As filed with the Securities and Exchange Commission on September 4, 1996
Registration Statement No. 333-08883
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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Sovran Self Storage, Inc.
(Exact name of Registrant as specified in its charter)
Maryland 16-1194043
(State of incorporation) (I.R.S. Employer Identification Number)
5166 Main Street
Williamsville, N.Y. 14221
(716) 633-1850
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
-------------------------------
Kenneth F. Myszka
President and Chief Executive Officer
Sovran Self Storage, Inc.
5166 Main Street
Williamsville, N.Y. 14221
(716) 633-1850
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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With copies to:
Frederick G. Attea, Esq.
Phillips, Lytle, Hitchcock, Blaine & Huber
3400 Marine Midland Center
Buffalo, NY 14203
(716) 847-7010
Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box.|_|
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box.|X|
If this form is used to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act Registration Statement number of the earlier
effective registration statement for the same offering.|_|
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
Registration Statement number of the earlier effective registration statement
for the same offering.|_|
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box.|_|
-----------------------------
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell nor the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED SEPTEMBER 4, 1996
PROSPECTUS
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$150,000,000
Sovran Self Storage, Inc.
Debt Securities
Preferred Stock
Common Stock
---------------
Sovran Self Storage, Inc. ("Sovran" or the "Company") may offer from
time to time in one or more series (i) its debt securities ("Debt Securities")
which may be senior or subordinated, (ii) shares of its preferred stock, $.01
par value per share ("Preferred Stock"), and (iii) shares of its common stock,
$.01 par value per share ("Common Stock"), with an aggregate public offering
price of up to $150,000,000 (or its equivalent based on the exchange rate at the
time of sale) in amounts, at prices and on terms to be determined at the time of
offering. The Debt Securities, Preferred Stock and Common Stock (collectively,
the "Securities") may be offered separately or together, in separate classes or
series, in amounts, at prices and on terms to be set forth in one or more
supplements to this Prospectus (each a "Prospectus Supplement").
The specific terms of the Securities for 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, ranking, 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
Common Stock or Preferred Stock, covenants and any initial public offering
price; (ii) in the case of Preferred Stock, the specific designation and stated
value per share, any dividend, liquidation, redemption, conversion, voting and
other rights, and any initial public offering price; and (iii) in the case of
Common Stock, any initial public offering price. In addition, such specific
terms may include limitations on direct or beneficial ownership and restrictions
on transfer of the Securities, in each case as may be consistent with the
Company's Amended and Restated Articles of Incorporation or otherwise
appropriate to preserve the status of the Company as a real estate investment
trust ("REIT") for federal income tax purposes. See "Restrictions on Transfers
of Capital Stock."
The applicable Prospectus Supplement will also contain information,
where appropriate, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities covered
by such Prospectus Supplement.
The Securities may be offered by the Company directly to one or more
purchasers, through agents designated from time to time by the Company or to or
through underwriters or dealers. If any agents or underwriters are involved in
the sale of any of the securities, their names, and any applicable purchase
price, fee, commission or discount arrangement between or among them will be set
forth, or will be calculable from the information set forth, in an accompanying
Prospectus Supplement. See "Plan of Distribution." No Securities may be sold
without delivery of a Prospectus Supplement describing the method and terms of
the offering of such Securities.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR
ENDORSED THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
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The date of this Prospectus is September ____, 1996.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"SEC" or "Commission") a Registration Statement on Form S-3 under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the Securities.
This Prospectus, which constitutes part of the Registration Statement, omits
certain of the information contained in the Registration Statement and the
exhibits thereto on file with the Commission pursuant to the Securities Act and
the rules and regulations of the Commission thereunder. The Registration
Statement, including exhibits thereto, may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549, and at the Commission's Regional Offices at 7
World Trade Center, 13th Floor, New York, New York 10048, and Northwestern
Atrium Center, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661-2511,
and copies may be obtained at the prescribed rates from the Public Reference
Section of the Commission at its principal office in Washington, D.C. Statements
contained in this Prospectus as to the contents of any contract or other
document referred to are not necessarily complete, and in each instance
reference is made to the copy of such contract or other document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.
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 proxy statements and other information
with the Commission. Such reports, proxy statements and other information can be
inspected and copied at the locations described above. Copies of such materials
can be obtained by mail from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates.
In addition, the Common Stock is listed on the New York Stock Exchange (the
"NYSE"), and such materials can be inspected and copied at the NYSE, 20 Broad
Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company with the
Commission pursuant to the Exchange Act are incorporated by reference in this
Prospectus: (i) Annual Report on Form 10-K for the fiscal year ended December
31, 1995, (ii) Quarterly Report on Form 10-Q for the fiscal quarter ended March
31, 1996, (iii) the Company's Current Report on Form 8-K dated July 25, 1996 as
amended by the Company's Amended Current Report on Form 8-K/A dated September 3,
1996, and (iv) the description of the Company's Common Stock contained in the
Company's Registration Statement on Form 8-A dated June 16, 1995.
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 all Securities shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. The Company will provide, without charge, to
each person, including any beneficial owner, to whom a copy of this Prospectus
is delivered, at the request of such person, a copy of any or all of the
documents incorporated herein by reference (other than exhibits thereto, unless
such exhibits are specifically incorporated by reference into such documents).
Written requests for such copies should be directed to David L. Rogers, Chief
Financial Officer, Sovran Self Storage, Inc., 5166 Main Street, Williamsville,
New York, 14221, telephone (716) 633-1850.
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 an applicable Prospectus Supplement) or in any
subsequently filed document that is incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part of this Prospectus or any Prospectus
Supplement, except as so modified or superseded.
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THE COMPANY
General
Sovran Self Storage, Inc. is a self-administered and self-managed real
estate investment trust ("REIT") which acquires, owns and manages self storage
properties. (The Company's self storage properties are hereinafter referred to
collectively as the "Properties" and individually as a "Property"). The Company
was formed through the transfer for cash on June 26, 1995 of 62 Properties
previously owned by limited partnerships of which the Company was the general
partner, and the simultaneous acquisition of 12 additional Properties from
unrelated third parties, in connection with the contemporaneous consummation of
the Company's initial public offering (the "Initial Offering") and related
transactions. The Company has since acquired 26 additional Properties from
unrelated third parties. As of June 30, 1996, the Company owned and operated, a
total of 100 self-storage Properties, consisting of approximately 5.45 million
net rentable square feet, situated primarily in the Eastern United States, in 15
states. As of June 30, 1996, the Properties had a weighted average occupancy of
87.8% and a weighted average annual rent per square foot of $7.20. The Company
believes that it is one of the largest operators of self-storage properties in
the United States based on facilities owned.
The Company seeks to increase cash flow and enhance shareholder value
through aggressive management of the Properties and selective acquisition of new
self-storage properties. Aggressive property management entails increasing
rents, increasing occupancy levels, strictly controlling costs, maximizing
collections, strategically expanding and improving the Properties and, should
economic conditions warrant, developing new properties. The Company believes
that there continue to be significant opportunities for growth through
acquisitions, and constantly seeks to acquire self-storage properties located
primarily in the Eastern United States that are susceptible to realization of
increased economies of scale and enhanced performance through the application of
the Company's management expertise.
The Company was formed to continue the business of its predecessor
company which had engaged in the self storage business since 1985. The Company
owns a 100% fee simple interest in each of the Properties through a limited
partnership (the "Partnership") of which the Company holds a 99% limited
partnership interest and a wholly-owned subsidiary of the Company (the
"Subsidiary") holds a 1% general partnership interest. The Company believes that
this structure, commonly known as an umbrella partnership real estate investment
trust ("UPREIT"), facilitates the Company's ability to acquire properties by
using units of the Partnership as currency in property acquisitions.
The Company was incorporated on April 19, 1995 under Maryland law. The
Company's principal executive offices are located at 5166 Main Street,
Williamsville, New York 14221, and its telephone number is (716) 633-1850. The
Company also maintains a regional office in Atlanta, Georgia.
USE OF PROCEEDS
Unless otherwise described in the applicable Prospectus Supplement, the
Company intends to use the net proceeds from the sale of Securities for general
corporate purposes, which may include the acquisition of additional properties,
the repayment of outstanding debt or the improvement of certain properties
already in the Company's portfolio.
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RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Company's and its predecessor's
consolidated ratios of earnings to fixed charges for the periods shown:
Company Predecessors
------------------------------------------- ----------------------------------------------
Six months Year ended January 1, 1995 Year ended December 31,
ended June December to 1994 1993 1992 1991
30, 1996 31, 1995 June 25, 1995
------------------------------------------- ----------------------------------------------
7.26 21.88 1.09 1.31 0.84 0.53 0.31
The ratios of earnings to fixed charges were computed by dividing earnings by
fixed charges. For this purpose, earnings consist of pre-tax income from
continuing operations plus fixed charges. Fixed charges consist of interest
expense and the amortization of debt issuance costs. To date, the Company has
not issued any Preferred Stock; therefore, the ratios of earnings to combined
fixed charges and preferred stock dividend requirements are the same as the
ratios of earnings to fixed charges presented above.
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be direct unsecured obligations of the Company
and may be either senior Debt Securities ("Senior Debt Securities") or
subordinated Debt Securities ("Subordinated Debt Securities"). The Debt
Securities will be issued under one or more indentures, each dated as of a date
prior to the issuance of the Debt Securities to which it relates. Senior Debt
Securities and Subordinated Debt Securities may be issued pursuant to separate
indentures (respectively, a "Senior Indenture" and a "Subordinated Indenture"),
in each case between the Company and a trustee (a "Trustee"), which may be the
same Trustee, and in the form that has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part, subject to such
amendments or supplements as may be adopted from time to time. The Senior
Indenture and the Subordinated Indenture, as amended or supplemented from time
to time, are sometimes hereinafter referred to collectively as the "Indentures."
The Indentures will be subject to and governed by the Trust Indenture Act of
1939, as amended (the "TIA"). The statements made under this heading relating to
the Debt Securities and the Indentures are summaries of the anticipated
provisions thereof, do not purport to be complete and are qualified in their
entirety by reference to the Indentures and such Debt Securities.
Capitalized terms used herein and not defined shall have the meanings
assigned to them in the applicable Indenture.
Terms
General. The Debt Securities will be direct, unsecured obligations of
the Company. The indebtedness represented by the Senior Debt Securities will
rank equally with all other unsecured and unsubordinated indebtedness of the
Company. The indebtedness represented by Subordinated Debt Securities will be
subordinated in right of payment to the prior payment in full of Senior
Indebtedness of the Company as described under "--Subordination." The particular
terms of the Debt Securities offered by a Prospectus Supplement will be
described in the applicable Prospectus Supplement, along with any applicable
modifications of or additions to the general terms of the Debt Securities as
described herein and in the applicable Indenture and any applicable federal
income tax considerations. Accordingly, for a description of the terms of any
series of Debt Securities, reference must be made to both the Prospectus
Supplement relating thereto and the description of the Debt Securities set forth
in this Prospectus.
Except as set forth in any Prospectus Supplement, 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 by the
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Company or as set forth in the applicable Indenture or in one or more indentures
supplemental to such 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 issuance of additional Debt Securities of such series.
Each Indenture will provide that the Company may, but need not,
designate more than one Trustee thereunder, each with respect to one or more
series of Debt Securities. Any Trustee under an Indenture may resign or be
removed with respect to one or more series of Debt Securities, and a successor
Trustee may be appointed to act with respect to such series. In the event that
two or more persons are acting as Trustee with respect to different series of
Debt Securities, each such Trustee shall be a Trustee of a trust under the
applicable Indenture separate and apart from the trust administered by any other
Trustee, and, except as otherwise indicated herein, any action described herein
to be taken by each Trustee may be taken by each such Trustee with respect to,
and only with respect to, the one or more series of Debt Securities for which it
is Trustee under the applicable Indenture.
The following summaries set forth certain general terms and provisions
of the Indentures and the Debt Securities. The Prospectus Supplement relating to
the series of Debt Securities being offered will contain further terms of such
Debt Securities, including the following specific terms:
(1) The title of such Debt Securities and whether such Debt
Securities are Senior Debt Securities or Subordinated Debt
Securities;
(2) The aggregate principal amount of such Debt Securities and
any limit on such aggregate principal amount;
(3) The price (expressed as a percentage of the principal amount
thereof) 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 that
is convertible into Common Stock or Preferred Stock, 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 any applicable limitations on
the ownership or transferability of the Common Stock or
Preferred Stock receivable on conversion;
(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 such 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 such dates shall be determined, the persons to whom
such interest shall be payable, and the basis upon which
interest shall be calculated if other than that of a 360-day
year of twelve 30-day months;
(8) The place or places where the principal of (and premium or
Make-Whole Amount (as defined in the Indenture), if any) and
interest, if any, on such Debt Securities will be payable,
where such Debt Securities may be surrendered for
registration of transfer or exchange and where notices or
demands to or upon the Company in respect of such Debt
Securities and the applicable Indenture may be served;
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(9) The period or periods, if any, within which, the price or
prices at which and the other terms and conditions upon
which such Debt Securities may, pursuant to any optional or
mandatory redemption provisions, be redeemed, as a whole or
in part, at the option of the Company;
(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 other terms and conditions upon which such
Debt Securities will be redeemed, repaid or purchased, as a
whole or in part, pursuant to such obligation;
(11) If other than U.S. dollars, the currency or currencies in
which such Debt Securities are denominated and payable,
which may be a foreign currency or units of two or more
foreign currencies or a composite currency or currencies,
and the terms and conditions relating thereto;
(12) Whether the amount of payments of principal of (and premium
or Make-Whole Amount, if any, including any amount due upon
redemption, 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 the yield on or trading price of
other securities, including United States Treasury
securities, or on a currency, currencies, currency unit or
units, or composite currency or currencies) and the manner
in which such amounts shall be determined;
(13) Whether the principal of (and premium or Make-Whole Amount,
if any) or interest on the Debt Securities of the series are
to be payable, at the election of the Company or a holder
thereof, in a currency or currencies, currency unit or units
or composite currency or currencies other than that in which
such Debt Securities are denominated or stated to be
payable, the period or periods within which, and the terms
and conditions upon which, such election may be made, and
the time and manner of, and identity of the exchange rate
agent with responsibility for, determining the exchange rate
between the currency or currencies, currency unit or units
or composite currency or currencies in which such Debt
Securities are denominated or stated to be payable and the
currency or currencies, currency unit or units or composite
currency or currencies in which such Debt Securities are to
be so payable;
(14) Provisions, if any, granting special rights to the holders
of Debt Securities of the series upon the occurrence of such
events as may be specified;
(15) Any deletions from, modifications of or additions to the
Events of Default (as defined in the Indenture) or covenants
of the Company with respect to Debt Securities of the
series, whether or not such Events of Default or covenants
are consistent with the Events of Default or covenants
described herein;
(16) Whether and under what circumstances the Company will pay
any 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;
(17) Whether Debt Securities of the series are to be issuable as
Registered Securities, Bearer Securities (with or without
coupons) or both, any restrictions applicable to the offer,
sale or delivery of Bearer Securities and the terms upon
which Bearer Securities of the series may be exchanged for
Registered Securities of the series and vice versa (if
permitted by applicable laws and regulations), whether any
Debt Securities of the series are to be
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issuable initially in temporary global form and whether any
Debt Securities of the series are to be issuable in
permanent global form with or without coupons and, if so,
whether beneficial owners of interests in any such permanent
global Security may exchange such interests for Debt
Securities of such series and of like tenor of any
authorized form and denomination and the circumstances under
which any such exchanges may occur, if other than in the
manner provided in the Indenture, and, if Registered
Securities of the series are to be issuable as a Global
Security (as defined), the identity of the depository for
such series;
(18) The date as of which any Bearer Securities of the series and
any temporary Global Security representing outstanding Debt
Securities of the series shall be dated if other than the
date of original issuance of the first Security of the
series to be issued;
(19) The Person to whom any interest on any Registered Security
of the series shall be payable, if other than the Person in
whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the
Regular Record Date for such interest, the manner in which,
or the Person to whom, any interest on any Bearer Security
of the series shall be payable, if otherwise than upon
presentation and surrender of the coupons appertaining
thereto as they severally mature, and the extent to which,
or the manner in which, any interest payable on a temporary
Global Security on an Interest Payment Date will be paid if
other than in the manner provided in the Indenture;
(20) The applicability, if any, of the defeasance and covenant
defeasance provisions of the Indenture to the Debt
Securities of the series;
(21) If the Debt Securities of such series are to be issuable in
definitive form (whether upon original issue or upon
exchange of a temporary Security of such series) only upon
receipt of certain certificates or other documents or
satisfaction of other conditions, then the form and/or terms
of such certificates, documents or conditions;
(22) The obligation, if any, of the Company to permit the
conversion of the Debt Securities of such series into Common
Stock or Preferred Stock, as the case may be, and the terms
and conditions upon which such conversion shall be effected
(including, without limitation, the initial conversion price
or rate, the conversion period, any adjustment of the
applicable conversion price and any requirements relative to
the reservation of such shares for purposes of conversion);
and
(23) Any other terms of the series (which terms shall not be
inconsistent with the provisions of the Indenture under
which the Debt Securities are issued).
If so provided in the applicable Prospectus Supplement, the Debt
Securities may be issued at a discount below their principal amount and provide
for less than the entire principal amount thereof to be payable upon declaration
of acceleration of the maturity thereof ("Original Issue Discount Securities").
In such cases, all material 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 may be set forth in any Prospectus Supplement, the Debt
Securities will not contain any provisions that would limit the ability of the
Company to incur indebtedness or that would afford holders of Debt Securities
protection in the event of a highly leveraged or similar transaction involving
the Company or in the event of a change of control. Restrictions on ownership
and transfers of the Common Stock and Preferred Stock are designed to preserve
its status as a REIT and, therefore, may act to prevent or hinder a change of
control. See "Restrictions on Transfers of Capital Stock." Reference is made to
the applicable Prospectus Supplement for information with respect to any
deletions from, modifications of, or additions to,
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the events of default or covenants of the Company that are described below,
including any addition of a covenant or other provision providing event risk or
similar protection.
Denomination, Interest, Registration and Transfer
Unless otherwise described in the applicable Prospectus Supplement, the
Debt Securities of any series will be issuable in denominations of $1,000 and
integral multiples thereof. Where Debt Securities of any series are issued in
bearer form, the special restrictions and considerations, including special
offering restrictions and special federal income tax considerations, applicable
to any such Debt Securities and to payment on and transfer and exchange of such
Debt Securities will be described in the applicable Prospectus Supplement.
Bearer Debt Securities will be transferable by delivery.
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and interest
on any series of Debt Securities will be payable at the corporate trust office
of the applicable Trustee, the address of which will be stated 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 for such Debt Securities or by
wire transfer of funds to such person at an account maintained within the United
States.
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security in registered form ("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 Trustee, in which case notice thereof 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 any
authorized denomination of other Debt Securities of the same series and of a
like aggregate principal amount and tenor upon surrender of such Debt Securities
at the corporate trust office of the applicable Trustee or at the office of any
transfer agent designated by the Company for such purpose. 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 registration of
transfer or exchange thereof at the corporate trust office of the applicable
Trustee or at the office of any transfer agent designated by the Company for
such purpose. Every Debt Security in registered form surrendered for
registration of transfer or exchange must be duly endorsed or accompanied by a
written instrument of transfer, and the person requesting such action must
provide evidence of title and identity satisfactory to the applicable Trustee or
transfer agent. No service charge will be made for any registration of transfer
or exchange of any Debt Securities, but 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 applicable 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 Trustee shall be required to (a) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before the selection of any
Debt Securities for redemption and ending at the close of business on the day of
mailing of the notice of redemption; (b) register the transfer of or exchange
any Debt Security, or portion thereof, so selected for redemption, in whole or
in part, except the unredeemed portion of any Debt Security being redeemed in
part; or (c) issue, register the transfer of or exchange any Debt Security that
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.
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Payment in respect of Debt Securities in bearer form will be made in the
currency and in the manner designated in the applicable Prospectus Supplement,
subject to any applicable laws and regulations, at such paying agencies outside
the United States as the Company may appoint from time to time. The paying
agents outside the United States, if any, initially appointed by the Company for
a series of Debt Securities will be named in the Prospectus Supplement. Unless
otherwise provided in the applicable Prospectus Supplement, the Company may at
any time designate additional paying agents or rescind the designation of any
paying agents, except that, if Debt Securities of a series are issuable in
registered form, the Company will be required to maintain at least one paying
agent in each place of payment for such series and if Debt Securities of a
series are issuable in bearer form, the Company will be required to maintain at
least one paying agent in a place of payment outside the United States where
Debt Securities of such series and any coupons appertaining thereto may be
presented and surrendered for payment.
Merger, Consolidation or Sale of Assets
The Indentures will provide that the Company may, without the consent of
the holders of any outstanding Debt Securities, 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 (a) 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 is organized under the laws of any domestic jurisdiction
and assumes the Company's obligations to pay principal of (and premium or
Make-Whole Amount, 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 such Indenture; (b) immediately after giving effect to
such transaction and treating any indebtedness that 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 such Indenture, and no event which, after notice or the lapse of time, or
both, would become such an Event of Default, shall have occurred and be
continuing; and (c) an officers' certificate and legal opinion covering such
conditions shall be delivered to each Trustee.
Certain Covenants
The applicable Prospectus Supplement will describe any material
covenants in respect of a series of Debt Securities that are not described in
this Prospectus. Unless otherwise indicated in the applicable Prospectus
Supplement, Senior Debt Securities will include the following covenants of the
Company:
Existence. Except as permitted under "--Merger, Consolidation or Sale of
Assets," the Indentures will require the Company to do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence, rights (by articles of incorporation, by-laws and statute) and
franchises; provided, however, that the Company shall not be required to
preserve any right or franchise if its Board of Directors determines that the
preservation thereof is no longer desirable in the conduct of its business.
Maintenance of Properties. The Indentures will require the Company to
cause all of its material properties used or useful in the conduct of its
business or the business of any subsidiary to be maintained and kept in good
condition, repair and working order and supplied with all necessary equipment
and will cause to be made all necessary repairs, renewals, replacements,
betterments and improvements thereof, all as in the judgment of the Company may
be necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; provided, however, that the
Company and its subsidiaries shall not be prevented from selling or otherwise
disposing of their properties for value in the ordinary course of business.
9
Insurance. The Indentures will require the Company to cause each of its
and its subsidiaries' insurable properties to be insured against loss or damage
at least equal to their then full insurable value with insurers of recognized
responsibility and, if described in the applicable Prospectus Supplement, having
a specified rating from a recognized insurance rating service.
Payment of Taxes and Other Claims. The Indentures will require the
Company to pay or discharge or cause to be paid or discharged, before the same
shall become delinquent, (i) all taxes, assessments and governmental charges
levied or imposed upon it or any subsidiary or upon the income, profits or
property of the Company or any subsidiary and (ii) all lawful claims for labor,
materials and supplies which, if unpaid, might by law become a lien upon the
property of the Company or any subsidiary; provided, however, that the Company
shall not be required to pay or discharge or cause to be paid or discharged any
such tax, assessment, charge or claim whose amount, applicability or validity is
being contested in good faith.
Events of Default, Notice and Waiver
Unless otherwise provided in the applicable Prospectus Supplement, each
Indenture will provide that the following events are "Events of Default" with
respect to any series of Debt Securities issued thereunder: (a) default in the
payment of any interest on any Debt Security of such series when such interest
becomes due and payable that continues for a period of 30 days; (b) default in
the payment of the principal of (or premium or Make-Whole Amount, if any, on)
any Debt Security of such series when due and payable; (c) default in making any
sinking fund payment as required for any Debt Security of such series; (d)
default in the performance, or breach, of any other covenant or warranty of the
Company in the applicable Indenture with respect to the Debt Securities of such
series and continuance of such default or breach for a period of 60 days after
written notice as provided in the Indenture; (e) default under any bond,
debenture, note, mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any indebtedness for money
borrowed by the Company (or by any Subsidiary, the repayment of which the
Company has guaranteed or for which the Company is directly responsible or
liable as obligor or guarantor), having an aggregate principal amount
outstanding of at least $25,000,000, whether such indebtedness now exists or
shall hereafter be created, which default shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, without such indebtedness
having been discharged, or such acceleration having been rescinded or annulled,
within a period of 30 days after written notice to the Company as provided in
the Indenture; (f) certain events of bankruptcy, insolvency or reorganization,
or court appointment of a receiver, liquidator or trustee of the Company or any
Significant Subsidiary; and (g) any other event of default provided with respect
to a particular series of Debt Securities. The term "Significant Subsidiary" has
the meaning ascribed to such term in Regulation S-X promulgated under the
Securities Act.
If an Event of Default under any Indenture with respect to Debt
Securities of any series at the time outstanding occurs and is continuing, then
in every such case the applicable Trustee or the holders of not less than 25% in
principal amount of the Debt Securities of that series will have the right to
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or indexed securities, such portion of the
principal amount as may be specified in the terms thereof) of, and premium or
Make-Whole Amount, if any, on, all the Debt Securities of that series to be due
and payable immediately by written notice thereof to the Company (and to the
applicable Trustee if given by the holders). However, at any time after such a
declaration of acceleration with respect to Debt Securities of such series has
been made, but before a judgment or decree for payment of the money due has been
obtained by the applicable Trustee, the holders of not less than a majority in
principal amount of outstanding Debt Securities of such series may rescind and
annul such declaration and its consequences if (a) the Company shall have
deposited with the applicable Trustee all required payments of the principal of
(and premium or Make-Whole Amount, if any) and interest on the Debt Securities
of such series, plus certain fees, expenses, disbursements and advances of the
applicable Trustee and (b) all Events of Default, other than the non-payment of
accelerated principal (or specified portion thereof and the premium or
Make-Whole Amount, if any), with respect to Debt Securities of such series have
been cured or waived as provided in such Indenture. 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 may
10
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 or Make-Whole
Amount, 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 Indentures will require each Trustee to give notice to the holders
of Debt Securities within 90 days of a default under the applicable Indenture
unless such default shall have been cured or waived; provided, however, that
such Trustee may withhold notice to the holders of any series of Debt Securities
of any default with respect to such series (except a default in the payment of
the principal of (or premium or Make-Whole Amount, if any) or interest on any
Debt Security of such series or in the payment of any sinking fund installment
in respect of any Debt Security of such series) if specified responsible
officers of such Trustee consider such withholding to be in the interest of such
holders.
The Indentures will provide that no holders of Debt Securities of any
series may institute any proceedings, judicial or otherwise, with respect to
such Indenture or for any remedy thereunder, except in the case of failure of
the applicable Trustee, for 60 days, to act after it has received a written
request to institute proceedings in respect of an Event of Default from the
holders of not less than 25% in principal amount of the outstanding Debt
Securities of such series, as well as an offer of indemnity reasonably
satisfactory to it. This provision will not prevent, however, any holder of Debt
Securities from instituting suit for the enforcement of payment of the principal
of (and premium or Make-Whole Amount, if any) and interest on such Debt
Securities at the respective due dates or redemption dates thereof.
The Indentures will provide that, subject to provisions in each
Indenture relating to its duties in case of default, a Trustee will be under no
obligation to exercise any of its rights or powers under an Indenture at the
request or direction of any holders of any series of Debt Securities then
outstanding under such Indenture, unless such holders shall have offered to the
Trustee thereunder reasonable security or indemnity. The holders of not less
than a majority in principal amount of the outstanding Debt Securities of any
series (or of all Debt Securities then outstanding under an Indenture, as the
case may be) shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the applicable Trustee, or
of exercising any trust or power conferred upon such Trustee. However, a Trustee
may refuse to follow any direction which is in conflict with any law or the
applicable Indenture, which may involve such Trustee in personal liability or
which may be unduly prejudicial to the holders of Debt Securities of such series
not joining therein.
Within 120 days after the close of each fiscal year, the Company will be
required to deliver to each Trustee a certificate, signed by one of several
specified officers 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 Indentures
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 issued under such Indenture
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, (a) change the stated maturity of the principal
of, or any installment of interest (or premium or Make-Whole Amount, if any) on,
any such Debt Security; (b) reduce the principal amount of, or the rate or
amount of interest on, or any premium or Make-Whole Amount 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;
(c) change the place of payment, or the coin or currency, for payment of
principal of, premium or Make-Whole Amount, if any, or interest on any such Debt
Security; (d) impair the right to institute suit for the enforcement of any
payment on or with respect to any such Debt Security; (e) reduce the
above-stated percentage of outstanding Debt Securities of any series necessary
to
11
modify or amend the applicable Indenture, to waive compliance with certain
provisions thereof or certain defaults and consequences thereunder or to reduce
the quorum or voting requirements set forth in the applicable Indenture; (f)
change the currency or currency unit in which any Debt Security or any premium
or interest thereon is payable; (g) in the case of the Subordinated Indenture,
modify the subordination provisions thereof in a manner adverse to the holders
of Subordinated Debt Securities of any series then outstanding; or (h) 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.
The holders of a majority in aggregate principal amount of the
outstanding Debt Securities of each series may, on behalf of all holders of Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive covenants of the applicable
Indenture.
Modifications and amendments of an Indenture will be permitted to be
made by the Company and the respective Trustee thereunder without the consent of
any holder of Debt Securities for any of the following purposes: (a) to evidence
the succession of another person to the Company as obligor under such Indenture;
(b) 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; (c) to add events of default for the benefit
of the holders of all or any series of Debt Securities; (d) to add or change any
provisions of an 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
of any series in any material respect; (e) to change or eliminate any provisions
of an 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; (f)
to secure the Debt Securities; (g) to establish the form or terms of Debt
Securities of any series; (h) to provide for the acceptance of appointment by a
successor Trustee or facilitate the administration of the trusts under an
Indenture by more than one Trustee; (i) 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 issued under
such Indenture; or (j) 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 outstanding Debt Securities of any
series.
The Indentures 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, (a) the principal 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, (b) the principal amount of
any 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 (a) above), (c) 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 pursuant such
Indenture, and (d) 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.
The Indentures will contain provisions for convening meetings of the
holders of Debt Securities of a series. A meeting will be permitted to be called
at any time by the applicable 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
12
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 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 of that
series. Any resolution passed or decision taken at any meeting of holders of
Debt Securities of any series duly held in accordance with an 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, the Indentures 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 and other action that such Indenture expressly provides
may be made, given or taken by the holders of a specified percentage in
principal amount of all outstanding Debt Securities affected thereby, or of the
holders of such series and one or more additional series: (a) there shall be no
minimum quorum requirement for such meeting, and (b) 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.
Certain Definitions
"Indebtedness" means, with respect to any person, (a) any obligation of
such person to pay the principal of, premium, if any, interest on (including
interest accruing on or after the filing of any petition in bankruptcy or for
reorganization relating to such person, whether or not a claim for such
post-petition interest is allowed in such proceeding), penalties, reimbursement
or indemnification amounts, fees, expenses or other amounts relating to any
indebtedness of such person (i) for borrowed money (whether or not the recourse
of the lender is to the whole of the assets of such person or only to a portion
thereof), (ii) evidenced by notes, debentures or similar instruments (including
purchase money obligations) given in connection with the acquisition of any
property or assets (other than trade accounts payable for inventory or similar
property acquired in the ordinary course of business), including securities, for
the payment of which such person is liable, directly or indirectly, or the
payment of which is secured by a lien, charge or encumbrance on property or
assets of such person, (iii) for goods, materials or services purchased in the
ordinary course of business (other than trade accounts payable arising in the
ordinary course of business), (iv) with respect to letters of credit or bankers
acceptances issued for the account of such person or performance bonds, (v) for
the payment of money relating to a Capitalized Lease Obligation (as defined in
the Indenture), or (vi) under interest rate swaps, caps or similar agreements
and foreign exchange contracts, currency swaps or similar agreements; (b) any
liability of others of the kind described in the preceding clause (a) which such
person has guaranteed or which is otherwise its legal liability; and (c) any and
all deferrals, renewals, extensions and refunding of, or amendments,
modifications or supplements to, any liability of the kind described in any of
the preceding clauses (a) or (b).
"Senior Indebtedness" means Indebtedness of the Company, whether
outstanding on the date of issue of any Subordinated Debt Securities or
thereafter created, incurred, assumed or guaranteed by the Company, other than
the following: (a) any Indebtedness as to which, in the instrument evidencing
such Indebtedness or pursuant to which such Indebtedness was issued, it is
expressly provided that such Indebtedness is subordinate in right of payment to
all indebtedness of the Company not expressly subordinated to such Indebtedness;
(b) any Indebtedness which by its terms refers explicitly to the Subordinated
Debt Securities and
13
states that such Indebtedness shall not be senior, shall be pari passu or shall
be subordinated in right of payment to the Subordinated Debt Securities; and (c)
with respect to any series of Subordinated Debt Securities, any Indebtedness of
the Company evidenced by Subordinated Debt Securities of the same or of another
series. Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness shall not include: (x) Indebtedness of or amounts owed by the
Company for compensation to employees, or for goods, materials and services
purchased in the ordinary course of business, or (y) Indebtedness of the Company
to a subsidiary of the Company.
Subordination
Unless otherwise provided in the applicable Prospectus Supplement,
Subordinated Debt Securities will be subject to the following subordination
provisions.
The payment of the principal of, interest on, or any other amounts due
on, the Subordinated Debt Securities will be subordinated in right of payment to
the prior payment in cash in full of all Senior Indebtedness of the Company. No
payment on account of the principal of, redemption of, interest on or any other
amounts due on the Subordinated Debt Securities and no redemption, purchase or
other acquisition of the Subordinated Debt Securities may be made, unless (a)
full payment in cash of amounts then due for principal, sinking funds, interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company, whether or not a claim
for such post-petition interest is allowed in such proceeding), penalties,
reimbursement or indemnification amounts, fees and expenses, and of all other
amounts then due on all Senior Indebtedness shall have been made or duly
provided for pursuant to the terms of the instrument governing such Senior
Indebtedness, and (b) at the time of, or immediately after giving effect to, any
such payment, redemption, purchase or other acquisition, there shall not exist
under any Senior Indebtedness or any agreement pursuant to which any Senior
Indebtedness has been issued, any default which shall not have been cured or
waived and which shall have resulted in the full amount of such Senior
Indebtedness being declared due and payable and not rescinded. In addition, the
Subordinated Indenture provides that, if holders of any Senior Indebtedness
notify the Company and the Subordinated Trustee that a default has occurred
giving the holders of such Senior Indebtedness the right to accelerate the
maturity thereof, no payment on account of principal, sinking fund or other
redemption, interest or any other amounts due on the Subordinated Debt
Securities and no purchase, redemption or other acquisition of the Subordinated
Debt Securities will be made for the period (the "Payment Blockage Period")
commencing on the date such notice is received and ending on the earlier of (i)
the date on which such event of default shall have been cured or waived or (ii)
180 days from the date such notice is received. Notwithstanding the foregoing,
only one payment blockage notice with respect to the same event of default or
any other events of default existing and known to the person giving such notice
at the time of such notice on the same issue of Senior Indebtedness may be given
during any period of 360 consecutive days. No new Payment Blockage Period may be
commenced by the holders of Senior Indebtedness during any period of 360
consecutive days unless all events of default which triggered the preceding
Payment Blockage Period have been cured or waived. Upon any distribution of its
assets in connection with any dissolution, winding-up, liquidation or
reorganization of the Company, all Senior Indebtedness must be paid in full in
cash before the holders of the Subordinated Debt Securities are entitled to any
payments whatsoever.
The Subordinated Indenture does not restrict the amount of Senior
Indebtedness or other indebtedness of the Company or any Subsidiary. As a result
of these subordination provisions, in the event of the Company's insolvency,
holders of the Subordinated Debt Securities may recover ratably less than
general creditors of the Company.
If this Prospectus is being delivered in connection with a series of
Subordinated Debt Securities, the accompanying Prospectus Supplement or the
information incorporated herein by reference will set forth the approximate
amount of Senior Indebtedness outstanding as of the end of the Company's most
recent fiscal quarter.
14
Discharge, Defeasance and Covenant Defeasance
Unless otherwise indicated in the applicable Prospectus Supplement, the
Company will be permitted, at its option, to discharge certain obligations to
holders of any series of Debt Securities issued under any Indenture that have
not already been delivered to the applicable Trustee for cancellation and that
either have become due and payable or will become due and payable within one
year (or scheduled for redemption within one year) by irrevocably depositing
with the applicable 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 or Make-Whole Amount,
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.
The Indentures will provide that, unless otherwise indicated in the
applicable Prospectus Supplement, the Company may elect either (a) to defease
and be discharged from any and all obligations with respect to such Debt
Securities (except for 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 (b) to be
released from certain obligations with respect to such Debt Securities under the
applicable Indenture (including the restrictions described under "--Certain
Covenants") or, if provided in the applicable Prospectus Supplement, its
obligations with respect to any other covenant, and any omission to comply with
such obligations shall not constitute 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 Trustee, in trust, of an amount, in
such currency or currencies, currency unit or units or 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 or Make-Whole Amount, if any) and interest on such
Debt Securities, and any mandatory sinking fund or analogous payments thereon,
on the scheduled due dates therefor.
Such a trust will only be permitted to be established if, among other
things, the Company has delivered to the applicable 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, and such opinion of counsel,
in the case of defeasance, will be required to refer to and be based upon a
ruling received from or published by the Internal Revenue Service or a change in
applicable United States federal income tax law occurring after the date of the
Indenture. In the event of such defeasance, the holders of such Debt Securities
would thereafter be able to look only to such trust fund for payment of
principal (and premium or Make-Whole Amount, if any) and interest.
"Government Obligations" means securities that are (a) 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 (b)
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 such 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 Obligation or
the specific payment of interest on or principal of the Government Obligation
evidenced by such depository receipt.
15
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,
(a) 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
(b) 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 will be deemed to have been, and
will be, fully discharged and satisfied through the payment of the principal of
(and premium or Make-Whole Amount, 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 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 or
Make-Whole Amount, 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 of Event of Default other than the Event of Default
described in clause (d) under "--Events of Default, Notice and Waiver" with
respect to specified sections of an 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 applicable 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 of Event of Default. However, the Company would
remain liable to make payment of such amounts due at the time of acceleration.
The applicable Prospectus Supplement may further describe the
provisions, if any, permitting such defeasance or covenant defeasance, including
any modifications to the provisions described above, with respect to the Debt
Securities of or within a particular series.
Conversion Rights
The terms and conditions, if any, upon which the Debt Securities are
convertible into Common Stock or Preferred Stock will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into shares of Common Stock or
Preferred Stock, the conversion price (or manner of calculation thereof), the
conversion period, provisions as to whether conversion will be at the option of
the holders or the Company, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of such
Debt Securities and any restrictions on conversion, including restrictions
directed at maintaining the Company's REIT status.
Book-Entry System
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities ("Global Securities") that will be
deposited with, or on behalf of, a depository (the "Depository") identified in
the Prospectus Supplement relating to such series. Global Securities, if any,
issued in the United States are expected to be deposited with The Depository
Trust Company ("DTC"), as Depository. Global Securities may be issued in fully
registered form and may be issued in either temporary or permanent form.
16
Unless and until it is exchanged in whole or in part for the individual Debt
Securities represented thereby, a Global Security may not be transferred except
as a whole by the Depository for such Global Security to a nominee of such
Depository or by a nominee of such Depository to such Depository or another
nominee of such Depository or by such Depository or any nominee of such
Depositor to a successor Depository or any nominee of such successor.
The specific terms of the depository arrangement with respect to a
series of Debt Securities will be described in the Prospectus Supplement
relating to such series. The Company expects that unless otherwise indicated in
the applicable Prospectus Supplement, the following provisions will apply to
depository arrangements.
Upon the issuance of a Global Security, the Depository for such Global
Security or its nominee will credit on its book-entry registration and transfer
system the respective principal amounts of the individual Debt Securities
represented by such Global Security to the accounts of persons that have
accounts with such Depository ("Participants"). Such accounts shall be
designated by the underwriters, dealers or agents with respect to such Debt
Securities or by the Company if such Debt Securities are offered directly by the
Company. Ownership of beneficial interests in such Global Security will be
limited to Participants or persons that may hold interests through Participants.
The Company expects that, pursuant to procedures established by DTC,
ownership of beneficial interests in any Global Security with respect to which
DTC is the Depository will be shown on, and the transfer of that ownership will
be effected only through, records maintained by DTC or its nominee (with respect
to beneficial interests of Participants) and records of Participants (with
respect to beneficial interests of persons who hold through Participants).
Neither the Company nor the Trustee will have any responsibility or liability
for any aspect of the records of DTC or for maintaining, supervising or
reviewing any records of DTC or any of its Participants relating to beneficial
ownership interests in the Debt Securities. The laws of some states require that
certain purchasers of securities take physical delivery of such securities in
definitive form. Such limits and laws may impair the ability to own, pledge or
transfer beneficial interest in a Global Security.
So long as the Depository for a Global Security or its nominee is the
registered owner of such Global Security, such Depository or such nominee, as
the case may be, will be considered the sole owner or holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Except as described below or in the applicable Prospectus
Supplement, owners of beneficial interest in a Global Security will not be
entitled to have any of the individual Debt Securities represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of any such Debt Securities in definitive form and
will not be considered the owners or holders thereof under the applicable
Indenture. Beneficial owners of Debt Securities evidenced by a Global Security
will not be considered the owners or holders thereof under the applicable
Indenture for any purpose, including with respect to the giving of any
direction, instructions or approvals to the Trustee thereunder. Accordingly,
each person owning a beneficial interest in a Global Security with respect to
which DTC is the Depository must rely on the procedures of DTC and, if such
person is not a Participant, on the procedures of the Participant through which
such person owns its interests, to exercise any rights of a holder under the
applicable Indenture. The Company understands that, under existing industry
practice, if it requests any action of holders or if an owner of a beneficial
interest in a Global Security desires to give or take any action which a holder
is entitled to give or take under the applicable Indenture, DTC would authorize
the Participants holding the relevant beneficial interest to give or take such
action, and such Participants would authorize beneficial owners through such
Participants to give or take such actions or would otherwise act upon the
instructions of beneficial owners holding through them.
Payments of principal of, any premium or Make-Whole Amount and any
interest on individual Debt Securities represented by a Global Security
registered in the name of a Depository or its nominee will be made to or at the
direction of the Depository or its nominee, as the case may be, as the
registered owner of the Global Security under the applicable Indenture. Under
the terms of the applicable Indenture, the Company
17
and the Trustee may treat the persons in whose name Debt Securities, including a
Global Security, are registered as the owners thereof for the purpose of
receiving such payments. Consequently, neither the Company nor the Trustee has
or will have any responsibility or liability for the payment of such amounts to
beneficial owners of Debt Securities (including principal, premium or Make-Whole
Amount, if any, and interest). The Company believes, however, that it is
currently the policy of DTC to immediately credit the accounts of relevant
Participants with such payments, in amounts proportionate to their respective
holdings of beneficial interests in the relevant Global Security as shown on the
records of DTC or its nominee. The Company also expects that payments by
Participants to owners of beneficial interests in such Global Security held
through such Participants will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in street name, and will be the
responsibility of such Participants. Redemption notices with respect to any Debt
Securities represented by a Global Security will be sent to the Depository or
its nominee. If less than all of the Debt Securities of any series are to be
redeemed, the Company expects the Depository to determine the amount of the
interest of each Participant in such Debt Securities to be redeemed to be
determined by lot. None of the Company, the Trustee, any Paying Agent or the
Security Registrar for such Debt Securities will have any responsibility or
liability for any aspect of the records relating to or payments made on account
of beneficial ownership interests in the Global Security for such Debt
Securities or for maintaining any records with respect thereto.
Neither the Company nor the Trustee will be liable for any delay by the
holders of a Global Security or the Depository in identifying the beneficial
owners of Debt Securities and the Company and the Trustee may conclusively rely
on, and will be protected in relying on, instructions from the holder of a
Global Security or the Depository for all purposes. The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
If a Depository for any Debt Securities is at any time unwilling, unable
or ineligible to continue as depository and a successor depository is not
appointed by the Company within 90 days, the Company will issue individual Debt
Securities in exchange for the Global Security representing such Debt
Securities. In addition, the Company may at any time and in its sole discretion,
subject to any limitations described in the Prospectus Supplement relating to
such Debt Securities, determine not to have any of such Debt Securities
represented by one or more Global Securities and in such event will issue
individual Debt Securities in exchange for the Global Security or Securities
representing such Debt Securities. Individual Debt Securities so issued will be
issued in denominations of $1,000 and integral multiples thereof.
The Debt Securities of a series may also be issued in whole or in part
in the form of one or more bearer global securities (a "Bearer Global Security")
that will be deposited with a depository, or with a nominee for such depository,
identified in the applicable Prospectus Supplement. Any such Bearer Global
Securities may be issued in temporary or permanent form. The specific terms and
procedures, including the specific terms of the depository arrangement, with
respect to any portion of a series of Debt Securities to be represented by one
or more Bearer Global Securities will be described in the applicable Prospectus
Supplement.
Payment and Paying Agents
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium or Make-Whole Amount, if any) and interest
on any series of Debt Securities will be payable at the corporate trust office
of the Trustee, the address of which will be stated 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 for such Debt Securities or by wire transfer
of funds to such person at an account maintained within the United States.
All moneys paid by the Company to a paying agent or a Trustee for the
payment of the principal of or any premium, Make-Whole Amount or interest on any
Debt Security which remain unclaimed at the end of two years after such
principal, premium, Make-Whole Amount or interest has become due and payable
will be repaid to the Company, and the holder of such Debt Security thereafter
may look only to the Company for payment thereof.
18
Global Securities
The Debt Securities of a series may be issued in whole or in part in the
form of one or more global securities (the "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 a series of
Debt Securities will be described in the applicable Prospectus Supplement
relating to such series.
19
DESCRIPTION OF PREFERRED STOCK
The description of the Company's preferred stock, par value $.01 per
share ("Preferred Stock"), set forth below does not purport to be complete and
is qualified in its entirety by reference to the Company's Amended and Restated
Articles of Incorporation (the "Articles of Incorporation") and Amended and
Restated Bylaws (the "Bylaws").
General
Under the Articles of Incorporation, the Company has authority to issue
10 million shares of Preferred Stock, none of which was outstanding as of July
25, 1996. Shares of Preferred Stock may be issued from time to time, in one or
more series, as authorized by the Board of Directors of the Company. Prior to
issuance of shares of each series, the Board of Directors is required by the
Maryland General Corporation Law ("MGCL") and the Company's Articles of
Incorporation to fix for each series, the terms, preferences, conversion or
other rights, voting powers, restrictions, limitations as to dividends or other
distributions, qualifications and terms or conditions of redemption, as are
permitted by Maryland law. The Preferred Stock will, when issued, be fully paid
and nonassessable and will have no preemptive rights. The Board of Directors
could authorize the issuance of shares of Preferred Stock with terms and
conditions that could have the effect of discouraging a takeover or other
transaction that holders of Common Stock might believe to be in their best
interests or in which holders of some, or a majority, of the shares of Common
Stock might receive a premium for their shares over the then market price of
such shares of Common Stock.
Terms
The following description of the Preferred Stock sets forth certain
general terms and provisions of the Preferred Stock to which any Prospectus
Supplement may relate. The statements below describing the Preferred Stock are
in all respects subject to and qualified in their entirety by reference to the
applicable provisions of the Company's Articles of Incorporation and Bylaws and
any applicable amendment to the Articles of Incorporation designating terms of a
series of Preferred Stock (a "Designating Amendment").
Reference is made to the Prospectus Supplement relating to the Preferred
Stock offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Stock;
(2) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the offering price of such
Preferred Stock;
(3) The dividend rate(s), period(s) and/or payment date(s) or
method(s) of calculation thereof applicable to such Preferred
Stock;
(4) The date from which dividends on such Preferred Stock shall
accumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Stock;
(6) The provision for a sinking fund, if any, for such Preferred
Stock;
(7) The provision for redemption, if applicable, of such Preferred
Stock;
(8) Any listing of such Preferred Stock on any securities exchange;
(9) The terms and conditions, if applicable, upon which such
Preferred Stock will be convertible into Common Stock, including
the conversion price (or manner of calculation thereof);
20
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock;
(11) A discussion of federal income tax considerations applicable to
such Preferred Stock;
(12) The relative ranking and preference of such Preferred Stock as to
dividend rights and rights upon liquidation, dissolution or
winding up of the affairs of the Company;
(13) Any limitations on issuance of any series of Preferred Stock
ranking senior to or on a parity with such series of Preferred
Stock as to dividend rights and rights upon liquidation,
dissolution or winding up of the affairs of the Company; and
(14) 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.
Rank
Unless otherwise specified in the Prospectus Supplement, the Preferred
Stock will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Company, rank (i) senior to all classes or
series of Common Stock of the Company, and to all equity securities ranking
junior to such Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company; (ii) on a parity with all
equity securities issued by the Company the terms of which specifically provide
that such equity securities rank on a parity with the Preferred Stock with
respect to dividend rights or rights upon liquidation, dissolution or winding up
of the Company; and (iii) junior to all equity securities issued by the Company
the terms of which specifically provide that such equity securities rank senior
to the Preferred Stock with respect to dividend rights or rights upon
liquidation, dissolution or winding up of the Company. The term "equity
securities" does not include convertible debt securities.
Dividends
Holders of the Preferred Stock of each series will be entitled to
receive, when, as and if declared by the Board of Directors of the Company, out
of assets of the Company legally available for payment, cash dividends 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 on such record dates as shall
be fixed by the Board of Directors of the Company.
Dividends on any series of the Preferred Stock may be cumulative or
non-cumulative, as provided in the applicable Prospectus Supplement. Dividends,
if cumulative, will be cumulative from and after the date set forth in the
applicable Prospectus Supplement. If the Board of Directors of the Company fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Stock for which dividends are non-cumulative, then the holders of such
series of the Preferred Stock will have no right to receive a dividend in
respect of the dividend period ending on such dividend payment date, and the
Company will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Stock of any series is outstanding, no dividends will be
declared or paid or set apart for payment on any capital stock of the Company of
any other series ranking, as to dividends, on a parity with or junior to the
Preferred Stock of such series for any period unless (i) if such series of
Preferred Stock 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 is set apart for such payment on the Preferred Stock of such
series for all past dividend periods and the then current dividend period or
(ii) if such series of Preferred Stock 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
is set apart for such payment on the Preferred Stock of such series. When
dividends are not paid in full (or a sum
21
sufficient for such full payment is not so set apart) upon Preferred Stock of
any series and the shares of any other series of Preferred Stock ranking on a
parity as to dividends with the Preferred Stock of such series, all dividends
declared upon Preferred Stock of such series and any other series of Preferred
Stock ranking on a parity as to dividends with such Preferred Stock shall be
declared pro rata so that the amount of dividends declared per share of
Preferred Stock of such series and such other series of Preferred Stock shall in
all cases bear to each other the same ratio that accrued dividends per share on
the Preferred Stock of such series (which shall not include any accumulation in
respect of unpaid dividends for prior dividend periods if such Preferred Stock
does not have a cumulative dividend) and such other series of Preferred Stock
bear to each other. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on Preferred Stock of
such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i)
if such series of Preferred Stock has a cumulative dividend, full cumulative
dividends on the Preferred Stock of such series have been or contemporaneously
are declared and paid or declared and a sum sufficient for the payment thereof
is set apart for payment for all past dividend periods and the then current
dividend period, and (ii) if such series of Preferred Stock does not have a
cumulative dividend, full dividends on the Preferred Stock of such series have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof is set apart for payment for the then current dividend
period, no dividends (other than in shares of Common Stock or other shares of
capital stock ranking junior to the Preferred Stock of such series as to
dividends and upon liquidation) shall be declared or paid or set aside for
payment nor shall any other distribution be declared or made upon the Common
Stock, or any other capital stock of the Company ranking junior to or on a
parity with the Preferred Stock of such series as to dividends or upon
liquidation, nor shall any shares of Common Stock, or any other shares of
capital stock of the Company ranking junior to or on a parity with the Preferred
Stock of such series as to dividends or upon liquidation be redeemed, purchased
or otherwise acquired for any consideration (or any moneys be paid to or made
available for a sinking fund for the redemption of any such shares) by the
Company (except by conversion into or exchange for other capital stock of the
Company ranking junior to the Preferred Stock of such series as to dividends and
upon liquidation).
Any dividend payment made on shares of a series of Preferred Stock
shall first be credited against the earliest accrued but unpaid dividend due
with respect to shares of such series which remains payable.
Redemption
If so provided in the applicable Prospectus Supplement, the Preferred
Stock will be subject to mandatory redemption or redemption at the option of the
Company, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Stock that
is subject to mandatory redemption will specify the number of shares of such
Preferred Stock that shall be redeemed by the Company in each year commencing
after a date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon (which
shall not, if such Preferred Stock does not have a cumulative dividend, include
any accumulation in respect of unpaid dividends for prior dividend periods) to
the date of redemption. The redemption price may be payable in cash or other
property, as specified in the applicable Prospectus Supplement. If the
redemption price for Preferred Stock of any series is payable only from the net
proceeds of the issuance of shares of capital stock of the Company, the terms of
such Preferred Stock may provide that, if no such shares of capital stock shall
have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Stock shall automatically and mandatorily be converted into the
applicable shares of capital stock of the Company pursuant to conversion
provisions specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if a series of Preferred
Stock has a cumulative dividend, full cumulative dividends on all shares of such
series of Preferred Stock 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
22
past dividend periods and the then current dividend period, and (ii) if a series
of Preferred Stock does not have a cumulative dividend, full dividends on all
shares of the Preferred Stock 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 shares of such series
of Preferred Stock shall be redeemed unless all outstanding shares of Preferred
Stock of such series are simultaneously redeemed; provided, however, that the
foregoing shall not prevent the purchase or acquisition of Preferred Stock of
such series to preserve the REIT status of the Company or pursuant to a purchase
or exchange offer made on the same terms to holders of all outstanding shares of
Preferred Stock of such series. In addition, unless (i) if such series of
Preferred Stock has a cumulative dividend, full cumulative dividends on all
outstanding shares of such series of Preferred Stock 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 Stock does not
have a cumulative dividend, full dividends on the Preferred stock 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, the Company shall not purchase or otherwise acquire directly or
indirectly any shares of Preferred Stock of such series (except by conversion
into or exchange for capital shares of the Company ranking junior to the
Preferred Stock of such series as to dividends and upon liquidation); provided,
however, that the foregoing shall not prevent the purchase or acquisition of
shares of Preferred Stock of such series to preserve the REIT status of the
Company or pursuant to a purchase or exchange offer made on the same terms to
holders of all outstanding shares of Preferred Stock of such series.
If fewer than all of the outstanding shares of Preferred Stock of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Company and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares held
or for which redemption is requested by such holder (with adjustments to avoid
redemption of fractional shares) or by any other equitable 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 Stock
of any series to be redeemed at the address shown on the stock transfer books of
the Company. Each notice shall state: (i) the redemption date; (ii) the number
of shares and series of the Preferred Stock to be redeemed; (iii) the redemption
price; (iv) the place or places where certificates for such Preferred Stock 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 shares of Preferred Stock of any series are to
be redeemed, the notice mailed to each such holder thereof shall also specify
the number of shares of Preferred Stock to be redeemed from each such holder. If
notice of redemption of any Preferred Stock has been given and if the funds
necessary for such redemption have been set aside by the Company in trust for
the benefit of the holders of any Preferred Stock so called for redemption, then
from and after the redemption date dividends will cease to accrue on such
Preferred Stock, 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 Stock or any other class or series of
capital stock of the Company ranking junior to the Preferred Stock in the
distribution of assets upon any liquidation, dissolution or winding up of the
Company, the holders of each series of Preferred Stock shall be entitled to
receive out of assets of the Company legally available for distribution to
stockholders liquidating distributions in the amount of the liquidation
preference per share, if any, 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 noncumulative dividends for
prior dividend periods). After payment of the full amount of the liquidating
distributions to which they are entitled, the holders of Preferred Stock will
have no right or claim to any of the remaining assets of the Company. In the
event that, upon any such voluntary or involuntary liquidation, dissolution or
winding up, the available assets
23
of the Company are insufficient to pay the amount of the liquidating
distributions on all outstanding shares of Preferred Stock and the corresponding
amounts payable on all shares of other classes or series of capital stock of the
Company ranking on a parity with the Preferred Stock in the distribution of
assets, then the holders of the Preferred Stock and all other such classes or
series of capital stock shall share ratably in any such distribution of assets
in proportion to the full liquidating distributions to which they would
otherwise be respectively entitled.
If liquidating distributions shall have been made in full to all
holders of Preferred Stock, the remaining assets of the Company shall be
distributed among the holders of any other classes or series of capital stock
ranking junior to the Preferred Stock upon liquidation, dissolution or winding
up, according to their respective rights and preferences and in each case
according to their respective number of shares. For such purposes, the
consolidation or merger of the Company with or into any other corporation, trust
or entity, 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 Stock will not have any voting rights, except
as set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Unless provided otherwise for any series of Preferred Stock, so long as
any shares of Preferred Stock of a series remain outstanding, the Company will
not, without the affirmative vote or consent of the holders of at least
two-thirds of the shares of such series of Preferred Stock 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 capital stock ranking
prior to such series of Preferred Stock with respect to payment of dividends or
the distribution of assets upon liquidation, dissolution or winding up or
reclassify any authorized capital stock of the Company into 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 Company's Articles of Incorporation or the Designating
Amendment for such series of Preferred Stock, whether by merger, consolidation
or otherwise (an "Event"), so as to materially and adversely affect any right,
preference, privilege or voting power of such series of Preferred Stock or the
holders thereof; provided, however, with respect to the occurrence of any of the
Events set forth in (ii) above, so long as the Preferred Stock remains
outstanding with the terms thereof materially unchanged, taking into account
that upon the occurrence of an Event the Company may not be the surviving
entity, the occurrence of any such Event shall not be deemed to materially and
adversely affect such rights, preferences, privileges or voting power of holders
of Preferred Stock, and provided further that (x) any increase in the amount of
the authorized Preferred Stock or the creation or issuance of any other series
of Preferred Stock, or (y) any increase in the amount of authorized shares of
such series or any other series of Preferred Stock, in each case ranking on a
parity with or junior to the Preferred Stock 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 Stock
shall have been redeemed or called for redemption and sufficient funds shall
have been deposited in trust to effect such redemption.
Conversion Rights
The terms and conditions, if any, upon which any series of Preferred
Stock is convertible into Common Stock will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
shares of Common Stock into which the shares of Preferred Stock are convertible,
the conversion price (or manner of calculation thereof), the conversion period,
provisions as to whether conversion will be at the option of the holders of the
Preferred Stock or the Company, the events requiring
24
an adjustment of the conversion price and provisions affecting conversion in the
event of the redemption of such series of Preferred Stock.
Restrictions on Ownership
For the Company to qualify as a REIT under the Internal Revenue Code of
1986, as amended (the "Code"), not more than 50% in value of its outstanding
capital stock may be owned, directly or indirectly, by five or fewer individuals
(as defined in the Code to include certain entities) during the last half of a
taxable year. To assist the Company in meeting this requirement, the Company may
take certain actions to limit the beneficial ownership, directly or indirectly,
by a single person of the Company's outstanding equity securities, including any
Preferred Stock of the Company. Therefore, the Designating Amendment for each
series of Preferred Stock may contain provisions restricting the ownership and
transfer of the Preferred Stock. The applicable Prospectus Supplement will
specify any additional ownership limitation relating to a series of Preferred
Stock. See "Restrictions on Transfers of Capital Stock."
Transfer Agent
The transfer agent and registrar for the Preferred Stock will be set
forth in the applicable Prospectus Supplement.
DESCRIPTION OF COMMON STOCK
The description of the Company's Common Stock set forth below does not
purport to be complete and is qualified in its entirety by reference to the
Company's Articles of Incorporation and Bylaws.
General
Under the Articles of Incorporation, the Company has authority to issue
100 million shares of Common Stock, par value $.01 per share. Under Maryland
law, stockholders generally are not responsible for the corporation's debts or
obligations. At July 25, 1996, the Company had outstanding 7,544,171 shares of
Common Stock.
Terms
Subject to the preferential rights of any other shares or series of
stock, holders of shares of Common Stock will be entitled to receive dividends
on shares of Common Stock if, as and when authorized and declared by the Board
of Directors of the Company out of assets legally available therefor and to
share ratably in the assets of the Company legally available for distribution to
its stockholders in the event of its liquidation, dissolution or winding-up
after payment of, or adequate provision for, all known debts and liabilities of
the Company.
Each outstanding share of Common Stock entitles the holder to one vote
on all matters submitted to a vote of stockholders, including the election of
Directors and, except as otherwise required by law or except as provided with
respect to any other class or series of stock, the holders of Common Stock will
possess the exclusive voting power. There is no cumulative voting in the
election of Directors, which means that the holders of a majority of the
outstanding shares of Common Stock can elect all of the Directors then standing
for election, and the holders of the remaining shares of Common Stock will not
be able to elect any Directors.
Holders of Common Stock have no conversion, sinking fund or redemption
rights, or preemptive rights to subscribe for any securities of the Company.
25
The Company intends to furnish its stockholders with annual reports
containing audited consolidated financial statements and an opinion thereon
expressed by an independent public accounting firm and quarterly reports for the
first three quarters of each fiscal year containing unaudited financial
information.
All shares of Common Stock will have equal dividend, distribution,
liquidation and other rights, and will have no preference, appraisal or exchange
rights.
Pursuant to the MGCL, a corporation generally cannot dissolve, amend
its Articles of Incorporation, merge, sell all or substantially all of its
assets, engage in a share exchange or engage in similar transactions outside the
ordinary course of business unless approved by the affirmative vote of
stockholders holding at least two-thirds of the shares entitled to vote on the
matter unless a lesser percentage (but not less than a majority of all of the
votes to be cast on the matter) is set forth in the corporation's Articles of
Incorporation. The Company's Articles of Incorporation do not provide for a
lesser percentage in such situations.
Restrictions on Ownership
For the Company to qualify as a REIT under the Code, not more than 50%
in value of its outstanding capital stock may be owned, directly or indirectly,
by five or fewer individuals (as defined in the Code to include certain
entities) during the last half of a taxable year. To assist the Company in
meeting this requirement, the Company may take certain actions to limit the
beneficial ownership, directly or indirectly, by a single person of the
Company's outstanding equity securities. See "Restrictions on Transfers of
Capital Stock."
Transfer Agent
The transfer agent and registrar for the Common Stock is American Stock
Transfer and Trust Company.
RESTRICTIONS ON TRANSFERS OF CAPITAL STOCK
For the Company to qualify as a REIT under the Code, among other
things, not more than 50% in value of its outstanding capital stock may be
owned, directly or indirectly, by five or fewer individuals (defined in the Code
to include certain entities) during the last half of a taxable year (other than
the first year) (the "Five or Fewer Test"), and such shares of capital stock
must be beneficially owned by 100 or more persons during at least 335 days of a
taxable year of 12 months (other than the first year) or during a proportionate
part of a shorter taxable year. The Articles of Incorporation, subject to
certain exceptions, provide that no holder may own, or be deemed to own by
virtue of the attribution provisions of the Code, shares of the Company's
capital stock in excess of the Ownership Limit. Pursuant to the Code, generally,
certain types of entities, such as pension trusts qualifying under Section
401(a) of the Code, United States investment companies registered under the
Investment Company Act of 1940, corporations, trusts and partnerships will be
looked-through for purposes of the Five or Fewer Test (i.e., the beneficial
owners of such entities will be counted as holders). The Company's Articles of
Incorporation limit such entities under the Look-Through Ownership Limit to
holdings of no more than 15% of the aggregate value of the Company's shares of
capital stock. Any transfer of shares of capital stock or any security
convertible into shares of capital stock that would create a direct or indirect
ownership of shares of capital stock in excess of the Ownership Limit or the
Look-Through Ownership Limit or that would result in the disqualification of the
Company as a REIT, including any transfer that results in the shares of capital
stock being owned by fewer than 100 persons or results in the Company being
"closely held" within the meaning of Section 856(h) of the Code shall be null
and void, and the intended transferee will acquire no rights to the shares of
capital stock. The foregoing restrictions on transferability and ownership will
not apply if the Board of Directors determines that it is no longer in the best
interests of the Company to attempt to qualify, or to continue to qualify, as a
REIT. The Board of Directors may, in its sole discretion, waive the Ownership
Limit or the Look-Through
26
Ownership Limit if evidence satisfactory to the Board of Directors and the
Company's tax counsel is presented that the changes in ownership will not then
or in the future jeopardize the Company's REIT status.
Capital stock owned, or deemed to be owned, or transferred to a
shareholder in excess of the Ownership Limit or the Look-Through Ownership Limit
or that causes the Company to be treated as "closely-held" under Section 856(h)
of the Code or is otherwise not permitted as provided above, will be designated
shares in trust ("Shares in Trust") that will be transferred, by operation of
law, to a person unaffiliated with the Company designated by the Board of
Directors as trustee (the "Trustee") of a trust (the "Share Trust") for the
benefit of one or more charitable organizations. Shares in Trust will remain
issued and outstanding Common or Preferred Shares of the Company and will be
entitled to the same rights and privileges as all other shares of the same class
or series. The Trustee will receive all dividends and distributions on the
Shares in Trust for the Share Trust and will hold such dividends or
distributions in trust for the benefit of one or more designated charitable
beneficiaries. The Trustee will vote all Shares in Trust. Any vote cast by the
proposed transferee in respect of the Shares in Trust prior to the discovery by
the Company that such shares have been transferred to the Share Trust shall be
rescinded and shall be void ab initio. Any dividend or distribution paid to a
proposed transferee or owner of Shares in Trust prior to the discovery by the
Company that such shares have been transferred to the Share Trust will be
required to be repaid upon demand to the Trustee for the benefit of one or more
charitable beneficiaries. The Trustee may, at any time the Shares in Trust are
held in the Share Trust, transfer the interest in the Share Trust representing
the Shares in Trust to any person whose ownership of the shares of capital stock
designated as Shares in Trust would not violate the Ownership Limit or the
Look-Through Ownership Limit, or otherwise result in the disqualification of the
REIT, as described above, and provided such permitted transferee purchases such
shares for valuable considerations. Upon such sale, the proposed original
transferee will receive the lesser of (i) the price paid by the original
transferee shareholder for the shares of capital stock that were transferred to
the Share Trust, or if the original transferee shareholder did not give value
for such shares (e.g., the capital stock was received through a gift, devise or
other transaction), the average closing price for the class of shares from which
such shares of Shares in Trust were designated for the ten days immediately
preceding such sale or gift and (ii) the price received by the Trustee from such
sale. Any amounts received by the Trustee in excess of the amounts paid to the
proposed transferee will be distributed to one or more charitable beneficiaries
of the Share Trust. If the foregoing transfer restrictions are determined to be
void or invalid by virtue of any legal decision, statute, rule or regulation,
then the intended transferee of shares held in the Share Trust may be deemed, at
the option of the Company, to have acted as an agent on behalf of the Company in
acquiring the Shares in Trust and to hold the Shares in Trust on behalf of the
Company.
In addition, the Company has the right, for a period of 90 days during
the time any shares of Shares in Trust are held by the Trustee, to purchase all
or any portion of the Shares in Trust from the Trust at the lesser of (i) the
price initially paid for such shares by the original transferee-shareholder, or
if the original transferee-shareholder did not give value for such shares (e.g.,
the shares were received through a gift, device or other transaction), the
average closing price for the class of stock from which such Shares in Trust
were designated for the ten days immediately preceding such sale or gift, and
(ii) the average closing price for the class of shares form which such Shares in
Trust were designated for the ten trading days immediately preceding the date
the Company elects to purchase such shares. The 90-day period begins on date of
the violative transfer if the original transferee-shareholder gives notice to
the Company of the transfer or, if no such notice is given, the date the Board
of Directors determines that a violative transfer has been made.
All certificates representing shares of stock of the Company bear a
legend referring to the restrictions described above.
Each shareholder shall upon demand be required to disclose to the
Company in writing any information with respect to the direct, indirect and
constructive ownership of capital stock as the Board of Directors deems
necessary to comply with the provisions of the Code applicable to REITs, to
comply with the requirements of any taxing authority or governmental agency or
to determine any such compliance.
27
The Ownership Limit and the Look-Through Ownership Limit may have the
effect of precluding acquisition of control of the Company.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of certain material U.S. Federal income tax
considerations to the Company regarding the offering of Securities. The
following discussion is not exhaustive of all possible tax considerations and is
not tax advice. The Code provisions governing the Federal income tax treatment
of REITs are highly technical and complex, and this summary is qualified in its
entirety by the applicable Code provisions, rules and regulations promulgated
thereunder, and the administrative and judicial interpretations thereof. The
following discussion is based on current law. The tax treatment of a holder of
any of the Securities will vary depending upon the terms of the specific
Securities acquired by such holder as well as his particular situation, and this
discussion does not attempt to address any aspects of Federal income taxation
relating to the holders of Securities. Certain Federal income tax considerations
relevant to holders of Securities will be provided in the applicable Prospectus
Supplement relating thereto.
EACH PROSPECTIVE PURCHASER IS URGED TO CONSULT WITH HIS OR HER OWN TAX
ADVISOR WITH RESPECT TO SUCH PURCHASER'S SPECIFIC FEDERAL, STATE, LOCAL, FOREIGN
AND OTHER TAX CONSEQUENCES OF THE PURCHASE, HOLDING AND SALE OF SECURITIES.
Taxation of the Company
The Company intends to operate so as to meet the requirements under the
Code for qualification as a REIT, commencing with its taxable year ending
December 31, 1995. No assurance can be given, however, that such requirements
will be met. Based on various assumptions and factual representations made by
the Company, in the opinion of Phillips, Lytle, Hitchcock, Blaine & Huber,
counsel to the Company, the Company has been organized in conformity with the
requirements for qualification as a REIT beginning with its taxable year ending
December 31, 1995, and its proposed method of operation as described in this
Prospectus and as represented by the Company will enable it to satisfy the
requirements for such qualification. Such qualification depends upon the
Company's ability to meet the various requirements imposed under the Code
through actual operating results, as discussed below. Phillips, Lytle,
Hitchcock, Blaine & Huber will not review these operating results, and no
assurance can be given that actual operating results will meet these
requirements. The opinion of Phillips, Lytle, Hitchcock, Blaine & Huber is not
binding on the Internal Revenue Service (the "Service"). In addition, the
opinion of Phillips, Lytle, Hitchcock, Blaine & Huber is also based upon
existing law, Treasury regulations, currently published administrative positions
of the Service and judicial decisions, which are subject to change either
prospectively or retroactively.
In any year in which the Company qualifies as a REIT, it generally will
not be subject to Federal corporate income taxes on that portion of its ordinary
income or capital gain that is currently distributed to shareholders. The REIT
provisions of the Code generally allow a REIT to deduct distributions paid to
its shareholders. This deduction for distributions paid to shareholders
substantially eliminates the Federal "double taxation" on earnings (once at the
corporate level and once again at the shareholder level) that usually results
from investments in a corporation.
Even if the Company qualifies as a REIT, however, the Company will be
subject to Federal income tax, as set forth below. First, the Company will be
taxed at regular corporate rates on its undistributed REIT taxable income,
including undistributed net capital gains. Second, under certain circumstances,
the Company may be subject to the "alternative minimum tax" as a consequence of
its items of tax preference. Third, if
28
the Company has net income from the sale or other disposition of "foreclosure
property" that is held primarily for sale to customers in the ordinary course of
business or other non-qualifying income from foreclosure property, it will be
subject to tax at the highest corporate rate on such income. Fourth, if the
Company has net income from prohibited transactions (which are, in general,
certain sales or other disposition of property other than foreclosure property
held primarily for sale to customers in the ordinary course of business), such
income will be subject to a 100% tax. Fifth, if the Company should fail to
satisfy either the 75% or 95% gross income test (discussed below) but has
nonetheless maintained its qualification as a REIT because certain other
requirements have been met, it will be subject to a 100% tax on the net income
attributable to the greater of the amount by which the Company fails the 75% or
95% test, multiplied by a fraction intended to reflect the Company's
profitability. Sixth, if the Company fails to distribute during each year at
least the sum of (i) 85% of its REIT ordinary income for such year, (ii) 95% of
its REIT capital gain net income for such year and (iii) any undistributed
taxable income from prior periods, the Company will be subject to a 4% excise
tax on the excess of such required distribution over the amounts actually
distributed. Seventh, if the Company should dispose of any of the asset owned at
the time of the Initial Offering that had a fair market value at such time in
excess of its adjusted tax basis ("Built-In-Gain") or any asset acquired by the
Company from a C corporation (i.e., a corporation generally subject to the full
corporate level tax) in a carryover basis transaction during the ten-year period
(the "Recognition Period") beginning on the date of the Initial Offering with
respect to assets owned by the Company at the time of the Initial Offering, or
the date on which the asset was acquired by the Company from a C corporation,
then, to the extent of the Built-In Gain, such gain will be subject to a tax at
the highest regular corporate rate, pursuant to guidelines issued by the Service
(the "Built-In Gain Rules").
Requirements for Qualification
To qualify as a REIT, the Company must elect to be so treated and must meet
the requirements, discussed below, relating to the Company's organization,
sources of income, nature of assets and distributions of income to shareholders
("REIT Requirements").
Organizational Requirements
The Code defines a REIT as a corporation, trust or association: (i)
that is managed by one or more trustees or directors, (ii) the beneficial
ownership of which is evidenced by transferable shares or by transferable
certificates of beneficial interest, (iii) that would be taxable as a domestic
corporation but for the REIT Requirements, (iv) that is neither a financial
institution nor an insurance company subject to certain provisions of the Code,
(v) the beneficial ownership of which is held by 100 or more persons, and (vi)
at all times during the last half of each taxable year not more than 50% in
value of the outstanding shares of which is owned, directly or indirectly,
through the application of certain attribution rules, by five or fewer
individuals (as defined in the Code to include certain entities). In addition,
certain other tests, described below, regarding the nature of its income and
assets also must be satisfied. The Code provides that conditions (i) through
(iv), inclusive, must be met during the entire taxable year and that condition
(v) must be met during at least 335 days of a taxable year of twelve months, or
during a proportionate part of a taxable year of less than 12 months. Conditions
(v) and (vi) (the "100 shareholder" and "five or fewer" requirements) will not
apply until after the first taxable year for which an election is made to be
taxed as a REIT. For purposes of conditions (v) and (vi), pension funds and
certain other tax-exempt entities are treated as individuals, subject to a
"look-through" exception in the case of condition (vi).
Prior to consummation of the Initial Offering, the Company did not
satisfy conditions (v) and (vi) above. The Initial Offering and related
transactions allowed the Company to satisfy the 100 shareholder and
29
five or fewer requirements. In addition, the Company's Articles of Incorporation
currently include certain restrictions regarding transfer of its stock, which
restrictions are intended (among other things) to assist the Company in
continuing to satisfy conditions (v) and (vi) above.
In addition, a corporation may not elect to become a REIT unless its
taxable year is the calendar year. Effective January 1, 1995, the Company
changed its taxable year to the calendar year.
In order to provide the Company with flexibility, the Company owns the
Properties through the Partnership. The Company holds a 99% limited partnership
interest in the Partnership. The Subsidiary, a wholly-owned subsidiary of the
Company, holds a 1% general partner interest in the Partnership. The Partnership
and the Subsidiary are qualified REIT subsidiaries. A qualified REIT subsidiary
is any corporation that is 100% owned by a REIT at all times during the period
the subsidiary is in existence. Under Section 856(i) of the Code, a qualified
REIT subsidiary is not treated as a separate corporation from the REIT, and all
assets, liabilities, income, deductions, and credits of the qualified REIT
subsidiary are treated as assets, liabilities and such items (as the case may
be) of the REIT. The Partnership is currently disregarded for Federal income tax
purposes since the existence of the Subsidiary is ignored for Federal income tax
purposes and, as a result, the Partnership has only one partner for Federal
income tax purposes.
Although the Partnership is, as of July 25, 1996, wholly-owned by the
Company and the Subsidiary, the Company anticipates using units of the
Partnership to acquire properties from unrelated third parties which would
result in the Partnership being treated as a partnership for Federal income tax
purposes and the Company being treated as a partner in the Partnership. In the
case of a REIT that is a partner in a partnership, Treasury Regulations provide
that the REIT will be deemed to own its proportionate share of the assets of the
partnership and will be deemed to be entitled to the income of the partnership
attributable to such share. In addition, the character of the assets and gross
income of the partnership shall retain the same character in the hands of the
REIT for purposes of Section 856 of the Code, including satisfying the gross
income tests and asset tests. Thus, the Company's proportionate share of the
assets, liabilities and items of income of the Partnership will be treated as
assets, liabilities and items of income of the Company for purposes of applying
the requirements described herein.
Income Tests
To maintain qualification as a REIT, three gross income requirements
must be satisfied annually.
. First, at least 75% of the Company's gross income,
excluding gross income from certain dispositions of
property held primarily for sale to customers in the
ordinary course of a trade or business ("prohibited
transactions"), for each taxable year must be derived
directly or indirectly from investments relating to
real property or mortgages on real property
(including "rents form real property" and in certain
circumstances, interest) or from certain types of
temporary investments.
. Second, at least 95% of the Company's gross income
(excluding gross income from prohibited transactions)
for each taxable year must be derived from such real
property investments and from dividends, interest and
gain from the sale or disposition of stock or
securities or from any combination of the foregoing.
. Third, less than 30% of the Company's gross income
(including gross income from prohibited transactions)
for each taxable year is derived from gain from the
sale or other disposition of stock or securities held
for less than one year, gain from
30
prohibited transactions and gain from the sale or
other disposition of real property held for less than
four years (apart from involuntary conversion and
sales of foreclosure property). For purposes of
applying the 30% gross income test, the holding
period of the Properties acquired by the Company at
the time of the Initial Offering will be deemed to
have commenced on the date of acquisition.
Rents received or deemed to be received by the Company will qualify as
"rents from real property in satisfying the gross income requirements for a REIT
described above only if several conditions are met.
. First, the amount of rent generally must not be based
in whole or in part on the income or profits of any
person.
. Second, the Code provides that rents from a tenant will
not qualify as "rents from real property" in satisfying
the gross income tests if the REIT, or an owner of 10%
or more of the REIT, directly or constructively owns
10% or more of such tenant (a "Related Party Tenant").
. Third, if rent attributable to personal property,
leased in connection with a lease of real property, is
greater than 15% of the total rent received under the
lease, then the portion of rent attributable to the
personal property will not qualify as "rents from real
property."
. Finally, for rents to qualify as "rents from real
property" the REIT must not operate or manage the
property or furnish or render services to tenants,
other than through an "independent contractor" who is
adequately compensated and from whom the REIT does not
derive any income; provided, however, that a REIT may
provide services with respect to its properties and the
income will qualify as "rents from real property" if
the services are "usually or customarily rendered" in
connection with the rental of a room or other space for
occupancy only and are not otherwise considered
"rendered to the occupant."
The Company does not anticipate charging rent that is based in whole or
in part on the income or profits of any person. The Company will not derive rent
attributable to personal property leased in connection with real property that
exceeds 15% of the total rents. The Company does not anticipate receiving rent
from Related Party Tenants.
The Company provides certain services with respect to the Properties.
The Company believes that the services provided by it directly are usually or
customarily rendered in connection with the rental of space for occupancy only
and are not otherwise rendered to particular tenants and therefore that the
provision of such services will not cause rents received with respect to the
Properties to fail to qualify as rents from real property. Services with respect
to the Properties that may not be provided by the Company directly will be
performed by independent contractors.
If the Company fails to satisfy one or both of the 75% or 95% gross
income tests for any taxable year, it may nevertheless qualify as a REIT for
that year if it is eligible for relief under certain provisions of the Code.
These relief provisions will generally be available if (i) the Company's failure
to meet these tests was due to reasonable cause and not due to willful neglect,
(ii) the Company attaches a schedule of the sources of its income to its Federal
income tax return and (iii) any incorrect information on the schedule is not due
to fraud with intent to evade tax. It is not possible, however, to state
whether, in all circumstances, the Company would be entitled to the benefit of
these relief provisions. For example, if the Company fails to
31
satisfy the gross income tests because non-qualifying income that the Company
intentionally incurs exceeds the limits on such income, the Service could
conclude that the Company's failure to satisfy the tests was not due to
reasonable cause. As discussed above, even if these relief provisions apply, a
100% tax would be imposed on the greater of the amount by which the Company
fails either the 75% or 95% gross income test, multiplied by a fraction intended
to reflect the Company's profitability. No similar mitigation provision provides
relief if the Company fails the 30% income test, and in such case, the Company
will cease to qualify as a REIT.
Asset Tests
At the close of each quarter of its taxable year, the Company also must
satisfy three tests relating to the nature and diversification of its assets.
. First, at least 75% of the value of the Company's
total assets must be represented by real estate
assets, cash, cash items and government securities.
. Second, no more than 25% of the value of the
Company's total assets may be represented by
securities other than those in the 75% asset class.
. Third, of the investments included in the 25% asset
class, the value of any one issuer's securities owned
by the Company may not exceed 5% of the value of the
Company's total assets, and the Company may not own
more than 10% of any one issuer's outstanding voting
securities.
After initially meeting the asset tests at the close of any quarter,
the Company will not lose its status as a REIT for failure to satisfy the asset
tests at the end of a later quarter solely by reason of changes in asset values.
If the failure to satisfy the asset tests results from an acquisition of
securities or other property during a quarter, the failure can be cured by
disposition of sufficient non-qualifying assets within 30 days after the close
of that quarter. The Company intends to maintain adequate records of the value
of its assets to ensure compliance with the asset tests and to take such other
actions within 30 days after the close of any quarter as may be required to cure
any noncompliance.
Annual Distribution Requirements
To qualify as a REIT, the Company is required to make distributions
(other than capital gain distributions) to its shareholders in an amount at
least equal to (a) the sum of (i) 95% of the Company's "REIT taxable income"
(computed without regard to the dividends-paid deduction and the Company's
capital gain) and (ii) 95% of the net income, if any, from foreclosure property
in excess of the special tax on income from foreclosure property, minus (b) the
sum of certain items of non-cash income. Such distributions must be paid in the
taxable year to which they relate, or in the following taxable year if declared
before the Company timely files its Federal income tax return for such year and
if paid on or before the first regular distribution after such declaration. To
the extent that the Company does not distribute all of its net capital gain or
distributes less than 100% (but at least 95%) of its "REIT taxable income" as
adjusted, it will be subject to tax thereon at regular ordinary or capital gains
corporate tax rates, as the case may be. Further, if the Company should fail to
distribute during each calendar year at least the sum of (a) 85% of its REIT
ordinary income for that year, (b) 95% of its REIT capital gain net income for
that year and (c) any undistributed taxable income from prior periods, the
Company would be subject to a 4% excise tax on the excess of such required
distribution over the amounts actually distributed. In addition, during its
Recognition Period, if the
32
Company disposes of any asset subject to the Built-In Gain Rules, the Company
will be required, pursuant to guidance issued by the Service, to distribute at
least 95% of the Built-In Gain (after tax), if any, recognized on the
disposition of the asset.
The Company intends to make timely distributions sufficient to satisfy
the annual distribution requirements.
It is expected that the Company's REIT taxable income will be less than
its cash flow due to the allowance of depreciation and other non-cash charges in
computing REIT taxable income. Accordingly, the Company anticipates that it will
generally have sufficient cash or liquid assets to enable it to satisfy the 95%
distribution requirement. It is possible, however, that the Company, from time
to time, may not have sufficient cash or other liquid assets to meet the 95%
distribution requirement or to distribute such greater amount as may be
necessary to avoid income and excise taxation, due to timing differences between
(i) the actual receipt of income and actual payment of deductible expenses and
(ii) the inclusion of such income and deduction of such expenses in arriving at
taxable income of the Company, or if the amount of nondeductible expenses such
as principal amortization or capital expenditures exceed the amount of non-cash
deductions. In the event that such timing differences occur, the Company may
find it necessary to arrange for borrowings, if possible, in order to meet the
distribution requirement.
Under certain circumstances, the Company may be able to rectify a
failure to meet the distribution requirement for a year by paying "deficiency
dividends" to shareholders in a later year, which may be included in the
Company's deduction for dividends paid for the earlier year. Thus, the Company
may be able to avoid being taxed on amounts distributed as deficiency dividends.
The Company will, however, be required to pay interest based upon the amount of
any deduction taken for deficiency dividends.
Earnings and Profits.
In order to qualify as a REIT, the Company must either satisfy the REIT
requirements described in this Prospectus for all taxable years after 1986 or
have, at the close of any taxable year, no earnings and profits attributable to
a non-REIT year. Pursuant to Treasury Regulations, in order to qualify under
either of these two provisions, the Company must not have acquired the assets of
a corporation in a nonrecognition transaction after 1986 with accumulated
earnings and profits attributable to a non-REIT period unless, by the close of
its first taxable year, such earnings are distributed to the shareholders.
Accordingly, any earnings and profits that are carried over to the Company
through the transactions resulting in the formation of the Company (the
"Formation Transactions") were required, pursuant to Section 381 of the Code, to
have been distributed to the shareholders prior to the close of the Company's
first taxable year. The Company has represented that it had no non-REIT earnings
and profits for Federal income tax purposes as of the end of its first taxable
year ended December 31, 1995. In rendering its opinion regarding the eligibility
of the Company to qualify as a REIT, Phillips, Lytle, Hitchcock, Blaine & Huber
is relying on such representation. The Company believes that even if there were
a subsequent determination that it received non-REIT earnings and profits in the
Formation Transactions, distributions to shareholders in 1995 in excess of
current earnings and profits likely were sufficient to distribute any such non-
REIT earnings and profits. Moreover, although not free from doubt, pursuant to
Treasury Regulations, the Company may be able to use certain "deficiency
dividend" procedures to distribute any non-REIT earnings and profits determined
to exist that were not distributed by the close of the 1995 taxable year. There
can be no assurance, however, that 1995 distributions were sufficient to
distribute any non-REIT earnings and profits determined to exist or that such
deficiency dividend procedures would be available. In the event that 1995
distributions were insufficient to distribute any such non-REIT earnings and
profits, and the Company were unable to utilize the deficiency dividend
procedures in the Treasury Regulations, the Company would fail to qualify as a
REIT.
33
Failure to Qualify
If the Company fails to qualify as a REIT in any taxable year and the
relief provisions do not apply, the Company will be subject to tax (including
any applicable alternative minimum tax) on its taxable income at regular
corporate rates. Distributions to shareholders in any year in which the Company
fails to qualify will not be deductible by the Company nor will they be required
to be made. In such event, to the extent of current and accumulated earnings and
profits, all distributions to shareholders will be dividends, taxable as
ordinary income, and subject to certain limitations of the Code, corporate
distributees may be eligible for the dividends-received deduction. Unless the
Company is entitled to relief under specific statutory provisions, the Company
also will be ineligible for qualification as a REIT for the four taxable years
following the year during which qualification was lost. It is not possible to
state whether in all circumstances the Company would be entitled to such
statutory relief. For example, if the Company fails to satisfy the gross income
tests because non-qualifying income that the Company intentionally incurs
exceeds the limit on such income, the Service could conclude that the Company's
failure to satisfy the tests was not due to reasonable cause.
Built-In Gain
To the extent the Company held any asset that has Built-In Gain as of
the first day of the first taxable year for which the Company qualifies as a
REIT, the Company may recognize a corporate level tax at the time it disposes of
such asset. Pursuant to Section 337(d)(1) of the Code, Congress has authorized
the Service to issue regulations to ensure that the repeal of the General
Utilities doctrine is not circumvented through the use of investment vehicles
like a REIT. In Notice 88-19, 1988-1 C.B. 486, the Service announced that it
intends to promulgate regulations requiring a C corporation to recognize any net
Built-In Gain that would have been realized if the corporation had liquidated at
the end of the last taxable year before the taxable year in which it qualifies
to be taxed as a REIT. However, in lieu of this immediate recognition rule, the
regulations will permit a REIT to elect to be subject to rule similar to rules
applicable to S corporations with built-in gains under Section 1374 of the Code.
Section 1374 of the Code generally provides that a corporation with appreciated
assets that elects S corporation status will recognize a corporate level tax on
the built-in gain if the S corporation disposes of the appreciated assets within
a ten-year period commencing on the date on which the S corporation election was
made. The Company has represented that it will elect to have rules similar to
the rules of Section 1374 of the Code apply to it. Accordingly, if the Company
disposes of appreciated assets in a taxable transaction within a ten-year period
commencing on the date the Company first qualifies as a REIT, the Company will
be taxed at the corporate level on the Built-in Gain attributable to the
disposed assets. For these purposes, the assets owned by the Company prior to
the Formation Transactions will be appreciated assets. If these assets are
disposed of within the ten-year recognition period, the Company will recognize a
corporate level tax on the Built-In Gain attributable to the disposed assets.
Accordingly, the disposition of assets acquired in the Formation Transactions
will adversely affect a shareholder's investment in the Company. However, the
Company may dispose of Property that is subject to the tax on Built-in Gain in a
tax-free exchange of like-kind property pursuant to Section 1031 of the Code
which will not trigger Built-In Gain. Moreover, the Company does not anticipate
disposing of a substantial portion of its Built-In Gain assets, other than in a
tax-free exchange, within the ten-year recognition period. The Company estimates
that the amount of Built-In Gain with respect to the Properties is approximately
$5,000,000 and the amount of the corporate level tax if such Built-In Gain was
recognized would be approximately $1,750,000 at current tax rates. The amount of
such Built-In Gain is based upon the Company's determination of fair value as of
the first day of the first taxable year for which the Company qualified as a
REIT which valuation could be challenged by the Service.
34
PLAN OF DISTRIBUTION
The Company may sell Securities to or through one or more underwriters
or dealers for public offering and sale by or through them, and may also sell
Securities directly to one or more institutional or other purchasers, through
agents or through any combination of these methods of sale. Any such
underwriter, dealer or agent involved in the offer and sale of Securities will
be named in the applicable Prospectus Supplement.
Underwriters may offer and sell the Securities at a fixed price or
prices, which may be changed, or from time to time at market prices prevailing
at the time of sale, at prices related to such prevailing market prices or at
negotiated prices. The Company also may offer and sell the Securities in
exchange for one or more of its outstanding issues of debt or convertible or
exchangeable debt securities. The Company also may, from time to time, authorize
underwriters acting as the Company's agents to offer and sell the Securities
upon the terms and conditions as shall be set forth in any Prospectus
Supplement. In connection with the sale of Securities, underwriters may be
deemed to have received compensation from the Company in the form of
underwriting discounts or commissions and may also receive commissions from
purchasers of Securities for whom they may act as agent. Underwriters may sell
Securities to or through dealers, and such dealers may receive compensation in
the form of discounts, concessions or commissions from the underwriters and/or
commissions (which may be changed from time to time) from the purchasers for
whom they may act as agent.
Any underwriting compensation paid by the Company to underwriters or
agents in connection with the offering of Securities, and any discounts,
concessions or commission allowed by underwriters to participating dealers, will
be set forth in an applicable Prospectus Supplement. Underwriters, dealers and
agents participating in the distribution of the Securities may be deemed to be
underwriters, and any discounts and commissions received by them and any profit
realized by them on resale of the Securities may be deemed to be underwriting
discounts and commissions, under the Securities Act. Underwriters, dealers and
agents may be entitled, under agreements with the Company, to indemnification
against and contribution toward certain civil liabilities, including liabilities
under the Securities Act, and to reimbursement by the Company for certain
expenses.
Each series of Debt Securities or Preferred Stock will be a new issue
with no established trading market. The Company may elect to list any series of
Debt Securities or Preferred Stock on an exchange, but is not obligated to do
so. It is possible that one or more underwriters may make a market in a series
of Securities, but will not be obligated to do so and may discontinue any market
making at any time without notice. Therefore, no assurance can be given as to
the liquidity of, or the trading market for, the Securities.
Underwriters, dealers and agents and their associates may engage in
transactions with, or perform services for, the Company in the ordinary course
of business.
If so indicated in the applicable Prospectus Supplement, the Company
will authorize dealers or other persons acting as the Company's agents to
solicit offers by certain institutions to purchase Debt Securities from the
Company at the public offering price set forth in such Prospectus Supplement
pursuant to delayed delivery contracts ("Contracts") providing for payment and
delivery on the date or dates stated in such Prospectus Supplement. Each
Contract will be for an amount no less than, and the aggregate principal amounts
of Debt Securities sold pursuant to Contracts shall be not less nor more than,
the respective amounts stated in the applicable Prospectus Supplement.
Institutions with whom Contracts, when authorized, may be made include
commercial and savings banks, insurance companies, pension funds, investment
companies, educational and charitable institutions and other institutions, but
will in all cases be subject to the approval of the Company. Contracts will not
be subject to any conditions except (i) the purchase by an institution of the
Debt Securities covered by its Contracts shall not at the time of delivery be
prohibited under the laws of any jurisdiction in
35
the United States to which such institution is subject, and (ii) if Debt
Securities are being sold to underwriters, the Company shall have sold to such
underwriters the total principal amount of the Debt Securities less the
principal amount thereof covered by the Contracts. If in conjunction with the
sale of Debt Securities to institutions under Contracts, Debt Securities are
also being sold to the public, the consummation of the sale under the Contracts
shall occur simultaneously with the consummation of the sale to the public. The
underwriters and such other agents will not have any responsibility in respect
of the validity or performance of such Contracts.
In order to comply with the securities laws of certain states and other
jurisdictions, if applicable, the Securities offered hereby will be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states Securities may not be sold unless they have been
registered or qualified for sale in the applicable state or other jurisdiction
or an exemption from the registration or qualification requirement is available
and is complied with.
Under applicable rules and regulations under the Exchange Act, any
person engaged in the distribution of the Securities offered hereby may not
simultaneously engage in market making activities with respect to the Securities
for a period of two business days prior to the commencement of such
distribution.
LEGAL MATTERS
Phillips, Lytle, Hitchcock, Blaine & Huber, Buffalo, New York, will
pass upon certain legal matters for the Company. Phillips, Lytle, Hitchcock,
Blaine & Huber has in the past represented and is presently representing the
Company in certain other matters. Robert J. Attea, Chairman of the Board of the
Company, is the brother of a partner of Phillips, Lytle, Hitchcock, Blaine &
Huber. Several partners of Phillips, Lytle, Hitchcock, Blaine & Huber own shares
of Common Stock. Phillips, Lytle, Hitchcock, Blaine & Huber will rely upon the
opinion of Hogan & Hartson L.L.P., Washington, D.C., as to all matters of
Maryland law.
EXPERTS
The financial statements and schedules thereto incorporated by
reference in this Prospectus or elsewhere in the Registration Statement, to the
extent and for the periods indicated in their reports, have been audited by
Ernst & Young LLP, independent accountants, and are incorporated herein in
reliance upon the authority of said firm as experts in giving said reports.
36
================================================================================
No person has been authorized in connection with the offering made hereby to
give any information or to make any representation not contained in this
Prospectus and, if given or made, such information or representation must not be
relied upon as having been authorized by the Company or any other person. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any of the Securities offered hereby to any person or by anyone in any
jurisdiction in which it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information contained herein is
correct as of any date subsequent to the date hereof.
---------------------------
TABLE OF CONTENTS
Page
----
Available Information.......................... 2
Incorporation of Certain
Documents by Reference....................... 2
The Company.................................... 3
Use of Proceeds................................ 3
Ratios of Earnings to Fixed Charges............ 4
Description of Debt Securities................. 5
Description of Preferred Stock................. 20
Description of Common Stock.................... 25
Restrictions on Transfers of Capital Stock..... 26
Certain Federal Income Tax Considerations...... 28
Plan of Distribution........................... 35
Legal Matters.................................. 36
Experts........................................ 36
================================================================================
================================================================================
$150,000,000
Sovran Self Storage, Inc.
Debt Securities
Preferred Stock
Common Stock
--------------------
PROSPECTUS
--------------------
,1996
================================================================================
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The expenses in connection with the issuance and distribution of the
securities being registered will be borne by the Company and are set forth in
the following table (all amounts except the registration fee and NASD fee are
estimated):
Registration fee $ 51,724
NASD fee 15,500
Legal fees and expenses 150,000
Blue Sky expenses 20,000
Accounting fees and expenses 100,000
Printing fees and expenses 300,000
Miscellaneous 10,000
-----
Total $647,224
========
---------------
Item 15. Indemnification of Directors and Officers.
The Registrant's officers and Directors are and will be indemnified
under the Articles of Incorporation and Bylaws of the Registrant against certain
liabilities. The Articles of Incorporation requires the Registrant to indemnify
its Directors and officers, among others, against claims and liabilities and
reasonable expenses actually incurred by them in connection with any claim or
liability by reason of their services in those or other capacities unless it is
established that the act or omission of the Director or officer was material to
the matter giving rise to the proceeding and was committed in bad faith or was
the result of active and deliberate dishonestly or the Director or officer
actually received an improper personal benefit or, in the case of any criminal
proceeding, the Director or officer has reasonable cause to believe that the act
or omission was unlawful.
The Registrant has entered into indemnification agreements with each of
its senior executive officers and Directors. The indemnification agreements
require, among other matters, that the Registrant indemnify such officers and
Directors to the fullest extent permitted by law and advance to such officers
and Directors all related expenses, subject to reimbursement if it is
subsequently determined that indemnification is not permitted. Under these
agreements, the Registrant must also indemnify and advance all expenses incurred
by officers and Directors seeking to enforce their rights under the
indemnification agreements and may cover officers and Directors under the
Registrant's directors' and officers' liability insurance. Although the form of
indemnification agreement offers substantially the same scope of coverage
afforded by law, it provides additional assurance to Directors and officers that
indemnifications will be available because, as a contract, it cannot be modified
unilaterally in the future by the Board of Directors or the stockholders to
eliminate the rights it provides.
It is the position of the Commission that indemnification of directors
and officers for liabilities under the Securities Act is against public policy
and unenforceable pursuant to Section 14 of the Securities Act.
As permitted by Maryland Law, the Articles of Incorporation provides
that a Director or officer of the Company shall not be liable for monetary
damages to the Company or its shareholders for any act or omission in the
performance of his duties, except to the extent that (1) the person actually
received an improper benefit or (2) the person's action or failure to act was
the result of active and deliberate dishonesty and was material to the cause of
action adjudicated.
II-1
Item 16. Exhibits.
- ------------
Exhibit No. Description
4.1 Amended and Restated Articles of Incorporation. (Incorporated by
reference to Exhibit 3.1 of the Registration Statement on Form S-11
of Sovran Self Storage, Inc., Registration No. 33-91422.)
4.2 Amended and Restated Bylaws. (Incorporated by reference to Exhibit
3.2 of the Registration Statement on Form S-11 of Sovran Self
Storage, Inc., Registration No. 33-91422.)
4.3 Indenture for Senior Debt Securities
4.4 Form of Senior Debt Security (included in Exhibit No. 4.3)
4.5 Indenture for Subordinated Debt Securities
4.6 Form of Subordinated Debt Security (included in Exhibit No. 4.5)
5.1 Opinion of Phillips, Lytle, Hitchcock, Blaine & Huber as to the
legality of the Securities being registered.
5.2 Opinion of Hogan & Hartson L.L.P. as to the legality of the
Securities being registered.
8.1 Opinion of Phillips, Lytle, Hitchcock, Blaine & Huber as to certain
tax matters.
12.1* Calculation of Ratios of Earnings to Fixed Charges.
23.1 Consent of Ernst & Young LLP, Independent Accountants.
23.2 Consent of Phillips, Lytle, Hitchcock, Blaine & Huber (included in
Exhibit 5.1 hereto).
23.3 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.2 hereto)
24.1* Powers of Attorney
- -----------------
* Previously filed.
II-2
Item 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by
Section 10(a)(3)of the Securities Act;
(ii) To reflect in the prospectus any facts
or events arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which, individually
or in the aggregate, represent a fundamental change
in the information set forth in the registration
statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered
(if the total dollar value of securities offered
would not exceed that which was registered) and any
deviation from the low or high and of the estimated
maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20% change in
the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any material information
with respect to the plan of distribution not
previously disclosed in the registration statement or
any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii)
herein do not apply if the information required to be included
in a post-effective amendment by those paragraphs is contained
in periodic reports filed with or furnished to the Commission
by the undersigned registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by
reference in the registration statement;
(2) That, for the purpose of determining any
liability under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof; and
(3) To remove from registration by means of a
post-effective amendment any of the securities being
registered which remain unsold at the termination of the
offering.
(b) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act
that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the registrant pursuant to the
provisions
II-3
described under Item 15 above, or otherwise, the registrant
has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final
adjudication of such issue.
(d) The undersigned registrant hereby undertakes to file an
application for the purpose of determining the eligibility of
the trustee to act under subsection (a) of Section 310 of the
Trust Indenture Act ("Act") in accordance with the rules and
regulations prescribed by the Commission under Section
305(b)(2) of the Act.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Sovran Self
Storage, Inc. certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Buffalo, New York, on the 4th day of September,
1996.
SOVRAN SELF STORAGE, INC.
By: /s/ Kenneth F. Myszka
--------------------------------
Kenneth F. Myszka, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Capacity Date
/s/ Robert J. Attea* Chairman of the Board of Directors September 4, 1996
- ------------------------------------
Robert J. Attea
/s/ Kenneth F. Myszka* President, Chief Executive Officer and September 4, 1996
- ---------------------------------- Director (Principal Executive Officer)
Kenneth F. Myszka
/s/ David L. Rogers Chief Financial Officer September 4, 1996
- ------------------------------------ (Principal Financial and Accounting
David L. Rogers Officer)
/s/ John Burns* Director September 4, 1996
- ------------------------------------
John Burns
/s/ Michael A. Elia* Director September 4, 1996
- ------------------------------------
Michael A. Elia
Director September 4, 1996
- ------------------------------------
Anthony P. Gammie
/s/ Charles E. Lannon* Director September 4, 1996
- ------------------------------------
Charles E. Lannon
* By David L. Rogers as attorney-in-fact.
II-5
EXHIBIT INDEX
Exhibit No. Description Page
- ---------- ----------- ----
4.3 Indenture for Senior Debt Securities
4.4 Form of Senior Debt Security (included in Exhibit No. 4.3)
4.5 Indenture for Subordinated Debt Securities
4.6 Form of Subordinated Debt Security (included in Exhibit No. 4.5)
5.1 Opinion of Phillips, Lytle, Hitchcock, Blaine & Huber as to the legality of the Securities
being registered.
5.2 Opinion of Hogan & Hartson L.L.P. as to the legality of the Securities being registered.
8.1 Opinion of Phillips, Lytle, Hitchcock, Blaine & Huber as to certain tax matters.
12.1* Calculation of Ratios of Earnings to Fixed Charges.
23.1 Consent of Ernst & Young LLP, Independent Accountants.
23.2 Consent of Phillips, Lytle, Hitchcock, Blaine & Huber (included in Exhibit 5.1 hereto).
23.3 Consent of Hogan & Hartson L.L.P. (included in Exhibit 5.2 hereto)
24.1* Powers of Attorney
* Previously filed