<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 29, 1997
REGISTRATION STATEMENT NO. 333-31639
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
CAPSTONE CAPITAL CORPORATION
(Exact name of Registrant as specified in its charter)
1000 URBAN CENTER DRIVE, SUITE 630
BIRMINGHAM, ALABAMA 35242
(205) 967-2092
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
---------------------
<TABLE>
<C> <C> <C>
MARYLAND JOHN W. MCROBERTS 63-1115479
(State or Other Jurisdiction PRESIDENT AND CHIEF EXECUTIVE OFFICER (I.R.S. Employer Identification No.)
of Organization) 1000 URBAN CENTER DRIVE, SUITE 630
BIRMINGHAM, ALABAMA 35242
(205) 967-2092
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent for Service)
</TABLE>
---------------------
Copies To:
JOHN H. COOPER, ESQ.
SIROTE & PERMUTT, P.C.
2222 ARLINGTON AVENUE SOUTH
BIRMINGHAM, ALABAMA 35255-5727
PHONE: (205) 930-5108
FAX: (205) 930-5301
Approximate date of commencement of proposed sale to the public: From time
to time after the effective time of this Registration Statement as determined by
market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================================================
PROPOSED
TITLE OF EACH AMOUNT MAXIMUM AMOUNT OF
CLASS OF SECURITIES TO BE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1)(2)(3) OFFERING PRICE(4) FEE
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Stock(par value $.001 per share)(5).................. N/A
- ----------------------------------------------------------------------------------------------------------------------------
Preferred Stock(par value $.001 per share)(6)............... N/A
- ----------------------------------------------------------------------------------------------------------------------------
Debt Securities(7).......................................... N/A
- ----------------------------------------------------------------------------------------------------------------------------
Warrants(8)................................................. N/A
- ----------------------------------------------------------------------------------------------------------------------------
Total................................................... $500,000,000(7) $500,000,000 $151,515(9)
============================================================================================================================
</TABLE>
(footnotes on next page)
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
---------------------
PURSUANT TO RULE 429, THE PROSPECTUS CONTAINED IN THIS REGISTRATION
STATEMENT WILL ALSO BE USED IN CONNECTION WITH THE OFFERING OF UP TO $24,831,250
PRINCIPAL AMOUNT OF OTHER SECURITIES PREVIOUSLY REGISTERED PURSUANT TO THE
COMPANY'S REGISTRATION STATEMENT (FILE NO. 33-97926) AND NOT ISSUED. IN THE
EVENT ANY SUCH PREVIOUSLY REGISTERED SECURITIES ARE OFFERED PRIOR TO THE
EFFECTIVE DATE OF THIS REGISTRATION STATEMENT, THEY WILL NOT BE INCLUDED IN ANY
PROSPECTUS HEREUNDER.
================================================================================
<PAGE> 2
(1) This Registration Statement also covers delayed delivery contracts which may
be issued by the Registrant under which the counterparty may be required to
purchase Debt Securities, Preferred Stock, Common Stock or Warrants. Such
contracts may be issued together with the specific Securities to which they
relate. In addition, Securities registered hereunder may be sold separately,
together or as units with other Securities registered hereunder.
(2) In U.S. Dollars or the equivalent thereof denominated in one or more foreign
currencies or units or two or more foreign currencies or composite
currencies (such as European Currency Units).
(3) Pursuant to Rule 429 under the Securities Act of 1933, as amended (the
"Securities Act"), the Prospectus included in this Registration Statement
relates also to $24,831,250 of Securities registered on the Company's
Registration Statement (No. 33-97926) and unissued as of the date hereof.
(4) Amount to be registered, proposed maximum offering price per security, and
proposed maximum aggregate offering price for each class of securities
omitted pursuant to General Instruction II.D of Form S-3 under the
Securities Act.
(5) Such indeterminate number of shares of Common Stock as may from time to time
be issued at indeterminate prices or issuable upon conversion of Debt
Securities or Preferred Stock registered hereunder or upon exercise of
Warrants registered hereunder, as the case may be.
(6) Such indeterminate number of shares of Preferred Stock as may from time to
time be issued at indeterminate prices or issuable upon conversion of Debt
Securities.
(7) Estimated solely for purposes of calculating the registration fee. No
separate consideration will be received for shares of Common Stock or
Preferred Stock that are issued upon conversion of Debt Securities or
Preferred Stock or upon exercise of Warrants registered hereunder, as the
case may be. The aggregate maximum offering price of all Securities issued
pursuant to this Registration Statement will not exceed $500,000,000.
(8) There are being registered hereunder an indeterminate number of Warrants
representing rights to purchase shares of Preferred Stock, Common Stock or
Debt Securities registered hereunder. Warrants may be sold separately or
with Securities.
(9) Calculated pursuant to Rule 457(o) of Regulation C under the Securities Act.
Pursuant to Rule 429, the Prospectus contained in this Registration
Statement will also be used in connection with the offering of up to
$24,831,250 principal amount of other securities previously registered
pursuant to the Company's Registration Statement (No. 33-97926) and not
issued. The Company previously paid a registration fee of $8,562 with
respect to the securities being carried forward pursuant to Rule 429.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED AUGUST 29, 1997
$524,831,250
[CAPSTONE LOGO]
CAPSTONE CAPITAL CORPORATION
DEBT SECURITIES, PREFERRED STOCK, COMMON STOCK AND WARRANTS
------------------------
Capstone Capital Corporation (the "Company") may offer from time to time,
together or separately, in one or more series (i) debt securities ("Debt
Securities"), which may be either senior debt securities (the "Senior Debt
Securities") or subordinated debt securities (the "Subordinated Debt
Securities"), (ii) shares of Preferred Stock of the Company ("Preferred Stock"),
(iii) shares of Common Stock of the Company ("Common Stock"), and (iv) Warrants
to purchase shares of Preferred Stock, Common Stock or Debt Securities (the
"Warrants") (the Debt Securities, Preferred Stock, Common Stock and Warrants are
collectively referred to as the "Securities"), at an aggregate initial offering
price not to exceed U.S. $524,831,250, in amounts, at prices and on terms to be
determined at the time of sale. The Debt Securities, Preferred Stock, Common
Stock and Warrants may be offered separately or together, in separate series, in
amounts, at prices and on terms to be set forth in a supplement or supplements
to this Prospectus (a "Prospectus Supplement").
The accompanying Prospectus Supplement will set forth with regard to the
particular Securities in respect of which this Prospectus is being delivered (i)
in the case of Debt Securities, the title, aggregate principal amount,
denominations (which may be in United States dollars, or in any other currency,
currencies or currency unit, including the European Currency Unit), maturity,
rate, if any (which may be fixed or variable), or method of calculation thereof,
time of payment of any interest, any terms for redemption at the option of the
Company or the holder, any terms for sinking fund payments, rank, any conversion
or exchange rights, any listing on a securities exchange, and the initial public
offering price and any other terms in connection with the offering and sale of
such Debt Securities, (ii) in the case of Preferred Stock, the specific title,
the aggregate amount and the stated value, any dividend (including the method of
calculating the payment of dividend), liquidation, redemption, conversion,
voting or other rights and the initial offering price (iii) in the case of
Common Stock, the number of shares of Common Stock, the initial offering price
and the terms of the offering thereof, and (iv) in the case of Warrants, the
duration, offering price, exercise price and detachability. The Prospectus
Supplement will also contain information, as applicable, about material U.S.
federal income tax considerations relating to the Securities in respect of which
this Prospectus is being delivered.
The Common Stock of the Company is listed on the New York Stock Exchange
("NYSE") under the symbol "CCT". The Prospectus Supplement will also contain
information, where applicable, as to any listing on a securities exchange of the
Securities covered by such Prospectus Supplement. There is no guarantee that a
public market will develop or be sustained with respect to the Debt Securities,
Preferred Stock or Warrants.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES 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. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Company may sell Securities to or through underwriters, and also may
sell Securities directly to other purchasers or through agents. The accompanying
Prospectus Supplement will set forth the names of any underwriters or agents
involved in the sale of the Securities in respect of which this Prospectus is
being delivered, the amounts of Securities, if any, to be purchased by
underwriters and the compensation, if any, of such underwriters or agents. See
"Plan of Distribution" herein.
The date of this Prospectus is , 1997
<PAGE> 4
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITERS, AGENTS OR DEALERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER
TO BUY SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY AND ITS SUBSIDIARIES
SINCE THE DATE HEREOF OR THE INFORMATION CONTAINED HEREIN IS CORRECT AT ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). The Registration
Statement, the exhibits and schedules forming a part thereof and the reports,
proxy statements and other information filed by the Company with the Commission
in accordance with the Exchange Act can be inspected and copied at the
Commission's public reference section, 450 Fifth Street, NW, Room 1024,
Washington, DC 20549, and at the following regional offices of the Commission:
Seven World Trade Center, 13th Floor, New York, New York 10048 and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can also be obtained at prescribed rates by
writing to the Public Reference Section of the Commission, 450 Fifth Street, NW,
Washington, D.C. 20549. In addition, the Company's Common Stock is listed on the
NYSE and similar information concerning the Company can be inspected and copied
at the offices of the NYSE, 20 Broad Street, New York, New York 10005. The
Commission maintains an Internet web site that contains reports, proxy and
information statements and other information regarding registrants, including
the Company, that file electronically with the Commission (http://www.sec.gov).
This Prospectus constitutes a part of a registration statement on Form S-3
(the "Registration Statement") filed by the Company with the Commission under
the Securities Act of 1933, as amended (the "Securities Act"). As permitted by
the rules and regulations of the Commission, this Prospectus omits certain of
the information contained in the Registration Statement and reference is hereby
made to the Registration Statement and related exhibits for further information
with respect to the Company and the Securities offered hereby. Statements
contained herein concerning the provisions of any documents filed as an exhibit
to the Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance reference is made to the copy of such
document so filed. Each such statement is qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's (i) Current Report on Form 8-K (filed on March 4, 1997), (ii)
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (filed on
March 31, 1997) and Form 10-K/A (filed on August 29, 1997), (iii) Quarterly
Report on Form 10-Q for the quarterly period ended March 31, 1997 (filed on May
15, 1997) and Form 10-Q/A (filed on August 29, 1997), (iv) Quarterly Report on
Form 10-Q for the quarterly period ended June 30, 1997 (filed on August 14,
1997) and Form 10-Q/A (filed on August 29, 1997) and (v) the description of the
Common Stock and the description of certain provisions of Maryland Law and the
Company's Articles of Incorporation and Bylaws, both contained in the Company's
Registration Statement of Form 8-A, dated June 21, 1994, and the information
thereby incorporated by reference contained in the Company's Registration
Statement on Form S-11, dated March 23, 1995, are hereby incorporated by
reference into this Prospectus. The file number for the Company's filings under
the Exchange Act is 1-11345. All other documents filed by the Company pursuant
to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the termination of the offering of any
Securities shall be deemed to be incorporated by reference in this Prospectus
and to be part hereof from the date of filing such documents (provided, however,
that the information referred to in
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Item 402(a)(8) of Regulation S-K of the Commission shall not be deemed
specifically incorporated by reference herein).
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
(or in the applicable Prospectus Supplement) or in any other subsequently filed
document 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.
Copies of all documents which are incorporated herein by reference (not
including the exhibits to such information, unless such exhibits are
specifically incorporated by reference in such information) will be provided
without charge to each person, including any beneficial owner of the Securities,
to whom this Prospectus is delivered, upon written or oral request. Requests
should be made to Mr. Malcolm E. McVay, Chief Financial Officer of the Company,
1000 Urban Center Drive, Suite 630, Birmingham, Alabama 35242 (telephone number:
(205) 967-2092).
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THE COMPANY
The Company is a real estate investment trust ("REIT") which owns, leases
and invests in a diversified portfolio of healthcare properties. As of March 31,
1997, the Investments consisted of (i) 72 healthcare properties leased to 18
healthcare operators (the "Leased Properties") and (ii) 22 mortgage loans on
healthcare properties (the "Mortgage Loans"). The Investments are located in 18
states primarily in the southeastern and western regions of the United States
and represent a variety of facility types in diverse healthcare industry
segments. The Investments, including commitments to invest certain of which have
been partially funded, have grown from approximately $115 million at inception
on June 30, 1994 to approximately $697 million on July 31, 1997.
The Company was incorporated in Maryland in March 1994. The Company's
principal executive offices are located at 1000 Urban Center Drive, Suite 630,
Birmingham, Alabama 35242, and its telephone number is (205) 967-2092.
RISK FACTORS
Prospective purchasers of any of the Securities offered hereby should
consider carefully, in addition to the other information contained or
incorporated by reference in this Prospectus, the following factors in
evaluating the Company and its business and an investment in such Securities.
This Prospectus (including the documents incorporated by reference herein) and
the accompanying Prospectus Supplement contain, in addition to historical
information, forward-looking statements that involve risks and uncertainties.
The Company's actual results could differ materially. Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed below, as well as those discussed elsewhere in this Prospectus.
DEPENDENCE ON LESSEES, BORROWERS AND GUARANTORS FOR REVENUE
The Company's revenues are derived primarily from rent under the leases and
payments under the Mortgage Loans, and therefore any defaults by the lessees,
borrowers or their guarantors in their obligations to the Company will result in
lower revenues and less cash available for repayment of indebtedness and
distribution to stockholders. For the year ended December 31, 1996, the Company
derived approximately 33.4% and 19.5% of its revenues from HEALTHSOUTH
Corporation ("HEALTHSOUTH") and Columbia/HCA Healthcare Corporation,
respectively. The guarantors' obligations are unsecured and may be structurally
subordinated to their secured indebtedness to the extent of the assets securing
such indebtedness. While the Company has not established any definitive credit
criteria, the Company evaluates the creditworthiness of lessees, borrowers and
guarantors based upon a review of publicly available financial and other
information, as well as a due diligence review of the individual financial
statements and other non-financial information provided by lessees, borrowers
and guarantors, to the extent available, and other data customarily reviewed
when a company makes an acquisition or significant investment. The operating
results of properties underlying existing Investments and any future
acquisitions depend upon various factors over which the Company has no control
and which may affect the present or future cash flows of the Company. Those
factors include general economic conditions, changes in the supply of, or demand
for, competing healthcare facilities, changes in occupancy levels, the ability
of lessees and borrowers through rate increases or otherwise to absorb increases
in operating expenses, and changes in government regulations and zoning laws.
Leases representing approximately 95% of the Company's total Investments as
of June 30, 1997, expire at various times between 2004 and 2012. No assurance
can be given that a lessee will exercise any option to renew its lease upon the
expiration of the initial term. In such an instance, the Company may not be able
to locate a qualified purchaser or a qualified replacement tenant, as a result
of which it would lose a source of revenue while remaining responsible for the
payment of its obligations.
DEVELOPMENT PROJECTS
Investments in facilities under development subject the Company to risks
related to possible delays in construction, cost of materials, financing
availability, volatility in interest rates, labor availability, compliance
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with development agreements and funding arrangements and ability of the
completed facility to generate the cash flow necessary to make payments to the
Company under the leases or Mortgage Loans, as applicable. Because development
projects relate to properties under construction and which have no operating
history, these investments generally involve greater risks than the sale and
leaseback of operating properties.
The Company also from time to time makes Mortgage Loans for the
construction of, and funds the development of, certain healthcare facilities. In
addition to the risks applicable to development projects generally as discussed
in the preceding paragraph, Mortgage Loans made in connection with the
development projects subject the Company to the risk of default by the borrower
during construction, which could require the Company to incur additional costs
to foreclose its mortgage and/or advance additional funds to complete
construction.
The Company attempts to minimize the risks associated with development
activities and construction loans, including obtaining additional forms of
security and collateral beyond that provided by the leases and term Mortgage
Loans, such as irrevocable letters of credit from financial institutions,
payment and performance completion bonds or completion guarantees and corporate
and personal loan guarantees. No assurance, however, can be given that such
additional security will be sufficient.
ILLIQUIDITY OF REAL ESTATE INVESTMENTS.
The Investments are subject to risks typically associated with investments
in real estate. Equity investments in real estate are relatively illiquid, and,
therefore, the ability of the Company to vary its portfolio in response to
changed conditions will be limited.
LACK OF INDUSTRY DIVERSIFICATION
While the Company is authorized to invest in various types of
income-producing real estate and real estate-related loans, its current strategy
is to invest in healthcare-related properties. The Company derives all of its
operating income from investments in healthcare-related properties.
Consequently, the Company currently has chosen not to include assets selected to
reduce risks associated with an investment in real estate in the healthcare
industry, and is subject to the risks associated with investments in a single
industry. An economic downturn in the healthcare industry, significant decreases
in Medicare and Medicaid or other payor reimbursements or adoption of adverse
federal or state regulation could adversely affect the ability of the lessees,
borrowers and guarantors to generate the cash flow necessary to make payments to
the Company under the leases or Mortgage Loans, as applicable.
RELIANCE ON GOVERNMENT REIMBURSEMENT
A significant portion of the revenue of the lessees, borrowers and
guarantors is derived, directly or indirectly, from government reimbursement
programs, such as Medicare and Medicaid. While the specific portion with respect
to each lessee, borrower and guarantor varies and changes over time,
approximately one-third to two-thirds of the revenue of each of the Company's
existing lessees, borrowers and guarantors is derived from such programs.
Although lease and loan payments to the Company are not linked to the level of
government reimbursement, to the extent that changes in these programs have a
material adverse effect on the lessees, borrowers and guarantors, such changes
could adversely affect their ability to make lease and loan payments. The
Medicare program is highly regulated and subject to frequent and substantial
changes. In recent years, fundamental changes in the Medicare program (including
the implementation of a prospective payment system ("Prospective Payment System"
or "PPS") in which facilities are reimbursed generally a flat amount based on a
patient's diagnosis and not based on the facility's cost for inpatient services
at medical surgical hospitals) have resulted in reduced levels of payment for a
substantial portion of healthcare services. The Medicaid program is a
federally-mandated, state-run program providing benefits to low income and other
eligible persons and is funded through a combination of state and federal
funding. The method of reimbursement under Medicaid varies from state to state,
but is typically based on rates negotiated between the provider and the state,
or is based on per diem or per diagnosis rates similar to Medicare. In addition,
in recent years both the Medicare and Medicaid programs have made substantial
efforts to increase the proportion of beneficiaries participating in managed
care plans. These plans receive a flat annual fee for each
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enrollee and negotiate reimbursement rates with selected healthcare providers.
Increased reliance on such plans by Medicare and Medicaid could lead to reduced
payment rates for providers and reduced utilization of healthcare resources
regardless of other reimbursement policies adopted by these programs. Moreover,
healthcare facilities have experienced increasing pressures from private payors
attempting to control healthcare costs that have reduced reimbursement to levels
approaching that of government payors.
Considerable uncertainties surround the future determination of payment
levels under government reimbursement programs. In addition, future budget
reductions in government-financed programs could significantly reduce payments
made to lessees, borrowers and guarantors within a short period of time, and
there can be no assurance that future payment rates will be sufficient to cover
cost increases in providing services to patients. Reductions in payments
pursuant to government healthcare programs could have an adverse impact on a
lessee's, borrower's or guarantor's financial condition and, therefore, could
adversely affect the ability of such lessee, borrower or guarantor to generate
the cash flow necessary to make payments to the Company under the leases and
Mortgage Loans, as applicable.
HEALTHCARE COST CONTROL EFFORTS
The healthcare industry is undergoing significant changes as government and
third party payors adopt techniques, including managed care, to control the
cost, utilization and delivery of healthcare services. In addition to extensive
existing governmental healthcare regulation, there are numerous initiatives at
the federal and state levels for comprehensive reforms affecting the payment for
and availability of healthcare services. Aspects of certain of these healthcare
proposals, such as further reductions in Medicare and Medicaid payments and
increased use of managed care, if adopted, could adversely affect the Company by
reducing the lessees', borrowers' or guarantors' ability to generate the cash
flow necessary to make payments to the Company under the leases and Mortgage
Loans, as applicable. Other cost-control initiatives regarding the cost and
delivery of healthcare are also currently being considered, and reductions in
payments to physicians or other changes in reimbursement for healthcare services
by other third-party payors could materially adversely affect the financial
condition of the sublessees. Substantially all of the tenants or sublessees
under leases are in the medical profession and the Company believes that such
tenants are dependent on payment for their services by third-party payors. No
assurance can be given whether or to what extent any of the healthcare proposals
will be enacted into law, or the effect any such proposals or subsequent
legislation or other changes regarding healthcare would have on the financial
condition of the tenants or owners of the healthcare facilities underlying the
Investments and their ability to generate the cash flow necessary to make
payments to the Company under the leases or Mortgage Loans, as applicable, or to
renew leases.
POTENTIAL ADVERSE IMPACT OF GOVERNMENT REGULATION OF HEALTHCARE INDUSTRY
The healthcare industry is highly regulated by federal, state and local
laws, state and local licensing requirements, facility inspections,
reimbursement policies, regulations concerning capital and other expenditures,
certification requirements and other laws, regulations and rules. The failure of
any lessee, borrower or their sublessees or tenants to comply with such laws,
requirements and regulations could affect such lessee's or borrower's ability to
operate the healthcare facilities underlying the Investments and thereby
adversely affect their ability to generate the cash flow necessary to make
payments to the Company under the leases or Mortgage Loans, as applicable.
POTENTIAL OPERATOR LOSS OF LICENSE OR CERTIFICATION
Healthcare operators are subject to federal and state laws and regulations
which govern financial and other arrangements between healthcare providers.
These laws prohibit certain direct and indirect payments or fee-splitting
arrangements between healthcare providers that are designed to induce or
encourage the referral of patients to, or the recommendation of, a particular
provider for medical products and services. They also require compliance with a
variety of safety, health and other requirements relating to the conditions of
the licensed facility and quality of care provided. Possible sanctions for
violation of these laws and regulations include loss of license or
certification, the imposition of civil monetary and criminal penalties and
potential exclusion from Medicare and Medicaid programs, any of which could
adversely affect the ability of an
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operator to generate the cash flow necessary to make payments to the Company
under the leases or Mortgage Loans, as applicable.
In certain circumstances, conviction of abusive or fraudulent behavior with
respect to one facility may subject other facilities under common control or
ownership to disqualification from participation in the Medicare and Medicaid
programs.
Because this area of the law currently is subject to intense scrutiny,
additional laws and regulations may be enacted which could require changes in
certain operations of lessees, borrowers, guarantors or sublessees. For example,
a tenant's loss of license or Medicare/Medicaid certification could result in
the Company or a lessee or borrower having to obtain another tenant for the
affected healthcare facilities underlying the Investments. No assurances can be
given that the Company or any lessee, borrower or guarantor could contract with
such a tenant on a timely basis or on acceptable terms and a failure to do so
could have an adverse effect on the Company's revenues.
LIMITATIONS ON TRANSFERS AND ALTERNATIVE USES OF INVESTMENTS
Transfers of operations of certain healthcare facilities are subject to
regulatory approvals not required for transfers of other types of commercial
operations and other types of real estate. In addition, certain of the
healthcare facilities underlying the Investments are special purpose facilities
that may not be easily adaptable to non-healthcare-related uses.
POTENTIAL IMPACT OF REDUCED OCCUPANCY RATES IN HOSPITALS ADJACENT TO ANCILLARY
HOSPITAL FACILITIES
Most of the hospitals adjacent to the ancillary hospital facilities owned
by the Company or securing Mortgage Loans are less than fully occupied on an
inpatient basis. The increased use of managed care by both government and
private third party payors has and is expected to continue to constrain
utilization of healthcare facilities. Despite such occupancy rates, however, the
Company believes that operating cash flow produced by such hospitals will
adequately cover lease and loan payments to the Company. If the inpatient
occupancy rate at any such hospital were to deteriorate to a level at which
operating cash flow would be insufficient to cover payments to the Company under
leases and Mortgage Loans, as applicable, with respect to such ancillary
hospital facility the Company would have to rely upon the general credit of the
lessee, borrower, or related guarantor. Investments in facilities under
development subject the Company to risks related to possible delays in
construction, cost of materials, financing availability, volatility in interest
rates, labor availability, compliance with development agreements and funding
arrangements. Development projects and construction loans generally involve
greater risks than the sale and leaseback.
PROXIMITY TO HOSPITALS
A significant number of the healthcare facilities underlying the
Investments are in close proximity to one or more hospitals. The relocation or
closure of a hospital could make the Investments in such area less desirable to
doctors affiliated with such hospital and affect a lessee's, borrower's or any
sublessee's ability to renew leases and attract new tenants.
ABILITY TO INCUR ADDITIONAL DEBT
As of June 30, 1997, the Company had outstanding indebtedness of
approximately $110.6 million under its $170 million line of credit from
NationsBank of Georgia, N.A., as agent for a consortium of bank lenders (the
"Bank Credit Facility"), approximately $7.1 million of 10.5% Convertible
Subordinated Debentures due 2002 (the "10.5% Debentures"), approximately $67.9
million of 6.55% Convertible Subordinated Debentures due 2002 (the "6.55%
Debentures"), and approximately $40.1 million in mortgage notes payable. The
Bank Credit Facility, 10.5% Debentures and 6.55% Debentures are unsecured.
Approximately 10.2% of the Company's Investments were encumbered by mortgages as
of June 30, 1997. The Company's total debt to capital ratio at June 30, 1997,
was 44.2%. The Bank Credit Facility contains customary negative covenants,
including (i) maintenance of minimum consolidated tangible net worth; (ii)
maintenance of minimum financial ratios; (iii) limitations on the ability to
incur additional indebtedness except as permitted therein;
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<PAGE> 10
(iv) prohibitions on the sale, lease or transfer of assets in excess of $5
million unless such sale, lease or transfer does not create a default
thereunder; (v) prohibitions on capital expenditures in excess of $3 million
with respect to any one property and $20 million in the aggregate during each
fiscal year, excluding acquisitions of new facilities and (vi) prohibitions on
any merger, consolidation or liquidation of the Company except in the case of
the merger of subsidiaries of the Company or a merger in which the Company is
the survivor, provided such merger does not cause a default thereunder.
The Company may borrow additional funds and mortgage its properties in
connection with the acquisition of additional properties and for purposes of
funding other capital and operating expenditures, including expenditures
relating to the renovation, modification or expansion of the Leased Properties.
In addition, the Company could be required to borrow money and/or mortgage its
properties to fund any cash shortfall in order to meet its obligation to
distribute 95% of the Company's REIT taxable income. See " -- Consequences of
Failure to Continue to Qualify as a REIT" and "Federal Income Tax
Considerations -- Taxation of the Company." The Company's current policy limits
the incurrence of debt (secured or unsecured) to 70% of total capitalization.
However, this limitation can be changed by the Board of Directors without
stockholder approval. Moreover, there are no provisions in the Company's Amended
and Restated Articles of Incorporation (the "Charter") or Bylaws of the Company,
as amended (the "Bylaws"), which require such limitation. The degree to which
the Company is leveraged could have important consequences to holders of the
Securities, including, but not limited to, the following: (i) a substantial
portion of the Company's cash flow from operations must be dedicated to debt
service and will not be available for operations and other purposes and (ii) the
Company's ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions or general corporate purposes may be
impaired.
The degree of risk associated with borrowings will increase to the extent
that the Company borrows on terms involving variable interest rates and/or
"balloon" payments at maturity. Borrowings under the Bank Credit Facility bear
interest at a rate chosen by the Company from either the base rate of
NationsBank or the Eurodollar rate plus a percentage that varies from 1% to
1.625%. At June 30, 1997, the Company had variable interest rate indebtedness
aggregating approximately $110.6 million under the Bank Credit Facility. Future
indebtedness may also bear interest at a floating rate. Increases in interest
rates could increase the Company's interest expense, which could adversely
affect the Company's ability to pay dividends to stockholders. The Bank Credit
Facility matures on June 24, 2000. The Company intends to renew the Bank Credit
Facility or repay the outstanding balance at that time with proceeds from a
refinancing or from a sale of debt or equity securities. There can be no
assurances that the lenders will agree to renew the Bank Credit Facility on
terms favorable to the Company or that the Company will be able to obtain
refinancing proceeds or proceeds from the sale of debt or equity securities.
The Indentures (as defined herein) with respect to the Debt Securities do
not contain any provisions that limit the Company's ability to incur
indebtedness. Holders of Debt Securities will not have the benefit of any
specific covenants or provisions in the applicable Indenture or Debt Securities
that would protect them in the event the Company engages in or becomes the
subject of a highly leveraged transaction, other than any covenants described in
any Prospectus Supplement, and the limitations on mergers, consolidations and
transfers of substantially all of the Company's properties and assets as an
entirety to any person as described below under "Description of Debt
Securities -- Consolidation, Merger and Sale of Assets." Such covenants may not
be waived or modified by the Company or its Board or Directors, although holders
of Debt Securities could waive or modify such covenants as more fully described
below under "Description of Debt Securities -- Modification and Waiver."
ENVIRONMENTAL RISKS AND COST OF REMEDIATION
Under various federal, state and local environmental laws, ordinances and
regulations, an owner of real property may be liable for the costs of removal or
remediation of certain hazardous or toxic substances at, under or disposed of in
connection with such property, as well as certain other potential costs relating
to hazardous or toxic substances (including injuries to persons and adjacent
property as well as fines). Most, if not all, of these laws, ordinances and
regulations contain stringent enforcement provisions including, but not limited
to, the authority to impose substantial administrative, civil and criminal fines
and penalties upon
8
<PAGE> 11
violators. Such laws often impose liability without regard to whether the owner
knew of, or was responsible for, the presence or disposal of such substances and
may be imposed on the owner in connection with the activities of an operator of
the property. The cost of any required remediation, removal, fines or personal
or property damages and the owner's liability therefor could exceed the value of
the property and/or the aggregate assets of the owner or affect an operator's
ability to satisfy its financial obligations to the Company under the Leased
Properties or Mortgage Loans. In addition, the presence of such substances, or
the failure to properly dispose of or remediate such substances, may adversely
affect the owner's ability to sell or lease such property or to borrow using
such property as collateral. In addition, under the laws of some states and
under the Comprehensive Environmental Response, Compensation and Liability Act,
a lender may be held liable under certain circumstances as an "owner" or
"operator" for costs of addressing releases or threatened releases of hazardous
substances at a property in which the lender holds a security interest.
Operations at the healthcare facilities underlying the Investments have
been and will continue to be subject to numerous federal, state and local
environmental laws, ordinances and regulations, including those relating to the
generation, segregation, handling, packaging and disposal of radioactive
materials and other medical wastes as well as facility siting, construction,
occupational training and safety, disposal of non-medical wastes, underground
storage tanks and ash emissions from incinerators. In addition, certain of the
Investments were built prior to the time prohibitions on the use of asbestos in
building construction were enacted and other such facilities may be acquired by
the Company in the future.
Although property acquisition agreements, leases and mortgage loans
generally require the seller, lessee or borrower, as the case may be, to
indemnify the Company for certain environmental liabilities, the scope of such
obligations may be limited, and there can be no assurance that any such seller,
lessee or borrower will be able to fulfill its indemnification obligations. Nor
can there be any assurance that those indemnities will be sufficient to cover
any liability for any or all of the environmental liabilities that may exist in
connection with the healthcare facilities underlying the Investments.
DEPENDENCE ON KEY PERSONNEL AND BOARD OF DIRECTORS
The Company is dependent on the efforts of its executive officers, John W.
McRoberts, William C. Harlan and Malcolm E. McVay. The loss of the services of
any one of these individuals could have a material adverse effect on the
performance of the Company. The Company has entered into an employment agreement
with John W. McRoberts. In addition, the Company identifies potential investment
opportunities, in part, through the relationship of certain members of its Board
of Directors with HEALTHSOUTH, MedPartners, Inc. ("MedPartners") and Integrated
Health Systems, Inc. ("Integrated Health") (three of which are also directors of
HEALTHSOUTH, two of which are also directors of MedPartners and one of which is
also a director of Integrated Health). Leases with HEALTHSOUTH, MedPartners and
Integrated Health are entered into on terms no less favorable than leases from
unrelated lessees with similar credit criteria. Accordingly, while there is no
assurance that the Company would be able to obtain additional investments from
such entities, the Company believes that it would continue to maintain such
relationships if such individuals no longer served as directors of the Company.
CONFLICTS OF INTEREST
Five of the Company's nine directors, Richard M. Scrushy, Michael D.
Martin, Robert N. Elkins, Larry R. House and Larry D. Striplin, Jr., are
executive officers and/or directors of certain existing lessees and guarantors
(the "Interested Directors") including HEALTHSOUTH, Integrated Health and
MedPartners (collectively the "Interested Lessees"). The Company paid
HEALTHSOUTH $31.5 million in 1996 to acquire Leased Properties. The Company
received rental income during the period from January 1 through June 30, 1997 of
$6.5 million, $1.6 million, and $2.2 million from HEALTHSOUTH, Integrated Health
and MedPartners, respectively.
There may from time to time be disputes between the Company as landlord and
the Interested Lessees and their subsidiaries as tenants with respect to
maintenance, repairs, defaults and similar items. It is also possible that the
Company will engage in other transactions with the Interested Lessees, such as
purchasing
9
<PAGE> 12
additional properties from the Interested Lessees and their subsidiaries and
leasing back all or a portion of such additional properties. As a result,
conflicts of interest may arise in the Interested Directors' duties to the
stockholders of the Company and to the stockholders of Interested Lessees.
Officers of the Company spend substantially all of their time managing the
Company and do not compete with the Company's business. All of the nonemployee
directors of the Company are engaged, and may engage in the future, in the
ownership, management or operation of other companies for their own accounts.
Accordingly, certain conflicts of interest may arise with respect to the
allocation of the time and efforts of such persons between their own activities
and the activities of the Company. All of the nonemployee directors are involved
with healthcare companies which own or operate properties that may compete with
the Company's properties.
The Company's Bylaws require that any transactions (including a property
acquisition or loan) between the Company and any of its officers and directors
or their affiliates be approved by a majority of the directors not interested in
such transaction.
COMPETITION
The Company believes that it is one of 13 publicly traded real estate
investment trusts (REITs) currently investing primarily in income-producing real
estate with an emphasis on healthcare-related facilities, many of which have
greater financial resources than the Company. The Company competes with each of
these REITs in seeking attractive investment opportunities in healthcare-related
facilities throughout the United States.
The Company also competes with real estate partnerships, healthcare
providers and other lenders, including, but not limited to, banks and insurance
companies, many of which have greater financial resources than the Company, in
the acquisition, leasing and financing of healthcare facilities located
throughout the United States. There can be no assurance that suitable
investments will be identified or that investments can be consummated on
commercially reasonable terms.
CONSEQUENCES OF FAILURE TO CONTINUE TO QUALIFY AS A REIT
The Company was organized and has elected, and believes that it has been
operated and intends to operate, so as to qualify as a REIT for U.S. federal
income tax purposes under Sections 856 through 860 of the Internal Revenue Code
of 1986, as amended to the date hereof (the "Code"). See "Federal Income Tax
Considerations." If the Company qualifies as a REIT, it will generally be
allowed a deduction for dividends paid to its stockholders in computing its
federal taxable income. This treatment substantially eliminates the "double
taxation" of corporate earnings. If in any taxable year the Company does not
qualify as a REIT under the Code, it will be taxed as a corporation and
distributions to stockholders will not be deductible by the Company in computing
taxable income. In addition, unless the Company is entitled to relief under
certain statutory provisions, the Company will be disqualified from electing
treatment as a REIT for the four succeeding years following the year in which
qualification was lost. Failure to qualify as a REIT under the Code, even in one
taxable year, could dramatically affect the Company's ability to pay interest on
Debt Securities and dividends to stockholders.
To qualify as a REIT under the Code, the Company is required, among other
things, to distribute at least 95% of its "REIT taxable income" to stockholders
each year and to satisfy certain requirements on a continuing basis, which
requirements may substantially affect day-to-day decision making by the Company.
No assurance can be given that the Company will at all times satisfy these
tests. Possible timing differences between receipt of income and payment of
expenses, and the inclusion and deduction of such amounts in determining taxable
income, could require the Company to reduce its dividends below the level
necessary to maintain its qualification as a REIT, which would adversely affect
the Company's ability to maintain REIT status. See "Federal Income Tax
Considerations -- Taxation of the Company."
Even if the Company qualifies as a REIT, certain transactions or other
events could result in the imposition of federal tax at rates ranging from 4% to
100% on certain types of the Company's income or gains.
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<PAGE> 13
ANTITAKEOVER EFFECT OF OWNERSHIP LIMIT AND POWER TO ISSUE ADDITIONAL SHARES
For the Company to qualify as a REIT under the Code in any taxable year, no
more than 50% in value of its outstanding stock may be owned directly, or
indirectly by attribution, by five or fewer individuals (as defined in the Code
to include certain entities) at any time during the second half of the Company's
taxable year (other than during the first year for which the Company elects to
be treated as a REIT). In addition, the outstanding stock must be owned by 100
or more persons during at least 335 days of a taxable year of 12 months or
during a proportional part of a shorter taxable year (other than during the
first year for which the Company elects to be treated as a REIT). See "Federal
Income Tax Considerations."
Because of the stock ownership requirements applicable to REITs, the
Company's Charter contains restrictions on transfer of its stock. Such
restrictions authorize the Company to refuse to transfer stock to any person, if
as a result of such transfer such person or entity would beneficially own stock
in excess of 9.8% in number or value of the outstanding stock of the Company.
Such provisions may inhibit market activity and the resulting opportunity for
stockholders to realize a premium for their Securities that might otherwise
exist if a stockholder were attempting to assemble a block of stock in excess of
9.8% in number or value of the outstanding stock. Also, there can be no
assurance that such provisions will in fact enable the Company to meet the
relevant REIT stock ownership requirements.
The Company's Charter authorizes the Board of Directors to cause the
Company to issue additional authorized but unissued shares of Common Stock or
Preferred Stock and to classify or reclassify any unissued shares of Common
Stock or Preferred Stock and to set the preferences, rights and other terms of
such classified or unclassified shares. See "Description of Capital Stock."
Although the Board of Directors has no such intention at the present time, it
could establish a series of Preferred Stock that could, depending on the terms
of such series, delay or impede a transaction or a change of control of the
Company that might involve a premium price for the Common Stock or otherwise be
in the best interest of the stockholders. The Charter and Bylaws of the Company
also contain other provisions that may delay or impede a transaction or a change
of control of the Company that might involve a premium price for the Common
Stock or otherwise be in the best interest of the stockholder.
MARYLAND BUSINESS COMBINATION LAW
Under the Maryland General Corporation Law ("MGCL"), certain "business
combinations" (including certain issuances of equity securities) between a
Maryland corporation and any person who beneficially owns ten percent or more of
the voting power of the corporation's shares or an affiliate of the corporation
who, at any time within the two-year period prior to the date in question, was
the beneficial owner of ten percent or more of the voting power of the
then-outstanding voting stock of the corporation (an "Interested Stockholder")
or an affiliate thereof are prohibited for five years after the most recent date
on which the Interested Stockholder becomes an Interested Stockholder.
Thereafter, any such business combination must be approved by two super-majority
stockholder votes unless, among other conditions, the corporation's common
stockholders receive a minimum price (as defined in the MGCL) for their shares
and the consideration is received in cash or in the same form as previously paid
by the Interested Stockholder for its shares.
USE OF PROCEEDS
The Company intends to use the net proceeds from the sale of the Securities
for acquisitions and repayment, reduction and/or refinancing of other
indebtedness, including acquisition indebtedness, working capital, capital
expenditures and for general corporate purposes.
CONSOLIDATED RATIOS OF EARNINGS TO FIXED CHARGES
AND COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDEND REQUIREMENTS
For purposes of calculating the following ratios, (i) earnings represent
income from continuing operations before income taxes, plus fixed charges, and
(ii) fixed charges represent interest expense on all indebtedness (including
amortization of deferred debt issuance costs) and the portion of operating lease
rental expense that is representative of the interest factor (deemed to be
one-third of operating lease rentals). There were no shares of Preferred Stock
outstanding during any of the periods below indicated and therefore the ratio of
earnings to combined fixed charges and Preferred Stock dividend requirements
would have been the same as the ratio of earnings to fixed charges for each
period indicated.
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED FROM JUNE 30, 1994
ENDED DECEMBER 31, (INCEPTION)
JUNE 30, ------------- THROUGH
1997 1996 1995 DECEMBER 31, 1994
------------- ----- ----- ------------------
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges............... 2.7x 3.0x 2.0x 4.0x
</TABLE>
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<PAGE> 14
DESCRIPTION OF DEBT SECURITIES
The following description sets forth certain general terms and provisions
of the Debt Securities to which this Prospectus and any applicable Prospectus
Supplement may relate. The particular terms of the Debt Securities being offered
and the extent to which such general provisions may apply will be set forth in
the applicable Indenture or in one or more indentures supplemental thereto and
described in a Prospectus Supplement relating to such Debt Securities. The 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 may be either senior Debt Securities ("Senior Debt
Securities") or subordinated Debt Securities ("Subordinated Debt Securities").
The Debt Securities will be issued under one or more indentures (the
"Indentures"). 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 (a
"Trustee"). The Indentures will be subject to and governed by the Trust
Indenture Act of 1939, as amended (the "TIA"). The statements made under this
heading relating to the Debt Securities and the Indentures are summaries of the
anticipated provisions thereof, do not purport to be complete and are qualified
in their entirety by reference to the Indentures and such Debt Securities. All
section references appearing herein are to sections of each Indenture unless
otherwise indicated and capitalized terms used but not defined below shall have
the respective meanings set forth in each Indenture.
Unless otherwise specified in the applicable Prospectus Supplement or
Prospectus Supplements, the Debt Securities will be general unsecured
obligations of the Company. The Indentures do not limit the aggregate amount of
Debt Securities which may be issued thereunder, and Debt Securities may be
issued thereunder from time to time in separate series up to the aggregate
amount from time to time authorized by the Company for each series. (Section
301) Unless otherwise specified in the Prospectus Supplement or Prospectus
Supplements, the Senior Debt Securities when issued will be unsubordinated
obligations of the Company and will rank equally and ratably with all other
unsecured and unsubordinated indebtedness of the Company. The Subordinated Debt
Securities when issued will be subordinated in right of payment to the prior
payment in full of all Senior Debt (as defined herein and in the Subordinated
Indenture) of the Company as described below under "-- Subordination of
Subordinated Debt Securities" and in the Prospectus Supplement applicable to an
offering of Subordinated Debt Securities. (Article Fifteen)
The applicable Prospectus Supplement or Prospectus Supplements pursuant to
which any Debt Securities are offered will describe the following terms of the
Debt Securities in respect of which this Prospectus is being delivered: (1) the
title of such Debt Securities; (2) any limit on the aggregate principal amount
of such Debt Securities; (3) the person to whom any interest on any Debt
Security of the series shall be payable if other than the person in whose name
the Debt Security is registered on the regular record date; (4) the date or
dates on which such Debt Securities will mature; (5) the rate or rates of
interest, if any, or the method of calculation thereof, which such Debt
Securities will bear, the date or dates from which any such interest will
accrue, the interest payment dates on which any such interest on such Debt
Securities will be payable and the regular record date for any interest payable
on any interest payment date; (6) the place or places where the principal of,
premium, if any, and interest on such Debt Securities will be payable; (7) the
period or periods within which, the events upon the occurrence of which, and the
price or prices at which, such Debt Securities may, pursuant to any optional or
mandatory provisions, be redeemed or purchased, in whole or in part, by the
Company and any terms and conditions relevant thereto; (8) the obligations of
the Company, if any, to redeem or repurchase such Debt Securities pursuant to
any sinking fund provision or analogous provision or at the option of the
holders and the period or periods within which, and the other terms and
conditions upon which, such Debt Securities shall be redeemed, repaid or
repurchased, in whole or in part, pursuant to such obligations; (9) the
denominations in which any such Debt Securities will be issuable, if other than
denominations of $1,000, and any integral multiple thereof; (10) any index or
formula used to determine the amount of payments of principal of and any premium
and interest on such Debt Securities; (11) the currency, currencies or currency
unit or units of payment of principal of and any premium and
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<PAGE> 15
interest on such Debt Securities if other than U.S. dollars; (12) if the
principal of, or premium, if any, or interest on such Debt Securities is to be
payable, at the election of the Company or a holder thereof, in one or more
currencies or currency units other than that or those in which such Debt
Securities are stated to be payable, the currency, currencies or currency units
in which payment of the principal of and any premium and interest on Debt
Securities of such series as to which such election is made shall be payable,
and the periods within which and the terms and conditions upon which such
election is to be made; (13) if other than the principal amount thereof, the
portion of the principal amount of such Debt Securities of the series which will
be payable upon acceleration of the maturity thereof; (14) if the principal
amount of any Debt Securities which will be payable at the maturity thereof will
not be determinable as of any date prior to such maturity, the amount which will
be deemed to be the outstanding principal amount of such Debt Securities; (15)
the applicability of any provisions described below under "Defeasance"; (16)
whether any of such Debt Securities are to be issuable in permanent global form
("Global Security") and, if so, the terms and conditions, if any, upon which
interests in such Securities in global form may be exchanged, in whole or in
part, for the individual Debt Securities represented thereby; (17) the
applicability of any covenant with respect to such Debt Securities and the
applicability of any provisions described below under "Events of Default" and
any additional Events of Default applicable thereto; (18) any covenants
applicable to such Debt Securities; (19) the terms and conditions, if any,
pursuant to which the Debt Securities are convertible or exchangeable into
shares of Common Stock or other Securities; (20) any change in the subordination
provisions contained en of the Subordinated Indenture with respect to such Debt
Securities; and (21) any other terms of such Debt Securities not inconsistent
with the provisions of the Indentures. (Section 301)
Debt Securities may be issued at a discount from their principal amount.
U.S. federal income tax considerations and other special considerations
applicable to any such original issue discount Securities will be described in
the applicable Prospectus Supplement.
If the purchase price of any of the Debt Securities is denominated in a
foreign currency or currencies or a foreign currency unit or units or if the
principal of and any premium and interest on any series of Debt Securities is
payable in a foreign currency or currencies or a foreign currency unit or units,
the restrictions, elections, general tax considerations, specific terms and
other information with respect to such issue of Debt Securities will be set
forth in the applicable Prospectus Supplement.
Since the Company is a holding company, the rights of the Company, and
hence the right of creditors of the Company (including the holders of Debt
Securities), to participate in any distribution of the assets of any subsidiary
upon its liquidation or reorganization or otherwise is necessarily subject to
the prior claims of creditors of any such subsidiary, except to the extent that
claims of the Company itself as a creditor of the subsidiary may be recognized.
The Indentures do not contain any provisions that limit the Company's
ability to incur indebtedness. Holders of Debt Securities will not have the
benefit of any specific covenants or provisions in the applicable Indenture or
Debt Securities that would protect them in the event the Company engages in or
becomes the subject of a highly leveraged transaction, other than any covenants
described in any Prospectus Supplement, and the limitations on mergers,
consolidations and transfers of substantially all of the Company's properties
and assets as an entirety to any person as described below under
"-- Consolidation, Merger and Sale of Assets." Such covenants may not be waived
or modified by the Company or its Board or Directors, although holders of Debt
Securities could waive or modify such covenants as more fully described below
under "-- Modification and Waiver."
CONVERSION OR EXCHANGE OF DEBT SECURITIES
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Debt Securities, such series will be convertible or
exchangeable into shares of Common Stock or other securities on the terms and
conditions set forth in the Subordinated Indenture and in such Prospectus
Supplement. Such terms shall include provisions as to whether conversion is
mandatory, at the option of the holder or at the option of the Company, and may
include provisions pursuant to which the number of shares of Common Stock or
other securities of the Company to be received by the holders of Debt Securities
would be calculated
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<PAGE> 16
according to the market price of the Common Stock or other securities of the
Company as of a time stated in the Prospectus Supplement. Certain restrictions
on ownership may apply in the event of a conversion or exchange. Such
restrictions will be indicated in any Prospectus Supplement with respect to the
Debt Securities to which such restrictions relate. See "Description of Capital
Stock -- Restrictions on Ownership."
FORM, EXCHANGE, REGISTRATION, CONVERSION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities will be issued only in fully registered form in denominations of
$1,000 or integral multiples thereof. (Section 302) Unless otherwise indicated
in the applicable Prospectus Supplement, payment of principal, premium, if any,
and interest on the Debt Securities will be payable, and the exchange,
conversion and transfer of Debt Securities will be registerable, at the office
or agency of the Company or the Trustee maintained for such purposes and at any
other office or agency maintained for such purpose. (Section 1002) No service
charge will be made for any registration of transfer or exchange of the Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge imposed in connection therewith. (Section 305)
All monies paid by the Company to a paying agent for the payment of
principal of and any premium or interest on any Debt Security which remain
unclaimed for two years after such principal, premium or interest has become due
and payable may be repaid to the Company and thereafter the holder of such Debt
Security may look only to the Company for payment thereof. (Section 1003)
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary (the "Global Depositary") or its nominee identified in the
applicable Prospectus Supplement. In such a case, one or more Global Securities
will be issued in a denomination or aggregate denomination equal to the portion
of the aggregate principal amount of outstanding Debt Securities of the series
to be represented by such Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in registered form, a Global
Security may not be registered for transfer or exchange except as a whole by the
Global Depositary for such Global Security to a nominee of such Global
Depositary or by a nominee of such Global Depositary to such Global Depositary
or another nominee of such Global Depositary or by such Global Depositary or any
nominee to a successor Global Depositary or a nominee of such successor Global
Depositary and except in the circumstances described in the applicable
Prospectus Supplement. (Section 305)
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements, although no
assurance can be given that such will be the case.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Global Depositary will be represented by a Global Security
registered in the name of such Global Depositary or its nominee. Upon the
issuance of such Global Security, and the deposit of such Global Security with
or on behalf of the Global Depositary for such Global Security, the Global
Depositary will credit, on its book-entry registration and transfer system, the
respective principal amounts of the Debt Securities represented by such Global
Security to the accounts of institutions that have accounts with such Global
Depositary or its nominee ("participants"). The accounts to be credited will be
designated by the underwriters or agents for the sale of such Debt Securities or
by the Company, if such Debt Securities are offered and sold directly by the
Company. Ownership of beneficial interests in such Global Security will be
limited to participants or persons that may hold interests through participants.
Ownership of beneficial interests by participants in such Global Security will
be shown on, and the transfer of that ownership interest will be effected only
through, records maintained by the Global Depositary or its nominee for such
Global Security. Ownership of beneficial interests in such Global Security by
persons that hold through participants will be shown on, and the transfer of
such ownership interests within such participant will be effected only through,
records maintained by such participant. The laws of some
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jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. The foregoing limitations and
such laws may impair the ability to transfer beneficial interests in such Global
Securities.
So long as the Global Depositary for a Global Security, or its nominee, is
the registered owner of such Global Security, such Global Depositary or such
nominee, as the case may be, will be considered the sole owner or holder of the
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as set forth below, unless otherwise specified in
the applicable Prospectus Supplement, owners of beneficial interests in such
Global Security will not be entitled to have Debt Securities of the series
represented by such Global Security registered in their names, will not receive
or be entitled to receive physical delivery of Debt Securities of such series in
certificated form and will not be considered the holders thereof for any
purposes under the applicable Indenture. Accordingly, each person owning a
beneficial interest in such Global Security must rely on the procedures of the
Global Depositary and, if such person is not a participant, on the procedures of
the participant through which such person owns its interest, to exercise any
rights of a holder under the applicable Indenture. The Company understands that
under existing industry practices, if the Company requests any action of holders
or an owner of a beneficial interest in such Global Security desires to give any
notice or take any action a holder is entitled to give or take under the
applicable Indenture, the Global Depositary would authorize the participants to
give such notice or take such action, and participants would authorize
beneficial owners owning through such participants to give such notice or take
such action or would otherwise act upon the instructions of beneficial owners
owning through them.
If the Global Depositary for Debt Securities of a series is at any time
unwilling, unable or ineligible to continue as Global Depositary and a successor
Global Depositary is not appointed by the Company within 90 days or an Event of
Default under the applicable Indenture has occurred and is continuing, the
Company will issue Debt Securities of such series in definitive form in exchange
for the Global Security or Securities representing the Debt Securities of such
series. In addition, the Company may at any time and in its sole discretion,
subject to any limitations described in the applicable Prospectus Supplement,
determine not to have any Debt Securities of a series represented by one or more
Global Securities and, in such event, will issue Debt Securities of such series
in definitive form in exchange for the Global Security or Securities
representing such Debt Securities. Further, if the Company so specifies with
respect to the Debt Securities of a series, an owner of a beneficial interest in
a Global Security representing Debt Securities of such series may, on terms
acceptable to the Company and the Global Depositary for such Global Security,
receive Debt Securities of such series in definitive form in exchange for such
beneficial interest, subject to any limitations described in the applicable
Prospectus Supplement relating to such Debt Securities. In any such instance, an
owner of a beneficial interest in a Global Security will be entitled to physical
delivery in definitive form of Debt Securities of the series represented by such
Global Security equal in principal amount to such beneficial interest and to
have such Debt Securities registered in its name (if the Debt Securities of such
series are issuable as registered securities).
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
CERTAIN COVENANTS OF THE COMPANY
The Company will be subject to certain covenants respecting (i) payment of
principal of, premium, if any and interest on the Debt Securities, (ii)
maintenance of an office or agency where Debt Securities may be surrendered for
registration of transfer or exchange or surrendered for conversion and where
notices and demands to or upon the Company in respect of the Debt Securities,
and the Indenture may be served, (iii) the holding of monies for Debt Securities
payments in trust, (iv) delivery of certificates to the Trustee by the Company
regarding defaults, (v) maintenance of the Company's corporate existence, (vi)
maintenance of the Company's properties and (vii) payment of taxes and other
claims by the Company. If so indicated in the applicable Prospectus Supplement
with respect to a particular series of Debt Securities, the Company will be
subject to the additional covenants described therein.
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EVENTS OF DEFAULT
Unless otherwise indicated in the applicable Prospectus Supplement, the
following constitute Events of Default under the Indentures with respect to Debt
Securities of any series: (a) failure to pay principal of or premium, if any, on
any Debt Security of that series when due; (b) failure to pay any interest on
any Debt Security of that series when due, continued for 30 days; (c) failure in
the deposit of any sinking fund payment in respect of any Debt Security of that
series; (d) failure to perform any other covenant of the Company in the
Indentures (other than a covenant included in the applicable Indenture solely
for the benefit of a series of Debt Securities other than that series),
continued for 60 days after written notice to the Company as provided in the
applicable Indenture; (e) acceleration of the maturity of indebtedness of the
Company or any of its subsidiaries having an outstanding principal amount of at
least $5,000,000 or a failure to pay such indebtedness at its stated maturity
after demand therefor, provided that within 10 days after such acceleration or
maturity the Trustee or holders of at least 25% in aggregate principal amount of
the Debt Securities of such series then outstanding have given notice thereof
and demand for the discharge of such acceleration or repayment at maturity; (f)
a final judgment or final judgments that exceed $5,000,000 for the payment of
money have been entered by a court or courts of competent jurisdiction against
the Company and/or any subsidiary of the Company and such judgment or judgments
have not been discharged within 30 days after all rights to appeal have been
exhausted; and (g) certain events of bankruptcy, insolvency or reorganization
respecting the Company or its Subsidiaries. (Section 501) The applicable
Prospectus Supplement with respect to Debt Securities of any series will
indicate any other Event or Events of Default with respect to Debt Securities of
that series.
Unless otherwise indicated in the applicable Prospectus Supplement, if (i)
an Event of Default with respect to outstanding Debt Securities of any series
shall occur and be continuing (other than an Event of Default described in
clause (g) of the foregoing paragraph), either the applicable Trustee or the
holders of not less than 25% in principal amount of the outstanding Debt
Securities of that series by notice as provided in the Indentures may declare
the principal amount (or, if the Debt Securities of that series are original
issue discount Securities, such portion of the principal amount as may be
specified in the terms of that series) of all Debt Securities of that series to
be due and payable immediately or (ii) an Event of Default described in clause
(g) of the foregoing paragraph occurs with respect to outstanding Debt
Securities of any series, all principal of, premium, if any, and accrued and
unpaid interest on all Debt Securities of that series (or, if the Debt
Securities of that series are original issue discount securities, such portion
of the principal amount as may be specified in the terms of that series) shall
be immediately due and payable without any declaration by the Trustee or
holders. (Section 502) However, at any time after a declaration of acceleration
with respect to Debt Securities of any series has been made, but before a
judgment or decree based on such acceleration has been obtained, the holders of
a majority in principal amount of the outstanding Debt Securities of that series
may, under certain circumstances, rescind and annul such acceleration. (Section
502) For information as to waiver or defaults, see "-- Modification and Waiver"
below.
The Indentures provide that, subject to the duty of the applicable Trustee
thereunder during an Event of Default to act with the required standard of care,
such Trustee will be under no obligation to exercise any of its rights or powers
under the applicable Indenture at the request or direction of any of the
holders, unless such holders shall have offered to such Trustee reasonable
security or indemnity. (Section 603) Subject to certain provisions, including
those requiring security or indemnification of the Trustees, the holders of a
majority in principal amount of the outstanding Debt Securities of any series
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustees, or exercising any trust or
power conferred on such Trustees, with respect to the Debt Securities of that
series. (Section 512)
No holder of a Debt Security of any series will have the right to institute
any proceeding with respect to the Indentures or for any remedy thereunder,
unless (i) such holder shall have previously given to the applicable Trustee
written notice of a continuing Event of Default (as defined) with respect to
Debt Securities of that series; (ii) the holders of not less than 25% in
aggregate principal amount of the outstanding Debt Securities of the same series
shall have made written request, and offered reasonable indemnity, to the
applicable Trustee to institute proceedings in respect of such Event of Default
in its own name as trustee under the applicable Indenture; (iii) the Trustee
shall have failed to institute such proceedings within 60 days; and
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(iv) the Trustee shall not have received from the holders of a majority in
aggregate principal amount of the outstanding Debt Securities of the same series
a direction inconsistent with such request; provided, however, that such
limitations do not apply to a suit instituted by a holder of a Debt Security for
enforcement of payment of the principal of and any premium and interest on such
Debt Security on or after the respective due dates expressed in such Debt
Security, or in the case of convertible Debt Securities, for enforcement of a
right of conversion. (Section 507, Section 508)
The Company will be required to furnish to the Trustees annually a
statement as to the performance by the Company of its obligations under the
Indentures and as to any default in such performance. (Section 1004)
MODIFICATION AND WAIVER
Without the consent of any holder of outstanding Debt Securities, the
Company and the applicable Trustee may amend or supplement the applicable
Indenture or Debt Securities to cure any ambiguity, defect or inconsistency, or
to make certain specified changes and other changes that do not adversely affect
the rights of any holder of Debt Securities. Other modifications and amendments
of the Indentures may be made by the Company and the applicable Trustee only
with the consent of the holders of not less than a majority in aggregate
principal amount of the outstanding Debt Securities of each series affected
thereby; provided, however, that no such modification or amendment may, without
the consent of the holder of each outstanding Debt Security affected thereby:
(a) change the stated maturity of the principal of, or any installment of
principal of, or interest on, any Debt Security; (b) reduce the principal amount
of, the rate of interest on, or the premium, if any, payable upon the redemption
or repurchase of, any Debt Security; (c) reduce the amount of principal of an
original issue discount Security payable upon acceleration of the maturity
thereof; (d) change the place or currency of payment of principal of, or
premium, if any, or interest on any Debt Security; (e) impair the right to
institute suit for the enforcement of any payment on or with respect to any Debt
Security on or after the stated maturity or redemption date thereof; (f) modify
the conversion provisions applicable to convertible Debt Securities in a manner
adverse to the holders thereof; (g) modify the subordination provisions
applicable to any series of Debt Securities in a manner adverse to the holders
thereof; or (h) reduce the percentage in principal amount of outstanding Debt
Securities of any series, the consent of the holders of which is required for
modification or amendment of the Indentures or for waiver of compliance with
certain provisions of the applicable Indenture or for waiver of certain
defaults. (Section 902)
The holders of at least a majority in aggregate principal amount of the
outstanding Debt Securities of any series may on behalf of the holders of all
Debt Securities of that series waive, insofar as that series is concerned,
compliance by the Company with certain covenants of the Indentures. The holders
of not less than a majority in principal amount of the outstanding Debt
Securities of any series may, on behalf of the holders of all Debt Securities of
that series, waive any past default under the applicable Indenture with respect
to that series, except a default in the payment of the principal of, or premium,
if any, or interest on, any Debt Security of that series or in respect of a
provision which under such applicable Indenture cannot be modified or amended
without the consent of the holder of each outstanding Debt Security of that
series affected. (Section 513)
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of any holders of outstanding Debt
Securities, may consolidate with or merge into, or transfer or lease its assets
substantially as an entirety to, any Person, and any other Person may
consolidate with or merge into, or transfer or lease its assets substantially as
an entirety to, the Company, provided that (a) the Person (if other than the
Company) formed by such consolidation or into which the Company is merged or
which acquires or leases the assets of the Company substantially as an entirety
assumes the Company's obligations on the Debt Securities and under the Indenture
relating thereto and (b) after giving effect to such transaction no Event of
Default, and no event which, after notice or lapse of time or both, would become
an Event of Default, shall have happened and be continuing. (Section 801) A
Prospectus Supplement may set forth any additional provisions regarding a
consolidation with, merger into, or transfer or lease of its assets
substantially as an entirety to, any Person (or of such Person with, into or to
the Company).
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DEFEASANCE
If so indicated in the applicable Prospectus Supplement with respect to the
Debt Securities of a series, the Company, at its option (i) will be discharged
from any and all obligations in respect of the Debt Securities of such series
(except for certain obligations to register the transfer or exchange of Debt
Securities of such series, to replace destroyed, stolen, lost or mutilated Debt
Securities of such series, and to maintain an office or agency in respect of the
Debt Securities and hold moneys for payment in trust) or (ii) will be released
from its obligations to comply with any covenants that may be specified in the
applicable Prospectus Supplement with respect to the Debt Securities of such
series, and the occurrence of an event described in clause (d) under "Events of
Default" above with respect to any defeased covenants shall no longer be an
Event of Default, if in either case the Company irrevocably deposits with the
applicable Trustee, in trust, money or U.S. Government Obligations that through
the payment of interest thereon and principal thereof in accordance with their
terms will provide money in an amount sufficient to pay all of the principal of
and premium, if any, and any interest on the Debt Securities of such series on
the dates such payments are due (which may include one or more redemption dates
designated by the Company) in accordance with the terms of such Debt Securities.
(Section 1302, Section 1303) Such a trust may only be established if, among
other things, (a) no Event of Default or event which with the giving of notice
or lapse of time, or both, would become an Event of Default under the applicable
Indenture shall have occurred and be continuing on the date of such deposit, (b)
no Event of Default described under clause (g) under "Events of Default" above
or event which with the giving of notice or lapse of time, or both, would become
and Event of Default described under such clause (g) shall have occurred and be
continuing at any time during the period ending on the 91st day following such
date of deposit, and (c) the Company shall have delivered an opinion of counsel
to the effect that the holders of the Debt Securities will not recognize gain or
loss for U.S. federal income tax purposes as a result of such deposit or
defeasance and will be subject to U.S. federal income tax in the same manner as
if such deposit and defeasance had not occurred, which opinion of counsel, in
the case of a deposit and defeasance of such Indenture with respect to the Debt
Securities of any series as described under clause (i) above, shall be based on
either (A) a ruling to such effect that the Company has received from, or that
has been published by, the Internal Revenue Service or (B) a change in the
applicable federal income tax law, occurring after the date of the applicable
Indenture, to such effect. (Section 1304) In the event the Company omits to
comply with its remaining obligations under such Indenture after a defeasance of
such Indenture with respect to the Debt Securities of any series as described
under clause (ii) above and the Debt Securities of such series are declared due
and payable because of the occurrence of any undefeased Event of Default, the
amount of money and U.S. Government Obligations on deposit with the applicable
Trustee may be insufficient to pay amounts due on the Debt Securities of such
series at the time of the acceleration resulting from such Event of Default.
However, the Company will remain liable for such payments.
SUBORDINATION OF SUBORDINATED DEBT SECURITIES
Unless otherwise indicated in the Prospectus Supplement, the following
provisions will apply to the Subordinated Debt Securities.
Payment of principal of, premium, if any, and interest on the Subordinated
Debt Securities will, to the extent set forth in the Subordinated Indenture, be
subordinate in right of payment to all Senior Debt, including the Senior Debt
Securities. (Section 1501) The Prospectus Supplement will set forth as of the
most recent practicable date the aggregate amount of outstanding indebtedness
that by the terms of the Subordinated Debt Securities will be senior to the
Subordinated Debt Securities. Except as may otherwise be provided in the
applicable Prospectus Supplement, there will be no limitation on the Company's
ability to issue additional Senior Debt.
Upon any payment or distribution of assets to creditors upon any
liquidation, dissolution, winding up, reorganization, assignment for the benefit
of creditors, marshalling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of the Company, the holders of Senior Debt will first be
entitled to receive payment in full of principal of (and premium, if any) and
interest, if any, on such Senior Debt before the holders of the Subordinated
Debt Securities will be entitled to receive or retain any payment in respect of
the principal of (and premium, if any)
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or interest, if any, on the Subordinated Debt Securities. (Section 1502). By
reason of such subordination, in the event of liquidation or insolvency of the
Company, holders of Subordinated Debt Securities may recover less, ratably, than
holders of Senior Debt.
In the event of the acceleration of the maturity of any Subordinated Debt
Securities, the holders of all Senior Debt outstanding at the time of such
acceleration will be entitled to receive payment in full of all amounts due or
to become due in respect of all Senior Debt, or provision shall have been made
for such payment in cash, before the holders of the Subordinated Debt Securities
will be entitled to receive any payment upon the principal of (or premium, if
any) or interest, if any, on the Subordinated Debt Securities. (Section 1503)
No payments on account of principal (or premium, if any) or interest, if
any, in respect of the Subordinated Debt Securities may be made if there shall
have occurred and be continuing a default in any payment with respect to Senior
Debt. In addition, during the continuance of any non-payment default or event of
default with respect to Senior Debt in an aggregate principal amount of at least
$10 million pursuant to which the maturity thereof is or may be accelerated, or
in the event any judicial proceeding shall be pending with respect to any such
default, then upon receipt by the Trustee of notice thereof from the holder of
such Senior Debt, unless and until (i) such default or event of default shall
have been cured or waived or shall have ceased to exist, or (ii) certain events
of bankruptcy or insolvency or reorganization involving the Company or any
subsidiary of the Company shall have occurred and be continuing, or (iii) such
Senior Debt shall have been paid in full (each of clauses (i), (ii) and (iii)
being a "Termination Event"), no payment or distribution will be made by or on
behalf of the Company on account of or with respect to the Subordinated Debt
Securities (except for those funds held in trust for the benefit of the holders
of any Subordinated Debt Securities to such holders) during a period (a
"Blockage Period") commencing on the date of receipt of such notice by the
Trustee and ending 179 days thereafter. In addition, so long as no Termination
Event shall have occurred, upon the occurrence of either such a payment or a
non-payment default, neither the Trustee nor any holder of the Subordinated Debt
Securities may take any action to accelerate the maturity of the Subordinated
Debt Securities during any Blockage Period (with respect to a payment default,
the Blockage Period shall be deemed to commence on the date which is the first
date payment should have been made). Notwithstanding anything herein to the
contrary, (a) in no event will a Blockage Period extend beyond 179 days from the
date the payment on the Subordinated Debt Securities was due and (b) there must
be 180 days in any 365 day period during which no Blockage Period is in effect.
Not more than one Blockage Period may have commenced with respect to the
Subordinated Debt Securities during any period of 365 consecutive days. No
default or event of default that existed or was continuing on the date of
commencement of any Blockage period with respect to the Senior Debt initiating
such Blockage Period may be, or be made, the basis of the commencement of any
other Blockage period by the holders of such Senior Debt, whether or not within
a period of 365 consecutive days, unless such default or event of default has
been cured or waived for a period of not less than 90 consecutive days. (Section
1504)
For purposes of the subordination provisions, the payment, issuance and
delivery of cash, property or securities (other than stock and certain
subordinated securities of the Company) upon conversion of a Subordinated Debt
Security will be deemed to constitute payment on account of the principal of
such Subordinated Debt Security. By reason of these provisions, in the event of
a default on any Senior Debt, whether now outstanding or hereafter issued,
payments of principal of, premium, if any and interest on Subordinated Debt
Securities may not be permitted to be made, and the obligations thereunder may
not be able to be accelerated, until such Senior Debt is paid in full or such
event of default is cured or waived. (Section 1515)
"Senior Debt" is defined to mean the principal, premium, if any, unpaid
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for post-filing interest is allowed in such proceeding), fees, charges,
expenses, reimbursement and indemnification obligations, and all other amounts
payable under or in respect of Indebtedness (as defined) of the Company, whether
any such Indebtedness exists as of the date of the Subordinated Indenture or is
created, incurred, assumed or guaranteed after such date, other than (i)
Indebtedness that by its terms or by operation of law is subordinated to or on a
parity with the Subordinated
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Debt Security, (ii) Indebtedness owed to a subsidiary or partnership of the
Company, and (iii) Indebtedness owing in respect of the Company's 10.5%
Debentures and the Company's 6.55% Debentures. (Section 101)
"Indebtedness" with respect to any Person is defined to mean:
(i) any debt (a) for money borrowed, or (b) evidenced by a bond, note,
debenture, or similar instrument (including purchase money obligations)
given in connection with the acquisition of any business, property or
assets, whether by purchase, merger, consolidation or otherwise, but shall
not include any account payable or other obligation created or assumed by a
Person in the ordinary course of business in connection with the obtaining
of materials or services, or (c) which is a direct or indirect obligation
which arises as a result of banker's acceptances or bank letters of credit
issued to secure obligations of such Person, or to secure the payment of
revenue bonds issued for the benefit of such Person, whether contingent or
otherwise;
(ii) any debt of others described in the preceding clause (i) which
such Person has guaranteed or for which it is otherwise liable;
(iii) the obligation of such Person as lessee under any lease of
property which is reflected on such Person's balance sheet as a capitalized
lease; and
(iv) any deferral, amendment, renewal, extension, supplement or
refunding of any liability of the kind described in any of the preceding
clauses (i), (ii) and (iii);
provided, however, that, in computing the Indebtedness of any Person, there
shall be excluded any particular indebtedness if, upon or prior to the maturity
thereof, there shall have been deposited with a depository in trust money (or
evidence of Indebtedness, if permitted by the instrument creating such
Indebtedness) in the necessary amount to pay, redeem or satisfy such
Indebtedness as it becomes due, and the amount so deposited shall not be
included in any computation of the assets of such Person. (Section 101)
STRUCTURAL SUBORDINATION
The Indentures do not limit or prohibit the incurrence of indebtedness or
liabilities by any of the Company's subsidiaries or partnerships. Certain of the
Company's operations are conducted through subsidiaries or partnerships, which
are separate and distinct legal entities and have no obligation, contingent or
otherwise, to pay any amounts due pursuant to the Debt Securities or to make any
funds available therefor, whether by dividends, loans or other payments. The
Debt Securities will be structurally subordinated to all indebtedness and other
liabilities and commitments (including trade payables and lease obligations) of
the Company's subsidiaries and partnerships. Any right of the Company to receive
assets of any such subsidiary or partnership upon the liquidation or
reorganization of any such subsidiary or partnership (and the consequent rights
of the holders of Debt Securities to participate in those assets) will be
structurally subordinated to the claims of that subsidiary's or partnership's
creditors.
DESCRIPTION OF CAPITAL STOCK
The following descriptions do not purport to be complete and are subject
to, and qualified in their entirety by reference to, the more complete
descriptions thereof set forth in the Company's Charter and Bylaws, which
documents have been incorporated by reference as exhibits to the Registration
Statement.
For the Company to qualify as a REIT under the Code, not more than 50% of
the value of the outstanding stock may be owned, directly or indirectly, by five
or fewer individuals (as defined in the Code to include certain entities) during
the last half of a taxable year and the 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). Accordingly, the Charter
contains provisions that restrict the ownership and transfer of shares of stock.
See " -- Restrictions on Ownership."
The Charter authorizes the issuance of up to 60,000,000 shares, consisting
of 50,000,000 shares of Common Stock, $.001 par value per share ("Common
Stock"), and 10,000,000 shares of Preferred Stock, par
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value $.001 per share ("Preferred Stock"). As of June 30, 1997, the Company had
16,205,672 shares of Common Stock and no shares of Preferred Stock outstanding.
PREFERRED STOCK
The following is a description of certain general terms and provisions of
the Preferred Stock. The particular terms of any series of Preferred Stock will
be described in the applicable Prospectus Supplement. This summary does not
purport to be complete and is subject to, and qualified in its entirety by, the
provisions of the Charter and the articles supplementary relating to each series
of the Preferred Stock, which will be filed as an exhibit to or incorporated by
reference in the Registration Statement of which this Prospectus is a part at or
prior to the time of issuance of such series of the Preferred Stock (the
"Articles Supplementary").
The Preferred Stock authorized by the Charter may be issued from time to
time in one or more series in such amounts and with such designations,
preferences, conversion or other rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption as may be fixed by the Board of Directors. Under certain
circumstances, the issuance of Preferred Stock could have the effect of
delaying, deferring or preventing a change of control of the Company and may
adversely affect the voting and other rights of the holders of Common Stock. The
Charter authorizes the Board of Directors to classify or reclassify any unissued
shares of Preferred Stock by setting or changing the designations, preferences,
conversion or other rights, voting powers, restrictions, limitations as to
distributions, qualifications and terms and conditions of redemption of such
Preferred Stock.
The Preferred Stock shall have the dividend, liquidation, redemption and
voting rights set forth below unless otherwise described in a Prospectus
Supplement relating to a particular series of the Preferred Stock. The
applicable Prospectus Supplement will describe the following terms of the series
of Preferred Stock in respect of which this Prospectus is being delivered: (1)
the title of such Preferred Stock and the number of shares offered; (2) the
amount of liquidation preference per share; (3) the initial public offering
price at which such Preferred Stock will be issued; (4) the dividend rate (or
method of calculation), the dates on which dividends shall be payable and the
dates from which dividends shall commence to cumulate, if any; (5) any
redemption or sinking fund provisions; (6) any conversion or exchange rights;
(7) any additional voting, dividend, liquidation, redemption, sinking fund and
other rights, preferences, privileges, limitations and restrictions; (8) any
listing of such Preferred Stock on any securities exchange; (9) a discussion of
U.S. federal income tax considerations applicable to such Preferred Stock; (10)
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; (11) any limitations on issuance of any series of Preferred Stock
ranking senior to or on a parity with such series of Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or winding up of the
affairs of the Company; and (12) 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.
General
The Preferred Stock offered hereby will be issued in one or more series.
The Preferred Stock, upon issuance against full payment of the purchase price
therefor, will be fully paid and nonassessable. The liquidation preference is
not indicative of the price at which the Preferred Stock will actually trade on
or after the date of issuance.
Rank
The Preferred Stock shall, with respect to dividend rights and rights upon
liquidation, dissolution and winding up of the Company, rank prior to the Common
Stock and to all other classes and series of equity securities of the Company
now or hereafter authorized, issued or outstanding (the Common Stock and such
other classes and series of equity securities collectively may be referred to
herein as the "Junior Stock"), other than any classes or series of equity
securities of the Company which by their terms specifically provide for a
ranking on a parity with (the "Parity Stock") or senior to (the "Senior Stock")
the Preferred Stock as to
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dividend rights and rights upon liquidation, dissolution or winding up of the
Company. The Preferred Stock shall be junior to all outstanding debt of the
Company. The Preferred Stock shall be subject to creation of Senior Stock,
Parity Stock and Junior Stock to the extent not expressly prohibited by the
Charter.
Dividends
Holders of Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of assets of the Company legally
available for payment, dividends, or distributions in cash, property or other
assets of the Company or in Securities of the Company or from any other source
as the Board of Directors in their discretion shall determine and at such dates
and at such rates per share per annum as described in the applicable Prospectus
Supplement. Such rate may be fixed or variable or both. Each declared dividend
shall be payable to holders of record as they appear at the close of business on
the books of the Company on such record dates, not more than 90 calendar days
preceding the payment dates therefor, as are determined by the Board of
Directors (each of such dates, a "Record Date").
Such dividends may be cumulative or noncumulative, as described in the
applicable Prospectus Supplement. If dividends on a series of Preferred Stock
are noncumulative and if the Board of Directors fails to declare a dividend in
respect of a dividend period with respect to such series, then holders of such
Preferred Stock will have no right to receive a dividend in respect of such
dividend period, and the Company will have no obligation to pay the dividend for
such period, whether or not dividends are declared payable on any future
dividend payment dates. If dividends of a series of Preferred Stock are
cumulative, the dividends on such shares will accrue from and after the date set
forth in the applicable Prospectus Supplement.
No full dividends shall be declared or paid or set apart for payment on
Preferred Stock of any series ranking, as to dividends, on a parity with or
junior to the series of Preferred Stock offered by the applicable Prospectus
Supplement for any period unless full dividends for the immediately preceding
dividend period on such Preferred Stock (including any accumulation in respect
of unpaid dividends for prior dividend periods, if dividends on such Preferred
Stock are cumulative) have been or contemporaneously are declared and paid or
declared and a sum sufficient for the payment thereof is set apart for such
payment. When dividends are not so paid in full (or a sum sufficient for such
full payment is not so set apart) upon such Preferred Stock and any other
Preferred Stock of the Company ranking on a parity as to dividends with the
Preferred Stock, dividends upon such Preferred Stock and dividends on such other
Preferred Stock ranking on a parity with the Preferred Stock shall be declared
pro rata so that the amount of dividends declared per share on such Preferred
Stock and such other Preferred Stock ranking on a parity with the Preferred
Stock shall in all cases bear to each other the same ratio that accrued
dividends for the then-current dividend period per share on such Preferred Stock
(including any accumulation in respect of unpaid dividends for prior dividend
periods, if dividends on such Preferred Stock are cumulative) and accrued
dividends, including required or permitted accumulations, if any, on shares of
such other Preferred Stock, bear to each other. No interest, or sum of money in
lieu of interest, shall be payable in respect of any dividend payment(s) on
Preferred Stock which may be in arrears. Unless full dividends on the series of
Preferred Stock offered by the applicable Prospectus Supplement have been
declared and paid or set apart for payment for the immediately preceding
dividend period (including any accumulation in respect of unpaid dividends for
prior dividend periods, if dividends on such Preferred Stock are cumulative),
(a) no cash dividend or distribution (other than in shares of Junior Stock) may
be declared, set aside or paid on the Junior Stock, (b) the Company may not,
directly or indirectly, repurchase, redeem or otherwise acquire any shares of
its Junior Stock (or pay any monies into a sinking fund for the redemption of
any shares) except by conversion into or exchange for Junior Stock, and (c) the
Company may not, directly or indirectly, repurchase, redeem or otherwise acquire
any Preferred Stock or Parity Stock (or pay any monies into a sinking fund for
the redemption of any shares of any such stock) otherwise than pursuant to pro
rata offers to purchase or a concurrent redemption of all, or a pro rata
portion, of the outstanding Preferred Stock and shares of Parity Stock (except
by conversion into or exchange for Junior Stock).
Any dividend payment made on a series of Preferred Stock shall first be
credited against the earliest accrued but unpaid dividend due with respect to
shares of such series.
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Redemption
The terms, if any, on which Preferred Stock of any series may be redeemed
will be set forth in the applicable Prospectus Supplement.
Liquidation
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company, the holders of a series of Preferred
Stock will be entitled, subject to the rights of creditors, but before any
distribution or payment to the holders of Common Stock, or any Junior Stock on
liquidation, dissolution or winding up of the Company, to receive a liquidating
distribution in the amount of the liquidation preference per share as set forth
in the applicable Prospectus Supplement plus accrued and unpaid dividends for
the then-current dividend period (including any accumulation in respect of
unpaid dividends for prior dividend periods, if dividends on such series of
Preferred Stock are cumulative). If the amounts available for distribution with
respect to the Preferred Stock and all other outstanding Parity Stock are not
sufficient to satisfy the full liquidation rights of all the outstanding
Preferred Stock and Parity Stock, then the holders of each series of such stock
will share ratably in any such distribution of assets in proportion to the full
respective preferential amount (which in the case of Preferred Stock may include
accumulated dividends) to which they are entitled. After payment of the full
amount of the liquidation distribution, the holders of Preferred Stock will not
be entitled to any further participation in any distribution of assets by the
Company.
Voting
The Preferred Stock of a series will not be entitled to vote, except as
described below or in the applicable Prospectus Supplement. Without the
affirmative vote of a majority of the Preferred Stock then outstanding (voting
separately as a class together with any Parity Stock), the Company may not (i)
increase or decrease the aggregate number of authorized shares of such class or
any security ranking prior to the Preferred Stock, (ii) increase or decrease the
par value of the shares of holders of such class, or (iii) alter or change the
voting or other powers, preferences or special rights of such class so as to
affect them adversely. An amendment which increases the number of authorized
shares of or authorizes the creation or issuance of other classes or series of
Junior Stock or Parity Stock, or substitutes the surviving entity in a merger,
consolidation, reorganization or other business combination for the Company,
shall not be considered to be such an adverse change.
No Other Rights
The shares of a series of Preferred Stock will not have any preferences,
voting powers or relative, participating, optional or other special rights
except as set forth above or in the applicable Prospectus Supplement, the
Charter and in the applicable Articles Supplementary or as otherwise required by
law.
Transfer Agent and Registrar
The transfer agent for each series of Preferred Stock will be described in
the related Prospectus Supplement.
COMMON STOCK
Subject to the preferential rights of any other shares or series of stock
and to the provisions of the Charter regarding Excess Shares (as defined
herein), holders of shares of Common Stock will be entitled to receive dividends
on such stock as the Board of Directors may declare out of assets legally
available for the payment of dividends. See "-- Restrictions on Ownership". Upon
issuance against full payment of the purchase price therefor, the 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
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of Preferred Stock, if any. The Common Stock is subject to restrictions on
transfer under certain circumstances. See "-- Restrictions on Ownership."
Subject to the provisions of the Charter regarding Excess Shares, each
share of Common Stock will be entitled to one vote on all matters voted upon by
the holders of Common Stock. Holders of shares of Common Stock will have no
cumulative voting rights. The Company's Bylaws provide that the President, Chief
Executive Officer or a majority of the Board may call a special meeting and the
Secretary of the Company must call a special meeting of stockholders upon
written request of stockholders entitled to cast at least 25% of all votes
entitled to be cast at the meeting.
Pursuant to the MGCL, a corporation generally cannot dissolve, amend its
charter, merger, sell all or substantially all of its assets, engage in a share
exchange or engage in similar transactions outside the ordinary course of
business unless approved by the affirmative vote of stockholders holding at
least two-thirds of the shares entitled to vote on the matter unless a lesser
percentage (but not less than a majority of all of the votes entitled to be cast
on the matter) is set forth in the corporation's charter. The Charter of the
Company contains no such provision. As permitted by the MGCL, the Charter of the
Company provides that the affirmative vote of the holders of at least 90% of the
"voting stock" of the Company, voting together as a single class, shall be
required to repeal or amend any provision relating to removal of directors, the
limit on ownership and Excess Shares, amendment of the Charter and limitation of
liability and indemnification of directors and officers.
The Charter authorizes the Board of Directors to reclassify any unissued
shares of Common Stock into other series of stock and to establish the number of
shares in each series and to fix the designation, conversion or other rights,
voting powers, restrictions, limitations as to distributions, preferences,
qualifications or terms or conditions of redemption of such shares of each such
series.
The Common Stock of the Company is listed on the NYSE under the symbol
"CCT." The transfer agent for the Common Stock is AmSouth Bank of Alabama,
Birmingham, Alabama.
RESTRICTIONS ON OWNERSHIP
The Charter contains a number of provisions which restrict the ownership
and transfer of shares and which are designed to safeguard the Company against
an inadvertent loss of REIT status. For the Company to qualify as a REIT under
the Code in any taxable year after the first year of its election to be treated
as a REIT, (i) not more than 50% in value of its outstanding Stock (as defined
below) may be owned, directly or indirectly (after application of certain
complex attribution rules), by five or fewer individuals 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 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 9.8% or more in
number or value of the outstanding Common Stock and/or Preferred Stock
(collectively, the "Stock") has or may become concentrated in the hands of one
beneficial owner, the Board of Directors has the power to refuse to transfer or
issue Stock to a person whose acquisition of such Stock would cause a beneficial
holder to hold in excess of 9.8% in number or value of the outstanding Stock.
Further, any transfer of Stock that would create a beneficial owner of more than
9.8% in number or value of the outstanding Stock shall be deemed null and void,
and the intended transferee shall be deemed never to have had an interest
therein.
If at any time there is a transfer in violation of such restrictions, the
shares of Stock held by such person in excess of the 9.8% limitation (the
"Excess Shares") shall be deemed automatically to have been converted into a
class separate and distinct from the class or series from which converted and
from any other class of Excess Shares, each such class being designated "Excess
Shares of [Name of Stockholder]." Excess Shares shall be issued and outstanding
but shall have no voting rights. No dividends shall be paid with respect to
Excess Shares. The Company shall have the right to redeem 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 Stock so
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purchased shall be equal to (i) the average daily per share closing sales price
of a share of stock of the class of the Company from which such Excess Share was
converted, if then listed on a national securities exchange or on the Nasdaq
National Market or (ii) if such shares are not so listed, the market price shall
be the mean between the average per share closing bid prices and asked prices,
in each case during the 30-day period ending on the business day prior to the
redemption date. If no such closing sales prices or quotations are available,
the purchase price shall be the price determined by the Board of Directors in
good faith.
The Board of Directors of the Company may exempt certain persons from these
restrictions, if evidence satisfactory to the Board of Directors is presented
showing that such exemption will not jeopardize the Company's status as a REIT
under the Code. As a condition of such exemption, the Board of Directors may
require a ruling from the Internal Revenue Service and/or an opinion of counsel
satisfactory to it and/or representations and undertakings from the applicant
with respect to preserving the REIT status of the Company.
The foregoing restrictions on transferability and ownership will not apply
if the Board of Directors determines that it is no longer in the best interests
of the Company to attempt to qualify, or to continue to qualify, as a REIT.
ANTITAKEOVER EFFECT OF OWNERSHIP LIMIT AND POWER TO ISSUE ADDITIONAL SHARES
For the Company to qualify as a REIT under the Code in any taxable year, no
more than 50% in value of its outstanding stock may be owned directly, or
indirectly by attribution, by five or fewer individuals (as defined in the Code
to include certain entities) at any time during the second half of the Company's
taxable year (other than during the first year for which the Company elects to
be treated as a REIT). In addition, the outstanding stock must be owned by 100
or more persons during at least 335 days of a taxable year of 12 months or
during a proportional part of a shorter taxable year (other than during the
first year for which the Company elects to be treated as a REIT). See "Federal
Income Tax Considerations."
Because of the stock ownership requirements applicable to REITs, the
Company's Charter contains restrictions on transfer of its stock. Such
restrictions authorize the Company to refuse to transfer stock to any person, if
as a result of such transfer such person or entity would beneficially own stock
in excess of 9.8% in number or value of the outstanding stock of the Company.
Such provisions may inhibit market activity and the resulting opportunity for
stockholders to realize a premium for their Securities that might otherwise
exist if a stockholder were attempting to assemble a block of stock in excess of
9.8% in number or value of the outstanding stock. Also, there can be no
assurance that such provisions will in fact enable the Company to meet the
relevant REIT stock ownership requirements.
The Company's Charter authorizes the Board of Directors to cause the
Company to issue additional authorized but unissued shares of Common Stock or
Preferred Stock and to classify or reclassify any unissued shares of Common
Stock or Preferred Stock and to set the preferences, rights and other terms of
such classified or unclassified shares. Although the Board of Directors has no
such intention at the present time, it could establish a series of Preferred
Stock that could, depending on the terms of such series, delay or impede a
transaction or a change of control of the Company that might involve a premium
price for the Common Stock or otherwise be in the best interest of the
stockholders. The Charter and Bylaws of the Company also contain other
provisions that may delay or impede a transaction or a change of control of the
Company that might involve a premium price for the Common Stock or otherwise be
in the best interest of the stockholder.
MARYLAND BUSINESS COMBINATION LAW
Under the MGCL, certain "business combinations" (including certain
issuances of equity securities) between a Maryland corporation and any
Interested Stockholder or an affiliate thereof are prohibited for five years
after the most recent date on which the Interested Stockholder becomes an
Interested Stockholder. Thereafter, any such business combination must be
approved by two super-majority stockholder votes unless, among other conditions,
the corporation's common stockholders receive a minimum price (as defined in the
MGCL) for their shares and the consideration is received in cash or in the same
form as previously paid by the Interested Stockholder for its shares.
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DESCRIPTION OF WARRANTS
The Company has no Warrants outstanding (other than options issued under
the Company's 1994 Stock Incentive Plan), as of July 18, 1997. The Company may
issue Warrants for the purchase of Preferred Stock, Common Stock or Debt
Securities. Warrants may be issued independently or together with any other
Securities offered by any Prospectus Supplement and may be attached to or
separate from such Securities. Each series of Warrants will be issued under a
separate warrant agreement (each, a "Warrant Agreement") to be entered into
between the Company and a warrant agent specified in the applicable Prospectus
Supplement (the "Warrant Agent"). The Warrant Agent will act solely as an agent
of the Company in connection with the Warrants of such series and will not
assume any obligation or relationship of agency or trust for or with any
provisions of the Warrants offered hereby. Further terms of the Warrants and the
applicable Warrant Agreements will be set forth in the applicable Prospectus
Supplement.
The applicable Prospectus Supplement will describe the terms of the
Warrants in respect of which this Prospectus is being delivered, and shall set
forth the following: (1) The title of such Warrants; (2) The aggregate number of
such Warrants; (3) The price or prices at which such Warrants will be issued;
(4) The designation, number of terms of the shares of Preferred Stock, Common
Stock or Debt Securities purchasable upon exercise of such Warrants; (5) The
designation and terms of the Securities, if any, with which such Warrants are
issued and the number of such Warrants issued with each such Security; (6) The
date, if any, on and after which such Warrants and the related Preferred Stock,
Common Stock or Debt Securities will be separately transferable; (7) The price
at which each share of Preferred Stock, Common Stock or Debt Securities
purchasable upon exercise of such Warrants may be purchased; (8) The date on
which the right to exercise such Warrants shall commence and the date on which
such right shall expire; (9) The minimum or maximum amount of such Warrants
which may be exercised at any one time; (10) Information with respect to
book-entry procedures, if any; (11) A discussion of certain federal income tax
consequences; and (12) Any other terms of such Warrants, including terms,
procedures and limitations relating to the exchange and exercise of such
Warrants.
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FEDERAL INCOME TAX CONSIDERATIONS
GENERAL
The following discussion represents a summary of the material U.S. federal
income tax consequences relating to the purchase, ownership and disposition of
the Securities. In addition, set forth below is a general discussion of the
material U.S. federal income tax considerations relating to the treatment of the
Company as a REIT and ownership of Securities therein. The discussion is based
on the Code, current and proposed Treasury Regulations promulgated thereunder,
administrative rulings and applicable judicial decisions, all of which are
subject to change, possibly with retroactive effect. The discussion does not
purport to deal with all aspects of federal income taxation that may be relevant
to particular holders of Securities in view of their personal circumstances and,
except as otherwise specifically indicated, is not addressed to certain types of
holders subject to special treatment under federal income tax law, such as
insurance companies, tax-exempt organizations, financial institutions,
broker-dealers, persons that hold Securities that are a hedge or that are hedged
against currency risks or that are part of a "straddle" or "conversion"
transaction, and foreign persons.
In the opinion of Sirote & Permutt, P.C., the Company was and is organized
in conformity with the requirements for qualification as a REIT and its proposed
method of operation as described in this Prospectus permits it to meet the
requirements for qualification and taxation as a REIT under the Code.
Qualification of the Company as a REIT will depend upon its ability to meet,
through actual annual and other operating results, the various qualification
tests imposed under the Code, as discussed below. Such opinion assumes, although
no assurance can be given, that the actual results of the Company's operations
for any one taxable year will satisfy such requirements. See "-- Taxation of the
Company -- Failure to Qualify" below.
PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY ARE URGED TO
CONSULT WITH THEIR OWN TAX ADVISORS AS TO THE SPECIFIC FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE SECURITIES.
TAXATION OF THE COMPANY
The Company was organized and has elected, and believes that it has been
operated and intends to operate so as to, qualify as a REIT for federal income
tax purposes under Sections 856 through 860 of the Code (the "REIT Provisions of
the Code"). No assurance can be given, however, that the Company will continue
to be operated in a manner so as to remain qualified as an REIT.
In brief, if certain detailed conditions imposed by the REIT Provisions of
the Code are met, entities such as the Company that invest primarily in real
estate and that otherwise would be treated for federal income tax purposes as
corporations subject to regular corporate income tax are generally not taxed at
the corporate level on their "REIT taxable income" that is distributed to
stockholders. This treatment substantially eliminates the "double taxation" (at
both the corporate and stockholder levels) that generally results from the use
of corporate investment vehicles.
If the Company were to fail to qualify as a REIT in any year, it would be
subject to federal income tax at regular corporate income tax rates as if it
were a regular domestic corporation, and its stockholders would be taxed in the
same manner as stockholders of regular corporations. In this event, the Company
could be subject to potentially significant tax liabilities and therefore the
amount of cash available to make distributions to its stockholders would be
reduced.
General. Provided the Company qualifies for taxation as a REIT under the
Code, the Company, generally will not be subject to federal income tax on that
portion of its ordinary income or capital gain that is currently distributed to
its stockholders. The Company will be subject to federal income tax, however, as
follows: First, the Company will be taxed at regular corporate rates on any
undistributed "REIT taxable income," including undistributed net capital gains.
Second, under certain circumstances, the Company may be subject to the
"alternative minimum tax" on its items of tax preference, if any. Third, if the
Company has net income from the sale or other disposition of foreclosure
property that is held primarily for sale to customers in
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the ordinary course of business or other nonqualifying income from foreclosure
property, it will be subject to tax on such income at the highest corporate
rate. Fourth, any net income that the Company has from prohibited transactions
(which are, in general, certain sales or other dispositions of property other
than foreclosure property held primarily for sale to customers in the ordinary
course of business) will be subject to a 100% tax. Fifth, if the Company was to
fail to satisfy either the 75% or 95% gross income tests (as discussed below),
and nonetheless maintains its qualification as a REIT because certain other
requirements have been met, it would be subject to a 100% tax on the net income
attributable to the greater of the amount by which the Company fails the 75% or
95% gross income tests, multiplied by a fraction intended to reflect the
Company's profitability. Sixth, if the Company fails to distribute during each
year at least the sum of (i) 85% of its REIT ordinary income for such year, (ii)
95% of its REIT capital gain net income for such year, and (iii) any
undistributed taxable income from preceding periods, then the Company would be
subject to a 4% excise tax on the excess of such required distribution over the
amounts actually distributed. Seventh, provided certain federal tax elections
are made, if, during the 10-year period commencing on the day on which assets
having a net unrealized built-in gain are acquired by the Company from a C
corporation in a transaction in which the Company inherits the tax basis in such
assets from the C corporation, the Company recognizes a gain from the
disposition of all or a portion of such assets, then the Company will be subject
to tax at the highest regular corporate rate on the excess, if any, of the fair
market value over the adjusted basis of any such asset disposed of determined as
of the beginning of the relevant 10-year period.
Requirements for Qualification as a REIT. To qualify as a REIT for a
taxable year under the Code, the Company must elect or have in effect an
election to be so treated and must meet certain other requirements, as
summarized below, including percentage tests relating to the sources of its
gross income, the nature of the Company's assets, and the distribution of its
income to stockholders. Such election, if properly made and assuming continuing
compliance with the qualification tests described herein, will continue in
effect for subsequent taxable years.
The Code defines a REIT as a corporation, trust or association: (1) which
is managed by one or more trustees or directors, (2) the beneficial ownership of
which is evidenced by transferable shares or by transferable certificates of
beneficial interest, (3) which would be taxable, but for the REIT Provisions of
the Code, as an association taxable as a domestic corporation, (4) which is
neither a financial institution nor an insurance company subject to certain
provisions of the Code, (5) the beneficial ownership of which is held by 100 or
more persons, determined without reference to any rules of attribution (the
"share ownership" test), (6) which is not closely held as determined under the
personal holding company stock ownership test of Section 542(a) (as applied with
certain modifications), and (7) which meets certain other tests described below
regarding the nature of its income and assets. The Code provides that conditions
(1) through (4), inclusive, must be met during the entire taxable year and that
condition (5) must be met during at least 335 days of a taxable year of 12
months, or during a proportionate part of a taxable year of less than 12 months.
By reason of condition (6) above, the Company will fail to qualify as a REIT for
a taxable year if at any time during the last half of such year more than 50% in
value of its outstanding stock is owned directly or indirectly (including under
certain complex ownership attribution rules) by five or fewer individuals (the
"five or fewer test"). For purposes of the five or fewer test, any stock held by
a qualified trust described in Section 401(a) of the Code will be treated as if
the stock is held directly by the beneficiaries of the trust in proportion to
their actual interest in the trust rather than as held by the trust. The five or
fewer test and the share ownership test do not apply to the first taxable year
for which an election is made to be treated as a REIT. As previously described,
the Company's Charter provides for restrictions regarding the transfer of Common
Stock that are intended to assist the Company in continuing to satisfy the share
ownership test and the five or fewer test described in (5) and (6) above. See
"Description of Capital Stock -- Restrictions on Ownership."
In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. The Company has a calendar year taxable year.
If a REIT owns a qualified REIT subsidiary, the Code provides that the
qualified REIT subsidiary is disregarded for federal income tax purposes, and
all assets, liabilities, and items of income, deduction and
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credit of the qualified REIT subsidiary are treated as assets, liabilities and
such items of the REIT itself. A qualified REIT subsidiary is a corporation of
which all of the outstanding capital stock is owned by the REIT.
Gross Income Tests. There are two separate percentage tests relating to
the sources of the Company's gross income which must be satisfied annually.
1. The 75% Test. At least 75% of the Company's gross income from the
taxable year must be "qualifying income." Qualifying income generally
includes (i) rents from real property (except as modified below), (ii)
interest on obligations collateralized by mortgages on, or interest in real
property, (iii) gains from the sale or other disposition of interests in
real property and real estate mortgages, other than gain from property held
primarily for sale to customers in the ordinary course of the Company's
trade or business ("dealer property"), (iv) dividends or other
distributions on shares in other REITs, as well as gain from the sale of
such shares, (v) abatements and refunds of real property taxes, (vi) income
from the operation, and gain from the sale of property reduced to
possession following a lessee's default under the terms of a lease of
property acquired at or in lieu of a foreclosure of the mortgage
collateralized by such property ("foreclosure property"), (vii) commitment
fees received for agreeing to make loans collateralized by mortgages on
real property or to purchase or lease real property, and (viii) certain
qualified temporary investment income attributable to the investment of new
capital received by the Company in exchange for its shares during the
one-year period following the receipt of such new capital.
2. The 95% Test. In addition to deriving 75% of its gross income from
the sources listed above, at least 95% of the Company's gross income for
the taxable year must be derived from the above-described qualifying
income, or from dividends, interest or gains from the sale or disposition
of stock or other securities that are not dealer property. Dividends and
interest on any obligations not collateralized by an interest in real
property are included for purposes of the 95% test, but not for purposes of
the 75% test. Similarly, any payments made to the Company by a financial
institution pursuant to a rate protection agreement that hedges variable
rate indebtedness incurred by the Company to acquire or carry real estate
assets will be included as qualifying income for purposes of the 95% gross
income test, but not for purposes of the 75% test.
For purposes of determining whether the Company complies with the 75%
and 95% income tests, gross income does not include income from prohibited
transactions. A "prohibited transaction" is a sale of dealer property,
excluding sales of foreclosure property and certain sales of dealer
property exempted from the prohibited transaction tax by virtue of a
limited safe harbor rule.
In order to qualify as rents from real property, the amount of rent
received generally must not be based on the income or profits of any
person, but may be based on a fixed percentage or percentages of receipts
or sales. The Code also provides that rents will not qualify as rents from
real property, in satisfying the gross income tests, if the REIT owns 10%
or more of the tenant, whether directly or pursuant to certain attribution
rules. The Company intends to lease property only under circumstances such
that substantially all rents from such property would qualify as rents from
real property. Although it is possible that a tenant could sublease space
to a sublessee in which the REIT is deemed to own directly or indirectly
10% or more of the tenant, the Company believes that as a result of the
provisions in the Articles of Incorporation limiting ownership to 9.8% such
occurrence would be unlikely. Application of the 10% ownership rule is,
however, dependent upon complex attribution rules provided in the Code and
circumstances beyond the control of the Company. Ownership, directly or by
attribution, by an unaffiliated third party of more than 10% of the
Company's Common Stock and more than 10% of the stock of any lessee or
sublessee would result in a violation of the rule.
In order to qualify as interest on obligations secured by mortgages on
real property, the amount of interest received generally must not be based
on the income or profits of any person, but may be based on a fixed
percentage or percentages of receipts or sales.
In addition, the Company must not manage its properties or furnish or
render services to the tenants of its properties, except through an
independent contractor from whom the Company derives no income. There is an
exception to this rule permitting a REIT to perform directly certain
customary tenant services
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which are "reasonable and customary" in the geographic area in which the
services are performed. The Company anticipates that any services provided
for tenants will meet this requirement.
If rent attributable to personal property leased in connection with a
lease of real property is greater than 15% of the total rent received under
the lease, then the portion of rent attributable to such personal property
will not qualify as rents from real property. Generally, this 15% test is
applied separately to each lease. The portion of rental income treated as
attributable to personal property is determined according to the ratio of
the tax basis of the personal property to the total tax basis of the
property which is rented. The determination of what fixtures and other
property constitute personal property for federal tax purposes is difficult
and imprecise. The Company does not believe that it will have 15% in value
of any of its real properties classified as personalty. If however, rent
payments do not qualify, for reasons discussed above, as rents from real
property for purposes of Section 856 of the Code, it will be more difficult
for the Company to meet the 95% or 75% gross income tests.
The Company may temporarily invest its working capital in short-term
investments, including shares in other REITs or interests in real estate
mortgage investment conduits. Although the Company will use its best
efforts to ensure that its income generated by these investments will be of
a type which satisfies the 75% and 95% gross income tests, there can be no
assurance in this regard. Moreover, the Company may realize short-term
capital gain upon sale or exchange of such investments. The Company
generally expects to meet the 75% and 95% gross income tests through the
rental of the property it acquires.
If the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, the Company may nevertheless qualify as
a REIT for such year if it is entitled to relief under certain provisions
of the Code. It is not possible, however, to know whether the Company would
be entitled to the benefit of these relief provisions as the application of
the relief provisions is dependent on future facts and circumstances. If
these relief provisions apply, a special tax generally equal to 100% is
imposed upon the net income attributable to the greater of the amount by
which the Company failed the 75% or 95% gross income tests, multiplied by a
fraction intended to reflect the Company's profitability.
Asset Tests. At the close of each quarter of the Company's taxable year,
the Company must also satisfy three tests relating to the nature of its assets.
First, at least 75% of the value of the Company's total assets must consist of
real estate assets (including interests in real property and interests in
mortgages on real property as well as its allocable share of real estate assets
held by joint ventures or partnerships in which the Company participates, if
any), cash, cash items and government securities. Second, not more than 25% of
the Company's total assets may be represented by securities other than those
includible in the 75% asset class. Finally, of the investments included in the
25% asset class, the value of any one issuer's securities owned by the Company
may not exceed 5% of the value of the Company's total assets, and the Company
may not own more than 10% of any one issuer's outstanding voting securities. The
Company may own 100% of another corporation, provided such other corporation
constitutes a qualified REIT subsidiary under the REIT Provisions of the Code.
As noted above, in such as case the separate existence of the qualified REIT
subsidiary is ignored for federal income tax purposes and the assets, income,
gain, loss and other attributes of such entity are treated as being owned or
generated directly by the Company.
The Company will not fail to meet the Asset Tests described above at the
close of any quarter merely because of a change in the value of its assets in a
subsequent quarter unless, subject to a 30 day grace period ending after the
close of such subsequent quarter, such change exists immediately after the
acquisition of any security or other property and is wholly or partly the result
of such an acquisition during such quarter. The Company intends to maintain
adequate records as to the value of its assets in order to maintain compliance
with the Asset Tests.
Annual Distribution Requirements. The Company, in order to continue to
qualify as a REIT, is required to distribute dividends (other than capital gain
dividends) to its stockholders in an amount equal to or greater than the excess
of (A) the sum of (i) 95% of the Company's "REIT taxable income" (computed
without regard to the dividends paid deduction and the Company's net capital
gain) and (ii) 95% of the net income, if any, (after tax) from foreclosure
property, over (B) the sum of certain non-cash income (from certain imputed
rental income and income from transactions inadvertently failing to qualify as
like-kind exchanges).
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To the extent that the Company does not distribute all of its net long-term
capital gain and all of its REIT taxable income, it will be subject to tax
thereon. In addition, the Company will be subject to a 4% excise tax to the
extent it fails within a calendar year to make required distributions to its
stockholders of 85% of its ordinary income and 95% of its capital gain net
income plus the excess, if any, of the grossed up required distribution for the
preceding calendar year over the amount treated as distributed for such
preceding calendar year. For this purpose, "grossed up required distribution"
for any calendar year is the sum of the taxable income of the Company for the
taxable year (without regard to the deduction for dividends paid) and all
amounts from earlier years that are not treated as having been distributed under
the provision. Dividends declared in the last quarter of the year (October,
November or December) and paid during the following January, will be treated as
having been paid and received on December 31.
It is possible that the Company, from time to time, may not have sufficient
cash or other liquid assets to meet the 95% distribution requirements due to
timing differences between actual receipt of income and actual payment of
deductible expenses or dividends on the one hand and the inclusion of such
income and deduction of such expenses or dividends in arriving at REIT taxable
income of the Company on the other hand. The problem of inadequate cash to make
required distributions could also occur as a result of the repayment in cash of
principal amounts due on the Company's outstanding debt, particularly in the
case of balloon repayments or as a result of capital losses on short-term
investments of working capital. Therefore, the Company might find it necessary
to arrange for short-term, or possibly long-term, borrowing or new equity
financing. If the Company were unable to arrange such borrowing or financing as
might be necessary to provide funds for required distributions, its REIT status
could be jeopardized.
Under certain circumstances, the Company may be able to rectify a failure
to meet the annual REIT distribution requirements for a taxable year by paying
deficiency dividends to stockholders within a specified period.
Share Ownership Test. As described above, the Company's stock must be held
by a minimum of 100 persons for at least approximately 92% of the days in each
taxable year subsequent to 1994. In addition, at all times during the second
half of each taxable year subsequent to 1994, no more than 50% in value of the
shares of beneficial interest of the Company may be owned, directly or
indirectly, and by applying certain constructive ownership rules, by five or
fewer individuals. In order to assist in complying with this test, the Company
has placed certain restrictions on the transfer of the stock to prevent further
concentration of share ownership. Moreover, to evidence compliance with these
requirements, the Company must maintain records which disclose the actual
ownership of its outstanding stock. In fulfilling its obligations to maintain
records, the Company must and will demand written statements each year from the
record holders of designated percentages of its Common Stock disclosing the
actual owners of such stock. A list of those persons failing or refusing to
comply with such demand must be maintained as a part of the Company's records. A
stockholder failing or refusing to comply with the Company's written demand must
submit with his tax returns a similar statement disclosing the actual ownership
of stock and certain other information. In addition, the Company's Charter
provides restrictions regarding the transfer of its shares that are intended to
assist the Company in continuing to satisfy the share ownership requirements.
Other REIT Issues. With respect to property acquired from and leased back
to the same or an affiliated party of a lessee, the IRS could assert that the
Company realized prepaid rental income in the year of purchase to the extent
that the value of the leased property exceeds the purchase price paid by the
Company for that property. In litigated cases involving sale-leasebacks which
have considered this issue, courts have concluded that buyers have realized
prepaid rent where both parties acknowledged that the purported purchase price
for the property was substantially less than fair market value and the purported
rents were substantially less than the fair market rentals. Because of the lack
of clear precedent and the inherently factual nature of the inquiry, complete
assurance cannot be given that IRS could not successfully assert the existence
of prepaid rental income. The value of and fair market rent for properties
involved in sale-leasebacks are inherently factual matters and always subject to
challenge.
Subject to a safe harbor exception for annual sales of up to seven
properties (or properties with a basis of up to 10% of the REIT's assets) that
have been held for four years, gain from the sale of a property held for
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sale to customers in the ordinary course of business is subject to a 100% tax.
The simultaneous exercise of rights of first refusal granted to certain Lessees
or other events could result in sales of properties by the Company that exceed
this safe harbor. However, the Company believes that in such event, it will not
have held such properties for sale to customers in the ordinary course of
business.
Depreciation of Properties. For tax purposes, the Company's real property
generally is expected to be depreciated over 40 years and 20 years for buildings
and land improvements, respectively, utilizing the straight-line method of
depreciation. Personal property is expected to be depreciated over seven years
utilizing the straight-line method of depreciation.
Failure to Qualify. If the Company fails to qualify for taxation as an
REIT in any taxable year and the relief provisions do not apply, the Company
will be subject to tax (including any applicable alternative minimum tax) on its
taxable income at regular corporate rates. Distributions to stockholders in any
year in which the Company fails to qualify will not be deductible by the
Company, nor will they be required to be made. In such event, to the extent of
current or accumulated earnings and profits, all distributions to stockholders
will be taxable as ordinary income, and, subject to certain limitations in the
Code, corporate distributees may be eligible for the dividends received
deduction. Failure to qualify and to maintain qualification as a REIT would
force the Company to significantly reduce its distributions and possibly incur
substantial indebtedness or liquidate substantial investments in order to pay
the resulting corporate taxes. In addition, the Company, once having obtained
REIT status and having lost such status, would not be eligible to elect REIT
status for the four subsequent taxable years, unless its failure to maintain its
qualification was due to reasonable cause and not willful neglect, and certain
other requirements were satisfied. In order to elect again to be taxed as a
REIT, the Company would be required to distribute all of its earnings and
profits accumulated in any non-REIT taxable year.
TAXPAYER RELIEF ACT OF 1997
On August 5, 1997, President Clinton signed into law the Taxpayer Relief
Act of 1997 (H.R. 2014), which will have the effect of modifying certain
REIT-related Code provisions for tax years of the Company beginning on or after
January 1, 1998. Some of the potentially significant REIT-related changes
contained in this legislation include: (i) the rule disqualifying a REIT for any
year in which it fails to comply with certain regulations requiring the REIT to
monitor its stock ownership is replaced with an intermediate financial penalty;
(ii) the rule disqualifying a REIT in any year that it is "closely held" does
not apply if during such year the REIT complied with certain regulations which
require the REIT to monitor its stock ownership, and the REIT did not know or
have reason to know that it was closely held; (iii) a REIT is permitted to
render a de minimis amount of impermissible services to tenants in connection
with the management of property and still treat amounts received with respect to
such property (other than certain amounts relating to such services) as
qualified rent; (iv) the rules regarding attribution to partnerships for
purposes of defining qualified rent and independent contractors are modified so
that attribution occurs only when a partner owns a 25% or greater interest in
the partnership; (v) the 30% gross income test is repealed; (vi) any corporation
wholly-owned by a REIT is permitted to be treated as a qualified REIT subsidiary
regardless of whether such subsidiary has always been owned by the REIT; (vii) a
REIT may elect to retain, rather than distribute, its net long-term capital
gains and pay the tax on such gains, while its shareholders include their
proportionate share of the undistributed long-term capital gains in income and
receive a credit for their share of the tax paid by the REIT; (viii) the class
of excess noncash items for purposes of the REIT distribution requirements is
expanded; and (ix) certain other Code provisions relating to REITs are amended.
Some or all of the provisions could affect both the Company's operations and its
ability to maintain its REIT status for its taxable years beginning in 1998.
TAXATION OF HOLDERS OF DEBT SECURITIES
As used herein, the term "U.S. Holder" means a holder of a Debt Security
who (for U.S. federal income tax purposes) is (i) a citizen (or, if certain
conditions are met, a former citizen) or resident of the United States, (ii) a
corporation or partnership created or organized under the laws of the United
States or any state thereof, (iii) an estate the income of which is includable
in gross income for federal income tax purposes
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regardless of source or (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 U.S. fiduciaries has the authority to control all substantial decisions of
the trust. "Non-U.S. Holder" means a holder of a Debt Security other than a U.S.
Holder.
U.S. Holders
Payments of Interest. Interest on a Debt Security will be taxable to a
U.S. Holder as ordinary income at the time it is received or accrued, depending
on the holder's method of accounting for tax purposes.
Purchase, Sale and Retirement of the Debt Securities. A U.S. Holder's tax
basis in a Debt Security will generally be its U.S. dollar cost. A U.S. Holder
will generally recognize gain or loss on the sale or retirement of a Debt
Security equal to the difference, if any, between the amount realized on the
sale or retirement and the U.S. Holder's adjusted tax basis in the Debt
Security. Except to the extent attributable to accrued but unpaid interest and
assuming that the Debt Security is held as capital asset at all relevant times,
gain or loss recognized on the sale or retirement of a Debt Security generally
will be capital gain or loss and generally will be long-term capital gain or
loss if the Debt Security was held for more than one year.
Non-U.S. Holders
This discussion assumes that the Debt Security is not subject to the rules
of Section 871(h)(4)(A) of the Code (relating to interest payments that are
determined by reference to the income, profits, changes in the value of property
or other attributes of the debtor or a related party).
Under present U.S. federal income and estate tax law, and subject to the
discussion of backup withholding below:
(i) payments of principal, premium (if any) and interest by the
Company or any of its paying agents to any holder of a Debt Security that
is a Non-U.S. Holder will not be subject to U.S. federal withholding tax
if, in the case of interest (a) the beneficial owner of the Debt Security
does not actually or constructively own 10% or more of the total combined
voting power of all classes of stock of the Company entitled to vote, (b)
the beneficial owner of the Debt Security is not a controlled foreign
corporation that is related to the Company through stock ownership, and (c)
either (A) the beneficial owner of the Debt Security certifies to the
Company or its agent, under penalties of perjury, that it is not a U.S.
person and provides its name and address or (B) a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "financial
institution") and holds the Debt Security certifies to the Company or its
agent under penalties of perjury that such statement has been received from
the beneficial owner by it or by a financial institution between it and the
beneficial owner and furnishes the payor with a copy thereof;
(ii) a Non-U.S. Holder of a Debt Security will not be subject to U.S.
federal income or withholding tax on any gain realized on the sale or
exchange of a Debt Security unless such holder is an individual who is
present in the United States for 183 days or more in the taxable year of
disposition and certain conditions are met; and
(iii) a Debt Security held by an individual who at death is not a
citizen or resident of the United States will not be includible in the
individual's gross estate for purposes of the U.S. federal estate tax as a
result of the individual's death if (a) the individual did not actually or
constructively own 10% or more of the total combined voting power of all
classes of stock of the Company entitled to vote and (b) the income on the
Debt Security would not have been effectively connected with a United
States trade or business of the individual at the time of the individual's
death.
Recently proposed Internal Revenue Service Treasury regulations (the
"Proposed Regulations") would provide alternative methods for satisfying the
certification requirement described in clause (i)(c) above. The Proposed
Regulations also would require, in the case of Debt Securities held by a foreign
partnership, that (x) the certification described in clause (i)(c) above be
provided by the partners rather than by the foreign partnership and (y) the
partnership provide certain information, including a United States taxpayer
identification number. A look-through rule would apply in the case of tiered
partnerships. The Proposed
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Regulations are proposed to be effective for payments made after December 31,
1997. There can be no assurance that the Proposed Regulations will be adopted or
as to the provisions that they will include if and when adopted in temporary or
final form.
Information Reporting and Backup Withholding
U.S. Holders. In general, information reporting requirements will apply to
payments of principal, any premium and interest on a Debt Security and the
proceeds of the sale of a Debt Security before maturity within the United States
to non-corporate U.S. Holders, and "backup withholding" at a rate of 31% will
apply to such payments if the U.S. Holder fails to provide an accurate taxpayer
identification number or to report all interest and dividends required to be
shown on its federal income tax returns.
Non-U.S. Holders. Information reporting and backup withholding will not
apply to payments of principal, premium (if any) and interest made by the
Company or a paying agent to a Non-U.S. Holder on a Debt Security if the
certification described in clause (i)(c) under "Non-U.S. Holders" above is
received, provided that the payor does not have actual knowledge that the holder
is a U.S. person.
Payments of the proceeds from the sale by a Non-U.S. Holder of a Debt
Security made to or through a foreign office of a broker will not be subject to
information reporting or backup withholding, except that if the broker is a U.S.
person, a controlled foreign corporation for U.S. federal income tax purposes or
a foreign person 50% or more of whose gross income is effectively connected with
a United States trade or business for a specified three-year period, information
reporting may apply to such payments. Payments of the proceeds from the sale of
a Debt Security to or through the United States office of a broker is subject to
information reporting and backup withholding unless the holder or beneficial
owner certifies as to its non-United States status or otherwise establishes an
exemption from information reporting and backup withholding.
Original Issue Discount and Other Special Federal Tax Rules Applicable to Debt
Securities
The applicable Prospectus Supplement will contain a discussion of any
special U.S. federal income tax rules with respect to Debt Securities that are
issued at a discount or premium or as a unit with other Securities, have a
maturity of one year or less, provide for conversion rights, contingent
payments, early redemption or payments that are denominated in or determined by
reference to a currency other than the U.S. dollar or otherwise subject to
special U.S. federal income tax rules.
TAXATION OF DOMESTIC STOCKHOLDERS
Taxation of Taxable Domestic Stockholders. As used herein, the term
"domestic stockholder" means a stockholder of the Company who, for U.S. federal
income tax purposes, is (i) a citizen (or, if certain conditions are met, a
former citizen) or resident of the United States, (ii) a corporation or
partnership created or organized under the laws of the United States or any
state thereof, (iii) an estate the income of which is includable in gross income
for federal income tax purposes regardless of source or (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 U.S. fiduciaries has the authority
to control all substantial decisions of the trust. As long as the Company
qualifies as a REIT, distributions other than capital gain dividends (including
reinvestments pursuant to the Company's dividend reinvestment plan, if any) made
to the Company's taxable domestic stockholders out of current and accumulated
earnings and profits will be taken into account by them as ordinary income, and
corporate stockholders will not be eligible for the dividends received
deduction. Distributions that are designated as capital gain dividends will be
taxed as long-term capital gains to the extent they do not exceed the Company's
actual net capital gain for the taxable year, although corporate stockholders
may be required to treat up to 20% of any such capital gain dividend as ordinary
income. Distributions in excess of the Company's current and accumulated
earnings and profits will not be taxable to a stockholder to the extent that
they do not exceed the adjusted basis of a stockholder's shares of stock. To the
extent that such distributions exceed the adjusted basis of a stockholder's
shares of stock, they will be included in income as long-term capital gain (or
short-term capital gain if the shares of stock have been held for not more than
one year) assuming the shares
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of stock are a capital asset in the hands of the stockholder. Stockholders may
not include, in their respective income tax returns, any net operating losses or
capital losses of the Company.
Dividends declared by the Company in the last quarter of the calendar year
(October through December) to stockholders of record on a date in such quarter
shall be treated as both paid by the Company and received by such stockholders
on December 31 of such year, provided that the Company actually pays such
dividends during January of the following calendar year.
In general, any gain or loss recognized by a stockholder on the sale or
other taxable disposition of shares of stock will be treated as capital gain or
loss, provided the shares are a capital asset in the hands of the seller. In
general, any loss upon a sale or exchange of shares of stock by a stockholder
who has held such shares for not more than six months (after applying certain
rules), will be treated as a long-term capital loss to the extent of
distributions from the Company required to be treated by such stockholder as
long-term gain.
Tax preference and other items which are treated differently for regular
and alternative minimum tax purposes are to be allocated between a REIT and its
stockholders under regulations which are to be prescribed. It is likely that
these regulations would require tax preference items to be allocated to the
Company's stockholders with respect to any accelerated depreciation claimed by
the Company.
The Taxpayer Relief Act of 1997 (the "Act") alters the taxation of capital
gain income. Under the Act, individuals who hold certain investments for more
than 18 months may be taxed at a maximum long-term capital gain rate of 20% on
the sale or exchange of those investments. Individuals who hold certain assets
for more than 12 months but less than 18 months may be taxed at a maximum
mid-term capital gain rate of 28% on the sale or exchange of those investments.
The Act also provides a maximum rate of 25% for "unrecaptured section 1250 gain"
for individuals, special rules for "qualified 5-year gain," as well as other
changes to prior law. The Act allows the IRS to prescribe regulations on how the
Act's new capital gain rates will apply to sales of capital assets by "pass-thru
entities," which include REITs such as the Company. To date regulations have not
yet been prescribed, and it remains unclear how the Act's new rates will apply
to capital gain dividends or undistributed capital gains, including for example
the extent, if any, to which capital gain dividends or undistributed capital
gains from the Company will be taxed to individuals at the new rates for
mid-term capital gains and unrealized section 1250 recapture, rather than the
long-term capital gain rates. Investors are urged to consult their own tax
advisors with respect to the new rules contained in the Act.
Taxation of Tax-Exempt Domestic Stockholders. As a general rule, amounts
distributed by a REIT to a tax-exempt entity do not constitute unrelated
business taxable income ("UBTI") and thus distributions by the Company to a
stockholder that is a tax-exempt entity should not constitute UBTI, provided
that the tax-exempt entity has not financed the acquisition of stock with
"acquisition indebtedness" within the meaning of the Code and the tax-exempt
entity's shares of stock are not otherwise used in an unrelated trade or
business of the tax-exempt entity. Similarly, gain from the sale of stock by a
stockholder that is a tax-exempt entity should not generally constitute UBTI
unless the tax-exempt stockholder has held such stock as a "dealer" under the
Code or has financed the acquisition of such stock with "acquisition
indebtedness." If a REIT constitutes a "pension-held REIT" in a taxable year,
distributions by such REIT to a tax-exempt employee's pension trust that owns
more than 10% of the REIT may be treated as UBTI in an amount equal to the
percentage of gross income of the REIT that is derived from an "unrelated trade
or business" (determined as if the REIT were a pension trust and subject to
certain de minimis rules) divided by the gross income of the REIT for the year
in which the dividends are paid. This rule only applies, however, if (i) the
percentage of the gross income derived from the REIT for the year in which the
dividends are paid is at least five percent, (ii) the REIT qualifies as a REIT
only because the pension trust is not treated as a single individual for
purposes of the "five-or-fewer" rule (see "--Taxation of the
Company -- Requirements for Qualification as a REIT") and (iii) (A) one pension
trust owns more than 25% of the value of the REIT, or, (B) a group of pension
trusts individually holding more than 10 percent of the value of the REIT
collectively own more than 50 percent of the value of the REIT. The Company does
not expect that it will constitute a "pension-held REIT" in part because the
ownership limits in the Company's Charter (assuming no waiver of such limits by
the Board of Directors) would prevent such a pension trust from acquiring stock
in excess of the Ownership Limit.
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TAXATION OF FOREIGN STOCKHOLDERS
The following is a discussion of certain anticipated U.S. federal income
and estate tax consequences of the ownership and disposition of stock applicable
to Non-U.S. Holders of such shares. A "Non-U.S. Holder" is any person other than
(i) a citizen or resident of the United States, (ii) a corporation or
partnership created or organized in the United States or under the laws of the
United States or of any state thereof, (iii) an estate whose income is
includible in gross income for U.S. federal income tax purposes regardless of
its source or (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 U.S. fiduciaries has the authority to control all substantial decisions of
the trust. The discussion is based on current law and is for general information
only. The discussion addresses only certain and not all aspects of U.S. federal
income and estate taxation.
Ordinary Dividends. The portion of dividends received by Non-U.S. Holders
payable out of the Company's earnings and profits which are not attributable to
capital gains of the Company and which are not effectively connected with a U.S.
trade or business of the Non-U.S. Holder will be subject to U.S. withholding tax
at the rate of 30% (unless reduced by an applicable treaty). In general, and
subject to the discussion below, Non-U.S. Holders will not be considered engaged
in a U.S. trade or business solely as a result of their ownership of stock. In
cases where the dividend income from a Non-U.S. Holder's investment in stock is
(or is treated as) effectively connected with the Non-U.S. Holder's conduct of a
U.S. trade or business, the Non-U.S. Holder generally will be subject to U.S.
tax at graduated rates, in the same manner as U.S. stockholders are taxed with
respect to such dividends (and may also be subject to the 30% branch profits tax
in the case of a Non-U.S. Holder that is a foreign corporation).
To determine the applicability of a tax treaty providing for a lower rate
of withholding, dividends paid to an address in a foreign country are presumed
under current Treasury Regulations to be paid to a resident of that country
absent knowledge that the presumption is not warranted. Treasury regulations
proposed in April 1996 would require non-U.S. Holders to file a "withholding
certificate" with the Company's withholding agent certifying such holder's
entitlement to benefits under a treaty. Such certificates would contain the
holder's name and address and other pertinent information and the basis for any
reduced rate claimed. These withholding certificates would be required in the
case of dividends paid after December 31, 1997 (December 31, 1999, in the case
of dividends paid to accounts in existence on or before the date that is 60 days
after the proposed regulations are published as final regulations.) Under
certain treaties, lower withholding rates generally applicable to dividends do
not apply to dividends distributed by a REIT, such as the Company.
Non-Dividend Distributions. Distributions by the Company which exceed its
current and accumulated earnings and profits will not be taxable to the extent
such distributions are not in excess of the Non-U.S. Holder's adjusted basis in
its shares, but rather will reduce (but not below zero) the adjusted basis for
such shares. To the extent such distributions exceed the adjusted basis of a
Non-U.S. Holder's shares of stock, the distributions will give rise to U.S. tax
liability if the Non-U.S. Holder would otherwise be subject to tax on gain from
the sale or disposition of shares in the Company, as described below. If it
cannot be determined at the time a distribution is made whether or not such
distribution will be in excess of current and accumulated earnings and profits,
the distribution will be subject to withholding at the rate applicable to
dividends. The Non-U.S. Holder may seek a refund of such amounts from the IRS,
however, if it is subsequently determined that such distribution was, in fact,
in excess of current and accumulated earnings and profits of the Company.
Capital Gain Dividends. Under the Foreign Investment in Real Property Tax
Act of 1980 ("FIRPTA"), a distribution made by the Company to a Non-U.S. Holder,
to the extent attributable to gains from dispositions of United States Real
Property Interests ("USRPIs") will be considered effectively connected with a
U.S. trade or business of the Non-U.S. Holder and subject to U.S. income tax at
the rate applicable to U.S. individuals or corporations, without regard to
whether such distribution is designated as a capital gain dividend. In addition,
the Company will be required to withhold tax equal to 35% of the amount of
dividends to the extent such dividends constitute USRPI capital gains.
Distributions subject to FIRPTA may also be subject to a 30% branch profits tax
in the hands of a foreign corporate stockholder that is not entitled to treaty
exemption.
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Dispositions of Stock. Unless the stock constitutes a USRPI, a sale of
stock by a Non-U.S. Holder will generally not be subject to U.S. taxation under
FIRPTA. The stock will not constitute a USRPI in the hands of a Non-U.S. Holder
if the Company constitutes a "domestically controlled REIT." A domestically
controlled REIT means a REIT in which, at all times during a specified testing
period, less than 50% in value of its shares is held directly or indirectly by
Non-U.S. Holders. At present, the Company believes that it is and will continue
to be a domestically controlled REIT, and therefore that the sale of Common
Stock will not be subject to taxation under FIRPTA. Because the stock is
publicly traded, however, no assurance can be given the Company will in fact be
a domestically controlled REIT.
If the Company does not constitute a domestically controlled REIT, a
Non-U.S. Holder's sale of stock will generally not be subject to tax under
FIRPTA as a sale of a USRPI, provided that (i) the Company's stock is "regularly
traded" (as defined by applicable Treasury Regulations) on an established
securities market (e.g., the NYSE, on which the Common Stock is listed) and (ii)
the selling Non-U.S. Holder held 5% or less of the Company's outstanding stock
at all times during a specified testing period.
If gain on the sale of stock were subject to taxation under FIRPTA, the
Non-U.S. Holder would generally be subject to the same treatment as a U.S.
stockholder with respect to such gain (subject to applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien
individuals) and the purchaser of stock could be required to withhold 10% of the
purchase price and remit such amount to the IRS.
Capital gains recognized by a Non-U.S. Holder that are not subject to
FIRPTA nonetheless will generally be subject to current U.S. federal income
taxation if: (i) the Non-U.S. Holder's investment in stock is effectively
connected with a U.S. trade or business conducted by such Non-U.S. Holder or
(ii) the Non-U.S. Holder is a nonresident alien individual who was present in
the United States for 183 days or more during the taxable year and has a "tax
home" in the United States.
Estate Tax. Stock owned or treated as owned by an individual who is not a
citizen or resident of the United States (as specially defined for U.S. federal
estate tax purposes) at the time of death will be includible in the individual's
gross estate for U.S. federal estate tax purposes, unless an applicable estate
tax treaty provides otherwise. Such individual's estate may be subject to U.S.
federal estate tax on the property includible in the estate for U.S. federal
estate tax purposes.
OTHER TAX CONSEQUENCES
The Company and its stockholders may be subject to state or local taxation
in various state or local jurisdictions, including those in which it or they
transact business or reside. The state and local tax treatment of the Company
and its stockholders may not conform to the federal income tax consequences
discussed above. Consequently, prospective stockholders should consult their own
tax advisors regarding the effect of state and local tax laws on an investment
in the stock of the Company.
The Company will report to its stockholders and the IRS the amount of
dividends paid or deemed paid during each calendar year, and the amount of tax
withheld, if any.
There may be other federal, state, local or foreign income, or estate and
gift tax considerations applicable to the circumstances of a particular
investor. Stockholders should consult their own tax advisors with respect to
such matters.
PLAN OF DISTRIBUTION
The Company may sell the Securities to one or more underwriters for public
offering and sale by them or may sell the Securities to investors directly or
through agents. Any such underwriter or agent involved in the offer and sale of
the Securities will be named in the applicable Prospectus Supplement. The
Company has reserved the right to sell the Securities directly to investors on
its own behalf in those jurisdictions where it is authorized to do so.
37
<PAGE> 40
Underwriters may offer and sell the Securities at a fixed price or prices
that may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices. The Company
also may, from time to time, authorize dealers, acting as the Company's agents,
to offer and sell the Securities upon such terms and conditions as set forth in
the related Prospectus Supplement. In connection with the sale of the
Securities, underwriters may receive 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 the Securities to or through dealers, and such dealers may receive
compensation in the form of discounts, concession or commissions from the
underwriters and/or commissions (which may be changed from time to time) from
the purchasers for whom they may act as agents.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the 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. 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 entered into with the Company, to
indemnification against and contribution towards certain civil liabilities,
including any liabilities under the Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize dealers acting as the Company's agents to solicit agreements by
certain institutions to purchase the Securities from the Company at the public
offering price set forth in the related Prospectus Supplement pursuant to
delayed delivery contracts ("Contracts") providing for payment and delivery on
the date or dates stated in a Prospectus Supplement. Each Contract will be for
an amount specified in the applicable Prospectus Supplement. Institutions with
whom 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. Contracts will not be subject to any conditions
except that (i) the purchase by an institution of the Securities covered by
Contracts will 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 such amount specified in the applicable Prospectus Supplement.
Any Securities issued hereunder (other than Common Stock) will be new
issues of securities with no established trading market. Any underwriters or
agents to or through whom such Securities are sold by the Company for public
offering and sale may make a market in such Securities, but such underwriters or
agents will not be obligated to do so and may discontinue any market at any time
without notice. No assurance can be given as to the liquidity of the trading
market for any such Securities.
Certain of the underwriters, dealers or agents and their associates may
engage in transactions with, and perform services for, the Company and certain
of its affiliates in the ordinary course of business.
LEGAL MATTERS
Sirote & Permutt, P.C., Birmingham, Alabama, counsel to the Company, will
render an opinion with respect to the validity of the Securities offered hereby.
In rendering such opinion, Sirote & Permutt, P.C., will rely upon the opinion of
Ballard Spahr Andrews & Ingersoll, Baltimore, Maryland, as to certain matters of
Maryland law.
38
<PAGE> 41
EXPERTS
The Consolidated Financial Statements and schedules of Capstone Capital
Corporation as of December 31, 1996 and 1995 and for the years ended December
31, 1996 and 1995, and for the period from June 30, 1994 (inception) to December
31, 1994, have been incorporated by reference herein and in the registration
statement in reliance upon the reports of KPMG Peat Marwick LLP, independent
certified public accountants, incorporated by reference herein, and upon the
authority of said firm as experts in accounting and auditing. To the extent that
KPMG Peat Marwick LLP, audits and reports on financial statements of Capstone
Capital Corporation issued at future dates, and consents to the use of their
report thereon, such financial statements also will be incorporated by reference
in the registration statement in reliance upon their reports and said authority.
39
<PAGE> 42
EXHIBIT 4.5
================================================================================
CAPSTONE CAPITAL CORPORATION
TO
AMSOUTH BANK OF ALABAMA, TRUSTEE
--------------
INDENTURE
Dated as of __________, 1997
-------------
SUBORDINATED DEBT SECURITIES
================================================================================
<PAGE> 43
CERTAIN SECTIONS OF THIS INDENTURE RELATING TO SECTIONS 310 THROUGH 318,
INCLUSIVE, OF THE TRUST INDENTURE ACT OF 1939:
<TABLE>
<CAPTION>
Trust Indenture Indenture Section
Act Section
<S> <C> <C>
ss.310 (a)(1) ........................................................609
(a)(2) ........................................................609
(a)(3) .............................................Not Applicable
(a)(4) .............................................Not Applicable
(b) ........................................................608
610
ss.311 (a) ........................................................613
(b) ........................................................613
ss.312 (a) ........................................................701
702
(b) ........................................................702
(c) ........................................................702
ss.313 (a) ........................................................703
(b) ........................................................703
(c) ........................................................703
(d) ........................................................703
ss.314 (a) ........................................................704
(a)(4) ........................................................101
1004
(b) .............................................Not Applicable
(c)(1) ........................................................102
(c)(2) ........................................................102
(c)(3) .............................................Not Applicable
(d) .............................................Not Applicable
(e) ........................................................102
ss.315 (a) ........................................................601
(b) ........................................................602
(c) ........................................................601
(d) ........................................................601
(e) ........................................................514
ss.316 (a) ........................................................101
(a)(1)(A)........................................................502
512
(a)(1)(B)........................................................513
(a)(2) .................................................Applicable
(b) ........................................................508
(c) ........................................................104
ss.317 (a)(1) ........................................................503
(a)(2) ........................................................504
(b) .......................................................1003
ss.318 (a) ........................................................107
</TABLE>
- ------------------------------
NOTE: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
<PAGE> 44
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------
<S> <C>
PARTIES...........................................................................................................1
RECITALS OF THE COMPANY...........................................................................................1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions:
Act....................................................................................2
Affiliate; control.....................................................................2
Authenticating Agent...................................................................2
Blockage Period........................................................................2
Blockage Termination...................................................................2
Board of Directors.....................................................................2
Board Resolution.......................................................................2
Business Day...........................................................................2
Change of Control......................................................................2
Closing Price..........................................................................2
Code...................................................................................3
Commencement Date......................................................................3
Commission.............................................................................3
Common Stock...........................................................................3
Company................................................................................3
Company Request; Company Order.........................................................3
Conversion Date........................................................................3
Conversion Price.......................................................................3
Corporate Trust Office.................................................................3
Corporation............................................................................3
Covenant Defeasance....................................................................3
Current Market Price...................................................................3
Defaulted Interest.....................................................................3
Defeasance.............................................................................3
Depositary.............................................................................3
Event of Default.......................................................................4
Exchange Act...........................................................................4
Expiration Date........................................................................4
Expiration Time........................................................................4
Global Security........................................................................4
Holder.................................................................................4
Indebtedness...........................................................................4
Indenture..............................................................................4
Interest...............................................................................5
</TABLE>
i
<PAGE> 45
<TABLE>
<S> <C> <C>
Interest Payment Date..................................................................5
Investment Company Act.................................................................5
Maturity...............................................................................5
Notice of Default......................................................................5
Officers' Certificate..................................................................5
Opinion of Counsel.....................................................................5
Original Issue Discount Security.......................................................5
Outstanding............................................................................5
Paying Agent...........................................................................6
Person.................................................................................6
Place of Payment.......................................................................6
Predecessor Security...................................................................7
Purchased Shares.......................................................................7
Redemption Date........................................................................7
Redemption Price.......................................................................7
Regular Record Date....................................................................7
REIT...................................................................................7
Repurchase Event.......................................................................7
Repurchase Offer.......................................................................7
Repurchase Price.......................................................................7
Repurchase Date........................................................................7
Responsible Officer....................................................................7
Securities.............................................................................7
Securities Act.........................................................................7
Security Register and Security Registrar...............................................7
Senior Debt............................................................................7
Senior Non-Payment Default.............................................................8
Senior Payment Default.................................................................8
Special Record Date....................................................................8
Stated Maturity........................................................................8
Subsidiary.............................................................................8
Trading Day............................................................................8
Triggering Event.......................................................................8
Trust Indenture Act....................................................................8
Trustee................................................................................8
U.S. Government Obligations............................................................8
Vice President.........................................................................9
SECTION 102. Compliance Certificates and Opinions...................................................9
SECTION 103. Form of Documents Delivered to Trustee.................................................9
SECTION 104. Acts of Holders; Record Dates.........................................................10
SECTION 105. Notices, Etc., to Trustee and Company.................................................12
SECTION 106. Notice to Holders; Waiver.............................................................12
SECTION 107. Conflict with Trust Indenture Act.....................................................13
SECTION 108. Effect of Headings and Table of Contents..............................................13
SECTION 109. Successors and Assigns................................................................13
</TABLE>
ii
<PAGE> 46
<TABLE>
<S> <C> <C>
SECTION 110. Separability Clause...................................................................13
SECTION 111. Benefits of Indenture.................................................................13
SECTION 112. Governing Law.........................................................................14
SECTION 113. Legal Holidays........................................................................14
SECTION 114. No Recourse Against Others............................................................14
SECTION 115. Counterparts..........................................................................14
ARTICLE TWO
FORM OF SECURITIES
SECTION 201. Forms Generally.......................................................................15
SECTION 202. Form of Face of Security..............................................................15
SECTION 203. Form of Reverse of Security...........................................................17
SECTION 204. Form of Legend for Global Securities..................................................25
SECTION 205. Form of Trustee's Certificate of Authentication.......................................26
ARTICLE THREE
THE SECURITIES
SECTION 301. Amount Unlimited; Issuable in Series..................................................26
SECTION 302. Denominations.........................................................................29
SECTION 303. Execution, Authentication, Delivery and Dating........................................29
SECTION 304. Temporary Securities..................................................................31
SECTION 305. Registration; Registration of Transfer and Exchange...................................31
SECTION 306. Mutilated, Destroyed, Lost and Stolen Securities......................................33
SECTION 307. Payment of Interest; Interest Rights Preserved........................................34
SECTION 308. Persons Deemed Owners.................................................................35
SECTION 309. Cancellation..........................................................................35
SECTION 310. Computation of Interest...............................................................36
SECTION 311. CUSIP Numbers.........................................................................36
SECTION 312. Ownership and Transfer Restrictions...................................................36
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture...............................................37
SECTION 402. Application of Trust Money............................................................38
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.....................................................................39
SECTION 502. Acceleration of Maturity; Rescission and Annulment....................................41
</TABLE>
iii
<PAGE> 47
<TABLE>
<S> <C> <C>
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.......................42
SECTION 504. Trustee May File Proofs of Claim......................................................42
SECTION 505. Trustee May Enforce Claims Without Possession of Securities...........................43
SECTION 506. Application of Money Collected........................................................43
SECTION 507. Limitation on Suits...................................................................44
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest and to Convert..........................................44
SECTION 509. Restoration of Rights and Remedies....................................................45
SECTION 510. Rights and Remedies Cumulative........................................................45
SECTION 511. Delay or Omission Not Waiver..........................................................45
SECTION 512. Control by Holders....................................................................45
SECTION 513. Waiver of Past Defaults...............................................................46
SECTION 514. Undertaking for Costs.................................................................46
SECTION 515. Waiver of Usury, Stay or Extension Laws...............................................46
ARTICLE SIX
THE TRUSTEE
SECTION 601. Certain Duties and Responsibilities...................................................47
SECTION 602. Notice of Defaults....................................................................47
SECTION 603. Certain Rights of Trustee.............................................................47
SECTION 604. Not Responsible for Recitals or Issuance of Securities................................48
SECTION 605. May Hold Securities...................................................................49
SECTION 606. Money Held in Trust...................................................................49
SECTION 607. Compensation and Reimbursement........................................................49
SECTION 608. Disqualification; Conflicting Interests...............................................50
SECTION 609. Corporate Trustee Required; Eligibility...............................................50
SECTION 610. Resignation and Removal; Appointment of Successor.....................................50
SECTION 611. Acceptance of Appointment by Successor................................................52
SECTION 612. Merger, Conversion, Consolidation or Succession to Business...........................53
SECTION 613. Preferential Collection of Claims Against Company.....................................54
SECTION 614. Appointment of Authenticating Agent...................................................54
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.............................55
SECTION 702. Preservation of Information; Communications to Holders................................56
SECTION 703. Reports by Trustee....................................................................56
SECTION 704. Reports by Company....................................................................56
</TABLE>
iv
<PAGE> 48
<TABLE>
<S> <C> <C>
SECTION 705. Notice of Default.....................................................................57
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms..................................57
SECTION 802. Successor Substituted.................................................................58
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. Supplemental Indentures Without Consent of Holders....................................58
SECTION 902. Supplemental Indentures With Consent of Holders.......................................59
SECTION 903. Execution of Supplemental Indentures..................................................61
SECTION 904. Effect of Supplemental Indentures.....................................................61
SECTION 905. Conformity with Trust Indenture Act...................................................61
SECTION 906. Reference in Securities to Supplemental Indentures....................................61
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium and Interest............................................61
SECTION 1002. Maintenance of Office or Agency.......................................................62
SECTION 1003. Money for Securities Payments to Be Held in Trust.....................................62
SECTION 1004. Statement by Officers as to Default...................................................63
SECTION 1005. Existence.............................................................................63
SECTION 1006. Maintenance of Properties.............................................................64
SECTION 1007. Payment of Taxes and Other Claims.....................................................64
SECTION 1008. Waiver of Certain Covenants...........................................................64
SECTION 1009. Calculation of Original Issue Discount................................................65
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Applicability of Article..............................................................65
SECTION 1102. Election to Redeem; Notice to Trustee.................................................65
SECTION 1103. Selection by Trustee of Securities to Be Redeemed.....................................66
SECTION 1104. Notice of Redemption..................................................................67
SECTION 1105. Deposit of Redemption Price...........................................................67
SECTION 1106. Securities Payable on Redemption Date.................................................68
SECTION 1107. Securities Redeemed in Part...........................................................68
</TABLE>
v
<PAGE> 49
<TABLE>
<CAPTION>
ARTICLE TWELVE
SINKING FUNDS
<S> <C> <C>
SECTION 1201. Applicability of Article..............................................................69
SECTION 1202. Satisfaction of Sinking Fund Payments with Securities.................................69
SECTION 1203. Redemption of Securities for Sinking Fund.............................................69
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance..........................70
SECTION 1302. Defeasance and Discharge..............................................................70
SECTION 1303. Covenant Defeasance...................................................................70
SECTION 1304. Conditions to Defeasance or Covenant Defeasance.......................................71
SECTION 1305. Deposited Money and U.S. Government Obligations to Be Held in Trust;
Miscellaneous Provisions......................................................73
SECTION 1306. Reinstatement.........................................................................73
ARTICLE FOURTEEN
CONVERSION OF SECURITIES
SECTION 1401. Applicability; Conversion Privilege and Conversion Price..............................74
SECTION 1402. Exercise of Conversion Privilege......................................................74
SECTION 1403. Fractions of Shares...................................................................75
SECTION 1404. Adjustment of Conversion Price........................................................76
SECTION 1405. Notice of Adjustments of Conversion Price.............................................81
SECTION 1406. Notice of Certain Corporate Action....................................................81
SECTION 1407. Company to Reserve Shares.............................................................82
SECTION 1408. Taxes on Conversions..................................................................82
SECTION 1409. Covenant as to Shares.................................................................83
SECTION 1410. Cancellation of Converted Securities..................................................83
SECTION 1411. Provisions in Case of Reclassification, Consolidation,
Merger or Sale of Assets.....................................................83
SECTION 1412. Responsibility of Trustee and Conversion Agent........................................84
SECTION 1413. Refusal to Convert Securities to Protect REIT Status..................................85
ARTICLE FIFTEEN
SUBORDINATION OF SECURITIES
SECTION 1501. Securities Subordinate to Senior Debt.................................................85
SECTION 1502. Payment Over of Proceeds Upon Dissolution, Etc........................................86
</TABLE>
vi
<PAGE> 50
<TABLE>
<S> <C> <C>
SECTION 1503. Prior Payment to Senior Debt Upon
Acceleration of Securities...................................................87
SECTION 1504. No Payment When Senior Debt in Default................................................87
SECTION 1505. Payment Permitted if no Default.......................................................89
SECTION 1506. Subrogation to Rights of Holders of
Senior Debt..................................................................89
SECTION 1507. Provisions Solely to Define Relative Rights...........................................89
SECTION 1508. Trustee to Effectuate Subordination...................................................90
SECTION 1509. No Waiver of Subordination Provisions.................................................90
SECTION 1510. Notice to Trustee.....................................................................90
SECTION 1511. Reliance on Judicial Order or Certificate
of Liquidating Agent.........................................................91
SECTION 1512. Trustee Not Fiduciary for Holders of Senior
Debt.........................................................................91
SECTION 1513. Rights of Trustee as Holder of Senior Debt;
Preservation of Trustee's Rights.............................................92
SECTION 1514. Article Applicable to Paying Agents...................................................92
SECTION 1515. Certain Conversions Deemed Payment....................................................92
TESTIMONIUM......................................................................................................93
SIGNATURES AND SEALS.............................................................................................93
ACKNOWLEDGEMENTS.................................................................................................94
</TABLE>
vii
<PAGE> 51
INDENTURE, dated as of , 1997, between CAPSTONE CAPITAL CORPORATION, a
corporation duly organized and existing under the laws of the State of Maryland
(herein called the "Company"), having its principal office at 1000 Urban Center
Drive, Suite 630, Birmingham, Alabama 35242, and AMSOUTH BANK OF ALABAMA, an
Alabama banking corporation, as Trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
subordinated debentures, notes or other evidences of indebtedness (herein called
the "Securities"), to be issued in one or more series as in this Indenture
provided.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually agreed, for the equal and
proportionate benefit of all Holders of the Securities or of series thereof, as
follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly provided or
unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted
accounting principles, and, except as otherwise
<PAGE> 52
herein expressly provided, the term "generally accepted accounting
principles" with respect to any computation required or permitted
hereunder shall mean such accounting principles as are generally
accepted in the United States of America at the date of such
computation;
(4) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case
may be, of this Indenture; and
(5) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Indenture as a whole and not to
any particular Article, Section or other subdivision.
"Act", when used with respect to any Holder, has the meaning specified
in Section 104.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee
pursuant to Section 614 to act on behalf of the Trustee to authenticate
Securities of one or more series.
"Blockage Period" has the meaning specified in Section 1504 hereof.
"Blockage Termination Event" has the meaning specified in Section 1504
hereof.
"Board of Directors" means either the board of directors of the Company
or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment, means
any day which is not a day on which banking institutions in that Place of
Payment are authorized or obligated by law or executive order to close.
"Change of Control" has the meaning specified in Section 1606 hereof.
"Closing Price" has the meaning specified in Section 1404(g) hereof.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commencement Date" has the meaning specified in Section 1404(g)
hereof.
2
<PAGE> 53
"Commission" means the Securities and Exchange Commission, from time to
time constituted, created under the Exchange Act, or, if at any time after the
execution of this instrument such Commission is not existing and performing the
duties now assigned to it under the Trust Indenture Act, then the body
performing such duties at such time.
"Common Stock" means the common stock of the company.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman of the Board, its President or
a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or
an Assistant Secretary, and delivered to the Trustee.
"Conversion Date" means the last date on which a Holder has the right
to convert a Security at a particular Conversion Price.
"Conversion Price" has the meaning specified in Section 1401 hereof.
"Corporate Trust Office" means the principal office of the Trustee in
Birmingham, Alabama at which at any particular time its corporate trust business
shall be administered, which office at the date hereof is located at 1901 6th
Avenue North, Birmingham, Alabama 35203, Attention: Corporate Trust
Administrator.
"Corporation" means a corporation, association, company, limited
liability company, joint-stock company or business trust.
"Covenant Defeasance" has the meaning specified in Section 1303.
"Current Market Price" has the meaning specified in Section 1404(g)
hereof.
"Defaulted Interest" has the meaning specified in Section 307.
"Defeasance" has the meaning specified in Section 1302.
"Depositary" means, with respect to Securities of any series issuable
in whole or in part in the form of one or more Global Securities, a clearing
agency registered under the Exchange Act that is designated to act as Depositary
for such Securities as contemplated by Section 301.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time.
3
<PAGE> 54
"Expiration Date" has the meaning specified in Section 104 hereof.
"Expiration Time" has the meaning specified in Section 1404(e) hereof.
"Global Security" means a Security that evidences all or part of the
Securities of any series and bears the legend set forth in Section 204 (or such
legend as may be specified as contemplated by Section 301 for such Securities).
"Holder" means a Person in whose name a Security is registered in the
Security Register.
"Indebtedness" with respect to any Person means (i) any debt (a) for
money borrowed, or (b) evidenced by a bond, note, debenture, or similar
instrument (including purchase money obligations) given in connection with the
acquisition of any business, property or assets, whether by purchase, merger,
consolidation or otherwise, but shall not include any account payable or other
obligation created or assumed by a Person in the ordinary course of business in
connection with the obtaining of materials or services, or (c) which is a direct
or indirect obligation which arises as a result of banker's acceptances or bank
letters of credit issued to secure obligations of such Person, or to secure the
payment of revenue bonds issued for the benefit of such Person, whether
contingent or otherwise; (ii) any debt of others described in the preceding
clause (i) which such Person has guaranteed or for which it is otherwise liable;
(iii) the obligation of such Person as lessee under any lease of property which
is reflected on such Person's balance sheet as a capitalized lease; and (iv) any
deferral, amendment, renewal, extension, supplement or refunding of any
liability of the kind described in any of the preceding clauses (i), (ii) and
(iii); provided, however, that in computing the Indebtedness of any Person there
shall be excluded any particular indebtedness if, upon or prior to the maturity
thereof, there shall have been deposited with a depository in trust money (or
evidence of Indebtedness, if permitted by the instrument creating such
Indebtedness) in the necessary amount to pay, redeem or satisfy such
Indebtedness as it becomes due, and the amount so deposited shall not be
included in any computation of the assets of such Person.
"Indenture" means this instrument as originally executed and as it may
from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof,
including, for all purposes of this instrument and any such supplemental
indenture, the provisions of the Trust Indenture Act that are deemed to be a
part of and govern this instrument and any such supplemental indenture,
respectively. The term "Indenture" shall also include the terms of particular
series of Securities established as contemplated by Section 301.
"Interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date", when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"Investment Company Act" means the Investment Company Act of 1940 and
any statute successor thereto, in each case as amended from time to time.
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"Maturity", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"Notice of Default" means a written notice of the kind specified in
Section 501(4) or 501(5) or any similar notice that may be specified in any
event of default with respect to a particular series of Securities established
as contemplated by Section 301.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered
to the Trustee. One of the officers signing an Officers' Certificate given
pursuant to Section 1004 shall be the principal executive, financial or
accounting officer of the Company.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, and who shall be acceptable to the Trustee.
"Original Issue Discount Security" means any Security which provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the Maturity thereof pursuant to Section 502.
"Outstanding", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(1) Securities theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
(2) Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Securities; provided that, if such
Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to
the Trustee has been made;
(3) Securities as to which Defeasance has been effected pursuant
to Section 1302;
(4) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities
in respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hand such Securities are valid obligations of the Company; and
(5) Securities which have been delivered to the Trustee for
conversion pursuant to Article Fourteen;
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provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Securities have given, made or taken any
request, demand, authorization, direction, notice, consent, waiver or other
action hereunder as of any date, (A) the principal amount of an Original Issue
Discount Security which shall be deemed to be Outstanding shall be the amount of
the principal thereof which would be due and payable as of such date upon
acceleration of the Maturity thereof to such date pursuant to Section 502, (B)
if, as of such date, the principal amount payable at the Stated Maturity of a
Security is not determinable, the principal amount of such Security which shall
be deemed to be Outstanding shall be the amount as specified or determined as
contemplated by Section 301, (C) the principal amount of a Security denominated
in one or more foreign currencies or currency units which shall be deemed to be
Outstanding shall be the U.S. dollar equivalent, determined as of such date in
the manner provided as contemplated by Section 301, of the principal amount of
such Security (or, in the case of a Security described in Clause (A) or (B)
above, of the amount determined as provided in such Clause), and (D) Securities
owned by the Company or any other obligor upon the Securities or any Affiliate
of the Company or of such other obligor shall be disregarded and deemed not to
be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent, waiver or other action, only Securities which the Trustee knows
to be so owned shall be so disregarded. Securities so owned that have been
pledged in good faith may be regarded as Outstanding if the pledgee establishes
to the satisfaction of the Trustee the pledgee's right so to act with respect to
such Securities and that the pledgee is not the Company or any other obligor
upon the Securities or any Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to pay the
principal of or any premium or interest on any Securities on behalf of the
Company.
"Person" means any individual, corporation, partnership, joint venture,
trust, unincorporated organization or government or any agency or political
subdivision thereof.
"Place of Payment", when used with respect to the Securities of any
series, means the place or places where the principal of and any premium and
interest on the Securities of that series are payable as specified as
contemplated by Section 301.
"Predecessor Security" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Security.
"Purchased Shares" has the meaning specified in Section 1404(e) hereof.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
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"Regular Record Date" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 301.
"REIT" means a real estate investment trust under Section 856 through
859 of the Code.
"Responsible Officer", when used with respect to the Trustee, means the
chairman or any vice-chairman of the board of directors, the chairman or any
vice-chairman of the executive committee of the board of directors, the chairman
of the trust committee, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, the controller
or any assistant controller or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture.
"Securities Act" means the Securities Act of 1933 and any statute
successor thereto, in each case as amended from time to time.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 305.
"Senior Debt" means the principal of (and premium, if any) and unpaid
interest (including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not a claim
for post-filing interest is allowed in such proceeding), fees, charges,
expenses, reimbursement and indemnification obligations, and all other amounts
payable under or in respect of Indebtedness of the Company, whether any such
Indebtedness exists as of the date hereof or is created, incurred, assumed or
guaranteed after such date, other than (i) Indebtedness that by its terms or by
operation of law is subordinated to or on a parity with the Securities, (ii)
Indebtedness owed to a Subsidiary of the Company, and (iii) Indebtedness owing
in respect of the Company's 10 1/2% Convertible Subordinated Debentures due 2002
and the Company's 6.55% Convertible Subordinated Debentures due 2002.
"Senior Non-Payment Default" has the meaning specified in Section 1504
hereof.
"Senior Payment Default" has the meaning specified in Section 1504
hereof.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 307.
"Stated Maturity", when used with respect to any Security or any
installment of principal thereof or interest thereon, means the date specified
in such Security as the fixed date on which the principal of such Security or
such installment of principal or interest is due and payable.
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"Subsidiary" means (i) a corporation at least 50% of whose capital
stock with voting power, under ordinary circumstances, to elect directors is, at
the time, directly owned by the Company or by one or more other Subsidiaries, or
by the Company and one or more other Subsidiaries, or (ii) a partnership in
which the Company or a Subsidiary of the Company is, at the time, a general
partner of such partnership, or (iii) any other Person (other than a corporation
or a partnership) in which the Company, one or more Subsidiaries of the Company,
or the Company and one or more Subsidiaries, directly or indirectly, at the date
of determination thereof, has (a) at least a 50% ownership interest or (b) the
power to elect or direct the election of the directors or other governing body
of such Person.
"Trading Day" has the meaning specified in Section 1404(g) hereof.
"Triggering Event" has the meaning specified in Section 1404(f) hereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in force
at the date as of which this instrument was executed; provided, however, that in
the event the Trust Indenture Act of 1939 is amended after such date, "Trust
Indenture Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean or include each Person who is then a Trustee hereunder, and
if at any time there is more than one such Person, "Trustee" as used with
respect to the Securities of any series shall mean the Trustee with respect to
Securities of that series.
"U.S. Government Obligation" has the meaning specified in Section 1304.
"Vice President", when used with respect to the Company or the Trustee,
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president".
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Upon any application or request by the Company to the Trustee to take
any action under any provision of this Indenture, the Company shall furnish to
the Trustee such certificates and opinions as may be required under the Trust
Indenture Act. Each such certificate or opinion shall be given in the form of an
Officers' Certificate, if to be given by an officer of the Company, or an
Opinion of Counsel, if to be given by counsel, and shall comply with the
requirements of the Trust Indenture Act and any other requirements set forth in
this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (except for certificates
provided for in Section 1004) shall include
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
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(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENT DELIVERED TO TRUSTEE.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or opinion of counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. ACTS OF HOLDERS; RECORD DATES.
Any request, demand, authorization, direction, notice, consent, waiver
or other action provided or permitted by this Indenture to be given, made or
taken by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing
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appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 601) conclusive in favor of the Trustee and the Company,
if made in the manner provided in this Section.
The fact and date of the execution by any Person of any such instrument
of writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of his
authority. The fact and date of the execution of any such instrument in writing,
or the authority of the Person executing the same, may also be proved in any
other manner which the Trustee deems sufficient.
The ownership of Securities shall be proved by the Security Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon the
Security.
The Company may, in the circumstances permitted by the Trust Indenture
Act, set any day as a record date for the purpose of determining the Holders of
Outstanding Securities of any series entitled to give, make or take any request,
demand, authorization, direction, notice, consent, waiver or other Act provided
or permitted by this Indenture to be given, made or taken by Holders of
Securities of such series, provided that the Company may not set a record date
for, and the provisions of this paragraph shall not apply with respect to, the
giving or making of any notice, declaration, request or direction referred to in
the next paragraph. If any record date is set pursuant to this paragraph, the
Holders of Outstanding Securities of the relevant series on such record date,
and no other Holders, shall be entitled to take relevant action, whether or not
such Holders remain Holders after such record date; provided that no such action
shall be effective hereunder unless taken on or prior to the applicable
Expiration Date by Holders of the requisite principal amount of Outstanding
Securities of such series on such record date. Nothing in this paragraph shall
be construed to prevent the Company from setting a new record date for any
action for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically and with
no action by any Person be canceled and of no effect), and nothing in this
paragraph shall be construed to render ineffective any action taken by Holders
of the requisite principal amount of Outstanding Securities of the relevant
series on the date such action is taken. Promptly after any record date is set
pursuant to this paragraph, the Company, at its own expense, shall cause notice
of such record date, the proposed action by Holders and the applicable
Expiration Date to be given to the Trustee in writing and to each Holder of
Securities of the relevant series in the manner set forth in Section 106.
The Trustee may set any day as a record date for the purpose of
determining the Holders of Outstanding Securities of any series entitled to join
in the giving or making of (i) any Notice of
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Default, (ii) any declaration of acceleration referred to in Section 502, (iii)
any request to institute proceedings referred to in Section 507(2) or (iv) any
direction referred to in Section 512, in each case with respect to Securities of
such series. If any record date is set pursuant to this paragraph, the Holders
of Outstanding Securities of such series on such record date, and no other
Holders, shall be entitled to join in such notice, declaration, request or
direction, whether or not such Holders remain Holders after such record date;
provided that no such action shall be effective hereunder unless taken on or
prior to the applicable Expiration Date by Holders of the requisite principal
amount of Outstanding Securities of such series on such record date. Nothing in
this paragraph shall be construed to prevent the Trustee from setting a new
record date for any action for which a record date has previously been set
pursuant to this paragraph (whereupon the record date previously set shall
automatically and with no action by any Person be canceled and of no effect),
and nothing in this paragraph shall be construed to render ineffective any
action taken by Holders of the requisite principal amount of Outstanding
Securities of the relevant series on the date such action is taken. Promptly
after any record date is set pursuant to this paragraph, the Trustee, at the
Company's expense, shall cause notice of such record date, the proposed action
by Holders and the applicable Expiration Date to be given to the Company in
writing and to each Holder of Securities of the relevant series in the manner
set forth in Section 106.
With respect to any record date set pursuant to this Section, the party
hereto which sets such record dates may designate any day as the "Expiration
Date" and from time to time may change the Expiration Date to any earlier or
later day; provided that no such change shall be effective unless notice of the
proposed new Expiration Date is given to the other party hereto in writing, and
to each Holder of Securities of the relevant series in the manner set forth in
Section 106, on or prior to the existing Expiration Date. If an Expiration Date
is not designated with respect to any record date set pursuant to this Section,
the party hereto which set such record date shall be deemed to have initially
designated the 180th day after such record date as the Expiration Date with
respect thereto, subject to its right to change the Expiration Date as provided
in this paragraph. Notwithstanding the foregoing, no Expiration Date shall be
later than the 180th day after the applicable record date.
Without limiting the foregoing, a Holder entitled hereunder to take any
action hereunder with regard to any particular Security may do so with regard to
all or any part of the principal amount of such Security or by one or more duly
appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such principal amount.
SECTION 105. NOTICES, ETC., TO TRUSTEE AND COMPANY.
Any request, demand, authorization, direction, notice, consent, waiver
or Act of Holders or other document provided or permitted by this Indenture to
be made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust Administration, or
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(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at the address of its principal
office specified in the first paragraph of this instrument, Attention:
Corporate Trust Administration, or at any other address previously
furnished in writing to the Trustee by the Company.
SECTION 106. NOTICE TO HOLDERS; WAIVER.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, at his address as it appears in the Security Register, not later
than the latest date (if any), and not earlier than the earliest date (if any),
prescribed for the giving of such notice. In any case where notice to Holders is
given by mail, neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder shall affect the sufficiency of such
notice with respect to other Holders. Where this Indenture provides for notice
in any manner, such notice may be waived in writing by the person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Holders shall be filed with
the Trustee, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Trustee shall
constitute a sufficient notification for every purpose hereunder.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision hereof limits, qualifies or conflicts with a provision
of the Trust Indenture Act that is required under such Act to be a part of and
govern this Indenture, the latter provision shall control. If any provision of
this Indenture modifies or excludes any provision of the Trust Indenture Act
that may be so modified or excluded, the latter provision shall be deemed to
apply to this Indenture as so modified or to be excluded, as the case may be.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings herein and the Table of Contents are
for convenience only and shall not affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
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SECTION 110. SEPARABILITY CLAUSE.
In case any one or more of the provisions contained in this Indenture
or in the Securities shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions of this Indenture or of the Securities,
but this Indenture and the Securities shall be construed as if such invalid or
illegal or unenforceable provision had never been contained herein or therein.
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Debt (to the extent and on the terms set forth
in Article Fifteen) and the Holders, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
This Indenture and the Securities shall be governed by and construed in
accordance with the law of the State of New York, without regard to principles
of conflicts of law.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date,
Conversion Date or Stated Maturity of any Security shall not be a Business Day
at any Place of Payment, then (notwithstanding any other provision of this
Indenture or of the Securities (other than a provision of any Security which
specifically states that such provision shall apply in lieu of this Section))
payment of interest or principal and premium, if any, or conversion need not be
made at such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same force and effect
as if made on the Interest Payment Date, Redemption Date or Conversion Date, or
at the Stated Maturity, provided that no interest shall accrue with respect to
such payment for the period from and after such Interest Payment Date,
Redemption Date or Stated Maturity, as the case may be.
SECTION 114. NO RECOURSE AGAINST OTHERS.
A director, officer, employee, stockholder or incorporator, as such, of
the Company shall not have any liability for any obligations of the Company
under the Securities or this Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. Each holder of a Security by
accepting such Security waives and releases all such liability. Such waiver and
release are part of the consideration for the issuance of the Securities.
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SECTION 115. COUNTERPARTS.
This Indenture may be executed in any number of counterparts each of
which shall be an original, but such counterparts shall together constitute but
one and the same instrument.
ARTICLE TWO
FORM OF SECURITIES
SECTION 201. FORMS GENERALLY.
The Securities of each series shall be in substantially the form set
forth in this Article, or in such other form as shall be established by or
pursuant to a Board Resolution or in one or more indentures supplemental hereto,
in each case with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or Depositary therefor or as may, consistently herewith, be
determined by the officers executing such Securities, as evidenced by their
execution thereof. If the form of Securities of any series is established by
action taken pursuant to a Board Resolution, a copy of an appropriate record of
such action shall be certified by the Secretary or an Assistant Secretary of the
Company and delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 303 for the authentication and delivery of such
Securities.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such Securities, as evidenced by their execution of
such Securities.
SECTION 202. FORM OF FACE OF SECURITY.
[Insert any legend required by the Internal Revenue Code and
the regulations thereunder.]
CAPSTONE CAPITAL CORPORATION
----------------------------------------------
No. $
----------------- ---------------
CUSIP No.
CAPSTONE CAPITAL CORPORATION, a corporation duly organized and existing
under the laws of the State of Maryland (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to
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pay to ___________________________________________, or registered assigns, the
principal sum of ____________________ Dollars on _______________________, and to
pay interest thereon from the date of issue or the most recent Interest Payment
Date to which interest has been paid or duly provided for, semiannually on
_______________________ and _____________________ in each year, commencing as of
___________, at the rate of [ %] per annum, until the principal hereof is paid
or made available for payment, provided that any principal and premium, and any
such installment of interest, which is overdue shall bear interest at the rate
of [ %] per annum (to the extent that the payment of such interest shall be
legally enforceable), from the dates such amounts are due until they are paid or
made available for payment, and such interest shall be payable on demand. The
interest so payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in such Indenture, be paid to the Person in whose
name this Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest, which shall be
the _______________________ or ________________________ (whether or not a
Business Day), as the case may be, next preceding such Interest Payment Date.
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on such Regular Record Date and may either be
paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest to be fixed by the Trustee, notice
whereof shall be given to Holders of Securities of this series not less than 10
days prior to such Special Record Date, or be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Securities of this series may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in said Indenture.
[If the Security is not to bear interest prior to Maturity, insert -
The principal of this Security shall not bear interest except in the case of a
default in payment of principal upon acceleration, upon redemption or at Stated
Maturity and in such case the overdue principal and any overdue premium shall
bear interest at the rate of % per annum (to the extent that the payment of such
interest shall be legally enforceable), from the dates such amounts are due
until they are paid or made available for payment. Interest on any overdue
principal or premium shall be payable on demand. Any such interest on any
overdue principal or premium which is not so paid on demand shall bear interest
at the rate of % per annum (to the extent that the payment of such interest
shall be legally enforceable), from the dates such amounts are due until they
are paid or made available for payment. Interest on any overdue interest shall
be payable on demand.]
Payment of the principal of and premium, if any, and [if applicable,
insert - any such] interest on this Security will be payable, and [the
conversion and] transfer of this Security may be registered, at the office or
agency of the Company or the Trustee maintained for that purpose in [ ], in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts; provided, however, that at
the option of the Company payment of interest may be made by check mailed to the
address of the person entitled thereto as such address shall appear in the
Security Register. The foregoing notwithstanding, principal of and premium, if
any, and interest on Securities which are Global Securities and are held of
record by the Depositary or its nominee will be payable in same day funds.
Interest shall be computed on the basis of a 360-day year of twelve 30-day
months.
15
<PAGE> 66
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
No stockholder, director, officer, employee or incorporator, as such,
past, present or future, of the Company or any successor corporation shall have
any liability for any obligation of the Company under the Securities or the
Indenture or for any claim based on, in respect of or by reason of, such
obligations or their creation. Each Holder of a Security by accepting such
Security waives and releases all such liability. This waiver and release are
part of the consideration for the issuance of the Securities.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed under its corporate seal.
CAPSTONE CAPITAL CORPORATION
By
-----------------------------
Attest:
- -------------------------------------
SECTION 203. FORM OF REVERSE OF SECURITY.
IF NECESSARY TO EFFECT COMPLIANCE BY THE COMPANY WITH CERTAIN PROVISIONS OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), THE TRANSFER OF
OWNERSHIP OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE [insert, if
applicable - AND THE CONVERSION OF SUCH SECURITIES INTO SHARES OF COMMON STOCK
OF THE COMPANY] MAY BE PROHIBITED UPON THE TERMS AND CONDITIONS SET FORTH BELOW
AND IN THE INDENTURE AND THE ARTICLES OF INCORPORATION AND BYLAWS OF THE
COMPANY. THE COMPANY WILL FURNISH A COPY OF SUCH TERMS AND CONDITIONS TO THE
REGISTERED HOLDER OF THIS CERTIFICATE UPON REQUEST AND WITHOUT CHARGE. TO ENABLE
THE COMPANY TO ENSURE THAT IT COMPLIES WITH THE PROVISIONS OF THE CODE, THE
HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND ANY PROPOSED
TRANSFEREE OF SUCH HOLDER SHALL
16
<PAGE> 67
UPON DEMAND DISCLOSE TO THE COMPANY IN WRITING SUCH INFORMATION AS THE COMPANY
MAY DEEM NECESSARY FOR SUCH PURPOSES.
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), limited in the aggregate principal
amount to $__________________, issued and to be issued in one or more series
under an Indenture, dated as of __________________________ (herein called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), between the Company and AmSouth Bank of Alabama, as trustee (herein
called the "Trustee", which term includes any successor trustee under the
Indenture), and reference is hereby made to the Indenture and all indentures
supplemental thereto for a statement of the respective rights, limitations of
rights, duties and immunities thereunder of the Company, the Trustee and the
Holders of the Securities and of the terms upon which the Securities are, and
are to be, authenticated and delivered.
[If applicable, insert - Subject to and upon compliance with the
provisions of the Indenture, the Holder of this Security is entitled, at his
option, at any time on or before the close of business on , or in case this
Security or a portion hereof is called for redemption, then in respect of this
Security or such portion hereof until and including, but (unless the Company
defaults in making the payment due upon redemption) not after, the close of
business on the date prior to the Redemption Date, to convert this Security (or
any portion of the principal amount hereof which is $1,000 or an integral
multiple thereof), at the principal amount hereof, or of such portion, into a
fully paid and non-assessable shares (calculated as to each conversion to the
nearest 1/100 of a share) of Common Stock of the Company at a conversion price
per share of Common Stock equal to $_______ per share (or at the current
adjusted conversion price if an adjustment has been made as provided in the
Indenture) by surrender of this Security, duly endorsed or assigned to the
Company or in blank, to the Company at its office or agency in , accompanied by
written notice to the Company that the Holder hereof elects to convert this
Security, or if less than the entire principal amount hereof is to be converted
the portion hereof to be converted and, in case such surrender shall be made
during the period from the close of business on any Regular Record Date next
preceding any Interest Payment Date to the opening of business on such Interest
Payment Date (unless this Security or the portion thereof being converted has
been called for redemption on a Redemption Date within such period), also
accompanied by payment in New York Clearing House or other funds acceptable to
the Company of an amount equal to the interest payable on such Interest Payment
Date on the principal amount of this Security then being converted. Subject to
the aforesaid requirement for payment and, in the case of a conversion after the
Regular Record Date next preceding any Interest Payment Date and on or before
such Interest Payment Date, to the right of the Holder of this Security (or any
Predecessor Security) of record at such Regular Record Date to receive an
installment of interest (with certain exceptions provided in the Indenture), no
payment or adjustment is to be made on conversion for interest accrued hereon or
for dividends on the shares of Common Stock issued on conversion. No fractions
of shares of scrip representing fractions of shares will be issued on
conversion, but instead of any fractional interest the Company shall pay a cash
adjustment as provided in the Indenture. The conversion price is subject to
adjustment as provided in the Indenture. In addition, the Indenture provides
that in case of certain consolidations or mergers to which the Company is a
party or the transfer of substantially all of the assets of the Company, the
Indenture shall be amended, without the consent of any Holders of Securities, so
that this Security, if then outstanding, will be convertible thereafter, during
the period this Security shall be convertible as
17
<PAGE> 68
specified above, only into the kind and amount of securities, cash and other
property receivable upon the consolidation, merger or transfer by a holder of
the number of shares of Common Stock into which this Security might have been
converted immediately prior to such consolidation, merger or transfer (assuming
such holder of Common Stock failed to exercise any rights of election and
received per share the kind and amount received per share by a plurality of
non-electing shares).]
[If applicable, insert - The Securities of this series are subject to
redemption upon not less than 30 days' nor more than 60 days' notice by mail,
[if applicable, insert - (1) on ____________________ in any year commencing with
the year _____________ and ending with the year ____________ through operation
of the sinking fund for this series at a Redemption Price equal to 100% of the
principal amount, and (2)] at any time [if applicable, insert - on or after
_______________, 19_____], as a whole or in part, at the election of the
Company, at the Redemption Prices set forth below (expressed as percentages of
the principal amount), plus accrued and unpaid interest to the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date).
If redeemed during the 12-month period beginning ______________________
of the years indicated, the Redemption Price per Security shall be:
<TABLE>
<CAPTION>
Redemption Redemption
Year Price Year Price
- ---- ----- ---- -----
<S> <C> <C> <C>
</TABLE>
and thereafter at a Redemption Price equal to _____% of the principal amount,
together in the case of any such redemption [(whether through operation of the
sinking fund or otherwise)] with accrued interest to the Redemption Date, but
interest installments whose Stated Maturity is on or prior to such Redemption
Date will be payable to the Holders of such Securities, or one or more
Predecessor Securities, of record at the close of business on the relevant
Record Dates referred to on the face hereof, all as provided in the Indenture.
Notwithstanding the foregoing, the Securities will be subject to
redemption, in whole or in part, at any time, to the extent necessary for the
Company to continue to qualify as a REIT. The Redemption Price for such
Securities redeemed shall equal to 100% of the principal amount of the
Securities, plus accrued and unpaid interest, if any, to and including the
Redemption Date. The Company may exercise such redemption powers solely with
respect to Holders who pose a threat to the Company's REIT status and only to
the extent deemed necessary or advisable by the Board of Directors to preserve
such status.
[If applicable, insert - The sinking fund for this series provides for
the redemption on _______________________ in each year beginning with the year
_______ and ending with the year
18
<PAGE> 69
_______ of [If applicable, insert - not less than $__________ ("mandatory
sinking fund") and not more than] $__________ aggregate principal amount of
Securities of this series. Securities of this series acquired or redeemed by the
Company otherwise than through [if applicable, insert - mandatory] sinking fund
payments may be credited against subsequent [if applicable, insert - mandatory]
sinking fund payments otherwise required to be made [if applicable, insert -, in
the inverse order in which they become due].]
[If the Security is subject to redemption of any kind, insert - In the
event of redemption of this Security in part only, a new Security or Securities
of this series and of like tenor for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancellation hereof.]
The Company covenants and agrees, and each Holder of a Security, by his
acceptance thereof, likewise covenants and agrees, that to the extent and in the
manner set forth in the Indenture, the indebtedness represented by the
Securities and the payment of principal of and premium, if any, and interest on
each and all of the Securities are hereby expressly made subordinate and subject
in right of payment to the prior payment in full of all Senior Debt.
[If applicable, insert - The Indenture contains provisions for
defeasance at any time of the entire indebtedness of this Security and Events of
Default with respect to this Security, in each case upon compliance with certain
conditions set forth in the Indenture.]
[If the Security is not an Original Issue Discount Security, insert -
If an Event of Default with respect to Securities of this series shall occur and
be continuing, the principal of the Securities of this series may be declared
due and payable in the manner and with the effect provided in the Indenture.]
[If the Security is an Original Issue Discount Security, insert - If an
Event of Default with respect to Securities of this series shall occur and be
continuing, an amount of principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. Such amount shall be equal to - insert formula for determining the
amount. Upon payment (i) of the amount of principal so declared due and payable
and (ii) of interest on any overdue principal, premium and interest (in each
case to the extent that the payment of such interest shall be legally
enforceable), all of the Company's obligations in respect of the payment of the
principal of and premium and interest, if any, on the Securities of this series
shall terminate.]
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of a majority in principal amount of the Securities at
the time Outstanding of each series to be affected. The Indenture also contains
provisions permitting the Holders of specified percentages in the principal
amount of the Securities of each series at the time Outstanding, on behalf of
the Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued
19
<PAGE> 70
upon the registration of transfer hereof or in exchange herefor or in lieu
hereof, whether or not notation of such consent or waiver is made upon this
Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of not less than 25% in principal amount
of the Securities of this series at the time Outstanding shall have made written
request to the Trustee to institute proceedings in respect of such Event of
Default as Trustee and offered the Trustee reasonable indemnity, and the Trustee
shall not have received from the Holders of a majority in principal amount of
Securities of this series at the time Outstanding a direction inconsistent with
such request, and shall have failed to institute any such proceeding, for 60
days after receipt of such notice, request and offer of indemnity. The foregoing
shall not apply to any suit instituted by the Holder of this Security for the
enforcement of payment of principal hereof or any premium or interest hereon on
or after the respective due dates expressed herein.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any place where the principal of and any
premium and interest on this Security is payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new Securities of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees. The Security Registrar shall not be required to register the
transfer of any Securities if such transfer, in the good faith opinion of the
Board of Directors, [(i)] might cause the Company to fail to comply with any
requirement necessary for the continued qualification of the Company as a REIT
under Section 856 through 859 of the Code [if applicable, insert - or (ii) would
result in a single Person owing more than 9.8% of the Company's outstanding
stock within the meaning of the Code].
Subject to the rights of holders of Senior Debt, as set forth in the
Indenture, no other reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Security at the time, place and rate, and
in the coin or currency, herein prescribed [if applicable, insert - or to
convert this Security as provided in the Indenture].
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
20
<PAGE> 71
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
21
<PAGE> 72
[If applicable, insert -
[FORM OF CONVERSION NOTICE]
To: CAPSTONE CAPITAL CORPORATION
The undersigned owner of this Security hereby irrevocably exercises the
option to convert this Security, or portion hereof (which is $1,000 or an
integral multiple thereof) below designated, into shares of Common Stock in
accordance with the terms of the Indenture referred to in this Security, and
directs that the shares issuable and deliverable upon the conversion, together
with any check in payment for fractional shares and any Securities, representing
any unconverted principal amount hereof, be issued and delivered to the
registered holder hereof unless a different name has been indicated below. If
shares are to be issued in the name of a person other than the undersigned, the
undersigned will pay all transfer taxes payable with respect thereto. Any amount
required to be paid by the undersigned on account of interest accompanies this
Security.
Dated:
Signature(s) NOTICE: THE SIGNATURE(S) TO
THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE
WHATSOEVER.
Signature Guarantee:
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTY MEDALLION PROGRAM), PURSUANT TO
S.E.C. 17Ad-15.
Fill in for registration of shares of Common Stock and Securities if to be
issued otherwise than to the registered holder:
- ----------------------------------
Name
- ----------------------------------
Address
- ----------------------------------
(please print name and address,
including zip code number)
Principal Amount to be
converted (in an integral
multiple of $1,000, if
less than all):
$
Social Security Or Other Taxpayer
Identification Number Of Owner:
22
<PAGE> 73
[FORM OF ASSIGNMENT]
If you the holder want to assign this Security, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Security to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
----------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code) and
irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Security on the books of the Company. The
agent may substitute another to act for him.
- --------------------------------------------------------------------------------
Date: Your signature:
------------------------- -------------------------------
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
Signature Guarantee:
-----------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTY MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
23
<PAGE> 74
The Company will furnish to any Securityholder upon written request and
without charge a copy of the Indenture. Requests may be made to: Capstone
Capital Corporation, c/o Secretary, 1000 Urban Center Drive, Suite 630,
Birmingham, Alabama 35242.
KEEP THIS CERTIFICATE IN A SAFE PLACE, IF IT IS LOST,
STOLEN OR DESTROYED, THE COMPANY MAY REQUIRE A BOND
OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A
REPLACEMENT CERTIFICATE.
SECTION 204. FORM OF LEGEND FOR GLOBAL SECURITIES.
Unless otherwise specified as contemplated by Section 301 for the
Securities evidenced thereby, every global Security authenticated and delivered
hereunder shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. THIS SECURITY MAY NOT BE EXCHANGED IN WHOLE OR IN PART FOR A
SECURITY REGISTERED, AND NO TRANSFER OF THIS SECURITY IN WHOLE OR IN PART MAY BE
REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A NOMINEE
THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
Owners of beneficial interests in Securities represented by a Global
Security shall be entitled to receive physical delivery of Securities in
definitive form only under the circumstances set forth in Section 305 hereof [if
applicable, insert - and as set forth in the next sentence. An owner of a
beneficial interest in Securities represented by a Global Security may, on terms
acceptable to the Company and the Depositary, receive Securities in definitive
form in exchange for such beneficial interest. In any such instance, the owner
of such beneficial interest will be entitled to physical delivery in definitive
form of Securities represented by the Global Security equal in principal amount
to such beneficial interest and to have such Securities registered in its name].
24
<PAGE> 75
SECTION 205. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificates of authentication shall be in substantially
the following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
Dated: AMSOUTH BANK OF ALABAMA,
As Trustee
By
-----------------------------
Authorized Signatory
ARTICLE THREE
THE SECURITIES
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES.
The aggregate principal amount of Securities which may be authenticated
and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution and, subject to Section 303,
set forth, or determined in the manner provided, in an Officers' Certificate, or
established in one or more indentures supplemental hereto, prior to the issuance
of Securities of any series,
(1) the title of the Securities of the series (which shall
distinguish the Securities of the series from Securities of any other
series);
(2) any limit upon the aggregate principal amount of the
Securities of the series which may be authenticated and delivered under
this Indenture (except for Securities authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other
Securities of the series pursuant to Section 304, 305, 306, 906 or 1107
and except for any Securities which, pursuant to Section 303, are
deemed never to have been authenticated and delivered hereunder);
(3) the Person to whom any interest on a Security of the
series shall be payable, if other than the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest;
25
<PAGE> 76
(4) the date or dates on which the principal of any Securities
of the series is payable;
(5) the rate or rates at which any Securities of the series
shall bear interest, if any, or the method of calculation thereof, the
date or dates from which any such interest shall accrue, the Interest
Payment Dates on which any such interest shall be payable and the
Regular Record Date for any such interest payable on any Interest
Payment Date;
(6) the place or places where the principal of and any premium
and interest on any Securities of the series shall be payable;
(7) the period or periods within which, the events upon the
occurrence of which, and the price or prices at which any Securities of
the series may be redeemed, in whole or in part, at the option of the
Company and, if other than by a Board Resolution, the manner in which
any election by the Company to redeem the Securities shall be
evidenced;
(8) the obligation, if any, of the Company to redeem or
purchase any Securities of the series pursuant to any sinking fund or
analogous provisions or at the option of the Holder thereof and the
period or periods within which, the price or prices at which and the
terms and conditions upon which any Securities of the series shall be
redeemed, repaid or purchased, in whole or in part, pursuant to such
obligation;
(9) if other than denominations of $1,000 and any integral
multiple thereof, the denominations in which any Securities of the
series shall be issuable;
(10) if the amount of principal of or any premium or interest
on any Securities of the series may be determined with reference to an
index or pursuant to a formula, the manner in which such amounts shall
be determined;
(11) if other than the currency of the United States of
America, the currency, currencies or currency units in which the
principal of or any premium or interest on any Securities of the series
shall be payable and the manner of determining the equivalent thereof
in the currency of the United States of America for any purpose,
including for purposes of the definition of "Outstanding" in Section
101;
(12) if the principal of or any premium or interest on any
Securities of the series is to be payable, at the election of the
Company or the Holder thereof, in one or more currencies or currency
units other than that or those in which such Securities are stated to
be payable, the currency, currencies or currency units in which the
principal of or any premium or interest on such Securities as to which
such election is made shall be payable, the periods within which and
the terms and conditions upon which such election is to be made and the
amount so payable (or the manner in which such amount shall be
determined);
(13) if other than the entire principal amount thereof, the
portion of the principal amount of any Securities of the series which
shall be payable upon declaration of acceleration of the Maturity
thereof pursuant to Section 502;
26
<PAGE> 77
(14) if the principal amount payable at the Stated Maturity of
any Securities of the series will not be determinable as of any one or
more dates prior to the Stated Maturity, the amount which shall be
deemed to be the principal amount of such Securities as of any such
date for any purpose thereunder or hereunder, including the principal
amount thereof which shall be due and payable upon any Maturity other
than the Stated Maturity or which shall be deemed to be Outstanding as
of any date prior to the Stated Maturity (or, in any such case, the
manner in which such amount deemed to be the principal amount shall be
determined);
(15) if applicable, that the Securities of the series shall be
subject to either or both of Defeasance or Covenant Defeasance as
provided in Article Thirteen; provided that no series of Securities
that is convertible into or exchangeable for shares of Common Stock or
other securities pursuant to Section 301(19) shall be subject to
Defeasance pursuant to Section 1302;
(16) if applicable, that any Securities of the series shall be
issuable in whole or in part in the form of one or more Global
Securities and, in such case, the respective Depositaries for such
Global Securities, the form of any legend or legends which shall be
borne by any such Global Security in addition to or in lieu of that set
forth in Section 204 and any circumstances in addition to or in lieu of
those set forth in Clause (2) of the last paragraph of Section 305 in
which any such Global Security may be exchanged in whole or in part for
Securities registered, and any transfer of such Global Security in
whole or in part may be registered, in the name or names of Persons
other than the Depositary for such Global Security or a nominee
thereof;
(17) any addition to, or change in the Events of Default which
applies to any Securities of the series and any change in the right of
the Trustee or the requisite Holders of such Securities to declare the
principal amount thereof due and payable pursuant to Section 502;
(18) any addition to, deletion from or change in the covenants
set forth in Article Ten which applies to Securities of the series;
(19) the terms and conditions, if any, pursuant to which the
Securities are convertible into or exchangeable for Common Stock or
other securities;
(20) any addition to, deletion from or change in the
subordination provisions contained in Article Fifteen with respect to
Securities of the series; and
(21) any other terms of the series (which terms shall not be
inconsistent with the provisions of this Indenture, except as permitted
by Section 901(5)).
All Securities of any one series shall be substantially identical
except as to denomination and except as may otherwise be provided in or pursuant
to the Board Resolution referred to above and (subject to Section 303) set
forth, or determined in the manner provided, in the Officers' Certificate
referred to above or in any such indenture supplemental hereto.
27
<PAGE> 78
If any of the terms of the series are established by action taken
pursuant to a Board Resolution, a copy of an appropriate record of such action
shall be certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate setting forth the terms of the series.
SECTION 302. DENOMINATIONS.
The Securities of each series shall be issuable only in registered form
without coupons and only in such denominations as shall be specified as
contemplated by Section 301. In the absence of any such specified denomination
with resect to the Securities of any series, the Securities of such series shall
be issuable in denominations of $1,000 and any integral multiple thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents, under its
corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. If the
form or terms of the Securities of the series have been established by or
pursuant to one or more Board Resolutions as permitted by sections 201 and 301,
in authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive, and (subject to Section 601) shall be fully protected in
relying upon, an Opinion of Counsel stating,
(1) if the form of such Securities has been established by or
pursuant to Board Resolution as permitted by Section 201, that such
form has been established in conformity with the provisions of this
Indenture;
(2) if the terms of such Securities have been established by
or pursuant to Board Resolution as permitted by Section 301, that such
terms have been established in conformity with the provisions of this
Indenture; and
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(3) that such Securities, when authenticated and delivered by
the Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid
and legally binding obligations of the Company enforceable in
accordance with their terms, subject to bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to or affecting creditors' rights to
general equity principles.
If such form or terms have been so established, the Trustee shall not
be required to authenticate such Securities if the issue of such Securities
pursuant to this Indenture will affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Notwithstanding the provisions of Section 301, and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 301 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the
authentication of each Security of such series if such documents are delivered
at or prior to the authentication upon original issuance of the first Security
of such series to be issued.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee by manual signature, and such certificate upon any
Security shall be conclusive evidence, and the only evidence that such Security
has been duly authenticated and delivered hereunder. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 309, for all
purposes of this Indenture such Security shall be deemed never to have been
authenticated and delivered hereunder and shall never be entitled to the
benefits of this Indenture.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities of any series, the
Company may execute, and upon Company Order the Trustee shall authenticate and
deliver, temporary Securities which are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Securities in lieu of which they
are issued and with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities may determine, as
evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of that series to be prepared without unreasonable
delay. After the preparation of definitive Securities of such series, the
temporary Securities of such series shall be exchangeable for definitive
Securities of such series upon surrender of the temporary Securities of such
series at the office or agency of the Company in a Place of Payment for that
series, without charge to the Holder. Upon
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surrender for cancellation of any one or more temporary Securities of any
series, the Company shall execute and the Trustee shall authenticate and deliver
in exchange therefor one or more definitive Securities of the same series, of
any authorized denominations and of like tenor and aggregate principal amount.
Until so exchanged, the temporary Securities of any series shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities
of such series and tenor.
SECTION 305. REGISTRATION; REGISTRATION OF TRANSFER AND EXCHANGE.
The Company shall cause to be kept at the Corporate Trust Office of the
Trustee a register (the register maintained in such office and in any other
office or agency of the Company in a Place of Payment being herein sometimes
collectively referred to as the "Security Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Securities and of transfers of Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Securities and
transfers of Securities as herein provided.
Upon surrender for registration of transfer of any Security of a series
at the office or agency of the Company in a Place of Payment for that series,
the Company shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more new Securities
of the same series, of any authorized denominations and of like tenor and
aggregate principal amount.
At the option of the Holder, Securities of any series may be exchanged
for other Securities of the same series, of any authorized denominations and of
like tenor and aggregate principal amount, upon surrender of the Securities to
be exchanged at such office or agency. Whenever any Securities are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Securities which the Holder making the exchange is
entitled to receive.
All Securities issued upon any registration of transfer or exchange of
Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange of Securities, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 304, 906 or 1107 not involving any transfer.
If the Securities of any series (or of any series and specified tenor)
are to be redeemed in part, the Company shall not be required (A) to issue,
register the transfer of or exchange any Securities of that series (or of that
series and specified tenor, as the case may be) during a period beginning at the
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opening of business 15 days before the day of the mailing of a notice of
redemption of any such Securities selected for redemption under Section 1103 and
ending at the close of business on the day of such mailing, or (B) to register
the transfer of or exchange any Security so selected for redemption in whole or
in part, except the unredeemed portion of any Security being redeemed in part.
The provisions of Clauses (1), (2), (3) and (4) below shall apply only
to Global Securities:
(1) Each Global Security authenticated under this Indenture
shall be registered in the name of the Depositary designated for such
Global Security or a nominee thereof and deposited with such Depositary
or a nominee thereof or custodian therefor, shall be issued in a
denomination or aggregate denomination equal to the portion of the
aggregate principal amount of Securities of the applicable series to be
represented by such Global Security, and shall constitute a single
Security for all purposes of this Indenture.
(2) Notwithstanding any other provision in this Indenture, no
Global Security may be exchanged in whole or in part for Securities
registered, and no transfer of a Global Security in whole or in part
may be registered, in the name of any Person other than the Depositary
for such Global Security or a nominee thereof or a successor Depositary
or a nominee thereof unless (A) such Depositary (i) has notified the
Company that it is unwilling or unable to continue as Depositary for
such Global Security or (ii) has ceased to be a clearing agency
registered under the Exchange Act, and in either case a successor
Depositary is not appointed within 90 days by the Company, (B) there
shall have occurred and be continuing an Event of Default with respect
to such Global Security or (C) there shall exist such circumstances, if
any, in addition to or in lieu of the foregoing as have been specified
for this purpose as contemplated by Section 301.
(3) Subject to Clause (2) above, any exchange of a Global
Security for other Securities may be made in whole or in part, and all
Securities issued in exchange for a Global Security or any portion
thereof shall be registered in such names as the Depositary for such
Global Security shall direct.
(4) Every Security authenticated and delivered upon
registration of transfer of, or in exchange for or in lieu of, a Global
Security or any portion thereof, whether pursuant to this Section,
Section 304, 306, 906 or 1107 or otherwise, shall be authenticated and
delivered in the form of, and shall be, a Global Security, unless such
Security is registered in the name of a Person other than the
Depositary for such Global Security or a nominee thereof.
SECTION 306. MUTILATED, DESTROYED, LOST AND STOLEN SECURITIES.
If any mutilated Security is surrendered to the Trustee, the Company
shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
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If there shall be delivered to the Company and the Trustee (i) evidence
to their satisfaction of the destruction, loss or theft of any Security and (ii)
such security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same series and of like tenor and principal amount and bearing a number
not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Except as otherwise provided as contemplated by Section 301 with
respect to any series of Securities, interest on any Security which is payable,
and is punctually paid or duly provided for, on any Interest Payment Date shall
be paid to the Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest.
Any interest on any Security of any series which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest shall be paid by the Company, at its election in each
case, as provided in either Clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities of such series
(or their respective Predecessor Securities) are registered at the
close of business on a Special Record Date for the payment of such
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Defaulted Interest, which shall be fixed in the following manner. The
Company shall notify the Trustee in writing of the amount of Defaulted
Interest proposed to be paid on each Security of such series and the date
of the proposed payment, and at the same time the Company shall deposit
with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest
as in this Clause provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be not
more than 15 days and not less than 10 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall promptly
notify the Company of such Special Record Date and, in the name and at
the expense of the Company, shall cause notice of the proposed payment of
such Defaulted Interest and the Special Record Date therefor to be given
to each Holder of Securities of such series in the manner set forth in
Section 106, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the Special
Record Date therefor having been so mailed, such Defaulted Interest shall
be paid to the Persons in whose names the Securities of such series (or
their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Securities of any series in any other lawful manner not inconsistent with
the requirements of any securities exchange on which such Securities may
be listed, and upon such notice as may be required by such exchange, if,
after notice given by the Company to the Trustee of the proposed payment
pursuant to this Clause, such manner of payment shall be deemed
practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
Subject to the provisions of Section 1402, in case of any Security which
is converted after any Regular Record Date and on or prior to the next
succeeding Interest Payment Date (other than any Security whose Maturity is
prior to such Interest Payment Date), interest whose Stated Maturity is on such
Interest Payment Date shall be payable on such Interest Payment Date
notwithstanding such conversion, and such interest (whether or not punctually
paid or duly provided for) shall be paid to the Person in whose name that
Security (or one or more Predecessor Securities) is registered at the close of
business on such Regular Record Date, provided, however, that Securities so
surrendered for conversion (except Securities or portions thereof called for
redemption) shall be accompanied by payment in New York Clearing House funds or
other funds acceptable to the Company of an amount equal to the interest payable
on such Interest Payment Date on the principal amount being surrendered for
conversion. Except as otherwise expressly provided in the immediately preceding
sentence, in the case of any Security which is converted, interest whose Stated
Maturity is after the date of conversion of such Security shall not be payable.
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SECTION 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name such Security is registered as the owner of such
Security for the purpose of receiving payment of principal of and any premium
and (subject to Section 307) any interest on such Security and for all other
purposes whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee nor any agent of the Company or the Trustee shall be
affected by notice to the contrary.
SECTION 309. CANCELLATION.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or conversion for credit against any sinking fund payment
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly canceled by it. The Company may at any time
deliver to the Trustee for cancellation any Securities previously authenticated
and delivered hereunder which the Company may have acquired in any manner
whatsoever, and may deliver to the Trustee (or to any other Person for delivery
to the Trustee) for cancellation any Securities previously authenticated
hereunder which the Company has not issued and sold, and all Securities so
delivered shall be promptly canceled by the Trustee. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Trustee shall be disposed of in a manner customary to the
Trustee as directed by a Company Order.
SECTION 310. COMPUTATION OF INTEREST.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a 360-day year of twelve 30-day months.
SECTION 311. CUSIP NUMBERS.
The Company in issuing the Securities may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Securities or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Securities, and any such redemption shall not be affected
by any defect in or omission of such numbers.
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SECTION 312. OWNERSHIP AND TRANSFER RESTRICTIONS.
(a) To protect the Company's status as a REIT, a Person may not own or
convert any Security if such ownership or conversion, in the good faith opinion
of the Board of Directors, (i) might cause the Company to fail to comply with
any requirement necessary for the continued qualification of the Company as a
REIT or (ii) would result in a single Person owning more than 9.8% of the
Company's outstanding stock within the meaning of the Code. For the purpose of
the preceding sentence, a Person shall be considered to own shares of Company
stock which are owned directly by such Person (held of record by such Person or
such Person's nominee or nominees) and shares of Company stock which are owned
indirectly by such Person (including shares of Common Stock issuable upon
conversation of the Securities) pursuant to Sections 542, 544 and 856 of the
Code and the regulations promulgated thereunder.
(b) The Security Registrar shall not be required to register the
transfer of any Securities if such transfer, in the good faith opinion of the
Board of Directors, (i) might cause the Company to fail to comply with any
requirement necessary for the continued qualification of the Company as a REIT
under Section 856 through 859 of the Code or (ii) would result in a single
Person owning more than 9.8% of the Company's outstanding stock within the
meaning of the Code. The Company shall advise the Security Registrar in writing
promptly of any determination by the Board of Directors not to permit a transfer
of any Security pursuant to the immediately preceding sentence, identifying such
Security by Holder and any other appropriate method, and shall instruct the
Security Registrar not to register the transfer of such Security. The Security
Registrar shall not be liable to the Company, Holders of Securities or any other
Persons for transfers of such Securities effected prior to its receipt of such
written instructions from the Company and the Company shall indemnify the
Security Registrar for all claims, costs and expenses incurred by it in
connection with refusing to transfer Securities as instructed by the Company.
The ownership and transfer of Securities and the conversion
thereof shall also be subject to such additional restrictions as may be provided
for in the Articles of Incorporation and Bylaws of the Company.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. SATISFACTION AND DISCHARGE OF INDENTURE.
This Indenture shall upon Company Request cease to be of further effect
(except as to any surviving rights of conversion, registration of transfer or
exchange of Securities herein expressly provided for), and the Trustee, at the
expense of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture, when
(1) either
(A) all Securities theretofore authenticated and delivered
(other than (i) Securities which have been destroyed, lost or stolen
and which have been replaced or paid as provided in Section 306 and
(ii) Securities for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided
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in Section 1003) have been delivered to the Trustee for cancellation
and/or conversion; or
(B) all such Securities not theretofore delivered to
the Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving
of notice of redemption by the Trustee in the name, and at the
expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has deposited
or caused to be deposited with the Trustee as trust funds in trust for
the purpose money in an amount sufficient to pay and discharge the
entire indebtedness on such Securities not theretofore delivered to the
Trustee for cancellation, for principal and any premium and interest to
the date of such deposit (in the case of Securities which have become
due and payable) or to the Stated Maturity or Redemption Date, as the
case may be;
(2) the Company has paid or caused to be paid all other sums payable
hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel, each stating that all conditions precedent
herein provided for relating to the satisfaction and discharge of this
Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture, the
obligations of the Company to the Trustee under Section 607, the obligations of
the Trustee to any Authenticating Agent under Section 614 and, if money shall
have been deposited with the Trustee pursuant to subclause (B) of Clause (1) of
this Section, the obligations of the Trustee under Section 402 and the last
paragraph of Section 1003 shall survive.
SECTION 402. APPLICATION OF TRUST MONEY.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal and any premium and
interest for whose payment such money has been deposited with the Trustee. Money
deposited pursuant to this Section in accordance with this Indenture shall not
be subject to claims of the holders of Senior Debt under Article Fifteen.
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ARTICLE FIVE
REMEDIES
SECTION 501. EVENTS OF DEFAULT.
"Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be occasioned by the provisions of Article
Fifteen or be voluntary or involuntary or be effected by operation of law or
pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of all or any part of the principal
of or premium, if any, on any Security of that series when and as the
same becomes due and payable at Stated Maturity, upon redemption,
repurchase at the option of the Holder, acceleration, or otherwise,
whether or not such payment is prohibited by the provisions of Article
Fifteen hereof; or
(2) default in the payment of any interest upon any Security
of that series when it becomes due and payable, whether or not such
payment is prohibited by the provisions of Article Fifteen, and
continuance of such default for a period of 30 days; or
(3) default in the deposit of any sinking fund payment,
when and as due by the terms of a Security of that series; or
(4) default in the performance, or breach, of any covenant or
warranty of the Company in this Indenture (other than a covenant or
warranty a default in whose performance or whose breach is elsewhere in
this Section specifically dealt with or which has expressly been
included in this Indenture solely for the benefit of series of
Securities other than that series), and continuance of such default or
breach for a period of 60 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in principal
amount of the Outstanding Securities of that series a written notice
specifying such default or breach and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder; or
(5) (a) a default under any bond, debenture, note or other
evidence of Indebtedness for money borrowed by the Company or any
Subsidiary (including a default with respect to Securities of any
series other than that series) having an aggregate principal amount
outstanding of at least $5,000,000, or under any mortgage, indenture or
instrument (including this Indenture) under which there may be issued
or by which there may be secured or evidenced any Indebtedness for
money borrowed by the Company or any Subsidiary having an aggregate
principal amount outstanding of at least $5,000,000, whether such
Indebtedness now exists or shall hereafter be created, which default
shall have resulted in such Indebtedness becoming or being declared due
and payable prior to the date on which it would otherwise have become
due and payable, without such Indebtedness having been discharged, or
(b) a
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failure to pay Indebtedness in the outstanding principal amount of at
least $5,000,000 at its stated maturity after demand therefor;
provided, that in each case of (a) and (b) above within a period of 10
days after the Trustee or the Holders, as applicable, have received
written notice of such event from the Company or, in the case of the
Holders, from the Trustee, there shall have been given, by registered
or certified mail, to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities of that series a written notice specifying such
default and (x) requiring the Company to cause such Indebtedness to be
discharged or cause such acceleration to be rescinded or annulled, or
(y) requiring the Company to pay the Indebtedness which the Company
failed to pay at maturity after demand therefor and in each case
stating that such notice is a "Notice of Default" hereunder; or
(6) the entry by a court or courts of competent jurisdiction
of a final judgment or final judgments for the payment of money against
the Company or any Subsidiary which remain undischarged for a period
(during which execution shall not be effectively stayed, the posting of
any required bond not being deemed an execution for purposes hereof) of
30 days after all rights to appeal have been exhausted, provided that
the aggregate amount of all such judgments exceeds $5,000,000; or
(7) the entry by a court having jurisdiction in the premises
of (A) a decree or order for relief in respect of the Company in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or (B) a
decree or order adjudging the Company a bankrupt or insolvent, or
approving as properly filed a petition seeking reorganization,
arrangement, adjustment or composition of or in respect of the Company
under any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the
continuance of any such decree or order for relief or any such other
decree or order unstayed and in effect for a period of 60 consecutive
days; or
(8) the commencement by the Company or any Subsidiary of a
voluntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or of any
other case or proceeding to be adjudicated a bankrupt or insolvent, or
the consent by the Company or any Subsidiary to the entry of a decree
or order for relief in respect of the Company or any Subsidiary in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
the Company or any Subsidiary, or the filing by the Company or any
Subsidiary of a petition or answer or consent seeking reorganization or
relief under any applicable Federal or State law, or the consent by the
Company or any Subsidiary to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official
of the Company or any Subsidiary or of any substantial part of their
respective property, or the making by the Company or any Subsidiary of
an assignment for the benefit of creditors, or the admission by the
Company or any Subsidiary in writing of its
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inability to pay its debts generally as they become due, or the taking
of corporate action by the Company or any Subsidiary in furtherance of
any such action; or
(9) any other Event of Default provided with respect to
Securities of that series.
SECTION 502. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
If an Event of Default (other than an Event of Default specified in Section
501(7) or 501(8)) with respect to Securities of any series at the time
Outstanding occurs and is continuing, then in every such case the Trustee or the
Holders of not less than 25% in principal amount of the Outstanding Securities
of that series may declare the principal amount of all the Securities of that
series (or, if any Securities of that series are Original Issue Discount
Securities, such portion of the principal amount of such Securities as may be
specified by the terms thereof) to be due and payable immediately, by a notice
in writing to the Company (and to the Trustee if given by Holders), and upon any
such declaration such principal amount (or specified amount) shall become
immediately due and payable. If an Event of Default specified in Section 501(7)
or 501(8) with respect to Securities of any series at the time Outstanding
occurs, the principal amount of all the Securities of that series (or, if any
Securities of that series are Original Issue Discount Securities, such portion
of the principal amount of such Securities as may be specified by the terms
thereof) shall automatically, and without any declaration or other action on the
part of the Trustee or any Holder, become immediately due and payable.
At any time after such a declaration of acceleration with respect to
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the Trustee as hereinafter in this
Article provided, the Holders of a majority in principal amount of the
Outstanding Securities of that series, by written notice to the Company and the
Trustee, may rescind and annul such declaration and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities of that series,
(B) the principal of and premium, if any, on any Securities of
that series which have become due otherwise than by such declaration of
acceleration and any interest thereon at the rate or rates prescribed
therefor in such Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest at the rate or rates prescribed therefor
in such Securities, and
(D) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel;
and
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(2) all Events of Default with respect to Securities of that series,
other than the non-payment of the principal of Securities of that
series which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT
BY TRUSTEE.
The Company covenants that if
(1) default is made in the payment of any interest on any
Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Security at the Maturity thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Securities, the whole amount then due and payable on such
Securities for principal and any premium and interest and, to the extent that
payment of such interest shall be legally enforceable, interest on any overdue
principal and premium and on any overdue interest, at the rate or rates
prescribed therefor in such Securities, and, in addition thereto, such further
amount as shall be sufficient to cover the costs and expenses of collection,
including the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel.
If an Event of Default with respect to Securities of any series occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
SECTION 504. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of any judicial proceeding relative to the Company (or any
other obligor upon the Securities), its property or its creditors, the Trustee
shall be entitled and empowered, by intervention in such proceeding or
otherwise, to take any and all actions authorized under the Trust Indenture Act
in order to have claims of the Holders and the Trustee allowed in any such
proceeding. In particular, the Trustee shall be authorized to collect and
receive any moneys or other property payable or deliverable on any such claims
and to distribute the same; and any custodian, receiver, assignee, trustee,
liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any
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amount due it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder any plan
of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof or to authorize the Trustee to
vote in respect of the claim of any Holder in any such proceeding; provided,
however, that the Trustee may, on behalf of the Holders, vote for the election
of a trustee in bankruptcy or similar official and be a member of a creditors'
or other similar committee.
SECTION 505. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture or the Securities
may be prosecuted and enforced by the Trustee without the possession of any of
the Securities or the production thereof in any proceeding relating thereto, and
any such proceeding instituted by the Trustee shall be brought in its own name
as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
SECTION 506. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or any premium
or interest, upon presentation of the Securities and the notation thereon of the
payment if only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee
under Section 607 hereof; and
SECOND: Subject to the provisions of Article Fifteen, to the
payment of the amounts then due and unpaid for principal of and any
premium and interest on the Securities in respect of which or for the
benefit of which such money has been collected, ratably, without
preference or priority of any kind, according to the amounts due and
payable on such Securities for principal and any premium and interest,
respectively; and
THIRD: To the Company, the remainder, if any.
SECTION 507. LIMITATION ON SUITS.
No Holder of any Security of any series shall have any right to
institute any proceeding, judicial or otherwise, with respect to this Indenture,
or for the appointment of a receiver or trustee, or for any other remedy
hereunder, unless
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(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default with respect to the Securities
of that series;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities of that series shall have made written
request to the Trustee to institute proceedings in respect of such
Event of Default in its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60 day period by the Holders of a
majority in principal amount of the Outstanding Securities of that
series;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders, or to obtain or to seek to obtain priority or preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 508. UNCONDITIONAL RIGHTS OF HOLDERS TO RECEIVE PRINCIPAL, PREMIUM AND
INTEREST AND TO CONVERT.
Notwithstanding any other provision in this Indenture, but subject to
Article Fifteen hereof, the Holder of any Security shall have the right, which
is absolute and unconditional, to receive payment of the principal of and any
premium and (subject to Section 307) interest on such Security on the respective
Stated Maturities expressed in such Security (or, in the case of redemption, on
the Redemption Date), to convert such Security in accordance with Article
Fourteen hereof and to institute suit for the enforcement of any such payment or
such right of conversion, and such rights shall not be impaired without the
consent of such Holder.
SECTION 509. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
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SECTION 510. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided with respect to the replacement or payment
of mutilated, destroyed, lost or stolen Securities in the last paragraph of
Section 306, no right or remedy herein conferred upon or reserved to the Trustee
or to the Holders is intended to be exclusive of any other right or remedy, and
every right and remedy shall, to the extent permitted by law, be cumulative and
in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 511. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder of any Securities
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. CONTROL BY HOLDERS.
The Holders of a majority in principal amount of the Outstanding
Securities of any series shall have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred on the Trustee, with respect to the
Securities of such series, provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. WAIVER OF PAST DEFAULTS.
The Holders of not less than a majority in principal amount of the
Outstanding Securities of any series may on behalf of the Holders of all the
Securities of such series waive any past default hereunder with respect to such
series and its consequences, except a default
(1) in the payment of the principal of or any premium or
interest on any Security of such series, or
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(2) in respect of a covenant or provision hereof which under
Article Nine cannot be modified or amended without the consent of the
Holder of each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
SECTION 514. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture, or in any suit against the Trustee for any action taken, suffered or
omitted by it as Trustee, a court may require any party litigant in such suit to
file an undertaking to pay the costs of such suit, and may assess costs against
any such party litigant, in the manner and to the extent provided in the Trust
Indenture Act. The provisions of this Section shall not apply to any suit
instituted by the Trustee, to any suit instituted by the Company, to any suit
instituted by any Holder, or group of Holders of an aggregate more than 10
percent in principal amount of the Securities then outstanding, or to any suit
instituted by any Holder for the enforcement of the payment of the principal of,
premium, if any, or interest on any Security, on or after the respective due
dates expressed in such Security (including, in the case of redemption, on or
after the Redemption Date).
SECTION 515. WAIVER OF USURY, STAY OR EXTENSION LAWS.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, or plead, or in any manner whatsoever claim
or take the benefit or advantage of, any usury, stay or extension law wherever
enacted, now or at any time hereafter in force, which may affect the covenants
or the performance of this Indenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Trustee, but will suffer and permit the execution of
every such power as though no such law had been enacted.
ARTICLE SIX
THE TRUSTEE
SECTION 601. CERTAIN DUTIES AND RESPONSIBILITIES.
The duties and responsibilities of the Trustee shall be as provided by
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Indenture shall require the Trustee to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its duties hereunder,
or in the exercise of any of its rights or powers, if it shall have reasonable
grounds for
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believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it. Whether or not therein expressly
so provided, every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 602. NOTICE OF DEFAULTS.
If a default occurs hereunder with respect to Securities of any series,
the Trustee shall give the Holders of Securities of such series notice of such
default as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
501(4) with respect to Securities of such series, no such notice to Holders
shall be given until at least 30 days after the occurrence thereof. For the
purpose of this Section, the term "default" means any event which is, or after
notice or lapse of time or both would become, an Event of Default with respect
to Securities of such series.
SECTION 603. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 601:
(1) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent,
order, bond, debenture, note, other evidence of indebtedness or other
paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties;
(2) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order,
and any resolution of the Board of Directors shall be sufficiently
evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(4) the Trustee may consult with counsel of its selection and
the advice of such counsel (to be confirmed in writing) or any Opinion
of Counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon;
(5) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
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indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(6) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(8) the Trustee shall not be liable for any action taken,
suffered, or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Indenture.
SECTION 604. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and neither the Trustee nor any Authenticating Agent assumes any
responsibility for their correctness. The Trustee makes no representations as to
the validity or sufficiency of this Indenture or of the Securities. Neither the
Trustee nor any Authenticating Agent shall be accountable for the use or
application by the Company of Securities or the proceeds thereof.
SECTION 605. MAY HOLD SECURITIES.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
608 and 613, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
SECTION 606. MONEY HELD IN TRUST.
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
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SECTION 607. COMPENSATION AND REIMBURSEMENT.
The Company agrees
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time
agree in writing for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to
the compensation of a trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee and any predecessor Trustee for,
and to hold it harmless against, any loss, liability or expense
incurred without negligence or bad faith on its part, arising out of or
in connection with the acceptance or administration of the trust or
trusts hereunder, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
The Trustee shall have a lien prior to the Securities as to all
property and funds held by it hereunder for any amount owing it or any
predecessor Trustee pursuant to this Section 607, except with respect to funds
held in trust for the benefit of the Holders of particular Securities. When the
Trustee incurs expenses or renders services in connection with an Event of
Default specified in Section 501(7) or Section 501(8), the expenses (including
the reasonable charges and expenses of its counsel) and the compensation for the
services are intended to constitute expenses of administration under any
applicable Federal or state bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 608. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture. To the extent
permitted by such Act, the Trustee shall not be deemed to have a conflicting
interest by virtue of being a trustee under this Indenture with respect to
Securities of more than one series.
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SECTION 609. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be a Person
eligible pursuant to the Trust Indenture Act to act as such and shall have a
combined capital and surplus of at least $50,000,000. If any such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of its supervising or examining authority, then for the purposes of
this Section and to the extent permitted by the Trust Indenture Act, the
combined capital and surplus of such Person shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published. If at any time the Trustee with respect to the Securities of any
series shall cease to be eligible in accordance with the provisions of this
Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
SECTION 610. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 611.
The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company.
The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (B) subject to Section 514, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
If the instrument of acceptance by a successor Trustee required by
Section 611 shall not have been delivered to the Trustee within 30 days after
the giving of such notice of resignation or removal,
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the Trustee resigning or being removed may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series) and shall comply with the applicable
requirements of Section 611. If, within one year after such resignation, removal
or incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the Holders
of a majority in principal amount of the Outstanding Securities of such series
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 611, become the successor Trustee
with respect to the Securities of such series and to that extent supersede the
successor Trustee appointed by the Company. If no successor Trustee with respect
to the Securities of any series shall have been so appointed by the Company or
the Holders and accepted appointment in the manner required by Section 611, the
retiring Trustee or any Holder who has been a bona fide Holder of a Security of
such series for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series to all Holders
of Securities of such series in the manner provided in Section 106. Each notice
shall include the name of the successor Trustee with respect to the Securities
of such series and the address of its Corporate Trust Office.
SECTION 611. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental
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hereto wherein each successor Trustee shall accept such appointment and which
(1) shall contain such provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustee of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any successor Trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held by such retiring Trustee hereunder with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates.
Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in the
first or second preceding paragraph, as the case may be.
No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 612. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder, provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
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SECTION 613. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the Trustee shall be subject to the
provisions of the Trust Indenture Act regarding the collection of claims against
the Company (or any such other obligor).
SECTION 614. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents with respect
to one or more series of Securities which shall be authorized to act on behalf
of the Trustee to authenticate Securities of such series issued upon original
issue and upon exchange, registration of transfer, or partial redemption thereof
or pursuant to Section 306, and Securities so authenticated shall be entitled to
the benefits of this Indenture and shall be valid and obligatory for all
purposes as if authenticated by the Trustee hereunder. Wherever reference is
made in this Indenture to the authentication and delivery of Securities by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as Authenticating
Agent, having a combined capital and surplus of not less than $50,000,000 and
subject to supervision or examination by Federal or State authority. If such
Authentication Agent publishes reports of condition at least annually, pursuant
to law or to the requirements of said supervising or examining authority, then
for the purposes of this Session, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written notice
thereof to the Trustee and to the Company. The Trustee may at any time terminate
the agency of an Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time such
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, the Trustee may appoint a successor Authenticating
Agent which shall be acceptable to the Company and shall give notice of such
appointment in the manner provided in Section 106 to all Holders of Securities
of the
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series with respect to which such Authenticating Agent will serve. Any successor
Authenticating Agent upon acceptance of its appointment hereunder shall become
vested with all the rights, powers and duties of its predecessor hereunder, with
like effect as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the provisions of
this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 607.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the Trustee's certificate of authentication, an alternative
certificate of authentication in the following form:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
AMSOUTH BANK OF ALABAMA,
As Trustee
By
-----------------------------------
As Authenticating Agent
By
-----------------------------------
Authorized Officer
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 701. COMPANY TO FURNISH TRUSTEE NAMES AND ADDRESSES OF HOLDERS.
The Company will furnish or cause to be furnished to the Trustee (1)
semi-annually, not later than March 15 and September 15 in each year, a list, in
such form as the Trustee may reasonably require, of the names and addresses of
the Holders of Securities of each series as of the preceding March 1 or
September 1, as the case may be, and (2) at such other times as the Trustee may
request in writing within 30 days after the receipt by the Company of any such
request, a list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished; excluding from any such list names and
addresses received by the Trustee in its capacity as Security Registrar.
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SECTION 702. PRESERVATION OF INFORMATION; COMMUNICATION TO HOLDERS.
The Trustee shall preserve, in as current a form as is reasonably
practicable, the names and addresses of Holders contained in the most recent
list furnished to the Trustee as provided in Section 701 and the names and
addresses of Holders received by the Trustee in its capacity as Security
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
The rights of Holders to communicate with other Holders with respect to
their rights under this Indenture or under the Securities, and the corresponding
rights and privileges of the Trustee, shall be as provided by the Trust
Indenture Act.
Every Holder of Securities, by receiving and holding the same, agree
with the Company and the Trustee that neither the Company nor the Trustee nor
any agent of either of them shall be held accountable by reason of any
disclosure of information as to names and addresses of Holders made pursuant to
the Trust Indenture Act.
SECTION 703. REPORTS BY TRUSTEE.
The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto.
Reports so required to be transmitted at stated intervals of not more than 12
months shall be transmitted within 60 days after the first date of issuance of
Securities and on each anniversary of such date. A copy of each such report
shall, at the time of such transmission to Holders, be filed by the Trustee with
each stock exchange upon which any Securities are listed, with the Commission
and with the Company. The Company will promptly notify the Trustee when any
Securities are listed on any stock exchange.
SECTION 704. REPORTS BY COMPANY.
The Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and such
summaries thereof, as may be required pursuant to the Trust Indenture Act at the
time and in the manner provided pursuant to such Act; provided that any such
information, documents or reports required to be filed with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act shall be filed with the
Trustee within 15 days after the same is so required to be filed with the
Commission. Delivery of such reports, information and documents to the Trustee
is for informational purpose only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
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SECTION 705. NOTICE OF DEFAULT.
The Company shall file with the Trustee written notice of the
occurrence of any Event of Default within five Business Days of its becoming
aware of any such Event of Default.
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. COMPANY MAY CONSOLIDATE, ETC., ONLY ON CERTAIN TERMS.
The Company shall not consolidate with or merge into any other Person
or convey, transfer or lease its properties and assets substantially as an
entirety to any Person, and the Company shall not permit any Person to
consolidate with or merge into the Company or convey, transfer or lease its
properties and assets substantially as an entirety to the Company, unless:
(1) in case the Company shall consolidate with or merge into
another Person or convey, transfer or lease its properties and assets
substantially as an entirety to any Person, the Person formed by such
consolidation or into which the Company is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a
corporation, partnership or trust, shall be organized and validly
existing under the laws of the United States of America, any State
thereof or the District of Columbia, and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, the due and punctual payment of
the principal of and any premium and interest on all the Securities and
the performance or observance of every covenant of this Indenture on
the part of the Company to be performed or observed and shall have
provided for conversion rights in accordance with Section 1411 with
respect to each series of Securities afforded conversion thereunder;
and
(2) immediately after giving effect to such transaction and
treating any indebtedness which becomes an obligation of the Company or
any Subsidiary as a result of such transaction as having been incurred
by the Company or such Subsidiary at the time of such transaction, no
Event of Default, and no event which, after notice or lapse of time or
both, would become an Event of Default, shall have happened and be
continuing.
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SECTION 802. SUCCESSOR SUBSTITUTED.
Upon any consolidation of the Company with, or merger of the Company
into, any other Person or any conveyance, transfer or lease of the properties
and assets of the Company substantially as an entirety in accordance with
Section 801, the successor Person formed by such consolidation or into which the
Company is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company under this Indenture with the same effect as if such successor
Person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
ARTICLE NINE
SUPPLEMENTAL INDENTURES
SECTION 901. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS.
Without the consent of any Holders, the Company, when authorized by a
Board Resolution, and the Trustee, at any time and from time to time, may enter
into one or more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Securities; or
(2) to add to the covenants of the Company for the benefit of
the Holders of all or any series of Securities (and if such covenants
are to be for the benefit of less than all series of Securities,
stating that such covenants are expressly being included solely for the
benefit of such series) or to surrender any right or power herein
conferred upon the Company; or
(3) to add additional Events of Default for the benefit of the
Holders of all or any series of Securities (and if such additional
Events of Default are to be for the benefit of less than all series of
Securities, stating that such additional Events of Default are
expressly being included solely for the benefit of such series); or
(4) to add to or change any of the provisions of this
Indenture to such extent as shall be necessary to permit or facilitate
the issuance of Securities in bearer form, registrable or not
registrable as to principal, and with or without interest coupons, or
to permit or facilitate the issuance of Securities in uncertificated
form; or
(5) to add to, change or eliminate any of the provisions of
this Indenture in respect of one or more series of Securities, provided
that any such addition, change or elimination (A) shall neither (i)
apply to any Security of any series created prior to the execution of
such supplemental indenture and entitled to the benefit of such
provision nor (ii) modify the rights
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of the Holder of any such Security with respect to such provision or
(B) shall become effective only when there is no such Security
Outstanding; or
(6) to secure the Security; or
(7) to establish the form or terms of Securities of any
series as permitted by Sections 201 and 301; or
(8) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee with respect to the Securities of one
or more series and to add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee,
pursuant to the requirements of Section 611; or
(9) to make provision with respect to the conversion of
Holders pursuant to the requirements of Article Fourteen; or
(10) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision herein, or to make any other provisions with respect to
matters or questions arising under this Indenture, provided that such
action pursuant to this Clause (10) shall not adversely affect the
interests of the Holders of Securities of any series in any material
respect.
SECTION 902. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture, by Act of said Holders delivered to the Company and the
Trustee, the Company, when authorized by a Board Resolution, and the Trustee may
enter into an indenture or indentures supplemental hereto for the purpose of
adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of modifying in any manner the rights of the
Holders of Securities of such series under this Indenture; provided, however,
that no such supplemental indenture shall, without the consent of the Holder of
each Outstanding Security affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of principal of or interest on, any Security, or reduce the
principal amount thereof or the rate of interest thereon or any premium
payable upon the redemption thereof, or reduce the amount of the
principal of an Original Issue Discount Security or any other Security
which would be due and payable upon a declaration of acceleration of
the Maturity thereof pursuant to Section 502, or change any Place of
Payment where, or the coin or currency in which, any Security or any
premium or interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment on or after the
Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or modify the provisions of this Indenture with
respect to the conversion of the Securities in a manner adverse to
Holders, or modify the
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provisions of this Indenture with respect to the subordination of the
Securities in a manner adverse to the Holders, or
(2) reduce the percentage in principal amount of the
Outstanding Securities of any series, the consent of whose Holders is
required for any such supplemental indenture, or the consent of whose
Holders is required for any waiver (of compliance with certain
provisions of this Indenture or certain defaults hereunder and their
consequences) provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513
or Section 1008, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Security
affected thereby; provided, however, that this clause shall not be
deemed to require the consent of any Holder with respect to changes in
the references to "the Trustee" and concomitant changes in this
Section, Section 513 and Section 1008, or the deletion of this proviso,
in accordance with the requirements of Sections 611 and 901(8).
A supplemental indenture which changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Persons entitled to consent to any indenture
supplemental hereto. If a record date is fixed, the Holders on such record date,
or their duly designated proxies, and only such Persons, shall be entitled to
consent to such supplemental indenture, whether or not such Holders remain
Holders after such record date; provided, that unless such consent shall have
become effective by virtue of the requisite percentage having been obtained
prior to the date which is 90 days after such record date, any such consent
previously given shall automatically and without further action by any Holder be
canceled and of no further effect.
SECTION 903. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 601) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such
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supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. CONFORMITY WITH TRUST INDENTURE ACT.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act.
SECTION 906. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities of any series authenticated and delivered after the
execution of any supplemental indenture pursuant to this Article may, and shall
if required by the Trustee, bear a notation in form approved by the Trustee as
to any matter provided for in such supplemental indenture. If the Company shall
so determine, new Securities of any series so modified as to conform, in the
opinion of the Trustee and the Company, to any such supplemental indenture may
be prepared and executed by the Company and authenticated and delivered by the
Trustee in exchange for Outstanding Securities of such series.
ARTICLE TEN
COVENANTS
SECTION 1001. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of and any premium
and interest on the Securities of that series in accordance with the terms of
the Securities and this Indenture.
SECTION 1002. MAINTENANCE OF OFFICE OR AGENCY.
The Company will maintain in each Place of Payment for any series of
Securities an office or agency where Securities of that series may be presented
or surrendered for payment, where Securities of that series may be surrendered
for registration of transfer or exchange or surrendered for conversion and where
notices and demands to or upon the Company in respect of the Securities of that
series and this Indenture may be served. The Company will give prompt written
notice to the
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Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies where the Securities of one or more series may be presented
or surrendered for any or all such purposes and may from time to time rescind
such designations; provided, however, that no such designation or rescission
shall in any manner relieve the Company of its obligation to maintain an office
or agency in each Place of Payment for Securities of any series for such
purposes. The Company will give prompt written notice to the Trustee of any such
designation or rescission and of any change in the location of any such other
office or agency.
SECTION 1003. MONEY FOR SECURITIES PAYMENTS TO BE HELD IN TRUST.
If the Company shall at any time act as its own Paying Agent with
respect to any series of Securities, it will, on or before each due date of the
principal of or any premium or interest on any of the Securities of that series,
segregate and hold in trust for the benefit of the Persons entitled thereto a
sum sufficient to pay the principal and any premium and interest so becoming due
until such sums shall be paid to such Persons or otherwise disposed of as herein
provided and will promptly notify the Trustee of its action or failure so to
act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, prior to each due date of the principal of or any
premium or interest on any Securities of that series, deposit with a Paying
Agent a sum sufficient to pay such amount, such sum to be held as provided by
the Trust Indenture Act, and (unless such Paying Agent is the Trustee) the
Company will promptly notify the Trustee of its action or failure so to act.
The Company will cause each Paying Agent for any series of Securities
other than the Trustee to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will (1) comply with the provisions of
the Trust Indenture Act applicable to it as a Paying Agent and (2) during the
continuance of any default by the Company (or any other obligor upon the
Securities of that series) in the making of any payment in respect of the
Securities of that series, upon the written request of the Trustee, forthwith
pay to the Trustee all sums held in trust by such Paying Agent for payment in
respect of the Securities of that series.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
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Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of or any premium or
interest on any Security of any series and remaining unclaimed for two years
after such principal, premium or interest has become due and payable shall be
paid to the Company on Company Request, or (if then held by the Company) shall
be discharged from such trust; and the Holder of such Security shall thereafter,
as an unsecured general creditor, look only to the Company for payment thereof,
and all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company cause to
be published once, in a newspaper published in the English language, customarily
published on each Business Day and of general circulation in New York, New York,
notice that such money remains unclaimed and that, after a date specified
therein, which shall not be less than 30 days from the date of such publication,
any unclaimed balance of such money then remaining will be repaid to the
Company.
SECTION 1004. STATEMENT BY OFFICERS AS TO DEFAULT.
The Company will deliver to the Trustee, within 120 days after the end
of each fiscal year of the Company ending after the date hereof, an Officers'
Certificate, stating whether or not to the best knowledge of the signers thereof
the Company is in default in the performance and observance of any of the terms,
provisions and conditions of this Indenture (without regard to any period of
grace or requirement of notice provided hereunder) and, if the Company shall be
in default, specifying all such defaults and the nature and status thereof of
which they may have knowledge.
SECTION 1005. EXISTENCE.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence,
rights (charter and statutory) and franchises; provided, however, that the
Company shall not be required to preserve any such right or franchise if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1006. MAINTENANCE OF PROPERTIES.
The Company will keep and will cause its Subsidiaries to keep all
properties used or useful in the conduct of its business or the business of its
Subsidiaries in good working order and condition (ordinary wear and tear
excepted) and will make or cause to be made such necessary repairs, replacements
and renewals thereof as in the judgment of the Company may be necessary to
conduct such business in accordance with customary business practices; provided,
however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, in the judgment of the Company, desirable in the conduct
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of its business or the business of any Subsidiary and not disadvantageous in any
material respect to the Holders.
SECTION 1007. PAYMENT OF TAXES AND OTHER CLAIMS.
The Company will pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary, and (2)
all lawful claims for labor, materials and supplies which, if unpaid, might by
law become a lien upon the property of the Company or any Subsidiary; provided,
however, that the Company shall not be required to pay or discharge or cause to
be paid or discharged any such tax, assessment, charge or claim whose amount,
applicability or validity is being contested in good faith by appropriate
proceedings.
SECTION 1008. WAIVER OF CERTAIN COVENANTS.
Except as otherwise specified as contemplated by Section 301 for
Securities of such series, the Company may, with respect to the Securities of
any series, omit in any particular instance to comply with any term, provision
or condition set forth in any covenant provided pursuant to Section 301(18),
901(2) or 901(7) for the benefit of the Holders of such series if before the
time for such compliance the Holders of at least a majority in principal amount
of the Outstanding Securities of such series shall, by Act of such Holders,
either waive such compliance in such instance or generally waive compliance with
such term, provision or condition, but no such waiver shall extend to or affect
such term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
SECTION 1009. CALCULATIONS OF ORIGINAL ISSUE DISCOUNT.
The Company shall file with the Trustee promptly at the end of each
calendar year a written notice specifying the amount, if any, of original issue
discount (including daily rates and accrual periods) accrued on Outstanding
Securities as of the end of such year.
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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. APPLICABILITY OF ARTICLE.
Securities of any series which are redeemable before their Stated
Maturity shall be redeemable in accordance with their terms and (except as
otherwise specified as contemplated by Section 301 for such Securities) in
accordance with this Article.
Notwithstanding the foregoing paragraph, the Securities will be subject
to redemption, in whole or in part, at any time, to the extent necessary for the
Company to continue to qualify as a REIT. The Redemption Price for such
Securities redeemed shall equal to 100% of the principal amount of the
Securities, plus accrued and unpaid interest, if any, to and including the
Redemption Date. The Company may exercise such redemption powers solely with
respect to Holders who pose a threat to the Company's REIT status and only to
the extent deemed necessary or advisable by the Board of Directors to preserve
such status.
SECTION 1102. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities shall be evidenced
by a Board Resolution or in another manner specified as contemplated by Section
301 for such Securities. In case of any redemption at the election of the
Company of less than all the Securities of any series (including any such
redemption affecting only a single Security), the Company shall, at least 60
days prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Trustee), notify the Trustee of such Redemption
Date, of the principal amount of Securities of such series to be redeemed and,
if applicable, of the tenor of the Securities to be redeemed. In case of any
redemption at the election of the Company of all of the Securities, the Company
shall, at least 45 days prior to the Redemption Date fixed by the Company
(unless a shorter period shall be satisfactory to the Trustee), notify the
Trustee of such Redemption Date.
SECTION 1103. SELECTION BY TRUSTEE OF SECURITIES TO BE REDEEMED.
If less than all the Securities of any series are to be redeemed
(unless all the Securities of such series and of a specified tenor are to be
redeemed or unless such redemption affects only a single Security), the
particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee, from the Outstanding Securities of
such series not previously called for redemption, by lot or pro rata or by such
other method as the Trustee shall deem fair and appropriate and which may
provide for the selection for redemption of portions (equal to $1,000 or any
integral multiple thereof) of the principal amount of any Security of such
series, provided that the unredeemed portion of the principal amount of any
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed (so
far as may be) to be the portion selected for redemption. Securities which have
been converted during a selection of Securities to be redeemed shall be treated
by the Trustee as Outstanding for the purpose of such selection. In any case
where more than one Security
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is registered in the same name, the Trustee in its discretion may treat the
aggregate principal amount so registered as if it were represented by one
Security.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption as aforesaid and, in case of any Securities
selected for partial redemption as aforesaid, the principal amount thereof to be
redeemed.
The provisions of the two preceding paragraphs shall not apply with
respect to any redemption affecting only a single Security, whether such
Security is to be redeemed in whole or in part. In the case of any such
redemption in part, the unredeemed portion of the principal amount of the
Security shall be in an authorized denomination (which shall not be less than
the minimum authorized denomination) for such Security.
If any Security selected for partial redemption is converted in part
before termination of the conversion right with respect to the portion of the
Security so selected, the converted portion of such Security shall be deemed to
be the portion selected for redemption. Securities that have been converted
during a selection of Securities to be redeemed shall be treated by the Trustee
as Outstanding for the purpose of such selection.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 1104. NOTICE OF REDEMPTION.
Notice of redemption shall be given by first-class mail, postage
prepaid, mailed not less than 30 nor more than 60 days prior to the Redemption
Date, to the Trustee and to each Holder of Securities to be redeemed, at his
address appearing in the Security Register.
All notices of redemption shall include the CUSIP number, if any, and
shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Securities of any series
consisting of more than a single Security are to be redeemed, the identification
(and, in the case of partial redemption of any such Securities, the principal
amounts) of the particular Securities to be redeemed and, if less than all the
Outstanding Securities of any series consisting of a single Security are to be
redeemed, the principal amount of the particular Security to be redeemed,
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(4) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security to be redeemed and that (unless the Company
shall default in the payment of the Redemption Price) interest thereon will
cease to accrue on and after said date,
(5) in the case of any Securities that are convertible pursuant to
Article Fourteen, the Conversion Price, the date on which the right to convert
the principal of the Securities to be redeemed will terminate and the place or
places where such Securities may be surrendered for conversion,
(6) the place or places where each such Security is to be
surrendered for payment of the Redemption Price, and
(7) that the redemption is for a sinking fund, if such is the case.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request received
by the Trustee at least 40 days prior to the Redemption Date, by the Trustee in
the name and at the expense of the Company and shall be irrevocable.
SECTION 1105. DEPOSIT OF REDEMPTION PRICE.
At or prior to 9:00 a.m. (New York City time) on any Redemption Date,
the Company shall deposit with the Trustee or with a Paying Agent (or, if the
Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money sufficient to pay the Redemption
Price of, and (except if the Redemption Date shall be an Interest Payment Date)
accrued interest on, all the Securities which are to be redeemed on that date
other than any Securities called for redemption on that date which have been
converted prior to the date of such deposit.
If any Security called for redemption is converted, any money deposited
with the Trustee or with any Paying Agent or so segregated and held in trust for
the redemption of such Security shall (subject to any right of the Holder of
such Security or any Predecessor Security to receive interest as provided in the
last paragraph of Section 307) be paid to the Company upon Company Request or,
if then held by the Company, shall be discharged from such trust.
SECTION 1106. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, the Securities so
to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued
interest) such Securities shall cease to bear interest. Upon surrender of any
such Security for redemption in accordance with said notice, such Security shall
be paid by the Company at the Redemption Price, together with accrued interest
to the Redemption Date; provided, however, that, unless otherwise specified as
contemplated by Section 301, installments of interest whose Stated Maturity is
on or prior to the Redemption Date will be payable to the Holders of such
Securities, or one or more Predecessor Securities, registered as such at the
close of business on the relevant Record Dates according to their terms and the
provisions of Section 307.
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If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal and any premium shall, until
paid, bear interest from the Redemption Date at the rate prescribed therefor in
the Security.
SECTION 1107. SECURITIES REDEEMED IN PART.
Any Security which is to be redeemed only in part shall be surrendered
at a Place of Payment therefor (with, if the Company or the Trustee so requires,
due endorsement by, or a written instrument of transfer in form satisfactory to
the Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Security without service
charge, a new Security or Securities of the same series and of like tenor, of
any authorized denomination as requested by such Holder, in an aggregate
principal amount equal to and in exchange for the unredeemed portion of the
principal of the Security so surrendered.
ARTICLE TWELVE
SINKING FUNDS
SECTION 1201. APPLICABILITY OF ARTICLE.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of Securities of any series except as otherwise specified as
contemplated by Section 301 for such Securities.
The minimum amount of any sinking fund payment provided for by the
terms of any Securities is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of such Securities is herein referred to as an "optional sinking fund
payment". If provided for by the terms of any Securities, the cash amount of any
sinking fund payment may be subject to reduction as provided in Section 1202.
Each sinking fund payment shall be applied to the redemption of Securities as
provided for by the terms of such Securities.
SECTION 1202. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.
The Company (1) may deliver Outstanding Securities of a series (other
than any previously called for redemption) and (2) may apply as a credit
Securities of a series which have been converted pursuant to Article Fourteen of
this Indenture or which have been redeemed either at the election of the Company
pursuant to the terms of such Securities or through the application of permitted
optional sinking fund payments pursuant to the terms of such Securities, in each
case in satisfaction of all or any part of any sinking fund payment with respect
to any Securities of such series required to be made pursuant to the terms of
such Securities as and to the extent provided for by the terms of such
Securities; provided that the Securities to be so credited have not been
previously so credited. The
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Securities to be so credited shall be received and credited for such purpose by
the Trustee at the Redemption Price, as specified in the Securities so to be
redeemed, for redemption through operation of the sinking fund and the amount of
such sinking fund payment shall be reduced accordingly.
SECTION 1203. REDEMPTION OF SECURITIES FOR SINKING FUND.
Not less than 60 days prior to each sinking fund payment date for any
Securities, the Company will deliver to the Trustee an Officers' Certificate
specifying the amount of the next ensuing sinking fund payment for such
Securities pursuant to the terms of such Securities, the portion thereof, if
any, which is to be satisfied by payment of cash and the portion thereof, if
any, which is to be satisfied by delivering and crediting Securities pursuant to
Section 1202 and will also deliver to the Trustee any Securities to be so
delivered. Not less than 30 nor more than 45 days prior to each such sinking
fund payment date, the Trustee shall select the Securities to be redeemed upon
such sinking fund payment date in the manner specified in Section 1103 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Company in the manner provided in Section 1104. Such notice having been
duly given, the redemption of such Securities shall be made upon the terms and
in the manner stated in Sections 1106 and 1107.
ARTICLE THIRTEEN
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1301. COMPANY'S OPTION TO EFFECT DEFEASANCE OR COVENANT
DEFEASANCE.
If applicable to a particular series of Securities, the Company may
elect, at its option at any time, to have Section 1302 or Section 1303 applied
to any such series of Securities or any Securities of such series, as the case
may be, designated pursuant to Section 301 as being defeasible pursuant to such
Section 1302 or 1303, in accordance with any applicable requirements provided
pursuant to Section 301 and upon compliance with the conditions set forth below
in this Article. Any such election shall be evidenced by a Board Resolution or
in another manner specified as contemplated by Section 301 for such Securities.
SECTION 1302. DEFEASANCE AND DISCHARGE.
Upon the Company's exercise of its option (if any) to have this Section
applied to any series of Securities or any Securities of such series, as the
case may be, the Company shall be deemed to have been discharged from its
obligations with respect to such Securities as provided in this Section on and
after the date the conditions set forth in Section 1304 are satisfied
(hereinafter called "Defeasance"). For this purpose, such Defeasance means that
the Company shall be deemed to have paid and discharged the entire indebtedness
represented by such Securities and to have satisfied all its other obligations
under such Securities and this Indenture insofar as such Securities are
concerned (and the Trustee, at the expense of the Company, shall execute proper
instruments acknowledging
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the same), subject to the following which shall survive until otherwise
terminated or discharged hereunder: (1) the rights of Holders of such Securities
to receive, solely from the trust fund described in Section 1304 and as more
fully set forth in such Section, payments in respect of the principal of and any
premium and interest on such Securities when payments are due, (2) the Company's
obligations with respect to such Securities under Sections 304, 305, 306, 1002
and 1003, (3) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and (4) this Article. Subject to compliance with this Article, the
Company may exercise its option (if any) to have this Section applied to any
applicable Securities notwithstanding the prior exercise of its option (if any)
to have Section 1303 applied to such Securities.
SECTION 1303. COVENANT DEFEASANCE.
Upon the Company's exercise of its option (if any) to have this Section
applied to any applicable series of Securities or any Securities of such series,
as the case may be, (1) the Company shall be released from its obligations under
Section 801, Sections 1005 through 1007, inclusive, and any covenants provided
pursuant to Section 301(18), 901(2) or 901(7) for the benefit of the Holders of
such Securities and (2) the occurrence of any event specified in Sections 501(4)
(with respect to any of Section 801, Sections 1005 through 1007, inclusive, and
any such covenants provided pursuant to Section 301(18), 901(2) or 901(7)),
501(4), 501(5), 501(6) and 501(9) shall be deemed not to be or result in an
Event of Default, in each case with respect to such Securities as provided in
this Section on and after the date the conditions set forth in Section 1304 are
satisfied (hereinafter called "Covenant Defeasance"). For this purpose, such
Covenant Defeasance means that, with respect to such Securities, the Company may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such specified Section (to the extent
so specified in the case of Section 501(4)), whether directly or indirectly by
reason of any reference elsewhere herein to any such Section or by reason of any
reference in any such Section to any other provision herein or in any other
document, but the remainder of this Indenture and such Securities shall be
unaffected thereby.
SECTION 1304. CONDITIONS TO DEFEASANCE OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of Section
1302 or Section 1303 to any applicable series of Securities or any Securities of
such series, as the case may be:
(1) The Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee which satisfies the
requirements contemplated by Section 609 and agrees to comply with the
provisions of this Article applicable to it) as trust funds in trust
for the purpose of making the following payments, specifically pledged
as security for, and dedicated solely to, the benefits of the Holders
of such Securities, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will
provide, not later than one day before the due date of any payment,
money in an amount, or (C) a combination thereof, in each case
sufficient, in the opinion of a nationally recognized firm of
independent public
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accountants expressed in a written certification thereof delivered to
the Trustee, to pay and discharge, and which shall be applied by the
Trustee (or any such other qualifying trustee) to pay and discharge,
the principal of and any premium and interest on such Securities on
their respective Stated Maturities, in accordance with the terms of
this Indenture and such Securities. As used herein, "U.S. Government
Obligation" means (x) any security which is (i) a direct obligation of
the United States of America for the payment of which the full faith
and credit of the United States of America is pledged or (ii) an
obligation of a Person controlled or supervised by and acting as an
agency or instrumentality of the United States of America the payment
of which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America, which, in either case (i)
or (ii), is not callable or redeemable at the option of the issuer
thereof, and (y) any depositary receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act) as custodian with respect to any
U.S. Government Obligation which is specified in Clause (x) above and
held by such bank for the account of the holder of such depositary
receipt, or with respect to any specific payment of principal of or
interest on any U.S. Government Obligation which is so specified and
held, provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the holder
of such depositary receipt from any amount received by the custodian in
respect of the U.S. Government Obligation or the specific payment of
principal or interest evidenced by such depositary receipt.
(2) In the event of an election to have Section 1302 apply to
any applicable series of Securities or any Securities of such series,
as the case may be, the Company shall have delivered to the Trustee an
Opinion of Counsel stating that (A) the Company has received from, or
there has been published by, the Internal Revenue Service a ruling or
(B) since the date of this instrument, there has been a change in the
applicable Federal income tax law, in either case (A) or (B) to the
effect that, and based thereon such opinion shall confirm that, the
Holder of such Securities will not recognize gain or loss for Federal
income tax purposes as a result of the deposit, Defeasance and
discharge to be effected with respect to such Securities and will be
subject to Federal income tax on the same amount, in the same manner
and at the same time as would be the case if such deposit, Defeasance
and discharge were not to occur.
(3) In the event of an election to have Section 1303 apply to
any applicable series of Securities or any Securities of such series,
as the case may be, the Company shall have delivered to the Trustee an
Opinion of Counsel to the effect that the Holders of such Securities
will not recognize gain or loss for Federal income tax purposes as a
result of the deposit and Covenant Defeasance to be effected with
respect to such Securities and will be subject to Federal income tax on
the same amount, in the same manner and at the same times as would be
the case if such deposit and Covenant Defeasance were not to occur.
(4) The Company shall have delivered to the Trustee an
Officers' Certificate to the effect that neither such Securities nor
any other Securities of the same series, if then listed on any
securities exchange, will be delisted as a result of such deposit.
(5) No event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to such Securities
or any other Securities shall have occurred and be
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continuing at the time of such deposit or, with regard to any such
event specified in Sections 501(7) and (8), at any time on or prior to
the 91st day after the date of such deposit (it being understood that
this condition shall not be deemed satisfied until after such 91st
day).
(6) Such Defeasance or Covenant Defeasance shall not cause the
Trustee to have a conflicting interest within the meaning of the Trust
Indenture Act (assuming all Securities are in default within the
meaning of such Act).
(7) Such Defeasance or Covenant Defeasance shall not result in
a breach or violation of, or constitute a default under, any other
agreement or instrument to which the Company is a party or by which it
is bound.
(8) Such Defeasance or Covenant Defeasance shall not result in
the trust arising from such deposit constituting an investment company
within the meaning of the Investment Company Act unless such trust
shall be registered under such Act or exempt from registration
thereunder.
(9) The Company shall have delivered to the Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent with respect to such Defeasance or Covenant
Defeasance have been complied with.
SECTION 1305. DEPOSITED MONEY AND U.S. GOVERNMENT OBLIGATIONS TO BE HELD IN
TRUST; MISCELLANEOUS PROVISIONS.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee or other qualifying trustee (solely for purpose of this Section
and Section 1306, the Trustee and any such other trustee are referred to
collectively as the "Trustee") pursuant to Section 1304 in respect of any
Securities shall be held in trust and applied by the Trustee, in accordance with
the provisions of such Securities and this Indenture, to the payment, either
directly or through any such Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Holders of such
Securities, of all sums due and to become due thereon in respect of principal
and any premium and interest, but money so held in trust need not be segregated
from other funds except to the extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee or
other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to Section 1304 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of Outstanding Securities.
Anything in this Article to the contrary notwithstanding, the Trustee
shall deliver or pay to the Company from time to time upon Company Request any
money or U.S. Government Obligations held by it as provided in Section 1304 with
respect to any Securities which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
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delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect the Defeasance or Covenant Defeasance, as
the case may be, with respect to such Securities.
SECTION 1306. REINSTATEMENT.
If the Trustee or the Paying Agent is unable to apply any money in
accordance with this Article with respect to any Securities by reason of any
order or judgment of any court or governmental authority enjoining, restraining
or otherwise prohibiting such application, then the obligations under this
Indenture and such Securities from which the Company has been discharged or
released pursuant to Section 1302 or 1303 shall be revived and reinstated as
though no deposit had occurred pursuant to this Article with respect to such
Securities, until such time as the Trustee or Paying Agent is permitted to apply
all money held in trust pursuant to Section 1305 with respect to such Securities
in accordance with this Article; provided, however, that if the Company makes
any payment of principal of or any premium or interest on any such Security
following such reinstatement of its obligations, the Company shall be subrogated
to the rights (if any) of the Holders of such Securities to receive such payment
from the money so held in trust.
ARTICLE FOURTEEN
CONVERSION OF SECURITIES
SECTION 1401. APPLICABILITY; CONVERSION PRIVILEGE AND CONVERSION PRICE.
Securities of any series which are convertible into Common Stock shall
be convertible in accordance with their terms and (except as otherwise specified
as contemplated by Section 301 for Securities of any series) in accordance with
this Article.
Subject to and upon compliance with the provisions of this Article, at
the option of the Holder thereof, any Security or any portion of the principal
amount thereof which is an integral multiple of the authorized denomination
thereof may be converted at the principal amount thereof, or of such portion
thereof, into fully paid and nonassessable shares (calculated as to each
conversion to the nearest 1/100 of a share) of Common Stock, at the Conversion
Price, determined as hereinafter provided, in effect at the time of conversion.
Such conversion right shall expire at the close of business on the date
specified for Securities of such series. In case a Security or portion thereof
is called for redemption, such conversion right in respect of the Security or
portion so called shall expire at the close of business on the date prior to the
Redemption Date, unless the Company defaults in making the payment due upon
redemption.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Price") shall be the price specified
in relation to Securities of such series pursuant to Section 301. The Conversion
Price shall be adjusted in certain instances as provided in Section 1404.
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SECTION 1402. EXERCISE OF CONVERSION PRIVILEGE.
In order to exercise the conversion privilege, the Holder of any
Security to be converted shall surrender such Security, duly endorsed or
assigned to the Company or in blank, at any office or agency of the Company
maintained for that purpose pursuant to Section 1002, accompanied by written
notice to the Company (which shall be substantially in the form set forth in
Section 203) at such office or agency or, if applicable, by notice in accordance
with the procedure of the Depositary that the Holder elects to convert such
Security or, if less than the entire principal amount thereof is to be
converted, the portion thereof to be converted. Securities surrendered for
conversion during the period from the close of business on any Regular Record
Date next preceding any Interest Payment Date to the opening of business on such
Interest Payment Date shall (except in the case of Securities or portions
thereof which have been called for redemption on a Redemption Date within such
period) be accompanied by payment in New York Clearing House funds or other
funds acceptable to the Company of an amount equal to the interest payable on
such Interest Payment Date on the principal amount of Securities being
surrendered for conversion; provided, however, that a Security surrendered for
conversion on an Interest Payment Date need not be accompanied by a payment and
interest on the principal amount of the Security being converted will be paid on
such Interest Payment Date to the Holder of such Security on the immediately
preceding Record Date. Except as provided in the Securities and subject to the
last paragraph of Section 307, no payment or adjustment shall be made upon any
conversion on account of any interest accrued on the Securities surrendered for
conversion or on account of any dividends on the Common Stock issued upon
conversion.
Securities shall be deemed to have been converted immediately prior to
the close of business on the day of surrender of such Securities for conversion
in accordance with the foregoing provisions, and at such time the rights of the
Holders of such Securities as Holders shall cease, and the Person or Persons
entitled to receive the shares of Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock at such time. As promptly as practicable on or after the Conversion
Date, the Company shall issue and shall deliver at such office or agency a
certificate or certificates for the number of full shares of Common Stock
issuable upon conversion, together with payment in lieu of any fraction of a
share, as provided in Section 1403.
In the case of any Security which is converted in part only, upon such
conversion the Company shall execute and the Trustee shall authenticate and
deliver to the Holder thereof, at the expense of the Company, a new Security or
Securities of authorized denominations in aggregate principal amount equal to
the unconverted portion of the principal amount of such Security.
SECTION 1403. FRACTIONS OF SHARES.
No fractional shares of Common Stock shall be issued upon conversion of
Securities. If more than one Security shall be surrendered for conversion at one
time by the same Holder, the number of full shares which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate principal
amount of the Securities (or specified portions thereof) so surrendered. Instead
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of any fractional share of Common Stock which would otherwise be issuable upon
conversion of any Security or Securities (or specified portions thereof), the
Company shall pay a cash adjustment in respect of such fraction in an amount
equal to the same fraction of the market price per share of Common Stock (as
determined by the Board of Directors or in any manner prescribed by the Board of
Directors) at the close of business on the day prior to the day of conversion.
SECTION 1404. ADJUSTMENT OF CONVERSION PRICE.
The Conversion Price shall be subject to adjustment from time to time
as follows:
(a) In case the Company shall pay or make a dividend or other
distribution on the Common Stock exclusively in Common Stock or shall pay or
make a dividend or other distribution on any other class of capital stock of the
Company which dividend or distribution includes Common Stock, the Conversion
Price in effect at the opening of business on the day following the date fixed
for the determination of stockholders entitled to receive such dividend or other
distribution shall be reduced by multiplying such Conversion Price by a fraction
of which the numerator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator shall be the sum of such number of shares and the total number of
shares constituting such dividend or other distribution, such reduction to
become effective immediately after the opening of business on the day following
the date fixed for such determination. For the purpose of this paragraph (a),
the number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company. The Company shall not pay any
dividend or make any distribution on shares of Common Stock held in the treasury
of the Company.
(b) Subject to paragraph (f) of this Section, in case the
Company shall pay or make a dividend or other distribution on the Common Stock
consisting exclusively of, or shall otherwise issue to all holders of the Common
Stock, rights or warrants entitling the holders thereof to subscribe for or
purchase shares of Common Stock at a price per share less than the Current
Market Price (determined as provided in paragraph (g) of this Section) on the
date fixed for the determination of stockholders entitled to receive such rights
or warrants, the Conversion Price in effect at the opening of business on the
day following the date fixed for such determination shall be reduced by
multiplying such Conversion Price by a fraction of which the numerator shall be
the number of shares of Common Stock outstanding at the close of business on the
date fixed for such determination plus the number of shares of Common Stock
which the aggregate of the offering price of the total number of shares of
Common Stock so offered for subscription or purchase would purchase at such
Current Market Price and the denominator shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus the number of shares of Common Stock so offered for
subscription or purchase, such reduction to become effective immediately after
the opening of business on the day following the date fixed for such
determination. For the purposes of this paragraph (b), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company. The Company shall not issue any rights or warrants in
respect of shares of Common Stock held in the treasury of the Company.
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(c) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion Price
in effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and,
conversely, in case outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Conversion Price in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately increased, such reduction or
increase, as the case may be, to become effective immediately after the opening
of business on the day following the day upon which subdivision or combination
becomes effective.
(d) Subject to the last sentence of this paragraph (d) and to
paragraph (f) of this Section, in case the Company shall, by dividend or
otherwise, distribute to all holders of the Common Stock evidences of its
indebtedness, shares of any class of its capital stock, cash or other assets
(including securities, but excluding any rights or warrants referred to in
paragraph (b) of this Section, excluding any dividend or distribution paid
exclusively in cash and excluding any dividend or distribution referred to in
paragraph (a) of this Section), the Conversion Price shall be reduced by
multiplying the Conversion Price in effect immediately prior to the close of
business on the date fixed for the determination of stockholders entitled to
such distribution by a fraction of which the numerator shall be the Current
Market Price (determined as provided in paragraph (g) of this Section) on such
date less the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution) on such
date of the portion of the evidences of indebtedness, shares of capital stock,
cash and other assets to be distributed applicable to one share of Common Stock
and the denominator shall be such Current Market Price, such reduction to become
effective immediately prior to the opening of business on the day following such
date. If the Board of Directors determines the fair market value of any
distribution for purposes of this paragraph (d) by reference to the actual or
when-issued trading market for any securities comprising part or all of such
distribution, it must in doing so consider the prices in such market over the
same period used in computing the Current Market Price pursuant to paragraph (g)
of this Section, to the extent possible. For purposes of this paragraph (d), any
dividend or distribution that includes shares of Common Stock, rights or
warrants to subscribe for or purchase shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock shall be deemed to
be (x) a dividend or distribution of the evidences of indebtedness, cash, assets
or shares of capital stock other than such shares of Common Stock, such rights
or warrants or such convertible or exchangeable securities (making any
Conversion Price reduction required by this paragraph (d)) immediately followed
by (y) in the case of such shares of Common Stock or such rights or warrants, a
dividend or distribution thereof (making any further Conversion Price reduction
required by paragraph (a) and (b) of this Section, except any shares of Common
Stock included in such dividend or distribution shall not be deemed "outstanding
at the close of business on the date fixed for such determination" within the
meaning of paragraph (a) of this Section), or (z) in the case of such
convertible or exchangeable securities, a dividend or distribution of the number
of shares of Common Stock as would then be issuable upon the conversion or
exchange thereof, whether or not the conversion or exchange of such securities
is subject to any conditions (making any further Conversion Price reduction
required by paragraph (a) of this Section, except the shares deemed to
constitute such dividend or distribution shall not be deemed "outstanding at the
close of business on the date fixed for such determination" within the meaning
of paragraph (a) of this Section).
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(e) In case a tender offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall be consummated and
such tender offer shall involve an aggregate consideration having a fair market
value (as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) as of the last time (the
"Expiration Time") that tenders may be made pursuant to such tender offer (as it
shall have been amended) that, together with the aggregate of the cash plus the
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution) as of the Expiration
Time of the other consideration paid in respect of any other tender offer by the
Company or a Subsidiary for all or any portion of the Common Stock consummated
within the 12 months preceding the Expiration Time and in respect of which no
conversion price adjustment pursuant to this paragraph (e) has been made
previously, exceeds the greater of (i) 12.5% of the product of the Current
Market Price (determined as provided in paragraph (g) of this Section)
immediately prior to the Expiration Time times the number of shares of Common
Stock outstanding (including any Expiration Time, the Conversion Price shall be
reduced by multiplying the Conversion Price in effect immediately prior to the
Expiration Time by a fraction of which the numerator shall be (x) the product of
the Current Market Price (determined as provided in paragraph (g) of this
Section) immediately prior to the Expiration Time times the number of shares of
Common Stock outstanding: (including any tendered shares at the Expiration Time
minus (y) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders upon consummation of such tender offer and
the denominator shall be the product of (A) such Current Market Price times (B)
such number of outstanding shares at the Expiration Time minus the number of
shares accepted for payment in such tender offer (the "Purchased Shares"), such
reduction to become effective immediately prior to the opening of business on
the day following the Expiration Time; provided, that if the number of Purchased
Shares or the aggregate consideration payable therefor have not been finally
determined by such opening of business, the adjustment required by this
paragraph (e) shall, pending such final determination, be made based upon the
preliminarily announced results of such tender offer, and, after such final
determination shall have been made, the adjustment required by this paragraph
(e) shall be made based upon the number of Purchased Shares and the aggregate
consideration payable therefor as so finally determined.
(f) Rights or warrants issued by the Company to all holders of
the Common Stock entitling the holders thereof to subscribe for or purchase
shares of Common Stock (either initially or under certain circumstances), which
rights or warrants (i) are deemed to be transferred with such shares of Common
Stock, (ii) are not exercisable and (iii) are also issued in respect of future
issuances of Common Stock, in each case in clauses (i) through (iii) until the
occurrence of a specified event or events ("Trigger Event"), shall for purposes
of this Section 1404 not be deemed issued until the occurrence of the earliest
Trigger Event. If any such rights or warrants, including any such existing
rights or warrants distributed prior to the date of this Indenture are subject
to subsequent events, upon the occurrence of each of which such rights or
warrants shall become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the occurrence of each such event shall be
deemed to be such date of issuance and record date with respect to new rights or
warrants (and a termination or expiration of the existing rights or warrants
without exercise by the holder thereof). In addition, in the event of any
distribution (or deemed distribution) of rights or warrants, or any Trigger
Event with respect thereto, that was counted for purposes of calculating a
distribution amount for which an adjustment to the Conversion Price under this
Section 1404 was made, (1) in the case
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of any such rights or warrant which shall all have been redeemed or repurchased
without exercise by any holders thereof, the Conversion Price shall be
readjusted upon such final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received by
a holder or holders of Common Stock with respect to such rights or warrants
(assuming such holder had retained such rights or warrants), made to all holders
of Common Stock as of the date of such redemption or repurchase, and (2) in the
case of such rights or warrants which shall have expired or been terminated
without exercise by any holders thereof the Conversion Price shall be readjusted
as if such rights and warrants had not been issued.
Notwithstanding any other provision of this Section 1404 to
the contrary, rights, warrants, evidences of indebtedness, other securities,
cash or other assets (including, without limitation, any rights distributed
pursuant to any stockholder rights plan) shall be deemed not to have been
distributed for purposes of this Section 1404 if the Company makes proper
provision so that each holder of Securities who converts a Security (or any
portion thereof) after the date fixed for determination of stockholders entitled
to receive such distribution shall be entitled to receive if such holder had,
immediately prior to such determination date, converted such Security into
Common Stock.
(g) For the purpose of any computation under this paragraph
and paragraphs (b) and (d) of this Section, the current market price per share
of Common Stock (the "Current Market Price") on any date shall be deemed to be
the average of the daily Closing Prices for the 5 consecutive Trading Days
selected by the Company commencing not more than 20 Trading Days before, and
ending not later than, the date in question; provided, however, that (i) if the
"ex" date for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
paragraph (a), (b), (c), (d) or (e) above occurs on or after the 20th Trading
Day prior to the date in question and prior to the "ex" date for the issuance or
distribution requiring such computation, the Closing Price for each Trading Day
prior to the "ex" date for such other event shall be adjusted by multiplying
such Closing Price by the same fraction by which the Conversion Price is so
required to be adjusted as a result of such other event, (ii) if the "ex" date
for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
paragraph (a), (b), (c), (d) or (e) above occurs on or after the "ex" date for
the issuance or distribution requiring such computation and on or prior to the
date in question, the Closing Price for each Trading Day on and after the "ex"
date for such other event shall be adjusted by multiplying such Closing Price by
the reciprocal of the fraction by which the Conversion Price is so required to
be adjusted as a result of such other event, and (iii) if the "ex" date for the
issuance or distribution requiring such computation is on or prior to the date
in question, after taking into account any adjustment required pursuant to
clause (ii) of this proviso, the Closing Price for each Trading Day on or after
such "ex" date shall be adjusted by adding thereto the amount of any cash and
the fair market value on the date in question (as determined by the Board of
Directors in a manner consistent with any determination of such value for
purposes of paragraph (d) of this Section, whose determination shall be
conclusive and described in a Board Resolution) of the evidences of
indebtedness, shares of capital stock or assets being distributed applicable to
one share of Common Stock as of the close of business on the day before such
"ex" date. For the purpose of any computation under paragraph (e) of this
Section, the Current Market Price on any date shall be
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deemed to be the average of the daily Closing Prices for the 5 consecutive
Trading Days selected by the Company commencing on or after the latest (the
"Commencement Date") of (i) the date 20 Trading Days before the date in
question, (ii) the date of commencement of the tender offer requiring such
computation and (iii) the date of the last amendment, if any, of such tender
offer involving a change in the maximum number of shares for which tenders are
sought or a change in the consideration offered, and ending not later than the
Expiration Time of such tender offer; provided, however, that is the "ex" date
for any event (other than the tender offer requiring such computation) that
requires an adjustment to the Conversion Price pursuant to paragraph (a), (b),
(c), (d) or (e) above occurs on or after the Commencement Date and prior to the
Expiration Time for the tender offer requiring such computation, the Closing
Price for each Trading Day prior to the "ex" date for such other event shall be
adjusted by multiplying such Closing Price by the same fraction by which the
Conversion Price is so required to be adjusted as a result of such other event.
The closing price for any Trading Day (the "Closing Price") shall be the last
reported sales price regular way or, in case no such reported sale takes place
on such day, the average of the reported closing bid and asked prices regular
way, in either case on the New York Stock Exchange or, if the Common Stock is
not listed or admitted to trading on such exchange, on the principal national
securities exchange on which the Common Stock is listed or admitted to trading
or if not listed or admitted to trading on any national securities exchange, on
the Nasdaq Stock Market's National Market, or if the Common Stock is not listed
or admitted to trading on any national securities exchange or quoted on such
National Market, the average of the closing bid and asked prices in the
over-the-counter market as furnished by any New York Stock Exchange member firm
selected from time to time by the Company for that purpose. For purposes of this
paragraph, the term "Trading Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday, other than any day on which securities are generally not
traded on the applicable securities exchange or in the applicable securities
market and the term "ex" date, (i) when used with respect to any issuance or
distribution, means the first day on which the Common Stock trades regular way
on the relevant exchange or in the relevant market from which the Closing Prices
were obtained without the right to receive such issuance or distribution, (ii)
when used with respect to any subdivision or combination of shares of Common
Stock, means the first date on which the Common Stock trades regular way on such
exchange or in such market after the time at which the Common Stock trades
regular way on such exchange or in such market after the time at which such
subdivision or combination becomes effective, and (iii) when used with respect
to any tender offer means the first date on which the Common Stock trades
regular way on such exchange or in such market after the last time that tenders
may be made pursuant to such tender offer (as if shall have been amended).
(h) The Company may make such reductions in the Conversion
Price, in addition to those required by paragraphs (a), (b), (c), (d) and (e) of
this Section, as it considers to be advisable (as evidenced by a Board
Resolution) in order that any event treated for federal income tax purposes as a
dividend of stock or stock rights shall not be taxable to the recipients or, if
that is not possible, to diminish any income taxes that are otherwise payable
because of such event.
(i) No adjustment in the Conversion Price shall be required
unless such adjustment (plus any other adjustments not previously made by reason
of this paragraph (i)) would require an increase or decrease of at least 1% in
the Conversion Price; provided, however, that any adjustments
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which by reason of this paragraph (i) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.
(j) Notwithstanding any other provision of this Section 1404,
no adjustment to the Conversion Price shall reduce the Conversion Price below
the then par value share of the Common Stock, and any such purported adjustment
shall instead reduce the Conversion Price to such par value. The Company hereby
covenants not to take any action to increase the par value per share of the
Common Stock.
SECTION 1405. NOTICE OF ADJUSTMENTS OF CONVERSION PRICE.
Whenever the Conversion Price is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Price in
accordance with Section 1404 and shall prepare a certificate signed by
the Treasurer or Director of Treasury of the Company setting forth the
adjusted Conversion Price and showing in reasonable detail the facts
upon which such adjustment is based, and such certificate shall
forthwith be filed at the Corporate Trust Office of the Trustee and at
each office or agency maintained for the purpose of conversion of
Securities pursuant to Section 1002; and
(b) a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price shall
forthwith be required, and as soon as practicable after it is required,
such notice shall be mailed by the Company to all Holders at their last
addresses as they shall appear in the Security Register.
SECTION 1406. NOTICE OF CERTAIN CORPORATE ACTION.
In case:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out of
its retained earnings; or
(b) the Company shall authorize the granting to the holders of
its Common Stock of rights or warrants to subscribe for or purchase any
shares of capital stock: of any class or of any other rights; or
(c) the Company shall declare a dividend out of Excess Cash;
or
(d) of any reclassification of the Common Stock of the Company
(other than a subdivision or combination of its outstanding shares of
Common Stock), or of any consolidation or merger to which the Company
is a party and for which approval of any stockholders of the Company is
required, or of the sale or transfer of all or substantially all of the
assets of the Company; or
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(e) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then the Company shall cause to be filed at the Corporate Trust Office of the
Trustee and at each office or agency maintained for the purpose of conversion of
Securities pursuant to Section 1002, and shall cause to be mailed to all Holders
at their last addresses as they shall appear in the Security Register, at least
15 days (or 10 days in any case specified in clause (a) or (b) above) prior to
the applicable record, effective or expiration date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution, rights or warrants, or, if a record is not to be
taken, the date as of which the holders of Common Stock of record to be entitled
to such dividend, distribution, rights or warrants are to be determined, or (y)
the date on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall bc
entitled to exchange their Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up. Neither the failure to give any such
notice nor any defect therein shall affect the legality or validity of any
action described in clause (a) through (e) of this Section 1406.
SECTION 1407. COMPANY TO RESERVE SHARES
The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued Common Stock, for the
purpose of effecting the conversion of Securities, the full number of shares of
Common Stock then issuable upon the conversion of all Outstanding Securities.
SECTION 1408. TAXES ON CONVERSIONS.
The Company will pay any and all taxes that may be payable in respect
of the issue or delivery of Common Stock on conversion of Securities pursuant
hereto. The Company shall not, however, be required to pay any tax which may be
payable in respect of any transfer involved in the issue and delivery of Common
Stock in a name other than that of the Holder of the Security or Securities to
be converted, and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Company the amount of any such tax,
or has established to the satisfaction of the Company that such tax has been
paid.
SECTION 1409. COVENANT AS TO SHARES.
The Company covenants that all Common Stock which may be issued upon
conversion of Securities will upon issue be fully paid and nonassessable.
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SECTION 1410. CANCELLATION OF CONVERTED SECURITIES.
All Securities delivered for conversion shall be delivered to the
Trustee to be canceled by or at the direction of the Trustee, which shall
dispose of the same as provided in Section 309.
SECTION 1411. PROVISIONS IN CASE OF RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE OF ASSETS.
In case of any capital reorganization or reclassification of the
capital stock of the Company (other than solely a change in par value, or from
par value to no par value) or any consolidation of the Company with, or merger
of the Company into, any other Person, any merger of another Person into the
Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding Common Stock or preferred
shares of beneficial interest of the Company) or any sale or transfer of all or
substantially all of the assets of the Company, the Holder of each Security then
outstanding shall have the right thereafter, during the period such Security
shall be convertible as specified in Section 1401, to convert such Security only
into the kind and amount of securities, cash and other property receivable upon
such reorganization, recapitalization, consolidation, merger, sale or transfer
by a holder of the number of shares of Common Stock into which such Security
might have been converted immediately prior to such reorganization,
consolidation, merger, sale or transfer, assuming such holder of Common Stock
(i) is not a Person with which the Company consolidated or into which the
Company merged or which merged into the Company or to which such sale or
transfer was made, as the case may be ("constituent Person"), or an Affiliate of
a constituent Person and (ii) failed to exercise his rights of election, if any,
as to the kind or amount of securities, cash and other property receivable upon
such consolidation, merger, sale or transfer (provided that if the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer is not the same for each share of Common
Stock held immediately prior to such consolidation, merger, sale or transfer by
others than a constituent Person or an Affiliate thereof and in respect of which
such rights of election shall not have been exercised ("non-electing share"),
then for the purpose of this Section the kind and amount of securities, cash and
other property receivable upon such consolidation, merger, sale or transfer by
each non-electing share shall be deemed to be the kind and amount so receivable
per share by a plurality of the non-electing shares). The Company shall not
effect any consolidation, merger, sale or transfer unless, prior to or
simultaneously with the consummation thereof the Person formed by such
consolidation or resulting from such merger or which acquires such assets, as
the case may be, shall execute and deliver to the Trustee a supplemental
indenture pursuant to which such Person assumes the obligation to deliver to the
Holder of each Security such securities, cash and other property as such Holder
may be entitled to in accordance with the provisions of this Section 1411. Such
supplemental indenture shall provide for adjustments which, for events
subsequent to the effective date of such supplemental indenture, shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Article. The Trustee shall not be under any responsibility to determine the
correctness of any provision contained in such supplemental indenture relating
to either the kind or amount of shares of stock or securities or cash or
property receivable by Holders upon the conversion of their Securities after any
such consolidation, merger, sale or transfer. The above provisions of this
Section shall similarly apply to successive consolidations, mergers, sales or
transfers.
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SECTION 1412. RESPONSIBILITY OF TRUSTEE AND CONVERSION AGENT.
Neither the Trustee nor any agent appointed to effect conversions shall
at any time be under any duty or responsibility to any Holder of Securities to
determine whether any facts exist which may require any adjustment of the
Conversion Price, or with respect to the nature or extent of any such adjustment
when made, or with respect to the method employed, or herein or in any
supplemental indenture provided to be employed, in making the same. Neither the
Trustee nor any such conversion agent shall be accountable with respect to the
validity or value (or the kind or amount) of any Common Stock or of any
securities or property which may at any time be issued or delivered upon the
conversion of any Security; and neither the Trustee nor any such conversion
agent makes any representation with respect thereto. Neither the Trustee nor any
such conversion agent shall be responsible for any failure of the Company to
issue, transfer or deliver any shares of Common Stock or stock certificates or
other securities or property or to make any cash payment upon the delivery of
any Security for the purpose of conversion or to comply with any of the
covenants contained in this Article.
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SECTION 1413. REFUSAL TO CONVERT SECURITIES TO PROTECT REIT STATUS.
Notwithstanding anything herein to the contrary, neither the Company,
any conversion agent nor the Security Registrar shall be required to take any
steps to effect the conversion of any Security or Securities if such conversion,
in the good faith opinion of the Board of Directors, (a) might cause the Company
to fail to comply with any requirement necessary for the continued qualification
of the Company as a REIT or (b) would result in a single Person owning more than
9.8% of the Company's outstanding stock within the meaning of the Code. For the
purpose of the preceding sentence, a Person shall be considered to own shares of
Company stock which are owned directly by such Person (held of record by such
Person or such Person's nominee or nominees) and shares of Company stock which
are owned indirectly by such Person (including shares of Common Stock issuable
upon conversion of the Securities) pursuant to Sections 542, 544 and 856 of the
Code and the regulations promulgated thereunder. Any attempted conversion of a
Security or Securities by a Holder in violation of the limits set forth above
shall be null and void ab initio as to such Holder and such Holder shall not
acquire any rights or economic interest in the Common Stock issuable upon such
conversion. The Company shall advise the Security Registrar and any conversion
agent in writing promptly of any such determination by the Board of Directors
with respect to any Securities, identifying such Security by Holder and other
appropriate method, and shall instruct the Security Registrar and any conversion
agent not to register the transfer of such Security. The Security Registrar and
any conversion agent shall not be liable to the Company, Holders of Securities
or any other Persons for conversions of such Securities effected prior to its
receipt of such written instructions from the Company and the Company shall
indemnify the Security Registrar and any conversion agent of all claims, costs
and expenses incurred by it in connection with refusing to convert Securities as
instructed by the Company.
ARTICLE FIFTEEN
SUBORDINATION OF SECURITIES
SECTION 1501. SECURITIES SUBORDINATE TO SENIOR DEBT.
The Company covenants and agrees, and each Holder of a Security, by his
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article, the indebtedness represented
by the Securities and the payment of the principal of, and premium, of any, and
interest on each and all of the Securities are hereby expressly made subordinate
and subject in right of payment to the prior payment in full of all Senior Debt.
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SECTION 1502. PAYMENT OVER OF PROCEEDS UPON DISSOLUTION, ETC.
In the event of (a) any insolvency or bankruptcy case or proceeding, or
any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, or (b) any liquidation, dissolution or other winding
up of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets and liabilities of the Company, then and in any
such event the holders of Senior Debt shall be entitled to receive payment in
full of all amounts due or to become due on or in respect of all Senior Debt, or
provision shall be made for such payment in cash, before the Holders of the
Securities are entitled to receive any payment on account of principal of (or
premium, if any) or interest on the Securities, and to that end the holders of
Senior Debt shall be entitled to receive, for application to the payment
thereof, any payment or distribution of any kind or character, whether in cash,
property or securities, including any such payment or distribution which may be
payable or deliverable by reason of the payment of any other indebtedness of the
Company being subordinated to the payment of the Securities, which may be
payable or deliverable in respect of the Securities in any such case,
proceeding, dissolution, liquidation or other winding up event.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received any
payment or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, including any such payment or
distribution which may be payable or deliverable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of the
Securities, before all Senior Debt is paid in full or payment thereof provided
for, and if such fact shall, at or prior to the time of such payment or
distribution, have been made known to the Trustee or, as the case may be, such
Holder, then and in such event such payment or distribution shall be paid over
or delivered forthwith to the trustee in bankruptcy, receiver, liquidating
trustee, custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for application to the payment of all
Senior Debt remaining unpaid, to the extent necessary to pay all Senior Debt in
full, after giving effect to any concurrent payment or distribution to or for
the holders of Senior Debt. Any taxes that have been withheld or deducted from
any payment or distribution in respect of the Securities, or any taxes that
ought to have been withheld or deducted from any such payment or distribution
that have been remitted to the relevant taxing authority, shall not be
considered to be an amount that the Trustee or the Holder of any Security
received for purposes of this Section.
For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment which are subordinated
in right of payment to all Senior Debt which may at the time be outstanding to
substantially the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article. The consolidation of the
Company with, or the merger of the Company into, another Person or the
liquidation or dissolution of the Company following the conveyance or transfer
of its properties and assets substantially as an entirety to another Person upon
the terms and conditions set forth in Article Eight shall not be deemed a
dissolution, winding up, liquidation, reorganization, assignment for the benefit
of creditors or marshalling of assets and liability of the Company for the
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purposes of this Section if the Person formed by such consolidation or into
which the Company is merged or the Person which acquires by conveyance or
transfer such properties and assets substantially as an entirety, as the case
may be, shall, as a part of such consolidation, merger, conveyance or transfer,
comply with the conditions set forth in Article Eight.
SECTION 1503. PRIOR PAYMENT TO SENIOR DEBT UPON ACCELERATION OF SECURITIES.
In the event that any Securities are declared due and payable before
their Stated Maturity, then and in such event the holders of Senior Debt shall
be entitled to receive payment in full of all amounts due or to become due on or
in respect of all Senior Debt or provision shall be made for such payment in
cash, before the Holders of the Securities are entitled to receive any payment
(including any payment which may be payable by reason of the payment of any
other indebtedness of the Company being subordinated to the payment of the
Securities) by the Company on account of the principal of, premium, if any, or
interest on the Securities or on account of the purchase or other acquisition of
Securities; provided, however, that nothing in this Section shall prevent the
satisfaction of any sinking fund payment in accordance with Article Twelve by
delivering and crediting pursuant to Section 1202 Securities which have been
acquired (upon redemption or otherwise) or which have been converted pursuant to
Article 14 prior to such declaration of acceleration.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 1402 would be applicable.
SECTION 1504. NO PAYMENT WHEN SENIOR DEBT IN DEFAULT.
In the event and during the continuation of any default in the payment
of principal of, premium, if any, or interest on any Senior Debt beyond any
applicable grace period with respect thereto (a "Senior Payment Default") then
no payment (including any payment which may be payable by reason of the payment
of any other indebtedness of the Company being subordinated to the payment of
the Securities) shall be made by the Company on account of principal of, or
premium, if any, or interest on the Securities or on account of the purchase or
other acquisition of Securities.
During the continuance of any non-payment default or event of default
with respect to Senior Debt in an aggregate principal amount of at least $10
million pursuant to which the maturity thereof is or may be accelerated, or in
the event any judicial proceeding shall be pending with respect to any such
default, then, upon receipt by the Trustee of notice thereof from the holders of
such Senior Debt (a "Senior Non-Payment Default"), unless and until (i) such
default or event of default shall have been cured or waived or shall have ceased
to exist, or (ii) a Default under either Section 501(7) or Section 501(8) hereof
involving the Company or any Subsidiary of the Company shall have occurred and
be
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continuing, or (iii) such Senior Debt shall have been paid in full (each of
clause (i), (ii) and (iii) being a "Blockage Termination Event"), no payment or
distribution will be made by or on behalf of the Company on account of or with
respect to the Securities (except for those funds held in trust for the benefit
of the Holders of any Securities to such Holders) during a period (a "Blockage
Period") commencing on the date of receipt of such notice by the Trustee and
ending 179 days thereafter.
In addition to the restrictions on payment set forth in the two
immediately preceding paragraphs, so long as no Blockage Termination Event shall
have occurred, upon the occurrence of either a Senior Payment Default or a
Senior Non-Payment Default, neither the Trustee nor any Holder of the Securities
may take any action to accelerate the maturity of the Securities during any
Blockage Period (with respect to a Senior Payment Default, the Blockage Period
shall be deemed to commence on the date which is the first date payment should
have been made).
Notwithstanding anything herein to the contrary, (i) in no event will a
Blockage Period extend beyond the 179 days from the date the payment on the
Securities was due and (ii) there must be 180 days in any 365 day period during
which no Blockage Period is in effect. Not more than one Blockage Period may be
commenced with respect to the Securities during any period of 365 consecutive
days. No default or event of default that existed or was continuing on the date
of commencement of any Blockage Period with respect to the Senior Debt
initiating such Blockage Period may be, or be made, the basis for the
commencement of any other Blockage Period by the holders of such Senior Debt,
whether or not within a period of 365 consecutive days, unless such default or
event of default has been cured or waived for a period of not less than 90
consecutive days.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited by the
foregoing provisions of this Section, and if such fact shall, at or prior to the
time of such payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such payment shall be paid over and
delivered forthwith to the Company.
The provisions of this Section shall not apply to any payment with
respect to which Section 1402 hereof would be applicable.
SECTION 1505. PAYMENT PERMITTED IN CERTAIN SITUATIONS.
Nothing contained in this Article or elsewhere in this Indenture or in
any of the Securities shall prevent (a) the Company, at any time except during
the pendency of any case, proceeding, dissolution, liquidation or other winding
up, assignment for the benefit of creditors or other marshalling of assets and
liabilities of the Company referred to in Section 1502 or under the conditions
described in Section 1503 or 1504, from making payments at any time of principal
of (and premium, if any) or interest on the Securities, or (b) the application
by the Trustee of any money deposited with it hereunder to the payment of or on
account of the principal of (and premium, if any) or interest on the Securities
or the retention of such payment by the holders, if, at the time of such
application by the Trustee, it did not have knowledge that such payment would
have been prohibited by the provisions of this Article.
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SECTION 1506. SUBROGATION TO RIGHTS OF HOLDERS OF SENIOR DEBT.
Subject to the payment in full of all Senior Debt or the provision for
such payment in cash or cash equivalents or otherwise in a manner satisfactory
to the holders of Senior Debt, the Holders of the Securities shall be subrogated
to the extent of the payments or distributions made to the holders of such
Senior Debt pursuant to the provisions of this Article (equally and ratably with
the holders of indebtedness of the Company which by its express terms is
subordinated to indebtedness of the Company to substantially the same extent as
the Securities are subordinated to the Senior Debt and is entitled to like
rights of subrogation) to the rights of the holders of such Senior Debt to
receive payments and distributions of cash, property and securities applicable
to the Senior Debt until the principal of, premium, if any, and interest on the
Senior Debt shall be paid in full. For purposes of such subrogation, no payments
or distributions to the holders of the Senior Debt of any cash, property or
securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior Debt by
Holders of the Securities or the Trustee, shall, as among the Company, its
creditors other than holders of Senior Debt and the Holders of the Securities,
be deemed to be a payment or distribution by the Company to or on account of the
Senior Debt.
SECTION 1507. PROVISIONS SOLELY TO DEFINE RELATIVE RIGHTS.
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities on the
one hand and the holders of Senior Debt on the other hand. Nothing contained in
this Article or elsewhere in this Indenture or in the Securities is intended to
or shall (a) impair, as among the Company, its creditors other than holders of
Senior Debt and the Holders of the Securities, the obligation of the Company,
which is absolute and unconditional (and which, subject to the rights under this
Article of the holders of Senior Debt, is intended to rank equally with all
other general obligations of the Company), to pay to the Holders of the
Securities the principal of (and premium, if any) and interest on the Securities
as and when the same shall become due and payable in accordance with their
terms; or (b) affect the relative rights against the Company of the Holders of
the Securities and creditors of the Company other than the holders of Senior
Debt; or (c) prevent the Trustee or the Holder of any Security from exercising
all remedies otherwise permitted by applicable law upon default under this
Indenture, subject to the rights, if any, under this Article of the holders of
Senior Debt to receive cash, property and securities otherwise payable or
deliverable to the Trustee or such Holder.
SECTION 1508. TRUSTEE TO EFFECTUATE SUBORDINATION.
Each Holder of a Security by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
85
<PAGE> 136
SECTION 1509. NO WAIVER OF SUBORDINATION PROVISIONS.
No right of any present or future holders of any Senior Debt to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any non-compliance
by the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Debt may, at any time and from time to time, without the
consent of or notice to the Trustee or the Holders of the Securities, without
incurring responsibility to the Holders of the Securities and without impairing
or releasing the subordination provided in this Article or the obligations
hereunder of the Holders of the Securities to the holders of Senior Debt do any
one or more of the following: (i) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior Debt or otherwise
amend or supplement in any manner Senior Debt or any instrument evidencing the
same or any agreement under which Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Debt; (iii) release any Person liable in any manner
for the collection of Senior Debt; and (iv) exercise or refrain from exercising
any rights against the Company and any other Person.
SECTION 1510. NOTICE TO TRUSTEE.
The Company shall give prompt written notice to the Trustee of any fact
known to the Company which would prohibit the making of any payment to or by the
Trustee in respect of the Securities. Notwithstanding the provisions of this
Article or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts which would prohibit the
making of any payment to or by the Trustee in respect of the Securities, unless
and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Debt or from any trustee therefor; and, prior to
the receipt of any such written notice, the Trustee, subject to the provisions
of Section 601, shall be entitled in all respects to assume that no such facts
exist.
Subject to the provisions of Section 601, the Trustee shall be entitled
to rely on the delivery to it of a written notice by a Person representing
himself to be a holder of Senior Debt (or a trustee therefor) to establish that
such notice has been given by a holder of Senior Debt (or a trustee therefor).
In the event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this Article, the Trustee
may request such Person to furnish evidence to the reasonable satisfaction of
the Trustee as to the amount of Senior Debt held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution and
any other facts pertinent to the rights of such Person under this Article, and
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment.
86
<PAGE> 137
SECTION 1511. RELIANCE ON JUDICIAL ORDER OR CERTIFICATE OF LIQUIDATING AGENT.
Upon any payment or distribution of assets of the Company referred to
in this Article, the Trustee, subject to the provisions of Section 601, and the
Holders of the Securities shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders of Securities, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Debt and other indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article.
SECTION 1512. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR DEBT.
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Debt and shall not be liable to any such holders or creditors
if it shall in good faith pay over or distribute to Holders of Securities or to
the Company or to any other Person cash, property or securities to which any
holders of Senior Debt shall be entitled by virtue of this Article or otherwise.
SECTION 1513. RIGHTS OF TRUSTEE AS HOLDER OF SENIOR DEBT; PRESERVATION OF
TRUSTEE'S RIGHTS.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Debt which may at
any time be held by it, to the same extent as any other holder of Senior Debt
and nothing in this Indenture shall deprive the Trustee of any of its rights as
such holder.
Nothing in this Article shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 607.
SECTION 1514. ARTICLE APPLICABLE TO PAYING AGENTS.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context otherwise
requires) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1413 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
87
<PAGE> 138
SECTION 1515. CERTAIN CONVERSIONS DEEMED PAYMENT.
For purposes of this Article only, (1) the issuance and delivery of
junior securities upon conversion of Securities in accordance with Article
Fourteen hereof shall not be deemed to constitute a payment or distribution on
account of the principal of or premium, if any, or interest on Securities or on
account of the purchase or other acquisition of Securities, and (2) the payment,
issuance or delivery of cash, property or securities (other than junior
securities) upon conversion of a Security shall be deemed to constitute payment
on account of the principal of such Security. For the purposes of this Section,
the term "junior securities" means (a) shares of any class of capital stock of
the Company and (b) securities of the Company which are subordinated in right of
payment to all Senior Debt which may be outstanding at the time of issuance or
delivery of such securities to substantially the same extent as, or to a greater
extent than, the Securities are so subordinated as provided in this Article.
Nothing contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Company, its creditors
other than holders of Senior Debt and the Holders of the Securities, the right,
which is absolute and unconditional, of the Holder of any Security to convert
such Security in accordance with Article Fourteen hereof.
88
<PAGE> 139
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
CAPSTONE CAPITAL CORPORATION
By
-----------------------------------
AMSOUTH BANK OF ALABAMA,
Trustee:
By
-----------------------------------
89
<PAGE> 140
STATE OF ALABAMA )
) ss.:
COUNTY OF JEFFERSON )
On the _____ day of _________________,_____, before me personally came
______________________________ to me known, who, being by me duly sworn, did
depose and say that he is _________________________ of __________________, one
of the corporations described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to said
instrument is such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation; and that he signed his name thereto by
like authority.
---------------------------------------
STATE OF ALABAMA )
) ss.:
COUNTY OF JEFFERSON )
On the _____ day of _________________,_____, before me personally came
______________________________ to me known, who, being by me duly sworn, did
depose and say that he is _____________________ of _____________________, one of
the corporations described in and which executed the foregoing instrument; that
he knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
--------------------------------------
90
<PAGE> 141
======================================================
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, NOR DOES IT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY THE SECURITIES 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 ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
SUMMARY TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 4
Risk Factors.......................... 4
Use of Proceeds....................... 11
Consolidated Ratios of Earnings to
Fixed Charges and Combined Fixed
Charges and Preferred Stock Dividend
Requirements........................ 11
Description of Debt Securities........ 12
Description of Capital Stock.......... 20
Description of Warrants............... 26
Federal Income Tax Considerations..... 27
Plan of Distribution.................. 37
Legal Matters......................... 38
Experts............................... 38
</TABLE>
======================================================
======================================================
[CAPSTONE LOGO]
CAPSTONE CAPITAL
CORPORATION
-----------------
PROSPECTUS
, 1997
-----------------
======================================================
<PAGE> 142
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Set forth below is an estimate of the fees and expenses to be incurred in
connection with the issuance and distribution of the securities being
registered, other than the underwriting discounts and commissions, are as
follows:
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee......... $151,515
Blue Sky Fees and Expenses.................................. 0
Legal Fees and Expenses..................................... 50,000
Accounting Fees............................................. 20,000
Printing and Engraving Costs................................ 50,000
Transfer Agent's Fee........................................ 0
Miscellaneous Expenses...................................... 3,485
--------
Total............................................. $275,000
========
</TABLE>
- ---------------
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's Amended and Restated Bylaws ("Bylaws") obligate it, to the
fullest extent permitted by Maryland law, to indemnify and advance expenses to
its present and former directors or officers.
The Maryland General Corporation Law ("MGCL") requires a corporation
(unless its charter provides otherwise, which the Company's charter does not) to
indemnify a director or officer who has been successful, on the merits or
otherwise, in the defense of any proceeding to which he is made a party by
reason of his service in that capacity. Section 2-418 also generally permits a
corporation to indemnify its present and former directors and officers, among
others, who are made a party to any proceeding by reason of their service in
these or other capacities, unless it is established that (i) the act or omission
of such person was material to the matter giving rise to the proceeding and was
committed in bad faith or was the result of active and deliberate dishonesty; or
(ii) such person actually received an improper personal benefit in money,
property or services; or (iii) in the case of any criminal proceeding, such
person had reasonable cause to believe that the act or omission was unlawful.
The indemnification may include judgments, penalties, fines, settlements and
reasonable expenses actually incurred by the director in connection with the
proceeding. However, a Maryland corporation may not indemnify for an adverse
judgment in a suit by or in the right of the corporation. In addition, the MGCL
requires the Company, as a condition to advancing expenses, to obtain (a) a
written affirmation by the director or officer of his good faith belief that he
has met the standard of conduct necessary for indemnification by the Company as
authorized by the Bylaws and (b) a written statement by or on his behalf to
repay the amount paid or reimbursed by the Company if it shall ultimately be
determined that the standard of conduct was not met. The termination of any
proceeding by conviction or upon a plea of nolo contendere or its equivalent
creates a rebuttable presumption that the director did not meet the requisite
standard of conduct required for permitted indemnification. The termination of
any proceeding by judgment, order or settlement, however, does not create a
presumption that the director failed to meet the requisite standard of conduct
for permitted indemnification. Indemnification under the provisions of the MGCL
is not deemed exclusive of any other rights, by indemnification or otherwise, to
which a director or officer may be entitled under the charter, Bylaws,
resolution of stockholders or directors, contract or otherwise.
II-1
<PAGE> 143
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
4.1 -- Specimen of Common Stock Certificate incorporated by
reference (pursuant to the provisions of Rule 411(c)) to
Exhibit 4 to the Company's Form S-11 Registration Statement
No. 33-77788, dated April 15, 1994.
4.2 -- Form of Indenture for Senior Debt Securities.
4.3 -- Form of Senior Debt Security (included in Exhibit 4.2).
4.4 -- Form of Indenture for Subordinated Debt Securities.
4.5 -- Form of Subordinated Debt Security (included in Exhibit 4.4)
5.1 -- Opinion of Sirote & Permutt, P.C.
5.2 -- Opinion of Ballard Spahr Andrews & Ingersoll.
8 -- Tax Opinion of Sirote & Permutt, P.C.
12 -- Statement Regarding Computation of Consolidated Ratios of
Earnings to Fixed Charges and Combined Fixed Charges and
Preferred Stock Dividend Requirements
23.1 -- Consent of KPMG Peat Marwick LLP.
23.2 -- Consent of Sirote & Permutt, P.C. (see Exhibits 5.1 and 8).
23.3 -- Consent of Ballard Spahr Andrews & Ingersoll (see Exhibit
5.2).
24 -- Powers of Attorney (included in Page II-6).
25 -- Statement of Eligibility of Trustee on Form T-1
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this Item 17
do not apply if the registration statement is on Form S-3, Form S-8, or
Form F-3, and the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed with
or furnished to the Commission by the registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
II-2
<PAGE> 144
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the registrant's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or, otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-3
<PAGE> 145
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Birmingham, State of Alabama, on the 29th day of
August, 1997.
CAPSTONE CAPITAL CORPORATION
By: /s/ MALCOLM E. MCVAY
------------------------------------
Vice President and Chief Financial
Officer
II-4
<PAGE> 146
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Amendment No. 1 to Registration Statement has been signed by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Chairman of the Board of August 29, 1997
- ----------------------------------------------------- Directors
Richard M. Scrushy
* President, Chief Executive August 29, 1997
- ----------------------------------------------------- Officer and Director
John W. McRoberts (Principal Executive Officer)
/s/ MALCOLM E. MCVAY Chief Financial Officer August 29, 1997
- ----------------------------------------------------- (Principal Financial and
Malcolm E. McVay Accounting Officer)
* Director August 29, 1997
- -----------------------------------------------------
Michael D. Martin
* Director August 29, 1997
- -----------------------------------------------------
Robert N. Elkins
* Director August 29, 1997
- -----------------------------------------------------
Eric R. Hanson
* Director August 29, 1997
- -----------------------------------------------------
Larry D. Striplin, Jr.
* Director August 29, 1997
- -----------------------------------------------------
Barry Morton
* Director August 29, 1997
- -----------------------------------------------------
George E. Bogle
* Director August 29, 1997
- -----------------------------------------------------
Larry R. House
*By: /s/ MALCOLM E. MCVAY August 29, 1997
------------------------------------------------
Malcolm E. McVay
Power of Attorney
</TABLE>
II-5
<PAGE> 147
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGE
- ------- ----------------------- ------------
<C> <C> <S> <C>
*4.1 -- Specimen of Common Stock Certificate incorporated by
reference (pursuant to the provisions of Rule 411(c)) to
Exhibit 4 to the Company's Form S-11 Registration Statement
No. 33-77788, dated April 15, 1994.
*4.2 -- Form of Indenture for Senior Debt Securities.
*4.3 -- Form of Senior Debt Security (included in Exhibit 4.2).
*4.4 -- Form of Indenture for Subordinated Debt Securities.
*4.5 -- Form of Subordinated Debt Security (included in Exhibit 4.4)
*5.1 -- Opinion of Sirote & Permutt, P.C.
5.2 -- Opinion of Ballard Spahr Andrews & Ingersoll.
*8 -- Tax Opinion of Sirote & Permutt, P.C.
*12 -- Statement Regarding Computation of Consolidated Ratios of
Earnings to Fixed Charges and Combined Fixed Charges and
Preferred Stock Dividend Requirements
23.1 -- Consent of KPMG Peat Marwick LLP.
*23.2 -- Consent of Sirote & Permutt, P.C. (see Exhibits 5.1 and 8).
23.3 -- Consent of Ballard Spahr Andrews & Ingersoll (see Exhibit
5.2).
*24 -- Powers of Attorney (included in Page II-6).
*25 -- Statement of Eligibility of Trustee on Form T-1
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 5.2
July 18, 1997
Sirote & Permutt, P.C.
2222 Arlington Avenue South
Birmingham, Alabama 35205
Re: Capstone Capital Corporation: Registration
Statement on Form S-3: $500,000,000 Aggregate
Offering Price of Debt Securities, Preferred
Stock, Common Stock and Warrants
Ladies and Gentlemen:
We have served as Maryland counsel to Capstone Capital Corporation, a
Maryland corporation (the "Company"), in connection with certain matters of
Maryland law arising out of the registration of the following securities of
the Company having an aggregate initial offering price of up to $500,000,000
(collectively, the "Securities"): (a) debt securities ("Debt Securities"),
which may be either senior debt securities (the "Senior Debt Securities") or
subordinated debt securities (the "Subordinated Debt Securities"), (b) shares
of common stock, $.001 par value per share, of the Company ("Common Stock"),
(c) shares of preferred stock, $.01 par value per share, of the Company
("Preferred Stock"), and (d) warrants (the "Warrants") to purchase shares of
Common Stock or Preferred Stock or Debt Securities, covered by the
above-referenced Registration Statement, and all amendments thereto (the
"Registration Statement"), filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "1933 Act"). Unless otherwise defined herein, capitalized terms
used herein shall have the meanings assigned to them in the Registration
Statement.
In connection with our representation of the Company, and as a basis
for the opinion hereinafter set forth, we have
<PAGE> 2
Sirote & Permutt, P.C.
July 18, 1997
Page 2
examined originals, or copies certified or otherwise identified to our
satisfaction, of the following documents (collectively, the "Documents"):
1. The Registration Statement and the related form of prospectus
included therein in the form in which it was transmitted to the Commission
under the 1933 Act;
2. The charter of the Company (the "Charter"), certified as of a
recent date by the State Department of Assessments and Taxation of Maryland
(the "SDAT");
3. The Bylaws of the Company, certified as of a recent date by its
Secretary;
4. Resolutions adopted by the Board of Directors of the Company
(the "Board") relating to the sale, issuance and registration of the
Securities, certified as of a recent date by the Secretary of the Company (the
"Resolutions");
5. The form of certificate representing a share of Common Stock,
certified as of a recent date by the Secretary of the Company;
6. The form of certificate representing a share of Preferred
Stock, certified as of a recent date by the Secretary of the Company;
7. A certificate of the SDAT as to the good standing of the
Company, dated as of a recent date;
8. A certificate executed by the Secretary of the Company, dated
as of the date hereof; and
9. Such other documents and matters as we have deemed necessary or
appropriate to express the opinion set forth in this letter, subject to the
assumptions, limitations and qualifications stated herein.
In expressing the opinion set forth below, we have assumed, and so far
as is known to us there are no facts inconsistent with, the following:
<PAGE> 3
Sirote & Permutt, P.C.
July 18, 1997
Page 3
1. Each individual executing any of the Documents, whether on behalf
of such individual or another person, is legally competent to do so.
2. Each individual executing any of the Documents on behalf of a party
(other than the Company) is duly authorized to do so.
3. Each of the parties (other than the Company) executing any of the
Documents has duly and validly executed and delivered each of the Documents to
which such party is a signatory, and such party's obligations set forth therein
are legal, valid and binding.
4. All Documents submitted to us as originals are authentic. All
Documents submitted to us as certified or photostatic copies conform to the
original documents. All signatures on all such Documents are genuine. All
public records reviewed or relied upon by us or on our behalf are true and
complete. All statements and information contained in the Documents are true
and complete. There are no oral or written modifications or amendments to the
Documents, by action or conduct of the parties or otherwise.
5. The outstanding shares of stock of the Company have not been and
will not be transferred in violation of any restriction or limitation contained
in the Charter. The Securities will not be transferred in violation of any
restriction or limitation contained in the Charter.
6. In accordance with the Resolutions, the issuance of, and certain
terms of, the Securities to be issued by the Company from time to time will be
approved by the Board or a duly authorized committee thereof in accordance with
the Maryland General Corporation Law (with such approval referred to herein as
the "Corporate Proceedings").
The phrase "known to us" is limited to the actual knowledge, without
independent inquiry, of the lawyers at our firm who have performed legal
services in connection with the issuance of this opinion.
<PAGE> 4
Sirote & Permutt, P.C.
July 18, 1997
Page 4
Based upon the foregoing, and subject to the assumptions, limitations
and qualifications stated herein, it is our opinion that:
1. The Company is a corporation duly incorporated and existing under
and by virtue of the laws of the State of Maryland and is in good standing with
the SDAT.
2. Upon the completion of all Corporate Proceedings relating to the
Securities that are shares of Common Stock (including shares of Common Stock
which may be issued upon exercise of Warrants or conversion of shares of
Preferred Stock or Debt Securities) (the "Common Securities") and the due
execution, countersignature and delivery of certificates representing Common
Securities and assuming that the sum of (a) all shares of Common Stock issued
as of the date hereof, (b) any shares of Common Stock issued between the date
hereof and the date on which any of the Common Securities are actually issued
(not including any of the Common Securities), and (c) the Common Securities
will not exceed the total number of shares of Common Stock that the Company is
authorized to issue, the Common Securities are duly authorized and, when and if
delivered against payment therefor in accordance with the Resolutions and the
Corporate Proceedings, will be validly issued, fully paid and nonassessable.
3. Upon the completion of all Corporate Proceedings relating to the
Securities that are shares of Preferred Stock (including shares of Preferred
Stock which may be issued upon exercise of Warrants or conversion of Debt
Securities) (the "Preferred Securities") and the due execution,
countersignature and delivery of certificates representing Preferred Securities
and assuming that the sum of (a) all shares of Preferred Stock issued as of
the date hereof, (b) any shares of Preferred Stock issued between the date
hereof and the date on which any of the Preferred Securities are actually
issued (not including any of the Preferred Securities), and (c) the Preferred
Securities will not exceed the total number of shares of Preferred Stock that
the Company's authorized to issue, the Preferred Securities are duly authorized
and, when and if delivered against payment therefor in accordance with the
Resolutions and the Corporate Proceedings, will be validly issued, fully paid
and nonassessable.
<PAGE> 5
Sirote & Permutt, P.C.
July 15, 1997
Page 5
4. Upon the completion of all Corporate Proceedings relating to
the Securities that are Warrants, the issuance of the Warrants will be duly
authorized by all necessary corporate action and when duly executed and
delivered by the Company against payment therefor and countersigned by the
applicable Warrant Agent in accordance with the applicable Warrant Agreement and
delivered to and paid for by the purchasers of the Warrants in the manner
contemplated by the Registration Statement and/or the applicable Prospectus
Supplement, the Warrants will be validly issued.
5. Upon the completion of all Corporate Proceedings relating to the
Securities that are Debt Securities (including Debt Securities which may be
issued upon exercise of Warrants), the issuance of the Debt Securities will have
been duly authorized by all necessary corporate action.
The foregoing opinion is limited to the laws of the State of Maryland
and we do not express any opinion herein concerning any other law. The opinion
expressed herein is subject to the effect of judicial decisions which may
permit the introduction of parol evidence to modify the terms or the
interpretation of agreements. We express no opinion as to compliance with the
securities (or "blue sky") laws of the State of Maryland.
We assume no obligation to supplement this opinion if any applicable
law changes after the date hereof or if we become aware of any fact that might
change the opinion expressed herein after the date hereof.
This opinion is being furnished to you for submission to the
Commission as an exhibit to the Registration Statement and, accordingly, may
not be relied upon by, quoted in any manner to, or delivered to any other
person or entity without, in each instance, our prior written consent.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of the name of our firm therein. In
giving this consent, we do not admit that we are within the category of persons
whose consent is required by Section 7 of the 1933 Act.
Very truly yours,
/s/ Ballard Spahr Andrews & Ingersoll
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Stockholders and Board of Directors
Capstone Capital Corporation:
We consent to the use of our reports incorporated by reference herein and to the
reference to our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Birmingham, Alabama
August 29, 1997
