424(b)(3)
PROSPECTUS File No. 333-43573
$2,000,000,000
Hospitality Properties Trust
Debt Securities, Preferred Shares of Beneficial Interest, Depositary Shares,
Common Shares of Beneficial Interest and Warrants
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Hospitality Properties Trust, a Maryland real estate investment trust
(the "Company" or "HPT"), may from time to time offer in one or more series (i)
its unsecured debt securities (the "Debt Securities"), (ii) its preferred shares
of beneficial interest, without par value (the "Preferred Shares"), (iii)
fractional shares of the Preferred Shares (the "Depositary Shares"), (iv) its
common shares of beneficial interest, par value $.01 per share (the "Common
Shares"), or (v) warrants to purchase any of the above securities (the
"Warrants"), with an aggregate public offering price of up to $2,000,000,000 on
terms to be determined at the time of offering. The Debt Securities, Preferred
Shares, Depositary Shares, Common Shares and Warrants (collectively, the
"Offered Securities") may be offered, separately or together, in separate series
in amounts, at prices and on terms to be set forth in a supplement to this
Prospectus (a "Prospectus Supplement").
The specific terms of the Offered Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement and will include, where applicable: (i) in the case of Debt
Securities, the specific title, aggregate principal amount, currency, form
(which may be registered or bearer, or certificated or global), authorized
denominations, maturity, rate (or manner of calculation thereof) and time of
payment of interest, terms for redemption at the option of the Company or
repayment at the option of the holder, terms for sinking fund payments, terms
for conversion into Preferred Shares, Depositary Shares or Common Shares, terms
for subordination to other indebtedness of the Company, and any initial public
offering price; (ii) in the case of Preferred Shares, the specific title and
stated value, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; (iii) in the case of
Depositary Shares, the fractional shares of Preferred Shares represented by each
Depositary Share; (iv) in the case of Common Shares, any offering price; and (v)
in the case of Warrants, the securities to which they relate, duration, offering
price, exercise price and detachability. In addition, such specific terms may
include limitations on direct or beneficial ownership and restrictions on
transfer of the Offered Securities, in each case as may be appropriate to
preserve the status of the Company as a real estate investment trust ("REIT")
for federal income tax purposes.
The applicable Prospectus Supplement will also contain information,
where applicable, about certain United
States federal income tax considerations relating to, and any listing on a
securities exchange of, the Offered Securities covered by such Prospectus
Supplement.
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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 COM-
MISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------------
The Offered Securities may be offered directly, through agents
designated from time to time by the Company or to or through underwriters or
dealers. If any agents or underwriters are involved in the sale of any of the
Offered Securities, their names, and any applicable purchase price, fee,
commission or discount arrangement between or among them, will be set forth, or
will be calculable from the information set forth, in an accompanying Prospectus
Supplement. See "Plan of Distribution." No Offered Securities may be sold
without delivery of a Prospectus Supplement describing the method and terms of
the offering of such Offered Securities.
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The date of this Prospectus is January 15, 1998.
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus in connection with the offer contained in this Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Company or any underwriters, agents or dealers.
This Prospectus does not constitute an offer to sell or solicitation of an offer
to buy securities in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation. Neither the delivery of this Prospectus nor any
sale made hereunder shall, under any circumstances, create an implication that
there has been no change in the affairs of the Company and its subsidiaries
since the date hereof or the information contained or incorporated by reference
herein is correct at any time subsequent to the date hereof.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") in Washington, D.C., a registration statement on Form S-3
(together with all exhibits, schedules and amendments thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Offered Securities. This Prospectus, which is a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement. Statements in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and in each instance
reference is made to the copy of such contract or other documents filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference and the exhibits and schedules thereto. For
further information concerning the Company and the Offered Securities, reference
is made to the Registration Statement. Copies of the Registration Statement may
be obtained from the Commission at its principal office in Washington, D.C. upon
payment of the prescribed fee.
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 and other information with 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 can be inspected and copies obtained at the public reference
facilities maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the following regional offices of
the Commission: Chicago Regional Office, Suite 1400, 500 West Madison Street,
Chicago, Illinois 60661-2511; and New York Regional Office, Seven World Trade
Center, New York, New York 10048. Copies of such material can be obtained at
prescribed rates from the Public Reference Section of the Commission at its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. The address of the site is
http://www.sec.gov. The Company's Common Shares are traded on the New York Stock
Exchange ("NYSE") under the symbol "HPT," and similar information concerning the
Company may be inspected at the office of the NYSE at 20 Broad Street, New York,
New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission
pursuant to the Exchange Act, are hereby incorporated in this Prospectus and
specifically made a part hereof by reference: (i) the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1996 (the "Annual Report"),
(ii) the Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1997, June 30, 1997 and September 30, 1997, (iii) the Company's current
reports on Form 8-K dated April 3, 1997, May 20, 1997, November 21, 1997 and
December 9, 1997 and (iv) the Company's Registration Statement on Form 8-A dated
August 14, 1995, relating to the Common Shares. All documents filed by the
Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Prospectus and prior to the termination of the
offering of the Offered Securities shall be deemed to be incorporated by
reference into this Prospectus and to be a part hereof from the respective dates
of filing of such documents.
(ii)
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Any statement contained herein or in a document incorporated or deemed
to be incorporated herein by reference 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
subsequently filed document that also is or is deemed to be incorporated herein
by reference, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person
to whom this Prospectus is delivered, upon the written or oral request of such
person, a copy of any and all of the information that has been incorporated by
reference in this Prospectus (excluding exhibits unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Requests for such copies should be made to the Company at its
principal executive offices, 400 Centre Street, Newton, Massachusetts 02158,
Attention: Investor Relations, telephone (617) 964-8389.
(iii)
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THE COMPANY
Hospitality Properties Trust (the "Company") is a real estate
investment trust ("REIT") formed to acquire, own and lease hotels to
unaffiliated tenants. At September 30, 1997, the Company owned 93 hotels with
approximately 13,500 rooms or suites located in 29 states, purchased for
approximately $968 million. The hotels include 26 Residence Inn by Marriott(R)
hotels, 55 Courtyard by Marriott(R) hotels and 12 Wyndham(R) hotels.
The Company's business strategy is to invest in and lease hotels at
minimum rents which produce income in excess of the Company's cost of capital.
The Company provides capital to unaffiliated hotel operators who wish to divest
their properties while remaining in the hotel business as tenants. As a REIT,
the Company may not operate or manage its hotels.
The Company is organized as a Maryland real estate investment trust
under Title 8 of the Corporations and Associations Article of the Annotated Code
of Maryland (the "Maryland REIT Law"). The Company's principal place of business
is 400 Centre Street, Newton, Massachusetts 02158 and its telephone number is
(617) 964-8389.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of the Offered Securities
for general business purposes, which may include the acquisition of, or other
investments in, hotel and lodging related properties and the repayment of
indebtedness outstanding at such time or the reduction of amounts outstanding
under the Company's credit facilities. Pending utilization as set forth above,
the proceeds from the sale of the Offered Securities will be invested in short
term investments, including repurchase agreements. Such investments may not be
investment grade.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's consolidated ratios of
earnings to fixed charges for the periods indicated:
<TABLE>
<CAPTION>
February 7, 1995
(inception) to Fiscal year ended Nine Months ended For the quarter ended
December 31, 1995 December 31, 1996 September 30, 1997 September 30, 1997
<S> <C> <C> <C> <C>
Ratio of earnings to fixed charges.... 3.24x 10.15x 5.23x 4.52x
</TABLE>
The ratios of earnings to fixed charges presented above were computed
by dividing the Company's earnings by fixed charges. For this purpose, earnings
have been calculated by adding fixed charges to income before income taxes,
extraordinary items and gain or loss on the disposition of real property. Fixed
charges consist of interest costs, whether expensed or capitalized, the interest
component of rental expense, if any, amortization of debt discounts and deferred
financing costs, whether expensed or capitalized. To date, the Company has not
issued any Preferred Shares; therefore, the ratio of earnings to combined fixed
charges and Preferred Shares distributions are the same as the ratios of
earnings to fixed charges presented above.
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DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued under one or more indentures (an
"Indenture") between the Company and a trustee (an "Indenture Trustee"). Any
Indenture will be subject to, and governed by, the Trust Indenture Act of 1939,
as amended (the "TIA"). The statements made hereunder relating to any Indentures
and the Debt Securities to be issued thereunder are summaries of certain
anticipated provisions thereof and do not purport to be complete and are subject
to, and are qualified in their entirety by reference to, all provisions of the
Indentures and such Debt Securities.
General
The Company has filed with its Registration Statement with respect to
the Offered Securities a form of Indenture (as supplemented from time to time,
the "Senior Indenture") relating to the Senior Securities (as defined) and a
form of Indenture (as supplemented from time to time, the "Subordinated
Indenture") relating to the Subordinated Securities (as defined). The Debt
Securities will be direct, unsecured obligations of the Company and, if issued
under the Senior Indenture, will rank equally and ratably with other unsecured
and unsubordinated indebtedness of the Company (the "Senior Securities"), or, if
issued under the Subordinated Indenture, will be subordinated in right of
payment to the prior payment in full of Senior Indebtedness (as defined in the
applicable Prospectus Supplement) ("Subordinated Securities"). See
"--Subordination". The Debt Securities may be issued without limit as to
aggregate principal amount, in one or more series, in each case as established
from time to time in or pursuant to authority granted by a resolution of the
Board of Trustees of the Company (the "Trustees") or as established in one or
more indentures supplemental to any Indenture. All Debt Securities of one series
need not be issued at the same time and, unless otherwise provided, a series may
be reopened, without the consent of the holders of the Debt Securities of such
series, for issuances of additional Debt Securities of such series.
It is anticipated that any Indenture will provide that the Company may,
but need not, designate more than one Indenture Trustee thereunder, each with
respect to one or more series of Debt Securities. Any Indenture Trustee under
any Indenture may resign or be removed with respect to one or more series of
Debt Securities, and a successor Indenture Trustee may be appointed to act with
respect to such series. In the event that two or more persons are acting as
Indenture Trustee with respect to different series of Debt Securities, each such
Indenture Trustee shall be a trustee of a trust under the applicable Indenture
separate and apart from the trust administered by any other Indenture Trustee,
and, except as otherwise indicated herein, any action described herein to be
taken by the Indenture Trustee may be taken by each such Indenture Trustee with
respect to, and only with respect to, the one or more series of Debt Securities
for which it is Indenture Trustee under the applicable Indenture.
Reference is made to the Prospectus Supplement relating to the series
of Debt Securities being offered for the specific terms thereof, including,
where applicable, the following:
(1) the title of such Debt Securities and whether such Debt
Securities are Senior Securities or Subordinated Securities;
(2) the aggregate principal amount of such Debt Securities and any
limit on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt
Securities will be issued and, if other than the principal
amount thereof, the portion of the principal amount thereof
payable upon declaration of acceleration of the maturity
thereof, or (if applicable) the portion of the principal
amount of such Debt Securities which is convertible, or the
method by which any such portion shall be determined;
(4) if convertible, the terms on which such Debt Securities are
convertible, including the initial conversion price or rate
and the conversion period and, in connection with the
preservation of the
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Company's status as a REIT, any applicable limitations on the
ownership or transferability of the securities into which such
Debt Securities are convertible;
(5) the date or dates, or the method for determining such date or
dates, on which the principal of such Debt Securities will be
payable;
(6) the rate or rates (which may be fixed or variable), or the
method by which such rate or rates shall be determined, at
which such Debt Securities will bear interest, if any;
(7) the date or dates, or the method for determining such date or
dates, from which any interest will accrue, the dates on which
any such interest will be payable, the record dates for such
interest payment dates, or the method by which any such date
shall be determined, the person to whom such interest shall be
payable, and the basis upon which interest shall be calculated
if other than that of a 360-day year of 12 months consisting
of 30 days each;
(8) the place or places where the principal of, any premium and
interest on, and any additional amounts payable in respect of
such Debt Securities will be payable, such Debt Securities may
be surrendered for conversion or registration of transfer or
exchange and notices or demands to or upon the Company in
respect of such Debt Securities and the applicable Indenture
may be served;
(9) the period or periods within which, the price or prices at
which and the terms and conditions upon which such Debt
Securities may be redeemed, as a whole or in part, at the
option of the Company, if the Company is to have such an
option;
(10) the obligation, if any, of the Company to redeem, repay or
purchase such Debt Securities pursuant to any sinking fund or
analogous provision or at the option of a holder thereof, and
the period or periods within which, the price or prices at
which and the terms and conditions upon which such Debt
Securities will be redeemed, repaid or purchased, as a whole
or in part, pursuant to such obligation;
(11) if other than U.S. dollars, the currency or currencies in
which such Debt Securities are denominated and payable, which
may be a foreign currency or units of two or more foreign
currencies or a composite currency or currencies, and the
terms and conditions relating thereto;
(12) 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
premium, if any, 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) whether the amount of payments of principal of (and premium,
if any) or interest, if any, on such Debt Securities may be
determined with reference to an index, formula or other method
(which index, formula or method may, but need not, be based on
a currency, currencies, currency unit or units or composite
currency or currencies) and the manner in which such amounts
shall be determined;
(14) the events of default or covenants of such Debt Securities, to
the extent different from or in addition to those described
herein, and any provisions granting special rights to the
holders of such Debt Securities upon the occurrence of events
specified in such Prospectus Supplement;
(15) whether such Debt Securities will be issued in certificated
and/or book-entry form;
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(16) whether such Debt Securities will be in registered or bearer
form and, if in registered form, the denominations thereof if
other than $1,000 and any integral multiple thereof and, if in
bearer form, the denominations thereof and terms and
conditions relating thereto;
(17) whether any of such Debt Securities are to be issuable in
permanent global form (a "Global Security") and, if so, the
terms and conditions, if any, upon which interests in such
Debt Securities in global form may be exchanged, in whole or
in part, for the individual Debt Securities represented
thereby;
(18) the applicability, if any, of the defeasance and covenant
defeasance provisions described herein or any modification
thereof;
(19) if such Debt Securities are to be issued upon the exercise of
debt warrants, the time, manner and place for such Debt
Securities to be authenticated and delivered;
(20) whether and under what circumstances the Company will pay
additional amounts on such Debt Securities in respect of any
tax, assessment or governmental charge and, if so, whether the
Company will have the option to redeem such Debt Securities in
lieu of making such payment; and
(21) any other terms of such Debt Securities.
The Debt Securities may provide for less than the entire principal
amount thereof to be payable upon declaration of acceleration of the maturity
thereof ("Original Issue Discount Securities"). If material or applicable,
special U.S. federal income tax, accounting and other considerations applicable
to Original Issue Discount Securities will be described in the applicable
Prospectus Supplement.
Except as described under "--Merger, Consolidation or Sale" or as may
be set forth in any Prospectus Supplement, an Indenture will not contain any
other provisions that would limit the ability of the Company to incur
indebtedness or that would afford holders of the Debt Securities protection in
the event of a highly leveraged or similar transaction involving the Company.
However, restrictions on ownership and transfers of the Company's equity
securities, designed to preserve its status as a REIT, as well as the Company's
shareholder rights plan, may act to prevent or hinder a change of control (see
"Redemption; Trustees; Business Combinations and Control Share Acquisitions --
Rights Plan," below). Reference is made to the applicable Prospectus Supplement
for information with respect to any deletions from, modifications of or
additions to the events of default or covenants that are described below,
including any addition of a covenant or other provisions providing event risk or
similar protection.
Denominations, Interest, Registration and Transfer
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series which are registered securities, other than
registered securities issued in global form (which may be of any denomination),
shall be issuable in denominations of $1,000 and any integral multiple thereof.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and premium, if any) and interest on any series of Debt Securities
will be payable at the corporate trust office of the Indenture Trustee,
initially at the address which will be set forth in the applicable Prospectus
Supplement; provided 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 it
appears in the applicable register or by wire transfer of funds to such person
at an account maintained within the United States.
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Any interest not punctually paid or duly provided for on any interest
payment date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the holder on the applicable regular record
date and may either be paid to the person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
applicable Indenture Trustee, notice whereof shall be given to the holder of
such Debt Security not less than 10 days prior to such Special Record Date, or
may be paid at any time in any other lawful manner, all as more completely
described in the applicable Indenture.
Subject to certain limitations imposed upon Debt Securities issued in
book-entry form, the Debt Securities of any series will be exchangeable for
other Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations upon surrender of such
Debt Securities at the corporate trust office of the applicable Indenture
Trustee. In addition, subject to certain limitations imposed upon Debt
Securities issued in book-entry form, the Debt Securities of any series may be
surrendered for conversion or registration of transfer thereof at the corporate
trust office of the applicable Indenture Trustee. Every Debt Security
surrendered for conversion, registration of transfer or exchange shall be duly
endorsed or accompanied by a written instrument of transfer. No service charge
will be made for any registration of transfer or exchange of any Debt
Securities, but the Indenture Trustee or the Company may require payment of a
sum sufficient to cover any tax or other governmental charge payable in
connection therewith. If the applicable Prospectus Supplement refers to any
transfer agent (in addition to the Indenture Trustee) initially designated by
the Company with respect to any series of Debt Securities, the Company may at
any time rescind the designation of any such transfer agent or approve a change
in the location through which any such transfer agent acts, except that the
Company will be required to maintain a transfer agent in each place of payment
for such series. The Company may at any time designate additional transfer
agents with respect to any series of Debt Securities.
Neither the Company nor any Indenture Trustee shall be required to (i)
issue, register the transfer of or exchange Debt Securities of any series during
a period beginning at the opening of business 15 days before any selection of
Debt Securities of that series to be redeemed and ending at the close of
business on (a) if such Debt Securities are issuable only as registered
securities, the day of the mailing of the relevant notice of redemption and (b)
if such Debt Securities are issuable as bearer securities, the day of the first
publication of the relevant notice of redemption or, if such Debt Securities are
also issuable as registered securities and there is no publication, the mailing
of the relevant notice of redemption, or (ii) to register the transfer of or
exchange any registered security so selected for redemption in whole or in part,
except, in the case of any registered security to be redeemed in part, the
portion thereof not to be redeemed, or (iii) to exchange any bearer security so
selected for redemption except that such a bearer security may be exchanged for
a registered security of that series and like tenor; provided that such
registered security shall be simultaneously surrendered for redemption, or (iv)
to issue, register the transfer of or exchange any Debt Security which has been
surrendered for repayment at the option of the holder, except the portion, if
any, of such Debt Security not to be so repaid.
Merger, Consolidation or Sale
The Company may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other entity;
provided that (i) either the Company shall be the continuing entity or the
successor entity (if other than the Company) formed by or resulting from any
such consolidation or merger or which shall have received the transfer of such
assets shall expressly assume payment of the principal of (and premium, if any)
and interest on all of the Debt Securities and the due and punctual performance
and observance of all of the covenants and conditions contained in any
Indenture; (ii) immediately after giving effect to such transaction and treating
any indebtedness which becomes an obligation of the Company or any subsidiary as
a result thereof as having been incurred by the Company or such subsidiary at
the time of such transaction, no event of default under any Indenture, and no
event which, after notice or the lapse of time, or both, would become such an
event of default, shall have occurred and be continuing; and (iii) an officer's
certificate and legal opinion covering such conditions shall be delivered to the
Indenture Trustee.
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Certain Covenants
Existence. Except as permitted under "--Merger, Consolidation or Sale,"
the Company will be required to do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, rights
(charter and statutory) and franchises; provided, however, that the Company
shall not be required to preserve any right or franchise if it determines that
the preservation thereof is no longer desirable in the conduct of its business.
Provision of Financial Information. Whether or not the Company is
subject to Section 13 or 15(d) of the Exchange Act, the Company will, to the
extent permitted under the Exchange Act, file with the Commission the annual
reports, quarterly reports and other documents which the Company would have been
required to file with the Commission pursuant to such Section 13 or 15(d) (the
"Financial Statements") if the Company were so subject, such documents to be
filed with the Commission on or prior to the respective dates (the "Required
Filing Dates") by which the Company would have been required so to file such
documents if the Company were so subject. The Company will also in any event (i)
within 15 days of each Required Filing Date (a) transmit by mail to all holders
of Debt Securities, as their names and addresses appear in the Company's
security register, without cost to such holders, copies of the annual reports
and quarterly reports which the Company would have been required to file with
the Commission pursuant to Section 13 or 15(d) of the Exchange Act if the
Company were subject to such Sections, and (b) file with the applicable
Indenture Trustee copies of the annual reports, quarterly reports and other
documents which the Company would have been required to file with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act if the Company were subject
to such Sections, and (ii) if filing such documents by the Company with the
Commission is not permitted under the Exchange Act, promptly upon written
request and payment of the reasonable cost of duplication and delivery, supply
copies of such documents to any prospective holder of Debt Securities.
Additional Covenants. Any additional or different covenants of the
Company with respect to any series of Debt Securities will be set forth in the
Prospectus Supplement relating thereto.
Events of Default, Notice and Waiver
Each Indenture will provide that the following events are "Events of
Default" with respect to any series of Debt Securities issued thereunder: (a)
default for 30 days in the payment of any installment on any Debt Security of
such series; (b) default in the payment of the principal of (or premium, if any,
on) any Debt Security of such series at its maturity; (c) default in making any
sinking fund payments as required for any Debt Security of such series; (d)
default in the performance of any other covenant of the Company contained in the
applicable Indenture (other than a covenant added to such Indenture solely for
the benefit of a series of Debt Securities issued thereunder other than such
series), such default having continued for 60 days after written notice as
provided in such Indenture; (e) default in the payment of an aggregate principal
amount exceeding a specified dollar amount of any evidence of indebtedness of
the Company or any mortgage, indenture or other instrument under which such
indebtedness is issued or by which such indebtedness is secured, such default
having occurred after the expiration of any applicable grace period and having
resulted in the acceleration of the maturity of such indebtedness, but only if
such indebtedness is not discharged or such acceleration is not rescinded or
annulled; (f) certain events of bankruptcy, insolvency or reorganization, or
court appointment of a receiver, liquidator or trustee of the Company or any
Significant Subsidiary (as hereinafter defined) or any of their respective
property; and (g) any other event of default provided with respect to a
particular series of Debt Securities. The term "Significant Subsidiary" means
each significant subsidiary (as defined in Regulation S-X promulgated under the
Securities Act) of the Company.
If an Event of Default (other than an Event of Default described in
clause (f) above) under any Indenture with respect to Debt Securities of any
series at the time outstanding occurs and is continuing, then in every such case
the applicable Indenture Trustee or the holders of not less than a majority in
principal amount of the outstanding Debt Securities of that series may declare
the principal amount (or, if the Debt Securities of that series are Original
Issue Discount Securities or indexed securities, such portion of the principal
amount as may be specified
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in the terms thereof) of all of the Debt Securities of that series to be due and
payable immediately by written notice thereof to the Company (and to the
applicable Indenture Trustee if given by the holders). If an Event of Default
described in clause (f) above with respect to the Debt Securities of any series
at the time outstanding shall occur, the principal amount of all the Debt
Securities of that series (or, in the case of any such Original Issue Discount
Security or other Debt Security, such specified amount) will automatically, and
without any action by the Indenture Trustee or any holder of such series of Debt
Securities, become immediately due and payable. However, at any time after such
a declaration of acceleration with respect to Debt Securities of such series (or
of all Debt Securities then outstanding under the applicable Indenture, as the
case may be) has been made, but before a judgment or decree for payment of the
money due has been obtained by the applicable Indenture Trustee, the holders of
not less than a majority in principal amount of outstanding Debt Securities of
such series (or of all Debt Securities then outstanding under the applicable
Indenture, as the case may be) may rescind and annul such declaration and its
consequences if (i) the Company shall have deposited with the applicable
Indenture Trustee all required payments of the principal of (and premium, if
any) and interest on the Debt Securities of such series (or of all Debt
Securities then outstanding under the applicable Indenture, as the case may be),
plus certain fees, expenses, disbursements and advances of the applicable
Indenture Trustee, and (ii) all Events of Default, other than the non-payment of
accelerated principal (or specified portion thereof), or premium (if any) or
interest on the Debt Securities of such series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be) have been cured
or waived as provided in the applicable Indenture. Each of the Indentures will
also provide that the holders of not less than a majority in principal amount of
the outstanding Debt Securities of any series (or of all Debt Securities then
outstanding under the applicable Indenture, as the case may be) may waive any
past default with respect to such series and its consequences, except a default
(i) in the payment of the principal of (or premium, if any) or interest on any
Debt Security of such series or (ii) in respect of a covenant or provision
contained in the applicable Indenture that cannot be modified or amended without
the consent of the holder of each outstanding Debt Security affected thereby.
The Indenture Trustee will be required to give notice to the holders of
Debt Securities within 90 days of a default under the applicable Indenture
unless such default has been cured or waived; provided, however, that such
Indenture Trustee may withhold notice to the holders of any series of Debt
Securities of any default with respect to such series (except a default in the
payment of the principal of (or premium, if any) or interest on any Debt
Security of such series or in the payment of any sinking fund installment in
respect of any Debt Security of such series) if specified responsible officers
of such Indenture Trustee consider such withholding to be in the interest of
such holders.
Each Indenture will provide that no holders of Debt Securities of any
series may institute any proceedings, judicial or otherwise, with respect to the
Indenture or for any remedy thereunder, except in the case of failure of the
Indenture Trustee, for 60 days, to act after it has received a written request
to institute proceedings in respect of an event of default from the holders of
not less than a majority in principal amount of the outstanding Debt Securities
of such series, as well as an offer of reasonable indemnity. This provision will
not prevent, however, any holder of Debt Securities from instituting suit for
the enforcement of payment of the principal of (and premium, if any) and
interest on such Debt Securities at the respective due dates thereof.
Subject to provisions in the applicable Indenture relating to its
duties in case of default, no Indenture Trustee will be under any obligation to
exercise any of its rights or powers under such Indenture at the request or
direction of any holders of any series of Debt Securities then outstanding under
such Indenture, unless such holders shall have offered to the Indenture Trustee
reasonable security or indemnity. The holders of not less than a majority in
principal amount of the outstanding Debt Securities of any series (or of all
Debt Securities then outstanding under the applicable Indenture, as the case may
be) shall have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the applicable Indenture Trustee, or of
exercising any trust or power conferred upon such Indenture Trustee. However, an
Indenture Trustee may refuse to follow any direction which is in conflict with
any law or the Indenture, which may involve such Indenture Trustee in personal
liability or which may be unduly prejudicial to the holders of Debt Securities
of such series not joining therein.
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The Company will be required to deliver to each Indenture Trustee
annually a certificate, signed by one of several specified officers of the
Company, stating whether or not such officer has knowledge of any default under
the applicable Indenture and, if so, specifying each such default and the nature
and status thereof.
Modification of the Indenture
Modifications and amendments of an Indenture will be permitted to be
made only with the consent of the holders of not less than a majority in
principal amount of all outstanding Debt Securities or series of outstanding
Debt Securities which are affected by such modification or amendment; provided,
however, that no such modification or amendment may, without the consent of the
holder of each such Debt Security affected thereby, (i) change the stated
maturity of the principal of, or any installment of interest (or premium, if
any) on any such Debt Security; (ii) reduce the principal amount of, or the rate
or amount of interest on, or any premium payable on redemption of, any such Debt
Security, or reduce the amount of principal of an Original Issue Discount
Security that would be due and payable upon declaration of acceleration of the
maturity thereof or would be provable in bankruptcy, or adversely affect any
right of repayment of the holder of any such Debt Security; (iii) change the
place of payment, or the coin or currency, for payment of principal of, premium,
if any, or interest on any such Debt Security; (iv) impair the right to
institute suit for the enforcement of any payment on or with respect to any such
Debt Security; (v) reduce the above-stated percentage of outstanding Debt
Securities of any series necessary to modify or amend the Indenture, to waive
compliance with certain provisions thereof or certain defaults and consequences
thereunder or to reduce the quorum or voting requirements set forth in such
Indenture; or (vi) modify any of the foregoing provisions or any of the
provisions relating to the waiver of certain past defaults or certain covenants,
except to increase the required percentage to effect such action or to provide
that certain other provisions may not be modified or waived without the consent
of the holder of such Debt Security.
Each Indenture will provide that the holders of not less than a
majority in principal amount of a series of outstanding Debt Securities have the
right to waive compliance by the Company with certain covenants relating to such
series of Debt Securities in such Indenture.
Modifications and amendments of an Indenture will be permitted to be
made by the Company and the applicable Indenture Trustee thereunder without the
consent of any holder of Debt Securities for any of the following purposes: (i)
to evidence the succession of another person to the Company as obligor under
such Indenture; (ii) to add to the covenants of the Company for the benefit of
the holders of all or any series of Debt Securities or to surrender any right or
power conferred upon the Company in such Indenture; (iii) to add events of
default for the benefit of the holders of all or any series of Debt Securities;
(iv) to add or change any provisions of the Indenture to facilitate the issuance
of, or to liberalize certain terms of, Debt Securities in bearer form, or to
permit or facilitate the issuance of Debt Securities in uncertificated form;
provided that such action shall not adversely affect the interests of the
holders of the Debt Securities in any material respect; (v) to change or
eliminate any provisions of the Indenture; provided that any such change or
elimination shall become effective only when there are no Debt Securities
outstanding of any series created prior thereto which are entitled to the
benefit of such provision; (vi) to secure the Debt Securities; (vii) to
establish the form or terms of Debt Securities of any series, including the
provisions and procedures, if applicable, for the conversion of such Debt
Securities into Common Shares or Preferred Shares; (viii) to provide for the
acceptance of appointment by a successor Indenture Trustee or facilitate the
administration of the trusts under an Indenture by more than one Indenture
Trustee; (ix) to cure any ambiguity, defect or inconsistency in an Indenture;
provided that such action shall not adversely affect the interests of holders of
Debt Securities of any series in any material respect; or (x) to supplement any
of the provisions of an Indenture to the extent necessary to permit or
facilitate defeasance and discharge of any series of such Debt Securities;
provided that such action shall not adversely affect the interests of the
holders of the Debt Securities of any series in any material respect.
Each Indenture will provide that in determining whether the holders of
the requisite principal amount of outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of holders of Debt
Securities, (i) the principal
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amount of an Original Issue Discount Security that shall be deemed to be
outstanding shall be the amount of the principal thereof that would be due and
payable as of the date of such determination upon declaration of acceleration of
the maturity thereof, (ii) the principal amount of a Debt Security denominated
in a foreign currency that shall be deemed outstanding shall be the U.S. dollar
equivalent, determined on the issue date for such Debt Security, of the
principal amount (or, in the case of an Original Issue Discount Security, the
U.S. dollar equivalent on the issue date of such Debt Security of the amount
determined as provided in (i) above), (iii) the principal amount of an indexed
security that shall be deemed outstanding shall be the principal face amount of
such indexed security at original issuance, unless otherwise provided with
respect to such indexed security in the applicable Indenture, and (iv) Debt
Securities owned by the Company or any other obligor upon the Debt Securities or
any affiliate of the Company or of such other obligor shall be disregarded.
Each Indenture will contain provisions for convening meetings of the
holders of Debt Securities of a series. A meeting may be called at any time by
an Indenture Trustee, and also, upon request, by the Company or the holders of
at least 25% in principal amount of the outstanding Debt Securities of such
series, in any such case, upon notice given as provided in such Indenture.
Except for any consent that must be given by the holder of each Debt Security
affected by certain modifications and amendments of an Indenture, any resolution
presented at a meeting or adjourned meeting duly reconvened at which a quorum is
present may be adopted by the affirmative vote of the holders of a majority in
principal amount of the outstanding Debt Securities of that series; provided,
however, that, except as referred to above, any resolution with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that may be made, given or taken by the holders of a specified
percentage, which is less than a majority, in principal amount of the
outstanding Debt Securities of a series may be adopted at a meeting or adjourned
meeting duly reconvened at which a quorum is present by the affirmative vote of
the holders of such specified percentage in principal amount of the outstanding
Debt Securities for that series. Any resolution passed or decision taken at any
meeting of holders of Debt Securities of any series duly held in accordance with
the applicable Indenture will be binding on all holders of Debt Securities of
that series. The quorum at any meeting called to adopt a resolution, and at any
reconvened meeting, will be persons holding or representing a majority in
principal amount of the outstanding Debt Securities of a series; provided,
however, that if any action is to be taken at such meeting with respect to a
consent or waiver which may be given by the holders of not less than a specified
percentage in principal amount of the outstanding Debt Securities of a series,
the persons holding or representing such specified percentage in principal
amount of the outstanding Debt Securities of such series will constitute a
quorum.
Notwithstanding the foregoing provisions, each Indenture will provide
that if any action is to be taken at a meeting of holders of Debt Securities of
any series with respect to any request, demand, authorization, direction,
notice, consent, waiver or other action that such Indenture expressly provides
may be made, given or taken by the holders of such series and one or more
additional series: (i) there shall be no minimum quorum requirement for such
meeting and (ii) the principal amount of the outstanding Debt Securities of such
series that vote in favor of such request, demand, authorization, direction,
notice, consent, waiver or other action shall be taken into account in
determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under such
Indenture.
Discharge, Defeasance and Covenant Defeasance
The Company may discharge certain obligations to holders of any series
of Debt Securities that have not already been delivered to the applicable
Indenture Trustee for cancellation and that either have become due and payable
or will become due and payable within one year (or scheduled for redemption
within one year) by irrevocably depositing with such Indenture Trustee, in
trust, funds in such currency or currencies, currency unit or units or composite
currency or currencies in which such Debt Securities are payable in an amount
sufficient to pay the entire indebtedness on such Debt Securities in respect of
principal (and premium, if any) and interest to the date of such deposit (if
such Debt Securities have become due and payable) or to the stated maturity or
redemption date, as the case may be.
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An Indenture may provide that, if certain provisions thereof are made
applicable to the Debt Securities of or within a series pursuant to the
Indenture, the Company may elect either (i) to defease and be discharged from
any and all obligations with respect to such Debt Securities (except for the
obligation to pay additional amounts, if any, upon the occurrence of certain
events of tax, assessment or governmental charge with respect to payments on
such Debt Securities and the obligations to register the transfer or exchange of
such Debt Securities, to replace temporary or mutilated, destroyed, lost or
stolen Debt Securities, to maintain an office or agency in respect of such Debt
Securities and to hold moneys for payment in trust) ("defeasance") or (ii) to be
released from its obligations with respect to such Debt Securities under certain
sections of such Indenture (including the restrictions described under
"--Certain Covenants") and, if provided pursuant to such Indenture, its
obligations with respect to any other covenant, and any omission to comply with
such obligations shall not constitute a default or an event of default with
respect to such Debt Securities ("covenant defeasance"), in either case upon the
irrevocable deposit by the Company with the applicable Indenture Trustee, in
trust, of an amount, in such currency or currencies, currency unit or units of
composite currency or currencies in which such Debt Securities are payable at
stated maturity, or Government Obligations (as defined below), or both,
applicable to such Debt Securities which through the scheduled payment of
principal and interest, in accordance with their terms will provide money in an
amount sufficient to pay the principal of (and premium, if any) and interest on
such Debt Securities, and any mandatory sinking fund or analogous payments
thereon, on the scheduled dates therefor.
Such a trust may be established only if, among other things, the
Company has delivered to the applicable Indenture Trustee an opinion of counsel
(as specified in the applicable Indenture) to the effect that the holders of
such Debt Securities will not recognize income, gain or loss for U.S. federal
income tax purposes as a result of such defeasance or covenant defeasance and
will be subject to U.S. federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such defeasance or
covenant defeasance had not occurred.
"Government Obligations" means securities which are (i) direct
obligations of the United States of America or the government which issued the
foreign currency in which the Debt Securities of a particular series are
payable, for the payment of which its full faith and credit is pledged or (ii)
obligations of a person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which issued
the foreign currency in which the Debt Securities of a particular series are
payable, the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America or such other government,
which, in either case, are not callable or redeemable at the option of the
issuer thereof, and shall also include a depository receipt issued by a bank or
trust company as custodian with respect to any such Government Obligation or a
specific payment of interest on or principal of any such Government Obligation
held by such custodian for the account of the holder of a depository receipt;
provided that (except as required by law) such custodian is not authorized to
make any deduction from the amount payable to the holder of such depository
receipt from any amount received by the custodian in respect of the Government
Obligations or the specific payment of interest on or principal of the
Government Obligations evidenced by such depository receipt.
Unless otherwise provided in the applicable Prospectus Supplement, if
after the Company has deposited funds and/or Government Obligations to effect
defeasance or covenant defeasance with respect to Debt Securities of any series,
(i) the holder of a Debt Security of such series is entitled to, and does, elect
pursuant to the applicable Indenture or the terms of such Debt Security to
receive payment in a currency, currency unit or composite currency other than
that in which such deposit has been made in respect of such Debt Security, or
(ii) a Conversion Event (as defined below) occurs in respect of the currency,
currency unit or composite currency in which such deposit has been made, the
indebtedness represented by such Debt Security shall be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium, if any) and interest on such Debt Security as they become due out
of the proceeds yielded by converting the amount so deposited in respect of such
Debt Security into the currency, currency unit or composite currency in which
such Debt Security becomes payable as a result of such election or such
cessation of usage based on the applicable market exchange rate. "Conversion
Event" means the cessation of use of (i) a currency, currency unit or composite
currency both by the government of the country which issued such currency and
for the settlement of transactions by a central bank or other public
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institutions of or within the international banking community, (ii) the ECU both
within the European Monetary System and for the settlement of transactions by
public institutions of or within the European Communities or (iii) any currency
unit or composite currency other than the ECU for the purposes for which it was
established. Unless otherwise provided in the applicable Prospectus Supplement,
all payments of principal of (and premium, if any) and interest on any Debt
Security that is payable in a foreign currency that ceases to be used by its
government of issuance shall be made in U.S. dollars.
In the event the Company effects covenant defeasance with respect to
any Debt Securities and such Debt Securities are declared due and payable
because of the occurrence of any event of default other than the event of
default described in clause (d) under "--Events of Default, Notice and Waiver"
with respect to certain sections of the applicable Indenture (which sections
would no longer be applicable to such Debt Securities) or described in clause
(g) under "--Events of Default, Notice and Waiver" with respect to any other
covenant as to which there has been covenant defeasance, the amount in such
currency, currency unit or composite currency in which such Debt Securities are
payable, and Government Obligations on deposit with the Trustee, will be
sufficient to pay amounts due on such Debt Securities at the time of their
stated maturity but may not be sufficient to pay amounts due on such Debt
Securities at the time of the acceleration resulting from such event of default.
However, the Company would remain liable to make payment of such amounts due at
the time of acceleration.
Notwithstanding the description set forth under "--Subordination"
below, in the event that the Company deposits money or Government Obligations in
compliance with the applicable Indenture in order to defease all or certain of
its obligations with respect to any Subordinated Securities, the moneys or
Government Obligations so deposited will not be subject to the subordination
provisions of such Indenture and the indebtedness evidenced by such Subordinated
Securities will not be subordinated in right of payment to the holders of senior
indebtedness to the extent of the moneys or Government Obligations so deposited.
The applicable Prospectus Supplement may further describe the
provisions, if any, permitting such defeasance or covenant defeasance, including
any modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
Conversion Rights
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common or Preferred Shares will be set forth in the Prospectus
Supplement relating thereto. Such terms will include whether such Debt
Securities are convertible into Common or Preferred Shares, the conversion price
(or manner of calculation thereof), the conversion period, provisions as to
whether conversion will be at the option of the holders of the Company, the
events requiring an adjustment of the conversion price and provisions affecting
conversion in the event of the redemption of such Debt Securities and any
restrictions on conversion, including restrictions directed at maintaining the
Company's REIT status.
Subordination
The terms and conditions, if any, upon which Subordinated Securities of
a series are subordinated to Debt Securities of other series or to other
indebtedness of the Company will be set forth in the applicable Prospectus
Supplement relating thereto. Such terms will include a description of the
indebtedness ranking senior to such Subordinated Securities, the restrictions on
payments to the holders of such Subordinated Securities while a default with
respect to such senior indebtedness is continuing, the restrictions, if any, on
payments to the holders of such Subordinated Securities following an Event of
Default, and provisions requiring holders of such Subordinated Securities to
remit certain payments to holders of senior indebtedness.
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Global Securities
If so set forth in the applicable Prospectus Supplement, 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 identified in the applicable Prospectus Supplement relating to such
series. Global Securities may be issued in either registered or bearer form and
in either temporary or permanent form. The specific terms of the depositary
arrangement with respect to any such series of Debt Securities will be described
in the related Prospectus Supplement.
DESCRIPTION OF SHARES
The Declaration of Trust ("Declaration") authorizes the Company to
issue an aggregate of 200,000,000 shares of beneficial interest ("Shares") in
the Company, including (i) 100,000,000 Common Shares, par value $.01 per share,
and (ii) 100,000,000 Preferred Shares, without par value. As of December 22,
1997 there were 38,878,295 Shares outstanding, all of which were Common Shares.
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 Declaration. Capitalized terms not defined
herein are as defined in the Declaration.
The Declaration authorizes the Trustees to cause the issuance, without
shareholder approval, of classes or series of Preferred Shares from time to time
and to set (or change, if the class or series has been previously established)
the par value, if any, the preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms and
conditions of redemption of such Preferred Shares as are not prohibited by the
Declaration or applicable law. In connection with the adoption of the Company's
shareholders rights plan (see "Redemption; Trustees; Business Combinations and
Control Share Acquisitions -- Rights Plan," below), the Trustees established an
authorized but unissued class of 1,000,000 Preferred Shares, par value $.01 per
share (the "Junior Participating Preferred Shares"), described more fully below
under "Description of Preferred Shares --Junior Participating Preferred Shares,"
and as of December 22, 1997 no other class or series of Preferred Shares had
been established.
Except as otherwise determined by the Trustees with respect to any
class or series of Preferred Shares, all Shares: (i) will participate equally in
dividends payable to shareholders when, as and if declared by the Company and
ratably in net assets available for distribution to shareholders on liquidation
or dissolution; (ii) will have one vote per share on all matters submitted to a
vote of the shareholders, (iii) will not have cumulative voting rights in the
election of Trustees; and (iv) will have no preference, conversion, exchange,
sinking fund, redemption rights or preemptive or similar rights.
Upon issuance in accordance with the Declaration, applicable law and
the terms and conditions described in the related Prospectus Supplement, the
Shares will be fully paid and nonassessable. The holders of Shares do not have
preemptive rights with respect to the issuance of additional Shares or other
securities of the Company.
The Board of Trustees may, without shareholder approval, amend the
Declaration in order to increase the Company's authorized shares. Authorized but
unissued Shares will be available for issuance from time to time by the Company
at the sole discretion of its Board of Trustees for any proper purpose, which
could include raising capital, providing compensation or benefits to employees
and others, paying stock dividends or acquiring companies, businesses or
properties. The issuance of such unissued Shares could have the effect of
diluting the earnings per share and book value per share of currently
outstanding Shares.
For certain other information with respect to the Shares, see
"Limitation of Liabilities; Shareholder Liability" and "Redemption; Trustees;
Business Combinations and Control Share Acquisitions" below.
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DESCRIPTION OF PREFERRED SHARES
The following description of the Preferred Shares sets forth certain
general terms and provisions of the Preferred Shares to which any Prospectus
Supplement may relate. The statements below describing the Preferred Shares are
in all respects subject to and qualified in their entirety by reference to the
applicable provisions of the Declaration (including any applicable articles
supplementary) and By-Laws.
General
Subject to limitations prescribed by Maryland law and the Declaration,
the Trustees are authorized to cause the issuance, without shareholder approval,
of classes or series of Preferred Shares and to fix the number of shares
constituting each such class or series of Preferred Shares and the designations
and powers, par value, if any, preferences and relative, participating, optional
or other specific rights and qualifications, limitations or restrictions
thereof, including such provisions as may be desired concerning voting,
redemption, dividends, dissolution or the distribution of assets, conversion or
exchange, and such other subjects or matters as may be fixed by resolutions of
the Trustees.
Reference is made to the Prospectus Supplement relating to the
Preferred Shares offered thereby for specific terms, including:
(1) the title of such Preferred Shares;
(2) the number of shares of such Preferred Shares offered, the par
value, if any, the liquidation preference per share and the
offering price of such Preferred Shares;
(3) the dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred
Shares;
(4) the date from which dividends on such Preferred Shares shall
accumulate, if applicable;
(5) the procedures for any auction and remarketing, if any, for
such Preferred Shares;
(6) the provision for a sinking fund, if any, for such Preferred
Shares;
(7) the provision for redemption, if applicable, of such Preferred
Shares;
(8) any listing of such Preferred Shares on any securities
exchange;
(9) the terms and conditions, if applicable, upon which such
Preferred Shares will be convertible into Common Shares of the
Company or another series of Offered Securities, including the
conversion price (or manner of calculation thereof);
(10) whether interests in such Preferred Shares will be represented
by Depositary Shares as more fully described below under
"Description of Depositary Shares";
(11) any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Shares;
(12) a discussion of federal income tax considerations applicable
to such Preferred Shares;
(13) the relative ranking and preferences of such Preferred Shares
as to dividend rights and rights upon liquidation, dissolution
or winding up of the affairs of the Company;
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(14) any limitations on issuance of any series of Preferred Shares
ranking senior to or on a parity with such series of Preferred
Shares as to dividend rights and rights upon liquidation,
dissolution or winding up of the affairs of the Company; and
(15) 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.
As described under "Description of Depositary Shares," the Company may,
at its option, elect to offer Depositary Shares evidenced by depositary receipts
("Depositary Receipts"), each representing a fractional interest (to be
specified in the Prospectus Supplement relating to the particular series of the
Preferred Shares) in a share of the particular series of the Preferred Shares
issued and deposited with a Depositary (as defined below).
Rank
Unless otherwise determined by the Trustees and specified in the
applicable Prospectus Supplement, it is expected that the Preferred Shares will,
with respect to dividend rights and rights upon liquidation, dissolution or
winding up of the Company, rank (i) senior to all Common Shares, and to all
equity securities ranking junior to such Preferred Shares; (ii) on a parity with
all equity securities issued by the Company the terms of which specifically
provide that such equity securities rank on a parity with the Preferred Shares;
and (iii) junior to all equity securities issued by the Company the terms of
which specifically provide that such equity securities rank senior to the
Preferred Shares.
Dividends
Holders of Preferred Shares of each series shall be entitled to
receive, when, as and if declared by the Company, out of assets of the Company
legally available for payment, cash dividends at such rates and on such dates as
will be set forth in the applicable Prospectus Supplement. Each such dividend
shall be payable to holders of record as they appear on the share transfer books
of the Company (or, if applicable, on the records of the Depositary referred to
below under "Description of Depositary Shares") on such record dates as shall be
fixed by the Trustees.
Dividends on any series of the Preferred Shares may be cumulative or
noncumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Trustees fail to declare a dividend
payable on a dividend payment date on any series of the Preferred Shares for
which dividends are noncumulative, then the holders of such series of the
Preferred Shares will have no right to receive a dividend in respect of the
dividend period ending on such dividend payment date, and the Company will have
no obligation to pay the dividend accrued for such period, whether or not
dividends on such series are declared payable on any future dividend payment
date.
If Preferred Shares of any series are outstanding, no full dividends
shall be declared or paid or set apart for payment on the Preferred Shares of
the Company of any other series ranking, as to dividends, on a parity with or
junior to the Preferred Shares of such series for any period unless (i) if such
series of Preferred Shares has a cumulative dividend, full cumulative dividends
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the Preferred
Shares of such series for all past dividend periods and the then current
dividend period or (ii) if such series of Preferred Shares does not have a
cumulative dividend, full dividends for the then current dividend period have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Preferred Shares of
such series. When dividends are not paid in full (or a sum sufficient for such
full payment is not so set apart) upon the Preferred Shares of any series and
the shares of any other series of Preferred Shares ranking on a parity as to
dividends with the Preferred Shares of such series, all dividends declared upon
Preferred Shares of such series and any other series of Preferred Shares shall
in all cases bear to each other the same ratio that accrued dividends per share
on the Preferred Shares of such series (which shall not include any accumulation
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in respect of unpaid dividends for prior dividend periods if such Preferred
Shares do not have a cumulative dividend) and such other series of Preferred
Shares bear to each other. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments on Preferred
Shares of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i)
if such series of Preferred Shares has a cumulative dividend, full cumulative
dividends on the Preferred Shares of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the repayment thereof
set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Shares does not have a
cumulative dividend, full dividends on the Preferred Shares of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for payment for the then current dividend
period, no dividends (other than in Common Shares or other shares of beneficial
interest ranking junior to the Preferred Shares of such series as to dividends
and upon liquidation) shall be declared or paid or set aside for payment and no
other distribution shall be declared or made upon the Common Shares or any other
shares of beneficial interest of the Company ranking junior to or on a parity
with the Preferred Shares of such series as to dividends or upon liquidation,
nor shall any Common Shares or any other shares of beneficial interest of the
Company ranking junior to or on a parity with the Preferred Shares of such
series as to dividends or upon liquidation be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for a
sinking fund for the redemption of any shares of any such stock) by the Company
(except by conversion into or exchange for other shares of beneficial interest
of the Company ranking junior to the Preferred Shares of such series as to
dividends and upon liquidation and except pursuant to certain pro rata offers to
purchase or a concurrent redemption of all, or a pro rata portion of, the
outstanding shares of the Preferred Shares of such series and any other series
of Preferred Shares ranking on a parity with such series as to dividends and
liquidation).
Any dividend payment made on shares of a series of Preferred Shares
shall first be credited against the earliest accrued but unpaid dividend due
with respect to shares of such series which remains payable.
Redemption
If so provided in the applicable Prospectus Supplement, the Preferred
Shares will be subject to mandatory redemption or redemption at the option of
the Company, as a whole or in part, in each case upon the terms, at the times
and at the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Shares that
is subject to mandatory redemption will specify the number of such Preferred
Shares that shall be redeemed by the Company in each year commencing after a
date to be specified, at a redemption price per share to be specified, together
with an amount equal to all accrued and unpaid dividends thereon (which shall
not, if such Preferred Shares do not have a cumulative dividend, include any
accumulation in respect of unpaid dividends for prior dividend periods) to the
date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Shares of any series is payable only from the net
proceeds of the issuance of shares of beneficial interest of the Company, the
terms of such Preferred Shares may provide that, if no such shares shall have
been issued or to the extent the net proceeds from any issuance are insufficient
to pay in full the aggregate redemption price then due, such Preferred Shares
shall automatically and mandatorily be converted into shares of the applicable
class of beneficial interest of the Company pursuant to conversion provisions
specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred
Shares has a cumulative dividend, full cumulative dividends on all shares of any
series of Preferred Shares shall have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for all past dividend periods and the then current dividend period, and
(ii) if such series of Preferred Shares does not have a cumulative dividend,
full dividends on the Preferred Shares of any series have been or
contemporaneously are
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declared and paid or declared and a sum sufficient for the payment thereof set
apart for payment for the then current dividend period, no shares of any series
of Preferred Shares shall be redeemed unless all outstanding Preferred Shares of
such series are simultaneously redeemed; provided, however, that the foregoing
shall not prevent the purchase or acquisition of Preferred Shares of such series
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding Preferred Shares of such series, and, unless (i) if such series
of Preferred Shares has a cumulative dividend, full cumulative dividends on all
outstanding shares of any series of Preferred Shares have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period, and (ii) if such series of Preferred Shares does not
have a cumulative dividend, full dividends on the Preferred Shares of any series
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for the then current
dividend period, the Company shall not purchase or otherwise acquire directly or
indirectly any Preferred Shares of such series (except by conversion into or
exchange for shares of beneficial interest of the Company ranking junior to the
Preferred Shares of such series as to dividends and upon liquidation).
If fewer than all of the outstanding Preferred Shares of any series are
to be redeemed, the number of Preferred Shares to be redeemed will be determined
by the Company and such shares may be redeemed pro rata from the holders of
record of such shares in proportion to the number of such shares held by such
holders (with adjustments to avoid redemption of fractional shares) or by lot in
manner determined by the Company.
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each holder of record of Preferred Shares
of any series to be redeemed at the address shown on the share transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Shares to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such Preferred
Shares are to be surrendered for payment of the redemption price; (v) that
dividends on the shares to be redeemed will cease to accrue on such redemption
date; and (vi) the date upon which the holder's conversion rights, if any, as to
such shares shall terminate. If fewer than all the Preferred Shares of any
series are to be redeemed, the notice mailed to each such holder thereof shall
also specify the number of Preferred Shares to be redeemed from each such
holder. If notice of redemption of any Preferred Shares has been given and if
the funds necessary for such redemption have been set aside by the Company in
trust for the benefit of the holders of any of the Preferred Shares so called
for redemption, then from and after the redemption date dividends will cease to
accrue on such Preferred Shares, and any and all rights of the holders of such
shares will terminate, except the right to receive the redemption price.
Liquidation Preference
Upon any voluntary or involuntary liquidation, dissolution or winding
up of the affairs of the Company, then, before any distribution or payment shall
be made to the holders of any Common Shares or any other class or series of
shares of beneficial interest of the Company ranking junior to the Preferred
Shares in the distribution of assets upon any liquidation, dissolution or
winding up of the Company, the holders of each series of Preferred Shares shall
be entitled to receive out of assets of the Company legally available for
distribution to shareholders liquidating distributions in the amount of the
liquidation preference per share (set forth in the applicable Prospectus
Supplement), plus an amount equal to all dividends accrued and unpaid thereon
(which shall not include any accumulation in respect of unpaid dividends for
prior dividend periods if such Preferred Shares do not have a cumulative
dividend). After payment of the full amount of the liquidating distributions to
which they are entitled, the holders of Preferred Shares will have no right or
claim to any of the remaining assets of the Company. In the event that upon any
such voluntary or involuntary liquidation, dissolution or winding up, the
available assets of the Company are insufficient to pay the amount of the
liquidating distributions on all outstanding Preferred Shares and the
corresponding amounts payable on all shares of other classes or series of shares
of beneficial interest of the Company ranking on a parity with the Preferred
Shares in the distribution of assets, then the holders of the Preferred Shares
and all other such classes or series of shares of beneficial interest shall
share ratably in any such distribution of assets in proportion to the full
liquidating distributions to which they would otherwise be respectively
entitled.
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If liquidating distributions shall have been made in full to all
holders of Preferred Shares, the remaining assets of the Company shall be
distributed among the holders of any other classes or series of shares of
beneficial interest ranking junior to the Preferred Shares upon liquidation,
dissolution or winding up, according to their respective rights and preferences
and in each case according to their respective number of shares. For such
purposes, the consolidation or merger of the Company with or into any other
trust or corporation, or the sale, lease or conveyance of all or substantially
all of the property or business of the Company, shall not be deemed to
constitute a liquidation, dissolution or winding up of the Company.
Voting Rights
Holders of the Preferred Shares will not have any voting rights, except
as set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, at any
time dividends on any Preferred Shares shall be in arrears for six consecutive
quarterly periods, the holders of such Preferred Shares (voting separately as a
class with all other series of preferred shares upon which like voting rights
have been conferred and are exercisable) will be entitled to vote for the
election of two additional trustees of the Company at the next annual meeting of
shareholders and at each subsequent meeting until (i) if such series of
Preferred Shares has a cumulative dividend, all dividends accumulated on such
Preferred Shares for the past dividend periods and the then current dividend
period shall have been fully paid or declared and a sum sufficient for the
payment thereof set aside for payment or (ii) if such series of Preferred Shares
does not have a cumulative dividend, four consecutive quarterly dividends shall
have been fully paid or declared and a sum sufficient for the payment thereof
set aside for payment. In such case, the entire Board of Trustees of the Company
will be increased by two trustees.
Unless provided otherwise for any series of Preferred Shares, so long
as any Preferred Shares remain outstanding, the Company shall not, without the
affirmative vote or consent of the holders of a majority of the shares of each
series of Preferred Shares outstanding at the time, given in person or by proxy,
either in writing or at a meeting (such series voting separately as a class),
(i) authorize or create, or increase the authorized or issued amount of, any
class or series of shares of beneficial interest ranking prior to such series of
Preferred Shares with respect to payment of dividends or the distribution of
assets upon liquidation, dissolution or winding up, or reclassify any authorized
shares of beneficial interest of the Company into any such shares, or create,
authorize or issue any obligation or security convertible into or evidencing the
right to purchase any such shares; or (ii) amend, alter or repeal the provisions
of the Declaration or the articles supplementary for such series of Preferred
Shares, whether by merger, consolidation or otherwise, so as to materially and
adversely affect any right, preference, privilege or voting power of such series
of Preferred Shares or the holders thereof; provided, however, that any increase
in the amount of the authorized Preferred Shares or the creation or issuance of
any other series of Preferred Shares, or any increase in the amount of
authorized shares of such series or any other series of Preferred Shares, in
each case ranking on a parity with or junior to the Preferred Shares of such
series with respect to payment of dividends or the distribution of assets upon
liquidation, dissolution or winding up, shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting powers.
The foregoing voting provisions will not apply if, at or prior to the
time when the act with respect to which such vote would otherwise be required
shall be effected, all outstanding shares of such series of Preferred Shares
shall have been redeemed or called for redemption and sufficient funds shall
have been deposited in trust to effect such redemption.
As more fully described under "Description of Depositary Shares" below,
if the Company elects to issue Depositary Shares, each representing a fraction
of share of a series of the Preferred Shares, each such Depositary will in
effect be entitled to such fraction of a vote per Depositary Share.
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Conversion Rights
The terms and conditions, if any, upon which shares of any series of
Preferred Shares may be converted into or exchanged for Common Shares or another
series of Preferred Shares or other series of Offered Securities will be set
forth in the Prospectus Supplement relating thereto. Such terms will include the
number of Common Shares or other securities into which the Preferred Share is
convertible or exchangeable, conversion or exchange price (or manner of
calculation thereof), the conversion or exchange period, provisions as to
whether conversion or exchange will be at the option of the holders of the
Preferred Shares or the Company, the events requiring an adjustment of the
conversion or exchange price and provisions affecting conversion or exchange in
the event of the redemption of such Preferred Shares.
Junior Participating Preferred Shares
In connection with the adoption of the Company's shareholders rights
plan, the Trustees established an authorized but unissued class of 1,000,000
Junior Participating Preferred Shares. See "Redemption; Trustees; Business
Combinations and Control Share Acquisitions" below. Certain powers, preferences
and rights and certain qualifications, limitations and restrictions of the
Junior Participating Preferred Shares, when and if issued, are as follows. The
statements below with respect to the Junior Participating Preferred Shares are
in all respects subject to and qualified in their entirety by reference to the
applicable provisions of the Declaration (including the applicable articles
supplementary) and By-Laws.
The holder of each Junior Participating Preferred Share is entitled to
quarterly dividends in the greater amount of $5.00 or 100 times the quarterly
per share dividend, whether cash or otherwise, declared upon the Common Shares.
Dividends on the Junior Participating Preferred Shares are cumulative. Whenever
dividends on the Junior Participating Preferred Shares are in arrears, the
Company, among other things, is prohibited from declaring or paying dividends,
making other distributions on, or redeeming or repurchasing Common Shares or
other Shares ranking junior to the Junior Participating Preferred Shares, and
upon failure of the Company to pay such dividends for six quarters, the holders
of the Junior Participating Preferred Shares will be entitled to elect two
trustees. The holder of each Junior Participating Preferred Share is entitled to
100 votes on all matters submitted to a vote of the shareholders, voting (unless
otherwise provided in the Declaration or by law) together with holders of Common
Shares as one class. Upon liquidation, dissolution or winding up of the Company,
the holders of Junior Participating Preferred Shares are entitled to a
liquidation preference of $100 per share plus the amount of any accrued and
unpaid dividends and distributions thereon (the "Liquidation Preference"), prior
to payment of any distribution in respect of the Common Shares or any other
Shares ranking junior to the Junior Participating Preferred Shares. Following
payment of the Liquidation Preference, the holders of Junior Participating
Preferred Shares are not entitled to further distributions until the holders of
Common Shares shall have received an amount per share (the "Common Share
Adjustment") equal to the Liquidation Preference divided by 100 (adjusted to
reflect events such as share splits, share dividends and recapitalizations
affecting the Common Shares) (the "Adjustment Number"). Following the payment of
the full amount of the Liquidation Preference and the Common Share Adjustment,
holders of Junior Participating Preferred Shares are entitled to participate
proportionately on a per share basis with holders of Common Shares in the
distribution of the remaining assets to be distributed in respect of Shares in
the ratio of the Adjustment Number to one, respectively. The powers, preferences
and rights of the Junior Participating Preferred Shares are subject to the
superior powers, preferences and rights of any senior series or class of
Preferred Shares which the Trustees shall, from time to time, authorize and
issue.
DESCRIPTION OF DEPOSITARY SHARES
General
The description set forth below and in any applicable Prospectus
Supplement of certain provisions of any Deposit Agreement (as defined below) and
of the Depositary Shares and Depositary Receipts does not purport to be complete
and is subject to and qualified in its entirety by reference to the forms of
Deposit Agreement and
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Depositary Receipts relating to each series of the Preferred Shares which have
been or will be filed with the Commission at or prior to the time of the
offering of such series of the Preferred Shares.
The Company may, at its option, elect to offer fractional interests in
shares of Preferred Shares, rather than shares of Preferred Shares. In the event
such option is exercised, the Company will provide for the issuance by a
Depositary (as defined below) to the public of receipts for Depositary Shares,
each of which will represent a fractional interest to be set forth in the
Prospectus Supplement relating to a particular series of the Preferred Shares
which will be filed with the Commission at or prior to the time of the offering
of such series of the Preferred Shares as described below. Preferred Shares of
each series represented by Depositary Shares will be deposited under a separate
deposit agreement (each, a "Deposit Agreement") among the Company and the
depositary named therein (a "Depositary"). The Prospectus Supplement relating to
a series of Depositary Shares will set forth the name and address of the
Depositary. Subject to the terms of the applicable Deposit Agreement, each owner
of a Depositary Share will be entitled, in proportion to the fractional interest
of a share of a particular series of Preferred Shares represented by such
Depositary Share, to all the rights and preferences of the Preferred Shares
represented by such Depositary Shares (including dividend, voting, conversion,
redemption and liquidation rights).
The Depositary Shares will be evidenced by Depositary Receipts issued
pursuant to the applicable Deposit Agreement. Upon surrender of Depositary
Receipts at the office of the Depositary and upon payment of the charges
provided in the Deposit Agreement and subject to the terms thereof, a holder of
Depositary Shares is entitled to have the Depositary deliver to such holder the
whole shares of Preferred Shares underlying the Depositary Shares evidenced by
the surrendered Depositary Receipts.
Dividends and Other Distributions
A Depositary will be required to distribute all cash dividends or other
cash distributions received in respect of the applicable Preferred Shares to the
record holders of Depositary Receipts evidencing the related Depositary Shares
in proportion to the number of such Depositary Receipts owned by such holders,
subject to certain obligations of holders to file proofs, certificates and other
information and to pay certain charges and expenses to such Depositary.
Fractions will be rounded down to the market whole cent.
In the event of a distribution other than in cash, a Depositary will be
required to distribute property received by it to the record holders of
Depositary Receipts entitled thereto, subject to certain obligations of holders
to file proofs, certificates and other information and to pay certain charges
and expenses to such Depositary, unless such Depositary determines that it is
not feasible to make such distribution, in which case such Depositary may, with
the approval of the Company, sell such property and distribute the net proceeds
from such sale to such holders.
No distributions will be made in respect of any Depositary Share to the
extent that it represents any Preferred Shares which have been converted or
exchanged. The Deposit Agreement will also contain provisions relating to the
manner in which any subscription or similar rights offered by the Company to
holders of the Preferred Shares shall be made available to holders of Depositary
Shares.
Redemption of Depositary Shares
If a series of the Preferred Shares underlying the Depositary Shares is
subject to redemption, the Depositary Shares will be redeemed from the proceeds
received by the Depositary resulting from the redemption, in whole or in part,
of such series of the Preferred Shares held by the Depositary. The Depositary
shall mail notice of redemption not less than 30 and not more than 60 days prior
to the date fixed for redemption to the record holders of the Depositary
Receipts evidencing the Depositary Shares to be so redeemed at their respective
addresses appearing in the Depositary's books. The redemption price per
Depositary Share will be equal to the applicable fraction of the redemption
price per share payable with respect to such series of the Preferred Shares.
Whenever the Company redeems shares of Preferred Shares held by the Depositary,
the Depositary will redeem as of the same redemption date the number of
Depositary Shares relating to shares of Preferred Shares so redeemed. If less
than
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all of the Depositary Shares are to be redeemed, the Depositary Shares to be
redeemed will be selected by lot or pro rata as may be determined by the
Depositary.
After the date fixed for redemption, the Depositary Shares so called
for redemption will no longer be deemed to be outstanding and all rights of the
holders of the Depositary Shares and the related Depositary Receipts will cease,
except the right to receive the moneys payable upon such redemption and any
money or other property to which the holders of such Depositary Shares were
entitled upon such redemption upon surrender to the Depositary of the Depositary
Receipts evidencing such Depositary Shares.
Voting of the Preferred Shares
Upon receipt of notice of any meeting at which the holders of the
applicable Preferred Shares are entitled to vote, a Depositary will be required
to mail the information contained in such notice of meeting to the record
holders of the Depositary Receipts evidencing the Depositary Shares which
represent such Preferred Shares. Each record holder of Depositary Receipts
evidencing Depositary Shares on the record date (which will be the same date as
the record date for the Preferred Shares) will be entitled to instruct such
Depositary as to the exercise of the voting rights pertaining to the amount of
Preferred Shares represented by such holder's Depositary Shares. Such Depositary
will endeavor, insofar as practical, to vote the amount of Preferred Shares
represented by such Depositary Shares in accordance with such instructions, and
the Company will agree to take all reasonable action which may be deemed
necessary by such Depositary in order to enable such Depositary to do so. Such
Depositary will be required to abstain from voting the amount of Preferred
Shares represented by such Depositary Shares to the extent it does not receive
specific instructions from the holders of Depositary Receipts evidencing such
Depositary Shares. The Depositary will not be responsible for any failure to
carry out any instruction to vote, or for the manner or effect of any such vote
made, as long as such action or non-action is in good faith and does not result
from gross negligence or willful misconduct of such Depositary.
Liquidation Preference
In the event of the liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, the holders of each Depositary Share
will be entitled to the fraction of the liquidation preference accorded each
Preferred Share represented by such Depositary Share, as set forth in the
applicable Prospectus Supplement.
Conversion of Preferred Shares
The Depositary Shares, as such, will not be convertible into or
exchangeable for Common Shares, Preferred Shares or any other securities or
property of the Company. Nevertheless, if so specified in the applicable
Prospectus Supplement relating to an offering of Depositary Shares, the
Depositary Receipts may be surrendered by holders thereof to the applicable
Depositary with written instructions to such Depositary to instruct the Company
to cause conversion or exchange of the Preferred Shares represented by the
Depositary Share evidenced by such Depositary Receipts into Common Shares, other
shares of Preferred Shares of the Company or such other securities as shall be
provided therein, and the Company will agree that upon receipt of such
instruction and any amounts payable in respect thereof, it will cause the
conversion or exchange thereof utilizing the same procedures as those provided
for delivery of Preferred Shares to effect such conversion or exchange. If the
Depositary Shares evidenced by a Depositary Receipt are to be converted in part
only, a new Depositary Receipt or Depositary Receipts will be issued for any
Depositary Shares not to be converted.
Amendment and Termination of a Deposit Agreement
Any form of Depositary Receipt evidencing Depositary Shares and any
provision of a Deposit Agreement will be permitted at any time to be amended by
agreement between the Company and the applicable Depositary. However, any
amendment that materially and adversely alters the rights of the holders of
Depositary Shares will
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not be effective unless such amendment has been approved by the existing holders
of at least a majority of the voting power of the applicable Depositary Shares
then outstanding. Every holder of an outstanding Depositary Receipt at the time
any such amendment becomes effective shall be deemed, by continuing to hold such
Depositary Receipt, to consent and agree to such amendment and to be bound by
the applicable Deposit Agreement as amended thereby.
Any Deposit Agreement may be terminated by the Company upon not less
than 30 days' prior written notice to the applicable Depositary if (i) such
termination is necessary to preserve the Company's status as a REIT or (ii)
holders of a majority of each series of Preferred Shares affected by such
termination consent to such termination, whereupon such Depositary will be
required to deliver or make available to each holder of Depositary Receipts,
upon surrender of the Depositary Receipts held by such holder, such number of
whole or fractional Preferred Shares as are represented by the Depositary Shares
evidenced by such Depositary Receipts together with any other property held by
such Depositary with receipts to such Depositary Receipts. The Company will
agree in each Depositary Agreement that if such Deposit Agreement is terminated
to preserve the Company's status as a REIT, then the Company will use its best
efforts to list the Preferred Shares issued upon surrender of the related
Depositary Shares on a national securities exchange. In addition, a Deposit
Agreement will automatically terminate if (i) all outstanding Depositary Shares
thereunder shall have been redeemed; (ii) there shall have been a final
distribution in respect of the related Preferred Shares in connection with any
liquidation, dissolution or winding up of the Company and such distribution
shall have been distributed to the holders of Depositary Receipts evidencing the
Depositary Shares underlying such Preferred Shares; or (iii) each of the related
Preferred Shares shall have been converted or exchanged into securities not so
represented by Depositary Shares.
Charges of a Depositary
The Company will pay all transfer and other taxes and governmental
charges arising solely from the existence of a Deposit Agreement. In addition,
the Company will pay the fees and expenses of a Depositary in connection with
the initial deposit of the Preferred Shares and any redemption of Preferred
Shares. However, holders of Depositary Receipts will pay any transfer or other
governmental charges and the fees and expenses of a Depositary for any duties
requested by such holders to be performed which are outside of those expressly
provided for in the applicable Deposit Agreement.
Resignation and Removal of Depositary
A Depositary may resign at any time by delivering to the Company notice
of its election to do so, and the Company may at any time remove a Depositary,
any such resignation or removal to take effect upon the appointment of a
successor Depositary. A successor Depositary will be required to be appointed
within 60 days after delivery of the notice of resignation or removal and will
be required to be a bank or trust company having its principal office in the
United States and having a combined capital and surplus of at least $50 million.
Miscellaneous
A Depositary will be required to forward to holders of Depositary
Receipts any reports and communications from the Company which are received by
such Depositary with respect to the related Preferred Shares.
Neither Depositary nor the Company will be liable if it is prevented
from or delayed in, by law or any circumstances beyond its control, performing
its obligations under a Deposit Agreement. The obligations of the Company and a
Depositary under a Deposit Agreement will be limited to performing their duties
thereunder in good faith and without gross negligence or willful misconduct, and
neither the Company nor any applicable Depositary will be obligated to prosecute
or defend any legal proceeding in respect of any Depositary Receipts, Depositary
Shares or Preferred Shares represented thereby unless satisfactory indemnity is
furnished. The Company and any Depositary will be permitted to rely on written
advice of counsel or accountants, or information provided by persons presenting
Preferred Shares represented thereby for deposit, holders of Depositary Receipts
or other persons
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believed in good faith to be competent to give such information, and on
documents believed in good faith to be genuine and signed by a proper party.
In the event a Depositary shall receive conflicting claims, requests or
instructions from any holders of Depositary Receipts, on the one hand, and the
Company, on the other hand, such Depositary shall be entitled to act on such
claims, requests or instructions received from the Company.
DESCRIPTION OF WARRANTS
The Company may issue, together with any other series of Offered
Securities or separately, Warrants entitling the holder to purchase from or sell
to the Company, or to receive from the Company the cash value of the right to
purchase or sell, Debt Securities, Preferred Shares, Depositary Shares or Common
Shares. The Warrants are to be issued under Warrant Agreements (each a "Warrant
Agreement") to be entered into between the Company and a warrant agent (the
"Warrant Agent"), all as set forth in the applicable Prospectus Supplement
relating to the particular issue of Warrants.
In the case of each series of Warrants, the applicable Prospectus
Supplement will describe the terms of the Warrants being offered thereby,
including the following, if applicable: (i) the offering price; (ii) the
currencies in which such Warrants are being offered; (iii) the number of
Warrants offered; (iv) the securities underlying the Warrants; (v) the exercise
price, the procedures for exercise of the Warrants and the circumstances, if
any, that will cause the Warrants to be deemed to be automatically exercised;
(vi) the date on which the right shall expire; (vii) U.S. federal income tax
consequences; and (viii) other terms of the Warrants.
Warrants may be exercised at the appropriate office of the Warrant
Agent or any other office indicated in the applicable Prospectus Supplement.
Prior to the exercise of Warrants entitling the holder to purchase any
securities, holders of such Warrants will not have any of the rights of holders
of the securities purchasable upon such exercise and will not be entitled to
payments made to holders of such securities.
The Warrant Agreements may be amended or supplemented without the
consent of the holders of the Warrants issued thereunder to effect changes that
are not inconsistent with the provisions of the Warrants and that do not
adversely affect the interests of the holders of the Warrants.
LIMITATION OF LIABILITY; SHAREHOLDER LIABILITY
The Maryland REIT Law permits a Maryland real estate investment trust
to include in its Declaration of Trust a provision limiting the liability of its
trustees and officers to the trust and its shareholders for money damages except
for liability resulting from (a) actual receipt of an improper benefit or profit
in money, property or services or (b) active and deliberate dishonesty
established by a final judgment as being material to the cause of action. The
Declaration of Trust of the Company contains such a provision which eliminates
such liability to the maximum extent permitted by the Maryland REIT Law. The
Maryland REIT Law provides that no shareholder shall be liable for any
obligation of a Maryland real estate investment trust. Counsel has advised the
Company that in some jurisdictions the possibility exists that shareholders of a
non-corporate entity such as the Company may be held liable for acts or
obligations of the Company. Counsel has advised the Company that the State of
Texas may not give effect to the limitation of shareholder liability afforded by
Maryland law, but that Texas law would likely recognize contractual limitations
of liability such as those discussed above. The Company intends to conduct its
business in a manner designed to minimize potential shareholder liability by,
among other things, inserting appropriate provisions in written agreements of
the Company; however, no assurance can be given that shareholders can avoid
liability in all instances in all jurisdictions.
The Declaration provides that, upon payment by a shareholder of any
such liability, the shareholder will be entitled to indemnification by the
Company. There can be no assurance that, at the time any such liability arises,
there will be assets of the Company sufficient to satisfy the Company's
indemnification obligation. The Trustees
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intend to conduct the operations of the Company, with the advice of counsel, in
such a way as to minimize or avoid, as far as practicable, the ultimate
liability of the shareholders of the Company. The Trustees do not intend to
provide insurance covering such risks to the shareholders.
REDEMPTION; TRUSTEES; BUSINESS COMBINATIONS
AND CONTROL SHARE ACQUISITIONS
Restrictions on Transfer
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), no more than 50% in value of its shares of
beneficial interest (after taking into account options to acquire Shares) may be
owned, directly or indirectly, by five or fewer individuals (as defined in the
Code to include certain entities and constructive ownership among specified
family members) during the last half of a taxable year (other than the first
taxable year) or during a proportionate part of a shorter taxable year. The
Shares must also be beneficially owned (other than during the first taxable
year) by 100 or more persons during at least 335 days of a taxable year or
during a proportionate part of a shorter taxable year. The Declaration contains
restrictions on the acquisition of Shares intended to ensure compliance with
these requirements.
Subject to certain exceptions specified in the Declaration, no holder
may own, directly or indirectly, more than 9.8% in number, value or voting power
of the issued and outstanding Shares of the Company (the "Ownership Limitation")
other than (a) HRP, Advisors and their affiliates, including persons who are
deemed to have beneficial ownership of the Shares directly owned by HRP and
Advisors pursuant to the attribution provisions of the Code and (b) other
shareholders exempted by majority vote of the Trustees (the "Exempted Persons").
Any person must give written notice to the Company no later than the 15th day
prior to any proposed transfer which, if consummated, would result in such
person owning Shares in excess of the Ownership Limitation, provided, however,
that the Trustees may waive the prior notice requirement upon determination that
such waiver is in the best interests of the Company. The Declaration does not
specify factors to be considered in granting any such exemption or waiver of the
prior notice requirement. In deciding whether to grant an exemption or waiver,
the Trustees may consider, among other factors, the general reputation and moral
character of the person requesting an exemption, whether ownership of Shares
would be direct or through ownership attributed to such person, whether such
person's ownership of Shares would adversely affect the Company's ability to
acquire additional hotels or engage in other transactions and whether granting
an exemption for the person requesting an exemption would adversely affect any
existing contractual arrangement of the Company. In addition, the Trustees may
require such opinions of counsel, affidavits, undertakings or arrangements as
they may deem necessary or advisable in order to determine or ensure the
Company's status as a REIT or otherwise.
The Declaration contains provisions designed to ensure that a
transferee attempting to acquire Shares in violation of the Ownership Limitation
will not acquire rights or economic interests in the Shares purportedly
transferred. The Declaration defines a transfer to include any sale, transfer,
gift, assignment, devise or other disposition of Shares, whether voluntary or
involuntary, whether of record or beneficial ownership and whether effected
constructively, by operation of law or otherwise. Under the Declaration, any
transfer of Shares that could, in the opinion of the Trustees, result in a
violation of the Ownership Limitation (as well as any transfer which could, in
the opinion of the Trustees, cause the Company to be treated as "closely held"
under Section 856(h) of the Code or cause the Shares to be held by fewer than
100 persons), and that is not otherwise permitted under the Declaration will
result in the designation of excess shares ("Excess Shares"). The Declaration
provides that Excess Shares will be transferred by operation of law to a person
that is unaffiliated with the Company and unaffiliated with the intended
transferee as trustee of a trust for the exclusive benefit of one or more
organizations described in Sections 170(b)(1)(a) and 170(c) of the Code
("Charitable Beneficiary") designated by the Company. The trustee of the trust
will be deemed to own these Excess Shares for the benefit of the Charitable
Beneficiary on the day prior to the date of the violative transfer. Any
dividends or distributions paid prior to the Company discovering that such
Excess Shares were held in trust must be repaid by the intended transferee to
the Company and any dividend declared but unpaid will be rescinded as void ab
initio with respect to the intended transferee. The Declaration provides that
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any dividends so disgorged or rescinded will then be paid over to the trustee
and held in trust for the Charitable Beneficiary, that any vote taken by an
intended transferee prior to the discovery by the Company that the Shares were
held in trust will be rescinded as void ab initio, and the intended transferee
will be deemed to have given an irrevocable proxy to the trustee to vote the
Shares for the benefit of the Charitable Beneficiary. At the direction of the
Company, the trustee of the trust is required to transfer the Shares held in the
trust to a person whose ownership of the Shares will not violate the Ownership
Limitation. If such a transfer is made, the interest of the Charitable
Beneficiary would terminate and proceeds of the sale would be payable to the
intended transferee and to the Charitable Beneficiary. The intended transferee
would receive the lesser of (i) the price paid by the intended transferee for
the Shares, or if the intended transferee did not give value for the Shares, the
market price of the Shares on the day of the event causing the Shares to be held
in trust and (ii) the price per Share received by the trustee from the sale or
other disposition of the Shares held in trust. Any proceeds in excess of the
amount payable to the intended transferee will be payable to the Charitable
Beneficiary. The Declaration also provides that all Shares held in trust for the
benefit of the Charitable Beneficiary will be offered for sale to the Company or
its designee for a 90-day period, at the lesser of the price paid for the Shares
by the intended transferee and the market price of the Shares on the date that
the Company accepts the offer. This period will commence on the date the Company
receives notice of the event causing the Shares to be held in trust. All
certificates representing Shares are required to bear a legend referring to the
restrictions described above. Pursuant to the Code, all persons who own,
directly or by virtue of the attribution provisions of the Code, 5% or more (or
such other percentage between 1/2 of 1% and 5%, as provided in the rules and
regulations promulgated under the Code) of the number or value of the
outstanding Shares must give written notice thereof to the Company by January 31
of each year. In addition, the Declaration provides that each shareholder is
required upon demand to disclose to the Company in writing such information with
respect to the ownership of Shares as the Trustees deem reasonably necessary to
comply with the provisions of the Code applicable to a REIT, to comply with the
requirements of any taxing authority or governmental agency or to determine any
such compliance.
These restrictions will not preclude settlement of transactions through
the NYSE.
Shareholder Proposals
The Company's Bylaws establish an advance notice procedure with regard
to shareholder proposals to be brought before an annual or special meeting of
shareholders (the "Business Procedure"). The Business Procedure provides that
shareholder proposals, other than proposals timely submitted for inclusion in
the Company's proxy statement, must be submitted in writing in a timely manner
in order to be considered at any such meeting. To be timely, such notice of a
shareholder proposal with respect to an annual meeting must (with limited
exceptions) be received by the Company not less than 90 days nor more than 120
days prior to the anniversary date of the immediately preceding annual meeting.
Nothing in the Business Procedure will preclude discussion by any shareholder of
any proposal properly made or brought before an annual meeting in accordance
with the above mentioned procedure.
Trustees
Under the Declaration, the number of Trustees may be fixed from time to
time by two thirds of the Trustees or by amendment of the Declaration duly
adopted by holders of two thirds of the outstanding Shares entitled to vote
thereon, with a minimum of three and a maximum of seven Trustees. The
Declaration provides that a majority of the Trustees must be Independent
Trustees (as defined in the Declaration). The terms of the Trustees are
staggered. As the Trustees' terms expire, replacements are elected by a majority
of the votes cast. The Declaration provides that a majority of the Trustees then
in office shall have the authority to fill any vacancies on the Board, including
vacancies created by an increase in the number of Trustees. In addition, the
Declaration provides that a new Trustee elected to fill a vacancy will serve for
the remainder of the full term of his or her class and that no decrease in the
number of Trustees shall shorten the term of an incumbent. Moreover, the
Declaration provides that Trustees may be removed with or without cause only by
the affirmative vote of all the remaining Trustees or by holders of Shares
representing two-thirds of the total votes authorized to be cast by Shares then
outstanding and entitled to vote thereon, voting as a single class.
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The Company's Bylaws establish an advance notice procedure with regard
to the nomination, other than by the Board of Trustees, of candidates for
election as Trustees (the "Nomination Procedure") which are not included in the
Company's proxy statement. The Nomination Procedure provides that only persons
who are nominated by or at the direction of the Board of Trustees, or by a
shareholder of record on the date of the giving of the notice who has given
timely prior written notice to the Secretary of the Company prior to the meeting
at which Trustees are to be elected, will be eligible for election as Trustees.
To be timely, notice of a shareholder's nomination in the case of an annual
meeting must (with limited exceptions) be received by the Company not less than
90 days nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting. Nothing in the Nomination Procedure will preclude
discussion by any shareholder of any nomination properly made or brought before
an annual or special meeting in accordance with the above mentioned procedures.
Indemnification of Trustees and Officers
The Declaration obligates the Company to indemnify (i) its Trustees and
officers to the full extent permitted by Maryland law, including in respect of
the advancement of expenses, and (ii) other employees and agents to such extent
as shall be authorized by the Trustees or the Bylaws and permitted by Maryland
law. The Maryland REIT Law permits a Maryland real estate investment trust to
indemnify and advance expenses to its trustees, officers, employees and agents
to the same extent as permitted by the Maryland General Corporation Law ("MGCL")
for directors and officers of Maryland corporations. The MGCL permits a
corporation to indemnify its present and former directors and officers, among
others, against judgments, penalties, fines, settlements and reasonable expenses
actually incurred by them in connection with any proceeding to which they may be
made a party by reason of their service in those or other capacities unless it
is established that (a) the act or omission of the director or officer was
material to the matter giving rise to the proceeding and (i) was committed in
bad faith or (ii) was the result of active and deliberate dishonesty, (b) the
director or officer actually received an improper personal benefit in money,
property or services or (c) in the case of any criminal proceeding, the director
or officer had reasonable cause to believe that the act or omission was
unlawful. However, under the MGCL, a Maryland corporation may not indemnify for
an adverse judgment in a suit by or in the right of the corporation or for a
judgment of liability on the basis that personal benefit was improperly
received, unless in either case a court orders indemnification and then only for
expenses. In addition, the MGCL permits a corporation to advance reasonable
expenses to a director or officer upon the corporation's receipt of (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 corporation
and (b) a written undertaking by or on his behalf to repay the amount paid or
reimbursed by the corporation if it shall ultimately be determined that the
standard of conduct was not met. The Company has the right but has no obligation
to obtain insurance including general liability, securities liability, trustee
and officer liability and other insurance in such amounts and with such carriers
as the Company reasonably deems appropriate in order to support the indemnity
described above.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to Trustees, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is therefore unenforceable.
Business Combinations
Under the MGCL, as applicable to Maryland real estate investment trusts,
certain "business combinations" (including certain mergers, consolidations,
share exchanges, asset transfers, issuances and reclassifications of equity
securities) between a Maryland real estate investment trust and any person who
beneficially owns 10% or more of the voting power of the trust's shares or an
affiliate of the trust who, at any time within the two-year period prior to the
date in question, was the beneficial owner of 10% or more of the voting power of
the then outstanding voting shares of beneficial interest of the trust (an
"Interested Shareholder") or an affiliate of the Interested Shareholder are
prohibited for five years after the most recent date on which the Interested
Shareholder becomes an Interested Shareholder. The Declaration provides that the
Company has elected not to be governed by these provisions of the MGCL.
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Control Share Acquisitions
The MGCL, as applicable to Maryland real estate investment trusts, provides
that "control shares" of a Maryland real estate investment trust acquired in a
"control share acquisition" have no voting rights except to the extent approved
by a vote of two-thirds of the votes entitled to be cast on the matter,
excluding shares of beneficial interest owned by the acquiror, by officers or by
trustees who are employees of the trust. The Declaration provides that the
Company has elected not to be governed by the control share acquisition
provisions of the MGCL.
Rights Plan
In May 1997, the Trustees adopted a shareholder rights plan (the "Rights
Plan"). The Rights Plan provides for the distribution of one Junior
Participating Preferred Share purchase right (a "Right") for each Common Share.
Each Right entitles the holder to buy 1/100th of a Junior Participating
Preferred Share (or, in certain circumstances, to receive cash, property, Common
Shares or other securities of the Company) at an exercise price of $100 per
1/100th of a Junior Participating Preferred Share. Certain powers, preferences
and rights and certain qualifications, limitations and restrictions of the
Junior Participating Preferred Shares are summarized above under "Description of
Preferred Shares--Junior Participating Shares."
Initially, the Rights are attached to Common Shares. The Rights will
separate from such Common Shares and a "Distribution Date" will occur upon
earlier of (i) 10 business days (or such later date as the Trustees may
determine before a Distribution Date occurs) following a public announcement by
the Company that a person, together with all affiliates and associates of such
person (each as defined in Rule 12b-2 of the Exchange Act), with certain
exceptions (an "Acquiring Person"), has acquired, or has obtained the right to
acquire, beneficial ownership of 10% or more of the outstanding Common Shares
(the date of such announcement being a "Share Acquisition Date") or (ii) 10
business days (or such later date as the Trustees may determine before a
Distribution Date occurs) following the commencement of a tender offer or
exchange offer that would result in a person becoming an Acquiring Person.
Until the Distribution Date, (i) the Rights will be evidenced by the
certificates for Common Shares and will be transferred with and only with such
Common Share certificates, (ii) Common Share certificates will contain a
notation incorporating the rights agreement pursuant to which the Rights were
issued (the "Rights Agreement") by reference and (iii) the surrender for
transfer of any certificates for Common Shares outstanding will also constitute
the transfer of the Rights associated with the Common Shares represented by such
certificates.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on April 30, 2007, unless earlier redeemed or exchanged
by the Company as described below. Until a Right is exercised, the holder
thereof, as such, has no rights as a shareholder of the Company, including,
without limitation, the right to vote or to receive dividends.
In the event (a "Flip-In Event") a Person becomes an Acquiring Person
(except pursuant to a tender or exchange offer for all outstanding Common Shares
at a price and on terms which a majority of the Company's Outside Trustees (as
defined in the Rights Agreement) determines to be fair to and otherwise in the
best interests of the Company and its shareholders (a "fair offer")), each
holder of a Right will thereafter have the right to receive, upon exercise of
such Right, Common Shares (or, in certain circumstances, cash, property or other
securities of the Company) having a Current Market Price (as defined in the
Rights Agreement) equal to two times the exercise price of the Right.
Notwithstanding the foregoing, following the occurrence of any Flip-In Event,
all Rights that are, or (under certain circumstances specified in the Rights
Agreement) were, beneficially owned by any Acquiring Person (or by certain
related parties) will be null and void in the circumstances set forth in the
Rights Agreement. However, Rights will not be exercisable following the
occurrence of any Flip-In Event until such time as the Rights are no longer
redeemable by the Company as set forth below.
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In the event (a "Flip-Over Event") that, at any time on or after the Share
Acquisition Date, (i) the Company shall take part in a merger or other business
combination transaction (other than certain mergers that follow a fair offer)
and the Company shall not be the surviving entity or (ii) the Company shall take
part in a merger or other business combination transaction in which the Common
Shares are changed or exchanged (other than certain mergers that follow a fair
offer) or (iii) 50% or more of the Company's assets or earning power is sold or
transferred, each holder of a Right (except Rights which previously have been
voided, as set forth above) shall thereafter have the right to receive, upon
exercise, a number of shares of common stock of the acquiring company having a
Current Market Price equal to two times the exercise price of the Right. Flip-In
Events and Flip-Over Events are collectively referred to as "Triggering Events."
The purchase price payable and the number of Junior Participating Preferred
Shares (or the amount of cash, property or other securities) issuable upon
exercise of the Rights are subject to adjustment from time to time to prevent
dilution (i) in the event of a share dividend on, or a subdivision, combination
or reclassification of, the Junior Participating Preferred Shares, (ii) if
holders of the Junior Participating Preferred Shares are granted certain rights
or warrants to subscribe for Junior Participating Preferred Shares or
convertible securities at less than the Current Market Price of the Junior
Participating Preferred Shares or (iii) upon the distribution to holders of the
Junior Participating Preferred Shares of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above). With certain exceptions, no
adjustment in the purchase price will be required until cumulative adjustments
amount to at least 1% of the purchase price. The Company is not required to
issue fractional Shares upon the exercise of any Right, and in lieu thereof, a
cash payment will be made.
At any time until 10 business days following the Share Acquisition Date,
the Company may redeem the Rights in whole, but not in part, at a price of $.01
per Right, payable, at the option of the Company, in cash, Common Shares or
other consideration as the Trustees may determine. Immediately upon the
effectiveness of the action of the Trustees ordering redemption of the Rights,
the Rights will terminate and the only right of the holders of Rights will be to
receive the $.01 per Right redemption price.
The terms of the Rights, other than key financial terms and the date on
which the Rights expire, may be amended by the Trustees prior to the
Distribution Date. Thereafter, the provisions of the Rights Agreement may be
amended by the Trustees only in order to cure any ambiguity, defect or
inconsistency, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person and certain
other related parties) or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to lengthen the time
period governing redemption is permitted to be made at such time as the Rights
are not redeemable.
Antitakeover Effect of Certain Provisions
As discussed above and in documents incorporated herein by reference, the
Company's Declaration and Bylaws contain several provisions that will make it
difficult to acquire control of the Company by means of a tender offer, open
market purchases, a proxy fight or otherwise, if the acquisition is not approved
by the Board of Trustees, or to change the composition of the Board of Trustees
in a relatively short period of time. The provisions are designed to reduce the
vulnerability of the Company to an unsolicited proposal for a takeover or an
unsolicited proposal for the restructuring or sale of the Company and to
encourage persons seeking to acquire control of the Company to consult first
with the Board of Trustees to negotiate the terms of any proposed business
combination or offer. These provisions may have the effect of delaying,
deferring or preventing a third party from making a tender offer or otherwise
attempting to obtain control of the Company, even though such an attempt might
be beneficial to the Company and its shareholders.
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PLAN OF DISTRIBUTION
The Company may sell the Offered Securities to one or more underwriters for
public offering and sale by them or may sell the Offered Securities to investors
directly or through agents. Any such underwriter or agent involved in the offer
and sale of the Offered Securities will be named in the applicable Prospectus
Supplement.
The distribution of Offered Securities may be effected from time to time in
one or more transactions at a fixed price or prices, which may be changed, at
market prices prevailing at the time of sale, at prices related to such market
prices or at negotiated prices. In connection with the sale of Offered
Securities, underwriters or agents may receive or be deemed to have received
compensation from the Company or from purchasers in the form of underwriting
discounts, concessions or commissions. Underwriters may sell Offered Securities
to or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters or from purchasers.
Any underwriting compensation paid by the Company to underwriters or agents
in connection with the offering of Offered Securities, and any discounts,
concessions or commissions allowed by underwriters to participating dealers,
will be set forth in the applicable Prospectus Supplement. Underwriters, dealers
and agents participating in the distribution of the Offered Securities may be
deemed to be underwriters, and any discounts, concessions and commissions
received by them and any profit realized by them on resale of the Offered
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 toward certain civil liabilities, including liabilities under the
Securities Act.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Offered Securities from the
Company at the public offering price set forth in such Prospectus Supplement
pursuant to contracts providing for payment and delivery on a future date or
dates. Institutions with whom such 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.
Any such contracts will be subject to the condition that the purchase by an
institution of the Offered Securities covered by its contracts shall not at the
time of delivery be prohibited under the law of any jurisdiction in the United
States to which such institution is subject and, if a portion of the Offered
Securities is being sold to underwriters, may be subject to the condition that
the Company shall have sold to such underwriters the Offered Securities not sold
for delayed delivery. The underwriters and such other persons will not have any
responsibility in respect of the validity or performance of such contracts.
Unless otherwise specified in the related Prospectus Supplement, each
series of Offered Securities will be a new issue with no established trading
market, other than Common Shares which are listed on the New York Stock
Exchange. Any Common Shares sold pursuant to a Prospectus Supplement will be
listed on such Exchange. The Company may elect to list any other series of
Offered Securities on an exchange, but is not obligated to do so. Any
underwriters to whom Offered Securities are sold by the Company for public
offering and sale may make a market in such Offered Securities, but such
underwriters will not be obligated to do so and may discontinue any market
making at any time without notice. No assurance can be given as to the liquidity
of or the trading markets for any Offered Securities.
Certain of the underwriters and their affiliates may be customers of,
engage in transactions with and perform services for the Company and its
subsidiaries in the ordinary course of business.
The specific terms and manner of sale of the Offered Securities will be set
forth or summarized in the applicable Prospectus Supplement.
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LEGAL MATTERS
Certain legal matters with respect to the Offered Securities offered by the
Company will be passed upon for the Company by Sullivan & Worcester LLP, Boston,
Massachusetts. Sullivan & Worcester LLP, will rely, as to certain matters of
Maryland law, upon one or more opinions of Ballard Spahr Andrews & Ingersoll,
Baltimore, Maryland. Barry M. Portnoy, a former partner of the firm of Sullivan
& Worcester LLP, is a Managing Trustee of the Company and Health and Retirement
Properties Trust ("HRPT"), a director of certain subsidiaries of the Company and
a director and 50% shareholder of HRPT Advisors, Inc., the advisor to the
Company ("Advisors"). Sullivan & Worcester LLP represents Advisors, HRPT and
certain affiliates thereof on various matters.
EXPERTS
The consolidated financial statements of the Company for the years ended
December 31, 1996 and 1995, HMH HPT Courtyard, Inc. for the fiscal year ended
January 3, 1997 and for the period from March 24, 1995 (inception) through
December 29, 1995 and of HMH HPT Residence Inn, Inc. for the period from March
22, 1996 (inception) through January 3, 1997, appearing in the Annual Report and
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto. Such reports
are incorporated herein and in the Registration Statement by reference in
reliance upon the authority of said firm as experts in giving said reports.
The combined financial statements as of January 3, 1997 and for the year
then ended, of the Limited Service I Hotels and Limited Service II Hotels (as
defined in the Company's Current Report on Form 8-K dated November 21, 1997)
incorporated by reference in this Prospectus and elsewhere in the Registration
Statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto. Such reports
are incorporated herein and in the Registration Statement by reference in
reliance upon the authority of said firm as experts in giving said reports.
The financial statements of Renthotel Utah, L.C. incorporated in this
Prospectus and the Registration Statement by reference to the Company's Current
Report on Form 8-K dated November 21, 1997, have been audited by Reznick Fedder
& Silverman, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
-----------------
THE DECLARATION OF TRUST OF THE COMPANY, AS AMENDED AND RESTATED ON AUGUST 21,
1995, A COPY OF WHICH, TOGETHER WITH ALL AMENDMENTS THERETO (THE "DECLARATION"),
IS DULY FILED IN THE OFFICE OF THE DEPARTMENT OF ASSESSMENTS AND TAXATION OF THE
STATE OF MARYLAND, PROVIDES THAT THE NAME "HOSPITALITY PROPERTIES TRUST" REFERS
TO THE TRUSTEES UNDER THE DECLARATION COLLECTIVELY AS TRUSTEES, BUT NOT
INDIVIDUALLY OR PERSONALLY, AND THAT NO TRUSTEE, OFFICER, SHAREHOLDER, EMPLOYEE
OR AGENT OF THE COMPANY SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR
SEVERALLY, FOR ANY OBLIGATION OF, OR CLAIM AGAINST, THE COMPANY. ALL PERSONS
DEALING WITH THE COMPANY, IN ANY WAY, SHALL LOOK ONLY TO THE ASSETS OF THE
COMPANY FOR THE PAYMENT OF ANY SUM OR THE PERFORMANCE OF ANY OBLIGATION.
29
