<PAGE>
PROSPECTUS SUPPLEMENT Filed Pursuant to Rule 424(b)(2)
(To Prospectus dated October 4, 1996) Registration No. 333-12885
[LOGO OF SECURITY CAPITAL PACIFIC TRUST]
$15,000,000 6.600% Notes due 1999
$20,000,000 6.950% Notes due 2002
$20,000,000 7.150% Notes due 2003
$20,000,000 7.250% Notes due 2004
$20,000,000 7.300% Notes due 2005
$20,000,000 7.375% Notes due 2006
$15,000,000 6.500% Notes due 2026
Interest on the 6.600% Notes due 1999 (the "1999 Notes"), the 6.950% Notes due
2002 (the "2002 Notes"), the 7.150% Notes due 2003 (the "2003 Notes"), the
7.250% Notes due 2004 (the "2004 Notes"), the 7.300% Notes due 2005 (the "2005
Notes"), the 7.375% Notes due 2006 (the "2006 Notes") and the 6.500% Notes due
2026 (the "2026 Notes" and, together with the 1999 Notes, the 2002 Notes, the
2003 Notes, the 2004 Notes, the 2005 Notes and the 2006 Notes, the "Notes") of
Security Capital Pacific Trust ("PTR") offered hereby is payable semi-annually
on April 15 and October 15, commencing April 15, 1997. Each series of Notes
will mature on October 15 in its year of maturity. See "Description of Notes--
Principal and Interest." Registered holders of the 2026 Notes may elect to
have such Notes, or any portion of the principal amount thereof that is a
multiple of $1,000, repaid on October 15, 1999 at 100% of the principal amount
thereof, together with accrued interest to October 15, 1999. Such election,
which is irrevocable when made, must be made within the period commencing on
August 15, 1999 and ending at the close of business on September 15, 1999. The
Notes, other than the 2026 Notes, may be redeemed at any time, and in the case
of the 2026 Notes at any time after October 15, 1999, at the option of PTR, in
whole or in part, at the Redemption Price (as defined herein). See
"Description of Notes--Optional Redemption."
Each series of Notes will be represented by one or more global securities
("Global Securities") registered in the name of The Depository Trust Company
("DTC") or its nominee. Beneficial interests in the Global Securities will be
shown on, and transfers thereof will be effected only through, records
maintained by DTC and its participants. Owners of beneficial interests in the
Global Securities will be entitled to physical delivery of Notes in
certificated form only under the limited circumstances described under
"Description of Notes--Book-Entry Procedures."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH
IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) PTR(1)(3)
- -------------------------------------------------------
<S> <C> <C> <C>
Per 1999 Note 99.983% .500% 99.483%
- -------------------------------------------------------
Per 2002 Note 99.770% .650% 99.120%
- -------------------------------------------------------
Per 2003 Note 99.991% .650% 99.341%
- -------------------------------------------------------
Per 2004 Note 99.829% .700% 99.129%
- -------------------------------------------------------
Per 2005 Note 99.716% .700% 99.016%
- -------------------------------------------------------
Per 2006 Note 99.863% .700% 99.163%
- -------------------------------------------------------
Per 2026 Note 99.983% .500% 99.483%
- -------------------------------------------------------
Total $129,828,700 $830,000 $128,998,700
- -------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from October 21, 1996.
(2) PTR has agreed to indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(3) Before deducting expenses payable by PTR estimated at $200,000.
The Notes are offered, subject to prior sale, when, as and if accepted by the
Underwriter and subject to approval of certain legal matters by Skadden, Arps,
Slate, Meagher & Flom, counsel for the Underwriter. It is expected that
delivery of the Notes will be made on or about October 21, 1996 through the
facilities of DTC, against payment therefor in immediately available funds.
J.P. MORGAN & CO.
October 16, 1996
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE NOTES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in
this Prospectus Supplement or the Prospectus, and, if given or made, such
information or representations must not be relied upon as having been
authorized. This Prospectus Supplement and the Prospectus do not constitute an
offer to sell or the solicitation of an offer to buy any securities other than
the securities to which they relate or any offer to sell or the solicitation
of any offer to buy such securities in any jurisdictions in which such offer
or solicitation is unlawful. Neither the delivery of this Prospectus
Supplement or the Prospectus nor any sale made hereunder or thereunder shall,
under any circumstances, create any implication that there has been no change
in the affairs of PTR since the date hereof or thereof or that the information
contained or incorporated by reference herein or therein is correct as of any
time subsequent to the date of such information.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Ratio of Earnings to Fixed Charges......................................... S-3
Use of Proceeds............................................................ S-3
Recent Developments........................................................ S-3
Description of Notes....................................................... S-4
Underwriting............................................................... S-7
Validity of Notes.......................................................... S-7
Experts.................................................................... S-8
PROSPECTUS
Available Information...................................................... 2
Incorporation by Reference................................................. 2
Security Capital Pacific Trust............................................. 3
Use of Proceeds............................................................ 3
Ratio of Earnings to Fixed Charges and Preferred Share Dividends........... 3
Description of Debt Securities............................................. 3
Description of Preferred Shares............................................ 16
Federal Income Tax Considerations.......................................... 21
Plan of Distribution....................................................... 23
Experts.................................................................... 24
Legal Matters.............................................................. 24
</TABLE>
S-2
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES
For the purpose of computing these ratios, (a) "earnings" consist of
earnings from operations plus fixed charges other than capitalized interest
and (b) "fixed charges" consist of interest on borrowed funds (including
capitalized interest) and amortization of debt discount and expense.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
PERIOD ENDED DECEMBER 31, JUNE 30,
----------------------------- ---------
1991 1992 1993 1994 1995 1995 1996
----- ----- ----- ----- ----- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges...... 1.5 2.9 4.0 2.6 3.2 2.9 2.9
</TABLE>
USE OF PROCEEDS
The net proceeds to PTR from the sale of the Notes offered hereby are
expected to be approximately $128.8 million, all of which will be used to
repay borrowings under PTR's revolving line of credit. PTR's $350 million
unsecured revolving line of credit bears interest at the greater of the
federal funds rate plus 0.5% and prime (8.25% at October 15, 1996) or, at
PTR's option, LIBOR plus 1.125% (6.50% at October 15, 1996), which premium can
vary from 0.75% to 1.50% based upon PTR's current senior unsecured debt
rating, and is scheduled to mature in August 1998 (which may be extended
annually for an additional year with the approval of the lenders). At October
15, 1996, $165.3 million in borrowings were outstanding under this line of
credit. PTR expects to make additional borrowings under the line of credit
following this offering. Borrowings under the line of credit are used for the
development and acquisition of multifamily properties and for working capital
purposes.
RECENT DEVELOPMENTS
On May 21, 1996, PTR, Security Capital Atlantic Incorporated ("ATLANTIC"),
Security Capital Group Incorporated ("SCG") and Homestead Village Incorporated
("Homestead") entered into a merger agreement pursuant to which each of PTR,
ATLANTIC and SCG will contribute, through a series of merger transactions (the
"Mergers"), all of their respective assets related to their extended-stay
Homestead Village(R) properties to Homestead, and PTR and ATLANTIC will enter
into funding agreements which will result in PTR owning (a) 9,485,727 shares
of Homestead common stock, (b) warrants to purchase 6,363,789 shares of
Homestead common stock at $10.00 per share which will expire one year after
the record date for the distribution described below, and (c) up to
$144,044,620 in convertible mortgage notes which will have a term of
approximately ten years, will bear interest at 9% per year, will not be
callable for five years and will be convertible into shares of Homestead
common stock after March 31, 1997 on the basis of one share of Homestead
common stock for every $11.50 of principal amount outstanding, subject to
antidilution adjustments. ATLANTIC and SCG will also receive Homestead common
stock and warrants to purchase Homestead common stock and ATLANTIC will
receive convertible mortgage notes in connection with the Mergers. PTR will
distribute the Homestead common stock and warrants to purchase Homestead
common stock pro rata to PTR's shareholders.
PTR's shareholders have approved the Mergers, which are expected to close in
October 1996. The consummation of the Mergers, are, however, subject to the
satisfaction of certain conditions, and there can be no assurance that the
Mergers will be consummated.
As of June 30, 1996, the Homestead Village assets owned by PTR constituted
7.00% of PTR's total assets, and PTR's investment in its wholly owned
Homestead Village subsidiaries, including intercompany advances, constituted
6.64% of PTR's total assets. PTR's Homestead Village operations accounted for
5.22% of PTR's total earnings from operations for the six months ended June
30, 1996.
S-3
<PAGE>
DESCRIPTION OF NOTES
The following description of the terms of the Notes offered hereby (referred
to in the accompanying Prospectus as the "Debt Securities") supplements, and
to the extent inconsistent therewith replaces, the description of the general
terms and provisions of the Debt Securities set forth in the accompanying
Prospectus, to which description reference is hereby made.
GENERAL
The 1999 Notes, the 2002 Notes, the 2003 Notes, the 2004 Notes, the 2005
Notes, the 2006 Notes and the 2026 Notes each constitute a separate series of
Debt Securities (which are more fully described in the accompanying
Prospectus) to be issued pursuant to an Indenture, dated as of February 1,
1994, as supplemented by the First Supplemental Indenture, dated as of
February 2, 1994 (as so supplemented, the "Indenture"), between PTR and State
Street Bank and Trust Company (as successor trustee to Morgan Guaranty Trust
Company of New York (the "Trustee")). The 1999 Notes and the 2026 Notes will
each be limited to an aggregate principal amount of $15,000,000. The 2002
Notes, the 2003 Notes, the 2004 Notes, the 2005 Notes and the 2006 Notes will
each be limited to an aggregate principal amount of $20,000,000. The terms of
the Notes include those provisions contained in the Indenture (the terms of
which are more fully described in the accompanying Prospectus) and those made
part of the Indenture by reference to the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act"). The Notes are subject to all such terms,
and holders of Notes are referred to the Indenture and Trust Indenture Act for
a statement thereof. PTR currently has $450,000,000 of indebtedness
outstanding pursuant to the Indenture.
The Notes will be direct, senior unsecured obligations of PTR and will rank
equally with all other unsecured and unsubordinated indebtedness of PTR from
time to time outstanding. However, the Notes are effectively subordinated to
mortgages and other secured indebtedness of PTR and PTR's subsidiaries, which
encumbered certain assets of PTR and PTR's subsidiaries (approximately $131.2
million of secured debt was outstanding at June 30, 1996).
As of June 30, 1996, on a pro forma basis giving effect to the issuance of
$100 million of notes by PTR in August 1996 and the issuance of the Notes
offered hereby and the application of the net proceeds therefrom, the total
outstanding indebtedness of PTR and its subsidiaries was approximately $711.2
million. PTR may incur additional indebtedness, subject to the provisions
described under "Description of Debt Securities--Certain Covenants--
Limitations on Incurrence of Debt" in the accompanying Prospectus.
Reference is made to the section entitled "Description of Debt Securities--
Certain Covenants" in the accompanying Prospectus for a description of the
covenants applicable to the Notes. The defeasance and covenant defeasance
provisions of the Indenture described under "Description of Debt Securities--
Discharge, Defeasance and Covenant Defeasance" in the accompanying Prospectus
will apply to the Notes. Each of the covenants described in the Prospectus
under the caption "Description of Debt Securities--Certain Covenants" will be
subject to defeasance.
The Notes will only be issued in fully registered form in denominations of
$1,000 and integral multiples thereof.
PRINCIPAL AND INTEREST
The 1999 Notes will bear interest at 6.600% per annum and will mature on
October 15, 1999. The 2002 Notes will bear interest at 6.950% per annum and
will mature on October 15, 2002. The 2003 Notes will bear interest at 7.150%
per annum and will mature on October 15, 2003. The 2004 Notes will bear
interest at 7.250% per annum and will mature on October 15, 2004. The 2005
Notes will bear interest at 7.300% per annum and will mature on October 15,
2005. The 2006 Notes will bear interest at 7.375% per annum and will mature on
October 15, 2006. The 2026 Notes will bear interest at 6.500% per annum and
will mature on October 15, 2026. The Notes will bear interest from October 21,
1996 or from the immediately preceding Interest Payment Date
S-4
<PAGE>
(as defined below) to which interest has been paid, payable semi-annually in
arrears on April 15 and October 15 of each year, commencing on April 15, 1997
(each, an "Interest Payment Date"), to the persons in whose name the
applicable Notes are registered in the Security Register on the preceding
April 1 or October 1 (whether or not a Business Day, as defined below), as the
case may be (each, a "Regular Record Date"). Interest on the Notes will be
computed on the basis of a 360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity Date falls on a day that is not
a Business Day, the required payment shall be made on the next Business Day as
if it were made on the date such payment was due and no interest shall accrue
on the amount so payable for the period from and after such Interest Payment
Date or the Maturity Date, as the case may be. "Business Day" means any day,
other than a Saturday or Sunday, on which banks in the City of New York are
not required or authorized by law or executive order to close.
REPAYMENT OF 2026 NOTES AT THE OPTION OF HOLDERS
The 2026 Notes may be repaid on October 15, 1999 (the "Option Payment
Date"), at the option of the registered Holders, at 100% of their principal
amount together with accrued interest to October 15, 1999. In order for a
Holder to exercise this option, PTR must receive at its offices during the
period beginning on August 15, 1999 and ending at 5:00 p.m. (Eastern Standard
time) on September 15, 1999 the 2026 Note with the form entitled "Option to
Elect Repayment on October 15, 1999" on the 2026 Note duly completed. Any such
notice received by PTR during the period beginning on August 15, 1999 and
ending at 5:00 p.m. (Eastern Standard time) on September 15, 1999, shall be
irrevocable. The repayment option may be exercised for less than the entire
principal amount of a 2026 Note, so long as the principal amount that is to be
repaid is equal to $1,000 or an integral multiple of $1,000. All questions as
to the validity, form, eligibility (including time of receipt) and acceptance
of any 2026 Note for repayment will be determined by PTR whose determination
will be final and binding.
Failure by PTR to repay the 2026 Notes when required as described in the
preceding paragraph will result in an Event of Default under the Indenture.
As described below under "Book-Entry Procedures," the 2026 Notes will be
registered in the name of DTC or its nominee which will be the Holder thereof
entitled to exercise the repayment option. In order to ensure that DTC or its
nominee will exercise such option in a timely manner with respect to a
particular 2026 Note, the beneficial owner of an interest in such 2026 Note
must instruct the broker or other Participant (as defined below) through which
it holds an interest in such 2026 Note to notify DTC or its nominee of its
desire to exercise such option. Different Participants have different cut-off
times for accepting instructions from their customers and, accordingly, each
such beneficial owner should consult the Participant through which it holds an
interest in the 2026 Notes to ascertain the cut-off time by which an
instruction must be given for timely notice to be delivered to DTC or its
nominee.
OPTIONAL REDEMPTION
The Notes, other than the 2026 Notes, may be redeemed at any time at the
option of PTR, in whole or in part, at a redemption price equal to the sum of
(i) the principal amount of the Notes being redeemed plus accrued interest
thereon to the redemption date and (ii) the Make-Whole Amount, if any, with
respect to such Notes (the "Redemption Price"). The 2026 Notes may be redeemed
at any time after October 15, 1999 at the option of PTR, in whole or in part,
at the Redemption Price.
From and after the date notice has been given as provided in the Indenture,
if funds for the redemption of any Notes called for redemption shall have been
made available on such redemption date, such Notes will cease to bear interest
on the date fixed for such redemption specified in such notice and the only
right of the Holders of the Notes will be to receive payment of the Redemption
Price.
Notice of any optional redemption of any Notes will be given to Holders at
their addresses, as shown in the Security Register, not more than 60 nor less
than 30 days prior to the date fixed for redemption. The notice of redemption
will specify, among other items, the Redemption Price and the principal amount
of the Notes held by such Holder to be redeemed.
S-5
<PAGE>
If less than all the Notes are to be redeemed at the option of PTR, PTR will
notify the Trustee at least 45 days prior to the redemption date (or such
shorter period as satisfactory to the Trustee) of the aggregate principal
amount of the Notes to be redeemed and the redemption date. The Trustee shall
select, in such manner as it shall deem fair and appropriate, Notes to be
redeemed in whole or in part. Notes may be redeemed in part in the minimum
authorized denomination for Notes or in any integral multiple thereof.
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Note, the excess, if any of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest
(exclusive of interest accrued to the date of redemption or accelerated
payment) that would have been payable in respect of such dollar if such
redemption or accelerated payment had not been made, determined by
discounting, on a semiannual basis, such principal and interest at the
Reinvestment Rate (determined on the third Business Day preceding the date
such notice of redemption is given or declaration of acceleration is made)
from the respective dates on which such principal and interest would have been
payable if such redemption or accelerated payment had not been made, over (ii)
the aggregate principal amount of the Notes being redeemed or paid.
"Reinvestment Rate" means 0.25% (one-fourth of one percent) plus the
arithmetic mean of the yields under the respective headings "This Week" and
"Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding
to such maturity shall be calculated pursuant to the immediately preceding
sentence and the Reinvestment Rate shall be interpolated or extrapolated from
such yields on a straight-line basis, rounding in each of such relevant
periods to the nearest month. For the purposes of calculating the Reinvestment
Rate, the most recent Statistical Release published prior to the date of
determination of the Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States
government securities adjusted to constant maturities, or, if such statistical
release is not published at the time of any determination under the Indenture,
then such other reasonably comparable index which shall be designated by PTR.
BOOK-ENTRY PROCEDURES
Each series of Notes will be issued in the form of one or more Global
Securities that will be deposited with, or on behalf of DTC and registered in
the name of DTC's nominee. Except as described in the accompanying Prospectus
under the caption "Description of Debt Securities--Global Securities," the
Notes will not be issuable in definitive form. So long as the Notes are
represented by one or more Global Securities, DTC's nominee will be considered
the sole owner or holder of the Notes for all purposes under the Indenture,
and the beneficial owners of the Notes will be entitled only to those rights
and benefits afforded to them in accordance with DTC's regular operating
procedures. See "Description of Debt Securities--Global Securities" in the
accompanying Prospectus.
The following is based on information furnished by DTC:
DTC will act as securities depository for the Notes. The Notes will be
issued as fully registered securities registered in the name of Cede & Co.
(DTC's partnership nominee). One fully registered Note certificate will be
issued with respect to each of the Notes.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities
Exchange Act of 1934, as
S-6
<PAGE>
amended. DTC holds securities that its participants (the "Participants")
deposit with DTC. DTC also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants include securities brokers and dealers
(including the Underwriter), banks, trust companies, clearing corporations,
and certain other organizations ("Direct Participants"). DTC is owned by a
number of its Direct Participants and by the New York Stock Exchange, Inc.,
the American Stock Exchange, Inc. and the National Association of Securities
Dealers, Inc. Access to the DTC system is also available to others such as
securities brokers and dealers, banks and trust companies that clear through
or maintain a custodial relationship with a Direct Participant, either
directly or indirectly. The rules applicable to DTC and its Participants are
on file with the Securities and Exchange Commission.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriter in immediately
available funds. All payments of principal and interest will be made by PTR in
immediately available funds or the equivalent, so long as DTC continues to
make its Same-Day Funds Settlement System available to PTR.
UNDERWRITING
Subject to the terms and conditions of the underwriting agreement (the
"Underwriting Agreement") dated the date hereof, J.P. Morgan Securities Inc.
(the "Underwriter") has agreed to purchase, and PTR has agreed to sell to the
Underwriter, all of the Notes offered hereby.
Under the terms and conditions of the Underwriting Agreement, the
Underwriter is obligated to take and pay for all of the Notes if any are
taken.
The Underwriter has advised PTR that it initially proposes to offer the
Notes directly to the public at the public offering prices set forth on the
cover page of this Prospectus Supplement, and to certain dealers at such
prices less a concession not in excess of .40% of the principal amount of the
1999 Notes, the 2002 Notes, the 2003 Notes, the 2004 Notes, the 2005 Notes,
the 2006 Notes and the 2026 Notes. The Underwriter may allow, and such dealers
may reallow, a concession not in excess of .25% of the principal amount of the
1999 Notes, the 2002 Notes, the 2003 Notes, the 2004 Notes, the 2005 Notes,
the 2006 Notes and the 2026 Notes to certain other dealers. After the initial
public offering, the public offering prices and such concessions may be
changed.
The Notes are a new issue of securities with no established trading market.
PTR has been advised by the Underwriter that the Underwriter intends to make a
market in the Notes but is not obligated to do so and may discontinue market
making at any time without notice. No assurance can be given as to the
liquidity of the trading markets for the Notes.
PTR has agreed to indemnify the Underwriter against certain liabilities,
including liabilities under the Securities Act of 1933, as amended.
In the ordinary course of their respective businesses, the Underwriter and
its affiliates have engaged, and may in the future engage, in investment
banking and/or commercial banking transactions with PTR and its affiliates.
VALIDITY OF NOTES
The validity of the Notes offered hereby will be passed upon for PTR by
Mayer, Brown & Platt, Chicago, Illinois. Certain legal matters will be passed
upon for the Underwriter by Skadden, Arps, Slate, Meagher & Flom, New York,
New York. Mayer, Brown & Platt has in the past represented, and is currently
representing, PTR and certain of its affiliates, including SCG, the owner of
PTR's REIT manager.
S-7
<PAGE>
EXPERTS
The financial statements of PTR as of December 31, 1995 and 1994, and for
each of the years in the three-year period ended December 31, 1995, and
related schedule, incorporated by reference herein; the combined statement of
revenues and certain expenses of the Group A Properties as of December 31,
1995, incorporated by reference herein, and the combined statement of revenues
and certain expenses of the Group B Properties as of December 31, 1995,
incorporated by reference herein, have been incorporated by reference herein
and in the Registration Statement in reliance upon the reports 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.
With respect to the unaudited interim financial information of PTR for the
periods ended March 31, 1996 and 1995 and June 30, 1996 and 1995, incorporated
by reference herein, the independent certified public accountants have
reported that they applied limited procedures in accordance with professional
standards for a review of such information. However, their separate reports
included in PTR's quarterly reports on Form 10-Q for the quarters ended March
31, 1996, as amended by Form 10-Q/A No. 1, and June 30, 1996, incorporated by
reference herein, states that they did not audit, and they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. The accountants are not
subject to the liability provisions of Section 11 of the Securities Act for
their reports on the unaudited interim financial information because those
reports are not a "report" or a "part" of the registration statement prepared
or certified by the accountants within the meaning of Sections 7 and 11 of the
Securities Act of 1933, as amended.
S-8
<PAGE>
PROSPECTUS
[LOGO OF SECURITY CAPITAL PACIFIC TRUST]
$300,000,000 DEBT SECURITIES AND PREFERRED SHARES
----------------
Security Capital Pacific Trust ("PTR") may from time to time offer in one or
more series its (i) unsecured senior debt securities (the "Debt Securities")
and (ii) Preferred Shares of Beneficial Interest, par value $1.00 per share
(the "Preferred Shares"). The Debt Securities and Preferred Shares (together,
the "Offered Securities") may be offered, separately or together, in separate
series, in amounts, at prices and on terms to be set forth in a supplement to
this Prospectus (a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Debt
Securities, the specific title, aggregate principal amount, currency, form
(which may be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of PTR or repayment at
the option of the Holder, terms for sinking fund payments, and any initial
public offering price; and (ii) in the case of Preferred Shares, the specific
title and stated value, any dividend, liquidation, redemption, voting and
other rights, and any initial public offering price. In addition, such
specific terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the Offered Securities, in each case as may be
appropriate to preserve the status of PTR as a real estate investment trust
("REIT") for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered
Securities covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated
from time to time by PTR, or to or through underwriters or dealers. If any
agents or underwriters are involved in the sale of any of the Offered
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them, will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such series of Offered Securities.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
----------------
THE DATE OF THIS PROSPECTUS IS OCTOBER 4, 1996.
<PAGE>
AVAILABLE INFORMATION
PTR is subject to the informational requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549; Room 1204, Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and 7 World Trade Center, 13th
Floor, New York, New York 10048, and are also available on the Commission's
worldwide web site at http://www.sec.gov. Copies of such material can be
obtained at prescribed rates from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. PTR's
outstanding Common Shares of Beneficial Interest, par value $1.00 per share
("Common Shares"), Cumulative Convertible Series A Preferred Shares of
Beneficial Interest, $1.00 par value ("Series A Preferred Shares"), and Series
B Cumulative Redeemable Preferred Shares of Beneficial Interest, $1.00 par
value ("Series B Preferred Shares"), are listed on the New York Stock Exchange
(the "NYSE") under the symbols "PTR," "PTR-PRA" and "PTR-PRB," respectively,
and all such reports, proxy statements and other information filed by PTR with
the NYSE may be inspected at the NYSE's offices at 20 Broad Street, New York,
New York 10005.
This Prospectus constitutes part of a registration statement on Form S-3
(together with all amendments and exhibits, the "Registration Statement")
filed by PTR with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"). This Prospectus does not contain all of 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 hereby made to the Registration
Statement.
INCORPORATION BY REFERENCE
There are incorporated herein by reference the following documents filed by
PTR with the Commission (File No. 1-10272):
(a) PTR's Annual Report on Form 10-K for the fiscal year ended December
31, 1995, as amended by Form 10-K/A No. 1;
(b) PTR's Quarterly Reports on Form 10-Q for the quarters ended March 31,
1996, as amended by Form 10-Q/A No. 1, and June 30, 1996;
(c) PTR's Current Reports on Form 8-K filed February 6, 1996, February
15, 1996, May 22, 1996, August 1, 1996, August 6, 1996, and September 23,
1996; and
(d) The description of PTR's Series B Preferred Shares contained in PTR's
registration statement on Form 8-A filed with the Commission on May 16,
1995.
All documents subsequently filed by PTR pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act prior to the termination of the offering of
the Offered Securities, shall be deemed to be incorporated by reference in
this Prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained herein or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein, or in any subsequently filed document which is also or is
deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
PTR will provide without charge to each person, including any beneficial
owner, to whom a copy of this Prospectus is delivered, upon the written or
oral request of such person, a copy of any or all of the documents
incorporated herein by reference, other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into such documents.
Requests should be addressed to Secretary, Security Capital Pacific Trust,
7777 Market Center Avenue, El Paso, Texas 79912, telephone number: (915) 877-
3900.
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<PAGE>
SECURITY CAPITAL PACIFIC TRUST
PTR's objective is to be the preeminent real estate operating company
focusing on multifamily property in its western United States target market.
PTR's REIT manager is Security Capital Pacific Incorporated (the "REIT
Manager" or "REIT Management"). PTR focuses on development, acquisition,
operation and long-term ownership of multifamily properties. Through its REIT
Management Agreement with the REIT Manager, PTR has access to the services
provided by the REIT Manager and its specialized service affiliates, which
provides PTR with access to the same resources as a fully integrated operating
company. PTR seeks to achieve long-term sustainable growth in cash flow by
maximizing operating performance through value-added operating systems and
concentrating its experienced team of professionals on developing and
acquiring industry-leading product in targeted submarkets exhibiting strong
job growth and favorable demographic trends. The REIT Manager provides PTR
with strategic and day-to-day management, including research, investment
analysis, development, acquisition, due diligence, asset management, capital
markets, legal and accounting services. PTR operates as a REIT.
PTR was formed in 1963 and is a real estate investment trust organized under
the laws of Maryland. Its principal executive offices are located at 7777
Market Center Avenue, El Paso, Texas 79912, and its telephone number is (915)
877-3900.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the net
proceeds from the sale of the Offered Securities will be used for the
development and acquisition of additional multifamily properties, as suitable
opportunities arise, for the repayment of certain outstanding indebtedness at
such time, for working capital purposes and, to a lesser extent, for capital
improvements to properties.
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED SHARE DIVIDENDS
For the purpose of computing these ratios, (a) "earnings" consist of
earnings from operations plus fixed charges other than capitalized interest
and (b) "fixed charges" consist of interest on borrowed funds (including
capitalized interest) and amortization of debt discount and expense.
<TABLE>
<CAPTION>
SIX
MONTHS
PERIOD ENDED DECEMBER ENDED
31, JUNE 30,
------------------------ ---------
1991 1992 1993 1994 1995 1995 1996
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to fixed charges and
Preferred Share dividends.................. 1.5 2.9 3.4 1.6 1.9 1.9 1.8
</TABLE>
DESCRIPTION OF DEBT SECURITIES
The Debt Securities are to be issued under an Indenture, dated as of
February 1, 1994, as supplemented by the First Supplemental Indenture, dated
as of February 2, 1994 (as so supplemented, the "Indenture"), between PTR and
State Street Bank and Trust Company (the "Trustee"). The Indenture has been
filed as an exhibit to the Registration Statement of which this Prospectus is
a part and is available for inspection at the corporate trust office of the
Trustee at 225 Franklin Street, Boston, Massachusetts 02110 or as described
above under "Available Information." The Indenture is subject to, and governed
by, the Trust Indenture Act of 1939, as amended (the "TIA"). The statements
made hereunder relating to the Indenture and the Debt Securities to be issued
thereunder are summaries of certain provisions thereof, do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all provisions of the Indenture and such Debt Securities. All section
references appearing herein are to sections of the Indenture, and capitalized
terms used but not defined herein shall have the respective meanings set forth
in the Indenture.
3
<PAGE>
GENERAL
The Debt Securities will be direct, unsecured obligations of PTR and will
rank equally with all other unsecured and unsubordinated indebtedness of PTR.
The Indenture provides that 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 in or pursuant to authority granted by a
resolution of the Board of Trustees of PTR or as established in one or more
indentures supplemental to the Indenture. All Debt Securities of one series
need not be issued at the same time and, unless otherwise provided, a series
may be reopened, without the consent of the Holders of the Debt Securities of
such series, for issuances of additional Debt Securities of such series
(Section 301).
The Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
the 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 (Section 608). 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 Indenture separate and apart
from the trust administered by any other Trustee (Sections 101 and 609), and,
except as otherwise indicated herein, any action described herein to be taken
by the 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 Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities;
(2) the aggregate principal amount of such Debt Securities and any limit
on such principal amount;
(3) the percentage of the principal amount at which such Debt Securities
will be issued and, if other than the full principal amount thereof, the
portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof, or the method by which any such
portion shall be determined;
(4) the date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable and the
amount of principal payable thereon;
(5) 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;
(6) the date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the Interest Payment Dates on
which any such interest will be payable, the Regular Record Dates for such
Interest Payment Dates, or the method by which such Dates shall be
determined, the Person to whom such interest shall be payable, and the
basis upon which interest shall be calculated if other than that of a 360-
day year comprised of twelve 30-day months;
(7) the place or places where the principal of (and premium or Make-Whole
Amount (as defined), if any) and interest and Additional Amounts, 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 PTR in respect of such Debt Securities and the Indenture
may be served;
(8) the period or periods within which, the price or prices (including
the premium or Make-Whole Amount, if any) at which, the currency or
currencies in which, and the other terms and conditions upon which such
Debt Securities may be redeemed, as a whole or in part, at the option of
PTR, if PTR is to have such an option;
(9) the obligation, if any, of PTR to redeem, repay or purchase such Debt
Securities pursuant to any sinking fund or analogous provision or at the
option of a Holder thereof, and the period or periods within which, the
price or prices at which and the terms and conditions upon which such Debt
Securities will be redeemed, repaid or purchased, as a whole or in part,
pursuant to such obligation;
4
<PAGE>
(10) if other than United States 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;
(11) whether the amount of payments of principal of (and premium or Make-
Whole Amount, if any) or interest, if any, on such Debt Securities may be
determined with reference to an index, formula or other method (which
index, formula or method may, but need not be, based on a currency,
currencies, currency unit or units or composite currency or currencies) and
the manner in which such amounts shall be determined;
(12) whether the principal of (and premium or Make-Whole Amount, if any)
or interest or Additional Amounts, if any, on such Debt Securities are to
be payable, at the election of PTR or a Holder, in one or more 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 in which
such Debt Securities are denominated or stated to be payable and the
currency or currencies in which such Debt Securities are to be so payable;
(13) any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to the Events of Default or covenants set
forth in the Indenture;
(14) whether such Debt Securities will be issued in certificated or book-
entry form;
(15) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof if other than $5,000 and terms and conditions relating thereto;
(16) the applicability, if any, of the defeasance and covenant defeasance
provisions of Article Fourteen of the Indenture;
(17) if such Debt Securities are to be issued upon the exercise of debt
warrants, the time, manner and place for such Debt Securities to be
authenticated and delivered;
(18) whether and under what circumstances PTR will pay Additional Amounts
as contemplated in the Indenture on such Debt Securities in respect of any
tax, assessment or governmental charge and, if so, whether PTR will have
the option to redeem such Debt Securities in lieu of making such payment;
and
(19) any other terms of such Debt Securities not inconsistent with the
provisions of the Indenture (Section 301).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special United States federal income
tax, accounting and other considerations applicable to Original Issue Discount
Securities will be described in the applicable Prospectus Supplement.
Under the Indenture, PTR will have the ability, in addition to the ability
to issue Debt Securities with terms different from those of Debt Securities
previously issued, without the consent of the Holders, to reopen a previous
issue of a series of Debt Securities and issue additional Debt Securities of
such series.
Except as set forth below under "Certain Covenants--Limitations on
Incurrence of Debt," the Indenture does not contain any other provisions that
would limit the ability of PTR to incur indebtedness or that would afford
Holders of Debt Securities protection in the event of a highly leveraged or
similar transaction involving PTR or in the event of a change of control of
PTR. However, PTR's Restated Declaration of Trust restricts beneficial
ownership of PTR's outstanding Common Shares by a single person, or persons
acting as a group, to 9.8% of such Common Shares, with certain exceptions
(including an exception for the ownership of up to 49% of such Common Shares
in the case of Security Capital Group Incorporated ("SCG")). Additionally, the
Articles Supplementary relating to the Series A Preferred Shares and the
Series B Preferred Shares restrict beneficial ownership of such Series A
Preferred Shares and Series B Preferred Shares, respectively, by a person, or
persons
5
<PAGE>
acting as a group, to 25% of such Series A Preferred Shares or Series B
Preferred Shares, as the case may be. Similarly, the Articles Supplementary
for each series of Preferred Shares will contain certain provisions
restricting the ownership and transfer of the Preferred Shares. See
"Description of Preferred Shares--Restrictions on Ownership." These
restrictions are designed to preserve PTR's status as a REIT and, therefore,
may act to prevent or hinder a change of control. Reference is made to the
applicable Prospectus Supplement for information with respect to any deletions
from, modifications of or additions to the Events of Default or covenants of
PTR that are described below, including any addition of a covenant or other
provision providing event risk or similar protection.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series issued in registered form will be issuable in
denominations of $1,000 and integral multiples thereof. Unless otherwise
described in the applicable Prospectus Supplement, the Debt Securities of any
series issued in bearer form will be issuable in denominations of $5,000
(Section 302).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and 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, initially located at 225 Franklin Street, Boston, Massachusetts
02110; provided that, at the option of PTR, payment of interest may be made by
check mailed to the address of the Person entitled thereto as it appears in
the Security Register or by wire transfer of funds to such Person to an
account maintained within the United States (Sections 301, 305, 306, 307 and
1002).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and either may 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, notice of which shall be given to the Holder of such Debt Security
not less than 10 days prior to such Special Record Date, or may be paid at any
time in any other lawful manner, all as more completely described in the
Indenture (Section 307).
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for other
Debt Securities of the same series and of a like aggregate principal amount
and tenor of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the Trustee referred to above. 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 thereof at the corporate trust office of the Trustee
referred to above. Every Debt Security surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer. No service charge will be made for any registration of
transfer or exchange of any Debt Securities, but PTR may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith (Section 305). If the applicable Prospectus Supplement
refers to any transfer agent (in addition to the Trustee) initially designated
by PTR with respect to any series of Debt Securities, PTR may at any time
rescind the designation of any such transfer agent or approve a change in the
location at which any such transfer agent acts, except that PTR will be
required to maintain a transfer agent in each Place of Payment for such
series. PTR may at any time designate additional transfer agents with respect
to any series of Debt Securities (Section 1002).
Neither PTR nor the 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 any selection of Debt
Securities of that series to be redeemed and ending at the close of business
on the day of mailing of the relevant notice of redemption; (ii) register the
transfer of or exchange any Debt Security, or portion thereof, called for
redemption, except the unredeemed portion of any Debt Security being redeemed
in part; or (iii) issue, register the transfer of or exchange any Debt
Security which has been surrendered for repayment at the option of the Holder,
except the portion, if any, of such Debt Security not to be so repaid (Section
305).
6
<PAGE>
MERGER, CONSOLIDATION OR SALE
PTR may 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 (a)
either PTR shall be the continuing entity, or the successor entity (if other
than PTR) formed by or resulting from any such consolidation or merger or
which shall have received the transfer of such assets is a Person organized
and existing under the laws of the United States or any State thereof and
shall expressly assume payment of the principal of (and premium or Make-Whole
Amount, if any) and any interest (including Additional Amounts, if any) on all
of the Debt Securities and the due and punctual performance and observance of
all of the covenants and conditions contained in the Indenture; (b)
immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of PTR or any Subsidiary as a result
thereof as having been incurred by PTR or such Subsidiary at the time of such
transaction, no Event of Default under the 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 (c) an officer's
certificate and legal opinion covering such conditions shall be delivered to
the Trustee (Sections 801 and 803).
CERTAIN COVENANTS
Limitations on Incurrence of Debt. PTR will not, and will not permit any
Subsidiary to, incur any Debt (as defined below) if, immediately after giving
effect to the incurrence of such additional Debt and the application of the
proceeds thereof, the aggregate principal amount of all outstanding Debt of
PTR and its Subsidiaries on a consolidated basis determined in accordance with
generally accepted accounting principles is greater than 60% of the sum of
(without duplication) (i) PTR's Total Assets (as defined below) as of the end
of the calendar quarter covered in PTR's Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, most recently filed with
the Commission (or, if such filing is not permitted under the Exchange Act,
with the Trustee) prior to the incurrence of such additional Debt and (ii) the
purchase price of any real estate assets or mortgages receivable acquired, and
the amount of any securities offering proceeds received (to the extent that
such proceeds were not used to acquire real estate assets or mortgages
receivable or used to reduce Debt), by PTR or any Subsidiary since the end of
such calendar quarter, including those proceeds obtained in connection with
the incurrence of such additional Debt (Section 1004).
In addition to the foregoing limitation on the incurrence of Debt, PTR will
not, and will not permit any Subsidiary to, incur any Debt secured by any
mortgage, lien, charge, pledge, encumbrance or security interest of any kind
upon any of the property of PTR or any Subsidiary if, immediately after giving
effect to the incurrence of such additional Debt and the application of the
proceeds thereof, the aggregate principal amount of all outstanding Debt of
PTR and its Subsidiaries on a consolidated basis which is secured by any
mortgage, lien, charge, pledge, encumbrance or security interest on property
of PTR or any Subsidiary is greater than 40% of PTR's Total Assets (Section
1004).
In addition to the foregoing limitations on the incurrence of Debt, PTR will
not, and will not permit any Subsidiary to, incur any Debt if the ratio of
Consolidated Income Available for Debt Service (as defined below) to the
Annual Service Charge (as defined below) for the four consecutive fiscal
quarters most recently ended prior to the date on which such additional Debt
is to be incurred shall have been less than 1.5:1, on a pro forma basis after
giving effect thereto and to the application of the proceeds therefrom, and
calculated on the assumption that (i) such Debt and any other Debt incurred by
PTR and its Subsidiaries since the first day of such four-quarter period and
the application of the proceeds therefrom, including to refinance other Debt,
had occurred at the beginning of such period; (ii) the repayment or retirement
of any other Debt by PTR and its Subsidiaries since the first day of such
four-quarter period had been incurred, repaid or retired at the beginning of
such period (except that, in making such computation, the amount of Debt under
any revolving credit facility shall be computed based upon the average daily
balance of such Debt during such period); (iii) in the case of Acquired Debt
(as defined below) or Debt incurred in connection with any acquisition since
the first day of such four-quarter period, the related acquisition had
occurred as of the first day of such period with the appropriate adjustments
with respect to such acquisition being included in such pro forma calculation;
and (iv) in the case of any acquisition or disposition by PTR or its
Subsidiaries of any asset or group of assets since the first day of
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<PAGE>
such four-quarter period, whether by merger, stock purchase or sale, or asset
purchase or sale, such acquisition or disposition or any related repayment of
Debt had occurred as of the first day of such period with the appropriate
adjustments with respect to such acquisition or disposition being included in
such pro forma calculation (Section 1004).
Existence. Except as permitted under "--Merger, Consolidation or Sale," PTR
will do or cause to be done all things necessary to preserve and keep in full
force and effect its existence, rights (charter and statutory) and franchises;
provided, however, that PTR shall not be required to preserve any right or
franchise if it determines that the preservation thereof is no longer
desirable in the conduct of its business and that the loss thereof is not
disadvantageous in any material respect to the Holders of the Debt Securities
(Section 1005).
Maintenance of Properties. PTR will cause all of its properties used or
useful in the conduct of its business or the business of any Subsidiary to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of PTR may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that PTR and its Subsidiaries shall not be prevented from selling or
otherwise disposing for value its properties in the ordinary course of
business (Section 1006).
Insurance. PTR will, and will cause each of its Subsidiaries to, keep all of
its insurable properties insured against loss or damage at least equal to
their then full insurable value with financially sound and reputable insurance
companies (Section 1007).
Payment of Taxes and Other Claims. PTR will pay or discharge or cause to be
paid or discharged, before the same shall become delinquent, (i) all taxes,
assessments and governmental charges levied or imposed upon it or any
Subsidiary or upon the income, profits or property of PTR 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 PTR or any Subsidiary;
provided, however, that PTR 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 by
appropriate proceedings (Section 1008).
Provision of Financial Information. Whether or not PTR is subject to Section
13 or 15(d) of the Exchange Act, PTR will, to the extent permitted under the
Exchange Act, file with the Commission the annual reports, quarterly reports
and other documents which PTR would have been required to file with the
Commission pursuant to such Section 13 and 15(d) (the "Financial Statements")
if PTR were so subject, such documents to be filed with the Commission on or
prior to the respective dates (the "Required Filing Dates") by which PTR would
have been required so to file such documents if PTR were so subject. PTR will
also in any event (x) within 15 days of each Required Filing Date (i) transmit
by mail to all Holders of Debt Securities, as their names and addresses appear
in the Security Register, without cost to such Holders, copies of the annual
reports and quarterly reports which PTR would have been required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act if PTR were
subject to such Sections and (ii) file with the Trustee copies of the annual
reports, quarterly reports and other documents which PTR would have been
required to file with the Commission pursuant to Section 13 or 15(d) of the
Exchange Act if PTR were subject to such Sections and (y) if filing such
documents by PTR with the Commission is not permitted under the Exchange Act,
promptly upon written request and payment of the reasonable cost of
duplication and delivery, supply copies of such documents to any prospective
Holder (Section 1009).
As used herein,
"Acquired Debt" means Debt of a Person (i) existing at the time such Person
becomes a Subsidiary or (ii) assumed in connection with the acquisition of
assets from such Person, in each case, other than Debt incurred in connection
with, or in contemplation of, such Person becoming a Subsidiary or such
acquisition. Acquired Debt shall be deemed to be incurred on the date of the
related acquisition of assets from any Person or the date the acquired Person
becomes a Subsidiary.
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<PAGE>
"Annual Service Charge" as of any date means the maximum amount which is
payable in any period for interest on, and original issue discount of, Debt of
PTR and its Subsidiaries and the amount of dividends which are payable in
respect of any Disqualified Stock.
"Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
"Consolidated Income Available for Debt Service" for any period means
Earnings from Operations (as defined below) of PTR and its Subsidiaries plus
amounts which have been deducted, and minus amounts which have been added, for
the following (without duplication): (a) interest on Debt of PTR and its
Subsidiaries, (b) provision for taxes of PTR and its Subsidiaries based on
income, (c) amortization of debt discount, (d) provisions for gains and losses
on properties and property depreciation and amortization, (e) the effect of
any noncash charge resulting from a change in accounting principles in
determining Earnings from Operations for such period and (f) amortization of
deferred charges.
"Debt" of PTR or any Subsidiary means any indebtedness of PTR or any
Subsidiary, whether or not contingent, in respect of (i) borrowed money or
evidenced by bonds, notes, debentures or similar instruments, (ii)
indebtedness secured by any mortgage, pledge, lien, charge, encumbrance or any
security interest existing on property owned by PTR or any Subsidiary, (iii)
the reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued or amounts representing the balance deferred
and unpaid of the purchase price of any property or services, except any such
balance that constitutes an accrued expense or trade payable, or all
conditional sale obligations or obligations under any title retention
agreement, (iv) the principal amount of all obligations of PTR or any
Subsidiary with respect to redemption, repayment or other repurchase of any
Disqualified Stock or (v) any lease of property by PTR or any Subsidiary as
lessee which is reflected on PTR's Consolidated Balance Sheet as a capitalized
lease in accordance with generally accepted accounting principles to the
extent, in the case of items of indebtedness under (i) through (iii) above,
that any such items (other than letters of credit) would appear as a liability
on PTR's Consolidated Balance Sheet in accordance with generally accepted
accounting principles, and also includes, to the extent not otherwise
included, any obligation by PTR or any Subsidiary to be liable for, or to pay,
as obligor, guarantor or otherwise (other than for purposes of collection in
the ordinary course of business), Debt of another Person (other than PTR or
any Subsidiary) (it being understood that Debt shall be deemed to be incurred
by PTR or any Subsidiary whenever PTR or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
(ii) is convertible into or exchangeable or exercisable for Debt or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the Stated Maturity of the
series of Debt Securities.
"Earnings from Operations" for any period means net earnings excluding gains
and losses on sales of investments, net as reflected in the financial
statements of PTR and its Subsidiaries for such period determined on a
consolidated basis in accordance with generally accepted accounting
principles.
"Total Assets" as of any date means the sum of (i) PTR's Undepreciated Real
Estate Assets and (ii) all other assets of PTR determined in accordance with
generally accepted accounting principles (but excluding accounts receivable
and intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of PTR and its
Subsidiaries on such date, before depreciation and amortization determined on
a consolidated basis in accordance with generally accepted accounting
principles.
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EVENTS OF DEFAULT, NOTICE AND WAIVER
The Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default
for 30 days in the payment of any installment of interest or Additional
Amounts payable on any Debt Security of such series; (b) default in the
payment of the principal of (or premium or Make-Whole Amount, if any, on) any
Debt Security of such series at its Maturity; (c) default in making any
sinking fund payment as required for any Debt Security of such series; (d)
default in the performance of any other covenant of PTR contained in the
Indenture (other than a covenant added to the Indenture solely for the benefit
of a series of Debt Securities issued thereunder other than such series),
continued for 60 days after written notice as provided in the Indenture; (e)
default in the payment of an aggregate principal amount exceeding $10,000,000
of any evidence of indebtedness of PTR or any mortgage, indenture or other
instrument under which such indebtedness is issued or by which such
indebtedness is secured, such default having occurred after the expiration of
any applicable grace period and having resulted in the acceleration of the
maturity of such indebtedness, but only if such indebtedness is not discharged
or such acceleration is not rescinded or annulled; (f) the entry by a court of
competent jurisdiction of one or more judgments, orders or decrees against PTR
or any of its Subsidiaries in an aggregate amount (excluding amounts fully
covered by insurance) in excess of $10,000,000 and such judgments, orders or
decrees remain undischarged, unstayed and unsatisfied in an aggregate amount
(excluding amounts fully covered by insurance) in excess of $10,000,000 for a
period of 30 consecutive days; (g) certain events of bankruptcy, insolvency or
reorganization, or court appointment of a receiver, liquidator or trustee of
PTR or any Significant Subsidiary or for all or substantially all of either of
its property; and (h) any other Event of Default provided with respect to a
particular series of Debt Securities (Section 501). The term "Significant
Subsidiary" means each significant subsidiary (as defined in Regulation S-X
promulgated by the Commission) of PTR.
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time Outstanding occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% in principal amount
of the Outstanding Debt Securities of that series may declare the principal
amount (or, if the Debt Securities of that series are Original Issue Discount
Securities or Indexed Securities, such portion of the principal amount as may
be specified in the terms thereof) of, and the Make-Whole Amount, if any, on,
all of the Debt Securities of that series to be due and payable immediately by
written notice thereof to PTR (and to the Trustee if given by the Holders).
However, at any time after such a declaration of acceleration with respect to
Debt Securities of such series (or of all Debt Securities then Outstanding
under the Indenture, as the case may be) has been made, but before a judgment
or decree for payment of the money due has been obtained by the Trustee, the
Holders of not less than a majority in principal amount of Outstanding Debt
Securities of such series (or of all Debt Securities then Outstanding under
the Indenture, as the case may be) may rescind and annul such declaration and
its consequences if (a) PTR shall have deposited with the Trustee all required
payments of the principal of (and premium or Make-Whole Amount, if any) and
interest, and any Additional Amounts, on the Debt Securities of such series
(or of all Debt Securities then outstanding under the Indenture, as the case
may be), plus certain fees, expenses, disbursements and advances of the
Trustee and (b) all Events of Default, other than the nonpayment of
accelerated principal (or specified portion thereof and the Make-Whole Amount,
if any) or interest, with respect to Debt Securities of such series (or of all
Debt Securities then Outstanding under the Indenture, as the case may be) have
been cured or waived as provided in the Indenture (Section 502). The Indenture
also provides that 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 the Indenture, as the case may be) may waive any past
default with respect to such series and its consequences, except a default (x)
in the payment of the principal of (or premium or Make-Whole Amount, if any)
or interest or Additional Amounts payable on any Debt Security of such series
or (y) in respect of a covenant or provision contained in the Indenture that
cannot be modified or amended without the consent of the Holder of each
Outstanding Debt Security affected thereby (Section 513).
The Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the Indenture; provided, however, that the
Trustee may withhold notice to the Holders of any series of Debt
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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 or Additional Amounts payable 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 the Responsible Officers of the Trustee consider such
withholding to be in the interest of such Holders (Section 601).
The Indenture provides that no Holders of Debt Securities of any series may
institute any proceedings, judicial or otherwise, with respect to the
Indenture or for any remedy thereunder, except in the case of failure of the
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an event of Default from the Holders of
not less than 25% in principal amount of the Outstanding Debt Securities of
such series, as well as an offer of reasonable indemnity (Section 507). 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), interest on, and Additional Amounts
payable with respect to, such Debt Securities at the respective due dates
thereof (Section 508).
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee is under no obligation to exercise any of its rights or
powers under the Indenture at the request or direction of any Holders of any
series of Debt Securities then Outstanding under the Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
(Section 602). 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 the 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 Trustee, or of exercising any trust or power conferred upon
the Trustee. However, the Trustee may refuse to follow any direction which is
in conflict with any law or the Indenture, which may involve the Trustee in
personal liability or which may be unduly prejudicial to the Holders of Debt
Securities of such series not joining therein (Section 512).
Within 120 days after the close of each fiscal year, PTR must deliver to the
Trustee a certificate, signed by one of several specified officers, stating
whether or not such officer has knowledge of any default under the Indenture
and, if so, specifying each such default and the nature and status thereof
(Section 1010).
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture may be made with the consent
of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities which are affected by such modification or
amendment; provided, however, that no such modification or amendment may,
without the consent of the Holder of each such Debt Security affected thereby,
(a) change the Stated Maturity of the principal of (or premium or Make-Whole
Amount, if any), or any installment of principal of or interest or Additional
Amounts payable on, any such Debt Security; (b) reduce the principal amount
of, or the rate or amount of interest on, or any premium or Make-Whole Amount
payable on redemption of, or any Additional Amounts payable with respect to,
any such Debt Security, or reduce the amount of principal of an Original Issue
Discount Security or Make-Whole Amount, if any, 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; (c) change the Place of Payment, or the coin or currency,
for payment of principal of (and premium or Make-Whole Amount, if any), or
interest on, or any Additional Amounts payable with respect to, any such Debt
Security; (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any such Debt Security; (e) reduce the above-
stated percentage of Outstanding Debt Securities of any series necessary to
modify or amend the Indenture, to waive compliance with certain provisions
thereof or certain defaults and consequences thereunder or to reduce the
quorum or voting requirements set forth in the Indenture; or (f) modify any of
the foregoing provisions or any of the provisions relating to the waiver of
certain past defaults or certain covenants, except to increase the required
percentage to effect such action or to provide that certain other provisions
may not be modified or waived without the consent of the Holder of such Debt
Security (Section 902).
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The Holders of not less than a majority in principal amount of Outstanding
Debt Securities have the right to waive compliance by PTR with certain
covenants in the Indenture (Section 1012).
Modifications and amendments of the Indenture may be made by PTR and the
Trustee without the consent of any Holder of Debt Securities for any of the
following purposes: (i) to evidence the succession of another Person to PTR as
obligor under the Indenture; (ii) to add to the covenants of PTR for the
benefit of the Holders of all or any series of Debt Securities or to surrender
any right or power conferred upon PTR in the 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 the Indenture to
facilitate the issuance of, or to liberalize certain terms of, Debt Securities
in bearer form, or to permit or facilitate the issuance of Debt Securities in
uncertificated form, provided that such action shall not adversely affect the
interests of the Holders of the Debt Securities of any series in any material
respect; (v) to change or eliminate any provisions of the 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 and any
related coupons; (viii) to provide for the acceptance of appointment by a
successor Trustee or facilitate the administration of the trusts under the
Indenture by more than one Trustee; (ix) to cure any ambiguity, defect or
inconsistency in the Indenture or to make any other changes, provided that in
each case, such action shall not adversely affect the interests of Holders of
Debt Securities of any series in any material respect; (x) to close the
Indenture with respect to the authentication and delivery of additional series
of Debt Securities or to qualify, or maintain qualification of, the Indenture
under the TIA; or (xi) to supplement any of the provisions of the 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 Debt Securities of any series in
any material respect (Section 901).
The Indenture provides 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 a Debt Security denominated in a Foreign Currency that shall be
deemed outstanding shall be the United States 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 United States dollar
equivalent on the issue date of such Debt Security of the amount determined as
provided in (i) above), (iii) the principal amount of an Indexed Security that
shall be deemed outstanding shall be the principal face amount of such Indexed
Security at original issuance, unless otherwise provided with respect to such
Indexed Security pursuant to Section 301 of the Indenture, and (iv) Debt
Securities owned by PTR or any other obligor upon the Debt Securities or any
Affiliate of PTR or of such other obligor shall be disregarded (Section 101).
The Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501). A meeting may be called at any
time by the Trustee, and also, upon request, by PTR or the Holders of at least
10% in principal amount of the Outstanding Debt Securities of such series, in
any such case upon notice given as provided in the Indenture (Section 1502).
Except for any consent that must be given by the Holder of each Debt Security
affected by certain modifications and amendments of the Indenture, any
resolution presented at a meeting or adjourned meeting duly reconvened at
which a quorum is present may be adopted by the affirmative vote of the
Holders of a majority in principal amount of the Outstanding Debt Securities
of that series; provided, however, that, except as referred to above, any
resolution with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that may be made, given or taken by
the Holders of a specified percentage, which is less than a majority, in
principal amount of the Outstanding Debt Securities of a series may be adopted
at a meeting or adjourned meeting duly reconvened at which a quorum is present
by the affirmative vote of the Holders of such specified percentage in
principal amount of the Outstanding Debt Securities of that series. Any
resolution passed or decision taken at any meeting of Holders of Debt
Securities of
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any series duly held in accordance with the 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 (Section 1504).
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Debt Securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that the Indenture expressly provides may be made, given or taken by
the Holders of 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 the
Indenture (Section 1504).
Any request, demand, authorization, direction, notice, consent, waiver or
other action provided by the Indenture to be given or taken by a specified
percentage in principal amount of the Holders of any or all series of Debt
Securities may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such specified percentage of Holders in
person or by agent duly appointed in writing; and, except as otherwise
expressly provided in the Indenture, such action shall become effective when
such instrument or instruments are delivered to the Trustee. Proof of
execution of any instrument or of a writing appointing any such agent shall be
sufficient for any purpose of the Indenture and (subject to Article Six)
conclusive in favor of the Trustee and PTR, if made in the manner specified
above (Section 1507).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
PTR may discharge certain obligations to Holders of any series of Debt
Securities that have not already been delivered to the 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 Trustee, in trust, funds in such currency or
currencies, currency unit or units or composite currency or currencies in
which such Debt Securities are payable in an amount sufficient to pay the
entire indebtedness on such Debt Securities in respect of principal (and
premium or Make-Whole Amount, if any) and interest and Additional Amounts
payable 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
(Section 401).
The Indenture provides that, if the provisions of Article Fourteen are made
applicable to the Debt Securities of or within any series pursuant to Section
301 of the Indenture, PTR may elect either (a) to defease and be discharged
from any and all obligations with respect to such Debt Securities (except for
the obligation to pay Additional Amounts, if any, upon the occurrence of
certain events of tax, assessment or governmental charge with respect to
payments on such Debt Securities and the obligations to register the transfer
or exchange of such Debt Securities, to replace temporary or mutilated,
destroyed, lost or stolen Debt Securities, to maintain an office or agency in
respect of such Debt Securities and to hold moneys for payment in trust)
("defeasance") (Section 1402) or (b) to be released from its obligations with
respect to such Debt Securities under Sections 1004 to 1009, inclusive, of the
Indenture (being the restrictions described under "--Certain Covenants") and,
if provided pursuant to Section 301 of the Indenture, its obligations with
respect to any other covenant, and any omission to comply with such
obligations shall not constitute a default or an Event of Default with respect
to such Debt Securities ("covenant defeasance") (Section 1403), in either case
upon the irrevocable deposit by PTR with the 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
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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 may only be established if, among other things, PTR has
delivered to the Trustee an Opinion of Counsel (as specified in the Indenture)
to the effect that the Holders of such Debt Securities will not recognize
income, gain or loss for United States federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to United States
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such defeasance or covenant defeasance
had not occurred, and such Opinion of Counsel, in the case of defeasance, must
refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable United States federal income tax law occurring after the
date of the Indenture (Section 1404).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which
issued the Foreign Currency in which the Debt Securities of such series are
payable, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America or such other
government, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such
Government Obligation or a specific payment of interest on or principal of any
such Government Obligation held by such custodian for the account of the
holder of a depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to
the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt (Section 101).
Unless otherwise provided in the applicable Prospectus Supplement, if after
PTR has deposited funds and/or Government Obligations to effect defeasance or
covenant defeasance with respect to Debt Securities of any series, (a) the
Holder of a Debt Security of such series is entitled to, and does, elect
pursuant to Section 301 of the Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(b) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been,
and will be, fully discharged and satisfied through the payment of the
principal of (and 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 (Section 1405). "Conversion Event" means the
cessation of use of (i) a currency, currency unit or composite currency (other
than the ECU or other currency unit) 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, (ii) the ECU both within the European Monetary System and for the
settlement of transactions by public institutions of or within the European
Communities or (iii) any currency unit or composite currency other than the
ECU for the purposes for which it was established. Unless otherwise provided
in the applicable Prospectus Supplement, all payments of principal of (and
premium 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 United States dollars (Section 101).
In the event PTR 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
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described in clause (d) under "--Events of Default, Notice and Waiver" with
respect to Sections 1004 to 1009, inclusive, of the Indenture (which Sections
would no longer be applicable to such Debt Securities) or described in clause
(g) 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 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, PTR 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.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of, a depository (the "Depository") identified in
the applicable Prospectus Supplement relating to such series. Global
Securities, if any, are expected to be deposited with The Depository Trust
Company, as Depository. Global Securities may be issued in fully registered
form and may be issued 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 Depository for such Global Security to a nominee of such
Depository or by a nominee of such Depository to such Depository or another
nominee of such Depository or by the Depository or any nominee of such
Depository to a successor Depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series. Unless otherwise indicated in the applicable
Prospectus Supplement, PTR anticipates that the following provisions will
apply to depository arrangements.
Upon the issuance of a Global Security, the Depository 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 Depository ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by PTR if such Debt Securities are offered and sold directly by
PTR. Ownership of beneficial interests in a Global Security will be limited to
Participants or persons that may hold interests through Participants.
Ownership of beneficial interests in such Global Security will be shown on,
and the transfer of that ownership will be effected only through, records
maintained by the applicable Depository 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). 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 Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
Indenture. Except as provided 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 of the series
represented by such Global Security registered in their names, will not
receive or be entitled to receive physical delivery of any such Debt
Securities of such series in definitive form and will not be considered the
owners or holders thereof under the Indenture.
Payments of principal of, any premium or Make-Whole Amount and any interest
on, or any Additional Amounts payable with respect to, individual Debt
Securities represented by a Global Security registered in the name of a
Depository or its nominee will be made to the Depository or its nominee, as
the case may be, as the
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registered owner of the Global Security representing such Debt Securities.
None of PTR, 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,
supervising or reviewing any records relating to such beneficial ownership
interests.
PTR expects that the Depository for a series of Debt Securities or its
nominee, upon receipt of any payment of principal, premium, Make-Whole Amount
or interest in respect of a permanent Global Security representing any of such
Debt Securities, immediately will credit Participants' accounts with payments
in amounts proportionate to their respective beneficial interests in the
principal amount of such Global Security for such Debt Securities as shown on
the records of such Depository or its nominee. PTR 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." Such payments will be
the responsibility of such Participants.
If a Depository for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depository and a successor depository is
not appointed by PTR within 90 days, PTR will issue individual Debt Securities
of such series in exchange for the Global Security representing such series of
Debt Securities. In addition, PTR may, at any time and in its sole discretion,
subject to any limitations described in the applicable Prospectus Supplement
relating to such Debt Securities, determine not to have any Debt Securities of
such series represented by one or more Global Securities and, in such event,
will issue individual Debt Securities of such series in exchange for the
Global Security or Securities representing such series of Debt Securities.
Individual Debt Securities of such series so issued will be issued in
denominations, unless otherwise specified by PTR, of $1,000 and integral
multiples thereof.
NO PERSONAL LIABILITY
No past, present or future trustee, officer, employee or shareholder, as
such, of PTR or any successor thereof shall have any liability for any
obligations of PTR under the Debt Securities or the Indenture or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Debt Securities by accepting such Debt Securities waives and
releases all such liability. The waiver and release are part of the
consideration for the issue of Debt Securities (Section 111).
DESCRIPTION OF PREFERRED SHARES
GENERAL
Subject to limitations prescribed by Maryland law and the Restated
Declaration of Trust, the Board of Trustees is authorized to issue, from the
authorized but unissued capital shares of PTR, Preferred Shares in series and
to establish from time to time the number of Preferred Shares to be included
in such series and to fix the designation and any preferences and other
rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption of the shares of each
series, and such other subjects or matters as may be fixed by resolution of
the Board of Trustees or duly authorized committee thereof. On September 16,
1996, PTR had 8,730,900 of its Series A Preferred Shares, issued and
outstanding and held of record by approximately 116 shareholders and 4,200,000
of its Series B Preferred Shares, issued and outstanding and held of record by
approximately 304 holders.
Reference is made to the Prospectus Supplement relating to the Preferred
Shares offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Shares;
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(2) The number of shares of such Preferred Shares offered, the
liquidation preference per share and the offering price of such Preferred
Shares;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Shares;
(4) The date from which dividends on such Preferred Shares shall
cumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Shares;
(6) The provision for a sinking fund, if any, for such Preferred Shares;
(7) The provision for redemption, if applicable, of such Preferred
Shares;
(8) Any listing of such Preferred Shares on any securities exchange;
(9) Whether interests in such Preferred Shares will be represented by
Global Securities;
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Shares;
(11) A discussion of federal income tax considerations applicable to such
Preferred Shares;
(12) The relative ranking and preferences of such Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of PTR;
(13) Any limitations on issuance of any series of preferred stock ranking
senior to or on a parity with such series of Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of PTR; and
(14) Any limitations on direct or beneficial ownership and restrictions
on transfer, in each case as may be appropriate to preserve the status of
PTR as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Shares will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of PTR, rank (i) senior to all classes or series of
Common Shares, and to all equity securities ranking junior to such Preferred
Shares; (ii) on a parity with all equity securities issued by PTR the terms of
which specifically provide that such equity securities rank on a parity with
the Preferred Shares; and (iii) junior to all equity securities issued by PTR
the terms of which specifically provide that such equity securities rank
senior to the Preferred Shares.
DIVIDENDS
Holders of Preferred Shares of each series shall be entitled to receive,
when, as and if declared by the Board of Trustees of PTR, out of assets of PTR
legally available for payment, cash dividends at such rates and on such dates
as will be set forth in the applicable Prospectus Supplement. Each such
dividend shall be payable to holders of record as they appear on the share
transfer books of PTR on such record dates as shall be fixed by the Board of
Trustees of PTR.
Dividends on any series of the Preferred Shares may be cumulative or
noncumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Trustees of PTR fails to
declare a dividend payable on a dividend payment date on any series of the
Preferred Shares for which dividends are noncumulative, then the holders of
such series of the Preferred Shares will have no right to receive a dividend
in respect of the dividend period ending on such dividend payment date, and
PTR will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Shares of any series are outstanding, no full dividends shall
be declared or paid or set apart for payment on the Preferred Shares of PTR of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Shares of such series for any period unless (i) if such series of
Preferred Shares has a cumulative
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dividend, full cumulative dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on the Preferred Shares of such series for all past
dividend periods and the then current dividend period or (ii) if such series
of Preferred Shares does not have a cumulative dividend, full dividends for
the then current dividend period have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart
for such payment on the Preferred Shares of such series. When dividends are
not paid in full (or a sum sufficient for such full payment is not so set
apart) upon the Preferred Shares of any series and the shares of any other
series of Preferred Shares ranking on a parity as to dividends with the
Preferred Shares of such series, all dividends declared upon Preferred Shares
of such series and any other series of Preferred Shares ranking on a parity as
to dividends with such Preferred Shares shall be declared pro rata so that the
amount of dividends declared per share on the Preferred Shares of such series
and such other series of Preferred Shares shall in all cases bear to each
other the same ratio that accrued dividends per share on the Preferred Shares
of such series (which shall not include any cumulation in respect of unpaid
dividends for prior dividend periods if such series of Preferred Shares does
not have a cumulative dividend) and such other series of Preferred Shares bear
to each other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on Preferred Shares of
such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends on the Preferred Shares of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient of
the payment thereof set apart for payment for all past dividend periods and
the then current dividend period and (ii) if such series of Preferred Shares
does not have a cumulative dividend, full dividends on the Preferred Shares of
such series have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for payment for the
then current dividend period, no dividends (other than in Common Shares or
other capital shares ranking junior to the Preferred Shares of such series as
to dividends and upon liquidation) shall be declared or paid or set aside for
payment or other distribution shall be declared or made upon the Common Shares
or any other capital shares of PTR ranking junior to or on a parity with the
Preferred Shares of such series as to dividends or upon liquidation, nor shall
any Common Shares or any other capital shares of PTR ranking junior to or on a
parity with the Preferred Shares 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 shares of any such shares) by PTR (except by conversion into
or exchange for other capital shares of PTR ranking junior to the Preferred
Shares of such series as to dividends and upon liquidation).
Any dividend payment made on a series of Preferred Shares shall first be
credited against the earliest accrued but unpaid dividend due with respect to
shares of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Shares
will be subject to mandatory redemption or redemption at the option of PTR, as
a whole or in part, in each case upon the terms, at the times and at the
redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of such Preferred
Shares that shall be redeemed by PTR 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 series of Preferred Shares does not have a cumulative dividend,
include any cumulation 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.
Notwithstanding the foregoing, unless (i) if such series of Preferred Shares
has a cumulative dividend, full cumulative dividends on all shares of any
series of Preferred Shares shall have been or contemporaneously are
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declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for all past dividend periods and the then current dividend
period and (ii) if such series of Preferred Shares does not have a cumulative
dividend, full dividends on the Preferred Shares of any 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 any series of Preferred Shares shall be redeemed unless
all outstanding Preferred Shares of such series are simultaneously redeemed;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Preferred Shares of such series pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding Preferred
Shares of such series, and, unless (i) if such series of Preferred Shares has
a cumulative dividend, full cumulative dividends on all outstanding shares of
any series of Preferred Shares have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend period and
(ii) if such series of Preferred Shares does not have a cumulative dividend,
full dividends on the Preferred Shares of any 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, PTR shall not purchase or otherwise acquire directly or indirectly any
shares of Preferred Shares of such series (except by conversion into or
exchange for capital shares of PTR ranking junior to the Preferred Shares of
such series as to dividends and upon liquidation).
If fewer than all of the outstanding Preferred Shares of any series are to
be redeemed, the number of shares to be redeemed will be determined by PTR and
such shares may be redeemed pro rata from the holders of record of such shares
in proportion to the number of such shares held by such holders (with
adjustments to avoid redemption of fractional shares) or by lot in a manner
determined by PTR.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Shares
of any series to be redeemed at the address shown on the share transfer books
of PTR. Each notice shall state: (i) the redemption date; (ii) the number of
shares and series of the Preferred Shares to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Shares
are to be surrendered for payment of the redemption price; and (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date. If fewer than all the Preferred Shares of any series are to be redeemed,
the notice mailed to each such holder thereof shall also specify the number of
Preferred Shares to be redeemed from each such holder. If notice of redemption
of any Preferred Shares has been given and if the funds necessary for such
redemption have been set aside by PTR in trust for the benefit of the holders
of any Preferred Shares so called for redemption, then from and after the
redemption date dividends will cease to accrue on such Preferred Shares, and
all rights of the holders of such shares will terminate, except the right to
receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of PTR, then, before any distribution or payment shall be made to
the holders of any Common Shares or any other class or series of capital
shares of PTR ranking junior to the Preferred Shares in the distribution of
assets upon any liquidation, dissolution or winding up of PTR, the holders of
each series of Preferred Shares shall be entitled to receive out of assets of
PTR legally available for distribution to shareholders liquidating
distributions in the amount of the liquidation preference per share (set forth
in the applicable Prospectus Supplement), plus an amount equal to all
dividends accrued and unpaid thereon (which shall not include any cumulation
in respect of unpaid dividends for prior dividend periods if such series of
Preferred Shares does not have a cumulative dividend). After payment of the
full amount of the liquidating distributions to which they are entitled, the
holders of Preferred Shares will have no right or claim to any of the
remaining assets of PTR. In the event that, upon any such voluntary or
involuntary liquidation, dissolution or winding up, the available assets of
PTR are insufficient to pay the amount of the liquidating distributions on all
outstanding Preferred Shares and the corresponding amounts payable on all
shares of other classes or series of capital shares of PTR ranking on a parity
with the Preferred Shares in the distribution of assets, then the holders of
the Preferred Shares and all other such classes or series of capital shares
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shall share ratably in any such distribution of assets in proportion to the
full liquidating distributions to which they would otherwise be respectively
entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Shares, the remaining assets of PTR shall be distributed among the
holders of any other classes or series of capital shares ranking junior to the
Preferred Shares upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
PTR with or into any other corporation, or the sale, lease or conveyance of
all or substantially all of the property or business of PTR, shall not be
deemed to constitute a liquidation, dissolution or winding up of PTR.
VOTING RIGHTS
Holders of the Preferred Shares will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement. The following is a summary
of the voting rights applicable to the Series A Preferred Shares and Series B
Preferred Shares, which, unless provided otherwise in the applicable
Prospectus Supplement, will apply to each series of Preferred Shares.
If six quarterly dividends (whether or not consecutive) payable on the
Series A Preferred Shares, Series B Preferred Shares or any other Parity
Shares are in arrears, whether or not earned or declared, the number of
Trustees then constituting the Board of Trustees of PTR will be increased by
two, and the holders of Series A Preferred Shares and Series B Preferred
Shares, voting together as a class with the holders of any other series of
Parity Shares (any such other series, the "Voting Preferred Shares"), will
have the right to elect two additional trustees to serve on PTR's Board of
Trustees at any annual meeting of shareholders or a properly called special
meeting of the holders of Series A Preferred Shares, Series B Preferred Shares
and such Voting Preferred Shares and at each subsequent annual meeting of
shareholders until all such dividends and dividends for the current quarterly
period on the Series A Preferred Shares, Series B Preferred Shares and such
other Voting Preferred Shares have been paid or declared and set aside for
payment. Such voting rights will terminate when all such accrued and unpaid
dividends have been declared and paid or set aside for payment. The term of
office of all trustees so elected will terminate with the termination of such
voting rights. For so long as SCG and certain of its affiliates beneficially
own in excess of 10% of the outstanding Common Shares, in any such vote by
holders of Series A Preferred Shares and Series B Preferred Shares, SCG and
certain of its affiliates shall vote their Series A Preferred Shares and
Series B Preferred Shares, if any, in the same respective percentages as the
Series A Preferred Shares and Series B Preferred Shares and Voting Preferred
Shares that are not held by such persons.
The approval of two-thirds of the outstanding Series A Preferred Shares,
Series B Preferred Shares and all other series of Voting Preferred Shares
similarly affected, voting as a single class, is required in order to (i)
amend PTR's Declaration of Trust to affect materially and adversely the
rights, preferences or voting power of the holders of the Series A Preferred
Shares, Series B Preferred Shares or the Voting Preferred Shares, (ii) enter
into a share exchange that affects the Series A Preferred Shares or Series B
Preferred Shares, consolidate with or merge into another entity, or permit
another entity to consolidate with or merge into PTR, unless in each such case
each Series A Preferred Share or Series B Preferred Share, as the case may be,
remains outstanding without a material and adverse change to its terms and
rights or is converted into or exchanged for convertible preferred stock of
the surviving entity having preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms or
conditions of redemption thereof identical to that of a Series A Preferred
Share or Series B Preferred Share, as the case may be (except for changes that
do not materially and adversely affect the holders of the Series A Preferred
Shares or Series B Preferred Shares), or (iii) authorize, reclassify, create,
or increase the authorized amount of any class of stock having rights senior
to the Series A Preferred Shares or Series B Preferred Shares with respect to
the payment of dividends or amounts upon liquidation, dissolution or winding
up. However, PTR may create additional classes of Parity Shares and Junior
Shares, increase the authorized number of Parity Shares and Junior Shares and
issue additional series of Parity Shares and Junior Shares without the consent
of any holder of Series A Preferred Shares or Series B Preferred Shares.
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Except as provided above and as required by law, the holders of Series A
Preferred Shares or Series B Preferred Shares are not entitled to vote on any
merger or consolidation involving PTR or a sale of all or substantially all of
the assets of PTR.
RESTRICTIONS ON OWNERSHIP
For PTR to qualify as a REIT under the Internal Revenue Code of 1986, as
amended (the "Code"), not more than 50% in value of its outstanding capital
shares may be owned by five or fewer individuals at any time during the last
half of a taxable year, and the capital stock must be beneficially owned by
100 or more persons during at least 335 days of PTR's taxable year of 12
months. Therefore, the Articles Supplementary for each series of Preferred
Shares will contain certain provisions restricting the ownership and transfer
of the Preferred Shares (the "Preferred Shares Ownership Limit Provision").
Except as otherwise described in the applicable Prospectus Supplement relating
thereto, the provisions of each Articles Supplementary relating to the
Preferred Shares Ownership Limit will provide (as in the case of the Series A
Preferred Shares and the Series B Preferred Shares) as summarized below.
The Preferred Shares Ownership Limit Provision will provide that, subject to
certain exceptions contained in such Articles Supplementary, no person, or
persons acting as a group, may beneficially own more than 25% of any series of
Preferred Shares outstanding at any time, except as a result of PTR's
redemption of Preferred Shares. Shares acquired in excess of the Preferred
Shares Ownership Limit Provision must be redeemed by PTR at a price equal to
the average daily per share closing sale price during the 30-day period ending
on the business day prior to the redemption date. Such redemption is not
applicable if a person's ownership exceeds the limitations due solely to PTR's
redemption of Preferred Shares; provided that thereafter any additional
Preferred Shares acquired by such person shall be Excess Shares. From and
after the date of notice of such redemption, the holder of the Preferred
Shares thus redeemed shall cease to be entitled to any distribution (other
than distributions declared prior to the date of notice of redemption), voting
rights and other benefits with respect to such shares except the right to
receive payment of the redemption price determined as described above. The
Preferred Shares Ownership Limit Provision may not be waived with respect to
certain affiliates of PTR.
All certificates representing shares of Preferred Shares will bear a legend
referring to the restrictions described above.
FEDERAL INCOME TAX CONSIDERATIONS
This section is a summary of certain federal income tax matters of general
application pertaining to REITs under the Code. The discussion is based on
current law and does not purport to deal with all aspects of federal income
taxation that may be relevant to investors subject to special treatment under
federal income tax laws, such as investors subject to the Employee Retirement
Income Security Act of 1974, as amended, other tax exempt investors, dealers
in securities or foreign persons. The provisions of the Code pertaining to
REITs are highly technical and complex and sometimes involve mixed questions
of fact and law. In addition, this section does not discuss foreign, state or
local taxation. PTR has not requested and will not request a ruling from the
Internal Revenue Service (the "Service") with respect to any of the federal
income tax issues discussed below. Prospective investors should consult, and
must depend on, their own tax advisors regarding the federal, state, local,
foreign and other tax consequences of holding and disposing of Preferred
Shares or Debt Securities.
TAXATION OF PTR
PTR believes that it has been organized and operated, and it intends to
continue to operate, in a manner qualifying it as a REIT under Sections 856
through 860 of the Code, but no assurance can be given that it will at all
times so qualify. PTR's ability to qualify as a REIT under the requirements of
the Code and the regulations promulgated thereunder is dependent upon actual
operating results.
To qualify as a REIT under the Code for a taxable year, PTR must meet
certain organizational and operational requirements, which generally require
it to be a passive investor in operating real estate and to avoid
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excessive concentration of ownership of its capital stock. First, its
principal activities must be real estate related. Generally, at least 75% of
the value of the total assets of PTR at the end of each calendar quarter must
consist of real estate assets, cash or governmental securities and for each
taxable year at least 75% of its gross income must be from real estate
sources, including rents from real property and interest on mortgage
obligations. PTR may not own more than 10% of the outstanding voting
securities of any corporation; shares of qualified REITs, qualified temporary
investments and shares of certain wholly owned subsidiaries are exempt from
this prohibition. PTR holds assets through certain wholly owned subsidiary
corporations that it believes qualify for the exemption. Additionally, gross
income from the sale or other disposition of stock and securities held for
less than one year, real property held for less than four years and property
in a prohibited transaction must constitute less than 30% of the gross income
for each taxable year of a REIT. For each taxable year, at least 75% of a
REIT's gross income must be derived from specified real estate sources and 95%
must be derived from such real estate sources plus certain other permitted
sources. Real estate income for purposes of these requirements includes gains
from the sale of real property not held primarily for sale to customers in the
ordinary course of business, dividends on REIT shares, interest on loans
secured by mortgages on real property, certain rents from real property and
income from foreclosure property. For rents to qualify, they may not be based
on the income or profits of any person, except that they may be based on a
percentage or percentages of gross income or receipts, and, subject to certain
limited exceptions, the REIT may not manage the property or furnish services
to tenants except through an independent contractor which is paid an arm's-
length fee and from which the REIT derives no income.
PTR must satisfy certain ownership restrictions that limit (i) concentration
of ownership of capital stock by a few individuals and (ii) ownership by PTR
of its tenants. The outstanding capital stock of PTR must be held by at least
100 shareholders. No more than 50% in value of the outstanding capital stock,
including in some circumstances capital stock into which outstanding
securities might be converted, may be owned actually or constructively by five
or fewer individuals or certain other entities at any time during the last
half of PTR's taxable year. Accordingly, PTR's Restated Declaration of Trust
restricts the transfer of Common Shares, Preferred Shares and any other
outstanding securities convertible into Common Shares when necessary to
maintain PTR's qualification as a REIT under the Code. However, because the
Code imposes broad attribution rules in determining constructive ownership, no
assurances can be given that the restrictions of PTR's Restated Declaration of
Trust will be effective in maintaining PTR's REIT status. See "Description of
Preferred Shares--Restrictions on Ownership." Because SCG is a corporation,
its ownership is attributed proportionally to all of its shareholders for
purposes of determining whether more than 50% in value of the outstanding
capital stock is owned by five or fewer individuals at any time during the
last half of PTR's taxable year.
So long as PTR qualifies for taxation as a REIT and distributes at least 95%
of its real estate investment trust taxable income (computed without regard to
net capital gains or the dividends-paid deduction) for its taxable year to its
shareholders annually, PTR itself will not be subject to federal income tax on
that portion of such income distributed to shareholders. PTR will be taxed at
regular corporate rates on all income not distributed to shareholders. PTR's
policy is to distribute at least 95% of its taxable income. REITs may also
incur taxes for certain other activities or to the extent distributions do not
satisfy certain other requirements.
Failure of PTR to qualify during any taxable year as a REIT could, unless
certain relief provisions were available, have a material adverse effect upon
its shareholders. If disqualified for taxation as a REIT for a taxable year,
PTR would also be disqualified for taxation as a REIT for the next four
taxable years, unless the failure was due to reasonable cause and not willful
neglect. PTR would be subject to federal income tax at corporate rates on all
of its taxable income and would not be able to deduct the dividends paid,
which could result in a discontinuation of or substantial reduction in
dividends to shareholders. Dividends would also be subject to the regular tax
rules applicable to dividends received by shareholders of corporations. Should
the failure to qualify be determined to have occurred retroactively in an
earlier tax year of PTR, the imposition of a substantial federal income tax
liability on PTR attributable to such nonqualifying tax years may adversely
affect PTR's ability to pay dividends. In the event that PTR fails to meet
certain income tests of the tax law, it may, generally, nonetheless retain its
qualification as a REIT if it pays a 100% tax on the amount by which it failed
to meet the income tests so long as its failure was due to reasonable cause
and not willful neglect. Any such taxes would adversely affect PTR's ability
to pay dividends or to pay interest on any Debt Securities.
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TAXATION OF THE SHAREHOLDERS OF PTR
As long as PTR qualifies as a REIT, distributions made to its shareholders
out of current or accumulated earnings and profits of PTR (which are not
designated as capital gain dividends) will generally be taxed to shareholders
as ordinary income either in the year of payment or, with respect to
distributions declared in the last quarter of any year and paid by January 31
of the following year, in the year of declaration and will not be eligible for
the dividends received deduction for corporations. PTR's earnings and profits
will first be allocated to any outstanding Preferred Shares. A distribution of
net capital gains by PTR will generally be treated as a long term capital gain
to shareholders to the extent properly designated by PTR as a capital gain
dividend and regardless of the length of time a shareholder has held his
shares of capital stock. Under Section 291 of the Code, however, corporate
shareholders may be required to treat up to 20% of any such capital gain as
ordinary income. Section 291 of the Code provides, in general, that if a
corporation sells or disposes of depreciable real property in a taxable
transaction, it must, to the extent of gain, include as ordinary income up to
20% of the depreciation previously taken on such property. Corporate
shareholders of a REIT are required to treat the portion of a capital gain
dividend attributable to the gain from the REIT's sale or exchange of
depreciable real property as subject to the 20% ordinary income rule. Capital
gains distributions are not eligible for the dividends-received deduction for
corporations. A dividend in excess of current or accumulated earnings and
profits will constitute a nontaxable return of capital, to the extent of the
shareholder's basis in his shares of capital stock, and is applied to reduce
the shareholder's basis in the shares of capital stock. To the extent such a
dividend is greater than such basis, it will be treated as capital gain to
those shareholders holding their shares of capital stock as capital assets.
PTR will notify shareholders as to the portions of each dividend which, in its
judgment, constitute ordinary income, capital gain dividends or return of
capital. Should PTR incur ordinary or capital losses, shareholders will not be
entitled to include such losses in their own income tax returns.
BACKUP WITHHOLDING
PTR will report to its U.S. shareholders and the Service the amount of
distributions paid during each calendar year, and the amount of tax withheld,
if any. Under the backup withholding rules, a shareholder may be subject to
backup withholding at applicable rates with respect to distributions paid
unless such shareholder (a) is a corporation or falls within certain other
exempt categories and, when required, demonstrates this fact, or (b) provides
a taxpayer identification number, certifies as to no loss of exemption from
backup withholding and otherwise complies with applicable requirements of the
backup withholding rules. A shareholder that does not provide PTR with his
correct taxpayer identification number may also be subject to penalties
imposed by the Service. Any amount paid as backup withholding will be
creditable against the shareholder's income tax liability. In addition, PTR
may be required to withhold a portion of capital gain distributions to any
shareholders who fail to certify their nonforeign status to PTR.
PLAN OF DISTRIBUTION
PTR may sell the Offered Securities to one or more underwriters or dealers
for public offering and sale by them or may sell the Offered Securities to
investors directly or through agents, which agents may be affiliated with PTR.
Direct sales to investors may be accomplished through subscription offerings
or concurrent rights offerings to PTR shareholders and direct placements to
third parties. Any such underwriter, dealer or agent involved in the offer and
sale of the Offered Securities will be named in the applicable Prospectus
Supplement.
The distribution of the Offered Securities may be effected from time to time
in one or more transactions at a fixed price or prices, which may be changed,
at prices related to the prevailing market prices at the time of sale or at
negotiated prices. PTR also may, from time to time, authorize underwriters
acting as PTR's agents to offer and sell the Offered Securities upon the terms
and conditions as set forth in the applicable Prospectus Supplement. In
connection with the sale of Offered Securities, underwriters may be deemed to
have received compensation from PTR in the form of underwriting discounts or
commissions and may also receive commissions from purchasers of Offered
Securities for whom they may act as agent. Underwriters may sell Offered
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent.
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Any underwriting compensation paid by PTR to underwriters or agents in
connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters,
dealers and agents participating in the distribution of the Offered Securities
may be deemed to be underwriters, and any discounts and commissions received
by them and any profit realized by them on resale of the Offered Securities
may be deemed to be underwriting discounts and commissions, under the
Securities Act. Underwriters, dealers and agents may be entitled, under
agreements entered into with PTR, to indemnification against and contribution
toward certain civil liabilities, including liabilities under the Securities
Act. Any such indemnification agreements will be described in the applicable
Prospectus Supplement.
If so indicated in the applicable Prospectus Supplement, PTR will authorize
dealers acting as PTR's agents to solicit offers by certain institutions to
purchase Offered Securities from PTR at the public offering price set forth in
such Prospectus Supplement pursuant to Delayed Delivery Contracts
("Contracts") providing for payment and delivery on the date or dates stated
in such Prospectus Supplement. Each Contract will be for an amount not less
than, and the aggregate principal amount of Offered Securities sold pursuant
to Contracts shall be not less nor more than, the respective amounts stated in
the applicable Prospectus Supplement. Institutions with whom Contracts, when
authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable
institutions, and other institutions but will in all cases be subject to the
approval of PTR. Contracts will not be subject to any conditions except (i)
the purchase by an institution of the Offered Securities covered by its
Contracts shall not at the time of delivery be prohibited under the laws of
any jurisdiction in the United States to which such institution is subject,
and (ii) if the Offered Securities are being sold to underwriters, PTR shall
have sold to such underwriters the total principal amount of the Offered
Securities less the principal amount thereof covered by Contracts.
Certain of the underwriters and their affiliates may be customers of, engage
in transactions with and perform services for PTR and its subsidiaries in the
ordinary course of business.
EXPERTS
The financial statements of PTR as of December 31, 1995 and 1994, and for
each of the years in the three-year period ended December 31, 1995, and
related schedule, incorporated by reference herein; and the combined statement
of revenues and certain expenses of the Group A Properties, incorporated by
reference herein, have been incorporated by reference herein and in the
Registration Statement in reliance upon the reports 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.
With respect to the unaudited interim financial information of PTR for the
periods ended March 31, 1996 and 1995 and June 30, 1996 and 1995, incorporated
by reference herein, the independent certified public accountants have
reported that they applied limited procedures in accordance with professional
standards for a review of such information. However, their separate reports
included in PTR's quarterly reports on Form 10-Q for the quarters ended March
31, 1996, as amended by Form 10-Q/A No. 1, and June 30, 1996, incorporated by
reference herein, states that they did not audit, and they do not express an
opinion on that interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. The accountants are not
subject to the liability provisions of Section 11 of the Securities Act for
their reports on the unaudited interim financial information because those
reports are not a "report" or a "part" of the registration statement prepared
or certified by the accountants within the meaning of Sections 7 and 11 of the
Securities Act.
LEGAL MATTERS
The validity of the Offered Securities will be passed upon for PTR by Mayer,
Brown & Platt, Chicago, Illinois.
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