As filed with the Securities and Exchange Commission on May 30, 1997
Registration Nos. 333-4544 and 333-4544-01
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CHATEAU COMMUNITIES, INC. CP LIMITED PARTNERSHIP
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
MARYLAND MARYLAND
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
38-3132038 38-3140664
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
6430 South Quebec Street
Englewood, Colorado 80111
(303) 741-3707
(Address, including zip code and telephone number, including area code,
of registrant's principal executive offices)
Gary P. McDaniel
6430 South Quebec Street
Englewood, Colorado 80111
(303) 741-3707
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Jay L. Bernstein, Esq.
Rogers & Wells
200 Park Avenue
New York, New York 10166
Approximate date of commencement of proposed sale to public:
From time to time after this Registration Statement becomes
effective as determined by market conditions.
If the only securities being registered on the Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [ X ]
If this Form is filed to registered 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 the delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
---------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Title of Each Class of Securities to be Registered(1)(2) Proposed Maximum Offering Price(3) Amount of Registration Fee(4)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock(5)..........................................
- ---------------------------------------------------------
Warrants(6)..............................................
- ---------------------------------------------------------
Preferred Stock(7)....................................... $200,000,000
- ---------------------------------------------------------
Depositary Shares Representing Preferred Stock(8)........
- ---------------------------------------------------------
Guarantees(9)............................................
- ---------------------------------------------------------
Debt Securities(10)...................................... $100,000,000
- -----------------------------------------------------------------------------------------------------------------------------------
Total........................................... $300,000,000 $90,910(11)
===================================================================================================================================
</TABLE>
(Footnotes on next page)
The Registrants hereby amend this registration statement on such date or
dates as may be necessary to delay its effective date until the registrants
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>
(Footnotes from previous page)
(1) The Common Stock, Warrants, Preferred Stock, Depositary Shares, Debt
Securities and Guarantees (collectively, the "Offered Securities")
registered hereunder may be sold separately, together or as units with
other Offered Securities registered hereunder.
(2) Pursuant to this Registration Statement, Chateau Communities, Inc. may
issue Common Stock, Warrants, Preferred Stock, Depositary Shares and
Guarantees and CP Limited Partnership may issue Debt Securities.
(3) The aggregate maximum public offering price of (i) all Common Stock,
Warrants, Preferred Stock, Depositary Shares and Guarantees issued by
Chateau Communities, Inc. pursuant to this Registration Statement,
including any of such securities issued upon exchange for or conversion
into any other of such securities, will not exceed $200,000,000 and (ii)
all Debt Securities issued by CP Limited Partnership pursuant to this
Registration Statement will not exceed $100,000,000.
(4) Calculated pursuant to Rule 457(o) of the rules and regulations under the
Securities Act of 1933, as amended.
(5) Such indeterminate number of shares of Common Stock as may from time to
time be issued at indeterminate prices or issuable upon conversion of
Preferred Stock or Depositary Shares of Chateau Communities, Inc.
registered hereunder or upon exercise of the Warrants registered
hereunder, as the case may be.
(6) Such indeterminate amount and number of Warrants, representing rights to
purchase Common Stock registered hereunder.
(7) Such indeterminate number of shares of Preferred Stock as may from time to
time be issued at indeterminate prices.
(8) Such indeterminate number of Depositary Shares to be evidenced by
Depositary Receipts, representing a fractional interest of a share of
Preferred Stock.
(9) To the extent that any Debt Securities issued by CP Limited Partnership
are not deemed to be investment grade, such Debt Securities will be fully
and unconditionally guaranteed by, and will be accompanied by Guarantees
of, Chateau Communities, Inc. None of the proceeds from such Debt
Securities will be received by Chateau Communities, Inc. in connection
with the issuance of the Guarantees.
(10) Such indeterminate amount of Debt Securities, as may from time to time be
issued by CP Limited Partnership, which will either be non-convertible
investment grade debt securities or other non-convertible debt securities
that are fully and unconditionally guaranteed by Chateau Communities, Inc.
(11) Of the amount shown, $85,780 was paid with the initial filing of this
Registration Statement. Transmitted prior to filing this Pre-Effective
Amendment No. 1 is an additional $5,130.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
Subject to Completion
Preliminary Prospectus Dated May 30, 1997
PROSPECTUS
$200,000,000
CHATEAU COMMUNITIES, INC.
Common Stock, Warrants, Preferred
Stock, Depositary Shares and Guarantees
$100,000,000
CP LIMITED PARTNERSHIP
Debt Securities
Chateau Communities, Inc. (the "Company") may from time to time offer in
one or more series (i) shares of its common stock, par value $.01 per share (the
"Common Stock"); (ii) warrants to purchase Common Stock (the "Warrants"); or
(iii) shares or fractional shares of its preferred stock, par value $.01 per
share (the "Preferred Stock"), which may be issued in the form of depositary
shares (the "Depositary Shares") evidenced by depositary receipts, with an
aggregate public offering price of up to $200,000,000. CP Limited Partnership, a
Maryland limited partnership and a majority-owned subsidiary of the Company (the
"Operating Partnership"), may from time to time offer in one or more series
unsecured non-convertible investment grade debt securities or other
non-convertible debt securities which will be fully and unconditionally
guaranteed by the Company (any such debt securities being referred to herein as
"Debt Securities" and any such guarantees being referred to herein as
"Guarantees"), with an aggregate public offering price of up to $100,000,000.
The Common Stock, Warrants, Preferred Stock, Depositary Shares, Debt Securities
and Guarantees (collectively, the "Offered Securities") may be offered
separately or together, in separate series, in amounts, at prices and on terms
to be determined at the time of offering and set forth in one or more
supplements to this Prospectus (each, a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Common Stock,
any public offering price; (ii) in the case of Warrants, the duration, offering
price, exercise price and detachability features; (iii) in the case of Preferred
Stock, the specific title, any distribution, liquidation, redemption,
conversion, voting and other rights and any initial public offering price; (iv)
in the case of Depositary Shares, the fractional share of Preferred Stock
represented by each such Depositary Share; and (v) in the case of Debt
Securities, the title, aggregate principal amount, denominations, maturity,
rate, if any (which may be fixed or variable), or method of calculation thereof,
time of payment of any interest, any terms for redemption at the option of the
Operating Partnership or the holder, any terms for sinking fund payments, rank,
any conversion or exchange rights, any Guarantees, and the initial public
offering price and any other terms in connection with the offering and sale of
such Debt Securities. In addition, such specific terms may include limitations
on direct or beneficial ownership and restrictions on transfer of the Offered
Securities, in each case as may be appropriate to preserve the status of the
Company as a real estate investment trust ("REIT") for federal income tax
purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about all material federal income tax considerations relating to,
and any listing on a securities exchange of, the Offered Securities covered by
such Prospectus Supplement.
The Offered Securities may be offered directly, through agents designated
from time to time by the Company or the Operating Partnership, or to or through
underwriters or dealers. If any agents or underwriters are involved in the sale
of any of the Offered Securities, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them, will be
set forth, or will be calculable from the information set forth, in the
applicable Prospectus Supplement. See "Plan of Distribution." No Offered
Securities may be sold without delivery of the applicable Prospectus Supplement
describing the method and terms of the offering of such series of Offered
Securities.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is _________, 1997
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus in connection with the offer contained in this Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or any underwriters, agents or dealers.
This Prospectus does not constitute an offer to sell or solicitation of an offer
to buy securities in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
there has been no change in the affairs of the Company or the Operating
Partnership since the date hereof or the information contained or incorporated
by reference herein is correct at any time subsequent to the date hereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith , files reports, proxy statements, and other information with the
Securities and Exchange Commission (the "Commission). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, 450 Fifth Street, N.W., Washington, D.C. 20549 , and at the Commission's
Regional Offices at Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and Seven World Trade Center, 13th Floor, New York, New
York 10048 . Copies of such material also can be obtained from the Public
Reference Section of the Commission, Washington, D.C. 20549 at prescribed rates.
The Company files its reports, proxy statements and other information with the
Commission electronically. The Commission maintains a Web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The Common Stock of the Company is listed on the New York Stock
Exchange ("NYSE") and similar information concerning the Company can be
inspected and copied at the offices of the NYSE, 20 Broad Street, New York, New
York, 10005.
The Company has filed with the Commission a registration statement (of
which this Prospectus is a part) on Form S-3 (together with all amendments and
exhibits thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Offered Securities.
This Prospectus does not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted as permitted
by the rules and regulations of the Commission, and in the exhibits thereto.
Statements contained in this Prospectus as to the content of any contract or
other document are not necessarily complete, and in each instance reference is
made to the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference and the exhibits and schedules thereto. For further information
regarding the Company and the Offered Securities, reference is hereby made to
the Registration Statement and such exhibits and schedules, which may be
examined without charge at, or copies obtained upon payment of prescribed fees
from, the Commission and its regional offices listed below.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Chateau Communities, Inc. and CP Limited
Partnership with the Commission pursuant to the Exchange Act are incorporated by
reference herein and made a part hereof:
2
<PAGE>
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.
2. The Operating Partnership's Annual Report on Form 10-K for the fiscal year
ended December 31, 1996.
3. The Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1997.
4. The Operating Partnership's Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997.
5. The description of the Company's Common Stock contained in the Company's
registration statement on Form 8-A, filed pursuant to the Exchange Act,
including any amendments or reports filed for the purpose of updating such
description.
6. The Company's Current Report on Form 8-K, dated May 30, 1997, filed with
the Commission pursuant to the Exchange Act.
All documents subsequently filed by the Company or the Operating
Partnership pursuant to Section 13(a), 13(c), 14 and 15(d) of the Exchange Act
and prior to the termination of the offering of all Offered Securities shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the date of filing of such document.
Any statement or information contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed modified or
superseded for the purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus .
The Company and the Operating Partnership will provide without charge to
each person to whom this Prospectus is delivered, upon written or oral request
of such person, a copy of any and all of the information incorporated by
reference into this Prospectus (not including exhibits to the information that
is incorporated by reference unless such exhibits are specifically incorporated
by reference to the information that this Prospectus incorporates). Written
requests for the information described in this paragraph shall be directed to:
Chateau Communities, Inc., 6430 South Quebec Street, Englewood, Colorado 80111.
3
<PAGE>
THE COMPANY AND THE OPERATING PARTNERSHIP
The Company is a self-administered and self-managed equity real estate
investment trust ("REIT") that was formed in 1993 to continue and expand the
property operations and business objectives of ownership, management, leasing,
expansion, development and acquisition of manufactured home communities
previously conducted by Chateau Estates, a Michigan co-partnership ("Chateau").
On February 11, 1997, the Company completed a strategic merger of equals (the
"Merger") with ROC Communities, Inc. ("ROC"), in which ROC merged with a
special-purpose merger subsidiary of the Company. As a result of the Merger, the
businesses of the Company and ROC were combined, and the Company is now the
largest owner/manager of manufactured home communities in the United States,
based both on the number of communities and the number of residential homesites
owned. As of March 31, 1997, the Company owned and operated 128 manufactured
home communities (the "Properties") located in 27 states, with an aggregate of
42,986 homesites. The Company's portfolio is geographically diversified, with
significant concentrations in the southeastern and midwestern United States, as
well as the Pacific Coast states, permitting economies of scale in property
management operations. The Company's portfolio is also diversified by resident
orientation, with approximately 28% of the residential homesites in communities
which are adult-oriented and 72% of residential homesites in comunities which
are family-oriented. At March 31, 1997, approximately 94.1% of the Company's
homesites were occupied. In addition, the Company fee manages 6,953 residential
homesites in 34 communities. Also at March 31, 1997, the Company owned
undeveloped land adjacent to existing communities containing approximately 4,200
expansion sites which are zoned for manufactured housing.
The Company conducts substantially all of its activities through the
Operating Partnership in which as of March 31, 1997 it owned, directly and
through ROC (the other general partner of the Operating Partnership), an
approximate 90% general partner interest. As general partners of the Operating
Partnership, the Company and ROC have unilateral control and complete
responsibility for the management of the Operating Partnership and over each of
the Properties. The Company's Common Stock is listed on the NYSE under the
Symbol "CPJ."
The Company's and the Operating Partnership's executive and principal
property management offices are located at 6430 South Quebec Street, Englewood,
Colorado 80111 and their telephone number is (303) 741-3707. The Company and the
Operating Partnership have regional property management offices in Clinton
Township, Michigan; Indianapolis, Indiana; Tampa, Florida; and Atlanta, Georgia.
USE OF PROCEEDS
Except as otherwise provided in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from any sale of the Offered Securities
for working capital and for general corporate purposes, which may include the
repayment of indebtedness, the financing of capital commitments and possible
future acquisitions, expansions and development of manufactured housing
communities.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year Ended December 31,
Three months ended ----------------------------------------
March 31, 1997 1996 1995 1994 1993 1992
--------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Ratio of earnings
to fixed charges............... 2.03 2.24 2.12 3.47 1.31 1.20
Ratio of funds from operations
to fixed charges............... 3.25 3.11 2.99 4.66 1.82 1.65
</TABLE>
4
<PAGE>
Ratio of earnings to fixed charges represents income before extraordinary
item plus fixed charges to fixed charges (principally interest and amortization
of deferred financing costs). Ratio of funds from operations to fixed charges
represents funds from operations plus fixed charges to fixed charges. Funds from
operations, as used in the above table and as defined by the National
Association of Real Estate Investment Trusts, means net income excluding gains
(or losses) from debt restructuring and sales of property plus depreciation and
amortization. Manangement believes that funds from operations is an important
and widely used measure of the operating performance of REITs which provides a
relevant basis for comparison among REITs. Funds from operations (i) does not
represent cash flow from operations as defined by generally accepted accounting
principles (ii) should not be considered as an alternative to net income as a
measure of operating performance or to cash flows from operating, investing and
financing activities and (iii) is not an alternative to cash flows as a measure
of liquidity. Funds from operations does not represent cash generated from
operating activities as defined by generally accepted accounting principles and,
therefore, should not be considered as an alternative to net income as the
primary indicator of operating performance or to cash flows as a measure of
liquidity, nor does it indicate that cash flows are sufficient to fund all cash
needs. The ratios for 1993 include the ratio for certain predecessors of the
Company and the Operating Partnership. The ratios for 1992 represent the ratios
of the same predecessors. To date, the Company has not issued any Preferred
Stock. Consequently, the ratios of earnings to combined fixed charges and
preferred stock dividends would not be any different from the ratios of earnings
to fixed charges shown above.
DESCRIPTION OF DEBT SECURITIES
The following sets forth certain general term and provisions of the
Indenture under which the Debt Securities are to be issued by the Operating
Partnership. The particular terms of the Debt Securities will be set forth in a
Prospectus Supplement relating to such Debt Securities.
The Debt Securities may be issued by the Operating Partnership, and will
be either (i) non-convertible investment grade Debt Securities or (ii)
non-convertible Debt Securities that are fully and unconditionally guaranteed
by, and are accompanied by Guarantees of, the Company. The Debt Securities will
be issued pursuant to indentures (each an "Indenture") between the Operating
Partnership and a trustee named in the Indenture (the "Trustee"). The form of
each Indenture has been filed as an exhibit to the Registration Statement of
which this Prospectus is a part, subject to such amendments or supplements as
may be adopted from time to time and is available for inspection as described
above under "Available Information." Each Indenture will be dated as of a date
on or prior to the issuance of the Debt Securities to which it relates. The
Indentures are subject to, and governed by, the Trust Indenture Act of 1939, as
amended (the "TIA"). The statements made hereunder relating to the Indentures
and the Debt Securities to be issued thereunder are summaries of certain
provisions thereof, do not purport to be complete and are subject to, and are
qualified in their entirety by reference to, all provisions of the Indentures
and the Debt Securities.
General
The Debt Securities will be direct, unsecured obligations of the Operating
Partnership. Except for any series of Debt Securities which is specifically
subordinated to other indebtedness of the Operating Partnership, the Debt
Securities will rank equally with all other unsecured and unsubordinated
indebtedness of the Operating Partnership.
Section 301 of the Indenture provides that the Debt Securities may be
issued without limit as to aggregate principal amount, in one or more series, in
each case as established from time to time in or pursuant to authority granted
by the Company and ROC, as general partners of the Operating Partnership, or
indentures supplemental to the Indenture. Prior to the issuance of Debt
Securities of any series, any or
5
<PAGE>
all of the following, as applicable (each of which (except for the matters set
forth in clauses (1), (2) and (13) below), if so provided, may be determined
from time to time by the Operating Partnership with respect to unissued Debt
Securities of or within the series when issued from time to time) and will be
set forth in the Prospectus Supplement relating to the series of Debt
Securities:
(1) the title of the Debt Securities of or within the series (which shall
distinguish the Debt Securities of such series from all other series in Debt
Securities);
(2) any limit upon the aggregate principal amount of the Debt Securities
of or within the series that may be authenticated and delivered under the
Indenture;
(3) the date or dates, or the method by which such date or dates will be
determined, on which the principal of the Debt Securities of or within the
series shall be payable and the amount of principal payable thereon;
(4) the rate or rates at which the Debt Securities of or within the series
shall bear interest, if any, or the method by which such rate or rates shall be
determined, the date or dates from which such interest shall accrue or the
method by which such date or dates shall be determined, the Interest Payment
Dates on which such interest will be payable and the Regular Record Date, if
any, for the interest payable on any Debt Security on any Interest Payment Date,
or the method by which such date shall be determined, and the basis upon which
interest shall be calculated if other than that of a 360-day year consisting of
twelve 30-day months;
(5) the place or places, if any other than or in addition to the Borough
of Manhattan, The City of New York or the City of Chicago, where the principal
of (and premium or Make-Whole Amount, if any) and interest, if any, on Debt
Securities of or within the series may be surrendered for registration of
transfer or exchange and notices or demands to or upon the Operating Partnership
in respect of the Debt Securities of or within the series and the Indenture may
be served;
(6) the period or periods within which, the price or prices (including the
premium or Make-Whole Amount, if any) at which, and other terms and conditions
upon which Debt Securities of or within the series may be redeemed in whole or
in part, at the option of the Operating Partnership, if the Operating
Partnership is to have the option;
(7) the obligation, if any, of the Operating Partnership to redeem, repay
or purchase Debt Securities of or within the series pursuant to any sinking fund
or analogous provision or at the option of a Holder thereof, and the period or
periods within which or the date or dates on which, the price or prices at
which, and other terms and conditions upon which Debt Securities of or within
the series shall be redeemed, repaid or purchased, in whole or in part, pursuant
to such obligation;
(8) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which any Debt Securities of or within the series
shall be issuable;
(9) if other than the Trustee, the identity of each Security Registrar
and/or Paying Agent;
(10) if other than the principal amount thereof, the portion of the
principal amount of Debt Securities of or within the series that shall be
payable upon declaration of acceleration of the maturity thereof pursuant to
Section 502 of the Indenture or the method by which such portion shall be
determined;
6
<PAGE>
(11) whether the amount of payments of principal of (and premium or
Make-Whole Amount, if any) or interest, if any, on the Debt Securities of or
within the series may be determined with reference to an index, formula or other
method (which index, formula or method may be based, without limitation, on one
or more currencies, currency units, composite currencies, commodities, equity
indices or other indices), and the manner in which such amounts shall be
determined;
(12) provisions, if any, granting special rights to the Holder of Debt
Securities of or within the series upon the occurrence of such events as may be
specified;
(13) any deletions from, modifications of or additions to the Events of
Default or covenants of the Operating Partnership with respect to Debt
Securities of or within the series;
(14) whether any Debt Securities of or within the series are to be
issuable initially in temporary global form and whether any Debt Securities of
or within the series are to be issuable in permanent global form and, if so,
whether beneficial owners of interests in any such permanent global Debt
Security may exchange such interests for Debt Securities of such series and of
like tenor of any authorized form and denomination and the circumstances under
which any such exchanges may occur, if other than in the manner provided in
Section 305 of the Indenture, and, if Debt Securities of or within the series
are to be issuable as a global Debt Security, the identity of the depositary for
such series;
(15) the date as of which any temporary global Debt Security representing
Outstanding Securities of or within the series shall be dated if other than the
date of original issuance of the first Debt Security of the series to be issued;
(16) the Person to whom any interest on any Debt Security of the series
shall be payable, if other than the Person in whose name that Debt Security (or
one or more Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest, and the extent to which, or the
manner in which, any interest payable on a temporary global Debt Security on an
Interest Payment Date will be paid if other than in the manner provided in
Section 304 of the Indenture;
(17) the applicability, if any, of Sections 1402 and/or 1403 of the
Indenture to the Debt Securities of or within the series and any provisions in
modification of, in addition to or in lieu of any of the provisions of Article
Fourteen;
(18) if the Debt Securities of such series are to be issuable in
definitive form (whether upon original issue or upon exchange of a temporary
Debt Security of such series) only upon receipt of certain certificates or other
documents or satisfaction of other conditions, then the form and/or terms of
such certificates, documents or conditions;
(19) if the Debt Securities of or within the series are to be issued upon
the exercise of debt warrants, the time, manner and place for such Debt
Securities to be authenticated and delivered; and
(20) any other terms of the series (which terms shall not be inconsistent
with the provisions of the Indenture).
All Debt Securities of any one series shall be substantially identical,
except, in the case of Debt Securities issued in global form, as to denomination
and except as may otherwise be provided in or pursuant to such resolution of the
Board of Directors, or in any indenture supplemental to the Indenture.
7
<PAGE>
All Debt Securities of any one series need not be issued at the same time and
unless otherwise provided, a series may be reopened, without the consent of the
Holders, for issuances of additional Debt Securities of such series.
Consolidation, Merger, Sale, Lease Or Conveyance
The Operating Partnership may consolidate with, or sell, lease or convey
all or substantially all of its assets to, or merge with or into any other
Person, provided that in any such case, (i) either the Operating Partnership
shall be the continuing entity, or the successor entity (if any other than the
Operating Partnership) shall be a Person organized and existing under the laws
of the United States of America or a State thereof and such successor entity
shall expressly assume the due and punctual payment of the principal of and any
interest (including all Additional Amounts, if any) on all of the Debt
Securities, according to their tenor, and the due and punctual performance and
observance of all of the covenants and conditions of the Indenture to be
performed by the Operating Partnership by supplemental indenture, satisfactory
to the Trustee, executed and delivered to the Trustee by such Person and (ii)
immediately after giving effect to such transaction and treating any
indebtedness which becomes an obligation of the Operating Partnership or any
Subsidiary as a result thereof as having been incurred by the Operating
Partnership or such Subsidiary at the time of such transaction, no Event of
Default, and no event which, after notice or the lapse of time, or both, would
become an Event of Default, shall have occurred and be continuing and (iii) an
Officers' Certificate and an Opinion of Counsel covering such conditions shall
be delivered to the Trustee (Sections 801 and 803).
Certain Covenants
Existence. Except as permitted under "Consolidation, Merger, Sale, Lease
or Conveyance" the Operating Partnership will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence, rights
and franchises; provided, however, that Operating Partnership shall not be
required to preserve any right or franchise if it determines that the
preservation thereof is no longer desirable in the conduct of the business of
the Operating Partnership, and that the loss thereof is not disadvantageous in
any material respect to the Holders (Section 1007).
Maintenance of Properties. The Indenture will require the Operating
Partnership to cause all of its properties used or useful in the conduct of its
business or the business of any Subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Operating
Partnership may be necessary so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that the Operating Partnership shall not be prevented from selling or
otherwise disposing of for value its Properties in the ordinary course of
business (Section 1008).
Insurance. The Operating Partnership will, and will cause each of its
Subsidiaries to, keep all of their respective insurable Properties insured
against loss or damage at least equal to their then fully insurable value with
financially sound and reputable insurance companies (Section 1009).
Payment of Taxes and Other Claims. The Operating Partnership, will pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon the Operating Partnership or upon the income, profits or property
of the Operating Partnership, and (ii) all lawful claims for labor, materials
and supplies which, if unpaid, might by law become a lien upon the property of
the Operating Partnership; provided, however, that the Operating Partnership
shall not be required to pay or discharge or cause to be paid or
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discharged any such tax, assessment, charge or claim whose amount, applicability
or validity is being contested in good faith by appropriate proceedings (Section
1010).
Additional Covenants. Reference is made to the applicable Prospectus
Supplement for information with respect to any additional covenants specific to
a particular series of Debt Securities.
Events Of Default, Notice And Waiver
Unless otherwise provided in the Prospectus Supplement, the Indenture
provides that the following events are "Events of Default" with respect to any
series of the Debt Securities issued thereunder: (a) default for 30 days in the
payment of any installment of interest on any Note; (b) default in the payment
of the principal of (or Make-Whole Amount, if any, on) any Note at its Maturity;
(c) default in the performance of any other covenant of the Operating
Partnership contained in the Indenture, continued for 60 days after written
notice as provided in the Indenture; (d) default under any bond, debenture,
note, mortgage, indenture or instrument under which there may be issued or by
which there may be secured or evidenced any indebtedness for money borrowed by
the Operating Partnership or any Subsidiary (or the repayment of which the
Operating Partnership has guaranteed or for which the Operating Partnership is
directly responsible or liable as obligor or guarantor) having an aggregate
principal amount outstanding of at least $10,000,000, whether such indebtedness
now exists or shall hereafter be created, which default shall have resulted in
such indebtedness being declared due and payable prior to the date on which it
would otherwise have become due and payable, without such acceleration having
been rescinded or annulled within 10 days after written notice as provided in
the Indenture; (e) the entry by a court of competent jurisdiction of one or more
judgments, orders or decrees against the Operating Partnership or any Subsidiary
in an aggregate amount (excluding amounts fully covered by insurance) in excess
of $10,000,000 and such judgments, orders or decrees remain undischarged,
unstayed and unsatisfied in an aggregate amount (excluding amounts fully covered
by insurance) in excess of $10,000,000 for a period of 30 consecutive days; and
(f) certain events of bankruptcy, insolvency or reorganization, or court
appointment of a receiver, liquidator or trustee of the Operating Partnership or
any Significant Subsidiary or for all or substantially all of the property of
any of them (Section 501).
If an Event of Default under the Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the Trustee or the Holders of not less than 25% in principal amount of
the Outstanding Debt Securities may declare the principal amount of, any
Make-Whole Amount, if any on, all of the Debt Securities to be due and payable
immediately by written notice thereof to the Operating Partnership (and to the
Trustee if given by the Holders) and upon any such declaration such principal or
specified portion thereof shall become immediately due and payable. At any time
after such declaration of acceleration has been made and before a judgment or
decree for payment of the money due has been obtained by the Trustee, the
Holders of not less than a majority in principal amount of the Outstanding Debt
Securities of such series may rescind and annul such declaration and its
consequences if (a) the Operating Partnership has deposited with the Trustee all
required payments of the principal of (and Make-Whole Amount, if any) and
interest, on the Debt Securities of such series, plus certain fees, expenses,
disbursements and advances of the Trustee and (b) all Events of Default, other
than the nonpayment of accelerated principal (or the Make-Whole Amount, if any)
or interest, with respect to the Debt Securities of such series have been cured
or waived as provided in the Indenture (Section 502). The Indenture also
provides that the Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may waive any past default and its
consequences, except a default (x) in the payment of the principal of (or the
Make-Whole Amount, if any) or interest on any Debt Securities of such series or
(y) in respect of a covenant or provision contained in the Indenture that cannot
be modified or amended without the consent of the Holder of each Outstanding
Debt Security affected thereby (Section 513).
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The Trustee is required to give notice to the Holders of the Debt
Securities within 90 days of a default under the Indenture; provided, however,
that the Trustee may withhold such notice (except a default in the payment of
the principal of (or the Make-Whole Amount, if any) or interest on any Debt
Securities of any series or in the payment of any sinking fund installment with
respect to Debt Securities of such series if the Responsible Officers of the
Trustee consider such withholding to be in the interest of such Holders (Section
601).
The Indenture provides that no Holders of the Debt Securities may
institute any proceedings, judicial or otherwise, with respect to the Indenture
or for any remedy thereunder, except in the case of failure of the Trustee, for
60 days, to act after it has received a written request to institute proceedings
in respect of an Event of Default from the Holders of not less than 25% in
principal amount of the Outstanding Debt Securities, as well as an offer of
reasonable indemnity (Section 507). This provision will not prevent, however,
any Holder of Debt Securities from instituting suit for the enforcement of
payment of the principal of (or the Make-Whole Amount, if any) and interest on
such Debt Securities at the respective due dates thereof (Section 508).
Modification of the Indenture
Modifications and amendments of the Indenture may be made with the consent
of the Holders of not less than a majority in principal amount of all
Outstanding Debt Securities which are affected by such modification or
amendment; provided, however, that no such modification or amendment may,
without the consent of the Holder of each such Note affected thereby, (a) change
the Stated Maturity of the principal of (or the Make-Whole Amount, if any), or
any interest on, any such Debt Security; (b) reduce the principal amount of, or
the rate or amount of interest on, or any Make-Whole Amount payable on
redemption of, any such Debt Security; (c) change the Place of Payment, or the
coin or currency, for payment of principal of (or the Make-Whole Amount, if any)
or interest on, any such Debt Security; (d) impair the right to institute suit
for the enforcement of any payment on or with respect to any such Debt Security
on or after the Stated Maturity thereof; (e) reduce the percentage of
Outstanding Debt Securities of any series necessary to modify or amend the
Indenture, to waive compliance with certain provisions thereof or certain
defaults and consequences thereunder or to reduce the quorum or voting
requirements set forth in the Indenture; or (f) modify any of the foregoing
provisions or any of the provisions relating to the waiver of certain past
defaults or certain covenants, except to increase the required percentage to
effect such action or to provide that certain other provisions may not be
modified or waived without the consent of the Holder of such Note (Section 902).
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities have the right to waive compliance by the Operating Partnership
with certain covenants in the Indenture (Section 1013).
Discharge, Defeasance and Covenant Defeasance
Unless otherwise provided in the Prospectus Supplement, the Operating
Partnership may discharge certain obligations to Holders of Debt Securities that
have not already been delivered to the Trustee for cancellation and that either
have become due and payable or will become due and payable within one year (or
scheduled for redemption within one year) by irrevocably depositing with the
Trustee, in trust, funds in an amount sufficient to pay the entire indebtedness
on such Debt Securities in respect of principal and interest to the date of such
deposit (if such Debt Securities have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be (Section 401).
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The Indenture provides that, unless otherwise provided in the Prospectus
Supplement, the Operating Partnership may elect either (a) to defease and be
discharged from any and all obligations with respect to the Debt Securities
(except for the obligations to register the transfer or exchange of the Debt
Securities, to replace temporary or mutilated, destroyed, lost or stolen Debt
Securities, to maintain an office or agency in respect of the Debt Securities
and to hold moneys for payment in trust ("Defeasance") (Section 1402) or (b) to
be released from its obligations with respect to the Debt Securities under
provisions of the Indenture described under "Certain Covenants," and its
obligations with respect to any other covenant, and any omission to comply with
such obligations shall not constitute a default or an Event or Default with
respect to the Debt Securities ("Covenant Defeasance") (Section 1403), in either
case upon the irrevocable deposit by the Operating Partnership with the Trustee,
in trust, of cash or Government Obligations (as deemed below), or both, which
through the scheduled payment of principal and interest in accordance with their
terms will provide money in an amount sufficient to pay the principal of and
interest on the Debt Securities on the scheduled due dates therefor.
Such a trust may only be established if, among other things, the Operating
Partnership has delivered to the Trustee an Opinion of Counsel (as specified in
the Indenture) to the effect that the Holders of the Debt Securities will not
recognize income, gain or loss for United States Federal income tax purposes as
a result of such defeasance or covenant defeasance and will be subject to United
States Federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such defeasance or covenant defeasance
had not occurred, and such Opinion of Counsel, in the case of defeasance, must
refer to and be based upon a ruling of the Internal Revenue Service (the "IRS")
or a change in applicable United States Federal income tax laws occurring after
the date of the Indenture (Section 1404).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America for the payment of which its full faith and
credit is pledged or (ii) obligations of a Person controlled or supervised by
and acting as an agency or instrumentality of the United States of America the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case, are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such Government Obligation or a specific payment of interest on
or principal of any such Government Obligation held by such custodian for the
account of the holder of a depository receipt, provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depository receipt from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
depository receipt (Section 101).
In the event the Operating Partnership effects covenant defeasance and the
Debt Securities are declared due and payable because of the occurrence of any
Event of Default other than an Event of Default with respect to provisions of
the Indenture which as a result of such covenant defeasance would no longer be
applicable to the Debt Securities, the cash and Government Obligations on
deposit with the Trustee will be sufficient to pay amounts due on the Debt
Securities at the time of their Stated Maturity but may not be sufficient to pay
amounts due on the Debt Securities at the time of the acceleration resulting
from such Event of Default. However, the Operating Partnership would remain
liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the provisions,
if any, permitting such defeasance or covenant defeasance, including any
modifications to the provisions described above, with respect to the Debt
Securities of a particular series.
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DESCRIPTION OF COMMON STOCK
Stock - General
The Company's Articles of Incorporation, as amended and supplemented (the
"Charter") , provide that the Company may issue up to 92,000,000 shares of
capital stock, currently consisting of 90,000,000 shares of Common Stock (par
value $.01 per share) and 2,000,000 shares of Preferred Stock (par value $.01
per share), of which, at April 30, 1997, 25,175,114 shares of Common Stock were
issued and outstanding. Up to 2,198,000 shares of Common Stock have been
reserved for issuance under the Company's stock option and incentive plans. In
addition, 2,756,057 shares of Common Stock are reserved for issuance upon the
conversion of outstanding units of limited partnership interest ("OP Units") in
the Operating Partnership. The Board of Directors has the authority to classify
or reclassify any authorized but unissued shares of capital stock into one or
more classes or series (including classes or series of preferred stock) and to
establish the terms of such classes or series. Under Maryland law, stockholders
generally are not liable for a corporation's debts or obligations. The following
descriptions do not purport to be complete and are subject to, and qualified in
their entirety by reference to, the more complete descriptions thereof set forth
in the following documents: (i) the Charter and (ii) the Company's By-Laws (the
"By-Laws"), which documents are exhibits to the Registration Statement of which
this Prospectus is a part.
Common Stock
The following description of the Common Stock sets forth certain general
terms and provisions of the Common Stock to which any Prospectus Supplement may
relate, including a Prospectus Supplement providing that Common Stock will be
issuable upon conversion of Preferred Stock or Depositary Shares or upon the
exercise of Warrants issued by the Company. This description is in all respects
subject to and qualified in its entirety by reference to the applicable
provisions of the Company's Charter and its By-laws. The Common Stock is listed
on the NYSE under the symbol "CPJ." The transfer agent and registrar for the
Common Stock is The Huntington National Bank.
All shares of Common Stock offered hereby will, when issued, be duly
authorized, fully paid and nonassessable. Subject to the preferential rights of
any other shares or series of stock and to the provisions of the Company's
Charter regarding "Excess Stock" (as defined below), holders of shares of Common
Stock will be entitled to receive dividends on such stock if, as and when
authorized and declared by the Board of Directors of the Company out of assets
legally available therefor and to share ratably in the assets of the Company
legally available for distribution to its stockholders in the event of its
liquidation, dissolution or winding-up after payment of, or adequate provision
for, all known debts and liabilities of the Company. The Company currently pays
quarterly dividends to holders of Common Stock.
Subject to the provisions of the Company's Charter regarding Excess Stock,
each outstanding share of Common Stock entitles the holder to one vote on all
matters submitted to a vote of stockholders, and, except as otherwise required
by law or except as provided with respect to any other class or series of stock,
the holders of such shares will possess the exclusive voting power. In the
election of directors, each outstanding shares of Common Stock entitles the
holder to one vote for each director to be elected, but there is no cumulative
voting in the election of directors, which means that the holders of a majority
of the outstanding shares of Common Stock can elect all of the directors then
standing for election and the holders of the remaining shares will not be able
to elect any directors.
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Holders of shares of Common Stock have no conversion, sinking fund,
redemption rights or preemptive rights to subscribe for any securities of the
Company.
Subject to the provisions of the Company's Charter regarding Excess Stock,
shares of Common Stock will have equal dividend, distribution, liquidation and
other rights, and will have no preference, appraisal or exchange rights.
Pursuant to Maryland law, a corporation generally cannot dissolve, amend
its Charter, merge, sell all or substantially all of its assets, engage in a
share exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of stockholders holding at
least two-thirds of the shares entitled to vote on the matter unless a lesser
percentage (but not less than a majority of all of the votes to be cast on the
matter) is set forth in the corporation's Charter. The Company's Charter does
not provide for a lesser percentage in such situations.
Restrictions on Transfer
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), shares of Common Stock must be beneficially owned
by 100 or more persons during at least 335 days of the taxable year of 12 months
(other than the first year) or during a proportionate part of a shorter taxable
year. Also, not more than 50% of the value of the outstanding shares of capital
stock may be owned, directly or indirectly, by five or fewer individuals (as
defined in the Code to include certain entities ) during the last half of a
taxable year (other than the first year) or during a proportionate part of a
shorter taxable year. (See "Federal Income Tax Considerations").
Because the Board of Directors believes it is essential for the Company to
continue to qualify as a REIT, the Charter, subject to certain exceptions,
provides that, except as otherwise provided below, no holder may own, or be
deemed to own by virtue of the attribution provisions of the Code, more than 7%
(the "Ownership Limit") of the number or value of the issued and outstanding
stock of the Company (or such greater percentage up to 9.8% as shall be
determined by the Board of Directors). The Company's Board of Directors, upon
receipt of a ruling from the IRS and upon such other conditions as the Board of
Directors may direct, may also exempt a proposed transferee from the Ownership
Limit. As a condition of such exemption, the intended transferee must give
written notice to the Company of the proposed transfer no later than the
fifteenth day prior to any transfer which, if consummated, would result in the
intended transferee owning shares in excess of the Ownership Limit. The Board of
Directors of the Company may require such opinions of counsel, affidavits,
undertakings or agreements as it may deem necessary or advisable in order to
determine or ensure the Company's status as a REIT. Any transfer of shares of
Common Stock or Preferred Stock that would (i) create a direct or indirect
ownership of shares of stock in excess of the Ownership Limit, (ii) result in
the shares of stock being owned by fewer than 100 persons, or (iii) result in
the Company being "closely held" within the meaning of Section 856(h) of the
Code, shall be null and void, and the intended transferee will acquire no rights
to the shares. The foregoing restrictions on transferability and ownership will
not apply if the Board of Directors determines that it is no longer in the best
interests of the Company to attempt to qualify, or to continue to qualify, as a
REIT.
The Company's Charter excludes certain predecessors of the Company (the
"Chateau Contributing Parties") from the Ownership Limit. Each of John A. Boll
and J. Peter Ministrelli (and certain persons related to each of them) is exempt
from the Ownership Limit up to a maximum level of 14.1% and 10.0%, respectively.
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Any purported transfer of shares that would result in a person owning
shares of capital stock in excess of the Ownership Limit or cause the Company to
become "closely held" under Section 856(h) of the Code that is not otherwise
permitted as provided above will constitute excess shares ("Excess Stock"), and
shall be deemed to have been transferred to such person or persons (who are
unaffiliated with the Company and the purported transferee), as designated from
time to time by the Company, who shall serve as Trustee or Co Trustees, as the
case may be, of a Trust for the exclusive benefit of one or more organizations
described in Sections 170(b)(1)(A) and 170(c) of the Code, as Beneficiary of
such Trust. While this Excess Stock is held in trust, any dividends or other
distributions shall be paid to the Trustee and the Trustee shall be deemed to
hold an irrevocable proxy to vote the shares. Subject to the Ownership Limit,
the Excess Stock may be retransferred by the trustee to any person (if the
Excess Stock would not be Excess Stock in the hands of such person). The
Purported Beneficial Transferee shall receive the lesser of (i) the price per
share which such Purported Beneficial Transferee paid for the Common Stock or
Preferred Stock, as the case may be, in the purported Transfer that resulted in
the Excess Stock or, if the Purported Beneficial Transferee did not give value
for such Excess Stock (through a gift, devise or other transaction), a price per
share equal to the Market Price for the shares of the Excess Stock on the date
of the purported Transfer that resulted in the Excess Stock, and (ii) the price
per share received by the Trustee from the sale or other disposition of the
shares of Excess Stock held by the Trust. Any proceeds in excess of the amount
payable to the Purported Beneficial Transferee shall be payable to the
Beneficiary.
If the foregoing transfer restrictions are determined to be void or
invalid by virtue of any legal decision, statute, rule or regulation, then the
intended transferee of any Excess Stock may be deemed, at the option of the
Company, to have acted as an agent on behalf of the Company in acquiring such
Excess Stock and to hold such Excess Stock on behalf of the Company.
In addition, Excess Stock shall be deemed to have been offered for sale to
the Company, or its designee, at a price per share equal to the lesser of (i)
the price per share in the transaction that created such Excess Stock (or, in
the case of a devise or gift, the Market Price at the time of such devise or
gift) and (ii) the Market Price of the Common Stock or Preferred Stock to which
such Excess Stock relates on the date the Company, or its designee, accepts such
offer. The Company shall have the right to accept such offer for a period of 90
days after the later of (i) the date of the Transfer which resulted in such
Excess Stock and (ii) the date the Board of Directors determines in good faith
that a Transfer resulting in Excess Stock has occurred, if the Company does not
receive a notice of such Transfer.
All certificates representing shares of stock will bear a legend referring
to the restrictions described above.
All persons who own directly or by virtue of the attribution provisions of
the Code, more than 5% (or such other percentage between 1/2 of 1% and 5%, as
provided in the rules and regulations promulgated under the Code) of the number
or value of the outstanding shares of stock of the Company must give written
notice of such ownership to the Company by January 31 of each year. In addition,
each stockholder shall upon demand be required to disclose to the Company in
writing such information with respect to the direct, indirect and constructive
ownership of shares of Common Stock or Preferred Stock as the Board of Directors
deems reasonably necessary to comply with the provisions of the Code applicable
to a REIT, to comply with the requirements of any taxing authority or
governmental agency or to determine any such compliance.
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These ownership limitations could have the effect of discouraging a
takeover or other transaction in which holders of some, or a majority, of shares
of Common Stock or Preferred Stock (if issued and outstanding) might receive a
premium for their shares over the then prevailing market price or which such
holders might believe to be otherwise in their best interest.
DESCRIPTION OF PREFERRED STOCK
General
Under the Charter, the Company currently has authority to issue 2,000,000
shares of Preferred Stock, none of which is outstanding as of the date of this
Prospectus. In addition, under the Charter the Board of Directors has authority
to classify or reclassify any authorized but unissued shares of any class of
capital stock into classes or series of preferred stock. Prior to issuance of
shares of each series, the Board of Directors is required by the Maryland
General Corporation Law (the "MGCL") and the Charter to fix for each series,
subject to the provisions of the Charter, the terms, preferences, conversion or
other rights, voting powers, restrictions (including restrictions on transfers
of shares), limitations as to distributions, qualifications and terms or
conditions of redemption , and to file articles supplementary to the Charter
(the "Articles Supplementary") reflecting such terms, preferences and other
rights. The Board of Directors could authorize the issuance of shares of
Preferred Stock with terms and conditions that could have the effect of
discouraging a takeover or other transaction in which holders of some, or a
majority, of the shares of Common Stock might receive a premium for their shares
over the then-prevailing market price or might believe to be otherwise in their
best interest.
The Preferred Stock will, upon issuance against full payment of the
purchase price therefor, will be fully paid and nonassessable and will have no
preemptive rights (except as may be granted by the Board of Directors at the
time of issuance). The specific terms of a particular class or series of
Preferred Stock will be described in the Prospectus Supplement relating to that
class or series, including a Prospectus Supplement providing that Preferred
Stock may be issuable upon the exercise of Warrants issued by the Company. The
description of Preferred Stock set forth below and the description of the terms
of a particular class or series of Preferred Stock set forth in a Prospectus
Supplement do not purport to be complete and are qualified in their entirety by
reference to the articles supplementary relating to that class or series. The
discussion of Excess Stock is also applicable to Preferred Stock.
Terms
The following description of the Preferred Stock sets forth certain
general terms and provisions of the Preferred Stock to which any Prospectus
Supplement may relate. The statements below describing the Preferred Stock are
in all respects subject to and qualified in their entirety by reference to the
applicable provisions of the Charter and the By-Laws and any Articles
Supplementary designating terms of a series of Preferred Stock.
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for the specific terms thereof, including, where
applicable, the following:
1. The title of such Preferred Stock;
2. The number of shares of such Preferred Stock offered, the liquidation
preference per share and the offering price of such Preferred Stock;
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3. The distribution rate(s), period(s), and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred Stock;
4. Whether such Preferred Stock is cumulative or not and, if cumulative,
the date from which distributions on such Preferred Stock shall accumulate;
5. The provision for sinking fund, if any, for such Preferred Stock;
6. The provision for redemption, if applicable, of such Preferred Stock;
7. Any listing of such Preferred Stock on any securities exchange;
8. The terms and conditions, if applicable, upon which such Preferred
Stock will be converted into Common Stock, including the conversion price (or
manner of calculation thereof);
9. Any limitations on direct or beneficial ownership and restrictions on
transfer, in each case as may be appropriate to preserve the status of the
Company as a REIT;
10. The relative ranking and preferences of such Preferred Stock as to
distribution rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company;
11. Any limitations on issuance of any class or series of preferred stock
ranking senior to or on a parity with such class or series of Preferred Stock as
to distribution rights and rights upon liquidation, dissolution or winding up of
the affairs of the Company;
12. Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock; and
13. Any voting rights of such Preferred Stock.
Rank
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to distribution rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to Common Stock (and
Excess Stock arising from Common Stock) of the Company, and to all equity
securities ranking junior to such Preferred Stock with respect to distribution
rights and rights upon liquidation, dissolution or winding up of the Company;
(ii) on a parity with all equity securities issued by the Company the terms of
which specifically provide that such equity securities rank on a parity with the
Preferred Stock with respect to distribution rights or rights upon liquidation,
dissolution or winding up of the Company; and (iii) junior to all equity
securities issued by the Company the terms of which specifically provide that
such equity securities rank senior to the Preferred Stock with respect to
distribution rights or rights upon liquidation, dissolution or winding up of the
Company.
Conversion Rights
The terms and conditions, if any, upon which any shares of any class or
series of Preferred Stock are convertible into Common Stock will be set forth in
the applicable Prospectus Supplement relating thereto. Such terms will include
the number of shares of Common Stock into which the share of Preferred
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Stock are convertible, the conversion price (or manner of calculation thereof),
the conversion period, provisions as to whether conversion will be at the option
of the holders of such class or series of Preferred Stock or the Company, the
events requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such class or series of Preferred
Stock.
Restrictions on Transfer
The provisions contained in the Charter restricting certain transfers and
limiting the beneficial ownership, directly or indirectly, of the Company's
outstanding capital stock will affect any shares of Preferred Stock that may
from time to time be issued by the Company. See "Description of Common
Stock--Restrictions on Transfer."
DESCRIPTION OF DEPOSITARY SHARES
General
The Company may issue Depositary Shares, each of which will represent a
fractional interest of a share of particular class or series of Preferred Stock,
as specified in the applicable Prospectus Supplement. Shares of a class or
series of Preferred Stock represented by Depositary Shares will be deposited
under a separate Deposit Agreement (each, a "Deposit Agreement") among the
Company, the depositary named therein (the "Preferred Stock Depositary") and the
holders from time to time of the depositary receipts issued by the Preferred
Stock Depositary which will evidence the Depositary Shares ("Depositary
Receipts"). Subject to the terms of the Deposit Agreement, each owner of a
Depositary Receipt will be entitled, in proportion to the fractional interest of
a share of a particular class or series of Preferred Stock represented by the
Depositary Shares evidenced by such Depositary Receipt, to all the rights and
preferences of the class or series of the Preferred Stock represented by such
Depositary Shares (including dividend, voting, conversion, redemption and
liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the Preferred Stock by the Company to a Preferred Stock
Depositary, the Company will cause such Preferred Stock Depositary to issue, on
behalf of the Company, the Depositary Receipts. Copies of the applicable form of
Deposit Agreement and Depositary Receipt may be obtained from the Company upon
request, and the statements made hereunder relating to the Deposit Agreement and
the Depositary Receipt to be issued thereunder are summaries of certain
anticipated provisions thereof and do not purport to be complete and are subject
to, and qualified in their entirety by reference to, all of the provisions of
the applicable Deposit Agreement and related Depositary Receipts.
Dividends and Other Distributions
The Preferred Stock Depositary will distribute all cash dividends or other
cash distributions received in respect of a class or series of Preferred Stock
to the record holders of Depositary Receipts evidencing the related Depositary
Shares in proportion to the number of the such Depositary Receipts owned by such
holders, subject to certain obligations of holders to file proofs, certificates
and other information and to pay certain charges and expenses to such Preferred
Stock Depositary.
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and
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expenses to the Preferred Stock Depositary, unless such Preferred Stock
Depositary determines that it is not feasible to make such distribution, in
which case the Preferred Stock Depositary may, with the approval of the Company,
sell such property and distribute the net proceeds from such sale to such
holders.
No distribution will be made in respect of any Depositary Share to the
extent that it represents any class or series of Preferred Stock converted into
Excess Stock or otherwise converted or exchanged.
Withdrawal of Stock
Upon surrender of the Depositary Receipts at the corporate trust office of
the Preferred Stock Depositary (unless the related Depositary Shares have
previously been called for redemption or converted or converted into Excess
Stock or otherwise), the holders thereof will be entitled to delivery at such
office, to or upon each such holder's order, of the number of whole or
fractional shares of the class or series of Preferred Stock and any money or
other property represented by the Depositary Shares evidenced by such Depositary
Receipts. Holders of Depositary Receipts will be entitled to receive whole or
fractional shares of the related class or series of Preferred Stock on the basis
of the proportion of Preferred Stock represented by each Depositary Share as
specified in the applicable Prospectus Supplement, but holders of such shares of
Preferred Stock will not thereafter be entitled to receive Depositary Shares
therefor. If the Depositary Receipts delivered by the holder evidence a number
of Depositary Shares in excess of the number of Depositary Shares representing
the number of shares of Preferred Stock to be withdrawn, the Preferred Stock
Depositary will deliver to such holder at the same time a new Depositary Receipt
evidencing such excess number of Depositary Shares.
Redemption of Depositary Shares
Whenever the Company redeems shares of Preferred Stock held by the
Preferred Stock Depositary, the Preferred Stock Depositary will redeem as of the
same redemption date the number of the Depositary Shares representing shares of
such class or series of Preferred Stock so redeemed, provided the Company shall
have paid in full to the Preferred Stock Depositary the redemption price of the
Preferred Stock to be redeemed plus an amount equal to any accrued and unpaid
dividends thereon to the date fixed for redemption. The redemption price per
Depositary Share will be equal to the corresponding proportion of the redemption
price and any other amounts per share payable with respect to such class or
series of Preferred Stock. If fewer than all the Depositary Shares are to be
redeemed, the Depositary Shares to be redeemed will be selected pro rata (as
nearly as may be practicable without creating fractional Depositary Shares) or
by any other equitable method determined by the Company that will not result in
the issuance of any Excess Stock.
From and after the date fixed for redemption, all dividends in respect of
the shares of a class or series of Preferred Stock so called for redemption will
cease to accrue, the Depositary Shares so called for redemption will no longer
be deemed to be outstanding and all rights of holders of the Depositary Receipts
evidencing the Depositary Shares so called for redemption will cease, except the
right to receive any moneys payable upon such redemption and any money or other
property to which the holders of such Depositary Receipts were entitled upon
such redemption upon surrender thereof to the Preferred Stock Depositary.
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Voting of the Preferred Stock
Upon receipt of notice of any meeting at which the holders of a class or
series of Preferred Stock deposited with the Preferred Stock Depositary are
entitled to vote, the Preferred Stock Depositary will mail the information
contained in such notice of meeting to the record holders of the Depositary
Receipts evidencing the Depositary Shares which represent such class or series
of Preferred Stock. Each record holder of Depositary Receipts evidencing
Depositary Shares on the record date (which will be the same date as the record
date for such class or series of Preferred Stock) will be entitled to instruct
the Preferred Stock Depositary as to the exercise of the voting rights
pertaining to the amount of Preferred Stock represented by such holder's
Depositary Shares. The Preferred Stock Depositary will vote the amount of such
class or series of Preferred Stock represented by such Depositary Shares in
accordance with such instructions, and the Company will agree to take all
reasonable action which may be deemed necessary by the Preferred Stock
Depositary in order to enable the Preferred Stock Depositary to do so. The
Preferred Stock Depositary will abstain from voting the amount of Preferred
Stock represented by such Depositary Shares to the extent it does not receive
specific instructions from the holders of Depositary Receipts evidencing such
Depositary Shares. The Preferred Stock Depositary will not be responsible for
any failure to carry out any instruction to vote, or for the manner or effect of
any such vote made, as long as any such action or non-action is in good faith
and does not result from negligence or willful misconduct of the Preferred Stock
Depositary.
Liquidation Preference
In the event of the liquidation, dissolution or winding up of the Company
whether voluntary or involuntary, the holders of each Depositary Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock as set forth in the applicable Prospectus Supplement.
Conversion of Preferred Stock
The Depositary Shares, as such, will not be convertible into Common Stock
or any other securities or property of the Company, except in connection with
certain exchanges in connection with the preservation of the Company's status as
a REIT. See "Description of Common Stock--Restrictions on Transfer."
Nevertheless, if so specified in the applicable Prospectus Supplement relating
to an offering of Depositary Shares, the Depositary Receipts may be surrendered
by holders thereof to the applicable Preferred Stock Depositary with written
instructions to the Preferred Stock Depositary to instruct the Company to cause
conversion of a class or a series of Preferred Stock represented by the
Depositary Shares evidenced by such Depositary Receipts into whole shares of
Common Stock, other shares of a class or series of Preferred Stock (including
Excess Stock) of the Company or other shares of stock, and the Company has
agreed that upon receipt of such instructions and any amounts payable in respect
thereof, it will cause the conversion thereof utilizing the same procedures as
those provided for delivery of Preferred Stock to effect such conversion. If the
Depositary Shares evidenced by a Depositary Receipt are to be converted in part
only, a Depositary Receipt or Receipts will be issued for any Depositary Shares
not to be converted. No fractional shares of Common Stock will be issued upon
conversion, and if such conversion will result in a fractional share being
issued, an amount will be paid in cash by the Company equal to the value of the
fractional interest based upon the closing price of the Common Stock on the last
business day prior to the conversion.
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Amendment and Termination of a Deposit Agreement
The form of Depositary Receipt evidencing Depositary Shares which
represent the Preferred Stock and any provision of the Deposit Agreement may at
any time be amended by agreement between the Company and the Preferred Stock
Depositary. However, any amendment that materially and adversely alters the
rights of the holders of Depositary Receipts or that would be materially and
adversely inconsistent with the rights granted to the holders of the related
Preferred Stock will not be effective unless such amendment has been approved by
the existing holders of at least two-thirds of the applicable Depositary Shares
evidenced by the applicable Depositary Receipts then outstanding. No amendment
shall impair the right, subject to certain anticipated exceptions in the Deposit
Agreement, of any holder of Depositary Receipts to surrender any Depositary
Receipt with instructions to deliver to the holder the related class or series
of Preferred Stock and all money and other property, if any, represented
thereby, except in order to comply with law. Every holder of any outstanding
Depositary Receipt at the time any such amendment becomes effective shall be
deemed, by continuing to hold such Depositary Receipt, to consent and agree to
such amendment and to be bound by the applicable Deposit Agreement as amended
thereby.
The Deposit Agreement may be terminated by the Company upon not less than
30 days prior written notice to the Preferred Stock Depositary if (i) such
termination is necessary to preserve the Company's status as a REIT or (ii) a
majority of each series or class of Preferred Stock subject to such Deposit
Agreement consents to such termination, whereupon the Preferred Stock Depositary
will deliver or make available to each holder of Depositary Receipts, upon
surrender of the Depositary Receipts held by such holder, such number of whole
or fractional shares of Preferred Stock as are represented by the Depositary
Shares evidenced by such Depositary Receipts together with any other property
held by Preferred Stock Depositary with respect to such Depositary Receipts. The
Company has agreed that if the Deposit Agreement is terminated to preserve the
Company's status as a REIT, then the Company will use its best efforts to list
each class or series of Preferred Stock issued upon surrender of the related
Depositary Shares on a national securities exchange. In addition, the Deposit
Agreement will automatically terminate if (i) all outstanding Depositary Shares
have been redeemed, (ii) there shall have been a final distribution in respect
of each class or series of Preferred Stock in connection with any liquidation,
dissolution or winding up of the Company and such distribution shall have been
distributed to the holders of the Depositary Receipts evidencing the Depositary
Shares representing such class or series of Preferred Stock or (iii) each share
of the related Preferred Stock shall have been converted into stock of the
Company not so represented by Depositary Shares.
Charges of a Preferred Stock Depositary
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the Deposit Agreement. In addition, the
Company will pay the fees and expenses of the Preferred Stock Depositary in
connection with the performance of its duties under the Deposit Agreement.
However, holders of Depositary Receipts will pay the fees and expenses of the
Preferred Stock Depositary for any duties requested by such holders to be
performed which are outside of those expressly provided for in the Deposit
Agreement.
Resignation and Removal of Depositary
The Preferred Stock Depositary may resign at any time by delivering to the
Company notice of its election to do so, and the Company may at any time remove
the Preferred Stock Depositary, any such resignation or removal to take effect
upon the appointment of a successor Preferred Stock Depositary. A successor
Preferred Stock Depositary must be appointed within 60 days after delivery of
the notice of
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resignation or removal and must be a bank or trust company having its principal
office in the United States and have a combined capital and surplus of at least
$50,000,000.
Miscellaneous
The Preferred Stock Depositary will forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
the Preferred Stock Depositary with respect to the related Preferred Stock.
Neither the Preferred Stock Depositary nor the Company will be liable if
it is prevented from or delayed in, by law or any circumstances beyond its
control, performing its obligations under the Deposit Agreement. The obligations
of the Company and the Preferred Stock Depositary under the Deposit Agreement
will be limited to performing their duties thereunder in good faith and without
negligence (in the case of any action or inaction in the voting of a class or
series of Preferred Stock represented by the Depositary Shares), gross
negligence or willful misconduct, and the Company and the Preferred Stock
Depositary will not be obligated to prosecute or defend any legal proceeding in
respect of any Depositary Receipts, Depositary Shares or shares of a class or
series of Preferred Stock represented thereby unless satisfactory indemnity is
furnished. The Company and the Preferred Stock Depositary may rely on written
advice of counsel or accountants, or information provided by persons presenting
shares of Preferred Stock represented thereby for deposit, holders of Depositary
Receipts or other persons believed in good faith to be competent to give such
information, and on documents believed in good faith to be genuine and signed by
a proper party.
In the event a Preferred Stock Depositary shall receive conflicting
claims, requests or instructions from any holders of Depositary Receipts, on the
one hand, and the Company, on the other hand, the Preferred Stock Depositary
shall be entitled to act on such claims, requests or instructions received from
the Company.
Restrictions on Transfer
The provisions contained in the Charter restricting certain transfers and
limiting the beneficial ownership, directly or indirectly, of the Company's
outstanding capital stock will affect any Depositary Shares that may from time
to time be issued by the Company. See "Description of Common Stock--Restrictions
on Transfer."
DESCRIPTION OF WARRANTS
The Company has no Warrants outstanding (other than options issued under
the Company's stock option plans). The Company may issue Warrants for the
purchase of Common Stock. Warrants may be issued independently or together with
any other Offered Securities offered by any Prospectus Supplement and may be
attached to or separate from such Offered Securities. Each series of Warrants
will be issued under a separate warrant agreement (each, a "Warrant Agreement")
to be entered into between the Company and a warrant agent specified in the
applicable Prospectus Supplement (the "Warrant Agent"). The Warrant Agent will
act solely as an agent of the Company in connection with the Warrants of such
series and will not assume any obligation or relationship of agency or trust for
or with any provisions of the Warrants offered hereby. Further terms of the
Warrants and the applicable Warrant Agreements will be set forth in the
applicable Prospectus Supplement.
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The applicable Prospectus Supplement will describe the terms of the
Warrants in respect of which this Prospectus is being delivered, including,
where applicable, the following: (1) the title of such Warrants; (2) the
aggregate number of such Warrants; (3) the price or prices at which such
Warrants will be issued; (4) the designation, terms and number of shares of
Common Stock purchasable upon exercise of such Warrants; (5) the designation and
terms of the Offered Securities, if any, with which such Warrants are issued and
the number of such Warrants issued with each such Offered Security; (6) the
date, if any, on and after which such Warrants and the related Common Stock will
be separately transferable; (7) the price at which each share of Common Stock
purchasable upon exercise of such Warrants may be purchased; (8) the date on
which the right to exercise such Warrants shall commence and the date on which
such right shall expire; (9) the minimum or maximum amount of such Warrants
which may be exercised at any one time; (10) information with respect to
book-entry procedures, if any; and (11) any other terms of such Warrants,
including terms, procedures and limitations relating to the exchange and
exercise of such Warrants.
FEDERAL INCOME TAX CONSIDERATIONS
General
The following summary of material federal income tax considerations
relevant to the Company is based upon current law, and is not intended as tax
advice. The following discussion is not exhaustive of all possible tax
considerations, and does not give a detailed discussion of any state, local, or
foreign tax considerations. Nor does it discuss all of the aspects of federal
income taxation that may be relevant to a prospective holder of Offered
Securities in light of his or her particular investment or tax circumstances or
to certain types of stockholders (including insurance companies, tax-exempt
entities, financial institutions or broker-dealers, foreign corporations and
persons who are not citizens or residents of the United States) who are subject
to special treatment under the federal income tax laws. The tax treatment of a
holder of any Offered Securities will also vary depending upon the terms of the
specific securities acquired by such holder. Additional federal income tax
considerations relevant to holders of the Offered Securities other than Common
Stock may be provided in the applicable Prospectus Supplement relating thereto.
The statements in this discussion are based on current provisions of the
Code, existing, temporary, and currently proposed Treasury Regulations under the
Code, the legislative history of the Code, existing administrative rulings and
practices of the IRS, and judicial decisions. No assurance can be given that
legislative, judicial, or administrative changes will not affect the accuracy of
any statements in this Prospectus with respect to transactions entered into or
contemplated prior to the effective date of such changes.
EACH PROSPECTIVE PURCHASER IS ADVISED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR REGARDING THE SPECIFIC TAX CONSEQUENCES TO HIM OR HER OF THE PURCHASE,
OWNERSHIP AND SALE OF THE OFFERED SECURITIES INCLUDING THE FEDERAL, STATE,
LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP AND SALE
AND OF POTENTIAL CHANGES IN APPLICABLE TAX LAWS.
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Taxation of the Company
General. The Company elected to be taxed as a REIT under Sections 856
through 860 of the Code and applicable Treasury Regulations, commencing with its
taxable year ended December 31, 1993. The Company believes that it was organized
and has operated in a manner so as to qualify for taxation as a REIT under the
applicable provisions of the Code, and the Company intends to continue to
operate in such a manner. No assurance can be given, however, that the Company
has operated in a manner so as to qualify or will operate in a manner so as to
remain qualified as a REIT. Rogers & Wells, counsel to the Company ("Counsel"),
has rendered an opinion that commencing with its taxable year ended December 31,
1993, the Company was organized in conformity with the requirements for
qualification and taxation as a REIT, and the Company's proposed method of
operation will enable it to continue to so qualify. It must be emphasized that
Counsel's opinion is based on various assumptions and is conditioned upon
certain representations made by the Company as to factual matters. In addition,
Counsel's opinion is based upon factual representations of the Company
concerning its business and properties and the business and properties of the
Operating Partnership. Unlike a tax ruling, an opinion of counsel is not binding
upon the IRS and no assurance can be given that the IRS will not challenge the
status of the Company as a REIT. Moreover, such qualification and taxation as a
REIT depend upon the Company's ability to meet, through actual annual operating
results, distribution levels, diversity of stock ownership and various other
qualification tests imposed under the Code, discussed below, the results of
which will not be reviewed by Counsel. Accordingly, no assurance can be given
that the actual results of the Company's operations for any taxable year will
satisfy such requirements. See "-Failure to Qualify."
The following is a description of the material aspects of the federal
income tax consequences to the Company and its stockholders of the treatment of
the Company as a REIT. This summary is qualified in its entirety by the
applicable Code provisions, rules and regulations promulgated thereunder, and
administrative and judicial interpretations thereof.
In any year in which the Company qualifies as a REIT, it generally will
not be subject to federal corporate income tax on that portion of its net income
which is distributed currently to stockholders. However, the Company will be
subject to federal income or excise tax as follows: (i) the Company will be
taxed at regular corporate rates on any undistributed REIT taxable income and
undistributed net capital gains; (ii) under certain circumstances, the Company
may be subject to the "alternative minimum tax" on its items of tax preference,
if any; (iii) if the Company has (1) net income from the sale or other
disposition of "foreclosure property" (generally, property acquired by reason of
a foreclosure or otherwise on default of a loan secured by the property) that is
held primarily for sale to customers in the ordinary course of business or (2)
other nonqualifying net income from foreclosure property, it will be subject to
tax at the highest corporate rate on such income; (iv) if the Company has net
income from prohibited transactions (which are, in general, certain sales or
other dispositions of property (other than foreclosure property) held primarily
for sale to customers in the ordinary course of business), such income will be
subject to a 100% tax; (v) if the Company should fail to satisfy the 75% gross
income test or the 95% gross income test (as discussed below), and has
nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on the net income
attributable to the greater of the amount by which the Company fails the 75% or
95% test, multiplied by a fraction intended to reflect the Company's
profitability; (vi) if the Company should fail to distribute with respect to
each calendar year at least the sum of (1) 85% of its REIT ordinary income for
such year, (2) 95% of its REIT capital gain net income for such year, and (3)
any undistributed taxable income from prior years, the Company would
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be subject to a 4% excise tax on the excess of such required distribution over
the amounts actually distributed; (vii) if the Company acquires any asset from a
C corporation (i.e., generally a corporation subject to full corporate-level
tax) in a transaction in which the basis of the asset in the Company's hands is
determined by reference to the basis of the asset (or any other property) in the
hands of the C corporation and the Company subsequently recognizes gain on the
disposition of such asset during the 10-year period (the "Recognition Period")
beginning on the date on which the asset was acquired by the Company (or the
Company first qualified as a REIT), then the excess of (1) the fair market value
of the asset as of the beginning of the applicable Recognition Period, over (2)
the REIT's adjusted basis in such asset as of the beginning of such Recognition
Period will be subject to tax at the highest regular corporate rate (pursuant to
Treasury Regulations issued by the IRS which have not yet been promulgated).
Organizational Requirements. The Code defines a REIT as a corporation,
trust, or association (i) that is managed by one or more trustees or directors;
(ii) the beneficial ownership of which is evidenced by transferable shares or by
transferable certificates of beneficial interest; (iii) that would be taxable as
a domestic corporation but for Sections 856 through 859 of the Code; (iv) that
is neither a financial institution nor an insurance company subject to certain
provisions of the Code; (v) the beneficial ownership of which is held by 100 or
more persons; (vi) during the last half of each taxable year not more than 50%
in value of the outstanding stock of which is owned, directly or indirectly
(through the application of certain attribution rules), by five or fewer
individuals (as defined in the Code to include certain entities); and (vii) that
has the calendar year as its taxable year. In addition, certain other tests,
described below, regarding the nature of its income and assets must also be
satisfied.
The Code provides that conditions (i) through (iv), inclusive, must be met
during the entire taxable year and that condition (v) must be met during at
least 335 days of a taxable year of twelve months, or during a proportionate
part of a taxable year of less than twelve months. Conditions (v) and (vi) will
not apply until after the first taxable year for which an election is made to be
taxed as a REIT.
As a result of the Merger, ROC became a subsidiary of Chateau, with the
intent that both the Company and ROC would continue to qualify as REITs for the
purposes of the Code. The Company and ROC believe that they have satisfied and
will continue to satisfy the requirements set forth in (i) through (vii) above.
In addition, both the Company and ROC's Charters include certain restrictions
regarding transfer of the their shares. These restrictions are intended (among
other things) to assist the Company and ROC in continuing to satisfy the share
ownership requirements described in conditions (v) and (vi) above. See
"Description of Common Stock--Restrictions on Transfer." Moreover, to evidence
compliance with these requirements, a REIT must maintain records which disclose
the actual ownership of its outstanding stock. In fulfilling its obligations to
maintain records, both the Company and ROC have and will continue to demand
written statements each year from the record holders of designated percentages
of their stock disclosing the actual owners of such Shares. A list of those
persons failing or refusing to comply with such demand is maintained as a part
of the their respective records. A stockholder failing or refusing to comply
with such written demands must submit with his tax return a similar statement
disclosing the actual ownership of the shares of stock and certain other
information.
The Company may have one or more "qualified REIT subsidiaries." A
corporation that is a "qualified REIT subsidiary" is not treated as a separate
corporation for federal income tax purposes, and all assets, liabilities and
items of income, deduction, and credit of a "qualified REIT subsidiary" are
treated as assets, liabilities, and items of the REIT. Thus, the Company's
"qualified REIT subsidiaries" will not be subject to federal corporate income
taxation, although they may be subject to state or local taxation.
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In the case of a REIT that is a partner in a partnership, the REIT is
deemed to own its proportionate share of the assets of the partnership and is
deemed to receive the income of the partnership attributable to such share. In
addition, the character of assets and gross income of the partnership shall
retain the same character in the hands of the REIT. Thus, the Company and ROC's
proportionate share of the assets, liabilities and items of income of the
Operating Partnership, CCF, L.P. (the "Financing Partnership") and other
partnerships in which the Operating Partnership holds an interest (the "Subtier
Partnerships") should be treated as assets, liabilities and items of income of
the Company and ROC, to the extent of their respective interest therein, for
purposes of applying the requirements described herein. See "--Tax Aspects of
the Company's Investments in Partnerships."
Asset Tests. For the Company and ROC to maintain qualification as REITs,
at the close of each quarter of its taxable year, each company must satisfy two
tests relating to the nature of its assets. First, at least 75% of the value of
such company's total assets must be represented by real estate assets (including
(i) real property, (ii) stock or debt instruments purchased with the proceeds of
a stock offering or long-term (at least five years) debt offering of such
Company and held for not more than one year following the receipt of such
proceeds, (iii) interests in mortgages on real property, and (iv) shares in
other REITs), cash, cash items (including receivables) and government
securities. Second, although the remaining 25% of each Company's assets
generally may be invested without restriction, securities in this class may not
exceed either (i) 5% of the value of such Company's total assets as to any one
non-governmental issuer, or (ii) 10% of the outstanding voting securities of any
one issuer.
The Company believes that it and ROC has, and will continue to be able to
comply with the asset tests. More than 75% of the assets of each of the Company
and ROC are real estate assets. In addition, neither Company holds any
securities representing more than 10% of any one issuer's voting securities,
other than any qualified REIT subsidiary or another qualified REIT, or
securities of any one issuer exceeding 5% of the value of its gross assets. The
securities of ROC held by the Company will not cause the Company to violate the
asset tests as long as ROC qualifies as a REIT. If, however, ROC fails to
qualify as a REIT for any reason, the Company would fail the asset tests because
such securities will no longer qualify as real estate assets for purposes of the
75% asset test and the Company owns more than 10% of ROC's voting securities.
After initially meeting the asset tests at the close of any quarter,
neither the Company nor ROC will lose its status as a REIT for failure to
satisfy the asset tests at the end of a later quarter solely by reason of
changes in asset values. If the failure to satisfy the asset tests results from
an acquisition of securities or other property during a quarter, the failure can
be cured by disposition of sufficient nonqualifying assets within 30 days after
the close of that quarter as may be required to cure any noncompliance. However,
there can be no assurance that such action will always be successful.
Income Tests. For the Company and ROC to maintain qualification as REITs,
there are three separate percentage tests relating to the sources of each
company's gross income which must be satisfied for each taxable year. First, at
least 75% of each company's gross income (excluding gross income from prohibited
transactions) for each taxable year must be derived from (i) rents from real
property (except as modified below); (ii) interest on obligations secured by
mortgages on real property or on interests in real property; (iii) gains from
the sale or other disposition of real property, interests in real property and
interests in mortgages on real property, other than gains from property held
primarily for sale to customers in the ordinary course of the Company's trade or
business; (iv) dividends or other distributions on shares in other REITs, as
well as gain from the sale of such shares; (v) abatements and refunds of taxes
on real property; (vi) income and gain derived from foreclosure property; (vii)
commitment fees received or accrued for entering into agreements to make loans
secured by mortgages
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on real property or to purchase or lease real property; and (viii) qualified
temporary investment income. Second, at least 95% of each company's gross income
(excluding gross income from prohibited transactions) for each taxable year must
be derived from the same items which qualify under the 75% gross income test,
and from dividends, interest and gain from the sale or disposition of stock or
other securities, or from any combination of the foregoing. Any payments made to
the Company by a financial institution pursuant to a bona fide interest rate
swap or cap agreement to hedge any variable rate indebtedness incurred or to be
incurred to acquire or carry real property, or interests in real property, and
any gain from the sale or other disposition of such agreement also will be
included. Third, each company must derive less than 30% of its gross income for
each taxable year from the sale or other disposition of (i) real property
(including interests in real property and interests in mortgages on real
property) held for less than four years (other than foreclosure property and
property involuntarily or compulsorily converted), (ii) stock or securities held
for less than one year, and (iii) property in a transaction which is a
prohibited transaction.
Rents received from a tenant will qualify as "rents from real property" in
satisfying the 75% or the 95% gross income tests described above only if several
conditions (related to the identity of the tenant, the computation of rent
payable and the nature of the property leased) are met. Neither company
anticipates receiving rents in excess of a de minimus amount that fail to meet
these conditions. Finally, for rents received to qualify as rents from real
property, a REIT generally must not operate or manage the property or furnish or
render services to tenants, other than through an "independent contractor" which
is adequately compensated from whom the REIT derives no revenue. The
"independent contractor" requirement, however, does not apply to the extent that
the services provided by the REIT are of a type that a tax exempt organization
can provide to its tenants without causing its rental income to be unrelated
business taxable income under the Code, which includes those services provided
which are "usually or customarily rendered" in connection with the rental of
space for occupancy only and are not otherwise considered "rendered to the
occupant".
The Company believes that it and ROC have, and will continue to satisfy
the gross income tests discussed above. The Company receives a significant
amount of dividends from ROC, which will be qualifying income for purposes of
the 95% gross income test, and for the 75% gross income test so long as ROC
qualifies as a REIT. In addition, the majority of both the Company and ROC's
income will be derived from their interests in the Operating Partnership and
Subtier Partnerships, which income will, for the most part, qualify as "rents
from real property" for purposes of the 75% and 95% gross income tests.
The Operating Partnership will provide certain services with respect to
its properties and any newly acquired manufactured housing community properties.
The Company believes, however, that the services which it provides are usually
or customarily rendered in connection with the rental of space for occupancy
only, and therefore that the provision of such services will not cause the rents
received with respect to any properties to fail to qualify as rents from real
property for purposes of the 75% and 95% gross income tests. Further, the
Company has obtained a private letter ruling from the IRS holding that certain
services and amenities provided through the Operating Partnership will not cause
its distributive share of rents paid by tenants to be excluded from the
definition of rents from real property.
The Operating Partnership will receive fees in exchange for the
performance of certain management and administrative services relating to
properties not owned by the Operating Partnership. Such management and
administrative fees are not qualifying income for purposes of the 75% and 95%
gross income tests. The Company and ROC's share of the aggregate amount of such
fees and other
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non-qualifying income in any taxable year, however, should not cause either
company to exceed the limits on non-qualifying income under the 75% or 95% gross
income tests.
If the Company or ROC fails to satisfy one or both of the 75% or 95%
gross income tests for any taxable year, it may nevertheless qualify as a REIT
for such year if entitled to relief under certain provisions of the Code . It is
not possible, however, to state whether in all circumstances the Company or ROC
would be entitled to the benefit of these relief provisions. Even if these
relief provisions apply, a tax would be imposed with respect to certain excess
net income.
Annual Distribution Requirements. In order to qualify as REITs, both the
Company and ROC are required to distribute dividends (other than capital gain
dividends) to its stockholders each year in an amount which equals or exceeds
(A) the sum of (i) 95% of such company's REIT taxable income (computed without
regard to the dividends paid deduction and the REIT's net capital gain) and (ii)
95% of the net income (after tax), if any, from foreclosure property, minus (B)
the sum of certain items of noncash income. Such distributions must be paid in
the taxable year to which they relate, or in the following taxable year if
declared before the company timely files its tax return for such year and if
paid on or before the first regular dividend payment after such declaration. To
the extent that either company does not distribute all of its net capital gain
or distributes at least 95%, but less than 100%, of its "REIT taxable income",
as adjusted, it will be subject to tax on the undistributed amount at regular
capital gains or ordinary corporate tax rates, as the case may be. Furthermore,
if either company should fail to distribute during each calendar year at least
the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of its
REIT capital gain net income for such year, and (iii) any undistributed taxable
income from prior years, it will be subject to a 4% excise tax on the excess of
such required distribution over the amounts actually distributed.
Both the Company and ROC have made and intend to continue to make timely
distributions sufficient to satisfy the annual distribution requirements. It is
possible that either company, from time to time, may not have sufficient cash or
other liquid assets to meet the 95% distribution requirement, due primarily to
the expenditure of cash for nondeductible expenses such as principal
amortization or capital expenditures . To avoid any problem with the 95%
distribution requirement, the Company and ROC will closely monitor the
relationship between their REIT taxable income and cash flow and, if necessary,
will borrow funds (or cause the Operating Partnership to borrow funds) in order
to satisfy the distribution requirement.
Under certain circumstances, a REIT may be able to rectify a failure to
meet the distribution requirements by paying a "deficiency dividend" (plus
applicable penalties and interest) within a specified period.
Failure to Qualify. If either the Company or ROC fails to qualify for
taxation as a REIT in any taxable year and the special relief provisions do not
apply, the Company (and ROC if it fails to qualify) will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to stockholders in any year in which it
fails to qualify will not be deductible , nor will they be required to be made.
In such event, to the extent of current and accumulated earnings and profits,
all distributions to stockholders will be taxable as ordinary income and,
subject to certain limitations in the Code, corporate distributees may eligible
for the dividends received deduction. Unless entitled to relief under specific
statutory provisions, the Company (and ROC if it fails to qualify) also will be
disqualified from taxation as a REIT for the four taxable years following the
year during which qualification was lost. It is not possible to state whether in
all circumstances either the Company or ROC would be entitled to such statutory
relief.
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Tax Aspects of the Company's Investment in Partnerships
General. The Company and ROC hold direct and indirect interests in the
Operating Partnership, the Financing Partnership and the Subtier Partnerships
(together, the "Partnerships").
The Company believes that each of the Partnerships are properly treated as
partnerships for federal income tax purposes. If, however, either the Operating
Partnership, the Financing Partnership and/or a Subtier Partnership was treated
as an association taxable as a corporation, the Company would most likely fail
to qualify as a REIT. See "Federal Income Tax Considerations--Taxation of the
Company--Failure to Qualify". Furthermore, in such a situation, any Partnership
treated as a corporation would be subject to corporate income taxes.
Tax Allocations with Respect to the Properties. The Operating Partnership
was originally formed by way of contribution of properties which had appreciated
in value (the "Chateau Properties") at the date of contribution. In addition,
ROC, contributed or caused to be contributed properties, which were also
appreciated , to the Operating Partnership and Financing Partnership immediately
after the Merger (the "ROC Properties"). When property is contributed to a
partnership in exchange for an interest in the partnership, the partnership
generally takes a carryover basis in that property for tax purposes equal to the
adjusted basis of the contributing partner in the property, rather than a basis
equal to the fair market value of the property at the time of contribution (this
difference is referred to as a "Book-Tax Difference"). The Company also
inherited most or all of the existing Book-Tax Differences with respect to OP
Units previously exchanged by unitholders. The partnership agreements of the
Operating Partnership and the Financing Partnership require allocations of
income, gain, loss and deduction with respect to contributed properties to be
made in a manner consistent with the special rules in Section 704(c) of the Code
and the Treasury Regulations thereunder, which will tend to eliminate the
Book-Tax Differences with respect to the ROC Properties and the Chateau
Properties over the life of the Operating Partnership and the Financing
Partnership. Under these rules, ROC and/or the Company and the initial
contributors of the Chateau Properties who are OP unitholders are generally
allocated lower amounts of depreciation deductions with respect to, and
increased taxable gain on a sale of, the ROC or Chateau Properties,
respectively. However, because of certain technical limitations, the special
allocation rules of Section 704(c) may not always entirely eliminate the
Book-Tax Difference on an annual basis or with respect to a specific taxable
transaction such as a sale. Thus, the carryover basis of the contributed ROC
Properties in the hands of the Operating Partnership and the Financing
Partnership and the carryover basis of the contributed Chateau Properties in the
hands of the Operating Partnership could cause the Company (i) to be allocated
lower amounts of depreciation and other deductions for tax purposes that it
would be allocated if such properties had a tax basis equal to their fair market
value at the time of acquisition and (ii) to be allocated lower amounts of
taxable loss in the event of the sale of such a property at a book loss less
than the economic or book loss allocated to it as a result of such sale. The
foregoing principles also apply in determining the earnings and profits of the
Company for purposes of determining the portion of distributions taxable as
dividend income. The application of these rules over time may result in a higher
portion of distributions being taxed as dividends than would have occurred had
the Company purchased the Chateau and ROC Properties and the OP Units exchanged
at their respective fair market values.
Taxation of Stockholders
Taxation of Taxable Domestic Stockholders. As long as the Company
qualifies as a REIT, distributions made to the Company's taxable domestic
stockholders out of current or accumulated earnings and profits (and not
designated as capital gain dividends) will be taken into account by them as
ordinary income, and corporate stockholders will not be eligible for the
dividends received deduction
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as to such amounts. Distributions that are designated as capital gain dividends
will be taxed as long-term capital gains (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 stockholder has held its stock. However, corporate
stockholders may be required to treat up to 20% of certain capital gain
dividends as ordinary income. To the extent that the Company makes distributions
in excess of its current and accumulated earnings and profits, such
distributions are treated first as a tax-free return of capital to the
stockholder, reducing the tax basis of a stockholder's Common Stock by the
amount of such distribution (but not below zero), with distributions in excess
of the stockholder's tax basis taxable as capital gains (if the Common Stock is
held as a capital asset). In addition, any dividend declared by the Company in
October, November or December of any year and payable to a stockholder of record
on a specific date in any such month shall be treated as both paid by the
Company and received by the stockholder on December 31 of such year, provided
that the dividend is actually paid by the Company during January of the
following calendar year. Stockholders may not include in their individual income
tax returns any net operating losses or capital losses of the Company.
In general, any loss upon a sale or exchange of Common Stock by a
stockholder who has held such stock for six months or less (after applying
certain holding period rules) will be treated as a long-term capital loss, to
the extent of distributions from the Company required to be treated by such
stockholder as long-term capital gains.
Backup Withholding. The Company will report to its domestic
stockholders and to the IRS the amount of dividends paid during each calendar
year, and the amount of tax withheld, if any, with respect thereto. Under the
backup withholding rules, a stockholder may be subject to backup withholding at
the rate of 31% with respect to dividends paid unless such stockholder (a) is a
corporation or comes within certain other exempt categories and, when required,
demonstrates this fact, or (b) provides a taxpayer identification number,
certifies as to no loss of exemption from backup withholding, and otherwise
complies with applicable requirements of the backup withholding rules. A
domestic stockholder that does not provide the Company with its correct taxpayer
identification number may also be subject to penalties imposed by the IRS. 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 made to any stockholders who fail to
certify their non-foreign status to the Company. See "--Taxation of Foreign
Stockholders" below.
Taxation of Tax-Exempt Stockholders. Distributions by the Company to a
stockholder that is a tax-exempt entity generally should not constitute
unrelated business taxable income ("UBTI") , provided that the tax-exempt entity
has not financed the acquisition of its shares with "acquisition indebtedness"
within the meaning of the Code, and that the shares are not otherwise used in an
unrelated trade or business by such tax-exempt entity. In addition, under
certain circumstances, qualified trusts that own more than 10% (by value) of the
Company's shares may be required to treat a certain percentage of dividends as
UBTI. This requirement will only apply if the Company is a "pension-held REIT."
The restrictions on ownership in the Company's Charter should prevent the
Company from being treated as a pension-held REIT.
Taxation of Foreign Stockholders. The rules governing United States
federal income taxation of nonresident alien individuals, foreign corporations,
foreign partnerships and other foreign stockholders (collectively, "Non-U.S.
Stockholders") are complex and no attempt will be made herein to provide more
than a summary of such rules. Prospective Non-U.S. Stockholders should consult
with their own tax advisors to determine the impact of federal, state, and local
income tax laws with regard to an investment in shares, including any reporting
requirements, as well as the tax treatment of such an investment under their
home country laws.
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In general, Non-U.S. Stockholders will be subject to regular United States
federal income taxation with respect to their investment in shares of Common
Stock in the same manner as a U.S. Stockholder (i.e., at graduated rates on a
net basis, after allowance of deductions) if such investment is "effectively
connected" with the conduct by such Non-U.S. Stockholder of a trade or business
in the United States. A Non-U.S. Stockholder that is a corporation and that
receives income with respect to its investment in shares of Common Stock that is
(or is treated as) "effectively connected" with the conduct of a trade or
business in the United States may also be subject to the 30% branch profits tax
imposed under Section 884 of the Code, which is payable in addition to the
regular United States corporate income tax. The following discussion addresses
only the United States federal income taxation of Non-U.S. Stockholders whose
investment in shares of Common Stock is not "effectively connected" with the
conduct of a trade or business in the United States. Prospective investors whose
investment in shares of Common Stock may be "effectively connected" with the
conduct of a United States trade or business should consult their own tax
advisors as to the tax consequences thereof.
Distributions that are not attributable to gain from sales or exchanges by
the Company of United States real property interests and not designated by the
Company as capital gains dividends will be treated as dividends of ordinary
income to the extent that they are made out of current or accumulated earnings
and profits of the Company. Such distributions ordinarily will be subject to a
withholding tax equal to 30% of the gross amount of the distribution unless an
applicable tax treaty reduces or eliminates that tax. Pursuant to current
Treasury Regulations, dividends paid to an address in a country outside the
United States are generally presumed to be paid to a resident of such country
for purposes of determining the applicability of withholding discussed above and
the availability of a reduced tax treaty rate. Under proposed Treasury
Regulations, not currently in effect, however, a Non-U.S. Stockholder who wishes
to claim the benefit of an applicable treaty rate would be required to satisfy
certain certification and other requirements. Distributions made by the Company
in excess of its current and accumulated earnings and profits will not be
taxable to a stockholder to the extent they do not exceed the adjusted basis of
the stockholder's shares, but rather will reduce the adjusted basis of such
shares (but not below zero). To the extent that such distributions exceed the
adjusted basis of the Non-U.S. Stockholder's shares, they will give rise to tax
liability if the Non-U.S. Stockholder would otherwise be subject to tax on any
gain from the sale or disposition of his shares in the Company, as described
below.
As a result of a legislative change made by the Small Business Job
Protection Act of 1996, effective for distributions made after August 20, 1996,
the Company is required to withhold 10% of any distribution in excess of the
Company's current and accumulated earnings and profits. Consequently, although
the Company intends to withhold at a rate of 30% on the entire amount of any
distribution, to the extent that the Company does not do so any portion of a
distribution not subject to withholding at a rate of 30% will be subject to
withholding at a rate of 10%. However, the Non-U.S. Stockholder may seek a
refund of such amounts from the IRS if it is subsequently determined that such
distribution was, in fact, in excess of current or accumulated earnings and
profits of the Company, and the amount withheld exceeded the Non-U.S.
Stockholder's United States tax liability, if any, with respect to the
distribution.
For any year in which the Company qualifies as a REIT, distributions that
are attributable to gain from sales or exchanges by the Company of United States
real property interests will be taxed to a Non-U.S. Stockholder under the
provisions of the Foreign Investment in Real Property Tax Act of 1980
("FIRPTA"). Under FIRPTA, these distributions are taxed to a Non-U.S.
Stockholder as if such gain were effectively connected with the conduct of a
United States trade or business. Non-U.S. Stockholders would thus be taxed at
the normal capital gain rates applicable to U.S. stockholders (subject to
applicable alternative minimum tax and special alternative minimum tax in the
case of nonresident alien individuals), without regard as to whether such
distributions are designated by the
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Company as capital gain dividends. Also, distributions subject to FIRPTA may be
subject to a 30% branch profits tax in the hands of a foreign corporate
stockholder not entitled to treaty exemption. The Company is required by
Treasury Regulations to withhold 35% of any distribution to a Non-U.S.
Stockholder that could be designated by the Company as a capital gain dividend.
This amount is creditable against the Non-U.S. Stockholder's FIRPTA tax
liability.
Gain recognized by the Non-U.S. Stockholder upon a sale of shares
generally will not be taxed under FIRPTA if the Company is a "domestically
controlled REIT," defined generally as a REIT in which at all times during a
specified testing period less than 50% in value of its stock was held directly
or indirectly by foreign persons. The Company believes that it is, and will
continue to be a domestically controlled REIT and therefore, that the sale of
its shares will not be subject to taxation under FIRPTA.
If the gain on the sale of shares were to be subject to tax under FIRPTA,
the Non-U.S. Stockholder would be subject to the same treatment as U.S.
Stockholders with respect to such gain (subject to applicable alternative
minimum tax and a special alternative minimum tax in the case of nonresident
alien individuals and the possible application of the 30% branch profits tax in
the case of foreign corporations), and the purchaser of the shares would be
required to withhold and remit to the IRS 10% of the purchase price.
Notwithstanding the foregoing, gain from the sale or exchange of shares of
Company stock not otherwise subject to FIRPTA and distributions made by the
Company to Non-U.S. Stockholders that are designated as capital gain dividends
(and are not attributable to the sale or other disposition of a United States
real property interest) generally will not be taxable unless the Non-U.S.
Stockholder is a nonresident alien individual who is present in the United
States for 183 days or more during the taxable year and has a "tax home" in the
United States. In such case, the nonresident alien individual will be subject to
a 30% United States withholding tax on the amount of such individual's gain.
Other Tax Considerations
Dividend Reinvestment Program. Stockholders participating in the Company's
dividend reinvestment program will be deemed to have received the gross amount
of any cash distributions which would have been paid by the Company to such
stockholders had they not elected to participate. These deemed distributions
will be treated as actual distributions from the Company generally. See "Federal
Income Tax Considerations--Taxation of Stockholders." Participants in the
dividend reinvestment program are subject to federal income tax on the amount of
the deemed distributions to the extent that such distributions represent
dividends or gains, even though they receive no cash. Shares of Common Stock
received under the program will have a holding period beginning with the day
after purchase, and a tax basis equal to their cost (which is the gross amount
of the deemed distribution).
State and Local Taxes. The Company and its stockholders may be subject to
state or local taxation in various jurisdictions, including those in which it or
they transact business or reside. The state and local tax treatment of the
Company and its stockholders may not conform to the federal income tax advisors
regarding the effect of state and local tax laws on an investment in the Common
Stock of the Company.
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PLAN OF DISTRIBUTION
The Company may sell the Common Stock, Preferred Stock, Warrants,
Depositary Shares and Guarantees, and the Operating Partnership may sell the
Debt Securities, through underwriters or dealers, directly to one or more
purchasers (including executive officers of the Company or other persons that
may be deemed affiliates of the Company), through agents or through a
combination of any such methods of sale.
The distribution of the Offered Securities may be effected from time to
time in one or more transactions at a fixed price or prices, which may be
changed, at market prices prevailing at the time of the sale, at prices related
to such prevailing market prices or at negotiated prices. Further, the
distribution of any Common Stock in one or more special offerings pursuant to a
dividend reinvestment plan or other similar plan of the Company may be effected
from time to time at a fixed price or prices, which may be changed, at market
prices prevailing at the time of the sale, at prices related to such prevailing
market prices or at negotiated prices.
In connection with the sale of the Offered Securities, underwriters or
agents may receive compensation from the Company or the Operating Partnership or
from purchasers of the Offered Securities, for whom they may act as agents in
the form of discounts, concessions or commissions. Underwriters may sell the
Offered Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concessions or commissions from the
underwriters and/or commissions from the purchasers for whom they may act as
agents . Underwriters, dealers and agents that participate in the distribution
of the Offered Securities may be deemed to be underwriters under the Securities
Act, and any discounts or commissions they receive from the Company or the
Operating Partnership and any profit on the resale of the Offered Securities
they realize may be deemed to be underwriting discounts and commissions under
the Securities Act. Any such underwriter or agent will be identified, and any
such compensation received from the Company or the Operating Partnership will be
described, in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, each
series of the Offered Securities will be a new issue with no established trading
market, other than the Common Stock which is listed on the NYSE. Any shares of
Common Stock sold pursuant to a Prospectus Supplement will be listed on the
NYSE, subject to official notice of issuance. The Company or the Operating
Partnership, as the case may be, may elect to list any series of Debt
Securities, Warrants, Preferred Stock or Depositary Shares on an exchange, but
is not obligated to do so. It is possible that one or more underwriters may make
a market in a series of the Offered Securities, but will not be obligated to do
so and may discontinue any market making at any time without notice. Therefore,
no assurance can be given as to the liquidity of, or the trading market for, the
Offered Securities.
Under agreements into which the Company or the Operating Partnership may
enter, underwriters, dealers and agents who participate in the distribution of
the Offered Securities may be entitled to indemnification by the Company or the
Operating Partnership, as the case may be, against certain liabilities,
including liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with , or
perform services for, or be tenants of, the Company or the Operating Partnership
in the ordinary course of business.
In order to comply with the securities laws of certain states, if
applicable, the Offered Securities will be sold in such jurisdictions only
through registered or licensed brokers or dealers. In addition, in
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certain states the Offered Securities may not be sold unless they have been
registered or qualified for sale in the applicable state or an exemption from
the registration or qualification requirement is available and is complied with.
LEGAL MATTERS
The legality of the Offered Securities will be passed upon for the Company
by Rogers & Wells, New York, New York. Rogers & Wells will rely on Piper &
Marbury L.L.P., Baltimore, Maryland, as to matters of Maryland law.
EXPERTS
The consolidated balance sheets as of December 31, 1996 and 1995, and the
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1996, incorporated by
reference in this Registration Statement, have been incorporated herein in
reliance on the reports of Coopers & Lybrand L.L.P., independent accountants,
given the authority of that firm as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the estimated expenses to be incurred in
connection with the issuance and distribution of the securities being
registered.
Registration Fee................................................ $ 90,910
Printing or Copying Expenses............,....................... 50,000
Legal Fees and Expenses......................................... 125,000
Accounting Fees and Expenses.................................... 25,000
Blue Sky Fees and Expenses...............,...................... 30,000
Miscellaneous................................................... 10,000
Total........................................................... $330,910
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Charter limits the liability of the Company's directors and
officers to the Company and its stockholders to the fullest extent permitted
from time to time by Maryland law. Maryland law presently permits the liability
of directors and officers to a corporation or its stockholders for money damages
to be limited, except (i) to the extent that it is proved that the director or
officer actually received an improper benefit or profit in money, property or
services for the amount of the benefit or profit in money, property or services
actually received, or (ii) if a judgment or other final adjudication is entered
in a proceeding based on a finding that the director's or officer's action, or
failure to act, was the result of active and deliberate dishonesty and was
material to the cause of action adjudicated in the proceeding. This provision
does not limit the ability of the Company or its stockholders to obtain other
relief, such as an injunction or rescission.
The Charter and By-Laws require (or permit, as the case may be) the
Company to indemnify its directors, officers and certain other parties to the
fullest extent permitted from time to time by Maryland law. The MGCL permits a
corporation to indemnify its directors, officers and certain other parties
against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service to or at the request of the corporation,
unless it is established that (i) the act or omission of the indemnified party
was material to the matter giving rise to the proceeding and (x) was committed
in bad faith or (y) was the result of active and deliberate dishonest, (ii) the
indemnified party actually received an improper personal benefit in money,
property or services or (iii) in the case of any criminal proceeding, the
indemnified party had reasonable cause to believe that the act or omission was
unlawful. Indemnification may be made against judgments, penalties, fines,
settlements and reasonable expenses actually incurred by the director or officer
in connection with the proceeding; provided, however,that if the proceeding is
one by or in the right of the corporation, indemnification may not be made with
respect to any proceeding in which the director or officer has been adjudged to
be liable to the corporation. In addition, a director or officer may not be
indemnified with respect to any proceeding charging improper personal benefit to
the director or officer in which the director or officer was adjudged to be
liable on the basis that personal benefit was improperly received. The
termination of any proceeding by conviction, or upon a plea of nolo contendere
or its equivalent, or an entry of any order of probation
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prior to judgment, creates a rebuttable presumption that the director or officer
did not meet the requisite standard of conduct required for indemnification to
be permitted. It is the position of the Securities and Exchange Commission that
indemnification of directors and officers for liabilities arising under the
Securities Act is against public policy and is unenforceable pursuant to Section
14 of the Securities Act.
The partnership agreement of the Operating Partnership also provides for
indemnification of the Company and its officers and directors and from the
reimbursement of the Company to the extent it is required to provide
indemnification of its directors to the extent provided in the partnership
agreement. The partnership agreement also limits the liability of the Company
and its officers and directors to the Operating Partnership and its partners to
the extent provided.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors and officers of the Operating Partnership
pursuant to the foregoing provisions or otherwise, the Operating Partnership has
been advised that, although the validity and scope of the governing statute have
not been tested in court, 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 addition, indemnification
may be limited by state securities laws.
Item 16. EXHIBITS
Exhibit No. Description
- ----------- -----------
1.1* Form of Underwriting Agreement (for Debt Securities)
1.2* Form of Underwriting Agreement (for Common Stock)
1.3* Form of Underwriting Agreement (for Warrants)
1.4* Form of Underwriting Agreement (for Preferred Stock)
3.1+ Articles of Amendment and Restatement of the Company (1993)
3.2* Articles of Amendment of the Company (1995)
3.3+++ Articles of Amendment of the Company (1997)
3.4++++ Amended and Restated By-Laws of the Company
3.5* Form of Articles Supplementary of the Company (for Preferred Stock)
3.6+++++ Amended and Restated Agreement of Limited Partnership of the
Operating Partnership
4.1++ Form of Common Stock Certificates
4.2* Form of Preferred Stock Certificate
4.3* Form of Warrant Agreement
4.4* Form of Deposit Agreement
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4.5** Form of Indenture of the Operating Partnership
5.1** Opinion of Rogers & Wells
5.2** Opinion of Piper & Marbury L.L.P.
8** Opinion of Rogers & Wells Regarding Tax Matters
12 Statement of Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Rogers & Wells (included as part of Exhibit 5.1)
23.2 Consent of Piper & Marbury L.L.P. (included as part of Exhibit 5.2)
23.3* Consent of Coopers & Lybrand L.L.P.
24 Power of Attorney (included on Page II-7)
25* Statement of Eligibility of Trustee on Form T-1
- ----------
* To be filed by post-effective amendment to this Registration Statement or
pursuant to a Form 8-K to be filed after effectiveness by the Company
** To be filed pre-effective amendment to this Registration Statement
+ Incorporated by reference to the Exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995
filed with the Commission on August 10, 1995 (Commission File No. 1-12496)
++ Incorporated by reference to the Exhibits filed with the Company's
Registration Statement on Form S-11 filed with the Securities and Exchange
Commission on November 10, 1993 (Commission File No. 33-69150)
+++ Incorporated by reference to the Exhibits filed with the Company's Current
Report on Form 8-K, filed with the Commission on May 30, 1997
++++ Incorporated by reference to the Exhibits filed with the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1997, filed with the Commission on May 15, 1997 (Commission File No.
1-12496)
+++++ Incorporated by reference to the Exhibits filed with the Company's Form
S-4, filed with the Commission on December 24, 1996 (Commission File No.
333-18807)
II-3
<PAGE>
Item 17. UNDERTAKINGS
(a) Each of the undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(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 and 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 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(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 (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, 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
registrants pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
(4) If the registrant is a foreign private issuer, to file a
post-effective amendment to the registration statement to include any financial
statements required by Rule 3-19 of this chapter at the start of any delayed
offering or throughout a continuous offering. Financial statements and
information otherwise required by Section 10(a)(3) of the Act need not be
furnished, provided, that the registrant includes in the prospectus, by means of
a post-effective amendment, financial statements required pursuant to this
paragraph (a)(4) and other information necessary to ensure that all other
information in the prospectus is at least as current as the date of those
financial statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment need not be
filed to include financial statements and information required by Section
10(a)(3) of the Act or Rule 3-19 of this chapter if such financial statements
and information are
II-4
<PAGE>
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange
Act of 1934 that are incorporated by reference in the Form F-3.
(b) The undersigned registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrants' annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) 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 the time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrants pursuant to the foregoing provisions, or otherwise,
the registrants have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrants of expenses incurred or paid by a director, officer
or controlling person of the registrants 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 registrants 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 of 1933 and will be governed by the final adjudication of such
issue.
(d) The undersigned registrants hereby undertake to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Act.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrants certify that they have reasonable grounds to believe that they meet
all of the requirements for a filing on Form S-3 and have duly caused this
Amendment No. 1 to the Registration Statement to be signed on their respective
behalf by the undersigned, thereunto duly authorized, in the City of Englewood,
State of Colorado, on the 30th day of May, 1997.
CHATEAU COMMUNITIES, INC.
By: /s/ Tamara D. Fischer
----------------------------
Tamara D. Fischer
Chief Financial Officer
CP LIMITED PARTNERSHIP
By: Chateau Communities, Inc. as
general partner
By: /s/ Tamara D. Fischer
----------------------------
Tamara D. Fischer
Executive Vice President and
Chief Financial Officer
II-6
<PAGE>
POWER OF ATTORNEY
Each person whose signature appears below, hereby constitutes and appoints
Gary P. McDaniel, C.G. Kellogg and Tamara D. Fischer, or any 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 this Amendment No. 1 to the Registration Statement and any
or all further amendments, including pre-effective and post-effective
amendments, thereto, and to file the same, with exhibits thereto and any and all
other documents filed as part of or in connection therewith, with the Securities
and Exchange Commission, granting unto each of such attorneys-in-fact and agents
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection with such matters, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that each of such attorneys-in-fact and agents or their
substitute or substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the Registration Statement has been signed by the following persons in
the capacities and on the date indicated:
Signature Title Date
/s/ John A. Boll Chairman of the Board of May 30, 1997
- ------------------------
John A. Boll
/s/ Gary P. McDaniel Director and Chief Executive May 30, 1997
- ------------------------ Officer (Principal Executive
Gary P. McDaniel Officer)
/s/ C.G. Kellogg Director and President May 30, 1997
- ------------------------
C.G. Kellogg
/s/ Tamara D. Fischer Chief Financial Officer May 30, 1997
- ------------------------ (Principal Financial
Tamara D. Fischer Accounting Officer)
/s/ Edward R. Allen Director May 30, 1997
- ------------------------
Edward R. Allen
/s/ Gebran S. Anton, Jr. Director May 30, 1997
- ------------------------
Gebran S. Anton, Jr.
/s/ James l. Clayton Director May 30, 1997
- ------------------------
James L. Clayton
/s/ Steven G. Davis Director May 30, 1997
- ------------------------
Steven G. Davis
/s/ James M. Hankins Director May 30, 1997
- ------------------------
James M. Hankins
/s/ James M. Lane Director May 30, 1997
- ------------------------
James M. Lane
/s/ Donald E. Miller Director May 30, 1997
- ------------------------
Donald E. Miller
II-7
<PAGE>
/s/ Rhonda G. Hogan Director May 30, 1997
- ------------------------
Rhonda G. Hogan
II-8
<PAGE>
Exhibit Index
Exhibit No. Description
- ------- --- -----------
1.1* Form of Underwriting Agreement (for Debt Securities)
1.2* Form of Underwriting Agreement (for Common Stock)
1.3* Form of Underwriting Agreement (for Warrants)
1.4* Form of Underwriting Agreement (for Preferred Stock)
3.1+ Articles of Amendment and Restatement of the Company (1993)
3.2* Articles of Amendment of the Company (1995)
3.3+++ Articles of Amendment of the Company (1997)
3.4++++ Amended and Restated By-Laws of the Company
3.5* Form of Articles Supplementary of the Company (for Preferred Stock)
3.6+++++ Amended and Restated Agreement of Limited Partnership of the
Operating Partnership
4.1++ Form of Common Stock Certificates
4.2* Form of Preferred Stock Certificate
4.3* Form of Warrant Agreement
4.4* Form of Deposit Agreement
4.5** Form of Indenture of the Operating Partnership
5.1** Opinion of Rogers & Wells
5.2** Opinion of Piper & Marbury L.L.P.
8** Opinion of Rogers & Wells Regarding Tax Matters
12 Statement of Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Rogers & Wells (included as part of Exhibit 5.1)
23.2 Consent of Piper & Marbury L.L.P. (included as part of Exhibit 5.2)
23.3* Consent of Coopers & Lybrand L.L.P.
24 Power of Attorney (included on Page II-7)
II-9
<PAGE>
25* Statement of Eligibility of Trustee on Form T-1
- ----------
* To be filed by post-effective amendment to this Registration Statement or
pursuant to a Form 8-K to be filed after effectiveness by the Company
** To be filed pre-effective amendment to this Registration Statement
+ Incorporated by reference to the Exhibits filed with the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1995
filed with the Commission on August 10, 1995 (Commission File No. 1-12496)
++ Incorporated by reference to the Exhibits filed with the Company's
Registration Statement on Form S-11 filed with the Securities and Exchange
Commission on November 10, 1993 (Commission File No. 33-69150)
+++ Incorporated by reference to the Exhibits filed with the Company's Current
Report on Form 8-K, filed with the Commission on May 30, 1997
++++ Incorporated by reference to the Exhibits filed with the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31,
1997, filed with the Commission on May 15, 1997 (Commission File No.
1-12496)
+++++ Incorporated by reference to the Exhibits filed with the Company's Form
S-4, filed with the Commission on December 24, 1996 (Commission File No.
333-18807)
II-10
EXHIBIT 12
CP LIMITED PARTNERSHIP
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Company/
Company Predecessor Predecessor
For the Quarter For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended Ended
March 31, December 31, December 31, December 31, December 31, December 31,
1997 1996 1995 1994 1993 1992
--------------- ------------ ------------ ------------ ------------ ------------
(Dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income before
extraordinary$charges $ 5,588 $16,100 $13,979 $14,897 $ 3,931 $ 2,921
Fixed charges 5,438 13,002 12,488 6,027 12,708 14,334
------- ------- ------- ------- ------- -------
$11,026 $29,102 $26,467 $20,924 $16,639 $17,255
======= ======= ======= ======= ======= =======
Fixed charges:
Interest expens $ 5,320 $12,525 $11,914 $ 5,560 $12,381 $13,907
Amortization of 108 437 538 436 296 396
deferred financing
costs
Interest factor on rental
expense(1) 10 40 36 31 31 31
------- ------- ------- ------- ------- -------
$ 5,438 $13,002 $12,488 $ 6,027 $12,708 $14,334
======= ======= ======= ======= ======= =======
Ratio of earnings to
fixed charges 2.03 2.24 2.12 3.47 1.31 1.20
======= ======= ======= ======= ======= =======
</TABLE>
(1) Amount represents one third of all rental expense (the proportion deemed
representative of the interest factor).
Exh. 12 -1
