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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 22, 1997
REGISTRATION NO. 333-35185
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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THE PRICE REIT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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<S> <C>
MARYLAND 52-1746059
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
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. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE PRICE(1)(2) FEE(7)(8)
- ---------------------------------------------------------------------------------------------------------------
Debt Securities(3)...........................
Preferred Stock, $0.01 par value per
share(4)................................... $400,000,000 (2) $400,000,000 $30,303.03
Common Stock, $0.01 par value per share(5)...
Warrants(6)..................................
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(Footnotes on following page)
Pursuant to Rule 429(b), the Prospectus contained in this registration
statement also relates to the Registrant's registration statement on Form S-3
(File No. 333-16787).
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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(1) In no event will the aggregate maximum offering price of all securities
issued pursuant to this Registration Statement exceed $400,000,000. 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) Pursuant to Rule 429(b) of the Rules and Regulations, registration fees
totaling $8,339.85 with respect to $27,521,500 of the securities registered
hereby were previously paid upon the registration of $175,000,000 of
securities (Registration No. 333-16787). Registration fees totaling
$82,569.24 with respect to $272,478,500 of the securities registered hereby
were previously paid upon the filing of this registration statement on
September 8, 1997. The applicable additional registration fee of $30,303.03
with respect to an additional $100,000,000 of securities registered hereby
is being paid herewith.
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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 SEPTEMBER 22, 1997
PROSPECTUS
$400,000,000
THE PRICE REIT, INC.
DEBT SECURITIES, PREFERRED STOCK,
COMMON STOCK AND WARRANTS
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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 $400,000,000 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, if the Common Stock is issued in series, the specific title and any
dividend, liquidation, redemption, conversion, voting and other rights
applicable to that series; 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.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is September , 1997.
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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, 1996;
b. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997
and June 30, 1997;
c. Current Reports on Form 8-K, filed January 21, 1997, April 16, 1997,
May 28, 1997, June 18, 1997, July 25, 1997, August 5, 1997 and
September 12, 1997 and Current Reports on Form 8-K/A, filed May 9, 1997
and July 24, 1997;
d. The following sections of the Company's Proxy Statement relating to its
Annual Meeting of Stockholders held on May 28, 1997: Election of
Directors, Securities Ownership of Certain Beneficial Owners and
Management, Executive Compensation and Other Information, Certain
Relationships and Related Transactions and Section 16(a) Beneficial
Ownership Reporting Compliance; and
e. 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.
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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.
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.
CERTAIN PERSONS PARTICIPATING IN AN OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE OFFERED
SECURITIES, INCLUDING STABILIZING AND SYNDICATE COVERING TRANSACTIONS AND THE
IMPOSITION OF A PENALTY BID. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF
DISTRIBUTION."
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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 June 30, 1997 (with
the exception of the Cerritos, California property which was sold on July 9,
1997), the Company owned or had interests in 31 properties, consisting of 26
power and community centers, one stand alone retail warehouse, two projects
under development and two undeveloped land parcels (the "Properties") located in
ten states containing approximately 6.1 million square feet of gross leasable
space with approximately 403 tenants. The overall occupancy rate of the power
and community centers was approximately 98.4% at June 30, 1997.
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, Costco, HomeBase, The Sports Authority,
Burlington Coat Factory, Target, Staples, T.J. Maxx, Circuit City, 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 five to ten 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 six-month period
ended June 30, 1997 and the years ended December 31, 1996, 1995, 1994, 1993 and
1992 were 2.36x, 2.31x, 3.17x, 4.73x, 3.07x and 2.28x, 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
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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 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;
(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
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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
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
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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 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).
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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 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
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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).
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
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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; (ix) 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; and (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 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
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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 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
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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.
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
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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 and applicable law. 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.
As of June 30, 1997, there were approximately 10,685,503 shares of Common
Stock issued and outstanding. Approximately 752,000 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.
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COMMON STOCK
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").
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. As noted above, however, in
the event that the Board of Directors determines to issue Common Stock in one or
more series, prior to issuance, the Board of Directors is authorized to fix the
number, designate and determine and establish various rights applicable to that
series.
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
ChaseMellon 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 of shares of such series. Notwithstanding the
foregoing, however, in no event shall the Preferred Stock be redeemable, except
in connection with the redemption
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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
(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
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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
Charter provides that 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
Charter states that 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. The Charter further states that 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, as provided in the Charter, is 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, the Charter states that any transfer of shares of stock that would
cause a Disqualifying Event shall be deemed void. If such provision is deemed
invalid, the Charter provides that 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 benefit of those persons to whom the
shares can ultimately be transferred without causing a Disqualifying Event.
According to the Charter, 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. An interest in the 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.
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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 provides that a Maryland corporation may not engage 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,
the MGCL provides that 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 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.
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LIMITATION OF LIABILITY AND INDEMNIFICATION
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 provides for the elimination of 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;
(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;
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(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 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.
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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, if the Company acquires such an asset.
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)
(the "5/50 Rule"); and (7) which meets certain other tests, described below,
regarding the nature of its income and assets. The Code 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 Charter provides 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.
For taxable years of the Company beginning on or after January 1, 1998, the
Company will be treated as satisfying the 5/50 Rule if it complies with demand
letter and recordkeeping requirements described below, and if it does not know,
and exercising reasonable diligence would not have known, whether it failed to
satisfy
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the 5/50 Rule. To monitor the Company's compliance with the share ownership
requirements, the Company is required to maintain records regarding the actual
ownership of its shares. To do so, the Company must demand written statements
each year from the record holders of certain percentages of its stock in which
the record holders are to disclose the actual owners of the shares (i.e., the
persons required to include in gross income the REIT dividends). A REIT with
2,000 or more record stockholders must demand statements from record holders of
5% or more of its shares, one with less than 2,000, but more than 200 record
stockholders must demand statements from record holders of 1% or more of the
shares, while a REIT with 200 or fewer record stockholders must demand
statements from record holders of 0.5% or more of the shares. A list of those
persons failing or refusing to comply with this demand must be maintained as
part of the Company's records. A stockholder who fails or refuses to comply with
the demand must submit a statement with its tax return disclosing the actual
ownership of the shares and certain other information. For taxable years of the
Company beginning prior to January 1, 1998, failure to comply with these
requirements could have resulted in the Company's disqualification as a REIT.
The Company believes that it has complied with these requirements for such
taxable years. For taxable years of the Company beginning on or after January 1,
1998, failure by the Company to comply with these demand and recordkeeping
requirements could result in the imposition of a penalty against the Company of
$25,000 (or more if the failure is due to intentional disregard of such
requirements).
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 (the "30% Test"). The 30% Test does not
apply to taxable years of the Company beginning on or after January 1, 1998.
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 (such impermissible
services, "Disqualified Services"). For taxable years of the Company beginning
on or after January 1, 1998, however, the performance of Disqualified Services
with respect to any property will not cause rents from property to fail
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to be treated as "rents from real property" if the amount received or accrued
for such Disqualified Services is less than, or equal to, one percent of all
amounts received or accrued, directly or indirectly, by the Company with respect
to such property. For purposes of the preceding sentence, the amount treated as
received for any Disqualified Services shall not be less than 150% of the direct
cost of the Company in furnishing or rendering the Disqualified Services. 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 Disqualified Services.
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.
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 may not own more than
10% of any one issuer's outstanding voting securities. The Company previously
owned all of the non-voting preferred stock of K&F Development Company, which
investment was not a qualifying asset for purposes of the 75% test. The Company
believes, however, that such investment represented less than 5% of the
Company's total assets, and the Company expects that any subsequent investment
in the value of any one issuer's securities will represent less than 5% of the
Company's total assets and that all 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
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addition, if the Company disposes of any Built-In Gain Asset that it may acquire
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% 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 used herein, the term
"Domestic Stockholder" means a holder of shares of Common Stock who (for United
States Federal income tax purposes) (i) is a citizen or resident of the United
States, (ii) is a corporation, partnership, or other entity created or organized
in or under the laws of the United States or of any political subdivision
thereof, (iii) is an estate, the income of which is subject to United States
Federal income taxation regardless of its source or (iv) is a trust, if a court
within the United States is able to exercise primary supervision over the
administration of the trust and one or more United States fiduciaries have the
authority to control all substantial decisions of the trust. 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
and that are out of current and accumulated earnings and profits will be taxed
as gains from the sale or exchange of a capital asset held for more than one
year (to the extent they do not exceed the Company's actual net capital gain for
the taxable
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year) without regard to the period for which the stockholder has held its stock.
However, Domestic Stockholders that are corporations 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
Domestic Stockholder to the extent that they do not exceed the adjusted basis of
such Domestic 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 Domestic Stockholder's shares they will be included in income as long-term
capital gain (or mid-term capital gain if the shares have been held for more
than one year and less than eighteen months, or short-term capital gain if the
Shares have been held for one year or less) provided the shares have been held
as a capital asset. 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.
Pursuant to the Taxpayer Relief Act of 1997 (the "Act"), for taxable years
of the Company that begin on or after January 1, 1998, the Company may elect to
retain and pay income tax on its net long-term capital gain attributable to such
taxable year. If the Company makes this election, its Domestic Stockholders will
be required to include in their income as long-term capital gain their
proportionate share of such amount so designated by the Company. A Domestic
Stockholder will be treated as having paid his or her share of the tax paid by
the Company in respect of such amount so designated by the Company, for which
such stockholder will be entitled to a credit or refund. Additionally, each
Domestic Stockholder's adjusted basis in the Common Stock will be increased by
the excess of the amount so includible in income over the tax deemed paid on
such amount. The Company must pay tax on its designated long-term capital gain
within 30 days of the close of any taxable year in which it designates long-term
capital gain pursuant to this rule, and it must mail a written notice of its
designation to its stockholders within 60 days of the close of the taxable year.
Distributions made by the Company and gain arising from the sale or
exchange by a Domestic Stockholder of shares of Common Stock will not be treated
as passive activity income, and, as a result, Domestic Stockholders will not be
able to apply any "passive losses" against such income or gain. Distributions
made by the Company (to the extent that they do not constitute a return of
capital) generally will be treated as investment income for purposes of
computing the investment income limitation. Gain arising from the sale or other
disposition of Common Stock (and distributions treated as such), however, will
not be treated as investment income unless a Domestic Stockholder so elects, in
which case such capital gains will be taxed at ordinary income rates.
Upon any sale or other disposition of Common Stock, a Domestic Stockholder
will recognize gain or loss for Federal income tax purposes in an amount equal
to the difference between (i) the amount of cash and the fair market value of
any property received on such sale or other disposition and (ii) the holder's
adjusted basis in such shares of Common Stock for tax purposes. Such gain or
loss will be capital gain or loss if the shares have been held by the Domestic
Stockholder as a capital asset, and will be mid-term or long-term gain or loss
if such shares have been held for more than one year or eighteen months,
respectively. In general, any loss recognized by a Domestic Stockholder upon the
sale or other disposition of shares of Common Stock that have been held for six
months or less (after applying certain holding period rules) will be treated as
a long-term capital loss, to the extent of capital gain dividends received by
such Domestic Stockholder from the Company which were required to be treated as
long-term capital gains.
As a result of other changes made by the Act to the Code, capital gains of
non-corporate taxpayers derived in respect of capital assets held for at least
one year are eligible for reduced rates of taxation. Although the Act did not
make conforming changes to other provisions of the Code, the Act authorizes the
IRS to issue regulations coordinating these capital gains provisions with other
rules involving the treatment of sales and exchanges by "pass-through" entities,
such as REITs and partnerships, and of sales and exchanges of interests therein.
Due to the complexity of these provisions and in the absence of the coordinating
regulations, each prospective investor should consult his or her own tax advisor
concerning the tax consequences to him or her of the changes made by the Act.
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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.
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 (or if an income tax treaty applies, is attributable to a U.S.
permanent establishment of the Non-U.S. Stockholder), 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 (or if an income tax treaty applies, is
attributable to a U.S. permanent establishment of the 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 same 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 United 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 (or if
an income tax treaty applies, is attributable to a U.S. permanent establishment
of the Non-U.S. Stockholder), 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.
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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 35% 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 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 (or if an income tax
treaty applies, is attributable to a U.S. permanent establishment of the
Non-U.S. Stockholder), 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.
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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.
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.
An Underwriter may engage in stabilizing transactions, syndicate covering
transactions and penalty bids in accordance with Rule 104 under the Securities
Act of 1934, as amended. Stabilizing transactions permit bids to purchase the
Common Stock so long as the stabilizing bids do not exceed a specified maximum.
Syndicate covering transactions involve purchases of the Common Stock in the
open market following completion of this offering to cover all or a portion of a
syndicate short position created by an Underwriter selling more shares of Common
Stock in connection with an offering than it is committed to purchase from the
Company. In addition, an Underwriter may impose "penalty bids" under contractual
arrangements between an Underwriter and dealers participating in this offering
whereby they may reclaim from a dealer participating in the offering the selling
concession with respect to shares of Common Stock that are distributed in this
offering but subsequently purchased for the account of an Underwriter in the
open market. Such
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stabilizing transactions, syndicate covering transactions and penalty bids may
result in the maintenance of the price of the Common Stock at a level above that
which might otherwise prevail in the open market. None of the transactions
described in this paragraph is required, and, if any are undertaken, they may be
discontinued at any time.
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, 1996, 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.
With respect to the unaudited condensed consolidated interim financial
information for the three-month periods ended March 31, 1997 and March 31, 1996
and the three-month and six-month periods ended June 30, 1997 and June 30, 1996,
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, 1997 and June 30, 1997, 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 report on
such information should be restricted considering the limited nature of the
review procedures applied. The independent auditors are not subject to the
liability provisions of Section 11 of the Securities Act of 1933 (the "Act") for
their report on the unaudited interim financial information because that report
is not a "report" or a "part" of a Registration Statement prepared or certified
by the auditors within the meaning of Sections 7 and 11 of the Act.
LEGAL MATTERS
The validity of the Debt Securities and Warrants and certain tax matters
described in "Federal Income Tax Considerations" will be passed upon for the
Company by Gibson, Dunn & Crutcher LLP, Los Angeles, California and the validity
of the Common Stock and Preferred Stock offered hereby will be passed upon for
the Company by Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland. Gibson,
Dunn & Crutcher LLP will rely as to certain matters of Maryland law, including
the legality of the Common Stock and Preferred Stock, on the opinion of Ballard
Spahr Andrews & Ingersoll.
29
<PAGE> 32
======================================================
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.................. 28
Experts............................... 29
Legal Matters......................... 29
</TABLE>
======================================================
======================================================
$400,000,000
THE PRICE REIT, INC.
DEBT SECURITIES,
PREFERRED STOCK, COMMON STOCK
AND WARRANTS
------------------------
PROSPECTUS
------------------------
SEPTEMBER , 1997
======================================================
<PAGE> 33
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................................. $112,872
Printing fees................................................... 80,000
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.......................................... 22,128
--------
Total................................................. $475,000
========
</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> 34
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 3l, 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 Indenture, dated as of October 27, 1995, between The Price REIT, Inc. and First
Trust of California, National Association, as trustee (incorporated by reference
to Exhibit 4.1 to Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995)
4.2+ Form of Note
4.3+ Form of Warrant
4.4+ Form of Warrant Agreement
5.1 Opinion of Gibson, Dunn & Crutcher LLP
5.2 Opinion of Ballard Spahr Andrews & Ingersoll
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 June 30, 1997)
15.1 Letter Regarding Unaudited Interim Financial Statements
23.1 Consent of Ernst & Young LLP
23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1)
23.3 Consent of Ballard Spahr Andrews & Ingersoll (included in Exhibit 5.2)
24.1* Power of Attorney
25.1 Statement of Eligibility of Trustee on Form T-1 (incorporated by reference to
Exhibit 25.1 to Registrant's Current Report in Form 8-K, dated October 25, 1995)
</TABLE>
- ---------------
+ To be filed by Current Report on Form 8-K or by post-effective amendment.
* Previously filed.
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 this registration
statement;
provided however, that subparagraphs (i) and (ii) do not apply if the
information required to be included in a posteffective 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.
II-2
<PAGE> 35
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such posteffective 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.
(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.
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> 36
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 Amendment
No. 1 to 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 19th day of September, 1997.
THE PRICE REIT, INC.
By: /s/ JOSEPH K. KORNWASSER
------------------------------------
Joseph K. Kornwasser
President and Chief Executive
Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------- -------------------
<C> <S> <C>
* Chairman of the Board and September 19, 1997
- --------------------------------------------- Director
Vice Admiral Raymond E. Peet
/s/ JOSEPH K. KORNWASSER President, Chief September 19, 1997
- --------------------------------------------- Executive Officer and
Joseph K. Kornwasser Director
(Principal Executive
Officer)
/s/ GEORGE M. JEZEK Executive Vice President, September 19, 1997
- --------------------------------------------- Chief Financial Officer,
George M. Jezek Treasurer, Secretary and
Director (Principal
Financial Officer and
Principal Accounting
Officer)
* Director September 19, 1997
- ---------------------------------------------
Roy P. Drachman
* Director September 19, 1997
- ---------------------------------------------
William D. Jones
* Director September 19, 1997
- ---------------------------------------------
Keene Wolcott
* Director September 19, 1997
- ---------------------------------------------
Walter Weisman
</TABLE>
*By: /s/ JOSEPH K. KORNWASSER
-------------------------------
Joseph K. Kornwasser
Attorney-in-fact
II-4
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -------------------------------------------------------------
<C> <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 Indenture, dated as of October 27, 1995, between The Price
REIT, Inc. and First Trust of California, National
Association, as trustee (incorporated by reference to Exhibit
4.1 to Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995).
4.2+ Form of Note.
4.3+ Form of Warrant.
4.4+ Form of Warrant Agreement.
5.1 Opinion of Gibson, Dunn & Crutcher LLP.
5.2 Opinion of Ballard Spahr Andrews & Ingersoll.
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 June 30, 1997).
15.1 Letter Regarding Unaudited Interim Financial Statements.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
5.1).
23.3 Consent of Ballard Spahr Andrews & Ingersoll (included in
Exhibit 5.2).
24.1* Power of Attorney.
25.1 Statement of Eligibility of Trustee on Form T-1 (incorporated
by reference to Exhibit 25.1 to Registrant's Current Report
on Form 8-K, dated October 25, 1995).
</TABLE>
- ---------------------------
+ To be filed by Current Report on Form 8-K or by post-effective amendment.
* Previously filed.
<PAGE> 1
[GIBSON, DUNN & CRUTCHER LLP LETTERHEAD]
EXHIBIT 5.1
September 22, 1997
(213) 229-7000 C 72752-00040
The Price REIT, Inc.
7979 Ivanhoe Avenue
Suite 524
La Jolla, California 92037
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We have acted as special counsel for The Price REIT, Inc., a Maryland
corporation (the "Company"), in connection with the preparation of the Company's
Registration Statement on Form S-3 (the "Registration Statement"), filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "Securities Act"), for the registration of the sale by the Company
from time to time of up to $400,000,000 maximum aggregate initial offering price
of (i) its debt securities ("Debt Securities"), (ii) shares of its Preferred
Stock, par value $.01 per share (the "Preferred Stock"), (iii) shares of its
Common Stock, par value $.01 per share (the "Common Stock") or (iv) Warrants to
purchase Debt Securities, Preferred Stock or Common Stock (the "Warrants"). The
Debt Securities, Preferred Stock, Common Stock and Warrants are herein
collectively referred to as the "Securities." We understand that the
Registration Statement provides that the Debt Securities and Preferred Stock may
be convertible into Preferred Stock, Common Stock or other securities or rights.
Terms not otherwise defined herein shall have the meanings given to them in the
Registration Statement.
We have examined originals or copies, certified or otherwise identified
to our satisfaction, of such documents, corporate records, certificates of
public officials and other
<PAGE> 2
GIBSON, DUNN & CRUTCHER LLP
The Price REIT, Inc.
September 22, 1997
Page 2
instruments and have made such inquiries as we have deemed appropriate for the
purpose of rendering this opinion.
We have assumed the genuineness of all signatures, the legal capacity
of natural persons, the authenticity of all documents submitted to us as
originals, and the conformity to original documents of all documents submitted
to us as copies and the authenticity of the originals of such copied documents.
On the basis of and in reliance upon the foregoing examination,
inquiries and assumptions, and such other matters of fact and upon the
examination of such other questions of law as we deem appropriate, and subject
to the assumptions, exceptions, qualifications and limitations contained herein,
we are of the opinion that:
(i) When the Company and a Trustee execute and deliver an Indenture and
the specific terms of a particular Debt Security have been duly authorized and
established in accordance with such Indenture, and such Debt Security has been
duly authorized, executed, authenticated, issued and delivered in accordance
with such Indenture, against payment therefor or upon exchange in accordance
with the applicable underwriting or other agreement, such Debt Security will
constitute the valid and binding obligation of the Company; and
(ii) When the Warrants shall have been issued and sold as described in
the Registration Statement, and if in an underwritten offering, in accordance
with the terms and conditions of the applicable underwriting agreement, and in a
manner contemplated in the Registration Statement, including the Prospectus
Supplement relating to any Warrants, such Warrants will constitute the valid and
binding obligations of the Company.
The opinions set forth above are subject to the following assumptions,
qualifications, limitations and exceptions being true and correct at or prior to
the time of the delivery of any such Security:
(a) the Board of Directors shall have duly established the terms of
such Security and duly authorized the issuance and sale of such Security and
such authorization shall not have been modified or rescinded;
(b) the Registration Statement shall have been declared effective and
such effectiveness shall not have been terminated or rescinded;
(c) the applicable Indentures, if any, shall have been duly authorized,
executed and delivered by the Company and the applicable Trustee and shall have
been
<PAGE> 3
GIBSON, DUNN & CRUTCHER LLP
The Price REIT, Inc.
September 22, 1997
Page 3
qualified under the Trust Indenture Act of 1939, as amended, and properly filed
as an exhibit to the Registration Statement;
(d) in the case of an Indenture, Debt Security or agreement pursuant to
which any Warrants are to be issued, there shall be no terms or provisions
contained therein which would have the effect, under applicable law, of
vitiating the validity and binding nature of such instrument; and
(e) there will not have occurred any change in law affecting the
validity or enforceability of such Security.
We have also assumed that none of the terms of any Security to be
established subsequent to the date hereof, nor the issuance and delivery of such
Security, nor the compliance by the Company with the terms of such Security will
violate any applicable law or will result in a violation of any provision of any
instrument or agreement then binding upon the Company, or any restriction
imposed by any court or governmental body having jurisdiction over the Company.
This opinion is limited to the present laws of the State of New York as
presently in effect, to the present federal laws of the United States and to the
present judicial interpretations thereof and to the facts as they presently
exist. We understand that you have received an opinion of Ballard Spahr Andrews
& Ingersoll with respect to the Common Stock, the Preferred Stock and certain
other matters.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our name in the Registration
Statement and the related Prospectus.
This opinion may be incorporated by reference into a registration
statement filed by the Company pursuant to Rule 462(b) under the Securities Act
and related to the Registration Statement.
<PAGE> 4
GIBSON, DUNN & CRUTCHER LLP
The Price REIT, Inc.
September 22, 1997
Page 4
This opinion has been delivered for your benefit in connection with the
transactions contemplated by the Registration Statement. Unless expressly
provided otherwise, it may not be relied upon by you for any other purpose, and
may not be copied or quoted in whole or in part without our prior express
written permission.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER LLP
-------------------------------
GIBSON, DUNN & CRUTCHER LLP
KMD:SJC:TDS
<PAGE> 1
EXHIBIT 5.2
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL]
September 22, 1997
The Price REIT Inc.
7979 Ivanhoe Avenue, Suite 524
La Jolla, California 92037
Re: The Price REIT Inc.
Ladies and Gentlemen:
We have served as Maryland counsel to The Price REIT Inc., a Maryland
corporation (the "Company"), in connection with certain matters of Maryland law
arising out of the Registration Statement on Form S-3 filed or to be filed by
the Company on or about the date hereof, with the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act") (the "Registration Statement"), relating to the offering by the Company
from time to time of (i) one or more series of Debt Securities (the "Debt
Securities"), (ii) one or more series of shares of Preferred Stock, par value
$.01 per share (the "Preferred Stock"), (iii) shares of Common Stock, par value
$.01 per share (the "Common Stock"), and (iv) Warrants to purchase Common Stock
or Preferred Stock (the "Warrants"), with a maximum aggregate initial public
offering price of up to $400,000,000. The Debt Securities, Preferred Stock,
Common Stock and Warrants are collectively referred to herein as the
"Securities."
In our capacity as Maryland counsel in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization and issuance of the
Securities, and for purposes of this opinion have assumed that such proceedings
will be timely completed in the manner presently proposed. In addition, we have
made such legal and factual examinations and inquiries, including an examina-
tion of originals or copies, certified or otherwise identified to our
satisfaction, of such documents, corporate records and instruments as we have
deemed necessary or appropriate for purposes of this opinion. Among such
documents are the Registration Statement, the Charter of the Company as of
record with the State Department
<PAGE> 2
BALLARD SPAHR ANDREWS & INGERSOLL
The Price REIT Inc.
September 22, 1997
Page 2
of Assessments and Taxation of Maryland (the "Charter"), the Amended and
Restated By-Laws of the Company and Resolutions adopted by the Board of
Directors of the Company in connection with the matters contemplated by the
Registration Statement.
In our examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, and the
conformity to authentic original documents of all documents submitted to us as
copies or facsimiles. In addition, we have assumed that the number of shares of
Preferred Stock and the number of shares of Common Stock to be offered and sold
under the Registration Statement, together with the number of shares thereof
issuable upon conversion of the Debt Securities and exercise of the Warrants,
will not, in the aggregate, exceed the number of shares thereof, respectively,
authorized in the Charter, less the number of shares thereof, respectively,
authorized and reserved for issuance and issued and outstanding on the date on
which the Securities are authorized, issued, delivered, converted or exercised,
as the case may be; and none of the terms of any of the Securities to be
established subsequent to the date hereof, nor the issuance and delivery
thereof, nor the compliance with the Company of the terms thereof, will violate
any applicable law or conflict with, or result in a breach or violation of the
Charter or By-Laws of the Company, or any instrument or agreement to which the
Company is a party or by which the Company is bound, or any order or decree of
any court, administrative or governmental body having jurisdiction over the
Company.
We have been furnished with, and have relied upon, Certificates of
Officers of the Company with respect to certain factual matters. In addition, we
have obtained and relied upon such certificates and assurances from public
officials as we have deemed necessary; and we have assumed that each certificate
submitted to us is true and correct, both when given and as of the date hereof.
Subject to the foregoing and the other matters set forth herein, it is
our opinion that, as of the date hereof:
1. The Company has the authority, pursuant to its Charter, to issue up
to 2,000,000 shares of Preferred Stock. When a series of Preferred Stock has
been duly established in accordance with the terms of the Company's Charter and
applicable law, and upon
<PAGE> 3
BALLARD SPAHR ANDREWS & INGERSOLL
The Price REIT Inc.
September 22, 1997
Page 3
adoption by the Board of Directors of the Company of a resolution in form and
content as required by applicable law, and upon issuance and delivery of and
payment for such shares in the manner contemplated by the Registration Statement
and/or the applicable Prospectus Supplement (as defined in the Registration
Statement) and by such resolution, such shares of such series of Preferred Stock
will be validly issued, fully paid and nonassessable.
2. The Company has the authority, pursuant to its Charter, to issue up
to 25,000,000 shares of Common Stock. Upon adoption by the Board of Directors of
the Company of a resolution in form and content as required by applicable law,
and upon issuance and delivery of and payment for such shares in the manner
contemplated by the Registration Statement and/or the applicable Prospectus
Supplement and by such resolution, such shares of Common Stock will be validly
issued, fully paid and nonassessable.
We consent to your filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the prospectus included therein.
The foregoing opinions are limited to the laws of the State of Maryland
and we do not express any opinion herein concerning any other law.
We assume no obligation to supplement this opinion any applicable law
changes after the date hereof or if we become aware of any fact that might
change the opinions expressed herein after the date hereof.
This opinion has been delivered for your benefit in connection with the
transactions contemplated by the Registration Statement. Unless expressly
provided otherwise, it may not be relied upon for any other purpose, and may not
be copied or quoted in whole or in part without our prior express written
permission.
Very truly yours,
/s/ BALLARD SPAHR ANDREWS & INGERSOLL
-------------------------------------
Ballard Spahr Andrews & Ingersoll
<PAGE> 1
Exhibit 15.1 Letter Regarding Unaudited Interim Financial Information
September 22, 1997
The Board of Directors
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 $400,000,000 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 30, 1997 and July 23, 1997 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, 1997 and June 30,
1997.
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
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 $400,000,000 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 22, 1997, 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, 1996, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
San Diego, California
September 22, 1997
