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PROSPECTUS SUPPLEMENT
SEPTEMBER 11, 1997
(TO PROSPECTUS DATED JANUARY 9, 1997)
567,720 SHARES
TRINET CORPORATE REALTY TRUST, INC.
COMMON STOCK
TriNet Corporate Realty Trust, Inc. (the "Company" or "TriNet") is a 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 September 11, 1997, TriNet's portfolio consisted of 99
properties (the "Properties") located in 25 states, all of which were 100%
leased.
All of the shares of common stock, par value $.01 per share (the "Common
Stock"), offered hereby (the "Offering") are being sold by the Company. The
Common Stock is listed on the New York Stock Exchange ("NYSE") under the symbol
"TRI." On September 11, 1997, the reported last sale price of the Common Stock
on the NYSE was $35 7/8 per share. See "Price Range of Common Stock and
Distributions."
FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION
WITH AN INVESTMENT IN THE COMMON STOCK, SEE "RISK FACTORS" COMMENCING ON PAGE S-
3 IN THIS PROSPECTUS SUPPLEMENT.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Underwriter has agreed to purchase the shares of Common Stock from the
Company at a price of $34.08125 per share, resulting in aggregate proceeds to
the Company of $19,348,607.25 before payment of expenses by the Company
estimated at $100,000, subject to the terms and conditions in the Underwriting
Agreement. The Underwriter intends to deposit the shares of Common Stock with
the trustee of The Equity Focus Trusts - REIT Portfolio Series 1997 (the
"Trust") in exchange for units in the Trust. If all of the shares of Common
Stock so deposited with the trustee of the Trust are valued at their reported
last sale price on September 11, 1997, the aggregate underwriting commissions
would be $1,018,347.75. See "Underwriting."
The shares of Common Stock offered hereby are offered by the Underwriter,
subject to prior sale, when, as and if issued to and accepted by the Underwriter
and subject to approval of certain legal matters by Cahill Gordon & Reindel,
counsel for the Underwriter. The Underwriter reserves the right to reject orders
in whole or in part. It is expected that delivery of the Common Stock offered
hereby will be made against payment therefor in New York, New York on or about
September 16, 1997.
SMITH BARNEY INC.
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITER MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING AND
MAY BID FOR, AND PURCHASE, THE COMMON STOCK IN THE OPEN MARKET. FOR A
DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
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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
September 11, 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 Common Stock involves various risks. In addition to
general investment risks and those factors set forth elsewhere herein,
prospective investors should consider, among other things, the following risk
factors:
RISKS ASSOCIATED WITH BORROWING
The Company currently uses and intends to continue using leverage to increase
the Company's rate of return on its investments and allow the Company to make
more investments than it otherwise could. Such use of leverage presents an
additional element of risk in the event that the cash flow from lease payments
on its properties is insufficient to meet both debt payment obligations and the
distribution requirements of the REIT provisions of the Internal Revenue Code of
1986, as amended (the "Code").
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 7.70% Notes due July 15, 2017 (the "2017 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, July 15, 2017, October 8, 1999 and December 1, 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.
The 1994 Mortgage Loan and the Acquisition Facility bear interest at a
floating rate tied to the London Interbank Offered Rate ("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 for distribution to the Company's
stockholders.
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
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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 an adverse effect on the Company. At September 11, 1997, TriNet had leases
with a total of 71 tenants. At such date, the Company's five largest tenants
collectively accounted for approximately 25.2% 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 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
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to qualify as a REIT was due to reasonable cause and not to willful neglect of
the qualification provisions of the Code. The additional tax liability of the
Company for the year or years involved would reduce the net earnings of the
Company and could adversely affect its ability to pay distributions to its
stockholders. 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 product or waste
(collectively, "Hazardous Materials") releases on, under, in or from such
property, and may be held liable to governmental entities or to third parties
for certain damage and for investigation and cleanup costs incurred by such
parties in connection with the release or threatened release of Hazardous
Materials. Such laws typically impose responsibility and liability without
regard to whether the owner knew of or was responsible for the presence of
Hazardous Materials, and the liability under such laws has been interpreted to
be joint and several under certain circumstances. The Company's leases generally
provide that the tenant is responsible for all environmental liabilities and for
compliance with environmental regulations relating to the tenant's operations.
Such a contractual arrangement does not eliminate the Company's statutory
liability or preclude claims against the Company by governmental authorities or
persons who are not parties to such an arrangement. Contractual arrangements in
the Company's leases may provide a basis for the Company to recover from the
tenant damages or costs for which the Company has been found liable.
The costs of investigation and cleanup of Hazardous Materials on, under, in or
from property can be substantial, and the fact that the property has had a
release of Hazardous Materials, even if remediated, may adversely affect the
value of the property and the owner's ability to sell or lease the property or
to borrow using the property as collateral. In addition, some environmental laws
create a lien on a property in favor of the government for damages and costs it
incurs in connection with the release or threatened release of Hazardous
Materials, and certain state environmental laws provide that such a lien has
priority over all other encumbrances on the property or that a lien can be
imposed on other property owned by the responsible party. Finally, the presence
of Hazardous Materials on a property could result in a claim by a private party
for personal injury or a claim by a neighboring property owner for property
damage.
Other federal, state and local laws and regulations govern the removal or
encapsulation of asbestos-containing material when such material is in poor
condition or in the event of building remodeling, renovation or demolition.
Still other federal, state and local statutes, regulations and ordinances may
require the removal or upgrading of underground storage tanks that are out of
service or out of compliance. In addition, federal, state and local laws,
regulations and ordinances may impose prohibitions, limitations and operational
standards on, or require permits, approvals and notifications in connection
with, the discharge of wastewater and other water pollutants, the emission of
air pollutants and operation of air polluting equipment, the generation and
management of Hazardous Materials, and workplace health and safety. Non-
compliance with environmental or health and safety requirements may also result
in the need to cease or alter operations at a property, which could affect the
financial health of a tenant and its ability to make lease payments.
Furthermore, if there is a violation of such a requirement in connection with a
tenant's operations, it is possible that the Company, as the owner of the
property, could be held accountable by governmental authorities for such
violation and could be required to correct the violation.
The Company typically undertakes an investigation of potential environmental
risks when evaluating an acquisition. Where warranted, Phase I and/or Phase II
assessments are performed by independent 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 relating to the tenant's operations 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.
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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 some degree
of 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.
PRICE RANGE OF COMMON STOCK AND DISTRIBUTIONS
The Company's Common Stock is traded on the NYSE under the symbol "TRI." The
high and low sales prices per share of Common Stock and the distributions
declared per share of Common Stock are set forth below for the periods
indicated.
<TABLE>
<CAPTION>
PRICE RANGE
OF COMMON STOCK DISTRIBUTIONS
---------------- DECLARED PER
HIGH LOW SHARE
<S> <C> <C> <C>
Year Ended December 31, 1995:
1st Quarter............................... $29 3/8 $26 $0.61
2nd Quarter............................... 29 1/4 24 1/4 0.61
3rd Quarter............................... 29 1/2 26 7/8 0.61
4th Quarter............................... 29 1/2 26 0.62
Year Ended December 31, 1996:
1st Quarter............................... $30 3/8 $27 $0.62
2nd Quarter............................... 30 7/8 27 1/8 0.62
3rd Quarter............................... 32 3/8 29 1/8 0.62
4th Quarter............................... 35 1/2 31 1/8 0.63
Year Ending December 31, 1997:
1st Quarter............................... $36 3/4 $31 $0.63
2nd Quarter............................... 33 7/8 31 5/8 0.63
3rd Quarter through September 11, 1997.... 36 1/8 32 7/8 0.63(1)
</TABLE>
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(1) To be paid on October 15, 1997 to stockholders of record on September 30,
1997.
The reported last sale price of the Common Stock on the NYSE on September 11,
1997 was $35 7/8 per share. As of September 11, 1997, there were 424 record
holders of Common Stock. The transfer agent and registrar for the Common Stock
is Harris Trust and Savings Bank of Chicago, Illinois.
Prior to the consummation of its initial public offering in June 1993 (the
"Initial Offering"), the Company did not pay any distributions to its
stockholders. Since the consummation of the Initial Offering, the Company has
paid regular and uninterrupted distributions. The Company intends to continue to
declare quarterly distributions on its Common Stock. No assurance, however, can
be given as to the amounts or timing of future distributions, as such
distributions are subject to the Company's earnings, financial condition,
capital requirements and such other factors as the Company's Board of Directors
deems relevant.
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USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby are expected to be approximately $19.2 million. The Company
intends to use such net proceeds to repay borrowings under the Acquisition
Facility, which were incurred principally to finance acquisition activities. As
of September 11, 1997, the Acquisition Facility, which matures on October 8,
1999, bore interest at a weighted average interest rate of 6.3% per annum, and
approximately $65.0 million was outstanding thereunder.
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 has qualified or will at all times so qualify. See "Risk
Factors -- REIT Qualification Requirements."
In any year in which the Company qualifies to be taxed as a REIT,
distributions made to its stockholders out of current or accumulated earnings
and profits will generally be taxed to stockholders as ordinary income, except
that, subject to the discussion below regarding the new tax rates introduced by
the Taxpayer Relief Act of 1997 (the "1997 Act"), distributions of net capital
gains designated by the Company as capital gain dividends will be taxed as long-
term capital gain income to the stockholders. To the extent that distributions
exceed current or accumulated earnings and profits, they will constitute a
return of capital, rather than dividend or capital gain income, and will reduce
the basis for the stockholder's shares of Common Stock with respect to which the
distribution is paid or, to the extent that they exceed such basis, will be
taxed in the same manner as gain from the sale of those shares.
The Company is permitted under the Code to elect to retain and pay income tax
on its net long-term capital gains received during the taxable year. Under the
1997 Act, however, for taxable years beginning after December 31, 1997, if the
Company so elects, stockholders would include in income their proportionate
shares of a designated portion of the Company's undistributed long-term capital
gains for the taxable year, and would also be deemed to have paid their
proportionate shares of the income tax paid by the Company on such undistributed
capital gains (which would be credited against the stockholder's tax liability,
and subject to normal refund procedures). Each stockholder's basis in his or
her shares of Common Stock would be increased by the amount of undistributed
long-term capital gains (less the tax paid by the Company) included in the
stockholder's income.
The 1997 Act also alters the taxation of capital gain income for individuals
(and for certain trusts and estates). Gains from the sale or exchange of
certain investments held for more than 18 months may be taxed at a maximum long-
term capital gain rate of 20%. Gains from the sale or exchange of such
investments held for 18 months or less, but more than one year, may be taxed at
a maximum mid-term capital gain rate of 28%. The 1997 Act also provides a
maximum rate of 25% for "unrecaptured section 1250 gain" recognized on the sale
or exchange of certain real estate assets, and introduces special rules for
"qualified 5-year gain," as well as other changes to prior law. The Internal
Revenue Service may prescribe regulations on how the 1997 Act's new capital gain
rates will apply to sales of capital assets by REITs and other "pass-thru
entities," but it has not yet done so, and it remains unclear how the 1997 Act's
new rates will apply to capital gain dividends and undistributed capital gains.
For example, the extent, if any, to which capital gain dividends and
undistributed capital gains from the Company will be taxed to individuals at the
new rates for mid-term capital gains and unrecaptured section 1250 gain, rather
than the long-term capital gain rates, is unclear.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the shares of Common Stock 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, investors are urged to consult their own tax advisors with respect
to the new rules contained in the 1997 Act, and foreign investors should consult
their own tax advisors concerning the tax consequences of an investment in the
Company, including the possibility of United States income tax withholding on
Company distributions.
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UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
dated the date hereof (the "Underwriting Agreement"), between Smith Barney Inc.
(the "Underwriter") and the Company, the Underwriter has agreed to purchase from
the Company, and the Company has agreed to sell to the Underwriter, 567,720
shares of Common Stock at the offering price less the underwriting discounts set
forth on the cover page of this Prospectus Supplement.
The Underwriting Agreement provides that the obligations of the Underwriter to
pay for and accept delivery of the shares of Common Stock are subject to
approval of certain legal matters by its counsel and to certain other
conditions. The Underwriter is obligated to take and pay for all shares of
Common Stock offered hereby if any such shares of Common Stock are taken.
The Underwriter intends to deposit the shares of Common Stock with the trustee
of the Trust, a registered unit investment trust under the Investment Company
Act of 1940, as amended, in exchange for units in the Trust. If all of the
shares of Common Stock so deposited with the trustee of the Trust are valued at
their reported last sale price on September 11, 1997, the aggregate underwriting
commissions would be $1,018,347.75. The Underwriter is acting as sponsor and
depositor of the Trust and is therefore considered an affiliate of the Trust.
The Underwriting Agreement contains covenants of indemnity between the
Underwriter and the Company against certain liabilities, including liabilities
under the Securities Act.
The Underwriter and its affiliates have from time to time performed, and may
continue to perform in the future, various investment banking services for the
Company, for which customary compensation has been received.
In connection with this offering, the Underwriter may engage in transactions
that stabilize, maintain or otherwise affect the price of the Common Stock.
Specifically, the Underwriter may overallot in connection with such offering,
creating a short position in the Common Stock for its own account. In addition,
the Underwriter may bid for and purchase shares of Common Stock in the open
market to cover short positions or to stabilize the price of the Common Stock.
Any of these activities may stabilize or maintain the market price of the Common
Stock above independent market levels. The Underwriter is not required to engage
in any of these activities, and may end any of them at any time.
LEGAL MATTERS
Certain legal matters, including the legality of the Common Stock being
offered hereby, are being passed upon for the Company by Goodwin, Procter & Hoar
LLP, Boston, Massachusetts. Certain legal matters related to the Offering are
being passed upon for the Underwriter by Cahill Gordon & Reindel (a partnership
including a professional corporation), New York, New York. Cahill Gordon &
Reindel will rely as to all matters of Maryland law on the opinion of Goodwin,
Procter & Hoar LLP, Boston, Massachusetts.
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PROSPECTUS
$400,000,000
TRINET CORPORATE REALTY TRUST, INC.
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
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TriNet Corporate Realty Trust, Inc. ("TriNet" or the "Company") may offer from
time to time in one or more series (i) its unsecured debt securities ("Debt
Securities"), (ii) shares of its preferred stock, $.01 par value per share
("Preferred Stock") and (iii) shares of its common stock, $.01 par value per
share ("Common Stock"), with an aggregate public offering price of up to
$400,000,000 (or its equivalent based on the exchange rate at the time of sale)
in amounts, at prices and on terms to be determined at the time of offering. The
Debt Securities, Preferred Stock and Common Stock (collectively, the
"Securities") may be offered separately or together, in separate series, in
amounts, at prices and on terms to be set forth in one or more supplements to
this Prospectus (each, a "Prospectus Supplement").
The specific terms of the Securities for which this Prospectus is being
delivered will be set forth in the applicable Prospectus Supplement and will
include, where applicable: (i) in the case of Debt Securities, the specific
title, aggregate principal amount, ranking, currency, form (which may be
registered or bearer, or certificated or global), authorized denominations,
maturity, rate (or manner of calculation thereof) and time of payment of
interest, terms for redemption at the option of the Company or repayment at the
option of the holder, terms for sinking fund payments, terms for conversion into
Common Stock or Preferred Stock, covenants and any initial public offering
price; (ii) in the case of Preferred Stock, the specific designation and stated
value per share, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; and (iii) in the case of
Common Stock, any initial public offering price. In addition, such specific
terms may include limitations on direct or beneficial ownership and restrictions
on transfer of the Securities, in each case as may be consistent with the
Company's Amended and Restated Articles of Incorporation, as amended or
otherwise appropriate to preserve the status of the Company as a real estate
investment trust ("REIT") for federal income tax purposes. See "Restrictions on
Transfers of Capital Stock."
The applicable Prospectus Supplement will also contain information, where
appropriate, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Securities may be offered by the Company directly to one or more
purchasers, through agents designated from time to time by the Company or to or
through underwriters or dealers. If any agents or underwriters are involved in
the sale of any of the securities, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them will be set
forth, or will be calculable from the information set forth, in an accompanying
Prospectus Supplement. See "Plan of Distribution." No Securities may be sold
without delivery of a Prospectus Supplement describing the method and terms of
the offering of such Securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
The date of this Prospectus is January 9, 1997.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the "SEC"
or "Commission") a Registration Statement on Form S-3 under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the Securities. This
Prospectus, which constitutes part of the Registration Statement, omits certain
of the information contained in the Registration Statement and the exhibits
thereto on file with the Commission pursuant to the Securities Act and the rules
and regulations of the Commission thereunder. The Registration Statement,
including exhibits thereto, may be inspected and copied at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the Commission's Regional Offices at 7 World
Trade Center, 13th Floor, New York, New York 10048 and 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 Common Stock, the Series A Preferred Stock and the Series B
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, 1995, (ii)
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 1996,
June 30, 1996 and September 30, 1996, (iii) the Company's Current Report on Form
8-K dated March 25, 1996, (iv) the Company's Current Report on Form 8-K dated
April 12, 1996, as amended by the Company's Current Report on Form 8-K/A dated
May 2, 1996, (v) the Company's Current Report on Form 8-K dated May 10, 1996,
(vi) the Company's Current Report on Form 8-K dated May 21, 1996, (vii) the
Company's Current Report on Form 8-K dated May 24, 1996, (viii) the Company's
Registration Statement on Form 8-A dated June 12, 1996, as amended by the
Company's Registration Statement on Form 8-A/A dated June 28, 1996, (ix) the
Company's Current Report on Form 8-K dated June 28, 1996, (x) the Company's
Current Report on Form 8-K dated July 17, 1996, as amended by the Company's
Current Report on Form 8- K/A dated August 7, 1996, (xi) the Company's
Registration Statement on Form 8-A dated August 6, 1996, as amended by the
Company's Registration Statement on Form 8-A/A dated August 9, 1996, (xii) the
Company's Current Report on Form 8-K dated August 14, 1996, (xiii) the Company's
Current Report on Form 8-K dated December 26, 1996 and (xiv) the description of
the Company's Common Stock contained in the Company's Registration Statement on
Form 8-A dated April 1, 1993.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of all Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. The Company will provide, without charge, to
each person, including any beneficial owner, to whom a copy of this Prospectus
is delivered, at the request of such person, a copy of any or all of the
documents incorporated herein by reference (other than exhibits thereto, unless
such exhibits are specifically incorporated by reference into such documents).
Written requests for such copies should be directed to A. William Stein, 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
GENERAL
TriNet Corporate Realty Trust, Inc. is real estate investment trust (a "REIT")
which acquires, owns and manages predominantly office and industrial properties
net leased to corporations nationwide, including corporate headquarters and
strategically important distribution facilities. Under a net lease, the tenant
is responsible for obligations such as taxes, repairs and insurance, which would
otherwise be the responsibility of the landlord. Based on total market
capitalization, the Company is one of the largest publicly traded REITs in the
United States engaged exclusively in the corporate net leased real estate
business. As of December 27, 1996, TriNet's portfolio consists of 77 properties
(the "Properties"), which are predominantly single-tenant industrial and office
buildings located throughout the United States. The Properties are 100% net
leased pursuant to leases with an average remaining term (excluding extension
options) of approximately 9.5 years when lease terms are weighted according to
contractual rent revenues. TriNet is a self-administered and self-managed REIT.
The Company was incorporated under the laws of the State of Maryland on March
4, 1993. The Company's principal executive offices are located at Four
Embarcadero Center, Suite 3150, San Francisco, California 94111, and its
telephone number is (415) 391-4300. The Company also maintains regional offices
in Florida and Pennsylvania.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of Securities for general
corporate purposes, which may include the acquisition of additional properties,
the repayment of outstanding debt or the improvement of certain properties
already in the Company's portfolio.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The Company's ratio of earnings to combined fixed charges and preferred stock
dividends for the nine months ended September 30, 1996 was 2.06x. The Company's
historical ratios of earnings to fixed charges for the nine months ended
September 30, 1995 and for the years ended December 31, 1995, 1994, 1993 and
1992 were 1.92x, 1.97x, 2.65x, 2.17x and 1.12x, respectively. For the year ended
December 31, 1991, earnings were insufficient to cover fixed charges by
$532,000.
The ratios of (i) earnings to fixed charges and (ii) earnings to combined
fixed charges and preferred stock dividends were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations plus fixed charges (excluding preferred stock dividends).
Fixed charges consist of interest expense 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 "TIA"). The statements made under this heading relating to the
Debt Securities and the Indentures are summaries of the anticipated provisions
thereof, do not purport to be complete and are qualified in their entirety by
reference to the Indentures and such Debt Securities.
Capitalized terms used herein and not defined shall have the meanings assigned
to them in the applicable Indenture.
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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 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 on the ownership or transferability of the Common Stock
or Preferred Stock receivable on conversion;
(5) The date or dates, or the method for determining such date or dates, on
which the principal of such Debt Securities will be payable;
(6) The rate or rates (which may be fixed or variable), or the method by which
such rate or rates shall be determined, at which such Debt Securities will bear
interest, if any;
(7) The date or dates, or the method for determining such date or dates, from
which any such interest will accrue, the dates on which any such interest will
be payable, the record dates for such interest payment dates, or the method by
which such dates shall be determined, the persons to whom such interest shall be
payable, and the basis upon which interest shall be calculated if other than
that of a 360-day year of twelve 30-day months;
(8) The place or places where the principal of (and premium or Make-Whole
Amount (as defined in the Indenture), if any) and interest, if any, on such Debt
Securities will be payable, where such Debt Securities may be surrendered for
registration of transfer
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or exchange and where notices or demands to or upon the Company in respect of
such Debt Securities and the applicable Indenture may be served;
(9) The period or periods, if any, within which, the price or prices at which
and the other terms and conditions upon which such Debt Securities may, pursuant
to any optional or mandatory redemption provisions, be redeemed, as a whole or
in part, at the option of the Company;
(10) The obligation, if any, of the Company to redeem, repay or purchase such
Debt Securities pursuant to any sinking fund or analogous provision or at the
option of a holder thereof, and the period or periods within which, the price or
prices at which and the other terms and conditions upon which such Debt
Securities will be redeemed, repaid or purchased, as a whole or in part,
pursuant to such obligation;
(11) If other than U.S. dollars, the currency or currencies in which such Debt
Securities are denominated and payable, which may be a foreign currency or units
of two or more foreign currencies or a composite currency or currencies, and the
terms and conditions relating thereto;
(12) Whether the amount of payments of principal of (and premium or Make-Whole
Amount, if any, including any amount due upon redemption, if any) or interest,
if any, on such Debt Securities may be determined with reference to an index,
formula or other method (which index, formula or method may, but need not be,
based on the yield on or trading price of other securities, including United
States Treasury securities, or on a currency, currencies, currency unit or
units, or composite currency or currencies) and the manner in which such amounts
shall be determined;
(13) Whether the principal of (and premium or Make-Whole Amount, if any) or
interest on the Debt Securities of the series are to be payable, at the election
of the Company or a holder thereof, in a currency or currencies, currency unit
or units or composite currency or currencies other than that in which such Debt
Securities are denominated or stated to be payable, the period or periods within
which, and the terms and conditions upon which, such election may be made, and
the time and manner of, and identity of the exchange rate agent with
responsibility for, determining the exchange rate between the currency or
currencies, currency unit or units or composite currency or currencies in which
such Debt Securities are denominated or stated to be payable and the currency or
currencies, currency unit or units or composite currency or currencies in which
such Debt Securities are to be so payable;
(14) Provisions, if any, granting special rights to the holders of Debt
Securities of the series upon the occurrence of such events as may be specified;
(15) Any deletions from, modifications of or additions to the Events of
Default (as defined in the Indenture) or covenants of the Company with respect
to Debt Securities of the series, whether or not such Events of Default or
covenants are consistent with the Events of Default or covenants described
herein;
(16) Whether and under what circumstances the Company will pay any additional
amounts on such Debt Securities in respect of any tax, assessment or
governmental charge and, if so, whether the Company will have the option to
redeem such Debt Securities in lieu of making such payment;
(17) Whether Debt Securities of the series are to be issuable as Registered
Securities, Bearer Securities (with or without coupons) or both, any
restrictions applicable to the offer, sale or delivery of Bearer Securities and
the terms upon which Bearer Securities of the series may be exchanged for
Registered Securities of the series and vice versa (if permitted by applicable
laws and regulations), whether any Debt Securities of the series are to be
issuable initially in temporary global form and whether any Debt Securities of
the series are to be issuable in permanent global form with or without coupons
and, if so, whether beneficial owners of interests in any such permanent global
Security may exchange such interests for Debt Securities of such series and of
like tenor of any authorized form and denomination and the circumstances under
which any such exchanges may occur, if other than in the manner provided in the
Indenture, and, if Registered Securities of the series are to be issuable as a
Global Security (as defined), the identity of the depository for such series;
(18) The date as of which any Bearer Securities of the series and any
temporary Global Security representing outstanding Debt Securities of the series
shall be dated if other than the date of original issuance of the first Security
of the series to be issued;
(19) The Person to whom any interest on any Registered Security of the series
shall be payable, if other than the Person in whose name that Security (or one
or more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest, the manner in which, or the Person to
whom, any interest on any Bearer Security of the series shall be payable, if
otherwise
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than upon presentation and surrender of the coupons appertaining thereto as they
severally mature, and the extent to which, or the manner in which, any interest
payable on a temporary Global Security on an Interest Payment Date will be paid
if other than in the manner provided in the Indenture;
(20) The applicability, if any, of the defeasance and covenant defeasance
provisions of the Indenture to the Debt Securities of the series;
(21) If the Debt Securities of such series are to be issuable in definitive
form (whether upon original issue or upon exchange of a temporary Security of
such series) only upon receipt of certain certificates or other documents or
satisfaction of other conditions, then the form and/or terms of such
certificates, documents or conditions;
(22) The obligation, if any, of the Company to permit the conversion of the
Debt Securities of such series into Common Stock or Preferred Stock, as the case
may be, and the terms and conditions upon which such conversion shall be
effected (including, without limitation, the initial conversion price or rate,
the conversion period, any adjustment of the applicable conversion price and any
requirements relative to the reservation of such shares for purposes of
conversion); and
(23) Any other terms of the series (which terms shall not be inconsistent with
the provisions of the Indenture under which the Debt Securities are issued).
If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof ("Original Issue Discount Securities"). In
such cases, all material U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
Except as may be set forth in any Prospectus Supplement, the Debt Securities
will not contain any provisions that would limit the ability of the Company to
incur indebtedness or that would afford holders of Debt Securities protection in
the event of a highly leveraged or similar transaction involving the Company or
in the event of a change of control. Restrictions on ownership and transfers of
the Common Stock and Preferred Stock are designed to preserve its status as a
REIT and, therefore, may act to prevent or hinder a change of control. See
"Restrictions on Transfers of Capital Stock." Reference is made to the
applicable Prospectus Supplement for information with respect to any deletions
from, modifications of, or additions to, the events of default or covenants of
the Company that are described below, including any addition of a covenant or
other provision providing event risk or similar protection.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof. Where Debt Securities of any series are issued in
bearer form, the special restrictions and considerations, including special
offering restrictions and special federal income tax considerations, applicable
to any such Debt Securities and to payment on and transfer and exchange of such
Debt Securities will be described in the applicable Prospectus Supplement.
Bearer Debt Securities will be transferable by delivery.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and interest
on any series of Debt Securities will be payable at the corporate trust office
of the applicable Trustee, the address of which will be stated in the applicable
Prospectus Supplement; provided that, at the option of the Company, payment of
interest may be made by check mailed to the address of the person entitled
thereto as it appears in the applicable register for such Debt Securities or by
wire transfer of funds to such person at an account maintained within the United
States.
Any interest not punctually paid or duly provided for on any Interest Payment
Date with respect to a Debt Security in registered form ("Defaulted Interest")
will forthwith cease to be payable to the holder on the applicable Regular
Record Date and may either be paid to the Person in whose name such Debt
Security is registered at the close of business on a special record date (the
"Special Record Date") for the payment of such Defaulted Interest to be fixed by
the Trustee, in which case notice thereof shall be given to the holder of such
Debt Security not less than 10 days prior to such Special Record Date, or may be
paid at any time in any other lawful manner, all as more completely described in
the applicable Indenture.
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt Securities
at the corporate trust office of the applicable Trustee or at the office of any
transfer agent designated by the Company for such purpose. In addition, subject
to certain limitations imposed upon Debt Securities issued
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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 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 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
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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, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any subsidiary or upon the income, profits or property of the
Company or any subsidiary and (ii) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or any subsidiary; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the following events are "Events of Default" with
respect to any series of Debt Securities issued thereunder: (a) default in the
payment of any interest on any Debt Security of such series when such interest
becomes due and payable that continues for a period of 30 days; (b) default in
the payment of the principal of (or premium or Make-Whole Amount, if any, on)
any Debt Security of such series when due and payable; (c) default in making any
sinking fund payment as required for any Debt Security of such series; (d)
default in the performance, or breach, of any other covenant or warranty of the
Company in the applicable Indenture with respect to the Debt Securities of such
series and continuance of such default or breach for a period of 60 days after
written notice as provided in the Indenture; (e) default under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company (or by any Subsidiary, the repayment of which the
Company has guaranteed or for which the Company is directly responsible or
liable as obligor or guarantor), having an aggregate principal amount
outstanding of at least $25,000,000, whether such indebtedness now exists or
shall hereafter be created, which default shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, without such indebtedness
having been discharged, or such acceleration having been rescinded or annulled,
within a period of 30 days after written notice to the Company as provided in
the Indenture; (f) certain events of bankruptcy, insolvency or reorganization,
or court appointment of a receiver, liquidator or trustee of the Company or any
Significant Subsidiary; and (g) any other event of default provided with respect
to a particular series of Debt Securities. The term "Significant Subsidiary" has
the meaning ascribed to such term in Regulation S-X promulgated under the
Securities Act.
If an Event of Default under any Indenture with respect to Debt Securities of
any series at the time outstanding occurs and is continuing, then in every such
case the applicable Trustee or the holders of not less than 25% in principal
amount of the Debt Securities of that series will have the right to declare the
principal amount (or, if the Debt Securities of that series are Original Issue
Discount Securities or indexed securities, such portion of the principal amount
as may be specified in the terms thereof) of, and premium or Make-Whole Amount,
if any, on, all the Debt Securities of that series to be due and payable
immediately by written notice thereof to the Company (and to the applicable
Trustee if given by the holders). However, at any time after such a declaration
of acceleration with respect to Debt Securities of such series has been made,
but before a judgment or decree for payment of the money due has been obtained
by the applicable Trustee, the holders of not less than a majority in principal
amount of outstanding Debt Securities of such series may rescind and annul such
declaration and its consequences if (a) the Company shall have deposited with
the applicable Trustee all required payments of the principal of (and premium or
Make-Whole Amount, if any) and interest on the Debt Securities of such series,
plus certain fees, expenses, disbursements and advances of the applicable
Trustee and (b) all Events of Default, other than the non-payment of accelerated
principal (or 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
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principal of (or premium or Make-Whole Amount, if any) or interest on any Debt
Security of such series or in the payment of any sinking fund installment in
respect of any Debt Security of such series) if specified responsible officers
of such Trustee consider such withholding to be in the interest of such holders.
The Indentures will provide that no holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to such
Indenture or for any remedy thereunder, except in the case of failure of the
applicable Trustee, for 60 days, to act after it has received a written request
to institute proceedings in respect of an Event of Default from the holders of
not less than 25% in principal amount of the outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it. This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and premium
or Make-Whole Amount, if any) and interest on such Debt Securities at the
respective due dates or redemption dates thereof.
The Indentures will provide that, subject to provisions in each Indenture
relating to its duties in case of default, a Trustee will be under no obligation
to exercise any of its rights or powers under an Indenture at the request or
direction of any holders of any series of Debt Securities then outstanding under
such Indenture, unless such holders shall have offered to the Trustee thereunder
reasonable security or indemnity. The holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under an Indenture, as the case may be) shall
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the applicable Trustee, or of exercising any trust
or power conferred upon such Trustee. However, a Trustee may refuse to follow
any direction which is in conflict with any law or the applicable Indenture,
which may involve such Trustee in personal liability or which may be unduly
prejudicial to the holders of Debt Securities of such series not joining
therein.
Within 120 days after the close of each fiscal year, the Company will be
required to deliver to each Trustee a certificate, signed by one of several
specified officers of the Company, stating whether or not such officer has
knowledge of any default under the applicable Indenture and, if so, specifying
each such default and the nature and status thereof.
MODIFICATION OF THE INDENTURES
Modifications and amendments of an Indenture will be permitted to be made only
with the consent of the holders of not less than a majority in principal amount
of all outstanding Debt Securities issued under such Indenture affected by such
modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the holder of each such Debt Security
affected thereby, (a) change the stated maturity of the principal of, or any
installment of interest (or premium or Make-Whole Amount, if any) on, any such
Debt Security; (b) reduce the principal amount of, or the rate or amount of
interest on, or any premium or Make-Whole Amount payable on redemption of, any
such Debt Security, or reduce the amount of principal of an Original Issue
Discount Security that would be due and payable upon declaration of acceleration
of the maturity thereof or would be provable in bankruptcy, or adversely affect
any right of repayment of the holder of any such Debt Security; (c) change the
place of payment, or the coin or currency, for payment of principal of, premium
or Make-Whole Amount, if any, or interest on any such Debt Security; (d) impair
the right to institute suit for the enforcement of any payment on or with
respect to any such Debt Security; (e) reduce the above-stated percentage of
outstanding Debt Securities of any series necessary to modify or amend the
applicable Indenture, to waive compliance with certain provisions thereof or
certain defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the applicable Indenture; (f) change the currency or
currency unit in which any Debt Security or any premium or interest thereon is
payable; (g) in the case of the Subordinated Indenture, modify the subordination
provisions thereof in a manner adverse to the holders of Subordinated Debt
Securities of any series then outstanding; or (h) modify any of the foregoing
provisions or any of the provisions relating to the waiver of certain past
defaults or certain covenants, except to increase the required percentage to
effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the holder of such Debt Security.
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all holders of Debt Securities
of that series, waive, insofar as that series is concerned, compliance by the
Company with certain restrictive covenants of the applicable Indenture.
Modifications and amendments of an Indenture will be permitted to be made by
the Company and the respective Trustee thereunder without the consent of any
holder of Debt Securities for any of the following purposes: (a) to evidence the
succession of another person to the Company as obligor under such Indenture; (b)
to add to the covenants of the Company for the benefit of the holders of all or
any series of Debt Securities or to surrender any right or power conferred upon
the Company in such Indenture; (c) to add events of default for the benefit of
the holders of all or any series of Debt Securities; (d) to add or change any
provisions of an Indenture to facilitate the issuance of, or to liberalize
certain terms of, Debt Securities in bearer form, or to permit or facilitate
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the issuance of Debt Securities in uncertificated form, provided that such
action shall not adversely affect the interests of the holders of the Debt
Securities of any series in any material respect; (e) to change or eliminate any
provisions of an Indenture, provided that any such change or elimination shall
become effective only when there are no Debt Securities outstanding of any
series created prior thereto which are entitled to the benefit of such
provision; (f) to secure the Debt Securities; (g) to establish the form or terms
of Debt Securities of any series; (h) to provide for the acceptance of
appointment by a successor Trustee or facilitate the administration of the
trusts under an Indenture by more than one Trustee; (i) to cure any ambiguity,
defect or inconsistency in an Indenture, provided that such action shall not
adversely affect the interests of holders of Debt Securities of any series
issued under such Indenture; or (j) to supplement any of the provisions of an
Indenture to the extent necessary to permit or facilitate defeasance and
discharge of any series of such Debt Securities, provided that such action shall
not adversely affect the interests of the holders of the outstanding Debt
Securities of any series.
The Indentures will provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (a) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (b) the principal amount of
any Debt Security denominated in a foreign currency that shall be deemed
Outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (a) above), (c) the
principal amount of an indexed security that shall be deemed outstanding shall
be the principal face amount of such indexed security at original issuance,
unless otherwise provided with respect to such indexed security pursuant such
Indenture, and (d) Debt Securities owned by the Company or any other obligor
upon the Debt Securities or any affiliate of the Company or of such other
obligor shall be disregarded.
The Indentures will contain provisions for convening meetings of the holders
of Debt Securities of a series. A meeting will be permitted to be called at any
time by the applicable Trustee, and also, upon request, by the Company or the
holders of at least 25% in principal amount of the outstanding Debt Securities
of such series, in any such case upon notice given as provided in such
Indenture. Except for any consent that must be given by the holder of each Debt
Security affected by certain modifications and amendments of an Indenture, any
resolution presented at a meeting or adjourned meeting duly reconvened at which
a quorum is present may be adopted by the affirmative vote of the holders of a
majority in principal amount of the outstanding Debt Securities of that series;
provided, however, that, except as referred to above, any resolution with
respect to any request, demand, authorization, direction, notice, consent,
waiver or other action that may be made, given or taken by the holders of a
specified percentage, which is less than a majority, in principal amount of the
outstanding Debt Securities of a series may be adopted at a meeting or adjourned
meeting or adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the holders of such specified percentage in principal amount
of the outstanding Debt Securities of that series. Any resolution passed or
decision taken at any meeting of holders of Debt Securities of any series duly
held in accordance with an Indenture will be binding on all holders of Debt
Securities of that series. The quorum at any meeting called to adopt a
resolution, and at any reconvened meeting, will be persons holding or
representing a majority in principal amount of the outstanding Debt Securities
of a series; provided, however, that if any action is to be taken at such
meeting with respect to a consent or waiver which may be given by the holders of
not less than a specified percentage in principal amount of the outstanding Debt
Securities of a series, the persons holding or representing such specified
percentage in principal amount of the outstanding Debt Securities of such series
will constitute a quorum.
Notwithstanding the foregoing provisions, the Indentures will provide that if
any action is to be taken at a meeting of holders of Debt Securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver and other action that such Indenture expressly provides may be
made, given or taken by the holders of a specified percentage in principal
amount of all outstanding Debt Securities affected thereby, or of the holders of
such series and one or more additional series: (a) there shall be no minimum
quorum requirement for such meeting and (b) the principal amount of the
outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under such Indenture.
CERTAIN DEFINITIONS
"Indebtedness" means, with respect to any person, (a) any obligation of such
person to pay the principal of, premium, if any, interest on (including interest
accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to such person, whether or not a claim for such post-
petition interest is allowed in such proceeding), penalties, reimbursement or
indemnification amounts, fees, expenses or other amounts relating to any
indebtedness of such person (i) for borrowed money (whether or not the recourse
of the lender is to the whole of the assets of such person or only to a portion
thereof), (ii) evidenced by notes, debentures
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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: (x) Indebtedness of or amounts owed by the
Company for compensation to employees, or for goods, materials and services
purchased in the ordinary course of business or (y) Indebtedness of the Company
to a subsidiary of the Company.
SUBORDINATION
Unless otherwise provided in the applicable Prospectus Supplement,
Subordinated Debt Securities will be subject to the following subordination
provisions.
The payment of the principal of, interest on, or any other amounts due on, the
Subordinated Debt Securities will be subordinated in right of payment to the
prior payment in cash in full of all Senior Indebtedness of the Company. No
payment on account of the principal of, redemption of, interest on or any other
amounts due on the Subordinated Debt Securities and no redemption, purchase or
other acquisition of the Subordinated Debt Securities may be made, unless (a)
full payment in cash of amounts then due for principal, sinking funds, interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company, whether or not a claim
for such post-petition interest is allowed in such proceeding), penalties,
reimbursement or indemnification amounts, fees and expenses, and of all other
amounts then due on all Senior Indebtedness shall have been made or duly
provided for pursuant to the terms of the instrument governing such Senior
Indebtedness, and (b) at the time of, or immediately after giving effect to, any
such payment, redemption, purchase or other acquisition, there shall not exist
under any Senior Indebtedness or any agreement pursuant to which any Senior
Indebtedness has been issued, any default which shall not have been cured or
waived and which shall have resulted in the full amount of such Senior
Indebtedness being declared due and payable and not rescinded. In addition, the
Subordinated Indenture provides that, if holders of any Senior Indebtedness
notify the Company and the Subordinated Trustee that a default has occurred
giving the holders of such Senior Indebtedness the right to accelerate the
maturity thereof, no payment on account of principal, sinking fund or other
redemption, interest or any other amounts due on the Subordinated Debt
Securities and no purchase, redemption or other acquisition of the Subordinated
Debt Securities will be made for the period (the "Payment Blockage Period")
commencing on the date such notice is received and ending on the earlier of (i)
the date on which such event of default shall have been cured or waived or (ii)
180 days from the date such notice is received. Notwithstanding the foregoing,
only one payment blockage notice with respect to the same event of default or
any other events of default existing and known to the person giving such notice
at the time of such notice on the same issue of Senior Indebtedness may be given
during any period of 360 consecutive days. No new Payment Blockage Period may be
commenced by the holders of Senior Indebtedness during any period of 360
consecutive days unless all events of default which triggered the preceding
Payment Blockage Period have been cured or waived. Upon any distribution of its
assets in connection with any dissolution, winding-up, liquidation or
reorganization of the Company, all Senior Indebtedness must be paid in full in
cash before the holders of the Subordinated Debt Securities are entitled to any
payments whatsoever.
The Subordinated Indenture does not restrict the amount of Senior Indebtedness
or other indebtedness of the Company or any Subsidiary. As a result of these
subordination provisions, in the event of the Company's insolvency, holders of
the Subordinated Debt Securities may recover ratably less than general creditors
of the Company.
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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 released
from certain obligations with respect to such Debt Securities under the
applicable Indenture (including the restrictions described under "--Certain
Covenants") or, if provided in the applicable Prospectus Supplement, its
obligations with respect to any other covenant, and any omission to comply with
such obligations shall not constitute an Event of Default with respect to such
Debt Securities ("covenant defeasance"), in either case upon the irrevocable
deposit by the Company with the applicable Trustee, in trust, of an amount, in
such currency or currencies, currency unit or units or composite currency or
currencies in which such Debt Securities are payable at stated maturity, or
Government Obligations (as defined below), or both, applicable to such Debt
Securities, which through the scheduled payment of principal and interest in
accordance with their terms will provide money in an amount sufficient to pay
the principal of (and premium or Make-Whole Amount, if any) and interest on such
Debt Securities, and any mandatory sinking fund or analogous payments thereon,
on the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among other things,
the Company has delivered to the applicable Trustee an opinion of counsel (as
specified in the applicable Indenture) to the effect that the holders of such
Debt Securities will not recognize income, gain or loss for U.S. federal income
tax purposes as a result of such defeasance or covenant defeasance and will be
subject to U.S. federal income tax on the same amounts, in the same manner and
at the same times as would have been the case if such defeasance or covenant
defeasance had not occurred, and such opinion of counsel, in the case of
defeasance, will be required to refer to and be based upon a ruling received
from or published by the Internal Revenue Service or a change in applicable
United States federal income tax law occurring after the date of the Indenture.
In the event of such defeasance, the holders of such Debt Securities would
thereafter be able to look only to such trust fund for payment of principal (and
premium or Make-Whole Amount, if any) and interest.
"Government Obligations" means securities that are (a) direct obligations of
the United States of America or the government which issued the foreign currency
in which the Debt Securities of a particular series are payable, for the payment
of which its full faith and credit is pledged or (b) obligations of a person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America or such government which issued the foreign currency in
which the Debt Securities of such series are payable, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America or such other government, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
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
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discharged and satisfied through the payment of the principal of (and premium or
Make-Whole Amount, if any) and interest on such Debt Security as they become due
out of the proceeds yielded by converting the amount so deposited in respect of
such Debt Security into the currency, currency unit or composite currency in
which such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of (i) a currency, currency unit or composite
currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public
institutions of or within the international banking community, (ii) the ECU both
within the European Monetary System and for the settlement of transactions by
public institutions of or within the European Communities or (iii) any currency
unit or composite currency other than the ECU for the purposes for which it was
established. Unless otherwise provided in the applicable Prospectus Supplement,
all payments of principal of (and premium or Make-Whole Amount, if any) and
interest on any Debt Security that is payable in a foreign currency that ceases
to be used by its government of issuance shall be made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any Debt
Securities and such Debt Securities are declared due and payable because of the
occurrence of any Event of Default other than the Event of Default described in
clause (d) under "--Events of Default, Notice and Waiver" with respect to
specified sections of an Indenture (which sections would no longer be applicable
to such Debt Securities) or described in clause (g) under "--Events of Default,
Notice and Waiver" with respect to any other covenant as to which there has been
covenant defeasance, the amount in such currency, currency unit or composite
currency in which such Debt Securities are payable, and Government Obligations
on deposit with the applicable Trustee, will be sufficient to pay amounts due on
such Debt Securities at the time of their stated maturity but may not be
sufficient to pay amounts due on such Debt Securities at the time of the
acceleration resulting from such Event of Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into shares of Common Stock or
Preferred Stock, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option of
the holders or the Company, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of such
Debt Securities and any restrictions on conversion, including restrictions
directed at maintaining the Company's REIT status.
BOOK-ENTRY SYSTEM
The Debt Securities of a series may be issued in whole or in part in the form
of one or more global securities ("Global Securities") that will be deposited
with, or on behalf of, a depository (the "Depository") identified in the
Prospectus Supplement relating to such series. Global Securities, if any, issued
in the United States are expected to be deposited with The Depository Trust
Company ("DTC"), as Depository. Global Securities may be issued in fully
registered form and may be issued in either temporary or permanent form. Unless
and until it is exchanged in whole or in part for the individual Debt Securities
represented thereby, a Global Security may not be transferred except as a whole
by the Depository for such Global Security to a nominee of such Depository or by
a nominee of such Depository to such Depository or another nominee of 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, any premium or Make-Whole Amount and any interest on
individual Debt Securities represented by a Global Security registered in the
name of a Depository or its nominee will be made to or at the direction of the
Depository or its nominee, as the case may be, as the registered owner of the
Global Security under the applicable Indenture. Under the terms of the
applicable Indenture, the Company and the Trustee may treat the persons in whose
name Debt Securities, including a Global Security, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Debt Securities (including
principal, premium or Make-Whole Amount, if any, and interest). The Company
believes, however, that it is currently the policy of DTC to immediately credit
the accounts of relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant Global Security as shown on the records of DTC or its nominee. The
Company also expects that payments by Participants to owners of beneficial
interests in such Global Security held through such Participants will be
governed by standing instructions and customary practices, as is the case with
securities held for the account of customers in bearer form or registered in
street name, and will be the responsibility of such Participants. Redemption
notices with respect to any Debt Securities represented by a Global Security
will be sent to the Depository or its nominee. If less than all of the Debt
Securities of any series are to be redeemed, the Company expects the Depository
to determine the amount of the interest of each Participant in such Debt
Securities to be redeemed to be determined by lot. None of the Company, the
Trustee, any Paying Agent or the Security Registrar for such Debt Securities
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Security for such Debt Securities or for maintaining any records with respect
thereto.
Neither the Company nor the Trustee will be liable for any delay by the
holders of a Global Security or the Depository in identifying the beneficial
owners of Debt Securities and the Company and the Trustee may conclusively rely
on, and will be protected in relying on, instructions from the holder of a
Global Security or the Depository for all purposes. The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
If a Depository for any Debt Securities is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not appointed
by the Company within 90 days, the Company will issue individual Debt Securities
in exchange for the Global Security representing such Debt Securities. In
addition, the Company may at any time and in its sole discretion, subject to any
limitations described in the Prospectus Supplement relating to such Debt
Securities, determine not to have any of such Debt Securities represented by one
or more Global Securities and in such event will issue individual Debt
Securities in exchange for the Global Security or Securities representing such
Debt Securities. Individual Debt Securities so issued will be issued in
denominations of $1,000 and integral multiples thereof.
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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.
DESCRIPTION OF PREFERRED STOCK
The description of the Company's preferred stock, par value $.01 per share
("Preferred Stock"), set forth below does not purport to be complete and is
qualified in its entirety by reference to the Company's Amended and Restated
Articles of Incorporation, 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") and Amended and Restated Bylaws (the "Bylaws").
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 10
million shares of Preferred Stock, 3,300,000 shares of which were issued and
outstanding as of December 27, 1996. Shares of Preferred Stock may be issued
from time to time, in one or more series, as authorized by the Board of
Directors of the Company. Prior to issuance of shares of each series, the Board
of Directors is required by the Maryland General Corporation Law ("MGCL") and
the Company's Articles of Incorporation to fix for each series, subject to the
provisions of the Company's Articles of Incorporation regarding excess stock,
$.01 par value per share ("Excess Stock"), the terms, preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption, as are
permitted by Maryland law. The Preferred Stock will, when issued, be fully paid
and nonassessable and will have no preemptive rights. The Board of Directors
could authorize the issuance of shares of Preferred Stock with terms and
conditions that could have the effect of discouraging a takeover or other
transaction that holders of Common Stock might believe to be in their best
interests or in which holders of some, or a majority, of the shares of Common
Stock might receive a premium for their shares over the then market price of
such shares of Common Stock.
TERMS
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Articles of Incorporation and Bylaws and
any applicable amendment to the Articles of Incorporation designating terms of a
series of Preferred Stock (a "Designating Amendment").
Reference is made to the Prospectus Supplement relating to the Preferred Stock
offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
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(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall accumulate,
if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred Stock;
(7) The provision for redemption, if applicable, of such Preferred Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock, including the conversion price
(or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(11) A discussion of federal income tax considerations applicable to such
Preferred Stock;
(12) The relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of the
affairs of the Company;
(13) Any limitations on issuance of any series of Preferred Stock ranking
senior to or on a parity with such series of Preferred Stock as to dividend
rights and rights upon liquidation, dissolution or winding up of the affairs
of the Company; and
(14) Any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of the
Company as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred Stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Company, rank (i) senior to all classes or series of Common
Stock of the Company, and to all equity securities ranking junior to such
Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding up of the Company; (ii) on a parity with all equity
securities issued by the Company the terms of which specifically provide that
such equity securities rank on a parity with the Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up of the
Company; and (iii) junior to all equity securities issued by the Company the
terms of which specifically provide that such equity securities rank senior to
the Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding up of the Company. The term "equity securities" does not
include convertible debt securities.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of assets
of the Company legally available for payment, cash dividends at such rates and
on such dates as will be set forth in the applicable Prospectus Supplement. Each
such dividend shall be payable to holders of record as they appear on the share
transfer books of the Company on such record dates as shall be fixed by the
Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or non-
cumulative, as provided in the applicable Prospectus Supplement. Dividends, if
cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are non-cumulative, then the holders of such
series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be declared
or paid or set apart for payment on any capital stock of the Company of any
other series ranking, as to dividends, on a parity with or junior to the
Preferred Stock of such series for any
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period unless (i) if such series of Preferred Stock has a cumulative dividend,
full cumulative dividends have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof is set apart for such
payment on the Preferred Stock of such series for all past dividend periods and
the then current dividend period or (ii) if such series of Preferred Stock does
not have a cumulative dividend, full dividends for the then current dividend
period have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof is set apart for such payment on the
Preferred Stock of such series. When dividends are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon Preferred Stock of
any series and the shares of any other series of Preferred Stock ranking on a
parity as to dividends with the Preferred Stock of such series, all dividends
declared upon Preferred Stock of such series and any other series of Preferred
Stock ranking on a parity as to dividends with such Preferred Stock shall be
declared pro rata so that the amount of dividends declared per share of
Preferred Stock of such series and such other series of Preferred Stock shall in
all cases bear to each other the same ratio that accrued dividends per share on
the Preferred Stock of such series (which shall not include any accumulation in
respect of unpaid dividends for prior dividend periods if such Preferred Stock
does not have a cumulative dividend) and such other series of Preferred Stock
bear to each other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on Preferred Stock of
such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if such
series of Preferred Stock has a cumulative dividend, full cumulative dividends
on the Preferred Stock of such series have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof is
set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other shares of
capital stock ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Preferred Stock of such series as to dividends or upon
liquidation, nor shall any shares of Common Stock, or any other shares of
capital stock of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to dividends or upon liquidation be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by the
Company (except by conversion into or exchange for other capital stock of the
Company ranking junior to the Preferred Stock of such series as to dividends and
upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall first
be credited against the earliest accrued but unpaid dividend due with respect to
shares of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of shares of capital stock of the Company, the terms of
such Preferred Stock may provide that, if no such shares of capital stock shall
have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Stock shall automatically and mandatorily be converted into the
applicable shares of capital stock of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Stock has a
cumulative dividend, full cumulative dividends on all shares of such series of
Preferred Stock shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment for
all past dividend periods and the then current dividend period, and (ii) if a
series of Preferred Stock does not have a cumulative dividend, full dividends on
all shares of the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period, no shares of such
series of Preferred Stock shall be redeemed unless all outstanding shares of
Preferred Stock of such series are simultaneously redeemed; provided, however,
that the foregoing shall not prevent the purchase or acquisition of Preferred
Stock of such series to preserve the REIT status of the Company or pursuant to a
purchase or exchange offer
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made on the same terms to holders of all outstanding shares of Preferred Stock
of such series. In addition, unless (i) if such series of Preferred Stock has a
cumulative dividend, full cumulative dividends on all outstanding shares of such
series of Preferred Stock have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period, and (ii) if
such series of Preferred Stock does not have a cumulative dividend, full
dividends on the Preferred stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
set apart for payment for the then current dividend period, the Company shall
not purchase or otherwise acquire directly or indirectly any shares of Preferred
Stock of such series (except by conversion into or exchange for capital shares
of the Company ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation); provided, however, that the foregoing shall not
prevent the purchase or acquisition of shares of Preferred Stock of such series
to preserve the REIT status of the Company or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding shares of Preferred
Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any series
are to be redeemed, the number of shares to be redeemed will be determined by
the Company and such shares may be redeemed pro rata from the holders of record
of such shares in proportion to the number of such shares held or for which
redemption is requested by such holder (with adjustments to avoid redemption of
fractional shares) or by any other equitable manner determined by the Company.
Notice of redemption will be mailed at least 30 days but not more than 60 days
before the redemption date to each holder of record of Preferred Stock of any
series to be redeemed at the address shown on the stock transfer books of the
Company. Each notice shall state: (i) the redemption date; (ii) the number of
shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (v) that dividends on the
shares to be redeemed will cease to accrue on such redemption date; and (vi) the
date upon which the holder's conversion rights, if any, as to such shares shall
terminate. If fewer than all the shares of Preferred Stock of any series are to
be redeemed, the notice mailed to each such holder thereof shall also specify
the number of shares of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Stock, and all rights of the holders of such shares will terminate,
except the right to receive the redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of capital
stock of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to stockholders,
liquidating distributions in the amount of the liquidation preference per share,
if any, set forth in the applicable Prospectus Supplement, plus an amount equal
to all dividends accrued and unpaid thereon (which shall not include any
accumulation in respect of unpaid noncumulative dividends for prior dividend
periods). After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Preferred Stock will have no right or
claim to any of the remaining assets of the Company. In the event that, upon any
such voluntary or involuntary liquidation, dissolution or winding up, the
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding shares of Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
capital stock of the Company ranking on a parity with the Preferred Stock in the
distribution of assets, then the holders of the Preferred Stock and all other
such classes or series of capital stock shall share ratably in any such
distribution of assets in proportion to the full liquidating distributions to
which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed among
the holders of any other classes or series of capital stock ranking junior to
the Preferred Stock upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Company with or into any other corporation, trust or entity, or the sale,
lease or conveyance of all or substantially all of the property or business of
the Company, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Company.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as set
forth below or as otherwise from time to time required by law or as indicated in
the applicable Prospectus Supplement.
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Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least two-thirds of
the shares of such series of Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to such
series of Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or reclassify
any authorized capital stock of the Company into such shares, or create,
authorize or issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or (ii) amend, alter or repeal the provisions
of the Company's Articles of Incorporation or the Designating Amendment for such
series of Preferred Stock, whether by merger, consolidation or otherwise (an
"Event"), so as to materially and adversely affect any right, preference,
privilege or voting power of such series of Preferred Stock or the holders
thereof; provided, however, with respect to the occurrence of any of the Events
set forth in (ii) above, so long as the Preferred Stock remains outstanding with
the terms thereof materially unchanged, taking into account that upon the
occurrence of an Event the Company may not be the surviving entity, the
occurrence of any such Event shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting power of holders of
Preferred Stock, and provided further that (x) any increase in the amount of the
authorized Preferred Stock or the creation or issuance of any other series of
Preferred Stock, or (y) any increase in the amount of authorized shares of such
series or any other series of Preferred Stock, in each case ranking on a parity
with or junior to the Preferred Stock of such series with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or winding
up, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption and sufficient funds shall have been
deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock is
convertible into Common Stock will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include the number of shares of
Common Stock into which the shares of Preferred Stock are convertible, the
conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such series of Preferred Stock.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Internal Revenue Code of 1986,
as amended (the "Code"), not more than 50% in value of its outstanding capital
stock may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code to include certain entities) during the last half of a
taxable year. To assist the Company in meeting this requirement, the Company may
take certain actions to limit the beneficial ownership, directly or indirectly,
by a single person of the Company's outstanding equity securities, including any
Preferred Stock of the Company. Therefore, the Designating Amendment for each
series of Preferred Stock may contain provisions restricting the ownership and
transfer of the Preferred Stock. The applicable Prospectus Supplement will
specify any additional ownership limitation relating to a series of Preferred
Stock. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Preferred Stock will be set forth in
the applicable Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
The description of the Company's Common Stock set forth below does not purport
to be complete and is qualified in its entirety by reference to the Company's
Articles of Incorporation and Bylaws.
GENERAL
Under the Articles of Incorporation, the Company has authority to issue 40
million shares of Common Stock, par value $.01 per share. Under Maryland law,
stockholders generally are not responsible for the corporation's debts or
obligations. At December 27, 1996, the Company had outstanding 13,966,667 shares
of Common Stock.
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TERMS
Subject to the preferential rights of any other shares or series of stock and
to the provisions of the Company's Articles of Incorporation regarding Excess
Stock, holders of shares of Common Stock will be entitled to receive dividends
on shares of Common Stock if, as and when authorized and declared by the Board
of Directors of the Company out of assets legally available therefor and to
share ratably in the assets of the Company legally available for distribution to
its stockholders in the event of its liquidation, dissolution or winding-up
after payment of, or adequate provision for, all known debts and liabilities of
the Company.
Subject to the provisions of the Company's Articles of Incorporation regarding
Excess Stock, each outstanding share of Common Stock entitles the holder to one
vote on all matters submitted to a vote of stockholders, including the election
of Directors and, except as otherwise required by law or except as provided with
respect to any other class or series of stock, the holders of Common Stock will
possess the exclusive voting power. There is no cumulative voting in the
election of Directors, which means that the holders of a majority of the
outstanding shares of Common Stock can elect all of the Directors then standing
for election, and the holders of the remaining shares of Common Stock will not
be able to elect any Directors.
Holders of Common Stock have no conversion, sinking fund or redemption rights,
or preemptive rights to subscribe for any securities of the Company.
The Company intends to furnish its stockholders with annual reports containing
audited consolidated financial statements and an opinion thereon expressed by an
independent public accounting firm and quarterly reports for the first three
quarters of each fiscal year containing unaudited financial information.
Subject to the provisions of the Company's Articles of Incorporation regarding
Excess Stock, all shares of Common Stock will have equal dividend, distribution,
liquidation and other rights, and will have no preference, appraisal or exchange
rights.
Pursuant to the MGCL, a corporation generally cannot dissolve, amend its
Articles of Incorporation, merge, sell all or substantially all of its assets,
engage in a share exchange or engage in similar transactions outside the
ordinary course of business unless approved by the affirmative vote of
stockholders holding at least two-thirds of the shares entitled to vote on the
matter unless a lesser percentage (but not less than a majority of all of the
votes to be cast on the matter) is set forth in the corporation's Articles of
Incorporation. The Company's Articles of Incorporation do not provide for a
lesser percentage in such situations.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly, by
five or fewer individuals (as defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities. See "Restrictions on Transfers of Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Common Stock will be set forth in the
applicable Prospectus Supplement.
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
For the Company to qualify as a REIT under the Code, among other things, not
more than 50% in value of its outstanding capital stock may be owned, directly
or indirectly, by five or fewer individuals (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 Articles of Incorporation, subject to certain
exceptions, provide that no holder may own, or be deemed to own by virtue of the
attribution provisions of the Code, more than 9.3% (the "Ownership Limit") of
the Company's capital stock. The Board of Directors may waive the Ownership
Limit if evidence satisfactory to the Board of Directors and the Company's tax
counsel is presented that the changes in ownership will not then or in the
future jeopardize the Company's status as a REIT. Any transfer of capital stock
or any security convertible into capital stock that would create a direct or
indirect ownership of capital stock in excess of the Ownership Limit or that
would result in the disqualification of the Company as a REIT, including any
transfer that results in the capital stock being owned by fewer than 100 persons
or results in the Company being "closely
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held" within the meaning of Section 856(h) of the Code, shall be null and void,
and the intended transferee will acquire no rights to the capital stock. The
foregoing restrictions on transferability and ownership will not apply if the
Board of Directors determines that it is no longer in the best interests of the
Company to attempt to qualify, or to continue to qualify, as a REIT.
Capital stock owned, or deemed to be owned, or transferred to a stockholder in
excess of the Ownership Limit will automatically be exchanged for shares of
Excess Stock that will be transferred, by operation of law, to the Company as
trustee of a trust for the exclusive benefit of the transferees to whom such
capital stock may be ultimately transferred without violating the Ownership
Limit. While the Excess Stock is held in trust, it will not be entitled to vote,
it will not be considered for purposes of any stockholder vote or the
determination of a quorum for such vote and, except upon liquidation, it will
not be entitled to participate in dividends or other distributions. Any dividend
or distribution paid to a proposed transferee of Excess Stock prior to the
discovery by the Company that capital stock has been transferred in violation of
the provisions of the Company's Articles of Incorporation shall be repaid to the
Company upon demand. The Excess Stock is not treasury stock, but rather
constitutes a separate class of issued and outstanding stock of the Company. The
original transferee-stockholder may, at any time the Excess Stock is held by the
Company in trust, transfer the interest in the trust representing the Excess
Stock to any individual whose ownership of the capital stock exchanged into such
Excess Stock would be permitted under the Ownership Limit, at a price not in
excess of the price paid by the original transferee-stockholder for the capital
stock that was exchanged in Excess Stock. Immediately upon the transfer to the
permitted transferee, the Excess Stock will automatically be exchanged for
capital stock of the class from which it was converted. If the foregoing
transfer restrictions are determined to be void or invalid by virtue of any
legal decision, statute, rule or regulation, then the intended transferee of any
Excess Stock may be deemed, at the option of the Company, to have acted as an
agent on behalf of the Company in acquiring the Excess Stock and to hold the
Excess Stock on behalf of the Company.
In addition to the foregoing transfer restrictions, the Company will have the
right, for a period of 90 days during the time any Excess Stock is held by the
Company in trust, to purchase all or any portion of the Excess Stock from the
original transferee-stockholder for the lesser of the price paid for the capital
stock by the original transferee-stockholder or the market price (as determined
in the manner set forth in the Articles of Incorporation) of the capital stock
on the date the Company exercises its option to purchase. The 90-day period
begins on the date on which the Company receives written notice of the transfer
or other event resulting in the exchange of capital stock for Excess Stock.
Each stockholder shall upon demand be required to disclose to the Company in
writing any information with respect to the direct, indirect and constructive
ownership of beneficial interests as the Board of Directors deems necessary to
comply with the provisions of the Code applicable to REITs, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.
This ownership limitation may have the effect of precluding acquisition of
control of the Company unless the Board of Directors determines that maintenance
of REIT status is no longer in the best interests of the Company.
FEDERAL INCOME TAX CONSIDERATIONS
The Company believes it has operated, and the Company intends to continue to
operate, in such manner as to qualify as a REIT under the Code, but no assurance
can be given that it will at all times so qualify.
The provisions of the Code pertaining to REITs are highly technical and
complex. The following is a brief and general summary of certain provisions that
currently govern the federal income tax treatment of the Company and its
stockholders. For the particular provisions that govern the federal income tax
treatment of the Company and its stockholders, reference is made to Sections 856
through 860 of the Code and the regulations thereunder. The following summary is
qualified in its entirety by such reference.
Under the Code, if certain requirements are met in a taxable year, a REIT
generally will not be subject to federal income tax with respect to income that
it distributes to its stockholders. If the Company fails to qualify during any
taxable year as a REIT, unless certain relief provisions are available, it will
be subject to tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates, which could have a material adverse
effect upon its stockholders.
In any year in which the Company qualifies to be taxed as a REIT,
distributions made to its stockholders out of current or accumulated earnings
and profits will be taxed to stockholders as ordinary income except that
distributions of net capital gains designated by the Company as capital gain
dividends will be taxed as long-term capital gain income to the stockholders. To
the extent that distributions exceed current or accumulated earnings and
profits, they will constitute a return of capital, rather than dividend or
21
<PAGE>
capital gain income, and will reduce the basis for the stockholder's Securities
with respect to which the distribution is paid or, to the extent that they
exceed such basis, will be taxed in the same manner as gain from the sale of
those Securities.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the Securities offered hereby and with
respect to the tax consequences arising under federal law and the laws of any
state, municipality or other taxing jurisdiction, including tax consequences
resulting from such investor's own tax characteristics. In particular, foreign
investors should consult their own tax advisors concerning the tax consequences
of an investment in the Company, including the possibility of United States
income tax withholding on Company distributions.
PLAN OF DISTRIBUTION
The Company may sell Securities to or through one or more underwriters or
dealers for public offering and sale by or through them, and may also sell
Securities directly to one or more institutional or other purchasers, through
agents or through any combination of these methods of sale. Any such
underwriter, dealer or agent involved in the offer and sale of Securities will
be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, or from time to time at market prices prevailing at the
time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may, from time to time, authorize
underwriters acting as the Company's agents to offer and sell the Securities
upon the terms and conditions as shall be set forth in any Prospectus
Supplement. In connection with the sale of Securities, underwriters may be
deemed to have received compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of Securities for whom they may act as agent. Underwriters may sell
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions (which may be changed from time to time) from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents in
connection with the offering of Securities, and any discounts, concessions or
commission allowed by underwriters to participating dealers, will be set forth
in an applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Securities may be deemed to be underwriting
discounts and commissions, under the Securities Act. Underwriters, dealers and
agents may be entitled, under agreements with the Company, to indemnification
against and contribution toward certain civil liabilities, including liabilities
under the Securities Act, and to reimbursement by the Company for certain
expenses.
Each series of Debt Securities or Preferred Stock will be a new issue with no
established trading market. The Company may elect to list any series of Debt
Securities or Preferred Stock on an exchange, but is not obligated to do so. It
is possible that one or more underwriters may make a market in a series of
Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of, or the trading market for, the Securities.
Underwriters, dealers and agents and their associates may engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers or other persons acting as the Company's agents to solicit
offers by certain institutions to purchase Debt Securities from the Company at
the public offering price set forth in such Prospectus Supplement pursuant to
delayed delivery contracts ("Contracts") providing for payment and delivery on
the date or dates stated in such Prospectus Supplement. Each Contract will be
for an amount no less than, and the aggregate principal amounts of Debt
Securities sold pursuant to Contracts shall be not less nor more than, the
respective amounts stated in the applicable Prospectus Supplement. Institutions
with whom Contracts, when authorized, may be made include commercial and savings
banks, insurance companies, pension funds, investment companies, educational and
charitable institutions and other institutions, but will in all cases be subject
to the approval of the Company. Contracts will not be subject to any conditions
except (i) the purchase by an institution of the Debt Securities covered by its
Contracts shall not at the time of delivery be prohibited under the laws of any
jurisdiction in the United States to which such institution is subject, and (ii)
if Debt Securities are being sold to underwriters, the Company shall have sold
to such underwriters the total principal amount of the Debt Securities less the
principal amount thereof covered by the Contracts. If in conjunction with the
sale of Debt Securities to institutions under Contracts, Debt Securities are
also being sold to the public, the consummation of the sale under the Contracts
shall occur simultaneously with the consummation of the sale to the public. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such Contracts.
22
<PAGE>
In order to comply with the securities laws of certain states and other
jurisdictions, if applicable, the Securities offered hereby will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states Securities may not be sold unless they have been
registered or qualified for sale in the applicable state or other jurisdiction
or an exemption from the registration or qualification requirement is available
and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Securities offered hereby may not
simultaneously engage in market making activities with respect to the Securities
for a period of two business days prior to the commencement of such
distribution.
LEGAL MATTERS
Certain legal matters, including the legality of the Securities, will be
passed upon for the Company by Goodwin, Procter & Hoar 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.
23
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No dealer, salesperson or other person has
been authorized to give any information or
to make any representations other than those
contained or incorporated by reference in
this Prospectus Supplement or the
accompanying Prospectus and, if given or
made, such other information or
representation must not be relied upon as
having been authorized by the Company or the
Underwriter. This Prospectus Supplement and
accompanying Prospectus do not constitute an
offer to sell, or a solicitation of an offer
to buy, to any person in any jurisdiction
where such an offer or solicitation would be
unlawful.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
PROSPECTUS SUPPLEMENT
Risk Factors........................... S-3
Price Range of Common Stock and
Distributions.......................... S-6
Use of Proceeds........................ S-7
Federal Income Tax Considerations...... S-7
Underwriting........................... S-8
Legal Matters.......................... S-8
PROSPECTUS
Available Information.................. 2
Incorporation of Certain Documents by
Reference.............................. 2
The Company............................ 3
Use of Proceeds........................ 3
Ratios of Earnings to Combined Fixed
Charges and Preferred Stock
Dividends.............................. 3
Description of Debt Securities......... 3
Description of Preferred Stock......... 15
Description of Common Stock............ 19
Restrictions on Transfers of Capital
Stock................................. 20
Federal Income Tax Considerations...... 21
Plan of Distribution................... 22
Legal Matters.......................... 23
Experts................................ 23
</TABLE>
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567,720 SHARES
TRINET CORPORATE REALTY
TRUST, INC.
COMMON STOCK
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PROSPECTUS SUPPLEMENT
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SMITH BARNEY INC.
SEPTEMBER 11, 1997
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