<PAGE>
Filed pursuant to Rule 424(b)(5)
Registration No. 333-19137
PROSPECTUS SUPPLEMENT
FEBRUARY 25, 1997
(TO PROSPECTUS DATED JANUARY 9, 1997)
[LOGO OF TRINET APPEARS HERE]
6,000,000 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 December 31, 1996, TriNet's portfolio consisted of 79
properties (the "Properties") located in 23 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 February 24, 1997, the reported last sale price of the Common
Stock on the NYSE was $33 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" ON PAGES S-9 TO S-
12 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.
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO THE DISCOUNTS AND TO THE
PUBLIC COMMISSIONS(1) COMPANY(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.............................. $33.625 $1.76 $31.865
Total(3)............................... $201,750,000 $10,560,000 $191,190,000
- --------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting" for indemnification arrangements with the Underwriters.
(2) Before deducting expenses payable by the Company estimated at
approximately $1,000,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an aggregate of 900,000 additional shares at the Price to the Public,
less Underwriting Discounts and Commissions, solely to cover over-
allotments, if any. If such option is exercised in full, the total Price
to the Public, Underwriting Discounts and Commissions and Proceeds to the
Company will be $232,012,500, $12,144,000 and $219,868,500, respectively.
See "Underwriting."
The shares of Common Stock offered hereby are offered by the several
Underwriters, subject to prior sale, when, as and if issued to and accepted by
them and subject to approval of certain legal matters by Cahill Gordon &
Reindel, counsel for the Underwriters. The Underwriters reserve 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 February 28, 1997.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SMITH BARNEY INC.
<PAGE>
TriNet Corporate Realty Trust, Inc.
Property and Office Locations
[map of United States showing property and office locations]
- --------------------------------------------------------------------------------
Portfolio Summary
Based on Annualized Rents in Effect
at December 31, 1996
Portfolio by Location* Portfolio by Property Type
[pie chart showing:] [pie chart showing:]
29% Pacific 58% Office
20% Midwest 37% Industrial
20% South Central 5% Retail
20% Mid Atlantic
11% South Atlantic
* Geographic breakdown is according to S&P guidelines.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OPEN MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT
ANY TIME.
<PAGE>
PROSPECTUS SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information included elsewhere in this Prospectus Supplement and the
accompanying Prospectus or incorporated herein and therein by reference. Unless
the context requires otherwise, all references in this Prospectus Supplement to
"TriNet" or the "Company" refer to TriNet Corporate Realty Trust, Inc. and its
subsidiaries on a consolidated basis. Except as otherwise indicated, (i)
references to the Company's properties, tenants and rental income include the
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 December 31, 1996 and assumes that
the Underwriters' over- allotment option is not exercised. This Prospectus
Supplement contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's actual results could
differ materially from those set forth in the forward-looking statements.
Certain factors that might cause such a difference are discussed in the section
entitled "Risk Factors" starting on page S-9 of this Prospectus Supplement. The
reader is cautioned, however, that the factors discussed in that section may
not be exhaustive.
THE COMPANY
TriNet is a REIT that acquires, owns and manages predominantly office and
industrial properties leased to major corporations nationwide, including
corporate headquarters and strategically important distribution facilities.
TriNet's leases typically provide for scheduled rent increases during their
term and that tenants pay for most or all property operating expenses.
As of December 31, 1996, TriNet's portfolio consisted of 79 Properties,
including four Properties owned by the Sunnyvale Partnership, located in 23
states. All of the Properties are 100% leased. At December 31, 1996, the
Company had 52 tenants, and the Company's largest single tenant accounted for
approximately 8% of the Company's annualized rental income.
From the consummation of its initial public offering in June 1993 (the
"Initial Offering") through December 31, 1996, the Company acquired 55
properties for an aggregate purchase price of approximately $615.0 million.
From December 31, 1995 to December 31, 1996, TriNet:
. acquired 19 office and industrial Properties for an aggregate purchase
price of approximately $250.0 million;
. sold 36 properties for aggregate consideration of approximately $37.1
million, resulting in an aggregate gain to the Company of approximately
$6.8 million;
. increased aggregate annualized rental income by over 32%; and
. diversified and improved the credit quality of its tenant base by adding
18 new tenants through the acquisition of office and industrial
Properties.
BUSINESS OBJECTIVE AND STRATEGIES
The Company seeks to increase its income primarily by acquiring additional
office and industrial properties, in either single property or multiple
property transactions, and by negotiating leases containing scheduled rent
increases. Its primary investment focus is the acquisition of strategically
important office and industrial properties leased to major corporations. TriNet
pursues three primary acquisition strategies: (i) structuring
purchase/leaseback transactions with corporations; (ii) acquiring properties
subject to existing leases; and (iii) assisting corporations and working with
developers on build-to-suit transactions.
S-3
<PAGE>
In structuring purchase/leaseback transactions, TriNet seeks types of
transactions and seller circumstances that will allow it to obtain favorable
terms. For example, the Company focuses its purchase/leaseback activities on
businesses that are trying to achieve corporate financial and strategic goals
and objectives, including repayment of high-cost debt and obtaining infusions
of working capital for growth, rather than on businesses that are simply
solving specific real estate financing problems. In addition, the Company
concentrates on businesses that possess strong or improving credit quality
characteristics, successful operating histories, potential for growth,
recognized business franchises and market presence. The Company believes that
significantly less competition exists for purchase/leaseback transactions and
net leased property acquisitions involving portfolios containing a number of
properties located in more than one geographic region, and that its national
presence, acquisition experience and access to capital allow it to compete
effectively for such transactions.
The Company seeks to include in its leases provisions such as periodic rent
increases, operating and financial covenants, indemnities against environmental
and other claims and security for lease payments such as guarantees from
additional entities, letters of credit and cross-default provisions in multiple
property transactions. Its tenants generally are responsible for most operating
and capital expenses relating to the properties they occupy, including real
estate taxes, utilities, insurance, maintenance and capital improvements. As a
result, the Company's operating costs are lower than would be the case if it
invested in properties that were not net leased.
When underwriting a potential transaction, the Company undertakes analyses in
each of the following areas: (i) real estate factors such as the current value
of the property, present and anticipated local market conditions and the
prospects for selling or re-tenanting the property on favorable terms in the
event of a vacancy; (ii) the creditworthiness of the tenant and the need to
obtain additional protection such as letters of credit and guarantees from
other entities; and (iii) strategic factors such as the position of the
prospective tenant in its industry, the strength of the prospective tenant's
business franchise and the importance of the property to the prospective
tenant's business.
The Company employs experienced individuals with backgrounds in real estate
and credit analysis, finance and asset management, who use established
procedures and systems to identify, acquire and manage commercial real estate
assets. TriNet's senior management team has developed an extensive network of
contacts with bankers, brokers and senior corporate managers which it uses to
identify new investment opportunities.
RECENT DEVELOPMENTS
Acquisitions. During 1996, the Company acquired 19 Properties (the "1996
Acquired Properties") with an aggregate of approximately 3.3 million net
rentable square feet for an aggregate purchase price of approximately $250.0
million. In addition, in February 1997, the Company acquired a 222,267 square
foot office/research and development building in Dallas, Texas leased to
International Business Machines Corporation ("IBM") (the "1997 Acquired
Property") for a purchase price of approximately $9.9 million. Together, the
1996 Acquired Properties and the 1997 Acquired Property are expected to provide
an approximately 11.1% unleveraged return on cost (computed as the weighted
average property annual contractual net operating income from leases in place
at the date of acquisition divided by total acquisition cost). The 1996
Acquired Properties are located primarily in the Company's current target
markets, including the Denver, Colorado metropolitan area, the greater Dallas,
Texas metropolitan area, northern California and the Greenville/Spartanburg
area of South Carolina, which is one of the Company's newest target markets.
S-4
<PAGE>
1996 ACQUIRED PROPERTIES
<TABLE>
<CAPTION>
NET
RENTABLE
PROPERTY NO. OF SQUARE
TENANT OR GUARANTOR TYPE PROPERTIES STATE FEET
<S> <C> <C> <C> <C>
WHOLLY-OWNED PROPERTIES
Federal Express Corpora-
tion................... Office/World HQ 1 TN 241,927
Olympus America Inc. ... Office/Corp. HQ 1 NY 270,000
MJD Investments, Inc.
(d/b/a "MJDesigns").... Warehouse/Distribution/Corp. HQ 1 TX 510,654
Pure Atria Corporation.. Office/Corp. HQ 1 CA 101,373
Galileo International
Partnership............ Office 1 CO 137,900
adidas America, Inc. ... Warehouse/Distribution 1 SC 563,210
Lever Brothers Company.. Warehouse/Distribution 1 MO 402,192
Blue Cross & Blue Shield
United of Wisconsin.... Office/Corp. HQ 1 WI 229,888
Lucent Technologies
Inc. .................. Office 1 CO 158,146
Lam Research Corpora-
tion................... Office/R&D 1 CA 120,576
Fresenius USA, Inc. .... Office/R&D 1 CA 85,000
Northern Telecom Inc. .. Office 1 TX 60,000
Teradyne, Inc. ......... Office/R&D 1 CA 60,000
Lockheed Martin Corpora-
tion................... Office/R&D 1 PA 118,800
Frontier Corporation.... Office/Corp. HQ 1 CO 55,310
--- ---------
Subtotal............... 15 3,114,976
SUNNYVALE PARTNERSHIP
PROPERTIES
Mitsubishi Electronics
America, Inc. ......... Office/Division HQ 3 CA 181,715
National Semiconductor
Corporation/Kanematsu
USA Inc................ Office 1 CA 33,766
--- ---------
Subtotal............... 4 215,481
--- ---------
Total................. 19 3,330,457
=== =========
</TABLE>
Pending Acquisitions. The Company has an active acquisition program through
which it continuously is engaged in identifying, negotiating and consummating
property acquisitions. The Company's acquisition department typically is
considering approximately $1.0 billion of property acquisition opportunities at
any time. The Company has entered into contracts or non-binding letters of
intent to acquire several properties (the "Pending Acquisitions"). The Pending
Acquisitions are subject to completion of due diligence, approval by the
Company's Board of Directors for certain of the acquisitions and a number of
other contingencies. There can be no assurance that any of the Pending
Acquisitions will be completed. The Pending Acquisitions include the following,
which have an aggregate purchase price of approximately $162.4 million:
. two office buildings, totaling 444,362 square feet, in Atlanta, Georgia
leased to IBM (388,104 square feet) and to three other tenants;
. three buildings, totaling 442,000 square feet, in the RiverPark campus,
located in the Boston, Massachusetts metropolitan area, consisting of a
200,000 square foot office/research and development, light manufacturing
and warehouse building and a 150,000 square foot office building, both
leased to Lotus Development Corporation, and a 92,000 square foot
warehouse/distribution building leased to Central National-Gottesman,
Inc.;
. three buildings, totaling 309,144 square feet, in the Canyon Corporate
Center, located in Anaheim, California, consisting of a 156,135 square
foot office/research and development building which is the operations
center of Los Angeles Cellular Telephone Company, a 100,049 square foot
suburban office building which is a division headquarters of Experian
CCN and a 52,960 square foot research and development building which is
the corporate headquarters of Programmed Composites, Inc.;
. a 222,636 square foot high-cube distribution center in the Baltimore,
Maryland metropolitan area leased to Sunbelt Beverage Corporation;
S-5
<PAGE>
. a 121,068 square foot office/research and development building in the
Dallas, Texas metropolitan area leased to Northern Telecom Inc.; and
. a 100,024 square foot office/research and development building in San
Jose, California leased to S-MOS Systems, Inc. and Seiko Epson.
Pending Acquisitions Under Development. The Company has entered into
contracts and non-binding letters of intent with third-party developers to
acquire certain properties that are currently under development (the "Build-to-
Suit Properties"). The Company's acquisition of the Build-to-Suit Properties is
subject to the completion of construction, occupancy of the premises by the
tenants (pursuant to leases that have already been executed by the parties) and
the satisfaction of certain other conditions. The Build-to-Suit Properties
include the following, which have an aggregate purchase price of approximately
$92.5 million:
. a 62,100 square foot office building currently under construction as a
build-to-suit for Frontier Corporation in the Denver, Colorado
metropolitan area, which the Company expects to acquire in June 1997;
. a 261,700 square foot warehouse/distribution building currently under
construction as a build-to-suit for Electronic Data Systems Corporation
in the Dallas, Texas metropolitan area, which the Company expects to
acquire in June 1997;
. an existing 106,560 square foot office building, currently occupied by
WellPoint Health Networks, Inc. ("WellPoint"), and an adjacent 111,000
square foot office building currently under construction as a build-to-
suit for WellPoint in Thousand Oaks, California, both of which the
Company expects to acquire in the fourth quarter of 1997;
. a 170,000 square foot office building currently under construction as a
build-to-suit for Hewlett-Packard Company near Denver, Colorado, which
the Company expects to acquire in the fourth quarter of 1997; and
. a 200,000 square foot North American headquarters building to be
constructed as a build-to-suit for Nokia, Inc. in the Dallas, Texas
metropolitan area, which the Company expects to acquire in the fourth
quarter of 1997.
The estimated completion dates for the Build-to-Suit Properties have been
provided by the developers and are based on what the Company believes are
reasonable assumptions in light of current conditions. However, construction
delays could be experienced that might enable the tenant to refuse to occupy
the property and allow TriNet to refuse to acquire the property.
Property Dispositions. The Company continuously evaluates local market
conditions and property-related factors and will sell a property when it
believes it is to the Company's advantage to do so. During 1996, the Company
sold 36 properties. Thirty-five of these properties were sold as part of the
Company's strategy to reposition its portfolio by reducing its retail property
holdings. In April 1996, the Company sold its retail property in Denham
Springs, Louisiana to Schwegmann Giant Super Markets ("Schwegmann"), the former
tenant, for approximately $1.3 million, which resulted in an immaterial gain.
In November 1996, the Company sold its portfolio of 34 retail properties net
leased to REX Stores Corporation ("REX"), comprising 408,586 square feet, for
$24.8 million. The Company recognized a gain of approximately $6.2 million as a
result of the sale. These retail property dispositions, combined with the
acquisition of the 1996 Acquired Properties, reduced the overall portfolio
rents from retail properties from 11.6% of total annual rents at December 31,
1995 to 5.0% of total annual rents at December 31, 1996. In addition, in July
1996, the Company sold a 124,950 square foot office building occupied by
Linvatec Corporation ("Linvatec") and located in Largo, Florida for
approximately $11.0 million. The Company recognized a gain of approximately
$650,000 in connection with the sale. The proceeds of these dispositions were
used primarily to reduce borrowings under the Company's $200.0 million
unsecured revolving credit facility (the "Acquisition Facility").
On March 21, 1996, a property leased to an affiliate of MacFrugal's
Bargains.Closeouts, Inc. ("MacFrugal's") was destroyed by fire. On December 13,
1996, the Company received a $30.0 million cash
S-6
<PAGE>
settlement from MacFrugal's as compensation for the destruction of this
warehouse/distribution building and as consideration for termination of the
lease. Through December 13, 1996, the Company continued to receive rent
payments from MacFrugal's in accordance with the lease. The Company used
approximately $20.0 million of the proceeds from this cash settlement to
partially repay the 1994 Mortgage Loan (as hereinafter defined) and used the
approximately $10.0 million balance to reduce borrowings outstanding under the
Acquisition Facility. The Company recognized an extraordinary gain of
approximately $3.2 million from the settlement proceeds and an extraordinary
charge of approximately $1.0 million due to early debt extinguishment. The
$30.0 million cash settlement included a lease cancellation fee of $3.5
million.
Financing Activities. On May 22, 1996, the Company completed a public
offering of $100.0 million of its 7.30% Notes due May 15, 2001 (the "2001
Notes") and $50.0 million of its 7.95% Notes due May 15, 2006 (the "2006 Notes"
and, together with the 2001 Notes, the "Notes"). The Notes are senior,
unsecured obligations of the Company. The net proceeds of the offering of the
Notes were used to repay outstanding borrowings, principally under the
Acquisition Facility.
On June 19, 1996, the Company completed a public offering of 2,000,000 shares
of 9 3/8% Series A Cumulative Preferred Stock. The approximately $47.7 million
in net proceeds were used to repay borrowings under the Acquisition Facility.
Subsequently, on July 1, 1996, the Company borrowed $35.0 million under the
Acquisition Facility to partially repay a $110.0 million term loan entered into
in 1994 (the "1994 Mortgage Loan"). Following such repayment, the interest rate
on the remaining balance of $75.0 million under the 1994 Mortgage Loan was
reduced from the London Interbank Offered Rate ("LIBOR") plus 1.25% per annum
to LIBOR plus 1.00% per annum. The 1994 Mortgage Loan is secured by first
mortgage liens on 18 of the Properties. Additionally, as discussed above,
approximately $20.0 million of the 1994 Mortgage Loan was repaid in December
1996.
On August 13, 1996, the Company completed a public offering of 1,300,000
shares of 9.20% Series B Cumulative Preferred Stock. The approximately $31.1
million in net proceeds were used to repay borrowings under the Acquisition
Facility.
Effective September 30, 1996, the Company amended the Acquisition Facility to
obtain a reduction of 30 basis points on the interest rate for outstanding
borrowings, which reduced the interest rate to LIBOR plus 1.20% per annum. In
addition, the commitment fee on the average undrawn commitment was reduced from
25 basis points to 20 basis points and the expiration date of the facility was
extended by two years to October 8, 1999.
THE OFFERING
Common Stock offered by the 6,000,000 shares
Company............................
Common Stock to be outstanding
after the Offering................. 19,966,667 shares (1)
Use of Proceeds..................... Approximately $111.7 million to repay
borrowings under the Acquisition
Facility and the balance to fund Pending
Acquisitions and other future
acquisitions and for general corporate
purposes. See "Use of Proceeds."
NYSE Symbol......................... TRI
- --------------------
(1) As of December 31, 1996.
S-7
<PAGE>
SUMMARY FINANCIAL AND OPERATING DATA
The following sets forth summary financial, operating and other data on an
historical basis for the Company and, for periods prior to the Initial
Offering, the properties that were owned by seven predecessor partnerships.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1996 1995 1994 1993 1992
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues:
Rent......................... $ 75,252 $ 56,199 $ 35,020 $ 17,511 $11,222
Joint venture income......... 455 -- -- -- --
Other........................ 1,117 693 452 211 104
-------- -------- -------- -------- -------
Total revenues............... 76,824 56,892 35,472 17,722 11,326
Expenses:
General and administrative
and property operating
costs....................... 8,063 5,167 3,362 1,324 753
Financing expenses (related
parties).................... -- -- -- 433 933
Financing expenses (other)... -- -- -- -- 207
Interest (related parties)... -- -- -- 1,326 2,793
Interest (other)............. 20,768 17,329 6,726 2,883 2,082
Depreciation and
amortization................ 16,358 14,162 9,472 4,989 3,729
Provision for portfolio
repositioning(1)............ 6,800 -- -- -- --
-------- -------- -------- -------- -------
Income before gain on sale of
real estate and extraordinary
items........................ 24,835 20,234 15,912 6,767 829
Gain on sale of real estate... 6,807 -- -- -- --
-------- -------- -------- -------- -------
Income before extraordinary
items........................ 31,642 20,234 15,912 6,767 829
Extraordinary gain from casu-
alty loss.................... 3,178 -- -- -- --
Extraordinary charge from
early extinguishment of
debt......................... (2,191) (9,561) -- -- --
-------- -------- -------- -------- -------
Net income.................... 32,629 10,673 15,912 6,767 829
Preferred dividend require-
ment......................... (3,646) -- -- -- --
-------- -------- -------- -------- -------
Earnings available to common
shares....................... $ 28,983 $ 10,673 $ 15,912 $ 6,767 $ 829
======== ======== ======== ======== =======
Earnings available per common
share before extraordinary
items, net of
preferred dividend require-
ment......................... $ 2.02 $ 1.80 $ 1.84
Extraordinary gain per common
share........................ 0.23 -- --
Extraordinary charge per com-
mon share.................... (0.16) (0.85) --
-------- -------- --------
Earnings available per common
share........................ $ 2.09 $ 0.95 $ 1.84
======== ======== ========
Weighted average number of
common shares outstanding (in
thousands)................... 13,864 11,219 8,647
======== ======== ========
OTHER DATA:
Funds from operations(2)...... $ 41,551 $ 30,642 $ 22,380 $ 10,440 $ 3,845
Total Properties (at end of
period)...................... 79 97 82 67 42
Total net rentable sq. ft. (at
end of period, in
thousands)................... 12,295 10,747 8,590 5,851 1,834
BALANCE SHEET DATA (AT END OF
PERIOD):
Real estate, before
accumulated depreciation..... $697,517(3) $538,717 $377,522 $221,477 $91,066
Total assets.................. 708,238 559,727 401,241 229,099 86,277
Total unsecured debt.......... 251,918 77,000 -- -- --
Total secured debt............ 55,013 167,750 204,415 114,912 88,302
Total liabilities............. 342,190 270,387 214,554 120,151 92,326
Stockholders' equity (net
deficit)..................... 366,048 289,340 186,687 108,948 (6,049)
</TABLE>
- --------------------
(1) This provision relates to the Company's four retail Properties leased to
Schwegmann. Effective October 1, 1996, the Company ceased recognizing
straight-line rental income from three of the Schwegmann Properties. See
"Risk Factors--Financial Difficulties of One of the Company's Tenants."
(2) Funds from operations has been calculated in accordance with the National
Association of Real Estate Investment Trusts, Inc.'s definition of "funds
from operations," that is, net income, computed in accordance with
generally accepted accounting principles, excluding gains or losses from
debt restructuring and sales of property, plus depreciation and
amortization (in each case only on real estate related assets) and after
adjustments for unconsolidated partnerships and joint ventures, less
preferred stock dividends. Funds from operations should not be considered
as a substitute for net income as an indication of the Company's
performance or as a substitute for cash flow as a measure of its liquidity.
Straight-line rent adjustments for the years ended December 31, 1996, 1995,
1994, 1993 and 1992 were $4,824, $4,226, $2,917, $1,301 and $408,
respectively.
(3) Does not include the four Properties owned by the Sunnyvale Partnership.
S-8
<PAGE>
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 2001 Notes, the 2006 Notes, the Acquisition Facility and
the 1994 Mortgage Loan require payments of interest only until maturity on May
15, 2001, May 15, 2006, 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 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. At December 31,
1996, the Company had no exposure to floating interest rates.
REAL ESTATE INVESTMENT RISKS
Real property investments are subject to a number of risks. For example,
under certain leases the Company is responsible for certain capital
improvements such as roof replacement and major structural improvements. In
addition, to the extent that the Company's lease for a property is not a
triple net lease, the Company will have greater expenses associated with that
property and will bear some or all of the risk of any increase in such
expenses, unless the lease provides for a rent adjustment based on escalations
in operating expenses. Similarly, adverse economic conditions could affect the
ability of a tenant to make its lease payments, resulting in a reduction in
the cash flow of the Company and a decrease in the value of the property
leased to such tenant in the event the lease is terminated and the Company is
unable to lease the property to another tenant on similar or better terms, or
at all. In addition, demand for rental space in a particular market may be
weak at the end of a lease term, which could prevent the Company from leasing
the property to another tenant on favorable terms, or at all. In any such
case, the Company could not only lose the cash flow from such property, but in
order to prevent a foreclosure, also might divert cash flow generated by other
properties to meet mortgage payments, if any, and pay other expenses
associated with owning the property with respect to which the default or
expiration occurred. Furthermore, the Company may enter into or acquire net
leases with corporate tenants for properties that are specially suited to the
needs of a particular tenant, and this may be the case with certain of the
Properties. Such a property may require renovations or lease payment
concessions in order to lease it to another tenant if the initial lease is
terminated or not renewed.
Although the Company seeks to acquire properties which it believes are
strategically important to the ongoing operations of the tenants, the changing
operational circumstances of the Company's tenants may alter the importance of
the leased properties to their businesses. The level of ongoing strategic
importance of any given property to a tenant may affect the probability of
lease renewal by such tenant and, therefore, could have an adverse impact on
the Company's financial performance.
S-9
<PAGE>
The financial failure of a tenant could cause the tenant to become the
subject of bankruptcy proceedings. Under bankruptcy law, a tenant has the
option of assuming (continuing) or rejecting (terminating) an unexpired lease.
If the tenant assumes its lease with the Company, the tenant must cure all
defaults under the lease and provide the Company with adequate assurance of
its future performance under the lease. If the tenant rejects the lease, the
Company's claim for breach of the lease would (absent collateral securing the
claim) be treated as a general unsecured claim. The amount of the claim would
be capped at the amount owed for unpaid pre-petition lease payments unrelated
to the rejection, plus the greater of one year's lease payments or 15% of the
remaining lease payments payable under the lease (but not to exceed the amount
of three years' lease payments). In a purchase/leaseback transaction it is
also possible, depending on the terms of the transaction, that a bankruptcy
court could recharacterize a purchase/leaseback transaction as a secured
lending transaction. If a transaction were recharacterized as a secured
lending transaction, the Company would not be treated as the owner of the
property, but might have certain additional rights as a secured creditor.
TENANT CONCENTRATION
To the extent TriNet 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 December 31, 1996, TriNet had
leases with a total of 52 tenants. At such date, the Company's five largest
tenants collectively accounted for approximately 31% of the Company's
annualized rental income. For a list of the Company's tenants at December 31,
1996, see "The Properties."
FINANCIAL DIFFICULTIES OF ONE OF THE COMPANY'S TENANTS
As of December 31, 1996, the Company owned four Properties leased to
Schwegmann (the "Schwegmann Properties"), which represented approximately 5%
of annualized rental revenues as of such date. On February 14, 1997, an entity
formed by Kohlberg & Co., L.L.C. ("Kohlberg"), a privately-owned investment
firm, acquired the retail grocery operations of Schwegmann and, in connection
therewith, assumed the lease on the Schwegmann Property located in New
Orleans, Louisiana for the remaining 18 years of the primary lease term. In
addition, the Kohlberg entity has subleased the three other Schwegmann
Properties for one year, during which time the Company and Schwegmann intend
to market these Properties for sale or sublease. No assurance, however, can be
given that the Company will be able to sell or Schwegmann will be able to
sublease these Properties. Obligations with respect to the Schwegmann
Properties are secured by a first mortgage and assignment of rents on a
separate property that is owned by Schwegmann and leased to the Kohlberg
entity; that property generates approximately $500,000 in annual rents.
Schwegmann has been experiencing financial difficulties due to an
increasingly competitive grocery retailing environment. In consideration of
the Company's focus on decreasing its retail property holdings and in response
to Schwegmann's deteriorating financial condition, the Company recorded a
provision for portfolio repositioning in its financial statements as of
December 31, 1996 in the amount of $6.8 million.
While to date Schwegmann has met its lease obligations, there can be no
assurance that timely lease and sublease payments from Schwegmann and the
Kohlberg entity will be made in the future. Moreover, if either Schwegmann or
the Kohlberg entity is unable, because of its financial condition, to make
required lease or sublease payments, or if Schwegmann seeks protection under
bankruptcy laws, there can be no assurance that the Company's provision of
$6.8 million will be adequate. In addition, if Schwegmann were to seek such
protection, there can be no assurance that all or any of the Company's leases
with Schwegmann would be assumed.
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
S-10
<PAGE>
subject to a 4% nondeductible excise tax on any amount by which certain
distributions paid by it with respect to any calendar year are less than the
sum of 85% of its ordinary income for the calendar year, 95% of its capital
gains net income for the calendar year and any undistributed ordinary income
or capital gain net income from the preceding calendar year.
To comply with the 95% distribution requirement and to avoid the 4%
nondeductible excise tax, the Company intends to make distributions to
stockholders of substantially all of its taxable income at least annually. The
Company anticipates that the cash flow available from operations will be
sufficient to enable it to pay its operating expenses and meet this
distribution requirement, but no assurance can be given in this regard. In
addition, differences in timing between the actual receipt of income and
payment of expenses in calculating taxable income could require the Company to
borrow funds to meet the stockholder distribution requirements that are
necessary to achieve the tax benefits associated with a qualifying REIT.
Failure of the Company in any taxable year to qualify as a REIT will render
the Company subject to tax on its taxable income at regular corporate rates,
and distributions to stockholders in any nonqualifying years will not be
deductible by the Company. If the Company's status as a REIT is terminated,
the Company generally would not be eligible to elect REIT status again prior
to the fifth taxable year following the year in which its REIT status is
terminated. An exception to this general five-year rule exists if, among other
things, the Company can satisfy the Internal Revenue Service that its failure
to qualify as a REIT was due to reasonable cause and not to willful neglect of
the qualification provisions of the Code. The additional tax liability of the
Company for the year or years involved would reduce the net earnings of the
Company and could adversely affect its ability to pay 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.
S-11
<PAGE>
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.
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.
S-12
<PAGE>
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 through February 24, 1997........... $36 3/4 $32 1/2 $0.63(1)
</TABLE>
- ---------------------
(1) To be paid on April 15, 1997 to stockholders of record on March 31, 1997.
The reported last sale price of the Common Stock on the NYSE on February 24,
1997 was $33 7/8 per share. As of February 3, 1997, there were 369 record
holders of Common Stock. The transfer agent and registrar for the Common Stock
is KeyCorp Shareholder Services, Inc. of Cleveland, Ohio.
Prior to the consummation of 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.
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 $190.2 million (approximately
$218.9 million if the Underwriters' over-allotment option is exercised in
full). The Company intends to use approximately $111.7 million of such net
proceeds to repay borrowings under the Acquisition Facility, which were
incurred principally to finance acquisition activities, and the balance of
$78.5 million (approximately $107.2 million if the Underwriters' over-
allotment option is exercised in full) to finance Pending Acquisitions and
other future acquisitions and for general corporate purposes. As of February
24, 1997, the Acquisition Facility, which matures on October 8, 1999, bore
interest at a weighted average interest rate of 6.72% per annum, and
approximately $111.7 million was outstanding thereunder.
Pending the above uses, the net proceeds may be invested in short-term
income producing investments such as investment grade commercial paper,
government and government agency securities, money market funds that invest in
government securities, certificates of deposit, interest-bearing bank accounts
and mortgage loan participations.
S-13
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996, and as adjusted to give effect to the Offering and the
application of a portion of the net proceeds therefrom to repay borrowings
under the Acquisition Facility. This information should be read in conjunction
with the consolidated financial statements and notes thereto incorporated by
reference into the accompanying Prospectus.
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1996
--------------------------
(IN THOUSANDS)
ACTUAL AS ADJUSTED
<S> <C> <C>
Debt:
1994 Mortgage Loan................................ $ 55,013 $ 55,013
Acquisition Facility.............................. 102,200 --
7.30% Notes due 2001.............................. 100,000 100,000
7.95% Notes due 2006.............................. 50,000 50,000
Debt discount..................................... (282) (282)
----------- -----------
Total debt...................................... 306,931 204,731
----------- -----------
Stockholders' equity:
Preferred stock, $.01 par value, 10,000,000 shares
authorized, 3,300,000 shares issued and
outstanding (aggregate liquidation preference
$82,500,000)..................................... 33 33
Common stock, $.01 par value, 40,000,000 shares
authorized, 13,966,667
shares issued and outstanding; 19,966,667 shares
issued and outstanding as adjusted (1)........... 139 199
Paid-in capital................................... 394,852 584,982
Accumulated deficit............................... (28,976) (28,976)
----------- -----------
Total stockholders' equity...................... 366,048 556,238
----------- -----------
Total capitalization............................ $ 672,979 $ 760,969
=========== ===========
</TABLE>
- ---------------------
(1) Excludes 923,833 shares issuable upon the exercise of outstanding options
granted to officers and directors of the Company as of December 31, 1996,
including those granted under the Company's stock incentive plans.
S-14
<PAGE>
THE COMPANY
GENERAL
The Company is a self-administered and self-managed REIT that acquires, owns
and manages predominantly office and industrial properties leased to major
corporations nationwide, including corporate headquarters and strategically
important distribution facilities. The Company believes that operating a
national portfolio of real estate reduces the risk of exposure to economic
downturns in any one market. Within its current national operating strategy,
TriNet's acquisition efforts are focused on markets with growing employment,
increasing real estate occupancy rates and rising rents. As of December 31,
1996, TriNet owned 79 properties totaling more than 12 million square feet in
23 states, all of which were 100% leased.
TriNet generally seeks to include provisions in its leases that place on its
tenants, to the greatest extent possible, the economic costs of ownership of
its properties (such as real property taxes and assessments, insurance,
operating expenses, responsibility for structural repairs and maintenance, and
the duty to restore or relinquish to TriNet any insurance proceeds or
condemnation awards, in case of casualty or condemnation). In some cases,
TriNet has agreed to retain responsibility for some of these obligations. As
used herein, the terms "triple net lease" and "net lease" refer to leases in
which the tenant is responsible for all or most of such obligations.
The Company also seeks to include in its leases, (i) clauses providing for
periodic rent increases, either fixed or based on an index, such as the All
Urban Consumer Price Index, (ii) change of control and restrictive operating
and financial covenants, (iii) covenants providing that the tenant must
indemnify the Company against environmental and other contingent liabilities
(although such lease provisions may not entirely protect the Company as an
owner in the event of a tenant's inability to satisfy an adverse judgement),
(iv) guarantees from parent companies or other parties, (v) additional
security through recourse to other assets or letters of credit and (vi) cross-
default provisions in leases in multiple property transactions.
The Company 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.
BUSINESS STRATEGIES
INTERNAL GROWTH STRATEGY
TriNet seeks to grow its income internally by negotiating leases which have
scheduled rent increases and by renegotiating expiring leases at higher rents.
EXTERNAL GROWTH STRATEGY
TriNet acquires new properties and increases rent income by focusing on
three primary acquisition strategies: (i) structuring purchase/leaseback
transactions with corporations; (ii) acquiring properties subject to existing
leases; and (iii) working with corporations and developers on build-to-suit
transactions. From the Initial Offering through December 31, 1996, TriNet
completed over $615.0 million in acquisitions.
In a typical purchase/leaseback transaction, TriNet purchases the land and
building from an operating company and simultaneously leases them back to the
operating company under a long-term (i.e., more than five years) operating
lease. These transactions are structured to provide TriNet with a consistent
stream of income which typically increases periodically pursuant to the lease.
In addition, TriNet may realize a capital gain if the property appreciates in
value. A purchase/leaseback transaction enables an operating company (the
seller/tenant) to realize the value of its owned real estate while continuing
occupancy on a long-term basis. A purchase/leaseback transaction also may
provide the seller with accounting, earnings and market value benefits.
S-15
<PAGE>
For example, the lease on a property may be structured by the operating
company as an off-balance sheet operating lease, consistent with generally
accepted accounting principles, which may increase the seller's earnings, net
worth and borrowing capacity.
In addition to purchase/leaseback transactions, the Company also acquires
properties that are subject to existing net leases where the Company believes
the terms are favorable.
The Company seeks to negotiate with third-party developers and corporations
to acquire properties under development. In these transactions, TriNet
typically acquires the property after construction is completed, subject to
certain conditions, which generally include: (i) completion of the building
within a specified period of time; (ii) execution of a lease; (iii) receipt of
a certificate of occupancy; and (iv) the tenant's occupancy of the building.
TriNet currently has contracts and a non-binding letter of intent with
developers with respect to six Build-to-Suit Properties totaling $92.5
million.
INVESTMENT FOCUS
In acquiring properties, the Company seeks types of transactions and seller
circumstances that will allow it to obtain favorable terms, including:
Market Focus. Pursuant to its national operating strategy, the Company
focuses its acquisition efforts on markets with growing employment, increasing
real estate occupancy rates and rising rents. The Company's current target
markets include, for example, northern California and the metropolitan areas
of Denver, Colorado and Dallas, Texas, in all of which markets the Company
completed acquisitions in 1996.
Corporate Finance Solutions. The Company focuses its purchase/leaseback
activities on businesses that are trying to achieve corporate financial and
strategic goals and objectives, including repayment of high-cost debt and
obtaining infusions of working capital for growth, rather than on businesses
that are simply solving specific real estate financing problems.
Tenant Credit Characteristics. The Company concentrates on businesses that
possess strong or improving credit quality characteristics, successful
operating histories, potential for growth, recognized business franchises and
market presence. The Company will consider transactions with tenants of
diverse credit quality provided the real estate meets the Company's standards
and the Company believes that the property is strategically important to the
prospective corporate tenant. The Company's tenants may include public and
private companies which may be unrated or rated investment grade or below
investment grade.
Multiple Property Transactions. The Company believes that there is
significantly less competition for purchase/leaseback transactions and net
leased property acquisitions involving portfolios containing a number of
properties located in more than one geographic region. The Company believes
that its national presence, acquisition experience and access to capital allow
it to compete effectively for such transactions.
UNDERWRITING EXPERTISE
In underwriting a purchase/leaseback transaction or the purchase of a
property subject to an existing net lease, the Company undertakes the
following analyses, each of which the Company believes is critical to the
long-term profitability of the investment:
Real Estate Analysis. The Company evaluates the value of the property,
present and anticipated conditions in the local real estate market and the
prospects for selling or re-tenanting the property on favorable terms in the
event of a vacancy. The Company seeks to acquire general purpose commercial
properties that can accommodate single or multiple tenants and that may be
easily re-leased to new tenants without significant new investment by TriNet.
S-16
<PAGE>
Tenant Credit Analysis. The Company evaluates the prospective tenant's
business and financial outlook to determine the prospective tenant's ability
to meet its ongoing obligations under the lease and the need to obtain
additional security for these obligations, such as letters of credit and
guarantees from parent companies or other parties.
Strategic Factors. The Company evaluates a number of strategic factors,
including the position of the prospective tenant in its industry, the strength
of the prospective tenant's business franchise and the importance of the
property to the prospective tenant's business.
OPERATING AND FINANCING STRATEGIES
The Company monitors, on an ongoing basis, compliance by its tenants with
their lease obligations and the factors that could affect the financial
performance of each of its properties. The Company reviews periodic financial
statements with respect to each of its tenants and undertakes regular physical
inspections of the condition and maintenance of its properties. The Company
also monitors real estate market conditions, including market rents and
occupancy trends, in the areas where its properties are located. The Company
will respond to changes in such market conditions as appropriate, including by
negotiating to extend the lease terms or by selling the property subject to
the existing lease.
The Company's tenants generally are responsible for most operating and
capital expenses relating to the properties they occupy, including real estate
taxes, utilities, insurance, maintenance and capital improvements. As a
result, the Company's operating costs are lower than would be the case if it
invested in properties that were not net leased.
Consistent with its investment policies, the Company employs leverage, when
available on favorable terms, in connection with funding purchase/leaseback
transactions and acquiring net leased properties to enable it to acquire more
properties than it otherwise could. The Company seeks to maintain its
operating flexibility and reduce its financing costs through unsecured
borrowings, such as the Acquisition Facility and the Notes, and by reducing
its funds from operations ("FFO") payout ratio over time as FFO increases. The
Company believes that to facilitate a clear understanding of the operating
results of the Company, FFO should be examined in conjunction with net income.
The definition of FFO was clarified in the National Association of Real Estate
Investment Trusts, Inc. ("NAREIT") White Paper, adopted by the NAREIT Board of
Governors on March 3, 1995, as net income (computed in accordance with
generally accepted accounting principles) excluding gains (or losses) from
debt restructuring and sales of property, plus depreciation and amortization
(in each case only on real estate related assets), less preferred stock
dividends, and after adjustments for unconsolidated partnerships and joint
ventures. Adjustments for unconsolidated partnerships and joint ventures will
be calculated to reflect FFO on the same basis. FFO should not be considered
as a substitute for net income as an indication of the Company's performance
or as a substitute for cash flow as a measure of its liquidity.
S-17
<PAGE>
THE PROPERTIES
As of December 31, 1996, the Company's portfolio consisted of 79 Properties,
all of which were 100% leased. The Properties include office (including
research and development), industrial (e.g., warehouse and distribution) and
retail facilities, which are located in 23 states and are leased to tenants in
a variety of industries. Set forth below is certain information relating to
the Properties.
<TABLE>
<CAPTION>
PERCENT
NET RENTABLE CURRENT OF TOTAL
PROPERTY NO. OF SQUARE TOTAL ANNUAL ANNUAL
TENANT OR GUARANTOR TYPE PROPERTIES STATE FEET RENTS(1) RENTS
<S> <C> <C> <C> <C> <C> <C>
WHOLLY-OWNED PROPERTIES
AT&T Corporation(2)..... Office/Corp. HQ 2 FL, NJ 466,002 $ 6,766,032 8.22%
Unisys Corporation...... Office 3 IL, PA 755,157 6,171,000 7.50%
Schwegmann Giant Super
Markets(3)............. Retail 4 LA 381,933 4,137,796 5.03%
Caterair International
Corporation............ Industrial/Distribution 12 7 states 493,617 4,124,376 5.01%
Federal Express
Corporation(4)......... Office/World HQ 1 TN 241,927 3,991,796 4.85%
GATX Logistics, Inc..... Warehouse/Distribution 6 NY 1,135,500 3,260,756 3.96%
Olympus America Inc. ... Office/Corp. HQ 1 NY 270,000 2,929,209 3.56%
Volkswagen of America,
Inc.................... Distribution Centers 3 CA, FL, IL 628,716 2,864,000 3.48%
NIKE, Inc............... Warehouse/Distribution 1 TN 812,697 2,247,405 2.73%
MJD Investments, Inc.
(d/b/a "MJDesigns").... Warehouse/Distribution/Corp. HQ 1 TX 510,654 2,173,000 2.64%
Pure Atria Corporation.. Office/Corp. HQ 1 CA 101,373 2,128,800 2.58%
Ralphs Grocery Company.. Warehouse/Distribution 1 CA 272,236 2,128,770 2.58%
SPX Corporation......... Office/Corp. HQ 2 MI 214,454 1,937,500 2.35%
Galileo International
Partnership............ Office 1 CO 137,900 1,877,547 2.28%
adidas America, Inc..... Warehouse/Distribution 1 SC 563,210 1,856,445 2.25%
Lever Brothers Company.. Warehouse/Distribution 1 MO 402,192 1,724,392 2.10%
Blue Cross & Blue Shield
United of Wisconsin ... Office/Corp. HQ 1 WI 229,888 1,609,600 1.96%
Unison Industries,
L.P. .................. Office/Corp. HQ 1 FL 135,000 1,554,243 1.89%
Primerica Life Insurance
Company................ Office/Regional HQ 1 GA 190,000 1,425,000 1.73%
Lucent Technologies
Inc. .................. Office 1 CO 158,146 1,344,241 1.63%
Certified Grocers of
California, Ltd........ Office/Corp. HQ 1 CA 108,000 1,293,750 1.57%
PNC Mortgage Corporation
of America, Inc.(5).... Office/Corp. HQ 1 IL 102,208 1,265,335 1.54%
First Health Strategies,
Inc. .................. Office/Corp. HQ 1 UT 173,107 1,245,046 1.51%
Microsoft
Corporation(6)......... Office 1 TX 87,635 1,226,890 1.49%
Sears Logistics
Services(7) ........... Warehouse/Distribution 1 OH 398,471 1,217,432 1.48%
Cirrus Logic, Inc....... Office/R&D/Corp. HQ 2 CA 121,582 1,207,104 1.47%
TRW, Inc. .............. Office 1 CA 124,400 1,179,924 1.43%
Nissan Motor Acceptance
Corporation ........... Office 1 TX 174,421 1,159,635 1.41%
Lam Research
Corporation............ Office/R&D 1 CA 120,576 1,157,530 1.41%
Lockheed Martin
Aerospace Corporation.. Office/Division HQ 1 CA 174,600 987,694 1.20%
REX Stores Corporation.. Warehouse/Distribution/Corp. HQ 1 OH 345,325 799,248 0.97%
Tech Data Corporation... Warehouse/Distribution 1 IN 225,000 783,750 0.95%
Fresenius USA, Inc...... Office/R&D 1 CA 85,000 739,500 0.90%
Universal Technical
Institute.............. Office/Corp. HQ 1 AZ 106,763 729,157 0.89%
Deluxe Corporation...... Office 1 MN 73,150 694,560 0.84%
Northern Telecom Inc.... Office 1 TX 60,000 690,332 0.84%
Dunham's Athleisure
Corporation............ Warehouse/Distribution 1 IN 249,920 647,500 0.79%
Teradyne, Inc........... Office/R&D 1 CA 60,000 540,000 0.66%
Kelley-Clarke, Inc. .... Office/Regional HQ 1 CA 44,000 534,864 0.65%
Compaq Computer
Corporation ........... Warehouse/Distribution 1 TX 251,850 513,774 0.62%
Northern States Power
Company................ Office/Operations Center 1 MN 41,574 509,282 0.62%
Arrow Electronics,
Inc.................... Warehouse/Distribution 1 CO 119,200 500,482 0.61%
HomeSide Lending, Inc... Office 1 FL 49,344 479,047 0.58%
Uarco Incorporated...... Warehouse/Distribution 1 IL 140,000 478,800 0.58%
ArtLine, Inc. .......... Warehouse/Corp. HQ 1 IL 172,846 475,326 0.58%
Fluid Systems
Corporation............ Office/R&D/Corp. HQ 1 CA 90,500 470,000 0.57%
Lockheed Martin
Corporation(8) ........ Office/R&D 1 PA 118,800 469,260 0.57%
PepsiCo, Inc.(9)........ Warehouse/Distribution 1 KS 105,600 353,040 0.43%
Frontier
Corporation(10)........ Office/Corp. HQ 1 CO 55,310 345,847 0.42%
--- ---------- ----------- ------
Subtotal................ 75 12,079,784 78,946,017 95.91%
SUNNYVALE PARTNERSHIP
PROPERTIES (11)
Mitsubishi Electronics
America, Inc........... Office/Division HQ 3 CA 181,715 $ 2,878,366 3.50%
National Semiconductor
Corporation/
Kanematsu USA Inc...... Office 1 CA 33,766 480,841 0.59%
--- ---------- ----------- ------
Subtotal................ 4 215,481 3,359,207 4.09%
--- ---------- ----------- ------
Total.................. 79 12,295,265 $82,305,224 100.00%
=== ========== =========== ======
</TABLE>
S-18
<PAGE>
- ---------------------
(1) Contractual rent payments on a cash basis not taking into account a
straight-line method of accounting. Annual rent is calculated by
multiplying monthly rent in effect at December 31, 1996 by 12.
(2) AT&T is the lessee under one lease and the guarantor under the other
lease, for which the lessee is AT&T Capital Corporation. The annual rent
at December 31, 1996 for the property leased to AT&T includes $481,212
during the initial term of the lease for tenant improvements made by the
previous landlord. The annual rent at December 31, 1996 for the Property
leased to AT&T Capital Corporation has been calculated before deducting an
annual management incentive fee payable to a third-party property manager,
which the Company estimates is currently $750,000.
(3) In the event that Schwegmann determines to permanently vacate any of these
Properties, it must offer to repurchase such Property at the greater of
TriNet's original purchase price or fair market value (subject to the
lease, including extension options), and if TriNet elects not to sell the
Property to Schwegmann, the lease for such Property will terminate. As of
December 31, 1996, Schwegmann had (i) an option to purchase all of these
Properties during a two-year period commencing in July 2003 at TriNet's
original purchase price plus a fixed return and (ii) an option to purchase
all of these Properties at the end of the initial lease term at a purchase
price equal to the greater of TriNet's original purchase price plus a
fixed return or fair market value (subject to the lease, including
extension options) (collectively, the "Purchase Options"). In February
1997, a Kohlberg entity acquired Schwegmann's retail grocery operations.
See "Risk Factors--Financial Difficulties of One of the Company's
Tenants." In connection with the acquisition, the Purchase Options were
eliminated.
(4) The Company has a maximum annual obligation under the lease for operating
expenses and taxes of $1,451,562.
(5) This Property was subleased to Komatsu America International Company
("Komatsu") effective July 29, 1996. Komatsu has executed a direct lease
with the Company that commences in July 2002.
(6) The Company has a maximum annual obligation under the lease for operating
expenses of $526,634.
(7) The Company has a maximum annual obligation under the lease for taxes and
insurance of $134,518.
(8) Chesapeake Park, Inc., a subsidiary of Lockheed Martin Corporation, is the
lessee. Lockheed Martin Corporation, which occupies the Property, is not a
guarantor on the lease.
(9) The Company holds fee title to the land and a leasehold interest in the
building for this Property.
(10) This Property is occupied by ConferTech International, Inc., a subsidiary
of the lessee, Frontier Corporation. Concurrently with the acquisition of
this Property, the Company entered into an agreement to purchase a second
office building that is being constructed as a build-to-suit for Frontier
Corporation. The build-to-suit property will comprise approximately
62,100 square feet upon completion, which is expected in June 1997.
(11) In connection with the acquisition of the Sunnyvale Research Center,
comprised of four office properties, the Sunnyvale Partnership assumed
$17.0 million of non-recourse first mortgage debt owed to Chase Manhattan
Bank. The Sunnyvale Partnership's limited partnership agreement places
certain restrictions on the Sunnyvale Partnership's ability to sell the
acquired Properties prior to June 1998. The Company owns approximately
45% of the equity interests in the Sunnyvale Partnership. The limited
partners of the Sunnyvale Partnership are entitled to receive from the
Sunnyvale Partnership's distributable cash a priority return currently
equal to approximately 9% per annum on their approximately $7.6 million
investment with further distributions made to the Company and the limited
partners in a 99:1 ratio. In addition, beginning in June 1998, the
limited partners have the right, under certain circumstances, to request
the redemption of their interests in the Sunnyvale Partnership, and the
Company may satisfy the redemption request with shares of the Company's
common stock or cash.
S-19
<PAGE>
LEASE EXPIRATIONS
The following table shows scheduled lease expirations for all leases for the
Properties as of December 31, 1996.
<TABLE>
<CAPTION>
NET RENTABLE CURRENT TOTAL PERCENT OF
SQUARE FEET ANNUAL RENTS CURRENT TOTAL
NUMBER OF SUBJECT UNDER EXPIRING ANNUAL RENTS
LEASES TO EXPIRING LEASES (2) REPRESENTED BY
YEAR OF LEASE EXPIRATION (1) EXPIRING LEASES (IN THOUSANDS) EXPIRING LEASES
<S> <C> <C> <C> <C>
1997...................... 1 148,595 $ 525 .64%
1998...................... 1 17,725 269 .33%
1999...................... 4 548,944 2,675 3.25%
2000...................... 8 1,580,706 11,429 13.89%
2001...................... 8 1,329,898 5,217 6.34%
2002...................... 5 1,002,277 7,376 8.96%
2003...................... 6 1,280,777 8,030 9.76%
2004...................... 10 2,335,116 12,824 15.58%
2005...................... 2 134,500 1,005 1.22%
2006...................... 5 824,045 9,090 11.04%
2007 and thereafter....... 26 3,092,682 23,865 28.99%
---------- ------- ------
TOTAL................... 12,295,265 $82,305 100.00%
========== ======= ======
</TABLE>
- ---------------------
(1) Lease expirations, assuming tenants do not exercise existing renewal,
termination or purchase options.
(2) Reflects monthly base rent provided for under the terms of each expiring
lease as in effect on December 31, 1996 multiplied by 12 and does not take
into account any contractual rent escalations.
S-20
<PAGE>
MANAGEMENT
The following table sets forth certain information with respect to the
Directors and certain officers of the Company:
<TABLE>
<CAPTION>
NAME AGE OFFICE
<S> <C> <C>
DIRECTORS AND EXECUTIVE
OFFICERS
Robert W. Holman, Jr. ..... 53 Chairman of the Board of Directors
Mark S. Whiting............ 40 President, Chief Executive Officer and Director
Willis Andersen, Jr. ...... 65 Director
John G. McDonald........... 59 Director
Robert S. Morris........... 42 Director
Stephen B. Oresman......... 64 Director
Jay H. Shidler............. 50 Director
A. William Stein........... 43 Executive Vice President and Chief Financial
Officer
Gary P. Lyon............... 36 Executive Vice President and Chief Acquisitions
Officer
Jo Ann Chitty.............. 36 Senior Vice President, Asset Management
OTHER SENIOR OFFICERS
James H. Ida............... 51 Senior Vice President, Acquisitions
Elisa F. DiTommaso......... 34 Vice President, Capital Markets and Treasurer
Geoffrey M. Dugan.......... 44 Vice President, Administration and General
Counsel
Dawn D. Hinson............. 36 Vice President, Asset Management
Peter H. Monaghan.......... 38 Vice President, Acquisitions
Debra H. Paul.............. 39 Vice President and Controller
James A. Pierre............ 35 Vice President, Asset Management
David J. Yeager............ 39 Vice President, Acquisitions
</TABLE>
DIRECTORS AND EXECUTIVE OFFICERS
ROBERT W. HOLMAN, JR. Mr. Holman was Co-Chairman of the Board of Directors
and Chief Executive Officer of the Company from its formation until May 22,
1996, when he became Chairman of the Board. He was a co-founder and Chairman
and the Chief Executive Officer of Holman/Shidler Capital Corporation ("HSCC")
and, since 1986, has overseen the evaluation, structuring and closing of
acquisitions of over 250 properties in 40 states and in Canada. Prior to
founding HSCC, Mr. Holman acquired and managed an investment portfolio of real
estate and corporate assets in Hawaii. For over 14 years, he managed the U.S.
real estate portfolio of Australia's largest merchant bank, Partnership
Pacific Bank, owned by Bank of Tokyo, Bank of America and Westpac, and was
corporate treasurer and a director of Watkins Pacific, Inc., a public company.
He also directed the State of Hawaii's revitalization of the Honolulu
waterfront. An Economics graduate of the University of California at Berkeley,
Mr. Holman received his M.A. degree in Economics and Planning from Lancaster
University in England and was a Loeb Fellow at Harvard University.
MARK S. WHITING. Mr. Whiting has been President of the Company since its
formation and has been a Director since May 1993. Mr. Whiting became Chief
Executive Officer of the Company on May 22, 1996. Prior thereto, Mr. Whiting
was the Company's Chief Operating Officer. He joined The Shidler Group in 1987
where he directed its acquisition activities and managed the operation of over
250 properties in 40 states and in Canada. Prior to joining The Shidler Group
and HSCC, Mr. Whiting was Manager/Resort Development for Wailea Development
Company, Inc. in Hawaii. Prior to that, Mr. Whiting served as a Corporate
Financial and Operations Analyst for Alexander & Baldwin, Inc., in Hawaii.
Before that, he was a Vice President of Trans-Pacific Realty, Inc., a real
estate brokerage and investment firm located in Hawaii. Mr. Whiting holds a
Bachelor of Arts degree from Stanford University and an M.B.A. from the
Stanford University Graduate School of Business.
WILLIS ANDERSEN, JR., CRE. Mr. Andersen became a Director of the Company in
June 1993. He is a real estate and REIT industry consultant with over 35 years
of experience as an advisor, financial consultant and
S-21
<PAGE>
principal in the real estate industry. Mr. Andersen currently specializes in
advisory work for publicly traded real estate companies, focusing specifically
on REITs. Mr. Andersen's real estate career has involved work with Allied
Properties Inc. of San Francisco; Bankoh Advisory Corp. of Honolulu; RAMPAC
and ICM Property Investors, Inc., NYSE-listed REITs; and Bedford Properties,
Inc., a commercial property investment and development firm. He is an active
member of the American Society of Real Estate Counselors and NAREIT, and is a
former Governor and Past President (1980-81) of NAREIT.
JOHN G. MCDONALD. Professor McDonald became a Director of the Company in
June 1993. He is a Professor of Finance in the Graduate School of Business at
Stanford University, where he has taught since 1968. Professor McDonald has
taught M.B.A. courses and executive programs in two broad subject areas,
investment management and corporate financial management, both with a global
perspective. He currently serves on the Boards of Directors of Scholastic
Corporation, Varian Associates, Inc., Investment Company of America, Income
Fund of America, Growth Fund of America, New Perspective Fund, EuroPacific
Growth Fund, Emerging Markets Growth Fund, Inc. and American Balanced Fund.
ROBERT S. MORRIS. Mr. Morris became a Director of the Company in June 1993.
He is the founder and managing partner of Olympus Private Placement Fund, L.P.
and Olympus Growth Fund, L.P. Mr. Morris is currently a director of Master
Protection Holdings, Inc., Tempest Reinsurance Co. Ltd. and Nebraska Book
Company, Inc. Prior to founding Olympus Private Placement Fund, L.P. in 1988,
Mr. Morris was Senior Vice President of General Electric Investment
Corporation where he established that company's Private Placements division in
1983 and subsequently managed and enlarged the portfolio to over $1.8 billion.
From 1977 to 1982, Mr. Morris held management positions in various General
Electric manufacturing and financial services businesses.
STEPHEN B. ORESMAN. Mr. Oresman became a Director of the Company in June
1993. He has been the owner and President of Saltash, Ltd., a management
consulting firm, since 1991. He was a partner and Vice President of The Canaan
Group consulting firm from 1988 to 1991. Mr. Oresman's early career included
ten years in the manufacturing sector, first with Bausch & Lomb, Inc. in
Rochester, New York, and later with Interlake Steel Corp. in Chicago.
Subsequently, Mr. Oresman joined Booz-Allen Hamilton, Inc., where he spent 19
years, including ten years as managing officer of the firm's Eastern Region
and five years as Chairman of Booz-Allen Hamilton International, guiding the
firm's activities outside of the U.S. Mr. Oresman later joined the advertising
agency BBDO International, as President of the firm's independent marketing
companies. Mr. Oresman is a member of the Boards of Directors of Cleveland
Cliffs, Inc., Grossman's, Inc. and Technology Solutions Company. Mr. Oresman
is a graduate of Amherst College and the Harvard Business School.
JAY H. SHIDLER. Mr. Shidler has been a member of the Board of Directors
since the formation of the Company in March 1993 and was Co-Chairman until May
1996. He is the founder and Managing Partner of The Shidler Group and was a
co-founder of HSCC and in these capacities has been responsible for the
overall investment strategies and policies of these entities. A nationally
acknowledged innovator in the field of real estate investment, Mr. Shidler has
over 20 years of experience in real estate investment and has acquired and
managed properties involving over $2 billion in aggregate value. Since 1970,
Mr. Shidler has been directly involved in the acquisition and management of
over 500 properties in 40 states and in Canada. Mr. Shidler holds a Bachelor's
degree in Business Administration from the University of Hawaii. Mr. Shidler
is co-founder and Chairman of the Board of First Industrial Realty Trust,
Inc., a NYSE-listed REIT. He also serves on the boards of directors of several
private companies and is active as a trustee of several charitable and
cultural organizations.
A. WILLIAM STEIN. Mr. Stein has been Executive Vice President and Chief
Financial Officer since April 1996. He is responsible for the Company's
financial management and policies, compliance, credit policy, human resources
and general administration. Mr. Stein also serves as the Company's Secretary.
Between October 1995 and April 1996, Mr. Stein was Senior Vice President,
Capital Markets of the Company. Prior to joining TriNet, Mr. Stein held a
number of positions with Westinghouse Electric Corporation in Pittsburgh,
Pennsylvania, including Assistant Treasurer and Director--Banking. In
addition, Mr. Stein was a Vice President at Westinghouse Financial Services,
with responsibilities for structured finance, capital markets and real estate
sale/leaseback investments. Previously, he was Treasurer of Duquesne Light
Company in Pittsburgh and
S-22
<PAGE>
practiced law both as a securities and finance lawyer and as a trial lawyer.
Mr. Stein holds a Bachelor of Arts degree in Classics from Princeton
University, a J.D. from the University of Pittsburgh and an M.S. in Industrial
Administration from Carnegie Mellon University. Mr. Stein is a member of the
Pennsylvania Bar and the Florida Bar.
GARY P. LYON. Mr. Lyon has been Executive Vice President and Chief
Acquisitions Officer since April 1996. Mr. Lyon's responsibilities include
directing all of the Company's real estate acquisition functions. Between June
1993 and April 1996, Mr. Lyon served as a Senior Vice President of the Company
with responsibility for acquisitions within the Midwest and the Northeast.
Prior to joining The Shidler Group and HSCC in 1987, Mr. Lyon worked for J.P.
Morgan & Co., Inc. and Goldman, Sachs & Co. Mr. Lyon received his Bachelor of
Arts degree in Economics from Duke University and his M.B.A. in International
Business from The Wharton School.
JO ANN CHITTY. Ms. Chitty has been Senior Vice President, Asset Management
of the Company since its formation. She is responsible for the asset
management functions of the Company including property disposition, lease
compliance and acquisition underwriting. Prior to her employment with the
Company, Ms. Chitty was the Vice President, Asset Management for HSCC. Ms.
Chitty holds her M.B.A. from Jacksonville University.
OTHER SENIOR OFFICERS
JAMES H. IDA. Mr. Ida has been Senior Vice President, Acquisitions since
April 1996. He oversees evaluation, structuring and closing of acquisitions in
the western United States. Prior to joining TriNet, Mr. Ida was a director in
GE Capital Investment Advisors' investment group and was responsible for
originating, negotiating and underwriting real estate equity and debt
investments on behalf of pension fund clients throughout the United States.
Mr. Ida was also with the three predecessor companies of GE Capital. Before
that, Mr. Ida held senior acquisition executive positions at Krupp Realty and
Development, Essex Property Corporation and Landsing Property Corporation. Mr.
Ida holds a Bachelor of Science degree in Economics and an M.B.A. with an
emphasis in finance and real estate, both from the University of California at
Berkeley.
ELISA F. DITOMMASO. Ms. DiTommaso has been Vice President, Capital Markets
since June 1996 and Treasurer since February 1997. She is responsible for
corporate and project finance, banking and bank relations, risk management,
financial planning, rating agency relations and credit evaluation. Prior to
joining TriNet, Ms. DiTommaso was responsible for certain capital markets
activities for Westinghouse Electric Corporation and held several positions
with Westinghouse Financial Services in real estate, capital markets and
structured finance. Ms. DiTommaso also has five years of public accounting
experience with Price Waterhouse and is a C.P.A. She received her Bachelor of
Science degree from The Pennsylvania State University.
GEOFFREY M. DUGAN. Mr. Dugan has been Vice President, Administration and
General Counsel since January 1, 1997. Mr. Dugan is responsible for the
Company's legal matters, including compliance with applicable laws and
regulations and oversight of outside legal counsel engaged by the Company. His
responsibilities also include administration of the Company's human resources
and employee benefit functions and general administration of the Company's San
Francisco headquarters. Prior to joining the Company, Mr. Dugan was a partner
in the San Francisco law firm of Landels Ripley & Diamond, LLP, where his
practice emphasized corporate finance, securities and commercial transactions
for real estate investment trusts and other business entities. Mr. Dugan holds
a Bachelor of Arts degree from Harvard College and a J.D. from Georgetown
University Law Center and is a member of the New York Bar and the State Bar of
California.
DAWN D. HINSON. Ms. Hinson has been Vice President, Asset Management since
November 1994. She is responsible for overseeing the leasing, budgeting, due
diligence and property management for the Company's properties located in the
eastern half of the United States. Prior to joining TriNet, Ms. Hinson was
employed by Regency Realty Corporation, a southeastern office and retail REIT,
as a general manager responsible for property management and lease
administration. Ms. Hinson holds a Bachelor of Science degree in Management
from Clemson University and has C.P.M. designation from the Institute of Real
Estate Management.
S-23
<PAGE>
PETER H. MONAGHAN. Mr. Monaghan has been Vice President, Acquisitions since
February 1997. He is responsible for TriNet's acquisition activities in the
northeastern United States. Prior to joining TriNet, Mr. Monaghan spent 16
years with Cushman & Wakefield, Inc., a national and international full
service real estate brokerage firm, where he was involved in the sale and
financing of institutional and corporate real estate holdings and was named a
Director in 1989. Mr. Monaghan received a Bachelor of Arts degree in Economics
from The University of Pennsylvania.
DEBRA H. PAUL. Ms. Paul joined the Company as Vice President and Controller
in 1994. She is responsible for managing the Company's accounting functions,
including internal/external reporting, cash management, tax compliance,
budgeting and information systems. Prior to joining TriNet, Ms. Paul was Vice
President/Controller of Meridian Point Properties, Inc., a group of seven
publicly-traded REITs. A C.P.A., she received a Bachelor of Science degree
from California State University, Fresno.
JAMES A PIERRE. Mr. Pierre joined the Company as Vice President, Asset
Management in August 1996. He is responsible for asset management of the
Company's properties located in the western half of the United States. Prior
to joining TriNet, Mr. Pierre was a vice president at GE Capital Investment
Advisors, where he was responsible for the management, leasing and strategic
planning of two real estate portfolios owned by pension fund clients. Prior to
joining GE, Mr. Pierre was a portfolio manager at The RREEF Funds, overseeing
the management and leasing for three institutional real estate portfolios. Mr.
Pierre holds a Bachelor of Arts degree in Business Economics from the
University of California, Santa Barbara.
DAVID J. YEAGER. Mr. Yeager has been Vice President, Acquisitions since
August 1996. He is responsible for TriNet's acquisition activities in the
southeastern United States and also provides in-house real estate development
expertise for the Company's build-to-suit opportunities. Prior to joining
TriNet, Mr. Yeager was a vice president with Radnor Advisors, Inc., a real
estate investment consulting and development firm where he was responsible for
the development of corporate real estate facilities, corporate advisory
services and acquisition activities. Before that, Mr. Yeager was Director of
Real Estate for the Linpro Company, a national developer, and began his real
estate career with IBM as Real Estate Administrator. Mr. Yeager received a
Bachelor of Fine Arts and Bachelor of Landscape Architecture from The Rhode
Island School of Design and a Master of Urban Design and Planning from Harvard
University.
S-24
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement,
the Underwriters named below (each, an "Underwriter" and together, the
"Underwriters") have severally agreed to purchase from the Company, and the
Company has agreed to sell to each of the Underwriters, for whom Donaldson,
Lufkin & Jenrette Securities Corporation, Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, J.P. Morgan Securities Inc. and Smith
Barney Inc. are acting as representatives (the "Representatives"), the number
of shares of Common Stock set forth below opposite their respective names at
the offering price less the underwriting discounts set forth on the cover of
this Prospectus Supplement.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.............. 1,000,000
Goldman, Sachs & Co.............................................. 1,000,000
Merrill Lynch, Pierce, Fenner & Smith
Incorporated ........................................... 1,000,000
J.P. Morgan Securities Inc. ..................................... 1,000,000
Smith Barney Inc. ............................................... 1,000,000
Jefferies & Company, Inc. ....................................... 200,000
Montgomery Securities............................................ 200,000
Robertson, Stephens & Company LLC................................ 200,000
UBS Securities LLC............................................... 200,000
Commerzbank Capital Markets Corporation.......................... 100,000
Nesbitt Burns Securities, Inc. .................................. 100,000
---------
Total.......................................................... 6,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of shares of Common Stock are
subject to approval of certain legal matters by their counsel and to certain
other conditions. The Underwriters are obligated to take and pay for all
shares of Common Stock offered hereby (other than the shares of Common Stock
covered by the over-allotment option described below) if any such shares of
Common Stock are taken.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the offering
price set forth on the cover page of this Prospectus Supplement and to certain
dealers at such price, less a concession not in excess of $1.06 per share of
Common Stock. The Underwriters may allow, and such dealers may re-allow, a
concession of not in excess of $0.10 per share of Common Stock on sales to
certain other dealers. After the Offering, the offering price and other
selling terms may be changed by the Representatives. The Company has granted
to the Underwriters an option, exercisable not later than 30 calendar days
from the date of this Prospectus Supplement, to purchase up to an additional
900,000 shares of Common Stock at the same price per share of Common Stock as
the Company receives for the shares of Common Stock that the Underwriters have
agreed to purchase.
To the extent the Underwriters exercise such option, each of the
Underwriters will have a firm commitment to purchase approximately the same
percentage of such additional shares of Common Stock as the number of shares
of Common Stock to be purchased by it shown in the above table bears to the
total number of shares of Common Stock shown in the above table, and the
Company will be obligated, pursuant to the option, to sell such shares of
Common Stock to the Underwriters. The Underwriters may exercise such option
only to cover over-allotments made in connection with the sale of the shares
of Common Stock offered hereby. If purchased, the Underwriters will sell such
additional 900,000 shares of Common Stock on the same terms as those on which
the shares of Common Stock are being offered.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain liabilities, including
liabilities under the Securities Act of 1933, as amended.
S-25
<PAGE>
Certain of the Underwriters and their affiliates have from time to time
performed, and may continue to perform in the future, various investment
banking and commercial banking services for the Company, for which customary
compensation has been received. Morgan Guaranty Trust Company of New York
("MGT") is the agent and lead lender under the Acquisition Facility and will
receive 12.5% of the net proceeds of the Offering applied to the repayment of
borrowings under the Acquisition Facility (see "Use of Proceeds"). MGT is an
affiliate of J.P. Morgan Securities Inc. Additionally, an affiliate of
Goldman, Sachs & Co. was the owner of the 1997 Acquired Property referred to
under "Prospectus Supplement Summary--Recent Developments--Acquisitions."
The Company, its executive officers and certain Directors have agreed, with
certain exceptions, that they will not, without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation, register the sale of,
sell, offer to sell, contract to sell or otherwise dispose of any shares of
Common Stock or any securities convertible into or exercisable or exchangeable
for Common Stock, or in any other manner transfer all or a portion of the
economic consequences associated with the ownership of Common Stock, for a
period of 90 days after the date of the Underwriting Agreement.
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 Underwriters by Cahill Gordon & Reindel (a
partnership including a professional corporation), New York, New York. Cahill
Gordon & Reindel will rely as to all matters of Maryland law on the opinion of
Goodwin, Procter & Hoar LLP, Boston, Massachusetts.
S-26
<PAGE>
PROSPECTUS
$400,000,000
TRINET CORPORATE REALTY TRUST, INC.
DEBT SECURITIES
PREFERRED STOCK
COMMON STOCK
---------------
TriNet Corporate Realty Trust, Inc. ("TriNet" or the "Company") may offer
from time to time in one or more series (i) its unsecured debt securities
("Debt Securities"), (ii) shares of its preferred stock, $.01 par value per
share ("Preferred Stock") and (iii) shares of its common stock, $.01 par value
per share ("Common Stock"), with an aggregate public offering price of up to
$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 ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
---------------
The date of this Prospectus is January 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
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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.
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.
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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.
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
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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 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;
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(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 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;
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(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.
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Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt
Securities at the corporate trust office of the applicable Trustee or at the
office of any transfer agent designated by the Company for such purpose. In
addition, subject to certain limitations imposed upon Debt Securities issued
in book-entry form, the Debt Securities of any series may be surrendered for
registration of transfer or exchange thereof at the corporate trust office of
the applicable Trustee or at the office of any transfer agent designated by
the Company for such purpose. Every Debt Security in registered form
surrendered for registration of transfer or exchange must be duly endorsed or
accompanied by a written instrument of transfer, and the person requesting
such action must provide evidence of title and identity satisfactory to the
applicable Trustee or transfer agent. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If the applicable Prospectus
Supplement refers to any transfer agent (in addition to the applicable
Trustee) initially designated by the Company with respect to any series of
Debt Securities, the Company may at any time rescind the designation of any
such transfer agent or approve a change in the location through which any such
transfer agent acts, except that the Company will be required to maintain a
transfer agent in each place of payment for such series. The Company may at
any time designate additional transfer agents with respect to any series of
Debt Securities.
Neither the Company nor any Trustee shall be required to (a) issue, register
the transfer of or exchange Debt Securities of any series during a period
beginning at the opening of business 15 days before the selection of any Debt
Securities for redemption and ending at the close of business on the day of
mailing of the notice of redemption; (b) register the transfer of or exchange
any Debt Security, or portion thereof, so selected for redemption, in whole or
in part, except the unredeemed portion of any Debt Security being redeemed in
part; or (c) issue, register the transfer of or exchange any Debt Security
that has been surrendered for repayment at the option of the holder, except
the portion, if any, of such Debt Security not to be so repaid.
Payment in respect of Debt Securities in bearer form will be made in the
currency and in the manner designated in the applicable Prospectus Supplement,
subject to any applicable laws and regulations, at such paying agencies
outside the United States as the Company may appoint from time to time. The
paying agents outside the United States, if any, initially appointed by the
Company for a series of Debt Securities will be named in the Prospectus
Supplement. Unless otherwise provided in the applicable Prospectus Supplement,
the Company may at any time designate additional paying agents or rescind the
designation of any paying agents, except that, if Debt Securities of a series
are issuable in registered form, the Company will be required to maintain at
least one paying agent in each place of payment for such series and if Debt
Securities of a series are issuable in bearer form, the Company will be
required to maintain at least one paying agent in a place of 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.
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CERTAIN COVENANTS
The applicable Prospectus Supplement will describe any material covenants in
respect of a series of Debt Securities that are not described in this
Prospectus. Unless otherwise indicated in the applicable Prospectus
Supplement, Senior Debt Securities will include the following covenants of the
Company:
Existence. Except as permitted under "--Merger, Consolidation or Sale of
Assets," the Indentures will require the Company to do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (by articles of incorporation, by-laws and statute) and
franchises; provided, however, that the Company shall not be required to
preserve any right or franchise if its Board of Directors determines that the
preservation thereof is no longer desirable in the conduct of its business.
Maintenance of Properties. The Indentures will require the Company to cause
all of its material properties used or useful in the conduct of its business
or the business of any subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements, betterments
and improvements thereof, all as in the judgment of the Company may be
necessary so that the business carried on in connection therewith may be
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
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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 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.
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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 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.
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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
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whole of the assets of such person or only to a portion thereof), (ii)
evidenced by notes, debentures or similar instruments (including purchase
money obligations) given in connection with the acquisition of any property or
assets (other than trade accounts payable for inventory or similar property
acquired in the ordinary course of business), including securities, for the
payment of which such person is liable, directly or indirectly, or the payment
of which is secured by a lien, charge or encumbrance on property or assets of
such person, (iii) for goods, materials or services purchased in the ordinary
course of business (other than trade accounts payable arising in the ordinary
course of business), (iv) with respect to letters of credit or bankers
acceptances issued for the account of such person or performance bonds, (v)
for the payment of money relating to a Capitalized Lease Obligation (as
defined in the Indenture) or (vi) under interest rate swaps, caps or similar
agreements and foreign exchange contracts, currency swaps or similar
agreements; (b) any liability of others of the kind described in the preceding
clause (a) which such person has guaranteed or which is otherwise its legal
liability; and (c) any and all deferrals, renewals, extensions and refunding
of, or amendments, modifications or supplements to, any liability of the kind
described in any of the preceding clauses (a) or (b).
"Senior Indebtedness" means Indebtedness of the Company, whether outstanding
on the date of issue of any Subordinated Debt Securities or thereafter
created, incurred, assumed or guaranteed by the Company, other than the
following: (a) any Indebtedness as to which, in the instrument evidencing such
Indebtedness or pursuant to which such Indebtedness was issued, it is
expressly provided that such Indebtedness is subordinate in right of payment
to all indebtedness of the Company not expressly subordinated to such
Indebtedness; (b) any Indebtedness which by its terms refers explicitly to the
Subordinated Debt Securities and states that such Indebtedness shall not be
senior, shall be pari passu or shall be subordinated in right of payment to
the Subordinated Debt Securities; and (c) with respect to any series of
Subordinated Debt Securities, any Indebtedness of the Company evidenced by
Subordinated Debt Securities of the same or of another series. Notwithstanding
anything to the contrary in the foregoing, Senior Indebtedness shall not
include: (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
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which such event of default shall have been cured or waived or (ii) 180 days
from the date such notice is received. Notwithstanding the foregoing, only one
payment blockage notice with respect to the same event of default or any other
events of default existing and known to the person giving such notice at the
time of such notice on the same issue of Senior Indebtedness may be given
during any period of 360 consecutive days. No new Payment Blockage Period may
be commenced by the holders of Senior Indebtedness during any period of 360
consecutive days unless all events of default which triggered the preceding
Payment Blockage Period have been cured or waived. Upon any distribution of
its assets in connection with any dissolution, winding-up, liquidation or
reorganization of the Company, all Senior Indebtedness must be paid in full in
cash before the holders of the Subordinated Debt Securities are entitled to
any payments whatsoever.
The Subordinated Indenture does not restrict the amount of Senior
Indebtedness or other indebtedness of the Company or any Subsidiary. As a
result of these subordination provisions, in the event of the Company's
insolvency, holders of the Subordinated Debt Securities may recover ratably
less than general creditors of the Company.
If this Prospectus is being delivered in connection with a series of
Subordinated Debt Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Indebtedness outstanding as of the end of the Company's most
recent fiscal quarter.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company will be permitted, at its option, to discharge certain obligations to
holders of any series of Debt Securities issued under any Indenture that have
not already been delivered to the applicable Trustee for cancellation and that
either have become due and payable or will become due and payable within one
year (or scheduled for redemption within one year) by irrevocably depositing
with the applicable Trustee, in trust, funds in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable in an amount sufficient to pay the entire indebtedness
on such Debt Securities in respect of principal (and premium or Make-Whole
Amount, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the stated maturity or
redemption date, as the case may be.
The Indentures will provide that, unless otherwise indicated in the
applicable Prospectus Supplement, the Company may elect either (a) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of such
Debt Securities, and to hold moneys for payment in trust) ("defeasance") or
(b) to be 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
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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 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.
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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.
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
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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.
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
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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.
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TERMS
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Articles of Incorporation and Bylaws
and any applicable amendment to the Articles of Incorporation designating
terms of a series of Preferred Stock (a "Designating Amendment").
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall
accumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred Stock;
(7) The provision for redemption, if applicable, of such Preferred Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into Common Stock, including the conversion price
(or manner of calculation thereof);
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(11) A discussion of federal income tax considerations applicable to such
Preferred Stock;
(12) The relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company;
(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
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at such rates and on such dates as will be set forth in the applicable
Prospectus Supplement. Each such dividend shall be payable to holders of
record as they appear on the share transfer books of the Company on such
record dates as shall be fixed by the Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or non-
cumulative, as provided in the applicable Prospectus Supplement. Dividends, if
cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company
fails to declare a dividend payable on a dividend payment date on any series
of the Preferred Stock for which dividends are non- cumulative, then the
holders of such series of the Preferred Stock will have no right to receive a
dividend in respect of the dividend period ending on such dividend payment
date, and the Company will have no obligation to pay the dividend accrued for
such period, whether or not dividends on such series are declared payable on
any future dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company
of any other series ranking, as to dividends, on a parity with or junior to
the Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for such payment on the Preferred Stock
of such series for all past dividend periods and the then current dividend
period or (ii) if such series of Preferred Stock does not have a cumulative
dividend, full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Stock of
such series. When dividends are not paid in full (or a sum sufficient for such
full payment is not so set apart) upon Preferred Stock of any series and the
shares of any other series of Preferred Stock ranking on a parity as to
dividends with the Preferred Stock of such series, all dividends declared upon
Preferred Stock of such series and any other series of Preferred Stock ranking
on a parity as to dividends with such Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share of Preferred Stock of
such series and such other series of Preferred Stock shall in all cases bear
to each other the same ratio that accrued dividends per share on the Preferred
Stock of such series (which shall not include any accumulation in respect of
unpaid dividends for prior dividend periods if such Preferred Stock does not
have a cumulative dividend) and such other series of Preferred Stock bear to
each other. No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments on Preferred Stock of such
series which may be in arrears.
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.
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REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and
at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(which shall not, if such Preferred Stock does not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in
cash or other property, as specified in the applicable Prospectus Supplement.
If the redemption price for Preferred Stock of any series is payable only from
the net proceeds of the issuance of shares of capital stock of the Company,
the terms of such Preferred Stock may provide that, if no such shares of
capital stock shall have been issued or to the extent the net proceeds from
any issuance are insufficient to pay in full the aggregate redemption price
then due, such Preferred Stock shall automatically and mandatorily be
converted into the applicable shares of capital stock of the Company pursuant
to conversion provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Stock has
a cumulative dividend, full cumulative dividends on all shares of such series
of Preferred Stock shall have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period, and (ii)
if a series of Preferred Stock does not have a cumulative dividend, full
dividends on all shares of the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend
period, no shares of such series of Preferred Stock shall be redeemed unless
all outstanding shares of Preferred Stock of such series are simultaneously
redeemed; provided, however, that the foregoing shall not prevent the purchase
or acquisition of Preferred Stock of such series to preserve the REIT status
of the Company or pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding shares of Preferred Stock of such series.
In addition, unless (i) if such series of Preferred Stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of such series
of Preferred Stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period, and (ii)
if such series of Preferred Stock does not have a cumulative dividend, full
dividends 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
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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.
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,
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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.
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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 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.
25
<PAGE>
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
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
26
<PAGE>
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.
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.
27
<PAGE>
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.
28
<PAGE>
[Pictures of the following properties of TriNet Corporate Realty Trust, Inc.:
Lucent Technologies Inc., Olympus America Inc., Microsoft Corporation, AT&T
Capital Corporation, Nissan Motor Acceptance Corporation and Lever Brothers
Company]
<PAGE>
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NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY IN-
FORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCOR-
PORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PRO-
SPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRIT-
ERS. 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
PROSPECTUS SUPPLEMENT
<S> <C>
Prospectus Supplement Summary.............................................. S-3
Risk Factors............................................................... S-9
Price Range of Common Stock and Distributions.............................. S-13
Use of Proceeds............................................................ S-13
Capitalization............................................................. S-14
The Company................................................................ S-15
The Properties............................................................. S-18
Management................................................................. S-21
Underwriting............................................................... S-25
Legal Matters.............................................................. S-26
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..................................... 4
Description of Debt Securities............................................. 4
Description of Preferred Stock............................................. 18
Description of Common Stock................................................ 23
Restrictions on Transfers of Capital Stock................................. 25
Federal Income Tax Considerations.......................................... 26
Plan of Distribution....................................................... 26
Legal Matters.............................................................. 27
Experts.................................................................... 28
</TABLE>
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6,000,000 SHARES
[LOGO OF TRINET APPEARS HERE]
TRINET CORPORATE REALTY
TRUST, INC.
COMMON STOCK
----------------------------------
PROSPECTUS SUPPLEMENT
----------------------------------
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
J.P. MORGAN & CO.
SMITH BARNEY INC.
FEBRUARY 25, 1997
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