<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 24, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM S-4
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
---------------------
HEALTHCARE REALTY TRUST INCORPORATED
(Exact Name of Registrant as Specified In Its Charter)
<TABLE>
<S> <C> <C>
MARYLAND 6798 62-1507028
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification
Incorporation or Organization) Classification Code Number) No.)
</TABLE>
3310 WEST END AVENUE, SUITE 700
NASHVILLE, TENNESSEE 37203
(615) 269-8175
(Address, Including Zip Code, and Telephone Number, including
Area Code, of Registrant's Principal Executive Offices)
DAVID R. EMERY
HEALTHCARE REALTY TRUST INCORPORATED
3310 WEST END AVENUE, SUITE 700
NASHVILLE, TENNESSEE 37203
(615) 269-8175
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent For Service)
---------------------
WITH COPIES TO:
<TABLE>
<S> <C>
THEODORE W. LENZ, ESQ. JOHN H. COOPER, ESQ.
WALLER LANSDEN DORTCH & DAVIS, PLLC SIROTE & PERMUTT, P.C.
511 UNION STREET, SUITE 2100 2222 ARLINGTON AVENUE S.
NASHVILLE, TENNESSEE 37219 BIRMINGHAM, ALABAMA 35205
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this form is a Registration Statement filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE FEE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value per
share 18,907,100 shares $23.3750 $441,953,463 $130,377(2)
- ---------------------------------------------------------------------------------------------------------------------
8 7/8% Series A Voting Cumulative
Preferred Stock, $.01 par value
per share 3,000,000 shares $24.7188 $74,156,400 $21,877(3)
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the maximum number of shares of common stock, par value $.01 per
share, and 8 7/8% Series A Voting Cumulative Preferred Stock, par value $.01
per share, issuable by Registrant upon consummation of the merger of a
subsidiary of Registrant with and into Capstone Capital Corporation.
(2) Pursuant to Rules 457(f)(1) and 457(c), the registration fee was calculated
on the basis of the average of the high and low prices reported in the
consolidated reporting system of a share of common stock, par value $.001
per share, of Capstone Capital Corporation as of July 20, 1998.
(3) Pursuant to Rules 457(f)(1) and 457(c), the registration fee was calculated
on the basis of the average of the high and low prices reported in the
consolidated reporting system of a share of 8 7/8% Series A Cumulative
Preferred Stock, par value $.001 per share, of Capstone Capital Corporation
as of July 20, 1998.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
(HEALTHCARE REALTY TRUST LOGO) (CAPSTONE CAPITAL LOGO)
CAPSTONE
CAPITAL CORPORATION
, 1998
MERGER PROPOSED -- YOUR VOTE IS VERY IMPORTANT
The Boards of Directors of Healthcare Realty Trust Incorporated and
Capstone Capital Corporation have agreed on a merger designed to create one of
the leading publicly traded healthcare real estate investment trusts. The merger
is structured so that Healthcare Realty will be the surviving publicly traded
company and Capstone will become a wholly owned subsidiary of Healthcare Realty.
Capstone common stockholders will receive .8518 shares of Healthcare Realty
common stock for each share of Capstone common stock that they own, and
Healthcare Realty common stockholders will continue to own their existing
shares. Capstone preferred stockholders will receive one share of Healthcare
Realty voting preferred stock for each share of Capstone preferred stock that
they own. We estimate that the shares of Healthcare Realty common stock to be
issued to Capstone common stockholders will represent approximately % of
the outstanding common stock of Healthcare Realty after the merger. Likewise,
the shares of Healthcare Realty common stock held by Healthcare Realty
stockholders prior to the merger will represent approximately % of the
outstanding common stock of Healthcare Realty after the merger. The shares of
Healthcare Realty preferred stock to be issued to Capstone preferred
stockholders will represent 100% of the outstanding preferred stock of
Healthcare Realty after the merger.
Stockholders of Healthcare Realty are being asked, at Healthcare Realty's
special meeting of stockholders, to approve the issuance of shares of Healthcare
Realty common stock and preferred stock in the merger. Stockholders of Capstone
are being asked, at Capstone's special meeting of stockholders, to approve the
merger. Whether or not you plan to attend your meeting, please take the time to
vote by completing and mailing the enclosed proxy card to us.
The merger cannot be completed unless the holders of Healthcare Realty
common stock approve the issuance of shares and the holders of Capstone common
stock and preferred stock approve the merger. YOUR VOTE IS VERY IMPORTANT.
IF YOU SIGN, DATE AND MAIL YOUR PROXY CARD WITHOUT INDICATING HOW YOU WANT
TO VOTE, YOUR PROXY WILL BE COUNTED AS A VOTE IN FAVOR OF THE PROPOSAL(S)
SUBMITTED AT YOUR MEETING. IF YOU ARE A CAPSTONE STOCKHOLDER AND FAIL TO RETURN
YOUR CARD, THE EFFECT WILL BE A VOTE AGAINST THE MERGER, UNLESS YOU VOTE IN
PERSON AT THE CAPSTONE SPECIAL MEETING. IF YOU ARE A HEALTHCARE REALTY
STOCKHOLDER AND FAIL TO RETURN YOUR CARD, THERE WILL BE NO EFFECT ON THE RESULT
OF THE VOTE UNLESS YOU VOTE IN PERSON AT THE HEALTHCARE REALTY SPECIAL MEETING.
<PAGE> 3
Only stockholders of record of Healthcare Realty common stock, Capstone
common stock and Capstone preferred stock as of , 1998, are entitled
to attend and vote at the meetings. The dates, times and places of the meetings
are as follows:
FOR CAPSTONE STOCKHOLDERS:
Richard M. Scrushy Conference Center
Two HealthSouth Parkway
Birmingham, Alabama 35243
, 1998
.m. (local time)
FOR HEALTHCARE REALTY STOCKHOLDERS:
Healthcare Realty Trust Incorporated
The Board Room
3310 West End Avenue, Suite 700
Nashville, Tennessee 37203
, 1998
.m. (local time)
This Joint Proxy Statement-Prospectus provides you with detailed
information about the proposed merger. We encourage you to read this entire
document carefully. In addition, you may obtain information about our companies
from documents that we have filed with the Securities and Exchange Commission.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
David R. Emery Richard M. Scrushy
Chairman and Chief Executive Officer Chairman
Healthcare Realty Trust Incorporated Capstone Capital Corporation
</TABLE>
NEITHER THE SEC NOR ANY STATE SECURITIES REGULATORS HAVE APPROVED THE HEALTHCARE
REALTY COMMON STOCK OR PREFERRED STOCK TO BE ISSUED UNDER THIS JOINT PROXY
STATEMENT-PROSPECTUS OR DETERMINED IF THIS JOINT PROXY STATEMENT-PROSPECTUS IS
ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Joint Proxy Statement-Prospectus is dated , 1998, and is
first being mailed to the stockholders of Healthcare Realty and Capstone on or
about , 1998.
<PAGE> 4
(HEALTHCARE REALTY TRUST LOGO)
3310 WEST END AVENUE, SUITE 700
NASHVILLE, TENNESSEE 37203
(615) 269-8175
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1998
TO THE STOCKHOLDERS OF
HEALTHCARE REALTY TRUST INCORPORATED:
Notice is hereby given that a special meeting of the stockholders of
Healthcare Realty Trust Incorporated ("Healthcare Realty") will be held on
, , 1998, at .m. (local time) at Healthcare Realty
Trust Incorporated, The Board Room, 3310 West End Avenue, Suite 700, Nashville,
Tennessee, to consider and vote on a proposal to issue shares of common stock
and 8 7/8% Series A Voting Cumulative Preferred Stock of Healthcare Realty in
connection with the transactions contemplated in the Plan and Agreement of
Merger, dated as of June 8, 1998, among Healthcare Realty, HR Acquisition I
Corporation and Capstone Capital Corporation.
The Board of Directors has fixed the close of business on ,
1998 as the record date for determining stockholders entitled to notice of and
to vote at the meeting and at any adjournment thereof.
By Order of the Board of Directors
David R. Emery
Chairman and Chief Executive Officer
Nashville, Tennessee
, 1998
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, TO ASSURE THE
PRESENCE OF A QUORUM, PLEASE COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED PROXY AS
SOON AS POSSIBLE. IF YOU ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES
PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE THE PROXY IS EXERCISED.
<PAGE> 5
(CAPSTONE CAPITAL LOGO)
CAPSTONE CAPITAL CORPORATION
1000 URBAN CENTER DRIVE, SUITE 630
BIRMINGHAM, ALABAMA 35242
(205) 967-2092
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1998
TO THE STOCKHOLDERS OF
CAPSTONE CAPITAL CORPORATION:
Notice is hereby given that a special meeting of the holders of common
stock and 8 7/8% Series A Cumulative Preferred Stock of Capstone Capital
Corporation ("Capstone") will be held on , , 1998,
at .m. (local time) at the Richard M. Scrushy Conference
Center, Two HealthSouth Parkway, Birmingham, Alabama. At the meeting, holders of
Capstone common stock and preferred stock will consider and vote on a proposal
to approve the merger as described in the Plan and Agreement of Merger, dated as
of June 8, 1998, among Capstone, Healthcare Realty Trust Incorporated and HR
Acquisition I Corporation.
The Board of Directors has fixed the close of business on ,
1998 as the record date for determining stockholders entitled to notice of and
to vote at the meeting and at any adjournment thereof.
By Order of the Board of Directors
Richard M. Scrushy
Chairman
Birmingham, Alabama
, 1998
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, TO ASSURE THE
PRESENCE OF A QUORUM, PLEASE COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED PROXY AS
SOON AS POSSIBLE. IF YOU ATTEND THE MEETING AND WISH TO VOTE YOUR SHARES
PERSONALLY, YOU MAY DO SO AT ANY TIME BEFORE THE PROXY IS EXERCISED.
<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 3
The Companies............................................. 3
Special Stockholders Meetings............................. 3
Recommendations to Stockholders........................... 3
Record Dates; Voting Powers............................... 3
Vote Required............................................. 4
The Merger................................................ 4
Background of the Merger.................................. 4
Reasons for the Merger.................................... 4
Opinions of Financial Advisors............................ 4
Federal Income Tax Consequences........................... 4
Accounting Treatment...................................... 5
Interests of Certain Persons in the Merger................ 5
Conditions to Completion of the Merger.................... 5
Termination of the Merger Agreement....................... 6
Comparative Per Share Market Price Information............ 6
Forward-Looking Statements May Prove Inaccurate........... 6
Ownership of Healthcare Realty Following the Merger....... 7
Board of Directors and Management of Healthcare Realty
After the Merger....................................... 7
Termination Fee........................................... 7
No Appraisal Rights....................................... 7
Listing of Healthcare Realty Stock........................ 7
Dividends After the Merger................................ 7
Summary Historical Consolidated Financial Information..... 8
Summary Pro Forma Consolidated Financial Information...... 9
Comparative Per Share Data................................ 10
THE SPECIAL MEETINGS OF STOCKHOLDERS........................ 11
Voting Rights; Votes Required for Approval................ 11
Proxies................................................... 12
THE MERGER.................................................. 14
Description of the Merger................................. 14
Capstone Securities....................................... 14
Healthcare Realty Securities.............................. 15
Exchange of Certificates.................................. 15
Background of the Merger.................................. 16
Capstone's Reasons for the Merger; Recommendation of the
Capstone Board......................................... 22
Healthcare Realty's Reasons for the Merger; Recommendation
of the Healthcare Realty Board......................... 25
Opinion of Capstone's Financial Advisor................... 26
Opinion of Healthcare Realty's Financial Advisor.......... 30
Accounting Treatment...................................... 34
Certain Federal Income Tax Consequences................... 34
Interests of Certain Persons in the Merger................ 36
Comparison of Rights of Stockholders...................... 36
No Appraisal Rights....................................... 36
Board of Directors and Management of Healthcare Realty
After the Merger....................................... 36
Restrictions on Resales by Affiliates..................... 36
THE MERGER AGREEMENT........................................ 37
Conditions to the Merger.................................. 37
Conduct of Business Prior to the Merger and Other
Covenants.............................................. 38
Termination of the Merger Agreement....................... 38
</TABLE>
i
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Non-Solicitation.......................................... 39
Termination Fee; Expenses................................. 39
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND
INFORMATION............................................... 40
Market Prices............................................. 40
Dividends................................................. 42
CERTAIN TRANSACTIONS........................................ 43
Restricted Stock and Stock Options........................ 43
Consulting and Non-Competition Agreements................. 43
Office Furniture, Fixtures and Equipment.................. 44
INFORMATION ABOUT HEALTHCARE REALTY......................... 44
Recent Developments....................................... 44
INFORMATION ABOUT CAPSTONE.................................. 45
DESCRIPTION OF HEALTHCARE REALTY COMMON STOCK............... 45
Restrictions on Transfer.................................. 45
Business Combinations..................................... 46
Control Share Acquisitions................................ 46
Dividend Reinvestment Plan and Employee Stock Purchase
Plan................................................... 47
Transfer Agent and Registrar.............................. 47
DESCRIPTION OF HEALTHCARE REALTY PREFERRED STOCK............ 47
Rank...................................................... 48
Dividends................................................. 48
Redemption................................................ 49
Liquidation Preference.................................... 50
Voting Rights............................................. 50
Restrictions on Transfer.................................. 50
Transfer Agent and Registrar.............................. 51
COMPARATIVE RIGHTS OF COMMON STOCKHOLDERS OF CAPSTONE AND
HEALTHCARE REALTY......................................... 51
Voting Rights............................................. 51
Change of Control......................................... 51
Board of Directors........................................ 52
Removal of Directors...................................... 52
Limitation on Personal Liability of Directors and
Officers; Indemnification.............................. 52
Rights of Stockholders to Call Special Meetings........... 54
Authorized Stock.......................................... 54
Restrictions on Ownership and Transfer.................... 54
Dividend Reinvestment Plan................................ 55
Amendment of Articles and Bylaws.......................... 55
COMPARATIVE RIGHTS OF PREFERRED STOCKHOLDERS OF CAPSTONE AND
HEALTHCARE REALTY......................................... 56
Voting Rights............................................. 56
Par Value................................................. 56
Dividend Payment Dates.................................... 56
Restriction on Ownership and Transfer..................... 56
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
INFORMATION............................................... 57
WHERE YOU CAN FIND MORE INFORMATION......................... 64
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
INFORMATION............................................... 66
LEGAL MATTERS............................................... 66
EXPERTS..................................................... 66
Annex A -- Plan and Agreement of Merger..................... A-1
Annex B -- Opinion of Salomon Smith Barney.................. B-1
Annex C -- Opinion of NationsBanc Montgomery Securities
LLC....................................................... C-1
</TABLE>
ii
<PAGE> 8
QUESTIONS AND ANSWERS
ABOUT THE MERGER
Q: WHY ARE THE TWO COMPANIES PROPOSING TO MERGE?
A: Healthcare Realty and Capstone are proposing to merge because they believe
that by combining they will be able to provide their respective stockholders
with substantial benefits and better serve their clients. The companies also
think that, by combining, they can create a company that is better
positioned to be a strong competitor in the rapidly changing real estate
market and to serve the real estate needs of the healthcare industry.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: Capstone common stockholders will receive .8518 shares of Healthcare Realty
common stock in exchange for each share of Capstone common stock owned by
them. Healthcare Realty will not, however, issue any fractional shares of
common stock. Instead, for any fraction of a share of common stock, you will
receive cash equal to the fraction multiplied by $28.5625.
For example, if you own ten shares of Capstone common stock, upon completion
of the merger you'll have the right to receive eight shares of Healthcare
Realty common stock and a check for $14.80 (0.518 of a share of Healthcare
Realty common stock multiplied by $28.5625).
Capstone preferred stockholders will receive one share of Healthcare Realty
voting preferred stock for each share of Capstone preferred stock owned by
them. The Capstone preferred stock is not voting stock except in special
circumstances.
Healthcare Realty common stockholders will continue to own the shares of
Healthcare Realty common stock they now own.
Q: WHAT HAPPENS AS THE MARKET PRICE OF HEALTHCARE REALTY COMMON STOCK
FLUCTUATES?
A: The exchange ratio is fixed at .8518. Because the market value of Healthcare
Realty common stock will fluctuate before and after the completion of the
merger, the value of the Healthcare Realty common stock that holders of
Capstone common stock will receive in the merger will fluctuate as well and
could decrease.
Q: WHAT WILL HAPPEN TO CAPSTONE IN THE MERGER?
A: Capstone will merge with a subsidiary of Healthcare Realty and will survive
but will no longer be an independent company. The businesses and operations
of Healthcare Realty and Capstone will be combined, and Capstone will become
a wholly owned subsidiary of Healthcare Realty. Accordingly, Capstone
stockholders will own a portion of the combined company, which will be
represented by the shares of Healthcare Realty common stock and preferred
stock that they will receive in the merger.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: Healthcare Realty and Capstone hope to complete the merger by
, 1998.
Q: WHAT ARE THE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO ME?
A: For federal income tax purposes, it is anticipated that your exchange of
shares of Capstone common stock or Capstone preferred stock for shares of
Healthcare Realty common stock or Healthcare Realty preferred stock in the
merger generally will not cause you to recognize any gain or loss. You will,
however, have to recognize gain in connection with any cash received instead
of fractional shares. A more detailed review of certain federal income tax
consequences of the merger is provided at page 34 of this document.
Healthcare Realty stockholders will experience no tax effect.
Q: WHAT ABOUT FUTURE DIVIDENDS?
A: Historically, each of Healthcare Realty and Capstone has paid dividends.
Healthcare Realty expects to pay dividends in the future consistent with
past practice, subject to Healthcare Realty's financial condition and
results of operations.
<PAGE> 9
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on the enclosed proxy card how you want to vote, and sign and
mail the proxy card in the enclosed return envelope as soon as possible so
that your shares may be represented at your special stockholders' meeting.
If you sign and send in your proxy but don't indicate how you want to vote,
your proxy will be counted as a vote in favor of the proposal(s) submitted
at your meeting.
If you are a Capstone stockholder and don't vote on the merger or if you
abstain, the effect will be a vote against the merger unless you vote in
person at the Capstone special meeting.
If you are a Healthcare Realty stockholder and don't vote on the issuance of
additional shares of capital stock or if you abstain, there will be no
effect on the result of the vote unless you vote in person at the Healthcare
Realty special meeting.
You are invited to the applicable special stockholders' meeting to vote your
shares in person, rather than signing and mailing your proxy card. If you
sign your proxy card, you can take back your proxy until the applicable
special stockholders' meeting and either change your vote or attend the
special stockholders' meeting and vote in person. More detailed instructions
about voting are provided beginning on page 11 of this document.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: Only if you provide instructions on how your broker should vote. Your broker
will ask you for instructions. You should instruct your broker how to vote
your shares, following the directions your broker provides. Without
instructions from you, your broker will not vote your shares, and if you are
a Capstone stockholder, this will effectively be a vote against the merger.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. Capstone stockholders should not send in their Capstone stock
certificates now. After the merger is completed, you will be sent written
instructions on how to exchange your Capstone stock for Healthcare Realty
stock.
Healthcare Realty stockholders do not need to send their Healthcare Realty
stock certificates. The merger will have no effect on outstanding
certificates for Healthcare Realty stock.
Q: WHOM DO I CONTACT IF I HAVE QUESTIONS ABOUT THE MERGER?
A: If you are a Capstone stockholder and you have more questions about the
merger, you should contact:
Capstone Capital Corporation 1000 Urban Center Drive, Suite 630 Birmingham,
Alabama 35242 Attention: Malcolm E. "Tadd" McVay Phone Number: (205)
967-2092
If you are a Healthcare Realty stockholder and you have more questions about
the merger, you should contact:
Healthcare Realty Trust Incorporated 3310 West End Avenue, Suite 700
Nashville, Tennessee 37203 Attention: Fredrick M. Langreck Phone Number:
(615) 269-8175
2
<PAGE> 10
SUMMARY
This summary highlights selected information from this document. It does
not contain all of the information that is important to you. You should
carefully read this entire document and the documents to which we have referred
you in order to understand fully the merger and to obtain a more complete
description of the two companies and the legal terms of the merger. See "WHERE
YOU CAN FIND MORE INFORMATION" (page 64). Each item in this summary includes a
page reference that directs you to a more complete description in this document
of the topic discussed.
THE COMPANIES (PAGES 44 AND 45)
HEALTHCARE REALTY TRUST
INCORPORATED
3310 West End Avenue, Suite 700
Nashville, Tennessee 37203
(615) 269-8175
Healthcare Realty is incorporated in Maryland and is a self-managed and
self-administered real estate investment trust which integrates owning, managing
and developing income-producing real estate properties associated with the
delivery of healthcare services throughout the United States.
CAPSTONE CAPITAL CORPORATION
1000 Urban Center Drive, Suite 630
Birmingham, Alabama 35242
(205) 967-2092
Capstone is incorporated in Maryland and is a self-managed and
self-administered real estate investment trust which owns, leases and invests in
a diversified portfolio of healthcare properties.
SPECIAL STOCKHOLDERS MEETINGS (PAGE 11)
A special meeting of Capstone common stockholders and preferred
stockholders will be held at the Richard M. Scrushy Conference Center, Two
HealthSouth Parkway, Birmingham, Alabama, at .m. on , 1998. At
the special meeting, stockholders of Capstone will be asked to approve the
merger.
A special meeting of Healthcare Realty stockholders will be held at
Healthcare Realty Trust Incorporated, The Board Room, 3310 West End Avenue,
Suite 700, Nashville, Tennessee, at .m. on , 1998. At the special
meeting, stockholders of Healthcare Realty will be asked to approve the issuance
of shares of capital stock in connection with the merger.
RECOMMENDATIONS TO STOCKHOLDERS (PAGES 25 AND 26)
To Capstone Stockholders: The Capstone Board believes that the merger is
fair to you and in the best interests of Capstone, and unanimously recommends
that you vote "FOR" the proposal to approve the merger.
To Healthcare Realty Stockholders: The Healthcare Realty Board believes
that the issuance of shares of Healthcare Realty capital stock in connection
with the merger is fair to you and in your best interests, and unanimously
recommends that you vote "FOR" the proposal to issue such shares in the merger.
RECORD DATES; VOTING POWERS (PAGES 11 AND 12)
The Capstone Board set , 1998 as the record date for determining
the Capstone stockholders who are entitled to vote on the merger. You can vote
at the Capstone special meeting if you owned Capstone common stock or preferred
stock as of the close of business on that date. On that date, shares
of Capstone common stock were outstanding and 3,000,000 shares of Capstone
preferred stock were outstanding and therefore are allowed to vote at the
Capstone special meeting. You will be able to cast one vote for each share of
Capstone stock you owned on , 1998.
The Healthcare Realty Board set , 1998 as the record date for
determining the Healthcare Realty stockholders who are entitled to vote on the
issuance of the shares in the merger. You can vote at the Healthcare Realty
special meeting if you owned Healthcare Realty common stock as of the close of
business on that date. On that date, shares of Healthcare Realty
common stock were outstanding and therefore are allowed to vote at the
Healthcare Realty special meeting. You will be able to cast one vote for each
share of Healthcare Realty stock you owned on , 1998.
3
<PAGE> 11
VOTE REQUIRED (PAGES 11 AND 12)
To Capstone Stockholders: In order for the merger to be approved, the
holders of two-thirds of the outstanding shares of Capstone common stock and
two-thirds of the outstanding shares of Capstone preferred stock on ,
1998, voting separately as a class, must vote in favor of the merger. The
directors and officers of Capstone can cast a total of approximately % of
the votes entitled to be cast at the Capstone special meeting. We expect that
they will vote all of their shares in favor of the merger.
To Healthcare Realty Stockholders: In order to approve the issuance of
shares of Healthcare Realty capital stock in connection with the merger, the
holders of a majority of the votes cast at the Healthcare Realty special meeting
must vote in favor of the issuance. The directors and officers of Healthcare
Realty can cast a total of approximately % of the votes entitled to be cast
at the Healthcare Realty special meeting. We expect that they will vote all of
their shares in favor of the issuance of shares of Healthcare Realty stock in
the merger.
THE MERGER (PAGE 14)
Healthcare Realty and Capstone have entered into a merger agreement that
governs the merger. The merger agreement is attached to this Joint Proxy
Statement-Prospectus as Annex A, and we encourage you to read it.
BACKGROUND OF THE MERGER (PAGE 16)
The Capstone Board determined to solicit indications of interest for the
purchase of its business. It discussed a transaction with a number of companies,
including Healthcare Realty. After negotiations, the Capstone Board approved the
merger. The exchange ratio of .8518 shares is equivalent to $24.33 per share
based on the closing price of Healthcare Realty common stock on May 13, 1998.
REASONS FOR THE MERGER (PAGES 22 AND 25)
The merger will combine the strengths of Healthcare Realty and Capstone.
The companies expect that the combined company resulting from the merger should
be able to achieve superior financial performance compared to the individual
companies on their own.
OPINIONS OF FINANCIAL ADVISORS (PAGES 26 AND 30)
Smith Barney Inc. and Salomon Brothers Inc (collectively doing business as
Salomon Smith Barney) have acted as financial advisors to Capstone in connection
with the merger and have delivered to the Capstone Board a written opinion dated
June 8, 1998 to the effect that, as of the date of such opinion and based upon
and subject to certain matters stated in such opinion, the exchange ratio was
fair, from a financial point of view, to the holders of Capstone common stock.
We have attached this opinion as Annex B to this document. Capstone stockholders
should read it carefully. THE OPINION OF SALOMON SMITH BARNEY IS DIRECTED TO THE
CAPSTONE BOARD AND RELATES ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A
FINANCIAL POINT OF VIEW, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR
RELATED TRANSACTIONS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER
AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE CAPSTONE SPECIAL MEETING.
In deciding to approve the merger, the Healthcare Realty Board considered
an opinion delivered June 8, 1998 by its financial advisor, NationsBanc
Montgomery Securities LLC, that the merger consideration to be paid by
Healthcare Realty was fair to Healthcare Realty, from a financial point of view
as of that date. We have attached this opinion as Annex C to this document.
Healthcare Realty stockholders should read it carefully. THE OPINION OF
NATIONSBANC MONTGOMERY SECURITIES LLC IS DIRECTED TO THE HEALTHCARE REALTY
BOARD, COVERS ONLY THE FINANCIAL FAIRNESS TO HEALTHCARE REALTY OF THE
CONSIDERATION TO BE PAID BY HEALTHCARE REALTY IN THE MERGER AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD
VOTE AT THE HEALTHCARE REALTY SPECIAL MEETING.
FEDERAL INCOME TAX CONSEQUENCES (PAGE 34)
We have structured the merger with the intent that Capstone, Healthcare
Realty, and their respective stockholders won't recognize any gain or loss for
U.S. federal income tax purposes in the merger, except in connection with cash
received instead of fractional shares by Capstone common stockholders. The
merger is conditioned on receipt of legal opinions that this will be the case,
but these opinions won't bind the Internal Revenue Service, which could take a
different view. Determining the actual tax consequences of the merger to you can
be
4
<PAGE> 12
complicated. They will depend on your specific situation and many variables not
within our control. You should consult your own tax advisor for a full
understanding of the merger's tax consequences to you.
ACCOUNTING TREATMENT (PAGE 34)
We expect the merger to be accounted for as a purchase in accordance with
generally accepted accounting principles.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (PAGE 36)
If you are a Capstone stockholder, in considering the Capstone Board's
recommendation that you vote in favor of the merger, you should be aware that
several of the Capstone directors and officers have agreements that provide them
with interests in the merger that are different from, or in addition to, yours.
They include:
- - Prior to the completion of the merger, the vested and unvested restricted
shares of Capstone common stock held by certain officers and directors of
Capstone will be redeemed for $24.33 per share, to be paid by Capstone from
available cash or borrowings by Capstone repayable from cash flow generated by
Capstone's operations. At the completion of the merger, Healthcare Realty will
buy each outstanding option to purchase Capstone common stock for a purchase
price of $24.33 per share less the stated exercise price of such option.
- - As of July , 1998, the directors and executive officers of Capstone
beneficially owned a total of shares of Capstone common stock
(excluding the restricted shares and options mentioned above). Based upon the
exchange ratio of .8518, this would result in these individuals receiving an
aggregate of approximately shares of Healthcare Realty common stock
upon consummation of the merger.
- - Richard M. Scrushy, the Chairman of Capstone, Michael D. Martin, a director of
Capstone, and John W. McRoberts, the President and Chief Executive Officer of
Capstone, each of whom is a founder of Capstone, will each enter into
consulting and non-competition agreements with Healthcare Realty as a
condition to the completion of the merger.
- - Simultaneously with the completion of the merger, Capstone and certain of its
subsidiaries will sell all of the personal property at Capstone's headquarters
used by Capstone or its subsidiaries, excluding certain assets, to Orthopaedic
Surgeons, Inc., a Delaware corporation the majority of the capital stock of
which is owned by HEALTHSOUTH Corporation and MedPartners, Inc. Healthcare
Realty has granted Orthopaedic Surgeons, Inc. the right to lease the assets
and sublease the facility at fair market rents for a period of one year or
less.
CONDITIONS TO COMPLETION OF THE MERGER (PAGE 37)
The completion of the merger depends on a number of conditions being met,
including without limitation the following:
- - Stockholders of Capstone approving the merger;
- - Stockholders of Healthcare Realty approving the issuance of capital stock in
connection with the merger;
- - The New York Stock Exchange having authorized for listing the shares of
Healthcare Realty common stock and preferred stock to be issued to
stockholders of Capstone in the merger;
- - The absence of any court order preventing or materially delaying completion of
the merger, or materially limiting Healthcare Realty's ability to exercise
full rights of ownership of the assets or business of Capstone;
- - Receipt of an opinion of legal counsel to Capstone that the U.S. federal
income tax treatment in the merger will generally be as described to you in
this document;
- - Richard M. Scrushy, Michael D. Martin and John W. McRoberts, the Chairman, a
director, and the President and Chief Executive Officer of Capstone,
respectively, entering into consulting and non-competition agreements with
Healthcare Realty; and
- - Receipt of all consents, orders and approvals legally required for
consummation of the merger.
In cases where the law permits, a party to the merger agreement could elect
to waive a condition that has not been satisfied and complete the merger. We
cannot be certain whether or when any of the conditions we have listed will be
satisfied (or waived, where permissible), or that the merger will be completed.
5
<PAGE> 13
TERMINATION OF THE MERGER AGREEMENT (PAGE 38)
The parties can agree at any time to terminate the merger agreement without
completing the merger, even if the stockholders of Capstone have already voted
to approve it. Also, Healthcare Realty can terminate the merger agreement if the
Capstone Board fails to recommend the merger or withdraws its recommendation
that stockholders of Capstone approve the merger.
Additionally, either company can terminate the merger agreement in the
following circumstances:
- - If the merger is not completed by December 31, 1998;
- - If the other party fails to perform any agreement in any material respect and
fails to cure such failure in all material respects within 15 days after
notice by the terminating party or fails to complete a condition to its
obligations by reason of a breach by that party of its obligations; or
- - If Capstone executes an agreement in connection with a separate acquisition
proposal.
Generally, a party can only terminate the merger agreement in one of the
preceding situations if that party is not in violation of the merger agreement
or if its violations of the merger agreement are not the cause of the event
permitting its termination.
COMPARATIVE PER SHARE MARKET PRICE INFORMATION (PAGE 40)
Common Stock. Shares of Healthcare Realty common stock are listed on the
New York Stock Exchange. On June 8, 1998, the day of the public announcement of
the merger, Healthcare Realty's common stock closed at $28.625 per share. On
, 1998, Healthcare Realty's common stock closed at $ per share.
Shares of Capstone common stock are listed on the New York Stock Exchange.
On June 8, 1998, the day of the public announcement of the merger, Capstone's
common stock closed at $22.8125 per share. On , 1998, Capstone's
common stock closed at $ per share.
Based on the exchange ratio in the merger of .8518 and the closing price of
Healthcare Realty common stock on , 1998 of $ , the market
value of the consideration that stockholders of Capstone will receive in the
merger for each share of Capstone common stock would be $ . Of course,
the market price of Healthcare Realty common stock will fluctuate prior to and
after completion of the merger, while the exchange ratio is fixed. You should
obtain current stock price quotations for Healthcare Realty common stock.
Preferred Stock. Shares of Healthcare Realty preferred stock have not been
issued but are expected to be listed on the New York Stock Exchange upon
consummation of the merger. Prior to this offering, there has been no market for
Healthcare Realty preferred stock.
Shares of Capstone preferred stock are listed on the New York Stock
Exchange. On June 8, 1998, the day of the public announcement of the merger,
Capstone's preferred stock closed at $24.25 per share. On , 1998,
Capstone's preferred stock closed at $ per share.
For each issued and outstanding share of Capstone preferred stock, holders
will receive one share of Healthcare Realty preferred stock having substantially
the same rights and preferences as the Capstone preferred stock, except that the
Healthcare Realty preferred stock will have additional voting rights. The market
price of Healthcare Realty preferred stock, once it begins trading after
completion of the merger, may not directly correlate to the market price of
Capstone preferred stock prior to the merger.
FORWARD-LOOKING STATEMENTS MAY PROVE INACCURATE (PAGE 66)
We have made forward-looking statements in this document (and in documents
to which we refer) that are subject to risks and uncertainties. These
forward-looking statements include information about possible or assumed future
results of our operations or the performance of the combined company after the
merger. Also, when we use any of the words "believes," "expects," "anticipates"
or similar expressions, we are making forward-looking statements. Many possible
events or factors could affect the future financial results and performance of
each of the companies and the combined company after the merger and could cause
those results or performance to differ materially from those ex-
6
<PAGE> 14
pressed in our forward-looking statements. These possible events or factors
include the following:
- - We encounter problems or delays in bringing together the two companies, either
before or after the merger is consummated;
- - Legal and regulatory risks and uncertainties;
- - Economic, political and competitive forces affecting the companies'
businesses, markets, constituencies or securities; and
- - The risk that our analyses of these risks and forces could be incorrect, or
that the strategies developed to deal with them may not succeed.
OWNERSHIP OF HEALTHCARE REALTY
FOLLOWING THE MERGER (PAGE 15)
Healthcare Realty will issue approximately 18.9 million shares of
Healthcare Realty common stock and 3.0 million shares of preferred stock to
Capstone stockholders in the merger. Based on those numbers, the shares of
Healthcare Realty common stock issued to Capstone stockholders in the merger
will constitute approximately % of the outstanding common stock of
Healthcare Realty after the merger, and the shares of Healthcare Realty
preferred stock issued to Capstone stockholders in the merger will constitute
100% of the outstanding preferred stock of Healthcare Realty after the merger.
BOARD OF DIRECTORS AND
MANAGEMENT OF HEALTHCARE REALTY
AFTER THE MERGER (PAGE 36)
When the merger is complete, the current executive officers of Healthcare
Realty will continue as executive officers, and the Healthcare Realty Board will
consist of its current eight members. Executive officers and directors of
Healthcare Realty will serve in such capacities with Capstone after the merger.
None of the executive officers or members of the Capstone Board will continue to
serve as such after the merger.
TERMINATION FEE (PAGE 39)
The merger agreement requires Capstone to pay to Healthcare Realty a
termination fee of $20 million if the merger agreement is terminated under
certain circumstances. Under other circumstances, Healthcare Realty or Capstone
must pay the expenses of the other party.
NO APPRAISAL RIGHTS (PAGE 36)
Under Maryland law, Capstone stockholders do not have any right to dissent
from the merger and receive the appraised value of their shares in cash rather
than Healthcare Realty capital stock.
LISTING OF HEALTHCARE REALTY STOCK
(PAGE 40)
The shares of Healthcare Realty common stock and preferred stock issued in
connection with the merger will be listed on the New York Stock Exchange.
DIVIDENDS AFTER THE MERGER
(PAGE 42)
Historically, each of Healthcare Realty and Capstone has paid dividends.
Healthcare Realty expects to pay dividends in the future consistent with past
practice, subject to Healthcare Realty's financial condition and results of
operations.
7
<PAGE> 15
SUMMARY HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
We are providing the following summary financial information to aid you in
your analysis of the financial aspects of the merger. This information was
derived from our historical financial statements (and related notes) contained
in the annual reports and other information that we have filed with the
Securities and Exchange Commission and should be read in conjunction with that
information. See "WHERE YOU CAN FIND MORE INFORMATION" on page 64. The
historical financial statements for the full years were audited; those for
interim periods were not audited. The unaudited financial information reflects
all adjustments (consisting only of normal recurring accruals) which we
respectively consider necessary to present fairly the financial information for
such periods. The results of operations for any interim period are not
necessarily indicative of results for a full year, and historical results are
not necessarily indicative of future results.
HEALTHCARE REALTY TRUST INCORPORATED
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31, FROM INCEPTION
------------------- ----------------------------------------- (JUNE 3, 1993) TO
1998 1997 1997 1996 1995 1994 DECEMBER 31, 1993
-------- -------- -------- -------- -------- -------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenues...................... $ 17,333 $ 12,842 $ 59,796 $ 38,574 $ 33,361 $ 24,226 $ 7,135
Net income.................... 8,606 6,339 31,212 19,732 18,258 15,716 3,950
Net income per share --
Basic....................... $ 0.44 $ 0.39 $ 1.71 $ 1.52 $ 1.41 $ 1.33 $ 0.64
Net income per share --
Diluted..................... $ 0.43 $ 0.38 $ 1.68 $ 1.49 $ 1.41 $ 1.33 $ 0.63
Balance Sheet Data (at end of
period):
Real estate properties, net... $474,476 $423,178 $470,981 $416,034 $318,480 $280,767 $133,393
Total assets.................. 507,936 479,463 488,514 427,505 336,778 283,190 134,070
Senior notes payable.......... 90,000 90,000 90,000 90,000 -- -- --
Bank credit facility.......... -- -- 11,300 71,900 -- 37,300 21,000
Serial and term bonds
payable..................... -- -- -- 6,719 2,970 3,075 --
Total stockholders' equity.... 409,088 378,739 376,472 245,964 234,448 236,340 108,190
</TABLE>
CAPSTONE CAPITAL CORPORATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31, FROM INCEPTION
------------------- ------------------------------ (JUNE 30, 1994) TO
1998 1997 1997 1996 1995 DECEMBER 31, 1994
-------- -------- -------- -------- -------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Statement of Income Data:
Revenues............................ $ 20,637 $ 11,284 $ 57,178 $ 35,952 $ 24,707 $ 8,240
Net income.......................... 10,192 6,245 28,881 18,914 9,708 4,763
Net income per share --
Basic............................. $ 0.42 $ 0.43 $ 1.76 $ 1.71 $ 1.55 $ 0.80
Net income per share --
Diluted........................... $ 0.42 $ 0.43 $ 1.75 $ 1.68 $ 1.55 $ 0.80
Balance Sheet Data (at end of period):
Real estate properties, net......... $548,934 $342,186 $526,047 $303,997 $207,257 $151,328
Mortgage notes receivable........... 188,630 67,506 170,066 39,326 24,989 13,224
Total assets........................ 771,170 427,519 723,291 356,695 240,625 166,364
Convertible subordinated
debentures........................ 72,952 84,310 72,684 17,657 43,947 --
Bank credit facility................ 126,200 68,800 172,950 68,500 30,225 67,500
Mortgage notes payable.............. 61,360 23,184 56,944 23,228 -- --
Total stockholders' equity.......... 488,142 241,578 372,233 241,556 163,747 98,389
</TABLE>
8
<PAGE> 16
SUMMARY PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
In the table below, we present combined balance sheet information for
Healthcare Realty and Capstone as of March 31, 1998, as if the merger had been
completed on March 31, 1998. We present combined statement of income information
for Healthcare Realty and Capstone for the fiscal year ended December 31, 1997
and the three months ended March 31, 1998, as if the merger had been completed
on January 1, 1997. The merger has been accounted for under the purchase method
of accounting in accordance with Accounting Principles Board Opinion No. 16.
It is important to remember that this information is hypothetical, and does
not necessarily reflect the financial performance that would have actually
resulted if the merger had been completed on those dates. It is also important
to remember that this information does not necessarily reflect future financial
performance if the merger actually occurs.
See "UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION"
beginning on page 57 of this Joint Proxy Statement-Prospectus for a more
detailed explanation of this analysis.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997
--------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Statement of Income Data:
Revenues.................................................. $ 37,970 $116,974
Net income................................................ 17,898 55,073
Net income per share -- Basic............................. $ 0.44 $ 1.71
Net income per share -- Diluted........................... $ 0.44 $ 1.71
Balance Sheet Data (at end of period):
Real estate properties, net............................... $1,187,421 --
Mortgage notes receivable................................. 198,062 --
Total assets.............................................. 1,439,562 --
Senior notes payable...................................... 90,000 --
Convertible subordinated debentures....................... 78,693 --
Bank credit facility...................................... 162,487 --
Mortgage notes payable.................................... 63,229 --
Total stockholders' equity................................ 1,013,789 --
</TABLE>
9
<PAGE> 17
COMPARATIVE PER SHARE DATA
The following table sets forth certain book value, net income, dividends
and funds from operations per share data for Healthcare Realty and Capstone on a
historical and pro forma basis. The pro forma earnings per share data are
derived from the Unaudited Pro Forma Condensed Consolidated Financial
Information appearing elsewhere in this Joint Proxy Statement-Prospectus
beginning on page 57, which gives effect to the merger as if the merger had been
consummated at the beginning of the earliest period presented. The information
set forth below should be read in conjunction with the Summary Historical
Consolidated Financial Information of Healthcare Realty and Capstone appearing
on page 8 of this Joint Proxy Statement-Prospectus, the Unaudited Pro Forma
Condensed Consolidated Financial Information, including the notes thereto,
beginning on page 57 of this Joint Proxy Statement-Prospectus and the
consolidated financial statements of Healthcare Realty and Capstone, including
the notes thereto, included in documents incorporated by reference in this Joint
Proxy Statement-Prospectus. See "WHERE YOU CAN FIND MORE INFORMATION" on page
64.
<TABLE>
<CAPTION>
CAPSTONE
HEALTHCARE REALTY -----------------------
---------------------- PRO FORMA
HISTORICAL PRO FORMA HISTORICAL EQUIVALENT
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
Book value per common share:
March 31, 1998..................................... $19.79 $22.11 $21.77 $18.83
December 31, 1997.................................. $19.52 $21.32 $21.47 $18.16
Net income per common and common equivalent share:
Three months ended March 31, 1998 --
Basic......................................... $ 0.44 $ 0.44 $ 0.42 $ 0.37
Diluted....................................... $ 0.43 $ 0.44 $ 0.42 $ 0.37
Year ended December 31, 1997 --
Basic......................................... $ 1.71 $ 1.71 $ 1.76 $ 1.46
Diluted....................................... $ 1.68 $ 1.71 $ 1.75 $ 1.46
Dividends declared and paid per share:
Three months ended March 31, 1998............... $ 0.51 $ 0.51 $ 0.49 $ 0.43
Year ended December 31, 1997.................... $ 1.99 $ 1.99 $ 1.89 $ 1.70
Funds from operations per common and common
equivalent share(1):
Three months ended March 31, 1998 --
Basic......................................... $ 0.60 $ 0.62 $ 0.51 $ 0.53
Diluted....................................... $ 0.59 $ 0.61 $ 0.50 $ 0.52
Year ended December 31, 1997 --
Basic......................................... $ 2.32 $ 2.43 $ 2.08 $ 2.07
Diluted....................................... $ 2.28 $ 2.42 $ 2.06 $ 2.06
</TABLE>
- ---------------
(1) Funds from operations, as defined by the National Association of Real Estate
Investment Trusts, Inc. 1995 White Paper, means net income (computed in
accordance with generally accepted accounting principles), excluding gains
(or losses) from debt restructuring and sales of property, plus depreciation
from real estate assets. Healthcare Realty and Capstone consider funds from
operations to be an informative measure of the performance of an equity real
estate investment trust and consistent with measures used by analysts to
evaluate equity real estate investment trusts. Funds from operations does
not represent cash generated from operating activities in accordance with
generally accepted accounting principles, is not necessarily indicative of
cash available to fund cash needs, and should not be considered as an
alternative to net income as an indicator of operating performance or as an
alternative to cash flow as a measure of liquidity. The calculation of
Capstone's historical funds from operations per share presented above has
been conformed to Healthcare Realty's method of calculation. For additional
information, see the notes to the Unaudited Pro Forma Condensed Consolidated
Financial Information.
10
<PAGE> 18
THE SPECIAL MEETINGS OF STOCKHOLDERS
This Joint Proxy Statement-Prospectus is being furnished on or about
, 1998 to the holders (the "Capstone Stockholders") of shares of
common stock, $.001 par value per share ("Capstone Common Stock"), and of shares
of 8 7/8% Series A Cumulative Preferred Stock, $.001 par value per share
("Capstone Preferred Stock"), of Capstone Capital Corporation, a Maryland
corporation ("Capstone"), and to the holders (the "Healthcare Realty
Stockholders") of shares of common stock, $.01 par value per share ("Healthcare
Realty Common Stock"), of Healthcare Realty Trust Incorporated, a Maryland
corporation ("Healthcare Realty"), for use at special meetings of the Capstone
Stockholders and the Healthcare Realty Stockholders to be held on ,
1998 (the "Capstone Special Meeting" and the "Healthcare Realty Special
Meeting," respectively) to consider and vote upon the merger (the "Merger") of a
subsidiary of Healthcare Realty into Capstone and the related Plan and Agreement
of Merger (the "Merger Agreement").
VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL
To Capstone Stockholders: The Board of Directors of Capstone (the
"Capstone Board") has fixed , 1998 as the record date (the "Capstone
Record Date") for the determination of the Capstone Stockholders entitled to
receive notice of and to vote at the Capstone Special Meeting. Accordingly, only
Capstone Stockholders of record at the close of business on the Capstone Record
Date will be entitled to notice of and to vote at the Capstone Special Meeting.
The affirmative vote of the holders of at least two-thirds of the outstanding
shares of Capstone Common Stock and of at least two-thirds of the outstanding
shares of Capstone Preferred Stock, each voting separately as a class, is
required to approve the Merger and the Merger Agreement. At the close of
business on the Capstone Record Date, there were shares of
Capstone Common Stock and 3,000,000 shares of Capstone Preferred Stock entitled
to vote at the Capstone Special Meeting, which shares were held by approximately
and holders of record, respectively. Each share of
Capstone Common Stock and each share of Capstone Preferred Stock outstanding on
the Capstone Record Date entitles its holder to one vote as to the approval of
the Merger and the Merger Agreement.
Capstone will count shares of Capstone Common Stock and Capstone Preferred
Stock present in person at the Capstone Special Meeting but not voting, and
shares of Capstone Common Stock and Capstone Preferred Stock for which it has
received proxies but with respect to which holders of such shares have
abstained, as present at the Capstone Special Meeting for purposes of
determining the presence or absence of a quorum for the transaction of business.
In addition, broker non-votes will be counted as present for purposes of
determining whether a quorum exists.
As of the Capstone Record Date, directors and executive officers of
Capstone beneficially owned approximately shares of Capstone
Common Stock, or approximately % of the shares of Capstone Common Stock
entitled to vote at the Capstone Special Meeting. It is currently expected that
each such director and executive officer of Capstone will vote the shares of
Capstone Common Stock beneficially owned by him for approval of the Merger and
the Merger Agreement.
Additional information with respect to beneficial ownership of Capstone
Common Stock by individuals and entities owning more than 5% of such stock and
more detailed information with respect to beneficial ownership of Capstone
Common Stock by directors and executive officers of Capstone are contained in
Capstone's Proxy Statement for its 1998 annual meeting of stockholders, the
relevant portions of which are incorporated by reference into Capstone's Annual
Report on Form 10-K for the year ended December 31, 1997. See "WHERE YOU CAN
FIND MORE INFORMATION."
To Healthcare Realty Stockholders: The Board of Directors of Healthcare
Realty (the "Healthcare Realty Board") has fixed , 1998 as the
record date (the "Healthcare Realty Record Date") for the determination of the
Healthcare Realty Stockholders entitled to receive notice of and to vote at the
Healthcare Realty Special Meeting. Accordingly, only Healthcare Realty
Stockholders of record at the close of business on the Healthcare Realty Record
Date will be entitled to notice of and to vote at the Healthcare Realty Special
Meeting. The affirmative vote of the holders of at least a majority of the votes
cast at the Healthcare Realty Special Meeting must vote in favor of the issuance
of Healthcare Realty capital stock in
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<PAGE> 19
connection with the Merger; provided, however, that the total vote cast on the
proposal represents over 50% in interest of all Healthcare Realty Common Stock
entitled to vote on the proposal. At the close of business on the Healthcare
Realty Record Date, there were shares of Healthcare Realty Common
Stock entitled to vote at the Healthcare Realty Special Meeting, which shares
were held by approximately holders of record; no shares of
Healthcare Realty Preferred Stock were outstanding on the Healthcare Realty
Record Date. Each share of Healthcare Realty Common Stock outstanding on the
Healthcare Realty Record Date entitles its holder to one vote as to the approval
of the issuance of Healthcare Realty capital stock in connection with the
Merger.
Healthcare Realty will count shares of Healthcare Realty Common Stock
present in person at the Healthcare Realty Special Meeting but not voting, and
shares of Healthcare Realty Common Stock for which it has received proxies but
with respect to which holders of such shares have abstained, as present at the
Healthcare Realty Special Meeting for purposes of determining the presence or
absence of a quorum for the transaction of business. In addition, broker
non-votes will be counted as present for purposes of determining whether a
quorum exists.
As of the Healthcare Realty Record Date, directors and executive officers
of Healthcare Realty beneficially owned approximately shares of
Healthcare Realty Common Stock, or approximately % of the shares entitled
to vote at the Healthcare Realty Special Meeting. It is currently expected that
each such director and executive officer of Healthcare Realty will vote the
shares of Healthcare Realty Common Stock beneficially owned by him or her for
approval of the issuance of Healthcare Realty capital stock in connection with
the Merger.
Additional information with respect to beneficial ownership of Healthcare
Realty Common Stock by individuals and entities owning more than 5% of such
stock and more detailed information with respect to beneficial ownership of
Healthcare Realty Common Stock by directors and executive officers of Healthcare
Realty are contained in Healthcare Realty's Proxy Statement for its 1998 annual
meeting of stockholders, the relevant portions of which are incorporated by
reference into Healthcare Realty's Annual Report on Form 10-K for the year ended
December 31, 1997. See "WHERE YOU CAN FIND MORE INFORMATION."
PROXIES
All shares of capital stock represented at the special meetings by properly
executed proxies will be voted in accordance with the instructions indicated in
such proxies, except to the extent such proxies are revoked in advance of a
vote. IF A CAPSTONE STOCKHOLDER SIGNS AND RETURNS A PROXY WITHOUT VOTING
INSTRUCTIONS, AND THE PROXY IS NOT REVOKED, THE PROXY WILL BE VOTED FOR THE
APPROVAL OF THE MERGER. IF A HEALTHCARE REALTY STOCKHOLDER SIGNS AND RETURNS A
PROXY WITHOUT VOTING INSTRUCTIONS, AND THE PROXY IS NOT REVOKED, THE PROXY WILL
BE VOTED FOR THE APPROVAL OF THE ISSUANCE OF HEALTHCARE REALTY CAPITAL STOCK IN
CONNECTION WITH THE MERGER.
Both Capstone and Healthcare Realty will treat broker non-votes (i.e.,
shares held by brokers or nominees which are represented at a meeting but with
respect to which the broker or nominee is not empowered to vote on a particular
proposal) and abstentions as shares that are present for purposes of determining
the presence of a quorum at each of the special meetings. In the case of
Capstone stockholders, broker non-votes and abstentions will have the effect of
a vote against the proposal to approve the Merger and the Merger Agreement. In
the case of Healthcare Realty stockholders, broker non-votes and abstentions
will have the effect of a vote against the proposal to approve the issuance,
unless holders of more than 50% in interest of all securities entitled to vote
on the proposal cast votes, in which event neither a broker non-vote nor an
abstention will have any effect on the result of the vote.
A stockholder may revoke his or her proxy at any time in advance of a vote
by delivering to the Secretary of Healthcare Realty or Capstone, as the case may
be, a signed notice of revocation or a later-dated signed
12
<PAGE> 20
proxy or by attending the applicable special meeting and voting in person.
Attendance at a special meeting will not, in and of itself, constitute the
revocation of a proxy.
Healthcare Realty and Capstone will share equally the cost of printing and
mailing this Joint Proxy Statement-Prospectus. Each company will bear its own
expenses of soliciting proxies from its stockholders for its respective meeting.
In addition to the solicitation of proxies by mail, Capstone and Healthcare
Realty will request banks, brokers and other record holders to send proxies and
proxy material to the beneficial owners of the stock and secure their voting
instructions, if necessary. Capstone and Healthcare Realty will reimburse such
record holders for their reasonable expenses in so doing. If necessary,
directors, officers and employees of Capstone or Healthcare Realty may solicit
proxies, either personally or by telephone, telegram, facsimile or special
delivery letter. These individuals will not receive any special compensation for
soliciting proxies, but they will be reimbursed for their out-of-pocket
expenses.
Capstone has retained to perform solicitation services in
connection with this Joint Proxy Statement-Prospectus. For such services,
will receive a fee of approximately $ and will be
reimbursed for certain out-of-pocket expenses and indemnified against certain
liabilities incurred in connection with this proxy solicitation.
13
<PAGE> 21
THE MERGER
DESCRIPTION OF THE MERGER
At the effective time of the Merger (the "Effective Time"), Capstone will
merge with HR Acquisition I Corporation, a Delaware corporation and a wholly
owned subsidiary of Healthcare Realty, and Capstone will survive as a wholly
owned subsidiary of Healthcare Realty. Subject to the satisfaction or waiver of
certain conditions set forth in the Merger Agreement and described more fully in
"THE MERGER AGREEMENT -- Conditions to the Merger" on page 37, the Merger will
become effective at such time as the articles of merger (the "Articles of
Merger") are accepted for record by the Maryland State Department of Assessments
and Taxation in accordance with the Maryland General Corporation Law ("MGCL"),
and upon the filing of a certificate of merger (the "Certificate of Merger") in
the office of the Secretary of State of the State of Delaware in accordance with
the Delaware General Corporation Law (the "DGCL"). The Merger will have the
effect set forth in Section 3-114 of the MGCL and Section 259 of the DGCL, and
HR Acquisition I Corporation's amended and restated certificate of
incorporation, bylaws, officers and directors as in effect at the Effective Time
will be those of HR Acquisition I Corporation.
CAPSTONE SECURITIES
Immediately prior to the Effective Time, each of the 517,150 shares of
Capstone restricted common stock ("Capstone Restricted Stock"), all of which are
owned by officers, directors and employees of Capstone, will be redeemed for
$24.33 per share in cash. Such amount is equivalent to the Exchange Ratio
(defined below) multiplied by the closing price of Healthcare Realty Common
Stock on May 13, 1998.
At the Effective Time, automatically by virtue of the Merger and without
any action on the part of any party or Capstone Stockholder, the following
securities of Capstone will be converted as follows:
- Each share of Capstone Common Stock (excluding Capstone Restricted Stock,
or shares held by Capstone or any of its subsidiaries) will be converted
into the fixed amount of .8518 shares (the "Exchange Ratio") of
Healthcare Realty Common Stock.
- Each share of Capstone Preferred Stock will be converted into one share
of Healthcare Realty Preferred Stock.
- All options to purchase shares of Capstone Common Stock (each, a
"Capstone Stock Option" and, collectively, representing the right to
purchase 973,000 shares) that are then outstanding and unexercised,
whether or not then vested or exercisable, will cease to represent rights
to acquire shares of Capstone Common Stock and will be purchased for cash
in an amount equal to the excess of (i) $24.33 per share over (ii) the
stated exercise price of the Capstone Stock Option.
- All shares of Capstone Common Stock held by Capstone, or by any of its
subsidiaries, will be canceled.
- All of Capstone's 10 1/2% Convertible Subordinated Debentures due 2002
(the "10 1/2% Debentures") will remain outstanding in accordance with the
indenture pursuant to which the 10 1/2% Debentures have been issued, and
Healthcare Realty will assume each obligation of Capstone contained in
the indenture. Each 10 1/2% Debenture will be convertible into that
number of shares of Healthcare Realty Common Stock equal to the number of
shares of Capstone Common Stock into which such 10 1/2% Debenture was
convertible immediately prior to the Effective Time, multiplied by the
Exchange Ratio.
- All of Capstone's 6.55% Convertible Subordinated Debentures due 2002 (the
"6.55% Debentures") will remain outstanding in accordance with the
indenture pursuant to which the 6.55% Debentures have been issued, and
Healthcare Realty will assume each obligation of Capstone contained in
the indenture. Each 6.55% Debenture will be convertible into that number
of shares of Healthcare Realty Common Stock equal to the number of shares
of Capstone Common Stock into which such 6.55% Debenture was convertible
immediately prior to the Effective Time, multiplied by the Exchange
Ratio.
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HEALTHCARE REALTY SECURITIES
All shares of Healthcare Realty Common Stock outstanding as of the
Effective Time will remain outstanding. Healthcare Realty will issue
approximately 18.9 million shares of Healthcare Realty Common Stock and 3.0
million shares of Healthcare Realty Preferred Stock to Capstone Stockholders in
the Merger. Based on those numbers, the shares of Healthcare Realty Common Stock
issued to Capstone Stockholders in the Merger will constitute approximately
% of the outstanding Common Stock of Healthcare Realty after the Merger,
and the shares of Healthcare Realty Preferred Stock issued to Capstone
Stockholders in the Merger will constitute 100% of the outstanding Preferred
Stock of Healthcare Realty after the Merger.
EXCHANGE OF CERTIFICATES
When the Merger becomes effective, Healthcare Realty will deposit with
, as exchange agent (the "Exchange Agent"), certificates
representing the shares of Healthcare Realty Common Stock and Healthcare Realty
Preferred Stock (collectively, "Healthcare Realty Certificates") and cash to be
paid in lieu of fractional shares to which Capstone Stockholders would otherwise
be entitled.
As soon as reasonably practicable after the Merger becomes effective, the
Exchange Agent will mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of Capstone Common Stock or Capstone Preferred Stock (each a
"Capstone Certificate"), a letter of transmittal and instructions for use in
exchanging such Capstone Stockholder's Capstone Certificates for Healthcare
Realty Certificates. Upon surrender of a Capstone Certificate to the Exchange
Agent, together with a duly executed letter of transmittal, the Exchange Agent
will send a certificate representing the number of whole shares of Healthcare
Realty Common Stock or Healthcare Realty Preferred Stock to which such holder
has become entitled and a check in the amount of cash in lieu of fractional
shares, if any, of Healthcare Realty Common Stock to which such holder has
become entitled pursuant to the Merger Agreement. Capstone Certificates so
surrendered will immediately be canceled. No interest will be paid or accrued on
any cash to be paid upon such surrender, whether in lieu of fractional shares of
Healthcare Realty Common Stock or with respect to unpaid dividends or
distributions thereon.
CAPSTONE STOCKHOLDERS SHOULD NOT SEND IN THEIR CAPSTONE CERTIFICATES UNTIL
THEY RECEIVE THE TRANSMITTAL MATERIALS FROM THE EXCHANGE AGENT.
No fractional shares of Healthcare Realty Common Stock will be issued in
the Merger, nor will any dividend or distribution be payable on or with respect
thereto, nor will any such fractional share entitle the holder thereof to vote
or to any other rights of a Healthcare Realty Stockholder. Instead, Healthcare
Realty will pay to each Capstone Stockholder who would otherwise be entitled to
a fractional share of Healthcare Realty Common Stock (after taking into account
all Capstone Certificates delivered by such Capstone Stockholder) an amount in
cash (without interest) determined by multiplying such fraction by $28.5625.
Until exchanged, each Capstone Certificate shall be deemed to represent the
number of whole shares of Healthcare Realty Common Stock or Healthcare Realty
Preferred Stock into which the Capstone Certificate has been converted plus the
right to receive cash in lieu of fractional shares, if any.
After the Effective Time, former Capstone Stockholders may vote their
Healthcare Realty shares whether or not they have exchanged Capstone
Certificates for Healthcare Realty Certificates. However, the holder of any
unsurrendered Capstone Certificate will not receive any dividends or other
distributions with respect to Healthcare Realty Common Stock or Healthcare
Realty Preferred Stock declared after the Effective Time and payable to
Healthcare Realty Stockholders of record until the holder thereof surrenders
such Capstone Certificate in accordance with the Merger Agreement. After the
proper surrender of a Capstone Certificate, the record holder thereof will be
entitled to receive any such dividends or other distributions, without any
interest thereon, which theretofore had become payable with respect to shares of
Healthcare Realty Common Stock or Healthcare Realty Preferred Stock represented
by such Capstone Certificate.
Any part of the consideration to be paid in the Merger that remains
unclaimed by Capstone Stockholders for six months after the Effective Time will
be paid to Healthcare Realty, and after such time Capstone
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Stockholders may look only to Healthcare Realty for payment of the Merger
consideration and unpaid dividends and distributions, if any, on Healthcare
Realty Common Stock or Healthcare Realty Preferred Stock deliverable in respect
of each share of Capstone Common Stock or Capstone Preferred Stock held by such
holder, in each case, without interest thereon. None of Capstone, Healthcare
Realty or the Exchange Agent, or any other person, will be liable to any former
Capstone Stockholder for any amounts properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
In the event that any Capstone Certificate is lost, stolen or destroyed,
the Exchange Agent will issue in exchange for such Capstone Certificate the
shares of Healthcare Realty Common Stock or Healthcare Realty Preferred Stock
and cash in lieu of fractional shares deliverable in respect of Healthcare
Realty Common Stock, upon the making of an affidavit of that fact by the person
claiming the same, and if required by Healthcare Realty or the Exchange Agent,
the posting of a bond by such person in an amount determined by Healthcare
Realty as indemnity against any claim that may be made against it with respect
to such Capstone Certificate.
BACKGROUND OF THE MERGER
The decision by the Capstone Board to enter into the Merger Agreement
reflected its desire to maximize stockholder value in a changing REIT industry
environment. The decision process involved, in part, an assessment of the
potential risks and benefits of a strategic merger with Healthcare Realty
compared to the potential risks and benefits of other strategic alternatives
available to Capstone. A significant factor considered by the Capstone Board was
its perception of certain risks attendant upon Capstone's continuing to operate
as a stand-alone entity and its perception that the merger consideration and
other terms offered by Healthcare Realty, as well as the strategic advantages
offered by a combination with Healthcare Realty, represented a transaction
potentially more attractive to Capstone and its stockholders than other
potential alternatives.
The Capstone Board considered, among other things (and without assigning
relative weights):
- The improved access to capital and lowered cost of capital potentially
created by a strategic affiliation with another REIT;
- The increasing consolidation of operating companies in the healthcare
industry and its effect on the demand for REIT financing in the industry;
- The market position and prospects for growth of Healthcare Realty,
Capstone and other healthcare REITs;
- The changing focus of Capstone away from traditional sale-leaseback
transactions and toward construction and development loans as a result of
increased competition; and
- The increasing credit quality of healthcare borrowers and their resulting
enhanced access to non-REIT capital.
During the summer and fall of 1997, Michael D. Martin, in his capacity as
Chief Financial Officer of HEALTHSOUTH Corporation ("HEALTHSOUTH"), had several
telephone conversations with the chief executive officer of a publicly held REIT
("Company A") concerning matters relating to HEALTHSOUTH's acquisition of
another corporation which held a number of properties pursuant to leases or
mortgages with Company A. During those conversations, the chief executive
officer of Company A suggested the possibility of a strategic business
combination with Capstone. No substantive discussions occurred at that time.
In early March 1998, the chief executive officer of Company A telephoned
Mr. Martin and suggested that Company A was interested in making a definitive
proposal for a strategic merger with Capstone. Shortly thereafter, he telephoned
Richard M. Scrushy, Chairman of the Board of Capstone, and reiterated Company
A's interest in exploring a transaction. As a result of these contacts,
Capstone's management began preliminary consideration of the potential risks and
benefits associated with pursuing a strategic business combination with another
healthcare REIT versus continuing to pursue its existing business plan. On
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March 23, 1998, Capstone engaged Salomon Smith Barney to act as Capstone's
financial advisor should Capstone decide to explore a potential business
combination with Company A or other healthcare REITs.
On March 26, 1998, Capstone and Company A executed a confidentiality
agreement and exchanged certain business and financial information relating to
each company.
Informal discussions continued among management of Capstone,
representatives of Company A and their respective advisors in late March and
early April 1998, as Capstone continued to evaluate strategic alternatives and
explore the specific terms of a proposed transaction. On April 9, 1998, Capstone
received a written term sheet from Company A, proposing to acquire all of the
outstanding shares of Capstone Common Stock in exchange for a fixed number of
shares of Company A common stock, for an indicated premium of 7.8% over the
market price of the Capstone Common Stock on that date ($24.125). All of the
shares of Capstone Restricted Stock would be acquired in exchange for either
Company A common stock on the same basis as the outstanding Capstone Common
Stock or cash in an amount equal to 95% of the value per share of the Company A
common stock. The proposal also required certain members of the Capstone Board
and management to enter into noncompetition agreements and consulting
agreements.
On April 14, 1998, the Capstone Board met by telephone to consider the
potential options available to Capstone, including continuing to execute its
existing strategic plan as a stand-alone entity, entering into a business
combination with Company A, or exploring potential business combinations with
other healthcare REITs. In evaluating the strategic alternative of remaining
independent and executing its growth strategy, the Capstone Board considered
changes in the healthcare industry, in general, and the healthcare REIT
industry, in particular, that were perceived to have a potentially adverse
impact on Capstone and its stockholders. These changes included, among other
things, those factors listed above.
In addition, the Capstone Board considered the potential competitive
advantages that could be achieved through a strategic affiliation with another
healthcare REIT, such as an enhanced competitive position among healthcare REITs
resulting from increased size. After thoroughly analyzing its strategic
alternatives, the Capstone Board concluded that a merger with another healthcare
REIT was the alternative most likely to maximize stockholder value. The Capstone
Board and its financial advisors had extensive discussions concerning these
matters, including consideration of the market position and prospects for growth
of Company A, Capstone and other healthcare REITs. While the Capstone Board did
not make a decision to enter into a transaction at this meeting, it did
authorize Capstone's management, with the advice and assistance of its legal and
financial advisors, to proceed with due diligence activities and detailed
negotiations concerning a potential business combination with Company A.
On April 15 and 16, 1998, representatives of Company A conducted certain
due diligence reviews on Capstone in Birmingham, Alabama. On April 17, 1998,
representatives of Capstone conducted certain due diligence reviews on Company A
at its headquarters, and counsel for the parties commenced negotiation of the
terms of a definitive plan and agreement of merger.
On April 20, 1998, Company A notified Salomon Smith Barney that Capstone's
investments that were not structured as sale-leaseback transactions were not
compatible with Company A's portfolio of properties and, therefore, Company A
would need to conduct additional due diligence reviews of these investments to
determine what it would cost Company A to restructure or terminate these
investments. While expressing its interest in continuing discussions, Company A
stated that it was not prepared to make a formal offer at that time, and any
offer it might make would likely be at a lower exchange ratio for Capstone
Common Stock. After evaluating the current stated position of Company A,
Capstone determined that continued discussions with Company A would not lead to
an offer that would be in Capstone's best interest. Accordingly, Capstone
authorized Salomon Smith Barney to contact other healthcare REITs to determine
whether any of them had any interest in developing an acquisition proposal for
Capstone.
On April 20 and 21, 1998, seven healthcare REITs, including Healthcare
Realty, were contacted to determine whether they had any interest in developing
an acquisition proposal for Capstone. Each of such parties was advised that it
would be required to execute a confidentiality agreement in order to receive
nonpublic information about Capstone, and that Capstone would only consider
written expressions of interest.
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Beginning on April 22, 1998, Capstone entered into confidentiality
agreements with seven healthcare REITs, including Healthcare Realty, which had
expressed an interest in exploring an acquisition proposal for Capstone.
Pursuant to these confidentiality agreements, Capstone and its advisors provided
certain confidential legal and financial information to each such interested
party. Each of the interested parties, including Healthcare Realty, were
requested to deliver a preliminary expression of interest no later than the
close of business on April 27, 1998 and were informed that after all preliminary
expressions of interest were reviewed, a limited number of interested parties
would be invited to proceed with the next level of due diligence.
On April 23, 1998, Healthcare Realty and its counsel met with
representatives of NationsBank, N.A. ("NationsBank") to discuss the potential
acquisition of Capstone on an all cash basis. Shortly after that meeting,
Healthcare Realty retained NationsBanc Montgomery Securities LLC ("NationsBanc
Montgomery") to act as its financial advisor.
On April 27, 1998, Capstone received written preliminary, non-binding
expressions of interest from four interested parties, including Healthcare
Realty. Shortly thereafter, each of the four interested parties, including
Healthcare Realty, were invited to conduct a due diligence examination of
Capstone.
On April 28, 1998, Healthcare Realty held its regularly scheduled quarterly
board meeting. The directors discussed the possible acquisition of Capstone. In
determining whether Healthcare Realty should pursue the possible acquisition of
Capstone, the directors considered, among other things, that:
- The acquisition of Capstone would provide Healthcare Realty with access
to clients of Capstone, which should result in increased opportunity for
capital investment and the marketing of Healthcare Realty's real estate
administration, management and development services to those clients;
- The majority of investments made by Capstone were compatible with those
of Healthcare Realty, with the remainder being of a quality that should
be accretive to Healthcare Realty. Further, Capstone's compatible
investments would provide geographical and sponsor diversification to
Healthcare Realty's present portfolio of investments;
- Capstone did not have a real estate services organization; therefore,
there should be significant opportunity to maximize the value of
Capstone's portfolio of real estate assets through enhanced
administration and property management of those assets by Healthcare
Realty's real estate services organization;
- The acquisition of Capstone should result in a significant reduction in
general, administrative and overhead expenditures with respect to
Capstone's investment portfolio;
- Consolidation within the REIT industry had begun and Healthcare Realty
anticipated that growth resulting from the proposed acquisition of
Capstone would benefit its comparable market position within the REIT
industry; and
- The acquisition of Capstone would immediately increase the equity base of
Healthcare Realty, which should result in improved access to debt and
equity capital at lower cost to Healthcare Realty.
The Healthcare Realty Board did not make a decision to enter into a
transaction to acquire Capstone at this meeting. The directors did, however,
authorize Healthcare Realty's management to further investigate a potential
acquisition of Capstone with the advice and assistance of Healthcare Realty's
legal and financial advisors.
Beginning on April 28, 1998, and continuing through May 7, 1998, the four
interested REITs, including Healthcare Realty, each of which had executed a
confidentiality agreement and had continued to express an interest in developing
an acquisition proposal for Capstone, were provided additional information about
Capstone, including the opportunity to perform on-site due diligence
investigations in Birmingham, Alabama, thorough data room visits and access to
Capstone management.
On April 30 and May 1, 1998, Healthcare Realty met with its legal and
financial advisors to discuss due diligence issues, potential combination
structures, financing alternatives and the timing of a possible combination.
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On May 1, 1998, Capstone delivered a form of plan and agreement of merger
and ancillary agreements to each of such interested parties and certain of their
legal and financial advisors.
On May 5 and 6, 1998, executives of Healthcare Realty and its legal,
financial and accounting advisors visited the corporate offices of Capstone and
the offices of its legal advisors in Birmingham, Alabama, for an initial
corporate and property due diligence. Abstracts of all of Capstone's real estate
leases and mortgage assets were prepared, together with preliminary review of
corporate legal documents. Capstone made certain of its executive officers and
legal advisors available to answer questions.
On May 5, 1998, each of the interested parties, including Healthcare
Realty, was requested to submit a firm offer for 100% of the capital stock of
Capstone no later than the close of business on Monday, May 11, 1998, together
with a mark-up of the plan and agreement of merger.
At the regularly scheduled meeting of the Capstone Board on May 7, 1998,
the Capstone Board discussed the status of the due diligence meetings and
discussions with the interested parties. At this meeting, the Capstone Board
received presentations from Capstone's management and legal and financial
advisors. At such meeting, Salomon Smith Barney reviewed with the Capstone Board
the financial terms of the non-binding expressions of interest that had been
received from each of the interested parties. The Capstone Board had extensive
discussions concerning such expressions of interest and the strategic
alternatives available to Capstone and was given the opportunity to ask
questions of Capstone's management and legal and financial advisors. After
consideration of these matters, including the factors discussed at the April 14
meeting, the Capstone Board concluded that a merger with another healthcare REIT
was the alternative most likely to maximize stockholder value. The Capstone
Board authorized Capstone's management and legal and financial advisors to
continue negotiations with each of the interested parties with the goal of
achieving the highest and best value for Capstone's stockholders. The Capstone
Board expressed its opinion that it would not be interested in any proposal that
was subject to a financing contingency. Because the Capstone Board anticipated
that any offer would likely include a requirement that Mr. Scrushy, Mr. Martin
and Mr. McRoberts execute noncompetition agreements and consulting agreements in
exchange for separate consideration, the Capstone Board appointed a committee of
independent directors (the "Independent Committee"), comprised of Larry D.
Striplin, Jr., Eric R. Hanson, George E. Bogle and Barry Morton, to review the
terms of any offer received by Capstone. The Independent Committee was given the
authority to meet separately, to consult with Salomon Smith Barney and to seek
advice from Capstone's legal counsel or others.
From May 5 to May 11, 1998, representatives of Healthcare Realty and
Capstone discussed various alternative acquisition proposals on a daily basis.
On May 11, 1998, Healthcare Realty sent a letter to Capstone's financial
advisors indicating that Healthcare Realty had elected not to make an all cash
offer to acquire Capstone; instead, Healthcare Realty expressed its interest in
a transaction which involved Healthcare Realty making an equity investment in
Capstone, assuming management of Capstone, and managing Capstone's properties.
As part of the proposal, Healthcare Realty would purchase the Capstone
Restricted Stock and Capstone Stock Options, and Capstone's senior management
and directors would enter into non-competition agreements for certain
non-compete payments. Capstone rejected Healthcare Realty's alternative proposal
because it was not responsive to Capstone's request that any proposal provide
value to Capstone Stockholders through the acquisition of all of Capstone's
capital stock.
From May 7, 1998 and continuing through June 5, 1998, Healthcare Realty and
its legal and financial advisors undertook additional due diligence review of
Capstone, including, among other items, interviews with Capstone's officers and
directors, additional real estate review and document abstracting, secured debt
review, preparation of schedules, litigation review, financial modeling, review
of corporate equity and debt instruments and discussions and visits with major
clients of Capstone.
On May 12, 1998, Capstone received a letter from one interested party
("Company B") reconfirming its interest in developing an acquisition proposal,
but the letter did not contain specific terms, included a financing contingency
and conditioned further discussions on Capstone's agreement to deal exclusively
with Company B. Because this letter was unresponsive to Capstone's request and
required exclusivity, Capstone did not pursue this proposal.
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Following Capstone's rejection of Healthcare Realty's alternative proposal,
from May 14 through May 28, 1998, Healthcare Realty and Capstone continued to
exchange information and structural proposals. Through written expressions of
interest and on-going discussions, Healthcare Realty proposed several
alternative acquisition structures having a per share price ranging from
$24.5625 to $24.8125 and premiums over the then current market price of Capstone
Common Stock of 2.1% to 6.2%, subject to certain conditions, which included
among other items, that:
- There would be cash and stock components to the purchase price;
- There would be a financing contingency for the cash portion of the
purchase price;
- The transaction would be taxable to the Capstone stockholders, to permit
an increase in tax basis of Capstone's assets;
- Healthcare Realty would employ the use of a special purpose entity, not
consolidated with Healthcare Realty, to make the acquisition;
- There would be firm written confirmations of future investment and
service opportunities from clients of Capstone; and
- There would be six-year consulting and noncompete agreements from certain
key officers and directors of Capstone which would provide for separate
cash consideration ranging from $17,000,000 to $19,000,000 in the
aggregate.
During the course of these discussions, Capstone maintained its preference
for a tax-free transaction and its rejection of the use of a non-consolidated
special purpose acquisition entity and the financing contingency. Additionally,
Capstone was unable to provide Healthcare Realty with firm written commitments
for future business opportunities.
On May 28, 1998, Capstone received a proposal from another interested party
("Company C") providing for the acquisition of all of the shares of Capstone
Common Stock, including the Capstone Restricted Stock, for $23.80 in Company C
common stock, indicating a premium of 1.8% over the then current market price
for Capstone Common Stock. This proposal also contemplated that the transaction
would be accounted for under the "pooling of interests" accounting method.
Because of the lower price and the "pooling" requirement, Capstone did not
believe that there was a realistic possibility of reaching an agreement with
Company C and did not pursue additional discussions with Company C.
On June 1, 1998, following substantial discussions between Healthcare
Realty and Capstone, the parties determined to begin negotiating a definitive
agreement based upon the following terms. Healthcare Realty agreed that the
transaction would be an all stock tax-free merger and that a non-consolidated
special purpose entity, the financing contingency, and written confirmations of
future business opportunities would not be required. Capstone and Healthcare
Realty agreed upon the fixed Exchange Ratio and a per share purchase price for
the Capstone Restricted Stock and Capstone Stock Options of $24.33 and that the
consideration to be paid in accordance with the noncompetition and consulting
agreements would be part cash and part stock, with the stock portion to be
delivered in four successive annual installments beginning in October 1999.
On June 2, 1998, Capstone signed and delivered to Healthcare Realty a
confidentiality agreement designed to protect the confidentiality of Healthcare
Realty material received by Capstone. Healthcare Realty continued to be bound by
its previously delivered confidentiality agreement.
On June 3, 1998, Capstone performed a due diligence investigation of
Healthcare Realty in Nashville, Tennessee. On June 4 and 5, 1998,
representatives of Healthcare Realty and its counsel visited the offices of
Capstone and its counsel to conduct further due diligence on specific matters
and to finalize the remaining issues in the Merger Agreement. In addition,
counsel to Capstone provided additional information with respect to certain
matters in the disclosure schedule draft and indicated measures Capstone was
going to undertake to resolve remaining issues presented in the disclosure
schedule.
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During the period from June 3 through June 7, representatives of Capstone
and Healthcare Realty exchanged drafts of the definitive Merger Agreement and
continued to have numerous telephone conversations among themselves and their
financial and legal advisors and accountants to refine certain issues, including
the indemnification by Healthcare Realty of Capstone's officers and directors, a
break-up fee provision and the ability of the officers of Capstone who were
starting a new business in Birmingham, Alabama to acquire the executive offices
of Capstone, including the office furniture and equipment in the executive
offices.
On the evening of June 4, 1998, the Independent Committee met with
Capstone's legal and financial advisors to discuss Healthcare Realty's proposal
and the status of negotiations with Healthcare Realty, including the revised
offer for a tax-free, stock-for-stock exchange and the requirement that Mr.
Scrushy, Mr. Martin and Mr. McRoberts each enter into six-year noncompetition
and consulting agreements. The Independent Committee recommended that management
continue negotiations with representatives of Healthcare Realty.
On June 5, 1998, the Capstone Board met to consider the Healthcare Realty
proposal. A copy of the draft Merger Agreement had been delivered to the
Capstone Board, including the Independent Committee, prior to the meeting. At
such meeting, representatives of Salomon Smith Barney outlined for the Capstone
Board the financial aspects of Healthcare Realty's proposal, which were
consistent with the terms described under "-- Capstone Securities."
Counsel to Capstone reviewed the terms of the definitive Merger Agreement,
noting for the Capstone Board that the proposed Merger Agreement contained
conditions customary for transactions of this type, including approval of the
stockholders of Capstone, the continuing accuracy of Healthcare Realty's and
Capstone's respective representations and warranties, and the absence of any
litigation seeking to prohibit the consummation of the Merger. Counsel informed
the Capstone Board that the Merger Agreement had been fully negotiated, but for
two substantive issues relating to post-closing indemnification of Capstone's
officers and directors by Healthcare Realty and the purchase price to be paid at
closing for the furniture, fixtures and equipment at Capstone's headquarters by
Orthopaedic Surgeons, Inc., a Delaware corporation the majority of the stock of
which is owned by HEALTHSOUTH and MedPartners, Inc. ("MedPartners"). The
Capstone Board was also advised by Capstone's counsel that under Maryland law
the Merger would require the affirmative vote of 66 2/3% of the outstanding
Capstone Common Stock and 66 2/3% of the outstanding Capstone Preferred Stock,
voting separately as a class, and that a special meeting of Capstone's
stockholders would be needed to obtain the requisite approval.
Salomon Smith Barney also reviewed the financial analyses performed by
Salomon Smith Barney in connection with its evaluation of the Exchange Ratio and
rendered to the Capstone Board its oral opinion (which opinion was subsequently
confirmed by delivery of a written opinion dated June 8, 1998, the date of
execution of the Merger Agreement) to the effect that, as of such date and based
upon and subject to certain matters, the Exchange Ratio was fair to the holders
of Capstone Common Stock from a financial point of view. See "-- Opinion of
Capstone's Financial Advisor." After discussion and evaluation, the Independent
Committee approved the terms of Healthcare Realty's proposal, including the
terms of the ancillary agreements, and the Capstone Board, subject to
satisfactory resolution of the remaining issues, unanimously approved Healthcare
Realty's proposal, the Merger and the Merger Agreement, and authorized
management to execute and deliver the Merger Agreement as presented at the
meeting. The remaining issues in the Merger Agreement, none of which related to
the Exchange Ratio, were resolved over the weekend of June 6 and 7, 1998.
On June 5, 1998, the Healthcare Realty Board held a telephonic meeting to
discuss the proposed transaction. Prior to the meeting, NationsBanc Montgomery
circulated preliminary financial information to the directors. At the meeting,
David R. Emery, President of Healthcare Realty, summarized the discussions to
date and representatives of NationsBanc Montgomery reviewed its financial
analysis of the Merger. In addition, Healthcare Realty's legal counsel described
the primary legal and tax considerations associated with the proposed
transaction. No action was taken on the transaction since all remaining issues
had not been finalized. NationsBanc Montgomery sent additional material
overnight to each director for delivery on June 6,
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1998, and Healthcare Realty called another meeting of the Healthcare Realty
Board for Monday morning, June 8, 1998.
On June 8, 1998, the Healthcare Realty Board held a telephonic meeting to
discuss the substantially final Merger Agreement. At the meeting, (i) the
Healthcare Realty Board reviewed with Healthcare Realty's management and legal
and financial advisors the proposed terms of the Merger and the probable effects
of the Merger on Healthcare Realty and the combined company and (ii) NationsBanc
Montgomery rendered its oral opinion (which opinion was subsequently confirmed
by delivery of a written opinion dated June 8, 1998, the date of execution of
the Merger Agreement) that, as of such date and based upon and subject to
certain matters, the consideration proposed to be paid by Healthcare Realty in
the Merger was fair to Healthcare Realty from a financial point of view, as of
such date. See "-- Opinion of Healthcare Realty's Financial Advisor." After the
discussion, the Healthcare Realty Board unanimously approved the Merger
Agreement and related transactions and resolved to recommend that the
stockholders of Healthcare Realty vote in favor of the issuance of the
securities to be issued in the Merger.
On June 8, 1998, the definitive Merger Agreement was finalized and during
the afternoon, the chief executive officers of both Healthcare Realty and
Capstone executed the agreement. The execution was publicly announced by joint
press release later that day.
CAPSTONE'S REASONS FOR THE MERGER; RECOMMENDATION OF THE CAPSTONE BOARD
In reaching its determination to approve and adopt the Merger Agreement,
the Capstone Board consulted with Capstone's management and its financial and
legal advisors, and considered a number of factors. The following is a
discussion of the information and factors considered by the Capstone Board in
reaching this determination. This discussion is not intended to be exhaustive
but includes all of the material factors considered by the Capstone Board. In
the course of its deliberations with respect to the Merger, the Capstone Board
discussed the anticipated impact of the Merger on Capstone, Capstone
Stockholders and Capstone's various other constituencies, and no material
disadvantages expected to result from the Merger were identified during these
discussions. In reaching its determination to approve and recommend the Merger,
the Capstone Board did not assign any relative or specific weights to the
factors considered in reaching such determination, and individual directors may
have given differing weights to different factors.
At a meeting of the Capstone Board held on June 5, 1998, after careful
consideration, the Capstone Board, subject to reaching agreement with Healthcare
Realty on remaining open contractual matters, which were resolved over the
weekend of June 6 and 7, 1998, (a) determined that the Merger is fair to, and in
the best interests of, the Capstone Stockholders, (b) approved the Merger, the
Merger Agreement and the transactions contemplated thereby, and (c) resolved to
recommend that the stockholders of Capstone vote in favor of the approval of the
Merger and adoption of the Merger Agreement. The following briefly describes
certain of the reasons, factors and information taken into account by the
Capstone Board in reaching its conclusion.
INFORMATION AND FACTORS CONSIDERED BY THE CAPSTONE BOARD
In reaching its determination, the Capstone Board consulted with Capstone's
management and legal and financial advisors, and carefully considered a number
of factors without assigning relative weights thereto, including among others
the following material factors:
- The Capstone Board's familiarity with and review of the business,
operations, financial condition and earnings of Capstone on an historical
and a prospective basis;
- The Capstone Board's review of the business, operations, financial
condition and earnings of Healthcare Realty on an historical and a
prospective basis and of the combined company on a pro forma basis, the
historical stock price performance of the Healthcare Realty Common Stock,
the resulting relative interests of Capstone Stockholders and Healthcare
Realty Stockholders in the common equity of the combined company, and the
potential for increased earnings and dividends of the combined company
for the holders of Capstone Common Stock;
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- The process conducted on behalf of Capstone in exploring and determining
the potential value which could be realized by Capstone Stockholders in a
business combination transaction, including the solicitation of
indications of interest from certain healthcare-related REITs determined
to be the most likely companies to be both interested in and financially
and otherwise capable of engaging in a business combination transaction
with Capstone, the fact that each of such selected REITs which expressed
interest in a business combination transaction with Capstone was afforded
an opportunity to submit proposals for such a transaction to Capstone,
the terms of the proposals received by Capstone from such REITs and the
fact that the indicated premium of the Exchange Ratio in the Healthcare
Realty proposal over the current market price for Capstone Common Stock
was higher as of June 5, 1998 than the indicated premiums over the
current market price for Capstone Common Stock offered in the other
proposals submitted to Capstone (see "-- Background of the Merger");
- The current and prospective economic and competitive environment facing
the REIT industry generally, and Capstone in particular, including:
- The improved access to capital and lowered cost of capital
potentially created by a strategic affiliation with another REIT;
- The increasing consolidation of operating companies in the
healthcare industry and its effect on the demand for REIT financing
in the industry;
- The market position and prospects for growth of Healthcare Realty,
Capstone and other healthcare-specific REITs;
- The changing focus of Capstone away from traditional sale-leaseback
transactions and toward construction and development loans as a
result of increased competition; and
- The increasing credit quality of healthcare borrowers and their
resulting enhanced access to non-REIT capital.
- The Capstone Board's belief, after considering alternatives to the Merger
for enhancing stockholder value, that such alternatives were not likely
to result in greater value for Capstone Stockholders than the value to be
realized in the Merger. In this regard, the Capstone Board considered,
among other things, variables relating to Capstone's ability to continue
to make investments in healthcare facilities and to generate revenue
growth, improved profitability and superior stockholder returns on a
stand-alone basis, and the availability of attractive acquisition
opportunities for Capstone;
- The potential benefits of the combination of the two companies. The
management of Capstone discussed with the Capstone Board the current
operations of Healthcare Realty and the opportunities that would be
created for the benefit of Capstone Stockholders from the combination of
the two companies, including the potential competitive advantages that
could be achieved through a strategic affiliation. The Capstone Board
discussed with Capstone management how the assets of Healthcare Realty
would complement Capstone's existing assets and provide opportunities for
revenue enhancements, operating efficiencies and cost savings;
- The receipt of equity securities of Healthcare Realty by the holders of
Capstone Common Stock and Capstone Preferred Stock, which will enable
Capstone Stockholders to participate in the value that may be generated
through the combination of the two companies through their combined
equity participation as stockholders of Healthcare Realty;
- The current and historical market prices and trading volumes of the
Capstone Common Stock, Capstone Preferred Stock and the Healthcare Realty
Common Stock and the current and historical trading multiples of other
comparable companies;
- The terms of the Merger Agreement and the Merger, including the Exchange
Ratio, noting that the Exchange Ratio reflected a 5.7% premium for the
holders of Capstone Common Stock based on the closing prices of
Healthcare Realty Common Stock and Capstone Common Stock on June 4, 1998,
the last trading day prior to approval by the Capstone Board of the
Merger;
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- The financial presentations of Salomon Smith Barney to the Capstone
Board, and the oral opinion of Salomon Smith Barney rendered to the
Capstone Board on June 5, 1998 (which opinion was subsequently confirmed
by delivery of a written opinion dated June 8, 1998, the date of
execution of the Merger Agreement) to the effect that, as of such date
and based upon and subject to certain matters stated in such opinion, the
Exchange Ratio was fair from a financial point of view to holders of
Capstone Common Stock (see "-- Opinion of Capstone's Financial Advisor");
- The expectation that the Merger will be treated as a tax-free
reorganization for federal income tax purposes (see "-- Certain Federal
Income Tax Consequences");
- The provisions of the Merger Agreement that permit Capstone, under
certain circumstances, to furnish information to and participate in
substantive negotiations and discussions with third parties and to
terminate the Merger Agreement upon execution of a definitive agreement
in connection with an Acquisition Proposal (as defined herein under "THE
MERGER AGREEMENT -- Termination Fee; Expenses") upon the payment of a $20
million termination fee and reimbursement of all reasonable out-of-pocket
expenses and fees (see "THE MERGER AGREEMENT -- Termination of the Merger
Agreement");
- The other provisions of the Merger Agreement, including the fact that the
Capstone Stockholders will vote on the transaction;
- The absence of any provisions in the Merger Agreement that either limit
the effect of changes in the price of Healthcare Realty Common Stock
prior to the consummation of the Merger on the value of the consideration
to be received by the holders of Capstone Common Stock in the Merger or
permit Capstone to terminate the Merger Agreement based upon such changes
and that, accordingly, the value of such consideration could change
depending upon the performance of Healthcare Realty Common Stock between
the execution of the Merger Agreement and the consummation of the Merger.
While recognizing that the absence of such provisions exposed the
Capstone Stockholders to some risk, the Capstone Board considered this
risk to be mitigated by (a) a review of the historical trading prices of
both the Healthcare Realty Common Stock and the Capstone Common Stock and
the fact that, generally, industry changes affecting Healthcare Realty
Common Stock should similarly affect Capstone Common Stock and (b) the
fact that Capstone Stockholders would be able to participate in any
appreciation in the value of Healthcare Realty Common Stock between the
announcement of the transaction and the consummation of the Merger. The
Capstone Board recognized that, while such provisions might provide
limited protection against declines in the share price of the Healthcare
Realty Common Stock to be received, they also generally would limit the
benefits from any appreciation in that price. The Capstone Board also was
advised that Healthcare Realty had stated that it would not consider a
transaction involving anything other than a fixed exchange ratio;
- The interests of the officers and directors of Capstone in the Merger,
including the matters disclosed under "CERTAIN TRANSACTIONS";
- The challenges of combining the businesses of two major corporations of
this size and the attendant risk of not achieving the expected synergies
or improved earnings (as discussed under "CAUTIONARY STATEMENT CONCERNING
FORWARD-LOOKING INFORMATION") and of diverting management focus and
resources from other strategic opportunities and from operational matters
for an extended period of time.
In view of the wide variety of factors considered by the Capstone Board in
connection with its evaluation of the Merger and the complexity of such matters,
the Capstone Board did not consider it practicable to, nor did it attempt to,
quantify, rank or otherwise assign relative weights to the specific factors it
considered in reaching its decision. In considering the factors described above,
individual members of the Capstone Board may have given different weight to
different factors.
For information concerning certain interests of members of the Capstone
Board, see "CERTAIN TRANSACTIONS."
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THE CAPSTONE BOARD BELIEVES THE MERGER IS FAIR TO, AND IN THE BEST
INTERESTS OF, CAPSTONE AND THE CAPSTONE STOCKHOLDERS. THE CAPSTONE BOARD
UNANIMOUSLY RECOMMENDS THAT CAPSTONE STOCKHOLDERS VOTE FOR THE APPROVAL OF THE
MERGER AND THE MERGER AGREEMENT.
HEALTHCARE REALTY'S REASONS FOR THE MERGER; RECOMMENDATION OF THE HEALTHCARE
REALTY BOARD
Following the review of the materials and discussions provided to the
Healthcare Realty Board at the June 5, 1998 and June 8, 1998 meetings, the
directors concluded that the terms of the Merger were fair to, and in the best
interests of Healthcare Realty and its stockholders. Accordingly, the directors
voted unanimously to approve the Merger, the terms of the Merger Agreement and
the transactions contemplated thereby; and the Healthcare Realty Board resolved
to recommend that the stockholders of Healthcare Realty vote in favor of the
issuance of shares of Healthcare Realty Common Stock and Healthcare Realty
Preferred Stock. In reaching its decision, the Healthcare Realty Board
considered several factors, consulted with Healthcare Realty management, legal
counsel and accountants and were advised by NationsBanc Montgomery, its
financial advisors in this transaction. In reaching its determination to approve
and recommend the Merger, the Healthcare Realty Board did not assign any
relative or specific weights to the factors considered in reaching such
determination, and individual directors may have given differing weights to
different factors. The principal reasons for the Healthcare Realty Board's
approval of the Merger and its recommendation to the stockholders of Healthcare
Realty are as follows:
- Expansion of Healthcare Realty's Client Base. The existing client base
of Capstone will permit Healthcare Realty access to clients not presently
associated with Healthcare Realty, thus offering new opportunities for
capital investment and the provision of real estate administration,
management and development services. Further, because Capstone did not
have a real estate services organization, significant opportunity exists
to provide services to the Capstone portfolio of real estate assets as
well.
- Diversification of Real Estate and Sponsorships. The majority of
Capstone's real estate assets are compatible with the investment criteria
of Healthcare Realty and will provide greater geographical and
sponsorship diversification to the portfolio of Healthcare Realty,
resulting in a reduced risk profile for the combined portfolio.
- Cost Savings and Operating Efficiencies. None of the employees and
officers of Capstone will become employees of Healthcare Realty.
Consequently, there should be considerable opportunity to benefit from
cost savings due to reduction in the general, administrative and overhead
expenditures that will be eliminated upon the Merger. Healthcare Realty
presently has sufficient capacity to transition the portfolio without
significant additional cost.
- Growth in Relative Size and Equity Base. The REIT industry has
experienced explosive growth. As a consequence of the Merger, the
directors concluded that Healthcare Realty could enlarge its asset
portfolio by 159 real estate properties and its market capitalization to
approximately $5.5 million. The growth should result in a more
competitive position for Healthcare Realty, as compared to other REITs,
and greater access to public capital markets. Following the Merger,
Healthcare Realty should be the leading provider of investment capital
and real estate services to the outpatient sector of the healthcare
industry.
- Accretive Effect to Healthcare Realty. The Merger should result in
potential accretion in funds from operations of Healthcare Realty in the
fourth quarter of 1998 and for fiscal year 1999.
- Fairness Opinion of NationsBanc Montgomery. Healthcare Realty's
financial advisor delivered an oral opinion on June 8, 1998, subsequently
confirmed in writing as of the same date, that the consideration to be
paid by Healthcare Realty pursuant to the Merger Agreement was fair to
Healthcare Realty from a financial point of view, as of such date.
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The Healthcare Realty Board and management also discussed certain potential
negative facts and risks that could arise or would arise from the Merger. These
included, among others:
- Increased Debt. The fact that upon completion of the Merger, it was
estimated that Healthcare Realty's debt-to-book-capital ratio will rise
to approximately 27%; and in the event of full funding of current capital
investment commitments, the ratio will rise to approximately 37%, absent
the receipt of additional equity investment in Healthcare Realty.
- Certain Non-Core Strategy Assets. The fact that, while the majority of
the assets of Capstone are compatible with Healthcare Realty,
approximately $248 million of senior housing and assisted living assets
and $167 million of real estate mortgages do not fall within Healthcare
Realty's core operating strategy. While such assets are accretive,
Healthcare Realty may undertake to dispose of those assets following the
Merger.
- Credit Risks. The risks attendant to certain healthcare industry
sponsors providing credit support to Capstone's real estate investments
which have had disappointing earnings or changes in management that have
lead to some concerns regarding the credit attaching to the assets.
- Failure to Achieve Merger Benefits. The risk that the anticipated
benefits of the Merger may not be realized as a result of possible
changes in the real estate market in general, the inability to market
investment capital and real estate services to the existing client base
of Capstone, and the inability to achieve the anticipated reductions in
expense or other potential difficulties in integrating the two companies
and their respective operations.
The Healthcare Realty Board did not believe that the foregoing negative
factors were sufficient, either individually or collectively, to outweigh the
advantages of the Merger.
THE HEALTHCARE REALTY BOARD BELIEVES THE MERGER CONSIDERATION IS FAIR TO,
AND IN THE BEST INTEREST OF, HEALTHCARE REALTY AND THE HEALTHCARE REALTY
STOCKHOLDERS. THE HEALTHCARE REALTY BOARD UNANIMOUSLY RECOMMENDS THAT HEALTHCARE
REALTY STOCKHOLDERS VOTE FOR THE ISSUANCE OF HEALTHCARE REALTY CAPITAL STOCK IN
CONNECTION WITH THE MERGER.
OPINION OF CAPSTONE'S FINANCIAL ADVISOR
Salomon Smith Barney was retained by Capstone to act as its financial
advisor in connection with the proposed Merger. In connection with such
engagement, Capstone requested that Salomon Smith Barney evaluate the fairness,
from a financial point of view, to the holders of Capstone Common Stock of the
consideration to be received by such holders in the Merger. On June 5, 1998, at
a meeting of the Capstone Board held to evaluate the proposed Merger, Salomon
Smith Barney delivered an oral opinion (which opinion was subsequently confirmed
by delivery of a written opinion, dated June 8, 1998, the date of execution of
the Merger Agreement) to the Capstone Board to the effect that, as of the date
of such opinion and based upon and subject to certain matters stated therein,
the Exchange Ratio was fair, from a financial point of view, to the holders of
Capstone Common Stock.
In arriving at its opinion, Salomon Smith Barney reviewed the Merger
Agreement and held discussions with certain senior officers, directors and other
representatives and advisors of Capstone and certain senior officers and other
representatives and advisors of Healthcare Realty concerning the businesses,
operations and prospects of Capstone and Healthcare Realty. Salomon Smith Barney
examined certain publicly available business and financial information relating
to Capstone and Healthcare Realty as well as certain financial forecasts and
other information and data for Capstone and Healthcare Realty which were
provided to or otherwise discussed with Salomon Smith Barney by the respective
managements of Capstone and Healthcare Realty, including information relating to
certain strategic implications and operational benefits anticipated to result
from the Merger. Salomon Smith Barney reviewed the financial terms of the Merger
as set forth in the Merger Agreement in relation to, among other things: current
and historical market prices and trading volumes of the Capstone Common Stock
and Healthcare Realty Common Stock; the historical and projected earnings and
other operating data of Capstone and Healthcare Realty; and the capitalization
and financial
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condition of Capstone and Healthcare Realty. Salomon Smith Barney considered, to
the extent publicly available, the financial terms of other transactions
recently effected which Salomon Smith Barney considered relevant in evaluating
the Merger and analyzed certain financial, stock market and other publicly
available information relating to the businesses of other companies whose
operations Salomon Smith Barney considered relevant in evaluating those of
Capstone and Healthcare Realty. Salomon Smith Barney also evaluated the
potential pro forma financial impact of the Merger on Healthcare Realty. In
connection with its engagement, Salomon Smith Barney was requested to approach
on a selected basis, and Salomon Smith Barney held discussions with, certain
third parties to solicit indications of interest in the possible acquisition of
Capstone. In addition to the foregoing, Salomon Smith Barney conducted such
other analyses and examinations and considered such other financial, economic
and market criteria as it deemed appropriate in arriving at its opinion.
In rendering its opinion, Salomon Smith Barney assumed and relied, without
independent verification, upon the accuracy and completeness of all financial
and other information and data publicly available or furnished to or otherwise
reviewed by or discussed with Salomon Smith Barney. With respect to financial
forecasts and other information and data provided to or otherwise reviewed by or
discussed with Salomon Smith Barney, the managements of Capstone and Healthcare
Realty advised Salomon Smith Barney that such forecasts and other information
and data were reasonably prepared on bases reflecting the best currently
available estimates and judgments of the managements of Capstone and Healthcare
Realty as to the future financial performance of Capstone and Healthcare Realty
and the strategic implications and operational benefits anticipated to result
from the Merger. Salomon Smith Barney assumed, with the consent of the Capstone
Board, that the Merger will be treated as a tax-free reorganization for federal
income tax purposes and that the Merger and the transactions contemplated
thereby will not adversely affect the real estate investment trust status of the
combined entity resulting from the Merger. Salomon Smith Barney did not express
any opinion as to what the value of the Healthcare Realty Common Stock actually
will be when issued to Capstone stockholders pursuant to the Merger or the price
at which the Healthcare Realty Common Stock will trade subsequent to the Merger.
Salomon Smith Barney did not make and was not provided with an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of Capstone or Healthcare Realty nor did Salomon Smith Barney make any physical
inspection of the properties or assets of Capstone or Healthcare Realty. Salomon
Smith Barney expressed no view as to, and its opinion does not address, the
relative merits of the Merger as compared to any alternative business strategies
that might exist for Capstone or the effect of any other transaction in which
Capstone might engage. Salomon Smith Barney's opinion is necessarily based upon
information available, and financial, stock market and other conditions and
circumstances existing and disclosed, to Salomon Smith Barney as of the date of
its opinion. Although Salomon Smith Barney evaluated the Exchange Ratio from a
financial point of view, Salomon Smith Barney was not asked to and did not
recommend the specific consideration payable in the Merger, which was determined
through negotiation between Capstone and Healthcare Realty. No other limitations
were imposed by Capstone on Salomon Smith Barney with respect to the
investigations made or procedures followed by Salomon Smith Barney in rendering
its opinion.
THE FULL TEXT OF THE WRITTEN OPINION OF SALOMON SMITH BARNEY, DATED JUNE 8,
1998, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS
ON THE REVIEW UNDERTAKEN, IS ATTACHED HERETO AS ANNEX B AND SHOULD BE READ
CAREFULLY IN ITS ENTIRETY. THE OPINION OF SALOMON SMITH BARNEY IS DIRECTED TO
THE CAPSTONE BOARD AND RELATES ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO FROM A
FINANCIAL POINT OF VIEW, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER OR
RELATED TRANSACTIONS AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER
AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE CAPSTONE SPECIAL MEETING. THE
SUMMARY OF THE OPINION OF SALOMON SMITH BARNEY SET FORTH IN THIS JOINT PROXY
STATEMENT-PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT
OF SUCH OPINION.
In preparing its opinion, Salomon Smith Barney performed a variety of
financial and comparative analyses, including those described below. The summary
of such analyses does not purport to be a complete description of the analyses
underlying Salomon Smith Barney's opinion. The preparation of a fairness opinion
is a complex analytic process involving various determinations as to the most
appropriate and relevant methods of financial analyses and the application of
those methods to the particular circumstances and, therefore, such
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an opinion is not readily susceptible to summary description. Accordingly,
Salomon Smith Barney believes that its analyses must be considered as a whole
and that selecting portions of its analyses and factors, without considering all
analyses and factors, could create a misleading or incomplete view of the
processes underlying such analyses and opinion. In its analyses, Salomon Smith
Barney made numerous assumptions with respect to Capstone, Healthcare Realty,
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Capstone
and Healthcare Realty. The estimates contained in such analyses and the
valuation ranges resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by such analyses.
In addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, such analyses and estimates are
inherently subject to substantial uncertainty. Salomon Smith Barney's opinion
and analyses were only one of many factors considered by the Capstone Board in
its evaluation of the Merger and should not be viewed as determinative of the
views of the Capstone Board or management of Capstone with respect to the
Exchange Ratio or the proposed Merger.
Selected Company Analysis. Using publicly available information, Salomon
Smith Barney analyzed, among other things, the market values and trading
multiples of Capstone and the following 11 selected publicly traded companies in
the health care REIT industry: Healthcare Realty, American Health Properties,
Inc., Health Care Property Investors, Inc., Health Care REIT, Inc., Health &
Retirement Properties Trust, LTC Properties Inc., Meditrust Corporation,
National Health Investors, Inc., Nationwide Health Properties, Inc., Omega
Healthcare Investors, Inc., and Universal Health Realty Income Trust
(collectively, the "Selected Companies"). Salomon Smith Barney compared, among
other things, market values as multiples of estimated calendar 1998 and 1999
funds from operations ("FFO"). FFO projections for the Selected Companies were
based on estimates of selected investment banking firms and FFO projections for
Capstone and Healthcare Realty were based on internal estimates of the
managements of Capstone and Healthcare Realty. All multiples were based on
closing stock prices as of June 4, 1998. Applying a range of multiples for the
Selected Companies of estimated calendar 1998 and 1999 FFO per share of 9.2x to
11.9x and 9.0x to 11.1x, respectively, to corresponding financial data for
Capstone resulted in an equity reference range for Capstone of approximately
$20.37 to $25.72 per share.
Selected Merger and Acquisition Transactions Analysis. Using publicly
available information, Salomon Smith Barney reviewed the purchase prices and
implied transaction multiples paid or proposed to be paid in the following 26
selected transactions in the REIT industry (acquiror/target): Excel Realty
Trust/New Plan Realty Trust; Equity Inns, Inc./RFS Hotel Investors, Inc.;
Security Capital Pacific Trust/Security Capital Atlantic Incorporated; FelCor
Suite Hotels, Inc./Bristol Hotel Company; CapStar Hotel Company/American General
Hospitality Corporation; Kimco Realty Corporation/The Price REIT, Inc.;
Apartment Investment and Management Company/Ambassador Apartments, Inc.; Camden
Property Trust/Oasis Residential, Inc.; Prime Retail, Inc./Horizon Group, Inc.;
BRE Properties, Inc./Trammel Crow Company; Simon DeBartolo Group, Inc./Retail
Property Trust; Cali Realty Corp./Mack Company; Meditrust Corporation/Santa
Anita Operating Company; Cornerstone Properties Inc./Dutch Institutional Holding
Company, Inc.; Post Properties, Inc./Columbus Realty Trust; Pennsylvania Real
Estate Investment Trust/Rubin Organization Inc.; Walden Residential Properties,
Inc./Drever Partners Inc.; Vornado Realty Trust/The Mendik Company, Inc.; Camden
Property Trust/Paragon Group, Inc.; United Dominion Realty Trust/South West
Property Trust Inc.; Chateau Properties, Inc./ROC Communities, Inc.; EastGroup
Properties, Inc./Copley Properties, Inc.; Whitehall Real Estate Limited
Partnership/Rockefeller Center Properties, Inc.; BRE Properties, Inc./Real
Estate Investment Trust of California; EastGroup Properties, Inc./LNH REIT,
Inc.; and Omega Healthcare Investors, Inc./Health Equity Properties Incorporated
(collectively, the "Selected Transactions"). All multiples were based on
information available at the time of such transaction. Salomon Smith Barney
compared, among other things, purchase prices in the Selected Transactions as a
multiple of estimated 1998 FFO. Applying a range of multiples for the Selected
Transactions of estimated 1998 FFO per share of 7.8x to 12.0x to corresponding
financial data for Capstone resulted in an equity reference range for Capstone
of approximately $16.93 to $26.04 per share.
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No company, transaction or business used in the "Selected Company Analysis"
or "Selected Merger and Acquisition Transactions Analysis" as a comparison is
identical to Capstone, Healthcare Realty or the Merger. Accordingly, an analysis
of the results of the foregoing is not entirely mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that could affect the
acquisition, public trading or other values of the Selected Companies, the
Selected Transactions or the business segment, company or transaction to which
they are being compared.
Premium Analysis. Salomon Smith Barney compared the implied premium
payable in the Merger with the premiums paid in the Selected Transactions based
on the closing price of the common stock of the target companies one month prior
to public announcement of such Selected Transactions. Applying a range of
premiums for the Selected Transactions of approximately 1.2% to 25.5% to the
closing price of Capstone Common Stock one month prior to public announcement of
the Merger resulted in an equity reference range for Capstone of approximately
$23.15 to $28.71 per share. The trading range of Capstone Common Stock over the
52-week period prior to public announcement of the Merger was between $22.13 to
$26.00 per share.
Contribution Analysis. Salomon Smith Barney analyzed the respective
contributions of Capstone and Healthcare Realty to the estimated revenues,
earnings before interest, taxes, depreciation, and amortization ("EBITDA") and
FFO of the combined company for fiscal years 1997 through 1999, based on
internal estimates of the managements of Capstone and Healthcare Realty. This
analysis indicated that (i) in fiscal year 1997, Capstone would have contributed
approximately 47.3% of revenues, 49.8% of EBITDA and 44.1% of the FFO of the
combined company; (ii) in fiscal year 1998, Capstone would contribute
approximately 54.3% of revenues, 58.0% of EBITDA and 50.0% of the FFO of the
combined company; and (iii) in fiscal year 1999, Capstone would contribute
approximately 54.3% of revenues, 58.5% of EBITDA and 50.3% of the FFO of the
combined company. Based on the Exchange Ratio, current stockholders of Capstone
and Healthcare Realty would own approximately 47.9% and 52.1%, respectively, of
the equity value of the combined company and Capstone and Healthcare Realty
would constitute approximately 56.8% and 43.2%, respectively, of the enterprise
value of the combined company upon consummation of the Merger.
Pro Forma Merger Analysis. Salomon Smith Barney analyzed certain pro forma
effects resulting from the Merger, including, among other things, the impact of
the Merger on Healthcare Realty's projected FFO for fiscal years 1998 and 1999,
based on internal estimates of the management of Healthcare Realty. The results
of the pro forma merger analysis suggested that the Merger could be accretive to
Healthcare Realty's FFO in fiscal years 1998 and 1999 after giving effect to
certain potential synergies anticipated by the management of Healthcare Realty
to result from the Merger. The actual results achieved by the Surviving
Corporation may vary from projected results and the variations may be material.
Exchange Ratio Analysis. Salomon Smith Barney compared the Exchange Ratio
with the historical ratio of the daily closing prices of Capstone Common Stock
to Healthcare Realty Common Stock over the 12-month period ending June 4, 1998.
The range of exchange ratios during such 12-month period was 0.792 to 0.901
(with a mean of 0.847), as compared to the Exchange Ratio of 0.8518.
Net Asset Valuation Analysis. Salomon Smith Barney performed a net asset
valuation analysis of Capstone's operating assets, based on internal estimates
of the management of Capstone. For purposes of such analysis, Salomon Smith
Barney applied capitalization rates, ranging from an average of 10.2% to 11.3%
(with a mean of 10.8%) depending on asset classification type, to Capstone's
annualized 1998 net operating income. The results were then adjusted for
outstanding net debt, construction in progress and other miscellaneous items.
This analysis indicated an implied equity reference range for Capstone of
approximately $16.47 to $19.56 per share.
Other Factors and Comparative Analyses. In rendering its opinion, Salomon
Smith Barney considered certain other factors and conducted certain other
comparative analyses, including, among other things, a review of (i) indications
of interest received from, and discussions with, third parties other than
Healthcare Realty; (ii) historical and projected financial results of Capstone
and Healthcare Realty; (iii) the history of trading prices and volume for
Capstone Common Stock and Healthcare Realty Common Stock, and a comparison of
such common stock to a 30-year U.S. Treasury yield; (iv) selected published
analysts' reports
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on Capstone and Healthcare Realty, including analysts' earnings estimates with
respect to Capstone and Healthcare Realty; and (v) the pro forma ownership of
the combined company.
Pursuant to the terms of Salomon Smith Barney's engagement, Capstone has
agreed to pay Salomon Smith Barney an aggregate fee of $4.5 million for its
services in connection with the Merger. Capstone has also agreed to reimburse
Salomon Smith Barney for travel and other out-of-pocket expenses incurred by
Salomon Smith Barney in performing its services, including the fees and expenses
of its legal counsel, and to indemnify Salomon Smith Barney and related persons
against certain liabilities, including liabilities under the federal securities
laws, arising out of Salomon Smith Barney's engagement.
Salomon Smith Barney has advised Capstone that, in the ordinary course of
business, Salomon Smith Barney and its affiliates may actively trade or hold the
securities of Capstone and Healthcare Realty for their own account or for the
account of customers and, accordingly, may at any time hold a long or short
position in such securities. Salomon Smith Barney has in the past provided
investment banking and financial advisory services to Capstone and Healthcare
Realty unrelated to the proposed Merger, for which services Salomon Smith Barney
has received compensation. In addition, Salomon Smith Barney and its affiliates
(including Travelers Group Inc. and its affiliates) may maintain relationships
with Capstone, Healthcare Realty and their respective affiliates.
Salomon Smith Barney is an internationally recognized investment banking
firm and was selected by Capstone based on its experience, expertise and
familiarity with Capstone and its business. Salomon Smith Barney regularly
engages in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
OPINION OF HEALTHCARE REALTY'S FINANCIAL ADVISOR
Pursuant to an engagement letter dated June 4, 1998, as amended (the
"Engagement Letter"), Healthcare Realty retained NationsBanc Montgomery to act
as its exclusive representative and financial advisor in connection with the
Merger. NationsBanc Montgomery is a nationally recognized investment banking
firm and, as part of its activities, is regularly engaged in the valuation of
businesses and their securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other purposes.
Healthcare Realty selected NationsBanc Montgomery as its financial advisor on
the basis of NationsBanc Montgomery's experience and expertise in transactions
similar to the Merger and its reputation in the healthcare and REIT industries
and investment community.
On June 8, 1998, NationsBanc Montgomery delivered to the Healthcare Realty
Board its oral opinion, subsequently confirmed in writing as of the same date,
that the consideration to be paid by Healthcare Realty pursuant to the Merger
Agreement was fair to Healthcare Realty from a financial point of view, as of
such date. NationsBanc Montgomery did not determine the form or amount of
consideration to be offered to Capstone Stockholders in the Merger. No
limitations were imposed by the Healthcare Realty Board on NationsBanc
Montgomery with respect to the investigations made or procedures followed in
rendering its opinion.
THE FULL TEXT OF NATIONSBANC MONTGOMERY'S WRITTEN OPINION TO THE HEALTHCARE
REALTY BOARD IS ATTACHED HERETO AS ANNEX C AND IS INCORPORATED HEREIN BY
REFERENCE. THE FOLLOWING SUMMARY OF NATIONSBANC MONTGOMERY'S OPINION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE OPINION, WHICH
SHOULD BE READ CAREFULLY AND IN ITS ENTIRETY IN CONNECTION WITH THIS JOINT PROXY
STATEMENT-PROSPECTUS. NATIONSBANC MONTGOMERY'S OPINION IS DIRECTED TO THE
HEALTHCARE REALTY BOARD, COVERS ONLY THE FINANCIAL FAIRNESS TO HEALTHCARE REALTY
OF THE CONSIDERATION TO BE PAID BY HEALTHCARE REALTY IN THE MERGER AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD
VOTE AT THE HEALTHCARE REALTY SPECIAL MEETING. NATIONSBANC MONTGOMERY'S OPINION
ADDRESSES ONLY THE FINANCIAL FAIRNESS OF THE CONSIDERATION TO BE PAID BY
HEALTHCARE REALTY PURSUANT TO THE MERGER AND DOES NOT ADDRESS THE RELATIVE
MERITS OF THE MERGER OR ANY ALTERNATIVES TO THE MERGER, THE UNDERLYING DECISION
OF THE HEALTHCARE REALTY BOARD TO PROCEED WITH OR EFFECT THE MERGER OR ANY OTHER
ASPECT OF THE MERGER. IN FURNISHING ITS OPINION,
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NATIONSBANC MONTGOMERY DID NOT ADMIT THAT IT IS AN EXPERT WITHIN THE MEANING OF
THE TERM "EXPERT" AS USED IN THE SECURITIES ACT OF 1933 (THE "SECURITIES ACT"),
NOR DID IT ADMIT THAT ITS OPINION CONSTITUTES A REPORT OR VALUATION WITHIN THE
MEANING OF THE SECURITIES ACT, AND STATEMENTS TO SUCH EFFECT ARE INCLUDED IN THE
NATIONSBANC MONTGOMERY OPINION.
In connection with its opinion, NationsBanc Montgomery, among other things:
(i) reviewed certain publicly available financial and other data with respect to
Capstone and Healthcare Realty, including their respective consolidated
financial statements for recent years and interim periods to March 31, 1998 and
certain other relevant financial and operating data relating to Capstone and
Healthcare Realty made available to NationsBanc Montgomery from published
sources and from the internal records of Capstone and Healthcare Realty; (ii)
reviewed the Merger Agreement; (iii) reviewed certain publicly available
information concerning the trading of, and the trading market for, Capstone
Common Stock and Healthcare Realty Common Stock; (iv) compared Capstone from a
financial point of view with certain other publicly traded companies in the
healthcare REIT industry which NationsBanc Montgomery deemed to be relevant; (v)
considered the financial terms, to the extent publicly available, of selected
recent business combinations of companies in the REIT industry which NationsBanc
Montgomery deemed to be comparable, in whole or in part, to the Merger; (vi)
reviewed and discussed with representatives of the management of Capstone and
Healthcare Realty certain information of a business and financial nature
regarding Capstone and Healthcare Realty, furnished to NationsBanc Montgomery by
Capstone and Healthcare Realty, including financial forecasts and related
assumptions of Capstone and Healthcare Realty; (vii) made inquiries regarding
and discussed the Merger and the Merger Agreement and other matters related
thereto with Healthcare Realty's counsel; and (viii) performed such other
analyses and examinations as NationsBanc Montgomery deemed appropriate.
In connection with its review, NationsBanc Montgomery did not assume any
obligation independently to verify the foregoing information and relied on its
being accurate and complete in all material respects. With respect to the
financial forecasts for Capstone and Healthcare Realty provided to NationsBanc
Montgomery by their respective management, upon their advice and with Healthcare
Realty's consent, NationsBanc Montgomery assumed for purposes of its opinion
that the forecasts were reasonably prepared on bases reflecting the best
available estimates and judgments of their respective management at the time of
preparation as to the future financial performance of Capstone and Healthcare
Realty and that they provided a reasonable basis upon which NationsBanc
Montgomery could form its opinion. NationsBanc Montgomery also assumed that
there were no material changes in Capstone's or Healthcare Realty's assets,
financial condition, results of operations, business or prospects since the
respective dates of their last financial statements made available to
NationsBanc Montgomery. NationsBanc Montgomery relied on advice of counsel and
independent accountants to Healthcare Realty as to all legal and financial
reporting matters with respect to Capstone, the Merger and the Merger Agreement.
NationsBanc Montgomery assumed that the Merger would be consummated in a manner
that complies in all respects with the applicable provisions of the Securities
Act, the Exchange Act and all other applicable federal and state statutes, rules
and regulations. In addition, NationsBanc Montgomery did not assume
responsibility for reviewing any individual credit, loan or real estate files,
or making an independent evaluation, appraisal or physical inspection of any of
the assets or liabilities (contingent or otherwise) of Capstone, nor was
NationsBanc Montgomery furnished with any such appraisals. Healthcare Realty
informed NationsBanc Montgomery, and NationsBanc Montgomery assumed, that the
Merger will be recorded as a purchase under generally accepted accounting
principles. Finally, NationsBanc Montgomery's opinion was based on economic,
monetary and market and other conditions as in effect on, and the information
made available to NationsBanc Montgomery as of, the date of its opinion.
Accordingly, although subsequent developments may affect its opinion,
NationsBanc Montgomery has not assumed any obligation to update, revise or
reaffirm such opinion.
The following is a summary of the report presented by NationsBanc
Montgomery to the Healthcare Realty Board at its June 8, 1998 meeting in
connection with its opinion.
Comparable Company Analysis. Using publicly available information and
estimates of future financial results published by First Call, NationsBanc
Montgomery compared certain financial and operating information for Capstone
with the corresponding financial and operating information for a group of nine
publicly
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traded healthcare REITs which it deemed comparable to Capstone. For the purpose
of its analysis, the following companies were used as comparable companies to
Capstone: American Health Properties, Inc., Health & Retirement Properties
Trust, Health Care Property Investors, Inc., Health Care REIT, Inc., Healthcare
Realty, LTC Properties Inc., National Health Investors, Inc., Nationwide Health
Properties, Inc. and Omega Healthcare Investors, Inc. (collectively, the
"Comparable Companies").
NationsBanc Montgomery's calculations resulted in the following ranges for
the Comparable Companies as of June 5, 1998: a range of market value as a
multiple of projected 1998 FFO of 10.4x to 11.9x, with a mean of 11.0x and a
range of market value as a multiple of projected 1999 FFO of 9.6x to 11.1x, with
a mean of 10.4x. Application of these multiples to Capstone's estimated 1998 and
1999 FFO, resulted in an implied per share valuation of the Capstone Common
Stock that ranged from $21.18 to $26.23.
Comparable Transactions Analysis. NationsBanc Montgomery also reviewed the
financial terms, to the extent publicly available, of 14 pending or completed
mergers between publicly traded REITs which it considered relevant (the
"Comparable Transactions"). The Comparable Transactions included, (listed below
by target/acquiror): New Plan Realty Trust/Excel Realty Trust, ASR Investments
Corp./United Dominion Realty Trust, Oasis Residential, Inc./Camden Property
Trust, Ambassador Apartments, Inc./Apartment Investment Management and Trust,
Beacon Properties Corp./Equity Office Properties Trust, Value Property
Trust/Wellsford Real Properties, Evans Withycombe Residential, Inc./Equity
Residential Properties Trust, Columbus Realty Trust/Post Properties, Wellsford
Residential Property Trust/Equity Residential Properties Trust, Paragon Group,
Inc./Camden Property Trust, South West Property Trust/United Dominion Realty
Trust, ROC Communities, Inc./Chateau Properties, Crocker Realty Trust/Highwoods
Properties and DeBartolo Realty Corp./Simon Property Group.
For purposes of comparison, NationsBanc Montgomery utilized the target's
estimated FFO per share for the current calendar year if the transaction was
announced in the first half of the year or the next calendar year if the
transaction was announced in the second half of the year, based on First Call
and third-party analyst estimates available prior to the date the transaction
was announced. NationsBanc Montgomery noted the multiple of equity purchase
price to estimated forward year FFO for the Comparable Transactions ranged from
9.3x to 15.0x (with a mean of 11.4x). Application of these multiples to
Capstone's estimated 1998 FFO resulted in an implied per share valuation of the
Capstone Common Stock that ranged from $20.47 to $32.94.
No company or transaction used in the Comparable Companies or Comparable
Transactions analysis as a comparison is identical to Capstone or the Merger.
Accordingly, an analysis of the results of the foregoing is not mathematical;
rather, it involves complex considerations and judgments concerning differences
in financial and operating characteristics of the companies and other factors
that could affect the public trading, acquisition or other value of the
Comparable Companies or Comparable Transactions to which Capstone and the Merger
are being compared.
Net Asset Value Analysis. NationsBanc Montgomery performed a net asset
value analysis of Capstone's operating healthcare properties by subtracting
outstanding debt from the gross estimated value of the properties. The gross
estimated value for Capstone's operating assets was estimated by capitalizing
the projected annualized 1998 fourth quarter net operating income (gross rental
income less associated management expenses) as projected by Capstone management.
NationsBanc Montgomery included in fourth quarter annualized net operating
income all income associated with construction-in-progress due to be completed
during 1998. Capitalization rates from 8.5% to 10.0% were used, with a
particular emphasis on 9.0% to 9.5%. The net asset value analysis was further
adjusted for land held in development, healthcare properties held in development
and gross investment in mortgage notes. This analysis indicated an implied per
share valuation of the Capstone Common Stock that ranged from $21.78 to $27.02
($23.34 to $25.08 for the emphasized range).
Discounted Cash Flow Analysis. NationsBanc Montgomery applied a discounted
cash flow analysis to the cash flow forecasts for Capstone for calendar years
1998 through 2002, provided by the management of Capstone and adjusted by
NationsBanc Montgomery. In conducting this analysis, NationsBanc Montgomery
first calculated the present values of Capstone's forecasted cash flows and then
calculated the present value of the aggregate terminal value of Capstone at the
end of 2002 by applying multiples to Capstone's estimated FFO, which ranged from
10.0x to 12.0x. Such cash flows and aggregate terminal values were discounted to
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present values using discount rates ranging from 8.5% to 9.5%, chosen to reflect
the weighted average cost of capital for the healthcare REIT industry. This
analysis indicated an implied per share valuation of the Capstone Common Stock
that ranged from $19.25 to $26.75.
Premiums Paid Analysis. NationsBanc Montgomery reviewed the consideration
paid in the Comparable Transactions. NationsBanc Montgomery calculated the
premiums paid or offered in the Comparable Transactions over the stock price of
the target company one day, one week and four weeks prior to the announcement of
the acquisition offer. Such analysis indicated median premiums, respectively, of
9.4%, 10.0% and 11.4%, respectively. Application of these premiums to the
respective Capstone Common Stock prices one day, one week and four weeks prior
to the announcement of the Merger, resulted in an implied per share valuation of
the Capstone Common Stock that ranged from $25.03 to $26.67. NationsBanc
Montgomery noted that the premiums implied by the Merger were 6.4%, 4.4% and
1.6%, respectively, for the period one day, one week and four weeks prior to the
announcement of the Merger.
Contribution Analysis. Using estimates and forecasts prepared by
Healthcare Realty management and by Capstone management and as adjusted by
NationsBanc Montgomery with respect to Capstone, NationsBanc Montgomery reviewed
the estimated contribution of each of Healthcare Realty and Capstone to
estimated calendar 1999 revenue and FFO for the combined company. NationsBanc
Montgomery then compared such contributions to the pro forma share ownership of
the combined company to be owned by each of Healthcare Realty's and Capstone's
Stockholders, assuming consummation of the Merger as described in the Merger
Agreement. Such analysis indicated that the Healthcare Realty Stockholders would
own approximately 51.4% of the pro forma combined company. Such analysis also
indicated that, based on such estimates, Healthcare Realty would contribute
approximately 43.7% and 49.4% of the combined company's pro forma estimated 1999
revenue and FFO, respectively.
Pro Forma Merger Analysis. NationsBanc Montgomery also analyzed the pro
forma effects resulting from the Merger, including the potential impact on
Healthcare Realty's projected stand alone FFO per share and the potential
accretion to Healthcare Realty's FFO per share resulting from the Merger.
NationsBanc Montgomery used management estimates for calendar year 1998 and 1999
for Healthcare Realty and Capstone. NationsBanc Montgomery performed the
analysis giving effect to the synergies anticipated by the management of
Healthcare Realty to result from the Merger (excluding non-recurring costs
resulting from the Merger) in each year. NationsBanc Montgomery observed that
the analysis showed the Merger to be accretive on a pro forma basis to
Healthcare Realty's estimated FFO per share in the fourth quarter of 1998 and
for fiscal year 1999. The actual results achieved from the Merger may vary from
the pro forma merger analysis and the variations may be substantial.
While the foregoing summary describes all analyses and examinations that
NationsBanc Montgomery deemed material to its opinion, it is not a comprehensive
description of the presentation by NationsBanc Montgomery to the Healthcare
Realty Board or of all analyses and examinations actually conducted by
NationsBanc Montgomery. The preparation of a fairness opinion necessarily is not
susceptible to partial analysis or summary description. NationsBanc Montgomery
believes that its analyses and the summary set forth above must be considered as
a whole and that selecting portions of its analyses and of the factors
considered, without considering all analyses and factors, would create an
incomplete view of the process underlying the analyses set forth in its
presentation to the Healthcare Realty Board. In addition, NationsBanc Montgomery
may have given various analyses more or less weight than other analyses, and may
have deemed various assumptions more or less probable than other assumptions.
The fact that any specific analysis has been referred to in the summary above is
not meant to indicate that such analysis was given greater weight than any other
analysis. In arriving at its opinion, NationsBanc Montgomery did not ascribe a
specific range of values to Capstone, but rather made its determination as to
the fairness from a financial point of view of the consideration to be paid by
Healthcare Realty on the basis of the financial and comparative analyses
described above. Accordingly, the ranges of valuations resulting from any
particular analysis described above should not be taken to be NationsBanc
Montgomery's view of the actual value of Capstone.
In performing its analyses, NationsBanc Montgomery made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond
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the control of Healthcare Realty and Capstone. The analyses performed by
NationsBanc Montgomery are not necessarily indicative of actual values or actual
future results, which may be significantly more or less favorable than those
suggested by such analyses. Such analyses were prepared solely as part of
NationsBanc Montgomery's analysis of the financial fairness of the consideration
to be paid by Healthcare Realty pursuant to the Merger and were provided to the
Healthcare Realty Board in connection with the delivery of NationsBanc
Montgomery's opinion. The analyses do not purport to be appraisals or to reflect
the prices at which a company might actually be sold or the prices at which any
securities may trade at any time in the future. NationsBanc Montgomery used in
its analyses various projections of future performance prepared by the
management of Capstone and adjusted by NationsBanc Montgomery, Heathcare Realty
and various third-party analysts. These projections are based on numerous
variables and assumptions, which are inherently unpredictable and must be
considered not certain of occurrence as projected. Accordingly, actual results
could vary significantly from the projections used in connection with
NationsBanc Montgomery's opinion.
As described above, NationsBanc Montgomery's opinion and presentation to
the Healthcare Realty Board were among the many factors taken into consideration
by the Healthcare Realty Board in making its determination to approve, and to
recommend that the Healthcare Realty Stockholders approve, the Merger.
Pursuant to the Engagement Letter, Healthcare Realty has agreed to pay
NationsBanc Montgomery a fee of $3.5 million in connection with the Merger,
$375,000 of which was paid upon execution of the Merger Agreement, $375,000 of
which will be payable upon mailing of this Joint Proxy Statement-Prospectus and
the remaining $2.75 million of which will be payable upon consummation of the
Merger. Accordingly, a significant portion of NationsBanc Montgomery's fee is
contingent upon closing of the Merger. Healthcare Realty has also agreed to
reimburse NationsBanc Montgomery for its reasonable out-of-pocket expenses,
including counsel fees. Pursuant to a separate letter agreement, Healthcare
Realty has agreed to indemnify NationsBanc Montgomery, its affiliates, and their
respective partners, directors, officers, agents, consultants, employees and
controlling persons against certain liabilities, including liabilities under
federal securities laws.
In the ordinary course of its business, NationsBanc Montgomery may actively
trade the equity securities of Capstone and Healthcare Realty for its own
account and for the accounts of customers and, accordingly, may at any time hold
a long or short position in such securities. NationsBank, the parent company of
NationsBanc Montgomery, and its affiliates maintain active banking and other
business relationships with Capstone and Healthcare Realty and serve as the lead
lending agent for both Capstone and Healthcare Realty. In addition, NationsBank
and its affiliates maintain active banking, investment banking and other
business relationships with HEALTHSOUTH and MedPartners and serve as the lead
lending agent for both HEALTHSOUTH and MedPartners. Richard M. Scrushy, Chairman
of Capstone, also serves as Chairman and Chief Executive Officer of HEALTHSOUTH
and Chairman of MedPartners.
ACCOUNTING TREATMENT
It is intended that the Merger will be accounted for as a purchase under
generally accepted accounting principles. The unaudited pro forma financial
information included in this Joint Proxy Statement-Prospectus reflects the
Merger using the purchase method of accounting. See "SUMMARY -- Comparative Per
Share Data" and "SUMMARY -- Summary Historical Consolidated Financial
Information."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated U.S. federal income
tax consequences of the Merger to Capstone Stockholders who hold Capstone Common
Stock or Capstone Preferred Stock as a capital asset. The summary is based on
the Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations
thereunder, and administrative rulings and court decisions in effect as of the
date hereof, all of which are subject to change at any time, possibly with
retroactive effect. This summary is not a complete description of all of the
consequences of the Merger and, in particular, may not address U.S. federal
income tax considerations applicable to stockholders subject to special
treatment under U.S. federal income tax law
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(including, for example, non-U.S. persons, financial institutions, dealers in
securities, insurance companies, tax-exempt entities, holders who acquired
Capstone Common Stock pursuant to the exercise of an employee stock option or
right or otherwise as compensation, and holders who hold Capstone Common Stock
as part of a hedge, straddle or conversion transaction). In addition, no
information is provided herein with respect to the tax consequences of the
Merger under applicable foreign, state or local laws. CAPSTONE STOCKHOLDERS ARE
URGED TO CONSULT WITH THEIR TAX ADVISORS REGARDING THE TAX CONSEQUENCES OF THE
MERGER TO THEM, INCLUDING THE EFFECTS OF U.S. FEDERAL, STATE AND LOCAL, FOREIGN,
AND OTHER TAX LAWS.
In connection with the filing of the Registration Statement, Healthcare
Realty has received an opinion of Farris, Warfield & Kanaday PLC, special tax
counsel to Healthcare Realty, dated the date hereof, addressing and confirming
the status of Healthcare Realty as a REIT under the Code and the U.S. federal
income tax consequences of the Merger described below. Such opinion has been
rendered on the basis of facts, representations and assumptions set forth or
referred to in such opinion which are consistent with the state of facts
existing on the date of the opinion. In rendering this opinion, such counsel has
required and relied upon representations and covenants, including those
contained in certificates of officers of Capstone and Healthcare Realty.
Capstone's obligation to consummate the Merger is conditioned upon the
receipt of an opinion of Sirote & Permutt, P.C., and Healthcare Realty's
obligation to consummate the Merger is conditioned upon the receipt of an
opinion of Farris, Warfield & Kanaday PLC, in each case dated as of the
Effective Time, opining as to the same U.S. federal income tax consequences
discussed immediately below. Neither of the tax opinions to be delivered to the
parties in connection with the Merger as described herein are binding on the
Internal Revenue Service (the "IRS") or the courts, and the parties do not
intend to request a ruling from the IRS with respect to the Merger. Accordingly,
there can be no assurance that the IRS will not challenge the conclusions
reflected in such opinions or that a court will not sustain such challenge. Such
opinions will be to the effect that, for U.S. federal income tax purposes:
- The Merger will be treated as a reorganization within the meaning of
Section 368(a) of the Code;
- No gain or loss will be recognized by Healthcare Realty or Capstone as a
result of the Merger;
- No gain or loss will be recognized by the Capstone Stockholders who
exchange all of their Capstone Common Stock or Capstone Preferred Stock
solely for Healthcare Realty Common Stock or Healthcare Realty Preferred
Stock pursuant to the Merger (except with respect to cash received in
lieu of a fractional share interest in Healthcare Realty Common Stock);
and
- The aggregate tax basis of the Healthcare Realty Common Stock or
Healthcare Realty Preferred Stock received by Capstone Stockholders who
exchange all of their Capstone Common Stock or Capstone Preferred Stock
solely for Healthcare Realty Common Stock or Healthcare Realty Preferred
Stock pursuant to the Merger will be the same as the aggregate tax basis
of the Capstone Common Stock or Capstone Preferred Stock surrendered in
exchange therefor (reduced by any amount allocable to a fractional share
interest for which cash is received).
Based upon the current ruling position of the IRS, cash received by a
Capstone Stockholder in lieu of a fractional share interest in Healthcare Realty
Common Stock will be treated as received in redemption of such fractional share
interest, and a Capstone Stockholder should generally recognize capital gain or
loss for federal income tax purposes measured by the difference between the
amount of cash received and the portion of the tax basis of the share of
Capstone Common Stock allocable to such fractional share interest. Such gain or
loss should be a long-term capital gain or loss if the holding period for such
share of Capstone Common Stock is greater than one year at the Effective Time.
In the case of individual Capstone Stockholders, such capital gain will be taxed
at a maximum rate of 20% if such Capstone Stockholder's holding period is more
than 12 months. The holding period of a share of Healthcare Realty Common Stock
received in the Merger (including a fractional share interest deemed received
and redeemed as described above) will include the holder's holding period in the
Capstone Common Stock surrendered in exchange therefor.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Capstone's management and the Capstone Board may be
deemed to have certain interests in the Merger that are in addition to their
interests as Capstone Stockholders generally. The Capstone Board was aware of
these interests and considered them, among other matters, in approving the
Merger Agreement and the transactions contemplated thereby. See "CERTAIN
TRANSACTIONS."
COMPARISON OF RIGHTS OF STOCKHOLDERS
At the Effective Time, Capstone Stockholders will automatically become
Healthcare Realty Stockholders (except for Capstone Stockholders who hold only
Capstone Restricted Stock). Healthcare Realty is a Maryland corporation governed
by provisions of the MGCL, the Healthcare Realty Articles of Incorporation, as
amended (the "Healthcare Realty Articles"), and the Healthcare Realty Bylaws.
Capstone is a Maryland corporation governed by provisions of the MGCL, the
Capstone Articles of Incorporation (the "Capstone Articles") and the Capstone
Bylaws. See "COMPARATIVE RIGHTS OF COMMON STOCKHOLDERS OF CAPSTONE AND
HEALTHCARE REALTY" and "COMPARATIVE RIGHTS OF PREFERRED STOCKHOLDERS OF CAPSTONE
AND HEALTHCARE REALTY."
NO APPRAISAL RIGHTS
Under Maryland law, Capstone Stockholders do not have any right to dissent
from the Merger and receive the appraised value of their shares in cash rather
than Healthcare Realty capital stock.
BOARD OF DIRECTORS AND MANAGEMENT OF HEALTHCARE REALTY AFTER THE MERGER
When the Merger is complete, Capstone will be a wholly owned subsidiary of
Healthcare Realty. The current executive officers of Healthcare Realty will
continue as executive officers, and the Healthcare Realty Board will consist of
its current eight members. The executive officers and directors of Healthcare
Realty will serve in such capacities with Capstone after the merger. None of the
executive officers or members of the Capstone Board will continue to serve as
such after the Merger.
RESTRICTIONS ON RESALES BY AFFILIATES
The shares of Healthcare Realty Common Stock and Healthcare Realty
Preferred Stock issuable to Capstone Stockholders upon consummation of the
Merger have been registered under the Securities Act. Such securities may be
traded freely without restriction by those stockholders who are not deemed to be
"affiliates" of Capstone or Healthcare Realty, as that term is defined in the
rules promulgated under the Securities Act. Shares of Healthcare Realty Common
Stock received by those Capstone Stockholders who are deemed to be affiliates of
Capstone at the time of the Capstone Special Meeting may be resold without
registration under the Securities Act only as permitted by Rule 145 under the
Securities Act or as otherwise permitted thereunder.
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THE MERGER AGREEMENT
The Merger Agreement contains various representations and warranties by
Healthcare Realty and Capstone, and the obligations of Healthcare Realty and
Capstone under the Merger Agreement are subject to various conditions. The
following summary of certain terms and provisions of the Merger Agreement does
not purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, which is incorporated herein by reference and, with the
exception of certain exhibits and schedules thereto, is attached as Annex A to
this Joint Proxy Statement-Prospectus.
CONDITIONS TO THE MERGER
The obligations of Capstone and Healthcare Realty to consummate the Merger
are subject to the satisfaction (or waiver, where legally allowed), at or prior
to the Effective Time, of a number of conditions set forth in the Merger
Agreement.
The obligations of both Capstone and Healthcare Realty are subject to
certain conditions, including:
- Approval of the Merger by the Capstone Stockholders;
- Approval of the issuance of the Merger Consideration (defined in the
Merger Agreement) by the Healthcare Realty Stockholders;
- The receipt of the Required Statutory Approvals (defined in the Merger
Agreement), with such Required Statutory Approvals remaining in full
force as of the Effective Time;
- The effectiveness of the Registration Statement pertaining to the
issuance of the Healthcare Realty Common Stock and Healthcare Realty
Preferred Stock under the Securities Act and the absence of any stop
order suspending such effectiveness and of any pending or threatened
proceedings for such purpose by the Securities and Exchange Commission;
- The absence of any order, decree or injunction issued by any court of
competent jurisdiction which would prevent or materially delay the
consummation of the Merger, or would impose any material limitation on
Healthcare Realty's ability to exercise effectively full rights of
ownership of Capstone's assets or business;
- The fairness opinions not having been withdrawn, revoked or modified in
any material respect; and
- The consulting and non-competition agreements having been entered into.
In addition, each party's obligations under the Merger Agreement are
subject to certain conditions, including:
- The accuracy of the representations of the other party to the Merger
Agreement as of the Closing Date (defined in the Merger Agreement) as
though made as of the Closing Date, subject to the materiality standards
set forth in the Merger Agreement, and the receipt of a certificate to
the foregoing effect signed on behalf of such other party by an officer
thereof;
- The performance by the other party to the Merger Agreement in all
material respects of all of the obligations required to be performed by
it under the Merger Agreement at or prior to the Closing Date, and the
receipt of a certificate to the foregoing effect signed on behalf of such
other party by an officer thereof;
- The receipt of legal and tax opinions from legal counsel to Capstone and
the receipt of legal and tax opinions from legal counsel to Healthcare
Realty;
- With respect to Capstone's obligations, the authorization for listing on
the New York Stock Exchange of the shares of Healthcare Realty Common
Stock and Healthcare Realty Preferred Stock to be issued in the Merger,
subject to official notice of issuance; and
- With respect to Healthcare Realty's obligations, the cancellation of the
current employment agreement of John W. McRoberts.
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<PAGE> 45
CONDUCT OF BUSINESS PRIOR TO THE MERGER AND OTHER COVENANTS
In the Merger Agreement, Capstone has agreed that, prior to the Effective
Time and except as expressly contemplated or permitted by the Merger Agreement
or with the prior written consent of Healthcare Realty, Capstone and its
subsidiaries will carry on their businesses in the ordinary course consistent
with past practice and will not take certain extraordinary actions. Those
actions are set forth in Sections 5.1 and 5.2 of the Merger Agreement.
In the Merger Agreement, Healthcare Realty has agreed that, prior to the
Effective Time and except as expressly contemplated or permitted by the Merger
Agreement or with the prior written consent of Capstone, Healthcare Realty and
its subsidiaries will carry on their businesses in the ordinary course
consistent with past practice.
The Merger Agreement also contains certain other agreements relating to the
conduct of the parties prior to the Effective Time, including, among other
things, those requiring:
- Capstone to maintain its status as a REIT;
- Each party, subject to certain limitations regarding privileged or
confidential information, to afford to the officers, employees,
accountants, counsel and other representatives of the other party to the
Merger Agreement access during normal business hours to all of such
party's properties, books, contracts, commitments, records, officers,
employees, accountants, counsel and make available all information
concerning its business, properties and personnel as such other party may
reasonably request;
- Each party to use reasonable best efforts to obtain all permits,
consents, approvals and authorizations of all third parties and
governmental entities necessary or advisable to consummate the
transactions contemplated by the Merger Agreement;
- Capstone to hold the Capstone Special Meeting and to recommend to
Capstone Stockholders approval of the Merger Agreement and the
transactions contemplated thereby and related matters;
- Healthcare Realty to use its best efforts to register the sale of the
shares of Healthcare Realty Common Stock and Healthcare Realty Preferred
Stock to be issued in the Merger;
- Capstone to use its best efforts to cause each director, executive
officer and other person who is an "affiliate" of Capstone for purposes
of Rule 145 under the Securities Act to deliver to Healthcare Realty as
soon as practicable a written agreement intended to ensure compliance
with the Securities Act; and
- Healthcare Realty to use its best efforts to cause the shares of
Healthcare Realty Common Stock and Healthcare Realty Preferred Stock to
be issued in the Merger to be approved for listing on the New York Stock
Exchange, subject to official notice of issuance, as of the Effective
Time.
In addition, Healthcare Realty agreed to provide indemnification to the
officers and directors of Capstone from acts or omissions occurring prior to the
Closing Date to the same extent as Healthcare Realty indemnifies its own
officers and directors and to maintain in effect the directors' and officers'
liability insurance currently maintained by Capstone.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval by the Capstone Stockholders or the
Healthcare Realty Stockholders:
- By mutual consent of the respective Boards of Directors of Healthcare
Realty and Capstone;
- By either Healthcare Realty or Capstone if the Merger is not consummated
on or before December 31, 1998, unless the party seeking to terminate the
Merger Agreement has breached its obligations set forth therein;
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<PAGE> 46
- By either Healthcare Realty or Capstone (provided that the terminating
party is not then in material breach of any representation, warranty,
covenant or other agreement contained in the Merger Agreement) if there
is a material breach of any of the representations or warranties set
forth in the Merger Agreement on the part of the other party and that
breach (a) is not cured within 15 business days following written notice
to the party committing the breach, or (b) by its nature, cannot be cured
prior to the Closing Date;
- By Healthcare Realty if the Capstone Board either fails to recommend the
approval of the Merger Agreement or has withdrawn its recommendation to
the Capstone Stockholders; or
- By Healthcare Realty if Capstone enters into a definitive agreement with
another bidder with respect to a merger, sale of assets, or other
business combination.
In the event of termination of the Merger Agreement pursuant to its terms,
the Merger Agreement will become void and have no effect, except with respect to
the parties' obligations with respect to confidential information, expenses or
the break-up fee described below and except that termination will not relieve or
release a breaching party from liability or damages for its willful breach of
the Merger Agreement.
NON-SOLICITATION
Capstone has agreed that neither Capstone nor its subsidiaries will,
directly or indirectly, through any officer, director, agent or otherwise, (i)
solicit, initiate or encourage submission of proposals or offers from any person
relating to any acquisition or purchase of all or (other than in the ordinary
course of business) a material amount of the assets of, or any equity interest
in, Capstone or any merger, consolidation, or business combination with
Capstone, or (ii) subject to the obligations of Capstone's directors and
officers under applicable law as advised by counsel, participate in any
discussions or negotiations regarding, or furnish to any other person any
information with respect to, any of the foregoing, or (iii) otherwise cooperate
in any way with, or assist or participate in, facilitate or encourage, any
effort or attempt by any other person to do or seek any of the foregoing.
Capstone has agreed that it shall promptly notify Healthcare Realty if any such
proposal or offer, or any inquiry or contact with any person with respect
thereto, is made. The provisions of the Merger Agreement do not prohibit
Capstone or the Capstone Board from taking any particular position with respect
to any such offer or proposal or from otherwise withdrawing, modifying or
amending its recommendation with respect to the Merger, in each case to the
extent required by the obligations of Capstone's directors and officers under
applicable law as advised by counsel, or from disclosing to its stockholders a
position as contemplated by Rule 14e-2 promulgated under the Securities Exchange
Act of 1934 or from making such other disclosure to stockholders which, in the
judgment of the Capstone Board on advice of counsel, may be required by law in
connection with any such proposal or offer.
TERMINATION FEE; EXPENSES
Except as described in the following paragraphs, each party to the Merger
Agreement will bear all expenses incurred by it in connection with the Merger
Agreement and the transactions contemplated thereby, except that Capstone and
Healthcare Realty will share equally the expenses of printing and distributing
this Joint Proxy Statement-Prospectus. Capstone's expenses for legal and
accounting fees and expenses will not exceed $1.1 million.
The Merger Agreement contains provisions designed to protect the investment
of time and money made by Healthcare Realty in negotiating and attempting to
complete the Merger. If the Merger is terminated because of certain events, or
because certain events occur within six months after termination, involving a
competing offer from another bidder, including:
- A tender or exchange offer in circumstances where the Capstone Board does
not recommend rejection of the third party tender or exchange offer;
- Receipt of a proposal for a merger, consolidation, sale of a material
amount of assets or other business combination from another bidder, or a
transaction whereby 25% of the voting power of Capstone is
39
<PAGE> 47
transferred to another party and either the Capstone Board accepts the
proposal or does not reject the proposal within a reasonable time;
- The withdrawal, modification or amendment of the Capstone Board's
favorable recommendation of the Merger; or
- The occurrence of such an event within six months after the Merger is
terminated,
then Capstone will pay to Healthcare Realty the sum of $20 million plus
Healthcare Realty's expenses.
If the Merger is terminated because one party has breached any obligation,
covenant, agreement, or representation, then the breaching party shall pay the
expenses of the non-breaching party.
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
MARKET PRICES
HEALTHCARE REALTY COMMON STOCK
Healthcare Realty Common Stock is listed on the New York Stock Exchange
under the symbol "HR." As of , 1998, Healthcare Realty Common Stock
was held of record by approximately persons. The following table sets
forth the high and low closing sale prices for Healthcare Realty Common Stock as
reported by the New York Stock Exchange for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1996
First Quarter........................................ $23.1250 $20.8750
Second Quarter....................................... 23.7500 21.5000
Third Quarter........................................ 24.1250 21.5000
Fourth Quarter....................................... 26.8750 23.0000
1997
First Quarter........................................ 29.1250 26.0000
Second Quarter....................................... 27.8750 25.5000
Third Quarter........................................ 29.0000 27.3750
Fourth Quarter....................................... 29.8750 27.8130
1998
First Quarter........................................ 29.9375 27.3750
Second Quarter....................................... 28.6250 26.9375
Third Quarter (through , 1998)..................
</TABLE>
HEALTHCARE REALTY PREFERRED STOCK
None of the Healthcare Realty Preferred Stock will be issued or outstanding
prior to consummation of the Merger. Therefore, there is no market for the
shares.
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<PAGE> 48
CAPSTONE COMMON STOCK
Capstone Common Stock is listed on the New York Stock Exchange under the
symbol "CCT." As of , 1998, Capstone Common Stock was held of record
by approximately persons. The following table sets forth the high and low
closing sale prices for Capstone Common Stock as reported by the New York Stock
Exchange for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1996
First Quarter............................................. $21.5000 $18.8750
Second Quarter............................................ 21.5000 19.5000
Third Quarter............................................. 21.2500 19.7500
Fourth Quarter............................................ 21.8750 20.7500
1997
First Quarter............................................. 24.1250 22.3750
Second Quarter............................................ 24.3750 21.3750
Third Quarter............................................. 24.5000 22.8750
Fourth Quarter............................................ 25.5625 23.3750
1998
First Quarter............................................. 25.9375 23.7500
Second Quarter............................................ 24.3750 22.0625
Third Quarter (through , 1998).....................
</TABLE>
CAPSTONE PREFERRED STOCK
Capstone Preferred Stock is listed on the New York Stock Exchange under the
symbol "CCT PrA." As of , 1998, Capstone Preferred Stock was held of
record by approximately persons. The following table sets forth the high
and low closing sale prices for Capstone Preferred Stock as reported by the New
York Stock Exchange for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1997
Fourth Quarter............................................ $25.5625 $24.4375
1998
First Quarter............................................. 25.7500 24.8125
Second Quarter............................................ 25.1875 24.0000
Third Quarter (through , 1998).....................
</TABLE>
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<PAGE> 49
DIVIDENDS
The following table sets forth dividends declared per share of Healthcare
Realty Common Stock, Capstone Common Stock and Capstone Preferred Stock,
respectively, for the periods indicated. The ability of either Healthcare Realty
or Capstone to pay dividends to its respective stockholders is subject to
certain restrictions.
HEALTHCARE REALTY COMMON STOCK
<TABLE>
<CAPTION>
DISTRIBUTION
PER SHARE
------------
<S> <C>
1996:
First Quarter............................................. $ .475
Second Quarter............................................ .480
Third Quarter............................................. .485
Fourth Quarter............................................ .490
-------
Total............................................. $ 1.930
1997:
First Quarter............................................. $ .495
Second Quarter............................................ .500
Third Quarter............................................. .505
Fourth Quarter............................................ .510
-------
Total............................................. $ 2.010
1998:
First Quarter............................................. $ .515
Second Quarter............................................
</TABLE>
CAPSTONE COMMON STOCK
<TABLE>
<CAPTION>
DISTRIBUTION
PER SHARE
------------
<S> <C>
1996:
First Quarter............................................. $ .445
Second Quarter............................................ .455
Third Quarter............................................. .460
Fourth Quarter............................................ .465
-------
Total............................................. $ 1.825
1997:
First Quarter............................................. $ .470
Second Quarter............................................ .475
Third Quarter............................................. .480
Fourth Quarter............................................ .485
-------
Total............................................. $ 1.910
1998:
First Quarter............................................. $ .490
Second Quarter............................................
</TABLE>
CAPSTONE PREFERRED STOCK
<TABLE>
<CAPTION>
DISTRIBUTION
PER SHARE
------------
<S> <C>
1997:
Fourth Quarter............................................ $.36979
1998:
First Quarter............................................. $.55469
Second Quarter............................................ .55469
</TABLE>
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<PAGE> 50
CERTAIN TRANSACTIONS
If you are a Capstone Stockholder, in considering the Capstone Board's
recommendation that you vote in favor of the Merger, you should be aware that
several of Capstone's directors and officers have agreements that provide them
with interests in the Merger that are different from, or in addition to, yours.
Such interests include:
RESTRICTED STOCK AND STOCK OPTIONS
Immediately prior to the Effective Time, Capstone will redeem each
outstanding share of Capstone Restricted Stock (whether vested or unvested) for
cash in an amount of $24.33 per restricted share. Capstone will provide such
cash from available cash resources or borrowings. Such amount is equivalent to
the Exchange Ratio multiplied by the closing price of Healthcare Realty Common
Stock on May 13, 1998.
At the Effective Time, Healthcare Realty will purchase all rights with
respect to each option to purchase Capstone Common Stock outstanding at the
Effective Time (whether or not vested or exercisable) for cash in an amount per
share equal to the excess of (i) $24.33 over (ii) the stated exercise price per
share of such option.
The following table sets forth the number of restricted shares and stock
options owned by the executive officers and directors of Capstone and the amount
of cash each such person will receive:
<TABLE>
<CAPTION>
NUMBER OF
RESTRICTED CASH NUMBER OF CASH
NAME SHARES PAYMENT OPTIONS PAYMENT
- ---- ---------- ----------- --------- ----------
<S> <C> <C> <C> <C>
Richard M. Scrushy.......... 107,300 $ 2,610,609 158,000 $1,099,015
John W. McRoberts........... 186,000 4,525,380 250,000 1,754,375
Malcolm E. McVay............ 35,800 871,014 50,000 85,250
Andrew L. Kizer............. 23,700 576,621 105,000 732,775
Michael D. Martin........... 51,500 1,252,995 110,000 771,925
Robert N. Elkins............ 16,450 400,229 50,000 318,375
Eric R. Hanson.............. 16,450 400,229 50,000 318,375
Larry R. House.............. 16,450 400,229 50,000 309,000
Larry D. Striplin, Jr....... 16,450 400,229 50,000 318,375
Barry Morton................ 16,450 400,229 50,000 318,375
George E. Bogle............. 16,450 400,229 50,000 318,375
------- ----------- ------- ----------
Total 503,000 $12,237,993 973,000 $6,344,215
</TABLE>
CONSULTING AND NON-COMPETITION AGREEMENTS
Each of Richard M. Scrushy, Michael D. Martin and John W. McRoberts will
enter into a consulting and non-competition agreement with Healthcare Realty,
pursuant to which they will perform consulting and advisory services with
respect to the combined entity for a period of six years. Such persons will
assist Healthcare Realty in the transition of Capstone's assets and activities
to Healthcare Realty and the integration of those assets and activities with the
assets and activities of Healthcare Realty. Moreover, such persons will provide
assistance, advice and counsel to Healthcare Realty in the promotion and
enhancement of Healthcare Realty's business.
For such services, each such person will receive a cash payment at the
closing as shown on the following table. In addition, each person will receive
the number of shares of Healthcare Realty Common Stock shown on the following
table, payable in four equal annual installments beginning in October 1999:
<TABLE>
<CAPTION>
CASH RESTRICTED
NAME PAYMENT SHARES
- ---- ---------- ----------
<S> <C> <C>
Richard M. Scrushy.................................. $2,040,000 360,000
Michael D. Martin................................... $1,020,000 180,000
John W. McRoberts................................... $ 340,000 60,000
</TABLE>
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<PAGE> 51
OFFICE FURNITURE, FIXTURES AND EQUIPMENT
Simultaneously with the closing of the Merger, Capstone and certain of its
subsidiaries will sell substantially all of the personal property at Capstone's
headquarters used by Capstone or its subsidiaries to Orthopaedic Surgeons, Inc.,
a Delaware corporation the majority of the capital stock of which is owned by
HEALTHSOUTH and MedPartners. In consideration for these assets, Orthopaedic
Surgeons, Inc. will (i) assume Capstone's obligations under the lease of its
headquarters, (ii) assume Capstone's obligations under certain office equipment
leases, and (iii) for non-leased assets, pay Capstone $350,000. Healthcare
Realty has granted Orthopaedic Surgeons, Inc. the right to lease the assets at
fair market rents for a period of one year or less.
INFORMATION ABOUT HEALTHCARE REALTY
Healthcare Realty is incorporated in Maryland and is a self-managed and
self-administered real estate investment trust that integrates owning, managing
and developing income-producing real estate properties associated with the
delivery of healthcare services throughout the United States. As of June 30,
1998, Healthcare Realty's portfolio was comprised of seven facility types,
located in 44 markets nationwide, and operated pursuant to contractual
arrangements with 19 healthcare providers. From the commencement of operations
in June 1993 to June 30, 1998, Healthcare Realty invested or committed to invest
over $523 million in 91 income-producing real estate properties totaling over
4.4 million square feet. At June 30, 1998, Healthcare Realty provided property
management services for 302 properties, totaling over 6.2 million square feet,
and third-party asset management services for 312 properties, totaling over 1.5
million square feet.
Healthcare Realty's executive offices are located at 3310 West End Avenue,
Suite 700, Nashville, Tennessee 37203, and its telephone number is (615)
269-8175.
For more information regarding Healthcare Realty, see "WHERE YOU CAN FIND
MORE INFORMATION" on page 64.
RECENT DEVELOPMENTS
Both Healthcare Realty and Capstone have outstanding credit facilities from
commercial banks led by NationsBank. Healthcare Realty anticipates combining
both credit facilities into one new credit facility. NationsBank has indicated
an interest in discussing the transaction, and Healthcare Realty has supplied
NationsBank with certain requested information. No terms have been agreed to.
However, while Healthcare Realty can give no assurances, it believes that it
will obtain a combined credit facility on economically reasonable terms.
During April and May, Healthcare Realty participated in two private
offerings and sold an aggregate of 49,953 shares of common stock for aggregate
proceeds of $1.4 million.
During May, Healthcare Realty loaned $6.8 million to a healthcare real
estate entity secured by a pledge of all of the equity interests of The Atrium
of San Jose, LLC, the owner of an independent living facility in San Jose,
California.
On May 18, 1998, Healthcare Realty paid a dividend of $0.515 per share to
the holders of its common stock as of the close of business on May 6, 1998. This
dividend related to the period from January 1, 1998 through March 31, 1998.
On July 1, 1998, warrants for 128,149 shares of common stock were
exercised. Healthcare Realty received $2.4 million in proceeds from the
exercise. Healthcare Realty has no other warrants outstanding.
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<PAGE> 52
INFORMATION ABOUT CAPSTONE
Capstone is incorporated in Maryland and is a self-managed and
self-administered real estate investment trust which owns, leases and invests in
a diversified portfolio of healthcare properties. As of March 31, 1998,
Capstone's investments consisted of (i) 88 healthcare properties, excluding
construction in progress, leased to 19 healthcare operators, and (ii) 71
mortgage loans on healthcare properties, including loans related to construction
in progress, made to 36 healthcare operators. For the quarter ended March 31,
1998, Capstone realized approximately $15.5 million of rental income from its
leased properties and approximately $4.7 million of interest income from its
mortgage loans. Capstone's investments are located in 30 states, primarily in
the southeastern and western regions of the United States, and represent a
variety of facility types in diverse healthcare industry segments. Capstone's
aggregate investments and commitments to invest not yet funded have grown from
approximately $115 million in investments at inception on June 30, 1994 to
approximately $715.8 million in investments, excluding approximately $44.5
million in construction in progress, and approximately $102.4 million in
commitments to invest not yet funded on March 31, 1998.
Capstone's executive offices are located at 1000 Urban Center Drive, Suite
630, Birmingham, Alabama 35242, and its telephone number is (205) 967-2092.
For more information regarding Capstone, see "WHERE YOU CAN FIND MORE
INFORMATION" on page 64.
DESCRIPTION OF HEALTHCARE REALTY COMMON STOCK
Healthcare Realty is authorized to issue 150,000,000 shares of Common
Stock. The following description of the Healthcare Realty Common Stock sets
forth certain general terms and provisions of the Healthcare Realty Common
Stock. The statements below describing the Healthcare Realty Common Stock are in
all respects subject to and qualified in their entirety by reference to the
applicable provisions of the Healthcare Realty Articles.
Holders of shares of Healthcare Realty Common Stock are entitled to receive
such dividends as the Healthcare Realty Board may declare out of funds legally
available for the payment of dividends. Upon issuance, the shares of Healthcare
Realty Common Stock will be fully paid and nonassessable and have no preferences
or conversion, exchange or preemptive rights. In the event of any liquidation,
dissolution or winding-up of Healthcare Realty, the holders of shares of
Healthcare Realty Common Stock are entitled to share ratably in any of
Healthcare Realty's assets remaining after the satisfaction of all obligations
and liabilities of Healthcare Realty and after required distributions to holders
of Healthcare Realty preferred stock, if any. The Healthcare Realty Common Stock
is subject to restrictions on transfer under certain circumstances described
under "Restrictions on Transfer" below. Each share is entitled to one vote on
all matters voted upon by the holders of Healthcare Realty Common Stock. Holders
of shares of Healthcare Realty Common Stock have no cumulative voting rights.
RESTRICTIONS ON TRANSFER
For Healthcare Realty to qualify as a REIT under the Code in any taxable
year after the first year of its election to be treated as a REIT, (i) not more
than 50% in value of its outstanding Stock (as defined below) may be owned,
directly or indirectly (after application of certain attribution rules), by five
or fewer individuals at any time during the last half of its taxable year, and
(ii) its 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 order to ensure that requirement (i) above is
satisfied, the Healthcare Realty Board has the power to refuse to transfer
shares of Healthcare Realty Common Stock and/or Healthcare Realty Preferred
Stock (collectively, the "Stock"), to any person whose acquisition of such
shares would result in the direct or indirect ownership of more than 9.9% in
value of the outstanding Stock (the "Share Limit"). All such shares in excess of
the Share Limit are referred to as "Excess Shares."
In connection with the foregoing, if the Healthcare Realty Board at any
time and in good faith, believes that direct or indirect ownership (as
determined under applicable federal tax attribution rules) in excess of the
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<PAGE> 53
Share Limit has or may become concentrated in the hands of one beneficial owner,
the Healthcare Realty Board has the power to refuse to transfer or issue Stock
to a person whose acquisition of such Stock would cause a beneficial holder to
hold in excess of the Share Limit. Further, any transfer of Stock that would
cause a beneficial owner to hold shares of Stock in excess of the Share Limit
shall be deemed void, and the intended transferee shall be deemed never to have
had an interest therein.
If at any time there is a transfer in violation of such restrictions, the
Excess Shares shall be deemed to have been transferred to Healthcare Realty, as
trustee for the benefit of such persons to whom the Excess Shares are later
transferred. Subject to Healthcare Realty's right to purchase the Excess Shares,
the interest in the trust representing the Excess Shares shall be freely
transferable by the intended transferee at a price that does not exceed the
price paid by the intended transferee of the Excess Shares. Excess Shares will
have no voting rights, and shall not be considered for the purpose of any
stockholder vote or determining a quorum, but will continue to be reflected as
issued and outstanding stock. No dividends shall be paid with respect to Excess
Shares. Healthcare Realty shall have the right to purchase Excess Shares for the
lesser of the amount paid for the Excess Shares by the intended transferee or
the market price. The market price for any Stock so purchased shall be equal to
the fair market value of such shares reflected in (i) the closing sales price
for the Stock, if then listed on a national securities exchange, (ii) the
average closing sales price of such Stock, if then listed on more than a
national securities exchange, or (iii) if the Stock is not then listed on a
national securities exchange, the latest bid quotation for the Stock if then
traded over-the-counter, as of the day immediately preceding the date on which
notices of such purchase are sent by Healthcare Realty. If no such closing sales
prices or quotations are available, the purchase price will equal the net asset
value of such Stock as determined by the Healthcare Realty Board in good faith.
All certificates representing shares of Healthcare Realty Common Stock or
Healthcare Realty Preferred Stock will bear a legend referring to the
restrictions described above.
BUSINESS COMBINATIONS
Under the MGCL, certain "business combinations" (including a merger,
consolidation, share exchange, or, in certain circumstances, an asset transfer
or issuance of equity securities) between a Maryland corporation and any person
who beneficially owns 10% of more of the voting power of the corporation's
outstanding voting stock (an "Interested Stockholder") or an affiliate of such
person are prohibited for five years after the most recent date on which the
Interested Stockholder becomes an Interested Stockholder. Thereafter, any such
business combination must be: (a) recommended by the corporation's board of
directors; and (b) approved by the affirmative vote of at least (i) 80% of the
corporation's outstanding shares entitled to vote and (ii) two-thirds of the
outstanding shares entitled to vote which are not held by the Interested
Stockholder with whom (or with whose affiliate) the business combination is to
be effected, unless, among other things, the corporation's common stockholders
receive a minimum price (as defined in the statute) for their shares and the
consideration is received in cash or in the same form as previously paid by the
Interested Stockholder for his or her shares. These provisions of Maryland law
do not apply, however, to business combinations that are approved by the board
of directors of a Maryland corporation prior to such person becoming an
Interested Stockholder.
CONTROL SHARE ACQUISITIONS
The MGCL provides that "control shares" of a Maryland corporation acquired
in a "control share acquisition" may not be voted except to the extent approved
by a vote of two-thirds of all the votes entitled to be cast on the matter by
stockholders, excluding voting shares owned by the acquirer and officers and
directors who are also employees of the corporation. "Control shares" are voting
shares of stock which, if aggregated with all other shares of stock owned by a
person or in respect of which that person is entitled to exercise or direct the
exercise of voting power (except solely by virtue of a revocable proxy), would
entitle the acquirer to exercise voting power in electing directors within one
of the following ranges of voting power: (i) one-fifth or more but less than
one-third, (ii) one-third or more but less than a majority, or (iii) a majority
or more of all shares having voting power. Control shares do not include shares
the acquiring person is entitled to vote
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<PAGE> 54
because stockholder approval has previously been obtained. A "control share
acquisition" means the acquisition of control shares, subject to certain
exceptions.
A person who has made or proposes to make a control share acquisition and
who has obtained a definitive financing agreement with a responsible financial
institution providing for any amount of financing not to be provided by the
acquiring person may compel the corporation's board of directors to call a
special meeting of stockholders to be held within 50 days of demand to consider
the voting rights of the shares. If no request for a meeting is made, the
corporation may itself present the question at any stockholders' meeting.
Subject to certain conditions and limitations, the corporation may redeem
any or all of the control shares, except those for which voting rights have
previously been approved, for fair value determined, without regard to voting
rights, as of the date of the last control share acquisition or as of the date
of any meeting of stockholders at which the voting rights of such shares are
considered and not approved. If voting rights for control shares are approved at
a stockholders' meeting and the acquirer is entitled to vote a majority of the
shares entitled to vote, all other stockholders may exercise appraisal rights.
The fair value of the shares as determined for purposes of such appraisal rights
may not be less than the highest price per share in the control share
acquisition, and certain limitations and restrictions otherwise applicable to
the exercise of dissenters' rights do not apply in the context of a control
share acquisition.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to the acquisitions approved or exempted by the articles of
incorporation or bylaws of the corporation prior to a control share acquisition.
The limitation on ownership of Healthcare Realty Common Stock set forth in
the Healthcare Realty Articles, as well as the provisions of Maryland law
described above, could have the effect of discouraging offers to acquire
Healthcare Realty or delaying, deferring or preventing a transaction or a change
in control of Healthcare Realty that might result in a premium price to or
otherwise be in the best interest of Healthcare Realty Stockholders.
DIVIDEND REINVESTMENT PLAN AND EMPLOYEE STOCK PURCHASE PLAN
Healthcare Realty has adopted and implemented a Dividend Reinvestment Plan
to provide registered owners of Healthcare Realty Common Stock with a method of
investing dividends and other distributions paid in cash in additional shares of
Healthcare Realty Common Stock. Healthcare Realty has also adopted an Employee
Stock Purchase Plan to allow employees of Healthcare Realty to purchase shares
of Healthcare Realty Common Stock on terms and conditions set forth in such
plans. Since such additional shares of Healthcare Realty Common Stock will be
purchased from Healthcare Realty, Healthcare Realty will receive additional
funds which will be used for its general corporate purposes.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Healthcare Realty Common Stock is
presently BankBoston.
DESCRIPTION OF HEALTHCARE REALTY PREFERRED STOCK
Healthcare Realty is authorized to issue 50,000,000 shares of preferred
stock consisting of 3,000,000 shares of 8 7/8% Series A Voting Cumulative
Preferred Stock, par value $.01 per share, and 47,000,000 shares of undesignated
preferred stock. The following description of the Healthcare Realty Preferred
Stock sets forth certain general terms and provisions of the Healthcare Realty
Preferred Stock. The statements below describing the Healthcare Realty Preferred
Stock are in all respects subject to and qualified in their entirety by
reference to the applicable provisions of the Healthcare Realty Articles
(including the Articles Supplementary describing the designations, rights, and
preferences of the Healthcare Realty Preferred Stock) and the Healthcare Realty
Bylaws.
The Healthcare Realty Articles authorize the Healthcare Realty Board to
issue preferred stock from time to time in one or more series and designate the
number of shares constituting each series of preferred stock
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and the designations and powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations or restrictions
thereof, including such provisions as may be desired concerning voting,
redemption, dividends, dissolution or the distribution of assets, conversion or
exchange, and such other subjects or matters as may be fixed by resolution of
the Healthcare Realty Board. The Healthcare Realty Board has classified
3,000,000 of its shares of preferred stock as shares of 8 7/8% Series A Voting
Cumulative Preferred Stock, par value $.01 per share, to be issued in connection
with the Merger. The Healthcare Realty Preferred Stock will, when issued, be
fully paid and nonassessable and will have no preemptive rights.
RANK
The Healthcare Realty Preferred Stock will, with respect to dividend rights
and rights upon liquidation, dissolution or winding up of Healthcare Realty,
rank (i) senior to all classes or series of Healthcare Realty Common Stock, and
to all equity securities ranking junior to such Healthcare Realty Preferred
Stock, (ii) on a parity with all equity securities issued by Healthcare Realty
the terms of which specifically provide that such equity securities rank on a
parity with the Healthcare Realty Preferred Stock, and (iii) junior to all
equity securities issued by Healthcare Realty the terms of which specifically
provide that such equity securities rank senior to the Healthcare Realty
Preferred Stock.
DIVIDENDS
Holders of shares of the Healthcare Realty Preferred Stock shall be
entitled to receive, when, as and if declared by the Healthcare Realty Board,
out of assets of Healthcare Realty legally available for payment, cumulative
preferential cash dividends at the rate of 8 7/8% per annum of the liquidation
preference ($25 per share), payable quarterly in arrears on or before the last
business day in February, May, August and November of each year. Each such
dividend shall be payable to holders of record as they appear on the stock
transfer books of Healthcare Realty on such record dates as shall be fixed by
the Healthcare Realty Board.
Dividends on the Healthcare Realty Preferred Stock will be cumulative from
and after the Effective Time of the Merger.
If any shares of the Healthcare Realty Preferred Stock of any series are
outstanding, no full dividends shall be declared or paid or set apart for
payment on the preferred stock of Healthcare Realty of any other series ranking,
as to dividends, on a parity with or junior to the Healthcare Realty Preferred
Stock for any period unless full dividends have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment on the Healthcare Realty Preferred Stock.
When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the shares of Healthcare Realty Preferred
Stock and the shares of any other series of preferred stock ranking on a parity
as to dividends with the Healthcare Realty Preferred Stock, all dividends
declared upon shares of Healthcare Realty Preferred Stock and any other series
of Healthcare Realty Preferred Stock ranking on a parity as to dividends with
such Healthcare Realty Preferred Stock shall be declared pro rata among the
holders of such series. No interest, or sum of money in lieu of interest, shall
be payable in respect of any dividend payment or payments on Healthcare Realty
Preferred Stock of such series which may be in arrears.
Until required dividends are paid, no dividends (other than in Healthcare
Realty Common Stock or other capital stock ranking junior to the Healthcare
Realty Preferred Stock as to dividends and upon liquidation) shall be declared
or paid or set aside for payment or other distribution shall be declared or made
upon the Healthcare Realty Common Stock or any other capital stock of Healthcare
Realty ranking junior to or on a parity with the Healthcare Realty Preferred
Stock of such series as to dividends or upon liquidation, nor shall any
Healthcare Realty Common Stock or any other capital stock of Healthcare Realty
ranking junior to or on a parity with the Healthcare Realty 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 shares of any such stock)
by Healthcare Realty (except by conversion into or exchange for other capital
stock of Healthcare Realty ranking junior to the Healthcare Realty Preferred
Stock of such series as to dividends and upon liquidation).
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Any dividend payment made on shares of Healthcare Realty Preferred Stock
shall first be credited against the earliest accrued but unpaid dividend due
with respect to shares of Healthcare Realty Preferred Stock of such series which
remains payable.
REDEMPTION
The Healthcare Realty Preferred Stock is not redeemable prior to September
30, 2002. On and after September 30, 2002, Healthcare Realty, at its option upon
not less than 30 nor more than 60 days' written notice, may redeem shares of the
Healthcare Realty Preferred Stock, in whole or in part, at any time or from time
to time, for cash at the Redemption Price (as defined below), without interest.
No Healthcare Realty Preferred Stock may be redeemed except with funds legally
available for the payment of the Redemption Price. If less than all is to be
redeemed, the Healthcare Realty Preferred Stock to be redeemed will be selected
pro rata (as nearly as practicable without creating fractional shares) or by any
other equitable method determined by Healthcare Realty.
The Redemption Price of the Healthcare Realty Preferred Stock (other than
any portion consisting of accrued and unpaid dividends) may be paid solely from
the proceeds of the sale of capital stock of Healthcare Realty and not from any
other source. For purposes of the preceding sentence, "capital stock" means any
equity securities (including Healthcare Realty Common Stock and preferred stock)
shares, interests, participation or other ownership interests (however
designated) and any rights (other than debt securities convertible into or
exchangeable for equity securities) or options to purchase any of the foregoing.
Unless full cumulative dividends on all shares of Healthcare Realty Preferred
Stock have been or contemporaneously are authorized and paid or authorized and a
sum sufficient for the payment thereof set apart for payment for all past
Dividend Periods (as defined below) and the then current Dividend Period, no
shares of Healthcare Realty Preferred Stock will be redeemed unless all
outstanding shares of Healthcare Realty Preferred Stock are simultaneously
redeemed, and Healthcare Realty will not purchase or otherwise acquire directly
or indirectly any shares of Healthcare Realty Preferred Stock (except by
exchange for capital stock of Healthcare Realty ranking junior to the Healthcare
Realty Preferred Stock as to dividends and upon liquidation); provided, however,
that the foregoing will not prevent the purchase or acquisition of shares of
Healthcare Realty Preferred Stock pursuant to a purchase or exchange offer made
on the same terms to holders of all outstanding shares of Healthcare Realty
Preferred Stock.
Immediately prior to any redemption, Healthcare Realty will pay, in cash,
any accumulated and unpaid dividends through the Redemption Date (as defined
below), unless a Redemption Date falls after a Dividend Record Date (as defined
below) and prior to the corresponding Dividend Payment Date, in which case each
holder of Healthcare Realty Preferred Stock at the close of business on such
Dividend Record Date shall be entitled to the dividend payable on such shares on
the corresponding Dividend Payment Date notwithstanding the redemption of such
shares before such Dividend Payment Date. Except as described herein, Healthcare
Realty will make no payment or allowance for unpaid dividends, whether or not in
arrears, on Healthcare Realty Preferred Stock which is redeemed. The procedure
for redemption of the Healthcare Realty Preferred Stock will be as described in
the Healthcare Realty Articles. If notice of redemption has been given and if
the funds necessary for such redemption have been set aside, then from and after
the Redemption Date dividends will cease to accrue, the Healthcare Realty
Preferred Stock called for redemption will no longer be deemed outstanding and
all rights of the holders of such shares will terminate except the right to
receive the Redemption Price.
Any shares of Healthcare Realty Preferred Stock that at any time have been
redeemed will, after such redemption, have the status of authorized but unissued
preferred stock, without designation as to series until such shares are once
more designated as part of a particular series by the Healthcare Realty Board.
As used above, (i) "Redemption Price" means a price per share equal to
$25.00 together with accrued and unpaid dividends, if any, to the Redemption
Date, (ii) "Dividend Period" means the period from and including the Initial
Issue Date (as defined below) to, but not including, the first Dividend Payment
Date and, thereafter, each quarterly period from and including the Dividend
Payment Date to, but not including, the next Dividend Payment Date, (iii)
"Dividend Record Date" means the first day of the calendar month in
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which the applicable Dividend Payment Date falls or on such other date as
designated by the Healthcare Realty Board for the payment of the dividends that
is not more than 30 nor less than ten days prior to the applicable Dividend
Payment Date, (iv) "Dividend Payment Date" means a date selected by the
Healthcare Realty Board which date shall be on or before the last business day
in February, May, August and November of each year, commencing , 1998;
(v) "Initial Issue Date" means the Effective Time of the Merger; and (vi)
"Redemption Date" means the date specified in the notice of redemption.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of Healthcare Realty, then, before any distribution or payment shall
be made to the holders of Healthcare Realty Common Stock, or any other class or
series of capital stock of Healthcare Realty ranking junior to the Healthcare
Realty Preferred Stock in the distribution of assets upon any liquidation,
dissolution or winding up of Healthcare Realty, the holders of Healthcare Realty
Preferred Stock shall be entitled to receive out of assets of Healthcare Realty
legally available for distribution to stockholders liquidating distributions in
the amount of the liquidation preference per share of $25.00, plus an amount
equal to all dividends accrued and unpaid thereon. After payment of the full
amount of the liquidating distributions to which they are entitled, the holders
of shares of Healthcare Realty Preferred Stock will have no right or claim to
any of the remaining assets of Healthcare Realty. In the event that, upon any
such voluntary or involuntary liquidation, dissolution or winding up, the
legally available assets of Healthcare Realty are insufficient to pay the amount
of the liquidating distributions on all outstanding shares of Healthcare Realty
Preferred Stock and the corresponding amounts payable on all shares of other
classes or series of capital stock of Healthcare Realty ranking on a parity with
the Healthcare Realty Preferred Stock in the distribution of assets upon
liquidation, dissolution or winding up, then the holders of the Healthcare
Realty 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
shares of Healthcare Realty Preferred Stock, the remaining assets of Healthcare
Realty shall be distributed among the holders of any other classes or series of
capital stock ranking junior to the Healthcare Realty 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.
VOTING RIGHTS
The holders of each share of Healthcare Realty Preferred Stock will have
one vote, voting together with the Healthcare Realty Common Stock, on all
matters on which the Healthcare Realty Stockholders may vote. In the event that
dividends on shares of Healthcare Realty Preferred Stock are in arrears for six
or more quarters, holders of Healthcare Realty Preferred Stock (voting
separately as a class but including any preferred stock which is on parity with
the Healthcare Realty Preferred Stock) will have the right to elect two
additional directors until all accrued dividends are paid in full. In addition,
the holders of Healthcare Realty Preferred Stock shall vote separately as a
class on certain matters specified in the Healthcare Realty Articles including
generally any amendment to the Healthcare Realty Articles or Articles
Supplementary, whether by merger, consolidation or otherwise, which materially
affects the rights of the Healthcare Realty Preferred Stock. Such matters will
require the approval of two-thirds of the outstanding shares of Healthcare
Realty Preferred Stock.
RESTRICTIONS ON TRANSFER
As discussed above under "DESCRIPTION OF HEALTHCARE REALTY COMMON STOCK --
Restrictions on Transfer," for Healthcare Realty to qualify as a REIT under the
Code, not more than 50% in value of its outstanding 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 the 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
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proportionate part of a shorter taxable year. Therefore, ownership and transfer
of the Healthcare Realty Preferred Stock will be restricted in the same manner
as the Healthcare Realty Common Stock.
All certificates representing shares of Healthcare Realty Preferred Stock
will bear a legend referring to the restrictions described above.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Healthcare Realty Preferred Stock
will be .
COMPARATIVE RIGHTS OF COMMON STOCKHOLDERS OF
CAPSTONE AND HEALTHCARE REALTY
At the Effective Date, Capstone Common Stockholders whose rights are
governed by the Capstone Articles, Capstone Bylaws and the MGCL, will
automatically become Healthcare Realty Common Stockholders upon consummation of
the Merger. As such, the rights of the former Capstone Common Stockholders will
be governed by the Healthcare Realty Articles, the Healthcare Realty Bylaws and
the MGCL.
While it is impractical to summarize all such differences, set forth below
are the material differences between the rights of Capstone Common Stockholders
under the Capstone Articles, the Capstone Bylaws and the MGCL and the rights of
Healthcare Realty Common Stockholders under the Healthcare Realty Articles,
Healthcare Realty Bylaws and the MGCL.
VOTING RIGHTS
Capstone. The Capstone Bylaws provide that a plurality of all the votes
cast at a meeting of stockholders duly called and at which a quorum is present
shall be sufficient to elect a director. A majority of votes cast at a meeting
of stockholders duly called and at which a quorum is present is sufficient to
approve any other matter which may properly come before the meeting, unless the
MGCL or the Capstone Articles require more than a majority of votes cast to
approve the matter. Unless otherwise provided in the Capstone Articles, each
share of outstanding stock, regardless of class, entitles the holder to one vote
on each matter submitted to a vote at a meeting of stockholders. The Capstone
Articles and Bylaws do not provide for cumulative voting by stockholders.
Healthcare Realty. The Healthcare Realty Articles provide that each share
of issued and outstanding Healthcare Realty Common Stock entitles the holder to
one vote on each matter with respect to which stockholders are entitled to vote.
The Healthcare Realty Articles and Bylaws do not provide for cumulative voting
by stockholders.
CHANGE OF CONTROL
Capstone. The Capstone Articles provide that no person shall at any time
directly or indirectly acquire or hold beneficial ownership in the aggregate of
more than 9.8% (the "Ownership Limit") of the outstanding shares of common stock
and preferred stock of Capstone. Shares of Capstone Common Stock held by a
stockholder over the Ownership Limit are referred to as "Excess Common Shares."
Any shares of Capstone Preferred Stock held by a stockholder over the Ownership
Limit are referred to as "Excess Preferred Shares." The Excess Common Shares and
the Excess Preferred Shares are referred to as the "Capstone Excess Shares." A
person shall be deemed to be the beneficial owner of the stock that such person
(i) actually owns, (ii) constructively owns after applying the rules of Section
544 of the Code as modified in the case of a REIT by Sections 857(a)(6) and
856(b) of the Code, or (iii) has the right to acquire upon exercise of
outstanding rights, options and warrants, or upon conversion of any securities
convertible into stock, if any, if such inclusion will cause such person to own
more than the Ownership Limit. If, in the opinion of the Capstone Board, any
proposed transfer or issuance would jeopardize the status of Capstone as a real
estate investment trust under the REIT provisions of the Code, the Capstone
Board shall have the right, but not the duty, to refuse to permit such transfer
or issuance or refuse to give effect to such transfer or issuance and to take
any action to void any such issuance or cause any such transfer not to occur. No
stockholder may vote any
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Capstone Excess Shares held by such stockholder, and Capstone Excess Shares
shall not be considered outstanding for the purpose of determining a quorum at
any meeting of the Capstone Stockholders. Capstone, upon authorization by the
Capstone Board, by notice to the holder thereof, may redeem any or all shares
that are Capstone Excess Shares. See also "-- Restrictions on Transfer."
Healthcare Realty. The Healthcare Realty Articles and Bylaws contain
several provisions which make a change of control of Healthcare Realty more
difficult to accomplish without the approval of the Healthcare Realty Board. The
Healthcare Realty Board is divided into three classes so that only one-third of
the directors will be subject to reelection at each annual meeting of the
stockholders of Healthcare Realty. The Healthcare Realty Articles also contain a
9.9% "Excess Shares" clause, similar to the one contained in the Capstone
Articles.
Certain Maryland statutes provide additional restrictions on changes in
control of Maryland corporations. Since both Capstone and Healthcare Realty are
Maryland corporations, these provisions of the MGCL are applicable to both. Such
provisions are described above in "DESCRIPTION OF HEALTHCARE REALTY COMMON
STOCK -- Business Combinations" and "-- Control Share Acquisitions."
BOARD OF DIRECTORS
Capstone. The Capstone Articles provide for a Board of Directors
consisting of eight directors, which may be increased or decreased from time to
time in accordance with Capstone's Bylaws, but shall not be less than the number
required under the MGCL. The Capstone Bylaws provide that, at any regular or
special meeting called for that purpose, a majority of the entire Capstone Board
may establish, increase or decrease the number of directors, provided that the
number thereof shall never be less than three nor more than 15, and further
provided that the tenure of office of a director shall not be affected by any
decrease in the number of directors.
Healthcare Realty. The Healthcare Realty Bylaws provide that the number of
Healthcare Realty directors shall be no fewer than three and no more than nine.
The number of directors is currently set at eight. The Healthcare Realty Board
is classified into three classes, equal or approximately equal in number. Each
class of directors shall be elected for successive terms ending at the annual
meeting of stockholders the third year after election. Directors may be removed
from office for cause by: (1) the vote of holders of 80% of the outstanding
shares of Healthcare Realty or (2) the unanimous vote of all other members of
the Healthcare Realty Board.
REMOVAL OF DIRECTORS
Capstone. The Capstone Articles provide that a director may be removed
from office with or without cause only at a meeting of the stockholders of
Capstone called for that purpose by the affirmative vote of the holders of not
less than two-thirds of the shares then outstanding and entitled to vote in the
election of directors. This provision may preclude stockholders from removing
incumbent directors except upon substantial affirmative vote and filling the
vacancies created by such removal with their own nominees.
Healthcare Realty. The Healthcare Realty Articles provide that a director
of Healthcare Realty may be removed for cause by the affirmative vote of 80% of
the outstanding shares of Healthcare Realty or the unanimous vote of all other
members of the Board of Directors. This provision may preclude stockholders from
removing incumbent directors except upon substantial affirmative vote and
filling the vacancies created by such removal with their own nominees.
LIMITATION ON PERSONAL LIABILITY OF DIRECTORS AND OFFICERS; INDEMNIFICATION
Capstone. The Capstone Articles provide that, to the maximum extent that
the Maryland law in effect from time to time permits limitation of liability of
directors and officers, no director or officer of Capstone shall be liable to
Capstone or its stockholders for money damages. The Capstone Bylaws provide
that, to the maximum extent permitted by Maryland law in effect from time to
time, Capstone, without requiring a preliminary determination of the ultimate
entitlement to indemnification, shall indemnify and shall pay or
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reimburse reasonable expenses in advance of final disposition of a proceeding to
(i) any individual who is a present or former director or officer of Capstone
and who is made a party to the proceeding by reason of his service in that
capacity or (ii) any individual who, while a director of Capstone and at the
request of Capstone, serves or has served another corporation, partnership,
joint venture, trust, employee benefit plan or any other enterprise as a
director, officer, partner or trustee of such corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and who is made a
party to the proceeding by reason of his service in that capacity. The Capstone
Bylaws also provide that Capstone may, with the approval of the Capstone Board,
provide such indemnification and advancement of expenses to a person who served
as a predecessor of Capstone in any of the capacities described in (i) or (ii)
above and to any employee or agent of Capstone or a predecessor of Capstone.
Capstone also provides a directors and officers liability insurance policy
for its directors and officers.
Healthcare Realty. The Healthcare Realty Articles provide that directors
or officers shall not be personally liable to Healthcare Realty or its
stockholders for money damages unless (i) it is proved that the person actually
received an improper benefit or profit in money, property, or services, for the
amount of the benefit or profit in money, property, or services actually
received or (ii) a judgment or other final adjudication adverse to the person is
entered in a proceeding, based on a finding in the proceeding that the person's
action, or failure to act, was the result of active and deliberate dishonesty
and was material to the cause of action adjudicated in the proceeding.
The Healthcare Realty Articles provide that if the law of the State of
Maryland is amended to authorize corporate action further limiting or
eliminating the personal liability of directors or officers or expanding such
liability, then the liability of directors or officers to Healthcare Realty or
its shareholders shall be limited or eliminated to the fullest extent permitted
by Maryland law as so amended from time to time. Any repeal or modification of
this provision by the stockholders of Healthcare Realty shall be prospective
only, and shall not adversely affect any limitation on the personal liability of
a director or the corporation existing at the time of such repeal or
modification.
The Healthcare Realty Articles further provide that Healthcare Realty shall
indemnify directors, officers, employees and agents to the fullest extent
permitted by the law of the State of Maryland. Healthcare Realty may purchase
and maintain liability insurance, or make other arrangements for such
obligations or otherwise, to the extent permitted by the law of the State of
Maryland, whether or not Healthcare Realty would have the power to indemnify
against liability under the provisions of such law.
The MGCL requires a corporation (unless its charter provides otherwise) to
indemnify a director or officer who has been successful, on the merits or
otherwise, in the defense of any proceeding to which he is made a party by
reason of his service in that capacity. The MGCL permits a corporation to
indemnify its present and former directors and officers, among others, against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by them in connection with any proceeding to which they may be made a
party by reason of their service in those or other capacities unless it is
established that (a) the act or omission of the director or officer was material
to the matter giving rise to the proceeding and (i) was committed in bad faith
or (ii) was the result of active and deliberate dishonesty, (b) the director or
officer actually received an improper personal benefit in money, property or
services or (c) in the case of any criminal proceeding, the director or officer
had reasonable cause to believe that the act or omission was unlawful. However,
a Maryland corporation may not indemnify for an adverse judgment in a suit by or
in the right of the corporation or for a judgment of liability on the basis that
personal benefit was improperly received, unless in either case a court orders
indemnification and then only for expenses. In addition, the MGCL permits a
corporation to advance reasonable expenses to a director or officer upon the
corporation's receipt of (a) a written affirmation by the director or officer of
his good faith belief that he has met the standard of conduct necessary for
indemnification by such corporation and (b) a written undertaking by him or on
his behalf to repay the amount paid or reimbursed by the corporation if it shall
ultimately be determined that the standard of conduct was not met.
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RIGHTS OF STOCKHOLDERS TO CALL SPECIAL MEETINGS
Capstone. The Capstone Bylaws provide that the President, the Chief
Executive Officer or a majority of the Board of Directors may call special
meetings of the stockholders. A special meeting may also be called by the
Secretary upon the written request of stockholders entitled to cast at least 25%
of all the votes entitled to be cast at the meeting. The request must state the
purpose of the meeting and the matters proposed to be acted on at such meeting.
The stockholders shall pay costs of preparing and mailing notices of meeting.
Unless requested by stockholders entitled to cast a majority of all the votes
entitled to be cast at such meeting, a special meeting need not be called to
consider any matter which is substantially the same as a matter voted on at any
meeting of the stockholders held during the preceding 12 months.
Healthcare Realty. The Healthcare Realty Bylaws provide that a special
meeting of the stockholders of Healthcare Realty may be called upon the written
request of stockholders entitled to cast at least 25% of all of the votes
entitled to be cast at the meeting.
AUTHORIZED STOCK
Capstone. Capstone is authorized to issue 50,000,000 shares of Common
Stock and 10,000,000 shares of Preferred Stock. As of the Capstone Record Date,
Capstone had shares of Capstone Common Stock and 3,000,000 shares of
Capstone Preferred Stock issued and outstanding.
Healthcare Realty. Healthcare Realty is authorized to issue 150,000,000
shares of Common Stock and 50,000,000 shares of preferred stock, consisting of
47,000,000 shares of undesignated preferred stock and 3,000,000 shares of
Healthcare Realty Preferred Stock. As of the Healthcare Realty Record Date,
Healthcare Realty had shares of Healthcare Realty Common Stock and no
shares of Healthcare Realty Preferred Stock issued and outstanding. The
Healthcare Realty Board may, at any time, issue Healthcare Realty preferred
stock for such consideration and with such voting power, dividends, dividend
preferences, liquidation preferences, conversion preferences and other
preferences, privileges and right which the Healthcare Realty Board deems
advisable.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
Capstone. Capstone has elected to be taxed as a REIT. In order to satisfy
certain tax provisions relating to REIT status, the Capstone Articles limit
beneficial ownership of Capstone capital stock by any one person to 9.8% of the
number or value of the then outstanding shares of Capstone capital stock (the
"Capstone Ownership Limit"), with certain limited exceptions described in the
Capstone Articles. Any shares of Capstone Common Stock or Capstone Preferred
Stock held by a stockholder in excess of the Capstone Ownership Limit (the
"Capstone Excess Shares") are deemed automatically to have been converted into a
class separate and distinct from the class or series from which converted and
from any other class of Capstone Excess Shares, and will not be entitled to
vote, will not be considered outstanding for purposes of determining a quorum,
and will not be entitled to distributions or dividends except to the extent the
Capstone Board chooses, in its sole discretion, to accumulate such distributions
or dividends and pay them to the holders of the Capstone Excess Shares at such
time as they cease to be Capstone Excess Shares. Capstone may redeem any or all
Capstone Excess Shares and, from and after the date of notice of redemption,
such shares will cease to be outstanding and the holder will cease to be
entitled to dividends, voting rights and other benefits with respect to such
shares (except payment of the redemption price). If within 30 days after the
redemption date the person from whom the Capstone Excess Shares have been
redeemed sells a number of remaining shares of the same class as the Capstone
Excess Shares at least equal to the number of such Excess Shares, Capstone must
rescind the redemption if following such rescission such person would not be the
holder of Capstone Excess Shares. Notwithstanding any other provision of the
Capstone Articles, any purported acquisition or continued ownership of stock of
Capstone that would: (i) create an owner of Capstone Excess Shares; (ii) result
in the shares of Capstone being owned by fewer than 100 persons; (iii) result in
Capstone being "closely held" with the meaning of Section 856(h) of the Code; or
(iv) result in the disqualification of Capstone as a REIT, shall be void ab
initio.
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Healthcare Realty. Healthcare Realty has elected to be taxed as a REIT. In
order to satisfy certain tax provisions relating to REIT status, the Healthcare
Realty Articles limit beneficial ownership of Healthcare Realty capital stock by
any one person to 9.9% in value of the outstanding shares of Healthcare Realty
(the "Healthcare Realty Ownership Limit"). If the Board determines that
ownership of any one owner has exceeded the Healthcare Realty Ownership Limit,
the Board may refuse to transfer or issue shares of Healthcare Realty stock to
such person and any transfer that would create an individual direct or indirect
owner of in excess of the Healthcare Realty Ownership Limit will be deemed void.
If there is a transfer in violation of the Healthcare Realty Ownership Limit,
those shares in excess of the Healthcare Realty Ownership Limit will be "Excess
Shares" (the "Healthcare Realty Excess Shares"), and will be deemed to have been
transferred to Healthcare Realty as trustee of a trust for the benefit of such
persons to whom the Healthcare Realty Excess Shares are subsequently
transferred. Healthcare Realty Excess Shares will have no voting rights, and
will not be considered for purposes of shareholder votes or determining a
quorum, but will be reflected as issued and outstanding stock of Healthcare
Realty. No dividends or other distributions will be paid with respect to
Healthcare Realty Excess Shares.
DIVIDEND REINVESTMENT PLAN
Capstone. Capstone has adopted a Dividend Reinvestment Plan to provide
registered owners of Capstone Common Stock a method of investing dividends and
other distributions paid in cash ("dividends") in additional shares of Capstone
Common Stock at a 2% discount from current market value and without payment of
any brokerage commission or service charge.
Participating stockholders may have cash dividends on all or a portion of
their shares of Capstone Common Stock automatically reinvested in additional
shares of Capstone Common Stock ("Plan Shares"). Participants' funds will be
fully invested because the Dividend Reinvestment Plan permits fractions of
shares to be credited to a participant's account. Dividends on such fractions,
as well as on whole shares, will be reinvested in additional shares, and such
shares will be credited to a participant's account. Participants may also make
optional investments of up to $5,000 per quarter.
Healthcare Realty. Stockholders of Healthcare Realty Common Stock are
eligible to participate in the company's Dividend Reinvestment Plan, which is
substantially similar to that of Capstone, including the right to reinvest
dividends at a 5% discount and the right to make optional investments of up to
$5,000 per quarter.
AMENDMENT OF ARTICLES AND BYLAWS
Capstone. The Capstone Articles provide that the affirmative vote of the
holders of at least 90% of the "voting stock" of Capstone, voting together as a
single class, is required to repeal or amend any provision inconsistent with the
provisions of the Capstone Articles governing the removal of directors,
restrictions on ownership and transfer of shares of stock, amendments to the
Capstone Articles or limitations on personal liability and indemnification of
directors and officers. The Capstone Articles provide that the Capstone Board
shall have the exclusive power to alter, amend or repeal any provision of the
Capstone Bylaws and to make new Capstone Bylaws.
Healthcare Realty. The provisions of Healthcare Realty Articles relating
to (i) the number of directors, (ii) share transfer and ownership limitations,
(iii) indemnification of officers and directors and (iv) amendments may be
repealed or amended upon the affirmative vote of the holders of at least 90% of
the voting stock of Healthcare Realty. All other provisions of the Healthcare
Realty Articles may be amended by the affirmative vote of the holders of
two-thirds of the voting stock of Healthcare Realty. The Healthcare Realty
Bylaws may be amended or repealed by the affirmative vote of the holders of at
least 90% of the voting stock of Healthcare Realty.
55
<PAGE> 63
COMPARATIVE RIGHTS OF PREFERRED STOCKHOLDERS OF CAPSTONE
AND HEALTHCARE REALTY
Capstone Preferred Stockholders, whose rights are governed by the Capstone
Articles, Capstone Bylaws and the MGCL, will become Healthcare Realty Preferred
Stockholders upon consummation of the Merger. As a result, the rights of the
former Capstone Preferred Stockholders will be governed by the Healthcare Realty
Articles, the Healthcare Realty Bylaws and the MGCL.
The newly created Healthcare Realty Preferred Stock will have substantially
identical terms, rights and preferences as the Capstone Preferred Stock. Set
forth below are the material differences between the rights of Capstone
Preferred Stockholders under the Capstone Articles, the Capstone Bylaws and the
MGCL, and the rights of Healthcare Realty Preferred Stockholders under the
Healthcare Realty Articles, the Healthcare Realty Bylaws and the MGCL.
VOTING RIGHTS
Capstone. The holders of Capstone Preferred Stock have no voting rights
except in special circumstances as provided in the Capstone Articles and under
Maryland law.
Healthcare Realty. The holders of each share of Healthcare Realty
Preferred Stock will have one vote, voting together with the Healthcare Realty
Common Stock, on all matters on which the Healthcare Realty Stockholders may
vote. Holders of Healthcare Realty Preferred Stock will also have the same
voting rights as holders of Capstone Preferred Stock currently have, including
the right that, in the event that dividends on shares of Healthcare Realty
Preferred Stock are in arrears for six or more quarters, holders of Healthcare
Realty Preferred Stock (voting separately as a class but including any preferred
stock which is on parity with the Healthcare Realty Preferred Stock) can elect
two additional directors until all accrued dividends are paid in full. In
addition, the holders of Healthcare Realty Preferred Stock will vote separately
as a class on certain matters specified in the Healthcare Realty Articles or if
required by law, including generally any amendment to the Healthcare Realty
Articles or Articles Supplementary, whether by merger, consolidation or
otherwise, which materially affects the rights of the Healthcare Realty
Preferred Stock. Such matters will require the approval of holders of two-thirds
of the outstanding shares of Healthcare Realty Preferred Stock.
PAR VALUE
Capstone. The Capstone Preferred Stock has a $.001 per share par value.
Healthcare Realty. The Healthcare Realty Preferred Stock will have a $.01
per share par value.
DIVIDEND PAYMENT DATES
Capstone. Dividends on shares of Capstone Preferred Stock are payable
quarterly in arrears on or before March 15, June 15, September 15 and December
15 of each year or, if not a Business Day (as defined in the Capstone Articles),
the next succeeding Business Day.
Healthcare Realty. Dividends on shares of Healthcare Preferred Stock are
payable quarterly in arrears on or before the last business day in February,
May, August and November of each year.
RESTRICTIONS ON OWNERSHIP AND TRANSFER
For a comparison of the rights of Capstone Preferred Stockholders and the
Healthcare Realty Preferred Stockholders relative to restrictions on ownership
and transfer, see "COMPARATIVE RIGHTS OF COMMON STOCKHOLDERS OF CAPSTONE AND
HEALTHCARE REALTY -- Restrictions on Ownership and Transfer."
56
<PAGE> 64
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma consolidated financial statements give
effect to the Merger using the purchase method of accounting, after giving
effect to the pro forma adjustments described in the accompanying notes. The
unaudited pro forma balance sheet gives effect to the Merger as if it had
occurred on March 31, 1998. The remaining information gives effect to the Merger
as if it had occurred on January 1, 1997. We prepared this information by adding
or combining the historical amounts of each company. This information is
presented for illustrative purposes only and is not necessarily indicative of
the operating results or financial position that would have occurred had the
Merger been consummated at the dates indicated, nor is it necessarily indicative
of the future operating results or financial position of the merged companies.
This information is only a summary and you should read it in conjunction
with the historical financial statements (and related notes) contained in the
annual reports and other information that Healthcare Realty and Capstone have
filed with the Commission. See "WHERE YOU CAN FIND MORE INFORMATION."
57
<PAGE> 65
HEALTHCARE REALTY TRUST INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL
---------------------
HEALTHCARE CAPSTONE PRO FORMA
REALTY CAPITAL ADJUSTMENTS PRO FORMA
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Real estate properties:
Land............................................... $ 62,046 $ 47,945 $ 12,670(1) $ 122,661
Buildings and improvements......................... 438,347 477,918 126,299(1) 1,042,564
Personal property.................................. 4,827 1,264 (1,264)(1) 4,827
Construction in progress........................... 7,278 44,549 3,564(1) 55,391
--------- -------- -------- ----------
512,498 571,676 141,269 1,225,443
Less accumulated depreciation........................ (38,022) (22,743) 22,743(1) (38,022)
--------- -------- -------- ----------
Real estate properties, net................. 474,476 548,933 164,012 1,187,421
Mortgage notes receivable............................ -- 188,630 9,432(1) 198,062
Cash and cash equivalents............................ 13,021 1,808 14,829
Accrued rental income................................ -- 9,013 (9,013)(1) --
Other assets, net.................................... 20,439 22,786 (3,975)(1) 39,250
--------- -------- -------- ----------
Total assets................................ $ 507,936 $771,170 $160,456 $1,439,562
========= ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Senior notes payable............................... $ 90,000 $ -- $ 90,000
Convertible subordinated debentures................ -- 72,952 5,741(1) 78,693
Bank credit facility............................... -- 126,200 36,287(2) 162,487
Mortgage notes payable............................. -- 61,360 1,869(1) 63,229
Accrued expenses and other liabilities............. 8,848 22,516 31,364
--------- -------- -------- ----------
Total liabilities........................... 98,848 283,028 43,897 425,773
--------- -------- -------- ----------
Stockholders' equity:
Preferred stock, $.01 par value.................... 0 3 27(1) 30
Common stock, $.01 par value....................... 207 22 167(1) 396
Additional paid-in capital......................... 440,345 494,356 114,126(1) 1,048,827
Deferred compensation.............................. (11,521) (2,249) 2,249(1) (11,521)
Loans to officers to finance stock purchases....... -- (191) 191(1) --
Cumulative net income.............................. 97,473 72,458 (72,458)(1) 93,473
(4,000)(2)
Cumulative dividends............................... (117,416) (72,897) 72,897(1) (117,416)
--------- -------- -------- ----------
409,088 491,502 113,199 1,013,789
Less: Treasury stock............................... -- (3,360) 3,360(1) --
--------- -------- -------- ----------
Total stockholders' equity.................. 409,088 488,142 116,559 1,013,789
--------- -------- -------- ----------
Total liabilities and stockholders'
equity.................................... $ 507,936 $771,170 $160,456 $1,439,562
========= ======== ======== ==========
</TABLE>
58
<PAGE> 66
HEALTHCARE REALTY TRUST INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED MARCH 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
---------------------
HEALTHCARE CAPSTONE PRO FORMA
REALTY CAPITAL ADJUSTMENTS PRO FORMA
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Master lease rental income......................... $ 9,755 $ 15,488 $ 25,243
Property operating income.......................... 6,820 -- 6,820
Mortgage interest income........................... -- 4,716 4,716
Management fees.................................... 458 -- 458
Interest and other income.......................... 300 433 733
--------- -------- -------- ----------
17,333 20,637 -- 37,970
--------- -------- -------- ----------
EXPENSES:
General and administrative......................... 1,325 1,172 (820)(3) 1,677
Property operating expenses........................ 2,394 1,205 3,599
Interest........................................... 1,783 4,987 295(4) 7,065
Depreciation....................................... 3,142 2,863 1,626(5) 7,631
Amortization....................................... 83 218 (201)(6) 100
--------- -------- -------- ----------
8,727 10,445 900 20,072
--------- -------- -------- ----------
NET INCOME........................................... $ 8,606 $ 10,192 $ (900) $ 17,898
========= ======== ======== ==========
NET INCOME PER SHARE - BASIC......................... $ 0.44 $ 0.42 $ 0.44
========= ======== ==========
NET INCOME PER SHARE - DILUTED....................... $ 0.43 $ 0.42 $ 0.44
========= ======== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC.......... 19,344 20,092 (2,935)(7) 36,501
========= ======== ======== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED........ 19,821 20,349 (3,192)(7) 36,978
========= ======== ======== ==========
FUNDS FROM OPERATIONS................................ $ 11,604 $ 12,347 $ 312(8) $ 24,263
========= ======== ======== ==========
FUNDS FROM OPERATIONS PER SHARE - BASIC.............. $ 0.60 $ 0.53 $ 0.62
========= ======== ==========
FUNDS FROM OPERATIONS PER SHARE - DILUTED............ $ 0.59 $ 0.52 $ 0.61
========= ======== ==========
</TABLE>
59
<PAGE> 67
HEALTHCARE REALTY TRUST INCORPORATED
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL
---------------------
HEALTHCARE CAPSTONE PRO FORMA
REALTY CAPITAL ADJUSTMENTS PRO FORMA
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
REVENUES:
Master lease rental income......................... $ 40,298 $ 46,160 $ 86,458
Property operating income.......................... 14,631 -- 14,631
Mortgage interest income........................... -- 10,148 10,148
Management fees.................................... 1,499 -- 1,499
Interest and other income.......................... 3,368 870 4,238
--------- -------- -------- ----------
59,796 57,178 -- 116,974
--------- -------- -------- ----------
EXPENSES:
General and administrative......................... 3,807 2,902 (2,031)(3) 4,678
Property operating expenses........................ 5,008 1,143 6,151
Interest........................................... 7,969 14,767 1,180(4) 23,916
Depreciation....................................... 11,468 8,782 6,507(5) 26,757
Amortization....................................... 332 703 (636)(6) 399
--------- -------- -------- ----------
28,584 28,297 5,020 61,901
--------- -------- -------- ----------
NET INCOME........................................... $ 31,212 $ 28,881 $ (5,020) $ 55,073
========= ======== ======== ==========
NET INCOME PER SHARE - BASIC......................... $ 1.71 $ 1.76 $ 1.71
========= ======== ==========
NET INCOME PER SHARE - DILUTED....................... $ 1.68 $ 1.75 $ 1.71
========= ======== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC.......... 18,222 15,760 (2,357)(7) 31,625
========= ======== ======== ==========
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED........ 18,572 16,346 (2,943)(7) 31,975
========= ======== ======== ==========
FUNDS FROM OPERATIONS................................ $ 42,337 $ 34,744 $ 735(8) $ 77,816
========= ======== ======== ==========
FUNDS FROM OPERATIONS PER SHARE - BASIC.............. $ 2.32 $ 2.13 $ 2.43
========= ======== ==========
FUNDS FROM OPERATIONS PER SHARE - DILUTED............ $ 2.28 $ 2.11 $ 2.42
========= ======== ==========
</TABLE>
60
<PAGE> 68
HEALTHCARE REALTY TRUST INCORPORATED
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
BALANCE SHEET
(1) Adjustment to reflect: (a) the estimated relative fair value of assets
acquired and liabilities assumed; (b) the elimination of Capstone
stockholders' equity attributable to prior years' net income and dividends;
(c) the elimination of deferred compensation attributable to the Capstone
Restricted Stock redeemed pursuant to the Merger; and (d) the cancellation
of treasury stock pursuant to the Merger, in accordance with the purchase
method of accounting.
Calculation of estimated purchase price (in thousands):
<TABLE>
<S> <C>
LIABILITIES:
Existing Liabilities Assumed.............................. $283,028
Estimated Fair Value Increase In Liabilities.............. 7,610
Estimated Increase in Bank Credit Facilities (Note 2)..... 32,287
--------
Estimated Total Liabilities Assumed....................... 322,925
EQUITY:
Preferred Stock (3,000,000 shares valued at $24.25 per
share)................................................. 72,750
Common Stock (18,893,509 shares valued at $28.375 per
share)................................................. 536,103
Estimated Registration Costs.............................. (152)
--------
Estimated Equity Issued................................... 608,701
--------
Estimated Total Purchase Price.............................. $931,626
========
</TABLE>
Fair values of the real estate properties are based on preliminary
estimates. As a condition to the closing of the Merger, Healthcare Realty will
enter into consulting and non-competition agreements under which three Capstone
directors or officers will receive in the aggregate cash payments of $3.4
million and contingent grants of 600,000 shares of Healthcare Realty Common
Stock, which management of Healthcare Realty believes will protect and enhance
the value of the real estate properties Healthcare Realty is acquiring from
Capstone. The estimated total purchase price does not include the contingent
consideration to be paid in connection with the consulting and non-competition
agreements. Healthcare Realty is in the process of determining fair values on a
property-by-property basis (including the contingent consideration under the
consulting and non-competition agreements) using the present value of future
cash flows. Mortgage notes receivable, convertible subordinated debentures and
mortgage notes payable have been adjusted to estimated fair values based upon
current interest rates.
Estimated allocation of purchase price (in thousands):
<TABLE>
<S> <C>
Cash and Cash Equivalents................................... $ 1,808
Estimated Real Estate Properties............................ 712,945
Estimated Mortgage Notes Receivable......................... 198,062
Estimated Other Assets...................................... 18,811
--------
Estimated Net Assets Acquired............................... $931,626
========
</TABLE>
(2) Adjustment to reflect borrowings under the bank credit facilities required
to fund the amounts listed below (in thousands) in connection with the
Merger. Other net estimated Merger related costs include: (a) financial
advisory fees; (b) professional fees (attorneys, accountants, etc.); (c) the
cash portion of the consulting and non-compete fees; (d) estimated
Healthcare Realty non-recurring charges directly related to the Merger,
which will be charged to Healthcare Realty's earnings within twelve months
of the Merger date. The non-recurring charges have not been reflected in the
pro forma condensed consolidated statement of income.
61
<PAGE> 69
HEALTHCARE REALTY TRUST INCORPORATED
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<S> <C>
Redemption of Restricted Stock and Purchase of Stock
Options................................................... $ 18,926
Other Net Estimated Merger Related Costs.................... 17,361
--------
Net Increase In Bank Credit Facilities...................... $ 36,287
Estimated Non-Recurring Merger Related Charges.............. (4,000)
--------
Net Increase in Bank Credit Facilities Attributable to
Purchase Price............................................ $ 32,287
========
</TABLE>
STATEMENTS OF INCOME
(3) Adjustment to reflect the net reduction in general and administrative
expenses resulting from the: (a) elimination of payroll costs associated
with Capstone employees (none of whom will continue as employees of
Healthcare Realty); (b) elimination of occupancy-related costs associated
with Capstone's corporate office (which will not be retained by Healthcare
Realty); (b) elimination of other costs duplicative of those currently
incurred by Healthcare Realty; and (d) addition of payroll and related costs
for new Healthcare Realty employees required due to the Merger.
(4) Adjustment to reflect the net effect of: (a) the increase in interest
expense calculated by applying a 6.875% annual rate to the increased
borrowings discussed in Note 2 above (a change of 0.125% in this interest
rate would change this adjustment by $45,600 per year or $11,400 per
quarter); and (b) the decrease in interest expense related to adjusting
liabilities assumed to estimated fair value.
(5) Adjustment to reflect the increase in depreciation expense based upon
depreciating the purchase accounting step-up in the basis of depreciable
properties acquired in the Merger, using the straight-line method over 6 and
39-year periods.
(6) Adjustment to eliminate amortization expense attributable to intangible
assets (loan costs, etc.) which have no continuing value and have therefore
been allocated no portion of the purchase price, pursuant to the Merger, net
of amortization of consulting and non-competition agreements entered into in
connection with the Merger.
(7) Adjustment to reflect the effect of the Merger upon weighted average shares
outstanding, calculated by assuming the redemption of the Capstone
Restricted Stock and by applying the Exchange Ratio of .8518 to the
remaining shares of Capstone Common Stock.
62
<PAGE> 70
HEALTHCARE REALTY TRUST INCORPORATED
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
(8) Adjustment to reflect the effect of the Merger upon funds from operations
("FFO") due to: (a) the decrease in general and administrative expenses
(discussed in Note 3); (b) the increase in interest expense (discussed in
Note 4); (c) the decrease in amortization expense (discussed in Note 6); and
(d) the decrease due to conforming Capstone's historical method of
calculating FFO to Healthcare Realty's historical (and continuing) method of
calculating FFO. The following schedule includes calculations of Capstone's
historical FFO under its historical method (the "Historical" columns) and
under Healthcare Realty's historical method (the "Historical, As Adjusted"
columns):
CAPSTONE CAPITAL CORPORATION
FUNDS FROM OPERATIONS
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1998 DECEMBER 31, 1997
---------------------------- ----------------------------
HISTORICAL, AS HISTORICAL, AS
HISTORICAL ADJUSTED HISTORICAL ADJUSTED
---------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
Net Income............................... $10,192 $10,192 $28,881 $28,881
Straight line rents.................... (1,139) (1,139) (3,183) (3,183)
Add:
Depreciation of real estate
assets............................ 2,863 2,863 8,782 8,782
Amortization........................ 218 -- 703 --
Stock-based compensation expense.... 213 -- 116 --
Undeclared preferred stock
dividends......................... -- -- (555) (555)
------- ------- ------- -------
Total Adjustments.............. 2,155 1,724 5,863 5,044
------- ------- ------- -------
Funds from Operations.................... $12,347 $11,916 $34,744 $33,925
Subtract:
Dividends paid on preferred stock... (1,664) (1,664) (1,109) (1,109)
------- ------- ------- -------
Funds from Operations Available to Common
Stockholders -- Basic.................. $10,683 $10,252 $33,635 $32,816
Add
Impact of potential dilutive
securities........................ -- -- 785 785
------- ------- ------- -------
Funds from Operations Available to Common
Stockholders -- Diluted................ $10,683 $10,252 $34,420 $33,601
======= ======= ======= =======
Weighted Average Shares Outstanding......
-- Basic............................... 20,092 20,092 15,760 15,760
-- Diluted............................. 20,349 20,349 16,346 16,346
Funds from Operations per Share
-- Basic............................... $ 0.53 $ 0.51 $ 2.13 $ 2.08
-- Diluted............................. $ 0.52 $ 0.50 $ 2.11 $ 2.06
</TABLE>
63
<PAGE> 71
WHERE YOU CAN FIND MORE INFORMATION
Healthcare Realty has filed with the Commission under the Securities Act a
Registration Statement on Form S-4 that registers the distribution to Capstone
Stockholders of the shares of Healthcare Realty Common Stock and Healthcare
Realty Preferred Stock to be issued in connection with the Merger (collectively,
the "Registration Statement"). The Registration Statement, including the
attached exhibits and schedules, contains additional relevant information about
Healthcare Realty, the Healthcare Realty Common Stock and the Healthcare Realty
Preferred Stock. The rules and regulations of the Commission allows Healthcare
Realty to omit certain information included in the Registration Statement from
this Joint Proxy Statement-Prospectus.
In addition, Healthcare Realty and Capstone file reports, proxy statements
and other information with the Commission under the Securities Exchange Act of
1934. You may read and copy this information at the following locations of the
Commission:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 2054 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates.
The Commission also maintains an Internet world wide web site that contains
reports, proxy statements and other information about issuers, like Healthcare
Realty and Capstone, who file electronically with the Commission. The address of
that site is http://www.sec.gov.
You can also inspect reports, proxy statements and other information about
Healthcare Realty and Capstone at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
The Commission allows Healthcare Realty and Capstone to "incorporate by
reference" information into this Joint Proxy Statement-Prospectus from documents
that Healthcare Realty and Capstone have previously filed with the Commission.
This means that the companies can disclose important information to you by
referring you to another document filed separately with the Commission. These
documents contain important information about the companies and their financial
condition. The information incorporated by reference is considered to be a part
of this Joint Proxy Statement-Prospectus, except for any information that is
superseded by other information that is set forth directly in this document.
This Joint Proxy Statement-Prospectus incorporates by reference the
following documents with respect to Capstone:
(1) Capstone's 1997 Annual Report to Stockholders (only as to the
portions that include Capstone's consolidated financial statements and
notes thereto and management's discussion and analysis of financial
condition and results of operations);
(2) Capstone's Annual Report on Form 10-K for the year ended December
31, 1997;
(3) Capstone's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998;
(4) Capstone's Current Report on Form 8-K, dated June 12, 1998;
(5) The description of Capstone Common Stock contained in Capstone's
Registration Statement on Form 8-A, dated June 21, 1994; and
(6) The description of Capstone Preferred Stock contained in
Capstone's Registration Statement on Form 8-A, dated September 25, 1997.
64
<PAGE> 72
This Joint Proxy Statement-Prospectus incorporates by reference the
following documents with respect to Healthcare Realty:
(1) Healthcare Realty's Annual Report on Form 10-K for the year ended
December 31, 1997;
(2) Healthcare Realty's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998;
(3) Healthcare Realty's Current Report on Form 8-K, dated June 12,
1998; and
(4) The description of Healthcare Realty Common Stock contained in
Healthcare Realty's Registration Statement on Form 8-A, dated April 8,
1993.
Healthcare Realty and Capstone incorporate by reference additional
documents that each may file with the Commission pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 between the date of
this Joint Proxy Statement-Prospectus and the date of the Capstone Special
Meeting and the Healthcare Realty Special Meeting. These documents include
periodic reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form
10-Q and Current Reports on Form 8-K, as well as proxy statements. Healthcare
Realty has supplied all information contained or incorporated by reference in
this Joint Proxy Statement-Prospectus relating to Healthcare Realty, as well as
all pro forma financial information. Capstone has supplied all information
contained or incorporated by reference in this Joint Proxy Statement-Prospectus
relating to Capstone.
You can obtain copies of the documents incorporated by reference in this
Joint Proxy Statement-Prospectus with respect to Healthcare Realty without
charge, excluding any exhibits to those documents unless the exhibit is
specifically incorporated by reference as an exhibit in this Joint Proxy
Statement-Prospectus, by requesting them in writing or by telephone from
Healthcare Realty at the following:
Healthcare Realty Trust Incorporated
3310 West End Avenue, Suite 700
Nashville, Tennessee 37203
Attention: Fredrick M. Langreck
(615) 269-8175
You can obtain copies of the documents incorporated by reference in this
Joint Proxy Statement-Prospectus with respect to Capstone without charge,
excluding any exhibits to those documents unless the exhibit is specifically
incorporated by reference as an exhibit in this Joint Proxy
Statement-Prospectus, by requesting them in writing or by telephone from
Capstone at the following:
Capstone Capital Corporation
1000 Urban Center Drive, Suite 630
Birmingham, Alabama 35242
Attention: Malcolm E. ("Tadd") McVay
(205) 967-2092
If you would like to request documents from Capstone or Healthcare Realty,
please do so by , 1998 to receive them before the Capstone Special
Meeting or the Healthcare Realty Special Meeting. You can also obtain copies of
these documents from the Commission through the Commission's Internet world wide
web site or at the address described above.
You should rely only on the information contained in or incorporated by
reference in this Joint Proxy Statement-Prospectus in considering how to vote
your shares at the Capstone Special Meeting or the Healthcare Realty Special
Meeting. Neither Healthcare Realty nor Capstone has authorized anyone to provide
you with information that is different from the information in this document.
This Joint Proxy Statement-Prospectus is dated , 1998. You should
not assume that the information contained in this document is accurate as of any
date other than that date. Neither the mailing of this Joint Proxy
Statement-Prospectus nor the issuance of Healthcare Realty Common Stock and the
Healthcare Realty Preferred Stock in the Merger shall create any implication to
the contrary.
65
<PAGE> 73
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This Joint Proxy Statement-Prospectus contains certain forward-looking
statements about the financial condition, results of operations and business of
each of our companies and about Healthcare Realty following the consummation of
the Merger. These statements concern the cost savings, revenue enhancements and
other advantages we expect to obtain from the Merger, and the anticipated impact
of the Merger on Capstone's financial performance and earnings estimates for
Healthcare Realty. These statements appear in several sections of this Joint
Proxy Statement-Prospectus, including "SUMMARY," "THE MERGER -- Capstone's
Reasons for the Merger; Recommendation of the Capstone Board," "THE MERGER --
Healthcare Realty's Reasons for the Merger; Recommendation of the Healthcare
Realty Board" and "THE MERGER -- Opinion of Capstone's Financial Advisor" and
"THE MERGER -- Opinion of Healthcare Realty's Financial Advisor." Also, when we
use any of the words "believes," "expects," "anticipates," "intends,"
"estimates," "plans" or similar expressions, we are making forward-looking
statements.
Forward-looking statements are not guarantees of future performance. They
involve risks, uncertainties and assumptions. The future results and stockholder
values of Healthcare Realty and Capstone, and of the combined company, may
differ materially from those expressed in these forward-looking statements. Many
of the factors that could influence or determine actual results are
unpredictable and not within the control of Healthcare Realty or Capstone. In
addition, neither Healthcare Realty nor Capstone intend to, nor are they
obligated to, update these forward-looking statements after this Joint Proxy
Statement-Prospectus is distributed, even if new information, future events or
other circumstances have made them incorrect or misleading as of any future
date. For all of these statements, Healthcare Realty and Capstone claim the
protection of the safe harbor for forward-looking statements provided in the
Private Securities Litigation Reform Act of 1995.
Healthcare Realty has discussed certain factors that may cause its
forward-looking statements not to be realized in its Annual Report for the year
ended December 31, 1997 on Form 10-K. Capstone has discussed certain factors
that may cause its forward-looking statements not to be realized in its Annual
Report for the year ended December 31, 1997 on Form 10-K.
LEGAL MATTERS
The validity of the shares of Healthcare Realty Common Stock and Healthcare
Realty Preferred Stock to be issued to the Capstone Stockholders in the Merger
will be passed upon by Waller Lansden Dortch & Davis, A Professional Limited
Liability Company, Nashville, Tennessee, special counsel to Healthcare Realty.
Certain tax matters concerning the Merger will be passed upon on behalf of
Healthcare Realty by Farris, Warfield & Kanaday PLC, Nashville, Tennessee.
Certain legal matters concerning the Merger will be passed upon on behalf of
Capstone by Sirote & Permutt, P.C., Birmingham, Alabama. Certain matters of
Maryland law will be passed upon on behalf of Healthcare Realty by Brown & Wood
LLP, Washington, D.C., and on behalf of Capstone by Ballard Spahr Andrews &
Ingersoll, LLP, Baltimore, Maryland.
EXPERTS
The consolidated financial statements and schedule of Healthcare Realty
Trust Incorporated at December 31, 1997 and 1996, and for each of the three
years in the period ended December 31, 1997 appearing or incorporated by
reference in the Healthcare Realty Trust Incorporated Annual Report (Form 10-K)
for the year ended December 31, 1997, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon included or
incorporated by reference therein and incorporated herein by reference. Such
consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such reports given upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements and schedules of Capstone Capital
Corporation as of December 31, 1997 and 1996 and for each of the years in the
three-year period ended December 31, 1997, have been incorporated by reference
herein in reliance upon the report of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of such firm as experts in accounting and auditing.
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Annex A
PLAN AND AGREEMENT OF MERGER
DATED AS OF JUNE 8, 1998
by and among
HR ACQUISITION I CORPORATION,
HEALTHCARE REALTY TRUST INCORPORATED,
and
CAPSTONE CAPITAL CORPORATION
<PAGE> 75
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (this "Plan of Merger"), is
entered into as of June 8, 1998, by and among HR ACQUISITION I CORPORATION, a
Delaware corporation ("Buyer"), HEALTHCARE REALTY TRUST INCORPORATED, a Maryland
corporation ("HR"), and CAPSTONE CAPITAL CORPORATION, a Maryland corporation
("Target") (Buyer and Target being sometimes collectively referred to herein as
the "Constituent Entities").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Target, HR and
Buyer have approved the merger of Buyer with and into Target (the "Merger"),
upon the terms and subject to the conditions set forth in this Plan of Merger,
whereby all issued and outstanding shares of (i) Target common stock, par value
$.001 per share (the "Target Common Stock"), and (ii) Target 8 7/8% Series A
Cumulative Preferred Stock, par value $.001 per share (the "Target Series A
Preferred Stock" and, together with the Target Common Stock, the "Target
Stock"), not owned directly or indirectly by Target (other than restricted
shares of Target Common Stock to be redeemed as hereinafter provided), will be
converted into the Merger Consideration (as hereinafter defined); and
WHEREAS, each of Buyer, HR, and Target desires to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and the
mutual representations, warranties, covenants and agreements contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto do hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the
conditions set forth in this Plan of Merger, and in accordance with Section
3-101 et seq. of the Maryland General Corporation Law (the "MGCL") and in
accordance with Sections 251 and 252 of the Delaware General Corporation Law
(the "DGCL"), Buyer shall be merged with and into Target at the Effective Time
(as defined in Section 1.3). Following the Effective Time, the separate
corporate existence of Buyer shall cease and Target shall continue as the
surviving entity (the "Surviving Entity") under the name "HR Acquisition I
Corporation" and shall succeed to and assume all the rights and obligations of
Target and Buyer in accordance with the
<PAGE> 76
MGCL and the DGCL. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time of the Merger, (a) the Surviving Entity shall
possess all assets and property of every description, and every interest
therein, wherever located, and the rights, privileges, immunities, powers,
franchises and authority, of a public as well as of a private nature, of each of
the Constituent Entities, (b) all obligations belonging to or due each of the
Constituent Entities shall be vested in, and become the obligations of, the
Surviving Entity without further act or deed, (c) title to any real estate or
any interest therein vested in either of the Constituent Entities shall not
revert or in any way be impaired by reason of the Merger, (d) all rights of
creditors and all liens upon any property of either of the Constituent Entities
shall be preserved unimpaired, and (e) the Surviving Entity shall be liable for
all of the debts and obligations of each of the Constituent Entities, and any
claim existing, or action or proceeding pending, by or against either of the
Constituent Entities may be prosecuted to judgment with right of appeal, as if
the Merger had not taken place.
Section 1.2 THE CLOSING. The closing of the Merger (the
"Closing") will take place at such time and on such date as is specified by the
parties (the "Closing Date"), which (subject to satisfaction or waiver of the
conditions set forth in Article VII) shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Section 7.1
(other than Section 7.1(d), which shall be satisfied at the Closing Date), at
such location as the parties may agree, unless another date is agreed to in
writing by the parties hereto.
Section 1.3 EFFECTIVE TIME. Subject to the provisions of this
Plan of Merger, the parties shall file articles of merger (the "Articles of
Merger") executed in accordance with Sections 3-109, 3-110 and 1-301 of the MGCL
and a certificate of merger (the "Certificate of Merger") executed in accordance
with Section 103 of the DGCL and shall make all other filings or records
required under the MGCL and the DGCL as soon as practical on or after the
Closing Date. The Merger shall become effective at such time as the Articles of
Merger are accepted for record by the State Department of Assessments and
Taxation of Maryland (the "SDAT") and the Certificate of Merger is accepted for
record by the Delaware Office of the Secretary of State, or at such other time
as Buyer and Target shall agree as specified in the Articles of Merger and the
Certificate of Merger but not exceeding 30 days after the later of the date the
Articles of Merger are accepted for record by the SDAT or the Certificate of
Merger is accepted for record by the Delaware Office of the Secretary of State
(the "Effective Time").
Section 1.4 EFFECT OF MERGER. The Merger shall have the effect
set forth in Section 3-114 of the MGCL and Section 259 of the DGCL.
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ARTICLE II
EFFECT OF THE MERGER ON THE STOCK OF
THE CONSTITUENT ENTITIES; EXCHANGE OF CERTIFICATES
Section 2.1 EFFECT ON STOCK. As of the Effective Time, by
virtue of the Merger and without any action on the part of any holder of any
stock of either of the Constituent Entities:
(a) CANCELLATION OF TREASURY STOCK. Each share of
Target Stock that is owned by Target or by any subsidiary of
Target shall automatically be canceled and retired and shall
cease to exist, and no consideration shall be delivered in
exchange therefor.
(b) CONVERSION OF TARGET COMMON STOCK AND TARGET
SERIES A PREFERRED STOCK. Subject to Section 2.2, each issued
and outstanding share of Target Common Stock (other than
restricted shares of Target Common Stock to be redeemed in
accordance with Section 2.1(c)) and each issued and
outstanding share of Target Series A Preferred Stock
(collectively, the "Exchanging Target Shares") shall be
converted into such number of shares of the common stock, par
value $.01 per share, of HR (the "HR Common Stock"), and
shares of the 8 7/8 % Series A Cumulative Preferred Stock, par
value $.01 per share, of HR (the "HR Preferred Stock") (such
shares of HR Common Stock and HR Preferred Stock being
delivered in connection with the Merger referred to herein as
the "Merger Consideration") in accordance with the following
provisions:
(i) Each issued and outstanding share of
Target Common Stock (other than restricted shares of
Target Common Stock to be redeemed in accordance with
Section 2.1(c) below) shall be converted into .8518
shares of HR Common Stock (the "Common Stock Exchange
Ratio"); and
(ii) Each issued and outstanding share of
Target Series A Preferred Stock, shall be converted
into one share of HR Preferred Stock having
substantially the same rights and preferences as the
Target Series A Preferred Stock (the "Preferred Stock
Exchange Ratio").
As of the Effective Time, all such Exchanging Target Shares
shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder
of a certificate representing any Exchanging Target Shares
shall cease to have any rights with respect thereto, except
the right to receive the Merger Consideration and any cash in
lieu of fractional shares to be issued or paid in
consideration therefor with respect to the Exchanging Target
Shares
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<PAGE> 78
upon surrender of such certificate in accordance with Section
2.2, without interest.
(c) RESTRICTED TARGET SHARES. Immediately prior to
the Effective Time, each outstanding restricted share of
Target Common Stock (whether vested or unvested) shall be
redeemed for cash in an amount of $24.33 per restricted share
of Target Common Stock. Such cash shall be provided by Target
from available cash resources or from Target borrowings. HR
agrees that any such borrowings will be repaid only from cash
flow generated from Target's operations and not from cash
furnished, directly or indirectly, by HR.
(d) STOCK OPTIONS. At the Effective Time, all rights
with respect to each option to purchase Target Common Stock
which is outstanding at the Effective Time, whether or not
then vested or exercisable, shall be purchased by Buyer for
cash in an amount equal to the excess of (i) $24.33 per share
of Target Common Stock over (ii) the stated exercise price of
such option.
(e) 10 1/2% DEBENTURES. On or before the Effective
Time, all of Target's 10 1/2% Convertible Subordinated
Debentures due 2000 (the "10 1/2% Debentures") which are
outstanding at the Effective Time shall remain outstanding in
accordance with the indenture pursuant to which the 10 1/2%
Debentures have been issued and the instruments by which such
10 1/2% Debentures are evidenced, in each case as the same may
have been amended or restated or otherwise modified in
accordance with the terms thereof, and HR shall assume each
and every obligation of Target contained in the indenture.
Each 10 1/2% Debenture shall be convertible into that number
of shares of HR Common Stock equal to the number of shares of
Target Common Stock into which such 10 1/2% Debenture was
convertible immediately prior to the Effective Time,
multiplied by the Common Stock Exchange Ratio; the indentures
and instruments pursuant to which such 10 1/2% Debentures have
been issued shall be amended or supplemented to provide for
the conversion of such 10 1/2% Debentures into HR Common
Stock, and such amendments shall provide for adjustments to
the conversion price for events subsequent to the Effective
Time that will be as nearly equal as may be practicable to the
conversion adjustments which currently apply to the 10 1/2%
Debentures.
(f) 6.55% DEBENTURES. All of Target's 6.55%
Convertible Subordinated Debentures due 2002 (the "6.55%
Debentures")which are outstanding at the Effective Time shall
remain outstanding in accordance with the indenture pursuant
to which the 6.55% Debentures have been issued and the
instruments by which such 6.55% Debentures are evidenced, in
each case as the same may have
4
<PAGE> 79
been amended or restated or otherwise modified in accordance
with the terms thereof, and HR shall assume each and every
obligation of Target contained in the indenture. Each 6.55%
Debenture shall be convertible into that number of shares of
HR Common Stock equal to the number of shares of Target
Common Stock into which such 6.55% Debenture was convertible
immediately prior to the Effective Time, multiplied by the
Common Stock Exchange Ratio. The indentures and instruments
pursuant to which such 6.55% Debentures into HR Common
Stock, and such amendments shall provide for adjustments to
the conversion price for events subsequent to the Effective
Time that will be as nearly equal as may be practicable to
the conversion adjustments which currently apply to the
6.55% Debentures.
(g) ANTI-DILUTION PROVISIONS. If after the date
hereof and prior to the Effective Time, the Board of Directors
of HR shall have declared a stock split (including a reverse
split) of HR Common Stock or a dividend payable in HR Common
Stock, or any other distribution of securities or dividend
payable in securities to holders of HR Common Stock with
respect to their HR Common Stock (including such a
distribution or dividend made in connection with a
recapitalization, reclassification, merger, consolidation,
reorganization or similar transaction), then (i) the Common
Stock Exchange Ratio shall be appropriately adjusted to
reflect such stock split or dividend or other distribution of
securities and (ii) if such stock split, dividend or
distribution has a record date prior to the Effective Time,
then the number of shares of HR Common Stock to be issued
pursuant to Section 2.1(b)(i) shall be appropriately adjusted
to reflect such stock split, dividend or other distribution of
securities.
Section 2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Prior to the Effective Time,
Buyer shall enter into an agreement with such bank or trust
company as may be designated by Buyer (the "Exchange Agent")
providing that Buyer shall deposit with the Exchange Agent as
of the Effective Time, for the benefit of the holders of
Exchanging Target Shares, for exchange in accordance with this
Article II, through the Exchange Agent, certificates
representing the Merger Consideration (the Merger
Consideration together with any distributions or dividends
with respect to such Merger Consideration with a record date
after the Effective Time and any cash to be paid in lieu of
fractional shares, being hereinafter referred to as the
"Exchange Fund").
(b) EXCHANGE PROCEDURES. As soon as reasonably
practicable after the Effective Time, the Surviving Entity
shall cause
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<PAGE> 80
the Exchange Agent to mail to each holder of record of a
certificate or certificates which immediately prior to the
Effective Time represented outstanding shares of Target
Stock (the "Certificates") whose shares were converted into
the Merger Consideration pursuant to Section 2.1, (i) a
letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the
Certificates shall pass only upon delivery of the
Certificates, to the Exchange Agent and shall be in such
form and have such other provisions as Buyer may reasonably
specify), and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by Buyer, together with such
letter of transmittal, duly executed, and such other
documents as may reasonably be required by the Exchange
Agent, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing that
number of whole shares of HR Common Stock or HR Preferred
Stock into which the shares of Target Stock held by such
holder have been converted pursuant to the provisions of
this Article II, and the Certificate so surrendered shall
forthwith be canceled. In the event of a transfer of
ownership of shares of Exchanging Target Shares which are
not registered in the transfer records of Target, delivery
of the Merger Consideration may be made to a person other
than the person in whose name the Certificate so surrendered
is registered, if such Certificate shall be properly
endorsed or otherwise in proper form for transfer and the
person requesting such delivery shall pay any transfer or
other taxes required by reason of delivery of the Merger
Consideration to a person other than the registered holder
of such Certificate or establish to the satisfaction of
Buyer that such tax has been paid or is not applicable.
Until surrendered as contemplated by this Section 2.2, each
Certificate shall be deemed at any time after the Effective
Time to represent only that number of whole shares of HR
Common Stock or HR Preferred Stock into which the shares of
Target Stock represented by such Certificate have been
converted pursuant to the provisions of this Article II and
the right to receive upon such surrender the amount of cash
payable in lieu of any fractional shares which the holder
thereof has the right to receive in respect of such
Certificate pursuant to this Article II. No interest will be
paid or will accrue on any cash payable in lieu of any
fractional shares to holders of Certificates pursuant to the
provisions of this Article II. Former stockholders of record
of Target shall be entitled to vote after the Effective Time
at any meeting of HR shareholders the number of shares of HR
Common Stock or of HR Preferred Stock, as applicable, into
which their respective shares of Target Common Stock or
Target Series A Preferred Stock are converted, regardless of
whether such holders have exchanged their
6
<PAGE> 81
Certificates for certificates representing shares of HR
Common Stock or of HR Preferred Stock, as applicable, in
accordance with this Section 2.2.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES.
No dividends or other distributions with respect to the Merger
Consideration shall be paid to the holder of any unsurrendered
Certificate with respect to the shares of HR Common Stock or
HR Preferred Stock represented thereby until the surrender of
such Certificate in accordance with this Article II. Following
surrender of any such Certificate, there shall be paid to the
holder of the certificate representing whole shares of HR
Common Stock or HR Preferred Stock issued in exchange
therefor, without interest, (i) at the time of such surrender,
the amount of any cash payable to such holder pursuant to
Section 2.2(e) and the amount of dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of HR
Common Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and with
a payment date subsequent to such surrender payable with
respect to such whole shares of HR Common Stock.
(d) NO FURTHER OWNERSHIP RIGHTS IN EXCHANGING TARGET
SHARES. All shares of HR Common Stock or HR Preferred Stock
issued upon the surrender for exchange of Certificates in
accordance with the terms of this Article II (including any
cash paid pursuant to Section 2.1, 2.2(c) or 2.2(e)) shall be
deemed to have been issued (and paid) in full satisfaction of
all rights pertaining to the Exchanging Target Shares
theretofore represented by such Certificates. If, after the
Effective Time, Certificates are presented to the Surviving
Entity or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Article II, except
as otherwise provided by law.
(e) NO FRACTIONAL SHARES. No certificates or scrip
representing fractional shares of HR Common Stock or HR
Preferred Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any rights of
a shareholder of HR. Notwithstanding any other provision of
this Plan of Merger, each holder of Exchanging Target Shares
exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of HR Common Stock
or HR Preferred Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu
thereof, cash (without
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<PAGE> 82
interest) in an amount equal to such fractional part of a
share of HR Common Stock multiplied by $28.5625.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the
Exchange Fund which remains undistributed to the holders of
the Certificates six months after the Effective Time shall be
delivered to Buyer, on demand, and any holders of the
Certificates who have not theretofore complied with this
Article II shall thereafter look only to Buyer for payment of
their claim for Merger Consideration and any dividends or
distributions with respect to HR Common Stock.
(g) NO LIABILITY. None of Buyer, HR, Target or the
Exchange Agent shall be liable to any person in respect of any
shares of HR Common Stock (or dividends or distributions with
respect thereto) or cash from the Exchange Fund delivered to a
public official pursuant to any applicable abandoned property,
escheat or similar law. If any Certificates shall not have
been surrendered prior to seven years after the Effective Time
(or immediately prior to such earlier date on which any Merger
Consideration would otherwise escheat to or become the
property of any governmental entity), any such Merger
Consideration shall, to the extent permitted by applicable
law, become the property of the Surviving Entity, free and
clear of all claims or interest of any person previously
entitled thereto.
(h) INVESTMENT OF EXCHANGE FUND. The Exchange Agent
shall invest any cash included in the Exchange Fund in deposit
accounts or short-term money market instruments, as directed
by Buyer, on a daily basis. Any interest and other income
resulting from such investments shall be paid to Buyer.
Section 2.3 CERTIFICATE OF INCORPORATION OF THE SURVIVING
ENTITY. The Certificate of Incorporation of Buyer, effective as of the Effective
Time, shall become the Certificate of Incorporation of the Surviving Entity from
and after the Effective Time and until thereafter amended as provided by law.
Section 2.4 BYLAWS OF THE SURVIVING ENTITY. The Bylaws of
Buyer shall be the Bylaws of the Surviving Entity from and after the Effective
Time and until thereafter altered, amended or repealed in accordance with the
DGCL, the Certificate of Incorporation of Buyer and said Bylaws.
Section 2.5 DIRECTORS. The Board of Directors of Buyer at the
Effective Time shall, from and after the Effective Time, be the Board of
Directors of the Surviving Entity until their successors have been duly elected
or appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Entity's Certificate of Incorporation and
applicable law.
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Section 2.6 OFFICERS. The officers of Buyer at the Effective
Time shall, from and after the Effective Time, be the officers of the Surviving
Entity until their successors have been duly elected or appointed and qualified
or until their earlier death, resignation or removal in accordance with the
Surviving Entity's Certificate of Incorporation and Bylaws.
Section 2.7 ASSETS, LIABILITIES. At the Effective Time, the
assets, liabilities, reserves and accounts of each of the Constituent Entities
shall be taken upon the books of the Surviving Entity at the amounts at which
they respectively shall be carried on the books of the Constituent Entities
immediately prior to the Effective Time, except as otherwise set forth in this
Plan of Merger and subject to such adjustments, or elimination of intercompany
items, as may be appropriate in giving effect to the Merger in accordance with
generally accepted accounting principles.
Section 2.8 TAX TREATMENT. The Constituent Entities
acknowledge that for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization under the provisions of Section 368(a)(2)(E)
of the Internal Revenue Code of 1986, as amended (the "Code").
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF TARGET
Target represents and warrants to Buyer and HR as follows (and
for purposes of this Article III, all references to "Target" shall be deemed to
include all Target Subsidiaries (as hereinafter defined) unless the context
otherwise requires):
Section 3.1 ORGANIZATION AND QUALIFICATION. Each of Target and
the Target Subsidiaries (as defined below in Section 3.3) is duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation, if a corporation, and is legally formed and validly existing
under the laws of the jurisdiction of its organization, if a trust, association,
partnership, limited liability company or business organization, and each has
the requisite corporate, trust or organizational power and authority to own,
lease and operate its assets and properties and to carry on its business as it
is now being conducted. Target and each Target Subsidiary is registered or
qualified to do business and is in good standing in each jurisdiction in which
the properties owned, leased or operated by it or the nature of the business
conducted by it makes such registration or qualification necessary, except where
the failure to be so registered or qualified and in good standing will not have
and would not reasonably be expected to have a material adverse effect (as
defined in Section 9.10 below) on Target. True, accurate and complete copies of
the charter and bylaws, if a corporation, and the partnership agreements or
other agreements and organizational documents, if a trust,
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<PAGE> 84
association, partnership, limited liability company or business organization, of
Target and each Target Subsidiary, in each case as in effect on the date hereof,
including all amendments thereto, have heretofore been delivered to Buyer.
Section 3.2 CAPITALIZATION.
(a) The authorized stock of Target consists of (i)
50,000,000 shares of Target Common Stock, and (ii) 10,000,000
shares of Target Preferred Stock, of which 3,450,000 shares
are classified as Target Series A Preferred Stock. As of the
date of this Plan of Merger, (i) 22,286,650 shares (including
99,900 restricted shares) of Target Common Stock were issued
and outstanding and (ii) 3,000,000 shares of Target Series A
Preferred Stock were issued and outstanding, and (iii) no
other shares of Target Preferred Stock were issued and
outstanding. All of the issued and outstanding shares of
Target Common Stock and Target Series A Preferred Stock are
validly issued and are fully paid, nonassessable and none have
been issued in violation of any preemptive rights of current
or former shareholders of Target. As of the date of this Plan
of Merger, Target holds 140,000 shares of Target Common Stock
in its treasury.
(b) Except as set forth on Exhibit 3.2 to the
Disclosure Schedule delivered by Target to Buyer
simultaneously with the execution and delivery of this Plan of
Merger (the "Target Disclosure Schedule"), all of the issued
and outstanding shares of stock of each Target Subsidiary is
owned by Target, free and clear of all liens, charges,
encumbrances, equities or claims and all of the issued and
outstanding shares of each Target Subsidiary are fully paid
and nonassessable. None of the outstanding shares of capital
stock of Target Subsidiaries has been issued in violation of
any preemptive rights of current or former shareholders of the
Target Subsidiaries.
(c) Except as set forth on Exhibit 3.2 to the Target
Disclosure Schedule or otherwise disclosed in the Target
Annual Report on Form 10-K for the fiscal year ended December
31, 1997, (i) there are no options, warrants or similar rights
granted, or debentures issued, by Target or any Target
Subsidiary or any other agreement to which Target or any
Target Subsidiary is a party providing for the issuance or
sale by it of any additional securities which would remain in
effect after the Effective Time, and (ii) there are no voting
trusts, proxies or other agreements or understandings to which
Target is a party or is bound with respect to the voting of
any shares of stock of Target or any Target Subsidiary.
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<PAGE> 85
(d) Except as set forth on Exhibit 3.2 to the Target
Disclosure Schedule, there is no liability for dividends
declared or accumulated but unpaid with respect to any of the
shares of Target Common Stock or Target Series A Preferred
Stock.
Section 3.3 SUBSIDIARIES. Attached to the Target Disclosure
Schedule as Exhibit 3.3 is a list of all subsidiaries of Target (each a "Target
Subsidiary" and collectively, the "Target Subsidiaries") and their respective
states of incorporation or formation. Except as set forth on Exhibit 3.3 to the
Target Disclosure Schedule, neither Target nor any Target Subsidiary owns any
stock or other equity interests in, and does not control, directly or
indirectly, any other corporation, partnership, joint venture, limited liability
company, association or business organization. Except for Target Subsidiaries
which are limited partnerships or limited liability companies, each Target
Subsidiary is a "qualified REIT subsidiary" under Section 856 of the Code.
Except as set forth on Exhibit 3.3 to the Target Disclosure Schedule, neither
Target nor any Target Subsidiary is, or has been within the two years
immediately preceding the date of this Plan of Merger, a subsidiary or division
of another corporation (except Target), nor has Target or any Target Subsidiary
during such time owned, directly or indirectly, any shares of HR Common Stock.
Section 3.4 POWER AND AUTHORITY. Subject to the satisfaction
of the conditions precedent set forth herein, Target (a) has the corporate power
to execute, deliver and perform this Plan of Merger and all agreements and other
documents executed and delivered or to be executed and delivered by it pursuant
to this Plan of Merger, and (b) has taken all action required by its Charter,
Bylaws or otherwise, to authorize the execution, delivery and performance of
this Plan of Merger and such related documents. The execution and delivery of
this Plan of Merger has been approved by the Board of Directors of Target. This
Plan of Merger has been duly executed and delivered by Target and, assuming the
receipt of required stockholder and regulatory approvals and further assuming
that this Plan of Merger constitutes a valid and binding obligation of Buyer and
HR, constitutes a valid and binding obligation of Target, enforceable against
Target in accordance with its terms.
Section 3.5 NO VIOLATIONS. Except as set forth on Exhibit 3.5
to the Target Disclosure Schedule, the execution and delivery of this Plan of
Merger does not and, subject to the receipt of required stockholder approvals
(as set forth in Section 3.17) and regulatory approvals (as set forth in Section
3.6) and any other required third-party consents or approvals, the consummation
of the Merger will not, violate any provision of Target's Charter or Bylaws, or
any provisions of, or result in the acceleration of any obligation under, result
in the creation of any lien, charge, encumbrance or claim on any property or
assets of Target or Target Subsidiaries under any material mortgage, lien,
lease, agreement, instrument, order, arbitration award, judgment or decree to
which Target or any Target Subsidiary is a party, or by which it is bound, or
violate any restrictions of any kind
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to which it is subject which, if violated or accelerated, would have a material
adverse effect on Target.
Section 3.6 CONSENTS. Except for (i) the filing of the
Registration Statement and the Joint Proxy Statement (in each case as defined in
Section 6.2 below) with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Act of 1933, as amended (the "Securities Act"), and
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the
declaration of the effectiveness thereof by the SEC and filings with various
state blue sky authorities, (ii) the acceptance for record of the Articles of
Merger by the SDAT and by the Delaware Office of the Secretary of State in
connection with the Merger, (iii) any required filings with or approvals from
applicable state environmental authorities and (iv) any required filings with or
approvals from applicable state health care regulation and licensing authorities
(the filings and approvals referred to in clauses (i) through (iv) being
collectively referred to as the "Target Required Statutory Approvals"), no
declaration, filing or registration with, or notice to, or authorization,
consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Plan of Merger by Target or the
consummation by Target of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in the
aggregate, have a material adverse effect on Target. No filing or notice under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") is
required in connection with the execution and delivery of this Plan of Merger or
the consummation of the transactions contemplated hereby.
Section 3.7 TARGET PUBLIC INFORMATION. Target has heretofore
furnished Buyer with a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by it with the SEC
since January 1, 1997 (as any such documents have been amended since the time of
their original filing, the "Target SEC Documents"), which are all of the
documents (other than preliminary materials) that it was required to file from
such date through the date of this Plan of Merger. As of their respective dates,
the Target SEC Documents did not contain any untrue statements of material facts
or omit to state material facts required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As of their respective dates, the Target SEC Documents
complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations promulgated
under such statutes. The financial statements contained in the Target SEC
Documents, together with the notes thereto, have been prepared in accordance
with generally accepted accounting principles consistently followed throughout
the periods indicated (except, in the case of the unaudited financial
statements, as permitted by Form 10-Q), reflect all known liabilities of Target
required to be stated therein, including all known contingent liabilities as of
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the end of each period reflected therein, and present fairly the financial
condition of Target at said date and the consolidated results of operations and
cash flows of Target for the periods then ended. The consolidated balance sheet
of Target at December 31, 1997 included in the Target SEC Documents is herein
sometimes referred to as the "Target Balance Sheet." The consolidated financial
statements of Target at December 31, 1997 included in the Target SEC Documents
are herein sometimes referred to as the "Target Financial Statements."
Section 3.8 LEGAL PROCEEDINGS. Except as disclosed in the
Target SEC Documents or on Exhibit 3.8 to the Target Disclosure Schedule and,
except for actions in the ordinary course of business against space tenants for
breaches of space leases that either individually or in the aggregate will not
have a material adverse effect on Target, there is no material litigation,
governmental investigation or other proceeding pending or, to the best knowledge
of Target, threatened against or relating to Target, any Target Subsidiary, or
their respective properties or businesses or the transactions contemplated by
this Plan of Merger and, to the best knowledge of Target, no basis for any such
action exists.
Section 3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except as
disclosed on Exhibit 3.9 to the Target Disclosure Schedule, neither Target nor
any Target Subsidiary had, at December 31, 1997, and has not incurred since that
date, any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of any nature (other than ordinary and recurring operating expenses),
except (a) liabilities, obligations or contingencies which are accrued or
reserved against in the Target Financial Statements or reflected in the notes
thereto and (b) liabilities, obligations or contingencies which (i) would not,
in the aggregate, have, or be reasonably expected to have, a material adverse
effect on Target, or (ii) have been discharged or paid in full prior to the date
hereof or will be discharged or paid in full prior to the Effective Time.
Section 3.10 CONTRACTS, ETC. Except as set forth on Exhibit
3.10 to the Target Disclosure Schedule:
(a) each material contract, lease, agreement and
arrangement to which Target or any Target Subsidiary is a
party is legally valid and binding in accordance with its
terms and in full force and effect. To the best knowledge of
Target, no party is in material default thereunder, and no
event has occurred which, but for the lapse of time or the
giving of notice, or both, would constitute a default
thereunder, except, in each case, where the invalidity of such
lease, contract, agreement or arrangement or the default or
breach thereunder or thereof would not, individually or in the
aggregate, have a material adverse effect on Target;
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(b) no contract or agreement to which Target or any
Target Subsidiary is a party will, by its terms, terminate as
a result of the transaction contemplated hereby or require any
consent from any obligor thereto in order to remain in full
force and effect immediately after the Effective Time, except
for contracts or agreements which, if terminated, would not
have a material adverse effect on Target; and
(c) neither Target nor any Target Subsidiary has
granted any right of first refusal or similar right in favor
of any third party with respect to any material portion of its
properties or assets or entered into any noncompetition
agreement or similar agreement restricting its ability to
engage in any business in any location.
Section 3.11 SUBSEQUENT EVENTS. Except as set forth on Exhibit
3.11 to the Target Disclosure Schedule or disclosed in the Target SEC Documents,
Target has not, since the date of the last-filed Target SEC Document:
(a) suffered any material adverse change;
(b) paid or satisfied any material obligation or
liability (absolute, accrued, contingent or otherwise) other
than (i) liabilities shown in the Target Financial Statements
or (ii) liabilities incurred since the date of the last-filed
Target SEC Document in the ordinary course of business, which
payment or satisfaction would have a material adverse effect
on Target;
(c) increased or established any reserve for taxes or
any other liability on its books or otherwise provided
therefor which would have a material adverse affect on Target,
except as may have been required due to income or operations
of Target since the date of the last-filed Target SEC
Document;
(d) sold, transferred, mortgaged, pledged or
subjected to any lien, charge or other encumbrance any of its
assets which are material to its consolidated business or
financial condition, other than in the ordinary course of
business;
(e) granted any material increase in salary payable
or to become payable by Target to any officer or employee,
consultant or agent (other than merit increases in the
ordinary course of business consistent with past practice), or
by means of any bonus or pension plan, contract or other
commitment, increased in any material respect the compensation
of any officer, employee, consultant or agent;
(f) except for this Plan of Merger and any other
agreement executed and delivered pursuant hereto, entered into
any material
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transaction other than in the ordinary course of business or
permitted under other Sections hereof;
(g) changed its authorized or issued capital stock;
granted any stock option, warrant or right to purchase of
shares of its capital stock; issued any security convertible
into its capital stock; granted any registration rights with
respect to any securities issued by Target; purchased,
redeemed, or otherwise acquired any securities issued by
Target; or declared or paid any dividend or other distribution
or payment in respect of shares of its capital stock, except
for payment of any dividends consistent with past practice;
(h) amended Target's Articles of Incorporation or
ByLaws;
(i) adopted or increased any profit sharing, bonus,
deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any
employees of Target; and
(j) entered into any agreement or understanding,
whether or not in writing, to do, or the result of which would
cause, any of the foregoing.
Section 3.12 TAXES. Except as set forth on Exhibit 3.12 to the
Target Disclosure Schedule:
(a) Target (i) has duly filed with the appropriate
governmental authorities all Tax Returns (as hereinafter
defined) required to be filed by it for all periods ending on
or prior to the Effective Time, and such tax returns are true,
correct and complete in all material respects, (ii) has duly
paid in full or made adequate provision for the payment of all
Taxes (as hereinafter defined) for all periods ending at or
prior to the Effective Time (whether or not shown on any Tax
Return), and (iii) has not filed for an extension to file any
Tax Return not yet filed. No claim has been made by any
authority in a jurisdiction where Target or any Target
Subsidiary does not file a Tax Return that Target or any
Target Subsidiary is or may be subject to tax in such
jurisdiction. No waivers of statutes of limitation have been
given by or requested with respect to any Taxes. Target has
not agreed to any extension of time with respect to any Tax
deficiency. The liabilities and reserves for Taxes reflected
in the Target Balance Sheet are adequate to cover all Taxes
for all periods ending on or prior to December 31, 1997 and
there are no liens for Taxes upon any property or asset of
Target, except for liens for Taxes not yet due. Target is not
a party to any agreement providing for the allocation or
sharing of Taxes with any entity except for certain of the
Target Leases and Target Mortgage Loans (in each case as
hereinafter defined) which provide
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that the lessee or mortgagor thereunder shall pay all taxes
assessed with respect to the Target Property (as hereinafter
defined) demised under such Target Leases or securing such
Target Mortgage Loans. Target has not, with regard to any
assets or property held, acquired or to be acquired by it,
filed a consent to the application of Section 341(f) of the
Code. Target has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid
or owing to any employee, independent contractor, creditor,
stockholder, or other third party. Target has or will have,
by the Effective Time, received cash sufficient to satisfy
the requirements of Section 857(a) and Section 857(b)(3)(A)
of the Code and any applicable excise taxes relating to the
operation of Target for the taxable years of Target up to
the Effective Time.
(b) Target has not been notified that any tax returns
of Target or any Target Subsidiary are currently under audit
by the IRS or any state or local tax agency.
(c) Target has not been a member of any affiliated or
combined group of companies that files a consolidated,
affiliated, or other combined group Tax Return and Target has
no liability for the Taxes of any person under Treasury
Regulations 1.1502-6 (or any similar provision of non-federal
tax law) as a transferee or successor, by contract, or
otherwise, except for the Target Subsidiaries.
(d) For purposes of this Plan of Merger, the term
"Taxes" shall mean all taxes, charges, fees, levies or other
assessments, including gross receipts, excise, property,
sales, withholding, social security, occupation, use, service,
service use, license, payroll, franchise, transfer and
recording taxes, fees and charges, imposed by the United
States, or any state, local or foreign government or
subdivision or agency thereof whether computed on a separate,
consolidated, unitary, combined or any other basis; and such
term shall include any interest, fines, penalties or
additional amounts attributable or imposed or with respect to
any such taxes, charges, fees, levies or other assessments,
and the term "Tax Return" shall mean any return, report or
other document or information required to be supplied to a
taxing authority in connection with Taxes.
Section 3.13 COMMISSIONS AND FEES. Except as set forth on
Exhibit 3.13 to the Target Disclosure Schedule, there are no valid claims for
brokerage commissions or finder's or similar fees in connection with the
transactions contemplated by this Plan of Merger which may be now or hereafter
asserted against Target resulting from any action taken by Target or its
stockholders, officers or directors, or any of them.
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Section 3.14 EMPLOYEE BENEFIT PLANS; EMPLOYMENT MATTERS.
Except as described in the Target SEC Documents or set forth on Exhibit 3.14 to
the Target Disclosure Schedule, Target has neither established nor maintains nor
is obligated to make contributions to or under or otherwise participate in (i)
any bonus or other type of incentive compensation plan, program, agreement,
policy, commitment, contract or arrangement (whether or not set forth in a
written document), (ii) any pension, profit-sharing, retirement or other plan,
program or arrangement, or (iii) any other employee benefit plan, fund or
program, including, but not limited to, those described in Section 3(3) of the
Employee Retirement Income Security Act of 1976, as amended ("ERISA"). All such
plans (individually, a "Plan" and collectively, the "Plans") have been operated
and administered in all material respects in accordance with, as applicable,
ERISA, the Code, Title VII of the Civil Rights Act of 1964, as amended, the
Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act of
1967, as amended, and the related rules and regulations adopted by those federal
agencies responsible for the administration of such laws. No act or failure to
act by Target has resulted in a "prohibited transaction" (as defined in ERISA)
with respect to the Plans that is not subject to a statutory or regulatory
exception. No "reportable event" (as defined in ERISA) has occurred with respect
to any of the Plans which is subject to Title IV of ERISA. Target has not
previously made, is not currently making, and is not obligated in any way to
make, any contributions to any multi-employer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980.
Section 3.15 COMPLIANCE WITH LAWS IN GENERAL. Except as set
forth on Exhibit 3.15 to the Target Disclosure Schedule or disclosed in the
Target SEC Documents, neither Target nor any Target Subsidiary, nor (to Target's
best knowledge) any of Target's borrowers or lessees, has received any notices
of material violations of any federal, state or local laws, regulations or
ordinances relating to its business and operations, and no notice of any pending
inspection or violation of any such law, regulation or ordinance has been
received by Target or any Target Subsidiary which, if it were determined that a
violation had occurred, would have a material adverse effect on Target.
Section 3.16 LICENSES. Target and the Target Subsidiaries,
and, to the best knowledge of Target, their respective borrowers and lessees,
hold all licenses, permits, certificates and other regulatory approvals
(collectively, the "Licenses") which are needed or required by law with respect
to their businesses, operations and facilities as currently conducted, except
for permits, licenses, franchises, variances, exemptions, orders,
authorizations, consents and approvals the absence of which, alone or in the
aggregate, would not have a material adverse effect on Target. Except as set
forth on Exhibit 3.16 to the Target Disclosure Schedule and subject to
compliance with applicable securities laws, the consummation of the Merger will
not violate any law or regulation to which Target is subject which, if violated,
would have a material adverse effect on Target. Except for routine notices
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to state authorities that may be required upon a change of control of assisted
living facilities, nursing homes or inpatient rehabilitation hospitals and
except as set forth on Exhibit 3.16 to the Target Disclosure Schedule, Target
and the Target Subsidiaries and, to the best knowledge of Target, each of their
borrowers and lessees (i) has duly and currently filed all reports and other
information required to be filed with any federal, state or local governmental
or regulatory authority in connection with the Licenses, (ii) is not in
violation of the terms of any License, except for delays in filing reports or
violations which, alone or in the aggregate, would not have a material adverse
effect on Target, and (iii) is using and occupying each of the Target Properties
in a manner that complies with all applicable codes and zoning laws and
regulations, except where the failure to so comply would not have, or would not
be reasonably expected to have, a material adverse effect on Target.
Section 3.17 VOTE REQUIRED. The affirmative vote of the
holders of two-thirds of the outstanding shares of the Target Common Stock
entitled to vote thereon and the affirmative vote of the holders of two-thirds
of the outstanding shares of the Target Series A Preferred Stock are the only
votes of the holders of any class or series of Target equity securities
necessary to approve this Plan of Merger, the Merger and the transactions
contemplated hereby.
Section 3.18 CERTAIN INDEBTEDNESS. Except as disclosed on
Exhibit 3.18 to the Target Disclosure Schedule, neither Target nor any Target
Subsidiary is indebted for money borrowed, either directly or indirectly, from
any of its officers, directors, or any Affiliate (as defined below), in any
amount whatsoever; nor are any of its officers, directors, or Affiliates
indebted for money borrowed from Target or any Target Subsidiary, nor are there
any transactions of a continuing nature between Target or any Target Subsidiary
and any of its officers, directors, or Affiliates (other than by or through the
regular employment thereof by Target) not subject to cancellation which will
continue beyond the time the Merger becomes effective, including use of Target's
or any Target Subsidiary's assets for personal benefit with or without adequate
compensation. As used herein, the term "Affiliate" shall mean any Person (as
defined below) that, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with, the Person
specified. As used in the foregoing definition, the term (i) "control" shall
mean the power through the ownership of voting securities, contract, or
otherwise to direct the affairs of another Person and (ii) "Person" shall mean
an individual, firm, trust, association, corporation, limited liability company,
partnership, government (whether federal, state, local or other political
subdivision, or any agency or bureau of any of them) or other entity.
Section 3.19 NYSE LISTING. Each share of the Target Common
Stock and the Target Series A Preferred Stock is, and immediately prior to the
Effective Time will be, listed on the NYSE.
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Section 3.20 TARGET OWNERSHIP OF HR COMMON STOCK. Target is
not, and its "affiliates" and "associates" collectively are not, and will not be
as of the Effective Time, the "beneficial owner" (as such terms are defined in
rules and regulations under the Securities Act, the Exchange Act, and the MGCL)
of one percent or more of the outstanding shares of HR Common Stock.
Section 3.21 REIT QUALIFICATION. At all times during its
existence, Target has been, and as of the Effective Time Target will be,
organized in conformity with the requirements for qualification and, as of the
date hereof for all taxable periods has qualified, as a "real estate investment
trust" under the Code and the rules and regulations thereunder. Target has at
all times during its existence (i) met the 75%, 95% and (through the tax year
ended December 31, 1997) 30% income tests set forth in Section 856 of the Code,
(ii) met the 75% and 25% asset tests set forth in Section 856 of the Code, (iii)
distributed dividends to its stockholders at least equal to the 95% requirements
of Section 857 of the Code, and (iv) been in compliance with Section 856(c)(5)
of the Code.
Section 3.22 TITLE TO PROPERTIES. Target has good title to all
real property owned or leased by it (individually, a "Target Property" and
collectively, the "Target Properties"), and good title to all personal property
owned by it which is material to its business, in each case free and clear of
all liens, encumbrances, claims, security interests and defects, other than (i)
those items disclosed on Exhibit 3.22 to the Target Disclosure Schedule, (ii)
the Target Mortgages (as hereinafter defined), and (iii) those liens,
encumbrances, claims, security interests and defects which would not, either
individually or in the aggregate, have a material adverse effect on any Target
Property (including the present maintenance, operation, occupancy or use
thereof) (collectively, "Permitted Target Encumbrances").
Section 3.23 TITLE INSURANCE.
(a) Except as set forth on Exhibit 3.23 to the Target
Disclosure Schedule, (x) an owner's policy of title insurance
issued by a nationally recognized title insurance company in a
form and containing coverages customarily approved and
required by institutional investors has been obtained for each
Target Property, and (y) each owner's policy of title
insurance insures the fee simple or leasehold ownership
interest of Target or the appropriate Target Subsidiary in
each Target Property subject only to Permitted Target
Encumbrances and is in an amount at least equal to the sum of
(i) the cost of the acquisition of such Target Property and
(ii) any subsequent cost of the construction and installation
of the improvements made by Target located on such Target
Property (measured at the time of such construction).
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(b) Except as set forth on Exhibit 3.23 to the Target
Disclosure Schedule, a mortgagee's policy of title insurance
issued by a nationally recognized title insurance company in a
form and containing coverages customarily approved and
required by institutional investors and insuring title in the
priority listed on Exhibit 3.23 to the Target Disclosure
Schedule has been obtained for each Target Mortgage Loan (as
hereinafter defined). Each mortgagee's policy of title
insurance insures the mortgage interest of Target or the
appropriate Target Subsidiary in the real property encumbered
by the Target Mortgage Loan and is in an amount at least equal
to the amount of the Target Mortgage Loan.
Section 3.24 ENVIRONMENTAL MATTERS. Except as disclosed on
Exhibit 3.24 to the Target Disclosure Schedule, (a) all of the Target Properties
and any of the real properties encumbered by a Tenant Mortgage Loan (as defined
in Section 3.30) have been the subject of preliminary environmental assessments,
inspections or reviews, and (b) Target has no knowledge of (i) the unlawful
presence of any Hazardous Materials (as defined below) on any of the Target
Properties or any of the real properties encumbered by a Tenant Mortgage Loan
(as defined in Section 3.30) that would have a material adverse effect on any of
the Target Properties or any of the real properties encumbered by a Tenant
Mortgage Loan (as defined in Section 3.30) or (ii) any unlawful spills,
releases, discharges or disposal of Hazardous Materials that have occurred or
are presently occurring on any of Target Properties or any of the real
properties encumbered by a Tenant Mortgage Loan (as defined in Section 3.30) as
a result of any construction on or operation and use of any of Target Properties
or any of the real properties encumbered by a Tenant Mortgage Loan (as defined
in Section 3.30) that would have a material adverse effect. The term "Hazardous
Materials" means any material which has been determined by any applicable
governmental authority to be harmful to the health or safety of human or animal
life or vegetation, regardless of whether such material is found on or below the
surface of the ground, in any surface or underground water, airborne in ambient
air or in the air inside any structure built or located upon or below the
surface of the ground or in building materials or in improvements of any
structures, or in any personal property located or used in any such structure,
including all hazardous substances, imminently hazardous substances, hazardous
wastes, toxic substances, infectious wastes, pollutants and contaminants from
time to time defined, listed, identified, designated or classified as such under
any Environmental Laws. The term "Environmental Laws" means any federal, state
or local statute, regulation, rule or ordinance, and any judicial or
administrative interpretation thereof, regulating the use, generation, handling,
storage, transportation, discharge, emission, spillage or other release of
Hazardous Materials or relating to the protection of the environment.
Section 3.25 DEFECTS. Except as set forth on Exhibit 3.25 to
the Target Disclosure Schedule and except for routine matters that typically
arise in
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connection with new construction of the Target Properties to the best of
Target's knowledge without any independent investigation, there are no material
defects in the improvements located on any of the Target Properties or any of
the real properties encumbered by a Tenant Mortgage Loan (as defined in Section
3.30) including any defect in the foundation, structural systems, roof or the
electrical, plumbing, heating, ventilating or air conditioning systems included
within the improvements located on any of the Target Properties or any of the
real properties encumbered by a Tenant Mortgage Loan (as defined in Section
3.30) and there are no repairs or deferred maintenance required to be made
thereto.
Section 3.26 CONDEMNATION. There is no pending or, to the best
of Target's knowledge, threatened public or private condemnation or similar
proceeding affecting any of the Target Properties or any of the real properties
encumbered by a Tenant Mortgage Loan (as defined in Section 3.30) or any part
thereof which could have a material adverse effect upon the present maintenance,
operation, occupancy or use of any of the Target Properties or any of the real
properties encumbered by a Tenant Mortgage Loan (as defined in Section 3.30).
Section 3.27 TAXES AND ASSESSMENTS ON TARGET PROPERTIES. There
are no material unpaid real estate property taxes or assessments due and payable
against any Target Property. Neither Target nor any Target Subsidiary has
received any notice of assessment for public improvements with respect to or
relating to a Target Property.
Section 3.28 PROPERTIES AND LEASES. Exhibit 3.28 to the Target
Disclosure Schedule sets forth a complete and correct list of (i) all Target
Properties and (ii) all leases of Target Properties or any part thereof, other
than space subleases and occupancy agreements (each a "Target Tenant Lease" and
collectively, the "Target Tenant Leases") under a Target Lease (as hereinafter
defined), in effect on the date hereof (individually, a "Target Lease" and
collectively, the "Target Leases") and sets forth a complete and correct
description of the following:
(a) the location of the Target Property encumbered by
each Target Lease;
(b) the approximate square footage of the building
under each Target Lease;
(c) the name of the tenant and any guarantor under
each Target Lease;
(d) the date of each Target Lease and any amendment
or modification thereof, the commencement or amendment start
date of
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each Target Lease and the expiration date of the term of each
Target Lease;
(e) the amount of annual or monthly base rent and
additional rent due under each Target Lease and the amount, or
the basis of calculation thereof, of any scheduled increase or
other escalation in the annual and monthly base rent or
additional rent;
(f) any renewal, extension, expansion or cancellation
right of the tenant under each Target Lease; and
(g) any security deposit or outstanding rent
concession or abatement under each Target Lease.
There are no material leases, tenancies, licenses or other rights of occupancy
or use of Target Properties or any portion thereof except for Target Leases and
Target Tenant Leases and except as set forth on Exhibit 3.28 to the Target
Disclosure Schedule. Except as set forth on Exhibit 3.28 to the Target
Disclosure Schedule, each Target Lease is valid and enforceable, is in full
force and effect, has not been materially amended, modified or supplemented, and
the tenant thereunder has accepted its demised premises, is in actual possession
in the normal course and has commenced payment of rent and additional rent, if
applicable, therefor. Except as set forth on Exhibit 3.28 to the Target
Disclosure Schedule, each Target Lease provides that the tenant thereunder is
required to pay all or its pro rata share of the operating expenses, repairs and
maintenance, and taxes and insurance in connection with the maintenance,
ownership, use and occupancy of the Target Property demised thereunder. Neither
Target nor any Target Subsidiary is in default in the payment or performance of
any material obligation binding on Target or a Target Subsidiary under a Target
Lease and neither Target nor any Target Subsidiary has given notice of material
default to a tenant (which default has not previously been cured), nor does any
condition or event exist which with the giving of notice or the passage of time,
or both, would constitute a material default by Target or any Target Subsidiary
or, to the best of Target's knowledge, by a tenant under a Target Lease. Target
does not have any knowledge of any material claim, offset, right of recoupment
or defense available to a tenant under a Target Lease, and there have been no
material waivers by Target or any Target Subsidiary of any material default
under or breach of a Target Lease by a tenant. Except for Target Mortgages (as
hereinafter defined), neither Target nor any Target Subsidiary has assigned,
pledged, hypothecated or otherwise encumbered any of its right, title or
interest in and to a Target Lease or any rents payable thereunder.
Section 3.29 MORTGAGES. Exhibit 3.29 to the Target Disclosure
Schedule sets forth a complete and correct list of all mortgages, deeds of
trust, deeds to secure debt and other similar security interests encumbering any
Target Property or any part thereof (individually, a "Target Mortgage" and
collectively, the
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"Target Mortgages") and sets forth a complete and correct description of the
following:
(a) the location of each Target Property encumbered
by each Target Mortgage;
(b) the name of the obligor, each guarantor and the
holder of each Target Mortgage;
(c) the priority of each Target Mortgage and any
mortgage, deed of trust or other similar instrument that is
prior to each Target Mortgage;
(d) the date of each Target Mortgage and any
amendment or modification thereof;
(e) the original principal amount of the debt secured
by each Target Mortgage, the current rate of interest
thereunder and the current outstanding principal balance
thereof;
(f) the maturity date of the debt secured by each
Target Mortgage, the type of debt secured thereby and whether
any balloon payment is due at the maturity of the debt secured
thereby;
(g) the amount of the current monthly payment of
interest, principal or other amounts due under each Target
Mortgage and the amount of any other mandatory principal or
other payment due thereunder prior to the maturity date of the
debt secured thereby;
(h) any amount that has not been disbursed or
advanced to Target by the holder of a Target Mortgage that
such holder is obligated to disburse or advance;
(i) any prepayment premiums with respect to the
prepayment (full or partial) of the debt secured by each
Target Mortgage and the current penalty payable in connection
with any such prepayment; and
(j) the amount of any escrow deposits or other
deposits or payments held under each Target Mortgage by the
holder of each Target Mortgage.
There are no mortgages, deeds of trusts, deeds to secure debt or other similar
instruments encumbering any Target Property or any portion thereof except for
the Target Mortgages. Each Target Mortgage is valid and enforceable, is in full
force and effect, and has not been amended, modified or supplemented except as
set forth
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on Exhibit 3.29 to the Target Disclosure Schedule. All payments, installments
and charges due and payable under the Target Mortgages have been paid in full.
Neither Target nor any Target Subsidiary has received notice of material default
by Target or any Target Subsidiary (which default has not previously been cured)
from the holder of a Target Mortgage nor does any condition or event exist which
with the giving of notice or the passage of time, or both, would constitute a
material default by Target or any Target Subsidiary under a Target Mortgage.
Except as set forth on Exhibit 3.29 to the Target Disclosure Schedule, the
occurrence of any of the transactions contemplated by this Plan of Merger will
not require the consent or approval of the holder of a Target Mortgage and will
not violate, conflict with or constitute a default by Target or any Target
Subsidiary under a Target Mortgage or result in a condition or event which with
the giving of notice or the passage of time, or both, would constitute a default
by Target under a Target Mortgage.
Section 3.30 TARGET MORTGAGE LOANS. Exhibit 3.30 to the Target
Disclosure Schedule sets forth a complete and correct list of all loans made by
Target or any Target Subsidiary to others secured by a mortgage, deed of trust,
deed to secure debt or other similar instrument encumbering real property and
personalty related to such real property (individually, a "Target Mortgage Loan"
and collectively, the "Target Mortgage Loans") and sets forth a complete and
accurate description of the following:
(a) the location of the real property encumbered by
each Target Mortgage Loan;
(b) the name of the obligor, each guarantor and the
holder of each Target Mortgage Loan;
(c) the priority of each Target Mortgage Loan and any
mortgage, deed of trust, deed to secure debt or other similar
instrument that is prior to each Target Mortgage Loan;
(d) the date of each Target Mortgage Loan and any
amendment or modification thereof;
(e) the original principal amount of the debt secured
by each Target Mortgage Loan, the current rate of interest
thereunder and the current outstanding principal thereof;
(f) the maturity date of the debt secured by each
Target Mortgage Loan, the type of debt secured thereby and
whether any balloon payment is due at the maturity of the debt
secured thereby;
(g) the amount of the current monthly payment of
interest, principal or other amounts due under each Target
Mortgage Loan and
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the amount of any other mandatory principal or other payment
due thereunder prior to the maturity date of the debt secured
thereby;
(h) any amount that has not been disbursed or
advanced to the obligor under each Target Mortgage Loan by
Target or a Target Subsidiary that Target or a Target
Subsidiary is obligated to disburse or advance;
(i) any prepayment premiums with respect to the
prepayment (full or partial) of the debt secured by each
Target Mortgage Loan and the current penalty payable in
connection with any such prepayment; and
(j) the amount of any escrow deposits or other
deposits or payments held under each Target Mortgage Loan by
Target or a Target Subsidiary.
Except as set forth on Exhibit 3.30 to the Target Disclosure Schedule, there are
no loans made by Target or any Target Subsidiary to others secured by a
mortgage, deed of trust, deed to secure debt or other similar instruments
encumbering real property and personalty related to such real property, except
for Target Mortgage Loans. Target has good title to all Target Mortgage Loans,
in each case free and clear of all encumbrances senior to the Target Mortgage
Loans, claims, security interests and defects. Each Target Mortgage Loan is
valid and enforceable, is in full force and effect and has not been amended,
modified or supplemented, except as set forth in Exhibit 3.30 to the Target
Disclosure Schedule. All payments, installments and material charges due and
payable under each Target Mortgage Loan have been paid in full. Target is not in
material default in the payment or performance of any obligation under a Target
Mortgage Loan and has not given any notice of material default to an obligor
under a Target Mortgage Loan (which default has not previously been cured) nor
does any condition or event exist which with the giving of notice or the passage
of time, or both, would constitute a material default by an obligor under a
Target Mortgage Loan. To the best of Target's knowledge, no obligor under a
Target Mortgage Loan has a valid defense to the payment in full of such Target
Mortgage Loan nor is such Target Mortgage Loan subject to any valid right of
rescission, set-off, abatement, diminution, counterclaim or defense. There have
been no waivers by Target or any Target Subsidiary of any material default under
or breach of a Target Mortgage Loan by an obligor under a Target Mortgage Loan.
The occurrence of any of the transactions contemplated by this Plan of Merger
does not require the consent or approval of the obligor under a Target Mortgage
Loan and will not violate, conflict with or constitute a default by Target or
any Target Subsidiary under a Target Mortgage Loan or result in a condition or
event which with the giving of notice or the passage of time, or both, would
constitute a default by Target or any Target Subsidiary under a Target Mortgage
Loan.
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Section 3.31 OPINION OF FINANCIAL ADVISOR. The Board of
Directors of Target has received from a financial advisor satisfactory to
Target's Board of Directors an opinion to the effect that, as of the date of
this Plan of Merger, the Common Stock Exchange Ratio is fair, from a financial
point of view, to the holders of Target Common Stock. A written copy of such
opinion will be delivered by Target to Buyer prior to the date on which the
definitive proxy materials for the Joint Proxy Statement are filed with the SEC.
Section 3.32 INVESTMENT COMPANY ACT. Target is not, and as of
the Effective Time will not be, an "investment company" or company "controlled"
by "an investment company" within the meaning of the Investment Company Act of
1940, as amended.
Section 3.33 BOOKS AND RECORDS. The books of account, minute
books, stock record books and other records of Target, all of which have been
made available to Buyer and HR, are complete and correct and have been
maintained in accordance with the sound business practices and the requirements
of Section 13(b)(2) of the Exchange Act, including, but not limited to, the
maintenance of an adequate system of internal controls. The minute books of
Target contain accurate and complete records of all meetings held of, and
corporate action taken by, the stockholders, the Board of Directors and
committees of the Board of Directors of Target and no meetings of any such
stockholders, Board of Directors or committees has been held for which minutes
have not been prepared and are not contained in such minute books. At the
Closing, all of those books and records will be in the possession of HR. Target
has furnished HR with any annual management letters from Target's independent
certified public accountants for each of the last three years to the extent such
letters address the business conducted by Target.
Section 3.34 INTELLECTUAL PROPERTY. Target has no intellectual
property assets which are material to Target's operations.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER AND HR
Buyer and HR represent and warrant to Target as follows:
Section 4.1 CORPORATE ORGANIZATION AND QUALIFICATION. Buyer is
legally formed and validly existing under the laws of the State of Delaware, and
has the requisite corporate power and authority to own, lease and operate its
assets and properties and to carry on its business as it is now being conducted.
Buyer is registered or qualified to do business and is in good standing in each
jurisdiction in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such registration or qualification
necessary, except where the
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failure to be so registered or qualified and in good standing will not have and
would not reasonably be expected to have a material adverse effect on Buyer.
Section 4.2 SUBSIDIARIES. Buyer does not own any stock or
other equity interests in, and does not control, directly or indirectly, any
other corporation, partnership, joint venture, limited liability company,
association or business organization.
Section 4.3 CORPORATE POWER AND AUTHORITY. Subject to the
satisfaction of the conditions precedent set forth herein Buyer (i) has the
power to execute, deliver and perform this Plan of Merger and all agreements and
other documents executed and delivered or to be executed and delivered by it
pursuant to this Plan of Merger, and (ii) has taken all action required by its
Certificate of Incorporation, Bylaws, or otherwise, to authorize the execution,
delivery and performance of this Plan of Merger and such related documents. The
execution and delivery of this Plan of Merger has been approved by the Board of
Directors of Buyer. This Plan of Merger has been duly executed and delivered by
Buyer and, assuming the receipt of required stockholder and regulatory approvals
and further assuming that this Plan of Merger constitutes a valid and binding
obligation of Target and HR, constitutes a valid and binding obligation of
Buyer, enforceable against Buyer in accordance with its terms.
Section 4.4 NO VIOLATIONS. The execution and delivery of this
Plan of Merger does not and, subject to the receipt of required stockholder and
regulatory approvals and any other required third-party consents or approvals,
the consummation of the Merger will not, violate any provision of Buyer's
Certificate of Incorporation or Bylaws, or any provisions of, or result in the
acceleration of any obligation under, any material mortgage, lien, lease,
agreement, instrument, order, arbitration award, judgment or decree, to which
Buyer is a party, or by which it is bound, or violate any restrictions of any
kind to which it is subject which, if violated or accelerated, would have a
material adverse effect on Buyer.
Section 4.5 CONSENTS. Except for (i) the filing of the
Registration Statement and the Joint Proxy Statement (in each case as defined in
Section 6.2 below) with the SEC pursuant to the Securities Act and the Exchange
Act, and the declaration of the effectiveness thereof by the SEC and filings
with various state blue sky authorities, (ii) the acceptance for record of the
Articles of Merger by the SDAT and the Certificate of Merger by the Delaware
Office of Secretary of State in connection with the Merger, (iii) any required
filings with or approvals from applicable state environmental authorities and
(iv) any required filings with or approvals from applicable state health care
regulation and licensing authorities (the filings and approvals referred to in
clauses (i) through (iv) being collectively referred to as the "Buyer Required
Statutory Approvals"), to Buyer's best knowledge, no declaration, filing or
registration with, or notice to, or authorization,
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consent or approval of, any governmental or regulatory body or authority is
necessary for the execution and delivery of this Plan of Merger by Buyer or the
consummation by Buyer of the transactions contemplated hereby, other than such
declarations, filings, registrations, notices, authorizations, consents or
approvals which, if not made or obtained, as the case may be, would not, in the
aggregate, have a material adverse effect on Buyer. No filing or notice under
the HSR Act is required in connection with the execution and delivery of this
Plan of Merger or the consummation of the transactions contemplated hereby.
Section 4.6 LEGAL PROCEEDINGS. There is no material
litigation, governmental investigation or other proceeding pending or, to the
best knowledge of Buyer, threatened against or relating to Buyer, or its
properties or businesses or the transactions contemplated by this Plan of Merger
and, to the best knowledge of Buyer, no basis for any such action exists.
Section 4.7 COMPLIANCE WITH LAWS IN GENERAL. Buyer has not
received any notices of material violations of any federal, state or local laws,
regulations or ordinances relating to its business and operations, and no notice
of any pending inspection or violation of any such law, regulation or ordinance
has been received by Buyer which, if it were determined that a violation had
occurred, would have a material adverse effect on Buyer.
Section 4.8 LICENSES. Buyer holds all Licenses which are
needed or required by law with respect to its business, operations and
facilities as they are currently conducted, except for permits, licenses,
franchises, variances, exemptions, orders, authorizations, consents and
approvals the absence of which, alone or in the aggregate, would not have a
material adverse effect on Buyer.
Section 4.9 VOTE REQUIRED. A majority of the outstanding
shares of voting stock entitled to vote thereon is the only vote of the holders
of any class or series of Buyer's equity securities necessary to approve this
Plan of Merger, the Merger and the transactions contemplated hereby.
Section 4.10 INVESTMENT COMPANY ACT. Buyer is not, and as of
the Effective Time will not be, an "investment company" or company "controlled"
by "an investment company" within the meaning of the Investment Company Act of
1940, as amended.
Section 4.11 ORGANIZATION AND QUALIFICATION OF HR AND HR
SUBSIDIARIES. Each of HR and the subsidiaries of HR set forth in Exhibit 21 of
HR's Form 10-K for the year ended December 31, 1997 (each an "HR Subsidiary"
and, collectively, the "HR Subsidiaries") is a corporation duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
incorporation,
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and each has the requisite corporate power to own its property and carry on its
business as it is now being conducted. HR and each HR Subsidiary is qualified to
transact business as a foreign corporation and is in good standing in all
jurisdictions in which the properties owned, leased or operated by it or the
nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified and in good standing will not have
and would not reasonably be expected to have a material adverse effect on HR.
Section 4.12 POWER AND AUTHORITY. Subject to the satisfaction
of the conditions precedent set forth herein, HR (i) has the power to execute,
deliver and perform this Plan of Merger and all agreements and other documents
executed and delivered or to be executed and delivered by it pursuant to this
Plan of Merger, and (ii) has taken all action required by its Articles of
Incorporation, Bylaws or otherwise, to authorize the execution, delivery and
performance of this Plan of Merger and such related documents. The execution and
delivery of this Plan of Merger has been approved by the Board of Directors of
HR. This Plan of Merger has been duly executed and delivered by HR and, assuming
the receipt of required HR stockholder vote and regulatory approvals and further
assuming that this Plan of Merger constitutes a valid and binding obligation of
Buyer and Target, constitutes a valid and binding obligation of HR, enforceable
against HR in accordance with its terms.
Section 4.13 STATUS OF HR COMMON STOCK AND HR PREFERRED STOCK.
On and after the Effective Time, upon due and proper exchange of Exchanging
Target Shares therefor, the HR Common Stock and the HR Preferred Stock will be
validly authorized, duly issued, fully paid and nonassessable.
Section 4.14 AUTHORIZATION OF THE ISSUANCE OF THE HR COMMON
STOCK AND HR PREFERRED STOCK. HR has all requisite corporate power and authority
to issue the HR Common Stock and the HR Preferred Stock. No other corporate or
legal proceedings on the part of HR is necessary to approve and authorize the
issuance of the HR Common Stock and HR Preferred Stock, other than the approval
of the stockholders of HR in the case of the HR Common Stock.
Section 4.15 NO VIOLATIONS. The execution and delivery of this
Plan of Merger does not and, subject to the receipt of required stockholder and
regulatory approvals and any other required third-party consents or approvals,
the consummation of the Merger will not, violate any provision of HR's Articles
of Incorporation or Bylaws, or any provisions of, or result in the acceleration
of any obligation under, any material mortgage, lien, lease, agreement,
instrument, order, arbitration award, judgment or decree, to which HR is a
party, or by which it is bound, or violate any restrictions of any kind to which
it is subject which, if violated or accelerated, would have a material adverse
effect on HR.
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Section 4.16 SEC DOCUMENTS OF HR. Since January 1, 1997, HR
has filed all required reports, registration statements, proxy statements and
other documents, together with any amendments required to be made thereto (as
such documents have been amended since the time of their original filing, the
"HR SEC Documents"). As of their respective dates, the HR SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such HR SEC Documents and none of the HR SEC Documents
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Section 4.17 NYSE LISTING. On the Closing Date, the HR Common
Stock and the HR Preferred Stock will have been approved for listing on the New
York Stock Exchange upon official notice of issuance.
Section 4.18 HR REIT QUALIFICATION. At all times during its
existence, HR has been, and as of the Effective Time HR will be, organized in
conformity with the requirements for qualification and, as of the date hereof
for all taxable periods has qualified, as a "real estate investment trust" under
the Code and the rules and regulations thereunder. HR has at all times during
its existence (i) met the 75%, 95% and (through the tax year ended December 31,
1997) 30% income tests set forth in Section 856 of the Code, (ii) met the 75%
and 25% asset tests set forth in Section 856 of the Code and (iii) distributed
dividends to its stockholders at least equal to the 95% requirements of Section
857 of the Code.
Section 4.19 HR NOT AN INVESTMENT COMPANY. HR is not, and as
of the Effective Time will not be, an "investment company" or company
"controlled" by "an investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section 4.20 ABSENCE OF UNDISCLOSED LIABILITIES. HR did not,
at March 31, 1998, and has not incurred since that date, any liabilities or
obligations (whether absolute, accrued, contingent or otherwise) of any nature
(other than ordinary and recurring operating expenses), except (a) liabilities,
obligations or contingencies which are accrued or reserved against in HR's
financial statements included in the HR SEC Documents or reflected in the notes
thereto and (b) liabilities, obligations or contingencies which (i) would not,
in the aggregate, have, or be reasonably expected to have, a material adverse
effect on HR, or (ii) have been discharged or paid in full prior to the date
hereof or will be discharged or paid in full prior to the Effective Time.
Section 4.21 OPINION OF FINANCIAL ADVISOR. The Board of
Directors of HR has received from a financial advisor satisfactory to HR's Board
of Directors
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an opinion to the effect that, as of the date of this Plan of Merger, the Common
Stock Exchange Ratio is fair, from a financial point of view, to the holders of
HR Common Stock. A written copy of such opinion will be delivered by HR to
Target prior to the date on which the definitive proxy materials for the Joint
Proxy Statement are filed with the SEC.
Section 4.22 VOTE REQUIRED. The affirmative vote of the
holders of a majority of all the votes cast at a meeting at which a quorum is
present is the only vote of the holders of any class or series of HR equity
securities necessary to approve this Plan of Merger, the Merger and the
transactions contemplated hereby.
Section 4.23 STATEMENTS OF INTENT. (i) HR has no plans or
intent to liquidate Target following the Merger; (ii) HR will cause Target to
continue the historic business of Target or to use a significant portion of
Target's historic business assets in a business following the Merger; and (iii)
HR does not plan to cause Target to issue additional shares of stock of Target
in such manner that would cause HR to lose control of Target under Section
368(c) of the Code following the Merger.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
Section 5.1 CONDUCT OF BUSINESS BY TARGET PENDING THE MERGER.
Subject to compliance with applicable law, after the date hereof and prior to
the Closing Date or earlier termination of this Plan of Merger, unless Buyer and
HR shall otherwise agree in writing or as may be otherwise specifically
contemplated by this Plan of Merger, Target shall:
(a) conduct its business in the ordinary and usual
course of business and consistent with past practice;
(b) not amend or propose to amend its Articles of
Incorporation or Bylaws, or split, combine or reclassify its
outstanding stock, unless such action is necessary to preserve
its status as a REIT or a "qualified REIT subsidiary";
(c) not issue, sell, pledge or dispose of, or agree
to issue, sell, pledge or dispose of, any additional shares
of, or any options, warrants or rights of any kind to acquire
any shares of stock of Target of any class or any debt or
equity securities convertible into or exchangeable for such
stock or amend or modify the terms and conditions of any of
the foregoing, except that in the ordinary course of its
business and consistent with its past practices, Target may
issue shares upon exercise of outstanding options to purchase
Target Common Stock and
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in connection with the exercise of the rights to acquire
Target Common Stock as are described or referred to in
Section 3.2 above in accordance with the terms thereof,
including the right of holders of the 10 1/2% Debentures and
the 6.55% Debentures to convert such Debentures into Target
Common Stock;
(d) except as contemplated by Exhibit 5.1 to the
Target Disclosure Schedule, not (i) incur or become
contingently liable with respect to any indebtedness for
borrowed money, except in the ordinary course of business,
(ii) redeem, purchase, acquire or offer to purchase or acquire
any shares of its stock, other than as required by the
governing terms of such securities, (iii) take any action
which would jeopardize Target's status as a real estate
investment trust, (iv) make any acquisition of assets or
businesses, without HR's prior written consent, which shall
not be unreasonably withheld; provided, however, that HR will
not consent to any (a) investments in assisted living
facilities or skilled nursing facilities other than the
funding of commitments for such investments in existence on
the date of this Plan of Merger, (b) investments in
construction and/or development projects other than the
funding of commitments for such investments in existence on
the date of this Plan of Merger, (c) acquisitions or
investments which are not in the ordinary course of Target's
business, or (d) investments which, taken together with all
other assets, businesses, and investments of HR and Capstone,
would cause an event of default or breach of any material
agreement of HR, (v) sell any assets or businesses, in a
transaction or series of related transactions for a cost in
excess of $50,000, or (vi) enter into any contract, agreement,
commitment or arrangement with respect to any of the
foregoing;
(e) use reasonable efforts to preserve intact its
business organization and goodwill and business relationships
with all lessees, mortgagors, operators, suppliers,
distributors, customers, and others having business
relationships with Target and not engage in any action,
directly or indirectly, with the intent to adversely impact
the transactions contemplated by this Plan of Merger;
(f) subject to compliance with applicable law, confer
with one or more representatives of Buyer when requested, to
report on material operational matters and the general status
of ongoing operations of Target's business;
(g) not enter into or amend any employment,
severance, special pay arrangement with respect to termination
of employment or other similar arrangements or agreements with
any directors, officers, employees or other representatives,
or agree to do so;
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(h) other than in accordance with established
compensation adjustment policies and as contemplated by this
Plan of Merger, not increase the rate of remuneration payable
to any of its directors, officers, employees or other
representatives, or agree to do so, it being understood that
this Section 5.1(h) shall not preclude payment of bonuses
accrued as of the Closing Date in accordance with past
practice at the same rate as accrued during 1998 through the
date of this Plan of Merger not exceeding an aggregate of
$700,000 to persons (except Richard M. Scrushy, Michael D.
Martin and John W. McRoberts) who are employees of Target on
the Closing Date and who sign termination agreements
containing appropriate releases and confidentiality
provisions;
(i) except as may be contemplated by the terms
hereof, not adopt, enter into or amend any bonus, profit
sharing, compensation, stock option, pension, retirement,
deferred compensation, health care, employment or other
employee benefit plan, agreement, trust, fund or arrangement
for the benefit or welfare of any employee or retiree, except
as required to comply with changes in applicable law or as
contemplated by this Plan of Merger;
(j) file all required reports, including its
Quarterly Report on Form 10-Q for the quarter ending June 30,
1998, on or before the date prescribed for such reports
pursuant to the Exchange Act and cause such reports to comply
with the requirements of the Exchange Act; and
(k) maintain, in full force and effect, with all
premiums due thereon paid, policies of insurance covering all
of the insurable tangible assets and businesses of Target and
the Target Subsidiaries in amounts and as to foreseeable risks
usually insured against by persons operating similar
businesses under valid and enforceable policies of insurance
issued by insurers of recognized responsibility.
Section 5.2. NEGATIVE COVENANTS OF TARGET. Subject to
compliance with applicable laws, after the date hereof and prior to the Closing
Date or earlier termination of this Plan of Merger, unless Buyer and HR shall
otherwise agree in writing or as may be otherwise specifically contemplated by
this Plan of Merger, Target shall not:
(a) Incur any liabilities other than current
liabilities incurred in the ordinary course of business;
(b) Incur any mortgage, lien, pledge, hypothecation,
charge, encumbrance, or restriction of any kind, except liens
for taxes not due;
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(c) Become a party to any contract, or renew, extend,
or modify any existing contract, except in the ordinary course
of business;
(d) Make any capital expenditures, except for
ordinary repairs, maintenance, and replacement;
(e) Declare or pay any dividend on or make any other
distribution to stockholders, except for payment of any
dividends consistent with past practice;
(f) Pay or agree to pay any bonus, increase in
compensation, pension, or severance pay to any director,
stockholder, officer, consultant, agent, or employee, except
for bonuses accrued as of the Closing Date at the same rate as
accrued during 1998 through the date of this Plan of Merger in
accordance with past practice not exceeding an aggregate of
$700,000 to persons (except Richard M. Scrushy, Michael D.
Martin and John W. McRoberts) who are employees of Target on
the Closing Date and who sign termination agreements
containing appropriate releases and confidentiality
provisions;
(g) Discharge or satisfy any lien or encumbrance, or
pay any obligation or liability, except current liabilities
shown on the Target Balance Sheet, or incurred in the ordinary
course of business since the date of the Target Balance Sheet;
(h) Merge or consolidate with any other entity;
(i) Enter into any transactions or take any acts that
would constitute a breach of the representations, and
warranties contained in this Plan of Merger; and
(j) Institute, settle, or agree to settle any action
or proceeding before any court or governmental body.
Section 5.3 CONDUCT OF BUSINESS BY BUYER AND HR PENDING THE
MERGER. Subject to compliance with applicable law, after the date hereof and
prior to the Closing Date or earlier termination of this Plan of Merger, unless
Target shall otherwise agree in writing or as may be otherwise specifically
contemplated by this Plan of Merger, Buyer and HR shall conduct their respective
businesses in the ordinary and usual course of business and consistent with past
practice.
Section 5.4 NO SOLICITATION. Neither Target nor Target
Subsidiaries will, directly or indirectly, through any officer, director, agent
or otherwise, (i) solicit, initiate or encourage submission of proposals or
offers from any person relating to any acquisition or purchase of all or (other
than in the ordinary course of business) a material amount of the assets of, or
any equity interest in, Target or
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any merger, consolidation, or business combination with Target, or (ii) subject
to the obligations of Target's directors and officers under Section 2-405.1(a)
of the MGCL or under applicable law as advised by counsel, participate in any
discussions or negotiations regarding, or furnish to any other person any
information with respect to, any of the foregoing, or (iii) otherwise cooperate
in any way with, or assist or participate in, facilitate or encourage, any
effort or attempt by any other person to do or seek any of the foregoing. Target
shall promptly notify Buyer if any such proposal or offer, or any inquiry or
contact with any person with respect thereto, is made. Nothing contained herein
shall be construed to prohibit Target and its Board of Directors from taking any
particular position with respect to any such offer or proposal or from otherwise
withdrawing, modifying or amending its recommendation with respect to the
Merger, in each case to the extent required by the obligations of Target's
directors and officers under Section 2-405.1(a) of the MGCL or under applicable
law as advised by counsel, or from disclosing to its shareholders a position as
contemplated by Rule 14e-2 promulgated under the Exchange Act or from making
such other disclosure to shareholders which, in the judgment of its Board of
Directors on advice of counsel, may be required by law in connection with any
such proposal or offer.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 ACCESS TO INFORMATION; COOPERATION.
(a) ACCESS TO INFORMATION. Target shall afford to
Buyer, HR and their respective accountants, counsel, financial
advisors and other representatives (the "Buyer
Representatives") and Buyer and HR shall afford to Target and
its accountants, counsel, financial advisors and other
representatives (the "Target Representatives") full access
during normal business hours throughout the period prior to
the Effective Time to all of the properties, books, contracts,
commitments and records (including Tax returns) of Buyer, HR,
and Target, as appropriate, and, during such period, each
shall furnish promptly to the others (i) a copy of each
report, schedule and other document filed or received pursuant
to the requirements of federal or state securities laws or
filed with the SEC in connection with the transactions
contemplated by this Plan of Merger or which may have a
material effect on Buyer's, HR's or Target's business,
properties or financial condition, as appropriate, and (ii)
such other information concerning their respective businesses,
properties and financial condition as shall be reasonably
requested; provided that no investigation pursuant to this
Section 6.1 shall affect any representation or warranty made
herein or the conditions to the obligations of the respective
parties hereto to consummate the Merger. All non-public
documents and
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information furnished to Buyer, HR, or Target, as the case
may be, in connection with the transactions contemplated by
this Plan of Merger shall be deemed to have been received
pursuant to and shall be subject to the provisions of the
Confidentiality Agreement between HR and Target (the
"Confidentiality Agreement"), except that Buyer, HR and
Target may disclose such information as may be necessary in
connection with seeking Target Required Statutory Approvals,
Buyer Required Statutory Approvals, or the approval of
stockholders of Buyer, HR, or Target. Buyer and HR shall
promptly advise Target, and Target shall promptly advise
Buyer and HR, in writing of any change or the occurrence of
any event after the date of this Plan of Merger having, or
which, insofar as can reasonably be foreseen, in the future
may have, any material adverse effect on Buyer, HR, or
Target.
(b) COOPERATION. Subject to the terms and conditions
herein provided, each of the parties hereto shall cooperate
and use their respective best efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions
contemplated by this Plan of Merger, including using its best
efforts to identify and obtain all necessary or appropriate
waivers, consents and approvals to effect all necessary
registrations, filings and submissions (including Target
Required Statutory Approvals, Buyer Required Statutory
Approvals and any filings under federal and state securities
laws and to lift any injunction or other legal bar to the
Merger (and, in such case, to proceed with the Merger as
expeditiously as possible), subject, however, to obtaining the
necessary approvals by the stockholders of each of Target, HR,
and Buyer of this Plan of Merger and the transactions
contemplated hereby, and subject at all times to the duties of
the respective Boards of Directors of Target, HR, and Buyer.
(c) OTHER ACTIONS. Neither Target, HR, nor Buyer
shall knowingly or intentionally take any action, or omit to
take any action, if such action or omission would, or
reasonably might be expected to, result in any of its
representations and warranties set forth herein being or
becoming untrue in any material respect, or in any of the
conditions to the Merger set forth in this Plan of Merger not
being satisfied, or (unless such action is required by
applicable law) which would materially adversely affect the
ability of Target, HR, or Buyer to obtain any consents or
approvals required for the consummation of the Merger without
imposition of a condition or restriction which would have a
material adverse effect on the Surviving Entity or which would
otherwise materially impair the ability of Target, HR, or
Buyer to
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consummate the Merger in accordance with the terms of this
Plan of Merger or materially delay such consummation.
(d) CONTINUED QUALIFICATION AS A REAL ESTATE
INVESTMENT TRUST. From and after the date hereof through the
Effective Time, Target will maintain its qualification as a
"real estate investment trust" under the Code and the rules
and regulations thereunder. Without limiting the generality of
the foregoing, Target will make dividend distributions and all
other payments during its final taxable period sufficient to
satisfy the requirement of Section 857 of the Code.
Section 6.2 REGISTRATION STATEMENT; JOINT PROXY STATEMENT.
(a) Within 60 days after the execution of this Plan
of Merger, HR shall prepare and file with the SEC and any
other applicable regulatory bodies a Registration Statement on
Form S-4 with respect to the shares of HR Common Stock to be
issued in connection with the Merger (the "Registration
Statement"), and will otherwise proceed promptly to satisfy
the requirements of the Securities Act, including Rule 145
thereunder. Such Registration Statement shall contain a joint
proxy statement of HR and Target containing the information
required by the Exchange Act (the "Joint Proxy Statement"). HR
shall take all reasonable steps to cause the Registration
Statement to be declared effective and to maintain such
effectiveness until all of the shares covered thereby have
been distributed. HR shall promptly amend or supplement the
Registration Statement to the extent necessary in order to
make the statements therein not misleading or to correct any
misstatements which have become false or misleading. HR shall
use its best efforts to have the Joint Proxy Statement
approved by the SEC under the provisions of the Exchange Act.
HR shall provide Target with copies of all filings made
pursuant to this Section 6.2 and shall consult with Target on
responses to any comments made by the staff of the SEC with
respect thereto. If at any time prior to the Effective Time
any event or circumstance relating to Buyer or HR or their
respective officers or directors should be discovered by HR
which should be set forth in an amendment to the Registration
Statement or a supplement to the Joint Proxy Statement, HR
shall promptly inform Target.
(b) The information specifically designated as being
supplied by Target for inclusion in the Registration Statement
shall not, at the time the Registration Statement is declared
effective, at the time the Joint Proxy Statement is first
mailed to holders of Target Stock, at the time of the Special
Meetings (as defined below in Section 6.4) and at
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the Effective Time, contain any untrue statement of a
material fact or omit to state any material fact required to
be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The information specifically
designated as being supplied by Target for inclusion in the
Joint Proxy Statement to be sent to the holders of Target
Stock in connection with the Special Meetings shall not, at
the date the Joint Proxy Statement (or any amendment thereof
or supplement thereto) is first mailed to holders of Target
Stock, at the time of the Special Meetings and at the
Effective Time, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein,
in light of the circumstances under which they were made,
not misleading. If at any time prior to the Effective Time
any event or circumstance relating to Target or its officers
or directors, should be discovered by Target which should be
set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement, Target shall promptly
inform HR. All documents, if any, that Target is responsible
for filing with the SEC in connection with the transactions
contemplated herein will comply as to form and substance in
all material respects with the applicable requirements of
the Securities Act and the rules and regulations thereunder
and the Exchange Act and the rules and regulations thereunder.
(c) The information specifically designated as being
supplied by Buyer or HR for inclusion in the Registration
Statement shall not, at the time the Registration Statement is
declared effective, at the time the Joint Proxy Statement is
first mailed to holders of Target Stock, at the time of the
Special Meetings and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances
under which they were made, not misleading. The information
specifically designated as being supplied by Buyer or HR for
inclusion in the Joint Proxy Statement to be sent to the
holders of Target Stock in connection with the Special
Meetings shall not, at the date the Joint Proxy Statement (or
any amendment thereof or supplement thereto) is first mailed
to holders of Target Stock, at the time of the Special
Meetings or at the Effective Time, contain any untrue
statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances
under which they are made, not misleading. If at any time
prior to the Effective Time any event or circumstance relating
to Buyer or HR or their respective officers or directors,
should be
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discovered by Buyer or HR which should be set forth in an
amendment to the Registration Statement or a supplement to
the Joint Proxy Statement, HR shall promptly inform Target
and shall promptly file such amendment to the Registration
Statement. All documents that HR is responsible for filing
with the SEC in connection with the transactions contemplated
herein will comply as to form and substance in all material
respects with the applicable requirements of the Securities
Act and the rules and regulations thereunder and the Exchange
Act and the rules and regulations thereunder.
(d) Target shall furnish all information to HR with
respect to Target and the Target Subsidiaries as HR may
reasonably request for inclusion in the Registration
Statement, the Joint Proxy Statement and the Listing
Applications pertaining to the HR Common Stock and the HR
Preferred Stock, and shall otherwise cooperate with HR in the
preparation and filing of such documents.
Section 6.3 NYSE. HR shall use its best efforts to effect, at
or before the Effective Time, authorization for listing on the NYSE upon
official notice of issuance, of the HR Common Stock and the HR Preferred Stock.
Section 6.4 APPROVAL OF STOCKHOLDERS. Each of Buyer, HR, and
Target shall promptly take such action as may be required by their respective
governing documents and applicable law to obtain the requisite approval of this
Plan of Merger and the transactions contemplated hereby, and shall use their
respective best efforts to obtain approval and adoption of this Plan of Merger
and the transactions contemplated hereby as soon as practicable following the
date upon which the Registration Statement is declared effective by the SEC.
Subject to the duties of the respective Boards of Directors of Target, HR, and
Buyer under applicable law, and unless this Plan of Merger shall have been
validly terminated as provided herein, Buyer and Target shall, through their
respective Boards, recommend to their respective equity holders the approval of
this Plan of Merger and of the transactions contemplated by this Plan of Merger.
Without limiting the generality of the foregoing, each of Buyer, HR, and Target
will call, give notice of, convene and hold a meeting of its stockholders
(collectively, the "Special Meetings") as soon as practicable after the
effectiveness of the Registration Statement for the purpose of approving this
Plan of Merger (to the extent that such approval is required by applicable law
in order to consummate the Merger) and for such other purposes as may be
necessary; provided that nothing contained herein shall affect the right of
either Buyer, HR, or Target to take action by written consent in lieu of meeting
to the extent permitted by applicable law and their respective governing
documents.
Section 6.5 COMPLIANCE WITH THE SECURITIES ACT. Target shall
use its best efforts to cause each principal executive officer, each director
and each other
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person who is an "affiliate" (as such term is used in paragraphs (c) and (d) of
Rule 145 under the Securities Act) of Target to deliver to Buyer and HR on or
prior to the Effective Time a written agreement (an "Affiliate Agreement") to
the effect that such person will not offer to sell, sell or otherwise dispose of
any shares of HR Common Stock except, in each case, pursuant to an effective
registration statement or in compliance with Rule 145, as amended from time to
time, or in a transaction which, in the opinion of legal counsel satisfactory to
Buyer and HR, is exempt from the registration requirements of the Securities
Act.
Section 6.6 PUBLIC STATEMENTS. The parties shall consult with
each other prior to issuing any press release or any written public statement
with respect to this Plan of Merger or the transactions contemplated hereby and
shall not issue any such press release or written public statement prior to
review and approval by the other party, except that prior review and approval
shall not be required if, in the reasonable judgment of the party seeking to
issue such release or public statement, prior review and approval would prevent
the timely dissemination of such release or announcement in violation of any
applicable law, rule, regulation or policy of the NYSE. The parties shall issue
a joint press release, mutually acceptable to Buyer, HR, and Target, promptly
upon execution and delivery of this Plan of Merger.
Section 6.7 CERTAIN INFORMATION. For as long as any affiliate
(as defined for purposes of Rule 145 under the Securities Act) of Target holds
any HR Common Stock (but not for a period in excess of two years from the date
of consummation of the Merger), HR shall file with the SEC or otherwise make
publicly available all information about HR required pursuant to Rule 144(c)
under the Securities Act to enable such affiliate to resell such shares under
the provisions of Rule 145(d) under the Securities Act.
Section 6.9 ACCOUNTING METHODS. Neither Buyer, HR, nor Target
shall change, in any material respect, its methods of accounting in effect at
its most recent fiscal year end, except as required by changes in generally
accepted accounting principles as concurred in by both such parties' independent
accountants.
Section 6.10 NOTICE OF SUBSEQUENT EVENTS. Target shall notify
the other parties of any changes, additions or events which would cause any
material change in or material addition to any Exhibit to the Target Disclosure
Schedule delivered by Target under this Plan of Merger, promptly after the
occurrence of the same.
Section 6.11 RESIGNATION OF TARGET DIRECTORS. On or prior to
the Closing Date, Target shall deliver to Buyer evidence satisfactory to Buyer
of the
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resignation of the Directors of Target and all Target Subsidiaries, such
resignations to be effective on the Closing Date.
Section 6.12 BREAKUP FEE.
(a) (i) If this Plan of Merger is terminated for any
reason, after
(1) a tender or exchange offer for Target Common Stock
is announced by any corporation, partnership, person, other
entity, syndicate or group (as defined in Section 13(d)(3)
of the Exchange Act) (collectively, "Persons") other than
Buyer or any of its affiliates, and the Board of Directors
of Target takes any position under Rule 14e-2 under the
Exchange Act other than to recommend rejection of such
offer; or
(2) Target receives a proposal or offer from any Person
concerning: (x) a merger, consolidation, sale of a material
amount of assets or other business combination not in the
ordinary course of business involving Target or Target
Subsidiaries, or (y) any transaction involving transfer of
beneficial ownership of securities representing, or the
right to acquire beneficial ownership of or to vote
securities representing, more than 25% of the total voting
power of Target, and either:
(A) the Board of Directors resolves to accept, or
recommend acceptance of, such proposal or offer, or
determines such proposal or offer to be more favorable
to the shareholders of Target than the Merger as
contemplated herein; or
(B) the Board of Directors, after a reasonable time
for consideration thereof, does not resolve to reject
or recommend rejection of such proposal or offer; or
(3) in the absence of the announcement of a tender or
exchange offer and of any proposal or offer, described in
clauses (1) and (2) above, Target withdraws, modifies or
amends in any respect its favorable recommendation of the
Merger, or the Board of Directors resolves to do any of the
foregoing (except that the foregoing shall not apply to a
change solely in the reasons
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for such recommendation, so long as Target and its Board of
Directors continue to recommend acceptance of the Merger);
or
(ii) if this Plan of Merger is terminated for any reason,
and:
(1) at any time after the date hereof, within six
months after such termination, any Person, other than Buyer,
HR or any HR Subsidiary, shall have either: (x) directly or
indirectly acquired, or disclosed the direct or indirect
acquisition of, the beneficial ownership of securities
representing, or directly or indirectly acquired, or
disclosed the direct or indirect possession of, the right to
acquire beneficial ownership of, or the right to vote,
securities representing 25% or more of the total voting
power of Target, or publicly announced its intention to do
any of the foregoing; (y) commenced or publicly proposed a
tender or exchange offer for some portion or all of the
Target Common Stock, or publicly proposed any merger,
consolidation, acquisition of a material amount of assets or
other business combination not in the ordinary course of
business involving Target or the Target Subsidiaries or
publicly proposed a transaction involving the transfer of
beneficial ownership of securities representing, or of the
right to acquire beneficial ownership of or the right to
vote, securities representing more than 25% of the total
voting power of Target, or publicly announced its intention
to do any of the foregoing (any such commencement or
proposal being herein referred to as an "Acquisition
Proposal"); or (z) directly or indirectly had discussions
with Target or one or more of its executive officers or
directors (or had discussions with any agents of the
foregoing, of which the principal was aware), with respect
to any of the transactions described in clauses (x) or (y)
above; and
(2) at any time, not later than six months after the
date of such termination, any Person (whether or not a
Person referred to in clause (iii) (1) above), other than
Buyer, HR or any of their respective affiliates, either (x)
directly or indirectly acquires or discloses the direct or
indirect acquisition of securities representing, or directly
or indirectly acquires or discloses the direct or indirect
possession of the right to acquire beneficial ownership of
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or to vote securities representing, 25% or more of the total
voting power of Target; or (y) consummates, or enters into
an agreement with Target or any of its affiliates or the
Target Subsidiaries with respect to, any Acquisition
Proposal, other than acquisitions by Target which do not
result in a change in ownership of securities representing
25% or more of the total voting power of Target;
then Target will, within five days after the first of any such events
to occur, (1) pay Buyer a fee of $20 million and (2) reimburse HR and
Buyer for all reasonable out-of-pocket expenses and fees incurred by
them (including fees payable to their proposed lenders and investment
bankers) or on their behalf in connection with the Merger and the
consummation of all transactions contemplated by this Plan of Merger,
and the financing of such transactions, and incurred by financial
institutions and assumed by HR in connection with the negotiation,
preparation, execution and performance of this Plan of Merger.
(b) If this Plan of Merger is terminated pursuant to Section
8.1(c) because:
(i) any obligation, covenant, or agreement of Target under
this Plan of Merger shall have been breached or not performed as
required in any material respect, by a willful and deliberate
act or omission by or on behalf of Target; or
(ii) any of the representations and warranties of Target in
this Plan of Merger (including the Target Disclosure Schedule)
shall not have been accurate on the date of execution of this
Plan of Merger, except for inaccuracies which would not, either
individually or in the aggregate, have a material adverse effect
on Target,
then Target will, within five days of the first of any such events to
occur, reimburse HR and Buyer for all reasonable out-of-pocket
expenses and fees incurred by them (including fees payable to their
proposed lenders and investment bankers) or on their behalf in
connection with the Merger and the consummation of all transactions
contemplated by this Plan of Merger, and the financing of such
transactions, and incurred by financial institutions and assumed by HR
in connection with the negotiation, preparation, execution, and
performance of this Plan of Merger.
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(c) If the Plan of Merger is terminated pursuant to Section
8.1(c) because:
(i) any obligation, covenant, or agreement of Buyer and
HR under this Plan of Merger shall have been breached or not
performed as required in any material respect, by a willful
and deliberate act or omission by or on behalf of Buyer and
HR; or
(ii) any of the representations and warranties of Buyer
and HR in this Plan of Merger shall not have been accurate
on the date of execution of this Plan of Merger, except for
inaccuracies which would not, either individually or in the
aggregate, have a material adverse effect on HR,
then Buyer and HR will, within five days of the first of any such
events to occur, reimburse Target for all reasonable
out-of-pocket expenses and fees incurred by it (including fees
payable to its investment bankers) or on its behalf in connection
with the Merger and the consummation of all transactions
contemplated by this Plan of Merger, and incurred by Target in
connection with the negotiation, preparation, execution, and
performance of this Plan of Merger.
(d) Except as aforesaid, all costs and expenses incurred in
connection with this Plan of Merger and the transactions
contemplated hereby shall be paid in accordance with Section 6.16
hereof.
Section 6.13 TERMINATION OF EMPLOYEE BENEFIT PLANS. As soon as
practical, the Surviving Entity shall cause the termination of all pension,
profit-sharing and retirement Plans set forth on Exhibit 3.14 to the Target
Disclosure Schedule and take all necessary action to submit each such Plan to
the IRS for a determination that the termination of the Plan will not adversely
affect the qualification of each Plan and shall promptly pursue such
determination letter. Upon receipt of a letter from the IRS, the Surviving
Entity shall cause each of the trusts established to fund each Plan to be
promptly liquidated and shall cause the trustees to disburse all benefits to
participants pursuant to the terms of such Plans. All fees in connection with
such terminations and distributions, including but not limited to user fees,
attorneys' fees, accountants' fees and third-party administrators' fees shall be
paid by the Surviving Entity.
Section 6.14 ACQUISITION OF TARGET FURNITURE, FIXTURES AND
EQUIPMENT. Target and certain Target Subsidiaries will enter into an asset
purchase agreement with Orthopaedic Surgeons, Inc., a Delaware corporation
("OSI"), pursuant to which OSI will acquire at Closing all of the personal
property at Target's corporate headquarters used by Target or Target
Subsidiaries in the
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operation of the business as now conducted a list of which is set forth on
Schedule 6.14 including all furniture, fixtures and equipment but excluding the
split dollar life insurance policies on the life of John W. McRoberts and all
personal property located in any owned real estate. The consideration to be paid
for these assets will be (i) the assumption by OSI of all of Target's
obligations under that certain Office Lease dated June 28, 1994, as amended,
between Target and TMK Income Properties, L.P., a Delaware limited partnership
(successor in interest to Torchmark Development Corporation), (ii) the
assumption of all of Target's obligations under certain office equipment leases
a list of which is set forth on Schedule 6.14, and (iii) for the non-leased
assets, the sum of $350,000. HR agrees to give OSI the option to lease the
assets and sublease the facilities at fair market rents for a reasonable period
of time (not to exceed one year) to enable OSI to obtain capital financing. On
or prior to the date of purchase of the assets, Target shall obtain and deliver
to Buyer a release of Buyer and HR from any liability of Target under the
assumed leases effective as of the date of purchase. John W. McRoberts will
receive the policies of split dollar life insurance on his life without
additional consideration. Target agrees to make no further payments of premiums
on such policies.
Section 6.15. DIRECTORS AND OFFICERS INSURANCE. HR shall
provide to each officer and director of Target indemnification from acts or
omissions occurring prior to the Closing Date to the same extent as HR
indemnifies its officers and directors. Such indemnification shall be provided
through indemnification agreements which will be entered into at the Closing,
the form of which indemnification agreements will be provided to Target at least
ten days prior to the Closing. Buyer shall cause to be maintained in effect the
current policies of directors and officers liability insurance currently
maintained by Target.
Section 6.16 EXPENSES. Subject to Section 6.12, all costs and
expenses incurred in connection with this Plan of Merger and the transactions
contemplated hereby shall be paid by the party incurring such expenses (which
expenses of Target shall not exceed those set forth on Exhibit 3.9 to the Target
Disclosure Schedule), except that those expenses incurred in connection with
printing and distributing the Joint Proxy Statement shall be shared equally by
HR and Target.
Section 6.17 LIMITED LIABILITY COMPANY FORMATION. If requested
by Buyer at least ten days prior to the Closing Date, Target will form a
single-member limited liability company in each state designated by Buyer, and
Target shall contribute to such limited liability companies such properties and
assets of Target and Target Subsidiaries as are designated by Buyer.
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ARTICLE VII
CONDITIONS
Section 7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligation of each party to effect the Merger and the
other transactions contemplated hereby shall be subject to the fulfillment at or
prior to the Closing Date of the following conditions unless waived by the
parties hereto:
(a) Target shall have obtained the necessary approval
of its holders of Target Common Stock and Target Series A
Preferred Stock (voting as a separate class) of this Plan of
Merger and the transactions contemplated hereby;
(b) Buyer shall have obtained the necessary approval
of its stockholders of this Plan of Merger and the
transactions contemplated hereby;
(c) HR shall have obtained the necessary approval of
its stockholders of this Plan of Merger and the transactions
contemplated hereby, including the approval to issue the HR
Common Stock and the HR Preferred Stock;
(d) The Registration Statement pertaining to the HR
Common Stock and the HR Preferred Stock shall have become
effective in accordance with the provisions of the Securities
Act, and no stop order suspending such effectiveness shall
have been issued and remain in effect;
(e) Neither Buyer nor Target, nor any of their
respective subsidiaries, shall be subject to any order, decree
or injunction by a court of competent jurisdiction which (i)
prevents or materially delays the consummation of the Merger
or (ii) would impose any material limitation on the ability of
Buyer effectively to exercise full rights of ownership of the
Surviving Entity or any material portion of the assets or
business of Target and the Target Subsidiaries, taken as a
whole;
(f) All governmental consents, orders and approvals
legally required for the consummation of the Merger and the
transactions contemplated hereby, including Target Required
Statutory Approvals and Buyer Required Statutory Approvals,
shall have been obtained and be in effect at the Effective
Time, and all consents, orders and approvals legally required
for the consummation of the Merger and the transactions
contemplated hereby shall have been obtained;
(g) The respective opinions of the financial advisors
described in Section 3.31 and Section 4.21 shall not have been
withdrawn,
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revoked or modified in any material respect as of the date of
the Joint Proxy Statement; and
(h) Each of Richard M. Scrushy, Michael D. Martin,
and John W. McRoberts shall execute and deliver the consulting
and non-competition agreements referred to on Exhibit 7.1(h)
to the Target Disclosure Schedule.
Section 7.2 CONDITIONS TO OBLIGATION OF TARGET TO EFFECT THE
MERGER. Unless waived by Target, the obligation of Target to effect the Merger
and the other transactions contemplated hereby shall be subject to the
fulfillment at or prior to the Closing Date of the following additional
conditions:
(a) Buyer and HR shall have performed in all material
respects their respective agreements contained in this Plan of
Merger required to be performed on or prior to the Closing
Date and the representations and warranties of Buyer and HR
contained in this Plan of Merger shall be true and correct,
except for inaccuracies which would not, either individually
or in the aggregate, have a material adverse effect on Buyer
or HR, on and as of (i) the date when made and (ii) the
Closing Date (except in the case of representations and
warranties expressly made solely with reference to a
particular date, which shall be true and correct as of the
date specified), and Target shall have received a certificate
of an officer of Buyer and HR to that effect;
(b) Target shall have received one or more legal
opinions from counsel to Buyer, dated the Closing Date, in
form and substance satisfactory to Target; and
(c) the HR Common Stock and the HR Preferred Stock
shall have been authorized for listing on the NYSE upon
official notice of issuance.
Section 7.3 CONDITIONS TO OBLIGATION OF BUYER AND HR TO EFFECT
THE MERGER. Unless waived by Buyer and HR, the obligations of Buyer and HR to
effect the Merger and the other transactions contemplated hereby shall be
subject to the fulfillment at or prior to the Closing Date of the following
additional conditions:
(a) Target shall have performed in all material
respects its agreements contained in this Plan of Merger
required to be performed on or prior to the Closing Date and
the representations and warranties of Target contained in this
Plan of Merger shall be true and correct, except for
inaccuracies which would not, either individually or in the
aggregate, have a material adverse effect on Target, on and as
of (i) the
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date when made and (ii) the Closing Date (except in the case
of representations and warranties expressly made solely with
reference to a particular date which shall be true and
correct as of the date specified), and Buyer and HR shall
have received a certificate of an officer of Target to that
effect;
(b) Buyer shall have received an opinion from Sirote
& Permutt, P.C., counsel to Target, dated the Closing Date, in
form and substance satisfactory to Buyer; and
(c) Buyer shall have received an opinion from Sirote
& Permutt, P.C., tax counsel to Target, dated the Closing
Date, in form and substance satisfactory to Buyer.
(d) All employment agreements between Target and its
officers (including without limitation, the Employment and
Non-Competition Agreement, dated November 1, 1996 between
Target and John W. McRoberts) shall be cancelled without
termination payment or other compensation. In lieu thereof,
the consulting and non-competition agreements referred to in
Section 7.1(h) shall be executed and delivered.
ARTICLE VIII
TERMINATION
Section 8.1 TERMINATION. This Plan of Merger may be terminated
at any time prior to the Closing Date, whether before or after approval by the
stockholders of Target and Buyer:
(a) by mutual consent of the respective Boards of
Directors of Target, HR, and Buyer, whether before or after a
vote of shareholders;
(b) by either Buyer, HR, or Target, so long as such
party has not breached any of its obligations hereunder
(except for such breaches as are immaterial), if the Merger
shall not have been consummated on or before December 31, 1998
(the "Termination Date");
(c) unilaterally by Buyer and HR or Target, (i) if
the other (A) fails to perform any covenant or agreement in
this Plan of Merger in any material respect, and does not cure
the failure, in all material respects within 15 business days
after the terminating party delivers written notice of the
alleged failure, or (B) fails to fulfill or complete a
condition to the obligations of that party (which condition is
not waived) by reason of a breach by that party of its
obligations hereunder, or (ii) if any condition to the
obligations of that party is not
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satisfied (other than by reason of a breach by that party of
its obligations hereunder), and it reasonably appears that
the condition cannot be satisfied prior to the Termination
Date;
(d) unilaterally by Buyer or HR if Target, through
its Board of Directors in the exercise of its duties under
applicable law, either fails to recommend to Target's
stockholders the approval of this Plan of Merger and the
transactions contemplated hereby or withdraws such
recommendation; and
(e) unilaterally by either Buyer or Target upon
execution of a definitive agreement by Target in connection
with an Acquisition Proposal.
Section 8.2 EFFECT OF TERMINATION. In the event of termination
of this Plan of Merger by either Target, HR, or Buyer as provided in Section
8.1, this Plan of Merger shall forthwith become void and there shall be no
further obligation on the part of either Target, HR, or Buyer or their
respective officers or directors (except as set forth in this Section 8.2 and
Section 6.12 which shall survive such termination).
Section 8.3 AMENDMENT. This Plan of Merger may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto and in compliance with applicable law.
Section 8.4 EXTENSION; WAIVER. At any time prior to the
Effective Time, the parties hereto may (i) extend the time for the performance
of any of the obligations or other acts of the other parties hereto, (ii) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (iii) waive compliance with any of
the agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations and warranties in this Plan of Merger shall terminate at the
Effective Time or upon the termination of this Plan of Merger pursuant to
Section 8.1, as the case may be. Each party agrees that, except for the
representations and warranties contained in this Plan of Merger and the Target
Disclosure Schedule, no party hereto has made any other representations or
warranties, and each party hereby disclaims any other representations and
warranties made by itself or any of
49
<PAGE> 124
its officers, directors, employees, agents, financial and legal advisors or
other representatives, with respect to the execution and delivery of this Plan
of Merger or the Merger contemplated herein, notwithstanding the delivery or
disclosure to any other party or any party's representatives of any
documentation or other information with respect to any one or more of the
foregoing.
Section 9.2 NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed given if delivered personally,
sent via a recognized overnight courier with delivery confirmed in writing or
sent via facsimile to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) If to Buyer and HR, to:
Healthcare Realty Trust Incorporated
3310 West End Avenue, Suite 700
Nashville, Tennessee 37203
Attn: Roger O. West
Facsimile: (615) 269-8461
With a copy to:
Theodore W. Lenz, Esq.
Waller Lansden Dortch & Davis, PLLC
511 Union Street, Suite 2100
Nashville, Tennessee 37219
Facsimile: (615) 244-6804
(b) If to Target, to:
Capstone Capital Corporation
1000 Urban Center Drive, Suite 630
Birmingham, Alabama 35242
Attn: John W. McRoberts
Facsimile: (205) 967-9066
with a copy to:
Sirote & Permutt, P.C.
2222 Arlington Avenue South
Birmingham, Alabama 35205
Attn: John H. Cooper, Esq.
Facsimile: (205) 930-5301
50
<PAGE> 125
Section 9.3 SEVERABILITY. If any term or other provision of
this Plan of Merger is invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of this Plan
of Merger shall nevertheless remain in full force and effect so long as the
economic or legal substance of the Merger is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Plan of Merger so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner to the fullest extent permitted by applicable law in order that the
Merger may be consummated as originally contemplated to the fullest extent
possible.
Section 9.4 ASSIGNMENT; BINDING EFFECT; BENEFIT. Neither this
Plan of Merger nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other parties hereto.
Subject to the preceding sentence, this Plan of Merger shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Notwithstanding anything contained in this Plan of Merger
to the contrary, nothing in this Plan of Merger, expressed or implied, is
intended to confer on any person other than the parties hereto or their
respective successors and permitted assigns any rights or remedies under or by
reason of this Plan of Merger.
Section 9.5 INCORPORATION OF EXHIBITS. The Target Disclosure
Schedule and all Exhibits attached hereto and referred to herein are hereby
incorporated herein and made a part of this Plan of Merger for all purposes as
if fully set forth herein.
Section 9.6 GOVERNING LAW. THIS PLAN OF MERGER SHALL BE
GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF MARYLAND (WITHOUT REFERENCE TO CONFLICT OF LAW PRINCIPLES).
Section 9.7 HEADINGS. The descriptive headings contained in
this Plan of Merger are included for convenience of reference only and shall not
affect in any way the meaning or interpretation of this Plan of Merger.
Section 9.8 COUNTERPARTS. This Plan of Merger may be executed
and delivered (including by facsimile transmission) in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
51
<PAGE> 126
Section 9.9 ENTIRE AGREEMENT. This Plan of Merger (including
the Exhibits and the Target Disclosure Schedule) and the Confidentiality
Agreement (which shall survive the termination of this Plan of Merger)
constitute the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision of
this Plan of Merger shall be binding upon any party hereto unless made in
writing and signed by all parties hereto.
Section 9.10 "MATERIAL ADVERSE CHANGE" OR "MATERIAL ADVERSE
EFFECT." As used in this Plan of Merger, "material adverse change" or "material
adverse effect" means, when used in connection with Buyer, HR, any HR
Subsidiary, Target or any Target Subsidiary, any change, effect, event or
occurrence that has, or is reasonably likely to have, individually or in the
aggregate, a material adverse impact on the business or financial condition of
such Person and its subsidiaries taken as a whole.
Section 9.11 "INCLUDING." As used herein, the terms
"including" and "includes" means "including without limitation."
Section 9.12 PARTIES IN INTEREST. This Plan of Merger shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Plan of Merger, express or implied, is intended to confer upon any other
person any rights or remedies of any nature whatsoever under or by reason of
this Plan of Merger.
52
<PAGE> 127
IN WITNESS WHEREOF, each of Buyer, HR and Target has caused
this Plan of Merger to be signed by their respective officers thereunto duly
authorized as of the date first written above.
HR ACQUISITION I CORPORATION
By: /s/ Timothy Wallace
-----------------------------------
Name: Timothy Wallace
Title: Executive Vice President
HEALTHCARE REALTY TRUST
INCORPORATED
By: /s/ David R. Emery
-----------------------------------
Name: David R. Emery
Title: Chief Executive Officer
CAPSTONE CAPITAL CORPORATION
By: /s/ John W. McRoberts
-----------------------------------
Name: John W. McRoberts
Title: President
53
<PAGE> 128
ANNEX B
[LETTERHEAD OF SALOMON SMITH BARNEY]
June 8, 1998
The Board of Directors
Capstone Capital Corporation
1000 Urban Center Drive
Birmingham, Alabama 35242
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of Capstone Capital Corporation
("Capstone") of the consideration to be received by such holders pursuant to the
terms and subject to the conditions set forth in the Plan and Agreement of
Merger, dated as of June 8, 1998 (the "Merger Agreement"), by and among
Healthcare Realty Trust Incorporated ("HRT"), HR Acquisition I Corporation, a
wholly owned subsidiary of HRT ("Sub"), and Capstone. As more fully described in
the Merger Agreement, (i) Sub will be merged with and into Capstone (the
"Merger") and (ii) each outstanding share of the common stock, par value $0.001
per share, of Capstone (the "Capstone Common Stock") will be converted into the
right to receive 0.8518 (the "Exchange Ratio") of a share of the common stock,
par value $0.01 per share, of HRT (the "HRT Common Stock").
In arriving at our opinion, we reviewed the Merger Agreement and held
discussions with certain senior officers, directors and other representatives
and advisors of Capstone and certain senior officers and other representatives
and advisors of HRT concerning the businesses, operations and prospects of
Capstone and HRT. We examined certain publicly available business and financial
information relating to Capstone and HRT as well as certain financial forecasts
and other information and data for Capstone and HRT which were provided to or
otherwise discussed with us by the respective managements of Capstone and HRT,
including information relating to certain strategic implications and operational
benefits anticipated to result from the Merger. We reviewed the financial terms
of the Merger as set forth in the Merger Agreement in relation to, among other
things: current and historical market prices and trading volumes of the Capstone
Common Stock and HRT Common Stock; the historical and projected earnings and
other operating data of Capstone and HRT; and the capitalization and financial
condition of Capstone and HRT. We considered, to the extent publicly available,
the financial terms of other transactions recently effected which we considered
relevant in evaluating the Merger and analyzed certain financial, stock market
and other publicly available information relating to the businesses of other
companies whose operations we considered relevant in evaluating those of
Capstone and HRT. We also evaluated the potential pro forma financial impact of
the Merger on HRT. In connection with our engagement, we were requested to
approach on a selected basis, and we held discussions with, certain third
parties to solicit indications of interest in the possible acquisition of
Capstone. In addition to the foregoing, we conducted such other analyses and
examinations and considered such other financial, economic and market criteria
as we deemed appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed by
or discussed with us. With respect to financial forecasts and other information
and data provided to or otherwise reviewed by or discussed with us, we have been
advised by the managements of Capstone and HRT that such forecasts and other
information and data were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of Capstone and
HRT as to the future financial performance of Capstone and HRT and the strategic
implications and operational benefits anticipated to result from the Merger. We
have assumed, with your consent, that the Merger will be treated as a tax-free
reorganization for federal income tax purposes and that the Merger and the
transactions contemplated thereby will not adversely affect the real estate
investment trust status of the combined entity resulting from the Merger. We are
not expressing any opinion as to what the value of the HRT Common Stock actually
will be when issued to Capstone stockholders pursuant to the Merger or the price
at which the
<PAGE> 129
The Board of Directors
Capstone Capital Corporation
June 8, 1998
Page 2
HRT Common Stock will trade subsequent to the Merger. We have not made or been
provided with an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of Capstone or HRT nor have we made any
physical inspection of the properties or assets of Capstone or HRT. We express
no view as to, and our opinion does not address, the relative merits of the
Merger as compared to any alternative business strategies that might exist for
Capstone or the effect of any other transaction in which Capstone might engage.
Our opinion is necessarily based upon information available to us, and
financial, stock market and other conditions and circumstances existing and
disclosed to us, as of the date hereof.
Smith Barney Inc. and Salomon Brothers Inc (collectively doing business as
Salomon Smith Barney) have acted as financial advisors to Capstone in connection
with the proposed Merger and will receive a fee for such services, a significant
portion of which is contingent upon the consummation of the Merger. We also will
receive a fee upon the delivery of this opinion. In the ordinary course of our
business, we and our affiliates may actively trade or hold the securities of
Capstone and HRT for our own account or for the account of our customers and,
accordingly, may at any time hold a long or short position in such securities.
We have in the past provided investment banking services to Capstone and HRT
unrelated to the proposed Merger, for which services we have received
compensation. In addition, we and our affiliates (including Travelers Group Inc.
and its affiliates) may maintain relationships with Capstone, HRT and their
respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Capstone in its evaluation of the
proposed Merger, and our opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder should vote on the
proposed Merger. Our opinion may not be published or otherwise used or referred
to, nor shall any public reference to Salomon Smith Barney be made, without our
prior written consent.
Based upon and subject to the foregoing, our experience as investment bankers,
our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Exchange Ratio is fair, from a
financial point of view, to the holders of Capstone Common Stock.
Very truly yours,
SALOMON SMITH BARNEY
<PAGE> 130
ANNEX C
[LETTERHEAD OF NATIONSBANC MONTGOMERY SECURITIES LLC]
June 8, 1998
Board of Directors
Healthcare Realty Trust Incorporated
3310 West End Avenue
Suite 700
Nashville, TN 37203
Ladies and Gentlemen:
We understand that Capstone Capital Corporation, a Maryland corporation
("Capstone"), Healthcare Realty Trust Incorporated, a Maryland corporation
("HR"), and HR Acquisition I Corporation, a Delaware corporation and a
wholly-owned subsidiary of HR ("Buyer"), propose to enter into a Plan and
Agreement of Merger dated June 8, 1998 (the "Merger Agreement"), pursuant to
which Buyer shall be merged with and into Capstone, which will be the surviving
entity and become a wholly owned subsidiary of HR (the "Merger"). Pursuant to
the Merger, as more fully described in the Merger Agreement and as further
described to us by management of Buyer, we understand that subject to certain
adjustments (i) each issued and outstanding share of common stock, $0.001 par
value per share, of Capstone ("Capstone Common Stock"), other than restricted
shares which will be redeemed prior to the Merger, shall be exchanged for 0.8518
shares common stock, $0.01 par value per share, of HR, ("HR Common Stock"), (ii)
each issued and outstanding share of Capstone Series A Preferred Stock shall be
exchanged for one share of HR voting preferred stock having substantially the
same rights and preferences as Capstone Series A Preferred Stock, (iii) each
outstanding restricted share of Capstone Common Stock (whether vested or
unvested) shall be redeemed for cash in an amount of $24.33 per restricted share
of Capstone Common Stock, (iv) all rights with respect to each option to
purchase Capstone Common Stock which is outstanding at closing, whether or not
then vested or exercisable, shall be purchased by Buyer for cash in an amount
equal to the excess of (a) $24.33 per share of Capstone Common Stock over (b)
the stated exercise price of such option, (v) all of Capstone's 10 1/2%
Convertible Subordinated Debentures due 2000 which are outstanding at closing
shall remain outstanding, and HR shall assume each and every obligation of
Capstone contained in the related indenture and (vi) all of Capstone's 6.55%
Convertible Subordinated Debentures due 2002 which are outstanding at closing
shall remain outstanding, and HR shall assume each and every obligation of
Capstone contained in the related indenture (the "Consideration"). The terms and
conditions of the Merger are set forth in more detail in the Merger Agreement.
You have asked for our opinion as investment bankers as to whether the
Consideration to be paid by HR pursuant to the Merger is fair to HR from a
financial point of view, as of the date hereof. As you are aware, we were not
retained to nor did we advise HR with respect to alternatives to the Merger or
HR's underlying decision to proceed with or effect the Merger.
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to Capstone and
HR, including their respective consolidated financial statements for recent
years and interim periods to March 31, 1998 and certain other relevant financial
and operating data relating to Capstone and HR made available to us from
published sources and from the internal records of Capstone and HR; (ii)
reviewed the Merger Agreement; (iii) reviewed certain publicly available
information concerning the trading of, and the trading market for, Capstone
Common Stock and HR Common Stock; (iv) compared Capstone from a financial point
of view with certain other publicly traded companies in the healthcare REIT
industry which we deemed to be relevant; (v) considered the financial terms, to
the extent publicly available, of selected recent business combinations of
companies in the REIT industry which we deemed to be comparable, in whole or in
part, to the Merger; (vi) reviewed and discussed with representatives of the
management of Capstone and HR certain information of a business and financial
nature regarding Capstone and HR, furnished to us by Capstone and HR, including
financial forecasts and
<PAGE> 131
related assumptions of Capstone and HR; (vii) made inquiries regarding and
discussed the Merger and the Merger Agreement and other matters related thereto
with HR's counsel; and (viii) performed such other analyses and examinations as
we have deemed appropriate.
In connection with our review, we have not assumed any obligation
independently to verify the foregoing information and have relied on its being
accurate and complete in all material respects. With respect to the financial
forecasts for Capstone and HR provided to us by their respective management,
upon their advice and with your consent we have assumed for purposes of our
opinion that the forecasts have been reasonably prepared on bases reflecting the
best available estimates and judgments of their respective management at the
time of preparation as to the future financial performance of Capstone and HR
and that they provide a reasonable basis upon which we can form our opinion. We
have also assumed that there have been no material changes in Capstone's or HR's
assets, financial condition, results of operations, business or prospects since
the respective dates of their last financial statements made available to us. We
have relied on advice of counsel and independent accountants to HR as to all
legal and financial reporting matters with respect to Capstone, the Merger and
the Merger Agreement. We have assumed that the Merger will be consummated in a
manner that complies in all respects with the applicable provisions of the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934 and all other applicable federal and state statutes, rules
and regulations. In addition, we have not assumed responsibility for reviewing
any individual credit, loan or real estate files, or making an independent
evaluation, appraisal or physical inspection of any of the assets or liabilities
(contingent or otherwise) of Capstone, nor have we been furnished with any such
appraisals. You have informed us, and we have assumed, that the Merger will be
recorded as a purchase under generally accepted accounting principles. Finally,
our opinion is based on economic, monetary and market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
Accordingly, although subsequent developments may affect this opinion, we have
not assumed any obligation to update, revise or reaffirm this opinion.
We have further assumed with your consent that the Merger will be
consummated in accordance with the terms described in the Merger Agreement,
without any further amendments thereto, and without waiver by Capstone of any of
the conditions to its obligations thereunder. We have also assumed that in the
course of obtaining the necessary regulatory approvals for the Merger, no
restrictions, including any divestiture requirements, will be imposed that could
have a meaningful effect on the contemplated benefits of the Merger.
We have acted as financial advisor to HR in connection with the Merger and
will receive a fee for our services, including rendering this opinion, a
significant portion of which is contingent upon the consummation of the Merger.
In the ordinary course of our business, we may actively trade the equity
securities of Capstone and HR for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities. NationsBank, N.A. ("NationsBank") and its affiliates maintain
active banking and other business relationships with Capstone and HR and serve
as the lead lending agent for both Capstone and HR. In addition, NationsBank and
its affiliates maintain active banking, investment banking and other business
relationships with HEALTHSOUTH Corporation. ("HEALTHSOUTH") and MedPartners,
Inc. ("MedPartners") and serve as the lead lending agent for both HEALTHSOUTH
and MedPartners. Richard M. Scrushy, Chairman of Capstone, also serves as
Chairman and CEO of HEALTHSOUTH and Chairman of MedPartners.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be paid by HR pursuant to the
Merger is fair to HR from a financial point of view, as of the date hereof.
This opinion is directed to the Board of Directors of HR in its
consideration of the Merger and is not a recommendation to any shareholder as to
how such shareholder should vote with respect to the Merger. Further, this
opinion addresses only the financial fairness of the Consideration to HR and
does not address the relative merits of the Merger and any alternatives to the
Merger, HR's underlying decision to proceed with or effect the Merger, or any
other aspect of the Merger. This opinion may not be used or referred to by HR,
or quoted or disclosed to any person in any manner, without our prior written
consent, which consent is hereby given to the inclusion of this opinion in any
proxy statement or prospectus filed with the Securities and
2
<PAGE> 132
Exchange Commission in connection with the Merger. In furnishing this opinion,
we do not admit that we are experts within the meaning of the term "experts" as
used in the Securities Act and the rules and regulations promulgated thereunder,
nor do we admit that this opinion constitutes a report or valuation within the
meaning of Section 11 of the Securities Act.
Very truly yours,
NATIONSBANC MONTGOMERY SECURITIES LLC
3
<PAGE> 133
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The MGCL permits a Maryland corporation to include in its articles of
incorporation a provision limiting the liability of its directors and officers
to the corporation and its stockholders for money damages except for liability
resulting from (a) actual receipt of an improper benefit or profit in money,
property or services or (b) active and deliberate dishonesty established by a
judgment or other final adjudication as being material to the cause of action.
The Registrant's Second Articles of Amendment and Restatement (the "Articles")
provide that, if Maryland law is amended to authorize corporate action further
limiting or eliminating the personal liability of directors or officers or
expanding such liability, then the liability of the Registrant's directors or
officers to the Registrant or its stockholders will be limited or eliminated to
the fullest extent permitted by Maryland law.
The Registrant's Articles obligate it, to the maximum extent permitted by
Maryland law, to indemnify directors, officers, employees and agents. The
Registrant's Second Amended and Restated Bylaws (the "Bylaws") obligate it, to
the maximum extent permitted by Maryland law, to indemnify and hold harmless,
and permits it to pay expenses incurred by or satisfy a judgment or fine levied
against, each director and officer. The Registrant's Articles and Bylaws also
permit the Registrant to pay expenses to any officer, employee or agent to the
same extent as its directors, and to such further extent as is consistent with
law.
The MGCL requires a corporation (unless its articles of incorporation
provide otherwise, which the Registrant's Articles do not) to indemnify a
director or officer who has been successful, on the merits or otherwise, in the
defense of any proceeding to which he is made a party by reason of his service
in that capacity. The MGCL permits a corporation to indemnify its present and
former directors and officers, among others, against judgments, penalties,
fines, settlements and reasonable expenses actually incurred by them in
connection with any proceeding to which they may be made a party by reason of
their service in those or other capacities unless it is established that (a) the
act or omission of the director or officer was material to the matter giving
rise to the proceeding and (i) was committed in bad faith or (ii) was the result
of active and deliberate dishonesty, (b) the director or officer actually
received an improper personal benefit in money, property or services or (c) in
the case of any criminal proceeding, the director or officer had reasonable
cause to believe that the act or omission was unlawful. However, a Maryland
corporation may not indemnify for an adverse judgment in a suit by or in the
right of the corporation. In addition, the MGCL requires the Registrant, as a
condition to advancing expenses, to obtain (a) a written affirmation by the
director or officer of his good faith belief that he has met the standard of
conduct necessary for indemnification by the Registrant as authorized by the
Bylaws and (b) a written statement by or on his behalf to repay the amount paid
or reimbursed by the Registrant if it shall ultimately be determined that the
standard of conduct was not met.
In addition, the Registrant's Articles and Bylaws provide that it may
purchase and maintain liability insurance, or make other arrangements for such
obligations or otherwise, to the extent permitted by the law of the State of
Maryland, whether or not the corporation would have the power to indemnify
against liability under the provisions of such law. The Bylaws also provide that
the indemnification provisions contained therein shall not be construed as a
limitation upon the power of the corporation to enter into contracts or
undertakings of indemnity with a director, officer, employee or agent of the
Registrant, nor shall it be construed as a limitation upon any other rights to
which a person seeking indemnification may be entitled under any agreement, vote
of shareholders or his official capacity and as to action in another capacity
while holding office. These indemnification provisions are also applicable to
the officers (including without limitation the Chairman, Treasurer, and
Assistant Treasurer) appointed to serve in the administration and management of
any separate, segregated fund established for purposes of collecting and
distributing voluntary employee political contributions to federal, state or
local election campaigns pursuant to the Federal Election Campaign Act of 1971,
as amended or any similar federal, state or local statute or ordinance.
The Registrant's Bylaws permit it to purchase and maintain liability
insurance for directors, officers, employees and agents of the Registrant as and
to the extent permitted by Maryland law. The Registrant does
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<PAGE> 134
not maintain any insurance on behalf of its directors and officers against
liability asserted against or incurred by such persons in or arising from their
capacity as such.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling the Registrant
pursuant to the foregoing provisions, the Registrant has been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S>
2.1 -- Plan and Agreement of Merger, dated as of June 8, 1998, by
and among HR Acquisition I Corporation, the Registrant and
Capstone Capital Corporation(1)
3.1 -- Second Articles of Amendment and Restatement of the
Registrant(2)
3.2 -- Second Amended and Restated Bylaws of the Registrant(3)
3.3 -- Form of Articles Supplementary of the Registrant classifying
the 8 7/8% Series A Voting Cumulative Preferred Stock
4.1 -- Specimen Common Stock Certificate(4)
4.2 -- Specimen 8 7/8% Series A Voting Cumulative Preferred Stock
Certificate
4.3 -- Indenture for the 10 1/2% Convertible Subordinated
Debentures due 2002, dated March 30, 1995, between Capstone
Capital Corporation and AmSouth Bank of Alabama, N.A.
4.4 -- Form of First Supplemental Indenture for the 10 1/2%
Convertible Subordinated Debentures due 2002, dated
, 1998, among Registrant, Capstone Capital
Corporation and AmSouth Bank of Alabama*
4.5 -- Indenture dated as of March 14, 1997, between Capstone
Capital Corporation and AmSouth Bank of Alabama
4.6 -- First Supplemental Indenture for the 6.55% Convertible
Subordinated Debentures due 2002, dated as of March 14,
1997, between Capstone Capital Corporation and AmSouth Bank
of Alabama
4.7 -- Form of Second Supplemental Indenture for the 6.55%
Convertible Subordinated Debentures due 2002, dated
, 1998, among Registrant, Capstone Capital
Corporation and AmSouth Bank of Alabama*
5 -- Opinion of Waller Lansden Dortch & Davis, A Professional
Limited Liability Company
8 -- Opinion of Farris, Warfield & Kanaday PLC, as to tax matters
10.1 -- Form of Consulting Agreement*
10.2 -- Form of Asset Purchase Agreement, dated , 1998,
between Capstone Capital Corporation and Orthopaedic
Surgeons, Inc.
11 -- Statement re computation of earnings per share(5)
21 -- List of subsidiaries of the Registrant(6)
23.1 -- Consent of KPMG Peat Marwick LLP
23.2 -- Consent of Ernst & Young LLP
23.3 -- Consent of Waller Lansden Dortch & Davis, A Professional
Limited Liability Company (included in opinion filed as
Exhibit 5)
23.4 -- Consent of Farris, Warfield & Kanaday PLC (included in
opinion filed as Exhibit 8)
24.1 -- Power of Attorney (included on page II-5)
</TABLE>
II-2
<PAGE> 135
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ------- -----------------------
<C> <C> <S>
99.1 -- Consent of Salomon Smith Barney
99.2 -- Consent of NationsBanc Montgomery Securities LLC (included
in opinion filed as Annex C of the Joint Proxy
Statement-Prospectus)
99.3 -- Form of Proxy for Healthcare Realty holders of Common Stock
99.4 -- Form of Proxy for Capstone holders of Common Stock
99.5 -- Form of Proxy for Capstone holders of Preferred Stock
</TABLE>
- ---------------
* To be filed by amendment.
(1) Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report
on Form 8-K, filed on June 12, 1998.
(2) Incorporated by reference to Exhibit 3.1 to the Registrant's Registration
Statement on Form S-11, (No. 33-60506).
(3) Incorporated by reference to Exhibit 3.2 to the Registrant's Registration
Statement on Form S-11 (No. 33-72860).
(4) Incorporated by reference to Exhibit 4 to the Registrant's Registration
Statement on Form S-11 (No. 33-60506).
(5) Incorporated by reference to Part I, Item 1, footnote 9 of the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1998.
(6) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1997.
ITEM 22. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
Registration Statement to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
Registration Statement thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20% change in the maximum aggregate offering
price set forth in the "Calculation of Registration Fee" table in the
effective Registration Statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) For the purpose of determining any liability under the Securities Act,
each such Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a Registration Statement any of
the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's
II-3
<PAGE> 136
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
The undersigned Registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this Registration Statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The Registrant undertakes that every prospectus: (i) that is filed pursuant
to the paragraph immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Securities Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant, pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted against the
Registrant by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
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<PAGE> 137
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Nashville, State of
Tennessee, on July 23, 1998.
HEALTHCARE REALTY TRUST
INCORPORATED
By: /s/ DAVID R. EMERY
------------------------------------
David R. Emery
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David R. Emery and Timothy G. Wallace, and each
of them, his true and lawful attorney-in-fact, as agent and with full power of
substitution and resubstitution for him and in his name, place and stead, in any
and all capacity, to sign any or all amendments to this Registration Statement
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agents full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully and to all intents and purposes as they might or be in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, and their substitute or substitutes, may lawfully do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ DAVID R. EMERY Chairman, President and Chief July 23, 1998
- ----------------------------------------------------- Executive Officer (Principal
David R. Emery Executive Officer)
/s/ TIMOTHY G. WALLACE Executive Vice President and July 23, 1998
- ----------------------------------------------------- Chief Financial Officer
Timothy G. Wallace (Principal Financial Officer)
/s/ FREDRICK M. LANGRECK Senior Vice President and July 23, 1998
- ----------------------------------------------------- Treasurer (Principal Accounting
Fredrick M. Langreck Officer)
/s/ ERROL L. BIGGS, PH.D. Director July 23, 1998
- -----------------------------------------------------
Errol L. Biggs, Ph.D.
/s/ THOMPSON S. DENT Director July 23, 1998
- -----------------------------------------------------
Thompson S. Dent
/s/ CHARLES RAYMOND FERNANDEZ, M.D. Director July 23, 1998
- -----------------------------------------------------
Charles Raymond Fernandez, M.D.
/s/ BATEY M. GRESHAM, JR. Director July 23, 1998
- -----------------------------------------------------
Batey M. Gresham, Jr.
</TABLE>
II-5
<PAGE> 138
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ MARLIESE E. MOONEY Director July 23, 1998
- -----------------------------------------------------
Marliese E. Mooney
/s/ EDWIN B. MORRIS, III Director July 23, 1998
- -----------------------------------------------------
Edwin B. Morris, III
/s/ JOHN KNOX SINGLETON Director July 23, 1998
- -----------------------------------------------------
John Knox Singleton
</TABLE>
II-6
<PAGE> 1
EXHIBIT 3.3
[FORM OF ARTICLES SUPPLEMENTARY]
OF
HEALTHCARE REALTY TRUST INCORPORATED
Healthcare Realty Trust Incorporated, a corporation organized and
existing under the laws of the State of Maryland (the "Corporation"), hereby
certifies to the State Department of Assessments and Taxation of Maryland that:
FIRST: Under a power contained in Article V of the Corporation's Second
Articles of Amendment and Restatement, including these Articles Supplementary
(the "Articles"), the Board of Directors, by unanimous written consent dated as
of _______________, 1998, has classified and designated 3,000,000 shares (the
"Shares") of Preferred Stock (as defined in the Articles) as a separate class of
preferred stock to be known as 8 7/8% Series A Voting Cumulative Preferred
Stock, $.01 par value per share ("Series A Preferred Stock"), with the
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications, and term and conditions of redemption as follows:
8 7/8% Series A Voting Cumulative Preferred Stock
(A) Certain Definitions:
Unless the context otherwise requires, the terms defined in this
paragraph (A) shall have, for all purposes of the provisions of the Articles in
respect of the Series A Preferred Stock, the meanings herein specified (with
terms defined in the singular having comparable meanings when used in the
plural).
Business Day. The term "Business Day" shall mean any day, other than a
Saturday or Sunday, that is neither a legal holiday nor a day on which banking
institutions in New York City are authorized or required by law, regulation or
executive order to close.
Code. The term "Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
Common Stock. The term "Common Stock" shall mean the common stock, $.01
par value per share, of the Corporation.
Dividend Payment Date. The term "Dividend Payment Date" shall have the
meaning set forth in subparagraph (C)(2) below.
<PAGE> 2
Dividend Period. The term "Dividend Period" shall mean the period from,
and including, the Initial Issue Date to, but not including, the first Dividend
Payment Date and thereafter, each quarterly period from, and including, the
Dividend Payment Date to, but not including, the next Dividend Payment Date.
Dividend Record Date. The term "Dividend Record Date" shall mean the
first day of the calendar month in which the applicable Dividend Payment Date
falls or on such other date designated by the Board of Directors of the
Corporation for the payment of the dividends that is not more than 30 nor less
than ten days prior to such Dividend Payment Date.
Excess Shares. The term "Excess Shares" shall have the meaning set
forth in Article VI of the Articles.
Initial Issue Date. The term "Initial Issue Date" shall mean the date
shares of Series A Preferred Stock are first issued by the Corporation.
Liquidation Preference. The term "Liquidation Preference" shall mean
$25.00 per share.
Redemption Date. The term "Redemption Date" shall have the meaning set
forth in subparagraph (E)(1) below.
Redemption Price. The term "Redemption Price" shall mean a price per
share equal to $25.00 together with accrued and unpaid dividends, if any,
thereon to the Redemption Date.
REIT. The term "REIT" shall mean a real estate investment trust under
Section 856 of the Code.
Series A Preferred Stock. The term "Series A Preferred Stock" shall
mean the 8 7/8% Series A Voting Cumulative Preferred Stock. $.01 par value per
share, of the Corporation.
(B) Rank. The Series A Preferred Stock shall, with respect to dividend rights
and rights upon liquidation, dissolution or winding up of the Corporation, rank
(a) senior to all classes or series of Common Stock of the Corporation, and to
all equity securities ranking junior to such Series A Preferred Stock; (b) on a
parity with all equity securities issued by the Corporation the terms of which
specifically provide that such equity securities rank on a parity with the
Series A Preferred Stock; and (c) junior to all equity securities issued by the
Corporation the terms of which specifically provide that such equity securities
rank senior to the Series A Preferred Stock. The term "equity securities" shall
not include convertible debt securities.
2
<PAGE> 3
(C) Dividends.
(1) The record holders of the then outstanding shares of Series A
Preferred Stock shall be entitled to receive cumulative preferential cash
dividends, when and as authorized by the Board of Directors of the Corporation,
out of funds legally available for payment of dividends, at the rate of 8 7/8%
per annum of the Liquidation Preference (equivalent to a fixed annual amount of
$25.00 per share).
(2) Dividends on shares of Series A Preferred Stock shall accrue and be
cumulative from the Initial Issue Date. Dividends shall be payable quarterly in
arrears on or before the last Business Day in February, May, August and November
of each year (each, a "Dividend Payment Date"), commencing on _____________,
1998. The amount of dividends payable on Series A Preferred Stock for each full
Dividend Period shall be computed by dividing by four the annual dividend rate
set forth in subparagraph (C)(1) above. Dividends payable in respect of the
first Dividend Period and any subsequent Dividend Period which is less than a
full Dividend Period in length will be prorated and computed on the basis of a
360-day year consisting of 12 30-day months. Dividends shall be paid to the
holders of record of the Series A Preferred Stock as their names appear on the
stock transfer records of the Corporation at the close of business on the
Dividend Record Date for such dividends. Dividends in respect of any past
Dividend Periods that are in arrears may be authorized and paid at any time to
holders of record on the Dividend Record Date thereof. Any dividend payment made
on shares of Series A Preferred Stock shall be first credited against the
earliest accrued but unpaid dividend due which remains payable.
(3) No dividends on shares of Series A Preferred Stock shall be
authorized by the Board of Directors of the Corporation or paid or set apart for
payment by the Corporation at such time as the terms and provisions of any
agreement of the Corporation, including any agreement relating to its
indebtedness, prohibits such authorization, payment or setting apart for payment
or provides that such authorization, payment or setting apart for payment would
constitute a breach hereof or a default thereunder, or if such authorization or
payment shall be restricted or prohibited by law.
(4) Notwithstanding the foregoing, dividends on the Series A Preferred
Stock will accrue whether or not the terms and provisions set forth in
subparagraph (C)(3) hereof at any time prohibit the current payment of
dividends, whether or not there are funds legally available for the payment of
such dividends and whether or not such dividends are authorized. Accrued but
unpaid dividends on the Series A Preferred Stock will accumulate as of the
Dividend Payment Date on which they first become payable. Except as set forth in
the next sentence, no dividends will be authorized or paid or set apart for
payment on any stock of the Corporation or any other series of Preferred Stock
ranking as to dividends on a parity with or junior to the Series A Preferred
Stock (other than a dividend in shares of Common Stock or
3
<PAGE> 4
in shares of any other class of stock ranking junior to the Series A Preferred
Stock as to dividends and upon liquidation) for any period unless full
cumulative dividends have been paid or set apart for such payment on the Series
A Preferred Stock for all past Dividend Periods and the then current Dividend
Period. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the Series A Preferred Stock and the shares of
any other series of Preferred Stock ranking on a parity as to dividends with the
Series A Preferred Stock, all dividends authorized upon the Series A Preferred
Stock and any other series of Preferred Stock ranking on a parity as to
dividends with the Series A Preferred Stock shall be authorized pro rata so that
the amount of dividends authorized per share of Series A Preferred Stock and
such other series of Preferred Stock shall in all cases bear to each other the
same ratio that accrued dividends per share on the Series A Preferred Stock and
such other series of Preferred Stock (which shall not include any accrual in
respect of unpaid dividends for prior Dividend Periods if such Preferred Stock
does not have a cumulative dividend) bear to each other. No interest, or sum of
money in lieu of interest, shall be payable in respect of any dividend payment
or payments on the Series A Preferred Stock which may be in arrears.
(5) Except as provided in subparagraph (C)(4), unless full cumulative
dividends on the Series A Preferred Stock have been or contemporaneously are
authorized and paid or authorized and a sum sufficient for the payment thereof
is set apart for payment for all past Dividend Periods and the then current
Dividend Period, no dividends (other than in shares of Common Stock or other
shares of stock ranking junior to the Series A Preferred Stock as to dividends
and upon liquidation) shall be authorized or paid or set aside for payment nor
shall any other distribution be authorized or made upon the Common Stock, or any
other stock of the Corporation ranking junior to or on a parity with the Series
A Preferred Stock as to dividends or upon liquidation, nor shall any shares of
Common Stock, or any other shares of stock of the Corporation ranking junior to
or on a parity with the Series A Preferred Stock as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such shares) by the Corporation (except by conversion into or
exchange for other stock of the Corporation ranking junior to the Series A
Preferred Stock as to dividends and upon liquidation). Holders of shares of the
Series A Preferred Stock shall not be entitled to any dividend, whether payable
in cash, property or stock, in excess of full cumulative dividends on the Series
A Preferred Stock as provided above. Any dividend payment made on shares of the
Series A Preferred Stock shall be credited against the earliest accrued but
unpaid dividend due with respect to such shares which remains payable.
(6) If, for any taxable year, the Corporation elects to designate as
"capital gain dividends" (as defined in Section 856 of the Code) any portion
(the "Capital Gains Amount") of the dividends paid or made available for the
year to holders of
4
<PAGE> 5
all classes of stock (the "Total Dividends"), then the Capital Gains Amount
allocable to holders of the Series A Preferred Stock shall be the amount that
the total dividends paid or made available to the holders of the Series A
Preferred Stock for the year bears to the Total Dividends.
(D) Liquidation Preference.
(1) Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Corporation, the holders of Series A Preferred
Stock shall be entitled to receive out of the assets of the Corporation legally
available for distribution to its stockholders a distribution in cash or
property at its fair market value as determined by the Board of Directors of the
Corporation in the amount of the Liquidation Preference plus an amount equal to
all dividends accrued and unpaid thereon to the date of such liquidation,
dissolution or winding up, before any distribution of assets is made to holders
of Common Stock or any other class or series of stock of the Corporation that
ranks junior to the Series A Preferred Stock as to liquidation rights.
(2) In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the legally available assets of the
Corporation are insufficient to pay the amount of the Liquidation Preference
plus an amount equal to all dividends accrued and unpaid on all outstanding
shares of the Series A Preferred Stock and the corresponding amounts payable on
each class or series of stock ranking on a parity with the Series A Preferred
Stock as to the distribution of assets upon liquidation, dissolution or winding
up of the affairs of the Corporation, then the holders of the Series A Preferred
Stock and all such other classes or series of 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.
(3) After payment of the full amount of liquidating distributions to
which they are entitled, the holders of the Series A Preferred Stock will have
no right or claim to any of the remaining assets of the Corporation.
(4) Written notice of any such liquidation, dissolution or winding up
of the Corporation stating the payment date or dates when, and the place or
places where, the amounts distributable in such circumstances shall be payable,
shall be given no less than 30 nor 60 days prior to the payment date stated
therein, to each record holder of the Series A Preferred Stock.
(5) Neither the consolidation or merger of the Corporation with or into
any other corporation, trust or entity or of any other corporation with or into
the Corporation, nor the sale, lease or conveyance of all or substantially all
of the property or business of the Corporation to another corporation or any
other entity, shall be deemed to constitute a liquidation, dissolution or
winding up of the Corporation within the meaning of this paragraph (D).
5
<PAGE> 6
(6) In determining whether a distribution by dividend, redemption or
other acquisition of shares of the Corporation or otherwise is permitted under
Maryland law, no effect shall be given to amounts that would be needed, if the
Corporation were to be dissolved at the time of the distribution, to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
on dissolution are superior to those receiving the distribution.
(E) Redemption by the Corporation.
(1) The Series A Preferred Stock is not redeemable prior to September
30, 2002. On or after September 30, 2002, the Corporation, at its option upon
not less than 30 nor more than 60 days written notice, may redeem shares of the
Series A Preferred Stock, in whole or in part, at any time or from time to time
(the "Redemption Date"), for cash at the Redemption Price, without interest. If
less than all of the outstanding Series A Preferred Stock is to be redeemed, the
Series A Preferred Stock to be redeemed shall be selected pro rata (as nearly as
may be practicable without creating fractional shares) or by any other equitable
method determined by the Corporation.
(2) (a) The Redemption Price of the Series A Preferred Stock may be
paid solely from proceeds of the sale of the capital stock of the Corporation
and not from any other source. For purposes of the preceding sentence, "capital
stock" means any equity securities (including Common Stock and Preferred Stock)
shares, interests, participation or other ownership interests (however
designated) and any rights (other than debt securities convertible into or
exchangeable for equity securities) or options to purchase any of the foregoing.
(b) Unless full cumulative dividends on all shares of Series A
Preferred Stock shall have been or contemporaneously are authorized and paid or
authorized and a sum sufficient for the payment thereof set apart for payment
for all past Dividend Periods and the then current Dividend Period, no shares of
Series A Preferred Stock shall be redeemed unless all outstanding shares of
Series A Preferred Stock are simultaneously redeemed, and the Corporation shall
not purchase or otherwise acquire directly or indirectly any shares of Series A
Preferred Stock (except by exchange for capital stock of the Corporation ranking
junior to the Series A Preferred Stock as to dividends and upon liquidation);
provided, however, that the foregoing shall not prevent the purchase or
acquisition of shares of Series A Preferred Stock pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding shares of
Series A Preferred Stock.
(3) Immediately prior to any redemption of Series A Preferred Stock,
the Corporation shall pay, in cash, any accumulated and unpaid dividends through
the Redemption Date, unless a Redemption Date falls after a Dividend Record Date
and prior to the corresponding Dividend Payment Date, in which cash each holder
of Series A Preferred Stock at the close of business on such Dividend Record
Date
6
<PAGE> 7
shall be entitled to the dividend payable on such shares on the corresponding
Dividend Payment Date notwithstanding the redemption of such shares before such
Dividend Payment Date. Except as provided above, the Corporation will make no
payment or allowance for unpaid dividends, whether or not in arrears, on Series
A Preferred Stock which is redeemed.
(4) (a) Notice of redemption will be given by publication in a
newspaper of general circulation in the City of New York, such publication to be
made once a week for two successive weeks commencing not less than 30 nor more
than 60 days prior to the Redemption Date. A similar notice will be given by the
Corporation, not less than 30 nor more than 60 days prior to the Redemption
Date, addressed to the respective holders of record of the Series A Preferred
Stock to be redeemed. No failure to give such notice or any defect thereof or in
the sending thereof shall affect the validity of the proceedings for the
redemption of any shares of Series A Preferred Stock except as to the holder to
whom notice was defective or not given.
(b) In addition to any information required by law or by the
applicable rules of any exchange upon which Series A Preferred Stock may be
listed or admitted to trading, such notice shall state: (i) the Redemption Date;
(ii) the Redemption Price; (iii) the number of shares of Series A Preferred
Stock to be redeemed; (iv) the place or places where the certificates
representing the shares of Series A Preferred Stock are to be surrendered for
payment of the Redemption Price; and (v) that dividends on the shares to be
redeemed will cease to accrue on such Redemption Date. If less than all of the
Series A Preferred Stock held by any holder is to be redeemed, the notice mailed
to such holder shall also specify the number of shares of Series A Preferred
Stock held by such holder to be redeemed.
(c) If notice of redemption of any shares of Series A
Preferred Stock has been given and if the funds necessary for such redemption
have been set aside by the Corporation in trust for the benefit of the holders
of any shares of Series A Preferred Stock so called for redemption, then from
and after the Redemption Date dividends will cease to accrue on such shares of
Series A Preferred Stock, such shares of Series A Preferred Stock shall no
longer be deemed outstanding and all rights of the holders of such shares will
terminate, except the right to receive the Redemption Price. Holders of Series A
Preferred Stock to be redeemed shall surrender such Series A Preferred Stock at
the place designated in such notice and, upon surrender in accordance with said
notice of the certificates for shares of Series A Preferred Stock so redeemed
(properly endorsed or assigned for transfer, if the Corporation shall so require
and the notice shall so state), such shares of the Series A Preferred Stock
shall be redeemed by the Corporation at the Redemption Price. In case fewer than
all the shares of the Series A Preferred Stock represented by any such
certificate are redeemed, a new certificate or certificates shall be issued
representing the unredeemed shares of Series A Preferred Stock without cost to
the holder thereof.
7
<PAGE> 8
(5) The deposit of funds with a bank or trust corporation for the
purpose of redeeming Series A Preferred Stock shall be irrevocable except that:
(a) The Corporation shall be entitled to receive from such
bank or trust corporation the interest or other earnings, if any, earned on any
money so deposited in trust, and the holder of any shares redeemed shall have no
claim to such interest or other earnings; and
(b) Any balance of monies so deposited by the Corporation and
unclaimed by the holders of the Series A Preferred Stock entitled thereto at the
expiration of two years from the applicable Redemption Date shall be paid,
together with any interest or other earnings earned thereon, to the Corporation,
and after any such repayment, the holders of the shares entitled to the funds so
repaid to the Corporation shall look only to the Corporation for payment without
interest or other earnings.
(6) No Series A Preferred Stock may be redeemed except with funds
legally available for the payment of the Redemption Price.
(7) Any shares of Series A Preferred Stock that shall at any time have
been redeemed shall, after such redemption, have the status of authorized but
unissued preferred stock, without designation as to series until such shares are
once more designated as part of a particular series by the Board of Directors of
the Corporation.
(F) Voting Rights.
(1) Except where a vote by class is provided herein or required by law,
the holders of Series A Preferred Stock shall be entitled to one vote per share
of Series A Preferred Stock, voting together with the holders of Common Stock,
on all matters submitted to stockholders for a vote.
(2) Notwithstanding the foregoing, whenever dividends on any shares of
Series A Preferred Stock shall be in arrears for six or more quarterly periods
(a "Preferred Dividend Default"), the holders of such shares of Series A
Preferred Stock (voting together as a class with all other series of Preferred
Stock ranking on a parity with the Series A Preferred Stock as to dividends or
upon liquidation ("Parity Preferred") upon which like voting rights have been
conferred and are exercisable) will be entitled to vote for the election of a
total of two additional directors of the Corporation (the "Preferred Stock
Directors") at a special meeting called by the holders of record of at least 20%
of the Series A Preferred Stock or the holders of record of at least 20% of any
series of Parity Preferred so in arrears (unless such request is received less
than 90 days before the date fixed for the next annual or special meeting of the
stockholders) or at the next annual meeting of stockholders, and at each
subsequent annual meeting until all dividends accumulated on such shares of
Series A Preferred Stock for the past Dividend
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<PAGE> 9
Periods and the dividend for the then current Dividend Period shall have been
fully paid or authorized and a sum sufficient for the payment thereof set aside
for payment.
(3) If and when all accumulated dividends and the dividend for the then
current Dividend Period on the Series A Preferred Stock shall have been paid in
full or set aside for payment in full, the holders thereof shall be divested of
the voting rights set forth in subparagraph (F)(2) above (subject to revesting
in the event of each and every Preferred Dividend Default) and, if all
accumulated dividends and the dividend for the then current Dividend Period have
been paid in full or set aside for payment in full on all series of Parity
Preferred upon which like voting rights have been conferred and are exercisable,
the term of office of each Preferred Stock Director so elected shall immediately
terminate. Any Preferred Stock Director may be removed at any time with or
without cause by, and shall not be removed otherwise than by the vote of, the
holders of record of a majority of the outstanding shares of the Series A
Preferred Stock when they have the voting rights described above (voting
together as a class with all series of Parity Preferred upon which like voting
rights have been conferred and are exercisable). So long as a Preferred Dividend
Default shall continue, any vacancy in the office of a Preferred Stock Director
may be filled by written consent of the Preferred Stock Director remaining in
office, or if none remains in office, by a vote of the holders of record of a
majority of the outstanding shares of Series A Preferred Stock when they have
the voting rights described above (voting together as a class with all series of
Parity Preferred upon which like voting rights have been conferred and are
exercisable). The Preferred Stock Directors shall each be entitled to one vote
per director on any matter.
(4) So long as any shares of Series A Preferred Stock remain
outstanding, the Corporation will not, without the affirmative vote or consent
of the holders of at least two-thirds of the shares of the Series A Preferred
Stock outstanding at the time, given in person or by proxy, either in writing or
at a meeting (voting separately as a class), (a) authorize or create, or
increase the authorized or issued amount of, any class or series of stock
ranking prior to the Series A Preferred Stock with respect to payment of
dividends or the distribution of assets upon liquidation, dissolution or winding
up or reclassify any authorized stock of the Corporation into such shares, or
create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such shares; or (b) amend, alter or repeal
the provisions of the Corporation's Articles, as amended, or these Articles
Supplementary whether by merger, consolidation or otherwise (an "Event"), so as
to materially and adversely affect any right, preference, privilege or voting
power of the Series A Preferred Stock or the holders thereof; provided, however,
that with respect to the occurrence of any Event set forth in subparagraph
(F)(4)(b) above, so long as the Series A Preferred Stock remains outstanding
with the terms thereof materially unchanged, the occurrence of any such Event
shall not be deemed to materially and adversely affect such rights, preferences,
privileges or voting power
9
<PAGE> 10
of holders of the Series A Preferred Stock; and provided, further, that (i) any
increase in the amount of the authorized Preferred Stock or the creation or
issuance of any other series of Preferred Stock, or (ii) any increase in the
amount of authorized shares of such series, in each case ranking on a parity
with or junior to the Series A Preferred 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.
(5) The foregoing voting provisions will not apply if, at or prior to
the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding shares of Series A Preferred Stock
shall have been redeemed or called for redemption upon proper notice and
sufficient funds shall have been deposited in trust to effect such redemption.
(G) Conversion. The Series A Preferred Stock is not convertible into or
exchangeable for any other property or securities of the Corporation.
(H) Notice. All notices to be given to the holders of Series A Preferred Stock
shall be given by (i) mail, postage prepaid, by overnight delivery courier
service, (ii) by facsimile transmission, or (iii) by personal delivery, to the
holders of record, addressed to the address or sent to the facsimile number
shown by the records of the Corporation.
(I) Restrictions on Ownership and Transfer. The shares of Series A Preferred
Stock are subject to the provisions of Article VI of the Articles, including
without limitation the provisions relative to Excess Shares.
SECOND: These Articles Supplementary have been approved by the
Corporation's Board of Directors in the manner and by the vote required by law.
THIRD: These Articles Supplementary shall be effective at the time the
State Department of Assessments and Taxation of Maryland accepts these Articles
Supplementary for record.
10
<PAGE> 11
IN WITNESS WHEREOF, HEALTHCARE REALTY TRUST INCORPORATED has caused
Articles Supplementary to be signed in its name and on its behalf by its
President and attested by its Secretary, and said officers of the Corporation
further acknowledge these Articles Supplementary to be the corporate act of the
Corporation and, state under penalties of perjury that to the best of their
knowledge, information and belief the matters and facts therein set forth with
respect to approval are true in all material respects.
HEALTHCARE REALTY TRUST
INCORPORATED
------------------------------------
By: David R. Emery, President
Attest:
By:
--------------------------------
Rita H. Todd, Secretary
11
<PAGE> 1
EXHIBIT 4.2
[Front of Certificate]
Number Shares
----------- -----------
Incorporated Under The Laws See Reverse For Certain Legends
of the State of Maryland
This Certificate Is Transferable in New CUSIP ____________
York, New York or Boston, Massachusetts
HEALTHCARE REALTY TRUST
INCORPORATED
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT ________________________
IS THE REGISTERED HOLDER OF ______________________
- --------------------------------------------------------------------------------
FULLY-PAID AND NON-ASSESSABLE SHARES OF 8 7/8% SERIES A VOTING
CUMULATIVE PREFERRED STOCK, PAR VALUE $.01 PER SHARE, OF
Healthcare Realty Trust Incorporated transferable on the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
the surrender of this certificate properly endorsed. This certificate is not
valid until countersigned by the Transfer Agent and registered by the Registrar.
In Witness Whereof the Corporation has affixed the facsimile signatures
of its authorized officers and the facsimile of its seal to be printed hereon.
Dated:
[SEAL OF HEALTHCARE REALTY TRUST INCORPORATED]
/s/ Rita H. Todd /s/ David R. Emery
Secretary President
Countersigned and Registered:
- ---------------------------------
Transfer Agent and Registrar
By:
Authorized Signature
<PAGE> 2
[Reverse of Certificate]
HEALTHCARE REALTY TRUST INCORPORATED
IF NECESSARY TO EFFECT COMPLIANCE BY THE CORPORATION WITH CERTAIN
PROVISIONS OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE TRANSFER OF THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY BE PROHIBITED UPON THE TERMS AND
CONDITIONS SET FORTH IN THE ARTICLES OF INCORPORATION AND BYLAWS OF THE
CORPORATION. THE CORPORATION WILL FURNISH A COPY OF SUCH TERMS AND CONDITIONS TO
THE REGISTERED HOLDER OF THIS CERTIFICATE UPON REQUEST AND WITHOUT CHARGE. TO
ENABLE THE CORPORATION TO ENSURE THAT IT COMPLIES WITH THE PROVISIONS OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE HOLDER OF THE SHARES REPRESENTED
BY THIS CERTIFICATE AND ANY PROPOSED TRANSFEREE OF SUCH HOLDER SHALL UPON DEMAND
DISCLOSE TO THE CORPORATION IN WRITING SUCH INFORMATION AS THE CORPORATION MAY
DEEM NECESSARY FOR SUCH PURPOSES.
THE CORPORATION HAS THE AUTHORITY TO ISSUE STOCK OF MORE THAN ONE
CLASS. THE CORPORATION WILL, ON REQUEST AND WITHOUT CHARGE, FURNISH A FULL
STATEMENT OF THE DESIGNATIONS AND ANY PREFERENCES, CONVERSION AND OTHER RIGHTS,
VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS, AND
TERMS AND CONDITIONS OF REDEMPTION OF THE STOCK OF EACH CLASS WHICH THE
CORPORATION IS AUTHORIZED TO ISSUE.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with the right of survivorship and not
as tenants in common
UNIF GIFT MIN ACT Custodian
----------------------- ---------------------------
(Cust) (Minor)
under Uniform Gifts to Minors Act
---------------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ________________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- ------------------------------------------
- ------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING ZIP CODE OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------------
of the 8 7/8 Series A Voting Cumulative Preferred Stock represented by
the within certificate, and do hereby irrevocably constitute and
appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within named Corporation
with full power of substitution in the premises.
Dated:____________________ Signature:
-------------------------------------
Notice: The signature to this
assignment must correspond with the
name as written upon the face of the
Certificate in every particular,
without alteration or enlargement or
any change whatever.
Signature guaranteed:
-------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION
PROGRAM) PURSUANT TO S.E.C. RULE
17Ad-15.
<PAGE> 1
EXHIBT 4.3
$50,000,000*
10 1/2% Convertible Subordinated Debentures due 2002
-----------------------------------------
CAPSTONE CAPITAL CORPORATION
INDENTURE
Dated as of March 30, 1995
AMSOUTH BANK OF ALABAMA, as Trustee
-----------------------------------------
- --------
* $57,500,000 if the Over-Allotment Option is exercised in full.
<PAGE> 2
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TI INDENTURE
SECTION SECTION
------- -------
<S> <C>
310(a)(1)............................................................................ 7.10
(a)(2)............................................................................ 7.10
(a)(3)............................................................................ N.A.
(a)(4)............................................................................ N.A.
(a)(5)............................................................................ 7.10
(b)............................................................................... 7.8; 7.10
(c)............................................................................... N.A.
311(a)............................................................................... 7.11
(b)............................................................................... 7.11
(c)............................................................................... N.A.
312(a)............................................................................... 2.5
(b)............................................................................... 14.3
(c)............................................................................... 14.3
313(a)............................................................................... 7.6
(b)(1)............................................................................ 7.6
(b)(2)............................................................................ 7.6
(c)............................................................................... 7.6; 14.2
(d)............................................................................... 7.6
314(a)............................................................................... 4.7; 14.2
(b)............................................................................... N.A.
(c)(1)............................................................................ 2.2; 7.2; 14.4
(c)(2)............................................................................ 7.2; 14.4
(c)(3)............................................................................ N.A.
(d)............................................................................... N.A.
(e)............................................................................... 14.5
(f)............................................................................... N.A.
315(a)............................................................................... 7.1(b)
(b)............................................................................... 7.5; 14.2
(c)............................................................................... 7.1(a)
(d)............................................................................... 7.1(c)
(e)............................................................................... 6.13
316(a)(last sentence)................................................................ 2.9
(a)(1)(A)......................................................................... 6.11
(a)(1)(B)......................................................................... 6.12
(a)(2)............................................................................ N.A.
(b)............................................................................... 6.8, 6.12
(c)............................................................................... 10.5
317(a)(1)............................................................................ 6.3
(a)(2)............................................................................ 6.4
(b)............................................................................... 2.4
318(a)............................................................................... 14.1
</TABLE>
- --------------
N.A. means Not Applicable
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
PAGE
----
<S> <C> <C>
Section 1.1 Definitions.............................................................................. 1
Section 1.2 Incorporation by Reference of TIA........................................................ 9
Section 1.3 Rules of Construction.................................................................... 10
ARTICLE II
THE DEBENTURES
Section 2.1 Form and Dating.......................................................................... 10
Section 2.2 Execution and Authentication............................................................. 11
Section 2.3 Registrar, Paying Agent and Conversion Agent............................................. 12
Section 2.4 Paying Agent to Hold Assets in Trust..................................................... 13
Section 2.5 Debentureholder Lists.................................................................... 14
Section 2.6 Transfer and Exchange.................................................................... 14
Section 2.7 Replacement Debentures....................................................................16
Section 2.8 Outstanding Debentures....................................................................16
Section 2.9 Treasury Debentures...................................................................... 17
Section 2.10 Temporary Debentures......................................................................17
Section 2.11 Cancellation............................................................................. 18
Section 2.12 Defaulted Interest....................................................................... 18
Section 2.13 CUSIP Numbers............................................................................ 20
ARTICLE III
REDEMPTION
Section 3.1 Right of Redemption...................................................................... 20
Section 3.2 Notices to Trustee....................................................................... 21
Section 3.3 Selection of Debentures to Be Redeemed................................................... 21
Section 3.4 Notice of Redemption..................................................................... 21
Section 3.5 Effect of Notice of Redemption........................................................... 23
Section 3.6 Deposit of Redemption Price.............................................................. 23
Section 3.7 Debentures Redeemed in Part.............................................................. 24
ARTICLE IV
COVENANTS
Section 4.1 Payment of Debentures.................................................................... 24
Section 4.2 Maintenance of Office or Agency.......................................................... 25
Section 4.3 Corporate Existence...................................................................... 25
Section 4.4 Payment of Taxes and Other Claims........................................................ 26
Section 4.5 Maintenance of Properties and Insurance.................................................. 26
Section 4.6 Compliance Certificate; Notice of Default................................................ 26
</TABLE>
i
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 4.7 SEC Reports.............................................................................. 27
Section 4.8 Limitation on Status as Investment Company............................................... 28
Section 4.9 Waiver of Stay, Extension or Usury Laws.................................................. 28
ARTICLE V
SUCCESSOR CORPORATION
Section 5.1 When Company May Merge, Etc.............................................................. 29
Section 5.2 Successor Corporation Substituted........................................................ 30
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
Section 6.1 Events of Default........................................................................ 30
Section 6.2 Acceleration of Maturity Date; Rescission
and Annulment............................................................................ 33
Section 6.3 Collection of Indebtedness and Suits
for Enforcement by Trustee............................................................... 35
Section 6.4 Trustee May File Proofs of Claim......................................................... 36
Section 6.5 Trustee May Enforce Claims Without
Possession of Debentures ................................................................ 37
Section 6.6 Priorities............................................................................... 37
Section 6.7 Limitation on Suits...................................................................... 38
Section 6.8 Unconditional Right of Holders to
Receive Principal, Premium and Interest.................................................. 38
Section 6.9 Rights and Remedies Cumulative........................................................... 39
Section 6.10 Delay or Omission Not Waiver............................................................. 39
Section 6.11 Control by Holders....................................................................... 39
Section 6.12 Waiver of Past Default................................................................... 40
Section 6.13 Undertaking for Costs.................................................................... 40
Section 6.14 Restoration of Rights and Remedies....................................................... 41
ARTICLE VII
TRUSTEE
Section 7.1 Duties of Trustee........................................................................ 41
Section 7.2 Rights of Trustee........................................................................ 43
Section 7.3 Individual Rights of Trustee............................................................. 44
Section 7.4 Trustee's Disclaimer..................................................................... 44
Section 7.5 Notice of Default........................................................................ 44
Section 7.6 Reports by Trustee to Holders............................................................ 45
Section 7.7 Compensation and Indemnity............................................................... 45
Section 7.8 Replacement of Trustee................................................................... 46
Section 7.9 Successor Trustee by Merger, Etc......................................................... 48
Section 7.10 Eligibility; Disqualification............................................................ 48
Section 7.11 Preferential Collection of Claims
against Company.......................................................................... 48
Section 7.12 No Bond.................................................................................. 48
Section 7.13 Condition to Action...................................................................... 48
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
ARTICLE VIII
SATISFACTION AND DISCHARGE
PAGE
----
<S> <C> <C>
Section 8.1 Satisfaction, Discharge of the Indenture and
Defeasance of the Debentures ............................................................ 49
Section 8.2 Survival of Certain Obligations.......................................................... 50
Section 8.3 Acknowledgment of Discharge by Trustee................................................... 51
Section 8.4 Application of Trust Assets.............................................................. 51
Section 8.5 Repayment to the Company................................................................. 51
Section 8.6 Reinstatement............................................................................ 52
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 9.1 Supplemental Indentures Without Consent
of Holders............................................................................... 52
Section 9.2 Amendments, Supplemental Indentures and
Waivers With Consent of Holders.......................................................... 53
Section 9.3 Compliance with TIA...................................................................... 55
Section 9.4 Revocation and Effect of Consents........................................................ 55
Section 9.5 Notation on or Exchange of Debentures.................................................... 56
Section 9.6 Trustee to Sign Amendments, Etc.......................................................... 56
ARTICLE X
MEETINGS OF DEBENTUREHOLDERS
Section 10.1 Purposes for Which Meetings May Be Called................................................ 57
Section 10.2 Manner of Calling Meetings............................................................... 57
Section 10.3 Call of Meetings by Company or Holders................................................... 58
Section 10.4 Who May Attend and Vote at Meetings...................................................... 59
Section 10.5 Regulations May Be Made by Trustee; Conduct of
the Meeting; Voting Rights; Adjournment.................................................. 59
Section 10.6 Voting at the Meeting and Record to Be Kept.............................................. 60
Section 10.7 Exercise of Rights of Trustee or
Debentureholders May Not Be Hindered
or Delayed by Call of Meeting............................................................ 61
ARTICLE XI
SUBORDINATION
Section 11.1 Debentures Subordinated to Senior
Indebtedness............................................................................. 61
Section 11.2 No Payment on or Acceleration of Debentures
in Certain Circumstances................................................................. 62
Section 11.3 Debentures Subordinated to Prior Payment
of All Senior Indebtedness on Acceleration
of Principle of Debentures or on Dissolution,
Liquidation or Reorganization............................................................ 64
</TABLE>
iii
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 11.4 Debentureholders to Be Subrogated to Rights
of Holders of Senior Indebtedness........................................................ 66
Section 11.5 Obligations of the Company Unconditional................................................. 66
Section 11.6 Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice.......................................................... 67
Section 11.7 Application by Trustee of Assets Deposited
with It.................................................................................. 68
Section 11.8 Subordination Rights Not Impaired by Acts
or Omissions of the Company or Holders of
Senior Indebtedness...................................................................... 68
Section 11.9 Debentureholders Authorize Trustee to
Effectuate Subordination of Debentures................................................... 69
Section 11.10 Right of Trustee to Hold Senior Indebtedness............................................. 70
Section 11.11 Article XI Not to Prevent Events of Default.............................................. 70
Section 11.12 No Fiduciary Duty of Trustee to Holders of
Senior Indebtedness...................................................................... 70
ARTICLE XII
RIGHT TO REQUIRE REPURCHASE
Section 12.1 Repurchase of Debentures at Option of the Holder
Upon Change of Control................................................................... 71
Section 12.2 Notices; Method of Exercising Repurchase
Right, Etc............................................................................... 71
ARTICLE XIII
CONVERSION OF DEBENTURES
Section 13.1 Right of Conversion; Conversion Price.................................................... 74
Section 13.2 Issuance of Shares on Conversion......................................................... 74
Section 13.3 No Adjustment for Interest or Dividends.................................................. 75
Section 13.4 Adjustment of Conversion Price........................................................... 76
Section 13.5 Notice of Adjustment of Conversion Price................................................. 79
Section 13.6 Notice of Certain Corporation Action..................................................... 80
Section 13.7 Taxes on Conversions..................................................................... 81
Section 13.8 Fractional Shares........................................................................ 82
Section 13.9 Cancellation of Converted Debentures..................................................... 82
Section 13.10 Provisions in Case of Consolidation,
Merger or Sale of Assets................................................................. 82
Section 13.11 Disclaimer by Trustee of Responsibility for
Certain Matters.......................................................................... 83
Section 13.12 Covenant to Reserve Shares............................................................... 84
Section 13.13 Refusal to Convert Debentures to Protect
REIT Status.............................................................................. 84
</TABLE>
iv
<PAGE> 7
<TABLE>
<CAPTION>
ARTICLE XIV
MISCELLANEOUS
PAGE
----
<S> <C> <C>
Section 14.1 TIA Controls............................................................................. 85
Section 14.2 Notices.................................................................................. 86
Section 14.3 Communications by Holders with Other Holders............................................. 87
Section 14.4 Certificate and Opinion as to Conditions
Precedent................................................................................ 87
Section 14.5 Statements Required in Certificate or Opinion............................................ 88
Section 14.6 Legal Holidays........................................................................... 88
Section 14.7 Governing Law............................................................................ 89
Section 14.8 No Adverse Interpretation of Other Agreements............................................ 89
Section 14.9 No Recourse Against Others............................................................... 89
Section 14.10 Successors............................................................................... 90
Section 14.11 Duplicate Originals...................................................................... 90
Section 14.12 Severability............................................................................. 90
Section 14.13 Table of Contents, Headings, Etc......................................................... 90
Exhibit A Form of Debenture........................................................................A-1
</TABLE>
v
<PAGE> 8
INDENTURE, dated as of March 30, 1995, by and between Capstone
Capital Corporation, a Maryland corporation (the "Company"), and AmSouth Bank of
Alabama, an Alabama banking corporation, as trustee (the "Trustee").
Each party hereto agrees as follows for the benefit of each
other party and for the equal and ratable benefit of the Holders of the
Company's 10 1/2% Convertible Subordinated Debentures due 2002:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1 DEFINITIONS.
"Acceleration Notice" shall have the meaning
specified in Section 6.2 hereof.
"Affiliate" means any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company. For the purposes of this definition, "control" (including, with
correlative meanings, the terms "controlled by" and "under common control
with"), as used with respect to any Person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the management
or policies of such Person, whether through the ownership of voting securities
or by agreement or otherwise.
"Agent" means any Registrar, co-Registrar, Paying Agent,
Conversion Agent or agent for service of notices and demands.
"Bankruptcy Law" means Title 11, U.S. Code or any
similar federal, state or foreign law for the relief of debtors.
"Blockage Period" shall have the meaning specified in
Section 11.2(b) hereof.
"Blockage Termination Event" shall have the meaning specified
in Section 11.2(b) hereof.
"Board of Directors" means, with respect to any Person, the
Board of Directors of such Person or any committee of the Board of Directors of
such Person
1
<PAGE> 9
authorized, with respect to any particular matter, to exercise the power of the
Board of Directors of such Person.
"Board Resolution" means, with respect to any Person, a duly
adopted resolution of the Board of Directors of such Person.
"Business Day" means a day that is not a Legal Holiday.
"Change of Control" means any of the following: (i) the sale,
lease, conveyance or other disposition of all or substantially all of the
Company's assets as an entirety or substantially as an entirety to any "person"
or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of
the Exchange Act, whether or not applicable) in one or a series of transactions
or (ii) any transaction or series of transactions (as a result of a tender
offer, merger, consolidation or otherwise) that results in any "person" or
"group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act, whether or not applicable) becoming the "beneficial owner" (as
that term is used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or
not applicable, except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total voting power entitled to
vote in the election of directors of the Company.
"Closing Price" means with respect to the shares of Common
Stock of the Company on any day, (i) the last reported sales price regular way
or, in case no such reported sale takes place on such day, the average of the
reported closing bid and asked prices regular way, in either case on the New
York Stock Exchange, or (ii) if the shares of Common Stock are not listed or
admitted to trading on the New York Stock Exchange, the last reported sales
price regular way, or in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, on the
principal national securities exchange on which the shares of Common Stock are
listed or admitted to trading, or (iii) if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange, the average
of
2
<PAGE> 10
the closing bid and asked prices as furnished by any New York Stock Exchange
member firm selected from time to time by the Company for that purpose.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock of the Company, par
value $.001 per share.
"Company" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
such successor.
"Conversion Agent" shall have the meaning specified in Section
2.3 hereof.
"conversion price" shall have the meaning specified in Section
13.1 hereof.
"Corporate Trust Office" means the principal office of the
Trustee at which at any particular time its corporate trust business shall be
administered.
"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.
"current market price" shall have the meaning specified in
Section 13.4(f) hereof.
"Debenture Register" shall have the meaning specified in
Section 2.5 hereof.
"Debentures" means the 10 1/2% Convertible Subordinated
Debentures due 2002, as supplemented from time to time in accordance with the
terms hereof, issued under this Indenture.
"Default" means an event or condition, the occurrence of which
is, or with the lapse of time or giving of notice, or both, would be, an Event
of Default.
"Defaulted Interest" shall have the meaning specified in
Section 2.12 hereof.
3
<PAGE> 11
"Event of Default" shall have the meaning specified in Section
6.1 hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated by the SEC thereunder.
"Final Repurchase Put Date" shall have the meaning specified
in Section 12.2 hereof.
"GAAP" means generally accepted accounting principles as in
effect in the United States from time to time.
"Holder" or "Debentureholder" means the Person in whose name a
Debenture is registered on the Registrar's books.
"Indebtedness" with respect to any Person means: (i) any debt
(a) for money borrowed, or (b) evidenced by a bond, note, debenture, or similar
instrument (including purchase money obligations) given in connection with the
acquisition of any business, property or assets, whether by purchase, merger,
consolidation, or otherwise, but shall not include any account payable or other
obligation created or assumed by a Person in the ordinary course of business in
connection with the obtaining of materials or services, or (c) which is a direct
or indirect obligation which arises as a result of banker's acceptances or bank
letters of credit issued to secure obligations of such Person, or to secure the
payment of revenue bonds issued for the benefit of such Person, whether
contingent or otherwise; (ii) any debt of others described in the preceding
clause (i) which such Person has guaranteed or for which it is otherwise liable;
(iii) the obligation of such Person as lessee under any lease of property which
is reflected on such Person's balance sheet as a capitalized lease; and (iv) any
deferral, amendment, renewal, extension, supplement or refunding of any
liability of the kind described in any of the preceding clauses (i), (ii) and
(iii); provided, however, that, in computing the Indebtedness of any Person,
there shall be excluded any particular indebtedness if, upon or prior to the
maturity thereof, there shall have been deposited with a depository in trust
money (or evidence of indebtedness if permitted by the instrument creating such
indebtedness) in the necessary amount to pay, redeem or satisfy such
indebtedness as it
4
<PAGE> 12
becomes due, and the amount so deposited shall not be included in any
computation of the assets of such Person.
"Indenture" means this Indenture, as amended or supplemented
from time to time in accordance with the terms hereof.
"Interest Payment Date" means the stated due date of an
installment of interest on the Debentures.
"Issue Date" means the date of first issuance of the
Debentures under this Indenture.
"Legal Holiday" shall have the meaning specified in Section
14.6 hereof.
"Maturity Date," when used with respect to any Debenture,
means the date on which the principal of such Debenture becomes due and payable
as therein or herein provided, whether at the Stated Maturity or Repurchase Date
or by declaration of acceleration, call for redemption or otherwise.
"Officer" means, with respect to the Company, the Chairman of
the Board, the Chief Executive Officer, the President, any Vice President, the
Chief Financial Officer, the Treasurer, the Controller or the Secretary of the
Company.
"Officers' Certificate" means, with respect to the Company, a
certificate signed by two Officers or by an Officer and an Assistant Secretary
of the Company and otherwise complying with the requirements of Sections 14.4
and 14.5 hereof.
"Opinion of Counsel" means a written opinion from legal
counsel complying with the requirements of Sections 14.4 and 14.5 hereof. Unless
otherwise reasonably required by the Trustee, the counsel may be inside counsel
to the Company.
"Over-Allotment Option" means the option of the Underwriters
to purchase additional Debentures in the aggregate principal amount of up to
$7,500,000 as provided in Section 2.2 hereof.
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"Paying Agent" shall have the meaning specified in Section 2.3
hereof.
"Person" means any corporation, individual, joint stock
company, joint venture, partnership, unincorporated association, governmental
regulatory entity, country, state or political subdivision thereof, trust,
municipality or other entity.
"Record Date" means a Record Date specified in the Debentures
whether or not such Record Date is a Business Day.
"Redemption Date," when used with respect to any Debenture or
Debentures to be redeemed, means the date fixed for such redemption pursuant to
this Indenture and Paragraph 5 in the form of Debenture attached hereto as
Exhibit A.
"Redemption Price," when used with respect to any Debenture or
Debentures to be redeemed, means the redemption price for such redemption
pursuant to Paragraph 5 in the form of Debenture attached hereto as Exhibit A.
"Registrar" shall have the meaning specified in Section 2.3
hereof.
"REIT" means a real estate investment trust under Section 856
through 859 of the Code.
"Repurchase Date" shall have the meaning specified in Section
12.1 hereof.
"Repurchase Event" means a Change of Control giving rise to
the right under Article XII hereof on the part of each Holder of a Debenture to
require, at the Holder's option, the Company to repurchase such Holder's
Debentures, unless: (i) the current market price of the Common Stock is at least
equal to 105% of the conversion price of the Debentures in effect immediately
preceding the time of such Change of Control; (ii) all of the consideration
(excluding cash payments for fractional shares) in the transaction giving rise
to such Change of Control to the holders of Common Stock consists of shares of
common stock that are, or immediately upon issuance will be, listed on a
national securities exchange or quoted on the Nasdaq National Market, and as a
result of such
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transaction the Debentures become convertible solely into such common stock; or
(iii) all of the consideration in the transaction giving rise to such Change of
Control to the holders of Common Stock consists of cash, securities that are, or
immediately upon issuance will be, listed on a national securities exchange or
quoted on the Nasdaq National Market, or a combination of cash and such
securities, and the aggregate fair market value of such consideration (which, in
the case of such securities, shall be equal to the average of the daily Closing
Price of such securities during the ten consecutive Trading Days commencing with
the sixth Trading Day following consummation of such transaction) is at least
105% of the conversion price of the Debentures in effect on the date immediately
preceding the closing date of such transaction.
"Repurchase Offer" shall have the meaning specified in Section
12.2 hereof.
"Repurchase Price" shall have the meaning specified in Section
12.1 hereof.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Senior Indebtedness" means the principal of, premium, if any,
unpaid 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 post-filing interest is allowed in such proceeding), fees,
charges, expenses, reimbursement and indemnification obligations, and all other
amounts payable under or in respect of Indebtedness of the Company, whether any
such Indebtedness exists as of the date of this Indenture or is created,
incurred, assumed or guaranteed after such date, other than (i) Indebtedness
that by its terms or by operation of law is subordinated to or on a parity with
the Debentures and (ii) Indebtedness owed to a Subsidiary.
"Senior Non-Payment Default" shall have the meaning specified
in Section 11.2(b) hereof.
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"Senior Payment Default" shall have the meaning specified in
Section 11.2(a) hereof.
"Special Payment Date" shall have the meaning specified in
Section 2.12 hereof.
"Special Record Date" for payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 2.12 hereof.
"Stated Maturity," when used with respect to any Debenture,
means April 1, 2002.
"Subsidiary" means, with respect to any Person, (i) a
corporation at least 50% of whose capital stock with voting power, under
ordinary circumstances, to elect directors is at the time, directly or
indirectly, owned by such Person, by such Person and one or more Subsidiaries of
such Person or by one or more Subsidiaries of such Person, or (ii) a partnership
in which such Person or a Subsidiary of such Person is, at the time, a general
partner of such partnership, or (iii) any other Person (other than a corporation
or a partnership) in which such Person, one or more Subsidiaries of such Person,
or such Person and one or more Subsidiaries of such Person, directly or
indirectly, at the date of determination thereof has (1) at least a 50%
ownership interest or (2) the power to elect or direct the election of the
directors or other governing body of such Person.
"Surviving Person" shall have the meaning specified in Section
5.1(a) hereof.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
ss.ss. 77aaa-77bbbb) as in effect on the date of the execution of this
Indenture, except as provided in Section 9.3 hereof.
"Trading Day" means any day other than any day on which
securities are not traded on the applicable securities exchange or in the
applicable securities market.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
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"Trust Officer" means any officer within the corporate trust
department (or any successor group) of the Trustee including any vice president,
assistant vice president, secretary, assistant secretary or any other officer or
assistant officer of the Trustee customarily performing functions similar to
those performed by the Persons who at that time shall be such officers, and also
means, with respect to a particular corporate trust matter, any other officer of
the corporate trust department (or any successor group) of the Trustee to whom
such trust matter is referred because of his knowledge of and familiarity with
the particular subject.
"Underwriters" means the parties underwriting the offering of
the Debentures.
"U.S. Government Obligations" means direct non-callable
obligations of, or non-callable obligations guaranteed by, the United States of
America for the payment of which obligation or guarantee the full faith and
credit of the United States of America is pledged.
"U.S. Legal Tender" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
SECTION 1.2 INCORPORATION BY REFERENCE OF TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture. The
following TIA terms used in this Indenture have the following meanings:
"indenture securities" means the Debentures.
"obligor" on the indenture securities means the Company and
any other obligor on the Debentures.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by SEC rule and
not otherwise defined herein have the meanings assigned to them thereby.
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SECTION 1.3 RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(c) "or" is not exclusive;
(d) words in the singular include the plural, and words in the
plural include the singular;
(e) provisions apply to successive events and transactions;
(f) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article, Section or other
subdivision; and
(g) references to Sections or Articles means reference to such
Section or Article in this Indenture, unless stated otherwise.
ARTICLE II
THE DEBENTURES
SECTION 2.1 FORM AND DATING.
The Debentures and the Trustee's certificate of
authentication, in respect thereof, shall be substantially in the form of
Exhibit A hereto, which is part of this Indenture, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends, notations or endorsements placed thereon as
may be required by law to comply with the rules of any securities exchange,
usage, or as may, consistently herewith, be determined by the officers executing
such Debentures, as evidenced by their execution thereof. The Company and the
Trustee shall approve the form of the Debentures and any notation, legend or
endorsement on them. Any such notations, legends or
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endorsements not contained in the form of Debenture attached as Exhibit A hereto
shall be delivered in writing to the Trustee. Each Debenture shall be dated the
date of its authentication.
The terms and provisions contained in the forms of Debentures
shall constitute, and are hereby expressly made, a part of this Indenture and,
to the extent applicable, the Company and the Trustee, by their execution and
delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby. In the event of any inconsistency between the Debentures and
the Indenture, the Indenture controls.
SECTION 2.2 EXECUTION AND AUTHENTICATION.
Two Officers shall sign, or one Officer shall sign and one
Officer shall attest to, the Debentures for the Company by manual or facsimile
signature. The Company's seal shall be impressed, affixed, imprinted or
reproduced on the Debentures and may be in facsimile form.
If an Officer whose signature is on a Debenture was an Officer
at the time of such execution but no longer holds that office at the time the
Trustee authenticates the Debenture, the Debenture shall be valid nevertheless
and the Company shall nevertheless be bound by the terms of the Debentures and
this Indenture.
A Debenture shall not be valid until an authorized signatory
of the Trustee manually signs the certificate of authentication on the Debenture
but such signature shall be conclusive evidence that the Debenture has been
authenticated pursuant to the terms of this Indenture.
The Trustee shall authenticate Debentures for original issue
in the aggregate principal amount of up to $50,000,000 (or up to $57,500,000 if
the Over-Allotment Option is exercised) upon a written order of the Company
signed by two Officers or by an Officer and Assistant Treasurer or Assistant
Secretary of the Company. The written order shall specify the amount of
Debentures to be authenticated and the date on which the Debentures are to be
authenticated. The aggregate principal amount of Debentures outstanding at any
time may not exceed $50,000,000 (or up to $57,500,000 if the Over-Allotment
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Option is exercised), except as provided in Section 2.7 hereof. Upon a written
order of the Company signed by two Officers or by an Officer and Assistant
Treasurer or Assistant Secretary of the Company, the Trustee shall authenticate
Debentures in substitution of Debentures originally issued to reflect any name
change of the Company.
Upon receipt by the Trustee of a written order of the Company
signed by two Officers or by an Officer and Assistant Treasurer or Assistant
Secretary of the Company stating that the Underwriters have elected to purchase
from the Company a specified aggregate principal amount of additional Debentures
not to exceed a total of $7,500,000 for all such elections in accordance with
this paragraph pursuant to the Underwriting Agreement, dated March 23, 1995,
between the Company and the Underwriters, the Trustee shall authenticate and
make available for delivery such specified aggregate principal amount of such
additional Debentures to or upon the Company's request, and such specified
aggregate principal amount of such additional Debentures shall be considered
part of the original aggregate principal amount of the Debentures.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Debentures. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Debentures whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with any obligor, any Affiliate of any obligor,
or any of their respective Subsidiaries.
Debentures shall be issuable only in registered form without
coupons in denominations of $1,000 and any integral multiple thereof.
SECTION 2.3 REGISTRAR, PAYING AGENT AND CONVERSION AGENT.
The Company shall maintain an office or agency where
Debentures may be presented for registration of transfer or for exchange
("Registrar"), an office or agency where Debentures may be presented for payment
("Paying Agent") and an office or agency where Debentures may be presented for
conversion ("Conversion Agent"). Notices and
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demands to or upon the Company in respect of the Debentures may be served as is
provided in Section 14.2 hereof. The Company or an Affiliate of the Company may
act as Registrar, Paying Agent or Conversion Agent, except that, for the
purposes of Articles III, VIII and XII hereof, neither the Company nor any
Affiliate of the Company shall act as Paying Agent. The Registrar shall keep a
register of the Debentures and of their transfer and exchange as provided in
Section 2.5 hereof.
The Company may have one or more co-Registrars, one or more
additional Paying Agents and one or more additional Conversion Agents. The term
"Paying Agent" includes any additional Paying Agent and the term "Conversion
Agent" includes any additional Conversion Agent. The Company may change any
Registrar, co-Registrar, Paying Agent, Conversion Agent or agent for service of
notices and demands on 30 days' prior notice to the Trustee.
The Company shall enter into an appropriate written agency
agreement with any Agent not a party to this Indenture, which agreement shall
implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee in writing in advance of the name and address
of any such Agent. If the Company fails to maintain a Registrar, Paying Agent,
Conversion Agent or agent for service of notices and demands, the Trustee shall
act as such.
The Company hereby appoints the Trustee as Registrar, Paying
Agent, Conversion Agent and agent for service of notices and demands, and the
Trustee hereby agrees so to act.
SECTION 2.4 PAYING AGENT TO HOLD ASSETS IN TRUST.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that each Paying Agent shall hold in trust for the
benefit of Holders or the Trustee all assets held by the Paying Agent for the
payment of principal of, premium, if any, or interest on, the Debentures
(whether such assets have been distributed to it by the Company or any other
obligor on the Debentures), and shall notify the Trustee in writing of any
Default in making any such payment. If the Company or an Affiliate of
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the Company acts as Paying Agent, it shall segregate such assets and hold them
as a separate trust fund for the benefit of the Holders or the Trustee. The
Company at any time may require a Paying Agent to distribute all assets held by
it to the Trustee and account for any assets disbursed and the Trustee may at
any time during the continuance of any payment Default, upon written request to
a Paying Agent, require such Paying Agent to distribute all assets held by it to
the Trustee and to account for any assets distributed. Upon distribution to the
Trustee of all assets that shall have been delivered by the Company to the
Paying Agent, the Paying Agent (if other than the Company or an Affiliate of the
Company) shall have no further liability for such assets.
SECTION 2.5 DEBENTUREHOLDER LISTS.
The Company shall cause to be kept at the Corporate Trust
Office of the Trustee a register (the register maintained in such office and in
any other office or agency designated pursuant to this Section 2.5 being herein
sometimes collectively referred to as the "Debenture Register") in which,
subject to such reasonable regulations as it may prescribe, the Company shall
provide for the registration and transfers of Debentures. The Registrar shall
preserve in the Debenture Register, in as current a form as is reasonably
practicable, the most recent list available to the Registrar of the names and
addresses of Holders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee on or before the third Business Day preceding each
Interest Payment Date and at such other times as the Trustee may request in
writing a list in such form and as of such date as the Trustee reasonably may
require of the names and addresses of Holders.
SECTION 2.6 TRANSFER AND EXCHANGE.
(a) When Debentures are presented to the Registrar or a
co-Registrar with a request to register the transfer of such Debentures or to
exchange such Debentures for an equal principal amount of Debentures of other
authorized denominations, the Registrar or co-Registrar shall register the
transfer or make the exchange as requested if its reasonable requirements for
such transaction are met; provided, however, that the Debentures surrendered for
transfer or exchange shall be duly endorsed
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or accompanied by a written instrument of transfer in form reasonably
satisfactory to the Company and the Registrar or co-Registrar, duly executed by
the Holder thereof or his attorney duly authorized in writing. To permit
registrations of transfers and exchanges, the Company shall execute and the
Trustee shall authenticate Debentures at the Registrar's or co-Registrar's
request. No service charge shall be made for any registration of transfer or
exchange, but the Company or the Trustee may require payment of a sum sufficient
to cover any transfer tax, assessment, or similar governmental charge payable in
connection therewith (other than any such transfer taxes, assessment, or similar
governmental charge payable upon exchanges or transfers pursuant to Section 2.2,
2.10, 3.7, 9.5, 12.1 or 13.2 hereof).
(b) The Registrar or co-Registrar shall not be required (i) to
issue, register the transfer of or exchange any Debenture for a period beginning
10 Business Days before the mailing of a notice of an offer to repurchase
pursuant to Article XII hereof or redeem Debentures pursuant to Article III
hereof and ending at the close of business on the day of such mailing; (ii) to
register the transfer or exchange of any Debenture selected for redemption in
whole or in part pursuant to Article III, except the unredeemed portion of any
Debenture being redeemed in part; or (iii) to register the transfer of any
Debentures if such transfer, in the good faith opinion of the Board of Directors
(1) might cause the Company to fail to comply with any requirement necessary for
the continued qualification of the Company as a REIT under Section 856 through
859 of the Code, or (2) would result in a single Person owning more than 9.8% of
the Company's outstanding stock within the meaning of the Code. For the purpose
of the preceding sentence, a Person shall be considered to own shares of Company
stock which are owned directly by such Person (held of record by such Person or
such Person's nominee or nominees) and shares of Company stock which are owned
indirectly by such Person (including shares of Common Stock issuable upon
conversion of the Debentures) pursuant to Sections 542, 544 and 856 of the Code
and the regulations promulgated thereunder. The Company shall advise the
Registrar or co-Registrar in writing promptly of any determination by the Board
of Directors or an Officer with respect to any Debenture to be redeemed under
clause (b)(iii) of this Section 2.6, identifying such Debenture by Holder and
other appropriate method, and shall instruct the
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Registrar or co-Registrar not to register the transfer of such Debenture. The
Registrar or co-Registrar shall not be liable to the Company, Holders of
Debentures or any other Persons for transfers of such Debentures effected prior
to its receipt of such written instructions from the Company and the Company
shall indemnify the Registrar or co- Registrar for all claims, costs and
expenses incurred by it in connection with refusing to transfer Debentures as
instructed by the Company.
SECTION 2.7 REPLACEMENT DEBENTURES.
If a mutilated Debenture is surrendered to the Trustee or if
the Holder of a Debenture claims and submits to the Trustee an affidavit or
other evidence, satisfactory to the Company and Trustee, to the effect that the
Debenture has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Debenture if the Company's and
the Trustee's requirements are met. If required by the Trustee or the Company,
such Holder must provide an indemnity bond or other indemnity, sufficient in the
judgment of both the Company and the Trustee, to protect the Company, the
Trustee or any Agent from any loss which any of them may suffer if a Debenture
is replaced. Upon the issuance of any new Debenture under this Section 2.7, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
The provisions of this Section 2.7 are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Debentures. Every replacement
Debenture is an additional obligation of the Company.
SECTION 2.8 OUTSTANDING DEBENTURES.
Debentures outstanding at any time are all the Debentures that
have been authenticated by the Trustee except those cancelled by it, those
delivered to it for cancellation and those described in this Section 2.8 as not
outstanding. A Debenture does not cease to be outstanding because the Company or
an Affiliate of the Company holds the Debenture, except as provided in Section
2.9 hereof.
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If a Debenture is replaced pursuant to Section 2.7 hereof
(other than a mutilated Debenture surrendered for replacement), it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Debenture is held by a bona fide purchaser. A mutilated Debenture
ceases to be outstanding upon surrender of such Debenture and replacement
thereof pursuant to Section 2.7 hereof.
If on a Redemption Date or the Maturity Date the Paying Agent
(other than the Company or an Affiliate of the Company) holds U.S. Legal Tender
or U.S. Government Obligations sufficient to pay all of the principal of,
premium, if any, and interest due on the Debentures payable on that date, then
on and after that date such Debentures cease to be outstanding and interest on
them ceases to accrue.
SECTION 2.9 TREASURY DEBENTURES.
In determining whether the Holders of the required principal
amount of Debentures have concurred in any direction, amendment, supplement,
waiver or consent, Debentures owned by the Company and Affiliates of the Company
shall be disregarded, except that, for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, amendment,
supplement, waiver or consent, only Debentures that the Trustee knows or has
reason to know are so owned shall be disregarded.
SECTION 2.10 TEMPORARY DEBENTURES.
Until definitive Debentures are ready for delivery, the
Company may prepare, and the Trustee shall authenticate, temporary Debentures.
Temporary Debentures shall be substantially in the form of definitive Debentures
but may have variations that the Company reasonably and in good faith considers
appropriate for temporary Debentures. Without unreasonable delay, the Company
shall prepare, and the Trustee shall authenticate, definitive Debentures in
exchange for temporary Debentures. Until so exchanged, the temporary Debentures
shall in all respects be entitled to the same benefits under this Indenture as
permanent Debentures authenticated and delivered hereunder.
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SECTION 2.11 CANCELLATION.
The Company at any time may deliver Debentures to the Trustee
for cancellation which the Company may have acquired in any manner whatsoever,
and all Debentures so delivered shall be promptly cancelled by the Trustee. The
Registrar, the Paying Agent and the Conversion Agent shall forward to the
Trustee any Debentures surrendered to them for transfer, payment or exchange.
The Trustee, or at the direction of the Trustee, the Registrar, the Paying Agent
or Conversion Agent (other than the Company or an Affiliate of the Company),
shall cancel and, at the written direction of the Company, shall dispose of all
Debentures surrendered for transfer, payment, exchange or cancellation. Subject
to Section 2.7 hereof, the Company may not issue new Debentures to replace
Debentures it has paid or delivered to the Trustee for cancellation. No
Debentures shall be authenticated in lieu of or in exchange for any Debentures
cancelled as provided in this Section 2.11, except as expressly permitted in the
form of Debentures and as permitted by this Indenture.
SECTION 2.12 DEFAULTED INTEREST.
Interest on any Debenture which is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Debenture (or one or more predecessor Debentures) is
registered at the close of business on the Record Date for such interest.
Any interest on any Debenture which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date plus, to the
extent lawful, any interest payable on the defaulted interest (herein called
"Defaulted Interest") shall forthwith cease to be payable to the registered
holder on the relevant Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in clause (a) or (b) below:
(a) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Debentures (or their respective
predecessor Debentures) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be fixed in
the following manner. The Company shall
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notify the Trustee in writing of the amount of Defaulted Interest proposed to be
paid on each Debenture, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be paid in
respect of such Defaulted Interest or shall make arrangements satisfactory to
the Trustee for such deposit prior to the date fixed for payment, such money
when deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as provided in this clause (a). Thereupon the Trustee
shall fix a Special Record Date and special payment date (the "Special Payment
Date") for the payment of such Defaulted Interest. The Special Record Date shall
be not more than 15 days and not less than 10 days prior to the Special Payment
Date. The Special Payment Date shall be not more than 60 days after receipt by
the Trustee of the notice to pay the Defaulted Interest. The Trustee shall
promptly notify the Company of such Special Record Date and, in the name and at
the expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder at his address as it appears in the
Debenture Register not less than 10 days prior to such Special Record Date. The
Trustee may, in its discretion, in the name and at the expense of the Company,
cause a similar notice to be published at least once in a newspaper, customarily
published in the English language on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, but such
publication shall not be a condition precedent to the establishment of such
Special Record Date. Notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the Persons in whose names the Debentures
(or their respective predecessor Debentures) are registered on such Special
Record Date and shall no longer be payable pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any securities
exchange on which the Debentures may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause accompanied by an Opinion of
Counsel stating that the manner of payment complies with
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this clause, such manner shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section 2.12, each
Debenture delivered under this Indenture upon transfer of or in exchange for or
in lieu of any other Debenture shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Debenture.
SECTION 2.13 CUSIP NUMBER.
The Company may use a "CUSIP" number when issuing the
Debentures, and if so, the Trustee may use the CUSIP number in notices of
redemption or exchange as a convenience to Debentureholders; provided that any
such notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number printed in the notice or on the Debentures, and
that reliance may be placed only on the other identification numbers printed on
the Debentures.
ARTICLE III
REDEMPTION
SECTION 3.1 RIGHT OF REDEMPTION.
Redemption of Debentures, as permitted or required by any
provision of this Indenture, shall be made in accordance with such provision and
this Article III. The Debentures may be redeemed at the election of the Company,
in whole or in part, at any time on or after April 5, 2000, at the applicable
Redemption Prices specified in Paragraph 5 of the form of Debenture attached as
Exhibit A hereto, set forth therein under the caption "Optional Redemption,"
plus accrued and unpaid interest to and including the Redemption Date.
Notwithstanding the foregoing paragraph, the Debentures will
be subject to redemption, in whole or in part, at any time, to the extent
necessary for the Company to continue to qualify as a REIT. The Redemption Price
for such Debentures redeemed shall equal 100% of the principal amount thereof,
plus accrued and unpaid interest to and including the Redemption Date. The
Company may exercise
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such redemption powers solely with respect to Holders who pose a threat to the
Company's REIT status and only to the extent deemed necessary or advisable by
the Board of Directors of the Company to preserve such status.
SECTION 3.2 NOTICES TO TRUSTEE.
If the Company elects to redeem Debentures pursuant to
Paragraph 5 of the Debentures, it shall notify the Trustee in writing of the
Redemption Date and the principal amount of Debentures to be redeemed and
whether the Company or the Trustee is to give notice of redemption to the Holder
or Holders.
The Company shall give each notice to the Trustee provided for
in this Section 3.2 at least 10 days before the Redemption Date (unless a
shorter notice shall be satisfactory to the Trustee).
SECTION 3.3 SELECTION OF DEBENTURES TO BE REDEEMED.
If less than all of the Debentures are to be redeemed pursuant
to Paragraph 5(a) of the Debentures, the Trustee shall redeem pro rata or by lot
or in such other manner as complies with any applicable legal and stock exchange
requirements.
The Trustee shall make the selection from the Debentures
outstanding and not previously called for redemption and shall promptly notify
the Company in writing of the Debentures selected for redemption and, in the
case of any Debenture selected for partial redemption, the principal amount
thereof to be redeemed. Debentures in denominations of $1,000 may be redeemed
only in whole. The Trustee may select for redemption portions (equal to $1,000
or any integral multiple thereof) of the principal of Debentures that have
denominations larger than $1,000. Provisions of this Indenture that apply to
Debentures called for redemption also apply to portions of Debentures called for
redemption.
SECTION 3.4 NOTICE OF REDEMPTION.
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail a notice of redemption by first class mail, postage
prepaid, to the
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Trustee and each Holder whose Debentures are to be redeemed pursuant to
paragraph 5 of the Debentures at his address appearing in the Debenture
Register.
Each notice of redemption shall identify the Debentures to be
redeemed and shall state the following and such other matters as the Trustee
shall deem proper:
(a) the Redemption Date;
(b) the Redemption Price and the amount of accrued and unpaid
interest per $1,000 principal amount to be paid upon such redemption;
(c) the name, address and telephone number of the Paying
Agent;
(d) that Debentures called for redemption must be surrendered
to the Paying Agent at the address specified in such notice to collect the
Redemption Price plus accrued and unpaid interest;
(e) that, unless the Company defaults in its obligation to
deposit U.S. Legal Tender with the Paying Agent in accordance with Section 3.6
hereof, interest on Debentures called for redemption ceases to accrue on and
after the Redemption Date and the only remaining right of the Holders of such
Debentures is to receive payment of the Redemption Price and accrued and unpaid
interest, upon surrender to the Paying Agent of the Debentures called for
redemption and to be redeemed;
(f) if any Debenture is being redeemed in part, the portion of
the principal amount, equal to $1,000 or any integral multiple thereof, of such
Debenture that will not be redeemed and that, after the Redemption Date, and
upon surrender of such Debenture, a new Debenture or Debentures in aggregate
principal amount equal to the unredeemed portion thereof will be issued;
(g) if less than all the Debentures are to be redeemed, the
identification of the particular Debentures (or portion thereof) to be redeemed,
as well as the aggregate principal amount of such Debentures to be redeemed and
the aggregate principal amount of Debentures to be outstanding after such
partial redemption; and
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(h) that the notice is being sent pursuant to this Section 3.4
and pursuant to the redemption provisions of Paragraph 5 of the Debentures.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. If a CUSIP number
is listed in such notice or printed on the Debenture, the notice shall state
that no representation is made as to the correctness or accuracy of such CUSIP
number.
SECTION 3.5 EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.4 hereof, Debentures called for redemption become due and payable on the
Redemption Date at the Redemption Price plus accrued and unpaid interest to the
Redemption Date. Upon surrender to the Trustee or Paying Agent, such Debentures
called for redemption shall be paid on the Redemption Date at the Redemption
Price plus interest, if any, accrued and unpaid to the Redemption Date; provided
that if the Redemption Date is after a regular Record Date and on or prior to
the Interest Payment Date, the accrued interest shall be payable to the Holder
of the redeemed Debentures registered as of the close of business on the
relevant Record Date; and provided, further, that if a Redemption Date is a
Legal Holiday, payment shall be made on the next succeeding Business Day and no
interest shall accrue for the period from such Redemption Date to such
succeeding Business Day.
SECTION 3.6 DEPOSIT OF REDEMPTION PRICE.
On or prior to the Redemption Date, the Company shall deposit
with the Paying Agent (other than the Company or an Affiliate of the Company)
U.S. Legal Tender sufficient to pay the Redemption Price of and accrued and
unpaid interest on all Debentures to be redeemed on such Redemption Date (other
than Debentures or portions thereof called for redemption on that date that have
been delivered by the Company to the Trustee for cancellation). The Paying Agent
shall promptly return to the Company any U.S. Legal Tender so deposited which is
not required for that purpose upon the written request of the Company.
If the Company complies with the preceding paragraph and the
other provisions of this Article III,
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interest on the Debentures to be redeemed will cease to accrue on the applicable
Redemption Date, whether or not such Debentures are presented for payment.
Notwithstanding anything herein to the contrary, if any Debenture surrendered
for redemption in the manner provided in the Debentures shall not be so paid
upon surrender for redemption because of the failure of the Company to comply
with the preceding paragraph, interest shall continue to accrue and be paid from
the Redemption Date until such payment is made on the unpaid principal, and, to
the extent lawful, on any interest not paid on such unpaid principal, in each
case at the rate and in the manner provided in Section 4.1 hereof and the
Debentures.
SECTION 3.7 DEBENTURES REDEEMED IN PART.
Upon surrender of a Debenture that is to be redeemed in part,
the Company shall execute and the Trustee shall authenticate and deliver to the
Holder, without service charge, a new Debenture or Debentures equal in principal
amount to the unredeemed portion of the Debenture surrendered.
ARTICLE IV
COVENANTS
SECTION 4.1 PAYMENT OF DEBENTURES.
The Company shall pay the principal of, premium, if any, and
interest on the Debentures on the dates and in the manner provided in the
Debentures. An installment of principal of, premium, if any, or interest on the
Debentures shall be considered paid on the date it is due if the Trustee or
Paying Agent (other than the Company or an Affiliate of the Company) holds for
the benefit of the Holders, on or before 10:00 a.m. New York City time on that
date, U.S. Legal Tender deposited and designated for and sufficient to pay the
installment.
The Company shall pay interest on overdue principal and on
overdue installments of interest at the rate specified in the Debentures
compounded semi-annually, to the extent lawful.
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Notwithstanding anything to the contrary contained in this
Indenture, the Company or the Trustee may, to the extent required by law, deduct
or withhold income or other similar taxes imposed by the United States of
America or any state or other political jurisdiction thereof from principal of,
premium, if any, or interest payments on the Debentures.
SECTION 4.2 MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, New
York, New York an office or agency where Debentures may be presented or
surrendered for payment, where Debentures may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Debentures and this Indenture may be served. The Company shall
give prior written notice to the Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Trustee
with the address thereof, such presentations, surrenders, notices and demands
may be made or served at the address of the Trustee set forth in Section 14.2
hereof. Such office may be an office maintained directly or indirectly by the
Trustee.
The Company may also from time to time designate one or more
other offices or agencies where the Debentures may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in New York, New York for such purposes. The Company shall give prior written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency. The Company hereby initially
designates the Corporate Trust Office of the Trustee (or the office of the agent
of the Trustee) in New York, New York as such office of the Company.
SECTION 4.3 CORPORATE EXISTENCE.
Subject to Article V hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect its
corporate existence and
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the corporate or other existence of each of its Subsidiaries in accordance with
the respective organizational documents of each of them; provided, however, that
the Company shall not be required to preserve any such existence if (a) the
Board of Directors of the Company shall determine that the preservation thereof
is no longer desirable in the conduct of the business of the Company and (b) the
loss thereof is not disadvantageous in any material respect to the Holders.
SECTION 4.4 PAYMENT OF TAXES AND OTHER CLAIMS.
The Company shall, and shall cause each of its Subsidiaries
to, comply with or contest in good faith all statutes and governmental
regulations and pay all taxes, assessments, governmental charges, claims for
labor, supplies, rent and any other obligations which, if unpaid, might become a
lien, charge or encumbrance against any of their properties, except liabilities
being contested in good faith and against which adequate reserves have been
established.
SECTION 4.5 MAINTENANCE OF PROPERTIES AND INSURANCE.
The Company shall maintain or shall cause to be maintained in
good working order and condition (ordinary wear and tear excepted) the
properties necessary to its and its Subsidiaries' operations and shall make or
shall cause to be made all needed repairs, replacements and renewals as are
necessary to conduct its business and the businesses of its Subsidiaries in
accordance with customary business practices. The Company and each of its
Subsidiaries will cause insurance, in favor of the Company or the Subsidiaries,
to be maintained with responsible insurers with respect to each of the Company's
and the Subsidiaries' properties and businesses against such casualties and
contingencies as shall be in accordance with general practices of businesses
engaged in similar activities in similar geographic areas.
SECTION 4.6 COMPLIANCE CERTIFICATE; NOTICE OF DEFAULT.
(a) The Company shall deliver to the Trustee within 45 days
after the end of each of its fiscal quarters an Officers' Certificate at least
one of which in each
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fiscal year shall comply with the annual reporting requirements of Section
314(a)(4) of the TIA (including the required signatory provisions) and stating
that a review of its activities and the activities of its Subsidiaries during
the preceding fiscal quarter has been made under the supervision of the signing
Officers with a view to determining whether the Company and its Subsidiaries
have kept, observed, performed and fulfilled its obligations under this
Indenture and further stating, as to each such Officer signing such certificate,
whether or not to the best knowledge of the signers thereof the Company or any
Subsidiary of the Company has failed to comply with any conditions or covenants
in this Indenture, or if the Company shall be in Default, the occurrence of any
Default, and, if such signor does know of such a failure to comply or Default,
the certificate shall describe such failure or Default with reasonable
particularity.
(b) The Company shall, so long as any of the Debentures are
outstanding, deliver to the Trustee, immediately upon becoming aware of any
Default or Event of Default under this Indenture, an Officers' Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto. The Trustee shall not be deemed
to have knowledge of a Default or an Event of Default unless one of its Trust
Officers receives notice of the Default giving rise thereto from the Company or
any of the Holders.
SECTION 4.7 SEC REPORTS.
The Company shall deliver to the Trustee and each Holder,
within 10 days after it files the same with the SEC, copies of all reports and
information (or copies of such portions of any of the foregoing as the SEC may
by rules and regulations prescribe), if any, which the Company is required to
file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act provided
that in the case of annual reports, information may be incorporated by reference
and furnished to Holders at the time and in the manner in which such information
is required to be furnished to the Company's common stockholders. The Company
agrees to continue to comply with the filing and reporting requirements of the
SEC as long as any of the Debentures are outstanding; provided, that if the
Company is not subject to the filing and reporting requirements of the SEC at
any time, (a) the Company shall provide the
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Trustee and each Holder with the reports and information (or copies of such
portions of any of the foregoing as the SEC may by rules and regulations
prescribe) which are specified in Section 13 or 15(d) of the Exchange Act as if
the Company were subject to such filing and reporting requirements, and (b) the
Company shall provide copies of such reports and information to any prospective
holder of the Debentures promptly upon written request and payment of reasonable
costs of duplication and delivery. The Record Date to identify the Holders to
whom such reports shall be furnished shall be no longer than 60 days prior to
the date on which such reports are first mailed to the Holders of the
Debentures.
SECTION 4.8 LIMITATION ON STATUS AS INVESTMENT COMPANY.
The Company shall not, and shall not permit any of its
Subsidiaries to, become an "investment company" (as that term is defined in the
Investment Company Act of 1940, as amended) or otherwise become subject to
regulation under such Investment Company Act.
SECTION 4.9 WAIVER OF STAY, EXTENSION OR USURY LAWS.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay or extension law or any
usury law or other similar law which would prohibit or forgive the Company from
paying all or any portion of the principal of, premium, if any, or interest on
the Debentures as contemplated herein, wherever enacted, now or at any time
hereafter in force, or which may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) the Company hereby
expressly waives all benefit or advantage of any such law, and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
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ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1 WHEN COMPANY MAY MERGE, ETC.
(a) The Company shall not, in a single transaction or through
a series of related transactions, consolidate with or merge with or into any
other Person, or, directly or indirectly, sell, lease, assign, transfer or
convey or otherwise dispose of all or substantially all of its assets (computed
on a consolidated basis), to another Person or group of Affiliated Persons,
unless:
(i) either (A) the Company shall be the continuing Person, or
(B) the Person formed by such consolidation or into which the Company is merged
or to which all or substantially all of the properties and assets of the Company
are transferred as an entirety or substantially as an entirety (the Company or
such other Person being hereinafter referred to as the "Surviving Person") shall
be a corporation or partnership organized and validly existing under the laws of
the United States, any state thereof or the District of Columbia, and shall
expressly assume, by an indenture supplemental hereto, executed and delivered to
the Trustee on or prior to the consummation of such transaction, in form
satisfactory to the Trustee, all the obligations of the Company under the
Debentures and this Indenture;
(ii) immediately after giving effect to such transaction, no
Event of Default, and no event which, after notice or lapse of time or both,
would become an Event of Default, shall have happened and be continuing; and
(iii) the Company has delivered to the Trustee an Officers'
Certificate stating that such consolidation, merger, sale, lease, assignment,
transfer, conveyance or other disposition and such supplemental indenture comply
with this Article V and that all conditions precedent herein provided relating
to such transaction have been satisfied, including an Opinion of Counsel with
respect to the matters set forth in paragraph (a)(i) of this Section 5.1.
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(b) For purposes of clause (a), the sale, lease, assignment,
transfer, conveyance, or other disposition of all or substantially all of the
properties and assets of one or more Subsidiaries of the Company (other than to
one or more wholly owned Subsidiaries of the Company), which properties and
assets, if held by the Company instead of such Subsidiaries, would constitute
all or substantially all of the properties and assets of the Company on a
consolidated basis shall be deemed to be the transfer of all or substantially
all of the properties and assets of the Company.
SECTION 5.2 SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any transfer or
disposition of assets in accordance with Section 5.1 hereof, the Surviving
Person formed by such consolidation or into which the Company is merged or to
which such transfer is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such Surviving Person had been named as the Company herein.
When a Surviving Person duly assumes all of the obligations of the Company
pursuant hereto and pursuant to the Debentures the predecessor shall be released
from such obligations.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1 EVENTS OF DEFAULT.
"Event of Default," wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be caused voluntarily or involuntarily or effected, without limitation, by
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) the failure by the Company to pay installments of interest
upon any Debenture as and when the same becomes due and payable, and the
continuance of such failure for 30 days;
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(b) the failure by the Company to pay all or any part of the
principal of, or premium, if any, on the Debentures when and as the same becomes
due and payable at Stated Maturity, upon redemption, upon acceleration, or
otherwise, including payment of the Repurchase Price;
(c) the failure of the Company to comply with the provisions
in Article V hereof;
(d) the failure of the Company to provide notice of a
Repurchase Event as provided in Section 12.2 hereof;
(e) the failure by the Company to observe or perform any
covenant, agreement or warranty of the Company contained in the Debentures or
this Indenture (other than a default in the performance of any covenant,
agreement or warranty which is specifically dealt with elsewhere in this Section
6.1), and continuance of such failure for the period and after the notice
specified below;
(f) (i) a default or defaults under any bond, debenture, note
or other evidence of Indebtedness for money borrowed by the Company or any
Subsidiary, or under any mortgage, indenture or instrument under which there may
be issued or by which there may be secured or evidenced any Indebtedness for
money borrowed, whether such Indebtedness now exists or shall hereafter be
created, which shall have resulted in Indebtedness in the outstanding principal
amount of at least $5,000,000 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 or (ii) a failure to pay Indebtedness in the outstanding
principal amount of at least $5,000,000 at its stated maturity after demand
therefor; provided, that in each case of (i) and (ii) above within a period of
10 days after such acceleration or maturity there shall have been given, by
registered or certified mail, to the Company by the Trustee or to the Company
and the Trustee by the Holders of at least 25% in aggregate principal amount of
the Debentures then outstanding a written notice specifying such default and (1)
requiring the Company to cause such accelerated Indebtedness to be discharged or
such acceleration to be rescinded or annulled or (2) requiring the Company to
pay the Indebtedness which the Company failed to pay at
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maturity after demand therefor and in each case stating that such notice is a
"Notice of Default" hereunder; or
(g) the entry by a court or courts of competent jurisdiction
of a final judgment or final judgments for the payment of money against the
Company or any Subsidiary which remain undischarged for a period (during which
execution shall not be effectively stayed, the posting of any required bond not
being deemed an execution for purposes hereof) of 30 days after all rights to
appeal have been exhausted, provided that the aggregate amount of all such
judgments exceeds $5,000,000;
(h) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company or any Subsidiary
in an involuntary case or proceeding under any applicable federal or state
bankruptcy, insolvency, reorganization or other similar law or (B) a decree or
order adjudging the Company or any Subsidiary a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any Subsidiary
under any applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the
Company or any Subsidiary or of any substantial part of their respective
property, or ordering the winding up or liquidation of affairs, and the
continuance of any such decree or order for relief or any such other decree or
order unstayed and in effect for a period of 90 consecutive days; or
(i) the commencement by the Company or any Subsidiary of a
voluntary case or proceeding under any applicable federal or state bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent to the
entry of a decree or order for relief in respect of the Company or any
Subsidiary in an involuntary case or proceeding under any applicable federal or
state bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against it, or
the filing of a petition or answer or consent seeking reorganization or relief
under any applicable federal or state law, or the consent to the filing of such
petition or to the appointment of or taking possession by a custodian, receiver,
liquidator, assignee,
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trustee, sequestrator or other similar official of the Company or any Subsidiary
or of any substantial part of their respective property, or the making of an
assignment for the benefit of creditors, or the admission in writing of
inability to pay debts generally as they become due, or the taking of corporate
action by the Company or any Subsidiary in furtherance of any such action.
A Default under clause (e) above (other than in the case of
any Default under Article XII of this Indenture) is not an Event of Default
until the Trustee notifies the Company, or the Holders of at least 25% in
aggregate principal amount of the Debentures then outstanding notify the Company
and the Trustee of the Default, and the Company does not cure the Default within
60 days after receipt of the notice. The notice must specify the Default, demand
that it be remedied and state that the notice is a "Notice of Default." Such
notice shall be given by the Trustee if so requested by the Holders of at least
25% in aggregate principal amount of the Debentures then outstanding.
In the case of any Event of Default pursuant to the provisions
of this Section 6.1 occurring by reason of any willful action (or inaction)
taken (or not taken) by or on behalf of the Company or any Subsidiary with the
intention of avoiding the period of time the Debentures are not optionally
redeemable or the payment of the premium which the Company would have to pay if
the Company then had elected to redeem the Debentures pursuant to Paragraph 5 of
the Debentures, an equivalent premium (or, in the case of an Event of Default
prior to the time optional redemptions are permitted, to the extent permitted by
law, a premium equal to the stated interest rate of the Debentures multiplied by
the quotient of (i) the number of full years left to maturity plus one, divided
by (ii) seven) shall also become and be immediately due and payable to the
extent permitted by law, anything in this Indenture or in the Debentures to the
contrary notwithstanding.
SECTION 6.2 ACCELERATION OF MATURITY DATE; RESCISSION AND
ANNULMENT.
Subject to Section 11.2(c), if an Event of Default (other than
an Event of Default specified in Section 6.1(h) or (i) relating to the Company
or its Subsidiaries) occurs and is continuing, then, and in every
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such case, unless the principal of all of the Debentures shall have already
become due and payable, either the Trustee or the Holders of not less than 25%
in aggregate principal amount of the Debentures then outstanding, by a notice in
writing to the Company (and to the Trustee if given by Holders) (an
"Acceleration Notice"), may declare all of the principal of the Debentures,
determined as set forth below, including in each case accrued interest thereon,
to be due and payable immediately. If an Event of Default specified in Section
6.1(h) or (i) relating to the Company or its Subsidiaries occurs, all principal
of, premium, if any, and accrued and unpaid interest on the Debentures shall be
immediately due and payable on all outstanding Debentures without any
declaration or other act on the part of the Trustee or the Holders.
At any time after such a declaration of acceleration is made
and before a judgment or decree for payment of the money due has been obtained
by the Trustee as hereinafter provided in this Article VI, the Holders of a
majority in aggregate principal amount of the Debentures then outstanding, by
written notice to the Company and the Trustee, may waive, rescind and annul on
behalf of all Holders, any such declaration of acceleration if:
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all overdue interest on all Debentures;
(ii) the principal of, and premium, if any,
applicable to, any Debentures which is then due other than by such declaration
of acceleration, and interest thereon at the rate borne by the Debentures;
(iii) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate borne by the Debentures;
(iv) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses, disbursements and advances
then due and unpaid of the Trustee, its agents and counsel; and
(b) all Events of Default (other than the non-payment of the
principal of, premium, if any, and interest on Debentures which have become due
solely by such
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declaration of acceleration) have been cured or waived as provided in Section
6.12 hereof, including, if applicable, any Event of Default relating to the
covenants contained in Article XII hereof. No such waiver shall cure or waive
any subsequent default or impair any right consequent thereon.
SECTION 6.3 COLLECTION OF INDEBTEDNESS AND SUITS FOR
ENFORCEMENT BY TRUSTEE.
Subject to Section 11.2 hereof, the Company covenants that if
an Event of Default in payment of principal of, premium, if any, or interest
specified in clause (a) or (b) of Section 6.1 hereof occurs and is continuing,
the Company shall, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Debentures, the whole amount then due and payable on such
Debentures for principal, premium, if any, and interest, and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal, and premium, if any, and on any overdue interest, at the rate borne
by the Debentures, and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation to, and expenses, disbursements and advances of the
Trustee, its agents and counsel.
If the Company fails to pay such amounts within 10 days of
such demand, the Trustee, in its own name and as trustee of an express trust in
favor of the Holders, may institute a judicial proceeding for the collection of
the sums so due and unpaid, may prosecute such proceeding to judgment or final
decree and may enforce the same against the Company or any other obligor upon
the Debentures and collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any other obligor
upon the Debentures, wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
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SECTION 6.4 TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Debentures or the property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of the Debentures
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any demand on
the Company or any obligor for the payment of overdue principal, premium, if
any, or interest) shall be entitled and empowered, by intervention in such
proceeding or otherwise to take any and all actions under the TIA, including:
(a) to file and prove a claim for the whole amount of
principal of, premium, if any, and interest owing and unpaid in respect of the
Debentures and to file such other papers or documents as may be necessary or
advisable in order to have the claims of the Trustee (including any claim for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agent and counsel) and of the Holders allowed in such judicial
proceeding, and
(b) to collect and receive any moneys or other property
payable or deliverable on any such claims and to distribute the same;
and any debtor-in-possession custodian, receiver, assignee, trustee, liquidator,
sequestrator or other similar official in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Trustee and, in the event
that the Trustee shall consent to the making of such payments directly to the
Holders, to pay to the Trustee any amount due it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.7 hereof.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement, adjustment, or composition affecting
the Debentures or the rights of any Holder
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thereof or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.
SECTION 6.5 TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
DEBENTURES.
All rights of action and claims under this Indenture or the
Debentures may be prosecuted and enforced by the Trustee without the possession
of any of the Debentures or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name as trustee of an express trust in favor of the Holders, and any
recovery of judgment shall, after provision for the payment of reasonable
compensation to, and reasonable expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the Holders of
the Debentures in respect of which such judgment has been recovered.
SECTION 6.6 PRIORITIES.
Subject to the provisions of Article XI hereof, any money
collected by the Trustee pursuant to this Article VI shall be applied in the
following order, at the date or dates fixed by the Trustee and, in case of the
distribution of such money on account of principal, premium, if any, or
interest, upon presentation of the Debentures and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the Trustee in payment of all amounts due pursuant
to Section 7.7 hereof;
SECOND: To the Holders in payment of the amounts then due and
unpaid for principal of, premium, if any, and interest on, the Debentures in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the amounts
due and payable on such Debentures for principal of, premium, if any, and
interest, respectively; and
THIRD: To the Company, the remainder, if any.
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SECTION 6.7 LIMITATION ON SUITS.
No Holder of any Debenture shall have any right to institute
or to order or direct the Trustee to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(b) the Holders of not less than 25% in aggregate principal
amount of the Debentures then outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee
reasonable security or indemnity against the costs, expenses and liabilities to
be incurred or reasonably probable to be incurred in compliance with such
request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a majority
in aggregate principal amount of the Debentures then outstanding;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 6.8 UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE
PRINCIPAL, PREMIUM AND INTEREST.
Notwithstanding any other provision of this Indenture, but
subject to Section 11.2 hereof, the Holder of any Debenture shall have the
right, which is absolute
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and unconditional, to receive payment of the principal of, premium, if any, and
interest on, such Debenture on the Maturity Dates of such payments as expressed
in such Debenture and to institute suit for the enforcement of any such payment
after such respective dates, and such rights shall not be impaired without the
consent of such Holder.
Notwithstanding any other provision of this Indenture, but
subject to Section 14 of the Debentures and Section 13.13 hereof, the right of
any Holder of a Debenture to convert the Debenture or to institute suit for the
enforcement of such right shall not be impaired or affected without the consent
of the Holder.
SECTION 6.9 RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Debentures in Section 2.7
hereof, no right or remedy herein conferred upon or reserved to the Trustee or
to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 6.10 DELAY OR OMISSION NOT WAIVER.
No delay or omission by the Trustee or by any Holder of any
Debenture to exercise any right or remedy arising upon any Event of Default
shall impair the exercise of any such right or remedy or constitute a waiver of
any such Event of Default. Every right and remedy given by this Article VI or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 6.11 CONTROL BY HOLDERS.
The Holder or Holders of a majority in aggregate principal
amount of the Debentures then outstanding shall have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the
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Trustee or exercising any trust or power conferred upon the Trustee, provided,
that
(a) such direction shall not be in conflict with any rule of
law or with this Indenture, and
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 6.12 WAIVER OF PAST DEFAULT.
Subject to Sections 2.9 and 9.2 hereof, the Holder or Holders
of not less than a majority in aggregate principal amount of the Debentures then
outstanding may, on behalf of all Holders, prior to the declaration of the
maturity of the Debentures, waive any past default hereunder and its
consequences, except a default
(a) in the payment of the principal of, premium, if any, or
interest on, any Debenture as specified in clauses (a) and (b) of Section 6.1,
or
(b) in respect of a covenant or provision hereof which, under
Article IX, cannot be modified or amended without the consent of the Holder of
each outstanding Debenture affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair the exercise of any right arising
therefrom.
SECTION 6.13 UNDERTAKING FOR COSTS.
All parties to this Indenture agree, and each Holder of any
Debenture by his acceptance thereof shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the enforcement of any
right or remedy under this Indenture, or in any suit against the Trustee for any
action taken, suffered or omitted to be taken by it as Trustee, the filing by
any party litigant in such suit of an undertaking to pay the costs of such suit,
and that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any
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party litigant in such suit, having due regard to the merits and good faith of
the claims or defenses made by such party litigant; but the provisions of this
Section 6.13 shall not apply to any suit instituted by the Company, to any suit
instituted by the Trustee, to any suit instituted by any Holder, or group of
Holders, holding in the aggregate more than 10% in aggregate principal amount of
the Debentures then outstanding, or to any suit instituted by any Holder for
enforcement of the payment of principal of, premium, if any, or interest on, any
Debenture on or after the respective Maturity Date expressed in such Debenture
(including, in the case of redemption, on or after the Redemption Date and in
the case of repurchase, on or after the Repurchase Date).
SECTION 6.14 RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
ARTICLE VII
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this
Indenture and covenants and agrees to perform the same, as herein expressed.
SECTION 7.1 DUTIES OF TRUSTEE.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and use the same degree of care and skill in their exercise
as a prudent person would exercise or use under the circumstances in the conduct
of his own affairs.
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(b) Except during the continuance of a Default or an Event of
Default:
(i) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no others, and no covenants or
obligations shall be implied in or read into this Indenture which are adverse to
the Trustee.
(ii) In the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) This paragraph does not limit the effect of
paragraph (b) of this Section 7.1.
(ii) The Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(iii) The Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 6.2 or 6.11 hereof.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or to take or omit to take any
action under this Indenture or at the request, order or direction of the Holders
or in the exercise of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity against
such risk or liability is not reasonably assured to it.
(e) The Trustee shall not be liable for interest on any assets
received by it except as the Trustee may
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agree in writing with the Company. Assets held in trust by the Trustee need not
be segregated from other assets except to the extent required by law.
(f) Every provision of this Indenture that in any way relates
to the Trustee is subject to paragraphs (a), (b), (c), (d) and (e) of this
Section 7.1.
SECTION 7.2 RIGHTS OF TRUSTEE.
Subject to Section 7.1 hereof:
(a) The Trustee may rely and shall be fully protected in
acting or refraining from acting on any document believed by it to be genuine
and to have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may, in the case of any request or application by the
Company, require an Officers' Certificate or an Opinion of Counsel, which shall
conform to Sections 14.4 and 14.5 hereof. The Trustee shall not be liable for
any action it takes or omits to take in good faith in reliance on written advice
from such counsel or such certificate or opinion.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent appointed
with due care.
(d) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it believes to be authorized or within its
rights or powers.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, notice, request, direction, consent, order, bond,
debenture, or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters as it
reasonably may see fit.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request, order or
direction of any of the
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Holders, pursuant to the provisions of this Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which may be incurred therein or thereby.
(g) Whenever by the terms of this Indenture, the Trustee shall
be required to transmit notices or reports to any or all Holders, the Trustee
shall be entitled to rely on the information provided by the Registrar as to the
names and addresses of the Holders as being correct. If the Registrar is other
than the Trustee, the Trustee shall not be responsible for the accuracy of such
information.
SECTION 7.3 INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Debentures and may otherwise deal with the Company, its
Subsidiaries, or their respective Affiliates with the same rights it would have
if it were not Trustee. Any Agent may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11 hereof.
SECTION 7.4 TRUSTEE'S DISCLAIMER.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Debentures; it shall not be accountable for
the Company's use of the proceeds from the Debentures; and it shall not be
responsible for (a) the use or application of any funds received by a Paying
Agent other than the Trustee or (b) any statement in the Debentures, other than
the Trustee's certificate of authentication.
The Trustee shall not be bound to ascertain or inquire as to
the performance or observance of any covenants, conditions or agreements on the
part of the Company hereunder, except as specifically set forth herein.
SECTION 7.5 NOTICE OF DEFAULT.
If a Default or an Event of Default occurs and is continuing
and if it is known to the Trustee pursuant to Section 4.6(b) hereof, the Trustee
shall mail to each Debentureholder notice of the uncured Default or Event of
Default within 90 days after such Default or Event of
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Default occurs. Except in the case of a Default or an Event of Default in
payment of principal of, or premium, if any, or interest on, any Debenture
(including all payments due on any Maturity Date), the Trustee may withhold the
notice if and so long as the board of directors, the executive committee or a
trust committee of directors and/or responsible officers of the Trustee in good
faith determines that withholding the notice is in the interest of the Holders.
SECTION 7.6 REPORTS BY TRUSTEE TO HOLDERS.
Within 60 days after each May 15 beginning with the May 15
following the date of this Indenture, the Trustee shall, if required, mail to
each Debentureholder a brief report dated as of such May 15 that complies with
TIA ss. 313(a). The Trustee also shall comply with TIA ss.ss. 313(b) and 313(c).
A copy of each report at the time of its mailing to
Debentureholders shall be mailed to the Company and filed with the SEC and each
stock exchange, if any, on which the Debentures are listed.
SECTION 7.7 COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time
reasonable compensation for its services (in whatever capacity rendered). The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. Except as otherwise expressly provided herein, the
Company shall reimburse the Trustee upon its request for all reasonable
disbursements, expenses and advances incurred or made by it in accordance with
the provisions of this Indenture. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents, experts and
counsel.
The Company shall indemnify the Trustee (in its capacity as
Trustee), and hold it harmless against, any claim, demand, expense (including
but not limited to, compensation, disbursements and expenses of the Trustees'
agents and counsel), loss or liability incurred by it without negligence or bad
faith on its part, arising out of or in connection with the administration of
this trust and its rights or duties hereunder including the reasonable costs and
expenses of defending itself against any claim or
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liability in connection with the exercise or performance of any of its powers or
duties hereunder. The Trustee shall notify the Company promptly of any claim
asserted against the Trustee for which it may seek indemnity. The Company shall
defend the claim and the Trustee shall provide reasonable cooperation at the
Company's expense in the defense. The Trustee may have separate counsel and the
Company shall pay the reasonable fees and expenses of such counsel; provided,
that the Company will not be required to pay such fees and expenses if it
assumes the Trustee's defense and there is no conflict of interest as reasonably
determined by the Trustee between the Company and the Trustee in connection
without such defense. The Company need not pay for any settlement made without
its written consent which shall not be unreasonably withheld. The Company need
not reimburse any expense or indemnify against any loss or liability to the
extent incurred by the Trustee through its negligence, bad faith or willful
misconduct.
To secure the Company's payment obligations in this Section
7.7, the Trustee shall have a lien prior to the Debentures on all assets held or
collected by the Trustee, in its capacity as Trustee, except assets held in
trust to pay principal of, and premium, if any, or interest on particular
Debentures.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.1(h) or (i) hereof occurs, the expenses
and the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
The Company's obligations under this Section 7.7 and any lien
arising hereunder shall survive the resignation or removal of the Trustee, the
discharge of the Company's obligations pursuant to Article VIII of this
Indenture and any rejection or termination of this Indenture under any
Bankruptcy Law.
SECTION 7.8 REPLACEMENT OF TRUSTEE.
The Trustee may resign by so notifying the Company in writing.
The Holder or Holders of a majority in aggregate principal amount of the
Debentures then outstanding may remove the Trustee by so notifying the Company
and the Trustee in writing and the Company shall
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appoint a successor trustee. The Company may remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged bankrupt or insolvent;
(c) a receiver, Custodian, or other public officer takes
charge of the Trustee or its property;
(d) the Trustee becomes incapable of acting; or
(e) the Trustee fails to perform its duties, obligations and
responsibilities under this Indenture in any material respect.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holder or Holders of a majority in aggregate principal amount of the Debentures
then outstanding may appoint a successor Trustee to replace the successor
Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that
and provided that all sums owing to the Trustee provided for in Section 7.7
hereof have been paid, the retiring Trustee shall transfer all property held by
it as Trustee to the successor Trustee, subject to the lien provided in Section
7.7 hereof, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Holder.
Subject to Section 310(b) of the TIA, if a successor Trustee
does not take office within 60 days after the retiring Trustee resigns or is
removed, the retiring Trustee, the Company or the Holder or Holders of at least
10% in aggregate principal amount of the Debentures then outstanding may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
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If the Trustee fails to comply with Section 7.10 hereof, any
Debentureholder who has been a bona fide holder of Debentures for at least six
months may petition any court of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this
Section 7.8, the Company's obligations under Section 7.7 hereof shall continue
for the benefit of the retiring Trustee.
SECTION 7.9 SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the resulting, surviving or transferee corporation without any
further act shall, if such resulting, surviving or transferee corporation is
otherwise eligible hereunder, be the successor Trustee.
SECTION 7.10 ELIGIBILITY; DISQUALIFICATION.
The Trustee shall at all times satisfy the requirements of TIA
ss.ss. 310(a)(1), (a)(2) and (a)(5). The Trustee shall comply with TIA
ss. 310(b).
SECTION 7.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST
COMPANY.
The Trustee shall comply with TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). A Trustee who has resigned or
been removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
SECTION 7.12 NO BOND.
The Trustee shall not be required to give any bond or surety
in respect to the execution of its trusts, powers, rights and duties under this
Indenture or otherwise in respect of the premises.
SECTION 7.13 CONDITION TO ACTION.
Notwithstanding anything elsewhere in this Indenture to the
contrary, the Trustee shall have the right, but shall not be required, to
demand, in respect of
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the authentication of any Debentures, any showings, certificates, opinions, or
other information, or corporate action or evidence thereof in addition to that
by the terms hereof required, as a condition of such action by the Trustee if
reasonably deemed desirable by the Trustee for the purpose of establishing the
right to the authentication of any Debentures by the Trustee.
ARTICLE VIII
SATISFACTION AND DISCHARGE
SECTION 8.1 SATISFACTION, DISCHARGE OF THE INDENTURE AND
DEFEASANCE OF THE DEBENTURES.
This Indenture shall cease to be of further effect (except as
to any surviving rights of conversion, registration of transfer or exchange of
Debentures herein expressly provided for), and the Trustee, on demand of and at
the expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(a) either
(i) all Debentures theretofore authenticated and
delivered (other than (1) Debentures which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 2.7 hereof and
(2) Debentures for whose payment money has heretofore been deposited in trust or
segregated and held in trust by the Company and thereafter repaid to the Company
or discharged from such trust, as provided in Sections 8.4 and 8.5 hereof) have
been delivered to the Trustee for cancellation; or
(ii) all such Debentures not theretofore delivered
to Trustee for cancellation
(1) have become due and payable, or
(2) will become due and payable at
their Stated Maturity within one year, or
(3) are to be called for redemption
within one year under arrangements satisfactory to the
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Trustee for the giving of notice of redemption by the Trustee in the
name, and at the expense, of the Company,
and the Company, in the case of clause (1), (2) or (3) above, has deposited or
caused to be deposited with the Trustee, as trust funds in an irrevocable trust,
U.S. Legal Tender or U.S. Government Obligations sufficient to pay and discharge
the entire indebtedness on such Debentures not theretofore delivered to the
Trustee for cancellation, for principal, premium, if any, and interest to the
date of such deposit (in the case of Debentures which have become due and
payable) or to the Stated Maturity, Redemption Date or Repurchase Date, as the
case may be; provided, however, that the Company shall be deemed to have made
the deposit required herein as to any Debentures in respect of which the Company
has mailed a check to the address of the Holder, as such address appears in the
Debenture Register;
(b) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(c) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
SECTION 8.2 SURVIVAL OF CERTAIN OBLIGATIONS.
Notwithstanding the satisfaction and discharge of this
Indenture and of the Debentures referred to in Section 8.1 hereof, the
respective obligations of the Company and the Trustee under Sections 2.2, 2.3,
2.4, 2.5, 2.6, 2.7, 2.11, Article III, 4.1, 4.2, 6.8, 7.7, 7.8, 8.4, 8.5, 8.6
hereof and this Section 8.2 shall survive until the Debentures are no longer
outstanding, and thereafter the obligations of the Company and the Trustee under
Sections 6.8, 7.7, 8.4, 8.5, 8.6 hereof and this Section 8.2 shall survive.
Nothing contained in this Article VIII shall abrogate any of the obligations or
duties of the Trustee under this Indenture.
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SECTION 8.3 ACKNOWLEDGMENT OF DISCHARGE BY TRUSTEE.
After (a) the conditions of Section 8.1 hereof have been
satisfied, (b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company and (c) the Company has delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel as provided for in Section 8.1
hereof, the Trustee upon request shall acknowledge in writing the discharge of
the Company's obligations under this Indenture except for those surviving
obligations specified in Section 8.2 hereof.
SECTION 8.4 APPLICATION OF TRUST ASSETS.
The Trustee shall hold any U.S. Legal Tender or U.S.
Government Obligations deposited with it in the irrevocable trust established
pursuant to Section 8.1 hereof. The Trustee shall apply the deposited U.S. Legal
Tender or U.S. Government Obligations, together with earnings thereon, through
the Paying Agent (other than the Company or any Affiliate of the Company), in
accordance with this Indenture and the terms of the irrevocable trust agreement,
if any, to the payment of principal of, premium, if any, and interest on the
Debentures.
SECTION 8.5 REPAYMENT TO THE COMPANY.
Upon termination of the trust established pursuant to Section
8.1 hereof, the Trustee and the Paying Agent shall promptly pay to the Company
upon request any excess U.S. Legal Tender or U.S. Government Obligations held by
them.
The Trustee and the Paying Agent shall pay to the Company upon
request, and, if applicable, in accordance with the irrevocable trust
established pursuant to Section 8.1 hereof, any U.S. Legal Tender or U.S.
Government Obligations held by them for the payment of principal of, premium, if
any, or interest on the Debentures that remain unclaimed for two years after the
date on which such payment shall have become due; provided, however, that the
Trustee or such Paying Agent, before being required to make any such repayment,
may, at the expense of the Company, cause to be published once, in a newspaper
customarily published on each Business Day and of general circulation in the
Borough of Manhattan, The City of New York, notice
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that such money remains unclaimed and that, after a date specified therein,
which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining shall be repaid to the Company.
After payment to the Company, Holders entitled to such payment must look to the
Company for such payment as general creditors unless an applicable abandoned
property law designates another Person.
SECTION 8.6 REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any U.S.
Legal Tender or U.S. Government Obligations in accordance with Section 8.4
hereof by reason of any legal proceeding or by reason of any order or judgment
of any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, the Company's obligations under this Indenture and
the Debentures shall be revived and reinstated as though no deposit had occurred
pursuant to Section 8.1 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in
accordance with Section 8.4 hereof; provided, however, that if the Company has
made any payment of principal of, premium, if any, or interest on any Debentures
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Debentures to receive such payment from the
U.S. Legal Tender or U.S. Government Obligations held by the Trustee or Paying
Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
HOLDERS.
Without the consent of any Holder, the Company, when
authorized by Board Resolutions, and the Trustee, at any time and from time to
time, may enter into one or more indentures supplemental hereto, in form
satisfactory to the Trustee, for any of the following purposes:
(a) to cure any ambiguity, defect, or inconsistency, or to
make any other provisions with respect to matters or questions arising under
this Indenture which
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shall not be inconsistent with the provisions of this Indenture, provided such
action pursuant to this clause (a) shall not adversely affect the interests of
any Holder in any respect;
(b) to add to the covenants of the Company for the benefit of
the Holders or to surrender any right or power herein conferred upon the Company
or to make any other change that does not adversely affect the rights of any
Holder, provided, that the Company has delivered to the Trustee an Opinion of
Counsel stating that such change does not adversely affect the rights of any
Holder;
(c) to provide for collateral for the Debentures;
(d) to evidence the succession of another Person to the
Company and the assumption by any such successor of the obligations of the
Company herein and in the Debentures in accordance with Article V; or
(e) to comply with the TIA.
SECTION 9.2 AMENDMENTS, SUPPLEMENTAL INDENTURES AND WAIVERS
WITH CONSENT OF HOLDERS.
Subject to Sections 2.9 and 6.8 hereof, with the consent of
the Holders of not less than a majority aggregate principal amount of the
Debentures then outstanding, by written act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by Board Resolutions, and
the Trustee may amend or supplement this Indenture or the Debentures or enter
into an indenture or indentures supplemental hereto for the purpose of adding
any provisions to or changing in any manner or eliminating any of the provisions
of this Indenture or the Debentures or of modifying in any manner the rights of
the Holders under this Indenture or the Debentures. Subject to Sections 2.9 and
6.8 hereof, the Holder or Holders of not less than a majority in aggregate
principal amount of the Debentures then outstanding may waive compliance by the
Company with any provision of this Indenture or the Debentures. Notwithstanding
any of the above, however, no such amendment, supplemental indenture or waiver
shall, without the consent of the Holder of each outstanding Debenture affected
thereby:
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(a) reduce the percentage of principal amount of Debentures
whose Holders must consent to an amendment, supplement or waiver of any
provision of this Indenture or the Debentures;
(b) reduce the rate or extend the time for payment of interest
on any Debenture;
(c) reduce the principal amount of any Debenture, or reduce
the Repurchase Price or the Redemption Price;
(d) (i) change the Stated Maturity of any Debenture or (ii)
change the Repurchase Date of any Debenture;
(e) alter (i) the redemption provisions of Article III hereof
or paragraph 5 of the Debentures, (ii) the terms or provisions of Article XII
hereof in a manner adverse to any Holder or (iii) the conversion provisions of
Article XII hereof or paragraph 14 of the Debentures;
(f) make any changes in the provisions concerning waivers of
Defaults or Events of Default by Holders of the Debentures (except to increase
any required percentage or to provide that certain other provisions hereof
cannot be modified or waived without the consent of the Holders of each
outstanding Debenture affected thereby) or the rights of Holders to recover the
principal of, premium, if any, interest on, or redemption payment with respect
to, any Debenture;
(g) make any changes in Section 6.4 or 6.7 hereof or the third
sentence of this Section 9.2; or
(h) make the principal of, premium, if any, or the interest
on, any Debenture payable with anything or in any manner other than as provided
for in this Indenture (including changing the place of payment where, or the
coin or currency in which, any Debenture or any premium or the interest thereon
is payable) and the Debentures as in effect on the date hereof.
It shall not be necessary for the consent of the Holders under
this Section 9.2 to approve the particular form of any proposed amendment,
supplement or waiver, but
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it shall be sufficient if such consent approves the substance thereof.
After an amendment, supplement or waiver under this Section
9.2 becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such supplemental indenture.
After an amendment, supplement or waiver under this Section
9.2 or under Section 9.4 hereof becomes effective, it shall bind each applicable
Holder.
In connection with any amendment, supplement or waiver under
this Article IX, the Company may, but shall not be obligated to, offer to any
Holder who consents to such amendment, supplement or waiver, or to all Holders,
consideration for such Holder's consent to such amendment, supplement or waiver.
SECTION 9.3 COMPLIANCE WITH TIA.
Every amendment, waiver or supplement of this Indenture or the
Debentures shall comply with the TIA as then in effect.
SECTION 9.4 REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, waiver or supplement becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Debenture or portion of a Debenture that evidences the
same debt as the consenting Holder's Debenture, even if notation of the consent
is not made on any Debenture. However, any such Holder or subsequent Holder may
revoke the consent as to his Debenture or portion of his Debenture by written
notice to the Company or the Person designated by the Company as the Person to
whom consents should be sent if such revocation is received by the Company or
such Person before the date on which the Trustee receives an Officers'
Certificate certifying that the Holders of the requisite principal amount of
Debentures have consented (and not theretofore revoked such consent) to the
amendment, supplement or waiver.
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The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement or waiver, which record date shall be the date so fixed by
the Company notwithstanding the provisions of the TIA. If a record date is
fixed, then notwithstanding the last sentence of the immediately preceding
paragraph, those Persons who were Holders at such record date, and only those
Persons (or their duly designated proxies), shall be entitled to revoke any
consent previously given, whether or not such Persons continue to be Holders
after such record date. No such consent shall be valid or effective for more
than 90 days after such record date.
After an amendment, supplement or waiver becomes effective, it
shall bind every Debentureholder; provided, that any such waiver shall not
impair or affect the right of any Holder to receive payment of principal of,
premium, if any, and interest on a Debenture, on or after the respective dates
set for such amounts to become due and payable expressed in such Debenture, or
to bring suit for the enforcement of any such payment on or after such
respective dates.
SECTION 9.5 NOTATION ON OR EXCHANGE OF DEBENTURES.
If an amendment, supplement or waiver changes the terms of a
Debenture, the Trustee may require the Holder of the Debenture to deliver it to
the Trustee or require the Holder to put an appropriate notation on the
Debenture. The Trustee may place an appropriate notation on the Debenture about
the changed terms and return it to the Holder. Alternatively, if the Company or
the Trustee so determines, the Company in exchange for the Debenture shall issue
and the Trustee shall authenticate a new Debenture that reflects the changed
terms. Any failure to make the appropriate notation or to issue a new Debenture
shall not affect the validity of such amendment, supplement or waiver.
SECTION 9.6 TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall execute any amendment, supplement or waiver
authorized pursuant to this Article IX; provided, that the Trustee may, but
shall not be obligated to, execute any such amendment, supplement or
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waiver which affects the Trustee's own rights, duties or immunities under this
Indenture. The Trustee at the expense of the Company shall be entitled to
receive, and shall be fully protected in relying upon, an Opinion of Counsel
stating that the execution of any amendment, supplement or waiver authorized
pursuant to this Article IX is authorized or permitted by this Indenture.
ARTICLE X
MEETINGS OF DEBENTUREHOLDERS
SECTION 10.1 PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
A meeting of Debentureholders may be called at any time and
from time to time pursuant to the provisions of this Article X for any of the
following purposes:
(a) to give any notice to the Company or to the Trustee, or to
give any directions to the Trustee, or to waive or to consent to the waiving of
any Default or Event of Default hereunder and its consequences, or to take any
other action authorized to be taken by Debentureholders pursuant to any of the
provisions of Article VI hereof;
(b) to remove the Trustee or appoint a successor Trustee
pursuant to the provisions of Article VII hereof;
(c) to consent to an amendment, supplement or waiver pursuant
to the provisions of Section 9.2 hereof; or
(d) to take any other action (i) authorized to be taken by or
on behalf of the Holder or Holders of any specified aggregate principal amount
of the Debentures under any other provision of this Indenture, or authorized or
permitted by law or (ii) which the Trustee deems necessary or appropriate in
connection with the administration of this Indenture.
SECTION 10.2 MANNER OF CALLING MEETINGS.
The Trustee may at any time call a meeting of Debentureholders
to take any action specified in Section 10.1 hereof, to be held at such time and
at such place in the City of New York, New York or elsewhere as the Trustee
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shall determine. Notice of every meeting of Debentureholders, setting forth the
time and place of such meeting and in general terms the action proposed to be
taken at such meeting, shall be mailed by the Trustee, first-class postage
prepaid, to the Company and to the Holders at their last addresses as they shall
appear on the registration books of the Registrar, not less than 10 nor more
than 60 days prior to the date fixed for a meeting.
Any meeting of Debentureholders shall be valid without notice
if the Holders of all Debentures then outstanding are present in Person or by
proxy, or if notice is waived before or after the meeting by the Holders of all
Debentures outstanding, and if the Company and the Trustee are either present by
duly authorized representatives or have, before or after the meeting, waived
notice.
SECTION 10.3 CALL OF MEETINGS BY COMPANY OR HOLDERS.
In case at any time the Company, pursuant to a Board
Resolution, or the Holders of not less than 10% in aggregate principal amount of
the Debentures then outstanding, shall have requested the Trustee to call a
meeting of Debentureholders to take any action specified in Section 10.1 hereof,
by written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have mailed the notice of such
meeting within 20 days after receipt of such request, then the Company or the
Holders of Debentures in the amount above specified may determine the time and
place in the City of New York, New York or elsewhere for such meeting and may
call such meeting for the purpose of taking such action, by mailing or causing
to be mailed notice thereof as provided in Section 10.2 hereof, or by causing
notice thereof to be published at least once in each of two successive calendar
weeks (on any Business Day during such week) in a newspaper or newspapers
printed in the English language, customarily published at least five days a week
of a general circulation in the City of New York, State of New York, the first
such publication to be not less than 10 nor more than 60 days prior to the date
fixed for the meeting.
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SECTION 10.4 WHO MAY ATTEND AND VOTE AT MEETINGS.
To be entitled to vote at any meeting of Debentureholders, a
Person shall (a) be a registered Holder of one or more Debentures or (b) be a
Person appointed by an instrument in writing as proxy for the registered Holder
or Holders of Debentures. The only Persons who shall be entitled to be present
or to speak at any meeting of Debentureholders shall be the Persons entitled to
vote at such meeting and their counsel and any representative of the Trustee and
its counsel and any representative of the Company and its counsel.
SECTION 10.5 REGULATIONS MAY BE MADE BY TRUSTEE; CONDUCT OF
THE MEETING; VOTING RIGHTS; ADJOURNMENT.
Notwithstanding any other provision of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for any
action by or any meeting of Debentureholders, in regard to proof of the holding
of Debentures and of the appointment of proxies, and in regard to the
appointment and duties of inspectors of votes, and submission and examination of
proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it shall deem appropriate. Such
regulations may fix a record date and time for determining the Holders of record
of Debentures entitled to vote at such meeting, in which case those and only
those Persons who are Holders of Debentures at the record date and time so
fixed, or their proxies, shall be entitled to vote at such meeting whether or
not they shall be such Holders at the time of the meeting.
The Trustee shall, by an instrument in writing, appoint a
chairman and secretary of the meeting, unless the meeting shall have been called
by the Company, in which case the Company shall in like manner appoint a
chairman and secretary. In the case of meetings called by Debentureholders as
provided by Section 10.3 hereof, the Debentureholders calling the meeting shall
by an instrument in writing appoint a temporary chairman and temporary secretary
with a permanent chairman and a permanent secretary of the meeting to be elected
by vote of the Holders of a majority in aggregate principal amount of the
Debentures then outstanding represented at the meeting and entitled to vote.
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At any meeting each Debentureholder or proxy shall be entitled
to one vote for each $1,000 principal amount of Debentures held or represented
by him; provided, however, that no vote shall be cast or counted at any meeting
in respect of any Debentures challenged as not outstanding and ruled by the
chairman of the meeting to be not then outstanding. The chairman of the meeting
shall have no right to vote other than by virtue of Debentures held by him or
instruments in writing as aforesaid duly designating him as the proxy to vote on
behalf of other Debentureholders. Any meeting of holders duly called pursuant to
the provisions of Section 10.2 or Section 10.3 hereof may be adjourned from time
to time by vote of the Holder or Holders of a majority in aggregate principal
amount of the Debentures then outstanding represented at the meeting and
entitled to vote, and the meeting may be held as so adjourned without further
notice.
SECTION 10.6 VOTING AT THE MEETING AND RECORD TO BE KEPT.
The vote upon any resolution submitted to any meeting of
Debentureholders shall be by written ballots on which shall be subscribed the
signatures of the Holders of Debentures or of their representatives by proxy and
the principal amount of the Debentures voted by the ballot. The chairman of the
meeting shall appoint two inspectors of votes, who shall count all votes cast at
the meeting for or against any resolution and who shall make and file with the
secretary of the meeting their verified written reports in duplicate of all
votes cast at the meeting. A record in duplicate of the proceedings of each
meeting of Debentureholders shall be prepared by the secretary of the meeting
and there shall be attached to such record the original reports of the
inspectors of votes on any vote by ballot taken thereat and affidavits by one or
more Persons having knowledge of the facts, setting forth a copy of the notice
of the meeting and showing that such notice was mailed as provided in Section
10.2 hereof or published as provided in Section 10.3 hereof. The record shall be
signed and verified by the affidavits of the chairman and the secretary of the
meeting and one of the duplicates shall be delivered to the Company and the
other to the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting.
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Any record so signed and verified shall be conclusive evidence
of the matters therein stated.
SECTION 10.7 EXERCISE OF RIGHTS OF TRUSTEE OR
DEBENTUREHOLDERS MAY NOT BE HINDERED OR DELAYED BY CALL OF MEETING.
Nothing contained in this Article X shall be deemed or
construed to authorize or permit, by reason of any call of a meeting of
Debentureholders or any rights expressly or impliedly conferred hereunder to
make such call, any hindrance or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the Debentureholders under any
of the provisions of this Indenture or of the Debentures.
ARTICLE XI
SUBORDINATION
SECTION 11.1 DEBENTURES SUBORDINATED TO SENIOR INDEBTEDNESS.
The Company, for itself and its successors, and each Holder,
by his acceptance of Debentures, agrees that (a) the payment of the principal
of, premium, if any, and interest on the Debentures and (b) any payment on
account of the acquisition or redemption of the Debentures by the Company
including, without limitation, pursuant to Section 12.1 hereof, is subordinated,
to the extent and in the manner provided in this Article XI, to the prior
payment in full of all Senior Indebtedness of the Company and that these
subordination provisions are for the benefit of the holders of Senior
Indebtedness.
This Article XI shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of, or continue to
hold, Senior Indebtedness, and such provisions are made for the benefit of the
holders of Senior Indebtedness, and such holders are made obligees hereunder and
any one or more of them may enforce such provisions.
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SECTION 11.2 NO PAYMENT ON OR ACCELERATION OF DEBENTURES IN
CERTAIN CIRCUMSTANCES.
(a) No payment shall be made by the Company on account of
principal of, premium, if any, or interest on the Debentures or on account of
the redemption, repurchase, acceleration or other acquisition of Debentures of
the Company, if there shall have occurred and be continuing a default in the
payment of all or any portion of the obligations on any Senior Indebtedness (a
"Senior Payment Default") until such Senior Payment Default shall have been
cured or waived or shall have ceased to exist.
(b) During the continuance of any non-payment default or event
of default with respect to Senior Indebtedness in an aggregate principal amount
of at least $10 million pursuant to which the maturity thereof may be
accelerated, and upon receipt by the Trustee of notice thereof from the holders
of such Senior Indebtedness (a "Senior Non-Payment Default"), then, unless and
until (i) such default or event of default shall have been cured or waived or
have ceased to exist, or (ii) a Default under either Section 6.1(h) or Section
6.1(i) hereof involving the Company or any Subsidiary of the Company shall have
occurred and be continuing, or (iii) such Senior Indebtedness shall have been
paid in full (each of clause (i), (ii) and (iii) being a "Blockage Termination
Event"), no payment or distribution will be made by or on behalf of the Company
on account of or with respect to the Debentures (except for those funds held in
trust for the benefit of the Holders of any Debentures to such Holders) during a
period (a "Blockage Period") commencing on the date of receipt of such notice by
the Trustee and ending 179 days thereafter.
(c) In addition to the restrictions on payment set forth in
Section 11.2(b) hereof, so long as no Blockage Termination Event shall have
occurred, upon the occurrence of either a Senior Payment Default or a Senior
Non-Payment Default, neither the Trustee nor any Holder of the Debentures may
take any action to accelerate the maturity of the Debentures during any Blockage
Period (with respect to a Senior Payment Default, the Blockage Period shall be
deemed to commence on the date which is the first date payment should have been
made).
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(d) Notwithstanding anything herein to the contrary, (i) in no
event will a Blockage Period extend beyond the 179 days from the date the
payment on the Debentures was due and (ii) there must be 180 days in any 365 day
period during which no Blockage Period is in effect. Not more than one Blockage
Period may be commenced with respect to the Debentures during any period of 365
consecutive days. No default or event of default that existed or was continuing
on the date of commencement of any Blockage Period with respect to the Senior
Indebtedness initiating such Blockage Period may be, or be made, the basis for
the commencement of any other Blockage Period by the holders of such Senior
Indebtedness, whether or not within a period of 365 consecutive days, unless
such default or event of default has been cured or waived for a period of not
less than 90 consecutive days.
(e) In furtherance of the provisions of Section 11.1 hereof,
in the event that, notwithstanding the foregoing provisions of this Section
11.2, any payment or distribution of assets on account of principal of, premium,
if any, or interest on the Debentures or to defease or acquire any of the
Debentures (including repurchases of Debentures pursuant to Article XII hereof)
for cash, property or securities, or on account of the redemption provisions of
the Debentures shall be made by the Company and received by the Trustee, by any
Holder or by any Paying Agent (or, if the Company is acting as its own Paying
Agent, money for any such payment shall be segregated and held in trust), at a
time when such payment or distribution was prohibited by the provisions of this
Section 11.2, then, unless such payment or distribution is no longer prohibited
by this Section 11.2, such payment or distribution (subject to the provisions of
Sections 11.6 and 11.7 hereof) shall be received and held in trust by the
Trustee or such Holder or Paying Agent for the benefit of the holders of Senior
Indebtedness, and shall be paid or delivered by the Trustee or such Holders or
such Paying Agent, as the case may be, to the holders of Senior Indebtedness
remaining unpaid and unprovided for or their representative or representatives,
or to the trustee or trustees under any indenture pursuant to which any
instruments evidencing any of such Senior Indebtedness may have been issued,
ratably according to the aggregate amounts on account of the Senior Indebtedness
held or represented by each, to the extent necessary to enable payment in full
(except as such payment otherwise shall
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have been provided for), of all Senior Indebtedness remaining unpaid, after
giving effect to all concurrent payments and distributions and all provisions
therefor, to or for the holders of such Senior Indebtedness, but only to the
extent that as to any holder of such Senior Indebtedness, as promptly as
practical following notice from the Trustee to the holders of such Senior
Indebtedness that such prohibited payment has been received by the Trustee,
Holder(s) or Paying Agent (or has been segregated as provided above), such
holder (or a representative thereof) notifies the Trustee of the amounts then
due and owing on such Senior Indebtedness, if any, held by such holder and only
the amounts specified in such notices to the Trustee shall be paid to the
holders of such Senior Indebtedness.
(f) The Company shall give prompt written notice to the
Trustee of any default or event of default, and any cure or waiver thereof, or
any acceleration under any Senior Indebtedness or under any agreement pursuant
to which Senior Indebtedness may have been issued.
SECTION 11.3 DEBENTURES SUBORDINATED TO PRIOR PAYMENT OF ALL
SENIOR INDEBTEDNESS ON ACCELERATION OF PRINCIPAL OF DEBENTURES OR ON
DISSOLUTION, LIQUIDATION OR REORGANIZATION.
Upon any acceleration of the principal of the Debentures or
any distribution of assets of the Company upon any dissolution, winding up,
total or partial liquidation or reorganization of the Company, whether voluntary
or involuntary, in bankruptcy, insolvency, receivership or similar proceeding or
upon assignment for the benefit of creditors:
(a) the holders of all Senior Indebtedness shall first be
entitled to receive payments in full (or to have such payment duly provided for)
of the principal of, premium, if any, and interest on and all other amounts
payable in respect thereof, before the Holders are entitled to receive any
payment on account of the principal of, premium, if any, and interest on the
Debentures;
(b) any payment or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to which the
Holders or the Trustee on behalf of the Holders would be entitled except for the
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provisions of this Article XI, shall be paid by the liquidating trustee or agent
or other Person making such a payment or distribution, directly to the holders
of Senior Indebtedness or their representative, ratably according to the
respective amounts of Senior Indebtedness held or represented by each, to the
extent necessary to make payment in full (or have such payment duly provided
for) of all such Senior Indebtedness remaining unpaid after giving effect to all
concurrent payments and distributions and all provisions therefor to or for the
holders of such Senior Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, shall be received by the Trustee or the
Holders or any Paying Agent (or, if the Company is acting as its own Paying
Agent, money for any such payment or distribution shall be segregated or held in
trust) on account of principal of, premium, if any, or interest on the
Debentures, as the case may be, before all Senior Indebtedness is paid in full
(or provision made therefor), such payment or distribution (subject to the
provisions of Sections 11.6 and 11.7 hereof) shall be received and held in trust
by the Trustee or such Holder or Paying Agent for the benefit of the holders of
such Senior Indebtedness, or their respective representative, ratably according
to the respective amounts of Senior Indebtedness held or represented by each, to
the extent necessary to make payment in full (except as such payment otherwise
shall have been provided for) of all such Senior Indebtedness remaining unpaid
after giving effect to all concurrent payments and distributions and all
provisions therefor to or for the holders of such Senior Indebtedness, but only
to the extent that as to any holder of such Senior Indebtedness, as promptly as
practical following notice from the Trustee to the holders of such Senior
Indebtedness that such prohibited payment has been received by the Trustee,
Holder(s) or Paying Agent (or has been segregated as provided above), such
holder (or a representative therefor) notifies the Trustee of the amounts then
due and owing on such Senior Indebtedness, if any, held by such holder and only
the amounts specified in such notices to the Trustee shall be paid to the
holders of such Senior Indebtedness.
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The Company shall give prompt written notice to the Trustee of
any dissolution, winding up, liquidation or reorganization of the Company or
assignment for the benefit of creditors by the Company.
SECTION 11.4 DEBENTUREHOLDERS TO BE SUBROGATED TO RIGHTS OF
HOLDERS OF SENIOR INDEBTEDNESS.
Subject to the payment in full of all Senior Indebtedness (or
provision made for its payment), the Holders of Debentures shall be subrogated
to the rights of the holders of such Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness
until all amounts owing on the Debentures shall be paid in full, and for the
purpose of such subrogation no such payments or distributions to the holders of
such Senior Indebtedness by or on behalf of the Company, or by or on behalf of
the Holders by virtue of this Article XI, which otherwise would have been made
to the Holders shall, as between the Company and the Holders, be deemed to be
payment by the Company, to or on account of such Senior Indebtedness, it being
understood that the provisions of this Article XI are and are intended solely
for the purpose of defining the relative rights of the Holders, on the one hand,
and the holders of such Senior Indebtedness, on the other hand.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article XI shall
have been applied, pursuant to the provisions of this Article XI, to the payment
of amounts payable under Senior Indebtedness, then the Holders shall be entitled
to receive from the holders of such Senior Indebtedness any payments or
distributions received by such holders of Senior Indebtedness in excess of the
amount sufficient to pay all amounts payable under or in respect of such Senior
Indebtedness in full.
SECTION 11.5 OBLIGATIONS OF THE COMPANY UNCONDITIONAL.
Nothing contained in this Article XI or elsewhere in this
Indenture or in the Debentures is intended to or shall impair, as between the
Company and the Holders, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders the principal of, premium, if any, and
interest on the Debentures as and when
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the same shall become due and payable in accordance with their terms, or is
intended to or shall affect the relative rights of the Holders and creditors of
the Company other than the holders of the Senior Indebtedness, nor shall
anything herein or in the Debentures prevent the Trustee or any Holder from
exercising all remedies otherwise permitted by applicable law upon default under
this Indenture, subject to the rights, if any, under this Article XI, of the
holders of Senior Indebtedness in respect of cash, property or securities of the
Company received upon the exercise of any such remedy. Notwithstanding anything
to the contrary in this Article XI or elsewhere in this Indenture or in the
Debentures upon any distribution of assets of the Company referred to in this
Article XI, the Trustee, subject to the provisions of Sections 7.1 and 7.2
hereof, and the Holders shall be entitled to rely upon any order or decree made
by any court of competent jurisdiction in which such dissolution, winding up,
liquidation or reorganization proceedings are pending, or a certificate of the
liquidating trustee or agent or other Person making any distribution to the
Trustee or to the Holders for the purpose of ascertaining the Persons entitled
to participate in such distribution, the holders of the Senior Indebtedness and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article XI. Nothing in this Section 11.5 shall apply to the
claims of, or payments to, the Trustee under or pursuant to Section 7.7 hereof.
SECTION 11.6 TRUSTEE ENTITLED TO ASSUME PAYMENTS NOT
PROHIBITED IN ABSENCE OF NOTICE.
The Trustee shall not at any time be charged with knowledge of
the existence of any facts which would prohibit the making of any payment to or
by the Trustee unless and until a Trust Officer of the Trustee or any Paying
Agent shall have received, no later than three Business Days prior to such
payment, written notice thereof from the Company or from one or more holders of
Senior Indebtedness or from any representative therefor and, prior to the
receipt of any such written notice, the Trustee, subject to the provisions of
Sections 7.1 and 7.2 hereof, shall be entitled in all respects conclusively to
assume that no such fact exists.
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SECTION 11.7 APPLICATION BY TRUSTEE OF ASSETS DEPOSITED
WITH IT.
U.S. Legal Tender or U.S. Government Obligations deposited in
trust with the Trustee pursuant to and in accordance with Section 8.1 or 8.2
hereof shall be for the sole benefit of Debentureholders and, to the extent (i)
the making of such deposit by the Company shall not have been in contravention
of any term or provision of any agreement creating or evidencing Senior
Indebtedness and (ii) allocated for the payment of Debentures, shall not be
subject to the subordination provisions of this Article XI. Otherwise, any
deposit of assets by the Company with the Trustee or any Paying Agent (whether
or not in trust) for the payment of principal of, premium, if any, or interest
on any Debentures shall be subject to the provisions of Sections 11.1, 11.2,
11.3 and 11.4 hereof; provided, that, if prior to the third Business Day
preceding the date on which by the terms of this Indenture any such assets may
become distributable for any purpose (including without limitation, the payment
of principal of, premium, if any, or interest on any Debenture) the Trustee or
such Paying Agent shall not have received with respect to such assets the
written notice provided for in Section 11.6 hereof, then the Trustee or such
Paying Agent shall have full power and authority to receive such assets and to
apply the same to the purpose for which they were received, and shall not be
affected by any notice to the contrary which may be received by it on or after
such date.
SECTION 11.8 SUBORDINATION RIGHTS NOT IMPAIRED BY ACTS OR
OMISSIONS OF THE COMPANY OR HOLDERS OF SENIOR INDEBTEDNESS.
No right of any present or future holders of any Senior
Indebtedness to enforce subordination provisions contained in this Article XI
shall at any time in any way be prejudiced or impaired by any act or failure to
act on the part of the Company or by any act or failure to act, in good faith,
by any such holder, or by any noncompliance by the Company with the terms of
this Indenture, regardless of any knowledge thereof with which any such holder
may have or be otherwise charged. The holders of Senior Indebtedness may extend,
renew, modify or amend the terms of the Senior Indebtedness or any security
therefor and release, sell or exchange such security and otherwise deal freely
with the Company all without affecting the
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liabilities and obligations of the parties to this Indenture or the Holders of
the Debentures or the subordination provisions of this Article XI or the rights
of holders of Senior Indebtedness to enforce such provisions.
SECTION 11.9 DEBENTUREHOLDERS AUTHORIZE TRUSTEE TO EFFECTUATE
SUBORDINATION OF DEBENTURES.
Each Holder of the Debentures by his acceptance thereof
authorizes and expressly directs the Trustee on his behalf to take such action
as may be necessary or appropriate under this Indenture to effectuate the
subordination provisions contained in this Article XI and to protect the rights
of the Holders, and appoints the Trustee his attorney-in-fact for such purpose,
including, in the event of any dissolution, winding up, liquidation or
reorganization of the Company (whether in bankruptcy, insolvency or receivership
proceedings or upon an assignment for the benefit of creditors or any other
marshaling of assets and liabilities of the Company) tending towards liquidation
of the business and assets of the Company, the immediate filing of a claim for
the unpaid balance of his Debentures in the form required in said proceedings
and causing said claim to be approved. If the Trustee does not file a proper
claim or proof of debt in the form required in such proceeding prior to 30 days
before the expiration of the time to file such claim or claims, then the holders
of the Senior Indebtedness or their representative are or is hereby authorized
to have the right to file and are or is hereby authorized to file an appropriate
claim for and on behalf of the Holders of said Debentures. Nothing herein
contained shall be deemed to authorize the Trustee or the holders of Senior
Indebtedness or their representative to authorize or consent to or accept or
adopt on behalf of any Debentureholder any plan of reorganization, arrangement,
adjustment or composition affecting the Debentures or the rights of any Holder
thereof, or to authorize the Trustee or the holders of Senior Indebtedness or
their representative to vote in respect of the claim of any Debentureholder in
any such proceeding, and the authority granted herein to holders of Senior
Indebtedness shall not impose any duty or other obligation on such holders to
take any action or refrain from any action with respect to any such plan or
proceeding.
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SECTION 11.10 RIGHT OF TRUSTEE TO HOLD SENIOR INDEBTEDNESS.
The Trustee shall be entitled to all of the rights set forth
in this Article XI in respect of any Senior Indebtedness at any time held by it
to the same extent as any other holder of Senior Indebtedness, and nothing in
this Indenture shall be construed to deprive the Trustee of any of its rights as
such holder.
SECTION 11.11 ARTICLE XI NOT TO PREVENT EVENTS OF DEFAULT.
The failure to make a payment on account of principal of,
premium, if any, or interest on the Debentures by reason of any provision of
this Article XI shall not be construed as preventing the occurrence of a Default
or an Event of Default under Section 6.1 hereof or in any way prevent the
Holders from exercising any right hereunder other than the rights to receive
payment on the Debentures and to accelerate the maturity thereof.
SECTION 11.12 NO FIDUCIARY DUTY OF TRUSTEE TO HOLDERS OF
SENIOR INDEBTEDNESS.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Indebtedness, and shall not be liable to any such holders
(other than for its willful misconduct or negligence) if it shall in good faith
mistakenly pay over or distribute to the Holders of Debentures or the Company or
any other Person, cash, property or securities to which any holders of Senior
Indebtedness shall be entitled by virtue of this Article XI or otherwise.
Nothing in this Section 11.12 shall affect the obligation of the Holders or the
Company or any other Person to hold such payment for the benefit of, and to pay
such payment over to, the holders of Senior Indebtedness or their
representative.
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ARTICLE XII
RIGHT TO REQUIRE REPURCHASE
SECTION 12.1 REPURCHASE OF DEBENTURES AT OPTION OF THE HOLDER
UPON CHANGE OF CONTROL.
In the event that a Repurchase Event occurs, each Holder of
Debentures shall have the right, at such Holder's option, subject to the terms
and conditions set forth herein, to require the Company to repurchase all or any
part of such Holder's Debentures (provided that the principal amount of such
Debentures at maturity must be $1,000 or an integral multiple thereof) on the
date that is no later than 45 calendar days after the date the Company gives
notice of such Repurchase Event (the "Repurchase Date"), at a cash purchase
price (the "Repurchase Price") equal to 100% of the principal amount thereof,
plus accrued and unpaid interest, if any, to and including the Repurchase Date.
SECTION 12.2 NOTICES; METHOD OF EXERCISING REPURCHASE RIGHT,
ETC.
(a) Within 30 calendar days after the occurrence of a
Repurchase Event, the Company shall make an irrevocable unconditional offer (a
"Repurchase Offer") to the Holders to purchase for U.S. Legal Tender all of the
Debentures pursuant to the offer described in clause (b) of this Section 12.2 at
the Repurchase Price plus accrued and unpaid interest, if any, to the Repurchase
Date. Within five Business Days after each date upon which the Company knows of
the occurrence of a Repurchase Event requiring the Company to make a Repurchase
Offer pursuant to Section 12.1 hereof, the Company shall so notify the Trustee.
(b) Notice of a Repurchase Offer shall be sent, not more than
30 calendar days after the occurrence of the Repurchase Event, by first class
mail, by the Company to each Holder at its registered address, with a copy to
the Trustee. The notice to the Holders shall contain all instructions and
materials required by applicable law and shall contain or make available to
Holders other information material to the decision of Holders generally to
tender Debentures pursuant to the Repurchase Offer. No failure of the Company to
give such notice or defect therein shall limit any Holder's right to exercise
his
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repurchase right or affect the validity of the proceedings for the repurchase of
the Debentures. The notice, which shall govern the terms of the Repurchase
Offer, shall state that:
(i) the Repurchase Offer is being made pursuant to
such notice and this Article XII and that all Debentures, or portions thereof,
properly tendered pursuant to the Repurchase Offer prior to the fifth Business
Day prior to the Repurchase Date (the "Final Repurchase Put Date") will be
accepted for payment;
(ii) the Repurchase Price, the Repurchase Date and
the Final Repurchase Put Date;
(iii) that any Debenture, or portion thereof, not
tendered or accepted for payment will continue to accrue interest, if interest
is then accruing;
(iv) that, unless the Company defaults in
depositing U.S. Legal Tender with the Paying Agent in accordance with the last
paragraph of clause (c) of this Section 12.2, or payment is otherwise prevented,
any Debenture, or portion thereof, accepted for payment pursuant to the
Repurchase Offer shall cease to accrue interest after the Repurchase Date;
(v) that Holders electing to have a Debenture, or
portion thereof, purchased pursuant to a Repurchase Offer will be required to
surrender the Debenture, with the form entitled "Option of Holder to Elect
Purchase" on the reverse of the Debenture completed, to the Paying Agent (which
may not for purposes of this Article XII, notwithstanding anything in this
Indenture to the contrary, be the Company or any Affiliate of the Company) at
the address specified in the notice prior to the close of business on the Final
Repurchase Put Date;
(vi) that Holders will be entitled to withdraw
their election if the Paying Agent receives, prior to the close of business on
the Final Repurchase Put Date, a telegram, telex, facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Debentures the Holder is withdrawing and a statement containing a facsimile
signature that such Holder is withdrawing his election to have such principal
amount of Debentures purchased;
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(vii) that Holders whose Debentures were purchased
only in part will be issued new Debentures equal in principal amount to the
unpurchased portion of the Debentures surrendered; and
(viii) a brief description, to the extent known to
the Company, of the events resulting in such Repurchase Event.
(c) Any such Repurchase Offer shall comply with all applicable
provisions of federal and state laws, including those regulating tender offers,
if applicable, and any provisions of this Indenture which conflict with such
laws shall be deemed to be superseded by the provisions of such laws. On or
before the Repurchase Date, the Company shall (a) accept for payment Debentures
or portions thereof properly tendered pursuant to the Repurchase Offer prior to
the close of business on the Final Repurchase Put Date, (b) deposit with the
Paying Agent U.S. Legal Tender sufficient to pay the Repurchase Price plus
accrued and unpaid interest, if any, to the Repurchase Date of all Debentures so
tendered and (c) deliver to the Trustee Debentures so accepted together with an
Officers' Certificate listing the Debentures or portions thereof being purchased
by the Company. The Paying Agent shall promptly mail to the Holders of
Debentures so accepted payment in an amount equal to the Repurchase Price plus
accrued and unpaid interest, if any, to the Repurchase Date, and the Trustee
shall promptly authenticate and mail or deliver to such Holders a new Debenture
equal in principal amount to any unpurchased portion of the Debenture
surrendered. Any Debentures not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof and the principal shall, until
paid, bear interest to the extent permitted by applicable law from the
Repurchase Date at the rate borne by the Debenture and each Debenture shall
remain convertible into Common Stock until the principal of such Debenture shall
have been paid or duly provided for. The Company shall publicly announce the
results of the Repurchase Offer on or as soon as practicable after the
Repurchase Date.
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ARTICLE XIII
CONVERSION OF DEBENTURES
SECTION 13.1 RIGHT OF CONVERSION; CONVERSION PRICE.
Subject to the provision of Section 14 of the Debentures and
Section 13.13 hereof, the Holder of any Debenture or Debentures shall have the
right, at his option, at any time before the close of business on April 1, 2002
(except that, with respect to any Debenture or portion of a Debenture which
shall be called for redemption, such right shall terminate, at the close of
business on the last Business Day prior to the date fixed for redemption of such
Debenture or portion of a Debenture unless the Company shall default in payment
due upon redemption thereof), to convert, subject to the terms and provisions of
this Article XIII, the principal of any such Debenture or Debentures or any
portion thereof which is $1,000 principal amount or an integral multiple thereof
into shares of Common Stock, initially at the conversion price per share of
$16 1/8; or, in case an adjustment of such price has taken place pursuant to the
provisions of Section 13.4 hereof, then at the price as last adjusted (such
price or adjusted price being referred to herein as the "conversion price"),
upon surrender of the Debenture or Debentures, the principal of which is so to
be converted, accompanied by written notice of conversion duly executed, to the
Company, at any time during usual business hours at the office or agency
maintained by it for such purpose, and, if so required by the Conversion Agent
or Registrar, accompanied by a written instrument or instruments of transfer in
form satisfactory to the Conversion Agent or Registrar duly executed by the
Holder or his duly authorized representative in writing. For convenience, the
conversion of any portion of the principal of any Debenture or Debentures into
Common Stock is hereinafter sometimes referred to as the conversion of such
Debenture or Debentures.
SECTION 13.2 ISSUANCE OF SHARES ON CONVERSION.
As promptly as practicable after the surrender, as herein
provided, of any Debenture or Debentures for conversion, the Company shall
deliver or cause to be delivered at its said office or agency, to or upon the
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written order of the Holder of the Debenture or Debentures so surrendered,
certificates representing the number of fully paid and nonassessable shares of
Common Stock into which such Debenture or Debentures may be converted in
accordance with the provisions of this Article XIII. Such conversion shall be
deemed to have been made as of the close of business on the date that such
Debenture or Debentures shall have been surrendered for conversion with a
written notice of conversion duly executed, so that the rights of the Holder of
such Debenture or Debentures as a Debentureholder shall cease at such time and,
subject to the following provisions of this paragraph, the Person or Persons
entitled to receive the shares of Common Stock upon conversion of such Debenture
or Debentures shall be treated for all purposes as having become the record
holder or holders of such shares of Common Stock at such time and such
conversion shall be at the conversion price in effect at such time; provided,
however, that no such surrender on any date when the stock transfer books of the
Company shall be closed shall be effective to constitute the Person or Persons
entitled to receive the shares of Common Stock upon such conversion as the
record holder or holders of such shares of Common Stock on such date, but such
surrender shall be effective to constitute the Person or Persons entitled to
receive such shares of Common Stock as the record holder or holders thereof for
all purposes at the close of business on the next succeeding day on which such
stock transfer books are open; such conversion shall be at the conversion price
in effect on the date that such Debenture or Debentures shall have been
surrendered for conversion, as if the stock transfer books of the Company had
not been closed.
Upon conversion of any Debenture which is converted in part
only, the Company shall execute and the Trustee shall authenticate and deliver
to or on the order of the Holder thereof, at the expense of the Company, a new
Debenture or Debentures of authorized denominations in principal amount equal to
the unconverted portion of such Debenture.
SECTION 13.3 NO ADJUSTMENT FOR INTEREST OR DIVIDENDS.
No payment or adjustment in respect of interest on the
Debentures or dividends on the shares of Common Stock shall be made upon the
conversion of any Debenture or
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Debentures; provided, however, that if a Debenture or any portion thereof (other
than a Debenture or portion thereof called for redemption) shall be converted
subsequent to any Record Date and on or prior to the next succeeding Interest
Payment Date, the interest falling due on such Interest Payment Date shall be
payable on such Interest Payment Date notwithstanding such conversion, and such
interest (whether or not punctually paid or duly provided for) shall be paid to
the Person in whose name such Debenture is registered at the close of business
on such Record Date and Debentures surrendered for conversion during the period
from the close of business on any Record Date to the opening of business on the
corresponding Interest Payment Date must be accompanied by payment of an amount
equal to the interest payable on such Interest Payment Date.
SECTION 13.4 ADJUSTMENT OF CONVERSION PRICE.
(a) In case the Company shall pay or make a dividend or other
distribution on any class of capital stock of the Company in shares of Common
Stock, the conversion price in effect at the opening of business on the day
following the date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
conversion price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the opening
of business on the day following the date fixed for such determination.
(b) In case the Company shall issue rights, options or
warrants to all or substantially all holders of its shares of Common Stock
entitling them to subscribe for or purchase shares of Common Stock at a price
per share less than the current market price per share (determined as provided
in paragraph (f) of this Section 13.4) of Common Stock on the date fixed for the
determination of stockholders entitled to receive such rights or warrants, the
conversion price in effect at the opening of business on the day following the
date fixed for such determination shall be reduced by multiplying such
conversion price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business
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on the date fixed for such determination plus the number of shares of Common
Stock which the aggregate of the subscription price of the total number of
shares of Common Stock so offered for subscription or purchase would purchase at
such current market price and the denominator shall be the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately after
the opening of business on the day following the date fixed for such
determination. In the event that all of the shares of Common Stock subject to
such rights or warrants have not been issued when such rights or warrants
expire, then the conversion price shall promptly be readjusted to the conversion
price which would then be in effect had the adjustment upon the issuance of such
rights or warrants been made on the basis of the actual number of shares of
Common Stock issued upon the exercise of such rights or warrants. For the
purposes of this paragraph (b), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu of
fractions of shares of Common Stock. The Company will not issue any rights or
warrants in respect of shares of Common Stock held in the treasury of the
Company.
(c) In case the outstanding shares of Common Stock shall be
subdivided into a greater number of shares, the conversion price in effect at
the opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, in case
outstanding shares of Common Stock shall be combined into a smaller number of
shares, the conversion price in effect at the opening of business on the day
following the day upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise,
distribute to all or substantially all holders of shares of Common Stock
evidences of indebtedness or assets of the Company (including securities, but
excluding any (i) rights, options or warrants referred to in
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paragraph (b) of this Section 13.4 and (ii) any dividend or distribution
referred to in paragraph (a) of this Section 13.4), the conversion price shall
be adjusted so that the same shall equal the price determined by multiplying the
conversion price in effect immediately prior to the close of business on the day
fixed for the determination of stockholders entitled to receive such
distribution by a fraction of which the numerator shall be the current market
price per share (determined as provided in paragraph (f) of this Section 13.4)
of Common Stock on the date fixed for such determination less the then fair
market value as determined by the Board of Directors (whose determination shall
be conclusive and described in a Board Resolution filed with the Trustee) of the
portion of the assets or evidences of indebtedness so distributed allocable to
one share of Common Stock and the denominator shall be such current market price
per share of Common Stock, such adjustment to become effective immediately prior
to the opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such distribution.
(e) In case the shares of Common Stock shall be changed into
the same or a different number of shares of any class or classes of stock,
whether by capital reorganization, reclassification, or otherwise (other than a
subdivision or combination of shares or a stock dividend described in paragraph
(a) or paragraph (c) of this Section 13.4, or a consolidation, merger or sale of
assets described in Section 13.10 hereof), then and in each such event the
Holders of Debentures shall have the right thereafter to convert such Debentures
into the kind and amount of shares of stock and other securities and property
receivable upon such reorganization, reclassification or other change, by
holders of the number of shares of Common Stock into which such Debentures might
have been converted immediately prior to such reorganization, reclassification
or change.
(f) For the purpose of any computation under paragraphs (b)
and (d) of this Section 13.4, the current market price per share of Common Stock
on any date shall be deemed to be the average of the Closing Prices for the 15
consecutive Trading Days selected by the Company commencing not more than 30 and
not less than 20 Trading Days before the date in question.
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(g) No adjustment in the conversion price shall be required
unless such adjustment (plus any adjustments no previously made by reason of
this paragraph (g)) would require an increase or decrease of at least 1% in such
price; provided, however, that any adjustments which by reason of this paragraph
(g) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this paragraph (g) shall be
made to the nearest cent.
(h) The Company may, but shall not be required to, make such
reductions in the conversion price, in addition to those required by paragraphs
(a), (b), (c) and (d) of this Section 13.4, as the Company's Board of Directors
considers to be advisable in order to avoid or diminish any income tax to any
holders of shares of Common Stock resulting from any dividend or distribution of
stock or issuance of rights or warrants to purchase or subscribe for stock or
from any event treated as such from income tax purposes or for any other
reasons. The Company's Board of Directors shall have the power to resolve any
ambiguity or correct any error in the adjustments made pursuant to this Section
13.4 and its actions in so doing shall be final and conclusive.
(i) No adjustment in the conversion price need be made for
rights to purchase or the sale of the Common Stock pursuant to a Company plan
providing for reinvestment of dividends or interest; provided, however, that any
discount under such plan may not exceed 5% of the current market price of the
Common Stock and such plan is registered under the Act.
SECTION 13.5 NOTICE OF ADJUSTMENT OF CONVERSION PRICE.
Whenever the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price in
accordance with Section 13.4 and shall prepare an Officers' Certificate setting
forth the adjusted conversion price and showing in reasonable detail the facts
upon which such adjustment is based and the computation thereof, and such
certificate shall forthwith be filed at each office or agency maintained for the
purpose of
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conversion of Debentures pursuant to Section 2.3 hereof and with the Trustee;
and
(b) a notice stating that the conversion price has been
adjusted and setting forth the adjusted conversion price shall as soon as
practicable as mailed by the Company to all Holders at their last addresses as
they shall appear in the Debenture Register.
SECTION 13.6 NOTICE OF CERTAIN CORPORATION ACTION.
(a) In case:
(i) the Company shall authorize the granting
to holders of its shares of Common Stock of rights or warrants entitling them to
subscribe for or purchase any shares of capital stock of any class or of any
other rights; or
(ii) of any reclassification of the shares
of Common Stock, or of any consolidation or merger to which the Company is a
party and for which approval of any stockholders of the Company is required, or
of the sale or transfer of all or substantially all of the assets of the
Company; or
(iii) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be filed at each office or agency maintained for
the purpose of conversion of Debentures pursuant to Section 2.3 and shall cause
to be mailed to all Holders at their last addresses as they shall appear in the
Debenture Register, at least 10 days (or 20 days in any case specified in clause
(iii) above) prior to the applicable record date hereinafter specified, a notice
stating (1) the date on which a record is to be taken for the purpose of such
dividend, distribution, rights or warrants, or, if a record is not to be taken,
the date as of which the holders of shares of Common Stock of record to be
entitled to such dividend, distribution, rights or warrants is to be determined,
or (2) the date on which such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of shares of
Common Stock of record shall be
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entitled to exchange their shares of Common Stock for securities, cash or other
property deliverable upon such reclassification, consolidation, merger, sale,
transfer, dissolution, liquidation or winding up. Such notice shall also state
whether such transaction will result in any adjustment in the conversion price
applicable to the Debentures and, if so, shall state what the adjusted
conversion price will be and when it will become effective. Neither the failure
to give the notice required by this Section 13.6, nor any defect therein, to any
particular Holder shall affect the sufficiency of the notice or the legality or
validity of any such dividend, distribution, right, warrant, reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution or winding-up,
or the vote on any action authorizing such with respect to the other Holders.
(b) In case the Company or any Affiliate of the Company shall
propose to engage in a "Rule 13e-3 Transaction" (as defined in the SEC's Rule
13e-3 under the Exchange Act) the Company shall, no later than the date on which
any information with respect to such Rule 13e-3 Transaction is first required to
be given to the SEC or any other person pursuant to such Rule 13e-3, cause to be
mailed to all Holders at their last addresses as they shall appear in the
Debenture Register, a copy of all information required to be given to the SEC or
such other person pursuant to such Rule 13e-3. The information required to be
given under this paragraph shall be in addition to and not in lieu of any other
information required to be given by the Company pursuant to this Section 13.6 or
any other provision of the Debentures or this Indenture.
SECTION 13.7 TAXES ON CONVERSIONS.
The Company will pay any and all stamp or similar taxes that
may be payable in respect of the issuance or delivery of shares of Common Stock
on conversion of Debentures pursuant hereto. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of shares of Common Stock in a name other than that
of the Holder of the Debenture or Debentures to be converted, and no such
issuance or delivery shall be made unless and until the Person requesting such
issuance has paid to the Company the amount of any such tax, or has
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established to the satisfaction of the Company that such tax has been paid.
SECTION 13.8 FRACTIONAL SHARES.
No fractional shares or scrip representing fractional shares
shall be issued upon the conversion of Debentures. If any such conversion would
otherwise require the issuance of a fractional share an amount equal to such
fraction multiplied by the Current Market Price per share of Common Stock
(determined as provided in paragraph (f) of Section 13.6 hereof) on the day of
conversion shall be paid to the Holder in cash by the Company.
SECTION 13.9 CANCELLATION OF CONVERTED DEBENTURES.
All Debentures delivered for conversion shall be delivered to
the Trustee to be cancelled by or at the direction of the Trustee, which shall
dispose of the same as provided in Section 2.11 hereof.
SECTION 13.10 PROVISIONS IN CASE OF CONSOLIDATION, MERGER OR
SALE OF ASSETS.
(a) In case of any consolidation of the Company with, or
merger of the Company into, any other corporation or trust, or in case of any
merger of another corporation or trust into the Company (other than a merger
which does not result in any reclassification, conversion, exchange or
cancellation of outstanding shares of Common Stock of the Company), or in case
of any sale, transfer or other disposition of all or substantially all of the
assets of the Company, the corporation or trust formed by such consolidation or
resulting from such merger or which acquires such assets, as the case may be,
shall execute and deliver to the Trustee a supplemental indenture (which shall
conform to the TIA at the time of execution) providing that the Holder of each
Debenture then outstanding shall have the right thereafter, during the period
such Debenture shall be convertible as specified in Section 13.1 hereof to
convert such Debenture only into the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer by a
holder of the number of Common Stock of the Company into which such Debenture
might have been converted immediately prior to such consolidation, merger, sale
or
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transfer, assuming such holder of Common Stock (i) is not a Person with which
the Company consolidated or into which the Company merged or which merged into
the Company or to which such sale or transfer was made, as the case may be (a
"Constituent Person"), or an Affiliate of a Constituent Person and (ii) failed
to exercise his rights of election, if any, as to the kind or amount of
securities, cash and other property receivable upon such consolidation, merger,
sale or transfer (provided that if the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer is
not the same for each share of Common Stock held immediately prior to such
consolidation, merger, sale or transfer by other than a Constituent Person or an
Affiliate thereof and in respect of which such rights of election shall not have
been exercised ("non-electing share"), then for the purpose of this Section
13.10 the kind and amount of securities, cash and other property receivable upon
such consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of
non-electing shares). Such supplemental indenture shall provide for adjustments
which, for events subsequent to the effective date of such supplemental
indenture, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article XIII. The above provisions of this
Section 13.10 shall similarly apply to successive consolidations, mergers, sales
or transfers.
(b) The Trustee shall not be under any responsibility to
determine the correctness of any provisions contained in any such supplemental
indenture relating either to the kind or amount of shares of stock or securities
or property receivable by Holders upon the conversion of their Debentures after
any such reclassification, change, consolidation, merger, sale or conveyance or
to any adjustment to be made with respect thereto.
SECTION 13.11 DISCLAIMER BY TRUSTEE OF RESPONSIBILITY FOR
CERTAIN MATTERS.
The Trustee and each Conversion Agent (other than the Company
or any of its Subsidiaries) shall not at any time be under any duty or
responsibility to any Holder of Debentures to determine whether any facts exist
which may require any adjustment of the conversion price, or with
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respect to the nature or extent of any such adjustment when made, or with
respect to the method employed, or herein or in any supplemental indenture
provided to be employed, in making the same. The Trustee and each Conversion
Agent (other than the Company or any of its Subsidiaries) shall not be
responsible for any failure of the Company to issue, transfer or deliver any
shares of Common Stock or stock certificates or other securities or property
upon the surrender of any Debenture for the purpose of conversion or, subject to
Section 7.1 hereof to comply with any of the covenants of the Company contained
in this Article XIII. The Trustee and each Conversion Agent (other than the
Company or any of its Subsidiaries) shall not at any time be under any duty or
responsibility to determine or inquire whether as a result of any conversion of
any Debenture any Person would then be deemed to own shares of stock in excess
of 9.8%.
SECTION 13.12 COVENANT TO RESERVE SHARES.
The Company covenants that it will at all times reserve and
keep available, free from preemptive rights, out of its authorized shares of
Common Stock, solely for the purpose of issuance upon conversion of Debentures
as herein provided, such number of shares of Common Stock as shall then be
issuable upon the conversion of all outstanding Debentures. The Company
covenants that all shares of Common Stock which shall be so issuable shall be,
when issued in accordance with the Debentures and this Indenture, duly and
validly issued and fully paid and nonassessable. For purposes of this Section
13.12, the number of shares of Common Stock which shall be deliverable upon the
conversion of all outstanding Debentures shall be computed as if at the time of
computation all outstanding Debentures were held by a single holder.
SECTION 13.13 REFUSAL TO CONVERT DEBENTURES TO PROTECT REIT
STATUS.
Notwithstanding anything herein to the contrary, neither to
Company, the Conversion Agent nor the Registrar or co-Registrar shall be
required to take any steps to
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effect the conversion of any Debenture or Debentures if such conversion, in the
good faith opinion of the Board of Directors, (a) might cause the Company to
fail to comply with any requirement necessary for the continued qualification of
the Company as a REIT or (b) would result in a single Person owning more than
9.8% of the Company's outstanding stock within the meaning of the Code. For the
purpose of the preceding sentence, a Person shall be considered to own shares of
Company stock which are owned directly by such Person (held of record by such
Person or such Person's nominee or nominees) and shares of Company stock which
are owned indirectly by such Person (including shares of Common Stock issuable
upon conversion of the Debentures) pursuant to Sections 542, 544 and 856 of the
Code and the regulations promulgated thereunder. Any attempted conversion of a
Debenture or Debentures by a Holder in violation of the limits set forth above
shall be null and void ab initio as to such Holder and such Holder shall not
acquire any rights or economic interest in the Common Stock issuable upon such
conversion. The Company shall advise the Registrar, co-Registrar and the
Conversion Agent in writing promptly of any such determination by the Board of
Directors with respect to any Debentures, identifying such Debenture by Holder
and other appropriate method, and shall instruct the Registrar and the
Conversion Agent not to register the transfer of such Debenture. The Registrar,
co-Registrar and the Conversion Agent shall not be liable to the Company,
Holders of Debentures or any other Persons for conversions of such Debentures
effected prior to its receipt of such written instructions from the Company and
the Company shall indemnify the Registrar, co-Registrar and the Conversion
Agent of all claims, costs and expenses incurred by it in connection with
refusing to convert Debentures as instructed by the Company.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 TIA CONTROLS.
If any provision of this Indenture limits, qualifies, or
conflicts with the duties imposed by operation of the TIA, the imposed duties,
upon qualification of this Indenture under the TIA, shall control.
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<PAGE> 93
SECTION 14.2 NOTICES.
Any notices or other communications to the Company or the
Trustee required or permitted hereunder shall be in writing, and shall be
sufficiently given if made by hand delivery by a nationally recognized overnight
air courier, by telex, by telecopier or registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
if to the Company:
Capstone Capital Corporation
100 Urban Center Drive
Suite 630
Birmingham, Alabama 35242
Attention: Chief Financial Officer
Telecopy: (205) 967-9066
with copies to:
Sirote & Permutt, P.C.
2222 Arlington Avenue South
Birmingham, AL 35205
Attention: John Cooper and
W. Todd Carlisle
Telecopy: (205) 930-5301
and
Sirote & Permutt, P.C.
200 Clinton Avenue, N.W.
Huntsville, Alabama 35801
Attention: Wanda S. McNeil
Telecopy: (205) 518-3681
if to the Trustee:
AmSouth Bank of Alabama
AmSouth/Harbert Plaza
1901 Sixth Avenue North
Suite 730
Birmingham, AL 35203
Attention: Corporate Trust Administrator
Telecopy: 205-581-7661
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<PAGE> 94
The Company or the Trustee by notice to each other party may
designate additional or different addresses as shall be furnished in writing by
such party. Any notice or communication to the Company or the Trustee shall be
deemed to have been given or made as of the date so delivered, if personally
delivered or delivered by air courier; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and five Business Days after mailing if
sent by registered or certified mail, postage prepaid (except that a notice of
change of address shall not be deemed to have been given until actually received
by the addressee).
Any notice or communication mailed to a Debentureholder shall
be mailed to him by first class mail or other equivalent means at his address as
it appears on the registration books of the Registrar and shall be sufficiently
given to him if so mailed within the time prescribed.
Failure to mail a notice or communication to a Debentureholder
or any defect in it shall not affect its sufficiency with respect to other
Debentureholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 14.3 COMMUNICATIONS BY HOLDERS WITH OTHER HOLDERS.
Debentureholders may communicate pursuant to TIA ss. 312(b)
with other Debentureholders with respect to their rights under this Indenture or
the Debentures. The Company, the Trustee, the Registrar and any other Person
shall have the protection of TIA ss. 312(c).
SECTION 14.4 CERTIFICATE AND OPINION AS TO CONDITIONS
PRECEDENT.
Upon any request or application by the Company to the Trustee
to take any action under this Indenture, the Company shall furnish to the
Trustee:
(a) an Officers' Certificate (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of the signers,
all conditions
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precedent, if any, provided for in this Indenture relating to the proposed
action have been complied with; and
(b) an Opinion of Counsel (in form and substance reasonably
satisfactory to the Trustee) stating that, in the opinion of such counsel, all
such conditions precedent have been complied with.
SECTION 14.5 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions contained in
such certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he has
made such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether or not, in the opinion of each
such Person, such condition or covenant has been complied with; provided,
however, that with respect to matters of fact or mixed matters of law and fact,
an Opinion of Counsel may rely on an Officers' Certificate or certificates of
public officials.
SECTION 14.6 LEGAL HOLIDAYS.
A "Legal Holiday" used with respect to a particular place of
payment is a Saturday, a Sunday or a day on which banking institutions at such
place are not required to be open. If a payment date is a Legal Holiday at such
place, payment may be made at such place on the next succeeding day that is not
a Legal Holiday, and no interest shall accrue for the intervening period.
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<PAGE> 96
SECTION 14.7 GOVERNING LAW.
This Indenture and the Debentures shall be governed by and
construed in accordance with the laws of the State of New York, as applied to
contracts made and performed within the State of New York, without regard to
principles of conflicts of law. The Company hereby irrevocably submits to the
jurisdiction of any New York State court sitting in the Borough of Manhattan in
the City of New York or any federal court sitting in the Borough of Manhattan in
the City of New York in respect of any suit, action or proceeding arising out of
or relating to this Indenture and the Debentures, and irrevocably accepts for
itself and in respect of its property, generally and unconditionally,
jurisdiction of the aforesaid courts. The Company irrevocably waives, to the
fullest extent they may effectively do so under applicable law, trial by jury
and any objection which it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding brought in any such court and any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. Nothing herein shall affect the right of the
Trustee or any Debentureholder to serve process in any other manner permitted by
law or to commence legal proceedings or otherwise proceed against the Company in
any other jurisdiction.
SECTION 14.8 NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret another indenture,
loan or debt agreement of any of the Company or any of its Subsidiaries. Any
such indenture, loan or debt agreement may not be used to interpret this
Indenture.
SECTION 14.9 NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or incorporator, as
such, of the Company shall not have any liability for any obligations of the
Company under the Debentures or this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creations. Each
Debentureholder by accepting a Debenture waives and releases all such liability.
Such waiver and release are part of the consideration for the issuance of the
Debentures.
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SECTION 14.10 SUCCESSORS.
All agreements of the Company in this Indenture and the
Debentures shall bind its successor. All agreements of the Trustee in this
Indenture shall bind its successor.
SECTION 14.11 DUPLICATE ORIGINALS.
All parties may sign any number of copies or counterparts of
this Indenture. Each signed copy or counterpart shall be an original, but all of
them together shall represent the same agreement.
SECTION 14.12 SEVERABILITY.
In case any one or more of the provisions in this Indenture or
in the Debentures shall be held invalid, illegal or unenforceable, in any
respect for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions shall not in
any way be affected or impaired thereby, it being intended that all of the
provisions hereof shall be enforceable to the full extent permitted by law.
SECTION 14.13 TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and headings of
the Articles and the Sections of this Indenture have been inserted for
convenience of reference only, are not to be considered a part hereof and shall
in no way modify or restrict any of the terms or provisions hereof.
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IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed as of the date first written above.
CAPSTONE CAPITAL CORPORATION
By: /s/ Andrew L. Kizer
-------------------------------------
Name: Andrew L. Kizer
Title: Vice President
AMSOUTH BANK OF ALABAMA
By: /s/ Charles S. Northen IV
-------------------------------------
Name: Charles S. Northen IV
Title: Assistant Vice President
and Corporate Trust Officer
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<PAGE> 99
EXHIBIT A
FORM OF DEBENTURE
CAPSTONE CAPITAL CORPORATION
10 1/2% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2002
No. $
--------- --------------
Capstone Capital Corporation, a Maryland corporation
(hereinafter called the "Company," which term includes any successor corporation
under the Indenture hereinafter referred to), for value received, hereby
promises to pay to ________________, or registered assigns, the principal sum of
________________ Dollars, on April 1, 2002.
Interest Payment Dates: April 1 and October 1
commencing October 1, 1995
Record Dates: March 15 and September 15
Reference is made to the further provisions of this Debenture
on the reverse side, which will, for all purposes, have the same effect as if
set forth at this place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Debenture shall not be entitled to any benefit under the Indenture or be
valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Instrument to
be duly executed under its corporate seal.
Dated:
CAPSTONE CAPITAL CORPORATION
By:
--------------------------------
Attest:
- ----------------------------------
Secretary
[Seal]
A-1
<PAGE> 100
FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Debentures described in the
within-mentioned Indenture.
AMSOUTH BANK OF ALABAMA, as Trustee
By:
---------------------------------
Authorized Officer
Dated:
A-2
<PAGE> 101
LEGEND
IF NECESSARY TO EFFECT COMPLIANCE BY THE COMPANY WITH CERTAIN PROVISIONS OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), THE TRANSFER OR
OWNERSHIP OF THE DEBENTURES REPRESENTED BY THIS CERTIFICATE AND THE CONVERSION
OF SUCH DEBENTURES INTO SHARES OF COMMON STOCK OF THE COMPANY MAY BE PROHIBITED
UPON THE TERMS AND CONDITIONS SET FORTH BELOW AND IN THE INDENTURE AND THE
ARTICLES OF INCORPORATION AND BYLAWS OF THE COMPANY. THE COMPANY WILL FURNISH A
COPY OF SUCH TERMS AND CONDITIONS TO THE REGISTERED HOLDER OF THIS CERTIFICATE
UPON REQUEST AND WITHOUT CHARGE. TO ENABLE THE COMPANY TO ENSURE THAT IT
COMPLIES WITH THE PROVISIONS OF THE CODE, THE HOLDER OF THE DEBENTURES
REPRESENTED BY THIS CERTIFICATE AND ANY PROPOSED TRANSFEREE OF SUCH HOLDER SHALL
UPON DEMAND DISCLOSE TO THE CORPORATION IN WRITING SUCH INFORMATION AS THE
COMPANY MAY DEEM NECESSARY FOR SUCH PURPOSES.
A-3
<PAGE> 102
CAPSTONE CAPITAL CORPORATION
10 1/2% CONVERTIBLE SUBORDINATED DEBENTURE DUE 2002
1. Interest.
Capstone Capital Corporation, a Maryland corporation (the
"Company"), promises to pay interest on the principal amount of this Debenture
at a rate of 10 1/2% per annum until the principal hereof is paid or made
available for payment. To the extent it is lawful, the Company promises to pay
interest on any interest payment due but unpaid on such principal amount at a
rate of 10 1/2% per annum.
The Company will pay interest semi-annually on April 1 and
October 1 of each year (each, an "Interest Payment Date"), commencing October 1,
1995. Interest on the Debentures will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance of the Debentures. Notwithstanding the foregoing, Debentures issued
pursuant to the Over-Allotment Option shall accrue interest from the date of
issuance of the initial $50,000,000 aggregate principal amount of Debentures.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months.
2. Method of Payment.
The Company shall pay interest on the Debentures (except
defaulted interest) to the Persons who are the registered Holders at the close
of business on the Record Date immediately preceding the Interest Payment Date.
Holders must surrender Debentures to a Paying Agent to collect principal
payments. Except as provided below, the Company shall pay principal of, premium,
if any, and interest on the Debentures in such coin or currency of the United
States of America as at the time of payment shall be legal tender for payment of
public and private debts ("U.S. Legal Tender"). However, the Company may pay
principal of, premium, if any and interest on the Debentures by wire transfer of
federal funds, or interest by its check payable in such U.S. Legal Tender. The
Company shall deliver any such interest payment to the Paying Agent who shall
remit such payment to the Person in whose name this Debenture (or
<PAGE> 103
one or more predecessor Debentures) is registered at the close of business on
the Record Date for such interest, which shall be the March 15 or September 15
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly provided
for will forthwith cease to be payable to the Holder on such Record Date and may
either (i) be paid to the Person in whose name this Debenture (or one or more
predecessor Debentures) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Debentures not less than 10
days prior to such Special Record Date, or (ii) be paid at any time in any other
lawful manner not inconsistent with the requirement of any securities exchange
on which the Debentures may be listed, and upon such notice as may be required
by such exchange.
3. Registrar and Agents.
Initially, AmSouth Bank of Alabama (the "Trustee") will act as
Registrar, co-Registrar, Paying Agent, Conversion Agent and agent for service of
notice and demands. The Company may change any Registrar, co-Registrar, Paying
Agent, Conversion Agent and agent for service of notice and demands without
notice to the Holders. The Company or an Affiliate of the Company may, subject
to certain exceptions, act as Registrar or co-Registrar, Paying Agent or
Conversion Agent.
4. Indenture.
The Company issued the Debentures under an Indenture, dated as
of March 30, 1995 (the "Indenture"), between the Company and the Trustee.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Debentures include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939 (15 U.S. Code ss.ss. 77aaa - 77bbbb), as amended (the
"TIA"), as in effect on the date of the Indenture. The Debentures are subject to
all such terms, and Holders of Debentures are referred to the Indenture and the
TIA for a statement of them. The Debentures are general unsecured obligations of
the Company limited in aggregate principal amount to $50,000,000 (up to
$57,500,000 if the Over-Allotment Option is exercised in full).
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<PAGE> 104
5. Optional Redemption.
(a) The Debentures may be redeemed, in whole or in part, at
any time on and after April 5, 2000, at the option of the Company, at the
Redemption Price (expressed as a percentage of principal amount) set forth below
with respect to the indicated Redemption Date, in each case, together with any
accrued but unpaid interest to and including the Redemption Date.
If redeemed during the period indicated below, the Redemption Price shall be:
<TABLE>
<CAPTION>
Redemption Price
----------------
<S> <C>
April 5, 2000 - March 31, 2001 . . . . . . . 103.0%
April 1, 2001 - March 31, 2002 . . . . . . . 101.5%
</TABLE>
Any such redemption will comply with Article III of the
Indenture. Pursuant to Section 3.3 of the Indenture if less than all of the
Debentures are to be redeemed, the Trustee shall redeem pro rata or by lot or in
such other manner as complies with any applicable legal and stock exchange
requirements.
(b) Notwithstanding the foregoing paragraph, the Debentures
will be subject to redemption, in whole or in part, at any time, but only to the
extent necessary for the Company to continue to qualify as a REIT. The
Redemption Price of such Debentures redeemed shall equal 100% of the principal
amount thereof, plus accrued and unpaid interest to and including the Redemption
Date. The Company may exercise such redemption powers solely with respect to
Holders who pose a threat to the Company's REIT status and only to the extent
deemed necessary or advisable by the Board of Directors of the Company to
preserve such status.
6. Notice of Redemption.
Notice of redemption will be mailed by first class mail at
least 30 days but not more than 60 days before the Redemption Date to each
Holder of Debentures to be redeemed at his registered address. The Debentures
may be redeemed in part in multiples of $1,000 only. Debentures in denominations
larger than $1,000 may be redeemed in part.
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<PAGE> 105
Except as set forth in the Indenture, from and after any
Redemption Date, if monies for the redemption of the Debentures called for
redemption shall have been deposited with the Paying Agent on such Redemption
Date the Debentures called for redemption will cease to bear interest and the
only right of the Holders of such Debentures will be to receive payment of the
Redemption Price and any accrued and unpaid interest to and including the
Redemption Date.
7. Denominations; Transfer; Exchange.
The Debentures are in registered form, without coupons, in
denominations of $1,000 and integral multiples of $1,000. A Holder may register
the transfer of or exchange Debentures in accordance with the Indenture. The
Registrar or co-Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay any taxes and fees
required by law or permitted by the Indenture. The Registrar or co-Registrar is
not required (i) to issue, register the transfer of or exchange any Debentures
during a period beginning 10 Business Days before the mailing of a notice of an
offer to repurchase pursuant to Article XII of the Indenture or redeem
Debentures pursuant to Article III of the Indenture and ending at the close of
business on the day of such mailing; (ii) to register the transfer of or
exchange any Debenture selected for redemption in whole or in part, except the
unredeemed portion of Debentures being redeemed in part; or (iii) to register
the transfer of any Debentures if such transfer, in the good faith opinion of
the Board of Directors (a) might cause the Company to fail to comply with any
requirement necessary for the continued qualification of the Company as a REIT
under Section 856 through 859 of the Code, or (b) would result in a single
Person owning more than 9.8% of the Company's outstanding stock within the
meaning of the Code. For the purpose of the preceding sentence, a Person shall
be considered to own shares of Company stock which are owned directly by such
Person (held of record by such Person or such Person's nominee or nominees) and
shares of Company stock which are owned indirectly by such Person (including
shares of Common Stock issuable upon conversion of the Debentures) pursuant to
Sections 542, 544 and 856 of the Code and the regulations promulgated
thereunder. Any attempted transfer of a Debenture or Debentures by a Holder in
violation of the limits set forth above shall be null and
4
<PAGE> 106
void ab initio as to such Holder and such transferee, and such transferee shall
not acquire any rights or economic interest in the Debenture or Debentures
transferred.
8. Persons Deemed Owners.
The Company, the Trustee and any agent of the Company or the
Trustee may treat the registered Holder of a Debenture as the owner of it for
all purposes; provided, however, that for the purposes of determining whether or
not a Holder of a Debenture or any other Person having an interest therein if
such Debenture were thereupon converted would be deemed to own shares of stock
in excess of the limits of 9.8%, beneficial ownership of such Debenture shall be
determined by reference to Sections 542, 544 and 856 of the Code and the
regulations promulgated thereunder. Ownership of the Debentures is conditioned
upon the owner or prospective owner thereof having provided to the Company
definitive written information concerning such ownership.
9. Unclaimed Money.
If money for the payment of principal of, premium, if any or
interest on the Debentures remains unclaimed for two years, the Trustee and the
Paying Agent(s) will pay the money back to the Company at its written request.
After that, all liability of the Trustee and such Paying Agent(s) with respect
to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company at any time deposits into an irrevocable trust
with the Trustee U.S. Legal Tender or U.S. Government Obligations sufficient to
pay the principal of, premium, if any, and interest on the Debentures to
redemption or maturity and complies with the other provisions of the Indenture
relating thereto, the Company will be discharged from certain provisions of the
Indenture and the Debentures (excluding its obligation to pay the principal of,
premium, if any, and interest on the Debentures).
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<PAGE> 107
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Debentures
may be amended or supplemented with the written consent of the Holders of at
least a majority in aggregate principal amount of the Debentures then
outstanding, and any existing Default or Event of Default or compliance with any
provision may be waived with the consent of the Holders of a majority in
aggregate principal amount of the Debentures then outstanding. Without notice to
or consent of any Holder, the parties thereto may amend or supplement the
Indenture or the Debentures to, among other things, cure any ambiguity, defect
or inconsistency (provided such amendment or supplement does not adversely
affect the rights of any Holder of a Debenture).
12. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of
the Company and its Subsidiaries to, among other things, merge or consolidate
with any other Person and sell, lease, transfer or otherwise dispose of
substantially all of its properties or assets. The limitations are subject to a
number of important qualifications and exceptions. The Company must make
quarterly reports to the Trustee with respect to its compliance with such
limitations.
13. Repurchase Event.
In the event there shall occur any Repurchase Event, each
Holder of Debentures shall have the right, at such Holder's option but subject
to the limitations and conditions set forth in the Indenture, to require the
Company to purchase on the Repurchase Date in the manner specified in the
Indenture, all or any part (in integral multiples of $1,000) of such Holder's
Debentures at a Repurchase Price equal to 100% of the principal amount thereof,
together with accrued and unpaid interest, if any, to and including the
Repurchase Date.
14. Conversion.
A Holder of a Debenture may convert such Debenture into shares
of Common Stock of the Company at any time before the close of business on April
1, 2002. If the Debenture is called for redemption, the Holder may convert
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<PAGE> 108
it at any time before the close of business on the last Business Day prior to
the date fixed for such redemption. The initial conversion price is $16 1/8 per
share, subject to adjustment in certain events. To determine the number of
shares issuable upon conversion of a Debenture, divide the principle amount to
be converted by the conversion price in effect on the conversion date. The
Company will deliver a check for any fractional share.
To convert a Debenture, a Holder must (i) complete and sign
the Conversion Notice on the back of the Debenture, (ii) surrender the Debenture
to a Conversion Agent, (iii) furnish appropriate endorsements and transfer
documents if required by the Registrar or Conversion Agent and (iv) pay any
transfer or similar tax if required. No adjustment is to be made on conversion
for interest accrued hereon or for dividends on shares of Common Stock issued on
conversion; provided, however, that if a Debenture (other than a Debenture
called for redemption) is surrendered for conversion after the Record Date for a
payment of interest and on or before the Interest Payment Date, then,
notwithstanding such conversion, the interest falling due to such Interest
Payment Date will be paid to the Person in whose name the Debenture is
registered at the close of business on such Record Date and any Debenture
surrendered for conversion during the period from the close of business on any
Record Date to the opening of business on the corresponding Interest Payment
Date must be accompanied by payment of an amount equal to the interest payable
on such Interest Payment Date. A Holder may convert a portion of a Debenture if
the portion is $1,000 principal amount or an integral multiple thereof.
If the Company is a party to a consolidation or merger or a
transfer, lease or other disposition of all or substantially all of its assets,
the right to convert a Debenture into shares of Common Stock may be changed into
a right to convert it into securities, cash or other assets of the Company or
another Person.
Notwithstanding the foregoing, a Holder may not convert any
Debenture, and such Debenture shall not be convertible by any Holder, if such
conversion, in the good faith opinion of the Board of Directors (a) might cause
the Company to fail to comply with any requirement necessary for the continued
qualification of the Company as a REIT under Section 856 through 859 of the
Code, or (b) would
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<PAGE> 109
result in a single Person owning more than 9.8% of the Company's outstanding
stock within the meaning of the Code. For the purpose of the preceding sentence,
a Person shall be considered to own shares of Company stock which are owned
directly by such Person (held of record by such Person or such Person's nominee
or nominees) and shares of Company stock which are owned indirectly by such
Person (including shares of Common Stock issuable upon conversion of the
Debentures) pursuant to Sections 542, 544 and 856 of the Code and the
regulations promulgated thereunder. Any attempted conversion of a Debenture or
Debentures by a Holder in violation of the limits set forth above shall be null
and void ab initio as to such Holder and such Holder shall not acquire any
rights or economic interest in the Common Stock issuable upon such conversion.
15. Successors.
When a successor assumes all the obligations of its
predecessor under the Debentures and the Indenture, the predecessor will be
released from those obligations.
16. Defaults and Remedies.
Subject to certain restrictions on the ability to accelerate
contained in the subordination provisions in the Indenture, if an Event of
Default occurs and is continuing, the Trustee or the Holders of at least 25% in
aggregate principal amount of Debentures then outstanding may declare all the
Debentures to be due and payable immediately in the manner and with the effect
provided in the Indenture. Holders of Debentures may not enforce the Indenture
or the Debentures except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Debentures.
Subject to certain limitations, Holders of a majority in aggregate principal
amount of the Debentures then outstanding may direct the Trustee in its exercise
of any trust or power. The Trustee may withhold from Holders of Debentures
notice of any continuing Default or Event of Default (except a Default in
payment of principal of, premium, if any, or interest on the Debentures,
including a Default at any Maturity Date), if it determines that withholding
notice is in their interest.
8
<PAGE> 110
17. No Recourse Against Others.
No stockholder, director, officer, employee or incorporator,
as such, past, present or future, of the Company or any successor corporation
shall have any liability for any obligation of the Company under the Debentures
or the Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder of a Debenture by accepting a
Debenture waives and releases all such liability. The waiver and release are
part of the consideration for the issuance of the Debentures.
18. Subordination.
The Indebtedness evidenced by this Debenture is subordinate to
all Senior Indebtedness of the Company. To the extent and in the manner provided
in the Indenture, Senior Indebtedness must be paid before any payment may be
made to any Holders of Debentures. In addition, under certain circumstances,
upon the occurrence of an Event of Default, the Trustee and the Holders of the
Debentures may be prohibited from accelerating the obligations of the Company
under the Debentures and the Indenture. Each Holder of this Debenture, by
accepting the same (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take action as may be
necessary or appropriate to effectuate the subordination so provided and (c)
appoints the Trustee his attorney-in-fact for any and all such purposes.
In addition to all other rights of Senior Indebtedness
described in the Indenture, the Senior Indebtedness shall continue to be Senior
Indebtedness and entitled to the benefit of the subordination provisions
irrespective of any amendment, modification or waiver of any term of any
instrument relating to the Senior Indebtedness or extension or renewal of the
Senior Indebtedness.
19. Authentication.
This Debenture shall not be valid until the Trustee or an
authenticating agent acceptable to the Company signs the certificate of
authentication on the other side of this Debenture.
9
<PAGE> 111
20. Abbreviations and Defined Terms.
Customary abbreviations may be used in the name of a Holder of
a Debenture or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act). Additional abbreviations may also be used though not in the
above list. Capitalized terms used herein and not otherwise defined shall have
the meanings assigned to them in the Indenture.
21. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on
Uniform Debenture Identification Procedures, the Company will cause CUSIP
numbers to be printed on the Debentures as a convenience to the Holders of the
Debentures. No representation is made as to the accuracy of such numbers as
printed on the Debentures and reliance may be placed only on the other
identification numbers printed hereon.
THE COMPANY WILL FURNISH TO ANY DEBENTUREHOLDER UPON WRITTEN REQUEST AND WITHOUT
CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO: CAPSTONE CAPITAL
CORPORATION, C/O SECRETARY, 1000 URBAN CENTER DRIVE, SUITE 630, BIRMINGHAM,
ALABAMA 35242.
10
<PAGE> 112
FORM OF ASSIGNMENT
I or we assign this Debenture to
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type name, address and zip code of assignee)
Please insert Social Security or other identifying number
of assignee
- -------------------------
and irrevocably appoint __________ agent to transfer this Debenture on the books
of the Company. The agent may substitute another to act for him.
Dated: Signed: x
----------- --------------------------------------------
x
--------------------------------------------
x
--------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS WRITTEN
UPON THE FACE OF THE CERTIFICATE, IN EVERY
PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER
Signatures guaranteed: x
------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE
MEDALLION PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN OR DESTROYED,
THE CORPORATION MAY REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE
ISSUANCE OF A REPLACEMENT CERTIFICATE.
<PAGE> 113
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Debenture purchased by the
Company pursuant to Article XII of the Indenture, check the box: [ ]
If you want to elect to have only part of this Debenture
purchased by the Company pursuant to Article XII of the Indenture state the
amount you want to be purchased (which must be a minimum of $1,000 or any
multiple thereof): $
---------------
Dated: Signed: x
--------------- ---------------------------------------------
x
---------------------------------------------
x
---------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ELECTION TO
PURCHASE MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN
EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER
Signatures guaranteed: x
-------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE> 114
CONVERSION NOTICE
To convert this Debenture into shares of common stock, par
value $.001 per share, of the Company, check the box: [ ]
To convert only part of this Debenture, state the principal
amount you want to be converted (which must be a minimum of $1,000 or any
multiple thereof): $
---------------
If you want the certificate made out in another person's name,
fill in the form below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type other person's name, address and zip code)
Please insert Social Security or other identifying number of
other person:
- -------------------------
Dated: Signed: x
----------- ---------------------------------------------
x
---------------------------------------------
x
---------------------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ELECTION TO
CONVERT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN
EVERY PARTICULAR, WITHOUT ALTERATION OR
ENLARGEMENT OR ANY CHANGE WHATSOEVER
Signatures guaranteed: x
--------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS
AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP
IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE> 1
EXHIBIT 4.5
----------------------------------------------------------------
----------------------------------------------------------------
CAPSTONE CAPITAL CORPORATION
TO
AMSOUTH BANK OF ALABAMA, TRUSTEE
--------------
INDENTURE
Dated as of March 14, 1997
-------------
SUBORDINATED DEBT SECURITIES
===============================================================
<PAGE> 2
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO
SECTIONS 310 THROUGH 318, INCLUSIVE, OF
THE TRUST INDENTURE ACT OF 1939:
<TABLE>
<CAPTION>
Trust Indenture Indenture Section
Act Section
<S> <C> <C>
Section 310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 609
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 608
610
Section 311 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 613
Section 312 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 701
702
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702
Section 313 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 703
Section 314 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
1004
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 315 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 602
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514
Section 316 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502
512
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 513
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 508
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
Section 317 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 504
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003
Section 318 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
</TABLE>
- ------------------------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be
a part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
-----------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions:
Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate; control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Company Request; Company Order . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Corporate Trust Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Depositary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Global Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Interest Payment Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Officers' Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Original Issue Discount Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C> <C>
Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Place of Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Predecessor Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Regular Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Responsible Officer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Security Register and Security Registrar . . . . . . . . . . . . . . . . . . . . . . . . . 7
Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Special Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
U.S. Government Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Vice President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 102. Compliance Certificates and Opinions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
SECTION 103. Form of Documents Delivered to Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SECTION 104. Acts of Holders; Record Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 105. Notices, Etc., to Trustee and Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 106. Notice to Holders; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
SECTION 107. Conflict with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 108. Effect of Headings and Table of Contents. . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 109. Successors and Assigns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 110. Separability Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 111. Benefits of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 112. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 113. Legal Holidays. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 114. No Recourse Against Others. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
SECTION 202. Form of Face of Security. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 203. Form of Reverse of Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 204. Form of Legend for Global Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 205. Form of Trustee's Certificate of Authentication . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
ii
<PAGE> 5
ARTICLE THREE
THE SECURITIES
<TABLE>
<S> <C> <C>
SECTION 301. Amount Unlimited; Issuable in Series. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 302. Denominations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
SECTION 303. Execution, Authentication, Delivery and Dating. . . . . . . . . . . . . . . . . . . . . . . 27
SECTION 304. Temporary Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
SECTION 305. Registration; Registration of Transfer and Exchange . . . . . . . . . . . . . . . . . . . . 29
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 307. Payment of Interest; Interest Rights Preserved . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 308. Persons Deemed Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 309. Cancellation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 310. Computation of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 311. CUSIP Numbers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 402. Application of Trust Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 502. Acceleration of Maturity; Rescission and Annulment. . . . . . . . . . . . . . . . . . . . . 38
SECTION 503. Collection of Indebtedness and Suits for
Enforcement by Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 504. Trustee May File Proofs of Claim. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 505. Trustee May Enforce Claims Without Possession
of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 506. Application of Money Collected. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 507. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest and to Convert . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 509. Restoration of Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 510. Rights and Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 511. Delay or Omission Not Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 512. Control by Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 513. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 514. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 515. Waiver of Usury, Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 44
</TABLE>
iii
<PAGE> 6
ARTICLE SIX
THE TRUSTEE
<TABLE>
<S> <C> <C>
SECTION 601. Certain Duties and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 602. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 603. Certain Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 604. Not Responsible for Recitals or Issuance of Securities . . . . . . . . . . . . . . . . . . 46
SECTION 605. May Hold Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 606. Money Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 607. Compensation and Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 608. Disqualification; Conflicting Interests . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 609. Corporate Trustee Required; Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . . 47
SECTION 610. Resignation and Removal; Appointment of Successor . . . . . . . . . . . . . . . . . . . . . 48
SECTION 611. Acceptance of Appointment by Successor. . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 612. Merger, Conversion, Consolidation or Succession
to Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 613. Preferential Collection of Claims Against Company . . . . . . . . . . . . . . . . . . . . . 51
SECTION 614. Appointment of Authenticating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses
of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 702. Preservation of Information; Communications
to Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 703. Reports by Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 704. Reports by Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 705. Notice of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on
Certain Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 802. Successor Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
</TABLE>
iv
<PAGE> 7
ARTICLE NINE
SUPPLEMENTAL INDENTURES
<TABLE>
<S> <C> <C>
SECTION 901. Supplemental Indentures Without Consent of Holders . . . . . . . . . . . . . . . . . . . . 56
SECTION 902. Supplemental Indentures With Consent of Holders . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 903. Execution of Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 904. Effect of Supplemental Indentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 905. Conformity with Trust Indenture Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 906. Reference in Securities to Supplemental Indentures. . . . . . . . . . . . . . . . . . . . . 59
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest. . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 1002. Maintenance of Office or Agency . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 1003. Money for Securities Payments to Be Held in Trust . . . . . . . . . . . . . . . . . . . . . 60
SECTION 1004. Statement by Officers as to Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 1005. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 1006. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 1007. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 1008. Waiver of Certain Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 1009. Calculation of Original Issue Discount. . . . . . . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 1102. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 1103. Selection by Trustee of Securities to Be Redeemed . . . . . . . . . . . . . . . . . . . . . 63
SECTION 1104. Notice of Redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 1105. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 1106. Securities Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 1107. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. Applicability of Article. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities . . . . . . . . . . . . . . . . . . . 67
SECTION 1203. Redemption of Securities for Sinking Fund . . . . . . . . . . . . . . . . . . . . . . . . 67
</TABLE>
v
<PAGE> 8
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
<TABLE>
<S> <C> <C>
SECTION 1301. Company's Option to Effect Defeasance or
Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 1302. Defeasance and Discharge. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 1303. Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 1304. Conditions to Defeasance or Covenant Defeasance . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 1305. Deposited Money and U.S. Government Obligations
to Be Held in Trust; Miscellaneous Provisions . . . . . . . . . . . . . . . . . . . 71
SECTION 1306. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE FOURTEEN
CONVERSION OF SECURITIES
SECTION 1401. Applicability; Conversion Privilege
and Conversion Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 1402. Exercise of Conversion Privilege. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 1403. Fractions of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 1404. Adjustment of Conversion Price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 1405. Notice of Adjustments of Conversion Price . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 1406. Notice of Certain Corporate Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SECTION 1407. Company to Reserve Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 1408. Taxes on Conversions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 1409. Covenant as to Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 1410. Cancellation of Converted Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 1411. Provisions in Case of Reclassification, Consolidation,
Merger or Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
SECTION 1412. Responsibility of Trustee and Conversion Agent. . . . . . . . . . . . . . . . . . . . . . . 81
ARTICLE FIFTEEN
SUBORDINATION OF SECURITIES
SECTION 1501. Securities Subordinate to Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 1502. Payment Over of Proceeds Upon Dissolution, Etc. . . . . . . . . . . . . . . . . . . . . . . 82
SECTION 1503. Prior Payment to Senior Debt Upon
Acceleration of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 1504. No Payment When Senior Debt in Default. . . . . . . . . . . . . . . . . . . . . . . . . . . 84
SECTION 1505. Payment Permitted if no Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
SECTION 1506. Subrogation to Rights of Holders of
Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
</TABLE>
vi
<PAGE> 9
<TABLE>
<S> <C> <C>
SECTION 1507. Provisions Solely to Define Relative Rights . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 1508. Trustee to Effectuate Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 1509. No Waiver of Subordination Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 86
SECTION 1510. Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 1511. Reliance on Judicial Order or Certificate
of Liquidating Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 87
SECTION 1512. Trustee Not Fiduciary for Holders of Senior
Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 1513. Rights of Trustee as Holder of Senior Debt;
Preservation of Trustee's Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 1514. Article Applicable to Paying Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
SECTION 1515. Certain Conversions Deemed Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
TESTIMONIUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
SIGNATURES AND SEALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
</TABLE>
vii
<PAGE> 10
INDENTURE, dated as of March 14, 1997, between CAPSTONE CAPITAL
CORPORATION, a corporation duly organized and existing under the laws of the
State of Maryland (herein called the "Company"), having its principal office at
1000 Urban Center Drive, Suite 630, Birmingham, Alabama 35242, and AMSOUTH BANK
OF ALABAMA, an Alabama banking corporation, as Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
subordinated debentures, notes or other evidences of indebtedness (herein
called the "Securities"), to be issued in one or more series as in this
Indenture provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
<PAGE> 11
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with
respect to any computation required or permitted hereunder shall mean
such accounting principles as are generally accepted in the United
States of America at the date of such computation;
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the
case may be, of this Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, means
any day which is not a day on which banking institutions in that Place of
Payment are authorized or obligated by law or executive order to close.
"Commission" means the Securities and Exchange Commission, from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" means the common stock of the company.
2
<PAGE> 12
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President
or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Corporate Trust Office" means the principal office of the Trustee in
Birmingham, Alabama at which at any particular time its corporate trust
business shall be administered, which office at the date hereof is located at
1901 6th Avenue North, Birmingham, Alabama 35203, Attention: Corporate Trust
Administration.
"Corporation" means a corporation, association, company, limited
liability company, joint-stock company or business trust.
"Covenant Defeasance" has the meaning specified in Section 1303.
"Conversion Date" means the last date on which a Holder has the right
to convert a Security at a particular conversion price.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 1302.
"Depositary" means, with respect to Securities of any series issuable
in whole or in part in the form of one or more Global Securities, a clearing
agency registered under the Exchange Act that is designated to act as
Depositary for such Securities as contemplated by Section 301.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.
"Expiration Date" has the meaning specified in Section 104.
"Global Security" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 204 (or such
legend as may be specified as contemplated by Section 301 for such Securities).
"Holder" means a Person in whose name a Security is registered in the
Security Register.
3
<PAGE> 13
"Indebtedness" with respect to any Person means (i) any debt (a) for
money borrowed, or (b) evidenced by a bond, note, debenture, or similar
instrument (including purchase money obligations) given in connection with the
acquisition of any business, property or assets, whether by purchase, merger,
consolidation or otherwise, but shall not include any account payable or other
obligation created or assumed by a Person in the ordinary course of business in
connection with the obtaining of materials or services, or (c) which is a
direct or indirect obligation which arises as a result of banker's acceptances
or bank letters of credit issued to secure obligations of such Person, or to
secure the payment of revenue bonds issued for the benefit of such Person,
whether contingent or otherwise; (ii) any debt of others described in the
preceding clause (i) which such Person has guaranteed or for which it is
otherwise liable; (iii) the obligation of such Person as lessee under any lease
of property which is reflected on such Person's balance sheet as a capitalized
lease; and (iv) any deferral, amendment, renewal, extension, supplement or
refunding of any liability of the kind described in any of the preceding
clauses (i), (ii) and (iii); provided, however, that in computing the
Indebtedness of any Person there shall be excluded any particular indebtedness
if, upon or prior to the maturity thereof, there shall have been deposited with
a depository in trust money (or evidence of Indebtedness, if permitted by the
instrument creating such Indebtedness) in the necessary amount to pay, redeem
or satisfy such Indebtedness as it becomes due, and the amount so deposited
shall not be included in any computation of the assets of such Person.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively. The term "Indenture" shall also include the terms of particular
series of Securities established as contemplated by Section 301.
"interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Investment Company Act" means the Investment Company Act of 1940 and
any statute successor thereto, in each case as amended from time to time.
"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
4
<PAGE> 14
"Notice of Default" means a written notice of the kind specified in
Section 501(4) or 501(5) or any similar notice that may be specified in any
event of default with respect to a particular series of Securities established
as contemplated by Section 301.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company,
and delivered to the Trustee. One of the officers signing an Officers'
Certificate given pursuant to Section 1004 shall be the principal executive,
financial or accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(1) Securities theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
(2) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or
any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its
own Paying Agent) for the Holders of such Securities; provided that,
if such Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(3) Securities as to which Defeasance has been effected
pursuant to Section 1302;
(4) Securities which have been paid pursuant to Section 306 or
in exchange for or in lieu of which other Securities have been
authenticated and delivered pursuant to this Indenture, other than any
such Securities in respect of which there shall have been presented to
the Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hand such Securities are valid
obligations of the Company; and
(5) Securities which have been delivered to the Trustee for
conversion pursuant to Article Fourteen;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, (A) the principal
5
<PAGE> 15
amount of an Original Issue Discount Security which shall be deemed to be
Outstanding shall be the amount of the principal thereof which would be due and
payable as of such date upon acceleration of the Maturity thereof to such date
pursuant to Section 502, (B) if, as of such date, the principal amount payable
at the Stated Maturity of a Security is not determinable, the principal amount
of such Security which shall be deemed to be Outstanding shall be the amount as
specified or determined as contemplated by Section 301, (C) the principal
amount of a Security denominated in one or more foreign currencies or currency
units which shall be deemed to be Outstanding shall be the U.S. dollar
equivalent, determined as of such date in the manner provided as contemplated
by Section 301, of the principal amount of such Security (or, in the case of a
Security described in Clause (A) or (B) above, of the amount determined as
provided in such Clause), and (D) Securities owned by the Company or any other
obligor upon the Securities or any Affiliate of the Company or of such other
obligor shall be disregarded and deemed not to be Outstanding, except that, in
determining whether the Trustee shall be protected in relying upon any such
request, demand, authorization, direction, notice, consent, waiver or other
action, only Securities which the Trustee knows to be so owned shall be so
disregarded. Securities so owned that have been pledged in good faith may be
regarded as Outstanding if the pledgee establishes to the satisfaction of the
Trustee the pledgee's right so to act with respect to such Securities and that
the pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, joint
venture, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"Place of Payment", when used with respect to the Securities of any
series, means the place or places where the principal of and any premium and
interest on the Securities of that series are payable as specified as
contemplated by Section 301.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
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<PAGE> 16
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 301.
"Responsible Officer", when used with respect to the Trustee, means
the chairman or any vice-chairman of the board of directors, the chairman or
any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer or assistant trust officer,
the controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate
trust matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and
delivered under this Indenture.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Debt" means the principal of (and premium, if any) and unpaid
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 post-filing interest is allowed in such proceeding), fees, charges,
expenses, reimbursement and indemnification obligations, and all other amounts
payable under or in respect of Indebtedness of the Company, whether any such
Indebtedness exists as of the date hereof or is created, incurred, assumed or
guaranteed after such date, other than (i) Indebtedness that by its terms or by
operation of law is subordinated to or on a parity with the Securities, (ii)
Indebtedness owed to a Subsidiary of the Company, and (iii) Indebtedness owing
in respect of the Company's 10 1/2% Convertible Subordinated Debentures due
2002.
"Special Record Date" for the payment of any Defaulted Interest means
a date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
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<PAGE> 17
"Subsidiary" means (i) a corporation at least 50% of whose capital
stock with voting power, under ordinary circumstances, to elect directors is,
at the time, directly owned by the Company or by one or more other
Subsidiaries, or by the Company and one or more other Subsidiaries, or (ii) a
partnership in which the Company or a Subsidiary of the Company is, at the
time, a general partner of such partnership, or (iii) any other Person (other
than a corporation or a partnership) in which the Company, one or more
Subsidiaries of the Company, or the Company and one or more Subsidiaries,
directly or indirectly, at the date of determination thereof, has (a) at least
a 50% ownership interest or (b) the power to elect or direct the election of
the directors or other governing body of such Person.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that in the event the Trust Indenture Act of 1939 is amended after such date,
"Trust Indenture Act" means, to the extent required by any such amendment, the
Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder,
and if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"U.S. Government Obligation" has the meaning specified in Section 1304.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of
an Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (except for certificates
provided for in Section 1004) shall include,
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
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<PAGE> 18
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to
enable him to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENT DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. ACTS OF HOLDERS; RECORD DATES.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given, made or
taken by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof
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of execution of any such instrument or of a writing appointing any such agent
shall be sufficient for any purpose of this Indenture and (subject to Section
601) conclusive in favor of the Trustee and the Company, if made in the manner
provided in this Section.
The fact and date of the execution by any Person of any such
instrument of writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument in
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of
the same Security and the Holder of every Security issued upon the registration
of transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon the
Security.
The Company may, in the circumstances permitted by the Trust Indenture
Act, set any day as a record date for the purpose of determining the Holders of
Outstanding Securities of any series entitled to give, make or take any
request, demand, authorization, direction, notice, consent, waiver or other Act
provided or permitted by this Indenture to be given, made or taken by Holders
of Securities of such series, provided that the Company may not set a record
date for, and the provisions of this paragraph shall not apply with respect to,
the giving or making of any notice, declaration, request or direction referred
to in the next paragraph. If any record date is set pursuant to this paragraph,
the Holders of Outstanding Securities of the relevant series on such record
date, and no other Holders, shall be entitled to take relevant action, whether
or not such Holders remain Holders after such record date; provided that no
such action shall be effective hereunder unless taken on or prior to the
applicable Expiration Date by Holders of the requisite principal amount of
Outstanding Securities of such series on such record date. Nothing in this
paragraph shall be construed to prevent the Company from setting a new record
date for any action for which a record date has previously been set pursuant to
this paragraph (whereupon the record date previously set shall automatically
and with no action by any Person be canceled and of no effect), and nothing in
this paragraph shall be construed to render ineffective any action taken by
Holders of the requisite principal amount of Outstanding Securities of the
relevant series on the date such action is taken. Promptly after any record
date is set pursuant to this paragraph, the Company, at its own expense, shall
cause notice of such record date, the proposed action by Holders and the
applicable Expiration Date to be given to the Trustee in writing and to each
Holder of Securities of the relevant series in the manner set forth in Section
106.
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<PAGE> 20
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to
join in the giving or making of (i) any Notice of Default, (ii) any declaration
of acceleration referred to in Section 502, (iii) any request to institute
proceedings referred to in Section 507(2) or (iv) any direction referred to in
Section 512, in each case with respect to Securities of such series. If any
record date is set pursuant to this paragraph, the Holders of Outstanding
Securities of such series on such record date, and no other Holders, shall be
entitled to join in such notice, declaration, request or direction, whether or
not such Holders remain Holders after such record date; provided that no such
action shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Trustee from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and
with no action by any Person be canceled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Trustee, at the Company's expense, shall cause
notice of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Company in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 106.
With respect to any record date set pursuant to this Section, the
party hereto which sets such record dates may designate any day as the
"Expiration Date" and from time to time may change the Expiration Date to any
earlier or later day; provided that no such change shall be effective unless
notice of the proposed new Expiration Date is given to the other party hereto
in writing, and to each Holder of Securities of the relevant series in the
manner set forth in Section 106, on or prior to the existing Expiration Date.
If an Expiration Date is not designated with respect to any record date set
pursuant to this Section, the party hereto which set such record date shall be
deemed to have initially designated the 180th day after such record date as the
Expiration Date with respect thereto, subject to its right to change the
Expiration Date as provided in this paragraph. Notwithstanding the foregoing,
no Expiration Date shall be later than the 180th day after the applicable
record date.
Without limiting the foregoing, a Holder entitled hereunder to take
any action hereunder with regard to any particular Security may do so with
regard to all or any part of the principal amount of such Security or by one or
more duly appointed agents each of which may do so pursuant to such appointment
with regard to all or any part of such principal amount.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
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<PAGE> 21
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Administration, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph of this instrument,
Attention: Secretary, or at any other address previously furnished in
writing to the Trustee by the Company.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders
is given by mail, neither the failure to mail such notice, nor any defect in
any notice so mailed, to any particular Holder shall affect the sufficiency of
such notice with respect to other Holders. Where this Indenture provides for
notice in any manner, such notice may be waived in writing by the person
entitled to receive such notice, either before or after the event, and such
waiver shall be the equivalent of such notice. Waivers of notice by Holders
shall be filed with the Trustee, but such filing shall not be a condition
precedent to the validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.
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SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to be a
part of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall
be deemed to apply to this Indenture as so modified or to be excluded, as the
case may be.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Debt (to the extent and on the terms set forth
in Article XV) and the Holders, any benefit or any legal or equitable right,
remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
This Indenture and the Securities shall be governed by and construed
in accordance with the law of the State of New York, without regard to
principles of conflicts of law.
SECTION 113. LEGAL HOLIDAYS.
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<PAGE> 23
In any case where any Interest Payment Date, Redemption Date,
Conversion Date or Stated Maturity of any Security shall not be a Business Day
at any Place of Payment, then (notwithstanding any other provision of this
Indenture or of the Securities (other than a provision of any Security which
specifically states that such provision shall apply in lieu of this Section))
payment of interest or principal (and premium, if any) or conversion need not
be made at such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same force and effect
as if made on the Interest Payment Date, Redemption Date or Conversion Date, or
at the Stated Maturity, provided that no interest shall accrue with respect to
such payment for the period from and after such Interest Payment Date,
Redemption Date or Stated Maturity, as the case may be.
SECTION 114. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or incorporator, as such,
of the Company shall not have any liability for any obligations of the Company
under the Securities or this Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. Each holder of a Security
by accepting such Security waives and releases all such liability. Such waiver
and release are part of the consideration for the issuance of the Securities.
ARTICLE TWO
SECURITY FORMS
SECTION 201. FORMS GENERALLY.
The Securities of each series shall be in substantially the form set
forth in this Article, or in such other form as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental
hereto, in each case with such appropriate insertions, omissions, substitutions
and other variations as are required or permitted by this Indenture, and may
have such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or Depositary therefor or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution thereof. If the form of Securities of any series is established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action shall be certified by the Secretary or an Assistant Secretary of
the Company and delivered to the Trustee at or prior to the delivery of the
Company Order contemplated by Section 303 for the authentication and delivery
of such Securities.
The definitive Securities shall be printed, lithographed or engraved
on steel engraved borders or may be produced in any other manner, all as
determined by the officers executing such Securities, as evidenced by their
execution of such Securities.
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SECTION 202. FORM OF FACE OF SECURITY.
[Insert any legend required by the Internal Revenue Code and the
regulations thereunder.]
CAPSTONE CAPITAL CORPORATION
----------------------------------------------
No. $
--------------- ----------
CUSIP No.
----------
CAPSTONE CAPITAL CORPORATION, a corporation duly organized and
existing under the laws of the State of Maryland (herein called the "Company",
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to
_____________________________________, or registered assigns, the principal sum
of _____________________________ Dollars on __________________________, and to
pay interest thereon from the date of issue or the most recent Interest Payment
Date to which interest has been paid or duly provided for, semiannually on
_____________________ and ____________________ in each year, commencing as of
________, at the rate of [_________ %] per annum, until the principal hereof is
paid or made available for payment, provided that any principal and premium,
and any such installment of interest, which is overdue shall bear interest at
the rate of [_________ %] per annum (to the extent that the payment of such
interest shall be legally enforceable), from the dates such amounts are due
until they are paid or made available for payment, and such interest shall be
payable on demand. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the __________ or __________ (whether or not
a Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
[If the Security is not to bear interest prior to Maturity, insert -
The principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal and any overdue premium shall
bear interest at the rate of _________% per annum (to the extent that the
payment of such interest shall be legally enforceable), from the dates such
amounts are due until
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<PAGE> 25
they are paid or made available for payment. Interest on any overdue principal
or premium shall be payable on demand. Any such interest on any overdue
principal or premium which is not so paid on demand shall bear interest at the
rate of _________% per annum (to the extent that the payment of such interest
shall be legally enforceable), from the dates such amounts are due until they
are paid or made available for payment. Interest on any overdue interest shall
be payable on demand.]
Payment of the principal of (and premium, if any) and [if applicable,
insert - any such] interest on this Security will be made at the office or
agency of the Company maintained for that purpose in [ ], in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, 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 such address shall appear in the
Security Register.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
No stockholder, director, officer, employee or incorporator, as such,
past, present or future, of the Company or any successor corporation shall have
any liability for any obligation of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder of a Security by accepting a
Security waives and releases all such liability. This waiver and release are
part of the consideration for the issuance of the Securities.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this
Security shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
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<PAGE> 26
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
CAPSTONE CAPITAL CORPORATION
By
--------------------------------
Attest:
- ------------------------------------
SECTION 203. FORM OF REVERSE OF SECURITY.
This security is one of a duly authorized issue of securities of the
Company called the "Securities"), issued and to be issued in one or more series
under an Indenture, dated as of _______________________ (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and AmSouth Bank of Alabama, as trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), and reference is hereby ade to the Indenture and all
indentures supplemental thereto for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is
one of the series designated on the face hereof [if applicable, insert -
limited or aggregate principal amount to $_________ ].
[If applicable, insert - Subject to and upon compliance with the
provisions of the Indenture, the Holder of this Security is entitled, at his
option, at any time on or before the close of business on _________ , or in case
this Security or a portion hereof is called for redemption, then in respect of
this Security or such portion hereof until and including, but (unless the
Company defaults in making the payment due upon redemption) not after, the
close of business on the date prior to the Redemption Date, to convert this
Security (or any portion of the principal amount hereof which is $1,000 or an
integral multiple thereof), at the principal amount hereof, or of such portion,
into a fully paid and non-assessable shares (calculated as to each conversion
to the nearest 1/100 of a share) of Common Stock of the Company at a conversion
price per share of Common Stock equal to $_______ per share (or at the current
adjusted conversion price if an adjustment has been made as provided in the
Indenture) by surrender of this Security, duly endorsed or assigned to the
Company or in blank, to the Company at its office or agency in _________ ,
accompanied by written notice to the Company that the Holder hereof elects to
convert this Security, or if less than the entire principal amount hereof is to
be converted the portion hereof to be converted and, in case such surrender
shall be made during the period from the close of business on any Regular
Record Date next preceding any Interest Payment Date to the opening
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<PAGE> 27
of business on such Interest Payment Date (unless this Security or the portion
thereof being converted has been called for redemption on a Redemption Date
within such period), also accompanied by payment in New York Clearing House or
other funds acceptable to the Company of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of this Security
then being converted. Subject to the aforesaid requirement for payment and, in
the case of a conversion after the Regular Record Date next preceding any
Interest Payment Date and on or before such Interest Payment Date, to the right
of the Holder of this Security (or any Predecessor Security) of record at such
Regular Record Date to receive an installment of interest (with certain
exceptions provided in the Indenture), no payment or adjustment is to be made
on conversion for interest accrued hereon or for dividends on the shares of
Common Stock issued on conversion. No fractions of shares of scrip representing
fractions of shares will be issued on conversion, but instead of any fractional
interest the Company shall pay a cash adjustment as provided in the Indenture.
The conversion price is subject to adjustment as provided in the Indenture. In
addition, the Indenture provides that in case of certain consolidations or
mergers to which the Company is a party or the transfer of substantially all of
the assets of the Company, the Indenture shall be amended, without the consent
of any Holders of Securities, so that this Security, if then outstanding, will
be convertible thereafter, during the period this Security shall be convertible
as specified above, only into the kind and amount of securities, cash and other
property receivable upon the consolidation, merger or transfer by a holder of
the number of shares of Common Stock into which this Security might have been
converted immediately prior to such consolidation, merger or transfer (assuming
such holder of Common Stock failed to exercise any rights of election and
received per share the kind and amount received per share by a plurality of
non-electing shares).]
[If applicable, insert - The Securities of this series are subject to
redemption upon not less than 30 days' nor more than 60 days' notice by mail,
[if applicable, insert - (1) on ___________ in any year commencing with the
year __________ and ending with the year ________ through operation of the
sinking fund for this series at a Redemption Price equal to 100% of the
principal amount, and (2)] at any time [if applicable, insert - on or after
_________, 19_____], as a whole or in part, at the election of the Company, at
the following Redemption Prices (expressed as percentages of the principal
amount): If redeemed during the 12-month period beginning ________________ of
the years indicated,
Redemption Redemption
Year Price Year Price
- ---- ----- ---- -----
and thereafter at a Redemption Price equal to _____% of the principal amount,
together in the case of any such redemption [(whether through operation of the
sinking fund or otherwise)] with
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<PAGE> 28
accrued interest to the Redemption Date, but interest installments whose Stated
Maturity is on or prior to such Redemption Date will be payable to the Holders
of such Securities, or one or more Predecessor Securities, of record at the
close of business on the relevant Record Dates referred to on the face hereof,
all as provided in the Indenture.
[If applicable, insert - The sinking fund for this series provides for
the redemption on _______________ in each year beginning with the year ______
and ending with the year ______ of [If applicable, insert - not less than
$__________ ("mandatory sinking fund") and not more than] $__________ aggregate
principal amount of Securities of this series. Securities of this series
acquired or redeemed by the Company otherwise than through [if applicable,
insert mandatory] sinking fund payments may be credited against subsequent [if
applicable, insert - mandatory] sinking fund payments otherwise required to be
made [if applicable, insert -, in the inverse order in which they become due].]
[If the Security is subject to redemption of any kind, insert - In the
event of redemption [if applicable, insert - or conversion] of this Security in
part only, a new Security or Securities of this series and of like tenor for
the unredeemed [if applicable, insert - or unconverted] portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.]
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, that to the extent and
in the manner set forth in Article Fifteen of the Indenture, the indebtedness
represented by the Securities and the payment of principal (and premium, if
any) and interest on each and all of the Securities are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
Senior Debt.
[If applicable, insert - The Indenture contains provisions for
defeasance at any time of the entire indebtedness of this Security and Events
of Default with respect to this Security, in each case upon compliance with
certain conditions set forth in the Indenture.]
[If the Security is not an Original Issue Discount Security, insert -
If an Event of Default with respect to Securities of this series shall occur
and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture.]
[If the Security is an Original Issue Discount Security, insert - If an
Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to insert formula for determining the
amount. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal, premium and interest (in each
case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and premium and interest, if any, on the Securities of this series
shall terminate.]
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<PAGE> 29
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with
the consent of the Holders of a majority in principal amount of the Securities
at the time Outstanding of each series to be affected. The Indenture also
contains provisions permitting the Holders of specified percentages in the
principal amount of the Securities of each series at the time Outstanding, on
behalf of the Holders of all Securities of such series, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such Holder and
upon all future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee
or for any other remedy thereunder, unless such Holder shall have previously
given the Trustee written notice of a continuing Event of Default with respect
to the Securities of this series, the Holders of not less than 25% in principal
amount of the Securities of this series at the time Outstanding shall have made
written request to the Trustee to institute proceedings in respect of such
Event of Default as Trustee and offered the Trustee reasonable indemnity, and
the Trustee shall not have received from the Holders of a majority in principal
amount of Securities of this series at the time Outstanding a direction
inconsistent with such request, and shall have failed to institute any such
proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder
of this Security for the enforcement of payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.
Subject to the rights of holders of Senior Debt, as set forth in the
Indenture, no other reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and any
premium and interest on this Security at the time, place and rate, and in the
coin or currency, herein prescribed [if applicable, insert - or to convert this
Security as provided in the Indenture].
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities
of this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
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<PAGE> 30
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Securities of this series are exchangeable for a like aggregate
principal amount of Securities of this series and of like tenor of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Security is registered as the owner
hereof for all purposes, whether or not this Security be overdue, and neither
the Company, the Trustee nor any such agent shall be affected by notice to the
contrary.
[If applicable, insert - Interest on the principal balance of this
Security shall be calculated on the basis of a 360-day year of twelve 30-day
months].
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
[If applicable, insert -
[FORM OF CONVERSION NOTICE]
To: CAPSTONE CAPITAL CORPORATION
The undersigned owner of this Security hereby irrevocably exercises
the option to convert this Security, or portion hereof (which is $1,000 or an
integral multiple thereof) below designated, into shares of Common Stock in
accordance with the terms of the Indenture referred to in this Security, and
directs that the shares issuable and deliverable upon the conversion, together
with any check in payment for fractional shares and any Securities,
representing any unconverted principal amount hereof, be issued and delivered
to the registered holder hereof unless a different name has been indicated
below. If shares are to be issued in the name of a person other than the
undersigned, the undersigned will pay all transfer taxes payable with respect
thereto. Any amount required to be paid by the undersigned on account of
interest accompanies this Security.
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<PAGE> 31
Dated:
Fill in for registration
of shares of Common
Stock and Securities if
to be issued otherwise
than to the registered
holder.
Principal Amount to be
converted (in an
integral multiple of
$1,000, if less than
all):
$
- ------------------
Name
- ------------------
Address
- -------------------------------- ------------------------------
(Please print name and address, Signature
including zip code number)
SOCIAL SECURITY OR OTHER
TAXPAYER IDENTIFYING
NUMBER: _________
[SIGNATURE GUARANTEED - required only if Common Stock and Securities are to be
issued and delivered to other than the registered holder]
________ ]
SECTION 204. FORM OF LEGEND FOR GLOBAL SECURITIES.
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<PAGE> 32
Unless otherwise specified as contemplated by Section 301 for the
Securities evidenced thereby, every global Security authenticated and delivered
hereunder shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY
BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A
NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
SECTION 205. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificates of authentication shall be in substantially
the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated: AMSOUTH BANK OF ALABAMA,
As Trustee
By
-----------------------------
Authorized Signatory
ARTICLE THREE
THE SECURITIES
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 303,
set forth, or determined in the manner
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<PAGE> 33
provided, in an Officers' Certificate, or established in one or more indentures
supplemental hereto, prior to the issuance of Securities of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other
series);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered
under this Indenture (except for Securities authenticated and
delivered upon registration of transfer of, or in exchange for, or in
lieu of, other Securities of the series pursuant to Section 304, 305,
306, 906 or 1107 and except for any Securities which, pursuant to
Section 303, are deemed never to have been authenticated and delivered
hereunder);
(3) the Person to whom any interest on a 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;
(4) the date or dates on which the principal of any Securities
of the series is payable;
(5) the rate or rates at which any Securities of the series
shall bear interest, if any, or the method of calculation thereof, the
date or dates from which any such interest shall accrue, the Interest
Payment Dates on which any such interest shall be payable and the
Regular Record Date for any such interest payable on any Interest
Payment Date;
(6) the place or places where the principal of and any premium
and interest on any Securities of the series shall be payable;
(7) the period or periods within which, the events upon the
occurrence of which, and the price or prices at which any Securities
of the series may be redeemed, in whole or in part, at the option of
the Company and, if other than by a Board Resolution, the manner in
which any election by the Company to redeem the Securities shall be
evidenced;
(8) the obligation, if any, of the Company to redeem or
purchase any Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of the Holder thereof and the
period or periods within which, the price or prices at which and the
terms and conditions upon which any Securities of the series shall be
redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation;
(9) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which any Securities of the
series shall be issuable;
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<PAGE> 34
(10) if the amount of principal of or any premium or interest
on any Securities of the series may be determined with reference to an
index or pursuant to a formula, the manner in which such amounts shall
be determined;
(11) if other than the currency of the United States of
America, the currency, currencies or currency units in which the
principal of or any premium or interest on any Securities of the
series shall be payable and the manner of determining the equivalent
thereof in the currency of the United States of America for any
purpose, including for purposes of the definition of "Outstanding" in
Section 101;
(12) if the principal of or any premium or interest on any
Securities of the series is to be payable, at the election of the
Company or the Holder thereof, in one or more currencies or currency
units other than that or those in which such Securities are stated to
be payable, the currency, currencies or currency units in which the
principal of or any premium or interest on such Securities as to which
such election is made shall be payable, the periods within which and
the terms and conditions upon which such election is to be made and
the amount so payable (or the manner in which such amount shall be
determined);
(13) if other than the entire principal amount thereof, the
portion of the principal amount of any Securities of the series which
shall be payable upon declaration of acceleration of the Maturity
thereof pursuant to Section 502;
(14) if the principal amount payable at the Stated Maturity of
any Securities of the series will not be determinable as of any one or
more dates prior to the Stated Maturity, the amount which shall be
deemed to be the principal amount of such Securities as of any such
date for any purpose thereunder or hereunder, including the principal
amount thereof which shall be due and payable upon any Maturity other
than the Stated Maturity or which shall be deemed to be Outstanding as
of any date prior to the Stated Maturity (or, in any such case, the
manner in which such amount deemed to be the principal amount shall be
determined);
(15) if applicable, that the Securities of the series shall be
subject to either or both of Defeasance or Covenant Defeasance as
provided in Article Thirteen; provided that no series of Securities
that is convertible into or exchangeable for shares of Common Stock or
other securities pursuant to Section 301(19) shall be subject to
Defeasance pursuant to Section 1302;
(16) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global
Securities and, in such case, the respective Depositaries for such
Global Securities, the form of any legend or legends which shall
be borne by any such Globa Security in addition to or in lieu of that
set forth in Section 204 and any circumstances in addition or in
lieu of those set forth in Clause (2) of the last paragraph of Section
305 in which any such Global Security may be exchanged in whole
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<PAGE> 35
or in part for Securities registered, and any transfer of such Global
Security in whole or in part may be registered, in the name or names
of Persons other than the Depositary for such Global Security or a
nominee thereof;
(17) any addition to or change in the Events of Default which
applies to any Securities of the series and any change in the right of
the Trustee or the requisite Holders of such Securities to declare the
principal amount thereof due and payable pursuant to Section 502;
(18) any addition to, deletion from or change in the covenants
set forth in Article Ten which applies to Securities of the series;
(19) the terms and conditions, if any, pursuant to which the
Securities are convertible into or exchangeable for Common Stock or
other securities;
(20) any addition to, deletion from or change in the
subordination provisions contained in Article XV with respect to
Securities of the series; and
(21) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as
permitted by Section 901(5)).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or
pursuant to the Board Resolution referred to above and (subject to Section 303)
set forth, or determined in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto.
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company
and delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
SECTION 302. DENOMINATIONS.
The Securities of each series shall be issuable only in registered
form without coupons and only in such denominations as shall be specified as
contemplated by Section 301. In the absence of any such specified denomination
with resect to the Securities of any series, the Securities of such series
shall be issuable in denominations of $1,000 and any integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents, under its
corporate seal reproduced thereon attested
26
<PAGE> 36
by its Secretary or one of its Assistant Secretaries. The signature of any of
these officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by
the Company to the Trustee for authentication, together with a Company order
for the authentication and delivery of such Securities, and the Trustee in
accordance with the Company Order shall authenticate and deliver such
Securities. If the form or terms of the Securities of the series have been
established by or pursuant to one or more Board Resolutions as permitted by
sections 201 and 301, in authenticating such Securities, and accepting the
additional responsibilities under this Indenture in relation to such
Securities, the Trustee shall be entitled to receive, and (subject to Section
601) shall be fully protected in relying upon, an Opinion of Counsel stating,
(1) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 201, that such
form has been established in conformity with the provisions of this
Indenture;
(2) if the terms of such Securities have been established by
or pursuant to Board Resolution as permitted by Section 301, that such
terms have been established in conformity with the provisions of this
Indenture; and
(3) that such Securities, when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and legally binding obligations of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights to
general equity principles.
If such form or terms have been so established, the Trustee shall not
be required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301, and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 301 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
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<PAGE> 37
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence that such Security
has been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered
hereunder but never issued and sold by the Company, and the Company shall
deliver such Security to the Trustee for cancellation as provided in Section
309, for all purposes of this Indenture such Security shall be deemed never to
have been authenticated and delivered hereunder and shall never be entitled to
the benefits of this Indenture.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon surrender for cancellation of any
one or more temporary Securities of any series, the Company shall execute and
the Trustee shall authenticate and deliver in exchange therefor one or more
definitive Securities of the same series, of any authorized denominations and
of like tenor and aggregate principal amount. Until so exchanged, the temporary
Securities of any series shall in all respects be entitled to the same benefits
under this Indenture as definitive Securities of such series and tenor.
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<PAGE> 38
SECTION 305. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is
hereby appointed "Security Registrar" for the purpose of registering Securities
and transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of a
series at the office or agency of the Company in a Place of Payment for that
series, the Company shall execute, and the Trustee shall authenticate and
deliver, in the name of the designated transferee or transferees, one or more
new Securities of the same series, of any authorized denominations and of like
tenor and aggregate principal amount.
At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
like tenor and aggregate principal amount, upon surrender of the Securities to
be exchanged at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange
is entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
If the Securities of any series (or of any series and specified tenor)
are to be redeemed in part, the Company shall not be required (A) to issue,
register the transfer of or exchange any Securities of that series (or of that
series and specified tenor, as the case may be) during a period beginning at
the opening of business 15 days before the day of the mailing of a notice of
redemption of any such Securities selected for redemption under Section 1103
and ending at the close of business on the day of such mailing, or (B) to
register the transfer of or exchange any
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<PAGE> 39
Security so selected for redemption in whole or in part, except the unredeemed
portion of any Security being redeemed in part.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:
(1) Each Global Security authenticated under this Indenture
shall be registered in the name of the Depositary designated for such
Global Security or a nominee thereof and deposited with such
Depositary or a nominee thereof or custodian therefor, shall be issued
in a denomination or aggregate denomination equal to the portion of
the aggregate principal amount of Securities of the applicable series
to be represented by such Global Security, and shall constitute a
single Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities
registered, and no transfer of a Global Security in whole or in part
may be registered, in the name of any Person other than the Depositary
for such Global Security or a nominee thereof or a successor
Depositary or a nominee thereof unless (A) such Depositary (i) has
notified the Company that it is unwilling or unable to continue as
Depositary for such Global Security or (ii) has ceased to be a
clearing agency registered under the Exchange Act, and in either case
a successor Depositary is not appointed within 90 days by the Company,
(B) there shall have occurred and be continuing an Event of Default
with respect to such Global Security or (C) there shall exist such
circumstances, if any, in addition to or in lieu of the foregoing as
have been specified for this purpose as contemplated by Section 301.
(3) Subject to Clause (2) above, any exchange of a Global
Security for other Securities may be made in whole or in part, and all
Securities issued in exchange for a Global Security or any portion
thereof shall be registered in such names as the Depositary for such
Global Security shall direct.
(4) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a
Global Security or any portion thereof, whether pursuant to this
Section, Section 304, 306, 906 or 1107 or otherwise, shall be
authenticated and delivered in the form of, and shall be, a Global
Security, unless such Security is registered in the name of a Person
other than the Depositary for such Global Security or a nominee
thereof.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any
Security and (ii) such security or indemnity as may be
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<PAGE> 40
required by them to save each of them and any agent of either of them harmless,
then, in the absence of notice to the Company or the Trustee that such Security
has been acquired by a bona fide purchaser, the Company shall execute and the
Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or
stolen Security, a new Security of the same series and of like tenor and
principal amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion
may, instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Indenture equally and proportionately
with any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Except as otherwise provided as contemplated by Section 301 with
respect to any series of Securities, interest on any Security which is payable,
and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to 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.
Any interest on any Security of any series which is payable, but is
not punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest shall be paid by the Company, at its election in each
case, as provided in either Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such series
(or their respective Predecessor Securities) are registered at the
close of business on a Special Record Date for the payment of such
Defaulted Interest, which shall be fixed in the following manner. The
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Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security of such series and the
date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate
amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit
prior to the date of the proposed payment, such money when deposited
to be held in trust for the benefit of the Persons entitled to such
Defaulted Interest as in this Clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted
Interest which shall be not more than 15 days and not less than 10
days prior to the date of the proposed payment and not less than 10
days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee shall promptly notify the Company of such Special
Record Date and, in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be given to each Holder of
Securities of such series in the manner set forth in Section 106, not
less than 10 days prior to such Special Record Date. Notice of the
proposed payment of such Defaulted Interest and the Special Record
Date therefor having been so mailed, such Defaulted Interest shall be
paid to the Persons in whose names the Securities of such series (or
their respective Predecessor Securities) are registered at the close
of business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on
the Securities of any series in any other lawful manner not
inconsistent with the requirements of any securities exchange on which
such Securities may be listed, and upon such notice as may be required
by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this Clause, such manner of
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Subject to the provisions of Section 1402, in case of any Security
which is converted after any Regular Record Date and on or prior to the next
succeeding Interest Payment Date, interest whose Stated Maturity is on such
Interest Payment Date shall be payable on such Interest Payment Date
notwithstanding such conversion, and such interest (whether or not punctually
paid or duly provided for) shall be paid to the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the close of
business on such Regular Record Date. Except as otherwise expressly provided in
the immediately preceding sentence in the case of any Security which is
converted, interest whose Stated Maturity is after the date of conversion of
such Security shall not be payable.
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SECTION 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and any premium
and (subject to Section 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or conversion or for credit against any sinking fund
payment shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and shall be promptly canceled by it. The Company may
at any time deliver to the Trustee for cancellation any Securities previously
authenticated and delivered hereunder which the Company may have acquired in
any manner whatsoever, and may deliver to the Trustee (or to any other Person
for delivery to the Trustee) for cancellation any Securities previously
authenticated hereunder which the Company has not issued and sold, and all
Securities so delivered shall be promptly canceled by the Trustee. No
Securities shall be authenticated in lieu of or in exchange for any Securities
canceled as provided in this Section, except as expressly permitted by this
Indenture. All canceled Securities held by the Trustee shall be disposed of in
a manner customary to the Trustee as directed by a Company Order.
SECTION 310. COMPUTATION OF INTEREST.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
SECTION 311. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be
affected by any defect in or omission of such numbers.
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ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall upon Company Request cease to be of further
effect (except as to any surviving rights of conversion, registration of
transfer or exchange of Securities herein expressly provided for), and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306 and
(ii) Securities for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 1003) have been delivered to the Trustee for cancellation
and/or conversion; or
(B) all such Securities not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust funds in
trust for the purpose money in an amount sufficient to pay and
discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee for cancellation, for principal and any
premium and interest to the date of such deposit (in the case of
Securities which have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
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Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium
and interest for whose payment such money has been deposited with the Trustee.
Money deposited pursuant to this Section in accordance with this Indenture
shall not be subject to claims of the holders of Senior Debt under Article
Fifteen.
ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT.
"Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be occasioned by the provisions of
Article Fifteen or be voluntary or involuntary or be effected by operation of
law or pursuant to any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(1) default in the payment of any interest upon any Security
of that series when it becomes due and payable, and continuance of
such default for a period of 30 days; or
(2) default in the payment of the principal of or any premium,
if any, on any Security of that series; or
(3) default in the deposit of any sinking fund payment, when
and as due by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere
in this Section specifically dealt with or which
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has expressly been included in this Indenture solely for the
benefit of series of Securities other than that series), and
continuance of such default or breach for a period of 60 days after
there has been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the Holders of at
least 25% in principal amount of the Outstanding Securities of that
series a written notice specifying such default or breach and
requiring it to be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(5) (a) a default under any bond, debenture, note or other
evidence of indebtedness for money borrowed by the Company or any
Subsidiary (including a default with respect to Securities of any
series other than that series) having an aggregate principal amount
outstanding of at least $5,000,000, or under any mortgage, indenture
or instrument (including this Indenture) under which there may be
issued or by which there may be secured or evidenced any indebtedness
for money borrowed by the Company having an aggregate principal amount
outstanding of at least $5,000,000, 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 (b)
a failure to pay Indebtedness in the outstanding principal amount of
at least $5,000,000 at its stated maturity after demand therefor;
provided, that in each case of (a) and (b) above within a period of 10
days after there shall have been given, by registered or certified
mail, to the Company by the Trustee or to the Company and the Trustee
by the Holders of at least 25% in principal amount of the Outstanding
Securities of that series a written notice specifying such default and
(a) requiring the Company to cause such Indebtedness to be discharged
or cause such acceleration to be rescinded or annulled, or (b)
requiring the Company to pay the Indebtedness which the Company failed
to pay at maturity after demand therefor and in each case stating that
such notice is a "Notice of Default" hereunder; provided, however,
that, subject to the provisions of Sections 601 and 602, the Trustee
shall not be deemed to have knowledge of such default unless either
(A) a Responsible Officer of the Trustee shall have knowledge of such
default or (B) the Trustee shall have received written notice thereof
from the Company, from any Holder, from the holder of any such
indebtedness or from the Trustee under any such mortgage, indenture or
other instrument; or
(6) the entry by a court or courts of competent jurisdiction
of a final judgment or final judgments for the payment of money
against the Company or any Subsidiary which remain undischarged for a
period (during which execution shall not be effectively stayed, the
posting of any required bond not being deemed an execution for
purposes hereof) of 30 days after all rights to appeal have been
exhausted, provided that the aggregate amount of all such judgments
exceeds $5,000,000; or
(7) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or
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(B) a decree or order adjudging the Company a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in
respect of the Company under any applicable Federal or State law, or
appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official of the Company or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in
effect for a period of 60 consecutive days; or
(8) the commencement by the Company of a voluntary case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case
or proceeding to be adjudicated a bankrupt or insolvent, or the
consent by it to the entry of a decree or order for relief in respect
of the Company in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking possession
by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or of any substantial part of
its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay
its debts generally as they become due, or the taking of corporate
action by the Company in furtherance of any such action; or
(9) any other Event of Default provided with respect to
Securities of that series.
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SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
Section 501(7) or 501(8)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or
the Holders of not less than 25% in principal amount of the Outstanding
Securities of that series may declare the principal amount of all the
Securities of that series (or, if any Securities of that series are Original
Issue Discount Securities, such portion of the principal amount of such
Securities as may be specified by the terms thereof) to be due and payable
immediately, by a notice in writing to the Company (and to the Trustee if given
by Holders), and upon any such declaration such principal amount (or specified
amount) shall become immediately due and payable. If an Event of Default
specified in Section 501(7) or 501(8) with respect to Securities of any series
at the time Outstanding occurs, the principal amount of all the Securities of
that series (or, if any Securities of that series are Original Issue Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms thereof) shall automatically, and without any
declaration or other action on the part of the Trustee or any Holder, become
immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in
this Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) the principal of (and premium, if any, on) any Securities
of that series which have become due otherwise than by such
declaration of acceleration and any interest thereon at the rate or
rates prescribed therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed
therefor in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that
series which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
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SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series
by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607.
No provision of this Indenture shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any Holder
any plan of reorganization, arrangement,
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adjustment or composition affecting the Securities or the rights of any Holder
thereof or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding; provided, however, that the Trustee may, on
behalf of the Holders, vote for the election of a trustee in bankruptcy or
similar official and be a member of a creditors' or other similar committee.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any
premium or interest, upon presentation of the Securities and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607; and
SECOND: To the payment of the amounts then due and unpaid for
principal of and any premium and interest on the Securities in respect
of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal and any
premium and interest, respectively.
SECTION 507. LIMITATION ON SUITS.
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this
Indenture, or for the appointment of a receiver or trustee, or for any other
remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the
Securities of that series;
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(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60 day period by the Holders of
a majority in principal amount of the Outstanding Securities of that
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 508. UNCONDITIONAL RIGHTS OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST AND TO CONVERT.
Notwithstanding any other provision in this Indenture, but subject to
Article Fifteen of this Indenture, the Holder of any Security shall have the
right, which is absolute and unconditional, to receive payment of the principal
of and any premium and (subject to Section 307) interest on such Security on
the respective Stated Maturities expressed in such Security (or, in the case of
redemption, on the Redemption Date), to convert such Security in accordance
with Article Fourteen and to institute suit for the enforcement of any such
payment or such right of conversion, and such rights shall not be impaired
without the consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders
shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Trustee and the Holders
shall continue as though no such proceeding had been instituted.
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SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 306, no right or remedy herein conferred upon or reserved
to the Trustee or to the Holders is intended to be exclusive of any other right
or remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent
the concurrent assertion or employment of any other appropriate right or
remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
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SECTION 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of or any premium or
interest on any Security of such series, or
(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 514. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit
to file an undertaking to pay the costs of such suit, and may assess costs
against any such party litigant, in the manner and to the extent provided in
the Trust Indenture Act. The provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by the Company, to any
suit instituted by any Holder, or group of Holders of an aggregate more than 10
percent in principal amount of the Securities then outstanding, or to any suit
instituted by any Holder for the enforcement of the payment of the principal of
or interest on any Security, on or after the respective due dates expressed in
such Security.
SECTION 515. WAIVER OF USURY, STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever
claim or take the benefit or advantage of, any usury, stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and
permit the execution of every such power as though no such law had been
enacted.
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ARTICLE SIX
THE TRUSTEE
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Whether or not therein expressly so provided, every provision of this Indenture
relating to the conduct or affecting the liability of or affording protection
to the Trustee shall be subject to the provisions of this Section.
SECTION 602. NOTICE OF DEFAULTS.
If a default occurs hereunder with respect to Securities of any
series, the Trustee shall give the Holders of Securities of such series notice
of such default as and to the extent provided by the Trust Indenture Act;
provided, however, that in the case of any default of the character specified
in Section 501(4) with respect to Securities of such series, no such notice to
Holders shall be given until at least 30 days after the occurrence thereof. For
the purpose of this Section, the term "default" means any event which is, or
after notice or lapse of time or both would become, an Event of Default with
respect to Securities of such series.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order,
and any resolution of the Board of Directors shall be sufficiently
evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any
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action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part,
rely upon an Officers' Certificate;
(4) the Trustee may consult with counsel of its selection and
the advice of such counsel (to be confirmed in writing) or any Opinion
of Counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(8) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Indenture.
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as
to the validity or sufficiency of this Indenture or of the Securities. Neither
the Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Company of Securities or the proceeds thereof.
SECTION 605. MAY HOLD SECURITIES.
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The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to
Sections 608 and 613, may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
SECTION 606. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time
agree in writing for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee and any predecessor Trustee for,
and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of
or in connection with the acceptance or administration of the trust or
trusts hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
The Trustee shall have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 607, except with respect to funds
held in trust for the benefit of the Holders of particular Securities.
When the Trustee incurs expenses or renders services in connection with
an Event of Default specified in Section 501(7) or Section 501(8), the expenses
(including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to
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constitute expenses of administration under any applicable Federal or state
bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by such Act, the Trustee shall not be deemed to have a conflicting
interest by virtue of being a trustee under this Indenture with respect to
Securities of more than one series.
SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a
Person eligible pursuant to the Trust Indenture Act to act as such and shall
have a combined capital and surplus of at least $50,000,000. If any such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of its supervising or examining authority, then for the purposes
of this Section and to the extent permitted by the Trust Indenture Act, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee with respect to the Securities of any
series shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company.
The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
If at any time:
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(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been
a bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of
its property shall be appointed or any public officer shall take
charge or control of the Trustee or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation,
then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (B) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
If the instrument of acceptance by a successor Trustee required by
Section 611 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation or removal, the Trustee resigning or
being removed may petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with
respect to the Securities of one or more series, the Company, by a Board
Resolution, shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or
more or all of such series and that at any time there shall be only one Trustee
with respect to the Securities of any particular series) and shall comply with
the applicable requirements of Section 611. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy, a
successor Trustee with respect to the Securities of any series shall be
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its
acceptance of such appointment in accordance with the applicable requirements
of Section 611, become the successor Trustee with respect to the Securities of
such series and to that extent supersede the successor Trustee appointed by the
Company. If no successor Trustee with respect to the Securities of any series
shall have been so appointed by the Company or the Holders and accepted
appointment in the manner required by Section 611, the retiring Trustee or any
Holder who has been a bona fide Holder of a Security of such series for at
least six months may, on behalf of himself and all others similarly situated,
petition any court of competent jurisdiction for the appointment of a successor
Trustee with respect to the Securities of such series.
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The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment
of a successor Trustee with respect to the Securities of any series to all
Holders of Securities of such series in the manner provided in Section 106.
Each notice shall include the name of the successor Trustee with respect to the
Securities of such series and the address of its Corporate Trust Office.
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1)
shall contain such provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of
that or those series to which the appointment of such successor Trustee
relates, (2) if the retiring Trustee is not retiring with respect to all
Securities, shall contain such provisions as shall be deemed necessary or
desirable to confirm that all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or those series as to
which the retiring Trustee is not retiring shall continue to be vested in the
retiring Trustee, and (3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the administration
of the trusts hereunder by more than one Trustee, it being understood that
nothing herein or in such supplemental indenture shall constitute such Trustees
co-trustee of the same trust and that each such Trustee shall be trustee of a
trust or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution and delivery of
such supplemental indenture the resignation or removal of the retiring Trustee
shall become effective to the extent provided therein and each such successor
Trustee, without any further act, deed or conveyance, shall become vested with
all the rights, powers, trusts and duties of the retiring Trustee with respect
to the Securities of that or those series to which the appointment of such
successor Trustee relates; but, on request of the Company or any successor
Trustee, such retiring Trustee shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring Trustee
hereunder with
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respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in the
first or second preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Trustee shall be a party, or
any corporation succeeding to all or substantially all the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents with respect
to one or more series of Securities which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series issued upon original
issue and upon exchange, registration of transfer, partial conversion or
partial redemption thereof or pursuant to Section 306, and Securities so
authenticated shall be entitled to the benefits of this Indenture and shall be
valid and obligatory for all purposes as if authenticated by the Trustee
hereunder. Wherever reference is made in this Indenture to the authentication
and delivery of Securities by the Trustee or the Trustee's certificate of
authentication, such reference shall be deemed to include authentication and
delivery on behalf of the Trustee by an Authenticating Agent and a certificate
of authentication executed
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on behalf of the Trustee by an Authenticating Agent. Each Authenticating Agent
shall be acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States of America,
any State thereof or the District of Columbia, authorized under such laws to
act as Authenticating Agent, having a combined capital and surplus of not less
than $50,000,000 and subject to supervision or examination by Federal or State
authority. If such Authentication Agent publishes reports of condition at least
annually, pursuant to law or to the requirements of said supervising or
examining authority, then for the purposes of this Session, the combined
capital and surplus of such Authenticating Agent shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent shall cease to
be eligible in accordance with the provisions of this Section, such
Authenticating Agent shall resign immediately in the manner and with the effect
specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any time
terminate the agency of an Authenticating Agent by giving written notice
thereof to such Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 106 to all Holders of Securities
of the series with respect to which such Authenticating Agent will serve. Any
successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
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AMSOUTH BANK OF ALABAMA,
As Trustee
By
------------------------------------
As Authenticating Agent
By
------------------------------------
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee
(1) semi-annually, not later than March 15 and September 15 in
each year, a list, in such form as the Trustee may reasonably require,
of the names and addresses of the Holders of Securities of each series
as of the preceding March 1 or September 1, as the case may be, and
(2) at such other times as the Trustee may request in writing within
30 days after the receipt by the Company of any such request, a list
of similar form and content as of a date not more than 15 days prior
to the time such list is furnished; excluding from any such list names
and addresses received by the Trustee in its capacity as Security
Registrar.
SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATION TO HOLDERS.
The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
The rights of Holders to communicate with other Holders with respect
to their rights under this Indenture or under the Securities, and the
corresponding rights and privileges of the Trustee, shall be as provided by the
Trust Indenture Act.
Every Holder of Securities, by receiving and holding the same, agree
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall
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be held accountable by reason of any disclosure of information as to names and
addresses of Holders made pursuant to the Trust Indenture Act.
SECTION 703. REPORTS BY TRUSTEE.
The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
Reports so required to be transmitted at stated intervals of not more than 12
months shall be transmitted within 60 days after the first date of issuance of
Securities and on each anniversary of such date.
A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange upon which any
Securities are listed, with the Commission and with the Company. The Company
will promptly notify the Trustee when any Securities are listed on any stock
exchange.
SECTION 704. REPORTS BY COMPANY.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at
the time and in the manner provided pursuant to such Act; provided that any
such information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission.
Delivery of such reports, information and documents to the Trustee is
for informational purpose only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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SECTION 705. NOTICE OF DEFAULT.
The Company shall file with the Trustee written notice of the
occurrence of any Event of Default within five Business Days of its becoming
aware of any such Event of Default.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties
and assets of the Company substantially as an entirety shall be a
corporation, partnership or trust, shall be organized and validly
existing under the laws of the United States of America, any State
thereof or the District of Columbia and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, the due and punctual payment of
the principal of and any premium and interest on all the Securities
and the performance or observance of every covenant of this Indenture
on the part of the Company to be performed or observed and shall have
provided for conversion rights in accordance with Section 1411 with
respect to each series of Securities afforded conversion thereunder;
and
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company
or any Subsidiary as a result of such transaction as having been
incurred by the Company or such Subsidiary at the time of such
transaction, no Event of Default, and no event which, after notice or
lapse of time or both, would become an Event of Default, shall have
happened and be continuing.
SECTION 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance with
Section 801, the successor Person formed by such
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consolidation or into which the Company is merged or to which such conveyance,
transfer or lease is made shall succeed to, and be substituted for, and may
exercise every right and power of, the Company under this Indenture with the
same effect as if such successor Person had been named as the Company herein,
and thereafter, except in the case of a lease, the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Securities.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the Company
and the assumption by any such successor of the covenants of the
Company herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of
the Holders of all or any series of Securities (and if such covenants
are to be for the benefit of less than all series of Securities,
stating that such covenants are expressly being included solely for
the benefit of such series) or to surrender any right or power herein
conferred upon the Company; or
(3) to add additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such additional
Events of Default are to be for the benefit of less than all series of
Securities, stating that such additional Events of Default are
expressly being included solely for the benefit of such series); or
(4) to add to or change any of the provisions of this
Indenture to such extent as shall be necessary to permit or facilitate
the issuance of Securities in bearer form, registrable or not
registrable as to principal, and with or without interest coupons, or
to permit or facilitate the issuance of Securities in uncertificated
form; or
(5) to add to, change or eliminate any of the provisions of
this Indenture in respect of one or more series of Securities,
provided that any such addition, change or elimination (A) shall
neither (i) apply to any Security of any series created prior to the
execution of such supplemental indenture and entitled to the benefit
of such provision nor (ii) modify the rights of the Holder of any such
Security with respect to such provision or (B) shall become effective
only when there is no such Security Outstanding; or
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(6) to secure the Security; or
(7) to establish the form or terms of Securities of any series
as permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 611; or
(9) to make provision with respect to the conversion of Holders
pursuant to the requirements of Article Fourteen; or
(10) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture, provided that such
action pursuant to this Clause (10) shall not adversely affect the
interests of the Holders of Securities of any series in any material
respect.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee
may enter into an indenture or indentures supplemental hereto for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce
the principal amount thereof or the rate of interest thereon or any
premium payable upon the redemption thereof, or reduce the amount of
the principal of an Original Issue Discount Security or any other
Security which would be due and payable upon a declaration of
acceleration of the Maturity thereof pursuant to Section 502, or
change any Place of Payment where, or the coin or currency in which,
any Security or any premium or interest thereon is payable, or
impair the right to institute suit for the enforcement of any such
payment on or after the Stated Maturity thereof (or, in the case of
redemption, on or after the Redemption Date), or modify the provisions
of this Indenture with respect to the conversion of the Securities in
a manner adverse to the Holders, or modify the provisions of this
Indenture with respect to the subordination of the Securities in a
manner adverse to the Holders, or
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(2) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513
or Section 1008, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby; provided, however, that this clause shall not be
deemed to require the consent of any Holder with respect to changes in
the references to "the Trustee" and concomitant changes in this
Section, Section 513 and Section 1008, or the deletion of this
proviso, in accordance with the requirements of Sections 611 and
901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under
this Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to consent to any indenture
supplemental hereto. If a record date is fixed, the Holders on such record
date, or their duly designated proxies, and only such Persons, shall be
entitled to consent to such supplemental indenture, whether or not such Holders
remain Holders after such record date; provided, that unless such consent shall
have become effective by virtue of the requisite percentage having been
obtained prior to the date which is 90 days after such record date, any such
consent previously given shall automatically and without further action by any
Holder be canceled and of no further effect.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby
of the trusts created by this Indenture, the Trustee shall be entitled to
receive, and (subject to Section 601) shall be fully protected in relying upon,
an Opinion of Counsel stating that the execution of such supplemental indenture
is authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
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SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every
Holder of Securities theretofore or thereafter authenticated and delivered
hereunder shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any
premium and interest on the Securities of that series in accordance with the
terms of the Securities and this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange or surrendered for conversion and
where notices and demands to or upon the Company in respect of the Securities
of that series and this Indenture may be served. The Company will give prompt
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written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain any
such required office or agency or shall fail to furnish the Trustee with the
address thereof, such presentations, surrenders, notices and demands may be
made or served at the Corporate Trust Office of the Trustee, and the Company
hereby appoints the Trustee as its agent to receive all such presentations,
surrenders, notices and demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in each Place of Payment for Securities of any series for such
purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.
SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of or any premium or interest on any of the Securities of that
series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal and any premium and interest so
becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of or
any premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will (1) comply with the provisions of
the Trust Indenture Act applicable to it as a Paying Agent and (2) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of the
Securities of that series, upon the written request of the Trustee, forthwith
pay to the Trustee all sums held in trust by such Paying Agent for payment in
respect of the Securities of that series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held
in trust by the Company or such Paying Agent, such sums to be held by the
Trustee upon the same trusts as those upon which such sums were held by the
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Company or such Paying Agent; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest on any Security of any series and remaining unclaimed for two years
after such principal, premium or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Security shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in New York, New York, notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such publication, any unclaimed balance of such money then
remaining will be repaid to the Company.
SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers
thereof the Company is in default in the performance and observance of any of
the terms, provisions and conditions of this Indenture (without regard to any
period of grace or requirement of notice provided hereunder) and, if the
Company shall be in default, specifying all such defaults and the nature and
status thereof of which they may have knowledge.
SECTION 1005. EXISTENCE.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1006. MAINTENANCE OF PROPERTIES.
The Company will keep and will cause its Subsidiaries to keep all
properties used or useful in the conduct of its business or the business of its
Subsidiaries in good working order and
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condition (ordinary wear and tear excepted) and will make or cause to be made
such necessary repairs, replacements and renewals thereof as in the judgment of
the Company may be necessary to conduct such business in accordance with
customary business practices; provided, however, that nothing in this Section
shall prevent the Company from discontinuing the operation or maintenance of
any of such properties if such discontinuance is, in the judgment of the
Company, desirable in the conduct of its business or the business of any
Subsidiary and not disadvantageous in any material respect to the Holders.
SECTION 1007. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
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 by appropriate
proceedings.
SECTION 1008. WAIVER OF CERTAIN COVENANTS.
Except as otherwise specified as contemplated by Section 301 for
Securities of such series, the Company may, with respect to the Securities of
any series, omit in any particular instance to comply with any term, provision
or condition set forth in any covenant provided pursuant to Section 301(18),
901(2) or 901(7) for the benefit of the Holders of such series if before the
time for such compliance the Holders of at least a majority in principal amount
of the Outstanding Securities of such series shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance
with such term, provision or condition, but no such waiver shall extend to or
affect such term, provision or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of the
Company and the duties of the Trustee in respect of any such term, provision or
condition shall remain in full force and effect.
SECTION 1009. CALCULATION OF ORIGINAL ISSUE DISCOUNT.
The Company shall file with the Trustee promptly at the end of each
calendar year a written notice specifying the amount of original issue discount
(including daily rates and accrual periods) accrued on Outstanding Securities
as of the end of such year.
ARTICLE ELEVEN
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REDEMPTION OF SECURITIES
SECTION 1101. APPLICABILITY OF ARTICLE.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 301 for such Securities) in
accordance with this Article.
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution or in another manner specified as contemplated
by Section 301 for such Securities. In case of any redemption at the election
of the Company of less than all the Securities of any series (including any
such redemption affecting only a single Security), the Company shall, at least
60 days prior to the Redemption Date fixed by the Company (unless a shorter
notice shall be satisfactory to the Trustee), notify the Trustee of such
Redemption Date, of the principal amount of Securities of such series to be
redeemed and, if applicable, of the tenor of the Securities to be redeemed. In
the case of any redemption of Securities prior to the expiration of any
restriction on such redemption provided in the terms of such Securities or
elsewhere in this Indenture, the Company shall furnish the Trustee with an
Officers Certificate evidencing compliance with such restriction.
SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities of any series are to be redeemed
(unless all the Securities of such series and of a specified tenor are to be
redeemed or unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by such method as the Trustee
shall deem fair and appropriate and which may provide for the selection for
redemption of a portion of the principal amount of any Security of such series,
provided that the unredeemed portion of the principal amount of any Security
shall be in an authorized denomination (which shall not be less than the
minimum authorized denomination) for such Security. If less than all the
Securities of such series and of a specified tenor are to be redeemed (unless
such redemption affects only a single Security), the particular Securities to
be redeemed shall be selected not more than 60 days prior to the Redemption
Date by the Trustee, from the Outstanding Securities of such series and
specified tenor not previously called for redemption in accordance with the
preceding sentence.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to
be redeemed.
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The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed to
be the portion selected for redemption. Securities that have been converted
during a selection of Securities to be redeemed shall be treated by the Trustee
as Outstanding for the purpose of such selection.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1104. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to each Holder of Securities to be redeemed, at his address appearing in
the Security Register.
All notices of redemption shall include the CUSIP number, if any, and
shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series
consisting of more than a single Security are to be redeemed, the
identification (and, in the case of partial redemption of any such Securities,
the principal amounts) of the particular Securities to be redeemed and, if
less than all the Outstanding Securities of any series consisting of a single
Security are to be redeemed, the principal amount of the particular Security to
be redeemed,
(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date,
(5) in the case of any Securities that are convertible pursuant to
Article Fourteen, the conversion price, the date on which the right to convert
the principal of the Securities to be redeemed will terminate and the place or
places where such Securities may be surrendered for conversion,
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(6) the place or places where each such Security is to be surrendered
for payment of the Redemption Price, and
(7) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company and shall be irrevocable.
SECTION 1105. DEPOSIT OF REDEMPTION PRICE.
Prior to any Redemption Date, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in Section 1003) an amount of
money sufficient to pay the Redemption Price of, and (except if the Redemption
Date shall be an Interest Payment Date) accrued interest on, all the Securities
which are to be redeemed on that date other than any Securities called for
redemption on that date which have been converted prior to the date of such
deposit.
If any Security called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held
in trust for the redemption of such Security shall (subject to any right of the
Holder of such Security or any Predecessor Security to receive interest as
provided in the last paragraph of Section 307) be paid to the Company upon
Company Request or, if then held by the Company, shall be discharged from such
trust.
SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security
shall be paid by the Company at the Redemption Price, together with accrued
interest to the Redemption Date; provided, however, that, unless otherwise
specified as contemplated by Section 301, installments of interest whose Stated
Maturity is on or prior to the Redemption Date will be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such
at the close of business on the relevant Record Dates according to their terms
and the provisions of Section 307.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
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SECTION 1107. SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Security without service charge, a new Security or Securities of the same
series and of like tenor, of any authorized denomination as requested by such
Holder, in an aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. APPLICABILITY OF ARTICLE.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of any series except as otherwise specified as
contemplated by Section 301 for such Securities.
The minimum amount of any sinking fund payment provided for by the
terms of any Securities is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of such Securities is herein referred to as an "optional sinking fund
payment". If provided for by the terms of any Securities, the cash amount of
any sinking fund payment may be subject to reduction as provided in Section
1202. Each sinking fund payment shall be applied to the redemption of
Securities as provided for by the terms of such Securities.
SECTION 1202. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.
The Company (1) may deliver Outstanding Securities of a series (other
than any previously called for redemption) and (2) may apply as a credit
Securities of a series which have been converted pursuant to Article Fourteen
of this Indenture or which have been redeemed either at the election of the
Company pursuant to the terms of such Securities or through the application of
permitted optional sinking fund payments pursuant to the terms of such
Securities, in each case in satisfaction of all or any part of any sinking fund
payment with respect to any Securities of such series required to be made
pursuant to the terms of such Securities as and to the extent provided for by
the terms of such Securities; provided that the Securities to be so credited
have not been previously so credited. The Securities to be so credited shall be
received and credited for such purpose by the Trustee at the Redemption Price,
as specified in the Securities so to be
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redeemed, for redemption through operation of the sinking fund and the amount
of such sinking fund payment shall be reduced accordingly.
SECTION 1203. REDEMPTION OF SECURITIES FOR SINKING FUND.
Not less than 60 days prior to each sinking fund payment date for any
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for such
Securities pursuant to the terms of such Securities, the portion thereof, if
any, which is to be satisfied by payment of cash and the portion thereof, if
any, which is to be satisfied by delivering and crediting Securities pursuant
to Section 1202 and will also deliver to the Trustee any Securities to be so
delivered. Not less than 30 nor more than 45 days prior to each such sinking
fund payment date, the Trustee shall select the Securities to be redeemed upon
such sinking fund payment date in the manner specified in Section 1103 and
cause notice of the redemption thereof to be given in the name of and at the
expense of the Company in the manner provided in Section 1104. Such notice
having been duly given, the redemption of such Securities shall be made upon
the terms and in the manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT DEFEASANCE.
If applicable to a particular series of Securities, the Company may
elect, at its option at any time, to have Section 1302 or Section 1303 applied
to any such series of Securities or any Securities of such series, as the case
may be, designated pursuant to Section 301 as being defeasible pursuant to such
Section 1302 or 1303, in accordance with any applicable requirements provided
pursuant to Section 301 and upon compliance with the conditions set
forth below in this Article. Any such election shall be evidenced by a Board
Resolution or in another manner specified as contemplated by Section 301 for
such Securities.
SECTION 1302. DEFEASANCE AND DISCHARGE.
Upon the Company's exercise of its option (if any) to have this
Section applied to any series of Securities or any Securities of such series,
as the case may be, the Company shall be deemed to have been discharged from
its obligations with respect to such Securities as provided in this Section on
and after the date the conditions set forth in Section 1304 are satisfied
(hereinafter called "Defeasance"). For this purpose, such Defeasance means that
the Company shall be deemed to have paid and discharged the entire indebtedness
represented by such Securities and to have satisfied all its other obligations
under such Securities and this Indenture
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insofar as such Securities are concerned (and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging the same), subject
to the following which shall survive until otherwise terminated or discharged
hereunder: (1) the rights of Holders of such Securities to receive, solely from
the trust fund described in Section 1304 and as more fully set forth in such
Section, payments in respect of the principal of and any premium and interest
on such Securities when payments are due, (2) the Company's obligations with
respect to such Securities under Sections 304, 305, 306, 1002 and 1003, (3) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and (4)
this Article. Subject to compliance with this Article, the Company may exercise
its option (if any) to have this Section applied to any applicable Securities
notwithstanding the prior exercise of its option (if any) to have Section 1303
applied to such Securities.
SECTION 1303. COVENANT DEFEASANCE.
Upon the Company's exercise of its option (if any) to have this
Section applied to any applicable series of Securities or any Securities of
such series, as the case may be, (1) the Company shall be released from its
obligations under Section 801, Sections 1005 through 1007, inclusive, and any
covenants provided pursuant to Section 301(18), 901(2) or 901(7) for the
benefit of the Holders of such Securities and (2) the occurrence of any event
specified in Sections 501(4) (with respect to any of Section 801, Sections 1005
through 1007, inclusive, and any such covenants provided pursuant to Section
301(18), 901(2) or 901(7)), 501(5), 501(6) and 501(9) shall be deemed not to be
or result in an Event of Default, in each case with respect to such Securities
as provided in this Section on and after the date the conditions set forth in
Section 1304 are satisfied (hereinafter called "Covenant Defeasance"). For this
purpose, such Covenant Defeasance means that, with respect to such Securities,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such specified Section (to
the extent so specified in the case of Section 501(4)), whether directly or
indirectly by reason of any reference elsewhere herein to any such Section or
by reason of any reference in any such Section to any other provision herein or
in any other document, but the remainder of this Indenture and such Securities
shall be unaffected thereby.
SECTION 1304. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of Section
1302 or Section 1303 to any applicable series of Securities or any Securities
of such series, as the case may be:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 609 and agrees to comply with the
provisions of this Article applicable to it) as trust funds in trust
for the purpose of making the following payments, specifically pledged
as security for, and dedicated solely to, the benefits of the Holders
of such Securities, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled
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payment of principal and interest in respect thereof in
accordance with their terms will provide, not later than one day
before the due date of any payment, money in an amount, or (C) a
combination thereof, in each case sufficient, in the opinion of a
nationally recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay
and discharge, and which shall be applied by the Trustee (or any such
other qualifying trustee) to pay and discharge, the principal of and
any premium and interest on such Securities on their respective Stated
Maturities, in accordance with the terms of this Indenture and such
Securities. As used herein, "U.S. Government Obligation" means (x) any
security which is (i) a direct obligation of the United States of
America for the payment of which the full faith and credit of the
United States of America is pledged or (ii) an obligation of a Person
controlled or supervised by and acting as an agency or instrumentality
of the United States of America the payment of which is
unconditionally guaranteed as a full faith and credit obligation by
the United States of America, which, in either case (i) or (ii), is
not callable or redeemable at the option of the issuer thereof, and
(y) any depositary receipt issued by a bank (as defined in Section
3(a)(2) of the Securities Act) as custodian with respect to any U.S.
Government Obligation which is specified in Clause (x) above and held
by such bank for the account of the holder of such depositary receipt,
or with respect to any specific payment of principal of or interest on
any U.S. Government Obligation which is so specified and held,
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 depositary receipt from any amount received by the custodian
in respect of the U.S. Government Obligation or the specific payment
of principal or interest evidenced by such depositary receipt.
(2) In the event of an election to have Section 1302 apply to
any applicable series of Securities or any Securities of such series,
as the case may be, the Company shall have delivered to the Trustee an
Opinion of Counsel stating that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or
(B) since the date of this instrument, there has been a change in the
applicable Federal income tax law, in either case (A) or (B) to the
effect that, and based thereon such opinion shall confirm that, the
Holder of such Securities will not recognize gain or loss for Federal
income tax purposes as a result of the deposit, Defeasance and
discharge to be effected with respect to such Securities and will be
subject to Federal income tax on the same amount, in the same manner
and at the same time as would be the case if such deposit, Defeasance
and discharge were not to occur.
(3) In the event of an election to have Section 1303 apply to
any applicable series of Securities or any Securities of such series,
as the case may be, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of such Securities
will not recognize gain or loss for Federal income tax purposes as a
result of the deposit and Covenant Defeasance to be effected with
respect to such Securities and will be subject to Federal income tax
on the same amount, in the same manner and at the same times as would
be the case if such deposit and Covenant Defeasance were not to occur.
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(4) The Company shall have delivered to the Trustee an
Officers' Certificate to the effect that neither such Securities nor
any other Securities of the same series, if then listed on any
securities exchange, will be delisted as a result of such deposit.
(5) No event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to such Securities
or any other Securities shall have occurred and be continuing at the
time of such deposit or, with regard to any such event specified in
Sections 501(7) and (8), at any time on or prior to the 91st day after
the date of such deposit (it being understood that this condition
shall not be deemed satisfied until after such 91st day).
(6) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming all Securities are in default within the
meaning of such Act).
(7) Such Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(8) Such Defeasance or Covenant Defeasance shall not result in
the trust arising from such deposit constituting an investment company
within the meaning of the Investment Company Act unless such trust
shall be registered under such Act or exempt from registration
thereunder.
(9) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent with respect to such Defeasance or Covenant
Defeasance have been complied with.
SECTION 1305. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee or other qualifying trustee (solely for purpose of
this Section and Section 1306, the Trustee and any such other trustee are
referred to collectively as the "Trustee") pursuant to Section 1304 in respect
of any Securities shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Securities and this Indenture, to the
payment, either directly or through any such Paying Agent (including the
Company acting as its own Paying Agent) as the Trustee may determine, to the
Holders of such Securities, of all sums due and to become due thereon in
respect of principal and any premium and interest, but money so held in trust
need not be segregated from other funds except to the extent required by law.
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The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1304 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is
for the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1304
with respect to any Securities which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee, are in excess of the amount thereof which
would then be required to be deposited to effect the Defeasance or Covenant
Defeasance, as the case may be, with respect to such Securities.
SECTION 1306. REINSTATEMENT.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been discharged or
released pursuant to Section 1302 or 1303 shall be revived and reinstated as
though no deposit had occurred pursuant to this Article with respect to such
Securities, until such time as the Trustee or Paying Agent is permitted to
apply all money held in trust pursuant to Section 1305 with respect to such
Securities in accordance with this Article; provided, however, that if the
Company makes any payment of principal of or any premium or interest on any
such Security following such reinstatement of its obligations, the Company
shall be subrogated to the rights (if any) of the Holders of such Securities to
receive such payment from the money so held in trust.
ARTICLE FOURTEEN
CONVERSION OF SECURITIES
SECTION 1401. APPLICABILITY; CONVERSION PRIVILEGE AND CONVERSION PRICE.
Securities of any series which are convertible into Common Stock shall
be convertible in accordance with their terms and (except as otherwise
specified as contemplated by Section 301 for Securities of any series) in
accordance with this Article.
Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any Security or any portion of the principal
amount thereof which is an integral multiple of the authorized denomination
thereof may be converted at the principal amount thereof, or of such portion
thereof, into fully paid and nonassessable shares (calculated as to each
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conversion to the nearest 1/100 of a share) of Common Stock, at the conversion
price, determined as hereinafter provided, in effect at the time of conversion.
Such conversion right shall expire at the close of business on the date
specified for Securities of such series. In case a Security or portion thereof
is called for redemption, such conversion right in respect of the Security or
portion so called shall expire at the close of business on the date prior to
the Redemption Date, unless the Company defaults in making the payment due upon
redemption.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "conversion price") shall be the price specified
in relation to Securities of such series pursuant to Section 301. The
conversion price shall be adjusted in certain instances as provided in Section
1404.
SECTION 1402. EXERCISE OF CONVERSION PRIVILEGE.
In order to exercise the conversion privilege, the Holder of any
Security to be converted shall surrender such Security, duly endorsed or
assigned to the Company or in blank, at any office or agency of the Company
maintained for that purpose pursuant to Section 1002, accompanied by written
notice to the Company (which shall be substantially in the form set forth in
Section 203) at such office or agency or, if applicable, by notice in
accordance with the procedure of the Depositary that the Holder elects to
convert such Security or, if less than the entire principal amount thereof is
to be converted, the portion thereof to be converted. Securities surrendered
for conversion during the period from the close of business on any Regular
Record Date next preceding any Interest Payment Date to the opening of business
on such Interest Payment Date shall (except in the case of Securities or
portions thereof which have been called for redemption on a Redemption Date
within such period) be accompanied by payment in New York Clearing House funds
or other funds acceptable to the Company of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of Securities
being surrendered for conversion; provided, however, that a Security
surrendered for conversion on an Interest Payment Date need not be accompanied
by a payment and interest on the principal amount of the Security being
converted will be paid on such Interest Payment Date to the Holder of such
Security on the immediately preceding Record Date. Except as provided in the
Securities and subject to the last paragraph of Section 307, no payment or
adjustment shall be made upon any conversion on account of any interest accrued
on the Securities surrendered for conversion or on account of any dividends on
the Common Stock issued upon conversion.
Securities shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of such Securities for conversion
in accordance with the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person or Persons
entitled to receive the shares of Common Stock issuable upon conversion shall
be treated for all purposes as the record holder or holders of such shares of
Common Stock at such time. As promptly as practicable on or after the
conversion date, the Company shall issue and shall deliver at such office or
agency a certificate or certificates for the
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number of full shares of Common Stock issuable upon conversion, together with
payment in lieu of any fraction of a share, as provided in Section 1403.
In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Security.
SECTION 1403. FRACTIONS OF SHARES.
No fractional shares of Common Stock shall be issued upon conversion
of Securities. If more than one Security shall be surrendered for conversion at
one time by the same Holder, the number of full shares which shall be issuable
upon conversion thereof shall be computed on the basis of the aggregate
principal amount of the Securities (or specified portions thereof) so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of any Security or Securities (or
specified portions thereof), the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the market price
per share of Common Stock (as determined by the Board of Directors or in any
manner prescribed by the Board of Directors) at the close of business on the
day prior to the day of conversion.
SECTION 1404. ADJUSTMENT OF CONVERSION PRICE.
The conversion price shall be subject to adjustment from time to time
as follows:
(1) In case the Company shall pay or make a dividend or other
distribution on its Common Stock, the conversion price in effect at
the opening of business on the day following the date fixed for the
determination of stockholders entitled to receive such dividend or
other distribution shall be reduced by multiplying such conversion
price by a fraction of which (x) the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the
date fixed for such determination and (y) the denominator shall be the
sum of such number of shares and the total number of shares
constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day
following the date fixed for such determination. For the purposes of
this paragraph (1), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip
certificates issued in lieu of shares of Common Stock. The Company
will not pay any dividend or make any distribution on shares of Common
Stock held in the treasury of the Company.
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(2) In case the Company shall issue rights or warrants (which
rights or warrants expire within 45 days and are not available on an
equivalent basis to Holders of the Securities convertible pursuant to
this Article Fourteen upon conversion) to all holders of its Common
Stock entitling them to subscribe for or purchase shares of Common
Stock at a price per share less than the current market price per
share (determined as provided in paragraph (6) of this Section) of the
Common Stock on the date fixed for the determination of stockholders
entitled to receive such rights or warrants, the conversion price in
effect at the opening of business on the day following the date fixed
for such determination shall be reduced by multiplying such conversion
price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common
Stock which the aggregate of the offering price of the total number of
shares of Common Stock so offered for subscription or purchase would
purchase at such current market price and the denominator shall be the
number of shares of Common Stock outstanding at the close of business
on the date fixed for such determination plus the number of shares of
Common Stock so offered for subscription or purchase, such reduction
to become effective immediately after the opening of business on the
day following the date fixed for such determination; provided,
however, that to the extent that shares of Common Stock are not
delivered after the expiration of such rights or warrants, the
conversion price shall be readjusted (but only with respect to
Securities converted after such expiration) to the conversion price
that would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made upon the basis of
delivery of only the number of shares of Common Stock actually issued.
In determining whether any rights or warrants entitle the holders of
Common Stock to subscribe for or purchase shares of Common Stock at
less than fair market value, there shall be taken into account any
consideration received by the Company upon issuance and upon exercise
of such rights or warrants, the value of such consideration, if other
than cash, to be determined by the Board of Directors (whose
determination shall be conclusive and described in a Board
Resolution). For the purposes of this paragraph (2), the number of
shares of Common Stock any time outstanding shall not include shares
held in the treasury of the Company but shall include shares issuable
in respect of scrip certificates issued in lieu of fractions of shares
of Common Stock. The Company will not issue any rights or warrants in
respect of shares of Common Stock held in the treasury of the Company.
(3) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
conversion price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective shall
be proportionately reduced, and, conversely, in case outstanding
shares of Common Stock shall each be combined into a smaller number of
shares of Common Stock, the conversion price in effect at the opening
of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction
or increase, as the case may be, to become effective immediately after
the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
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(4) In case the Company shall, by dividend or otherwise, at
any time distribute Excess Cash to all holders of its Common Stock,
the conversion price shall be reduced so that the same shall equal the
price determined by multiplying the conversion price in effect
immediately prior to the effectiveness of the conversion price
reduction contemplated by this paragraph (4) by a fraction of which
the numerator shall be the current market price per share (determined
as provided in paragraph (6) of this Section) of the Common Stock on
such date less the amount of Excess Cash so distributed applicable to
one share of Common Stock and the denominator shall be such current
market price per share of the Common Stock, such reduction to become
effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders
entitled to receive such cash dividend. "Excess Cash" shall mean any
dividend or distribution (excluding, in all events, any dividend or
distribution described in paragraph (5) of this Section) consisting
exclusively of cash and declared with respect to shares of Common
Stock to the extent such dividend or distribution when added to all
other dividends or distributions on shares of Common Stock consisting
exclusively of cash and made during the immediately preceding 12
months (applicable to one outstanding share of Common Stock) exceeds
15% of the current market price per share of the Common Stock
immediately preceding the date fixed for the determination of
stockholders entitled to receive such cash dividend.
(5) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its
indebtedness or assets or rights or warrants to subscribe for or
purchase any of its securities (including securities, but excluding
any dividend or distribution referred to in paragraph (1) of this
Section, any rights or warrants referred to in paragraph (2) of this
Section, any subdivision or combination referred to in paragraph (3)
of this Section, and any dividend or distribution payable in cash
(other than cash dividends or distributions made out of Excess Cash as
provided in paragraph (4) of this Section, which shall be treated
under such paragraph (4)), the conversion price shall be adjusted so
that the same shall equal the price determined by multiplying the
conversion price in effect immediately prior to the close of business
on the date fixed for the determination of stockholders entitled to
receive such distribution by a fraction of which the numerator shall
be the current market price per share (determined as provided in
paragraph (6) of this Section) of the Common Stock on the date fixed
for such determination less the then fair market value (as determined
by the Board of Directors, whose determination shall be conclusive and
described in a Board Resolution filed with the Trustee) of the portion
of the assets or evidences of indebtedness so distributed applicable
to one share of Common Stock and the denominator shall be such current
market price per share of the Common Stock, such adjustment to become
effective immediately prior to the opening of business on the day
following the date fixed for the determination of stockholders
entitled to receive such distribution. For the purposes of this
paragraph (5), the distribution of a security which is distributed not
only to the holders of the Common Stock on the date fixed for the
distribution of such security, but also is distributed with each share
of Common Stock delivered to a Holder exercising the conversion
privilege subsequent to such distribution date, shall not require an
adjustment
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of the conversion price pursuant to this paragraph (5); provided
that on the date, if any, on which a Holder exercising the
conversion privilege would no longer be entitled to receive such
security with a share of Common Stock (other than as a result of the
termination of all such securities), a distribution of such securities
shall be deemed to have occurred and the conversion price shall
be adjusted as provided in this paragraph (5) (and such day shall be
deemed to be "the date fixed for the determination of the stockholders
entitled to receive such distribution," and "the date fixed for such
determination" within the meaning of the immediately preceding
sentence).
(6) For the purpose of any computation under paragraphs (2),
(4) and (5) of this Section, the current market price per share of
Common Stock on any date shall be deemed to be the average of the
daily closing prices for the five consecutive Business Days selected
by the Company commencing not more than 20 Business Days before, and
ending not later than, the earlier of the day in question and the day
before the "ex" date with respect to the issuance or distribution
requiring such computation. The closing price for each day shall be
the last reported sales price regular way or, in case no such reported
sale takes place on such day, the average of the reported closing bid
and asked prices regular way, in either case on the New York Stock
Exchange or, if the Common Stock is not listed or admitted to trading
on such Exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on
the National Association of Securities Dealers Automated Quotations
National Market System or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or quoted on
such National Market System, the average of the closing bid and asked
prices in the over-the-counter market as furnished by any New York
Stock Exchange member firm selected from time to time by the Company
for that purpose. For purposes of this paragraph, the term "'ex'
date", when used with respect to any issuance or distribution, means
the first date on which the Common Stock trades in a regular way on
such exchange or in such market without the right to receive such
issuance or distribution.
(7) The Company may make such reductions in the conversion
price, in addition to those required by paragraphs (1) through (5) of
this Section, as it considers to be advisable in order that any event
treated for Federal income tax purposes as a dividend of stock or
stock rights shall not be taxable to the recipients.
(8) Notwithstanding any provision of this Indenture to the
contrary, no adjustment in the conversion price shall be required
unless such adjustment would require an increase or decrease of at
least one percent in such price; provided, however, that any
adjustments which by reason of this paragraph (8) are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Article shall be
made to the nearest cent or to the nearest one-hundredth of a share,
as the case may be.
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(9) The Company from time to time (by action of the Board of
Directors) may decrease the conversion price by any amount for any
period of time if the period is at least twenty days, the decrease is
irrevocable during the period and the Board of Directors in its sole
discretion shall have made a determination that such decrease would be
in the best interests of the Company, which determination shall be
conclusive and evidenced by a Board Resolution filed with the Trustee.
Whenever the conversion price is decreased pursuant to the preceding
sentence, the Company shall mail to holders of record of the
Securities a notice of the decrease at least fifteen days prior to the
date such decrease takes effect, and such notice shall state the
decreased conversion price and the period it will be in effect.
(10) Notwithstanding any provision of this Indenture to the
contrary, no adjustment in the conversion price will be made for the
issuance of shares of capital stock to directors, employees or
independent contractors pursuant to the Company's or any of its
Subsidiaries' stock option, stock ownership or other benefit plans or
arrangements or trusts related thereto or for issuance of any Common
Stock pursuant to any plan providing for the reinvestment of dividends
or interest payable on securities of the Company and the investment of
additional optional amounts in Common Stock under such plan.
(11) If the Company shall take any action affecting the Common
Stock, other than action described in this Section 1404, that in the
sole discretion of the Board of Directors would materially adversely
affect the conversion rights of the holders of the Securities, the
Company may, but shall not be obligated to, adjust the conversion
price for the Securities, to the extent permitted by law, in such
manner, and at such time, as the Board of Directors, in its sole
discretion, may determine to be equitable in the circumstances.
SECTION 1405. NOTICE OF ADJUSTMENTS OF CONVERSION PRICE.
Whenever the conversion price is adjusted as herein provided:
(a) the Company shall compute the adjusted conversion price in
accordance with Section 1404 and shall prepare a certificate signed by
the Treasurer or Director of Treasury of the Company setting forth the
adjusted conversion price and showing in reasonable detail the facts
upon which such adjustment is based, and such certificate shall
forthwith be filed at the Corporate Trust Office of the Trustee and at
each office or agency maintained for the purpose of conversion of
Securities pursuant to Section 1002; and
(b) a notice stating that the conversion price has been
adjusted and setting forth the adjusted conversion price shall
forthwith be required, and as soon as practicable after it is
required, such notice shall be mailed by the Company to all Holders at
their last addresses as they shall appear in the Security Register.
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SECTION 1406. NOTICE OF CERTAIN CORPORATE ACTION.
In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out
of its retained earnings; or
(b) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock: of any class or of any other rights; or
(c) the Company shall declare a dividend out of Excess Cash; or
(d) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding shares of
Common Stock), or of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company
is required, or of the sale or transfer of all or substantially all of
the assets of the Company; or
(e) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company;
then the Company shall cause to be filed at the Corporate Trust Office of the
Trustee and at each office or agency maintained for the purpose of conversion
of Securities pursuant to Section 1002, and shall cause to be mailed to all
Holders at their last addresses as they shall appear in the Security Register,
at least 15 days (or 10 days in any case specified in clause (a) or (b) above)
prior to the applicable record, effective or expiration date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, rights or warrants, or, if a record
is not to be taken, the date as of which the holders of Common Stock of record
to be entitled to such dividend, distribution, rights or warrants are to be
determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of
Common Stock of record shall bc entitled to exchange their Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up.
Neither the failure to give any such notice nor any defect therein shall affect
the legality or validity of any action described in clause (a) through (e) of
this Section 1406.
SECTION 1407. COMPANY TO RESERVE SHARES
The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, for the
purpose of effecting the conversion of
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Securities, the full number of shares of Common Stock then issuable upon the
conversion of all Outstanding Securities.
SECTION 1408. TAXES ON CONVERSIONS.
The Company will pay any and all taxes that may be payable in respect
of the issue or delivery of Common Stock on conversion of Securities pursuant
hereto. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of Common
Stock in a name other than that of the Holder of the Security or Securities to
be converted, and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Company the amount of any such
tax, or has established to the satisfaction of the Company that such tax has
been paid.
SECTION 1409. COVENANT AS TO SHARES.
The Company covenants that all Common Stock which may be issued upon
conversion of Securities will upon issue be fully paid and nonassessable.
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SECTION 1410. CANCELLATION OF CONVERTED SECURITIES.
All Securities delivered for conversion shall be delivered to the
Trustee to be canceled by or at the direction of the Trustee, which shall
dispose of the same as provided in Section 309.
SECTION 1411. PROVISIONS IN CASE OF RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE OF ASSETS.
In case of any capital reorganization or reclassification of the
capital stock of the Company (other than solely a change in par value, or from
par value to no par value) or any consolidation of the Company with, or merger
of the Company into, any other Person, any merger of another Person into the
Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding Common Stock or preferred
shares of beneficial interest of the Company) or any sale or transfer of all or
substantially all of the assets of the Company, the Holder of each Security
then outstanding shall have the right thereafter, during the period such
Security shall be convertible as specified in Section 1401, to convert such
Security only into the kind and amount of securities, cash and other property
receivable upon such reorganization, recapitalization, consolidation, merger,
sale or transfer by a holder of the number of shares of Common Stock into which
such Security might have been converted immediately prior to such
reorganization, consolidation, merger, sale or transfer, assuming such holder
of Common Stock (i) is not a Person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such sale
or transfer was made, as the case may be ("constituent Person"), or an
Affiliate of a constituent Person and (ii) failed to exercise his rights of
election, if any, as to the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer (provided
that if the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer is not the same for each
share of Common Stock held immediately prior to such consolidation, merger,
sale or transfer by others than a constituent Person or an Affiliate thereof
and in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this Section the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). The Company shall not effect any consolidation, merger,
sale or transfer unless, prior to or simultaneously with the consummation
thereof the Person formed by such consolidation or resulting from such merger
or which acquires such assets, as the case may be, shall execute and deliver to
the Trustee a supplemental indenture pursuant to which such Person assumes the
obligation to deliver to the Holder of each Security such securities, cash and
other property as such Holder may be entitled to in accordance with the
provisions of this Section 1411. Such supplemental indenture shall provide for
adjustments which, for events subsequent to the effective date of such
supplemental indenture, shall be as nearly equivalent as may be practicable to
the adjustments provided for in this Article. The Trustee shall not be under
any responsibility to determine the correctness of any provision contained in
such supplemental indenture relating to either the kind or amount of shares of
stock or securities or
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cash or property receivable by Holders upon the conversion of their Securities
after any such consolidation, merger, sale or transfer. The above provisions of
this Section shall similarly apply to successive consolidations, mergers, sales
or transfers.
SECTION 1412. RESPONSIBILITY OF TRUSTEE AND CONVERSION AGENT.
Neither the Trustee nor any agent appointed to effect conversions
shall at any time be under any duty or responsibility to any Holder of
Securities to determine whether any facts exist which may require any
adjustment of the conversion price, or with respect to the nature or extent of
any such adjustment when made, or with respect to the method employed, or
herein or in any supplemental indenture provided to be employed, in making the
same. Neither the Trustee nor any such conversion agent shall be accountable
with respect to the validity or value (or the kind or amount) of any Common
Stock or of any securities or property which may at any time be issued or
delivered upon the conversion of any Security; and neither the Trustee nor any
such conversion agent makes any representation with respect thereto. Neither
the Trustee nor any such conversion agent shall be responsible for any failure
of the Company to issue, transfer or deliver any shares of Common Stock or
stock certificates or other securities or property or to make any cash payment
upon the delivery of any Security for the purpose of conversion or to comply
with any of the covenants contained in this Article.
ARTICLE FIFTEEN
SUBORDINATION OF SECURITIES
SECTION 1501. SECURITIES SUBORDINATE TO SENIOR DEBT.
The Company covenants and agrees, and each Holder of a Security, by
his acceptance thereof, likewise covenants and agrees, that, to the extent and
in the manner hereinafter set forth in this Article, the indebtedness
represented by the Securities and the payment of the principal of (and premium,
of any) and interest on each and all of the Securities are hereby expressly
made subordinate and subject in right of payment to the prior payment in full
of all Senior Debt.
SECTION 1502. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, or (b) any liquidation, dissolution or
other winding up of the Company, whether voluntary or involuntary and whether
or not involving insolvency or bankruptcy, or (c) any assignment for the
benefit of creditors or any other marshalling of assets and liabilities of the
Company, then and in any such event the holders of
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Senior Debt shall be entitled to receive payment in full of all amounts due or
to become due on or in respect of all Senior Debt, or provision shall be made
for such payment in cash, before the Holders of the Securities are entitled to
receive any payment on account of principal of (or premium, if any) or interest
on the Securities, and to that end the holders of Senior Debt shall be entitled
to receive, for application to the payment thereof, any payment or distribution
of any kind or character, whether in cash, property or securities, including
any such payment or distribution which may be payable or deliverable by reason
of the payment of any other indebtedness of the Company being subordinated to
the payment of the Securities, which may be payable or deliverable in respect
of the Securities in any such case, proceeding, dissolution, liquidation or
other winding up event.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any such payment or
distribution which may be payable or deliverable by reason of the payment of
any other indebtedness of the Company being subordinated to the payment of the
Securities, before all Senior Debt is paid in full or payment thereof provided
for, and if such fact shall, at or prior to the time of such payment or
distribution, have been made known to the Trustee or, as the case may be, such
Holder, then and in such event such payment or distribution shall be paid over
or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay all Senior Debt in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt. Any taxes that have been withheld or deducted from
any payment or distribution in respect of the Securities, or any taxes that
ought to have been withheld or deducted from any such payment or distribution
that have been remitted to the relevant taxing authority, shall not be
considered to be an amount that the Trustee or the Holder of any Security
received for purposes of this Section.
For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment which are
subordinated in right of payment to all Senior Debt which may at the time be
outstanding to substantially the same extent as, or to a greater extent than,
the Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the
conveyance or transfer of its properties and assets substantially as an
entirety to another Person upon the terms and conditions set forth in Article
Eight shall not be deemed a dissolution, winding up, liquidation,
reorganization, assignment for the benefit of creditors or marshalling of
assets and liability of the Company for the purposes of this Section if the
Person formed by such consolidation or into which the Company is merged or the
Person which acquires by conveyance or transfer such properties and assets
substantially as an entirety, as the case may be, shall, as a part of such
consolidation, merger, conveyance or transfer, comply with the conditions set
forth in Article Eight.
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SECTION 1503. PRIOR PAYMENT TO SENIOR DEBT UPON ACCELERATION OF SECURITIES.
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of Senior Debt shall
be entitled to receive payment in full of all amounts due or to become due on
or in respect of all Senior Debt or provision shall be made for such payment in
cash, before the Holders of the Securities are entitled to receive any payment
(including any payment which may be payable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of the
Securities) by the Company on account of the principal of (or premium, if any)
or interest on the Securities or on account of the purchase or other
acquisition of Securities; provided, however, that nothing in this Section
shall prevent the satisfaction of any sinking fund payment in accordance with
Article Twelve by delivering and crediting pursuant to Section 1202 Securities
which have been acquired (upon redemption or otherwise) or which have been
converted pursuant to Article 14 prior to such declaration of acceleration.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to
the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 1402 would be applicable.
SECTION 1504. NO PAYMENT WHEN SENIOR DEBT IN DEFAULT.
In the event and during the continuation of any default in the payment
of principal of (or premium, if any) or interest on any Senior Debt beyond any
applicable grace period with respect thereto, or in the event that any event of
default with respect to any Senior Debt shall have occurred and be continuing
permitting the holders of such Senior Debt (or a trustee on behalf of the
holders thereof) to declare such Senior Debt due and payable prior to the date
on which it would otherwise have become due and payable, unless and until such
event of default shall have been cured or waived or shall have ceased to exist
and such acceleration shall have been rescinded or annulled, or (b) in the
event any judicial proceeding shall be pending with respect to any such default
in payment or event of default, then no payment (including any payment which
may be payable by reason of the payment of any other indebtedness of the
Company being subordinated to the payment of the Securities) shall be made by
the Company on account of principal of (or premium, if any) or interest on the
Securities or on account of the purchase or other acquisition of Securities;
provided, however, that nothing in this Section shall prevent the satisfaction
of any sinking fund payment in accordance with Article Twelve by delivering and
crediting pursuant to Section 1202 Securities which have been acquired (upon
redemption or otherwise) or which have been converted pursuant to Article 14
prior to such default in payment or event of default.
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In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to
the time of such payment, have been made known to the Trustee or, as the case
may be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 1402 would be applicable.
SECTION 1505. PAYMENT PERMITTED IN CERTAIN SITUATIONS.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time except during
the pendency of any case, proceeding, dissolution, liquidation or other winding
up, assignment for the benefit of creditors or other marshalling of assets and
liabilities of the Company referred to in Section 1502 or under the conditions
described in Section 1503 or 1504, from making payments at any time of
principal of (and premium, if any) or interest on the Securities, or (b) the
application by the Trustee of any money deposited with it hereunder to the
payment of or on account of the principal of (and premium, if any) or interest
on the Securities or the retention of such payment by the holders, if, at the
time of such application by the Trustee, it did not have knowledge that such
payment would have been prohibited by the provisions of this Article.
SECTION 1506. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT.
Subject to the payment in full of all Senior Debt or the provision for
such payment in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Debt, the Holders of the Securities shall be
subrogated to the extent of the payments or distributions made to the holders
of such Senior Debt pursuant to the provisions of this Article (equally and
ratably with the holders of indebtedness of the Company which by its express
terms is subordinated to indebtedness of the Company to substantially the same
extent as the Securities are subordinated to the Senior Debt and is entitled to
like rights of subrogation) to the rights of the holders of such Senior Debt to
receive payments and distributions of cash, property and securities applicable
to the Senior Debt until the principal of (and premium, if any) and interest on
the Senior Debt shall be paid in full. For purposes of such subrogation, no
payments or distributions to the holders of the Senior Debt of any cash,
property or securities to which the Holders of the Securities or the Trustee
would be entitled except for the provisions of this Article, and no payments
over pursuant to the provisions of this Article to the holders of Senior
Debt by Holders of the Securities or the Trustee, shall, as among the Company,
its creditors other than holders of Senior Debt and the Holders of the
Securities, be deemed to be a payment or distribution by the Company to or on
account of the Senior Debt.
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SECTION 1507. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Debt on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (a) impair, as among the Company, its creditors other than holders of
Senior Debt and the Holders of the Securities, the obligation of the Company,
which is absolute and unconditional (and which, subject to the rights under
this Article of the holders of Senior Debt, is intended to rank equally with
all other general obligations of the Company), to pay to the Holders of the
Securities the principal of (and premium, if any) and interest on the
Securities as and when the same shall become due and payable in accordance with
their terms; or (b) affect the relative rights against the Company of the
Holders of the Securities and creditors of the Company other than the holders
of Senior Debt; or (c) prevent the Trustee or the Holder of any Security from
exercising all remedies otherwise permitted by applicable law upon default
under this Indenture, subject to the rights, if any, under this Article of the
holders of Senior Debt to receive cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder.
SECTION 1508. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1509. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holders of any Senior Debt to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior Debt do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt or otherwise
amend or supplement in any manner Senior Debt or any instrument evidencing the
same or any agreement under which Senior Debt
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is outstanding; (ii) sell, exchange, release or otherwise deal with any
property pledged, mortgaged or otherwise securing Senior Debt; (iii) release
any Person liable in any manner for the collection of Senior Debt; and (iv)
exercise or refrain from exercising any rights against the Company and any
other Person.
SECTION 1510. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment to or
by the Trustee in respect of the Securities. Notwithstanding the provisions of
this Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Debt or from any trustee therefor; and, prior to
the receipt of any such written notice, the Trustee, subject to the provisions
of Section 601, shall be entitled in all respects to assume that no such facts
exist.
Subject to the provisions of Section 601, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Debt (or a trustee therefor) to
establish that such notice has been given by a holder of Senior Debt (or a
trustee therefor). In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a
holder of Senior Debt to participate in any payment or distribution pursuant to
this Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Debt held by
such Person, the extent to which such Person is entitled to participate in such
payment or distribution and any other facts pertinent to the rights of such
Person under this Article, and if such evidence is not furnished, the Trustee
may defer any payment to such Person pending judicial determination as to the
right of such Person to receive such payment.
SECTION 1511. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Section 601, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Debt and other indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts paid or
distributed thereon and all other facts pertinent thereto or to this Article.
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SECTION 1512. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt and shall not be liable to any such holders or creditors
if it shall in good faith pay over or distribute to Holders of Securities or to
the Company or to any other Person cash, property or securities to which any
holders of Senior Debt shall be entitled by virtue of this Article or
otherwise.
SECTION 1513. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT; PRESERVATION OF
TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it, to the same extent as any other holder of Senior Debt
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607.
SECTION 1514. ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1413 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 1515. CERTAIN CONVERSIONS DEEMED PAYMENT.
For the purposes of this Article only, (1) the issuance and delivery
of Common Stock upon conversion of Securities in accordance with Article
Fourteen shall not be deemed to constitute a payment or distribution on account
of the principal of or premium or interest on Securities or on account of the
purchase or other acquisition of Securities, and (2) the payment, issuance or
delivery of cash, property or securities (other than Common Stock) upon
conversion of a Security shall be deemed to constitute payment on account of
the principal of such Security. Nothing contained in this Article or elsewhere
in this Indenture or in the Securities is intended to or shall impair, as among
the Company, its creditors other than holders of Senior Debt and the Holders of
the Securities, the right, which is absolute and unconditional, of the Holder
of any Security to convert such Security in accordance with Article Fourteen.
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EXHIBIT 4.6
---------------------------------------------------------------------------
CAPSTONE CAPITAL CORPORATION
TO
AMSOUTH BANK OF ALABAMA, Trustee
____________________
First Supplemental Indenture
Dated as of March 14, 1997
$65,000,000 Aggregate Principal Amount
of 6.55% Convertible Subordinated Debentures
due 2002
____________________
SUBORDINATED DEBT SECURITIES
---------------------------------------------------------------------------
<PAGE> 2
FIRST SUPPLEMENTAL INDENTURE, dated as of March 14, 1997 (the "First
Supplemental Indenture"), between CAPSTONE CAPITAL CORPORATION, a corporation
duly organized and existing under the laws of the State of Maryland (herein
called the "Company"), having its principal office at 1000 Urban Center Drive,
Suite 630, Birmingham, Alabama 35242, and AMSOUTH BANK OF ALABAMA, an Alabama
banking corporation, as Trustee (herein called the "Trustee").
WHEREAS, the Company has executed and delivered the Indenture dated as
of March 14, 1997 (the "Base Indenture") to the Trustee to provide for the
future issuance of the Company's unsecured subordinated debentures, notes or
other evidences of indebtedness (the "Securities"), to be issued from time to
time in one or more series as might be determined by the Company under the Base
Indenture, as may thereafter be supplemented;
WHEREAS, pursuant to the terms of the Base Indenture, the Company
desires to provide for the establishment of a new series of its Securities to
be known as its 6.55% Convertible Subordinated Debentures due 2002 (the
"Debentures"), the terms, provisions and conditions of such Debentures and the
form thereof to be set forth as provided in the Base Indenture as supplemented
by this First Supplemental Indenture;
WHEREAS, Section 901 of the Base Indenture provides, among other
things, that the Company and the Trustee may enter into indentures supplemental
to the Base Indenture without the consent of holders of Securities for, among
other things, the purpose of establishing the forms and terms of securities of
any series as permitted by Sections 201 and 301 thereof and to add to, change
or eliminate any of the provisions of the Base Indenture in respect of one or
more series of Securities to be issued thereunder; and
WHEREAS, all things necessary to make the Debentures, when executed by
the Company and authenticated and delivered by the Trustee, the valid and
binding obligations of the Company and to make this First Supplemental
Indenture a valid and binding supplemental indenture and agreement according to
its terms, have been done;
NOW THEREFORE, in consideration of the purchase and acceptance of the
Debentures by the holders thereof, and for the purpose of setting forth the
terms, provisions and conditions of the Debentures and the form thereof, the
Company covenants and agrees with the Trustee as follows:
<PAGE> 3
ARTICLE ONE
DEFINITIONS
SECTION 101. DEFINITION OF TERMS.
Unless the context otherwise requires:
(a) references herein to the Indenture shall mean the Base
Indenture as supplemented by this First Supplemental Indenture;
(b) a term defined in the Base Indenture has the same meaning when
used in this First Supplemental Indenture unless otherwise defined herein (in
which case the definition set forth herein shall govern);
(c) a term defined anywhere in this First Supplemental Indenture
has the same meaning throughout;
(d) the singular includes the plural and vice versa; and
(e) headings are for convenience of reference only and do not
affect interpretation.
"Accreted Value" with respect to a Debenture in connection with a
Change of Control means the Issue Price of such Debenture plus accrued Original
Issue Discount on such Debenture to the date of such Change of Control.
"Base Indenture" has the meaning set forth in the recitals above.
"Blockage Period" has the meaning specified in Section 904 hereof.
"Blockage Termination Event" has the meaning specified in Section 904
hereof.
"Change of Control" has the meaning specified in Section 706 hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the Person named as the "Company" in the first
paragraph of this First Supplemental Indenture until a successor Person shall
have become such pursuant to the applicable provisions of the Indenture, and
thereafter "Company" shall mean such successor Person.
"Conversion Rate" has the meaning specified in Section 501 hereof.
"Debentures" has the meaning set forth in the recitals above.
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<PAGE> 4
"Events of Default" with respect to the Debentures has the meaning
specified in Section 801 hereof.
"First Supplemental Indenture" has the meaning set forth in the
recitals above.
"Indenture" means the Base Indenture as supplemented by this First
Supplemental Indenture, as the same may from time to time be supplemented or
amended by one or more supplemental indentures thereto, including for all
purposes, the provisions of the Trust Indenture Act deemed to be a part
thereof.
"Interest Payment Date" means the Stated Maturity of an installment of
interest on the Debentures.
"Issue Price" means $903.00 per $1,000 principal amount of Debentures,
which represents Original Issue Discount of 9.70% from the principal amount
thereof payable at its Stated Maturity.
"Original Issue Discount" means $97.00 per $1,000 principal amount of
Debentures, representing the excess of the principal amount per Debenture
payable at its Stated Maturity over the Issue Price per Debenture.
"Regular Record Date," for the interest payable on any Interest Payment
Date, means the February 28 or August 31 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"REIT" means a real estate investment trust under Section 856 through
859 of the Code.
"Repurchase Event" has the meaning specified in Section 706 hereof.
"Repurchase Price" has the meaning specified in Section 701 hereof.
"Repurchase Date" has the meaning specified in Section 701 hereof.
"Securities" has the meaning set forth in the recitals above.
"Senior Non-Payment Default" has the meaning specified in Section 904
hereof.
"Senior Payment Default" has the meaning specified in Section 904
hereof.
"Trustee" means the Person named as "Trustee" in the first paragraph of
this First Supplemental Indenture until a successor Trustee with respect to the
Debentures shall have become such pursuant to the applicable provisions of the
Indenture, and thereafter "Trustee" shall mean such successor Person.
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<PAGE> 5
"Yield to Maturity" means 9.00% per annum.
Certain terms used in Article Five hereof are defined therein.
ARTICLE TWO
THE DEBENTURES
SECTION 201. TITLE AND TERMS.
The aggregate principal amount of Debentures which may be authenticated
and delivered under the Indenture is limited to $74,750,000 (including
$9,750,000 aggregate principal amount of Debentures that may be sold to the
Underwriters by the Company upon exercise of the over-allotment option granted
pursuant to the Underwriting Agreement dated March 10, 1997 between the Company
and the Underwriters referred to therein), except for Debentures authenticated
and delivered upon registration of transfer of, or in exchange for, or in lieu
of, other Debentures pursuant to Section 304, 305, 306 or 906 of the Base
Indenture or Section 608 of this First Supplemental Indenture and except for
any Debentures which, pursuant to Section 303 of the Base Indenture, are deemed
never to have been authenticated and delivered under the Indenture.
The Debentures shall be known and designated as the "6.55% Convertible
Subordinated Debentures due 2002" of the Company. The Stated Maturity of the
Debentures shall be March 14, 2002 and the Debentures (including Debentures
issued upon any exercise of the over-allotment option referred to in the
immediately preceding paragraph) shall bear interest at the rate of 6.55% per
annum, from the date of original issuance of Debentures pursuant to the
Indenture or from the most recent Interest Payment Date to which interest has
been paid or duly provided for, as the case may be, payable semi-annually on
March 14 and September 14, commencing September 14, 1997, until the principal
thereof is paid or made available for payment. The Debentures are Original
Issue Discount Securities within the meaning of the Indenture and will be
issued at an Original Issue Discount (the excess of the principal amount of the
Debentures payable at their Stated Maturity over the Issue Price) of 9.70% from
the principal amount thereof payable at Stated Maturity. The rate of interest
on the Debentures and accrual of such Original Issue Discount represent a Yield
to Maturity, compounded semi-annually, of 9.00% per annum. Each Debenture
shall be dated the date of its authentication, except that Debentures issued
upon any exercise of the over-allotment option referred to in the immediately
preceding paragraph shall be dated the date which is the same as the date of
original issuance of Debentures pursuant to the Indenture (notwithstanding
anything to the contrary provided for in Section 303 of the Base Indenture).
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<PAGE> 6
The principal of and premium, if any, and interest on the Debentures
shall be payable, and the conversion and transfer of Debentures may be
registered, at the office or agency of the Company or the Trustee maintained
for that purpose in New York, New York and at any other office or agency
maintained by the Company or the Trustee for such purpose. Principal of and
premium, if any, and interest on Debentures which are Global Securities held of
record by the Depositary or its nominee will be payable in same day funds.
The Debentures shall be subject to the ownership and transfer
restrictions set forth in Article Four hereof.
The Debentures shall be convertible as provided in Article Five hereof
(and such Article Five shall supersede Article Fourteen of the Base Indenture
with respect to the Debentures).
The Debentures shall be redeemable at the option of the Company as
provided in Article Six hereof (and such Article Six shall supersede Article
Eleven of the Base Indenture with respect to the Debentures).
The Debentures shall be subject to repurchase at the option of the
Holder as provided in Article Seven hereof.
The Debentures shall be subordinated in right of payment to Senior Debt
as provided in Article Nine hereof (and such Article Nine shall supersede
Article Fifteen of the Base Indenture with respect to the Debentures).
The Debentures shall not be subject to the defeasance provisions of
Article Thirteen of the Base Indenture.
The Debentures shall not be subject to any sinking fund.
Remedies with respect to the Debentures shall be as provided in Article
Eight hereof (and such Article Eight shall supersede Article Five of the Base
Indenture with respect to the Debentures).
The Debentures shall be substantially in the form provided for by
Article Three hereof.
The last paragraph of Section 307 of the Base Indenture
notwithstanding, in the case of any Debenture which is converted after any
Regular Record Date and on or prior to the next succeeding Interest Payment
Date (other than any Debenture whose Maturity is prior to such Interest Payment
Date), interest whose Stated Maturity is on such Interest Payment Date shall be
payable on such Interest Payment Date notwithstanding such conversion, and such
interest (whether or not punctually paid or duly provided for) shall be paid to
the Person in whose name that Debenture (or one or
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<PAGE> 7
more Predecessor Debentures) is registered at the close of business on such
Regular Record Date, provided, however, that Debentures so surrendered for
conversion (except Debentures or portions thereof called for redemption) shall
be accompanied by payment in New York Clearing House funds or other funds
acceptable to the Company of an amount equal to the interest payable on such
Interest Payment Date on the principal amount being surrendered for conversion.
Except as otherwise expressly provided in the immediately preceding sentence,
in the case of any Debenture which is converted, interest whose Stated Maturity
is after the date of conversion of such Debenture shall not be payable.
Any reference in the Base Indenture to any Section or Article therein
which is superseded by any Section or Article contained in this First
Supplemental Indenture shall be deemed to refer to such superseding Section or
Article contained in this First Supplemental Indenture, to the extent
applicable.
ARTICLE THREE
FORM OF DEBENTURES
SECTION 301. FORM GENERALLY.
The Debentures shall be in substantially the form set forth in this
Article, with such appropriate insertions, omissions, substitutions and other
variations as are required or permitted by the Indenture, and may have such
letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or depositary therefor or as may, consistently herewith, be
determined by the officers executing such Debentures, as evidenced by their
execution thereof.
SECTION 302. FORM OF FACE OF DEBENTURE.
CAPSTONE CAPITAL CORPORATION
6.55% Convertible Subordinated Debentures due 2002
No. _____________ $______________
CUSIP No.______________
CAPSTONE CAPITAL CORPORATION, a corporation duly organized and existing
under the laws of the State of Maryland (herein called the "Company," which
term includes any successor Person under the Indenture hereinafter referred
to), for value received, hereby promises to pay to ___________________________,
or registered assigns, the principal sum of _______________________________
Dollars on March 14,
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<PAGE> 8
2002, and to pay interest thereon from the date of issue or the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually on March 14 and September 14 in each year, commencing
September 14, 1997, at the rate of 6.55% per annum, until the principal hereof
is paid or made available for payment. The interest so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in
the Indenture, be paid to the Person in whose name this Debenture (or one or
more Predecessor Debentures) is registered at the close of business on the
Regular Record Date for such interest, which shall be the February 28 or August
31 (whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Debenture
(or one or more Predecessor Debentures) is registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest to be fixed
by the Trustee, notice whereof shall be given to Holders of Debentures of this
series not less than 10 days prior to such Special Record Date, or be paid at
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Debentures may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in said
Indenture.
Payment of the principal of and premium, if any, and interest on this
Debenture will be payable, and the conversion and transfer of this Debenture
may be registered, at the office or agency of the Company or the Trustee
maintained for that purpose in New York, New York and at any other office or
agency maintained by the Company or the Trustee for such purpose. Principal of
and premium, if any, and interest on Debentures which are Global Securities and
are held of record by the Depositary or its nominee will be payable in same day
funds. Interest shall be computed on the basis of a 360-day year of twelve
30-day months.
Reference is hereby made to the further provisions of this Debenture
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
No stockholder, director, officer, employee or incorporator, as such,
past, present or future, of the Company or any successor corporation shall have
any liability for any obligation of the Company under the Indenture or for any
claim based on, in respect of or by reason of, such obligations or their
creation. Each Holder of a Debenture by accepting such Debenture waives and
releases all such liability. This waiver and release are part of the
consideration for the issuance of the Debentures.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this
Debenture shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
7
<PAGE> 9
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
CAPSTONE CAPITAL CORPORATION
By__________________________
Attest:
_____________________________
SECTION 303. FORM OF REVERSE OF DEBENTURE.
IF NECESSARY TO EFFECT COMPLIANCE BY THE COMPANY WITH CERTAIN PROVISIONS OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), THE TRANSFER OF
OWNERSHIP OF THE DEBENTURES REPRESENTED BY THIS CERTIFICATE AND THE CONVERSION
OF SUCH DEBENTURES INTO SHARES OF COMMON STOCK OF THE COMPANY MAY BE PROHIBITED
UPON THE TERMS AND CONDITIONS SET FORTH BELOW AND IN THE INDENTURE AND THE
ARTICLES OF INCORPORATION AND BYLAWS OF THE COMPANY. THE COMPANY WILL FURNISH
A COPY OF SUCH TERMS AND CONDITIONS TO THE REGISTERED HOLDER OF THIS
CERTIFICATE UPON REQUEST AND WITHOUT CHARGE. TO ENABLE THE COMPANY TO ENSURE
THAT IT COMPLIES WITH THE PROVISIONS OF THE CODE, THE HOLDER OF THE DEBENTURES
REPRESENTED BY THIS CERTIFICATE AND ANY PROPOSED TRANSFEREE OF SUCH HOLDER
SHALL UPON DEMAND DISCLOSE TO THE COMPANY IN WRITING SUCH INFORMATION AS THE
COMPANY MAY DEEM NECESSARY FOR SUCH PURPOSES.
This Debenture is one of a duly authorized issue of Debentures of the
Company designated as its 6.55% Convertible Subordinated Debentures due 2002
(herein called the "Debentures"), limited in aggregate principal amount to
$74,750,000 (including Debentures issuable pursuant to the Underwriters'
over-allotment option provided for in the Underwriting Agreement dated March
10, 1997 between the Company and the Underwriters referred to therein), issued
and to be issued under an Indenture, dated as of March 14, 1997 (as
supplemented by the First Supplemental Indenture thereto dated as of March 14,
1997, herein called the "Indenture"), between the Company and AmSouth Bank of
Alabama, as trustee (herein called the "Trustee," which term includes
8
<PAGE> 10
any successor trustee under the Indenture), and reference is hereby made to the
Indenture and all indentures supplemental thereto for a statement of the
respective rights, limitations of rights, duties and immunities thereunder of
the Company, the Trustee and the Holders of the Debentures and of the terms
upon which the Debentures are, and are to be, authenticated and delivered.
Subject to and upon compliance with the provisions of the Indenture,
the Holder of this Debenture is entitled, at his option, at any time on or
before the close of business on March 14, 2002, or in case this Debenture or a
portion hereof is called for redemption, then in respect of this Debenture or
such portion hereof until and including, but (unless the Company defaults in
making the payment due upon redemption) not after, the close of business on the
Business Day preceding the Redemption Date, to convert this Debenture (or any
portion of the principal amount hereof which is $1,000 or an integral multiple
thereof), at the principal amount hereof (or any portion of the principal
amount hereof which is $1,000 or an integral multiple thereof) into fully paid
and non-assessable shares (calculated as to each conversion to the nearest
1/100 of a share) of Common Stock of the Company at a Conversion Rate of
39.4754 shares of Common Stock for each $1,000 principal amount of Debentures
converted (or at the current adjusted Conversion Rate if an adjustment has been
made as provided in the Indenture) by surrender of this Debenture, duly
endorsed or assigned to the Company or in blank, to the Company at the office
or agency of the Company or the Trustee maintained for such purpose in New
York, New York, accompanied by written notice to the Company that the Holder
hereof elects to convert this Debenture, or if less than the entire principal
amount hereof is to be converted,the portion hereof to be converted and, in
case such surrender shall be made during the period from the close of business
on any Regular Record Date next preceding any Interest Payment Date to the
close of business on such Interest Payment Date (unless this Debenture or the
portion thereof being converted has been called for redemption), also
accompanied by payment in New York Clearing House funds or other funds
acceptable to the Company of an amount equal to the interest payable on such
Interest Payment Date on the principal amount of this Debenture then being
converted. Subject to the aforesaid requirement for payment and, in the case
of a conversion after the Regular Record Date next preceding any Interest
Payment Date and on or before such Interest Payment Date, to the right of the
Holder of this Debenture (or any Predecessor Debenture) of record at such
Regular Record Date to receive an installment of interest (with certain
exceptions provided in the Indenture), no payment or adjustment is to be made
on conversion for interest accrued hereon or for dividends on the shares of
Common Stock issued on conversion. No fractions of shares or scrip representing
fractions of shares will be issued on conversion, but instead of any fractional
interest the Company shall pay a cash adjustment as provided in the Indenture.
The Conversion Rate is subject to adjustment as provided in the Indenture. In
addition, the Indenture provides that in case of certain consolidations or
mergers to which the Company is a party or the transfer of substantially all of
the assets of the Company, the Indenture shall be amended, without the consent
of any Holders of Debentures, so that this Debenture, if then outstanding, will
be convertible thereafter, during the period this Debenture shall be
convertible as specified above, only into the kind and amount of
9
<PAGE> 11
securities, cash and other property receivable upon the consolidation, merger
or transfer by a holder of the number of shares of Common Stock into which this
Debenture might have been converted immediately prior to such consolidation,
merger or transfer (assuming such holder of Common Stock failed to exercise any
rights of election and received per share the kind and amount received per
share by a plurality of non-electing shares).
The Debentures are subject to redemption upon not less than 30 and not
more than 60 days' notice by mail, at any time on or after March 16, 2000, as a
whole or in part, at the election of the Company, at the Redemption Prices set
forth below, plus accrued and unpaid interest to the Redemption Date (subject
to the right of Holders of record on the relevant Regular Record Date to
receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date).
If redeemed during the 12-month period beginning March 14 in the year
indicated (March 16, in the case of 2000), the Redemption Price per Debenture
shall be:
<TABLE>
<CAPTION>
Year Redemption Price
---- ----------------
<S> <C>
2000 . . . . . . . . $989.48
2001 . . . . . . . . $994.14
</TABLE>
Notwithstanding the foregoing, the Debentures will be subject to
redemption, in whole or in part, at any time, to the extent necessary for the
Company to continue to qualify as a REIT. The Redemption Price for such
Debentures redeemed shall equal the Issue Price, plus accrued and unpaid
interest and accrued Original Issue Discount to and including the Redemption
Date. The Company may exercise such redemption powers solely with respect to
Holders who pose a threat to the Company's REIT status and only to the extent
deemed necessary or advisable by the Board of Directors to preserve such
status.
In certain circumstances involving the occurrence of a Repurchase
Event, the Holder hereof shall have the right to require the Company to
repurchase this Debenture at the Issue Price, plus accrued interest and accrued
Original Issue Discount to and including the Repurchase Date, but interest
installments whose Stated Maturity is on or prior to such Repurchase Date will
be payable to the Holders of such Debentures, or one or more Predecessor
Debentures, of record at the close of business on the relevant Record Dates
referred to on the face hereof, all as provided in the Indenture.
In the event of redemption, repurchase or conversion of this Debenture
in part only, a new Debenture or Debentures for the unredeemed, unrepurchased
or unconverted portion hereof will be issued in the name of the Holder hereof
upon the cancellation hereof.
10
<PAGE> 12
The Company covenants and agrees, and each Holder of a Debenture, by
his acceptance thereof, likewise covenants and agrees, that to the extent and
in the manner set forth in the Indenture, the indebtedness represented by the
Debentures and the payment of principal of and premium, if any, and interest on
each and all of the Debentures are hereby expressly made subordinate and
subject in right of payment to the prior payment in full of all Senior Debt.
If an Event of Default with respect to the Debentures shall occur and
be continuing, the Debentures may be declared due and payable in an amount of
principal of the Debentures equal to the Issue Price plus accrued Original
Issue Discount to the date of such declaration in the manner and with the
effect provided in the Indenture. Upon payment (i) of the amount of principal
so declared due and payable and (ii) of interest on any overdue principal,
premium, if any, and interest in the manner provided for in the Indenture (in
each case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and premium, if any, and interest on the Debentures shall
terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Debentures to be effected under
the Indenture at any time by the Company and the Trustee with the consent of
the Holders of a majority in principal amount of the Debentures at the time
Outstanding. The Indenture also contains provisions permitting the Holders of
specified percentages in the principal amount of the Debentures at the time
Outstanding, on behalf of the Holders of all Debentures, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Debenture shall be conclusive and binding upon such Holder and
upon all future Holders of this Debenture and of any Debenture issued upon the
registration of transfer hereof or in exchange herefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Debenture.
As provided in and subject to the provisions of the Indenture, the Holder of
this Debenture shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless such Holder shall have previously given the
Trustee written notice of a continuing Event of Default with respect to the
Debentures, the Holders of not less than 25% in principal amount of the
Debentures at the time Outstanding shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default as Trustee
and offered the Trustee reasonable indemnity, and the Trustee shall not have
received from the Holders of a majority in principal amount of Debentures at
the time Outstanding a direction inconsistent with such request, and shall have
failed to institute any such proceeding, for 60 days after receipt of such
notice, request and offer of indemnity. The foregoing shall not apply to any
suit instituted by the Holder of this Debenture for the enforcement of payment
of principal hereof or any premium or interest hereon on or after the
respective due dates expressed herein.
11
<PAGE> 13
Subject to the rights of holders of Senior Debt, as set forth in the
Indenture, no other reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Debenture at the time, place and rate, and
in the coin or currency, herein prescribed or to convert this Debenture as
provided in the Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Debenture is registrable in the Security
Register, upon surrender of this Debenture for registration of transfer at the
office or agency of the Company in any place where the principal of and premium,
if any, and interest on this Debenture are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney authorized in writing, and thereupon one or more new Debentures, of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees. The Security Registrar
shall not be required to register the transfer of any Debentures if such
transfer, in the good faith opinion of the Board of Directors, (i) might cause
the Company to fail to comply with any requirement necessary for the continued
qualification of the Company as a REIT under Section 856 through 859 of the Code
or (ii) would result in a single Person owning more than 9.8% of the Company's
outstanding stock within the meaning of the Code.
The Debentures are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, Debentures are
exchangeable for a like aggregate principal amount of Debentures of a different
authorized denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Debenture for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Debenture is registered as the owner hereof for
all purposes, whether or not this Debenture be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the contrary.
THIS DEBENTURE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
All terms used in this Debenture which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
12
<PAGE> 14
The Company will furnish to any Debentureholder upon written request and
without charge a copy of the Indenture. Requests may be made to: Capstone
Capital Corporation, c/o Secretary, 1000 Urban Center Drive, Suite 630,
Birmingham, Alabama 35242.
KEEP THIS CERTIFICATE IN A SAFE PLACE, IF IT IS LOST, STOLEN OR
DESTROYED, THE COMPANY MAY REQUIRE A BOND OF INDEMNITY AS
A CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
13
<PAGE> 15
[FORM OF CONVERSION NOTICE]
To: CAPSTONE CAPITAL CORPORATION
The undersigned owner of this Debenture hereby irrevocably exercises the
option to convert this Debenture, or portion hereof (which is $1,000 or an
integral multiple thereof) below designated, into shares of Common Stock in
accordance with the terms of the Indenture referred to in this Debenture, and
directs that the shares issuable and deliverable upon the conversion, together
with any check in payment for fractional shares and any Debentures, representing
any unconverted principal amount hereof, be issued and delivered to the
registered holder hereof unless a different name has been indicated below. If
shares are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto. Any
amount required to be paid by the undersigned on account of interest accompanies
this Debenture.
Dated:
------------------------------
Signature(s) NOTICE: THE SIGNATURE(S) TO THIS
------------------------ ASSIGNMENT MUST CORRESPOND WITH
THE NAME(S) AS WRITTEN UPON THE
THE FACE OF THE CERTIFICATE IN
EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATSOEVER.
Signature Guarantee:
----------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTY MEDALLION PROGRAM), PURSUANT TO
S.E.C. 17Ad-15.
Fill in for registration
of shares of Common Stock
and Debentures if to be
issued otherwise than to
the registered holder:
- -----------------------------------
Name
- -----------------------------------
Address
- -----------------------------------
(please print name and address,
including zip code number)
Principal Amount to be
converted (in an integral
multiple of $1,000, if
less than all):
$
--------------------------------------
Social Security Or Other Taxpayer
Identification Number Of Owner:
14
<PAGE> 16
[FORM OF ASSIGNMENT]
If you the holder want to assign this Debenture, fill in the form below
and have your signature guaranteed:
I or we assign and transfer this Debenture to
_____________________________________________________________________________
(Insert assignee's social security or tax ID number)_________________________
_____________________________________________________________________________
_____________________________________________________________________________
(Print or type assignee's name, address and zip code) and irrevocably appoint
_____________________________________________________________________________
agent to transfer this Debenture on the books of the Company. The agent may
substitute another to act for him.
_____________________________________________________________________________
Date:_________________________ Your signature:_______________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S)
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
Signature Guarantee:_________________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTY MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
15
<PAGE> 17
[OPTION OF HOLDER TO ELECT PURCHASE]
If you wish to have this Debenture purchased by the Company pursuant to
Section 701 of the First Supplemental Indenture dated as of March 14, 1997,
check the box: [ ]
If you wish to have a portion of this Debenture (which is $1,000 or an
integral multiple thereof) purchased by the Company pursuant to Section 701 of
the First Supplemental Indenture dated as of March 14, 1997, state the amount
you wish to have purchased:
$____________________
Date: ___________________ Your Signature(s):__________________________
NOTICE: THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND WITH THE
NAME(S) AS WRITTEN UPON THE FACE OF
THE CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATSOEVER.
Tax Identification No.: ___________
Signature Guarantee: ____________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTY MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
16
<PAGE> 18
SECTION 304. GLOBAL DEBENTURES.
Debentures may be issued in the form of Global Securities. Every
Debenture authenticated and delivered hereunder as a Global Security shall, in
addition to any other legends required by the Depositary, bear a legend in
substantially the following form:
THIS DEBENTURE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR
A NOMINEE THEREOF. THIS DEBENTURE MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
DEBENTURE REGISTERED, AND NO TRANSFER OF THIS DEBENTURE IN WHOLE OR IN PART MAY
BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
Owners of beneficial interests in Debentures represented by a Global
Security shall be entitled to receive physical delivery of Debentures in
definitive form only under the circumstances set forth in Section 305 of the
Base Indenture and as set forth in the next sentence. An owner of a beneficial
interest in Debentures represented by a Global Security may, on terms acceptable
to the Company and the Depositary, receive Debentures in definitive form in
exchange for such beneficial interest. In any such instance, the owner of such
benefical interest will be entitled to physical delivery in definitive form of
Debentures represented by the Global Security equal in principal amount to such
beneficial interest and to have such Debentures registered in its name.
SECTION 305. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificate of authentication shall be in substantially
the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: AMSOUTH BANK OF ALABAMA,
As Trustee
By__________________________________
Authorized Signatory
17
<PAGE> 19
ARTICLE FOUR
RESTRICTIONS ON OWNERSHIP AND TRANSFER
SECTION 401. OWNERSHIP AND TRANSFER RESTRICTIONS.
(a) To protect the Company's status as a REIT, a Person may not
own or convert any Debenture if such ownership or conversion, in the good
faith opinion of the Board of Directors, (i) might cause the Company to fail
to comply with any requirement necessary for the continued qualification of
the Company as a REIT or (ii) would result in a single Person owning more than
9.8% of the Company's outstanding stock within the meaning of the Code. For
the purpose of the preceding sentence, a Person shall be considered to own
shares of Company stock which are owned directly by such Person (held of record
by such Person or such Person's nominee or nominees) and shares of Company
stock which are owned indirectly by such Person (including shares of Common
Stock issuable upon conversation of the Debentures) pursuant to Sections 542,
544 and 856 of the Code and the regulations promulgated thereunder.
(b) The Security Registrar shall not be required to register the
transfer of any Debentures if such transfer, in the good faith opinion of the
Board of Directors, (i) might cause the Company to fail to comply with any
requirement necessary for the continued qualification of the Company as a REIT
under Section 856 through 859 of the Code or (ii) would result in a single
Person owning more than 9.8% of the Company's outstanding stock within the
meaning of the Code. The Company shall advise the Security Registrar in
writing promptly of any determination by the Board of Directors not to permit
a transfer of any Debenture pursuant to the immediately preceding sentence,
identifying such Debenture by Holder and any other appropriate method, and
shall instruct the Security Registrar not to register the transfer of such
Debenture. The Security Registrar shall not be liable to the Company, Holders
of Debentures or any other Persons for transfers of such Debentures effected
prior to its receipt of such written instructions from the Company and the
Company shall indemnify the Security Registrar for all claims, costs and
expenses incurred by it in connection with refusing to transfer Debentures as
instructed by the Company.
The ownership and transfer of Debentures and the conversion
thereof shall also be subject to such additional restrictions as may be
provided for in the Articles of Incorporation and Bylaws of the Company.
18
<PAGE> 20
ARTICLE FIVE
CONVERSION OF DEBENTURES
SECTION 501. CONVERSION PRIVILEGE AND CONVERSION RATE.
Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any Debenture or any portion of the principal
amount thereof which equals $1,000 or any integral multiple thereof may be
converted at any time at or prior to March 14, 2002, at the principal amount
thereof, or of such portion thereof, into fully paid and nonassessable shares
(calculated as to each conversion to the nearest 1/100 of a share) of Common
Stock, at the Conversion Rate, determined as hereinafter provided, in effect at
the time of conversion. Such conversion right shall expire at the close of
business on March 14, 2002. In case a Debenture or portion thereof is called
for redemption, such conversion right in respect of the Debenture or portion so
called shall expire at the close of business on the business day preceding the
applicable Redemption Date, unless the Company defaults in making the payment
due upon redemption.
The rate at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Rate") shall be initially 39.4754
shares of Common Stock for each $1,000 principal amount of Debentures. The
Conversion Rate shall be adjusted in certain instances as provided in paragraphs
(a), (b), (c), (d), (e) and (h) of Section 504.
SECTION 502. EXERCISE OF CONVERSION PRIVILEGE.
In order to exercise the conversion privilege, the Holder of any
Debenture shall surrender such Debenture, duly endorsed or assigned to the
Company or in blank, at any office or agency of the Company maintained pursuant
to Section 201 hereof, accompanied by written notice to the Company in the form
provided in the Debenture (or such other notice as is acceptable to the Company)
at such office or agency that the Holder elects to convert such Debenture or, if
less than the entire principal amount thereof is to be converted, the portion
thereof to be converted. Debentures surrendered for conversion during the
period from the opening of business on any Regular Record Date next preceding
any Interest Payment Date to the close of business on such Interest Payment Date
shall (except in the case of Debentures or portions thereof which have been
called for redemption) be accompanied by payment in New York Clearing House
funds or other funds acceptable to the Company of an amount equal to the
interest payable on such Interest Payment Date on the principal amount being
surrendered for conversion. Except as provided in the immediately preceding
sentence and subject to the last paragraph of Section 201 hereof, no payment or
adjustment shall be made upon any conversion on account of any interest accrued
on the Debentures surrendered for conversion or on account of any dividends on
the Common Stock issued upon conversion.
19
<PAGE> 21
Upon conversion of a Debenture, a holder will not receive any cash
payment representing accrued Original Issue Discount. The Company's delivery to
the holder of the number of shares of Common Stock into which such Debenture is
converted (together with a cash payment, if any, in lieu of any fractional
share) will satisfy the Company's obligation to pay the principal amount at
maturity of such Debenture as well as the accrued Original Issue Discount
attributable to the period from the issue date to the conversion date. Thus,
the accrued Original Issue Discount will be deemed to be paid in full rather
than cancelled, extinguished or forfeited. The Conversion Rate will not be
adjusted at any time during the term of such Debenture for accrued Original
Issue Discount.
Debentures shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of such Debentures for conversion
in accordance with the foregoing provisions, and at such time the rights of the
Holders of such Debentures as Holders shall cease, and the Person or Persons
entitled to receive the Common Stock issuable upon conversion shall be treated
for all purposes of the record holder or holders of such Common Stock as and
after such time. As promptly as practicable on or after the conversion date,
the Company shall issue and shall deliver at such office or agency a certificate
or certificates for the number of full shares of Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in Section 503.
In the case of any Debenture which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Debenture or
Debentures of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Debenture.
SECTION 503. FRACTIONS OF SHARES.
No fractional share of Common Stock shall be issued upon conversion of
Debentures. If more than one Debenture shall be surrendered for conversion at
one time by the same Holder, the number of full shares which shall be issuable
upon conversion thereof shall be computed on the basis of the aggregate
principal amount of the Debentures (or specified portions thereof) so
surrendered. Instead of any fractional share of Common Stock which would
otherwise be issuable upon conversion of any Debenture or Debentures (or
specified portions thereof), the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the Closing Price
(as hereinafter defined) at the close of business on the day of conversion (or,
if such day is not a Trading Day (as hereafter defined), on the Trading Day
immediately preceding such day).
20
<PAGE> 22
SECTION 504. ADJUSTMENT OF CONVERSION RATE.
(a) In case the Company shall pay or make a dividend or other
distribution on the Common Stock exclusively in Common Stock or shall pay or
make a dividend or other distribution on any other class of capital stock of the
Company which dividend or distribution includes Common Stock, the Conversion
Rate in effect at the opening of business on the day following the date fixed
for the determination of shareholders entitled to receive such dividend or other
distribution shall be increased by multiplying such Conversion Rate by a
fraction of which the numerator shall be the sum of the number of shares of
Common Stock outstanding at the close of business on the date fixed for such
determination and the total number of shares constituting such dividend or other
distribution and the denominator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination,
such increase to become effective immediately after the opening of business on
the day following the date fixed for such determination. For the purpose of
this paragraph (a), the number of shares of Common Stock at any time outstanding
shall not include shares held in the treasury of the Company. The Company shall
not pay any dividend or make any distribution on shares of Common Stock held in
the treasury of the Company.
(b) Subject to paragraph (f) of this Section, in case the Company
shall pay or make a dividend or other distribution on the Common Stock
consisting exclusively of, or shall otherwise issue to all holders of the Common
Stock, rights or warrants entitling the holders thereof to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price (determined as provided in paragraph (g) of this Section) on the
date fixed for the determination of shareholders entitled to receive such rights
or warrants, the Conversion Rate in effect at the opening of business on the day
following the date fixed for such determination shall be increased by
multiplying such Conversion Rate by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common Stock so
offered for subscription or purchase and the denominator shall be the number of
shares of Common Stock outstanding at the close of business on the date fixed
for such determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at such Current Market
Price, such increase to become effective immediately after the opening of
business on the day following the date fixed for such determination. For the
purposes of this paragraph (b), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Company. The
Company shall not issue any rights or warrants in respect of shares of Common
Stock held in the treasury of the Company.
(c) In case outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Rate in effect
at the opening of business on the day following the day upon which such
subdivision becomes
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effective shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Conversion Rate in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately reduced, such increase or reduction, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which subdivision or combination becomes
effective.
(d) Subject to the last sentence of this paragraph (d) and to
paragraph (f) of this Section, in case the Company shall, by dividend or
otherwise, distribute to all holders of the Common Stock evidences of its
indebtedness, shares of any class of its capital stock, cash or other assets
(including securities, but excluding any (i) rights or warrants referred to in
paragraph (b) of this Section, (ii) dividend or distribution paid exclusively in
cash and (iii) dividend or distribution referred to in paragraph (a) of this
Section), the Conversion Rate shall be increased by multiplying the Conversion
Rate in effect immediately prior to the close of business on the date fixed for
the determination of shareholders entitled to such distribution by a fraction of
which the numerator shall be the Current Market Price (determined as provided in
paragraph (g) of this Section) on such date and the denominator shall be such
Current Market Price less the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) on such date of the portion of the evidences of indebtedness, shares
of capital stock, cash and other assets to be distributed applicable to one
share of Common Stock, such increase to become effective immediately prior to
the opening of business on the day following such date. If the Board of
Directors determines the fair market value of any distribution for purposes of
this paragraph (d) by reference to the actual or when-issued trading market for
any securities comprising part or all of such distribution, it must in doing so
consider the prices in such market over the same period used in computing the
Current Market Price pursuant to paragraph (g) of this Section, to the extent
possible. For purposes of this paragraph (d), any dividend or distribution that
includes shares of Common Stock, rights or warrants to subscribe for or purchase
shares of Common Stock or securities convertible into or exchangeable for shares
of Common Stock shall be deemed to be (x) a dividend or distribution of the
evidences of indebtedness, cash, assets or shares of capital stock other than
such shares of Common Stock, such rights or warrants or such convertible or
exchangeable securities (making any Conversion Rate increase required by this
paragraph (d)) immediately followed by (y) in the case of such shares of Common
Stock or such rights or warrants, a dividend or distribution thereof (making any
further Conversion Rate increase required by paragraph (a) and (b) of this
Section, except any shares of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of business on the
date fixed for such determination" within the meaning of paragraph (a) of this
Section), or (z) in the case of such convertible or exchangeable securities, a
dividend or distribution of the number of shares of Common Stock as would then
be issuable upon the conversion or exchange thereof, whether or not the
conversion or exchange of such securities is subject to any conditions (making
any further Conversion Rate increase required by paragraph (a) of this Section,
except the
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shares deemed to constitute such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such determination"
within the meaning of paragraph (a) of this Section).
(e) In case a tender offer made by the Company or any Subsidiary
for all or any portion of the Common Stock shall be consummated and such tender
offer shall involve an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a Board Resolution) as of the last time (the "Expiration Time")
that tenders may be made pursuant to such tender offer (as it shall have been
amended) that, together with the aggregate of the cash plus the fair market
value (as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) as of the Expiration Time of the
other consideration paid in respect of any other tender offer by the Company or
a Subsidiary for all or any portion of the Common Stock consummated within the
12 months preceding the Expiration Time and in respect of which no Conversion
Rate adjustment pursuant to this paragraph (e) has been made previously, exceeds
the greater of (A) 12.5% of the product of the Current Market Price (determined
as provided in paragraph (g) of this Section) immediately prior to the
Expiration Time times the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time or (B) the Company's
retained earnings as of the Expiration Time, the Conversion Rate shall be
increased by multiplying the Conversion Rate in effect immediately prior to the
Expiration Time by a fraction of which the numerator shall be the product of (X)
the Current Market Price (determined as provided in paragraph (g) of this
Section) immediately prior to the Expiration Time times (Y) the number of shares
of Common Stock outstanding at the Expiration Time minus the number of shares
accepted for payment in such tender offer (the "Purchased Shares") and the
denominator shall be the product of (A) such Current Market Price times such
number of outstanding shares (including any tendered shares at the Expiration
Time) minus (B) the fair market value (determined as aforesaid) of the aggregate
consideration payable to shareholders upon consummation of such tender offer,
such increase to become effective immediately prior to the opening of business
on the day following the Expiration Time; provided, that if the number of
Purchased Shares or the aggregate consideration payable therefor have not been
finally determined by such opening of business, the adjustment required by this
paragraph (e) shall, pending such final determination, be made based upon the
preliminarily announced results of such tender offer, and, after such final
determination shall have been made, the adjustment required by this paragraph
(e) shall be made based upon the number of Purchased Shares and the aggregate
consideration payable therefor as so finally determined.
(f) Rights or warrants issued by the Company to all holders of the
Common Stock entitling the holders thereof to subscribe for or purchase shares
of Common Stock (either initially or under certain circumstances), which rights
or warrants (i) are deemed to be transferred with such shares of Common Stock,
(ii) are not exercisable until the occurrence of a specified event or events
("Trigger Event") and (iii) are also issued in respect of future issuances of
Common Stock, shall for purposes
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of this Section 504 not be deemed issued until the occurrence of the earliest
Trigger Event. If any such rights or warrants, including any such existing
rights or warrants distributed prior to the date of this Indenture are subject
to subsequent events, upon the occurence of each of which such rights or
warrants shall become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the occurrence of each such event shall be
deemed to be such date of issuance and record date with respect to new rights
or warrants (and a termination or expiration of the existing rights or warrants
without exercise by the holder thereof). In addition, in the event of any
distribution (or deemed distribution) of rights or warrants, or any Trigger
Event with respect thereto, that was counted for purposes of calculating a
distribution amount for which an adjustment to the Conversion Rate under this
Section 504 was made, (1) in the case of any such rights or warrant which shall
all have been redeemed or repurchased without exercise by any holders thereof,
the Conversion Rate shall be readjusted upon such final redemption or repurchase
to give effect to such distribution or Trigger Event, as the case may be, as
though it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder or holders of Common Stock with respect to
such rights or warrants (assuming such holder had retained such rights or
warrants), made to all holders of Common Stock as of the date of such redemption
or repurchase, and (2) in the case of such rights or warrants which shall have
expired or been terminated without exercise by any holders thereof, the
Conversion Rate shall be readjusted as if such rights and warrants had not been
issued.
Notwithstanding any other provision of this Section 504 to the contrary,
rights, warrants, evidences of indebtedness, other securities, cash or other
assets (including, without limitation, any rights distributed pursuant to any
stockholder rights plan) shall be deemed not to have been distributed for
purposes of this Section 504 if the Company makes proper provision so that each
holder of Debentures who converts a Debenture (or any portion thereof) after the
date fixed for determination of stockholders entitled to receive such
distribution shall be entitled to receive upon such conversion, in addition to
the shares of Common Stock issuable upon such conversion, the amount and kind of
such distributions that such holder would have been entitled to receive if such
holder had, immediately prior to such determination date, converted such
Debenture into Common Stock.
(g) For the purpose of any computation under this paragraph and
paragraphs (b) and (d) of this Section, the current market price per share of
Common Stock (the "Current Market Price") on any date shall be deemed to be the
average of the daily Closing Prices for the 5 consecutive Trading Days selected
by the Company commencing not more than 20 Trading Days before, and ending not
later than, the date in question; provided, however, that (i) if the "ex" date
for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Rate pursuant to
paragraph (a), (b), (c), (d) or (e) above occurs on or after the 20th Trading
Day prior to the date in question and prior to the "ex" date for the issuance or
distribution requiring such computation, the Closing Price for each Trading Day
prior to the "ex" date for such other event shall be adjusted by multiplying
such
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Closing Price by the reciprocal of the fraction by which the Conversion Rate is
so required to be adjusted as a result of such other event, (ii) if the "ex"
date for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Rate pursuant to
paragraph (a), (b), (c), (d) or (e) above occurs on or after the "ex" date for
the issuance or distribution requiring such computation and on or prior to the
date in question, the Closing Price for each Trading Day on and after the "ex"
date for such other event shall be adjusted by multiplying such Closing Price by
the same fraction by which the Conversion Rate is so required to be adjusted as
a result of such other event, and (iii) if the "ex" date for the issuance or
distribution requiring such computation is on or prior to the date in question,
after taking into account any adjustment required pursuant to clause (ii) of
this proviso, the Closing Price for each Trading Day on or after such "ex" date
shall be adjusted by adding thereto the amount of any cash and the fair market
value on the date in question (as determined by the Board of Directors in a
manner consistent with any determination of such value for purposes of paragraph
(d) of this Section, whose determination shall be conclusive and described in a
Board Resolution) of the evidences of indebtedness, shares of capital stock or
assets being distributed applicable to one share of Common Stock as of the close
of business on the day before such "ex" date. For the purpose of any
computation under paragraph (e) of this Section, the Current Market Price on any
date shall be deemed to be the average of the daily Closing Prices for the 5
consecutive Trading Days selected by the Company commencing on or after the
latest (the "Commencement Date") of (i) the date 20 Trading Days before the date
in question, (ii) the date of commencement of the tender offer requiring such
computation and (iii) the date of the last amendment, if any, of such tender
offer involving a change in the maximum number of shares for which tenders are
sought or a change in the consideration offered, and ending not later than the
Expiration Time of such tender offer; provided, however, that if the "ex" date
for any event (other than the tender offer requiring such computation) that
requires an adjustment to the Conversion Rate pursuant to paragraph (a), (b),
(c), (d) or (e) above occurs on or after the Commencement Date and prior to the
Expiration Time for the tender offer requiring such computation, the Closing
Price for each Trading Day prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the reciprocal of the fraction by
which the Conversion Rate is so required to be adjusted as a result of such
other event. The closing price for any Trading Day (the "Closing Price") shall
be the last reported sales price regular way or, in case no such reported sale
takes place on such day, the average of the reported closing bid and asked
prices regular way, in either case on the New York Stock Exchange or, if the
Common Stock is not listed or admitted to trading on such exchange, on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or, if not listed or admitted to trading on any national
securities exchange, on the Nasdaq Stock Market's National Market or, if the
Common Stock is not listed or admitted to trading on any national securities
exchange or quoted on such National Market, the average of the closing bid and
asked prices in the over-the-counter market as furnished by any New York Stock
Exchange member firm selected from time to time by the Company for that
purpose. For purposes of this paragraph, the term "Trading Day" means each
Monday, Tuesday, Wednesday, Thursday and Friday, other than any day on which
securities are
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generally not traded on the applicable securities exchange or in the applicable
securities market and the term "'ex' date," (i) when used with respect to any
issuance or distribution, means the first date on which the Common Stock trades
regular way on the relevant exchange or in the relevant market from which the
Closing Prices were obtained without the right to receive such issuance or
distribution, (ii) when used with respect to any subdivision or combination of
shares of Common Stock, means the first date on which the Common Stock trades
regular way on such exchange or in such market after the time at which such
subdivision or combination becomes effective, and (iii) when used with respect
to any tender offer means the first date on which the Common Stock trades
regular way on such exchange or in such market after the last time that tenders
may be made pursuant to such tender offer (as it shall have been amended).
(h) The Company may, but shall not be obligated to, make such
increases in the Conversion Rate, in addition to those required by paragraphs
(a), (b), (c), (d) and (e) of this Section, as it considers to be advisable (as
evidenced by a Board Resolution) in order that any event treated for federal
income tax purposes as a dividend of stock or stock rights shall not be taxable
to the recipients or, if that is not possible, to diminish any income taxes that
are otherwise payable because of such event.
(i) No adjustment in the Conversion Rate shall be required unless
such adjustment (plus any other adjustments not previously made by reason of
this paragraph (i)) would require an increase or decrease of at least 1% in the
Conversion Rate; provided, however, that any adjustments which by reason of this
paragraph (i) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment.
(j) Notwithstanding any other provision of this Section 504, no
adjustment to the Conversion Rate shall result in shares of Common Stock being
issued upon conversion at an effective price below the then par value per share
of the Common Stock, and any such purported adjustment shall instead increase
the Conversion Rate to such number resulting in the issuance of shares of Common
Stock at an effective price equal to par value. The Company hereby covenants
not to take any action to increase the par value per share of the Common Stock.
SECTION 505. NOTICE OF ADJUSTMENTS OF CONVERSION RATE.
Whenever the Conversion Rate is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Rate
in accordance with Section 504 hereof and shall prepare an
Officers' Certificate signed by the Treasurer of the Company setting
forth the adjusted Conversion Rate and showing in reasonable detail
the facts upon which such adjustment is based, and such certificate
shall forthwith be filed (with a copy to the Trustee) at each office
or agency maintained for the purpose of conversion of Debentures
pursuant to Section 201 hereof; and
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(b) a notice stating that the Conversion Rate has been
adjusted and setting forth the adjusted Conversion Rate shall
forthwith be prepared, and as soon as practicable after it is
prepared, such notice shall be mailed by the Company to all Holders
at their last addresses as they shall appear in the Debenture
Register.
SECTION 506. NOTICE OF CERTAIN CORPORATE ACTION.
(a) In case:
(i) the Company shall declare a dividend (or any
other distribution) on its Common Stock payable otherwise than
exclusively in cash; or
(ii) the Company shall authorize the granting to
the holders of its Common Stock of rights or warrants to
subscribe for or purchase any shares of capital stock of any
class or of any other rights (excluding shares of capital stock
or options for capital stock issued pursuant to a benefit plan
for employees, officers or directors of the Company); or
(iii) of any reclassification of the Common Stock
(other than a subdivision or combination of the
outstanding shares of Common Stock), or of any consolidation,
merger or share exchange to which the Company is a party and
for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially
all of the assets of the Company; or
(iv) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(v) the Company or any Subsidiary shall commence
a tender offer for all or a portion of the outstanding shares
of Common Stock (or shall amend any such tender offer to
change the maximum number of shares being sought or the amount
or type of consideration being offered therefor);
then the Company shall cause to be filed at each office or agency maintained
pursuant to Section 201 hereof, and shall cause to be mailed to all Holders at
their last addresses as they shall appear in the Debenture Register, at least
20 days (or 10 days in any case specified in clause (i), (ii) or (iii) above)
prior to the applicable record, effective or expiration date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights or warrants,
or, if a record is not to be taken, the date as of which the holders of Common
Stock of record who will be entitled to such dividend, distribution, rights or
warrants are to be determined, (y) the date on which such reclassification,
consolidation, merger, share
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exchange, sale, transfer, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of
Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up, or (z) the date on which such tender
offer commenced, the date on which such tender offer is scheduled to expire
unless extended, the consideration offered and the other material terms thereof
(or the material terms of any amendment thereto). Neither the failure to give
any such notice nor any defect therein shall affect the legality or validity of
any action described in clauses (i) through (v) of this Section 506(a).
(b) In case the Company or any Affiliate of the Company shall
propose to engage in a "Rule 13e-3 Transaction" (as defined in the Commission's
Rule 13e-3 under the Exchange Act) the Company shall, no later than the date on
which any information with respect to such Rule 13e-3 Transaction is first
required to be given to the Commission or any other person pursuant to such
Rule 13e-3, cause to be mailed to all Holders at their last addresses as they
shall appear in the Security Register, a copy of all information required to be
given to the Commission or such other person pursuant to such Rule 13e-3. The
information required to be given under this paragraph shall be in addition to
and not in lieu of any other information required to be given by the Company
pursuant to this Section 506 or any other provision of the Debentures or the
Indenture.
SECTION 507. COMPANY TO RESERVE COMMON STOCK.
The Company shall at all times reserve and keep available, free from
preemptive rights, out of the authorized but unissued Common Stock or out of
the Common Stock held in treasury, for the purpose of effecting the conversion
of Debentures, the full number of shares of Common Stock then issuable upon the
conversion of all outstanding Debentures. Shares of Common Stock issuable upon
conversion of outstanding Debentures shall be issued out of the Common Stock
held in Treasury to the extent available.
SECTION 508. TAXES ON CONVERSIONS.
The Company will pay any and all taxes that may be payable in respect
of the issue or delivery of shares of Common Stock on conversion of Debentures
pursuant hereto. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that of the Holder of
the Debenture or Debentures to be converted, and no such issue or delivery
shall be made unless and until the Person requesting such issue has paid to the
Company the amount of any such tax, or has established to the satisfaction of
the Company that such tax has been paid.
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SECTION 509. COVENANT AS TO COMMON STOCK.
The Company covenants that all shares of Common Stock which
may be issued upon conversion of Debentures will upon issue be fully paid
and nonassessable and, except as provided in Section 508 hereof, the Company
will pay all taxes, liens and charges with respect to the issue thereof.
SECTION 510. CANCELLATION OF CONVERTED DEBENTURES.
All Debentures delivered for conversion shall be delivered to
the Trustee to be canceled by or at the direction of the Trustee, which shall
dispose of the same as provided in Section 309 of the Base Indenture.
SECTION 511. PROVISIONS IN CASE OF RECLASSIFICATION, CONSOLIDATION, MERGER
OR SALE OF ASSETS.
In case of any capital reorganization or reclassification of
the capital stock of the Company (other than solely a change in par value, or
from par value to no par value) or any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another Person into
the Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding Common Stock or preferred
shares of beneficial interest of the Company) or any sale or transfer of all or
substantially all of the assets of the Company, the Holder of each Debenture
then outstanding shall have the right thereafter, during the period such
Debenture shall be convertible as specified in Section 501, to convert such
Debenture only into the kind and amount of securities, cash and other property
receivable upon such reorganization, recapitalization, consolidation, merger,
sale or transfer by a holder of the number of shares of Common Stock into which
such Debenture might have been converted immediately prior to such
reorganization, consolidation, merger, sale or transfer, assuming such holder
of Common Stock (i) is not a Person with which the Company consolidated or into
which the Company merged or which merged into the Company or to which such sale
or transfer was made, as the case may be ("constituent Person"), or an
Affiliate of a constituent Person and (ii) failed to exercise his rights of
election, if any, as to the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer (provided
that if the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer is not the same for each
share of Common Stock held immediately prior to such consolidation, merger,
sale or transfer by others than a constituent Person or an Affiliate thereof
and in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this Section the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). The Company shall not effect any consolidation, merger,
sale or transfer unless, prior to or simultaneously with the consummation
thereof the Person formed by such consolidation or resulting from
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such merger or which acquires such assets, as the case may be, shall execute
and deliver to the Trustee a supplemental indenture pursuant to which such
Person assumes the obligation to deliver to the Holder of each
Debenture such securities, cash and other property as such Holder may be
entitled to in accordance with the provisions of this Section 511. Such
supplemental indenture shall provide for adjustments which, for events
subsequent to the effective date of such supplemental indenture, shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Article. The Trustee shall not be under any responsibility to determine the
correctness of any provision contained in such supplemental indenture relating
to either the kind or amount of shares of stock or securities or cash or
property receivable by Holders upon the conversion of their Debentures after
any such consolidation, merger, sale or transfer. The above provisions of this
Section shall similarly apply to successive consolidations, mergers, sales or
transfers.
SECTION 512. RESPONSIBILITY OF TRUSTEE AND CONVERSION AGENT.
Neither the Trustee nor any agent appointed to effect
conversions shall at any time be under any duty or responsibility to any Holder
of Debentures to determine whether any facts exist which may require any
adjustment of the conversion price, or with respect to the nature or extent
of any such adjustment when made, or with respect to the method employed, or
herein or in any supplemental indenture provided to be employed, in making the
same. Neither the Trustee nor any such conversion agent shall be accountable
with respect to the validity or value (or the kind or amount) of any Common
Stock or of any securities or property which may at any time be issued or
delivered upon the conversion of any Debenture; and neither the Trustee nor any
such conversion agent makes any representation with respect thereto. Neither
the Trustee nor any such conversion agent shall be responsible for any failure
of the Company to issue, transfer or deliver any shares of Common Stock or
stock certificates or other securities or property or to make any cash payment
upon the delivery of any Debenture for the purpose of conversion or to comply
with any of the covenants contained in this Article.
SECTION 513. REFUSAL TO CONVERT DEBENTURES TO PROTECT REIT STATUS.
Notwithstanding anything herein to the contrary, neither the
Company, any conversion agent nor the Security Registrar shall be required to
take any steps to effect the conversion of any Debenture or Debentures if such
conversion, in the good faith opinion of the Board of Directors, (a) might
cause the Company to fail to comply with any requirement necessary for the
continued qualification of the Company as a REIT or (b) would result in a
single Person owning more than 9.8% of the Company's outstanding stock within
the meaning of the Code. For the purpose of the preceding sentence, a Person
shall be considered to own shares of Company stock which are owned directly by
such Person (held of record by such Person or such Person's nominee or
nominees) and shares of Company stock which are owned indirectly by such Person
(including shares of Common Stock issuable upon conversion of the Debentures)
pursuant to Sections 542, 544 and 856 of the Code and the regulations
promulgated thereunder.
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Any attempted conversion of a Debenture or Debentures by a Holder in violation
of the limits set forth above shall be null and void ab initio as to such
Holder and such Holder shall not acquire any rights or economic interest in the
Common Stock issuable upon such conversion. The Company shall advise the
Security Registrar and any conversion agent in writing promptly of any such
determination by the Board of Directors with respect to any Debentures,
identifying such Debenture by Holder and other appropriate method, and shall
instruct the Security Registrar and any conversion agent not to register the
transfer of such Debenture. The Security Registrar and any conversion agent
shall not be liable to the Company, Holders of Debentures or any other Persons
for conversions of such Debentures effected prior to its receipt of such
written instructions from the Company and the Company shall indemnify the
Security Registrar and any conversion agent of all claims, costs and expenses
incurred by it in connection with refusing to convert Debentures as instructed
by the Company.
ARTICLE SIX
REDEMPTION OF DEBENTURES
SECTION 601. RIGHT OF REDEMPTION.
The Debentures may be redeemed at the election of the Company, in
whole or from time to time in part, at any time on or after March 16, 2000,
at the Redemption Prices specified in the form of Debenture set forth in
Article Three, together with accrued and unpaid interest to and including the
Redemption Date.
Notwithstanding the foregoing paragraph, the Debentures will be
subject to redemption, in whole or in part, at any time, to the extent
necessary for the Company to continue to qualify as a REIT. The Redemption
Price for such Debentures redeemed shall equal the Issue Price, plus accrued
and unpaid interest and accrued Original Issue Discount to and including the
Redemption Date. The Company may exercise such redemption powers solely with
respect to Holders who pose a threat to the Company's REIT status and only to
the extent deemed necessary or advisable by the Board of Directors to preserve
such status.
SECTION 602. APPLICABILITY OF ARTICLE.
Redemption of Debentures at the election of the Company as
permitted by any provision of the Indenture shall be made in accordance
with such provision and this Article.
SECTION 603. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Debentures pursuant
to Section 601 shall be evidenced by a Board Resolution. In case of any
redemption at the
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election of the Company of less than all the Debentures, the Company shall,
at least 60 days prior to the Redemption Date fixed by the Company (unless a
shorter period shall be satisfactory to the Trustee), notify the Trustee of
such Redemption Date and of the principal amount of Debentures to be redeemed.
In case of any redemption at the election of the Company of all of the
Debentures, the Company shall, at least 45 days prior to the Redemption Date
fixed by the Company (unless a shorter period shall be satisfactory to the
Trustee), notify the Trustee of such Redemption Date.
SECTION 604. SELECTION BY TRUSTEE OF DEBENTURES TO BE REDEEMED.
If less than all the Debentures are to be redeemed, the
particular Debentures to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Debentures
not previously called for redemption, by lot or pro rata or by such other
method as the Trustee shall deem fair and appropriate and which may provide for
the selection for redemption of portions (equal to $1,000 or any integral
multiple thereof) of the principal amount of Debentures of a denomination
larger than $1,000.
If any Debenture selected for partial redemption is converted
in part before termination of the conversion right with respect to the portion
of the Debenture so selected, the converted portion of such Debenture shall
be deemed (so far as may be) to be the portion selected for redemption.
Debentures which have been converted during a selection of Debentures to be
redeemed shall be treated by the Trustee as Outstanding for the purpose of such
selection. In any case where more than one Debenture is registered in the same
name, the Trustee in its discretion may treat the aggregate principal amount so
registered as if it were represented by one Debenture.
The Trustee shall promptly notify the Company and each
Security Registrar in writing of the Debentures selected for redemption and, in
the case of any Debentures selected for partial redemption, the principal
amount thereof to be redeemed.
For all purposes of the Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Debentures
shall relate, in the case of any Debentures redeemed or to be redeemed only in
part, to the portion of the principal amount of such Debentures which has been
or is to be redeemed.
SECTION 605. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to the Trustee and to each Holder of Debentures to be
redeemed, at his address appearing in the Security Register.
All notices of redemption shall state:
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(a) the Redemption Date,
(b) the Redemption Price,
(c) if less than all the Outstanding Debentures are to
be redeemed, the identification (and, in the case of partial
redemption of any Debentures, the principal amounts) of the
particular Debentures to be redeemed,
(d) that on the Redemption Date the Redemption Price
will become due and payable upon each such Debenture to be redeemed
and that (unless the Company shall default in payment of the
Redemption Price) interest thereon will cease to accrue on and after
said date,
(e) the Conversion Rate, the date on which the right to
convert the Debentures to be redeemed will terminate and the place or
places where such Debentures may be surrendered for conversion, and
(f) the place or places where such Debentures are to be
surrendered for payment of the Redemption
Price.
Notice of redemption of Debentures to be redeemed at the
election of the Company shall be given by the Company or, at the Company's
request received by the Trustee at least 40 days prior to the Redemption Date,
by the Trustee in the name and at the expense of the Company.
SECTION 606. DEPOSIT OF REDEMPTION PRICE.
At or prior to 9:00 a.m. (New York City time) on any
Redemption Date, the Company shall deposit with the Trustee or with a Paying
Agent (or, if the Company is acting as its own Paying Agent, segregate and hold
in trust as provided in Section 1003 of the Base Indenture) an amount of
money in same day funds sufficient to pay the Redemption Price of, and (except
if the Redemption Date shall be an Interest Payment Date) accrued interest on,
all the Debentures or portions thereof which are to be redeemed on that date
other than any Debentures called for redemption on that date which have been
converted prior to the date of such deposit.
If any Debenture called for redemption is converted, any money
deposited with the Trustee or with any Paying Agent or so segregated and held
in trust for the redemption of such Debenture shall (subject to any right of
the Holder of such Debenture or any Predecessor Debenture to receive
interest as provided in the last paragraph of Section 201 hereof) be paid to
the Company upon Company Request or, if then held by the Company, shall be
discharged from such trust.
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SECTION 607. DEBENTURES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Debentures so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Debentures shall cease to bear interest. Upon surrender of any
such Debenture for redemption in accordance with said notice, such Debenture
shall be paid by the Company at the Redemption Price, together with accrued
interest to the Redemption Date; provided, however, that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Debentures, or one or more Predecessor
Debentures, registered as such at the close of business on the relevant Record
Dates according to their terms and the provisions of Section 307 of the Base
Indenture and the last paragraph of Section 201 hereof.
If any Debenture called for redemption shall not be so paid upon
surrender thereof for redemption, such Debenture shall, until paid, bear
interest to the extent permitted by applicable law from the Redemption Date at
the Yield to Maturity.
SECTION 608. DEBENTURES REDEEMED IN PART.
Any Debenture which is to be redeemed only in part shall be surrendered
at an office or agency of the Company maintained for that purpose pursuant to
Section 1002 of the Base Indenture (with, if the Company or the Trustee so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed by, the Holder
thereof or his attorney duly authorized in writing), and the Company shall
execute, and the Trustee shall authenticate and deliver to the Holder of such
Debenture without service charge, a new Debenture or Debentures, of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unredeemed portion of the principal of
the Debenture so surrendered.
ARTICLE SEVEN
RIGHT TO REQUIRE REPURCHASE
SECTION 701. RIGHT TO REQUIRE REPURCHASE.
In the event that there shall occur a Repurchase Event (as defined in
Section 706 hereof), then each Holder shall have the right, at such Holder's
option, to require the Company to purchase, and upon the exercise of such
right, the Company shall, subject to the provisions of Article Nine hereof,
purchase, all or any part of such Holder's Debentures no later than the date
(the "Repurchase Date") that is 45 days after the date the Company gives notice
of the Repurchase Event as contemplated in Section
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702(a) hereof at a price (the "repurchase Price") equal to the Issue Price,
together with accured and unpaid interest and accrued Original Issue Discount
to and including the Repurchase Date.
SECTION 702. NOTICE; METHOD OF EXERCISING REPURCHASE RIGHT.
(a) On or beofre the 30trh day after the occurence of a
Repurchase Event, the Company, or at the request of the Company received
by the Trustee at least 60 days prior to the Repurchase Date, the Trustee (in
the name and at the expense of the Company), shall give notice of the
occurrence of the Repurchase Event and of the repurchase right set forth herein
arising as a result thereof by first-class mail, postage prepaid, to the
Trustee and to each Holder of the Debentures at such Holder's address appearing
in the Security Register. The Company shall also deliver a copy of such notice
of a repurchase right to the Trustee.
Each notice of a repurchase right shall state:
(1) the event constituting the Repurchase Event and the
date thereof,
(2) the Repurchase Date,
(3) the date by which the repurchase right must be
exercised,
(4) the Repurchase Price, and
(5) the instructions a Holder must follow to exercise a
repurchase right.
No failure of the Company to give the foregoing notice shall
limit any Holder's right to exercise a repurchase right. The Trustee shall
have no affirmative obligation to determine if there shall have occurred a
Repurchase Event.
(b) To exercise a repurchase right, a Holder shall
deliver to the Company (or an agent designated by the Company for such purpose
in the notice referred to in (a) above) and to the Trustee on or before the
close of business on the Repurchase Date (i) written notice of the Holder's
exercise of such right, which notice shall set forth the name of the Holder,
the principal amount of the Debenture or Debentures (or portion of a Debenture)
to be repurchased, and a statement that an election to exercise the repurchase
right is being made thereby, and (ii) the Debenture or Debentures with respect
to which the repurchase right is being exercised, duly endorsed for transfer to
the Company. Such written notice shall be irrevocable. If the Repurchase Date
falls between any Regular Record Date and the next succeeding Interest Payment
Date, Debentures to be repurchased must be accompanied by payment from the
Holder of an amount equal to the interest thereon which the registered Holder
thereof is to receive on such Interest Payment Date.
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In the event a repurchase right shall be exercised
in accordance with the terms hereof, the Company shall on the Repurchase Date
pay or cause to be paid in cash to the Holder thereof the Repurchase Price of
the Debenture or Debentures as to which the repurchase right had been
exercised. In the event that a repurchase right is exercised with respect to
less than the entire principal amount of a surrendered Debenture, the Company
shall execute and deliver to the Trustee and the Trustee shall authenticate for
issuance in the name of the Holder a new Debenture or Debentures in the
aggregate principal amount of the unrepurchased portion of such surrendered
security.
SECTION 703. DEPOSIT OF REPURCHASE PRICE.
On or prior to the Repurchase Date, the Company shall deposit
with the Trustee or with a Paying Agent (or, if the Company is acting as its
own Paying Agent, segregate and hold in trust as provided in Section 1003 of
the Base Indenture) an amount of money in same day funds sufficient to pay the
Repurchase Price of the Debentures which are to be repaid on the Repurchase
Date.
SECTION 704. DEBENTURES NOT REPURCHASED ON REPURCHASE DATE.
If any Debenture surrendered for repurchase shall not be so
paid on the Repurchase Date, such Debenture shall, until paid, bear interest to
the extent permitted by applicable law from the Repurchase Date at the Yield to
Maturity.
SECTION 705. DEBENTURES REPURCHASED IN PART.
Any Debenture which is to be repurchased only in part shall
be surrendered at any office or agency of the Company designated for that
purpose pursuant to Section 1002 of the Base Indenture (with, if the Company or
the Trustee so requires, due endorsement by, or written instrument of transfer
in form satisfactory to the Company and the Trustee duly executed by, the
Holder thereof or his attorney duly authorized in writing), and the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder of
such Debenture without service charge, a new Debenture or Debentures of any
authorized denomination as requested by such Holder, in aggregate principal
amount equal to and in exchange for the unrepurchased portion of the principal
of the Debenture so surrendered.
SECTION 706. CERTAIN DEFINITIONS.
For purposes of this Article:
(a) "Repurchase Event" means a Change of Control occurring on or
after the date of this Supplemental Indenture and on or prior to March 14, 2002
and giving rise to the right under this Article Seven on the part of each
Holder of a Debenture to require, at the Holder's option, the Company to
repurchase such Holder's Debentures, unless: (i) the Current Market Price (as
defined in Section 504(g) hereof) per share of
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the Common Stock is at least equal to 105% of the Accreted Value of $1,000
principal amount of Debentures divided by the Conversion Rate then in effect
immediately preceding the time of such Change of Control; (ii) all of the
consideration (excluding cash payments for fractional shares) in the
transaction giving rise to such Change of Control to the holders of Common
Stock consists of shares of common stock that are, or immediately upon issuance
will be, listed on a national securities exchange or quoted on the Nasdaq
National Market, and as a result of such transaction the Debentures become
convertible solely into such common stock; or (iii) all of the consideration in
the transaction giving rise to such Change of Control to the holders of Common
Stock consists of cash, securities that are, or immediately upon issuance will
be, listed on a national securities exchange or quoted on the Nasdaq National
Market, or a combination of cash and such securities, and the aggregate fair
market value of such consideration (which, in the case of such securities,
shall be equal to the average of the daily Closing Price (as defined in Section
504(g) hereof) of such securities during the ten consecutive Trading Days (as
defined in Section 504(g) hereof) per share commencing with the sixth Trading
Day following consummation of such transaction) is at least 105% of the
Accreted Value of the Debentures divided by the Conversion Rate in effect on
the date immediately preceding the closing date of such transaction.
(b) "Change of Control" means any of the following: (i) the sale,
lease, conveyance or other disposition of all or substantially all of the
Company's assets as an entirety or substantially as an entirety to any "person"
or "group" (as such terms are used for purposes of Sections 13(d) and 14(d) of
the Exchange Act, whether or not applicable) in one or a series of transactions
or (ii) any transaction or series of transactions (as a result of a tender
offer, merger, consolidation or otherwise) that results in any "person" or
"group" (as such terms are used for purposes of Sections 13(d) and 14(d) of the
Exchange Act, whether or not applicable) becoming the "beneficial owner" (as
that term is used in Rules 13d-3 and 13d-5 under the Exchange Act, whether or
not applicable, except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 50% of the total voting power entitled to
vote in the election of directors of the Company.
ARTICLE EIGHT
REMEDIES
SECTION 801. EVENTS OF DEFAULT.
"Event of Default," wherever used herein with respect to the
Debentures, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be occasioned by the provisions of
Article Nine hereof or be voluntary or involuntary or be effected by operation
of law or pursuant to any judgment,
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decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(1) default in the payment of all or any part of the principal of
or premium, if any, on any Debenture when and as the same becomes due and
payable at Stated Maturity, upon redemption, repurchase at the option of the
Holder, acceleration, or otherwise, whether or not such payment is prohibited
by the provisions of Article Nine hereof; or
(2) default in the payment of any interest upon any Debenture
when it becomes due and payable, whether or not such payment is prohibited by
the provisions of Article Nine, and continuance such default for a period of 30
days; or
(3) failure to provide timely notice of a Repurchase Event as
required in accordance with the provisions of Article Seven hereof; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in the Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in this Section
specifically dealt with or which has expressly been included in the Indenture
solely for the benefit of series of Securities other than the Debentures), and
continuance of such default or breach for a period of 60 days after there has
been given, by registered or certified mail, to the Company by the Trustee or
to the Company and the Trustee by the Holders of at least 25% in principal
amount of the Outstanding Debentures a written notice specifying such default
or breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(5) (a) a default under any bond, debenture, note or other
evidence of Indebtedness for money borrowed by the Company or any Subsidiary
(including a default with respect to Securities of any series other than the
Debentures) having an aggregate principal amount outstanding of at least
$5,000,000, or under any mortgage, indenture or instrument (including, without
limitation, the Indenture) under which there may be issued or by which there
may be secured or evidenced any Indebtedness for money borrowed by the Company
or any Subsidiary having an aggregate principal amount outstanding of at least
$5,000,000, 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
(b) a failure to pay Indebtedness in the outstanding principal amount of at
least $5,000,000 at its stated maturity after demand therefor; provided, that
in each case of (a) and (b) above within a period of 10 days after the Trustee
or the Holders, as applicable, have received written notice of such event from
the Company or, in the case of the Holders, from the Trustee, there shall have
been given, by registered or certified mail, to the Company by the Trustee or
to the Company and the Trustee by the Holders of at least 25% in principal
amount of the Outstanding Debentures a written notice specifying such default
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and (x) requiring the Company to cause such Indebtedness to be discharged or
cause such acceleration to be rescinded or annulled, or (y) requiring the
Company to pay the Indebtedness which the Company failed to pay at maturity
after demand therefor and in each case stating that such notice is a "Notice of
Default" hereunder; or
(6) the entry by a court or courts of competent jurisdiction of a
final judgment or final judgments for the payment of money against the Company
or any Subsidiary which remain undischarged for a period (during which
execution shall not be effectively stayed, the posting of any required bond not
being deemed an execution for purposes hereof) of 30 days after all rights to
appeal have been exhausted, provided that the aggregate amount of all such
judgments exceeds $5,000,000; or
(7) the entry by a court having jurisdiction in the premises of
(A) a decree or order for relief in respect of the Company or any Subsidiary in
an involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a decree or
order adjudging the Company or any Subsidiary a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company or any Subsidiary
under any applicable Federal or State law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the
Company or any Subsidiary or of any substantial part of their respective
property, or ordering the winding up or liquidation of the Company's or any
Subsidiary's affairs, and the continuance of any such decree or order for
relief or any such other decree or order unstayed and in effect for a period of
60 consecutive days; or
(8) the commencement by the Company or any Subsidiary of a
voluntary case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or of any other case or
proceeding to be adjudicated a bankrupt or insolvent, or the consent by the
Company or any Subsidiary to the entry of a decree or order for relief in
respect of the Company or any Subsidiary in an involuntary case or proceeding
under any applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or to the commencement of any bankruptcy or insolvency case
or proceeding against the Company or any Subsidiary, or the filing by the
Company or any Subsidiary of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law, or the
consent by the Company or any Subsidiary to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of the Company or any
Subsidiary or of any substantial part of their respective property, or the
making by the Company or any Subsidiary of an assignment for the benefit of
creditors, or the admission by the Company or any Subsidiary in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Company or any Subsidiary in furtherance of any such
action.
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SECTION 802. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in
Section 801(7) or 801(8)) with respect to the Debentures occurs and is
continuing, then in every such case the Trustee or the Holders of not less than
25% in principal amount of the Outstanding Debentures may declare the portion
of principal equal to the Issue Price plus accrued Original Issue Discount to
the date of such declaration to be due and payable immediately, by a notice in
writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable. If an Event of Default specified in Section 801(7)
or 801(8) with respect to the Debentures occurs, the portion of principal equal
to the Issue Price plus accrued Original Issue Discount to the date of such
Event of Default shall automatically, and without any declaration or other
action on the part of the Trustee or any Holder, become immediately due and
payable.
At any time after such a declaration of acceleration with respect to
the Debentures has been made and before a judgment or decree for payment of the
money due has been obtained by the Trustee as hereinafter in this Article
provided, the Holders of a majority in principal amount of the Outstanding
Debentures, by written notice to the Company and the Trustee, may rescind and
annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Debentures,
(B) the principal of and premium, if any, on any
Debentures which have become due otherwise than by such declaration of
acceleration and any interest thereon at the rate borne by the Debentures,
(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the Yield to Maturity, and
(D) all sums paid or advanced by the Trustee hereunder
and the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel; and
(2) all Events of Default with respect to the Debentures, other
than the non-payment of the principal of Debentures which have become due
solely by such declaration of acceleration, have been cured or waived as
provided in Section 813 hereof.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
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SECTION 803. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE
The Company covenants that if
(1) default is made in the payment of any interest on
any Debenture when such interest becomes due and payable and
such default continues for a period of 30 days, or
(2) default is made in the payment of all or any portion
of the principal of or premium, if any, on any Debenture at the
Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Debentures, the whole amount then due and payable on such
Debentures for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the Yield to Maturity,
and, in addition thereto, such further amount as shall be sufficient to cover
the costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Trustee, its agents and counsel.
If an Event of Default with respect to the Debentures occurs and is
continuing, the Trustee may in its discretion proceed to protect and enforce
its rights and the rights of the Holders of the Debentures by such appropriate
judicial proceedings as the Trustee shall deem most effectual to protect and
enforce any such rights, whether for the specific enforcement of any covenant
or agreement in the Indenture or in aid of the exercise of any power granted in
the Indenture, or to enforce any other proper remedy.
SECTION 804. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Debentures), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same, and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 607 of the Base Indenture.
No provision of the Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of
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reorganization, arrangement, adjustment or composition affecting the Debentures
or the rights of any Holder thereof or to authorize the Trustee to vote
in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.
SECTION 805. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF DEBENTURES.
All rights of action and claims under the Indenture or the Debentures
may be prosecuted and enforced by the Trustee without the possession of any of
the Debentures or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Debentures in respect of which such
judgment has been recovered.
SECTION 806. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or premium,
if any, or interest, upon presentation of the Debentures and the notation
thereon of the payment if only partially paid and upon surrender thereof if
fully paid:
FIRST: To the payment of all amounts due the Trustee under
Section 607 of the Base Indenture;
SECOND: Subject to Article Nine hereof, to the payment of the
amounts then due and unpaid for principal of and any premium, if
any, and interest on the Debentures in respect of which or for the
benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Debentures for principal and any premium and
interest, respectively; and
THIRD: To the Company, the remainder, if any.
SECTION 807. LIMITATION ON SUITS.
No Holder of any Debenture shall have any right to institute any
proceeding, judicial or otherwise, with respect to the Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to
the Trustee of a continuing Event of Default with respect to the
Debentures;
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(2) the Holders of not less than 25% in principal amount of
the Outstanding Debentures shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default
in its own name as Trustee under the Indenture;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to
be incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity has failed to institute
any such proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60 day period by the Holders of
a majority in principal amount of the Outstanding Debentures;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of any
other of such Holders, or to obtain or to seek to obtain priority or preference
over any other of such Holders or to enforce any right under the Indenture,
except in the manner herein provided and for the equal and ratable benefit of
all of such Holders.
SECTION 808. UNCONDITIONAL RIGHTS OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM
AND INTEREST AND TO CONVERT.
Notwithstanding any other provision in the Indenture, but subject to
Article Nine hereof, the Holder of any Debenture shall have the right, which is
absolute and unconditional, to receive payment of the principal of and any
premium and (subject to Section 307 of the Base Indenture and the last paragraph
of Section 201 hereof) interest on such Debenture on the respective Stated
Maturities expressed in such Debenture (or, in the case of redemption, on the
Redemption Date), to convert such Debenture in accordance with Article Five
hereof and to institute suit for the enforcement of any such payment or such
right of conversion, and such rights shall not be impaired without the consent
of such Holder.
SECTION 809. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under the Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
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SECTION 810. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Debentures in the last paragraph of
Section 306 of the Base Indenture, no right or remedy in the Indenture conferred
upon or reserved to the Trustee or to the Holders is intended to be exclusive of
any other right or remedy, and every right and remedy shall, to the extent
permitted by law, be cumulative and in addition to every other right and remedy
given under the Indenture or now or hereafter existing at law or in equity or
otherwise. The assertion or employment of any right or remedy under the
Indenture, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 811. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Debentures
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 812. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Debentures shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or exercising
any trust or power conferred on the Trustee, with respect to the Debentures,
provided that
(1) such direction shall not be in conflict with any rule
of law or with the Indenture, and
(2) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction.
SECTION 813. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Debentures may on behalf of the Holders of all the Debentures waive
any past default hereunder with respect to the Debentures and its consequences,
except a default
(1) in the payment of the principal of or premium, if any,
or interest on any Debenture, or
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(2) in respect of a covenant or provision of the Indenture
which under Article Nine of the Base Indenture cannot be modified or
amended without the consent of the Holder of each Outstanding
Debenture affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of the Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
References in Section 902 of the Base Indenture to Section 513 thereof
shall be deemed to refer to this Section 813 for purposes of the Debentures.
SECTION 814. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under the
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act. The provisions of this Section shall not apply to any suit
instituted by the Trustee, to any suit instituted by the Company, to any suit
instituted by any Holder, or group of Holders of an aggregate more than 10
percent in principal amount of the Debentures then outstanding, or to any suit
instituted by any Holder for the enforcement of the payment of the principal of,
premium, if any, or interest on any Debenture, on or after the respective due
dates expressed in such Debenture (including, in the case of redemption, on or
after the Redemption Date and in the case of repurchase, on or after the
Repurchase Date).
SECTION 815. WAIVER OF USURY, STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any usury, stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of the Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
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ARTICLE NINE
SUBORDINATION OF DEBENTURES
SECTION 901. DEBENTURES SUBORDINATE TO SENIOR DEBT.
The Company covenants and agrees, and each Holder of a Debenture, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article, the indebtedness represented
by the Debentures and the payment of the principal of and premium, if any, and
interest on each and all of the Debentures are hereby expressly made subordinate
and subject in right of payment to the prior payment in full of all Senior
Debt.
SECTION 902. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event the holders of Senior Debt shall be entitled to receive payment in
full of all amounts due or to become due on or in respect of all Senior Debt, or
provision shall be made for such payment in cash, before the Holders of the
Debentures are entitled to receive any payment on account of principal of,
premium, if any, or interest on the Debentures, and to that end the holders of
Senior Debt shall be entitled to receive, for application to the payment
thereof, any payment or distribution of any kind or character, whether in cash,
property or securities, including any such payment or distribution which may be
payable or deliverable by reason of the payment of any other indebtedness of the
Company being subordinated to the payment of the Debentures, which may be
payable or deliverable in respect of the Debentures in any such case,
proceeding, dissolution, liquidation or other winding up event.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Debenture shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any such payment or
distribution which may be payable or deliverable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of the
Debentures, before all Senior Debt is paid in full or payment thereof provided
for, and if such fact shall, at or prior to the time of such payment or
distribution, have been made known to the Trustee or, as the case may be, such
Holder, then and in such event such payment or distribution shall be paid over
or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent
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necessary to pay all Senior Debt in full, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Debt. Any taxes that
have been withheld or deducted from any payment or distribution in respect of
the Debentures, or any taxes that ought to have been withheld or deducted from
any such payment or distribution that have been remitted to the relevant taxing
authority, shall not be considered to be an amount that the trustee or the
Holder of any Debenture received for purposes of this Section.
For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment which are subordinated
in right of payment to all Senior Debt which may at the time be outstanding to
substantially the same extent as, or to a greater extent than, the Debentures
are so subordinated as provided in this Article. The consolidation of the
Company with, or the merger of the Company into, another Person or the
liquidation or dissolution of the Company following the conveyance or transfer
of its properties and assets substantially as an entirety to another Person upon
the terms and conditions set forth in Article Eight of the Base Indenture shall
not be deemed a dissolution, winding up, liquidation, reorganization, assignment
for the benefit of creditors or marshalling of assets and liability of the
Company for the purposes of this Section if the Person formed by such
consolidation or into which the Company is merged or the Person which acquires
by conveyance or transfer such properties and assets substantially as an
entirety, as the case may be, shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions set forth in Article Eight of
the Base Indenture.
SECTION 903. PRIOR PAYMENT TO SENIOR DEBT UPON ACCELERATION OF DEBENTURES.
In the event that any Debentures are declared due and payable before
their Stated Maturity, then and in such event the holders of Senior Debt shall
be entitled to receive payment in full of all amounts due or to become due on or
in respect of all Senior Debt or provision shall be made for such payment in
cash, before the Holders of the Debentures are entitled to receive any payment
(including any payment which may be payable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of the
Debentures) by the Company on account of the principal of, premium, if any, or
interest on the Debentures or on account of the purchase or other acquisition of
Debentures.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Debenture prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
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The provisions of this Section shall not apply to any payment with
respect to which Section 902 hereof would be applicable.
SECTION 904. NO PAYMENT WHEN SENIOR DEBT IN DEFAULT.
In the event and during the continuation of any default in the payment
of principal of, premium, if any, or interest on any Senior Debt beyond any
applicable grace period with respect thereto (a "Senior Payment Default") then
no payment (including any payment which may be payable by reason of the payment
of any other indebtedness of the Company being subordinated to the payment of
the Debentures) shall be made by the Company on account of principal of, or
premium, if any, or interest on the Debentures or on account of the purchase or
other acquisition of Debentures.
During the continuance of any non-payment default or event of default
with respect to Senior Debt in an aggregate principal amount of at least $10
million pursuant to which the maturity thereof is or may be accelerated, or in
the event any judicial proceeding shall be pending with respect to any such
default, then, upon receipt by the Trustee of notice thereof from the holders of
such Senior Debt (a "Senior Non-Payment Default"), unless and until (i) such
default or event of default shall have been cured or waived or shall have ceased
to exist, or (ii) a Default under either Section 801(7) or Section 801(8) hereof
involving the Company or any Subsidiary of the Company shall have occurred and
be continuing, or (iii) such Senior Debt shall have been paid in full (each of
clause (i), (ii) and (iii) being a "Blockage Termination Event"), no payment or
distribution will be made by or on behalf of the Company on account of or with
respect to the Debentures (except for those funds held in trust for the benefit
of the Holders of any Debentures to such Holders) during a period (a "Blockage
Period") commencing on the date of receipt of such notice by the Trustee and
ending 179 days thereafter.
In addition to the restrictions on payment set forth in the two
immediately preceding paragraphs, so long as no Blockage Termination Event shall
have occurred, upon the occurrence of either a Senior Payment Default or a
Senior Non-Payment Default, neither the Trustee nor any Holder of the
Debentures may take any action to accelerate the maturity of the Debentures
during any Blockage Period (with respect to a Senior Payment Default, the
Blockage Period shall be deemed to commence on the date which is the first date
payment should have been made).
Notwithstanding anything herein to the contrary, (i) in no event will a
Blockage Period extend beyond the 179 days from the date the payment on the
Debentures was due and (ii) there must be 180 days in any 365 day period during
which no Blockage Period is in effect. Not more than one Blockage Period may be
commenced with respect to the Debentures during any period of 365 consecutive
days. No default or event of default that existed or was continuing on the date
of commencement of any Blockage Period with respect to the Senior Debt
initiating such Blockage Period may be, or be made, the basis for the
commencement of any other Blockage Period by the holders of such Senior Debt,
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whether or not within a period of 365 consecutive days, unless such default or
event of default has been cured or waived for a period of not less than 90
consecutive days.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Trustee or the Holder of any Debenture prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 902 hereof would be applicable.
SECTION 905. PAYMENT PERMITTED IN CERTAIN SITUATIONS.
Nothing contained in this Article or elsewhere in the Indenture or in
any of the Debentures shall prevent (a) the Company, at any time except during
the pendency of any case, proceeding, dissolution, liquidation or other winding
up, assignment for the benefit of creditors or other marshalling of assets and
liabilities of the Company referred to in Section 902 hereof or under the
conditions described in Section 903 or 904 hereof, from making payments at any
time of principal of, premium, if any, or interest on the Debentures, or (b) the
application by the Trustee of any money deposited with it hereunder to the
payment of or on account of the principal of, premium, if any, or interest on
the Debentures or the retention of such payment by the holders, if, at the time
of such application by the Trustee, it did not have knowledge that such payment
would have been prohibited by the provisions of this Article.
SECTION 906. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT.
Subject to the payment in full of all Senior Debt or the provision for
such payment in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Debt, the Holders of the Debentures shall be subrogated
to the extent of the payments or distributions made to the holders of such
Senior Debt pursuant to the provisions of this Article (equally and ratably with
the holders of indebtedness of the Company which by its express terms is
subordinated to indebtedness of the Company to substantially the same extent as
the Debentures are subordinated to the Senior Debt and is entitled to like
rights of subrogation) to the rights of the holders of such Senior Debt to
receive payments and distributions of cash, property and securities applicable
to the Senior Debt until the principal of, premium, if any, and interest on the
Debentures shall be paid in full. For purposes of such subrogation, no payments
or distributions to the holders of the Senior Debt of any cash, property or
securities to which the Holders of the Debentures or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior Debt by
Holders of the Debentures or the Trustee shall, as among the Company, its
creditors other than holders of Senior Debt and the Holders of the Debentures,
be
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deemed to be a payment or distribution by the Company to or on account of the
Senior Debt.
SECTION 907. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Debentures on the
one hand and the holders of Senior Debt on the other hand. Nothing contained in
this Article or elsewhere in the Indenture or in the Debentures is intended to
or shall (a) impair, as among the Company, its creditors other than holders of
Senior Debt and the Holders of the Debentures, the obligation of the Company,
which is absolute and unconditional, to pay to the Holders of the Debentures the
principal of and premium, if any, and interest on the Debentures as and when the
same shall become due and payable in accordance with their terms; or (b) affect
the relative rights against the Company of the Holders of the Debentures and
creditors of the Company other than the holders of Senior Debt; or (c) prevent
the Trustee or the Holder of any Debenture from exercising all remedies
otherwise permitted by applicable law upon default under the Indenture, subject
to the rights, if any, under this Article of the holders of Senior Debt to
receive cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder.
SECTION 908. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Debenture by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 909. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holders of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any non-compliance
by the Company with the terms, provisions and covenants of the Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Debentures, without
incurring responsibility to the Holders of the Debentures and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Debentures to the holders of Senior Debt do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt or otherwise
amend or supplement in any manner Senior Debt or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding; (ii) sell,
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exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (iii) release any Person liable in any manner
for the collection of Senior Debt; and (iv) exercise or refrain from exercising
any rights against the Company and any other Person.
SECTION 910. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Debentures. Notwithstanding the provisions of this
Article or any other provision of the Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Debentures, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Debt or from any trustee therefor; and, prior to
the receipt of any such written notice, the Trustee, subject to the provisions
of Section 601 of the Base Indenture, shall be entitled in all respects to
assume that no such facts exist.
Subject to the provisions of Section 601 of the Base Indenture, the
Trustee shall be entitled to rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior Debt (or a trustee
therefor) to establish that such notice has been given by a holder of Senior
Debt (or a trustee therefor). In the event that the Trustee determines in good
faith that further evidence is required with respect to the right of any Person
as a holder of Senior Debt to participate in any payment or distribution
pursuant to this Article, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Debt held by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent to the
rights of such Person under this Article, and if such evidence is not furnished,
the Trustee may defer any payment to such Person pending judicial determination
as to the right of such Person to receive such payment.
SECTION 911. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company referred to in
this Article, the Trustee, subject to the provisions of Section 601 of the Base
Indenture, and the Holders of the Debentures shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders of Debentures, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Debt and other indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article.
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SECTION 912. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT.
The Trustee shall not be deemed to owe any fiduciary duty to the holders
of Senior Debt and shall not be liable to any such holders or creditors if it
shall in good faith pay over or distribute to Holders of Debentures or to the
Company or to any other Person cash, property or securities to which any holders
of Senior Debt shall be entitled by virtue of this Article or otherwise.
SECTION 913. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT; PRESERVATION OF
TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it, to the same extent as any other holder of Senior Debt
and nothing in the Indenture shall deprive the Trustee of any of its rights as
such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607 of the Base Indenture.
SECTION 914. ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting under the Indenture, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; provided,
however, that Section 913 hereof shall not apply to the Company or any Affiliate
of the Company if it or such Affiliate acts as Paying Agent.
SECTION 915. CERTAIN CONVERSIONS DEEMED PAYMENT.
For purposes of this Article only, (1) the issuance and delivery of
junior securities upon conversion of Debentures in accordance with Article Five
hereof shall not be deemed to constitute a payment or distribution on account of
the principal of or premium, if any, or interest on Debentures or on account of
the purchase or other acquisition of Debentures, and (2) the payment, issuance
or delivery of cash, property or securities (other than junior securities) upon
conversion of a Debenture shall be deemed to constitute payment on account of
the principal of such Debenture. For the purposes of this Section, the term
"junior securities" means (a) shares of any class of capital stock of the
Company and (b) securities of the Company which are subordinated in right of
payment to all Senior Debt which may be outstanding at the time of issuance or
delivery of such securities to substantially the same extent as, or to a greater
extent than, the Debentures are so subordinated as provided in this Article.
Nothing contained in this Article or elsewhere in the Indenture or in the
Debentures is intended to or shall impair,
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as among the Company, its creditors other than holders of Senior Debt and the
Holders of the Debentures, the right, which is absolute and unconditional, of
the Holder of any Debenture to convert such Debenture in accordance with Article
Five hereof.
ARTICLE TEN
MISCELLANEOUS
SECTION 1001. SCOPE OF THIS FIRST SUPPLEMENTAL INDENTURE.
The changes, modifications and supplements to the Indenture effected by
this First Supplemental Indenture shall only be applicable with respect to, and
govern the terms of, the Debentures and shall not apply to any other Securities
that may be issued by the Company under the Indenture.
SECTION 1002. RATIFICATION OF INDENTURE.
The Indenture, as supplemented by this First Supplemental Indenture, is
in all respects ratified and confirmed, and this First Supplemental Indenture
shall be deemed part of the Indenture in the manner and to the extent herein and
therein provided.
SECTION 1003. TRUSTEE NOT RESPONSIBLE FOR RECITALS.
The recitals herein contained are made by the Company and not by the
Trustee, and the Trustee assumes no responsibility for the correctness thereof.
The Trustee makes no representation as to the validity or sufficiency of this
First Supplemental Indenture.
SECTION 1004. GOVERNING LAW.
This First Supplemental Indenture and each Debenture shall be governed
by and construed in accordance with the laws of the State of New York, without
regard to the principles of conflicts of laws thereof.
SECTION 1005. SEPARABILITY.
In case any one or more of the provisions contained in this First
Supplemental Indenture or in the Debentures shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this First
Supplemental Indenture or of the Debentures, but this First Supplemental
Indenture and the Debentures shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein or therein.
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SECTION 1006. COUNTERPARTS.
This First Supplemental Indenture may be executed in any number of
counterparts each of which shall be an original, but such counterparts shall
together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
CAPSTONE CAPITAL CORPORATION
By:_________________________
Name:
Title:
Attest:
By:___________________________________
Name:
Title:
AMSOUTH BANK OF ALABAMA,
as Trustee
By:_________________________
Name:
Title:
Attest:
By:___________________________________
Name:
Title:
<PAGE> 57
STATE OF ALABAMA )
) ss.:
COUNTY OF JEFFERSON )
On the _____ day of ____________, ____, before me personally came
____________ to me known, who, being by me duly sworn, did depose and say that
he is ____________ of ____________, one of the corporations described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
----------------------------
STATE OF ALABAMA )
) ss.:
COUNTY OF JEFFERSON )
On the _____ day of ____________, ____, before me personally
came ____________ to me known, who, being by me duly sworn, did depose and say
that he is ____________ of ____________, one of the corporations described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
----------------------------
<PAGE> 58
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
DEFINITIONS . . . . . . . . . . . . . . . . 2
SECTION 101. Definition of Terms . . . . . . . . . . . . . . 2
ARTICLE TWO
THE DEBENTURES . . . . . . . . . . . . . . 4
SECTION 201. Title and Terms . . . . . . . . . . . . . . . . 4
ARTICLE THREE
FORM OF DEBENTURES. . . . . . . . . . . . . 6
SECTION 301. Form Generally . . . . . . . . . . . . . . . . . 6
SECTION 302. Form of Face of Debenture. . . . . . . . . . . . 6
SECTION 303. Form of Reverse of Debenture . . . . . . . . . . 8
SECTION 304. Global Debentures . . . . . . . . . . . . . . . 17
SECTION 305. Form of Trustee's Certificate of Authentication. 17
ARTICLE FOUR
RESTRICTIONS ON OWNERSHIP AND TRANSFER. . . 18
SECTION 401. Ownership and Transfer Restrictions. . . . . . . 18
ARTICLE FIVE
CONVERSION OF DEBENTURES. . . . . . . . . . 19
SECTION 501. Conversion Privilege and Conversion Rate . . . . 19
SECTION 502. Exercise of Conversion Privilege . . . . . . . . 19
SECTION 503. Fractions of Shares. . . . . . . . . . . . . . . 20
SECTION 504. Adjustment of Conversion Rate. . . . . . . . . . 21
SECTION 505. Notice of Adjustments of Conversion Rate . . . . 26
SECTION 506. Notice of Certain Corporate Action . . . . . . . 27
SECTION 507. Company to Reserve Common Stock. . . . . . . . . 28
SECTION 508. Taxes on Conversions . . . . . . . . . . . . . . 28
SECTION 509. Covenant as to Common Stock. . . . . . . . . . . 29
</TABLE>
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<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 510. Cancellation of Converted Debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 511. Provisions in Case of Reclassification, Consolidation, Merger or Sale of Assets . . . . . . 29
SECTION 512. Responsibility of Trustee and Conversion Agent . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 513. Refusal to Convert Debentures to Protect REIT Status . . . . . . . . . . . . . . . . . . . 30
ARTICLE SIX
REDEMPTION OF DEBENTURES . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 601. Right of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 602. Applicability of Article . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 603. Election to Redeem; Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 604. Selection by Trustee of Debentures to be Redeemed . . . . . . . . . . . . . . . . . . . . . 32
SECTION 605. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 606. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 607. Debentures Payable on Redemption Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 608. Debentures Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE SEVEN
RIGHT TO REQUIRE REPURCHASE . . . . . . . . . . . . . . . . . . . . . 34
SECTION 701. Right to Require Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 702. Notice; Method of Exercising Repurchase Right . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 703. Deposit of Repurchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 704. Debentures Not Repurchased on Repurchase Date . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 705. Debentures Repurchased in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 706. Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE EIGHT
REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 801. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 802. Acceleration of Maturity; Rescission and Annulment . . . . . . . . . . . . . . . . . . . . 40
SECTION 803. Collection of Indebtedness and Suits for Enforcement by Trustee . . . . . . . . . . . . . . 41
SECTION 804. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
</TABLE>
ii
<PAGE> 60
<TABLE>
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<S> <C> <C>
SECTION 805. Trustee May Enforce Claims Without Possession of Debentures . . . . . . . . . . . . . . . . 42
SECTION 806. Application of Money Collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 807. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 808. Unconditional Rights of Holders to Receive Principal, Premium and Interest and to
Convert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 809. Restoration of Rights and Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 810. Rights and Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 811. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 812. Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 813. Waiver of Past Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
SECTION 814. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 815. Waiver of Usury, Stay or Extension Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 45
ARTICLE NINE
SUBORDINATION OF DEBENTURES . . . . . . . . . . . . . . . . . . . . . 46
SECTION 901. Debentures Subordinate to Senior Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 902. Payment Over of Proceeds Upon Dissolution, Etc. . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 903. Prior Payment to Senior Debt Upon Acceleration of Debentures . . . . . . . . . . . . . . . 47
SECTION 904. No Payment When Senior Debt in Default . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SECTION 905. Payment Permitted in Certain Situations . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 906. Subrogation to Rights of Holders of Senior Debt . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 907. Provisions Solely to Define Relative Rights . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 908. Trustee to Effectuate Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 909. No Waiver of Subordination Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 910. Notice to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 911. Reliance on Judicial Order or Certificate of Liquidating Agent . . . . . . . . . . . . . . 51
SECTION 912. Trustee Not Fiduciary for Holders of Senior Debt . . . . . . . . . . . . . . . . . . . . . 52
SECTION 913. Rights of Trustee as Holder of Senior Debt; Preservation of Trustee's Rights . . . . . . . 52
SECTION 914. Article Applicable to Paying Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 915. Certain Conversions Deemed Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
ARTICLE TEN
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 1001. Scope of this First Supplemental Indenture . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 1002. Ratification of Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
</TABLE>
iii
<PAGE> 61
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SECTION 1003. Trustee Not Responsible for Recitals . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 1004. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 1005. Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 1006. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
</TABLE>
iv
<PAGE> 1
EXHIBIT 5
WALLER LANSDEN DORTCH & DAVIS
A Professional Limited Liability Company
Nashville City Center
511 Union Street, Suite 2100
Post Office Box 198966
Nashville, Tennessee 37219-8966
(615) 244-6380
July 21, 1998
Healthcare Realty Trust Incorporated
3310 West End Avenue
Suite 700
Nashville, Tennessee 37203
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
In our capacity as special securities counsel to Healthcare Realty Trust
Incorporated, a Maryland corporation (the "Company"), we have examined the
Registration Statement on Form S-4 to be filed by the Company under the
Securities Act of 1933, as amended, and the related Joint Proxy
Statement-Prospectus included therein. The Registration Statement relates to up
to 18,907,100 shares of the common stock, par value $.01 per share, of the
Company (the "Common Stock") and 3,000,000 shares of the 8 7/8% Series A Voting
Cumulative Preferred Stock, par value $.01 per share, of the Company (the
"Preferred Stock") to be issued as part of a merger of a wholly-owned subsidiary
of the Company with and into Capstone Capital Corporation, a Maryland
corporation ("Capstone"), pursuant to a Plan and Agreement of Merger, dated June
8, 1998, among the Company HR Acquisition I Corporation, a Delaware corporation,
and Capstone. In this regard, we have examined and relied upon such records,
documents and other instruments as in our judgment are necessary or appropriate
in order to express the opinions hereinafter set forth.
Based upon the foregoing, we are of the opinion that the shares of Common
Stock and the Preferred Stock referred to in the Prospectus, to the extent
actually issued in the manner and on the terms described in the Prospectus, will
be duly and validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and further consent to the reference to us under the
caption "Legal Matters" in the Prospectus Supplement.
Very truly yours,
/s/ Waller Lansden Dortch & Davis
A Professional Limited Liability Company
<PAGE> 1
Exhibit 8
FARRIS, WARFIELD & KANADAY, PLC
ATTORNEYS AT LAW
SUNTRUST CENTER
424 CHURCH STREET, SUITE 1900
NASHVILLE, TENNESSEE 37219-2387
TELEPHONE (615) 244-5200
July 20, 1998 FAX (615) 726-3185
Board of Directors
Healthcare Realty Trust Incorporated
3310 West End Avenue, Suite 400
Nashville, Tennessee 37203
Re: Form S-4 Registration
Gentlemen:
We have acted as special tax counsel to Healthcare Realty Trust
Incorporated, a Maryland corporation (the "Company"), in connection with the
Registration Statement on Form S-4 (File No. 333-_____) and the documents
incorporated by reference therein (the "Incorporated Documents") pursuant to the
provisions of the Securities Act of 1933, as amended (the "Act") relating to the
registration of shares of common stock and preferred stock of the Company
(collectively, the "Securities") to be issued by the Company in connection with
a merger with Capstone Capital Corporation. The Company's registration
statement, as amended, including the Incorporated Documents, is hereinafter
referred to as the "Registration Statement" and the related joint proxy
statement - prospectus dated ________, 1998 (including the Incorporated
Documents), relating to the Securities is hereinafter referred to as the
"Prospectus". In connection with the Registration Statement, you have requested
our opinions (A) that the Company was and is organized in conformity with the
requirements for qualification as a real estate investment trust ("REIT") under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the
"Code") and that its method of operation as described in the Prospectus permits
it to meet the requirements for qualification and taxation as a REIT, and (B)
confirming the statements made relating to federal income tax considerations in
the Form 10-K of the Company for the year ending December 31, 1997, which is
incorporated by reference in the Prospectus. All capitalized terms in this
opinion which are defined in the Registration Statement and the Prospectus shall
have the same respective meanings as set forth in the Registration Statement and
the Prospectus.
In rendering our opinion, we have examined and relied upon the
following documents and other materials:
1. Schedules prepared and delivered by officials of the Company setting
forth:
(a) REIT taxable and gross income for the fiscal year ended
December 31, 1997, together with a schedule of actual dividends
distributed and projected dividends to be distributed in accordance
with Code Section 858 and compliance with the distribution requirements
of Code Section 857(a); and
<PAGE> 2
July 20, 1998
Page 2
(b) Compliance with the applicable REIT ratios or tests for
the fiscal year ended December 31, 1997, including:
Income tests:
(1) 95% gross income test for the year;
(2) 75% gross income test for the year;
(3) 30% gross income test for the year;
Asset tests:
(1) 75% asset test at the end of each quarter;
(2) 25% asset test at the end of each quarter;
(3) 10% asset test at the end of each quarter;
(4) 5% asset test at the end of each quarter.
2. The Company's certificate, dated as of July 15, 1998.
In addition, we have examined such additional records, documents,
certificates and other instruments and made such investigations of fact and law
as in our judgement are necessary or appropriate to enable us to render the
opinion expressed below.
In rendering our opinion, we have made the following assumptions:
1. Five or fewer shareholders have not owned, directly or indirectly
under the rules of Code Section 544, as modified by Code Section 856(h), at any
time since the completion of the initial public offering, over 50% in value of
the outstanding stock of the Company; and "Excess Shares" (defined in the
Company's Second Articles of Amendment and Restatement to be shares of a value
exceeding 9.9% in value of the outstanding shares of the Company) held or deemed
held by any person (pursuant to applicable rules of attribution) are deemed to
have no value or voting rights.
2. The Company has and will comply with any and all procedural
requirements for REIT status set forth in Code Sections 856 through 860 and the
regulations thereunder, including the timely making of such elections and the
obtaining and disclosing of such information as is required on the federal tax
returns to be filed by the Company.
3. The Company will operate in accordance with its past and proposed
method of operation as described in its filings with the Securities and Exchange
Commission under the Securities Act of 1933 and the Securities Exchange Act of
1934, as amended.
4. All partnerships in which the Company may have an ownership interest
will own only "real estate assets" and cash reserves. All activities of those
partnerships will consist of activities permitted to be undertaken by a REIT,
and income of such partnerships, other than interest income on cash reserves,
shall be "rents from real property".
<PAGE> 3
July 20, 1998
Page 3
5. Each corporation in which the Company has acquired or acquires an
equity interest shall either be a "Qualified REIT Subsidiary" under Code Section
856(i) or a corporation in which the Company will not own over ten percent of
the outstanding voting securities, and the securities owned of any such
corporation which is not a Qualified REIT Subsidiary will not be greater in
value than five percent (5%) of the value of the total assets of the Company.
On the basis of and in reliance on the foregoing, we wish to advise you
that under current law, including relevant statutes, regulations and judicial
and administrative precedent (which law is subject to change on a retroactive
basis), in our opinion the Company has been organized in conformity with the
requirements for qualification as a REIT under the Code since its taxable year
ended December 31, 1993, and that its method of operation as described in the
Prospectus permits it to meet the requirements for qualification and taxation as
a REIT.
In addition, we also hereby confirm the statements made under the
caption "Certain Federal Income Tax Consequences" in the Prospectus, including
Item 1 of the Company's Annual Report on Form 10-K for the year ending December
31, 1997, incorporated by reference therein, under the heading "Federal Income
Tax Information".
Since actual qualification as a REIT is dependent upon future facts and
circumstances, it is possible that future events, operations, distributions or
other actions will cause the Company not to qualify or continue to qualify as a
REIT.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We also consent to references to Farris, Warfield &
Kanaday, PLC in the Prospectus.
The foregoing opinions are limited to the federal income tax matters
addressed herein, and no other opinions are rendered with respect to other
federal tax matters or to any issues arising under the tax laws of any state,
locality or foreign country. We undertake no obligation to update the opinions
expressed herein after the date of this letter.
Sincerely,
/s/ Farris Warfield & Kanaday, PLC
<PAGE> 1
EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
AGREEMENT, dated as of _______________, 1998, between CAPSTONE CAPITAL
CORPORATION, a Maryland corporation ("Seller"), and ORTHOPAEDIC SURGEONS, INC.,
a Delaware corporation ("Buyer").
WITNESSETH:
WHEREAS, Seller desires to sell, assign and transfer, and Buyer desires
to purchase and acquire, certain of Seller's assets, subject to the assumption
by Buyer of the Assumed Liabilities (as defined herein), all on the terms and
conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
SECTION 1.1. PURCHASE AND SALE OF ASSETS.
1.1. TRANSFERRED ASSETS. Subject to the terms and conditions
set forth in this Agreement, Seller shall sell, transfer and deliver by
quitclaim and without warranty to Buyer, and Buyer shall purchase and acquire
from Seller, all of Seller's right, title and interest in and to the specific
assets owned by Seller set forth on Schedule A attached hereto (the "Transferred
Assets").
1.2. PURCHASE PRICE. The purchase price for the Transferred
Assets (the "Purchase Price") shall be (i) $350,000 in cash, payable on the
Closing Date and (ii) the assumption and release of Seller's obligations and
liabilities under the leases and agreements set forth on Schedule B attached
hereto (the "Assumed Agreements").
1.3. THE CLOSING. The closing of the purchase and sale
contemplated hereby (the "Closing") shall occur at Buyer's executive offices
concurrently with the closing of the Merger or on such other date as the parties
shall mutually agree upon, but not later than __________, 1999. At the Closing,
the parties hereto shall make the deliveries described below, provided that the
obligation of each to do so shall depend upon the performance by the other party
of its obligations hereunder:
(a) Seller shall deliver to Buyer the following:
(i) A bill of sale for the Transferred
Assets; and
(ii) Such other documents as may be
reasonably necessary to consummate
the transactions contemplated
hereby.
<PAGE> 2
(b) Buyer shall deliver the following:
(i) A wire transfer to Seller of the
amount of $350,000; and
(ii) An assumption of the Assumed
Agreements;
(iii) Releases of Seller's obligations
under each of the Assumed
Agreements; and
(iv) Such other documents as may be
reasonably necessary to consummate
the transactions contemplated
hereby.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller
represents and warrants to Buyer that Seller is a corporation duly organized and
existing in good standing under the laws of the state of Maryland. Seller has
all requisite power and authority, corporate or otherwise, to enter into this
Agreement and to perform fully its obligations hereunder. The execution and
delivery of this Agreement and the performance by Seller of its obligations
hereunder have been duly and validly authorized by all necessary corporate
action on the part of Seller. This Agreement is a valid and binding obligation
of Seller enforceable in accordance with its terms.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents
and warrants to Seller that Buyer is a corporation duly organized and existing
in good standing under the laws of the state of Delaware. Buyer has all
requisite corporate power and authority to enter into this Agreement and to
assume and perform fully its obligations hereunder. The execution and delivery
of this Agreement and the performance by Buyer of its obligations hereunder have
been duly and validly authorized by all necessary corporate action on the part
of Buyer. This Agreement is a valid and binding obligation of Buyer enforceable
in accordance with its terms.
SECTION 4. COVENANTS TO THE PARTIES.
4.1. EFFORTS TO CONSUMMATE TRANSACTION. Buyer and Seller
shall use their respective best efforts to take or cause to be taken all such
actions required to consummate the transactions contemplated hereby including,
without limitation, such actions as may be necessary to obtain, prior to the
Closing, all necessary governmental or other third-party approvals and consents
required to be obtained in connection with the consummation of the transactions
contemplated by this Agreement.
4.2. SELLER GIVES NO WARRANTY, EXPRESS OR IMPLIED, AS TO
DESCRIPTION, QUALITY, MERCHANTABILITY,
2
<PAGE> 3
FITNESS FOR ANY PARTICULAR PURPOSE, PRODUCTIVENESS, OR ANY OTHER MATTER, OF ANY
OF THE TRANSFERRED ASSETS. SELLER SHALL BE IN NO WAY RESPONSIBLE FOR THEIR
PROPER USE AND SERVICE, AND BUYER HEREBY WAIVES ALL RIGHTS OF REFUSAL AND RETURN
OF GOODS.
4.3. EXPENSES. Each party agrees to bear its own expenses
incurred in connection with the transactions contemplated hereby. All transfer
or sales taxes payable in connection with the purchase and sale of the
Transferred Assets shall be borne by Buyer.
SECTION 5.5. AGREEMENT TO INDEMNIFY. Buyer hereby agrees to
indemnify and hold harmless Seller and Seller's officers, directors, employees,
representatives, successors and affiliates from and against any and all losses,
liabilities, claims, damages and costs (including attorneys' fees) incurred by
any of such indemnified persons as a result of (i) the failure of the Buyer's
representations and warranties set forth in this Agreement to be true and
correct in all respects, or (ii) Buyer's failure to discharge the Assumed
Agreements when due. Such indemnification obligations shall apply regardless of
any investigation made by any party and shall survive until the expiration of
all applicable statutes of limitations.
* * * * *
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed on the date and year first above written.
CAPSTONE CAPITAL CORPORATION
By:
-----------------------------------
Title:
--------------------------------
ORTHOPAEDIC SURGEONS, INC.
By:
-----------------------------------
Title:
--------------------------------
4
<PAGE> 5
SCHEDULE A
TRANSFERRED ASSETS
A-1
<PAGE> 6
SCHEDULE B
ASSUMED AGREEMENTS
B-1
<PAGE> 1
Exhibit 23.1
CONSENT OF KPMG PEAT MARWICK LLP
The Board of Directors
Capstone Capital Corporation:
We consent to the use of our reports incorporated by reference herein related
to the financial statements of Capstone Capital Corporation and the financial
statement schedules as of December 31, 1997 and 1996, and for each of the years
in the three-year period ended December 31, 1997, and to the reference to our
firm under the heading "Experts" in the prospectus.
/s/ KPMG Peat Marwick LLP
Birmingham, Alabama
July 24, 1998
<PAGE> 1
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-4) and related Prospectus of Healthcare Realty
Trust Incorporated ("Healthcare Realty") for the registration of 18,907,100
shares of its common stock and 3,000,000 shares of its preferred stock and to
the incorporation by reference therein of our reports dated January 30, 1998
(except for the 2nd paragraph of Note 13 of the consolidated financial
statements as to which the date is February 27, 1998), with respect to the
consolidated financial statements of Healthcare Realty incorporated by reference
in its Annual Report (Form 10-K) for the year ended December 31, 1997 and the
related financial statement schedule included therein, filed with the Securities
and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
Nashville, TN
July 21, 1998
<PAGE> 1
Exhibit 99.1
[LETTERHEAD OF SALOMON SMITH BARNEY]
The Board of Directors
Capstone Capital Corporation
1000 Urban Center Drive
Birmingham, Alabama 35242
Members of the Board:
We hereby consent to the inclusion of our opinion letter to the Board of
Directors of Capstone Capital Corporation ("Capstone") as Annex B to the Joint
Proxy Statement-Prospectus of Capstone and Healthcare Realty Trust Incorporated
("Healthcare Realty") relating to the proposed merger transaction involving
Capstone and Healthcare Realty. In giving such consent, we do not admit that we
come within the category of persons whose consent is required under, and we do
not admit that we are "experts" for purposes of, the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
SMITH BARNEY INC.
SALOMON BROTHERS INC
By: /s/ Smith Barney Inc.
------------------------------
SMITH BARNEY INC.
July 24, 1998
<PAGE> 1
EXHIBIT 99.3
HEALTHCARE REALTY TRUST INCORPORATED
SPECIAL MEETING OF STOCKHOLDERS
_______________________, 1998
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
HEALTHCARE REALTY TRUST INCORPORATED
The undersigned hereby appoints David R. Emery and Timothy G.
Wallace and each of them, with full power of substitution, attorneys and proxies
of the undersigned to vote the shares of Common Stock, $.01 par value per share
(the "Common Stock"), of Healthcare Realty Trust Incorporated ("Healthcare
Realty"), which the undersigned could vote, and with all power the undersigned
would possess, if personally present at the special meeting of stockholders of
Healthcare Realty to be held at Healthcare Realty Trust Incorporated, The Board
Room, 3310 West End Avenue, Suite 700, Nashville, Tennessee on __________,
______________ ____, 1998, at ___.m. (local time), and any adjournment thereof:
1. To approve of the issuance of shares of Common Stock and 8 7/8%
Series A Voting Cumulative Preferred Stock of Healthcare Realty in connection
with the transactions contemplated in the Plan and Agreement of Merger, dated as
of June 8, 1998 (attached as Annex A to the Joint Proxy Statement-Prospectus
that has been transmitted in connection with the special meeting), among
Healthcare Realty, HR Acquisition I Corporation, a newly formed Delaware
corporation and wholly owned subsidiary of Healthcare Realty, and Capstone
Capital Corporation, all as described in the Joint Proxy Statement-Prospectus.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, the
above named proxies will vote in favor of the issuance of shares of Common Stock
and 8 7/8% Series A Voting Cumulative Preferred Stock of Healthcare Realty
referred to in Item 1 above.
Dated: , 1998
---------------------------------
Signature
---------------------------------
Signature if held jointly
Important: Please sign exactly as
your name or names appear on this
proxy and mail promptly in the
enclosed envelope. Joint owners
should sign personally. If you
sign as agent or in any other
capacity, please state the
capacity in which you sign.
<PAGE> 1
EXHIBIT 99.4
CAPSTONE CAPITAL CORPORATION
SPECIAL MEETING OF STOCKHOLDERS
_______________________, 1998
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CAPSTONE CAPITAL CORPORATION
The undersigned hereby appoints _______________ and
________________ and each of them, with full power of substitution, attorneys
and proxies of the undersigned to vote the shares of Common Stock, $.001 par
value per share, of Capstone Capital Corporation ("Capstone"), which the
undersigned could vote, and with all power the undersigned would possess, if
personally present at the special meeting of stockholders of Capstone to be held
at the Richard M Scrushy Conference Center, Two HealthSouth Parkway, Birmingham,
Alabama on _______, ______________ ____, 1998, at ___.m. (local time), and any
adjournment thereof:
1. To approve and adopt the merger contemplated by the Plan and
Agreement of Merger, dated as of June 8, 1998 (attached as Annex A to the Joint
Proxy Statement-Prospectus that has been transmitted in connection with the
special meeting), among Capstone, Healthcare Realty Trust Incorporated
("Healthcare Realty") and HR Acquisition I Corporation, a newly formed Delaware
corporation and wholly owned subsidiary of Healthcare Realty, all as described
in the Joint Proxy Statement-Prospectus.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, the
above named proxies will vote in favor of the approval and adoption of the Plan
and Agreement of Merger referred to in Item 1 above.
Dated: , 1998
---------------------------------
Signature
---------------------------------
Signature if held jointly
Important: Please sign exactly as
your name or names appear on this
proxy and mail promptly in the
enclosed envelope. Joint owners
should sign personally. If you
sign as agent or in any other
capacity, please state the
capacity in which you sign.
<PAGE> 1
EXHIBIT 99.5
CAPSTONE CAPITAL CORPORATION
SPECIAL MEETING OF STOCKHOLDERS
_______________________, 1998
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CAPSTONE CAPITAL CORPORATION
The undersigned hereby appoints _______________ and
________________ and each of them, with full power of substitution, attorneys
and proxies of the undersigned to vote the shares of 8-7/8% Series A Cumulative
Preferred Stock, $.001 par value per share, of Capstone Capital Corporation
("Capstone"), which the undersigned could vote, and with all power the
undersigned would possess, if personally present at the special meeting of
stockholders of Capstone to be held at the Richard M Scrushy Conference Center,
Two HealthSouth Parkway, Birmingham, Alabama on _______, ______________ ____,
1998, at ___.m. (local time), and any adjournment thereof:
1. To approve and adopt the merger contemplated by the Plan and
Agreement of Merger, dated as of June 8, 1998 (attached as Annex A to the Joint
Proxy Statement-Prospectus that has been transmitted in connection with the
special meeting), among Capstone, Healthcare Realty Trust Incorporated
("Healthcare Realty") and HR Acquisition I Corporation, a newly formed Delaware
corporation and wholly owned subsidiary of Healthcare Realty, all as described
in the Joint Proxy Statement-Prospectus.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
This Proxy, when properly executed, will be voted in the manner
directed herein by the undersigned stockholder. If no direction is made, the
above named proxies will vote in favor of the approval and adoption of the Plan
and Agreement of Merger referred to in Item 1 above.
Dated: , 1998
---------------------------------
Signature
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Signature if held jointly
Important: Please sign exactly as
your name or names appear on this
proxy and mail promptly in the
enclosed envelope. Joint owners
should sign personally. If you
sign as agent or in any other
capacity, please state the
capacity in which you sign.
