AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 18, 1997
REGISTRATION STATEMENT NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------------
CHELSEA GCA REALTY, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 22-3251332
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification number)
103 Eisenhower Parkway
Roseland, New Jersey 07068
(973) 228-6111
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
LESLIE T. CHAO, PRESIDENT
103 EISENHOWER PARKWAY
ROSELAND, NEW JERSEY 07068
(973) 228-6111
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------------
COPIES TO:
MARTIN H. NEIDELL, ESQ. THOMAS R. SMITH JR., ESQ.
STROOCK & STROOCK & LAVAN LLP EDWARD F. PETROSKY, ESQ.
180 Maiden Lane BROWN & WOOD LLP
New York, New York 10038 One World Trade Center
New York, New York 10048
-------------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: From time to
time after this Registration Statement becomes effective.
-------------------------------------
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, please check the following box. /x/
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434 under
the Securities Act, please check the following box|_|
----------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Title of each Amount to Maximum Maximum Amount of
Class of be Offering Aggregate Registration
Securities to be Registered Price Offering Fee
Registered Per Unit Price(1)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cumulative Redeemable
Preferred Stock 1,000,000 Shares $50.00 $50,000,000 $14,750
- ----------------------------------------------------------------------------------------------------------------------------------
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457 (c) of the Securities Act.
</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 WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<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 STATE.
<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED DECEMBER 18, 1997
1,000,000 SHARES
CHELSEA GCA REALTY, INC.
8 3/8% Series A Cumulative Redeemable Preferred Stock
(Par Value $0.01 Per Share)
(Liquidation Preference Equivalent to $50.00 Per Share)
----------------------
The shares of 8 3/8% Series A Cumulative Redeemable Preferred Stock, $0.01
par value per share (the "Preferred Shares"), of Chelsea GCA Realty, Inc. (the
"Company") offered hereby were issued (the "Original Offering") on October 15,
1997 (the "Original Offering Date") to Merrill Lynch, Pierce, Fenner & Smith
Incorporated (the "Initial Purchaser") and were simultaneously sold by the
Initial Purchaser in compliance with Rule 144A under the Securities Act of 1933,
as amended (the "Securities Act"), to "qualified institutional buyers" (as
defined in Rule 144A).
The Preferred Shares may be offered and sold from time to time by the
holders named in an accompanying supplement to this Prospectus (each, a
"Prospectus Supplement") or by their transferees, pledgees, donees or successors
pursuant to this Prospectus (collectively, "Selling Holders"). The Preferred
Shares may be sold by the Selling Holders from time to time directly to
purchasers or through agents, underwriters or dealers. See "Plan of
Distribution" and "Selling Holders." If required, the names of any such agents
or underwriters involved in the sale of the Preferred Shares and the applicable
agent's commission, dealer's purchase price or underwriter's discount, if any,
will be set forth in a Prospectus Supplement. The Selling Holders will receive
all of the net proceeds from the sale of the Preferred Shares and will pay all
underwriting discounts and selling commissions, if any, applicable to any such
sale. The Initial Purchaser is responsible for payment of certain other expenses
incident to the offer and sale of the Preferred Shares. The Selling Holders and
any dealers, agents or underwriters which participate in the distribution of the
Preferred Shares may be deemed to be "underwriters" within the meaning of the
Securities Act, and any commission received by them and any profit on the resale
of the Preferred Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Plan of Distribution"
for a description of indemnification arrangements.
Dividends on the Preferred Shares will be cumulative from the Original
Offering Date and will be payable quarterly on the 15th day of January, April,
July and October of each year, commencing January 15, 1998, at the rate of
8.375% of the liquidation preference per annum (equivalent to $4.1875 per share
per annum).
The Preferred Shares are not redeemable prior to October 15, 2027. On and
after October 15, 2027, the Preferred Shares may be redeemed for cash at the
option of the Company, in whole or in part, at a redemption price of $50.00 per
share, plus accumulated and unpaid dividends, if any, thereon. The redemption
price (other than the portion thereof consisting of accumulated and unpaid
dividends) is payable solely out of the sale proceeds of other capital stock of
the Company, which may include other series of preferred stock, and from no
other source. The Preferred Shares have no stated maturity and will not be
subject to any sinking fund or mandatory redemption and will not be convertible
into any other securities of the Company. See "Description of Preferred Shares -
Redemption." In order to maintain its qualification as a real estate investment
trust for federal income tax purposes, the Company's Articles of Incorporation
impose limitations on the number of shares of capital stock, including Preferred
Shares, that may be owned by any stockholder. See "Description of Preferred
Shares - Restrictions on Transfer."
----------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE PREFERRED SHARES
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------
The date of this Prospectus is ___________________.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the reporting 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"). Such reports, proxy
statements and other information can be inspected and copied at the offices of
the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, as well as the following regional offices of the
Commission: Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, IL 60661; and 7 World Trade Center, Suite 1300, New York, NY 10048.
Copies of such material can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates
or from the Commission's Web site which contains reports, proxy and information
statements and other information regarding registrants that file electronically
at http://www.sec.gov. Such materials can also be inspected at the office of the
New York Stock Exchange, Inc. on which exchange the Company's Common Stock is
listed.
The Company has filed with the Commission a Registration Statement on Form
S-3 (herein, together with all amendments and exhibits thereto, called the
"Registration Statement") under the Securities Act with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth or incorporated by reference in the Registration
Statement and the exhibits and schedules relating thereto, certain portions of
which have been omitted as permitted by the Rules and Regulations of the
Commission. For further information with respect to the Company and the
securities offered by this Prospectus, reference is made to the Registration
Statement and the exhibits filed or incorporated as a part thereof, which are on
file at the offices of the Commission and may be obtained upon payment of the
fee prescribed by the Commission, or may be examined without charge at the
offices of the Commission or on the Commission's Web site. Statements contained
in this Prospectus as to the contents of any documents referred to are not
necessarily complete; with respect to any such document filed as an exhibit to
the Registration Statement, reference is made to such exhibit for a more
complete description of the matter involved, and each such statement shall be
deemed qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed with the Commission and are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(b) Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997;
(c) Current Report on Form 8-K dated April 11, 1997; and
(d) The information contained in the section "Policies With
Respect to Certain Activities" contained in the Registration
Statement on Form S-11 (File No. 33-67870) filed on August 25,
1993, as amended.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Preferred Shares offered hereby shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing such documents.
Any statement contained 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 any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom this
Prospectus is delivered, upon the request of such person, a copy of any or all
of the foregoing documents incorporated herein by reference, other than exhibits
to such documents (unless such exhibits are specifically incorporated by
reference into such documents). Requests for such documents should be directed
to Investor Relations, Chelsea GCA Realty, Inc., 103 Eisenhower Parkway,
Roseland, New Jersey 07068, Telephone (973) 228-6111.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain of the matters discussed under the caption "Risk Factors" and
elsewhere in this Prospectus or in the information incorporated by reference
herein may constitute forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act") and as such
may involve known and unknown risks, uncertainties and other factors that may
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Some of the factors
that may cause such material differences are set forth herein under the caption
"Risk Factors."
<PAGE>
PROSPECTUS SUMMARY
The following summary does not purport to be complete and is qualified in
its entirety by the detailed information appearing elsewhere in this Prospectus
or incorporated by reference herein. All references to the Company in this
Prospectus include the Operating Partnership (as defined herein), those entities
owned or controlled by the Operating Partnership and predecessors of the
Operating Partnership, unless the context indicates otherwise.
THE COMPANY
Chelsea GCA Realty, Inc. (the "Company") is a self-administered and
self-managed real estate investment trust ("REIT") that specializes in the
development, leasing, marketing, management and long-term ownership of upscale
and fashion-oriented manufacturers' outlet centers. As of September 30, 1997,
the Company owned and operated 19 centers (the "Properties"), containing
approximately 4.1 million square feet of gross leasable space ("GLA"), in eleven
states. The Properties generally are located near densely populated, high-income
metropolitan areas or at or near major tourist destinations. The Company's
existing portfolio includes properties in or near New York City, Los Angeles,
San Francisco, Sacramento, Portland (Oregon), Kansas City, Atlanta, Cleveland,
Honolulu, the Napa Valley, Palm Springs and the Monterey Peninsula. In October
1997, the Company opened the 227,000 square foot first phase of Wrentham Village
Premium Outlets (Wrentham, Massachusetts), located near the junction of
Interstates 95 and 495 between Boston and Providence. The Company also has
properties under development, an expansion of Woodbury Common (Central Valley,
New York), its largest center, and expansions of other existing centers. As of
September 30, 1997, the Company's portfolio was 99% leased and contained
approximately 1,100 stores with approximately 350 different tenants.
Between the Company's initial public offering of Common Stock and the
formation transactions in November 1993 ("IPO") and September 30, 1997, the
Company developed, acquired and opened approximately 2.4 million square feet of
new GLA, contained in seven new centers, one acquired center and the expansions
of twelve existing centers. In March 1997, the Company acquired Waikele Factory
Outlets, a manufacturers' outlet center near Honolulu, Hawaii with 214,000
square feet of GLA. The Company is in the process of entitling sites and
planning development for 1998 and beyond.
All of the Company's interests in the Properties are held by, and all of
its operations relating to the Properties are conducted through, Chelsea GCA
Realty Partnership, L.P., a Delaware limited partnership (the "Operating
Partnership"), which is 81.6% owned and managed by the Company (exclusive of the
Series A Preferred Units (as defined herein)).
The Company is organized under the laws of the State of Maryland. Its
principal executive office is located at 103 Eisenhower Parkway, Roseland, New
Jersey 07068, telephone (973) 228-6111.
<PAGE>
THE OFFERING
The Issuer........................ Chelsea GCA Realty, Inc., a
self-administered and self-managed real
estate investment trust.
Securities Offered............... 1,000,000 shares of 8 3/8% Series A
Cumulative Redeemable Preferred Stock.
Selling Holders.................. The Preferred Shares were originally issued
by the Company and sold by the Initial
Purchaser in compliance with Rule 144A under
the Securities Act to "qualified
institutional buyers." These purchasers or
their transferees, pledgees, donees, or
successors may from time to time offer and
sell, pursuant to this Prospectus, any or
all of the Preferred Shares. See "Selling
Holders."
Ranking.......................... With respect to the payment of dividends and
amounts upon liquidation, the Preferred
Shares will rank on a parity with all other
shares of preferred stock of the Company
which are not by their terms junior to the
Preferred Shares and will rank senior to the
Common Stock and all other shares of capital
stock of the Company which, by their terms,
rank junior to the Preferred Shares. See
"Description of Preferred Shares --Rank."
Dividends........................ Dividends on the Preferred Shares are
cumulative from the Original Offering Date
and are payable quarterly on the 15th day of
January, April, July and October of each
year, commencing on January 15, 1998, at the
rate of 8.375% of the liquidation preference
per annum (equivalent to $4.1875 per share
per annum). Dividends on the Preferred
Shares will accumulate whether or not the
Company has earnings, whether or not there
are funds legally available for the payment
of such dividends and whether or not such
dividends are declared. See "Description of
Preferred Shares-- Dividends."
Liquidation Preference............ The Preferred Shares will have a liquidation
preference of $50.00 per share, plus an
amount equal to accumulated and unpaid
dividends, if any, thereon. See "Description
of Preferred Shares--Liquidation
Preference."
Redemption........................ The Preferred Shares are not redeemable
prior to October 15, 2027. On and after
October 15, 2027, the Preferred Shares will
be redeemable for cash at the option of the
Company, in whole or in part, at $50.00 per
share, plus accumulated and unpaid
dividends, if any, thereon. The redemption
price (other than the portion thereof
consisting of accumulated and unpaid
dividends) is payable solely out of the sale
proceeds of other capital stock of the
Company, which may include other series of
preferred stock, and from no other source.
See "Description of Preferred
Shares--Redemption."
Voting Rights..................... If dividends on the Preferred Shares are in
arrears for six or more quarterly periods,
whether or not such quarterly periods are
consecutive, holders of the Preferred Shares
(voting separately as a class with all other
series of preferred stock upon which like
voting rights have been conferred and are
exercisable) will be entitled to vote for
the election of two additional directors to
serve on the Board of Directors of the
Company until all dividend arrearages have
been paid. See "Description of Preferred
Shares--Voting Rights."
Conversion........................ The Preferred Shares are not convertible or
exchangeable for any other property or
securities of the Company.
Ownership Limits.................. The Preferred Shares are subject to certain
restrictions on transfer intended to
preserve the Company's status as a REIT for
federal income tax purposes. In general,
under such restrictions, a holder may not
acquire or own Preferred Shares to the
extent that such ownership causes a person
to own more than 7% of the value of the
outstanding series of Preferred Shares,
taking into account applicable constructive
ownership rules of the Internal Revenue Code
of 1986, as amended (the "Code"). Under
these rules, Preferred Shares held by
entities such as corporations, mutual funds,
insurance companies and pension trusts would
be treated as owned by their ultimate
individual beneficial owners for purposes of
applying the 7% ownership limit. See
"Description of Preferred
Shares--Restrictions on Transfer."
Registration Rights............... Pursuant to a Registration Rights Agreement
(the "Registration Rights Agreement") among
the Company, the Operating Partnership and
the Initial Purchaser, the Company agreed to
use its best efforts to keep the
Registration Statement effective until two
years after the Original Offering Date or
such shorter period ending when all the
Preferred Shares have been sold thereunder.
Liquidated Damages will be payable under
certain circumstances if the Company is not
in compliance with its obligations under the
Registration Rights Agreement. See
"Registration Rights."
Form.............................. The Preferred Shares will be represented by
a single fully-registered certificate in
book-entry form registered in the name of
the nominee of DTC, except under the limited
circumstances described herein.
Absence of Market for the
Preferred Shares.................. The Preferred Shares are a new issue of
securities with no established trading
market. Although the Initial Purchaser has
informed the Company that it currently
intends to make a market in the Preferred
Shares, the Initial Purchaser is not
obligated to do so, and any such market
making may be discontinued at any time
without notice. Accordingly, there can be no
assurance as to the development or liquidity
of any market for the Preferred Shares. See
"Plan of Distribution."
Use of Proceeds................... The Selling Holders will receive all of the
proceeds from the sale of the Preferred
Shares offered hereby. The Company will not
receive any proceeds from the sale of such
Preferred Shares.
<PAGE>
RISK FACTORS
PROSPECTIVE PURCHASERS OF PREFERRED SHARES SHOULD CAREFULLY REVIEW THE
INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS AND SHOULD PARTICULARLY
CONSIDER THE FOLLOWING MATTERS. CERTAIN STATEMENTS SET FORTH BELOW UNDER THIS
CAPTION CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE REFORM
ACT. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS" FOR ADDITIONAL
FACTORS RELATING TO SUCH STATEMENTS.
CONCENTRATION OF COMPANY'S REVENUE
Approximately 38% and 34% of the Company's revenues for the year ended
December 31, 1996 and the nine-month period ended September 30, 1997,
respectively, were derived from the Company's two centers with the highest
revenues, Woodbury Common Premium Outlets and Desert Hills Premium Outlets. The
loss of either of these centers or a material decrease in the revenues received
from either of such centers for any reason could have a material adverse effect
on the Company. In addition, approximately 44% and 39% of the Company's revenues
for the year ended December 31, 1996 and the nine-month period ended September
30, 1997, respectively, were derived from the Company's nine centers in
California.
LIMITATIONS ON ACQUISITION AND CHANGE IN CONTROL
OWNERSHIP LIMIT. The Company's Articles of Incorporation (the "Articles of
Incorporation") prohibit ownership of more than 7% of the outstanding Common
Stock by any person. Such restriction is likely to have the effect of precluding
acquisition of control of the Company by a third party without consent of the
Board of Directors even if a change in control were in the interest of
stockholders.
REQUIRED CONSENT OF THE OPERATING PARTNERSHIP FOR MERGER OR OTHER
SIGNIFICANT CORPORATE ACTION. So long as the limited partners own at least 10%
of the capital of the Operating Partnership, the Operating Partnership may not
merge, consolidate or engage in any combination with another person or sell all
or substantially all of its assets unless approved by the holders of a majority
of the limited partnership Units.
STAGGERED BOARD. The Board of Directors of the Company has three classes of
directors, the terms of which will expire in 1998, 1999 and 2000. Directors for
each class will be chosen for a three-year term. The staggered terms for
directors may affect the stockholders' ability to change control of the Company
even if a change in control were in the stockholders' interest.
DISTRIBUTIONS TO STOCKHOLDERS
To obtain the favorable tax treatment associated with REITs, the Company
generally will be required each year to distribute to its stockholders at least
95% of its net taxable income. The ability of the Company to make such
distributions is dependent upon the receipt of distributions or other payments
from the Operating Partnership.
ADVERSE IMPACT ON DISTRIBUTIONS OF FAILURE TO QUALIFY AS A REIT
The Company and the Operating Partnership intend to operate in a manner so
as to permit the Company to qualify as a REIT under the Code. Although the
Company believes that it will operate in such a manner, no assurance can be
given that the Company will qualify or remain qualified as a REIT. If in any
taxable year the Company were to fail to qualify as a REIT, the Company would
not be allowed a deduction for distributions to stockholders in computing
taxable income and would be subject to federal income tax (including any
applicable alternative minimum tax) on its taxable income at regular corporate
rates.
RISKS RELATED TO THE MANUFACTURERS' OUTLET CENTER INDUSTRY
COMPETITION FROM OTHER MANUFACTURERS' OUTLET CENTERS. Numerous developers
and real estate companies are engaged in the development or ownership of
manufacturers' outlet centers and other commercial properties and compete with
the Company in seeking tenants for outlet centers. This results in competition
for the acquisition of prime properties and for tenants who will lease space in
the manufacturers' outlet centers that the Company and its competitors own or
operate.
THE RELATIVELY SHORT HISTORY OF MANUFACTURERS' OUTLET CENTERS MAY NOT
BE INDICATIVE OF FUTURE PERIODS. Although the manufacturers' outlet center
industry has grown over the last several years, the industry represents a
relatively new and rapidly growing segment of the retailing industry and,
therefore, the long-term performance of these centers may not be comparable to,
and cash flows may not be as predictable as, traditional retail malls.
GENERAL REAL ESTATE INVESTMENT RISKS
ECONOMIC PERFORMANCE AND VALUE OF CENTERS DEPENDENT ON MANY FACTORS. Real
property investments are subject to varying degrees of risk. The economic
performance and values of real estate can be affected by many factors, including
changes in the national, regional and local economic climate, local conditions
such as an oversupply of space or a reduction in demand for real estate in the
area, the attractiveness of the properties to tenants, competition from other
available space, the ability of the owner to provide adequate maintenance and
insurance and increased operating costs.
RISKS OF DEVELOPMENT ACTIVITIES. The Company intends to actively pursue
manufacturers' outlet center development projects, including the expansion of
existing centers. Such projects generally require expenditure of capital as well
as various forms of government and other approvals, the receipt of which cannot
be assured.
DEPENDENCE ON RENTAL INCOME FROM REAL PROPERTY. Since substantially all of
the Company's income is derived from rental income from real property, the
Company's income and funds for distribution would be adversely affected if a
significant number of the Company's tenants were unable to meet their
obligations to the Company or if the Company were unable to lease a significant
amount of space in the Properties on economically favorable lease terms. In
addition, the terms of manufacturers' outlet store tenant leases traditionally
have been significantly shorter than in traditional segments of retailing. There
can be no assurance that any tenant whose lease expires in the future will renew
such lease or that the Company will be able to re-lease space on economically
advantageous terms.
ENVIRONMENTAL RISKS. Under various federal, state and local laws,
ordinances and regulations, each of the Company and the Operating Partnership
may be considered an owner or operator of real property or may have arranged for
the disposal or treatment of hazardous or toxic substances and, therefore, may
become liable for the costs of removal or remediation of certain hazardous
substances released on or in its property or disposed of by it, as well as
certain other potential costs which could relate to hazardous or toxic
substances (including governmental fines and injuries to persons and property).
Such liability may be imposed whether or not the Company knew of, or was
responsible for, the presence of such hazardous or toxic substances.
ABSENCE OF A PUBLIC MARKET
There is no established trading market for the Preferred Shares and there
can be no assurance as to the development or liquidity of any market for the
Preferred Shares, the ability of the holders to sell their Preferred Shares or
as to the price at which holders of the Preferred Shares may be able to sell
their Preferred Shares. Future trading prices of the Preferred Shares will
depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
The Initial Purchaser has informed the Company that the Initial Purchaser
intends to make a market in the Preferred Shares. However, the Initial Purchaser
is not obligated to do so, and any such market making activity may be
discontinued at any time without notice to the holders of Preferred Shares.
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND
PREFERRED STOCK DIVIDENDS
The following table sets forth the Company's and the Operating
Partnership's consolidated ratios of earnings to combined fixed charges and
preferred stock dividends for the periods shown:
NINE MONTHS Year Ended December 31,
ENDED ---------------------------------------------------------
SEPTEMBER 30, 1997 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------
2.21x 2.84x 3.59x 10.40x 1.45x 1.20x
The ratios of earnings to combined fixed charges and preferred stock
dividends were computed by dividing earnings by the sum of fixed charges and
preferred stock dividends. For this purpose, earnings consist of income from
continuing operations before minority interest and fixed charges, exclusive of
interest capitalized and amortization of loan costs capitalized. Fixed charges
consist of interest expense (including interest costs capitalized), the portion
of rent expense representative of interest and total amortization of debt
issuance costs (expensed and capitalized). No preferred stock dividends were
paid by the Company during the periods shown above.
THE COMPANY
The Company is a self-administered and self-managed REIT that specializes
in the development, leasing, marketing, management and long-term ownership of
upscale and fashion-oriented manufacturers' outlet centers. As of September 30,
1997, the Company owned and operated 19 centers (the "Properties") containing
approximately 4.1 million square feet of GLA, in eleven states. The Properties
generally are located near densely populated, high-income metropolitan areas or
at or near major tourist destinations. The Company's existing portfolio includes
properties in or near New York City, Los Angeles, San Francisco, Sacramento,
Portland (Oregon), Kansas City, Atlanta, Cleveland, Honolulu, the Napa Valley,
Palm Springs and the Monterey Peninsula. In October 1997, the Company opened the
227,000 square foot first phase of Wrentham Village Premium Outlets (Wrentham,
Massachusetts), located near the junction of Interstates 95 and 495 between
Boston and Providence. The Company also has properties under development, an
expansion of Woodbury Common (Central Valley, New York), its largest center, and
expansions of other existing centers. As of September 30, 1997, the Company's
portfolio was 99% leased and contained approximately 1,100 stores with
approximately 350 different tenants.
Between the IPO and September 30, 1997, the Company developed, acquired and
opened approximately 2.4 million square feet of new GLA, contained in seven new
centers, one acquired center and the expansions of twelve existing centers. In
March 1997, the Company acquired Waikele Factory Outlets, a manufacturers'
outlet center near Honolulu, Hawaii with 214,000 square feet of GLA. The Company
is in the process of entitling sites and planning development for 1998 and
beyond.
All of the Company's interests in the Properties are held by, and all of
its operations relating to the Properties are conducted through, the Operating
Partnership, which is 81.6% owned and managed by the Company (exclusive of the
Series A Preferred Units). It is the Company's policy that it shall not incur
indebtedness other than short-term trade, employee compensation, dividends
payable or similar indebtedness that will be paid in the ordinary course of
business, and that indebtedness shall instead be incurred by the Operating
Partnership to the extent necessary to fund the business activities conducted by
the Operating Partnership and its subsidiaries.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale by the Selling
Holders of the Preferred Shares. The net proceeds to the Company from the sale
of the Preferred Shares on the Original Offering Date was approximately $48.4
million. Such net proceeds were used to repay outstanding indebtedness under the
Company's unsecured bank credit facilities.
DESCRIPTION OF PREFERRED SHARES
GENERAL
The Company is authorized to issue up to 5,000,000 shares of preferred
stock, $0.01 par value per share, in one or more series, with such designations,
powers, preferences and rights of the shares of such series and the
qualifications, limitations or restrictions thereon, including, but not limited
to, the fixing of the dividend rights, dividend rate or rates, conversion
rights, voting rights and terms of redemption (including sinking fund
provisions), the redemption price or prices, and the liquidation preferences, in
each case, if any, as the Board of Directors of the Company may determine by
adoption of an applicable supplementary articles (a "Designating Amendment") to
the Articles of Incorporation, without any further vote or action by the
shareholders.
On October 7, 1997, a form of Designating Amendment was adopted determining
the terms of a series of preferred stock consisting of 1,000,000 shares,
designated 8 3/8% Series A Cumulative Redeemable Preferred Stock. The following
summary of the terms and provisions of the Preferred Shares does not purport to
be complete and is qualified in its entirety by reference to the pertinent
sections of the Articles of Incorporation and the Designating Amendment
designating the Preferred Shares.
The Company contributed or otherwise transferred the net proceeds of the
sale of the Preferred Shares to the Operating Partnership in exchange for 8 3/8%
Series A Preferred Units (the "Series A Preferred Units") in the Operating
Partnership, the economic terms of which are substantially identical to the
Preferred Shares. The Operating Partnership will be required to make all
required distributions on the Series A Preferred Units (which will mirror the
payments of dividends, including accumulated and unpaid dividends upon
redemption, and the amount of the liquidation preference applicable to the
Preferred Shares) prior to any distribution of cash or assets to the holders of
the Units or to the holders of any other interests in the Operating Partnership,
except for any other series of preference units ranking on a parity with the
Series A Preferred Units as to distributions and/or liquidation rights and
except for distributions required to enable the Company to maintain its
qualification as a REIT.
The Company's Credit Facilities include covenants that restrict the ability
of the Operating Partnership to make distributions in excess of stated amounts,
which in turn restrict the discretion of the Company to declare and pay
dividends. In general, during any fiscal year the Operating Partnership may only
distribute the lesser of (i) 90% of funds from operations for any fiscal year or
(ii) 100% of funds from operations for any two consecutive fiscal quarters. Each
Credit Facility contains exceptions to these limitations to allow the Operating
Partnership to make distributions necessary to allow the Company to maintain its
status as a REIT. The Company does not believe that these covenants will
adversely affect the ability of the Operating Partnership to make distributions
in an amount sufficient to permit the Company to pay dividends with respect to
the Preferred Shares.
The Preferred Shares have been validly issued and are fully paid and
nonassessable and are not subject to any preemptive or similar rights.
The registrar, transfer agent and dividends disbursing agent for the
Preferred Shares is Boston EquiServe, L.P., Boston, Massachusetts.
RANK
The Preferred Shares, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of the affairs of the Company, rank (i)
senior to the Common Stock and to all other shares of capital stock of the
Company which, by their terms, rank junior to the Preferred Shares and (ii) on a
parity with all other shares of preferred stock of the Company which are not by
their terms junior to the Preferred Shares.
DIVIDENDS
Holders of the Preferred Shares are entitled to receive, when and as
authorized by the Board of Directors of the Company, out of funds legally
available for the payment of dividends, cumulative cash dividends at the rate of
8.375% of the liquidation preference per annum (equivalent to $4.1875 per share
per annum). Such dividends shall accumulate from the Original Offering Date and
shall be payable quarterly in arrears on the 15th day of each January, April,
July and October or, if not a business day, the succeeding business day (each, a
"Dividend Payment Date"). The first dividend on the Preferred Shares will be
paid on January 15, 1998. Any dividend payable on the Preferred Shares for any
partial dividend period will be computed on the basis of a 360-day year
consisting of twelve 30-day months. Dividends will be payable to holders of
record as they appear in the share records of the Company at the close of
business on the applicable record date, which shall be the 1st day of the
calendar month in which the applicable Dividend Payment Date falls or such other
date designated by the Board of Directors of the Company for the payment of
dividends that is not more than 30 nor less than 10 days prior to such Dividend
Payment Date (each, a "Dividend Record Date").
No dividends on the Preferred Shares shall be authorized by the Board of
Directors of the Company or be paid or set apart for payment by the Company at
such time as the terms and provisions of any agreement of the Company (or the
Operating Partnership, as to the Series A Preferred Units), including any
agreement relating to its indebtedness, prohibits such authorization, payment or
setting apart for payment or provides that such authorization, payment or
setting apart for payment would constitute a breach thereof or a default
thereunder, or if such authorization or payment shall be restricted or
prohibited by law.
Notwithstanding the foregoing, dividends on the Preferred Shares will
accumulate whether or not the Company has earnings, whether or not there are
funds legally available for the payment of such dividends and whether or not
such dividends are authorized. Accumulated but unpaid dividends on the Preferred
Shares do not bear interest and holders of the Preferred Shares are not entitled
to any dividends in excess of full cumulative dividends as described above.
No dividends will be declared or paid or set apart for payment on any
capital stock of the Company ranking, as to dividends, on a parity with or
junior to the Preferred Shares for any period unless full cumulative dividends
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment therefor set apart for such payment on the Preferred
Shares for all past dividend periods and the then current dividend period. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon the Preferred Shares and the shares of each other series of
preferred stock ranking on a parity as to dividends with the Preferred Shares,
all dividends declared on the Preferred Shares and any other series of preferred
stock ranking on a parity as to dividends with the Preferred Shares shall be
declared pro rata so that the amount of dividends declared per Preferred Share
and such other series of preferred stock shall in all cases bear to each other
the same ratio that accumulated dividends per Preferred Share and such other
series of preferred stock bear to each other.
Except as provided in the immediately preceding paragraph, unless full
cumulative dividends on the Preferred Shares have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment therefor set
apart for such payment on the Preferred Shares for all past dividend periods and
the then current dividend period, no dividends (other than in shares of Common
Stock or other capital stock ranking junior to the Preferred Shares as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock or any other capital stock of the Company ranking junior to or on a parity
with the Preferred Shares as to dividends or upon liquidation, nor shall any
shares of Common Stock or any other capital stock of the Company ranking junior
to or on a parity with the Preferred Shares as to dividends or upon liquidation
be redeemed, purchased or otherwise acquired for any consideration (or any
moneys be paid or made available for a sinking fund for the redemption of such
shares) by the Company (except by conversion into or exchange for other capital
stock of the Company ranking junior to the Preferred Shares as to dividends and
upon liquidation).
Any dividend payment made on the Preferred Shares shall first be credited
against the earliest accumulated but unpaid dividend due with respect to such
shares which remains payable.
LIQUIDATION PREFERENCE
In the event of any liquidation, dissolution or winding up of the affairs
of the Company (generally referred to herein as a "liquidation"), the holders of
the Preferred Shares will be entitled to be paid out of the assets of the
Company legally available for distribution to its shareholders liquidating
distributions in cash or property at its fair market value as determined by the
Company's Board of Directors in the amount of a liquidation preference of $50.00
per share, plus an amount equal to any accumulated and unpaid dividends, if any,
thereon to the date of such liquidation, dissolution or winding up, before any
distribution of assets is made to holders of Common Stock or any other capital
stock ranking junior to the Preferred Shares as to liquidation rights. After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Preferred Shares will have no right or claim to any of
the remaining assets of the Company.
In the event that, upon any such voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Company, the legally available
assets of the Company are insufficient to pay the amount of the liquidating
distributions on the Preferred Shares and the corresponding amounts payable on
the shares of each other series of preferred stock of the Company ranking on a
parity with the Preferred Shares in the distribution of assets upon liquidation,
then the holders of the Preferred Shares and any other series of preferred stock
of the Company ranking on a parity with the Preferred Shares in the distribution
of assets upon liquidation shall share ratably in any such distribution of
assets in proportion to the full liquidating distributions to which they would
otherwise be respectively entitled.
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
property or business of the Company shall not be deemed to constitute a
liquidation, dissolution or winding up of the affairs of the Company.
REDEMPTION
The Preferred Shares are not redeemable prior to October 15, 2027. On and
after October 15, 2027, the Company, at its option upon not less than 30 nor
more than 60 days' written notice, may redeem the Preferred Shares, in whole or
in part at any time or from time to time, in cash at a redemption price of
$50.00 per share, plus accumulated and unpaid dividends, if any, thereon to the
date fixed for redemption (except as provided below), without interest, to the
extent the Company will have funds legally available therefor. The redemption
price of the Preferred Shares (other than any portion thereof consisting of
accumulated and unpaid dividends) shall be paid solely from the sale proceeds of
other capital stock of the Company and not from any other source. For purposes
of the preceding sentence, "capital stock" means any common stock, preferred
stock, depositary shares, interests, participation, or other ownership interests
(however designated) and any rights (other than debt securities convertible into
or exchangeable for equity securities) or options to purchase any of the
foregoing. Holders of Preferred Shares to be redeemed shall surrender such
Preferred Shares at the place designated in the notice of redemption and shall
be entitled to the redemption price upon such surrender. If notice of redemption
of any Preferred Shares has been given and if the funds necessary for such
redemption have been irrevocably set aside by the Company in trust for the
benefit of the holders of any Preferred Shares so called for redemption, then
from and after the redemption date dividends will cease to accumulate on such
Preferred Shares, such shares shall no longer be deemed outstanding and all
rights of the holders of such Preferred Shares will terminate, except the right
to receive the redemption price. If fewer than all of the outstanding Preferred
Shares are to be redeemed, the Preferred Shares to be redeemed shall be selected
pro rata (as nearly as may be practicable without creating fractional Preferred
Shares) or by any other equitable method determined by the Company.
Notwithstanding the foregoing, unless full cumulative dividends on the
Preferred Shares shall have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment therefor set apart for such
payment on the Preferred Shares for all past dividend periods and the then
current dividend period, no Preferred Shares shall be redeemed unless all
outstanding Preferred Shares are simultaneously redeemed; PROVIDED, HOWEVER,
that the foregoing shall not prevent the purchase or acquisition of Preferred
Shares to preserve the REIT status of the Company or pursuant to a purchase or
exchange offer made on the same terms to holders of all outstanding Preferred
Shares. In addition, unless full cumulative dividends on the Preferred Shares
shall have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment therefor set apart for such payment on the Preferred
Shares for all past dividend periods and the then current dividend period, the
Company shall not purchase or otherwise acquire, directly or indirectly, any
Preferred Shares; PROVIDED, HOWEVER, that the foregoing shall not prevent the
purchase or acquisition of Preferred Shares to preserve the REIT status of the
Company or pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding Preferred Shares.
Notice of redemption will be given by publication in a newspaper of general
circulation in The City of New York, such publication to be made once a week for
two successive weeks commencing not less than 30 nor more than 60 days prior to
the redemption date. A similar notice furnished by the Company will be mailed by
the registrar, postage prepaid, not less than 30 nor more than 60 days prior to
the redemption date, addressed to the respective holders of record of the
Preferred Shares to be redeemed at their respective addresses as they appear on
the share transfer records of the registrar. No failure to give such notice or
any defect thereto or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any Preferred Shares except as to the holder
to whom notice was defective or not given. Each notice shall state: (i) the
redemption date; (ii) the redemption price; (iii) the number of Preferred Shares
to be redeemed; (iv) the place or places where the Preferred Shares are to be
surrendered for payment of the redemption price; and (v) that dividends on the
Preferred Shares to be redeemed will cease to accumulate on such redemption
date. If fewer than all the Preferred Shares held by any holder are to be
redeemed, the notice mailed to such holder shall also specify the number of
Preferred Shares to be redeemed from such holder.
The holders of Preferred Shares at the close of business on a Dividend
Record Date will be entitled to receive the dividend payable with respect to the
Preferred Shares on the corresponding Dividend Payment Date notwithstanding the
redemption thereof between such Dividend Record Date and the corresponding
Dividend Payment Date or the Company's default in the payment of the dividend
due. Except as provided above, the Company will make no payment or allowance for
unpaid dividends, whether or not in arrears, on Preferred Shares to be redeemed.
The Preferred Shares do not have a stated maturity and are not subject to
any sinking fund or mandatory redemption provisions (except as provided under
"--Restrictions on Transfer" below).
VOTING RIGHTS
Except as indicated below or except as otherwise from time to time required
by applicable law, the holders of Preferred Shares will have no voting rights.
On any matter on which the Preferred Shares are entitled to vote (as
expressly provided herein or as may be required by law), including any action by
written consent, each Preferred Share shall be entitled to one vote. With
respect to each Preferred Share, the holder thereof may designate a proxy, with
each such proxy having the right to vote on behalf of such holder.
If dividends on the Preferred Shares are in arrears for six or more
quarterly periods, whether or not such quarterly periods are consecutive,
holders of the Preferred Shares (voting separately as a class with all other
series of preferred stock of the Company upon which like voting rights have been
conferred and are exercisable) will be entitled to vote for the election of two
additional directors to serve on the Board of Directors of the Company at a
special meeting called by the holders of record of at least ten percent of the
Preferred Shares (unless such request is received less than 90 days before the
date fixed for the next annual or special meeting of the stockholders) or at the
next annual meeting of the stockholders, and at each subsequent annual meeting
until all dividends accumulated on the Preferred Shares for the past dividend
periods and the then current dividend period shall have been fully paid or
declared and a sum sufficient for payment thereof set aside for payment. In such
case, the entire Board of Directors of the Company will be increased by two
directors.
So long as any Preferred Shares remain outstanding, the Company will not,
without the affirmative vote or consent of the holders of at least two-thirds of
the Preferred Shares outstanding at the time, given in person or by proxy,
either in writing or at a meeting (voting separately as a class), (i) authorize
or create, or increase the authorized or issued amount of, any class or series
of capital stock ranking senior to the Preferred Shares with respect to the
payment of dividends or the distribution of assets upon liquidation, dissolution
or winding up of the affairs of the Company or reclassify any authorized capital
stock of the Company into such capital stock, or create, authorize or issue any
obligation or security convertible into or evidencing the right to purchase any
such capital stock; or (ii) amend, alter or repeal the provisions of the
Articles of Incorporation or the Designating Amendment, whether by merger,
consolidation or otherwise (an "Event"), so as to materially and adversely
affect any right, preference, privilege or voting power of the Preferred Shares
or the holders thereof; PROVIDED, HOWEVER, with respect to the occurrence of any
of the Events set forth in (ii) above, so long as the Preferred Shares remain
outstanding with the terms thereof materially unchanged, taking into account
that upon the occurrence of an Event, the Company may not be the surviving
entity, the occurrence of any such Event shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers of
holders of Preferred Shares; and PROVIDED, FURTHER, that (x) any increase in the
amount of the authorized preferred stock of the Company or the creation or the
issuance of any other series of preferred stock, or (y) any increase in the
amount of authorized Preferred Shares, in each case ranking on a parity with or
junior to the Preferred Shares with respect to the payment of dividends and 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 such vote or consent would otherwise be required
shall be effected, all outstanding Preferred Shares shall have been redeemed or
called for redemption and sufficient funds shall have been deposited in trust to
effect such redemption.
CONVERSION
The Preferred Shares are not convertible into or exchangeable for any other
property or securities of the Company.
SHAREHOLDER LIABILITY
Applicable Maryland law provides that no shareholder, including holders of
Preferred Shares, shall be personally liable for the acts and obligations of the
Company and that the funds and property of the Company shall be the only
recourse for such acts or obligations.
RESTRICTIONS ON TRANSFER
The Designating Amendment contains certain restrictions on the number of
Preferred Shares that a single shareholder may own. For the Company to qualify
as a REIT under the Code, no more than 50% in value of its outstanding Preferred
Shares and Common Stock may be owned, actually and constructively under the
applicable constructive ownership provisions of the Code, by five or fewer
individuals (as are defined in the Code to include certain entities) during the
last half of a taxable year (other than the first year) or during a
proportionate part of a shorter taxable year. The Preferred Shares and Common
Stock must also be beneficially owned by 100 or more persons during at least 335
days of a taxable year (other than the first year) or during a proportionate
part of a shorter taxable year. Because the Company has elected to be treated as
a REIT, the Articles of Incorporation and the Designating Amendment of the
Company contain restrictions on the acquisition of Preferred Shares and Common
Stock intended to ensure compliance with these requirements.
Subject to certain exceptions specified in the Designating Amendment, no
person may own, after taking account the applicable constructive ownership
provisions of the Code, more than 7% (the "Ownership Limit") of the outstanding
Preferred Shares. Under the constructive ownership rules, Preferred Shares owned
by an entity, including a corporation, life insurance company, mutual fund or
pension trust, are treated as owned by the ultimate individual beneficial owners
of the entity. In addition, a holder is prohibited from acquiring any Preferred
Shares if such acquisition would cause five individuals to own (actually and
constructively under the applicable constructive ownership of the Code) in the
aggregate more than 50% in value of the outstanding Preferred Shares and Common
Stock.
If any shareholder purports to transfer shares to a person and either the
transfer would result in the Company failing to qualify as a REIT, or the
shareholder knows that such transfer would cause the transferee to hold more
than the applicable Ownership Limit, the purported transfer will be null and
void as to that number of shares the transfer of which would cause a violation
of the applicable limit, and the intended transferee (the "Purported
Transferee") shall not acquire any rights in the shares and those shares will be
transferred by operation of law to the Company, as trustee of a charitable trust
(the "Charitable Trust") created for the exclusive benefit of The American
Cancer Society, a designated charity. The Company, as trustee of the Charitable
Trust, may transfer the shares held in trust to a person (the "Permitted
Transferee") whose ownership would not violate the Company's ownership
restrictions. Upon a transfer by the Charitable Trust, the Purported Transferee
would receive the lesser of (i) the price paid by him for the shares, or if no
value is given for the shares, the market price of the shares on the day of the
event causing the shares to be held in trust, and (ii) the price per share
received by the Company, as trustee, from the sale of the shares held in trust.
Any proceeds in excess of the amount payable to the Purported Transferee will be
paid to the designated charity.
The Purported Transferee will not be entitled to designate a Permitted
Transferee, vote any shares it attempts to acquire or receive any dividends or
distributions. Any dividends or distributions paid to the Purported Transferee
must be repaid to the Company and held in trust for the designated charity. If a
Purported Transferee votes, any stockholder vote will be rescinded if the
stockholder vote would have been decided differently had the Purported
Transferee's vote not been counted. Any shares held in the Charitable Trust will
be deemed to have been offered for sale to the Company or its designee, for a
90-day period, at the lesser of the price paid by the Purported Transferee and
the market price on the date the Company accepts the offer.
The foregoing provisions are designed to provide that the Purported
Transferee will not receive any economic benefit from the attempted transfer.
All certificates representing Preferred Shares will bear a legend referring
to the restrictions described above.
The Designating Amendment provides that each shareholder shall upon demand
be required to disclose to the Company in writing such information as the
Company may request in good faith in order to determine the Company's status as
a REIT.
BOOK-ENTRY SYSTEM
The Preferred Shares will be represented by a single fully-registered
certificate in book-entry form (the "Global Certificate") which will be
deposited with, or on behalf of, The Depository Trust Company ("DTC") and
registered in the name of DTC's nominee. Except as set forth below, the Global
Certificate may not be transferred except as a whole by DTC to a nominee of DTC
or by a nominee of DTC to DTC or another nominee of DTC or by DTC or any such
nominee to a successor of DTC or a nominee of such successor.
So long as DTC or its nominee is the registered owner of the Global
Certificate, DTC or its nominee, as the case may be, will be considered the sole
recordholder of the Preferred Shares represented by the Global Certificate.
Except as provided below, owners of beneficial interests in the Global
Certificate will not be entitled to have Preferred Shares represented by the
Global Certificate registered in their names, will not receive or be entitled to
receive physical delivery of Preferred Shares in certificated form and will not
be considered the recordholders thereof. The laws of some states require that
certain purchasers of securities take physical delivery of securities in
certificated form; accordingly, such laws may limit the transferability of
beneficial interests in the Global Certificate.
The following is based on information furnished by DTC:
DTC will act as securities depository for the Preferred Shares. The
Preferred Shares will be issued as fully registered securities registered in the
name of Cede & Co. (DTC's partnership nominee). Initially, one fully registered
Preferred Share certificate will be issued to represent the Preferred Shares.
DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by The New York Stock Exchange,
the American Stock Exchange and the National Association of Securities Dealers,
Inc. Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain a
custodial relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to DTC and its Participants are
on file with the Commission.
Purchases of Preferred Shares under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Shares on DTC's records. The ownership interest of each actual purchaser of each
Preferred Share ("Beneficial Owner") is in turn recorded on the Direct and
Indirect Participants' records. A Beneficial Owner does not receive written
confirmation from DTC of its purchase, but such Beneficial Owner is expected to
receive a written confirmation providing details of the transaction, as well as
periodic statements of its holdings, from the Direct or Indirect Participant
through which such Beneficial Owner entered into the transaction. Transfers of
ownership interests in Preferred Shares are accomplished by entries made on the
books of Participants acting on behalf of Beneficial Owners. Beneficial Owners
do not receive certificates representing their ownership interests in Preferred
Shares, except in the event that use of the book-entry system for the Preferred
Shares is discontinued.
To facilitate subsequent transfers, all Preferred Shares deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Preferred Shares with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Preferred Shares; DTC records
reflect only the identity of the Direct Participants to whose accounts Preferred
Shares are credited, which may or may not be the Beneficial Owners. The
Participants remain responsible for keeping account of their holdings on behalf
of their customers.
Delivery of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct and Indirect
Participants to Beneficial Owners are governed by arrangements among them,
subject to any statutory or regulatory requirements as may be in effect from
time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Shares represented by the Global Certificate are to be redeemed, DTC's
practice is to determine by lot the amount of the interest of each Direct
Participants to be redeemed.
Neither DTC nor Cede & Co. will consent or vote with respect to the
Preferred Shares. Under its usual procedures, DTC mails a proxy (an "Omnibus
Proxy") to the issuer as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Preferred Shares are credited on the record
date (identified on a list attached to the Omnibus Proxy).
Dividend payments, redemption proceeds and other distributions in respect
of the Preferred Shares will be made in immediately available funds by the
Company or the Company's agent to DTC. DTC's practice is to credit Direct
Participant's accounts, upon receipt of funds and corresponding detail
information from the Company or the Company's agent, on the payable date in
accordance with their respective holdings as shown on DTC's records. Payments by
Participants to Beneficial Owners will be governed by standing instructions and
customary practices, as is the case with securities held for the accounts of
customers in bearer form or registered in "street name", and will be the
responsibility of such Participant and not of DTC, the Company or the Company's
agent, subject to any statutory or regulatory requirements as may be in effect
from time to time. Payments in respect of the Preferred Shares to DTC are the
responsibility of the Company or the Company's agent, disbursement of such
payments to Direct Participants is the responsibility of DTC, and disbursement
of such payments to the Beneficial Owners is the responsibility of Direct and
Indirect Participants.
DTC may discontinue providing its services as securities depository with
respect to the Preferred Shares at any time by giving reasonable notice to the
Company or the Company's agent. Under such circumstances, in the event that a
successor securities depository is not appointed, Preferred Share certificates
are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Preferred Share certificates will be printed and delivered.
None of the Company, the Company's agent or the Initial Purchaser will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial interests in the Global Certificate, or
for maintaining, supervising or reviewing any records relating to such
beneficial interests.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain federal income tax considerations is based
on current law, is for general information only, and is not tax advice. This
discussion does not purport to deal with all aspects of taxation that may be
relevant to particular shareholders in light of their personal investment or tax
circumstances, or to certain types of shareholders (including insurance
companies, tax-exempt organizations, financial institutions or broker dealers,
foreign corporations and persons who are not citizens or residents of the United
States) subject to special treatment under the federal income tax laws. In
addition, this section does not discuss foreign, state, or local taxation.
Prospective investors should consult, and must depend on, their own tax advisors
regarding the state, local, foreign and other tax consequences of holding and
disposing of Preferred Shares.
DIVIDENDS AND OTHER DISTRIBUTIONS. As long as the Company qualifies as a
REIT, distributions made to the Company's taxable U.S. stockholders out of
current or accumulated earnings and profits (and not designated as capital gain
dividends) will be taken into account by such U.S. stockholders as ordinary
income and will not be eligible for the dividends received deduction generally
available to corporations. As used herein, the term "U.S. stockholder" means a
holder of Preferred Shares that for U.S. federal income tax purposes is (i) a
citizen or resident of the United States, (ii) a corporation, partnership, or
other entity created or organized in or under the laws of the United States or
of any political subdivision thereof, (iii) an estate whose income from sources
without the United States is includible in gross income for United States
federal income tax purposes regardless of its connection with the conduct of a
trade or business within the United States, or (iv) any trust with respect to
which (A) a United States court is able to exercise primary supervision over the
administration of such trust and (B) one or more United States persons have the
authority to control all substantial decisions of the trust. Distributions that
are designated as capital gain dividends will be taxed as gain from the sale of
a capital asset held for more than one year (to the extent they do not exceed
the Company's actual net capital gain for the taxable year) without regard to
the period for which the U.S. stockholder has held his stock. U.S. stockholders
that are corporations may, however, be required to treat up to 20% of certain
capital gain dividends as ordinary income. Stockholders' bases in their shares
will be increased by undistributed long-term capital gains so designated by the
Company less the taxes thereon paid by the Company and credits to stockholders.
Distributions in excess of current and accumulated earnings and profits will not
be taxable to a U.S. stockholder to the extent that they do not exceed the
adjusted basis of the U.S. stockholder's stock, but rather will reduce the
adjusted basis of such stock. To the extent that such distributions in excess of
current and accumulated earnings and profits exceed the adjusted basis of a
stockholder's stock, such distributions will be included in income as long-term
capital gain (or short-term capital gain if the Preferred Shares had been held
for one year or less), assuming the Preferred Shares are a capital asset in the
hands of the U.S. stockholder.
If the Company elects to retain, rather than distribute as a capital gain
dividend, its net long-term capital gains, the Company would pay tax on such
retained net long-term capital gains. In addition, for tax years of the Company
beginning on or after January 1, 1998, to the extent timely designated by the
Company, a U.S. stockholder generally would (i) include its proportionate share
of such undistributed long-term capital gains in computing its long-term capital
gains in its return for its taxable year in which the last day of the Company's
taxable year falls (subject to certain limitations as to the amount so
includable), (ii) be deemed to have paid the capital gains tax imposed on the
Company on the designated amounts included in such U.S. stockholder's long-term
capital gains, (iii) receive a credit or refund for such amount or of tax deemed
paid by it, (iv) increase the adjusted basis of its Preferred Shares by the
difference between the amount of such includable gains and the tax deemed to
have been paid by it, and (v) in the case of a U.S. stockholder that is a
corporation, appropriately adjust its earnings and profits for the retained
capital gains in accordance with Treasury Regulations to be prescribed by the
Internal Revenue Service.
U.S. stockholders may not include in their individual income tax returns
any net operating losses or capital losses of the Company. Instead, such losses
would be carried over by the Company for potential offset against its future
income (subject to certain limitations). Taxable distributions from the Company
and gain from the disposition of the Preferred Shares will not be treated as
passive activity income and, therefore, stockholders generally will not be able
to apply any "passive activity losses" (such as losses from certain types of
limited partnerships in which a U.S. stockholder is a limited partner) against
such income. In addition, taxable distributions from the Company generally will
be treated as investment income for purposes of the investment interest
limitations. Capital gains from the disposition of Preferred Shares (or
distributions treated as such), however, will be treated as investment income
only if the U.S. stockholder so elects, in which case such capital gains will be
taxed at ordinary income rates. The Company will notify U.S. stockholders after
the close of the Company's taxable year as to the portions of the distributions
attributable to that year that constitute ordinary income or capital gain
dividends.
In determining the extent to which a distribution on the Preferred Shares
constitutes a dividend for tax purposes, the earnings and profits of the Company
will be allocated first to distributions with respect to the Preferred Shares
and then to distributions with respect to the Common Stock.
INFORMATION REPORTING REQUIREMENTS AND BACKUP WITHHOLDING. The Company will
report to its U.S. stockholders and to the Internal Revenue Service the amount
of distributions paid during each calendar year, and the amount of tax withheld,
if any. Under the backup withholding rules, a stockholder may be subject to
backup withholding at the rate of 31% with respect to distributions paid unless
such holder (i) is a corporation or comes within certain other exempt categories
and when required, demonstrates this fact or (ii) provides a taxpayer
identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with the applicable requirements of the
backup withholding rules. A stockholder who does not provide the Company with
his correct taxpayer identification number also may be subject to penalties
imposed by the Internal Revenue Service. Any amount paid as backup withholding
will be creditable against the stockholder's income tax liability. In addition,
the Company may be required to withhold a portion of capital gain distributions
to any stockholders who fail to certify their nonforeign status to the Company.
The Treasury Department has issued regulations regarding the backup withholding
rules as applied to non-U.S. stockholders that unify current certification
procedures and forms and unify reliance standards but generally do not
substantially alter the current system of backup withholding compliance. These
regulations will be generally effective with respect to distributions made after
December 31, 1998, subject to certain transition rules.
SALE OR EXCHANGE OF PREFERRED SHARES. Upon the sale or exchange of
Preferred Shares to a party other than the Company, a holder of Preferred Shares
will realize a capital gain or loss (provided the Preferred Shares are held as a
capital asset) measured by the difference between the amount realized on the
sale or other disposition and the holder's adjusted tax basis in the Preferred
Shares. In general, such gain or loss will be a long-term capital gain or loss
if the holder's holding period with respect to the Preferred Shares is more than
one year at the time of the sale or exchange. Lower capital gains rates will
apply to individuals who have held such Preferred Shares for more than 18
months. Further, any loss on a sale of Preferred Shares which were held by the
holder for six months or less and with respect to which a capital gain dividend
was received will be treated as a long term capital loss, up to the amount of
the capital gain dividend received with respect to such shares.
REDEMPTION OF PREFERRED SHARES. The treatment to be accorded to any
redemption by the Company of Preferred Shares can only be determined on the
basis of particular facts as to each holder of Preferred Shares at the time of
redemption. In general, a holder of Preferred Shares will recognize capital gain
or loss (provided the Preferred Shares are held as a capital asset) measured by
the difference between the amount realized by the holder upon the redemption and
such holder's adjusted tax basis in the Preferred Shares redeemed if such
redemption (i) results in a "complete termination" of the holder's interest in
all classes of shares of the Company under Section 302(b) (3) of the Code, (ii)
is "substantially disproportionate" with respect to the holder's interest in the
Company under Section 302(b)(2) of the Code (which will not be the case if only
Preferred Shares are redeemed, since they generally do not have voting rights)
or (iii) is "not essentially equivalent to a dividend" with respect to the
holder of Preferred Shares under Section 302(b)(1) of the Code. In determining
whether any of these tests have been met, shares considered to be owned by the
holder by reason of certain constructive ownership rules set forth in the Code,
as well as shares actually owned, generally must be taken into account. Because
the determination as to whether any of the alternative tests of Section 302(b)
of the Code will be satisfied with respect to any particular holder of Preferred
Shares depends upon the facts and circumstances at the time when the
determination must be made, prospective investors are advised to consult their
own tax advisors to determine such tax treatment.
REGISTRATION RIGHTS
The Company and the Operating Partnership entered into a registration
rights agreement with the Initial Purchaser (the "Registration Rights
Agreement") for the benefit of the holders of the Preferred Shares wherein the
Company agreed, for the benefit of the holders of the Preferred Shares, to use
its best efforts to keep the Registration Statement effective until the earlier
of October 15, 1999 or such time as all of the Preferred Shares have been sold
thereunder or otherwise cease to be registrable securities within the meaning of
the Registration Rights Agreement.
The Company will provide to each holder of Preferred Shares copies of this
Prospectus, notify each such holder when the Registration Statement for the
Preferred Shares has become effective and take certain other actions as are
required to permit, subject to the foregoing, unrestricted resales of the
Preferred Shares. Pursuant to the Registration Rights Agreement, the Initial
Purchaser shall pay all expenses of the registration of the Preferred Shares, up
to a maximum amount of $100,000. The Company is not obligated under the
Registration Rights Agreement to pay certain costs and expenses such as in
connection with opinions of counsel of such Selling Holders or accountants'
"cold comfort" letters and the officers and directors of the Company are not
obligated under the Registration Rights Agreement to participate in marketing
efforts on behalf of such Selling Holders.
Each Preferred Share certificate contains a legend to the effect that the
holder thereof, by its acceptance thereof, is deemed to have agreed to be bound
by the provisions of the Registration Rights Agreement. In that regard, each
holder will be deemed to have agreed that, upon receipt of notice from the
Company of the occurrence of any event which makes such statement in this
Prospectus untrue in any material respect or which requires the making of any
changes in this Prospectus in order to make the statements therein not
misleading or of certain other events specified in the Registration Rights
Agreement, such holder will suspend the sale of Preferred Shares pursuant to
this Prospectus until the Company has amended or supplemented this Prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemented prospectus to such holder or the Company has given notice that the
sale of the Preferred Shares may be resumed. The Company will be permitted to
suspend use of this Prospectus for a period not to exceed 30 days in any
three-month period or two periods not to exceed an aggregate of 45 days (whether
or not consecutive) in any twelve-month period under certain circumstances
relating to pending corporate developments, public filings with the Commission
and similar events.
If the Company shall give such notice to suspend the sale of the Preferred
Shares, it shall extend the relevant period referred to above during which the
Company is required to keep effective the Registration Statement by the number
of days during the period from and including the date of the giving of such
notice to and including the date when holders shall have received copies of the
supplemented or amended prospectus necessary to permit resales of the Preferred
Shares or to and including the date on which the Company has given notice that
the sale of Preferred Shares may be resumed, as the case may be.
If the Registration Statement ceases to remain effective or be available
for use by holders of the Preferred Shares at any time prior to October 15, 1999
(other than after such time as all Preferred Shares have been disposed of
thereunder or otherwise cease to be registrable securities within the meaning of
the Registration Rights Agreement), except as permitted in the second preceding
paragraph with respect to suspensions of the use of this Prospectus, then an
additional amount ("Liquidated Damages") shall be payable at a rate of 0.50% per
annum of the liquidation preference of the Preferred Shares commencing on the
day the Registration Statement ceases to remain effective or be available or on
the 31st day in any three-month period or 46th day in any twelve-month period
following the day the Registration Statement ceases to remain effective or be
available, as the case may be; PROVIDED, however, that the Liquidated Damages
may not exceed in the aggregate 0.50% per annum of the liquidation preference of
the Preferred Shares; PROVIDED, FURTHER, HOWEVER, that upon the effectiveness or
availability of the Registration Statement which had ceased to remain effective
or be available, Liquidated Damages on the Preferred Shares shall cease to be
payable.
Any amounts of Liquidated Damages due pursuant to the preceding paragraph
will be payable in cash on the next succeeding Dividend Payment Date to the
holders of record at the close of business on the Dividend Record Date
immediately preceding such date.
The Registration Rights Agreement is governed by, and construed in
accordance with, the laws of the State of New York. The summary herein of
certain provisions of the Registration Rights Agreement does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
all the provisions of the Registration Rights Agreement, a copy of which is
filed as an exhibit to the Registration Statement.
SELLING HOLDERS
The Preferred Shares were originally issued by the Company and sold by the
Initial Purchaser in compliance with Rule 144A under the Securities Act to
"qualified institutional buyers" (as defined in Rule 144A of the Securities
Act). These purchasers or their transferees, pledgees, donees or successors (the
"Selling Holders") may from time to time offer and sell pursuant to this
Prospectus any or all of the Preferred Shares. Although none of the Selling
Holders have advised the Company that they currently intend to sell all or any
of the Preferred Shares pursuant to this Prospectus, the Selling Holders may
choose to sell the Preferred Shares from time to time upon notice to the
Company. See "Plan of Distribution."
In view of the fact that Selling Holders may offer all or a portion of the
Preferred Shares held by them pursuant to this offering and because this
offering is not being underwritten on a firm commitment basis, no estimate can
be given as to the number of Preferred Shares that will be held by the Selling
Holders after completion of this offering.
Prior to any use of this Prospectus in connection with any offer or sale of
the Preferred Shares, this Prospectus will be supplemented to set forth the name
and number of shares beneficially owned by the Selling Holder intending to sell
such Preferred Shares, and the number of Preferred Shares to be offered. The
Prospectus Supplement will also disclose whether any Selling Holder selling in
connection with such Prospectus Supplement has held any position or office with,
been employed by or otherwise has a material relationship with, the Company or
any of its affiliates during the three years prior to the date of the Prospectus
Supplement.
PLAN OF DISTRIBUTION
The Preferred Shares may be sold from time to time to purchasers directly
by the Selling Holders. Alternatively, the Selling Holders may from time to time
offer the Preferred Shares to or through underwriters, dealers or agents, who
may receive compensation in the form of underwriting discounts, concessions or
commissions from the Selling Holders or the purchasers of such securities for
whom they may act as agents. The Selling Holders and any underwriters, dealers
or agents that participate in the distribution of Preferred Shares may be deemed
to be "underwriters" within the meaning of the Securities Act and any profit on
the sale of such securities and any discounts, commissions, concessions or other
compensation received by any such underwriter, dealer or agent may be deemed to
be underwriting discounts and commissions under the Securities Act.
The Preferred Shares may be sold from time to time in one or more
transactions at a fixed offering price, which may be changed, at prices related
to the then current market price at the time of sale, at varying prices
determined at the time of sale or at negotiated prices. The sale of the
Preferred Shares may be effectuated in transactions (which may involve crosses
or block transactions) (i) on any national securities exchange or quotation
service on which the Preferred Shares may be listed or quoted at the time of
sale, (ii) in the over-the-counter market, (iii) in transactions otherwise than
on such exchanges or in the over-the-counter market, or (iv) through the writing
and exercise of options. At the time a particular offering of the Preferred
Shares is made, a Prospectus Supplement will be distributed which will set forth
the aggregate amount of the Preferred Shares being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents,
any discounts, commissions and other terms constituting compensation from the
Selling Holders and any discounts, commissions or concessions allowed or
reallowed to be paid to dealers. The Prospectus Supplement and, if necessary, a
post-effective amendment to the Registration Statement, will be filed with the
Commission to reflect the disclosure of additional information with respect to
the distribution of the Preferred Shares. In addition, the Preferred Shares
covered by this Prospectus may be sold in private transactions or under Rule 144
rather than pursuant to this Prospectus. To comply with the securities laws of
certain jurisdictions, if applicable, the Preferred Shares will be offered or
sold in such jurisdictions only through registered or licensed brokers or
dealers. In addition, in certain jurisdictions the Preferred Shares may not be
offered or sold unless they have been registered or qualified for sale in such
jurisdictions or any exemption from registration or qualification is available
and is complied with.
The Selling Holders will be subject to applicable provisions of the
Exchange Act and rules and regulations thereunder, which provisions may limit
the timing of purchases and sales of any of the Preferred Shares by the Selling
Holders. The foregoing may affect the marketability of such securities.
Pursuant to the Registration Rights Agreement, the Initial Purchaser shall
pay all expenses of the registration of the Preferred Shares, including, without
limitation, Commission filing fees and expenses of compliance with state
securities or "blue sky" laws, up to a maximum amount of $100,000; provided,
however, that the Selling Holders will pay all underwriting discounts and
selling commissions, if any. The Selling Holders will be indemnified by the
Company against certain civil liabilities, including certain liabilities under
the Securities Act, or will be entitled to contribution in connection therewith.
LEGAL MATTERS
The validity of the Preferred Shares and certain United States federal
income taxation matters will be passed upon for the Company by Stroock & Stroock
& Lavan LLP, New York, New York, and for any underwriters, dealers or agents by
Brown & Wood LLP, New York, New York.
EXPERTS
The consolidated financial statements and schedule of the Company at
December 31, 1996 and 1995, and for each of the three years in the period ended
December 31, 1996, appearing in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements are
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
The statement of revenues and certain expenses of Waikele Factory Outlet
Stores for the year ended December 31, 1996, appearing in the Company's Current
Report on Form 8-K dated April 11, 1997, has been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon included therein and
incorporated herein by reference. Such financial statement is incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
<PAGE>
PART II.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the distribution of the Preferred
Shares (all of which shall be paid by the Initial Purchaser) being registered
hereunder (other than underwriting discounts) are set forth in the following
table (all amounts except the SEC registration fee are estimated):
Securities and Exchange Commission Registration Fee.... $ 14,750
Accounting Fees and Expenses........................... $ 10,000
Legal Fees and Expenses................................ $ 25,000
Printing Expenses...................................... $ 10,000
Miscellaneous.......................................... $ 250
----------
Total........................................... $ 60,000
==========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is a Maryland corporation. The Company's Articles of
Incorporation contain a provision limiting the liability of the directors and
officers to the fullest extent permitted by Section 5-349 of the Courts and
Judicial Proceedings Code of Maryland. The Company's Articles of Incorporation
also contain a provision permitted under Maryland General Corporation Law
eliminating (with limited exceptions) each director's personal liability for
monetary damages for breach of any duty as a director. In addition, the
Company's Articles of Incorporation and Bylaws provide for the Company's
indemnification of its directors and officers from certain liabilities and
expenses, as well as advancement of costs, expenses and attorneys' fees, to the
fullest extent permitted under Maryland General Corporation Law. Such rights are
contract rights fully enforceable by each beneficiary thereof, and are in
addition to, and not exclusive of, any other right to indemnification.
ITEM 16. EXHIBITS.
4.1 -- Registration Rights Agreement dated October 7,
1997 by and among the Company, the Operating
Partnership and the Initial Purchaser.
4.2 -- Form of Preferred Stock Certificate.
5.1 -- Opinion of Stroock & Stroock & Lavan LLP as to
the legality of the Preferred Shares.
8.1 -- Opinion of Stroock & Stroock & Lavan LLP as to
certain tax matters (included in Exhibit 5.1).
12 -- Calculation of Ratios of Earnings to Fixed
Charges and Preferred Stock Dividends.
23.1 -- Consent of Stroock & Stroock & Lavan LLP
(included in Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP.
24 -- Power of Attorney (included on signature page
of this Registration Statement).
- ---------------
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 the Registration Statement:
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or
events arising after the effective date of the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
Registration Statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by the Registrant
pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in the 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 therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(d) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange 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.
(e) The undersigned Registrant hereby undertakes (1) to use its best
efforts to distribute prior to the opening of bids, to prospective bidders,
underwriters, and dealers, a reasonable number of copies of a prospectus which
at that time meets the requirements of Section 10(a) of the Securities Act, and
relating to the securities offered at competitive bidding, as contained in the
Registration Statement, together with any supplements thereto, and (2) to file
an amendment to the Registration Statement reflecting the results of bidding,
the terms of the reoffering and related matters to the extent required by the
applicable form, not later than the first use, authorized by the Registrant
after the opening of bids, of a prospectus relating to the securities offered at
competitive bidding, unless no further public offering of such securities by the
Registrant and no reoffering of such securities by the purchasers is proposed to
be made.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Roseland, State of New Jersey , on December 17, 1997.
CHELSEA GCA REALTY, INC.
BY: /S/ Leslie T. Chao
Leslie T. Chao
President and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David C. Bloom, Leslie T. Chao, Michael J. Clarke
and Denise M. Elmer, and each of them, his true and lawful attorneys-in-fact and
agents with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities, to sign any or all amendments
(including post-effective amendments) of and supplements to this Registration
Statement and any Registration Statement relating to any offering made pursuant
to this Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto such attorney-in-fact and agents and each of
them full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, to all intents and
purposes and as fully as they might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents, or their substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<PAGE>
Signature TITLE DATE
/s/ David C. Bloom Chairman of the Board of Directors and December 17, 1997
- ------------------ Chief Executive
David C. Bloom (Principal Executive Officer)
/s/ Barry M. Ginsburg Director and Chairman of December 17, 1997
- --------------------- the Executive Committee
Barry M. Ginsburg
/s/ Leslie T. Chao President and Chief Financial Officer December 17, 1997
- ------------------ (Principal Financial Officer)
Leslie T. Chao
/s/ Michael J. Clarke Vice President-Finance December 17, 1997
- ------------------ (Principal Accounting Officer)
Michael J. Clarke
/s/ William D. Bloom
- ------------------- Director December 17, 1997
William D. Bloom
/s/ Brendan T. Byrne
- -------------------- Director December 17, 1997
Brendan T. Byrne
/s/ Robert Frommer
- -------------------- Director December 17, 1997
Robert Frommer
/s/ Philip D. Kaltenbacher
- -------------------------- Director December 17, 1997
Philip D. Kaltenbacher
/s/ Reuben S. Leibowitz
- ----------------------- Director December 17, 1997
Reuben S. Leibowitz
<PAGE>
EXHIBIT INDEX
EXHIBITS DESCRIPTION PAGE NO.
4.1 -- Registration Rights Agreement dated October 7,
1997 by and among the Company, the Operating
Partnership and the Initial Purchaser.
4.2 -- Form of Preferred Stock Certificate.
5.1 -- Opinion of Stroock & Stroock & Lavan LLP as to
the legality of the Preferred Shares.
8.1 -- Opinion of Stroock & Stroock & Lavan LLP as to
certain tax matters (included in Exhibit 5.1).
12 -- Calculation of Ratios of Earnings to Fixed
Charges and Preferred Stock Dividends.
23.1 -- Consent of Stroock & Stroock & Lavan LLP
(included in Exhibit 5.1).
23.2 -- Consent of Ernst & Young LLP.
24 -- Power of Attorney (included on signature page
of this Registration Statement).
Exhibit 4.1
REGISTRATION RIGHTS AGREEMENT
Dated as of October 15, 1997
among
CHELSEA GCA REALTY, INC.,
CHELSEA GCA REALTY PARTNERSHIP, L.P.
and
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
as Initial Purchaser
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made and entered
into as of October 15, 1997 among CHELSEA GCA REALTY, INC., a Maryland
corporation (the "COMPANY"), CHELSEA GCA REALTY PARTNERSHIP, L.P., a Delaware
limited partnership (the "OPERATING PARTNERSHIP") and MERRILL LYNCH, PIERCE,
FENNER & SMITH INCORPORATED (the "INITIAL PURCHASER").
This Agreement is made pursuant to the Purchase Agreement, dated October 7,
1997 (the "PURCHASE AGREEMENT"), among the Company, as issuer of the 8 3/8%
Series A Cumulative Redeemable Preferred Stock (the "SECURITIES"), the Operating
Partnership and the Initial Purchaser, which provides for, among other things,
the sale by the Company to the Initial Purchaser of 1,000,000 Securities. In
order to induce the Initial Purchaser to enter into the Purchase Agreement, the
Company has agreed to provide to the Initial Purchaser and their direct and
indirect transferees the registration rights set forth in this Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. DEFINITIONS. As used in this Agreement, the following
capitalized defined terms shall have the following meanings:
"ADVICE" shall have the meaning set forth in the last paragraph of Section
3 hereof.
"AFFILIATE" has the same meaning as given to that term in Rule 405 under
the Securities Act or any successor rule thereunder.
"BUSINESS DAY" means any day other than a Saturday, a Sunday, or a day on
which banking institutions in The City of New York are authorized or required by
law or executive order to remain closed.
"CLOSING TIME" shall mean the Closing Time as defined in the Purchase
Agreement.
"COMPANY" shall have the meaning set forth in the preamble to this
Agreement and also includes the Company's successors and permitted assigns.
"EFFECTIVENESS PERIOD" shall have the meaning set forth in Section 2(a)
hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"HOLDER" shall mean the Initial Purchaser, for so long as it owns any
Registrable Securities, and each of its respective successors, assigns and
direct and indirect transferees who become registered owners of Registrable
Securities.
"INITIAL PURCHASER" shall have the meaning set forth in the preamble to
this Agreement.
"INSPECTORS" shall have the meaning set forth in Section 3(m) hereof.
"ISSUE DATE" shall mean October 15, 1997, the date of original issuance of
the Securities.
"LIQUIDATED DAMAGES" shall have the meaning set forth in Section 2(d)
hereof.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the aggregate
liquidation preference of outstanding Securities.
"PERSON" shall mean an individual, partnership, corporation, trust or
unincorporated organization, limited liability company, or a government or
agency or political subdivision thereof.
"PROSPECTUS" shall mean the prospectus included in a Shelf Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by a Shelf Registration Statement, and by all
other amendments and supplements to a prospectus, including post-effective
amendments, and in each case including all documents incorporated by reference
therein.
"PURCHASE AGREEMENT" shall have the meaning set forth in the preamble to
this Agreement.
"RECORDS" shall have the meaning set forth in Section 3(m) hereof.
"REGISTRABLE SECURITIES" shall mean the Securities; PROVIDED, HOWEVER, that
Securities shall cease to be Registrable Securities when (i) a Shelf
Registration Statement with respect to such Securities for the resale thereof
shall have been declared effective under the Securities Act and such Securities
shall have been disposed of pursuant to such Shelf Registration Statement, (ii)
such Securities shall have been sold to the public pursuant to Rule 144(k) (or
any similar provision then in force, but not Rule 144A) under the Securities Act
or are eligible to be sold without restriction as contemplated by Rule 144(k) or
(iii) such Securities shall have ceased to be outstanding.
"REGISTRATION EXPENSES" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC or National Association of Securities Dealers,
Inc. (the "NASD") registration and filing fees, including, if applicable, the
fees and expenses of any "qualified independent underwriter" (and its counsel)
that is required to be retained by any Holder of Registrable Securities in
accordance with the rules and regulations of the NASD, (ii) all fees and
expenses incurred in connection with compliance with state securities or blue
sky laws (including reasonable fees and disbursements of one counsel for all
underwriters or Holders as a group in connection with blue sky qualification of
any of the Registrable Securities) and compliance with the rules of the NASD,
(iii) all expenses of any Persons in preparing or assisting in preparing, word
processing, printing and distributing any Shelf Registration Statement, any
Prospectus and any amendments or supplements thereto, and in preparing or
assisting in preparing, printing and distributing any underwriting agreements,
securities sales agreements and other documents relating to the performance of
and compliance with this Agreement, (iv) all rating agency fees and (v) any fees
and disbursements of counsel or accountants required by or incident to the
performance of and compliance with this Agreement.
"RULE 144(K) PERIOD" shall mean the period of two years (or such shorter
period as may hereafter be referred to in Rule 144(k) under the Securities Act
(or similar successor rule)) commencing on the Issue Date.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES" shall have the meaning set forth in the preamble to this
Agreement.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time.
"SHELF REGISTRATION" shall mean a registration effected pursuant to Section
2(a) hereof.
"SHELF REGISTRATION STATEMENT" shall mean a "shelf" registration statement
of the Company pursuant to the provisions of Section 2(a) hereof which covers
all of the Registrable Securities on an appropriate form under Rule 415 under
the Securities Act, or any similar rule that may be adopted by the SEC, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all documents incorporated by reference
therein.
2. REGISTRATION UNDER THE SECURITIES ACT.
(a) SHELF REGISTRATION. The Company shall use its best efforts to cause to
be filed, as promptly as practicable after the Issue Date, but in any event
within 150 days after the Issue Date, a Shelf Registration Statement providing
for the sale by the Holders of all of the Registrable Securities, and shall use
its best efforts to have such Shelf Registration Statement declared effective by
the SEC as promptly as practicable after filing thereof, but in any event within
180 days after the Issue Date. No Holder of Registrable Securities shall be
entitled to include any of its Registrable Securities in any Shelf Registration
pursuant to this Agreement unless and until such Holder agrees in writing to be
bound by all of the provisions of this Agreement applicable to such Holder and
furnishes to the Company in writing, within 15 days after receipt of a request
therefor, such information as the Company may, after conferring with counsel
with regard to information relating to Holders that would be required by the SEC
to be included in such Shelf Registration Statement or Prospectus included
therein, reasonably request for inclusion in any Shelf Registration Statement or
Prospectus included therein. Each Holder as to which any Shelf Registration is
being effected agrees to furnish to the Company all information with respect to
such Holder necessary to make the information previously furnished to the
Company by such Holder not materially misleading.
The Company agrees to use its best efforts to keep the Shelf Registration
Statement continuously effective and usable for resales for the Rule 144(k)
Period (subject to extension pursuant to the last paragraph of Section 3
hereof), or for such shorter period which will terminate when all of the
Securities covered by the Shelf Registration Statement have been sold pursuant
to the Shelf Registration Statement or cease to be Registrable Securities (the
"EFFECTIVENESS PERIOD"). The Company shall not permit any securities other than
(i) with respect to holders of the Company securities currently possessing
incidental registration rights and (ii) Registrable Securities to be included in
the Shelf Registration. The Company will, in the event a Shelf Registration
Statement is declared effective, provide to each Holder a reasonable number of
copies of the Prospectus which is a part of the Shelf Registration Statement,
notify each such Holder when the Shelf Registration Statement has become
effective and take such other actions as are required to permit certain
unrestricted resales of the Registrable Securities. The Company further agrees
to supplement or amend the Shelf Registration Statement if and as required by
the rules, regulations or instructions applicable to the registration form used
by the Company for such Shelf Registration Statement or by the Securities Act or
by any other rules and regulations thereunder for shelf registrations, and the
Company agrees to furnish to the Holders of Registrable Securities copies of any
such supplement or amendment promptly after its being used or filed with the
SEC.
(b) EXPENSES. The Company shall pay all Registration Expenses in connection
with any Shelf Registration Statement filed pursuant to Section 2(a) hereof and
will reimburse the Initial Purchaser for the fees and disbursements of any
single counsel designated in writing by the Majority Holders to act as counsel
for the Holders of the Registrable Securities in connection with a Shelf
Registration Statement, which counsel shall be reasonably satisfactory to the
Company; PROVIDED, HOWEVER, that the Initial Purchaser has agreed to reimburse
the Company for Registration Expenses and other out-of-pocket expenses arising
from the private, as opposed to public, offering of the Securities in the amount
of $100,000 upon the incurrence of such amount and the invoicing of such amount
delivered to the Initial Purchaser. Except as provided herein, each Holder shall
pay all expenses of its counsel, underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Securities pursuant to the Shelf Registration Statement.
(c) EFFECTIVE SHELF REGISTRATION STATEMENT. A Shelf Registration Statement
will not be deemed to have become effective unless it has been declared
effective by the SEC; PROVIDED, HOWEVER, that if, after it has been declared
effective, the offering of Registrable Securities pursuant to such Shelf
Registration Statement is interfered with by any stop order, injunction or other
order or requirement of the SEC or any other governmental agency or court, such
Shelf Registration Statement will be deemed not to have been effective during
the period of such interference, until the offering of Registrable Securities
pursuant to such Shelf Registration Statement may legally resume. The Company
will be deemed not to have used its best efforts to cause a Shelf Registration
Statement to become, or to remain, effective during the requisite period if it
voluntarily takes any action that would result in any such Shelf Registration
Statement not being declared effective or that would result in the Holders of
Registrable Securities covered thereby not being able to offer and sell such
Registrable Securities during that period, unless such action is required by
applicable law.
(d) LIQUIDATED DAMAGES. In the event that:
(i) a Shelf Registration Statement is not filed
with the SEC on or prior to the 150th day after the Issue Date, then, commencing
on the 151st day after the Issue Date, liquidated damages ("Liquidated Damages")
shall accumulate on the liquidation preference of the Securities at a rate of
0.50% per annum;
(ii) a Shelf Registration Statement is not
declared effective by the SEC on or prior to the 180th day after the Issue Date,
then, commencing on the 181st day after the Issue Date, Liquidated Damages shall
accumulate on the liquidation preference of the Securities at a rate of 0.50%
per annum; or
(iii) a Shelf Registration Statement has been
declared effective and such Shelf Registration Statement ceases to be effective
or usable for resales at any time prior to the expiration of the Rule 144(k)
Period (other than after such time as all Securities have been disposed of
thereunder or otherwise cease to be Registered Securities), except as permitted
in Section 3(i) hereof with respect to suspensions of the use of the Prospectus,
then, commencing on the day such Shelf Registration Statement ceases to be
effective or usable for resales or on the 31st day in any three-month period or
46th day in any twelve month period following the day such Shelf Registration
Statement ceases to be effective or usable for resales, as the case may be,
Liquidated Damages shall accumulate on the liquidation preference of the
Securities at a rate of 0.50% per annum;
PROVIDED, HOWEVER, that the Liquidated Damages rate on the liquidation
preference of the Securities may not exceed in the aggregate 0.50% per annum;
PROVIDED, FURTHER, HOWEVER, that (1) upon the filing of a Shelf Registration
Statement (in the case of clause (i) above), (2) upon the effectiveness of a
Shelf Registration Statement (in the case of clause (ii) above), or (3) upon
such time as the Shelf Registration Statement which had ceased to remain
effective or usable for resales again becomes effective and usable for resales
(in the case of clause (iii) above), Liquidated Damages on the liquidation
preference of the Securities as a result thereof shall cease to accumulate.
Any amounts of Liquidated Damages due pursuant to Section 2(d)(i), (ii) or
(iii) above will be payable in cash on the next succeeding January 15, April 15,
July 15 and October 15, as the case may be, to Holders on the relevant record
dates for the payment of dividends.
(e) SPECIFIC ENFORCEMENT. Without limiting the remedies available to the
Holders, the Company acknowledges that any failure by it to comply with its
obligations under Section 2(a) hereof may result in material irreparable injury
to the Holders for which there is no adequate remedy at law, that it would not
be possible to measure damages for such injuries precisely and that, in the
event of any such failure, any Holder may obtain such relief as may be required
to specifically enforce the Company's obligations under Section 2(a) hereof.
3. REGISTRATION PROCEDURES. In connection with the obligations of the
Company with respect to the Shelf Registration Statement pursuant to Section
2(a) hereof, the Company shall use its best efforts to:
(a) prepare and file with the SEC a Shelf Registration
Statement as prescribed by Sections 2(a) hereof within the relevant
time period specified in Section 2(a) hereof on the appropriate form
under the Securities Act, which form shall (i) be selected by the
Company, (ii) be available for the sale of the Registrable Securities
by the selling Holders thereof, and (iii) comply as to form in all
material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed
therewith; and use its best efforts to cause such Shelf Registration
Statement to become effective and remain effective and, usable for
resales in accordance with Section 2 hereof; PROVIDED, HOWEVER, that,
before filing any Shelf Registration Statement or Prospectus or any
amendments or supplements thereto, the Company shall furnish to and
afford the Holders of the Registrable Securities covered by such Shelf
Registration Statement, their counsel and the managing underwriters, if
any, a reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed. The Company
shall not file any Shelf Registration Statement or Prospectus or any
amendments or supplements thereto in respect of which the Holders must
be afforded an opportunity to review prior to the filing of such
document if the Majority Holders, their counsel or the managing
underwriters, if any, shall reasonably object in a timely manner;
(b) prepare and file with the SEC such amendments and
post-effective amendments to the Shelf Registration Statement as may be
necessary to keep such Shelf Registration Statement effective for the
Effectiveness Period; and cause each Prospectus to be supplemented, if
so determined by the Company or requested by the SEC, by any required
prospectus supplement and as so supplemented to be filed pursuant to
Rule 424 (or any similar provision then in force) under the Securities
Act, and comply with the provisions of the Securities Act, the Exchange
Act and the rules and regulations promulgated thereunder applicable to
it with respect to the disposition of all securities covered by a Shelf
Registration Statement during the Effectiveness Period in accordance
with the intended method or methods of distribution by the selling
Holders thereof described in this Agreement;
(c) (i) notify each Holder of Registrable Securities included
in the Shelf Registration Statement, at least three Business Days prior
to filing, that a Shelf Registration Statement with respect to the
Registrable Securities is being filed and advising such Holder that the
distribution of Registrable Securities will be made in accordance with
the method selected by the Majority Holders; (ii) furnish to each
Holder of Registrable Securities included in the Shelf Registration
Statement and to each underwriter of an underwritten offering of
Registrable Securities, if any, without charge, as many copies of each
Prospectus, including each preliminary prospectus, and any amendment or
supplement thereto, and such other documents as such Holder or
underwriter may reasonably request, in order to facilitate the public
sale or other disposition of the Registrable Securities; and (iii)
consent to the use of the Prospectus or any amendment or supplement
thereto by each of the selling Holders of Registrable Securities
included in the Shelf Registration Statement in connection with the
offering and sale of the Registrable Securities covered by the
Prospectus or any amendment or supplement thereto;
(d) register or qualify the Registrable Securities under all
applicable state securities or "blue sky" laws of such jurisdictions by
the time the applicable Shelf Registration Statement is declared
effective by the SEC as any Holder of Registrable Securities covered by
a Shelf Registration Statement and each underwriter of an underwritten
offering of Registrable Securities shall reasonably request in writing
in advance of such date of effectiveness, and do any and all other acts
and things which may be reasonably necessary or advisable to enable
such Holder and underwriter to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder;
PROVIDED, HOWEVER, that the Company shall not be required to (i)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but
for this Section 3(d), (ii) file any general consent to service of
process in any jurisdiction where it would not otherwise be subject to
such service of process or (iii) subject itself to taxation in any such
jurisdiction if it is not then so subject;
(e) promptly notify each Holder of Registrable Securities,
their counsel and the managing underwriters, if any, and promptly
confirm such notice in writing (i) when a Shelf Registration Statement
has become effective and when any post-effective amendments thereto
become effective, (ii) of any request by the SEC or any state
securities authority for amendments and supplements to a Shelf
Registration Statement or Prospectus or for additional information
after the Shelf Registration Statement has become effective, (iii) of
the issuance by the SEC or any state securities authority of any stop
order suspending the effectiveness of a Shelf Registration Statement or
the qualification of the Registrable Securities in any jurisdiction
described in Section 3(d) hereof or the initiation of any proceedings
for that purpose, (iv) if, between the effective date of a Shelf
Registration Statement and the closing of any sale of Registrable
Securities covered thereby, the representations and warranties of the
Company or the Operating Partnership contained in any purchase
agreement, securities sales agreement or other similar agreement cease
to be true and correct in all material respects, (v) of the happening
of any event or the failure of any event to occur or the discovery of
any facts, during the Effectiveness Period, which makes any statement
made in a Shelf Registration Statement or the related Prospectus untrue
in any material respect or which causes such Shelf Registration
Statement or Prospectus to omit to state a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and (vi) of the reasonable
determination of the Company that a post-effective amendment to the
Shelf Registration Statement would be appropriate;
(f) obtain the withdrawal of any order suspending the
effectiveness of the Shelf Registration Statement at the earliest
possible moment;
(g) furnish to each Holder of Registrable Securities included
within the coverage of a Shelf Registration Statement, without charge,
at least one conformed copy of the Shelf Registration Statement
relating to such Shelf Registration and any post-effective amendment
thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
(h) cooperate with the selling Holders of Registrable
Securities to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not
bearing any restrictive legends and registered in such names as the
selling Holders or the underwriters may reasonably request at least two
Business Days prior to the closing of any sale of Registrable
Securities pursuant to the Shelf Registration Statement;
(i) promptly after the occurrence of any event specified in
Section 3(e)(ii), 3(e)(iii), 3(e)(v) or 3(e)(vi) hereof, prepare a
supplement or post-effective amendment to the Shelf Registration
Statement or the related Prospectus or any document incorporated
therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Securities,
such Prospectus will not include any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made,
not misleading; and to notify each Holder to suspend use of the
Prospectus as promptly as practicable after the occurrence of such an
event, and each Holder hereby agrees to suspend use of the Prospectus
until the Company has amended or supplemented the Prospectus to correct
such misstatement or omission PROVIDED, HOWEVER, the Company will be
permitted to suspend the use of the Prospectus for a period not to
exceed 30 days in any three-month period or two periods not to exceed
an aggregate of 45 days (whether or not consecutive) in any
twelve-month period under circumstances relating to pending corporate
developments, public filings with the SEC and similar events;
(j) a reasonable time prior to the filing of any document
which is to be incorporated by reference into a Shelf Registration
Statement or a Prospectus after the initial filing of a Shelf
Registration Statement, provide a reasonable number of copies of such
document to the Holders; and make such of the representatives of the
Company as shall be reasonably requested by the Holders of Registrable
Securities or the Initial Purchaser on behalf of such Holders available
for discussion of such document;
(k) enter into such agreements (including underwriting
agreements) as are customary in underwritten offerings and take all
such other appropriate actions in connection therewith as are
reasonably requested by the Holders of at least 25% in aggregate
liquidation preference of the Registrable Securities in order to
expedite or facilitate the registration or the disposition or the
Registrable Securities;
(l) whether or not an underwriting agreement is entered into
and whether or not the registration is an underwritten registration, if
requested by (x) the Initial Purchaser, in the case where the Initial
Purchaser holds Securities acquired by it as part of its initial
placement and (y) Holders of at least 25% in aggregate liquidation
preference of the Registrable Securities covered thereby: (i) make such
representations and warranties to Holders of such Registrable
Securities and the underwriters (if any), with respect to the business
of the Company, the Operating Partnership and their subsidiaries as
then conducted and with respect to the Shelf Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, as are customarily
made by issuers to underwriters in underwritten offerings, and confirm
the same if and when requested; (ii) furnish customary closing
documentation in form and substance reasonably requested and reasonably
satisfactory to the managing underwriters (if any) and the Holders of a
majority in amount of the Regi:trable Securities being sold: and (iii)
if an underwriting agreement is entered into, the same shall contain
indemnification provisions and procedures no less favorable than those
set forth in Section 4 hereof (or such other provisions and procedures
acceptable to Holders of a majority in aggregate liquidation preference
of Registrable Securities covered by such Shelf Registration Statement
and the managing underwriters) customary for such agreements with
respect to all parties to be indemnified pursuant to said Section
(including, without limitation, such underwriters and selling Holders);
and in the case of an underwritten registration, the above requirements
shall be satisfied at each closing under the related underwriting
agreement or as and to the extent required thereunder;
(m) make reasonably available for inspection by any selling
Holder of Registrable Securities who certifies to the Company that it
has a current intention to sell Registrable Securities pursuant to the
Shelf Registration, any underwriter participating in any such
disposition of Registrable Securities, if any, and any attorney,
accountant or other agent retained by any such selling Holder or
underwriter (collectively, the "INSPECTORS"), at the offices where
normally kept, during the Company's normal business hours, all
financial and other records, pertinent corporate and partnership
documents and properties of the Company, the Operating Partnership and
their subsidiaries (collectively, the "RECORDS") as shall be reasonably
necessary to enable them to exercise any applicable due diligence
responsibilities, and cause the Company, the Operating Partnership and
their subsidiaries to supply all relevant information in each case
reasonably requested by any such Inspector in connection with such
Shelf Registration Statement; records and information which the Company
or the Operating Partnership determines, in good faith, to be
confidential and any Records and information which it notifies the
Inspectors are confidential shall not be disclosed to any Inspector
except where (i) the disclosure of such Records or information is
necessary to avoid or correct a material misstatement or omission in
such Shelf Registration Statement, (ii) the release of such Records or
information is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction or is necessary in connection with any
action, suit or proceeding or (iii) such Records or information
previously has been made generally available to the public; each
selling Holder of such Registrable Securities will be required to agree
in writing that Records and information obtained by it as a result of
such inspections shall be deemed confidential and shall not be used by
it as the basis for any market transactions in the securities of the
Company or the Operating Partnership unless and until such is made
generally available to the public through no fault of an Inspector or a
selling Holder and each selling Holder of such Registrable Securities
will be required to further agree in writing that it will, upon
learning that disclosure of such Records or information is sought in a
court of competent jurisdiction, or in connection with any action, suit
or proceeding, give notice to the Company and allow the Company or the
Operating Partnership at its expense to undertake appropriate action to
prevent disclosure of the Records and information deemed confidential;
(n) comply with all applicable rules and regulations of the
SEC so long as any provision of this Agreement shall be applicable and
make generally available to its securityholders earning statements
satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Securities are sold to underwriters in a firm
commitment or best efforts underwritten offering and (ii) if not sold
to underwriters in such an offering, commencing on the first day of the
first fiscal quarter of the Company after the effective date of a Shelf
Registration Statement, which statements shall cover said 12-month
periods, provided that the obligations under this Section 3(n) shall be
satisfied by the timely filing of quarterly and annual reports on Forms
10-Q and 10-K under the Exchange Act;
(o) cooperate with each seller of Registrable Securities
covered by a Shelf Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be
made with the NASD;
(p) take all other steps necessary to effect the registration
of the Registrable Securities covered by a Shelf Registration Statement
contemplated hereby; and
(q) the Company may require each seller of Registrable
Securities as to which any registration is being effected to furnish to
it such information regarding such seller as may be required by the
staff of the SEC to be included in a Shelf Registration Statement; the
Company may exclude from such registration the Registrable Securities
of any seller who unreasonably fails to furnish such information within
a reasonable time after receiving such request; and the Company shall
have no obligation to register under the Securities Act the Registrable
Securities of a seller who so fails to furnish such information.
Each Holder agrees that, upon receipt of any notice from the Company of the
occurrence of any event specified in Section 3(e)(ii), 3(e)(iii), 3(e)(v) or
3(e)(vi) hereof, such Holder will forthwith discontinue disposition of
Registrable Securities pursuant to a Shelf Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 3(i) hereof or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable Prospectus may be
resumed, and, if so directed by the Company, such Holder will deliver to the
Company (at the Company's expense) all copies in such Holder's possession, other
than permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Securities current at the time of receipt of such
notice. If the Company shall give any such notice to suspend the disposition of
Registrable Securities pursuant to a Shelf Registration Statement, the Company
shall use its best efforts to file and have declared effective (if an amendment)
as soon as practicable after the resolution of the related matters an amendment
or supplement to the Shelf Registration Statement and related Prospectus and
shall extend the period during which such Shelf Registration Statement is
required to be maintained effective and usable for resales pursuant to this
Agreement by the number of days in the period from and including the date of the
giving of such notice to and including the date when the Company shall have made
available to the Holders (x) copies of the supplemented or amended Prospectus
necessary to resume such dispositions or (y) the Advice.
4. INDEMNIFICATION AND CONTRIBUTION. (a) The Company and the Operating
Partnership, jointly and severally, hereby agree to indemnify and hold harmless
the Initial Purchaser, each Holder, each underwriter who participates in an
offering of the Registrable Securities, each Person, if any, who controls any of
such parties within the meaning of Section 15 of the Securities Act and each of
their respective directors, officers, employees and agents, as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in a Shelf
Registration Statement (or any amendment thereto) or Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact required to be stated therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, if such
settlement is effected with the prior written consent of the Company
and the Operating Partnership; and
(iii) against any and all expenses whatsoever (including the
fees and disbursements of counsel chosen by the Initial Purchaser or
such Holder), as reasonably incurred, in investigating, preparing or
defending against any litigation, or any investigation or proceedings
by any governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or
any such alleged untrue statement or omission, to the extent that any
such expense is not paid under subparagraph (i) or (ii) of this Section
4(a);
PROVIDED, HOWEVER, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
omission or alleged untrue statement or omission made in reliance upon and in
conformity with written information furnished in writing to the Company by the
Initial Purchaser or such Holder for use in the Shelf Registration Statement (or
any amendment thereto) or any Prospectus (or the related amendment or supplement
thereto).
(b) The Initial Purchaser and each Holder or underwriter agrees, severally
and not jointly, to indemnify and hold harmless the Company, its directors and
officers (including each officer of the Company who signed the Shelf
Registration Statement), the Operating Partnership and each Person, if any, who
controls the Company within or the Operating Partnership the meaning of Section
15 of the Securities Act against any and all loss, liability, claim, damage and
expense whatsoever described in the indemnity contained in Section 4(a) hereof,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Shelf Registration Statement (or any
amendment thereto) or the related Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by such Holder expressly for use in such Shelf Registration
Statement (or any amendment thereto) or such Prospectus (or any amendment or
supplement thereto); PROVIDED, HOWEVER, that no Holder shall be liable for any
claims hereunder in excess of the amount of net proceeds received by such Holder
from the sale of Registrable Securities.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
which it may have otherwise than on account of this indemnity agreement. In the
case of parties indemnified pursuant to Section 4(a) or (b) above, counsel to
the indemnified parties shall be selected by such parties. An indemnifying party
may participate at its own expense in the defense of such action. If it so
elects within a reasonable time after receipt of such notice, an indemnifying
party, jointly with any other indemnifying parties receiving such notice, may
assume the defense of such action with counsel chosen by it and approved by the
indemnified parties defendant in such action, unless such indemnified parties
reasonably object to such assumption on the ground that there may be legal
defenses available to them which are different from or in addition to those
available to such indemnifying party. If an indemnifying party assumes the
defense of such action, the indemnifying parties shall not be liable for any
fees and expenses of counsel for the indemnified parties incurred thereafter in
connection with such action. In no event shall the indemnifying parties be
liable for the fees and expenses of more than one counsel (in addition to local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement set forth in this Section 4 is
for any reason held to be unenforceable by the indemnified parties although
applicable in accordance with its terms, the Company, the Operating Partnership,
and the Holders shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Company, the Operating Partnership, and the Holders, as
incurred; PROVIDED, HOWEVER, that no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any Person that was not guilty of such fraudulent
misrepresentation. As between the Company and the Operating Partnership, on the
one hand, and the Holders, on the other hand, such parties shall contribute to
such aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement in such proportion as shall be
appropriate to reflect the relative fault of the Company and Operating
Partnership, on the one hand, and the Holders, on the other hand, with respect
to the statements or omissions which resulted in such loss, liability, claim,
damage or expense, or action in respect thereof, as well as any other relevant
equitable considerations. The relative fault of the Company and the Operating
Partnership, on the one hand, and of the Holders, on the other hand, shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the Company or the Operating
Partnership, on the one hand, or by or on behalf of the Holders, on the other,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company, the
Operating Partnership and the Holders of the Registrable Securities agree that
it would not be just and equitable if contribution pursuant to this Section 4
were to be determined by pro rata allocation or by any other method of
allocation that does not take into account the relevant equitable
considerations. For purposes of this Section 4, each Affiliate of a Holder, and
each director, officer and employee and Person, if any, who controls a Holder or
such Affiliate within the meaning of Section 15 of the Securities Act shall have
the same rights to contribution as such Holder, and each director of the Company
and each Person, if any, who controls the Company within the meaning of Section
15 of the Securities Act shall have the same rights to contribution as each of
the Company or the Operating Partnership.
5. PARTICIPATION IN AN UNDERWRITTEN REGISTRATION. No Holder may participate
in an underwritten registration hereunder unless such Holder (a) agrees to sell
such Holder's Registrable Securities on the basis provided in the underwriting
arrangement approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all reasonable questionnaires,
powers of attorney, indemnities, underwriting agreements, lock-up letters and
other documents reasonably required under the terms of such underwriting
arrangements.
6. SELECTION OF UNDERWRITERS. The Holders of Registrable Securities covered
by the Shelf Registration Statement who desire to do so may sell the Securities
covered by such Shelf Registration in an underwritten offering, subject to the
provisions of Section 3(1) hereof. In any such underwritten offering, the
underwriter or underwriters and manager or managers that will administer the
offering will be selected by the Holders of a majority in aggregate liquidation
preference of the Registrable Securities included in such offering; PROVIDED,
HOWEVER, that such underwriters and managers must be reasonably satisfactory to
the Company.
7. MISCELLANEOUS.
(a) RULE 144 AND RULE 144A. For so long as the Company is subject to the
reporting requirements of Section 13 or 15 of the Exchange Act and any
Registrable Securities remain outstanding, the Company will file the reports
required to be filed by it under the Securities Act and Section 13(a) or 15(d)
of the Exchange Act and the rules and regulations adopted by the SEC thereunder;
PROVIDED, HOWEVER, that if the Company ceases to be so required to file such
reports, it will, upon the request of any Holder of Registrable Securities (a)
make publicly available such information as is necessary to permit sales of its
securities pursuant to Rule 144 under the Securities Act, (b) deliver such
information to a prospective purchaser as is necessary to permit sales of its
securities pursuant to Rule 144A under the Securities Act, and (c) take such
further action that is reasonable in the circumstances, in each case, to the
extent required from time to time to enable such Holder to sell its Registrable
Securities without registration under the Securities Act within the limitation
of the exemptions provided by (i) Rule 144 under the Securities Act, as such
rule may be amended from time to time, (ii) Rule 144A under the Securities Act,
as such rule may be amended from time to time, or (iii) any similar rules or
regulations hereafter adopted by the SEC. Upon the request of any Holder of
Registrable Securities, the Company will deliver to such Holder a written
statement as to whether it has complied with such requirements.
(b) NO INCONSISTENT AGREEMENTS. Neither the Company nor the Operating
Partnership has entered into, or will enter into, any agreement which is
inconsistent with the rights granted to the Holders of Registrable Securities in
this Agreement or otherwise conflicts with the provisions hereof. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's or the
Operating Partnership's other issued and outstanding securities under any such
agreements.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including the
provisions of this sentence, may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of Holders of a majority in
aggregate liquidation preference of the outstanding Registrable Securities
affected by such amendment, modification, supplement, waiver or departure;
PROVIDED that no amendment, modification or supplement or waiver or consent to
the departure with respect to the provisions of Section 4 hereof shall be
effective as against any Holder of Registrable Securities unless consented to in
writing by such Holder of Registrable Securities. Notwithstanding the foregoing
sentence, (i) this Agreement may be amended, without the consent of any Holder
of Registrable Securities, by written agreement signed by the Company, the
Operating Partnership and the Initial Purchaser, to cure any ambiguity, correct
or supplement any provision of this Agreement that may be inconsistent with any
other provision of this Agreement or to make any other provisions with respect
to matters or questions arising under this Agreement which shall not be
inconsistent with other provisions of this Agreement, (ii) this Agreement may be
amended, modified or supplemented, and waivers and consents to departures from
the provisions hereof may be given, by written agreement signed by the Company,
the Operating Partnership and the Initial Purchaser to the extent that any such
amendment, modification, supplement, waiver or consent is, in their reasonable
judgment, necessary or appropriate to comply with applicable law (including any
interpretation of the Staff of the SEC) or any change therein and (iii) to the
extent any provision of this Agreement relates to the Initial Purchaser, such
provision may be amended, modified or supplemented, and waivers or consents to
departures from such provisions may be given, by written agreement signed by the
Initial Purchaser, the Company and the Operating Partnership.
Notwithstanding the foregoing, in the event that the SEC changes its
position to allow exchange offers of noninvestment grade preferred stock, this
Agreement may be amended without the consent of any Holder of Registrable
Securities in a form mutually acceptable to the Company, the Operating
Partnership and the Initial Purchaser.
(d) NOTICES. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if
to a Holder, at the most current address given by such Holder to the Company by
means of a notice given in accordance with the provisions of this Section 7(d),
which address initially is, with respect to the Initial Purchaser, the address
set forth in the Purchase Agreement; and (ii) if to the Company or the Operating
Partnership, initially at the Company's address set forth in the Purchase
Agreement and thereafter at such other address, notice of which is given in
accordance with the provisions of this Section 7(d).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
(e) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of the Initial
Purchaser, including, without limitation and without the need for an express
assignment, subsequent Holders; PROVIDED, HOWEVER, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Purchase Agreement or amended
charter of the Company. If any transferee of any Holder shall acquire
Registrable Securities, in any manner, whether by operation of law or otherwise,
such Registrable Securities shall be held subject to all of the terms of this
Agreement, and by taking and holding such Registrable Securities, such Person
shall be conclusively deemed to have agreed to be bound by and to perform all of
the terms and provisions of this Agreement and such Person shall be entitled to
receive the benefits hereof.
(f) THIRD PARTY BENEFICIARIES. Each Holder shall be a third party
beneficiary of the agreements made hereunder among the Company, the Operating
Partnership and the Initial Purchaser, and the Initial Purchaser shall have the
right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO HAVE BEEN MADE IN THE
STATE OF NEW YORK. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT, AND THE
TERMS AND CONDITIONS SET FORTH HEREIN, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY
PROVISIONS RELATING TO CONFLICTS OF LAWS. EACH OF THE PARTIES HERETO AGREES TO
SUBMIT TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF
THE MATTERS CONTEMPLATED HEREBY, IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF
PERSONAL JURISDICTION AND IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY
SUIT, ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT. EACH
OF THE PARTIES HERETO IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) SECURITIES HELD BY THE COMPANY, THE OPERATING PARTNERSHIP OR ITS
AFFILIATES. Whenever the consent or approval of Holders of a specified
percentage of Registrable Securities is required hereunder, Registrable
Securities held by the Company, the Operating Partnership or any Affiliates
shall not be counted in determining whether such consent or approval was given
by the Holders of such required percentage.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
Very truly yours,
CHELSEA GCA REALTY, INC.
By:/S/
Name:
Title:
CHELSEA GCA REALTY PARTNERSHIP, L.P.
By: Chelsea GCA Realty, Inc.
(its general partner)
By:/S/
Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By:/S/
Authorized Signatory
8-3/8% SERIES A CUMULATIVE 8-3/8% SERIES A CUMULATIVE
REDEEMABLE PREFERRED STOCK REDEEMABLE PREFERRED STOCK
CHELSEA GCA REALTY, INC.
Incorporated under the laws of
the State of Maryland
SEE LEGENDS ON REVERSE SIDE
Number PA1 1,000,000 Shares
See Reverse for
Certain Definitions CUSIP 163262 20 7
This Certificate is transferable
in Boston, MA
in New York, NY
This certifies that CEDE & CO. is the owner of one million (1,000,000)
fully paid and non-assessable shares (the "Preferred Shares"), $.01 par value
per share, of 8-3/8% Series A Cumulative Redeemable Preferred Stock of CHELSEA
GCA REALTY, INC. (the "Corporation"), which are transferable only on the books
of the Corporation or in person or by duly authorized attorney, upon surrender
of this certificate properly endorsed. This certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
WITNESS the seal of the Corporation and the signatures of its duly
authorized officers.
Dated: October 15, 1997
General Counsel and Secretary President
Countersigned and Registered:
BOSTON EQUISERVE, L.P.
(Boston, MA or New York, NY) [SEAL]
Transfer Agent and Registrar
By
Authorized Officer
<PAGE>
[Reverse Side of Preferred Stock Certificate]
CHELSEA GCA REALTY, INC.
----------
THE PREFERRED SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAW. NEITHER SUCH PREFERRED
SHARES NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION PURSUANT TO RULE 144A PROMULGATED UNDER THE SECURITIES ACT ("RULE
144A"). UNTIL THE PREFERRED SHARES REPRESENTED HEREBY HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT, SUCH PREFERRED SHARES WILL BE ISSUED AND MAY BE TRANSFERRED
ONLY IN AN AGGREGATE LIQUIDATION PREFERENCE OF $100,000 OR MORE.
THE HOLDER BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE
TRANSFER THE PREFERRED SHARES REPRESENTED HEREBY, PRIOR TO THE DATE WHICH IS TWO
YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE DATE HEREOF AND THE LAST DATE ON
WHICH THE CORPORATION OR ANY "AFFILIATE" OF THE CORPORATION WAS THE OWNER HEREOF
(OR ANY PREDECESSOR HEREOF), ONLY (A) TO THE CORPORATION, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, OR (C) SO LONG AS THE PREFERRED SHARES REPRESENTED HEREBY ARE ELIGIBLE FOR
RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A) THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THE HOLDER BY ITS ACCEPTANCE HEREOF HAS AGREED TO BE BOUND BY THE
PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT DATED OCTOBER 15, 1997 BETWEEN
THE CORPORATION AND MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED.
The Corporation is authorized to issue two classes of capital stock which
are designated as Common Stock and Preferred Stock. The Board of Directors is
authorized to determine the preferences, limitations and relative rights of the
Preferred Stock before the issuance of any Preferred Stock. The Corporation will
furnish, without charge, to any stockholder making a written request therefor, a
copy of the Corporation's charter and a written statement of the designations,
relative rights, preferences and limitations applicable to each such class of
stock. Requests for the Corporation's charter and such written statement may be
directed to Chelsea GCA Realty, Inc., 103 Eisenhower Parkway, Roseland, New
Jersey 07068. Attention: Secretary.
The Preferred Shares represented by this certificate are subject to
restrictions on ownership and Transfer for the purpose of the Corporation's
maintenance of its status as a Real Estate Investment Trust under the Internal
Revenue Code of 1986, as amended. No person may Beneficially Own Preferred
Shares in excess of 7% (or such greater percentage as may be determined by the
Board of Directors of the Corporation) of the outstanding Preferred Shares of
the Corporation, with certain exceptions set forth in the Corporation's charter.
Any Person who attempts to Beneficially Own Preferred Shares in excess of the
above limitations must immediately notify the Corporation. All capitalized terms
in this legend have the meanings defined in the Corporation's charter. Transfers
in violation of the restrictions described above may be void AB INITIO.
In addition, upon the occurrence of certain events, if the restrictions on
ownership are violated, the Preferred Shares represented hereby may be
automatically exchanged for Trust Shares which will be held in trust by the
Corporation. The Corporation has an option to acquire Trust Shares under certain
circumstances. The Corporation will furnish to the holder hereof upon request
and without charge a complete written statement of the terms and conditions of
the Trust Shares and a written statement of the terms and conditions of the
restrictions on ownership and Transfer. Requests for any such statement may be
directed to Chelsea GCA Realty, Inc. 103 Eisenhower Parkway, Roseland, New
Jersey 07068. Attention: Secretary.
<PAGE>
----------
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT -- __________ Custodian __________
(Cust) (Minor)
under Uniform Gifts to Minors Act
____________ (State)
Additional abbreviations may also be used though not in the above list.
-----------
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------------------------------------------
- -----------------------------------------------------------------------
(Please print or typewrite name and address of assignee)
__________________________________________________________________________
________________________________________________________________________shares
of the capital stock represented by the within Certificate and does hereby
irrevocably constitute and appoint
________________________________________________ Attorney to
transfer the said stock on the books of the within named Corporation with full
power of substitution in the premises.
Dated:
Signature
- -----------------------------------------------------------------------
NOTICE: The signature to this assignment must correspond
with the name as written upon the face of the
Certificate in every particular, without
alteration or enlargement or any change whatever.
Signature Guaranteed:
- ---------------------------------
- ---------------------------------
EXHIBITS 5.1 and 8.1
December 17, 1997
Chelsea GCA Realty, Inc.
103 Eisenhower Parkway
Roseland, New Jersey 07068
Ladies and Gentlemen:
Chelsea GCA Realty, Inc. (the "Corporation") has requested our opinion in
connection with the filing of a shelf registration statement on Form S-3 by the
Corporation (the "Registration Statement") registering 1,000,000 shares of
Cumulative Redeemable Preferred Stock (the "Preferred Stock") of the Corporation
to be sold to the public from time to time.
In furnishing this opinion, we have examined copies of the Registration
Statement, the Articles of Incorporation and By-Laws of the Corporation, as
amended to date, and the minutes of the meeting of the Board of Directors of the
Corporation authorizing the issuance of the Preferred Stock. We have also
examined such other documents, papers, statutes and authorities as we deemed
necessary to form a basis for the opinion hereinafter expressed. In our
examinations of such material, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as original
documents and the conformity to original documents of all documents supplied to
us as copies. As to various questions of fact material to such opinion, we have
relied upon statements and certificates of officers and representatives of the
Corporation and others.
Based upon and subject to the foregoing, it is our opinion that:
1 The Preferred Stock has been legally issued and is fully paid and
nonassessable.
1 The information in the Prospectus under the heading "Certain Federal Income
Considerations", to the extent that it constitutes matters of law,
summaries of legal matters or legal conclusions, has been reviewed by us
and is accurate in all material respects.
Attorneys involved in the preparation of this opinion are admitted to practice
law in the State of New York and we do not purport to be experts on, or to
express any opinion herein concerning, any law other than the laws of the State
of New York and the federal laws of the United States of America.
We hereby consent to be named in the Registration Statement to be filed by
the Corporation with the Securities and Exchange Commission under the Securities
Act as attorneys who have passed upon the legality and tax aspects of the
Preferred Stock to be registered by the Registration Statement. We further
consent to your filing a copy of this opinion as Exhibits 5.1 and 8.1 to the
Registration Statement. In giving such permission, we do not admit hereby that
we come within the category of persons whose consent is required under Section 7
of the Securities Act or the rules and regulations of the Securities and
Exchange Commission thereunder.
Very truly yours,
STROOCK & STROOCK & LAVAN LLP
EXHIBIT 12
<TABLE>
<CAPTION>
CHELSEA GCA REALTY, INC.
CHELSEA GCA REALTY PARTNERSHIP, L.P.
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
NINE
MONTHS
ENDED
SEPTEMBER Year Ended December 31,
30, 1996 1995 1994 1993 1992
1997
Earnings: (1):
<S> <C> <C> <C> <C> <C> <C>
Income from continuing operations............. $22,929 $31,360 $30,701 $24,966 $ 5,762 $ 2,840
Interest...................................... 11,343 8,818 3,129 982 10,110 11,201
Portion of rent expense representative of
interest.................................. 499 665 665 665 665 665
Amortization of loan costs.................... 755 810 759 -- 687 609
------- ---------- -------- -------- -------- ---------
Total earnings................................ $35,526 $41,653 $35,254 $26,613 $17,224 $15,315
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (1):
Interest...................................... $11,343 $ 8,818 $ 3,129 $ 982 $10,110 $11,201
Interest capitalized.......................... 3,265 3,924 3,723 375 453 262
Portion of rent expense representative of interest 499 665 665 665 665 665
Amortization of loan costs expensed........... 755 810 795 -- 687 609
Amortization of loan costs capitalized........ 233 457 1,546 543 -- --
--------- --------- --------- --------- --------- ---------
Total fixed charges........................... 16,095 $14,674 $ 9,822 $2,565 $11,915 $12,737
Ratio of earnings to fixed charges............ 2.21 2.84 3.59 10.40 1.45 1.20
------------------------
(1) To date the Company has not issued any preferred stock
</TABLE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related prospectus of Chelsea GCA Realty,
Inc. for the registration of 1,000,000 shares of Chelsea GCA Realty, Inc. 8 3/8%
Series A Cumulative Redeemable Preferred Stock (par value $0.01 per share) and
to the incorporation by reference therein of our reports dated February 12,
1997, with respect to the consolidated financial statements of Chelsea GCA
Realty, Inc. included in their Annual Report on Form 10-K for the year ended
December 31, 1996 and our report dated February 21, 1997 with respect to the
statement of revenues and certain expenses of Waikele Factory Outlet Stores
included in its current report on Form 8-K dated April 11, 1997 filed with the
Securities and Exchange Commission.
Ernst & Young LLP
New York, New York
December 15, 1997
