<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 1, 1998
REGISTRATION NO. 333-52977
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
---------------------
WESTFIELD AMERICA, INC.
(Exact name of Registrant as specified in its charter)
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<S> <C>
MISSOURI 43-0758627
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
11601 WILSHIRE BOULEVARD IRV HEPNER, SECRETARY
12TH FLOOR 11601 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90025 12TH FLOOR
(310) 478-4456 LOS ANGELES, CALIFORNIA 90025
(Address, including zip code, and telephone number, including (310) 478-4456
area code, of registrant's principal executive offices) (Name, address, including zip code,
and telephone number, including area code, of agent for
service)
</TABLE>
------------------------
Please send copies of all communications to:
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<S> <C>
BARRY MILLS, ESQ. GREGG A. NOEL, ESQ.
DEBEVOISE & PLIMPTON SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
875 THIRD AVENUE 300 SOUTH GRAND AVENUE
NEW YORK, NY 10022 LOS ANGELES, CALIFORNIA 90071
(212) 909-6000 (213) 687-5000
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after this Registration Statement becomes effective depending upon
market conditions and other factors.
------------------------
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment plans, please check the following
box: / /
If any of the securities being registered on this Form are being 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 register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement relates to securities which may be offered from
time to time by Westfield America, Inc. (the "Company"). This Registration
Statement contains a form of basic prospectus which will be used in connection
with an offering of securities by the Company. The specific terms of the
securities to be offered will be set forth in a Prospectus Supplement relating
to such securities.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 1, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
$600,000,000
WESTFIELD AMERICA, INC.
PREFERRED STOCK, COMMON STOCK,
DEPOSITARY SHARES AND WARRANTS
---------------------
Westfield America, Inc. (the "Company") may offer from time to time in one
or more series, together or separately, (i) shares of its preferred stock, $1.00
par value per share (the "Preferred Stock"), which may be issued in the form of
Depositary Shares (as defined herein) evidenced by Depositary Receipts (as
defined herein), (ii) shares of its common stock, $.01 par value per share (the
"Common Stock"), and (iii) warrants to purchase securities of the Company as
shall be designated by the Company at the time of the offering (the "Warrants"),
in amounts, at prices and on terms to be determined at the time of offering. The
Preferred Stock, Common Stock and Warrants are collectively called the
"Securities."
The Securities offered pursuant to this Prospectus may be issued in one or
more series and/or issuances and will have an aggregate public offering price of
up to U.S. $600,000,000. Certain terms of the particular class of Securities in
respect of which this Prospectus is being delivered are set forth in the
accompanying Prospectus Supplement (the "Prospectus Supplement"), including,
where applicable, (i) in the case of Preferred Stock, the specific designation,
the stated value and liquidation preference per share, the aggregate number of
shares offered, any dividend rights (including the method of calculating payment
of dividends), the date or dates on which dividends will accrue, any redemption,
voting and other rights, any terms for conversion or exchange into other
Securities or property, the initial public offering price and other specific
terms and any other terms not set forth herein, (ii) in the case of Warrants,
the number and terms thereof, the duration, purchase price, exercise price and
detachability of such Warrants and a description of the securities for which
each Warrant is exercisable, (iii) in the case of Depositary Shares, the
fractional share of Preferred Stock represented by each such Depositary Share,
and (iv) in the case of Common Stock, the aggregate number of shares offered,
the initial public offering price, the methods of distribution and other special
terms. In addition, the terms of the particular class of Securities may include
limitations on direct or beneficial ownership and restrictions on transfer of
the Securities, in each case as may be appropriate to assist in maintaining the
status of the Company as a real estate investment trust ("REIT") for U.S.
Federal income tax purposes.
The applicable Prospectus Supplement also will contain information, where
applicable, about certain U.S. Federal income tax considerations relating to the
Securities covered by such Prospectus Supplement, not contained in this
Prospectus.
The Common Stock is listed on the New York Stock Exchange ("NYSE") under the
trading symbol "WEA." Any Common Stock sold pursuant to a Prospectus Supplement
will be listed on such exchange, subject to official notice of issuance.
The Company may sell the Securities to or through underwriters, through
dealers or agents, directly to purchasers or through a combination of such
methods. See "Plan of Distribution." The accompanying Prospectus Supplement will
set forth the names of the underwriters, dealers or agents, if any, involved in
the sale of the Securities in respect of which this Prospectus is being
delivered and any applicable purchase price, fee, commission or discount
arrangements with them. The Prospectus Supplement will state whether the
Securities will be listed on any national securities exchange. If the Securities
are not listed on a national securities exchange, there can be no assurance that
there will be a secondary market for any such Securities. No Securities may be
sold by the Company through agents, underwriters or dealers without delivery of
a Prospectus Supplement describing the method and terms of the offering of such
Securities.
------------------------
SEE "RISK FACTORS" AT PAGE 4 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS IN THE 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 June 1, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN AN OFFERING OF SECURITIES MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE
SECURITIES. SUCH TRANSACTIONS MAY INCLUDE STABILIZING, THE PURCHASE OF
SECURITIES TO COVER SYNDICATE SHORT POSITIONS AND THE IMPOSITION OF PENALTY
BIDS. FOR A DESCRIPTION OF THOSE ACTIVITIES, SEE "UNDERWRITING" IN THE
ACCOMPANYING PROSPECTUS SUPPLEMENT.
No dealer, salesperson or other person has been authorized to give any
information or make any representations, other than those contained or
incorporated by reference in this Prospectus and the applicable Prospectus
Supplement, and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or any agent,
underwriter or dealer. This Prospectus and the applicable Prospectus Supplement
do not constitute an offer of any securities other than those to which they
relate, or an offer to sell or a solicitation of an offer to buy those to which
they relate in any jurisdiction to any person to whom it is unlawful to make
such offer or solicitation in such jurisdiction. The delivery of this Prospectus
and/or the applicable Prospectus Supplement at any time does not imply that the
information herein or therein is correct as of any time subsequent to the date
thereof.
TABLE OF CONTENTS
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PAGE
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Prospectus
Available Information....................................................................................... 1
Incorporation of Certain Documents by Reference............................................................. 2
Forward-Looking Statements.................................................................................. 2
The Company................................................................................................. 3
Risk Factors................................................................................................ 4
Use of Proceeds............................................................................................. 19
Ratio of Earnings to Combined Fixed Charges................................................................. 20
Description of Capital Stock................................................................................ 20
Description of Warrants..................................................................................... 30
Certain Provisions of the Company's Articles of Incorporation and By-laws and of Missouri Law............... 30
Federal Income Tax Considerations........................................................................... 35
Plan of Distribution........................................................................................ 46
Legal Matters............................................................................................... 47
Experts..................................................................................................... 48
</TABLE>
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, as well as the Registration Statement and the
exhibits and schedules thereto, can be inspected and copied at the public
reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 and at the regional offices of the
Commission located at 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can also be obtained at prescribed rates by
writing to the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. Information on the operation of
the Public Reference Section of the Commission may be obtained by calling the
Commission at 1-800-SEC-0330. The Commission also maintains a site on the world
wide web at http://www.sec.gov that contains reports, proxy and information
statements and other information filed electronically by the Company. In
addition, such reports, proxy statements and other information may be inspected
at the offices of the NYSE, 20 Broad Street, New York, New York 10005, upon
which the Common Stock of the Company is traded.
The Company has filed a registration statement on Form S-3 (together with
all amendments and exhibits, the "Registration Statement") under the Securities
Act of 1933, as amended (the "Securities Act") with respect to the Securities
offered hereby. This Prospectus and any accompanying Prospectus
1
<PAGE>
Supplement do not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the Securities offered hereby, reference is made to the Registration
Statement and the exhibits and the financial statements, notes and schedules
filed as a part thereof or incorporated by reference therein, which may be
inspected at the public reference facilities of the Commission, at the addresses
set forth above. Statements made in this Prospectus and any Prospectus
Supplement concerning the contents of any documents referred to herein or
therein are not necessarily complete, and in each instance are qualified in all
respects by reference to the copy of such document filed as an exhibit to the
Registration Statement or otherwise filed with the Commission.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act are incorporated herein by reference:
(1) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
(2) The Company's Quarterly Report on Form 10-Q for the calendar quarter
ended March 31, 1998;
(3) The Company's Proxy Statement, dated March 27, 1998, relating to the
Annual Meeting of Shareholders held on April 30, 1998.
(4) The Company's Current Report on Form 8-K, dated April 6, 1998; and
(5) The Company's Current Report on Form 8-K, dated May 4, 1998.
The Company's Exchange Act filing number is 1-12923.
All other documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the termination of the offering of the Securities shall
hereby be deemed to be incorporated by reference into this Prospectus and to be
a part hereof from the date of filing of such documents. Any statement contained
in a document incorporated or deemed to be incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus to
the extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein or in
any accompanying Prospectus Supplement 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 the Registration Statement or
this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, on written or
oral request of such person, a copy of any or all of the foregoing documents
incorporated by reference into this Prospectus (without exhibits and schedules
to such documents other than exhibits and schedules specifically incorporated by
reference into such documents). Requests for such copies should be directed to:
Irv Hepner, Secretary, at Westfield America, Inc., 11601 Wilshire Boulevard,
12th Floor, Los Angeles, California 90025; telephone number (310) 478-4456.
FORWARD-LOOKING STATEMENTS
This Prospectus, including the documents incorporated by reference herein,
contains forward-looking statements which reflect the Company's views at the
time the statements were made with respect to future events and financial
performance. These forward-looking statements are subject to certain risks and
uncertainties, including the matters described under "Risk Factors" and in the
documents incorporated by reference herein and in any Prospectus Supplement,
which could cause actual results to differ materially from historical results or
those anticipated. The words "believes," "expects," "anticipates," "intends,"
"plans," "estimates" and similar expressions identify forward-looking
statements, which speak only as of the dates on which they were made. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise. Readers are cautioned not to place undue reliance on these
forward-looking statements.
2
<PAGE>
THE COMPANY
The Company, a Missouri corporation, formerly known as CenterMark
Properties, Inc., was incorporated in 1924 and has been engaged for over 40
years in owning, operating, leasing, developing, redeveloping and acquiring
regional and super-regional shopping centers and power centers located primarily
in major metropolitan areas in the United States.
The Company owns interests in a portfolio of 16 super-regional shopping
centers and six regional shopping centers (together, the "Regional Centers"),
three power centers (the "Power Centers" and, collectively with the Regional
Centers, the "Centers"), 12 separate department store properties (the "May
Properties") which are net leased under financing leases to The May Department
Stores Company and are not located at the Centers, and certain other real estate
investments (collectively, the "Properties"). The Centers are located in seven
states in the east coast, midwest and west coast regions of the United States.
The Company is organized and operated as a real estate investment trust, or
REIT, under the Internal Revenue Code of 1986, as amended ("Code"). In order to
satisfy the provisions of the Code applicable to REITs, the Company must
distribute to its shareholders at least 95% of its REIT taxable income and meet
certain other requirements. The Company will make, at a minimum, distributions
to its shareholders sufficient to satisfy the REIT provisions under the Code.
The Company has transferred substantially all of its assets to a
partnership, Westfield America Limited Partnership (the "Operating
Partnership"). The general partner of the Operating Partnership is the Company
and all of the limited partnership interests of the Operating Partnership are
currently held by the Company or by wholly owned subsidiaries of the Company.
The Company expects to conduct substantially all of its operations through the
Operating Partnership.
The Company has engaged a property management company (the "Manager"), an
asset management company (the "Advisor") and a development company (the
"Developer") to provide property management, advisory and development services,
respectively, to the Company under agreements that expire in May 2000 and are
renewable annually thereafter. Each of the Manager, Advisor and Developer is an
affiliate of Westfield Holdings Limited, an Australian public company
("Westfield Holdings Limited" and together with its subsidiaries "Westfield
Holdings").
The Common Stock is listed on the NYSE under the trading symbol "WEA." The
principal executive offices of the Company are located at 11601 Wilshire
Boulevard, Los Angeles, California 90025; the telephone number is (310)
478-4456.
RECENT DEVELOPMENTS
On April 6, 1998, the Company announced that it had entered into an
agreement for the acquisition of interests in up to 13 properties (the "Hahn
Portfolio") from TrizecHahn Centers, Inc. ("Hahn") for a maximum purchase price
of $1.44 billion. The final price is dependent on the interests ultimately
acquired as certain of the properties are owned by joint ventures and are
subject to partnership rights, such as rights of first refusal. Settlement of
the purchase is scheduled to occur in stages between August and December of
1998. See Risk Factors--TrizecHahn Transaction.
On May 4, 1998, the Company announced that it had signed an underwriting
agreement to issue approximately $300.0 million of unsecured subordinated notes
to Australian investors, repayable in three equal installments due in June 2001,
2002 and 2003. The interest rate on the unsecured subordinated notes will be
fixed at the time of closing in June 1998 at approximately 225 basis points over
the Australian/U.S. dollar four-year swap rate. It is anticipated that proceeds
of the notes will be utilized in connection with the payment of the purchase
price for the Hahn Portfolio.
On May 29, 1998, the Company executed a subscription agreement (the "1998
Subscription Agreement") with Westfield America Trust, an Australian property
trust ("WAT"), pursuant to which WAT subscribed for approximately $300.0 million
of Common Stock of the Company to be purchased in three equal installments in
June 2001, 2002 and 2003 at a 5% discount to the prevailing market price of the
Common Stock at the applicable purchase dates. Although the issuance of the
Common Stock is at the option of the Company, the Company currently intends to
issue the Common Stock to WAT subject to market conditions at the time.
3
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RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER, AMONG OTHER FACTORS, THE
FOLLOWING INFORMATION IN EVALUATING AN INVESTMENT IN THE SECURITIES IN ADDITION
TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE APPLICABLE PROSPECTUS
SUPPLEMENT AND THE DOCUMENTS INCORPORATED HEREIN AND THEREIN BY REFERENCE.
POSSIBLE CONFLICTS OF INTERESTS WITH INSIDE PARTIES AND RELATED PARTY
TRANSACTIONS
INFLUENCE OF WESTFIELD AMERICA TRUST AND WESTFIELD HOLDINGS
As of March 27, 1998, WAT owned 60.6% and Westfield Holdings owned 16.4% of
the outstanding Common Stock on a fully-diluted basis. As of March 27, 1998,
Westfield Holdings also had an interest in approximately 26.2% of the Common
Stock held by WAT because it owns units in WAT ("WAT Units"). Westfield Holdings
Limited is an independent company from the Company. In addition, on May 29,
1998, the Company entered into the 1998 Subscription Agreement with WAT relating
to WAT's purchase of approximately $300.0 million of Common Stock. To maintain
the Company's qualification as a REIT, generally no individual (other than Frank
P. Lowy and the members of his family, who are subject to a higher ownership
threshold) may directly or indirectly hold more than 5.5%, by value, of the
Company's stock.
In addition, WAT is managed by Westfield America Management Limited ("WAM"),
a subsidiary of Westfield Holdings Limited. Perpetual Trust Company Limited, the
trustee of WAT (the "WAT Trustee") generally exercises all of the voting rights
over the shares of Common Stock owned by WAT as directed by WAM, subject to
applicable Australian law and certain other exceptions, including an exception
related to the designation and election of directors of the Company as set forth
below. The WAT Trustee may only vote shares of Common Stock for the election of
directors as directed by a majority of the WAT unitholders voting on the matter
at a meeting of unitholders. By virtue of WAT's substantial ownership of Common
Stock and Westfield Holdings' ownership of WAT Units and Common Stock, WAT and
Westfield Holdings are in a position to exercise significant influence on the
Company. Accordingly, WAT and Westfield Holdings together will be able to elect
all of the Company's directors and to control the vote on all matters submitted
to the Company's shareholders including approval of mergers, sales of all or
substantially all of the Company's assets, and "going private" transactions and
to exercise significant influence on the decision to terminate the Manager,
Developer or Advisor. The Company is also managed and advised by Westfield
Holdings.
As of March 31, 1998, interests associated with the Lowy family owned
approximately 44.0% of the ordinary shares of Westfield Holdings Limited and
8.4% of the outstanding WAT units and members of the Lowy family act as officers
and directors of Westfield Holdings, WAM and the Company. By virtue of their
ownership interests in Westfield Holdings Limited and WAT and their positions as
officers and directors, the Lowy family is in a position to exercise significant
influence on Westfield Holdings, WAT and the Company with respect to the
foregoing matters.
CONFLICTS OF INTERESTS WITH INSIDE PARTIES
Pursuant to the Management Agreements, the Advisory Agreement and the
Development Agreements (each as defined below) between the Manager, Advisor and
Developer, each a subsidiary of Westfield Holdings, and the Company with respect
to management, advisory and development services and Westfield Holdings'
substantial ownership of Common Stock, Westfield Holdings has interests that may
conflict with the interests of persons acquiring the Securities. Implementation
of the Company's key growth strategies will result in increased management,
development and advisory fees to Westfield Holdings.
WAT, by virtue of its stock ownership of the Company, and Westfield
Holdings, by virtue of its ownership of Common Stock, WAT Units and its
management of WAT and the Company, are in a position
4
<PAGE>
to exercise significant influence over the affairs of the Company, which
influence might not be consistent with the interests of other shareholders.
Certain officers and/or directors of Westfield Holdings also act as officers
and/or directors of the Company.
A subsidiary of Westfield Holdings Limited is also the manager of WAT and
certain officers and/or directors of such subsidiary are also directors and/or
officers of the Company. In addition, all of the executive officers of the
Company are employed by and provide services to Westfield Holdings and other
properties managed by Westfield Holdings. All of the executive officers of the
Company, other than Frank P. Lowy, currently devote substantially all of their
time to the business and affairs of the Company. The Company anticipates that
such officers will continue to devote substantially all of their time to the
business and affairs of the Company. However, as a result of services performed
for Westfield Holdings and other properties managed by Westfield Holdings, there
may be periods of time during which a particular officer devotes less than
substantially all, or less than a majority, of his or her time to the business
and affairs of the Company.
Westfield Holdings has agreed that, during the period in which it is the
Manager of the Centers and Advisor to the Company, it will not acquire any
ownership interest in shopping center properties or power centers in the United
States or manage or develop a shopping center property in competition with a
Center owned by the Company, except in the case of the acquisition by Westfield
Holdings of an entity that does not have any ownership interest in shopping
center properties and power centers in the United States and is then managing or
developing a competitive center (in addition to other properties). This non-
competition agreement does not apply to any activity by Westfield Holdings with
respect to airport projects. Each of Frank Lowy, David Lowy, Peter Lowy and
Steven Lowy agreed with the Company that he will not acquire any ownership
interest in shopping center properties or power centers in the United States for
so long as (i) Westfield Holdings is the Advisor to the Company and the Manager
of the Centers, and (ii) interests associated with the Lowy family have
significant ownership and significant management involvement in Westfield
Holdings Limited.
In May 1997, the Company acquired a substantial economic interest in the
revenues to be received from Garden State Plaza, a super-regional shopping
center located in Paramus, New Jersey, by making a $145 million participating
secured loan (the "Garden State Plaza Loan") to two wholly-owned, indirect
subsidiaries of Westfield Holdings Limited which have a combined 50% interest in
Garden State Plaza. The Garden State Plaza Loan is non-recourse, bears interest
at a fixed annual rate of 8.5% per annum, and is secured by a pledge of
Westfield Holdings' 50% partnership interest in the limited partnership which
owns Garden State Plaza. The Company also receives a participating interest
based on 80% of the borrowers' share of the adjusted cash flow (after payment of
the fixed interest and after calculating Westfield Holdings' share of cash flow
from Garden State Plaza as if the mortgage loan encumbering such property had a
fixed interest rate of 7.25% per annum) from Garden State Plaza subject to an
aggregate limit for fixed interest and participating interest in an amount equal
to 11% per annum. The Garden State Plaza Loan will mature on May 21, 2007, may
be prepaid with a yield maintenance premium (based on the payment of the maximum
amount of participating interest) after the expiration of the Company's option
to acquire Garden State Plaza in connection with the sale of Garden State Plaza
(or Westfield Holdings' interest therein) to an unaffiliated third party and may
not otherwise be prepaid for five years. If an event of default shall occur
under the Garden State Plaza Loan, the Company will be entitled to a yield
maintenance premium (based on the payment of the maximum amount of participating
interest) and will have the right to terminate its agreements with the Manager,
the Advisor and the Developer. In May 1997, the board of directors of Westfield
Holdings Limited represented that it will not prepay the Garden State Plaza Loan
for seven years except under the circumstances described above and with the
required yield maintenance premium. The Company received $3.5 million in
interest from the Garden State Plaza Loan for the three months ended March 31,
1998.
The other 50% interest in Garden State Plaza is owned by affiliates of
Rodamco North America B.V., a Netherlands corporation which is not affiliated
with the Company.
5
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RELIANCE ON WESTFIELD HOLDINGS; LACK OF CONTROL OVER
DAY-TO-DAY ACTIVITIES OF OUTSIDE MANAGEMENT
The Manager and Advisor, subsidiaries of Westfield Holdings, have management
contracts (the "Management Agreements") to manage the operations and leasing of
the Centers and an advisory agreement (the "Advisory Agreement") with the
Company to provide corporate strategic planning, administrative and other asset
management services to the Company. The Company has also entered into a master
development framework agreement (the "Development Agreement") with a subsidiary
of Westfield Holdings Limited to perform the necessary planning and
predevelopment work to determine if a particular development is feasible and
economically viable and to provide the development services. The Company and the
Operating Partnership have agreed that any properties acquired in the future
that they control will be subject to the Management Agreements and Development
Agreement. The Company and the Operating Partnership currently have no employees
and rely entirely on Westfield Holdings for the management of the Company and
the Centers and are not currently able to operate without Westfield Holdings.
Because the Company cannot elect the directors of the Manager, the Advisor
or the Developer, its ability to control their actions on a day-to-day basis is
limited. However, the Company does have various approval rights over aspects of
management and development including that the Manager must operate within
budgets and leasing guidelines approved by the Company and in accordance with
policies set by the Company and that all development projects are subject to the
approval of the Company's Board of Directors (including at least 75% of the
Independent Directors) of the plans and feasibility for such projects and the
costs thereof. Independent Directors are those members of the Board of Directors
who (i) are not, and have not for the last 12 months been, directors, officers
or employees of Westfield Holdings or WAT, (ii) are not affiliates of Westfield
Holdings or WAT or officers or employees of such affiliates, (iii) are not
members of the immediate family of any natural person described in clause (i) or
(ii) above and (iv) are free from any relationship that would interfere with the
exercise of independent judgment as a director. If the leasing guidelines are
not met or the Company does not grant its approval to a development project,
then the Manager or the Developer may not take actions to lease the property or
commence a development project. If the Manager or Developer nonetheless takes
any such action and a material breach of the Management Agreements or
Development Agreement occurs, then the Manager, Advisor or Developer may be
terminated. In addition, the Company generally has the right to terminate the
Management Agreements and Advisory Agreements after May 2000 upon certain
conditions, including a determination by at least 75% of the Independent
Directors and the WAT Trustee (so long as WAT owns at least 10% of the capital
stock of the Company) not to renew the Management or Advisory Agreements because
of unsatisfactory performance of the Manager or the Advisor that is materially
detrimental to the Company or because the fees thereunder are not fair. The
Company may also terminate the agreements upon the occurrence and during the
continuance of an event of default under the Garden State Plaza Loan.
The terms, agreements and understandings relating to these transactions were
negotiated between the Company and Westfield Holdings. The Company believes
that, although these agreements were negotiated between associated parties, they
reflect market terms. The Company has discretion as to whether or not to
undertake a development project. The fees payable by the Company under the
Development Agreement for any development project are subject to the review and
approval of the Board of Directors, including at least 75% of the Independent
Directors.
DEPENDENCE ON OPERATING PARTNERSHIP
The Company's ability to make distributions and other payments on the
Securities is initially dependent upon the Operating Partnership making
distributions and other payments to its partners. If the Operating Partnership
does not make distributions or other payments to its partners, for any reason,
it is
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expected that the Company would likely not be able to pay dividends, other
distributions or other payments on the Securities.
RISKS GENERALLY INHERENT IN REAL ESTATE INVESTMENT
GENERAL FACTORS AFFECTING INVESTMENTS IN REAL ESTATE;
EFFECT OF ECONOMIC AND REAL ESTATE CONDITIONS
A shopping center's revenues and value may be adversely affected by a number
of factors, including but not limited to: the national economic climate; the
regional economic climate (which may be adversely affected by plant closings,
industry slowdowns and other factors); local real estate conditions (such as an
oversupply of retail space); perceptions by retailers or shoppers of the safety,
convenience and attractiveness of the shopping center; trends in the retail
industry; competition for tenants; high vacancy rates; changes in market rental
rates; the inability to collect rent due to bankruptcy or insolvency of tenants
or otherwise; the need periodically to renovate, repair and relet space and the
costs thereof; increased operating costs; and the willingness and ability of the
property's owner to provide capable management and adequate maintenance. These
factors could influence the price a purchaser would be willing to pay for a
Center if the Company elects to sell such Center. In the case of vacant space,
the Company may not get full credit for the income that can be earned from such
vacant space in determining the sales price. In addition, other factors may
adversely affect a shopping center's value without affecting its current
revenues, including: changes in governmental regulations, zoning or tax laws;
potential environmental or other legal liabilities; and changes in interest rate
levels.
GEOGRAPHIC CONCENTRATION
Nine of the 25 Centers are located in California (representing approximately
35.8% of the total gross leasable area ("Total GLA"), six are located in
Missouri (representing approximately 23.7% of the Total GLA) and four are
located in Connecticut (representing approximately 15.0% of the Total GLA). To
the extent that general economic or other relevant conditions in these regions
decline and result in a decrease in consumer demand in these regions, the
Company's financial performance may be adversely affected. The markets for
certain Centers are also significantly dependent on the financial results of
major local employers and on industry concentrations. For example, the sales
growth of the Centers located in California was negatively affected by the
California economic recession from 1990 to 1993.
The Hahn Portfolio consists of four centers in San Diego, California; three
in Los Angeles, California; five in Northern California; and one in Washington
State, for a total of 12.5 million square feet of gross leasable area. If the
Company acquired all of such properties it would own 20 shopping centers in
California (including North County Fair), including eight in San Diego, seven in
Los Angeles and five in Northern California.
RISKS OF EXPANSION, REDEVELOPMENT AND ACQUISITION ACTIVITIES
The Company may incur risks in connection with the redevelopment and
expansion of existing shopping centers or the redevelopment of new and existing
shopping centers. These risks include the risk that redevelopment opportunities
explored by the Company may be abandoned after funds have been expended; the
risk that permits or approvals required for such development may not be
obtained; the risk that construction costs of a project may exceed original
estimates, possibly making the project uneconomical; the risk that redevelopment
may temporarily disrupt income; and the risk that occupancy rates and rents at a
completed project will not be sufficient to make the project profitable. In case
of an unsuccessful expansion or redevelopment project, the Company's loss could
exceed its investment in the project. Also, there may be competitors seeking to
expand properties or to acquire properties for redevelopment, some of which may
have greater resources than the Company.
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The Company intends to continue to actively seeking to acquire shopping
centers to the extent they can be acquired on advantageous terms and meet the
Company's investment criteria. Property acquisitions entail risks that
investments will fail to perform in accordance with expectations. Estimates of
the costs of improvements to bring an acquired property up to standards
established for the market position intended for that property may prove
inaccurate. In addition, there are general investment risks associated with any
new real estate investment.
The Company anticipates that future acquisitions will be financed, in whole
or in part, under existing credit facilities or loan commitments or other lines
of credit or other forms of secured or unsecured financing or through the
issuance of units by the Operating Partnership or additional equity by the
Company. The use of equity financing, rather than debt, for future developments
or acquisitions could have a diluting effect on the interest of existing
shareholders of the Company.
RELIANCE ON CERTAIN TENANTS AND ANCHORS
The Company's income and Funds from Operations could be adversely affected
in the event of the bankruptcy or insolvency, or a downturn in the business, of
any anchor tenant or anchor-owned store, or if any anchor tenant does not renew
its lease when it expires. Funds from Operations means net income (loss)
(computed in accordance with generally accepted accounting principals) excluding
gains (or losses) from debt restructurings and sales of property, plus real
estate related depreciation and amortization and after adjustments for
unconsolidated partnerships and joint ventures. This definition is in accordance
with standards established by the White Paper on Funds from Operations approved
by the Board of Governors of the National Association of Real Estate Investment
Trusts in March 1995. If the tenant sales in the Centers were to decline,
tenants might be unable to pay their rent or other occupancy costs. In the event
of default by a tenant, delays and costs in enforcing the lessor's rights could
be experienced. In addition, lease termination by one or more anchor tenants of
a shopping center or the closing of one or more anchor-owned stores whose
reciprocal easement agreements or leases may permit closing could result in
lease terminations or reductions in rent by other tenants whose leases may
permit cancellation or rent reduction in those circumstances and adversely
affect the Company's ability to re-lease the space that is vacated. Similarly,
the leases of certain anchor tenants, and the reciprocal easement agreements to
which certain of the anchor-owned stores are parties, permit an anchor to
transfer its interest in a shopping center to another retailer, often only after
the expiration of an initial period. The transfer to a new anchor tenant could
adversely affect customer traffic in the Center and thereby reduce the income
generated by that Center and could also allow certain other anchors and other
tenants to make reduced rental payments or to terminate their leases at that
Center. Each of these developments could adversely affect the Company's Funds
from Operations and its ability to make expected distributions to shareholders.
As of December 31, 1997, anchors owned (in fee or subject to ground leases)
43.8% and leased 15.4% of the Total GLA of the Centers. As of the same date, the
May Company owned 15.9%, J.C. Penney owned 8.7% and Sears owned 7.0% of the
Total GLA. No other anchor owned more than 3.3% of the Total GLA. Also, as of
such date, JC Penney's leased 4.1% of Total GLA and no other anchor leased more
than 2.4% of Total GLA. Also as of such date J.C. Penney represented 0.9% of the
aggregate annualized base rent of the Centers and no other anchor represented
more than 0.8% of the aggregate annualized base rent of the Centers.
Mall GLA means gross leasable area for Mall Stores (stores smaller than
anchors and kiosks permanently located within the corridors of the Centers that
are typically specialty retailers and free standing buildings generally located
along the perimeter of a Center's parking area). Collectively, tenants whose
parent company is The Limited Stores occupy over 771,949 square feet of Mall GLA
constituting 8.8% of total Mall GLA. These tenants include Bath & Body Works,
Express, Lane Bryant, Lerner, The Limited, Structure and Victoria Secret, among
others. While each of these tenants is operated as an independent subsidiary, an
unexpected negative change in the financial strength of the parent company,
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The Limited Stores, could result in the loss of some or all of the revenues
provided to the Company under the leases executed with these tenants.
In addition to being an anchor at many of the Centers, the May Company is
the lessee of the May Properties' leases. A negative change in the financial
condition of the May Company could result in the loss of some or all of the
revenues provided to the Company under the leases of the May Properties.
The Company has established a temporary leasing program pursuant to which it
leases Mall Store space on a short-term basis (usually for a term of between 30
days to eleven months) pending its ability to secure suitable long-term tenants.
These leases are generally subject to the termination by the Company on 30 days
notice. This short-term leasing program may present risks not encountered in
typical long-term retail leasing arrangements as the Company may not be able to
re-lease such space upon expiration of any such short-term lease.
COMPETITION
All of the Centers are located in developed retail and commercial areas.
With respect to certain of the Centers, other malls or neighborhood and
community shopping centers, may compete within the Primary Trade Area of each of
the Centers. Primary Trade Area means the geographic market from which a Center
draws a majority of its sales, as determined by the Company by taking into
account competing shopping centers, access, available sales data and on-site
geographic research. The amount of rentable space in the relevant Primary Trade
Area, the quality of facilities and the nature of stores at such competing malls
and shopping centers could each have a material adverse effect on the Company's
ability to lease space and on the level of rents the Company can obtain. In
addition, retailers at the Centers face potentially changing consumer
preferences and increasing competition from other forms of retailing, such as
discount shopping centers, outlet malls, upscale neighborhood strip centers,
catalogues, discount shopping clubs and telemarketing. In addition, while
specific competitive conditions vary on a center-by-center basis, all of the
Centers are located in major metropolitan areas which are served by multiple
retailing outlets and accordingly face strong competition.
Although the Company believes the Centers compete effectively within their
trade areas, the Company also competes with other owners, managers and
developers of super regional and regional shopping centers. Those competitors
that are not REITs may be at an advantage to the extent they can utilize working
capital to finance projects, while the Company (and its competitors that are
REITs) will be required by the annual distribution provisions under the Code to
distribute significant amounts of cash from operations to its shareholders. In
addition, the Company intends to distribute more cash to its shareholders than
is required by the Code. If the Company should require funds, it may have to
borrow when the cost of capital is high. Moreover, increased competition could
adversely affect the Company's revenues and Funds from Operations.
LIQUIDITY OF ASSETS
Equity real estate investments are relatively illiquid and therefore tend to
limit the ability of the Company to vary its portfolio promptly in response to
changes in economic or other conditions. Additionally, the corporate level tax
that would be imposed upon certain built-in gains may make it uneconomical for
the Company or the applicable subsidiary to sell certain assets owned on the
first day of the first taxable year for which the Company or the applicable
subsidiary qualified as a REIT within 10 years of such applicable qualification
date, without adversely affecting returns to shareholders.
RISKS OF TENANT BANKRUPTCY
Because virtually all of the Company's income consists of rental income paid
by retail tenants at the Centers, the Company's cash flow and its ability to
make distributions to shareholders will be adversely affected if the Company is
unable to lease a significant amount of space in the Centers, or if a
significant
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number of tenants are unable to pay their rent. In times of recession or other
economic downturn, there is an increased risk that retail tenants will be unable
to meet their obligations to the Company, otherwise default under their leases,
or become debtors in cases under the United States Bankruptcy Code, codified at
11 U.S.C. $101-1,330, as amended (the "Bankruptcy Code"). If any tenant becomes
a debtor in a case under the Bankruptcy Code, the Company would not be permitted
to evict the tenant solely because of its bankruptcy, but the bankruptcy court
could authorize the tenant to reject and terminate its lease with the Company.
The Company's claim against such a tenant for unpaid, future rent would be
subject to a statutory cap that could be substantially less than the remaining
rent actually owned under the lease. In any event, the Company's claim for
unpaid rent (as capped) would likely not be paid in full.
The bankruptcy of an Anchor could have an especially adverse effect on a
Center, by depriving the Company of the rent due from the Anchor and by reducing
foot traffic at the Center, which would impair the performance of the remaining
tenants and their ability to meet their obligations to the Company.
The bankruptcy of any tenant, including any Anchor, and the rejection of its
lease may provide a Center with an opportunity to lease the vacant space to
another more desirable tenant on better terms, but there can be no assurance
that the Company would be able to do so. The Company has experienced retail
bankruptcies by tenants in the past, including Edison Bros., Judy's, Paul Harris
and Merry Go Round and Nobody Beats the Wiz. The Company experienced no adverse
effects of such bankruptcies because the stores were either acquired by stronger
tenants or were acquired by the Company and re-leased.
LACK OF UPDATED TITLE INSURANCE
The Company does not have recent policies of title insurance on most of the
Properties. Based upon (i) the Company's review of the existing owner's and/or
mortgagee's title insurance policies, (ii) updated title reports obtained by the
Company for certain of the Properties, and (iii) the absence of any knowledge by
the Company of material title defects since Westfield Holdings acquired an
interest in the Company, the Company has determined that the substantial cost of
new owner's title insurance policies for the full market value of these
properties is not warranted. The Company intends to purchase title insurance on
the Hahn Portfolio.
CHANGES IN LAWS AFFECTING REAL ESTATE
Costs resulting from changes in real estate tax laws or real estate tax
rates generally are passed through to tenants and therefore should not have a
material adverse effect on the Company. Changes in laws increasing the potential
liability for environmental conditions existing at properties, increasing the
restrictions on discharges or other hazardous waste conditions, or increasing
building code or similar local law requirements may result in significant
unanticipated expenditures which would adversely affect the Company's Funds from
Operations and its ability to make distributions to shareholders.
LAWS BENEFITTING DISABLED PERSONS
A number of Federal, state and local laws (including the Americans with
Disabilities Act of 1990) and regulations exist that may require modifications
to existing buildings or restrict certain renovations by requiring improved
access to such buildings by disabled persons. Additional legislation or
regulations may impose further burdens or restrictions on owners with respect to
improved access by disabled persons. The costs of compliance with such laws and
regulations may be substantial, and limits or restrictions on completion of
certain renovations may limit implementation of the Company's investment
strategy in certain instances or reduce overall returns on its investments. The
Company will review its properties periodically to determine the level of
compliance and, if necessary, take appropriate action to bring such properties
into compliance. Although management has concluded based on its review to date
that the costs of compliance with such current laws and regulations will not
have a material adverse effect on the Company, no assurance can be given in this
regard.
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RISKS ASSOCIATED WITH DEBT FINANCING
POSSIBLE INABILITY TO REFINANCE BALLOON PAYMENTS ON DEBT
The Company does not expect to have sufficient Funds from Operations to be
able to make all of the balloon payments of principal on the debt of the Joint
Ventures (as defined below) and the Company in the aggregate principal amount of
$1,099.0 million as of March 31, 1998, (including amounts allocable to the
Outside Partners, as defined below) which becomes due in the period 1999 through
2001. The Company intends to refinance such debt at or before maturity or
otherwise to obtain funds through secured financings by utilizing unencumbered
properties or unsecured financings. The Company may also issue equity or debt in
order to obtain funds. Any such equity issuance may have a dilutive effect on
existing shareholders of the Company. However, there can be no assurance that
the Company or the Outside Partners will be able to refinance any such
indebtedness or to otherwise obtain funds on commercially reasonable terms, if
at all. An inability to make such balloon payments when due could cause a
mortgage lender to foreclose on such properties, which could have a material
adverse effect on the Company. In addition, interest rates on any debt incurred
to refinance mortgage debt or debt facilities may be higher than the rates on
the current mortgages or debt facilities or at floating rates.
The Company has entered into deferred interest rate exchange agreements to
manage future interest rates. These agreements consist of swaps and involve the
future receipt, corresponding with the expiration of existing fixed rate debt,
of a floating rate based on LIBOR and the payment of a fixed rate. In the
unlikely event that a counterparty fails to meet the terms of an interest rate
exchange agreement, the Company's exposure is limited to the interest rate
differential on the notional amount. The Company does not anticipate
non-performance by any of the counterparties. Since March 31, 1997, the Company
has lengthened the average remaining term of its pro rata share of total
borrowings and hedges, including delayed start swaps, from 4.9 to 7.0 years.
These exchange rate agreements ensure that, upon the expiration of certain
of the Company's debt, if the Company refinances such debt with new LIBOR based
loans, the interest rate on such loans will be no more than 5.94% to 6.26%, plus
the applicable spread of the loan at such time.
See also "--Trizec Hahn Transaction" below for a description of additional
debt facilities to fund that acquisition.
NO LIMITATION ON DEBT
As of March 31, 1998, the Company had an aggregate of $1,279.3 million of
debt, including $354.0 million of fixed rate debt with The Prudential Insurance
Company of America (the "Prudential Loan"), at an average interest rate of 6.4%
per annum, secured and cross-collateralized by seven wholly-owned Centers and
$73.9 million of fixed rate debt, at an average interest rate of 7.1% per annum,
secured by the May Properties. Except for a $15.0 million portion of the
Prudential Loan which relates to the redevelopment of Mid Rivers Mall, such
indebtedness is all non-recourse.
As of March 31, 1998, the Company's pro-rata share of debt-to-total market
capitalization based on the share price on March 31, 1998, was 47.4% and the
Company's balance of cash and cash equivalents was $12.3 million, not including
its proportionate share of cash held by unconsolidated real estate partnerships.
In addition, the Company has an $800.0 million unsecured revolving credit
facility with National Australia Bank Limited, Australia and New Zealand Banking
Group Limited, Commonwealth Bank of Australia and Union Bank of Switzerland. As
of March 31, 1998 the Company had unused capacity under its unsecured revolving
credit facility totaling $222.0 million which will be used to finance future
redevelopments, acquisitions and/or for working capital. See also "--Trizec Hahn
Transaction" below for a description of additional debt facilities to fund that
acquisition.
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The Company currently anticipates that cash from operations and its working
capital facility will be available to fund its business operations, recurring
and certain developmental capital expenditures, continuing debt service
obligations (other than the balloon payments discussed above), the payment of
distributions, accounts payable and deferred taxes in respect of installment
sales and other dispositions of property. Additional borrowings will be required
for developmental capital expenditures and may from time to time be required in
connection with the obligations described in the preceding sentence. There can
be no assurance, however, that such borrowings will be available on commercially
reasonable terms, if at all.
EFFECTS OF DEBT FINANCING
The Company is subject to the risks normally associated with debt financing,
including the risk that the Company's cash flow from operations will be
insufficient to meet required payments of principal and interest, the risk that
existing indebtedness will not be able to be refinanced or that the terms of
such refinancing will not be as favorable as the terms of such indebtedness, and
the risk that necessary capital expenditures for such purposes as renovations
and other improvements will not be able to be financed on favorable terms or at
all. Certain significant expenditures associated with a property (such as
mortgage payments and other indebtedness) are generally not reduced when
circumstances cause a reduction in income from such property. Should such events
occur, the Company's Funds from Operations and its ability to make expected
distributions to shareholders would be adversely affected. If a property is
mortgaged to secure payment of indebtedness and the Company is unable to meet
mortgage payments, the property could be transferred to the mortgagee (or other
third parties) with a consequent loss of income and asset value to the Company.
In addition, corporate level tax could result from such a transfer if built-in
gain is recognized. The Company has a $800 million unsecured revolving credit
facility, which contains customary financial covenants and limitations on
changes in the Advisor or the Manager without the approval of the lenders. The
Company has $354.0 million of mortgage indebtedness held by Prudential which
contains cross-default and cross-collateralization features among seven
properties. Under cross-default provisions, a default under the mortgages
included in the cross-defaulted loan constitutes a default under all such
mortgages and can lead to acceleration of the indebtedness due on each center
within the collateral package. Pursuant to such cross-collateralization feature,
the excess of the value of a center over the mortgage indebtedness specific to
that center serves as additional collateral for the entire indebtedness. See
also "--Trizec Hahn Transaction."
With respect to the loan obtained by the Joint Venture which owns North
County Fair, the lender participates in a percentage of gross revenues above a
specified base and after deduction of debt service and various expenses.
INTEREST RATE SWAPS
At March 31, 1998, the Company had four interest rate swap agreements for a
combined notional amount of $425.0 million with respect to interest currently
payable by the Company. Interest rate swaps are contractual agreements between
the Company and third parties to exchange fixed and floating interest payments
periodically without the exchange of the underlying principal amounts (notional
amounts). In the unlikely event that a counterparty fails to meet the terms of
an interest rate swap agreement, the Company's exposure is limited to the
interest rate differential on the notional amount. The Company does not
anticipate non-performance by any of the counterparties. In addition, the
Company has entered into interest rate exchange agreements with a counterparty
to manage future interest rates as described in "--Possible Inability to
Refinance Balloon Payments on Debt."
In addition, the Company has entered into interest rate exchange agreements
with a counterparty to manage future interest rates as described in "--Possible
Inability to Refinance Balloon Payments on Debt."
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Subsequent to March 31, 1998, the Company entered into deferred interest
rate agreements with a combined notional amount totaling $920 million. These
agreements begin at various dates during the period June 30, 1998 to December
11, 1998 and expire at various dates during the period June 30, 2001 to Aril 11,
2008.
TRIZEC HAHN TRANSACTION
On April 6, 1998, the Company announced that it entered into an agreement
for the acquisition of interests in the Hahn Portfolio from Hahn for a maximum
purchase price of $1.44 billion. The final price depends on the interests
ultimately acquired since certain of the properties are owned by joint ventures
and are subject to partner rights, such as rights of first refusal. Accordingly,
there can be no assurance that the Company will successfully complete the
acquisition of all of the properties or any specific property interest or what
the consequences thereof would be. Settlement of the purchase is scheduled to
occur in stages between August and December 1998.
The Company currently anticipates funding the purchase price for the
acquisition of the Hahn Portfolio as follows. The Company has entered into a
letter of intent with Union Bank of Switzerland for a short term loan facility
of $900 million that is expected to mature on June 30, 1999 subject to a
six-month extension. On May 4, 1998, the Company entered into an underwriting
agreement to sell in Australia approximately $300 million principal amount of
unsecured subordinated notes. The Company intends to fund the remainder of the
purchase price with (i) funds recently realized by the sale of certain warrants
issued to the Company by Westfield Holdings Limited that yielded approximately
$100 million of proceeds and (ii) the assumption of mortgage indebtedness
encumbering the Hahn Portfolio.
ADVERSE CONSEQUENCES OF FAILURE TO QUALIFY AS A REIT
FAILURE TO QUALIFY AS A REIT
Qualification as a REIT involves the application of highly technical and
complex provisions of the Code (for which there are only limited judicial or
administrative interpretations) and the determination of various factual matters
and circumstances not entirely within the Company's control. For example, in
order to qualify as a REIT, at least 95% of the Company's gross income in any
year must be derived from qualifying sources and the Company must make
distributions to shareholders aggregating annually to at least 95% of its REIT
taxable income (excluding net capital gains). In addition, the Company's
qualification as a REIT depends on the qualification of Westland Properties Inc.
("WPI") during the period that WPI was not wholly owned by the Company. Although
the Company believes that it has operated since February 12, 1994 in a manner so
as to qualify as a REIT, and the Company intends to continue to operate in a
manner so as to continue to qualify as a REIT, no assurance can be given that
the Company is or will remain so qualified. See "Federal Income Tax
Considerations." Although the Company is not aware of any pending tax
legislation that would adversely affect the Company's ability to operate as a
REIT, no assurance can be given that new legislation, regulations,
administrative interpretations or court decisions will not change the tax laws
with respect to qualification as a REIT or the Federal income tax consequences
of such qualification.
Skadden, Arps, Slate, Meagher and Flom LLP, tax counsel to the Company, has
issued its opinion that, commencing with the Company's taxable year ended
December 31, 1994, the Company was organized in conformity with the requirements
for qualification as a REIT, and its planned method of operation, and its actual
method of operation from February 12, 1994, will enable it to meet the
requirements for qualification and taxation under the Code. In rendering this
opinion, Skadden, Arps, Slate, Meagher & Flom LLP relied on certain assumptions
and representations made by the Company as of the date thereof regarding factual
matters and on opinions of local counsel with respect to matters of local law.
The opinion is expressed based upon facts, representations and assumptions as of
the date thereof and Skadden, Arps, Slate, Meagher & Flom LLP has no obligation
to advise holders of the Securities of any subsequent change
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in the matters stated, represented or assumed or any subsequent change in
applicable law. No assurance can be given that the Company has met these
requirements or will continue to meet these requirements in the future, and a
legal opinion is not binding on the Internal Revenue Service (the "IRS").
If, in any taxable year, the Company fails to qualify as a REIT, the Company
would not be allowed a deduction for distributions to shareholders in computing
taxable income and would be subject to federal income tax on its taxable income
at corporate rates. As a result of the additional tax liability, the Company
might need to borrow funds or liquidate certain investments in order to pay the
applicable tax and the funds available for investment or distribution to the
Company's shareholders would be reduced for each of the years involved. In
addition, the Company would no longer be required by the Code to make any
distributions. Unless entitled to relief under certain statutory provisions, the
Company would also be disqualified from treatment as a REIT for the four taxable
years following the year during which qualification is lost. Although the
Company currently intends to operate in a manner designed to qualify as a REIT,
it is possible that future economic, market, legal, tax or other considerations
may cause the Company to fail to qualify as a REIT or may cause the Board of
Directors of the Company with the consent of a majority of the holders of the
Preferred Stock and Common Stock to revoke the REIT election. See "Federal
Income Tax Considerations."
OWNERSHIP LIMIT
In order for the Company to maintain its qualification as a REIT, not more
than 50% of the value of its outstanding stock may be owned, directly or
constructively, by five or fewer individuals or entities (as set forth in the
Code and referred to herein as "Individuals"). The Third Amended and Restated
Articles of Incorporation of the Company (the "Articles") prohibit, subject to
certain exceptions, direct or constructive ownership of more than 5.5%, by
value, of the outstanding shares of capital stock of the Company by any
Individual (except for Frank P. Lowy and the members of his family who are
prohibited from owning, directly or indirectly, more than 26% of the outstanding
capital stock of the Company). The U.S. constructive ownership rules are complex
and may cause shares of capital stock owned directly or constructively by a
group of related individuals or entities to be constructively owned by one
individual or entity. The Articles authorize the Board of Directors to increase
the ownership limits if the Board of Directors obtains satisfactory assurances
that ownership in excess of a particular limit will not jeopardize the Company's
status as a REIT. A transfer of shares to a person who, as a result of the
transfer, would violate the ownership restrictions, may be void. Under some
circumstances, such shares may be transferred to a trust, for the benefit of one
or more qualified charitable organizations designated by the Company, with the
intended transferee having only a right to share (to the extent of the
transferee's original purchase price for such shares) in proceeds from the
trust's subsequent sale of such shares. See "Federal Income Tax
Considerations--Taxation of the Company--Requirements for Qualification" and
"Description of Capital Stock--Restrictions on Ownership and Transfer" for
additional information regarding the Ownership Limitations.
POSSIBLE TAXATION ON CAPITAL GAINS
Pursuant to an election made by the Company and WPI under Internal Revenue
Service Notice 88-19 ("Notice 88-19"), if during the ten-year period beginning
on the first day (the "Qualification Date") of the first taxable year for which
each such entity qualified as a REIT (February 12, 1994 for the Company and
January 1, 1996 for WPI), the Company recognizes gain on the disposition of any
property (including, any partnership interest) held by the Company or any
partnership in which the Company or WPI held an interest as of the Qualification
Date, then, to the extent of the excess of (i) the fair market value of such
property as of the Qualification Date over (ii) the adjusted income tax basis of
the Company or the partnerships in such property as of the Qualification Date,
the Company will be required to pay a corporate level Federal income tax on its
share of such gain at the highest regular corporate rate. This ten-
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year rule would apply to any asset required from a Corporation in a carryover
basis transaction and to any asset acquired from another REIT to the extent such
asset was within the 10-year period for such REIT.
Additionally, the taxable portion of the distributions paid to shareholders
of an entity that is subject to such corporate level tax will be increased by
the amount that the current and accumulated earnings and profits of such entity
are increased in respect of such gain. See "Federal Income Tax Considerations"
- -- "Taxation of the Company," "Federal Income Tax Considerations--Taxation of
Taxable Domestic Shareholders" and "Federal Income Tax Considerations--Taxation
of Foreign Shareholders." Although the Company has no present intention to
dispose of any such property in a manner that would trigger such tax
consequences, there can be no assurance that such dispositions will not occur.
Among other reasons, such dispositions could occur in the case of properties
held by the Company through partnerships and with respect to which the Company
may not have control over disposition decisions. See "--Conflicts of Interest
with Outside Partners in Jointly-Owned Centers and Limited Control With Respect
to Certain Activities."
DISTRIBUTIONS TO SHAREHOLDERS; POTENTIAL REQUIREMENT TO BORROW
To obtain the favorable tax treatment associated with REITs qualifying under
the Code, the Company generally will be required each year to distribute to its
shareholders at least 95% of its net taxable income (excluding any net capital
gain).
The Company intends to make distributions to its shareholders to comply with
the distribution provisions of the Code and to avoid certain income taxes
generally applicable upon its undistributed net income and a nondeductible
excise tax generally applicable upon its failure to meet minimum distribution
requirements. For Federal income tax purposes, distributions paid to
shareholders may consist of ordinary income, capital gains, nontaxable return of
capital or a combination thereof. The Company will provide its shareholders with
an annual statement indicating the tax character of the distributions. No
distributions may be paid on any Common Stock unless the full dividends on the
Preferred Shares have been paid. See "Description of Capital Stock."
For the three-month period ended March 31, 1998, the Company declared a
distribution of $.355 per share (or 91% of Funds from Operations in the
aggregate) to its shareholders. For the period February 12, 1994 through
December 31, 1997, the Company declared distributions of approximately 96% of
Funds from Operations, excluding a special Distribution totalling $13 million
declared for stockholders of record prior to the closing of the Company's
initial public offering. The Company does not intend to distribute more than
100% of Funds from Operations less recurring capital expenditures (not including
capital expenditures recovered from tenants) and rental income attributable to
rent straight-lining.
The expected size of future distributions may not allow the Company, using
only cash flow from operations, to fund 100% of (i) the tenant allowances
associated with renewal or replacement of current tenants as their leases expire
and (ii) the retirement of all of its debt when due, and therefore, the Company
may be required to seek periodic debt or equity financings to cover such items.
The Company's income will consist primarily of its share of income from the
Properties. Differences in timing between the receipt of income and the payment
of expenses in arriving at taxable income of the Company, and the effect of
required debt amortization payments, could require the Company to borrow funds
on a short-term basis to meet the REIT distribution requirements even if the
Company believes that then prevailing market conditions are not generally
favorable for such borrowings or that such borrowings would not be advisable in
the absence of such tax considerations. In addition, the Company's distribution
policy may negatively affect the Company in adverse market conditions and result
in a reevaluation of the level of distributions. In economic conditions where
market prices for shopping center properties are decreasing, the Company's
distribution policy may place the Company at a competitive disadvantage with
respect to potential acquisitions to other entities that distribute at a lower
payout ratio.
The Company plans to adopt a distribution reinvestment plan under which its
shareholders may elect to reinvest all or part of their distributions
automatically in additional shares of Common Stock. Any such
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distribution reinvestment plan will not adversely affect the Company's ability
to qualify as a REIT for U.S. Federal income tax purposes. The Company
understands that WAT plans to adopt a similar plan for its unitholders, and
intends to use the proceeds of such distribution reinvestment plan to
participate in the Company's distribution reinvestment plan to the extent that
its unitholders participate in the WAT distribution reinvestment plan. The
Company also understands that Westfield Holdings intends to participate in WAT's
distribution reinvestment plan to the full extent of distributions on its units
in WAT for a three-year period commencing with the first distribution period for
which reinvestment is permitted. No assurances can be given that WAT will adopt
a distribution reinvestment plan, that WAT will participate in the Company's
distribution reinvestment plan, or that Westfield Holdings will choose not to
participate in WAT's distribution reinvestment plan in the future.
CONFLICTS OF INTEREST WITH OUTSIDE PARTNERS IN JOINTLY-OWNED CENTERS AND LIMITED
CONTROL WITH RESPECT TO CERTAIN ACTIVITIES
Seven of the Centers (and certain other properties) are owned by joint
ventures (the "Joint Ventures" and each individually a "Joint Venture")
consisting of the Company and one or more individuals or entities having no
interest in the Company or Westfield Holdings (the "Outside Partners") who own
interests from 24% to 60% of the Joint Ventures. Although the Company currently
owns less than a 50% interest in four of the Centers, three are managed by
Westfield Holdings. The Company is the limited partner in the Joint Venture
which owns North County Fair (which the Company intends to acquire as part of
the acquisition of the Hahn Portfolio) and is one of two general partners in two
Joint Ventures (Topanga Plaza and Vancouver Mall) and, therefore, has limited
control regarding the operation and management of the Centers owned by such
Joint Venture. With respect to partnerships for which the Company serves as
general partner, the Company may have certain fiduciary responsibilities to
other partners in those partnerships which it will need to consider when making
decisions that affect those properties owned by such Joint Ventures. As a
result, potential conflicts and other problems, certain of which are summarized
below, could arise as a consequence of these ownership arrangements.
The Outside Partner has offered its interest Topanga Plaza for sale to third
parties. The Company has a right to first refusal to acquire the property and
intends to exercise its right.
The sale or transfer of interests in some of the Joint Ventures is subject
to buy-sell provisions or rights of first refusal or first offer. A right of
first refusal generally requires a partner desiring to sell its interests to a
third party to offer the interest first to the other partner on the same terms
and conditions offered by the third party. A right of first offer generally
requires a partner that does not yet have a third-party offer (but that desires
to sell its interest) to first offer the partnership interest to the other
partner for a specified price. If the other partner declines to purchase, the
offering partner may then attempt to sell its interest to a third party on terms
not materially less favorable to the offering partner than those offered to its
partner. A buy-sell provision generally allows either partner to initiate a
process that will result in one of the partners purchasing the other partner's
interest. The initiating partner specifies the price at which it would be
willing to sell its interest or purchase its partner's interest, and the other
partner elects whether to sell or buy at the specified price. These provisions
and rights may work to the advantage or disadvantage of the Company because,
among other things, they may provide an opportunity to acquire the interests of
the Outside Partners on advantageous terms or require the Company to make
decisions as to the purchase or sale of interests in a Joint Venture at a time
when the Company may not desire to sell but may be forced to do so because it
does not have the cash to purchase the other party's interest.
In addition, the consent of each Outside Partner could be required with
respect to certain major transactions, such as refinancing, encumbering,
expanding or selling a Property and with respect to a Joint Venture's
distribution policies. The interest of the Outside Partners and those of the
Company are not necessarily aligned in connection with the resolution of such
issues. Accordingly, the Company may not be able to resolve any such issue
favorably, or the Company may have to provide financial or other inducement to
the Outside Partner to obtain such a resolution. These limitations may result in
decisions by
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third parties with respect to such Properties that do not fully reflect the
interests of the Company at such time, including decisions relating to the
requirements with which the Company must comply in order to maintain its status
as a REIT for tax purposes. The Company is contractually restricted from selling
certain of these Properties without the consent of unrelated parties. These
limitations on sale may adversely affect the Company's ability to sell these
Properties at the most advantageous time for the Company.
BANKRUPTCY OF OUTSIDE PARTNERS
The bankruptcy of an Outside Partner could adversely affect the operation of
any Property in which the Outside Partner held an interest. Under the Bankruptcy
Code, any action by the debtor that is not in the ordinary course of its
business requires bankruptcy court approval, which in turn generally requires
prior notice to the debtor's creditors and a hearing in court. Thus, any action
that requires approval of an Outside Partner in bankruptcy and is arguably not
an "ordinary course" matter may be subject to delay and uncertainty while the
Outside Partner seeks bankruptcy court approval. There can be no assurance that
such approval would be obtained, particularly in cases in which the interests of
the Outside Partner and the Company may conflict, or where additional funding
from the Outside Partner is required. If a Joint Venture has incurred recourse
obligations, the discharge in bankruptcy of an Outside Partner might result in
the ultimate liability of the Company for a greater portion of such obligations
than it would otherwise bear. In addition, even if the Outside Partner (or its
estate) was not completely relieved of liability for such obligations, the
Company might be required to satisfy such obligations and then rely upon a claim
against the Outside Partner's estate for reimbursement.
EFFECT OF UNINSURED LOSS ON PROFITABILITY
The Company's subsidiaries, the Joint Ventures and the Company carry
comprehensive liability, fire, extended coverage and rental loss insurance
covering the Properties, with policy specifications and insured limits
customarily carried for similar properties. There are, however, certain types of
losses (such as from wars, floods and earthquake) that are generally either not
insured, not insured at full replacement cost or insured subject to larger
deductibles. Should an uninsured loss or a loss in excess of insured limits
occur, some or all of the capital invested in the Property, as well as the
anticipated future revenues from the Property, could be lost, while the Property
owner remains obligated for any mortgage indebtedness or other financial
obligations related to the Property. Any such loss could materially adversely
affect the Company. Moreover, wherever the Company is a general partner of the
Joint Venture, the Company will generally be liable for any unsatisfied
obligations of such Joint Ventures other than nonrecourse obligations. The
Company believes that the Properties are adequately insured in accordance with
industry standards. Many of the Properties are located in areas where the risk
of earthquakes is greater than in other parts of the country, including nine
Centers in California, and a total of up to 20 properties after the closing of
the Hahn Portfolio transaction. The Company currently carries earthquake
insurance on all Centers managed by Westfield Holdings. Such policies are
subject to a deductible on each building within such Centers equal to 5% of the
insured value of each such building and are further subject to a combined annual
aggregate loss limit of $120 million on the Centers.
POSSIBLE ENVIRONMENTAL LIABILITIES
Under various Federal, state and local environmental laws, ordinances and
regulations, a current or previous owner or operator of real property may be
liable for the costs of releases, including removal or remediation, of hazardous
or toxic materials on, under, in, or from such property. Such laws often impose
liability whether or not the owner or operator knew of, or was responsible for,
the presence or release of such hazardous or toxic materials. The presence of
hazardous or toxic materials, or the failure to remediate such property
properly, may adversely affect the owner's ability to sell such property or to
borrow using such property as collateral, and may cause the property owner to
incur substantial cleanup costs. Persons who arrange for the disposal or
treatment of hazardous or toxic materials may also be liable for the costs of
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<PAGE>
removal or remediation at the disposal or treatment facility to which such
materials were sent. Certain other laws regulate the management of, and may
impose liability for, personal injuries associated with exposure to asbestos-
containing materials or other regulated materials. In addition, if any of the
Centers undergoes renovation or demolition in the future, the Company may incur
substantial costs for the removal and disposal of such materials.
In connection with its ownership and operation of its currently and
formerly-owned properties, the Company and the Joint Ventures may be potentially
liable for removal or remediation costs, as well as certain other costs,
including governmental fines and costs related to injuries to persons and
property, resulting from environmental conditions at such properties. An
independent consultant has reviewed certain existing environmental reports,
including "Phase I" site assessments (which generally include a visual site
inspection, interviews and a records review) of certain of the Centers, to
identify environmental conditions at the Centers and certain formerly-owned
properties. A majority of the reports were prepared for parties other than the
Company. The Company has from time to time commissioned additional or follow-up
investigations by various outside consultants. There can be no assurance,
however, that circumstances have not changed since any investigations were
completed, that they reveal all potential environmental liabilities and
obligations or are accurate, or that prior owners or operators of the properties
have not created a potential environmental liability unknown to the Company. On
the basis of the foregoing investigations and the Company's knowledge of the
operation of the Properties, the Company believes that many of the Centers and
properties formerly owned by the Company contain or historically contained
petroleum storage tanks and included automobile service operations, and that
such operations have, or may have, resulted in soil or groundwater
contamination. Further, the Company is aware of asbestos containing materials in
each of the Centers and in at least some of the formerly owned properties.
In connection with its acquisition of the Hahn Portfolio, the Company
received environmental reports prepared by independent consultants. All of such
environmental reports were prepared in 1998.
Although there can be no assurances, the Company does not believe that
environmental conditions at any of the Properties or the Hahn Portfolio will
have a material adverse effect on the Company's business, financial condition or
results of operations. There can be no assurance that environmental laws and
regulations will not become more stringent in the future or that the
environmental conditions on or near the Properties, presently known or unknown,
will not have a material adverse effect on individual Properties or the Company
in the future.
POSSIBLE ADVERSE EFFECTS ON STOCK PRICES ARISING FROM SHARES AVAILABLE FOR
FUTURE SALE
As of May 13, 1998 the Company had 73,336,465 shares of Common Stock
outstanding. In addition, WAT holds (i) a warrant entitling it to purchase
6,246,096 shares of Common Stock, in whole or in part, at any time and from time
to time prior to July 1, 2016, at an exercise price of $16.01 per share, subject
to adjustment in certain events and (ii) a warrant entitling it to purchase
2,089,552 shares of Common Stock, in whole or in part, at any time and from time
to time prior to May 21, 2017, at $15.00 per share, subject to adjustment in
certain events, (collectively the "WAT Warrants").
In addition on May 29, 1998, the Company entered into the 1998 Subscription
Agreement with WAT relating to WAT's purchase of $300.0 million of Common Stock.
See "The Company--Recent Developments."
All of the Securities will be freely tradeable by persons other than
"affiliates" of the Company without restriction under the Securities Act,
subject to the limitations on ownership set forth in the Articles. There are
shares of outstanding Common Stock currently held by WAT, Westfield Holdings and
certain other existing shareholders, as well as shares issuable upon exercise of
the WAT Warrants, which are "restricted" securities within the meaning of Rule
144 promulgated under the Securities Act and may not be sold in the absence of
registration under the Securities Act or unless an exemption from the
registration is available, including exemptions contained in Rule 144. Certain
of those shares are eligible for sale in the public
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market subject to compliance with the volume limitations under Rule 144. On May
21, 2000 Westfield Holdings will have certain demand rights to register sales of
the 10,930,672 shares of Common Stock held by Westfield Holdings prior to
consummation of the Company's initial public offering; Westfield Holdings may
not sell those shares prior to May 21, 2000 without prior written consent.
Westfield Holdings also has certain currently exercisable demand rights to
register sales of any other shares of Common Stock.
No prediction can be made as to the effect, if any, that future sales of
shares of Common Stock or other securities, the availability of shares of Common
Stock for future sale, or future issuances of shares including upon the exercise
of the WAT Warrants will have on the market price of the Securities prevailing
from time to time. Sales of substantial numbers of shares of Common Stock, or
the perception that such sales could occur, could adversely affect the
prevailing market price for the Securities. If such sales reduce the market
price of the Common Stock, the Company's ability to raise additional capital in
the equity markets could be adversely affected. The existence of the WAT
Warrants and the registration rights referred to above also may adversely affect
the terms upon which the Company can obtain additional equity in the future.
CHANGES IN POLICY WITHOUT SHAREHOLDER APPROVAL
The major policies of the Company, including its policies with respect to
acquisitions, financing, growth, investments, debt capitalization, distributions
and operating policies, will be determined by the Board of Directors. The Board
of Directors may amend or rescind these and other policies from time to time
without a vote of the shareholders of the Company. Accordingly, shareholders
will have no control over changes in policies of the Company, and changes in the
Company's policies may not fully serve the interests of all shareholders.
USE OF PROCEEDS
The Company intends to use the net proceeds of the sale of the Securities
for general corporate purposes, including, without limitation, working capital,
capital expenditures, investments or loans to the Operating Partnership,
possible future business acquisitions, the satisfaction of other obligations or
for such other purposes as may be specified in the applicable Prospectus
Supplement. Unless otherwise indicated in the applicable Prospectus Supplement,
the Operating Partnership intends to use such net proceeds for general
partnership purposes, including, without limitation, working capital, capital
expenditures, investments in or loans to subsidiaries, the repayment or
refinancing of debt, possible future business acquisitions or the satisfaction
of other obligations.
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RATIO OF EARNINGS TO COMBINED FIXED CHARGES
The following table sets forth the Company's ratio of earnings to fixed
charges and ratio of earnings to combined fixed charges and preferred stock
dividends for the periods indicated:
<TABLE>
<CAPTION>
FOR THE THREE PERIOD FEBRUARY
MONTHS ENDED YEAR ENDED 12, 1994
-------------------------------- DECEMBER 31, THROUGH
MARCH 31, MARCH 31, ------------------------------------- DECEMBER 31,
1998 1997 1997 1996 1995 1994
----------------- ------------- --------- --------------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges.................... 1.73 1.82 1.92 1.77 2.25 2.89
Ratio of Earnings to Combined
Fixed Charges.............. 1.53 1.59 1.61 1.60 2.25 2.89
<CAPTION>
YEAR ENDED
DECEMBER 31,
1993
---------------
<S> <C>
Ratio of Earnings to Fixed
Charges.................... 3.47
Ratio of Earnings to Combined
Fixed Charges.............. 3.47
</TABLE>
For purposes of calculating the ratios of earnings to fixed charges and
combined fixed charges, earnings consist of income before minority interest,
income taxes, fixed charges (excluding capitalized interest and preferred stock
dividends) and includes distributed operating income from unconsolidated real
estate partnerships instead of income from unconsolidated real estate
partnerships. Fixed charges consist of interest expense, whether expensed or
capitalized, and amortization of debt expense. Combined fixed charges, consists
of fixed charges and dividends on preferred stock.
DESCRIPTION OF CAPITAL STOCK
The following summaries of certain provisions of the Articles and the
Company's Second Amended and Restated By-Laws (the "By-Laws") do not purport to
be complete and are subject to, and are qualified in their entirety by reference
to, the Articles, By-Laws, provisions of the General Business and Corporation
Law of Missouri ("GBCL") and the certificate of designation which will be filed
with the Commission in connection with any offering of Preferred Stock.
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
As of May 13, 1998 the authorized capital stock of the Company consisted of
(i) two hundred (200) shares of non-voting senior preferred stock, par value
$1.00 per share (the "Senior Preferred Shares"), of which two (2) shares were
currently outstanding, (ii) five million (5,000,000) shares of preferred stock,
par value $1.00 per share (the "Preferred Stock"), of which nine hundred forty
thousand (940,000) shares were designated Series A cumulative redeemable
preferred stock (the "Series A Preferred Shares"), and of which nine hundred
forty thousand (940,000) were currently outstanding, and of which 400,000 shares
are designated Series B preferred stock (the "Series B Preferred Shares") and of
which 270,000 were outstanding, (iii) 200,000,000 shares of common stock, par
value $.01 per share (the "Common Stock"), of which 73,336,465 were currently
outstanding, and (iv) 205,000,000 shares of excess stock, par value $.01 per
share, of which none were currently outstanding (the "Excess Shares"). Excess
Shares, if any, that are exchanged pursuant to the Articles (i) for Common
Stock, are sometimes referred to herein as "Excess Common Shares" and, together
with the Common Stock, the "Common Shares" and (ii) for Preferred Stock, are
sometimes referred to herein as "Excess Preferred Shares" and together with the
Preferred Stock, as "Preferred Shares." See "--Outstanding Warrants."
SENIOR PREFERRED SHARES
The holders of Senior Preferred Shares are entitled to receive, when and as
declared by the Board of Directors, but only out of funds legally available
therefor, cash dividends at the annual rate of $35.0 per share, and no more,
payable quarterly. No dividend will be paid on any Preferred Shares or Common
Shares unless the full dividend has been paid on Senior Preferred Shares. In the
event of any voluntary or
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involuntary liquidation, dissolution or winding up of the affairs of the
Company, the holders of Senior Preferred Shares are entitled, before any
distribution or payment is made to the holders of any Preferred Stock or Common
Shares, to be paid in full an amount equal to $550.0 per share, together with
the full dividend thereon for the then current quarterly-yearly dividend period.
The Company, at the option of the Board of Directors, may redeem in whole, but
not in part, the Senior Preferred Shares at the time outstanding at any time
from and after February 20, 1999, upon notice, at a redemption price for each
Senior Preferred Share equal to $550.0, together with the full dividend thereon
for the then current quarterly-yearly dividend period. Except as required by
applicable law, the holders of Senior Preferred Shares have no voting rights in
the Company.
PREFERRED SHARES
Preferred Shares may be issued, from time to time, in one or more series as
authorized by the Board of Directors. Prior to issuance of a series, the Board
of Directors by resolution shall designate that series to distinguish it from
other series and classes of stock of the Company, shall specify the number of
shares to be included in the series, and shall fix the terms, rights,
restrictions and qualifications of the shares of the series, including any
preferences, voting powers, dividend rights and redemption, sinking fund and
conversion rights. Subject to the express terms of any other series of Preferred
Shares outstanding at the time, the Board of Directors may increase or decrease
the number of shares or alter the designation or classify or reclassify any
unissued shares of a particular series of Preferred Shares by fixing or altering
in any one or more respects from time to time before issuing the shares any
terms, rights, restrictions and qualifications of the shares.
SERIES A PREFERRED SHARES
The holders of Series A Preferred Shares are entitled to receive, when and
as declared by the Board of Directors, but only out of funds legally available
therefor, per share cumulative cash dividends equal to the greater of (i) $8.50
per annum and (ii) an amount currently equal to 6.2461 times the dollar amount
declared on Common Shares for such period, subject to certain adjustments.
Holders of Series A Preferred Shares are entitled to dividends before dividends
can be distributed to holders of Common Shares. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Company, the holders of Series A Preferred Shares are entitled, before any
distribution or payment is made to the holders of any Common Shares, to be paid
in full an amount per share equal to $100.00, together with all accrued and
unpaid dividends through the end date of the calendar quarter most recently
completed prior to the date of liquidation, dissolution or winding up of the
affairs of the Company plus $2.125 times a fraction equal to the actual number
of days elapsed from the end date of the calendar quarter most recently
completed to the relevant liquidation date over 90 days. From and after July 1,
2003, the Company, at the option of the Board of Directors, with approval of a
majority of the Independent Directors, may redeem in whole, or in part, the
outstanding Series A Preferred Shares at a redemption price of $100.00 per
share, together with all accrued and unpaid dividends through the end date of
the calendar quarter most recently completed prior to the redemption date plus
$2.125 times a fraction equal to the actual number of days elapsed from the end
date of the calendar quarter most recently completed to the relevant redemption
date over 90 days, plus a right to receive on the payment date for the next
quarterly dividend declared on the Common Shares an amount equal to the
proportionate additional amount, if any, of dividends the holder of such Series
A Preferred Share would have been entitled to receive had such share been held
on the record date for such Common Shares dividend.
The holders of Series A Preferred Shares have no voting rights in the
Company except: (i) in the event that the Board of Directors does not declare a
dividend payable to holders of Series A Preferred Shares or any series of
Preferred Stock authorized with the consent of the holders of Series A Preferred
Shares ranking PARI PASSU with the Series A Preferred Shares ("Ranking Preferred
Shares") for four quarterly dividend periods, the number of directors
constituting the Board of Directors shall, without further action,
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<PAGE>
be increased by one and the holders of a majority of the Series A Preferred
Shares together with all series of Ranking Preferred Shares shall have the
exclusive right to elect one director to fill such newly created directorship
until such time as all such dividends in arrears are made current and paid in
full, at which time the director so elected shall cease to be a director, and
the number of directors constituting the Board of Directors shall be reduced by
one, (ii) a majority vote of the holders of Series A Preferred Shares voting
together as a class is required to approve any amendment to the Articles that
materially and adversely affects their rights, PROVIDED, that (x) except where a
unanimous vote is required under clause (y) below, where the amendment adversely
affects the rights of any series of Ranking Preferred Shares, then such
amendment shall be approved by the vote of the Series A Preferred Shares and the
Ranking Preferred Shares affected thereby voting together as a class and (y) the
unanimous approval of the holders of Series A Preferred Shares is required for
any amendment to the Articles that would decrease the rate or change the time of
payment of any dividend or distribution on the Series A Preferred Shares,
decrease the amount payable upon redemption of the Series A Preferred Shares or
upon liquidation of the Company, advance the date on which the Series A
Preferred Shares may be redeemed by the Company or amend the number of shares of
Series A Preferred Shares required to effect amendments to the Articles, (iii)
the affirmative vote of the holders of a majority of the Series A Preferred
Shares and any series of Ranking Preferred Shares affected thereby voting
together as a class is required to approve any merger or consolidation of the
Company and another entity in which the Company is not the surviving corporation
and each holder of the Series A Preferred Shares and such Ranking Preferred
Shares do not receive shares of the surviving corporation with substantially
similar rights, preferences and powers in the surviving corporation as such
Ranking Preferred Shares have with respect to the Company, (iv) the affirmative
vote of the holders of a majority of the Series A Preferred Shares and the
Ranking Preferred Shares voting together as a class is required to approve any
voluntary action by the Board of Directors intended to cause the Company to
cease to have the status as a REIT and (v) as otherwise required by applicable
law.
SERIES B PREFERRED SHARES
The holders of Series B Preferred Shares have the same rights as the holders
of Series A Preferred Shares and the terms of the Series B Preferred Shares are
substantially the same as those of the Series A Preferred Shares, except that
the amount of cumulative cash distributions is equal to the greater of (i) $8.50
per annum and (ii) an amount equal to the product of (x) 6.67 and (y) the dollar
amount declared on the Common Shares for the applicable period, subject to
certain adjustments.
OTHER SERIES OF PREFERRED STOCK
The particular terms of any series of Preferred Stock offered hereby will be
set forth in the Prospectus Supplement relating thereto. The rights,
preferences, privileges and restrictions, including dividend rights, voting
rights, terms of redemption, retirement and sinking fund provisions and
liquidation preferences, if any, of the Preferred Stock of each series, along
with 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, will be fixed or designated pursuant to a certificate of
designation adopted by the Board of Directors or a duly authorized committee
thereof. The terms, if any, on which shares of any series of Preferred Stock are
convertible or exchangeable into Common Stock will also be set forth in the
Prospectus Supplement relating thereto. Such terms may include provisions for
conversion or exchange, either mandatory, at the option of the holder, or at the
option of the Company, in which case the number of shares of Common Stock to be
received by the holders of Preferred Stock would be calculated as of a time and
in the manner stated in the applicable Prospectus Supplement. The description of
the terms of a particular series of Preferred Stock that will be set forth in
the applicable Prospectus Supplement does not purport to be complete and is
qualified in its entirety by reference to the certificate of designation
relating to such series.
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DEPOSITARY SHARES
GENERAL
The Company may, at its option, elect to offer receipts for fractional
interests ("Depositary Shares") in Preferred Stock, rather than full shares of
Preferred Stock. In such event, receipts ("Depositary Receipts") for Depositary
Shares, each of which will represent a fraction (to be set forth in the
Prospectus Supplement relating to a particular series of Preferred Stock) of a
share of a particular series of Preferred Stock, will be issued as described
below. The Company has no outstanding Depositary Shares.
The shares of any series of Preferred Stock represented by Depositary Shares
will be deposited under a Deposit Agreement (the "Deposit Agreement") between
the Company and a depositary to be named by the Company in a Prospectus
Supplement (the "Depositary"). Subject to the terms of the Deposit Agreement,
each owner of a Depositary Share will be entitled, in proportion to the
applicable fraction of a share of Preferred Stock represented by such Depositary
Share, to all the rights and preferences of the Preferred Stock represented
thereby (including dividend, voting, redemption, subscription and liquidation
rights). The following summary of certain provisions of the Deposit Agreement
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Deposit Agreement, including
the definitions therein of certain terms. Whenever particular sections of the
Deposit Agreement are referred to, it is intended that such sections shall be
incorporated herein by reference. Copies of the forms of Deposit Agreement and
Depositary Receipt are filed as exhibits to the Registration Statement of which
this Prospectus is a part, and the following summary is qualified in its
entirety by reference to such exhibits.
DIVIDENDS AND OTHER DISTRIBUTIONS
The Depositary will distribute all cash dividends or other cash
distributions received in respect of the Preferred Stock to the record holders
of Depositary Shares relating to such Preferred Stock in proportion to the
numbers of such Depositary Shares owned by such holders.
In the event of a distribution other than in cash, the Depositary will
distribute property received by it to the record holders of Depositary Shares in
an equitable manner, unless the Depositary determines that it is not feasible to
make such distribution, in which case the Depositary may sell such property and
distribute the net proceeds from such sale to such holders. The amount
distributed in any of the foregoing cases may be reduced by any amounts required
to be withheld by the Company or the Depositary on account of taxes.
No distribution will be made in respect of any Depositary Share to the
extent that it represents any Preferred Stock converted into Excess Shares.
WITHDRAWAL OF PREFERRED STOCK
Upon surrender of Depositary Receipts at a designated office of the
Depositary, the owner of the Depositary Shares evidenced thereby will be
entitled to delivery at such office of certificates evidencing Preferred Stock
(but only in whole shares of Preferred Stock) represented by such Depositary
Shares. If the Depositary Receipts delivered by the holder evidence a number of
Depositary Shares in excess of the number of whole shares of Preferred Stock to
be withdrawn, the 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
If a series of Preferred Stock represented by Depositary Shares is subject
to redemption, the Depositary Shares will be redeemed from the proceeds received
by the Depositary resulting from the redemption, in whole or in part, of such
series of Preferred Stock held by the Depositary. The redemption price per
Depositary Share will be equal to the applicable fraction of the redemption
price per share
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payable with respect to such series of the Preferred Stock. Whenever the Company
redeems shares of Preferred Stock held by the Depositary, the Depositary will
redeem as of the same redemption date the number of Depositary Shares
representing shares of Preferred Stock so redeemed. If fewer than all the
Depositary Shares are to be redeemed, the Depositary Shares to be redeemed will
be selected by lot, pro rata or by any other equitable method as may be
determined by the Depositary.
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 the 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 Depositary.
VOTING THE PREFERRED STOCK
Upon receipt of notice of any meeting at which the holders of the Preferred
Stock are entitled to vote, the Depositary will mail the information contained
in such notice of meeting to the record holders of the Depositary Shares
relating to such Preferred Stock. Each record holder of such Depositary Shares
on the record date (which will be the same date as the record date for the
Preferred Stock) will be entitled to instruct the Depositary as to the exercise
of the voting rights pertaining to the amount of the Preferred Stock represented
by such holder's Depositary Shares. The Depositary will endeavor, insofar as
practicable, to vote the amount of the 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
Depositary in order to enable the Depositary to do so. The Depositary will
abstain from voting shares of the Preferred Stock to the extent it does not
receive specific instructions from the holder of Depositary Shares representing
such Preferred Stock.
LIQUIDATION PREFERENCE
In the event of the liquidation, dissolution or winding up of the Company
whether voluntary or involuntary, the holders of each Depositary Receipt will be
entitled to the fraction of the liquidation preference accorded each share of
Preferred Stock represented by the Depositary Share evidenced by such Depositary
Receipt as set forth in the applicable Prospectus Supplement.
CONVERSION
The Depositary Shares, as such, will not be convertible into Common Stock or
any other securities or property of the Company. 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 Depositary with written instructions to the Depositary to instruct
the Company to cause conversion of a class or 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 shares in excess of the Ownership Limit) 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 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 Depositary. However, any
amendment that materially and adversely alters the rights of the holders of
Depositary Receipts or that would be materially and adversely inconsistent with
the rights granted to the holders of the related Preferred Stock will not be
effective unless such amendment has been approved by the existing holders of at
least a majority of the 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 Agreements, 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 an outstanding Depositary Receipt at
the time any such amendment becomes effective shall be deemed, by continuing to
hold such Depositary Receipt, to consent and agree to such amendment and to be
bound by the 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 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 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 each Preferred
Stock as are represented by the Depositary Shares evidenced by such Depositary
Receipts together with any other property held by 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. In addition, the Deposit Agreement
will automatically terminate if (i) all outstanding Depositary Shares shall 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
distribution 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.
RESIGNATION AND REMOVAL OF DEPOSITARY
The 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 Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary and its acceptance of such appointments. Such successor
Depositary must be appointed within 60 days after delivery of the notice of
resignation or removal and must be a bank or trust company having its principal
office in the United States and having a combined capital and surplus of at
least $50,000,000.
CHARGES OF DEPOSITARY
The Company will pay all transfer and other taxes and governmental charges
arising solely from the existence of the depositary arrangements. The Company
will pay charges of the Depositary in connection with the initial deposit of the
Preferred Stock and issuance of Depositary Receipts, all withdrawals of shares
of Preferred Stock by owners of the Depositary Shares and any redemption of the
Preferred Stock. Holders of Depositary Receipts will pay other transfer and
other taxes and governmental charges and such other charges as they are
expressly provided in the Deposit Agreement to be for their accounts.
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MISCELLANEOUS
The Depositary will forward all reports and communications from the Company
which are delivered to the Depositary and which the Company is required or
otherwise determines to furnish to the holders of the Preferred Stock.
Neither the Depositary nor the Company will be liable under the Deposit
Agreement to holders of Depositary Receipts other than for its gross negligence,
willful misconduct or bad faith. Neither the Company nor the Depositary will be
obligated to prosecute or defend any legal proceeding in respect of any
Depositary Shares or Preferred Stock unless satisfactory indemnity is furnished.
The Company and the Depositary may rely upon written advice of counsel or
accountants, or upon information provided by persons presenting Preferred Stock
for deposit, holders of Depositary Receipts or other persons believed to be
competent and on documents believed to be genuine.
In the event a 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 Depositary shall be entitled to act on such
claims, requests or instructions received from the Company.
COMMON STOCK
DISTRIBUTION RIGHTS
The holders of Common Shares are entitled to receive such distributions as
may be declared by the Board of Directors out of funds legally available
therefor. In order to qualify as a REIT, the Company is required to distribute
at least 95% of its taxable income. Under the Articles, holders of the Senior
Preferred Shares and Preferred Shares have a preference with respect to
dividends relative to the holders of Common Shares. The Company expects that
regular quarterly distributions of the Company will be declared for the
three-month periods ending March 31, June 30, September 30 and December 31 each
year. All distributions are at the discretion of the Board of Directors and
depend on the actual Funds from Operations, the Company's financial condition,
the annual distribution requirements under the REIT Requirements and such other
factors as the Board of Directors deems relevant and are subject to the prior
payment of preferred stock dividends.
LIQUIDATION RIGHTS
In the event of liquidation, dissolution, winding up of, or any distribution
of the assets of the Company, each holder of Common Shares is entitled to
receive ratably with each holder of Common Shares, in that portion of the assets
of the Company available for distribution to holders of Common Shares as the
number of Common Shares held by such holder bears to the total number of Common
Shares then outstanding.
VOTING RIGHTS
At all meetings of the shareholders of the Company, each holder of Common
Stock is entitled to one vote for each share of Common Stock entitled to vote at
such meeting. The affirmative vote of a majority of the holders of Common Stock
voting together as a class is required to approve: (1) an election to change the
Company's status as a REIT and (2) other matters as required by applicable law.
With respect to Excess Common Shares, the Trustee of any Excess Common Shares is
entitled to vote such shares.
ELECTION AND REMOVAL OF DIRECTORS
The Board of Directors is divided into three classes with the terms of
office of directors of each class ending in different years. The Class I, II and
III directors are to serve until the Annual Meeting of Shareholders in 2001,
1999 and 2000, respectively, or until their successors are elected. Following
the initial terms, the directors will serve three-year terms, or until their
successors are elected.
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Directors are elected by a plurality of the Common Shares entitled to vote
on the election of directors represented in person or by proxy at a meeting at
which a quorum is present, subject to any rights of holders of the Preferred
Stock to elect directors. There are no cumulative voting rights. Directors may
be removed from office only for cause and with the vote of 66 2/3% of the
outstanding Common Shares then entitled to vote for the election of directors.
PREEMPTIVE RIGHTS
No holder of Common Shares is entitled as a matter of right to subscribe for
or purchase, or have any preemptive right with respect to, any part of any new
or additional issue of stock of any class whatsoever, or of securities
convertible into any stock of any class whatsoever, whether now or hereafter
authorized and whether issued for cash or other consideration or by way of
dividend.
REDEMPTION RIGHTS
No holder of Common Shares is entitled to redemption rights.
SHAREHOLDER LIABILITY
Under Missouri corporate law, no shareholder of the Company is personally
liable for any obligation of the Company solely as a result of its status as a
shareholder.
OUTSTANDING WARRANTS
The Company currently has two outstanding warrants. In 1996, the Company
issued to WAT a warrant entitling it to purchase at any time and from time to
time in whole or in part, 6,246,096 shares of Common Stock at an exercise price
of $16.01 per share, subject to adjustment in certain events. This warrant
expires in July 2016. In May 1997, the Company issued to WAT a warrant entitling
it to purchase at any time and from time to time, in whole or in part, 2,089,552
shares of Common Stock at an exercise price of $15.00 per share, subject to
adjustment in certain events. This warrant expires in May 2017.
1998 SUBSCRIPTION AGREEMENT
On May 29, 1998, the Company entered into the 1998 Subscription Agreement
with WAT relating to WAT's purchase of approximately $300.0 million of Common
Stock. See "The Company--Recent Developments".
RESTRICTIONS ON OWNERSHIP AND TRANSFER
In order for the Company to qualify as a REIT under the Code, not more than
50% in value of its outstanding capital stock may be owned, directly or
indirectly, by or for five or fewer individuals, including certain entities (as
set forth in the Code and referred to herein as "Individuals") during the last
half of a taxable year, and the shares of capital stock must be beneficially
owned by 100 or more persons during at least 335 days of a taxable year of 12
months, or during a proportionate part of a shorter taxable year. Because the
Board of Directors believes that it is essential for the Company to continue to
qualify as a REIT, the Board of Directors has adopted, and the shareholders have
approved, provisions of the Articles restricting the acquisition and ownership,
directly and indirectly, of shares of the Company's capital stock.
The Company's Articles provide, subject to certain exceptions specified
therein, that no Individual may own, or be deemed to own by virtue of various
attribution and constructive ownership provisions of the Code, more than 5.5%
(except for Frank P. Lowy and the members of his family who are prohibited from
owning, directly or indirectly, more than 26.0%) of the outstanding shares of
capital stock of the Company, as measured by value (the "Ownership Limit"). The
Articles authorize the Board of Directors to increase the Ownership Limit on a
case-by-case basis if evidence satisfactory to the Board of Directors,
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based upon the advice of the Company's tax counsel or other evidence or
undertakings acceptable to it, is presented that such ownership will not then or
in the future jeopardize the Company's status as a REIT. As a condition of such
increase, the Board of Directors in its discretion may require opinions of
counsel satisfactory to it, and/or undertakings from the applicant with respect
to preserving the REIT status of the Company. The restrictions on ownership will
not apply if the holders of the Company's capital stock determine that it is no
longer in the best interest of the Company to attempt to qualify, or to continue
to qualify, as a REIT by resolution duly adopted by a majority of the holders of
each of the Common Stock and the Preferred Stock.
If shares of capital stock in violation of the Ownership Limit or shares of
capital stock which would cause the Company to be beneficially owned by less
than 100 persons, or which would result in it being "closely held" within the
meaning of Section 856(h) of the Code, or which would otherwise result in the
Company failing to qualify as a REIT, are issued or transferred to any person or
Individual, such issuance or transfer will be null and void to the intended
transferee, and the intended transferee would acquire no rights to the capital
stock. If, notwithstanding the preceding sentence, shares of capital stock are
transferred in violation of the rules set forth therein or the Ownership Limit,
such shares will automatically be converted into Excess Shares and transferred
to one or more trusts for the benefit of a designated charitable organization,
and if required by the Articles, such other charitable organizations as may be
designated from time to time by the Board of Directors (each a "Charitable
Trust"). In addition, if any other event occurs which would result in any person
or Individual directly or indirectly holding shares of capital stock in
violation of the Ownership Limit, then shares of capital stock directly or
indirectly held by such person or Individual will be transferred to a Charitable
Trust to the extent of such excess. Shares transferred to a Charitable Trust
will remain outstanding, and the trustee of the trust will have all voting and
dividend rights pertaining to such shares. Dividends made after violation of the
Ownership Limit but prior to discovery of such violation shall be returned to
the Company and thereafter turned over to the trustee of the Charitable Trust.
The trustee of such trust shall transfer such shares to a person whose ownership
of such shares does not violate the Ownership Limit or other applicable
limitations. Upon a sale of such shares by the trustee, the interest of the
charitable beneficiary will terminate, the Excess Shares will automatically be
converted into shares of capital stock of the same type and class as the shares
from which they were converted, and the sales proceeds would be paid, first, to
the original intended transferee, to the extent of the lesser of (a) such
transferee's original purchase price (or the original market value of such
shares if originally transferred to such person without having given value for
such shares) and (b) the price received by the trustee. Any remaining proceeds
will be paid to the charitable beneficiary. In addition, the Company may, for a
90-day period, designate the person to whom the trustee will sell the capital
stock held in the Charitable Trust. The 90-day period commences on the date of
the transfer in violation of the foregoing provisions that gave rise to the
issuance of Excess Shares, or the date that the Company first becomes aware of
such transfer, whichever is later.
All certificates representing shares of Common Stock bear a legend referring
to the restrictions described above, as follows:
The Common Shares represented by this certificate are subject to
restrictions on ownership and transfer for the purpose of the Corporation's
maintenance of its status as a real estate investment trust under the
Internal Revenue Code of 1986, as amended. No Individual may Beneficially
Own Shares in excess of the then applicable Ownership Limit, which may
decrease or increase from time to time, unless such Individual is an
Existing Holder. In general, any Individual who attempts to Beneficially Own
Shares in excess of the Ownership Limit must immediately notify the
Corporation. All capitalized terms used in this legend have the meanings set
forth in the Articles of Incorporation, a copy of which, including the
restrictions on ownership and transfer, will be sent without charge to each
shareholder who so requests. If the restrictions on ownership and transfer
are violated, the Common Shares represented hereby may be automatically
exchanged for Excess Shares and deemed transferred to a Special Trust as
provided in the Articles of Incorporation.
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Each shareholder 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 as the Board of Directors deems necessary to comply with the
provisions of the Code applicable to a REIT or to comply with the requirements
of any taxing authority or governmental agency.
The ownership limitations may have the effect of precluding acquisition of
control of the Company by a third party so long as the Board of Directors and
the shareholders determine that maintenance of REIT status is in the best
interests of the Company.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company.
LISTING
The Company's Common Stock is listed on the NYSE under the symbol "WEA."
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DESCRIPTION OF WARRANTS
The Company may issue warrants (the "Warrants"), including Warrants to
purchase Preferred Stock or Common Stock. Warrants may be issued independently
or together with any such securities of the Company and may be attached to or
separate from such securities of the Company. The Warrants are to be issued
under warrant agreements (each a "Warrant Agreement") to be entered into between
the Company and a warrant agent (the "Warrant Agent"), all as shall be set forth
in the Prospectus Supplement relating to Warrants being offered pursuant
thereto. The description of the terms of the Warrants that are set forth below
and that will be set forth in the applicable Prospectus Supplement do not
purport to be complete and are qualified in their entirety by reference to the
Warrant Agreement and warrant certificate relating to such Warrants.
The applicable Prospectus Supplement will describe the following terms of
any such other Warrants in respect of which this Prospectus is being delivered:
(i) the title of such Warrants; (ii) the securities (which may include Preferred
Stock or Common Stock) for which such Warrants are exercisable; (iii) the price
or prices at which such Warrants will be issued; (iv) if applicable, the
designation and terms of the Preferred Stock or Common Stock with which such
Warrants are issued, and the number of such Warrants issued with each such share
of Preferred Stock or Common Stock; (v) if applicable, the date on and after
which such Warrants and the related Preferred Stock or Common Stock will be
separately transferable; (vi) if applicable, a discussion of material United
States Federal income tax considerations; and (vii) any other terms of such
Warrants, including terms, procedures and limitations relating to the exchange
and exercise of such Warrants. The applicable Prospectus Supplement will also
set forth (a) the amount of securities called for by such Warrants, and if
applicable, the amount of Warrants outstanding, and (b) information relating to
provisions, if any, for a change in the exercise price or the expiration date of
such Warrants and the kind, frequency and timing of any notice to be given.
Prior to the exercise of their Warrants for shares of Preferred Stock or Common
Stock, holders of such Warrants will not have any rights of holders of the
Preferred Stock or Common Stock purchasable upon such exercise and will not be
entitled to dividend payments, if any, or voting rights of the Preferred Stock
or Common Stock purchasable upon such exercise.
EXERCISE OF WARRANTS
Each Warrant will entitle the holder thereof to purchase for cash or other
consideration such principal amount or such number of securities of the Company
at such exercise price as shall in each case be set forth in, or be determinable
as set forth in, the Prospectus Supplement relating to the Warrants offered
thereby. Warrants may be exercised as set forth in the Prospectus Supplement
relating to the Warrants offered thereby at any time up to the close of business
on the expiration date set forth in such Prospectus Supplement. After the close
of business on the expiration date (or such later expiration date as may be
extended by the Company), unexercised Warrants will become void.
Upon receipt of payment and the warrant certificate properly completed and
duly executed at the corporate trust office of the Warrant Agent or any other
office indicated in the applicable Prospectus Supplement, the Company will, as
soon as practicable, forward the securities purchasable upon such exercise. If
less than all of the Warrants represented by such warrant certificate are
exercised, a new warrant certificate will be issued for the remaining Warrants.
CERTAIN PROVISIONS OF THE COMPANY'S
ARTICLES OF INCORPORATION AND BY-LAWS AND OF MISSOURI LAW
Certain provisions of the Articles and By-Laws and the GBCL, as well as the
substantial influence of the Westfield America Trust and Westfield Holdings,
both principal shareholders of the Company, may delay or make more difficult
unsolicited acquisitions or changes in control of the Company. It is believed
that such provisions will enable the Company to develop its business in a manner
that will foster its long-term growth without disruption caused by the threat of
a takeover not deemed by its Board of Directors to
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be in the best interests of the Company and its shareholders. Such provisions
could have the effect of discouraging third parties from making proposals
involving an unsolicited acquisition or change of control of the Company,
although such proposals, if made, might be considered desirable by the holders
of the Securities. Such provisions may also have the effect of making it more
difficult for third parties to cause the replacement of the current management
of the Company without the concurrence of the Board of Directors. These
provisions include, among others, (i) the Ownership Limit, (ii) the availability
of capital stock for issuance from time to time at the discretion of the Board
of Directors, (iii) a classified board of directors, (iv) the inability of the
shareholders to take action by written consent, (v) prohibitions against
shareholders calling a special meeting of shareholders, (vi) requirements for
advance notice for raising business or making nominations at shareholders'
meetings, and (vii) additional requirements for certain business combination
transactions. The descriptions set forth herein of such provisions do not
purport to be complete and are qualified in their entirety by reference to the
Articles and By-Laws which have been filed as exhibits to the Registration
Statement of which this Prospectus is a part, and to the provisions of the GBCL.
OWNERSHIP LIMIT
The Articles contain the Ownership Limit which may discourage a change in
control of the Company, and may also deter tender offers for Common Stock that
might otherwise be advantageous to holders of the Common Stock. The Ownership
Limit may limit the opportunities of holders to receive a premium for their
Common Stock that might otherwise exist if an investor were attempting to
assemble a block of shares or otherwise effect a change in control of the
Company.
ADDITIONAL CLASSES AND SERIES OF PREFERRED STOCK
The Board of Directors is authorized to issue additional authorized but
unissued shares of Common Stock and to establish one or more series of Preferred
Stock and establish the number of shares to be included in the series and the
terms of such series, including any preferences, voting powers, dividend rights
and redemption, sinking fund and conversion rights, and issue such Common Stock
and Preferred Stock, without any further vote or action by the shareholders,
unless such action is required by applicable law or the rules of any stock
exchange or automated quotation system on which the Company's securities are
listed. The issuance of additional capital stock may have the effect of
delaying, deferring or preventing a change in control of the Company. The
issuance of additional series of Preferred Stock with voting or conversion
rights may adversely affect the voting power of the holders of Common Stock. The
ability of the Board of Directors to issue additional capital stock, while
providing flexibility in connection with possible acquisitions and other
corporate purposes, could have the effect of making it more difficult for a
third party to acquire, or of discouraging a third party from acquiring, a
majority of the outstanding voting stock of the Company.
SIZE OF BOARD, ELECTION OF DIRECTORS, CLASSIFIED BOARD, REMOVAL OF DIRECTORS AND
FILLING VACANCIES
The Articles and By-Laws provide that the Board of Directors be divided into
three classes as nearly equal in number as possible, with directors having
three-year terms of office that expire at different times in annual succession.
The Articles provide that directors may not be removed from office prior to the
expiration of their term without cause and the vote of 66 2/3% of the
outstanding Common Shares. A classified board makes it more difficult for
shareholders to change a majority of the directors.
The By-Laws limit the total number of directors to 14 and provide that newly
created directorships resulting from any increase in the authorized number of
directors (or any vacancy) may be filled by a vote of a majority of directors
then in office. Accordingly, the Board of Directors may be able to prevent any
shareholder from obtaining majority representation on the Board of Directors by
increasing the size of the board and filling the newly created directorships
with its own nominees.
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LIMITATIONS ON SHAREHOLDER ACTION BY WRITTEN CONSENT; ABILITY TO CALL SPECIAL
MEETINGS
As required by the GBCL, the Articles and the By-Laws provide that an action
by written consent of shareholders in lieu of a meeting must be unanimous. The
By-Laws provide that, unless otherwise prescribed by statute or the Articles,
special meetings of the shareholders can be called only by the Chairman of the
Board of Directors, any President of the Company or by resolution of the Board
of Directors. Furthermore, as required by the GBCL, the By-laws provide that
only such business as is specified in the notice of any such special meeting of
shareholders may come before such meeting.
These revisions may have an adverse effect on the ability of shareholders to
influence the governance of the Company and the possibility of shareholders
receiving a premium above market price for their securities from a potential
acquiror who is unfriendly to management.
ADVANCE NOTICE FOR RAISING BUSINESS OR MAKING NOMINATIONS AT MEETINGS
The By-Laws establish an advance notice procedure for shareholder proposals
to be brought before an annual meeting of shareholders and for nominations by
shareholders of candidates for election as directors at an annual or special
meeting at which directors are to be elected. Only such business may be
conducted at an annual meeting of shareholders as has been brought before the
meeting by, or at the direction of, the Board of Directors, or by a shareholder
who has given to the Secretary of the Company timely written notice, in proper
form, of the shareholder's intention to bring that business before the meeting.
The Chairman of such meeting will have the authority to make such
determinations. Only persons who are nominated by, or at the direction of, the
Board of Directors, or who are nominated by a shareholder who has given timely
written notice, in proper form, to the Secretary of the Company prior to a
meeting at which directors are to be elected will be eligible for election as
directors of the Company.
To be timely, notice of business to be brought before an annual meeting or
nominations of candidates for election as directors at an annual meeting is
required to be received by the Secretary of the Company not less than 60 nor
more than 90 days in advance of the meeting (or, in the event that less than 70
days' notice or prior public disclosure of the date of the meeting is given or
made to shareholders, not later than 10 days after the first public notice or
disclosure of the date of such annual meeting).
The notice of any nomination for election as a director is required to set
forth the name and address of the shareholder who intends to make the nomination
and of the person or persons to be nominated, the age and the principal
occupation or employment of each nominee, the class and number of shares
beneficially owned by such shareholder and by each nominee, such other
information regarding each nominee proposed by such shareholder required to be
included in a proxy statement filed pursuant to the proxy rules of the
Commission, and the consent of each nominee to be named as a nominee who would
serve as a director if so elected.
BUSINESS COMBINATION AND CONTROL SHARE ACQUISITION STATUTES AND RELATED
PROVISIONS
The Company is subject to the GBCL which contains certain provisions which
may be deemed to have an anti-takeover effect. Such provisions include
Missouri's Business Combination Statute and the control share acquisition
statute.
The Missouri Business Combination Statute prohibits certain transactions
between corporations subject to the statute and certain shareholders of such
corporations. In particular, the statute restricts certain "Business
Combinations" between a corporation and an "Interested Shareholder" or
affiliates of the Interested Shareholder unless certain conditions are met. A
"Business Combination" includes a merger or consolidation, certain sales,
leases, exchanges, pledges and similar dispositions of corporate assets or stock
and certain reclassifications and recapitalizations. An "Interested Shareholder"
includes any person or entity which beneficially owns or controls 20% or more of
the outstanding voting shares of the corporation.
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During the five-year restricted period after a person or entity becomes an
Interested Shareholder, no Business Combination may occur unless such Business
Combination or the transaction in which the person or entity become an
Interested Shareholder (the "Acquisition Transaction") was approved by the board
of directors of the corporation on or before the date of the Acquisition
Transaction. Business Combinations may occur after the five-year period
following the Acquisition Transaction only if: (i) prior to the Acquisition
Transaction, the board of directors approved the Acquisition Transaction or
approved the Business Combination in question; (ii) the holders of a majority of
the outstanding voting stock, other than stock owned by the Interested
Shareholder, approve the Business Combination; or (iii) the Business Combination
satisfies certain detailed fairness and procedural requirements.
The statute applies only to Missouri corporations which have either their
principal place of business or substantial assets in Missouri. In addition, the
corporation must have at least 100 shareholders, and (i) more than 10% of the
shareholders must be resident in Missouri, (ii) more than 10% of the outstanding
shares must be owned by Missouri residents, or (iii) more than 10,000
shareholders must be residents in Missouri (certain shares, such as shares held
by nominees, are disregarded in applying these tests).
The GBCL exempts from the statute: (i) corporations not having a class of
voting stock registered under Section 12 of the Exchange Act; (ii) corporations
which adopt provisions in their articles of incorporation or by-laws expressly
electing not to be covered by the statute; and (iii) certain circumstances in
which a shareholder inadvertently becomes an Interested Shareholder. The
Company's Articles and By-Laws do not contain an election to "opt out" of the
Missouri Business Combination Statute.
Because the Missouri Business Combination Statute may not apply to the
Company, the Articles contain a similar provision which will provide that,
during the five-year restricted period after a person or entity becomes an
Interested Shareholder, no Business Combination may occur unless such Business
Combination or the transaction in which the person or entity becomes an
Interested Shareholder was approved by the Board of Directors on or before the
date of the Acquisition Transaction or such person or entity was an Interested
Shareholder on the date the provision was adopted by the shareholders of the
Company. Business Combinations may occur after the five-year period following
the Acquisition Transaction only if (i) prior to the Acquisition Transaction,
the board of directors approved the Acquisition Transaction or approved the
Business Combination in question; (ii) the holders of a majority of the
outstanding voting stock, other than stock owned by the Interested Shareholder,
approve the Business Combination; or (iii) the Business Combination satisfies
certain detailed fairness and procedural requirements.
This provision may make it more difficult for a 20% beneficial owner to
effect transactions with the Company and may encourage persons interested in
acquiring the Company to negotiate in advance with the Board of Directors prior
to acquiring a 20% interest. It is possible that such a provision could make it
more difficult to accomplish a transaction which shareholders may otherwise deem
to be in their best interest.
The GBCL also contains a "Control Share Acquisition Statute" which may,
under some circumstances, limit the voting rights of certain shareholders. The
statute provides that an "Acquiring Person" who after any acquisition of shares
of certain publicly traded Missouri corporations has the voting power, when
added in all shares of the corporation previously owned or controlled by the
Acquiring Person, to exercise or direct the exercise of: (i) 20% but less than
33 1/3%, (ii) 33 1/3% or more but less than a majority or (iii) a majority, of
the voting power of outstanding stock of such corporation, will lose the right
to vote some or all of such shares unless the shareholder approval for the
purchase of the "Control Shares" is obtained. To obtain such approval, certain
disclosure requirements must be met and the retention or restoration of voting
rights approved by both: (i) a majority of the outstanding voting stock, and
(ii) a majority of the outstanding voting stock after exclusion of "Interested
Shares." Interested Shares are defined as shares owned by the Acquiring Person,
by directors who are also employees, and by officers of
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the corporation. Shareholders are given dissenters' rights with respect to the
vote on Control Share Acquisitions and may demand payment of the fair value of
their shares.
Certain acquisitions of shares are deemed not to constitute Control Share
Acquisitions, including good faith gifts, transfers pursuant to wills, purchases
pursuant to an issuance by the corporation, mergers involving the corporation
which satisfy the other requirements of the GBCL, transactions with a person who
owned a majority of the voting power of the corporation within the prior year or
purchases from a person who has previously satisfied the provisions of the
Control Share Acquisition Statute so long as the transaction does not result in
the purchasing party having voting power after the purchase in a percentage
range (such ranges are as set forth in the immediately preceding paragraph)
beyond the range for which the selling party previously satisfied the provisions
of the statute. The statute applies only to Missouri corporations which satisfy
requirements as to their place of business or assets and the residence of the
shareholders similar to those applicable to the Business Combination Statute, as
described above. Additionally, a corporation may exempt itself from application
of the statute by inserting a provision in its articles of incorporation or
by-laws expressly electing not to be covered by the statute. The Company's
Articles and By-Laws do not contain an election to "opt out" of the Control
Share Acquisition Statute.
TERMINATION OF REIT STATUS
The Articles permit the directors, with the approval of a majority of each
of the holders of the Common Stock and the Preferred Stock (and with respect to
the Excess Shares, the trustee of the Excess Common Shares and the Excess
Preferred Shares), to terminate the status of the Company as a REIT under the
Code at any time.
LIMITATION ON LIABILITY OF DIRECTORS; INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles limit the liability of directors of the Company, in their
capacity as such, whether to the Company, its shareholders or otherwise, to the
fullest extent permitted by Missouri law.
The Articles also contain provisions indemnifying the Company's directors
and officers to the maximum extent permitted by Missouri law. Section 355.1 of
the GBCL provides that the Company may indemnify its directors, officers,
employees and agents in any action, suit or proceeding other than an action by
or in the right of the Company, against expenses (including attorneys' fees),
judgments, fines and settlement amounts actually and reasonably incurred by such
person in connection with such action, suit or proceeding if such person acted
in good faith and in a manner that such person reasonably believed to be in or
not opposed to the best interests of the Company and, with respect to any
criminal action, had no reasonable cause to believe his conduct was unlawful.
Section 355.2 of the GBCL provides that the Company may indemnify any such
person in any action or suit by or in the right of the Company against expenses
(including attorneys' fees) and settlement amounts actually and reasonably
incurred by him in connection with the defense or settlement of the action or
suit if such person acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Company, except that such
person may not be indemnified in respect of any matter in which such person has
been adjudged liable for negligence or misconduct in the performance of his duty
to the Company, unless authorized by the court. Section 355.1 of the GBCL
provides that the Company shall indemnify any such person against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the action, suit or proceeding if such person has been
successful in defending such action, suit or proceeding and if such action, suit
or proceeding is one for which the Company may indemnify him under Section 355.1
or 355.2. Section 355.7 of the GBCL provides that the Company shall have the
power to give any further indemnity to any such person, in addition to the
indemnity otherwise authorized under Section 355, provided such further
indemnity is either (i) authorized, directed or provided for in the Articles or
any duly adopted amendment thereof or (ii) is authorized, directed or provided
for in any By-Law or agreement of the Company which has been adopted by a vote
of the shareholders of the Company, provided that no such
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indemnity shall indemnify any person from or on account of any conduct of such
person which was finally adjudged to have been knowingly fraudulent or
deliberately dishonest or to constitute willful misconduct.
FEDERAL INCOME TAX CONSIDERATIONS
THE FOLLOWING SUMMARY OF MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
REGARDING AN INVESTMENT IN THE SECURITIES IS BASED ON CURRENT LAW, IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. THIS DISCUSSION DOES NOT PURPORT
TO DEAL WITH ALL ASPECTS OF TAXATION THAT MAY BE RELEVANT TO PARTICULAR
INVESTORS IN LIGHT OF THEIR PERSONAL INVESTMENT OR TAX CIRCUMSTANCES, OR, EXCEPT
TO THE EXTENT DISCUSSED UNDER "--TAXATION OF TAX-EXEMPT SHAREHOLDERS" AND
"--TAXATION OF FOREIGN SHAREHOLDERS," TO CERTAIN TYPES OF INVESTORS (INCLUDING
INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS, FINANCIAL INSTITUTIONS OR
BROKER-DEALERS, FOREIGN CORPORATIONS AND PERSONS WHO ARE NOT CITIZENS OR
RESIDENTS OF THE UNITED STATES) THAT ARE SUBJECT TO SPECIAL TREATMENT UNDER THE
FEDERAL INCOME TAX LAWS NOR DOES IT GIVE A DETAILED DISCUSSION OF ANY STATE,
LOCAL OR FOREIGN TAX CONSIDERATIONS.
EACH PROSPECTIVE PURCHASER SHOULD CONSULT WITH ITS TAX ADVISOR REGARDING THE
SPECIFIC TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND SALE OF THE SECURITIES
AND OF THE COMPANY'S ELECTION TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST,
INCLUDING THE FEDERAL, STATE, LOCAL, AND FOREIGN INCOME AND OTHER TAX
CONSEQUENCES OF SUCH PURCHASE, OWNERSHIP, SALE AND ELECTION, AND OF POTENTIAL
CHANGES IN APPLICABLE TAX LAWS.
TAXATION OF THE COMPANY
GENERAL
The REIT provisions of the Code are highly technical and complex. The
following sets forth the material aspects of the provisions of the Code that
govern the Federal income tax treatment of a REIT and its shareholders. This
summary is based on, and qualified in its entirety by, current U.S. law,
including the applicable Code provisions, rules and regulations promulgated
thereunder, and administrative and judicial interpretations thereof, all of
which are subject to change which may apply retroactively.
OPINION OF COUNSEL
The Company elected to be taxed as a REIT under the Code, commencing with
its taxable year ending December 31, 1994, and the Company intends to continue
to operate in a manner consistent with such election and all rules with which a
REIT must comply. Skadden, Arps, Slate, Meagher & Flom LLP has issued its
opinion that, commencing with the Company's taxable year ended December 31,
1994, the Company was organized in conformity with the requirements for
qualification as a REIT, and its planned method of operation, and its actual
method of operation from February 12, 1994, will enable it to meet the
requirements for qualification and taxation as a REIT under the Code.
The foregoing opinion is based and conditioned upon certain assumptions and
representations made by the Company as of the date thereof regarding factual
matters. The opinion is expressed as of the date thereof, and Skadden, Arps,
Slate, Meagher & Flom LLP will have no obligation to advise holders of the
Securities of any subsequent change in the matters stated, represented or
assumed or any subsequent change in the applicable law. The Company's
qualification as a REIT depends on the qualification of Westland Properties,
Inc. ("WPI") during the period that WAT was not wholly owned by the Company.
Moreover, such qualification and taxation as a REIT depends upon the Company
having met and continuing to meet through, among other things, actual annual
operating results, distribution levels and diversity of stock ownership, the
various qualification tests imposed under the Code as discussed below, the
results of which will not be reviewed by Skadden, Arps, Slate, Meagher & Flom
LLP. Accordingly, no assurance can be given that the actual results of the
Company's operations for any particular taxable year have satisfied or will
satisfy such requirements. See "--Failure to Qualify." An opinion of counsel is
not
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binding on the IRS, and no assurance can be given that the IRS will not
challenge the Company's eligibility for taxation as a REIT.
TAXATION OF THE COMPANY
If the Company continues to qualify for taxation as a REIT, it generally
will not be subject to Federal corporate income tax on its net income that is
currently distributed to shareholders. This treatment substantially eliminates
the "double taxation" (at the corporate and shareholder levels) that generally
results from investment in a corporation. However, the Company will be subject
to Federal income tax as follows: First, the Company will be taxed at regular
corporate rates on any undistributed REIT taxable income, including
undistributed net capital gains. Second, under certain circumstances, the
Company may be subject to the "alternative minimum tax" on its items of tax
preference. Third, if the Company has net income from prohibited transactions
(which are, in general, certain sales or other dispositions of property, other
than certain foreclosure property, held primarily for sale to customers in the
ordinary course of business), such net income will be subject to a 100% tax.
Fourth, if the Company should fail to satisfy the 75% gross income test or the
95% gross income test (as discussed below), but has nonetheless maintained its
qualification as a REIT because certain other requirements have been met, it
will be subject to a 100% tax on an amount equal to (i) the gross income
attributable to the greater of the amount by which the Company fails the 75% or
95% test multiplied by (ii) a fraction intended to reflect the Company's
profitability. Fifth, if the 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 (other than
certain long-term capital gain net income which the Company elects to retain and
pay tax on), and (iii) any undistributed taxable income from prior periods, the
Company would be subjected to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. Sixth, if during the
ten-year period beginning on the first day of the first taxable year for which
the Company qualified as a REIT (the "Recognition Period"), the Company
recognizes gain on the disposition of any property (including any partnership
interest) held by the Company or any partnership in which an interest was held
as of the beginning of such Recognition Period, then, to the extent of the
excess of (i) the fair market value of such property as of the beginning of such
Recognition Period over (ii) the adjusted tax basis of the Company or the
partnerships in such property as of the beginning of such Recognition Period
(the "Built-in Gain"), such gain will be subject to tax at the highest corporate
tax rate pursuant to IRS regulations that have not yet been promulgated.
Seventh, 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
adjusted tax basis of the asset in the hands of the Company is determined by
reference to the adjusted tax basis of the asset (or any other property) in the
hands of the C corporation, and the Company recognizes gain on the disposition
of such asset during the Recognition Period beginning on the date on which such
asset was acquired by the Company, then, to the extent of the Built-in Gain,
such gains will be subject to tax at the highest regular corporate tax rate
pursuant to IRS regulations that have not yet been promulgated. The results
described above with respect to the recognition of Built-in Gain upon the
acquisition of assets from a C corporation assume that the Company will make an
election pursuant to IRS Notice 88-19 and that the availability or nature of
such election is not modified as proposed in President Clinton's 1999 Federal
Budget Proposal. In addition, the Company could also be subject to tax in
certain situations and on certain transactions not presently contemplated.
REQUIREMENTS FOR QUALIFICATION
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) which would be taxable as a domestic corporation, but
for the special Code provisions applicable to REITs; (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) in which not more than 50% in value of the outstanding stock is owned,
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directly or indirectly, by five or fewer individuals (as defined in the Code to
include certain entities); (vii) that makes an election to be a REIT (or has
made such election for a previous taxable year) and satisfies all relevant
filing and other administrative requirements established by the IRS that must be
met in order to elect and maintain REIT status; (viii) that uses a calendar year
for Federal income tax purposes and complies with the record keeping
requirements of the Code and Treasury Regulations promulgated thereunder; and
(ix) which meets certain other tests described below (including with respect to
the nature of its income and assets). The Code provides that conditions (i)
through (iv) must be met during the entire taxable year, that condition (v) must
be met during at least 335 days of a taxable year of 12 months, or during a
proportionate part of a taxable year of less than 12 months, and that condition
(vi) must be met during the last half of each taxable year. The Company believes
that it satisfies all of the conditions set forth above. In order to comply with
the share ownership tests described in conditions (v) and (vi) above, the
Articles provide certain restrictions on the transfer of its capital stock to
prevent concentration of stock ownership. These restrictions may not ensure that
the Company will, in all cases, be able to satisfy the share ownership tests set
forth above. If a REIT complies with all the requirements for ascertaining the
ownership of its outstanding stock in a taxable year and does not know or have
reason to know that it violated the share ownership tests set forth above, the
REIT will be deemed to have complied with such tests for such taxable year.
To monitor the Company's compliance with the share ownership requirements,
the Company is required to maintain records regarding the actual ownership of
its shares. To do so, the Company must demand written statements each year from
the record holders of certain percentages of its stock in which the record
holders are to disclose the actual owners of the shares (I.E., the persons
required to include in gross income the REIT dividends). A list of those persons
failing or refusing to comply with this demand must be maintained as part of the
Company's records. A shareholder who fails or refuses to comply with the demand
must submit a statement with its U.S. Federal income tax return disclosing the
actual ownership of the shares and certain other information.
OWNERSHIP OF PARTNERSHIP INTERESTS
In the case of a REIT that is a partner in a partnership, regulations
provide that the REIT is deemed to own its proportionate share of the
partnership's assets and to earn its proportionate share of the partnership's
income. In addition, the assets and gross income of the partnership retain the
same character in the hands of the REIT for purposes of the gross income and
asset tests applicable to REITs as described below. Thus, the Company's
proportionate share of the assets, liabilities and items of income of the
partnership will be treated as assets, liabilities and items of income of the
Company for purposes of applying the REIT requirements described herein. A
summary of certain rules governing the Federal income taxation of partnerships
and their partners is provided below in "--Tax Aspects of the Company's
Investments in Partnerships."
INCOME TESTS
In order to maintain qualification as a REIT, the Company annually must
satisfy two gross income requirements. First, at least 75% of the Company's
gross income (excluding gross income from "prohibited transactions," I.E.,
certain sales of property held primarily for sale to customers in the ordinary
course of business) for each taxable year must be derived directly or indirectly
from investments relating to real property or mortgages on real property
(including "rents from real property" and interest on obligations secured by
mortgages on real property or on interest in real property, and dividends or
other distributions on a gain from the sale of stock in other REITs) or from
certain types of temporary investments. Second, at least 95% of the Company's
gross income (excluding gross income from prohibited transactions) for each
taxable year must be derived from such real property investments, and from other
dividends, interest and gain from the sale or disposition of stock or securities
(or from any combination of the foregoing). Income earned on liability hedges
against the Company's indebtedness, such as option, futures, and forward
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contracts will qualify for the 95% test (but not the 75% test). In certain
cases, Treasury Regulations treat a variable rate and/or foreign currency debt
instrument and a liability and/or currency hedge as a synthetic debt instrument
for all purposes of the Code. If a hedge entered into by the Company is subject
to these Treasury Regulations, income earned on the hedge will operate to reduce
its interest expense, and, therefore such income will not affect the Company's
compliance with either the 75% or 95% tests.
Rents received by the Company from the tenants of real property directly,
through partnerships in which it has a direct or indirect ownership interest
(collectively, the "Partnerships"), or through its wholly-owned subsidiary
corporations ("qualified REIT subsidiaries," as described below) will qualify as
"rents from real property" in satisfying the gross income requirements described
above, only if several conditions are met, including the following. If rent
attributable to personal property leased in connection with a lease of real
property is greater than 15% of the total rent received under the lease, then
the portion of rent attributable to such personal property will not qualify as
"rents from real property." Moreover, for rents received to qualify as "rents
from real property," the REIT generally must not operate or manage the property
or furnish or render services to the tenants of such property, other than
through an "independent contractor" from which the REIT derives no revenue.
However, the Company (or its affiliates) are permitted to, and do directly
perform services that are "usually or customarily rendered" in connection with
the rental of space for occupancy only and are not otherwise considered rendered
to the occupant of the property. In addition, the Company (or its affiliates)
may provide non-customary services to tenants of its properties without
disqualifying all of the rent from the property if the payment for such services
does not exceed 1% of the total gross income from the property. For purposes of
this test, the income received from such non-customary services is deemed to be
at least 150% of the direct cost of providing the services. Because certain
properties are managed by third parties, the ability to treat amounts from such
property as "rents from real property" will be dependent on the actions of
others and will not be within the control of the Company. In addition, the
Company generally may not and will not charge rent that is based in whole or in
part on the income or profits of any person (except by reason of being based on
a percentage of the tenant's gross receipts or sales). Finally, rents derived
from tenants that are at least 10% owned, directly or constructively, by the
Company do not qualify as "rents from real property" for purposes of the gross
income requirements. While the Company regularly attempts to monitor such
requirements, no assurance can be given that the Company will not realize income
that does not qualify as "rents from real property," and that such amounts, when
combined with other nonqualifying income, may exceed 5% of the Company's taxable
income and thus disqualify the Company as a REIT.
The Company has derived and continues to derive income from certain sources
that are not described above and that generally do not constitute qualifying
income for purposes of the gross income requirements. While no assurance can be
given that the IRS would not successfully assert otherwise, the Company believes
that the aggregate amount of such income in any taxable year will not exceed the
limits on nonqualifying income under the gross income tests.
If the Company 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 it is entitled to relief under certain provisions of the Code. These relief
provisions will be generally available if the Company's failure to meet such
tests was due to reasonable cause and not due to willful neglect, the Company
attaches a schedule of the sources of its income to its return, and any
incorrect information on the schedule was not due to fraud with intent to evade
tax. It is not possible, however, to state whether in all circumstances the
Company would be entitled to the benefit of these relief provisions. If these
relief provisions are inapplicable to a particular set of circumstances
involving the Company, the Company will not qualify as a REIT. As discussed
above, even where these relief provisions apply, a tax is imposed with respect
to the excess of the actual amount of non-qualifying income over the amount
permitted under the gross income tests.
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ASSET TESTS
The Company, at the close of each quarter of its taxable year, must also
satisfy three tests relating to the nature of its assets. First, at least 75% of
the value of the Company's total assets must be represented by real estate
assets (including its allocable share of real estate assets held by the
Partnerships), stock in other REITs, stock or debt instruments held for not more
than one year purchased with the proceeds of a stock offering or long-term (at
least five years) debt offering of the Company, cash, cash items and U.S.
government securities. Second, not more than 25% of the Company's total assets
may be represented by securities other than those in the 75% asset class. Third,
of the investments not included in the 75% asset class, the value of any one
issuer's securities owned by the Company may not exceed 5% of the value of the
Company's total assets, and the Company may not own more than 10% of any one
issuer's outstanding voting securities.
The Company's indirect interests in certain of the Partnerships and certain
properties are held through wholly-owned corporate subsidiaries of the Company
organized and operated as "qualified REIT subsidiaries" within the meaning of
the Code. Qualified REIT subsidiaries are not treated as separate entities from
their parent REIT for Federal income tax purposes. Instead, all assets,
liabilities and items of income, deduction and credit of each qualified REIT
subsidiary are treated as assets, liabilities and items of the Company. Each
qualified REIT subsidiary therefore will not be subject to Federal corporate
income taxation, although it may be subject to state or local taxation.
In addition, the Company's ownership of stock of each qualified REIT
subsidiary and its interest in the Partnerships do not violate either the 5%
value restriction or the restriction against ownership of more than 10% of the
voting securities of any issuer. Similarly, the ownership by the Company of any
other REIT will not violate these restrictions.
If the Company should fail to satisfy the asset test at the end of a
calendar quarter, such a failure would not cause it to lose its REIT status if
(i) it satisfied the asset tests at the close of the preceding calendar quarter
and (ii) the discrepancy between the value of the Company's assets and the asset
test requirements arose from changes in the market value of its assets and was
not wholly or partly caused by the acquisition of one or more non-qualifying
assets. If the condition described in clause (ii) of the preceding sentence were
not satisfied, the Company still could avoid disqualification by eliminating any
discrepancy within 30 days after the close of the calendar quarter in which it
arose.
ANNUAL DISTRIBUTION REQUIREMENTS
In order to qualify as a REIT, the Company is required to distribute
dividends (other than capital gain dividends) to its shareholders in an amount
at least equal to (i) the sum of (a) 95% of the Company's "REIT taxable income"
(computed without regard to the dividends paid deduction and the Company's net
capital gain) and (b) 95% of the net income (after tax), if any, from
foreclosure property, minus (ii) 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 with or before the first regular dividend
payment after such declaration. To the extent that the 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
thereon at the capital gains or ordinary corporate tax rates, as the case may
be. Furthermore, if the 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 income for such year (other than certain long-term
capital gains income which the Company elects to retain and pay tax on), and
(iii) any undistributed taxable income from prior periods, the Company would be
subject to a 4% excise tax on the excess of such required distribution over the
amounts actually distributed. The Company believes that it has made, and intends
to make, timely distributions sufficient to satisfy this annual distribution
requirement.
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It is possible that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet the 95% distribution requirement due to
timing differences between (i) the actual receipt of income and actual payment
of deductible expenses and (ii) the inclusion of such income and deduction of
such expenses in arriving at the Company's REIT taxable income. In the event
that such timing differences occur, in order to meet the 95% distribution
requirement, the Company may find it necessary to arrange for short-term, or
possibly long-term, borrowings (on terms that may not be favorable to the
Company) or to pay dividends in the form of taxable distributions of property.
Under certain circumstances, the Code permits the Company to rectify a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to shareholders in a later year, which may be included in the
Company's deduction for dividends paid for the earlier year. Thus, the Company
may avoid being taxed on amounts distributed as deficiency dividends. The
Company would, however, be required to pay interest based on the amount of any
deduction taken for deficiency dividends.
ABSENCE OF EARNINGS AND PROFITS
The Code provides that, in the case of a corporation such as the Company
that was formerly a taxable C corporation and in the case of a corporation that
is acquired by the Company, the Company may qualify as a REIT for a taxable year
only if, as of the close of the such year, it has no "earnings and profits"
accumulated in any non-REIT year. The Company and its former owners retained
independent certified public accountants to determine the Company's earnings and
profits as of February 11, 1994 (and December 31, 1994) for purposes of the
distribution requirement. The determination by the independent certified public
accountants that the Company had no non-REIT earnings and profits was based upon
the Company's tax returns as filed with the IRS and other assumptions and
qualifications set forth in the reports issued by such accountants. The Company
also believes it has satisfied this requirement with respect to each corporation
that has been acquired.
Any adjustments to the Company's taxable income for taxable years ending on
or before the effective date of its REIT election, including as a result of an
examination of its returns by the IRS, could affect the calculation of its
earnings and profits as of the appropriate measurement date. Furthermore, the
determination of earnings and profits requires the resolution of certain
technical tax issues with respect to which there is no authority directly on
point and, consequently, the proper treatment of these issues for earnings and
profits purposes is not free from doubt. There can be no assurance that the IRS
will not examine the tax returns of the Company for prior years and propose
adjustments to increase its taxable income. In this regard, the IRS can consider
all taxable years of a corporation as open for review for purposes of
determining the amount of such earnings and profits.
FAILURE TO QUALIFY
If the Company fails to qualify for taxation as a REIT in any taxable year,
and the relief provisions do not apply, the Company will be subject to tax
(including any applicable alternative minimum tax) on its taxable income at
regular corporate rates. Distributions to shareholders in any year in which the
Company fails to qualify will not be deductible by the Company nor will they be
required to be made. In such event, to the extent of current and accumulated
earnings and profits, all distributions to shareholders will be taxable as
ordinary income, and, subject to certain limitations of the Code, corporate
distributees may be eligible for the dividends received deduction. Unless
entitled to relief under specific statutory provisions, the Company will also 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 the Company would be entitled to such statutory relief. In
addition, a recent Federal budget proposal contains language which, if enacted
in its present form, would result in the immediate taxation of all gain inherent
in a C corporation's assets upon an election by the corporation to become a
REIT, and thus would effectively preclude the Company from re-electing REIT
status following a termination of its REIT qualification.
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TAX ASPECTS OF THE COMPANY'S INVESTMENTS IN PARTNERSHIPS
GENERAL
Certain of the Company's investments are held indirectly through
partnerships (including LLCs treated as partnerships for Federal income tax
purposes). In general, partnerships are "pass-through" entities that are not
subject to Federal income tax. Rather, partners are allocated their
proportionate shares of the items of income, gain, loss, deduction and credit of
a partnership, and are potentially subject to tax thereon, without regard to
whether the partners receive a distribution from the partnership. The Company
will include in its income its proportionate share of the foregoing partnership
items for purposes of the various REIT income tests and in the computation of
its REIT taxable income.
Moreover, for purposes of the REIT asset tests, the Company will include its
proportionate share of assets held by such partnerships. See "--Taxation of the
Company --Ownership of Partnership Interests."
ENTITY CLASSIFICATION
The Company's direct and indirect investment in partnerships (including LLCs
treated as partnerships for Federal income tax purposes) involves special tax
considerations, including the possibility of a challenge by the IRS of the
status of any of the partnerships as a partnership (as opposed to an association
taxable as a corporation) for Federal income tax purposes. If certain of these
entities were treated as an association for Federal income tax purposes, it
would be taxable as a corporation and therefore subject to an entity-level tax
on its income. In such a situation, the character of the Company's assets and
items of gross income would change, which could preclude the Company from
satisfying the asset tests and/or the income tests (see "--Taxation of the
Company --Asset Tests" and "--Taxation of the Company --Income Tests"), and in
turn could prevent the Company from qualifying as a REIT. See "--Taxation of the
Company -- Failure to Qualify" above for a discussion of the effect of the
Company's failure to meet such tests for a taxable year. In addition, any change
in the status of any of the partnerships for tax purposes might be treated as a
taxable event, in which case the Company might incur a tax liability without any
related cash distributions.
TAX ALLOCATIONS WITH RESPECT TO THE PROPERTIES
Pursuant to the Code and the regulations thereunder, income, gain, loss and
deduction attributable to appreciated or depreciated property that is
contributed to a partnership in exchange for an interest in the partnership must
be allocated in a manner such that the contributing partner is charged with, or
benefits from, respectively, the unrealized gain or unrealized loss associated
with the property at the time of the contribution. The amount of such unrealized
gain or unrealized loss is generally equal to the difference between the fair
market value of contributed property at the time of contribution, and the
adjusted tax basis of such property at the time of contribution (a "Book-Tax
Difference"). Such allocations are solely for Federal income tax purposes and do
not affect the book capital accounts or other economic or legal arrangements
among the partners. Where a partner contributes cash to a partnership that holds
appreciated property, the Treasury regulations provide for a similar allocation
of such items to the other partners. These rules would apply to the contribution
by the Company to an existing partnership of the cash proceeds received in any
offerings of its stock.
With respect to any property purchased or to be purchased by any of the
partnerships (other than through the issuance of partnership units), such
property will initially have a tax basis equal to its fair market value and the
special allocation provisions described above will not apply.
SALE OF THE PROPERTIES
The Company's share of any gain realized by any partnership, in which it
holds a direct or indirect interest, on the sale of any property held as
inventory or primarily for sale to customers in the ordinary
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course of business will be treated as income from a prohibited transaction that
is subject to a 100% penalty tax. See "--Requirements for Qualification --Income
Tests." Such prohibited transaction income may also have an adverse effect on
the Company's ability to satisfy the income tests for status as a REIT. Under
existing law, whether property is held as inventory or primarily for sale to
customers in the ordinary course of a partnership's trade or business is a
question of fact that depends on all the facts and circumstances with respect to
the particular transaction. The Company intends to hold its interests in the
subject partnerships, and such partnerships intend to hold their properties for
investment with a view to long-term appreciation, to engage in the business of
acquiring, developing, owning, and operating the properties and to make such
occasional sales of the properties, including peripheral land, as are consistent
with the Company's investment objectives. Accordingly, the Company believes that
its interests in the subject partnerships, and such partnerships' interests in
the properties will not be treated as inventory or as property held primarily
for sale to customers in the ordinary course of a trade or business.
TAXATION OF TAXABLE DOMESTIC SHAREHOLDERS
As long as the Company qualifies as a REIT, distributions made to the
Company's taxable domestic shareholders out of current or accumulated earnings
and profits (and not designated as capital gain dividends or retained net
long-term capital gains) will be taken into account by them as ordinary income
and will not be eligible for the dividends received deduction for corporations.
Distributions that are designated as capital gain dividends will be taxed as
long-term capital gain (to the extent that they do not exceed the Company's
actual net capital gain for the taxable year) without regard to the period for
which the shareholder has held its stock. Pursuant to recently enacted
legislation, in the case of a shareholder who is an individual, an estate or a
trust, long-term capital gains and losses are separated into three tax rate
groups: a 20% group, a 25% group and a 28% group and subject to tax at the rate
effective for each group. The Company intends to designate capital gain
dividends, if any, as 20% rate gain distributions, 25% rate gain distributions
or 28% rate distributions and detail such designations in a manner intended to
comply with applicable requirements. If the Company elects to retain their share
of capital gains rather than distribute them, a shareholder will be deemed to
receive a capital gain dividend equal to the amount of such retained net
long-term capital gains. A shareholder will be allowed a credit against its
Federal income tax liability for its proportionate share of tax paid by the
Company on retained capital gains. Such gains are subject to apportionment among
the three tax rate groups as set forth above. Corporate shareholders may be
required to treat up to 20% of certain capital gain dividends as ordinary
income.
Distributions in excess of current and accumulated earnings and profits will
not be taxable to a shareholder to the extent that they do not exceed the
adjusted tax basis of the shareholder's shares, but rather will reduce the
adjusted tax basis of such shares. To the extent that such distributions exceed
the adjusted tax basis of a shareholder's shares, they will be included in
income as long-term capital gain (or short-term capital gain if the shares have
been held for one year or less) provided that the shares are a capital asset in
the hands of the shareholder. In addition, any dividend declared by the Company
in October, November or December of any year and payable to a shareholder of
record on a specified date in any such month shall be treated as both paid by
the Company and received by the shareholder on December 31 of such year,
provided that the dividend is actually paid by the Company during January of the
following calendar year. Shareholders 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 shares by a shareholder who
has held such shares for six months or less (after applying certain holding
period rules) will be treated as a long-term capital loss to the extent that
distributions from the Company are required to be treated by such shareholder as
long-term capital gain.
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TAXATION OF TAX-EXEMPT SHAREHOLDERS
Based upon a published ruling by the IRS, distributions by the Company to a
shareholder that is a tax-exempt entity will 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 the shares are not otherwise used in an unrelated trade or
business of the tax-exempt entity.
Notwithstanding the preceding paragraph, however, a portion of the dividends
paid by the Company may be treated as UBTI to certain U.S. private pension
trusts if the Company is treated as a "pension-held REIT." The Company is not,
and does not expect to become, a "pension-held REIT." If the Company were to
become a pension-held REIT, these rules generally would only apply to certain
U.S. pension trusts that hold more than 10% of the Company's stock.
TAXATION OF FOREIGN SHAREHOLDERS
The following is a discussion of certain anticipated U.S. Federal income and
estate tax consequences of the ownership and disposition of the Company's stock
applicable to Non-U.S. Holders of such stock. A "Non-U.S. Holder" is any person
other than (i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the laws of the
United States or of any state thereof, (iii) an estate or trust whose income is
includable in gross income for U.S. Federal income tax purposes regardless of
its source, or (iv) a trust if a United States court is able to exercise primary
supervision over the administration of such trust and one or more United States
fiduciaries have the authority to control all substantial decisions of such
trust. The discussion is based on current law and is for general information
only. The discussion addresses only certain and not all aspects of U.S. Federal
income and estate taxation.
ORDINARY DIVIDENDS
The portion of dividends received by Non-U.S. Holders payable out of the
Company's earnings and profits which are not attributable to capital gains of
the Company and which are not effectively connected with a U.S. trade or
business of the Non-U.S. Holder will be subject to U.S. withholding tax at the
rate of 30% (or lower rate, if so provided by an applicable income tax treaty).
In general, Non-U.S. Holders will not be considered engaged in a U.S. trade or
business solely as a result of their ownership of stock of the Company. In cases
where the dividend income from a Non-U.S. Holder's investment in stock of the
Company is (or is treated as) effectively connected with the Non-U.S. Holder's
conduct of a U.S. trade or business, the Non-U.S. Holder generally will be
subject to U.S. tax at graduated rates, in the same manner as U.S. shareholders
are taxed with respect to such dividends (and may also be subject to the 30%
branch profits tax in the case of a Non-U.S. Holder that is a foreign
corporation).
NON-DIVIDEND DISTRIBUTIONS
Distributions by the Company to a Non-U.S. Holder who holds 5% or less of
the Common Stock (after application of certain constructive ownership rules)
which are not dividends out of the earnings and profits of the Company will not
be subject to U.S. income or withholding tax. If it cannot be determined at the
time a distribution is made whether or not such distribution will be in excess
of current and accumulated earnings and profits, the distribution will be
subject to withholding at the rate applicable to dividends. However, the
Non-U.S. Holder 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 and accumulated earnings and profits of the Company.
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CAPITAL GAIN DIVIDENDS
Under the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"), a
distribution made by the Company to a Non-U.S. Holder, to the extent
attributable to gains from dispositions of United States Real Property Interests
("USRPIs") such as the properties beneficially owned by the Company ("USRPI
Capital Gains"), will be considered to be income effectively connected with a
U.S. trade or business of the Non-U.S. Holder and subject to U.S. income tax at
the rate applicable to U.S. individuals or corporations, without regard to
whether such distribution is designated as a capital gain dividend. In addition,
the Company will be required to withhold tax equal to 35% of the amount of
dividends to the extent such dividends constitute USRPI Capital Gains.
Distributions subject to FIRPTA may also be subject to a 30% branch profits tax
in the hands of a foreign corporate shareholder that is not entitled to treaty
exemption.
DISPOSITION OF STOCK OF THE COMPANY
Unless the Company's stock constitutes a USRPI, a sale of such stock by a
Non-U.S. Holder generally will not be subject to U.S. taxation under FIRPTA. The
stock will not constitute a USRPI if the Company is a "domestically controlled
REIT." A domestically controlled REIT is a REIT in which, at all times during a
specified testing period, less than 50% in value of its shares is held directly
or indirectly by Non-U.S. Holders. The Company is not a domestically controlled
REIT. A Non-U.S. Holder's sale of stock generally nevertheless will not be
subject to tax under FIRPTA as a sale of a USRPI provided that (i) the stock is
"regularly traded" (as defined by applicable Treasury regulations) on an
established securities market (e.g., the NYSE, on which the regularly traded
Common Stock will be listed) and (ii) the selling Non-U.S. Holder (after
application of certain constructive ownership rules) held 5% or less of the
Company's outstanding stock or the regularly traded class at all times during a
specified testing period.
If gain on the sale of stock of the Company were subject to taxation under
FIRPTA, the Non-U.S. Holder would be subject to the same treatment as a U.S.
shareholder 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 purchaser of the stock could be required to withhold 10% of
the purchase price and remit such amount to the IRS.
Capital gains not subject to FIRPTA will nonetheless be taxable in the
United States to a Non-U.S. Holder in two cases: (i) if the Non-U.S. Holder's
investment in the stock of the Company is effectively connected with a U.S.
trade or business conducted by such Non-U.S. holder, the Non-U.S. Holder will be
subject to the same treatment as a U.S. shareholder with respect to such gain,
or (ii) if the Non-U.S. Holder is a nonresident alien individual who was present
in the United States for 183 days or more during the taxable year and has a "tax
home" in the United States, the nonresident alien individual will be subject to
a 30% tax on the individual's capital gain.
ESTATE TAX
Stock of the Company owned or treated as owned by an individual who is not a
citizen or resident (as specially defined for U.S. Federal estate tax purposes)
of the United States at the time of death will be includable in the individual's
gross estate for U.S. Federal estate tax purposes, unless an applicable estate
tax treaty provides otherwise. Such individual's estate may be subject to U.S.
Federal estate tax on the property includable in the estate for U.S. Federal
estate tax purposes.
INFORMATION REPORTING AND BACKUP WITHHOLDING
U.S. SHAREHOLDERS
The Company will report to the U.S. Shareholders and the IRS the amount of
distributions paid during each calendar year and the amount of tax withheld, if
any. Under the backup withholding rules, a U.S. Shareholder may be subject to
backup withholding at the rate of 31% with respect to distributions
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paid unless such holder (i) is a corporation or comes within certain other
exempt categories and, when required, demonstrates this fact, or (ii) provides a
taxpayer identification number, certifies as to no loss of exemption from backup
withholding, and otherwise complies with applicable requirements of the backup
withholding rules. A U.S. Shareholder that does not provide the Company with his
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
U.S. Shareholder's income tax liability. In addition, the Company may be
required to withhold a portion of capital gain distributions to any U.S.
Shareholders who fail to certify their nonforeign status to the Company. See
"Federal Income Tax Considerations--Taxation of Foreign Shareholders."
FOREIGN SHAREHOLDERS
The Company must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends (including any capital gain dividends) paid to, and the tax
withheld with respect to, such Non-U.S. Holder. These reporting requirements
apply regardless of whether withholding was reduced or eliminated by an
applicable tax treaty. Copies of these returns may also be made available under
the provisions of a specific treaty or agreement with the tax authorities in the
country in which the Non-U.S. Holder resides.
U.S. backup withholding (which generally is imposed at the rate of 31% on
certain payments to persons that fail to furnish the information required under
the U.S. information reporting requirements) and information reporting generally
will not apply to dividends (including any capital gain dividends) paid on stock
of the Company to a Non-U.S. Holder at an address outside the United States.
The payment of the proceeds from the disposition of stock of the Company to
or through a U.S. office of a broker will be subject to information reporting
and backup withholding unless the owner, under penalties of perjury, certifies,
among other things, its status as a Non-U.S. Holder, or otherwise establishes an
exemption. The payment of the proceeds from the disposition of stock to or
through a non-U.S. office of a non-U.S. broker generally will not be subject to
backup withholding and information reporting.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules will be refunded or credited against the Non-U.S.
Holder's U.S. Federal income tax liability, provided that the required
information is furnished to the IRS.
The IRS has issued final Treasury Regulations regarding the backup
withholding rules as applied to Non-U.S. Holders. Those final Treasury
Regulations alter the current system of backup withholding compliance and will
be effective for payments made after December 31, 1999. Prospective purchasers
should consult their tax advisors regarding the application of the final
Treasury Regulations and the potential effect on their ownership of Common
Stock.
OTHER TAX CONSEQUENCES
POSSIBLE LEGISLATIVE OR OTHER ACTIONS AFFECTING TAX CONSEQUENCES
Prospective investors should recognize that the present Federal income tax
treatment of an investment in the Company may be modified by legislative,
judicial or administrative action at any time, and that any such action may
affect investments and commitments previously made. The rules dealing with
Federal income taxation are constantly under review by persons involved in the
legislative process and by the IRS and the U.S. Treasury Department, resulting
in revisions of regulations and revised interpretations of established concepts
as well as statutory changes. Revisions in Federal tax laws and interpretations
thereof could adversely affect the tax consequences of an investment in the
Company. For example, a recent Federal budget proposal contains language which,
if enacted in it, present form, would result in the immediate taxation of all
gain inherent in a C corporation's assets upon an election by the corporation to
become a REIT, and thus would effectively preclude the Company from re-electing
REIT status following a termination of its REIT qualification.
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STATE AND LOCAL TAXES
The Company and its shareholders may be subject to state or local income and
other taxation in various state or local jurisdictions, including those in which
it or they transact business or reside. The state and local tax treatment of the
Company and its shareholders may not conform to the Federal income tax
consequences discussed above. Consequently, prospective shareholders should
consult their own tax advisors regarding the effect of state and local tax laws
on an investment in the Company.
PLAN OF DISTRIBUTION
The Company may sell any of the Securities being offered hereby in any one
or more of the following ways from time to time: (i) through agents; (ii) to or
through underwriters; (iii) through dealers; and (iv) directly to purchasers, or
through a combination of such methods.
The distribution of the 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 sale, at prices related to such prevailing
market prices or at negotiated prices.
Sales of Common Stock offered hereby may be effected from time to time in
one or more transactions on the NYSE or in negotiated transactions or a
combination of such methods of sale, at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at other negotiated
prices.
Offers to purchase Securities may be solicited by agents designated by the
Company from time to time. Any such agent involved in the offer or sale of the
Securities in respect of which this Prospectus is delivered will be named, and
any commissions payable by the Company to such agent will be set forth, in the
applicable Prospectus Supplement. Unless otherwise indicated in such Prospectus
Supplement, any such agent will be acting on a reasonable best efforts basis for
the period of its appointment. Any such agent may be deemed to be an
underwriter, as that term is defined in the Securities Act, of the Securities so
offered and sold.
If Securities are sold by means of an underwritten offering, the Company
will execute an underwriting agreement with an underwriter or underwriters at
the time an agreement for such sale is reached, and the names of the specific
managing underwriter or underwriters, as well as any other underwriters, the
respective amounts underwritten and the terms of the transaction, including
commissions, discounts and any other compensation of the underwriters and
dealers, if any, will be set forth in the applicable Prospectus Supplement which
will be used by the underwriters to make resales of the Securities in respect of
which this Prospectus is being delivered to the public. If underwriters are
utilized in the sale of any Securities in respect of which this Prospectus is
being delivered, such Securities will be acquired by the underwriters for their
own account and may be resold from time to time in one or more transactions,
including negotiated transactions, at fixed public offering prices or at varying
prices determined by the underwriters at the time of sale. Securities may be
offered to the public either through underwriting syndicates represented by one
or more managing underwriters or directly by one or more underwriters. If any
underwriter or underwriters are utilized in the sale of the Securities, unless
otherwise indicated in the applicable Prospectus Supplement, the underwriting
agreement will provide that the obligations of the underwriters are subject to
certain conditions precedent and that the underwriters with respect to a sale of
Securities will be obligated to purchase all such Offered Securities if any are
purchased.
In connection with offers of Depositary Shares, Preferred Stock, Warrants or
Common Stock, the Company may grant to the underwriters options to purchase
additional shares of Depositary Shares, Preferred Stock or Common Stock, as the
case may be, to cover over-allotments, if any, at the initial public offering
price (with additional underwriting commissions or discounts), as may be set
forth in the Prospectus Supplement relating thereto. If the Company grants any
over-allotment option, the terms of
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such over-allotment option will be set forth in the Prospectus Supplement for
such Depositary Shares, Preferred Stock or Common Stock.
If a dealer is utilized in the sale of the Securities in respect of which
this Prospectus is delivered, the Company will sell such Securities to the
dealer as principal. The dealer may then resell such Securities to the public at
varying prices to be determined by such dealer at the time of resale. Any such
dealer may be deemed to be an underwriter, as such term is defined in the
Securities Act, of the Securities so offered and sold. The name of the dealer
and the terms of the transaction will be set forth in the Prospectus Supplement
relating thereto.
Offers to purchase Securities may be solicited directly by the Company and
the sale thereof may be made by the Company directly to institutional investors
or others, including to affiliates and other shareholders of the Company, who
may be deemed to be underwriters within the meaning of the Securities Act with
respect to any resale thereof. The terms of any such sales will be described in
the Prospectus Supplement relating thereto.
Securities may also be offered and sold, if so indicated in the applicable
Prospectus Supplement, in connection with a remarketing upon their purchase, in
accordance with a redemption or repayment pursuant to their terms, or otherwise,
by one or more firms ("Remarketing Firms"), acting as principals for their own
accounts or as agents for the Company. Any Remarketing Firm will be identified
and the terms of its agreement, if any, with the Company and its compensation
will be described in the applicable Prospectus Supplement. Remarketing Firms may
be deemed to be underwriters, as that term is defined in the Securities Act, in
connection with the Securities remarketed thereby.
If so indicated in the applicable Prospectus Supplement, the Company may
authorize agents and underwriters to solicit offers by certain institutions to
purchase Securities from the Company at the public offering price set forth in
the applicable Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on the date or dates stated in the applicable
Prospectus Supplement. Such delayed delivery contracts will be subject to only
those conditions set forth in the applicable Prospectus Supplement. A commission
indicated in the applicable Prospectus Supplement will be paid to underwriters
and agents soliciting purchases of Securities pursuant to delayed delivery
contracts accepted by the Company.
Agents, underwriters, dealers and Remarketing Firms may be entitled under
relevant agreements with the Company to indemnification by the Company against
certain liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which such agents, underwriters, dealers
and Remarketing Firms may be required to make in respect thereof.
Each series of Securities will be a new issue and, other than the Common
Stock which is listed on the NYSE, will have no established trading market. The
Company may elect to list any series of Securities on an exchange, and in the
case of the Common Stock, on any additional exchange, but, unless otherwise
specified in the applicable Prospectus Supplement, the Company shall not be
obligated to do so. Therefore, no assurance can be given as to the liquidity of
the trading market for any of the Securities.
Agents, underwriters, dealers, and Remarketing Firms may be customers of,
engage in transactions with, or perform services for, the Company and its
subsidiaries in the ordinary course of business.
LEGAL MATTERS
Unless otherwise specified in a Prospectus Supplement relating to particular
Securities, the validity under Missouri law of the Securities offered hereby
will be passed upon for the Company by Husch & Eppenberger, LLC, Kansas City,
Missouri, on behalf of the Company, and certain tax matters will be passed upon
for the Company by Skadden, Arps, Slate, Meagher & Flom LLP, Los Angeles,
California.
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EXPERTS
The consolidated financial statements and schedule are incorporated in this
Prospectus by reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1997. The consolidated financial statements and
schedules for the years ended December 31, 1997 and December 31, 1996 have been
audited by Ernst & Young, independent auditors, and for the year ended December
31, 1995 by Coopers & Lybrand L.L.P., independent auditors, as stated in their
reports, which are incorporated herein by reference. Such consolidated financial
statements and schedule have been so incorporated in reliance upon the reports
of such firms given upon their authority as experts in accounting and auditing.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses (other than underwriting
discounts, concessions and commissions) expected to be incurred in connection
with the issuance and distribution of securities being registered. Except for
the Securities and Exchange Commission filing fee, all amounts shown below are
estimates.
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee................................... $ 177,000
Blue Sky Fees and Expenses (including counsel's fees)........................... 30,500
Legal Fees and Expenses......................................................... 250,000
Accounting Fees and Expenses.................................................... 120,000
New York Stock Exchange Listing Fees............................................ 1,000,000
Printing and Engraving Expenses................................................. 100,000
Miscellaneous................................................................... 322,500
Total....................................................................... $2,000,000
</TABLE>
The Company will bear all of the foregoing expenses.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company has obtained, and pays the cost of, directors' and officers'
liability insurance coverage in the amount of $25.0 million (subject to a
retention or a "deductible" of $250,000). Directors' and officers' insurance
insures (i) the directors and officers of the Company from any claim arising out
of an alleged wrongful act by the directors and officers of the Company in their
respective capacities as directors and officers of the Company, and (ii) the
Company to the extent that the Company has indemnified the directors and
officers for such loss. The Articles provide for indemnification to the full
extent permitted by Missouri law.
Section 351.355(1) of the Revised Statutes of Missouri provides that a
corporation may indemnify a director, officer, employee or agent of the
corporation in any action, suit or proceeding other than an action by or in the
right of the corporation, against expenses (including attorney's fees),
judgments, fines and settlement amounts actually and reasonably incurred by him
in connection with such action, suit or proceeding if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the corporation and, with respect to any criminal action, had no reasonable
cause to believe his conduct was unlawful.
Section 351.355(2) provides that the corporation may indemnify any such
person in any action or suit by or in the right of the corporation against
expenses (including attorney's fees) and settlement amounts actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the corporation, except that he
may not be indemnified in respect of any matter in which he has been adjudged
liable for negligence or misconduct in the performance of his duty to the
corporation, unless authorized by the court.
Section 351.355(3) provides that a corporation shall indemnify any such
person against expenses (including attorney's fees) actually and reasonably
incurred by him in connection with the action, suit or pro ceeding if he has
been successful in defense of such action, suit or proceeding, and if such
action, suit or proceeding is one for which the corporation may indemnify him
under Section 351.355(1) or (2). Section 351.355(7) provides that a corporation
shall have the power to give any further indemnity to any such person, in
addition to the indemnity otherwise authorized under Section 351.355, provided
such further
II-1
<PAGE>
indemnity is either (i) authorized, directed or provided for in the articles of
incorporation of the corporation or any duly adopted amendment thereof or (ii)
is authorized, directed or provided for in any by-law or agreement of the
corporation which has been adopted by a vote of the shareholders of the
corporation, provided that no such indemnity shall indemnify any person from or
on account of such person's conduct which was finally adjudged to have been
knowingly fraudulent, deliberately dishonest or willful misconduct.
The Articles of Incorporation of the Company contain provisions indemnifying
its directors and officers to the extent authorized specifically by Sections
351.355(1), (2), (3) and (7).
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Commission, such indemnification is against
public policy as expressed in the Securities Act of 1933 and is therefore
unenforceable.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
ITEM 16. EXHIBITS.
- --------- -----------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
4.1 Third Restated Articles of Incorporation of the Company, incorporated herein by reference to Exhibit 3.1 to
the Company Form 10-Q for the quarterly period ended June 30, 1997.
4.2 Second Amended and Restated By-Laws of the Company, incorporated herein by reference to Exhibit 3.3 to the
Company Form 10-Q for the quarterly period ended June 30, 1997.
4.3 Specimen certificate representing Common Stock incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-11 (File No. 333-2231).
4.4 Certificate of Designation for Series B Preferred Shares, incorporated by reference to the Company's Form
10-Q for the quarterly period ended June 30, 1997.
4.5 Form of Warrant.*
4.6 Form of Warrant Agreement.*
4.7 Form of Deposit Agreement.*
4.8 Form of the Depositary Receipt.*
5.1 Opinion of Husch & Eppenberger, as to legality of the Securities.**
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding tax matters.
12.1 Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Fixed Charges and Preferred
Stock Dividends.**
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Coopers & Lybrand LLP.
23.3 Consent of Husch & Eppenberger, LLP (included in Exhibit 5.1).**
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 8.1).
24.1 Powers of Attorney.**
</TABLE>
- ------------------------
* The form or forms of Warrant, Warrant Agreement, Deposit Agreement and
Depositary Receipt with respect to each particular offering of Warrants or
Depositary Receipts will be filed as an exhibit to a report of Form 8-K and
incorporated herein by reference.
** Previously filed.
II-2
<PAGE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; 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 this 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 or Form S-8, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant 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.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's 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 that 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 registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question
II-3
<PAGE>
whether such indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(d) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 1 to the registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Los Angeles, State of
California, on June 1, 1998.
WESTFIELD AMERICA, INC.
(Registrant)
By: /s/ PETER S. LOWY
-----------------------------------------
(Peter S. Lowy,
Director and Co-President)
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to the registration statement has been signed by the following
persons in the capacities indicated on the 1 of June, 1998.
* Director and Chairman of
- ------------------------------ the Board
Frank P. Lowy
/s/ PETER S. LOWY Director and Co-President
- ------------------------------ (Principal Executive
Peter S. Lowy Officer)
/s/ RICHARD E. GREEN Co-President (Principal
- ------------------------------ Executive Officer)
Richard E. Green
Chief Financial Officer and
/s/ MARK A. STEFANEK Treasurer (Principal
- ------------------------------ Financial and Accounting
Mark A. Stefanek Officer)
* Director
- ------------------------------
Roy L. Furman
* Director
- ------------------------------
Frederick G. Hilmer
* Director
- ------------------------------
David P. Lowy
* Director
- ------------------------------
Herman Huizinga
* Director
- ------------------------------
Bernard Marcus
* Director
- ------------------------------
Larry A. Silverstein
* Director
- ------------------------------
Francis T. Vincent
* Director
- ------------------------------
George Weissman
By: /s/ PETER S. LOWY
-----------------------------------------
Peter S. Lowy,
Attorney-in-fact
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION PAGE NO.
- ----------- ---------------------------------------------------------------------------------------------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement.
4.1 Third Restated Articles of Incorporation of the Company, incorporated herein by reference to
Exhibit 3.1 to the Company Form 10-Q for the quarterly period ended June 30, 1997.
4.2 Second Amended and Restated By-Laws of the Company, incorporated herein by reference to
Exhibit 3.3 to the Company Form 10-Q for the quarterly period ended June 30, 1997.
4.3 Specimen certificate representing Common Stock incorporated by reference to Exhibit 4.1 of the
Company's Registration Statement on Form S-11 (File No. 333-2231).
4.4 Certificate of Designation for Series B Preferred Shares, incorporated by reference to the
Company's Form 10-Q for the quarterly period ended June 30, 1997.
4.5 Form of Warrant.*
4.6 Form of Warrant Agreement.*
4.7 Form of Deposit Agreement.*
4.8 Form of the Depositary Receipt.*
5.1 Opinion of Husch & Eppenberger, as to legality of the Securities.**
8.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP regarding tax matters.
12.1 Computation of Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.**
23.1 Consent of Ernst & Young LLP.
23.2 Consent of Coopers & Lybrand LLP.
23.3 Consent of Husch & Eppenberger (included in Exhibit 5.1).**
23.4 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 8.1).
24.1 Power of Attorney.**
</TABLE>
- ------------------------
* The form or forms of Warrant, Warrant Agreement, Deposit Agreement and
Depositary Receipt with respect to each particular offering of Warrants or
Depositary Receipts will be filed as an exhibit to a report of Form 8-K and
incorporated herein by reference.
** Previously filed.
<PAGE>
Westfield America, Inc.
Preferred Stock, Common Stock, Depositary Shares and Warrants
----------------------
Underwriting Agreement
------------,
Ladies and Gentlemen:
From time to time Westfield America, Inc., a Missouri corporation organized
and operating as a real estate investment trust ("REIT") for Federal income tax
purposes (the "Company), proposes to enter into one or more Pricing Agreements
(each a "Pricing Agreement") in the form of Annex I hereto, with such additions
and deletions as the parties thereto may determine, and, subject to the terms
and conditions stated herein and therein, to issue and sell to the firms named
in Schedule I to the applicable Pricing Agreement (such firms constituting the
Underwriters with respect to such Pricing Agreement and the securities specified
therein) certain securities ( the "Securities"), specified in Schedule II to
such Pricing Agreement (with respect to such Pricing Agreement, the "Firm
Securities"). If specified in such Pricing Agreement, the Company may grant to
the Underwriters the right to purchase at their election an additional number of
Securities, specified in such Pricing Agreement as provided in Section 3 hereof
(the "Optional Securities"). The Firm Securities and the Optional Securities, if
any, which the Underwriters elect to purchase pursuant to Section 3 hereof are
herein collectively called the "Designated Securities".
The terms and rights of any particular issuance of Designated Securities
shall be as specified in the Pricing Agreement relating thereto.
If the Designated Securities specified in any Pricing Agreement are
depositary shares (the "Depositary Shares"), each Depositary Share will
represent a portion, specified in the applicable Pricing Agreement, of the
Company's capital stock that the Company will have deposited against delivery of
depositary receipts (the "Depositary Receipts") to be issued by a depositary,
specified in the applicable Pricing Agreement, (the "Depositary"), under a
deposit agreement (the "Deposit Agreement) among the Company, the Depositary and
the holders from time to time of the Depositary Receipts issued thereunder. Each
Depositary Receipt will represent Depositary Shares as described in the
applicable Depositary Agreement.
1. Particular sales of Designated Securities may be made from time to time
to the Underwriters of such Designated Securities, for whom the firms designated
as representatives of the
<PAGE>
Underwriters of such Designated Securities in the Pricing Agreement relating
thereto will act as representatives (the "Representatives"). The term
"Representatives" also refers to a single firm acting as sole representative of
the Underwriters and to Underwriters who act without any firm being designated
as their representative. This Underwriting Agreement shall not be construed as
an obligation of the Company to sell any of the Securities or as an obligation
of any of the Underwriters to purchase any of the Securities. The obligation of
the Company to issue and sell any of the Securities and the obligation of any of
the Underwriters to purchase any of the Securities shall be evidenced by the
Pricing Agreement with respect to the Designated Securities specified therein.
Each Pricing Agreement shall specify the aggregate number of the Firm
Securities, the maximum number of Optional Securities, if any, the initial
public offering price of such Firm and Optional Securities or the manner of
determining such price, the purchase price to the Underwriters of such
Designated Securities, the names of the Underwriters of such Designated
Securities, the names of the Representatives of such Underwriters, the number of
such Designated Securities to be purchased by each Underwriter and the
commission, if any, payable to the Underwriters with respect thereto and shall
set forth the date, time and manner of delivery of such Firm and Optional
Securities, if any, and payment therefor. The Pricing Agreement shall also
specify (to the extent not set forth in the registration statement and
prospectus with respect thereto) the terms of such Designated Securities. A
Pricing Agreement shall be in the form of an executed writing (which may be in
counterparts), and may be evidenced by an exchange of telegraphic communications
or any other rapid transmission device designed to produce a written record of
communications transmitted. The obligations of the Underwriters under this
Agreement and each Pricing Agreement shall be several and not joint.
2. The Company and the Operating Partnership (as hereinafter defined),
jointly and severally, represent and warrant to, and agree with, each of the
Underwriters that:
(a) The Company meets the requirements for use of Form S-3 under the
Securities Act of 1933, as amended (the "Act"). A registration statement on
Form S-3 (File Nos. 333-52977) in respect of the Securities of the Company
has been filed with the Securities and Exchange Commission (the
"Commission"); such registration statement and any post-effective amendment
thereto, each in the form heretofore delivered or to be delivered to the
Representatives and, excluding exhibits to such registration statement, but
including all documents incorporated by reference in the prospectus included
therein, to the Representatives for each of the other Underwriters have been
declared effective by the Commission in such form; no other document with
respect to such registration statement or documents incorporated by
reference therein has heretofore been filed, or transmitted for filing, with
the Commission (other than prospectuses filed pursuant to Rule 424(b) of the
rules and regulations of the Commission under the Act, each in the form
heretofore delivered to the Representatives); and no stop order suspending
the effectiveness of such registration statement has been issued and no
proceeding for that purpose has been initiated or threatened by the
Commission (any preliminary prospectus included in such registration
statement or filed with the Commission pursuant to Rule 424(a) under the
Act, is hereinafter called a "Preliminary Prospectus"; the various parts of
such registration statement, including all
2
<PAGE>
exhibits thereto and the documents incorporated by reference in the
prospectus contained in the registration statement at the time such part of
the registration statement became effective, each as amended at the time
such part of the registration statement became effective, are hereinafter
collectively called the "Registration Statement"; the prospectus relating to
the Securities, in the form in which it has most recently been filed, or
transmitted for filing, with the Commission on or prior to the date of this
Agreement, is hereinafter called the "Prospectus"; any reference herein to
any Preliminary Prospectus or the Prospectus shall be deemed to refer to and
include the documents incorporated by reference therein pursuant to the
applicable form under the Act, as of the date of such Preliminary Prospectus
or Prospectus, as the case may be; any reference to any amendment or
supplement to any Preliminary Prospectus or the Prospectus shall be deemed
to refer to and include any documents filed after the date of such
Preliminary Prospectus or Prospectus, as the case may be, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
incorporated by reference in such Preliminary Prospectus or Prospectus, as
the case may be; any reference to any amendment to the Registration
Statement shall be deemed to refer to and include any report of the Company
filed pursuant to Section 13(a) or 15(d) of the Exchange Act after the
effective date of the Registration Statement that is incorporated by
reference in the Registration Statement; and any reference to the Prospectus
as amended or supplemented shall be deemed to refer to the Prospectus as
amended or supplemented in relation to the applicable Designated Securities
in the form in which it is filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof, including any
documents incorporated by reference therein as of the date of such filing);
(b) The documents incorporated by reference in the Prospectus, when
they became effective or were filed with the Commission, as the case may be,
conformed in all material respects to the requirements of the Act or the
Exchange Act, as applicable, and the rules and regulations of the Commission
thereunder, and none of such documents contained an untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and any
further documents so filed and incorporated by reference in the Prospectus
or any further amendment or supplement thereto, when such documents become
effective or are filed with the Commission, as the case may be, will conform
in all material respects to the requirements of the Act or the Exchange Act,
as applicable, and the rules and regulations of the Commission thereunder
and will not contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by an Underwriter of Designated Securities directly
or through the Representatives expressly for use in the Prospectus as
amended or supplemented relating to such Securities;
(c) The Registration Statement and the Prospectus conform, and any
further amendments or supplements to the Registration Statement or the
Prospectus will conform,
3
<PAGE>
in all material respects to the requirements of the Act and the rules and
regulations of the Commission thereunder and do not and will not, as of the
applicable effective date as to the Registration Statement and any amendment
thereto and as of the applicable filing date as to the Prospectus and any
amendment or supplement thereto, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided, however,
that this representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information furnished
in writing to the Company by an Underwriter of Designated Securities
directly or through the Representatives expressly for use in the Prospectus
as amended or supplemented relating to such Securities;
(d) Neither the Company nor any of its subsidiaries has sustained since
the date of the latest audited financial statements included or incorporated
by reference in the Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in the
Prospectus ; and, since the respective dates as of which information is
given in the Registration Statement and the Prospectus , there has not been
any change in the capitalization or long-term debt of the Company or any of
its subsidiaries or any material adverse change in or affecting the
condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its subsidiaries taken as a whole,
otherwise than as set forth or contemplated in the Prospectus;
(e) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Missouri and has
corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the Prospectus and to enter into and
perform its obligations under this Agreement and any applicable Pricing
Agreement; and the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure to
so qualify or to be in good standing would not result in a material adverse
effect on the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company and its subsidiaries taken as a
whole;
(f) Westfield America Limited Partnership (the "Operating Partnership")
has been duly organized and is validly existing as a limited partnership in
good standing under the laws of the State of Delaware and has power and
authority to own, lease and operate its properties and to conduct its
business as described in the Prospectus and is duly qualified as a foreign
organization to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure to so qualify would not have a material adverse effect on
the condition, financial or otherwise, or the earnings, business
4
<PAGE>
affairs or business prospects of the Operating Partnership; all of the
issued and outstanding limited partnership interests of the Operating
Partnership have been duly authorized and validly issued and are fully paid
and nonassessable; the Company's ownership interest in the Operating
Partnership is as described in the Prospectus as amended or supplemented;
(g) Each subsidiary of the Company, other than the Operating
Partnership, which is covered in paragraph (f) above, has been duly
organized and is validly existing in good standing under the laws of the
jurisdiction of its organization and has power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectus and is duly qualified as a foreign organization to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure to so qualify
or to be in good standing would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its subsidiaries taken as a whole; all
of the issued and outstanding capital stock or other ownership interests of
each such subsidiary has been duly authorized and validly issued, is fully
paid and nonassessable and, except for joint ventures which are owned as
described in the Prospectus , is owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity, except for the stock of CMF, Inc., which
is pledged by the Company as security for certain indebtedness relating to
department stores which are net leased to The May Department Stores Company
(the "May Properties"), and except as would not have a material adverse
effect on the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company and its subsidiaries taken as a
whole and as disclosed in the Prospectus;
(h) The Company elected to be taxed as a REIT under the Internal
Revenue Code of 1986, as amended (the "Code"), commencing with its taxable
year ended December 31, 1994, and the Company intends to continue to operate
in a manner consistent with such election and all rules with which a REIT
must comply. Commencing with the Company's taxable year ended December 31,
1994, the Company was organized in conformity with the requirements for
qualification as a REIT, and its planned method of operation, and its actual
method of operation from February 12, 1994 through the date of the
Prospectus as amended or supplemented (taking into account the Company's
interest in Westland Properties, Inc. ("WPI")), will enable it to meet the
requirements for qualification and taxation as a REIT under the Code.
(i) The authorized, issued and outstanding capital stock of the Company
is as set forth in the Prospectus as amended or supplemented under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant
to this Underwriting Agreement, to reservations or agreements referred to in
the Prospectus as amended or supplemented or to the exercise of convertible
securities referred to in the Prospectus as amended or
5
<PAGE>
supplemented). The shares of issued and outstanding capital stock of the
Company have been duly authorized and validly issued and are fully paid and
non-assessable;
(j) The Designated Securities to be purchased by the Underwriters have
been duly authorized, and, when the Firm Securities are issued and delivered
pursuant to this Agreement and the Pricing Agreement with respect to such
Designated Securities and, in the case of any Optional Securities, pursuant
to Overallotment Options (as defined in Section 3 hereof) with respect to
such Optional Securities, such Designated Securities will be duly and
validly issued and fully paid and nonassessable;
(k) Neither the Company nor any of its subsidiaries is in violation of
its charter, by-laws or other organizational documents or in default in the
performance or observance of any obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, deed of trust,
loan or credit agreement, note, lease or other agreement or instrument to
which the Company or any of its subsidiaries is a party or by which any of
them may be bound, or to which any of the property or assets of the Company
or any of its subsidiaries is subject (collectively, "Agreements and
Instruments"), except for such defaults as would not reasonably be expected
to result in a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries taken as a whole; and the execution, delivery
and performance of this Agreement, any Pricing Agreement, any Deposit
Agreement, the deposit of any Securities in accordance with any applicable
Deposit Agreement and each Overallotment Option, if any, and the
consummation of the transactions contemplated herein and therein and in the
Registration Statement and compliance by the Company with its obligations
hereunder and under any Pricing Agreement have been duly authorized by all
necessary corporate and other action and do not and will not, whether with
or without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined below)
under, or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Company or any of its
subsidiaries pursuant to, the Agreements and Instruments (except for such
conflicts, breaches or defaults or liens charges or encumbrances that would
not reasonably be expected to result in a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its subsidiaries taken as a whole),
nor will such action result in any violation of the provisions of the
charter, by-laws or other organizational documents of the Company or any of
its subsidiaries or any applicable law, statute, rule, regulation, judgment,
order, writ or decree of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any of
its subsidiaries or any of its assets, properties or operations. As used
herein, a "Repayment Event" means any event or condition which gives the
holder of any note, debenture or other evidence of indebtedness (or any
person acting on such holder's behalf) the right to require the repurchase,
redemption or repayment of all or a portion of such indebtedness by the
Company or any of its subsidiaries;
6
<PAGE>
(l) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency, foreign or domestic, is necessary or required for the
performance by the Company of its obligations hereunder, in connection with
the offering, issuance or sale of the Securities hereunder or the
consummation of the transactions contemplated by this Agreement or any
Pricing Agreement or any Overallotment Option, except such as have been
already obtained, or will have been prior to each Time of Delivery (as
defined in Section 4 hereof), be obtained as may be required under the Act
or the rules and regulations thereunder or foreign or state securities or
blue sky laws;
(m) This Agreement has been, and, when signed, the applicable Pricing
Agreement relating to the Designated Securities will be, duly authorized by
all necessary corporate action of the Company, executed and delivered by the
Company;
(n) The Company and its subsidiaries have no employees;
(o) Other than as set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company or any of its
subsidiaries is a party or of which any property of the Company or any of
its subsidiaries is the subject, which, if determined adversely to the
Company or any of its subsidiaries, would individually or in the aggregate
have a material adverse effect on the condition, financial or otherwise, or
the earnings, business affairs or business prospects of the Company and its
subsidiaries taken as a whole; and, to the best of the Company's knowledge,
no such proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(p) There are no contracts or documents which are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits thereto which have not been so described and filed as required;
(q) The Securities conform to the description thereof contained in the
Registration Statement under the caption "Description of Capital Stock" and
"Description of Warrants," as applicable and the Designated Securities will
conform to the description thereof contained in the Prospectus as amended or
supplemented under the caption "Description of Capital Stock" and
"Description of Warrants," as applicable as amended or supplemented with
respect to such Designated Securities and such description will conform to
the rights set forth in the instruments defining the same; the statements
set forth in the Prospectus under the captions "Federal Income Tax
Considerations", "Plan of Distribution" and any equivalent captions, insofar
as they purport to describe the provisions of the laws and documents
referred to therein, are fair summaries in all material respects;
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(r) Neither the Company nor any of its subsidiaries is subject to
registration as an "investment company" under the Investment Company Act of
1940, as amended (the "Investment Company Act");
(s) The accountants who have certified certain financial statements and
financial statement schedules included or incorporated by reference in the
Registration Statement and the Prospectus are independent public accountants
as required by the Act and the rules and regulations of the Commission
thereunder;
(t) The financial statements and the financial statement schedules
included or incorporated by reference in the Registration Statement and the
Prospectus present fairly the financial position of the respective entity or
entities at the dates indicated, the results of their operations for the
periods specified and the information required to be stated therein; and
said financial statements and financial statement schedules have been
prepared in conformity with generally accepted accounting principles applied
on a consistent basis throughout the periods involved. The selected
financial data included or incorporated by reference in the Prospectus
present fairly the information shown therein and have been compiled on a
basis consistent with that of the financial statements included or
incorporated by reference in the Registration Statement. Any pro forma
financial statements and other pro forma financial information included in
the Registration Statement and the Prospectus comply in all material
respects with the applicable requirements of Rule 11-02 of Regulation S-X of
the Commission and present fairly the information shown therein; the pro
forma adjustments, if any, have been properly applied to the historical
amounts in the compilation of such statements, and in the opinion of the
Company, the assumptions used in the preparation thereof are reasonable and
the adjustments used therein are appropriate to give effect to the
transactions or circumstances referred to therein;
(u) The Company's common stock is listed on the New York Stock Exchange
(the "NYSE");
(v) The Company and its subsidiaries own or possess, or can acquire on
reasonable terms, adequate patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or
procedures), trademarks, service marks, trade names or other intellectual
property, including a non-transferable, non-exclusive, royalty-free right
and license granted by Westfield Corporation, Inc. to the Company to use the
name of "Westfield" in the names "Westfield America, Inc." and "Westfield
Shopping Town" as evidenced by the Trade Name License Agreement and the
amendments thereto (collectively, "Intellectual Property"), necessary to
carry on the business now operated by it, and neither the Company nor any of
its subsidiaries has received any notice or is otherwise aware of any
infringement of or conflict with asserted rights of others with respect to
any Intellectual Property or of any facts or circumstances which would
render any Intellectual Property invalid or inadequate to protect the
interest of the Company or any of its subsidiaries therein,
8
<PAGE>
and which infringement or conflict or invalidity or inadequacy, singly or in
the aggregate, would result in a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business
prospects of the Company and its subsidiaries taken as a whole;
(w) Except as otherwise disclosed in the Prospectus, and except as
would not have a material adverse effect on the condition, financial or
otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries taken as a whole: (i) each of the Company and
its subsidiaries, or any partnership or joint venture in which the Company
or any of its subsidiaries is a managing partner or managing joint venturer,
has good and marketable title to, or a valid leasehold interest in, all
properties and assets described in the Prospectus as amended or supplemented
as owned or leased by such party (collectively, for purposes of this Section
2(a)(w), the "Properties"); all consents necessary with respect to any
changes in the ownership of the Properties (or any entities that own any
such Property or own interests in any such entity) have been obtained; in
each case free of all liens, encumbrances claims, security interests and
defects of any kind (including, without limitation, options to purchase and
rights of first refusal), other than those referred to in the Prospectus,
those contained in any applicable partnership or joint venture agreements or
those which do not, singly or in the aggregate, materially affect the value
of such Properties and do not materially interfere with the use made and
proposed to be made of the Properties by the Company or any of its
subsidiaries; (ii) all liens, charges, encumbrances, claims, or restrictions
on or affecting the properties and assets of the Company or any of its
subsidiaries (or the ability of the Company or any of its subsidiaries to
collect rent from the Properties) that are required to be disclosed in the
Prospectus are disclosed therein; (iii) neither the Company, any of its
subsidiaries nor, to the knowledge of the Company, any lessee of any portion
of any such party's properties is in default under any of the leases
pursuant to which the Company or any of its subsidiaries leases its
properties and neither the Company nor any of its subsidiaries knows of any
event which, but for the passage of time or the giving of notice, or both,
would constitute a default under any of such leases; (iv) to the best of its
knowledge, each of the properties of the Company or any of its subsidiaries
complies with all applicable codes and zoning laws and regulations; and (v)
neither the Company nor any of its subsidiaries has knowledge of any pending
or threatened condemnation, zoning change or other proceeding or action that
will in any manner affect the size or use of, improvements or construction
on or access to the properties of the Company or any of its subsidiaries;
(vi) the maintenance, service, advertising and other like contracts and
agreements with respect to the ownership and operation of Properties are in
full force and effect, except where the failure to be in full force and
effect would not reasonably be expected to result in a material adverse
effect on the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company and its subsidiaries taken as a
whole, and are on commercially reasonable terms and are incidental and
reasonably related to the ownership and/or operation of its Properties and
neither the Company nor its subsidiaries is in default under any such
contracts except for such defaults that would not reasonably be expected to
result in a material adverse effect on the condition, financial or
otherwise, or the earnings,
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<PAGE>
business affairs or business prospects of the Company and its subsidiaries
taken as a whole; (vii) all of the leases and subleases material to the
business of the Company and its subsidiaries, considered as a whole, and
under which the Company or any of its subsidiaries holds Properties are in
full force and effect, and neither the Company nor any of its subsidiaries
has any notice of any claim of any sort that has been asserted by anyone
adverse to the rights of the Company or any subsidiary under any of the
leases or subleases mentioned above, or affecting or questioning the rights
of the Company or such subsidiary to the continued possession of the leased
or subleased premises under any such lease or sublease, except for any claim
that could not reasonably be expected to result in a material adverse effect
on the condition, financial or otherwise, or the earnings, business affairs
or business prospects of the Company and its subsidiaries taken as a whole;
and (viii) except as set forth in the Prospectus, the Company's collection
of rents from the Properties is in accordance with all applicable laws,
rules and regulations and neither the Company nor any of its subsidiaries
has received a notice of violation of any of the foregoing, except for such
violations that would not reasonably be expected to have a material adverse
effect on the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company and its subsidiaries taken as a
whole;
(x) The May Properties as described in the Prospectus represent the
sole assets of CMF, Inc.;
(y) Each of the Company and its subsidiaries has title insurance on all
of its shopping centers, subject only to liens, encumbrances, claims,
security interests and defects that do not, singly or in the aggregate,
materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company or any of
its subsidiaries; such title insurance is in full force and effect; and no
notice of cancellation has been received with respect thereto and, to the
knowledge of the Company, none is threatened;
(z) The mortgages and deeds of trust encumbering the properties and
assets described in the Prospectus (a) are not convertible into an equity
ownership interest in the Company or any of its subsidiaries, and (b) except
as disclosed in the Prospectus, neither the Company nor any of its
subsidiaries holds a participating interest therein, and (c) except as
disclosed in the Prospectus, such mortgages and deeds of trust are not
cross-defaulted or cross-collateralized to any property not owned or leased
by the Company or any of its subsidiaries;
(aa) The Company has not taken and will not take directly or
indirectly, any action designed to, or that might be reasonably expected to
cause or result in stabilization or manipulation of the price of any of the
Securities;
(ab) Except as described in the Registration Statement and except as
would not, singly or in the aggregate, result in a material adverse effect
on the condition, financial or
10
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otherwise, or the earnings, business affairs or business prospects of the
Company and its subsidiaries taken as a whole or otherwise require
disclosure in the Registration Statement, (i) neither the Company nor any of
its subsidiaries is in violation of any applicable federal, state, local or
foreign statute, law, rule, regulation, ordinance, code, policy or rule of
common law or any judicial or administrative interpretation thereof,
including any judicial or administrative order, consent, decree or judgment,
relating to pollution or protection of human health, the environment
(including, without limitation, ambient air, surface water, groundwater,
land surface or subsurface strata) or wildlife, including, without
limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively,
"Hazardous Materials") or to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Materials
(collectively, "Environmental Laws"), (ii) the Company and its subsidiaries
have all permits, authorizations and approvals required under any applicable
Environmental Laws and are in compliance with their requirements, (iii)
there are no pending or, to the knowledge of the Company, threatened
administrative, regulatory or judicial actions, suits, demands, demand
letters, claims, liens, notices of noncompliance or violation, investigation
or proceedings relating to any Environmental Law against the Company or any
of its subsidiaries and (iv) to the knowledge of the Company, there are no
events or circumstances that would reasonably be expected to form the basis
of an order for clean-up or remediation, or an action, suit or proceeding by
any private party or governmental body or agency, against or affecting the
Company or any of its subsidiaries relating to Hazardous Materials or any
Environmental Laws;
The Company has conducted environmental investigations of, and has
reviewed information regarding, its business, properties and operations as
described in the Registration Statement; on the basis of such reviews,
investigations and inquiries, the Company has reasonably concluded that,
except as disclosed in the Registration Statement, any costs and liabilities
associated with such matters would not have a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its subsidiaries taken as a whole or
otherwise require disclosure in the Registration Statement;
(ac) (i) The Company has prepared and filed when due (taking into
account any timely filed extensions) all material Federal, state, local and
foreign returns for "Taxes" (as hereinafter defined) that are required to be
filed by it for all taxable periods through the date of this Underwriting
Agreement; all such returns are true, correct and complete in all material
respects; the Company has paid all Taxes reported as due on such returns,
except to the extent that any Taxes are being contested in good faith or for
which a reserve has been established and has paid any other material Taxes
for which it is liable; (ii) except as previously disclosed in writing,
there are no material liens or claims for Taxes outstanding upon or against
or threatened upon or against the Company or any of its assets (other than
liens for Taxes which are not yet due and payable); and (iii) no audit,
inquiry, investigation
11
<PAGE>
or similar proceeding with respect to Taxes is currently pending or, to the
knowledge of the Company, threatened against the Company or any of its
assets with respect to which it may be liable for the payment of Taxes, an
adverse outcome of which would reasonably be expected to result in a
material adverse effect on the condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company and its
subsidiaries taken as a whole.
As used in the above paragraph, the term "Tax" or "Taxes" shall mean
all United States Federal, state, local and foreign taxes, assessments or
other governmental charges (whether imposed directly or through withholding
by any governmental entity), including any interest, penalties and additions
to taxes applicable thereto;
(ad) Except as set forth in the Prospectus as amended or supplemented,
there are no persons with registration rights or other similar rights to
have any securities registered pursuant to the Registration Statement or
otherwise registered by the Company under the Act;
(ae) Any certificate signed by any officer of the Company or any of its
subsidiaries and delivered to the Representatives or to counsel for the
Underwriters shall be deemed a representation and warranty by the Company to
each Underwriter as to the matters covered thereby;
(af) Assuming due authorization, execution and delivery of any
applicable Deposit Agreement by the Depositary, any Designated Security that
is a Depositary Share will represent the interest in the Securities,
deposited pursuant to the applicable Deposit Agreement, specified in the
applicable Pricing Agreement; assuming due authorization, execution and
delivery of the Depositary Receipts by the Depositary pursuant to the
applicable Depositary Agreement, the Depositary Receipts will entitle the
holders thereof to the benefits provided therein and in the applicable
Depositary Agreement;
(ag) Each applicable Deposit Agreement, as of the applicable Time of
Delivery, will have been duly authorized, executed and delivered by the
Company.
3. Upon the execution of the Pricing Agreement applicable to any Designated
Securities and authorization by the Representatives of the release of the Firm
Securities, the several Underwriters propose to offer the Firm Securities for
sale upon the terms and conditions set forth in the Prospectus as amended or
supplemented.
The Company may specify in the Pricing Agreement applicable to any
Designated Securities that the Company thereby grants to the Underwriters the
right (an "Overallotment Option") to purchase at their election up to the number
of Optional Securities set forth in such Pricing Agreement, on the terms set
forth in the paragraph above, for the sole purpose of covering over-allotments
in the sale of the Firm Securities. Any such election to purchase Optional
Securities
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<PAGE>
may be exercised by written notice from the Representatives to the Company,
given within a period specified in the Pricing Agreement, setting forth the
aggregate number of Optional Securities to be purchased and the date on which
such Optional Securities are to be delivered, as determined by the
Representatives, but in no event earlier than the First Time of Delivery (as
defined in Section 4 hereof) or, unless the Representatives and the Company
otherwise agree in writing, earlier than or later than the respective number of
business days after the date of such notice set forth in such Pricing Agreement.
The number of Optional Securities to be added to the number of Firm
Securities to be purchased by each Underwriter as set forth in Schedule I to the
Pricing Agreement applicable to such Designated Securities shall be, in each
case, the number of Optional Securities which the Company has been advised by
the Representatives have been attributed to such Underwriter; provided that, if
the Company has not been so advised, the number of Optional Securities to be so
added shall be, in each case, that proportion of Optional Securities which the
number of Firm Securities to be purchased by such Underwriter under such Pricing
Agreement bears to the aggregate number of Firm Securities (rounded as the
Representatives may determine to the nearest 100 Securities). The total number
of Designated Securities to be purchased by all the Underwriters pursuant to
such Pricing Agreement shall be the aggregate number of Firm Securities set
forth in Schedule I to such Pricing Agreement plus the aggregate number of
Optional Securities which the Underwriters elect to purchase.
4. Certificates for the Firm Securities and the Optional Securities to be
purchased by each Underwriter pursuant to the Pricing Agreement relating
thereto, in the form specified in such Pricing Agreement and in such authorized
denominations and registered in such names as the Representatives may request
upon at least forty-eight hours' prior notice to the Company, shall be delivered
by or on behalf of the Company to the Representatives for the account of such
Underwriter, against payment by such Underwriter or on its behalf of the
purchase price therefor to the Company in the funds specified in such Pricing
Agreement, (i) with respect to the Firm Securities, all in the manner and at the
place and time and date specified in such Pricing Agreement or at such other
place and time and date as the Representatives and the Company may agree upon in
writing, such time and date being herein called the "First Time of Delivery" and
(ii) with respect to the Optional Securities, if any, in the manner and at the
time and date specified by the Representatives in the written notice given by
the Representatives of the Underwriters' election to purchase such Optional
Securities, or at such other time and date as the Representatives and the
Company may agree upon in writing, such time and date, if not the First Time of
Delivery, herein called the "Second Time of Delivery". Each such time and date
for delivery is herein called a "Time of Delivery".
5. The Company agrees with each of the Underwriters of any Designated
Securities:
(a) To prepare the Prospectus as amended and supplemented in relation
to the applicable Designated Securities in a form approved by the
Representatives and to file such Prospectus pursuant to Rule 424(b) under
the Act not later than the Commission's close of
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<PAGE>
business on the second business day following the execution and delivery of
the Pricing Agreement relating to the applicable Designated Securities or,
if applicable, such earlier time as may be required by Rule 424(b); to make
no further amendment or any supplement to the Registration Statement or
Prospectus as amended or supplemented after the date of the Pricing
Agreement relating to the Designated Securities and prior to any Time of
Delivery for the Designated Securities which shall be disapproved by the
Representatives for the Designated Securities promptly after reasonable
notice thereof; to advise the Representatives promptly of any such amendment
or supplement after any Time of Delivery for the Designated Securities and
furnish the Representatives with copies thereof; to file promptly all
reports and any definitive proxy or information statements required to be
filed by the Company with the Commission pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act for so long as the delivery of a prospectus
is required in connection with the offering or sale of the Designated
Securities, and during such same period to advise the Representatives,
promptly after it receives notice thereof, of the time when any amendment to
the Registration Statement has been filed or becomes effective or any
supplement to the Prospectus or any amended Prospectus has been filed with
the Commission, of any comments from the Commission, of the issuance by the
Commission of any stop order or of any order preventing or suspending the
use of any prospectus relating to the Securities, of the suspension of the
qualification of the Securities for offering or sale in any jurisdiction, of
the initiation or threatening of any proceeding for any such purpose, or of
any request by the Commission for the amending or supplementing of the
Registration Statement or Prospectus or for additional information. The
Company will make every reasonable effort to prevent the issuance of any
stop order or order preventing or suspending any such qualification and, if
any such order is issued, to obtain the lifting thereof at the earliest
possible moment;
(b) Promptly from time to time to take such action as the
Representatives may reasonably request to qualify the Designated Securities
for offering and sale under the securities laws of such jurisdictions as the
Representatives may request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such jurisdictions for as long
as may be necessary to complete the distribution of the Designated
Securities, provided that in connection therewith the Company shall not be
required to qualify as a foreign corporation or to file a general consent to
service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the Prospectus as
amended or supplemented in such quantities as the Representatives may from
time to time reasonably request and, if the delivery of a prospectus is
required at any time in connection with the offering or sale of the
Securities and if at such time any event shall have occurred as a result of
which the Prospectus as then amended or supplemented would include an untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made when such Prospectus is delivered, not
misleading, or, if for any other reason, it shall be necessary during such
same period to amend or supplement the Prospectus or to file under the
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Exchange Act any document incorporated by reference in the Prospectus in
order to comply with the Act or the Exchange Act, to notify the
Representatives and upon their request to file such document and to prepare
and furnish without charge to each Underwriter and to any dealer in
securities as many copies as the Representatives may from time to time
reasonably request of an amended Prospectus or a supplement to the
Prospectus which will correct such statement or omission or effect such
compliance;
(d) To make generally available to its security holders as soon as
practicable, but in any event not later than eighteen months after the
effective date of the Registration Statement (as defined in Rule 158(c)
under the Act), an earnings statement of the Company and its subsidiaries
(which need not be audited) complying with Section 11(a) of the Act and the
rules and regulations of the Commission thereunder (including, at the option
of the Company, Rule 158); and
(e) During the period specified in the applicable Pricing Agreement for
the Designated Securities, the Company will not offer, sell, contract to
sell or otherwise dispose of any securities of the Company (other than
pursuant to employee stock option plans existing on, or upon the conversion
of convertible or exchangeable securities outstanding as of, the date of the
Pricing Agreement for the Designated Securities) which are substantially
similar to the Designated Securities or which are convertible into or
exchangeable for securities which are substantially similar to the
Designated Securities without the prior written consent of the
Representatives, except for the Designated Securities and any Securities (or
securities convertible into or exercisable or exchangeable for Securities)
issued by the Company in connection with acquisitions or a dividend
reinvestment plan disclosed in the Prospectus as amended or supplemented.
(f) The Company will use the net proceeds received by it from the sale
of the Securities in the manner specified in the Prospectus as amended or
supplemented under "Use of Proceeds".
(g) Except as set forth in any applicable pricing Agreement, the
Company will use its best efforts to effect the listing of the Securities on
the NYSE.
(h) The Company will use its best efforts to continue to meet the
requirements to qualify as a REIT under the Code unless the directors
determine, with the approval of a majority of each of the holders of the
Company's common stock and preferred stock (including, but not limited to,
its Series A Preferred Shares and its Series B Preferred Shares) to revoke
the Company's REIT election because of a change in circumstances or changes
in the Code (or in any regulations promulgated thereunder).
(i) The Company, during the period when any Prospectus is required to
be delivered under the Act or the Exchange Act, will file all documents
required to be filed with the Commission pursuant to the Exchange Act within
the time periods required by the Exchange Act and the rules and regulations
of the Commission thereunder.
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6. The Company covenants and agrees with the several Underwriters that,
except as may be otherwise set forth in the applicable Pricing Agreement
relating to the Designated Securities, the Company will pay or cause to be paid
the following: (i) the fees, disbursements and expenses of the Company's counsel
and accountants in connection with the registration of the Securities under the
Act and all other expenses in connection with the preparation, printing and
filing of the Registration Statement, any Preliminary Prospectus and the
Prospectus and amendments and supplements thereto and the mailing and delivering
of copies thereof to the Underwriters and dealers; (ii) the cost of printing or
producing any Agreement among Underwriters, this Agreement, any Pricing
Agreement, any Blue Sky Memorandum, closing documents (including compilations
thereof) and any other documents in connection with the offering, purchase, sale
and delivery of the Securities; (iii) all expenses, if any, in connection with
the qualification of the Securities for offering and sale under state securities
laws as provided in Section 5(c) hereof, including any fees and disbursements of
counsel for the Underwriters in connection with such qualification and in
connection with the Blue Sky survey(s); (iv) any filing fees incident to, and
the fees and disbursements of counsel for the Underwriters in connection with,
any required reviews by the National Association of Securities Dealers, Inc. of
the terms of the sale of the Securities; (v) the cost of preparing, issuing and
delivering certificates for the Securities; (vi) the cost and charges of any
transfer agent or registrar or dividend disbursing agent; (vii) the fees and
expenses incurred in connection with the listing of any of the Securities on the
NYSE; and (viii) all other costs and expenses incident to the performance of its
obligations hereunder and under any Over-allotment Options which are not
otherwise specifically provided for in this Section. It is understood, however,
that, except as provided in this Section, and Sections 8 and 11 hereof, the
Underwriters will pay all of their own costs and expenses, including the fees of
their counsel, transfer taxes on resale of any of the Securities by them, and
any advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters of any Designated Securities under
the Pricing Agreement relating to such Designated Securities shall be subject,
in the discretion of the Representatives, to the condition that all
representations and warranties and other statements of the Company in or
incorporated by reference in the Pricing Agreement relating to such Designated
Securities or in certificates of any officer of the Company delivered pursuant
to the provisions hereof and thereof are, at and as of each Time of Delivery for
such Designated Securities, true and correct, the condition that the Company
shall have performed all of its obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) The Prospectus as amended or supplemented in relation to such
Designated Securities shall have been filed with the Commission pursuant to
Rule 424(b) within the applicable time period prescribed for such filing by
the rules and regulations under the Act and in accordance with Section 5(a)
hereof; no stop order suspending the effectiveness of the Registration
Statement or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the Commission; and
all requests for additional information on the part of the Commission shall
have been complied with to the Representatives' reasonable satisfaction;
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(b) Skadden, Arps, Slate, Meagher & Flom LLP, counsel for the
Underwriters, shall have furnished to the Representatives such opinion or
opinions, dated each Time of Delivery for such Designated Securities, with
respect to the matters covered in paragraphs (i), (ii), and (iii) of
subsection (c) below as well as such other related matters as the
Representatives may reasonably request, and such counsel shall have received
such papers and information as they may reasonably request to enable them to
pass upon such matters;
In addition, the opinion of Counsel for the Underwriters shall state that
they have participated in conferences with officers and representatives of the
Company, counsel for the Company, representatives of the independent accountants
of the Company and you at which the contents of the Registration Statement and
the Prospectus as amended or supplemented and related matters were discussed
and, although they are not passing upon, and do not assume any responsibility
for, the accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus as amended or supplemented and have
made no independent check or verification thereof, on the basis of the
foregoing, no facts have come to such counsel's attention that have led them to
believe that the Registration Statement (except for financial statements and
supported schedules and other financial information and data included therein or
omitted therefrom), at the time it became effective, contained an untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading or
that each of the Prospectus as amended or supplemented except as aforesaid, as
of its date and as of the date hereof, contained or contains an untrue statement
of a material fact or omitted or omits to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(c) Debevoise & Plimpton, counsel for the Company, shall have furnished
to the Representatives their written opinions, dated each Time of Delivery
for such Designated Securities in form and substance satisfactory to the
Representatives, to the effect that:
(i) The Registration Statement, including any registration
statement filed pursuant to Rule 462(b) of the Act (a "Rule 462(b)
Registration Statement"), has been declared effective under the Act ;
any required filing of the Prospectus as amended or supplemented
pursuant to Rule 424(b) has been made in the manner and within the time
period required by Rule 424(b); and, to our knowledge, no stop order
suspending the effectiveness of the Registration Statement or any Rule
462(b) Registration Statement has been issued under the Act and no
proceedings for that purpose have been instituted or are pending or
threatened by the Commission;
(ii) The Registration Statement, including any Rule 462(b)
Registration Statement and any information deemed to be part of
Registration Statement pursuant to Rule 430A or Rule 434, as
applicable, the Prospectus and each amendment or supplement to the
Registration Statement and Prospectus as of their respective effective
or issue dates (other than the financial statements and supporting
schedules and other financial information and data included therein
or omitted therefrom, as to which we need express no opinion)
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<PAGE>
complied as to form in all material respects with the requirements of
the Act and the rules and regulations thereunder;
(iii) The form of certificate used to evidence Designated
Securities that will be listed on the NYSE, if so provided in an
applicable Pricing Agreement, complies in all material respects with
the requirements of the New York Stock Exchange;
(iv) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree known to such counsel of,
any court or governmental authority or agency, domestic or foreign
(other than under the Act and the rules and regulations thereunder,
which have been obtained, or as may be required under the securities or
blue sky laws of the various states, as to which such counsel need
express no opinion) is necessary or required in connection with the due
authorization, execution and delivery of the Underwriting Agreement,
the applicable Pricing Agreement or, if applicable, the applicable
Deposit Agreement or for the offering, issuance or sale of the
Designated Securities;
(v) The execution, delivery and performance of the Underwriting
Agreement, any applicable Pricing Agreement and any applicable Deposit
Agreement and the consummation of the transactions contemplated
hereunder, thereunder and in the Registration Statement and compliance
by the Company with its obligations under the Underwriting Agreement
and any applicable Pricing Agreement do not and will not, nor will such
action result in any violation of the provisions of any (A) applicable
New York or Federal law, statute, rule, regulation, judgment, order,
writ or decree, known such counsel, of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over
the Company or any of its subsidiaries, or any of their respective
properties, assets or operations or (B) the certificate of limited
partnership of the Operating Partnership;
(vi) The Operating Partnership is a limited partnership duly
organized and existing under the laws of the State of Delaware and has
the power and authority to own, lease and operate its properties and
conduct its business substantially as described in the Prospectus;
(vii) All regulatory consents, authorizations, approvals and
filings required to be obtained or made by the Company under the
Federal laws of the United States and the laws of the State of New York
for the issuance, sale and delivery of the Designated Securities by the
Company to the Underwriters have been obtained or made; provided,
however, that for purposes of this paragraph (x), such counsel need not
express any opinion with respect to state securities laws; and
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(viii) Neither the Company nor any of its subsidiaries is an
"investment company" or an entity "controlled" by an "investment
company", as such terms are defined in the Investment Company Act of
1940;
In addition, the opinion of Debevoise & Plimpton shall state that they
have participated in conferences with officers and representatives of the
Company, general counsel for the Company, counsel for the Underwriters,
representatives of the independent accountants of the Company and you at
which the contents of the Registration Statement, the Prospectus as amended
or supplemented and related matters were discussed and, although they are
not passing upon, and do not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Registration
Statement, the Prospectus as amended or supplemented or any applicable
Pricing Agreement and have made no independent check or verification
thereof, on the basis of the foregoing, no facts have come to such counsel's
attention that have led them to believe that the Registration Statement
(except for (i) financial statements and supported schedules and other
financial information and data included therein or omitted therefrom and
(ii) tax matters as to which such counsel will not be required to express
any beliefs), at the time it became effective, contained an untrue statement
of a material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or
that the Prospectus as amended or supplemented except as aforesaid, as of
its date and as of the Time of Delivery, contained or contains an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
In giving these opinions, Debevoise & Plimpton may state that they are
admitted to the bar of the State of New York and do not express any opinion
as to the laws of any jurisdiction other than the Federal laws of the United
States of America, the State of New York and Delaware corporate law and may
rely (1) as to all matters of fact, upon certificates and written statements
of officers and employees of and accountants for the Company and (2) as to
the qualification and good standing of the Company or any of its
subsidiaries, upon opinions of counsel in such other jurisdictions and
certificates of appropriate government officials.
(d) Husch & Eppenberger, LLC, special Missouri counsel for the Company,
shall have furnished to the Representatives their written opinions, dated
each Time of Delivery for such Designated Securities, respectively, in form
and substance satisfactory to the Representatives, to the effect that:
(i) The Company is a corporation duly incorporated and in good
standing under and by virtue of the laws of the State of Missouri;
(ii) The Company has corporate power and authority to own, lease
and operate its properties and to conduct its business substantially as
described in the
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Prospectus and to enter into and perform its obligations under this
Agreement and the applicable Pricing Agreement;
(iii) The numbers of authorized, issued and outstanding securities
of the Company are as set forth in the Prospectus as amended or
supplemented under "Capitalization" (except for subsequent issuances,
if any, pursuant to the Purchase Agreement, any applicable Pricing
Agreement or pursuant to reservations or agreements referred to in the
Prospectus as amended or supplemented or pursuant to the exercise of
convertible securities or options referred to in the Prospectus as
amended or supplemented);
(iv) The issuance and sale of the Designated Securities to the
Underwriters pursuant to the Underwriting Agreement and the Pricing
Agreement with respect to the Designated Securities, and if applicable,
the deposit of Securities in accordance with the Deposit Agreement,
have been duly authorized, and, when issued and delivered by the
Company against payment therefor pursuant to this Agreement and the
Pricing Agreement, the Designated Securities will be validly issued,
fully paid and nonassessable;
(v) The information in the Prospectus under the headings
"Description of Capital Stock", "Description of Warrants" and under
such other heading, if any, in the Prospectus as amended or
supplemented with respect to the Designated Securities which sets forth
the terms of the Designated Securities, to the extent that it
constitutes matters of Missouri law, summaries of legal matters,
documents or proceedings or legal conclusions, has been reviewed by
such counsel and is correct in all material respects;
(vi) The form of certificate evidencing the Designated Securities
is in due and proper form and complies in all material respects with
all applicable requirements of Missouri law and with any applicable
requirements of the charter and by-laws of the Company;
(vii) The issuance of the Designated Securities is not subject to
any preemptive or similar rights arising under Missouri law, the
Charter or the Bylaws of the Company;
(viii) No authorization, approval, consent or order of any court
or governmental authority or agency of the State of Missouri is
required in connection with the offering, issuance or sale of the
Designated Securities to the Underwriters,
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except such as may be required under the Act or the rules and
regulations of the Commission thereunder or securities laws or
regulations of any state or other jurisdiction;
(ix) The Underwriting Agreement, the applicable Pricing Agreement
relating to the Designated Securities and, if applicable, the Deposit
Agreement relating to the Designated Securities have been duly
authorized by all necessary corporate action of the Company; and
(x) The execution, delivery and performance of the Underwriting
Agreement, any applicable Pricing Agreement and, if applicable, the
Deposit Agreement, and the consummation of the issuance and sale of the
Designated Securities and the compliance by the Company with its
obligations under the Underwriting Agreement, any applicable Pricing
Agreement and, if applicable, the Deposit Agreement, do not and will
not, nor will such action result in any violation of, the provisions of
the charter and by-laws of the Company, or any Missouri law, statute,
rule or regulation that such counsel, in its experience, recognizes as
directly applicable to the Company.
In giving these opinions, Husch Eppenberger, LLC may state that such
opinions are limited to the law of the State of Missouri and may rely (1) as
to all matters of fact, upon certificates and written statements of officers
and employees of and accountants for the Company and (2) as to the
qualification and good standing of the Company or any of its subsidiaries,
upon opinions of counsel in such other jurisdictions and certificates of
appropriate government officials.
(e) Irv Hepner, General Counsel of the Westfield Corporation, Inc. (the
advisor to the Company) shall have furnished to the Representatives his
written opinions, dated each Time of Delivery for such Designated
Securities, respectively, in form and substances satisfactory to the
Representatives, to the effect that:
(i) The Company and the Operating Partnership are duly qualified
as foreign entities to transact business and are in good standing in
each jurisdiction in which such qualification is required, whether by
reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good
standing would not result in a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its subsidiaries taken as a
whole;
(ii) The outstanding capital stock of the Company is as set forth
in the Prospectus as amended or supplemented under the caption
"Capitalization" (except for subsequent issuances, if any, pursuant to
the Purchase Agreement, any applicable Pricing Agreement or pursuant to
reservations or agreements referred to in the
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Prospectus as amended or supplemented or pursuant to the exercise of
convertible securities or options referred to in the Prospectus as
amended or supplemented);
(iii) To the best of such counsel's knowledge, at the Time of
Delivery the issuance of the Designated Securities is not subject to
preemptive or other similar rights of any securityholder of the
Company;
(iv) Each subsidiary of the Company has been duly formed and is
validly existing and in good standing under the laws of the
jurisdiction of its origin has the power and authority to own, lease
and operate its properties and to conduct its business as described in
the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure so to qualify or to
be in good standing would not result in a material adverse effect on
the condition, financial or otherwise, or the earnings, business
affairs or business prospects of the Company and its subsidiaries taken
as a whole; except as disclosed in the Registration Statement, all of
the issued and outstanding capital stock or other ownership interests
of each such subsidiary has been duly authorized and validly issued, is
fully paid and non-assessable and, to his knowledge, except as
otherwise disclosed in the Prospectus as amended or supplemented, the
Underwriting Agreement and/or the applicable Pricing Agreement, is
owned by the Company, directly or through subsidiaries, free and clear
of any security interest, mortgage, pledge, lien, encumbrance, claim or
equity; and, to the best of such counsel's knowledge, none of the
outstanding securities of any subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such subsidiary;
(v) (a) The Underwriting Agreement, applicable Pricing Agreement
and, if applicable, Deposit Agreement have been delivered by the
Company;
(vi) To the best of such counsel's knowledge, there is not pending
or threatened any action, suit, proceeding, inquiry or investigation,
to which the Company or any of its subsidiaries is party, or to which
the property of any of them is subject, before or brought by any court
or governmental agency or body, domestic or foreign, which might
reasonably be expected to result in a material adverse effect on the
condition, financial or otherwise, or the earnings, business affairs or
business prospects of the Company and its subsidiaries taken as a
whole, or which might reasonably be expected to materially and
adversely affect the consummation of the transactions contemplated in
the Underwriting Agreement, the applicable Pricing Agreement or, if
applicable, the applicable Deposit Agreement or the performance by the
Company of its obligations hereunder and thereunder;
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<PAGE>
(vii) To the best of such counsel's knowledge there is neither any
litigation nor governmental proceedings instituted or threatened
against the Company or any of its subsidiaries that would be required
to be disclosed in the Prospectus as amended or supplemented and that
is not so disclosed or of any documents that are required to be
described in the Registration Statement or the Prospectus as amended or
supplemented or to be filed as exhibits thereto which have not been
so described or filed as required;
(viii) To the best of such counsel's knowledge, neither the
Company nor any of its subsidiaries is in violation of its charter,
by-laws or other organizational documents and no default by the Company
or any of its subsidiaries exists in the due performance or observance
of any material obligation, agreement, covenant or condition contained
in any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument that is described or referred to in the
Registration Statement or the Prospectus as amended or supplemented or
filed as an exhibit to the Registration Statement, except for such
defaults that would not reasonably be expected to result in a material
adverse effect on the condition, financial or otherwise, or the
earnings, business affairs or business prospects of the Company and its
subsidiaries taken as a whole;
(ix) The execution, delivery and performance of the Underwriting
Agreement, the applicable Pricing Agreement and, if applicable, the
applicable Deposit Agreement and the consummation of the transactions
contemplated herein, therein and in the Registration Statement and
compliance by the Company with its obligations under the Underwriting
Agreement, the Pricing Agreement and, if applicable, the Deposit
Agreement do not and will not, whether with or without the giving of
notice or lapse of time or both, conflict with or constitute a breach
of, or default or Repayment Event (as defined in Section 2(k) of this
Underwriting Agreement) under or result in the creation or imposition
of any lien, charge or encumbrance upon any property or assets of the
Company or any of its subsidiaries pursuant to any contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or any
other agreement or instrument, known to him, to which the Company or
any of its subsidiaries is a party or by which any of them may be
bound, or to which any of the property or assets of the Company or any
of its subsidiaries is subject (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not reasonably be
expected to result in a material adverse effect on the condition,
financial or otherwise, or the earnings, business affairs or business
prospects of the Company and its subsidiaries taken as a whole);
In giving these opinions Mr. Hepner may state that such opinions are
limited to Federal law, the laws of the State of California and may rely (1)
as to all matters of fact, upon certificates and written statements of
officers and employees of and accountants for the
23
<PAGE>
Company and (2) as to the qualification and good standing of the Company or
any of its subsidiaries in any other jurisdiction, upon opinions of counsel
in such other jurisdictions and certificates of appropriate government
officials.
(f) Skadden, Arps, Slate, Meagher & Flom LLP, tax counsel for the
Company, shall have furnished to the Representatives their written opinions
dated each Time of Delivery for such Designated Securities, respectively, in
form and substance satisfactory to the Representatives, to the effect that:
(i) Commencing with the Company's taxable year ended December
31, 1994, the Company was organized in conformity with the
requirements for qualification as a REIT under the Code, and its
planned method of operation, and its actual method of operation from
February 12, 1994 through the date of such Time of Delivery, will
enable it to meet the requirements for qualification and taxation as
a REIT under the Code. The foregoing opinion takes into account the
Company's interest in WPI during the period that WPI was not a
qualified REIT Subsidiary.
(ii) The discussion in the Registration Statement under the
heading "Federal Income Tax Considerations" is a fair and accurate
summary of the material Federal income tax consequences of the
purchase, ownership and disposition of the Designated Securities,
subject to the qualifications set forth therein.
In addition, the opinion of Skadden, Arps, Slate, Meagher & Flom LLP
shall state that they have participated in conferences at which the contents
of the Registration Statement and the Prospectus as amended or supplemented
relating to tax matters were discussed with officers and other
representatives of the Company, the Underwriters, counsel for the
Underwriters and the Company's independent accountants and although they are
not passing upon, and do not assume any responsibility for, the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or Prospectus as amended or supplemented (other than the
discussion under the heading "Federal Income Tax Considerations"), and have
not independently verified such statements, on the basis of the foregoing no
facts have come to such counsel's attention that have led them to believe
(i) that at the time that the Registration Statement became effective, the
discussion in the Registration Statement, insofar as it relates to tax
matters, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) that the discussion in the
Prospectus as amended or supplemented, insofar as it relates to tax matters,
as of the date of the Prospectus as amended or supplemented and as of the
Time of Delivery, included any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances in which they
were made, not misleading. Skadden, Arps, Slate, Meagher & Flom LLP need
express no opinion or belief with respect to any other part of the
Registration Statement or the Prospectus as
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<PAGE>
amended or supplemented, including, without limitation, the financial
statements, schedules and other financial or statistical data included in
the Prospectus as amended or supplemented or excluded therefrom and
included in the exhibits to the Registration Statement.
In giving these opinions Skadden, Arps, Slate, Meagher & Flom LLP may
state that the Company's qualification and taxation as a REIT depends upon
the ability of the Company to meet through actual annual operating results,
certain requirements, including requirements relating to distribution levels
and diversity of stock ownership, and the various qualification tests
imposed under the Code, respectively, the results of which will not be
reviewed by them. Accordingly, no assurance can be given that the actual
result of the Company's operation for any one taxable year will satisfy such
requirements.
Skadden, Arps, Slate, Meagher & Flom LLP will not undertake to advise
of any subsequent changes in the matters stated, represented or assumed in
any such opinion or any subsequent changes in applicable law. Additionally,
Skadden, Arps, Slate, Meagher & Flom LLP may rely, as to matters of fact,
upon certificates and written statements of officers and employees of and
accountants for the Company.
(g) On the date of the Pricing Agreement for such Designated Securities
and at each Time of Delivery for such Designated Securities, the independent
accountants of the Company who have certified the financial statements
included or incorporated by reference in the Registration Statement, shall
have furnished to the Representatives a letter, dated the effective date of
the Registration Statement or the date of the most recent report filed with
the Commission containing financial statements and incorporated by reference
in the Registration Statement, if the date of such report is later than such
effective date, and a letter dated such Time of Delivery, respectively, to
the effect set forth in Annex II hereto, and with respect to such letter
dated such Time of Delivery, as to such other matters as the Representatives
may reasonably request and in form and substance satisfactory to the
Representatives;
(h) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements included
or incorporated by reference in the Prospectus as amended prior to the date
of the Pricing Agreement relating to the Designated Securities any loss or
interference with its business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as set forth
or contemplated in the Prospectus as amended prior to the date of the
Pricing Agreement relating to the Designated Securities, and (ii) since the
respective dates as of which information is given in the Prospectus as
amended prior to the date of the Pricing Agreement relating to the
Designated Securities there shall not have been any change in the
capitalization or long-term debt of the Company or any of its subsidiaries
or any change, or any development involving a prospective change, in or
affecting the general affairs, management, financial position, shareholders'
equity or results of operations of the Company and its subsidiaries,
otherwise
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than as set forth or contemplated in the Prospectus as amended prior to the
date of the Pricing Agreement relating to the Designated Securities, the
effect of which, in any such case described in clause (i) or (ii), is in the
judgment of the Representatives so material and adverse as to make it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Designated Securities on the terms and in the manner
contemplated in the Prospectus as amended relating to the Designated
Securities;
(i) On or after the date of the Pricing Agreement relating to the
Designated Securities (i) no downgrading shall have occurred in the rating
accorded the Company's preferred stock by any "nationally recognized
statistical rating organization," as that term is defined by the Commission
for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization
shall have publicly announced that it has under surveillance or review, with
possible negative implications, its rating of any of the Company's preferred
stock;
(j) On or after the date of the Pricing Agreement relating to the
Designated Securities there shall not have occurred any of the following:
(i) a suspension or material limitation in trading in securities generally
on the NYSE; (ii) a suspension or material limitation in trading in the
Company's securities on the NYSE; (iii) a general moratorium on commercial
banking activities declared by either Federal or New York State authorities;
or (iv) the outbreak or escalation of hostilities involving the United
States or the declaration by the United States of a national emergency or
war, if the effect of any such event specified in this Clause (iv) in the
judgment of the Representatives makes it impracticable or inadvisable to
proceed with the public offering or the delivery of the Firm Securities or
Optional Securities or both on the terms and in the manner contemplated in
the Prospectus as first amended or supplemented relating to the Designated
Securities;
(k) If requested by the Underwriters, the Designated Securities at each
Time of Delivery shall have been duly listed, subject to notice of issuance,
on the NYSE;
(l) The NASD shall have confirmed that it has not raised any objection
with respect to the fairness and reasonableness of the underwriting terms
and arrangements relating to the offering of the Designated Securities
pursuant to this Agreement or any applicable Pricing Agreement;
(m) The Company and the Operating Partnership shall have furnished or
caused to be furnished to the Representatives at each Time of Delivery for
the Designated Securities certificates of officers of the Company and the
Operating Partnership satisfactory to the Representatives as to the accuracy
of the representations and warranties of the Company and the Operating
Partnership herein at and as of such Time of Delivery, as to the performance
by the Company and the Operating Partnership of all of their respective
obligations hereunder to be performed at or prior to such Time of Delivery,
as to the matters set forth in subsections (a) and (i) of this Section and
as to such other matters as the Representatives may reasonably request;
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(n) On or before the applicable Time of Delivery, if requested, the
Company shall have received and provided to the Representatives copies of
valid and binding agreements duly executed by the persons or entities named
in the applicable Pricing Agreement, pursuant to which each such person or
entity shall agree not to, without the prior written consent of the
Representatives, sell, offer to sell, grant any option for the sale of,
contract to sell or otherwise transfer or dispose of or announce its intent
to take any such action, any Securities or any security convertible or
exchangeable for Securities, for the period specified in the applicable
Pricing Agreement; and
(o) At each Time of Delivery, counsel for the Underwriters shall have
been furnished with such documents and opinions as they may require for the
purpose of enabling them to pass upon the issuance and sale of the
Designated Securities as contemplated in the appropriate Pricing Agreement,
or in order to evidence the accuracy of any of the representations or
warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Company in connection with the issuance and
sale of the Designated Securities as herein contemplated shall be
satisfactory in form and substance to the Representatives and counsel for
the Underwriters.
In the event that the Underwriters exercise their option provided in Section
3 hereof to purchase all or any portion of the Optional Securities, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished hereunder shall be true and correct as
of each Time of Delivery and, at the applicable Time of Delivery, the
Representatives shall have received the certificates and opinions, dated the
relevant Time of Delivery, referred to in this Section 7.
8. (a) The Company and the Operating Partnership jointly and severally
will indemnify and hold harmless each Underwriter against any losses,
claims, damages or liabilities, joint or several, to which such Underwriter
may become subject, under the Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of
or are based upon an untrue statement or alleged untrue statement of a
material fact contained in any Preliminary Prospectus, any preliminary
prospectus supplement, the Registration Statement, the Prospectus as amended
or supplemented and any other prospectus relating to the Securities, or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
and will reimburse each Underwriter for any legal or other expenses
reasonably incurred by such Underwriter in connection with investigating or
defending any such action or claim as such expenses are incurred; provided,
however, that the Company and the Operating Partnership shall not be liable
in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission made in any Preliminary
Prospectus, any preliminary prospectus supplement, the Registration
Statement, the Prospectus as amended or supplemented and any other
prospectus relating to the Securities, or any such amendment or supplement
in reliance upon and in conformity with written information furnished to the
Company by any Underwriter of Designated Securities directly or
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through the Representatives expressly for use in the Prospectus as amended or
supplemented relating to such Securities.
(b) Each Underwriter will indemnify and hold harmless the Company and
the Operating Partnership against any losses, claims, damages or liabilities
to which the Company or the Operating Partnership may become subject, under
the Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus, any preliminary prospectus supplement, the
Registration Statement, the Prospectus as amended or supplemented and any
other prospectus relating to the Securities, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein not misleading, in each case to the extent,
but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in any Preliminary
Prospectus, any preliminary prospectus supplement, the Registration
Statement, the Prospectus as amended or supplemented and any other
prospectus relating to the Securities, or any such amendment or supplement
in reliance upon and in conformity with written information furnished to the
Company or the Operating Partnership by such Underwriter directly or through
the Representatives expressly for use therein; and will reimburse the
Company and the Operating Partnership for any legal or other expenses
reasonably incurred by the Company or the Operating Partnership in
connection with investigating or defending any such action or claim as such
expenses are incurred.
(c) Promptly after receipt by an indemnified party under subsection (a)
or (b) above of notice of the commencement of any action, such indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have
to any indemnified party otherwise than under such subsection. In case any
such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such indemnified
party (who shall not, except with the consent of the indemnified party, be
counsel to the indemnifying party), and, after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified
party under such subsection for any legal expenses of other counsel or any
other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs of
investigation. In no event shall the indemnifying party or parties be liable
for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in
the same jurisdiction arising out of the same general allegations or
circumstances. No indemnifying party shall, without the written consent of
the indemnified party, effect the settlement or compromise of, or consent to
the entry of any judgment with respect to, any pending or threatened action
or claim in respect of which
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<PAGE>
indemnification or contribution may be sought hereunder (whether or not the
indemnified party is an actual or potential party to such action or claim)
unless such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such
action or claim and (ii) does not include any statement as to or an
admission of fault, culpability or a failure to act, by or on behalf of any
indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions in respect thereof) referred to therein, then each
indemnifying party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Operating
Partnership on the one hand and the Underwriters of the Designated
Securities on the other from the offering of the Designated Securities to
which such loss, claim, damage or liability (or action in respect thereof)
relates. If, however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified party
failed to give the notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or payable by such
indemnified party in such proportion as is appropriate to reflect not only
such relative benefits but also the relative fault of the Company and the
Operating Partnership on the one hand and the Underwriters of the Designated
Securities on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations.
The relative benefits received by the Company and the Operating Partnership
on the one hand and such Underwriters on the other shall be deemed to be in
the same proportion as the total net proceeds from such offering (before
deducting expenses) received by the Company and the Operating Partnership
bear to the total underwriting discounts and commissions received by such
Underwriters. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company and the Operating Partnership on the one
hand or such Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Company, the Operating Partnership and the
Underwriters agree that it would not be just and equitable if contributions
pursuant to this subsection (d) were determined by pro rata allocation (even
if the Underwriters were treated as one entity for such purpose) or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses, claims, damages
or liabilities (or actions in respect thereof) referred to above in this
subsection (d) shall be deemed to include any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the applicable Designated Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
29
<PAGE>
alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. The
obligations of the Underwriters of Designated Securities in this subsection
(d) to contribute are several in proportion to their respective underwriting
obligations with respect to such Securities and not joint.
(e) The obligations of the Company and the Operating Partnership under
this Section 8 shall be in addition to any liability which the Company and
the Operating Partnership may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the Underwriters under
this Section 8 shall be in addition to any liability which the respective
Underwriters may otherwise have and shall extend, upon the same terms and
conditions, to each officer, trustee or partner, as applicable, of the
Company or the Operating Partnership and to each person, if any, who
controls the Company or the Operating Partnership within the meaning of the
Act.
9. (a) If any Underwriter shall default in its obligation to purchase
the Firm Securities or Optional Securities which it has agreed to purchase
under the Pricing Agreement relating to such Securities, the Representatives
may in their discretion arrange for themselves or another party or other
parties to purchase such Securities on the terms contained herein. If within
thirty-six hours after such default by any Underwriter the Representatives
do not arrange for the purchase of such Firm Securities or Optional
Securities, as the case may be, then the Company shall be entitled to a
further period of thirty-six hours within which to procure another party or
other parties satisfactory to the Representatives to purchase such
Securities on such terms. In the event that, within the respective
prescribed period, the Representatives notify the Company that they have so
arranged for the purchase of such Securities, or the Company notifies the
Representatives that it has so arranged for the purchase of such Securities,
the Representatives or the Company shall have the right to postpone a Time
of Delivery for such Securities for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in the
Registration Statement or the Prospectus as amended or supplemented, or in
any other documents or arrangements, and the Company agrees to file promptly
any amendments or supplements to the Registration Statement or the
Prospectus which in the opinion of the Representatives may thereby be made
necessary. The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if such person
had originally been a party to the Pricing Agreement with respect to such
Designated Securities.
(b) If, after giving effect to any arrangements for the purchase of the
Firm Securities or Optional Securities, as the case may be, of a defaulting
Underwriter or Underwriters by the Representatives and the Company as
provided in subsection (a) above, the aggregate number of such Securities
which remains unpurchased does not exceed one-eleventh of the aggregate
number of the Firm Securities or Optional Securities, as the case may be, to
be purchased at the respective Time of Delivery, then the Company shall have
the right to require each non-defaulting Underwriter to purchase the number
of Firm Securities or Optional Securities, as the case may be, which such
Underwriter agreed to purchase under the Pricing Agreement relating to such
Designated Securities
30
<PAGE>
and, in addition, to require each non-defaulting Underwriter to purchase its
pro rata share (based on the number of Firm Securities or Optional
Securities, as the case may be, which such Underwriter agreed to purchase
under such Pricing Agreement) of the Firm Securities or Optional Securities,
as the case may be, of such defaulting Underwriter or Underwriters for which
such arrangements have not been made; but nothing herein shall relieve a
defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the purchase of the
Firm Securities or Optional Securities, as the case may be, of a defaulting
Underwriter or Underwriters by the Representatives and the Company as
provided in subsection (a) above, the aggregate number of Firm Securities or
Optional Securities, as the case may be, which remains unpurchased exceeds
one-eleventh of the aggregate number of the Firm Securities or Optional
Securities, as the case may be, to be purchased at the respective Time of
Delivery, as referred to in subsection (b) above, or if the Company shall
not exercise the right described in subsection (b) above to require
non-defaulting Underwriters to purchase Firm Securities or Optional
Securities, as the case may be, of a defaulting Underwriter or Underwriters,
then the Pricing Agreement relating to such Firm Securities or the
Over-allotment Option relating to such Optional Securities, as the case may
be, shall thereupon terminate, without liability on the part of any
non-defaulting Underwriter or the Company, except for the expenses to be
borne by the Company and the Underwriters as provided in Section 6 hereof
and the indemnity and contribution agreements in Section 8 hereof; but
nothing herein shall relieve a defaulting Underwriter from liability for its
default.
10. The respective indemnities, agreements, representations, warranties and
other statements of the Company, the Operating Partnership and the several
Underwriters, as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person of any
Underwriter, or the Company or the Operating Partnership or any officer or
director or partner or controlling person of the Company or the Operating
Partnership, and shall survive delivery of and payment for the Securities.
11. If any Pricing Agreement or Over-allotment Option shall be terminated
pursuant to Section 9 hereof, the Company shall not then be under any liability
to any Underwriter with respect to the Firm Securities or Optional Securities
with respect to which such Pricing Agreement shall have been terminated except
as provided in Sections 6 and 8 hereof; but, if for any other reason, Designated
Securities are not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Underwriters through the Representatives for all
out-of-pocket expenses approved in writing by the Representatives, including
fees and disbursements of counsel, reasonably incurred by the Underwriters in
making preparations for the purchase, sale and delivery of such Designated
Securities, but the Company shall then be under no further liability to any
Underwriter with respect to such Designated Securities except as provided in
Sections 6 and 8 hereof.
31
<PAGE>
12. In all dealings hereunder, the Representatives of the Underwriters of
Designated Securities shall act on behalf of each of such Underwriters, and the
parties hereto shall be entitled to act and rely upon any statement, request,
notice or agreement on behalf of any Underwriter made or given by such
Representatives jointly or by such of the Representatives, if any, as may be
designated for such purpose in the Pricing Agreement.
The Company, the Operating Partnership and the Underwriters acknowledge that
Skadden, Arps, Slate, Meagher & Flom LLP, which is acting as counsel to the
Underwriters in connection with the offer and sale of the Securities, also acts
as counsel to the Company, the Operating Partnership and certain affiliates
thereof with respect to tax matters. The Operating Partnership, the Company and
each of the Underwriters consent to Skadden, Arps, Slate, Meagher & Flom LLP
acting both as counsel to the Underwriters and as counsel to the Company, the
Operating Partnership and certain affiliates thereof with respect to tax
matters.
All statements, requests, notices and agreements hereunder shall be in
writing, and if to the Underwriters shall be delivered or sent by mail, telex or
facsimile transmission to the address of the Representatives as set forth in the
Pricing Agreement; and if to the Company or the Operating Partnership shall be
delivered or sent by mail, telex or facsimile transmission to the Company at
11601 Wilshire Boulevard, 12th Floor, Los Angeles, CA 90025, Attention: Irv
Hepner; provided, however, that any notice to an Underwriter pursuant to Section
8(c) hereof shall be delivered or sent by mail, telex or facsimile transmission
to such Underwriter at its address set forth in its Underwriters' Questionnaire,
or telex constituting such Questionnaire, which address will be supplied to the
Company by the Representatives upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement and each Pricing Agreement shall be binding upon, and
inure solely to the benefit of, the Underwriters, the Company and, to the extent
provided in Sections 8 and 10 hereof, the officers and directors of the Company
and each person who controls the Company or any Underwriter, and their
respective heirs, executors, administrators, successors and assigns, and no
other person shall acquire or have any right under or by virtue of this
Agreement or any such Pricing Agreement. No purchaser of any of the Securities
from any Underwriter shall be deemed a successor or assign by reason merely of
such purchase.
14. Time shall be of the essence of each Pricing Agreement. As used herein,
the term "business day" shall mean any day when the Commission's office in
Washington, D.C. is open for business.
15. This Agreement and each Pricing Agreement shall be governed by and
construed in accordance with the laws of the State of New York including,
without limitation, Section 5-1401 of the New York General Obligations Law.
32
<PAGE>
16. This Agreement and each Pricing Agreement may be executed by any one or
more of the parties hereto and thereto in any number of counterparts, each of
which shall be deemed to be an original, but all such respective counterparts
shall together constitute one and the same instrument.
33
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us four counterparts hereof.
Very truly yours,
Westfield America, Inc.
By:
-------------------------------
Name:
Title:
Westfield America Limited Partnership
By: Westfield America, Inc.
its General Partner
By:
-------------------------------
Name:
Title:
Accepted as of the date hereof:
- -------------------------------
By:
------------------------------
( )
-----------------------------
34
<PAGE>
ANNEX I
Pricing Agreement
Ladies and Gentlemen:
Westfield America, Inc., a Missouri corporation organized and operating
as a real estate investment trust (the "Company"), proposes, subject to the
terms and conditions stated herein and in the Underwriting Agreement, dated
.......... , ..... (the "Underwriting Agreement"), between the Company on the
one hand and ......... on the other hand, to issue and sell to the
Underwriters named in Schedule I hereto (the "Underwriters") the Securities
specified in Schedule II hereto (the "Designated Securities" consisting of
Firm Securities and any Optional Securities the Underwriters may elect to
purchase). Each of the provisions of the Underwriting Agreement is
incorporated herein by reference in its entirety, and shall be deemed to be a
part of this Agreement to the same extent as if such provisions had been set
forth in full herein; and each of the representations and warranties set
forth therein shall be deemed to have been made at and as of the date of this
Pricing Agreement, except that each representation and warranty which refers
to the Prospectus in Section 2 of the Underwriting Agreement shall be deemed
to be a representation or warranty as of the date of the Underwriting
Agreement in relation to the Prospectus (as therein defined), and also a
representation and warranty as of the date of this Pricing Agreement in
relation to the Prospectus as amended or supplemented relating to the
Designated Securities which are the subject of this Pricing Agreement. Each
reference to the Representatives herein and in the provisions of the
Underwriting Agreement so incorporated by reference shall be deemed to refer
to you. Unless otherwise defined herein, terms defined in the Underwriting
Agreement are used herein as therein defined. The Representatives designated
to act on behalf of the Representatives and on behalf of each of the
Underwriters of the Designated Securities pursuant to Section 12 of the
Underwriting Agreement and the address of the Representatives referred to in
such Section 12 are set forth in Schedule II hereto.
An amendment to the Registration Statement, or a supplement to the
Prospectus, as the case may be, relating to the Designated Securities, in the
form heretofore delivered to you is now proposed to be filed with the
Commission.
<PAGE>
Subject to the terms and conditions set forth herein and in the Underwriting
Agreement incorporated herein by reference, [(a)] the Company agrees to issue
and sell to each of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from the Company, at the time and place
and at the purchase price to the Underwriters set forth in Schedule II hereto,
the number of Firm Securities set forth opposite the name of such Underwriter in
Schedule I hereto [and, (b) in the event and to the extent that the Underwriters
shall exercise the election to purchase Optional Securities, as provided below,
the Company agrees to issue and sell to each of the Underwriters, and each of
the Underwriters agrees, severally and not jointly, to purchase from the Company
at the purchase price to the Underwriters set forth in Schedule II hereto that
portion of the number of Optional Securities as to which such election shall
have been exercised].
[The Company hereby grants to each of the Underwriters the right to purchase
at their election up to the number of Optional Securities set forth opposite the
name of such Underwriter in Schedule I hereto on the terms referred to in the
paragraph above for the sole purpose of covering over-allotments in the sale of
the Firm Securities. Any such election to purchase Optional Securities may be
exercised by written notice from the Representatives to the Company given within
a period of 30 calendar days after the date of this Pricing Agreement, setting
forth the aggregate number of Optional Securities to be purchased and the date
on which such Optional Securities are to be delivered, as determined by the
Representatives, but in no event earlier than the First Time of Delivery or,
unless the Representatives and the Company otherwise agree in writing, no
earlier than two or later than ten business days after the date of such notice.]
I-2
<PAGE>
If the foregoing is in accordance with your understanding, please sign and
return to us [one for the Company and one for each of the Representatives plus
one for each counsel] counterparts hereof, and upon acceptance hereof by you, on
behalf of each of the Underwriters, this letter and such acceptance hereof,
including the provisions of the Underwriting Agreement incorporated herein by
reference, shall constitute a binding agreement between each of the Underwriters
and the Company. It is understood that your acceptance of this letter on behalf
of each of the Underwriters is or will be pursuant to the authority set forth in
a form of Agreement among Underwriters, the form of which shall be submitted to
the Company for examination, upon request, but without warranty on the part of
the Representatives as to the authority of the signers thereof.
Very truly yours,
Westfield America, Inc.
By:
-------------------------------
Name:
Title:
Accepted as of the date hereof:
- -------------------------------
Name(s) of Co-Representative(s)
By:
----------------------------
( )
---------------------------
I-3
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
Maximum
Number
Number of of Optional
Firm Securities
Securities Which
to be May be
Underwriter Purchased Purchased
------------------ ----------- -----------
<S> <C> <C>
[Name(s) of Representative(s)]
[Names of other Underwriters]
Total
------------- -------------
------------- -------------
</TABLE>
I-4
<PAGE>
SCHEDULE II
Number of Designated Securities:
Number of Firm Securities:
Maximum Number of Optional Securities:
Initial Offering Price to Public:
[$........ per Security] [Formula]
Purchase Price by Underwriters:
[$........ per Security] [Formula]
Commission Payable to Underwriters:
$........ per Share
Form of Designated Securities:
Definitive form, to be made available for checking and packaging at least
twenty-four hours prior to the Time of Delivery at the office of The Depository
Trust Company or [its designated custodian, the Representatives]
Specified Funds for Payment of Purchase Price:
Blackout Provisions:
Time of Delivery:
......... a.m. (New York City time), .................., 19..
Closing Location:
Names and Addresses of Representatives:
Designated Representatives:
Address for Notices, etc.:
Other Terms:
I-5
<PAGE>
ANNEX II
Pursuant to Section 7(g) of the Underwriting Agreement, the accountants
shall furnish letters to the Underwriters to the effect that:
(i) They are independent certified public accountants with respect to
the entities represented by financial statements or financial statement
schedules included or incorporated by reference in the Registration
Statement or the Prospectus as amended or supplemented within the meaning of
the Act and the applicable published rules and regulations thereunder;
(ii) In their opinion, the financial statements and any supplementary
financial information and schedules (and, if applicable, financial forecasts
and/or pro forma financial information) examined by them and included or
incorporated by reference in the Registration Statement or the Prospectus as
amended or supplemented comply as to form in all material respects with the
applicable accounting requirements of the Act or the Exchange Act, as
applicable, and the related published rules and regulations thereunder; and,
if applicable, they have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of the
consolidated interim financial statements, selected financial data, pro
forma financial information, financial forecasts and/or condensed financial
statements derived from audited financial statements of the entities
represented by financial statements or financial statement schedules
included or incorporated by reference in the Registration Statement or the
Prospectus as amended or supplemented for the periods specified in such
letter, as indicated in their reports thereon, copies of which have been
furnished to the representatives of the Underwriters (the
"Representatives");
(iii) They have made a review in accordance with standards
established by the American Institute of Certified Public Accountants of
the unaudited condensed consolidated statements of income, consolidated
balance sheets and consolidated statements of cash flows included in the
Prospectus as amended or supplemented and/or included in the Company's
quarterly reports on Form 10-Q incorporated by reference into the
Prospectus as amended or supplemented; and on the basis of specified
procedures including inquiries of officials of the Company who have
responsibility for financial and accounting matters regarding whether the
unaudited condensed consolidated financial statements referred to in
paragraph (vi)(A)(i) below comply as to form in all material respects
with the applicable accounting requirements of the Act and the Exchange
Act and the related published rules and regulations, nothing came to
their attention that caused them to believe that the unaudited condensed
consolidated financial statements do not comply as to form in all
material respects with the applicable accounting requirements of the Act
and the Exchange Act and the related published rules and regulations;
<PAGE>
(iv) The unaudited selected financial information with respect to the
consolidated results of operations and financial position of the entities
represented by financial statements or financial statement schedules
included or incorporated by reference in the Registration Statement or the
Prospectus as amended or supplemented for the five most recent fiscal years
included in the Prospectus as amended or supplemented and included or
incorporated by reference in Item 6 of any such entity's Annual Report on
Form 10-K for the most recent fiscal year agrees with the corresponding
amounts (after restatement where applicable) in the audited consolidated
financial statements for such five fiscal years which were included or
incorporated by reference in any such entity's Annual Reports on Form 10-K
for such fiscal years;
(v) They have compared the information in the Prospectus as amended or
supplemented under selected captions with the disclosure requirements of
Regulation S-K and on the basis of limited procedures specified in such
letter nothing came to their attention as a result of the foregoing
procedures that caused them to believe that this information does not
conform in all material respects with the disclosure requirements of items
301, 302, 402 and 503(d), respectively, of Regulation S-K;
(vi) On the basis of limited procedures, not constituting an
examination in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and other
information referred to below, a reading of the latest available interim
financial statements of the entities whose financial statements or financial
statement schedules are included in or incorporated by reference in the
Registration Statement or Prospectus as amended or supplemented, inspection
of the minute books of such entities since the date of the latest audited
financial statements included or incorporated by reference in the Prospectus
as amended or supplemented, inquiries of officials of such entities
responsible for financial and accounting matters and such other inquiries
and procedures as may be specified in such letter, nothing came to their
attention that caused them to believe that:
(A) (i) the unaudited condensed consolidated statements of income,
consolidated balance sheets and consolidated statements of cash flows
included in the Prospectus as amended or supplemented and/or included
or incorporated by reference in such entities' Quarterly Reports on
Form 10-Q incorporated by reference in the Prospectus as amended or
supplemented do not comply as to form in all material respects with the
applicable accounting requirements of the Act and the Exchange Act and
the related published rules and regulations, or (ii) any material
modifications should be made to the unaudited condensed consolidated
statements of income, consolidated balance sheets and consolidated
statements of cash flows included in the Prospectus as amended or
supplemented or included in the such entities' Quarterly Reports on
Form 10-Q incorporated by reference in the Prospectus as amended or
supplemented, for them to be in conformity with generally accepted
accounting principles;
II-2
<PAGE>
(B) any other unaudited income statement data and balance sheet
items in the Prospectus as amended or supplemented do not agree with
the corresponding items in the unaudited consolidated financial
statements from which such data and items were derived, and any such
unaudited data and items were not determined on a basis substantially
consistent with the basis for the corresponding amounts in the audited
consolidated financial statements included or incorporated by reference
in such entities' Annual Report on Form 10-K for the most recent fiscal
year;
(C) the unaudited financial statements which were not included in
the Prospectus as amended or supplemented but from which were derived
the unaudited condensed financial statements referred to in clause (A)
and any unaudited income statement data and balance sheet items
included in the Prospectus as amended or supplemented and referred to
in Clause (B) were not determined on a basis substantially consistent
with the basis for the audited financial statements included or
incorporated by reference in such entities' Annual Report on Form 10-K
for the most recent fiscal year;
(D) any unaudited pro forma consolidated condensed financial
statements included or incorporated by reference in the Prospectus as
amended or supplemented do not comply as to form in all material
respects with the applicable accounting requirements of the Act and the
published rules and regulations thereunder or the pro forma adjustments
have not been properly applied to the historical amounts in the
compilation of those statements;
(E) as of a specified date not more than five days prior to the
date of such letter, there have been any changes in the issued and
outstanding equity securities of the Company (other than issuances of
securities upon exercise of options and stock appreciation rights, upon
earn-outs of performance securities and upon conversions of convertible
securities, in each case which were outstanding on the date of the
latest balance sheet included or incorporated by reference in the
Prospectus as amended or supplemented) or any increase in the
consolidated long-term debt of the Company and its subsidiaries, or any
increases in any items specified by the Representatives, in each case
as compared with amounts shown in the latest balance sheet included or
incorporated by reference in the Prospectus as amended or supplemented,
except in each case for changes, increases or decreases which the
Prospectus as amended or supplemented discloses have occurred or may
occur or which are described in such letter; and
II-3
<PAGE>
(F) for the period from the date of the latest financial
statements included or incorporated by reference in the Prospectus as
amended or supplemented to the specified date referred to in Clause (E)
there were any decreases in consolidated net revenues or operating
profit or the total or per share amounts of consolidated net income or
other items specified by the Representatives, or any increases in any
items specified by the Representatives, in each case as compared with
the comparable period of the preceding year and with any other period
of corresponding length specified by the Representatives, except in
each case for increases or decreases which the Prospectus as amended or
supplemented discloses have occurred or may occur or which are
described in such letter; and
(vii) In addition to the examination referred to in their report(s)
included or incorporated by reference in the Prospectus as amended or
supplemented and the limited procedures, inspection of minute books,
inquiries and other procedures referred to in paragraphs (iii) and (vi)
above, they have carried out certain specified procedures, not constituting
an examination in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial information
specified by the Representatives which are derived from the general
accounting records of the Company and its subsidiaries, which appear in the
Prospectus as amended or supplemented (excluding documents incorporated by
reference), or in Part II of, or in exhibits and schedules to, the
Registration Statement specified by the Representatives or in documents
incorporated by reference in the Prospectus as amended or supplemented
specified by the Representatives, and have compared certain of such amounts,
percentages and financial information with the accounting records of the
Company and its subsidiaries and have found them to be in agreement.
All references in this Annex II to the Prospectus shall be deemed to refer
to the Prospectus (including the documents incorporated by reference therein) as
defined in the Underwriting Agreement as of the date of the letter delivered on
the date of the Pricing Agreement for purposes of such letter and to the
Prospectus as amended or supplemented (including the documents incorporated by
reference therein) in relation to the applicable Designated Securities for
purposes of the letter delivered at the Time of Delivery for such Designated
Securities.
II-4
<PAGE>
Exhibit 8.1
June 1, 1998
Westfield America, Inc.
11601 Wilshire Boulevard, 12th Floor
Los Angeles, California 900025-1748
Re: Federal Income Tax Matters
--------------------------
Dear Sirs:
You have requested our opinion concerning certain Federal income tax
considerations in connection with the Registration Statement on Form S-3 (No.
333-52977) filed with the Securities and Exchange Commission (the
"Registration Statement") by Westfield America, Inc., a Missouri corporation
(1) ("WEA," and together with the subsidiary corporations, limited liability
companies and partnerships in which WEA owns a direct or indirect interest,
the "Company").
We have acted as special tax counsel to the Company in connection with,
and have assisted in the preparation of, tax aspects of the Registration
Statement and certain other documents. You have provided to us and we have
reviewed certain documents (collectively, the "Documents") that we have
deemed necessary or appropriate as a basis for our opinion, including,
without limitation (i) organizational documents of the entities comprising
the Company, (ii) copies of certain leases, management contracts and other
agreements, (iii) responses to questionnaires describing the Company's
properties and their operation, (iv) a certificate executed by a duly
appointed officer of WEA (the "Officer's Certificate") setting forth certain
factual representation, and (v) certain schedules, memoranda, financial
information and other records. For purposes of our opinion, we have not made
an independent investigation of the facts set forth in the Documents. We
have, consequently, relied on your representations that the information
presented in the Documents or otherwise furnished to us accurately and
completely describes all material facts relevant to our opinion.
- --------------------------
(1) Westfield America, Inc. was formerly known as CenterMark Properties, Inc.
<PAGE>
Wesfield America, Inc.
June 1, 1998
Page 2
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified, conformed or photostatic copies, and
the authenticity of the originals of such copies. Where documents have been
provided to us in draft form, we have assumed that the final executed
versions of such documents will not differ materially from such drafts.
Our opinion is based on the correctness of the following specific
assumptions: (i) WEA and each of the entities comprising the Company has been
and will continue to be operated in accordance with the laws of the
jurisdiction in which it was formed and in the manner described in the relevant
partnership agreement or other organizational documents; (ii) there will be no
changes in the applicable laws of the States of Missouri or Delaware or any
other state under the laws of which any of the entities comprising the Company
have been formed; and (iii) each of the representations contained in the
Officer's Certificate are true, correct and complete.
In rendering our opinion, we have also considered and relied upon the
Internal Revenue Code of 1986, as amended (the "Code"), the regulations
promulgated thereunder by the Treasury Department (the "Regulations"),
administrative rulings and the other interpretations of the Code and the
Regulations by the courts and the Internal Revenue Service, all as they exist at
the date of this letter. With respect to the latter assumption, it should be
noted that statutes, regulations, judicial decisions, and administrative
interpretations are subject to change at any time and, in some circumstances,
with retroactive effect. A material change that is made after the date hereof
in any of the foregoing bases for our opinion could affect our conclusions.
We express no opinion as to the laws of any jurisdiction other than the
Federal laws of the United States of America to the extent specifically
referred to herein.
Based on the foregoing, we are of the opinion that:
1. Commencing with WEA's taxable year ended December 31, 1994, WEA was
organized in conformity with the requirements for qualification as a real estate
investment trust ("REIT") under the Code, and its planned method of operation,
and its
<PAGE>
Wesfield America, Inc.
June 1, 1998
Page 3
actual method of operation from February 12, 1994 through the date of this
letter, will enable it to meet the requirements for qualification and taxation
as a REIT under the Code. The foregoing opinion takes into account the
Company's interest in Westland Properties Inc. ("WPI") during the period that
WPI was not a qualified REIT subsidiary under section 856(i)(2) of the Code.
Qualification and taxation as a REIT depends upon the ability of WEA to meet,
through actual annual operating results, certain requirements, including
requirements relating to distribution levels and diversity of stock ownership,
and the various qualification tests imposed under the Code, the results of which
will not be reviewed by us. Accordingly, no assurance can be given that the
actual results of WEA's operation for any one taxable year will satisfy such
requirements.
2. The discussion in the Registration Statement under the heading
"FEDERAL INCOME TAX CONSIDERATIONS" is a fair and accurate summary of the
material Federal income tax consequences of the purchase, ownership and
disposition of Common Stock, subject to the qualifications set forth therein.
Other than as expressly stated above, we express no opinion on any issue
relating to WEA, the Company or to any investment therein.
This opinion is intended for the exclusive use of the Company and its
shareholders and, except as set forth herein, it may not be used, circulated,
quoted or relied upon for any other purpose without our prior written
consent. We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the references to Skadden, Arps, Slate, Meagher
& Flom LLP in the Registration Statement. In giving this consent, we do not
thereby admit that we are within the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the
rules or regulations of the Securities and Exchange Commission thereunder.
This opinion is expressed as of the date hereof, and we disclaim any
undertaking to advise you of any subsequent changes in the matters stated,
represented, or assumed herein or any subsequent changes in applicable law.
Very truly yours,
Skadden, Arps, Slate
Meagher & Flom LLP
<PAGE>
Exhibit 23.1
Consent of Ernst & Young LLP
We consent to the reference to our firm under the caption "Experts" in
Amendment No. 1 to the Registration Statement (Form S-3, No. 333-52977) and
related Prospectus of Westfield America, Inc. for the registration of common
stock, preferred stock, depositary shares and warrants for the purchase of
its preferred stock and common stock, and to the incorporation by reference
therein of our report dated January 19, 1998, with respect to the
consolidated financial statements and schedule of Westfield America, Inc.
included in its Annual Report (Form 10-K) for the year ended December 31,
1998, filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
Los Angeles, California
June 1, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Amendment No. 1 to the
registration statement on Form S-3 of our report, dated February 13, 1996,
except for information as to earnings per share, distributions per share and
average shares outstanding, for which the date is March 3, 1997, on our audit
of the consolidated financial statements of Westfield America, Inc., formerly
known as CenterMark Properties, Inc., as of and for the year ended December
31, 1995, which report is included in the Annual Report on Form 10-K. We also
consent to the reference to our Firm under the caption "Experts."
Coopers & Lybrand L.L.P.
Los Angeles, California
June 1, 1998
