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Filed Pursuant to Rule 424(B)(5)
Registration No. 333-29593
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 1, 1997)
[LOGO]
TRINET CORPORATE REALTY TRUST, INC.
$100,000,000
7.70% Notes due 2017
Interest payable January 15 and July 15
ISSUE PRICE: 99.606%
Interest on the 7.70% Notes due 2017 (the "Notes") of TriNet Corporate Realty
Trust, Inc. ("TriNet" or the "Company") offered hereby is payable semi-annually
on January 15 and July 15, commencing January 15, 1998. See "Description of
Notes -- Principal and Interest." The Notes will mature on July 15, 2017. The
Notes may be redeemed at any time at the option of the Company, in whole or in
part, at a redemption price equal to the sum of (i) the principal amount of the
Notes being redeemed plus accrued interest thereon to the redemption date and
(ii) the Make-Whole Amount (as hereinafter defined), if any. See "Description of
Notes -- Optional Redemption."
The Notes will be represented by one or more Global Securities (as hereinafter
defined) registered in the name of The Depository Trust Company ("DTC") or its
nominee. Interests in the Global Securities will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its
participants. Except as provided herein, Notes in definitive form will not be
issued. See "Description of Notes."
SEE "RISK FACTORS" COMMENCING ON PAGE S-3 FOR A DISCUSSION OF CERTAIN FACTORS
RELEVANT TO AN INVESTMENT IN THE NOTES.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO WHICH IT
RELATES. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3)
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<S> <C> <C> <C>
Per Note 99.606% .875% 98.731%
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Total $99,606,000 $875,000 $98,731,000
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(1) Plus accrued interest, if any, from July 14, 1997.
(2) The Company has agreed to indemnify the several 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 $350,000.
The Notes are offered, subject to prior sale, when, as and if accepted by the
Underwriters and subject to approval of certain legal matters by Cahill Gordon &
Reindel, counsel for the Underwriters. It is expected that delivery of the Notes
will be made on or about July 14, 1997 through the facilities of DTC, against
payment therefor in immediately available funds.
J.P. MORGAN & CO.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
SMITH BARNEY INC.
July 9, 1997
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR, AND PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION
OF THESE ACTIVITIES, SEE "UNDERWRITING."
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN 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 IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR
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 THEREOF OR THAT THE
INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
OF SUCH INFORMATION.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
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Page
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Risk Factors......................................................................... S-3
Use of Proceeds...................................................................... S-6
Description of Notes................................................................. S-7
Underwriting......................................................................... S-15
Legal Matters........................................................................ S-16
</TABLE>
PROSPECTUS
<TABLE>
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Available Information................................................................... 2
Incorporation of Certain Documents by Reference......................................... 2
The Company............................................................................. 3
Use of Proceeds......................................................................... 3
Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends........................................... 3
Description of Debt Securities.......................................................... 3
Restrictions on Transfers of Capital Stock.............................................. 17
Federal Income Tax Considerations....................................................... 18
Plan of Distribution.................................................................... 19
Legal Matters........................................................................... 20
Experts................................................................................. 20
</TABLE>
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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 (the "Properties"),
tenants and rental income include the four Properties owned by TriNet Sunnyvale
Partners, L.P. (the "Sunnyvale Partnership"), a joint venture partnership of
which the Company is the sole general partner, and the tenants and rental income
of such Properties and (ii) information contained herein is given as of June 30,
1997.
This Prospectus Supplement contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). 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 below in the section
entitled "Risk Factors." The reader is cautioned, however, that the factors
discussed in that section may not be exhaustive.
RISK FACTORS
An investment in the Notes 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:
OTHER INDEBTEDNESS
The Notes will be direct, senior unsecured obligations of the Company and
will rank equally with all other unsecured and unsubordinated indebtedness of
the Company from time to time outstanding. The Notes will be effectively
subordinated to mortgages and other secured indebtedness of the Company and to
indebtedness and other liabilities of the Company's subsidiaries. Claims of the
holders of the Notes will be effectively subordinated to the prior claims of the
Company's secured lenders to the properties securing such indebtedness and of
the subsidiaries' creditors to the subsidiaries' assets. Accordingly, such prior
claims will have to be satisfied in full before holders of the Notes will be
able to realize any value from the secured or indirectly-held properties or
other assets of the subsidiaries. At June 30, 1997, on a pro forma basis after
giving effect to the offering of the Notes and the application of the net
proceeds therefrom, the Company would have had outstanding approximately $361.5
million of indebtedness (excluding approximately $17.0 million of non-recourse
indebtedness secured by the four Sunnyvale Partnership Properties). Of such
indebtedness, approximately $55.0 million is indebtedness of subsidiaries of the
Company and is secured by 18 Properties. Also at such date, all of the
Properties were owned by subsidiaries of the Company. A default under the
obligations referred to above, which include the obligations described under
"-- Risks Associated with Borrowing," could result in the Company losing its
interest in a substantial number of the Properties, including those securing the
obligation as to which the default relates, and would also most likely adversely
affect cash available to satisfy the Company's obligations under the Notes.
RISKS ASSOCIATED WITH BORROWING
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 real estate investment trust ("REIT")
provisions of the Internal Revenue Code of 1986, as amended (the "Code").
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 7.30% Notes due May 15, 2001 (the "2001 Notes"), the 7.95% Notes due May 15,
2006 (the "2006 Notes"), the $200.0 million unsecured revolving credit facility
(the "Acquisition Facility") and the $55.0 million term loan entered into in
1994 (the "1994 Mortgage Loan") require payments of interest only until maturity
on May 15, 2001, May 15, 2006, October 8, 1999 and December 1,
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2004, respectively. 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. See "-- Other Indebtedness."
The 1994 Mortgage Loan and the Acquisition Facility bear interest at a
floating rate tied to LIBOR. Increases in the interest rates under the 1994
Mortgage Loan and the Acquisition Facility, to the extent not mitigated by
interest rate protection agreements, could adversely affect the amount of cash
available to make payments on the Notes.
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.
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 rights as a secured creditor.
TENANT CONCENTRATION
To the extent TriNet has a significant concentration of rental revenues
from any single tenant, the inability of that tenant to make its lease payments
could have a material adverse effect on the Company. At
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June 30, 1997, TriNet had leases with a total of 68 tenants. At such date, the
Company's five largest tenants collectively accounted for approximately 24.4% of
the Company's annualized rental income.
REIT QUALIFICATION REQUIREMENTS
The Company currently 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 expenses, including its obligations with
respect to the Notes, 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 make payments on the Notes.
The Company might be required to borrow funds or to liquidate certain of its
investments to pay the applicable taxes.
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 products 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
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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 laws, 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. Phase I assessments do not involve subsurface
testing, whereas Phase II assessments involve some degree of soil and/or
groundwater testing. The Company may acquire a property which is known to have
had a release of Hazardous Materials in the past, 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 tenant's 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
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 $2.0 million, the majority of
which is covered by existing letters of credit and corporate guarantees. The
Company believes that its tenants are taking or will soon be taking all required
remedial action with respect to any material environmental conditions at the
Properties. 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 assessments that have been conducted at the Properties have
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.
USE OF PROCEEDS
The $98.4 million estimated net proceeds to the Company from the offering
of the Notes will be used to repay borrowings under the Acquisition Facility
that were incurred principally to finance acquisition activities. As of July 9,
1997, the Acquisition Facility, which matures on October 8, 1999, bore interest
at a weighted average interest rate of 6.4% per annum and approximately $148.9
million was outstanding thereunder. As of such date, approximately $8.4 million
of such borrowings were owed to Morgan Guaranty Trust Company of New York, an
affiliate of J.P. Morgan Securities Inc., one of the Underwriters of the
offering of the Notes. See "Underwriting."
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DESCRIPTION OF NOTES
The following description of the particular terms of the Notes offered
hereby supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the "Senior Debt Securities"
set forth in the accompanying Prospectus under "Description of Debt Securities,"
to which reference is hereby made.
GENERAL
The Notes constitute a separate series of Senior Debt Securities (which are
more fully described in the accompanying Prospectus) to be issued under (i) the
Indenture, dated as of May 22, 1996 (the "Original Indenture") (as previously
supplemented by Supplemental Indenture No. 1, dated as of May 22, 1996, to
provide for the issuance of the 2001 Notes and the 2006 Notes) and (ii)
Supplemental Indenture No. 2, to be dated as of July 14, 1997 (the "Supplemental
Indenture" and together with the Original Indenture, the "Indenture") between
the Company and Harris Trust and Savings Bank (the "Trustee"). The Indenture is
subject to, and governed by, the Trust Indenture Act of 1939, as amended (the
"TIA"). The statements made hereunder relating to the Indenture and the Notes
are summaries of certain provisions thereof, do not purport to be complete and
are subject to, and are qualified in their entirety by reference to, all
provisions of the Indenture and the Notes. All capitalized terms used but not
defined herein shall have the respective meanings set forth in the Indenture.
The Notes will be limited to an aggregate principal amount of $100,000,000,
will be direct, senior unsecured obligations of the Company and will rank
equally with all other unsecured and unsubordinated indebtedness of the Company
from time to time outstanding. The Notes will be effectively subordinated to
mortgages and other secured indebtedness of the Company and to indebtedness and
other liabilities of the Company's subsidiaries. Accordingly, such prior
indebtedness will have to be satisfied in full before Holders of the Notes will
be able to realize any value from encumbered or indirectly-held properties.
As of June 30, 1997, on a pro forma basis after giving effect to the
offering of the Notes and the application of the net proceeds therefrom as
described under "Use of Proceeds," the Company would have had approximately
$361.5 million of indebtedness (excluding approximately $17.0 million of
non-recourse indebtedness secured by the Sunnyvale Partnership Properties). Of
such indebtedness, approximately $55.0 million is indebtedness of subsidiaries
of the Company and is secured by 18 Properties. Also at such date, all of the
Properties were owned by subsidiaries. The Company may incur additional
indebtedness, including secured indebtedness, subject to the provisions
described below under "--Certain Covenants--Limitations on Incurrence of
Indebtedness."
The Notes will only be issued in fully registered form in denominations of
$1,000 and integral multiples thereof.
PRINCIPAL AND INTEREST
The Notes will bear interest at 7.70% per annum and will mature on July 15,
2017. The Notes will bear interest from July 14, 1997 or from the immediately
preceding Interest Payment Date (as defined below) to which interest has been
paid, payable semi-annually in arrears on January 15 and July 15 of each year,
commencing January 15, 1998 (each, an "Interest Payment Date"), and, if not
otherwise an Interest Payment Date, at the applicable Stated Maturity, to the
Persons in whose name the applicable Notes are registered in the Security
Register on the preceding January 1 or July 1 (whether or not a Business Day, as
defined below), as the case may be (each, a "Regular Record Date"). Interest on
the Notes will be computed on the basis of a 360-day year comprised of twelve
30-day months.
If any Interest Payment Date or Stated Maturity falls on a day that is not
a Business Day, the required payment shall be made on the next Business Day as
if it were made on the date such payment was due and no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date
or the Stated Maturity, as the case may be. "Business Day" means any day, other
than a Saturday or Sunday, that is neither a legal holiday nor a day on which
banks in the City of New York are required or authorized by law, regulation or
executive order to close.
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The principal of and interest on the Notes will be payable in such coin or
currency of the United States of America as at the time of payment is a legal
tender for payment of public and private debts. With respect to any Notes not
represented by a Global Security, such principal and interest will be payable at
the corporate trust office of the agent of Harris Trust and Savings Bank (the
"Paying Agent") in the City of New York, initially located at 77 Water Street,
provided that, at the option of the Company, payment of interest may be made by
check mailed to the address of the Person entitled thereto as it appears in the
Security Register or by wire transfer of funds to such Person at an account
maintained within the United States.
OPTIONAL REDEMPTION
The Notes may be redeemed at any time at the option of the Company, in
whole or in part, at a redemption price equal to the sum of (i) the principal
amount of the Notes being redeemed plus accrued interest thereon to the
redemption date and (ii) the Make-Whole Amount, if any, with respect to such
Notes (the "Redemption Price").
If notice has been given as provided in the Indenture and funds for the
redemption of any Notes called for redemption shall have been made available on
the redemption date referred to in such notice, such Notes will cease to bear
interest on the date fixed for such redemption specified in such notice and the
only right of the Holders of the Notes will be to receive payment of the
Redemption Price.
Notice of any optional redemption of any Notes will be given to Holders at
their addresses, as shown in the Security Register, not more than 60 nor less
than 30 days prior to the date fixed for redemption. The notice of redemption
will specify, among other items, the Redemption Price and the principal amount
of the Notes held by such Holder to be redeemed.
If less than all the Notes are to be redeemed at the option of the Company,
the Company will notify the Trustee at least 45 days prior to the redemption
date (or such shorter period as is satisfactory to the Trustee) of the aggregate
principal amount of Notes to be redeemed and their redemption date. The Trustee
shall select, in such manner as it shall deem fair and appropriate, Notes to be
redeemed in whole or in part. Notes may be redeemed in part in the minimum
authorized denomination for Notes or in any integral multiple thereof.
As used herein:
"Make-Whole Amount" means, in connection with any optional redemption or
accelerated payment of any Note, the excess, if any, of (i) the aggregate
present value as of the date of such redemption or accelerated payment of each
dollar of principal being redeemed or paid and the amount of interest (exclusive
of interest accrued to the date of redemption or accelerated payment) that would
have been payable in respect of such dollar if such redemption or accelerated
payment had not been made, determined by discounting, on a semi-annual basis,
such principal and interest at the Reinvestment Rate (determined on the third
Business Day preceding the date such notice of Redemption is given or
declaration of acceleration is made) from the respective dates on which such
principal and interest would have been payable if such redemption or accelerated
payment had not been made, over (ii) the aggregate principal amount of the
respective Notes being redeemed or paid.
"Reinvestment Rate" means .25% (twenty-five one hundredths of one percent)
plus the arithmetic mean of the yields under the respective headings "This Week"
and "Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For such purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
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"Statistical Release" means the statistical release designated "H.15(519)"
or any successor publication which is published weekly by the Federal Reserve
System and which establishes yields on actively traded United States government
securities adjusted to constant maturities or, if such statistical release is
not published at the time of any determination of the Make-Whole Amount, then
such other reasonably comparable index which shall be designated by the Company.
CERTAIN COVENANTS
Limitations on Incurrence of Indebtedness. The Company will not, and will
not permit any of its Subsidiaries to, incur any Indebtedness (as defined below)
if, immediately after giving effect to the incurrence of such additional
Indebtedness and the application of the proceeds thereof, the aggregate
principal amount of all outstanding Indebtedness of the Company and its
Subsidiaries on a consolidated basis determined in accordance with generally
accepted accounting principles ("GAAP") is greater than 60% of the sum of
(without duplication) (i) the Total Assets (as defined below) of the Company and
its Subsidiaries as of the end of the calendar quarter covered in the Company's
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be,
most recently filed with the Securities and Exchange Commission (the
"Commission") (or, if such filing is not permitted under the Exchange Act, with
the Trustee) prior to the incurrence of such additional Indebtedness and (ii)
the purchase price of any real estate assets or mortgages receivable acquired,
and the amount of any securities offering proceeds received (to the extent that
such proceeds were not used to acquire real estate assets or mortgages
receivable or used to reduce Indebtedness), by the Company or any of its
Subsidiaries since the end of such calendar quarter, including those proceeds
obtained in connection with the incurrence of such additional Indebtedness.
In addition to the foregoing limitation on the incurrence of Indebtedness,
the Company will not, and will not permit any of its Subsidiaries to, incur any
Indebtedness secured by any Encumbrance (as defined below) upon any of the
property of the Company or any of its Subsidiaries if, immediately after giving
effect to the incurrence of such additional Indebtedness and the application of
the proceeds thereof, the aggregate principal amount of all outstanding
Indebtedness of the Company and its Subsidiaries on a consolidated basis
determined in accordance with GAAP that is secured by any Encumbrance on
property of the Company or any of its Subsidiaries is greater than 40% of the
sum of (without duplication) (i) the Total Assets of the Company and its
Subsidiaries as of the end of the calendar quarter covered in the Company's
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be,
most recently filed with the Commission (or, if such filing is not permitted
under the Exchange Act, with the Trustee) prior to the incurrence of such
additional Indebtedness and (ii) the purchase price of any real estate assets or
mortgages receivable acquired, and the amount of any securities offering
proceeds received (to the extent that such proceeds were not used to acquire
real estate assets or mortgages receivable or used to reduce Indebtedness), by
the Company or any of its Subsidiaries since the end of such calendar quarter,
including those proceeds obtained in connection with the incurrence of such
additional Indebtedness.
The Company and its Subsidiaries may not at any time own Total Unencumbered
Assets (as defined below) equal to or less than 185% of the aggregate
outstanding principal amount of the Unsecured Indebtedness (as defined below) of
the Company and its Subsidiaries on a consolidated basis determined in
accordance with GAAP.
In addition to the foregoing limitations on the incurrence of Indebtedness,
the Company will not, and will not permit any of its Subsidiaries to, incur any
Indebtedness if the ratio of Consolidated Income Available for Debt Service (as
defined below) to the Annual Service Charge (as defined below) for the four
consecutive fiscal quarters most recently ended prior to the date on which such
additional Indebtedness is to be incurred shall have been less than 2.0:1 on a
pro forma basis after giving effect thereto and to the application of the
proceeds therefrom, and calculated on the assumption that (i) such Indebtedness
and any other Indebtedness incurred by the Company and its Subsidiaries since
the first day of such four-quarter period and the application of the proceeds
therefrom, including to refinance other Indebtedness, had occurred at the
beginning of such period; (ii) the repayment or retirement of any other
Indebtedness by the Company and its Subsidiaries since the first day of such
four-quarter period had been repaid or retired at the beginning of such period
(except that, in making such computation, the amount of Indebtedness under any
revolving credit
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<PAGE> 10
facility shall be computed based upon the average daily balance of such
Indebtedness during such period); (iii) in the case of Acquired Indebtedness (as
defined below) or Indebtedness incurred in connection with any acquisition since
the first day of such four-quarter period, the related acquisition had occurred
as of the first day of such period with the appropriate adjustments with respect
to such acquisition being included in such pro forma calculation; and (iv) in
the case of any acquisition or disposition by the Company or its Subsidiaries of
any asset or group of assets since the first day of such four-quarter period,
whether by merger, stock purchase or sale, or asset purchase or sale, such
acquisition or disposition or any related repayment of Indebtedness had occurred
as of the first day of such period with the appropriate adjustments with respect
to such acquisition or disposition being included in such pro forma calculation.
Provision of Financial Information. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Company will, to the extent
permitted under the Exchange Act, file with the Commission the annual reports,
quarterly reports and other documents which the Company would have been required
to file with the Commission pursuant to such Section 13 and 15(d) if the Company
were so subject, such documents to be filed with the Commission on or prior to
the respective dates (the "Required Filing Dates") by which the Company would
have been required so to file such documents if the Company were so subject. The
Company will also in any event (x) within 15 days of each Required Filing Date
(i) if the Company is not then subject to such Section 13 or 15(d), transmit by
mail to all Holders of Notes, as their names and addresses appear in the
Security Register, without cost to such Holders, copies of the annual reports
and quarterly reports that the Company would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Company
were subject to such Sections and (ii) file with the Trustee copies of the
annual reports, quarterly reports and other documents that the Company is
required to file with the Commission or would have been required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act if the
Company were subject to such Sections and (y) if filing such documents by the
Company with the Commission is not permitted under the Exchange Act, promptly
upon written request and payment of the reasonable cost of duplication and
delivery, supply copies of such documents to any prospective Holder.
Waiver of Certain Covenants. The Company may omit to comply with any term,
provision or condition of the foregoing covenants, and with any other term,
provision or condition with respect to the Notes (except any such term,
provision or condition which could not be amended without the consent of all
Holders of Notes), if before or after the time for such compliance the Holders
of at least a majority in principal amount of all outstanding Notes, by Act of
such Holders, either waive such compliance in such instance or generally waive
compliance with such covenant or condition. Except to the extent so expressly
waived, and until such waiver shall become effective, the obligations of the
Company and the duties of the Trustee in respect of any such term, provision or
condition shall remain in full force and effect.
As used herein, and in the Indenture:
"Acquired Indebtedness" means Indebtedness of a Person (i) existing at the
time such Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from such Person, in each case, other than Indebtedness
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Indebtedness shall be deemed to be
incurred on the date of the related acquisition of assets from any Person or the
date the acquired Person becomes a Subsidiary.
"Annual Service Charge" for any period means the aggregate interest expense
for such period in respect of, and the amortization during such period of any
original issue discount of, Indebtedness of the Company and its Subsidiaries and
the amount of dividends which are payable during such period in respect of any
Disqualified Stock.
"Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
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<PAGE> 11
"Consolidated Income Available for Debt Service" for any period means
Earnings from Operations (as defined below) of the Company and its Subsidiaries
plus amounts which have been deducted, and minus amounts which have been added,
for the following (without duplication): (i) interest on Indebtedness of the
Company and its Subsidiaries, (ii) provision for taxes of the Company and its
Subsidiaries based on income, (iii) amortization of debt discount, (iv)
provisions for gains and losses on properties and property depreciation and
amortization, (v) the effect of any noncash charge resulting from a change in
accounting principles in determining Earnings from Operations for such period
and (vi) amortization of deferred charges.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
of such Person which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise
(other than Capital Stock which is redeemable solely in exchange for common
stock), (ii) is convertible into or exchangeable or exercisable for Indebtedness
or Disqualified Stock or (iii) is redeemable at the option of the holder
thereof, in whole or in part (other than Capital Stock which is redeemable
solely in exchange for Capital Stock which is not Disqualified Stock or the
redemption price of which may, at the option of such Person, be paid in Capital
Stock which is not Disqualified Stock), in each case on or prior to the Stated
Maturity of the Notes.
"Earnings from Operations" for any period means net earnings excluding
gains and losses on sales of investments, extraordinary items and property
valuation losses, net as reflected in the financial statements of the Company
and its Subsidiaries for such period determined on a consolidated basis in
accordance with GAAP.
"Encumbrance" means any mortgage, lien, charge, pledge or security interest
of any kind.
"Indebtedness" of the Company or any of its Subsidiaries means any
indebtedness of the Company or any Subsidiary, whether or not contingent, in
respect of (i) borrowed money or evidenced by bonds, notes, debentures or
similar instruments whether or not such indebtedness is secured by any
Encumbrance existing on property owned by the Company or any of its
Subsidiaries, (ii) indebtedness for borrowed money of a Person other than the
Company or a Subsidiary which is secured by any Encumbrance existing on property
owned by the Company or any Subsidiary, to the extent of the lesser of (x) the
amount of indebtedness so secured and (y) the fair market value of the property
subject to such Encumbrance, (iii) the reimbursement obligations, contingent or
otherwise, in connection with any letters of credit actually issued or amounts
representing the balance deferred and unpaid of the purchase price of any
property or services, except any such balance that constitutes an accrued
expense or trade payable, or all conditional sale obligations or obligations
under any title retention agreement, (iv) the principal amount of all
obligations of the Company or any Subsidiary with respect to redemption,
repayment or other repurchase of any Disqualified Stock, (v) any lease of
property by the Company or any Subsidiary as lessee which is reflected on the
Company's consolidated balance sheet as a capitalized lease in accordance with
GAAP, or (vi) interest rate swaps, caps or similar agreements and foreign
exchange contracts, currency swaps or similar agreements, to the extent, in the
case of items of indebtedness under (i) through (iii) above, that any such items
(other than letters of credit) would appear as a liability on the Company's
consolidated balance sheet in accordance with GAAP, and also includes, to the
extent not otherwise included, any obligation by the Company or any Subsidiary
to be liable for, or to pay, as obligor, guarantor or otherwise (other than for
purposes of collection in the ordinary course of business), Indebtedness of
another Person (other than the Company or any Subsidiary) (it being understood
that Indebtedness shall be deemed to be incurred by the Company or any of its
Subsidiaries whenever the Company or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which a majority of (i) the voting power of the voting equity
securities or (ii) the outstanding equity interests of which are owned, directly
or indirectly, by such Person. For the purposes of this definition, "voting
equity securities" means equity securities having voting power for the election
of directors, whether at all times or only so long as no senior class of
security has such voting power by reason of any contingency.
S-11
<PAGE> 12
"Total Assets" as of any date means the sum of (i) the Undepreciated Real
Estate Assets and (ii) all other assets of the Company and its Subsidiaries
determined in accordance with GAAP (but excluding accounts receivable and
intangibles).
"Total Unencumbered Assets" means the sum of (i) those Undepreciated Real
Estate Assets not subject to an Encumbrance for borrowed money and (ii) all
other assets of the Company and its Subsidiaries not subject to an Encumbrance
for borrowed money, determined in accordance with GAAP (but excluding accounts
receivable and intangibles).
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Company and its
Subsidiaries on such date, before depreciation and amortization, determined on a
consolidated basis in accordance with GAAP.
"Unsecured Indebtedness" means Indebtedness which is not secured by any
Encumbrance upon any of the properties of the Company or any of its
Subsidiaries.
See "Description of Debt Securities--Certain Covenants" in the accompanying
Prospectus for a description of additional covenants applicable to the Company.
EVENTS OF DEFAULT
The Indenture provides that the following events are "Events of Default"
with respect to the Notes: (a) default in the payment of any interest on any
Notes 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 Make-Whole Amount,
if any, on) any Notes when due and payable; (c) default in the performance, or
breach, of any other covenant or warranty of the Company in the Indenture with
respect to the Notes and continuance of such default or breach for a period of
60 days after written notice as provided in the Indenture; (d) 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 $10,000,000, 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 10 days after written notice to the Company as provided in
the Indenture; (e) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against the Company or any Subsidiary in an
aggregate amount (excluding amounts covered by insurance) in excess of
$10,000,000 and such judgments, orders or decrees remain undischarged, unstayed
and unsatisfied in an aggregate amount (excluding amounts covered by insurance)
in excess of $10,000,000 for a period of 30 consecutive days; and (f) certain
events of bankruptcy, insolvency or reorganization, or court appointment of a
receiver, liquidator or trustee of the Company or any Significant Subsidiary.
The term "Significant Subsidiary" has the meaning ascribed to such term in
Regulation S-X promulgated under the Securities Act.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
The provisions of Article 14 of the Indenture relating to defeasance and
covenant defeasance, which are described under "Description of Debt
Securities--Discharge, Defeasance and Covenant Defeasance" in the accompanying
Prospectus, will apply to the Notes. Each of the covenants described under
"--Certain Covenants" herein and "Description of Debt Securities--Certain
Covenants" in the accompanying Prospectus will be subject to covenant
defeasance.
BOOK-ENTRY SYSTEM
The provisions described under "Description of Debt Securities--Book-Entry
System and Global Securities" in the accompanying Prospectus will apply to the
Notes.
S-12
<PAGE> 13
DTC will act as securities depository for the Notes. The Notes will be
issued as fully-registered securities registered in the name of Cede & Co.
(DTC's nominee). One fully-registered Global Security will be issued for each
issue of the Notes, in the aggregate principal amount of such issue, and will be
deposited with DTC.
DTC has advised the Company of the following information regarding DTC: DTC
is a limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the Federal Reserve System, a "clearing corporation" within the meaning of
the New York Uniform Commercial Code and a "clearing agency" registered pursuant
to the provisions of Section 17A of the Exchange Act. DTC holds securities that
its Participants (as defined in the accompanying Prospectus) deposit with DTC.
DTC also facilitates the settlement among its Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in its Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct Participants of DTC include securities brokers and dealers (including the
Underwriters), banks, trust companies, clearing corporations and certain other
organizations. DTC is owned by a number of its direct Participants and by the
NYSE, the American Stock Exchange, Inc. and the National Association of
Securities Dealers, Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks and trust companies that clear
through or maintain a custodial relationship with a direct Participant of DTC,
either directly or indirectly. The rules applicable to DTC and its participants
are on file with the Commission.
Purchases of the Notes under DTC's system must be made by or through direct
Participants, which will receive a credit for the Notes on DTC's records. The
ownership interest of each actual purchaser of each Note (the "Beneficial
Owner") is in turn to be recorded on the direct Participants' and indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transactions, as well as periodic
statements of their holdings, from the direct Participant or indirect
Participant through which the Beneficial Owner entered into the transactions.
Transfers of ownership interests in the Notes are to be accomplished by entries
made on the books of Participants acting on behalf of the Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Notes, except in the event that use of the book-entry system for
any series of Notes is discontinued.
To facilitate subsequent transfers, all Global Securities deposited by
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Global Securities with DTC and their registration in the name of
Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of the
actual Beneficial Owners of the Notes; DTC's records reflect only the identity
of the direct Participants to whose accounts such Notes are credited, which may
or may not be the Beneficial Owners. The Participants will remain responsible
for keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to direct
Participants, by direct Participants to indirect Participants and indirect
Participants to Beneficial Owners will be governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Notes within an issue are being redeemed, DTC's current practice is to determine
by lot the amount of the interest of each direct Participant in such issued to
be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the Notes.
Under its usual procedures, DTC will mail an "Omnibus Proxy" to the Company as
soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.'s
consenting or voting rights to those direct Participants to whose accounts the
Notes are credited on the record date (identified in a listing attached to the
Omnibus Proxy).
Principal and interest payments on the Notes will be made to DTC. DTC's
practice is to credit direct Participants' accounts on the payable date in
accordance with their respective holdings shown on DTC's records unless DTC has
reason to believe that it will not receive payment on the payable date. Payments
by Participants to Beneficial Owners will be governed by standing instructions
and customary practices, as in the case of securities held for the accounts of
customers in bearer form or registered in "street name" and will be
S-13
<PAGE> 14
the responsibility of such Participant and not of DTC, the Paying Agent or the
Company, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payment of principal and interest to DTC is the
responsibility of the Company or Paying Agent, disbursement of such payments to
direct Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of direct
Participants and indirect Participants.
A Beneficial Owner shall give notice to elect to have its Notes purchased
or tendered, through its Participant, to the agent established for such purpose
(the "Tender Agent"), and shall effect delivery of such Notes by causing the
direct Participant to transfer the Participant's interest in the Notes, on DTC's
records, to the Tender Agent. The requirements for physical delivery of the
Notes in connection with a demand for purchase or a mandatory purchase will be
deemed satisfied when the ownership rights in the Notes are transferred by a
direct Participant on DTC's records and followed by a book-entry credit of
tendered Notes to the Tender Agent's account.
DTC may discontinue providing its services as securities depository with
respect to the Notes at any time by giving reasonable notice to the Company or
the Trustee, Paying Agent and registrar for the Notes. Under such circumstances,
in the event that a successor securities depository is not obtained, certified
Notes will be printed and delivered in exchange for the Notes represented by a
Global Security held by DTC.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
certificated Notes will be printed and delivered in exchange for the Notes
represented by a Global Security held by DTC.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
Neither the Company, the Trustee, any Paying Agent nor the registrar for
the Notes will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a Global Security held by DTC or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
SAME-DAY SETTLEMENT AND PAYMENT
Settlement for the Notes will be made by the Underwriters in immediately
available funds. All payments of principal and interest in respect of Notes in
the form of Global Securities will be made by the Company in immediately
available funds.
Secondary trading in long-term notes and debentures of corporate issuers is
generally settled in clearing house or next-day funds. In contrast, Notes
represented by a Global Security will trade in DTC's Same-Day Funds Settlement
System until maturity or until the Notes are issued in certificated form, and
secondary market trading activity in such Notes will therefore be required by
DTC to settle in immediately available funds. No assurance can be given as to
the effect, if any, of settlement in immediately available funds on trading
activity in the Notes.
GOVERNING LAW
The Indenture will be governed by and shall be construed in accordance with
the laws of the State of New York.
NO PERSONAL LIABILITY
No past, present or future stockholder, employee, officer or director of
the Company or any successor thereof shall have any liability for any
obligation, covenant or agreement of the Company contained under the Notes or
the Indenture. Each Holder of Notes by accepting such Notes waives and releases
all such liability. The waiver and release are part of the consideration for the
issue of the Notes.
CONCERNING THE TRUSTEE
The Trustee is an affiliate of Bank of Montreal, which is one of the
lenders under the Acquisition Facility.
S-14
<PAGE> 15
UNDERWRITING
Subject to the terms and conditions in the Underwriting Agreement dated the
date hereof (the "Underwriting Agreement"), the Company has agreed to sell to
each of the Underwriters named below (the "Underwriters"), severally, and each
of the Underwriters has severally agreed to purchase, the principal amount of
Notes set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF NOTES
- ----------- -----------------
<S> <C>
J.P. Morgan Securities Inc................................................... $ 60,000,001
Donaldson, Lufkin & Jenrette Securities Corporation.......................... 13,333,333
Goldman, Sachs & Co.......................................................... 13,333,333
Smith Barney Inc............................................................. 13,333,333
------------
Total................................................................... $100,000,000
============
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
Underwriters will be obligated to purchase all of the Notes if any are
purchased.
The Underwriters have advised the Company that they propose initially to
offer the Notes directly to the public at the public offering price set forth on
the cover page of this Prospectus Supplement, and to certain dealers at such
price less a concession not in excess of .50% of the principal amount of the
Notes. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of .25% of the principal amount of the Notes to certain other
dealers. After the initial public offering, the public offering price and such
concession may be changed.
The Notes are a new issue of securities with no established trading market.
The Company has been advised by the Underwriters that the Underwriters intend to
make a market in the Notes but are not obligated to do so and may discontinue
market making at any time without notice. No assurance can be given as to the
liquidity of the trading market for the Notes.
The Company has agreed to indemnify the Underwriters against certain civil
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Underwriters may be required to make in respect thereof.
Certain of the Underwriters and their affiliates have from time to time
performed, and may continue to perform in the future, various investment banking
and commercial banking services for the Company, for which customary
compensation has been received. Morgan Guaranty Trust Company of New York, an
affiliate of J.P. Morgan Securities Inc., is the agent and lead lender under the
Acquisition Facility and will receive 8.5% of the net proceeds of the offering
of the Notes applied to the repayment of borrowings under the Acquisition
Facility. See "Use of Proceeds."
In connection with this offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Notes. Specifically, the Underwriters may overallot in connection with such
offering, creating a syndicate short position. In addition, the Underwriters may
bid for and purchase the Notes in the open market to cover syndicate short
positions or to stabilize the price of the Notes. Finally, the syndicate may
reclaim selling concessions allowed for distributing Notes in the offering, if
the syndicate repurchases previously distributed Notes in the market to cover
overallotments or to stabilize the price of the Notes. Any of these activities
may stabilize or maintain the market price of the Notes above independent market
levels. The Underwriters are not required to engage in any of these activities,
and may end any of them at any time.
S-15
<PAGE> 16
LEGAL MATTERS
Certain legal matters, including the legality of the Notes being offered
hereby and certain matters of Maryland law, are being passed upon for the
Company by Goodwin, Procter & Hoar LLP, Boston, Massachusetts. Certain legal
matters related to the offering of the Notes are being passed upon for the
Underwriters by Cahill Gordon & Reindel (a partnership including a professional
corporation), New York, New York.
S-16
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PROSPECTUS
$250,000,000
[LOGO]
TRINET CORPORATE REALTY TRUST, INC.
DEBT SECURITIES
TriNet Corporate Realty Trust, Inc. ("TriNet" or the "Company") may offer
from time to time in one or more series its unsecured debt securities ("Debt
Securities") with an aggregate public offering price of up to $250,000,000 (or
its equivalent based on the exchange rate at the time of sale) in amounts, at
prices and on other terms to be determined at the time of offering. The Debt
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 Debt Securities for which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable, 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, covenants and any initial public offering price.
The applicable Prospectus Supplement will also contain information, where
appropriate, about certain U.S. federal income tax considerations relating to,
and any listing on a securities exchange of, the Debt Securities covered by such
Prospectus Supplement.
The Debt Securities may be sold 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 Debt 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 Debt Securities may be
sold without delivery of a Prospectus Supplement describing the method and terms
of the offering of such Debt 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 date of this Prospectus is July 1, 1997.
<PAGE> 18
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 Debt
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 at 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. In addition, the Company is required to file electronic
versions of these documents with the Commission through the Commission's
Electronic Data Gathering, Analysis and Retrieval (EDGAR) system, and such
electronic versions are available to the public at the Commission's World-Wide
Web Site, http://www.sec.gov. 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 Company's common stock, $.01 par value per share ("Common
Stock") and its Series A and Series B preferred stock, $.01 par value per share
("Preferred Stock") are 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, 1996, (ii)
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 1997, (iii)
the Company's Current Report on Form 8-K dated February 4, 1997, (iv) the
Company's Current Report on Form 8-K dated February 28, 1997 and (v) the
Company's Current Report on Form 8-K dated March 27, 1997, as amended by the
Company's Current Report on Form 8-K/A dated April 30, 1997.
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 Debt 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 A. William Stein,
Executive Vice President and 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.
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THE COMPANY
TriNet is a self-administered and self-managed real estate investment trust
("REIT") that acquires, owns and manages predominantly office and industrial
properties leased to major corporations nationwide, including corporate
headquarters and strategically important distribution facilities. As of June 16,
1997, TriNet owned 89 properties (the "Properties"), aggregating approximately
14 million square feet in 25 states, all of which are 100% leased.
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 the Debt 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.
RATIO OF EARNINGS TO FIXED CHARGES AND
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The Company's ratio of earnings to fixed charges for the three months ended
March 31, 1997 and for the years ended December 31, 1996, 1995, 1994, 1993 and
1992 were 2.83x, 2.05x, 1.97x, 2.65x, 2.17x and 1.12x, respectively.
The Company's ratio of earnings to combined fixed charges and preferred
stock dividends for the three months ended March 31, 1997 was 2.12x and for the
year ended December 31, 1996 was 1.78x.
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 and 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.
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 "Trust Indenture Act"). 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.
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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. Unless otherwise indicated in the applicable Prospectus Supplement, 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 below 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;
(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, in connection with the
preservation of the Company's status as a REIT, 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;
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(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, 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, in 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, in 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 U.S. 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
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 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
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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 (as defined) 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, 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 Debt 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 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. 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
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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 ten 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 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
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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 officers' 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 above 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
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, (a) 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 (b) 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.
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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
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 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.
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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; (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.
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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 in any material respect.
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 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
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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) 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: (i) 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 (ii) 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
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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.
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
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released from certain obligations with respect to such Debt Securities under the
applicable Indenture (including the restrictions described above 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 U.S. 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.
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 institution 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
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<PAGE> 31
(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 Event of Default other than the Event of Default described
in clause (d) above 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 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 AND GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of, a depository (the "Depository") identified in
the 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 either
fully registered or bearer form and in either temporary or permanent form.
Unless and until it is exchanged in whole or in part for the individual Debt
Securities represented thereby, a Global Security may not be transferred except
as a whole by the Depository for such Global Security to a nominee of such
Depository or by a nominee of such Depository to such Depository or another
nominee of such Depository or by 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.
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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 (and applicable premium or Make-Whole Amount, if
any) and 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 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.
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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 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.
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (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 (as 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 Company's Amended and Restated Articles of Incorporation, as amended
by Articles Supplementary Establishing and Fixing the Rights and Preferences of
a Series of Shares of Preferred Stock (Series A) and by Articles Supplementary
Establishing and Fixing the Rights and Preferences of a Series of Shares of
Preferred Stock (Series B) (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, shares of any class or series of the
Company's capital stock with an aggregate value in excess of 9.3% (the
"Ownership Limit") of the aggregate value of all outstanding stock of such class
or series. 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
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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, $.01 par value per share ("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.
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.
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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.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the Debt 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 U.S. income tax
withholding on Company distributions.
PLAN OF DISTRIBUTION
The Company may sell Debt Securities to or through one or more underwriters
or dealers for public offering and sale by or through them, and may also sell
Debt 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 Debt Securities
will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Debt 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 Debt
Securities upon the terms and conditions as shall be set forth in any Prospectus
Supplement. In connection with the sale of Debt 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 Debt Securities for whom they may act as agent. Underwriters may
sell Debt 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 Debt 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 Debt 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 Debt Securities may be deemed to be
underwriting discounts and commissions, under the Securities Act. Underwriters,
dealers and agents may 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 will be a new issue with no established
trading market. The Company may elect to list any series of Debt Securities on
an exchange, but is not obligated to do so. It is possible that one or more
underwriters may make a market in a series of Debt 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 Debt 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
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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 (a) 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 (b) 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 Debt Securities offered hereby will be sold in
such jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states Debt 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 Debt Securities offered hereby may not
simultaneously engage in market making activities with respect to the Debt
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 Debt Securities, will
be passed upon for the Company by Geoffrey M. Dugan, Vice President and General
Counsel of the Company, and Goodwin, Procter & Hoar LLP, 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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