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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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BURNHAM PACIFIC PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 33-0204162
(State of incorporation) (I.R.S. Employer Identification Number)
</TABLE>
610 WEST ASH STREET
SUITE 1600
SAN DIEGO, CALIFORNIA 92101
(619) 652-4700
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
------------------------
DANIEL B. PLATT
610 West Ash Street
Suite 1600
San Diego, California 92101
(619) 652-4700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
WITH COPY TO:
WILLIAM B. KING, P.C.
GOODWIN, PROCTER & HOAR LLP
Exchange Place, Boston, Massachusetts 02109-2881 (617) 570-1000
Approximate date of commencement of proposed sale to the public: From time
to time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box. [X]
If this form is used to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
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<CAPTION>
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<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
AMOUNT TO BE OFFERING AGGREGATE AMOUNT OF
TITLE OF SECURITIES BEING REGISTERED REGISTERED(1) PRICE PER UNIT(2) OFFERING PRICE(3) REGISTRATION FEE(4)
<CAPTION>
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<S> <C> <C> <C> <C>
Debt Securities.................................
Common Stock(5)................................. $321,728,125 N.A. $321,728,125 $60,607
Preferred Stock(6)..............................
Depositary Shares representing Preferred
Stock(7)......................................
Warrants or Rights(8)...........................
Units of Securities.............................
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</TABLE>
(1) The amount to be registered consists of up to $200,000,000 of an
indeterminate amount of Debt Securities, Common Stock, Preferred Stock,
Depositary Shares representing Preferred Stock, Warrants or Rights and/or
Units of Securities, and pursuant to Rule 429 under the Securities Act the
Prospectus contained herein also relates to an additional $121,728,125 of
Common Stock and Convertible Debt Securities being carried forward from the
Registrant's earlier Registration Statement on Form S-3 (File No. 33-68712),
which have not been sold.
(2) The proposed maximum offering price per unit has been omitted pursuant to
Securities Act Release No. 6964. The registration fee has been calculated in
accordance with Rule 457(o) under the Securities Act and reflects the
offering price rather than the principal amount of any Debt Securities
issued at a discount.
(3) Estimated solely for purposes of computing the registration fee. No separate
consideration will be received for shares of Common Stock issued upon
conversion of Debt Securities or Preferred Stock.
(4) Pursuant to Rule 429 under the Securities Act the amount of $121,728,125 of
Common Stock and Convertible Debt Securities covered by the earlier
Registration Statement on Form S-3 (File No. 33-68712) is being carried
forward and the corresponding registration fee of $38,017 was previously
paid at the time of filing.
(5) There is also being registered hereunder such currently indeterminate number
of shares of Common Stock as may be issued upon conversion of the Debt
Securities or Preferred Stock and/or upon the exercise of Warrants or Rights
registered hereby.
(6) There is also being registered hereunder such currently indeterminate number
of shares of Preferred Stock as shall be issuable upon conversion or
redemption of Debt Securities or Depositary Shares and/or registered hereby
and upon exercise of Warrants or Rights registered hereby.
(7) There is also being registered hereunder such currently indeterminate number
of Depositary Shares representing Preferred Stock to be evidenced by
Depositary Receipts issued pursuant to a Deposit Agreement. In the event the
Registrant elects to offer to the public fractional interests in shares of
Preferred Stock registered hereunder, Depositary Receipts will be
distributed to those persons purchasing such fractional interests, and
shares of Preferred Stock will be issued to the depositary under the Deposit
Agreement.
(8) There is also being registered hereunder such currently indeterminate amount
and number of Warrants or Rights, representing rights to purchase Debt
Securities, shares of Preferred Stock, Depositary Shares or shares of Common
Shares registered hereby.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
NOR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF
THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED JULY 18, 1997
PROSPECTUS
- -----------------
$321,728,125
BURNHAM PACIFIC PROPERTIES, INC.
DEBT SECURITIES
COMMON STOCK
PREFERRED STOCK
DEPOSITARY SHARES REPRESENTING PREFERRED STOCK
WARRANTS OR RIGHTS
UNITS OF SECURITIES
------------------------
Burnham Pacific Properties, Inc. ("Burnham" or the "Company") may offer
from time to time in one or more series (i) its unsecured debt securities
consisting of bonds, debentures, notes and/or other evidences of indebtedness
("Debt Securities"), (ii) shares of its common stock, par value $.01 per share
("Common Stock"), (iii) shares of its preferred stock, par value $.01 per share
("Preferred Stock" and, together with the Common Stock, the "Capital Stock"),
(iv) Preferred Stock represented by depositary shares ("Depositary Shares"), (v)
warrants or rights ("Warrants") for Common Stock, Preferred Stock and/or Debt
Securities and (vi) units ("Units") consisting of two or more of the foregoing
securities, with an aggregate public offering price of up to $321,728,125 in
amount, at prices and on terms to be determined at the time of offering. The
Debt Securities, Common Stock, Preferred Stock, Depositary Shares, Warrants and
Units (collectively, the "Securities") may be offered separately or together, in
separate series, in amounts, at prices and on terms to be set forth in one or
more supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities for which this Prospectus is being
delivered will be set forth in the applicable Prospectus Supplement and will
include, where applicable: (i) in the case of Debt Securities, the specific
title, aggregate principal amount, ranking, currency, form (which may be
registered or bearer, or certificated or global), authorized denominations,
maturity, rate (or manner of calculation thereof) and time of payment of
interest, terms for redemption at the option of the Company or repayment at the
option of the holder, terms for sinking fund payments, terms for conversion into
Preferred Stock or Common Stock, covenants and the offering price; (ii) in the
case of Common Stock, the offering price; (iii) in the case of Preferred Stock,
the specific designation and stated value per share, any dividend, liquidation,
redemption, conversion, voting and other rights, and the offering price; (iv) in
the case of Depositary Shares, the fractional shares of Preferred Stock
represented by each such Depositary Share; (v) in the case of Warrants, the
number and terms thereof, any applicable designation thereof, and the
designation and the number of securities issuable upon their exercise, the
exercise price, the terms of the offering and sale thereof and, where
applicable, the duration and detachability thereof; and (vi) in the case of
Units, a description of the securities comprising such Units and the offering
price thereof. In addition, such specific terms may include limitations on
direct or beneficial ownership and restrictions on transfer of the Securities,
in each case as may be consistent with the Company's Articles of Incorporation,
as amended (the "Charter") or otherwise appropriate to preserve the status of
the Company as a real estate investment trust ("REIT") for federal income tax
purposes.
The applicable Prospectus Supplement will also contain information, where
appropriate, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Securities may be offered directly by the Company, through agents
designated from time to time by the Company or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in an accompanying Prospectus
Supplement. See "Plan of Distribution." No Securities may be sold without
delivery of a Prospectus Supplement describing the method and terms of the
offering of such Securities.
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.
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The date of this Prospectus is July 18, 1997.
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AVAILABLE INFORMATION
No person has been authorized to give any information or to make any
representation not contained or incorporated by reference in this Prospectus or
any accompanying Prospectus Supplement and, if given or made, such information
or representation must not be relied upon as having been authorized by the
Company or any underwriter, dealer or agent. Neither the delivery of this
Prospectus or any accompanying Prospectus Supplement nor any sale made hereunder
or thereunder shall, under any circumstances, create an implication that the
information contained herein or in the accompanying Prospectus Supplement is
correct as of any date subsequent to the date hereof or thereof or that there
has been no change in the affairs of the Company since the date hereof or
thereof. Neither this Prospectus nor any accompanying Prospectus Supplement
constitutes an offer to sell or a solicitation of an offer to buy Securities in
any jurisdiction in which such offer or solicitation is not authorized or in
which the person making such offer or solicitation is not qualified to do so or
to any person to whom it is unlawful to make such offer or solicitation.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith
files periodic and current reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Copies of such
material can be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Such reports, proxy statements and other information can also be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street N.W., Washington, D.C. 20549, and at
the Commission's Regional Offices located at 500 West Madison Street (Suite
1400), Chicago, Illinois 60661 and at 7 World Trade Center, 13th Floor, New
York, New York 10048 and at the offices of the New York Stock Exchange, Inc., 20
Broad Street, New York, New York 10005. The Commission also maintains a Web site
that contains reports, proxy statements and other information about the Company
filed electronically with the Commission: http://www.sec.gov.
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. This Prospectus does not contain all the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules 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 or in the accompanying Prospectus
Supplement as to the contents of any contract or other document referred to do
not purport to be 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 (i) its Annual Report on Form
10-K for the year ended December 31, 1996 filed with the Commission on March 25,
1997, (ii) its Proxy Statement dated March 31, 1997 for its 1997 Annual Meeting
of Shareholders, (iii) its Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997 filed on May 15, 1997, (iv) its Current Report on Form 8-K/A
dated January 31, 1997 filed on April 15, 1997, and (v) the description of its
Common Stock contained in its Registration Statement on Form 8-B filed on June
2, 1997.
All documents subsequently filed by the Company pursuant to Sections 13(a),
13(c), 14 or 15(d) of the 1934 Act after the date of this Prospectus and prior
to the termination of the Offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein (or in an applicable Prospectus Supplement) or in
any subsequently filed document that is incorporated or deemed to be
incorporated by reference herein modifies or supersedes such
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statement. Any such statement so modified or superseded shall not be deemed to
constitute a part of this Prospectus or any Prospectus Supplement, except as so
modified or superseded.
The Company will provide, without charge, to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, at the request
of such person, a copy of any or all of the documents incorporated herein by
reference (other than exhibits thereto, unless such exhibits are specifically
incorporated by reference into such documents). Written requests for such copies
should be directed to Daniel B. Platt, Chief Financial Officer, Burnham Pacific
Properties, Inc., 610 West Ash Street, Suite 1600, San Diego, California 92101,
telephone (619) 652-4700.
THE COMPANY
The Company is a fully-integrated, self-managed real estate operating
company which acquires, rehabilitates, develops and manages retail properties on
the West Coast. The Company was originally incorporated as a California
corporation in 1986 and in 1987 became the successor to a publicly-traded real
estate limited partnership which was organized in 1963. The Company reorganized
as a Maryland corporation in May 1997. The Company has elected to qualify as a
real estate investment trust ("REIT") for federal income tax purposes since
1987.
The Company's principal, executive office is located at 610 West Ash
Street, Suite 1600, San Diego, California, 92101, and its telephone number is
(619) 652-4700.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
QUARTER
ENDED
YEAR ENDED DECEMBER 31, MARCH 31
------------------------------------------- --------
1992 1993 1994 1995 1996 1997
---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges.......... 1.09 1.94 2.13 -- 1.67 1.23
Deficiency in the coverage of fixed charges
by earnings before fixed charges.......... -- -- -- $15,048 -- --
</TABLE>
The ratio of earnings to fixed charges equals earnings before fixed charges
divided by fixed charges. For purposes of calculating the ratio of earnings to
fixed charges, earnings before fixed charges consist of income from operations
plus fixed charges (other than capitalized interest). Fixed charges consist of
interest expense and capitalized interest.
Exclusive of impairments/write downs of assets, the ratio of earnings to
fixed charges for the year ended December 31, 1995, would have been 1.61.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of Securities primarily to
repay indebtedness, to acquire additional retail shopping centers or other
retail or entertainment facilities and to fund the development, expansion and/or
improvement of new or existing retail shopping centers or other retail or
entertainment centers already owned by the Company. The net proceeds from the
sale of Securities may also be used for other general corporate purposes.
Pending their use as described above, net proceeds from the sale of Securities
may be invested in short term investments.
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RISK FACTORS
In addition to the other information set forth and incorporated by
reference herein, prospective investors should carefully consider the following
information in evaluating the Company and its business before making an
investment in the Securities offered hereby. The information contained and
incorporated by reference in this Prospectus and the applicable Prospectus
Supplement contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that involve a number of risks and uncertainties. A number of factors could
cause results to differ materially from those anticipated by such
forward-looking statements. These factors include, but are not limited to, the
competitive environment in the retail industry in general and in the Company's
specific market areas, changes in prevailing interest rates and the availability
of financing, inflation, economic conditions in general and in the Company's
specific market areas, labor disturbances, demands placed on management by a
substantial increase in the number of properties owned by the Company (the
"Properties"), and changes in the Company's acquisition plans and certain other
factors described below or in the Prospectus Supplement relating to a specific
issuance of Securities. In addition, such forward-looking statements are
necessarily dependent upon assumptions, estimates and data that may be incorrect
or imprecise. Accordingly, any forward-looking statements included or
incorporated by reference in this Prospectus and the applicable Prospectus
Supplement do not purport to be predictions of future events or circumstances
and may not be realized. Forward-looking statements can be identified by, among
other things, the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "seeks," "pro forma," or "anticipates," or
the negative thereof, or other variations thereon or comparable terminology, or
by discussions of strategy or intentions.
GENERAL REAL ESTATE INVESTMENT RISKS
Real property investments are subject to a variety of risks. The yields
available from equity investments in real estate depend on the amount of income
generated and expenses incurred. If the Properties do not generate sufficient
income to meet operating expenses, including debt service and capital
expenditures, the Company's results of operations and ability to make
distributions to its stockholders will be adversely affected. The performance of
the economy in each of the areas in which the Company's Properties are located
affects occupancy, market rental and vacancy rates and expenses, and,
consequently, has an impact on the revenues from the Properties and their
underlying values. The financial results of major local employers may have an
impact on the revenues and value of certain of the Properties.
Revenues from the Company's Properties may be further adversely affected
by, among other things, the general economic climate, local economic conditions
in which the Properties are located, such as oversupply of space or a reduction
in demand for rental space, the attractiveness of the Properties to tenants,
competition from other available space, the ability of the Company to provide
for adequate maintenance and insurance and increased operating expenses
(including real estate taxes and utilities) which may not be passed through to
tenants, and the expense of periodically renovating, repairing and re-leasing
space. There is also the risk that as leases on the Properties expire, tenants
will enter into new leases on terms that are less favorable to the Company.
Revenues and real estate values may also be adversely affected by such factors
as applicable laws (e.g., the Americans With Disabilities Act of 1990 and tax
laws), interest rate levels and the availability and terms of financing. In
addition, real estate investments are relatively illiquid and, therefore, will
tend to limit the ability of the Company to vary its portfolio promptly in
response to changes in economic or other conditions.
Most of the leases of the Company's retail Properties, as is common with
many multi-tenant shopping centers, provide for tenants to reimburse the Company
for a portion (frequently based upon the portion of total retail space in the
Property that is occupied by the tenant) of the common area maintenance, real
estate taxes, insurance and other operating expenses of the Property. To the
extent that a Property has vacant rentable space, not only will the Company be
deprived of the base rent that it would receive if the vacant space were
occupied, but the Company itself will have to bear the unreimbursed expense
applicable to such vacant space. Likewise, such expenses are generally not
reduced when circumstances cause a reduction in rental revenues from the
Property. If a Property is mortgaged to secure the payment of indebtedness and
if the Company is
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unable to meet its mortgage payments, a loss could be sustained as a result of
foreclosure on the Property or the exercise of other remedies by the mortgagee.
Likewise, if a Property suffers sustained reductions in revenues, the Company
may sustain a writedown of the asset value and a related charge to earnings.
GEOGRAPHIC CONCENTRATION
The Company's Properties are all located on the West Coast, substantially
all within the State of California, and within such state primarily in the San
Diego County, greater Los Angeles and San Francisco Bay areas. This
concentration of Properties subjects the Company to the strengths or weaknesses
of the California economy and the aforementioned local economies in a number of
ways. The performance of the economy in each locality affects occupancy, market
rental rates and expenses and, consequently, has an impact on the revenues from
the Company's Properties and their underlying values. The financial results of
major local employers may have an impact on the revenues and value of certain of
the Properties. A downturn in the economy of California in general or of any of
these local economies could adversely affect the Company's results of operations
and ability to make distributions to its stockholders. In that regard, certain
areas of California (particularly the greater Los Angeles area) have in the past
been adversely affected by reductions in defense spending, and certain other
areas of California (particularly the San Francisco Bay area) may be
substantially influenced by conditions in the high technology industries.
Additionally, certain areas in California have been and remain subject to
various natural disasters, including earthquakes and floods. See "--Insurance
Coverage Limitations."
INVESTMENT IN SINGLE INDUSTRY
The Company's current strategy is to acquire interests only in retail
shopping centers and related properties. As a result, the Company will be
subject to risks inherent in investments in a single industry. The effects on
cash available for distribution to the Company's stockholders resulting from a
downturn in the retail industry might be more pronounced than if the Company's
portfolio were more diversified as to property types.
Among the risks that the Company as an owner of Properties leased primarily
to retail tenants may face are the volatile nature of the retail business and
changes in consumer preferences, which may result in tenant failures or changes
in the physical requirements of retailers that the Company may be required to
accommodate in order to retain or attract tenants. Retail chains may overexpand
in the same general market area, thereby creating competition with their own
stores that may be in one or more of the Company's Properties. Because many
anchor tenants frequently have negotiating power to demand the exclusive or sole
right to sell certain types of products in a shopping center, the existence of
such rights may adversely limit the Company's ability to lease space in the
center to retailers of potentially competing products. The foregoing and similar
factors may affect the revenues, and resulting value, of the Company's
Properties.
COMPETITION
Numerous retail properties compete with the Company's Properties in
attracting tenants to lease space. Some of these competing properties are newer
and better located or designed and may offer lower expenses or be better
capitalized than the Company's Properties. The number of competitive commercial
properties in a particular area could have a material adverse effect on the
Company's ability to lease space in its Properties or at newly developed or
acquired properties and on the rents charged.
Additionally, the Company may be competing for investment opportunities
with entities which have substantially greater financial resources than the
Company. These entities may generally be able to accept more risk than the
Company can prudently manage. Competition may generally reduce the number of
suitable investment opportunities offered to the Company and increase the
bargaining power of property owners seeking to sell.
BANKRUPTCY AND FINANCIAL CONDITION OF TENANTS
At any time, a tenant of the Properties may seek the protection of the
bankruptcy laws, which could result in the rejection and termination of such
tenant's lease and thereby adversely affect the Company's results of operations
and ability to make distributions to its stockholders. Although the Company has
not experienced
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material losses from tenant bankruptcies, no assurance can be given that tenants
will not file for bankruptcy protection in the future, or if any tenants file,
that they will affirm their leases and continue to make rental payments in a
timely manner. In addition, a tenant from time to time may experience a downturn
in its business which may weaken its financial condition and result in the
failure to make rental payments when due. If tenant leases are not affirmed
following bankruptcy or if a tenant's financial condition weakens, the Company's
results of operations and ability to make distributions to its stockholders may
be adversely affected.
ACQUISITION AND DEVELOPMENT ACTIVITIES
The Company intends to acquire existing retail commercial properties to the
extent that they can be acquired on acceptable terms and meet the Company's
investment criteria, including the availability of suitable financing.
Acquisitions of retail commercial properties entail general investment risks
associated with any real estate investment, including the risk that investments
will fail to perform as expected or that estimates of the cost of improvements
to bring an acquired property up to standards established for the intended
market position may prove inaccurate.
The Company is pursuing certain commercial property development projects
and expects to develop other projects. As a general matter, property development
projects typically carry a higher, and sometimes substantially higher, level of
risk than the acquisition of existing properties. For example, development
projects generally require various governmental and other approvals, the receipt
of which cannot be assured. Approvals frequently require undertakings for public
infrastructure improvements or other activities to mitigate the effects of the
proposed development, whose costs also cannot be assured. The Company's
development activities will entail a variety of other risks, including the risk
that funds will be expended and management time will be devoted to projects
which may not come to fruition; the risk that a project will not be developed by
the scheduled completion date; the risk that construction costs of a project may
exceed original estimates, possibly making the project economically unfavorable
to operate or requiring a writedown of the carrying amount of the project; the
risk that occupancy rates and rents at a completed project will be less than
anticipated; and the risk that expenses at a completed development will be
higher than anticipated. These risks may adversely affect the Company's results
of operations and ability to make distributions to its stockholders.
The integration of the aforementioned acquisition and development
properties into the systems and procedures of the Company presents a management
challenge, and the failure to integrate such properties into the Company's
operating structures could have a material adverse effect on the Company's
results of operations and ability to make distributions to its stockholders.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the efforts of its executive officers, J. David
Martin, President and Chief Executive Officer of the Company, and Daniel B.
Platt, Executive Vice President, Chief Financial Officer and Chief
Administrative Officer of the Company, and the loss of their services could have
an adverse affect on the operations of the Company. The Company has an
employment agreement with Mr. Martin, which is terminable by either party at
will.
CONFLICTS OF INTEREST
The Company currently has various development projects which it acquired
from Mr. Martin, concurrently with Mr. Martin's appointment as President and
Chief Executive Officer in 1995. While the Company has adopted procedures for
decision-making with respect to such projects (including Mr. Martin's absence
from Board of Directors meetings during certain discussions involving such
projects), nevertheless the arrangement could result in conflicts of interest in
one or more of the projects.
CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
The Company has elected to qualify as a REIT under the Internal Revenue
Code of 1986 as amended (the "Code"). Although the Company believes that it has
operated in a manner which satisfies the REIT qualification requirements since
1987, no assurance can be given that the Company's qualification as a REIT will
not be challenged by the Internal Revenue Service for taxable years still
subject to audit or that the
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Company will continue to qualify as a REIT in future years. A REIT generally is
not taxed on distributed income so long as it distributes to its stockholders at
least 95% of its real estate investment trust taxable income. Qualification as a
REIT involves the satisfaction of numerous requirements (some on an annual or
quarterly basis) established under highly technical and complex Code provisions
for which there are only limited judicial or administrative interpretations and
involves the determination of various factual matters and circumstances not
entirely within the Company's control. If in any taxable year the Company were
to fail to qualify as a REIT, the Company would not be allowed a deduction for
distributions to stockholders in computing taxable income and would be subject
to federal income tax on its taxable income at regular corporate rates. Unless
entitled to relief under certain statutory provisions, the Company would also be
disqualified from treatment as a REIT for the four taxable years following the
year during which qualification was lost. As a result, the funds available for
distribution to the Company's stockholders would be reduced for each of the
years involved. Although the Company currently intends to operate in a manner
designed to qualify as a REIT, it is possible that future economic, market,
legal, tax or other considerations may cause the Company to fail to qualify as a
REIT or may cause the Company's Board of Directors to revoke the REIT election.
See "Federal Income Tax Considerations."
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations, an
owner or operator of real estate is liable for the costs of removal or
remediation of certain hazardous or toxic substances on or in such property.
Such laws often impose such liability without regard to whether the owner or
operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. The presence of such substances, or the failure to properly
remediate such substances, may adversely affect the owner's or operator's
ability to sell or rent such property or to borrow using such property as
collateral. Persons who arrange for the disposal or treatment of such hazardous
or toxic substances may also be liable for the costs of removal or remediation
of such substances at a disposal or treatment facility, whether or not such
facility is owned or operated by such person. In connection with the ownership
(direct or indirect), operation, management and development of real properties,
the Company may be considered an owner or operator of such properties or as
having arranged for the disposal or treatment of hazardous or toxic substances
and, therefore, may be potentially liable for removal or remediation costs.
Certain environmental laws impose liability for release of asbestos-containing
materials into the air, and third parties may seek recovery from owners or
operators of real properties for personal injuries associated with
asbestos-containing materials. The Company may be potentially liable for removal
or remediation costs, as well as certain other costs, including governmental
fines and costs related to injuries to persons and property, resulting from the
environmental condition of its Properties, regardless of whether the Company
itself actually contributed to such condition.
RISKS OF LEVERAGE
Like many owners of real estate, the Company relies on borrowings to assist
it in acquiring, developing and holding its properties. The Company currently
has a line of credit facility (the "Credit Facility") that has secured and
unsecured portions and also owns various Properties that are encumbered by deeds
of trust or mortgages to various lenders. Neither the Charter nor the Bylaws of
the Company limit the amount of indebtedness the Company may incur. Although
financial covenants contained in the Credit Facility limit the amount of
additional indebtedness the Company may incur, those covenants currently would
permit the Company to incur substantial additional indebtedness. Currently, the
maximum committed amount available under the Company's Credit Facility is $205
million. The Company has utilized the Credit Facility to finance certain recent
acquisitions and may use the Credit Facility to fund the acquisition of
additional properties and for other general corporate purposes. A portion of the
Credit Facility is currently secured by certain Properties owned by the Company
and the Credit Facility requires that the Company comply with a number of
financial covenants. The Company is also obligated by other indebtedness secured
by individual Properties. There can be no assurances that the Company will be
able to meet its debt service obligations or to comply with the financial
covenants in its debt instruments and, to the extent that it cannot, the lenders
typically would be entitled to demand immediate repayment of the related
indebtedness and to commence foreclosure proceedings against the property
securing such indebtedness, thereby subjecting the Company to the risk of loss
of
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some or all of its assets, including certain of its Properties. Adverse economic
conditions could cause the terms on which borrowings become available to be
unfavorable. In such circumstances, if the Company is in need of capital to
repay indebtedness in accordance with its terms or otherwise, it could be
required to liquidate one or more investments in Properties at unfavorable
prices. The Company will be subject to the risks normally associated with debt
financing, including the risk that the Company's cash flow will be insufficient
to meet required payments of principal and interest, the risk of increases in
interest rates on indebtedness (such as borrowings under the Credit Facility)
which bears interest at floating rates, the risk that existing indebtedness
cannot be refinanced or that the terms of such refinancing will not be as
favorable as the terms of existing indebtedness. The Company's mortgage
indebtedness (other than indebtedness under the Credit Facility) is generally
nonrecourse to the Company. However, even with respect to nonrecourse mortgage
indebtedness, the lenders may have the right to recover deficiencies from the
Company in certain circumstances, including fraud, misapplication of funds and
environmental liabilities.
INVESTMENTS IN JOINT VENTURES
The Company has agreements with an institutional investor, California Urban
Investment Partners ("CUIP"), relating to the joint ownership of two shopping
center properties, Margarita Plaza and Ladera Center. Each property is owned by
a separate limited liability company, of which both the Company and CUIP are
managing members. The Company's interest in Margarita Plaza is 25%, and CUIP's
is 75%. While the Company has substantially all of the ownership interest in
Ladera Center at the date of this Prospectus, CUIP is obligated to fund its
acquisition of a 75% interest in Ladera Center in the near future, which will
reduce the Company's interest to a minority 25%.
The Company occasionally makes acquisitions through what are sometimes
referred to as "DownREIT partnerships." In general, these transactions involve
the existing owners (usually partnerships) contributing their interests in the
acquired property to a new limited partnership of which the Company is the
general partner, in exchange for consideration which includes the issuance to
the contributors of limited partnership interests that are exchangeable after a
specified period of time for a fixed number of shares of Common Stock of the
Company. A principal objective of contributors in structuring the sale of
property to such a partnership is to defer the recognition of income taxes that
would be incurred if the consideration received were other than a partnership
interest; and the agreements relating to such transactions generally require
that the partnerships hold the properties and/or maintain certain levels of
indebtedness for negotiated periods of time in order to accommodate the
contributors' objectives. Although the Company as general partner of such
DownREIT partnerships has full control over the operations of the partnerships
and the contributed properties, its ability to sell or refinance the properties
may be limited by the terms of the agreements with the contributors.
The Company may in the future acquire interests in other limited liability
companies or in limited and general partnerships, joint ventures and other
enterprises (collectively, "Joint Ventures") formed to own or develop real
property or interests in real property. The Company may acquire minority
interests in certain such Joint Ventures and also may acquire interests as a
passive investor without rights to actively participate in management of the
Joint Ventures. Investments in Joint Ventures involve additional risks,
including the possibility that the other participants may become bankrupt or
have economic or other business interests or goals which are inconsistent with
those of the Company, that the Company will not have the right or power to
direct the management and policies of the Joint Ventures and that such other
participants may take action contrary to the instructions or requests of the
Company and its policies and objectives or which could jeopardize the Company's
ability to maintain its qualification as a REIT. Such investments may also have
the potential risk of impasse on decisions, such as a sale, because neither the
Company nor any of the other participants have full control over the Joint
Ventures. The Company will, however, seek to maintain sufficient control of such
Joint Ventures to permit the Company's business objectives to be achieved and
its status as a REIT preserved, although there can be no assurance that it will
be successful in doing so, which could have a material adverse effect on the
Company and its ability to make distributions to stockholders. There is no
limitation under the Company's organizational documents as to the amount of
available funds that may be invested in Joint Ventures.
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INSURANCE COVERAGE LIMITATIONS
The Company carries comprehensive general liability coverage and umbrella
liability coverage on all of its Properties with limits of liability which the
Company deems adequate (subject to deductibles and subject to the limitations
described below on insurance for losses caused by earthquake or flood) to insure
against liability claims and provide for the cost of defense. Similarly, the
Company is insured against the risk of direct physical damage in amounts the
Company estimates to be adequate (subject to deductibles) to reimburse the
Company on a replacement cost basis for costs incurred to repair or rebuild each
Property, including loss of rental income during the reconstruction period.
There are, however, certain types of extraordinary losses which may be either
uninsurable, or not economically insurable. Should any uninsured loss occur, the
Company could lose its investment in, and anticipated revenues from, a Property,
which could have a material adverse effect on the Company and its ability to
make distributions to stockholders. Currently the Company also insures certain
of its Properties for loss caused by earthquake in the aggregate amount of $50
million (subject to deductibles) and one of its Properties for loss caused by
flood. Because of the high cost of this type of insurance coverage and the wide
fluctuations in price and availability, the Company has made the determination
that the risk of loss due to earthquake and flood does not justify the cost to
increase this coverage any further under current market conditions. However,
there can be no assurance that the occurrence of an earthquake, flood or other
natural disaster will not adversely affect the Company.
EFFECT OF VARIOUS MARKET FACTORS ON PRICE OF STOCK
A variety of factors may influence the price of the Company's Common Stock
in public trading markets. The Company believes that investors generally
perceive REITs as yield-driven investments and compare the annual yield from
distributions by REITs with yields on various other types of financial
instruments. Thus an increase in market interest rates generally could adversely
affect the market price of the Company's Common Stock. Similarly, to the extent
that the investing public has a negative perception of companies in the retail
business or REITs that own and operate retail shopping centers and other
properties catering to retail tenants, the value of the Company's Common Stock
may be negatively impacted in comparison to shares of other REITs owning other
types of properties and catering to different types of tenants.
The market price for the Common Stock may be affected by factors such as
the announcement of new acquisitions or development projects by the Company or
its competitors, quarterly variations in the Company's operating results or the
operating results of the Company's competitors, changes in earnings (losses) or
other estimates by analysts or reported results that vary from such estimates.
In addition, the stock market may experience significant price fluctuations
which could affect the market price of the Company's Common Stock which may be
unrelated to the operating performance of the Company. Following periods of
volatility in the market price of the Company's Common Stock, securities class
action litigation could be initiated against the Company which could result in
substantial costs and a diversion of management's attention and resources, which
would have a material adverse effect on the Company and its ability to make
distributions to stockholders.
The same factors may also adversely affect the market value of any shares
of Preferred Stock (or Depositary Receipts representing interests therein) that
the Company may issue. Whether or not a market for any series of Preferred Stock
(or Depositary Receipts representing interests therein) develops will depend
upon a variety of factors including the amount and terms of such series and the
number and investment objectives of the purchasers thereof. See "Description of
Capital Stock -- Preferred Stock".
DEBT SECURITIES SUBJECT TO EVENT RISK
Except as may be set forth in any Prospectus Supplement, the Debt
Securities will not contain any provisions that would limit the ability of the
Company to incur indebtedness or that would afford holders of Debt Securities
protection in the event of a highly leveraged or similar transaction involving
the Company or in the event of a change of control. Restrictions on ownership
and transfers of the Common Stock and Preferred Stock are designed to preserve
the Company's status as a REIT and, therefore, may act to prevent or hinder a
change of control. See "Description of Capital Stock -- Restrictions on
Transfers." Reference is made to the applicable Prospectus Supplement for
information with respect to any deletions from, modifica-
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tions of, or additions to, the events of default or covenants of the Company
that are described below, including any addition of a covenant or other
provision providing event risk or similar protection.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be direct unsecured obligations of the Company and
may be either senior Debt Securities ("Senior Debt Securities") or subordinated
Debt Securities ("Subordinated Debt Securities"). The Debt Securities will be
issued under one or more indentures, each dated as of a date prior to the
issuance of the Debt Securities to which it relates. Senior Debt Securities and
Subordinated Debt Securities may be issued pursuant to separate indentures
(respectively, a "Senior Indenture" and a "Subordinated Indenture"), in each
case between the Company and a trustee (a "Trustee"), which may be the same
Trustee, and in the form that will be incorporated as an exhibit to the
Registration Statement of which this Prospectus is a part prior to or at the
time of the offering of the Debt Securities, subject to such amendments as may
be adopted from time to time. The Senior Indenture and the Subordinated
Indenture, as amended or supplemented from time to time, are sometimes
hereinafter referred to collectively as the "Indentures." The Indentures will be
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"TIA"). The statements made under this heading relating to the Debt Securities
and the Indentures are summaries of the anticipated provisions thereof, do not
purport to be complete and are qualified in their entirety by reference to the
Indentures and such Debt Securities and to any further discussions thereof made
in the applicable Prospectus Supplement relating to the specific Debt
Securities.
Capitalized terms used herein and not defined shall have the meanings
assigned to them in the applicable Indenture.
TERMS
General. The Debt Securities will be direct, unsecured obligations of the
Company. Unless otherwise indicated in the applicable Prospectus Supplement, the
indebtedness represented by the Senior Debt Securities will rank equally with
all other unsecured and unsubordinated indebtedness of the Company. The
indebtedness represented by Subordinated Debt Securities will be subordinated in
right of payment to the prior payment in full of Senior Indebtedness of the
Company as described under "-- Subordination." The particular terms of the Debt
Securities offered by a Prospectus Supplement will be described in the
applicable Prospectus Supplement, along with any applicable modifications of or
additions to the general terms of the Debt Securities as described herein and in
the applicable Indenture and any applicable federal income tax considerations.
Accordingly, for a description of the terms of any series of Debt Securities,
reference must be made to both the Prospectus Supplement relating thereto and
the description of the Debt Securities set forth in this Prospectus.
Except as set forth in any Prospectus Supplement, the Debt Securities may
be issued without limit as to aggregate principal amount, in one or more series,
in each case as established from time to time by the Company or as set forth in
the applicable Indenture or in one or more indentures supplemental to such
Indenture. All Debt Securities of one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent of
the holders of the Debt Securities of such series, for issuance of additional
Debt Securities of such series.
Each Indenture will provide that the Company may, but need not, designate
more than one Trustee thereunder, each with respect to one or more series of
Debt Securities. Any Trustee under an Indenture may resign or be removed with
respect to one or more series of Debt Securities, and a successor Trustee may be
appointed to act with respect to such series. In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the applicable
Indenture separate and apart from the trust administered by any other Trustee,
and, except as otherwise indicated herein, any action described herein to be
taken by each Trustee may be taken by each such Trustee with respect to, and
only with respect to, the one or more series of Debt Securities for which it is
Trustee under the applicable Indenture.
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The following summaries set forth certain general terms and provisions of
the Indentures and the Debt Securities. The Prospectus Supplement relating to
the series of Debt Securities being offered will contain further terms of such
Debt Securities, including the following specific terms:
(1) The title of such Debt Securities and whether such Debt Securities
are Senior Debt Securities or Subordinated Debt Securities;
(2) The aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(3) The price (expressed as a percentage of the principal amount
thereof) at which such Debt Securities will be issued and, if other than
the principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof, or (if
applicable) the portion of the principal amount of such Debt Securities
that is convertible into Common Stock or Preferred Stock, or the method by
which any such portion shall be determined;
(4) If convertible, the terms on which such Debt Securities are
convertible, including the initial conversion price or rate and the
conversion period and any applicable limitations on the ownership or
transferability of the Common Stock or Preferred Stock receivable on
conversion;
(5) The date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be payable;
(6) The rate or rates (which may be fixed or variable), or the method
by which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(7) The date or dates, or the method for determining such date or
dates, from which any such interest will accrue, the dates on which any
such interest will be payable, the record dates for such interest payment
dates, or the method by which such dates shall be determined, the persons
to whom such interest shall be payable, and the basis upon which interest
shall be calculated if other than that of a 360-day year of twelve 30-day
months;
(8) The place or places where the principal of (and premium or
Make-Whole Amount (as defined in the Indenture), if any) and interest, if
any, on such Debt Securities will be payable, where such Debt Securities
may be surrendered for registration of transfer or exchange and where
notices or demands to or upon the Company in respect of such Debt
Securities and the applicable Indenture may be served;
(9) The period or periods, if any, within which, the price or prices
at which and the other terms and conditions upon which such Debt Securities
may, pursuant to any optional or mandatory redemption provisions, be
redeemed, as a whole or in part, at the option of the Company;
(10) The obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or periods
within which, the price or prices at which and the other terms and
conditions upon which such Debt Securities will be redeemed, repaid or
purchased, as a whole or in part, pursuant to such obligation;
(11) If other than U.S. dollars, the currency or currencies in which
such Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(12) Whether the amount of payments of principal of (and premium or
Make-Whole Amount, if any, including any amount due upon redemption, if
any) or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on the yield on or trading price of
other securities, including United States Treasury securities, or on a
currency, currencies, currency unit or units, or composite currency or
currencies) and the manner in which such amounts shall be determined;
(13) Whether the principal of (and premium or Make-Whole Amount, if
any) or interest on the Debt Securities of the series are to be payable, at
the election of the Company or a holder thereof, in a
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currency or currencies, currency unit or units or composite currency or
currencies other than that in which such Debt Securities are denominated or
stated to be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made, and the time and manner
of, and identity of the exchange rate agent with responsibility for,
determining the exchange rate between the currency or currencies, currency
unit or units or composite currency or currencies in which such Debt
Securities are denominated or stated to be payable and the currency or
currencies, currency unit or units or composite currency or currencies in
which such Debt Securities are to be so payable;
(14) Provisions, if any, granting special rights to the holders of
Debt Securities of the series upon the occurrence of such events as may be
specified;
(15) Any deletions from, modifications of or additions to the Events
of Default (as defined in the Indenture) or covenants of the Company with
respect to Debt Securities of the series, whether or not such Events of
Default or covenants are consistent with the Events of Default or covenants
described herein;
(16) Whether and under what circumstances the Company will pay any
additional amounts on such Debt Securities in respect of any tax,
assessment or governmental charge and, if so, whether the Company will have
the option to redeem such Debt Securities in lieu of making such payment;
(17) Whether Debt Securities of the series are to be issuable as
Registered Securities, Bearer Securities (with or without coupons) or both,
any restrictions applicable to the offer, sale or delivery of Bearer
Securities and the terms upon which Bearer Securities of the series may be
exchanged for Registered Securities of the series and vice versa (if
permitted by applicable laws and regulations), whether any Debt Securities
of the series are to be issuable initially in temporary global form and
whether any Debt Securities of the series are to be issuable in permanent
global form with or without coupons and, if so, whether beneficial owners
of interests in any such permanent global Security may exchange such
interests for Debt Securities of such series and of like tenor of any
authorized form and denomination and the circumstances under which any such
exchanges may occur, if other than in the manner provided in the Indenture,
and, if Registered Securities of the series are to be issuable as a Global
Security (as defined), the identity of the Depositary for such series;
(18) The date as of which any Bearer Securities of the series and any
temporary Global Security representing outstanding Debt Securities of the
series shall be dated if other than the date of original issuance of the
first Security of the series to be issued;
(19) The Person to whom any interest on any Registered Security of the
series shall be payable, if other than the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest, the manner in
which, or the Person to whom, any interest on any Bearer Security of the
series shall be payable, if otherwise than upon presentation and surrender
of the coupons appertaining thereto as they severally mature, and the
extent to which, or the manner in which, any interest payable on a
temporary Global Security on an Interest Payment Date will be paid if other
than in the manner provided in the Indenture;
(20) The applicability, if any, of the defeasance and covenant
defeasance provisions of the Indenture to the Debt Securities of the
series;
(21) If the Debt Securities of such series are to be issuable in
definitive form (whether upon original issue or upon exchange of a
temporary Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions, then
the form and/or terms of such certificates, documents or conditions;
(22) The obligation, if any, of the Company to permit the conversion
of the Debt Securities of such series into Common Stock or Preferred Stock,
as the case may be, and the terms and conditions upon which such conversion
shall be effected (including, without limitation, the initial conversion
price or rate, the conversion period, any adjustment of the applicable
conversion price and any requirements relative to the reservation of such
shares for purposes of conversion); and
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(23) Any other terms of the series (which terms shall not be
inconsistent with the provisions of the Indenture under which the Debt
Securities are issued).
If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof ("Original Issue Discount Securities"). In
such cases, all material U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof. Where Debt Securities of any series are issued in
bearer form, the special restrictions and considerations, including special
offering restrictions and special federal income tax considerations, applicable
to any such Debt Securities and to payment on and transfer and exchange of such
Debt Securities will be described in the applicable Prospectus Supplement.
Bearer Debt Securities will be transferable by delivery.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and interest
on any series of Debt Securities will be payable at the corporate trust office
of the applicable Trustee, the address of which will be stated in the applicable
Prospectus Supplement; provided that, at the option of the Company, payment of
interest may be made by check mailed to the address of the person entitled
thereto as it appears in the applicable register for such Debt Securities or by
wire transfer of funds to such person at an account maintained within the United
States.
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security in registered form ("Defaulted
Interest") will forthwith cease to be payable to the holder on the applicable
Regular Record Date and may either be paid to the Person in whose name such Debt
Security is registered at the close of business on a special record date (the
"Special Record Date") for the payment of such Defaulted Interest to be fixed by
the Trustee, in which case notice thereof shall be given to the holder of such
Debt Security not less than 10 days prior to such Special Record Date, or may be
paid at any time in any other lawful manner, all as more completely described in
the applicable Indenture.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt Securities
at the corporate trust office of the applicable Trustee or at the office of any
transfer agent designated by the Company for such purpose. In addition, subject
to certain limitations imposed upon Debt Securities issued in book-entry form,
the Debt Securities of any series may be surrendered for registration of
transfer or exchange thereof at the corporate trust office of the applicable
Trustee or at the office of any transfer agent designated by the Company for
such purpose. Every Debt Security in registered form surrendered for
registration of transfer or exchange must be duly endorsed or accompanied by a
written instrument of transfer, and the person requesting such action must
provide evidence of title and identity satisfactory to the applicable Trustee or
transfer agent. No service charge will be made for any registration of transfer
or exchange of any Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. If the applicable Prospectus Supplement refers to any transfer agent
(in addition to the applicable Trustee) initially designated by the Company with
respect to any series of Debt Securities, the Company may at any time rescind
the designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Company will be
required to maintain a transfer agent in each place of payment for such series.
The Company may at any time designate additional transfer agents with respect to
any series of Debt Securities.
Neither the Company nor any Trustee shall be required to (i) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before the selection of any
Debt Securities for redemption and ending at the close of business on the day of
mailing of the notice of redemption; (ii) register the transfer of or exchange
any Debt Security, or portion thereof, so selected for
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redemption, in whole or in part, except the unredeemed portion of any Debt
Security being redeemed in part; or (iii) issue, register the transfer of or
exchange any Debt Security that has been surrendered for repayment at the option
of the holder, except the portion, if any, of such Debt Security not to be so
repaid.
Payment in respect of Debt Securities in bearer form will be made in the
currency and in the manner designated in the applicable Prospectus Supplement,
subject to any applicable laws and regulations, at such paying agencies outside
the United States as the Company may appoint from time to time. The paying
agents outside the United States, if any, initially appointed by the Company for
a series of Debt Securities will be named in the Prospectus Supplement. Unless
otherwise provided in the applicable Prospectus Supplement, the Company may at
any time designate additional paying agents or rescind the designation of any
paying agents, except that, if Debt Securities of a series are issuable in
registered form, the Company will be required to maintain at least one paying
agent in each place of payment for such series and if Debt Securities of a
series are issuable in bearer form, the Company will be required to maintain at
least one paying agent in a place of payment outside the United States where
Debt Securities of such series and any coupons appertaining thereto may be
presented and surrendered for payment.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indentures will provide that the Company may, without the consent of
the holders of any outstanding Debt Securities, consolidate with, or sell, lease
or convey all or substantially all of its assets to, or merge with or into, any
other entity provided that (i) either the Company shall be the continuing
entity, or the successor entity (if other than the Company) formed by or
resulting from any such consolidation or merger or which shall have received the
transfer of such assets is organized under the laws of any domestic jurisdiction
and assumes the Company's obligations to pay principal of (and premium or
Make-Whole Amount, if any) and interest on all of the Debt Securities and the
due and punctual performance and observance of all of the covenants and
conditions contained in such Indenture; (ii) immediately after giving effect to
such transaction and treating any indebtedness that becomes an obligation of the
Company or any subsidiary as a result thereof as having been incurred by the
Company or such subsidiary at the time of such transaction, no Event of Default
under such Indenture, and no event which, after notice or the lapse of time, or
both, would become such an Event of Default, shall have occurred and be
continuing; and (iii) an officers' certificate and legal opinion covering such
conditions shall be delivered to each Trustee.
CERTAIN COVENANTS
The applicable Prospectus Supplement will describe any material covenants
in respect of a series of Debt Securities that are not described in this
Prospectus. Unless otherwise indicated in the applicable Prospectus Supplement,
Senior Debt Securities will include the following covenants of the Company:
Existence. Except as permitted under "--Merger, Consolidation or Sale of
Assets," the Indentures will require the Company to do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (by Charter, Bylaws and statute) and franchises; provided,
however, that the Company shall not be required to preserve any right or
franchise if its Board of Directors determines that the preservation thereof is
no longer desirable in the conduct of its business.
Maintenance of Properties. The Indentures will require the Company to
cause all of its material properties used or useful in the conduct of its
business or the business of any subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that the
Company and its subsidiaries shall not be prevented from selling or otherwise
disposing of their properties for value in the ordinary course of business.
Insurance. The Indentures will require the Company to cause each of its
and its subsidiaries' insurable properties to be insured against loss or damage
at least equal to their then full insurable value with insurers of
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recognized responsibility and, if described in the applicable Prospectus
Supplement, having a specified rating from a recognized insurance rating
service.
Payment of Taxes and Other Claims. The Indentures will require the Company
to pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any subsidiary or upon the income, profits or property of the
Company or any subsidiary and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or any subsidiary; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the following events are "Events of Default" with
respect to any series of Debt Securities issued thereunder: (i) default in the
payment of any interest on any Debt Security of such series when such interest
becomes due and payable that continues for a period of 30 days; (ii) default in
the payment of the principal of (or premium or Make-Whole Amount, if any, on)
any Debt Security of such series when due and payable; (iii) default in making
any sinking fund payment as required for any Debt Security of such series; (iv)
default in the performance, or breach, of any other covenant or warranty of the
Company in the applicable Indenture with respect to the Debt Securities of such
series and continuance of such default or breach for a period of 60 days after
written notice as provided in the Indenture; (v) default under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company (or by any Subsidiary, the repayment of which the
Company has guaranteed or for which the Company is directly responsible or
liable as obligor or guarantor), having a specified aggregate principal amount
outstanding, whether such indebtedness exists at the time the debt securities
are issued or are thereafter created, which default shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, without such indebtedness
having been discharged, or such acceleration having been rescinded or annulled,
within a period of 30 days after written notice to the Company as provided in
the Indenture; (vi) certain events of bankruptcy, insolvency or reorganization,
or court appointment of a receiver, liquidator or trustee of the Company or any
Significant Subsidiary; and (vii) any other event of default provided with
respect to a particular series of Debt Securities. The term "Significant
Subsidiary" has the meaning ascribed to such term in Regulation S-X promulgated
under the Securities Act.
If an Event of Default under any Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of that series will have the right to
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of, and premium or
Make-Whole Amount, if any, on, all the Debt Securities of that series to be due
and payable immediately by written notice thereof to the Company (and to the
applicable Trustee if given by the holders). However, at any time after such a
declaration of acceleration with respect to Debt Securities of such series has
been made, but before a judgment or decree for payment of the money due has been
obtained by the applicable Trustee, the holders of not less than a majority in
principal amount of outstanding Debt Securities of such series may rescind and
annul such declaration and its consequences if (i) the Company shall have
deposited with the applicable Trustee all required payments of the principal of
(and premium or Make-Whole Amount, if any) and interest on the Debt Securities
of such series, plus certain fees, expenses, disbursements and advances of the
applicable Trustee and (ii) all Events of Default, other than the non-payment of
accelerated principal (or specified portion thereof and the premium or
Make-Whole Amount, if any), with respect to Debt Securities of such series have
been cured or waived as provided in such Indenture. The Indentures will also
provide that the holders of not less than a majority in principal amount of the
outstanding Debt Securities of any series may waive any past default with
respect to such series and its consequences, except a default (a) in the payment
of the principal of (or premium or Make-Whole Amount, if any) or interest on any
Debt Security of such series
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or (b) in respect of a covenant or provision contained in the applicable
Indenture that cannot be modified or amended without the consent of the holder
of each outstanding Debt Security affected thereby.
The Indentures will require each Trustee to give notice to the holders of
Debt Securities within 90 days of a default under the applicable Indenture
unless such default shall have been cured or waived; provided, however, that
such Trustee may withhold notice to the holders of any series of Debt Securities
of any default with respect to such series (except a default in the payment of
the principal of (or premium or Make-Whole Amount, if any) or interest on any
Debt Security of such series or in the payment of any sinking fund installment
in respect of any Debt Security of such series) if specified responsible
officers of such Trustee consider such withholding to be in the interest of such
holders.
The Indentures will provide that no holders of Debt Securities of any
series may institute any proceedings, judicial or otherwise, with respect to
such Indenture or for any remedy thereunder, except in the case of failure of
the applicable Trustee, for 60 days, to act after it has received a written
request to institute proceedings in respect of an Event of Default from the
holders of not less than 25% in principal amount of the outstanding Debt
Securities of such series, as well as an offer of indemnity reasonably
satisfactory to it. This provision will not prevent, however, any holder of Debt
Securities from instituting suit for the enforcement of payment of the principal
of (and premium or Make-Whole Amount, if any) and interest on such Debt
Securities at the respective due dates or redemption dates thereof.
The Indentures will provide that, subject to provisions in each Indenture
relating to its duties in case of default, a Trustee will be under no obligation
to exercise any of its rights or powers under an Indenture at the request or
direction of any holders of any series of Debt Securities then outstanding under
such Indenture, unless such holders shall have offered to the Trustee thereunder
reasonable security or indemnity. The holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under an Indenture, as the case may be) shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee, or of exercising any trust
or power conferred upon such Trustee. However, a Trustee may refuse to follow
any direction which is in conflict with any law or the applicable Indenture,
which may involve such Trustee in personal liability or which may be unduly
prejudicial to the holders of Debt Securities of such series not joining
therein.
Within 120 days after the close of each fiscal year, the Company will be
required to deliver to each Trustee a certificate, signed by one of several
specified officers of the Company, stating whether or not such officer has
knowledge of any default under the applicable Indenture and, if so, specifying
each such default and the nature and status thereof.
MODIFICATION OF THE INDENTURES
Modifications and amendments of an Indenture will be permitted to be made
only with the consent of the holders of not less than a majority in principal
amount of all outstanding Debt Securities issued under such Indenture affected
by such modification or amendment; provided, however, that no such modification
or amendment may, without the consent of the holder of each such Debt Security
affected thereby, (i) change the stated maturity of the principal of, or any
installment of interest (or premium or Make-Whole Amount, if any) on, any such
Debt Security; (ii) reduce the principal amount of, or the rate or amount of
interest on, or any premium or Make-Whole Amount payable on redemption of, any
such Debt Security, or reduce the amount of principal of an Original Issue
Discount Security that would be due and payable upon declaration of acceleration
of the maturity thereof or would be provable in bankruptcy, or adversely affect
any right of repayment of the holder of any such Debt Security; (iii) change the
place of payment, or the coin or currency, for payment of principal of, premium
or Make-Whole Amount, if any, or interest on any such Debt Security; (iv) impair
the right to institute suit for the enforcement of any payment on or with
respect to any such Debt Security; (v) reduce the above-stated percentage of
outstanding Debt Securities of any series necessary to modify or amend the
applicable Indenture, to waive compliance with certain provisions thereof or
certain defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the applicable Indenture; (vi) change the currency or
currency unit in which any Debt Security or any premium
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or interest thereon is payable; (vii) in the case of the Subordinated Indenture,
modify the subordination provisions thereof in a manner adverse to the holders
of Subordinated Debt Securities of any series then outstanding; or (viii) modify
any of the foregoing provisions or any of the provisions relating to the waiver
of certain past defaults or certain covenants, except to increase the required
percentage to effect such action or to provide that certain other provisions may
not be modified or waived without the consent of the holder of such Debt
Security.
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all holders of Debt Securities
of that series, waive, insofar as that series is concerned, compliance by the
Company with certain restrictive covenants of the applicable Indenture.
Modifications and amendments of an Indenture will be permitted to be made
by the Company and the respective Trustee thereunder without the consent of any
holder of Debt Securities for any of the following purposes: (i) to evidence the
succession of another person to the Company as obligor under such Indenture;
(ii) to add to the covenants of the Company for the benefit of the holders of
all or any series of Debt Securities or to surrender any right or power
conferred upon the Company in such Indenture; (iii) to add events of default for
the benefit of the holders of all or any series of Debt Securities; (iv) to add
or change any provisions of an Indenture to facilitate the issuance of, or to
liberalize certain terms of, Debt Securities in bearer form, or to permit or
facilitate the issuance of Debt Securities in uncertificated form, provided that
such action shall not adversely affect the interests of the holders of the Debt
Securities of any series in any material respect; (v) to change or eliminate any
provisions of an Indenture, provided that any such change or elimination shall
become effective only when there are no Debt Securities outstanding of any
series created prior thereto which are entitled to the benefit of such
provision; (vi) to secure the Debt Securities; (vii) to establish the form or
terms of Debt Securities of any series; (viii) to provide for the acceptance of
appointment by a successor Trustee or facilitate the administration of the
trusts under an Indenture by more than one Trustee; (ix) to cure any ambiguity,
defect or inconsistency in an Indenture, provided that such action shall not
adversely affect the interests of holders of Debt Securities of any series
issued under such Indenture; or (x) to supplement any of the provisions of an
Indenture to the extent necessary to permit or facilitate defeasance and
discharge of any series of such Debt Securities, provided that such action shall
not adversely affect the interests of the holders of the outstanding Debt
Securities of any series.
The Indentures will provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (ii) the principal amount
of any Debt Security denominated in a foreign currency that shall be deemed
outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above), (iii) the
principal amount of an indexed security that shall be deemed outstanding shall
be the principal face amount of such indexed security at original issuance,
unless otherwise provided with respect to such indexed security pursuant such
Indenture, and (iv) Debt Securities owned by the Company or any other obligor
upon the Debt Securities or any affiliate of the Company or of such other
obligor shall be disregarded.
The Indentures will contain provisions for convening meetings of the
holders of Debt Securities of a series. A meeting will be permitted to be called
at any time by the applicable Trustee, and also, upon request, by the Company or
the holders of at least 25% in principal amount of the outstanding Debt
Securities of such series, in any such case upon notice given as provided in
such Indenture. Except for any consent that must be given by the holder of each
Debt Security affected by certain modifications and amendments of an Indenture,
any resolution presented at a meeting or adjourned meeting duly reconvened at
which a quorum is present may be adopted by the affirmative vote of the holders
of a majority in principal amount of the outstanding Debt Securities of that
series; provided, however, that, except as referred to above, any resolution
with respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given
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or taken by the holders of a specified percentage, which is less than a
majority, in principal amount of the outstanding Debt Securities of a series may
be adopted at a meeting or adjourned meeting or adjourned meeting duly
reconvened at which a quorum is present by the affirmative vote of the holders
of such specified percentage in principal amount of the outstanding Debt
Securities of that series. Any resolution passed or decision taken at any
meeting of holders of Debt Securities of any series duly held in accordance with
an Indenture will be binding on all holders of Debt Securities of that series.
The quorum at any meeting called to adopt a resolution, and at any reconvened
meeting, will be persons holding or representing a majority in principal amount
of the outstanding Debt Securities of a series; provided, however, that if any
action is to be taken at such meeting with respect to a consent or waiver which
may be given by the holders of not less than a specified percentage in principal
amount of the outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, the Indentures will provide that
if any action is to be taken at a meeting of holders of Debt Securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver and other action that such Indenture expressly provides may be
made, given or taken by the holders of a specified percentage in principal
amount of all outstanding Debt Securities affected thereby, or of the holders of
such series and one or more additional series: (i) there shall be no minimum
quorum requirement for such meeting and (ii) the principal amount of the
outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under such Indenture.
CERTAIN DEFINITIONS
"Indebtedness" means, with respect to any person, (i) any obligation of
such person to pay the principal of, premium, if any, interest on (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to such person, whether or not a claim for such
post-petition interest is allowed in such proceeding), penalties, reimbursement
or indemnification amounts, fees, expenses or other amounts relating to any
indebtedness of such person (a) for borrowed money (whether or not the recourse
of the lender is to the whole of the assets of such person or only to a portion
thereof), (b) evidenced by notes, debentures or similar instruments (including
purchase money obligations) given in connection with the acquisition of any
property or assets (other than trade accounts payable for inventory or similar
property acquired in the ordinary course of business), including securities, for
the payment of which such person is liable, directly or indirectly, or the
payment of which is secured by a lien, charge or encumbrance on property or
assets of such person, (c) for goods, materials or services purchased in the
ordinary course of business (other than trade accounts payable arising in the
ordinary course of business), (d) with respect to letters of credit or bankers
acceptances issued for the account of such person or performance bonds, (e) for
the payment of money relating to a Capitalized Lease Obligation (as defined in
the Indenture) or (f) under interest rate swaps, caps or similar agreements and
foreign exchange contracts, currency swaps or similar agreements; (ii) any
liability of others of the kind described in the preceding clause (i) which such
person has guaranteed or which is otherwise its legal liability; and (iii) any
and all deferrals, renewals, extensions and refunding of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (i) or (ii).
"Senior Indebtedness" means Indebtedness of the Company, whether
outstanding on the date of issue of any Subordinated Debt Securities or
thereafter created, incurred, assumed or guaranteed by the Company, other than
the following: (i) any Indebtedness as to which, in the instrument evidencing
such Indebtedness or pursuant to which such Indebtedness was issued, it is
expressly provided that such Indebtedness is subordinate in right of payment to
all indebtedness of the Company not expressly subordinated to such Indebtedness;
(ii) any Indebtedness which by its terms refers explicitly to the Subordinated
Debt Securities and states that such Indebtedness shall not be senior, shall be
pari passu or shall be subordinated in right of payment to the Subordinated Debt
Securities; and (iii) with respect to any series of Subordinated Debt
Securities, any Indebtedness of the Company evidenced by Subordinated Debt
Securities of the same or of another series. Notwithstanding anything to the
contrary in the foregoing, Senior Indebtedness shall not include: (a)
Indebtedness of or amounts owed by the Company for compensation to employees, or
for goods, materials
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and services purchased in the ordinary course of business or (b) Indebtedness of
the Company to a subsidiary of the Company.
SUBORDINATION
Unless otherwise provided in the applicable Prospectus Supplement,
Subordinated Debt Securities will be subject to the following subordination
provisions.
The payment of the principal of, interest on, or any other amounts due on,
the Subordinated Debt Securities will be subordinated in right of payment to the
prior payment in cash in full of all Senior Indebtedness of the Company. No
payment on account of the principal of, redemption of, interest on or any other
amounts due on the Subordinated Debt Securities and no redemption, purchase or
other acquisition of the Subordinated Debt Securities may be made, unless (i)
full payment in cash of amounts then due for principal, sinking funds, interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company, whether or not a claim
for such post-petition interest is allowed in such proceeding), penalties,
reimbursement or indemnification amounts, fees and expenses, and of all other
amounts then due on all Senior Indebtedness shall have been made or duly
provided for pursuant to the terms of the instrument governing such Senior
Indebtedness, and (ii) at the time of, or immediately after giving effect to,
any such payment, redemption, purchase or other acquisition, there shall not
exist under any Senior Indebtedness or any agreement pursuant to which any
Senior Indebtedness has been issued, any default which shall not have been cured
or waived and which shall have resulted in the full amount of such Senior
Indebtedness being declared due and payable and not rescinded. In addition, the
Subordinated Indenture provides that, if holders of any Senior Indebtedness
notify the Company and the Subordinated Trustee that a default has occurred
giving the holders of such Senior Indebtedness the right to accelerate the
maturity thereof, no payment on account of principal, sinking fund or other
redemption, interest or any other amounts due on the Subordinated Debt
Securities and no purchase, redemption or other acquisition of the Subordinated
Debt Securities will be made for the period (the "Payment Blockage Period")
commencing on the date such notice is received and ending on the earlier of (a)
the date on which such event of default shall have been cured or waived or (b)
180 days from the date such notice is received. Notwithstanding the foregoing,
only one payment blockage notice with respect to the same event of default or
any other events of default existing and known to the person giving such notice
at the time of such notice on the same issue of Senior Indebtedness may be given
during any period of 360 consecutive days. No new Payment Blockage Period may be
commenced by the holders of Senior Indebtedness during any period of 360
consecutive days unless all events of default which triggered the preceding
Payment Blockage Period have been cured or waived. Upon any distribution of its
assets in connection with any dissolution, winding-up, liquidation or
reorganization of the Company, all Senior Indebtedness must be paid in full in
cash before the holders of the Subordinated Debt Securities are entitled to any
payments whatsoever.
The Subordinated Indenture does not restrict the amount of Senior
Indebtedness or other indebtedness of the Company or any Subsidiary. As a result
of these subordination provisions, in the event of the Company's insolvency,
holders of the Subordinated Debt Securities may recover ratably less than
general creditors of the Company.
If this Prospectus is being delivered in connection with a series of
Subordinated Debt Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Indebtedness outstanding as of the end of the Company's most
recent fiscal quarter.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company will be permitted, at its option, to discharge certain obligations to
holders of any series of Debt Securities issued under any Indenture that have
not already been delivered to the applicable Trustee for cancellation and that
either have become due and payable or will become due and payable within one
year (or scheduled for redemption within one year) by irrevocably depositing
with the applicable Trustee, in trust, funds in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable in an
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amount sufficient to pay the entire indebtedness on such Debt Securities in
respect of principal (and premium or Make-Whole Amount, if any) and interest to
the date of such deposit (if such Debt Securities have become due and payable)
or to the stated maturity or redemption date, as the case may be.
The Indentures will provide that, unless otherwise indicated in the
applicable Prospectus Supplement, the Company may elect either (i) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of such Debt
Securities, and to hold moneys for payment in trust) ("defeasance") or (ii) to
be released from certain obligations with respect to such Debt Securities under
the applicable Indenture (including the restrictions described under "--Certain
Covenants") or, if provided in the applicable Prospectus Supplement, its
obligations with respect to any other covenant, and any omission to comply with
such obligations shall not constitute an Event of Default with respect to such
Debt Securities ("covenant defeasance"), in either case upon the irrevocable
deposit by the Company with the applicable Trustee, in trust, of an amount, in
such currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at stated maturity, or
Government Obligations (as defined below), or both, applicable to such Debt
Securities, which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium or Make-Whole Amount, if any) and interest on such
Debt Securities, and any mandatory sinking fund or analogous payments thereon,
on the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among other
things, the Company has delivered to the applicable Trustee an opinion of
counsel (as specified in the applicable Indenture) to the effect that the
holders of such Debt Securities will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such opinion of counsel,
in the case of defeasance, will be required to refer to and be based upon a
ruling received from or published by the Internal Revenue Service or a change in
applicable United States federal income tax law occurring after the date of the
Indenture. In the event of such defeasance, the holders of such Debt Securities
would thereafter be able to look only to such trust fund for payment of
principal (and premium or Make-Whole Amount, if any) and interest.
"Government Obligations" means securities that are (i) direct obligations
of the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations of
a person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the foreign
currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depositary receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depositary receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depositary receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(i) the holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the applicable Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(ii) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security will be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and
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premium or Make-Whole Amount, if any) and interest on such Debt Security as they
become due out of the proceeds yielded by converting the amount so deposited in
respect of such Debt Security into the currency, currency unit or composite
currency in which such Debt Security becomes payable as a result of such
election or such cessation of usage based on the applicable market exchange
rate. "Conversion Event" means the cessation of use of (a) a currency, currency
unit or composite currency both by the government of the country which issued
such currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community, (b) the
ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities or
(iii) any currency unit or composite currency other than the ECU for the
purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium or
Make-Whole Amount, if any) and interest on any Debt Security that is payable in
a foreign currency that ceases to be used by its government of issuance shall be
made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than the Event of Default described
in clause (iv) under "--Events of Default, Notice and Waiver" with respect to
specified sections of an Indenture (which sections would no longer be applicable
to such Debt Securities) or described in clause (vii) under "--Events of
Default, Notice and Waiver" with respect to any other covenant as to which there
has been covenant defeasance, the amount in such currency, currency unit or
composite currency in which such Debt Securities are payable, and Government
Obligations on deposit with the applicable Trustee, will be sufficient to pay
amounts due on such Debt Securities at the time of their stated maturity but may
not be sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such Event of Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into shares of Common Stock or
Preferred Stock, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option of
the holders or the Company, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of such
Debt Securities and any restrictions on conversion, including restrictions
directed at maintaining the Company's REIT status.
BOOK-ENTRY SYSTEM
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of, a depositary (the "Depositary") identified in
the Prospectus Supplement relating to such series. Global Securities, if any,
issued in the United States are expected to be deposited with The Depository
Trust Company ("DTC"), as Depositary. Global Securities may be issued in either
fully registered or bearer form and in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for the individual Debt
Securities represented thereby, a Global Security may not be transferred except
as a whole by the Depositary for such Global Security to a nominee of such
Depositary or by a nominee of such Depositary to such Depositary or another
nominee of such Depositary or by such Depositary or any nominee of such
Depositary to a successor Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company expects that unless otherwise indicated in the
applicable Prospectus Supplement, the following provisions will apply to
depositary arrangements.
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Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depositary ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Company if such Debt Securities are offered directly by the
Company. Ownership of beneficial interests in such Global Security will be
limited to Participants or persons that may hold interests through Participants.
The Company expects that, pursuant to procedures established by DTC,
ownership of beneficial interests in any Global Security with respect to which
DTC is the Depositary will be shown on, and the transfer of that ownership will
be effected only through, records maintained by DTC or its nominee (with respect
to beneficial interests of Participants) and records of Participants (with
respect to beneficial interests of persons who hold through Participants).
Neither the Company nor the Trustee will have any responsibility or liability
for any aspect of the records of DTC or for maintaining, supervising or
reviewing any records of DTC or any of its Participants relating to beneficial
ownership interests in the Debt Securities. The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to own, pledge or
transfer beneficial interest in a Global Security.
So long as the Depositary for a Global Security or its nominee is the
registered owner of such Global Security, such Depositary 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
applicable Indenture. Except as described below or in the applicable Prospectus
Supplement, owners of beneficial interest in a Global Security will not be
entitled to have any of the individual Debt Securities represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Debt Securities in definitive form and
will not be considered the owners or holders thereof under the applicable
Indenture. Beneficial owners of Debt Securities evidenced by a Global Security
will not be considered the owners or holders thereof under the applicable
Indenture for any purpose, including with respect to the giving of any
direction, instructions or approvals to the Trustee thereunder. Accordingly,
each person owning a beneficial interest in a Global Security with respect to
which DTC is the Depositary must rely on the procedures of DTC and, if such
person is not a Participant, on the procedures of the Participant through which
such person owns its interests, to exercise any rights of a holder under the
applicable Indenture. The Company understands that, under existing industry
practice, if it requests any action of holders or if an owner of a beneficial
interest in a Global Security desires to give or take any action which a holder
is entitled to give or take under the applicable Indenture, DTC would authorize
the Participants holding the relevant beneficial interest to give or take such
action, and such Participants would authorize beneficial owners through such
Participants to give or take such actions or would otherwise act upon the
instructions of beneficial owners holding through them.
Payments of principal of, any premium or Make-Whole Amount and any interest
on individual Debt Securities represented by a Global Security registered in the
name of a Depositary or its nominee will be made to or at the direction of the
Depositary or its nominee, as the case may be, as the registered owner of the
Global Security under the applicable Indenture. Under the terms of the
applicable Indenture, the Company and the Trustee may treat the persons in whose
name Debt Securities, including a Global Security, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Debt Securities (including
principal, premium or Make-Whole Amount, if any, and interest). The Company
believes, however, that it is currently the policy of DTC to immediately credit
the accounts of relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant Global Security as shown on the records of DTC or its nominee. The
Company also expects that payments by Participants to owners of beneficial
interests in such Global Security held through such Participants will be
governed by standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered in
street name, and will be the responsibility of such Participants. Redemption
notices with respect to any Debt Securities represented by a Global Security
will be sent to the Depositary or its nominee. If less than all of the Debt
Securities of any
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series are to be redeemed, the Company expects the Depositary to determine the
amount of the interest of each Participant in such Debt Securities to be
redeemed to be determined by lot. None of the Company, the Trustee, any Paying
Agent or the Security Registrar 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 the Global
Security for such Debt Securities or for maintaining any records with respect
thereto.
Neither the Company nor the Trustee will be liable for any delay by the
holders of a Global Security or the Depositary in identifying the beneficial
owners of Debt Securities and the Company and the Trustee may conclusively rely
on, and will be protected in relying on, instructions from the holder of a
Global Security or the Depositary for all purposes. The rules applicable to DTC
and its Participants are on file with the SEC.
If a Depositary for any Debt Securities is at any time unwilling, unable or
ineligible to continue as depositary and a successor depositary is not appointed
by the Company within 90 days, the Company will issue individual Debt Securities
in exchange for the Global Security representing such Debt Securities. In
addition, the Company may at any time and in its sole discretion, subject to any
limitations described in the Prospectus Supplement relating to such Debt
Securities, determine not to have any of such Debt Securities represented by one
or more Global Securities and in such event will issue individual Debt
Securities in exchange for the Global Security or Securities representing such
Debt Securities. Individual Debt Securities so issued will be issued in
denominations of $1,000 and integral multiples thereof.
The Debt Securities of a series may also be issued in whole or in part in
the form of one or more bearer global securities (a "Bearer Global Security")
that will be deposited with a depositary, or with a nominee for such depositary,
identified in the applicable Prospectus Supplement. Any such Bearer Global
Securities may be issued in temporary or permanent form. The specific terms and
procedures, including the specific terms of the depositary arrangement, with
respect to any portion of a series of Debt Securities to be represented by one
or more Bearer Global Securities will be described in the applicable Prospectus
Supplement.
PAYMENT AND PAYING AGENTS
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and interest
on any series of Debt Securities will be payable at the corporate trust office
of the Trustee, the address of which will be stated in the applicable Prospectus
Supplement; provided that, at the option of the Company, payment of interest may
be made by check mailed to the address of the person entitled thereto as it
appears in the applicable register for such Debt Securities or by wire transfer
of funds to such person at an account maintained within the United States.
All moneys paid by the Company to a paying agent or a Trustee for the
payment of the principal of or any premium, Make-Whole Amount or interest on any
Debt Security which remain unclaimed at the end of two years after such
principal, premium, Make-Whole Amount or interest has become due and payable
will be repaid to the Company, and the holder of such Debt Security thereafter
may look only to the Company for payment thereof.
DESCRIPTION OF CAPITAL STOCK
The description of the Company's Capital Stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Company's Charter and Bylaws, each as amended and restated.
GENERAL
Under its Charter, the Company has authority to issue up to 100 million
shares of stock, consisting of 75 million shares of Common Stock, 20 million
shares of "Excess Stock" (as described below) and 5 million shares of Preferred
Stock. The Directors have authority to issue authorized shares of Common Stock
and of Preferred Stock and to classify or reclassify any unissued shares of
either class in one or more classes or series of stock, each without action by
the stockholders. Under Maryland law, stockholders generally are not responsible
for a corporation's debts or obligations. As of the date of this Prospectus,
there are approximately
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23,432,852 shares of Common Stock issued and outstanding, and no Preferred Stock
or Excess Stock is outstanding.
COMMON STOCK
All shares of Common Stock offered hereby have been duly authorized and
will, when issued and paid for as described in the applicable Prospectus
Supplement, be fully paid and nonassessable. Subject to the preferential rights
of any shares or series of Preferred Stock and to the provisions of the
Company's Charter regarding Excess Stock, holders of shares of Common Stock are
entitled to receive dividends on Common Stock if, as and when authorized and
declared by the Board of Directors of the Company out of assets legally
available therefor and to share ratably in the assets of the Company legally
available for distribution to its stockholders in the event of its liquidation,
dissolution or winding-up after payment of, or adequate provision for, all known
debts and liabilities of the Company.
Subject to the provisions of the Company's Charter regarding Excess Stock,
each outstanding share of Common Stock entitles the holder to one vote on all
matters submitted to a vote of stockholders, including the election of
directors, and, except as provided with respect to any other class or series of
stock, the holders of Common Stock will possess exclusive voting power. There is
no cumulative voting in the election of directors, which means that the holders
of a majority of the outstanding shares of Common Stock can, subject to any
rights of holders of Preferred Stock, elect all of the directors then standing
for election, and the holders of the remaining shares of Common Stock will not
be able to elect any directors.
See "--Restrictions on Transfer; Excess Stock" below for a description of
certain provisions of the Company's Charter designed to preserve the status of
the Company as a qualified REIT, that limit the transfer of, and provide the
Company with a right to redeem, shares of capital stock (including shares of
Common Stock) and that also provide for the conversion of such stock to Excess
Stock, in certain circumstances.
Subject to the Company's Charter regarding Excess Stock, all shares of
Common Stock have equal dividend, distribution, liquidation and other rights,
and have no preferences, appraisal or exchange rights. Holders of Common Stock
have no conversion, sinking fund or redemption rights, or preemptive rights to
subscribe for any securities of the Company.
The Company furnishes its stockholders with annual reports containing
audited consolidated financial statements and an opinion thereon expressed by an
independent public accounting firm and quarterly reports for the first three
quarters of each fiscal year containing unaudited financial information.
Pursuant to the Maryland General Corporation Law ("MGCL") and the Company's
Charter, the Corporation generally cannot dissolve, amend its Charter, merge,
sell all or substantially all of its assets, engage in a share exchange or
engage in similar transactions outside the ordinary course of business unless
approved by the Board of Directors and the affirmative vote of holders of shares
entitled to cast a majority of all the votes entitled to be cast on such
matters.
The transfer agent and registrar for the Common Stock is The First Chicago
Trust Company of New York, 525 Washington Boulevard, Jersey City, New Jersey
07303.
PREFERRED STOCK
General. Shares of Preferred Stock may be issued from time to time, in one
or more series, as authorized by the Board of Directors of the Company. Prior to
issuance of shares of each series, the Board of Directors is required by the
MGCL and the Company's Charter to fix for each series, subject to the provisions
of the Company's Charter regarding Excess Stock, the terms, preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends or other distributions, qualifications and terms or conditions of
redemption, as are permitted by Maryland law. The Preferred Stock will, when
issued, be fully paid and nonassessable by the Company and will have no
preemptive rights, other than as determined by the Board of Directors. The Board
of Directors could authorize the issuance of shares of Preferred Stock with
terms and conditions that could have the effect of discouraging a takeover or
other transaction that holders of Common Stock might believe to be in their best
interests or in which holders of some, or a majority, of the shares of
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Common Stock might receive a premium for their shares over the then market price
of such shares of Common Stock.
Terms. The following description of the Preferred Stock sets forth certain
general terms and provisions of the Preferred Stock to which any Prospectus
Supplement may relate. The statements below describing the Preferred Stock are
in all respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Charter and Bylaws and any applicable
amendment to the Charter designating terms of a series of Preferred Stock (a
"Designating Amendment").
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the offering price of such Preferred
Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall
accumulate, if applicable;
(5) The voting rights, if any, of such Preferred Stock;
(6) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(7) The provision for a sinking fund, if any, for such Preferred
Stock;
(8) The provision for redemption, if applicable, of such Preferred
Stock;
(9) Any listing of such Preferred Stock on any securities exchange;
(10) If convertible, the terms and conditions upon which such
Preferred Stock will be convertible into Common Stock, including the
initial conversion price (or manner of calculation thereof) and the
conversion period;
(11) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(12) Whether interests in such Preferred Stock will be represented by
Depositary Shares;
(13) A discussion of certain federal income tax considerations
applicable to such Preferred Stock;
(14) The relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company;
(15) Any limitations on issuance of any series of Preferred Stock
ranking senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company; and
(16) Any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to preserve
the status of the Company as a qualified REIT.
Rank. Unless otherwise specified in the Prospectus Supplement, the
Preferred Stock will, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of the Company, rank (i) senior to all
classes or series of Common Stock of the Company, and to all equity securities
ranking junior to such Preferred Stock; (ii) on a parity with all equity
securities issued by the Company the terms of which specifically provide that
such equity securities rank on a parity with the Preferred Stock; and (iii)
junior to all equity securities issued by the Company the terms of which
specifically provide that such equity securities rank senior to the Preferred
Stock. The term "equity securities" does not include convertible debt
securities.
Dividends. Holders of the Preferred Stock of each series will be entitled
to receive, when, as and if declared by the Board of Directors of the Company,
out of assets of the Company legally available for
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payment, cash dividends at such rates and on such dates as will be set forth in
the applicable Prospectus Supplement. Each such dividend shall be payable to
holders of record as they appear on the share transfer books of the Company on
such record dates as shall be fixed by the Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are non-cumulative, then the holders of such
series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Stock of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Stock does not have a cumulative dividend, full
dividends for the then current dividend period have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for such payment on the Preferred Stock of such series. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon Preferred Stock of any series and the shares of any other
series of Preferred Stock ranking on a parity as to dividends with the Preferred
Stock of such series, all dividends declared upon Preferred Stock of such series
and any other series of Preferred Stock ranking on a parity as to dividends with
such Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share of Preferred Stock of such series and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock of such series (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend) and such
other series of Preferred Stock bear to each other. No interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend payment or
payments on Preferred Stock of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other shares of
capital stock ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Preferred Stock of such series as to dividends or upon
liquidation, nor shall any shares of Common Stock, or any other shares of
capital stock of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to dividends or upon liquidation be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by the
Company (except by conversion into or exchange for other capital stock of the
Company, including Excess Stock, ranking junior to the Preferred Stock of such
series as to dividends and upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
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Redemption. If so provided in the applicable Prospectus Supplement, the
Preferred Stock shall be subject to mandatory redemption or redemption at the
option of the Company, as a whole or in part, in each case upon the terms, at
the times and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of shares of capital stock of the Company, the terms of
such Preferred Stock may provide that, if no such shares of capital stock shall
have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Stock shall automatically and mandatorily be converted into the
applicable shares of capital stock of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Stock
has a cumulative dividend, full cumulative dividends on all shares of such
series of Preferred Stock shall have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend period, and
(ii) if a series of Preferred Stock does not have a cumulative dividend, full
dividends on all shares of the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current dividend period, no
shares of such series of Preferred Stock shall be redeemed unless all
outstanding shares of Preferred Stock of such series are simultaneously
redeemed; provided, however, that the foregoing shall not prevent the purchase
or acquisition of Preferred Stock of such series to preserve the REIT status of
the Company or pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding shares of Preferred Stock of such series. In
addition, unless (i) if such series of Preferred Stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of such series of
Preferred Stock have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for payment for all past
dividend periods and the then current dividend period, and (ii) if such series
of Preferred Stock does not have a cumulative dividend, full dividends on the
Preferred stock of such series have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for the then current dividend period, the Company shall not purchase or
otherwise acquire directly or indirectly any shares of Preferred Stock of such
series (except by conversion into or exchange for capital stock of the Company
ranking junior to the Preferred Stock of such series as to dividends and upon
liquidation); provided, however, that the foregoing shall not prevent the
purchase or acquisition of shares of Preferred Stock of such series to preserve
the REIT status of the Company or pursuant to a purchase or exchange offer made
on the same terms to holders of all outstanding shares of Preferred Stock of
such series.
If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
or for which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by lot in a manner determined by the
Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the share transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all the shares of
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Preferred Stock of any series are to be redeemed, the notice mailed to each such
holder thereof shall also specify the number of shares of Preferred Stock to be
redeemed from each such holder. If notice of redemption of any Preferred Stock
has been given and if the funds necessary for such redemption have been set
aside by the Company in trust for the benefit of the holders of any Preferred
Stock so called for redemption, then from and after the redemption date
dividends will cease to accrue on such Preferred Stock, and all rights of the
holders of such shares will terminate, except the right to receive the
redemption price.
Liquidation Preference. Upon any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, then, before any
distribution or payment shall be made to the holders of any Common Stock or any
other class or series of capital stock of the Company ranking junior to the
Preferred Stock in the distribution of assets upon any liquidation, dissolution
or winding up of the Company, the holders of each series of Preferred Stock
shall be entitled to receive out of assets of the Company legally available for
distribution to stockholders liquidating distributions in the amount of the
liquidation preference per share (set forth in the applicable Prospectus
Supplement), plus an amount equal to all dividends accrued and unpaid thereon
(which shall not include any accumulation in respect of unpaid noncumulative
dividends for prior dividend periods). After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of Preferred
Stock will have no right or claim to any of the remaining assets of the Company.
In the event that, upon any such voluntary or involuntary liquidation,
dissolution or winding up, the available assets of the Company are insufficient
to pay the amount of the liquidating distributions on all outstanding shares of
Preferred Stock and the corresponding amounts payable on all shares of other
classes or series of capital stock of the Company ranking on a parity with the
Preferred Stock in the distribution of assets, then the holders of the Preferred
Stock and all other such classes or series of capital stock shall share ratably
in any such distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital stock ranking junior to
the Preferred Stock upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Company with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
the Company, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Company.
Voting Rights. Holders of the Preferred Stock will not have any voting
rights, except as set forth below or as indicated in the applicable Prospectus
Supplement.
Whenever dividends on any shares of Preferred Stock shall be in arrears for
six or more consecutive quarterly periods, the holders of such shares of
Preferred Stock (voting separately as a class with all other series of Preferred
Stock upon which like voting rights have been conferred and are exercisable)
will be entitled to vote for the election of two additional directors of the
Company at a special meeting called by the holders of record of at least ten
percent (10%) of any series of Preferred Stock so in arrears (unless such
request is received less than 90 days before the date fixed for the next annual
or special meeting of the stockholders) or at the next annual meeting of
stockholders, and at each subsequent annual meeting until (i) if such series of
Preferred Stock has a cumulative dividend, all dividends accumulated on such
shares of Preferred Stock for the past dividend periods and the then current
dividend period shall have been fully paid or declared and a sum sufficient for
the payment thereof set aside for payment or (ii) if such series of Preferred
Stock does not have a cumulative dividend, four consecutive quarterly dividends
shall have been fully paid or declared and a sum sufficient for the payment
thereof set aside for payment. In such case, the entire Board of Directors of
the Company will be increased by two directors.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least a majority of
the shares of such series of Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to such
series of
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Preferred Stock with respect to payment of dividends or the distribution of
assets upon liquidation, dissolution or winding up or reclassify any authorized
capital stock of the Company into such shares, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase any
such shares; or (ii) amend, alter or repeal the provisions of the Company's
Charter or the Designating Amendment for such series of Preferred Stock, whether
by merger, consolidation or otherwise (an "Event"), so as to materially and
adversely affect any right, preference, privilege or voting power of such series
of Preferred Stock or the holders thereof; provided, however, with respect to
the occurrence of any of the Events set forth in (ii) above, so long as the
Preferred Stock remains outstanding with the terms thereof materially unchanged,
taking into account that upon the occurrence of an Event the Company may not be
the surviving entity, the occurrence of any such Event shall not be deemed to
materially and adversely affect such rights, preferences, privileges or voting
power of holders of Preferred Stock and provided further that (a) any increase
in the amount of the authorized Preferred Stock or the creation or issuance of
any other series of Preferred Stock, or (b) any increase in the amount of
authorized shares of such series or any other series of Preferred Stock, in each
case ranking on a parity with or junior to the Preferred Stock of such series
with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been set
aside by the Company in trust for the benefit of the holders of such shares to
effect such redemption.
Conversion Rights. The terms and conditions, if any, upon which any series
of Preferred Stock is convertible into shares of Common Stock will be set forth
in the applicable Prospectus Supplement relating thereto. Such terms will
include the number of shares of Common Stock into which the shares of Preferred
Stock are convertible, the conversion price (or manner of calculation thereof),
the conversion period, provisions as to whether conversion will be at the option
of the holders of the Preferred Stock or the Company, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of such series of Preferred Stock.
Restrictions on Ownership. As discussed below under "--Restrictions on
Transfer; Excess Stock," for the Company to qualify as a REIT under the Code not
more than 50% in value of its outstanding capital stock may be owned, directly
or indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year. To assist the Company
in meeting this requirement, the Company may take certain actions to limit the
beneficial ownership, directly or indirectly, by a single person of the
Company's outstanding equity securities, including any Preferred Stock of the
Company. Therefore, the Designating Amendment for each series of Preferred Stock
may contain provisions restricting the ownership and transfer of the Preferred
Stock and/or providing for the automatic exchange of shares of Preferred Stock
into shares of Excess Stock in certain circumstances. The applicable Prospectus
Supplement will specify any additional ownership limitation relating to a series
of Preferred Stock.
Transfer Agent and Registrar. The transfer agent and registrar for the
Preferred Stock will be set forth in the applicable Prospectus Supplement.
RESTRICTIONS ON TRANSFERS; EXCESS STOCK
For the Company to qualify as a REIT under the Code, among other things,
not more than 50% in value of its outstanding capital stock may be owned,
directly or indirectly, by five or fewer individuals (defined in the Code to
include certain entities) during the last half of a taxable year (other than the
first year), and such capital stock must be beneficially owned by 100 or more
persons during at least 335 days of a taxable year of 12 months (other than the
first year) or during a proportionate part of a shorter taxable year. The
Charter of the Company contains provisions, designed to preserve the Company's
qualification as a REIT, that limit any holder from owning, or being deemed to
own by virtue of the attribution provisions of the Code either (i) more than
9.8% (in value or in number of shares, whichever is more restrictive) of the
outstanding shares of
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Common Stock (the "Common Stock Ownership Limit") or (ii) shares of capital
stock having a value that is more than 9.8% of the value of all outstanding
capital stock of the Company (the "Ownership Limit"). The Charter provides that
each person (which includes natural persons, corporations, trusts, partnerships
and other entities) shall be deemed to own stock that such person (i) actually
owns, (ii) constructively owns after applying attribution rules specified in the
Code, and (iii) has the right to acquire upon exercise of any rights, options or
warrants or conversion of any convertible securities held by such person. The
fact that certain affiliated entities, such as separate mutual funds advised by
the same investment adviser, may own more than 9.8% of all outstanding shares of
Common Stock or of the value of all outstanding capital stock in the aggregate
will not of itself result in either the Common Stock Ownership Limit or the
Ownership Limit being exceeded, merely because a single person may be considered
to be the "beneficial owner" of such stock for purposes of Section 13(g) of the
Exchange Act. The Board of Directors may waive either the Common Stock Ownership
Limit or the Ownership Limit if evidence satisfactory to the Board of Directors
and the Company's tax counsel is presented that the changes in ownership will
not then or in the future jeopardize the Company's status as a REIT.
Any transfer of capital stock or any Security convertible into capital
stock that would create direct or indirect ownership of capital stock in excess
of either the Common Stock Ownership limit or the Ownership Limit or that would
result in the disqualification of the Company as a REIT, including any transfer
that results in the Company being "closely held" within the meaning of Section
856(h) of the Code, shall be null and void, and the intended transferee will
acquire no rights to the capital stock. Shares of capital stock owned, or deemed
to be owned, or transferred to a stockholder in excess of either the Common
Stock Ownership Limit or the Ownership Limit will automatically be exchanged for
shares of Excess Stock that will be transferred, by operation of law, to a
trustee (to be named by the Board of Directors of the Company, but unaffiliated
with the Company) as trustee for the exclusive benefit (except to the extent
described below) of one or more charitable beneficiaries designated from time to
time by the Company. The Excess Stock held in trust will be considered as issued
and outstanding shares of stock of the Company, will be entitled to receive
distributions declared by the Company and may be voted by the trustee for the
exclusive benefit of the charitable beneficiary. Any dividend or distribution
paid to a purported transferee of Excess Stock prior to the discovery by the
Company that capital stock has been transferred in violation of the provisions
of the Company's Charter (a "prohibited transfer") shall be repaid to the
Company upon demand and thereupon paid over by the Company to the trustee. Any
votes of holders of shares of capital stock purported to have been cast by a
purported transferee prior to such discovery of a prohibited transfer will be
retroactively deemed not to have been cast and may be recast by the trustee for
the benefit of the charitable beneficiary, but said retroactive nullification or
recast of the vote of the relevant shares of capital stock shall not adversely
affect the rights of any person (other than the purported transferee) who has
relied in good faith upon the effectiveness of the matter that was the subject
of the stockholder action as to which such votes were cast.
Excess Stock is not transferable. Subject to the redemption rights of the
Company discussed below, the trustee of the trust may, however, sell and
transfer the interest in the trust to a transferee in whose hands the interest
in the trust representing Excess Stock would not be an interest in Excess Stock,
and upon such sale the shares of Excess Stock represented by the sold interest
shall be automatically exchanged for shares of capital stock of the class that
was originally exchanged into such Excess Stock. Upon such sale, the trustee
shall distribute to the purported transferee only so much of the sales proceeds
as is not more than the price paid by the purported transferee in the prohibited
transfer that resulted in the exchange of Excess Stock for the capital stock
purported to have been transferred (or, if the purported transferee received
such capital stock by gift, devise or otherwise without giving value for such
stock, only an amount that does not exceed the market price for such stock, as
determined in the manner set forth in the Charter, at the time of the prohibited
transfer), and the trustee shall distribute all remaining proceeds from such
sale to the charitable beneficiary.
In addition to the foregoing transfer restrictions, the Company will have
the right, for a period of 90 days during the time any Excess Stock is held by
the trustee, to purchase all or any portion of the Excess Stock from the trustee
for the lesser of the price paid for the capital stock by the original purported
transferee (or, if the purported transferee received such capital stock by gift,
devise or otherwise without giving value for such stock, the market price of the
capital stock at the time of such prohibited transfer) or the market price of
the
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capital stock on the date the Company exercises its option to purchase. Upon any
such purchase by the Company, the trustee shall distribute the purchase price to
the original purported transferee. The 90-day period begins on the date on which
the Company receives written notice of the prohibited transfer or other event
resulting in the exchange of capital stock for Excess Stock.
The Charter provides that if the foregoing transfer restrictions are
determined to be void or invalid by virtue of any legal decision, statute, rule
or regulation, then the intended transferee of any Excess Stock may be deemed,
at the option of the Company, to have acted as an agent on behalf of the Company
in acquiring the Excess Stock and to hold the Excess Stock on behalf of the
Company.
These restrictions will not preclude settlement of transactions on the New
York Stock Exchange or any other stock exchange on which capital stock of the
Company is listed. The foregoing restrictions on transferability and ownership
also will not apply if the Board of Directors determines that it is no longer in
the best interests of the Company to continue to qualify as a REIT.
The Company's Charter requires that, upon demand by the Company, each
stockholder and each proposed transferee of capital stock will disclose to the
Company in writing any information with respect to the direct, indirect and
constructive ownership of shares of stock as the Board of Directors deems
necessary to comply with the provisions of the Code applicable to REITs, to
comply with the requirements of any taxing authority or governmental agency or
to determine any such compliance.
The Ownership Limitation provided by the Company's Charter may have the
effect of delaying, deferring or preventing the acquisition of control of the
Company. However, the Charter provides that the Ownership Limit shall not apply
to shares of capital stock acquired pursuant to an all cash tender offer for all
outstanding shares of capital stock in conformity with applicable laws where not
less than two-thirds of the outstanding shares of capital stock (not including
securities held by the tender offeror and/or its affiliates and associates) are
tendered and accepted pursuant to such tender offer and where the tender offeror
commits in such tender offer, if the offer is accepted by the holders of
two-thirds of the outstanding stock, promptly after the tender offeror's
purchase of the tendered stock to give any non-tendering stockholders a
reasonable opportunity to put their capital stock to the tender offeror at a
price not less than that paid pursuant to the tender offer.
CERTAIN PROVISIONS OF MARYLAND LAW
The following summary of certain provisions of the MGCL does not purport to
be complete and is qualified in its entirety by reference to the MGCL.
Business Combinations. Under the MGCL, certain "business combinations"
(including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance or reclassification of equity
securities) between a Maryland corporation and any person who beneficially owns
10% or more of the voting power of the corporation's shares of capital stock or
an affiliate of the corporation who, at any time within the two-year period
prior to the date in question, was the beneficial owner of 10% or more of the
voting power of the then-outstanding voting stock of the corporation (an
"Interested Stockholder") or an affiliate thereof are prohibited for five years
after the most recent date on which the Interested Stockholder becomes an
Interested Stockholder. Thereafter, any such business combination must be
recommended by the board of directors of the corporation and approved by the
affirmative vote of at least (i) 80% of the votes entitled to be cast by holders
of outstanding voting shares of the corporation and (ii) two-thirds of the votes
entitled to be cast by holders of outstanding voting shares of the corporation
other than shares held by the Interested Stockholder with whom (or with whose
affiliate) the business combination is to be effected, unless, among other
conditions, the corporation's common stockholders receive a minimum price (as
defined in the MGCL) for their shares and the consideration is received in cash
or in the same form as previously paid by the Interested Stockholder for its
shares. These provisions of Maryland law do not apply, however, to business
combinations that are approved or exempted by the board of directors of the
corporation prior to the time that the Interested Stockholder becomes an
Interested Stockholder.
Pursuant to authority contained in the MGCL, the Company's Board of
Directors has adopted a resolution providing that the "business combination"
provisions of the MGCL shall not apply to the Company,
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reserving however the right to offer, revoke or repeal such resolution if the
Board of Directors determines that such alteration, revocation or repeal is in
the best interest of the Company and its stockholders.
Control Share Acquisitions. The MGCL provides that "control shares" of a
Maryland corporation acquired in a "control share acquisition" have no voting
rights except to the extent approved by a vote of two-thirds of the votes
entitled to be cast on the matter, excluding shares of stock owned by the
acquiror or by officers or directors who are employees of the corporation.
"Control shares" are voting shares of stock that, if aggregated with all other
shares of stock previously acquired by that person, or in respect of which the
acquiror is able to exercise or direct the exercise of voting power (except
solely by virtue of a revocable proxy), would entitle the acquiror to exercise
voting power in electing directors within one of the following ranges of voting
power: (i) one-fifth or more but less than one-third, or (ii) one-third or more
but less than a majority, or (iii) a majority of all voting power. Control
shares do not include shares the acquiring person is then entitled to vote as a
result of having previously obtained stockholder approval. A "control share
acquisition" means the acquisition of control shares, subject to certain
exceptions.
A person who has made or proposes to make a control share acquisition, upon
satisfaction of certain conditions (including an undertaking to pay expenses),
may compel the board of directors to call a special meeting of stockholders to
be held within 50 days of demand to consider the voting rights of the shares. If
no request for a meeting is made, the corporation may itself present the
question at any meeting of stockholders.
If voting rights are not approved at the meeting or if the acquiring person
does not deliver an acquiring person statement as required by the statute, then,
subject to certain conditions and limitations, the corporation may redeem any or
all of the control shares (except those for which voting rights have been
previously been approved) for fair value determined, without regard to the
absence of voting rights for the control shares, as of the date of the last
control share acquisition by the acquiror or of any meeting of stockholders at
which the voting rights of such shares are considered and not approved. If
voting rights for control shares are approved at a stockholders meeting and the
acquiror becomes entitled to vote a majority of the shares entitled to vote, all
other stockholders may exercise appraisal rights. The fair value of the shares
as determined for purposes of the appraisal rights may not be less than the
highest price per share paid by the acquiror in the control share acquisition,
and certain limitations and restrictions otherwise applicable to the exercise of
dissenters' rights do not apply in the context of a control share acquisition.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to acquisitions approved or exempted by a corporation's articles
of incorporation or bylaws.
The Company's Bylaws contain a provision exempting any and all acquisitions
of the Company's shares of capital stock from the control shares provision of
the MGCL. The Board of Directors, however, by vote of two-thirds of its members,
has authority at any time, without stockholder approval, to repeal or amend such
exemption, whether before or after an acquisition of control shares, if it
determines that such repeal or amendment is in the best interests of the
stockholders of the Company. Alternatively, the Bylaws may be amended or
repealed by the affirmative vote of a majority of the Board of Directors and a
majority of all votes cast by holders of stock entitled to vote generally in the
election of directors.
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DESCRIPTION OF DEPOSITARY SHARES REPRESENTING PREFERRED STOCK
GENERAL
The Company may issue receipts ("Depositary Receipts") for Depositary
Shares, each of which will represent a fractional interest of a share of a
particular series of Preferred Stock, as specified in the applicable Prospectus
Supplement. Shares of Preferred Stock of each series represented by Depositary
Shares will be deposited under a separate Deposit Agreement (each, a "Deposit
Agreement") among the Company, the depositary named therein (the "Preferred
Shares Depositary") and the holders from time to time of the Depositary
Receipts. Subject to the terms of the Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest of
a share of a particular series of Preferred Stock represented by the Depositary
Shares evidenced by such Depositary Receipt, to all rights and preferences of
the Preferred Stock represented by such Depositary Shares (including dividend,
voting, conversion, redemption and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the Preferred Stock by the Company to the Preferred Shares
Depositary, the Company will cause the Preferred Shares Depositary to issue, on
behalf of the Company, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from the Company upon
request, and the following summary of the form thereof that will be incorporated
as an exhibit to the Registration Statement of which this Prospectus is a part
at the time of the offering of the Depository Shares is qualified in its
entirety by reference thereto.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Shares Depositary will distribute all cash dividends or other
cash distributions received in respect of the Preferred Stock to the record
holders of Depositary Receipts evidencing the related Depositary Shares in
proportion to the number of such Depositary Receipts owned by such holders,
subject to certain obligations of holders to file proofs, certificates and other
information and to pay certain charges and expenses to the Preferred Shares
Depositary.
In the event of a distribution other than in cash, the Preferred Shares
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and expenses to the Preferred Shares Depositary, unless the Preferred Shares
Depositary determines that it is not feasible to make such distribution, in
which case the Preferred Shares Depositary may, with the approval of the
Company, sell such property and distribute the net proceeds from such sale to
such holders.
WITHDRAWAL OF SHARES
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Shares Depositary (unless the related Depositary Shares have
previously been called for redemption), the holders thereof will be entitled to
delivery at such office, to or upon such holder's order, of the number of whole
or fractional shares of Preferred Stock and any money or other property
represented by the Depositary Shares evidenced by such Depositary Receipts.
Holders of Depositary Receipts will be entitled to receive whole or fractional
shares of the related Preferred Stock on the basis of the proportion of
Preferred Stock represented by each Depositary Share as specified in the
applicable Prospectus Supplement, but holders of such shares of Preferred Stock
will not thereafter be entitled to receive Depositary Shares therefor. If the
Depositary Receipts delivered by the holder evidence a number of Depositary
Shares in excess of the number of Depositary Shares representing the number of
shares of Preferred Stock to be withdrawn, the Preferred Shares Depositary will
deliver to such holder at the same time a new Depositary Receipt evidencing such
excess number of Depositary Shares. The Company does not expect that there will
be any public market for shares of Preferred Stock that are withdrawn as
described in this paragraph.
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REDEMPTION OF DEPOSITARY SHARES
Whenever the Company redeems shares of Preferred Stock held by the
Preferred Shares Depositary, the Preferred Shares Depositary will redeem as of
the same redemption date the number of Depositary Shares representing the shares
of Preferred Stock so redeemed, provided the Company shall have paid in full to
the Preferred Shares Depositary the redemption price of the Preferred Stock to
be redeemed plus an amount equal to any accrued and unpaid dividends thereon to
the date fixed for redemption. The redemption price per Depositary Share will be
equal to the redemption price and any other amounts per share payable with
respect to the Preferred Stock. If fewer than all the Depositary Shares are to
be redeemed, the Depositary Shares to be redeemed will be selected pro rata (as
nearly as may be practicable without creating fractional Depositary Shares) or
by any other equitable method determined by the Company.
From and after the date fixed for redemption, all dividends in respect of
shares of Preferred Stock so called for redemption will cease to accrue, the
Depositary Shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the Depositary Receipts evidencing
the Depositary Shares so called for redemption will cease, except the right to
receive any moneys payable upon such redemption and any money or other property
to which the holders of such Depositary Receipts were entitled upon such
redemption upon surrender thereof to the Preferred Shares Depositary.
VOTING
Upon receipt of notice of any meeting at which the holders of shares of
Preferred Stock are entitled to vote, the Preferred Shares Depositary will mail
the information contained in such notice of meeting to the record holders of the
Depositary Receipts evidencing the Depositary Shares which represent such shares
of Preferred Stock. Each record holder of Depositary Receipts evidencing
Depositary Shares on the record date (which will be the same date as the record
date for the Preferred Stock) will be entitled to instruct the Preferred Shares
Depositary as to the exercise of the voting rights pertaining to the amount of
Preferred Stock represented by such holder's Depositary Shares. The Preferred
Shares Depositary will vote the amount of Preferred Stock represented by such
Depositary Shares in accordance with such instructions, and the Company will
agree to take all reasonable action which may be deemed necessary by the
Preferred Shares Depositary in order to enable the Preferred Shares Depositary
to do so. The Preferred Shares Depositary will abstain from voting the amount of
Preferred Stock represented by such Depositary Shares to the extent it does not
receive specific instructions from the holders of Depositary Receipts evidencing
such Depositary Shares. The Preferred Shares Depositary shall not be responsible
for any failure to carry out any instruction to vote, or for the manner or
effect of any such vote made, as long as any such action or non-action is in
good faith and does not result from negligence or willful misconduct of the
Preferred Shares Depositary.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of each Depositary Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depositary Share evidenced by such Depositary
Receipt, as set forth in the applicable Prospectus Supplement.
CONVERSION
The Depositary Shares, as such, are not convertible into shares of Common
Stock or any other securities or property of the Company. Nevertheless, if so
specified in the applicable Prospectus Supplement relating to an offering of the
Depositary Shares, the Depositary Receipts may be surrendered by holders thereof
to the Preferred Shares Depositary with written instructions to the Preferred
Shares Depositary to instruct the Company to cause conversion of the Preferred
Stock represented by the Depositary Shares evidenced by such Depositary Receipts
into whole shares of Common Stock, other shares of Preferred Stock of the
Company or other shares of beneficial interest, and the Company has agreed that,
upon receipt of such instructions and any amounts payable in respect thereof, it
will cause the conversion thereof utilizing the same procedures as those
provided for delivery of shares of Preferred Stock to effect such conversion. If
the Depositary Shares evidenced by a Depositary Receipt are to be converted in
part only, a new Depositary Receipt will be issued
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for any Depositary Shares not to be converted. No fractional shares of Common
Stock will be issued upon conversion, and if such conversion will result in a
fractional share being issued, an amount will be paid in cash by the Company
equal to the value of the fractional interest based upon the closing price of
the Common Stock on the last business day prior to the conversion.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares which
represent the Preferred Stock and any provision of the Deposit Agreement may at
any time be amended by agreement between the Company and the Preferred Shares
Depositary. However, any amendment that materially and adversely alters the
rights of the holders of Depositary Receipts or that would be materially and
adversely inconsistent with the rights granted to the holders of the related
Preferred Stock will not be effective unless such amendment has been approved by
the existing holders of at least a majority of the Depositary Shares evidenced
by the Depositary Receipts then outstanding. No amendment shall impair the
right, subject to certain exceptions in the Deposit Agreement, of any holder of
Depositary Receipts to surrender any Depositary Receipt with instructions to
deliver to the holder the related Preferred Stock and all money and other
property, if any, represented thereby, except in order to comply with law. Every
holder of an outstanding Depositary Receipt at the time any such amendment
becomes effective shall be deemed, by continuing to hold such Depositary
Receipt, to consent and agree to such amendment and to be bound by the Deposit
Agreement as amended thereby.
The Deposit Agreement may be terminated by the Company upon not less than
30 days' prior written notice to the Preferred Shares Depositary if (i) such
termination is necessary to preserve the Company's status as a REIT or (ii) at
least two-thirds of each series of Preferred Stock affected by such termination
consents to such termination, whereupon the Preferred Shares Depositary shall
deliver or make available to each holder of Depositary Receipts, upon surrender
of the Depositary Receipts held by such holder, such number of whole or
fractional shares of Preferred Stock as are represented by the Depositary Shares
evidenced by such Depositary Receipts together with any other property held by
the Preferred Shares Depositary with respect to such Depositary Receipt. The
Company has agreed that, if the Deposit Agreement is terminated to preserve the
Company's status as a REIT, the Company will use its best efforts to list the
shares of Preferred Stock issued upon surrender of the related Depositary Shares
on a national securities exchange. In addition, the Deposit Agreement will
automatically terminate if (a) all outstanding Depositary Shares shall have been
redeemed or converted, or (b) there shall have been a final distribution in
respect of the related Preferred Stock in connection with any liquidation,
dissolution or winding up of the Company and such distribution shall have been
distributed to the holders of Depositary Receipts evidencing the Depositary
Shares representing such Preferred Stock.
CHARGES OF PREFERRED SHARES DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Deposit Agreement. In addition, the
Company will pay the fees and expenses of the Preferred Shares Depositary in
connection with the performance of its duties under the Deposit Agreement.
However, holders of Depositary Receipts will pay certain other transfer and
other taxes and governmental charges as well as the fees and expenses of the
Preferred Shares Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the Deposit
Agreement.
RESIGNATION AND REMOVAL OF DEPOSITARY
The Preferred Shares Depositary may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time remove
the Preferred Shares Depositary, any such resignation or removal to take effect
upon the appointment of a successor Preferred Shares Depositary. A successor
Preferred Shares Depositary must be appointed within 60 days after delivery of
the notice of resignation or removal and must be a bank or trust company having
its principal office in the United States and having a combined capital and
surplus of at least $50,000,000.
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MISCELLANEOUS
The Preferred Shares Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
the Preferred Shares Depositary with respect to the related Preferred Stock.
Neither the Preferred Shares Depositary nor the Company will be liable if
it is prevented from or delayed in, by law or any circumstances beyond its
control, performing its obligations under the Deposit Agreement. The obligations
of the Company and the Preferred Shares Depositary under the Deposit Agreement
will be limited to performing their duties thereunder in good faith and without
negligence or willful misconduct, and the Company and the Preferred Shares
Depositary will not be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Receipts, Depositary Shares or shares of Preferred
Stock represented thereby unless satisfactory indemnity is furnished. The
Company and the Preferred Shares Depositary may rely on written advice of
counsel or accountants, or information provided by persons presenting shares of
Preferred Stock represented thereby for deposit, holders of Depositary Receipts
or other persons believed in good faith to be competent to give such
information, and on documents believed in good faith to be genuine and signed by
a proper party.
In the event the Preferred Shares Depositary shall receive conflicting
claims, requests or instructions from any holders of Depositary Receipts, on the
one hand, and the Company, on the other hand, the Preferred Shares Depositary
shall be entitled to act on such claims, requests or instructions received from
the Company.
DESCRIPTION OF WARRANTS OR RIGHTS
The Company may issue warrants or rights (collectively, the "Warrants") for
the purchase of any series of Debt Securities, Depositary Shares or shares of
any class of capital stock of the Company. Warrants may be issued independently
or together with any other Securities and may be attached to or separate from
such Securities. Each series of Warrants will be issued under a separate warrant
agreement or rights agreement (each, a "Warrant Agreement") to be entered into
between the Company and a warrant agent or rights agent ("Warrant Agent"). The
Warrant Agent will act solely as an agent of the Company in connection with the
Warrants of such series and will not assume any obligation or relationship of
agency or trust for or with any holders or beneficial owners of Warrants.
The applicable Prospectus Supplement will describe the following terms,
where applicable, of the Warrants in respect of which this Prospectus is being
delivered: (i) the title of such Warrants; (ii) the aggregate number of such
Warrants; (iii) the price or prices at which such Warrants will be issued; (iv)
the designation, aggregate principal amount and terms of the Securities
purchasable upon exercise of such Warrants; (v) the designation and terms of the
Securities, if any, with which such Warrants are issued and the number of such
Warrants issued with each such Security; (vi) if applicable, the date on and
after which such Warrants and the related Securities will be separately
transferable; (vii) the price at which the Securities purchasable upon exercise
of such Warrants may be purchased; (viii) the date on which the right to
exercise such Warrants shall commence and the date on which such right shall
expire; (ix) the minimum or maximum amount of such Warrants which may be
exercised at any one time; (x) information with respect to book-entry
procedures, if any; (xi) a discussion of certain applicable federal income tax
considerations; and (xii) any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants.
DESCRIPTION OF UNITS OF SECURITIES
The Company may issue Units consisting of two or more other constituent
Securities, which Units may be issuable as, and for the period of time specified
therein may be transferable as, a single Security only, as distinguished from
the separate constituent Securities comprising such Units. Any such Units will
be offered pursuant to a Prospectus Supplement which will (i) identify and
designate the title of any series of Units; (ii) identify and describe the
separate constituent Securities comprising such Units; (iii) set forth the price
or prices at which such Units will be issued; (iv) describe, if applicable, the
date on and after which the
36
<PAGE> 38
constituent Securities comprising the Units will become separately transferable;
(v) provide information with respect to book-entry procedures, if any; (vi)
discuss certain applicable federal income tax considerations relating to the
Units; and (vii) describe any other terms of the Units and their constituent
Securities.
FEDERAL INCOME TAX CONSIDERATIONS
The Company has elected to qualify as a REIT under the Code. In the opinion
of Goodwin, Procter & Hoar LLP, the Company has been organized in conformity
with the requirements for qualification as a REIT under the Code, and its manner
of operation has met and will continue to meet the requirements for
qualification and taxation as a REIT under the Code. This opinion is based on
various assumptions and is conditioned upon representations made by the Company
as to factual matters and the continuation of such factual matters. Investors
should be aware, however, that opinions of counsel are not binding upon the
Internal Revenue Service or any court. Moreover, such qualification and taxation
as a REIT in any tax year depends upon the Company's ability to meet in its
actual results for the tax year the various source of income, ownership of
assets, distribution and diversity of ownership requirements of the Code for
qualification as a REIT, which results will not be reviewed by Goodwin, Procter
& Hoar LLP. Accordingly, no assurance can be given that the actual results of
the Company for any particular tax year will in fact satisfy the requirements
for qualification. Likewise, although the Company believes that it has operated
in a manner which satisfies the REIT qualification requirements under the Code
for all years since and including 1987, no assurance can be given that the
Company's qualification as a REIT will not be challenged by the Internal Revenue
Service for taxable years still subject to audit.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and very general summary of certain provisions
which currently govern the federal income tax treatment of the Company and its
stockholders. For the particular provisions which govern the federal income tax
treatment of the Company and its stockholders, reference is made to Sections 856
through 860 of the Code and the income tax regulations promulgated thereunder.
The following summary is qualified in its entirety by such reference. This
discussion does not address any state tax considerations or issues that arise as
a result of an investor's special circumstances or special status under the
Code.
Under the Code, if certain requirements are met in a taxable year,
including the requirement that the REIT distribute to the stockholders at least
95% of its real estate investment trust taxable income for the taxable year, a
REIT will generally not be subject to federal income tax with respect to income
which it distributes to its stockholders. However, the Company may be subject to
federal income tax under certain circumstances, including taxes at regular
corporate rates on any undistributed REIT taxable income, the alternative
minimum tax on its items of tax preference, and taxes imposed on income and gain
generated by certain extraordinary transactions. If the Company fails to qualify
during any taxable year as a REIT, unless certain relief provisions are
available, it will be subject to tax (including any applicable alternative
minimum tax) on its taxable income at regular corporate rates, which could have
a material adverse effect upon the Company and its ability to make distributions
to its stockholders. For additional discussion of certain issues relating to the
Company's qualification as a REIT, see "Risk Factors -- Consequences of Failure
to Qualify as a REIT."
As long as the Company qualifies as a REIT, distributions made to the
Company's taxable U.S. stockholders out of current or accumulated earnings and
profits (and not designated as a capital gain dividends) will be taken into
account by such U.S. stockholders as ordinary income and will not be eligible
for the dividends received deduction generally available to corporations. As
used herein, the term "U.S. stockholder" means a holder of Common Stock that for
U.S. federal income tax purposes is (i) a citizen or resident of the United
States, (ii) a corporation, partnership, or other entity created or organized in
or under the laws of the United States or any political subdivision thereof, or
(iii) an estate or trust the income of which is subject to U.S. federal income
taxation regardless of its source and (iv) does not have special status under
the Code, such as tax-exempt organization; provided, however, for taxable years
beginning after December 31, 1996 (or certain earlier periods if the trust so
elects) trusts are to be included as "U.S. stockholders" only if a court within
the United States is able to exercise primary supervision over the
administration of such trust and
37
<PAGE> 39
one or more United States fiduciaries have the authority to control all
substantial decisions of the trust. Distributions that are designated as capital
gain dividends will be taxed as long-term capital gains (to the extent they do
not exceed the Company's actual net capital gain for the taxable year) without
regard to the period for which the stockholder has held his Common Stock.
However, corporate stockholders may be required to treat up to 20% of certain
capital gain dividends as ordinary income. Distributions in excess of current
and accumulated earnings and profits will not be taxable to a stockholder to the
extent that they do not exceed the adjusted basis of the stockholder's Common
Stock, but rather will reduce the adjusted basis of such stock. To the extent
that distributions in excess of current and accumulated earnings and profits
exceed the adjusted basis of stockholder's Common Stock, the distribution will
be included in income as long-term capital gain (or short-term capital gain if
the Common Stock has been held for one year or less) assuming the Common Stock
is a capital asset in the hands of the stockholder. In addition, any dividend
declared by the Company in October, November or December of any year and payable
to a stockholder of record on a specified date in any such month shall be
treated as both paid by the Company and received by the stockholder on December
31 of such year, provided that the distribution is actually paid by the Company
during January of the following calendar year.
Investors are urged to consult their own tax advisors with respect to the
tax consequences arising under federal law and the laws of any state,
municipality or other taxing jurisdiction. Foreign investors should consult
their own tax advisors concerning the tax consequences of an investment in the
Company, including the possibility of United States income tax withholding on
Company distributions.
PLAN OF DISTRIBUTION
The Company may sell Securities through underwriters or dealers, directly
to one or more purchasers, or through agents.
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, at market
prices prevailing at the time of sale or at prices related to such prevailing
market prices, or at negotiated prices.
In connection with the sale of Securities, underwriters or agents 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.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions, or commissions from
the underwriters and/or commissions from the purchasers for whom they may act as
agents. Underwriters, dealers, and agents that participate in the distribution
of Securities may be deemed to be underwriters, and any discounts or commissions
they receive from the Company, and any profit on the resale of Securities they
realize may be deemed to be underwriting discounts and commissions, under the
Securities Act. Any such underwriter or agent will be identified, and any such
compensation received from the Company will be described, in the applicable
Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each
series of Securities will be a new issue with no established trading market,
other than the Common Stock which is listed on the NYSE. Any shares of Common
Stock sold pursuant to a Prospectus Supplement will be listed on the NYSE,
subject to official notice of issuance. The Company may elect to list any series
of Debt Securities or Preferred Stock on an exchange, but is not obligated to do
so. It is possible that one or more underwriters may make a market in a series
of Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of, or the trading market for, the Securities.
Under agreements into which the Company may enter, underwriters will be,
and dealers and agents who participate in the distribution of Securities may be,
entitled to indemnification by the Company against certain liabilities,
including liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or
perform services for, or be customers of, the Company in the ordinary course of
business.
38
<PAGE> 40
If so indicated in the applicable Prospectus Supplement, the Company may
itself, or may authorize underwriters or other persons acting as the Company's
agents to, solicit offers by certain institutions to purchase Securities from
the Company pursuant to contracts providing for payment and delivery on a future
date. Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the Securities shall not at the time of delivery be prohibited under the laws of
the jurisdiction to which such purchaser is subject. The underwriters and such
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers.
LEGAL MATTERS
The validity of the Securities that are subject to this Prospectus will be
passed upon for the Company by Goodwin, Procter & Hoar LLP, Boston,
Massachusetts. In the case of an underwritten public offering, certain legal
matters will be passed upon for the Underwriters by legal counsel named in the
applicable Prospectus Supplement.
EXPERTS
The financial statements and related financial statement schedules
incorporated in this Prospectus by reference to the Company's Annual Report on
Form 10-K have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report, which is incorporated herein by reference, and have been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The BRE Portfolio's Combined Statement of Gross Income and Direct Operating
Expenses for each of the three years in the period ended December 31, 1996
incorporated by reference herein has been audited by Ernst & Young LLP,
independent auditors, as stated in their report thereon incorporated herein and
has been so incorporated by reference herein in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
The combined statements of revenue and direct operating expenses of The
Downey Portfolio for each of the years in the three-year period ended December
31, 1996, have been incorporated by reference herein in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing. Such report contains a paragraph that states that the
combined statements of revenue and certain expenses were prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission as described in note 1. It is not intended to be a complete
presentation of The Downey Portfolio's combined revenue and expenses.
39
<PAGE> 41
======================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information................ 2
Incorporation of Certain Documents by
Reference.......................... 2
The Company.......................... 3
Ratio of Earnings to Fixed Charges... 3
Use of Proceeds...................... 3
Risk Factors......................... 4
Description of Debt Securities....... 10
Description of Capital Stock......... 23
Description of Depositary Shares
representing Preferred Stock....... 33
Description of Warrants or Rights.... 36
Description of Units of Securities... 36
Federal Income Tax Considerations.... 37
Plan of Distribution................. 38
Legal Matters........................ 39
Experts.............................. 39
</TABLE>
======================================================
======================================================
$321,728,125
BURNHAM PACIFIC
PROPERTIES, INC.
DEBT SECURITIES
COMMON STOCK
PREFERRED STOCK
DEPOSITARY SHARES REPRESENTING
PREFERRED STOCK
WARRANTS OR RIGHT
UNITS OF SECURITIES
------------------------
PROSPECTUS
------------------------
JULY 18, 1997
======================================================
<PAGE> 42
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The expenses in connection with the issuance and distribution of the
securities being registered will be borne by the Company and are set forth in
the following table (all amounts except the registration fee are estimated):
<TABLE>
<S> <C>
Registration fee....................................................... $ 60,607
NASD fee............................................................... 30,500
Legal fees and expenses................................................ 400,000
Blue Sky expenses...................................................... 15,000
Accounting fees and expenses........................................... 150,000
Printing fees and expenses............................................. 300,000
Transfer Agency/Trustee Fees........................................... 25,000
Miscellaneous.......................................................... 18,893
Total.................................................................. $1,000,000
==========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Maryland General Corporation Law ("MGCL") permits a Maryland
corporation to include in its charter a provision limiting the liability of its
directors and officers to the corporation and its stockholders for money damages
except for liability resulting from (i) actual receipt of an improper benefit or
profit in money, property or services or (ii) active and deliberate dishonesty
established by a final judgment as being material to the cause of action. The
charter of Burnham Pacific Properties, Inc. (the "Company") contains such a
provision which eliminates such liability to the maximum extent permitted by
Maryland law.
The charter of the Company authorizes it, to the maximum extent permitted
by Maryland law, to obligate itself to indemnify and to pay or reimburse
reasonable expenses in advance of final disposition of a proceeding to (i) any
individual who is a present or former director, officer, employee or agent of
the Company or of its predecessor, Burnham Pacific Properties, Inc., a
California corporation (the "Predecessor Corporation") or (ii) any individual
who, while a director of the Company or Predecessor Corporation and at the
request of the Company or Predecessor Corporation, serves or has served as a
director, officer, partner or trustee of another corporation, partnership, joint
venture, trust, employee benefit plan or any other enterprise. The Bylaws of the
Company obligate it, to the maximum extent permitted by Maryland law, to
indemnify (a) any individual who is a present or former director, officer,
employee or agent of the Company or Predecessor Corporation or (b) any
individual who, while a director of the Company or Predecessor Corporation and
at the request of the Company or Predecessor Corporation, serves or has served
another corporation, partnership, joint venture, trust, employee benefit plan or
any other enterprise as a director, officer, partner or trustee.
The MGCL requires a corporation (unless its charter provides otherwise,
which the Company's charter does not) to indemnify a director or officer who has
been successful, on the merits or otherwise, in the defense of any proceeding to
which he is made a party by reason of his service in that capacity. The MGCL
permits a corporation to indemnify its present and former directors and
officers, among others, against judgments, penalties, fines, settlements and
reasonable expenses actually incurred by them in connection with any proceeding
to which they may be made a party by reason of their service in those or other
capacities unless it is established that (i) the act or omission of the director
or officer was material to the matter giving rise to the proceeding and (a) was
committed in bad faith or (b) was the result of active and deliberate
dishonesty, (ii) the director or officer actually received an improper personal
benefit in money, property or services or (iii) in the case of any criminal
proceeding, the director or officer had reasonable cause to believe that the act
or omission was unlawful. However, a Maryland corporation may not indemnify for
an adverse judgment in a suit by or in the right of the corporation. In
addition, the MGCL allows a corporation to advance expenses to a director or
officer, provided that, as a condition to advancing expenses, the corporation
obtains (x) a written affirmation by the director or officer of his good faith
belief that he has met the standard of conduct necessary for indemnification by
the corporation as authorized by the bylaws and (y) a written statement by or on
his behalf to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not met.
II-1
<PAGE> 43
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------
<S> <C>
1.1 Form of Underwriting Agreement for Common Stock, incorporated by reference to
Exhibit 1.0 to Post-Effective Amendment No. 3 to Registration Statement No.
33-68712.
**1.2 Form of Underwriting Agreement for Debentures.
3.1 Charter of the Company, as amended and restated May 6, 1997, incorporated by
reference to pages B-1 through B-13 of the Company's Proxy Statement for its 1997
Annual Meeting, filed March 31, 1997.
3.2 Bylaws of the Company, incorporated by reference to pages C-1 through C-13 of the
Company's Proxy Statement for its 1997 Annual Meeting, filed March 31, 1997.
4.1 Articles VI and VII of Charter of the Company -- See Exhibit 3.1.
4.2 Bylaws of the Company -- See Exhibit 3.2.
4.3 Form of stock certificate for Common Stock of the Company, incorporated by
reference to Exhibit 4.0 to Registration Statement No. 33-20489 and subsequently
overprinted to state "THE CORPORATION IS NOW INCORPORATED IN THE STATE OF MARYLAND
WITH $0.01 PAR VALUE PER SHARE."
**4.4 Preferred Stock terms as set forth in resolutions of the Board of Directors.
**4.5 Form of stock certificate for Preferred Stock.
**4.6 Form of Deposit Agreement (including form of Depositary Receipt).
**4.7 Form of Warrant Agreement.
**4.8 Form of Trust Indenture for Senior Debt Security (including text of such
Security).
**4.9 Form of Trust Indenture for Subordinated Debt Security (including text of such
Security).
*5.1 Opinion of Goodwin, Procter & Hoar LLP as to legality of Securities (including
consent).
*8.1 Tax Opinion of Goodwin, Procter & Hoar LLP.
*12.1 Computation of Ratio of Earnings to Fixed Charges.
*23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Ernst & Young LLP.
*23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Goodwin, Procter & Hoar LLP (Included in Exhibits 5.1 and 8.1).
**25.1 Statement of Eligibility of Trustee.
</TABLE>
- ---------------
* Filed herewith
** To be filed by amendment or incorporated by subsequent reference.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act")
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any
II-2
<PAGE> 44
deviation from the low or high and of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) herein do
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by
the undersigned registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
that are incorporated by reference in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act each filing of the registrant's annual report
pursuant to Section 13(a) or 15(d) of the Exchange Act that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the Securities
and Exchange Commission (the "Commission") such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act of 1939, as amended, in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Act.
II-3
<PAGE> 45
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on the 18th day of
July, 1997.
BURNHAM PACIFIC PROPERTIES, INC.
/s/ J. DAVID MARTIN
By: ................................
J. DAVID MARTIN
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated, each of whom also constitutes and
appoints J. David Martin and Daniel B. Platt, and each of them singly, his true
and lawful attorney-in-fact and agent, for him, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments to this Registration Statement,
and/or any Registration Statement filed pursuant to Rule 462(b) under the
Securities Act of 1933, as amended, relating to additional securities of the
same class(es) as offered in an offering of Securities pursuant to this
Registration Statement, and to file the same and all exhibits thereto, and any
other documents in connection therewith with the Securities and Exchange
Commission, granting unto each attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each attorney-in-fact and agent
or his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ ------------------------------ --------------
<C> <S> <C>
/s/ J. DAVID MARTIN President, Chief Executive July 18, 1997
........................................ Officer (Principal Executive
J. DAVID MARTIN Officer) and Director
/s/ DANIEL B. PLATT Chief Financial Officer July 18, 1997
........................................
DANIEL B. PLATT
/s/ JEFFREY R. FISHER Director of Finance and July 18, 1997
........................................ Treasurer (Principal
JEFFREY R. FISHER Accounting Officer)
/s/ MALIN BURNHAM Director July 18, 1997
........................................
MALIN BURNHAM
/s/ JAMES D. HARPER, JR. Director July 18, 1997
........................................
JAMES D. HARPER, JR.
/s/ JAMES D. KLINGBEIL Director July 11, 1997
........................................
JAMES D. KLINGBEIL
/s/ DONNE P. MOEN Director July 18, 1997
........................................
DONNE P. MOEN
</TABLE>
II-4
<PAGE> 46
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------------------ ------------------------------ --------------
<C> <S> <C>
/s/ THOMAS A. PAGE Director July 18, 1997
........................................
THOMAS A. PAGE
/s/ PHILIP S. SCHLEIN Director July 18, 1997
........................................
PHILIP S. SCHLEIN
/s/ RICHARD R. TARTRE Director July 18, 1997
........................................
RICHARD R. TARTRE
/s/ ROBIN WOLANER Director July 18, 1997
........................................
ROBIN WOLANER
</TABLE>
II-5
<PAGE> 47
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement for Common Stock, incorporated by reference to
Exhibit 1.0 to Post-Effective Amendment No. 3 to Registration Statement No.
33-68712.
**1.2 Form of Underwriting Agreement for Debentures.
3.1 Charter of the Company, as amended and restated May 6, 1997, incorporated by
reference to pages B-1 through B-13 of the Company's Proxy Statement for its 1997
Annual Meeting, filed March 31, 1997.
3.2 Bylaws of the Company, incorporated by reference to pages C-1 through C-13 of the
Company's Proxy Statement for its 1997 Annual Meeting, filed March 31, 1997.
4.1 Articles VI and VII of Charter of the Company -- See Exhibit 3.1.
4.2 Bylaws of the Company -- See Exhibit 3.2.
4.3 Form of stock certificate for Common Stock of the Company, incorporated by
reference to Exhibit 4.0 to Registration Statement No. 33-20489 and subsequently
overprinted to state "THE CORPORATION IS NOW INCORPORATED IN THE STATE OF MARYLAND
WITH $0.01 PAR VALUE PER SHARE."
**4.4 Preferred Stock terms as set forth in resolutions of the Board of Directors.
**4.5 Form of stock certificate for Preferred Stock.
**4.6 Form of Deposit Agreement (including form of Depositary Receipt).
**4.7 Form of Warrant Agreement.
**4.8 Form of Trust Indenture for Senior Debt Security (including text of such
Security).
**4.9 Form of Trust Indenture for Subordinated Debt Security (including text of such
Security).
*5.1 Opinion of Goodwin, Procter & Hoar LLP as to legality of Securities (including
consent).
*8.1 Tax Opinion of Goodwin, Procter & Hoar LLP.
*12.1 Computation of Ratio of Earnings to Fixed Charges.
*23.1 Consent of Deloitte & Touche LLP.
*23.2 Consent of Ernst & Young LLP.
*23.3 Consent of KPMG Peat Marwick LLP.
23.4 Consent of Goodwin, Procter & Hoar LLP (Included in Exhibits 5.1 and 8.1).
**25.1 Statement of Eligibility of Trustee.
</TABLE>
- ---------------
* Filed herewith
** To be filed by amendment or incorporated by subsequent reference.
<PAGE> 1
EXHIBIT 5.1
GOODWIN, PROCTER & HOAR LLP
Exchange Place
Boston, MA 02109-2881
July 11, 1997
Burnham Pacific Properties, Inc.
610 West Ash Street
San Diego, CA 92101
Ladies and Gentlemen:
Re: Legality of Securities to be Registered under
Registration Statement on Form S-3
---------------------------------------------
This opinion letter is delivered in our capacity as counsel to Burnham
Pacific Properties, Inc. (the "Company") in connection with the Company's
Registration Statement on Form S-3 (the "Registration Statement") being filed
with the Securities and Exchange Commission under the Securities Act of 1933, as
amended, relating to an indeterminate amount of Debt Securities, Common Stock,
Preferred Stock, Depositary Shares representing Preferred Stock, Warrants or
Rights and Units consisting of two or more of the foregoing securities, with an
aggregate public offering price of up to $200,000,000 (such securities
hereinafter collectively the "Securities"). The Registration Statement provides
that the Securities may be offered separately or together, in separate series,
in amounts, at prices and on terms to be set forth in one or more supplements
(each a "Prospectus Supplement") to the Prospectus contained in the Registration
Statement.
We have examined the Charter of the Company (consisting of the Articles of
Incorporation of the Company as amended and restated to the date hereof and on
file with the Maryland State Department of Assessments and Taxation), the Bylaws
of the Company, such records of corporate proceedings of the Company as we deem
appropriate for the purposes of this opinion, the Registration Statement and the
exhibits thereto.
Based upon the foregoing, we are of the opinion that, when specifically
authorized for issuance by the Company's Board of Directors or an authorized
committee thereof (the "Authorizing Resolution") and when issued as described in
a Prospectus Supplement that is consistent with the Authorizing Resolution, and
in the case of Debt Securities consistent with the Indenture relating thereto
(the "Indenture"), and upon receipt by the Company of the
<PAGE> 2
Burnham Pacific Properties, Inc.
July 11, 1997
Page 2
consideration provided for in the Authorizing Resolution (which consideration is
not less than the $.01 par value per share in the case of Common Stock or
Preferred Stock), the Common Stock or Preferred Stock issued pursuant to the
Authorizing Resolution will be legally issued, fully paid and nonassessable, and
the Debt Securities issued pursuant to the Authorizing Resolution and the
Indenture will be legally issued, fully paid and nonassessable and binding
obligations of the Company.
We hereby consent to being named as counsel to the Company in the
Registration Statement, to the references therein to our firm under the caption
"Legal Matters" and to the inclusion of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/Goodwin, Procter & Hoar LLP
----------------------------------
Goodwin, Procter & Hoar LLP
<PAGE> 1
EXHIBIT 8.1
GOODWIN, PROCTER & HOAR LLP
Exchange Place
Boston, MA 02109-2881
July 11, 1997
Burnham Pacific Properties, Inc.
610 West Ash Street
San Diego, CA 92101
Ladies and Gentlemen:
Re: Certain Federal Income Tax Matters
----------------------------------
This opinion is furnished to you in our capacity as counsel to Burnham
Pacific Properties, Inc., a Maryland corporation (the "Company", which word also
refers as applicable to its predecessor Burnham Pacific Properties, Inc., a
California corporation) in connection with the Company's Form S-3 Registration
Statement (the "Registration Statement") to be filed with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, relating to up
to $200,000,000 of Securities of the Company that may include Debt Securities,
Common Stock, Preferred Stock, Depositary Shares representing Preferred Stock,
Warrants or Rights and Units of Securities. This opinion relates to the
Company's qualification for federal income tax purposes as a real estate
investment trust ("REIT") under the Internal Revenue Code of 1986, as amended
(the "Code").
In rendering the following opinion, we have examined the Registration
Statement, the Company's Charter and Bylaws (each as in effect from time to
time) and such other records, certificates and documents as we have deemed
necessary or appropriate for purposes of rendering the opinion set forth herein.
We also have relied upon the representations of the Company regarding the manner
in which the Company has been and will continue to be owned and operated. We
have neither independently investigated nor verified such representations, and
we assume that such representations are true, correct and complete and that all
representations made "to the best of the knowledge and belief" of any person(s)
or party(ies) or with similar qualification are and will be true, correct and
complete as if made without such qualification. We assume, and rely upon such
assumption, that the Company has been and will be operated in accordance with
applicable laws and the terms and conditions of applicable documents. In
addition, we have relied on certain additional facts and assumptions described
below.
<PAGE> 2
Burnham Pacific Properties, Inc.
July 11, 1997
Page 2
In rendering the opinion set forth herein, we have assumed (i) the
genuineness of all signatures on documents we have examined, (ii) the
authenticity of all documents submitted to us as originals, (iii) the conformity
to the original documents of all documents submitted to us as copies, (iv) the
conformity of final documents to all documents submitted to us as drafts, (v)
the authority and capacity of the individual or individuals who executed any
such documents on behalf of any person (vi) the accuracy and completeness of all
records made available to us, and (vii) the factual accuracy of all
representations, warranties and other statements made by all parties. We also
have assumed, and rely upon such assumption, without investigation, that all
documents, certificates, warranties and covenants on which we have relied in
rendering the opinion set forth below and that were given or dated earlier than
the date of this letter continue to remain accurate, insofar as relevant to the
opinions set forth herein, from such earlier date, through and including the
date of this letter.
The discussion and conclusions set forth below are based upon the Code, the
Income Tax Regulations and Procedure and Administration Regulations promulgated
thereunder and existing administrative and judicial interpretations thereof, all
of which are subject to change. No assurance can therefore be given that the
federal income tax consequences described below will not be altered in the
future.
Based upon and subject to the foregoing, and provided that the Company
continues to meet the applicable asset composition, source of income,
shareholder diversification, distribution, recordkeeping and other requirements
of the Code necessary for a corporation to qualify as a REIT, we are of the
opinion that:
1. For all years as to which the Company's tax returns remain open for
adjustment by the Internal Revenue Service, the Company has been
organized in conformity with the requirements for qualification as a
"real estate investment trust" under the Code, and the Company's
method of operation, as described in the representations referred to
above, has been such as to enable it to meet, and to continue to meet,
the requirements for qualification and taxation as a "real estate
investment trust" under the Code.
2. The statements in the Registration Statement set forth under the
caption "Federal Income Tax Considerations", to the extent such
statements constitute matters of law, summaries of legal matters or
legal conclusions, have been reviewed by us and are accurate in all
material respects.
We express no opinion with respect to the transactions described in the
Registration Statement other than those expressly set forth herein. You should
recognize that our opinion is not binding on the Internal Revenue Service and
that the Internal Revenue Service may disagree
<PAGE> 3
Burnham Pacific Properties, Inc..
July 11, 1997
Page 3
with the opinion contained herein. Although we believe that our opinion will be
sustained if challenged, there can be no assurance that this will be the case.
The opinion expressed herein is based upon the law as it currently exists.
Consequently, future changes in the law may cause the federal income tax
treatment of the transactions described herein to be materially and adversely
different from that described above.
We consent to being named as counsel to the Company in the Registration
Statement, to the references in the Registration Statement to our firm and to
the inclusion of a copy of this opinion letter as an exhibit to the Registration
Statement.
Very truly yours,
/s/Goodwin, Procter & Hoar LLP
-----------------------------------
Goodwin, Procter & Hoar LLP
<PAGE> 1
Exhibit 12.1
BURNHAM PACIFIC PROPERTIES, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS
DECEMBER 31, ENDED
1992 1993 1994 1995 1996 MARCH 31, 1997
<S> <C> <C> <C> <C> <C> <C>
EARNINGS (LOSS) BEFORE FIXED CHARGES:
INCOME (LOSS) FROM OPERATIONS $ 1,058 $ 9,846 $13,164 $(14,951) $ 9,892 $1,632
INTEREST EXPENSE 11,208 10,483 11,582 11,960 10,744 3,331
EARNINGS (LOSS) BEFORE FIXED CHARGES $12,266 $20,329 $24,746 $ (2,991) $20,636 $4,963
FIXED CHARGES:
INTEREST EXPENSE 11,208 10,483 11,582 11,960 10,744 3,331
INTEREST CAPITALIZED 55 97 1,635 693
FIXED CHARGES 11,208 10,483 11,637 12,057 12,379 4,024
RATIO OF EARNINGS (LOSS) TO FIXED
CHARGES 1.09 1.94 2.13 -- 1.67 1.23
</TABLE>
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Burnham Pacific Properties, Inc. on Form S-3 of our report dated February 28,
1997 appearing in the Annual Report on Form 10-K of Burnham Pacific Properties,
Inc. for the year ended December 31, 1996, and to the reference to us under the
headings "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ Deloitte and Touche LLP
San Diego, California
July 18, 1997
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) of Burnham Pacific Properties, Inc. for the
registration of up to $321,728,125 of debt securities, common stock,
preferred stock, depositary shares representing preferred stock, warrants or
rights and/or units of securities, and to the incorporation by reference
therein of our report dated March 9, 1997, with respect to the combined
statements of gross income and direct operating expenses of the BRE Portfolio
for the three years in the period ended December 31, 1996, included in the
Burnham Pacific Properties, Inc.'s Current Report on Form 8-K dated January 31,
1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young, LLP
San Francisco, California
July 17, 1997
<PAGE> 1
Exhibit 23.3
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Burnham Pacific Properties, Inc.:
We consent to incorporation by reference in the registration statement on Form
S-3 of Burnham Pacific Properties, Inc. of our report dated January 31, 1997,
with respect to the combined statements of revenue and direct operating expenses
of The Downey Portfolio for each of the years in the three-year period ended
December 31, 1996, which report appears in the Form 8-K/A of Burnham Pacific
Properties, Inc. dated January 31, 1997, filed on April 15, 1997 and to the
reference to KPMG Peat Marwick LLP under the heading "Experts" in the prospectus
supplement. Such report contains a paragraph that states that the combined
statements of revenue and direct operating expenses were prepared for the
purpose of complying with the rules and regulations of the Securities and
Exchange Commission, as described in note 1. It is not intended to be a complete
presentation of The Downey Portfolio's combined revenue and expenses.
/s/ KPMG Peat Marwick, LLP
San Diego, California
July 17, 1997
