<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1995
REGISTRATION NO. 33-58693
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------------------
SHURGARD STORAGE CENTERS, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 91-1080141
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
1201 THIRD AVENUE, SUITE 2200
SEATTLE, WASHINGTON 98101
(206) 624-8100
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
CHARLES K. BARBO
1201 THIRD AVENUE, SUITE 2200
SEATTLE, WASHINGTON 98101
(206) 624-8100
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
MICHAEL E. STANSBURY WILLIAM J. CERNIUS
L. MICHELLE WILSON DANIEL L. PELEKOUDAS
PERKINS COIE LATHAM & WATKINS
1201 THIRD AVENUE, 40TH FLOOR 650 TOWN CENTER DRIVE, 20TH FLOOR
SEATTLE, WASHINGTON 98101-3099 COSTA MESA, CALIFORNIA 92626-1925
(206) 583-8888 (714) 540-1235
</TABLE>
--------------------------
Approximate date of commencement of proposed sale to the public: From time
to time after the effective date of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT PRICE(1)(2)
<S> <C> <C> <C>
Debt Securities..........................................
Preferred Stock, par value $.001 per share(3)............
Class A Common Stock, par value $.001 per share(4).......
Total.................................................. $200,000,000 (5) $200,000,000
<CAPTION>
TITLE OF EACH CLASS OF AMOUNT OF
SECURITIES TO BE REGISTERED REGISTRATION FEE
<S> <C>
Debt Securities..........................................
Preferred Stock, par value $.001 per share(3)............
Class A Common Stock, par value $.001 per share(4).......
Total.................................................. $68,966(6)
<FN>
(1) In U.S. Dollars or the equivalent thereof denominated in one or more
foreign currencies or units of two or more foreign currencies or composite
currencies (such as European Currency Units).
(2) Estimated solely for purposes of calculating the registration fee. No
separate consideration will be received for Class A Common Stock or
Preferred Stock that is issued upon conversion of Debt Securities or
Preferred Stock registered hereunder, as the case may be. The aggregate
maximum public offering price of all Securities issued pursuant to this
Registration Statement will not exceed $200,000,000.
(3) Such indeterminate number of shares of Preferred Stock as may from time to
time be issued at indeterminate prices or issuable upon conversion of Debt
Securities.
(4) Such indeterminate number of shares of Class A Common Stock (including the
associated Preferred Share Purchase Rights) as may from time to time be
issued at indeterminate prices or issuable upon conversion of Debt
Securities or Preferred Stock registered hereunder, as the case may be.
(5) Omitted pursuant to General Instruction II.D of Form S-3 under the
Securities Act of 1933, as amended.
(6) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act of 1933, as amended, and previously paid.
</TABLE>
--------------------------
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 THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION DATED MAY 1, 1995
PROSPECTUS
SHURGARD STORAGE CENTERS, INC.
$200,000,000
DEBT SECURITIES, PREFERRED STOCK AND COMMON STOCK
Shurgard Storage Centers, Inc. (the "Company") may from time to time offer
in one or more series (i) its debt securities (the "Debt Securities"), (ii)
shares of its preferred stock, par value $.001 per share (the "Preferred
Stock"), or (iii) shares of its Class A Common Stock, par value $.001 per share
(the "Class A Common Stock"), with an aggregate public offering price of up to
$200,000,000 on terms to be determined at the time of offering. The Debt
Securities, the Preferred Stock and the Class A Common Stock (collectively, the
"Securities") may be offered, separately or together, in separate series, in
amounts, at prices and on terms to be set forth in one or more supplements to
this Prospectus (each, a "Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Debt Securities, the specific
title, aggregate principal amount, currency, form (which may be registered or
bearer, or certificated or global), authorized denominations, maturity, rate (or
manner of calculation thereof) and time of payment of interest, terms for
redemption at the Company's option or repayment at the holder's option, terms
for sinking fund payments, terms for conversion into Preferred Stock or Class A
Common Stock, covenants and any initial public offering price; (ii) in the case
of Preferred Stock, the specific designation and stated value, any dividend,
liquidation, redemption, conversion, voting and other rights, and any initial
public offering price; and (iii) in the case of Class A Common Stock, any
initial public offering price. In addition, such specific terms may include
limitations on actual or constructive ownership and restrictions on transfer of
the Securities, in each case as may be appropriate to preserve the status of the
Company as a real estate investment trust ("REIT") for federal income tax
purposes. See "Restrictions on Transfers of Capital Stock; Excess Stock."
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Securities may be offered directly, through agents designated from time
to time by the Company, or to or through underwriters or dealers. If any agents
or underwriters are involved in the sale of any of the Securities, their names,
and any applicable purchase price, fee, commission or discount arrangement
between or among them, will be set forth, or will be calculable from the
information set forth, in the applicable Prospectus Supplement. See "Plan of
Distribution." No Securities may be sold without delivery of the applicable
Prospectus Supplement describing the method and terms of the offering of such
series of Securities.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
------------------------
The date of this Prospectus is May , 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The registration
statement on Form S-3 (of which this Prospectus is a part) (the "Registration
Statement"), the exhibits and schedules forming a part thereof and the reports,
proxy statements and other information filed by the Company with the Commission
in accordance with the Exchange Act can be inspected and copied at the
Commission's Public Reference Section, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the following regional offices of the Commission: Seven World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can
be obtained from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition, the
Class A Common Stock is quoted on the Nasdaq National Market ("Nasdaq") and
similar information concerning the Company can be inspected and copied at the
offices of Nasdaq, 1735 K Street, N.W., Washington, D.C. 20006. The Company has
been approved for listing on the New York Stock Exchange (the "NYSE") commencing
May 5, 1995, and similar information concerning the Company can be inspected and
copied at the offices of the NYSE, 20 Broad Street, New York, New York 10005
after that time.
The Company has filed with the Commission the Registration Statement under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Securities. This Prospectus does not contain all the information set forth
in the Registration Statement, certain portions of which have been omitted as
permitted by the Commission's rules and regulations. Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or other document filed as an exhibit to the Registration Statement,
each such statement being qualified in all respects by such reference and the
exhibits and schedules thereto. For further information regarding the Company
and the Securities, reference is hereby made to the Registration Statement and
such exhibits and schedules, which may be obtained from the Commission at its
principal office in Washington, D.C. upon payment of the fees prescribed by the
Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The documents listed below have been filed by the Company under the Exchange
Act with the Commission and are incorporated herein by reference:
a. Annual Report on Form 10-K for the fiscal year ended December 31, 1994;
b. Description of the Class A Common Stock contained in the Company's
Registration Statement on Form 8-A, as amended, dated April 19, 1995;
c. Description of the Preferred Share Purchase Rights contained in the
Company's Registration Statement on Form 8-A, as amended, dated April 19,
1995; and
d. Current Report on Form 8-K dated April 24, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the Securities shall be deemed to be
incorporated by reference in this Prospectus and to be part hereof from the date
of filing such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
Copies of all documents that are incorporated herein by reference (not
including the exhibits to such documents, unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates) will be provided without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request. Requests should be directed to the Secretary of the Company, 1201 Third
Avenue, Suite 2200, Seattle, Washington, 98101 (telephone number: (206) 624-8100
ext. 511).
2
<PAGE>
THE COMPANY
Shurgard Storage Centers, Inc. (the "Company") is a fully integrated,
self-managed real estate investment trust ("REIT") that acquires, owns and
manages self-storage properties. The Company's self-storage properties offer
low-cost, easily accessible storage space for personal and business uses. The
Company is one of the largest operators of self-storage properties in the United
States. The Company owns, as of March 31, 1995, directly and through joint
ventures, 161 operating self-storage properties, containing approximately 10.7
million net rentable square feet, which are located in 22 major metropolitan
areas in 19 states. As a result of the merger (the "Merger") with Shurgard
Incorporated (the "Management Company") described below, the Company also
manages 87 self-storage facilities for affiliated and unaffiliated owners of
self-storage facilities. In addition, the Company owns two business parks. As of
December 31, 1994, the Company's owned self-storage properties had a weighted
average annual square foot occupancy of 89% and a weighted average annual rent
per square foot of $8.25.
The Company began operations as a REIT through the consolidation on March 1,
1994 of 17 publicly held real estate limited partnerships (the "Consolidation")
that were sponsored by the Management Company. On March 24, 1995, the Management
Company merged with and into the Company pursuant to an Agreement and Plan of
Merger dated December 19, 1994, and the Company became self-administered and
self-managed. Through the Merger, the Company internalized the expertise and
experience of the Management Company's personnel that cover all aspects of the
self-storage industry.
The Company is a Delaware corporation incorporated on July 23, 1993. The
Company's executive offices are located at 1201 Third Avenue, Suite 2200,
Seattle, Washington 98101, and the telephone number is (206) 624-8100.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Securities for
general corporate purposes, which will include the development and acquisition
of additional properties and other acquisition transactions, the expansion and
improvement of certain properties in the Company's portfolio, and the repayment
of indebtedness.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth ratios of earnings to fixed charges for the
periods shown. The ratio shown for the year ended December 31, 1994 is for the
Company. Ratios shown for the years ended December 31, 1993, 1992, 1991 and 1990
are derived from combined historical financial information of the 17 publicly
held real estate limited partnerships that were included in the Consolidation
("Predecessor").
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
- -------------------------------------------------------
PREDECESSOR COMPANY
- ------------------------------------------ -----------
1990 1991 1992 1993 1994
- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C>
7.69x 8.93x 10.23x 8.80x 2.95x
</TABLE>
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of net income before
extraordinary items plus fixed charges. Fixed charges consist of interest
expense (including interest costs capitalized) and the amortization of debt
issuance costs. To date, the Company has not issued any Preferred Stock;
therefore, the ratios of earnings to combined fixed charges and preferred share
dividends are the same as the ratios presented above.
3
<PAGE>
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Debt Securities will be direct obligations of the Company, which may be
secured or unsecured, and which may be senior or subordinated indebtedness of
the Company. The Debt Securities may be issued under one or more indentures,
each dated as of a date before the issuance of the Debt Securities to which it
relates and in the form that has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part, subject to such amendments or
supplements as may be adopted from time to time. Each such indenture
(collectively, the "Indenture") will be entered into between the Company and a
trustee (the "Trustee"), which may be the same Trustee. The Indenture will be
subject to, and governed by, the Trust Indenture Act of 1939, as amended. The
statements made hereunder relating to the Indenture and the Debt Securities are
summaries of the anticipated provisions thereof, do not purport to be complete
and are subject to, and are qualified in their entirety by reference to, all
provisions of the Indenture and such Debt Securities. Capitalized terms used but
not defined herein shall have the respective meanings set forth in the
Indenture.
TERMS
The particular terms of the Debt Securities offered by a Prospectus
Supplement will be described in the particular Prospectus Supplement, along with
any applicable modifications of or additions to the general terms of the Debt
Securities as described herein and in the applicable Indenture and any
applicable federal income tax considerations. Accordingly, for a description of
the terms of any series of Debt Securities, reference must be made to both the
Prospectus Supplement relating thereto and the description of the Debt
Securities set forth in this Prospectus.
Except as set forth in any Prospectus Supplement, the Debt Securities may be
issued without limits as to aggregate principal amount, in one or more series,
in each case as established from time to time by the Company's Board of
Directors or as set forth in the applicable Indenture or one or more indentures
supplemental to the Indenture. All Debt Securities of one series need not be
issued at the same time and, unless otherwise provided, a series may be
reopened, without the consent of the holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series.
Each Indenture will provide that the Company may, but need not, designate
more than one Trustee thereunder, each with respect to one or more series of
Debt Securities. Any Trustee under an Indenture may resign or be removed with
respect to one or more series of Debt Securities, and a successor Trustee may be
appointed to act with respect to such series. If two or more persons are acting
as Trustee with respect to different series of Debt Securities, each such
Trustee shall be a Trustee of a trust under the applicable Indenture separate
and apart from the trust administered by any other Trustee and, except as
otherwise indicated herein, any action described herein to be taken by a Trustee
may be taken by each such Trustee with respect to, and only with respect to, the
one or more series of Debt Securities for which it is Trustee under the
applicable Indenture.
The following summaries set forth certain general terms and provisions of
the Indenture and the Debt Securities. The Prospectus Supplement relating to the
series of Debt Securities being offered will contain further terms of such Debt
Securities, including the following specific terms:
(1) the title of such Debt Securities;
(2) the aggregate principal amount of such Debt Securities and any limit on such
aggregate principal amount;
(3) the price (expressed as a percentage of the principal amount thereof) at
which such Debt Securities will be issued and, if other than the principal
amount thereof, the portion of the principal amount thereof payable upon
declaration of acceleration of the maturity thereof, or (if applicable) the
portion of the principal amount of such Debt Securities that is convertible
into Class A Common Stock or Preferred Stock, or the method by which any
such portion shall be determined;
4
<PAGE>
(4) if convertible, the terms on which such Debt Securities are convertible,
including the initial conversion price or rate and conversion period and, in
connection with the preservation of the Company's status as a REIT, any
applicable limitations on the ownership or transferability of the Class A
Common Stock or the Preferred Stock into which such Debt Securities are
convertible;
(5) the date or dates, or the method for determining such date or dates, on
which the principal of such Debt Securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the method by which
such rate or rates shall be determined, at which such Debt Securities will
bear interest, if any;
(7) the date or dates, or the method for determining such date or dates, from
which any interest will accrue, the dates upon which any such interest will
be payable, the record dates for payment of such interest, or the method by
which any such dates shall be determined, the persons to whom such interest
shall be payable, and the basis upon which interest shall be calculated if
other than that of a 360-day year of twelve 30-day months;
(8) the place or places where the principal of (and premium, if any) and
interest, if any, on such Debt Securities will be payable, where such Debt
Securities may be surrendered for conversion or registration of transfer or
exchange and where notices or demands to or upon the Company in respect of
such Debt Securities and the Indenture may be served;
(9) the period or periods, if any, within which, the price or prices at which
and the terms and conditions upon which such Debt Securities may be
redeemed, as a whole or in part, at the Company's option;
(10) the obligation, if any, of the Company to redeem, repay or purchase such
Debt Securities pursuant to any sinking fund or analogous provision or at
the option of a holder thereof, and the period or periods within which, the
price or prices at which and the terms and conditions upon which such Debt
Securities will be redeemed, repaid or purchased, as a whole or in part,
pursuant to such obligation;
(11) if other than U.S. dollars, the currency or currencies in which such Debt
Securities are denominated and payable, which may be a foreign currency or
units of two or more foreign currencies or a composite currency or
currencies, and the terms and conditions relating thereto;
(12) whether the amount of payments of principal of (and premium, if any) or
interest, if any, on such Debt Securities may be determined with reference
to an index, formula or other method (which index, formula or method may,
but need not, be based on a currency, currencies, currency unit or units or
composite currency or currencies) and the manner in which such amounts shall
be determined;
(13) whether such Debt Securities will be issued in certificated and/or
book-entry form, and, if so, the identity of the depositary for such Debt
Securities;
(14) whether such Debt Securities will be in registered or bearer form and, if
in registered form, the denominations thereof if other than $1,000 and any
integral multiple thereof and, if in bearer form, the denominations thereof
and terms and conditions relating thereto;
(15) the applicability, if any, of the defeasance and covenant defeasance
provisions described herein or set forth in the applicable Indenture, or any
modification thereof;
(16) any deletions from, modifications of or additions to the events of default
or covenants of the Company, to the extent different from those described
herein or in the applicable Indenture with respect to such Debt Securities,
and any change in the right of any Trustee or any of the holders to declare
the principal amount of any such Debt Securities due and payable;
5
<PAGE>
(17) whether and under what circumstances the Company will pay any Additional
Amounts on such Debt Securities in respect of any tax, assessment or
governmental charge and, if so, whether the Company will have the option to
redeem such Debt Securities in lieu of making such payment;
(18) the subordination provisions, if any, relating to such Debt Securities;
(19) the provisions, if any, relating to any security provided for such Debt
Securities; and
(20) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
If so provided in the applicable Prospectus Supplement, the Debt Securities
may be issued at a discount below their principal amount and provide for less
than the entire principal amount thereof to be payable upon declaration of
acceleration of the maturity thereof ("Original Issue Discount Securities"). In
such cases, any special U.S. federal income tax, accounting and other
considerations applicable to Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
Except as may be set forth in any Prospectus Supplement, the Debt Securities
will not contain any provisions that would limit the Company's ability to incur
indebtedness or that would afford holders of Debt Securities protection in the
event of a highly leveraged or similar transaction involving the Company or in
the event of a change of control. Restrictions on ownership and transfers of the
Common Stock (defined below) and Preferred Stock are, however, designed to
preserve the Company's status as a REIT and, therefore, may act to prevent or
hinder a change of control. See "Restrictions on Transfers of Capital Stock;
Excess Stock." In addition, the Company's Restated By-Laws (the "By-Laws")
provide that, subject to certain exceptions, the Company may not incur debt if
after giving effect to such borrowing, its indebtedness for borrowed funds would
exceed 50% of its total assets (as defined in the By-laws) or 300% of its
adjusted net worth (as defined in the By-laws). Reference is made to the
applicable Prospectus Supplement for information with respect to any deletions
from, modifications of or additions to the events of default or covenants of the
Company that are described below, including any addition of a covenant or other
provision providing event risk or similar protection.
DENOMINATIONS, INTEREST, REGISTRATION AND TRANSFER
Unless otherwise described in the applicable Prospectus Supplement, the Debt
Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof.
Unless otherwise described in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of Debt
Securities will be payable at the applicable Trustee's corporate trust office,
the address of which will be set forth in the applicable Prospectus Supplement;
PROVIDED, HOWEVER, that, at the Company's option, payment of interest may be
made by check mailed to the address of the person entitled thereto as it appears
in the applicable register for such Debt Securities or by wire transfer of funds
to such person at an account maintained within the United States.
Subject to certain limitations imposed on Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt Securities
at the applicable Trustee's corporate trust office or at the office of any
transfer agent designated by the Company for such purpose. In addition, subject
to certain limitations imposed on Debt Securities issued in book-entry form, the
Debt Securities of any series may be surrendered for conversion or registration
of transfer thereof at the applicable Trustee's corporate trust office or at the
office of any transfer agent designated by the Company for such purpose. Every
Debt Security surrendered for conversion, registration of transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer and
the person requesting such transfer must provide evidence of title and identity
satisfactory to the applicable Trustee or transfer agent. No service charge will
be made for any registration of transfer or exchange of any Debt Securities, but
the
6
<PAGE>
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. If the applicable
Prospectus Supplement refers to any transfer agent (in addition to the
applicable Trustee) initially designated by the Company with respect to any
series of Debt Securities, the Company may at any time rescind the designation
of any such transfer agent or approve a change in the location through which any
such transfer agent acts, except that the Company will be required to maintain a
transfer agent in each place of payment for such series. The Company may at any
time designate additional transfer agents with respect to any series of Debt
Securities.
Neither the Company nor any Trustee shall be required to (a) issue, register
the transfer of or exchange Debt Securities of any series during a period
beginning at the opening of business 15 days before the day of mailing of notice
of redemption of any Debt Securities of that series that may be selected for
redemption and ending at the close of business on the day of mailing the
relevant notice of redemption; (b) register the transfer of or exchange any Debt
Security, or portion thereof, so selected for redemption, in whole or in part,
except the unredeemed portion of any Debt Security being redeemed in part; or
(c) issue, register the transfer of or exchange any Debt Security that has been
surrendered for repayment at the holder's option, except the portion, if any, of
such Debt Security not to be so repaid.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture will provide that the Company may, with or without the consent
of the holders of any outstanding Debt Securities, consolidate with, or sell,
lease or convey all or substantially all of its assets to, or merge with or
into, any other entity, provided that (a) either the Company shall be the
continuing entity, or the successor entity (if other than the Company) formed by
or resulting from any such consolidation or merger or which shall have received
the transfer of such assets shall expressly assume the Company's obligation to
pay the principal of (and premium, if any) and interest on all the Debt
Securities and the due and punctual performance and observance of all the
covenants and conditions contained in the Indenture; (b) immediately after
giving effect to such transaction and treating any indebtedness that becomes an
obligation of the Company or any subsidiary as a result thereof as having been
incurred by the Company or such subsidiary at the time of such transaction, no
event of default under the Indenture, and no event that, after notice or the
lapse of time, or both, would become such an event of default, shall have
occurred and be continuing; and (c) an officers' certificate and legal opinion
covering such conditions shall be delivered to each Trustee.
CERTAIN COVENANTS
EXISTENCE. Except as permitted under "-- Merger, Consolidation or Sale of
Assets," the Indenture will require the Company to do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (by certificate of incorporation, by-laws and statute) and
franchises; PROVIDED, HOWEVER, that the Company shall not be required to
preserve any right or franchise if its Board of Directors determines that the
preservation thereof is no longer desirable in the conduct of its business.
MAINTENANCE OF PROPERTIES. The Indenture will require the Company to cause
all of its material properties used or useful in the conduct of its business or
the business of any subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and to cause
to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the Company's judgment may be necessary so that
the business carried on or in connection therewith may be properly and
advantageously conducted at all times; PROVIDED, HOWEVER, that the Company and
its subsidiaries shall not be prevented from selling or otherwise disposing of
their properties for value in the ordinary course of business.
INSURANCE. The Indenture will require the Company to, and to cause each of
its subsidiaries to, keep in force upon all of its properties and operations
policies of insurance carried with responsible companies in such amounts and
covering all such risks as shall be customary in the industry in accordance with
prevailing market conditions and availability.
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PAYMENT OF TAXES AND OTHER CLAIMS. The Indenture will require the Company
to pay or discharge or cause to be paid or discharged, before the same shall
become delinquent, (a) all taxes, assessments and governmental charges levied or
imposed on it or any subsidiary or on the income, profits or property of the
Company or any subsidiary and (b) all lawful claims for labor, materials and
supplies that, 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 the amount, applicability or validity of which is
being contested in good faith.
PROVISION OF FINANCIAL INFORMATION. Whether or not the Company is subject
to Section 13 or 15(d) of the Exchange Act, the Indenture will require the
Company, within 15 days after each of the respective dates by which the Company
would have been required to file annual reports, quarterly reports and other
documents with the Commission if the Company were so subject, (a) to transmit by
mail to all holders of Debt Securities, as their names and addresses appear in
the applicable register for such Debt Securities, without cost to such holders,
copies of the annual reports, quarterly reports and other documents that the
Company would have been required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act if the Company were subject to such Sections,
(b) to file with the Trustee copies of the annual reports, quarterly reports and
other documents that the Company would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Company
were subject to such Sections, and (c) to supply, promptly upon written request
and payment of the reasonable cost of duplication and delivery, copies of such
documents to any prospective holder of Debt Securities.
ADDITIONAL COVENANTS. Any additional covenants of the Company with respect
to any of the series of Debt Securities will be set forth in the Prospectus
Supplement relating thereto.
EVENTS OF DEFAULT, NOTICE AND WAIVER
Unless otherwise provided in the applicable Indenture, each Indenture will
provide that the following events are "events of default" with respect to any
series of Debt Securities issued thereunder: (a) default for 30 days in the
payment of any installment of interest on any Debt Security of such series; (b)
default in the payment of the principal of (or premium, if any, on) any Debt
Security of such series at its maturity; (c) default in making any sinking fund
payment as required for any Debt Security of such series; (d) default in the
performance of any other covenant of the Company contained in the Indenture
(other than a covenant added to the Indenture solely for the benefit of a series
of Debt Securities issued thereunder other than such series), continued for 60
days after written notice as provided in the applicable Indenture; (e) a default
under any bond, debenture, note or other evidence of indebtedness for money
borrowed by the Company or any of its subsidiaries (including obligations under
leases required to be capitalized on the balance sheet of the lessee under
generally accepted accounting principles, but not including any indebtedness or
obligations for which recourse is limited to property purchased) in an aggregate
principal amount in excess of $10,000,000 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 by the Company or any of its
subsidiaries (including such leases, but not including such indebtedness or
obligations for which recourse is limited to property purchased) in an aggregate
principal amount in excess of $10,000,000, whether such indebtedness now exists
or shall hereafter be created, which default shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable or such obligations being
accelerated, without such acceleration having been rescinded or annulled; (f)
certain events of bankruptcy, insolvency or reorganization, or court appointment
of a receiver, liquidator or trustee of the Company or any Significant
Subsidiary of the Company; and (g) any other Event of Default provided with
respect to a particular series of Debt Securities. The term "Significant
Subsidiary" has the meaning ascribed to such term in Regulation S-X promulgated
under the Securities Act.
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If an event of default under any Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% in
principal amount of the outstanding Debt Securities of that series may declare
the principal amount (or, if the Debt Securities of that series are Original
Issue Discount Securities or indexed securities, such portion of the principal
amount as may be specified in the terms thereof) of all the Debt Securities of
that series to be due and payable immediately by written notice thereof to the
Company (and to the applicable Trustee if given by the holders). However, at any
time after such a declaration of acceleration with respect to Debt Securities of
such series (or of all Debt Securities then outstanding under the Indenture, as
the case may be) has been made, but before a judgment or decree for payment of
the money due has been obtained by the applicable Trustee, the holders of not
less than a majority of the principal amount of the outstanding Debt Securities
of such series (or of all Debt Securities then outstanding under the Indenture,
as the case may be) may rescind and annul such declaration and its consequences
if (a) the Company shall have deposited with the applicable Trustee all required
payments of the principal of (and premium, if any) and interest on the Debt
Securities of such series (or of all Debt Securities then outstanding under the
Indenture, as the case may be), plus certain fees, expenses, disbursements and
advances of the applicable Trustee and (b) all events of default, other than the
nonpayment of accelerated principal (or specified portion thereof), with respect
to Debt Securities of such series (or of all Debt Securities then outstanding
under the Indenture, as the case may be) have been cured or waived as provided
in the Indenture. The Indenture will also provide that the holders of not less
than a majority in principal amount of the outstanding Debt Securities of any
series (or of all Debt Securities then outstanding under the Indenture, as the
case may be) may waive any past default with respect to such series and its
consequences, except a default (y) in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or (z) in
respect of a covenant or provision contained in the Indenture that cannot be
modified or amended without the consent of the holder of each outstanding Debt
Security affected thereby.
The Indenture will require each Trustee to give notice to the holders of
Debt Securities within 90 days of a default under the Indenture unless such
default shall have been cured or waived; PROVIDED, HOWEVER, that such Trustee
may withhold notice to the holders of any series of Debt Securities of any
default with respect to such series (except a default in the payment of the
principal of (or premium, if any) or interest on any Debt Security of such
series or in the payment of any sinking fund installment in respect of any Debt
Security of such series) if specified responsible officers of the Trustee
consider such withholding to be in such holders' interest.
The Indenture will provide that no holders of Debt Securities of any series
may institute any proceedings, judicial or otherwise, with respect to the
Indenture or for any remedy thereunder, except in the case of failure of the
Trustee, for 60 days, to act after it has received a written request to
institute proceedings in respect of an event of default from the holders of not
less than 25% in principal amount of the outstanding Debt Securities of such
series, as well as an offer of indemnity reasonably satisfactory to it. This
provision will not prevent, however, any holder of Debt Securities from
instituting suit for the enforcement of payment of the principal of (and
premium, if any) and interest on such Debt Securities at the respective due
dates thereof.
The Indenture will provide that, subject to provisions in such Indenture
relating to its duties in case of default, the Trustee is under no obligation to
exercise any of its rights or powers under the Indenture at the request or
direction of any holders of any series of Debt Securities then outstanding under
the Indenture, unless such holders shall have offered to the Trustee reasonable
security or indemnity. The holders of not less than a majority in principal
amount of the outstanding Debt Securities of any series (or of all Debt
Securities then outstanding under the Indenture, as the case may be) shall have
the right to direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee, or of exercising any trust or power
conferred upon the Trustee. The Trustee may, however, refuse to follow any
direction that is in conflict with any law or the Indenture that may involve the
Trustee in personal liability or that may be unduly prejudicial to the holders
of Debt Securities of such series not joining therein.
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Within 120 days after the close of each fiscal year, the Company will be
required to deliver to the Trustee a certificate, signed by one of several
specified officers, stating whether or not such officer has knowledge of any
default under the Indenture and, if so, specifying each such default and the
nature and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of any Indenture will be permitted only with
the consent of the holders of not less than a majority in principal amount of
all outstanding Debt Securities issued under such Indenture affected by such
modification or amendment; PROVIDED, HOWEVER, that no such modification or
amendment may, without the consent of the holder of each Debt Security affected
thereby, (a) change the stated maturity of the principal of, or any installment
of interest (or premium, if any) on, any such Debt Security; (b) reduce the
principal amount of, or the rate or amount of interest on, or any premium
payable on redemption of, any such Debt Security, or reduce the amount of
principal of an Original Issue Discount Security that would be due and payable
upon declaration of acceleration of the maturity thereof or would be provable in
bankruptcy, or adversely affect any right of repayment of the holder of any such
Debt Security; (c) change the place of payment, or the coin or currency, for
payment of principal of (and premium, if any), or interest on any such Debt
Security; (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any such Debt Security; (e) reduce the
above-stated percentage of outstanding Debt Securities of any series necessary
to modify or amend the Indenture, to waive compliance with certain provisions
thereof or certain defaults and consequences thereunder or to reduce the quorum
or voting requirements set forth in the Indenture; or (f) modify any of the
foregoing provisions or any of the provisions relating to the waiver of certain
past defaults or certain covenants, except to increase the required percentage
to effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the holder of such Debt Security.
The holders of a majority in aggregate principal amount of outstanding Debt
Securities of each series may, on behalf of all holders of Debt Securities of
that series waive, insofar as that series is concerned, compliance by the
Company with certain restrictive covenants in the applicable Indenture.
Modifications and amendments of the Indenture will be permitted to be made
by the Company and the Trustee without the consent of any holder of Debt
Securities for any of the following purposes: (a) to evidence the succession of
another person to the Company as obligor under the Indenture; (b) to add to the
covenants of the Company for the benefit of the holders of all or any series of
Debt Securities or to surrender any right or power conferred upon the Company in
the Indenture; (c) to add events of default for the benefit of the holders of
all or any series of Debt Securities; (d) to add or change any provisions of the
Indenture to facilitate the issuance of, or to liberalize certain terms of, Debt
Securities in bearer form, or to permit or facilitate the issuance of Debt
Securities in uncertificated form, PROVIDED that such action shall not adversely
affect the interests of the holders of the Debt Securities of any series in any
material respect; (e) to change or eliminate any provisions of the Indenture,
PROVIDED that any such change or elimination shall become effective only when
there are no Debt Securities outstanding of any series created prior thereto
that are entitled to the benefit of such provision; (f) to secure the Debt
Securities; (g) to establish the form or terms of Debt Securities of any series,
including the provisions and procedures, if applicable, for the conversion of
such Debt Securities into Class A Common Stock or Preferred Stock; (h) to
provide for the acceptance of appointment by a successor Trustee or facilitate
the administration of the trusts under the Indenture by more than one Trustee;
(i) to cure any ambiguity, defect or inconsistency in the Indenture; PROVIDED,
HOWEVER, that such action shall not adversely affect the interests of holders of
Debt Securities of any series in any material respect; or (j) to supplement any
of the provisions of the Indenture to the extent necessary to permit or
facilitate defeasance and discharge of any series of such Debt Securities,
PROVIDED, HOWEVER, that such action shall not adversely affect the interests of
the holders of the Debt Securities of any series in any material respect.
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The Indenture will provide that in determining whether the holders of the
requisite principal amount of outstanding Debt Securities of a series have given
any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (a) the principal amount of an Original Issue Discount Security that
shall be deemed to be outstanding shall be the amount of the principal thereof
that would be due and payable as of the date of such determination upon
declaration of acceleration of the maturity thereof, (b) the principal amount of
any Debt Security denominated in a foreign currency that shall be deemed
outstanding shall be the U.S. dollar equivalent, determined on the issue date
for such Debt Security, of the principal amount (or, in the case of an Original
Issue Discount Security, the U.S. dollar equivalent on the issue date of such
Debt Security of the amount determined as provided in (a) above), (c) the
principal amount of an indexed security that shall be deemed outstanding shall
be the principal face amount of such indexed security at original issuance,
unless otherwise provided with respect to such indexed security in the
applicable Indenture, and (d) Debt Securities owned by the Company or any other
obligor upon the Debt Securities or any affiliate of the Company or of such
other obligor shall be disregarded.
The Indenture will contain provisions for convening meetings of the holders
of Debt Securities of a series. A meeting may be permitted to be called at any
time by the Trustee, and also, upon request, by the Company or the holders of at
least 10% in principal amount of the outstanding Debt Securities of such series,
in any such case upon notice given as provided in the Indenture. Except for any
consent that must be given by the holder of each Debt Security affected by
certain modifications and amendments of the Indenture, any resolution presented
at a meeting or adjourned meeting duly reconvened at which a quorum is present
may be adopted by the affirmative vote of the holders of a majority in principal
amount of the outstanding Debt Securities of that series; PROVIDED, HOWEVER,
that, except as referred to above, any resolution with respect to any request,
demand, authorization, direction, notice, consent, waiver or other action that
may be made, given or taken by the holders of a specified percentage, which is
less than a majority, in principal amount of the outstanding Debt Securities of
a series may be adopted at a meeting or adjourned meeting duly reconvened at
which a quorum is present by the affirmative vote of the holders of such
specified percentage in principal amount of the outstanding Debt Securities of
that series. Any resolution passed or decision taken at any meeting of holders
of Debt Securities of any series duly held in accordance with the Indenture will
be binding on all holders of Debt Securities of that series. The quorum at any
meeting called to adopt a resolution, and at any reconvened meeting, will be
persons holding or representing a majority in principal amount of the
outstanding Debt Securities of a series; PROVIDED, HOWEVER, that if any action
is to be taken at such meeting with respect to a consent or waiver that may be
given by the holders of not less than a specified percentage in principal amount
of the outstanding Debt Securities of a series, the persons holding or
representing such specified percentage in principal amount of the outstanding
Debt Securities of such series will constitute a quorum.
Notwithstanding the foregoing provisions, the Indenture will provide that if
any action is to be taken at a meeting of holders of Debt Securities of any
series with respect to any request, demand, authorization, direction, notice,
consent, waiver or other action that the Indenture expressly provides may be
made, given or taken by the holders of a specified percentage in principal
amount of all outstanding Debt Securities affected thereby, or of the holders of
such series and one or more additional series: (a) there shall be no minimum
quorum requirement for such meeting and (b) the principal amount of the
outstanding Debt Securities of such series that vote in favor of such request,
demand, authorization, direction, notice, consent, waiver or other action shall
be taken into account in determining whether such request, demand,
authorization, direction, notice, consent, waiver or other action has been made,
given or taken under the Indenture.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company will be permitted, at its option, to discharge certain obligations to
holders of any series of Debt Securities that have not already been delivered to
the applicable Trustee for cancellation and that either have become
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due and payable or will become due and payable within one year (or scheduled for
redemption within one year) by irrevocably depositing with the applicable
Trustee, in trust, funds in such currency or currencies, currency unit or units
or composite currency or currencies in which such Debt Securities are payable in
an amount sufficient to pay the entire indebtedness on such Debt Securities in
respect of principal (and premium, if any) and interest to the date of such
deposit (if such Debt Securities have become due and payable) or to the stated
maturity or redemption date, as the case may be.
The Indenture will provide that, unless otherwise indicated in the
applicable Prospectus Supplement, the Company may elect either to (a) defease
and be discharged from any and all obligations with respect to any series of
Debt Securities (except for the obligation to pay additional amounts, if any,
upon the occurrence of certain events of tax, assessment or governmental charge
with respect to payments on such Debt Securities and the obligations to register
the transfer or exchange of such Debt Securities, to replace temporary or
mutilated, destroyed, lost or stolen Debt Securities, to maintain an office or
agency in respect of such Debt Securities and to hold money for payment in
trust) ("defeasance") or (b) be released from its obligations with respect to
such Debt Securities under the applicable Indenture (being the restrictions
described under "-- Certain Covenants") or, if provided in the applicable
Prospectus Supplement, its obligations with respect to any other covenant, and
any omission to comply with such obligations, shall not constitute a default or
an event of default with respect to such Debt Securities ("covenant
defeasance"), in either case upon the irrevocable deposit by the Company with
the applicable Trustee, in trust, of an amount, in such currency or currencies,
currency unit or units or composite currency or currencies in which such Debt
Securities are payable at stated maturity, or Government Obligations (as defined
below), or both, applicable to such Debt Securities that through the scheduled
payment of principal and interest in accordance with their terms will provide
money in an amount sufficient to pay the principal of (and premium, if any) and
interest on such Debt Securities, and any mandatory sinking fund or analogous
payments thereon, on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Company has
delivered to the applicable Trustee an opinion of counsel (as specified in the
applicable Indenture) to the effect that the holders of such Debt Securities
will not recognize income, gain or loss for U.S. federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to U.S.
federal income tax on the same amounts, in the same manner and at the same times
as would have been the case if such defeasance or covenant defeasance had not
occurred, and such opinion of counsel, in the case of defeasance, must refer to
and be based on a ruling of the Internal Revenue Service (the "IRS") or a change
in applicable U.S. federal income tax law occurring after the date of the
Indenture. In the event of such defeasance, the holders of such Debt Securities
would thereafter be able to look only to such trust fund for payment of
principal (and premium, if any) and interest.
"Government Obligations" means securities that are (a) direct obligations of
the United States of America or the government which issued the foreign currency
in which the Debt Securities of a particular series are payable, for the payment
of which its full faith and credit is pledged, or (b) obligations of a person
controlled or supervised by and acting as an agency or instrumentality of the
United States of America or such government which issued the foreign currency in
which the Debt Securities of such series are payable, the payment of which is
unconditionally guaranteed as a full faith and credit obligation by the United
States of America or such other government, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt; PROVIDED, HOWEVER, that (except
as required by law) such custodian is not authorized to make any deduction from
the amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the Government Obligation or the
specific payment of interest on or principal of the Government Obligation
evidenced by such depository receipt.
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Unless otherwise provided in the applicable Prospectus Supplement, if after
the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(a) the holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the applicable Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security or (b)
a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security will be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of (i) a currency, currency unit or composite
currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public institution
of or within the international banking community, (ii) the ECU both within the
European Monetary System and for the settlement of transactions by public
institutions of or within the European Communities, or (iii) any currency unit
or composite currency other than the ECU for the purposes for which it was
established. Unless otherwise provided in the applicable Prospectus Supplement,
all payments of principal of (and premium, if any) and interest on any Debt
Security that is payable in a foreign currency that ceases to be used by its
government of issuance shall be made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to any
Debt Securities and such Debt Securities are declared due and payable because of
the occurrence of any event of default other than the event of default described
in clause (d) under "-- Events of Default, Notice and Waiver" with respect to
the specified sections of the applicable Indenture (which sections would no
longer be applicable to such Debt Securities) or clause (g) thereunder with
respect to any other covenant as to which there has been covenant defeasance,
the amount in such currency, currency unit or composite currency in which such
Debt Securities are payable, and Government Obligations on deposit with the
applicable Trustee, will be sufficient to pay amounts due on such Debt
Securities at the time of their stated maturity, but may not be sufficient to
pay amounts due on such Debt Securities at the time of the acceleration
resulting from such event of default. The Company would, however, remain liable
to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions, if
any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
CONVERSION RIGHTS
The terms and conditions, if any, upon which the Debt Securities are
convertible into Class A Common Stock or Preferred Stock will be set forth in
the applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Class A Common Stock or
Preferred Stock, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option of
the holders or the Company, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of such
Debt Securities and any restrictions on conversion, including restrictions
directed at maintaining the Company's REIT status.
PAYMENT
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of Debt
Securities will be payable at the Trustee's corporate trust office, the address
of which will be stated in the applicable Prospectus Supplement; PROVIDED,
HOWEVER, that, at the Company's option, payment of interest may be made by check
mailed to
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the address of the person entitled thereto as it appears in the applicable
register for such Debt Securities or by wire transfer of funds to such person at
an account maintained within the United States.
All amounts paid by the Company to a paying agent or a Trustee for the
payment of the principal of or any premium or interest on any Debt Security that
remain unclaimed at the end of two years after such principal, premium or
interest has become due and payable will be repaid to the Company, and the
holder of such Debt Security thereafter may look only to the Company for payment
thereof.
GLOBAL SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "Global Securities") that will be
deposited with, or on behalf of, a depositary identified in the applicable
Prospectus Supplement relating to such series. Global Securities may be issued
in either registered or bearer form and in either temporary or permanent form.
The specific terms of the depositary arrangement with respect to a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
DESCRIPTION OF COMMON STOCK
The Company has authority to issue 120,000,000 shares of Class A Common
Stock, par value $.001 per share and 500,000 shares of Class B Common Stock, par
value $.001 per share (collectively, the "Common Stock"). At April 14, 1995, the
Company had outstanding 18,095,988 shares of Class A Common Stock and 154,604
shares of Class B Common Stock.
GENERAL
The following description of the Class A Common Stock sets forth certain
general terms and provisions of the Class A Common Stock to which any Prospectus
Supplement may relate, including a Prospectus Supplement providing that Class A
Common Stock will be issuable upon conversion of Debt Securities or Preferred
Stock. The statements below describing the Class A Common Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation") and By-Laws.
TERMS
Subject to the preferential rights of any other shares or series of stock,
holders of Class A Common Stock will be entitled to receive dividends when, as
and if declared by the Company's Board of Directors out of funds legally
available therefor. Payment and declaration of dividends on the Class A Common
Stock and purchases of shares thereof by the Company will be subject to certain
restrictions if the Company fails to pay dividends on the Preferred Stock. See
"Description of Preferred Stock." Upon any liquidation, dissolution or winding
up of the Company, holders of Class A Common Stock (together with holders of
Class B Common Stock) will be entitled to share equally and ratably in any
assets available for distribution to them, after payment or provision for
payment of the debts and other liabilities of the Company and the preferential
amounts owing with respect to any outstanding Preferred Stock. The Class A
Common Stock will possess ordinary voting rights for the election of directors
and in respect of other corporate matters, each share entitling the holder
thereof to one vote. Holders of Class A Common Stock will not have cumulative
voting rights in the election of directors, which means that holders of more
than 50% of all the shares of the Company's Common Stock voting for the election
of directors can elect all the directors if they choose to do so and the holders
of the remaining shares cannot elect any directors. Holders of shares of Class A
Common Stock will not have preemptive rights, which means they have no right to
acquire any additional shares of Class A Common Stock that may be issued by the
Company at a subsequent date. All shares of Class A Common Stock now outstanding
are, and additional shares of Class A Common Stock offered will be when issued,
fully paid and nonassessable, and no shares of Class A Common Stock are or will
be subject to preemptive or similar rights.
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The Class B Common Stock has rights substantially similar to those of the
Class A Common Stock. Each holder of Class B Common Stock was entitled to a loan
from the Company in an amount necessary to satisfy the holder's general partner
capital obligation to certain partnerships that were acquired by the Company in
the Consolidation. Each loan is secured by a pledge of the Class B Common Stock
held by the borrowing stockholder. Upon repayment of a portion of the loan, that
portion of the Class B Common Stock equal to the percentage of the loan
principal repaid is released from the pledge and is convertible, on a
share-for-share basis, into shares of Class A Common Stock. Class B Common Stock
is not publicly traded but is transferable upon its release from the pledge.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), not more than 50% in value of its outstanding
capital stock may be owned, actually or constructively, by five or fewer
individuals (defined in the Code to include certain entities) during the last
half of a taxable year. To assist the Company in meeting this requirement, the
Company may take certain actions to limit the beneficial ownership, actually or
constructively, by a single person or entity of the Company's outstanding equity
securities. See "Restrictions on Transfers of Capital Stock; Excess Stock."
TRANSFER AGENT
The registrar and transfer agent for the Common Stock is Gemisys
Corporation.
STOCKHOLDER RIGHTS PLAN
Pursuant to the Rights Agreement dated as of March 17, 1994, between the
Company and Gemisys Corporation, as Rights Agent (the "Rights Agreement"),
holders of shares of the Common Stock have certain rights to purchase shares of
the Company's Series A Junior Participating Preferred Stock (the "Junior
Preferred Shares") exercisable only in certain circumstances (the "Rights"). The
Rights, which are represented by certificates for the Common Stock, trade
together with the Common Stock until a Distribution Date (as defined below).
Each Right, when it becomes exercisable as described below, will entitle the
registered holder to purchase one one-hundredth of a Junior Preferred Share at
$65 per one one-hundredth of a Junior Preferred Share (subject to adjustment,
the "Purchase Price").
Until the earlier to occur of (a) 10 days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 10% or more of the outstanding
Common Stock and (b) 10 business days (or such later date as may be determined
by action of the Company's Board of Directors prior to such time as any person
or group of affiliated persons becomes an Acquiring Person) following the
commencement of, or announcement of an intention to make, a tender offer or
exchange offer, the consummation of which would result in the beneficial
ownership by a person or group of 10% or more of such outstanding Common Stock
(the earlier of such dates, the "Distribution Date"), the Rights will be
evidenced, with respect to any of the Common Stock certificates outstanding as
of March 25, 1994 (the "Rights Record Date"), by such Common Stock certificate,
with a copy of a Summary of Rights to Purchase Preferred Shares (the "Summary of
Rights") attached thereto.
The Rights Agreement provides that, until the Distribution Date (or earlier
redemption or expiration of the Rights), the Rights will be transferred with and
only with the Common Stock. Until the Distribution Date (or earlier redemption
or expiration of the Rights), new Common Stock certificates issued after the
Rights Record Date upon transfer or new issuance of Common Stock will contain a
notation incorporating the Rights Agreement by reference. Until the Distribution
Date (or earlier redemption or expiration of the Rights), the surrender for
transfer of any certificates for Common Stock outstanding as of the Rights
Record Date, even without such notation or a copy of the Summary of Rights being
attached thereto, will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate. As soon as practicable
following the Distribution Date,
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separate certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Common Stock as of the close of business on
the Distribution Date, and such separate Right Certificates alone will evidence
the Rights.
The Rights are not exercisable until the Distribution Date. The Rights will
expire on March 17, 2004, unless such date is extended or unless the Rights are
earlier redeemed or exchanged by the Company, in each case as described below.
The Purchase Price payable and the number of Junior Preferred Shares or
other securities or property issuable upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (a) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Junior
Preferred Shares, (b) upon the grant to holders of the Junior Preferred Shares
of certain rights or warrants to subscribe for or purchase Junior Preferred
Shares at a price, or securities convertible into Junior Preferred Shares with a
conversion price, less than the then-current market price of the Junior
Preferred Shares, or (c) upon the distribution to holders of the Junior
Preferred Shares of evidences of indebtedness or assets (excluding regular
periodic cash dividends paid out of earnings or retained earnings or dividends
payable in Junior Preferred Shares) or of subscription rights or warrants (other
than those referred to above).
The number of outstanding Rights and the number of one one-hundredths of a
Junior Preferred Share issuable upon exercise of each Right is also subject to
adjustment in the event of a stock split of the Common Stock or a dividend on
the Common Stock payable in Common Stock or subdivisions, consolidations or
combinations of the Common Stock occurring, in any such case, prior to the
Distribution Date.
Junior Preferred Shares purchasable upon exercise of the Rights will be
redeemable only in accordance with the redemption provisions discussed under
"Restrictions on Transfers of Capital Stock; Excess Stock." Each holder of
Junior Preferred Shares will be entitled to a minimum preferential quarterly
dividend payment of the greater of $1 per share and a per share dividend of 100
times the aggregate dividends declared per share of Common Stock. In the event
of liquidation, the holders of Junior Preferred Shares will be entitled to a
minimum preferential liquidation payment of $100 per share or, if greater, to an
aggregate per share payment of 100 times the aggregate payment made per share of
Common Stock. Each Junior Preferred Share will have 100 votes, voting together
with the Common Stock. Finally, in the event of any merger, consolidation or
other transaction in which shares of Common Stock are exchanged, each Junior
Preferred Share will be entitled to receive 100 times the amount received per
share of Common Stock. These rights are protected by customary antidilution
provisions.
Because of the nature of the Junior Preferred Shares' dividend, liquidation
and voting rights, the value of the one one-hundredth interest in a Junior
Preferred Share purchasable upon exercise of each Right should approximate the
value of one share of Common Stock.
If any person or group of affiliated or associated persons becomes an
Acquiring Person, proper provision will be made so that each holder of a Right,
other than Rights beneficially owned by the Acquiring Person (which will
thereafter be void), will thereafter have the right to receive upon exercise
that number of shares of Common Stock having a market value, as of the date of
exercise, of two times the exercise price of the Right. If the Company is
acquired in a merger or other business combination transaction, or 50% or more
of its consolidated assets or earning power are sold, proper provision will be
made so that each holder of a Right will thereafter have the right to receive,
upon the exercise thereof at the then-current exercise price of the Right, that
number of shares of common stock of the acquiring company that at the time of
such transaction will have a market value of two times the exercise price of the
Right.
At any time after any person or group becomes an Acquiring Person and prior
to the acquisition by such person or group of 50% or more of the outstanding
Common Stock, the Company's Board of Directors may exchange the Rights (other
than Rights owned by such person or group that have
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become void), in whole or in part, at an exchange ratio of one share of Common
Stock, or one one-hundredth of a Junior Preferred Share (or of a share of a
class or series of the Company's Preferred Stock having equivalent rights,
preferences and privileges), per Right (subject to adjustment).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Junior Preferred Shares will be issued (other
than fractions that are integral multiples of one one-hundredth of a Junior
Preferred Share, which may, at the Company's election, be evidenced by
depositary receipts) and, in lieu thereof, an adjustment in cash will be made
based on the market price of the Junior Preferred Shares on the last trading day
prior to the date of exercise.
At any time prior to any person or group becoming an Acquiring Person, the
Company's Board of Directors may redeem the Rights in whole, but not in part, at
the price of $.0001 per Right, with adjustments for stock splits, stock
dividends or other similar transactions (the "Redemption Price"). The redemption
of the Rights may be made effective at such time, on such basis and with such
conditions as the Company's Board of Directors in its sole discretion may
establish. Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
The terms of the Rights may be amended by the Company's Board of Directors
without the consent of the holders of the Rights, including an amendment to
lower certain 10% thresholds described above to not less than the greater of (a)
the sum of .001% and the largest percentage of the outstanding Common Stock then
known to the Company to be beneficially owned by any person or group of
affiliated persons and (b) 9.8%, except that, from and after such time as any
person or group of affiliated or associated persons becomes an Acquiring Person,
no such amendment may adversely affect the interests of the holders of the
Rights.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends.
The Rights have certain antitakeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
without conditioning the offer on substantially all the Rights being acquired.
The Rights will not interfere with any merger or other business combination
approved by the Company's Board of Directors since the Company's Board of
Directors may, at its option, at any time prior to any person or group becoming
an Acquiring Person, redeem all, but not less than all, the then-outstanding
Rights at the Redemption Price.
DESCRIPTION OF PREFERRED STOCK
The Company is authorized to issue 40,000,000 shares of Preferred Stock, par
value $.001 per share, of which no shares were outstanding as of April 14, 1995.
The Company has designated 2,800,000 shares of the Preferred Stock as the Junior
Preferred Shares issuable in connection with the Rights Agreement discussed
under "Description of Common Stock -- Stockholder Rights Plan."
GENERAL
The following description of the Preferred Stock sets forth certain general
terms and provisions of the Preferred Stock to which any Prospectus Supplement
may relate. The statements below describing the Preferred Stock are in all
respects subject to and qualified in their entirety by reference to the
applicable provisions of the Certificate of Incorporation (including the
applicable Certificate of Designations) and By-Laws.
Shares of Preferred Stock may be issued from time to time in one or more
series as authorized by the Company's Board of Directors. Subject to limitations
prescribed by the Delaware General Corporation Law and the Certificate of
Incorporation, the Company's Board of Directors is authorized to fix the number
of shares constituting each series of Preferred Stock and the designations and
powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations
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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 by the Board of Directors or a duly authorized committee thereof. The
Preferred Stock will, when issued, be fully paid and nonassessable and will have
no preemptive rights.
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) the title and stated value of such Preferred Stock;
(2) the number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
(3) the dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation thereof applicable to such Preferred Stock;
(4) whether such Preferred Stock is cumulative or not and, if cumulative, the
date from which dividends on such Preferred Stock shall accumulate;
(5) the procedures for any auction and remarketing, if any, for such Preferred
Stock;
(6) the provision for a sinking fund, if any, for such Preferred Stock;
(7) any voting rights of such Preferred Stock;
(8) the provision for redemption, if applicable, of such Preferred Stock;
(9) any listing of such Preferred Stock on any securities exchange;
(10) the terms and conditions, if applicable, upon which such Preferred Stock
will be convertible into Common Stock of the Company, including the
conversion price (or manner of calculation thereof);
(11) a discussion of federal income tax considerations applicable to such
Preferred Stock;
(12) any limitations on actual, beneficial or constructive ownership and
restrictions on transfer, in each case as may be appropriate to preserve the
Company's REIT status;
(13) the relative ranking and preferences of such Preferred Stock as to dividend
rights and rights upon liquidation, dissolution or winding up of the affairs
of the Company;
(14) any limitations on issuance of any series of Preferred Stock ranking senior
to or on a parity with such series of Preferred Stock as to dividend rights
and rights upon liquidation, dissolution or winding up of the affairs of the
Company; and
(15) any other specific terms, preferences, rights, limitations or restrictions
of such Preferred Stock.
RANK
Unless otherwise specified in the applicable Prospectus Supplement, the
Preferred Stock will, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of the affairs of the Company, rank (a)
senior to all classes or series of Common Stock and Excess Stock of the Company,
to the Junior Preferred Shares and to all equity securities ranking junior to
such Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding up of the Company; (b) on a parity with all equity
securities issued by the Company the terms of which specifically provide that
such equity securities rank on a parity with the Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up of the
affairs of the Company; and (c) junior to all equity securities issued by the
Company the terms of which specifically provide that such equity securities rank
senior to the Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the affairs of the Company. As used in
the Certificate of Incorporation for these purposes, the term "equity
securities" does not include convertible debt securities.
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DIVIDENDS
Holders of shares of the Preferred Stock of each series shall be entitled to
receive, when, as and if declared by the Company's Board of Directors, out of
the Company's assets legally available for payment, cash dividends at such rates
and on such dates as will be set forth in the applicable Prospectus Supplement.
Each such dividend shall be payable to holders of record as they appear on the
Company's stock transfer books on such record dates as shall be fixed by the
Company's Board of Directors.
Dividends on any series of Preferred Stock may be cumulative or
noncumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Company's Board of Directors fails to
declare a dividend payable on a dividend payment date on any series of Preferred
Stock for which dividends are noncumulative, then the holders of such series of
Preferred Stock will have no right to receive a dividend in respect of the
dividend period ending on such dividend payment date, and the Company will have
no obligation to pay the dividend accrued for such period, whether or not
dividends on such series are declared payable on any future dividend payment
date.
If any shares of 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 any other series ranking, as to dividends, on a parity with or junior
to the Preferred Stock of such series for any period unless (a) if such series
of Preferred Stock has a cumulative dividend, full cumulative dividends have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for such payment on the Preferred Stock of
such series for all past dividend periods and the then current dividend period
or (b) if such series of Preferred Stock does not have a cumulative dividend,
full dividends for the then current dividend period have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for such payment on the Preferred Stock of such
series. When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the shares of Preferred Stock of any series
and the shares of any other series of Preferred Stock ranking on a parity as to
dividends with the Preferred Stock of such series, all dividends declared on
shares of Preferred Stock of such series and any other series of Preferred Stock
ranking on a parity as to dividends of such Preferred Stock shall be declared
pro rata so that the amount of dividends declared per share on the Preferred
Stock of such series and such other series of Preferred Stock shall in all cases
bear to each other the same ratio that accrued dividends per share on the shares
of Preferred Stock of such series (which shall not include any accumulation in
respect of unpaid dividends for prior dividend periods if such Preferred Stock
does not have a cumulative dividend) and such other series of Preferred Stock
bear to each other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on Preferred Stock of
such series that may be in arrears.
Except as provided in the immediately preceding paragraph, unless (a) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for payment for all past dividend periods and the then current
dividend period and (b) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for payment for the then current dividend
period, no dividends (other than in Common Stock or other capital stock of the
Company ranking junior to the Preferred Stock of such series as to dividends and
upon liquidation) shall be declared or paid or set aside for payment nor shall
any other distribution be declared or made on the Common Stock or any other
capital stock of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to dividends or upon liquidation, nor shall any Common
Stock or any other capital stock of the Company ranking junior to or on a parity
with the Preferred Stock of such series as to dividends or upon liquidation be
redeemed, purchased or otherwise acquired for any consideration (or any amounts
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be paid to or made available for a sinking fund for the redemption of any shares
of any such stock) by the Company (except by conversion into or exchange for
other capital stock of the Company ranking junior to the Preferred Stock of such
series as to dividends and upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series that remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the shares of
Preferred Stock will be subject to mandatory redemption or redemption at the
Company's option, as a whole or in part, in each case on the terms, at the times
and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accumulated and unpaid dividends thereon
(which shall not, if such Preferred Stock does not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in cash
or other property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of capital stock of the Company, the terms of such
Preferred Stock may provide that, if no such capital stock shall have been
issued or to the extent the net proceeds from any issuance are insufficient to
pay in full the aggregate redemption price then due, such Preferred Stock shall
automatically and mandatorily be converted into shares of the applicable capital
stock of the Company pursuant to conversion provisions specified in the
applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (a) if such series of Preferred Stock
has a cumulative dividend, full cumulative dividends on all shares of such
series of Preferred Stock have been or contemporaneously are declared and paid
or declared and a sum sufficient for the payment thereof is set apart for
payment for all past dividend periods and the then current dividend period and
(b) if such series of Preferred Stock does not have a cumulative dividend, full
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for payment for the then current dividend period, no shares of such
series of Preferred Stock shall be redeemed unless all outstanding shares of
Preferred Stock of such series are simultaneously redeemed; PROVIDED, HOWEVER,
that the foregoing shall not prevent the purchase or acquisition of shares of
Preferred Stock of such series to preserve the Company's REIT status or pursuant
to a purchase or exchange offer made on the same terms to holders of all
outstanding shares of Preferred Stock of such series. In addition, unless (i) if
such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on all outstanding shares of such series of Preferred Stock have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for payment for all past dividend periods and
the then current dividend period and (ii) if such series of Preferred Stock does
not have a cumulative dividend, full dividends on the Preferred Stock of such
series have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof is set apart for payment for the then
current dividend period, the Company shall not purchase or otherwise acquire
directly or indirectly any shares of Preferred Stock of such series (except by
conversion into or exchange for capital stock of the Company ranking junior to
the Preferred Stock of such series as to dividends and upon liquidation);
PROVIDED, HOWEVER, that the foregoing shall not prevent the purchase or
acquisition of shares of Preferred Stock of such series to preserve the
Company's REIT status or pursuant to a purchase or exchange offer made on the
same terms to holders of all outstanding shares of Preferred Stock of such
series.
If fewer than all the outstanding shares of Preferred Stock of any series
are to be redeemed, the number of shares to be redeemed will be determined by
the Company and such shares may be
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redeemed pro rata from the holders of record of such shares in proportion to the
number of such shares held by such holders (with adjustments to avoid redemption
of fractional shares) or any other equitable method determined by the Company
that will not result in the issuance of any Excess Stock.
Notice of redemption will be mailed at least 30, but not more than 60, days
before the redemption date to each holder of record of a share of Preferred
Stock of any series to be redeemed at the address shown on the Company's stock
transfer books. Each notice shall state: (a) the redemption date; (b) the number
of shares and series of the Preferred Stock to be redeemed; (c) the redemption
price; (d) the place or places where certificates for such Preferred Stock are
to be surrendered for payment of the redemption price; (e) that dividends on the
shares to be redeemed will cease to accumulate on such redemption date; and (f)
the date on which the holder's conversion rights, if any, as to such shares
shall terminate. If fewer than all the shares of Preferred Stock of any series
are to be redeemed, the notice mailed to each such holder thereof shall also
specify the number of shares of Preferred Stock to be redeemed from each such
holder and, upon redemption, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof. If notice of redemption of
any shares of Preferred Stock has been given and if the funds necessary for such
redemption have been set aside by the Company in trust for the benefit of the
holders of any shares of Preferred Stock so called for redemption, then from and
after the redemption date dividends will cease to accrue on such shares of
Preferred Stock, such shares of 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. In order to facilitate the redemption
of shares of Preferred Stock of any series, the Board of Directors may fix a
record date for the determination of shares of such series of Preferred Stock to
be redeemed.
Subject to applicable law and the limitation on purchases when dividends on
a series of Preferred Stock are in arrears, the Company may, at any time and
from time to time, purchase any shares of such series of Preferred Stock in the
open market, by tender or by private agreement.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of any Common Stock or any other class or series of capital
stock of the Company ranking junior to any series of the Preferred Stock in the
distribution of assets upon any liquidation, dissolution or winding up of the
affairs of the Company, the holders of such series of Preferred Stock shall be
entitled to receive out of assets of the Company legally available for
distribution to stockholders liquidating distributions in the amount of the
liquidation preference per share (set forth in the applicable Prospectus
Supplement), plus an amount equal to all dividends accrued and unpaid thereon
(which shall not include any accumulation in respect of unpaid dividends for
prior dividend periods if such Preferred Stock does not have a cumulative
dividend). After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Preferred Stock will have no right or
claim to any of the remaining assets of the Company. If, upon any such voluntary
or involuntary liquidation, dissolution or winding up, the legally available
assets of the Company are insufficient to pay the amount of the liquidating
distributions on all outstanding shares of any series of Preferred Stock and the
corresponding amounts payable on all shares of other classes or series of
capital stock of the Company ranking on a parity with such series of Preferred
Stock in the distribution of assets upon liquidation, dissolution or winding up,
then the holders of such series of 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.
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If liquidating distributions shall have been made in full to all holders of
any series of Preferred Stock, the remaining assets of the Company shall be
distributed among the holders of any other classes or series of capital stock
ranking junior to such series of Preferred Stock upon liquidation, dissolution
or winding up, according to their respective rights and preferences and in each
case according to their respective number of shares. For such purposes, the
consolidation or merger of the Company with or into any other entity, or the
sale, lease, transfer or conveyance of all or substantially all of the Company's
property or business, shall not be deemed to constitute a liquidation,
dissolution or winding up of the affairs of the Company.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Stock, so long as any
shares of Preferred Stock of a series remain outstanding, the Company shall not,
without the affirmative vote or consent of the holders of at least a majority of
the shares of such series of Preferred Stock outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (a) authorize or create, or increase the authorized or
issued amount of, any class or series of capital stock ranking prior to such
series of Preferred Stock with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or reclassify
any authorized capital stock of the Company into any 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 Certificate of Incorporation or the Certificate of Designations for such
series of Preferred Stock, whether by merger, consolidation or otherwise, so as
to materially and adversely affect any right, preference, privilege or voting
power of such series of Preferred Stock or the holders thereof; PROVIDED,
HOWEVER, that any increase in the amount of the authorized Preferred Stock or
the creation or issuance of any other series of Preferred Stock, or any increase
in the amount of authorized shares of such series or any other series of
Preferred Stock, in each case ranking on a parity with or junior to the
Preferred Stock of such series with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up, shall not be
deemed to materially and adversely affect such rights, preferences, privileges
or voting powers.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Stock shall have
been redeemed or called for redemption upon proper notice and sufficient funds
shall have been deposited in trust to effect such redemption.
Under Delaware law, notwithstanding anything to the contrary set forth
above, holders of each series of Preferred Stock will be entitled to vote as a
class upon a proposed amendment to the Certificate of Incorporation, whether or
not entitled to vote thereon by the Certificate of Incorporation, if the
amendment would increase or decrease the aggregate number of authorized shares
of such series, increase or decrease the par value of the shares of such series,
or alter or change the powers, preferences or special rights of the shares of
such series so as to affect them adversely.
CONVERSION RIGHTS
The terms and conditions, if any, upon which shares of any series of
Preferred Stock are convertible into Class A Common Stock will be set forth in
the applicable Prospectus Supplement relating thereto. Such terms will include
the number of shares of Class A Common Stock into which the Preferred Stock is
convertible, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option of
the holders of the Preferred Stock or the Company, the events requiring an
adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of such Preferred Stock.
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RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code, not more than 50% in
value of its outstanding capital stock may be owned, actually or constructively,
by five or fewer individuals (defined in the Code to include certain entities)
during the last half of a taxable year. To assist the Company in meeting this
requirement, the Company may take certain actions to limit the beneficial
ownership, actually or constructively, by a single person or entity of the
Company's outstanding equity securities. See "Restrictions on Transfers of
Capital Stock; Excess Stock."
TRANSFER AGENT
The transfer agent and registrar for any series of Preferred Stock will be
set forth in the applicable Prospectus Supplement.
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK; EXCESS STOCK
For the Company to qualify as a REIT under the Code, among other things, not
more than 50% in value of its outstanding capital stock may be owned, actually
or constructively, by five or fewer individuals (defined in the Code to include
certain entities) during the last half of a taxable year, and such capital stock
must be beneficially owned by 100 or more persons during at least 355 days of a
taxable year of 12 months or during a proportionate part of a shorter taxable
year. To ensure that the Company remains qualified as a REIT, the Certificate of
Incorporation, subject to certain exceptions, provides that the Company may
prevent the transfer and/or call for redemption of shares of the Company
(whether Common Stock or Preferred Stock) if more than 50% of the outstanding
shares would be owned, actually or constructively, by five or fewer persons
(defined to include individuals, corporations, partnerships, joint ventures and
similar entities) or if one person would own, actually or constructively, more
than 9.8% of the total outstanding shares (or such higher percentage as may be
determined by the Company's Board of Directors (the "Ownership Limit")). In
addition, the Company may prevent such transfers and/or call for redemption of
such shares if the Company's Board of Directors determines in good faith that
the shares have or may become concentrated to the extent that may prevent the
Company from qualifying as a REIT. See "Certain Federal Income Tax
Considerations -- Overview of REIT Qualification Rules -- Share Ownership." Any
class or series of Preferred Stock may be subject to these restrictions if so
stated in the resolutions providing for the issuance of such Preferred Stock.
Any corporate investor wishing to acquire or own more than 9.8% of the total
outstanding shares may petition the Company's Board of Directors in writing for
approval. The Company's Board will grant such request unless it determines in
good faith that the acquisition or ownership of such shares would jeopardize the
Company's qualification as a REIT under existing federal tax laws and
regulations. Any corporate investor intending to acquire shares in excess of the
Ownership Limit must give written notice to the Company of the proposed
acquisition no later than the date on which the transaction occurs and must
furnish such opinions of counsel, affidavits, undertakings, agreements and
information as may be required by the Company's Board of Directors to evaluate
or to protect against any adverse effect of the transfer. Notwithstanding the
foregoing, the Company's Board of Directors is not required to grant a request
to adjust the Ownership Limit if the Company's Board of Directors believes,
based on advice of legal counsel, that the granting of such request would cause
the Company's Board of Directors to breach its fiduciary duties to the
stockholders of the Company.
If, despite the restrictions noted above, any person acquires shares of the
Company's Common Stock in excess of the Ownership Limit (applying certain
constructive ownership provisions), the shares most recently acquired by such
person in excess of the Ownership Limit will be automatically exchanged for an
equal number of shares of Excess Stock. The Company is authorized to issue
160,000,000 shares of Excess Stock, par value $.001 per share. Pursuant to the
Company's Certificate of Incorporation, shares of Excess Stock have the
following characteristics: (a) owners of Excess Stock are not entitled to
exercise voting rights with respect to the Excess Stock; (b) Excess Stock shall
not be deemed outstanding for purposes of determining a quorum at any annual or
special meeting of stockholders; and (c) Excess Stock will not be entitled to
any dividends or other distributions. Any
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person who becomes an owner of Excess Stock is obligated to immediately give the
Company written notice of such fact and certain information required by the
Certificate of Incorporation. Excess Stock is also deemed to have been offered
for sale to the Company or its designee for a period of 120 days from the later
of (i) the date of the transfer that created the Excess Stock if the Company has
actual notice that such transfer created the Excess Stock and (ii) the date on
which the Company's Board of Directors determines in good faith that the
transfer creating the Excess Stock has occurred. The Company has the right
during such time period to accept the deemed offer or, in the Board of
Directors' discretion, the Company may acquire and sell, or cause the owner to
sell, the Excess Stock. The price for the Excess Stock will be the lesser of (y)
the closing price of the shares exchanged into Excess Stock on the national
stock exchange on which the shares are listed as of the date the Company or its
designee acquires the Excess Stock or, if no such price is available, as
determined in good faith by the Company's Board of Directors and (z) the price
per share paid by the owner of the shares that were exchanged into Excess Stock
or, if no purchase price was paid, the fair market value of such shares on the
date of acquisition as determined in good faith by the Company's Board of
Directors. Upon such transfer or sale, the Excess Stock will automatically
convert to Class A Common Stock with all voting and dividend rights effective as
of the date of such conversion; PROVIDED, HOWEVER, that the owner will not be
entitled to receive dividends payable with respect to Class A Common Stock for
the period during which the shares were Excess Stock.
All certificates of Class A Common Stock and Class B Common Stock, any other
series of the Company's Common Stock, and any class or series of Preferred Stock
will bear a legend referring to the restrictions described above. All persons
who own a specified percentage (or more) of the outstanding capital stock of the
Company must file an affidavit with the Company containing information regarding
their ownership of stock as set forth in the Treasury Regulations. Under current
Treasury Regulations, the percentage is set between .5% and 5%, depending on the
number of record holders of capital stock. In addition, each stockholder shall
upon demand be required to disclose to the Company in writing such information
with respect to the direct, indirect and constructive ownership of shares of
capital stock of the Company as the Board of Directors deems necessary to comply
with the provisions of the Code applicable to a REIT, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.
This ownership limitation may have the effect of precluding acquisition of
control of the Company by a third party unless the Board of Directors determines
that maintenance of REIT status is no longer in the best interests of the
Company.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following summary of certain federal income tax considerations to the
Company is based on current law, is for general information only, and is not tax
advice. The tax treatment of a holder of any of the Securities will vary
depending on the terms of the specific Securities acquired by such holder, as
well as his or her particular situation. This discussion does not attempt to
address any aspects of federal income taxation relating to holders of
Securities. Certain federal income tax considerations relevant to a holder of
Securities will be provided in the Prospectus Supplement relating thereto.
EACH INVESTOR IS ADVISED TO CONSULT THE APPLICABLE PROSPECTUS SUPPLEMENT, AS
WELL AS HIS OR HER OWN TAX ADVISOR, REGARDING THE TAX CONSEQUENCES TO HIM OR HER
OF THE ACQUISITION, OWNERSHIP AND SALE OF THE OFFERED SECURITIES, INCLUDING THE
FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF SUCH ACQUISITION,
OWNERSHIP AND SALE AND OF POTENTIAL CHANGES IN APPLICABLE LAWS.
QUALIFICATION OF THE COMPANY AS A REIT; OPINION OF COUNSEL
The Company intends to elect to be taxed as a REIT under Sections 856
through 860 of the Code, commencing with its fiscal year ended December 31,
1994. The election to be taxed as a REIT will
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continue until it is revoked or otherwise terminated. The most important
consequence to the Company of being treated as a REIT for federal income tax
purposes is that it will not be subject to federal corporate income taxes on net
income that is currently distributed to its stockholders. This treatment
substantially eliminates the "double taxation" (at the corporate and stockholder
levels) that typically results when a corporation earns income and distributes
that income to stockholders in the form of a dividend. Accordingly, if the
Company at any time fails to qualify as a REIT, the Company will be taxed on its
distributed income, thereby reducing the amount of cash available for
distribution to its stockholders.
In the opinion of Perkins Coie, counsel to the Company, commencing with the
taxable year ended December 31, 1994, the Company has been organized in
conformity with the requirements for qualification as a REIT and its proposed
method of operation will enable it to continue to meet the requirements for
qualification and taxation as a REIT under the Code. This opinion is based on
various assumptions and is conditioned upon the representations of the Company
as to factual matters. Moreover, continued qualification and taxation as a REIT
will depend on the Company's ability to satisfy on a continuing basis certain
distribution levels, diversity of stock ownership and various qualification
tests imposed by the Code as summarized below. While the Company intends to
operate so that it will continue to qualify as a REIT, given the highly complex
nature of the rules governing REITs, the ongoing importance of factual
determinations, and the possibility of future changes in the circumstances of
the Company, no assurance can be given by counsel or the Company that the
Company will so qualify for any particular year. Perkins Coie will not review
compliance with these tests on a continuing basis, and has not undertaken to
update its opinion subsequent to the date hereof.
TAXATION OF THE COMPANY AS A REIT
If the Company qualifies for taxation as a REIT, it generally will not be
subject to federal income tax on net income that is currently distributed to its
stockholders. The Company may, however, be subject to certain federal taxes
based on the amount of its distributions or its inability to meet certain REIT
qualification requirements. These taxes are the following:
TAX ON UNDISTRIBUTED INCOME. First, if the Company does not distribute all
of its net taxable income, including any net capital gain, the Company would be
taxed at regular corporate rates on the undistributed income or gains.
TAX ON PROHIBITED TRANSACTIONS. Second, if the Company has net income from
certain prohibited transactions, including sales or dispositions of property
held primarily for sale to customers in the ordinary course of business, such
net income would be subject to a 100% confiscatory tax.
TAX ON FAILURE TO MEET GROSS INCOME REQUIREMENTS. Third, if the Company
should fail to meet either the 75% or 95% gross income test as described below
but still qualify for REIT status because, among other requirements, it was able
to show that such failure was due to reasonable cause, it will be subject to a
100% tax on an amount equal to (a) the gross income attributable to the greater
of the amount, if any, by which the Company failed either the 75% or the 95%
gross income test, multiplied by (b) a fraction intended to reflect the
Company's profitability.
TAX ON FAILURE TO MEET DISTRIBUTION REQUIREMENTS. Fourth, if the Company
should fail to distribute during each calendar year at least the sum of (a) 85%
of its REIT ordinary income for such year, (b) 95% of its REIT capital gain net
income for such year, and (c) any undistributed taxable income from prior
periods, the Company would be subject to a 4% excise tax on the excess of such
required distribution over the amounts actually distributed.
TAX ON BUILT-IN GAIN. Fifth, if during the 10-year period (the "Recognition
Period") beginning on the date that the Management Company merged with and into
the Company, the Company recognizes gain on the disposition of any asset
acquired by the Company from the Management Company, then to the extent of the
excess of (a) the fair market value of such asset as of the beginning
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of such Recognition Period over (b) the Company's adjusted basis in such asset
as of the beginning of such Recognition Period, such gain will be subject to tax
at the highest regular corporate rate pursuant to IRS regulations that have not
yet been promulgated.
ALTERNATIVE MINIMUM TAX. Sixth, the Company may be subject to alternative
minimum tax on certain items of tax preference.
TAX ON FORECLOSURE PROPERTY. Seventh, if the Company has (a) net income
from the sale or other disposition of foreclosure property that is held
primarily for sale to customers in the ordinary course of business or (b) other
nonqualifying income from foreclosure property, it will be subject to tax at the
highest corporate rate on such income.
OVERVIEW OF REIT QUALIFICATION RULES
The following summarizes the basic requirements for REIT status:
(a) The Company must be a corporation, trust or association that is managed
by one or more trustees or directors.
(b) The Company's stock or beneficial interests must be transferable and
held by more than 100 stockholders, and no more than 50% of the value of the
Company's stock may be held, actually or constructively, by five or fewer
individuals.
(c) Generally, 75% (by value) of the Company's investments must be in real
estate, mortgages secured by real estate, cash or government securities.
(d) The Company must meet three gross income tests:
(i) First, at least 75% of the gross income must be derived from
specific real estate sources;
(ii) Second, at least 95% of the gross income must be from the real
estate sources includable in the 75% test, or from dividends,
interest or gains from the sale or disposition of stock and
securities; and
(iii) Third, less than 30% of the gross income may be derived from the
sale of real estate assets held for less than four years, from the
sale of certain "dealer" properties or from the sale of stock or
securities having a short-term holding period.
(e) The Company must distribute to its stockholders in each taxable year an
amount at least equal to 95% of the Company's "REIT taxable income" (which is
generally equivalent to taxable ordinary income and is defined below).
The discussion set forth below explains these REIT qualification
requirements in greater detail. It also addresses how these highly technical
rules may be expected to impact the Company in its operations, noting areas of
uncertainty that perhaps could lead to adverse consequences to the Company and
its stockholders.
SHARE OWNERSHIP. The Company's shares of stock are fully transferable, with
the exception of certain shares that are subject to contractual transfer
restrictions. Furthermore, the Company has more than 100 stockholders and its
Certificate of Incorporation provides, to decrease the possibility that the
Company will ever be closely held, that no individual, corporation or
partnership is permitted to actually or constructively acquire more than 9.8% of
the number of outstanding shares of Class A Common Stock. The Ownership Limit
may be adjusted, however, by the Company's Board of Directors in certain
circumstances. Shares acquired in excess of the Ownership Limit may be redeemed
by the Company. In addition, the Certificate of Incorporation provides that
shares acquired in excess of the Ownership Limit will automatically convert into
nondividend-paying and nonvoting shares of Excess Stock. Contractual or
securities law restrictions on transferability should be disregarded for
purposes of determining the transferability of REIT shares. The ownership and
transfer restrictions pertaining generally to a particular issue of Preferred
Stock will be described in the Prospectus Supplement relating to such issue.
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NATURE OF ASSETS. On the last day of each calendar quarter, at least 75% of
the value of the Company's total assets must consist of (a) real estate assets
(including interests in real property and mortgages on loans secured by real
property), (b) cash and cash items (including receivables), and (c) government
securities (collectively, the "real estate assets"). In addition, no more than
25% of the value of the Company's assets may consist of securities (other than
government securities). Finally, except for certain "qualified REIT
subsidiaries," as described below, the securities of any issuer, other than the
United States government, may not represent more than 5% of the value of the
Company's total assets or 10% of the outstanding voting securities of any one
issuer.
While, as noted above, a REIT cannot own more than 10% of the outstanding
voting securities of any single issuer, an exception to this rule permits REITs
to own "qualified REIT subsidiaries." A "qualified REIT subsidiary" is any
corporation in which 100% of its stock is owned by the REIT at all times during
which the corporation was in existence. The Company currently has three wholly
owned corporate subsidiaries that were formed and owned at all times during
their existence by the Company. These corporations should be treated as
"qualified REIT subsidiaries" and should not adversely affect the Company's
qualification as a REIT.
The Company owns interests in partnerships that directly or indirectly own
and operate self-storage facilities. The Company, for purposes of satisfying its
REIT asset and income tests, will be treated as if it owns a proportionate share
of each of the assets of these partnerships attributable to such interests. For
these purposes, the Company's interest in each of the partnerships will be
determined in accordance with its capital interest in such partnership. The
character of the various assets in the hands of the partnership and the items of
gross income of the partnership will remain the same in the Company's hands for
these purposes. Accordingly, to the extent the partnership receives qualified
real estate rentals and holds real property, a proportionate share of such
qualified income and assets, based on the Company's capital interest in the
partnerships, will be treated as qualified rental income and real estate assets
of the Company for purposes of determining its REIT characterization. It is
expected that substantially all the properties of the partnerships will
constitute real estate assets and generate qualified rental income for these
REIT qualification purposes.
In several partnerships, the Company is entitled to a percentage of profits
in excess of its percentage of total capital contributed to the partnership.
Regulatory authority does not specifically address this situation and, based on
existing authority, the treatment of these profit interests when applying these
gross income and asset rules is uncertain. For example, based on the existing
rules, if the amount of net income allocated to a REIT based on a profit
interest in a partnership is in excess of its capital interest in the
partnership's underlying gross income, the amount of such excess should be
entirely disregarded for these REIT qualification purposes. Furthermore, these
rules do not specifically address the manner in which a REIT is to determine its
capital interest. There is no reference to the capital account or special
allocation rules of Section 704(b) of the Code and the Treasury Regulations
promulgated thereunder and these rules do not address acquisitions of
partnership interests for valuable consideration. Based on the fact that the
Company acquired these interests for valuable consideration in connection with
the Merger and at a time when the partnership assets may have some appreciated
capital value, the Company may be treated as having a capital percentage in the
partnerships at the time of the Merger. In the event the IRS determines that the
percentage of capital contributed is the proper indicator of a capital interest,
however, a portion of the income recognized by the Company and the real estate
treated as owned by the Company attributable to its interest in these
partnerships may be disregarded when applying these gross income and asset
requirements.
This treatment for partnerships is conditioned on the treatment of these
entities as partnerships for federal income tax purposes (as opposed to
associations taxable as corporations). If any of the partnerships is treated as
an association, it would be taxable as a corporation. In such situation, if the
Company's ownership in any of the partnerships exceeded 10% of the partnership's
voting interests or the value of such interest exceeded 5% of the value of the
Company's assets, the Company would cease to qualify as a REIT. Furthermore, in
such a situation, distributions from any of the partnerships to the Company
would be treated as dividends, which are not taken into account in satisfying
the 75%
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gross income test described below and which could therefore make it more
difficult for the Company to qualify as a REIT for the taxable year in which
such distribution was received. In addition, in such a situation, the interest
in any of the partnerships held by the Company would not qualify as "real estate
assets," which could make it more difficult for the Company to meet the 75%
asset test described above. Finally, in such a situation, the Company would not
be able to deduct its share of any losses generated by the partnerships in
computing its taxable income. The Company believes that each of the partnerships
will be taxed for tax purposes as a partnership (and not as an association
taxable as a corporation). However, there can be no assurance that the IRS may
not successfully challenge the tax status of any of the partnerships.
INCOME TESTS. To maintain its qualification as a REIT, the Company must
meet three gross income requirements that must be satisfied annually. First, at
least 75% of the REIT's gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived directly or indirectly from
investments relating to real property or mortgages on real property (including
"rents from real property" and, in certain circumstances, interest) or from
certain types of temporary investments. Second, at least 95% of the REIT's gross
income (excluding gross income from prohibited transactions) for each taxable
year must be derived from such real property investments, and from dividends,
interest and gain from the sale or disposition of stock or securities, or from
any combination of the foregoing. Third, short-term gain from the sale or other
disposition of stock or securities, gain from prohibited transactions and gain
from the sale or other disposition of real property held for less than four
years (apart from involuntary conversions and sales of foreclosure property)
must represent less than 30% of the REIT's gross income (including gross income
from prohibited transactions) for each taxable year.
Rents received by the Company on the lease of self-storage facilities will
qualify as "rents from real property" in satisfying the gross income
requirements for a REIT described above only if several conditions are met.
First, the amount of rent must not be based in whole or in part on the income or
profits of any person. However, an amount received or accrued generally will not
be excluded from the term "rents from real property" solely by reason of being
based on a fixed percentage or percentages of receipts of sales. Second, the
Code provides that rents received from a tenant will not qualify as "rents from
real property" in satisfying the gross income test if the Company, or an owner
of 10% or more of the Company, actually or constructively owns 10% or more of
such tenant (a "Related-Party Tenant"). Third, if rent attributable to personal
property leased in connection with the lease of real property is greater than
15% of the total rent received under the lease, then the portion of rent
attributable to such personal property will not qualify as "rents from real
property." The Company does not anticipate charging rent for any portion of any
property that is based in whole or in part on the income or profits of any
person and the Company does not anticipate receiving rents in excess of a de
minimis amount from Related-Party Tenants. Furthermore, the Company does not
lease personal property in connection with its rental of self-storage
facilities.
Finally, for rents to qualify as "rents from real property," the Company
must not operate or manage the property or furnish or render services to tenants
unless the Company furnishes or renders such services through an independent
contractor from whom the Company derives no revenue. The Company need not
utilize an independent contractor to the extent that services provided by the
Company are usually and customarily rendered in connection with the rental of
space for occupancy only and are not otherwise considered "rendered to the
occupant." The Company has obtained a private letter ruling from the IRS ruling
that the management services provided by the Company for its own properties will
not cause the rents received by the Company to be treated as other than "rents
from real property." The ruling is based on a description of those management
services to be performed by the Company in connection with its own properties,
including maintenance, repair, lease administration and accounting and security.
The ruling also considers certain ancillary services to be directly
performed by the Company such as truck rentals and inventory sales. The ruling
provides that such services do not otherwise adversely affect the
characterization of the rental income received by the Company. Nonetheless,
income from
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truck rentals and certain other ancillary services does not qualify under these
gross income tests ("Nonqualifying Income"). In addition, the fees,
consideration and certain reimbursements that the Company receives for
performing management and administrative services with respect to properties
that are not owned entirely by the Company will also be treated as Nonqualifying
Income.
As of the date of this Prospectus, the Company anticipates that it will
generate Nonqualifying Income of between approximately 4.1% and 4.3% in 1995 and
between approximately 4.5% and 4.7% in 1996 based on its historical and budgeted
revenues and assuming no substantial change in its current operations.
The Company intends to monitor the percentage of Nonqualifying Income and
reduce the percentage of Nonqualifying Income if necessary. Because the income
tests are based on a percentage of total gross income, increases in qualifying
rents will reduce the percentage of Nonqualifying Income. For example, the
Company may acquire real estate assets that would generate additional qualifying
income, thereby lowering the percentage of total Nonqualifying Income. Increases
in other Nonqualifying Income may similarly affect these calculations. Reference
is made to the applicable Prospectus Supplement for a current discussion, if
any, relating to the amount of Nonqualifying Income expected to be generated by
the Company.
If the Company fails to satisfy one or both of the 75% and 95% gross income
tests for any taxable year, it may nevertheless qualify as a REIT for such year
if it is entitled to relief under certain provisions of the Code. These relief
provisions generally will be available if the Company's failure to meet such
test was due to reasonable cause and not willful neglect and the Company
attaches a schedule of its income sources to its tax return that does not
fraudulently or intentionally exclude any income sources. As discussed above,
even if these relief provisions apply, a tax would be imposed with respect to
such excess income.
ANNUAL DISTRIBUTION REQUIREMENTS. Each year, the Company must have a
deduction for dividends paid (determined under Section 561 of the Code) to its
stockholders in an amount equal to (a) 95% of the sum of (i) its "REIT taxable
income" as defined below, (ii) any net income from foreclosure property less the
tax on such income, minus (b) any "excess noncash income," as defined below.
"REIT taxable income" is the taxable income of a REIT computed without a
deduction for dividends paid and excluding any net capital gain. REIT taxable
income is further adjusted by certain items, including, without limitation, an
exclusion for net income from foreclosure property, a deduction for the excise
tax on the greater of the amount by which the REIT fails the 75% or the 95%
income test, and an exclusion for an amount equal to any net income derived from
prohibited transactions. "Excess noncash income" means the excess of certain
amounts that the REIT is required to recognize as income in advance of receiving
cash, such as original issue discount on purchase money debt, over 5% of the
REIT taxable income before deduction for dividends paid and excluding any net
capital gain. Such distributions must be made in the taxable year to which they
relate, or in the following taxable year if declared before the REIT timely
files its tax return for such year and is paid on or before the first regular
dividend payment after such declaration.
It is possible that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement due to
timing differences between (a) the actual receipt of income and the actual
payment of deductible expenses and (b) the inclusion of such income and
deduction of such expenses in arriving at taxable income of the Company.
Furthermore, substantial principal payments on Company indebtedness, which has
the effect of lowering the amount of distributable cash without an offsetting
deduction to Company taxable income, may adversely affect the Company's ability
to meet this distribution requirement. In the event that such timing differences
or reduction to distributable cash occurs, in order to meet the 95% distribution
requirement, the Company may find it necessary to arrange for short-term, or
possible long-term, borrowings or to pay dividends in the form of taxable stock
dividends.
Under certain circumstances, the Company may be able to rectify a failure to
meet the distribution requirement for a year by paying "deficiency dividends" to
stockholders in a later year that may
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be included in the Company's deduction for dividends paid for the earlier year.
Thus, the Company may be able to avoid being taxed on amounts distributed as
deficiency dividends; however, the Company will be required to pay to the IRS
interest based on the amount of any deduction taken for deficiency dividends.
DISTRIBUTION OF ACQUIRED EARNINGS. In addition to the above annual
distribution requirements, a REIT is not allowed to have accumulated earnings
and profits attributable to non-REIT years. A REIT has until the close of its
first taxable year in which it has non-REIT earnings and profits to distribute
any such accumulated earnings and profits. As a result of the Merger in March
1995, the Company is treated as having acquired the Management Company's
accumulated earnings and profits and must, therefore, distribute these earnings
and profits prior to the close of 1995. Failure to do so would result in loss of
the Company's REIT status. See "-- Failure of the Company to Qualify as a REIT."
The amount of the Management Company's accumulated earnings and profits
acquired by the Company (the "Acquired Earnings") will be determined, in part,
through an earnings and profits study based on the Management Company's
corporate tax returns as filed for the years beginning on the Management
Company's date of incorporation through the date of the Merger. Furthermore, as
a result of the Management Company's spin off of InterMation, Inc.
("InterMation") prior to the Merger, a portion of the Management Company's
consolidated earnings and profits have been allocated to InterMation based on
the relative fair market values of the two separate corporations at the time of
the spin-off. The valuation of these two corporations will be based on the share
consideration paid by the Company for the Management Company in the Merger
(exclusive of contingent consideration) and an independent valuation of
InterMation.
As of the date of this Prospectus the Company estimates that the amount of
the Acquired Earnings is between $4,500,000 and $5,500,000, depending on the
relative values of InterMation assumed for allocating such accumulated earnings
and profits in connection with the spin-off. This estimate is based on, among
other things, (i) a reduction in the accumulated earnings and profits of the
Management Company resulting from the exercise of stock options and the payment
of cash bonuses to pay taxes associated with such exercise during 1995, (ii) a
reduction in the accumulated earnings and profits of the Management Company
resulting from payment of stock and cash bonuses during 1994 and 1995, and (iii)
a reduction in the accumulated earnings and profits of the Management Company
resulting from an InterMation net operating loss for the 1995 period ending on
the date of the spin-off. The amount of these reductions has not been
independently reviewed as of the date of this Prospectus. Because the above
range is based on estimates and other assumptions, the actual amount of Acquired
Earnings may differ from the above range.
Based on its quarterly dividend history during 1994, the Company will be
required to increase its distributions during 1995 to distribute the Acquired
Earnings. The Company may accomplish these additional distributions by
increasing its quarterly distribution, making special distributions during 1995
or making a special year-end distribution. A year-end distribution must be
declared within the last three months of 1995, payable to stockholders of record
on a specified date in any such month and paid prior to January 31, 1996. This
distribution, to the extent it constitutes a dividend, would be treated for all
purposes as a 1995 dividend to the Company's stockholders even though received
by the stockholders after year-end. The Company intends to make distributions
that are sufficient to fully distribute the Acquired Earnings prior to the end
of 1995. As a result of these increased distributions, the Company's
stockholders will recognize additional dividend income in 1995.
The calculation of the amount of Acquired Earnings is subject to challenge
by the IRS. The IRS may examine the Management Company's prior tax returns and
propose adjustments to increase its taxable income. Because the earnings and
profits study used to calculate the amount of Acquired Earnings is based on
these returns, such adjustments may increase the amount of Acquired Earnings,
particularly since the IRS may consider all taxable years as open for review for
purposes of determining earnings and profits. Moreover, there can be no
assurance that the IRS will respect the valuations used for purposes of
allocating the consolidated earnings and profits between the Management
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Company and InterMation in connection with the spin-off. If the IRS determines
that the Management Company has a proportionately greater value than InterMation
at the time of the InterMation spin-off, the amount of Acquired Earnings would
proportionately increase.
If the IRS determines that the Company has not distributed the Acquired
Earnings prior to the end of 1995, the Company would fail to qualify as a REIT
for 1995. See "-- Failure of the Company to Qualify as a REIT." However, the
Company may make an additional distribution within 90 days of such a
determination by the IRS and would be required to pay the IRS an interest charge
based on 50% of the amount not previously distributed. If such additional
distribution is made, the Company's failure to distribute the Acquired Earnings
would not prevent it from qualifying as a REIT for years subsequent to 1995.
Reference is made to the applicable Prospectus Supplement for a current
discussion, if any, of the amount of Acquired Earnings and the expected timing
and amount of Company distributions.
FAILURE OF THE COMPANY TO QUALIFY AS A REIT
If the Company fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, the Company would be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates, thereby reducing the amount of cash available for
distribution to its stockholders. Distributions to stockholders in any year in
which the Company fails to qualify would not be deductible by the Company nor
would they be required to be made. In such an event, to the extent of current
and accumulated earnings and profits, all distributions to stockholders would be
taxable as ordinary income and, subject to certain limitations in the Code,
corporate distributees may be eligible for the dividends-received deduction.
Unless entitled to relief under specific statutory relief provisions, the
Company would also be disqualified from taxation as a REIT for the four taxable
years following the year during which such qualification was lost. It is not
possible to state whether in all circumstances the Company would be entitled to
such statutory relief.
MANAGEMENT COMPANY MERGER
The Company has obtained an opinion from Perkins Coie that, among other
things, the Merger will be treated as a reorganization under Section 368(a) of
the Code and that no gain or loss will be recognized by the Company or the
Management Company in the Merger. No ruling from the IRS will be applied for
with respect to the federal income tax consequences of the Merger. Thus there
can be no assurance that the IRS will agree with the conclusions set forth in
such opinion. If the Merger does not qualify as a reorganization under Section
368(a) of the Code, the Management Company would recognize gain or loss in an
amount equal to the difference between the fair market value of the Class A
Common Stock issued in the Merger and the adjusted tax basis of the Management
Company assets acquired in the Merger. Although the Company would not directly
recognize gain or loss as a result of the failure of the Merger to qualify as a
reorganization under Section 368(a) of the Code, the Company will be primarily
liable as the successor to the Management Company for the resulting tax
liability imposed on the Management Company. Furthermore, the failure of the
Merger to qualify as a reorganization may cause the InterMation spin-off to fail
to qualify as a tax-free corporate division under Section 355(a)(1) of the Code.
STATE AND LOCAL TAXES
The Company or its stockholders, or both, may be subject to state or local
taxes in other jurisdictions such as those in which the Company may be deemed to
be engaged in activities or in which stockholders reside or own property or
other interests. Such tax treatment of the Company and its stockholders in
states having taxing jurisdiction over them may differ from the federal income
tax treatment described in the summary. Each stockholder should consult his or
her tax advisor as to the status of the Securities under the respective state
laws applicable to them.
31
<PAGE>
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for public
offering and sale by them or may sell the Securities to investors directly or
through agents. Any such underwriter or agent involved in the offer and sale of
the Securities will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, at prices relating to the prevailing market prices at the
time of sale or at negotiated prices. The Company also may, from time to time,
authorize underwriters acting as the Company's agents to offer and sell the
Securities upon the terms and conditions as are set forth in the applicable
Prospectus Supplement. In connection with the sale of Securities, underwriters
may be deemed to have received compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of Securities for whom they may act as agent. Underwriters may sell
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions from the purchasers for whom they may act as agent. Any underwriting
compensation paid by the Company to underwriters or agents in connection with
the offering of Securities, and any discounts, concessions or commissions
allowed by underwriters to participating dealers, will be set forth in the
applicable Prospectus Supplement. Underwriters, dealers and agents participating
in the distribution of the Securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the Securities may be deemed to be underwriting discounts and
commissions, under the Securities Act. Any such underwriter or agent will be
identified, and such compensation received from the Company will be described,
in the applicable Prospectus Supplement.
Underwriters, dealers and agents may be entitled, under agreements entered
into with the Company, to indemnification against and contribution toward
certain civil liabilities, including liabilities under the Securities Act.
Certain of the underwriters, dealers and agents and their affiliates may be
customers of, engage in transactions with and perform services for the Company
and its subsidiaries in the ordinary course of business.
Unless otherwise specified in the related Prospectus Supplement, each series
of Securities will be a new issue with no established trading market, other than
the Class A Common Stock. The Class A Common Stock is currently quoted on Nasdaq
and has been approved for listing on the NYSE commencing May 5, 1995. Unless
otherwise specified in the related Prospectus Supplement, any shares of Class A
Common Stock sold pursuant to a Prospectus Supplement will be listed on the
NYSE, subject to official notice of issuance. The Company may elect to list any
series of Debt Securities or Preferred Stock on an exchange or Nasdaq, but is
not obligated to do so. It is possible that one or more underwriters may make a
market in a series of Securities, but will not be obligated to do so and may
discontinue any market making at any time without notice. Therefore, there can
be no assurance as to the liquidity of, or the trading market for, the
Securities.
In order to comply with the securities laws of certain states, if
applicable, the Securities offered hereby will be sold in such jurisdictions
only through registered or licensed brokers or dealers. In addition, in certain
states Securities may not be sold unless they have been registered or qualified
for sale in the applicable state or an exemption from the registration or
qualification requirement is available and is complied with.
Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the Securities offered hereby may not
simultaneously engage in market making activities with respect to the Securities
for a period of two business days prior to the commencement of such
distribution.
32
<PAGE>
EXPERTS
The financial statements incorporated in this Prospectus by reference from
the Company's Annual Report on Form 10-K have been audited by Deloitte & Touche
LLP, independent auditors, as stated in their report, which is incorporated
herein by reference, and have been so incorporated in reliance upon the report
of such firm given upon their authority as experts in accounting and auditing.
LEGAL MATTERS
The validity of the Securities will be passed upon for the Company by
Perkins Coie, Seattle, Washington.
33
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses, other than underwriting discounts and commissions,
in connection with the offerings of the Securities are as follows:
<TABLE>
<S> <C>
Securities Act Registration Fee......... $ 68,966
Blue Sky Fees and Expenses.............. 15,000
Printing and Engraving Expenses......... 150,000
Legal Fees and Expenses................. 175,000
Accounting Fees and Expenses............ 100,000
Miscellaneous........................... 50,000
--------
Total................................. $558,966
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article 13 of the Certificate of Incorporation provides that directors
of the Registrant shall not be liable to the Registrant or its stockholders
for monetary damages for their conduct as directors to the full extent
permitted by the Delaware General Corporation Law ("Delaware Law") as it
existed at the time the Certificate of Incorporation was adopted, and as it
may thereafter be amended. Any amendment to or repeal of Article 13 shall
apply only to acts or omissions of directors occurring after such amendment
or repeal.
The By-Laws provide that the Registrant shall indemnify and hold
harmless its directors and officers to the fullest extent permitted under
Delaware Law or by any other applicable law against all litigation expenses,
judgments, fines and settlement amounts incurred in connection with their
service or status as directors and officers. Such indemnification also
extends to liabilities arising from actions taken by directors or officers
when serving at the request of the Registrant as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust or other enterprise.
Section 145 of Delaware Law, as currently in effect, sets forth the
indemnification rights of directors and officers of Delaware corporations.
Under such provision, a director or officer of a corporation (i) shall be
indemnified by the corporation for all expenses of litigation or other legal
proceedings when he or she is successful on the merits or otherwise, (ii) may
be indemnified by the corporation for the expenses, judgments, fines and
amounts paid in settlement of such litigation (other than a derivative suit),
even if he or she is not successful on the merits, if he or she acted in good
faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the corporation (and, in the case of a criminal
proceeding, had no reason to believe his or her conduct was unlawful), and
(iii) may be indemnified by the corporation for the expenses of a derivative
suit (a suit by a stockholder alleging a breach by a director or an officer
of a duty owed to the corporation), even if he or she is not successful on
the merits, if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, provided that no such indemnification may be made in accordance
with this clause (iii) if the director or officer is adjudged liable to the
corporation, unless a court determines that, despite such adjudication but in
view of all the circumstances, he or she is fairly and reasonably entitled to
indemnification of such expenses. The indemnification described in clauses
(ii) and (iii) above shall be made only upon a determination by (A) a
majority of a quorum of disinterested directors, (B) independent legal
counsel in a written opinion, or (C) the stockholders, that indemnification
is proper because the applicable standard of conduct has been met.
The effect of the indemnification provisions contained in the By-Laws is
to require the Registrant to indemnify its directors and officers under
circumstances where such indemnification would otherwise be discretionary and
to extend to the Registrant's directors and officers the benefits of Delaware
Law dealing with director and officer indemnification, as well as any future
changes that might occur under Delaware Law in this area.
II-1
<PAGE>
The By-Laws state that the indemnification rights granted thereunder are
not exclusive of any other indemnification rights to which the director or
officer may otherwise be entitled. As permitted by Section 145(g) of Delaware
Law, the By-Laws also authorize the Registrant to purchase directors and
officers insurance for the benefit of its directors and officers,
irrespective of whether the Registrant has the power to indemnify such
persons under Delaware Law. The Registrant currently maintains such insurance
as allowed by these provisions.
ITEM 16. EXHIBITS
1(a) Form of Underwriting Agreement for Debt Securities(1)
1(b) Form of Underwriting Agreement for Equity Securities(1)
2 Agreement and Plan of Merger dated as of December 19, 1994 (incorporated
by reference to Exhibit 2.1 to the Registration Statement on Form S-4 of
Shurgard Storage Centers, Inc. (Registration No. 33-57047))
4(a) Amended and Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 to the Registration Statement on Form S-4 of
Shurgard Storage Centers, Inc. (Registration No. 33-57047))
4(b) Restated By-Laws (incorporated by reference to Exhibit 3.2 to the
Registration Statement on Form S-4 of Shurgard Storage Centers, Inc.
(Registration No. 33-57047))
4(c) Rights Agreement between Shurgard Storage Centers, Inc. and Gemisys
Corporation dated as of March 17, 1994 (incorporated by reference to
Exhibit 2-1 to the Registration Statement on Form 8-A (File No. 0-23466)
of Shurgard Storage Centers, Inc. filed with the Securities and Exchange
Commission on March 17, 1994)
4(d) Form of Indenture(2)
4(e) Form of Debt Security (included in Exhibit 4(d))(2)
4(f) Form of Certificate of Designations for the Preferred Stock(1)
4(g) Form of Preferred Stock Certificate(1)
5 Opinion of Perkins Coie(1)
8 Opinion of Perkins Coie Regarding Tax Matters
12 Statement of Computation of Ratios of Earnings to Fixed Charges(2)
23(a) Consent of Deloitte & Touche LLP (contained on page II-5)
23(b) Consents of Perkins Coie (included in Exhibit 5 and Exhibit 8)
24 Power of Attorney(2)
25 Statement of Eligibility of Trustee on Form T-1(1)
_________________
(1) To be filed by amendment or incorporated by reference in connection with
the offering of Securities.
(2) Previously filed.
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act");
II-2
<PAGE>
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) that, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
PROVIDED, HOWEVER, that subparagraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in the periodic reports filed with or furnished
to the Commission by the Registrant pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that
are incorporated by reference in this Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered that remain unsold at the
termination of the offering.
(b) The undersigned Registrant hereby further undertakes that, for the
purposes of determining any liability under the Securities Act, each filing
of the Registrant's annual report pursuant to Section 13(a) or Section 15(d)
of the Exchange Act that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered herein, and the offering of such Securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) 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 provisions under Item 15 above, 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 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.
(d) The undersigned Registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with
the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Trust Indenture Act.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended
the Registrant certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-3 and has duly caused this
Amendment No. 1 to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Seattle, State of
Washington, on this 1st day of May, 1995.
SHURGARD STORAGE CENTERS, INC.
By HARRELL L. BECK
-----------------------------------
Harrell L. Beck
Senior Vice President, Chief
Financial Officer, Treasurer and
Director (Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement has been signed by the
following persons in the capacities indicated below on this 1st day of
May, 1995.
SIGNATURE TITLE
--------- -----
/s/ CHARLES K. BARBO* Chairman of the Board, Chief Executive
- ----------------------------------- Officer and President
Charles K. Barbo
HARRELL L. BECK Senior Vice President, Chief Financial
- ----------------------------------- Officer, Treasurer and Director
Harrell L. Beck (Principal Financial and Accounting
Officer)
/s/ DAN KOURKOUMELIS
- -----------------------------------
Dan Kourkoumelis
/s/ DONALD W. LUSK* Director
- -----------------------------------
Donald W. Lusk
/s/ W.J. (JIM) SMITH* Director
- -----------------------------------
W.J. (Jim) Smith
*By: HARRELL L. BECK
---------------------------------
Harrell L. Beck, Attorney-in-Fact
II-4
<PAGE>
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 33-58693 of Shurgard Storage Centers, Inc. of our
report dated February 9, 1995 (March 24, 1995 as to Notes E and N), appearing
in the Annual Report on Form 10-K of Shurgard Storage Centers, Inc. for
the year ended December 31, 1994 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
DELOITTE & TOUCHE LLP
Seattle, Washington
May 1, 1995
II-5
<PAGE>
EXHIBIT INDEX
1(a) Form of Underwriting Agreement for Debt Securities(1)
1(b) Form of Underwriting Agreement for Equity Securities(1)
2 Agreement and Plan of Merger dated as of December 19, 1994 (incorporated
by reference to Exhibit 2.1 to the Registration Statement on Form S-4 of
Shurgard Storage Centers, Inc. (Registration No. 33-57047))
4(a) Amended and Restated Certificate of Incorporation (incorporated by
reference to Exhibit 3.1 to the Registration Statement on Form S-4 of
Shurgard Storage Centers, Inc. (Registration No. 33-57047))
4(b) Restated By-Laws (incorporated by reference to Exhibit 3.2 to the
Registration Statement on Form S-4 of Shurgard Storage Centers, Inc.
(Registration No. 33-57047))
4(c) Rights Agreement between Shurgard Storage Centers, Inc. and Gemisys
Corporation dated as of March 17, 1994 (incorporated by reference to
Exhibit 2-1 to the Registration Statement on Form 8-A (File No. 0-23466)
of Shurgard Storage Centers, Inc. filed with the Securities and Exchange
Commission on March 17, 1994)
4(d) Form of Indenture(2)
4(e) Form of Debt Security (included in Exhibit 4(d))(2)
4(f) Form of Certificate of Designations for the Preferred Stock(1)
4(g) Form of Preferred Stock Certificate(1)
5 Opinion of Perkins Coie(1)
8 Opinion of Perkins Coie Regarding Tax Matters
12 Statement of Computation of Ratios of Earnings to Fixed Charges(2)
23(a) Consent of Deloitte & Touche LLP (contained on page II-5)
23(b) Consents of Perkins Coie (included in Exhibit 5 and Exhibit 8)
24 Power of Attorney(2)
25 Statement of Eligibility of Trustee on Form T-1(1)
_________________
(1) To be filed by amendment or incorporated by reference in connection with
the offering of Securities.
(2) Previously filed.
<PAGE>
PERKINS COIE
A Law Partnership Including Professional Corporations
1201 Third Avenue, 40th Floor
Seattle, Washington 98101-3099
May 1, 1995
Shurgard Storage Centers, Inc.
1201 Third Avenue, Suite 2200
Seattle, Washington 98101
RE: $200,000,000 AGGREGATE OFFERING PRICE OF SECURITIES (THE
"SECURITIES") OF SHURGARD STORAGE CENTERS, INC. (THE "COMPANY")
Ladies and Gentlemen:
In connection with the registration statement on Form S-3 (the
"Registration Statement") being filed by you on May 1, 1995 with the Securities
and Exchange Commission, in connection with the registration of the Securities
under the Securities Act of 1933, as amended, you have requested our opinion
concerning certain of the federal income tax consequences to the Company of its
election to be taxed as a real estate investment trust (a "REIT"). This opinion
is based on various facts and assumption, and is conditioned upon certain
representations made by the Company as to factual matters. In addition, this
opinion is based upon the factual representations of the Company concerning its
business and properties as set forth in the Registration Statement.
As tax counsel, we have made such legal and factual examinations and
inquiries, including an examination of originals or copies certified or
otherwise identified to our satisfaction of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for purposes of
this opinion.
This opinion is based on (i) existing law as contained in the Internal
Revenue Code of 1986 (the "Code"), regulations issued thereunder by the U.S.
Treasury Department, administrative pronouncements of the Internal Revenue
Service (the "IRS") and court decisions as of the date hereof, (ii) our
understanding of the relevant facts related to the Company, its past, current,
and contemplated operation, as reflected in the Registration Statement and as
represented to us in the certificate of the Company attached hereto, and (iii)
our assumption that the Company will continue to meet, through actual annual
operating results, distribution levels and diversity of stock ownership, the
various qualification tests imposed under the Code. Any of the statutes,
regulations, administrative pronouncements, or judicial decisions upon which
this opinion is based could be changed at any time, perhaps with
<PAGE>
May 1, 1995
Page 2
retroactive effect. Furthermore, some of the issues under existing law that
could significantly affect our opinion have not yet been authoritatively
addressed by the IRS or the courts.
Based on such facts assumption and representations, it is our opinion that:
1. Commencing with the Company's taxable year beginning January 1, 1994,
the Company has been organized in conformity with the requirements for
qualification as a "real estate investment trust" and its proposed method of
operation as described in the representations of the Company referred to above,
will enable it to meet the requirements for qualification and taxation as a
"real estate investment trust" under the Code.
2. The statements in the Registration Statement set forth under the
caption, "Certain Federal Income Tax Considerations," to the extent such
information constitutes matters of law, summaries of legal matters, or legal
conclusions, have been reviewed by us and are accurate in all material respects.
No opinion is expressed as to any matter not discussed herein.
We are opining herein as to the effect on the subject transaction only of
the federal income tax laws of the United States and we express no opinion with
respect to the applicability thereto, or the effect thereon, of other federal
laws, the laws of any other jurisdiction or as to any matters of municipal law
or the laws of any other local agencies within any state. Our opinion is not
binding on the IRS. Hence there can be no assurance that the IRS will not
assert that the Company does not qualify as a REIT for federal income tax
purposes, particularly since the determination whether the Company qualifies as
a REIT depends upon numerous factual issues as to which we are relying upon
representations of the Company. In this regard, our opinion is based on our
understanding of the facts as represented to us in the attached certificate of
the Company and on the assumption that the Company is operated in the manner
described in the Registration Statement and in the attached certificate.
Perkins Coie will undertake no obligation to update this opinion or to ascertain
after the date hereof whether circumstances occurring after such date may affect
the conclusions set forth herein. Accordingly, no assurance can be given that
the actual results of the Company's operation for any one taxable year will
satisfy these requirements.
This opinion is furnished only to you, and is solely for the use in
connection with the Registration Statement. We hereby consent to the filing of
this opinion as an exhibit to the Registration Statement and to the use of our
name under the caption "Legal Matters" in the Registration Statement.
Very truly yours,
PERKINS COIE
<PAGE>
CERTIFICATE OF SHURGARD STORAGE CENTERS, INC.
The undersigned, Harrell Beck, hereby certifies that he is the Vice
President and Chief Financial Officer of Shurgard Storage Centers, Inc., a real
estate investment trust organized as a Delaware corporation (the "Company"), and
that he has received from Perkins Coie a proposed form of opinion letter
addressed to the Company, which opinion is to be delivered to the Company in
connection with the registration of securities, more fully described in the
Registration Statement on Form S-3 to be filed with the Securities and Exchange
Commission on or about May 1, 1995. The undersigned has read said proposed
opinion letter. This Certificate, which is rendered on behalf of the Company,
is intended as a statement of facts upon which Perkins Coie may rely in
rendering the opinion. The undersigned acknowledges that, with the exception of
the preparation of this Certificate, Perkins Coie has not undertaken any
independent inquiry into or verification of the matters addressed herein. All
terms used in this Certificate shall have the meanings set forth (or
incorporated by reference) in the proposed opinion letter, unless otherwise
defined herein.
The undersigned, for and on behalf of the Company, hereby certifies to
Perkins Coie as follows:
1. The Company is organized as a Delaware corporation.
2. The Company will elect to be taxed as a real estate investment trust
("REIT") within the meaning of Section 856(a) of the Internal Revenue Code of
1986, as amended (the "Code") beginning with its taxable year ended December 31,
1994.
3. The Company is not a bank (within the meaning of Section 581 of the
Code), financial institution described in Section 591 of the Code, small
business investment company operating under the Small Business Act of 1958,
business development corporation (within the meaning of Section 582(c)(2)(B) of
the Code) or insurance company subject to Subpart L of the Code.
4. The Company is managed by a board of directors.
5. The beneficial ownership of the Company is evidenced by shares of
common stock, which shares, subject to federal and state securities laws and
applicable transfer restrictions set forth in the Company's Certificate of
Incorporation, are freely transferable.
6. The Company will, for each year after its first taxable year, have
more than 100 stockholders during at least 335/365ths of such taxable year.
7. No more than 50% of the value of the Company's capital stock is or has
been held at any time during the last half of any taxable year since 1994
actually or constructively (taking into account the constructive ownership rules
of Section 856(h) of the Code) by or for five or fewer individuals.
8. At the end of each quarter of each taxable year since 1994, (i) at
least 75% of the value of the Company's total assets consisted of "real estate
assets," cash and cash items (i.e., receivables arising in the ordinary course
of the Company's operations), certificates of deposit, obligations secured by
mortgages on real property, shares in REITs, or government securities; and
(ii) the Company's total assets did not consist of securities (other than
obligations secured by mortgages on real property, shares in REITs, or
government securities) of any one issuer that represented either more than 5% of
the value of the Company's total assets or more than 10% of the outstanding
voting securities of such issuer (within the meaning of Section 856(c)(5)(B) of
the Code and Treasury Regulation Section 1.856-3(e) thereunder), except for the
"Qualified REIT Subsidiaries" as provided in paragraph 14. For purposes of
this representation, "real estate assets" means real property (including fee
ownership, co-ownership, leaseholds, and options to acquire such interests),
mortgages
<PAGE>
on real property, and shares in another REIT, and the Company is considered to
own a proportionate share of any assets owned by a partnership in which the
Company is a partner.
9. At least 75% of the Company's gross income for each taxable year since
1994 has been derived from: (i) "rents from real property" (as defined in
Section 856(d) of the Code); (ii) interest on obligations secured by mortgages
on real property or interests in real property (excluding amounts described in
Section 856(f) of the Code); (iii) gain from the sale or other disposition of
real property not held as inventory or primarily for sale to customers in the
ordinary course of business; (iv) dividends or other distributions on, and gain
from the sale or other disposition of, transferable shares in other REITs;
(v) abatements and refunds of taxes on real property; (vi) income from
foreclosure property (as defined in Section 856(e) of the Code); (vii) amounts
received or accrued as consideration for entering into agreements to make loans
secured by mortgages on real property or on interests in real property or to
purchase or lease real property (including interests in real property and
interests in mortgages on real property); (viii) gain from the sale or
disposition of a real estate asset that is not a prohibited transaction solely
by reason of Section 857(b)(6) of the Code; and (ix) any income that is
attributable to a stock or debt instrument, the temporary investment of new
capital, and is received or accrued during the one-year period beginning on the
date the Company received the capital.
10. At least 95% of the Company's gross income for each taxable year since
1994 has been derived from the sources described in paragraph 9 plus dividends,
interest on obligations other than mortgages, and gain from the sale or other
disposition of stock and securities not held as inventory or primarily for sale
to customers in the ordinary course of business.
11. No amounts payable to the Company in connection with the rental of any
property depends in whole or in part on income or profits derived from any
tenant (or sub-tenant) of such property (except that such amounts may be based
on a fixed percentage or percentages of receipts or sales).
12. Less than 15% of the rent received by the Company with respect to
each property is attributable to personal property and all personal property
contained in the properties is leased under or in connection with a lease of
real property.
13. Less than 30% of the Company's gross income for each taxable year
since 1994 has been derived from the sale or disposition of stock or securities
held for less than one year, property held as inventory or primarily for sale in
the ordinary course of business, and real property held for less than four
years, other than property compulsorily or involuntarily converted (within the
meaning of Section 1033 of the Code) and foreclosure property (within the
meaning of Section 856(3) of the Code).
14. The Company does not own securities in any other corporate issuer that
either (i) represents in excess of 10% of the outstanding voting securities of
such issuer or (ii) has an aggregate value in excess of 5% of the value of the
total assets of the Company (as determined in accordance with Treasury
Regulation Section 1.856-2(d)(2)), except that the Company has three "Qualified
REIT Subsidiaries" (as defined in Section 856(i) of the Code).
15. The Company has complied with the record-keeping requirements set
forth in Treasury Regulation Sections 1.857-8 and -9 (relating to the records to
be maintained concerning stock ownership and information required to be
requested from stockholders) for each of its taxable years.
16. During 1994, the Company distributed less than 95% of its REIT taxable
income for such year. In order to continue to satisfy the 95% REIT taxable
income distribution requirement for 1994, the Company made distributions in 1995
that, pursuant to Section 858 of the Code, qualified as attributable to
the 1994 REIT taxable income sufficient to satisfy the requirement that the
Company distribute 95% of its REIT taxable income for 1994.
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<PAGE>
17. During 1995, the Company will make distributions in an amount
necessary to eliminate the accumulated earnings and profits of Shurgard
Incorporated acquired by the Company in the merger of Shurgard Incorporated with
and into the Company.
18. The Company is not aware of any facts, circumstances, or events which
are contrary to or inconsistent with any of the foregoing statements or any of
the statements and opinions contained in the proposed opinion letter. To the
knowledge of the undersigned, the Company has never been advised by an
accounting firm or a law firm that there exists a material issue as to the
Company's qualification or continued qualification as a REIT.
19. With respect to the representations in paragraphs 6 through 18, the
Company expects that, and it will take all measures within its control to ensure
that, those representations continue to be true for 1994 and succeeding taxable
years.
20. The facts contained within letter ruling request as delivered by
Shurgard Incorporated to the Internal Revenue Service on behalf of the Company
with respect to services performed by the Company on a system wide basis for
Company tenants are true, correct and complete in all material respects.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the
1st day of May, 1995.
SHURGARD STORAGE CENTERS, INC.
By HARRELL BECK
-----------------------------------
Harrell Beck
Vice President and
Chief Financial Officer
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