As filed with the Securities and Exchange Commission on July 31, 1997
Registration No. 333-_____
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
_______________________
KRANZCO REALTY TRUST
(Exact name of registrant as specified in its declaration of trust)
Maryland 23-2691327
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
128 Fayette Street
Conshohocken, Pennsylvania 19428
(610) 941-9292
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
_______________________
Norman M. Kranzdorf
Kranzco Realty Trust
128 Fayette Street
Conshohocken, Pennsylvania 19428
(610) 941-9292
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
_____________________
Copies to:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attention: Alan S. Pearce, Esq.
Eric I. Cohen, Esq.
______________________
Approximate date of commencement of proposed sale to the public: From
time to time after the effective date of this Registration Statement as
determined by market conditions.
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, check the following box and list the Securities Act
registration 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
Title of Each Proposed Proposed
Class of Sec- Amount Maximum Maximum Amount
urities to be to be Re- Offering Price Offering of Regis-
Registered (1) gistered (2) Per Unit (2)(3) Price (2)(3) tration Fee
Debt Securi-
ties (4)
Preferred shares
of Beneficial
Interest, $.01
par value per
share (5) (10) (10) (10)
Common Shares
of Beneficial
Interest, $.01
par value per
share (6)
Warrants (7)
Rights (8)
Total (9) $100,000,000 $100,000,000 $30,303(11)
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act 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.
(Footnotes on next page)
<PAGE>
_____________________________
(Footnotes for previous page)
(1) This Registration Statement also covers Debt Securities, Preferred Shares,
Common Shares, Warrants or Rights which may be issued by the Registrant
under delayed delivery contracts pursuant to which the counterparty may be
required to purchase such securities.
(2) In U.S. dollars or the equivalent thereof denominated in one or more
foreign currencies or units of two or more foreign currencies or composite
currencies (such as European Currency Units).
(3) Estimated solely for purposes of calculating the registration fee. No
separate consideration will be received for Preferred Shares or Common
Shares that are issued upon conversion of Debt Securities or Preferred
Shares or upon exercise of the Warrants registered hereunder, as the case
may be. Similarly, no separate consideration will be received for Debt
Securities that are issued upon the exercise of Warrants registered
hereunder.
(4) Subject to note (9) below, there is being registered hereunder an
indeterminate principal amount of Debt Securities. If any Debt Securities
are being issued at an original issue discount, then the offering price
shall be in such greater principal amount as shall result in an aggregated
initial offering price not to exceed $100,000,000 less the dollar amount
of any securities previously issued hereunder.
(5) Subject to note (9) below, there is being registered hereunder an
indeterminate number of Preferred Shares as may be sold, from time to
time, by the Registrant. There is also being registered hereunder an
indeterminate number of Preferred Shares as shall be issuable upon
conversion or redemption of Debt Securities registered hereby or upon
exercise of Warrants registered hereby.
(6) Subject to note (9) below, there is being registered hereunder an
indeterminate number of Common Shares as may be sold, from time to time,
by the Registrant. There is also being registered hereunder an
indeterminate number of Common Shares as shall be issuable upon conversion
or redemption of Debt Securities or Preferred Shares registered hereby or
upon exercise of Warrants or Rights registered hereby.
(7) Subject to note (9) below, there are being registered hereunder an
indeterminate amount and number of Warrants, representing rights to
purchase Debt Securities, Preferred Shares or Common Shares registered
hereby.
(8) Subject to note (9) below, there is being registered hereunder an
indeterminate number of Rights representing rights to purchase Common
Shares registered hereby.
(9) In no event will the aggregate initial offering price of all securities
issued from time to time pursuant to this Registration Statement exceed
$100,000,000. Any securities registered hereunder may be sold separately
or as units with other securities registered hereunder.
(10) Omitted pursuant to General Instruction II.D of Form S-3 under the
Securities Act of 1933, as amended.
(11) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act of 1933, as amended.
<PAGE>
PROSPECTUS SUBJECT TO COMPLETION
_________ PRELIMINARY PROSPECTUS DATED JULY 31, 1997
KRANZCO REALTY TRUST
$100,000,000
Debt Securities, Preferred Shares,
Common Shares, Warrants and Rights
Kranzco Realty Trust (the "Company") may from time to time offer in one or
more series its (i) unsecured debt securities, which may be either senior debt
securities ("Senior Securities") or subordinated debt securities ("Subordinated
Securities," and together with Senior Securities, the "Debt Securities"),
(ii) preferred shares of beneficial interest, par value $.01 per share
("Preferred Shares"), (iii) common shares of beneficial interest, par value
$.01 per share ("Common Shares"), (iv) warrants to purchase Debt Securities,
Preferred Shares or Common Shares (collectively, "Warrants"), or (v) rights to
purchase Common Shares ("Rights"), with an aggregate initial public offering
price of up to $100,000,000 on terms to be determined at the time of offering.
Debt Securities, Preferred Shares, Common Shares, Warrants and Rights
(collectively, the "Offered Securities") may be offered, separately or
together, in separate series in amounts, at prices and on terms to be set forth
in a supplement to this Prospectus (a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Debt
Securities, the specific title, aggregate principal amount, ranking, currency,
form (which may be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of the Company or
repayment at the option of the holder, terms for sinking fund payments, terms
for conversion into Preferred Shares or Common Shares, certain covenants, other
terms and conditions, and the initial public offering price; (ii) in the case
of Preferred Shares, the number, specific title and stated value, any
distribution, liquidation, redemption, conversion, voting and other terms and
conditions, and the initial public offering price; (iii) in the case of Common
Shares, any initial public offering price; (iv) in the case of Warrants, the
number and terms thereof, the designation and the number of securities issuable
upon their exercise, the exercise price, the terms of the offering and sale
thereof and, where applicable, the duration and detachability thereof; and (v)
in the case of Rights, the duration, exercise price and transferability
thereof. In addition, such specific terms may include limitations on direct or
beneficial ownership and restrictions on transfer of certain types of 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 tax
purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Offered
Securities covered by such Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated
from time to time by 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 series of Offered Securities.
____________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
_____________________
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
_____________________
The date of this Prospectus is _______, 1997.
<PAGE>
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 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 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. 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. In addition, the Company's Common
Shares and 9.75% Series B-1 Cumulative Convertible Preferred Shares of
Beneficial Interest are 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 document 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 or to previous filings made by the Company with the
Commission, 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, the previous filings made by the Company with the
Commission and the exhibits and schedules thereto, which may be obtained from
the Commission (i) at its principal office in Washington, D.C., upon payment of
the fees prescribed by the Commission or (ii) by consulting the Commission's
Web site at the address of http://www.sec.gov.
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:
1. The Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
2. The Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997.
3. The Company's Current Report on Form 8-K dated February 27, 1997,
filed March 14, 1997, as amended by Form 8-K/A dated May 6, 1997, filed
May 8, 1997.
4. The description of the Company's Common Shares contained in the
Registration Statement on Form S-11 (No. 33-49434), and the documents
incorporated therein by reference, as amended by Amendment No. 1, filed
with the Commission on October 16, 1992, Amendment No. 2, filed with the
Commission on November 4, 1992 and Amendment No. 3, filed with the
Commission on November 10, 1992, dated November 10, 1992.
5. The description of the Company's Series A-1 Preferred Shares (as
defined below), contained in the Registration Statement on Form S-4 (No.
333-18249), and the documents incorporated therein by reference, as
amended by Amendment No. 1, filed with the Commission on January 29, 1997.
6. The description of the Company's Series B-1 Preferred Shares (as
defined below) contained in the Registration Statement on Form 8-A (No. 1-
11478), and the documents incorporated therein by reference, as amended by
Amendment No. 1, filed with the Commission on June 2, 1997.
7. The description of the Company's Series B-2 Preferred Shares and
Series C Preferred Shares (each, as defined below), contained in the
Company's Current Report on Form 8-K dated February 27, 1997.
8. All other reports filed by the Company pursuant to Section 13(a)
or 15(d) of the Exchange Act since December 31, 1996.
All reports and other 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 a part hereof from the date of filing such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein (or in 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 to whom this Prospectus is delivered, upon
written or oral request. Requests should be directed to Kranzco Realty Trust,
Attention: Robert H. Dennis, 128 Fayette Street, Conshohocken, Pennsylvania
19428 (Telephone Number: (610) 941-9292).
THE COMPANY
Kranzco Realty Trust is a self-administered and self-managed equity real
estate investment trust in the business of owning, managing, operating,
leasing, acquiring and expanding neighborhood and community shopping centers.
The Company owns and operates 54 neighborhood and community shopping centers
and free-standing properties aggregating approximately 7.0 million square feet
of gross leasable area located in Arizona, Connecticut, Georgia, Kentucky,
Maryland, Massachusetts, Michigan, Minnesota, Mississippi, New Jersey, New
York, North Carolina, Pennsylvania, Rhode Island, South Carolina and Virginia.
The Company's primary business objective is to achieve growth in its funds
from operations by enhancing the operating performance of its properties and
the value of its portfolio, and through selective acquisitions. The Company's
operating strategies are to: (i) focus on the neighborhood and community
shopping center business; (ii) actively manage its properties (in a manner
consistent with the REIT tax rules) for long term growth in funds from
operations and capital appreciation; (iii) increase occupancy by capitalizing
on management's reputation and long-standing relationships with national and
regional tenants and extensive experience in marketing to local tenants, as
well as the negotiating leverage inherent in a large portfolio of properties;
(iv) maintain, renovate, expand and reconfigure its properties; (v) optimize
the mix of tenants in each shopping center as that center's lease expiration
schedule, physical configuration, changing competitive position and trade area
dictate; (vi) develop or ground lease outparcels or expansion areas existing at
many of the Properties for use as restaurants, banks, auto centers, cinemas or
other facilities; and (vii) benefit from economies of scale by spreading
overhead expenses over a larger asset base.
The Company's acquisition strategy is to acquire properties which have
been over-leveraged or need replacement anchor stores, or where improvements to
the properties and the leasing expertise and reputation of the Company's
management in the shopping center industry can enhance value.
The Company was formed on June 17, 1992 as a Maryland real estate
investment trust. The Company's executive offices are located at 128 Fayette
Street, Conshohocken, Pennsylvania 19428, and its telephone number is (610)
941-9292.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the historical ratios of earnings to fixed
charges for the Company for the periods indicated and for the predecessors to
the Company, Kranzco Controlled Properties, for the period January 1, 1992 to
November 18, 1992:
KRANZCO
CONTROLLED
KRANZCO REALTY TRUST PROPERTIES
___________________________________________________________________ __________
For the 12 Months Nov. 19, Jan. 1,
Three Months Ended Dec. 31, 1992- 1992-
Ended Dec. 31, Nov. 18,
March 31, 1997 1996 1995 1994 1993 1992 1992
______________ ____ ____ ____ ____ ________ ________
Ratio of
Earnings to
Fixed Charges 1.37 1.41(1) 1.50 1.72 1.99 1.73 1.01
==== ==== ==== ==== ==== ==== ====
_______________
(1) Excludes $11,052,000 extraordinary loss on refinancing.
For purposes of computing the ratio of earnings to fixed charges: (a)
earnings have been based on income (loss) from continuing operations before
fixed charges (exclusive of interest capitalized) and (b) fixed charges consist
of interest and amortization of deferred financing costs (including amounts
capitalized) and distributions on the Series A-1 Preferred Shares, the Series
B-1 Preferred Shares, the Series B-2 Preferred Shares and the Series C
Preferred Shares (each, as defined below).
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Offered Securities
for general corporate purposes, which may include the acquisition of shopping
centers as suitable opportunities arise, the expansion and improvement of
certain properties owned or to be owned by the Company, the repayment of
certain indebtedness outstanding at such time, and working capital.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Debt Securities to which any Prospectus Supplement may relate. The
particular terms of the Debt Securities being offered and the extent to which
such general provisions may apply will be described in a Prospectus Supplement
relating to such Debt Securities.
The Senior Securities are to be issued under an Indenture, as amended or
supplemented from time to time (the "Senior Securities Indenture"), between the
Company and a trustee to be selected by the Company (the "Senior Securities
Trustee") and the Subordinated Securities are to be issued under an Indenture,
as amended or supplemented from time to time (the "Subordinated Securities
Indenture"), between the Company and a trustee to be selected by the Company
(the "Subordinated Securities Trustee"). The Senior Securities Indenture and
the Subordinated Securities Indenture are referred to herein individually as
the "Indenture" and collectively as the "Indentures," and the Senior Securities
Trustee and the Subordinated Securities Trustee are referred to herein
individually as the "Trustee" and collectively as the "Trustees." A form of
the Senior Securities Indenture and a form of the Subordinated Securities
Indenture will be filed as exhibits to the Registration Statement of which this
Prospectus is a part and will be available for inspection at the corporate
trust offices of the respective Trustees or as described above under "Available
Information." The Indentures will be subject to and governed by the Trust
Indenture Act of 1939, as amended (the "TIA"). The description of the
Indentures set forth below assumes that the Company has entered into the
Indentures. The Company will execute the applicable Indenture when and if the
Company issues Debt Securities. The statements made hereunder relating to the
Indentures and the Debt Securities to be issued thereunder 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
Indentures and such Debt Securities.
Unless otherwise specified, all capitalized terms used but not defined
herein shall have the meanings set forth in the Indentures.
General
The Debt Securities will be direct, unsecured obligations of the Company.
Senior Securities will rank pari passu with certain other senior debt of the
Company that may be outstanding from time to time, and will rank senior to all
Subordinated Securities that may be outstanding from time to time.
Subordinated Securities will be subordinated in right of payment to the prior
payment in full of the Senior Debt of the Company, as described under
"Subordination."
Each Indenture provides that the Debt Securities may be issued without
limit as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Trustees of 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.
Each 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 either Indenture may resign or be removed with respect to one or
more series of Debt Securities, and a successor Trustee shall be appointed by
the Company, by or pursuant to a resolution adopted by the Board of Trustees,
to act with respect to such series. In the event that two or more persons are
acting as Trustee with respect to different series of Debt Securities, each
such Trustee shall be a Trustee of a trust under the applicable Indenture
separate and apart from the trust administered by any other Trustee thereunder,
and, except as otherwise indicated herein or therein, any action described
herein or therein 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 applicable Indenture.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities;
(2) the classification of such Debt Securities as Senior Securities
or Subordinated Securities;
(3) the aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(4) 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 Shares
or Preferred Shares, or the method by which any such portion
shall be determined;
(5) if convertible, in connection with the preservation of the
Company's status as a REIT, any applicable limitations on the
ownership or transferability of the Common Shares or Preferred
Shares into which such Debt Securities are convertible;
(6) the date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be
payable;
(7) 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;
(8) 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;
(9) the place or places where the principal of (and premium or Make-
Whole Amount, if any) and interest and Additional Amounts, if
any, on such Debt Securities will be payable, such Debt
Securities may be surrendered for conversion or registration of
transfer or exchange and notices or demands to or upon the
Company in respect of such Debt Securities and the applicable
Indenture may be served;
(10) the period or periods within which, the price or prices
(including premium or Make-Whole Amount, if any) at which and
the terms and conditions upon which such Debt Securities may be
redeemed, in whole or in part, at the option of the Company, if
the Company is to have such an option;
(11) the obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or
analogous provision or at the option of a Holder thereof, and
the period or periods within which, the price or prices at which
and the terms and conditions upon which such Debt Securities
will be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation;
(12) if other than U.S. dollars, the currency or currencies in which
such Debt Securities are denominated and payable, which may be a
foreign currency or units of two or more foreign currencies or a
composite currency or currencies, and the terms and conditions
relating thereto;
(13) whether the amount of payments of principal of (and premium or
Make-Whole Amount, if any) or interest, if any, on such Debt
Securities may be determined with reference to an index, formula
or other method (which index, formula or other 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;
(14) whether such Debt Securities will be issued in the form of one
or more global securities and whether such global securities are
to be issuable in a temporary global form or permanent global
form;
(15) any additions to, modifications of or deletions from the terms
of such Debt Securities with respect to the Events of Default or
covenants set forth in the applicable Indenture;
(16) whether the principal of (and premium or Make-Whole Amount, if
any) or interest or Additional Amounts, if any, on such Debt
Securities are to be payable, at the election of the Company or
a Holder, in one or more currencies other than that in which
such Debt Securities are denominated or stated to be payable,
the period or periods within which, and the terms and conditions
upon which, such election may be made, and the time and manner
of, and identity of the exchange rate agent with responsibility
for, determining the exchange rate between the currency or
currencies in which such Debt Securities are denominated or
stated to be payable and the currency or currencies in which
such Debt Securities are to be so payable;
(17) whether such Debt Securities will be issued in certificated or
book-entry form;
(18) 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 the terms and
conditions relating thereto;
(19) the applicability, if any, of the defeasance and covenant
defeasance provisions of the applicable Indenture;
(20) if such Debt Securities are to be issued upon the exercise of
Warrants, the time, manner and place for such Debt Securities to
be authenticated and delivered;
(21) the terms, if any, upon which such Debt Securities may be
convertible into Common Shares or Preferred Shares and the terms
and conditions upon which such conversion will be effected,
including, without limitation, the initial conversion price or
rate and the conversion period;
(22) whether and under what circumstances the Company will pay
Additional Amounts as contemplated in the applicable 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;
(23) the name of the applicable Trustee and the address of its
corporate trust office; and
(24) any other terms of such Debt Securities not inconsistent with
the provisions of the applicable Indenture.
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") or that the principal amount thereof
payable at their stated maturity may be more or less than the principal face
amount thereof at original issuance ("Indexed Securities"). Special U.S.
federal income tax, accounting and other considerations applicable to Original
Issue Discount Securities will be described in the applicable Prospectus
Supplement.
Except as set forth below under "Certain Covenants-Senior Securities
Indenture Limitations on Incurrence of Debt," neither Indenture contains any
other provisions that would limit the ability of the Company to incur
indebtedness or that would afford Holders of Debt Securities protection in the
event of a highly leveraged or similar transaction involving the Company or in
the event of a change of control. However, restrictions on ownership and
transfers of the Company's Common Shares and Preferred Shares are designed to
preserve its status as a REIT and, therefore, may act to prevent or hinder a
change of control. See "Description of Preferred Shares" and "Description of
Common Shares."
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. Unless otherwise described in the applicable
Prospectus Supplement, the Debt Securities of any series issued in bearer form
will be issuable in denominations of $5,000.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium or Make-Whole Amount, if any) and interest on any
series of Debt Securities will be payable at an office or agency established by
the Company in accordance with the Indenture, 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.
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
applicable 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 applicable Indenture.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the applicable Trustee or at
an office or agency established by the Company in accordance with the
Indenture. In addition, subject to certain limitations imposed upon Debt
Securities issued in book-entry form, the Debt Securities of any series may be
surrendered for exchange or registration of transfer thereof at the corporate
trust office of the applicable Trustee or at an office or agency established by
the Company in accordance with the Indenture. Every Debt Security surrendered
for registration of transfer or exchange shall be duly endorsed or accompanied
by a written instrument of transfer. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If the applicable Prospectus
Supplement refers to any transfer agent (in addition to the Trustee) initially
designated by the Company with respect to any series of Debt Securities, the
Company may at any time rescind the designation of any such transfer agent or
approve a change in the location through which any such transfer agent acts,
except that the Company will be required to maintain a transfer agent in each
Place of Payment for such series. The Company may at any time designate
additional transfer agents with respect to any series of Debt Securities.
Neither the Company nor any Trustee shall be required to (i) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before any selection of
Debt Securities of that series to be redeemed and ending at the close of
business on the day of mailing of the relevant notice of redemption; (ii)
register the transfer of or exchange any Debt Security, or portion thereof,
called for redemption, except the unredeemed portion of any Debt Security being
redeemed in part; or (iii) issue, register the transfer of or exchange any Debt
Security which has been surrendered for repayment at the option of the Holder,
except the portion, if any, of such Debt Security not to be so repaid.
Certain Covenants
Senior Securities Indenture Limitations on Incurrence of Debt. The
Company will not, and will not permit any Subsidiary to, incur any Debt (as
defined below) if, immediately after giving effect to the incurrence of such
additional Debt and the application of the proceeds thereof, the aggregate
principal amount of all outstanding Debt of the Company and its Subsidiaries on
a consolidated basis determined in accordance with generally accepted
accounting principles is greater than 75% of the sum of (without duplication)
(i) the Company's Undepreciated Real Estate Assets (as defined below) as of the
end of the calendar quarter covered in the Company's Annual Report on Form 10-K
or Quarterly Report on Form 10-Q, as the case may be, most recently filed with
the Commission (or, if such filing is not permitted under the Exchange Act,
with the Trustee) prior to the incurrence of such additional Debt and (ii) the
purchase price of any real estate assets or mortgages receivable acquired, and
the amount of any securities offering proceeds received (to the extent that
such proceeds were not used to acquire real estate assets or mortgages
receivable or used to reduce Debt), by the Company or any Subsidiary since the
end of such calendar quarter, including those proceeds obtained in connection
with the incurrence of such additional Debt.
In addition to the foregoing limitation on the incurrence of Debt, the
Company will not, and will not permit any Subsidiary to, incur any Debt secured
by any mortgage, lien, charge, pledge, encumbrance or security interest of any
kind upon any of the property of the Company or any Subsidiary if, immediately
after giving effect to the incurrence of such additional Debt and the
application of the proceeds thereof, the aggregate principal amount of all
outstanding Debt of the Company and its Subsidiaries on a consolidated basis
which is secured by any mortgage, lien, charge, pledge, encumbrance or security
interest on property of the Company or any Subsidiary is greater than 60% of
the sum of (without duplication) (i) the Company's Undepreciated Real Estate
Assets as of the end of the calendar quarter covered in the Company's Annual
Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be, most
recently filed with the Commission (or, if such filing is not permitted under
the Exchange Act, with the Trustee) prior to the incurrence of such additional
Debt and (ii) the purchase price of any real estate assets or mortgages
receivable acquired, and the amount of any securities offering proceeds
received (to the extent that such proceeds were not used to acquire real estate
assets or mortgages receivable or used to reduce Debt), by the Company or any
Subsidiary since the end of such calendar quarter, including those proceeds
obtained in connection with the incurrence of such additional Debt.
In addition to the foregoing limitations on the incurrence of Debt, the
Company will not, and will not permit any Subsidiary to, incur any Debt if the
ratio of Consolidated Income Available for Debt Service (as defined below) to
the Annual Service Charge (as defined below) for the four consecutive fiscal
quarters most recently ended prior to the date on which such additional Debt is
to be incurred shall have been less than 1.5:1, on a pro forma basis after
giving effect thereto and to the application of the proceeds therefrom, and
calculated on the assumption that (i) such Debt and any other Debt incurred by
the Company and its Subsidiaries since the first day of such four-quarter
period and the application of the proceeds therefrom, including to refinance
other Debt, had occurred at the beginning of such period; (ii) the repayment or
retirement of any other Debt by the Company and its Subsidiaries since the
first day of such four-quarter period had been repaid or retired at the
beginning of such period (except that, in making such computation, the amount
of Debt under any revolving credit facility shall be computed based upon the
average daily balance of such Debt during such period); (iii) in the case of
Acquired Debt (as defined below) or Debt incurred in connection with any
acquisition since the first day of such four-quarter period, the related
acquisition had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition being included in such
pro forma calculation; and (iv) in the case of any acquisition or disposition
by the Company or its Subsidiaries of any asset or group of assets since the
first day of such four-quarter period, whether by merger, stock purchase or
sale, or asset purchase or sale, such acquisition or disposition or any related
repayment of Debt had occurred as of the first day of such period with the
appropriate adjustments with respect to such acquisition or disposition being
included in such pro forma calculation.
As used herein,
"Acquired Debt" means Debt of a Person (i) existing at the time
such Person becomes a Subsidiary or (ii) assumed in connection with
the acquisition of assets from such Person, in each case, other than
Debt incurred in connection with, or in contemplation of, such Person
becoming a Subsidiary or such acquisition. Acquired Debt shall be
deemed to be incurred on the date of the related acquisition of
assets from any Person or the date the acquired Person becomes a
Subsidiary.
"Annual Service Charge" as of any date means the maximum amount
which is payable in any period for interest on, and original issue
discount of, Debt of the Company and its Subsidiaries.
"Capital Stock" means, with respect to any Person, any capital
stock (including preferred stock), shares, interests, participants or
other ownership interests (however designated) of such Person and any
rights (other than debt securities convertible into or exchangeable
for corporate stock), warrants or options to purchase any thereof.
"Consolidated Income Available for Debt Service" for any period
means Earnings from Operations (as defined below) of the Company and
its Subsidiaries plus amounts which have been deducted, and minus
amounts which have been added, for the following (without
duplication): (i) interest on Debt of the Company and its
Subsidiaries, (ii) provision for taxes of the Company and its
Subsidiaries based on income, (iii) amortization of debt discount,
(iv) provisions for gains and losses on properties and property
depreciation and amortization, (v) the effect of any noncash charge
resulting from a change in accounting principles in determining
Earnings from Operations for such period and (vi) amortization of
deferred charges.
"Debt" of the Company or any Subsidiary means any indebtedness
of the Company or any Subsidiary, whether or not contingent, in
respect of (i) borrowed money or evidenced by bonds, notes,
debentures or similar instruments, (ii) indebtedness for borrowed
money secured by any mortgage, pledge, lien, charge, encumbrance or
any security interest existing on property owned by the Company or
any Subsidiary (each securing such debt, an "Encumbrance"), (iii) the
reimbursement obligations, contingent or otherwise, in connection
with any letters of credit actually issued or amounts representing
the balance deferred and unpaid of the purchase price of any property
or services, except any such balance that constitutes an accrued
expense or trade payable or (iv) any lease of property by the
Company or any Subsidiary as lessee which is reflected on the
Company's Consolidated Balance Sheet as a capitalized lease in
accordance with generally accepted accounting principles to the
extent, in the case of items of indebtedness under (i) through (iii)
above, that any such items (other than letters of credit) would
appear as a liability on the Company's Consolidated Balance Sheet in
accordance with generally accepted accounting principles, and also
includes, to the extent not otherwise included, any obligation by the
Company or any Subsidiary to be liable for, or to pay, as obligor,
guarantor or otherwise (other than for purposes of collection in the
ordinary course of business), Debt of another Person (other than the
Company or any Subsidiary) (it being understood that Debt shall be
deemed to be incurred by the Company or any Subsidiary whenever the
Company or such Subsidiary shall create, assume, guarantee or
otherwise become liable in respect thereof).
"Earnings from Operations" for any period means net earnings
excluding gains and losses on sales of investments, net as reflected
in the financial statements of the Company and its Subsidiaries for
such period determined on a consolidated basis in accordance with
generally accepted accounting principles.
"Subsidiary" means, with respect to any Person, any corporation
or other entity of which a majority of (i) the voting power of the
voting equity securities or (ii) the outstanding equity interests are
owned, directly or indirectly, by such Person. For the purposes of
this definition, "voting equity securities" means equity securities
having voting power for the election of directors, whether at all
times or only so long as no senior class of security has such voting
power by reason of any contingency.
"Total Unencumbered Assets" means the sum of (i) those
Undepreciated Real Estate Assets not subject to an Encumbrance and
(ii) all other assets of the Company and its Subsidiaries not subject
to an Encumbrance determined in accordance with generally accepted
accounting principles (but excluding accounts receivable and
intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost
(original cost plus capital improvements) of real estate assets of
the Company and its Subsidiaries on such date, before depreciation
and amortization determined on a consolidated basis in accordance
with generally accepted accounting principles.
"Unsecured Debt" means Debt which is not secured by any
mortgage, lien, charge, pledge or security interest of any kind upon
any of the properties of the Company or any Subsidiary.
Existence. Except as permitted under "Merger, Consolidation or Sale," the
Company will do or cause to be done all things necessary to preserve and keep
in full force and effect its existence, rights (charter and statutory) and
franchises; provided, however, that the Company will 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.
Maintenance of Properties. The Company will cause all of its properties
used or useful in the conduct of its business or the business of any Subsidiary
to be maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all necessary
repairs, renewals, replacements, betterments and improvements thereof, all as
in the judgment of 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 for value its properties in the
ordinary course of business.
Insurance. The Company will, and will cause each of its Subsidiaries to,
keep all of its insurable properties adequately insured against loss or damage
with financially sound and reputable insurance companies.
Payment of Taxes and Other Claims. The Company will pay or discharge or
cause to be paid or discharged, before the same shall become delinquent, (i)
all taxes, assessments and governmental charges levied or imposed upon it or
any Subsidiary or upon the income, profits or property of 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, unless such lien would not have a material adverse effect upon such
property; provided, however, that the Company will not be required to pay or
discharge or cause to be paid or discharged any such tax, assessment, charge or
claim whose amount, applicability or validity is being contested in good faith
by appropriate proceedings or for which the Company has set apart and maintains
an adequate reserve.
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"), or which the Company would have been so required 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 is or would have been so required to file such documents if the Company
is or were so subject. The Company will also in any event (x) within 15 days
of each Required Filing Date (i) transmit by mail to all Holders of Debt
Securities, as their names and addresses appear in the Security Register,
without cost to such Holders, copies of the annual reports and quarterly
reports which the Company is required to file with the Commission pursuant to
Section 13 or 15(d) of the Exchange Act, or which the Company would have been
so required if the Company were subject to such Sections and (ii) file with the
Trustees copies of annual reports, quarterly reports and other documents which
the Company is required to file with the Commission pursuant to Section 13 or
15(d) of the Exchange Act, or which the Company would have been so required 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.
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 entity,
provided that (a) either the Company shall be the continuing entity, or the
successor entity (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received the transfer of such
assets shall expressly assume payment of the principal of (and premium or Make-
Whole Amount, if any) and interest (including Additional Amounts, if any) on
all of the Debt Securities and the due and punctual performance and observance
of all of the covenants and conditions contained in the Indentures; (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 Indentures, 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 Trustees.
Events of Default, Notice and Waiver
Each Indenture will provide that the following events are "Events of
Default" with respect to any series of Debt Securities issued thereunder: (a)
default for 30 days in the payment of any installment of interest or Additional
Amounts on any Debt Security of such series; (b) default in the payment of the
principal of (or premium or Make-Whole Amount, if any, on) any Debt Security of
such series 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 of the Company contained in the applicable Indenture
(other than a covenant added to such Indenture solely for the benefit of a
series of Debt Securities issued thereunder other than such series) continued
for 60 days after written notice as provided in such Indenture; (e) default in
the payment of an aggregate principal amount exceeding $10,000,000 of any
evidence of indebtedness for borrowed money of the Company or any mortgage,
indenture or other instrument under which such indebtedness is issued or by
which such indebtedness is secured, such default having occurred after the
expiration of any applicable grace period and having resulted in the
acceleration of the maturity of such indebtedness, but only if such
indebtedness is not discharged or such acceleration is not rescinded or
annulled; (f) certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the Company, any
Significant Subsidiary or the property of the Company or any Significant
Subsidiary or all or substantially all of either of its property; and (g) any
other Event of Default provided with respect to a particular series of Debt
Securities. The term "Significant Subsidiary" means each significant
subsidiary (as defined in Regulation S-X promulgated under the Securities Act)
of the Company.
If an Event of Default under either 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) and the Make-Whole Amount, if any, of
the Outstanding Debt Securities of that series to be due and payable
immediately by written notice thereof to the Company (and to the applicable
Trustee if given by the Holders). However, at any time after such a
declaration of acceleration with respect to Debt Securities of such series (or
of all Debt Securities then Outstanding under the applicable Indenture, as the
case may be) has been made, but before a judgment or decree for payment of the
money due has been obtained by the applicable Trustee, the Holders of not less
than a majority in principal amount of Debt Securities then outstanding of such
series (or of all Debt Securities then Outstanding under the applicable
Indenture, as the case may be) may rescind and annul such declaration and its
consequences if (a) the Company shall have deposited with the applicable
Trustee all required payments of the principal of (and premium or Make-Whole
Amount, if any) and interest, and any Additional Amounts, on the Debt
Securities of such series (or of all Debt Securities then outstanding under the
applicable Indenture, as the case may be), plus certain fees, expenses,
disbursements and advances of the Trustee and (b) all Events of Default, other
than the non-payment of accelerated principal (or specified portion thereof and
the premium or Make-Whole Amount, if any, or interest), with respect to Debt
Securities of such series (or of all Debt Securities then Outstanding under the
applicable Indenture, as the case may be) have been cured or waived as provided
in the applicable Indenture. Each Indenture also provides that the Holders of
not less than a majority in principal amount of the Outstanding Debt Securities
of any series (or of all Debt Securities then Outstanding under the applicable
Indenture, as the case may be) may waive any past default with respect to such
series and its consequences, except a default (x) in the payment of the
principal of (premium or Make-Whole Amount, if any) or interest or Additional
Amounts on any Debt Security of such series or (y) in respect of a covenant or
provision contained in the applicable Indenture that cannot be modified or
amended without the consent of the Holder of each Outstanding Debt Security
affected thereby.
Each Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the applicable 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 or Make-Whole Amount, if any) or
interest payable on or any Additional Amounts with respect to 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.
Each Indenture provides that no Holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to the
applicable Indenture or for any remedy thereunder, except in the case of
failure of the Trustee thereunder for 60 days, to act after it has received a
written request to institute proceedings in respect of an Event of Default from
the Holders of not less than 25% in principal amount of the Outstanding Debt
Securities of such series, as well as an offer of reasonable indemnity. This
provision will not prevent, however, any Holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium or Make-Whole Amount, if any) and interest on, and Additional Amounts
payable with respect to, such Debt Securities at the respective due dates
thereof.
Subject to provisions in each Indenture relating to its duties in case of
default, each Trustee is under no obligation to exercise any of its rights or
powers under the applicable Indenture at the request or direction of any
Holders of any series of Debt Securities then Outstanding under such Indenture,
unless such Holders shall have offered to the Trustee reasonable security or
indemnity. The Holders of not less than a majority in principal amount of the
applicable Outstanding Debt Securities of any series (or of all Debt Securities
then Outstanding under the applicable Indenture, as the case may be) shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee or of exercising any trust or power
conferred upon the Trustee. However, the Trustee may refuse to follow any
direction which is in conflict with any law or the applicable 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.
Within 120 days after the close of each fiscal year, the Company must
deliver to each Trustee a certificate, signed by one of several specified
officers, stating whether or not such officer has knowledge of any default
under the applicable Indenture and, if so, specifying each such default and the
nature and status thereof.
Modification of the Indentures
Except as described below, modifications and amendments of each Indenture
may be made with the consent of the Holders of not less than a majority in
principal amount of all Outstanding Debt Securities issued under such Indenture
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 Additional Amounts payable on
(or premium or Make-Whole Amount, if any) any such Debt Security; (b) reduce
the principal amount of, or the rate or amount of interest on, or any premium
or Make-Whole Amount payable on redemption of, or change any obligation of the
Company to pay any Additional Amounts set forth in the Indenture relating to,
or reduce any Additional Amounts payable with respect to, any such Debt
Security, or reduce the amount of principal of an Original Issue Discount
Security or premium or Make-Whole Amount, if any, that would be due and payable
upon declaration of acceleration of the maturity thereof or would be payable in
bankruptcy, or adversely affect any right of repayment of the Holder of any
such Debt Security; (c) change the Place of Payment, or the coin or currency,
for payment of principal of (and premium or Make-Whole Amount, if any), or
interest on, or any Additional Amounts payable with respect to, any such Debt
Security; (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any such Debt Security; (e) reduce the percentage
of Outstanding Debt Securities of any series necessary to modify or amend the
applicable Indenture, to waive compliance with certain provisions thereof or
certain defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in such 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.
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities issued under either Indenture have the right to waive
compliance by the Company with certain covenants in the applicable Indenture.
Modifications and amendments of each Indenture may be made by the Company
and the applicable Trustee without the consent of any Holder of Debt Securities
issued thereunder for any of the following purposes: (i) to evidence the
succession of another Person to the Company as obligor under the applicable
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 applicable 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 applicable Indenture to
facilitate the issuance of, or to liberalize certain terms of, Debt Securities
in bearer form, or to permit or facilitate the issuance of Debt Securities in
uncertificated form, provided that such action shall not adversely affect the
interests of the Holders of the Debt Securities of any series in any material
respect; (v) to change or eliminate any provision of the applicable Indenture,
provided that any such change or elimination shall become effective only when
there are no Debt Securities Outstanding of any series issued thereunder
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 provisions and procedures, if
applicable, for the conversion of such Debt Securities into Preferred Shares or
Common Shares; (viii) to provide for the acceptance of appointment by a
successor Trustee or facilitate the administration of the trusts under the
applicable Indenture by more than one Trustee; (ix) to cure any ambiguity,
defect or inconsistency in the applicable Indenture, provided that such action
will not adversely affect the interests of Holders of Debt Securities of any
series in any material respect; (x) to close the applicable Indenture with
respect to the authentication and delivery of additional series of Debt
Securities or to qualify or maintain qualification of, the applicable Indenture
under the TIA; or (xi) to supplement any of the provisions of the applicable
Indenture to the extent necessary to permit or facilitate defeasance and
discharge of any series of such Debt Securities, provided that such action will
not adversely affect the interests of the Holders of the Debt Securities of any
series in any material respect.
Each 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 will 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 will 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 will be deemed outstanding will be
the principal face amount of such Indexed Security at original issuance, unless
otherwise provided with respect to such Indexed Security pursuant to the
applicable 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 will be disregarded.
Each Indenture contains provisions for convening meetings of the Holders
of Debt Securities of a series. A meeting may be called at any time by the
applicable Trustee, and also, upon request, by the Company, pursuant to a
resolution adopted by the Board of Trustees, or the Holders of at least 10% in
principal amount of the Outstanding Debt Securities of such series, in any such
case upon notice given as provided in the applicable Indenture. Except for any
consent that must be given by the Holder of each Debt Security affected by
certain modifications and amendments of the applicable Indenture, any
resolution presented at a meeting or adjourned meeting duly reconvened at which
a quorum is present may be adopted by the affirmative vote of the Holders of a
majority in principal amount of the Outstanding Debt Securities of that series;
provided, however, that, except as referred to above, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the Holders of a
specified percentage, which is less than a majority, in principal amount of the
Outstanding Debt Securities of a series may be adopted at a meeting or
adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the Holders of such specified percentage in principal
amount of the Outstanding Debt Securities of that series. Any resolution
passed or decision taken at any meeting of Holders of Debt Securities of any
series duly held in accordance with the applicable Indenture will be binding on
all Holders of Debt Securities of that series. The quorum at any meeting
called to adopt a resolution, and at any reconvened meeting, will be Persons
holding or representing a majority in principal amount of the Outstanding Debt
Securities of a series; provided, however, that, if any action is to be taken
at such meeting with respect to a consent or waiver which may be given by the
Holders of not less than a specified percentage in principal amount of the
Outstanding Debt Securities of a series, the Persons holding or representing
such specified percentage in principal amount of the Outstanding Debt
Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, 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 applicable 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 applicable Indenture.
Discharge, Defeasance and Covenant Defeasance
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 scheduled for redemption within one year) by
irrevocably depositing with the applicable Trustee, in trust, funds in such
currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable in an amount sufficient to
pay the entire indebtedness on such Debt Securities in respect of principal
(and premium or Make-Whole Amount, if any) and interest and Additional Amounts
payable to the date of such deposit (if such Debt Securities have become due
and payable) or to the Stated Maturity or Redemption Date, as the case may be.
Each Indenture provides that, under certain circumstances, the Company may
elect to (a) 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") and/or (b) be released from its
obligations with respect to such Debt Securities under the applicable Indenture
(being the restrictions described under "Certain Covenants") or, under certain
circumstances, its obligations with respect to any other covenant, and any
omission to comply with such obligations will not constitute a default or an
Event of Default with respect to such Debt Securities ("covenant defeasance"),
in either case upon the irrevocable deposit by the Company with the applicable
Trustee, in trust, of an amount, in such currency or currencies, currency unit
or units or composite currency or currencies in which such Debt Securities are
payable at Stated Maturity, or Government Obligations (as defined below), or
both, applicable to such Debt Securities which through the scheduled payment of
principal and interest in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium or Make-Whole Amount, if
any) and interest on such Debt Securities, and any mandatory sinking fund or
analogous payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company
has delivered to the applicable Trustee an Opinion of Counsel (as specified in
the applicable Indenture) to the effect that the Holders of such Debt
Securities will not recognize income, gain or loss for U.S. federal income tax
purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such Opinion of Counsel, in the case of
defeasance, must refer to and be based upon a ruling of the Internal Revenue
Service (the "IRS") or a change in applicable United States federal income tax
law occurring after the date of the Indenture.
"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 will 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.
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 the applicable Indenture or the terms of such Debt
Security to receive payment in a currency, currency unit or composite currency
other than that in which such deposit has been made in respect of such Debt
Security, or (b) a Conversion Event (as defined below) occurs in respect of the
currency, currency unit or composite currency in which such deposit has been
made, the indebtedness represented by such Debt Security shall be deemed to
have been, and will be, fully discharged and satisfied through the payment of
the principal of (and premium or Make-Whole Amount, if any) and interest on
such Debt Security as they become due out of the proceeds yielded by converting
the amount so deposited in respect of such Debt Security into the currency,
currency unit or composite currency in which such Debt Security becomes payable
as a result of such election or such cessation of usage based on the applicable
market exchange rate. "Conversion Event" means the cessation of use of (i) a
Foreign Currency (other than the ECU or other currency unit), both by the
government of the country which issued such currency and for the settlement of
transactions by a central bank or other public institutions of or within the
international banking community, (ii) the ECU both within the European Monetary
System and for the settlement of transactions by public institutions of or
within the European Communities or (iii) any currency unit or composite
currency other than the ECU for the purposes for which it was established.
Unless otherwise provided in the applicable Prospectus Supplement, all payments
of principal of (and premium or Make-Whole Amount, if any) and interest on any
Debt Security that is payable in a Foreign Currency that ceases to be used by
its government of issuance will 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" under
certain circumstances or described in clause (g) under "Events of Default,
Notice and Waiver" under certain circumstances, the amount in such currency,
currency unit or composite currency in which such Debt Securities are payable,
and Government Obligations on deposit with the applicable Trustee, will be
sufficient to pay amounts due on such Debt Securities at the time of their
Stated Maturity but may not be sufficient to pay amounts due on such Debt
Securities at the time of the acceleration resulting from such Event of
Default. However, the Company would remain liable to make payment of such
amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
Conversion Rights
The terms and conditions, if any, upon which the Debt Securities are
convertible into Preferred Shares or Common Shares will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Preferred Shares or Common
Shares, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the
Holders or the Company, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of
such Debt Securities.
Global Securities
The Debt Securities of a series may be issued in whole or in part in the
form of one or more fully registered 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 are expected to be deposited with The Depository
Trust Company, as Depositary. Global Securities may be issued in either
registered or bearer form and in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for the individual
Debt Securities represented thereby, a Global Security may not be transferred
except as a whole by the Depositary for such Global Security to a nominee of
such Depositary or by a nominee of such Depositary to such Depositary or
another nominee of such Depositary or by the Depositary or any nominee of such
Depositary to a successor Depositary or any nominee of such successor.
The specific terms of the depositary arrangement with respect to a series
of Debt Securities will be described in the applicable Prospectus Supplement
relating to such series. Unless otherwise indicated in the applicable
Prospectus Supplement, the Company anticipates that the following provisions
will apply to depositary arrangements.
Upon the issuance of a Global Security, the Depositary for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depositary ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Company if such Debt Securities are offered and sold
directly by the Company. Ownership of beneficial interests in a Global
Security will be limited to Participants or persons that may hold interests
through Participants. Ownership of beneficial interests in such Global
Security will be shown on, and the transfer of that ownership will be effected
only through, records maintained by the applicable Depositary or its nominee
(with respect to beneficial interests of Participants) and records of
Participants (with respect to beneficial interests of persons who hold through
Participants). The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and laws may impair the ability to own, pledge or transfer beneficial
interest in a Global Security.
So long as the Depositary for a Global Security or its nominee is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as provided below or in the applicable Prospectus
Supplement, owners of a beneficial interest in a Global Security will not be
entitled to have any of the individual Debt Securities of the series
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of any such Debt Securities of such
series in definitive form and will not be considered the owners or holders
thereof under the applicable Indenture.
Payments of principal of, any premium or Make-Whole Amount on, and any
interest on, or any Additional Amounts payable with respect to, individual Debt
Securities represented by a Global Security registered in the name of a
Depositary or its nominee will be made to the Depositary or its nominee, as the
case may be, as the registered owner of the Global Security representing such
Debt Securities. None of the Company, the Trustees, any Paying Agent or the
Security Registrar for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Security for such Debt
Securities or for maintaining, supervising or reviewing any records relating to
such beneficial ownership interests.
The Company expects that the Depositary for a series of Debt Securities or
its nominee, upon receipt of any payment of principal, premium or interest in
respect of a permanent Global Security representing any of such Debt
Securities, will immediately credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security for such Debt Securities as shown on the records
of such Depositary or its nominee. The Company also expects that payments by
Participants to owners of beneficial interests in such Global Security held
through such Participants will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in "street name." Such payments will be
the responsibility of such Participants.
If a Depositary for a series of Debt Securities is at any time unwilling,
unable or ineligible to continue as depositary and a successor depositary is
not appointed by the Company within 90 days, the Company will issue individual
Debt Securities of such series in exchange for the Global Security representing
such series of Debt Securities. In addition, the Company may, at any time and
in its sole discretion, subject to any limitations described in the applicable
Prospectus Supplement relating to such Debt Securities, determine not to have
any Debt Securities of such series represented by one or more Global Securities
and, in such event, will issue individual Debt Securities of such series in
exchange for the Global Security or Securities representing such series of Debt
Securities. Individual Debt Securities of such series so issued will be issued
in denominations, unless otherwise specified by the Company, of $1,000 and
integral multiples thereof.
No Personal Liability
No past, present or future trustee, officer, employee or shareholder, as
such, of the Company or any successor thereof shall have any liability for any
obligations of the Company under the Debt Securities or the applicable
Indenture or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Debt Securities by accepting
such Debt Securities waives and releases all such liability. The waiver and
release are part of the consideration for the issue of Debt Securities. Each
Holder of Debt Securities shall look solely to the assets of the Company for
satisfaction of any liability of the Company in respect of the applicable
Indenture or the Debt Securities and will not seek recourse or commence any
action against any of the trustees, officers or shareholders of the Company or
any of their personal assets for the performance or payment of any obligation
thereunder.
Subordination
Upon any distribution to creditors of the Company in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
the Subordinated Securities will be subordinated to the extent provided in the
Subordinated Securities Indenture in right of payment to the prior payment in
full of all Senior Debt, but the obligation of the Company to make payment of
the principal and interest on the Subordinated Securities will not otherwise be
affected. No payment of principal or interest may be made on the Subordinated
Securities at any time if a default on Senior Debt exists that permits the
holders of such Senior Debt to accelerate its maturity and the default is the
subject of judicial proceedings or the Company receives notice of the default.
After all Senior Debt is paid in full and until the Subordinated Securities are
paid in full, holders will be subrogated to the rights of holders of Senior
Debt to receive distributions applicable to Senior Debt to the extent that
distributions otherwise payable to holders have been applied to the payment of
Senior Debt. By reason of such subordination, in the event of a distribution
of assets upon insolvency, certain general creditors of the Company may recover
more, ratably, than holders of the Subordinated Securities.
Senior Debt is defined in the Subordinated Securities Indenture as the
principal of and interest on, or substantially similar payments to be made by
the Company in respect of, the following, whether outstanding at the date of
execution of the Subordinated Securities Indenture or thereafter incurred,
created or assumed: (a) indebtedness of the Company for money borrowed or
represented by purchase-money obligations, (b) indebtedness of the Company
evidenced by notes, debentures, or bonds, or other securities issued under the
provisions of an indenture, fiscal agency agreement or other instrument, (c)
obligations of the Company as lessee under leases of property either made as
part of any sale and leaseback transaction to which the Company is a party or
otherwise, (d) indebtedness of partnerships and joint ventures that is included
in the consolidated financial statements of the Company, (e) indebtedness,
obligations and liabilities of others in respect of which the Company is liable
contingently or otherwise to pay or advance money or property or as guarantor,
endorser or otherwise or which the Company has agreed to purchase or otherwise
acquire, and (f) any binding commitment of the Company to fund any real estate
investment or to fund any investment in any entity making such real estate
investment, in each case other than (1) any such indebtedness, obligation or
liability referred to in clauses (a) through (f) above as to which, in the
instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such indebtedness, obligation or liability is
not superior in right of payment to the Subordinated Securities or ranks pari
passu with the Subordinated Securities, (2) any such indebtedness, obligation
or liability which is subordinated to indebtedness of the Company to
substantially the same extent as or to a greater extent than the Subordinated
Securities are subordinated, (3) any trade accounts payable and (4) the
Subordinated Securities. There are no restrictions in the Subordinated
Securities Indenture upon the creation of additional Senior Debt. However, the
Senior Securities Indenture contains limitations on incurrence of indebtedness
by the Company. See "Certain Covenants - Senior Securities Indenture
Limitations on Incurrence of Debt."
If this Prospectus is being delivered in connection with a series of
Subordinated Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Debt outstanding as of the end of the Company's most recent
fiscal quarter.
DESCRIPTION OF PREFERRED SHARES
The Company's Amended and Restated Declaration of Trust, as amended (the
"Declaration of Trust"), authorizes the Company to issue up to 100,000,000
shares of beneficial interest of the Company, consisting of Common Shares and
such other types or classes of shares of beneficial interest as the Board of
Trustees may create and authorize from time to time and designate as
representing a beneficial interest in the Company. The Board of Trustees is
granted the power to authorize the issuance of one or more series of preferred
shares of beneficial interest. As of June 27, 1997, the Company had issued and
outstanding 11,155 Series A-1 Increasing Rate Cumulative Convertible Preferred
Shares of Beneficial Interest (the "Series A-1 Preferred Shares"), 195,631
9.75% Series B-1 Cumulative Convertible Preferred Shares of Beneficial Interest
(the "Series B-1 Preferred Shares"), 907,578 9.75% Series B-2 Cumulative
Convertible Preferred Shares of Beneficial Interest (the "Series B-2 Preferred
Shares," and, together with the Series B-1 Preferred Shares, the "Series B
Preferred Shares") and 311,850 Series C Cumulative Redeemable Preferred Shares
of Beneficial Interest (the "Series C Preferred Shares").
The holders of the Series A-1 Preferred Shares (the "Series A-1 Preferred
Holders") are entitled to cumulative cash distributions at the current rate of
5.5% increasing annually to 6.5% in 2001 as set forth in the Company's Articles
Supplementary Classifying 11,155 Shares of Beneficial Interest as Series A-1
Preferred Shares, payable quarterly. In the event of any liquidation,
dissolution or winding-up of the affairs of the Company, the Series A-1
Preferred Holders are entitled to receive, out of the assets of the Company
legally available therefor, the amount of $1,000 in cash for each Series A-1
Preferred Share, plus an amount in cash equal to all accrued and unpaid
distributions on each such share. The Series A-1 Preferred Shares rank pari
passu with the Series B Preferred Shares and Series C Preferred Shares as to
priority for receiving distributions, including liquidating distributions. The
Series A-1 Preferred Holders have the right, exercisable at any time and from
time to time after April 18, 1999 and prior to April 18, 2009, to convert all
or any of their respective Series A-1 Preferred Shares into such number of
Common Shares as would then receive aggregate annual cash distributions equal
to the then aggregate annual cash distributions such holders of the Series A-1
Preferred Shares are entitled to receive on the number of Series A-1 Preferred
Shares which such holders elect to convert into Common Shares, subject to
certain limitations on the number of Series A-1 Preferred Shares which may be
converted in any one year. The Series A-1 Preferred Shares may be redeemed at
the option of the Company, in whole or from time to time in part, at the
redemption price per share of $1,000, plus in each case all accrued and unpaid
distributions, if any, to the redemption date. The Series A-1 Preferred
Holders are not entitled to vote, except as required by law and in certain
other limited situations.
The Series B-1 Preferred Shares and Series B-2 Preferred Shares are
identical in all respects, and have the same rights, privileges and preferences
in all circumstances, except with respect to the conversion rights. The
holders of the Series B Preferred Shares (the "Series B Preferred Holders") are
entitled to cumulative cash distributions at the rate of 9.75% per annum of the
$25.00 per share liquidation preference of the Series B Preferred Shares,
payable quarterly. In the event of any liquidation, dissolution or winding-up
of the affairs of the Company, the Series B Preferred Holders are entitled to
receive, out of the assets of the Company legally available therefor, a
liquidation preference in the amount of $25.00 per share, plus an amount equal
to all accrued and unpaid distributions on each such share. The Series B
Preferred Shares rank pari passu with the Series A-1 Preferred Shares and
Series C Preferred Shares as to priority for receiving distributions, including
liquidating distributions. The Series B Preferred Shares are not redeemable
prior to February 27, 2002. On and after February 27, 2002, if the aggregate
liquidation preferences of all of the outstanding Series B Preferred Shares is
less than $3,000,000, the Series B Preferred Shares may be redeemed at the
option of the Company, in whole, at a redemption price equal to $25.00 per
share, plus accrued and unpaid distributions, if any, to the redemption date.
The holders of the Series B-1 Preferred Shares shall have the right,
exercisable after February 27, 1998 (unless exercisable earlier in the event of
a Special Conversion Event as described below), to convert each of their
respective Series B-1 Preferred Shares into such number of Common Shares as is
obtained by dividing the $25.00 per share liquidation preference by (i)
$19.1750 if the date of conversion is February 28, 1998 to February 27, 1999,
(ii) $18.6875 if the date of conversion is February 28, 1999 to February 27,
2000, (iii) $18.2000 if the date of conversion is February 28, 2000 to February
27, 2001, (iv) $17.7125 if the date of conversion is February 28, 2001 and
thereafter and at any time after a Special Conversion Event shall have
occurred. A "Special Conversion Event" shall mean, among other events, (i)
Norman M. Kranzdorf ceasing to be a senior executive officer of the Company,
(ii) certain mergers or sales of assets where there is a change of control or
(iii) the Company failing to pay a distribution on the Series B Preferred
Shares for any quarterly distribution period within five days of the
distribution payment date therefor. The Series B-2 Preferred Shares will, after
February 27, 2000 (unless converted earlier upon the occurrence of a Special
Conversion Event), automatically convert into an equal number of Series B-1
Preferred Shares which will then be convertible into Common Shares at the same
conversion rate as set forth above. The conversion rate for the Series B
Preferred Shares in effect at any time shall be subject to adjustment from time
to time to protect against certain dilutive events.
The Series B Preferred Holders are generally not entitled to vote, except
as required by law and except in certain other limited situations summarized
below. If the Company fails to pay the distributions on the outstanding Series
B Preferred Shares for any two distribution periods or a Special Conversion
Event shall have occurred, the Series B Preferred Holders shall at all times
thereafter vote together with the holders of the Common Shares as a single
class on all actions. If the Company fails to authorize and pay or declare and
set apart for payment the distributions accumulated on the outstanding Series B
Preferred Shares (i) for any four distribution periods the Series B Preferred
Holders shall have the right to elect one additional trustee to the Company's
Board of Trustees and (ii) for any six distribution periods the Series B
Preferred Holders shall have the right to elect a second additional trustee, in
each case, until the full distributions accumulated on all outstanding Series B
Preferred Shares shall have been authorized and paid or declared and set apart
for payment.
The holders of the Series C Preferred Shares (the "Series C Preferred
Holders") are entitled to cumulative cash distributions at the rate of 8% per
annum of the $10.00 per share liquidation preference of the Series C Preferred
Shares, payable quarterly. In the event of any liquidation, dissolution or
winding-up of the affairs of the Company, the Series B Preferred Holders are
entitled to receive, out of the assets of the Company legally available
therefor, a liquidation preference in the amount of $10.00 per share, plus an
amount equal to all accrued and unpaid distributions on each such share. The
Series C Preferred Shares rank pari passu with the Series A-1 Preferred Shares
and Series B Preferred Shares as to priority for receiving distributions,
including liquidating distributions. The Company is required to redeem all of
the Series C Preferred Shares in eight equal quarterly on the last day of
January, April, July and October of each calendar year, beginning April 30,
1997, at a redemption price equal to $10.00 per share, plus accrued and unpaid
distributions (the "Series C Redemption Price"), if any, to the redemption
date. The Company shall also be required to redeem all outstanding Series C
Preferred Shares at the Series C Redemption Price if the Company fails to
discharge any mandatory redemption obligation or fails to pay a distribution on
the outstanding Series C Preferred Shares for any quarter within five days of
any distribution payment date therefor. The Series C Preferred Shares may be
redeemed at the option of the Company at any time, and from time to time, at
the Series C Redemption Price. The Series C Preferred Holders are not entitled
to vote, except as required by law and in certain other limited situations.
The following description of the Preferred Shares which may be offered
pursuant to a Prospectus Supplement sets forth certain general terms and
provisions of the Preferred Shares to which any Prospectus Supplement may
relate. The particular terms of the Preferred Shares being offered and the
extent to which such general provisions may or may not apply will be described
in a Prospectus Supplement relating to such Preferred Shares. The statements
below describing the Preferred Shares are in all respects subject to and
qualified in their entirety by reference to the applicable provisions of the
Declaration of Trust (including the applicable Articles Supplementary) and the
Company's Bylaws, as in effect.
General
Subject to limitations prescribed by Maryland law and the Declaration of
Trust, the Board of Trustees is authorized to fix the number of shares
constituting each series of Preferred Shares and the designations and powers,
preferences and the relative participating, optional or other special rights
and qualifications, limitations or restrictions thereof, including such
provisions as may be desired concerning voting, redemption, distributions,
dissolution or the distribution of assets, conversion or exchange, and such
other subjects or matters as may be fixed by resolution of the Board of
Trustees or a duly authorized committee thereof. The Preferred Shares will,
when issued, be fully paid and nonassessable and will have no preemptive
rights.
Both Maryland statutory law governing real estate investment trusts
organized under the laws of that state and the Declaration of Trust provide
that no shareholder of the Company will be personally liable for any obligation
of the Company solely as a result of his status as a shareholder. The
Company's Bylaws further provide that the Company shall indemnify each
shareholder or former shareholder against any claim or liability to which the
shareholder may become subject by reason of his being or having been a
shareholder or a former shareholder and that the Company shall reimburse each
shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. In addition, it is the Company's
policy to include a clause in its contracts which provides that shareholders
assume no personal liability for obligations entered into on behalf of the
Company. However, with respect to tort claims, contractual claims where
shareholder liability is not so negated, claims for taxes and certain statutory
and other liabilities, a shareholder may, in some jurisdictions, be personally
liable to the extent that such claims are not satisfied by the Company.
Inasmuch as the Company carries public liability insurance which it considers
adequate, any risk of personal liability to shareholders is limited to
situations in which the Company's assets plus its insurance coverage would be
insufficient to satisfy the claims against the Company and its shareholders.
The Register and Transfer Agent for any Preferred Shares will be set forth
in the applicable Prospectus Supplement.
Reference is made to the Prospectus Supplement relating to the Preferred
Shares offered thereby for specific terms, including:
(1) the title and stated value of such Preferred Shares;
(2) the number of shares of such Preferred Shares being offered, the
liquidation preference per share and the offering price of such
Preferred Shares;
(3) the distribution rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Shares;
(4) the date from which distributions on such Preferred Shares shall
accumulate, if applicable;
(5) the procedures for any auction and remarketing, if any, for such
Preferred Shares;
(6) the provision for a sinking fund, if any, for such Preferred Shares;
(7) the provisions for redemption, if applicable, of such Preferred
Shares;
(8) any listing of such Preferred Shares on any securities exchange;
(9) the terms and conditions, if applicable, upon which such Preferred
Shares will be convertible into Common Shares, including the
conversion price (or manner of calculation thereof);
(10) a discussion of federal income tax considerations applicable to such
Preferred Shares;
(11) the relative ranking and preferences of such Preferred Shares as to
distribution rights (including whether any liquidation preference as
to the Preferred Shares will be treated as a liability for purposes
of determining the availability of assets of the Company for
distributions to holders of Shares remaining junior to the Preferred
Shares as to distribution rights) and rights upon liquidation,
dissolution or winding up of the affairs of the Company;
(12) any limitations on issuance of any series of preferred shares ranking
senior to or on a parity with such series of Preferred Shares as to
distribution rights and rights upon liquidation, dissolution or
winding up of the affairs of the Company;
(13) any limitations on direct or beneficial ownership and restrictions on
transfer of such Preferred Shares, in each case as may be appropriate
to preserve the status of the Company as a REIT; and
(14) any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Shares.
Rank
Unless otherwise specified in the applicable Prospectus Supplement, the
Preferred Shares will, with respect to distribution rights and/or rights upon
liquidation, dissolution or winding up of the Company, rank (i) senior to all
classes or series of Common Shares, and to all equity securities ranking junior
to such Preferred Shares with respect to distribution rights and/or rights upon
liquidation, dissolution or winding up of the Company, as the case may be; (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 Shares with respect to distribution rights and/or rights upon
liquidation, dissolution or winding up of the Company, as the case may be; 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
Shares with respect to distribution rights and/or rights upon liquidation,
dissolution or winding up of the Company, as the case may be. As used in the
Declaration of Trust, for these purposes, the term "equity securities" does not
include convertible debt securities. The Preferred Shares will rank on a
parity with or junior to the Series A-1 Preferred Shares, Series B Preferred
Shares and Series C Preferred Shares unless the Series A-1 Preferred Holders,
Series B Preferred Holders or Series C Preferred Holders agree otherwise with
respect to the Series A-1 Preferred Shares, Series B Preferred Shares or Series
C Preferred Shares, respectively.
Distributions
Holders of Preferred Shares shall be entitled to receive, when, as and if
authorized by the Board of Trustees of the Company, out of assets of the
Company legally available for payment, cash distributions at such rates (or
method of calculation thereof) and on such dates as will be set forth in the
applicable Prospectus Supplement. Each such distribution shall be payable to
holders of record as they appear on the share transfer books of the Company on
such record dates as shall be fixed by the Board of Trustees of the Company.
Distributions on any series of the Preferred Shares may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement.
Distributions, if cumulative, will be cumulative from and after the date set
forth in the applicable Prospectus Supplement. If the Board of Trustees of the
Company fails to authorize a distribution payable on a distribution payment
date on any series of the Preferred Shares for which distributions are
noncumulative, then the holders of such series of the Preferred Shares will
have no right to receive a distribution in respect of the distribution period
ending on such distribution payment date, and the Company will have no
obligation to pay the distribution accrued for such period, whether or not
distributions on such series are authorized for payment on any future
distribution payment date.
If any Preferred Shares of any series are outstanding, no full
distributions shall be authorized or paid or set apart for payment on the
preferred shares of the Company of any other series ranking, as to
distributions, on a parity with or junior to the Preferred Shares of such
series for any period unless (i) if such series of Preferred Shares has a
cumulative distribution, full cumulative distributions have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof set apart for such payment on the Preferred Shares of
such series for all past distribution periods and the then current distribution
period or (ii) if such series of Preferred Shares does not have a cumulative
distribution, full distributions for the then current distribution period have
been or contemporaneously are authorized and paid or authorized and a sum
sufficient for the payment thereof set apart for such payment on the Preferred
Shares of such series. When distributions are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Preferred Shares
of any series and the shares of any other series of preferred shares ranking on
a parity as to distributions with the Preferred Shares of such series, all
distributions authorized upon the Preferred Shares of such series and any other
series of preferred shares ranking on a parity as to distributions with such
Preferred Shares shall be authorized pro rata so that the amount of
distributions authorized per share on the Preferred Shares of such series and
such other series of preferred shares shall in all cases bear to each other the
same ratio that accrued and unpaid distributions per share on the Preferred
Shares of such series (which shall not include any accumulation in respect of
unpaid distributions for prior distribution periods if such Preferred Shares do
not have a cumulative distribution) and such other series of preferred shares
bear to each other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any distribution payment or payments on Preferred Shares
of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Shares has a cumulative distribution, full cumulative
distributions on the Preferred Shares of such series have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof set apart for payment for all past distribution periods
and the then current distribution period and (ii) if such series of Preferred
Shares does not have a cumulative distribution, full distributions on the
Preferred Shares of such series have been or contemporaneously are authorized
and paid or authorized and a sum sufficient for the payment thereof set apart
for payment for the then current distribution period, no distributions (other
than in common shares or other shares of beneficial interest ranking junior to
the Preferred Shares of such series as to distributions and upon liquidation,
dissolution or winding up of the affairs of the Company) shall be authorized or
paid or set aside for payment or other distribution upon the Common Shares or
any other shares of beneficial interest of the Company ranking junior to or on
a parity with the Preferred Shares of such series as to distributions or upon
liquidation, dissolution or winding up of the affairs of the Company, nor shall
any Common Shares or any other shares of beneficial interest of the Company
ranking junior to or on a parity with the Preferred Shares of such series as to
distributions or upon liquidation, dissolution or winding up of the affairs of
the Company be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any shares of beneficial interest) by the Company (except by
conversion into or exchange for other shares of beneficial interest of the
Company ranking junior to the Preferred Shares of such series as to
distributions and upon liquidation, dissolution or winding up of the affairs of
the Company).
Any distribution payment made on a series of Preferred Shares shall first
be credited against the earliest accrued but unpaid distribution due with
respect to shares of such series which remains payable.
Redemption
If so provided in the applicable Prospectus Supplement, the Preferred
Shares of any series will be subject to mandatory redemption or redemption at
the option of the Company, as a whole or in part, in each case upon the terms,
at the times and at the redemption prices set forth in such Prospectus
Supplement.
The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of such Preferred
Shares that shall be redeemed by the Company in each year commencing after a
date to be specified, at a redemption price per share to be specified, together
with an amount equal to all accrued and unpaid distributions thereon (which
shall not, if such Preferred Shares does not have a cumulative distribution,
include any accumulation in respect of unpaid distributions for prior
distribution periods) to the date of redemption. The redemption price may be
payable in cash or other property, as specified in the applicable Prospectus
Supplement. If the redemption price for Preferred Shares of any series is
payable only from the net proceeds of the issuance of shares of beneficial
interest of the Company, the terms of such Preferred Shares may provide that,
if no such shares of beneficial interest shall have been issued or to the
extent the net proceeds from any issuance are insufficient to pay in full the
aggregate redemption price then due, such Preferred Shares shall automatically
and mandatorily be converted into shares of the applicable shares of beneficial
interest of the Company pursuant to conversion provisions specified in the
applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred
Shares has a cumulative distribution, full cumulative distributions on all
shares of such series have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof set apart for payment
for all past distribution periods and the then current distribution period and
(ii) if such series of Preferred Shares does not have a cumulative
distribution, full distributions on all shares of such series have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof set apart for payment for the then current distribution
period, no shares of such series of Preferred Shares shall be redeemed unless
all outstanding Preferred Shares of such series are simultaneously redeemed;
provided, however, that the foregoing shall not prevent the purchase or
acquisition of Preferred Shares of such series pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding Preferred
Shares of such series, and, unless (i) if such series of Preferred Shares has a
cumulative distribution, full cumulative distributions on all outstanding
shares of such series have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof set apart for payment
for all past distribution periods and the then current distribution period and
(ii) if such series of Preferred Shares does not have a cumulative
distribution, full distributions on all shares of such series have been or
contemporaneously are authorized and paid or authorized and a sum sufficient
for the payment thereof set apart for payment for the then current distribution
period, the Company shall not purchase or otherwise acquire directly or
indirectly any Preferred Shares of such series (except by conversion into or
exchange for shares of beneficial interest of the Company ranking junior to the
Preferred Shares of such series as to distributions and upon liquidation).
If fewer than all of the outstanding Preferred Shares of any series are to
be redeemed, the number of shares to be redeemed will be determined by the
Company and such shares may be redeemed pro rata from the holders of record of
such shares in proportion to the number of such shares held by such holders
(with adjustments to avoid redemption of fractional shares) or any other
equitable method determined by the Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Shares of
any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the
number of shares and series of the Preferred Shares to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such
Preferred Shares are to be surrendered for payment of the redemption price; (v)
that distributions on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) the date upon which the holder's conversion rights,
if any, as to such shares shall terminate. If fewer than all the Preferred
Shares of any series are to be redeemed, the notice mailed to each such holder
thereof shall also specify the number of Preferred Shares to be redeemed from
each such holder. If notice of redemption of any Preferred Shares has been
properly given and if the funds necessary for such redemption have been
irrevocably set aside by the Company in trust for the benefit of the holders of
any Preferred Shares so called for redemption, then from and after the
redemption date distributions will cease to accrue on such Preferred Shares,
such Preferred Shares shall no longer be deemed outstanding and all rights of
the holders of such shares will terminate, except the right to receive the
redemption price. Any moneys so deposited which remain unclaimed by the
holders of such Preferred Shares at the end of two years after the redemption
date will be returned by the applicable bank or trust company to the Company.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding up
of the affairs of the Company, then, before any distribution or payment shall
be made to the holders of any Common Shares or any other class or series of
shares of beneficial interest of the Company ranking junior to any series of
Preferred Shares in the distribution of assets upon any liquidation,
dissolution or winding up of the Company, the holders of such series of
Preferred Shares shall be entitled to receive, after payment or provision for
payment of the Company's debts and other liabilities, out of assets of the
Company legally available for distribution to shareholders, liquidating
distributions in the amount of the liquidation preference per share (set forth
in the applicable Prospectus Supplement), plus an amount equal to all
distributions accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid distributions for prior distribution periods
if such Preferred Shares do not have a cumulative distribution). After payment
of the full amount of the liquidating distributions to which they are entitled,
the holders of such series of Preferred Shares will have no right or claim to
any of the remaining assets of the Company. In the event that, upon any such
voluntary or involuntary liquidation, dissolution or winding up, the legally
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all such outstanding Preferred Shares and the
corresponding amounts payable on all shares of other classes or series of
shares of beneficial interest of the Company ranking on a parity with such
series of Preferred Shares in the distribution of assets upon liquidation,
dissolution or winding up, then the holders of such series of Preferred Shares
and all other such classes or series of shares of beneficial interest shall
share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
If the liquidating distributions shall have been made in full to all
holders of a series of Preferred Shares, the remaining assets of the Company
shall be distributed among the holders of any other classes or series of shares
of beneficial interest ranking junior to such series of Preferred Shares upon
liquidation, dissolution or winding up, according to their respective rights
and preferences and in each case according to their respective number of
shares. For purposes of this section, a distribution of assets in any
dissolution, winding up or liquidation will not include (i) any consolidation
or merger of the Company with or into any other corporation, (ii) any
dissolution, liquidation, winding up, or reorganization of the Company
immediately followed by organization of another entity to which such assets are
distributed or (iii) a sale or other disposition of all or substantially all of
the Company's assets to another entity; provided that, in each case, effective
provision is made in the charter of the resulting and surviving entity or
otherwise for the recognition, preservation and protection of the rights of the
holders of Preferred Shares.
Voting Rights
Holders of any series of Preferred Shares will not have any voting rights,
except as set forth below or as otherwise from time to time required by law or
as indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Shares, so long as
any Preferred Shares remain outstanding, the Company will not, without the
affirmative vote or consent of the holders of a majority of the shares of each
series of Preferred Shares outstanding at the time, given in person or by
proxy, either in writing or at a meeting (such series voting separately as a
class), (i) authorize, create or issue, or increase the authorized or issued
amount of, any class or series of shares of beneficial interest ranking prior
to such series of Preferred Shares with respect to payment of distributions or
the distribution of assets upon liquidation, dissolution or winding up, or
reclassify any authorized shares of beneficial interest of the Company into any
such shares, or create, authorize or issue any obligation or security
convertible into or evidencing the right to purchase any such shares; or (ii)
amend, alter or repeal the provisions of the Declaration of Trust, including
the applicable Articles Supplementary for such series of Preferred Shares,
whether by merger, consolidation or otherwise, so as to materially and
adversely affect any right, preference, privilege or voting power of such
series of Preferred Shares or the holders thereof; provided, however, that any
increase in the amount of the authorized preferred shares or the creation or
issuance of any other series of preferred shares, or any increase in the amount
of authorized shares of such series or any other series of Preferred Shares, in
each case ranking on a parity with or junior to the Preferred Shares of such
series with respect to payment of distributions or the distribution of assets
upon liquidation, dissolution or winding up, shall not be deemed to materially
and adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be affected, all outstanding shares of such series of Preferred Shares shall
have been redeemed or called for redemption upon proper notice and sufficient
funds shall have been irrevocably deposited in trust to effect such redemption.
Whenever distributions on any Preferred Shares shall be in arrears for six
or more consecutive quarterly periods, the holders of such Preferred Shares
(voting together as a class with all other series of Preferred Shares upon
which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of two additional trustees of the Company
until, (i) if such series of Preferred Shares has a cumulative distribution,
all distributions accumulated on such Preferred Shares for the past
distribution periods and the then current distribution period shall have been
fully paid or authorized and a sum sufficient for the payment thereof set aside
for payment or (ii) if such series of Preferred Shares does not have a
cumulative distribution, four consecutive quarterly distributions shall have
been fully paid or authorized and a sum sufficient for the payment thereof set
aside for payment. In such case, the entire Board of Trustees of the Company
will be increased by two trustees.
Conversion Rights
The terms and conditions, if any, upon which any series of Preferred
Shares are convertible into Common Shares will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
Common Shares into which the Preferred Shares are convertible, the conversion
price (or manner of calculation thereof), the conversion period, provisions as
to whether conversion will be at the option of the holders of the Preferred
Shares 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 Shares.
Restrictions on Transfer
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), not more than 50% in value of its outstanding
shares of beneficial interest may be owned, directly or indirectly, by five or
fewer individuals (as defined in the Code) during the last half of a taxable
year, and the shares of beneficial interest must be beneficially 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). Therefore, the
Declaration of Trust imposes certain restrictions on the ownership and
transferability of Preferred Shares. For a general description of such
restrictions, see "Description of Common Shares -- Restrictions on Ownership."
All certificates representing Preferred Shares will bear a legend referring to
these restrictions.
DESCRIPTION OF COMMON SHARES
As of June 30, 1997, the Company had outstanding 10,334,796 Common Shares.
The following description of the Common Shares sets forth certain general terms
and provisions of the Common Shares to which any Prospectus Supplement may
relate, including a Prospectus Supplement providing that Common Shares will be
issuable upon conversion of Debt Securities or Preferred Shares or upon the
exercise of Warrants. The statements below describing the Common Shares are in
all respects subject to and qualified in their entirety by reference to the
applicable provisions of the Declaration of Trust and the Company's Bylaws.
Holders of Common Shares will be entitled to receive distributions when,
as and if authorized and declared by the Board of Trustees of the Company, out
of funds legally available therefor. Payment and authorization of
distributions on the Common Shares and purchases of Common Shares by the
Company will be subject to certain restrictions if the Company fails to pay
distributions on the Series A-1 Preferred Shares, Series B Preferred Shares,
Series C Preferred Shares or Preferred Shares. See "Description of Preferred
Shares." Upon any liquidation, dissolution or winding up of the Company,
holders of Common Shares will be entitled to share equally and ratably in any
assets available for distribution to them, after payment or provision for
payment of the debts and other liabilities of the Company and the preferential
amounts owing with respect to any outstanding Series A-1 Preferred Shares,
Series B Preferred Shares, Series C Preferred Shares or Preferred Shares. The
Common Shares will possess ordinary voting rights for the election of trustees
and in respect of other trust matters, each share entitling the holder thereof
to one vote. Holders of Common Shares will not have cumulative voting rights
in the election of trustees, which means that holders of more than 50% of all
of the outstanding Common Shares voting for the election of trustees can elect
all of the trustees if they choose to do so and the holders of the remaining
shares cannot elect any trustees. Approval of the following matters requires
the affirmative vote of the holders of at least 66-2/3% of all outstanding
Common Shares: certain amendments to the Declaration of Trust, termination of
the Company, removal of a trustee, certain mergers, reorganizations or
consolidations of the Company or the sale, conveyance, exchange or other
disposition of all or substantially all of the Company's property. Holders of
Common Shares will not have preemptive rights, which means they have no right
to acquire any additional Common Shares that may be issued by the Company at a
subsequent date. The Common Shares will, when issued, be fully paid and
nonassessable.
The description of the limitations on the liability of shareholders of the
Company set forth under "Description of Preferred Shares -- General" is
applicable to holders of Common Shares.
The Registrar and Transfer Agent for the Company's Common Shares is First
Union National Bank of NC.
Restrictions on Ownership
For the Company to continue to qualify as a REIT under the Code, among
other requirements, not more than 50% in value of its outstanding shares of
beneficial interest may be owned, directly or indirectly, by five or fewer
individuals (after applying certain attribution rules of the Code) during the
last half of a taxable year; the shares must be beneficially 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 (see "Federal Income Tax
Considerations"). Therefore, the Declaration of Trust, subject to certain
exceptions, provides that no holder (other than (i) Norman M. Kranzdorf,
President and Chief Executive Officer of the Company, and Marvin Williams,
former Chairman of the Board of the Company, and (ii) any other person approved
by the trustees, at their option and in their discretion, provided that such
approval will not result in the termination of the status of the Company as a
REIT) may own, or be deemed to own by virtue of the attribution provisions of
the Code, more than 9.8% (the "Ownership Limit") of the lesser of the number or
value (in either case as determined in good faith by the trustees) of the total
outstanding Common Shares. All certificates representing Common Shares will
bear a legend referring to these restrictions. The Articles Supplementary for
any series of Preferred Shares will provide, subject to certain exceptions,
that no holder (other than any person approved by the trustees, at their option
and in their discretion, provided that such approval will not result in the
termination of the status of the Company as a REIT) may own, or be deemed to
own by virtue of the attribution provisions of the Code, more than 9.8% (the
"Preferred Shares Ownership Limit") of the lesser of the number or the value
(in either case as determined in good faith by the trustees) of the total
outstanding Preferred Shares. Notwithstanding the foregoing, if certain events
occur, including a substantial reduction in the value of the Common Shares and
high concentrations of beneficial ownership of Common Shares and/or Preferred
Shares, such that five or fewer individuals own more than 50% of the value of
the outstanding shares of beneficial interest of the Company during the last
half of a taxation year, then the Company would fail to qualify as a REIT.
The trustees may waive the Ownership Limit or the Preferred Shares
Ownership Limit if evidence satisfactory to the trustees and the Company's tax
counsel is presented that such ownership will not then or in the future
jeopardize the Company's status as a REIT. As a condition of such waiver, the
intended transferee must give written notice to the Company of the proposed
transfer and must furnish such opinions of counsel, affidavits, undertakings,
agreements and information as may be required by the trustees no later than the
15th day prior to any transfer which, if consummated, would result in the
intended transferee owning shares in excess of the Ownership Limit or the
Preferred Shares Ownership Limit. The foregoing restrictions on
transferability and ownership will not apply if the trustees determine that it
is no longer in the best interests of the Company to attempt to qualify, or to
continue to qualify, as a REIT. Any transfer of shares that would (i) create a
direct or indirect ownership of shares in excess of the Ownership Limit or the
Preferred Shares Ownership Limit, (ii) result in the shares being owned by
fewer than 100 persons or (iii) result in the Company being "closely held"
within the meaning of Section 856(h) of the Code, shall be null and void, and
the intended transferee will acquire no rights to the shares. The Declaration
of Trust provides that the Company, by notice to the holder thereof, may
purchase any or all shares of beneficial interest of the Company (the "Excess
Shares") that are proposed to be transferred pursuant to a transfer which, if
consummated, would result in the intended transferee owning shares in excess of
the Ownership Limit or would otherwise jeopardize the REIT status of the
Company. The Articles Supplementary for any series of Preferred Shares will
provide that the Company, by notice to the holder thereof, may purchase any or
all Preferred Shares (the "Excess Preferred Shares") that are proposed to be
transferred pursuant to a transfer which, if consummated, would result in the
intended transferee owning Preferred Shares in excess of the Preferred Shares
Ownership Limit or would otherwise jeopardize the REIT status of the Company.
The purchase price of any Excess Shares or Excess Preferred Shares, as the case
may be, shall be equal to the fair market value of such shares reflected in the
closing sales price for the shares, if then listed on a national securities
exchange, or such price for the shares on the principal exchange if then listed
on more than one national securities exchange, or, if the shares are not then
listed on a national securities exchange, the latest bid quotation for the
shares if then traded over-the-counter, or, if such quotation is not available,
the fair market value as determined by the trustees in good faith, on the last
trading day immediately preceding the day on which notice of such proposed
purchase is sent by the Company. From and after the date fixed for purchase by
the trustees, the holder of such shares to be purchased by the Company shall
cease to be entitled to distribution, voting rights and other benefits with
respect to such shares except the right to payment of the purchase price for
the shares. Any distribution paid to a proposed transferee on Excess Shares or
Excess Preferred Shares prior to the discovery by the Company that such shares
have been transferred in violation of the provisions of the Declaration of
Trust or Articles Supplementary shall be repaid to the Company upon demand. If
the foregoing transfer restrictions are determined to be void or invalid by
virtue of any legal decision, statute, rule or regulation, then the intended
transferee of any Excess Shares or Excess Preferred Shares may be deemed, at
the option of the Company, to have acted as an agent on behalf of the Company
in acquiring such Excess Shares or Excess Preferred Shares and to hold such
Excess Shares or Excess Preferred Shares on behalf of the Company.
All persons who own, directly or by virtue of the attribution provisions
of the Code, more than 5% in number or value of the outstanding (i) Common
Shares or (ii) Preferred Shares of the Company must give a written notice to
the Company containing the information specified in the Declaration of Trust or
Articles Supplementary by January 30 of each year. In addition, each
shareholder shall upon demand be required to disclose to the Company in writing
such information with respect to the direct, indirect and constructive
ownership of beneficial interests as the trustees deem necessary to comply with
the provisions of the Code applicable to a REIT, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.
These ownership limitations may have the effect of precluding acquisition
of control of the Company unless the trustees determine that maintenance of
REIT status is no longer in the best interests of the Company.
DESCRIPTION OF WARRANTS
The Company may issue Warrants for the purchase of Debt Securities,
Preferred Shares or Common Shares. Warrants may be issued independently or
together with any Offered Securities and may be attached to or separate from
such 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 ("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 following terms,
where applicable, of the Warrants in respect of which this Prospectus is being
delivered: (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 currencies in which the price of such Warrants may be payable; (5) the
designation, aggregate principal amount and terms of the securities purchasable
upon exercise of such Warrants; (6) the designation and terms of the Offered
Securities with which such Warrants are issued and the number of such Warrants
issued with each such security; (7) the currency or currencies, including
composite currencies, in which the principal of or any premium or interest on
the securities purchasable upon exercise of such Warrants will be payable; (8)
if applicable, the date on and after which such Warrants and the related
securities will be separately transferable; (9) the price at which and currency
or currencies, including composite currencies, in which the securities
purchasable upon exercise of such Warrants may be purchased; (10) the date on
which the right to exercise such Warrants shall commence and the date on which
such right shall expire; (11) the minimum or maximum amount of such Warrants
which may be exercised at any one time; (12) information with respect to book-
entry procedures, if any; (13) a discussion of certain Federal income tax
considerations; and (14) any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants.
DESCRIPTION OF RIGHTS
The Company may issue Rights to its shareholders for the purchase of
Common Shares. Each series of Rights will be issued under a separate rights
agreement (a "Rights Agreement") to be entered into between the Company and a
bank or trust company, as Rights agent, all as set forth in the Prospectus
Supplement relating to the particular issue of Rights. The Rights agent will
act solely as an agent of the Company in connection with the certificates
relating to the Rights and will not assume any obligation or relationship of
agency or trust for or with any holders of Rights certificates or beneficial
owners of Rights. The Rights Agreement and the Rights certificates relating to
each series of Rights will be filed with the Commission and incorporated by
reference as an exhibit to the Registration Statement of which this Prospectus
is a part at or prior to the time of the issuance of such series of Rights.
The applicable Prospectus Supplement will describe the terms of the Rights
to be issued, including the following where applicable: (i) the date for
determining the shareholders entitled to the Rights distribution; (ii) the
aggregate number of Common Shares purchasable upon exercise of such Rights and
the exercise price; (iii) the aggregate number of Rights being issued; (iv) the
date, if any, on and after which such Rights may be transferable separately;
(v) the date on which the right to exercise such Rights shall commence and the
date on which such right shall expire; (vi) any special United States federal
income tax consequences; and (vii) any other terms of such Rights, including
terms, procedures and limitations relating to the distribution, exchange and
exercise of such Rights.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a general summary of the Code provisions
governing the United States federal income tax treatment of a REIT and is not
tax advice. The discussion is based upon the Code, Treasury regulations, and
IRS rulings and judicial decisions now in effect, all of which are subject to
change at any time, possibly with retroactive effect, by legislative, judicial
or administrative action. The tax treatment of a holder of any of the Offered
Securities will vary depending upon the terms of the specific securities
acquired by such holder, as well as his particular situation, and this
discussion does not attempt to address any aspects of Federal income taxation
relating to holders of Offered Securities. Certain Federal income tax
considerations relevant to holders of the Offered Securities will be provided
in the applicable Prospectus Supplement relating thereto.
EACH INVESTOR IS ADVISED TO CONSULT THE APPLICABLE PROSPECTUS SUPPLEMENT,
AS WELL AS HIS OWN TAX ADVISOR, REGARDING THE TAX CONSEQUENCES OF THE
ACQUISITION, OWNERSHIP AND SALE OF THE OFFERED SECURITIES, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH ACQUISITION,
OWNERSHIP, AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
Federal Income Taxation of the Company
General
The Company has elected to be taxed as a REIT under Sections 856 through
860 of the Code, commencing with its taxable year ended December 31, 1992. The
Company believes that, commencing with its taxable year ended December 31,
1992, it was organized and has been operating 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 qualify or remain qualified.
In the opinion of Robinson Silverman Pearce Aronsohn & Berman LLP,
commencing with the Company's taxable year ended December 31, 1992, the Company
was organized in conformity with the requirements for qualification as a REIT,
and its method of operation enabled it to meet the requirements for
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. Such factual
assumptions and representations are set forth below in this discussion of
"Federal Income Tax Considerations." In addition, this opinion is based upon
the factual representations of the Company concerning its business and
properties as set forth in this Prospectus. Moreover, such qualification and
taxation as a REIT depends upon the Company's ability to meet, through actual
annual operating results, distribution levels, diversity of share ownership,
and the various other qualification tests imposed under the Code discussed
below, the results of which have not been and will not be reviewed by Robinson
Silverman Pearce Aronsohn & Berman LLP. Accordingly, no assurance can be given
that the actual results of the Company's operation for any one taxable year
will satisfy such requirements. See "--Failure to Qualify as a Real Estate
Investment Trust."
If the Company qualifies for tax treatment as a REIT, it will generally
not be subject to Federal corporate taxation on its net income to the extent
currently distributed to its shareholders. This substantially eliminates the
"double taxation" (at both the corporate and stockholder levels) that typically
results from the use of corporate investment vehicles.
The Company will be subject to Federal income tax, however, as follows:
First, the Company will be taxed at regular corporate rates on its
undistributed REIT taxable income, including undistributed net capital gains.
Second, under certain circumstances, the Company may be subject to the
"alternative minimum tax" to the extent that tax exceeds its regular tax.
Third, if the Company has net income from the sale or other disposition of
"foreclosure property" that is held primarily for sale to customers in the
ordinary course of business or other nonqualifying income from foreclosure
property, it will be subject to tax at the highest corporate rate on such
income. Fourth, any net income that the Company has from prohibited
transactions (which are, in general, certain sales or other dispositions of
property other than foreclosure property held primarily for sale to customers
in the ordinary course of business) will be subject to a 100% tax. Fifth, if
the Company should fail to satisfy either the 75% or 95% gross income tests (as
discussed below), and 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 fails to distribute during each year at least the sum of (i) 85% of its
REIT ordinary income for such year, (ii) 95% of its REIT capital gain net
income for such year, and (iii) any undistributed taxable income from preceding
periods, the Company will be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed. Seventh, if the
Company acquires any asset from a C corporation (i.e., generally a corporation
subject to full corporate-level tax) in certain transactions in which the basis
of the asset in the hands of the Company is determined by reference to the
basis of the asset (or any other property) in the hands of the C corporation,
and the Company recognizes gain on the disposition of such asset during the 10-
year period (the "Recognition Period") beginning on the date on which such
asset was acquired by the Company, then, to the extent of the excess, if any,
of the fair market value over the adjusted basis of any such asset as of the
beginning of the Recognition Period, such gain will be subject to tax at the
highest regular corporate rate pursuant to Internal Revenue Service regulations
that have not yet been promulgated.
Requirements for Qualification
A REIT is defined in the Code 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 860 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) not more than 50% in value of the outstanding stock of which is
owned during the last half of each taxable year, directly or indirectly, by or
for five or fewer individuals (as defined in the Code to include certain
entities) (the "Five or Fewer Requirement"); and (7) which meets certain income
and asset tests described below. Conditions (1) to (4), inclusive, must be met
during the entire taxable year and 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. For purposes of conditions (5) and (6),
pension funds and certain other tax-exempt entities are treated as individuals,
subject to a "look-through" exception in the case of condition (6).
The Company has represented that it has satisfied the share ownership
requirements set forth in (5) and (6) above. In addition, the Company's
Declaration of Trust provides restrictions regarding the transfer of its Shares
which are intended to assist the Company in continuing to satisfy the shares
ownership requirements described in (5) and (6) above. Such transfer
restrictions are described in "Description of Common Shares -- Restrictions on
Ownership."
The Company owns and operates a number of properties through subsidiaries.
Code Section 856(i) provides that a corporation which is a "qualified REIT
subsidiary" shall not be treated as a separate corporation, and all assets,
liabilities, and items of income, deduction, and credit of a "qualified REIT
subsidiary" shall be treated as assets, liabilities and such items (as the case
may be) of the REIT. Thus, in applying the requirements described herein, the
Company's "qualified REIT subsidiaries" will be ignored, and all assets,
liabilities and items of income, deduction, and credit of such subsidiaries
will be treated as assets, liabilities and items of the Company.
Income Tests
There are three percentage tests relating to the sources of the Company's
gross income. First, at least 75% of the Company's gross income (excluding
gross income from certain sales of property held primarily for sale and from
discharge of indebtedness) must be directly or indirectly derived each taxable
year from investments relating to real property or mortgages on real property
or certain temporary investments. Second, at least 95% of the Company's gross
income (excluding gross income from certain sales of property held primarily
for sale and from discharge of indebtedness) must be directly or indirectly
derived each taxable year from any of the sources qualifying for the 75% test
and from dividends, interest, and gain from the sale or disposition of stock or
securities. Third, in each taxable year short-term gains from sales of stock or
securities, gains from sales of property (other than foreclosure property) held
primarily for sale and gains from the sale or other taxable disposition of real
property held for less than four years (other than from involuntary conversions
and foreclosure property) must represent less than 30% of the Company's gross
income. In applying these tests, if the Company invests in a partnership, the
Company will be treated as realizing its share of the income and bearing its
share of the loss of the partnership, and the character of such income or loss,
as well as other partnership items, will be determined at the partnership
level.
Rents received by the Company will qualify as "rents from real property"
for purposes of satisfying the gross income tests for a REIT 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, although rents generally will not
be excluded merely because they are based on a fixed percentage of receipts or
sales. Second, rents received from a tenant will not qualify as "rents from
real property" if the REIT, or an owner of 10% or more of the REIT, also
directly or constructively owns 10% or more of such tenant. 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 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 income; provided,
however, the Company may directly perform certain services other than services
which are considered rendered to the occupant of the property. The Company
will, in a timely manner, hire independent contractors from whom it derives no
revenue to perform such services, except that the Company will directly perform
services under certain of its leases with respect to which it will receive an
opinion of counsel or otherwise satisfy itself that its performance of such
services will not cause the rents received with respect to such leases to fail
to qualify as "rents from real property." The Company has represented that each
of the above requirements has been satisfied.
The term "interest" generally does not include any amount if the
determination of such amount depends in whole or in part on the income or
profits of any person, although an amount generally will not be excluded from
the term "interest" solely by reason of being based on a fixed percentage of
receipts or sales.
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 eligible for relief under certain provisions of the Code. These relief
provisions will be generally available if the Company's failure to meet such
tests 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 now possible to determine the circumstances under which the
Company may be entitled to the benefit of these relief provisions. If these
relief provisions apply, a 100% tax is imposed on the net income attributable
to the greater of the amount by which the Company failed the 75% test or the
95% test.
Asset Tests
At the close of each quarter of its taxable year, the Company must also
satisfy several tests relating to the nature and diversification of its assets.
First, at least 75% of the value of the Company's total assets must be
represented by real estate assets, cash, cash items (including receivables
arising in the ordinary course of the Company's operation) and government
securities. In addition, not more than 25% of the value of the Company's total
assets may be represented by securities other than those includible in the 75%
asset class. Moreover, 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. Finally, of the investments included
in the 25% asset class, the Company may not own more than 10% of any one
issuer's outstanding voting securities.
Annual Distribution Requirements
The Company, in order to avoid being taxed as a regular corporation, is
required to make distributions (other than capital gain distributions) to its
shareholders which qualify for the dividends paid deduction in an amount at
least equal to (A) the sum of (i) 95% of the Company's "REIT taxable income"
(computed without regard to the dividends paid deduction and the Company's net
capital gain) and (ii) 95% of the after-tax net income, if any, from
foreclosure property, minus (B) the sum of certain items of non-cash income.
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 distribution
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 "REIT taxable income," as adjusted, it will be subject to tax
thereon at regular corporate tax rates. Finally, as discussed above, the
Company may be subject to an excise tax if it fails to meet certain other
distribution requirements. The Company intends to make timely distributions
sufficient to satisfy these annual distribution requirements.
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, or to distribute such greater amount as may be necessary to avoid
income and excise taxation, due to, among other things, (a) 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, or (b) the payment of severance
benefits that may not be deductible to the Company. In the event that such
timing differences occur, the Company may find it necessary to arrange for
borrowings or, if possible, pay taxable share distributions in order to meet
the distribution requirement.
Under certain circumstances, in the event of a deficiency determined by
the IRS, the Company may be able to rectify a resulting failure to meet the
distribution requirement for a year by paying "deficiency dividends" to
shareholders in a later year, which may be included in the Company's deduction
for distributions paid for the earlier year. Thus, although the Company may be
able to avoid being taxed on amounts distributed as deficiency distributions,
it will be required to pay interest based upon the amount of any deduction
taken for deficiency distributions.
Failure to Qualify as a Real Estate Investment Trust
The Company's election to be treated as a REIT will be automatically
terminated if the Company fails to meet the requirements described above. In
that event, the Company will be subject to tax (including any applicable
minimum tax) on its taxable income at regular corporate rates, and
distributions to shareholders will not be deductible by the Company. All
distributions to shareholders will be taxable as ordinary income to the extent
of current and accumulated earnings and profits allocable to such distributions
and will be eligible for the 70% dividends received deduction for corporate
shareholders (although special rules apply in the case of any "extraordinary
dividend" as defined in Code Section 1059). The Company will not be eligible
again to elect REIT status until the fifth taxable year which begins after the
year for which the Company's election was terminated unless the Company did not
willfully fail to file a timely return with respect to the termination taxable
year, inclusion of incorrect information in such return was not due to fraud
with intent to evade tax, and the Company establishes that failure to meet the
requirement was due to reasonable cause and not willful neglect. Failure to
qualify for even one year could result in the Company incurring substantial
indebtedness (to the extent borrowings are feasible) or liquidating substantial
investments in order to pay the resulting taxes.
Federal Income Taxation of Shareholders
General
So long as the Company qualifies for taxation as a REIT, distributions
with respect to its Shares made out of current or accumulated earnings and
profits allocable thereto (and not designated as capital gain dividends) will
be includible by the shareholders as ordinary income for Federal income tax
purposes. For this purpose, the current and accumulated earnings and profits of
the Company will be allocated first to distributions with respect to Series A-1
Preferred Shares, Series B Preferred Shares and Series C Preferred Shares and
then to distributions with respect to Common Shares. None of these
distributions will be eligible for the dividends received deduction for
corporate shareholders. Distributions that are designated as capital gain
dividends will be taxed as long-term capital gains (to the extent they do not
exceed the Company's actual net capital gain for the taxable year) without
regard to the period for which the shareholder has held his share. Corporate
shareholders, however, may be required to treat up to 20% of certain capital
gain dividends as ordinary income.
Distributions in excess of current or accumulated earnings and profits
will not be taxable to a shareholder to the extent that they do not exceed the
adjusted basis of the shareholder's Shares. Shareholders will be required to
reduce the tax basis of their Shares by the amount of such distributions until
such basis has been reduced to zero, after which such distributions will be
taxable as capital gain (ordinary income in the case of a shareholder who holds
his Shares as a dealer). The tax basis as so reduced will be used in computing
the capital gain or loss, if any, realized upon sale of the Shares. Any loss
upon a sale or exchange of Shares by a shareholder who held such Shares for six
months or less (after applying certain holding period rules) will generally be
treated as a long-term capital loss to the extent such shareholder previously
received capital gain distributions with respect to such Shares.
Shareholders may not include in their individual Federal income tax
returns any net operating losses or capital losses of the Company. In addition,
any distribution declared by the Company in October, November or December of
any year payable to a shareholder of record on a specified date in any such
month shall be treated as both paid by the Company and received by the
shareholder on December 31 of such year, provided that the distribution is
actually paid by the Company no later than January 31 of the following year.
The Company may be required to withhold a portion of capital gain distributions
to any shareholders who fail to certify their non-foreign status to the
Company.
Upon the sale or exchange of Shares to or with a person other than the
Company, a holder will recognize capital gain or loss equal to the difference
between the amount realized on such sale or exchange and the holder's adjusted
tax basis in such shares. Any capital gain or loss recognized will generally be
treated as long-term capital gain or loss if the holder held such shares for
more than one year (although proposed legislation would increase the period to
more than 18 months, effective July 29, 1997).
Backup Withholding and Information Reporting
A noncorporate holder of Shares who is not otherwise exempt from backup
withholding may be subject to backup withholding at the rate of 31% with
respect to distributions paid on, or the proceeds of a sale, exchange or
redemption of, the Shares. Generally, backup withholding applies only when the
taxpayer (i) fails to furnish or certify his correct taxpayer identification
number to the payor in the manner requested, (ii) is notified by the IRS that
he has failed to report payments of interest or dividends properly, or (iii)
under certain circumstances, fails to certify that he has not been notified by
the IRS that he is subject to backup withholding for failure to report interest
or dividend payments. Any amounts withheld under the backup withholding rules
from a payment to a holder will be allowed as a credit against the holder's
federal income tax liability or as a refund, provided that the required
information is furnished to the IRS. Holders should consult their own tax
advisors regarding their qualification for exemption from backup withholding
and the procedure for obtaining any applicable exemption.
Foreign Shareholders
The rules governing United States Federal income taxation of nonresident
alien individuals, foreign corporations, foreign partnerships and other foreign
shareholders (collectively, "Non-U.S. Shareholders") are complex and no attempt
will be made herein to provide more than a general summary of such rules.
Prospective Non-U.S. Shareholders 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, as well as the
tax treatment of such an investment under their home country laws.
Distributions 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
Non-U.S. Shareholder's conduct of a United States trade or business, the
Non-U.S. Shareholder generally will be subject to a tax at graduated rates, in
the same manner as U.S. Shareholders are taxed with respect to such dividends
(and may also be subject to the 30% branch profits tax in the case of a
shareholder that is a foreign corporation). The Company expects to withhold
United States income tax at the rate of 30% on the gross amount of any such
dividends paid to a Non-U.S. Shareholder unless (i) a lower treaty rate applies
and the Non-U.S. Shareholder files an IRS Form 1001 with the Company claiming a
lower treaty rate or (ii) the Non-U.S. Shareholder files an IRS Form 4224 with
the Company claiming that the distribution is effectively connected income.
Distributions in excess of current and accumulated earnings and profits of the
Company will not be taxable to a shareholder to the extent that they do not
exceed the adjusted basis of the shareholder'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. Shareholder's Shares, they will give rise to
tax liability if the Non-U.S. Shareholder would otherwise be 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 as dividends (although Proposed Treasury Regulations would allow the
Company to make a reasonable estimate of any excess distributions and avoid
withholding thereon). 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.
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. Shareholder 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.
Shareholder as if such gain were effectively connected with a United States
business. Non-U.S. Shareholders would thus be taxed at the normal capital gain
rates applicable to U.S. shareholders (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 shareholder not
entitled to treaty exemption. The Company is required 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. Shareholder's FIRPTA
tax liability.
Gain recognized by a Non-U.S. Shareholder 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. It is currently anticipated that the Company
will be a "domestically controlled REIT," and that therefore the sale of Shares
will not be subject to taxation under FIRPTA. However, gain not subject to
FIRPTA will be taxable to a Non-U.S. Shareholder if (i) investment in the
Shares is effectively connected with the Non-U.S. Shareholder's United States
trade or business, in which case the Non-U.S. Shareholder will be subject to
the same treatment as U.S. shareholders with respect to such gain, or (ii) the
Non-U.S. Shareholder 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. Shareholder
will be subject to the same treatment as U.S. shareholders with respect to such
gain (subject to applicable alternative minimum tax and a special alternative
minimum tax in the case of nonresident alien individuals).
Tax-Exempt Shareholders
Distributions from the Company to a tax-exempt employee pension trust or
other domestic tax-exempt shareholder generally will not constitute "unrelated
business taxable income" ("UBTI") unless the shareholder has borrowed to
acquire or carry its Shares. Qualified trusts that hold more than 10% (by
value) of the shares of certain REITs, however, may be required to treat a
certain percentage of such a REIT's distributions as UBTI. This requirement
will apply only if (i) the REIT would not qualify as such for Federal income
tax purposes but for the application of a "look-through" exception to the Five
or Fewer Requirement applicable to shares held by qualified trusts and (ii) the
REIT is "predominantly held" by qualified trusts. A REIT is predominantly held
by qualified trusts if either (i) a single qualified trust holds more than 25%
by value of the interests in the REIT or (ii) one or more qualified trusts,
each owning more than 10% by value of the interests in the REIT, hold in the
aggregate more than 50% of the interests in the REIT. The percentage of any
REIT distribution treated as UBTI is equal to the ratio of (a) the UBTI earned
by the REIT (treating the REIT as it were a qualified trust and therefore
subject to tax on UBTI) to (b) the total gross income of the REIT. A de
minimis exception applies where the percentage is less than 5% for any year.
For these purposes, a qualified trust is any trust described in section 401(a)
of the Code and exempt from tax under section 501(a) of the Code. The
provisions requiring qualified trusts to treat a portion of REIT distributions
as UBTI will not apply if the REIT is able to satisfy the Five or Fewer
Requirement without relying upon the "look-through" exception.
State, Local and Foreign Taxation
The Company and its shareholders may be subject to state, local or foreign
taxation in various state, local or foreign jurisdictions, including those in
which it or they transact business or reside. Such state, local or foreign
taxation may differ from the Federal income tax treatment described above.
Consequently, prospective holders of Offered Securities should consult their
own tax advisors regarding the effect of state, local and foreign tax laws on
an investment in the Company.
Proposed Legislation
Congress has recently proposed legislation which, if passed, would be
beneficial to the Company and its shareholders because the relevant provisions
would liberalize several of the rules concerning the qualifications and
taxation of the Company as a REIT. In addition, the proposed legislation would
reduce the rate of tax on capital gains and, effective July 29, 1997, would
increase the holding period for long-term capital gain from one year to 18
months. It is uncertain whether the above legislation will become law and, if
so, what the precise terms will be. Prospective holders of Offered Securities
are urged to consult their own tax advisors regarding any proposed and new
legislation.
PLAN OF DISTRIBUTION
The Company may sell the 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 or through a combination of any such
methods of sale. Any such underwriter or agent involved in the offer and sale
of the Offered Securities will be named in the applicable Prospectus
Supplement.
Underwriters may offer and sell the 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 are 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.
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. In the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Unless otherwise specified in the applicable Prospectus Supplement, each
series of Offered Securities will be a new issue with no established trading
market, other than the Common Shares which are listed on the New York Stock
Exchange. Any shares of Common Shares sold pursuant to a Prospectus Supplement
will be listed on the New York Stock Exchange, subject to official notice of
issuance. The Company may elect to list any series of Offered Securities 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.
If so indicated in a Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain institutional
investors to purchase Offered Securities of the series to which such Prospectus
Supplement relates providing for payment and delivery on a future date
specified in such Prospectus Supplement. There may be limitations on the
minimum amount which may be purchased by any such institutional investor or on
the portion of the aggregate principal amount of the particular Offered
Securities which may be sold pursuant to such arrangements. Institutional
investors to which such offers may be made, when authorized, include commercial
and savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and such other institutions as may be
approved by the Company. The obligations of any such purchasers pursuant to
such delayed delivery and payment arrangements will not be subject to any
conditions except that (i) the purchase by an institution of the particular
Offered Securities 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 particular Offered Securities are being sold to
underwriters, the Company shall have sold to such underwriters the total
principal amount of such Offered Securities or number of Warrants less the
principal amount or number thereof, as the case may be, covered by such
arrangements. Underwriters will not have any responsibility in respect of the
validity of such arrangements or the performance of the Company or such
institutional investors thereunder.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
In order to comply with the securities laws of certain states, if
applicable, the Offered Securities offered hereby will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states Offered Securities may not be sold unless they have
been registered or qualified for sale in the applicable state or an exemption
from the registration or qualification requirement is available and is complied
with.
ERISA MATTERS
The Company may be considered a "party in interest" within the meaning of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
a "disqualified person" under corresponding provisions of the Code with respect
to certain employee benefit plans. Certain transactions between an employee
benefit plan and a party in interest or disqualified person may result in
"prohibited transactions" within the meaning of ERISA and the Code, unless such
transactions are effected pursuant to an applicable exemption. Any employee
benefit plan or other entity subject to such provisions of ERISA or the Code
proposing to invest in the Offered Securities should consult with its legal
counsel.
LEGAL OPINIONS
Certain legal matters will be passed upon for the Company by Robinson
Silverman Pearce Aronsohn & Berman LLP, New York, New York. The legal
authorization and issuance of the Offered Securities, as well as certain other
legal matters concerning Maryland law, will be passed upon for the Company by
Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland. In addition, the
description of Federal income tax consequences contained in this Prospectus
entitled "Federal Income Tax Considerations" is based upon the opinion of
Robinson Silverman Pearce Aronsohn & Berman LLP.
<PAGE>
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report (Form 10-K) for the year ended December 31, 1996, have
been audited by Arthur Andersen L.L.P., independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table itemizes the expenses incurred by the Company in
connection with the offering of the Offered Securities being registered. All
the amounts shown are estimates except the Securities and Exchange Commission
registration fee.
Item Amount
____ ______
Registration Fee -- Securities and
Exchange Commission. . . . . . . . . . $ 30,303
New York Stock Exchange Listing Fee. . . 51,300
Fees of Rating Agencies . . . . . . . . 75,000
Legal Fees and Expenses. . . . . . . . . 150,000
Accounting Fees and Expenses . . . . . .25,000
Printing and Engraving Expenses. . . . . 50,000
Blue Sky Fees and Expenses . . . . . . . 25,000
Trustee's Fees (including counsel fees). 20,000
Miscellaneous Expenses . . . . . . . . . 23,397
_______
Total. . . . . . . . . . . . . . . . . . $450,000
========
Item 15. Indemnification of Trustees and Officers.
Under Maryland law, a real estate investment trust formed in Maryland is
permitted to eliminate, by provision in its declaration of trust, the liability
of its trustees and officers to the trust and its shareholders for money
damages except for (i) actual receipt of an improper benefit or profit in
money, property or services or (ii) acts or omissions involving active and
deliberate dishonesty established by a final judgment as being material to the
cause of action. The Company's Declaration of Trust contains such a provision
which eliminates such liability to the maximum extent permitted by Maryland
law.
The Company's Bylaws require it to indemnify (i) any present or former
trustee or officer who has been successful, on the merits or otherwise, in the
defense of a proceeding to which he was made a party by reason of his service
in that capacity, against reasonable expenses incurred by him in connection
with the proceeding and (ii) any present or former trustee or officer against
any claim or liability to which he may become subject by reason of service in
that capacity unless it is established that (a) his act or omission was
committed in bad faith or was the result of active and deliberate dishonesty,
(b) he actually received an improper personal benefit in money, property or
services or (c) in the case of a criminal proceeding, he had reasonable cause
to believe that his act or omission was unlawful. In addition, the Company's
Bylaws require it to pay or reimburse, in advance of final disposition of a
proceeding, reasonable expenses incurred by a present or former trustee or
officer made a party to a proceeding by reason of his status as a trustee or
officer provided that the Company shall have received (i) a written affirmation
by the trustee or officer of his good faith belief that he has met the standard
of conduct necessary for indemnification by the Company as authorized by the
Bylaws and (ii) a written undertaking by or on his behalf to repay the amount
paid or reimbursed by the Company if it shall ultimately be determined that the
standard of conduct was not met. The Company's Bylaws also (i) permit the
Company to provide indemnification and payment or reimbursement of expenses to
a present or former trustee or officer who served a predecessor of the Company
in such capacity and to any employee or agent of the Company or a predecessor
of the Company, (ii) provide that any indemnification or payment or
reimbursement of the expenses permitted by the Bylaws shall be furnished in
accordance with the procedures provided for indemnification and payment or
reimbursement of expenses under Section 2-418 of the Maryland General
Corporation Law ("MGCL") for directors of Maryland corporations and (iii)
permit the Company to provide to the trustees and officers such other and
further indemnification or payment or reimbursement of expenses as may be
permitted by Section 2-418 of the MGCL for directors of Maryland corporations.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to trustees and officers of the Company pursuant to the foregoing
provisions or otherwise, the Company has been advised that, although the
validity and scope of the governing statute has not been tested in court, in
the opinion of the Securities and Exchange 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.
Item 16. Exhibits
1.1 Form of Underwriting Agreement(s).*
4.1(a) Amended and Restated Declaration of Trust of Registrant.**
4.1(b) Amendment No. 1 to Amended and Restated Declaration of Trust,
dated March 7, 1996.***
4.1(c) Amendment No. 2 to Amended and Restated Declaration of Trust,
dated June 4, 1997.
4.2(a) Articles Supplementary classifying 11,155 Shares of Beneficial
Interest as Series A-1 Increasing Rate Cumulative Convertible
Preferred Shares of Beneficial Interest of the Company.****
4.2(b) Articles Supplementary classifying 1,235,000 Shares of
Beneficial Interest as 9.75% Series B-1 Cumulative Convertible
Preferred Shares of Beneficial Interest.*****
4.2(c) Articles Supplementary classifying 1,235,000 Shares of
Beneficial Interest as 9.75% Series B-2 Cumulative Convertible
Preferred Shares of Beneficial Interest.******
4.2(d) Articles Supplementary classifying 395,834 Shares of Beneficial
Interest as Series C Cumulative Redeemable Preferred Shares of
Beneficial Interest of the Company.******
4.3 Amended and Restated Bylaws of Registrant, as amended.**
4.4 Form of Indenture relating to Senior Securities to be entered
into by the Company and a trustee to be selected by the
Company.*
4.5 Form of Senior Security.*
4.6 Form of Indenture relating to Subordinated Securities to be
entered into by the Company and a trustee to be selected by the
Company.*
4.7 Form of Subordinated Security.*
4.8 Form of Articles Supplementary for the Preferred Shares.*
4.9 Form of Preferred Share Certificate.*
4.10 Form of Common Share Certificate.**
4.11 Form of Common Shares Warrant Agreement.*
4.12 Form of Preferred Shares Warrant Agreement.*
4.13 Form of Rights Agreement.*
5.1 Opinion of Ballard Spahr Andrews & Ingersoll re: legality of the
Offered Securities.
8.1 Opinion of Robinson Silverman Pearce Aronsohn & Berman LLP re:
tax matters.
12.1 Calculation of Ratios of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included as part
of Exhibit 5.1).
23.3 Consent of Robinson Silverman Pearce Aronsohn & Berman LLP
(included as part of Exhibit 8.1).
24.1 Power of attorney (included on signature page).
25.1 Statement of Eligibility of Senior Securities Trustee on Form T-
1.*
25.2 Statement of Eligibility of Subordinated Securities Trustee on
Form T-1.*
________________________
* To be filed by amendment or incorporated by reference in connection
with the offering of Offered Securities.
** Previously filed as an exhibit to the Registrant's Registration
Statement on Form S-11 (No. 33-49434) and incorporated herein by
reference.
*** Previously filed as an exhibit to the Registrant's Registration
Statement on Form S-8 (No. 33-94294) and incorporated herein by
reference.
**** Previously filed as an exhibit to the Registrant's Registration
Statement on Form S-4 (No. 333-18249) and incorporated herein by
reference.
***** Previously filed as an exhibit to the Registrant's Registration
Statement on Form 8-A (No. 1-11478) and incorporated herein by
reference.
****** Previously filed as an exhibit to the Registrant's Current Report on
Form 8-K dated February 27, 1997, filed March 14, 1997 and
incorporated herein by reference.
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 the registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the registration statement is on Form S-3 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registration
pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, 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 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 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 the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrant hereby further undertakes to file an
application for the purpose of determining the eligibility of the trustee to
act under subsection (a) of Section 310 of the Trust Indenture Act in
accordance with the rules and regulations prescribed by the Commission under
Section 305(b)(2) of the Act.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
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 the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, 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 of whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issues.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing a Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Conshohocken, Commonwealth of Pennsylvania, on July
31, 1997.
KRANZCO REALTY TRUST
By: /s/ Norman M. Kranzdorf
__________________________________
Norman M. Kranzdorf
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Norman M. Kranzdorf or Robert H. Dennis,
his true and lawful attorney-in-fact and agent, with full power of substitution
and resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective
amendments) to this registration statement, and to file the same, with exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorney-in-fact
and agent or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Name Title Date
____ _____ ____
/s/ Norman M. Kranzdorf President, Chief Executive Officer July 31, 1997
_________________________
Norman M. Kranzdorf and Trustee (Principal Executive
Officer)
/s/ Edmund Barrett Executive Vice President, Chief July 31, 1997
_________________________
Edmund Barrett Operating Officer and Trustee
/s/ Robert H. Dennis Chief Financial Officer, Treasurer July 31, 1997
__________________________
Robert H. Dennis and Trustee (Principal Financial
and Accounting Officer)
/s/ Bernard J. Korman Trustee July 31, 1997
__________________________
Bernard J. Korman
/s/ Peter D. Linneman Trustee July 31, 1997
__________________________
Peter D. Linneman
/s/ James B. Selonick Trustee July 31, 1997
__________________________
James B. Selonick
/s/ E. Donald Shapiro Trustee July 31, 1997
__________________________
E. Donald Shapiro<PAGE>
EXHIBIT INDEX
Exhibit No. Description Page No.
___________ ___________ ________
1.1 Form of Underwriting Agreement(s).*
4.1(a) Amended and Restated Declaration of Trust of
Registrant.**
4.1(b) Amendment No. 1 to Amended and Restated Declaration of Trust,
dated March 7, 1996.***
4.1(c) Amendment No. 2 to Amended and Restated Declaration of Trust,
dated June 4, 1997.
4.2(a) Articles Supplementary classifying 11,155 Shares of Beneficial
Interest as Series A-1 Increasing Rate Cumulative Convertible
Preferred Shares of Beneficial Interest of the Company.****
4.2(b) Articles Supplementary classifying 1,235,000 Shares of
Beneficial Interest as 9.75% Series B-1 Cumulative Convertible
Preferred Shares of Beneficial Interest.*****
4.2(c) Articles Supplementary classifying 1,235,000 Shares of
Beneficial Interest as 9.75% Series B-2 Cumulative Convertible
Preferred Shares of Beneficial Interest.******
4.2(d) Articles Supplementary classifying 395,834 Shares of Beneficial
Interest as Series C Cumulative Redeemable Preferred Shares of
Beneficial Interest of the Company.******
4.3 Amended and Restated Bylaws of Registrant, as amended.**
4.4 Form of Indenture relating to Senior Securities to be
entered into by the Company and a trustee to be selected by
the Company.*
4.5 Form of Senior Security.*
4.6 Form of Indenture relating to Subordinated Securities to be
entered into by the Company and a trustee to be selected by
the Company.*
4.7 Form of Subordinated Security.*
4.8 Form of Articles Supplementary for the Preferred Shares.*
4.9 Form of Preferred Share Certificate.*
4.10 Form of Common Share Certificate.**
4.11 Form of Common Shares Warrant Agreement.*
4.12 Form of Preferred Shares Warrant Agreement.*
4.13 Form of Rights Agreement.*
5.1 Opinion of Ballard Spahr Andrews & Ingersoll re: legality
of the Offered Securities.
8.1 Opinion of Robinson Silverman Pearce Aronsohn & Berman LLP
re: tax matters.
12.1 Calculation of Ratios of Earnings to Fixed Charges.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Ballard Spahr Andrews & Ingersoll (included as
part of Exhibit 5.1).
23.3 Consent of Robinson Silverman Pearce Aronsohn & Berman LLP
(included as part of Exhibit 8.1).
24.1 Power of attorney (included on signature page).
25.1 Statement of Eligibility of Senior Securities Trustee on
Form T-1.*
25.2 Statement of Eligibility of Subordinated Securities Trustee
on Form T-1.*
________________________
* To be filed by amendment or incorporated by reference in connection
with the offering of Offered Securities.
** Previously filed as an exhibit to the Registrant's Registration
Statement on Form S-11 (No. 33-49434) and incorporated herein by
reference.
*** Previously filed as an exhibit to the Registrant's Registration
Statement on Form S-8 (No. 33-94294) and incorporated herein by
reference.
**** Previously filed as an exhibit to the Registrant's Registration
Statement on Form S-4 (No. 333-18249) and incorporated herein by
reference.
***** Previously filed as an exhibit to the Registrant's Registration
Statement on Form 8-A (No. 1-11478) and incorporated herein by
reference.
****** Previously filed as an exhibit to the Registrant's Current Report on
Form 8-K dated February 27, 1997, filed March 14, 1997 and
incorporated herein by reference.
EXHIBIT 4.1(c)
KRANZCO REALTY TRUST
---------------------
AMENDMENT OF DECLARATION OF TRUST
THIS IS TO CERTIFY THAT:
First: Section 2.2 of Article II of the Amended and Restated
Declaration of Trust, dated November 4, 1992, as amended (the "Declaration"),
of Kranzco Realty Trust, a Maryland real estate investment trust (the
"Company"), is hereby amended by (i) deleting the following name and address:
Name Address
---- -------
Irvin Maizlish c/o Kranzco Realty Trust
128 Fayette Street
Conshohocken, PA 19428;
and (ii) inserting in lieu thereof the following name and address:
Name Address
---- ------
Bernard J. Korman c/o Kranzco Realty Trust
128 Fayette Street
Conshohocken, PA 19428
SECOND: The foregoing amendment to the Declaration has been duly
approved by the Board of Trustees of the Company by at least a two-thirds vote
as required by law.
THIRD: Each of the undersigned acknowledges this amendment to be the
trust act of the Company and, as to all matters or facts required to be
verified under oath, each of the undersigned acknowledges that, to the best of
his knowledge, information and belief, these matters and facts are true in all
material respects and that this statement is made under the penalties for
perjury.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this amendment to be
signed in its name and on its behalf by at least a majority of the entire Board
of Trustees of the Company this 4th day of June, 1997.
/s/ Norman M. Kranzdorf (SEAL)
-----------------------------
Norman M. Kranzdorf, Trustee
/s/ Peter D. Linneman (SEAL)
-----------------------------
Dr. Peter D. Linneman, Trustee
/s/ James B. Selonick (SEAL)
------------------------------
James B. Selonick, Trustee
/s/ Edmund Barrett (SEAL)
------------------------------
Edmund Barrett, Trustee
/s/ E. Donald Shapiro (SEAL)
------------------------------
E. Donald Shapiro, Trustee
/s/ Robert H. Dennis (SEAL)
------------------------------
Robert H. Dennis, Trustee
/s/ Bernard J. Korman (SEAL)
------------------------------
Bernard J. Korman, Trustee
EXHIBIT 5.1
July 31, 1997
Kranzco Realty Trust
128 Fayette Street
Conshohocken, Pennsylvania 19428
Re: Registration Statement on Form S-3,
filed with Securities and Exchange
Commission on July 31, 1997
----------------------------------
Ladies and Gentlemen:
We have served as Maryland counsel to Kranzco Realty Trust, a
Maryland real estate investment trust (the "Company"), in connection with
certain matters of Maryland law arising out of the registration of the
following securities having an aggregate initial offering price of up to
$100,000,000 (collectively, the "Securities"): (a) debt securities ("Debt
Securities"), (b) common shares of beneficial interest, $.01 par value per
share ("Common Shares"), including Common Shares which may be issued upon the
conversion or exercise of Debt Securities, Preferred Shares (as defined
herein), Warrants (as defined herein) or Rights (as defined herein), (c)
preferred shares of beneficial interest, $.01 par value per share ("Preferred
Shares"), including Preferred Shares which may be issued upon the conversion or
exercise of Debt Securities or Warrants, (d) warrants to purchase Debt
Securities, Common Shares or Preferred Shares ("Warrants") and (e) rights to
purchase Common Shares ("Rights"), covered by the above-referenced Registration
Statement, and all amendments thereto (the "Registration Statement"), filed by
the Company with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "1933 Act"). Capitalized
terms used but not defined herein shall have the meanings given to them in the
Registration Statement.
In connection with our representation of the Company, and as a basis
for the opinion hereinafter set forth, we have examined originals, or copies
certified or otherwise identified to our satisfaction, of the following
documents (collectively, the "Documents"):
1. The Registration Statement and the related form of prospectus
included therein in the form in which it was transmitted to the Commission
under the 1933 Act;
2. The Amended and Restated Declaration of Trust, as amended, of
the Company (the "Declaration of Trust"), certified as of a recent date by the
State Department of Assessments and Taxation of Maryland (the "SDAT");
3. the Bylaws of the Company, certified as of a recent date by its
Secretary;
4. Resolutions adopted by the Board of Trustees of the Company (the
"Board") relating to the sale, issuance and registration of the Securities,
certified as of a recent date by the Secretary of the Company (the
"Resolutions");
5. The form of certificate evidencing a Common Share, certified as
of a recent date by the Secretary of the Company;
6. A certificate of the SDAT as to the good standing of the
Company, dated as of a recent date;
7. A certificate executed by the Secretary of the Company, dated
July 31, 1997; and
8. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth in this letter, subject to the
assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed, and so
far as is known to us there are no facts inconsistent with, the following:
1. Each individual executing any of the Documents, whether on
behalf of such individual or another person, is legally competent to do so.
2. Each individual executing any of the Documents on behalf of a
party (other than the Company) is duly authorized to do so.
3. Each of the parties (other than the Company) executing any of
the Documents has duly and validly executed and delivered each of the Documents
to which such party is a signatory, and such party's obligations set forth
therein are legal, valid and binding and are enforceable in accordance with all
stated terms.
4. All Documents submitted to us as originals are authentic. All
Documents submitted to us as certified or photostatic copies conform to the
original documents. All signatures on all such Documents are genuine. All
public records reviewed or relied upon by us or on our behalf are true and
complete. All statements and information contained in the Documents are true
and complete. There are no oral or written modifications or amendments to the
Documents, and there has been no waiver of any of the provisions of the
Documents, by action or omission of the parties or otherwise.
5. The outstanding shares of beneficial interest of the Company
have not been and will not be transferred in violation of any restriction or
limitation contained in Section 6.6 of the Declaration of Trust. The
Securities will not be transferred in violation of any restriction or
limitation contained in Section 6.6 of the Declaration of Trust.
6. All Preferred Shares will be evidenced by certificates meeting
the requirements of Section 8-203(d) of the Corporations and Associations
Article of the Annotated Code of Maryland.
7. In accordance with the Resolutions, the issuance of, and certain
terms of, the Securities to be issued by the Company from time to time will be
approved by the Board or a duly authorized committee thereof in accordance with
Title 8 of the Corporations and Associations Article of the Annotated Code of
Maryland (with such approval referred to herein as the "Trust Proceedings").
The phrase "known to us" is limited to the actual knowledge, without
independent inquiry, of the lawyers at our firm who have performed legal
services in connection with the issuance of this opinion.
Based upon the foregoing, and subject to the assumptions, limitations
and qualifications stated herein, it is our opinion that:
1. The Company is a real estate investment trust duly formed and
existing under and by virtue of the laws of the State of Maryland and is in
good standing with the SDAT.
2. Upon the completion of all Trust Proceedings relating to the
Securities that are Common Shares (the "Common Securities") and the due
execution, countersignature and delivery of certificates evidencing Common
Securities and assuming that the sum of (a) all Common Shares issued as of the
date hereof, (b) any Common Shares issued between the date hereof and the date
on which any of the Common Securities are actually issued (not including any of
the Common Securities), and (c) the Common Securities will not exceed the total
number of Common Shares that the Company is authorized to issue, the Common
Securities are duly authorized and, when and if delivered against payment
therefor in accordance with the Resolutions and the Trust Proceedings, will be
validly issued, fully paid and nonassessable.
3. Upon the completion of all Trust Proceedings relating to the
Securities that are Preferred Shares (the "Preferred Securities") and the due
execution, countersignature and delivery of certificates evidencing Preferred
Securities and assuming that the sum of (a) all Preferred Shares issued as of
the date hereof, (b) any Preferred Shares issued between the date hereof and
the date on which any of the Preferred Securities are actually issued (not
including any of the Preferred Securities), and (c) the Preferred Securities
will not exceed the total number of Preferred Shares that the Company is
authorized to issue, the Preferred Securities are duly authorized and, when and
if delivered against payment therefor in accordance with the Resolutions and
the Trust Proceedings, will be validly issued, fully paid and nonassessable.
4. Upon the completion of all Trust Proceedings relating to the
Securities that are Debt Securities, the issuance of the Debt Securities and
the execution by the Company of the applicable Indenture will be duly
authorized by all necessary trust action.
5. Upon the completion of all Trust Proceedings relating to the
Securities that are Warrants, the issuance of the Warrants will be duly
authorized by all necessary trust action and, when duly executed and delivered
by the Company against payment therefor and countersigned by the applicable
Warrant Agent in accordance with the applicable Warrant Agreement and delivered
to and paid for by the purchasers of the Warrants in the manner contemplated by
the Registration Statement and/or the applicable Prospectus Supplement, the
Warrants will be validly issued.
6. Upon the completion of all Trust Proceedings relating to the
Securities that are Rights, the issuance of the Rights will be duly authorized
by all necessary trust action and, when duly executed and delivered by the
Company against payment therefor and countersigned by the applicable Rights
Agent in accordance with the applicable Rights Agreement and delivered to and
paid for by the purchasers of the Rights in the manner contemplated by the
Registration Statement and/or the applicable Prospectus Supplement, the Rights
will be validly issued.
The foregoing opinion is limited to the laws of the State of Maryland
and we do not express any opinion herein concerning any other law. The opinion
expressed herein is subject to the effect of judicial decisions which may
permit the introduction of parol evidence to modify the terms or the
interpretation of agreements. We express no opinion as to compliance with the
securities (or "blue sky") laws of the State of Maryland.
We assume no obligation to supplement this opinion if any applicable
law changes after the date hereof or if we become aware of any fact that might
change the opinion expressed herein after the date hereof.
This opinion is being furnished to you solely for submission to the
Commission as an exhibit to the Registration Statement and, accordingly, may
not be relied upon by, quoted in any manner to, or delivered to any other
person or entity without, in each instance, our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein. In
giving this consent, we do not admit that we are within the category of persons
whose consent is required by Section 7 of the 1933 Act.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
EXHIBIT 8.1
July 31, 1997
Kranzco Realty Trust
128 Fayette Street
Conshohocken, Pennsylvania 19428
Ladies and Gentlemen:
You have requested our opinion concerning the qualification and
taxation of Kranzco Realty Trust, a Maryland real estate investment trust (the
"Company"), as a real estate investment trust ("REIT") under the Internal
Revenue Code of 1986, as amended (the "Code"), for the taxable years ended
December 31, 1992 through December 31, 1996. We have examined such documents
as we have deemed necessary, including the Company's Form S-3 Registration
Statement under the Securities Act of 1933, filed with the Securities and
Exchange Commission on July 31, 1997, as amended. In our review, we have
assumed, with your consent, that all of the representations and statements set
forth in the documents we reviewed are true and correct, and all of the
obligations imposed by any such documents on the parties thereto have been and
will be performed or satisfied in accordance with their terms. We have also
assumed the genuineness of all signatures, the proper execution of all
documents, the authenticity of all documents submitted to us as originals, the
conformity to originals of documents submitted to us as copies, and the
authenticity of the originals from which any copies were made. Our
understanding of the facts is based on the information set forth in such
documents and various assumptions and factual representations made by the
Company, including the representation letter dated July 31, 1997.
For the purposes of our opinion, we have not made an independent
investigation of the facts set forth in the documents we reviewed. We
consequently have assumed that the information presented in such documents or
otherwise furnished to us accurately and completely describes all material
facts relevant to our opinion. Moreover, the qualification and taxation of the
Company as a REIT depends upon its ability to meet, through actual annual
operating results, distribution levels and diversity of share ownership and the
various disqualification tests imposed under the Code, the results of which
will not be reviewed by the undersigned. Accordingly, no assurance can be
given that the actual results of the operations of the Company for any one
taxable year will satisfy such requirements.
Based upon and subject to the foregoing, we are of the opinion that
the Company was organized and has operated in conformity with the requirements
for qualification as REIT under the Code for the taxable years ended December
31, 1992 through December 31, 1996.
Our opinion is based upon our examination and review of the documents
noted above, the facts, circumstances and assumptions referred to above and
existing law as contained in the Code, applicable Treasury Regulations
promulgated thereunder, administrative rulings of the Internal Revenue Service,
and judicial decisions as of the date hereof, all of which are subject to
change either prospectively or retroactively. Any change in applicable law or
any of the facts and circumstances upon which we have relied may affect the
continuing validity of the opinion set forth herein. We express no opinion
concerning any tax consequences other than as expressly set forth herein.
We assume no obligation to supplement this opinion if any applicable
law changes after the date hereof or if we become aware of any fact after the
date hereof that might change the opinion expressed herein. This opinion is
being furnished to you solely for submission as an exhibit to the Registration
Statement and, accordingly, may not be relied upon by, quoted in any manner to,
or delivered to any other person or entity without, in each instance, our prior
written consent.
We consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein. In
giving this consent, we do not admit that we are within the category of persons
whose consent is required by Section 7 of the Securities Act of 1933.
Very truly yours,
/s/ Robinson Silverman Pearce
Aronsohn & Berman LLP
<TABLE>
<CAPTION> EXHIBIT 12.1
____________
KRANZCO REALTY TRUST AND SUBSIDIARIES
RATIO OF EARNINGS TO FIXED CHARGES
($ in thousands)
KRANZCO REALTY TRUST KRANZCO
____________________ CONTROLLED
PROPERTIES
For the 12 months ------------------------------
Three months ended December 31, November 19- January 1-
Ended __________________________________ December 31, November 18,
March 31, 1997 1996 1995 1994 1993 1992 1992
______________ ____ ____ ____ ____ ____________ ____________
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS
Net Income (Loss) $2,466 $ 8,536(1) $ 9,877 $ 9,867 $ 9,944 $ 826 $ 21
Plus:
1) Interest expense 4,486 17,069 16,208 10,469 8,877 1,064 2,512
2) Amortization of debt costs 123 667 964 960 1,164 68 106
----- ------ ------ ------ ----- ----- -----
Total Earnings $7,075 $26,272 $27,049 $21,296 $19,985 $1,958 $2,639
------ ------- ------- ------- ------- ------ ------
FIXED CHARGES
1) Interest expense $4,594 $17,320 $16,529 $11,405 $ 8,877 $1,064 $2,512
2) Amortization of debt
costs 123 667 960 906 1,164 68 106
3) Distributions on
Preferred Shares 465 695 485 0 0 0 0
------ ------- ------- ------- ------- ------ ------
Total Fixed Charges $5,182 $18,682 $17,978 $12,365 $10,041 $1,132 $2,618
Ratio of Earnings to
Fixed Charges 1.37 1.41(1) 1.50 1.72 1.99 1.73 1.01
==== ==== ==== ==== ==== ==== ====
</TABLE>
_______________________
(1) Excludes $11,052 extraordinary loss on debt refinancing.
EXHIBIT 23.1
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our reports dated February 28, 1997
included in Kranzco Realty Trust's Form 10-K for the year ended December 31,
1996 and to all references to our Firm included in this registration statement
on Form S-3 dated July 31, 1997.
/s/ Arthur Andersen LLP
Philadelphia, Pa.
July 29, 1997
