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Filed pursuant to Rule 424(b)(2)
Registration No. 333-42717
Prospectus Supplement to Prospectus dated December 30, 1997
800,000 SHARES
TRINET CORPORATE REALTY TRUST, INC.
COMMON STOCK
_____________
This Prospectus Supplement and the attached Prospectus relate to the
offering and sale of 800,000 shares of the common stock, par value $.01 per
share (the "Common Stock"), of TriNet Corporate Realty Trust, Inc. (the
"Company") to several investors at a purchase price of $37 1/2 per share, for an
aggregate purchase price of $30,000,000.
The Company intends to use the net cash proceeds from the sale of the
Common Stock offered hereby, which are estimated to be approximately $29.99
million, to repay borrowings under the Acquisition Facility, which were incurred
principally to finance acquisition activities. The Acquisition Facility matures
on October 8, 1999 and currently bears a weighted average interest rate of
7.51% per annum. Any net proceeds not used to retire such indebtedness will be
used for general corporate purposes.
The date of this Prospectus Supplement is March 13, 1998
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PROSPECTUS
$500,000,000
TRINET CORPORATE REALTY TRUST, INC.
DEBT SECURITIES
PREFERRED STOCK
DEPOSITARY SHARES REPRESENTING PREFERRED STOCK
COMMON STOCK
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TriNet Corporate Realty Trust, Inc. ("TriNet" or the "Company") may offer
from time to time in one or more series (i) its unsecured debt securities
("Debt Securities"), (ii) shares of its preferred stock, $.01 par value per
share ("Preferred Stock"), (iii) Preferred Stock represented by depositary
shares ("Depositary Shares") and (iv) shares of its common stock, $.01 par
value per share ("Common Stock"), with an aggregate public offering price of
up to $500,000,000 (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, Depositary Shares 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;
(iii) in the case of Depositary Shares, the fractional shares of Preferred
Stock represented by each such Depositary Share and (iv) 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.
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THE DATE OF THIS PROSPECTUS IS DECEMBER 30, 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,
the Series B Preferred Stock and the Series C 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.
In accordance with Section 2-210 of the Maryland General Corporation Law, as
amended, the Board of Directors has authorized the issuance of some or all of
the shares of any or all of its classes or series of capital stock without
certificates. In addition, the Company has the authority to designate and
issue more than one class or series of capital stock having various
preferences, conversion and other rights, voting powers, restrictions,
limitations as to dividends, qualifications, and terms and conditions of
redemption. See "Description of Preferred Stock" and "Description of Common
Stock." The Company's Articles of Incorporation impose limitations on the
ownership and transfer of the Company's capital stock. See "Restrictions on
Transfers of Capital Stock." The Company will furnish a full statement of the
relative rights and preferences of each class or series of capital stock of
the Company which has been so designated and any restrictions on the ownership
or transfer of capital stock of the Company to any stockholder upon request
and without charge. Written requests for such copies should be directed to:
TriNet Corporate Realty Trust, Inc., Four Embarcadero Center, Suite 3150, San
Francisco, California 94111, Attention: Chief Financial Officer.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the Commission
pursuant to the Exchange Act are incorporated by reference in this Prospectus:
(i) Annual Report on Form 10-K for the fiscal year ended December 31, 1996,
(ii) Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31,
1997, June 30, 1997 and September 30, 1997, (iii) the Company's Current Report
on Form 8-K filed with the Commission on February 5, 1997, (iv) the Company's
Current Report on Form 8-K filed with the Commission on March 7, 1997, (v) the
Company's Current Report on Form 8-K filed with the Commission on March 28,
1997, as amended by the Company's Current Report on Form 8-K/A filed with the
Commission on April 30, 1997, (vi) the Company's Current Report on Form 8-K
filed with the Commission on July 8, 1997, (vii) the Company's Current Report
on
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Form 8-K filed with the Commission on July 23, 1997, (viii) the Company's
Current Report on Form 8-K filed with the Commission on September 25, 1997,
(ix) the Company's Current Report on Form 8-K filed with the Commission on
October 3, 1997, as amended by the Company's Current Report on Form 8-K/A
filed with the Commission on October 6, 1997, (x) the Company's Current Report
on Form 8-K filed with the Commission on October 21, 1997, (xi) the
description of the Company's Common Stock contained in the Company's
Registration Statement on Form 8-A dated April 1, 1993, (xii) 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, (xiii) 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 and
(xiv) the Company's Registration Statement on Form 8-A dated October 3, 1997.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering of all Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. The Company will provide, without charge, to
each person, including any beneficial owner, to whom a copy of this Prospectus
is delivered, at the request of such person, a copy of any or all of the
documents incorporated herein by reference (other than exhibits thereto,
unless such exhibits are specifically incorporated by reference into such
documents). Written requests for such copies should be directed to Geoffrey M.
Dugan, Vice President and General Counsel, 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
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 16,
1997, TriNet owned 106 properties totaling approximately 16 million square
feet in 25 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.
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 judgment),
(iv) guarantees from parent companies or other parties, (v) additional
security through recourse to other assets or letters of credit and (vi) cross-
default provisions in leases in multiple property transactions.
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The Company was incorporated under the laws of the State of Maryland on
March 4, 1993. The Company's principal executive offices are located at Four
Embarcadero Center, Suite 3150, San Francisco, California 94111, and its
telephone number is (415) 391-4300. The Company also maintains regional
offices in Florida and Pennsylvania.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of Securities for
general corporate purposes, which may include the acquisition of additional
properties, the repayment of outstanding debt or the improvement of certain
properties already in the Company's portfolio.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The Company's ratios of earnings to combined fixed charges and preferred
stock dividends for the nine months ended September 30, 1997 and the year
ended December 31, 1996 were 2.29x and 1.78x, respectively. The Company's
historical ratios of earnings to fixed charges for the nine months ended
September 30, 1997 and for the years ended December 31, 1996, 1995, 1994, 1993
and 1992 were 3.00x, 2.05x, 1.97x, 2.65x, 2.17x and 1.12x, respectively.
The ratios of (i) earnings to fixed charges and (ii) earnings to combined
fixed charges and preferred stock dividends were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations plus fixed charges (excluding preferred stock
dividends). Fixed charges consist of interest expense and the amortization of
debt issuance costs, and with respect to the ratio of earnings to combined
fixed charges and preferred stock dividends, preferred stock dividend
requirements. For the periods presented, the Company had no capitalized
interest.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be direct unsecured obligations of the Company and
may be either senior Debt Securities ("Senior Debt Securities") or
subordinated Debt Securities ("Subordinated Debt Securities"). The Debt
Securities will be issued under one or more indentures, each dated as of a
date prior to the issuance of the Debt Securities to which it relates. Senior
Debt Securities and Subordinated Debt Securities may be issued pursuant to
separate indentures (respectively, a "Senior Indenture" and a "Subordinated
Indenture"), in each case between the Company and a trustee (a "Trustee"),
which may be the same Trustee, and in the form that has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part,
subject to such amendments or supplements as may be adopted from time to time.
The Senior Indenture and the Subordinated Indenture, as amended or
supplemented from time to time, are sometimes hereinafter referred to
collectively as the "Indentures." The Indentures will be subject to and
governed by the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"). The statements made under this heading relating to the Debt Securities
and the Indentures are summaries of the anticipated provisions thereof, do not
purport to be complete and are qualified in their entirety by reference to the
Indentures and such Debt Securities.
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
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will rank equally with all other unsecured and unsubordinated indebtedness of
the Company. The indebtedness represented by Subordinated Debt Securities will
be subordinated in right of payment to the prior payment in full of Senior
Indebtedness of the Company as described below under "--Subordination." The
particular terms of the Debt Securities offered by a Prospectus Supplement
will be described in the applicable Prospectus Supplement, along with any
applicable modifications of or additions to the general terms of the Debt
Securities as described herein and in the applicable Indenture and any
applicable federal income tax considerations. Accordingly, for a description
of the terms of any series of Debt Securities, reference must be made to both
the Prospectus Supplement relating thereto and the description of the Debt
Securities set forth in this Prospectus.
Except as set forth in any Prospectus Supplement, the Debt Securities may be
issued without limit as to aggregate principal amount, in one or more series,
in each case as established from time to time by the Company or as set forth
in the applicable Indenture or in one or more indentures supplemental to such
Indenture. All Debt Securities of one series need not be issued at the same
time and, unless otherwise provided, a series may be reopened, without the
consent of the holders of the Debt Securities of such series, for issuance of
additional Debt Securities of such series.
Each Indenture will provide that the Company may, but need not, designate
more than one Trustee thereunder, each with respect to one or more series of
Debt Securities. Any Trustee under an Indenture may resign or be removed with
respect to one or more series of Debt Securities, and a successor Trustee may
be appointed to act with respect to such series. In the event that two or more
persons are acting as Trustee with respect to different series of Debt
Securities, each such Trustee shall be a Trustee of a trust under the
applicable Indenture separate and apart from the trust administered by any
other Trustee, and, except as otherwise indicated herein, any action described
herein to be taken by each Trustee may be taken by each such Trustee with
respect to, and only with respect to, the one or more series of Debt
Securities for which it is Trustee under the applicable Indenture.
The following summaries set forth certain general terms and provisions of
the Indentures and the Debt Securities. The Prospectus Supplement relating to
the series of Debt Securities being offered will contain further terms of such
Debt Securities, including the following specific terms:
(1) the title of such Debt Securities and whether such Debt Securities
are Senior Debt Securities or Subordinated Debt Securities;
(2) the aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) the price (expressed as a percentage of the principal amount thereof)
at which such Debt Securities will be issued and, if other than the
principal amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity thereof, or (if
applicable) the portion of the principal amount of such Debt Securities
that is convertible into Common Stock or Preferred Stock, or the method by
which any such portion shall be determined;
(4) if convertible, the terms on which such Debt Securities are
convertible, including the initial conversion price or rate and the
conversion period and any applicable limitations, in connection with the
preservation of the Company's status as a REIT, on the ownership or
transferability of the Common Stock or Preferred Stock receivable on
conversion;
(5) the date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(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
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payable, and the basis upon which interest shall be calculated if other
than that of a 360-day year of twelve 30-day months;
(8) the place or places where the principal of (and premium or Make-Whole
Amount, (if any) and interest, if any, on such Debt Securities will be
payable, where such Debt Securities may be surrendered for registration of
transfer or exchange and where notices or demands to or upon the Company in
respect of such Debt Securities and the applicable Indenture may be served;
(9) the period or periods, if any, within which, the price or prices at
which and the other terms and conditions upon which such Debt Securities
may, pursuant to any optional or mandatory redemption provisions, be
redeemed, in whole or in part, at the option of the Company;
(10) the obligation, if any, of the Company to redeem, repay or purchase
such Debt Securities pursuant to any sinking fund or analogous provision or
at the option of a holder thereof, and the period or periods within which,
the price or prices at which and the other terms and conditions upon which
such Debt Securities will be redeemed, repaid or purchased, as a whole or
in part, pursuant to such obligation;
(11) if other than U.S. dollars, the currency or currencies in which such
Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(12) whether the amount of payments of principal of (and premium or Make-
Whole Amount, if any, including any amount due upon redemption, if any) or
interest, if any, on such Debt Securities may be determined with reference
to an index, formula or other method (which index, formula or method may,
but need not be, based on the yield on or trading price of other
securities, including U.S. Treasury securities, or on a currency,
currencies, currency unit or units, or composite currency or currencies)
and the manner in which such amounts shall be determined;
(13) whether the principal of (and premium or Make-Whole Amount, if any)
or interest on the Debt Securities of the series are to be payable, at the
election of the Company or a holder thereof, in a currency or currencies,
currency unit or units or composite currency or currencies other than that
in which such Debt Securities are denominated or stated to be payable, the
period or periods within which, and the terms and conditions upon which,
such election may be made, and the time and manner of, and identity of the
exchange rate agent with responsibility for, determining the exchange rate
between the currency or currencies, currency unit or units or composite
currency or currencies in which such Debt Securities are denominated or
stated to be payable and the currency or currencies, currency unit or units
or composite currency or currencies in which such Debt Securities are to be
so payable;
(14) provisions, if any, granting special rights to the holders of Debt
Securities of the series upon the occurrence of such events as may be
specified;
(15) any deletions from, modifications of or additions to the Events of
Default or covenants of the Company with respect to Debt Securities of the
series, whether or not such Events of Default or covenants are consistent
with the Events of Default or covenants described herein;
(16) whether and under what circumstances the Company will pay any
additional amounts on such Debt Securities in respect of any tax,
assessment or governmental charge and, if so, whether the Company will have
the option to redeem such Debt Securities in lieu of making such payment;
(17) whether Debt Securities of the series are to be issuable as
Registered Securities, Bearer Securities (with or without coupons) or both,
any restrictions applicable to the offer, sale or delivery of Bearer
Securities and the terms upon which Bearer Securities of the series may be
exchanged for Registered Securities of the series and vice versa (if
permitted by applicable laws and regulations), whether any Debt Securities
of the series are to be issuable initially in temporary global form and
whether any Debt Securities of the series are to be issuable in permanent
global form with or without coupons and, if so, whether beneficial owners
of interests in any such permanent Global Security (as defined) may
exchange such interests for Debt Securities of such series and of like
tenor of any authorized form and denomination and the circumstances under
which any such exchanges may occur, if other than in the manner provided in
the
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Indenture, and, if Registered Securities of the series are to be issuable
as a Global Security, the identity of the depository for such series;
(18) the date as of which any Bearer Securities of the series and any
temporary Global Security representing outstanding Debt Securities of the
series shall be dated if other than the date of original issuance of the
first Security of the series to be issued;
(19) the Person to whom any interest on any Registered Security of the
series shall be payable, if other than the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the close
of business on the Regular Record Date for such interest, the manner in
which, or the Person to whom, any interest on any Bearer Security of the
series shall be payable, if otherwise than upon presentation and surrender
of the coupons appertaining thereto as they severally mature, and the
extent to which, or the manner in which, any interest payable on a
temporary Global Security on an Interest Payment Date will be paid if other
than in the manner provided in the Indenture;
(20) the applicability, if any, of the defeasance and covenant defeasance
provisions of the Indenture to the Debt Securities of the series;
(21) if the Debt Securities of such series are to be issuable in
definitive form (whether upon original issue or upon exchange of a
temporary Debt Security of such series) only upon receipt of certain
certificates or other documents or satisfaction of other conditions, then
the form and/or terms of such certificates, documents or conditions;
(22) the obligation, if any, of the Company to permit the conversion of
the Debt Securities of such series into Common Stock or Preferred Stock, as
the case may be, and the terms and conditions upon which such conversion
shall be effected (including, without limitation, the initial conversion
price or rate, the conversion period, any adjustment of the applicable
conversion price and any requirements relative to the reservation of such
shares for purposes of conversion); and
(23) any other terms of the series (which terms shall not be inconsistent
with the provisions of the Indenture under which the Debt Securities are
issued).
If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof ("Original Issue Discount Securities").
In such cases, all material U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
Except as may be set forth in any Prospectus Supplement, the Debt Securities
will not contain any provisions that would limit the ability of the Company to
incur indebtedness or that would afford holders of Debt Securities protection
in the event of a highly leveraged or similar transaction involving the
Company or in the event of a change of control. Reference is made to the
applicable Prospectus Supplement for information with respect to any deletions
from, modifications of, or additions to, the events of default or covenants of
the Company that are described below, including any addition of a covenant or
other provision providing event risk or similar protection.
DENOMINATION, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof. Where Debt Securities of any series are issued in
bearer form, the special restrictions and considerations, including special
offering restrictions and 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.
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Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and
interest on any series of Debt Securities will be payable at the corporate
trust office of the applicable Trustee, the address of which will be stated in
the applicable Prospectus Supplement; provided that, at the option of the
Company, payment of interest may be made by check mailed to the address of the
person entitled thereto as it appears in the applicable register for such Debt
Securities or by wire transfer of funds to such person at an account
maintained within the United States.
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security in registered form ("Defaulted
Interest") will forthwith cease to be payable to the holder on the applicable
Regular Record Date and may either be paid to the Person in whose name such
Debt Security is registered at the close of business on a special record date
(the "Special Record Date") for the payment of such Defaulted Interest to be
fixed by the Trustee, in which case notice thereof shall be given to the
holder of such Debt Security not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner, all as
more completely described in the applicable Indenture.
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt
Securities at the corporate trust office of the applicable Trustee or at the
office of any transfer agent designated by the Company for such purpose. In
addition, subject to certain limitations imposed upon Debt Securities issued
in book-entry form, the Debt Securities of any series may be surrendered for
registration of transfer or exchange thereof at the corporate trust office of
the applicable Trustee or at the office of any transfer agent designated by
the Company for such purpose. Every Debt Security in registered form
surrendered for registration of transfer or exchange must be duly endorsed or
accompanied by a written instrument of transfer, and the person requesting
such action must provide evidence of title and identity satisfactory to the
applicable Trustee or transfer agent. No service charge will be made for any
registration of transfer or exchange of any Debt Securities, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith. If the applicable Prospectus
Supplement refers to any transfer agent (in addition to the applicable
Trustee) initially designated by the Company with respect to any series of
Debt Securities, the Company may at any time rescind the designation of any
such transfer agent or approve a change in the location through which any such
transfer agent acts, except that the Company will be required 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.
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MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indentures will provide that the Company may, without the consent of the
holders of any outstanding Debt Securities, consolidate with, or sell, lease
or convey all or substantially all of its assets to, or merge with or into,
any other entity provided that (a) either the Company shall be the continuing
entity, or the successor entity (if other than the Company) formed by or
resulting from any such consolidation or merger or which shall have received
the transfer of such assets is organized under the laws of any domestic
jurisdiction and assumes the Company's obligations to pay principal of (and
premium or Make-Whole Amount, if any) and interest on all of the Debt
Securities and the due and punctual performance and observance of all of the
covenants and conditions contained in such Indenture; (b) immediately after
giving effect to such transaction and treating any indebtedness that becomes
an obligation of the Company or any subsidiary as a result thereof as having
been incurred by the Company or such subsidiary at the time of such
transaction, no Event of Default under such Indenture, and no event which,
after notice or the lapse of time, or both, would become such an Event of
Default, shall have occurred and be continuing; and (c) an officers'
certificate and legal opinion covering such conditions shall be delivered to
each Trustee.
CERTAIN COVENANTS
The applicable Prospectus Supplement will describe any material covenants in
respect of a series of Debt Securities that are not described in this
Prospectus. Unless otherwise indicated in the applicable Prospectus
Supplement, Senior Debt Securities will include the following covenants of the
Company:
Existence. Except as permitted above under "--Merger, Consolidation or Sale
of Assets," the Indentures will require the Company to do or cause to be done
all things necessary to preserve and keep in full force and effect its
corporate existence, rights (by articles of incorporation, by-laws and
statute) and franchises; provided, however, that the Company shall not be
required to preserve any right or franchise if its Board of Directors
determines that the preservation thereof is no longer desirable in the conduct
of its business.
Maintenance of Properties. The Indentures will require the Company to cause
all of its material properties used or useful in the conduct of its business
or the business of any subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and will
cause to be made all necessary repairs, renewals, replacements, betterments
and improvements thereof, all as in the judgment of the Company may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
the Company and its subsidiaries shall not be prevented from selling or
otherwise disposing of their properties for value in the ordinary course of
business.
Insurance. The Indentures will require the Company to cause each of its and
its subsidiaries' insurable properties to be insured against loss or damage at
least equal to their then full insurable value with insurers of recognized
responsibility and, if described in the applicable Prospectus Supplement,
having a specified rating from a recognized insurance rating service.
Payment of Taxes and Other Claims. The Indentures will require the Company
to pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (a) all taxes, assessments and governmental charges levied
or imposed upon it or any subsidiary or upon the income, profits or property
of the Company or any subsidiary and (b) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Company or any subsidiary; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged
any such tax, assessment, charge or claim whose amount, applicability or
validity is being contested in good faith.
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
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payable that continues for a period of 30 days; (b) default in the payment of
the principal of (or premium or Make-Whole Amount, if any, on) any Debt
Security of such series when due and payable; (c) default in making any
sinking fund payment as required for any Debt Security of such series; (d)
default in the performance, or breach, of any other covenant or warranty of
the Company in the applicable Indenture with respect to the Debt Securities of
such series and continuance of such default or breach for a period of 60 days
after written notice as provided in the Indenture; (e) default under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness for
money borrowed by the Company (or by any Subsidiary, the repayment of which
the Company has guaranteed or for which the Company is directly responsible or
liable as obligor or guarantor), having an aggregate principal amount
outstanding of at least $25,000,000, whether such indebtedness now exists or
shall hereafter be created, which default shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, without such
indebtedness having been discharged, or such acceleration having been
rescinded or annulled, within a period of 30 days after written notice to the
Company as provided in the Indenture; (f) certain events of bankruptcy,
insolvency or reorganization, or court appointment of a receiver, liquidator
or trustee of the Company or any Significant Subsidiary; and (g) any other
event of default provided with respect to a particular series of Debt
Securities. The term "Significant Subsidiary" has the meaning ascribed to such
term in Regulation S-X promulgated under the Securities Act.
If an Event of Default under any Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of that series will have the right to
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of, and premium or
Make-Whole Amount, if any, on, all the Debt Securities of that series to be
due and payable immediately by written notice thereof to the Company (and to
the applicable Trustee if given by the holders). However, at any time after
such a declaration of acceleration with respect to Debt Securities of such
series has been made, but before a judgment or decree for payment of the money
due has been obtained by the applicable Trustee, the holders of not less than
a majority in principal amount of outstanding Debt Securities of such series
may rescind and annul such declaration and its consequences if (a) the Company
shall have deposited with the applicable Trustee all required payments of the
principal of (and premium or Make-Whole Amount, if any) and interest on the
Debt Securities of such series, plus certain fees, expenses, disbursements and
advances of the applicable Trustee and (b) all Events of Default, other than
the non-payment of accelerated principal (or specified portion thereof and the
premium or Make-Whole Amount, if any), with respect to Debt Securities of such
series have been cured or waived as provided in such Indenture. The Indentures
will also provide that the holders of not less than a majority in principal
amount of the outstanding Debt Securities of any series may waive any past
default with respect to such series and its consequences, except a default (i)
in the payment of the principal of (or premium or Make-Whole Amount, if any)
or interest on any Debt Security of such series or (ii) in respect of a
covenant or provision contained in the applicable Indenture that cannot be
modified or amended without the consent of the holder of each outstanding Debt
Security affected thereby.
The Indentures will require each Trustee to give notice to the holders of
Debt Securities within 90 days of a default under the applicable Indenture
unless such default shall have been cured or waived; provided, however, that
such Trustee may withhold notice to the holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the 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
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Securities of such series, as well as an offer of indemnity reasonably
satisfactory to it. This provision will not prevent, however, any holder of
Debt Securities from instituting suit for the enforcement of payment of the
principal of (and premium or Make-Whole Amount, if any) and interest on such
Debt Securities at the respective due dates or redemption dates thereof.
The Indentures will provide that, subject to provisions in each Indenture
relating to its duties in case of default, a Trustee will be under no
obligation to exercise any of its rights or powers under an Indenture at the
request or direction of any holders of any series of Debt Securities then
outstanding under such Indenture, unless such holders shall have offered to
the Trustee thereunder reasonable security or indemnity. The holders of not
less than a majority in principal amount of the outstanding Debt Securities of
any series (or of all Debt Securities then outstanding under an Indenture, as
the case may be) shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the applicable Trustee,
or of exercising any trust or power conferred upon such Trustee. However, a
Trustee may refuse to follow any direction which is in conflict with any law
or the applicable Indenture, which may involve such Trustee in personal
liability or which may be unduly prejudicial to the holders of Debt Securities
of such series not joining therein.
Within 120 days after the close of each fiscal year, the Company will be
required to deliver to each Trustee a certificate, signed by one of several
specified officers of the Company, stating whether or not such officer has
knowledge of any default under the applicable Indenture and, if so, specifying
each such default and the nature and status thereof.
MODIFICATION OF THE INDENTURES
Modifications and amendments of an Indenture will be permitted to be made
only with the consent of the holders of not less than a majority in principal
amount of all outstanding Debt Securities issued under such Indenture affected
by such modification or amendment; provided, however, that no such
modification or amendment may, without the consent of the holder of each such
Debt Security affected thereby, (a) change the stated maturity of the
principal of, or any installment of interest (or premium or Make-Whole Amount,
if any) on, any such Debt Security; (b) reduce the principal amount of, or the
rate or amount of interest on, or any premium or Make-Whole Amount payable on
redemption of, any such Debt Security, or reduce the amount of principal of an
Original Issue Discount Security that would be due and payable upon
declaration of acceleration of the maturity thereof or would be provable in
bankruptcy, or adversely affect any right of repayment of the holder of any
such Debt Security; (c) change the place of payment, or the coin or currency,
for payment of principal of, premium or Make-Whole Amount, if any, or interest
on any such Debt Security; (d) impair the right to institute suit for the
enforcement of any payment on or with respect to any such Debt Security; (e)
reduce the above-stated percentage of outstanding Debt Securities of any
series necessary to modify or amend the applicable Indenture, to waive
compliance with certain provisions thereof or certain defaults and
consequences thereunder or to reduce the quorum or voting requirements set
forth in the applicable Indenture; (f) change the currency or currency unit in
which any Debt Security or any premium or interest thereon is payable; (g) in
the case of the Subordinated Indenture, modify the subordination provisions
thereof in a manner adverse to the holders of Subordinated Debt Securities of
any series then outstanding; or (h) modify any of the foregoing provisions or
any of the provisions relating to the waiver of certain past defaults or
certain covenants, except to increase the required percentage to effect such
action or to provide that certain other provisions may not be modified or
waived without the consent of the holder of such Debt Security.
The holders of a majority in aggregate principal amount of the outstanding
Debt Securities of each series may, on behalf of all holders of Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive covenants of the applicable
Indenture.
Modifications and amendments of an Indenture will be permitted to be made by
the Company and the respective Trustee thereunder without the consent of any
holder of Debt Securities for any of the following purposes: (a) to evidence
the succession of another person to the Company as obligor under such
Indenture; (b)
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to add to the covenants of the Company for the benefit of the holders of all
or any series of Debt Securities or to surrender any right or power conferred
upon the Company in such Indenture; (c) to add events of default for the
benefit of the holders of all or any series of Debt Securities; (d) to add or
change any provisions of an Indenture to facilitate the issuance of, or to
liberalize certain terms of, Debt Securities in bearer form, or to permit or
facilitate the issuance of Debt Securities in uncertificated form, provided
that such action shall not adversely affect the interests of the holders of
the Debt Securities of any series in any material respect; (e) to change or
eliminate any provisions of an Indenture, provided that any such change or
elimination shall become effective only when there are no Debt Securities
outstanding of any series created prior thereto which are entitled to the
benefit of such provision; (f) to secure the Debt Securities; (g) to establish
the form or terms of Debt Securities of any series; (h) to provide for the
acceptance of appointment by a successor Trustee or facilitate the
administration of the trusts under an Indenture by more than one Trustee; (i)
to cure any ambiguity, defect or inconsistency in an Indenture, provided that
such action shall not adversely affect the interests of holders of Debt
Securities of any series issued under such Indenture; or (j) to supplement any
of the provisions of an Indenture to the extent necessary to permit or
facilitate defeasance and discharge of any series of such Debt Securities,
provided that such action shall not adversely affect the interests of the
holders of the outstanding Debt Securities of any series in any material
respect.
The Indentures will provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (a) the principal amount of an Original Issue Discount Security
that shall be deemed to be outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination
upon declaration of acceleration of the maturity thereof, (b) the principal
amount of any Debt Security denominated in a foreign currency that shall be
deemed outstanding shall be the U.S. dollar equivalent, determined on the
issue date for such Debt Security, of the principal amount (or, in the case of
an Original Issue Discount Security, the U.S. dollar equivalent on the issue
date of such Debt Security of the amount determined as provided in (a) above),
(c) the principal amount of an indexed security that shall be deemed
outstanding shall be the principal face amount of such indexed security at
original issuance, unless otherwise provided with respect to such indexed
security pursuant such Indenture, and (d) Debt Securities owned by the Company
or any other obligor upon the Debt Securities or any affiliate of the Company
or of such other obligor shall be disregarded.
The Indentures will contain provisions for convening meetings of the holders
of Debt Securities of a series. A meeting will be permitted to be called at
any time by the applicable Trustee, and also, upon request, by the Company or
the holders of at least 25% in principal amount of the outstanding Debt
Securities of such series, in any such case upon notice given as provided in
such Indenture. Except for any consent that must be given by the holder of
each Debt Security affected by certain modifications and amendments of an
Indenture, any resolution presented at a meeting or adjourned meeting duly
reconvened at which a quorum is present may be adopted by the affirmative vote
of the holders of a majority in principal amount of the outstanding Debt
Securities of that series; provided, however, that, except as referred to
above, any resolution with respect to any request, demand, authorization,
direction, notice, consent, waiver or other action that may be made, given or
taken by the holders of a specified percentage, which is less than a majority,
in principal amount of the outstanding Debt Securities of a series may be
adopted at a meeting or adjourned meeting or adjourned meeting duly reconvened
at which a quorum is present by the affirmative vote of the holders of such
specified percentage in principal amount of the outstanding Debt Securities of
that series. Any resolution passed or decision taken at any meeting of holders
of Debt Securities of any series duly held in accordance with an Indenture
will be binding on all holders of Debt Securities of that series. The quorum
at any meeting called to adopt a resolution, and at any reconvened meeting,
will be persons holding or representing a majority in principal amount of the
outstanding Debt Securities of a series; provided, however, that if any action
is to be taken at such meeting with respect to a consent or waiver which may
be given by the holders of not less than a specified percentage in principal
amount of the outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the outstanding
Debt Securities of such series will constitute a quorum.
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Notwithstanding the foregoing provisions, the Indentures will provide that
if any action is to be taken at a meeting of holders of Debt Securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver and other action that such Indenture expressly provides may be
made, given or taken by the holders of a specified percentage in principal
amount of all outstanding Debt Securities affected thereby, or of the holders
of such series and one or more additional series: (a) there shall be no
minimum quorum requirement for such meeting and (b) the principal amount of
the outstanding Debt Securities of such series that vote in favor of such
request, demand, authorization, direction, notice, consent, waiver or other
action shall be taken into account in determining whether such request,
demand, authorization, direction, notice, consent, waiver or other action has
been made, given or taken under such Indenture.
CERTAIN DEFINITIONS
"Indebtedness" means, with respect to any person, (a) any obligation of such
person to pay the principal of, premium, if any, interest on (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to such person, whether or not a claim for such post-
petition interest is allowed in such proceeding), penalties, reimbursement or
indemnification amounts, fees, expenses or other amounts relating to any
indebtedness of such person (i) for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such person or only to
a portion thereof), (ii) evidenced by notes, debentures or similar instruments
(including purchase money obligations) given in connection with the
acquisition of any property or assets (other than trade accounts payable for
inventory or similar property acquired in the ordinary course of business),
including securities, for the payment of which such person is liable, directly
or indirectly, or the payment of which is secured by a lien, charge or
encumbrance on property or assets of such person, (iii) for goods, materials
or services purchased in the ordinary course of business (other than trade
accounts payable arising in the ordinary course of business), (iv) with
respect to letters of credit or bankers acceptances issued for the account of
such person or performance bonds, (v) for the payment of money relating to a
Capitalized Lease Obligation (as defined in the Indenture) or (vi) under
interest rate swaps, caps or similar agreements and foreign exchange
contracts, currency swaps or similar agreements; (b) any liability of others
of the kind described in the preceding clause (a) which such person has
guaranteed or which is otherwise its legal liability; and (c) any and all
deferrals, renewals, extensions and refunding of, or amendments, modifications
or supplements to, any liability of the kind described in any of the preceding
clauses (a) or (b).
"Senior Indebtedness" means Indebtedness of the Company, whether outstanding
on the date of issue of any Subordinated Debt Securities or thereafter
created, incurred, assumed or guaranteed by the Company, other than the
following: (a) any Indebtedness as to which, in the instrument evidencing such
Indebtedness or pursuant to which such Indebtedness was issued, it is
expressly provided that such Indebtedness is subordinate in right of payment
to all indebtedness of the Company not expressly subordinated to such
Indebtedness; (b) any Indebtedness which by its terms refers explicitly to the
Subordinated Debt Securities and states that such Indebtedness shall not be
senior, shall be pari passu or shall be subordinated in right of payment to
the Subordinated Debt Securities; and (c) with respect to any series of
Subordinated Debt Securities, any Indebtedness of the Company evidenced by
Subordinated Debt Securities of the same or of another series. Notwithstanding
anything to the contrary in the foregoing, Senior Indebtedness shall not
include: (i) Indebtedness of or amounts owed by the Company for compensation
to employees, or for goods, materials and services purchased in the ordinary
course of business or (ii) Indebtedness of the Company to a subsidiary of the
Company.
SUBORDINATION
Unless otherwise provided in the applicable Prospectus Supplement,
Subordinated Debt Securities will be subject to the following subordination
provisions.
The payment of the principal of, interest on, or any other amounts due on,
the Subordinated Debt Securities will be subordinated in right of payment to
the prior payment in cash in full of all Senior Indebtedness of the Company.
No payment on account of the principal of, redemption of, interest on or any
other amounts due on
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the Subordinated Debt Securities and no redemption, purchase or other
acquisition of the Subordinated Debt Securities may be made, unless (a) full
payment in cash of amounts then due for principal, sinking funds, interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company, whether or not a
claim for such post-petition interest is allowed in such proceeding),
penalties, reimbursement or indemnification amounts, fees and expenses, and of
all other amounts then due on all Senior Indebtedness shall have been made or
duly provided for pursuant to the terms of the instrument governing such
Senior Indebtedness, and (b) at the time of, or immediately after giving
effect to, any such payment, redemption, purchase or other acquisition, there
shall not exist under any Senior Indebtedness or any agreement pursuant to
which any Senior Indebtedness has been issued, any default which shall not
have been cured or waived and which shall have resulted in the full amount of
such Senior Indebtedness being declared due and payable and not rescinded. In
addition, the Subordinated Indenture provides that, if holders of any Senior
Indebtedness notify the Company and the Subordinated Trustee that a default
has occurred giving the holders of such Senior Indebtedness the right to
accelerate the maturity thereof, no payment on account of principal, sinking
fund or other redemption, interest or any other amounts due on the
Subordinated Debt Securities and no purchase, redemption or other acquisition
of the Subordinated Debt Securities will be made for the period (the "Payment
Blockage Period") commencing on the date such notice is received and ending on
the earlier of (i) the date on which such event of default shall have been
cured or waived or (ii) 180 days from the date such notice is received.
Notwithstanding the foregoing, only one payment blockage notice with respect
to the same event of default or any other events of default existing and known
to the person giving such notice at the time of such notice on the same issue
of Senior Indebtedness may be given during any period of 360 consecutive days.
No new Payment Blockage Period may be commenced by the holders of Senior
Indebtedness during any period of 360 consecutive days unless all events of
default which triggered the preceding Payment Blockage Period have been cured
or waived. Upon any distribution of its assets in connection with any
dissolution, winding-up, liquidation or reorganization of the Company, all
Senior Indebtedness must be paid in full in cash before the holders of the
Subordinated Debt Securities are entitled to any payments whatsoever.
The Subordinated Indenture does not restrict the amount of Senior
Indebtedness or other indebtedness of the Company or any Subsidiary. As a
result of these subordination provisions, in the event of the Company's
insolvency, holders of the Subordinated Debt Securities may recover ratably
less than general creditors of the Company.
If this Prospectus is being delivered in connection with a series of
Subordinated Debt Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Indebtedness outstanding as of the end of the Company's most
recent fiscal quarter.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company will be permitted, at its option, to discharge certain obligations to
holders of any series of Debt Securities issued under any Indenture that have
not already been delivered to the applicable Trustee for cancellation and that
either have become due and payable or will become due and payable within one
year (or scheduled for redemption within one year) by irrevocably depositing
with the applicable Trustee, in trust, funds in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable in an amount sufficient to pay the entire indebtedness
on such Debt Securities in respect of principal (and premium or Make-Whole
Amount, if any) and interest to the date of such deposit (if such Debt
Securities have become due and payable) or to the stated maturity or
redemption date, as the case may be.
The Indentures will provide that, unless otherwise indicated in the
applicable Prospectus Supplement, the Company may elect either (a) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of
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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 above under "--Certain Covenants") or, if provided in the applicable
Prospectus Supplement, its obligations with respect to any other covenant, and
any omission to comply with such obligations shall not constitute an Event of
Default with respect to such Debt Securities ("covenant defeasance"), in
either case upon the irrevocable deposit by the Company with the applicable
Trustee, in trust, of an amount, in such currency or currencies, currency unit
or units or composite currency or currencies in which such Debt Securities are
payable at stated maturity, or Government Obligations (as defined below), or
both, applicable to such Debt Securities, which through the scheduled payment
of principal and interest in accordance with their terms will provide money in
an amount sufficient to pay the principal of (and premium or Make-Whole
Amount, if any) and interest on such Debt Securities, and any mandatory
sinking fund or analogous payments thereon, on the scheduled due dates
therefor.
Such a trust will only be permitted to be established if, among other
things, the Company has delivered to the applicable Trustee an opinion of
counsel (as specified in the applicable Indenture) to the effect that the
holders of such Debt Securities will not recognize income, gain or loss for
U.S. federal income tax purposes as a result of such defeasance or covenant
defeasance and will be subject to U.S. federal income tax on the same amounts,
in the same manner and at the same times as would have been the case if such
defeasance or covenant defeasance had not occurred, and such opinion of
counsel, in the case of defeasance, will be required to refer to and be based
upon a ruling received from or published by the Internal Revenue Service or a
change in applicable U.S. federal income tax law occurring after the date of
the Indenture. In the event of such defeasance, the holders of such Debt
Securities would thereafter be able to look only to such trust fund for
payment of principal (and premium or Make-Whole Amount, if any) and interest.
"Government Obligations" means securities that are (a) direct obligations of
the United States of America or the government which issued the foreign
currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (b) obligations
of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which
issued the foreign currency in which the Debt Securities of such series are
payable, the payment of which is unconditionally guaranteed as a full faith
and credit obligation by the United States of America or such other
government, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank or trust company as custodian with respect to any such
Government Obligation or a specific payment of interest on or principal of any
such Government Obligation held by such custodian for the account of the
holder of a depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable to
the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any
series, (a) the holder of a Debt Security of such series is entitled to, and
does, elect pursuant to the applicable Indenture or the terms of such Debt
Security to receive payment in a currency, currency unit or composite currency
other than that in which such deposit has been made in respect of such Debt
Security, or (b) a Conversion Event (as defined below) occurs in respect of
the currency, currency unit or composite currency in which such deposit has
been made, the indebtedness represented by such Debt Security will be deemed
to have been, and will be, fully discharged and satisfied through the payment
of the principal of (and premium or Make-Whole Amount, if any) and interest on
such Debt Security as they become due out of the proceeds yielded by
converting the amount so deposited in respect of such Debt Security into the
currency, currency unit or composite currency in which such Debt Security
becomes payable as a result of such election or such cessation of usage based
on the applicable market exchange rate. "Conversion Event" means the cessation
of use of (i) a currency, currency unit or composite currency both by the
government of the country which issued such currency and for the settlement of
transactions by a central bank or other public institutions of or within the
international banking
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community, (ii) the ECU both within the European Monetary System and for the
settlement of transactions by public institution 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) above under "--Events of Default, Notice and Waiver"
with respect to specified sections of an Indenture (which sections would no
longer be applicable to such Debt Securities) or described in clause (g) under
"--Events of Default, Notice and Waiver" with respect to any other covenant as
to which there has been covenant defeasance, the amount in such currency,
currency unit or composite currency in which such Debt Securities are payable,
and Government Obligations on deposit with the applicable Trustee, will be
sufficient to pay amounts due on such Debt Securities at the time of their
stated maturity but may not be sufficient to pay amounts due on such Debt
Securities at the time of the acceleration resulting from such Event of
Default. However, the Company would remain liable to make payment of such
amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into shares of Common Stock or
Preferred Stock, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option
of the holders or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such Debt Securities and any restrictions on conversion,
including restrictions directed at maintaining the Company's REIT status.
BOOK-ENTRY SYSTEM AND GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of, a depository (the "Depository") identified in
the Prospectus Supplement relating to such series. Global Securities, if any,
issued in the United States are expected to be deposited with The Depository
Trust Company ("DTC"), as Depository. Global Securities may be issued in
either fully registered or bearer form and in either temporary or permanent
form. Unless and until it is exchanged in whole or in part for the individual
Debt Securities represented thereby, a Global Security may not be transferred
except as a whole by the Depository for such Global Security to a nominee of
such Depository or by a nominee of such Depository to such Depository or
another nominee of such Depository or by such Depository or any nominee of
such Depositor to a successor Depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a series of
Debt Securities will be described in the Prospectus Supplement relating to
such series. The Company expects that unless otherwise indicated in the
applicable Prospectus Supplement, the following provisions will apply to
depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit on its book-entry registration and
transfer system the respective principal amounts of the individual Debt
Securities represented by such Global Security to the accounts of persons that
have accounts with such Depository ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with
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respect to such Debt Securities or by the Company if such Debt Securities are
offered directly by the Company. Ownership of beneficial interests in such
Global Security will be limited to Participants or persons that may hold
interests through Participants.
The Company expects that, pursuant to procedures established by DTC,
ownership of beneficial interests in any Global Security with respect to which
DTC is the Depository will be shown on, and the transfer of that ownership
will be effected only through, records maintained by DTC or its nominee (with
respect to beneficial interests of Participants) and records of Participants
(with respect to beneficial interests of persons who hold through
Participants). Neither the Company nor the Trustee will have any
responsibility or liability for any aspect of the records of DTC or for
maintaining, supervising or reviewing any records of DTC or any of its
Participants relating to beneficial ownership interests in the Debt
Securities. The laws of some states require that certain purchasers of
securities take physical delivery of such securities in definitive form. Such
limits and laws may impair the ability to own, pledge or transfer beneficial
interest in a Global Security.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as described below or in the applicable
Prospectus Supplement, owners of beneficial interest in a Global Security will
not be entitled to have any of the individual Debt Securities represented by
such Global Security registered in their names, will not receive or be
entitled to receive physical delivery of any such Debt Securities in
definitive form and will not be considered the owners or holders thereof under
the applicable Indenture. Beneficial owners of Debt Securities evidenced by a
Global Security will not be considered the owners or holders thereof under the
applicable Indenture for any purpose, including with respect to the giving of
any direction, instructions or approvals to the Trustee thereunder.
Accordingly, each person owning a beneficial interest in a Global Security
with respect to which DTC is the Depository must rely on the procedures of DTC
and, if such person is not a Participant, on the procedures of the Participant
through which such person owns its interests, to exercise any rights of a
holder under the applicable Indenture. The Company understands that, under
existing industry practice, if it requests any action of holders or if an
owner of a beneficial interest in a Global Security desires to give or take
any action which a holder is entitled to give or take under the applicable
Indenture, DTC would authorize the Participants holding the relevant
beneficial interest to give or take such action, and such Participants would
authorize beneficial owners through such Participants to give or take such
actions or would otherwise act upon the instructions of beneficial owners
holding through them.
Payments of principal of (and applicable premium or Make-Whole Amount, if
any) and interest on individual Debt Securities represented by a Global
Security registered in the name of a Depository or its nominee will be made to
or at the direction of the Depository or its nominee, as the case may be, as
the registered owner of the Global Security under the applicable Indenture.
Under the terms of the applicable Indenture, the Company and the Trustee may
treat the persons in whose name Debt Securities, including a Global Security,
are registered as the owners thereof for the purpose of receiving such
payments. Consequently, neither the Company nor the Trustee has or will have
any responsibility or liability for the payment of such amounts to beneficial
owners of Debt Securities (including principal, premium or Make-Whole Amount,
if any, and interest). The Company believes, however, that it is currently the
policy of DTC to immediately credit the accounts of relevant Participants with
such payments, in amounts proportionate to their respective holdings of
beneficial interests in the relevant Global Security as shown on the records
of DTC or its nominee. The Company also expects that payments by Participants
to owners of beneficial interests in such Global Security held through such
Participants will be governed by standing instructions and customary
practices, as is the case with securities held for the account of customers in
bearer form or registered in street name, and will be the responsibility of
such Participants. Redemption notices with respect to any Debt Securities
represented by a Global Security will be sent to the Depository or its
nominee. If less than all of the Debt Securities of any series are to be
redeemed, the Company expects the Depository to determine the amount of the
interest of each Participant in such Debt Securities to be redeemed to be
determined by lot. None of the Company, the Trustee, any Paying Agent or the
Security Registrar for such Debt Securities will have any responsibility or
liability for any aspect of the records
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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 Commission.
If a Depository for any Debt Securities is at any time unwilling, unable or
ineligible to continue as depository and a successor depository is not
appointed by the Company within 90 days, the Company will issue individual
Debt Securities in exchange for the Global Security representing such Debt
Securities. In addition, the Company may at any time and in its sole
discretion, subject to any limitations described in the Prospectus Supplement
relating to such Debt Securities, determine not to have any of such Debt
Securities represented by one or more Global Securities and in such event will
issue individual Debt Securities in exchange for the Global Security or
Securities representing such Debt Securities. Individual Debt Securities so
issued will be issued in denominations of $1,000 and integral multiples
thereof.
The Debt Securities of a series may also be issued in whole or in part in
the form of one or more bearer global securities (a "Bearer Global Security")
that will be deposited with a depository, or with a nominee for such
depository, identified in the applicable Prospectus Supplement. Any such
Bearer Global Securities may be issued in temporary or permanent form. The
specific terms and procedures, including the specific terms of the depository
arrangement, with respect to any portion of a series of Debt Securities to be
represented by one or more Bearer Global Securities will be described in the
applicable Prospectus Supplement.
PAYMENT AND PAYING AGENTS
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and
interest on any series of Debt Securities will be payable at the corporate
trust office of the Trustee, the address of which will be stated in the
applicable Prospectus Supplement; provided that, at the option of the Company,
payment of interest may be made by check mailed to the address of the person
entitled thereto as it appears in the applicable register for such Debt
Securities or by wire transfer of funds to such person at an account
maintained within the United States.
All moneys paid by the Company to a paying agent or a Trustee for the
payment of the principal of or any premium, Make-Whole Amount or interest on
any Debt Security which remain unclaimed at the end of two years after such
principal, premium, Make-Whole Amount or interest has become due and payable
will be repaid to the Company, and the holder of such Debt Security thereafter
may look only to the Company for payment thereof.
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 (i) Articles Supplementary
Establishing and Fixing the Rights and Preferences of a Series of Shares of
Preferred Stock (Series A), (ii) Articles Supplementary Establishing and
Fixing the Rights and Preferences of a Series of Shares of Preferred Stock
(Series B) and (iii) Articles Supplementary Establishing and Fixing the Rights
and Preferences of a Series of Shares of Preferred Stock (Series C) (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, 7,300,000 shares of which were issued and
outstanding as of December 16, 1997. Shares of Preferred
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Stock may be issued from time to time, in one or more series, as authorized by
the Board of Directors of the Company. Prior to issuance of shares of each
series, the Board of Directors is required by the Maryland General Corporation
Law ("MGCL") and the Company's Articles of Incorporation to fix for each
series, subject to the provisions of the Company's Articles of Incorporation
regarding excess stock, $.01 par value per share ("Excess Stock"), the terms,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends or other distributions, qualifications and terms
or conditions of redemption, as are permitted by Maryland law. The Preferred
Stock will, when issued, be fully paid and nonassessable and will have no
preemptive rights. The Board of Directors could authorize the issuance of
shares of Preferred Stock with terms and conditions that could have the effect
of discouraging a takeover or other transaction that holders of Common Stock
might believe to be in their best interests or in which holders of some, or a
majority, of the shares of Common Stock might receive a premium for their
shares over the then market price of such shares of Common Stock.
TERMS
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Articles of Incorporation and Bylaws
and any applicable amendment to the Articles of Incorporation designating
terms of a series of Preferred Stock (a "Designating Amendment").
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock;
(4) The date from which dividends on such Preferred Stock shall
accumulate, if applicable;
(5) The voting rights, if any, of such Preferred Stock;
(6) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(7) The provision for a sinking fund, if any, for such Preferred Stock;
(8) The provision for redemption, if applicable, of such Preferred
(9) Any listing of such Preferred Stock on any securities exchange;
(10) 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);
(11) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(12) Whether interests in such Preferred Stock will be represented by
Depositary Shares;
(13) A discussion of federal income tax considerations applicable to such
Preferred Stock;
(14) 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;
(15) 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
(16) 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.
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RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred Stock
will, with respect to dividend rights and rights upon liquidation, dissolution
or winding up of the Company, rank (i) senior to all classes or series of
Common Stock of the Company, and to all equity securities ranking junior to
such Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company; (ii) on a parity with
all equity securities issued by the Company the terms of which specifically
provide that such equity securities rank on a parity with the Preferred Stock
with respect to dividend rights or rights upon liquidation, dissolution or
winding up of the Company; and (iii) junior to all equity securities issued by
the Company the terms of which specifically provide that such equity
securities rank senior to the Preferred Stock with respect to dividend rights
or rights upon liquidation, dissolution or winding up of the Company. The term
"equity securities" does not include convertible debt securities.
DIVIDENDS
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of
assets of the Company legally available for payment, cash dividends at such
rates and on such dates as will be set forth in the applicable Prospectus
Supplement. Each such dividend shall be payable to holders of record as they
appear on the share transfer books of the Company on such record dates as
shall be fixed by the Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or non-
cumulative, as provided in the applicable Prospectus Supplement. Dividends, if
cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company
fails to declare a dividend payable on a dividend payment date on any series
of the Preferred Stock for which dividends are non-cumulative, then the
holders of such series of the Preferred Stock will have no right to receive a
dividend in respect of the dividend period ending on such dividend payment
date, and the Company will have no obligation to pay the dividend accrued for
such period, whether or not dividends on such series are declared payable on
any future dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company
of any other series ranking, as to dividends, on a parity with or junior to
the Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends have been
or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for such payment on the Preferred Stock
of such series for all past dividend periods and the then current dividend
period or (ii) if such series of Preferred Stock does not have a cumulative
dividend, full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment on the Preferred Stock of
such series. When dividends are not paid in full (or a sum sufficient for such
full payment is not so set apart) upon Preferred Stock of any series and the
shares of any other series of Preferred Stock ranking on a parity as to
dividends with the Preferred Stock of such series, all dividends declared upon
Preferred Stock of such series and any other series of Preferred Stock ranking
on a parity as to dividends with such Preferred Stock shall be declared pro
rata so that the amount of dividends declared per share of Preferred Stock of
such series and such other series of Preferred Stock shall in all cases bear
to each other the same ratio that accrued dividends per share on the Preferred
Stock of such series (which shall not include any accumulation in respect of
unpaid dividends for prior dividend periods if such Preferred Stock does not
have a cumulative dividend) and such other series of Preferred Stock bear to
each other. No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments on Preferred Stock of such
series which may be in arrears.
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
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for payment for all past dividend periods and the then current dividend
period, and (ii) if such series of Preferred Stock does not have a cumulative
dividend, full dividends on the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other shares of
capital stock ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Preferred Stock of such series as to dividends or upon
liquidation, nor shall any shares of Common Stock, or any other shares of
capital stock of the Company ranking junior to or on a parity with the
Preferred Stock of such series as to dividends or upon liquidation be
redeemed, purchased or otherwise acquired for any consideration (or any moneys
be paid to or made available for a sinking fund for the redemption of any such
shares) by the Company (except by conversion into or exchange for other
capital stock of the Company ranking junior to the Preferred Stock of such
series as to dividends and upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Stock
will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and
at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(which shall not, if such Preferred Stock does not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in
cash or other property, as specified in the applicable Prospectus Supplement.
If the redemption price for Preferred Stock of any series is payable only from
the net proceeds of the issuance of shares of capital stock of the Company,
the terms of such Preferred Stock may provide that, if no such shares of
capital stock shall have been issued or to the extent the net proceeds from
any issuance are insufficient to pay in full the aggregate redemption price
then due, such Preferred Stock shall automatically and mandatorily be
converted into the applicable shares of capital stock of the Company pursuant
to conversion provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred Stock has
a cumulative dividend, full cumulative dividends on all shares of such series
of Preferred Stock shall have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period, and (ii)
if a series of Preferred Stock does not have a cumulative dividend, full
dividends on all shares of the Preferred Stock of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend
period, no shares of such series of Preferred Stock shall be redeemed unless
all outstanding shares of Preferred Stock of such series are simultaneously
redeemed; provided, however, that the foregoing shall not prevent the purchase
or acquisition of Preferred Stock of such series to preserve the REIT status
of the Company or pursuant to a purchase or exchange offer made on the same
terms to holders of all outstanding shares of Preferred Stock of such series.
In addition, unless (i) if such series of Preferred Stock has a cumulative
dividend, full cumulative dividends on all outstanding shares of such series
of Preferred Stock have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof set apart for payment
for all past dividend periods and the then current dividend period, and (ii)
if such series of Preferred Stock does not have a cumulative dividend, full
dividends 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
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apart for payment for the then current dividend period, the Company shall not
purchase or otherwise acquire directly or indirectly any shares of Preferred
Stock of such series (except by conversion into or exchange for capital shares
of the Company ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation); provided, however, that the foregoing shall
not prevent the purchase or acquisition of shares of Preferred Stock of such
series to preserve the REIT status of the Company or pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any series
are to be redeemed, the number of shares to be redeemed will be determined by
the Company and such shares may be redeemed pro rata from the holders of
record of such shares in proportion to the number of such shares held or for
which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by any other equitable manner determined
by the Company.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Stock of
any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such
Preferred Stock are to be surrendered for payment of the redemption price; (v)
that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) the date upon which the holder's conversion rights,
if any, as to such shares shall terminate. If fewer than all the shares of
Preferred Stock of any series are to be redeemed, the notice mailed to each
such holder thereof shall also specify the number of shares of Preferred Stock
to be redeemed from each such holder. If notice of redemption of any Preferred
Stock has been given and if the funds necessary for such redemption have been
set aside by the Company in trust for the benefit of the holders of any
Preferred Stock so called for redemption, then from and after the redemption
date dividends will cease to accrue on such Preferred Stock, and all rights of
the holders of such shares will terminate, except the right to receive the
redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of
capital stock of the Company ranking junior to the Preferred Stock in the
distribution of assets upon any liquidation, dissolution or winding up of the
Company, the holders of each series of Preferred Stock shall be entitled to
receive out of assets of the Company legally available for distribution to
stockholders, liquidating distributions in the amount of the liquidation
preference per share, if any, set forth in the applicable Prospectus
Supplement, plus an amount equal to all dividends accrued and unpaid thereon
(which shall not include any accumulation in respect of unpaid noncumulative
dividends for prior dividend periods). After payment of the full amount of the
liquidating distributions to which they are entitled, the holders of Preferred
Stock will have no right or claim to any of the remaining assets of the
Company. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the available assets of the Company
are insufficient to pay the amount of the liquidating distributions on all
outstanding shares of Preferred Stock and the corresponding amounts payable on
all shares of other classes or series of capital stock of the Company ranking
on a parity with the Preferred Stock in the distribution of assets, then the
holders of the Preferred Stock and all other such classes or series of capital
stock shall share ratably in any such distribution of assets in proportion to
the full liquidating distributions to which they would otherwise be
respectively entitled.
If liquidating distributions shall have been made in full to all holders of
Preferred Stock, the remaining assets of the Company shall be distributed
among the holders of any other classes or series of capital stock ranking
junior to the Preferred Stock upon liquidation, dissolution or winding up,
according to their respective rights and preferences and in each case
according to their respective number of shares. For such purposes, the
consolidation or merger of the Company with or into any other corporation,
trust or entity, or the sale, lease or conveyance of all or substantially all
of the property or business of the Company, shall not be deemed to constitute
a liquidation, dissolution or winding up of the Company.
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VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company will
not, without the affirmative vote or consent of the holders of at least two-
thirds of the shares of such series of Preferred Stock outstanding at the
time, given in person or by proxy, either in writing or at a meeting (such
series voting separately as a class), (i) authorize or create, or increase the
authorized or issued amount of, any class or series of capital stock ranking
prior to such series of Preferred Stock with respect to payment of dividends
or the distribution of assets upon liquidation, dissolution or winding up or
reclassify any authorized capital stock of the Company into such shares, or
create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such shares; or (ii) amend, alter or
repeal the provisions of the Company's Articles of Incorporation or the
Designating Amendment for such series of Preferred Stock, whether by merger,
consolidation or otherwise (an "Event"), so as to materially and adversely
affect any right, preference, privilege or voting power of such series of
Preferred Stock or the holders thereof; provided, however, with respect to the
occurrence of any of the Events set forth in (ii) above, so long as the
Preferred Stock remains outstanding with the terms thereof materially
unchanged, taking into account that upon the occurrence of an Event the
Company may not be the surviving entity, the occurrence of any such Event
shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting power of holders of Preferred Stock, and
provided further that (x) any increase in the amount of the authorized
Preferred Stock or the creation or issuance of any other series of Preferred
Stock, or (y) any increase in the amount of authorized shares of such series
or any other series of Preferred Stock, in each case ranking on a parity with
or junior to the Preferred Stock of such series with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or
winding up, shall not be deemed to materially and adversely affect such
rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall
have been redeemed or called for redemption and sufficient funds shall have
been deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Stock
is convertible into Common Stock will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
shares of Common Stock into which the shares of Preferred Stock are
convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option
of the holders of the Preferred Stock or the Company, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of such series of Preferred Stock.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), not more than 50% in value of its outstanding
capital stock may be owned, directly or indirectly, by five or fewer
individuals (as defined in the Code to include certain entities) during the
last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, directly or indirectly, by a single person of the Company's
outstanding equity securities, including any Preferred Stock of the Company.
Therefore, the Designating Amendment for each series of Preferred Stock may
contain provisions restricting the ownership and transfer of the Preferred
Stock. The applicable Prospectus Supplement will specify any additional
ownership limitation relating to a series of Preferred Stock. See
"Restrictions on Transfers of Capital Stock."
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TRANSFER AGENT
The transfer agent and registrar for the Preferred Stock will be set forth
in the applicable Prospectus Supplement.
DESCRIPTION OF DEPOSITARY SHARES REPRESENTING PREFERRED STOCK
GENERAL
The Company may, at its option, elect to offer Depositary Shares rather than
full shares of Preferred Stock. In the event such option is exercised, each of
the Depositary Shares will represent ownership of and entitlement to all
rights and preferences of a fraction of a share of Preferred Stock of a
specified series (including dividend, voting, redemption and liquidation
rights). The applicable fraction will be specified in the Prospectus
Supplement. The shares of Preferred Stock represented by the Depositary Shares
will be deposited with a Depositary (the "Preferred Shares Depositary") named
in the applicable Prospectus Supplement, under a Deposit Agreement (the
"Deposit Agreement"), among the Company, the Preferred Shares Depositary and
the holders of the certificates evidencing Depositary Shares ("Depositary
Receipts"). The Depositary Receipts will be delivered to those persons
purchasing Depositary Shares in the offering. The Preferred Shares Depositary
will be the transfer agent, registrar and dividend disbursing agent for the
Depositary Shares. Holders of Depositary Receipts will be bound by the Deposit
Agreement, which will require holders to take certain actions such as filing
proof of residence and paying certain charges.
The summary of terms of the Depositary Shares contained in this Prospectus
does not purport to be complete and is subject to, and qualified in its
entirety by, the provisions of the Deposit Agreement, the Articles of
Incorporation and the form of Designating Amendment for the applicable series
of Preferred Stock. All material terms of the Depository Shares, except those
disclosed in the applicable Prospectus Supplement, are described in this
Prospectus.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Preferred Shares Depositary will distribute all cash dividends or other
cash distributions received in respect of the Preferred Stock to the record
holders of Depositary Receipts evidencing the related Depositary Shares in
proportion to the number of such Depositary Receipts owned by such holders,
subject to certain obligations of holders to file proofs, certificates and
other information and to pay certain charges and expenses to the Preferred
Shares Depositary.
In the event of a distribution other than in cash, the Preferred Shares
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of
holders to file proofs, certificates and other information and to pay certain
charges and expenses to the Preferred Shares Depositary, unless the Preferred
Shares Depositary determines that it is not feasible to make such
distribution, in which case the Preferred Shares Depositary may, with the
approval of the Company, sell such property and distribute the net proceeds
from such sale to such holders.
WITHDRAWAL OF SHARES
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Shares Depositary (unless the related Depositary Shares have
previously been called for redemption), the holders thereof will be entitled
to delivery at such office, to or upon such holder's order, of the number of
whole or fractional shares of Preferred Stock and any money or other property
represented by the Depositary Shares evidenced by such Depositary Receipts.
Holders of Depositary Receipts will be entitled to receive whole or fractional
shares of the related Preferred Stock on the basis of the proportion of
Preferred Stock represented by each Depositary Share as specified in the
applicable Prospectus Supplement, but holders of such shares of Preferred
Stock will not thereafter be entitled to receive Depositary Shares therefor.
If the Depositary Receipts delivered by the holder
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evidence a number of Depositary Shares in excess of the number of Depositary
Shares representing the number of shares of Preferred Stock to be withdrawn,
the Preferred Shares Depositary will deliver to such holder at the same time a
new Depositary Receipt evidencing such excess number of Depositary Shares. The
Company does not expect that there will be any public market for shares of
Preferred Stock that are withdrawn as described in this paragraph.
REDEMPTION OF DEPOSITARY SHARES
Whenever the Company redeems shares of Preferred Stock held by the Preferred
Shares Depositary, the Preferred Shares Depositary will redeem as of the same
redemption date the number of Depositary Shares representing the shares of
Preferred Stock so redeemed, provided the Company shall have paid in full to
the Preferred Shares Depositary the redemption price of the Preferred Stock to
be redeemed plus an amount equal to any accrued and unpaid dividends thereon
to the date fixed for redemption. The redemption price per Depositary Share
will be equal to the applicable fraction of the redemption price and any other
amounts per share payable with respect to the Preferred Stock. If fewer than
all the Depositary Shares are to be redeemed, the Depositary Shares to be
redeemed will be selected pro rata (as nearly as may be practicable without
creating fractional Depositary Shares) or by any other equitable method
determined by the Company.
From and after the date fixed for redemption, all dividends in respect of
shares of Preferred Stock so called for redemption will cease to accrue, the
Depositary Shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the Depositary Receipts
evidencing the Depositary Shares so called for redemption will cease, except
the right to receive any money payable upon such redemption and any money or
other property to which the holders of such Depositary Receipts were entitled
upon such redemption upon surrender thereof to the Preferred Shares
Depositary.
VOTING
Upon receipt of notice of any meeting at which the holders of shares of
Preferred Stock of a series represented by Depositary Shares are entitled to
vote, the Preferred Shares Depositary will mail the information contained in
such notice of meeting to the record holders of the Depositary Receipts
evidencing the Depositary Shares which represent such shares of Preferred
Stock. Each record holder of Depositary Receipts evidencing Depositary Shares
on the record date (which will be the same date as the record date for the
Preferred Stock) will be entitled to instruct the Preferred Shares Depositary
as to the exercise of the voting rights pertaining to the amount of Preferred
Stock represented by such holder's Depositary Shares. The Preferred Shares
Depositary will vote the amount of Preferred Stock represented by such
Depositary Shares in accordance with such instructions, and the Company will
agree to take all reasonable action which may be deemed necessary by the
Preferred Shares Depositary in order to enable the Preferred Shares Depositary
to do so. The Preferred Shares Depositary will abstain from voting the amount
of Preferred Stock represented by such Depositary Shares to the extent it does
not receive specific instructions from the holders of Depositary Receipts
evidencing such Depositary Shares. The Preferred Shares Depositary shall not
be responsible for any failure to carry out any instruction to vote, or for
the manner or effect of any such vote made, as long as any such action or non-
action is in good faith and does not result from negligence or willful
misconduct of the Preferred Shares Depositary.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the Company,
whether voluntary or involuntary, the holders of each Depositary Receipt will
be entitled to the fraction of the liquidation preference accorded each share
of Preferred Stock represented by the Depositary Share evidenced by such
Depositary Receipt, as set forth in the applicable Prospectus Supplement.
CONVERSION
The Depositary Shares, as such, are not convertible into shares of Common
Stock or any other securities or property of the Company. Nevertheless, if so
specified in the applicable Prospectus Supplement relating to an
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offering of the Depositary Shares, the Depositary Receipts may be surrendered
by holders thereof to the Preferred Shares Depositary with written
instructions to the Preferred Shares Depositary to instruct the Company to
cause conversion of the Preferred Stock represented by the Depositary Shares
evidenced by such Depositary Receipts into whole shares of Common Stock or
other shares of Preferred Stock of the Company, and the Company has agreed
that, upon receipt of such instructions and any amounts payable in respect
thereof, it will cause the conversion thereof utilizing the same procedures as
those provided for delivery of shares of Preferred Stock to effect such
conversion. If the Depositary Shares evidenced by a Depositary Receipt are to
be converted in part only, a new Depositary Receipt will be issued for any
Depositary Shares not to be converted. No fractional shares of Common Stock or
Preferred Stock will be issued upon conversion, and if such conversion will
result in a fractional share being issued, an amount will be paid in cash by
the Company equal to the value of the fractional interest based upon the
closing price of the Common Stock on the last business day prior to the
conversion.
AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of Depositary Receipt evidencing the Depositary Shares which
represent the Preferred Stock and any provision of the Deposit Agreement may
at any time be amended by agreement between the Company and the Preferred
Shares Depositary. However, any amendment that materially and adversely alters
the rights of the holders of Depositary Receipts or that would be materially
and adversely inconsistent with the rights granted to the holders of the
related Preferred Stock will not be effective unless such amendment has been
approved by the existing holders of at least a majority of the Depositary
Shares evidenced by the Depositary Receipts then outstanding. No amendment
shall impair the right, subject to certain exceptions in the Deposit
Agreement, of any holder of Depositary Receipts to surrender any Depositary
Receipt with instructions to deliver to the holder the related Preferred Stock
and all money and other property, if any, represented thereby, except in order
to comply with law. Every holder of an outstanding Depositary Receipt at the
time any such amendment becomes effective shall be deemed, by continuing to
hold such Depositary Receipt, to consent and agree to such amendment and to be
bound by the Deposit Agreement as amended thereby.
The Deposit Agreement may be terminated by the Company upon not less than 30
days' prior written notice to the Preferred Shares Depositary if (i) such
termination is necessary to preserve the Company's status as a REIT or (ii) at
least two-thirds of each series of Preferred Stock affected by such
termination consents to such termination, whereupon the Preferred Shares
Depositary shall deliver or make available to each holder of Depositary
Receipts, upon surrender of the Depositary Receipts held by such holder, such
number of whole or fractional shares of Preferred Stock as are represented by
the Depositary Shares evidenced by such Depositary Receipts together with any
other property held by the Preferred Shares Depositary with respect to such
Depositary Receipt. The Company has agreed that, if the Deposit Agreement is
terminated to preserve the Company's status as a REIT, the Company will use
its best efforts to list the shares of Preferred Stock issued upon surrender
of the related Depositary Shares on a national securities exchange. In
addition, the Deposit Agreement will automatically terminate if (a) all
outstanding Depositary Shares shall have been redeemed or converted, or (b)
there shall have been a final distribution in respect of the related Preferred
Stock in connection with any liquidation, dissolution or winding up of the
Company and such distribution shall have been distributed to the holders of
Depositary Receipts evidencing the Depositary Shares representing such
Preferred Stock.
CHARGES OF PREFERRED SHARES DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Deposit Agreement. In addition, the
Company will pay the fees and expenses of the Preferred Shares Depositary in
connection with the performance of its duties under the Deposit Agreement.
However, holders of Depositary Receipts will pay certain other transfer and
other taxes and governmental charges as well as the fees and expenses of the
Preferred Shares Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the Deposit
Agreement.
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RESIGNATION AND REMOVAL OF DEPOSITARY
The Preferred Shares Depositary may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time
remove the Preferred Shares Depositary, any such resignation or removal to
take effect upon the appointment of a successor Preferred Shares Depositary. A
successor Preferred Shares Depositary must be appointed within 60 days after
delivery of the notice of resignation or removal and must be a bank or trust
company having its principal office in the United States and having a combined
capital and surplus of at least $50,000,000.
MISCELLANEOUS
The Preferred Shares Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
the Preferred Shares Depositary with respect to the related Preferred Stock.
Neither the Preferred Shares Depositary nor the Company will be liable if it
is prevented from or delayed in, by law or any circumstances beyond its
control, performing its obligations under the Deposit Agreement. The
obligations of the Company and the Preferred Shares Depositary under the
Deposit Agreement will be limited to performing their duties thereunder in
good faith and without negligence or willful misconduct, and the Company and
the Preferred Shares Depositary will not be obligated to prosecute or defend
any legal proceeding in respect of any Depositary Receipts, Depositary Shares
or shares of Preferred Stock represented thereby unless satisfactory indemnity
is furnished. The Company and the Preferred Shares Depositary may rely on
written advice of counsel or accountants, or information provided by persons
presenting shares of Preferred Stock represented thereby for deposit, holders
of Depositary Receipts or other persons believed in good faith to be competent
to give such information, and on documents believed in good faith to be
genuine and signed by a proper party.
In the event the Preferred Shares Depositary shall receive conflicting
claims, requests or instructions from any holders of Depositary Receipts, on
the one hand, and the Company, on the other hand, the Preferred Shares
Depositary shall be entitled to act on such claims, requests or instructions
received from the Company.
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 16, 1997, the Company had outstanding 20,846,058
shares of Common Stock.
TERMS
Subject to the preferential rights of any other shares or series of stock
and to the provisions of the Company's Articles of Incorporation regarding
Excess Stock, holders of shares of Common Stock will be entitled to receive
dividends on shares of Common Stock if, as and when authorized and declared by
the Board of Directors of the Company out of assets legally available therefor
and to share ratably in the assets of the Company legally available for
distribution to its stockholders in the event of its liquidation, dissolution
or winding-up after payment of, or adequate provision for, all known debts and
liabilities of the Company.
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Subject to the provisions of the Company's Articles of Incorporation
regarding Excess Stock, each outstanding share of Common Stock entitles the
holder to one vote on all matters submitted to a vote of stockholders,
including the election of Directors and, except as otherwise required by law
or except as provided with respect to any other class or series of stock, the
holders of Common Stock will possess the exclusive voting power. There is no
cumulative voting in the election of Directors, which means that the holders
of a majority of the outstanding shares of Common Stock can elect all of the
Directors then standing for election, and the holders of the remaining shares
of Common Stock will not be able to elect any Directors.
Holders of Common Stock have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company.
The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm and quarterly reports for
the first three quarters of each fiscal year containing unaudited financial
information.
Subject to the provisions of the Company's Articles of Incorporation
regarding Excess Stock, all shares of Common Stock will have equal dividend,
distribution, liquidation and other rights, and will have no preference,
appraisal or exchange rights.
Pursuant to the MGCL, a corporation generally cannot dissolve, amend its
Articles of Incorporation, merge, sell all or substantially all of its assets,
engage in a share exchange or engage in similar transactions outside the
ordinary course of business unless approved by the affirmative vote of
stockholders holding at least two-thirds of the shares entitled to vote on the
matter unless a lesser percentage (but not less than a majority of all of the
votes to be cast on the matter) is set forth in the corporation's Articles of
Incorporation. The Company's Articles of Incorporation do not provide for a
lesser percentage in such situations.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, directly or indirectly,
by five or fewer individuals (as defined in the Code to include certain
entities) during the last half of a taxable year. To assist the Company in
meeting this requirement, the Company may take certain actions to limit the
beneficial ownership, directly or indirectly, by a single person of the
Company's outstanding equity securities. See "Restrictions on Transfers of
Capital Stock."
TRANSFER AGENT
The transfer agent and registrar for the Common Stock will be set forth in
the applicable Prospectus Supplement.
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
For the Company to qualify as a REIT under the Code, among other things, not
more than 50% in value of its outstanding capital stock may be owned, directly
or indirectly, by five or fewer individuals (as defined in the Code to include
certain entities) during the last half of a taxable year, and such capital
stock must be beneficially owned by 100 or more persons during at least 335
days of a taxable year of 12 months or during a proportionate part of a
shorter taxable year (in each case, other than the first such year). To ensure
that the Company remains a qualified REIT, the Articles of Incorporation,
subject to certain exceptions, provide that no holder may own, or be deemed to
own by virtue of the attribution provisions of the Code, more than 9.3% (the
"Ownership Limit") of the Company's capital stock. The Board of Directors may
waive the Ownership Limit if evidence satisfactory to the Board of Directors
and the Company's tax counsel is presented that the changes in ownership will
not then or in the future jeopardize the Company's status as a REIT. Any
transfer of capital stock or any security convertible into capital stock that
would create a direct or indirect ownership of capital stock in excess of the
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Ownership Limit or that would result in the disqualification of the Company as
a REIT, including any transfer that results in the capital stock being owned
by fewer than 100 persons or results in the Company being "closely held"
within the meaning of Section 856(h) of the Code, shall be null and void, and
the intended transferee will acquire no rights to the capital stock. The
foregoing restrictions on transferability and ownership will not apply if the
Board of Directors determines that it is no longer in the best interests of
the Company to attempt to qualify, or to continue to qualify, as a REIT.
Capital stock owned, or deemed to be owned, or transferred to a stockholder
in excess of the Ownership Limit will automatically be exchanged for shares of
Excess Stock that will be transferred, by operation of law, to the Company as
trustee of a trust for the exclusive benefit of the transferees to whom such
capital stock may be ultimately transferred without violating the Ownership
Limit. While the Excess Stock is held in trust, it will not be entitled to
vote, it will not be considered for purposes of any stockholder vote or the
determination of a quorum for such vote and, except upon liquidation, it will
not be entitled to participate in dividends or other distributions. Any
dividend or distribution paid to a proposed transferee of Excess Stock prior
to the discovery by the Company that capital stock has been transferred in
violation of the provisions of the Company's Articles of Incorporation shall
be repaid to the Company upon demand. The Excess Stock is not treasury stock,
but rather constitutes a separate class of issued and outstanding stock of the
Company. The original transferee-stockholder may, at any time the Excess Stock
is held by the Company in trust, transfer the interest in the trust
representing the Excess Stock to any individual whose ownership of the capital
stock exchanged into such Excess Stock would be permitted under the Ownership
Limit, at a price not in excess of the price paid by the original transferee-
stockholder for the capital stock that was exchanged in Excess Stock.
Immediately upon the transfer to the permitted transferee, the Excess Stock
will automatically be exchanged for capital stock of the class from which it
was converted. If the foregoing transfer restrictions are determined to be
void or invalid by virtue of any legal decision, statute, rule or regulation,
then the intended transferee of any Excess Stock may be deemed, at the option
of the Company, to have acted as an agent on behalf of the Company in
acquiring the Excess Stock and to hold the Excess Stock on behalf of the
Company.
In addition to the foregoing transfer restrictions, the Company will have
the right, for a period of 90 days during the time any Excess Stock is held by
the Company in trust, to purchase all or any portion of the Excess Stock from
the original transferee-stockholder for the lesser of the price paid for the
capital stock by the original transferee-stockholder or the market price (as
determined in the manner set forth in the Articles of Incorporation) of the
capital stock on the date the Company exercises its option to purchase. The
90-day period begins on the date on which the Company receives written notice
of the transfer or other event resulting in the exchange of capital stock for
Excess Stock.
Each stockholder shall upon demand be required to disclose to the Company in
writing any information with respect to the direct, indirect and constructive
ownership of beneficial interests as the Board of Directors deems necessary to
comply with the provisions of the Code applicable to REITs, to comply with the
requirements of any taxing authority or governmental agency or to determine
any such compliance.
This ownership limitation may have the effect of precluding acquisition of
control of the Company unless the Board of Directors determines that
maintenance of REIT status is no longer in the best interests of the Company.
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
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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.
To qualify as a REIT, the Company must comply with a number of annual
requirements regarding its income, assets and distributions. These
requirements impose a number of restrictions on the Company's operations. For
example, the Company may not lease property if the lease has the effect of
giving the Company a share of the net income of the lessee. The amount of
personal property that may be included under a lease may not exceed a defined
level, and the Company may not provide services to its tenants, other than
customary services and (beginning in 1998) de minimis non-customary services.
The Company's ability to acquire non-real estate assets is restricted, and a
100% tax is imposed on any gain that the Company realizes from sales of
property (including real estate) to customers in the ordinary course of
business (other than property acquired by reason of certain foreclosures),
effectively preventing the Company from participating directly in projects
involving the development or acquisition of property for resale. Minimum
distribution requirements also generally require the Company to distribute at
least 95% of its taxable income each year (excluding any net capital gain).
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
with respect to the Company's taxable year ending December 31, 1997 and, with
respect to subsequent taxable years, as long-term capital gain, mid-term
capital gain or unrecaptured section 1250 gain. 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
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commissions from purchasers of Securities for whom they may act as agent.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions or commissions from
the underwriters and/or commissions (which may be changed from time to time)
from the purchasers for whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Securities, and any discounts, concessions
or commission allowed by underwriters to participating dealers, will be set
forth in an applicable Prospectus Supplement. Underwriters, dealers and agents
participating in the distribution of the Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any
profit realized by them on resale of the Securities may be deemed to be
underwriting discounts and commissions, under the Securities Act.
Underwriters, dealers and agents may be entitled, under agreements with the
Company, to indemnification against and contribution toward certain civil
liabilities, including liabilities under the Securities Act, and to
reimbursement by the Company for certain expenses.
Each series of Debt Securities or Preferred Stock will be a new issue with
no established trading market. The Company may elect to list any series of
Debt Securities or Preferred Stock on an exchange, but is not obligated to do
so. It is possible that one or more underwriters may make a market in a series
of Securities, but will not be obligated to do so and may discontinue any
market making at any time without notice. Therefore, no assurance can be given
as to the liquidity of, or the trading market for, the Securities.
Underwriters, dealers and agents and their associates may engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers or other persons acting as the Company's agents to solicit
offers by certain institutions to purchase Debt Securities from the Company at
the public offering price set forth in such Prospectus Supplement pursuant to
delayed delivery contracts ("Contracts") providing for payment and delivery on
the date or dates stated in such Prospectus Supplement. Each Contract will be
for an amount no less than, and the aggregate principal amounts of Debt
Securities sold pursuant to Contracts shall be not less nor more than, the
respective amounts stated in the applicable Prospectus Supplement.
Institutions with whom Contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and other institutions, but
will in all cases be subject to the approval of the Company. Contracts will
not be subject to any conditions except (i) the purchase by an institution of
the Debt Securities covered by its Contracts shall not at the time of delivery
be prohibited under the laws of any jurisdiction in the United States to which
such institution is subject, and (ii) if Debt Securities are being sold to
underwriters, the Company shall have sold to such underwriters the total
principal amount of the Debt Securities less the principal amount thereof
covered by the Contracts. If in conjunction with the sale of Debt Securities
to institutions under Contracts, Debt Securities are also being sold to the
public, the consummation of the sale under the Contracts shall occur
simultaneously with the consummation of the sale to the public. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such Contracts.
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.
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LEGAL MATTERS
Certain legal matters, including the legality of the Securities, will be
passed upon for the Company by Goodwin, Procter & Hoar LLP, Boston,
Massachusetts.
EXPERTS
The financial statements and schedules thereto incorporated by reference in
this Prospectus or elsewhere in the Registration Statement, to the extent and
for the periods indicated in their reports, have been audited by Coopers &
Lybrand L.L.P., independent accountants, and are incorporated herein in
reliance upon the authority of said firm as experts in giving said reports.
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