<PAGE> 1
FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NO. 33-80709
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JANUARY 24, 1996)
[TRINET LOGO]
1,300,000 SHARES
TRINET CORPORATE REALTY TRUST, INC.
9.20% SERIES B CUMULATIVE PREFERRED STOCK
LIQUIDATION PREFERENCE $25 PER SHARE
------------------
Dividends on the 9.20% Series B Cumulative Preferred Stock, par value $.01
per share (the "Series B Preferred Stock"), of TriNet Corporate Realty Trust,
Inc. ("TriNet" or the "Company") are cumulative from the date of original issue
and are payable quarterly, commencing on September 15, 1996, at the rate of
9.20% per annum of the $25 liquidation preference (equivalent to a fixed annual
rate of $2.30 per share). See "Description of Series B Preferred
Stock -- Dividends."
Except in certain circumstances relating to the Company's qualification as
a real estate investment trust (a "REIT"), the Series B Preferred Stock is not
redeemable prior to August 15, 2001. On and after August 15, 2001, the Series B
Preferred Stock may be redeemed for cash at the option of the Company, in whole
or in part, at a redemption price of $25 per share, plus accrued and unpaid
dividends, if any, thereon to the redemption date. The redemption price (other
than the portion thereof consisting of accrued and unpaid dividends) shall be
payable solely out of the sale proceeds of other capital stock of the Company,
which may include other series of the Company's preferred stock, par value $.01
per share ("Preferred Stock"), and from no other source. The Series B Preferred
Stock has no stated maturity and will not be subject to any sinking fund or
mandatory redemption and will not be convertible into any other securities of
the Company. See "Description of Series B Preferred Stock -- Redemption."
In order to ensure that the Company remains a qualified REIT for federal
income tax purposes, shares of Series B Preferred Stock may be exchanged for
shares of Excess Stock (as defined in the accompanying Prospectus) if a holder
owns more than 9.3% of the Company's capital stock, and the Company will have
the right to purchase Excess Stock from the holder. See "Restrictions on
Transfers of Capital Stock" in the accompanying Prospectus.
The New York Stock Exchange ("NYSE") has approved the listing of the shares
of Series B Preferred Stock, subject to official notice of issuance. Trading of
the shares of Series B Preferred Stock on the NYSE is expected to commence
within a seven-day period after the initial delivery of the shares of Series B
Preferred Stock. See "Underwriting."
------------------
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE MATTERS DISCUSSED UNDER
"RISK FACTORS" BEGINNING ON PAGE S-10 IN THIS PROSPECTUS SUPPLEMENT.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR
THE PROSPECTUS. 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.
<TABLE>
=========================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(3)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share........................... $25.00 $.7875 $24.2125
- ---------------------------------------------------------------------------------------------------------
Total(4)............................ $32,500,000 $1,023,750 $31,476,250
=========================================================================================================
<FN>
(1) Plus accrued dividends, if any, from the date of original issue.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deducting expenses payable by the Company estimated at $182,000.
(4) The Company has granted the Underwriters an option for 30 days to purchase
up to an additional 195,000 shares of Series B Preferred Stock on the same
terms set forth above to cover over-allotments, if any. If such option is
exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $37,375,000, $1,177,313 and
$36,197,687, respectively.
</TABLE>
------------------
The shares of Series B Preferred Stock are being offered by the
Underwriters named herein, subject to prior sale, when, as and if accepted by
them and subject to certain conditions. It is expected that delivery of the
shares of Series B Preferred Stock will be made at the offices of Smith Barney
Inc., 333 West 34th Street, New York, New York 10001 on or about August 13,
1996.
------------------
SMITH BARNEY INC. DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
August 8, 1996
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SERIES B
PREFERRED STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE
PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK
STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING,
IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
S-2
<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus Supplement and the
accompanying Prospectus or incorporated herein and therein by reference. Unless
the context requires otherwise, all references in this Prospectus Supplement to
"TriNet" or the "Company" refer to TriNet Corporate Realty Trust, Inc. and its
subsidiaries on a consolidated basis. Except as otherwise indicated, (i)
references to the Company's properties, tenants and rental income include the
properties owned by TriNet Sunnyvale Partners, L.P., a joint venture partnership
of which the Company is the sole general partner (the "Sunnyvale Partnership"),
and the tenants and rental income of such properties, and (ii) information
contained herein is given as of June 30, 1996 and assumes that the Underwriters'
over-allotment option is not exercised. This Prospectus Supplement contains
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. The Company's actual results could differ materially from those set
forth in the forward-looking statements. Certain factors that might cause such a
difference are discussed in the section entitled "Risk Factors" starting on page
S-10 of this Prospectus Supplement. The reader is cautioned, however, that the
factors discussed in that section may not be exhaustive.
THE COMPANY
TriNet is a self-administered and self-managed real estate investment trust
("REIT") which acquires, owns and manages predominantly office and industrial
properties net leased to corporations nationwide, including strategically
important distribution facilities and corporate headquarters. TriNet's triple
net leases typically provide that its tenants pay for most or all property
operating expenses while contractual rental income escalates.
As of June 30, 1996, TriNet's portfolio consisted of 108 properties (the
"Properties"), including four properties held in the Sunnyvale Partnership,
located in 26 states, all of which were 100% leased pursuant to leases with an
average remaining term (excluding extension options) of approximately 10 years
when lease terms are weighted according to contractual rent revenues. Of the
Company's 108 Properties, 61 were acquired concurrently with the consummation of
the Company's initial public offering in June 1993 (the "Initial Offering"). At
June 30, 1996, the Company had 47 tenants, and the Company's largest single
tenant accounted for approximately 9% of the Company's annualized rental income.
From the Initial Offering through June 30, 1996, TriNet has:
- completed the acquisition of 48 additional properties for an aggregate
purchase price of approximately $511 million;
- more than quadrupled its aggregate annualized rental income from
approximately $18.5 million to approximately $76.2 million; and
- diversified and improved the credit quality of its tenant base by adding
37 new tenants through the acquisition of additional Properties.
There can be no assurance that the foregoing trends will continue. See
"Business -- Recent Developments" and "Risk Factors."
The Company grows its portfolio of net leased properties by either
purchasing and leasing properties back to the sellers under net leases
structured by the Company or acquiring properties subject to existing net
leases. In a typical purchase/leaseback transaction, TriNet purchases the land
and building from an operating company and simultaneously leases them back to
the operating company under a long-term operating lease. These transactions are
structured to provide TriNet with a consistent stream of income which typically
increases periodically pursuant to the lease. In addition, TriNet may realize a
capital gain if the property appreciates in value. A purchase/leaseback
transaction enables an operating company (the seller/tenant) to realize the
value of its owned real estate while continuing occupancy on a long-term basis.
A purchase/leaseback transaction also may provide the seller with specific
accounting, earnings and market value benefits. For example, the lease on the
property may be structured by the operating company as an off-
S-3
<PAGE> 4
balance sheet operating lease, consistent with the rules of the Financial
Accounting Standards Board, which may increase the seller's earnings, net worth
and borrowing capacity.
TriNet generally seeks to include provisions in its leases which place on
its tenants, to the greatest extent possible, the economic costs of ownership of
its properties (such as real property taxes and assessments, insurance,
operating expenses, responsibility for structural repairs and maintenance and
the duty to restore, or relinquish to TriNet any insurance proceeds or
condemnation awards, in case of casualty or condemnation), although under some
of its leases, TriNet has agreed to retain responsibility for some of these
obligations. As used herein, the terms "triple net lease" and "net lease" refer
to leases in which the tenant is responsible for all or most of such
obligations.
BUSINESS OBJECTIVE AND STRATEGIES
The Company seeks to increase its income primarily by acquiring additional
net leased properties, structuring additional purchase/leaseback transactions
and negotiating leases containing contractual rent increases. Its primary
investment focus is on the acquisition, in either single property or multiple
property transactions, of single-tenant, strategically important office and
industrial properties subject to net leases.
In structuring purchase/leaseback transactions, TriNet seeks types of
transactions and seller circumstances that will allow it to obtain favorable
terms. For example, the Company focuses its purchase/leaseback activities on
businesses that are trying to achieve corporate financial and strategic goals
and objectives, including repayment of high-cost debt and obtaining infusions of
working capital for growth, rather than on businesses that are simply solving
specific real estate financing problems. In addition, the Company concentrates
on businesses that possess strong or improving credit quality characteristics,
successful operating histories, potential for growth, recognized business
franchises and market presence. The Company also believes that significantly
less competition exists for purchase/leaseback transactions and net leased
property acquisitions involving portfolios containing a number of properties
located in more than one geographic region and that its national presence,
acquisition experience and access to capital allow it to compete effectively for
such transactions.
The Company seeks to include in its leases provisions such as periodic rent
increases, operating and financial covenants, indemnities against environmental
and other claims, guaranties from additional entities, security such as letters
of credit and cross default provisions in multiple property transactions. Its
tenants generally are responsible for most operating and capital expenses
relating to the properties they occupy, including real estate taxes, utilities,
insurance, maintenance and capital improvements. As a result, the Company's
operating costs are lower than would be the case if it invested in properties
that were not net leased.
When underwriting a potential transaction, the Company undertakes analyses
in each of the following areas: (1) real estate factors such as the current
value of the property, present and anticipated local market conditions and the
prospects for selling or re-tenanting the property on favorable terms in the
event of a vacancy, (2) the creditworthiness of the tenant and the need to
obtain additional protections such as letters of credit and guarantees from
other entities and (3) strategic factors such as the position of the prospective
tenant in its industry, the strength of the prospective tenant's business
franchise and the importance of the property to the prospective tenant's
business.
Consistent with its investment policies, the Company employs leverage, when
available on favorable terms, in connection with funding purchase/leaseback
transactions and acquiring net leased properties to enable it to acquire more
properties than it otherwise could.
The Company employs experienced individuals with backgrounds in credit and
real estate analysis, finance and asset management, who use established
procedures and systems to identify, acquire and manage commercial net leased
real estate assets. TriNet's senior management team has developed an extensive
network of contacts with bankers, brokers and senior corporate managers which it
uses to identify new investment opportunities.
See "Business -- Business Objective and Strategies."
S-4
<PAGE> 5
RECENT DEVELOPMENTS
PROPERTY ACQUISITIONS. During the first half of 1996, the Company acquired
12 Properties (the "1996 Acquired Properties") for an aggregate purchase price
of approximately $136.5 million. Eight of the 1996 Acquired Properties were
acquired by wholly owned subsidiaries of the Company and four were acquired by
the Sunnyvale Partnership. The 1996 Acquired Properties consist of: (1) a
402,192 square foot warehouse/distribution facility leased to Lever Brothers
Company in St. Louis, Missouri; (2) the 241,927 square foot headquarters of
Federal Express Corporation in Memphis, Tennessee; (3) a combined 56,000 square
foot headquarters facility and 454,654 square foot warehouse/distribution
facility leased to MJD Investments, Inc. (d/b/a "MJDesigns") in the Dallas/Fort
Worth, Texas area; (4) the 60,000 square foot headquarters of Teradyne, Inc. in
Walnut Creek, California; (5) the 85,000 square foot headquarters of Fresenius
USA, Inc. in Walnut Creek, California; (6) a 118,800 square foot office/research
and development facility located in King of Prussia, Pennsylvania, which is
leased to Chesapeake Park, Inc., a subsidiary of Lockheed Martin Corporation;
(7) the four-building, 215,481 square foot Sunnyvale Research Center located in
Sunnyvale, California, which is leased to three different tenants: Mitsubishi
Electronics America, Inc., National Semiconductor Corporation and Kanematsu USA,
Inc.; (8) a 120,576 square foot office/research and development facility located
in Milpitas, California, which is leased to Lam Research Corporation and (9) the
216,541 square foot headquarters of Blue Cross & Blue Shield United of Wisconsin
("BC & BS Wisconsin") in Milwaukee, Wisconsin.
PROPERTY DISPOSITIONS. During 1996, the Company has sold two properties.
On April 24, 1996, the Company sold its property in Denham Springs, Louisiana to
Schwegmann Giant Super Markets ("Schwegmann"), the former tenant, for
approximately $1.3 million, which resulted in an immaterial gain. On July 3,
1996, the Company sold a 124,950 square foot office building occupied by
Linvatec Corporation and located in Largo, Florida to Largo Lakes-1 Limited
Partnership for a sale price of approximately $11.0 million. The Company
recognized a gain of approximately $650,000 in connection with the sale.
FINANCING ACTIVITIES. On May 22, 1996, the Company completed a public
offering of $100 million of its 7.30% Notes due 2001 (the "2001 Notes") and $50
million of its 7.95% Notes due 2006 (the "2006 Notes" and, together with the
2001 Notes, the "Notes"). The Notes are senior, unsecured obligations of the
Company. The net proceeds of the offering of the Notes (the "Notes Offering")
were used to repay the remaining $28.3 million balance of a $29.25 million
mortgage loan from NationsBank of Texas, N.A. (the "NationsBank Mortgage Loan")
and to reduce indebtedness under the Company's $200 million unsecured revolving
credit facility (the "1995 Acquisition Facility"). The 2001 Notes bear interest
at a rate of 7.30% per annum and mature on May 15, 2001, and the 2006 Notes bear
interest at a rate of 7.95% per annum and mature on May 15, 2006. The
supplemental indenture under which the Notes were issued creates certain
limitations on the ability of the Company to incur indebtedness.
On June 3, 1996, the Company repaid a $28.5 million mortgage loan from
Connecticut General Life Insurance Company (the "CIGNA Mortgage Loan") with
funds borrowed under the 1995 Acquisition Facility. On June 14, 1996, the
Company repaid $8 million of indebtedness under the 1995 Acquisition Facility.
On June 19, 1996, the Company completed a public offering of 2,000,000
shares of 9 3/8% Series A Cumulative Preferred Stock (the "Series A Preferred
Stock"). The offering was priced at $25 per share resulting in net proceeds to
the Company of approximately $47.7 million. The net proceeds were used to repay
borrowings under the 1995 Acquisition Facility. Subsequently, on July 1, 1996,
the Company borrowed $35 million under the 1995 Acquisition Facility to
partially repay a $110 million term loan entered into in 1994 (the "1994
Mortgage Loan"). Following such repayment, the interest rate on the remaining
balance of $75 million under the 1994 Mortgage Loan was reduced from the London
Interbank Offered Rate ("LIBOR") plus 1.25% to LIBOR plus 1.00%. The 1994
Mortgage Loan is secured by first mortgage liens on 19 of the Properties.
OTHER DEVELOPMENTS. On March 21, 1996, the Property leased to MacFrugal's
Bargains-Closeouts, Inc. ("MacFrugal's") was destroyed by fire. The lease for
this Property requires MacFrugal's to continue paying rent and to rebuild the
structure to original specifications. MacFrugal's maintains insurance to cover
the replacement cost of the building and the ongoing rent payments.
S-5
<PAGE> 6
THE PROPERTIES
As of June 30, 1996, the Company's portfolio consisted of 108 Properties,
all of which were 100% leased pursuant to leases with an average remaining term
(excluding extension options) of approximately 10 years when lease terms are
weighted according to contractual rent revenues. The Properties include office,
industrial (e.g., warehouse and distribution) and retail facilities, which are
located in 26 states and are leased to tenants in a variety of industries. Set
forth below are summary descriptions of the Properties.
<TABLE>
<CAPTION>
GROSS ANNUAL PERCENT PRIMARY
LEASABLE RENT AT OF TOTAL LEASE
NO. OF LOCATION AREA IN JUNE 30, ANNUAL TERM
TENANT OR GUARANTOR FACILITY TYPE PROPERTIES (STATE) SQ. FT. 1996(1) RENT EXPIRATION
- ------------------------- -------------------------- ---------- ---------- ---------- ----------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
WHOLLY OWNED PROPERTIES
AT&T Corporation(2).... Office 2 FL, NJ 466,002 $ 6,766,032 8.9% 2000
Unisys Corporation..... Office 3 IL, PA 755,157 6,171,000 8.1% (3)
Schwegmann Giant Super
Markets(4)........... Retail 4 LA 381,933 4,137,796 5.4% 2015
Caterair International
Corporation.......... Ware./Dist. 12 7 states 493,617 4,124,375 5.4% 2018
Federal Express
Corporation(5)....... Office 1 TN 241,927 3,991,796 5.2% 2008
Rex Stores
Corporation.......... Retail/Ware./Dist./Office 35 11 states 753,911 3,493,243 4.6% 2004
GATX Logistics, Inc.... Ware./Dist. 6 NY 1,135,500 3,260,756 4.3% 2001
Volkswagen of America,
Inc.................. Ware./Dist. 3 CA, FL, IL 628,716 2,864,000 3.8% 2008
MacFrugal's Bargains-
Closeouts, Inc.(6)... Ware./Dist. 1 LA 1,216,676 2,428,382 3.2% 2009
Nike, Inc.............. Ware./Dist. 1 TN 812,697 2,247,405 2.9% 2004
MJD Investments, Inc.
(d/b/a
"MJDesigns")......... Ware./Dist./Office 1 TX 510,654 2,173,000 2.9% 2011
Ralphs Grocery
Company.............. Ware./Dist. 1 CA 272,236 2,068,290 2.7% 2010
SPX Corporation........ Office 2 MI 214,454 1,937,500 2.5% 2004
Blue Cross & Blue
Shield United of
Wisconsin............ Office 1 WI 216,541 1,609,600 2.1% 2006
Lever Brothers
Company.............. Ware./Dist. 1 MO 402,192 1,579,603 2.1% 2000
Unison Industries,
L.P.................. Office 1 FL 135,000 1,554,243 2.0% 2003
Primerica Life
Insurance Company.... Office 1 GA 190,000 1,425,000 1.9% 2003
Certified Grocers of
California Ltd....... Office 1 CA 108,000 1,293,750 1.7% 2014
First Health
Strategies, Inc...... Office 1 UT 173,107 1,245,046 1.6% 2009
PNC Mortgage
Corporation of
America, Inc.(7)..... Office 1 IL 102,208 1,228,540 1.6% 2002
Sears Logistics
Services(8).......... Ware./Dist. 1 OH 398,471 1,217,432 1.6% 2000
Cirrus Logic, Inc...... Office 2 CA 121,582 1,207,104 1.6% 2008
Lam Research
Corporation.......... Office/R&D 1 CA 120,576 1,157,530 1.5% 2006
Microsoft
Corporation(9)....... Office 1 TX 87,635 1,051,620 1.4% 2001
Linvatec
Corporation(10)...... Ware./Office 1 FL 124,950 1,045,798 1.4% 2005
TRW, Inc............... Office 1 CA 124,400 1,030,524 1.4% 2004
Loral Corporation...... Office 1 CA 174,600 987,694 1.3% 1999
Tech Data
Corporation.......... Ware./Dist. 1 IN 225,000 783,750 1.0% 2002
Fresenius USA, Inc..... Office/R&D 1 CA 85,000 739,500 1.0% 2002
Universal Technical
Institute............ Office 1 AZ 106,763 729,157 1.0% 2001
Deluxe Corporation..... Office 1 MN 73,150 694,560 0.9% 1999
Dunham's Athleisure
Corporation.......... Ware./Dist. 1 IN 249,920 647,500 0.8% 2004
Nissan Motor Acceptance
Corp................. Office 1 TX 174,421 618,472 0.8% 2003
Teradyne, Inc.......... Office/R&D 1 CA 60,000 540,000 0.7% 2000
Kelley-Clarke, Inc..... Office 1 CA 44,000 534,864 0.7% 2005
</TABLE>
S-6
<PAGE> 7
<TABLE>
<CAPTION>
GROSS ANNUAL PERCENT PRIMARY
LEASABLE RENT AT OF TOTAL LEASE
NO. OF LOCATION AREA IN JUNE 30, ANNUAL TERM
TENANT OR GUARANTOR FACILITY TYPE PROPERTIES (STATE) SQ. FT. 1996(1) RENT EXPIRATION
--- ---------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
WHOLLY OWNED PROPERTIES (CONTINUED)
Compaq Computer
Corporation.......... Ware./Dist. 1 TX 251,850 513,774 0.7% 1999
Northern States Power
Company.............. Office 1 MN 41,574 509,281 0.7% 2004
Arrow Electronics...... Office 1 CO 119,200 500,482 0.7% 2000
BancBoston Mortgage
Corporation.......... Office 1 FL 49,344 479,048 0.6% 1999
Uarco
Incorporated(11)..... Ware./Office 1 IL 140,000 478,800 0.6% 2002
Artline, Inc........... Ware./Dist. 1 IL 172,846 475,327 0.6% 2004
Fluid Systems Corp..... Office/R&D 1 CA 90,500 470,000 0.6% 2005
Chesapeake Park,
Inc.(12)............. Office/R&D 1 PA 118,800 469,260 0.6% 2000
PepsiCo, Inc.(13)...... Ware./Dist. 1 KS 105,600 353,040 0.5% 2010
--- ---------- ----------- -----
Subtotal............... 104 12,470,710 $72,833,874 95.6%
--- ---------- ----------- -----
JOINT VENTURE PROPERTIES
TRINET SUNNYVALE PARTNERS, L.P.(14)
Mitsubishi Electronics
America, Inc......... Office 3 CA 181,715 $ 2,878,366 3.7% 2003
National Semiconductor
Corporation.......... Office 1/2 CA 17,725 269,100 0.4% 1998
Kanematsu USA, Inc..... Office 1/2 CA 16,041 211,741 0.3% 2000
--- ---------- ----------- -----
Subtotal............... 4 215,481 $ 3,359,207 4.4%
--- ---------- ----------- -----
Total................ 108 12,686,191 $76,193,081 100.0%
=== ========== =========== =====
<FN>
- ---------------
(1) Contractual rent payments on a cash basis not taking into account a
straight-line method of accounting. Except for AT&T Corporation ("AT&T")
and Uarco Incorporated ("Uarco"), whose annual rent is calculated by
multiplying monthly rent in effect at July 1, 1996 by 12, annual rent is
calculated by multiplying monthly rent in effect at June 30, 1996 by 12.
(2) AT&T's annual rent is based on its monthly rent in effect as of July 1,
1996; as of June 30, 1996, AT&T's annual rent was $6,754,069. AT&T is the
tenant under one lease and the guarantor under the other lease, for which
the tenant is one of its affiliates, AT&T Credit Holdings, Inc. The annual
rent at July 1, 1996 for one of the Properties includes $481,212 during the
initial term of the lease for tenant improvements made by the previous
landlord. The annual rent at July 1, 1996 for the other Property has been
calculated before deducting an annual management incentive fee payable to a
third-party property manager, which the Company estimates is currently
$750,000.
(3) The Unisys Corporation tenancy consists of three separate Properties with
primary lease terms that expire in 1997, 2002 and 2004, and with current
annual rents of $525,000, $2,496,000 and $3,150,000, respectively.
(4) In the event that Schwegmann determines to permanently vacate any of these
Properties, it must offer to repurchase such Property at the greater of
TriNet's original purchase price or fair market value (subject to the
lease, including extension options), and if TriNet elects not to sell the
Property to Schwegmann, the lease for such Property will terminate. In
addition, Schwegmann has an option to purchase all of these Properties
during a two-year period commencing in July 2003 at TriNet's original
purchase price plus a fixed return and also has an option to purchase all
of these Properties at the end of the initial lease term at a purchase
price equal to the greater of TriNet's original purchase price plus a fixed
return or fair market value (subject to the lease, including extension
options).
(5) The Company has a maximum annual obligation under the lease for operating
expenses and taxes of $1,451,562.
(6) The Company has a leasehold interest in this Property. The fee interest in
this Property is subject to certain liens associated with industrial
revenue bonds issued in connection with the development of the Property. On
March 21, 1996, the building was destroyed by fire. The lease for this
Property requires the tenant to continue paying rent in the specified
amount, which the tenant has continued to do. See "Business -- Recent
Developments."
(7) On March 15, 1996, this Property was subleased to Komatsu America
International Company ("Komatsu") effective July 29, 1996. Komatsu has
executed a direct lease with the Company for the period between July 2002
and July 2006, which may be extended at Komatsu's option through July 2011.
</TABLE>
S-7
<PAGE> 8
(8) The Company has a maximum annual obligation under the lease for taxes and
insurance of $134,518.
(9) The Company has a maximum annual obligation under the lease for operating
expenses of $526,634.
(10) The Company sold this Property for $11 million in July 1996.
(11) Uarco's annual rent is based on its monthly rent as of July 1, 1996; as of
June 30, 1996, Uarco's annual rent was $467,600.
(12) Chesapeake Park, Inc. is a subsidiary of Lockheed Martin Corporation, which
occupies the Property.
(13) The Company holds fee title to the land and a leasehold interest in the
building for this Property.
(14) In connection with the acquisition of the Sunnyvale Research Center, the
Sunnyvale Partnership assumed $17 million of non-recourse first mortgage
debt owed to Chase Manhattan Bank. The Sunnyvale Partnership's limited
partnership agreement places certain restrictions on the Sunnyvale
Partnership's ability to sell the acquired Properties prior to June 1998.
The Company owns approximately 45% of the equity interests in the Sunnyvale
Partnership. The limited partners of the Sunnyvale Partnership are entitled
to receive from the Sunnyvale Partnership's distributable cash a priority
return currently equal to 9% per annum on their approximately $7.6 million
investment with further distributions made to the Company and the limited
partners in a 99:1 ratio. In addition, beginning in June 1998, the limited
partners have the right, under certain circumstances, to request the
redemption of their interests in the Sunnyvale Partnership, and the Company
may satisfy the redemption request with shares of the Company's common
stock or cash.
S-8
<PAGE> 9
THE OFFERING
Securities Offered......... 1,300,000 shares of 9.20% Series B Cumulative
Preferred Stock (the "Series B Preferred Stock").
The NYSE has approved the listing of the shares of
Series B Preferred Stock, subject to official
notice of issuance. Trading of the shares of Series
B Preferred Stock on the NYSE is expected to
commence within a seven-day period after the
initial delivery of the shares of Series B
Preferred Stock. See "Underwriting."
Use of Proceeds............ The net proceeds from the sale of the Series B
Preferred Stock will be used to reduce indebtedness
under the 1995 Acquisition Facility. See "Use of
Proceeds."
Ranking.................... With respect to the payment of dividends and
amounts upon liquidation, the Series B Preferred
Stock will rank senior to the Company's common
stock, par value $.01 per share ("Common Stock"),
and pari passu with the Company's Series A
Preferred Stock, which are the only capital stock
of the Company currently outstanding. See
"Description of Series B Preferred
Stock -- Dividends" and "-- Liquidation
Preference."
Dividends.................. Dividends on the Series B Preferred Stock are
cumulative from the date of original issue and are
payable quarterly, commencing on September 15,
1996, at the rate of 9.20% per annum of the $25
liquidation preference (equivalent to a fixed
annual rate of $2.30 per share). See "Description
of Series B Preferred Stock -- Dividends."
Liquidation Rights......... Equivalent to $25 per share of Series B Preferred
Stock, plus an amount equal to accrued and unpaid
dividends (whether or not declared). See
"Description of Series B Preferred
Stock -- Liquidation Preference."
Redemption................. Except in certain circumstances relating to the
preservation of the Company's status as a REIT (see
"Restrictions on Transfers of Capital Stock" in the
accompanying Prospectus), the Series B Preferred
Stock is not redeemable prior to August 15, 2001.
On and after August 15, 2001, the Series B
Preferred Stock will be redeemable for cash at the
option of the Company, in whole or in part, at a
redemption price of $25 per share, plus dividends
accrued and unpaid to the redemption date. The
redemption price (other than the portion thereof
consisting of accrued and unpaid dividends) shall
be payable solely out of the sale proceeds of other
capital stock of the Company, which may include
other series of Preferred Stock, and from no other
source. See "Description of Series B Preferred
Stock -- Redemption."
Voting Rights.............. Holders of Series B Preferred Stock will generally
have no voting rights except as required by law.
However, whenever dividends on any shares of Series
B Preferred Stock shall be in arrears for six or
more quarterly periods, the holders of such shares
(voting separately as a class with all other series
of parity Preferred Stock upon which like voting
rights have been conferred and are exercisable)
will be entitled to vote for the election of two
additional directors of the Company until all
dividends accumulated on such shares of Series B
Preferred Stock have been fully paid or declared
and a sum sufficient for the payment thereof set
aside for payment. In addition, certain changes to
the terms of the Series B Preferred Stock that
would be materially adverse to the rights of
holders of the Series B Preferred Stock cannot be
made without the affirmative vote of holders of
two-thirds of the outstanding Series B Preferred
Stock. See "Description of Series B Preferred
Stock -- Voting Rights."
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RISK FACTORS
An investment in the Series B Preferred Stock involves various risks. In
addition to general investment risks and those factors set forth elsewhere
herein, prospective investors should consider, among other things, the following
risk factors:
RISKS ASSOCIATED WITH BORROWING
GENERAL. The Company currently uses and intends to continue using leverage
to increase the Company's rate of return on its investments and allow the
Company to make more investments than it otherwise could. Such use of leverage
presents an additional element of risk in the event that the cash flow from
lease payments on its properties is insufficient to meet both debt payment
obligations and the distribution requirements of the REIT provisions of the
Internal Revenue Code of 1986, as amended (the "Code").
BALLOON PAYMENTS. The Company has financed the acquisition of the
Properties in part, and may finance future investments, with debt obligations
that provide for the repayment of principal in a lump-sum or "balloon" payment
at maturity. Borrowings under the 2001 Notes, the 2006 Notes, the 1995
Acquisition Facility and the 1994 Mortgage Loan require payments of interest
only until maturity on May 15, 2001, May 15, 2006, October 3, 1997 (October 3,
1998, if extended) and December 1, 2004, respectively. See "Capitalization" and
"Use of Proceeds." The ability to repay such indebtedness at maturity or
otherwise may depend on the ability of the Company or its subsidiaries either to
refinance such indebtedness or to sell properties. The Company has no
commitments with respect to refinancing any such balloon payments, and there can
be no assurance that such refinancing will be available, that such a sale will
occur or that such refinancing or sale will be available on reasonable terms and
conditions.
RISING INTEREST RATES. The 1994 Mortgage Loan and the 1995 Acquisition
Facility bear interest at a floating rate tied to LIBOR. Increases in the
interest rates under the 1994 Mortgage Loan and the 1995 Acquisition Facility,
to the extent not mitigated by interest rate protection agreements, could
adversely affect the amount of cash available to pay dividends on the Series B
Preferred Stock.
REAL ESTATE INVESTMENT RISKS
Real property investments are subject to a number of risks. For example,
under certain leases the Company is responsible for certain capital improvements
such as roof replacement and major structural improvements. In addition, to the
extent that the Company's lease for a property is not a triple net lease, the
Company will have greater expenses associated with that property and will bear
some or all of the risk of any increase in such expenses, unless the lease
provides for a rent adjustment based on escalations in operating expenses.
Similarly, adverse economic conditions could affect the ability of a tenant to
make its lease payments, resulting in a reduction in the cash flow of the
Company and a decrease in the value of the property leased to such tenant in the
event the lease is terminated and the Company is unable to lease the property to
another tenant on similar or better terms, or at all. In addition, demand for
rental space in a particular market may be weak at the end of a lease term,
which could prevent the Company from leasing the property to another tenant on
favorable terms, or at all. In any such case, the Company could not only lose
the cash flow from such property, but in order to prevent a foreclosure, also
might divert cash flow generated by other properties to meet mortgage payments,
if any, and pay other expenses associated with owning the property with respect
to which the default or expiration occurred. Furthermore, the Company may enter
into or acquire net leases with corporate tenants for properties that are
specially suited to the needs of a particular tenant, and this may be the case
with certain of the Properties. Such a property may require renovations or lease
payment concessions in order to lease it to another tenant if the initial lease
is terminated or not renewed.
Although the Company seeks to acquire properties which it believes are
strategically important to the ongoing operations of the tenants, the changing
operational circumstances of the Company's tenants may alter the importance of
the leased properties to their businesses. The level of ongoing strategic
importance of any given property to a tenant may affect the probability of lease
renewal by such tenant and, therefore, could have an adverse impact on the
Company's financial performance.
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<PAGE> 11
The financial failure of a tenant could cause the tenant to become the
subject of bankruptcy proceedings. Under bankruptcy law, a tenant has the option
of assuming (continuing) or rejecting (terminating) an unexpired lease. If the
tenant assumes its lease with the Company, the tenant must cure all defaults
under the lease and provide the Company with adequate assurance of its future
performance under the lease. If the tenant rejects the lease, the Company's
claim for breach of the lease would (absent collateral securing the claim) be
treated as a general unsecured claim. The amount of the claim would be capped at
the amount owed for unpaid pre-petition lease payments unrelated to the
rejection, plus the greater of one year's lease payments or 15% of the remaining
lease payments payable under the lease (but not to exceed the amount of three
years' lease payments). In a purchase/leaseback transaction it is also possible,
depending on the terms of the transaction, that a bankruptcy court could
recharacterize a purchase/leaseback transaction as a secured lending
transaction. If a transaction were recharacterized as a secured lending
transaction, the Company would not be treated as the owner of the property, but
might have certain additional rights as a secured creditor.
TENANT CONCENTRATION
To the extent TriNet is dependent on lease payments from a limited number
of tenants, the inability of any single tenant to make its lease payments could
have a material adverse effect on the Company. At June 30, 1996, TriNet had
leases with a total of 47 tenants. At such date, two of the Properties,
representing in the aggregate approximately 9% of annualized rental income, were
leased to, or had leases guaranteed by, AT&T Corporation, and five of the
Company's tenants collectively accounted for approximately 33% of the Company's
annualized rental income. For a list of the Company's tenants, see "Prospectus
Supplement Summary -- The Properties."
REIT QUALIFICATION REQUIREMENTS
The Company intends to qualify as a REIT under the relevant provisions of
the Code. To obtain the favorable tax treatment associated with the REIT
provisions of the Code, the Company generally is required each year to
distribute to its stockholders at least 95% of its REIT taxable income. In
addition, the Company is subject to a 4% nondeductible excise tax on any amount
by which certain distributions paid by it with respect to any calendar year are
less than the sum of 85% of its ordinary income for the calendar year, 95% of
its capital gains net income for the calendar year and any undistributed
ordinary income or capital gain net income from the preceding calendar year.
To comply with the 95% distribution requirement and to avoid the 4%
nondeductible excise tax, the Company intends to make distributions to
stockholders of substantially all of its taxable income at least annually. The
Company anticipates that the cash flow available from operations will be
sufficient to enable it to pay its operating expenses and meet this distribution
requirement, but no assurance can be given in this regard. In addition,
differences in timing between the actual receipt of income and payment of
expenses in calculating taxable income could require the Company to borrow funds
to meet the stockholder distribution requirements that are necessary to achieve
the tax benefits associated with a qualifying REIT.
Failure of the Company in any taxable year to qualify as a REIT will render
the Company subject to tax on its taxable income at regular corporate rates, and
distributions to stockholders in any nonqualifying years will not be deductible
by the Company. If the Company's status as a REIT is terminated, the Company
generally would not be eligible to elect REIT status again prior to the fifth
taxable year following the year in which its REIT status is terminated. An
exception to this general five-year rule exists if, among other things, the
Company can satisfy the Internal Revenue Service that its failure to qualify as
a REIT was due to reasonable cause and not to willful neglect of the
qualification provisions of the Code. The additional tax liability of the
Company for the year or years involved would reduce the net earnings of the
Company and could adversely affect its ability to pay dividends on the Series B
Preferred Stock. The Company might be required to borrow funds or to liquidate
certain of its investments to pay the applicable taxes.
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<PAGE> 12
POTENTIAL ENVIRONMENTAL LIABILITIES
Under various federal, state and local environmental laws, regulations and
ordinances, current or former owners of real estate, as well as certain other
categories of parties, may be required to investigate and clean up hazardous or
toxic chemicals, substances or waste or petroleum product or waste
(collectively, "Hazardous Materials") releases on, under, in or from such
property, and may be held liable to governmental entities or to third parties
for certain damage and for investigation and cleanup costs incurred by such
parties in connection with the release or threatened release of Hazardous
Materials. Such laws typically impose responsibility and liability without
regard to whether the owner knew of or was responsible for the presence of
Hazardous Materials, and the liability under such laws has been interpreted to
be joint and several under certain circumstances. The Company's leases generally
provide that the tenant is responsible for all environmental liabilities and for
compliance with environmental regulations relating to the tenant's operations.
Such a contractual arrangement does not eliminate the Company's statutory
liability or preclude claims against the Company by governmental authorities or
persons who are not parties to such an arrangement. Contractual arrangements in
the Company's leases may provide a basis for the Company to recover from the
tenant damages or costs for which the Company has been found liable.
The costs of investigation and cleanup of Hazardous Materials on, under, in
or from property can be substantial, and the fact that the property has had a
release of Hazardous Materials, even if remediated, may adversely affect the
value of the property and the owner's ability to sell or lease the property or
to borrow using the property as collateral. In addition, some environmental laws
create a lien on a property in favor of the government for damages and costs it
incurs in connection with the release or threatened release of Hazardous
Materials, and certain state environmental laws provide that such a lien has
priority over all other encumbrances on the property or that a lien can be
imposed on other property owned by the responsible party. Finally, the presence
of Hazardous Materials on a property could result in a claim by a private party
for personal injury or a claim by a neighboring property owner for property
damage.
Other federal, state and local laws and regulations govern the removal or
encapsulation of asbestos-containing material when such material is in poor
condition or in the event of building remodeling, renovation or demolition.
Still other federal, state and local statutes, regulations and ordinances may
require the removal or upgrading of underground storage tanks that are out of
service or out of compliance. In addition, federal, state and local laws,
regulations and ordinances may impose prohibitions, limitations and operational
standards on, or require permits, approvals and notifications in connection
with, the discharge of wastewater and other water pollutants, the emission of
air pollutants and operation of air polluting equipment, the generation and
management of Hazardous Materials, and workplace health and safety.
Non-compliance with environmental or health and safety requirements may also
result in the need to cease or alter operations at a property, which could
affect the financial health of a tenant and its ability to make lease payments.
Furthermore, if there is a violation of such a requirement in connection with a
tenant's operations, it is possible that the Company, as the owner of the
property, could be held accountable by governmental authorities for such
violation and could be required to correct the violation.
The Company typically undertakes an investigation of potential
environmental risks when evaluating an acquisition. Where warranted, Phase I
and/or Phase II assessments are performed by third-party environmental
consulting and engineering firms. The Company may acquire a property with
Hazardous Materials, subject to a determination of the level of risk and
potential cost of remediation. The Company normally requires property sellers to
fully indemnify it against any environmental problem existing as of the date of
purchase. Additionally, the Company normally structures its leases to require
the tenant to assume all responsibility for environmental compliance or
environmental remediation and to provide that non-compliance with environmental
laws is deemed a lease default. In certain instances, the Company may also
require a cash reserve, a letter of credit or a guarantee from the tenant, the
parent company or a third party to assure lease compliance and funding of
remediation. The value of any of these protections depends on the amount of the
collateral and/or financial strength of the company providing the protection.
Some of the Properties are located in urban and industrial areas where fill
or current or historic industrial uses of the areas may have caused site
contamination at the Properties. In addition, the Company is aware of
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<PAGE> 13
environmental conditions at certain of the Properties that require remediation.
All such environmental conditions are primarily the responsibility of the
respective tenants under their leases. The Company and its consultants estimate
that the aggregate cost of addressing environmental conditions known to require
remediation at the Properties is approximately $4 million, the majority of which
is covered by existing letters of credit and corporate guarantees. The Company
believes that any material environmental conditions at the Properties are
currently being or will soon be addressed by its tenants. However, the Company
could be responsible for some or all of these costs if one or more of the
tenants fails to perform its obligations or to indemnify the Company.
Furthermore, no assurance can be given that the environmental studies that were
performed at the Properties disclosed all environmental liabilities, that any
prior owner did not create a material environmental condition not known to the
Company, or that a material condition does not otherwise exist as to any of the
Properties.
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<PAGE> 14
THE COMPANY
TriNet is a self-administered and self-managed REIT that acquires, owns and
manages predominantly office and industrial properties net leased to
corporations nationwide, including strategically important distribution
facilities and corporate headquarters. TriNet's triple net leases typically
provide that its tenants pay for most or all property operating expenses while
contractual rental income escalates.
As of June 30, 1996, TriNet's portfolio consisted of 108 Properties located
in 26 states, all of which were 100% leased pursuant to leases with an average
remaining term (excluding extension options) of approximately 10 years when
lease terms are weighted according to contractual rent revenues. Sixty-one of
the Properties were acquired concurrently with the consummation of the Initial
Offering from seven predecessor partnerships and from unaffiliated third
parties. From the Initial Offering in June 1993 through June 30, 1996, the
Company acquired the fee title interest in 46 additional Properties and, to
preserve favorable local property tax abatements, the leasehold interest (with
an option to acquire the fee title interest) in two additional Properties.
The Company employs experienced individuals with backgrounds in credit and
real estate analysis, finance and asset management, who use established
procedures and systems to identify, acquire and manage commercial net leased
real estate assets. TriNet's senior management team has developed an extensive
network of contacts with bankers, brokers and senior corporate managers which it
uses to identify new investment opportunities. Prior to purchasing and leasing
back a corporate property or acquiring a net lease, TriNet: (i) appraises the
market value and evaluates the structural integrity of the buildings and the
environmental condition of the land and improvements; (ii) underwrites the
credit quality and financial ability of the tenant to pay rent; and (iii)
evaluates the current and future usefulness of the property to the tenant's
business operations. Based on management's assessment of current market
conditions, the Company believes that opportunities exist for it to structure
additional purchase/leaseback transactions and to acquire additional net leased
properties on advantageous terms.
The Company was incorporated under the laws of the State of Maryland on
March 4, 1993. The Company's principal executive offices are located at Four
Embarcadero Center, Suite 3150, San Francisco, California 94111, and its
telephone number is (415) 391-4300. The Company also maintains regional offices
in Florida and Pennsylvania.
USE OF PROCEEDS
The $31.3 million estimated net proceeds to the Company from this offering
will be used to reduce indebtedness outstanding under the 1995 Acquisition
Facility. As of August 8, 1996, approximately $59.7 million was outstanding
under the 1995 Acquisition Facility, which currently bears interest at a
weighted average interest rate of 7.07% per annum and matures on October 3,
1997.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The Company's ratio of earnings to combined fixed charges and preferred
stock dividends for the six months ended June 30, 1996 was 2.13x. The Company's
historical ratios of earnings to fixed charges for the six months ended June 30,
1995 and for the years ended December 31, 1995, 1994, 1993 and 1992 were 1.95x,
1.97x, 2.65x, 2.17x and 1.12x, respectively. For the year ended December 31,
1991, earnings were insufficient to cover fixed charges by $532,000.
The ratios of (i) earnings to fixed charges and (ii) earnings to combined
fixed charges and preferred stock dividends were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations plus fixed charges (excluding preferred stock dividends).
Fixed charges consist of interest expense, the amortization of debt issuance
costs and, with respect to the ratio of earnings to combined fixed charges and
preferred stock dividends, preferred stock dividend requirements. For the
periods presented, the Company had no capitalized interest.
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996, and as adjusted to give effect to this offering and the application of
the net proceeds therefrom to reduce indebtedness outstanding under the 1995
Acquisition Facility. This information should be read in conjunction with the
consolidated financial statements and notes thereto incorporated by reference
into the accompanying Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)
<S> <C> <C>
DEBT:
1994 Mortgage Loan.................................................. $110,000 $110,000
1995 Acquisition Facility........................................... 33,196 1,902
7.30% Notes due 2001 ($100,000,000 aggregate principal amount)...... 99,768 99,768
7.95% Notes due 2006 ($50,000,000 aggregate principal amount)....... 49,927 49,927
-------- --------
Total debt....................................................... 292,891 261,597
-------- --------
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value, 10,000,000 shares authorized,
2,000,000 issued and outstanding, actual (aggregate liquidation
preference $50,000,000); 3,300,000 shares issued and outstanding,
as adjusted (aggregate liquidation preference $82,500,000)....... 20 33
Common stock, $.01 par value, 40,000,000 shares authorized,
13,847,667 shares issued and outstanding......................... 138 138
Paid-in capital..................................................... 360,724 392,005
Distributions in excess of net income............................... (27,031) (27,031)
-------- --------
Total stockholders' equity....................................... 333,851 365,145
-------- --------
Total capitalization............................................. $626,742 $626,742
======== ========
</TABLE>
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BUSINESS
GENERAL
The Company is a self-administered and self-managed REIT that acquires,
owns and manages predominantly office and industrial properties net leased to
corporations nationwide, including strategically important distribution
facilities and corporate headquarters. TriNet's triple net leases typically
provide that its tenants pay for most or all property operating expenses while
contractual rental income escalates.
TriNet grows its portfolio of net leased properties by either purchasing
and leasing properties back to the sellers under net leases structured by the
Company or acquiring properties subject to existing net leases. In a typical
purchase/leaseback transaction, TriNet purchases the land and building from an
operating company and simultaneously leases them back to the operating company
under a long-term operating lease. These transactions are structured to provide
TriNet with a consistent stream of income which typically increases periodically
pursuant to the lease. In addition, TriNet may realize a capital gain if the
property appreciates in value. A purchase/leaseback transaction enables an
operating company (the seller/tenant) to realize the value of its owned real
estate while continuing occupancy on a long-term basis. A purchase/leaseback
transaction also may provide the seller with specific accounting, earnings and
market value benefits. For example, the lease on the property may be structured
by the operating company as an off-balance sheet operating lease, consistent
with the rules of the Financial Accounting Standards Board, which may increase
the seller's earnings, net worth and borrowing capacity.
TriNet generally seeks to include provisions in its leases which place on
its tenants, to the greatest extent possible, the economic costs of ownership of
its properties (such as real property taxes and assessments, insurance,
operating expenses, responsibility for structural repairs and maintenance and
the duty to restore, or relinquish to TriNet any insurance proceeds or
condemnation awards, in case of casualty or condemnation), although under some
of its leases, TriNet has agreed to retain responsibility for some of these
obligations. As used herein, the terms "triple net lease" and "net lease" refer
to leases in which the tenant is responsible for all or most of such
obligations.
The Company believes that opportunities exist to structure additional
purchase/leaseback transactions and acquire additional net leased properties on
advantageous terms. Since the Initial Offering, the Company has experienced an
increase in investment opportunities as more businesses with significant equity
in their real estate assets turn to TriNet as a source of capital that can allow
them to realize the value of those assets to improve their balance sheets and
fund their operating needs.
BUSINESS OBJECTIVE AND STRATEGIES
BUSINESS OBJECTIVE. TriNet seeks to increase its income primarily by
acquiring additional net leased properties, structuring additional
purchase/leaseback transactions and negotiating leases containing contractual
rent increases. The Company generally intends to hold its net leased properties
for long-term investment. However, the Company may dispose of a property if it
deems such a disposition to be in its best interest, and may either reinvest the
proceeds of such a disposition or distribute the proceeds to stockholders.
GROWTH STRATEGIES. The Company intends to expand its portfolio of
properties by acquiring additional net leased office and industrial properties
and engaging in purchase/leaseback transactions with operating companies. Since
the Initial Offering, TriNet has completed over $511 million (including
acquisition costs) in acquisitions. The Company believes the experience of its
management in structuring purchase/leaseback transactions to meet the often
complex needs of prospective tenants while providing adequate security to the
Company allows the Company to obtain a higher yield for a given level of risk
than would typically be available by purchasing a property subject to an
existing net lease. However, the Company will also seek to acquire properties
subject to existing net leases if the Company believes the terms are favorable.
To the extent additional investment opportunities are available on advantageous
terms, TriNet intends to continue to grow by expanding its portfolio of
properties.
The Company generally seeks to negotiate or acquire triple net leases. The
Company also seeks to include in its leases (i) clauses providing for periodic
rent increases, either automatically or based on an index, such as the All Urban
Consumer Price Index, (ii) change of control and restrictive operating and
financial covenants, (iii) covenants providing that the tenant must indemnify
the Company against environmental and other
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contingent liabilities (although such lease provisions may not entirely protect
the Company as an owner in the event of a tenant's inability to satisfy an
adverse judgment), (iv) guarantees from parent companies or other parties, (v)
additional security through recourse to other assets or letters of credit and
(vi) cross-default provisions in leases in multiple property transactions.
The Company's primary focus is on the acquisition of single-tenant, net
leased office and industrial properties. The Company does not intend to acquire
hotels, health care facilities, restaurants or land unrelated to a corporate
facility or the future operating requirements of a corporate tenant. The Company
also does not intend to develop properties, but it may finance build-to-suit
projects with identified tenants when it can do so by taking minimal risk of
construction completion. The Company also may permit its tenants, under certain
circumstances, to develop or further expand properties they lease from the
Company.
INVESTMENT FOCUS. In structuring purchase/leaseback transactions, the
Company seeks types of transactions and seller circumstances that will allow it
to obtain favorable terms, including the following:
Corporate Finance Solutions. The Company focuses its
purchase/leaseback activities on businesses that are trying to achieve
corporate financial and strategic goals and objectives, including repayment
of high-cost debt and obtaining infusions of working capital for growth,
rather than on businesses that are simply solving specific real estate
financing problems.
Tenant Credit Characteristics. The Company concentrates on businesses
that possess strong or improving credit quality characteristics, successful
operating histories, potential for growth, recognized business franchises
and market presence. The Company will consider purchase/leaseback and net
lease transactions with prospective tenants of diverse credit quality
provided the real estate meets the Company's standards and the Company
believes that the property is strategically important to the prospective
corporate tenant. The Company's tenants may include public and private
companies which may be unrated or rated investment grade or below
investment grade.
Multiple Property Transactions. The Company believes that there is
significantly less competition for purchase/leaseback transactions and net
leased property acquisitions involving portfolios containing a number of
properties located in more than one geographic region. The Company believes
that its national presence, acquisition experience and access to capital
allow it to compete effectively for such transactions.
UNDERWRITING EXPERTISE. In underwriting a purchase/leaseback transaction
or the purchase of a property subject to an existing net lease, the Company
undertakes the following analyses, each of which the Company believes is
critical to the long-term profitability of the investment:
Real Estate Analysis. The Company evaluates the value of the
property, present and anticipated conditions in the local real estate
market and the prospects for selling or re-tenanting the property on
favorable terms in the event of a vacancy. The Company seeks to acquire
general purpose commercial properties that may be easily re-leased to new
tenants without significant new investment by TriNet.
Tenant Credit Analysis. The Company evaluates the prospective
tenant's business and financial outlook to determine the prospective
tenant's ability to meet its ongoing obligations under the lease and the
need to obtain additional security for these obligations, such as letters
of credit and guarantees from parent companies or other parties.
Strategic Factors. The Company evaluates a number of strategic
factors, including the position of the prospective tenant in its industry,
the strength of the prospective tenant's business franchise and the
importance of the property to the prospective tenant's business.
OPERATING AND FINANCING STRATEGIES
The Company monitors, on an ongoing basis, compliance by its tenants with
their lease obligations and the factors that could affect the financial
performance of each of its properties. The Company reviews periodic financial
statements with respect to each of its tenants and undertakes regular physical
inspections of the condition and maintenance of its properties. The Company also
monitors real estate market conditions, including market rents and occupancy
trends in the areas where its properties are located. The Company will
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<PAGE> 18
respond to changes in such market conditions as appropriate, including by
negotiating to extend the lease terms or by selling the property subject to the
existing lease.
The Company's tenants generally are responsible for most operating and
capital expenses relating to the properties they occupy, including real estate
taxes, utilities, insurance, maintenance and capital improvements. As a result,
the Company's operating costs are lower than would be the case if it invested in
properties that were not net leased.
Consistent with its investment policies, the Company employs leverage, when
available on favorable terms, in connection with funding purchase/leaseback
transactions and acquiring net leased properties to enable it to acquire more
properties than it otherwise could. The Company seeks to maintain its operating
flexibility and reduce its financing costs through unsecured borrowings, such as
the 1995 Acquisition Facility and the Notes, and by reducing its Funds From
Operations ("FFO") payout ratio over time as FFO increases. The Company believes
that to facilitate a clear understanding of the operating results of the
Company, FFO should be examined in conjunction with net income. The definition
of FFO was clarified in the National Association of Real Estate Investment
Trusts, Inc. ("NAREIT") White Paper, adopted by the NAREIT Board of Governors on
March 3, 1995, as net income (computed in accordance with generally accepted
accounting principles) excluding gains (or losses) from debt restructuring and
sales of property, plus depreciation and amortization (in each case only on real
estate related assets), less preferred stock dividends, and after adjustments
for unconsolidated partnerships and joint ventures. Adjustments for
unconsolidated partnerships and joint ventures will be calculated to reflect FFO
on the same basis. FFO should not be considered as a substitute for net income
as an indication of the Company's performance or as a substitute for cash flow
as a measure of its liquidity.
RECENT DEVELOPMENTS
PROPERTY ACQUISITIONS. During the first half of 1996, the Company acquired
12 Properties for an aggregate purchase price of approximately $136.5 million.
Eight of the 1996 Acquired Properties were acquired by wholly owned subsidiaries
of the Company and four were acquired by the Sunnyvale Partnership. The 1996
Acquired Properties consist of:
- a 402,192 square foot warehouse/distribution facility leased to Lever
Brothers Company in St. Louis, Missouri with a lease expiring in
September 2000 and providing for a current annual rent of approximately
$1.6 million;
- the 241,927 square foot headquarters of Federal Express Corporation in
Memphis, Tennessee with a lease expiring in May 2008 and providing for a
current annual rent of approximately $4.0 million;
- a combined 56,000 square foot headquarters facility and 454,654 square
foot warehouse/distribution facility leased to MJD Investments, Inc.
(d/b/a "MJDesigns") in the Dallas/Fort Worth, Texas area with a lease
expiring in March 2011 and providing for a current annual rent of
approximately $2.2 million;
- the 60,000 square foot headquarters of Teradyne, Inc. in Walnut Creek,
California with a lease expiring in December 2000 and providing for a
current annual rent of $540,000;
- the 85,000 square foot headquarters of Fresenius USA, Inc. in Walnut
Creek, California with a lease expiring in June 2002 and providing for a
current annual rent of approximately $740,000;
- a 118,800 square foot office/research and development facility leased to
Chesapeake Park, Inc., a subsidiary of Lockheed Martin Corporation, in
King of Prussia, Pennsylvania with a lease expiring in August 2000 and
providing for a current annual rent of approximately $469,000;
- a four-building, 215,481 square foot office campus in Sunnyvale,
California leased to three different tenants: three buildings are leased
to Mitsubishi Electronics America, Inc. under a lease expiring in July
2003 and providing for a current annual rent of approximately $2.9
million; a portion of the fourth building is leased to National
Semiconductor Corporation under a lease expiring in January 1998 and
providing for a current annual rent of approximately $269,000; and the
remainder of that building is
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leased to Kanematsu USA, Inc. under a lease expiring in August 2000 and
providing for a current annual rent of approximately $212,000;
- a 120,576 square foot office/research and development facility leased to
Lam Research Corporation in Milpitas, California with a lease expiring in
January 2006 and providing for a current annual rent of approximately
$1.2 million; and
- the 216,541 square foot headquarters of BC & BS Wisconsin in Milwaukee,
Wisconsin with a lease expiring in June 2006 and providing for a current
annual rent of approximately $1.6 million.
PROPERTY DISPOSITIONS. During 1996, the Company has sold two properties.
On April 24, 1996, the Company sold its property in Denham Springs, Louisiana to
Schwegmann, the former tenant, for approximately $1.3 million, which resulted in
an immaterial gain. On July 3, 1996, the Company sold a 124,950 square foot
office building occupied by Linvatec Corporation and located in Largo, Florida
to Largo Lakes-1 Limited Partnership for a sale price of approximately $11.0
million. The Company recognized a gain of approximately $650,000 in connection
with the sale.
FINANCING ACTIVITIES. On May 22, 1996, the Company completed a public
offering of $100 million of the 2001 Notes and $50 million of the 2006 Notes.
The Notes are senior, unsecured obligations of the Company. The net proceeds of
the Notes Offering were used to repay the remaining $28.3 million balance of the
NationsBank Mortgage Loan and to reduce indebtedness under the 1995 Acquisition
Facility. The 2001 Notes bear interest at a rate of 7.30% per annum and mature
on May 15, 2001, and the 2006 Notes bear interest at a rate of 7.95% per annum
and mature on May 15, 2006. The supplemental indenture under which the Notes
were issued creates certain limitations on the ability of the Company to incur
indebtedness.
On June 3, 1996, the Company repaid the CIGNA Mortgage Loan with funds
borrowed under the 1995 Acquisition Facility. On June 14, 1996, the Company
repaid $8 million of indebtedness under the 1995 Acquisition Facility.
On June 19, 1996, the Company completed a public offering of the Series A
Preferred Stock. The offering was priced at $25 per share resulting in net
proceeds to the Company of approximately $47.7 million. The net proceeds were
used to repay borrowings under the 1995 Acquisition Facility. Subsequently, on
July 1, 1996, the Company borrowed $35 million under the 1995 Acquisition
Facility to partially repay the 1994 Mortgage Loan. Following such repayment,
the interest rate on the remaining balance of $75 million under the 1994
Mortgage Loan was reduced from LIBOR plus 1.25% to LIBOR plus 1.00%. The 1994
Mortgage Loan is secured by first mortgage liens on 19 of the Properties.
OTHER DEVELOPMENTS. On March 21, 1996, the Property leased to MacFrugal's
was destroyed by fire. The lease for this Property requires MacFrugal's to
continue paying rent and to rebuild the structure to original specifications.
MacFrugal's maintains insurance to cover the replacement cost of the building
and the ongoing rent payments.
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MANAGEMENT
The following table sets forth certain information with respect to the
Directors and senior executive officers of the Company:
<TABLE>
<CAPTION>
NAME AGE OFFICE
---- --- ------
<S> <C> <C>
Robert W. Holman, Jr........ 52 Chairman of the Board of Directors
Mark S. Whiting............. 39 President, Chief Executive Officer and Director
Willis Andersen, Jr......... 64 Director
John G. McDonald............ 59 Director
Robert S. Morris............ 41 Director
Stephen B. Oresman.......... 64 Director
Jay H. Shidler.............. 50 Director
A. William Stein............ 42 Executive Vice President and Chief Financial Officer
Gary P. Lyon................ 35 Executive Vice President and Chief Acquisition Officer
Jo Ann Chitty............... 35 Senior Vice President, Asset Management
</TABLE>
ROBERT W. HOLMAN, JR. Mr. Holman was Co-Chairman of the Board of Directors
and Chief Executive Officer of the Company from its formation until May 22,
1996, when he became Chairman of the Board. He was a co-founder and Chairman and
the Chief Executive Officer of Holman/Shidler Capital Corporation ("HSCC") and,
since 1986, has overseen the evaluation, structuring and closing of acquisitions
of over 250 purchase/leaseback corporate properties in 40 states and in Canada.
Prior to founding HSCC, Mr. Holman acquired and managed an investment portfolio
of real estate and corporate assets in Hawaii. For over 14 years, he managed the
U.S. real estate portfolio of Australia's largest merchant bank, Partnership
Pacific Bank, owned by Bank of Tokyo, Bank of America and Westpac, and was
corporate treasurer and a director of Watkins Pacific, Inc., a public company.
He also directed the State of Hawaii's revitalization of the Honolulu
waterfront. An Economics graduate of the University of California at Berkeley,
Mr. Holman received his M.A. degree in Economics and Planning from Lancaster
University in England and was a Loeb Fellow at Harvard University.
MARK S. WHITING. Mr. Whiting has been President of the Company since its
formation and has been a Director since May 1993. Mr. Whiting became Chief
Executive Officer of the Company on May 22, 1996. Prior thereto, Mr. Whiting was
the Company's Chief Operating Officer. He joined The Shidler Group in 1987 where
he directed its purchase/leaseback activities and managed the operation of over
250 purchase/leaseback corporate properties in 40 states and in Canada. Prior to
joining The Shidler Group and HSCC, Mr. Whiting was Manager/Resort Development
for Wailea Development Company, Inc. in Hawaii. Prior to that, Mr. Whiting
served as a Corporate Financial and Operations Analyst for Alexander & Baldwin,
Inc., in Hawaii. Before that, he was a Vice President of Trans-Pacific Realty,
Inc., a real estate brokerage and investment firm located in Hawaii. Mr. Whiting
holds a Bachelor of Arts degree from Stanford University and an M.B.A. from the
Stanford University Graduate School of Business.
WILLIS ANDERSEN, JR., CRE. Mr. Andersen became a Director of the Company
in June 1993. He is a real estate and REIT industry consultant with over 35
years of experience as an advisor, financial consultant and principal in the
real estate industry. Mr. Andersen currently specializes in advisory work for
publicly traded real estate companies, focusing specifically on REITs. Mr.
Andersen's real estate career has involved work with Allied Properties Inc. of
San Francisco; Bankoh Advisory Corp. of Honolulu; RAMPAC and ICM Property
Investors, Inc., NYSE-listed REITs; and Bedford Properties, Inc., a commercial
property investment and development firm. He is an active member of the American
Society of Real Estate Counselors and NAREIT, and is a former Governor and Past
President (1980-81) of NAREIT.
JOHN G. MCDONALD. Professor McDonald became a Director of the Company in
June 1993. He is a Professor of Finance in the Graduate School of Business at
Stanford University, where he has taught since 1968. Professor McDonald has
taught M.B.A. courses and executive programs in two broad subject areas,
investment management and corporate financial management, both with a global
perspective. He currently
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serves on the Boards of Directors of Scholastic Corporation, Varian Associates,
Inc., Investment Company of America, Income Fund of America, Growth Fund of
America, New Perspective Fund, EuroPacific Growth Fund, Emerging Markets Growth
Fund, Inc. and American Balanced Fund.
ROBERT S. MORRIS. Mr. Morris became a Director of the Company in June
1993. He is the founder and managing partner of Olympus Private Placement Fund,
L.P. and Olympus Growth Fund, L.P. Mr. Morris is currently a director of Master
Protection Holdings, Inc., Tempest Reinsurance Co. Ltd. and Nebraska Book
Company, Inc. Prior to founding Olympus Private Placement Fund, L.P. in 1988,
Mr. Morris was Senior Vice President of General Electric Investment Corporation
where he established that company's Private Placements division in 1983 and
subsequently managed and enlarged the portfolio to over $1.8 billion. From 1977
to 1982, Mr. Morris held management positions in various General Electric
manufacturing and financial services businesses.
STEPHEN B. ORESMAN. Mr. Oresman became a Director of the Company in June
1993. He has been the owner and President of Saltash, Ltd., a management
consulting firm, since 1991. He was a partner and Vice President of The Canaan
Group consulting firm from 1988 to 1991. Mr. Oresman's early career included ten
years in the manufacturing sector, first with Bausch & Lomb, Inc. in Rochester,
New York, and later with Interlake Steel Corp. in Chicago. Subsequently, Mr.
Oresman joined Booz-Allen Hamilton, Inc., where he spent 19 years, including ten
years as managing officer of the firm's Eastern Region and five years as
Chairman of Booz-Allen Hamilton International, guiding the firm's activities
outside of the U.S. Mr. Oresman later joined the advertising agency BBDO
International, as President of the firm's independent marketing companies. Mr.
Oresman is a member of the Boards of Directors of Cleveland Cliffs, Inc.,
Grossman's, Inc. and Technology Solutions Company. Mr. Oresman is a graduate of
Amherst College and the Harvard Business School.
JAY H. SHIDLER. Mr. Shidler has been a member of the Board of Directors
since the formation of the Company in March 1993 and was Co-Chairman until May
1996. He is the founder and Managing Partner of The Shidler Group and was a
co-founder of HSCC and in these capacities has been responsible for the overall
investment strategies and policies of these entities. A nationally acknowledged
innovator in the field of real estate investment, Mr. Shidler has over 20 years
of experience in real estate investment and has acquired and managed properties
involving over $2 billion in aggregate value. Since 1970, Mr. Shidler has been
directly involved in the acquisition and management of over 500 properties in 40
states and in Canada. Mr. Shidler holds a Bachelor's degree in Business
Administration from the University of Hawaii. Mr. Shidler is co-founder and
Chairman of the Board of First Industrial Realty Trust, Inc., a NYSE-listed
REIT. He also serves on the boards of directors of several private companies and
is active as a trustee of several charitable and cultural organizations.
A. WILLIAM STEIN. Mr. Stein has been Executive Vice President and Chief
Financial Officer since April 1996. He is responsible for the Company's
corporate finance (including banking and capital markets), financial management,
compliance and reporting. Between October 1995 and April 1996, Mr. Stein was
Senior Vice President, Capital Markets of the Company. Prior to joining TriNet,
Mr. Stein held a number of positions with Westinghouse Electric Corporation in
Pittsburgh, Pennsylvania, including Assistant Treasurer and Director--Banking.
In addition, Mr. Stein was a Vice President at Westinghouse Financial Services,
with responsibilities for structured finance, capital markets and real estate
sale/leaseback investments. Previously, he was Treasurer of Duquesne Light
Company in Pittsburgh and practiced law both as a securities and finance lawyer
and as a trial lawyer. Mr. Stein holds a Bachelor of Arts degree in Classics
from Princeton University, a J.D. from the University of Pittsburgh and an M.S.
in Industrial Administration from Carnegie Mellon University. Mr. Stein is a
member of the Pennsylvania Bar and the Florida Bar.
GARY P. LYON. Mr. Lyon has been Executive Vice President and Chief
Acquisition Officer since April 1996. Mr. Lyon's responsibilities include
directing all of the Company's purchase/leaseback and net leased real estate
business functions. Between June 1993 and April 1996, Mr. Lyon served as a
Senior Vice President of the Company with responsibility for acquisitions within
the Midwest and the Northeast. Prior to joining The Shidler Group and HSCC in
1987, Mr. Lyon worked for J.P. Morgan & Co., Inc. and Goldman,
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Sachs & Co. Mr. Lyon received his Bachelor of Arts degree in Economics from Duke
University and his M.B.A. in International Business from The Wharton School.
JO ANN CHITTY. Ms. Chitty has been a Senior Vice President of the Company
since its formation. From February 1990 until her employment with the Company,
Ms. Chitty was the Vice President, Asset Management for HSCC. From September
1987 to February 1990, she served as Director of Sales -- East for The Shidler
Group. From January 1987 through September 1987, she served as Property
Manager/Escrow Coordinator for HSCC. Prior to that time, she served as Escrow
Coordinator with IU Terminal Properties, Inc., a property holding and management
company.
DESCRIPTION OF SERIES B PREFERRED STOCK
This description of the particular terms of the Series B Preferred Stock
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Preferred Stock set forth in the
accompanying Prospectus, to which description reference is hereby made.
GENERAL
The Company is authorized to issue up to 10,000,000 shares of Preferred
Stock in one or more series, with such terms, preferences, conversion or other
rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption, in each
case, if any, as are permitted by Maryland law and as the Board of Directors of
the Company may determine by adoption of an amendment of the Company's Articles
of Incorporation, as amended (the "Articles"), without any further vote or
action by the Company's stockholders. See "Description of Preferred Stock" in
the accompanying Prospectus. The Series B Preferred Stock is a series of the
Company's Preferred Stock.
The following summary of the terms and provisions of the Series B Preferred
Stock does not purport to be complete and is qualified in its entirety by
reference to the pertinent sections of the Articles and the Articles
Supplementary creating the Series B Preferred Stock (the "Designating
Amendment"), each of which is available from the Company.
DIVIDENDS
Holders of shares of the Series B Preferred Stock shall be entitled to
receive, when and as declared by the Board of Directors, out of funds legally
available for the payment of dividends, cumulative preferential cash dividends
at the rate of 9.20% per annum of the $25 liquidation preference (equivalent to
a fixed annual rate of $2.30 per share). Such dividends shall be cumulative from
the date of original issue and shall be payable quarterly in arrears on or
before the 15th day of each March, June, September and December or, if not a
business day, the next succeeding business day (each, a "Dividend Payment
Date"). The first dividend, which will be paid on September 15, 1996, will be
for less than a full quarter. Such dividend and any dividend payable on the
Series B Preferred Stock for any partial dividend period will be computed on the
basis of a 360-day year consisting of twelve 30-day months. Dividends will be
payable to holders of record as they appear in the stock records of the Company
at the close of business on the applicable record date, which shall be the first
day of the calendar month in which the applicable Dividend Payment Date falls or
on such other date designated by the Board of Directors of the Company for the
payment of dividends that is not more than 30 nor less than 10 days prior to
such Dividend Payment Date (each, a "Dividend Record Date"). The Series B
Preferred Stock will rank senior to the Company's Common Stock and pari passu
with the Company's Series A Preferred Stock with respect to the payment of
dividends.
No dividends on shares of Series B Preferred Stock shall be declared by the
Board of Directors of the Company or paid or set apart for payment by the
Company at such time as the terms and provisions of any agreement of the
Company, including any agreement relating to its indebtedness, prohibits such
declaration, payment or setting apart for payment or provides that such
declaration, payment or setting apart for payment would constitute a breach
thereof or a default thereunder, or if such declaration or payment shall be
restricted or prohibited by law.
Notwithstanding the foregoing, dividends on the Series B Preferred Stock
will accrue whether or not the Company has earnings, whether or not there are
funds legally available for the payment of such dividends and whether or not
such dividends are declared. Accrued but unpaid dividends on the Series B
Preferred Stock will
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accumulate as of the Dividend Payment Date on which they first become payable.
Except as set forth in the next sentence, no dividends will be declared or paid
or set apart for payment on any capital stock of the Company or any other series
of Preferred Stock ranking, as to dividends, on a parity with or junior to the
Series B Preferred Stock (other than a dividend in shares of the Company's
Common Stock or in shares of any other class of stock ranking junior to the
Series B Preferred Stock as to dividends and upon liquidation) for any period
unless full cumulative dividends have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof is set apart for
such payment on the Series B Preferred Stock for all past dividend periods and
the then current dividend period. When dividends are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon the Series B
Preferred Stock and the shares of any other series of Preferred Stock ranking on
a parity as to dividends with the Series B Preferred Stock, all dividends
declared upon the Series B Preferred Stock and any other series of Preferred
Stock ranking on a parity as to dividends with the Series B Preferred Stock
shall be declared pro rata so that the amount of dividends declared per share of
Series B Preferred Stock and such other series of Preferred Stock shall in all
cases bear to each other the same ratio that accrued dividends per share on the
Series B Preferred Stock and such other series of Preferred Stock (which shall
not include any accrual in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend) bear to
each other. No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments on the Series B Preferred Stock
which may be in arrears.
Except as provided in the immediately preceding paragraph, unless full
cumulative dividends on the Series B Preferred Stock have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for payment for all past dividend periods and the
then current dividend period, no dividends (other than in shares of Common Stock
or other shares of capital stock ranking junior to the Series B Preferred Stock
as to dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Series B Preferred Stock as to dividends or upon liquidation,
nor shall any shares of Common Stock, or any other shares of capital stock of
the Company ranking junior to or on a parity with the Series B Preferred Stock
as to dividends or upon liquidation be redeemed, purchased or otherwise acquired
for any consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any such shares) by the Company (except by conversion
into or exchange for other capital stock of the Company ranking junior to the
Series B Preferred Stock as to dividends and upon liquidation). Holders of
shares of the Series B Preferred Stock shall not be entitled to any dividend,
whether payable in cash, property or stock, in excess of full cumulative
dividends on the Series B Preferred Stock as provided above. Any dividend
payment made on shares of the Series B Preferred Stock shall first be credited
against the earliest accrued but unpaid dividend due with respect to such shares
which remains payable. See "Description of Preferred Stock -- Dividends" in the
accompanying Prospectus.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, the holders of shares of Series B Preferred Stock
are entitled to be paid out of the assets of the Company legally available for
distribution to its stockholders a liquidation preference of $25 per share, plus
an amount equal to any accrued and unpaid dividends to the date of payment,
before any distribution of assets is made to holders of Common Stock or any
other class or series of capital stock of the Company that ranks junior to the
Series B Preferred Stock as to liquidation rights. Holders of Series B Preferred
Stock will be entitled to written notice of any such liquidation. After payment
of the full amount of the liquidating distributions to which they are entitled,
the holders of Series B Preferred Stock will have no right or claim to any of
the remaining assets of the Company. The consolidation or merger of the Company
with or into any other corporation, trust or entity or of any other corporation
with or into the Company, or the sale, lease or conveyance of all or
substantially all of the property or business of the Company, shall not be
deemed to constitute a liquidation, dissolution or winding up of the Company.
For further information regarding the rights of the holders of the Series B
Preferred Stock upon the liquidation, dissolution or winding up of the Company,
see "Description of Preferred Stock -- Liquidation Preference" in the
accompanying Prospectus.
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<PAGE> 24
REDEMPTION
The Series B Preferred Stock is not redeemable prior to August 15, 2001.
However, in order to ensure that the Company remains a qualified REIT for
federal income tax purposes, Series B Preferred Stock will be subject to the
Articles, pursuant to which Series B Preferred Stock owned by a stockholder in
excess of the Ownership Limit (as defined in the accompanying Prospectus) will
automatically be exchanged for shares of Excess Stock, and the Company will have
the right to purchase Excess Stock from the holder. See "Restrictions on
Transfers of Capital Stock" in the accompanying Prospectus. On and after August
15, 2001, the Company, at its option upon not less than 30 nor more than 60
days' written notice, may redeem shares of the Series B Preferred Stock, in
whole or in part, at any time or from time to time, for cash at a redemption
price of $25 per share, plus all accrued and unpaid dividends thereon to the
date fixed for redemption (except as provided below), without interest. The
redemption price of the Series B Preferred Stock (other than the portion thereof
consisting of accrued and unpaid dividends) is payable solely out of the sale
proceeds of other capital stock of the Company, which may include other series
of Preferred Stock, and from no other source. For purposes of the preceding
sentence, "capital stock" means any equity securities (including Common Stock
and Preferred Stock), shares, interest, participation or other ownership
interests (however designated) and any rights (other than debt securities
convertible into or exchangeable for equity securities) or options to purchase
any of the foregoing. Holders of Series B Preferred Stock to be redeemed shall
surrender such Series B Preferred Stock at the place designated in such notice
and shall be entitled to the redemption price and any accrued and unpaid
dividends payable upon such redemption following such surrender. If notice of
redemption of any shares of Series B Preferred Stock has been given and if the
funds necessary for such redemption have been set aside by the Company in trust
for the benefit of the holders of any shares of Series B Preferred Stock so
called for redemption, then from and after the redemption date dividends will
cease to accrue on such shares of Series B Preferred Stock, such shares of
Series B Preferred Stock 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. If less than all of the outstanding Series B Preferred Stock
is to be redeemed, the Series B Preferred Stock to be redeemed shall be selected
pro rata (as nearly as may be practicable without creating fractional shares) or
by any other equitable method determined by the Company.
Unless full cumulative dividends on all shares of Series B Preferred Stock
shall have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past dividend
periods and the then current dividend period, no shares of Series B Preferred
Stock shall be redeemed unless all outstanding shares of Series B Preferred
Stock are simultaneously redeemed and the Company shall not purchase or
otherwise acquire directly or indirectly any shares of Series B Preferred Stock
(except by exchange for capital stock of the Company ranking junior to the
Series B Preferred Stock as to dividends and upon liquidation); provided,
however, that the foregoing shall not prevent the purchase by the Company of
shares of Excess Stock in order to ensure that the Company remains qualified as
a REIT for federal income tax purposes, as described under "Restrictions on
Transfers of Capital Stock" in the accompanying Prospectus, or the purchase or
acquisition of shares of Series B Preferred Stock pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
Series B Preferred Stock.
Notice of redemption will be given by publication in a newspaper of general
circulation in the City of New York, such publication to be made once a week for
two successive weeks commencing not less than 30 nor more than 60 days prior to
the redemption date. A similar notice will be mailed by the Company, postage
prepaid, not less than 30 nor more than 60 days prior to the redemption date,
addressed to the respective holders of record of the Series B Preferred Stock to
be redeemed at their respective addresses as they appear on the stock transfer
records of the Company. No failure to give such notice or any defect thereto or
in the mailing thereof shall affect the validity of the proceedings for the
redemption of any shares of Series B Preferred Stock except as to the holder to
whom notice was defective or not given. Each notice shall state: (i) the
redemption date; (ii) the redemption price; (iii) the number of shares of Series
B Preferred Stock to be redeemed; (iv) the place or places where the Series B
Preferred Stock is to be surrendered for payment of the redemption price; and
(v) that dividends on the shares to be redeemed will cease to accrue on such
redemption date. If less than all of the Series B Preferred Stock held by any
holder is to be redeemed, the
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notice mailed to such holder shall also specify the number of shares of Series B
Preferred Stock held by such holder to be redeemed.
Immediately prior to any redemption of Series B Preferred Stock, the
Company shall pay, in cash, any accumulated and unpaid dividends through the
redemption date, unless a redemption date falls after a Dividend Record Date and
prior to the corresponding Dividend Payment Date, in which case each holder of
Series B Preferred Stock at the close of business on such Dividend Record Date
shall be entitled to the dividend payable on such shares on the corresponding
Dividend Payment Date notwithstanding the redemption of such shares before such
Dividend Payment Date. Except as provided above, the Company will make no
payment or allowance for unpaid dividends, whether or not in arrears, on Series
B Preferred Stock which is redeemed.
The Series B Preferred Stock has no stated maturity and will not be subject
to any sinking fund or mandatory redemption. However, in order to ensure that
the Company remains a qualified REIT for federal income tax purposes, Series B
Preferred Stock owned by a stockholder in excess of the Ownership Limit will
automatically be exchanged for shares of Excess Stock, and the Company will have
the right to purchase Excess Stock from the holder. Excess Stock issued upon
exchange of shares of Series B Preferred Stock may be redeemed, in whole or in
part, at any time when outstanding shares of Series B Preferred Stock are being
redeemed, for cash at a redemption price of $25 per share, plus all accrued and
unpaid dividends on the shares of Series B Preferred Stock, which were exchanged
for such Excess Stock, through the date of such exchange, without interest. Such
Excess Stock shall be redeemed in such proportion and in accordance with such
procedures as shares of Series B Preferred Stock are being redeemed.
VOTING RIGHTS
Holders of the Series B Preferred Stock will not have any voting rights,
except as set forth below or as otherwise from time to time required by law.
Whenever dividends on any shares of Series B Preferred Stock shall be in
arrears for six or more quarterly periods (a "Preferred Dividend Default"), the
holders of such shares of Series B Preferred Stock (voting separately as a class
with all other series of Preferred Stock ranking on a parity with the Series B
Preferred Stock as to dividends or upon liquidation ("Parity Preferred") upon
which like voting rights have been conferred and are exercisable) will be
entitled to vote for the election of a total of two additional directors of the
Company (the "Preferred Stock Directors") at a special meeting called by the
holders of record of at least 20% of the Series B Preferred Stock or the holders
of any series of Parity Preferred so in arrears (unless such request is received
less than 90 days before the date fixed for the next annual or special meeting
of the stockholders) or at the next annual meeting of stockholders, and at each
subsequent annual meeting until all dividends accumulated on such shares of
Series B Preferred Stock for the past dividend periods and the dividend for the
then current dividend period shall have been fully paid or declared and a sum
sufficient for the payment thereof set aside for payment. If and when all
accumulated dividends and the dividend for the then current dividend period on
the Series B Preferred Stock shall have been paid in full or set aside for
payment in full, the holders thereof shall be divested of the foregoing voting
rights (subject to revesting in the event of each and every Preferred Dividend
Default) and, if all accumulated dividends and the dividend for the then current
dividend period have been paid in full or set aside for payment in full on all
series of Parity Preferred upon which like voting rights have been conferred and
are exerciseable, the term of office of each Preferred Stock Director so elected
shall terminate. Any Preferred Stock Director may be removed at any time with or
without cause by, and shall not be removed otherwise than by the vote of, the
holders of record of a majority of the outstanding shares of the Series B
Preferred Stock when they have the voting rights described above (voting
separately as a class with all series of Parity Preferred upon which like voting
rights have been conferred and are exercisable). So long as a Preferred Dividend
Default shall continue, any vacancy in the office of a Preferred Stock Director
may be filled by written consent of the Preferred Stock Director remaining in
office, or if none remains in office, by a vote of the holders of record of a
majority of the outstanding shares of Series B Preferred Stock when they have
the voting rights described above (voting separately as a class with all series
of Parity Preferred upon which like voting rights have been conferred and are
exercisable). The Preferred Stock Directors shall each be entitled to one vote
per director on any matter.
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So long as any shares of Series B Preferred Stock remain outstanding, the
Company will not, without the affirmative vote or consent of the holders of at
least two-thirds of the shares of the Series B Preferred Stock outstanding at
the time, given in person or by proxy, either in writing or at a meeting (voting
separately as a class), (a) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to the
Series B Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or reclassify
any authorized capital stock of the Company into such shares, or create,
authorize or issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or (b) amend, alter or repeal the provisions
of the Articles or the Designating Amendment, whether by merger, consolidation
or otherwise (an "Event"), so as to materially and adversely affect any right,
preference, privilege or voting power of the Series B Preferred Stock or the
holders thereof; provided, however, with respect to the occurrence of any Event
set forth in (b) above, so long as the Series B Preferred Stock remains
outstanding with the terms thereof materially unchanged, the occurrence of any
such Event shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting power of holders of the Series B Preferred
Stock and provided further that (i) any increase in the amount of the authorized
Preferred Stock or the creation or issuance of any other series of Preferred
Stock, or (ii) any increase in the amount of authorized shares of such series,
in each case ranking on a parity with or junior to the Series B Preferred Stock
with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of Series B Preferred Stock shall have been
redeemed or called for redemption upon proper notice and sufficient funds shall
have been deposited in trust to effect such redemption.
CONVERSION
The Series B Preferred Stock is not convertible into or exchangeable for
any other property or securities of the Company, except that the shares of
Series B Preferred Stock may be exchanged for shares of Excess Stock, in
accordance with the Articles. See "Restrictions on Transfers of Capital Stock"
in the accompanying Prospectus.
RESTRICTIONS ON OWNERSHIP
For information regarding restrictions on ownership of the Series B
Preferred Stock, see "Restrictions on Transfers of Capital Stock" in the
accompanying Prospectus.
TRANSFER AGENT
The transfer agent, registrar and dividend disbursing agent for the Series
B Preferred Stock will be KeyCorp Shareholder Services, Inc., Denver, Colorado.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain federal income tax considerations is based
on current law, is for general information only, and is not tax advice. This
discussion does not purport to deal with all aspects of taxation that may be
relevant to particular stockholders in light of their personal investment or tax
circumstances, or to certain types of stockholders (including insurance
companies, tax exempt organizations, financial institutions or broker dealers,
foreign corporations and persons who are not citizens or residents of the United
States) subject to special treatment under the federal income tax laws. In
addition, this section does not discuss foreign, state or local taxation.
This discussion does not address the taxation of the Company or the impact
on the Company of its election to be taxed as a REIT. Such matters are discussed
in the accompanying Prospectus under "Federal Income Tax Considerations."
Prospective investors should consult, and must depend on, their own tax advisors
S-26
<PAGE> 27
regarding the state, local, foreign and other tax consequences of holding and
disposing of Series B Preferred Stock.
DISTRIBUTIONS ON SERIES B PREFERRED STOCK
As long as the Company qualifies as a REIT, distributions that are made to
its stockholders out of the Company's current accumulated earnings and profits,
and that are not designated as capital gain dividends, generally will be taxed
to stockholders as ordinary income, either in the year of payment or, with
respect to distributions declared in the last quarter of any year and paid by
January 31 of the following year, in the year of declaration, and will not be
eligible for the dividends received deduction for corporations. The Company's
earnings and profits will be allocated first to any outstanding Preferred Stock.
A distribution of net capital gain by the Company generally will be treated as
long term capital gain to stockholders to the extent properly designated by the
Company as a capital gain dividend and regardless of the length of time a
stockholder has held such stockholder's Series B Preferred Stock. Under Section
291 of the Code, however, corporate stockholders may be required to treat up to
20% of any such capital gain as ordinary income. Corporate stockholders of a
REIT generally are required to treat the portion of a capital gain distribution
attributable to the gain from the REIT's sale or exchange of depreciable real
property as subject to the 20% ordinary income rule of Section 291 of the Code.
Capital gain distributions also are not eligible for the dividends received
deduction for corporations. A dividend in excess of current or accumulated
earnings and profits will constitute a nontaxable return of capital to the
extent of the stockholder's basis in such stockholder's Series B Preferred
Stock, and will be applied to reduce the stockholder's basis in the Series B
Preferred Stock. To the extent such a dividend is greater than such basis, it
will be treated as capital gain to those stockholders holding their Series B
Preferred Stock as capital assets. The Company will notify stockholders as to
the portions of each distribution which, in its judgment, constitute ordinary
income, capital gain distributions or return of capital. Should the Company
incur ordinary or capital losses, stockholders will not be entitled to include
such losses in their own income tax returns.
REDEMPTION OF SERIES B PREFERRED STOCK
A redemption of shares of Series B Preferred Stock for cash generally will
be treated as a sale or exchange if the holder of such redeemed shares does not
own, actually or constructively within the meaning of Section 318 of the Code,
any stock of the Company other than the redeemed Series B Preferred Stock. If a
holder does own, actually or constructively, such other stock (including Series
B Preferred Stock not redeemed), a redemption of Series B Preferred Stock may be
treated as a dividend to the extent of the Company's current or accumulated
earnings and profits. Such dividend treatment would not apply if the redemption
were "not essentially equivalent to a dividend" with respect to the holder under
Section 302(b)(1) of the Code. A distribution to a holder will be "not
essentially equivalent to a dividend" if it results in a "meaningful reduction"
in the holder's stock interest in the Company. For this purpose, a redemption of
Series B Preferred Stock that results in a reduction in the proportionate
interest in the Company (taking into account any ownership of Common Stock and
any stock constructively owned) of a holder whose relative stock interest in the
Company is minimal and who exercises no control over corporate affairs should be
regarded as a meaningful reduction in the holder's stock interest in the
Company. If the redemption of the Series B Preferred Stock for cash is not
treated as a distribution taxable as a dividend, the redemption will result in
capital gain or loss equal to the difference between the amount of cash received
by the holder and the holder's adjusted tax basis in the Series B Preferred
Stock redeemed.
If a redemption of Series B Preferred Stock is treated as a distribution
that is taxable as a dividend, the holder's adjusted tax basis in the redeemed
Series B Preferred Stock will be transferred to any remaining stock holdings in
the Company. If the holder does not retain any stock ownership in the Company,
the holder may lose such basis entirely.
S-27
<PAGE> 28
UNDERWRITING
Under the terms and subject to the conditions of the Underwriting Agreement
dated the date hereof, each of the Underwriters named below (each, an
"Underwriter" and together, the "Underwriters") has severally agreed to
purchase, and the Company has agreed to sell to each Underwriter, the number of
shares of Series B Preferred Stock set forth opposite the name of such
Underwriter below:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Smith Barney Inc. ........................................................ 650,000
Donaldson, Lufkin & Jenrette
Securities Corporation................................................. 650,000
---------
Total................................................................ 1,300,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Series B Preferred Stock are
subject to approval of certain legal matters by counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all shares of
Series B Preferred Stock offered hereby (other than those covered by the
over-allotment option described below) if any such shares are taken.
The Underwriters initially propose to offer part of the shares of Series B
Preferred Stock directly to the public at the public offering price set forth on
the cover page of this Prospectus Supplement and part to certain dealers at a
price which represents a concession not in excess of $.50 per share under the
public offering price. Each Underwriter may allow, and such dealers may
re-allow, a concession not in excess of $.30 per share to the other Underwriter
or to certain other dealers. After the initial public offering, the public
offering price and such concessions may be changed by the Underwriters.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus Supplement, to purchase up to an aggregate
of 195,000 additional shares of Series B Preferred Stock at the public offering
price set forth on the cover page of this Prospectus Supplement, minus the
underwriting discounts and commissions. The Underwriters may exercise such
option to purchase additional shares of Series B Preferred Stock solely for the
purpose of covering over-allotments, if any, incurred in connection with the
sale of the shares of Series B Preferred Stock offered hereby. To the extent
such option is exercised, each Underwriter will become obligated, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares of Series B Preferred Stock as the number of shares of Series
B Preferred Stock set forth opposite such Underwriter's name in the preceding
table bears to the total number of shares of Series B Preferred Stock in such
table.
The Company and the Underwriters have agreed to indemnify each other
against certain liabilities, including liabilities under the Securities Act of
1933, as amended.
The NYSE has approved the listing of the shares of Series B Preferred
Stock, subject to official notice of issuance, under the symbol "TRI PrB." Prior
to this offering, there has been no public market for the shares of Series B
Preferred Stock. Trading of the shares of Series B Preferred Stock on the NYSE
is expected to commence within a seven-day period after the initial delivery of
the shares of Series B Preferred Stock. The Underwriters have advised the
Company that they intend to make a market in the Series B Preferred Stock prior
to the commencement of trading on the NYSE, but are not obligated to do so and
may discontinue market making at any time without notice.
LEGAL MATTERS
Certain legal matters, including the legality of the Series B Preferred
Stock being offered hereby, are being passed upon for the Company by Goodwin,
Procter & Hoar LLP, Boston, Massachusetts. Certain legal matters related to this
offering are being passed upon for the Underwriters by Cahill Gordon & Reindel
(a partnership including a professional corporation), New York, New York. Cahill
Gordon & Reindel will rely as to all matters of Maryland law on the opinion of
Goodwin, Procter & Hoar LLP, Boston, Massachusetts.
S-28
<PAGE> 29
PROSPECTUS
$300,000,000
[TRINET LOGO]
TRINET CORPORATE REALTY TRUST, INC.
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
TriNet Corporate Realty Trust, Inc. ("TriNet" or the "Company") may offer
from time to time in one or more series (i) its unsecured debt securities ("Debt
Securities"), (ii) shares of its preferred stock, $.01 par value per share
("Preferred Stock"), and (iii) shares of its common stock, $.01 par value per
share ("Common Stock"), with an aggregate public offering price of up to
$300,000,000 (or its equivalent based on the exchange rate at the time of sale)
in amounts, at prices and on terms to be determined at the time of offering. The
Debt Securities, Preferred Stock and Common Stock (collectively, the
"Securities") may be offered separately or together, in separate series, in
amounts, at prices and on terms to be set forth in one or more supplements to
this Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities for which this Prospectus is being
delivered will be set forth in the applicable Prospectus Supplement and will
include, where applicable: (i) in the case of Debt Securities, the specific
title, aggregate principal amount, ranking, currency, form (which may be
registered or bearer, or certificated or global), authorized denominations,
maturity, rate (or manner of calculation thereof) and time of payment of
interest, terms for redemption at the option of the Company or repayment at the
option of the holder, terms for sinking fund payments, terms for conversion into
Common Stock or Preferred Stock, covenants and any initial public offering
price; (ii) in the case of Preferred Stock, the specific designation and stated
value per share, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; and (iii) in the case of
Common Stock, any initial public offering price. In addition, such specific
terms may include limitations on direct or beneficial ownership and restrictions
on transfer of the Securities, in each case as may be consistent with the
Company's Amended and Restated Articles of Incorporation or otherwise
appropriate to preserve the status of the Company as a real estate investment
trust ("REIT") for federal income tax purposes. See "Restrictions on Transfers
of Capital Stock."
The applicable Prospectus Supplement will also contain information, where
appropriate, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Securities may be offered by the Company directly to one or more
purchasers, through agents designated from time to time by the Company or to or
through underwriters or dealers. If any agents or underwriters are involved in
the sale of any of the securities, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them will be set
forth, or will be calculable from the information set forth, in an accompanying
Prospectus Supplement. See "Plan of Distribution." No Securities may be sold
without delivery of a Prospectus Supplement describing the method and terms of
the offering of such Securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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 JANUARY 24, 1996.
<PAGE> 30
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC" or "Commission") a Registration Statement on Form S-3 under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the Securities.
This Prospectus, which constitutes part of the Registration Statement, omits
certain of the information contained in the Registration Statement and the
exhibits thereto on file with the Commission pursuant to the Securities Act and
the rules and regulations of the Commission thereunder. The Registration
Statement, including exhibits thereto, may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the Commission's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048, and Northwestern
Atrium Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661-2511,
and copies may be obtained at the prescribed rates from the Public Reference
Section of the Commission at its principal office in Washington, D.C. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
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 and proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the locations described above. Copies of such materials
can be obtained by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
In addition, the Common Stock is listed on the New York Stock Exchange (the
"NYSE"), and such materials can be inspected and copied at the NYSE, 20 Broad
Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus:
(i) Annual Report on Form 10-K for the fiscal year ended December 31, 1994, as
amended by the Company's Form 10-K/A dated October 5, 1995, (ii) Quarterly
Reports on Form 10-Q for the fiscal quarters ended March 31, 1995, June 30, 1995
and September 30, 1995, (iii) the Company's Current Report on Form 8-K dated May
2, 1995, as amended by the Company's Form 8-K/A dated June 14, 1995, (iv) the
Company's Current Report on Form 8-K dated June 23, 1995, (v) the Company's
Current Report on Form 8-K dated October 5, 1995, (vi) the Company's Current
Report on Form 8-K dated November 4, 1995, and (vii) the description of the
Company's Common Stock contained in the Company's Registration Statement on Form
8-A dated April 1, 1993.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of all Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. The Company will provide, without charge, to
each person, including any beneficial owner, to whom a copy of this Prospectus
is delivered, at the request of such person, a copy of any or all of the
documents incorporated herein by reference (other than exhibits thereto, unless
such exhibits are specifically incorporated by reference into such documents).
Written requests for such copies should be directed to James R. Reinhart, Chief
Financial Officer, TriNet Corporate Realty Trust, Inc., Four Embarcadero Center,
Suite 3150, San Francisco, California 94111, telephone (415) 391-4300.
Any statement contained herein or in a document incorporated or deemed to
be incorporated herein by reference shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in an applicable Prospectus Supplement) or in any subsequently filed
document that is incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed to
constitute a part of this Prospectus or any Prospectus Supplement, except as so
modified or superseded.
2
<PAGE> 31
THE COMPANY
GENERAL
TriNet Corporate Realty Trust, Inc. is real estate investment trust (a
"REIT") which acquires, owns and manages properties that are net leased to
corporations in a variety of industries throughout the United States and that
the Company believes are essential or important to the ongoing operations of
those corporations. Under a net lease, the tenant is responsible for obligations
such as taxes, repairs and insurance, which would otherwise be the
responsibility of the landlord. Based on total market capitalization, the
Company is one of the largest publicly traded REITs in the United States engaged
exclusively in the corporate net leased real estate business. As of January 18,
1996, TriNet's portfolio consists of 97 properties (the "Properties"), which are
predominantly single-tenant industrial and office buildings located throughout
the United States. The Properties are 100% net leased pursuant to leases with an
average remaining term (excluding extension options) of approximately 11 years
when lease terms are weighted according to contractual rent revenues. TriNet is
a self-administered and self-managed REIT.
The Company was incorporated under the laws of the State of Maryland on
March 4, 1993. The Company's principal executive offices are located at Four
Embarcadero Center, Suite 3150, San Francisco, California 94111, and its
telephone number is (415) 391-4300. The Company also maintains regional offices
in Florida and Pennsylvania.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of Securities for general
corporate purposes, which may include the acquisition of additional properties,
the repayment of outstanding debt or the improvement of certain properties
already in the Company's portfolio.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the periods shown:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1995 DECEMBER 31, 1994
------------------ -----------------
<S> <C>
1.92x 2.65x
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations plus fixed charges. Fixed charges consist of interest
expense and the amortization of debt issuance costs. To date, the Company has
not issued any Preferred Stock; therefore, the ratios of earnings to combined
fixed charges and preferred stock dividend requirements are the same as the
ratios of earnings to fixed charges presented above.
3
<PAGE> 32
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be direct unsecured obligations of the Company and
may be either senior Debt Securities ("Senior Debt Securities") or subordinated
Debt Securities ("Subordinated Debt Securities"). The Debt Securities will be
issued under one or more indentures, each dated as of a date prior to the
issuance of the Debt Securities to which it relates. Senior Debt Securities and
Subordinated Debt Securities may be issued pursuant to separate indentures
(respectively, a "Senior Indenture" and a "Subordinated Indenture"), in each
case between the Company and a trustee (a "Trustee"), which may be the same
Trustee, and in the form that has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part, subject to such amendments or
supplements as may be adopted from time to time. The Senior Indenture and the
Subordinated Indenture, as amended or supplemented from time to time, are
sometimes hereinafter referred to collectively as the "Indentures." The
Indentures will be subject to and governed by the Trust Indenture Act of 1939,
as amended (the "TIA"). The statements made under this heading relating to the
Debt Securities and the Indentures are summaries of the anticipated provisions
thereof, do not purport to be complete and are qualified in their entirety by
reference to the Indentures and such Debt Securities.
Capitalized terms used herein and not defined shall have the meanings
assigned to them in the applicable Indenture.
TERMS
General. The Debt Securities will be direct, unsecured obligations of the
Company. The indebtedness represented by the Senior Debt Securities will rank
equally with all other unsecured and unsubordinated indebtedness of the Company.
The indebtedness represented by Subordinated Debt Securities will be
subordinated in right of payment to the prior payment in full of Senior
Indebtedness of the Company as described under "--Subordination." The particular
terms of the Debt Securities offered by a Prospectus Supplement will be
described in the applicable Prospectus Supplement, along with any applicable
modifications of or additions to the general terms of the Debt Securities as
described herein and in the applicable Indenture and any applicable federal
income tax considerations. Accordingly, for a description of the terms of any
series of Debt Securities, reference must be made to both the Prospectus
Supplement relating thereto and the description of the Debt Securities set forth
in this Prospectus.
Except as set forth in any Prospectus Supplement, the Debt Securities may
be issued without limit as to aggregate principal amount, in one or more series,
in each case as established from time to time by the Company or as set forth in
the applicable Indenture or in one or more indentures supplemental to such
Indenture. All Debt Securities of one series need not be issued at the same time
and, unless otherwise provided, a series may be reopened, without the consent of
the holders of the Debt Securities of such series, for issuance of additional
Debt Securities of such series.
Each Indenture will provide that the Company may, but need not, designate
more than one Trustee thereunder, each with respect to one or more series of
Debt Securities. Any Trustee under an Indenture may resign or be removed with
respect to one or more series of Debt Securities, and a successor Trustee may be
appointed to act with respect to such series. In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the applicable
Indenture separate and apart from the trust administered by any other Trustee,
and, except as otherwise indicated herein, any action described herein to be
taken by each Trustee may be taken by each such Trustee with respect to, and
only with respect to, the one or more series of Debt Securities for which it is
Trustee under the applicable Indenture.
The following summaries set forth certain general terms and provisions of
the Indentures and the Debt Securities. The Prospectus Supplement relating to
the series of Debt Securities being offered will contain further terms of such
Debt Securities, including the following specific terms:
(1) The title of such Debt Securities and whether such Debt
Securities are Senior Debt Securities or Subordinated Debt Securities;
4
<PAGE> 33
(2) The aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(3) The price (expressed as a percentage of the principal amount
thereof) at which such Debt Securities will be issued and, if other than
the principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof, or (if
applicable) the portion of the principal amount of such Debt Securities
that is convertible into Common Stock or Preferred Stock, or the method by
which any such portion shall be determined;
(4) If convertible, the terms on which such Debt Securities are
convertible, including the initial conversion price or rate and the
conversion period and any applicable limitations on the ownership or
transferability of the Common Stock or Preferred Stock receivable on
conversion;
(5) The date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be payable;
(6) The rate or rates (which may be fixed or variable), or the method
by which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(7) The date or dates, or the method for determining such date or
dates, from which any such interest will accrue, the dates on which any
such interest will be payable, the record dates for such interest payment
dates, or the method by which such dates shall be determined, the persons
to whom such interest shall be payable, and the basis upon which interest
shall be calculated if other than that of a 360-day year of twelve 30-day
months;
(8) The place or places where the principal of (and premium or
Make-Whole Amount (as defined in the Indenture), if any) and interest, if
any, on such Debt Securities will be payable, where such Debt Securities
may be surrendered for registration of transfer or exchange and where
notices or demands to or upon the Company in respect of such Debt
Securities and the applicable Indenture may be served;
(9) The period or periods, if any, within which, the price or prices
at which and the other terms and conditions upon which such Debt Securities
may, pursuant to any optional or mandatory redemption provisions, be
redeemed, as a whole or in part, at the option of the Company;
(10) The obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or periods
within which, the price or prices at which and the other terms and
conditions upon which such Debt Securities will be redeemed, repaid or
purchased, as a whole or in part, pursuant to such obligation;
(11) If other than U.S. dollars, the currency or currencies in which
such Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(12) Whether the amount of payments of principal of (and premium or
Make-Whole Amount, if any, including any amount due upon redemption, if
any) or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on the yield on or trading price of
other securities, including United States Treasury securities, or on a
currency, currencies, currency unit or units, or composite currency or
currencies) and the manner in which such amounts shall be determined;
(13) Whether the principal of (and premium or Make-Whole Amount, if
any) or interest on the Debt Securities of the series are to be payable, at
the election of the Company or a holder thereof, in a currency or
currencies, currency unit or units or composite currency or currencies
other than that in which such Debt Securities are denominated or stated to
be payable, the period or periods within which, and the terms and
conditions upon which, such election may be made, and the time and manner
of, and identity of the exchange rate agent with responsibility for,
determining the exchange rate between the currency or currencies, currency
unit or units or composite currency or currencies in which such Debt
5
<PAGE> 34
Securities are denominated or stated to be payable and the currency or
currencies, currency unit or units or composite currency or currencies in
which such Debt Securities are to be so payable;
(14) Provisions, if any, granting special rights to the holders of
Debt Securities of the series upon the occurrence of such events as may be
specified;
(15) Any deletions from, modifications of or additions to the Events
of Default (as defined in the Indenture) or covenants of the Company with
respect to Debt Securities of the series, whether or not such Events of
Default or covenants are consistent with the Events of Default or covenants
described herein;
(16) Whether and under what circumstances the Company will pay any
additional amounts on such Debt Securities in respect of any tax,
assessment or governmental charge and, if so, whether the Company will have
the option to redeem such Debt Securities in lieu of making such payment;
(17) Whether Debt Securities of the series are to be issuable as
Registered Securities, Bearer Securities (with or without coupons) or both,
any restrictions applicable to the offer, sale or delivery of Bearer
Securities and the terms upon which Bearer Securities of the series may be
exchanged for Registered Securities of the series and vice versa (if
permitted by applicable laws and regulations), whether any Debt Securities
of the series are to be issuable initially in temporary global form and
whether any Debt Securities of the series are to be issuable in permanent
global form with or without coupons and, if so, whether beneficial owners
of interests in any such permanent global Security may exchange such
interests for Debt Securities of such series and of like tenor of any
authorized form and denomination and the circumstances under which any such
exchanges may occur, if other than in the manner provided in the Indenture,
and, if Registered Securities of the series are to be issuable as a Global
Security (as defined), the identity of the depository for such series;
(18) The date as of which any Bearer Securities of the series and any
temporary Global Security representing outstanding Debt Securities of the
series shall be dated if other than the date of original issuance of the
first Security of the series to be issued;
(19) The Person to whom any interest on any Registered Security of the
series shall be payable, if other than the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest, the manner in
which, or the Person to whom, any interest on any Bearer Security of the
series shall be payable, if otherwise than upon presentation and surrender
of the coupons appertaining thereto as they severally mature, and the
extent to which, or the manner in which, any interest payable on a
temporary Global Security on an Interest Payment Date will be paid if other
than in the manner provided in the Indenture;
(20) The applicability, if any, of the defeasance and covenant
defeasance provisions of the Indenture to the Debt Securities of the
series;
(21) If the Debt Securities of such series are to be issuable in
definitive form (whether upon original issue or upon exchange of a
temporary Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions, then
the form and/or terms of such certificates, documents or conditions;
(22) The obligation, if any, of the Company to permit the conversion
of the Debt Securities of such series into Common Stock or Preferred Stock,
as the case may be, and the terms and conditions upon which such conversion
shall be effected (including, without limitation, the initial conversion
price or rate, the conversion period, any adjustment of the applicable
conversion price and any requirements relative to the reservation of such
shares for purposes of conversion); and
(23) Any other terms of the series (which terms shall not be
inconsistent with the provisions of the Indenture under which the Debt
Securities are issued).
If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon
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declaration of acceleration of the maturity thereof ("Original Issue Discount
Securities"). In such cases, all material U.S. federal income tax, accounting
and other considerations applicable to Original Issue Discount Securities will
be described in the applicable Prospectus Supplement.
Except as may be set forth in any Prospectus Supplement, the Debt
Securities will not contain any provisions that would limit the ability of the
Company to incur indebtedness or that would afford holders of Debt Securities
protection in the event of a highly leveraged or similar transaction involving
the Company or in the event of a change of control. Restrictions on ownership
and transfers of the Common Stock and Preferred Stock are designed to preserve
its status as a REIT and, therefore, may act to prevent or hinder a change of
control. See "Restrictions on Transfers of Capital Stock." 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.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof. Where Debt Securities of any series are issued in
bearer form, the special restrictions and considerations, including special
offering restrictions and special federal income tax considerations, applicable
to any such Debt Securities and to payment on and transfer and exchange of such
Debt Securities will be described in the applicable Prospectus Supplement.
Bearer Debt Securities will be transferable by delivery.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and interest
on any series of Debt Securities will be payable at the corporate trust office
of the applicable Trustee, the address of which will be stated in the applicable
Prospectus Supplement; provided that, at the option of the Company, payment of
interest may be made by check mailed to the address of the person entitled
thereto as it appears in the applicable register for such Debt Securities or by
wire transfer of funds to such person at an account maintained within the United
States.
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security in registered form ("Defaulted
Interest") will forthwith cease to be payable to the holder on the applicable
Regular Record Date and may either be paid to the Person in whose name such Debt
Security is registered at the close of business on a special record date (the
"Special Record Date") for the payment of such Defaulted Interest to be fixed by
the Trustee, in which case notice thereof shall be given to the holder of such
Debt Security not less than 10 days prior to such Special Record Date, or may be
paid at any time in any other lawful manner, all as more completely described in
the applicable Indenture.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt Securities
at the corporate trust office of the applicable Trustee or at the office of any
transfer agent designated by the Company for such purpose. In addition, subject
to certain limitations imposed upon Debt Securities issued in book-entry form,
the Debt Securities of any series may be surrendered for registration of
transfer or exchange thereof at the corporate trust office of the applicable
Trustee or at the office of any transfer agent designated by the Company for
such purpose. Every Debt Security in registered form surrendered for
registration of transfer or exchange must be duly endorsed or accompanied by a
written instrument of transfer, and the person requesting such action must
provide evidence of title and identity satisfactory to the applicable Trustee or
transfer agent. No service charge will be made for any registration of transfer
or exchange of any Debt Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in connection
therewith. If the applicable Prospectus Supplement refers to any transfer agent
(in addition to the applicable Trustee) initially designated by the Company with
respect to any series of Debt Securities, the Company may at any time rescind
the designation of any such transfer agent or approve a change in the location
through which any such transfer agent acts, except that the Company will be
required
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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 (a) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before the selection of any
Debt Securities for redemption and ending at the close of business on the day of
mailing of the notice of redemption; (b) register the transfer of or exchange
any Debt Security, or portion thereof, so selected for redemption, in whole or
in part, except the unredeemed portion of any Debt Security being redeemed in
part; or (c) issue, register the transfer of or exchange any Debt Security that
has been surrendered for repayment at the option of the holder, except the
portion, if any, of such Debt Security not to be so repaid.
Payment in respect of Debt Securities in bearer form will be made in the
currency and in the manner designated in the applicable Prospectus Supplement,
subject to any applicable laws and regulations, at such paying agencies outside
the United States as the Company may appoint from time to time. The paying
agents outside the United States, if any, initially appointed by the Company for
a series of Debt Securities will be named in the Prospectus Supplement. Unless
otherwise provided in the applicable Prospectus Supplement, the Company may at
any time designate additional paying agents or rescind the designation of any
paying agents, except that, if Debt Securities of a series are issuable in
registered form, the Company will be required to maintain at least one paying
agent in each place of payment for such series and if Debt Securities of a
series are issuable in bearer form, the Company will be required to maintain at
least one paying agent in a place of payment outside the United States where
Debt Securities of such series and any coupons appertaining thereto may be
presented and surrendered for payment.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indentures will provide that the Company may, without the consent of
the holders of any outstanding Debt Securities, consolidate with, or sell, lease
or convey all or substantially all of its assets to, or merge with or into, any
other entity provided that (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 is organized under the laws of any domestic jurisdiction
and assumes the Company's obligations to pay principal of (and premium or
Make-Whole Amount, if any) and interest on all of the Debt Securities and the
due and punctual performance and observance of all of the covenants and
conditions contained in such Indenture; (b) immediately after giving effect to
such transaction and treating any indebtedness that becomes an obligation of the
Company or any subsidiary as a result thereof as having been incurred by the
Company or such subsidiary at the time of such transaction, no Event of Default
under such Indenture, and no event which, after notice or the lapse of time, or
both, would become such an Event of Default, shall have occurred and be
continuing; and (c) an officer's certificate and legal opinion covering such
conditions shall be delivered to each Trustee.
CERTAIN COVENANTS
The applicable Prospectus Supplement will describe any material covenants
in respect of a series of Debt Securities that are not described in this
Prospectus. Unless otherwise indicated in the applicable Prospectus Supplement,
Senior Debt Securities will include the following covenants of the Company:
Existence. Except as permitted under "--Merger, Consolidation or Sale of
Assets," the Indentures will require the Company to do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (by articles of incorporation, by-laws and statute) and
franchises; provided, however, that the Company shall not be required to
preserve any right or franchise if its Board of Directors determines that the
preservation thereof is no longer desirable in the conduct of its business.
Maintenance of Properties. The Indentures will require the Company to
cause all of its material properties used or useful in the conduct of its
business or the business of any subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
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properly and advantageously conducted at all times; provided, however, that the
Company and its subsidiaries shall not be prevented from selling or otherwise
disposing of their properties for value in the ordinary course of business.
Insurance. The Indentures will require the Company to cause each of its
and its subsidiaries' insurable properties to be insured against loss or damage
at least equal to their then full insurable value with insurers of recognized
responsibility and, if described in the applicable Prospectus Supplement, having
a specified rating from a recognized insurance rating service.
Payment of Taxes and Other Claims. The Indentures will require the Company
to pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any subsidiary or upon the income, profits or property of the
Company or any subsidiary and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or any subsidiary; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the following events are "Events of Default" with
respect to any series of Debt Securities issued thereunder: (a) default in the
payment of any interest on any Debt Security of such series when such interest
becomes due and payable that continues for a period of 30 days; (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 and payable; (c) default in making any
sinking fund payment as required for any Debt Security of such series; (d)
default in the performance, or breach, of any other covenant or warranty of the
Company in the applicable Indenture with respect to the Debt Securities of such
series and continuance of such default or breach for a period of 60 days after
written notice as provided in the Indenture; (e) default under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company (or by any Subsidiary, the repayment of which the
Company has guaranteed or for which the Company is directly responsible or
liable as obligor or guarantor), having an aggregate principal amount
outstanding of at least $25,000,000, whether such indebtedness now exists or
shall hereafter be created, which default shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, without such indebtedness
having been discharged, or such acceleration having been rescinded or annulled,
within a period of 30 days after written notice to the Company as provided in
the Indenture; (f) certain events of bankruptcy, insolvency or reorganization,
or court appointment of a receiver, liquidator or trustee of the Company or any
Significant Subsidiary; and (g) any other event of default provided with respect
to a particular series of Debt Securities. The term "Significant Subsidiary" has
the meaning ascribed to such term in Regulation S-X promulgated under the
Securities Act.
If an Event of Default under any Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of that series will have the right to
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of, and premium or
Make-Whole Amount, if any, on, all the Debt Securities of that series to be due
and payable immediately by written notice thereof to the Company (and to the
applicable Trustee if given by the holders). However, at any time after such a
declaration of acceleration with respect to Debt Securities of such series has
been made, but before a judgment or decree for payment of the money due has been
obtained by the applicable Trustee, the holders of not less than a majority in
principal amount of outstanding Debt Securities of such series may rescind and
annul such declaration and its consequences if (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 on the Debt Securities
of such series, plus certain fees, expenses, disbursements and advances of the
applicable Trustee and (b) all Events of Default, other than the non-payment of
accelerated principal (or
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specified portion thereof and the premium or Make-Whole Amount, if any), with
respect to Debt Securities of such series have been cured or waived as provided
in such Indenture. The Indentures will also provide that the holders of not less
than a majority in principal amount of the outstanding Debt Securities of any
series may waive any past default with respect to such series and its
consequences, except a default (i) in the payment of the principal of (or
premium or Make-Whole Amount, if any) or interest on any Debt Security of such
series or (ii) in respect of a covenant or provision contained in the applicable
Indenture that cannot be modified or amended without the consent of the holder
of each outstanding Debt Security affected thereby.
The Indentures will require each Trustee to give notice to the holders of
Debt Securities within 90 days of a default under the applicable Indenture
unless such default shall have been cured or waived; provided, however, that
such Trustee may withhold notice to the holders of any series of Debt Securities
of any default with respect to such series (except a default in the payment of
the principal of (or premium or Make-Whole Amount, if any) or interest on any
Debt Security of such series or in the payment of any sinking fund installment
in respect of any Debt Security of such series) if specified responsible
officers of such Trustee consider such withholding to be in the interest of such
holders.
The Indentures will provide that no holders of Debt Securities of any
series may institute any proceedings, judicial or otherwise, with respect to
such Indenture or for any remedy thereunder, except in the case of failure of
the applicable Trustee, for 60 days, to act after it has received a written
request to institute proceedings in respect of an Event of Default from the
holders of not less than 25% in principal amount of the outstanding Debt
Securities of such series, as well as an offer of indemnity reasonably
satisfactory to it. This provision will not prevent, however, any holder of Debt
Securities from instituting suit for the enforcement of payment of the principal
of (and premium or Make-Whole Amount, if any) and interest on such Debt
Securities at the respective due dates or redemption dates thereof.
The Indentures will provide that, subject to provisions in each Indenture
relating to its duties in case of default, a Trustee will be under no obligation
to exercise any of its rights or powers under an Indenture at the request or
direction of any holders of any series of Debt Securities then outstanding under
such Indenture, unless such holders shall have offered to the Trustee thereunder
reasonable security or indemnity. The holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under an Indenture, as the case may be) shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee, or of exercising any trust
or power conferred upon such Trustee. However, a Trustee may refuse to follow
any direction which is in conflict with any law or the applicable Indenture,
which may involve such Trustee in personal liability or which may be unduly
prejudicial to the holders of Debt Securities of such series not joining
therein.
Within 120 days after the close of each fiscal year, the Company will be
required to deliver to each Trustee a certificate, signed by one of several
specified officers of the Company, stating whether or not such officer has
knowledge of any default under the applicable Indenture and, if so, specifying
each such default and the nature and status thereof.
MODIFICATION OF THE INDENTURES
Modifications and amendments of an Indenture will be permitted to be made
only with the consent of the holders of not less than a majority in principal
amount of all outstanding Debt Securities issued under such Indenture affected
by such modification or amendment; provided, however, that no such modification
or amendment may, without the consent of the holder of each such Debt Security
affected thereby, (a) change the stated maturity of the principal of, or any
installment of interest (or premium or Make-Whole Amount, if any) on, any such
Debt Security; (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, any
such Debt Security, or reduce the amount of principal of an Original Issue
Discount Security that would be due and payable upon declaration of acceleration
of the maturity thereof or would be provable in bankruptcy, or adversely affect
any right of repayment of the holder of any such Debt Security; (c) change the
place of payment, or the coin or currency, for payment of principal of, premium
or Make-Whole Amount, if any, or interest on any such Debt Security;
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(d) impair the right to institute suit for the enforcement of any payment on or
with respect to any such Debt Security; (e) reduce the above-stated percentage
of outstanding Debt Securities of any series necessary to modify or amend the
applicable Indenture, to waive compliance with certain provisions thereof or
certain defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the applicable Indenture; (f) change the currency or
currency unit in which any Debt Security or any premium or interest thereon is
payable; (g) in the case of the Subordinated Indenture, modify the subordination
provisions thereof in a manner adverse to the holders of Subordinated Debt
Securities of any series then outstanding; or (h) modify any of the foregoing
provisions or any of the provisions relating to the waiver of certain past
defaults or certain covenants, except to increase the required percentage to
effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the holder of such Debt Security.
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all holders of Debt Securities
of that series, waive, insofar as that series is concerned, compliance by the
Company with certain restrictive covenants of the applicable Indenture.
Modifications and amendments of an Indenture will be permitted to be made
by the Company and the respective Trustee thereunder without the consent of any
holder of Debt Securities for any of the following purposes: (a) to evidence the
succession of another person to the Company as obligor under such Indenture; (b)
to add to the covenants of the Company for the benefit of the holders of all or
any series of Debt Securities or to surrender any right or power conferred upon
the Company in such Indenture; (c) to add events of default for the benefit of
the holders of all or any series of Debt Securities; (d) to add or change any
provisions of an Indenture to facilitate the issuance of, or to liberalize
certain terms of, Debt Securities in bearer form, or to permit or facilitate the
issuance of Debt Securities in uncertificated form, provided that such action
shall not adversely affect the interests of the holders of the Debt Securities
of any series in any material respect; (e) to change or eliminate any provisions
of an Indenture, provided that any such change or elimination shall become
effective only when there are no Debt Securities outstanding of any series
created prior thereto which are entitled to the benefit of such provision; (f)
to secure the Debt Securities; (g) to establish the form or terms of Debt
Securities of any series; (h) to provide for the acceptance of appointment by a
successor Trustee or facilitate the administration of the trusts under an
Indenture by more than one Trustee; (i) to cure any ambiguity, defect or
inconsistency in an Indenture, provided that such action shall not adversely
affect the interests of holders of Debt Securities of any series issued under
such Indenture; or (j) to supplement any of the provisions of an Indenture to
the extent necessary to permit or facilitate defeasance and discharge of any
series of such Debt Securities, provided that such action shall not adversely
affect the interests of the holders of the outstanding Debt Securities of any
series.
The Indentures will provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (a) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (b) the principal amount of
any Debt Security denominated in a foreign currency that shall be deemed
Outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (a) above), (c) the
principal amount of an indexed security that shall be deemed outstanding shall
be the principal face amount of such indexed security at original issuance,
unless otherwise provided with respect to such indexed security pursuant such
Indenture, and (d) Debt Securities owned by the Company or any other obligor
upon the Debt Securities or any affiliate of the Company or of such other
obligor shall be disregarded.
The Indentures will contain provisions for convening meetings of the
holders of Debt Securities of a series. A meeting will be permitted to be called
at any time by the applicable Trustee, and also, upon request, by the Company or
the holders of at least 25% in principal amount of the outstanding Debt
Securities of such series, in any such case upon notice given as provided in
such Indenture. Except for any consent that must be
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given by the holder of each Debt Security affected by certain modifications and
amendments of an Indenture, any resolution presented at a meeting or adjourned
meeting duly reconvened at which a quorum is present may be adopted by the
affirmative vote of the holders of a majority in principal amount of the
outstanding Debt Securities of that series; provided, however, that, except as
referred to above, any resolution with respect to any request, demand,
authorization, direction, notice, consent, waiver or other action that may be
made, given or taken by the holders of a specified percentage, which is less
than a majority, in principal amount of the outstanding Debt Securities of a
series may be adopted at a meeting or adjourned meeting or adjourned meeting
duly reconvened at which a quorum is present by the affirmative vote of the
holders of such specified percentage in principal amount of the outstanding Debt
Securities of that series. Any resolution passed or decision taken at any
meeting of holders of Debt Securities of any series duly held in accordance with
an Indenture will be binding on all holders of Debt Securities of that series.
The quorum at any meeting called to adopt a resolution, and at any reconvened
meeting, will be persons holding or representing a majority in principal amount
of the outstanding Debt Securities of a series; provided, however, that if any
action is to be taken at such meeting with respect to a consent or waiver which
may be given by the holders of not less than a specified percentage in principal
amount of the outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, the Indentures will provide that
if any action is to be taken at a meeting of holders of Debt Securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver and other action that such Indenture expressly provides may be
made, given or taken by the holders of a specified percentage in principal
amount of all outstanding Debt Securities affected thereby, or of the holders of
such series and one or more additional series: (a) there shall be no minimum
quorum requirement for such meeting, and (b) the principal amount of the
outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under such Indenture.
CERTAIN DEFINITIONS
"Indebtedness" means, with respect to any person, (a) any obligation of
such person to pay the principal of, premium, if any, interest on (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to such person, whether or not a claim for such
post-petition interest is allowed in such proceeding), penalties, reimbursement
or indemnification amounts, fees, expenses or other amounts relating to any
indebtedness of such person (i) for borrowed money (whether or not the recourse
of the lender is to the whole of the assets of such person or only to a portion
thereof), (ii) evidenced by notes, debentures or similar instruments (including
purchase money obligations) given in connection with the acquisition of any
property or assets (other than trade accounts payable for inventory or similar
property acquired in the ordinary course of business), including securities, for
the payment of which such person is liable, directly or indirectly, or the
payment of which is secured by a lien, charge or encumbrance on property or
assets of such person, (iii) for goods, materials or services purchased in the
ordinary course of business (other than trade accounts payable arising in the
ordinary course of business), (iv) with respect to letters of credit or bankers
acceptances issued for the account of such person or performance bonds, (v) for
the payment of money relating to a Capitalized Lease Obligation (as defined in
the Indenture), or (vi) under interest rate swaps, caps or similar agreements
and foreign exchange contracts, currency swaps or similar agreements; (b) any
liability of others of the kind described in the preceding clause (a) which such
person has guaranteed or which is otherwise its legal liability; and (c) any and
all deferrals, renewals, extensions and refunding of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (a) or (b).
"Senior Indebtedness" means Indebtedness of the Company, whether
outstanding on the date of issue of any Subordinated Debt Securities or
thereafter created, incurred, assumed or guaranteed by the Company, other than
the following: (a) any Indebtedness as to which, in the instrument evidencing
such Indebtedness or pursuant to which such Indebtedness was issued, it is
expressly provided that such Indebtedness is subordinate in right of payment to
all indebtedness of the Company not expressly subordinated to such Indebtedness;
(b)
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any Indebtedness which by its terms refers explicitly to the Subordinated Debt
Securities and states that such Indebtedness shall not be senior, shall be pari
passu or shall be subordinated in right of payment to the Subordinated Debt
Securities; and (c) with respect to any series of Subordinated Debt Securities,
any Indebtedness of the Company evidenced by Subordinated Debt Securities of the
same or of another series. Notwithstanding anything to the contrary in the
foregoing, Senior Indebtedness shall not include: (x) Indebtedness of or amounts
owed by the Company for compensation to employees, or for goods, materials and
services purchased in the ordinary course of business, or (y) Indebtedness of
the Company to a subsidiary of the Company.
SUBORDINATION
Unless otherwise provided in the applicable Prospectus Supplement,
Subordinated Debt Securities will be subject to the following subordination
provisions.
The payment of the principal of, interest on, or any other amounts due on,
the Subordinated Debt Securities will be subordinated in right of payment to the
prior payment in cash in full of all Senior Indebtedness of the Company. No
payment on account of the principal of, redemption of, interest on or any other
amounts due on the Subordinated Debt Securities and no redemption, purchase or
other acquisition of the Subordinated Debt Securities may be made, unless (a)
full payment in cash of amounts then due for principal, sinking funds, interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company, whether or not a claim
for such post-petition interest is allowed in such proceeding), penalties,
reimbursement or indemnification amounts, fees and expenses, and of all other
amounts then due on all Senior Indebtedness shall have been made or duly
provided for pursuant to the terms of the instrument governing such Senior
Indebtedness, and (b) at the time of, or immediately after giving effect to, any
such payment, redemption, purchase or other acquisition, there shall not exist
under any Senior Indebtedness or any agreement pursuant to which any Senior
Indebtedness has been issued, any default which shall not have been cured or
waived and which shall have resulted in the full amount of such Senior
Indebtedness being declared due and payable and not rescinded. In addition, the
Subordinated Indenture provides that, if holders of any Senior Indebtedness
notify the Company and the Subordinated Trustee that a default has occurred
giving the holders of such Senior Indebtedness the right to accelerate the
maturity thereof, no payment on account of principal, sinking fund or other
redemption, interest or any other amounts due on the Subordinated Debt
Securities and no purchase, redemption or other acquisition of the Subordinated
Debt Securities will be made for the period (the "Payment Blockage Period")
commencing on the date such notice is received and ending on the earlier of (i)
the date on which such event of default shall have been cured or waived or (ii)
180 days from the date such notice is received. Notwithstanding the foregoing,
only one payment blockage notice with respect to the same event of default or
any other events of default existing and known to the person giving such notice
at the time of such notice on the same issue of Senior Indebtedness may be given
during any period of 360 consecutive days. No new Payment Blockage Period may be
commenced by the holders of Senior Indebtedness during any period of 360
consecutive days unless all events of default which triggered the preceding
Payment Blockage Period have been cured or waived. Upon any distribution of its
assets in connection with any dissolution, winding-up, liquidation or
reorganization of the Company, all Senior Indebtedness must be paid in full in
cash before the holders of the Subordinated Debt Securities are entitled to any
payments whatsoever.
The Subordinated Indenture does not restrict the amount of Senior
Indebtedness or other indebtedness of the Company or any Subsidiary. As a result
of these subordination provisions, in the event of the Company's insolvency,
holders of the Subordinated Debt Securities may recover ratably less than
general creditors of the Company.
If this Prospectus is being delivered in connection with a series of
Subordinated Debt Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Indebtedness outstanding as of the end of the Company's most
recent fiscal quarter.
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DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company will be permitted, at its option, to discharge certain obligations to
holders of any series of Debt Securities issued under any Indenture that have
not already been delivered to the applicable Trustee for cancellation and that
either have become due and payable or will become due and payable within one
year (or scheduled for redemption within one year) by irrevocably depositing
with the applicable Trustee, in trust, funds in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable in an amount sufficient to pay the entire indebtedness on
such Debt Securities in respect of principal (and premium or Make-Whole Amount,
if any) and interest to the date of such deposit (if such Debt Securities have
become due and payable) or to the stated maturity or redemption date, as the
case may be.
The Indentures will provide that, unless otherwise indicated in the
applicable Prospectus Supplement, the Company may elect either (a) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of such Debt
Securities, and to hold moneys for payment in trust) ("defeasance") or (b) to be
released from certain obligations with respect to such Debt Securities under the
applicable Indenture (including the restrictions described under "-Certain
Covenants") or, if provided in the applicable Prospectus Supplement, its
obligations with respect to any other covenant, and any omission to comply with
such obligations shall not constitute an Event of Default with respect to such
Debt Securities ("covenant defeasance"), in either case upon the irrevocable
deposit by the Company with the applicable Trustee, in trust, of an amount, in
such currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at stated maturity, or
Government Obligations (as defined below), or both, applicable to such Debt
Securities, which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium or Make-Whole Amount, if any) and interest on such
Debt Securities, and any mandatory sinking fund or analogous payments thereon,
on the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among other
things, the Company has delivered to the applicable Trustee an opinion of
counsel (as specified in the applicable Indenture) to the effect that the
holders of such Debt Securities will not recognize income, gain or loss for U.S.
federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such opinion of counsel,
in the case of defeasance, will be required to refer to and be based upon a
ruling received from or published by the Internal Revenue Service or a change in
applicable United States federal income tax law occurring after the date of the
Indenture. In the event of such defeasance, the holders of such Debt Securities
would thereafter be able to look only to such trust fund for payment of
principal (and premium or Make-Whole Amount, if any) and interest.
"Government Obligations" means securities that are (a) 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 (b) obligations of
a person controlled or supervised by and acting as an agency or instrumentality
of the United States of America or such government which issued the foreign
currency in which the Debt Securities of such series are payable, the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America or such other government, which, in either case, are
not callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
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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 will 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 currency, currency
unit or composite currency both by the government of the country which issued
such currency and for the settlement of transactions by a central bank or other
public institutions of or within the international banking community, (ii) the
ECU both within the European Monetary System and for the settlement of
transactions by public institutions of or within the European Communities or
(iii) any currency unit or composite currency other than the ECU for the
purposes for which it was established. Unless otherwise provided in the
applicable Prospectus Supplement, all payments of principal of (and premium or
Make-Whole Amount, if any) and interest on any Debt Security that is payable in
a foreign currency that ceases to be used by its government of issuance shall be
made in 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 of Event of Default other than the Event of Default
described in clause (d) under "--Events of Default, Notice and Waiver" with
respect to specified sections of an Indenture (which sections would no longer be
applicable to such Debt Securities) or described in clause (g) under "--Events
of Default, Notice and Waiver" with respect to any other covenant as to which
there has been covenant defeasance, the amount in such currency, currency unit
or composite currency in which such Debt Securities are payable, and Government
Obligations on deposit with the 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 of Event of Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into shares of Common Stock or
Preferred Stock, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option of
the holders or the Company, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of such
Debt Securities and any restrictions on conversion, including restrictions
directed at maintaining the Company's REIT status.
BOOK-ENTRY SYSTEM
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of, a depository (the "Depository") identified in
the Prospectus Supplement relating to such series. Global Securities, if any,
issued in the United States are expected to be deposited with The Depository
Trust Company ("DTC"), as Depository. Global Securities may be issued in fully
registered form and may be issued in either temporary or permanent form. Unless
and until it is exchanged in whole or in part for the individual Debt Securities
represented thereby, a Global Security may not be transferred except as a whole
by the Depository for such Global Security to a nominee of such Depository or by
a nominee of such Depository to such Depository or another nominee of
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such Depository or by such Depository or any nominee of such Depositor to a
successor Depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a series
of Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company expects that unless otherwise indicated in the
applicable Prospectus Supplement, the following provisions will apply to
depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depository ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Company if such Debt Securities are offered directly by the
Company. Ownership of beneficial interests in such Global Security will be
limited to Participants or persons that may hold interests through Participants.
The Company expects that, pursuant to procedures established by DTC,
ownership of beneficial interests in any Global Security with respect to which
DTC is the Depository will be shown on, and the transfer of that ownership will
be effected only through, records maintained by DTC or its nominee (with respect
to beneficial interests of Participants) and records of Participants (with
respect to beneficial interests of persons who hold through Participants).
Neither the Company nor the Trustee will have any responsibility or liability
for any aspect of the records of DTC or for maintaining, supervising or
reviewing any records of DTC or any of its Participants relating to beneficial
ownership interests in the Debt Securities. The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to own, pledge or
transfer beneficial interest in a Global Security.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as described below or in the applicable Prospectus
Supplement, owners of beneficial interest in a Global Security will not be
entitled to have any of the individual Debt Securities represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Debt Securities in definitive form and
will not be considered the owners or holders thereof under the applicable
Indenture. Beneficial owners of Debt Securities evidenced by a Global Security
will not be considered the owners or holders thereof under the applicable
Indenture for any purpose, including with respect to the giving of any
direction, instructions or approvals to the Trustee thereunder. Accordingly,
each person owning a beneficial interest in a Global Security with respect to
which DTC is the Depository must rely on the procedures of DTC and, if such
person is not a Participant, on the procedures of the Participant through which
such person owns its interests, to exercise any rights of a holder under the
applicable Indenture. The Company understands that, under existing industry
practice, if it requests any action of holders or if an owner of a beneficial
interest in a Global Security desires to give or take any action which a holder
is entitled to give or take under the applicable Indenture, DTC would authorize
the Participants holding the relevant beneficial interest to give or take such
action, and such Participants would authorize beneficial owners through such
Participants to give or take such actions or would otherwise act upon the
instructions of beneficial owners holding through them.
Payments of principal of, any premium or Make-Whole Amount and any interest
on individual Debt Securities represented by a Global Security registered in the
name of a Depository or its nominee will be made to or at the direction of the
Depository or its nominee, as the case may be, as the registered owner of the
Global Security under the applicable Indenture. Under the terms of the
applicable Indenture, the Company and the Trustee may treat the persons in whose
name Debt Securities, including a Global Security, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Debt Securities (including
principal, premium or Make-Whole Amount, if any, and interest). The Company
believes, however, that it is currently the policy of DTC to immediately credit
the accounts of relevant Participants with such payments, in amounts
proportionate to their respective holdings of
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beneficial interests in the relevant Global Security as shown on the records of
DTC or its nominee. The Company also expects that payments by Participants to
owners of beneficial interests in such Global Security held through such
Participants will be governed by standing instructions and customary practices,
as is the case with securities held for the account of customers in bearer form
or registered in street name, and will be the responsibility of such
Participants. Redemption notices with respect to any Debt Securities represented
by a Global Security will be sent to the Depository or its nominee. If less than
all of the Debt Securities of any series are to be redeemed, the Company expects
the Depository to determine the amount of the interest of each Participant in
such Debt Securities to be redeemed to be determined by lot. None of the
Company, the Trustee, any Paying Agent or the Security Registrar for such Debt
Securities will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in the Global Security for such Debt Securities or for maintaining any
records with respect thereto.
Neither the Company nor the Trustee will be liable for any delay by the
holders of a Global Security or the Depository in identifying the beneficial
owners of Debt Securities and the Company and the Trustee may conclusively rely
on, and will be protected in relying on, instructions from the holder of a
Global Security or the Depository for all purposes. The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
If a Depository for any Debt Securities is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not appointed
by the Company within 90 days, the Company will issue individual Debt Securities
in exchange for the Global Security representing such Debt Securities. In
addition, the Company may at any time and in its sole discretion, subject to any
limitations described in the Prospectus Supplement relating to such Debt
Securities, determine not to have any of such Debt Securities represented by one
or more Global Securities and in such event will issue individual Debt
Securities in exchange for the Global Security or Securities representing such
Debt Securities. Individual Debt Securities so issued will be issued in
denominations of $1,000 and integral multiples thereof.
The Debt Securities of a series may also be issued in whole or in part in
the form of one or more bearer global securities (a "Bearer Global Security")
that will be deposited with a depository, or with a nominee for such depository,
identified in the applicable Prospectus Supplement. Any such Bearer Global
Securities may be issued in temporary or permanent form. The specific terms and
procedures, including the specific terms of the depository arrangement, with
respect to any portion of a series of Debt Securities to be represented by one
or more Bearer Global Securities will be described in the applicable Prospectus
Supplement.
PAYMENT AND PAYING AGENTS
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and interest
on any series of Debt Securities will be payable at the corporate trust office
of the Trustee, the address of which will be stated in the applicable Prospectus
Supplement; provided that, at the option of the Company, payment of interest may
be made by check mailed to the address of the person entitled thereto as it
appears in the applicable register for such Debt Securities or by wire transfer
of funds to such person at an account maintained within the United States.
All moneys paid by the Company to a paying agent or a Trustee for the
payment of the principal of or any premium, Make-Whole Amount or interest on any
Debt Security which remain unclaimed at the end of two years after such
principal, premium, Make-Whole Amount or interest has become due and payable
will be repaid to the Company, and the holder of such Debt Security thereafter
may look only to the Company for payment thereof.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
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DESCRIPTION OF PREFERRED STOCK
The description of the Company's preferred stock, par value $.01 per share
("Preferred Stock"), set forth below does not purport to be complete and is
qualified in its entirety by reference to the Company's Amended and Restated
Articles of Incorporation (the "Articles of Incorporation") and Amended and
Restated Bylaws (the "Bylaws").
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 10
million shares of Preferred Stock, none of which was outstanding as of January
18, 1996. Shares of Preferred Stock may be issued from time to time, in one or
more series, as authorized by the Board of Directors of the Company. Prior to
issuance of shares of each series, the Board of Directors is required by the
Maryland General Corporation Law ("MGCL") and the Company's Articles of
Incorporation to fix for each series, subject to the provisions of the Company's
Articles of Incorporation regarding excess stock, $.01 par value per share
("Excess Stock"), the terms, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption, as are permitted by
Maryland law. The Preferred Stock will, when issued, be fully paid and
nonassessable and will have no preemptive rights. The Board of Directors could
authorize the issuance of shares of Preferred Stock with terms and conditions
that could have the effect of discouraging a takeover or other transaction that
holders of Common Stock might believe to be in their best interests or in which
holders of some, or a majority, of the shares of Common Stock might receive a
premium for their shares over the then market price of such shares of Common
Stock.
TERMS
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Articles of Incorporation and Bylaws and
any applicable amendment to the Articles of Incorporation designating terms of a
series of Preferred Stock (a "Designating Amendment").
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the offering price of such Preferred
Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall
accumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred
Stock;
(7) The provision for redemption, if applicable, of such Preferred
Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such
Preferred Stock will be convertible into Common Stock, including the
conversion price (or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(11) A discussion of federal income tax considerations applicable to
such Preferred Stock;
(12) The relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company;
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(13) Any limitations on issuance of any series of Preferred Stock
ranking senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company; and
(14) Any limitations on direct or beneficial ownership and
restrictions on transfer, in each case as may be appropriate to preserve
the status of the Company as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Stock of the Company, and to all equity securities ranking
junior to such Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company; (ii) on a parity with all
equity securities issued by the Company the terms of which specifically provide
that such equity securities rank on a parity with the Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the Company; and (iii) junior to all equity securities issued by the Company
the terms of which specifically provide that such equity securities rank senior
to the Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company. The term "equity
securities" does not include convertible debt securities.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of assets
of the Company legally available for payment, cash dividends at such rates and
on such dates as will be set forth in the applicable Prospectus Supplement. Each
such dividend shall be payable to holders of record as they appear on the share
transfer books of the Company on such record dates as shall be fixed by the
Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are non-cumulative, then the holders of such
series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Stock of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Stock does not have a cumulative dividend, full
dividends for the then current dividend period have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for such payment on the Preferred Stock of such series. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon Preferred Stock of any series and the shares of any other
series of Preferred Stock ranking on a parity as to dividends with the Preferred
Stock of such series, all dividends declared upon Preferred Stock of such series
and any other series of Preferred Stock ranking on a parity as to dividends with
such Preferred Stock shall be declared pro rata so that the amount of dividends
declared per share of Preferred Stock of such series and such other series of
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the Preferred Stock of such series (which shall
not include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Stock does not have a cumulative dividend) and such
other series of Preferred Stock bear to each other. No interest, or sum of money
in lieu of interest, shall be payable in respect of any dividend payment or
payments on Preferred Stock of such series which may be in arrears.
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Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other shares of
capital stock ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Preferred Stock of such series as to dividends or upon
liquidation, nor shall any shares of Common Stock, or any other shares of
capital stock of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to dividends or upon liquidation be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by the
Company (except by conversion into or exchange for other capital stock of the
Company ranking junior to the Preferred Stock of such series as to dividends and
upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
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 Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of shares of capital stock of the Company, the terms of
such Preferred Stock may provide that, if no such shares of capital stock shall
have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Stock shall automatically and mandatorily be converted into the
applicable shares of capital stock of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Stock
has a cumulative dividend, full cumulative dividends on all shares of such
series of Preferred Stock shall have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend period, and
(ii) if a series of Preferred Stock does not have a cumulative dividend, full
dividends on all shares of the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for the then current dividend period, no
shares of such series of Preferred Stock shall be redeemed unless all
outstanding shares of Preferred Stock of such series are simultaneously
redeemed; provided, however, that the foregoing shall not prevent the purchase
or acquisition of Preferred Stock of such series to preserve the REIT status of
the Company or pursuant to a purchase or exchange offer made on the same terms
to holders of all outstanding shares of Preferred Stock of such series. In
addition, unless (i) if such series of Preferred Stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of such series of
Preferred Stock have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for payment for all past
dividend periods and the then current dividend period, and (ii) if such series
of Preferred Stock does not have a cumulative dividend, full dividends
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on the Preferred stock of such series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for the then current dividend period, the Company shall not
purchase or otherwise acquire directly or indirectly any shares of Preferred
Stock of such series (except by conversion into or exchange for capital shares
of the Company ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation); provided, however, that the foregoing shall not
prevent the purchase or acquisition of shares of Preferred Stock of such series
to preserve the REIT status of the Company or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding shares of Preferred
Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
or for which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by any other equitable manner determined by
the Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all the shares of Preferred Stock of any series are to
be redeemed, the notice mailed to each such holder thereof shall also specify
the number of shares of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Stock, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of capital
stock of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to stockholders
liquidating distributions in the amount of the liquidation preference per share,
if any, set forth in the applicable Prospectus Supplement, plus an amount equal
to all dividends accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid noncumulative dividends for prior dividend
periods). After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Preferred Stock will have no right or
claim to any of the remaining assets of the Company. In the event that, upon any
such voluntary or involuntary liquidation, dissolution or winding up, the
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
capital stock of the Company ranking on a parity with the Preferred Stock in the
distribution of assets, then the holders of the Preferred Stock and all other
such classes or series of capital stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital stock ranking junior to
the Preferred Stock upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Company with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
the Company, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Company.
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<PAGE> 50
VOTING RIGHTS
Holders of the Preferred Stock 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 Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least two-thirds of
the shares of such series of Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to such
series of Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or reclassify
any authorized capital stock of the Company into such shares, or create,
authorize or issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or (ii) amend, alter or repeal the provisions
of the Company's Articles of Incorporation or the Designating Amendment for such
series of Preferred Stock, whether by merger, consolidation or otherwise (an
"Event"), so as to materially and adversely affect any right, preference,
privilege or voting power of such series of Preferred Stock or the holders
thereof; provided, however, with respect to the occurrence of any of the Events
set forth in (ii) above, so long as the Preferred Stock remains outstanding with
the terms thereof materially unchanged, taking into account that upon the
occurrence of an Event the Company may not be the surviving entity, the
occurrence of any such Event shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting power of holders of
Preferred Stock, and provided further that (x) any increase in the amount of the
authorized Preferred Stock or the creation or issuance of any other series of
Preferred Stock, or (y) any increase in the amount of authorized shares of such
series or any other series of Preferred Stock, in each case ranking on a parity
with or junior to the Preferred Stock of such series with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or winding
up, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of shares of
Common Stock into which the shares of Preferred Stock are convertible, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
RESTRICTIONS ON OWNERSHIP
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
capital stock may be owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of a
taxable year. To assist the Company in meeting this requirement, the Company may
take certain actions to limit the beneficial ownership, directly or indirectly,
by a single person of the Company's outstanding equity securities, including any
Preferred Stock of the Company. Therefore, the Designating Amendment for each
series of Preferred Stock may contain provisions restricting the ownership and
transfer of the Preferred Stock. The applicable Prospectus Supplement will
specify any additional ownership limitation relating to a series of Preferred
Stock. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
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<PAGE> 51
DESCRIPTION OF COMMON STOCK
The description of the Company's Common Stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Company's Articles of Incorporation and Bylaws.
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 40
million shares of Common Stock, par value $.01 per share. Under Maryland law,
stockholders generally are not responsible for the corporation's debts or
obligations. At January 18, 1996, the Company had outstanding 13,841,667 shares
of Common Stock.
TERMS
Subject to the preferential rights of any other shares or series of stock
and to the provisions of the Company's Articles of Incorporation regarding
Excess Stock, holders of shares of Common Stock will be entitled to receive
dividends on shares of Common Stock if, as and when authorized and declared by
the Board of Directors of the Company out of assets legally available therefor
and to share ratably in the assets of the Company legally available for
distribution to its stockholders in the event of its liquidation, dissolution or
winding-up after payment of, or adequate provision for, all known debts and
liabilities of the Company.
Subject to the provisions of the Company's Articles of Incorporation
regarding Excess Stock, each outstanding share of Common Stock entitles the
holder to one vote on all matters submitted to a vote of stockholders, including
the election of Directors and, except as otherwise required by law or except as
provided with respect to any other class or series of stock, the holders of
Common Stock will possess the exclusive voting power. There is no cumulative
voting in the election of Directors, which means that the holders of a majority
of the outstanding shares of Common Stock can elect all of the Directors then
standing for election, and the holders of the remaining shares of Common Stock
will not be able to elect any Directors.
Holders of Common Stock have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company.
The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm and quarterly reports for the
first three quarters of each fiscal year containing unaudited financial
information.
Subject to the provisions of the Company's Articles of Incorporation
regarding Excess Stock, all shares of Common Stock will have equal dividend,
distribution, liquidation and other rights, and will have no preference,
appraisal or exchange rights.
Pursuant to the MGCL, a corporation generally cannot dissolve, amend its
Articles of Incorporation, merge, sell all or substantially all of its assets,
engage in a share exchange or engage in similar transactions outside the
ordinary course of business unless approved by the affirmative vote of
stockholders holding at least two-thirds of the shares entitled to vote on the
matter unless a lesser percentage (but not less than a majority of all of the
votes to be cast on the matter) is set forth in the corporation's Articles of
Incorporation. The Company's Articles of Incorporation do not provide for a
lesser percentage in such situations.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is KeyCorp
Shareholder Services, Inc. of Cleveland, Ohio.
23
<PAGE> 52
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
For the Company to qualify as a REIT under the Code, among other things,
not more than 50% in value of its outstanding capital stock may be owned,
directly or indirectly, by five or fewer individuals (defined in the Code to
include certain entities) during the last half of a taxable year, and such
capital stock must be beneficially owned by 100 or more persons during at least
335 days of a taxable year of 12 months or during a proportionate part of a
shorter taxable year (in each case, other than the first such year). To ensure
that the Company remains a qualified REIT, the Articles of Incorporation,
subject to certain exceptions, provide that no holder may own, or be deemed to
own by virtue of the attribution provisions of the Code, more than 9.3% (the
"Ownership Limit") of the Company's capital stock. The Board of Directors may
waive the Ownership Limit if evidence satisfactory to the Board of Directors and
the Company's tax counsel is presented that the changes in ownership will not
then or in the future jeopardize the Company's status as a REIT. Any transfer of
capital stock or any security convertible into capital stock that would create a
direct or indirect ownership of capital stock in excess of the Ownership Limit
or that would result in the disqualification of the Company as a REIT, including
any transfer that results in the capital stock being owned by fewer than 100
persons or results in the Company being "closely held" within the meaning of
Section 856(h) of the Code, shall be null and void, and the intended transferee
will acquire no rights to the capital stock. The foregoing restrictions on
transferability and ownership will not apply if the Board of Directors
determines that it is no longer in the best interests of the Company to attempt
to qualify, or to continue to qualify, as a REIT.
Capital stock owned, or deemed to be owned, or transferred to a stockholder
in excess of the Ownership Limit will automatically be exchanged for shares of
Excess Stock that will be transferred, by operation of law, to the Company as
trustee of a trust for the exclusive benefit of the transferees to whom such
capital stock may be ultimately transferred without violating the Ownership
Limit. While the Excess Stock is held in trust, it will not be entitled to vote,
it will not be considered for purposes of any stockholder vote or the
determination of a quorum for such vote and, except upon liquidation, it will
not be entitled to participate in dividends or other distributions. Any dividend
or distribution paid to a proposed transferee of Excess Stock prior to the
discovery by the Company that capital stock has been transferred in violation of
the provisions of the Company's Articles of Incorporation shall be repaid to the
Company upon demand. The Excess Stock is not treasury stock, but rather
constitutes a separate class of issued and outstanding stock of the Company. The
original transferee-stockholder may, at any time the Excess Stock is held by the
Company in trust, transfer the interest in the trust representing the Excess
Stock to any individual whose ownership of the capital stock exchanged into such
Excess Stock would be permitted under the Ownership Limit, at a price not in
excess of the price paid by the original transferee-stockholder for the capital
stock that was exchanged in Excess Stock. Immediately upon the transfer to the
permitted transferee, the Excess Stock will automatically be exchanged for
capital stock of the class from which it was converted. If the foregoing
transfer restrictions are determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the intended transferee of any
Excess Stock may be deemed, at the option of the Company, to have acted as an
agent on behalf of the Company in acquiring the Excess Stock and to hold the
Excess Stock on behalf of the Company.
In addition to the foregoing transfer restrictions, the Company will have
the right, for a period of 90 days during the time any Excess Stock is held by
the Company in trust, to purchase all or any portion of the Excess Stock from
the original transferee-stockholder for the lesser of the price paid for the
capital stock by the original transferee-stockholder or the market price (as
determined in the manner set forth in the Articles of Incorporation) of the
capital stock on the date the Company exercises its option to purchase. The
90-day period begins on the date on which the Company receives written notice of
the transfer or other event resulting in the exchange of capital stock for
Excess Stock.
Each stockholder shall upon demand be required to disclose to the Company
in writing any information with respect to the direct, indirect and constructive
ownership of beneficial interests as the Board of Directors deems necessary to
comply with the provisions of the Code applicable to REITs, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.
This ownership limitation may have the effect of precluding acquisition of
control of the Company unless the Board of Directors determines that maintenance
of REIT status is no longer in the best interests of the Company.
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<PAGE> 53
FEDERAL INCOME TAX CONSIDERATIONS
The Company believes it has operated, and the Company intends to continue
to operate, in such manner as to qualify as a REIT under the Code, but no
assurance can be given that it will at all times so qualify.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of certain provisions that
currently govern the federal income tax treatment of the Company and its
stockholders. For the particular provisions that govern the federal income tax
treatment of the Company and its stockholders, reference is made to Sections 856
through 860 of the Code and the regulations thereunder. The following summary is
qualified in its entirety by such reference.
Under the Code, if certain requirements are met in a taxable year, a REIT
generally will not be subject to federal income tax with respect to income that
it distributes to its stockholders. If the Company fails to qualify during any
taxable year as a REIT, unless certain relief provisions are available, it will
be subject to tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates, which could have a material adverse
effect upon its stockholders.
In any year in which the Company qualifies to be taxed as a REIT,
distributions made to its stockholders out of current or accumulated earnings
and profits will be taxed to stockholders as ordinary income except that
distributions of net capital gains designated by the Company as capital gain
dividends will be taxed as long-term capital gain income to the stockholders. To
the extent that distributions exceed current or accumulated earnings and
profits, they will constitute a return of capital, rather than dividend or
capital gain income, and will reduce the basis for the stockholder's Securities
with respect to which the distribution is paid or, to the extent that they
exceed such basis, will be taxed in the same manner as gain from the sale of
those Securities.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the Securities offered hereby and with
respect to the tax consequences arising under federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from such investor's own tax characteristics. In particular, foreign
investors should consult their own tax advisors concerning the tax consequences
of an investment in the Company, including the possibility of United States
income tax withholding on Company distributions.
PLAN OF DISTRIBUTION
The Company may sell Securities to or through one or more underwriters or
dealers for public offering and sale by or through them, and may also sell
Securities directly to one or more institutional or other purchasers, through
agents or through any combination of these methods of sale. Any such
underwriter, dealer or agent involved in the offer and sale of Securities will
be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, or from time to time at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may, from time to time, authorize
underwriters acting as the Company's agents to offer and sell the Securities
upon the terms and conditions as shall be set forth in any Prospectus
Supplement. In connection with the sale of 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 Securities for whom they may act as agent. Underwriters may sell
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions (which may be changed from time to time) 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 Securities, and any discounts, concessions or
commission allowed by underwriters to participating dealers, will be set forth
in an applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the 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 Securities may be deemed to be underwriting
discounts and commissions, under the Securities Act. Underwriters, dealers and
agents may
25
<PAGE> 54
be entitled, under agreements with the Company, to indemnification against and
contribution toward certain civil liabilities, including liabilities under the
Securities Act, and to reimbursement by the Company for certain expenses.
Each series of Debt Securities or Preferred Stock will be a new issue with
no established trading market. The Company may elect to list any series of Debt
Securities or Preferred Stock on an exchange, but is not obligated to do so. It
is possible that one or more underwriters may make a market in a series of
Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of, or the trading market for, the Securities.
Underwriters, dealers and agents and their associates may engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers or other persons acting as the Company's agents to solicit
offers by certain institutions to purchase Debt Securities from the Company at
the public offering price set forth in such Prospectus Supplement pursuant to
delayed delivery contracts ("Contracts") providing for payment and delivery on
the date or dates stated in such Prospectus Supplement. Each Contract will be
for an amount no less than, and the aggregate principal amounts of Debt
Securities sold pursuant to Contracts shall be not less nor more than, the
respective amounts stated in the applicable Prospectus Supplement. Institutions
with whom Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions, but will in all cases be subject
to the approval of the Company. Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Debt Securities covered by its
Contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject, and (ii)
if Debt Securities are being sold to underwriters, the Company shall have sold
to such underwriters the total principal amount of the Debt Securities less the
principal amount thereof covered by the Contracts. If in conjunction with the
sale of Debt Securities to institutions under Contracts, Debt Securities are
also being sold to the public, the consummation of the sale under the Contracts
shall occur simultaneously with the consummation of the sale to the public. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such Contracts.
In order to comply with the securities laws of certain states and other
jurisdictions, if applicable, the Securities offered hereby will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states Securities may not be sold unless they have been
registered or qualified for sale in the applicable state or other jurisdiction
or an exemption from the registration or qualification requirement is available
and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Securities offered hereby may not
simultaneously engage in market making activities with respect to the Securities
for a period of two business days prior to the commencement of such
distribution.
LEGAL MATTERS
Certain legal matters, including the legality of the Securities, will be
passed upon for the Company by Goodwin, Procter & Hoar, Boston, Massachusetts.
EXPERTS
The financial statements and schedules thereto incorporated by reference in
this Prospectus or elsewhere in the Registration Statement, to the extent and
for the periods indicated in their reports, have been audited by Coopers &
Lybrand L.L.P., independent accountants, and are incorporated herein in reliance
upon the authority of said firm as experts in giving said reports.
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<PAGE> 56
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION
OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO WHICH THEY RELATE
OR ANY OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY SUCH SECURITIES IN
ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT NOR THE ACCOMPANYING PROSPECTUS NOR ANY
SALE MADE HEREUNDER OR THEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF OR THAT THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE OF SUCH
INFORMATION.
<TABLE>
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TABLE OF CONTENTS
<CAPTION>
PAGE
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<S> <C>
PROSPECTUS SUPPLEMENT
Prospectus Supplement Summary.............. S-3
Risk Factors............................... S-10
The Company................................ S-14
Use of Proceeds............................ S-14
Ratios of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.... S-14
Capitalization............................. S-15
Business................................... S-16
Management................................. S-20
Description of Series B Preferred Stock.... S-22
Certain Federal Income Tax
Considerations........................... S-26
Underwriting............................... S-28
Legal Matters.............................. S-28
PROSPECTUS
Available Information...................... 2
Incorporation of Certain Documents by
Reference................................ 2
The Company................................ 3
Use of Proceeds............................ 3
Ratios of Earnings to Fixed Charges........ 3
Description of Debt Securities............. 4
Description of Preferred Stock............. 18
Description of Common Stock................ 23
Restrictions on Transfers of Capital
Stock.................................... 24
Federal Income Tax Considerations.......... 25
Plan of Distribution....................... 25
Legal Matters.............................. 26
Experts.................................... 26
</TABLE>
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1,300,000 SHARES
TRINET CORPORATE REALTY
TRUST, INC.
9.20% SERIES B CUMULATIVE
PREFERRED STOCK
[TRINET LOGO]
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PROSPECTUS SUPPLEMENT
AUGUST 8, 1996
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SMITH BARNEY INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
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