<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-38611
PRICING SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 30, 1997
AND PROSPECTUS SUPPLEMENT DATED FEBRUARY 5, 1998)
$75,000,000
(JDN LOGO) JDN REALTY CORPORATION
6.918% MANDATORY PAR PUT REMARKETED SECURITIES(SM) ("MOPPRS(SM)")
DUE MARCH 31, 2013
---------------------
JDN Realty Corporation (the "Company") is offering $75,000,000 in aggregate
principal amount of its 6.918% MandatOry Par Put Remarketed Securities(SM)
("MOPPRS(SM)") due March 31, 2013. The annual interest rate on the MOPPRS to
March 31, 2003 (the "Remarketing Date") is 6.918%. THE MOPPRS ARE SUBJECT TO
MANDATORY TENDER ON THE REMARKETING DATE. If Merrill Lynch, Pierce, Fenner &
Smith Incorporated, as Remarketing Dealer (the "Remarketing Dealer"), has
elected to remarket the MOPPRS as described herein, the MOPPRS will be subject
to mandatory tender to the Remarketing Dealer at 100% of the principal amount
thereof for remarketing on the Remarketing Date, except in the limited
circumstances described herein. See "Description of the MOPPRS -- Tender of
MOPPRS; Remarketing." If the Remarketing Dealer for any reason does not purchase
all tendered MOPPRS on the Remarketing Date or elects not to remarket the
MOPPRS, or in certain other limited circumstances described herein, the Company
will be required to repurchase the MOPPRS from the beneficial owners
("Beneficial Owners") thereof at 100% of the principal amount thereof plus
accrued interest, if any. See "Description of the MOPPRS -- Repurchase."
The MOPPRS are part of the Medium-Term Notes series of the Company described
in the accompanying Prospectus Supplement, dated February 5, 1998 (the
"Prospectus Supplement"), and the accompanying Prospectus, dated October 30,
1997 (the "Prospectus"). Interest on the MOPPRS is payable semiannually on March
31 and September 30 of each year, commencing September 30, 1998. Except in the
limited circumstances described herein, the MOPPRS are not subject to redemption
by the Company prior to their Stated Maturity Date (as defined below). See
"Description of the MOPPRS -- Redemption."
Ownership of the MOPPRS will be maintained in book-entry form by or through
The Depository Trust Company ("DTC"). Interests in the MOPPRS will be shown on,
and transfers thereof will be effected only through, records maintained by DTC
and its participants. Beneficial Owners of the MOPPRS will not have the right to
receive physical certificates evidencing their ownership except under the
limited circumstances described herein. Settlement for the MOPPRS will be made
in immediately available funds. The secondary market trading activity in the
MOPPRS will therefore settle in immediately available funds. All payments of
principal and interest on the MOPPRS will be made by the Company in immediately
available funds so long as the MOPPRS are maintained in book-entry form.
Beneficial interests in the MOPPRS may be acquired, or subsequently transferred,
only in denominations of $1,000 and integral multiples thereof.
SEE "RISK FACTORS" COMMENCING ON PAGE S-3 OF THE PROSPECTUS SUPPLEMENT AND
IN THE COMPANY'S CURRENT REPORT ON FORM 8-K, DATED JANUARY 26, 1998,
INCORPORATED BY REFERENCE INTO THE ACCOMPANYING PROSPECTUS, FOR A DISCUSSION OF
CERTAIN RISKS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
MOPPRS.
---------------------
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 PRICING SUPPLEMENT, THE ACCOMPANYING PROSPECTUS
SUPPLEMENT OR THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
---------------------
The MOPPRS will be sold to the public at varying prices relating to
prevailing market prices at the time of resale to be determined by the
applicable Underwriter at the time of each sale. The net proceeds to the Company
will be 102.13% of the principal amount of the MOPPRS sold and the aggregate
proceeds will be $76,597,500, plus accrued interest, if any, from March 31,
1998. Expenses payable by the Company for the Offering are estimated at
$200,000. For further information with respect to the plan of distribution, see
"Supplemental Plan of Distribution."
The MOPPRS are offered by the several Underwriters, subject to prior sale,
when, as and if issued to and accepted by them and subject to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the MOPPRS will be made through the book-entry facilities of DTC on
or about March 31, 1998.
---------------------
MERRILL LYNCH & CO.
BT ALEX. BROWN
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
---------------------
The date of this Pricing Supplement is March 25, 1998.
- ---------------
"MandatOry Par Put Remarketed Securities(SM)" and "MOPPRS(SM)" are service marks
owned by Merrill Lynch & Co., Inc.
<PAGE> 2
[JDN LOGO]
PROPERTY LOCATION MAP
[MAP]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE MOPPRS. SUCH TRANSACTIONS MAY
INCLUDE OVER-ALLOTMENT TRANSACTIONS AND THE PURCHASE OF MOPPRS TO COVER THE
UNDERWRITERS' SHORT POSITIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"SUPPLEMENTAL PLAN OF DISTRIBUTION."
PS-2
<PAGE> 3
PRICING SUPPLEMENT SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in,
or incorporated by reference into, the accompanying Prospectus Supplement and
Prospectus. Unless the context otherwise requires, as used herein the terms
"Company" or "JDN" include JDN Realty Corporation, its predecessor, JDN
Development Company, Inc., subsidiaries of JDN Realty Corporation and JDN
Development Company, Inc., and joint ventures (including limited liability
companies) in which JDN Realty Corporation, JDN Development Company, Inc. or
their subsidiaries own an interest. The offering of the MOPPRS pursuant to this
Pricing Supplement and accompanying Prospectus Supplement and Prospectus is
referred to herein as the "Offering."
THE COMPANY
The Company, which began operations in 1978, is a real estate development
company specializing in the development and asset management of retail shopping
centers anchored by value-oriented retailers. As of February 28, 1998, the
Company owned and operated 76 properties containing approximately 9.6 million
square feet of gross leasable area ("Company GLA") located in 13 states. The
principal tenants of the Company's properties include Wal-Mart, Lowe's and
Kroger. The Company has elected to be treated as a real estate investment trust
("REIT") for federal income tax purposes.
The Company is one of the largest developers of Wal-Mart anchored shopping
centers in the United States. The Company and its founders have developed or
jointly developed 142 shopping center projects, 95 of which were built on
assignment from Wal-Mart, and have developed, sold or leased more than 150
outparcels.
The Company's business objective is to increase its funds from operations
per share by (i) development of new shopping centers anchored by strong shopping
center retailers, (ii) redevelopment and expansion of its existing properties,
(iii) effective leasing and management of its properties and ground leasing of
adjacent outparcels and (iv) acquisition of existing shopping centers. The
Company is a fully integrated real estate firm with in-house development,
redevelopment, expansion, leasing, property management and acquisition
expertise.
The eight members of the Company's senior management team average
approximately 11 years with the Company and each has significant experience in
the real estate industry. As of February 28, 1998, the executive officers and
directors of the Company as a group beneficially owned approximately 7.8% of the
outstanding Common Stock of the Company.
THE PROPERTIES
The Company owns and operates 76 neighborhood and community shopping
centers with an average size of approximately 160,000 square feet of gross
leasable area, including both Company GLA and gross leasable area not owned by
the Company (collectively, "Total GLA"), that are generally leased to national
or regional retailers that the Company considers to be leaders in their
respective market sectors. These retailers typically market basic goods and
other staples that generally are in demand throughout most economic cycles. The
Company leases a substantial portion of Company GLA on a long-term net basis.
The Company's leases with anchor tenants are typically net leases which require
the lessee to be responsible for substantially all of the costs and expenses
associated with the ongoing maintenance of the property. As of February 28,
1998, approximately 86.7% of the Company's Annualized Base Rent (as defined
below) was derived from national or regional tenants. As of December 31, 1997,
approximately 63.1% of the Company's Annualized Base Rent was derived from
leases expiring in more than 10 years. As of February 28, 1998, the Company GLA
was 97.1% leased.
On February 4, 1998, the Company purchased a portfolio of five shopping
center properties in Milwaukee, Wisconsin aggregating 1,095,189 square feet for
a purchase price of approximately $58.5 million (the "Milwaukee Acquisition").
PS-3
<PAGE> 4
The following table sets forth, as of February 28, 1998, certain
information with respect to the types of tenant space leased by the Company:
<TABLE>
<CAPTION>
ANNUALIZED
BASE RENT
PERCENTAGE OF PER LEASED
COMPANY GLA PERCENTAGE OF ANNUALIZED ANNUALIZED SQUARE
TYPE OF TENANT SPACE (SQUARE FEET) COMPANY GLA BASE RENT(1) BASE RENT FOOT
- -------------------- ------------- ------------- ------------ ------------- ----------
<S> <C> <C> <C> <C> <C>
Anchor.............................. 7,425,567 77.6% $45,984,205 70.4% $ 6.19
Non-Anchor.......................... 1,872,500 19.5 19,347,488 29.6 10.33
Unleased............................ 275,565 2.9 -- -- --
--------- ----- ----------- ----- ------
Total or Weighted
Average.................. 9,573,632 100.0% $65,331,693 100.0% $ 7.03
========= ===== =========== =====
National............................ 6,660,524 69.6% $42,951,538 65.8% $ 6.45
Regional............................ 1,798,723 18.8 13,679,935 20.9 7.61
Local............................... 838,820 8.7 8,700,220 13.3 10.37
Unleased............................ 275,565 2.9 -- -- --
--------- ----- ----------- ----- ------
Total or Weighted
Average.................. 9,573,632 100.0% $65,331,693 100.0% $ 7.03
========= ===== =========== =====
</TABLE>
- ---------------
(1) "Annualized Base Rent" represents the monthly base rent in effect as of
February 28, 1998 (as set forth in executed leases) multiplied by 12,
excluding tenant recoveries for common area maintenance, property taxes,
insurance and percentage rent.
THE OFFERING
For a more complete description of the MOPPRS specified in the following
summary, including definitions of capitalized terms not otherwise found therein,
see "Description of the MOPPRS" in this Pricing Supplement, "Description of
Notes" in the accompanying Prospectus Supplement and "Description of Debt
Securities" in the Prospectus.
Securities Offered......... $75,000,000 aggregate principal amount of 6.918%
MandatOry Par Put Remarketed Securities ("MOPPRS")
due March 31, 2013.
Maturity................... The Stated Maturity Date of the MOPPRS is March 31,
2013.
Remarketing Date........... The Remarketing Date of the MOPPRS is March 31,
2003.
Mandatory Tender of MOPPRS;
Remarketing and
Repurchase............... Provided that the Remarketing Dealer gives notice
to the Company and the Trustee on a Business Day
not later than five Business Days prior to the
Remarketing Date of its intention to purchase the
MOPPRS for remarketing, each MOPPRS will be
automatically tendered, or deemed tendered, to the
Remarketing Dealer for purchase on the Remarketing
Date, except in the circumstances described under
"Description of the MOPPRS -- Repurchase" or
"-- Redemption."
The purchase price to be paid by the Remarketing
Dealer for the tendered MOPPRS will equal 100% of
the principal amount thereof. When the MOPPRS are
tendered for remarketing, the Remarketing Dealer
may remarket the MOPPRS for its own account at
varying prices to be determined by the Remarketing
Dealer at the time of each sale. If the Remarketing
Dealer for any reason does not purchase all
tendered MOPPRS on the Remarketing Date or elects
not to remarket the MOPPRS, or in certain other
limited circumstances described herein, the Company
will be required to repurchase the MOPPRS from the
Beneficial Owners thereof on the Remarketing Date,
at 100% of the
PS-4
<PAGE> 5
principal amount thereof plus accrued and unpaid
interest, if any. See "Description of the
MOPPRS -- Repurchase."
Optional Redemption........ The MOPPRS are subject to redemption from the
Remarketing Dealer, in whole but not in part, at
the option of the Company on the Remarketing Date
at the Optional Redemption Price. The MOPPRS are
not otherwise subject to redemption by the Company.
Interest Payment Dates..... Interest on the MOPPRS will be payable semiannually
in arrears on each March 31 and September 30,
commencing September 30, 1998.
Ranking.................... The MOPPRS will rank pari passu with each other and
with all other unsecured and unsubordinated
indebtedness of the Company, and the MOPPRS will be
effectively subordinated to the prior claims of any
secured indebtedness of the Company to the extent
of the value of the property securing such
indebtedness. As of December 31, 1997, the
Company's secured indebtedness aggregated
approximately $13.6 million (approximately $19.0
million on a pro forma basis after giving effect to
the Milwaukee Acquisition, the February Offerings
(as hereinafter defined) and the application of net
proceeds therefrom and the Offering and the
application of net proceeds therefrom
(collectively, the "First Quarter Transactions"))
and unsecured and unsubordinated indebtedness
aggregated approximately $203.0 million
(approximately $234.5 million on a pro forma basis
after giving effect to the First Quarter
Transactions). See "Capitalization."
Form....................... The MOPPRS will be issued and maintained in
book-entry form registered in the name of a nominee
of DTC, except under the limited circumstances
described herein. See "Description of the MOPPRS --
Tender of MOPPRS; Remarketing" below and
"Description of Notes -- Book-Entry Notes" in the
accompanying Prospectus Supplement.
Use of Proceeds............ The net proceeds to the Company from the Offering
(approximately $76.4 million) will be used to
reduce the outstanding balance under the Company's
$150 million unsecured line of credit led by
Wachovia Bank of Georgia, N.A., as agent (the
"Unsecured Credit Facility").
Limitations on Incurrence
of Debt.................... The MOPPRS contain various covenants, including the
following:
(1) The Company and its Subsidiaries will not incur
any Debt, other than intercompany Debt, if,
after giving effect thereto, the aggregate
principal amount of all outstanding Debt of the
Company and its Subsidiaries is greater than
60% of (i) the Total Assets of the Company and
its Subsidiaries as of the end of the most
recent fiscal quarter plus (ii) the increase,
if any, in the Total Assets of the Company and
its Subsidiaries since the end of such quarter,
including any increase in the Total Assets of
the Company and its Subsidiaries resulting from
the incurrence of such additional Debt minus
(iii) the decrease, if any, in the Total Assets
of the Company and its Subsidiaries since the
end of such quarter (the Total Assets of the
Company and its Subsidiaries as so adjusted is
referred to as "Adjusted Total Assets"). As of
December 31, 1997, on a pro forma basis giving
effect to the First Quarter Transactions, the
aggregate principal amount of all outstanding
Debt of the Company and its
PS-5
<PAGE> 6
Subsidiaries was 37.5% of the Adjusted Total
Assets of the Company and its Subsidiaries.
(2) The Company and its Subsidiaries will not incur
any Secured Debt, other than intercompany Debt,
if, after giving effect thereto, the aggregate
amount of all outstanding Secured Debt of the
Company and its Subsidiaries is greater than
40% of the Adjusted Total Assets. As of
December 31, 1997, on a pro forma basis giving
effect to the First Quarter Transactions, the
aggregate amount of all outstanding Secured
Debt of the Company and its Subsidiaries was
6.4% of the Adjusted Total Assets of the
Company and its Subsidiaries.
(3) The Company and its Subsidiaries will not incur
any Debt, other than intercompany Debt, if
Consolidated Income Available for Debt Service
for the four consecutive fiscal quarters (for
which financial statements are available) most
recently ended prior to the date of the
incurrence of such Debt, on a pro forma basis,
would be less than 1.5 times the Annual Debt
Service Charge on all Debt outstanding
immediately after the incurrence of such
additional Debt. As of December 31, 1997, on a
pro forma basis giving effect to the First
Quarter Transactions, the Consolidated Income
Available for Debt Service of the Company and
its Subsidiaries for the four consecutive
fiscal quarters most recently ended was 5.3
times the Annual Debt Service Charge on all
Debt outstanding.
(4) The Company and its Subsidiaries will maintain
Total Unencumbered Assets of not less than 150%
of the aggregate outstanding principal amount
of the Unsecured Debt of the Company and its
Subsidiaries. As of December 31, 1997, on a pro
forma basis giving effect to the First Quarter
Transactions, the Total Unencumbered Assets of
the Company and its Subsidiaries equalled
293.6% of the Unsecured Debt of the Company and
its Subsidiaries.
For certain defined terms and additional covenants,
see "Description of Notes -- Certain Covenants" in
the accompanying Prospectus Supplement.
PS-6
<PAGE> 7
BUSINESS AND PROPERTIES
The Company, which began operations in 1978, is a real estate development
company specializing in the development and asset management of retail shopping
centers anchored by value-oriented retailers. As of February 28, 1998, the
Company owned and operated 76 properties containing approximately 9.6 million
square feet of Company GLA located in 13 states. The principal tenants of the
Company's properties include Wal-Mart, Lowe's and Kroger. The Company has
elected to be treated as a REIT for federal income tax purposes. As of February
28, 1998, the average age of the Company's shopping centers was 7.8 years and
the Company GLA was 97.1% leased.
The Company is one of the largest developers of Wal-Mart anchored shopping
centers in the United States. The Company and its founders have developed or
jointly developed 142 shopping center projects, 95 of which were built on
assignment from Wal-Mart, and have developed, sold or leased more than 150
outparcels.
The Company's business objective is to increase its funds from operations
per share by (i) development of new shopping centers anchored by strong shopping
center retailers, (ii) redevelopment and expansion of its existing properties,
(iii) effective leasing and management of its properties and ground leasing of
adjacent outparcels and (iv) acquisition of existing shopping centers. The
Company is a fully integrated real estate firm with in-house development,
redevelopment, expansion, leasing, property management and acquisition
expertise.
The eight members of the Company's senior management team average
approximately 11 years with the Company and each has significant experience in
the real estate industry. As of February 28, 1998, the executive officers and
directors of the Company as a group beneficially owned approximately 7.8% of the
outstanding Common Stock of the Company.
JDN Realty Corporation was incorporated under the laws of Maryland in
December 1993. The Company's executive offices are located at 359 East Paces
Ferry Road, Suite 400, Atlanta, Georgia 30305 and its telephone number is (404)
262-3252.
Relationships with Shopping Center Retailers. Management believes that the
Company's relationships with national, regional and local shopping center
retailers provide it with a competitive advantage relative to other shopping
center developers. The Company's relationships include prominent retailers such
as Wal-Mart, Lowe's, Kroger, TJ Maxx, Kmart, Food Lion, Kohl's, Target and Home
Depot. The Company continuously works to improve existing relationships and to
develop new relationships with value-oriented retailers that enjoy a leading
position in their respective market segments. The Company intends to continue to
leverage these relationships in developing power and community shopping centers
on an assignment basis. Management believes that these relationships are the
product of the Company's historical track record of delivering development
projects on an assignment basis that are generally on time and on budget.
Management believes that the Company's relationships with a select group of
value-oriented retailers provide the Company with a superior selection of
potential anchor tenants for its shopping centers. Management believes that the
selection of the initial tenants for a shopping center project is among the most
important factors in determining the initial success and long-term viability of
a project.
PS-7
<PAGE> 8
The following table sets forth, as of February 28, 1998, certain
information with respect to tenants that individually account for more than 2%
of the Company's Annualized Base Rent:
<TABLE>
<CAPTION>
PERCENTAGE OF
NUMBER OF ADDITIONAL COMPANY GLA ANNUALIZED PERCENTAGE OF
TENANT STORES LEASED STORES(1) (SQUARE FEET) BASE RENT COMPANY GLA
- ------ ------------- ---------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Wal-Mart................... 20 11 2,191,584 16.8% 22.9%
Lowe's..................... 11 2 1,239,416 14.2 12.9
Kroger..................... 8 2 471,466 5.4 4.9
TJ Maxx.................... 7 -- 347,649 3.3 3.6
Bruno's.................... 7 1 365,614 3.2 3.8
Kmart...................... 4 -- 389,564 2.6 4.1
Food Lion.................. 8 -- 236,079 2.5 2.5
-- -- --------- ---- ----
Total............ 65 16 5,241,372 48.0% 54.7%
== == ========= ==== ====
</TABLE>
- ---------------
(1) Represents additional retail stores that are not owned by the Company but
are part of or adjacent to the Company's shopping center properties.
As of February 28, 1998, 48.4% of the Company's Annualized Base Rent was
derived from tenants whose long-term senior unsecured debt securities are rated
investment grade, which for these purposes are deemed to be "senior unsecured
debt" rated BBB- or better by Standard and Poor's Corporation or "long-term
bonds" rated Baa3 or better by Moody's Investors Service. Security ratings are
subject to revision or withdrawal at any time by the assigning rating
organization.
The following table sets forth information on lease expirations as of
December 31, 1997:
<TABLE>
<CAPTION>
PERCENT OF PERCENT OF
COMPANY GLA ANNUALIZED BASE
COMPANY GLA ANNUALIZED BASE REPRESENTED RENT REPRESENTED
LEASE NUMBER OF UNDER EXPIRING RENT UNDER BY EXPIRING BY EXPIRING
EXPIRATION YEAR LEASES EXPIRING LEASES (SQ. FT.) EXPIRING LEASES(1) LEASES LEASES
- --------------- --------------- ---------------- ------------------ ----------- ----------------
<S> <C> <C> <C> <C> <C>
1998 165 377,217 $ 3,145,487 4.7% 5.3%
1999 137 332,104 3,330,261 4.1 5.6
2000 165 459,939 4,327,093 5.7 7.2
2001 84 209,461 2,512,717 2.6 4.2
2002 80 299,496 2,716,106 3.7 4.5
2003 21 108,164 979,431 1.3 1.6
2004 10 332,272 1,463,142 4.1 2.5
2005 11 103,863 794,250 1.3 1.3
2006 20 276,506 1,906,305 3.4 3.2
2007 9 95,634 906,429 1.2 1.5
Thereafter 100 5,486,598 37,813,030 67.9 63.1
--- --------- ----------- ----- -----
Total 802 8,081,254 $59,894,251 100.0% 100.0%
=== ========= =========== ===== =====
</TABLE>
- ---------------
(1) Represents rates in effect at the time of lease expiration.
Wal-Mart is the Company's largest tenant in terms of both Annualized Base
Rent and Company GLA, representing approximately 16.8% of the Company's
Annualized Base Rent and approximately 22.9% of Company GLA at February 28,
1998. Of the 20 stores that Wal-Mart leased from the Company as of February 28,
1998, 19 contained Company GLA over 60,000 square feet and six were less than
five years old.
Lowe's is the Company's second largest tenant in terms of both Annualized
Base Rent and Company GLA, representing approximately 14.2% of the Company's
Annualized Base Rent and approximately 12.9% of Company GLA at February 28,
1998. Of the 11 stores which Lowe's leased from the Company as of February 28,
1998, ten contained Company GLA over 70,000 square feet and eight were less than
five years old.
PS-8
<PAGE> 9
Consistent Operating Performance. Management believes that the successful
implementation of the Company's operating strategy accounts for the Company's
consistent operating performance. The Company's relationships with shopping
center retailers, reputation for timely delivery of development projects,
financial strength, access to capital and experienced professionals are
important factors in achieving the Company's goals of increasing shareholder
value and realizing growth of funds from operations per share. Management
believes that the following indicators of the Company's operating performance
demonstrate the success of its operating strategy:
- The Company's operating portfolio of shopping center properties was
97.1%, 98.2%, and 98.9% leased as of December 31, 1997, 1996 and 1995,
respectively.
- On a same property basis, Annualized Base Rent per leased square foot
increased to $6.59 as of December 31, 1997 from $6.52 as of December 31,
1996.
- Minimum and percentage rents have increased from $27.5 million in 1995 to
$32.9 million in 1996 and $43.3 million in 1997, increases of 19.9% and
31.6%, respectively.
- Funds from Operations ("FFO") per share increased 10.1% from the year
ended December 31, 1996 to the year ended December 31, 1997.
The Company believes that FFO is helpful to investors as a measure of the
performance of an equity REIT because, along with cash provided by
operating activities, investing activities and financing activities, it
provides investors with an indication of the ability of the Company to
make capital expenditures and to fund other cash needs. FFO is defined by
the National Association of Real Estate Investment Trusts, Inc. ("NAREIT")
to mean net income, computed in accordance with generally accepted
accounting principles ("GAAP"), excluding gains or losses from debt
restructuring and sales of property, plus depreciation and amortization of
real estate assets, and after adjustments for unconsolidated partnerships
and joint ventures. The Company's method of calculating FFO may be
different from methods used by other REITs and, accordingly, may not be
comparable to such other REITs. FFO does not represent cash provided by
operating activities, as defined by GAAP, should not be considered as an
alternative to net income (determined in accordance with GAAP) as an
indication of operating performance and is not indicative of cash
available to fund all cash flow needs, including the Company's ability to
make cash distributions.
Disciplined Approach to Development. The Company's primary growth strategy
is to develop, on assignment, shopping centers anchored by value-oriented
retailers. Since 1978, the Company and its founders have developed or jointly
developed 142 shopping center projects, of which 95 have been built on
assignment from Wal-Mart. The Company's primary development relationships
continue to be with Wal-Mart and Lowe's, with additional significant
relationships with Kroger, Target and Home Depot.
The Company's assignment-based development strategy is designed to reduce
the risks associated with development by ensuring that a significant shopping
center retailer is committed before the Company spends substantial time or money
on a project. Typically, the Company has signed leases or has commitments from
shopping center retailers for 80% to 90% of the planned Total GLA prior to the
purchase of land and the commencement of construction.
After obtaining an assignment from a significant retailer in a particular
market, the Company:
- Performs preliminary demographic, traffic and economic studies that
indicate particular locations, and estimates preliminary costs associated
with those potential sites;
- Contacts other major shopping center retailers that the Company believes
would be interested in the same market to seek a development assignment;
- Obtains an option on the proposed site;
- Estimates costs by evaluating soil, water, sewer, environmental and
traffic factors, as well as any other costs associated with the particular
site;
PS-9
<PAGE> 10
- Develops a site plan, taking into account the physical constraints of the
property and the physical requirements of the shopping center retailers,
that can be translated into economic terms to set rental rates for anchor
tenants;
- Reviews the local rental market to determine demand for and pricing of
local tenant space;
- Contacts potential outparcel users for the site to determine demand for
and pricing of outparcels;
- Performs financial analyses to confirm that the development meets
internal return-on-cost criteria;
- After the Company obtains a signed lease or a commitment from a
significant shopping center retailer, the Company purchases the land and
oversees construction of the shopping center.
By adhering to a disciplined development philosophy that mitigates
development risks, the Company has generally been able to deliver projects on a
timely basis that meet budgeted returns.
The Company has historically concentrated its development activities in the
Southeast as a result of attractive shopping center development opportunities
with its major anchor tenants in this region. The Company continues to actively
pursue development opportunities within the Southeast based on assignments from
major retailers. The Company is also pursuing development opportunities outside
the Southeast in areas such as the Midwest and Southwest as the result of (i)
increased tenant interest in developments in these areas and (ii) opportunities
in these new areas with local developers in the form of strategic alliance
relationships. These strategic alliance relationships evolve through
relationships the Company has developed with local developers who in turn have
development opportunities in their local markets. The Company typically owns
these projects and compensates the strategic alliance partners on a fee basis.
Capital Structure. Management intends to finance the Company's future
growth through the maintenance of a flexible capital structure that management
believes will allow the Company to take advantage of development and acquisition
opportunities while providing access to the public debt and equity capital
markets on favorable terms. The Company intends to maintain a strong financial
position by: (i) maintaining a low level of leverage (i.e., a ratio of
debt-to-total-market-capitalization of 50% or less), (ii) maintaining a large
pool of unencumbered properties, (iii) managing its exposure to variable
interest rates and (iv) continuing to decrease its distribution payout ratio
(i.e., distributions paid in respect of a year as a percentage of FFO for such
year).
Management believes the following indicators reflect its strong financial
position:
- The Company's ratio of EBIDA (as defined below) to Fixed Charges was 4.1
for the year ended December 31, 1997 compared to 3.4 for the year ended
December 31, 1996. For the year ended December 31, 1997, on a pro forma
basis giving effect to the First Quarter Transactions, the Company's ratio
of EBIDA to Fixed Charges was 3.9.
EBIDA represents earnings before interest expense, depreciation and
amortization, and is computed as income before extraordinary items plus
interest expense, depreciation and amortization. The Company believes that
in addition to cash flows and net income, EBIDA is a useful financial
performance measurement for assessing its operating performance because,
together with net income and cash flows, EBIDA provides investors with an
additional basis to evaluate its ability to incur and service debt and to
fund acquisitions and other capital expenditures. To evaluate EBIDA and
the trends it depicts, the components of EBIDA, such as rental revenues,
rental expenses, real estate taxes and general and administrative
expenses, should be considered. Excluded from EBIDA are financing costs
such as interest as well as depreciation and amortization, each of which
can significantly affect the Company's results of operations and liquidity
and should be considered in evaluating its operating performance. Further,
EBIDA does not represent net income or cash flows from operating,
financing and investing activities as defined by GAAP and does not
necessarily indicate that cash flows will be sufficient to fund cash
needs. It should not be considered as an alternative to net income as an
indicator of the Company's operating performance or to cash flows as a
measure of liquidity. Fixed Charges represent interest expense plus
capitalized interest and scheduled principal amortization.
PS-10
<PAGE> 11
- As of December 31, 1997, on a pro forma basis giving effect to the First
Quarter Transactions, the Company and its Subsidiaries had $686.5 million
of Total Unencumbered Assets supporting Unsecured Debt of the Company and
its Subsidiaries of $234.5 million. (See "Description of Notes -- Certain
Covenants" in the accompanying Prospectus Supplement for definitions of
these capitalized terms.)
- As of December 31, 1997, on a pro forma basis giving effect to the First
Quarter Transactions, the Company and its Subsidiaries had a ratio of Debt
to Adjusted Total Assets of 37.5%, a ratio of Secured Debt to Total Assets
of 6.4%, a ratio of Total Unencumbered Assets to Unsecured Debt of 293.6%
and Consolidated Income Available for Debt Service was 5.3 times the
Annual Debt Service Charge (calculated based upon the last four fiscal
quarters in accordance with the Indenture). (See "Description of
Notes -- Certain Covenants" in the accompanying Prospectus Supplement for
definitions of these capitalized terms.)
- As of December 31, 1997, on a pro forma basis giving effect to the First
Quarter Transactions, the Company's debt-to-total-market-capitalization
ratio was 28.0%.
- As of December 31, 1997, the Company's weighted average debt maturity was
7.3 years, and, on a pro forma basis giving effect to the First Quarter
Transactions, the Company's weighted average debt maturity was 7.6 years.
- The Company's payout ratio, based on FFO, has decreased from 84.4% to
80.6% for the year ended December 31, 1996 as compared to the year ended
December 31, 1997.
Operating Portfolio. The following table sets forth certain information
about the Company's properties as of February 28, 1998:
<TABLE>
<CAPTION>
ANNUALIZED
BASE RENT
YEAR BUILT/ PER LEASED
RENOVATED TOTAL COMPANY PERCENT ANNUALIZED SQUARE
LOCATION OR EXPANDED GLA(1) GLA LEASED BASE RENT FOOT ANCHOR STORES
-------- ----------- ---------- --------- ------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
ALABAMA
Decatur.................. 1965/1996 122,956 122,956 99.6% $ 803,068 $ 6.56 Food World
Gadsden.................. 1979 131,044 85,341 95.4 304,262 3.74 Public Wholesale, Food
World(2), Eckerd
Opelika.................. 1993/1995 306,225 306,225 100.0 1,826,603 5.96 Wal-Mart, Lowe's, Winn-
Dixie, Goody's, CVS
---------- --------- -----------
Subtotal........... 560,225 514,522 2,933,933
% of Portfolio
Total............ 4.6% 5.4% 4.5%
FLORIDA
Brandon.................. 1997 127,255 -- -- -- -- Lowe's(2)
Fort Walton Beach........ 1986 124,852 21,901 65.8% 176,736 12.27 Wal-Mart(2)
Gulf Breeze.............. 1998 168,630 -- -- -- -- Wal-Mart(2)
Ocala.................... 1984/1991 183,818 151,338 92.9 658,746 4.69 Wal-Mart, Winn-Dixie
Tallahassee.............. 1990/1994 265,301 109,052 98.9 734,060 6.81 Wal-Mart(2), Lowe's
---------- --------- -----------
Subtotal........... 869,856 282,291 1,569,542
% of Portfolio
Total............ 7.2% 2.9% 2.4%
GEORGIA
Canton................... 1983 65,251 65,251 89.7% 365,259 6.24 Ingles, Revco
Canton(3)................ 1996 238,026 238,026 99.4 1,695,071 7.16 Wal-Mart
Cartersville............. 1984 52,240 52,240 89.3 283,130 6.07 Ingles, Eckerd
Cartersville............. 1995 375,828 375,828 100.0 2,332,914 6.21 Wal-Mart, Lowe's
Conyers(4)............... 1996 428,116 126,998 100.0 1,274,975 10.04 Wal-Mart(2), Home Depot(2),
Rhodes, Sport Shoe Expo,
Goody's, PetsMart
Cordele.................. 1997 176,054 176,054 94.7 1,008,045 6.05 Wal-Mart
Cumming.................. 1997 387,748 256,649 99.5 1,615,084 6.32 Wal-Mart, Home Depot(2),
Goody's, OfficeMax
Eastman.................. 1990 82,907 41,603 100.0 280,798 6.75 Wal-Mart(2), Food Lion
Fayetteville............. 1990 156,063 156,063 89.2 1,257,608 9.03 Bruno's, Cinemark Movies,
Revco
Fort Oglethorpe.......... 1973/1992 176,903 176,903 97.7 780,057 4.51 Kmart, FoodMax, Revco
Griffin.................. 1986 172,546 64,772 95.1 422,936 6.87 Wal-Mart(2), Winn-Dixie
</TABLE>
PS-11
<PAGE> 12
<TABLE>
<CAPTION>
ANNUALIZED
BASE RENT
YEAR BUILT/ PER LEASED
RENOVATED TOTAL COMPANY PERCENT ANNUALIZED SQUARE
LOCATION OR EXPANDED GLA(1) GLA LEASED BASE RENT FOOT ANCHOR STORES
-------- ----------- ---------- --------- ------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
LaFayette................ 1990 70,849 70,849 86.7% $ 378,514 $ 6.16 Food Lion, Goody's, Revco
LaGrange................. 1984 62,990 62,990 100.0 233,063 3.70 Wal-Mart
Lawrenceville............ 1990 89,064 89,064 95.8 858,120 10.05 Winn-Dixie, Eckerd
Lawrenceville............ 1989/1995 322,349 277,079 98.2 2,175,934 8.00 Wal-Mart, Kroger, Regal
Cinemas
Lilburn.................. 1990 73,951 73,951 95.8 622,180 8.78 Kroger
Lilburn.................. 1997 132,847 132,847 100.0 -- -- Lowe's
Lilburn.................. 1975 50,922 50,922 92.2 274,918 5.85 --
Loganville............... 1995 95,277 91,197 100.0 926,678 10.16 Kroger
Madison.................. 1989 106,100 106,100 92.3 472,544 4.83 Wal-Mart, Ingles, Revco
Marietta................. 1997 132,847 132,847 100.0 -- -- Lowe's
Newnan................... 1995 426,725 360,669 99.3 2,412,555 6.73 Wal-Mart, Lowe's, Uptons(2)
Peachtree City........... 1997 10,800 10,800 100.0 221,950 20.55 Pike Nurseries
Riverdale................ 1989 80,186 22,401 100.0 300,728 13.42 Kroger(2)
Stockbridge.............. 1988 162,779 162,779 97.7 783,801 4.93 Kmart, Bruno's
Stockbridge.............. 1997 10,800 10,800 100.0 221,950 20.55 Pike Nurseries
Suwanee.................. 1997 10,800 10,800 100.0 201,250 18.63 Pike Nurseries
Union City............... 1986 181,957 100,005 97.2 807,027 8.30 Wal-Mart(2), Ingles, Drug
Emporium
Warner Robins(5)......... 1997 145,939 145,939 96.5 1,031,632 7.32 Lowe's
Woodstock................ 1995 164,453 164,453 100.0 1,453,440 8.84 Wal-Mart
Woodstock................ 1997 132,847 132,847 100.0 -- -- Lowe's
Woodstock................ 1997 11,020 11,020 100.0 270,250 24.52 Pike Nurseries
---------- --------- -----------
Subtotal........... 4,787,184 3,950,746 28,773,100
% of Portfolio
Total............ 39.4% 41.3% 44.0%
KANSAS
Topeka................... 1976 125,657 125,657 52.4% 252,420 3.83 Bauersfeld's Grocery
---------- --------- -----------
Subtotal........... 125,657 125,657 252,420
% of Portfolio
Total............ 1.0% 1.3% 0.4%
KENTUCKY
Richmond................. 1992 229,314 158,042 100.0% 1,011,647 6.40 Kmart, Lowe's(2), Food Lion
---------- --------- -----------
Subtotal........... 229,314 158,042 1,011,647
% of Portfolio
Total............ 1.9% 1.7% 1.5%
MISSISSIPPI
Jackson.................. 1996 328,239 107,980 94.4% 980,027 9.61 Target(2), Home Depot(2),
Office Depot, PetsMart,
Fred's
Jackson.................. 1997 30,000 30,000 100.0 225,000 7.50 Office Depot
---------- --------- -----------
Subtotal........... 358,239 137,980 1,205,027
% of Portfolio
Total............ 2.9% 1.4% 1.8%
NORTH CAROLINA
Asheville................ 1996 186,970 186,970 99.1% 1,749,011 9.44 Food Lion, Circuit City,
Carmike Cinemas, OfficeMax,
Michael's
Fayetteville............. 1985 204,291 204,291 90.4 1,356,115 7.34 Circuit City, Staples, TJ
Maxx, General Cinemas,
Discovery Zone
Greensboro............... 1997 370,480 247,939 89.8 2,115,514 9.50 Target(2), Kroger,
Homeplace, Babies "R" Us,
PetsMart
Greenville............... 1996 323,822 226,822 100.0 2,477,198 10.92 Target(2), Kroger, TJ Maxx,
Circuit City, Barnes &
Noble, Reading China
Hendersonville........... 1988/1995 170,792 133,052 100.0 723,104 5.43 Wal-Mart, Ingles
Rockingham............... 1988 168,776 168,776 97.6 913,347 5.54 Wal-Mart, Lowe's, Harris
Teeter
Wallace.................. 1989 118,991 118,991 100.0 542,166 4.56 Wal-Mart, Wilson's
Wilmington............... 1991 169,432 169,432 100.0 1,104,289 6.52 Wal-Mart, Winn-Dixie
---------- --------- -----------
Subtotal........... 1,713,554 1,456,273 10,980,746
% of Portfolio
Total............ 14.1% 15.2% 16.8%
</TABLE>
PS-12
<PAGE> 13
<TABLE>
<CAPTION>
ANNUALIZED
BASE RENT
YEAR BUILT/ PER LEASED
RENOVATED TOTAL COMPANY PERCENT ANNUALIZED SQUARE
LOCATION OR EXPANDED GLA(1) GLA LEASED BASE RENT FOOT ANCHOR STORES
-------- ----------- ---------- --------- ------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
OHIO
Burlington............... 1991/1995 356,181 159,359 100.0% $ 1,039,609 $ 6.52 Lowe's, Sam's Club(2),
Wal-Mart(2)
---------- --------- -----------
Subtotal........... 356,181 159,359 1,039,609
% of Portfolio
Total............ 2.9% 1.7% 1.6%
PENNSYLVANIA
Monaca................... 1997 142,514 142,514 94.6% 1,102,253 8.18 Lowe's
---------- --------- -----------
Subtotal........... 142,514 142,514 1,102,253
% of Portfolio
Total............ 1.2% 1.5% 1.7%
SOUTH CAROLINA
Charleston............... 1991 188,886 188,886 98.9% 1,510,517 8.08 Wal-Mart, Food Lion
Cheraw................... 1990 111,029 45,099 97.6 308,198 7.00 Wal-Mart(2), Food Lion
Lake City................ 1991 135,962 135,962 98.2 703,231 5.27 Wal-Mart, Food Lion
Sumter................... 1987 158,293 19,143 100.0 143,591 7.50 Wal-Mart(2), Kroger(2)
---------- --------- -----------
Subtotal........... 594,170 389,090 2,665,537
% of Portfolio
Total............ 4.9% 4.1% 4.1%
TENNESSEE
Chattanooga.............. 1992 214,579 214,579 95.3% 1,457,482 7.12 Kmart, FoodMax
Columbia................. 1993 68,948 68,948 100.0 516,504 7.49 FoodMax
Farragut................. 1991 71,311 71,311 100.0 519,015 7.28 BI-LO
Franklin................. 1983 186,000 18,000 100.0 135,377 7.52 Big Lots(2)
Goodlettsville........... 1987 84,945 84,945 100.0 704,415 8.29 Kroger
Memphis.................. 1993 64,223 64,223 100.0 558,631 8.70 Kroger
Murfreesboro............. 1972/1993 117,750 117,750 100.0 796,133 6.76 FoodMax
Murfreesboro............. 1972/1994 71,028 71,028 100.0 512,570 7.22 FoodMax
Tullahoma................ 1989 70,766 70,766 95.0 420,160 6.25 BI-LO
---------- --------- -----------
Subtotal........... 949,550 781,550 5,620,286
% of Portfolio
Total............ 7.8% 8.2% 8.6%
VIRGINIA
Chester.................. 1977/1978 116,311 116,311 100.0% 1,006,978 8.66 Ukrop's, Rite-Aid
Lexington................ 1989/1997 94,370 94,370 95.8 510,066 5.64 Wal-Mart
Midlothian............... 1985 79,408 79,408 97.0 667,370 8.66 Food Lion, CVS
South Boston............. 1989/1997 90,330 90,330 95.4 452,784 5.26 Wal-Mart
---------- --------- -----------
Subtotal........... 380,419 380,419 2,637,198
% of Portfolio
Total............ 3.1% 4.0% 4.0%
WISCONSIN
Brookfield............... 1967 190,142 190,142 98.7% 1,206,298 6.43 Homegoods, Burlington Coat
Factory, TJ Maxx, OfficeMax
Brown Deer............... 1967 217,093 217,093 100.0 1,119,124 5.16 TJ Maxx, Kohl's, OfficeMax,
Michael's
Brown Deer............... 1989 143,454 143,454 100.0 1,023,327 7.13 Pick 'N Save, Homegoods
Milwaukee................ 1962 160,533 160,533 100.0 588,859 3.67 Kohl's, Pick 'N Save
West Allis(6)............ 1968 383,967 383,967 100.0 1,602,787 4.17 Kohl's, Pick 'N Save,
Homegoods, Walgreens
---------- --------- -----------
Subtotal........... 1,095,189 1,095,189 5,540,395
% of Portfolio
Total............ 9.0% 11.4% 8.5%
---------- --------- ----- ----------- ------
Total or Weighted
Average.......... 12,162,052 9,573,632 97.1% $65,331,693 $ 7.03
========== ========= ===== ===========
</TABLE>
- ---------------
(1) Total GLA includes anchor stores that are not owned by the Company.
(2) Anchor store that is not owned by the Company.
(3) Wal-Mart store owned by JDN Development Company, Inc. Remainder of center
owned by the Company.
(4) Property owned by a joint venture which is 60% owned by JDN Development
Company, Inc. and 40% owned by unaffiliated third parties.
(5) Lowe's store owned by JDN Development Company, Inc. Remainder of center
owned by the Company.
(6) Property owned by a joint venture which is approximately 82.5% owned by the
Company and approximately 17.5% owned by unaffiliated third parties.
PS-13
<PAGE> 14
RECENT DEVELOPMENTS
Development. As of December 31, 1997, the Company had the following
developments under construction:
<TABLE>
<CAPTION>
TOTAL GLA PERCENTAGE OF
UNDER TOTAL GLA TOTAL GLA ACTUAL OR
CONSTRUCTION LEASED OR LEASED OR PROJECTED TENANT
LOCATION (SQUARE FEET) COMMITTED COMMITTED OPENINGS ANCHOR STORES UNDER CONSTRUCTION
-------- ------------- --------- ------------- ----------------- --------------------------------
<S> <C> <C> <C> <C> <C>
Cumming, GA(1)............. 12,000 12,000 100.0% 1st Q 98 Shoe Carnival
Greensboro, NC(2).......... 86,584 86,584 100.0 1st Q 98 Kohl's
Marietta, GA(3)............ 18,200 7,000 38.5 1st Q 98 --
Gulf Breeze, FL............ 206,358 181,558 88.0 1st Q 98 Wal-Mart(4)
Gallipolis, OH............. 202,158 179,958 89.0 3rd Q 98 Wal-Mart
Suwanee, GA(5)............. 25,200 3,150 12.5 2nd Q 98 --
Brandon, FL................ 112,000 100,000 89.3 2nd Q 98 Jumbo Sports(6), Linens &
Things(6)
Jackson, MS................ 52,917 31,317 59.2 2nd Q 98 Office Depot
Wilmington, NC............. 261,990 242,540 92.6 2nd Q 98 Target(4), Marshalls, PetsMart,
OfficeMax
Winston-Salem, NC.......... 15,000 -- -- 3rd Q 98 --
Murfreesboro, TN........... 403,825 398,825 98.8 4th Q 98 Lowe's(4), Target(4), Toys "R"
Us(4), Rhodes(6), TJ Maxx(6),
Books-A-Million(6)
Greensboro, NC -- North.... 249,356 122,000 48.9 4th Q 98/1st Q 99 Target(4), Grocery Anchor
Alpharetta, GA............. 129,044 129,044 100.0 3rd Q 98 Lowe's
Stone Mountain, GA......... 250,336 226,936 90.7 3rd Q 98/2nd Q 99 Lowe's(6), Grocery Anchor
Buford, GA................. 389,459 357,659 91.8 4th Q 98 Wal-Mart(6), Lowe's, Anchor
Monroe, LA(7).............. 209,540 130,000 62.0 3rd Q 98/1st Q 99 Home Depot(4)
Greensboro, NC -- Phase
II....................... 41,800 -- -- 1st Q 99 --
Woodstock, GA.............. 123,011 123,011 100.0 3rd Q 98 Anchor
Tucker, GA................. 255,009 224,332 88.0 3rd Q 99 Wal-Mart(4), Kroger(6),
Goody's(6)
Monaca, PA -- Phase II..... 182,857 142,857 78.1 1st Q 99 OfficeMax(6), Shop N Save(6),
PetsMart(6), Phar-Mor(6)
Macon, GA.................. 101,162 101,162 100.0 1st Q 98 Anchor
Nashville, TN -- Ch.
Pike..................... 386,628 329,128 85.1 4th Q 98/1st Q 99 Wal-Mart(6), Lowe's(6)
Brandon, FL................ 180,420 63,420 35.2 2nd Q 99/1st Q 00 Publix, Anchors
Irving, TX(8).............. 656,598 392,084 59.7 1st Q 99/4th Q 99 Wal-Mart(4), Theater(4), Anchors
Rocky Mount, NC............ 59,025 54,025 91.5 4th Q 98 Goody's(6), PetsMart(6), Pier
1(6)
--------- ---------
Total or Weighted
Average.......... 4,610,477 3,638,590 78.9%
============= =========
Total Owned or
Weighted
Average.......... 3,379,167 2,407,280 71.2%
============= =========
Total Non-Owned.... 1,231,310 1,231,310 100.0%
============= =========
</TABLE>
- ---------------
(1) The Company has already placed in service 386,648 square feet, of which
256,648 square feet is owned by the Company.
(2) This project contains a total of 456,522 square feet of which 369,938 square
feet is already in service.
(3) The Company placed in service a 132,847 square foot Lowe's on November 25,
1997.
(4) Retailer will build and own its portion of the shopping center.
(5) Shops are adjacent to a 10,800 square foot Pike Nurseries already in
operation.
(6) Tenant has committed to lease but has not yet delivered a signed lease
agreement to the Company and, therefore, there can be no assurance that a
lease agreement with this tenant will be executed.
(7) Property owned by a joint venture which is 50% owned by JDN Development
Company, Inc. and 50% owned by an unaffiliated third party.
(8) The Company has not yet purchased land associated with this project.
PS-14
<PAGE> 15
In addition, as of December 31, 1997, the Company had the following
re-development projects underway:
<TABLE>
<CAPTION>
PROJECTED
LOCATION DESCRIPTION TENANT OPENINGS
- -------- ----------- ---------------
<S> <C> <C>
South Boston, VA...... Expanding Wal-Mart by 106,316 square feet 2nd Qtr 98
Canton, GA............ Replacing former Wal-Mart with 60,000 square foot Ingles 4th Qtr 98
Cartersville, GA...... Replacing former Wal-Mart with 60,000 square foot Ingles 4th Qtr 98
Relocating Bauersfeld's Grocery to new 47,860 square foot
Topeka, KS............ space 1st Qtr 99
</TABLE>
Leasing and Management. The following information represents results of
the Company's leasing and management activities for the quarter ended December
31, 1997 (except where otherwise indicated):
- On a same property basis, Annualized Base Rent per leased square foot
increased to $6.59 as of December 31, 1997, from $6.52 as of December 31,
1996.
- New leases were signed for 30,161 square feet at an average rental rate
of $11.97 per square foot. For the two months ended February 28, 1998, new
leases were signed for 11,281 square feet at an average rental rate of
$15.18 per square foot.
- 70 tenants incurred contractual rental increases averaging 4.5%. For the
two months ended February 28, 1998, 45 tenants incurred contractual rental
increases averaging 4.2%.
- At the end of the quarter, the Company's portfolio was 97.1% leased. As
of February 28, 1998, the Company's portfolio was 97.1% leased.
Operating Results and Distributions. For the three-month period ended
December 31, 1997, FFO increased 59.7% to $11.0 million as compared to FFO for
the three-month period ended December 31, 1996 of $6.9 million. FFO per share
increased 12.5% for the three-month period ended December 31, 1997 as compared
to the three-month period ended December 31, 1996. Net income for the
three-month period ended December 31, 1997 increased 72.4% to $7.9 million, or
$0.47 per share, as compared to net income for the three-month period ended
December 31, 1996 of $4.6 million, or $0.39 per share. Total revenues for the
three-month period ended December 31, 1997 increased 46.7% to $14.5 million, as
compared to total revenues of $9.9 million for the three-month period ended
December 31, 1996.
For the year ended December 31, 1997, FFO increased 52.7% to $37.7 million
as compared to FFO for the year ended December 31, 1996 of $24.7 million. FFO
per share increased 10.1% for the year ended December 31, 1997, as compared to
FFO per share for the year ended December 31, 1996. Net income increased 27.6%
to $21.3 million, or $1.38 per share, for the year ended December 31, 1997, as
compared to net income of $16.7 million, or $1.50 per share, for the year ended
December 31, 1996. Total revenue increased 31.1% to $48.0 million, as compared
to total revenue of $36.6 million for the year ended December 31, 1996.
The Company's payout ratio, based on FFO, decreased from 82.0% for the
three months ended December 31, 1996 to 76.8% for the three months ended
December 31, 1997.
Common Stock Offerings. In February 1998, the Company issued 1,633,131
shares of its Common Stock in two public offerings which resulted in net
proceeds to the Company of approximately $52.1 million (collectively, the
"February Offerings"). The Company used the net proceeds from the February
Offerings to repay indebtedness outstanding under the Company's Unsecured Credit
Facility. On March 25, 1998, the Company entered into a Terms Agreement with
J.C. Bradford & Co., L.L.C. in connection with the issue and sale of 443,623
shares of its Common Stock which, if the sale closes, will result in net
proceeds to the Company of approximately $14.2 million. The Company intends to
use the net proceeds of this Common Stock offering to repay indebtedness
outstanding under the Company's Unsecured Credit Facility.
Acquisitions. On February 4, 1998, the Company closed the Milwaukee
Acquisition. On February 23, 1998, the Company purchased a 204,291 square foot
shopping center in Fayetteville, North Carolina for $12.9 million.
PS-15
<PAGE> 16
Tenant Developments. On February 2, 1998, Bruno's Inc. ("Bruno's") filed
for Chapter 11 bankruptcy protection in federal bankruptcy court in Delaware. At
February 28, 1998, Bruno's was a tenant in seven of the Company's shopping
centers and owned space that is part of an eighth shopping center owned by the
Company. As of February 28, 1998, Bruno's represented 3.2% of the Company's
Annualized Base Rent. On March 9, 1998, leases on two of the Company's Bruno's
stores were assumed by Ingles Markets, Incorporated. As of February 28, 1998,
adjusted for these lease assumptions, Bruno's represented 2.6% of the Company's
Annualized Base Rent. Management of the Company does not believe that the
bankruptcy of Bruno's will have a material adverse effect on the results of
operations or financial condition of the Company. There can be no assurance,
however, that such an adverse effect will not occur.
USE OF PROCEEDS
The net proceeds to the Company from the Offering, after payment of all
estimated expenses of the Offering, are estimated to be approximately $76.4
million.
The Company intends to use all of the net proceeds from the Offering to
reduce the outstanding balance under the Unsecured Credit Facility. Borrowings
outstanding under the Unsecured Credit Facility were approximately $94.0 million
at March 25, 1998. The Unsecured Credit Facility bears interest at LIBOR plus
1.25% (6.87% at February 28, 1998) and matures in May 2000.
PS-16
<PAGE> 17
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1997 and the pro forma capitalization of the Company as adjusted to
give effect to the First Quarter Transactions as if they had occurred on
December 31, 1997. See "Use of Proceeds." The information set forth in the
following table should be read in conjunction with the financial and other
information included elsewhere and incorporated by reference in this Pricing
Supplement, the accompanying Prospectus Supplement and the Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
------------------------
PRO FORMA
HISTORICAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Debt:
Unsecured notes payable................................... $159,511 $234,511
Unsecured line of credit.................................. 43,500 --
Mortgage notes payable.................................... 13,591 18,986
-------- --------
Total debt........................................ 216,602 253,497
Third-party investors' interest(1).......................... -- 3,000
Shareholders' equity:
Preferred Stock, par value $0.01 per share -- authorized
20,000,000 shares, none outstanding.................... -- --
Common Stock, par value $0.01 per share -- authorized
150,000,000 shares, issued and outstanding 18,497,227
shares, 20,130,358 shares pro forma as adjusted(2):.... 185 201
Paid-in capital........................................... 378,492 430,555
Accumulated deficit....................................... (7,089) (7,089)
-------- --------
Total shareholders' equity........................ 371,588 423,667
-------- --------
Total capitalization.............................. $588,190 $680,164
======== ========
</TABLE>
- ---------------
(1) JDN West Allis Associates, Limited Partnership (the "Partnership"), of which
the Company is the sole general partner, was organized in connection with
the acquisition of one of the shopping centers in the Milwaukee Acquisition.
As part of the purchase price for this shopping center, the Partnership
issued $3.0 million in value of units of limited partnership interests
which, subject to certain conditions and limitations, are exchangeable into
93,023 registered and freely transferable shares of Common Stock beginning
in February 1999.
(2) Excludes 1,855,393 shares of Common Stock reserved for issuance under the
Company's 1993 Incentive Stock Plan (the "Incentive Plan"), of which 32,000
have been issued upon exercise of stock options under the Incentive Plan,
300,000 shares of Common Stock reserved for issuance under the Company's
1993 Non-Employee Director Stock Option Plan, 491,049 shares of Common Stock
reserved for issuance under the Company's Dividend Reinvestment and Stock
Purchase Plan, and 99,168 shares of Common Stock reserved for issuance under
the Company's 1995 Employee Stock Purchase Plan. In February 1998, the
Company's Board of Directors authorized amendments to the Incentive Plan,
subject to shareholder approval, increasing the number of shares of Common
Stock reserved for issuance to 2,415,799. Also excludes shares described in
(1) above.
PS-17
<PAGE> 18
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------------------
PRO
FORMA
1997 1996 1995 1994(1) 1994 1993
--------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA
Minimum and percentage rents.............. $ 43,346 $ 32,933 $ 27,466 $ 21,889 $ 19,013 $ 8,313
Recoveries from tenants................... 4,512 3,475 3,245 2,806 2,500 1,070
Management fees and other revenue......... 147 215 651 515 512 1,177
--------- -------- -------- -------- -------- --------
Total revenues................... 48,005 36,623 31,362 25,210 22,025 10,560
Operating and maintenance expenses........ 3,201 2,586 2,231 1,878 1,618 893
Real estate taxes......................... 2,540 1,817 1,970 1,504 1,321 545
General and administrative expenses....... 4,265 3,367 2,818 2,359 2,236 1,954
Depreciation and amortization............. 10,130 7,786 6,558 5,493 4,768 1,964
--------- -------- -------- -------- -------- --------
Total expenses................... 20,136 15,556 13,577 11,234 9,943 5,356
Income from operations.................... 27,869 21,067 17,785 13,976 12,082 5,204
Interest expense, net..................... 4,856 5,868 7,195 6,882 6,919 6,444
Income before extraordinary items and
cumulative effect of change in
accounting principle.................... 27,585 16,697 11,268 7,024 5,093 4,216
Net income................................ 21,293 16,682 10,737 7,024 3,001 4,398
OTHER DATA
Funds from operations(2).................. $ 37,701 $ 24,683 $ 17,234 $ 12,492 $ 9,836 $ 855
Cash provided by (used in)
Operating activities.................... $ 41,577 $ 26,070 $ 18,052 $ 11,636 $ 9,705 $ (747)
Investing activities.................... (204,578) (83,983) (61,118) 156,620 156,620 17,961
Financing activities.................... 171,731 57,513 45,738 147,267 147,267 (17,830)
Ratio of earnings to fixed charges........ 2.62 2.29 1.90 1.94 1.64 --(3)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
SUPPLEMENTAL DATA
Shopping center properties............................ 68 48 42 38 25
Gross leasable area (square feet in thousands)........ 8,327 6,135 4,953 3,971 2,240
Percent of gross leasable area leased................. 97.1% 98.2% 98.9% 97.9% 96.9%
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Shopping center properties before accumulated
depreciation........................................ $535,303 $332,669 $276,818 $229,522 $ 71,818
Shopping center properties, net....................... 496,997 304,696 256,506 215,687 62,470
Total assets.......................................... 599,753 371,986 295,868 237,008 67,393
Unsecured debt........................................ 203,011 -- -- -- --
Total debt............................................ 216,602 141,882 128,839 113,332 65,586
Total liabilities..................................... 228,165 145,447 135,882 118,837 72,371
Shareholders' equity (owners' deficit)................ 371,588 226,539 159,986 118,171 (4,978)
</TABLE>
- ---------------
(1) Pro forma information represents the results of operations as if the
Company's initial public offering and related transactions had been
completed on January 1, 1994.
(2) FFO is defined by NAREIT to mean net income, computed in accordance with
GAAP, excluding gains or losses from debt restructuring and sales of
property, plus depreciation and amortization of real estate assets, and
after adjustments for unconsolidated partnerships and joint ventures. The
Company's method of calculating FFO may be different from methods used by
other REITs and, accordingly, may not be comparable to such other REITs. FFO
does not represent cash provided by operating activities, as defined by
GAAP, should not be considered as an alternative to net income (determined
in accordance with GAAP) as an indication of operating performance and is
not indicative of cash available to fund all cash flow needs, including the
Company's ability to make cash distributions.
(3) Prior to the completion of the Company's initial public offering, the
Company and its predecessor businesses were privately held and operated in a
manner to minimize net taxable income and to fund any operating cash flow
deficits through the sale of shopping center properties. As a result,
although the Company historically generated positive cash flow, it had net
losses for the year ended December 31, 1993. Consequently, the computation
of the ratio of earnings to fixed charges for 1993 indicates that the
earnings were inadequate to cover fixed charges by approximately $1.2
million.
PS-18
<PAGE> 19
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of JDN Realty Corporation are:
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY
---- --- --------------------------
<S> <C> <C>
J. Donald Nichols(1)................... 57 Chairman and Chief Executive Officer
Elizabeth L. Nichols................... 44 President and Director
William J. Kerley...................... 42 Chief Financial Officer, Secretary, Treasurer
Jeb L. Hughes.......................... 46 Vice President, Development of JDN Development
Company, Inc.
Leilani L. Jones....................... 36 Vice President and Director of Property Management
David L. Henzlik....................... 35 Vice President, Leasing
C. Sheldon Whittelsey IV............... 36 Vice President, Development
John D. Harris, Jr..................... 38 Controller, Assistant Secretary
William B. Greene(2)(3)................ 60 Director
Haywood D. Cochrane, Jr.(1)(2)......... 49 Director
Craig Macnab(1)(3)..................... 42 Director
Robert P. Corker, Jr................... 45 Director
William G. Byrnes...................... 47 Director
</TABLE>
- ---------------
(1) Member of Executive Committee.
(2) Member of Audit Committee.
(3) Member of Compensation Committee.
The following is a biographical summary of the experience of the executive
officers and directors of the Company:
J. Donald Nichols. Mr. Nichols has served as Chairman and Chief Executive
Officer of JDN Realty Corporation since December 1993. In 1978, Mr. Nichols
formed JDN Enterprises, Inc., the Company's predecessor ("Enterprises"), for the
purpose of developing shopping centers anchored primarily by Wal-Mart. He served
as President of Enterprises from its inception until 1989, at which time Mr.
Nichols became Chairman of Enterprises. Mr. Nichols served as Chairman of
Enterprises until he assumed his current position with the Company. He is a
member of the International Council of Shopping Centers ("ICSC").
Elizabeth L. Nichols. Ms. Nichols has served as President of JDN Realty
Corporation since December 1993. Ms. Nichols joined Enterprises in 1980, where
she arranged permanent and construction financing, performed market due
diligence and site acquisition, and negotiated leases. Ms. Nichols organized the
formation of Enterprises' in-house property management and leasing departments
in 1984. Ms. Nichols was Vice President of Finance for Enterprises from 1982
until 1989, when she became President. Ms. Nichols served as President of
Enterprises until she assumed her current position with the Company. She is a
member of ICSC.
William J. Kerley. Mr. Kerley has served as Chief Financial Officer of JDN
Realty Corporation since December 1993. Mr. Kerley served as Chief Financial
Officer of Enterprises from August 1993 to December 1993. From 1989 to 1993, Mr.
Kerley was a consultant to Enterprises and other real estate and operating
companies in the southeastern United States. He is a member of Financial
Executives Institute ("FEI") and ICSC.
Jeb L. Hughes. Mr. Hughes has served as Vice President, Development of JDN
Development Company, Inc. since May 1996. Mr. Hughes joined Enterprises in 1989
and managed the development and construction of shopping centers for Enterprises
until it was merged into the Company in December 1993. Mr. Hughes was
self-employed and acted as a consultant to Development Company from January 1994
to May 1996. He is a member of ICSC.
Leilani L. Jones. Ms. Jones has served as Vice President and Director of
Property Management of JDN Realty Corporation since December 1993. Ms. Jones
joined Enterprises in 1985 and served as Vice President and Director of Property
Management from 1990 until December 1993. She is a member of the Institute of
Real Estate Management and ICSC. Ms. Jones is a Certified Property Manager and a
Certified Commercial Investment Manager.
PS-19
<PAGE> 20
David L. Henzlik. Mr. Henzlik joined Enterprises in 1989 as a leasing
agent and has served as Vice President, Leasing of JDN Realty Corporation since
March 1995. He is a member of the National Association of Industrial and Office
Properties and ICSC.
C. Sheldon Whittelsey, IV. Mr. Whittelsey has served as Vice President,
Development of JDN Realty Corporation since December 1993. Mr. Whittelsey joined
Enterprises in 1986 where he was involved in site acquisition, development and
outparcel sales. He is a member of ICSC.
John D. Harris, Jr. Mr. Harris joined the Company as Controller in July
1994. From 1984 to July 1994, Mr. Harris was employed by the Atlanta, Georgia,
office of Ernst & Young, most recently holding the position of Senior Manager,
where he specialized in serving real estate and entrepreneurial companies. Mr.
Harris is a certified public accountant. He is a member of the American
Institute of Certified Public Accountants, Georgia Society of CPAs, FEI and
ICSC, and he serves on the Accounting Committee of NAREIT.
William B. Greene. Mr. Greene has been a director of JDN Realty
Corporation since December 1993. Mr. Greene was a founder of and, since 1975,
has served as Chairman of the Board of Bank of Tennessee, where he has also
served as President and Chief Executive Officer. Mr. Greene serves as President
and Chief Executive Officer of Greene Investment Corporation, a real estate and
investment firm located in Kingsport, Tennessee. Mr. Greene has approximately 30
years experience in commercial banking. He served as Chairman of the Board, and
for 18 years as President and Chief Executive Officer, of Carter County Bank in
Elizabethton, Tennessee. In 1968, Mr. Greene founded and served as President of
United Tennessee Bancshares Corporation, the first state-wide banking
organization in Tennessee.
Haywood D. Cochrane, Jr. Mr. Cochrane has been a director of the Company
since December 1993. Since February 1997, Mr. Cochrane has served as President
and Chief Executive Officer of Meridian Occupational Healthcare Associates,
Inc., a company providing a broad range of specialized medical services
primarily to large employers throughout the United States. From April 1995 to
October 1996, Mr. Cochrane served as Chief Financial Officer of Laboratory Corp.
of America Holdings, Inc., Burlington, North Carolina, a clinical laboratory
business. From June 1994 to April 1995, Mr. Cochrane was with National Health
Laboratories, Inc. Mr. Cochrane served as President, Chief Executive Officer and
a director of Allied Clinical Laboratories, Inc., Nashville, Tennessee, a
publicly held clinical laboratory company, from June 1989 until June 1994. From
April 1977 until June 1989, Mr. Cochrane was with Roche Biomedical Laboratories,
Inc., Burlington, North Carolina, a privately owned national clinical laboratory
company, with whom Mr. Cochrane held various positions including Chief Operating
Officer and Senior Vice President.
Craig Macnab. Mr. Macnab has been a director of the Company since December
1993. Since January 1997, Mr. Macnab has served as President of Tandem Capital,
a division of Sirrom Capital. From July 1993 to December 1996, Mr. Macnab was a
General Partner of MacNiel Advisors, the general partner of two hedge funds
located in Nashville, Tennessee. From 1987 until June 1993, Mr. Macnab was a
partner of J.C. Bradford & Co., Nashville, Tennessee, and a principal of
Bradford Capital Partners, L.P., a fund that invests in equity securities issued
by privately held companies.
Robert P. Corker, Jr. Mr. Corker has been a director of the Company since
September 1996. Since 1982, Mr. Corker has been the Chief Executive Officer of
the Corker Group. Mr. Corker served as Commissioner of Finance and
Administration for the State of Tennessee from December 1994 to July 1996.
William G. Byrnes. Mr. Byrnes has been a director of the Company since
February 1998. Mr. Byrnes was a managing director for BT Alex. Brown
Incorporated until his retirement on February 6, 1998. He joined Alex. Brown &
Sons Incorporated in 1981 and served as Group Head Real Estate between 1988 and
1996. Most recently, Mr. Byrnes was head of the Financial Services Group, which
included responsibilities for banks, insurance companies, specialty finance
companies and real estate companies, including REITs, overseeing 49 people in
three offices. Mr. Byrnes is currently an adjunct faculty member at Georgetown
University Business School.
J. Donald Nichols and Elizabeth L. Nichols are husband and wife. No other
family relationship exists among JDN Realty Corporation's officers and
directors.
PS-20
<PAGE> 21
DESCRIPTION OF THE MOPPRS
GENERAL
The MOPPRS are part of the Medium-Term Notes series of the Company
described in the accompanying Prospectus Supplement and Debt Securities of the
Company described in the accompanying Prospectus. The MOPPRS are to be issued
under the Indenture, dated as of July 15, 1997, as amended or supplemented from
time to time, between the Company and First Union National Bank, as trustee (the
"Trustee"), which is more fully described in the accompanying Prospectus
Supplement and Prospectus. The following description of the terms of the MOPPRS
supplements, and to the extent inconsistent therewith replaces, the description
of the general terms and provisions of the Medium-Term Notes set forth in the
accompanying Prospectus Supplement and Debt Securities set forth in the
Prospectus. The MOPPRS will be senior unsecured obligations of the Company and
will be limited to $75,000,000 in aggregate principal amount. The MOPPRS will
mature on March 31, 2013 (the "Stated Maturity Date"). Except in the limited
circumstances described herein, the MOPPRS are not subject to redemption by the
Company prior to their Stated Maturity Date. See "-- Redemption" below.
The MOPPRS will bear interest at the annual interest rate of 6.918% to
March 31, 2003 (the "Remarketing Date"). If the Remarketing Dealer elects to
remarket the MOPPRS, except in the limited circumstances described herein, (i)
the MOPPRS will be subject to mandatory tender to the Remarketing Dealer at 100%
of the principal amount thereof for remarketing on the Remarketing Date, on the
terms and subject to the conditions described herein, and (ii) on and after the
Remarketing Date, the MOPPRS will bear interest at the rate determined by the
Remarketing Dealer in accordance with the procedures set forth below (the
"Interest Rate to Maturity"). See "-- Tender of MOPPRS; Remarketing" below.
Under the circumstances described below, the MOPPRS are subject to
redemption by the Company from the Remarketing Dealer on the Remarketing Date.
See "-- Redemption" below. If the Remarketing Dealer for any reason does not
purchase all tendered MOPPRS on the Remarketing Date or elects not to remarket
the MOPPRS, or in certain other limited circumstances described herein, the
Company will be required to repurchase the MOPPRS from the Beneficial Owners
thereof on the Remarketing Date, at 100% of the principal amount thereof plus
accrued interest, if any. See "-- Repurchase" below.
The MOPPRS will bear interest from March 31, 1998, payable semiannually on
March 31 and September 30 of each year (each, an "Interest Payment Date"),
commencing September 30, 1998, to the persons in whose names the MOPPRS are
registered on the fifteenth calendar day (whether or not a Business Day)
immediately preceding the related Interest Payment Date (each, a "Record Date").
Interest on the MOPPRS will be computed on the basis of a 360-day year of twelve
30-day months. "Business Day" means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions in The
City of New York are authorized or required by law, regulation or executive
order to close.
Interest payable on any Interest Payment Date and at the Stated Maturity
Date or date of earlier redemption or repurchase shall be the amount of interest
accrued from and including the next preceding Interest Payment Date in respect
of which interest has been paid or duly provided for (or from and including
March 31, 1998, if no interest has been paid or duly provided for) with respect
to the MOPPRS to but excluding such Interest Payment Date or the Stated Maturity
Date or date of redemption or repurchase, as the case may be. If any Interest
Payment Date or the Stated Maturity Date or date of redemption or repurchase of
MOPPRS falls on a day that is not a Business Day, the payment shall be made on
the next Business Day with the same force and effect as if it were made on the
date such payment was due and no interest shall accrue on the amount so payable
for the period from and after such Interest Payment Date or the Stated Maturity
Date or date of earlier redemption or repurchase, as the case may be.
The MOPPRS will be issued in denominations of $1,000 and integral multiples
thereof.
PS-21
<PAGE> 22
TENDER OF MOPPRS; REMARKETING
The following description sets forth the terms and conditions of the
remarketing of the MOPPRS, in the event that the Remarketing Dealer elects to
purchase the MOPPRS and remarkets the MOPPRS on the Remarketing Date.
Mandatory Tender. Provided that the Remarketing Dealer gives notice to the
Company and the Trustee on a Business Day not later than five Business Days
prior to the Remarketing Date of its intention to purchase the MOPPRS for
remarketing (the "Notification Date"), each MOPPRS will be automatically
tendered, or deemed tendered, to the Remarketing Dealer for purchase on the
Remarketing Date, except in the circumstances described under "-- Repurchase" or
"-- Redemption" below. The purchase price for the tendered MOPPRS to be paid by
the Remarketing Dealer will equal 100% of the principal amount thereof. See
"-- Notification of Results; Settlement" below. When the MOPPRS are tendered for
remarketing, the Remarketing Dealer may remarket the MOPPRS for its own account
at varying prices to be determined by the Remarketing Dealer at the time of each
sale. From and after the Remarketing Date, the MOPPRS will bear interest at the
Interest Rate to Maturity. If the Remarketing Dealer elects to remarket the
MOPPRS, the obligation of the Remarketing Dealer to purchase the MOPPRS on the
Remarketing Date is subject to, among other things, the conditions that, since
the Notification Date, no material adverse change in the condition of the
Company and its subsidiaries, considered as one enterprise, shall have occurred
and that no Event of Default (as defined in the Indenture), or any event which,
with the giving of notice or passage of time, or both, would constitute an Event
of Default, with respect to the MOPPRS shall have occurred and be continuing. If
for any reason the Remarketing Dealer does not purchase all tendered MOPPRS on
the Remarketing Date, the Company will be required to repurchase the MOPPRS from
the Beneficial Owners thereof at a price equal to the principal amount thereof
plus all accrued and unpaid interest, if any, on the MOPPRS to the Remarketing
Date. See "-- Repurchase" below.
The Interest Rate to Maturity shall be determined by the Remarketing Dealer
by 3:30 p.m., New York City time, on the third Business Day immediately
preceding the Remarketing Date (the "Determination Date") to the nearest one
hundred-thousandth (0.00001) of one percent per annum and will be equal to
5.637% (the "Base Rate") plus the Applicable Spread (as defined below) which
will be based on the Dollar Price (as defined below) of the MOPPRS. The Interest
Rate to Maturity announced by the Remarketing Dealer, absent manifest error,
shall be binding and conclusive upon the Beneficial Owners and Holders of the
MOPPRS, the Company and the Trustee.
The "Applicable Spread" will be the lowest bid indication, expressed as a
spread (in the form of a percentage or in basis points) above the Base Rate,
obtained by the Remarketing Dealer on the Determination Date from the bids
quoted by five Reference Corporate Dealers (as defined below) for the full
aggregate principal amount of the MOPPRS at the Dollar Price, but assuming (i)
an issue date equal to the Remarketing Date, with settlement on such date
without accrued interest, (ii) a maturity date equal to the Stated Maturity Date
of the MOPPRS, and (iii) a stated annual interest rate, payable semiannually on
each Interest Payment Date, equal to the Base Rate plus the spread bid by the
applicable Reference Corporate Dealer. If fewer than five Reference Corporate
Dealers bid as described above, then the Applicable Spread shall be the lowest
of such bid indications obtained as described above.
"Dollar Price" means, with respect to the MOPPRS, the present value as
determined by the Remarketing Dealer, as of the Remarketing Date, of the
Remaining Scheduled Payments (as defined below) discounted to the Remarketing
Date, on a semiannual basis (assuming a 360-day year consisting of twelve 30-
day months), at the Treasury Rate (as defined below).
"Reference Corporate Dealers" means leading dealers of publicly traded debt
securities of the Company in The City of New York (which may include the
Remarketing Dealer or one of its affiliates) selected by the Remarketing Dealer.
"Treasury Rate" means, with respect to the Remarketing Date, the rate per
annum equal to the semiannual equivalent yield to maturity or interpolated (on a
day count basis) yield to maturity of the Comparable Treasury Issues (as defined
below), assuming a price for the Comparable Treasury Issues
PS-22
<PAGE> 23
(expressed as a percentage of its principal amount), equal to the Comparable
Treasury Price (as defined below) for such Remarketing Date.
"Comparable Treasury Issues" means the United States Treasury security or
securities selected by the Remarketing Dealer as having an actual or
interpolated maturity or maturities comparable to the remaining term of the
MOPPRS being purchased.
"Comparable Treasury Price" means, with respect to the Remarketing Date,
(a) the offer prices for the Comparable Treasury Issues (expressed in each case
as a percentage of its principal amount) on the Determination Date, as set forth
on "Telerate Page 500" (or such other page as may replace Telerate Page 500) or
(b) if such page (or any successor page) is not displayed or does not contain
such offer prices on such Determination Date, (i) the average of the Reference
Treasury Dealer Quotations for such Remarketing Date, after excluding the
highest and lowest of such Reference Treasury Dealer Quotations, or (ii) if the
Remarketing Dealer obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Reference Treasury Dealer Quotations.
"Telerate Page 500" means the display designated as "Telerate Page 500" on Dow
Jones Markets Limited (or such other page as may replace Telerate Page 500 on
such service) or such other service displaying the offer prices specified in (a)
above as may replace Dow Jones Markets Limited.
"Reference Treasury Dealer Quotations" means, with respect to each
Reference Treasury Dealer and the Remarketing Date, the offer prices for the
Comparable Treasury Issues (expressed in each case as a percentage of its
principal amount) quoted to the Remarketing Dealer by such Reference Treasury
Dealer by 3:30 p.m., New York City time, on the Determination Date.
"Reference Treasury Dealer" means each of Credit Suisse First Boston
Corporation, Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and Salomon Brothers Inc (or
their respective affiliates which are primary U.S. Government securities
dealers) and their respective successors; provided, however, that if any of the
foregoing or their affiliates shall cease to be a primary U.S. Government
securities dealer in The City of New York (a "Primary Treasury Dealer"), the
Remarketing Dealer shall substitute therefor another Primary Treasury Dealer.
"Remaining Scheduled Payments" means, with respect to the MOPPRS, the
remaining scheduled payments of the principal thereof and interest thereon,
calculated at the Base Rate only, that would be due after the Remarketing Date
to and including the Stated Maturity Date, as determined by the Remarketing
Dealer; provided, however, that if the Remarketing Date is not an Interest
Payment Date with respect to the MOPPRS, the amount of the next succeeding
scheduled interest payment thereon, calculated at the Base Rate only, will be
reduced by the amount of interest accrued thereon, calculated at the Base Rate
only, to the Remarketing Date.
Notification of Results; Settlement. Provided the Remarketing Dealer has
previously notified the Company and the Trustee on the Notification Date of its
intention to purchase all tendered MOPPRS on the Remarketing Date, the
Remarketing Dealer will notify the Company, the Trustee and DTC by telephone,
confirmed in writing (which may include facsimile or other electronic
transmission), by 4:00 p.m., New York City time, on the Determination Date, of
the Interest Rate to Maturity. All of the tendered MOPPRS will be automatically
delivered to the account of the Trustee, by book-entry through DTC pending
payment of the purchase price therefor, on the Remarketing Date.
In the event that the Remarketing Dealer purchases the tendered MOPPRS on
the Remarketing Date, the Remarketing Dealer will make or cause the Trustee to
make payment to the DTC Participant of each tendering Beneficial Owner of
MOPPRS, by book-entry through DTC no later than the close of business on the
Remarketing Date against delivery through DTC of such Beneficial Owner's
tendered MOPPRS, of 100% of the principal amount of the tendered MOPPRS that
have been purchased for remarketing by the Remarketing Dealer. If the
Remarketing Dealer does not purchase all of the MOPPRS on the Remarketing Date,
it will be the obligation of the Company to make or cause to be made such
payment for the MOPPRS, as described below under "-- Repurchase." In any case,
the Company will make or cause the Trustee to make
PS-23
<PAGE> 24
payment of interest to each Beneficial Owner of MOPPRS due on the Remarketing
Date by book-entry through DTC no later than the close of business on the
Remarketing Date.
The transactions described above will be executed on the Remarketing Date
through DTC in accordance with the procedures of DTC, and the accounts of the
respective DTC Participants will be debited and credited and the MOPPRS
delivered by book-entry as necessary to effect the purchases and sales thereof.
Transactions involving the sale and purchase of MOPPRS remarketed by the
Remarketing Dealer on and after the Remarketing Date will settle in immediately
available funds through DTC's Same-Day Funds Settlement System.
The tender and settlement procedures described above, including provisions
for payment by purchasers of MOPPRS in the remarketing or for payment to selling
Beneficial Owners of tendered MOPPRS, may be modified to the extent required by
DTC or to the extent required to facilitate the tender and remarketing of MOPPRS
in certificated form, if the book-entry system is no longer available for the
MOPPRS at the time of the remarketing. In addition, the Remarketing Dealer may,
in accordance with the terms of the Indenture, modify the tender and settlement
procedures set forth above in order to facilitate the tender and settlement
process.
As long as DTC's nominee holds the certificate representing any MOPPRS in
the book-entry system of DTC, no certificates for such MOPPRS will be delivered
by any selling Beneficial Owner to reflect any transfer of such MOPPRS effected
in the remarketing. In addition, under the terms of the MOPPRS and the
Remarketing Agreement (described below), the Company has agreed that,
notwithstanding any provision to the contrary set forth in the Indenture, (i) it
will use its best efforts to maintain the MOPPRS in book-entry form with DTC or
any successor thereto and to appoint a successor depositary to the extent
necessary to maintain the MOPPRS in book-entry form, and (ii) it will waive any
discretionary right it otherwise has under the Indenture to cause the MOPPRS to
be issued in certificated form.
For further information with respect to transfers and settlement through
DTC, see "Description of Notes -- Book-Entry Notes" in the accompanying
Prospectus Supplement.
The Remarketing Dealer. The Company and the Remarketing Dealer are
entering into a Remarketing Agreement, the general terms and provisions of which
are summarized below.
The Remarketing Dealer will not receive any fees or reimbursement of
expenses from the Company in connection with the remarketing.
The Company will agree to indemnify the Remarketing Dealer against certain
liabilities, including liabilities under the Securities Act of 1933 (the
"Securities Act"), arising out of or in connection with its duties under the
Remarketing Agreement.
In the event that the Remarketing Dealer elects to remarket the MOPPRS as
described herein, the obligation of the Remarketing Dealer to purchase MOPPRS
from tendering Beneficial Owners of MOPPRS will be subject to several conditions
precedent set forth in the Remarketing Agreement, including the conditions that,
since the Notification Date, no material adverse change in the condition of the
Company and its subsidiaries, considered as one enterprise, shall have occurred
and that no Event of Default (as defined in the Indenture), or any event which,
with the giving of notice or passage of time, or both, would constitute an Event
of Default, with respect to the MOPPRS shall have occurred and be continuing. In
addition, the Remarketing Agreement will provide for the termination thereof, or
redetermination of the Interest Rate to Maturity, by the Remarketing Dealer on
or before the Remarketing Date, upon the occurrence of certain events as set
forth in the Remarketing Agreement.
No Holder or Beneficial Owner of any MOPPRS shall have any rights or claims
under the Remarketing Agreement or against the Remarketing Dealer as a result of
the Remarketing Dealer not purchasing such MOPPRS.
The Remarketing Agreement will also provide that the Remarketing Dealer may
resign at any time as Remarketing Dealer, such resignation to be effective 10
days after the delivery to the Company and the
PS-24
<PAGE> 25
Trustee of notice of such resignation. In such case, it shall be the sole
obligation of the Company to appoint a successor Remarketing Dealer.
The Remarketing Dealer, in its individual or any other capacity, may buy,
sell, hold and deal in any of the MOPPRS. The Remarketing Dealer may exercise
any vote or join in any action which any Beneficial Owner of MOPPRS may be
entitled to exercise or take with like effect as if it did not act in any
capacity under the Remarketing Agreement. The Remarketing Dealer, in its
individual capacity, either as principal or agent, may also engage in or have an
interest in any financial or other transaction with the Company as freely as if
did not act in any capacity under the Remarketing Agreement.
REPURCHASE
In the event that (i) the Remarketing Dealer for any reason does not notify
the Company of the Interest Rate to Maturity by 4:00 p.m., New York City time,
on the Determination Date, or (ii) prior to the Remarketing Date, the
Remarketing Dealer has resigned and no successor has been appointed on or before
the Determination Date, or (iii) since the Notification Date, a material adverse
change in the condition of the Company and its subsidiaries, considered as one
enterprise, shall have occurred or an Event of Default (as defined in the
Indenture), or any event which, with the giving of notice or passage of time, or
both, would constitute an Event of Default, with respect to the MOPPRS shall
have occurred and be continuing, or any other event constituting a termination
event under the Remarketing Agreement shall have occurred, or (iv) the
Remarketing Dealer elects not to remarket the MOPPRS, or (v) the Remarketing
Dealer for any reason does not purchase all tendered MOPPRS on the Remarketing
Date, the Company will repurchase the MOPPRS as a whole on the Remarketing Date
at a price equal to 100% of the principal amount of the MOPPRS plus all accrued
and unpaid interest, if any, on the MOPPRS to the Remarketing Date. In any such
case, payment will be made by the Company to the DTC Participant of each
tendering Beneficial Owner of MOPPRS, by book-entry through DTC no later than
the close of business on the Remarketing Date against delivery through DTC of
such Beneficial Owner's tendered MOPPRS.
REDEMPTION
If the Remarketing Dealer elects to remarket the MOPPRS on the Remarketing
Date, the MOPPRS will be subject to mandatory tender to the Remarketing Dealer
for remarketing on such date, in each case subject to the conditions described
above under "-- Tender of MOPPRS; Remarketing" and "-- Repurchase" and to the
Company's right to redeem the MOPPRS from the Remarketing Dealer as described in
the next sentence. The Company will notify the Remarketing Dealer and the
Trustee, not later than the close of business on the Business Day immediately
preceding the Determination Date, if the Company irrevocably elects to exercise
its right to redeem the MOPPRS, in whole but not in part, from the Remarketing
Dealer on the Remarketing Date at the Optional Redemption Price.
The "Optional Redemption Price" shall be the greater of (i) 100% of the
principal amount of the MOPPRS and (ii) the Dollar Price, plus in either case
accrued and unpaid interest from the Remarketing Date on the principal amount
being redeemed to the date of redemption. If the Company elects to redeem the
MOPPRS, it shall pay the redemption price therefor in same-day funds by wire
transfer to an account designated by the Remarketing Dealer on the Remarketing
Date.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the MOPPRS is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (possibly retroactively) by legislation, administrative
action, judicial decision or possible differing interpretations. It deals only
with MOPPRS held as capital assets and does not purport to deal with persons in
special tax situations, such as financial institutions, insurance companies,
tax-exempt organizations, individual retirement and other tax-deferred accounts,
regulated investment companies, dealers in securities or currencies, persons
holding MOPPRS as a hedge against currency risk or as a position in a "straddle"
for tax purposes, or persons whose functional currency is not the U.S. dollar.
In addition, this
PS-25
<PAGE> 26
summary only addresses the Federal income tax consequences of the MOPPRS until
the Remarketing Date and generally does not deal with holders other than the
original purchasers of the MOPPRS. PERSONS CONSIDERING THE PURCHASE OF THE
MOPPRS SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF THE
FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE MOPPRS ARISING
UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION. For further information
regarding the Federal income tax consequences of investing in MOPPRS, see
"Certain United States Federal Income Tax Considerations" in the accompanying
Prospectus Supplement.
As used herein, the term "U.S. Holder" means a Beneficial Owner of a MOPPRS
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), (iii) an estate whose
income is subject to United States Federal income tax regardless of its source,
(iv) a trust if a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust, or
(v) any other person whose income or gain in respect of a MOPPRS is effectively
connected with the conduct of a United States trade or business. Notwithstanding
the preceding sentence, to the extent provided in Treasury regulations, certain
trusts in existence on August 20, 1996, and treated as United States persons
prior to such date, that elect to continue to be treated as United States
persons also will be a U.S. Holder. As used herein, the term "non-U.S. Holder"
means a Beneficial Owner of a MOPPRS that is not a U.S. Holder.
The Federal income tax treatment of the MOPPRS is not entirely certain and
depends, in part, on whether the MOPPRS are treated as maturing on their Stated
Maturity Date (i.e., 2013) or on the Remarketing Date. The Company intends to
treat the MOPPRS as maturing on the Remarketing Date because (i) the holders are
required to tender their MOPPRS on such date, and the tendered MOPPRS are
required to be purchased on such date either by the Remarketing Dealer or, if
the Remarketing Dealer elects not to purchase, by the Company, and (ii) the
holders will in either case be paid only the stated principal amount of the
MOPPRS plus any accrued and unpaid interest. Further, if the Remarketing Dealer
elects to purchase the tendered MOPPRS for resale, the Company intends to treat
the MOPPRS as newly issued debt instruments on such date having a 10-year term
and bearing the Interest Rate to Maturity.
Based on such treatment, interest payments in respect of the MOPPRS will
constitute "qualified stated interest" under the Treasury Regulations dealing
with the determination and reporting of original issue discount. As a result,
the MOPPRS will not be treated as issued with original issue discount if (i)
they are sold at par value or (ii) the excess (if any) of the par value over the
MOPPRS' issue price is less than the statutory de minimis amount (generally 1/4
of 1% of the MOPPRS' stated redemption price at the Remarketing Date multiplied
by the number of complete years to the Remarketing Date from the issue date).
Further, interest payments on the MOPPRS will be taxable to a U.S. Holder as
ordinary interest income at the time such payments are accrued or received, in
accordance with the U.S. Holder's regular method of tax accounting.
If the MOPPRS are issued at a discount equal to or greater than the
statutory de minimis amount, a U.S. Holder must include original issue discount
in income as ordinary interest for Federal income tax purposes as it accrues
under a constant yield method in advance of the receipt of the cash payments
attributable to such income, regardless of the U.S. Holder's regular method of
accounting. See "Certain United States Federal Income Tax Considerations -- U.S.
Holders -- Original Issue Discount" in the accompanying Prospectus Supplement.
Under the foregoing treatment, upon the sale, exchange or retirement of a
MOPPRS, a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the MOPPRS. A U.S. Holder's adjusted tax basis in
a MOPPRS generally will
PS-26
<PAGE> 27
equal such U.S. Holder's initial investment in the MOPPRS increased by any
original issue discount included in income (and accrued market discount, if any,
if the U.S. Holder has included such market discount in income) and decreased by
the amount of any payments, other than qualified stated interest payments,
received and amortizable bond premium taken with respect to such MOPPRS. Such
gain or loss generally will be capital gain or loss and will be long-term
capital gain or loss if, at the time of sale, exchange or retirement, the MOPPRS
have been held by such U.S. Holder for more than one year. For certain
non-corporate U.S. Holders, long-term capital gain may be taxed at preferential
rates, with the lowest rate available on MOPPRS held more than eighteen months.
There can be no assurance that the Internal Revenue Service ("IRS") will
agree with the Company's treatment of the MOPPRS and it is possible that the IRS
could assert another treatment. For instance, it is possible that the IRS could
seek to treat the MOPPRS as maturing on the Stated Maturity Date. In that event,
because the Interest Rate to Maturity will not be determined until the
Determination Date, the MOPPRS would be treated as having contingent interest
under the Treasury regulations governing debt instruments that provide for
contingent payments (the "Contingent Payment Regulations"). In that event, the
Company would be required to construct a projected payment schedule for the
MOPPRS, based upon the Company's current borrowing costs for comparable
noncontingent debt instruments of the Company, from which an estimated yield on
the MOPPRS would be calculated. A U.S. Holder would be required to include in
income original issue discount in an amount equal to the product of the adjusted
issue price of the MOPPRS at the beginning of each interest accrual period and
the estimated yield of the MOPPRS. In general, for these purposes, a MOPPRS'
adjusted issue price would equal the MOPPRS' issue price increased by the
interest previously accrued on the MOPPRS and reduced by all payments made on
the MOPPRS. As a result of the application of the Contingent Payment
Regulations, it is possible that a U.S. Holder would be required to include
interest in income in excess of actual cash payments received for certain
taxable years.
In addition, the character of any gain or loss, upon the sale or exchange
of a MOPPRS (including a sale pursuant to the mandatory tender on the
Remarketing Date) by a U.S. Holder, will likely differ if the MOPPRS were
treated as contingent payment obligations. Any such taxable gain generally would
be treated as ordinary income. Any such taxable loss generally would be ordinary
to the extent of previously accrued original issue discount, and any excess
would generally be treated as capital loss.
ERISA CONSIDERATIONS
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Code impose certain restrictions on (a) employee benefit plans (as
defined in Section 3(3) of ERISA), (b) plans described in section 4975(e)(I) of
the Code, including individual retirement accounts or Keogh plans, (c) any
entities whose underlying assets include plan assets by reason of a plan's
investment in such entities (each, including (a) and (b), a "Plan") and (d)
persons who have certain specified relationships to such Plans ("Parties-in-
Interest" under ERISA and "Disqualified Persons" under the Code). ERISA also
imposes certain duties on persons who are fiduciaries of Plans subject to ERISA
and prohibits certain transactions between a Plan and Parties-in-Interest or
Disqualified Persons with respect to such Plans.
The Company and the Remarketing Dealer, because of their activities or the
activities of their respective affiliates, may be considered to be
Parties-in-Interest or Disqualified Persons with respect to certain Plans. If
the MOPPRS are acquired by a Plan with respect to which the Company or the
Remarketing Dealer is, or subsequently becomes, a Party-in-Interest or
Disqualified Person, the purchase, holding, or sale of MOPPRS to the Remarketing
Dealer could be deemed to be a direct or indirect violation of the Prohibited
Transaction rules of ERISA and the Code unless such transaction were subject to
one or more statutory or administrative exemptions, such as Prohibited
Transaction Class Exemption ("PTCE") 75-1, which exempts certain transactions
involving employee benefit plans and certain broker-dealers, reporting dealers
and banks; PTCE 90-1, which exempts certain transactions between insurance
company pooled separate accounts and Parties-in-Interest or Disqualified
Persons; PTCE 91-38, which exempts certain transactions between bank collective
investment funds and Parties-in-Interest or Disqualified Persons; PTCE 84-14,
which exempts certain transactions effected on behalf of a Plan by a "qualified
professional asset manager;" PTCE 95-60,
PS-27
<PAGE> 28
which exempts certain transactions between insurance company general accounts
and Parties-in-Interest or Disqualified Persons (issued in response to John
Hancock Life Ins. Co. v. Harris Trust and Sav. Bank, 114 S. Ct. 517 (1993),
ruling that an insurance company's general account may be deemed to include
assets of the Plans investing in products supported by the general account); or
PTCE 96-23, which exempts certain transactions effected on behalf of a Plan by
an "in-house asset manager." Even if the conditions specified in one or more of
these exemptions are met, the scope of relief provided by these exemptions may
not necessarily cover all acts that might be construed as prohibited
transactions.
Accordingly, prior to making an investment in the MOPPRS, a Plan should
determine whether the Company or the Remarketing Dealer is a Party-in-Interest
or Disqualified Person with respect to such Plan and, if so, whether such
transaction is subject to one or more statutory or administrative exemptions,
including those described above.
Prior to making an investment in the MOPPRS, a Plan should consult with its
legal adviser concerning the impact of ERISA and the Code and the potential
consequences of such investment with respect to their specific circumstances.
Moreover, each Plan fiduciary should take into account, among other
considerations, whether the fiduciary has the authority to make the investment
on behalf of the Plan; whether the investment constitutes a direct or indirect
transaction with a Party-in-Interest or a Disqualified Person; and whether under
the general fiduciary standards of investment procedure and diversification an
investment in the MOPPRS is appropriate for the Plan, taking into account, among
other things, the overall investment policy of the Plan and the composition of
the Plan's investment portfolio.
SUPPLEMENTAL PLAN OF DISTRIBUTION
Subject to the terms and conditions set forth in the Distribution Agreement
by and among the Company and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner
& Smith Incorporated, BT Alex. Brown Incorporated, Morgan Stanley & Co.
Incorporated and Salomon Brothers Inc (the "Underwriters") as supplemented by a
terms agreement (together with the Distribution Agreement, the "Distribution
Agreement"), dated as of the date hereof and relating to the MOPPRS, by and
among the Company and the Underwriters, the Company has agreed to sell to each
of the Underwriters, and each of the Underwriters has severally agreed to
purchase, the respective principal amount of MOPPRS set forth opposite its name
below, at a price equal to 102.13% of the principal amount thereof.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITER OF MOPPRS
----------- ----------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated................................... $45,750,000
BT Alex. Brown Incorporated................................. 9,750,000
Morgan Stanley & Co. Incorporated........................... 9,750,000
Salomon Brothers Inc........................................ 9,750,000
-----------
Total.......................................... $75,000,000
===========
</TABLE>
In the Distribution Agreement, the several Underwriters have agreed,
subject to the terms and conditions set forth therein, to purchase all of the
MOPPRS offered hereby if any MOPPRS are purchased. The Underwriters have advised
the Company that the Underwriters propose to offer the MOPPRS from time to time
for sale in negotiated transactions or otherwise, at prices relating to
prevailing market prices determined at the time of sale. The Underwriters may
effect such transactions by selling MOPPRS to or through dealers and such
dealers may receive compensation in the form of underwriting discounts,
concessions or commissions from the Underwriters and any purchasers of MOPPRS
for whom they may act as agent. The Underwriters and any dealers that
participate with the Underwriters in the distribution of the MOPPRS may be
deemed to be underwriters, and any discounts or commissions received by them and
any profit on the resale of MOPPRS by them may be deemed to be underwriting
compensation.
The MOPPRS are a new issue of securities with no established trading
market. The Company has been advised by the Underwriters that the Underwriters
intend to make a market in the MOPPRS, but they are not
PS-28
<PAGE> 29
obligated to do so and may discontinue market making at any time without notice.
No assurance can be given as to the liquidity of the trading market for the
MOPPRS.
The Underwriters are permitted to engage in certain transactions that
maintain or otherwise affect the price of the MOPPRS. Such transactions may
include over-allotment transactions and purchases to cover short positions
created by the Underwriters in connection with the Offering. If the Underwriters
create a short position in the MOPPRS in connection with the Offering, i.e., if
they sell MOPPRS in an aggregate principal amount exceeding that set forth on
the cover page of this Pricing Supplement, the Underwriters may reduce that
short position by purchasing MOPPRS in the open market. In general, purchases of
a security to reduce a short position could cause the price of the security to
be higher than it might be in the absence of such purchases.
Neither the Company nor the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the MOPPRS. In addition, neither the
Company nor the Underwriters makes any representation that the Underwriters will
engage in such transactions or that such transactions, once commenced, will not
be discontinued without notice.
In the ordinary course of business, the Underwriters and their affiliates
have engaged and may in the future engage in investment banking transactions
with the Company and certain of its affiliates.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to make
contribution to certain payments in respect thereof.
PS-29
<PAGE> 30
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED OCTOBER 30, 1997)
$505,500,000
[LOGO] JDN JDN REALTY CORPORATION
MEDIUM-TERM NOTES
DUE NINE MONTHS OR MORE FROM DATE OF ISSUE
---------------------
JDN Realty Corporation (the "Company") may offer from time to time up to
$505,500,000 aggregate initial offering price, or the equivalent thereof in one
or more foreign or composite currencies, of its Medium-Term Notes Due Nine
Months or More From Date of Issue (the "Notes"). Such aggregate initial offering
price is subject to reduction as a result of the sale by the Company of other
Securities described in the accompanying Prospectus. Each Note will mature on
any day nine months or more from the date of issue (the "Stated Maturity Date"),
as specified in the applicable pricing supplement hereto (each, a "Pricing
Supplement"), and may be subject to redemption at the option of the Company or
repayment at the option of the Holder thereof, in each case, in whole or in
part, prior to its Stated Maturity Date, if specified in the applicable Pricing
Supplement. In addition, each Note will be denominated and/or payable in United
States dollars or a foreign or composite currency, as specified in the
applicable Pricing Supplement. The Notes, other than Foreign Currency Notes,
will be issued in minimum denominations of $1,000 and integral multiples
thereof, unless otherwise specified in the applicable Pricing Supplement, while
Foreign Currency Notes will be issued in the minimum denominations specified in
the applicable Pricing Supplement.
The Company may issue Notes that bear interest at fixed rates ("Fixed Rate
Notes") or at floating rates ("Floating Rate Notes"). The applicable Pricing
Supplement will specify whether a Floating Rate Note is a Regular Floating Rate
Note, a Floating Rate/Fixed Rate Note, an Inverse Floating Rate Note or other
Floating Rate Note and whether the rate of interest thereon is determined by
reference to one or more of the CD Rate, the CMT Rate, the Commercial Paper
Rate, the Eleventh District Cost of Funds Rate, the Federal Funds Rate, LIBOR,
the Prime Rate or the Treasury Rate (each, an "Interest Rate Basis"), or any
other interest rate basis or formula, as adjusted by any Spread and/or Spread
Multiplier. Interest on each Floating Rate Note will accrue from its date of
issue and, unless otherwise specified in the applicable Pricing Supplement, will
be payable monthly, quarterly, semiannually or annually in arrears, as specified
in the applicable Pricing Supplement, and on the Maturity Date. Unless otherwise
specified in the applicable Pricing Supplement, the rate of interest on each
Floating Rate Note will be reset daily, weekly, monthly, quarterly, semiannually
or annually, as specified in the applicable Pricing Supplement. Interest on each
Fixed Rate Note will accrue from its date of issue and, unless otherwise
specified in the applicable Pricing Supplement, will be payable semiannually in
arrears on February 1 and August 1 of each year and on the Maturity Date. The
Company may also issue Discount Notes, Indexed Notes and Amortizing Notes as
specified in the applicable Pricing Supplement.
The interest rate, or formula for the determination of the interest rate, if
any, applicable to each Note and the other variable terms thereof will be
established by the Company on the date of issue of such Note and will be
specified in the applicable Pricing Supplement. Interest rates or formulas and
other terms of Notes are subject to change by the Company, but no such change
will affect any Note previously issued or as to which an offer to purchase has
been accepted by the Company.
Each Note will be issued in book-entry form (a "Book-Entry Note") or in fully
registered certificated form (a "Certificated Note"), as specified in the
applicable Pricing Supplement. Each Book-Entry Note will be represented by one
or more fully registered global securities (the "Global Securities") deposited
with or on behalf of The Depository Trust Company (or such other depositary
identified in the applicable Pricing Supplement) (the "Depositary") and
registered in the name of the Depositary or the Depositary's nominee. Interests
in the Global Securities will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary (with respect to its
participants) and the Depositary's participants (with respect to beneficial
owners). Except in limited circumstances, Book-Entry Notes will not be
exchangeable for Certificated Notes.
SEE "RISK FACTORS" COMMENCING ON PAGE S-3 OF THIS PROSPECTUS SUPPLEMENT AND
IN THE COMPANY'S CURRENT REPORT ON FORM 8-K, DATED JANUARY 26, 1998,
INCORPORATED BY REFERENCE INTO THE ACCOMPANYING PROSPECTUS FOR A DISCUSSION OF
CERTAIN RISKS THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE
NOTES OFFERED HEREBY.
---------------------
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 SUPPLEMENT, THE PROSPECTUS OR ANY
SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
=============================================================================================================================
PRICE TO AGENTS' DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(1)(2) COMPANY(1)(3)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Note................................... 100% .125% - .750% 99.875% - 99.250%
- -----------------------------------------------------------------------------------------------------------------------------
Total(4)................................... $505,500,000 $631,875 - $3,791,250 $504,868,125 - $501,708,750
=============================================================================================================================
</TABLE>
(1) Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, BT
Alex. Brown Incorporated, Morgan Stanley & Co. Incorporated and Salomon
Brothers Inc (the "Agents"), individually or in a syndicate, may purchase
Notes, as principal, from the Company for resale to investors and other
purchasers at varying prices relating to prevailing market prices at the
time of resale as determined by the applicable Agent or, if so specified in
the applicable Pricing Supplement, for resale at a fixed offering price.
Unless otherwise specified in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price
equal to 100% of the principal amount thereof less a percentage of the
principal amount equal to the commission applicable to an agency sale (as
described below) of a Note of identical maturity. If agreed to by the
Company and an Agent, such Agent may utilize its reasonable efforts on an
agency basis to solicit offers to purchase the Notes at 100% of the
principal amount thereof, unless otherwise specified in the applicable
Pricing Supplement. The Company will pay a commission to an Agent, ranging
from .125% to .750% of the principal amount of a Note, depending upon its
stated maturity, sold through an Agent. Commissions with respect to Notes
with stated maturities in excess of 30 years that are sold through such
Agent will be negotiated between the Company and such Agent at the time of
such sale. See "Plan of Distribution."
(2) The Company has agreed to indemnify the Agents against, and to provide
contribution with respect to, certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Plan of Distribution."
(3) Before deducting expenses payable by the Company estimated at $500,000.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
---------------------
The Notes are being offered on a continuous basis by the Company to or
through the Agents. Unless otherwise specified in the applicable Pricing
Supplement, the Notes will not be listed on any securities exchange. There is no
assurance that the Notes offered hereby will be sold or, if sold, that there
will be a secondary market for the Notes or liquidity in the secondary market if
one develops. The Company reserves the right to cancel or modify the offer made
hereby without notice. The Company or an Agent, if it solicits the offer on an
agency basis, may reject any offer to purchase Notes in whole or in part. See
"Plan of Distribution."
---------------------
MERRILL LYNCH & CO.
BT ALEX. BROWN
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
---------------------
The date of this Prospectus Supplement is February 5, 1998.
<PAGE> 31
CERTAIN PERSONS PARTICIPATING IN THE OFFERING MADE HEREBY MAY ENGAGE IN
TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE
NOTES, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN
SUCH NOTES, AND THE IMPOSITION OF A PENALTY BID, IN CONNECTION WITH THE
OFFERING. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "PLAN OF DISTRIBUTION."
S-2
<PAGE> 32
RISK FACTORS
This Prospectus Supplement does not describe all of the risks of an
investment in Notes, whether resulting from such Notes being denominated or
payable in or determined by reference to a currency or composite currency other
than United States dollars or to one or more interest rate, currency or other
indices or formulas, or otherwise. The Company and the Agents disclaim any
responsibility to advise prospective investors of such risks as they exist at
the date of this Prospectus Supplement or as they change from time to time.
Prospective investors should consult their own financial and legal advisors as
to the risks entailed by an investment in such Notes and the suitability of
investing in such Notes in light of their particular circumstances. Such Notes
are not an appropriate investment for investors who are unsophisticated with
respect to foreign currency transactions or transactions involving the
applicable interest rate or currency index or other indices or formulas.
Prospective investors should carefully consider, among other factors, the
matters described below.
STRUCTURE RISKS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, if any, to one or more interest rate, currency (including exchange
rates and swap indices between currencies or composite currencies) or other
indices or formulas, either directly or inversely, entails significant risks
that are not associated with similar investments in a conventional fixed rate or
floating rate debt security. Such risks include, without limitation, the
possibility that such indices or formulas may be subject to significant changes,
that no interest will be payable in respect of such Notes or will be payable at
a rate lower than one applicable to a conventional fixed rate or floating rate
debt security issued by the Company at the same time, that repayment of the
principal and/or premium, if any, in respect of such Notes may occur at times
other than that expected by the persons in whose names the Notes are registered
("Holders"), and that the Holders could lose all or a substantial portion of
principal and/or premium, if any, payable with respect to such Notes on the
Maturity Date (as defined under "Description of Notes -- General"). Such risks
depend on a number of interrelated factors, including economic, financial and
political events, over which the Company has no control. Additionally, if the
formula used to determine the amount of principal, premium, if any, and/or
interest, if any, payable with respect to such Notes contains a multiplier or
leverage factor, the effect of any change in the applicable index or indices or
formula or formulas will be magnified. In recent years, values of certain
indices and formulas have been highly volatile and such volatility may be
expected to continue in the future. Fluctuations in the value of any particular
index or formula that have occurred in the past are not necessarily indicative,
however, of fluctuations that may occur in the future.
Any optional redemption feature of Notes might affect the market value of
such Notes. Since the Company may be expected to redeem such Notes when
prevailing interest rates are relatively low, Holders generally will not be able
to reinvest the redemption proceeds in a comparable security at an effective
interest rate as high as the current interest rate on such Notes.
The Notes will not have an established trading market when issued, and
there can be no assurance of a secondary market for the Notes or the liquidity
of the secondary market if one develops. See "Plan of Distribution."
The secondary market, if any, for Notes will be affected by a number of
factors independent of the creditworthiness of the Company and the value of the
applicable index or indices or formula or formulas, including the complexity and
volatility of each such index or formula, the method of calculating the
principal, premium, if any, and/or interest, if any, in respect of such Notes,
the time remaining to the maturity of such Notes, the outstanding amount of such
Notes, any redemption features of such Notes, the amount of other debt
securities linked to such index or formula and the level, direction and
volatility of market interest rates generally. Such factors also will affect the
market value of such Notes. In addition, certain Notes may be designed for
specific investment objectives or strategies and, therefore, may have a more
limited secondary market and experience more price volatility than conventional
debt securities. Holders may not be able to sell such Notes readily or at prices
that will enable them to realize their anticipated yield. No investor should
purchase Notes unless such investor understands and is able to bear the risk
that such Notes may not be
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readily saleable, that the value of such Notes will fluctuate over time and that
such fluctuations may be significant.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes (as defined under "Description of
Notes -- General") entails significant risks that are not associated with a
similar investment in a debt security denominated and payable in United States
dollars. Such risks include, without limitation, the possibility of significant
changes in the rate of exchange between the United States dollar and the
Specified Currency (as defined under "Description of Notes -- General") and the
possibility of the imposition or modification of exchange controls by the
applicable governments or monetary authorities. Such risks generally depend on
factors over which the Company has no control, such as economic, financial and
political events and the supply and demand for the applicable currencies or
composite currencies. In addition, if the formula used to determine the amount
of principal, premium, if any, and/or interest, if any, payable with respect to
Foreign Currency Notes contains a multiplier or leverage factor, the effect of
any change in the applicable currencies or composite currencies will be
magnified. In recent years, rates of exchange between the United States dollar
and foreign or composite currencies have been highly volatile and such
volatility may be expected to continue in the future. Fluctuations in any
particular exchange rate that have occurred in the past are not necessarily
indicative, however, of fluctuations that may occur in the future. Depreciation
of the Specified Currency applicable to a Foreign Currency Note against the
United States dollar would result in a decrease in the United States dollar-
equivalent yield of such Foreign Currency Note, in the United States
dollar-equivalent value of the principal and premium, if any, payable on the
Maturity Date of such Foreign Currency Note, and, generally, in the United
States dollar-equivalent market value of such Foreign Currency Note.
Governments or monetary authorities have imposed from time to time, and may
in the future impose or revise, exchange controls at or prior to the date on
which any payment of principal of, or premium, if any, or interest, if any, on,
a Foreign Currency Note is due, which could affect exchange rates as well as the
availability of the Specified Currency on such date. Even if there are no
exchange controls, it is possible that the Specified Currency would not be
available on the applicable payment date due to other circumstances beyond the
control of the Company. In such cases, the Company will be entitled to satisfy
its obligations in respect of such Foreign Currency Note in United States
dollars. See "Special Provisions Relating to Foreign Currency
Notes -- Availability of Specified Currency."
CREDIT RATINGS
The credit ratings assigned to the Company's medium-term note program may
not reflect the potential impact of all risks related to structure and other
factors on the value of the Notes. Accordingly, prospective investors should
consult their own financial and legal advisors as to the risks entailed by an
investment in the Notes and the suitability of investing in such Notes in light
of their particular circumstances.
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DESCRIPTION OF NOTES
The Notes will be issued as a series of Debt Securities under an Indenture,
dated as of July 15, 1997 as amended, supplemented or modified from time to time
(the "Indenture"), between the Company and First Union National Bank, as trustee
(the "Trustee"). The Indenture is subject to, and governed by, the Trust
Indenture Act of 1939, as amended. The following summary of certain provisions
of the Notes and the Indenture does not purport to be complete and is qualified
in its entirety by reference to the actual provisions of the Notes and the
Indenture. Capitalized terms used but not defined herein shall have the meanings
given to them in the accompanying Prospectus, the Notes or the Indenture, as the
case may be. The term "Debt Securities," as used in this Prospectus Supplement,
refers to all debt securities, including the Notes, issued and issuable from
time to time under the Indenture. The following description of Notes will apply
to each Note offered hereby unless otherwise specified in the applicable Pricing
Supplement. The following description of the Notes supplements, and to the
extent inconsistent therewith, replaces, the description of the general terms
and provisions of the Debt Securities set forth in the Prospectus, to which
reference is hereby made.
GENERAL
All Debt Securities, including the Notes, issued and to be issued under the
Indenture will be unsecured general obligations of the Company and will rank
pari passu with all other unsecured and unsubordinated indebtedness of the
Company from time to time outstanding. The Indenture does not limit the
aggregate initial offering price of Debt Securities that may be issued
thereunder and Debt Securities may be issued thereunder from time to time in one
or more series up to the aggregate initial offering price from time to time
authorized by the Company for each series. As of the date of this Prospectus
Supplement, the Company has issued and outstanding under the Indenture
$75,000,000 aggregate principal amount of 6.80% Notes due August 1, 2004, and
$85,000,000 aggregate principal amount of 6.95% Notes due August 1, 2007. The
Notes will be effectively subordinated to mortgages and other secured
indebtedness of the Company. As of December 31, 1997, such secured indebtedness
aggregated approximately $13.6 million and the Company's unsecured and
unsubordinated indebtedness aggregated approximately $203.0 million. The Company
may, from time to time, without the consent of the holders of the Notes, provide
for the issuance of Notes or other Debt Securities under the Indenture in
addition to the $505,500,000 aggregate initial offering price of Notes offered
hereby.
The Notes are currently limited to up to $505,500,000 aggregate initial
offering price, or the equivalent thereof in one or more foreign or composite
currencies. Each Note will mature on any day nine months or more from its date
of issue (the "Stated Maturity Date"), as specified in the applicable Pricing
Supplement, unless the principal thereof (or any installment of principal
thereof) becomes due and payable prior to the Stated Maturity Date, whether by
the declaration of acceleration of maturity, notice of redemption at the option
of the Company, notice of the Holder's option to elect repayment or otherwise
(the Stated Maturity Date or such prior date, as the case may be, is herein
referred to as the "Maturity Date" with respect to the principal of such Note
repayable on such date). Unless otherwise specified in the applicable Pricing
Supplement, interest-bearing Notes will either be Fixed Rate Notes or Floating
Rate Notes, as specified in the applicable Pricing Supplement. The Company may
also issue Discount Notes, Indexed Notes and Amortizing Notes (as such terms are
hereinafter defined).
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will be denominated in, and payments of principal, premium, if any, and/or
interest, if any, in respect thereof will be made in, United States dollars. The
Notes also may be denominated in, and payments of principal, premium, if any,
and/or interest, if any, in respect thereof may be made in, one or more foreign
or composite currencies ("Foreign Currency Notes"). See "Special Provisions
Relating to Foreign Currency Notes -- Payment of Principal, Premium, if any, and
Interest, if any." The currency or composite currency in which a particular Note
is denominated (or, if such currency or composite currency is no longer legal
tender for the payment of public and private debts, such other currency or
composite currency of the relevant country which is then legal tender for the
payment of such debts) is herein referred to as the "Specified Currency" with
respect to such Note.
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References herein to "United States dollars," "U.S. dollars" or "$" are to the
lawful currency of the United States of America (the "United States").
Unless otherwise specified in the applicable Pricing Supplement, purchasers
are required to pay for the Notes in the applicable Specified Currencies. At the
present time, there are limited facilities in the United States for the
conversion of United States dollars into foreign or composite currencies and
vice versa, and commercial banks do not generally offer non-United States dollar
checking or savings account facilities in the United States. The Agent from or
through which a Foreign Currency Note is purchased will be prepared to arrange
for the conversion of United States dollars into the Specified Currency in order
to enable the purchaser to pay for such Foreign Currency Note, provided that a
request is made to such Agent on or prior to the fifth Business Day (as
hereinafter defined) preceding the date of delivery of such Foreign Currency
Note, or by such other day as determined by such Agent. Each such conversion
will be made by such Agent on such terms and subject to such conditions,
limitations and charges as such Agent may from time to time establish in
accordance with its regular foreign exchange practices. All costs of exchange
will be borne by the purchaser of each such Foreign Currency Note. See "Special
Provisions Relating to Foreign Currency Notes."
Interest rates offered by the Company with respect to the Notes may differ
depending upon, among other factors, the aggregate principal amount of Notes
purchased in any single transaction. Notes with different variable terms other
than interest rates may also be offered concurrently to different investors.
Interest rates or formulas and other terms of Notes are subject to change by the
Company from time to time, but no such change will affect any Note previously
issued or as to which an offer to purchase has been accepted by the Company.
Each Note will be issued as a Book-Entry Note represented by one or more
fully registered Global Securities or as a fully registered Certificated Note.
The minimum denominations of each Note other than a Foreign Currency Note will
be $1,000 and integral multiples thereof, unless otherwise specified in the
applicable Pricing Supplement, while the minimum denominations of each Foreign
Currency Note will be specified in the applicable Pricing Supplement.
Payments of principal of, and premium, if any, and interest, if any, on,
Book-Entry Notes will be made by the Company through the Trustee to the
Depositary. See "-- Book-Entry Notes." In the case of Certificated Notes,
payment of principal and premium, if any, due on the Maturity Date will be made
in immediately available funds upon presentation and surrender thereof (and, in
the case of any repayment on an Optional Repayment Date (as hereinafter
defined), upon submission of a duly completed election form in accordance with
the provisions described below) at the office or agency maintained by the
Company for such purpose in the Borough of Manhattan, The City of New York,
currently the corporate trust office of the Trustee located at 40 Broad Street,
Suite 550, New York, New York 10004. Payment of interest, if any, due on the
Maturity Date of a Certificated Note will be made to the person to whom payment
of the principal thereof and premium, if any, thereon shall be made. Payment of
interest, if any, due on a Certificated Note on any Interest Payment Date (as
hereinafter defined) other than the Maturity Date will be made at the office or
agency referred to above maintained by the Company for such purposes or, at the
option of the Company, may be made by check mailed to the address of the Holder
entitled thereto as such address shall appear in the Security Register of the
Company. Notwithstanding the foregoing, a Holder of $10,000,000 (or, if the
Specified Currency is other than United States dollars, the equivalent thereof
in such Specified Currency) or more in aggregate principal amount of
Certificated Notes (whether having identical or different terms and provisions)
will be entitled to receive interest payments, if any, on any Interest Payment
Date other than the Maturity Date by wire transfer of immediately available
funds if appropriate wire transfer instructions have been received in writing by
the Trustee not less than 15 days prior to such Interest Payment Date. Any such
wire transfer instructions received by the Trustee shall remain in effect until
revoked by such Holder. For special payment terms applicable to Foreign Currency
Notes, see "Special Provisions Relating to Foreign Currency Notes -- Payment of
Principal, Premium, if any, and Interest, if any."
As used herein, "Business Day" means any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which banking institutions
are authorized or required by law, regulation or executive order to close in The
City of New York; provided, however, that, with respect to Foreign Currency
Notes, such
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day is also not a day on which banking institutions are authorized or required
by law, regulation or executive order to close in the Principal Financial Center
(as hereinafter defined) of the country issuing the Specified Currency (unless
the Specified Currency is European Currency Units ("ECU"), in which case such
day is also not a day that appears as an ECU non-settlement day on the display
designated as "ISDE" on the Reuter Monitor Money Rates Service (or is not a day
designated as an ECU non-settlement day by the ECU Banking Association) or, if
ECU non-settlement days do not appear on that page (and are not so designated),
a day that is not a day on which payments in ECU cannot be settled in the
international interbank market); provided, further, that, with respect to Notes
as to which LIBOR is an applicable Interest Rate Basis, such day is also a
London Business Day (as hereinafter defined). "London Business Day" means a day
on which dealings in the Designated LIBOR Currency (as hereinafter defined) are
transacted in the London interbank market.
"Principal Financial Center" means (i) the capital city of the country
issuing the Specified Currency (except as described in the immediately preceding
paragraph with respect to ECU) or (ii) the capital city of the country to which
the Designated LIBOR Currency, if applicable, relates (or, in the case of ECU,
Luxembourg), except, in each case, that with respect to United States dollars,
Australian dollars, Canadian dollars, Deutsche marks, Dutch guilders, Italian
lire and Swiss francs, the "Principal Financial Center" shall be The City of New
York, Sydney, Toronto, Frankfurt, Amsterdam, Milan (solely in the case of clause
(i) above) and Zurich, respectively.
Book-Entry Notes may be transferred or exchanged only through the
Depositary. See "-- Book-Entry Notes." Registration of transfer or exchange of
Certificated Notes will be made at the office or agency maintained by the
Company for such purpose in the Borough of Manhattan, The City of New York,
currently the corporate trust office of the Trustee located at 40 Broad Street,
Suite 550, New York, New York, 10004. No service charge will be made by the
Company or the Trustee for any such registration of transfer or exchange of
Notes, but the Company may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith (other
than exchanges pursuant to the Indenture not involving any transfer).
The defeasance and covenant defeasance provisions contained in the
Indenture shall apply to the Notes.
REDEMPTION AT THE OPTION OF THE COMPANY
Unless otherwise specified in the applicable Pricing Supplement, the Notes
will not be subject to any sinking fund. The Notes will be redeemable at the
option of the Company prior to the Stated Maturity Date only if an Initial
Redemption Date is specified in the applicable Pricing Supplement. If so
specified, the Notes will be subject to redemption at the option of the Company
on any date on and after the applicable Initial Redemption Date in whole or from
time to time in part in increments of $1,000 or such other minimum denomination
specified in such Pricing Supplement (provided that any remaining principal
amount thereof shall be at least $1,000 or such other minimum denomination), at
the applicable Redemption Price (as hereinafter defined), together with unpaid
interest accrued thereon to the date of redemption, on written notice given to
the Holders thereof not more than 60 nor less than 30 calendar days prior to the
date of redemption and in accordance with the provisions of the Indenture.
"Redemption Price," with respect to a Note, means an amount equal to the Initial
Redemption Percentage specified in the applicable Pricing Supplement (as
adjusted by the Annual Redemption Percentage Reduction, if applicable)
multiplied by the unpaid principal amount to be redeemed. The Initial Redemption
Percentage, if any, applicable to a Note shall decline at each anniversary of
the Initial Redemption Date by an amount equal to the applicable Annual
Redemption Percentage Reduction, if any, until the Redemption Price is equal to
100% of the unpaid principal amount to be redeemed. For a discussion of the
redemption of Discount Notes, see "-- Discount Notes."
REPAYMENT AT THE OPTION OF THE HOLDER
The Notes will be repayable by the Company at the option of the Holders
thereof prior to the Stated Maturity Date only if one or more Optional Repayment
Dates are specified in the applicable Pricing Supplement. If so specified, the
Notes will be subject to repayment at the option of the Holders thereof on any
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Optional Repayment Date in whole or from time to time in part in increments of
$1,000 or such other minimum denomination specified in the applicable Pricing
Supplement (provided that any remaining principal amount thereof shall be at
least $1,000 or such other minimum denomination), at a repayment price equal to
100% of the unpaid principal amount to be repaid, together with unpaid interest
accrued thereon to the date of repayment, unless such Note is a Discount Note,
in which case the applicable Pricing Supplement will specify the amount payable
upon such repayment. For any Note to be repaid, such Note must be received,
together with the form thereon entitled "Option to Elect Repayment" duly
completed, by the Trustee at its office maintained for such purpose in the
Borough of Manhattan, The City of New York, currently the corporate trust office
of the Trustee located at 40 Broad Street, Suite 550, New York, New York 10004,
not more than 60 nor less than 30 calendar days prior to the applicable Optional
Repayment Date. Exercise of such repayment option by the Holder will be
irrevocable. For a discussion of the repayment of Discount Notes, see
"-- Discount Notes."
Only the Depositary may exercise the repayment option in respect of Global
Securities representing Book-Entry Notes. Accordingly, Beneficial Owners (as
hereinafter defined) of Global Securities that desire to have all or any portion
of the Book-Entry Notes represented by such Global Securities repaid must
instruct the Participant (as hereinafter defined) through which they own their
interest to direct the Depositary to exercise the repayment option on their
behalf by delivering the related Global Security and duly completed election
form to the Trustee as aforesaid. In order to ensure that such Global Security
and election form are received by the Trustee on a particular day, the
applicable Beneficial Owner must so instruct the Participant through which it
owns its interest before such Participant's deadline for accepting instructions
for that day. Different firms may have different deadlines for accepting
instructions from their customers. Accordingly, Beneficial Owners should consult
the Participants through which they own their interest for the respective
deadlines for such Participants. All instructions given to Participants from
Beneficial Owners of Global Securities relating to the option to elect repayment
shall be irrevocable. In addition, at the time such instructions are given, each
such Beneficial Owner shall cause the Participant through which it owns its
interest to transfer such Beneficial Owner's interest in the Global Security or
Securities representing the related Book-Entry Notes, on the Depositary's
records, to the Trustee. See "-- Book-Entry Notes."
If applicable, the Company will comply with the requirements of Section
14(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and the rules promulgated thereunder, and any other securities laws or
regulations in connection with any such repayment.
The Company may at any time purchase Notes at any price or prices in the
open market or otherwise. Notes so purchased by the Company may, at the
discretion of the Company, be held, resold or surrendered to the Trustee for
cancellation.
INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement, each
interest-bearing Note will bear interest from its date of issue at the rate per
annum, in the case of a Fixed Rate Note, or pursuant to the interest rate
formula, in the case of a Floating Rate Note, in each case as specified in the
applicable Pricing Supplement, until the principal thereof is paid or duly made
available for payment. Unless otherwise specified in the applicable Pricing
Supplement, interest payments in respect of Fixed Rate Notes and Floating Rate
Notes will be made in an amount equal to the interest accrued from and including
the immediately preceding Interest Payment Date in respect of which interest has
been paid or duly made available for payment (or from and including the date of
issue, if no interest has been paid or duly made available for payment) to but
excluding the applicable Interest Payment Date or the Maturity Date, as the case
may be (each, an "Interest Period").
Interest on Fixed Rate Notes and Floating Rate Notes will be payable in
arrears on each Interest Payment Date and on the Maturity Date. Unless otherwise
specified in the applicable Pricing Supplement, the first payment of interest on
any such Note originally issued between a Record Date (as hereinafter defined)
and the related Interest Payment Date will be made on the Interest Payment Date
immediately following the
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next succeeding Record Date to the Holder on such next succeeding Record Date.
Unless otherwise specified in the applicable Pricing Supplement, a "Record Date"
shall be the fifteenth calendar day (whether or not a Business Day) immediately
preceding the related Interest Payment Date.
Fixed Rate Notes
Interest on Fixed Rate Notes will be payable on February 1 and August 1 of
each year or on such other date(s) specified in the applicable Pricing
Supplement (each, an "Interest Payment Date" with respect to Fixed Rate Notes)
and on the Maturity Date. Unless otherwise specified in the applicable Pricing
Supplement, interest on Fixed Rate Notes will be computed on the basis of a
360-day year of twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note
falls on a day that is not a Business Day, the required payment of principal,
premium, if any, and/or interest will be made on the next succeeding Business
Day as if made on the date such payment was due, and no interest will accrue on
such payment for the period from and after such Interest Payment Date or the
Maturity Date, as the case may be, to the date of such payment on the next
succeeding Business Day.
Floating Rate Notes
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds Rate,
(vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such other
Interest Rate Basis or interest rate formula as may be specified in the
applicable Pricing Supplement. The applicable Pricing Supplement will specify
certain terms with respect to which each Floating Rate Note is being delivered,
including: whether such Floating Rate Note is a "Regular Floating Rate Note," a
"Floating Rate/Fixed Rate Note," an "Inverse Floating Rate Note," or other
Floating Rate Note, the Fixed Rate Commencement Date, if applicable, Fixed
Interest Rate, if applicable, Interest Rate Basis or Bases, Initial Interest
Rate, if any, Initial Interest Reset Date, Interest Reset Dates, Interest
Payment Dates, Index Maturity, Maximum Interest Rate and/or Minimum Interest
Rate, if any, and Spread and/or Spread Multiplier, if any, as such terms are
defined below. If one or more of the applicable Interest Rate Bases is LIBOR or
the CMT Rate, the applicable Pricing Supplement will also specify the Designated
LIBOR Currency and Designated LIBOR Page or the Designated CMT Maturity Index
and Designated CMT Telerate Page, respectively, as such terms are defined below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note" or an "Inverse Floating Rate Note," or as having an
Addendum attached or having "Other Provisions; Addenda" apply, in each case
relating to a different interest rate formula, such Floating Rate Note will
be designated as a "Regular Floating Rate Note" and, except as described
below or in the applicable Pricing Supplement, will bear interest at the
rate determined by reference to the applicable Interest Rate Basis or Bases
(a) plus or minus the applicable Spread, if any, and/or (b) multiplied by
the applicable Spread Multiplier, if any. Commencing on the Initial
Interest Reset Date, the rate at which interest on such Regular Floating
Rate Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that the interest rate in effect for the period, if any,
from the date of issue to the Initial Interest Reset Date will be the
Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating
Rate/Fixed Rate Note," then, except as described below or in the applicable
Pricing Supplement, such Floating Rate Note will bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a)
plus or minus the applicable Spread, if any, and/or (b) multiplied by the
applicable Spread Multiplier, if any. Commencing on the Initial Interest
Reset Date, the rate at which interest on such Floating Rate/Fixed Rate
Note shall be payable shall be reset as of each Interest Reset Date;
provided, however, that (y) the interest rate in effect for the period, if
any, from the date of issue to the Initial Interest Reset Date will be the
Initial
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Interest Rate and (z) the interest rate in effect for the period commencing
on the Fixed Rate Commencement Date to the Maturity Date shall be the Fixed
Interest Rate, if such rate is specified in the applicable Pricing
Supplement or, if no such Fixed Interest Rate is specified, the interest
rate in effect thereon on the day immediately preceding the Fixed Rate
Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating
Rate Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the Fixed
Interest Rate minus the rate determined by reference to the applicable
Interest Rate Basis or Bases (a) plus or minus the applicable Spread, if
any, and/or (b) multiplied by the applicable Spread Multiplier, if any;
provided, however, that, unless otherwise specified in the applicable
Pricing Supplement, the interest rate thereon will not be less than zero.
Commencing on the Initial Interest Reset Date, the rate at which interest
on such Inverse Floating Rate Note shall be payable shall be reset as of
each Interest Reset Date; provided, however, that the interest rate in
effect for the period, if any, from the date of issue to the Initial
Interest Reset Date will be the Initial Interest Rate.
The "Spread" is the number of basis points to be added to or subtracted
from the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest Rate
Basis or Bases will be multiplied to determine the applicable interest rate on
such Floating Rate Note. The "Index Maturity" is the period to maturity of the
instrument or obligation with respect to which the related Interest Rate Basis
or Bases will be calculated.
Unless otherwise specified in the applicable Pricing Supplement, the
interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Pricing Supplement, the interest rate in effect on each day shall
be (i) if such day is an Interest Reset Date, the interest rate determined as of
the Interest Determination Date (as hereinafter defined) immediately preceding
such Interest Reset Date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
The applicable Pricing Supplement will specify whether the rate of interest
on the related Floating Rate Note will be reset daily, weekly, monthly,
quarterly, semiannually or annually or on such other specified basis (each, an
"Interest Reset Period") and the dates on which such rate of interest will be
reset (each, an "Interest Reset Date"). Unless otherwise specified in the
applicable Pricing Supplement, the Interest Reset Dates will be, in the case of
Floating Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating Rate
Notes as to which the Eleventh District Cost of Funds Rate is an applicable
Interest Rate Basis, which will reset on the first calendar day of the month);
(iv) quarterly, the third Wednesday of March, June, September and December of
each year; (v) semiannually, the third Wednesday of the two months specified in
the applicable Pricing Supplement; and (vi) annually, the third Wednesday of the
month specified in the applicable Pricing Supplement; provided however, that,
with respect to Floating Rate/Fixed Rate Notes, the rate of interest thereon
will not reset after the applicable Fixed Rate Commencement Date. If any
Interest Reset Date for any Floating Rate Note would otherwise be a day that is
not a Business Day, such Interest Reset Date will be postponed to the next
succeeding Business Day, except that in the case of a Floating Rate Note as to
which LIBOR is an applicable Interest Rate Basis and such Business Day falls in
the next succeeding calendar month, such Interest Reset Date will be the
immediately preceding Business Day.
The interest rate applicable to each Interest Reset Period commencing on
the related Interest Reset Date will be the rate determined by the Calculation
Agent as of the applicable Interest Determination Date and calculated on or
prior to the Calculation Date (as hereinafter defined), except with respect to
LIBOR and the Eleventh District Cost of Funds Rate, which will be calculated on
such Interest Determination Date. The "Interest Determination Date" with respect
to the CD Rate, the CMT Rate, the Commercial Paper Rate, the Federal Funds Rate
and the Prime Rate will be the second Business Day immediately preceding the
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applicable Interest Reset Date; the "Interest Determination Date" with respect
to the Eleventh District Cost of Funds Rate will be the last working day of the
month immediately preceding the applicable Interest Reset Date on which the
Federal Home Loan Bank of San Francisco (the "FHLB of San Francisco") publishes
the Index (as hereinafter defined); and the "Interest Determination Date" with
respect to LIBOR will be the second London Business Day immediately preceding
the applicable Interest Reset Date, unless the Designated LIBOR Currency is
British pounds sterling, in which case the "Interest Determination Date" will be
the applicable Interest Reset Date. With respect to the Treasury Rate, the
"Interest Determination Date" will be the day in the week in which the
applicable Interest Reset Date falls on which day Treasury Bills (as hereinafter
defined) are normally auctioned (Treasury Bills are normally sold at an auction
held on Monday of each week, unless that day is a legal holiday, in which case
the auction is normally held on the following Tuesday, except that such auction
may be held on the preceding Friday); provided, however, that if an auction is
held on the Friday of the week preceding the applicable Interest Reset Date, the
"Interest Determination Date" will be such preceding Friday; provided, further,
that if the Interest Determination Date would otherwise fall on an Interest
Reset Date, then such Interest Reset Date will be postponed to the next
succeeding Business Day. The "Interest Determination Date" pertaining to a
Floating Rate Note the interest rate of which is determined by reference to two
or more Interest Rate Bases will be the most recent Business Day which is at
least two Business Days prior to the applicable Interest Reset Date for such
Floating Rate Note on which each Interest Rate Basis is determinable. Each
Interest Rate Basis will be determined as of such date, and the applicable
interest rate will take effect on the applicable Interest Reset Date.
Notwithstanding the foregoing, a Floating Rate Note may also have either or
both of the following: (i) a Maximum Interest Rate, or ceiling, that may accrue
during any Interest Period and (ii) a Minimum Interest Rate, or floor, that may
accrue during any Interest Period. In addition to any Maximum Interest Rate that
may apply to any Floating Rate Note, the interest rate on Floating Rate Notes
will in no event be higher than the maximum rate permitted by New York law, as
the same may be modified by United States law of general application.
Except as provided below or in the applicable Pricing Supplement, interest
will be payable, in the case of Floating Rate Notes which reset: (i) daily,
weekly or monthly, on the third Wednesday of each month or on the third
Wednesday of March, June, September and December of each year, as specified in
the applicable Pricing Supplement; (ii) quarterly, on the third Wednesday of
March, June, September and December of each year; (iii) semiannually, on the
third Wednesday of the two months of each year specified in the applicable
Pricing Supplement; and (iv) annually, on the third Wednesday of the month of
each year specified in the applicable Pricing Supplement (each, an "Interest
Payment Date" with respect to Floating Rate Notes) and, in each case, on the
Maturity Date. If any Interest Payment Date other than the Maturity Date for any
Floating Rate Note would otherwise be a day that is not a Business Day, such
Interest Payment Date will be postponed to the next succeeding Business Day,
except that in the case of a Floating Rate Note as to which LIBOR is an
applicable Interest Rate Basis and such Business Day falls in the next
succeeding calendar month, such Interest Payment Date will be the immediately
preceding Business Day. If the Maturity Date of a Floating Rate Note falls on a
day that is not a Business Day, the required payment of principal, premium, if
any, and interest will be made on the next succeeding Business Day as if made on
the date such payment was due, and no interest will accrue on such payment for
the period from and after the Maturity Date to the date of such payment on the
next succeeding Business Day.
All percentages resulting from any calculation on Floating Rate Notes will
be rounded to the nearest one hundred-thousandth of a percentage point, with
five-one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded, in
the case of United States dollars, to the nearest cent or, in the case of a
foreign or composite currency, to the nearest unit (with one-half cent or unit
being rounded upwards).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the applicable Interest Period. Unless otherwise specified in the
applicable Pricing Supplement, the interest factor for each such day will be
computed by dividing the interest rate applicable to
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such day by 360, in the case of Floating Rate Notes for which an applicable
Interest Rate Basis is the CD Rate, the Commercial Paper Rate, the Eleventh
District Cost of Funds Rate, the Federal Funds Rate, LIBOR or the Prime Rate, or
by the actual number of days in the year in the case of Floating Rate Notes for
which an applicable Interest Rate Basis is the CMT Rate or the Treasury Rate.
Unless otherwise specified in the applicable Pricing Supplement, the interest
factor for Floating Rate Notes for which the interest rate is calculated with
reference to two or more Interest Rate Bases will be calculated in each period
in the same manner as if only the applicable Interest Rate Basis specified in
the applicable Pricing Supplement applied.
Unless otherwise specified in the applicable Pricing Supplement, First
Union National Bank will be the "Calculation Agent." Upon request of the Holder
of any Floating Rate Note, the Calculation Agent will disclose the interest rate
then in effect and, if determined, the interest rate that will become effective
as a result of a determination made for the next succeeding Interest Reset Date
with respect to such Floating Rate Note. Unless otherwise specified in the
applicable Pricing Supplement, the "Calculation Date," if applicable, pertaining
to any Interest Determination Date will be the earlier of (i) the tenth calendar
day after such Interest Determination Date or, if such day is not a Business
Day, the next succeeding Business Day or (ii) the Business Day immediately
preceding the applicable Interest Payment Date or the Maturity Date, as the case
may be.
Unless otherwise specified in the applicable Pricing Supplement, the
Calculation Agent shall determine each Interest Rate Basis in accordance with
the following provisions.
CD Rate. Unless otherwise specified in the applicable Pricing Supplement,
"CD Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CD Rate (a "CD Rate Interest Determination Date"), the rate on such date for
negotiable United States dollar certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement as published by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication ("H.15(519)")
under the heading "CDs (Secondary Market)," or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such CD Rate
Interest Determination Date for negotiable United States dollar certificates of
deposit of the Index Maturity specified in the applicable Pricing Supplement as
published by the Federal Reserve Bank of New York in its daily statistical
release "Composite 3:30 P.M. Quotations for U.S. Government Securities" or any
successor publication ("Composite Quotations") under the heading "Certificates
of Deposit." If such rate is not yet published in either H.15(519) or Composite
Quotations by 3:00 P.M., New York City time, on the related Calculation Date,
then the CD Rate on such CD Rate Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean of the secondary market
offered rates as of 10:00 A.M., New York City time, on such CD Rate Interest
Determination Date, of three leading nonbank dealers in negotiable United States
dollar certificates of deposit in The City of New York (which may include the
Agents or their affiliates) selected by the Calculation Agent for negotiable
United States dollar certificates of deposit of major United States money center
banks for negotiable certificates of deposit with a remaining maturity closest
to the Index Maturity specified in the applicable Pricing Supplement in an
amount that is representative for a single transaction in that market at that
time; provided, however, that if the dealers so selected by the Calculation
Agent are not quoting as mentioned in this sentence, the CD Rate determined as
of such CD Rate Interest Determination Date will be the CD Rate in effect on
such CD Rate Interest Determination Date.
CMT Rate. Unless otherwise specified in the applicable Pricing Supplement,
"CMT Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CMT Rate (a "CMT Rate Interest Determination Date"), the rate displayed on
the Designated CMT Telerate Page under the caption "Treasury Constant
Maturities . . . Federal Reserve Board Release H.15 . . . Mondays Approximately
3:45 P.M.," under the column for the Designated CMT Maturity Index for (i) if
the Designated CMT Telerate Page is 7055, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
weekly or monthly average, as specified in the applicable Pricing Supplement,
for the week or the month, as applicable, ended immediately preceding the week
or the month, as applicable, in which the related CMT Rate Interest
Determination Date falls. If such rate is no longer displayed on the relevant
page or is not displayed by
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3:00 P.M., New York City time, on the related Calculation Date, then the CMT
Rate for such CMT Rate Interest Determination Date will be such treasury
constant maturity rate for the Designated CMT Maturity Index as published in
H.15(519). If such rate is no longer published or is not published by 3:00 P.M.,
New York City time, on the related Calculation Date, then the CMT Rate on such
CMT Rate Interest Determination Date will be such treasury constant maturity
rate for the Designated CMT Maturity Index (or other United States Treasury rate
for the Designated CMT Maturity Index) for the CMT Rate Interest Determination
Date with respect to such Interest Reset Date as may then be published by either
the Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in H.15(519). If such information is not provided by 3:00 P.M.,
New York City time, on the related Calculation Date, then the CMT Rate on the
CMT Rate Interest Determination Date will be calculated by the Calculation Agent
and will be a yield to maturity, based on the arithmetic mean of the secondary
market offered rates as of approximately 3:30 P.M., New York City time, on such
CMT Rate Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers in
The City of New York (which may include the Agents or their affiliates) (each, a
"Reference Dealer") selected by the Calculation Agent (from five such Reference
Dealers selected by the Calculation Agent and eliminating the highest quotation
(or, in the event of equality, one of the highest) and the lowest quotation (or,
in the event of equality, one of the lowest)), for the most recently issued
direct noncallable fixed rate obligations of the United States ("Treasury
Notes") with an original maturity of approximately the Designated CMT Maturity
Index and a remaining term to maturity of not less than such Designated CMT
Maturity Index minus one year. If the Calculation Agent is unable to obtain
three such Treasury Note quotations, the CMT Rate on such CMT Rate Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity based on the arithmetic mean of the secondary market offered
rates as of approximately 3:30 P.M., New York City time, on such CMT Rate
Interest Determination Date of three Reference Dealers in The City of New York
(from five such Reference Dealers selected by the Calculation Agent and
eliminating the highest quotation (or, in the event of equality, one of the
highest) and the lowest quotation (or, in the event of equality, one of the
lowest)), for Treasury Notes with an original maturity of the number of years
that is the next highest to the Designated CMT Maturity Index and a remaining
term to maturity closest to the Designated CMT Maturity Index and in an amount
of at least $100 million. If three or four (and not five) of such Reference
Dealers are quoting as described above, then the CMT Rate will be based on the
arithmetic mean of the offered rates obtained and neither the highest nor the
lowest of such quotes will be eliminated; provided, however, that if fewer than
three Reference Dealers so selected by the Calculation Agent are quoting as
mentioned herein, the CMT Rate determined as of such CMT Rate Interest
Determination Date will be the CMT Rate in effect on such CMT Rate Interest
Determination Date. If two Treasury Notes with an original maturity as described
in the second preceding sentence have remaining terms to maturity equally close
to the Designated CMT Maturity Index, the Calculation Agent will obtain
quotations for the Treasury Note with the shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service (or any successor service) on the page specified in the applicable
Pricing Supplement (or any other page as may replace such page on such service)
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519). If no such page is specified in the applicable Pricing Supplement,
the Designated CMT Telerate Page shall be 7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30 years)
specified in the applicable Pricing Supplement with respect to which the CMT
Rate will be calculated or, if no such maturity is specified in the applicable
Pricing Supplement, two years.
Commercial Paper Rate. Unless otherwise specified in the applicable
Pricing Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Commercial Paper Rate (a "Commercial Paper
Rate Interest Determination Date"), the Money Market Yield (as hereinafter
defined) on such date of the
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rate for commercial paper having the Index Maturity specified in the applicable
Pricing Supplement as published in H.15(519) under the heading "Commercial
Paper-Nonfinancial." If such rate is not published by 3:00 P.M., New York City
time, on the related Calculation Date, then the Commercial Paper Rate on such
Commercial Paper Rate Interest Determination Date will be the Money Market Yield
of the rate for commercial paper having the Index Maturity specified in the
applicable Pricing Supplement as published in Composite Quotations under the
heading "Commercial Paper" (with an Index Maturity of one month or three months
being deemed to be equivalent to an Index Maturity of 30 days or 90 days,
respectively). If such rate is not yet published in either H.15(519) or
Composite Quotations by 3:00 P.M., New York City time, on the related
Calculation Date, then the Commercial Paper Rate on such Commercial Paper Rate
Interest Determination Date will be calculated by the Calculation Agent and will
be the Money Market Yield of the arithmetic mean of the offered rates at
approximately 11:00 A.M., New York City time, on such Commercial Paper Rate
Interest Determination Date of three leading dealers of commercial paper in The
City of New York (which may include the Agents or their affiliates) selected by
the Calculation Agent for commercial paper having the Index Maturity specified
in the applicable Pricing Supplement placed for an industrial issuer whose bond
rating is "Aa," or the equivalent, from a nationally recognized statistical
rating organization; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Commercial
Paper Rate determined as of such Commercial Paper Rate Interest Determination
Date will be the Commercial Paper Rate in effect on such Commercial Paper Rate
Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated
in accordance with the following formula:
<TABLE>
<S> <C> <C> <C> <C>
D X 360
Money Market Yield = ------------- X 100
360 - (D X M)
</TABLE>
where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the applicable Interest Reset Period.
Eleventh District Cost of Funds Rate. Unless otherwise specified in the
applicable Pricing Supplement, "Eleventh District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to a Floating Rate Note
for which the interest rate is determined with reference to the Eleventh
District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate Interest
Determination Date"), the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Rate Interest Determination Date falls, as set
forth under the caption "11th District" on Telerate Page 7058 as of 11:00 A.M.,
San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on such
Eleventh District Cost of Funds Rate Interest Determination Date, then the
Eleventh District Cost of Funds Rate on such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month immediately preceding
such Eleventh District Cost of Funds Rate Interest Determination Date. If the
FHLB of San Francisco fails to announce the Index on or prior to such Eleventh
District Cost of Funds Rate Interest Determination Date for the calendar month
immediately preceding such Eleventh District Cost of Funds Rate Interest
Determination Date, the Eleventh District Cost of Funds Rate determined as of
such Eleventh District Cost of Funds Rate Interest Determination Date will be
the Eleventh District Cost of Funds Rate in effect on such Eleventh District
Cost of Funds Rate Interest Determination Date.
Federal Funds Rate. Unless otherwise specified in the applicable Pricing
Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for United States dollar
federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date as published in
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Composite Quotations under the heading "Federal Funds/Effective Rate." If such
rate is not published in either H.15(519) or Composite Quotations by 3:00 P.M.,
New York City time, on the related Calculation Date, then the Federal Funds Rate
on such Federal Funds Rate Interest Determination Date will be calculated by the
Calculation Agent and will be the arithmetic mean of the rates for the last
transaction in overnight United States dollar federal funds arranged by three
leading brokers of federal funds transactions in The City of New York (which may
include the Agents or their affiliates) selected by the Calculation Agent prior
to 9:00 A.M., New York City time, on such Federal Funds Rate Interest
Determination Date; provided, however, that if the brokers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the Federal
Funds Rate determined as of such Federal Funds Rate Interest Determination Date
will be the Federal Funds Rate in effect on such Federal Funds Rate Interest
Determination Date.
LIBOR. Unless otherwise specified in the applicable Pricing Supplement,
"LIBOR" means the rate determined in accordance with the following provisions:
(i) With respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference
to LIBOR (a "LIBOR Interest Determination Date"), LIBOR will be either: (a)
if "LIBOR Reuters" is specified in the applicable Pricing Supplement, the
arithmetic mean of the offered rates (unless the Designated LIBOR Page by
its terms provides only for a single rate, in which case such single rate
shall be used) for deposits in the Designated LIBOR Currency having the
Index Maturity specified in such Pricing Supplement, commencing on the
applicable Interest Reset Date, that appear (or, if only a single rate is
required as aforesaid, appears) on the Designated LIBOR Page as of 11:00
A.M., London time, on such LIBOR Interest Determination Date, or (b) if
"LIBOR Telerate" is specified in the applicable Pricing Supplement or if
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable
Pricing Supplement as the method for calculating LIBOR, the rate for
deposits in the Designated LIBOR Currency having the Index Maturity
specified in such Pricing Supplement, commencing on such Interest Reset
Date, that appears on the Designated LIBOR Page as of 11:00 A.M., London
time, on such LIBOR Interest Determination Date. If fewer than two such
offered rates so appear, or if no such rate so appears, as applicable,
LIBOR on such LIBOR Interest Determination Date will be determined in
accordance with the provisions described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear, or no rate appears, as the case may
be, on the Designated LIBOR Page as specified in clause (i) above, the
Calculation Agent will request the principal London offices of each of four
major reference banks (which may include affiliates of the Agents) in the
London interbank market, as selected by the Calculation Agent, to provide
the Calculation Agent with its offered quotation for deposits in the
Designated LIBOR Currency for the period of the Index Maturity specified in
the applicable Pricing Supplement, commencing on the applicable Interest
Reset Date, to prime banks in the London interbank market at approximately
11:00 A.M., London time, on such LIBOR Interest Determination Date and in a
principal amount that is representative for a single transaction in the
Designated LIBOR Currency in such market at such time. If at least two such
quotations are so provided, then LIBOR on such LIBOR Interest Determination
Date will be the arithmetic mean of such quotations. If fewer than two such
quotations are so provided, then LIBOR on such LIBOR Interest Determination
Date will be the arithmetic mean of the rates quoted at approximately 11:00
A.M., in the applicable Principal Financial Center, on such LIBOR Interest
Determination Date by three major banks (which may include affiliates of
the Agents) in such Principal Financial Center selected by the Calculation
Agent for loans in the Designated LIBOR Currency to leading European banks,
having the Index Maturity specified in the applicable Pricing Supplement
and in a principal amount that is representative for a single transaction
in the Designated LIBOR Currency in such market at such time; provided,
however, that if the banks so selected by the Calculation Agent are not
quoting as mentioned in this sentence, LIBOR determined as of such LIBOR
Interest Determination Date will be LIBOR in effect on such LIBOR Interest
Determination Date.
"Designated LIBOR Currency" means the currency or composite currency
specified in the applicable Pricing Supplement as to which LIBOR shall be
calculated or, if no such currency or composite currency is specified in the
applicable Pricing Supplement, United States dollars.
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"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in such Pricing
Supplement (or any other page as may replace such page on such service) for the
purpose of displaying the London interbank rates of major banks for the
Designated LIBOR Currency, or (b) if "LIBOR Telerate" is specified in the
applicable Pricing Supplement or neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable Pricing Supplement as the method for calculating
LIBOR, the display on the Dow Jones Telerate Service (or any successor service)
on the page specified in such Pricing Supplement (or any other page as may
replace such page on such service) for the purpose of displaying the London
interbank rates of major banks for the Designated LIBOR Currency.
Prime Rate. Unless otherwise specified in the applicable Pricing
Supplement, "Prime Rate" means, with respect to any Interest Determination Date
relating to a Floating Rate Note for which the interest rate is determined with
reference to the Prime Rate (a "Prime Rate Interest Determination Date"), the
rate on such date as such rate is published in H.15(519) under the heading "Bank
Prime Loan." If such rate is not published prior to 3:00 P.M., New York City
time, on the related Calculation Date, then the Prime Rate shall be the
arithmetic mean of the rates of interest publicly announced by each bank that
appears on the Reuters Screen USPRIME1 Page (as hereinafter defined) as such
bank's prime rate or base lending rate as in effect for such Prime Rate Interest
Determination Date. If fewer than four such rates appear on the Reuters Screen
USPRIME1 Page for such Prime Rate Interest Determination Date, then the Prime
Rate shall be the arithmetic mean of the prime rates or base lending rates
quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date by four major money center banks (which may include
affiliates of the Agents) in The City of New York selected by the Calculation
Agent. If fewer than four such quotations are so provided, then the Prime Rate
shall be the arithmetic mean of four prime rates quoted on the basis of the
actual number of days in the year divided by a 360-day year as of the close of
business on such Prime Rate Interest Determination Date as furnished in The City
of New York by the major money center banks, if any, that have provided such
quotations and by a reasonable number of substitute banks or trust companies
(which may include affiliates of the Agents) to obtain four such prime rate
quotations, provided such substitute banks or trust companies are organized and
doing business under the laws of the United States, or any State thereof, each
having total equity capital of at least $500 million and being subject to
supervision or examination by Federal or State authority, selected by the
Calculation Agent to provide such rate or rates; provided, however, that if the
banks or trust companies so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the Prime Rate determined as of such Prime Rate
Interest Determination Date will be the Prime Rate in effect on such Prime Rate
Interest Determination Date.
"Reuters Screen USPRIME1 Page" means the display on the Reuter Monitor
Money Rates Service (or any successor service) on the "USPRIME1" page (or such
other page as may replace the USPRIME1 page on such service) for the purpose of
displaying prime rates or base lending rates of major United States banks.
Treasury Rate. Unless otherwise specified in the applicable Pricing
Supplement, "Treasury Rate" means, with respect to any Interest Determination
Date relating to a Floating Rate Note for which the interest rate is determined
by reference to the Treasury Rate (a "Treasury Rate Interest Determination
Date"), the rate from the auction held on such Treasury Rate Interest
Determination Date (the "Auction") of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified in the applicable Pricing
Supplement, as such rate is published in H.15(519) under the heading "Treasury
Bills-auction average (investment)" or, if not published by 3:00 P.M., New York
City time, on the related Calculation Date, the auction average rate of such
Treasury Bills (expressed as a bond equivalent on the basis of a year of 365 or
366 days, as applicable, and applied on a daily basis) as otherwise announced by
the United States Department of the Treasury. If the results of the Auction of
Treasury Bills having the Index Maturity specified in the applicable Pricing
Supplement are not reported as provided by 3:00 P.M., New York City time, on the
related Calculation Date, or if no such Auction is held, then the Treasury Rate
will be calculated by the Calculation Agent and will be a yield to maturity
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) of the arithmetic mean of the
secondary market bid rates, as of approximately 3:30 P.M., New York City time,
on such Treasury Rate Interest Determination
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Date, of three leading primary United States government securities dealers
(which may include the Agents or their affiliates) selected by the Calculation
Agent, for the issue of Treasury Bills with a remaining maturity closest to the
Index Maturity specified in the applicable Pricing Supplement; provided,
however, that if the dealers so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the Treasury Rate determined as of such
Treasury Rate Interest Determination Date will be the Treasury Rate in effect on
such Treasury Rate Interest Determination Date.
OTHER PROVISIONS; ADDENDA
Any provisions with respect to the Notes, including the specification and
determination of one or more Interest Rate Bases, the calculation of the
interest rate applicable to a Floating Rate Note, the Interest Payment Dates,
the Stated Maturity Date, any redemption or repayment provisions or any other
term relating thereto, may be modified and/or supplemented as specified under
"Other Provisions" on the face thereof or in an Addendum relating thereto, if so
specified on the face thereof and described in the applicable Pricing
Supplement.
DISCOUNT NOTES
The Company may offer Notes ("Discount Notes") from time to time that have
an Issue Price (as specified in the applicable Pricing Supplement) that is less
than 100% of the principal amount thereof (i.e. par) by more than a percentage
equal to the product of 0.25% and the number of full years to the Stated
Maturity Date. Discount Notes may not bear any interest currently or may bear
interest at a rate that is below market rates at the time of issuance. Unless
otherwise specified in the applicable Pricing Supplement, the difference between
the Issue Price of a Discount Note and par is referred to herein as the
"Discount" and will be ratably accrued over the term of such Discount Note for
purposes of determining the amount to be repaid in the event of redemption,
repayment or acceleration of maturity of such Discount Note. In the event of
redemption, repayment or acceleration of maturity of a Discount Note, the amount
payable to the Holder of such Discount Note will be equal to the sum of (i) the
Issue Price (increased by any accruals of Discount) and, in the event of any
redemption of such Discount Note (if applicable), multiplied by the Initial
Redemption Percentage (as adjusted by the Annual Redemption Percentage
Reduction, if applicable) and (ii) any unpaid interest accrued thereon to the
date of such redemption, repayment or acceleration of maturity, as the case may
be.
Unless otherwise specified in the applicable Pricing Supplement, for
purposes of determining the amount of Discount that has accrued as of any date
on which a redemption, repayment or acceleration of maturity occurs for a
Discount Note, such Discount will be accrued using a constant yield method. The
constant yield will be calculated using a 30-day month, 360-day year convention,
a compounding period that, except for the Initial Period (as hereinafter
defined), corresponds to the shortest period between Interest Payment Dates for
the applicable Discount Note (with ratable accruals within a compounding
period), a coupon rate equal to the initial coupon rate applicable to such
Discount Note and an assumption that the maturity of such Discount Note will not
be accelerated. If the period from the date of issue to the initial Interest
Payment Date for a Discount Note (the "Initial Period") is shorter than the
compounding period for such Discount Note, a proportionate amount of the yield
for an entire compounding period will be accrued. If the Initial Period is
longer than the compounding period, then such period will be divided into a
regular compounding period and a short period with the short period being
treated as provided in the preceding sentence. The accrual of the applicable
Discount may differ from the accrual of original issue discount for purposes of
the Internal Revenue Code of 1986, as amended (the "Code"), certain Discount
Notes may not be treated as having original issue discount within the meaning of
the Code, and Notes other than Discount Notes may be treated as issued with
original issue discount for federal income tax purposes. See "United States
Federal Income Tax Considerations."
INDEXED NOTES
The Company may from time to time offer Notes ("Indexed Notes") with the
amount of principal, premium and/or interest payable in respect thereof to be
determined with reference to the price or prices of
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specified commodities or stocks, to the exchange rate of one or more designated
currencies (including a composite currency such as the ECU) relative to an
indexed currency or to other items, in each case as specified in the applicable
Pricing Supplement. In certain cases, Holders of Indexed Notes may receive a
principal payment on the Maturity Date that is greater than or less than the
principal amount of such Indexed Notes depending upon the relative value on the
Maturity Date of the specified indexed item. Information as to the method for
determining the amount of principal, premium, if any, and/or interest, if any,
payable in respect of Indexed Notes, certain historical information with respect
to the specified indexed item and any material tax considerations associated
with an investment in Indexed Notes will be specified in the applicable Pricing
Supplement. See also "Risk Factors."
AMORTIZING NOTES
The Company may from time to time offer Notes ("Amortizing Notes") with the
amount of principal thereof and interest thereon payable in installments over
the term of such Notes. Unless otherwise specified in the applicable Pricing
Supplement, interest on each Amortizing Note will be computed on the basis of a
360-day year of twelve 30-day months. Payments with respect to Amortizing Notes
will be applied first to interest due and payable thereon and then to the
reduction of the unpaid principal amount thereof. Further information concerning
additional terms and provisions of Amortizing Notes will be specified in the
applicable Pricing Supplement, including a table setting forth repayment
information for such Amortizing Notes.
BOOK-ENTRY NOTES
The Company has established a depositary arrangement with The Depository
Trust Company with respect to the Book-Entry Notes, the terms of which are
summarized below. Any additional or differing terms of the depositary
arrangement with respect to the Book-Entry Notes will be described in the
applicable Pricing Supplement.
Upon issuance, all Book-Entry Notes of like tenor and terms up to
$200,000,000 aggregate principal amount will be represented by a single Global
Security. Each Global Security representing Book-Entry Notes will be deposited
with, or on behalf of, the Depositary and will be registered in the name of the
Depositary or a nominee of the Depositary. No Global Security may be transferred
except as a whole by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, or by the Depositary or such nominee to a successor
of the Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a
Global Security, the Depositary or its nominee, as the case may be, will be the
sole Holder of the Book-Entry Notes represented thereby for all purposes under
the Indenture. Except as otherwise provided below, the Beneficial Owners (as
hereinafter defined) of the Global Security or Securities representing
Book-Entry Notes will not be entitled to receive physical delivery of
Certificated Notes and will not be considered the Holders thereof for any
purpose under the Indenture, and no Global Security representing Book-Entry
Notes shall be exchangeable or transferable. Accordingly, each Beneficial Owner
must rely on the procedures of the Depositary and, if such Beneficial Owner is
not a Participant, on the procedures of the Participant through which such
Beneficial Owner owns its interest in order to exercise any rights of a Holder
under such Global Security or the Indenture. The laws of some jurisdictions
require that certain purchasers of securities take physical delivery of such
securities in certificated form. Such limits and laws may impair the ability to
transfer beneficial interests in a Global Security representing Book-Entry
Notes.
Unless otherwise specified in the applicable Pricing Supplement, each
Global Security representing Book-Entry Notes will be exchangeable for
Certificated Notes of like tenor and terms and of differing authorized
denominations in a like aggregate principal amount, only if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the Global Securities or the Company becomes aware that the Depositary has
ceased to be a clearing agency registered under the Exchange Act and, in any
such case, the Company shall not have appointed a successor to the Depositary
within 60 days thereafter, (ii) the Company, in its sole discretion, determines
that the Global Securities shall be exchangeable for Certificated Notes or (iii)
an Event of Default shall have occurred and be continuing with respect to
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the Notes under the Indenture. Upon any such exchange, the Certificated Notes
shall be registered in the names of the Beneficial Owners of the Global Security
or Securities representing Book-Entry Notes, which names shall be provided by
the Depositary's relevant Participants (as identified by the Depositary) to the
Trustee.
The following is based on information furnished by the Depositary:
The Depositary will act as securities depository for the Book-Entry
Notes. The Book-Entry Notes will be issued as fully registered securities
registered in the name of Cede & Co. (the Depositary's nominee). One fully
registered Global Security will be issued for each issue of Book-Entry
Notes, each in the aggregate principal amount of such issue, and will be
deposited with the Depositary. If, however, the aggregate principal amount
of any issue exceeds $200,000,000, one Global Security will be issued with
respect to each $200,000,000 of principal amount and an additional Global
Security will be issued with respect to any remaining principal amount of
such issue.
The Depositary is a limited-purpose trust company organized under the
New York Banking Law, a "banking organization" within the meaning of the
New York Banking Law, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section
17A of the Exchange Act. The Depositary holds securities that its
participants ("Participants") deposit with the Depositary. The Depositary
also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants'
accounts, thereby eliminating the need for physical movement of securities
certificates. Direct Participants of the Depositary ("Direct Participants")
include securities brokers and dealers (including the Agents), banks, trust
companies, clearing corporations and certain other organizations. The
Depositary is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Access to the Depositary's
system is also available to others such as securities brokers and dealers,
banks and trust companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or indirectly
("Indirect Participants"). The rules applicable to the Depositary and its
Participants are on file with the Securities and Exchange Commission
("Commission").
Purchases of Book-Entry Notes under the Depositary's system must be
made by or through Direct Participants, which will receive a credit for
such Book-Entry Notes on the Depositary's records. The ownership interest
of each actual purchaser of each Book-Entry Note represented by a Global
Security ("Beneficial Owner") is in turn to be recorded on the records of
Direct Participants and Indirect Participants. Beneficial Owners will not
receive written confirmation from the Depositary of their purchase, but
Beneficial Owners are expected to receive written confirmations providing
details of the transaction, as well as periodic statements of their
holdings, from the Direct Participants or Indirect Participants through
which such Beneficial Owner entered into the transaction. Transfers of
ownership interests in a Global Security representing Book-Entry Notes are
to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners of a Global Security
representing Book-Entry Notes will not receive Certificated Notes
representing their ownership interests therein, except in the event that
use of the book-entry system for such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities representing
Book-Entry Notes which are deposited with, or on behalf of, the Depositary
are registered in the name of the Depositary's nominee, Cede & Co. The
deposit of Global Securities with, or on behalf of, the Depositary and
their registration in the name of Cede & Co. effect no change in beneficial
ownership. The Depositary has no knowledge of the actual Beneficial Owners
of the Global Securities representing the Book-Entry Notes; the
Depositary's records reflect only the identity of the Direct Participants
to whose accounts such Book-Entry Notes are credited, which may or may not
be the Beneficial Owners. The Participants will remain responsible for
keeping account of their holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to
Direct Participants, by Direct Participants to Indirect Participants, and
by Direct Participants and Indirect Participants to Beneficial
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Owners will be governed by arrangements among them, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with
respect to the Global Securities representing the Book-Entry Notes. Under
its usual procedures, the Depositary mails an Omnibus Proxy to the Company
as soon as possible after the applicable record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Book-Entry Notes are credited on the
applicable record date (identified in a listing attached to the Omnibus
Proxy).
Principal, premium, if any, and/or interest, if any, payments on the
Global Securities representing the Book-Entry Notes will be made in
immediately available funds to the Depositary. The Depositary's practice is
to credit Direct Participants' accounts on the applicable payment date in
accordance with their respective holdings shown on the Depositary's records
unless the Depositary has reason to believe that it will not receive
payment on such date. Payments by Participants to Beneficial Owners will be
governed by standing instructions and customary practices, as is the case
with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such
Participant and not of the Depositary, the Trustee or the Company, subject
to any statutory or regulatory requirements as may be in effect from time
to time. Payment of principal, premium, if any, and/or interest, if any, to
the Depositary is the responsibility of the Company and the Trustee,
disbursement of such payments to Direct Participants shall be the
responsibility of the Depositary, and disbursement of such payments to the
Beneficial Owners shall be the responsibility of Direct Participants and
Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less
than all of the Book-Entry Notes of like tenor and terms are being
redeemed, the Depositary's practice is to determine by lot the amount of
the interest of each Direct Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have
its Book-Entry Notes repaid by the Company, through its Participant, to the
Trustee, and shall effect delivery of such Book-Entry Notes by causing the
Direct Participant to transfer the Participant's interest in the Global
Security or Securities representing such Book-Entry Notes, on the
Depositary's records, to the Trustee. The requirement for physical delivery
of Book-Entry Notes in connection with a demand for repayment will be
deemed satisfied when the ownership rights in the Global Security or
Securities representing such Book-Entry Notes are transferred by Direct
Participants on the Depositary's records.
The Depositary may discontinue providing its services as securities
depository with respect to the Book-Entry Notes at any time by giving
reasonable notice to the Company or the Trustee. Under such circumstances,
if a successor securities depository is not obtained, Certificated Notes
are required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through the Depositary (or a successor securities depository). In
that event, Certificated Notes will be printed and delivered.
The information in this section concerning the Depositary and the
Depositary's system has been obtained from sources that the Company believes to
be reliable, but the Company takes no responsibility for the accuracy thereof.
None of the Company, any Agent, the Trustee or the registrar for the Notes will
have any responsibility or liability for any aspect of the records relating to
or payments made on account of beneficial ownership interests in a Global
Security or for maintaining, supervising or reviewing any records relating to or
payments made on account of beneficial ownership interests in a Global Security
or for maintaining, supervising or reviewing any records relating to such
beneficial ownership interests.
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CERTAIN COVENANTS
For so long as any of the Notes are outstanding, the Company will comply
with the following covenants:
Limitation on Incurrence of Total Debt. The Company will not, and
will not permit a Subsidiary (as defined below) to, incur any Debt (as
defined below), other than intercompany Debt (representing Debt to which
the only parties are the Company and any of its Subsidiaries, but only so
long as such Debt is held solely by the Company and any Subsidiary) if,
after giving effect to the incurrence of such additional Debt, the
aggregate principal amount of all outstanding Debt of the Company and its
Subsidiaries determined in accordance with generally accepted accounting
principles ("GAAP") is greater than 60% of (i) Total Assets (as defined
below) of the Company and its Subsidiaries as of the end of the fiscal
quarter covered in the Company's Annual Report on Form 10-K or Quarterly
Report on Form 10-Q, as the case may be, most recently filed with the
Commission (or, if such filing is not permitted under the Exchange Act,
with the Trustee) prior to the incurrence of such additional Debt plus (ii)
the increase, if any, in the Total Assets of the Company and its
Subsidiaries from the end of such quarter including, without limitation,
any increase in Total Assets resulting from the incurrence of such
additional Debt minus (iii) the decrease, if any, in the Total Assets of
the Company and its Subsidiaries from the end of such quarter (the Total
Assets of the Company and its Subsidiaries as so adjusted is referred to as
the "Adjusted Total Assets").
Limitation on Incurrence of Secured Debt. In addition to the
foregoing limitations on the incurrence of Debt, the Company will not, and
will not permit any Subsidiary to, incur any Secured Debt of the Company or
any Subsidiary, other than intercompany Debt, if, after giving effect to
the incurrence of such additional Secured Debt, the aggregate principal
amount of all outstanding Secured Debt of the Company and its Subsidiaries
is greater than 40% of the Adjusted Total Assets of the Company and its
Subsidiaries.
Debt Service Coverage. In addition to the foregoing limitations on
the incurrence of Debt, the Company will not, and will not permit any
Subsidiary to, incur any Debt, other than intercompany Debt, if the ratio
of Consolidated Income Available for Debt Service to the Annual Debt
Service Charge (in each case as defined below) for the period consisting of
the four consecutive fiscal quarters (for which financial statements are
available) most recently ended prior to the date on which such additional
Debt is to be incurred shall have been less than 1.5 to 1, on a pro forma
basis after giving effect to the incurrence of such Debt and to the
application of the proceeds thereof, and calculated on the assumption that
(i) such Debt and any other Debt incurred by the Company or its
Subsidiaries since the first day of such four-quarter period and the
application of the proceeds thereof, including to refinance other Debt, had
occurred at the beginning of such period, (ii) the repayment or retirement
of any other Debt by the Company or its Subsidiaries since the first day of
such four-quarter period had been repaid or retired at the beginning of
such period (except that, in making such computation, the amount of Debt
under any revolving credit facility shall be computed based upon the
average daily balance of such Debt during such period), (iii) in the case
of Acquired Debt or Debt in connection with any acquisition since the first
day of the four-quarter period, the related acquisition had occurred as of
the first day of the period with the appropriate adjustments with respect
to the acquisition being included in the pro forma calculation and (iv) in
the case of any increase or decrease in Total Assets of the Company and its
Subsidiaries, or any other acquisition or disposition by the Company or any
Subsidiary of any asset or group of assets, since the first day of such
four-quarter period, including, without limitation, by merger, stock
purchase or sale, or asset purchase or sale, such increase, decrease or
other acquisition or disposition or any related repayment of Debt had
occurred as of the first day of such period with the appropriate
adjustments to revenues, expenses and Debt levels with respect to such
increase, decrease or other acquisition or disposition being included in
such pro forma calculation.
Maintenance of Total Unencumbered Assets. The Company and its
Subsidiaries are required to maintain Total Unencumbered Assets of not less
than 150% of the aggregate outstanding principal amount of the Unsecured
Debt of the Company and its Subsidiaries.
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As used herein:
"Acquired Debt" means Debt of a Person (i) existing at the time such
Person becomes a Subsidiary or (ii) assumed in connection with the
acquisition of assets from such Person, in each case, other than Debt
incurred in connection with, or in contemplation of, such Person becoming a
Subsidiary or such acquisition. Acquired Debt shall be deemed to be
incurred on the date of the related acquisition of assets from any Person
or the date the acquired Person becomes a Subsidiary.
"Annual Debt Service Charge" as of any date means the amount which is
expensed in any 12-month period for interest on Debt of the Company and its
Subsidiaries in accordance with GAAP.
"Consolidated Income Available for Debt Service" for any period means
Consolidated Net Income plus amounts which have been deducted in
determining Consolidated Net Income during such period for (i) Consolidated
Interest Expense, (ii) provision for taxes of the Company and its
Subsidiaries based on income, (iii) amortization (other than amortization
of debt discount) and depreciation, (iv) provisions for losses from sales
or joint ventures, (v) increases in deferred taxes and other non-cash
items, (vi) charges resulting from a change in accounting principles, and
(vii) charges for early extinguishment of debt, and less amounts which have
been added in determining Consolidated Net Income during such period for
(a) provisions for gains from sales or joint ventures, and (b) decreases in
deferred taxes and other non-cash items.
"Consolidated Interest Expense" means, for any period, and without
duplication, all interest (including the interest component of rentals on
capitalized leases, letter of credit fees, commitment fees and other like
financial charges) and all amortization of debt discount on all Debt
(including, without limitation, payment-in-kind, zero coupon and other like
securities) of the Company and its Subsidiaries, but excluding legal fees,
title insurance charges and other out-of-pocket fees and expenses incurred
in connection with the issuance of Debt, all determined in accordance with
GAAP.
"Consolidated Net Income" for any period means the amount of net
income (or loss) of the Company and its Subsidiaries for such period
determined in accordance with GAAP after eliminating intercompany accounts
and transactions.
"Debt" of the Company or any of its Subsidiaries means any
indebtedness of the Company or any of its Subsidiaries, whether or not
contingent, and without duplication, in respect of (i) borrowed money
evidenced by bonds, notes, debentures or similar instruments, (ii)
indebtedness secured by any mortgage, pledge, lien, charge, encumbrance or
any security interest existing on property owned by the Company or any of
its Subsidiaries, (iii) the reimbursement obligations, contingent or
otherwise, in connection with any letters of credit actually issued or
amounts representing the balance deferred and unpaid of the purchase price
of any property except any such balance that constitutes an accrued expense
or trade payable or (iv) any lease of property by the Company or any of its
Subsidiaries as lessee which is reflected in the balance sheet of the
Company or any of its Subsidiaries as a capitalized lease in accordance
with GAAP, in the case of items of indebtedness under (i) through (iii)
above to the extent that any such items (other than letters of credit)
would appear as a liability on the balance sheet of the Company or any of
its Subsidiaries in accordance with GAAP, and also includes, to the extent
not otherwise included, any obligation by the Company or any Subsidiary to
be liable for, or to pay, as obligor, guarantor or otherwise (other than
for purposes of collection in the ordinary course of business),
indebtedness of another person (other than the Company or any Subsidiary)
(it being understood that Debt shall be deemed to be incurred by the
Company or any of its Subsidiaries whenever the Company or any of its
Subsidiaries shall create, assume, guarantee or otherwise become liable in
respect thereof).
"Secured Debt" means Debt secured by any mortgage, trust deed, deed of
trust, deed to secure debt, security agreement, pledge, conditional sale or
other title retention agreement, capitalized lease, or other like agreement
granting or conveying security title to or a security interest in real
property or other tangible assets, other than those relating to
intercompany Debt. For purposes hereof, such Debt shall become Secured Debt
at the time it first becomes secured by execution of any of the documents,
instruments or agreements described in the immediately preceding sentence.
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"Senior Executive Group" shall mean, collectively, those individuals
holding the offices of Chairman, President, Chief Executive Officer, Chief
Financial Officer or any Vice President of the Company.
"Subsidiary" means (i) any corporation or other entity the majority of
the shares of the non-voting capital stock or other equivalent ownership
interests of which (except directors' qualifying shares) are at the time
directly or indirectly owned by the Company, and the majority of the shares
of the voting capital stock or other equivalent ownership interests of
which (except directors' qualifying shares) are at the time directly or
indirectly owned by the Company, any other Subsidiary, and/or one or more
individuals of the Senior Executive Group (or, in the event of death or
disability or any of such individuals, his/her respective legal
representative(s)), or such individuals' successors in office as an officer
of the Company or the Secretary of such Subsidiary, and (ii) any other
entity (other than the Company) the accounts of which are consolidated with
the accounts of the Company or any Subsidiary.
"Total Assets" as of any date means the sum of (i) Undepreciated Real
Estate Assets and (ii) all other assets of the Company and its Subsidiaries
determined in accordance with GAAP (but excluding intangibles and accounts
receivable) after eliminating intercompany accounts and transactions.
"Total Unencumbered Assets" as of any date means the sum of (i) those
Undepreciated Real Estate Assets not securing any portion of Secured Debt
and (ii) all other assets of the Company and its Subsidiaries not securing
any portion of Secured Debt determined in accordance with GAAP (but
excluding accounts receivable and intangibles) after eliminating
intercompany accounts and transactions.
"Undepreciated Real Estate Assets" as of any date means the cost
(original cost plus capital improvements) of real estate assets of the
Company and its Subsidiaries on such date, before depreciation and
amortization, determined in accordance with GAAP.
"Unsecured Debt" means Debt of the Company or any Subsidiary that is
not Secured Debt, excluding intercompany Debt.
For so long as any of the Notes are outstanding, the Company will also
comply with the following additional covenants:
Existence. Except as described under "Merger, Consolidation or Sale"
below, the Company is required to do or cause to be done all things
necessary to preserve and keep in force and effect its and its
Subsidiaries' existence, rights (charter and statutory) and franchises;
provided, however, that the Company shall not be required to preserve any
right or franchise if its Board of Directors determines that the
preservation thereof is no longer desirable in the conduct of the business
of the Company and its Subsidiaries as a whole and that the loss thereof is
not disadvantageous in any material respect to the Holders of the Notes.
Maintenance of Properties. The Company is required to cause all of
its properties used or useful in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition,
repair and working order and supplied with all necessary equipment and to
cause to be made all necessary repairs, renewals, replacements, betterments
and improvements thereof, all as in the judgment of the Company may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that
the Company shall not be prevented from discontinuing the operation and
maintenance of any of its properties if such discontinuance is, in the
judgment of the Company, desirable in the conduct of its business and not
disadvantageous in any material respect to the Holders of the Notes.
Insurance. The Company is required to, and is required to cause each
of its Subsidiaries to, keep all of its insurable properties insured
against loss or damage at least equal to their then full insurable value
with financially sound and reputable insurance companies.
Payment of Taxes and Other Claims. The Company is required to pay or
discharge or cause to be paid or discharged, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon the income, profits or property
of the Company or of any Subsidiary, and (ii) all lawful claims for labor,
materials and supplies which, if
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unpaid, might by law become a lien upon the property of the Company or any
Subsidiary; provided, however, that the Company shall not be required to
pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is
being contested in good faith by appropriate proceedings.
Provision of Financial Information. The Holders of the Notes will be
provided with copies of the annual reports and quarterly reports of the
Company. Whether or not the Company is subject to Section 13 or 15 (d) of
the Exchange Act and for so long as any Notes are outstanding, the Company
will, to the extent permitted under the Exchange Act, be required to file
with the Commission the annual reports, quarterly reports and other
documents which the Company would have been required to file with the
Commission pursuant to such Section 13 or 15 (d) (the "Financial
Statements") if the Company were so subject, such documents to be filed
with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been required so to file
such documents if the Company were so subject. The Company will also in any
event (x) within 15 days of each Required Filing Date (i) transmit by mail
to all Holders of Notes, as their names and addresses appear in the
security register for the Notes, without cost to such Holders, copies of
the annual reports and quarterly reports which the Company would have been
required to file with the Commission pursuant to Section 13 or 15 (d) of
the Exchange Act if the Company were subject to such Sections and (ii) file
with the Trustee copies of the annual reports, quarterly reports and other
documents which the Company would have been required to file with the
Commission pursuant to Section 13 or 15 (d) of the Exchange Act if the
Company were subject to such Sections and (y) if filing such documents by
the Company with the Commission is not permitted under the Exchange Act,
promptly upon written request and payment of the reasonable cost of
duplication and delivery, supply copies of such documents to any
prospective Holder.
MERGER, CONSOLIDATION OR SALE
The Indenture provides that the Company may consolidate with, or sell,
lease or convey all or substantially all of its assets to, or merge with or
into, any other Person, provided that (a) either the Company shall be the
continuing entity, or the successor entity (if other than the Company) shall be
a Person organized and existing under the laws of the United States or a State
thereof and such successor entity shall expressly assume all of the Company's
obligations under the Indenture; (b) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Company or any Subsidiary as a result thereof as having been incurred by the
Company or such Subsidiary at the time of such transaction, no Event of Default
under the Indenture, and no event which, after notice or the lapse of time, or
both, would become such an Event of Default, shall have occurred and be
continuing and (c) an officer's certificate and legal opinion covering such
conditions shall be delivered to the Trustee.
EVENTS OF DEFAULT, NOTICE AND WAIVER
"Events of Default" under the Indenture include (with grace and cure
periods): (i) default in the payment of any installment of interest on any of
the Notes; (ii) default in the payment of principal of (or premium, if any, on)
any of the Notes; (iii) default in the performance or breach of any other
covenant or warranty of the Company contained in the Indenture (other than a
covenant added to the Indenture solely for the benefit of a series of Debt
Securities issued thereunder other than the Notes), continued for a specified
period of days after written notice as provided in the Indenture; (iv) default
in the payment of any recourse indebtedness of the Company having an aggregate
principal amount exceeding $5,000,000 or any bond, debenture, note, mortgage,
indenture or instrument under which there may be issued or by which there may be
secured or evidenced any such recourse indebtedness for money borrowed by the
Company (or by any Subsidiary, the repayment of which the Company has guaranteed
or for which the Company is directly responsible or liable as obligor or
guarantor), such default having occurred after the expiration of any applicable
grace period and having resulted in the acceleration of the maturity of such
indebtedness, but only if such indebtedness is not discharged or such
acceleration is not rescinded or annulled; (v) certain events of bankruptcy,
insolvency or reorganization, or court appointment of a receiver, liquidator or
trustee of the
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Company or its property and (vi) default in the deposit of any sinking fund
payment, when and as due by the terms of the Notes.
If an Event of Default under the Indenture occurs and is continuing, then
the Trustee or the Holders of not less than a majority of the principal amount
of the outstanding Notes will have the right to declare the principal amount,
and the premium, if any, of all the Notes to be due and payable immediately by
written notice to the Company (and to the Trustee if given by the Holders).
However, at any time after such a declaration of acceleration with respect to
the Notes or of all then outstanding under the Indenture, as the case may be,
has been made, but before a judgment or decree for payment of the money due has
been obtained by the Trustee, the Holders of a majority in principal amount of
the outstanding Notes by written notice to the Company and the Trustee, may
rescind and annul such declaration and its consequences if (a) the Company shall
have paid or deposited with the Trustee a sum sufficient to pay all overdue
installments of interest on the outstanding Notes, the principal of (and
premium, if any, on) any outstanding Notes which have become due otherwise than
by such declaration of acceleration and interest thereon, all other overdue
amounts and certain compensation, expense, disbursements and advances of the
Trustee and (b) all Events of Default, other than the non-payment of accelerated
principal (or specified portion thereof or premium, if any, with respect to the
Notes have been cured or waived as provided in the Indenture. The Indenture also
provides that the Holders of not less than a majority in principal amount of the
outstanding Notes may waive any past default with respect to the Notes and its
consequences, except a default (x) in the payment of the principal of (or
premium, if any) or interest on or additional amounts payable in respect of any
Notes or (y) in respect of a covenant or provision contained in the Indenture
that cannot be modified or amended without the consent of the Holder of each
outstanding Note affected thereby.
The Trustee will be required to give notice to the Holders of the Notes
within 90 days of a default under the Indenture of which the Trustee has
knowledge unless such default shall have been cured or waived; provided,
however, that the Trustee may withhold notice to the Holders of the Notes of any
default with respect to such Notes, except a default in the payment of the
principal of (or premium, if any) or interest on any Note if specific
responsible officers of the Trustee consider such withholding to be in the
interest of such Holders.
The Indenture provides that no Holders of the Notes may institute any
proceedings, judicial or otherwise, with respect to the Indenture or for any
remedy thereunder, except in the case of failure of the Trustee, for 60 days, to
act after it has received a written request to institute proceedings in respect
of an Event of Default from the Holders of not less than a majority in principal
amount of the outstanding Notes as well as an offer of indemnity reasonably
satisfactory to it. This provision will not, however, prevent any Holder of
Notes from instituting suit for the enforcement of payment of the principal of
(and premium, if any) and interest on such Notes at the respective due dates
thereof.
Subject to provisions in the Indenture relating to its duties in case of
default, the Trustee will not be under any obligation to exercise any of its
rights or powers under the Indenture at the request or direction of any Holders
of any Notes then outstanding under the Indenture, unless such Holders shall
have offered to the Trustee reasonable security or indemnity. The Holders of not
less than a majority in principal amount of the outstanding Notes shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee, or of exercising any trust or power conferred
upon the Trustee with respect to the Notes. However, the Trustee may refuse to
follow any direction which is in conflict with any law or the Indenture, which
may involve the Trustee in personal liability or which may be unduly prejudicial
to the Holders of Notes not joining therein.
Within 120 days after the close of each fiscal year, the Company is
required to deliver to the Trustee a certificate, signed by one of several
specified officers, stating whether or not such officer has knowledge of any
default under the Indenture and, if so, specifying each such default and the
nature and status thereof.
MODIFICATION OF THE INDENTURE
Modifications and amendments of the Indenture may be made by the Company
and the Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the outstanding Notes
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issued under the Indenture which are affected by the modification or amendment,
provided that no such modification may, without a consent of each Holder of such
Notes affected thereby: (1) change the stated maturity date of the principal of
(or premium, if any) or any installment of interest, if any, on any Note; (2)
reduce the principal amount of (or premium, if any) or the rate or amount of
interest, if any, or other payment term on any note; (3) change the place or
currency of payment of principal of (or premium, if any) or interest, if any, on
any Note; (4) impair the right to institute suit for the enforcement of any such
payment on or with respect to any Notes; (5) reduce the above-stated percentage
of Holders of Notes necessary to modify or amend the Indenture; or (6) modify
the foregoing requirements or reduce the percentage of outstanding Notes
necessary to waive compliance with certain provisions of the Indenture or for
waiver of certain defaults. A record date may be set for any act of the Holders
with respect to consenting to any amendment.
The Holders of not less than a majority in principal amount of outstanding
Notes affected thereby will have the right to waive compliance by the Company
with certain covenants in the Indenture.
Modifications and amendments of the Indenture may be made by the Company
and the Trustee without the consent of the Holders for certain matters,
including: creation of additional classes of Debt Securities; adding to the
covenants of the Company for the benefit of the Holders and adding, changing or
eliminating any provisions of the Indenture in respect to other series of Debt
Securities, provided that such addition, change or elimination shall not
adversely affect the rights of holders of previously created securities.
The Indenture contains provisions for convening the meeting of the Holders
of Notes to take permitted action.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing the
applicable currency. The information set forth in this Prospectus Supplement is
directed to prospective purchasers who are United States residents and, with
respect to Foreign Currency Notes, is by necessity incomplete. The Company and
the Agents disclaim any responsibility to advise prospective purchasers who are
residents of countries other than the United States with respect to any matters
that may affect the purchase, holding or receipt of payments of principal of,
and premium, if any, and interest, if any, on, Foreign Currency Notes. Such
persons should consult their own financial and legal advisors with regard to
such matters. See "Risk Factors -- Exchange Rates and Exchange Controls."
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST, IF ANY
Unless otherwise specified in the applicable Pricing Supplement, the
Company is obligated to make payments of principal of, and premium, if any, and
interest, if any, on, a Foreign Currency Note in the Specified Currency. Any
such amounts payable by the Company in the Specified Currency will be converted
by the exchange rate agent named in the applicable Pricing Supplement (the
"Exchange Rate Agent") into United States dollars for payment to Holders unless
otherwise specified in the applicable Pricing Supplement or the Holder of such
Foreign Currency Note elects, in the manner hereinafter described, to receive
such amounts in the Specified Currency.
Any United States dollar amount to be received by a Holder of a Foreign
Currency Note will be based on the highest bid quotation in The City of New York
received by the Exchange Rate Agent at approximately 11:00 A.M., New York City
time, on the second Business Day preceding the applicable payment date from
three recognized foreign exchange dealers (one of whom may be the Exchange Rate
Agent) selected by the Exchange Rate Agent and approved by the Company for the
purchase by the quoting dealer of the Specified Currency for United States
dollars for settlement on such payment date in the aggregate amount of such
Specified Currency payable to all Holders of Foreign Currency Notes scheduled to
receive United States dollar payments and at which the applicable dealer commits
to execute a contract. All currency exchange
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costs will be borne by the Holders of such Foreign Currency Notes by deductions
from such payments. If three such bid quotations are not available, payments
will be made in the Specified Currency.
Holders of Foreign Currency Notes may elect to receive all or a specified
portion of any payment of principal, premium, if any, and/or interest, if any,
in the Specified Currency by submitting a written request for such payment to
the Trustee at its corporate trust office in The City of New York on or prior to
the applicable Record Date or at least fifteen calendar days prior to the
Maturity Date, as the case may be. Such written request may be mailed or hand
delivered or sent by cable, telex or other form of facsimile transmission.
Holders of Foreign Currency Notes may elect to receive all or a specified
portion of all future payments in the Specified Currency and need not file a
separate election for each payment. Such election will remain in effect until
revoked by written notice to the Trustee, but written notice of any such
revocation must be received by the Trustee on or prior to the applicable Record
Date or at least fifteen calendar days prior to the Maturity Date, as the case
may be. Holders of Foreign Currency Notes to be held in the name of a broker or
nominee should contact such broker or nominee to determine whether and how an
election to receive payments in the Specified Currency may be made.
Unless otherwise specified in the applicable Pricing Supplement, if the
Specified Currency is other than United States dollars, a Beneficial Owner of
the related Global Security or Securities which elects to receive payments of
principal, premium, if any, and/or interest, if any, in the Specified Currency
must notify the Participant through which it owns its interest on or prior to
the applicable Record Date or at least 15 calendar days prior to the Maturity
Date, as the case may be, of such Beneficial Owner's election. Such Participant
must notify the Depositary of such election on or prior to the third Business
Day after such Record Date or at least 12 calendar days prior to the Maturity
Date, as the case may be, and the Depositary will notify the Trustee of such
election on or prior to the fifth Business Day after such Record Date or at
least ten calendar days prior to the Maturity Date, as the case may be. If
complete instructions are received by the Participant from the Beneficial Owner
and forwarded by the Participant to the Depositary, and by the Depositary to the
Trustee, on or prior to such dates, then such Beneficial Owner will receive
payments in the Specified Currency.
Payments of the principal of, and premium, if any, and/or interest, if any,
on, Foreign Currency Notes which are to be made in United States dollars will be
made in the manner specified herein with respect to Notes denominated in United
States dollars. See "Description of Notes -- General." Payments of interest, if
any, on Foreign Currency Notes which are to be made in the Specified Currency on
an Interest Payment Date other than the Maturity Date will be made by check
mailed to the address of the Holders of such Foreign Currency Notes as they
appear in the Security Register, subject to the right to receive such interest
payments by wire transfer of immediately available funds under the circumstances
described under "Description of Notes -- General." Payments of principal of, and
premium, if any, and/or interest, if any, on, Foreign Currency Notes which are
to be made in the Specified Currency on the Maturity Date will be made by wire
transfer of immediately available funds to an account with a bank designated at
least fifteen calendar days prior to the Maturity Date by each Holder thereof,
provided that such bank has appropriate facilities therefor and that the
applicable Foreign Currency Note is presented and surrendered at the office or
agency maintained by the Company for such purpose in the Borough of Manhattan,
The City of New York, currently the corporate trust office of the Trustee
located at 40 Broad Street, Suite 550, New York, New York 10004, in time for the
Trustee to make such payments in such funds in accordance with its normal
procedures.
AVAILABILITY OF SPECIFIED CURRENCY
Except as set forth below, if the Specified Currency for a Foreign Currency
Note is not available for the required payment of principal, premium, if any,
and/or interest, if any, in respect thereof due to the imposition of exchange
controls or other circumstances beyond the control of the Company, the Company
will be entitled to satisfy its obligations to the Holder of such Foreign
Currency Note by making such payment in United States dollars on the basis of
the Market Exchange Rate, computed by the Exchange Rate Agent, on the second
Business Day prior to such payment or, if such Market Exchange Rate is not then
available, on the basis of the most recently available Market Exchange Rate, or
as otherwise specified in the applicable Pricing Supplement.
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If the Specified Currency for a Foreign Currency Note is a composite
currency that is not available for the required payment of principal, premium,
if any, and/or interest, if any, in respect thereof due to the imposition of
exchange controls or other circumstances beyond the control of the Company, the
Company will be entitled to satisfy its obligations to the Holder of such
Foreign Currency Note by making such payment in United States dollars on the
basis of the equivalent of the composite currency in United States dollars. The
component currencies of the composite currency for this purpose (the "Component
Currencies") shall be the currency amounts that were components of the composite
currency as of the last day on which the composite currency was used. The
equivalent of the composite currency in United States dollars shall be
calculated by aggregating the United States dollar equivalents of the Component
Currencies. The United States dollar equivalent of each of the Component
Currencies shall be determined by the Exchange Rate Agent on the basis of the
Market Exchange Rate on the second Business Day prior to the required payment
or, if such Market Exchange Rate is not then available, on the basis of the most
recently available Market Exchange Rate for each such Component Currency, or as
otherwise specified in the applicable Pricing Supplement.
If the official unit of any Component Currency is altered by way of
combination or subdivision, the number of units of the currency as a Component
Currency shall be divided or multiplied in the same proportion. If two or more
Component Currencies are consolidated into a single currency, the amounts of
those currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
The "Market Exchange Rate" for a Specified Currency other than United
States dollars means the noon dollar buying rate in The City of New York for
cable transfers for such Specified Currency as certified for customs purposes
(or, if not so certified, as otherwise determined) by the Federal Reserve Bank
of New York. Any payment made in United States dollars under such circumstances
where the required payment is in a Specified Currency other than United States
dollars will not constitute an Event of Default under the Indenture with respect
to the Notes.
All determinations referred to above made by the Exchange Rate Agent shall
be at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holders of the Foreign Currency
Notes.
JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of
the State of New York. If an action based on Foreign Currency Notes were
commenced in a court of the United States, such court would likely grant
judgment relating to such Foreign Currency Notes only in United States dollars.
It is not clear, however, whether, in granting such judgment, the rate of
conversion into United States dollars would be determined with reference to the
date of default, the date of entry of the judgment or some other date. Under
current New York law, a state court in the State of New York rendering a
judgment in respect of a Foreign Currency Note would be required to render such
judgment in the Specified Currency, and such foreign currency judgment would be
converted into United States dollars at the exchange rate prevailing on the date
of entry of such judgment. Accordingly, the Holder of such Foreign Currency Note
would be subject to exchange rate fluctuations between the date of entry of such
foreign currency judgment and the time the amount of such foreign currency
judgment is paid to such Holder in United States dollars and converted by such
Holder into the Specified Currency. It is not certain, however, whether a
non-New York state court would follow the same rules and procedures with respect
to conversions of foreign currency judgments.
The Company will indemnify the Holder of any Note against any loss incurred
by such Holder as a result of any judgment or order being given or made for any
amount due under such Note and such judgment or order requiring payment in a
currency or composite currency (the "Judgment Currency") other than the
Specified Currency, and as a result of any variation between (i) the rate of
exchange at which the Specified Currency amount is converted into the Judgment
Currency for the purpose of such judgment or order, and
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(ii) the rate of exchange at which the Holder of such Note, on the date of
payment of such judgment or order, is able to purchase the Specified Currency
with the amount of the Judgment Currency actually received by such Holder, as
the case may be.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax
consequences of the purchase, ownership and disposition of the Notes is based
upon laws, regulations, rulings and decisions now in effect, all of which are
subject to change (including changes in effective dates) or possible differing
interpretations. It deals only with Notes held as capital assets and does not
purport to deal with persons in special tax situations, such as financial
institutions, insurance companies, regulated investment companies, dealers in
securities or currencies, persons holding Notes as a hedge against currency
risks or as a position in a "straddle" for tax purposes, or persons whose
functional currency is not the United States dollar. It also does not deal with
holders other than original purchasers (except where otherwise specifically
noted). Persons considering the purchase of the Notes should consult their own
tax advisors concerning the application of United States Federal income tax laws
to their particular situations as well as any consequences of the purchase,
ownership and disposition of the Notes arising under the laws of any other
taxing jurisdiction.
As used herein, the term "U.S. Holder" means a beneficial owner of a Note
that is for United States Federal income tax purposes (i) a citizen or resident
of the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate the income of which is subject to United
States Federal income taxation regardless of its source, (iv) a trust whose
administration is subject to the primary supervision of a United States court
and which has one or more United States persons who would have authority to
control all substantial decisions of the trust or (v) any other person whose
income or gain in respect of a Note is effectively connected with the conduct of
a United States trade or business. As used herein, the term "non-U.S. Holder"
means a beneficial owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest
Payments of interest on a Note generally will be taxable to a U.S. Holder
as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting).
Original Issue Discount
The following summary is a general discussion of the United States Federal
income tax consequences to U.S. Holders of the purchase, ownership and
disposition of Notes issued with original issue discount ("Original Issue
Discount Notes"). The following summary is based upon final Treasury regulations
(the "OID Regulations") released by the Internal Revenue Service ("IRS") on
January 27, 1994, as amended on June 11, 1996, under the original issue discount
provisions of the Code.
For United States Federal income tax purposes, original issue discount is
the excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of 1%
of the Note's stated redemption price at maturity multiplied by the number of
complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest (as
hereinafter defined) prior to maturity, multiplied by the weighted average
maturity of such Note). The issue price of each Note in an issue of Notes equals
the first price at which a substantial amount of such Notes has been sold
(ignoring sales to bond houses, brokers, or similar persons or organizations
acting in the capacity of underwriters, placement agents, or wholesalers). The
stated redemption price at maturity of a Note is the sum of all payments
provided by the Note other than "qualified stated interest" payments. The term
"qualified stated interest" generally means stated interest that is
unconditionally payable in cash or property (other than debt instruments of the
issuer) at least annually at a
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single fixed rate. In addition, under the OID Regulations, if a Note bears
interest for one or more accrual periods at a rate below the rate applicable for
the remaining term of such Note (e.g., Notes with teaser rates or interest
holidays), and if the greater of either the resulting foregone interest on such
Note or any "true" discount on such Note (i.e., the excess of the Note's stated
principal amount over its issue price) equals or exceeds a specified de minimis
amount, then the stated interest on the Note would be treated as original issue
discount rather than qualified stated interest.
Payments of qualified stated interest on a Note are taxable to a U.S.
Holder as ordinary interest income at the time such payments are accrued or are
received (in accordance with the U.S. Holder's regular method of tax
accounting). A U.S. Holder of an Original Issue Discount Note must include
original issue discount in income as ordinary interest for United States Federal
income tax purposes as it accrues under a constant yield method in advance of
receipt of the cash payments attributable to such income, regardless of such
U.S. Holder's regular method of tax accounting. In general, the amount of
original issue discount included in income by the initial U.S. Holder of an
Original Issue Discount Note is the sum of the daily portions of original issue
discount with respect to such Original Issue Discount Note for each day during
the taxable year (or portion of the taxable year) on which such U.S. Holder held
such Original Issue Discount Note. The "daily portion" of original issue
discount on any Original Issue Discount Note is determined by allocating to each
day in any accrual period a ratable portion of the original issue discount
allocable to that accrual period. An "accrual period" may be of any length and
the accrual periods may vary in length over the term of the Original Issue
Discount Note, provided that each accrual period is no longer than one year and
each scheduled payment of principal or interest occurs either on the final day
of an accrual period or on the first day of an accrual period. The amount of
original issue discount allocable to each accrual period is generally equal to
the difference between (i) the product of the Original Issue Discount Note's
adjusted issue price at the beginning of such accrual period and its yield to
maturity (determined on the basis of compounding at the close of each accrual
period and appropriately adjusted to take into account the length of the
particular accrual period) and (ii) the amount of any qualified stated interest
payments allocable to such accrual period. The "adjusted issue price" of an
Original Issue Discount Note at the beginning of any accrual period is the sum
of the issue price of the Original Issue Discount Note plus the amount of
original issue discount allocable to all prior accrual periods minus the amount
of any prior payments on the Original Issue Discount Note that were not
qualified stated interest payments. Under these rules, U.S. Holders generally
will have to include in income increasingly greater amounts of original issue
discount in successive accrual periods.
A U.S. Holder who purchases an Original Issue Discount Note for an amount
that is greater than its adjusted issue price as of the purchase date and less
than or equal to the sum of all amounts payable on the Original Issue Discount
Note after the purchase date other than payments of qualified stated interest,
will be considered to have purchased the Original Issue Discount Note at an
"acquisition premium." Under the acquisition premium rules, the amount of
original issue discount which such U.S. Holder must include in its gross income
with respect to such Original Issue Discount Note for any taxable year (or
portion thereof in which the U.S. Holder holds the Original Issue Discount Note)
will be reduced (but not below zero) by the portion of the acquisition premium
properly allocable to the period.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the total
noncontingent principal payments due under the Variable Note by more than a
specified de minimis amount and (b) it provides for stated interest, paid or
compounded at least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the
value of such rate can reasonably be expected to measure contemporaneous
variations in the cost of newly borrowed funds in the currency in which the
Variable Note is denominated. Although a multiple of a qualified floating rate
will generally not itself constitute a qualified floating rate, a variable rate
equal to the product of a qualified floating rate and a fixed multiple that is
greater than .65 but not more than 1.35 will constitute a qualified floating
rate. A variable rate equal to the product of a qualified floating rate and a
fixed multiple that is greater than .65 but not more than
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1.35, increased or decreased by a fixed rate, will also constitute a qualified
floating rate. In addition, under the OID Regulations, two or more qualified
floating rates that can reasonably be expected to have approximately the same
values throughout the term of the Variable Note (e.g., two or more qualified
floating rates with values within 25 basis points of each other as determined on
the Variable Note's issue date) will be treated as a single qualified floating
rate. Notwithstanding the foregoing, a variable rate that would otherwise
constitute a qualified floating rate but which is subject to one or more
restrictions such as a maximum numerical limitation (i.e., a cap) or a minimum
numerical limitation (i.e., a floor) may, under certain circumstances, fail to
be treated as a qualified floating rate under the OID Regulations unless such
cap or floor is fixed throughout the term of the Note. An "objective rate" is a
rate that is not itself a qualified floating rate but which is determined using
a single fixed formula and which is based upon objective financial or economic
information. A rate will not qualify as an objective rate if it is based on
information that is within the control of the issuer (or a related party) or
that is unique to the circumstances of the issuer (or a related party), such as
dividends, profits or the value of the issuer's stock (although a rate does not
fail to be an objective rate merely because it is based on the credit quality of
the issuer). A "qualified inverse floating rate" is any objective rate where
such rate is equal to a fixed rate minus a qualified floating rate, as long as
variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the qualified floating rate. The OID Regulations
also provide that if a Variable Note provides for stated interest at a fixed
rate for an initial period of one year or less followed by a variable rate that
is either a qualified floating rate or an objective rate and if the variable
rate on the Variable Note's issue date is intended to approximate the fixed rate
(e.g., the value of the variable rate on the issue date does not differ from the
value of the fixed rate by more than 25 basis points), then the fixed rate and
the variable rate together will constitute either a single qualified floating
rate or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations and if
interest on such Note is unconditionally payable in cash or property (other than
debt instruments of the issuer) at least annually, then all stated interest on
such Note will constitute qualified stated interest and will be taxed
accordingly. Thus, a Variable Note that provides for stated interest at either a
single qualified floating rate or a single objective rate throughout the term
thereof and that qualifies as a "variable rate debt instrument" under the OID
Regulations will generally not be treated as having been issued with original
issue discount unless the Variable Note is issued at a "true" discount (i.e., at
a price below the Note's stated principal amount) in excess of a specified de
minimis amount. The amount of qualified stated interest and the amount of
original issue discount, if any, that accrues during an accrual period on such
Variable Note is determined under the rules applicable to fixed rate debt
instruments by assuming that the variable rate is a fixed rate equal to (i) in
the case of a qualified floating rate or qualified inverse floating rate, the
value as of the issue date of the qualified floating rate or qualified inverse
floating rate, or (ii) in the case of an objective rate (other than a qualified
inverse floating rate), a fixed rate that reflects the yield that is reasonably
expected for the Variable Note. The qualified stated interest allocable to an
accrual period is increased (or decreased) if the interest actually paid during
an accrual period exceeds (or is less than) the interest assumed to be paid
during the accrual period pursuant to the foregoing rules.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. In
the case of a Variable Note that qualifies as a "variable rate debt instrument"
and provides for stated interest at a fixed rate in addition to either one or
more qualified floating rates or a qualified inverse floating rate, the fixed
rate is initially converted into a qualified floating rate (or a qualified
inverse floating rate, if the Variable Note provides for a qualified inverse
floating rate). Under such circumstances, the qualified floating rate or
qualified inverse floating rate that replaces the fixed rate must be
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such that the fair market value of the Variable Note as of the Variable Note's
issue date is approximately the same as the fair market value of an otherwise
identical debt instrument that provides for either the qualified floating rate
or qualified inverse floating rate rather than the fixed rate. Subsequent to
converting the fixed rate into either a qualified floating rate or a qualified
inverse floating rate, the Variable Note is then converted into an "equivalent"
fixed rate debt instrument in the manner described above.
Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest, if any, are determined for the
"equivalent" fixed rate debt instrument by applying the general original issue
discount rules to the "equivalent" fixed rate debt instrument and a U.S. Holder
of the Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the "equivalent" fixed rate debt
instrument. Each accrual period's appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent" fixed rate debt instrument
in the event that such amounts differ from the actual amount of interest accrued
or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument"
under the OID Regulations, then the Variable Note would be treated as a
contingent payment debt obligation. It is not entirely clear under current law
how a Variable Note would be taxed if such Note were treated as a contingent
payment debt obligation. U.S. Holders should be aware that on June 11, 1996 the
Treasury Department issued final regulations (the "CPDI Regulations") concerning
the proper United States Federal income tax treatment of contingent payment debt
instruments. In general, the CPDI Regulations cause the timing and character of
income, gain or loss reported on a contingent payment debt instrument to
substantially differ from the timing and character of income, gain or loss
reported on a contingent payment debt instrument under previously applicable
general principles of United States Federal income tax law. Specifically, the
CPDI Regulations generally require a U.S. Holder of such an instrument to
include future contingent and noncontingent interest payments in income as such
interest accrues based upon a projected payment schedule. Moreover, in general,
under the CPDI Regulations, any gain recognized by a U.S. Holder on the sale,
exchange, or retirement of a contingent payment debt instrument will be treated
as ordinary income and all or a portion of any loss realized could be treated as
ordinary loss as opposed to capital loss (depending upon the circumstances). The
CPDI Regulations apply to debt instruments issued on or after August 13, 1996.
The proper United States Federal income tax treatment of Variable Notes that are
treated as contingent payment debt obligations will be more fully described in
the applicable Pricing Supplement. Furthermore, any other special United States
Federal income tax considerations, not otherwise discussed herein, which are
applicable to any particular issue of Notes will be discussed in the applicable
Pricing Supplement.
Certain of the Notes (i) may be redeemable at the option of the Company
prior to their stated maturity (a "call option") and/or (ii) may be repayable at
the option of the holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Short-Term Notes
Notes that have a fixed maturity of one year or less ("Short-Term Notes")
will be treated as having been issued with original issue discount. In general,
an individual or other cash method U.S. Holder is not required to accrue such
original issue discount unless the U.S. Holder elects to do so. If such an
election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the Short-Term Note will be
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ordinary income to the extent of the original issue discount accrued on a
straight-line basis, or upon election under the constant yield method (based on
daily compounding), through the date of sale or maturity, and a portion of the
deductions otherwise allowable to the U.S. Holder for interest on borrowings
allocable to the Short-Term Note will be deferred until a corresponding amount
of income is realized. U.S. Holders who report income for United States Federal
income tax purposes under the accrual method, and certain other holders
including banks and dealers in securities, are required to accrue original issue
discount on a Short-Term Note on a straight-line basis unless an election is
made to accrue the original issue discount under a constant yield method (based
on daily compounding).
Market Discount
If a U.S. Holder purchases a Note with a fixed maturity date greater than
one year, other than an Original Issue Discount Note, for an amount that is less
than its issue price (or, in the case of a subsequent purchaser, its stated
redemption price at maturity) or, in the case of an Original Issue Discount
Note, for an amount that is less than its adjusted issue price as of the
purchase date, such U.S. Holder will be treated as having purchased such Note at
a "market discount," unless such market discount is less than a specified de
minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat
any partial principal payment (or, in the case of an Original Issue Discount
Note, any payment that does not constitute qualified stated interest) on, or any
gain realized on the sale, exchange, retirement or other disposition of, a Note
as ordinary income to the extent of the lesser of (i) the amount of such payment
or realized gain or (ii) the market discount which has not previously been
included in income and is treated as having accrued on such Note at the time of
such payment or disposition. Market discount will be considered to accrue
ratably during the period from the date of acquisition to the maturity date of
the Note, unless the U.S. Holder elects to accrue market discount on a constant
interest basis.
A U.S. Holder may be required to defer the deduction of all or a portion of
the interest paid or accrued on any indebtedness incurred or maintained to
purchase or carry a Note with market discount until the maturity of the Note or
certain earlier dispositions, because a current deduction is only allowed to the
extent the interest expense exceeds an allocable portion of market discount. A
U.S. Holder may elect to include market discount in income currently as it
accrues (on either a ratable or a constant interest basis), in which case the
rules described above regarding the treatment as ordinary income of gain upon
the disposition of the Note and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply. Generally, such
currently included market discount is treated as ordinary interest income for
United States Federal income tax purposes. Such an election will apply to all
debt instruments acquired by the U.S. Holder on or after the first day of the
first taxable year to which such election applies and may be revoked only with
the consent of the IRS.
Premium
If a U.S. Holder purchases a Note for an amount that is greater than the
sum of all amounts payable on the Note after the purchase date other than
payments of qualified stated interest, such U.S. Holder will be considered to
have purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may offset interest otherwise
required to be included in respect of the Note during any taxable year by the
amortized amount of such excess for the taxable year. However, if the Note may
be optionally redeemed after the U.S. Holder acquires it at a price in excess of
its stated redemption price at maturity, special rules would apply which could
result in a deferral of the amortization of some bond premium until later in the
term of the Note. Any election to amortize bond premium applies to all taxable
debt instruments then owned and thereafter acquired by the U.S. Holder on or
after the first day of the first taxable year to which such election applies and
may be revoked only with the consent of the IRS.
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Disposition of a Note
Except as discussed above, upon the sale, exchange or retirement of a Note,
a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on the sale, exchange or retirement
(other than amounts representing accrued and unpaid interest) and such U.S.
Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax basis in a
Note generally will equal such U.S. Holder's initial investment in the Note
increased by any original issue discount included in income (and accrued market
discount, if any, if the U.S. Holder has included such market discount in
income) and decreased by the amount of any payments, other than qualified stated
interest payments, received and amortizable bond premium taken with respect to
such Note. Such gain or loss generally will be long-term capital gain or loss if
the Note were held for more than one year. For certain noncorporate U.S.
Holders, long-term capital gain may be treated at preferential rates, with the
lowest rate available only for Notes held more than eighteen months.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, IN A FOREIGN
CURRENCY
As used herein, "Foreign Currency" means a currency or composite currency
other than U.S. dollars.
Payments of Interest in a Foreign Currency
Cash Method. A U.S. Holder who uses the cash method of accounting for
United States Federal income tax purposes and who receives a payment of interest
on a Note (other than original issue discount or market discount) will be
required to include in income the U.S. dollar value of the Foreign Currency
payment (determined on the date such payment is received) regardless of whether
the payment is in fact converted to U.S. dollars at that time, and such U.S.
dollar value will be the U.S. Holder's tax basis in such Foreign Currency.
Accrual Method. A U.S. Holder who uses the accrual method of accounting
for United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the U.S.
dollar value of the amount of interest income (including original issue discount
or market discount and reduced by amortizable bond premium to the extent
applicable) that has accrued and is otherwise required to be taken into account
with respect to a Note during an accrual period. The U.S. dollar value of such
accrued income will be determined by translating such income at the average rate
of exchange for the accrual period or, with respect to an accrual period that
spans two taxable years, at the average rate for the partial period within the
taxable year. A U.S. Holder may elect, however, to translate such accrued
interest income using the rate of exchange on the last day of the accrual period
or, with respect to an accrual period that spans two taxable years, using the
rate of exchange on the last day of the taxable year. If the last day of an
accrual period is within five business days of the date of receipt of the
accrued interest, a U.S. Holder may translate such interest using the rate of
exchange on the date of receipt. The above election will apply to other debt
obligations held by the U.S. Holder and may not be changed without the consent
of the IRS. A U.S. Holder should consult a tax advisor before making the above
election. A U.S. Holder will recognize exchange gain or loss (which will be
treated as ordinary income or loss) with respect to accrued interest income on
the date such income is received. The amount of ordinary income or loss
recognized will equal the difference, if any, between the U.S. dollar value of
the Foreign Currency payment received (determined on the date such payment is
received) in respect of such accrual period and the U.S. dollar value of
interest income that has accrued during such accrual period (as determined
above).
Purchase, Sale and Retirement of Notes
A U.S. Holder who purchases a Note with previously owned Foreign Currency
will recognize ordinary income or loss in an amount equal to the difference, if
any, between such U.S. Holder's tax basis in the Foreign Currency and the U.S.
dollar fair market value of the Foreign Currency used to purchase the Note,
determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss
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generally will be capital gain or loss (except to the extent of any accrued
market discount not previously included in the U.S. Holder's income) and will be
long-term capital gain or loss if at the time of sale, exchange or retirement
the Note has been held by such U.S. Holder for more than one year. For certain
noncorporate U.S. Holders, long-term capital gain may be treated at preferential
rates, with the lowest rate available only for Notes held more than eighteen
months. To the extent the amount realized represents accrued but unpaid
interest, however, such amounts must be taken into account as interest income,
with exchange gain or loss computed as described in "Payments of Interest in a
Foreign Currency" above. If a U.S. Holder receives Foreign Currency on such a
sale, exchange or retirement, the amount realized will be based on the U.S.
dollar value of the Foreign Currency on the date the payment is received or the
Note is disposed of (or deemed disposed of as a result of a material change in
the terms of such Note). In the case of a Note that is denominated in Foreign
Currency and is traded on an established securities market, a cash basis U.S.
Holder (or, upon election, an accrual basis U.S. Holder) will determine the U.S.
dollar value of the amount realized by translating the Foreign Currency payment
at the spot rate of exchange on the settlement date of the sale. A U.S. Holder's
adjusted tax basis in a Note will equal the cost of the Note to such holder,
increased by the amounts of any market discount or original issue discount
previously included in income by the holder with respect to such Note and
reduced by any amortized acquisition or other premium and any principal payments
received by the holder. A U.S. Holder's tax basis in a Note, and the amount of
any subsequent adjustments to such holder's tax basis, will be the U.S. dollar
value of the Foreign Currency amount paid for such Note, or of the Foreign
Currency amount of the adjustment, determined on the date of such purchase or
adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that
is attributable to fluctuations in currency exchange rates will be ordinary
income or loss which will not be treated as interest income or expense. Gain or
loss attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date the U.S. Holder acquired the Note. Such Foreign
Currency gain or loss will be recognized only to the extent of the total gain or
loss realized by the U.S. Holder on the sale, exchange or retirement of the
Note.
Original Issue Discount
In the case of an Original Issue Discount Note or Short-Term Note, (i)
original issue discount is determined in units of the Foreign Currency, (ii)
accrued original issue discount is translated into U.S. dollars as described in
"Payments of Interest in a Foreign Currency -- Accrual Method" above and (iii)
the amount of Foreign Currency gain or loss on the accrued original issue
discount is determined by comparing the amount of income received attributable
to the discount (either upon payment, maturity or an earlier disposition), as
translated into U.S. dollars at the rate of exchange on the date of such
receipt, with the amount of original issue discount accrued, as translated
above.
Premium and Market Discount
In the case of a Note with market discount, (i) market discount is
determined in units of the Foreign Currency, (ii) accrued market discount taken
into account upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note (other than accrued market
discount required to be taken into account currently) is translated into U.S.
dollars at the exchange rate on such disposition date (and no part of such
accrued market discount is treated as exchange gain or loss) and (iii) accrued
market discount currently includible in income by a U.S. Holder for any accrual
period is translated into U.S. dollars on the basis of the average exchange rate
in effect during such accrual period, and the exchange gain or loss is
determined upon the receipt of any partial principal payment or upon the sale,
exchange, retirement or other disposition of the Note in the manner described in
"Payments of Interest in a Foreign Currency -- Accrual Method" above with
respect to computation of exchange gain or loss on accrued interest.
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With respect to a Note issued with amortizable bond premium, such premium
is determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder should
recognize exchange gain or loss equal to the difference between the U.S. dollar
value of the bond premium amortized with respect to a period, determined on the
date the interest attributable to such period is received, and the U.S. dollar
value of the bond premium determined on the date of the acquisition of the Note.
Exchange of Foreign Currencies
A U.S. Holder will have a tax basis in any Foreign Currency received as
interest or on the sale, exchange or retirement of a Note equal to the U.S.
dollar value of such Foreign Currency, determined at the time the interest is
received or at the time of the sale, exchange or retirement. Any gain or loss
realized by a U.S. Holder on a sale or other disposition of Foreign Currency
(including its exchange for U.S. dollars or its use to purchase Notes) will be
ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes
on payments of principal, premium (if any) or interest (including original issue
discount, if any) on a Note, unless such non-U.S. Holder is a direct or indirect
10% or greater shareholder of the Company, a controlled foreign corporation
related to the Company or a bank receiving interest described in section
881(c)(3)(A) of the Code. To qualify for the exemption from taxation, the last
United States payor in the chain of payment prior to payment to a non-U.S.
Holder (the "Withholding Agent") must have received in the year in which a
payment of interest or principal occurs, or in either of the two preceding
calendar years, a statement that (i) is signed by the beneficial owner of the
Note under penalties of perjury, (ii) certifies that such owner is not a U.S.
Holder and (iii) provides the name and address of the beneficial owner. The
statement may be made on an IRS Form W-8 or a substantially similar form, and
the beneficial owner must inform the Withholding Agent of any change in the
information on the statement within 30 days of such change. If a Note is held
through a securities clearing organization or certain other financial
institutions, the organization or institution may provide a signed statement to
the Withholding Agent. However, in such case, the signed statement must be
accompanied by a copy of the IRS Form W-8 or the substitute form provided by the
beneficial owner to the organization or institution. The United States Treasury
has recently finalized regulations regarding the withholding and information
reporting rules discussed above. In general, these regulations do not alter the
substantive information reporting requirements but unify certification
procedures and forms and clarity and modify reliance standards. These
regulations generally are effective for payments made after December 31, 1998,
subject to certain transition rules. A Non-U.S. Holder should consult its own
advisor regarding the effect of the new Treasury Regulations.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on
any amount which constitutes capital gain upon retirement or disposition of a
Note, provided the gain is not effectively connected with the conduct of a trade
or business in the United States by the non-U.S. Holder. Certain other
exceptions may be applicable, and a non-U.S. Holder should consult its tax
advisor in this regard.
The Notes will not be includible in the estate of a non-U.S. Holder unless
the individual is a direct or indirect 10% or greater shareholder of the Company
or, at the time of such individual's death, payments in respect of the Notes
would have been effectively connected with the conduct by such individual of a
trade or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to
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the IRS, unless the U.S. Holder is an exempt recipient or establishes an
exemption. Compliance with the identification procedures described in the
preceding section would establish an exemption from backup withholding for those
non-U.S. Holders who are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker
must withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be reported
by the broker to the IRS, unless either (i) the broker determines that the
seller is an exempt recipient or (ii) the seller certifies its non-U.S. status
(and certain other conditions are met). Certification of the registered owner's
non-U.S. status would be made normally on an IRS Form W-8 under penalties of
perjury, although in certain cases it may be possible to submit other
documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a credit against such beneficial owner's
United States Federal income tax provided the required information is furnished
to the IRS.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale by the Company
to or through Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, BT Alex. Brown Incorporated, Morgan Stanley & Co. Incorporated and
Salomon Brothers Inc. The Agents, individually or in a syndicate, may purchase
Notes, as principal, from the Company from time to time for resale to investors
and other purchasers at varying prices relating to prevailing market prices at
the time of resale as determined by the applicable Agent or, if so specified in
the applicable Pricing Supplement, for resale at a fixed offering price. If
agreed to by the Company and an Agent, such Agent may also utilize its
reasonable efforts on an agency basis to solicit offers to purchase the Notes at
100% of the principal amount thereof, unless otherwise specified in the
applicable Pricing Supplement. The Company will pay a commission to an Agent,
ranging from .125% to .750% of the principal amount of each Note, depending upon
its stated maturity, sold through such Agent as an agent of the Company.
Commissions with respect to Notes with stated maturities in excess of 30 years
that are sold through an Agent as an agent of the Company will be negotiated
between the Company and such Agent at the time of such sale.
Unless otherwise specified in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price equal
to 100% of the principal amount thereof less a percentage of the principal
amount equal to the commission applicable to an agency sale of a Note of
identical maturity. An Agent may sell Notes it has purchased from the Company as
principal to certain dealers less a concession equal to all or any portion of
the discount received in connection with such purchase. Such Agent may allow,
and such dealers may reallow, a discount to certain other dealers. After the
initial offering of Notes, the offering price (in the case of Notes to be resold
on a fixed offering price basis), the concession and the reallowance may be
changed.
The Company reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject offers in whole or in part (whether placed
directly with the Company or through an Agent). Each Agent will have the right,
in its discretion reasonably exercised, to reject in whole or in part any offer
to purchase Notes received by it on an agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of
the purchase price of the Notes will be required to be made in immediately
available funds in the Specified Currency in The City of New York on the date of
settlement. See "Description of Notes -- General."
Upon issuance, the Notes will not have an established trading market.
Unless otherwise specified in the applicable Pricing Supplement, the Notes will
not be listed on any securities exchange. The Agents may from time to time
purchase and sell Notes in the secondary market, but the Agents are not
obligated to do so, and there can be no assurance that there will be a secondary
market for the Notes or that there will be liquidity in
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the secondary market if one develops. From time to time, the Agents may make a
market in the Notes, but the Agents are not obligated to do so and may
discontinue any market-making activity at any time.
In connection with the offering made hereby, the Agents may purchase and
sell the Notes in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover short positions created by
the Agents in connection with the offering. Stabilizing transactions consist of
certain bids or purchases for the purpose of preventing or retarding a decline
in the market price of the Notes, and short positions created by the Agents
involve the sale by the Agents of a greater aggregate principal amount of Notes
than they are required to purchase from the Company. The Agents also may impose
a penalty bid, whereby selling concessions allowed to broker-dealers in respect
of the Notes sold in the offering may be reclaimed by the Agents if such Notes
are repurchased by the Agents in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
Notes, which may be higher than the price that might otherwise prevail in the
open market; and these activities, if commenced, may be discontinued at any
time. These transactions may be effected in the over-the-counter market or
otherwise.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Company has
agreed to indemnify the Agents against, and to provide contribution with respect
to, certain liabilities (including liabilities under the Securities Act). The
Company has agreed to reimburse the Agents for certain other expenses.
In the ordinary course of its business, the Agents and their affiliates
have engaged and may in the future engage in investment and commercial banking
transactions with the Company and certain of its affiliates.
From time to time, the Company may issue and sell other Securities
described in the accompanying Prospectus, and the amount of Notes offered hereby
is subject to reduction as a result of such sales.
LEGAL MATTERS
The validity of the Notes offered by this Prospectus Supplement will be
passed upon for the Company by Waller Lansden Dortch & Davis, A Professional
Limited Liability Company, Nashville, Tennessee. Certain matters of Maryland law
will be passed upon for the Company by Brown & Wood LLP, Washington, D.C.
Certain legal matters relating to the Offering will be passed upon for the
Agents by Hogan & Hartson L.L.P., Washington, D.C.
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PROSPECTUS
JDN REALTY CORPORATION
$600,000,000
COMMON STOCK, COMMON STOCK WARRANTS, PREFERRED STOCK AND DEBT SECURITIES
JDN Realty Corporation (the "Company") operates as a real estate investment
trust ("REIT") under the Internal Revenue Code of 1986, as amended, and may from
time to time offer in one or more series (i) shares of common stock, par value
$.01 per share (the "Common Stock"), (ii) warrants to purchase Common Stock (the
"Common Stock Warrants"), (iii) shares of preferred stock, par value $.01 per
share (the "Preferred Stock"), or (iv) debt securities (the "Debt Securities"),
with an aggregate public offering price of up to $600,000,000 (or the equivalent
thereof in foreign currencies or currency units) in amounts, at prices and on
terms to be determined at the time of any such offering. The Company may offer
the Common Stock, Common Stock Warrants, Preferred Stock, and Debt Securities
(collectively, the "Securities") from time to time, separately or together, in
separate series, in amounts, at prices and on terms to be set forth in
supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Common Stock, the specific
number of shares and issuance price per share; (ii) in the case of Common Stock
Warrants, the duration, offering price, exercise price and detachability; (iii)
in the case of Preferred Stock, the specific number of shares, designation, any
dividend, liquidation, redemption, conversion, voting and other rights, and any
initial public offering price; and (iv) in the case of Debt Securities, the
specific title, aggregate principal amount, currency of denomination and
payment, form (which may be registered or bearer, or certificated or global),
authorized denominations, maturity, rate (or manner of calculation thereof) and
time of payment of interest, terms for redemption at the option of the Company
or repayment at the option of the holder, terms for any sinking fund payments,
terms for conversion into Common Stock, Preferred Stock or Debt Securities of
another series, and any initial public offering price. In addition, such
specific terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the Securities, in each case as may be appropriate
to preserve the status of the Company as a REIT for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain federal income tax considerations relating to, and any
listing on a securities exchange of, the Securities covered by such Prospectus
Supplement.
The Securities may be offered by the Company directly, through agents
designated from time to time by the Company, or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
Securities, their names, and any applicable purchase price, fee, commission or
discount arrangement between or among them will be set forth, or will be
calculable from the information set forth, in the applicable Prospectus
Supplement. See "Plan of Distribution." No Securities may be sold without
delivery of the applicable Prospectus Supplement describing the method and terms
of the offering of such series of Securities.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
---------------------
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
---------------------
THE DATE OF THIS PROSPECTUS IS OCTOBER 30, 1997
<PAGE> 69
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional
Offices of the Commission: Midwest Regional Office, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511; Northeast Regional
Office, 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of
such material may be obtained from the Public Reference Section of the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. The Commission maintains a Web site that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission. The address
of the Commission's Web site is: http://www.sec.gov. The Common Stock is listed
on the NYSE and such reports, proxy statements and other information concerning
the Company can be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005.
The Company has filed with the Commission a Registration Statement on Form
S-3 (the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Securities. The Prospectus and any
accompanying Prospectus Supplement do not contain all of the information
included 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, reference is hereby
made to the Registration Statement, including the exhibits and schedules
thereto. Statements contained in this Prospectus and any accompanying Prospectus
Supplement concerning the provisions or contents of any contract, agreement or
any other document referred to herein are not necessarily complete. With respect
to each such contract, agreement or document filed as an exhibit to the
Registration Statement, reference is made to such exhibit for a more complete
description of the matters involved, and each such statement shall be deemed
qualified in its entirety by such reference to the copy of the applicable
document filed with the Commission. The Registration Statement, including the
exhibits and schedules thereto, may be inspected without charge at the
Commission's principal office at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 and copies of it or any part thereof may be obtained from
such office, upon payment of the fees prescribed by the Commission.
---------------------
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents which have previously been filed by the Company
with the Commission under the Exchange Act (File No. 1-12844) are incorporated
herein by reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1996;
(b) Quarterly Report on Form 10-Q for the quarter ended March 31,
1997;
(b) Quarterly Report on Form 10-Q for the quarter ended June 30, 1997;
(c) Quarterly Report on Form 10-Q for the quarter ended September 30,
1997;
(d) Current Report on Form 8-K, dated March 3, 1997;
(e) Current Report on Form 8-K, dated March 12, 1997;
(f) Current Report on Form 8-K, dated March 25, 1997;
(g) Current Report on Form 8-K, dated May 30, 1997;
(h) Current Report on Form 8-K, dated August 1, 1997;
(i) Current Report on Form 8-K, dated September 26, 1997;
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(j) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act since the end of the Company's fiscal year ended December 31,
1996; and
(k) The description of the Common Stock contained in the Company's
Registration Statement on Form 8-A, filed with the Commission on February
23, 1994, and the information therein incorporated by reference contained
in the Company's Registration Statement on Form S-11 (File No. 33-73710).
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering of the Securities made hereby shall be deemed to be
incorporated in this Prospectus by reference and to be a part hereof from the
date of filing of such documents. Any statement contained herein, or in a
document incorporated or deemed to be incorporated by reference herein, shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein (or in an applicable Prospectus
Supplement) or in any subsequently filed document which also is or is deemed to
be incorporated by reference herein, modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus or any
Prospectus Supplement.
The Company will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, on the written
request of any such person, a copy of any or all of the documents incorporated
herein by reference, except the exhibits to such documents (unless such exhibits
are specifically incorporated by reference in such documents). Requests for such
copies should be directed to the Company, at 3340 Peachtree Road, Suite 1530,
Atlanta, Georgia 30326, Attention: Investor Relations, (404) 262-3252.
Unless the context otherwise requires, as used herein the terms "Company"
or "JDN" include JDN Realty Corporation, its predecessor, JDN Development
Company, Inc., subsidiaries of JDN Realty Corporation and JDN Development
Company, Inc., and joint ventures (including limited liability companies) in
which JDN Realty Corporation, JDN Development Company, Inc. or their
subsidiaries own an interest.
THE COMPANY
JDN Realty Corporation (the "Company"), which began operations in 1978, is
a real estate development company operating as a REIT and specializing in the
development and asset management of retail shopping centers anchored by
value-oriented retailers. As of September 30, 1997, the Company owned and
operated, either directly or through affiliated entities or joint ventures, 61
shopping center properties containing approximately 7.3 million square feet of
gross leasable area, located in eleven states, primarily in the Southeast.
The Company is one of the largest developers of Wal-Mart anchored shopping
centers in the United States. The Company credits much of its success to its
strong relationships with national, regional and local tenants which it has
developed during its years of operations. The Company continuously works to
improve existing tenant relationships and to develop new tenant relationships.
The Company's business objective is to increase its funds from operations
by (i) development of new shopping centers anchored by strong retail tenants
with high credit quality, (ii) redevelopment and expansion of its existing
properties, (iii) effective leasing and management of its properties and ground
leasing of adjacent outparcels, and (iv) acquisition of existing shopping
centers. The Company is a fully integrated real estate firm with in-house
development, redevelopment, expansion, leasing, property management and
acquisition expertise.
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement
accompanying this Prospectus, the Company intends to use the net proceeds from
the sale of the Securities for general corporate purposes, which may include the
development, redevelopment and acquisition of shopping center properties as
suitable opportunities arise, the expansion and improvement of certain
properties in the Company's portfolio and the repayment of outstanding
indebtedness.
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Pending such uses, net proceeds of any offering of Securities will be
invested in short-term, investment grade instruments, interest-bearing bank
accounts or certificates of deposit, consistent with the Company's qualification
as a REIT, the Company's Charter, as amended (the "Charter") and the Company's
agreements with its lenders.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges of
the Company for the years indicated:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------- ------------------------------------
1997 1996 1996 1995 1994 1993 1992
----- ----- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed
Charges........................ 2.81x 2.28x 2.29x 1.90x 1.64x * *
</TABLE>
- ---------------
* Prior to completion of the Company's initial public offering of its common
stock on March 29, 1994, the Company and its predecessor businesses were
privately held and operated in a manner to minimize net taxable income and to
fund any operating cash flow deficits through the sale of shopping center
properties. As a result, although the Company historically generated positive
cash flow, it had net losses for the years ended December 31, 1993 and 1992.
Consequently, the computation of the ratio of earnings to fixed charges for
such years indicates that earnings were inadequate to cover fixed charges by
approximately $1.2 million and $1.8 million for the years ended December 31,
1993 and 1992, respectively.
For purposes of calculating the ratio of earnings to fixed charges,
earnings have been calculated by adding fixed charges (excluding capitalized
interest) to income (loss) before income tax benefits, net gain (loss) on real
estate sales, extraordinary items and cumulative effect of changes in accounting
principles. Fixed charges consist of interest costs, whether expensed or
capitalized, and amortization of deferred debt costs. To date, the Company has
not issued any Preferred Stock; therefore, the ratios of earnings to fixed
charges and Preferred Stock dividend requirements are the same as the ratios of
earnings to fixed charges presented above.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue an aggregate of 170,000,000 shares of
capital stock, which includes 150,000,000 shares of Common Stock and 20,000,000
shares of Preferred Stock. On the date hereof, 15,493,501 shares of Common Stock
were outstanding and no shares of Preferred Stock were outstanding.
RESTRICTIONS ON OWNERSHIP
For the Company to qualify as a REIT under the Code in any taxable year,
(i) not more than 50% in value of its outstanding capital stock may be owned,
directly or indirectly (after application of certain complex attribution rules),
by five or fewer individuals (as defined in the Code) at any time during the
last half of its taxable year, and (ii) its stock must be beneficially owned by
100 or more persons during at least 335 days of a taxable year of 12 months or
during a proportionate part of a shorter taxable year. In order to ensure that
requirement (i) above is satisfied, the Board of Directors shall refuse to
transfer shares of the Common Stock to any person whose acquisition of such
shares would result in the direct or indirect ownership of more than 8% either
in number or value of the outstanding Common Stock and to transfer shares of
Preferred Stock to any person whose acquisition of such shares would result in
the direct or indirect ownership of more than 8% either in number or value.
In connection with the foregoing, if the Board of Directors shall, at any
time and in good faith, believe that direct or indirect ownership (as determined
under applicable federal tax attribution rules) of at least 8% or more either in
number or value of the outstanding capital stock has or may become concentrated
in the hands of one beneficial owner (other than the Nichols, their family and
certain affiliates), the Board of Directors shall refuse to transfer or issue
capital stock to a person whose acquisition of such capital stock
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would cause a beneficial holder to hold in excess of 8% in value of the
outstanding capital stock, subject to certain exceptions specified in the
Charter. Further, any transfer of capital stock that would create a beneficial
owner of more than 8% of the outstanding capital stock (other than to the
Nichols, their family and certain affiliates, and certain exceptions specified
in the Charter) shall be deemed void and the intended transferee shall be deemed
never to have had an interest therein. As of December 31, 1996, the Nichols,
members of their family and certain affiliates beneficially owned in excess of
8% in value of the outstanding Common Stock of the Company and may continue to
do so. The Nichols, members of their family and certain affiliates may acquire
additional shares of Common Stock but not such that any five individuals (as
defined in the Code), taking into account the 8% limit, would beneficially own
more than 49.9% of the Company's outstanding Common Stock.
The Board of Directors is entitled to waive the ownership limit with
respect to a particular stockholder if evidence satisfactory to the Board of
Directors and the Company's tax counsel 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 waiver, the Board of Directors may require opinions of counsel
satisfactory to it and/or an undertaking from the stockholder with respect to
preserving the REIT status of the Company.
If at any time there is a transfer in violation of such restrictions, those
shares of outstanding capital stock in excess of 8% either in number or value of
the Company's outstanding Common Stock, and those shares of outstanding
Preferred Stock in excess of 8% either in number or value of the Company's
outstanding Preferred Stock, subject to the foregoing exceptions ("Excess
Shares"), shall be deemed to have been transferred to the Company, as trustee
for the benefit of such persons to whom the Excess Shares are later transferred.
Subject to the Company's right to purchase the Excess Shares, the interest in
the trust representing the Excess Shares shall be freely transferable by the
intended transferee at a price that does not exceed the price paid by the
intended transferee for the Excess Shares. Excess Shares shall have no voting
rights, and shall not be considered for the purpose of any shareholder vote or
determining a quorum, but shall continue to be reflected as issued and
outstanding stock. No dividends shall be paid with respect to Excess Shares. The
Company shall have the right to purchase Excess Shares for the lesser of the
amount paid by the intended transferee for the Excess Shares or the market
price. The market price for any capital stock so purchased, shall be equal to
the fair market value of such Excess Shares reflected in (i) the closing sales
price for the capital stock, if then listed on only one national securities
exchange, or (ii) the average closing sales price of such capital stock if then
listed on more than one national securities exchange, or (iii) if the capital
stock is not then listed on a national securities exchange, the latest bid
quotation for the capital stock if then traded over-the-counter, as of the day
immediately preceding the date on which notices of such purchase are sent by the
Company. If no such closing sales prices or quotations are available, the
purchase price shall equal the net asset value of such capital stock as
determined by the Board of Directors in good faith.
All persons who own a specified percentage (or more) of the outstanding
capital stock of the Company must file a certificate with the Company containing
information regarding their ownership of stock as set forth in the Treasury
Regulations. Under current Treasury Regulations, the percentage is set between
one-half of one percent and five percent, depending on the number of record
holders of stock. In addition, each stockholder shall, upon demand, be required
to disclose to the Company in writing such information with respect to the
direct, indirect, and constructive ownership of shares of stock of the Company
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.
All certificates representing shares of capital stock bear a legend
referring to the restrictions described above.
BUSINESS COMBINATIONS
Under the Maryland General Corporation Law, certain "business combinations"
(including a merger, consolidation, share exchange, or, in certain
circumstances, an asset transfer or issuance or reclassification of equity
securities) between a Maryland corporation and any person who beneficially owns
10% or more of the corporation's stock (an "Interested Shareholder") must be:
(a) recommended by the corporation's board of
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directors; and (b) approved by the affirmative vote of at least (i) 80% of the
corporation's outstanding shares entitled to vote and (ii) two-thirds of the
outstanding shares entitled to vote which are not held by the Interested
Shareholder with whom the business combination is to be effected, unless, among
other things, the corporation's holders of capital stock receive a minimum price
(as defined in the statute) for their shares and the consideration is received
in cash or in the same form as previously paid by the Interested Shareholder for
his shares. In addition, an Interested Shareholder or affiliate thereof may not
engage in a business combination with the corporation for a period of five years
following the most recent date the person became an Interested Shareholder.
These provisions of Maryland law do not apply, however, to business combinations
that are approved by the board of directors of a Maryland corporation prior to a
person's becoming an Interested Shareholder.
CONTROL SHARE ACQUISITIONS
The Maryland General Corporation Law provides that "control shares" of a
Maryland corporation acquired in a "control share acquisition" may not be voted
except to the extent approved by a vote of two-thirds of all the corporation's
shares entitled to vote on the matter, excluding all interested shares. "Control
shares" are shares which, if aggregated with all other shares owned by the
person or in respect of which that person is entitled to exercise or direct the
exercise of voting power, except solely by virtue of a revocable proxy, would
entitle the acquirer to vote (i) 20% or more but less than one-third, (ii)
one-third or more but less than a majority, or (iii) a majority or more of the
outstanding shares entitled to vote. Control shares do not include shares which
the acquiring person is entitled to vote as a result of having previously
obtained the required shareholder approval. A "control share acquisition" means
the acquisition of control shares, subject to certain exceptions.
A person who has made or proposes to make a control share acquisition and
who has undertaken to reimburse certain expenses of the corporation and has
obtained a definitive financing agreement with a responsible financial
institution providing for any amount of financing not to be provided by the
acquiring person may compel the corporation's board of directors to call a
special meeting of shareholders to be held within 50 days of demand to consider
the voting rights of the shares. If no request for a meeting is made, the
corporation may itself present the question at any shareholders meeting.
Subject to certain conditions and limitations, if the voting rights of the
control shares were considered and not approved, the corporation may redeem any
or all of the control shares, except those for which voting rights have
previously been approved, for fair value determined, without regard to absence
of voting rights, as of the date of the last control share acquisition by the
acquirer or as of the date of any meeting of shareholders at which the voting
rights of such shares are considered and not approved. If voting rights for
control shares are approved at a shareholders meeting and the acquirer is
entitled to vote a majority of the shares entitled to vote, prior to the control
share acquisition all other shareholders may exercise appraisal rights, unless
the charter or bylaws of the corporation provide otherwise. The fair value of
the shares as determined for purposes of such appraisal rights may not be less
than the highest price per share paid by the acquiring person in the control
share acquisition. Certain limitations and restrictions otherwise applicable to
the exercise of dissenters' rights do not apply in the context of a control
share acquisition.
The control share acquisition statute does not apply to shares acquired in
a merger, consolidation or share exchange if the corporation is a party to the
transaction, or to the acquisitions approved or exempted by the charter or
bylaws of the corporation prior to a control share acquisition.
The limitation on ownership of the Company's Stock set forth in the
Charter, as well as the provisions of Maryland law described above, could have
the effect of discouraging offers to acquire the Company and of increasing the
difficulty of consummating any such offer.
DESCRIPTION OF COMMON STOCK
The Company is authorized to issue 150,000,000 shares of Common Stock. On
the date hereof, 15,493,501 shares of Common Stock were outstanding, held by
approximately 416 record holders.
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The following description of the Common Stock sets forth certain general
terms and provisions of the Common Stock to which any Prospectus Supplement may
relate, including a Prospectus Supplement providing that Common Stock will be
issuable upon conversion of Debt Securities or Preferred Stock of the Company or
upon the exercise of Common Stock Warrants issued by the Company. The statements
below describing the Common Stock are in all respects subject to and qualified
in their entirety by reference to the applicable provisions of the Charter.
Holders of shares of Common Stock are entitled to receive such dividends as
the Board of Directors may declare out of funds legally available for the
payment of dividends. Upon issuance, the shares of Common Stock will be fully
paid and nonassessable and have no preferences or conversion, exchange or
preemptive rights. In the event of any liquidation, dissolution or winding-up of
the Company, the holders of shares of Common Stock are entitled to share ratably
in any of the Company's assets remaining after the satisfaction of all
obligations and liabilities of the Company and after required distributions to
holders of Preferred Stock, if any. Each share is entitled to one vote on all
matters voted upon by the holders of Common Stock. Holders of shares of Common
Stock have no cumulative voting rights.
EXCHANGE LISTING
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol JDN.
DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN
The Company initially reserved 500,000 shares of Common Stock for issuance
under its Dividend Reinvestment and Stock Purchase Plan (the "Plan") to provide
record owners of the Company's Common Stock with a method of investing dividends
and other distributions paid in cash in additional shares of the Company's
Common Stock. The Company may issue original issue shares under the Plan or,
from time to time, direct First Union National Bank of North Carolina, as the
Company's agent under the Plan, to repurchase shares of the Company's Common
Stock in the open market for sale under the Plan. To the extent shares of Common
Stock purchased under the Plan are purchased from the Company, the Company will
receive additional funds to be used for its general corporate purposes. On the
date hereof, 492,775 shares of Common Stock are reserved for issuance under this
plan.
EMPLOYEE STOCK PURCHASE PLAN
The Company initially reserved 100,000 shares of Common Stock for issuance
under the JDN Corporation 1995 Employee Stock Purchase Plan, which provides an
opportunity for eligible employees of JDN Realty Corporation and its
subsidiaries to acquire an interest in the Company through acquisitions of
shares of the Company's Common Stock at a discount. The proceeds of shares
purchased under this plan will be used for the Company's general corporate
purposes. On the date hereof, 99,168 shares of Common Stock are reserved for
issuance under this plan.
RESTRICTIONS ON OWNERSHIP
The Common Stock is subject to certain restrictions on ownership described
above under "Description of Capital Stock -- Restrictions on Ownership".
TRANSFER AGENT
The transfer agent and registrar for the Company's Common Stock is First
Union National Bank of North Carolina ("First Union").
DESCRIPTION OF COMMON STOCK WARRANTS
The Company may issue Common Stock Warrants for the purchase of Common
Stock. Common Stock Warrants may be issued independently or together with any
other Securities offered pursuant to any Prospectus Supplement and may be
attached to or separate from such Securities. Each series of Common
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Stock Warrants will be issued under a separate warrant agreement (each, a
"Warrant Agreement") to be entered into between the Company and the warrant
recipient or, if the recipients are numerous, a warrant agent identified in the
applicable Prospectus Supplement (the "Warrant Agent"). The Warrant Agent, if
engaged, will act solely as an agent of the Company in connection with the
Common Stock Warrants of such series and will not assume any obligation or
relationship of agency or trust for or with any holders or beneficial owners of
Common Stock Warrants. Further terms of the Common Stock Warrants and the
applicable Warrant Agreements will be set forth in the applicable Prospectus
Supplement.
The applicable Prospectus Supplement will describe the terms of any Common
Stock Warrants in respect of which this Prospectus is being delivered,
including, where applicable, the following: (1) the title of such Common Stock
Warrants; (2) the aggregate number of such Common Stock Warrants; (3) the price
or prices at which such Common Stock Warrants will be issued; (4) the
designation, number and terms of the shares of Common Stock purchasable upon
exercise of such Common Stock Warrants; (5) the designation and terms of the
other Securities with which such Common Stock Warrants are issued and the number
of such Common Stock Warrants issued with such offered Securities; (6) the date,
if any, on and after which such Common Stock Warrants and the related Common
Stock will be separately transferable; (7) the price at which each share of
Common Stock purchasable upon exercise of such Common Stock Warrants may be
purchased; (8) the date on which the right to exercise such Common Stock
Warrants shall commence and the date on which such right shall expire; (9) the
minimum or maximum amount of such Common Stock Warrants which may be exercised
at any one time; (10) information with respect to book-entry procedures, if any;
(11) a discussion of certain federal income tax considerations relevant to a
holder of such Common Stock Warrants; and (12) any other terms of such Common
Stock Warrants, including terms, procedures and limitations relating to the
exchange and exercise of such Common Stock Warrants.
Reference is made to the section captioned "Description of Common Stock"
for a general description of the Common Stock to be acquired upon the exercise
of the Common Stock Warrants. Additionally, the section captioned "Description
of Capital Stock" includes a description of certain restrictions on transfer of
the Common Stock.
DESCRIPTION OF PREFERRED STOCK
GENERAL
The Company is authorized to issue 20,000,000 shares of Preferred Stock,
par value $.01 per share, none of which were outstanding on the date hereof.
The following description of the Preferred Stock sets forth certain
anticipated general terms and provisions of the Preferred Stock to which any
Prospectus Supplement may relate. Certain other terms of any series of Preferred
Stock (which terms may be different than those stated below) will be described
in the Prospectus Supplement to which such series relates. The statements below
describing the Preferred Stock are in all respects subject to and qualified in
their entirety by reference to the applicable provisions of the applicable
Prospectus Supplement and Charter (including the amendment describing the
designations, rights, and preferences of each series of Preferred Stock) and
Bylaws.
Subject to limitations prescribed by Maryland law and the Charter, the
Company's Board of Directors is authorized to fix the number of shares
constituting each series of Preferred Stock and the designations and powers,
preferences and relative, participating, optional or other special rights and
qualifications, limitations or restrictions thereof, including such provisions
as may be desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such other subjects or
matters as may be fixed by resolution of the Board of Directors or the duly
authorized committee thereof. The Preferred Stock will, when issued, be fully
paid and nonassessable and will have no preemptive rights.
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including: (1) the title and stated
value of such Preferred Stock; (2) the number of shares of such Preferred Stock
offered, the liquidation preference per share and the offering price of such
Preferred
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Stock; (3) the dividend rate(s), period(s) and or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Stock; (4) the date from
which dividends on such Preferred Stock shall accumulate, if applicable; (5) the
procedures for any auction and remarketing, if any, for such Preferred Stock;
(6) the provision for a sinking fund, if any, for such Preferred Stock; (7) the
provisions for redemption, if applicable, of such Preferred Stock; (8) any
listing of such Preferred Stock on any securities exchange; (9) the terms and
conditions, if applicable, upon which such Preferred Stock will be convertible
into Common Stock, including the conversion price (or manner of calculation
thereof); (10) a discussion of certain federal income tax considerations
relevant to a holder of such Preferred Stock; (11) the relative ranking and
preferences of such Preferred Stock as to dividend rights and rights upon
liquidation, dissolution or winding up of the affairs of the Company; (12) any
limitations on issuance of any series of Preferred Stock ranking senior to or on
a parity with such series of Preferred Stock as to dividend rights and rights
upon liquidation, dissolution or winding up of the affairs of the Company; (13)
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 and (14) any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock.
RANK
Unless otherwise specified in the applicable Prospectus Supplement, the
Preferred Stock will, with respect to dividend rights and rights upon
liquidation, dissolution or winding up of the Company, rank (i) senior to all
classes or series of Common Stock of the Company, and to all equity and debt
securities which are specifically designated as ranking junior to such Preferred
Stock with respect to dividend rights or rights upon liquidation, dissolution or
winding up of the Company; (ii) on a parity with all equity and debt securities
issued by the Company the terms of which specifically provide that such equity
and debt securities rank on a parity with the Preferred Stock with respect to
dividend rights or rights upon liquidation, dissolution or winding up of the
Company; and (iii) junior to all equity and debt securities issued by the
Company the terms of which specifically provide that such equity and debt
securities rank senior to the Preferred Stock with respect to dividend rights or
rights upon liquidation, dissolution or winding up of the Company.
DIVIDENDS
Holders of shares of the Preferred Stock of each series shall be entitled
to receive, when, as and if declared by the Board of Directors of the Company,
out of assets of the Company legally available for payment, cash dividends (or
dividends in kind or in other property if expressly permitted and described in
the applicable Prospectus Supplement) at such rates and on such dates as will be
set forth in the applicable Prospectus Supplement. Each such dividend shall be
payable to holders of record as they appear on the stock transfer books of the
Company on such record dates as shall be fixed by the Board of Directors of the
Company.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are noncumulative, then the holders of such
series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
Unless otherwise specified in the applicable Prospectus Supplement, if any
shares of the Preferred Stock of any series are outstanding, no full dividends
shall be declared or paid or set apart for payment on the Preferred Stock of the
Company of any other series ranking, as to dividends, on a parity with or junior
to the Preferred Stock of such series for any period unless full dividends
(which include all unpaid dividends in the case of cumulative dividend Preferred
Stock) have been or contemporaneously are declared and paid or declared and a
sum sufficient for the payment thereof set apart for such payment on the
Preferred Stock of such series.
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When dividends are not paid in full (or a sum sufficient for such full
payment is not so set apart) upon the shares of Preferred Stock of any series
and the shares of any other series of Preferred Stock ranking on a parity as to
dividends with the Preferred Stock of such series, all dividends declared upon
shares of Preferred Stock of such series and any other series of Preferred Stock
ranking on a parity as to dividends with such Preferred Stock shall be declared
pro rata among the holders of such series. No interest, or sum of money in lieu
of interest, shall be payable in respect of any dividend payment or payments on
Preferred Stock of such series which may be in arrears.
Until required dividends are paid, no dividends (other than in Common Stock
or other capital stock ranking junior to the Preferred Stock of such series as
to dividends and upon liquidation) shall be declared or paid or set aside for
payment or other distribution shall be declared or made upon the Common Stock or
any other capital stock of the Company ranking junior to or on a parity with the
Preferred Stock of such series as to dividends or upon liquidation, nor shall
any Common Stock or any other capital stock of the Company ranking junior to or
on a parity with the Preferred Stock of such series as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any shares of any such stock) by the Company (except by conversion
into or exchange for other capital stock of the Company ranking junior to the
Preferred Stock of such series as to dividends and upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of Preferred Stock of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the shares of
Preferred Stock will be subject to mandatory redemption or redemption at the
option of the Company, as a whole or in part, in each case upon the terms, at
the times and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that is
subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of capital stock of the Company, the terms of such
Preferred Stock may provide that, if no such capital stock shall have been
issued or to the extent the net proceeds from any issuance are insufficient to
pay in full the aggregate redemption price then due, such Preferred Stock shall
automatically and mandatorily be converted into shares of the applicable capital
stock of the Company pursuant to conversion provisions specified in the
applicable Prospectus Supplement.
So long as any dividends on shares of any series of the Preferred Stock of
the Company ranking on a parity as to dividends and distributions of assets with
such series of the Preferred Stock are in arrears, no shares of any such series
of the Preferred Stock of the Company will be redeemed (whether by mandatory or
optional redemption) unless all such shares are simultaneously redeemed, and the
Company will not purchase or otherwise acquire any such shares; provided,
however, that the foregoing will not prevent the purchase or acquisition of such
shares of Preferred Stock to preserve the REIT status of the Company or pursuant
to a purchase or exchange offer made on the same terms to holders of all
outstanding shares of Preferred Stock of such series and, unless the full
cumulative dividends on all outstanding shares of any cumulative Preferred Stock
of such series and any other stock of the Company ranking on a parity with such
series as to dividends and upon liquidation shall have been paid or
contemporaneously are declared and paid for all past dividend periods, the
Company shall not purchase or otherwise acquire directly or indirectly any
shares of Preferred Stock of such series (except by conversion into or exchange
for stock of the Company ranking junior to the Preferred Stock of such series as
to dividends and upon liquidation); provided, however, that the foregoing will
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not prevent the purchase or acquisition of such shares of Preferred Stock to
preserve the REIT status of the Company or pursuant to a purchase or exchange
offer made on the same terms to holders of all outstanding shares of Preferred
Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
by such holders (with adjustments to avoid redemption of fractional shares) or
any other equitable method determined by the Company that will not result in the
issuance of any Excess Shares.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of a share of Preferred
Stock of any series to be redeemed at the address shown on the stock transfer
books of the Company. If notice of redemption of any shares of Preferred Stock
has been given and if the funds necessary for such redemption have been set
aside by the Company in trust for the benefit of the holders of any shares of
Preferred Stock so called for redemption, then from and after the redemption
date dividends will cease to accrue on such shares of Preferred Stock, such
shares of Preferred Stock shall no longer be deemed outstanding and all rights
of the holders of such shares will terminate, except the right to receive the
redemption price.
LIQUIDATION PREFERENCE
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company, then, before any distribution or payment shall be
made to the holders of Common Stock, or any other class or series of capital
stock of the Company ranking junior to the Preferred Stock in the distribution
of assets upon any liquidation, dissolution or winding up of the Company, the
holders of each series of Preferred Stock shall be entitled to receive out of
assets of the Company legally available for distribution to shareholders
liquidating distributions in the amount of the liquidation preference per share
(set forth in the applicable Prospectus Supplement), plus an amount equal to all
dividends accrued and unpaid thereon (which shall not include any accumulation
in respect of unpaid dividends for prior dividend periods if such Preferred
Stock does not have a cumulative dividend). After payment of the full amount of
the liquidating distributions to which they are entitled, the holders of shares
of Preferred Stock will have no right or claim to any of the remaining assets of
the Company. In the event that, upon any such voluntary or involuntary
liquidation, dissolution or winding up, the legally available assets of the
Company are insufficient to pay the amount of the liquidating distributions on
all outstanding shares of Preferred Stock and the corresponding amounts payable
on all shares of other classes or series of capital stock of the Company ranking
on a parity with the Preferred Stock in the distribution of assets upon
liquidation, dissolution or winding up, then the holders of the Preferred Stock
and all other such classes or series of capital stock shall share ratably in any
such distribution of assets in proportion to the full liquidating distributions
to which they would otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all holders of
shares of Preferred Stock, the remaining assets of the Company shall be
distributed among the holders of any other classes or series of capital stock
ranking junior to the Preferred Stock upon liquidation, dissolution or winding
up, according to their respective rights and preferences and in each case
according to their respective number of shares.
VOTING RIGHTS
Holders of the Preferred Stock will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Any series of Preferred Stock may provide that, so long as any shares of
such series of Preferred Stock remain outstanding, the holders of such series
may vote as a separate class on certain specified matters, which may include
changes in the Company's capitalization, amendments to the Charter, and mergers
and dispositions.
The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred
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Stock shall have been redeemed or called for redemption upon proper notice and
sufficient funds shall have been irrevocably deposited in trust to effect such
redemption.
The provisions of a series of Preferred Stock may provide for additional
rights, remedies, and privileges if dividends on such series are in arrears for
specified periods, which rights and privileges will be described in the
applicable Prospectus Supplement.
Under Maryland law, notwithstanding anything to the contrary set forth
above, holders of each series of Preferred Stock will be entitled to vote upon a
proposed amendment to the Charter, whether or not entitled to vote thereon by
the Charter, if the amendment would alter the contract rights, as set forth in
the Charter, of their shares of stock.
CONVERSION RIGHTS
The terms and conditions, if any, upon which shares of any series of
Preferred Stock are convertible into Common Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include the
number of shares of Common Stock into which the Preferred Stock is convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring an adjustment of the
conversion price and provisions affecting conversion in the event of the
redemption of such Preferred Stock.
RESTRICTIONS ON OWNERSHIP
The Preferred Stock is subject to certain restrictions on ownership
described above under "Description of Capital Stock -- Restrictions on
Ownership".
DESCRIPTION OF DEBT SECURITIES
The Company may issue Debt Securities under one or more trust indentures
(each an "Indenture") to be executed by the Company and one or more trustees
(each a "Trustee") meeting the requirements of a trustee under the Trust
Indenture Act of 1939, as amended (the "TIA"). The Indentures will be qualified
under the TIA.
The following description sets forth certain anticipated general terms and
provisions of the Debt Securities to which any Prospectus Supplement may relate.
The particular terms of the Debt Securities offered by any Prospectus Supplement
(which terms may be different than those stated below) and the extent, if any,
to which such general provisions may apply to the Debt Securities so offered
will be described in the Prospectus Supplement relating to such Debt Securities.
Accordingly, for a description of the terms of a particular issue of Debt
Securities, reference must be made to both the Prospectus Supplement relating
thereto and the following description. Forms of the Senior Indenture (as defined
herein) and the Subordinated Indenture (as defined herein) have been filed as
exhibits to the Registration Statement of which this Prospectus is a part.
GENERAL
The Debt Securities will be direct obligations of the Company and may be
either senior Debt Securities ("Senior Securities") or subordinated Debt
Securities ("Subordinated Securities"). The indebtedness represented by
Subordinated Securities will be subordinated in right of payment to the prior
payment in full of the Senior Debt (as defined in the applicable Indenture) of
the Company. Senior Securities and Subordinated Securities will be issued
pursuant to separate indentures (respectively, a "Senior Indenture" and a
"Subordinated Indenture"), in each case between the Company and a Trustee.
Except as set forth in the applicable Indenture and described in a
Prospectus Supplement relating thereto, the Debt Securities may be issued
without limit as to aggregate principal amount, in one or more series, secured
or unsecured, in each case as established from time to time in or pursuant to
authority granted by a resolution of the Board of Directors of the Company or as
established in the applicable Indenture. All
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Debt Securities of one series need not be issued at the same time and, unless
otherwise provided, a series may be reopened, without the consent of the holders
of the Debt Securities of such series, for issuances of additional Debt
Securities of such series.
The Prospectus Supplement relating to any series of Debt Securities being
offered will contain the applicable terms thereof, including, for example:
(1) the title of such Debt Securities and whether such Debt Securities
are Senior Securities or Subordinated Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon declaration of
acceleration of the maturity thereof, or (if applicable) the portion of the
principal amount of such Debt Securities which is convertible into Common
Stock or Preferred Stock, or the method by which any such portion shall be
determined;
(4) if convertible, any applicable limitations on the ownership or
transferability of the Common Stock or Preferred Stock into which such Debt
Securities are convertible;
(5) the date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the method
by which such rate or rates shall be determined, at which such Debt
Securities will bear interest, if any;
(7) the date or dates, or the method for determining such date or
dates, from which any interest will accrue, the interest payment dates on
which any such interest will be payable, the regular record dates for such
interest payment dates, or the method by which any such date shall be
determined, the person to whom such interest shall be payable, and the
basis upon which interest shall be calculated if other than that of a
360-day year of twelve 30-day months;
(8) the place or places where the principal of (and premium, if any)
and interest, if any, on such Debt Securities will be payable, such Debt
Securities may be surrendered for conversion or registration of transfer or
exchange and notices or demands to or upon the Company in respect of such
Debt Securities and the applicable Indenture may be served;
(9) the period or periods within which, the price or prices at which
and the terms and conditions upon which such Debt Securities may be
redeemed, as a whole or in part, at the option of the Company, if the
Company is to have such an option;
(10) the obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or analogous
provision or at the option of a holder thereof, and the period or periods
within which, the price or prices at which and the terms and conditions
upon which such Debt Securities will be redeemed, repaid or purchased, as a
whole or in part, pursuant to such obligation;
(11) if other than U.S. dollars, the currency or currencies in which
such Debt Securities are denominated and payable, which may be a foreign
currency or units of two or more foreign currencies or a composite currency
or currencies, and the terms and conditions relating thereto;
(12) whether the amount of payments of principal of (and premium, if
any) or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit
or units or composite currency or currencies) and the manner in which such
amounts shall be determined;
(13) any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to the Events of Default or covenants set
forth in the Indenture;
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(14) any provisions for collateral security for repayment of such Debt
Securities;
(15) whether such Debt Securities will be issued in certificated
and/or book-entry form;
(16) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof and terms and conditions relating thereto;
(17) the applicability, if any, of defeasance and covenant defeasance
provisions of the applicable Indenture;
(18) the terms, if any, upon which such Debt Securities may be
convertible into Common Stock or Preferred Stock of the Company and the
terms and conditions upon which such conversion will be effected,
including, without limitation, the initial conversion price or rate and the
conversion period;
(19) whether and under what circumstances the Company will pay
additional amounts as contemplated in the Indenture on such Debt Securities
in respect of any tax, assessment or governmental charge and, if so,
whether the Company will have the option to redeem such Debt Securities in
lieu of making such payment; and
(20) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture.
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities"). Special federal income tax, accounting
and other considerations applicable to Original Issue Discount Securities will
be described in the applicable Prospectus Supplement.
Except as set forth in the applicable Indenture, the applicable Indenture
will not contain any provisions that would limit the ability of the Company to
incur indebtedness or that would afford Holders of Debt Securities protection in
the event of a highly leveraged or similar transaction involving the Company or
in the event of a change of control. Restrictions on ownership and transfers of
the Company's Common Stock and Preferred Stock are designed to preserve its
status as a REIT and, therefore, may act to prevent or hinder a change of
control. See "Description of Capital Stock -- Restrictions on Ownership."
Reference is made to the applicable Prospectus Supplement for information with
respect to any deletions from, modifications of or additions to the Events of
Default or covenants of the Company that are described below, including any
addition of a covenant or other provision providing event risk or similar
protection.
MERGER, CONSOLIDATION OR SALE
It is expected that the Indenture will provide that the Company may
consolidate with, or sell, lease or convey all or substantially all of its
assets to, or merge with or into, any other corporation, provided that (a)
either the Company shall be the continuing corporation, or the successor
corporation (if other than the Company) formed by or resulting from any such
consolidation or merger or which shall have received the transfer of such assets
shall expressly assume payment of the principal of (and premium, if any), and
interest on, all of the applicable Debt Securities and the due and punctual
performance and observance of all of the covenants and conditions contained in
the applicable Indenture; (b) immediately after giving effect to such
transaction and treating any indebtedness which becomes an obligation of the
Company or any subsidiary as a result thereof as having been incurred by the
Company or such subsidiary at the time of such transaction, no Event of Default
under the applicable Indenture, and no event which, after notice or the lapse of
time, or both, would become such an Event of Default, shall have occurred and be
continuing; and (c) an officer's certificate and legal opinion covering such
conditions shall be delivered to the Trustee.
COVENANTS
The Indenture will contain covenants requiring the Company to take certain
actions and prohibiting the Company from taking certain actions. The covenants
with respect to any series of Debt Securities will be described in the
Prospectus Supplement relating thereto.
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EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture will describe specific "Events of Default" with respect to
any series of Debt Securities issued thereunder. Such "Events of Default" are
likely to include (with grace and cure periods): (i) default in the payment of
any installment of interest on any Debt Security of such series; (ii) default in
the payment of principal of (or premium, if any, on) any Debt Security of such
series at its maturity; (iii) default in making any required sinking fund
payment for any Debt Security of such series; (iv) default in the performance or
breach of any other covenant or warranty of the Company contained in the
applicable Indenture (other than a covenant added to the Indenture solely for
the benefit of a series of Debt Securities issued thereunder other than such
series), continued for a specified period of days after written notice as
provided in the applicable Indenture; (v) default in the payment of specified
amounts of indebtedness of the Company or any mortgage, indenture or other
instrument under which such indebtedness is issued or by which such indebtedness
is secured, such default having occurred after the expiration of any applicable
grace period and having resulted in the acceleration of the maturity of such
indebtedness, but only if such indebtedness is not discharged or such
acceleration is not rescinded or annulled and (vi) certain events of bankruptcy,
insolvency or reorganization, or court appointment of a receiver, liquidator or
trustee of the Company or any Significant Subsidiary or either of its property.
If an Event of Default under any Indenture with respect to Debt Securities
of any series at the time outstanding occurs and is continuing, then in every
such case the applicable Trustee or the holders of not less than 25% of the
principal amount of the outstanding Debt Securities of that series will have the
right to declare the principal amount (or, if the Debt Securities of that series
are Original Issue Discount Securities or indexed securities, such portion of
the principal amounts may be specified in the terms thereof) of all the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Company (and to the applicable Trustee if given by the holders).
However, at any time after such a declaration of acceleration with respect to
Debt Securities of such series (or of all Debt Securities then outstanding under
any Indenture, as the case may be) has been made, but before a judgment or
decree for payment of the money due has been obtained by the applicable Trustee,
the holders of not less than a majority in principal amount of outstanding Debt
Securities of such series (or of all Debt Securities then outstanding under the
applicable Indenture, as the case may be) may rescind and annul such declaration
and its consequences if (a) the Company shall have deposited with the applicable
Trustee all required payments of the principal of (and premium, if any) and
interest on the Debt Securities of such series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be), plus certain
fees, expenses, disbursements and advances of the applicable Trustee and (b) all
events of default, other than the non-payment of accelerated principal (or
specified portion thereof), with respect to Debt Securities of such series (or
of all Debt Securities then outstanding under the applicable Indenture, as the
case may be) have been cured or waived as provided in such Indenture. Each
Indenture also will provide that the holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under the applicable Indenture, as the case may
be) may waive any past default with respect to such series and its consequences,
except a default (x) in the payment of the principal of (or premium, if any) or
interest on any Debt Security of such series or (y) in respect of a covenant or
provision contained in the applicable Indenture that cannot be modified or
amended without the consent of the holder of each outstanding Debt Security
affected thereby.
Each Trustee will be required to give notice to the holders of Debt
Securities within 90 days of a default under the applicable Indenture unless
such default shall have been cured or waived; provided, however, that such
Trustee may withhold notice to the holders of any series of Debt Securities of
any default with respect to such series (except a default in the payment of the
principal of (or premium, if any) or interest on any Debt Security of such
series or in the payment of any sinking fund installment in respect of any Debt
Security of such series) if specified responsible officers of such Trustee
consider such withholding to be in the interest of such holders.
Each Indenture will provide that no holders of Debt Securities of any
series may institute any proceedings, judicial or otherwise, with respect to
such Indenture or for any remedy thereunder, except in the cases of failure of
the applicable Trustee, for 60 days, to act after it has received a written
request to institute proceedings in respect of a Event of Default from the
holders of not less than 25% in principal amount of the
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outstanding Debt Securities of such series, as well as an offer of indemnity
reasonably satisfactory to it. This provision will not prevent, however, any
holder of Debt Securities from instituting suit for the enforcement of payment
of the principal of (and premium, if any) and interest on such Debt Securities
at the respective due dates thereof.
Subject to provisions in each Indenture relating to its duties in case of
default, no Trustee will be under any obligation to exercise any of its rights
or powers under an Indenture at the request or direction of any holders of any
series of Debt Securities then outstanding under such Indenture, unless such
holders shall have offered to the Trustee thereunder reasonable security or
indemnity. The holders of not less than a majority in principal amount of the
outstanding Debt Securities of any series (or of all Debt Securities then
outstanding under an Indenture, as the case may be) shall have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the applicable Trustee, or of exercising any trust or power
conferred upon such Trustee. However, a Trustee may refuse to follow any
direction which is in conflict with any law or the applicable Indenture, which
may involve such Trustee in personal liability or which may be unduly
prejudicial to the holders of Debt Securities of such series not joining
therein.
Within 120 days after the close of each fiscal year, the Company will be
required to deliver to each Trustee a certificate, signed by one of several
specified officers, stating whether or not such officer has knowledge of any
default under the applicable Indenture and, if so, specifying each such default
and the nature and status thereof.
MODIFICATION OF THE INDENTURES
It is anticipated that modifications and amendments of an Indenture may be
made by the Company and the Trustee, with the consent of the holders of not less
than a majority in aggregate principal amount of each series of the outstanding
Debt Securities issued under the Indenture which are affected by the
modification or amendment, provided that no such modification or amendment may,
without a consent of each holder of such Debt Securities affected thereby: (1)
change the stated maturity date of the principal of (or premium, if any) or any
installment of interest, if any, on any such Debt Security; (2) reduce the
principal amount of (or premium, if any) or the interest, if any, on any such
Debt Security or the principal amount due upon acceleration of an Original Issue
Discount Security; (3) change the place or currency of payment of principal of
(or premium, if any) or interest, if any, on any such Debt Security; (4) impair
the right to institute suit for the enforcement of any such payment on or with
respect to any such Debt Security; (5) reduce the above-stated percentage of
holders of Debt Securities necessary to modify or amend the Indenture; or (6)
modify the foregoing requirements or reduce the percentage of outstanding Debt
Securities necessary to waive compliance with certain provisions of the
Indenture or for waiver of certain defaults. A record date may be set for any
act of the holders with respect to consenting to any amendment.
The holders of not less than a majority in principal amount of outstanding
Debt Securities of each series affected thereby will have the right to waive
compliance by the Company with certain covenants in such Indenture.
Each Indenture will contain provisions for convening meetings of the
holders of Debt Securities of a series to take permitted action.
REDEMPTION OF SECURITIES
The Indenture will provide that the Debt Securities may be redeemed at any
time at the option of the Company, in whole or in part, for certain reasons
intended to protect the Company's status as a REIT. Debt Securities may also be
subject to optional or mandatory redemption on terms and conditions described in
the applicable Prospectus Supplement.
From and after notice has been given as provided in the Indenture, if funds
for the redemption of any Debt Securities called for redemption shall have been
made available on such redemption date, such Debt Securities will cease to bear
interest on the date fixed for such redemption specified in such notice, and the
only right of the holders of the Debt Securities will be to receive payment of
the Redemption Price.
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CONVERSION OF SECURITIES
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Stock or Preferred
Stock, the conversion price (or manner of calculation thereof), the conversion
period, provisions as to whether conversion will be at the option of the holders
or the Company, the events requiring an adjustment of the conversion price and
provisions affecting conversion in the event of the redemption of such Debt
Securities and any restrictions on conversion, including restrictions directed
at maintaining the Company's REIT status.
SUBORDINATION
Upon any distribution to creditors of the Company in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
any Subordinated Securities will be subordinated to the extent provided in the
applicable Indenture in right of payment to the prior payment in full of all
Senior Securities. No payment of principal or interest will be permitted to be
made on Subordinated Securities at any time if a default in Senior Securities
exists that permits the Holders of such Senior Securities to accelerate their
maturity and the default is the subject of judicial proceedings or the Company
receives notice of the default. After all Senior Securities are paid in full and
until the Subordinated Securities are paid in full, Holders of Subordinated
Securities will be subrogated to the right of Holders of Senior Securities to
the extent that distributions otherwise payable to Holders of Subordinated
Securities have been applied to the payment of Senior Securities. By reason of
such subordination, in the event of a distribution of assets upon insolvency,
certain general creditors of the Company may recover more, ratably, than Holders
of Subordinated Securities. If this Prospectus is being delivered in connection
with a series of Subordinated Securities, the accompanying Prospectus Supplement
or the information incorporated herein by reference will contain the approximate
amount of Senior Securities outstanding as of the end of the Company's most
recent fiscal quarter.
PLAN OF DISTRIBUTION
The Company may sell Securities through underwriters for public offer and
sale by them, and also may sell Securities offered hereby to investors directly
or through agents. Any such underwriter or agent involved in the offer and sale
of the Securities will be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or prices,
which may be changed, at prices related to the prevailing market prices at the
time of sale or at negotiated prices. The Company also may, from time to time,
authorize underwriters acting as the Company's agents to offer and sell
Securities upon terms and conditions set forth in the applicable Prospectus
Supplement. In connection with the sale of the Securities, underwriters may be
deemed to have received compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of the Securities for whom they may act as agent. Underwriters may
sell Securities to or through dealers, and such dealers may receive compensation
in the form of discounts, concessions or commissions from the underwriters
and/or commissions from the purchasers for whom they may act as agent.
Any underwriters or agents in connection with an offering of the
Securities, and any discounts, concessions or commissions allowed by
underwriters to participating dealers, will be set forth in the applicable
Prospectus Supplement. Underwriters, dealers and agents participating in the
distribution of the Securities may be deemed to be underwriters, and any
discounts and commissions received by them and any profit realized by them on
resale of the Securities may be deemed to be underwriting discounts and
commissions, under the Securities Act. Underwriters, dealers and agents may be
entitled, under agreements to be entered into with the Company, to
indemnification against and contribution toward certain civil liabilities,
including liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Securities from the Company
at the public offering price set forth in such Prospectus Supplement pursuant to
delayed
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delivery contracts providing for payment and delivery on the date or dates
stated in such Prospectus Supplement. Each delayed delivery contract will be for
an amount not less than, and the aggregate principal amount of Securities sold
pursuant to delayed delivery contracts shall be not less nor more than, the
respective amounts stated in the applicable Prospectus Supplement. Institutions
with whom delayed delivery contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions, and other institutions but
will in all cases be subject to the approval of the Company. Delayed delivery
contracts will not be subject to any conditions except (i) the purchase by an
institution of the Securities covered by its delayed delivery contracts shall
not at the time of delivery be prohibited under the laws of any jurisdiction in
the United States to which such institution is subject, and (ii) if the
Securities are being sold to underwriters, the Company shall have sold to such
underwriters the total principal amount of the Securities less the principal
amount thereof covered by delayed delivery contracts.
EXPERTS
The consolidated financial statements and schedules of JDN Realty
Corporation included in JDN Realty Corporation's Annual Report (Form 10-K) for
the year ended December 31, 1996 and the statements of revenue and certain
expenses of The Junction Shopping Center for the period from March 25, 1996
(date of commencement of operations) to December 31, 1996, the River Hills
Shopping Center for the period from September 13, 1996 (date of commencement of
operations) to December 31, 1996, the Midway Plaza Shopping Center for the
period from November 2, 1995 (date of commencement of operations) to December
31, 1995 and the year ended December 31, 1996, and the Bermuda Square Shopping
Center for the year ended December 31, 1996, respectively, included in the
Current Report on Form 8-K of JDN Realty Corporation dated September 26, 1997
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon included therein and incorporated herein by reference.
Such consolidated financial statements, schedules and statements of revenue and
certain expenses are incorporated herein by reference in reliance upon such
reports given upon the authority of such firm as experts in accounting and
auditing.
LEGAL MATTERS
The validity of the Securities will be passed upon for the Company by
Waller Lansden Dortch & Davis, A Professional Limited Liability Company,
Nashville, Tennessee.
18
<PAGE> 86
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PRICING SUPPLEMENT, THE ACCOMPANYING
PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY
THIS PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS.
NEITHER THE DELIVERY OF THIS PRICING SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL
UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS PRICING SUPPLEMENT AND
THE ACCOMPANYING PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
---------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
PRICING SUPPLEMENT
Pricing Supplement Summary............. PS-3
Business and Properties................ PS-7
Recent Developments.................... PS-14
Use of Proceeds........................ PS-16
Capitalization......................... PS-17
Selected Financial Data................ PS-18
Management............................. PS-19
Description of the MOPPRS.............. PS-21
Certain United States Federal Income
Tax Considerations................... PS-25
ERISA Considerations................... PS-27
Supplemental Plan of Distribution...... PS-28
PROSPECTUS SUPPLEMENT
Risk Factors........................... S-3
Description of Notes................... S-5
Special Provisions Relating to Foreign
Currency Notes....................... S-26
Certain United States Federal Income
Tax Considerations................... S-29
Plan of Distribution................... S-37
Legal Matters.......................... S-38
PROSPECTUS
Available Information.................. 2
Incorporation of Certain Documents by
Reference............................ 2
The Company............................ 3
Use of Proceeds........................ 3
Ratio of Earnings to Fixed Charges..... 4
Description of Capital Stock........... 4
Description of Common Stock............ 6
Description of Common Stock Warrants... 7
Description of Preferred Stock......... 8
Description of Debt Securities......... 12
Plan of Distribution................... 17
Experts................................ 18
Legal Matters.......................... 18
</TABLE>
======================================================
======================================================
$75,000,000
(JDN LOGO)
JDN REALTY CORPORATION
6.918% MANDATORY PAR PUT
REMARKETED SECURITIES(SM) ("MOPPRS(SM)")
DUE MARCH 31, 2013
---------------------
PRICING SUPPLEMENT
---------------------
MERRILL LYNCH & CO.
BT ALEX. BROWN
MORGAN STANLEY DEAN WITTER
SALOMON SMITH BARNEY
MARCH 25, 1998
"MANDATORY PAR PUT REMARKETED
SECURITIES(SM)" AND "MOPPRS(SM)" ARE
SERVICE MARKS OWNED BY
MERRILL LYNCH & CO., INC.
======================================================
