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As filed with the Securities and Exchange Commission on November 25, 1996
Registration No. 333-
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
THE PRICE REIT, INC.
(Exact Name of Registrant as Specified in Its Charter)
MARYLAND 52-1746059
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
7979 IVANHOE AVENUE, SUITE 524
LA JOLLA, CA 92037
(619) 551-2320
(Address, Including Zip Code, and Telephone Number, Including
Area Code, of Registrant's Principal Executive Offices)
JOSEPH K. KORNWASSER
7979 IVANHOE AVENUE, SUITE 524
LA JOLLA, CA 92037
(619) 551-2320
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
COPIES TO:
KENNETH M. DORAN, ESQ.
GIBSON, DUNN & CRUTCHER LLP
333 SOUTH GRAND AVENUE
LOS ANGELES, CALIFORNIA 90071
(213) 229-7000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION FEE
TO BE REGISTERED REGISTERED (1) PER SHARE PRICE (1)(2) (7)(8)
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<S> <C> <C> <C> <C>
Debt Securities(3) . . . . . . . . . . .
Preferred Stock, $0.01 par value per $175,000,000 (2) $175,000,000 $50,485
share(4) . . . . . . . . . . . . . . . .
Common Stock, $0.01 par value per share(5)
Warrants(6) . . . . . . . . . . . . . .
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(1) In no event will the aggregate maximum offering price of all securities
issued pursuant to this Registration Statement exceed $175,000,000. Any
securities registered hereunder may be sold separately or as units with
other securities registered hereunder.
(2) The proposed maximum offering price per unit (a) has been omitted
pursuant to Instruction II.D of Form S-3 and (b) will be determined, from
time to time, by the Registrant in connection with the issuance by the
Registrant of the securities registered hereunder.
(3) Subject to footnote 1, there is being registered hereunder an
indeterminate principal amount of Debt Securities as may be sold, from
time to time, by the Registrant.
(4) Subject to footnote 1, there is being registered hereunder an
indeterminate number of shares of Preferred Stock as may be sold, from
time to time, by the Registrant. There is also being registered
hereunder an indeterminate number of shares of Preferred Stock as shall
be issuable upon exercise of Warrants registered hereby.
(5) Subject to footnote 1, there is being registered hereunder an
indeterminate number of shares of Common Stock as may be sold from time
to time, by the Registrant, including shares of other classes or series
of the Company's stock that may be issued upon reclassification of
unissued, authorized stock of the Company. There is also being
registered hereunder an indeterminate number of shares of Common Stock
including shares of other classes or series of the Company's stock that
may be issued upon reclassification of unissued, authorized stock of
the Company, as shall be issuable upon conversion of the Preferred
Stock or exercise of Warrants registered hereby.
(6) Subject to footnote 1, there is being registered hereunder an
indeterminate number of Warrants representing rights to purchase shares
of Preferred Stock or Common Stock, including shares of other classes or
series of the Company's stock that may be issued upon reclassification of
unissued, authorized stock of the Company, as the case may be, registered
pursuant to this Registration Statement.
(7) Calculated pursuant to Rule 457(o) of the rules and regulations (the
"Rules and Regulations") under the Securities Act of 1933, as amended.
(8) Registration fees totaling $2,546 with respect to $8,400,500 of the
securities registered hereby were previously paid upon the registration
of $10,566,750 of securities (Registration No. 333-15143). Pursuant to
Rule 429(b) of the Rules and Regulations, the applicable registration fee
of $50,485 with respect to the additional $166,599,500 of securities
registered hereby is being paid herewith.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE AN AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion
Preliminary Prospectus dated November 25, 1996
PROSPECTUS
$175,000,000
THE PRICE REIT, INC.
DEBT SECURITIES, PREFERRED STOCK,
COMMON STOCK AND WARRANTS
________________________
The Price REIT, Inc. (the "Company") may from time to time offer (i)
unsecured debt securities, which may be either senior debt securities ("Senior
Securities") or subordinated debt securities ("Subordinated Securities," and
together with the Senior Securities, the "Debt Securities"), (ii) shares of its
preferred stock, $.01 par value per share (the "Preferred Stock"), (iii) shares
of its common stock, $.01 par value per share (the "Common Stock"), or (iv)
warrants to purchase Preferred Stock or Common Stock (the "Warrants") with an
aggregate public offering price of up to $175,000,000 on terms to be determined
at the time of the offering. The Debt Securities, Preferred Stock, Common
Stock and Warrants (collectively, the "Offered Securities") may be offered,
separately or together, in separate amounts, at prices and on terms to be set
forth in a supplement to the Prospectus (each a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable (i) in the case of Debt
Securities, the specific title, aggregate principal amount, ranking, purchase
price, maturity, interest rate (which may be fixed or variable) and the time of
payment of interest (if any), authorized denominations, terms (if any) for the
subordination, redemption or conversion thereof, and terms (if any) for a
sinking fund; (ii) in the case of Preferred Stock, the specific title and
stated value, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; (iii) in the case of
Common Stock, the specific title and stated value and any initial public
offering price; and (iv) in the case of Warrants, the duration, offering price,
exercise price and detachability, as well as the terms of which and the
securities for which such Warrants may be exercised. 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 the Company as a real estate investment
trust ("REIT") for federal income purposes. See "Federal Income Tax
Considerations."
The applicable Prospectus Supplement will also contain information,
where applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered
Securities covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents
designated from time to time by the Company, or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
Offered Securities, their names, and any applicable purchase price, fee,
commission or discount arrangement between or among them, will be set forth or
will be calculable from the information set forth in the applicable Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of the applicable Prospectus Supplement describing the method
and terms of the offering of such 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 SUPPLEMENT OR THE PROSPECTUS TO WHICH IT RELATES
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
________________________
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
The date of this Prospectus is December , 1996.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). The Registration
Statement, and exhibits and schedules forming a part thereof and the reports,
proxy statements and other information filed by the Company with the Commission
in accordance with the Exchange Act can be inspected and copied at the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington,
D.C., 20549, and at the following regional offices of the Commission: Seven
World Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of
such material can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Electronic filings made through the Electronic Data Gathering, Analysis
and Retrieval System are publicly available through the Commission's Website
(http://www.sec.gov). In addition, the Common Stock is listed on the New York
Stock Exchange and similar information concerning the Company can be inspected
and copied at the offices of the New York Stock Exchange, Inc., 20 Broad
Street, New York, New York 10005.
The Company has filed with the Commission a registration statement
(the "Registration Statement") (of which this Prospectus is a part) under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
Offered Securities. This Prospectus does not contain all of the information
set forth in the Registration Statement, certain portions of which have been
omitted as permitted by the rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract or
other documents are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto. For further information
regarding the Company and the Offered Securities, reference is hereby made to
the Registration Statement and such exhibits and schedules which may be
obtained from the Commission at its principal office in Washington, D.C., upon
payment of the fees prescribed by the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the
Exchange Act with the Commission and are incorporated herein by reference:
a. Annual Report on Form 10-K for the year ended December 31,
1995;
b. Quarterly Reports on Form 10-Q for the quarters ended March
31, 1996, June 30, 1996 and September 30, 1996; and
c. The description of the Registrant's Common Stock contained in
the Company's Registration Statement on Form 8-A (File No. 1-13432) dated
October 25, 1994 and any amendments or reports filed for the purpose of
updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus and
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 part hereof
from the date of filing such documents.
Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in the applicable Prospectus Supplement) or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
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Copies of all documents which are incorporated herein by reference
(not including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered upon written or oral request. Requests should be
directed to the Secretary, The Price REIT, Inc., 7979 Ivanhoe Avenue, Suite
524, La Jolla, California 92037, (619) 551-2320.
IN CONNECTION WITH AN OFFERING, THE UNDERWRITERS FOR SUCH OFFERING MAY
OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE
OF THE SECURITIES AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE,
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY
BE DISCONTINUED AT ANY TIME.
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THE COMPANY
The Price REIT, Inc. (the "Company") is a self-administered and
self-managed equity real estate investment trust ("REIT") which is focused on
the acquisition, development, management and redevelopment of destination retail
shopping center properties known as "power centers". As of September 30, 1996,
the Company owns or has interests in 22 properties, consisting of 19 power
centers, one stand alone retail warehouse and two undeveloped land parcels (the
"Properties") located in seven states containing a total of approximately 5.0
million square feet of gross leasable space with approximately 303 tenants. The
overall occupancy rate of the Properties was approximately 98.3% at September
30, 1996.
Power centers are typically open-air centers ranging in size from
200,000 to 700,000 square feet of gross leasable area, and are usually
comprised of one or more national retail anchors, often in a warehouse format.
Anchor retail tenants typically occupy between 60% and 90% of the total square
footage in a power center. The tenant mix in a power center is designed to
draw consumers from up to a 15-mile radius, creating a shopping "destination."
The majority of the Company's anchor tenants are retail warehouses, which are
consumer-oriented facilities with at least 25,000 to 100,000 square feet of
gross leasable area offering a variety of products for business use, personal
use or resale. The retail warehouse format of merchandise display, direct
manufacturer purchasing, low mark-ups and rapid inventory turnover is designed
to provide substantial consumer savings compared to other sources of similar
merchandise.
Each of the Company's power centers is anchored by one or more
national retail tenants such as Home Depot, Price Club, HomeBase, The Sports
Authority, Burlington Coat Factory, Target, Builder's Square, Toys 'R' Us or
Sears Homelife. The Company typically seeks to structure tenant leases as
"triple net" leases, under the terms of which the tenant is responsible for its
pro rata share of costs and expenses associated with the ongoing operation of
the property, including but not limited to real property taxes and assessments,
repairs and maintenance, and insurance. The anchor tenants generally have
primary lease terms of 10 to 20 years and smaller tenants typically have
primary lease terms of 5 to 10 years. The Company's leases generally provide
for contractual rent increases over the life of the lease based on a fixed
amount or consumer price indices, and, in certain cases, percentage rent,
calculated as a percentage of a tenant's gross sales above a predetermined
threshold. The Company's principal executive office is located at 7979 Ivanhoe
Avenue, Suite 524, La Jolla, California 92037, and its telephone number is
(619) 551-2320.
TAX STATUS OF THE COMPANY
The Company has elected to be taxed as a REIT under Sections 856
through 860 of the Internal Revenue Code of 1986, as amended, commencing with
its taxable year ended December 31, 1991. As a REIT, the Company generally is
not subject to Federal income tax on net income that it distributes to its
stockholders. Even though the Company qualifies for taxation as a REIT, the
Company may be subject to certain Federal, state and local taxes on its income
and property. See "Federal Income Tax Considerations."
USE OF PROCEEDS
Unless otherwise indicated in the accompanying Prospectus Supplement,
the Company intends to use the proceeds for general corporate purposes
including, without limitation, the acquisition and development of additional
properties and the repayment of debt. The proceeds from the sale of the
Offered Securities initially may be temporarily invested in short-term
securities.
EARNINGS TO FIXED CHARGES RATIOS
The Company's ratios of earnings to fixed charges for the period from
July 31, 1991 (inception) through December 31, 1991 and the years ended December
31, 1992, 1993, 1994 and 1995 and the nine-month period ended June 30, 1996 were
- -x, 2.28x, 3.07x, 4.73x, 3.17x and 2.30x, respectively. The ratio of earnings
to fixed charges is computed by dividing earnings by fixed charges. For this
purpose, earnings consist of pre-tax income from continuing operations plus
fixed charges. Fixed charges consist of interest expense and the amortization
of debt discount and issuance costs. To date, the Company has not issued any
Preferred Stock; therefore, the ratios
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of earnings to combined fixed charges and preferred stock dividend requirements
are the same as the ratios of earnings to fixed charges presented above.
DESCRIPTION OF DEBT SECURITIES
The following sets forth certain general terms and provisions of the
Indenture under which the Debt Securities are to be issued. The particular
terms of the Debt Securities will be set forth in a Prospectus Supplement
relating to such Debt Securities.
The Debt Securities are to be issued under an Indenture, as amended or
supplemented from time to time (the "Indenture"), between the Company and a
Trustee chosen by the Company and qualified to act as such under the Trust
Indenture Act of 1939 as amended (the "TIA") (together with any other
trustee(s) appointed in a supplemental indenture with respect to a particular
series, the "Trustee"). The Indenture has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part and will be available
for inspection at the corporate trust office of the Trustee, or as described
above under "Available Information." The Indenture is subject to, and governed
by, the TIA. The Company will execute the Indenture if and when the Company
issues the Debt Securities. The statements made hereunder relating to the
Indenture and the Debt Securities to be issued hereunder are summaries of
certain provisions thereof and 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.
GENERAL
The Debt Securities will be direct, unsecured obligations of the
Company. Except for any series of Debt Securities which is specifically
subordinated to other indebtedness of the Company, the Debt Securities will
rank equally with all other unsecured and unsubordinated indebtedness of the
Company. Under the Indenture, 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 Directors of the Company 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 (Section
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.
TERMS
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 aggregate principal amount;
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(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal
amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity
thereof, or (if applicable) the portion of the principal
amount of such Debt Securities which is convertible into
Common Stock or Preferred Stock, 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;
(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 of twelve 30-day months;
(7) the place or places where (i) the principal of (and premium,
if any) and interest, if any, on such Debt Securities will be
payable, (ii) such Debt Securities may be surrendered for
conversion or registration of transfer, exchange or conversion
and (iii) notices or demands to or upon the Company in respect
of such Debt Securities and the Indenture may be served;
(8) the period or periods within which, or the date or dates on
which, the price or prices at which and the terms and
conditions upon which such Debt Securities may be redeemed, as
a whole or in part, at the option of the Company, if the
Company is to have such an option;
(9) the obligation, if any, of the Company to redeem, repay or
repurchase such Debt Securities pursuant to any sinking fund
or analogous provisions or at the option of a Holder thereof,
and the period or periods within which, or the date or dates
on which, the price or prices at which and the terms and
conditions upon which such Debt Securities are required to be
redeemed, repaid or purchased, as a whole or in part, pursuant
to such obligation;
(10) if other than U.S. dollars, the currency or currencies in
which such Debt Securities are denominated and/or 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,
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) any additions to, modifications of or deletions from the terms
of such Debt Securities with respect to the Events of Default
or covenants or other provisions set forth in the Indenture;
(13) whether such Debt Securities will be issued in certificated or
book-entry from;
(14) whether such Debt Securities will be in registered or bearer
form and, if in registered form, the denominations thereof if
other than $1,000 and any integral multiple thereof and, if in
bearer form, the denominations thereof and terms and
conditions relating thereto;
(15) the applicability, if any, of the defeasance and covenant
defeasance provisions of Article XIV of the Indenture;
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(16) 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;
(17) the terms, if any, upon which such Debt Securities may be
convertible into Common Stock or Preferred Stock of the
Company and the terms and conditions upon which such
conversion will be effected, including, without limitation,
the initial conversion price or rate, the conversion period
and, in connection with the preservation of the Company's
status as a REIT, limitations on the ownership of the Common
Stock or Preferred Stock into which such Debt Securities are
convertible;
(18) the terms and conditions, if any, upon which such Debt
Securities may be subordinated to other indebtedness of the
Company;
(19) whether and under what circumstances the Company 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 the Company will have
the option to redeem such Debt Securities in lieu of making
such payment; and
(20) 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 U.S. federal income
tax, accounting and other considerations applicable to the Original Issue
Discount Securities will be described in the applicable Prospectus Supplement.
The Indenture does not contain any provisions that would limit the
ability of the Company to incur indebtedness or that would afford Holders of
Debt Securities protection in the event of a highly leveraged or similar
transaction involving the Company. However, restrictions on ownership and
transfers of the Common Stock and Preferred Stock, designed to preserve the
Company's status as a REIT, may 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 the Company 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 will be issuable in denominations of $1,000
and integral multiples thereof (Section 302).
Unless otherwise specified in the applicable Prospectus Supplement,
the principal of (and premium, if any) and interest on any series of Debt
Securities will be payable at the corporate trust office of the Trustee,
provided that, at the option of the Company, payment of interest may be made by
check mailed to the address of the Person entitled thereto as it appears in the
Security Register or by wire transfer of funds to such Person at an account
maintained within the United States (Sections 301, 305, 307 and 1002).
All amounts paid by the Company to a paying agent or a Trustee for the
payment of the principal of or any premium or interest on any Debt Security
which remain unclaimed at the end of two years after the principal, premium or
interest has become due and payable will be repaid to the Company, and the
holder of the Debt Security thereafter may look only to the Company for payment
thereof.
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 may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
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Trustee, notice whereof 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
(Sections 101 and 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, 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. 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 conversion or
registration of transfer thereof at the corporate trust office of the Trustee
referred to above. Every Debt Security surrendered for conversion,
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 the Company
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 the Company with respect to any series of Debt
Securities, the Company may at any time rescind the designation of any such
transfer agent or approve a change in the location through which any such
transfer agent acts, except that the Company will be required to maintain a
transfer agent in each Place of Payment for such series. The Company may at
any time designate additional transfer agents with respect to any series of
Debt Securities (Section 1002).
Neither the Company 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 of 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 that portion, if any, of such Debt Security which is not to be so repaid
(Section 305).
MERGER, CONSOLIDATION OR SALE
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other trust or
corporation, provided (a) either the Company shall be the continuing entity, or
the successor (if other than the Company) formed by or resulting from any such
consolidation or merger or which shall have received the transfer of such
assets and is a corporation organized under the laws of any domestic
jurisdiction and shall expressly assume payment of the principal of (and
premium, if any) and interest on all of the Debt Securities and the due and
punctual performance and observance of all of the covenants and conditions
contained in the Indenture; (b) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Company or any Subsidiary as a result thereof as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of Default
under 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
Existence. Except as permitted under "Merger, Consolidation or Sale,"
the Indenture will require the Company to do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
(declaration and statutory) and franchises; provided, however, that the Company
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 1004).
Maintenance of Properties. The Indenture will require the Company to
cause all of its material properties used or useful in the conduct of its
business or the business of any subsidiary to be maintained and kept in good
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<PAGE> 10
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that the
Company and its subsidiaries shall not be prevented from selling or otherwise
disposing of their properties for value in the ordinary course of business.
(Section 1007).
Insurance. The Indenture will require the Company to cause each of
its and its subsidiaries' insurable properties to be insured against loss of
damage with insurers of recognized responsibility and, if described in the
applicable Prospectus Supplement, in specified amounts and with insurers having
a specified rating from a recognized insurance rating service. (Section 1008).
Payment of Taxes and Other Claims. The Indenture will require the
Company to pay or discharge or cause to be paid or discharged, before the same
shall become delinquent, (i) all taxes, assessments and governmental charges
levied or imposed upon it or any subsidiary or upon the income, profits or
property of the Company or any subsidiary and (ii) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Company or any subsidiary; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
tax, assessment, charge or claim whose amount, applicability is being contested
in good faith. (Section 1009).
Provision of Financial Information. Whether or not the Company is
subject to Section 13 or 15(d) of the Exchange Act, the Company will, to the
extent permitted under the Exchange Act, file with the Commission the annual
reports, quarterly reports and other documents which the Company would have
been required to file with the Commission pursuant to such Section 13 or 15(d)
(the "Financial Statements") if the Company were so subject, such documents to
be filed with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been required so to file such
documents if the Company were so subject. The Company will also in any event
(x) file with the Trustee copies of the annual reports, quarterly reports and
other documents which the Company would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Company
were subject to such Sections and (y) if filing such documents by the Company
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 1005).
Additional Covenants. Reference is made to the applicable Prospectus
Supplement for information with respect to any additional covenants specific to
a particular series of Debt Securities.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the Prospectus Supplement, 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 interest on any Debt Security of such series; (b) default in the
payment of any principal of (or premium, if any on) any Debt Security of such
series when due; (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 or warranty of the Company contained in the Indenture with respect to
any Debt Security of such series, continued for 60 days after written notice as
provided in the Indenture; (e) default in the payment of indebtedness of the
Company outstanding in an aggregate principal amount in excess of $5,000,000 or
any mortgage, indenture, note, bond, capitalized lease or other instrument
under which such indebtedness is issued or by which such indebtedness is
secured, such default having continued after the expiration of any applicable
grace period and having resulted in the acceleration of the maturity of such
indebtedness; (f) certain events of bankruptcy, insolvency or reorganization,
or court appointment of a receiver, liquidator or trustee of the Company or any
Significant Subsidiary or the property of either, (g) the acquisition by any
Person (including any affiliates of such Person) of 20% or more of the
Company's Common Stock, unless the Company's Board of Directors shall have
first approved of such acquisition; and (h) any other Event of Default provided
with respect to a particular series of Debt
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<PAGE> 11
Securities (Section 501). The term "Significant Subsidiary" means each
significant subsidiary (as defined in Regulation S-X promulgated under the
Securities Act) of the Company. (Section 101).
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 all of the Debt Securities
of that series to be due and payable immediately by written notice thereof to
the Company (and to the Trustee if given by the Holders). However, any time
after such a declaration of acceleration with respect to Debt Securities of
such series has been made, but before a judgment or decree for payment of the
money due has been obtained by the Trustee, the Holders of not less than a
majority in principal amount of Outstanding Debt Securities of such series may
rescind and annul such declaration and its consequences if (a) the Company
shall have paid or deposited with the Trustee all required payments of the
principal of (and premium, if any) and interest on the Debt Securities of such
series plus certain fees, expenses, disbursements and advances of the Trustee
and (b) all Events of Default, other than the nonpayment of accelerated
principal or interest with respect to Debt Securities of such series 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 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, if any) or interest 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
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium, if any) or interest on any Debt
Security of such series or in the payment of any sinking fund installment in
respect of any Debt Security of such series) if 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 that
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, if any) and interest on such Debt Securities at the respective due
date 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 Debt
Securities of any series 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 25% in principal amount of the
Outstanding Debt Securities of any series shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Trustee, or of exercising any trust or power conferred upon the Trustee.
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, the Company 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 1006).
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MODIFICATION OF THE INDENTURE
Modifications and amendments of provisions of the Indenture applicable
to any series may be made only with 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 any installment of interest (or premium, if any) on, any such Debt
Security; (b) reduce the principal amount of, or the rate or amount of interest
on, or any premium payable on redemption of, any such Debt Security, or reduce
the amount of principal of an Original Issue Discount Security that would be
due and payable upon declaration of acceleration of the maturity thereof or
would be provable in bankruptcy, or adversely affect any right of repayment of
the Holder of any such Debt Security; (c) change the Place of Payment, or the
coin or currency, for payment of principal of, premium, if any, or interest on
any such Debt Security; (d) impair the right to institute suit for the
enforcement of any payment on or with respect to any such Debt Security on or
after the Stated Maturity thereof; (e) reduce the above-stated percentage of
Outstanding Debt Securities of any series necessary to modify or amend the
Indenture, to waive compliance 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).
The Holders of not less than a majority in principal amount of
Outstanding Debt Securities of a particular series of any series have the right
to waive compliance by the Company with certain covenants in the Indenture
relating to such series (Section 1011).
Modifications and amendments of the Indenture may be made by the
Company 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 the Company as obligor under the Indenture; (ii) to add to the
covenants of the Company for the benefit of the Holders of all or any series of
Debt Securities or to surrender any right or power conferred upon the Company
in 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 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 not 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, including the
provision and procedures, if applicable, or the conversion of such Debt
Securities into Common Stock or Preferred Stock, (viii) to provide for the
acceptance of appointment by a successor Trustee or facilitate the
administration of the trust under the Indenture by more than one Trustee; (x)
to cure any ambiguity, defect or inconsistency in the Indenture, provided that
such action shall not adversely affect the interests of Holders of Debt
Securities of any series in any material respect; (x) 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 U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (i) above), (iii) the
principal amount of an Indexed Security that shall be deemed outstanding shall
be the principal face amount of
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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 the Company or any other obligor upon the Debt
Securities or any Affiliate of the Company 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 the Company or the
Holders of at least 10% in principal amount of the Outstanding Debt Securities
of such series, in any such case upon notice given as provided in the Indenture
(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 Debt Securities of that series.
Any resolution passed or decision taken at any meeting of Holders of Debt
Securities of any series duly held in accordance with the Indenture will be
binding on all Holders of Debt Securities of that series. The 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).
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise provided in the Prospectus Supplement, the Company
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 are 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, if any) and
interest to the date of such deposit (if such Debt Securities have become due
and payable) or to the Stated Maturity or Redemption Date, as the case may be
(Section 401).
The Indenture provides that, unless otherwise provided in the
Prospectus Supplement, if the provisions of Article Fourteen are made
applicable to the Debt Securities of any series pursuant to Section 301 of the
Indenture, the Company 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
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Securities under Sections 1004 and 1005, inclusive, of the Indenture (being the
restrictions described under "Certain Covenants") or, 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 the Company with the Trustee, in trust, of any amount, in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at Stated Maturity, or
Government Obligations (as defined below), or both applicable to such Debt
Securities which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium, 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, the
Company 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 U.S. Federal income tax purposes as a result
of such defeasance or covenant defeasance and will be subject to U.S. Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such defeasance or covenant defeasance had not
occurred, and such Opinion of Counsel, in the case of defeasance, must refer to
and be based 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 the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any
series, (a) the Holder of a Debt Security of such series is entitled to, and
does, elect pursuant to 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, 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 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 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. (Section 101.)
Unless otherwise provided in the applicable Prospectus Supplement, all payments
of principal of (and premium, if any) and interest on any Debt Security that is
payable in a Foreign Currency that cease to be used by its government of
issuance shall be made in U.S. dollars.
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In the event the Company effects covenant defeasance with respect to
any Debt Securities and such Debt Securities are declared due and payable
because of the occurrence of any Event of Default other than the Event of
Default described in clause (d) under "Events of Default, Notice and Waiver"
with respect to Sections 1004 and 1005, inclusive, of the Indenture (which
Sections would no longer be applicable to such Debt Securities) or described in
clause (h) 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, the Company would remain liable to make payment of such
amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the
provisions, if any, permitting such defeasance or covenant defeasance,
including any modifications to the provisions described above, with respect to
the Debt Securities of a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Stock or Preferred
Stock, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the
Holders of the Company, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of
such Debt Securities and any restriction on conversion, including restrictions
directed at maintaining the Company's REIT status.
SUBORDINATION
The terms and conditions, if any, upon which the Debt Securities are
subordinated to other indebtedness of the Company will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include a
description of the indebtedness ranking senior to the Debt Securities, the
restrictions on payments to the Holders of such Debt Securities while a default
with respect to such senior indebtedness in continuing, the restrictions, if
any, on payments to the Holders of such Debt Securities following an Event of
Default, and provisions requiring Holders of such Debt Securities to remit
certain payments to holders of senior indebtedness.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in
the form of one or more global securities (the "Global Securities") that will
be deposited with, or on behalf of, a depositary (the "Depositary") identified
in the applicable Prospectus Supplement relating to such series. Global
Securities may be issued in either registered or bearer form and in either
temporary or permanent form. The specific terms of the depositary arrangement
with respect to a series of Debt Securities will be described in the applicable
Prospectus Supplement relating to such series.
DESCRIPTION OF STOCK
The summary of the terms of the stock of the Company set forth below
does not purport to be complete and is subject to and qualified in its entirety
by reference to the charter and bylaws of the Company. See "Available
Information."
GENERAL
The total number of shares of stock which the Company is authorized to
issue is twenty-seven million (27,000,000) shares, of which two million
(2,000,000) is Preferred Stock, $.01 par value per share, and twenty-five
million (25,000,000) is Common Stock, $.01 par value per share.
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The Common Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to fix the number of any series
of Common Stock and to determine the designation of any such series. The Board
of Directors is also authorized to determine or alter the rights granted to or
imposed upon any wholly unissued series of Common Stock, including the dividend
rights, dividend rate, conversion rights, voting rights, and the liquidation
preference, and, within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series, to increase or decrease (but not below the number of
shares then outstanding) the number of shares of any such series subsequent to
the issue of shares of that series. In case the number of shares of any series
shall be so decreased, the shares constituting such decrease shall resume the
status which they had prior to the adoption of the resolution originally fixing
the number of shares of such series. Notwithstanding the foregoing, however,
in no event shall the Common Stock be redeemable, except in connection with the
redemption provisions of Article IX of the Company's Articles of Incorporation,
as amended to date (the "Charter").
As of September 30, 1996, there were approximately 9,061,464 shares of
Common Stock issued and outstanding. Approximately 705,500 shares of Common
Stock have been reserved for issuance pursuant to stock option agreements that
the Company has entered into with certain of its officers and directors.
COMMON STOCK
The holders of the Common Stock are entitled to participate in
distributions when and as authorized and declared by the Board of Directors.
The Company currently pays regular quarterly dividends to holders of Common
Stock. Holders of the Common Stock are entitled to one vote per share of
Common Stock on all matters submitted to a vote of the stockholders of the
Company. In voting for directors, a stockholder of the Company is entitled to
cumulate votes if such stockholder gives notice, prior to commencement of the
voting, of an intention to do so. If any one stockholder has given such
notice, then all stockholders entitled to vote may cumulate votes.
All issued and outstanding shares of Common Stock being offered hereby
will be, validly issued, fully paid and nonassessable. Holders of the Common
Stock currently issued and outstanding and holders of the shares of Common
Stock offered hereby do not have any preference, conversion, exchange or
preemptive rights.
Any shares of Common Stock sold in an offering will be freely
tradeable without restriction or registration under the Securities Act of 1933,
as amended (the "Securities Act"), unless acquired by an affiliate of the
Company, subject to the restrictions on transfer set forth below. Shares of
Common Stock held by affiliates or acquired in transactions not registered in
reliance on the private offering exemption under the Securities Act cannot be
resold unless registered under the Securities Act or sold pursuant to an
exemption from registration, such as Rule 144 promulgated under the Securities
Act.
The transfer agent and registrar for the Company's Common Stock is
Chase Mellon Shareholder Services, Los Angeles, California.
The Company's Common Stock is currently traded on the New York Stock
Exchange under the symbol "RET."
PREFERRED STOCK
The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is authorized to fix the number of shares of
any series of Preferred Stock and to determine the designation of any such
series. The Board of Directors is also authorized to determine or alter the
rights granted to or imposed upon any wholly unissued series of Preferred Stock
including the dividend rights, dividend rate, conversion rights, voting rights,
and the liquidation preference, and, within the limits and restrictions stated
in any resolution or resolutions of the Board of Directors originally fixing
the number of shares constituting any series, to increase or decrease (but not
below the number of shares then outstanding) the number of shares of any such
series subsequent to the issue of shares of that series. In case the number of
shares of any series shall be so decreased, the shares constituting such
decrease shall resume the status which they had prior to the adoption of the
resolution originally fixing the number
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of shares of such series. Notwithstanding the foregoing, however, in no event
shall the Preferred Stock be redeemable, except in connection with the
redemption provisions of Article IX of the Charter. The issuance of Preferred
Stock may have the effect of delaying, deferring or preventing a change in
control of the Company.
Preferred Stock, upon issuance against full payment of the purchase
price therefor, will be fully paid and nonassessable. The specific terms of a
particular series of Preferred Stock will be described in the Prospectus
Supplement relating to that series, including a Prospectus Supplement providing
that Preferred Stock may be issuable upon the exercise of Warrants issued by
the Company. The description of Preferred Stock set forth below and the
description of the terms of a particular series of Preferred Stock set forth in
a Prospectus Supplement do not purport to be complete and are qualified in
their entirety by reference to the articles supplementary relating to that
series.
The rights, preferences, privileges and restrictions of the Preferred
Stock of each series will be fixed by the articles supplementary relating to
such series. A Prospectus Supplement, relating to each series, will specify
the terms of the Preferred Stock as follows:
(1) the title and stated value of such Preferred Stock;
(2) the number of shares of such Preferred Stock offered, the
liquidation preference per share and the offering price of
such Preferred Stock;
(3) the dividend rate(s), period(s), and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred
Stock;
(4) whether such Preferred Stock is cumulative or not and, if
cumulative, the date from which dividends on such Preferred
Stock shall accumulate;
(5) the procedures for any auction and remarketing, if any, for
such Preferred Stock;
(6) the provision for a sinking fund, if any, for such Preferred
Stock;
(7) the provision for redemption, if applicable, of such Preferred
Stock;
(8) any listing of such Preferred Stock on any securities
exchange;
(9) the terms and conditions, if applicable, upon which such
Preferred Stock will be converted into Common Stock of the
Company, including the conversion price (or manner of
calculation thereof);
(10) a discussion of any material federal income tax considerations
applicable to such Preferred Stock;
(11) any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate
to preserve the status of the Company as a REIT;
(12) the relative ranking and preferences of such Preferred Stock
as to dividend rights and rights upon liquidation, dissolution
or winding up of the affairs of the Company;
(13) any limitations on issuance of any class or series of
preferred stock ranking senior to or on a parity with such
series of Preferred Stock as to dividend rights and rights
upon liquidation. dissolution or winding up of the affairs of
the Company;
(14) any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock; and
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(15) any voting rights of such Preferred Stock.
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to the Common Stock
of the Company, and to all equity securities ranking junior to such Preferred
Stock with respect to dividend rights or rights upon liquidation, dissolution
or winding up of the Company; (ii) on a parity with all equity securities
issued by the Company the terms of which specifically provide that such equity
securities rank on a parity with the Preferred Stock with respect to dividends
rights or rights upon liquidation, dissolution or winding up of the Company;
and (iii) junior to all equity securities issued by the Company the terms of
which specifically provide that such equity securities rank senior to the
Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding up of the Company.
The terms and conditions, if any, upon which shares of a series of
Preferred Stock are convertible into Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of shares of Common Stock into which the Preferred Stock is convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such Preferred Stock.
RESTRICTIONS ON TRANSFER
For the Company to qualify as a REIT under the Code in any taxable
year, not more than 50% of its outstanding equity securities may be owned
directly or indirectly by five or fewer individuals, and its equity securities
must be owned by 100 or more persons during at least 335 days of a taxable year
of 12 months or during a proportionate part of a shorter taxable year (except
the first year). In order to ensure that the Company will meet these
requirements, the Board of Directors has the power to redeem or prohibit the
transfer of a sufficient number of shares of stock, selected in a manner deemed
appropriate, to maintain or bring the ownership of shares into conformity with
such requirements. In connection with the foregoing, if the Board of Directors
shall, at any time and in good faith, be of the opinion that (i) direct or
indirect ownership of more than 9.8% in value of the outstanding shares of
stock of the Company has or may become concentrated in the hands of one
beneficial owner (including any "group," as that term is used in Section 13(d)
of the Exchange Act) or (ii) direct or indirect ownership of the outstanding
shares of stock has or may result in the Company's shares being held by less
than 100 persons (either occurrence, a "Disqualifying Event"), the Board of
Directors has the power (a) to redeem from any stockholders of the Company a
number of shares of stock sufficient, in the opinion of the Board, to maintain
or bring the direct or indirect ownership of shares of such owner to a level of
not more than 9.8% in value of the outstanding shares of stock of the Company
and (b) to refuse to transfer or issue shares of stock of the Company to any
person whose acquisition of such shares, in the opinion of the Board of
Directors, would cause a Disqualifying Event. Notice of such action by the
Board of Directors shall be sent to each person whose shares of stock of the
Company shall be redeemed or whose transfer or receipt of shares of stock of
the Company shall be refused specifying the date of each redemption (if
applicable) and the number of shares as affected. The purchase price for any
shares of stock of the Company so redeemed shall be equal to the fair market
value of such shares reflected in the closing sales price for the shares, if
then listed on a national securities exchange or the Nasdaq National Market
System, or, if the shares are not then listed on a national securities exchange
or the Nasdaq National Market System, the closing bid quotation for the shares
on the Nasdaq Automated Quotations System or any similar system then in use,
or, if such quotation is not available, the fair market value as determined by
the Board of Directors in good faith, on the last business day immediately
preceding the day on which a notice of such redemption is sent by the Board of
Directors. The Common Stock is presently listed on the New York Stock
Exchange. From and after the date fixed for purchase by the Board, the holder
of any shares of stock so called for purchase shall cease to be entitled to
distributions, voting rights and other benefits with respect to such shares
except the right to payment of the purchase price for the shares.
Further, any transfer of shares of stock that would cause a
Disqualifying Event shall be deemed void, in accordance with the Charter. If
such provision is deemed invalid, any shares of stock whose transfer would
cause a Disqualifying Event shall be deemed transferred by operation of law to
the Company as trustee of a trust for the
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benefit of those persons to whom the shares can ultimately be transferred
without causing a Disqualifying Event. Shares held in trust shall cease to be
entitled to distribution, voting rights and other benefits with respect to such
shares (except for the right to payment for transfer as described below) during
the time that they are held in trust. Shares held in trust may be transferred
by the person whose attempted transfer would have caused a Disqualifying Event,
at a price not in excess of the price paid by that person for the shares. Upon
such a transfer, the trustees shall distribute the shares held in trust to the
transferee, provided that such shares in the hands of such transferee would not
cause a Disqualifying Event. The foregoing provisions of the Charter may have
certain anti-takeover effects. Although the provisions do not apply to a cash
tender for all of the outstanding shares of the Company, the provisions do
impair the ability of any person to accumulate a controlling portion of the
Company's shares or conduct a proxy contest.
CERTAIN PROVISIONS OF MARYLAND LAW
Certain sections of the Maryland General Corporation Law ("MGCL")
contain provisions which may tend to impede or delay a takeover of the Company.
Section 3-602 of the MGCL prevents a Maryland corporation from engaging in any
"Business Combination" (defined to include a variety of transactions, including
mergers, as set forth below) with an "Interested Stockholder" (generally
defined as a beneficial owner of 10% or more of a corporation's voting power)
for five years following the date such person became an Interested Stockholder
unless, among other exceptions, (i) before such person becomes an Interested
Stockholder, the board of directors of the corporation exempted or approved the
business combinations; or (ii) the Interested Stockholder became an Interested
Stockholder at any time in the prior five years solely through inadvertence,
and the Interested Stockholder divests itself of a sufficient amount of the
corporation's voting stock so that it no longer is the beneficial owner of 10%
or more of the corporation's voting stock.
Unless exempted by the statute, in addition to any vote otherwise
required, a Business Combination with an Interested Stockholder that is not
prohibited by the provisions of Section 3-602 must be recommended by the board
of directors and approved by the affirmative vote of at least 80% of the voting
stock of the corporation, and must also be approved by two-thirds of the voting
stock, excluding voting stock held by the Interested Stockholder who will be a
party to the Business Combination or by an affiliate or associate thereof.
A corporation may elect not to be governed by Section 3-602 if the
stockholders adopt an amendment to the corporation's charter by a vote of at
least 80% of the voting stock of the corporation, and two-thirds of the votes
entitled to be cast by persons who are not Interested Stockholders of the
corporation or affiliates or associates thereof. Such an amendment, however,
shall not be effective until 18 months after the vote of stockholders and may
not apply to any Business Combination of the corporation with an Interested
Stockholder who became an Interested Stockholder on or before the date of the
vote.
The MGCL provides that during such five-year period the corporation
and certain of its subsidiaries may not merge, consolidate, or undertake a
share exchange with an Interested Stockholder or any affiliate of the
Interested Stockholder, unless the merger, consolidation or share exchange does
not alter the contract rights of the stock or change or convert outstanding
shares of stock of the corporation or its subsidiaries. In addition, the
corporation and certain of its subsidiaries may not engage in certain other
transactions with an interested Stockholder or any affiliate thereof.
In addition to the provisions of Section 3-602 and related Sections,
the MGCL also contains provisions which may have certain anti- takeover effects
through the restriction of voting rights of Control Shares. Section 3-702
provides that Control Shares of a Maryland corporation (defined as shares of
stock in respect of which an Acquiring Person (as defined in Section 3-701 of
the MGCL) is entitled to direct the exercise of voting power in electing
directors within one of the following ranges, (i) one-fifth or more but less
than one-third, (ii) one- third or more but less than a majority or (iii) a
majority or more of all voting power, and for which such voting power approval
has not been previously obtained) acquired in a Control Share Acquisition have
no voting rights except to the extent approved by two-thirds of all the votes
entitled to be cast on the matter, excluding all shares in respect of which an
Acquiring Person, an officer of the corporation, or an employee of the
corporation who is also a director
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of the corporation is entitled to exercise or direct the exercise of voting
power in the election of directors. An Acquiring Person is defined as a person
who makes or proposes to make a Control Share Acquisition.
The MGCL defines a Control Share Acquisition as the acquisition of
ownership of, or the power to direct the exercise of voting power with respect
to, issued and outstanding Control Shares. A Control Share Acquisition does
not include the acquisition of shares, among other instances, (i) under the
laws of descent and distribution, (ii) under the satisfaction of a pledge or
other security interest created in good faith and not for the purpose of
circumventing the Control Share provisions of the MGCL, (iii) under a merger,
consolidation or share exchange with the corporation which meets certain
requirements or (iv) under an acquisition of voting power within a range
previously authorized by the stockholders and made in good faith and not for
the purpose of circumventing the Control Share provisions of the MGCL.
LIMITATION OF LIABILITY AND INDEMNIFICATION
Directors have a fiduciary relationship to the stockholders. The
Charter provides that the personal liability of a director for monetary damages
for breach of fiduciary duty as a director shall be eliminated to the fullest
extent permissible under law. The MGCL permits a Maryland corporation to
include in its charter a provision limiting the liability of its directors and
officers to the corporation and its stockholders for money damages except for
liability resulting from (a) actual receipt of an improper benefit or profit in
money, property or services or (b) active and deliberate dishonesty established
by a final judgment as being material to the cause of action. The Charter
contains such a provision which eliminates such liability to the maximum extent
permitted by the MGCL. The Charter and Bylaws contain provisions which permit
the Company to indemnify its officers and directors to the extent permitted by
Maryland law and the Company has entered into indemnification agreements with
its officers and directors. The MGCL permits a corporation to indemnify its
present and former directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason
of their service in those or other capacities unless it is established that (a)
the act or omission of the director or officer was material to the matter
giving rise to the proceeding and (i) was committed in bad faith or (ii) was
the result of active and deliberate dishonesty, (b) the director or officer
actually received an improper personal benefit in money, property or services
or (c) in the case of any criminal proceeding, the director or officer had
reasonable cause to believe that the act or omission was unlawful. Such
indemnification also may be subject to certain limitations where claims under
securities laws violations are involved. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to the Company's
directors and officers pursuant to the foregoing provisions or otherwise, the
Company has been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In addition, indemnification may be limited by
state securities laws.
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Common Stock or
Preferred Stock. The Warrants may be issued independently or together with any
other Offered Securities offered by any Prospectus Supplement and may be
attached to or separate from such Offered Securities. Each series of Warrants
will be issued under a separate warrant agreement (each, a "Warrant Agreement")
to be entered into between the Company and a warrant agent specified in the
applicable Prospectus Supplement (the "Warrant Agent"). The Warrant Agent will
act solely as an agent of the Company in connection with the Warrants of such
series and will not assume any obligation or relationship of agency or trust
for or with any holders or beneficial owners of Warrants. The following sets
forth certain general terms and provisions of the Warrants offered hereby.
Further terms of the Warrants and the applicable Warrant Agreement will be set
forth in the applicable Prospectus Supplement.
The applicable Prospectus Supplement will describe the terms of the
Warrants in respect of which this Prospectus is being delivered, including,
where applicable, the following:
(1) the title of such Warrants;
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(2) the aggregate number of such Warrants;
(3) the price or prices at which such Warrants will be issued;
(4) the designation, number and terms of shares of Common Stock or
shares of Preferred Stock purchasable upon exercise of such
Warrants;
(5) the designation and terms of the other Offered Securities with
which such Warrants are issued and the number of such Warrants
issued with each such Offered Security;
(6) the date, if any, on and after which such Warrants and the
related Common Stock or Preferred Stock will be separately
transferable;
(7) the price at which each share of Common Stock or share of
Preferred Stock purchasable upon exercise of such Warrants may
be purchased;
(8) the date on which the right to exercise such Warrants shall
commence and the date on which such right shall expire;
(9) the minimum or maximum amount of such Warrants which may be
exercised at any one time;
(10) information with respect to book-entry procedures, if any;
(11) a discussion of certain Federal income tax considerations; and
(12) any other terms of such Warrants, including terms, procedures
and limitations relating to the exchange and exercise of such
Warrants.
FEDERAL INCOME TAX CONSIDERATIONS
The following summary of material Federal income tax considerations
regarding this Offering is based on current law, is for general information
only and is not tax advice. This discussion does not purport to deal with all
aspects of taxation that may be relevant to particular stockholders in light of
their personal investment or tax circumstances, or to certain types of
stockholders (including insurance companies, tax-exempt organizations,
financial institutions or broker-dealers, foreign corporations and persons who
are not citizens or residents of the United States) subject to special
treatment under the Federal income tax laws.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT HIS/HER OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM/HER OF THE PURCHASE,
OWNERSHIP AND SALE OF THE OFFERED SECURITIES AND OF THE COMPANY'S ELECTION TO
BE TAXED AS A REAL ESTATE INVESTMENT TRUST, INCLUDING THE FEDERAL, STATE,
LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND
ELECTION AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
General. The Company has elected to be taxed as a REIT, under
Sections 856 through 860 of the Code, from the Company's commencement of
operations in 1991. The Company believes that it is organized and operated in
such a manner as to qualify for taxation as a REIT under the Code and the
Company intends to continue to operate in such a manner, but no assurance can
be given that it will operate in a manner so as to remain qualified.
The REIT provisions of the Code are highly technical and complex. The
following sets forth the material aspects of the sections that govern the
Federal income tax treatment of a REIT and its stockholders. This summary
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is qualified in its entirety by the applicable Code provisions, rules and
regulations promulgated thereunder, and administrative and judicial
interpretations thereof. Gibson, Dunn & Crutcher LLP has acted as tax counsel
to the Company in connection with this Prospectus, but did not represent the
Company in connection with its initial qualification and election to be taxed
as a REIT.
In the opinion of Gibson, Dunn & Crutcher LLP, the Company is
organized in conformity with the requirements for qualification as a REIT and
its method of operation will enable it to meet the requirements for continued
qualification and taxation as a REIT under the Code. It must be emphasized
that this opinion is based on various assumptions and is conditioned upon
certain representations made by the Company as to factual matters. Moreover,
such qualification and taxation as a REIT depends upon the Company's ability to
meet, through actual annual operating results, distribution levels and
diversity of stock ownership, the various qualification tests imposed under the
Code discussed below, the results of which will not be reviewed by Gibson, Dunn
& Crutcher LLP. Accordingly, no assurance can be given that the actual results
of the Company's operations for any particular taxable year will satisfy such
requirements.
So long as the Company qualifies for taxation as a REIT, it generally
will not be subject to Federal corporate income taxes on its net income that is
currently distributed to stockholders. This treatment substantially eliminates
the "double taxation" (at the corporate and stockholder levels) that generally
results from investment in a corporation. However, the Company will be subject
to Federal income tax as follows. First, the Company will be taxed at regular
corporate rates on any undistributed real estate investment trust taxable
income, including undistributed net capital gains. Second, under certain
circumstances, the Company may be subject to the "alternative minimum tax" on
its items of tax preference. Third, if the Company has (i) net income from the
sale or other disposition of "foreclosure property" which is held primarily for
sale to customers in the ordinary course of business or (ii) other nonqualifying
income from foreclosure property, it will be subject to tax at the highest
corporate rate on such income. Fourth, if the Company has net income from
prohibited transactions (which are, in general, certain sales or other
dispositions of property held primarily for sale to customers in the ordinary
course of business other than foreclosure property), such income will be subject
to a 100% tax. Fifth, if the Company should fail to satisfy the 75% gross
income test or the 95% gross income test (as discussed below), but has
nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on an amount equal
to (a) the gross income attributable to the greater of the amount by which the
Company fails the 75% or 95% test multiplied by (b) a fraction intended to
reflect the Company's profitability. Sixth, if the Company should fail to
distribute during each calendar year at least the sum of (i) 85% of its real
estate investment trust ordinary income for such year, (ii) 95% of its real
estate investment trust capital gain net income for such year and (iii) any
undistributed taxable income from prior periods, the Company would be subject to
a 4% excise tax on the excess of such required distribution over the amounts
actually distributed. Seventh, with respect to an asset (a "Built-In Gain
Asset") acquired by the Company from a corporation which is or has been a C
corporation (i.e., generally a corporation subject to full corporate-level tax)
in a transaction in which the basis of the Built-In Gain Asset in the hands of
the Company is determined by reference to the basis of the asset in the hands of
the C corporation, if the Company recognizes gain on the disposition of such
asset during the ten year period (the "Recognition Period") beginning on the
date on which such asset was acquired by the Company, then, to the extent of the
Built-In Gain (i.e., the excess of (a) the fair market value of such asset over
(b) the Company's adjusted basis in such asset, determined as of the beginning
of the Recognition Period), such gain will be subject to tax at the highest
regular corporate tax pursuant to Internal Revenue Service ("IRS") regulations
that have not yet been promulgated. The results described above with respect to
the recognition of Built-In Gain assume that the Company will make an election
pursuant to IRS Notice 88-19.
Requirements for Qualification. The Code defines a REIT as a
corporation, trust or association (1) which is managed by one or more trustees
or directors; (2) the beneficial ownership of which is evidenced by
transferable shares, or by transferable certificates of beneficial interest;
(3) which would be taxable as a domestic corporation, but for Sections 856
through 859 of the Code; (4) which is neither a financial institution nor an
insurance company subject to certain provisions of the Code; (5) the beneficial
ownership of which is held by 100 or more persons; (6) during the last half of
each taxable year not more than 50% in value of the outstanding stock of which
is owned, directly or constructively, by five or fewer individuals (as defined
in the Code to include certain entities); and (7) which meets certain other
tests, described below, regarding the nature of its income and assets. The
Code
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provides that conditions (1) to (4), inclusive, must be met during the entire
taxable year and that condition (5) must be met during at least 335 days of a
taxable year of 12 months, or during a proportionate part of a taxable year of
less than 12 months. Conditions (5) and (6) do not apply until after the first
taxable year for which an election is made to be taxed as a REIT.
The Company has previously issued sufficient shares to allow it to
satisfy conditions (5) and (6). In addition, the Company's Articles of
Incorporation provide for restrictions regarding transfer of shares, which
restrictions are intended to assist the Company in continuing to satisfy the
share ownership requirements described in (5) and (6) above.
Income Tests. In order to maintain qualification as a REIT, the
Company annually must satisfy three gross income requirements. First, at least
75% of the Company's gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived directly or indirectly from
investments relating to real property or mortgages on real property (including
"rents from real property" and, in certain circumstances, interest) or from
certain types of temporary investments. Second, at least 95% of the Company's
gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived from such real property investments, dividends,
interest and gain from the sale or disposition of stock or securities (or from
any combination of the foregoing). Third, short-term gain from the sale or
other disposition of stock or securities, gain from prohibited transactions and
gain on the sale or other disposition of real property held for less than four
years (apart from involuntary conversions and sales of foreclosure property)
must represent less than 30% of the Company's gross income (including gross
income from prohibited transactions) for each taxable year.
Rents received by the Company will qualify as "rents from real
property" in satisfying the gross income requirements for a REIT described
above only if several conditions are met. First, the amount of rent must not
be based in whole or in part on the income or profits of any person. However,
an amount received or accrued generally will not be excluded from the term
"rents from real property" solely by reason of being based on a fixed
percentage or percentages of receipts or sales. (If a REIT receives or accrues
rent from a tenant that derives substantially all of its income with respect to
the property from the subleasing of substantially all such property, and a
portion of the tenant's sublease income would be treated as qualified rents if
it were received by the REIT, then the amounts received or accrued by the REIT
from the tenant will be treated as qualified rents to the same extent that the
amounts so received or accrued are attributable to qualified rents received by
the tenant.) Second, the Code provides that rents received from a tenant will
not qualify as "rents from real property" in satisfying the gross income tests
if the REIT, or an owner of 10% or more of the REIT, directly or constructively
owns 10% or more of such tenant (a "Related Party Tenant"). For purposes of
this test, the holdings of certain family members are aggregated. Third, if
rent attributable to personal property, leased in connection with a lease of
real property, is greater than 15% of the total rent received under the lease,
then the portion of rent attributable to such personal property will not
qualify as "rents from real property." Finally, for rents received to qualify
as "rents from real property," the REIT generally must not operate or manage
the property or furnish or render services to the tenants of such property,
other than through an independent contractor from whom the REIT derives no
revenue. The REIT may, however, directly perform certain services that are
"usually or customarily rendered" in connection with the rental of space for
occupancy only and are not otherwise considered "rendered to the occupant" of
the property. The Company does not and will not (i) charge rent for any
property that is based in whole or in part on the income or profits of any
person (except by reason of being based on a percentage of receipts or sales,
as described above), (ii) rent any property to a Related Party Tenant, (iii)
derive rental income attributable to personal property (other than personal
property leased in connection with the lease of real property, the amount of
which is less than 15% of the total rent received under the lease), or (iv)
perform services considered to be rendered to the occupant of the property,
other than through an independent contractor from whom the Company derives no
revenue.
The term "interest" generally does not include any amount received or
accrued (directly or indirectly) if the determination of such amount depends in
whole or in part on the income or profits of any person. However, an amount
received or accrued generally will not be excluded from the term "interest"
solely by reason of being based on a fixed percentage or percentages of
receipts or sales.
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Management, leasing and similar fees and other income from services do
not count toward satisfaction of either the 95% or the 75% gross income tests.
The Company receives management fee income from its property management
business. In the past, such management fee and other nonqualifying income
constituted less than 5% of the Company's gross income in any year, and the
Company anticipates that such nonqualifying income will continue to be less
than 5% of the Company's gross revenue in any year. The Company will continue
to monitor and manage the amount of such nonqualifying income in order to
comply with the 95% and 75% gross income tests.
If the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
such year if it is entitled to relief under certain provisions of the Code.
These relief provisions will be generally available if the Company's failure to
meet such test was due to reasonable cause and not due to willful neglect, the
Company attaches a schedule of the sources of its income to its return, and any
incorrect information on the schedule was not due to fraud with intent to evade
tax. It is not possible, however, to state whether in all circumstances the
Company would be entitled to the benefit of these relief provisions. As
discussed above in "Federal Income Tax Considerations-Taxation of the
Company-General," even if these relief provisions apply, a tax would be imposed
with respect to the excess net income.
Asset Tests. The Company, at the close of each quarter of its taxable
year, must also satisfy three tests relating to the nature of its assets.
First, at least 75% of the value of the Company's total assets must be
represented by real estate assets (including (i) its allocable shares of real
estate assets held by partnerships in which the Company owns an interest and
(ii) stock or debt instruments held for not more than one year purchased with
the proceeds of a stock offering or long-term (at least five years) debt
offering of the Company), cash, cash items and government securities. Second,
not more than 25% of the Company's total assets may be represented by
securities other than those in the 75% asset class. Third, of the investments
included in the 25% asset class, the value of any one issuer's securities owned
by the Company may not exceed 5% of the value of the Company's total assets and
the Company my not own more than 10% of any one issuer's outstanding voting
securities. The Company's investment in K&F Development Company is not a
qualifying asset for purposes of the 75% test. The Company expects, however,
that such investment will continue to represent less than 5% of the Company's
total assets and, together with any other non- qualifying assets, will continue
to represent less than 25% of the Company's total assets.
Annual Distribution Requirements. The Company, in order to qualify as
a REIT, is required to distribute dividends (other than capital gain dividends)
to its stockholders in an amount at least equal to (A) the sum of (i) 95% of
the Company's "real estate investment trust taxable income" (computed without
regard to the dividends paid deduction and the Company's net capital gain) and
(ii) 95% of the net income (after tax), if any, from foreclosure property,
minus (B) the sum of certain items of noncash income. In addition, if the
Company disposes of any Built-In Gain Asset during its Recognition Period, the
Company will be required, pursuant to IRS regulations which have not yet been
promulgated, to distribute at least 95% of the Built-In Gain (after tax), if
any, recognized on the disposition of such asset. Such distributions must be
paid in the taxable year to which they relate, or in the following taxable year
if declared before the Company timely files its tax return for such year and if
paid on or before the first regular dividend payment after such declaration.
To the extent that the Company does not distribute all of its net capital gain
or distributes at least 95%, but less than 100%, of its "real estate investment
trust taxable income," as adjusted, it will be subject to tax thereon at
regular ordinary and capital gain corporate tax rates. Furthermore, if the
Company should fail to distribute during each calendar year at least the sum of
(i) 85% of its ordinary income for such year, (ii) 95% of its real estate
investment trust capital gain income for such year, and (iii) any undistributed
taxable income from prior periods, the Company would be subject to a 4% excise
tax on the excess of such required distribution over the amounts actually
distributed. The Company intends to make timely distributions sufficient to
satisfy this annual distribution requirement.
It is possible that the Company, from time to time, may not have
sufficient cash or other liquid assets to meet the 95% distribution requirement
due to timing differences between (i) the actual receipt of income and actual
payment of deductible expenses and (ii) the inclusion of such income and
deduction of such expenses in arriving at taxable income of the Company. In
the event that such timing differences occur, in order to meet the 95%
23
<PAGE> 25
distribution requirement, the Company may find it necessary to arrange for
short-term, or possibly long-term, borrowings or to pay dividends in the form
of taxable stock dividends.
Under certain circumstances, the Company may be able to rectify a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to stockholders in a later year, which may be included in the
Company's deduction for dividends paid for the earlier year. Thus, the Company
may be able to avoid being taxed on amounts distributed as deficiency
dividends; however, the Company will be required to pay interest based upon the
amount of any deduction taken for deficiency dividends.
Failure to Qualify. If the Company fails to qualify for taxation as a
REIT in any taxable year, and the relief provisions do not apply, the Company
will be subject to tax (including any applicable alternative minimum tax) on
its taxable income at regular corporate rates. Distributions to stockholders
in any year in which the Company fails to qualify will not be deductible by the
Company nor will they be required to be made. In such event, to the extent of
current and accumulated earnings and profits, all distributions to stockholders
will be taxable as ordinary income, and, subject to certain limitations of the
Code, corporate distributees may be eligible for the dividends received
deduction. Unless entitled to relief under specific statutory provisions, the
Company will also be disqualified from taxation as a REIT for the four taxable
years following the year during which qualification was lost. It is not
possible to state whether in all circumstances the Company would be entitled to
such statutory relief. Failure to qualify for even one year could result in
the Company's incurring substantial indebtedness (to the extent that borrowings
are feasible) or liquidating substantial investments in order to pay the
resulting taxes.
TAXATION OF STOCKHOLDERS
Taxation of Taxable Domestic Stockholders. As long as the Company
qualifies as a REIT, distributions made to the Company's taxable domestic
stockholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taken into account by them as
ordinary income and will not be eligible for the dividends received deduction
for corporations. Distributions that are designated as capital gain dividends
will be taxed as long-term capital gains (to the extent they do not exceed the
Company's actual net capital gain for the taxable year) without regard to the
period for which the stockholder has held its stock. However, corporate
stockholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income. Distributions in excess of current and
accumulated earnings and profits will not be taxable to a stockholder to the
extent that they do not exceed the adjusted basis of the stockholder's shares,
but rather will reduce the adjusted basis of such shares. To the extent that
such distributions exceed the adjusted basis of a stockholder's shares they
will be included in income as long-term capital gain (or short-term capital
gain if the Shares have been held for one year or less) assuring the shares are
a capital asset in the hands of the stockholder. In addition, any dividend
declared by the Company in October, November or December of any year payable to
a stockholder of record on a specified date in any such month shall be treated
as both paid by the Company and received by the stockholder on December 31 of
such year, provided that the dividend is actually paid by the Company during
January of the following calendar year. Stockholders may not include in their
individual income tax returns any net operating losses or capital losses of the
Company.
In general, any loss upon a sale or exchange of shares by a
stockholder who has held such shares for six months or less (after applying
certain holding period rules) will be treated as a long-term capital loss to
the extent of distributions from the Company required to be treated by such
stockholder as long-term capital gain.
Taxation of Tax-Exempt Stockholders. In Revenue Ruling 66-106, 1966-1
C.B. 151, the IRS ruled that amounts distributed by a REIT to a tax-exempt
employees' pension trust did not constitute "unrelated business taxable income"
("UBTI"). Revenue rulings are interpretive in nature and subject to revocation
or modification by the IRS. However, based upon Revenue ruling 66-106 and the
analysis therein, distributions by the Company to a stockholder that is a
tax-exempt entity should also not constitute UBTI, provided that the tax-exempt
entity has not financed the acquisition of its shares with "acquisition
indebtedness" within the meaning of the Code and the shares are not otherwise
used in an unrelated trade or business of the tax-exempt entity.
24
<PAGE> 26
Taxation of Foreign Stockholders. The rules governing United States
Federal income taxation of nonresident alien individuals, foreign corporations,
foreign partnerships and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex, and no attempt will be made herein to provide more
than a summary of such rules. Prospective Non-U.S. Stockholders should consult
with their own tax advisors to determine the impact of federal, state and local
income tax laws with regard to an investment in shares, including any reporting
requirements.
Distributions by the Company that are not attributable to gain from
sales or exchanges by the Company of United States real property interests and
not designated by the Company as capital gain dividends will be treated as
dividends of ordinary income to the extent that they are made out of current or
accumulated earnings and profits of the Company. Such distributions,
ordinarily, will be subject to a withholding tax equal to 30% of the gross
amount of the distribution unless an applicable tax treaty reduces or
eliminates that tax. However, if income from the investment in the shares is
treated as effectively connected with the conduct by the Non-U.S. Stockholder
of a United States trade or business, the Non-U.S. Stockholder generally will
be subject to a tax at graduated rates in the same manner as U.S. Stockholders
are taxed with respect to such dividends (and may also be subject to the 30%
branch profits tax in the case of a stockholder that is a foreign corporation).
The Company withholds United States income tax at the rate of 30% on the gross
amount of any such dividends made to a Non-U.S. Stockholder unless (i) a lower
treaty rate applies or (ii) the Non-U.S. Stockholder files an IRS Form 4224
with the Company certifying that the investment to which the distribution
relates is effectively connected to a United States trade or business of such
Non-U.S. Stockholder. Lower treaty rates applicable to dividend income may not
necessarily apply to dividends from a REIT such as the Company, however.
Distributions in excess of current and accumulated earnings and profits of the
Company will not be taxable to a stockholder to the extent that they do not
exceed the adjusted basis of the stockholder's shares, but rather will reduce
the adjusted basis of such shares. To the extent that such distributions
exceed the adjusted basis of a Non-U.S. Stockholder's shares, they will give
rise to tax liability if the Non-U.S. Stockholder otherwise is subject to tax
on any gain from the sale or disposition of his shares in the Company (as
described below). If it cannot be determined at the time a distribution is
made whether or not such distribution will be in excess of current and
accumulated earnings and profits, the distributions will be subject to
withholding at the some rate applicable to dividends. However, amounts thus
withheld are refundable if it is subsequently determined that such distribution
was, in fact, in excess of current and accumulated earnings and profits of the
Company.
Distributions that are designated by the Company at the time of
distribution as capital gain dividends (other than those arising from the
disposition of a Untied States real property interest) generally will not be
subject to taxation, unless (i) investment in the shares is effectively
connected with the Non-U.S. Stockholder's United States trade or business, in
which case the Non-U.S. Stockholder will be subject to the same treatment as
U.S. Stockholders with respect to such gain (except that a stockholder that is
a foreign corporation may also be subject to the 30% branch profits tax), or
(ii) the Non-U.S. Stockholder is a nonresident alien individual who was present
in the United States for 183 days or more during the taxable year and has a
"tax home" in the United States, in which case the nonresident alien individual
will be subject to a 30% tax on the individual's capital gains.
For any year in which the Company qualifies as a REIT, distributions
that are attributable to gain from sales or exchanges by the Company of United
States real property interests will be taxed to a Non-U.S. Stockholder under
the provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, these distributions are taxed to a Non-U.S.
Stockholder as if such gain were effectively connected with a United States
trade or business. Non-U.S. Stockholders would thus be taxed at the same
capital gain rates applicable to U.S. Stockholders (subject to applicable
alternative minimum tax and a special alternative minimum tax in the case of
nonresident alien individuals). Also, distributions subject to FIRPTA may be
subject to a 30% branch profits tax in the hands of a foreign corporate
stockholder not entitled to treaty exemption. The Company is required by
applicable IRS regulations to withhold 34% of any distribution that could be
designated by the Company as a capital gain dividend. This amount is
creditable against the Non-U.S. Stockholder's FIRPTA tax liability.
Gain recognized by a Non-U.S. Stockholder upon a sale of shares
generally will not be taxed under FIRPTA if the Company is a
"domestically-controlled REIT," defined generally as a REIT in which at all
times during a specified testing period less than 50% in value of the stock was
held directly or indirectly by foreign
25
<PAGE> 27
persons. The Company currently is a "domestically-controlled REIT" and
anticipates continuing to be so classified, and therefore the sale of shares
should not be subject to taxation under FIRPTA. In addition, FIRPTA does not
apply to gain recognized upon a sale of shares of a class of the Company's
stock regularly traded on an established market by a Non-U.S. Stockholder
holding (during specified periods) 5% or less of such class of stock. However,
gain not subject to FIRPTA will be taxable to a Non-U.S. Stockholder if (i)
investment in the shares is effectively connected with the Non-U.S.
Stockholder's United States trade or business, in which case the Non-U.S.
Stockholder will be subject to the same treatment as U.S. Stockholders with
respect to such gain (a stockholder that is a foreign corporation may also be
subject to the 30% branch profits tax), or (ii) the Non-U.S. Stockholder is a
nonresident alien individual who was present in the United States for 183 days
or more during the taxable year and has a "tax home" in the United States, in
which case the nonresident alien individual will be subject to a 30% tax on the
individual's capital gains. If the gain on the sale of shares were to be
subject to taxation under FIRPTA, the Non-U.S. Stockholder will be subject to
the same treatment as U.S. Stockholders with respect to such gain (subject to
applicable alternative minimum tax and a special alternative minimum tax in the
case of nonresident alien individuals and, in the case of foreign corporations,
subject to the possible application of the 30% branch profits tax).
Backup Withholding. The Company will report to its domestic
stockholders and the IRS the amount of dividends paid during each calendar
year, and the amount of tax withheld, if any. Under the backup withholding
rules, a stockholder may be subject to backup withholding at the rate of 31%
with respect to dividends paid unless such holder (a) is a corporation or comes
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 stockholder that does not
provide the Company with his correct taxpayer identification number may also be
subject to penalties imposed by the IRS. Any amount paid as backup withholding
will be creditable against the stockholder's income tax liability. In
addition, the Company may be required to withhold a portion of capital gain
distributions to any stockholders who fail to certify their non-foreign status
to the Company. See "Taxation of Foreign Stockholders."
Offered Securities. Special federal income tax considerations with
respect to the Warrants, the Preferred Stock and the Debt Securities will be
described in the applicable Prospectus Supplement accompanying the issuance of
such Offered Securities.
OTHER TAX CONSEQUENCES
The Company and its stockholders may be subject to state or local
taxation in various state or local jurisdictions, including those in which it
or they transact business or reside. The state and local tax treatment of the
Company and its stockholders may not conform to the Federal income tax
consequences discussed above. Consequently, prospective stockholders should
consult their own tax advisors regarding the effect of state and local tax laws
on an investment in the Company.
PLAN OF DISTRIBUTION
The Company may sell the shares of Offered Securities to one or more
underwriters for public offering and sale by them or may sell the Offered
Securities to investors directly or through agents, which agents may be
affiliated with the Company. Direct sales to investors may be accomplished
through subscription offerings or concurrent rights offerings to the Company's
stockholders and direct placements to third parties. Any such underwriter or
agent involved in the offer and sale of the Offered Securities will be named in
the applicable Prospectus Supplement.
Sales of Offered Securities offered pursuant to any applicable
Prospectus Supplement may be effected from time to time in one or more
transactions on the New York Stock Exchange or in negotiated transactions or
any combination of such methods of sale, at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at other
negotiated prices.
26
<PAGE> 28
Underwriters may offer and sell Offered Securities at a fixed price or
prices which may be changed, at prices related to the prevailing market prices
at the time of sale, or at negotiated prices. The Company also may offer and
sell the Offered Securities in exchange for one or more of its then outstanding
issues of debt or convertible debt securities. The Company also may, from time
to time, authorize underwriters acting as the Company's agents to offer and
sell the Offered Securities upon the terms and conditions as set forth in the
applicable Prospectus Supplement. In connection with the sale of Offered
Securities, underwriters may be deemed to have received compensation from the
Company in the form of underwriting discounts or commissions and may also
receive commissions from purchasers of Offered Securities for whom they may act
as agent. Underwriters may sell Offered Securities to or through dealers, and
such dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agent.
Unless otherwise specified in the related Prospectus Supplement, each
series of Securities will be a new issue with no established trading market,
other than the Common Stock which is listed on the NYSE. Any shares of Common
Stock sold pursuant to a Prospectus Supplement will be listed on the NYSE,
subject to official notice of issuance. The Company may elect to list any
series of Debt Securities or Preferred Stock on an exchange, but is not
obligated to do so. It is possible that one or more underwriters may make a
market in a series of Offered Securities, but will not be obligated to do so
and may discontinue any market making at any time without notice. Therefore,
no assurance can be given as to the liquidity of, or the trading market for,
the Offered Securities.
Any underwriting compensation paid by the Company to underwriters or
agents in connection with the offering of Offered Securities, and any
discounts, concessions or commissions allowed by underwriters to participating
dealers, will be set forth in the applicable Prospectus Supplement.
Underwriters, dealers and agents participating in the distribution of the
Offered Securities may be deemed to be underwriters, and any discounts and
commissions received by them and any profit realized by them on resale of the
Offered Securities may be deemed to be underwriting discounts and commissions
under the Securities Act. Underwriters, dealers and agents may be entitled,
under agreements entered into with the Company, to indemnification against and
contribution toward certain civil liabilities, including liabilities under the
Securities Act. Any such indemnification agreements will be described in the
applicable Prospectus Supplement.
If so indicated in the applicable Prospectus Supplement, the Company
may authorize dealers acting as the Company's agents to solicit offers by
certain institutions to purchase Offered Securities from the Company at the
public offering price set forth in such Prospectus Supplement pursuant to
Delayed Delivery Contracts ("Contracts") providing for payment and delivery on
the date or dates stated in such Prospectus Supplement. Each Contract will be
for an amount not less than, and the aggregate principal amount of Offered
Securities sold pursuant to Contracts shall be not less nor more than, the
respective amounts stated in the applicable Prospectus Supplement.
Institutions with whom Contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions but
will in all cases be subject to the approval of the Company. Contracts will
not be subject to any conditions except (i) the purchase by an institution of
the Offered Securities covered by its Contracts shall not at the time of
delivery be prohibited under the laws of any jurisdiction in the United States
to which such institution is subject, and (ii) if the Offered Securities are
being sold to underwriters, the Company shall have sold to such underwriters
the total principal amount of the Offered Securities less the principal amount
thereof covered by Contracts.
EXPERTS
The consolidated financial statements and related financial statement
schedule of the Company appearing in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements and
related financial statement schedule are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
27
<PAGE> 29
With respect to the unaudited condensed consolidated interim financial
information for the three-month periods ended March 31, 1996 and March 31, 1995,
the three-month and six-month periods ended June 30, 1996 and June 30, 1995, and
the three-month and nine-month periods ended September 30, 1996 and September
30, 1995, incorporated by reference in this Prospectus, Ernst & Young LLP have
reported that they have applied limited procedures in accordance with
professional standards for a review of such information. However, their
separate reports, included in the Company's Quarterly Reports on Form 10-Q for
the quarters ended March 31, 1996, June 30, 1996, and September 30, 1996, and
incorporated herein by reference, state 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
considering the limited nature of the review procedures applied.
LEGAL MATTERS
The validity of the Offered Securities will be passed upon for the
Company by Gibson, Dunn & Crutcher LLP, Los Angeles, California. Gibson, Dunn
& Crutcher LLP will rely as to all matters of Maryland law, including the
legality of the Offered Securities, on the opinion of Ballard Spahr Andrews &
Ingersoll, Baltimore, Maryland.
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<PAGE> 30
=====================================================================
No person has been authorized to give any information
or to make any representations other than those
contained in this Prospectus and, if given or made,
such information or representations must not be
relied upon as having been authorized. This
Prospectus does not constitute an offer to sell or
the solicitation of an offer to buy any securities
other than the securities to which it relates or an
offer to sell or the solicitation of an offer to buy
such securities in any circumstances in which such
offer or solicitation is unlawful. Neither the
delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any
implication that there has been no change in the
affairs of the Company since the date hereof or that
the information contained herein is correct as of any
time subsequent to its date.
------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information . . . . . . . . . . . . . 2
Incorporation of Certain Documents
by Reference . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . 4
Tax Status of the Company . . . . . . . . . . . 4
Use of Proceeds . . . . . . . . . . . . . . . . 4
Earnings to Fixed Charges Ratios . . . . . . . 4
Description of Debt Securities . . . . . . . . 5
Description of Stock . . . . . . . . . . . . . 14
Description of Warrants . . . . . . . . . . . . 19
Federal Income Tax Considerations . . . . . . . 20
Plan of Distribution . . . . . . . . . . . . . 26
Experts . . . . . . . . . . . . . . . . . . . . 27
Legal Matters . . . . . . . . . . . . . . . . . 27
</TABLE>
=====================================================================
=====================================================================
$175,000,000
THE PRICE REIT, INC.
DEBT SECURITIES,
PREFERRED STOCK, COMMON STOCK
AND WARRANTS
-----------
PROSPECTUS
-----------
DECEMBER , 1996
=============================================================
<PAGE> 31
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The expenses, other than underwriting discounts and commissions in
connection with the offering of the securities being registered are set forth
below. All of such expenses are estimates, except the Securities Act
Registration fee.
<TABLE>
<S> <C>
Securities Act Registration fee . . . . . . . . . . . . . . . $ 50,485
Printing fees . . . . . . . . . . . . . . . . . . . . . . . . 50,000
Legal fees and expenses . . . . . . . . . . . . . . . . . . . 150,000
Accounting fees and expenses . . . . . . . . . . . . . . . . . 60,000
Blue sky fees and expenses . . . . . . . . . . . . . . . . . . 15,000
New York Stock Exchange listing fees . . . . . . . . . . . . . 20,000
Trustee expenses and fees . . . . . . . . . . . . . . . . . . 15,000
Miscellaneous expenses . . . . . . . . . . . . . . . . . . . . 39,515
-------
Total . . . . . . . . . . . . . . . . . . . . . . . $400,000
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Charter limits the liability of the Company's directors
to the Company and its stockholders for monetary damages for breach of
fiduciary duty to the fullest extent permitted from time to time by Maryland
law. Maryland law presently permits the liability of directors to a
corporation of its stockholders for money damages to be limited, except (i) to
the extent that it is proved that the director actually received an improper
benefit or profit or (ii) if a judgment or other final adjudication is entered
in a proceeding based on a finding that the director's action, or failure to
act, was the result of active and deliberate dishonesty and was material to the
cause of action adjudicated in the proceeding. This provision does not limit
the ability of the Company or its stockholders to obtain other relief, such as
an injunction or rescission.
The Company's Charter and Bylaws require the Company to indemnify its
directors, officers and certain other parties to the fullest extent permitted
from time to time by Maryland law. Maryland law permits a corporation to
indemnify its directors, officers and certain other parties against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason
of their service to or at the request of the corporation, unless it is
established that (a) the act or omission of the indemnified party was material
to the matter giving rise to the proceeding and (i) was committed in bad faith
or (ii) was the result of active and deliberate dishonesty, (b) the indemnified
party actually received an improper personal benefit, or (c) in the case of any
criminal proceeding, the indemnified party had reasonable cause to believe that
the act or omission was unlawful. Indemnification may be made against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by the director or officer in connection with the proceeding provided,
however, that if the proceeding is one by or in the right of the corporation,
indemnification may not be made with respect to any proceeding in which the
director or officer has been adjudged to be liable to the corporation. The
termination of any proceeding by conviction, or upon a plea of nolo contendere
or its equivalent, or an entry of any order of probation prior to judgment,
creates a rebuttable presumption that the director or officer did not meet the
requisite standard of conduct required for indemnification to be permitted. It
is the position of the SEC that indemnification of directors and officers for
liabilities arising under the Securities Act is against public policy and is
unenforceable pursuant to Section 14 of the Securities Act.
II-1
<PAGE> 32
ITEM 16. EXHIBITS
<TABLE>
<S> <C>
3.1 Articles of Incorporation, as amended, of the Registrant (incorporated by reference
to Exhibit 3.1 to Registrant's Report on
Form 10-K for the year ended December 31, 1993)
3.2 Amended and Restated Bylaws of the Registrant (incorporated by reference to
Exhibit 3.2 to Amendment No. 2 of the Registrant's
Registration Statement on Form S-11, dated August 3, 1993
(File No. 33-64344))
3.3 Articles of Amendment (incorporated by reference to Exhibit 3.1 to
Registrant's Report on Form 10-Q for the quarter ended June
30, 1995)
4.1 Form of Indenture (incorporated by reference to Exhibit 4.1 to Registrant's
Registration Statement on Form S-3, dated August 15, 1995 (File No. 33-95832))
4.2+ Form of Note
4.3+ Form of Warrant
4.4+ Form of Warrant Agreement
5.1+ Opinion of Gibson, Dunn & Crutcher LLP
8.1+ Opinion of Gibson, Dunn & Crutcher LLP relating to certain tax matters
12.1 Statement of Computation of Ratios (incorporated by reference to Exhibit
12.1 to Registrant's Report on Form 10-Q for the quarter ended September 30, 1996)
15.1 Letter Regarding Unaudited Interim Financial Statements
23.1 Consent of Ernst & Young LLP (included on page II-5)
23.2+ Consent of Gibson, Dunn & Crutcher LLP
24.1 Power of Attorney (included on page II-4)
25.1+ Statement of Eligibility of Trustee on Form T-I
</TABLE>
+ To be filed by Current Report on Form 8-K or by post-effective amendment.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the registration
statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a
fundamental change in the information set forth in this
registration statement; and
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in this registration statement or any material change to such
information in the registration statement;
provided however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in the periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered herein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
II-2
<PAGE> 33
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby further undertakes that, for the
purposes of determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby further undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby further undertakes to file an
application for the purpose of determining the eligibility of the Trustee to
act under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Act.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions described under Item 15 of
this registration statement, or otherwise (other than insurance), the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in such
Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the Securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in such Act
and will be governed by the final adjudication of such issue.
II-3
<PAGE> 34
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
undersigned Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Los Angeles, State of California, on
the 25th day of November, 1996.
THE PRICE REIT, INC.
By: /s/ Joseph K. Kornwasser
-------------------------------------
Joseph K. Kornwasser
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of The Price REIT, Inc., do
hereby constitute and appoint Joseph K. Kornwasser and George M. Jezek, and
each of them, our true and lawful attorneys-in-fact and agents, each with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that each of said attorneys-in-fact and agents, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Raymond E. Peet Chairman of the Board and Director November 25, 1996
----------------------------------------
Vice Admiral Raymond E. Peet
/s/ Joseph K. Kornwasser President, Chief Executive Officer and Director November 25, 1996
---------------------------------------- (Principal Executive Officer)
Joseph K. Kornwasser
/s/ George M. Jezek Executive Vice President, Chief Financial Officer, November 25, 1996
---------------------------------------- Treasurer, Secretary and Director (Principal
George M. Jezek Financial Officer and Principal Accounting Officer)
/s/ Roy P. Drachman Director November 25, 1996
----------------------------------------
Roy P. Drachman
/s/ William D. Jones Director November 25, 1996
----------------------------------------
William D. Jones
/s/ Keene Wolcott Director November 25, 1996
----------------------------------------
Keene Wolcott
Director November , 1996
----------------------------------------
Walter Weisman
</TABLE>
II-4
<PAGE> 35
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
<TABLE>
<S> <C>
3.1 Articles of Incorporation, as amended, of the Registrant (incorporated by reference
to Exhibit 3.1 to Registrant's Report on
Form 10-K for the year ended December 31, 1993)
3.2 Amended and Restated Bylaws of the Registrant (incorporated by reference to
Exhibit 3.2 to Amendment No. 2 of the Registrant's
Registration Statement on Form S-11, dated August 3, 1993
(File No. 33-64344))
3.3 Articles of Amendment (incorporated by reference to Exhibit 3.1 to
Registrant's Report on Form 10-Q for the quarter ended June
30, 1995)
4.1 Form of Indenture (incorporated by reference to Exhibit 4.1 to Registrant's
Registration Statement on Form S-3, dated August 15, 1995 (File No. 33-95832))
4.2+ Form of Note
4.3+ Form of Warrant
4.4+ Form of Warrant Agreement
5.1+ Opinion of Gibson, Dunn & Crutcher LLP
8.1+ Opinion of Gibson, Dunn & Crutcher LLP relating to certain tax matters
12.1 Statement of Computation of Ratios (incorporated by reference to Exhibit
12.1 to Registrant's Report on Form 10-Q for the quarter ended September 30, 1996)
15.1 Letter Regarding Unaudited Interim Financial Statements
23.1 Consent of Ernst & Young LLP
23.2+ Consent of Gibson, Dunn & Crutcher LLP
24.1 Power of Attorney (included on page II-4)
25.1+ Statement of Eligibility of Trustee on Form T-I
</TABLE>
- ---------------
+ To be filed by Current Report on Form 8-K or by post-effective amendment.
<PAGE> 1
EXHIBIT 15.1
LETTER REGARDING UNAUDITED INTERIM FINANCIAL INFORMATION
November 25, 1996
The Board of Directors and Stockholders
The Price REIT, Inc.
We are aware of the incorporation by reference in the Registration Statement
(Form S-3) of The Price REIT, Inc. for the registration of an aggregate
maximum total of $175,000,000 of its debt securities, preferred stock, common
stock, and warrants for the purchase of its preferred stock or common stock
of our reports dated April 19, 1996, July 26, 1996 and October 23, 1996
relating to the unaudited condensed consolidated interim financial statements
of The Price REIT, Inc. that are included in its Forms 10-Q for the quarters
ended March 31, 1996, June 30, 1996 and September 30, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our reports are not a
part of the registration statement prepared or certified by accountants within
the meaning of Section 7 or 11 of the Securities Act of 1933.
/s/ Ernst & Young LLP
San Diego, California
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
The Price REIT, Inc.
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of The Price REIT,
Inc. for the registration of an aggregate maximum total of $175,000,000 of its
debt securities, preferred stock, common stock, and warrants for the purchase of
its preferred stock or common stock and to the incorporation by reference
therein of our report dated January 31, 1996, with respect to the consolidated
financial statements and schedule of The Price REIT, Inc. included in its
Annual Report (Form 10-K) for the year ended December 31, 1995, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Diego, California
November 25, 1996
