addition, such Pricing Supplement and the applicable Note will
define or particularize for each Floating Rate Note the following terms, if
applicable: Initial Interest Rate, Index Maturity, Interest Payment Dates,
Interest Reset Dates, Interest Rate Reset Period, Regular Record Dates, and
Calculation Agent (if other than Fleet National Bank).
The interest rate on each Floating Rate Note will be calculated by
reference to the specified Base Rate or two or more specified Base Rates, in
either case plus or minus the Spread, if any, and/or multiplied by the Spread
Multiplier, if any. The "Spread" is the number of basis points to be added to or
subtracted from the related Base Rate or Rates applicable, to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Base Rate or
Rates applicable to such Floating Rate Note by which such Base Rate or Rates
will be multiplied to determine the applicable interest rate on such Floating
Rate Note. The "Index Maturity" is the period to maturity of the instrument or
obligation with respect to which the related Base Rate or Rates is calculated.
The Spread, Spread Multiplier, Index Maturity and other variable terms of the
Floating Rate Notes are
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subject to change by the Company from time to time, but no such change will
affect any Floating Rate Note previously issued or as to which an offer has been
accepted by the Company.
Each applicable Pricing Supplement will specify whether the rate of
interest on each Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually, annually or such other period (each, an "Interest Reset
Period"), and the dates on which such interest rate will be reset (each, an
"Interest Reset Date"). Unless otherwise specified in an applicable Pricing
Supplement, the Interest Reset Date will be, in the case of Floating Rate Notes
which reset (a) daily, each Business Day; (b) weekly, the Wednesday of each week
(with the exception of weekly reset Treasury Rate Notes which will reset the
Tuesday of each week, except as specified below); (c) monthly, the third
Wednesday of each month; (d) quarterly, the third Wednesday of March, June,
September and December of each year, (e) semiannually, the third Wednesday of
each of the two months specified in the applicable Pricing Supplement; and (f)
annually, the third Wednesday of the month specified in the applicable Pricing
Supplement. If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Reset Date will be
postponed to the next succeeding Business Day, except that in the case of a
LIBOR Note (or a Note for which the interest rate is determined with reference
to LIBOR), if such Business Day is in the next succeeding calendar month, such
Interest Reset Date shall be the immediately preceding Business Day.
The interest rate applicable to each Interest Accrual Period commencing on
the Interest Reset Date applicable to such Interest Accrual Period will be the
rate determined on the applicable "Interest Determination Date." Unless
otherwise specified in an applicable Pricing Supplement, the Interest
Determination Date with respect to the Certificate of Deposit Rate, Commercial
Paper Rate, CMT Rate, Federal Funds Rate and the Prime Rate will be the second
Business Day preceding each Interest Reset Date for the related Note; and the
Interest Determination Date with respect to LIBOR will be the second London
Business Day preceding each Interest Reset Date. With respect to the Treasury
Rate, unless otherwise specified in an applicable Pricing Supplement, the
Interest Determination Date will be the day of the week in which the Interest
Reset Date falls on which Treasury Bills (as defined below) normally would be
auctioned (Treasury Bills are normally sold at auction on Monday of each week,
unless that day is a legal holiday, in which case the auction is normally held
on the following Tuesday, except that such auction may be held on the preceding
Friday); provided, however, that if as a result of a legal holiday an auction is
held on the Friday of the week preceding the related Interest Reset Date, the
related Interest Determination Date shall be such preceding Friday; and
provided, further, that if an auction shall fall on any Interest Reset Date,
then the related Interest Reset Date shall instead be the first Business Day
following such auction. The Interest Determination Date pertaining to a Floating
Rate Note, the interest rate of which is determined with reference to two or
more Base Rates, will be the latest Business Day which is at least two Business
Days prior to the Interest Reset Date for such Note on which each Base Rate is
determinable. Each Base Rate shall be determined and compared on such date, and
the applicable interest rate shall take effect on the related Interest Reset
Date.
A Floating Rate Note may also have either or both of the following: (a) a
maximum limit, or ceiling, on the rate of interest which may accrue during any
Interest Accrual Period, and (b) a minimum limit, or floor, on the rate of
interest which may accrue during any Interest Accrual Period. In addition to any
maximum interest rate that may be applicable to any Floating Rate Note pursuant
to the above provisions, the interest rate on Floating Rate Notes will in no
event be higher than the maximum rate permitted by Massachusetts law, as the
same may be modified by United States law of general application.
Except as provided below or in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes which reset (a) daily,
weekly or monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as specified in
the applicable Pricing Supplement; (b) quarterly, on the third Wednesday of
March, June, September and December of each year; (c) semiannually, on the third
Wednesday of each of the two months of each year specified in the applicable
Pricing Supplement; and (d) annually, on
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the third Wednesday of the month specified in the applicable Pricing Supplement
and, in each case, at Maturity.
If any Interest Payment Date (other than at Maturity) with respect to a
Floating Rate Note falls on a day that is not a Business Day, such Interest
Payment Date will be postponed to the following Business Day, except that, in
the case of a LIBOR Note (or a Note for which the interest rate is determined
with reference to LIBOR), if such Business Day is in the next succeeding
calendar month, such Interest Payment Date shall be the immediately preceding
Business Day. If the Maturity of a Floating Rate Note falls on a day that is not
a Business Day, the payment of principal, premium, if any, and interest will be
made on the next succeeding Business Day, and no interest on such payment shall
accrue for the period from and after such Maturity.
The interest rate in effect with respect to a Floating Rate Note on each
day that is not an Interest Reset Date will be the interest rate determined as
of the Interest Determination Date pertaining to the immediately preceding
Interest Reset Date and the interest rate in effect on any day that is an
Interest Reset Date will be the interest rate determined as of the Interest
Determination Date pertaining to such Interest Reset Date, subject in either
case to any maximum or minimum interest rate limitation referred to above;
provided, however, that the interest rate in effect with respect to a Floating
Rate Note for the period from the date of issue to the first Interest Reset Date
will be the Initial Interest Rate (as defined herein) specified in the
applicable Pricing Supplement and the related Note.
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its face amount by an accrued interest factor. Such accrued interest
factor is computed by adding the interest factor calculated for each day from
the date of issue, or from the last date to which interest has been paid, to the
date for which accrued interest is being calculated. Unless otherwise specified
in an applicable Pricing Supplement, the interest factor for each such day is
computed by dividing the interest rate applicable to such day by 360, in the
case of Certificate of Deposit Rate Notes, Commercial Paper Rate Notes, Federal
Funds Rate Notes, LIBOR Notes and Prime Rate Notes, or by the actual number of
days in the year in the case of Treasury Rate Notes and CMT Rate Notes. Unless
otherwise specified in the applicable Pricing Supplement, the interest factor
for Notes for which the interest rate is calculated with reference to the lowest
of two or more Base Rates will be calculated in each period in the same manner
as if only the lowest of the applicable Base Rates applied.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point with five
one-millionths of a percentage point rounded upwards (e.g., 7.654325% (or
.07654325) would be rounded to 7.65433% (or .0765433)), and all dollar amounts
used in or resulting from such calculation on Floating Rate Notes will be
rounded to the nearest cent (with one-half cent being rounded upward).
Unless otherwise specified in the applicable Pricing Supplement, Fleet
National Bank will be the "Calculation Agent". Upon the request of the holder of
any Floating Rate Note, the Calculation Agent will provide the interest rate
then in effect and, if determined, the interest rate that will become effective
as a result of a determination made for the next Interest Reset Date with
respect to such Floating Rate Note. Unless otherwise specified in an applicable
Pricing Supplement, the "Calculation Date", if applicable, pertaining to any
Interest Determination Date will be the earlier of (a) the tenth calendar day
after such Interest Determination Date, or, if any such day is not a Business
Day, the next succeeding Business Day or (b) the Business Day preceding the
applicable Interest Payment Date or the Maturity, as the case may be.
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The interest rate in effect with respect to a Floating Rate Note from the
date of issue to the first Interest Reset Date (the "Initial Interest Rate")
will be specified in the applicable Pricing Supplement. The interest rate for
each subsequent Interest Reset Date will be determined by the Calculation Agent
as follows:
Certificate of Deposit Rate. Certificate of Deposit Rate Notes will bear
interest at the interest rates (calculated with reference to the Certificate of
Deposit Rate and the Spread and/or Spread Multiplier, if any) specified in such
Certificate of Deposit Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement,
"Certificate of Deposit Rate" means, with respect to any Interest Determination
Date relating to a Certificate of Deposit Rate Note or any Interest
Determination Date for a Floating Rate Note for which the interest rate is
determined with reference to the Certificate of Deposit Rate (a "Certificate of
Deposit Rate Interest Determination Date"), the rate on such date for negotiable
certificates of deposit having the Index Maturity specified in the applicable
Pricing Supplement as published by the Board of Governors of the Federal Reserve
System in "Statistical Release H.15(519), Selected Interest Rates" or any
successor publication ("H.15(519)") under the heading "CDs (Secondary Market)".
In the event such rate is not published by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such Certificate of Deposit Rate Interest
Determination Date, then the Certificate of Deposit Rate will be the rate on
such Certificate of Deposit Rate Interest Determination Date for negotiable
certificates of deposit of the Index Maturity specified in the applicable
Pricing Supplement as published by the Federal Reserve Bank of New York in its
daily statistical release "Composite 3:30 P.M. Quotations for U.S. Government
Securities" or any successor publication ("Composite Quotations") under the
heading "Certificates of Deposit". If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on such
Calculation Date, then the Certificate of Deposit Rate on such Certificate of
Deposit Rate Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the secondary market offered rates as
of 10:00 A.M., New York City time, on such Certificate of Deposit Rate Interest
Determination Date, of three leading nonbank dealers in negotiable United States
dollar certificates of deposit in New York, New York (which may include one or
more of the Agents) selected by the Calculation Agent for negotiable
certificates of deposit of major United States money center banks in the market
for negotiable certificates of deposit with a remaining maturity closest to the
Index Maturity specified in the applicable Pricing Supplement in an amount that
is representative for a single transaction in that market at that time;
provided, however, that if the dealers selected as aforesaid by the Calculation
Agent are not quoting as mentioned in this sentence, the Certificate of Deposit
Rate in effect for the applicable period will be the Certificate of Deposit Rate
in effect on such Certificate of Deposit Rate Interest Determination Date.
CMT Rate. CMT Rate Notes will bear interest at the interest rates
(calculated with reference to the CMT Rate and the Spread and/or Spread
Multiplier, if any) specified in such CMT Rate Notes and in the applicable
Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "CMT Rate"
means, with respect to any Interest Determination Date relating to a Floating
Rate Note for which the interest rate is determined with reference to the CMT
Rate (a "CMT Rate Interest Determination Date"), the rate displayed on the
Designated CMT Telerate Page under the caption ". . . Treasury Constant
Maturities . . . Federal Reserve Board Release H.15 . . . Mondays Approximately
3:45 P.M.", under the column for the Designated CMT Maturity Index for (i) if
the Designated CMT Telerate Page is 7055, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
week, or the month, as applicable, ended immediately preceding the week in which
the related CMT Rate Interest Determination Date occurs. If such rate is no
longer displayed on the relevant page or is not displayed by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate for such CMT Rate
Interest Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index as published in the relevant H.15(519). If such
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rate is no longer published or is not published by 3:00 P.M., New York City
time, on the related Calculation Date, then the CMT Rate on such CMT Rate
Interest Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest Determination Date with
respect to such Interest Reset Date as may then be published by either the Board
of Governors of the Federal Reserve System or the United States Department of
the Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519). If such information is not provided by 3:00 P.M., New York
City time, on the related Calculation Date, then the CMT Rate on the CMT Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be a yield to maturity, based on the arithmetic mean of the secondary market
closing offer side prices as of approximately 3:30 P.M., New York City time, on
such CMT Rate Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
(each, a "Reference Dealer") in The City of New York (which may include one or
more of the Agents) selected by the Calculation Agent (from five such Reference
Dealers selected by the Calculation Agent and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest quotation (or,
in the event of equality, one of the lowest)), for the most recently issued
direct noncallable fixed rate obligations of the United States ("Treasury
Notes") with an original maturity of approximately the Designated CMT Maturity
Index and a remaining term to maturity of not less than such Designated CMT
Maturity Index minus one year. If the Calculation Agent is unable to obtain
three such Treasury Note quotations, the CMT Rate on such CMT Rate Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity based on the arithmetic mean of the secondary market offer
side prices as of approximately 3:30 P.M., New York City time, on such CMT Rate
Interest Determination Date of three Reference Dealers in The City of New York
(from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least $100 million. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offer prices obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided however, that if fewer than
three Reference Dealers so selected by the Calculation Agent are quoting as
mentioned herein, the CMT Rate determined as of such CMT Rate Interest
Determination Date will be the CMT Rate in effect on such CMT Rate Interest
Determination Date. If two Treasury Notes with an original maturity as described
in the second preceding sentence have remaining terms to maturity equally close
to the Designated CMT Maturity Index, the quotes for the Treasury Note with the
shorter remaining term to maturity will be used.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service on the page specified in the applicable Pricing Supplement (or any other
page as may replace such page on that service for the purpose of displaying
Treasury Constant Maturities as reported in H.15(519)) for the purpose of
displaying Treasury Constant Maturities as reported in H.15(519). If no such
page is specified in the applicable Pricing Supplement, the Designated CMT
Telerate Page shall be 7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be 2 years.
Commercial Paper Rate. Commercial Paper Rate Notes will bear interest at
the interest rates (calculated with reference to the Commercial Paper Rate and
the Spread and/or Spread Multiplier, if any) specified in such Commercial Paper
Rate Notes and in the applicable Pricing Supplement.
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Unless otherwise specified in the applicable Pricing Supplement,
"Commercial Paper Rate" means, with respect to any Interest Determination Date
relating to a Commercial Paper Rate Note or any Interest Determination Date for
a Floating Rate Note for which the interest rate is determined with reference to
the Commercial Paper Rate (a "Commercial Paper Rate Interest Determination
Date"), the Money Market Yield (as defined below) on such date of the rate for
commercial paper having the Index Maturity specified in the applicable Pricing
Supplement as published in H.15(519) under the heading "Commercial Paper." In
the event that such rate is not published by 3:00 P.M., New York City time, on
the Calculation Date pertaining to such Commercial Paper Rate Interest
Determination Date, then the Commercial Paper Rate will be the Money Market
Yield on such Commercial Paper Rate Interest Determination Date of the rate for
commercial paper of the Index Maturity specified in the applicable Pricing
Supplement as published in Composite Quotations under the heading "Commercial
Paper" (with an Index Maturity of one month or three months being deemed to be
equivalent to an Index Maturity of 30 days or 90 days, respectively). If such
rate is not published in either H.15(519) or Composite Quotations by 3:00 P.M.,
New York City time, on such Calculation Date, then the Commercial Paper Rate
will be calculated by the Calculation Agent and will be the Money Market Yield
of the arithmetic mean of the offered rates, as of 11:00 A.M., New York City
time, on such Commercial Paper Rate Interest Determination Date, of three
leading dealers of commercial paper in New York, New York (which may include one
or more of the Agents) selected by the Calculation Agent for commercial paper of
the specified Index Maturity placed for an industrial issuer whose bond rating
is "AA", or the equivalent, from a nationally recognized statistical rating
agency; provided, however, that if the dealers selected as aforesaid by the
Calculation Agent are not quoting as mentioned in this sentence, the Commercial
Paper Rate in effect for the applicable period will be the Commercial Paper Rate
in effect on such Commercial Paper Rate Interest Determination Date.
"Money Market Yield" shall be a yield (expressed as a percentage rounded,
if necessary, to the nearest one hundred-thousandth of a percentage point)
calculated in accordance with the following formula:
<TABLE>
<S> <C> <C>
D X 360
Money Market Yield = -------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal and "M" refers to the actual
number of days in the interest period for which interest is being calculated.
Federal Funds Rate. Federal Funds Rate Notes will bear interest at the
interest rates (calculated with reference to the Federal Funds Rate and the
Spread and/or Spread Multiplier, if any) specified in such Federal Funds Rate
Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Federal
Funds Rate" means, with respect to any Interest Determination Date relating to a
Federal Funds Rate Note or any Interest Determination Date for a Floating Rate
Note for which the interest rate is determined with reference to the Federal
Funds Rate (a "Federal Funds Rate Interest Determination Date"), the rate of
interest on that day for Federal Funds as published in H.15(519) under the
heading "Federal Funds (Effective)". In the event such rate is not published by
3:00 P.M., New York City time, on the Calculation Date pertaining to such
Federal Funds Rate Interest Determination Date, then the Federal Funds Rate will
be the rate on such Federal Funds Rate Interest Determination Date as published
in Composite Quotations under the heading "Federal Funds/Effective Rate". If
such rate is not published in either H.15(519) or Composite Quotations by 3:00
P.M., New York City time, on such Calculation Date, the Federal Funds Rate on
such Federal Funds Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight Federal Funds arranged by three leading dealers of
Federal Funds transactions in New York, New York (which may include one or more
of the Agents) selected by the Calculation Agent as of 9:00 A.M., New York City
time, on such Federal Funds Rate Interest Determination Date; provided, however,
that if the dealers so selected as aforesaid by the
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Calculation Agent are not quoting as mentioned in this sentence, the Federal
Funds Rate in effect for the applicable period will be the Federal Funds Rate in
effect on such Federal Funds Rate Interest Determination Date.
LIBOR. LIBOR Notes will bear interest at the interest rates (calculated
with reference to LIBOR and the Spread and/or Spread Multiplier, if any)
specified in such LIBOR Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined by the Calculation Agent in accordance with the
following provisions:
(i) With respect to an Interest Determination Date relating to a LIBOR
Note or any Interest Determination Date for a Floating Rate Note for which
the interest rate is determined with reference to LIBOR (a "LIBOR Interest
Determination Date"), LIBOR will be, as specified in the applicable Pricing
Supplement, either: (a) the arithmetic mean of the offered rates for
deposits in U.S. dollars having the Index Maturity designated in the
applicable Pricing Supplement, commencing on the second London Business Day
immediately following that LIBOR Interest Determination Date, that appear
on the Reuters Screen LIBO Page as of 11:00 a.m., London time, on that
LIBOR Interest Determination Date, if at least two such offered rates
appear on the Reuters Screen LIBO Page ("LIBOR Reuters"), or (b) the rate
for deposits in U.S. dollars having the Index Maturity designated in the
applicable Pricing Supplement commencing on the second London Business Day
immediately following that LIBOR Interest Determination Date, that appears
on the Telerate Page 3750 as of 11:00 a.m., London time, on that LIBOR
Interest Determination Date ("LIBOR Telerate"). "Reuters Screen LIBO Page"
means the display designated as page "LIBO" on the Reuters Monitor Money
Rates Service (or such other page as may replace the LIBOR page on that
service for the purpose of displacing London interbank offered rates of
major banks). "Telerate Page 3750" means the display designated as page
"3750" on the Telerate Service (or such other page as may replace the 3750
page on that service or such other service or services as may be nominated
by the British Bankers' Association for the purpose of displaying London
interbank offered rates for U.S. dollar deposits). If neither LIBOR Reuters
nor LIBOR Telerate is specified in the applicable Pricing Supplement, LIBOR
will be determined as if LIBOR Telerate has been specified. If fewer than
two offered rates appear on the Reuters Screen LIBO Page, or if no rate
appears on the Telerate Page 3750, as applicable, LIBOR in respect of that
LIBOR Interest Determination Date will be determined as if the parties had
specified the rate described in (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear on the Reuters Screen LIBO Page, as
specified in (i) (a) above, or on which no rate appears on Telerate Page
3750, as specified in (i) (b) above, as applicable, LIBOR will be
determined on the basis of the rates at which deposits in U.S. dollars
having the Index Maturity designated in the applicable Pricing Supplement
are offered at approximately 11:00 a.m., London time, on that LIBOR
Interest Determination Date by four major banks in the London interbank
market selected by the Calculation Agent ("Reference Banks") to prime banks
in the London interbank market commencing on the second London Business Day
immediately following that LIBOR Interest Determination Date and in a
principal amount equal to an amount of not less than $1,000,000 that is
representative for a single transaction in such market at such time. The
Calculation Agent will request the principal London office of each of the
Reference Banks to provide a quotation of its rate. If at least two such
quotations are provided, LIBOR in respect of that LIBOR Interest
Determination Date will be the arithmetic mean of such quotations. If fewer
than two quotations are provided, LIBOR in respect of that LIBOR Interest
Determination Date will be the arithmetic mean of the rates quoted at
approximately 11:00 a.m., New York City time, on that LIBOR Interest
Determination Date by three major banks in the City of New York selected by
the Calculation Agent for loans in U.S. dollars to leading European banks
having the Index Maturity designated in the applicable Pricing Supplement
commencing on the second London Business Day immediately following that
LIBOR Interest Determination
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Date and in a principal amount equal to an amount of not less than
$1,000,000 that is representative for a single transaction in such market
at such time; provided, however, that if the banks selected as aforesaid by
the Calculation Agent are not quoting as mentioned in this sentence, LIBOR
in effect for the applicable period will be LIBOR in effect on such LIBOR
Interest Determination Date.
Prime Rate. Prime Rate Notes will bear interest at the rates (calculated
with reference to the Prime Rate and the Spread and/or Spread Multiplier, if
any) specified in such Prime Rate Notes and the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Prime
Rate" means, with respect to any Interest Determination Date relating to a Prime
Rate Note or any Floating Rate Note for which the interest rate is determined
with reference to the Prime Rate (a "Prime Rate Interest Determination Date"),
the rate on such date as such rate is published in H.15(519) under the heading
"Bank Prime Loan." If such rate is not published prior to 3:00 P.M., New York
City time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen NYMF Page (as defined below) as such bank's prime
rate or base lending rate as in effect for such Prime Rate Interest
Determination Date. If fewer than four such rates but more than one such rate
appear on the Reuters Screen NYMF Page for such Prime Rate Interest
Determination Date, the Prime Rate shall be the arithmetic mean of the prime
rates quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date by four major money center banks in The City of New York
selected by the Calculation Agent. If fewer than two such rates appear on the
Reuters Screen NYMF Page, the Prime Rate will be determined by the Calculation
Agent on the basis of the rates furnished in The City of New York by three
substitute banks or trust companies organized and doing business under the laws
of the United States, or any State thereof, having total equity capital of at
least $500 million and being subject to supervision or examination by Federal or
State authority, selected by the Calculation Agent to provide such rate or
rates; provided, however, that if the banks or trust companies selected as
aforesaid are not quoting as mentioned in this sentence, the Prime Rate
determined as of such Prime Rate Interest Determination Date will be the Prime
Rate in effect on such Prime Rate Interest Determination Date.
"Reuters Screen NYMF Page" means the display designated as page "NYMF" on
the Reuters Monitor Money Rates Service (or such other page as may replace the
NYMF page on that service for the purpose of displaying prime rates or base
lending rates of major United States banks).
Treasury Rate. Treasury Rate Notes will bear interest at the rates
(calculated with reference to
the Treasury Rate and the Spread and/or Spread Multiplier, if any) specified in
such Treasury Rate Notes and in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, "Treasury
Rate" means, with respect to any Interest Determination Date relating to a
Treasury Rate Note or any Interest Determination Date for a Floating Rate Note
for which the interest rate is determined with reference to the Treasury Rate (a
"Treasury Rate Interest Determination Date"), the rate applicable to the most
recent auction of direct obligations of the United States ("Treasury Bills")
having the Index Maturity specified in the applicable Pricing Supplement, as
such rate is published in H.15(519) under the heading "Treasury Bills -- auction
average (investment)" or, if not published by 3:00 P.M., New York City time, on
the Calculation Date pertaining to such Treasury Rate Interest Determination
Date, the auction average rate (expressed as a bond equivalent on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury Bills having the specified
Index Maturity are not reported as provided by 3:00 P.M., New York City time, on
such Calculation Date, or if no such auction is held in a particular week, then
the Treasury Rate shall be calculated by the Calculation Agent and shall be a
yield to maturity (expressed as a
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<PAGE> 21
bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) of the arithmetic mean of the secondary market bid
rates, as of approximately 3:30 P.M., New York City time, on such Treasury Rate
Interest Determination Date, of three leading primary United States government
securities dealers (which may include one or more of the Agents) selected by the
Calculation Agent, for the issue of Treasury Bills with a remaining maturity
closest to the specified Index Maturity; provided, however, that if the dealers
selected as aforesaid by the Calculation Agent are not quoting as mentioned in
this sentence, the Treasury Rate in effect for the applicable period will be the
Treasury Rate in effect on such Treasury Rate Interest Determination Date.
ORIGINAL ISSUE DISCOUNT NOTES
Notes may be issued at a price less than their stated redemption price at
maturity, resulting in the Notes being treated as issued with original issue
discount for federal income tax purposes. Such discounted Notes may currently
pay no interest or interest at a rate which at the time of issuance is below
market rates and such Notes may provide that upon redemption or repayment prior
to their Stated Maturity or upon acceleration of the maturity of such Notes, an
amount less than the stated principal amount thereof shall become due and
payable. If Notes are issued with original issue discount, holders of such Notes
will be required to include the amount of original issue discount in income in
accordance with applicable provisions of the Internal Revenue Code of 1986, as
amended, and the Treasury Regulations promulgated thereunder. Special Federal
income tax and other considerations applicable to any such discounted Notes are
described in "United States Taxation".
INDEXED NOTES
Notes also may be issued with the principal amount payable at Maturity,
premium, if any, and/or interest to be paid thereon to be determined with
reference to the price or prices of specified commodities (including baskets of
commodities) or securities (including baskets of securities), interest rate
indices, interest rate or exchange rate swap indices, the exchange rate of one
or more specified currencies (including baskets of currencies or a composite
currency such as the European Currency Unit) relative to an indexed currency, or
such other price or exchange rate or other financial index or indices (each an
"Index") as may be specified in such Note ("Indexed Notes"), as set forth in a
Pricing Supplement with respect to an Indexed Note. Holders of such Notes may
receive a principal amount at Maturity that is greater than or less than the
face amount of such Notes depending upon the relative value at Maturity of the
specified Index. Information as to the method for determining the principal
payable at Maturity and, where applicable, certain historical information with
respect to the specified indexed item or items and tax considerations associated
with investment in Indexed Notes, will be set forth in the applicable Pricing
Supplement with respect to an Indexed Note.
Notwithstanding anything to the contrary contained herein or in the
Prospectus, for purposes of determining the rights of a Holder of a Note indexed
as to principal in respect of voting for or against amendments to the Indenture
and modifications and the waiver or rights thereunder, the principal amount of
such Indexed Note shall be deemed to be equal to the face amount thereof upon
issuance. The amount of principal payable at Maturity will be specified in the
applicable Pricing Supplement.
RISKS RELATING TO INDEXED NOTES
CERTAIN RISKS ASSOCIATED WITH A PARTICULAR INDEXED NOTE MAY BE SET FORTH
MORE FULLY IN THE APPLICABLE PRICING SUPPLEMENT. INDEXED NOTES MAY PRESENT A
HIGH LEVEL OF RISK, AND INVESTORS IN CERTAIN INDEXED NOTES MAY LOSE THEIR ENTIRE
INVESTMENT. INVESTORS SHOULD CONSULT THEIR OWN FINANCIAL AND LEGAL ADVISORS AS
TO THE RISKS ENTAILED BY AN INVESTMENT IN INDEXED NOTES AND THE SUITABILITY OF
INDEXED NOTES IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
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Tax Risks
The treatment of Indexed Notes for United States federal income tax
purposes is often unclear due to the absence of any authority specifically
addressing the issues presented by any particular Indexed Note. Accordingly,
investors in Indexed Notes should, in general, be capable of independently
evaluating the federal income tax consequences applicable in their particular
circumstances of purchasing an Indexed Note.
Loss of Principal or Interest
The direction and magnitude of the change in the value of the relevant
Index will determine either or both the principal amount of an Indexed Note
payable at maturity or the amount of interest payable on an interest payment
date. The terms of a particular Indexed Note may or may not include a guaranteed
return of a percentage of the face amount at maturity or a minimum interest
rate. Accordingly, the Holder of an Indexed Note may lose all or a portion of
the principal invested in an Indexed Note and may receive no interest thereon.
Volatility
Certain indices are highly volatile. The expected principal amount payable
at maturity of, or the interest rate on, an Indexed Note based on a volatile
Index may vary substantially from time to time. Because the principal amount
payable at the maturity of, or interest payable on, an Indexed Note is generally
calculated based on the value of the relevant Index on a specified date or over
a limited period of time, volatility in the Index increases the risk that the
return on the Indexed Notes may be adversely affected by a fluctuation in the
level of the relevant index. Additionally, if the formula used to determine the
principal, premium or interest payable with respect to Indexed Notes contains a
multiple or leverage factor, the effect of any change in the applicable Index
may be increased. The historical experience of the relevant currencies,
commodities or interest rate indices should not be taken as an indication of
future performance of such currencies, commodities or interest rate indices
during the term of any Indexed Note.
The volatility of an Index may be affected by political or economic events,
including governmental actions, or by the activities of participants in the
relevant markets, any of which could adversely affect the value of an Indexed
Note.
Illiquidity
The secondary market for Indexed Notes will be affected by a number of
factors, independent of the creditworthiness of the Company and the value of the
applicable Index, including the volatility of the applicable Index, the time
remaining to the maturity of such Notes, the amount outstanding of such Notes
and market interest rates.
Under certain circumstances, Indexed Notes may be illiquid and investors in
Indexed Notes may not be able to sell such Notes at a particular price or at any
price.
Availability and Composition of Indices
Certain Indices reference several different currencies, commodities,
securities or other financial instruments. The compiler of such an Index
typically reserves the right to alter the composition of the Index and the
manner in which the value of the Index is calculated. Such an alteration may
result in a decrease in the value of or return on an Indexed Note which is
linked to such Index.
An Index may become unavailable due to such factors as war, natural
disasters, cessation of publication of the Index, or suspension of or disruption
in trading in the currency or currencies, commodity or commodities, security or
securities or other financial instrument or instruments comprising or underlying
such Index. If an Index becomes unavailable, the determination of principal of
or interest on an Indexed Note may be delayed or an alternative method may be
used to
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determine the value of the unavailable Index. Alternative methods of valuation
are generally intended to produce a value similar to the value resulting from
reference to the relevant Index. However, it is unlikely that such alternative
methods of valuation will produce values identical to those which would be
produced were the relevant Index to be used. An alternative method of valuation
may result in a decrease in the value of or return on an Indexed Note.
Certain Indexed Notes are linked to Indices which are not commonly utilized
or have been recently developed. The lack of a trading history may make it
difficult to anticipate the volatility or other risks to which such a Note is
subject. In addition, there may be less trading in such Indices or instruments
underlying such Indices, which could increase the volatility of such Indices and
decrease the value of or return on Indexed Notes relating thereto.
BOOK-ENTRY NOTES
Unless otherwise specified in an applicable Pricing Supplement, upon
issuance, all Book-Entry Notes having the same Original Issue Date, Stated
Maturity and otherwise having identical terms and provisions will be represented
by a single global security (each, a "Global Security"). Each Global Security
representing Book-Entry Notes will be deposited with, or on behalf of, the
Depositary. Except as set forth below, a Global Security may not be transferred
except as a whole by the Depositary to a nominee of the Depositary or by a
nominee of the Depositary to the Depositary or another nominee of the Depositary
or by the Depositary or any nominee to a successor of the Depositary or a
nominee of such successor.
The Depository Trust Company, New York, New York ("DTC"), will be the
initial Depositary with respect to the Notes. DTC has advised the Company and
the Agents that it is a limited-purpose trust company organized under the laws
of the State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a "clearing
agency registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). The Depositary was
created to hold securities of its participants and to facilitate the clearance
and settlement of securities transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC's participants include securities brokers and dealers
(including the Agents), banks, trust companies, clearing corporations and
certain other organizations, some of whom (and/or their representatives) own
DTC. Access to DTC's book-entry system is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Persons who are not participants may beneficially own securities held by DTC
only through participants.
Upon the issuance of the Notes represented by a Global Security, the
Depositary will credit, on its book-entry registration and transfer system, the
principal amounts of the Notes represented by such Global Security to the
accounts of participants. The accounts to be credited will be designated by the
Agents or underwriters of such Book-Entry Notes, as the case may be. Ownership
of beneficial interests in the Global Security will be limited to participants
or persons that hold interests through participants. Ownership of beneficial
interests in the Notes will be shown on, and the transfer of that ownership will
be effected only through, records maintained by the Depositary (with respect to
interests of participants in the Depositary), or by participants in the
Depositary or persons that may hold interests through such participants (with
respect to persons other than participants in the Depositary). The laws of some
states require that certain purchasers of securities take physical delivery of
such securities in definitive form. Such limitations and such laws may impair
the ability of holders of the Notes to transfer beneficial interests in a Global
Security.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, the Depositary or its nominee, as the
case may be, will be considered the sole owner or holder of the Notes
represented by such Global Security for all purposes under the
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Indenture. Except as provided below, owners of beneficial interests in the Notes
represented by a Global Security will not be entitled to have the Notes
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of the Notes in definitive form and
will not be considered the owners or holders thereof under the Indenture.
Payments of principal of and interest on the Notes will be made by the
Company through the Trustee to the Depositary or its nominee, as the case may
be, as the registered owner of a Global Security. Neither the Company nor the
Trustee will have any responsibility or liability for any aspect of the records
relating to or payments made on account of beneficial ownership interests of a
Global Security or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interests. The Company expects that the
Depositary, upon receipt of any payment of principal or interest in respect of a
Global Security, will credit the accounts of the related participants with
payment in amounts proportionate to their respective holdings in principal
amount of beneficial interest in such Global Security as shown on the records of
the Depositary. The Company also expects that payments by participants to owners
of beneficial interests in a Global Security will be governed by standing
customer instructions and customary practices, as is now the case with
securities held for the accounts of customers in bearer form or registered in
"street name" and will be the responsibility of such participants.
If the Depositary is at any time unwilling or unable to continue as
Depositary and a successor Depositary is not appointed by the Company within 90
days, the Company will issue Definitive Notes in exchange for the Notes
represented by such Global Security or Securities. In addition, the Company may
at any time and in its sole discretion determine to discontinue use of the
Global Security and, in such event, will issue Definitive Notes in exchange for
the Notes represented by such Global Security or Securities. Notes so issued
will be issued in denominations of $1,000 and integral multiples thereof and
will be issued in registered form only, without coupons.
UNITED STATES TAXATION
Set forth below is a summary of certain U.S. federal income tax
considerations of importance to holders of the Notes. The summary concerns
holders who hold the Notes as capital assets and not special classes of holders,
such as dealers in securities or currencies, persons who hold the Notes as a
hedge against currency risks or who hedge any currency risks of holding the
Notes, banks, tax-exempt investors or U.S. holders (as defined below) whose
functional currency is other than the U.S. dollar. The summary also does not
deal with holders of the Notes other than original purchasers. The discussion
below is based upon the United States Internal Revenue Code of 1986, as amended
(the "Code"), and final, temporary and proposed U.S. Treasury Regulations, which
are subject to change possibly with retroactive effect. Persons considering the
purchase of the Notes should consult their own tax advisors concerning the
application of U.S. federal income tax laws to their particular situations as
well as any consequences arising under the laws of any other taxing
jurisdiction.
U.S. TAX CONSIDERATIONS FOR U.S. HOLDERS
Interest
Interest on the Notes will generally be taxable to a U.S. holder as
ordinary interest income at the time it is accrued or received, depending on the
U.S. holder's method of accounting for tax purposes.
As used herein, "U.S. holder" means a beneficial owner of a Note who or
that is a citizen or resident of the United States, a domestic corporation or is
otherwise subject to U.S. federal income taxation on a net income basis in
respect of the Note. As used herein, the term "non U.S. holder" means a holder
that is not a U.S. holder.
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Original Issue Discount
General. Notes with a term greater than one year may be issued with
original issue discount ("OID") for federal income tax purposes. OID is the
excess of the "stated redemption price at maturity" of a Note over its "issue
price." If this excess is less than 0.25% of the Note's stated redemption price
at maturity multiplied by the number of complete years to its maturity (a "de
minimis amount"), the amount of OID is considered to be zero. The "stated
redemption price at maturity" of a Note is defined as all amounts payable on the
Note however designated other than payments of "qualified stated interest."
"Issue price" is defined as the first offering price to the public (excluding
bond houses and brokers) at which a substantial amount of the Notes have been
sold. "Qualified stated interest" is stated interest that is unconditionally
payable in cash or in property (other than debt instruments of the issuer) at
least annually at a single fixed rate (a single fixed rate is a rate that takes
into account the length of time between payments). If a Note has certain
interest payment characteristics (e.g., interest holidays, interest payable in
additional Notes or stepped interest rates), then the Note may also be treated
as having OID for federal income tax purposes even if such Note was issued at an
issue price which does not otherwise result in OID.
Accrual of OID. U.S. holders are required to include OID in income before
the receipt of cash attributable to such income regardless of such U.S. holder's
method of accounting for tax purposes. The amount of OID includible in income by
the initial U.S. holder of a Note is the sum of the daily portions of OID which
accrues under a constant yield method with respect to such Note for each day
during the accrual period or portion of the accrual period in which such U.S.
holder held such Note. The amount of OID which accrues in an accrual period is
an amount equal to the excess (if any) of (a) the product of the Note's adjusted
issue price at the beginning of such accrual period and its yield to maturity
(determined on the basis of compounding at the end of each accrual period and
properly adjusted to take into account the length of the particular accrual
period), over (b) the sum of the qualified stated interest payments, if any,
allocable to the accrual period. The daily portion of OID is determined by
allocating to each day in any accrual period a ratable portion of the increase
during such accrual period in the Note's "adjusted issue price." The "adjusted
issue price" of a Note at the beginning of any accrual period is the sum of the
issue price of such Note plus the OID allocable to all prior accrual periods
reduced by payments on the Note other than qualified stated interest. An
"accrual period" may be of any length and the accrual periods may even vary in
length over the term of the debt instrument, provided that each accrual period
is no longer than one year and each scheduled payment of principal or interest
occurs at the first day or the last day of an accrual period. Under these rules,
U.S. holders will generally have to include in income increasingly greater
amounts of OID in successive accrual periods.
Variable Rate Notes. A "Variable Rate Note" is a Note that: (i) has an
issue price that does not exceed the total noncontingent principal payments by
more than the lesser of (1) the product of (x) the total noncontingent principal
payments, (y) the number of complete years to maturity from the issue date and
(z) .015, or (2) 15 percent of the total noncontingent principal payments, and
(ii) provides for stated interest compounded or paid at least annually at (1)
one or more "qualified floating rates", (2) a single fixed rate and one or more
qualified floating rates, (3) a single "objective rate" or (4) a single fixed
rate and a single objective rate that is a "qualified inverse floating rate".
A qualified floating rate or objective rate in effect at any time during
the term of the instrument must be set at a "current value" of that rate. A
"current value" of a rate is the value of the rate on any day that is no earlier
than 3 months prior to the first day on which that value is in effect and no
later than 1 year following that first day.
A variable rate is a "qualified floating rate" if (i) variations in the
value of the rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the Note
is denominated or (ii) it is equal to the product of such a rate and either (a)
a fixed multiple that is greater than zero but not more than 1.35, or (b) a
fixed
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multiple greater than zero but not more than 1.35, increased or decreased by a
fixed rate. A rate is not a qualified floating rate, however, if the rate is
subject to certain restrictions (including caps, floors, governors, or other
similar restrictions) unless such restrictions are fixed throughout the term of
the Note or are not reasonably expected as of the issue date to significantly
affect the yield on the Note.
An "objective rate" is a rate, other than a qualified floating rate, that
is determined using a single, fixed formula and that is based on (i) one or more
qualified floating rates, (ii) one or more rates each of which would be a
qualified floating rate for a debt instrument denominated in a currency other
than the currency in which the debt instrument is denominated, (iii) the yield
or changes in the price of one or more actively traded items of personal
property other than stock or debt of the issuer or a related party, or (iv) a
combination of objective rates. A variable rate is not an objective rate,
however, if it is reasonably expected that the average value of the rate during
the first half of the Note's term will be either significantly less than or
significantly greater than the average value of the rate during the final half
of the Note's term. An objective rate is a "qualified inverse floating rate" if
(i) the rate is equal to a fixed rate minus a qualified floating rate, and (ii)
the variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the cost of newly borrowed funds. Under these
rules, Commercial Paper Rate Notes, Prime Rate Notes, LIBOR Notes, Treasury Rate
Notes, CD Rate Notes, and Federal Funds Rate Notes will generally be treated as
Variable Rate Notes.
In general, if a Variable Rate Note provides for stated interest at a
single qualified floating rate or objective rate at least annually, all stated
interest on the Note is qualified stated interest and the amount of OID, if any,
is determined by using, in the case of a qualified floating rate or qualified
inverse floating rate, the value as of the issue date of the qualified floating
rate or qualified inverse floating rate, or, in the case of any other objective
rate, a fixed rate that reflects the yield reasonably expected for the Note.
The applicable Pricing Supplement will describe the rules for determining
the amount of interest and OID accruals on a Variable Rate Note which does not
provide for stated interest at a single qualified floating rate or objective
rate and does not provide for interest at a fixed rate, or a Variable Rate Note
which provides for stated interest either at one or more qualified floating
rates or at a qualified inverse floating rate and in addition provides for
stated interest at a single fixed rate (other than at a single fixed rate for an
initial period).
Notes Subject to Contingencies Including Optional Redemption
In general, if a Note provides for an alternative payment schedule or
schedules applicable upon the occurrence of a contingency or contingencies and
the timing and amounts of the payments that comprise each payment schedule are
known as of the issue date, the yield and maturity of the Note are determined by
assuming that the payments will be made according to the Note's stated payment
schedule. If, however, based on all the facts and circumstances as of the issue
date, it is more likely than not that the Note's stated payment schedule will
not occur, then, in general, the yield and maturity of the Note are computed
based on the payment schedule most likely to occur.
Notwithstanding the general rules for determining yield and maturity in the
case of Notes subject to contingencies, if the Company or the Holder has an
unconditional option or options that, if exercised, would require payments to be
made on the Note under an alternative payment schedule or schedules, then (i) in
the case of an option or options of the Company, the Company will be deemed to
exercise or not exercise an option or combination of options in the manner that
minimizes the yield on the Note and (ii) in the case of an option or options of
the Holder, the Holder will be deemed to exercise or not exercise an option or
combination of options in the manner that maximizes the yield on the Note. For
purposes of those calculations, the yield on the Note is determined by using any
date on which the Note may be redeemed or repurchased as the maturity
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<PAGE> 27
date and the amount payable on such date in accordance with the terms of the
Note as the principal amount payable at maturity.
If a contingency (including the exercise of an option) actually occurs or
does not occur contrary to an assumption made according to the above rules (a
"change in circumstances") then, except to the extent that a portion of the Note
is repaid as a result of the change in circumstances and solely for purposes of
the accrual of OID, the yield and maturity of the Note are redetermined by
treating the Note as reissued on the date of the change in circumstances for an
amount equal to the Note's adjusted issue price on that date.
Acquisition Discount on Short Term Notes
Notes that have a fixed maturity of one year or less ("Short-Term Notes")
generally will be issued with acquisition discount. U.S. holders who are accrual
basis taxpayers, cash basis taxpayers making an appropriate election under the
Code and taxpayers in certain specified classes will be required to include
acquisition discount in income currently in an amount and manner similar to that
applicable to OID. Individuals and non-electing cash basis taxpayers holding
Short-Term Notes are not required to include accrued acquisition discount in
income until the cash payments attributable to such discount are received, which
payments will be treated as ordinary income. A U.S. holder who does not
recognize acquisition discount currently will be required to recognize ordinary
income on the sale, exchange or retirement of the Short-Term Note to the extent
of accrued acquisition discount, and may be subject to limitations on the
deductibility of interest on indebtedness incurred to purchase or carry such
Notes.
Market Discount and Acquisition Premium
If a U.S. holder purchases a Note that was not issued with OID for an
amount that is less than its issue price (or, in the case of a subsequent
purchaser, its stated redemption price at maturity) or, in the case of a Note
that was issued with OID, its revised issue price as of the purchase date, the
amount of the difference will be treated as a "market discount." If the market
discount exceeds a de minimis amount, any gain on the sale, exchange or
retirement of the Note is treated as ordinary interest income at the time of the
disposition to the extent of the accrued market discount, unless the U.S. holder
elects to accrue market discount on a current basis. Such an election will apply
to all debt instruments with market discount acquired by the electing U.S.
holder on or after the first day of the first taxable year to which the election
applies. This election may not be revoked without the consent of the Internal
Revenue Service (the "Service"). In addition, a U.S. holder not electing current
inclusion is required to defer deductions until maturity of the Note or its
earlier disposition for a portion of such holder's interest expense on any
indebtedness incurred to purchase or carry such Note. Market discount is
normally accrued on a straight-line basis, but a holder may elect to use a
constant yield method. Such election will apply only to the Note with respect to
which it is made and may not be revoked.
If a U.S. holder acquires a Note issued with OID for an amount above the
adjusted issue price, but less than or equal to the sum of all amounts payable
other than qualified stated interest, such U.S. holder may be considered to have
purchased the Note at an "acquisition premium." The amount of OID which such
holder (not making the election described below under "Election to Treat All
Interest as OID") must otherwise include in its gross income with respect to the
Note for any taxable year (or portion thereof in which the holder holds the
Note) will be reduced (but not below zero) by the portion of acquisition premium
properly allocable to such period.
Bond Premium. If a U.S. holder acquires a Note for an amount that is
greater than the stated redemption price at maturity, such U.S. holder will be
considered to have purchased the Note with "amortizable bond premium" equal to
the amount of such excess. Such a U.S. holder may elect to amortize this premium
over the remaining life of the Note (using a constant yield method) as an offset
to income otherwise includible in the U.S. holder's income. Any election to
amortize bond
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<PAGE> 28
premium will apply to all bonds (other than bonds the interest on which is
excludible from gross income) held by the U.S. holder at the beginning of the
first taxable year to which the election applies and to all such bonds
thereafter acquired by the U.S. holder, and may not be revoked without the
consent of the Service.
Election to Treat All Interest as OID
U.S. holders utilizing the accrual method of accounting may generally elect
to include all interest and discount (including stated interest, acquisition
discount, OID, de minimis OID, market discount, de minimis market discount, and
unstated interest, as adjusted by any amortizable bond premium or acquisition
premium on a debt instrument) in income by using the constant yield method
applicable to OID, subject to certain limitations and exceptions.
This election will generally apply only to the Note or the class or group
of Notes with respect to which it is made and may not be revoked without the
consent of the Service. If this election is made with respect to a Note with
amortizable bond premium, the electing holder will be deemed to have made the
election discussed above under "Bond Premium" with respect to all debt
instruments with amortizable bond premium (other than debt instruments the
interest on which is excludible from gross income) held by the electing U.S.
holder as of the beginning of the taxable year in which the Note with respect to
which the election is made is acquired or thereafter acquired.
If the election to apply the constant yield method to all interest on a
Note is made with respect to a Market Discount Note, the electing U.S. holder
will be treated as having made the election discussed above under "Market
Discount and Acquisition Premium" to include market discount in income currently
over the life of all debt instruments held or thereafter acquired by such U.S.
holder.
Disposition or Repayment of a Note
U.S. holders of Notes may recognize gain or loss on the sale, redemption,
exchange or other disposition of a Note. This gain or loss is measured by the
difference between the amount realized (except to the extent attributable to
accrued interest) and the U.S. holder's adjusted tax basis in the Note. A U.S.
holder's adjusted tax basis for determining gain or loss on a sale or
disposition of a Note generally will be such holder's cost increased by any
amounts included in income, other than qualified stated interest, and reduced by
any amortized premium and cash received other than qualified stated interest.
Gain or loss on the sale, exchange or redemption of a Note generally will be
long term capital gain or loss if the Note has been held for more than one year,
except to the extent that gain represents accrued market discount or acquisition
discount not previously included in the U.S. holder's income.
Foreign Currency Notes
Notes may be denominated in, or interest or principal on the Notes may be
determined by reference to, a foreign currency or foreign currency unit (e.g.,
the ECU) ("Foreign Currency Notes"). Special rules apply to determine OID for
any accrual period on a Foreign Currency Note and in the case of foreign
currency received as interest on a Note or on the sale or retirement of a Note.
The application of these rules will be described in an applicable Pricing
Supplement.
INDEXED NOTES
The applicable Pricing Supplement will contain a discussion of any special
United States federal income tax rules with respect to Notes that are not
subject to the rules governing Variable Rate Notes payments or which are
determined by reference to any index.
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<PAGE> 29
U.S. TAX CONSIDERATIONS FOR FOREIGN HOLDERS
Set forth below is a summary of certain U.S. federal income tax
consequences for non-U.S. holders of the Notes.
Assuming certain certification requirements are satisfied (which generally
can be satisfied by providing Internal Revenue Service Form W-8, identifying the
beneficial owner of the instrument as a non-U.S. person and disclosing the
non-U.S. holder's name and address), and assuming that the Note is not subject
to the rules of Section 871(h)(4)(A) of the Code (relating to interest payments
that are determined by reference to the income, profits, changes in value of
property or other attributes of the debtor or a related party) under current
U.S. federal income and estate tax laws:
(i) Payments of principal and interest (including OID) on a Note to a
non-U.S. holder will not be subject to U.S. federal income tax or
withholding tax, provided that, in the case of interest and OID, (a) the
payments are not effectively connected with a U.S. trade or business, (b)
the holder does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of the Company entitled to
vote, and (c) the holder is not a controlled foreign corporation related to
the Company through stock ownership.
(ii) A non-U.S. holder of a Note will not be subject to U.S. federal
income tax on gain realized on the sale, exchange or redemption of a Note
unless such gain is effectively connected with a U.S. trade or business or,
in the case of a non-U.S. holder who is an individual, such holder is
present in the United States for a total of 183 days or more during the
taxable year in which such gain is realized and other conditions apply; and
(iii) A Note held by an individual who at the time of death is not a
citizen or resident of the United States will not be subject to U.S.
federal estate tax as a result of such individual's death, unless the
individual actually or constructively owns 10% or more of the total
combined voting power of all classes of stock of the Company entitled to
vote or the interest received on such Note is effectively connected with
the conduct by such holder of a U.S. trade or business.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Under current U.S. federal income tax law, a 31% "backup" withholding tax
is applied to certain interest and principal payments made to, and to the
proceeds of sales before maturity by, certain U.S. persons if such persons fail
to supply taxpayer identification numbers and other information. Interest paid
with respect to a Note and received by a non-U.S. holder will not be subject to
information reporting or backup withholding if the payor has received
appropriate certification statements (described above) and provided that the
payor does not have actual knowledge that the holder is a U.S. person.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution
Agreement, the Notes are being offered on a continuing basis for sale by the
Company through Goldman, Sachs & Co., Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, NatWest Capital Markets Limited, and Smith
Barney Inc. (the "Agents"), who have agreed to use reasonable efforts to solicit
purchases of the Notes. The Company will have the sole right to accept offers to
purchase Notes and may reject any proposed purchase of Notes in whole or in
part. The Agents shall have the right, in their discretion reasonably exercised,
to reject any offer to purchase Notes, in whole or in part. The Company will pay
the Agents a commission of from 0.125% to 0.750% of the principal amount of
Notes, depending upon maturity, for sales made through them as Agents.
The Company may also sell Notes to the Agents as principals for their own
accounts at a discount to be agreed upon at the time of sale, or the purchasing
Agents may receive from the Company a commission or discount equivalent to that
set forth on the cover page hereof in the case
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<PAGE> 30
of any such principal transaction in which no other discount is agreed. Such
Notes may be resold at prevailing market prices, or at prices related thereto,
at the time of such resale, as determined by the Agents or, if so agreed, at a
fixed public offering price. The Company reserves the right to sell Notes
directly on its own behalf. No commission will be payable on any Notes sold
directly by the Company.
In addition, the Agents may offer the Notes they have purchased as
principal to other dealers. The Agents may sell Notes to any dealer at a
discount and, unless otherwise specified in the applicable Pricing Supplement,
such discount allowed to any dealer may include all or part of the discount to
be received from the Company. Unless otherwise indicated in the applicable
Pricing Supplement, any Note sold to an Agent as principal will be purchased by
such Agent at a price equal to 100% of the principal amount thereof less a
percentage equal to the commission applicable to any agency sale of a Note of
identical maturity. After the initial public offering of Notes to be resold to
investors and other purchasers on a fixed public offering price basis, the
public offering price, concession and discount may be changed.
The Agents, as agents or principals, may be deemed to be "underwriters"
within the meaning of the Securities Act of 1933 (the "Act"). The Company has
agreed to indemnify the Agents against certain liabilities, including
liabilities under the Act. The Company has agreed to reimburse the Agents for
certain expenses.
The Agents may sell to or through dealers who may resell to investors, and
the Agents may pay all or part of their discount or commission to such dealers.
Such dealers may be deemed to be "underwriters" within the meaning of the Act.
Unless otherwise indicated in the applicable Pricing Supplement, payment of
the purchase price of Notes will be required to be made in immediately available
funds in The City of New York.
Goldman, Sachs & Co., Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner &
Smith Incorporated, NatWest Securities Limited and Smith Barney Inc. may be
customers of, engage in transactions with and perform services for the Company
in the ordinary course of business.
National Westminster Bank U.S.A. ("NWB"), an affiliate of NatWest Capital
Markets Limited, is a member of a syndicate of eight banks which are lenders to
the Company under a revolving credit facility. An aggregate of $155 million may
be borrowed under the revolving credit facility. NWB's aggregate participation
in the facility is $25 million, of which approximately $9 million is currently
outstanding. The Company expects that it may use a portion of the net proceeds
from the sale of the Notes offered hereby to repay amounts outstanding under the
revolving credit facility. NWB would receive its pro rata share of any net
proceeds so applied. See "Use of Proceeds".
NatWest Capital Markets Limited, a United Kingdom broker-dealer and a
member of the Securities and Futures Authority Limited, has agreed that, as part
of the distribution of the Notes and subject to certain exceptions, it will not
offer or sell any Notes within the United States, its territories or possessions
or to persons who are citizens thereof or residents therein. The Distribution
Agreement does not limit sale of the Notes offered hereby outside the United
States.
NatWest Capital Markets Limited has further represented and agreed that (i)
it has not offered or sold and will not offer or sell prior to the date six
months after their date of issue any Notes to persons in the United Kingdom,
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have not resulted and will
not result in an offer to the public in the United Kingdom within the meaning of
the Public Offers of Securities Regulations 1995, (ii) it has complied with and
will comply with all applicable provisions of the Financial Services Act 1986
with respect to anything done by it in relation to the Notes in, from or
otherwise involving the United Kingdom, and (iii) it has only issued or passed
on and will only issue or pass on in the United Kingdom any document received by
it in connection with the issue of the Notes to a person who is of the kind
described in Article 11(3) of the Financial Services Act (Investment Advertise-
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<PAGE> 31
ments) (Exemptions) Order 1995 or is a person to whom such documents may
otherwise lawfully be issued or passed on.
The Notes are a new issue of securities with no established trading market
and will not be listed on any securities exchange. No assurance can be given as
to the existence or liquidity of the secondary market for the Notes.
VALIDITY OF NOTES
The validity of the Notes offered hereby will be passed upon for the
Company by Nutter, McClennen & Fish, Boston, Massachusetts and for the Agents by
Sullivan & Cromwell, New York, New York.
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<PAGE> 32
PROSPECTUS
[MEDITRUST LOGO]
SHARES OF BENEFICIAL INTEREST,
DEBT SECURITIES AND/OR SECURITIES WARRANTS
------------------------
Meditrust, a Massachusetts business trust (together with its subsidiaries
unless the context otherwise requires, the "Company"), is a real estate
investment trust under the Internal Revenue Code of 1986, as amended, which may
offer from time to time, in one or more series, its debt securities (the "Debt
Securities"), warrants to purchase Debt Securities (the "Debt Securities
Warrants"), shares of beneficial interest, without par value (the "Shares"), and
warrants to purchase Shares (the "Share Warrants"). The Debt Securities Warrants
and the Share Warrants are collectively referred to herein as the "Securities
Warrants." The Debt Securities, Shares and Securities Warrants are collectively
referred to herein as the "Securities." The Securities will have an aggregate
offering price of $565,652,767.50 and will be offered in amounts, at prices and
on terms to be determined at the time of offering.
In the case of Debt Securities, the specific title, the aggregate principal
amount, the purchase price, the maturity, the rate and time of payment of any
interest, any redemption or sinking fund provisions, any conversion provisions
and any other specific term of the Debt Securities will be set forth in an
accompanying supplement to this Prospectus (the "Prospectus Supplement"). In the
case of Shares, the specific number of Shares and issuance price per Share will
be set forth in an accompanying Prospectus Supplement. In the case of Securities
Warrants, the duration, offering price, exercise price and detachability, if
applicable, will be set forth in an accompanying Prospectus Supplement. The
Prospectus Supplement will also disclose whether the Securities will be listed
on a national securities exchange and if they are not to be listed, the possible
effects thereof on their marketability.
The Securities may be sold: (i) directly by the Company; (ii) through
underwriting syndicates represented by one or more managing underwriters, or by
one or more underwriters without a syndicate; and (iii) through agents
designated from time to time. The names of any underwriters or agents of the
Company involved in the sale of the Securities in respect of which this
Prospectus is being delivered and any applicable commissions or discounts will
be set forth in an accompanying Prospectus Supplement. See "Plan of
Distribution." The net proceeds to the Company from such sale also will be set
forth in the Prospectus Supplement.
The Company's shares are traded on the New York Stock Exchange under the
symbol "MT." On May 31, 1995, the closing sale price of the shares on the New
York Stock Exchange was $31.875.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION
TO THE CONTRARY IS UNLAWFUL.
------------------------
This Prospectus may not be used to consummate sales of Securities unless
accompanied by a Prospectus Supplement.
------------------------
THE DATE OF THIS PROSPECTUS IS JUNE 1, 1995.
<PAGE> 33
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information can be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024 of the offices of
the Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
or at the regional offices of the Commission located at Seven World Trade
Center, 13th Floor, New York, New York 10048 and Suite 1400, Northwestern Atrium
Center, 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material can be obtained from the principal offices of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed
rates. Reports, proxy materials and other information concerning the Company can
also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, Room 1102, New York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1993, as amended (the "Securities Act").
This Prospectus and any accompanying Prospectus Supplement do not contain all
the information set forth in the Registration Statement, certain parts of which
are omitted in accordance with the rules and regulations of the Commission. For
further information, reference is made to the Registration Statement, copies of
which may be obtained upon payment of a fee prescribed by the Commission, or may
be examined free of charge at the principal office of the Commission in
Washington, D.C.
Statements made in this Prospectus and any accompanying Prospectus
Supplement as to the contents of any contract or other document referred to are
not necessarily complete, and reference is made to the copy of such contract or
other document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference into this Prospectus its
Annual Report on Form 10-K for the fiscal year ended December 31, 1994, its
Current Report on Form 8-K dated March 8, 1995 and its Quarterly Report on Form
10-Q for the fiscal quarter ended March 13, 1995, which shall be deemed to be a
part hereof. The discussion of Federal income tax treatment of the Company and
its shareholders which is contained in the Company's Current Report on Form 8-K
dated March 4, 1992, including any amendment or report filed for the purpose of
updating such discussion, is hereby incorporated by reference into this
Prospectus and shall be deemed to be a part hereof.
All documents filed by the Company with the Commission pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date hereof and
prior to the termination of the offering of the Securities offered hereby shall
be deemed to be incorporated by reference into this Prospectus and to be a part
hereof from the date of filing such documents. Any statement contained herein or
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in a subsequently filed
document, as the case may be, which also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
(without exhibits) of any or all documents incorporated by reference into this
Prospectus. Requests for such copies should be directed to Lisa P. McAlister,
Vice President and Treasurer, Meditrust, 197 First Avenue, Needham Heights,
Massachusetts 02194, telephone (617) 433-6000.
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<PAGE> 34
THE DECLARATION OF TRUST ESTABLISHING THE COMPANY, DATED AUGUST 6, 1985, AS
AMENDED (THE "DECLARATION"), A COPY OF WHICH IS DULY FILED IN THE OFFICE OF THE
SECRETARY OF STATE OF THE COMMONWEALTH OF MASSACHUSETTS, PROVIDES THAT THE NAME
"MEDITRUST" REFERS TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS
TRUSTEES, BUT NOT INDIVIDUALLY OR PERSONALLY; AND THAT NO TRUSTEE, OFFICER,
SHAREHOLDER, EMPLOYEE OR AGENT OF THE COMPANY SHALL BE HELD TO ANY PERSONAL
LIABILITY, JOINTLY OR SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE
COMPANY. ALL PERSONS DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO
THE ASSETS OF THE COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY
OBLIGATION.
3
<PAGE> 35
THE COMPANY
Meditrust is the largest dedicated health care real estate investment trust
in the United States, based on its gross real estate investments of $1.66
billion as of March 31, 1995. The objective of the Company is to enable
shareholders to participate in the investment in health care related facilities
held primarily for the production of cash flows to be distributed to
shareholders. In meeting this objective, the Company invests in high quality
facilities that are managed by experienced operators and attempts to achieve
diversity in its property portfolio by sector of the health care industry,
geographic location, operator and form of investment.
As of March 31, 1995, the Company had investments in 282 facilities,
consisting of 238 long-term care facilities, 23 rehabilitation hospitals, six
psychiatric hospitals, six retirement living facilities, two alcohol and
substance abuse facilities, six medical office buildings and one acute care
hospital. The properties are located in 34 different states and are operated by
32 health care companies. Of the 32 different operators, seven are
publicly-traded companies (i.e., Sun Healthcare Group, Inc., Continental Medical
Systems, Inc., Geriatric and Medical Centers, Inc., OrNda Healthcorp.,
Integrated Health Services, Inc., NovaCare, Inc. and Mariner Health Group,
Inc.), and constitute approximately 45% of the Company's real estate
investments.
The Company's real estate investments are either owned by the Company or
secured by a mortgage lien. As of March 31, 1995 permanent mortgage loans
constituted 54%, sale/leaseback transactions constituted 41%, and development
mortgage financing constituted 5% of the Company's portfolio as measured by
gross real estate investments. The leases and mortgages provide for rental or
interest rates which generally range from 9.5% to 13.5% per annum of the
acquisition price or mortgage amount. The leases and mortgages generally provide
for an initial term of 10 years, with the leases having one or more five-year
renewal options. The leases and mortgages also provide for additional rent and
interest which are generally based upon a percentage of increased revenues over
specific base period revenues of the related properties. For the year ended
December 31, 1994, the aggregate amount of additional rent and interest was
approximately $8.2 million compared to $8.7 million for the year ended December
31, 1993.
In addition, the Company usually obtains guarantees from the parent
corporation, if any, of the operator or affiliates or individual principals of
the operator. Most obligations are backed by letters of credit, security
deposits or pledges of certificates of deposit which cover from three to twelve
months of lease or mortgage payments. In addition, permanent mortgage and
development mortgage loans generally are cross-collateralized with any other
mortgage and development loans, leases or other agreements between the Company
and the same operator or any affiliated operators. Leases and mortgage loans
generally are cross-defaulted with any other leases or mortgages between the
Company and the same operator or any affiliated operators. With respect to
development mortgage loans, the Company generally requires guaranteed maximum
price construction contracts, performance completion bonds or guarantees and
cost overrun guarantees. The Company enters into a development mortgage loan
when the Company will also be the permanent owner or mortgage lender. In making
its investment decisions, the Company reviews, among other criteria, the
operational viability of the facility, the experience and competency of the
operator and the financial strength of the guarantor.
The Company was organized to qualify, and intends to continue to operate,
as a real estate investment trust in accordance with Federal tax laws and
regulations. So long as the Company so complies, with limited exceptions, the
Company will not be taxed under Federal income tax laws on that portion of its
taxable income that it distributes to its shareholders. The Company has
distributed, and intends to continue to distribute, substantially all of its
real estate investment trust taxable income to shareholders.
In order to meet its ongoing capital requirements for additional
investments, the Company may raise additional equity capital through the sale of
Shares, Debt Securities, Share Warrants or Debt Securities Warrants or through a
securitization transaction.
The Company's principal executive offices are located at 197 First Avenue,
Needham Heights, Massachusetts 02194, and its telephone number is (617)
433-6000.
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<TABLE>
RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
YEAR ENDED DECEMBER 31, THREE-MONTH
-------------------------------------------------------- PERIOD ENDED
1990 1991 1992 1993 1994 MARCH 31,1995
---- ---- ---- ---- ---- -------------
<S> <C> <C> <C> <C> <C> <C>
Ratio................. 1.67 1.60 1.88 2.02 2.19 2.31
</TABLE>
For the purpose of calculating the ratio of earnings to fixed charges for
the years ended December 31, 1990, 1991, 1992, 1993 and 1994 and for the
three-month period ended March 31, 1995, net income has been added to interest
expense and that sum has been divided by such interest expense.
USE OF PROCEEDS
Unless otherwise specified in the Prospectus Supplement which accompanies
this Prospectus, the net proceeds from the sale of the Securities offered from
time to time hereby will be used for general business purposes, including the
repayment of bank lines of credit, if any, outstanding, and investments in
health care facilities. As of March 31, 1995, $50,000,000 was outstanding under
the Company's bank lines of credit. All currently outstanding loans under the
Company's bank lines of credit mature prior to July 1, 1997 and accrue interest
at the lenders' respective prime rates or the London Interbank Offering Rate
plus 1.00 to 1.50%. Pending such uses, the net proceeds will be invested in
short-term, interest-bearing, direct obligations issued or guaranteed by the
United States, certificates of deposit or accounts, or investment grade
commercial paper, consistent with the Company's qualification as a real estate
investment trust, the Company's Restated Declaration of Trust, as amended (the
"Declaration"), and the Company's agreements with its lenders.
DESCRIPTION OF SHARES
There is no limit on the number of Shares the Company is authorized to
issue. Shares may be issued by the Board of Trustees without any vote of the
shareholders. The outstanding Shares are of one class and without par value. The
following description is qualified in all respects by reference to the
Declaration and the By-laws of the Company, copies of which are incorporated by
reference as exhibits to the Registration Statement of which this Prospectus is
a part.
SHARES OF BENEFICIAL INTEREST. All Shares participate equally in dividends
and in net assets available for distribution to shareholders on liquidation or
termination of the Company, have one vote per Share on all matters submitted to
a vote of the shareholders and do not have cumulative voting rights in the
election of Trustees. The Shares offered hereby will be validly issued, fully
paid and nonassessable by the Company upon issuance.
REDEMPTION. For the Company to qualify as a real estate investment trust
under the Internal Revenue Code of 1986, as amended (the "Code"), in any taxable
year, not more than 50% of its outstanding Shares may be owned by five or fewer
individuals and Shares must be owned by 100 or more persons during at least 335
days of a taxable year of 12 months or during a proportionate part of a shorter
taxable year. In order to meet these requirements, the Trustees have the power
to redeem or prohibit the transfer of a sufficient number of Shares selected in
a manner deemed appropriate to maintain or bring the ownership of the Shares
into conformity with such requirements. In connection with the foregoing, if the
Trustees shall, at any time and in good faith, be of the opinion that direct or
indirect ownership of at least 9.9% or more of the Shares has or may become
concentrated in the hands of one beneficial owner, the Trustees shall have the
power (i) by lot or other means deemed equitable by them to call for the
purchase from any shareholder of the Company of a number of Shares sufficient,
in the opinion of the Trustees, to maintain or bring the direct or indirect
ownership of Shares of such owner to a level of no more than 9.9% of the
outstanding Shares, and (ii) to refuse to transfer or issue Shares to any person
whose acquisition of such Shares would cause a beneficial holder to hold in
excess of 9.9% of the outstanding Shares. Further, any transfer of Shares that
would create a beneficial owner of more than 9.9% of the outstanding Shares
shall be deemed void and the intended transferee shall be deemed never to have
had an interest therein. The purchase price for any Shares so redeemed shall be
equal to the fair market value of the Shares reflected in the closing sales
price for the Shares, if then listed on a national securities exchange, or the
average of the closing sales price for the Shares if then listed on
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<PAGE> 37
more than one national securities exchange, or if the Shares are not then listed
on a national securities exchange, the latest bid quotation for the Shares if
then traded over-the-counter, on the last business day immediately preceding the
day on which notices of such acquisition are sent by the Company. From and after
the date fixed for purchase by the Trustees, the holder of any Shares so called
for purchase shall cease to be entitled to distributions, voting rights and
other benefits with respect to such Shares, except the right to payment of the
purchase price for the Shares.
The foregoing provisions may have the effect of discouraging unilateral
tender offers or other takeover proposals which certain shareholders might deem
in their interest or in which they might receive a substantial premium. The
provisions could also have the effect of insulating current management against
the possibility of removal and could, by possibly reducing temporary
fluctuations in market price caused by accumulations of Shares, deprive
shareholders of opportunities to sell at a temporarily higher market price.
ADDITIONAL PROVISIONS. The Declaration provides that annual meetings of
shareholders are to be held within six months after the end of each fiscal year
and special meetings of the shareholders may be called by the President of the
Company, a majority of the Trustees or a majority of the Independent Trustees
(defined in the Declaration) and shall be called upon the written request of the
holders of 10% or more of the outstanding Shares.
Whenever any action is to be taken by the shareholders, it shall, except as
otherwise clearly indicated in the Declaration of Trust, be authorized by
holders of a majority of the Shares then outstanding and entitled to vote
thereon. Notwithstanding the foregoing, at all elections of Trustees, voting by
shareholders shall be conducted under the non-cumulative method and the election
of Trustees shall be by the affirmative vote of the holders of Shares
representing a plurality of the Shares then outstanding which are present in
person or by proxy at a meeting in which a quorum is present.
Whenever shareholders are required or permitted to take any action (unless
a vote at a meeting is specifically required, as with respect to termination or
amendment of the Declaration), such action may be taken without a meeting by
written consents setting forth the action so taken, signed by the holders of a
majority (or such higher percentage as may be specified) of the outstanding
Shares that would be entitled to vote thereon at a meeting.
Except with respect to matters on which a shareholders' vote is
specifically required by the Declaration, no action taken by the shareholders at
any meeting shall in any way bind the Trustees.
The Shares have no preemptive, conversion, exchange, sinking fund or
appraisal rights.
The Declaration provides that shareholders of the Company shall not be
subject to any liability for the acts or obligations of the Company and that, as
far as is practicable, each written agreement of the Company is to contain a
provision to that effect. No personal liability will attach to the shareholders
for claims under any contract containing such a provision in writing where
adequate notice is given of such provision, except possibly in a few
jurisdictions. With respect to all types of claims in such jurisdictions and
with respect to tort claims, contract claims where the shareholder liability is
not disavowed as described above, claims for taxes and certain statutory
liabilities in other jurisdictions, a shareholder may be held personally liable
to the extent claims are not satisfied by the Company. However, the Declaration
provides that, upon payment of any such liability, the shareholder will be
entitled to reimbursement from the general assets of the Company. The Trustees
intend to conduct the operations of the Company, with the advice of counsel, in
such a way as to avoid, as far as is practicable, the ultimate liability of the
shareholders of the Company. For example, almost all of the real estate and all
of the mortgages included in the assets of the Company are held by corporate
subsidiaries. The Trustees do not intend to provide insurance covering such
risks to shareholders.
TRANSFER AGENT AND REGISTRAR. Fleet National Bank, Providence, Rhode
Island, acts as transfer agent and registrar of the Shares.
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<PAGE> 38
DESCRIPTION OF DEBT SECURITIES
The Prospectus Supplement will describe certain terms of any Debt
Securities offered hereby, including (i) the title of such Debt Securities; (ii)
any limit on the aggregate principal amount of such Debt Securities and their
purchase price; (iii) the date or dates on which such Debt Securities will
mature; (iv) the rate or rates per annum (or manner in which interest is to be
determined) at which such Debt Securities will bear interest, if any, and the
date from which such interest, if any, will accrue; (v) the dates on which such
interest, if any, on such Debt Securities will be payable and the regular record
dates for such interest payment dates; (vi) any mandatory or optional sinking
fund or analogous provisions; (vii) additional provisions, if any, for the
defeasance of such Debt Securities; (viii) the date, if any, after which and the
price or prices at which such Debt Securities may, pursuant to any optional or
mandatory redemption or repayment provisions, be redeemed and the other detailed
terms and provisions of any such optional or mandatory redemption or repayment
provisions; (ix) whether such Debt Securities are to be issued in whole or in
part in registered form represented by one or more registered global securities
(a "Registered Global Security") and, if so, the identity of the depository for
such Registered Global Security or Securities; (x) certain applicable United
States Federal income tax consequences; (xi) any provisions relating to security
for payments due under such Debt Securities; (xii) any provisions relating to
the conversion or exchange of such Debt Securities into or for Shares or Debt
Securities of another series; (xiii) any provisions relating to the ranking of
such Debt Securities in right of payment as compared to other obligations of the
Company; (xiv) the denominations in which such Debt Securities are authorized to
be issued; (xv) the place or places where principal of, premium, if any, and
interest, if any, on such Debt Securities will be payable; (xvi) whether such
debt Securities are to be issued pursuant to an indenture of trust; and (xvii)
any other specific term of such Debt Securities, including any additional events
of default or covenants provided for with respect to such Debt Securities, and
any terms that may be required by or advisable under applicable laws or
regulations.
The Debt Securities may be issued in one or more series under an Indenture
to be executed by the Company and a trustee (the "Trustee"), a form of which is
included as an exhibit to the Registration Statement of which this Prospectus is
a part (the "Indenture"). The terms of the Debt Securities may include those
stated in the Indenture and those made a part of the Indenture (before any
supplements) by reference to the Trust Indenture Act of 1939, as amended.
The following is a summary of certain provisions of the Indenture and does
not purport to be complete and is qualified in its entirety by reference to the
detailed provisions of the Indenture, including the definitions of certain terms
therein to which reference is hereby made, for a complete statement of such
provisions. Wherever particular provisions or sections of the Indenture or terms
defined therein are referred to herein, such provisions or definitions are
incorporated herein by reference.
GENERAL. The Indenture does not limit the aggregate principal amount of
Debt Securities that may be issued thereunder and provides that Debt Securities
may be issued from time to time in one or more series.
CONVERSION RIGHTS. The terms, if any, on which Debt Securities of any
series may be converted into Shares or Debt Securities of another series will be
set forth in the Prospectus Supplement relating thereto. To protect the
Company's status as a real estate investment trust ("REIT"), the holders of Debt
Securities of any series ("Holders") may not convert any Debt Security, and such
Debt Security shall not be convertible by any Holder, if as a result of such
conversion any person would then be deemed to beneficially own, directly or
indirectly, 9.9% or more of the then outstanding Shares.
The conversion price will be subject to adjustment under certain
conditions, including (i) the payment of dividends (and other distributions) in
Shares on any class of shares of the Company; (ii) subdivisions, combinations
and reclassifications of Shares; (iii) the issuance to all or substantially all
holders of Shares of rights or warrants entitling them to subscribe for or
purchase Shares at a price per Share (or having a conversion price per Share)
less than the then current market price; and (iv) distributions to all or
substantially all holders of Shares or shares of any other class, or evidences
of indebtedness or assets (including securities, but excluding those rights,
warrants, dividends and distributions referred to above and dividends and
distributions not prohibited under the terms of the Indenture) of the Company,
subject to the limitation that all adjustments by reason
7
<PAGE> 39
of any of the foregoing would not be made until they result in a cumulative
change in the conversion price of at least 1%. In the event the Company shall
effect any capital reorganization or reclassification of its Shares or shall
consolidate or merge with or into any trust or corporation (other than a
consolidation or merger in which the Company is the surviving entity) or shall
sell or transfer substantially all its assets to any other trust or corporation,
the Holders shall, if entitled to convert such Debt Securities at any time after
such transaction, receive upon conversion thereof, in lieu of each Share into
which the Debt Securities of such series would have been convertible prior to
such transaction, the same kind and amount of stock and other securities, cash
or property as shall have been issuable or distributable in connection with such
transaction with respect to each Share.
A conversion price adjustment made according to the provisions of the Debt
Securities of any series (or the absence of provision for such an adjustment)
might result in a constructive distribution to the Holders of Debt Securities of
such series or holders of Shares that would be subject to taxation as a
dividend. The Company may, at its option, make such reductions in the conversion
price, in addition to those set forth above, as the Board of Trustees of the
Company deems advisable to avoid or diminish any income tax to holders of Shares
resulting from any dividend or distribution of Shares (or rights to acquire
Shares) or from any event treated as such for income tax purposes or for any
other reason. The Board of Trustees will also have the power to resolve any
ambiguity or correct any error in the provisions relating to the adjustment of
the conversion price of the Debt Securities of such series and its actions in so
doing shall be final and conclusive.
Fractional Shares will not be issued upon conversion, but, in lieu thereof,
the Company will pay a cash adjustment based upon market price.
The Holders of Debt Securities of any series at the close of business on an
interest payment record date shall be entitled to receive the interest payable
on such Debt Securities on the corresponding interest payment date
notwithstanding the conversion thereof. However, Debt Securities surrendered for
conversion during the period from the close of business on any record date for
the payment of interest to the opening of business on the corresponding interest
payment date must be accompanied by payment of an amount equal to the interest
payable on such interest payment date. Holders of Debt Securities of any series
who convert Debt Securities of such series on an interest payment date will
receive the interest payable by the Company on such date and need not include
payment in the amount of such interest upon surrender of such Debt Securities
for conversion. Except as aforesaid, no payment or adjustment is to be made on
conversion for interest accrued on the Debt Securities of any series or for
dividends on Shares.
OPTIONAL REDEMPTION. The Debt Securities of any series that are
convertible into Shares will be subject to redemption, in whole or from time to
time in part, at any time for certain reasons intended to protect the Company's
status as a REIT at the option of the Company on at least 30 days' prior notice
by mail at a redemption price equal to 100% of the principal amount, plus
interest accrued to the date of redemption. Except as otherwise set forth in the
accompanying Prospectus Supplement, the Company may exercise its redemption
powers solely with respect to the securities of the security holder or holders
which pose a threat to the Company's REIT status and only to the extent deemed
necessary by the Company's Board of Trustees to preserve such status. (See
"Redemption" under "Description of Shares".)
DIVIDENDS, DISTRIBUTIONS AND ACQUISITIONS OF SHARES OF BENEFICIAL
INTEREST. The Indenture provides that the Company will not (i) declare or pay
any dividend or make any distribution on its Shares or to holders of its Shares
(other than dividends or distributions payable in its Shares or other than as
the Company determines is necessary to maintain its status as a REIT) or (ii)
purchase, redeem or otherwise acquire or retire for value any of its Shares or
permit any subsidiary to do so, if at the time of such action an Event of
Default (as defined in the Indenture) has occurred and is continuing or would
exist immediately after giving effect to such action.
ADDITIONAL COVENANTS. Any additional covenants of the Company with respect
to a series of the Debt Securities will be set forth in the Prospectus
Supplement relative thereto.
MODIFICATION OF THE INDENTURE. Under the Indenture, with certain
exceptions, the rights and obligations of the Company with respect to any series
of Debt Securities and the rights of Holders of such series may only be modified
by the Company and the Trustee with the consent of the Holders
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<PAGE> 40
of at least a majority in principal amount of the outstanding Debt Securities of
such series. However, without the consent of each Holder of any Debt Securities
affected, an amendment, waiver or supplement may not (i) reduce the principal
of, or rate of interest on, any Debt Securities; (ii) change the stated maturity
date of the principal of, or any installment of interest on, any Debt
Securities; (iii) waive a default in the payment of the principal amount of, or
the interest on, or any premium payable on redemption of, any Debt Securities;
(iv) change the currency for payment of the principal of, or premium or interest
on, any Debt Securities; (v) impair the right to institute suit for the
enforcement of any such payment when due; (vi) adversely affect any right to
convert any Debt Securities; (vii) reduce the amount of outstanding Debt
Securities necessary to consent to an amendment, supplement or waiver provided
for in the Indenture; or (viii) modify any provisions of the Indenture relating
to the modification and amendment of the Indenture or waivers of past defaults,
except as otherwise specified.
EVENTS OF DEFAULT, NOTICE AND WAIVER. Except as otherwise set forth in the
accompanying Prospectus Supplement, the following is a summary of certain
provisions of the Indenture relating to events of default, notice and waiver.
The following are Events of Default under the Indenture with respect to any
series of Debt Securities: (i) default in the payment of interest on the Debt
Securities of such series when due and payable, which continues for 30 days;
(ii) default in the payment of principal of (and premium, if any) on the Debt
Securities when due, at maturity, upon redemption or otherwise, which continues
for five Business Days; (iii) failure to perform any other covenant of the
Company contained in the Indenture or the Debt Securities of such series which
continues for 60 days after written notice as provided in the Indenture; (iv)
default under any bond, debenture or other Indebtedness (as defined in the
Indenture) of the Company or any subsidiary if (a) either (x) such event of
default results from the failure to pay any such Indebtedness at maturity or (y)
as a result of such event of default, the maturity of such Indebtedness has been
accelerated prior to its expressed maturity and such acceleration shall not be
rescinded or annulled or the accelerated amount paid within ten days after
notice to the Company of such acceleration, or such Indebtedness having been
discharged, and (b) the principal amount of such Indebtedness, together with the
principal amount of any other such Indebtedness in default for failure to pay
principal or interest thereon, or the maturity of which has been so accelerated,
aggregates $10,000,000 or more; (v) certain events of bankruptcy, insolvency or
reorganization relating to the Company; and (vi) any other Event of Default
provided with respect to the Debt Securities of that series.
If an Event of Default occurs and is continuing with respect to the Debt
Securities of any series, either the Trustee or the Holders of a majority in
aggregate principal amount of the outstanding Debt Securities of such series may
declare the Debt Securities due and payable immediately.
The Indenture provides that the Trustee will, within 90 days after the
occurrence of any Default or Event of Default with respect to the Debt
Securities of any series, give to the Holders of Debt Securities notice of all
uncured Defaults and Events of Default known to it, but the Trustee will be
protected in withholding such notice if it in good faith determines that the
withholding of such notice is in the interest of such Holders, except in the
case of a default in the payment of the principal of (or premium, if any) or
interest on any of the Debt Securities of such series.
The Indenture provides that the Holders of a majority in aggregate
principal amount of the Debt Securities of any series then outstanding may
direct the time, method and place of conducting any proceedings for any remedy
available to the Trustee or exercising any trust or power conferred on the
Trustee with respect to the Debt Securities of such series. The right of a
Holder to institute a proceeding with respect to the Indenture is subject to
certain conditions precedent including notice and indemnity to the Trustee, but
the Holder has an absolute right to receipt of principal of (and premium, if
any) and interest on such Holder's Debt Securities on or after the respective
due dates expressed in the Debt Securities, and to institute suit for the
enforcement of any such payments.
The Holders of a majority in principal amount of the outstanding Debt
Securities of any series then outstanding may on behalf of the Holders of all
Debt Securities of such series waive certain past defaults, except a default in
payment of the principal of (or premium, if any) or interest on any Debt
Securities of such series or in respect of certain provisions of the Indenture
which cannot be modified or amended without the consent of the Holder of each
outstanding Debt Securities of such series affected thereby.
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<PAGE> 41
The Company will be required to furnish to the Trustee annually a statement
of certain officers of the Company stating whether or not they know of any
Default or Events of Default (as defined in the Indenture) and, if they have
knowledge of a Default or Event of Default, a description of the efforts to
remedy the same.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE. The Indenture provides that the
Company may merge or consolidate with, or sell or convey all or substantially
all of its assets to, any other trust or corporation, provided that (i) either
the Company shall be the continuing entity, or the successor entity (if other
than the Company) shall be an entity organized and existing under the laws of
the United States or a state thereof or the District of Columbia (although it
may, in turn, be owned by a foreign entity) and such entity shall expressly
assume by supplemental indenture all of the obligations of the Company under the
Debt Securities of any series and the Indenture, (ii) immediately after giving
effect to such transactions no Default or Event of Default shall have occurred
and be continuing, and (iii) the Company shall have delivered to the Trustee an
Officers' Certificate and opinion of counsel, stating that the transaction and
supplemental indenture comply with the Indenture. The Indenture does not contain
any provision requiring the Company to repurchase the Debt Securities of any
series at the option of the Holders thereof in the event of a leveraged buyout,
recapitalization or similar restructuring of the Company, even though the
Company's creditworthiness and the market value of the Debt Securities may
decline significantly as a result of such transaction. The Indenture does not
protect Holders of the Debt Securities of any series against any decline in
credit quality, whether resulting from any such transaction or from any other
cause.
GLOBAL SECURITIES. The Debt Securities of a series may be issued in whole
or in part in global form (the "Global Securities"). The Global Securities will
be deposited with a depository (the "Depository"), or with a nominee for a
Depository, identified in the Prospectus Supplement. In such case, one or more
Global Securities will be issued in a denomination or aggregate denominations
equal to the portion of the aggregate principal amount of outstanding Debt
Securities of the series to be represented by such Global Security or
Securities. Unless and until it is exchanged in whole or in part for Debt
Securities in definitive form, a Global Security may not be transferred except
as a whole by the Depository for such Global Security to a nominee of such
Depository or by a nominee of such Depository to such Depository or another
nominee of such Depository or by such Depository or any such nominee to a
successor for such Depository or a nominee of such successor.
The specific material terms of the depository arrangement with respect to
any portion of a series of Debt Securities to be represented by a Global
Security will be described in the Prospectus Supplement. The Company anticipates
that the following provisions will apply to all depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security will credit, on its book entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of persons that have accounts with such Depository
("participants"). The accounts to be credited shall be designated by any
underwriters or agents participating in the distribution of such Debt
Securities. Ownership of beneficial interests in a Global Security will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests in such Global Security will be shown on, and
the transfer of that ownership will be effected only through records maintained
by the Depository for such Global Security (with respect to interests of
participants) or by participants or persons that hold through participants (with
respect to interests of persons other than participants). So long as the
Depository for a Global Security, or its nominee, is the registered owner of
such Global Security, such Depository or such nominee as the case may be, will
be considered the sole owner or Holder of the Debt Securities represented by
such Global Security for all purposes under the Indenture; provided, however,
that for purposes of obtaining any consents or directions required to be given
by the Holders of the Debt Securities, the Company, the Trustee and its agents
will treat a person as the holder of such principal amount of Debt Securities as
specified in a written statement of the Depository.
Principal, premium, if any, and interest payments, if any, on Debt
Securities represented by a Global Security registered in the name of a
Depository or its nominee will be made to such
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<PAGE> 42
Depository or its nominee, as the case may be, as the registered owner of such
Global Security. None of the Company, the Trustee or any Paying Agent for such
Debt Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in such Global Security or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
The Company expects that the Depository for any Debt Securities represented
by a Global Security, upon receipt of any payment of principal, premium, if any,
or interest will immediately credit participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of such Depository. The
Company also expects that payments by participants will be governed by standing
instructions and customary practices, as is now the case with the securities
held for the accounts of customers registered in "street names," and will be the
responsibility of such participants.
If the Depository for any Debt Securities represented by a Global Security
is at any time unwilling or unable to continue as Depository and a successor
Depository is not appointed by the Company within 90 days, the Company will
issue each Debt Security in definitive form to the beneficial owners thereof in
exchange for such Global Security. In addition, the Company may at any time and
in its sole discretion determine not to have any of the Debt Securities of a
series represented by one or more Global Securities and, in such event, will
issue Debt Securities of such series in definitive form in exchange for all of
the Global Security or Securities representing such Debt Securities.
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such laws may impair
the ability to transfer beneficial interests in Debt Securities represented by
Global Securities.
GOVERNING LAW. The Indenture and the Debt Securities will be governed by
and construed in accordance with the laws of the Commonwealth of Massachusetts.
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<PAGE> 43
DESCRIPTION OF SECURITIES WARRANTS
The Company may issue Securities Warrants for the purchase of Debt
Securities or Shares. Securities Warrants may be issued independently or
together with Debt Securities or Shares offered by any Prospectus Supplement and
may be attached to or separate from such Debt Securities or Shares. Each series
of Securities Warrants will be issued under a separate warrant agreement (a
"Securities Warrant Agreement") to be entered into between the Company and a
bank or trust company, as Securities Warrant agent, all as set forth in the
Prospectus Supplement relating to the particular issue of offered Securities
Warrants. The Securities Warrant agent will act solely as an agent of the
Company in connection with the Securities Warrant certificates relating to the
Securities Warrants and will not assume any obligation or relationship of agency
or trust for or with any holders of Securities Warrant certificates or
beneficial owners of Securities Warrants. The following summaries of certain
provisions of the Securities Warrant Agreement and Securities Warrants do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, all the provisions of the Securities Warrant Agreement and the
Securities Warrant certificates relating to each series of Security Warrants
which will be filed with the Commission and incorporated by reference as an
exhibit to the Registration Statement of which this Prospectus is a part at or
prior to the time of the issuance of such series of Security Warrants.
If Debt Securities Warrants are offered, the applicable Prospectus
Supplement will describe the terms of such Securities Warrants, including the
following where applicable: (i) the offering price, (ii) the denominations and
terms of the series of Debt Securities purchasable upon exercise of such
Securities Warrants, (iii) the designation and terms of any series of Debt
Securities with which such Securities Warrants are being offered and the number
of such Securities Warrants being offered with each such Debt Security, (iv) the
date, if any, on and after which such Securities Warrants and the related series
of Debt Securities will be transferable separately, (v) the principal amount of
the series of Debt Securities purchasable upon exercise of each such Securities
Warrant and the price at which such principal amount of Debt Securities of such
series may be purchased upon such exercise, (vi) the date on which the right to
exercise such Securities Warrants shall commence and the date (the "Expiration
Date") on which such right shall expire, (vii) whether the Securities Warrants
will be issued in registered or bearer form, (viii) any special United States
Federal income tax consequences, (ix) the terms, if any, on which the Company
may accelerate the Expiration Date and (x) any other terms of such Securities
Warrants.
In the case of Share Warrants, the applicable Prospectus Supplement will
describe the terms of such Securities Warrants, including the following where
applicable: (i) the offering price, (ii) the aggregate number of Shares
purchasable upon exercise of such Securities Warrants and the exercise price,
(iii) the designation and terms of the Securities with which such Securities
Warrants are being offered, if any, and the number of such Securities Warrants
being offered with each such Security, (iv) the date, if any, on and after which
such Securities Warrants and the related series of Debt Securities or Shares
will be transferable separately, (v) the date on which the right to exercise
such Securities Warrants shall commence and the Expiration Date, (vi) any
special United States Federal income tax consequences and (vii) any other terms
of such Securities Warrants.
Securities Warrant certificates may be exchanged for new Securities Warrant
certificates of different denominations, may (if in registered form) be
presented for registration of transfer, and may be exercised at the corporate
trust office of the Securities Warrant agent or any other office indicated in
the applicable Prospectus Supplement. Prior to the exercise of any Debt
Securities Warrants, holders of such Securities Warrants will not have any of
the rights of holders of the Debt Securities purchasable upon such exercise,
including the right to receive payments of principal of, premium, if any, or
interest, if any, on such Debt Securities or to enforce covenants in the
applicable indenture. Prior to the exercise of any Share Warrants, holders of
such Securities Warrants will not have any rights of holders of such Shares,
including the right to receive payments of dividends, if any, on such Shares, or
to exercise any applicable right to vote.
CERTAIN RISK CONSIDERATIONS. Any Securities Warrants issued by the Company
will involve a certain degree of risk, including risks arising from the
fluctuations in the price of the underlying securities and general risks
applicable to the stock market (or markets) on which the underlying securities
are traded.
12
<PAGE> 44
Prospective purchasers of the Securities Warrants should recognize that the
Securities Warrants may expire worthless and, thus, purchasers should be
prepared to sustain a total loss of the purchase price of their Securities
Warrants. This risk reflects the nature of a Securities Warrant as an asset
which, other factors held constant, tends to decline in value over time and
which may, depending on the price of the underlying securities, become worthless
when it expires. The trading price of a Securities Warrant at any time is
expected to increase as the price, or, if applicable, dividend rate on the
underlying securities increases. Conversely, the trading price of a Securities
Warrant is expected to decrease as the time remaining to expiration of the
Securities Warrant decreases and as the price or, if applicable, dividend rate
on the underlying securities, decreases. Assuming all other factors are held
constant, the more a Securities Warrant is "out of the money" (i.e., the more
the exercise price exceeds the price of the underlying securities and the
shorter its remaining term to expiration), the greater the risk that a purchaser
of the Securities Warrant will lose all or part of his or her investment. If the
price of the underlying securities does not rise before the Securities Warrant
expires to an extent sufficient to cover a purchaser's cost of the Securities
Warrant, the purchaser will lose all or part of his or her investment in such
Securities Warrant upon expiration.
In addition, prospective purchasers of the Securities Warrants should be
experienced with respect to options and option transactions and understand the
risks associated with options and should reach an investment decision only after
careful consideration, with their financial advisers, of the suitability of the
Securities Warrants in light of their particular financial circumstances and the
information discussed herein and, if applicable, the Prospectus Supplement.
Before purchasing, exercising or selling any Securities Warrants, prospective
purchasers and holders of Securities Warrants should carefully consider, among
other things, (i) the trading price of the Securities Warrants, (ii) the price
of the underlying securities at such time, (iii) the time remaining to
expiration and (iv) any related transaction costs. Some of the factors referred
to above are in turn influenced by various political, economic and other factors
that can affect the trading prices of the underlying securities and should be
carefully considered prior to making any investment decisions.
Purchasers of the Securities Warrants should further consider that the
initial offering price of the Securities Warrants may be in excess of the price
that a purchaser of options might pay for a comparable option in a private, less
liquid transaction. In addition it is not possible to predict the price at which
the Securities Warrants will trade in the secondary market or whether any such
market will be liquid. The Company may, but is not obligated to, file an
application to list any Securities Warrants issued on a United States national
securities exchange. To the extent that any Securities Warrants are exercised,
the number of Securities Warrants outstanding will decrease, which may result in
a lessening of the liquidity of the Securities Warrants. Finally, the Securities
Warrants will constitute direct, unconditional and unsecured obligations of the
Company and as such will be subject to any changes in the perceived
creditworthiness of the Company.
EXERCISE OF SECURITIES WARRANTS. Each Securities Warrant will entitle the
holder thereof to purchase such principal amount of Debt Securities or number of
Shares, as the case may be, at such exercise price as shall in each case be set
forth in, or calculable from, the Prospectus Supplement relating to the offered
Securities Warrants. After the close of business on the Expiration Date (or such
later date to which such Expiration Date may be extended by the Company),
unexercised Securities Warrants will become void.
Securities Warrants may be exercised by delivering to the Securities
Warrant agent payment as provided in the applicable Prospectus Supplement of the
amount required to purchase the Debt Securities or Shares, as the case may be,
purchasable upon such exercise together with certain information set forth on
the reverse side of the Securities Warrant certificate. Securities Warrants will
be deemed to have been exercised upon receipt of payment of the exercise price,
subject to the receipt within five Business Days of the Securities Warrant
certificate evidencing such Securities Warrants. Upon receipt of such payment
and the Securities Warrant certificate properly completed and duly executed at
the corporate trust office of the Securities Warrant agent or any other office
indicated in the applicable Prospectus Supplement, the Company will, as soon as
practicable, issue and deliver the Debt Securities or Shares, as the case may
be, purchasable upon such exercise. If fewer than all of the Securities Warrants
represented by such Securities Warrant certificate are exercised, a new
Securities Warrant certificate will be issued for the remaining amount of
Securities Warrants.
13
<PAGE> 45
AMENDMENTS AND SUPPLEMENTS TO SECURITIES WARRANT AGREEMENT. The Securities
Warrant Agreements may be amended or supplemented without the consent of the
holders of the Securities Warrants issued thereunder, to effect changes that are
not inconsistent with the provisions of the Securities Warrants and that do not
adversely affect the interest of the holders of the Securities Warrants.
SHARE WARRANT ADJUSTMENTS. Unless otherwise indicated in the applicable
Prospectus Supplement, the exercise price of and the number of Shares covered by
a Share Warrant are subject to adjustment in certain events, including (i)
payment of a dividend on the Shares payable in Shares and Share splits,
combinations or reclassification of Shares, (ii) issuance to all holders of
Shares of rights or warrants to subscribe for or purchase Shares at less than
their current market price (as defined in the Securities Warrant Agreement for
such series of Share Warrants) and (iii) certain distributions of evidences of
indebtedness or assets (including securities but excluding cash, dividends or
distributions paid out of consolidated earnings or retained earnings or
dividends payable in Shares or of subscription rights and warrants excluding
those referred to above).
No adjustments in the exercise price of and the number of Shares covered by
a Share Warrant will be made for regular quarterly or other periodic or
recurring cash dividends or distributions or for cash dividends or distributions
to the extent paid from consolidated earnings or retained earnings. No
adjustment will be required unless such adjustment would require a change of at
least 1% in the exercise price then in effect. Except as stated above, the
exercise price of and the number of Shares covered by a Share Warrant will not
be adjusted for the issuance of Shares or any securities convertible into or
exchangeable for Shares or carrying the right or option to purchase or otherwise
acquire the foregoing in exchange for cash, other property or services.
In the event of any (i) consolidation or merger of the Company with or into
any entity (other than consolidation or a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding Shares),
(ii) sale, transfer, lease or conveyance of all or substantially all of the
assets of the Company or (iii) reclassification, capital reorganization or
change of the Shares (other than solely a change in par value), then any holder
of a Share Warrant will be entitled, on or after the occurrence of any such
event, to receive on exercise of such Share Warrant the kind and amount of
Shares or other securities, cash or other property (or any combination thereof)
that the holder would have received had such holder exercised such holder's
Share Warrant immediately prior to the occurrence of such event. If the
consideration to be received upon exercise of the Share Warrant following any
such event consists of common stock (or its equivalent) of the surviving entity,
then from and after the occurrence of such event, the exercise price of such
Share Warrant will be subject to the same anti-dilution and other adjustments
described in the second preceding paragraph, applied as if such common stock
were Shares.
PLAN OF DISTRIBUTION
The Company may sell the Securities in any of three ways: (i) through
underwriting syndicates represented by one or more managing underwriters, or by
one or more underwriters without a syndicate; (ii) through agents designated
from time to time; and (iii) directly to investors. The names of any
underwriters or agents of the Company involved in the sale of the Securities in
respect of which this Prospectus is being delivered and any applicable
commissions or discounts will be set forth in the Prospectus Supplement. The net
proceeds to the Company from such sale will also be set forth in the Prospectus
Supplement.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices (which may be changed from time
to time), at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. The Prospectus Supplement
will describe the method of distribution of the Securities.
In connection with the sale of Securities, underwriters or agents acting on
the Company's behalf may receive compensation from the Company or from
purchasers of Securities for whom they may act as agents, in the form of
discounts, concessions or commissions. The underwriter, dealers and agents that
participate in the distribution of Securities may be deemed to be underwriters
under the Securities Act and any discounts or commissions received by them and
any profit on the resale of Securities by them may be deemed to be underwriting
discounts and commissions under the
14
<PAGE> 46
Securities Act. Any such underwriter will be identified and any such
compensation will be described in the Prospectus Supplement.
Agents and underwriters may be entitled under agreements entered into with
the Company to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which the agents or underwriters may be required to make in respect
thereof. Agents and underwriters may engage in transactions with or perform
services for the Company in the ordinary course of business.
LEGAL MATTERS
The validity of the Securities offered hereby will be passed upon for the
Company by Nutter, McClennen & Fish. In addition, Nutter, McClennen & Fish will
pass upon certain Federal income tax matters relating to the Company. The name
of any legal counsel that passes on the validity of the Securities offered
hereby for any underwriter or agent will be set forth in the applicable
Prospectus Supplement.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1994 and
1993 and the related consolidated statements of income, changes in shareholders'
equity and cash flows for each of the three years in the period ended December
31, 1994, and the financial statement schedules incorporated by reference in
this Prospectus and elsewhere in the Registration Statement, have been audited
by Coopers & Lybrand L.L.P., independent accountants, as indicated in their
report with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and auditing.
Any financial statements and schedules hereafter incorporated by reference in
the registration statement of which this Prospectus is a part that have been
audited and are the subject of a report by independent accountants will be so
incorporated by reference in reliance upon such reports and upon the authority
of such firms as experts in accounting and auditing to the extent covered by
consents filed with the Commission.
15
<PAGE> 47
INSERT MAP
[SEE THE APPENDIX FOR A DESCRIPTION OF THE CHARTS]
<PAGE> 48
===============================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES
DESCRIBED IN THIS PROSPECTUS SUPPLEMENT OR AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH
INFORMATION.
<TABLE>
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<CAPTION>
PAGE
----
<S> <C>
Incorporation of Certain Documents by
Reference.......................... S-3
The Company.......................... S-3
Health Care Reform and Regulation.... S-4
Use of Proceeds...................... S-4
Management........................... S-5
Capitalization....................... S-6
Selected Financial Data.............. S-7
Ratio of Earnings to Fixed Charges... S-7
Description of the Notes............. S-8
United States Taxation............... S-24
Supplemental Plan of Distribution.... S-29
Validity of Notes.................... S-31
PROSPECTUS
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
The Company.......................... 4
Ratio of Earnings to Fixed Charges... 5
Use of Proceeds...................... 5
Description of Shares................ 5
Description of Debt Securities....... 7
Description of Securities Warrants... 12
Plan of Distribution................. 14
Legal Matters........................ 15
Experts.............................. 15
</TABLE>
===============================================================================
===============================================================================
$200,000,000
[MEDITRUST LOGO]
MEDIUM-TERM NOTES
DUE FROM 9 MONTHS
TO 30 YEARS FROM
DATE OF ISSUE
------------------------
PROSPECTUS SUPPLEMENT
------------------------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
NATWEST CAPITAL MARKETS
LIMITED
SMITH BARNEY INC.
===============================================================================
<PAGE> 49
APPENDIX
Description of Charts contained in Meditrust Prospectus Supplement filed
pursuant to Rule 424(b)(5)
- -------------------------------------------------------------------------------
Inside Front Cover
------------------
I. Bar chart showing Meditrust's gross real estate investments as of
December 31, 1986 through June 30, 1995.
II. Pie chart showing the percentage of Meditrust's total gross real estate
investments in certain of its operators as of June 30, 1995.
III. Bar chart showing per share annual distributions by Meditrust in 1986
through 1994.
Inside Back Cover
-----------------
I. Map of the United States showing number of healthcare facilities
owned by or mortgaged to Meditrust in each state as of June 30, 1995.
II. Pie chart showing percentages of Meditrust's gross real estate
investments as of June 30, 1995 in long-term care, rehabilitation,
alcohol and substance abuse and retirement living facilities,
psychiatric hospitals, and medical office buildings and an acute care
campus.
