Pursuant to Rule 424(b)2
Registration No. 33-63687
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 7, 1995)
$200,000,000
[LOGO OF FEDERAL REALTY INVESTMENT TRUST APPEARS HERE]
Medium-Term Notes
Due Nine Months or More from Date of Issue
Federal Realty Investment Trust (the "Trust") may offer from time to time up to
$200,000,000 aggregate initial offering price, or the equivalent thereof in one
or more foreign or composite currencies, of its Medium-Term Notes Due Nine
Months or More from Date of Issue (the "Notes"). Such aggregate initial
offering price is subject to reduction as a result of the sale by the Trust of
other Offered Securities described in the accompanying Prospectus. Each Note
will mature on any day nine months or more from the date of issue, as specified
in the applicable pricing supplement hereto (each, a "Pricing Supplement"), and
may be subject to redemption at the option of the Trust or repayment at the
option of the Holder thereof, in each case, in whole or in part, prior to its
Stated Maturity Date, as specified in the applicable Pricing Supplement. In
addition, each Note may be denominated and/or payable in United States dollars
or a foreign or composite currency ("Foreign Currency Notes"), as specified in
the applicable Pricing Supplement. The Notes, other than Foreign Currency
Notes, will be issued in minimum denominations of $1,000 and integral multiples
thereof, unless otherwise specified in the applicable Pricing Supplement, while
Foreign Currency Notes will be issued in the minimum denominations specified in
the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, Notes will
bear interest at fixed rates ("Fixed Rate Notes") or at floating rates
("Floating Rate Notes"). The applicable Pricing Supplement will specify whether
a Floating Rate Note is a Regular Floating Rate Note, a Floating Rate/Fixed
Rate Note or an Inverse Floating Rate Note and whether the rate of interest
thereon is determined by reference to one or more of the CD Rate, the CMT Rate,
the Commercial Paper Rate, the Eleventh District Cost of Funds Rate, the
Federal Funds Rate, LIBOR, the Prime Rate or the Treasury Rate (each, an
"Interest Rate Basis"), or any other interest rate basis or formula, as
adjusted by any Spread and/or Spread Multiplier. Interest on each Floating Rate
Note will accrue from its date of issue and, unless otherwise specified in the
applicable Pricing Supplement, will be payable monthly, quarterly, semiannually
or annually in arrears, as specified in the applicable Pricing Supplement, and
on the Maturity Date. Unless otherwise specified in the applicable Pricing
Supplement, the rate of interest on each Floating Rate Note will be reset
daily, weekly, monthly, quarterly, semiannually or annually, as specified in
the applicable Pricing Supplement. Interest on each Fixed Rate Note will accrue
from its date of issue and will be payable in arrears as specified in the
applicable Pricing Supplement and on the Maturity Date. Notes may also be
issued that do not bear any interest currently or that bear interest at a below
market rate. See "Description of Notes."
The interest rate, or formula for the determination of the interest rate,
applicable to each Note and the other variable terms thereof will be
established by the Trust on the date of issue of such Note and will be
specified in the applicable Pricing Supplement. Interest rates or formulas and
other terms of Notes are subject to change by the Trust, but no change will
affect any Note already issued or as to which an offer to purchase has been
accepted by the Trust.
Each Note will be issued in fully registered book-entry form (a "Book-Entry
Note") or in certificated form (a "Certificated Note"), as specified in the
applicable Pricing Supplement. Each Book-Entry Note will be represented by one
or more fully registered global securities (the "Global Securities") deposited
with or on behalf of The Depository Trust Company (the "Depositary") and
registered in the name of the Depositary or the Depositary's nominee. Interests
in the Global Securities will be shown on, and transfers thereof will be
effected only through, records maintained by the Depositary (with respect to
its participants) and the Depositary's participants (with respect to beneficial
owners).
SEE "RISK FACTORS" ON PAGE S-3 FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE NOTES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT, THE PROSPECTUS OR ANY
PRICING SUPPLEMENT HERETO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
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PRICE TO AGENTS' DISCOUNTS
PUBLIC(1) AND COMMISSIONS(1)(2) PROCEEDS TO TRUST(1)(3)
- ------------------------------------------------------------------------
Per Note 100% .125% - .750% 99.875% - 99.250%
- ------------------------------------------------------------------------
Total(4) $200,000,000 $250,000 - $1,500,000 $199,750,000 - $198,500,000
- ------------------------------------------------------------------------
(1) J.P. Morgan Securities Inc., Alex. Brown & Sons Incorporated, First Union
Capital Markets Corp., Goldman, Sachs & Co., Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated (the "Agents") may purchase the
Notes, as principal, from the Trust, for resale to investors and other
purchasers at varying prices relating to prevailing market prices at the
time of resale as determined by the applicable Agent, or, if so specified
in the applicable Pricing Supplement, for resale at a fixed offering price.
Unless otherwise specified in the applicable Pricing Supplement, any Note
sold to an Agent as principal will be purchased by such Agent at a price
equal to 100% of the principal amount thereof less a percentage of the
principal amount equal to the commission applicable to an agency sale (as
described below) of a Note of identical maturity. If agreed to by the Trust
and an Agent, such Agent may utilize its reasonable efforts on an agency
basis to solicit offers to purchase the Notes at 100% of the principal
amount thereof, unless otherwise specified in the applicable Pricing
Supplement. If the Trust issues any Note at a discount from or at a premium
over its principal amount, the Price to Public of any Note issued at a
discount or premium will be set forth in the applicable Pricing Supplement.
The Trust will pay a commission to the applicable Agent, ranging from .125%
to .750% of the principal amount of any Note, depending upon its stated
maturity, sold through such Agent. Commissions with respect to Notes with
stated maturities in excess of 30 years that are sold through such Agent
will be negotiated between the Trust and such Agent at the time of such
sale. See "Supplemental Plan of Distribution."
(2) The Trust has agreed to indemnify the Agents against, and to provide
contribution with respect to, certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Supplemental Plan of
Distribution."
(3) Before deducting expenses payable by the Trust estimated at $300,000.
(4) Or the equivalent thereof in one or more foreign or composite currencies.
The Notes are being offered on a continuous basis by the Trust to or through
the Agents. Unless otherwise specified in the applicable Pricing Supplement,
the Notes will not be listed on any securities exchange and there can be no
assurance that the Notes offered hereby will be sold or that there will be a
secondary market for the Notes or that there will be liquidity in such market
if one develops. The Trust reserves the right to cancel or modify the offer
made hereby without notice. The Trust or an Agent, if it solicits the offer on
an agency basis, may reject any offer to purchase Notes in whole or in part.
See "Supplemental Plan of Distribution."
J.P. MORGAN & CO.
ALEX. BROWN & SONS
INCORPORATED
FIRST UNION CAPITAL MARKETS CORP.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
April 17, 1997
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE NOTES. SPECIFICALLY,
THE AGENTS MAY OVERALLOT IN CONNECTION WITH THE OFFERING, AND MAY BID FOR, AND
PURCHASE, THE NOTES IN THE OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "SUPPLEMENTAL PLAN OF DISTRIBUTION."
NO DEALER, SALESPERSON, OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING
SUPPLEMENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE TRUST
OR THE AGENTS. THIS PROSPECTUS SUPPLEMENT, THE APPLICABLE PRICING SUPPLEMENT
AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE NOTES OFFERED HEREBY AND THEREBY OR
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH NOTES IN ANY
JURISDICTION BY ANY PERSONS NOT AUTHORIZED OR QUALIFIED TO MAKE SUCH OFFER OR
SOLICITATION OR TO ANY PERSONS TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS SUPPLEMENT, THE
APPLICABLE PRICING SUPPLEMENT OR THE PROSPECTUS, NOR ANY SALE MADE HEREUNDER OR
THEREUNDER, SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE TRUST SINCE THE DATE HEREOF OR THEREOF
OR THAT THE INFORMATION HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT
TO THE DATE OF SUCH INFORMATION.
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
PAGE
Risk Factors............................................................ S-3
Description of Notes.................................................... S-4
Special Provisions Relating to Foreign Currency Notes................... S-22
Certain United States Federal Income Tax Considerations................. S-24
Supplemental Plan of Distribution....................................... S-32
Legal Opinions.......................................................... S-33
PROSPECTUS
Available Information................................................... 2
Incorporation of Certain Documents by Reference......................... 2
The Trust............................................................... 3
Use of Proceeds......................................................... 4
Ratios of Earnings to Fixed Charges..................................... 4
Description of Debt Securities.......................................... 4
Description of Preferred Shares......................................... 15
Description of Common Shares............................................ 21
Plan of Distribution.................................................... 23
Legal Opinions.......................................................... 23
Experts................................................................. 24
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RISK FACTORS
THIS PROSPECTUS SUPPLEMENT DOES NOT DESCRIBE ALL OF THE RISKS OF AN INVESTMENT
IN NOTES THAT RESULT FROM SUCH NOTES BEING DENOMINATED OR PAYABLE IN OR
DETERMINED BY REFERENCE TO A CURRENCY OR COMPOSITE CURRENCY OTHER THAN UNITED
STATES DOLLARS OR TO ONE OR MORE INTEREST RATE, CURRENCY OR OTHER INDICES OR
FORMULAS. THE TRUST AND THE AGENTS DISCLAIM ANY RESPONSIBILITY TO ADVISE
PROSPECTIVE INVESTORS OF SUCH RISKS AS THEY EXIST AT THE DATE OF THIS
PROSPECTUS SUPPLEMENT OR AS THEY CHANGE FROM TIME TO TIME. EACH PROSPECTIVE
INVESTOR SHOULD CONSULT HIS OWN FINANCIAL AND LEGAL ADVISORS AS TO THE RISKS
ENTAILED BY AN INVESTMENT IN NOTES DENOMINATED OR PAYABLE IN OR DETERMINED BY
REFERENCE TO A CURRENCY OR COMPOSITE CURRENCY OTHER THAN UNITED STATES DOLLARS
OR TO ONE OR MORE INTEREST RATE, CURRENCY OR OTHER INDICES OR FORMULAS. SUCH
NOTES ARE NOT AN APPROPRIATE INVESTMENT FOR INVESTORS WHO ARE UNSOPHISTICATED
WITH RESPECT TO FOREIGN CURRENCY TRANSACTIONS OR TRANSACTIONS INVOLVING THE
APPLICABLE INTEREST RATE INDEX OR CURRENCY INDEX OR OTHER INDICES OR FORMULAS.
STRUCTURE RISKS
An investment in Notes indexed, as to principal, premium, if any, and/or
interest, to one or more currencies or composite currencies (including exchange
rates and swap indices between currencies or composite currencies),
commodities, interest rates or other indices or formulas, either directly or
inversely, entails significant risks that are not associated with similar
investments in a conventional fixed rate or floating rate debt security. Such
risks include, without limitation, the possibility that any such index or
formula may be subject to significant changes, that the resulting interest rate
will be less than that payable on a conventional fixed rate or floating rate
debt security issued by the Trust at the same time, that the repayment of
principal and/or premium, if any, can occur at times other than that expected
by the investor, and that the investor could lose all or a substantial portion
of principal and/or premium, if any, payable on the Maturity Date (as defined
below). Such risks depend on a number of interrelated factors, including
economic, financial and political events, over which the Trust has no control.
Additionally, if the formula used to determine the amount of principal,
premium, if any, and/or interest payable with respect to such Notes contains a
multiplier or leverage factor, the effect of any change in the applicable index
or indices or formula or formulas will be magnified. In recent years, values of
certain indices and formulas have been highly volatile and such volatility may
continue or increase in the future. Fluctuations in the value of any particular
index or formula that have occurred in the past are not necessarily indicative,
however, of fluctuations that may occur in the future.
The secondary market for Notes will be affected by a number of factors
independent of the creditworthiness of the Trust and the value of the
applicable index or indices or formula or formulas, including the complexity
and volatility of each such index or formula, the method of calculating the
principal, premium, if any, and/or interest in respect of such Notes, the time
remaining to the maturity of such Notes, the outstanding amount of such Notes,
any redemption features of such Notes, the amount of other debt securities
linked to such index or formula and the level, direction and volatility of
market interest rates generally. Such factors also will affect the market value
of such Notes. In addition, certain Notes may be designed for specific
investment objectives or strategies and, therefore, may have a more limited
secondary market and experience more price volatility than conventional debt
securities. Investors may not be able to sell such Notes readily or at prices
that will enable investors to realize their anticipated yield.
Any optional redemption feature of Notes might affect the market value of such
Notes. Since the Trust may be expected to redeem such Notes when prevailing
interest rates are relatively low, an investor might not be able to reinvest
the redemption proceeds at an effective interest rate as high as the interest
rate on such Notes.
The Notes will not have an established trading market when issued, and there
can be no assurance of a secondary market for the Notes or the liquidity of
such market if one develops. See "Supplemental Plan of Distribution."
S-3
No investor should purchase Notes unless such investor understands and is able
to bear the risk that such Notes may not be readily saleable, that the value of
Notes will fluctuate over time and that such fluctuations may be significant.
CREDIT RATINGS
The credit ratings assigned to the Trust's medium-term note program may not
reflect the potential impact of all risks related to structure and other
factors on the value of the Notes. Accordingly, prospective investors should
consult their own financial and legal advisors as to the risks entailed by an
investment in the Notes and the suitability of such Notes in light of their
particular circumstances.
EXCHANGE RATES AND EXCHANGE CONTROLS
An investment in Foreign Currency Notes (as defined below) entails significant
risks that are not associated with a similar investment in a debt security
denominated and payable in United States dollars. Such risks include, without
limitation, the possibility of significant changes in the rate of exchange
between the United States dollar and the applicable foreign currency or
composite currency and the possibility of the imposition or modification of
exchange controls by the applicable governments or monetary authorities. Such
risks generally depend on factors over which the Trust has no control, such as
economic, financial and political events and the supply and demand for the
applicable currencies or composite currencies. In addition, if the formula used
to determine the amount of principal, premium, if any, and/or interest payable
with respect to Foreign Currency Notes contains a multiplier or leverage
factor, the effect of any change in the applicable currencies or composite
currencies will be magnified. In recent years, rates of exchange between the
United States dollar and foreign currencies or composite currencies have been
highly volatile and such volatility may continue or increase in the future.
Fluctuations in any particular exchange rate that have occurred in the past are
not necessarily indicative, however, of fluctuations that may occur in the
future. Depreciation of the foreign currency or composite currency in which a
Foreign Currency Note is payable against the United States dollar would result
in a decrease in the United States dollar-equivalent yield of such Foreign
Currency Note, in the United States dollar-equivalent value of the principal
and premium, if any, payable on the Maturity Date of such Foreign Currency
Note, and, generally, in the United States dollar-equivalent market value of
such Foreign Currency Note.
Governments or monetary authorities have imposed from time to time, and may in
the future impose or revise, exchange controls at or prior to the date on which
any payment of principal of, or premium, if any, or interest on, a Foreign
Currency Note is due, which could affect exchange rates as well as the
availability of the foreign currency or composite currency in which such
payment is to be made on such date. Even if there are no exchange controls, it
is possible that the foreign currency or composite currency in which a payment
in respect of any particular Foreign Currency Note is to be made would not be
available on the applicable payment date due to other circumstances beyond the
reasonable control of the Trust. In such cases, the Trust will be entitled to
satisfy its obligations in respect of such Foreign Currency Note in United
States dollars. See "Special Provisions Relating to Foreign Currency Notes--
Payment Currency."
DESCRIPTION OF NOTES
The Notes will be issued as a series of Debt Securities (as defined below)
under an Indenture, dated as of December 1, 1993, as amended, supplemented or
modified from time to time (the "Indenture"), between the Trust and Signet
Trust Company, as trustee (the "Trustee"). The Indenture is subject to, and
governed by, the Trust Indenture Act of 1939, as amended. The following summary
of certain provisions of the Notes and the Indenture does not purport to be
complete and is qualified in its entirety by reference to the actual provisions
of the Notes and the Indenture. Capitalized terms used but not defined herein
shall have the meanings given to them in the accompanying Prospectus, the Notes
or the Indenture, as the case may be. The term "Debt Securities," as used in
this Prospectus Supplement, refers to all debt securities, including the Notes,
issued and issuable from time to time under the Indenture. The following
description of the particular terms of the Notes offered hereby (referred to in
the accompanying Prospectus as the "Senior Securities") supplements, and to the
extent inconsistent therewith replaces, the description of the general
S-4
terms and provisions of the Senior Securities set forth in the Prospectus, to
which description reference is hereby made.
The following description of Notes will apply to each Note offered hereby
unless otherwise specified in the applicable Pricing Supplement.
GENERAL
The Notes will be unsecured obligations of the Trust and will rank pari passu
with all other unsecured and unsubordinated indebtedness of the Trust from time
to time outstanding. The Notes are effectively subordinated to mortgages and
other secured indebtedness of the Trust (approximately $98.6 million at
December 31, 1996), which encumber certain assets of the Trust.
The Indenture does not limit the aggregate initial offering price of Debt
Securities that may be issued thereunder and Debt Securities may be issued
thereunder from time to time in one or more series up to the aggregate initial
offering price from time to time authorized by the Trust for each series. The
Trust may, from time to time, without the consent of the Holders of the Notes,
provide for the issuance of Notes or other Debt Securities under the Indenture
in addition to the $200,000,000 aggregate initial offering price of Notes
offered hereby.
The Notes are currently limited to up to $200,000,000 aggregate initial
offering price, or the equivalent thereof in one or more foreign or composite
currencies. The Notes will be offered on a continuous basis and will mature on
any day nine months or more from their dates of issue (each, a "Stated Maturity
Date"), as specified in the applicable Pricing Supplement. Unless otherwise
specified in the applicable Pricing Supplement, interest-bearing Notes will
either be Fixed Rate Notes or Floating Rate Notes, as specified in the
applicable Pricing Supplement. Notes may also be issued that do not bear any
interest currently or that bear interest at a below market rate.
Unless otherwise specified in the applicable Pricing Supplement, the Notes will
be denominated in, and payments of principal, premium, if any, and/or interest
will be made in, United States dollars. The Notes also may be denominated in,
and payments of principal, premium, if any, and/or interest may be made in, one
or more foreign currencies or composite currencies ("Foreign Currency Notes").
See "Special Provisions Relating to Foreign Currency Notes--Payment of
Principal, Premium, if any, and Interest." The currency or composite currency
in which a Note is denominated, whether United States dollars or otherwise, is
herein referred to as the "Specified Currency." References herein to "United
States dollars," "U.S. dollars" and "U.S.$" are to the lawful currency of the
United States of America (the "United States").
Unless otherwise specified in the applicable Pricing Supplement, purchasers are
required to pay for the Notes in the applicable Specified Currencies. At the
present time, there are limited facilities in the United States for the
conversion of United States dollars into foreign currencies or composite
currencies and vice versa, and commercial banks do not generally offer non-
United States dollar checking or savings account facilities in the United
States. Each applicable Agent is prepared to arrange for the conversion of
United States dollars into the applicable Specified Currency to enable the
purchaser to pay for the related Foreign Currency Note, provided that a request
is made to such Agent on or prior to the fifth Business Day (as defined below)
preceding the date of delivery of such Foreign Currency Note, or by such other
day as determined by such Agent. Each such conversion will be made by an Agent
on such terms and subject to such conditions, limitations and charges as such
Agent may from time to time establish in accordance with its regular foreign
exchange practices. All costs of exchange will be borne by the purchaser of
each such Foreign Currency Note. See "Special Provisions Relating to Foreign
Currency Notes."
Interest rates offered by the Trust with respect to the Notes may differ
depending upon, among other things, the aggregate principal amount of Notes
purchased in any single transaction. Interest rates or formulas and other terms
of Notes are subject to change by the Trust from time to time, but no such
change will affect any Note already issued or as to which an offer to purchase
has been accepted by the Trust.
Each Note will be issued in fully registered form as a Book-Entry Note or a
Certificated Note. The authorized denominations of each Note other than a
Foreign Currency Note will be $1,000 and integral
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multiples thereof, unless otherwise specified in the applicable Pricing
Supplement, while the authorized denominations of each Foreign Currency Note
will be specified in the applicable Pricing Supplement.
Payments of principal of, premium, if any, and interest on, Book-Entry Notes
will be made by the Trust through the Paying Agent (as defined below) to the
Depositary. See "--Book-Entry Notes." In the case of Certificated Notes,
payment of principal and premium, if any, due on the Stated Maturity Date or
any prior date on which the principal, or an installment of principal, of each
Certificated Note becomes due and payable, whether by the declaration of
acceleration, notice of redemption at the option of the Trust, notice of the
Holder's option to elect repayment or otherwise (the Stated Maturity Date or
such prior date, as the case may be, is herein referred to as the "Maturity
Date" with respect to the principal of the applicable Note repayable on such
date) will be made in immediately available funds upon presentation and
surrender thereof (or, in the case of any repayment on an Optional Repayment
Date, upon presentation and surrender thereof and a duly completed election
form in accordance with the provisions described below) at the office or agency
maintained by the Trust for such purpose in the Borough of Manhattan, The City
of New York. Such office or agency is maintained currently by The Bank of New
York (the "Paying Agent") at 101 Barclay Street, New York, New York 10286.
Payment of interest due on the Maturity Date of each Certificated Note will be
made to the person to whom payment of the principal and premium, if any, shall
be made. Payment of interest due on each Certificated Note on any Interest
Payment Date (as defined below) other than the Maturity Date will be made at
the office or agency referred to above maintained by the Trust for such purpose
or, at the option of the Trust, may be made by check mailed to the address of
the Holder entitled thereto as such address shall appear in the Security
Register of the Trust. Notwithstanding the foregoing, a Holder of $10,000,000
(or, if the applicable Specified Currency is other than United States dollars,
the equivalent thereof in such Specified Currency) or more in aggregate
principal amount of Notes (whether having identical or different terms and
provisions) will be entitled to receive interest payments on any Interest
Payment Date other than the Maturity Date by wire transfer of immediately
available funds if appropriate wire transfer instructions have been received in
writing by the Paying Agent not less than 15 days prior to such Interest
Payment Date. Any such wire transfer instructions received by the Paying Agent
shall remain in effect until revoked by such Holder. For special payment terms
applicable to Foreign Currency Notes, see "Special Provisions Relating to
Foreign Currency Notes--Payment of Principal, Premium, if any, and Interest."
As used herein, "Business Day" means any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which banking institutions are
authorized or required by law, regulation or executive order to close in The
City of New York; provided, however, that with respect to Foreign Currency
Notes, such day is also not a day on which banking institutions are authorized
or required by law, regulation or executive order to close in the Principal
Financial Center (as defined below) of the country issuing the Specified
Currency (or if the Specified Currency is European Currency Units ("ECU"), such
day is not a day that appears as an ECU non-settlement day on the display
designated as "ISDE" on the Reuter Monitor Money Rates Service (or a day so
designated by the ECU Banking Association), or, if ECU non-settlement days do
not appear on that page (and are not so designated), is not a day on which
payments in ECU cannot be settled in the international interbank market);
provided, further, that, with respect to Notes as to which LIBOR is an
applicable Interest Rate Basis, such day is also a London Business Day (as
defined below). "London Business Day" means any day (i) if the Index Currency
(as defined below) is other than ECU, on which dealings in such Index Currency
are transacted in the London interbank market or (ii) if the Index Currency is
ECU, that does not appear as an ECU non-settlement day on the display
designated as "ISDE" on the Reuter Monitor Money Rates Service (or a day so
designated by the ECU Banking Association, or, if ECU non-settlement days do
not appear on that page (and are not so designated), is not a day on which
payments in ECU cannot be settled in the international interbank market).
"Principal Financial Center" means the capital city of the country issuing the
Specified Currency or, solely with respect to the calculation of LIBOR, the
Index Currency, except that with respect to United States dollars, Australian
dollars, Deutsche marks, Dutch guilders, Italian lire, Swiss francs and ECU,
the Principal Financial Center shall be The City of New York, Sydney,
Frankfurt, Amsterdam, Milan, Zurich and Luxembourg, respectively.
Book-Entry Notes may be transferred or exchanged only through the Depositary.
See "--Book-Entry Notes." Registration of transfer or exchange of Certificated
Notes will be made at the office or agency maintained by
S-6
the Trust for such purpose in the Borough of Manhattan, The City of New York.
No service charge will be made by the Trust or The Bank of New York (the
"Securities Registrar") for any such registration of transfer or exchange of
Notes, but the Trust may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection therewith (other
than exchanges pursuant to the Indenture not involving any transfer).
Notwithstanding any provisions described in this Prospectus Supplement to the
contrary, if a Note specifies that an Addendum is attached thereto or that
"Other/Additional Provisions" apply, such Note will be subject to the terms
specified in such Addendum or "Other/Additional Provisions," as the case may
be, and will be described in the applicable Pricing Supplement.
REDEMPTION AT THE OPTION OF THE TRUST
Unless otherwise specified in the applicable Pricing Supplement, the Notes will
not be subject to any sinking fund. The applicable Pricing Supplement will
indicate if the Notes will be redeemable prior to the Stated Maturity Date and
the terms on which such Notes will be redeemable at the option of the Trust. If
so specified, the Notes will be subject to redemption at the option of the
Trust on any date on and after the applicable Initial Redemption Date in whole
or from time to time in part in increments of $1,000 or such other minimum
denomination specified in such Pricing Supplement (provided that any remaining
principal amount thereof shall be at least $1,000 or such minimum
denomination), at the applicable Redemption Price (as defined below), together
with unpaid interest accrued to the date of redemption, on notice given not
more than 60 nor less than 30 calendar days prior to the date of redemption and
in accordance with the provisions of the Indenture. Unless otherwise specified
in the applicable Pricing Supplement, "Redemption Price," with respect to a
Note, means an amount equal to the Initial Redemption Percentage specified in
the applicable Pricing Supplement (as adjusted by the Annual Redemption
Percentage Reduction, if applicable) multiplied by the unpaid principal amount
to be redeemed. The Initial Redemption Percentage, if any, applicable to a Note
shall decline at each anniversary of the Initial Redemption Date by an amount
equal to the applicable Annual Redemption Percentage Reduction, if any, until
the Redemption Price is equal to 100% of the unpaid principal amount to be
redeemed. See also "--Original Issue Discount Notes."
REPAYMENT AT THE NOTEHOLDERS' OPTION; REPURCHASES BY THE TRUST
The applicable Pricing Supplement will indicate if the Notes will be repayable
at the option of the Holders thereof on a date specified prior to the
applicable Maturity Date and, unless otherwise specified in the Pricing
Supplement, such Notes shall be repayable at a price equal to 100% of the
principal amount thereof, together with unpaid interest accrued to the date of
repayment.
In order for such a Note to be repaid, the Paying Agent must receive at least 30
days but not more than 60 days prior to the repayment date (i) such Note with
the form entitled "Option to Elect Repayment" on the reverse of such Note duly
completed or (ii) facsimile transmission or a letter from a member of a national
securities exchange or the National Association of Securities Dealers, Inc. or a
commercial bank or trust company in the United States setting forth the name of
the Holder of such Note, the principal amount of such Note, the principal amount
of such Note to be repaid, the certificate number or a description of the tenor
and terms of such Note, a statement that the option to elect repayment is being
exercised thereby, and a guarantee that such Note to be repaid, together with
the duly completed form entitled "Option to Elect Repayment" on the reverse of
such Note, will be received by the Paying Agent not later than the fifth
Business Day after the date of such facsimile transmission or letter; however,
such facsimile transmission or letter shall only be effective if such Note and
duly completed form are received by the Paying Agent by such fifth Business Day.
Unless otherwise specified in the applicable Pricing Supplement, exercise of the
repayment option by the Holder of a Note will be irrevocable. The repayment
option may be exercised by the Holder of a Note for less than the entire
principal amount of the Note, but in that event, the principal amount of the
Note remaining outstanding after repayment must be in an authorized
denomination.
If a Note is represented by a Global Security, the Depositary's nominee will be
the Holder of such Note and therefore will be the only entity that can exercise
a right to repayment. In order to ensure that the Depositary's nominee will
timely exercise a right to repayment with respect to a particular Note, the
Beneficial Owner of such Note must instruct the broker or other Direct
Participant (as defined below) or Indirect Participant (as defined below)
through which it holds an interest in such Note to notify the
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Depositary of its desire to exercise a right to repayment. Different firms have
different deadlines for accepting instructions from their customers.
Accordingly, each Beneficial Owner should consult the broker or other Direct
Participant or Indirect Participant through which it holds an interest in a
Note in order to ascertain the deadline by which such instruction must be given
in order for timely notice to be delivered to the Depositary.
If applicable, the Trust will comply with the requirements of Rule 14e-1 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and any
other securities laws or regulations in connection with any such repayment.
The Trust may at any time purchase Notes at any price or prices in the open
market or otherwise. Notes so purchased by the Trust may, at the discretion of
the Trust, be held, resold or surrendered to the Trustee for cancellation.
INTEREST
General
Unless otherwise specified in the applicable Pricing Supplement, each interest-
bearing Note will bear interest from its date of issue at the rate per annum,
in the case of a Fixed Rate Note, or pursuant to the interest rate formula, in
the case of a Floating Rate Note, in each case, as specified in the applicable
Pricing Supplement, until the principal thereof is paid or duly made available
for payment. Unless otherwise specified in the applicable Pricing Supplement,
interest payments in respect of Fixed Rate Notes and Floating Rate Notes will
equal the amount of interest accrued from and including the immediately
preceding Interest Payment Date in respect of which interest has been paid or
duly made available for payment (or from and including the date of issue, if no
interest has been paid or duly made available for payment with respect to the
applicable Note) to but excluding the applicable Interest Payment Date or the
Maturity Date, as the case may be (each, an "Interest Period").
Interest on Fixed Rate Notes and Floating Rate Notes will be payable in arrears
on each Interest Payment Date and on the Maturity Date. Unless otherwise
specified in the applicable Pricing Supplement, the first payment of interest
on any such Note originally issued between a Record Date (as defined below) and
the related Interest Payment Date will be made on the Interest Payment Date
immediately following the next succeeding Record Date to the Holder on such
next succeeding Record Date. Unless otherwise specified in the applicable
Pricing Supplement, a "Record Date" shall be the fifteenth calendar day
(whether or not a Business Day) immediately preceding the related Interest
Payment Date.
Fixed Rate Notes
Interest on Fixed Rate Notes will be payable in arrears as specified in the
applicable Pricing Supplement (each, an "Interest Payment Date") and on the
Maturity Date. Unless otherwise specified in the applicable Pricing Supplement,
interest on Fixed Rate Notes will be computed on the basis of a 360-day year of
twelve 30-day months.
If any Interest Payment Date or the Maturity Date of a Fixed Rate Note falls on
a day that is not a Business Day, the required payment of principal, premium,
if any, and/or interest will be made on the next succeeding Business Day with
the same force and effect as if made on the date such payment was due, and no
interest will accrue on such payment for the period from and after such
Interest Payment Date or the Maturity Date, as the case may be, to the date of
such payment on the next succeeding Business Day.
Floating Rate Notes
Unless otherwise specified in the applicable Pricing Supplement, Floating Rate
Notes will be issued as described below. The applicable Pricing Supplement will
specify certain terms with respect to which each Floating Rate Note is being
delivered, including: whether such Floating Rate Note is a "Regular Floating
Rate Note," a "Floating Rate/Fixed Rate Note" or an "Inverse Floating Rate
Note," the Fixed Rate Commencement Date, if applicable, Fixed Interest Rate, if
applicable, Interest Rate Basis or Bases, Initial Interest Rate, if any,
Initial Interest Reset Date, Interest Reset Period and Dates, Interest Payment
Period and Dates, Index Maturity, Maximum Interest Rate and/or Minimum Interest
Rate, if any, and Spread and/or Spread Multiplier, if any, as such terms are
defined below. If one or more of the applicable Interest
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Rate Bases is LIBOR or the CMT Rate, the applicable Pricing Supplement will
specify the Index Currency, if any, and Designated LIBOR Page or the
Designated CMT Maturity Index and Designated CMT Telerate Page, respectively,
as such terms are defined below.
The interest rate borne by the Floating Rate Notes will be determined as
follows:
(i) Unless such Floating Rate Note is designated as a "Floating Rate/Fixed
Rate Note," or an "Inverse Floating Rate Note" or as having an Addendum
attached or having "Other/Additional Provisions" apply relating to a different
interest rate formula, such Floating Rate Note will be designated as a
"Regular Floating Rate Note" and, except as described below or in the
applicable Pricing Supplement, will bear interest at the rate determined by
reference to the applicable Interest Rate Basis or Bases (a) plus or minus the
applicable Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the Initial Interest Reset Date, the rate at
which interest on such Regular Floating Rate Note shall be payable shall be
reset as of each Interest Reset Date; provided, however, that the interest
rate in effect for the period, if any, from the date of issue to the Initial
Interest Reset Date will be the Initial Interest Rate.
(ii) If such Floating Rate Note is designated as a "Floating Rate/Fixed Rate
Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the rate determined
by reference to the applicable Interest Rate Basis or Bases (a) plus or minus
the applicable Spread, if any, and/or (b) multiplied by the applicable Spread
Multiplier, if any. Commencing on the Initial Interest Reset Date, the rate at
which interest on such Floating Rate/Fixed Rate Note shall be payable shall be
reset as of each Interest Reset Date; provided, however, that (y) the interest
rate in effect for the period, if any, from the date of issue to the Initial
Interest Reset Date will be the Initial Interest Rate and (z) the interest
rate in effect for the period commencing on the Fixed Rate Commencement Date
to the Maturity Date shall be the Fixed Interest Rate, if such rate is
specified in the applicable Pricing Supplement or, if no such Fixed Interest
Rate is specified, the interest rate in effect thereon on the day immediately
preceding the Fixed Rate Commencement Date.
(iii) If such Floating Rate Note is designated as an "Inverse Floating Rate
Note," then, except as described below or in the applicable Pricing
Supplement, such Floating Rate Note will bear interest at the Fixed Interest
Rate minus the rate determined by reference to the applicable Interest Rate
Basis or Bases (a) plus or minus the applicable Spread, if any, and/or (b)
multiplied by the applicable Spread Multiplier, if any; provided, however,
that, unless otherwise specified in the applicable Pricing Supplement, the
interest rate thereon will not be less than zero. Commencing on the Initial
Interest Reset Date, the rate at which interest on such Inverse Floating Rate
Note shall be payable shall be reset as of each Interest Reset Date; provided,
however, that the interest rate in effect for the period, if any, from the
date of issue to the Initial Interest Reset Date will be the Initial Interest
Rate.
The "Spread" is the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to such Floating Rate
Note. The "Spread Multiplier" is the percentage of the related Interest Rate
Basis or Bases applicable to such Floating Rate Note by which such Interest
Rate Basis or Bases will be multiplied to determine the applicable interest
rate on such Floating Rate Note. The "Index Maturity" is the period to
maturity of the instrument or obligation with respect to which the related
Interest Rate Basis or Bases will be calculated.
Unless otherwise specified in the applicable Pricing Supplement, the interest
rate with respect to each Interest Rate Basis will be determined in accordance
with the applicable provisions below. Except as set forth above or in the
applicable Pricing Supplement, the interest rate in effect on each day shall
be (i) if such day is an Interest Reset Date, the interest rate determined as
of the Interest Determination Date (as defined below) immediately preceding
such Interest Reset Date or (ii) if such day is not an Interest Reset Date,
the interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date.
Interest on Floating Rate Notes will be determined by reference to the
applicable Interest Rate Basis or Interest Rate Bases, which may, as described
below, include (i) the CD Rate, (ii) the CMT Rate, (iii) the Commercial Paper
Rate, (iv) the Eleventh District Cost of Funds Rate, (v) the Federal Funds
Rate, (vi) LIBOR, (vii) the Prime Rate, (viii) the Treasury Rate, or (ix) such
other Interest Rate Basis or interest
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rate formula as may be specified in the applicable Pricing Supplement,
provided, however, that the interest rate in effect on a Floating Rate Note for
the period, if any, from the date of issue to the Initial Interest Reset Date
will be the Initial Interest Rate; provided, further, that with respect to a
Floating Rate/Fixed Rate Note the interest rate in effect for the period
commencing on the Fixed Rate Commencement Date to the Maturity Date shall be
the Fixed Interest Rate, if such rate is specified in the applicable Pricing
Supplement or, if no such Fixed Interest Rate is specified, the interest rate
in effect thereon on the day immediately preceding the Fixed Rate Commencement
Date.
The applicable Pricing Supplement will specify whether the rate of interest on
the related Floating Rate Note will be reset daily, weekly, monthly, quarterly,
semiannually or annually or on such other specified basis (each, an "Interest
Reset Period") and the dates on which such rate of interest will be reset
(each, an "Interest Reset Date"). Unless otherwise specified in the applicable
Pricing Supplement, the Interest Reset Dates will be, in the case of Floating
Rate Notes which reset: (i) daily, each Business Day; (ii) weekly, the
Wednesday of each week (with the exception of weekly reset Floating Rate Notes
as to which the Treasury Rate is an applicable Interest Rate Basis, which will
reset the Tuesday of each week, except as described below); (iii) monthly, the
third Wednesday of each month (with the exception of monthly reset Floating
Rate Notes as to which the Eleventh District Cost of Funds Rate is an
applicable Interest Rate Basis, which will reset on the first calendar day of
the month); (iv) quarterly, the third Wednesday of March, June, September and
December of each year; (v) semiannually, the third Wednesday of the two months
specified in the applicable Pricing Supplement; and (vi) annually, the third
Wednesday of the month specified in the applicable Pricing Supplement;
provided, however, that, with respect to Floating Rate/Fixed Rate Notes, the
rate of interest thereon will not reset after the applicable Fixed Rate
Commencement Date. If any Interest Reset Date for any Floating Rate Note would
otherwise be a day that is not a Business Day, such Interest Reset Date will be
postponed to the next succeeding Business Day, except that in the case of a
Floating Rate Note as to which LIBOR is an applicable Interest Rate Basis and
such Business Day falls in the next succeeding calendar month, such Interest
Reset Date will be the immediately preceding Business Day. In addition, in the
case of a Floating Rate Note as to which the Treasury Rate is an applicable
Interest Rate Basis and the Interest Determination Date would otherwise fall on
an Interest Reset Date, then such Interest Reset Date will be postponed to the
next succeeding Business Day.
The interest rate applicable to each Interest Reset Period commencing on the
related Interest Reset Date will be the rate determined as of the applicable
Interest Determination Date and calculated on or prior to the Calculation Date
(as defined below), except with respect to LIBOR and the Eleventh District Cost
of Funds Rate, which will be calculated as of such Interest Determination Date.
The "Interest Determination Date" with respect to the CD Rate, the CMT Rate,
the Commercial Paper Rate, the Federal Funds Rate and the Prime Rate will be
the second Business Day immediately preceding the applicable Interest Reset
Date; the "Interest Determination Date" with respect to the Eleventh District
Cost of Funds Rate will be the last business day of the month immediately
preceding the applicable Interest Reset Date on which the Federal Home Loan
Bank of San Francisco (the "FHLB of San Francisco") publishes the Index (as
defined below); and the "Interest Determination Date" with respect to LIBOR
will be the second London Business Day immediately preceding the applicable
Interest Reset Date, unless the Index Currency is British pounds sterling, in
which case the "Interest Determination Date" will be the applicable Interest
Reset Date. With respect to the Treasury Rate, the "Interest Determination
Date" will be the day in the week in which the applicable Interest Reset Date
falls on which day Treasury Bills (as defined below) are normally auctioned
(Treasury Bills are normally sold at an auction held on Monday of each week,
unless that day is a legal holiday, in which case the auction is normally held
on the following Tuesday, except that such auction may be held on the preceding
Friday); provided, however, that if an auction is held on the Friday of the
week preceding the applicable Interest Reset Date, the Interest Determination
Date will be such preceding Friday. The "Interest Determination Date"
pertaining to a Floating Rate Note the interest rate of which is determined by
reference to two or more Interest Rate Bases will be the most recent Business
Day which is at least two Business Days prior to the applicable Interest Reset
Date for such Floating Rate Note on which each Interest Rate Basis is
determinable. Each Interest Rate Basis will be determined as of such date, and
the applicable interest rate will take effect on the applicable Interest Reset
Date.
A Floating Rate Note may also have either or both of the following: (i) a
Maximum Interest Rate, or ceiling, that may accrue during any Interest Period
and (ii) a Minimum Interest Rate, or floor, that may accrue
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during any Interest Period. In addition to any Maximum Interest Rate that may
apply to any Floating Rate Note, the interest rate on Floating Rate Notes will
in no event be higher than the maximum rate permitted by New York law, as the
same may be modified by United States law of general application.
Except as provided below or in the applicable Pricing Supplement, interest will
be payable, in the case of Floating Rate Notes which reset: (i) daily, weekly
or monthly, on the third Wednesday of each month or the third Wednesday of
March, June, September and December of each year, as specified in the
applicable Pricing Supplement; (ii) quarterly, on the third Wednesday of March,
June, September and December of each year; (iii) semiannually, on the third
Wednesday of the two months of each year specified in the applicable Pricing
Supplement; and (iv) annually, on the third Wednesday of the month of each year
specified in the applicable Pricing Supplement (each, an "Interest Payment
Date") and, in each case, on the Maturity Date. If any Interest Payment Date
other than the Maturity Date for any Floating Rate Note would otherwise be a
day that is not a Business Day, such Interest Payment Date will be postponed to
the next succeeding Business Day, except that in the case of a Floating Rate
Note as to which LIBOR is an applicable Interest Rate Basis and such Business
Day falls in the next succeeding calendar month, such Interest Payment Date
will be the immediately preceding Business Day. If the Maturity Date of a
Floating Rate Note falls on a day that is not a Business Day, the required
payment of principal, premium, if any, and interest will be made on the next
succeeding Business Day with the same force and effect as if made on the date
such payment was due, and no interest will accrue on such payment for the
period from and after the Maturity Date to the date of such payment on the next
succeeding Business Day.
All percentages resulting from any calculation on Floating Rate Notes will be
rounded to the nearest one hundred-thousandth of a percentage point, with five-
one millionths of a percentage point rounded upwards (e.g., 9.876545% (or
.09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used in
or resulting from such calculation on Floating Rate Notes will be rounded, in
the case of United States dollars, to the nearest cent or, in the case of a
foreign currency or composite currency, to the nearest unit (with one-half cent
or unit being rounded upwards).
With respect to each Floating Rate Note, accrued interest is calculated by
multiplying its principal amount by an accrued interest factor. Such accrued
interest factor is computed by adding the interest factor calculated for each
day in the applicable Interest Period. Unless otherwise specified in the
applicable Pricing Supplement, the interest factor for each day will be
computed by dividing the interest rate applicable to such day by 360, in the
case of Floating Rate Notes for which an applicable Interest Rate Basis is the
CD Rate, the Commercial Paper Rate, the Eleventh District Cost of Funds Rate,
the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number of
days in the year in the case of Floating Rate Notes for which an applicable
Interest Rate Basis is the CMT Rate or the Treasury Rate. Unless otherwise
specified in the applicable Pricing Supplement, the interest factor for
Floating Rate Notes for which the interest rate is calculated with reference to
two or more Interest Rate Bases will be calculated in each period in the same
manner as if only one of the applicable Interest Rate Bases applied as
specified in the applicable Pricing Supplement.
Unless otherwise specified in the applicable Pricing Supplement, The Bank of
New York will be the "Calculation Agent" with respect to any Floating Rate
Note. Upon request of the Holder of any Floating Rate Note, the Calculation
Agent will disclose the interest rate then in effect and, if determined, the
interest rate that will become effective as a result of a determination made
for the next succeeding Interest Reset Date with respect to such Floating Rate
Note. Unless otherwise specified in the applicable Pricing Supplement, the
"Calculation Date," if applicable, pertaining to any Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date, or, if such day is not a Business Day, the next succeeding
Business Day or (ii) the Business Day immediately preceding the applicable
Interest Payment Date or the Maturity Date, as the case may be.
Unless otherwise specified in the applicable Pricing Supplement, the
Calculation Agent shall determine each Interest Rate Basis in accordance with
the following provisions.
CD Rate. Unless otherwise specified in the applicable Pricing Supplement, "CD
Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CD Rate (a "CD Rate Interest Determination Date"), the rate on such date
for
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negotiable United States dollar certificates of deposit having the Index
Maturity specified in the applicable Pricing Supplement as published by the
Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates" or any successor publication ("H.15(519)")
under the heading "CDs (Secondary Market)," or, if not published by 3:00 P.M.,
New York City time, on the related Calculation Date, the rate on such CD Rate
Interest Determination Date for negotiable United States dollar certificates of
deposit of the Index Maturity specified in the applicable Pricing Supplement as
published by the Federal Reserve Bank of New York in its daily statistical
release "Composite 3:30 P.M. Quotations for U.S. Government Securities" or any
successor publication ("Composite Quotations") under the heading "Certificates
of Deposit." If such rate is not yet published in either H.15(519) or Composite
Quotations by 3:00 P.M., New York City time, on the related Calculation Date,
then the CD Rate on such CD Rate Interest Determination Date will be calculated
by the Calculation Agent and will be the arithmetic mean of the secondary
market offered rates as of 10:00 A.M., New York City time, on such CD Rate
Interest Determination Date, of three leading nonbank dealers in negotiable
United States dollar certificates of deposit in The City of New York (which may
include any of the Agents or their affiliates) selected by the Calculation
Agent for negotiable United States dollar certificates of deposit of major
United States money center banks in the market for negotiable United States
dollar certificates of deposit with a remaining maturity closest to the Index
Maturity specified in the applicable Pricing Supplement in an amount that is
representative for a single transaction in that market at that time; provided,
however, that if the dealers so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the CD Rate determined as of such CD
Rate Interest Determination Date will be the CD Rate in effect on such CD Rate
Interest Determination Date.
CMT Rate. Unless otherwise specified in the applicable Pricing Supplement, "CMT
Rate" means, with respect to any Interest Determination Date relating to a
Floating Rate Note for which the interest rate is determined with reference to
the CMT Rate (a "CMT Rate Interest Determination Date"), the rate displayed on
the Designated CMT Telerate Page under the caption " . . . Treasury Constant
Maturities . . . Federal Reserve Board Release H.15 . . . Mondays Approximately
3:45 P.M.," under the column for the Designated CMT Maturity Index for (i) if
the Designated CMT Telerate Page is 7055, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
weekly or monthly average, as specified in the applicable Pricing Supplement,
for the week or the month, as applicable, ended immediately preceding the week
or month, as applicable, in which the related CMT Rate Interest Determination
Date occurs. If such rate is no longer displayed on the relevant page or is not
displayed by 3:00 P.M., New York City time, on the related Calculation Date,
then the CMT Rate for such CMT Rate Interest Determination Date will be such
treasury constant maturity rate for the Designated CMT Maturity Index as
published in the relevant H.15(519). If such rate is no longer published or is
not published by 3:00 P.M., New York City time, on the related Calculation
Date, then the CMT Rate on such CMT Rate Interest Determination Date will be
such treasury constant maturity rate for the Designated CMT Maturity Index (or
other United States Treasury rate for the Designated CMT Maturity Index) for
the CMT Rate Interest Determination Date with respect to such Interest Reset
Date as may then be published by either the Board of Governors of the Federal
Reserve System or the United States Department of the Treasury that the
Calculation Agent determines to be comparable to the rate formerly displayed on
the Designated CMT Telerate Page and published in the relevant H.15(519). If
such information is not provided by 3:00 P.M., New York City time, on the
related Calculation Date, then the CMT Rate on the CMT Rate Interest
Determination Date will be calculated by the Calculation Agent and will be a
yield to maturity, based on the arithmetic mean of the secondary market closing
offer side prices as of approximately 3:30 P.M., New York City time, on such
CMT Rate Interest Determination Date reported, according to their written
records, by three leading primary United States government securities dealers
(each, a "Reference Dealer") in The City of New York (which may include any of
the Agents or their affiliates) selected by the Calculation Agent (from five
such Reference Dealers selected by the Calculation Agent and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for the
most recently issued direct noncallable fixed rate obligations of the United
States ("Treasury Notes") with an original maturity of approximately the
Designated CMT Maturity Index and a remaining term to maturity of not less than
such Designated CMT Maturity Index minus one year. If the Calculation Agent is
unable to obtain three such Treasury Note quotations, the CMT Rate on such CMT
Rate Interest Determination Date will be calculated by the Calculation Agent
and will be a yield to maturity based on the arithmetic mean of the secondary
market offer side prices as of approximately 3:30 P.M., New
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York City time, on such CMT Rate Interest Determination Date of three Reference
Dealers in The City of New York (from five such Reference Dealers selected by
the Calculation Agent and eliminating the highest quotation (or, in the event
of equality, one of the highest) and the lowest quotation (or, in the event of
equality, one of the lowest)), for Treasury Notes with an original maturity of
the number of years that is the next highest to the Designated CMT Maturity
Index and a remaining term to maturity closest to the Designated CMT Maturity
Index and in an amount of at least $100,000,000. If three or four (and not
five) of such Reference Dealers are quoting as described above, then the CMT
Rate will be based on the arithmetic mean of the offer prices obtained and
neither the highest nor the lowest of such quotes will be eliminated; provided,
however, that if fewer than three Reference Dealers so selected by the
Calculation Agent are quoting as mentioned herein, the CMT Rate determined as
of such CMT Rate Interest Determination Date will be the CMT Rate in effect on
such CMT Rate Interest Determination Date. If two Treasury Notes with an
original maturity as described in the second preceding sentence have remaining
terms to maturity equally close to the Designated CMT Maturity Index, the
Calculation Agent will obtain quotations for the Treasury Note with the shorter
remaining term to maturity and will use such quotations to calculate the CMT
Rate as set forth above.
"Designated CMT Telerate Page" means the display on the Dow Jones Telerate
Service (or any successor service) on the page specified in the applicable
Pricing Supplement (or any other page as may replace such page on that service
(or any successor service) for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519)) for the purpose of displaying Treasury
Constant Maturities as reported in H.15(519). If no such page is specified in
the applicable Pricing Supplement, the Designated CMT Telerate Page shall be
7052, for the most recent week.
"Designated CMT Maturity Index" means the original period to maturity of the
U.S. Treasury securities (either one, two, three, five, seven, 10, 20 or 30
years) specified in the applicable Pricing Supplement with respect to which the
CMT Rate will be calculated. If no such maturity is specified in the applicable
Pricing Supplement, the Designated CMT Maturity Index shall be two years.
Commercial Paper Rate. Unless otherwise specified in the applicable Pricing
Supplement, "Commercial Paper Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Commercial Paper Rate (a "Commercial Paper
Rate Interest Determination Date"), the Money Market Yield (as defined below)
on such date of the rate for commercial paper having the Index Maturity
specified in the applicable Pricing Supplement as published in H.15(519) under
the heading "Commercial Paper." In the event that such rate is not published by
3:00 P.M., New York City time, on the related Calculation Date, then the
Commercial Paper Rate on such Commercial Paper Rate Interest Determination Date
will be the Money Market Yield of the rate for commercial paper having the
Index Maturity specified in the applicable Pricing Supplement as published in
Composite Quotations under the heading "Commercial Paper" (with an Index
Maturity of one month or three months being deemed to be equivalent to an Index
Maturity of 30 days or 90 days, respectively). If such rate is not yet
published in either H.15(519) or Composite Quotations by 3:00 P.M., New York
City time, on the related Calculation Date, then the Commercial Paper Rate on
such Commercial Paper Rate Interest Determination Date will be calculated by
the Calculation Agent and will be the Money Market Yield of the arithmetic mean
of the offered rates at approximately 11:00 A.M., New York City time, on such
Commercial Paper Rate Interest Determination Date of three leading dealers of
commercial paper in The City of New York (which may include any of the Agents
or their affiliates) selected by the Calculation Agent for commercial paper
having the Index Maturity specified in the applicable Pricing Supplement placed
for an industrial issuer whose bond rating is "AA," or the equivalent, from a
nationally recognized statistical rating organization; provided, however, that
if the dealers so selected by the Calculation Agent are not quoting as
mentioned in this sentence, the Commercial Paper Rate determined as of such
Commercial Paper Rate Interest Determination Date will be the Commercial Paper
Rate in effect on such Commercial Paper Rate Interest Determination Date.
"Money Market Yield" means a yield (expressed as a percentage) calculated in
accordance with the following formula:
D x 360 x 100
Money Market Yield = -------------
360 - (D x M)
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where "D" refers to the applicable per annum rate for commercial paper quoted
on a bank discount basis and expressed as a decimal, and "M" refers to the
actual number of days in the Interest Period for which interest is being
calculated.
Eleventh District Cost of Funds Rate. Unless otherwise specified in the
applicable Pricing Supplement, "Eleventh District Cost of Funds Rate" means,
with respect to any Interest Determination Date relating to a Floating Rate
Note for which the interest rate is determined with reference to the Eleventh
District Cost of Funds Rate (an "Eleventh District Cost of Funds Rate Interest
Determination Date"), the rate equal to the monthly weighted average cost of
funds for the calendar month immediately preceding the month in which such
Eleventh District Cost of Funds Rate Interest Determination Date falls, as set
forth under the caption "11th District" on Telerate Page 7058 as of 11:00 A.M.,
San Francisco time, on such Eleventh District Cost of Funds Rate Interest
Determination Date. If such rate does not appear on Telerate Page 7058 on such
Eleventh District Cost of Funds Rate Interest Determination Date then the
Eleventh District Cost of Funds Rate on such Eleventh District Cost of Funds
Rate Interest Determination Date shall be the monthly weighted average cost of
funds paid by member institutions of the Eleventh Federal Home Loan Bank
District that was most recently announced (the "Index") by the FHLB of San
Francisco as such cost of funds for the calendar month immediately preceding
such Eleventh District Cost of Funds Rate Interest Determination Date. If the
FHLB of San Francisco fails to announce the Index on or prior to such Eleventh
District Cost of Funds Rate Interest Determination Date for the calendar month
immediately preceding such Eleventh District Cost of Funds Rate Interest
Determination Date, the Eleventh District Cost of Funds Rate determined as of
such Eleventh District Cost of Funds Rate Interest Determination Date will be
the Eleventh District Cost of Funds Rate in effect on such Eleventh District
Cost of Funds Rate Interest Determination Date.
Federal Funds Rate. Unless otherwise specified in the applicable Pricing
Supplement, "Federal Funds Rate" means, with respect to any Interest
Determination Date relating to a Floating Rate Note for which the interest rate
is determined with reference to the Federal Funds Rate (a "Federal Funds Rate
Interest Determination Date"), the rate on such date for United States dollar
federal funds as published in H.15(519) under the heading "Federal Funds
(Effective)" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the rate on such Federal Funds Rate Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/Effective Rate." If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
related Calculation Date, then the Federal Funds Rate on such Federal Funds
Rate Interest Determination Date will be calculated by the Calculation Agent
and will be the arithmetic mean of the rates for the last transaction in
overnight United States dollar federal funds arranged by three leading brokers
of federal funds transactions in The City of New York (which may include any of
the Agents or their affiliates) selected by the Calculation Agent prior to 9:00
A.M., New York City time, on such Federal Funds Rate Interest Determination
Date; provided, however, that if the brokers so selected by the Calculation
Agent are not quoting as mentioned in this sentence, the Federal Funds Rate
determined as of such Federal Funds Rate Interest Determination Date will be
the Federal Funds Rate in effect on such Federal Funds Rate Interest
Determination Date.
LIBOR. Unless otherwise specified in the applicable Pricing Supplement, "LIBOR"
means the rate determined in accordance with the following provisions:
(i) With respect to any Interest Determination Date relating to a Floating Rate
Note for which the interest rate is determined with reference to LIBOR (a
"LIBOR Interest Determination Date"), LIBOR will be either: (a) if "LIBOR
Reuters" is specified in the applicable Pricing Supplement, the arithmetic mean
of the offered rates (unless the Designated LIBOR Page by its terms provides
only for a single rate, in which case such single rate shall be used) for
deposits in the Index Currency having the Index Maturity specified in such
Pricing Supplement, commencing on the applicable Interest Reset Date, that
appear (or, if only a single rate is required as aforesaid, appears) on the
Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR Interest
Determination Date, or (b) if "LIBOR Telerate" is specified in the applicable
Pricing Supplement or if neither "LIBOR Reuters" nor "LIBOR Telerate" is
specified in the applicable Pricing Supplement as the method for calculating
LIBOR, the rate for deposits in the Index Currency having the Index Maturity
specified in such Pricing Supplement, commencing on such Interest Reset Date,
that appears
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on the Designated LIBOR Page as of 11:00 A.M., London time, on such LIBOR
Interest Determination Date. If fewer than two such offered rates appear, or if
no such rate appears, as applicable, LIBOR on such LIBOR Interest Determination
Date will be determined in accordance with the provisions described in clause
(ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer than
two offered rates appear, or no rate appears, as the case may be, on the
Designated LIBOR Page as specified in clause (i) above, the Calculation Agent
will request the principal London offices of each of four major reference banks
in the London interbank market, as selected by the Calculation Agent, to
provide the Calculation Agent with its offered quotation for deposits in the
Index Currency for the period of the Index Maturity specified in the applicable
Pricing Supplement, commencing on the applicable Interest Reset Date, to prime
banks in the London interbank market at approximately 11:00 A.M., London time,
on such LIBOR Interest Determination Date and in a principal amount that is
representative for a single transaction in such Index Currency in such market
at such time. If at least two quotations are so provided, then LIBOR on such
LIBOR Interest Determination Date will be the arithmetic mean of such
quotations. If fewer than two such quotations are so provided, then LIBOR on
such LIBOR Interest Determination Date will be the arithmetic mean of the rates
quoted at approximately 11:00 A.M., in the applicable Principal Financial
Center, on such LIBOR Interest Determination Date by three major banks in such
Principal Financial Center selected by the Calculation Agent for loans in the
Index Currency to leading European banks, having the Index Maturity specified
in the applicable Pricing Supplement and in a principal amount that is
representative for a single transaction in such Index Currency in such market
at such time; provided, however, that if the banks so selected by the
Calculation Agent are not quoting as mentioned in this sentence, LIBOR
determined as of such LIBOR Interest Determination Date will be LIBOR in effect
on such LIBOR Interest Determination Date.
"Index Currency" means the currency or composite currency specified in the
applicable Pricing Supplement as to which LIBOR shall be calculated. If no such
currency or composite currency is specified in the applicable Pricing
Supplement, the Index Currency shall be United States dollars.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in the
applicable Pricing Supplement, the display on the Reuter Monitor Money Rates
Service (or any successor service) on the page specified in such Pricing
Supplement (or any other page as may replace such page or such service (or any
successor service)) for the purpose of displaying the London interbank rates of
major banks for the applicable Index Currency, or (b) if "LIBOR Telerate" is
specified in the applicable Pricing Supplement or neither "LIBOR Reuters" nor
"LIBOR Telerate" is specified in the applicable Pricing Supplement as the
method for calculating LIBOR, the display on the Dow Jones Telerate Service (or
any successor service) on the page specified in such Pricing Supplement (or any
other page as may replace such page or such service (or any successor service))
for the purpose of displaying the London interbank rates of major banks for the
applicable Index Currency.
Prime Rate. Unless otherwise specified in the applicable Pricing Supplement,
"Prime Rate" means, with respect to any Interest Determination Date relating to
a Floating Rate Note for which the interest rate is determined with reference
to the Prime Rate (a "Prime Rate Interest Determination Date"), the rate on
such date as is published in H.15(519) under the heading "Bank Prime Loan." If
such rate is not published prior to 3:00 P.M., New York City time, on the
related Calculation Date, then the Prime Rate shall be the arithmetic mean of
the rates of interest publicly announced by each bank that appears on the
Reuters Screen USPRIME1 Page (as defined below) as such bank's prime rate or
base lending rate as in effect for such Prime Rate Interest Determination Date.
If fewer than four such rates appear on the Reuters Screen USPRIME1 Page for
such Prime Rate Interest Determination Date, then the Prime Rate shall be the
arithmetic mean of the prime rates quoted on the basis of the actual number of
days in the year divided by a 360-day year as of the close of business on such
Prime Rate Interest Determination Date by four major money center banks in The
City of New York selected by the Calculation Agent. If fewer than four such
quotations are so provided, then the Prime Rate shall be the arithmetic mean of
four prime rates quoted on the basis of the actual number of days in the year
divided by a 360-day year as of the close of business on such Prime Rate
Interest Determination Date as furnished in The City of New York by the major
money center banks, if any, that have provided such quotations and by a
reasonable number of substitute banks or
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trust companies to obtain four such prime rate quotations, provided such
substitute banks or trust companies are organized and doing business under the
laws of the United States, or any State thereof, each having total equity
capital of at least $500,000,000 and being subject to supervision or
examination by Federal or State authority, selected by the Calculation Agent to
provide such rate or rates; provided, however, that if the banks or trust
companies so selected by the Calculation Agent are not quoting as mentioned in
this sentence, the Prime Rate determined as of such Prime Rate Interest
Determination Date will be the Prime Rate in effect on such Prime Rate Interest
Determination Date.
"Reuters Screen USPRIME1 Page" means the display designated as page "USPRIME1"
on the Reuter Monitor Money Rates Service (or any successor service) or such
other page as may replace the USPRIME1 Page on the Reuter Monitor Money Rates
Service (or any successor service) for the purpose of displaying prime rates or
base lending rates of major United States banks.
Treasury Rate. Unless otherwise specified in the applicable Pricing Supplement,
"Treasury Rate" means, with respect to any Interest Determination Date relating
to a Floating Rate Note for which the interest rate is determined by reference
to the Treasury Rate (a "Treasury Rate Interest Determination Date"), the rate
from the auction held on such Treasury Rate Interest Determination Date (the
"Auction") of direct obligations of the United States ("Treasury Bills") having
the Index Maturity specified in the applicable Pricing Supplement, as such rate
is published in H.15(519) under the heading "Treasury bills-auction average
(investment)" or, if not published by 3:00 P.M., New York City time, on the
related Calculation Date, the auction average rate of such Treasury Bills
(expressed as a bond equivalent on the basis of a year of 365 or 366 days, as
applicable, and applied on a daily basis) as otherwise announced by the United
States Department of the Treasury. In the event that the results of the Auction
of Treasury Bills having the Index Maturity specified in the applicable Pricing
Supplement are not reported as provided by 3:00 P.M., New York City time, on
the related Calculation Date, or if no such Auction is held, then the Treasury
Rate will be calculated by the Calculation Agent and will be a yield to
maturity (expressed as a bond equivalent on the basis of a year of 365 or 366
days, as applicable, and applied on a daily basis) of the arithmetic mean of
the secondary market bid rates, as of approximately 3:30 P.M., New York City
time, on such Treasury Rate Interest Determination Date, of three leading
primary United States government securities dealers (which may include any of
the Agents or their affiliates) selected by the Calculation Agent, for the
issue of Treasury Bills with a remaining maturity closest to the Index Maturity
specified in the applicable Pricing Supplement; provided, however, that if the
dealers so selected by the Calculation Agent are not quoting as mentioned in
this sentence, the Treasury Rate determined as of such Treasury Rate Interest
Determination Date will be the Treasury Rate in effect on such Treasury Rate
Interest Determination Date.
AMORTIZING NOTES
The Trust may from time to time offer amortizing notes ("Amortizing Notes").
Unless otherwise specified in the applicable Pricing Supplement, interest on
each Amortizing Note will be computed on the basis of a 360-day year of twelve
30-day months. Payments with respect to Amortizing Notes will be applied first
to interest due and payable thereon and then to the reduction of the unpaid
principal amount thereof. Further information concerning additional terms and
provisions of Amortizing Notes will be specified in the applicable Pricing
Supplement, including a table setting forth repayment information for such
Amortizing Notes.
ORIGINAL ISSUE DISCOUNT NOTES
The Trust may offer Notes ("Discount Notes") from time to time that have an
Issue Price (as specified in the applicable Pricing Supplement) that is less
than 100% of the principal amount thereof (i.e., par). Discount Notes may not
bear any interest currently or may bear interest at a rate that is below market
rates at the time of issuance. The difference between the Issue Price of a
Discount Note and par is referred to herein as the "Discount." In the event of
redemption, repayment or acceleration of maturity of a Discount Note, the
amount payable to the Holder of such Discount Note will be equal to the sum of:
(i) the Issue Price (increased by any accruals of Discount) and, in the event
of any redemption of such Discount Note (if applicable), multiplied by the
Initial Redemption Percentage specified in the applicable Pricing Supplement
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(as adjusted by the Annual Redemption Percentage Reduction, if applicable); and
(ii) any unpaid interest on such Discount Note accrued from the date of issue
to the date of such redemption, repayment or acceleration of maturity.
Unless otherwise specified in the applicable Pricing Supplement, for purposes
of determining the amount of Discount that has accrued as of any date on which
a redemption, repayment or acceleration of maturity occurs for a Discount Note,
such Discount will be accrued using a constant yield method. The constant yield
will be calculated using a 30-day month, 360-day year convention, a compounding
period that, except for the Initial Period (as defined below), corresponds to
the shortest period between Interest Payment Dates for the applicable Discount
Note (with ratable accruals within a compounding period), a coupon rate equal
to the initial coupon rate applicable to such Discount Note and an assumption
that the maturity of such Discount Note will not be accelerated. If the period
from the date of issue to the initial Interest Payment Date for a Discount Note
(the "Initial Period") is shorter than the compounding period for such Discount
Note, a proportionate amount of the yield for an entire compounding period will
be accrued. If the Initial Period is longer than the compounding period, then
such period will be divided into a regular compounding period and a short
period with the short period being treated as provided in the preceding
sentence. The accrual of the applicable Discount may differ from the accrual of
original issue discount for purposes of the Internal Revenue Code of 1986, as
amended (the "Code"), certain Discount Notes may not be treated as having
original issue discount within the meaning of the Code, and Notes other than
Discount Notes may be treated as issued with original issue discount for
federal income tax purposes. See "Certain United States Federal Income Tax
Considerations" herein.
INDEXED NOTES
Notes may be issued with the amount of principal, premium and/or interest
payable in respect thereof to be determined with reference to the price or
prices of specified commodities or stocks, to the exchange rate of one or more
designated currencies (including a composite currency such as the ECU) relative
to an indexed currency or to such other prices(s) or exchange rate(s) ("Indexed
Notes"), as specified in the applicable Pricing Supplement. In certain cases,
Holders of Indexed Notes may receive a principal payment on the Maturity Date
that is greater than or less than the principal amount of such Indexed Notes
depending upon the relative value on the Maturity Date of the specified indexed
item. Information as to the method for determining the amount of principal,
premium, if any, and/or interest payable in respect of Indexed Notes, certain
historical information with respect to the specified indexed item and certain
tax considerations associated with an investment in Indexed Notes will be
specified in the applicable Pricing Supplement. See also "Risk Factors."
COVENANTS
Limitations on Incurrence of Debt. The Notes will provide that the Trust will
not, and will not permit any Subsidiary to, incur any Debt (as defined below)
if, immediately after giving effect to the incurrence of such Debt and the
application of the proceeds thereof, the aggregate principal amount of all
outstanding Debt of the Trust and its Subsidiaries on a consolidated basis
determined in accordance with generally accepted accounting principles is
greater than 65% of the sum of (without duplication) (i) the Trust's Total
Assets as of the end of the calendar quarter covered in the Trust's Annual
Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be, most
recently filed with the Securities and Exchange Commission (or, if such filing
is not permitted under the Securities Exchange Act of 1934, with the Trustee)
prior to the incurrence of such additional Debt and (ii) the purchase price of
any real estate assets or mortgages receivable acquired, and the amount of any
securities offering proceeds received (to the extent such proceeds were not
used to acquire real estate assets or mortgages receivable or used to reduce
Debt), by the Trust or any Subsidiary since the end of such calendar quarter,
including those proceeds obtained in connection with the incurrence of such
additional Debt.
In addition to the foregoing limitation on the incurrence of Debt, the Notes
will provide that the Trust will not, and will not permit any Subsidiary to,
incur any Debt secured by any mortgage, lien, charge, pledge, encumbrance or
security interest of any kind upon any of the property of the Trust or any
Subsidiary if, immediately after giving effect to the incurrence of such Debt
and the application of the proceeds thereof, the aggregate principal amount of
all outstanding Debt of the Trust and its Subsidiaries on
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a consolidated basis which is secured by any mortgage, lien, charge, pledge,
encumbrance or security interest on property of the Trust or any Subsidiary is
greater than 40% of the Trust's Total Assets; provided that for purposes of
this limitation, the amount of obligations under capital leases shown as a
liability on the Trust's consolidated balance sheet shall be deducted from Debt
and from Total Assets.
In addition to the foregoing limitations on the incurrence of Debt, the Notes
will provide that the Trust will not and will not permit any Subsidiary to,
incur any Senior Debt if the ratio of Consolidated Income Available for Senior
Debt Service (as defined below) to the Annual Senior Debt Service Charge (as
defined below) for the four consecutive fiscal quarters most recently ended
prior to the date on which such Senior Debt is to be incurred shall have been
less than 1.5 to 1, on an unaudited pro forma basis after giving effect thereto
and to the application of the proceeds therefrom, and calculated on the
assumption that (i) such Senior Debt and any other Senior Debt incurred by the
Trust and its Subsidiaries since the first day of such four-quarter period and
the application of the proceeds therefrom, including to refinance other Senior
Debt, had occurred at the beginning of such period; (ii) the repayment or
retirement of any other Senior Debt by the Trust and its Subsidiaries since the
first day of such four-quarter period had been incurred, repaid or retired at
the beginning of such period (except that, in making such computation, the
amount of Senior Debt under any revolving credit facility shall be computed
based upon the average daily balance of such Senior Debt during such period);
(iii) in the case of Acquired Debt (as defined below) or Senior Debt incurred
in connection with any acquisition since the first day of such four-quarter
period, the related acquisition had occurred as of the first day of such period
with the appropriate adjustments with respect to such acquisition being
included in such unaudited pro forma calculation; and (iv) in the case of any
acquisition or disposition by the Trust or its Subsidiaries of any asset or
group of assets since the first day of such four-quarter period, whether by
merger, stock purchase or sale, or asset purchase or sale, such acquisition or
disposition or any related repayment of Senior Debt had occurred as of the
first day of such period with the appropriate adjustments with respect to such
acquisition or disposition being included in such unaudited pro forma
calculation.
Furthermore, the Notes also will provide that the Trust will not, and will
not permit any Subsidiary to, incur any Debt if the ratio of Consolidated
Income Available for Debt Service (as defined below) to the Annual Debt Service
Charge (as defined below) for the four consecutive fiscal quarters most
recently ended prior to the date on which such additional Debt is to be
incurred shall have been less than 1.3 to 1, on an unaudited pro forma basis
after giving effect thereto and to the application of the proceeds therefrom,
and calculated on the assumption that (i) such Debt and any other Debt incurred
by the Trust and its Subsidiaries since the first day of such four-quarter
period and the application of the proceeds therefrom, including to refinance
other Debt, had occurred at the beginning of such period; (ii) the repayment or
retirement of any other Debt by the Trust and its Subsidiaries since the first
day of such four-quarter period had been incurred, repaid or retired at the
beginning of such period (except that, in making such computation, the amount
of Debt under any revolving credit facility shall be computed based upon the
average daily balance of such Debt during such period); (iii) in the case of
Acquired Debt or Debt incurred in connection with any acquisition since the
first day of such four-quarter period, the related acquisition had occurred as
of the first day of such period with the appropriate adjustments with respect
to such acquisition being included in such unaudited pro forma calculation; and
(iv) in the case of any acquisition or disposition by the Trust or its
Subsidiaries of any asset or group of assets since the first day of such four-
quarter period, whether by merger, stock purchase or sale, or asset purchase or
sale, such acquisition or disposition or any related repayment of Debt had
occurred as of the first day of such period with the appropriate adjustments
with respect to such acquisition or disposition being included in such
unaudited pro forma calculation.
As used herein,
"Acquired Debt" means Debt (or Senior Debt, as the case may be) of a Person
(i) existing at the time such Person becomes a Subsidiary or (ii) assumed in
connection with the acquisition of assets from such Person, in each case, other
than Debt (or Senior Debt, as the case may be) incurred in connection with, or
in contemplation of, such Person becoming a Subsidiary or such acquisition.
Acquired Debt shall be deemed to be incurred on the date of the related
acquisition of assets from any Person or the date the acquired Person becomes a
Subsidiary.
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"Annual Debt Service Charge" as of any date means the maximum amount which is
payable in any period for interest on, and original issue discount of, Debt of
the Trust and its Subsidiaries and the amount of dividends which are payable in
respect of any Disqualified Stock (as defined below).
"Annual Senior Debt Service Charge" as of any date means the maximum amount
which is payable in any period for interest on, and original issue discount of,
Senior Debt of the Trust and its Subsidiaries.
"Capital Stock" means, with respect to any Person, any capital stock
(including preferred stock), shares, interests, participations or other
ownership interests (however designated) of such Person and any rights (other
than debt securities convertible into or exchangeable for corporate stock),
warrants or options to purchase any thereof.
"Consolidated Income Available for Debt Service" and "Consolidated Income
Available for Senior Debt Service" for any period means Funds from Operations
(as defined below) of the Trust and its Subsidiaries plus amounts which have
been deducted for interest on Debt of the Trust and its Subsidiaries.
"Debt" means any indebtedness of the Trust, or any Subsidiary, whether or not
contingent, in respect of (without duplication) (i) borrowed money or evidenced
by bonds, notes, debentures or similar instruments, (ii) indebtedness secured
by any mortgage, pledge, lien, charge, encumbrance or any security interest
existing on property owned by the Trust or any Subsidiary, (iii) the
reimbursement obligations, contingent or otherwise, in connection with any
letters of credit actually issued or amounts representing the balance deferred
and unpaid of the purchase price of any property or services, except any such
balance that constitutes an accrued expense or trade payable, or all
conditional sale obligations or obligations under any title retention
agreement, (iv) the principal amount of all obligations of the Trust or any
Subsidiary with respect to redemption, repayment or other repurchase of any
Disqualified Stock or (v) any lease of property by the Trust or any Subsidiary
as lessee which is reflected on the Trust's consolidated balance sheet as a
capitalized lease in accordance with generally accepted accounting principles
to the extent, in the case of items of indebtedness under (i) through (iii)
above, that any such items (other than letters of credit) would appear as a
liability on the Trust's consolidated balance sheet in accordance with
generally accepted accounting principles, and also includes, to the extent not
otherwise included, any obligation of the Trust or any Subsidiary to be liable
for, or to pay, as obligor, guarantor or otherwise (other than for purposes of
collection in the ordinary course of business or for the purposes of
guaranteeing the payment of all amounts due and owing pursuant to leases to
which the Trust is a party and has assigned its interest, provided that such
assignee of the Trust is not in default of any amounts due and owing under such
leases), Debt of another Person (other than the Trust or any Subsidiary) (it
being understood that Debt shall be deemed to be incurred by the Trust or any
Subsidiary whenever the Trust or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof).
"Disqualified Stock" means, with respect to any Person, any Capital Stock of
such Person which by the terms of such Capital Stock (or by the terms of any
security into which it is convertible or for which it is exchangeable or
exercisable), upon the happening of any event or otherwise (i) matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise,
(ii) is convertible into or exchangeable or exercisable for Debt or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the Stated Maturity of the
Notes.
"Funds from Operations" for any period means income before depreciation and
amortization and extraordinary items less gain on sale of real estate.
"Senior Debt" means Debt other than subordinated Debt and payments under
Disqualified Stock of the Trust.
"Total Assets" as of any date means the sum of (i) the Trust's Undepreciated
Real Estate Assets and (ii) all other assets of the Trust determined in
accordance with generally accepted accounting principles (but excluding
goodwill).
"Undepreciated Real Estate Assets" as of any date means the cost (original
cost plus capital improvements) of real estate assets of the Trust and its
Subsidiaries on such date, before depreciation and
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amortization determined on a consolidated basis in accordance with generally
accepted accounting principles.
See "Description of Debt Securities--Certain Covenants" in the Prospectus for
a description of additional covenants applicable to the Trust.
DEFEASANCE
The provisions of Article 14 of the Indenture relating to defeasance and
covenant defeasance, which are described in the accompanying Prospectus, will
apply to the Notes.
BOOK-ENTRY NOTES
The Trust has established a depositary arrangement with The Depository Trust
Company with respect to the Book-Entry Notes, the terms of which are summarized
below. Any additional or differing terms of the depositary arrangement with
respect to the Book-Entry Notes will be described in the applicable Pricing
Supplement.
Upon issuance, all Book-Entry Notes up to $200,000,000 aggregate principal
amount bearing interest at the same rate or pursuant to the same formula and
having the same date of issue, Specified Currency, Interest Payment Dates,
Stated Maturity Date, redemption provisions (if any), repayment provisions (if
any) and other terms will be represented by a single Global Security. Each
Global Security representing Book-Entry Notes will be deposited with, or on
behalf of, the Depositary and will be registered in the name of the Depositary
or a nominee of the Depositary. No Global Security may be transferred except as
a whole by a nominee of the Depositary to the Depositary or to another nominee
of the Depositary, or by the Depositary or such nominee to a successor of the
Depositary or a nominee of such successor.
So long as the Depositary or its nominee is the registered owner of a Global
Security, the Depositary or its nominee, as the case may be, will be the sole
Holder of the Book-Entry Notes represented thereby for all purposes under the
Indenture. Except as otherwise provided in this section, the Beneficial Owners
of the Global Security or Securities representing Book-Entry Notes will not be
entitled to receive physical delivery of Certificated Notes and will not be
considered the Holders thereof for any purpose under the Indenture, and no
Global Security representing Book-Entry Notes shall be exchangeable or
transferable. Accordingly, each Beneficial Owner must rely on the procedures of
the Depositary and, if such Beneficial Owner is not a Participant (as defined
below), on the procedures of the Participant through which such Beneficial
Owner owns its interest in order to exercise any rights of a Holder under such
Global Security or the Indenture. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of such securities in
certificated form. Such limits and such laws may impair the ability to transfer
beneficial interests in a Global Security representing Book-Entry Notes.
Unless otherwise specified in the applicable Pricing Supplement, each Global
Security representing Book-Entry Notes will be exchangeable for Certificated
Notes of like tenor and terms and of differing authorized denominations
aggregating a like principal amount, only if (i) the Depositary notifies the
Trust that it is unwilling or unable to continue as Depositary for the Global
Securities or the Depositary ceases to be a clearing agency registered under
the Exchange Act (if so required by applicable law or regulation) and, in each
case, a successor Depositary is not appointed by the Trust within 90 days after
the Trust receives such notice or becomes aware of such unwillingness,
inability or ineligibility, (ii) the Trust in its sole discretion determines
that the Global Securities shall be exchangeable for Certificated Notes or
(iii) there shall have occurred and be continuing an Event of Default under the
Indenture with respect to the Notes and Beneficial Owners representing a
majority in aggregate principal amount of the Book-Entry Notes represented by
Global Securities advise the Depositary to cease acting as depositary. Upon any
such exchange, the Certificated Notes shall be registered in the names of the
Beneficial Owners of the Global Security or Securities representing Book-Entry
Notes, which names shall be provided by the Depositary's relevant Participants
(as identified by the Depositary) to the Securities Registrar.
The information below concerning the Depositary and the Depositary's system has
been furnished by the Depositary, and the Trust takes no responsibility for the
accuracy thereof.
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The Depositary will act as securities depository for the Book-Entry Notes. The
Book-Entry Notes will be issued as fully registered securities registered in
the name of Cede & Co. (the Depositary's partnership nominee). One fully
registered Global Security will be issued for each issue of Book-Entry Notes,
each in the aggregate principal amount of such issue, and will be deposited
with the Depositary. If, however, the aggregate principal amount of any issue
exceeds $200,000,000, one Global Security will be issued with respect to each
$200,000,000 of principal amount and an additional Global Security will be
issued with respect to any remaining principal amount of such issue.
The Depositary is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the Federal Reserve System, a "clearing corporation"
within the meaning of the New York Uniform Commercial Code, and a "clearing
agency" registered pursuant to the provisions of Section 17A of the Exchange
Act. The Depositary holds securities that its participants ("Participants")
deposit with the Depositary. The Depositary also facilitates the settlement
among Participants of securities transactions, such as transfers and pledges,
in deposited securities through electronic computerized book-entry changes in
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants of the Depositary ("Direct
Participants") include securities brokers and dealers (including the Agents),
banks, trust companies, clearing corporations and certain other organizations.
The Depositary is owned by a number of its Direct Participants and by the New
York Stock Exchange, Inc., the American Stock Exchange, Inc. and the National
Association of Securities Dealers, Inc. Access to the Depositary's system is
also available to others such as securities brokers and dealers, banks and
trust companies that clear through or maintain a custodial relationship with a
Direct Participant, either directly or indirectly ("Indirect Participants").
The rules applicable to the Depositary and its Participants are on file with
the Securities and Exchange Commission.
Purchases of Book-Entry Notes under the Depositary's system must be made by or
through Direct Participants, which will receive a credit for such Book-Entry
Notes on the Depositary's records. The ownership interest of each actual
purchaser of each Book-Entry Note represented by a Global Security ("Beneficial
Owner") is in turn to be recorded on the Direct Participants' and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from the Depositary of their purchase, but Beneficial Owners are expected to
receive written confirmations providing details of the transaction, as well as
periodic statements of their holdings, from the Direct Participants or Indirect
Participants through which such Beneficial Owner entered into the transaction.
Transfers of ownership interests in a Global Security representing Book-Entry
Notes are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners of a Global Security
representing Book-Entry Notes will not receive Certificated Notes representing
their ownership interests therein, except in the event that use of the book-
entry system for such Book-Entry Notes is discontinued.
To facilitate subsequent transfers, all Global Securities representing Book-
Entry Notes which are deposited with, or on behalf of, the Depositary are
registered in the name of the Depositary's partnership nominee, Cede & Co. The
deposit of Global Securities with, or on behalf of, the Depositary and their
registration in the name of Cede & Co. effect no change in beneficial
ownership. The Depositary has no knowledge of the actual Beneficial Owners of
the Global Securities representing the Book-Entry Notes; the Depositary's
records reflect only the identity of the Direct Participants to whose accounts
such Book-Entry Notes are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by the Depositary to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time.
Neither the Depositary nor Cede & Co. will consent or vote with respect to the
Global Securities representing the Book-Entry Notes. Under its usual
procedures, the Depositary mails an Omnibus Proxy to the Trust as soon as
possible after the applicable record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct Participants to whose
accounts the Book-Entry Notes are credited on the applicable record date
(identified in a listing attached to the Omnibus Proxy).
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Principal, premium, if any, and/or interest payments on Global Securities
representing the Book-Entry Notes will be made to the Depositary. The
Depositary's practice is to credit Direct Participants' accounts on the
applicable payment date in accordance with their respective holdings shown on
the Depositary's records unless the Depositary has reason to believe that it
will not receive payment on such date. Payments by Participants to Beneficial
Owners will be governed by standing instructions and customary practices, as is
the case with securities held for the accounts of customers in bearer form or
registered in "street name," and will be the responsibility of such Participant
and not of the Depositary, the Trustee or the Trust, subject to any statutory
or regulatory requirements as may be in effect from time to time. Payment of
principal, premium, if any, and/or interest to the Depositary is the
responsibility of the Trust or the Paying Agent, disbursement of such payments
to Direct Participants shall be the responsibility of the Depositary, and
disbursement of such payments to the Beneficial Owners shall be the
responsibility of Direct Participants and Indirect Participants.
If applicable, redemption notices shall be sent to Cede & Co. If less than all
of the Book-Entry Notes within an issue are being redeemed, the Depositary's
practice is to determine by lot the amount of the interest of each Direct
Participant in such issue to be redeemed.
A Beneficial Owner shall give notice of any option to elect to have its Book-
Entry Notes repaid by the Trust, through its Participant, to the Securities
Registrar, and shall effect delivery of such Book-Entry Notes by causing the
Direct Participant to transfer the Participant's interest in the Global
Security or Securities representing such Book-Entry Notes, on the Depositary's
records, to the Securities Registrar. The requirement for physical delivery of
Book-Entry Notes in connection with a demand for repayment will be deemed
satisfied when the ownership rights in the Global Security or Securities
representing such Book-Entry Notes are transferred by Direct Participants on
the Depositary's records.
The Depositary may discontinue providing its services as securities depository
with respect to the Book-Entry Notes at any time by giving reasonable notice to
the Trust or the Trustee. Under such circumstances, in the event that a
successor securities depository is not obtained, Certificated Notes are
required to be printed and delivered.
The Trust may decide to discontinue use of the system of book-entry transfers
through the Depositary (or a successor securities depository). In that event,
Certificated Notes will be printed and delivered.
SPECIAL PROVISIONS RELATING TO FOREIGN CURRENCY NOTES
GENERAL
Unless otherwise specified in the applicable Pricing Supplement, Foreign
Currency Notes will not be sold in, or to residents of, the country issuing the
applicable currency. The information set forth in this Prospectus Supplement is
directed to prospective purchasers who are United States residents and, with
respect to Foreign Currency Notes, is by necessity incomplete. The Trust
disclaims any responsibility to advise prospective purchasers who are residents
of countries other than the United States with respect to any matters that may
affect the purchase, holding or receipt of payments of principal of, and
premium, if any, and interest on, the Foreign Currency Notes. Such persons
should consult their own financial and legal advisors with regard to such
matters. See "Risk Factors -- Exchange Rates and Exchange Controls."
PAYMENT OF PRINCIPAL, PREMIUM, IF ANY, AND INTEREST
Unless otherwise specified in the applicable Pricing Supplement, the Trust is
obligated to make payments of principal of, and premium, if any, and interest
on, Foreign Currency Notes in the applicable Specified Currency (or, if such
Specified Currency is not at the time of such payment legal tender for the
payment of public and private debts, in such other coin or currency of the
country which issued such Specified Currency as at the time of such payment is
legal tender for the payment of such debts). Any such amounts payable by the
Trust in a foreign currency or composite currency will, unless otherwise
specified in the applicable Pricing Supplement, be converted by the exchange
rate agent named in the applicable Pricing Supplement
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(the "Exchange Rate Agent") into United States dollars for payment to Holders.
However, the Holder of a Foreign Currency Note may elect to receive such
amounts in the applicable foreign currency or composite currency as hereinafter
described.
Any United States dollar amount to be received by a Holder of a Foreign
Currency Note will be based on the highest bid quotation in The City of New
York received by the Exchange Rate Agent at approximately 11:00 A.M., New York
City time, on the second Business Day preceding the applicable payment date
from three recognized foreign exchange dealers (one of whom may be the Exchange
Rate Agent) selected by the Exchange Rate Agent and approved by the Trust for
the purchase by the quoting dealer of the Specified Currency for United States
dollars for settlement on such payment date in the aggregate amount of such
Specified Currency payable to all Holders of Foreign Currency Notes scheduled
to receive United States dollar payments and at which the applicable dealer
commits to execute a contract. All currency exchange costs will be borne by the
Holders of such Foreign Currency Notes by deductions from such payments. If
three such bid quotations are not available, payments will be made in the
Specified Currency.
A Holder of a Foreign Currency Note may elect to receive all or a specified
portion of any payment of the principal of, and premium, if any, and/or
interest on, such Foreign Currency Note in the Specified Currency by submitting
a written request for such payment to the Paying Agent at its corporate trust
office in The City of New York on or prior to the applicable Record Date or at
least fifteen calendar days prior to the Maturity Date, as the case may be.
Such written request may be mailed or hand delivered or sent by cable, telex or
other form of facsimile transmission. A Holder of a Foreign Currency Note may
elect to receive all or a specified portion of all future payments in the
Specified Currency in respect of such principal, premium, if any, and/or
interest and need not file a separate election for each payment. Such election
will remain in effect until revoked by written notice to the Securities
Registrar, but written notice of any such revocation must be received by the
Securities Registrar on or prior to the applicable Record Date or at least
fifteen calendar days prior to the Maturity Date, as the case may be. Holders
of Foreign Currency Notes whose Notes are to be held in the name of a broker or
nominee should contact such broker or nominee to determine whether and how an
election to receive payments in the Specified Currency may be made.
Payments of the principal of, and premium, if any, and/or interest on, Foreign
Currency Notes which are to be made in United States dollars will be made in
the manner specified herein with respect to Notes denominated in United States
dollars. See "Description of Notes--General." Payments of interest on Foreign
Currency Notes which are to be made in the Specified Currency on an Interest
Payment Date other than the Maturity Date will be made by check mailed to the
address of the Holders of such Foreign Currency Notes as they appear in the
Security Register, subject to the right to receive such interest payments by
wire transfer of immediately available funds under certain circumstances
described under "Description of Notes--General." Payments of principal of, and
premium, if any, and/or interest on, Foreign Currency Notes which are to be
made in the Specified Currency on the Maturity Date will be made by wire
transfer of immediately available funds to an account with a bank designated at
least fifteen calendar days prior to the Maturity Date by each Holder thereof,
provided that such bank has appropriate facilities therefor and that the
applicable Foreign Currency Note is presented and surrendered at the principal
corporate trust office of the Paying Agent in time for the Paying Agent to make
such payments in such funds in accordance with its normal procedures.
Unless otherwise specified in the applicable Pricing Supplement, a Beneficial
Owner of a Global Security or Securities representing Book-Entry Notes payable
in a Specified Currency other than United States dollars which elects to
receive payments of principal, premium, if any, and/or interest in such
Specified Currency must notify the Participant through which it owns its
interest on or prior to the applicable Record Date or at least fifteen calendar
days prior to the Maturity Date, as the case may be, of such Beneficial Owner's
election. Such Participant must notify the Depositary of such election on or
prior to the third Business Day after such Record Date or at least twelve
calendar days prior to the Maturity Date, as the case may be, and the
Depositary will notify the Securities Registrar of such election on or prior to
the fifth Business Day after such Record Date or at least ten calendar days
prior to the Maturity Date, as the case may be. If complete instructions are
received by the Participant from the Beneficial Owner and forwarded by the
Participant to the Depositary, and by the Depositary to the Securities
Registrar, on or prior to such dates, then such Beneficial Owner will receive
payments in the applicable Specified Currency.
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PAYMENT CURRENCY
If the Specified Currency for a Foreign Currency Note is not available for the
required payment of principal, premium, if any, and/or interest due to the
imposition of exchange controls or other circumstances beyond the reasonable
control of the Trust, the Trust will be entitled to satisfy its obligations to
the Holder of such Foreign Currency Note by making such payment in United
States dollars on the basis of the Market Exchange Rate (as defined below) on
the second Business Day prior to such payment or, if such Market Exchange Rate
is not then available, on the basis of the most recently available Market
Exchange Rate or as otherwise specified in the applicable Pricing Supplement.
If payment in respect of a Foreign Currency Note is required to be made in any
composite currency (e.g., ECU), and such composite currency is unavailable due
to the imposition of exchange controls or other circumstances beyond the
reasonable control of the Trust, the Trust will be entitled to satisfy its
obligations to the Holder of such Foreign Currency Note by making such payment
in United States dollars. The amount of each payment in United States dollars
shall be computed by the Exchange Rate Agent on the basis of the equivalent of
the composite currency in United States dollars. The component currencies of
the composite currency for this purpose (collectively, the "Component
Currencies" and each, a "Component Currency") shall be the currency amounts
that were components of the composite currency as of the last day on which the
composite currency was used. The equivalent of the composite currency in United
States dollars shall be calculated by aggregating the United States dollar
equivalents of the Component Currencies. The United States dollar equivalent of
each of the Component Currencies shall be determined by the Exchange Rate Agent
on the basis of the most recently available Market Exchange Rate for each such
Component Currency, or as otherwise specified in the applicable Pricing
Supplement.
If the official unit of any Component Currency is altered by way of combination
or subdivision, the number of units of the currency as a Component Currency
shall be divided or multiplied in the same proportion. If two or more Component
Currencies are consolidated into a single currency, the amounts of those
currencies as Component Currencies shall be replaced by an amount in such
single currency equal to the sum of the amounts of the consolidated Component
Currencies expressed in such single currency. If any Component Currency is
divided into two or more currencies, the amount of the original Component
Currency shall be replaced by the amounts of such two or more currencies, the
sum of which shall be equal to the amount of the original Component Currency.
The "Market Exchange Rate" for a Specified Currency other than United States
dollars means the noon dollar buying rate in The City of New York for cable
transfers for such Specified Currency as certified for customs purposes by (or
if not so certified, as otherwise determined by) the Federal Reserve Bank of
New York. Any payment made in United States dollars under such circumstances
where the required payment is in a Specified Currency other than United States
dollars will not constitute an Event of Default under the Indenture with
respect to the Notes.
All determinations referred to above made by the Exchange Rate Agent shall be
at its sole discretion and shall, in the absence of manifest error, be
conclusive for all purposes and binding on the Holders of the Foreign Currency
Notes.
GOVERNING LAW; JUDGMENTS
The Notes will be governed by and construed in accordance with the laws of the
State of New York. Under current New York law, where a cause of action is based
upon an obligation denominated in a non-United States currency, a state court
in the State of New York rendering a judgment on such an obligation would be
required to render such judgment in the non-United States currency, and such
judgment would be converted into United States dollars at the exchange rate
prevailing on the date of entry of the judgment. The holders of such notes
could be subject to exchange rate fluctuations occurring after such judgment is
rendered. It is not certain, however, that a non-New York court would follow
the same rules with respect to conversion.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States Federal income tax consequences
of the purchase, ownership and disposition of the Notes is based upon laws,
regulations, rulings and decisions now in effect,
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all of which are subject to change (including changes in effective dates) or
possible differing interpretations. It deals only with Notes held as capital
assets and does not purport to deal with persons in special tax situations,
such as financial institutions, insurance companies, tax-exempt organizations,
regulated investment companies, dealers in securities or currencies, persons
holding Notes as a hedge against currency risks or as a position in a
"straddle" for tax purposes, or persons whose functional currency is not the
United States dollar. It also does not deal with Holders other than original
purchasers (except where otherwise specifically noted). BECAUSE THE EXACT
PRICING AND OTHER TERMS OF THE NOTES WILL VARY, NO ASSURANCE CAN BE GIVEN THAT
THE CONSIDERATIONS DESCRIBED BELOW WILL APPLY TO A PARTICULAR ISSUANCE OF
NOTES. CERTAIN MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES RELATING
TO THE OWNERSHIP OF PARTICULAR NOTES (WHERE APPLICABLE) WILL BE SUMMARIZED IN
THE PRICING SUPPLEMENT RELATING TO SUCH NOTES. PERSONS CONSIDERING THE PURCHASE
OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF
UNITED STATES FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATION AS WELL AS
ANY CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE NOTES
ARISING UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN TAXING JURISDICTION.
As used herein, the term "U.S. Holder" means a Beneficial Owner of a Note that
is for United States Federal income tax purposes (i) a citizen or resident of
the United States, (ii) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof, (iii) an estate or trust the income of which is subject to
United States Federal income taxation regardless of its source or (iv) any
other person whose income or gain in respect of a Note is effectively connected
with the conduct of a United States trade or business. As used herein, the term
"non-U.S. Holder" means a Beneficial Owner of a Note that is not a U.S. Holder.
U.S. HOLDERS
Payments of Interest. Payments of interest on a Note generally will be taxable
to a U.S. Holder as ordinary interest income at the time such payments are
accrued or are received (in accordance with the U.S. Holder's regular method of
tax accounting).
Original Issue Discount. The following summary is a general discussion of the
United States Federal income tax consequences to U.S. Holders of the purchase,
ownership and disposition of Notes issued with original issue discount. The
following summary is based upon final Treasury regulations (the "OID
Regulations") released by the Internal Revenue Service ("IRS") on January 27,
1994, as amended, under the original issue discount provisions of the Code.
For United States Federal income tax purposes, original issue discount is the
excess of the stated redemption price at maturity of a Note over its issue
price, if such excess equals or exceeds a de minimis amount (generally 1/4 of
1% of the Note's stated redemption price at maturity multiplied by the number
of complete years to its maturity from its issue date or, in the case of a Note
providing for the payment of any amount other than qualified stated interest
(as defined below) prior to maturity, multiplied by the weighted average
maturity of such Note). The issue price of each Note in an issue of Notes
equals the first price at which a substantial amount of such Notes has been
sold (ignoring sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents, or
wholesalers). The stated redemption price at maturity of a Note is the sum of
all payments provided by the Note other than "qualified stated interest"
payments. The term "qualified stated interest" generally means stated interest
that is unconditionally payable in cash or property (other than debt
instruments of the issuer) at least annually at a single fixed rate. In
addition, under the OID Regulations, if a Note bears interest for one or more
accrual periods at a rate below the rate applicable for the remaining term of
such Note (e.g., Notes with teaser rates or interest holidays), and if the
greater of either the resulting foregone interest on such Note or any "true"
discount on such Note (i.e., the excess of the Note's stated principal amount
over its issue price) equals or exceeds a specified de minimis amount, then a
portion, or in some circumstances all, of the stated interest on the Note would
be treated as original issue discount rather than qualified stated interest.
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Payments of qualified stated interest on a Note are taxable to a U.S. Holder as
ordinary interest income at the time such payments are accrued or are received
(in accordance with the U.S. Holder's regular method of tax accounting). A U.S.
Holder of a Discount Note must include original issue discount in income as
ordinary interest for United States Federal income tax purposes as it accrues
under a constant yield method in advance of receipt of the cash payments
attributable to such income, regardless of such U.S. Holder's regular method of
tax accounting. In general, the amount of original issue discount included in
income by the initial U.S. Holder of a Discount Note is the sum of the daily
portions of original issue discount with respect to such Discount Note for each
day during the taxable year (or portion of the taxable year) on which such U.S.
Holder held such Discount Note. The "daily portion" of original issue discount
on any Discount Note is determined by allocating to each day in any accrual
period a ratable portion of the original issue discount allocable to that
accrual period. An "accrual period" may be of any length and the accrual
periods may vary in length over the term of the Discount Note, provided that
each accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the final day of an accrual period or on
the first day of an accrual period. The amount of original issue discount
allocable to each accrual period is generally equal to the difference between
(i) the product of the Discount Note's adjusted issue price at the beginning of
such accrual period and its yield to maturity (determined on the basis of
compounding at the close of each accrual period and appropriately adjusted to
take into account the length of the particular accrual period) and (ii) the
amount of any qualified stated interest payments allocable to such accrual
period. The "adjusted issue price" of a Discount Note at the beginning of any
accrual period is the sum of the issue price of the Discount Note plus the
amount of original issue discount allocable to all prior accrual periods minus
the amount of any prior payments on the Discount Note that were not qualified
stated interest payments. Under these rules, U.S. Holders generally will have
to include in income increasingly greater amounts of original issue discount in
successive accrual periods. These same rules apply to any Note that is not
otherwise a Discount Note, but nonetheless has been issued with original issue
discount.
A U.S. Holder who purchases a Discount Note for an amount that is greater than
its adjusted issue price as of the purchase date and less than or equal to the
sum of all amounts payable on the Discount Note after the purchase date other
than payments of qualified stated interest, will be considered to have
purchased the Discount Note at an "acquisition premium." Under the acquisition
premium rules, the amount of original issue discount which such U.S. Holder
must include in its gross income with respect to such Discount Note for any
taxable year (or portion thereof in which the U.S. Holder holds the Discount
Note) will be reduced (but not below zero) by the portion of the acquisition
premium properly allocable to the period. These same rules apply to any Note
that is not otherwise a Discount Note, but nonetheless has been issued with
original issue discount.
Under the OID Regulations, Floating Rate Notes and Indexed Notes ("Variable
Notes") are subject to special rules whereby a Variable Note will qualify as a
"variable rate debt instrument" if (a) its issue price does not exceed the
total noncontingent principal payments due under the Variable Note by more than
a specified de minimis amount and (b) it provides for stated interest, paid or
compounded at least annually, at current values of (i) one or more qualified
floating rates, (ii) a single fixed rate and one or more qualified floating
rates, (iii) a single objective rate, or (iv) a single fixed rate and a single
objective rate that is a qualified inverse floating rate.
A "qualified floating rate" is any variable rate where variations in the value
of such rate can reasonably be expected to measure contemporaneous variations
in the cost of newly borrowed funds in the currency in which the Variable Note
is denominated. Although a multiple of a qualified floating rate will generally
not itself constitute a qualified floating rate, a variable rate equal to the
product of a qualified floating rate and a fixed multiple that is greater than
.65 but not more than 1.35 will constitute a qualified floating rate. A
variable rate equal to the product of a qualified floating rate and a fixed
multiple that is greater than .65 but not more than 1.35, increased or
decreased by a fixed rate, will also constitute a qualified floating rate. In
addition, under the OID Regulations, two or more qualified floating rates that
can reasonably be expected to have approximately the same values throughout the
term of the Variable Note (e.g., two or more qualified floating rates with
values within 25 basis points of each other as determined on the Variable
Note's issue date) will be treated as a single qualified floating rate.
Notwithstanding the foregoing, a variable rate that would otherwise constitute
a qualified floating rate but which is subject to one or more restrictions such
as a
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maximum numerical limitation (i.e., a cap) or a minimum numerical limitation
(i.e., a floor) may, under certain circumstances, fail to be treated as a
qualified floating rate under the OID Regulations unless such cap or floor is
fixed throughout the term of the Note. An "objective rate" is a rate that is
not itself a qualified floating rate but which is determined using a single
fixed formula and which is based upon objective financial or economic
information (e.g., a rate that is based on one or more qualified floating rates
or on the yield of actively traded personal property, other than stock or debt
of the issuer or a related party). The OID Regulations also provide that other
variable interest rates may be treated as objective rates if so designated by
the IRS in the future. Despite the foregoing, a variable rate of interest on a
Variable Note will not constitute an objective rate if it is reasonably
expected that the average value of such rate during the first half of the
Variable Note's term will be either significantly less than or significantly
greater than the average value of the rate during the final half of the
Variable Note's term. A "qualified inverse floating rate" is any objective rate
where such rate is equal to a fixed rate minus a qualified floating rate, as
long as variations in the rate can reasonably be expected to inversely reflect
contemporaneous variations in the qualified floating rate. The OID Regulations
also provide that if a Variable Note provides for stated interest at a fixed
rate for an initial period of less than one year followed by a variable rate
that is either a qualified floating rate or an objective rate and if the
variable rate on the Variable Note's issue date is intended to approximate the
fixed rate (e.g., the value of the variable rate on the issue date does not
differ from the value of the fixed rate by more than 25 basis points), then the
fixed rate and the variable rate together will constitute either a single
qualified floating rate or objective rate, as the case may be.
If a Variable Note that provides for stated interest at either a single
qualified floating rate or a single objective rate throughout the term thereof
qualifies as a "variable rate debt instrument" under the OID Regulations, then
any stated interest on such Note which is unconditionally payable in cash or
property (other than debt instruments of the issuer) at least annually will
constitute qualified stated interest and will be taxed accordingly. Thus, a
Variable Note that provides for stated interest at either a single qualified
floating rate or a single objective rate throughout the term thereof and that
qualifies as a "variable rate debt instrument" under the OID Regulations will
generally not be treated as having been issued with original issue discount
unless the Variable Note is issued at a "true" discount (i.e., at a price below
the Note's stated principal amount) in excess of a specified de minimus amount.
Original issue discount on such a Variable Note arising from "true" discount
and qualified stated interest are allocated to an accrual period using the
constant yield method described above by assuming that the variable rate is a
fixed rate equal to (i) in the case of a qualified floating rate or qualified
inverse floating rate, the value as of the issue date, of the qualified
floating rate or qualified inverse floating rate, or (ii) in the case of an
objective rate (other than a qualified inverse floating rate), a fixed rate
that reflects the yield that is reasonably expected for the Variable Note. The
amount of qualified stated interest allocable to an accrual period is increased
(or decreased) if the interest actually paid during an accrual period exceeds
(or is less than) the interest assumed to be paid during the accrual period.
In general, any other Variable Note that qualifies as a "variable rate debt
instrument" will be converted into an "equivalent" fixed rate debt instrument
for purposes of determining the amount and accrual of original issue discount
and qualified stated interest on the Variable Note. The OID Regulations
generally require that such a Variable Note be converted into an "equivalent"
fixed rate debt instrument by substituting any qualified floating rate or
qualified inverse floating rate provided for under the terms of the Variable
Note with a fixed rate equal to the value of the qualified floating rate or
qualified inverse floating rate, as the case may be, as of the Variable Note's
issue date. Any objective rate (other than a qualified inverse floating rate)
provided for under the terms of the Variable Note is converted into a fixed
rate that reflects the yield that is reasonably expected for the Variable Note.
In the case of a Variable Note that qualifies as a "variable rate debt
instrument" and provides for stated interest at a fixed rate in addition to
either one or more qualified floating rates or a qualified inverse floating
rate, the fixed rate is initially converted into a qualified floating rate (or
a qualified inverse floating rate, if the Variable Note provides for a
qualified inverse floating rate). Under such circumstances, the qualified
floating rate or qualified inverse floating rate that replaces the fixed rate
must be such that the fair market value of the Variable Notes as of the
Variable Note's issue date is approximately the same as the fair market value
of an otherwise identical debt instrument that provides for either the
qualified floating rate or qualified inverse floating rate rather than the
fixed rate. Subsequent to converting the fixed rate into either a qualified
floating rate or a qualified inverse floating rate, the Variable Note is then
converted into an "equivalent" fixed rate debt instrument in the manner
described above.
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Once the Variable Note is converted into an "equivalent" fixed rate debt
instrument pursuant to the foregoing rules, the amount of original issue
discount and qualified stated interest are determined for the "equivalent"
fixed rate debt instrument by applying the general original issue discount
rules to the "equivalent" fixed rate debt instrument and a U.S. Holder of the
Variable Note will account for such original issue discount and qualified
stated interest as if the U.S. Holder held the "equivalent" fixed rate debt
instrument. Each accrual period appropriate adjustments will be made to the
amount of qualified stated interest or original issue discount assumed to have
been accrued or paid with respect to the "equivalent" fixed rate debt
instrument in the event that such amounts differ from the actual amount of
interest accrued or paid on the Variable Note during the accrual period.
If a Variable Note does not qualify as a "variable rate debt instrument" under
the OID Regulations, then the Variable Note would be treated as a contingent
payment debt obligation. On June 11, 1996 the IRS released final Treasury
regulations dealing with the treatment of contingent payment obligations (the
"Contingent Debt Regulations").
Generally, if a Variable Note is treated as a contingent payment obligation,
interest payments thereon will be treated as "contingent interest" payments.
Any contingent interest payments on a Variable Note would be includible in
income in a taxable year whether or not the amount of any payment is fixed or
determinable in that year. The amount of interest included in income in any
particular accrual period would be determined by estimating a projected payment
schedule (as determined under the Contingent Debt Regulations) for the Variable
Note based on a comparable yield based on a hypothetical fixed rate instrument
having similar terms and conditions as the Variable Note and applying daily
accrual rules similar to those for accruing original issue discount on Notes
issued with original issue discount (as discussed above). If the actual amount
of contingent interest payments is not equal to the projected amount, an
adjustment to income at the time of the payment must be made to reflect the
difference.
Certain of the Notes (i) may be redeemable at the option of the Trust prior to
their stated maturity (a "call option") and/or (ii) may be repayable at the
option of the Holder prior to their stated maturity (a "put option"). Notes
containing such features may be subject to rules that differ from the general
rules discussed above. Investors intending to purchase Notes with such features
should consult their own tax advisors, since the original issue discount
consequences will depend, in part, on the particular terms and features of the
purchased Notes.
U.S. Holders may generally, upon election, include in income all interest
(including stated interest, acquisition discount, original issue discount, de
minimis original issue discount, market discount, de minimis market discount,
and unstated interest, as adjusted by any amortizable bond premium or
acquisition premium) that accrues on a debt instrument by using the constant
yield method applicable to original issue discount, subject to certain
limitations and exceptions.
Short-Term Notes. Notes that have a fixed maturity of one year or less ("Short-
Term Notes") will be treated as having been issued with original issue
discount. In general, a cash method U.S. Holder is not required to accrue such
original issue discount unless the U.S. Holder elects to do so. If such an
election is not made, any gain recognized by the U.S. Holder on the sale,
exchange or maturity of the Short-Term Note will be ordinary income to the
extent of the original issue discount accrued on a straight-line basis, or upon
election under the constant yield method (based on daily compounding), through
the date of sale or maturity, and a portion of the deductions otherwise
allowable to the U.S. Holder for interest on borrowings allocable to the Short-
Term Note will be deferred until a corresponding amount of income is realized.
U.S. Holders who report income for United States Federal income tax purposes
under the accrual method, and certain other Holders including banks and dealers
in securities, are required to accrue original issue discount on a Short-Term
Note on a straight-line basis unless an election is made to accrue the original
issue discount under a constant yield method (based on daily compounding).
Market Discount. If a U.S. Holder purchases a Note, other than a Note issued
with original issue discount, for an amount that is less than its issue price
(or, in the case of a subsequent purchaser, its stated redemption price at
maturity) or, in the case of a Note issued with original issue discount, for an
amount that is less than its adjusted issue price as of the purchase date, such
U.S. Holder will be treated as having
S-28
purchased such Note at a "market discount," unless such market discount is less
than a specified de minimis amount.
Under the market discount rules, a U.S. Holder will be required to treat any
partial principal payment (or, in the case of a Note issued with original issue
discount, any payment that is part of its "revised issue price") on, or any
gain realized on the sale, exchange, retirement or other disposition of, a Note
as ordinary income to the extent of the lesser of (i) the amount of such
payment or realized gain or (ii) the market discount which has not previously
been included in income and is treated as having accrued on such Note at the
time of such payment or disposition. Market discount will be considered to
accrue ratably during the period from the date of acquisition to the Maturity
Date of the Note, unless the U.S. Holder elects to accrue market discount on
the basis of constant interest rate.
A U.S. Holder may be required to defer the deduction of all or a portion of the
interest paid or accrued on any indebtedness incurred or maintained to purchase
or carry a Note with market discount until the maturity of the Note or certain
earlier dispositions, because a current deduction is only allowed to the extent
the interest expense exceeds an allocable portion of market discount. A U.S.
Holder may elect to include market discount in income currently as it accrues
(on either a ratable or a constant interest rate basis), in which case the
rules described above regarding the treatment as ordinary income of gain upon
the disposition of the Note and upon the receipt of certain cash payments and
regarding the deferral of interest deductions will not apply. Generally, such
currently included market discount is treated as ordinary interest for United
States Federal income tax purposes. Such an election will apply to all debt
instruments acquired by the U.S. Holder on or after the first day of the
taxable year to which such election applies and may be revoked only with the
consent of the IRS.
Premium. If a U.S. Holder purchases a Note for an amount that is greater than
the sum of all amounts payable on the Note after the purchase date other than
payments of qualified stated interest, such U.S. Holder will be considered to
have purchased the Note with "amortizable bond premium" equal in amount to such
excess. A U.S. Holder may elect to amortize such premium using a constant yield
method over the remaining term of the Note and may offset interest otherwise
required to be included in respect of the Note during any taxable year by the
amortized amount of such excess for the taxable year. However, if the Note may
be optionally redeemed after the U.S. Holder acquires it at a price in excess
of its stated redemption price at maturity, special rules would apply which
could result in a deferral of the amortization of some bond premium until later
in the term of the Note. Any election to amortize bond premium applies to all
taxable debt obligations then owned and thereafter acquired by the U.S. Holder
and may be revoked only with the consent of the IRS.
Disposition of a Note. Except as discussed above, upon the sale, exchange or
retirement of a Note, a U.S. Holder generally will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement (other than amounts representing accrued and unpaid interest) and
such U.S. Holder's adjusted tax basis in the Note. A U.S. Holder's adjusted tax
basis in a Note generally will equal such U.S. Holder's initial investment in
the Note increased by any original issue discount included in income (and
accrued market discount, if any, if the U.S. Holder has included such market
discount in income) and decreased by the amount of any payments, other than
qualified stated interest payments, received and amortizable bond premium taken
with respect to such Note. Such gain or loss generally will be long-term
capital gain or loss if the Note were held for more than one year.
NOTES DENOMINATED, OR IN RESPECT OF WHICH INTEREST IS PAYABLE, IN A FOREIGN
CURRENCY
As used herein, "Foreign Currency" means a currency or currency unit other than
U.S. dollars.
Cash Method. A U.S. Holder who uses the cash method of accounting for United
States Federal income tax purposes and who receives a payment of interest on a
Note (other than original discount or market discount) will be required to
include in income the U.S. dollar value of the Foreign Currency payment
(determined on the date such payment is received) regardless of whether the
payment is in fact converted to U.S. dollars at that time, and such U.S. dollar
value will be the U.S. Holder's tax basis in such Foreign Currency.
S-29
Accrual Method. A U.S. Holder who uses the accrual method of accounting for
United States Federal income tax purposes, or who otherwise is required to
accrue interest prior to receipt, will be required to include in income the
U.S. dollar value of the amount of interest income (including original issue
discount or market discount and reduced by amortizable bond premium to the
extent applicable) that has accrued and is otherwise required to be taken into
account with respect to a Note during an accrual period. The U.S. dollar value
of such accrued income will be determined by translating such income at the
average rate of exchange for the accrual period or, with respect to an accrual
period that spans two taxable years, at the average rate for the partial period
within the taxable year. A U.S. Holder may elect, however, to translate such
accrued interest income using the rate of exchange on the last day of the
accrual period or, with respect to an accrual period that spans two taxable
years, using the rate of exchange on the last day of the taxable year. If the
last day of an accrual period is within five business days of the date of
receipt of the accrued interest, a U.S. Holder may translate such interest
using the rate of exchange on the date of receipt. The above election will
apply to other debt obligations held by the U.S. Holder and may not be changed
without the consent of the IRS. A U.S. Holder should consult a tax advisor
before making the above election. A U.S. Holder will recognize exchange gain or
loss (which will be treated as ordinary income or loss) with respect to accrued
interest income on the date such income is received. The amount of ordinary
income or loss recognized will equal the difference, if any, between the U.S.
dollar value of the Foreign Currency payment received (determined on the date
such payment is received) in respect of such accrual period and the U.S. dollar
value of interest income that has accrued during such accrual period (as
determined above).
Purchase, Sale and Retirement of Notes. A U.S. Holder who purchases a Note with
previously owned Foreign Currency will recognize ordinary income or loss in an
amount equal to the difference, if any, between such U.S. Holder's tax basis in
the Foreign Currency and the U.S. dollar fair market value of the Foreign
Currency used to purchase the Note, determined on the date of purchase.
Except as discussed above with respect to Short-Term Notes, upon the sale,
exchange or retirement of a Note, a U.S. Holder will recognize taxable gain or
loss equal to the difference between the amount realized on the sale, exchange
or retirement and such U.S. Holder's adjusted tax basis in the Note. Such gain
or loss generally will be capital gain or loss (except to the extent of any
accrued market discount not previously included in the U.S. Holder's income)
and will be long-term capital gain or loss if at the time of sale, exchange or
retirement the Note has been held by such U.S. Holder for more than one year.
To the extent the amount realized represents accrued but unpaid interest,
however, such amounts must be taken into account as interest income, with
exchange gain or loss computed as described in "Payments of Interest in a
Foreign Currency" above. If a U.S. Holder receives Foreign Currency on such a
sale, exchange or retirement, the amount realized will be based on the U.S.
dollar value of the Foreign Currency on the date the payment is received or the
Note is disposed of (or deemed disposed of in the case of a taxable exchange of
the Note for a new Note). In the case of a Note that is denominated in Foreign
Currency and is traded on an established securities market, a cash basis U.S.
Holder (or, upon election, an accrual basis U.S. Holder) will determine the
U.S. dollar value of the amount realized by translating the Foreign Currency
payment at the spot rate of exchange on the settlement date of the sale. A U.S.
Holder's adjusted tax basis in a Note will equal the cost of the Note to such
Holder, increased by the amounts of any market discount or original issue
discount previously included in income by the Holder with respect to such Note
and reduced by any amortized acquisition or other premium and any principal
payments received by the Holder. A U.S. Holder's tax basis in a Note, and the
amount of any subsequent adjustments to such Holder's tax basis, will be the
U.S. dollar value of the Foreign Currency amount paid for such Note, or of the
Foreign Currency amount of the adjustment, determined on the date of such
purchase or adjustment.
Gain or loss realized upon the sale, exchange or retirement of a Note that is
attributable to fluctuations in currency exchange rates will be ordinary income
or loss which will not be treated as interest income or expense. Gain or loss
attributable to fluctuations in exchange rates will equal the difference
between the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date such payment is received or the Note is disposed
of, and the U.S. dollar value of the Foreign Currency principal amount of the
Note, determined on the date the U.S. Holder acquired the Note. Such Foreign
Currency gain or loss will be recognized only to the extent of the total gain
or loss realized by the U.S. Holder on the sale, exchange or retirement of the
Note.
S-30
Original Issue Discount. In the case of a Note issued with original issue
discount, (i) original issue discount is determined in units of the Foreign
Currency, (ii) accrued original issue discount is translated into U.S. dollars
as described in "Payments of Interest in a Foreign Currency--Accrual Method"
above and (iii) the amount of Foreign Currency gain or loss on the accrued
original issue discount is determined by comparing the amount of income
received attributable to the discount (either upon payment, maturity or an
earlier disposition), as translated into U.S. dollars at the rate of exchange
on the date of such receipt, with the amount of original issue discount
accrued, as translated above.
Premium and Market Discount. In the case of a Note with market discount, (i)
market discount is determined in units of the Foreign Currency, (ii) accrued
market discount taken into account upon the receipt of any partial principal
payment or upon the sale, exchange, retirement or other disposition of the Note
(other than accrued market discount required to be taken into account
currently) is translated into U.S. dollars at the exchange rate on such
disposition date (and no part of such accrued market discount is treated as
exchange gain or loss) and (iii) accrued market discount currently includible
in income by a U.S. Holder for any accrual period is translated into U.S.
dollars on the basis of the average exchange rate in effect during such accrual
period, and the exchange gain or loss is determined upon the receipt of any
partial principal payment or upon the sale, exchange, retirement or other
disposition of the Note in the manner described in "Payments of Interest in a
Foreign Currency--Accrual Method" above with respect to computation of exchange
gain or loss on accrued interest.
With respect to a Note issued with amortizable bond premium, such premium is
determined in the relevant Foreign Currency and reduces interest income in
units of the Foreign Currency. Although not entirely clear, a U.S. Holder
should recognize exchange gain or loss equal to the difference between the U.S.
dollar value of the bond premium amortized with respect to a period, determined
on the date the interest attributable to such period is received, and the U.S.
dollar value of the bond premium determined on the date of the acquisition of
the Note.
Exchange of Foreign Currencies. A U.S. Holder will have a tax basis in any
Foreign Currency received as interest or on the sale, exchange or retirement of
a Note equal to the U.S. dollar value of such Foreign Currency, determined at
the time the interest is received or at the time of the sale, exchange or
retirement. Any gain or loss realized by a U.S. Holder on a sale or other
disposition of Foreign Currency (including its exchange for U.S. dollars or its
use to purchase Notes) will be ordinary income or loss.
NON-U.S. HOLDERS
A non-U.S. Holder will not be subject to United States Federal income taxes on
payments of principal, premium (if any) or interest (including original issue
discount, if any) on a Note, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of the Trust, a controlled foreign
corporation related to the Trust or a bank receiving interest described in
section 881(c)(3)(A) of the Code. To qualify for the exemption from taxation,
the last United States payor in the chain of payment to a non-U.S. Holder (the
"Withholding Agent") must have received in the year in which a payment of
interest or principal occurs, or in either of the two preceding calendar years,
a statement that (i) is signed by the Beneficial Owner of the Note under
penalties of perjury, (ii) certifies that such owner is not a U.S. Holder and
(iii) provides the name and address of the Beneficial Owner. The statement may
be made on an IRS Form W-8 or a substantially similar form, and the Beneficial
Owner must inform the Withholding Agent of any change in the information on the
statement within 30 days of such change. If a Note is held through a securities
clearing organization or certain other financial institutions, the organization
or institution may provide a signed statement to the Withholding Agent.
However, in such case, the signed statement must be accompanied by a copy of
the IRS Form W-8 or the substitute form provided by the Beneficial Owner to the
organization or institution. The Treasury Department is considering
implementation of further certification requirements aimed at determining
whether the issuer of a debt obligation is related to Holders thereof.
Generally, a non-U.S. Holder will not be subject to Federal income taxes on any
amount which constitutes capital gain upon retirement or disposition of a Note,
provided the gain is not effectively connected with the conduct of a trade or
business in the United States by the non-U.S. Holder. Certain other exceptions
may be applicable, and a non-U.S. Holder should consult its tax advisor in this
regard.
S-31
The Notes will not be includible in the estate of a non-U.S. Holder unless the
individual is a direct or indirect 10% or greater shareholder of the Trust or,
at the time of such individual's death, payments in respect of the Notes would
have been effectively connected with the conduct by such individual of a trade
or business in the United States.
BACKUP WITHHOLDING
Backup withholding of United States Federal income tax at a rate of 31% may
apply to payments made in respect of the Notes to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the Notes to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for those non-U.S. Holders who
are not exempt recipients.
In addition, upon the sale of a Note to (or through) a broker, the broker must
withhold 31% of the entire purchase price, unless either (i) the broker
determines that the seller is a corporation or other exempt recipient or (ii)
the seller provides, in the required manner, certain identifying information
and, in the case of a non-U.S. Holder, certifies that such seller is a non-U.S.
Holder (and certain other conditions are met). Such a sale must also be
reported by the broker to the IRS, unless either (i) the broker determines that
the seller is an exempt recipient or (ii) the seller certifies its non-U.S.
status (and certain other conditions are met). Certification of the registered
owner's non-U.S. status would be made normally on an IRS Form W-8 under
penalties of perjury, although in certain cases it may be possible to submit
other documentary evidence.
Any amounts withheld under the backup withholding rules from a payment to a
Beneficial Owner would be allowed as a refund or a credit against such
Beneficial Owner's United States Federal income tax provided the required
information is furnished to the IRS.
SUPPLEMENTAL PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis for sale by the Trust to or
through J.P. Morgan Securities Inc., Alex. Brown & Sons Incorporated, First
Union Capital Markets Corp., Goldman, Sachs & Co., Merrill Lynch & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated (the "Agents"). The Agents may
purchase Notes, as principal, from the Trust from time to time for resale to
investors and other purchasers at varying prices relating to prevailing market
prices at the time of resale as determined by the applicable Agent(s), or, if
so specified in the applicable Pricing Supplement, for resale at a fixed
offering price. If agreed to by the Trust and an Agent, such Agent may also
utilize its reasonable efforts on an agency basis to solicit offers to purchase
the Notes at 100% of the principal amount thereof, unless otherwise specified
in the applicable Pricing Supplement. The Trust will pay a commission to an
Agent, ranging from .125% to .750% of the principal amount of each Note,
depending upon its stated maturity, sold through such Agent. Commissions with
respect to Notes with stated maturities in excess of 30 years that are sold
through an Agent will be negotiated between the Trust and such Agent at the
time of such sale.
Unless otherwise specified in the applicable Pricing Supplement, any Note sold
to an Agent as principal will be purchased by such Agent at a price equal to
100% of the principal amount thereof less a percentage of the principal amount
equal to the commission applicable to an agency sale of a Note of identical
maturity. An Agent may sell Notes it has purchased from the Trust as principal
to other dealers for resale to investors and other purchasers, and may allow
all or any portion of the discount received in connection with such purchase
from the Trust to such dealers. After the initial offering of Notes, the
offering price (in the case of Notes to be resold on a fixed price basis), the
concession and the discount may be changed.
In connection with the offering, the Agents may engage in transactions that
stabilize, maintain or otherwise affect the price of the Notes. Specifically,
the Agents may overallot the offering, creating a syndicate short position. In
addition, the Agents may bid for, and purchase, in the open market to cover
syndicate shorts or to stabilize the price of the Notes. Finally, the syndicate
may reclaim selling concessions allowed for
S-32
distributing the Notes in the offering, if the syndicate repurchases previously
distributed Notes in syndicate covering transactions. in stabilization
transactions or otherwise. Any of these activities may stabilize or maintain
the market price of the Notes above independent market levels. The Agents are
not required to engage in these activities, and may end any of these activities
at any time.
The Trust has reserved the right to sell the Notes directly to investors, and
may solicit and accept offers to purchase Notes directly from investors from
time to time on its own behalf. No commission will be paid on Notes sold
directly by the Trust. In certain instances, the Trust may offer Notes to or
through additional agents named in the applicable Pricing Supplement.
The Trust reserves the right to withdraw, cancel or modify the offer made
hereby without notice and may reject offers in whole or in part (whether placed
directly with the Trust or though the Agents). Each Agent will have the right,
in its discretion reasonably exercised, to reject in whole or in part any offer
to purchase Notes received by it on an agency basis.
Unless otherwise specified in the applicable Pricing Supplement, payment of the
purchase price of the Notes will be required to be made in immediately
available funds in the Specified Currency in The City of New York on the date
of settlement. See "Description of Notes--General."
Upon issuance, the Notes will not have an established trading market. The Notes
will not be listed on any securities exchange. The Agents may from time to time
purchase and sell Notes in the secondary market, but the Agents are not
obligated to do so, and there can be no assurance that there will be a
secondary market for the Notes or that there will be liquidity in the secondary
market if one develops. From time to time, the Agents may make a market in the
Notes, but the Agents are not obligated to do so and may discontinue any
market-making activity at any time.
The Agents may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). The Trust has agreed
to indemnify the Agents against certain liabilities (including liabilities
under the Securities Act), or to contribute to payments the Agents may be
required to make in respect thereof. The Trust has agreed to reimburse the
Agents for certain other expenses.
In the ordinary course of their respective businesses, the Agents and their
affiliates have engaged in, and may in the future engage in, investment and
commercial banking transactions with the Trust and certain of its affiliates.
Concurrently with the offering of Notes described herein, the Trust may issue
other Offered Securities described in the accompanying Prospectus.
LEGAL OPINIONS
Certain legal matters will be passed upon for the Trust by Kirkpatrick &
Lockhart LLP, Washington, D.C. and Goodwin, Procter & Hoar LLP, Boston,
Massachusetts, and for the Agents by Brown & Wood LLP, New York, New York. The
opinions of Kirkpatrick & Lockhart LLP, Goodwin, Procter & Hoar LLP and Brown &
Wood LLP will be based upon, and subject to, certain assumptions as to future
actions required to be taken in connection with the issuance and sale of the
Notes and as to other events that may affect the validity of the Notes but that
cannot be ascertained on the date of such opinions.
S-33
[LOGO OF FEDERAL REALTY INVESTMENT TRUST]
$480,000,000
DEBT SECURITIES, PREFERRED SHARES AND COMMON SHARES
Federal Realty Investment Trust (the "Trust") may from time to time offer in
one or more series (i) its unsecured debt securities (the "Debt Securities"),
(ii) its preferred shares (the "Preferred Shares"), and (iii) its common
shares, no par value (the "Common Shares"), with an aggregate public offering
price of up to $480,000,000 (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 Shares, and Common Shares
(collectively, the "Securities") may be offered, separately or together, in
separate series in amounts, at prices and on terms to be set forth in a
supplement to this Prospectus (a "Prospectus Supplement").
The Debt Securities will be direct unsecured obligations of the Trust and
may be either senior Debt Securities ("Senior Securities") or subordinated
Debt Securities ("Subordinated Securities"). The Senior Securities will rank
equally with all other unsecured and unsubordinated indebtedness of the Trust.
The Subordinated Securities will be subordinated to all existing and future
Senior Debt of the Trust, as defined. See "Description of Debt Securities."
The specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in the applicable Prospectus Supplement and
will include, where applicable: (i) in the case of Debt Securities, the
specific title, aggregate principal amount, currency, form (which may be
registered or bearer, or certificated or global), authorized denominations,
maturity, rate (or manner of calculation thereof) and time of payment of
interest, terms for redemption at the option of the Trust or repayment at the
option of the Holder, terms for sinking fund payments, terms for conversion
into Preferred Shares or Common Shares, covenants and the initial public
offering price; (ii) in the case of Preferred Shares, the specific title and
stated value, any dividend, liquidation, redemption, conversion, voting and
other rights, and the initial public offering price; and (iii) in the case of
Common Shares, the initial public offering price. In addition, such specific
terms may include limitations on direct or beneficial ownership and
restrictions on transfer of the Securities, in each case as may be appropriate
to preserve the status of the Trust as a real estate investment trust ("REIT")
for federal income tax purposes.
The applicable Prospectus Supplement will also contain information, where
applicable, about certain United States federal income tax considerations
relating to, and any listing on a securities exchange of, the Securities
covered by such Prospectus Supplement.
The Securities may be offered directly, through agents designated from time
to time by the Trust, or to or through underwriters or dealers. If any agents
or underwriters are involved in the sale of any of the Securities, their
names, and any applicable purchase price, fee, commission or discount
arrangement between or among them, will be set forth, or will be calculable
from the information set forth, in the applicable Prospectus Supplement. See
"Plan of Distribution." No Securities may be sold without delivery of the
applicable Prospectus Supplement describing the method and terms of the
offering of such series of Securities.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
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.
----------------
The date of this Prospectus is November 7, 1995.
AVAILABLE INFORMATION
The Trust is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and
other information can be inspected and copied at the Public Reference Section
maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington,
D.C. 20549; Midwest Regional Office, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661; and Northeast Regional Office, 7 World Trade Center,
New York, New York 10048. Such reports, proxy statements and other information
concerning the Trust can also be inspected at the office of the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
The Trust will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon their written or oral request, a copy of any or
all of the documents incorporated herein by reference (other than exhibits to
such documents). Written requests for such copies should be addressed to Kathy
Klein, Vice President, Corporate Communications, Federal Realty Investment
Trust, 4800 Hampden Lane, Bethesda, Maryland 20814 (telephone 301/652-3360).
The Trust has filed with the Commission a registration statement on Form S-3
(the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Securities offered hereby. For
further information with respect to the Trust and the Securities offered
hereby, reference is made to the Registration Statement and exhibits thereto.
Statements contained in this Prospectus as to the contents of any contract or
other documents are not necessarily complete, and in each instance, reference
is made to the copy of such contract or documents filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Trust with the Commission are
incorporated in this Prospectus by reference and are made a part hereof:
1. The Trust's Annual Report on Form 10-K, as amended, for the fiscal
year ended December 31, 1994.
2. The Trust's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1995 and June 30, 1995.
3. The Trust's Current Reports on Form 8-K filed with the Commission on
March 31, 1995, May 26, 1995, August 16, 1995 and September 22, 1995.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act and prior to termination
of the offering of all Securities to which this Prospectus relates shall be
deemed to be incorporated by reference in this Prospectus and shall be part
hereof from the date of filing of such document.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement herein, in any
accompanying Prospectus Supplement relating to a specific offering of
Securities or in any other subsequently filed document that is also
incorporated or deemed to be incorporated by reference herein, modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of
this Prospectus or any accompanying Prospectus Supplement. Subject to the
foregoing, all information appearing in this Prospectus and each accompanying
Prospectus Supplement is qualified in its entirety by the information
appearing in the documents incorporated by reference.
2
THE TRUST
Federal Realty Investment Trust (the "Trust") is an owner, operator and
redeveloper of community and neighborhood shopping centers and retail
buildings. Founded in 1962, the Trust is a self-administered real estate
investment trust ("REIT") that manages, leases and supervises renovation of
its properties. At October 6, 1995, the Trust owned 53 community and
neighborhood shopping centers, one apartment complex and 14 retail buildings.
The shopping center portfolio has approximately 11.7 million rentable square
feet and 1,600 tenants. At June 30, 1995, the occupancy rate of the shopping
center portfolio was 94%.
The Trust's properties are located in thirteen states with approximately 72%
of the Trust's rental income for the six months ended June 30, 1995 generated
by the properties located in three major metropolitan areas: New York/New
Jersey, Philadelphia and Baltimore/Washington, D.C. The Trust's properties are
located in well established, densely populated communities with attractive
retailing demographics and limited opportunities for new competing
developments. The typical Trust property is located on a major traffic artery,
with good visibility and access.
The Trust's strategy is to acquire older, well-located properties and to
enhance their operating performance through a program of renovation,
expansion, re-configuration, re-leasing and re-merchandising. The Trust's core
focus is on community and neighborhood shopping centers that are anchored by
supermarkets, drug stores or high volume, value oriented retailers that
provide consumer necessities. The Trust's shopping center leases typically are
structured to include minimum rents and percentage rents based on tenants'
sales volumes and reimbursement of operating and real estate tax expenses.
Beginning in late 1994, the Trust expanded its focus to include retail
buildings in densely developed urban and suburban areas ("main street
retail"), in order to capitalize on the demand by retailers for space in these
areas. To date, the Trust has purchased fourteen such main street retail
properties, for a total price of $46.7 million.
In addition to the acquisition of the main street retail properties, since
the beginning of 1993, the Trust has purchased 13 shopping centers and two
properties abutting properties it already owned for a total initial investment
of $210.9 million.
The Trust intends to continue its acquisition and redevelopment activities.
Acquisitions are being considered primarily in the Trust's core major
metropolitan markets of New York/New Jersey, Philadelphia and
Baltimore/Washington, D.C. as well as the Chicago, Illinois and Boston,
Massachusetts markets. In addition, the Trust is seeking to acquire additional
retail buildings in densely developed urban and suburban areas and is also
pursuing site acquisitions in its core markets to permit the Trust to develop
new shopping centers.
The Trust continually evaluates its properties for renovation, re-tenanting
and expansion opportunities. Similarly, the Trust regularly reviews its
portfolio and from time to time considers selling certain of its properties.
The Trust's operating results are affected by general economic and real estate
conditions, including conditions specific to the markets where the Trust's
properties are located.
The Trust has made 132 consecutive quarterly distributions and has increased
its distribution rate for each of the last 28 years. This is the longest
record of annual distribution increases in the REIT industry. The current
annual indicated distribution rate is $1.64 per share.
The Trust, a District of Columbia business trust of unlimited duration,
maintains its offices at 4800 Hampden Lane, Bethesda, Maryland 20814
(telephone 301/652-3360).
3
USE OF PROCEEDS
Unless otherwise specified in the applicable Prospectus Supplement for any
offering of Securities, the Trust intends to use the majority of the net
proceeds from the sale of Securities offered by the Trust to repay debt
(including repayments of amounts drawn on lines of credit for property
acquisitions), make improvements to properties, acquire additional properties
and for working capital.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table sets forth the Trust's consolidated ratios of earnings
to fixed charges for the periods shown:
SIX MONTHS
YEARS ENDED DECEMBER 31, ENDED JUNE 30,
----------------------------------------------------------- ---------------------------
1990 1991 1992 1993 1994 1994 1995
----- ----- ----- ----- ----- ------- -------
1.06X 1.09X 1.19X 1.50X 1.61X 1.56X 1.61X
The ratios of earnings to fixed charges were computed by dividing earnings
by fixed charges. For this purpose, earnings consist of income before gain on
sale of real estate and extraordinary items and fixed charges. Fixed charges
consist of interest expense (including interest costs capitalized) and the
portion of rent expense representing an interest factor. To date, the Trust
has not issued any Preferred Shares; therefore, the ratios of earnings to
combined fixed charges and preferred share dividends are unchanged from the
ratios presented in this section.
DESCRIPTION OF DEBT SECURITIES
GENERAL
The Senior Securities are to be issued under an indenture dated as of
December 1, 1993, as supplemented from time to time (the "Senior Indenture"),
between the Trust and Signet Trust Company, Trustee, and the Subordinated
Securities are to be issued under an indenture dated as of December 1, 1993,
as supplemented from time to time (the "Subordinated Indenture"), between the
Trust and First Union National Bank of North Carolina, Trustee. The term
"Trustee" as used herein shall refer to either Signet Trust Company or First
Union National Bank of North Carolina as appropriate for Senior Securities or
Subordinated Securities. The forms of the Senior Indenture and the
Subordinated Indenture (being sometimes referred to herein collectively as the
"Indentures" and individually as an "Indenture") are filed as exhibits to the
registration statement. The Indentures are 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 provisions thereof and do not purport to be complete and are qualified
in their entirety by reference to the Indentures and such Debt Securities.
Parenthetical references below are to the Indentures and capitalized terms
used but not defined herein shall have the respective meanings set forth in
the Indentures.
TERMS
The Debt Securities will be direct, unsecured obligations of the Trust. The
indebtedness represented by the Senior Securities will rank equally with all
other unsecured and unsubordinated indebtedness of the Trust. The indebtedness
represented by the Subordinated Securities will be subordinated in right of
payment to the prior payment in full of the Senior Debt of the Trust as
described under "Subordination."
4
Each Indenture provides that the Debt Securities may be issued without limit
as to aggregate principal amount, in one or more series, in each case as
established from time to time in or pursuant to authority granted by a
resolution of the Board of Trustees of the Trust or as established 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 issuances of additional Debt Securities of such
series (Section 301 of each Indenture).
Each Indenture provides that there may be more than one Trustee thereunder,
each with respect to one or more series of Debt Securities. Any Trustee under
either 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 (Section 608 of each Indenture). 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 (Section 609 of each Indenture), 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.
Reference is made to the Prospectus Supplement relating to the series of
Debt Securities being offered for the specific terms thereof, including:
(1) the title of such Debt Securities and whether such Debt Securities
are Senior Securities or Subordinated Securities;
(2) the aggregate principal amount of such Debt Securities and any limit
on such aggregate principal amount;
(3) the percentage of the principal amount at which such Debt Securities
will be issued and, if other than the principal amount thereof, the portion
of the principal amount thereof payable upon declaration of acceleration of
the maturity thereof, or (if applicable) the portion of the principal
amount of such Debt Securities that is convertible into Common Shares or
Preferred Shares, or the method by which any such portion shall be
determined;
(4) if convertible, in connection with the preservation of the Trust's
status as a REIT, any applicable limitations on the ownership or
transferability of the Common Shares or Preferred Shares into which such
Debt Securities are convertible;
(5) the date or dates, or the method for determining such date or dates,
on which the principal of such Debt Securities will be payable;
(6) the rate or rates (which may be fixed or variable), or the method by
which such rate or rates shall be determined, at which such Debt Securities
will bear interest, if any;
(7) the date or dates, or the method for determining such date or dates,
from which any such interest will accrue, the Interest Payment Dates on
which any such interest will be payable, the Regular Record Dates for such
Interest Payment Dates, or the method by which 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, if any) and
interest, if any, on such Debt Securities will be payable, where such Debt
Securities may be surrendered for conversion or registration of transfer or
exchange and where notices or demands to or upon the Trust in respect of
such Debt Securities and the applicable Indenture may be served;
(9) the period or periods within which, the price or prices at which and
the other terms and conditions upon which such Debt Securities may be
redeemed, as a whole or in part, at the option of the Trust, if the Trust
is to have such an option;
5
(10) the obligation, if any, of the Trust 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, if any)
or interest, if any, on such Debt Securities may be determined with
reference to an index, formula or other method (which index, formula or
method may, but need not be, based on a currency, currencies, currency unit
or units or composite currency or currencies) and the manner in which such
amounts shall be determined;
(13) any additions to, modifications of or deletions from the terms of
such Debt Securities with respect to the Events of Default or covenants set
forth in the applicable Indenture;
(14) whether such Debt Securities will be issued in certificated or book-
entry form;
(15) whether such Debt Securities will be in registered or bearer form
and, if in registered form, the denominations thereof if other than $1,000
and any integral multiple thereof and, if in bearer form, the denominations
thereof and terms and conditions relating thereto;
(16) the applicability, if any, of the defeasance and covenant defeasance
provisions of Article XIV of the applicable Indenture;
(17) the terms, if any, upon which such Debt Securities may be
convertible into Common Shares or Preferred Shares of the Trust and the
terms and conditions upon which such conversion will be effected,
including, without limitation, the initial conversion price or rate and the
conversion period;
(18) whether and under what circumstances the Trust will pay Additional
Amounts as contemplated in the applicable Indenture on such Debt Securities
in respect of any tax, assessment or governmental charge and, if so,
whether the Trust will have the option to redeem such Debt Securities in
lieu of making such payment; and
(19) any other terms of such Debt Securities not inconsistent with the
provisions of the applicable Indenture (Section 301 of each Indenture).
The Debt Securities may provide for less than the entire principal amount
thereof to be payable upon declaration of acceleration of the maturity thereof
("Original Issue Discount Securities") (Section 502 of each Indenture).
Special U.S. federal income tax, accounting and other considerations
applicable to Original Issue Discount Securities will be described in the
applicable Prospectus Supplement.
Except as may be set forth in any Prospectus Supplement, the Debt Securities
will not contain any provisions that would limit the ability of the Trust to
incur indebtedness or that would afford Holders of Debt Securities protection
in the event of a highly leveraged or similar transaction involving the Trust
or in the event of a change of control. Restrictions on ownership and
transfers of the Trust's Common Shares and Preferred Shares are designed to
preserve its status as a REIT and, therefore, may act to prevent or hinder a
change of control. See "Description of Common Shares" and "Description of
Preferred Shares." Reference is made to the applicable Prospectus Supplement
for information with respect to any deletions from, modifications of, or
additions to, the Events of Default or covenants of the Trust that are
described below, including any addition of a covenant or other provision
providing event risk or similar protection.
6
DENOMINATIONS, 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 (Section 302 of each Indenture).
Unless otherwise specified in the applicable Prospectus Supplement, the
principal of (and applicable premium, if any) and interest on any series of
Debt Securities will be payable at the corporate trust office of the Trustee,
initially located at Signet Trust Company, 7 St. Paul Street, 2nd Floor,
Baltimore, Maryland 21202 in the case of the Senior Securities and First Union
National Bank of North Carolina, 230 S. Tryon Street, 8th Floor, Charlotte,
North Carolina 28288 in the case of the Subordinated Securities, provided
that, at the option of the Trust, payment of interest may be made by check
mailed to the address of the Person entitled thereto as it appears in the
Security Register or by wire transfer of funds to such Person at an account
maintained within the United States (Sections 301, 305, 306, 307, and 1002 of
each Indenture).
Any interest not punctually paid or duly provided for on any Interest
Payment Date with respect to a Debt Security ("Defaulted Interest") will
forthwith cease to be payable to the Holder on the applicable Regular Record
Date and may either be paid to the Person in whose name such Debt Security is
registered at the close of business on a special record date (the "Special
Record Date") for the payment of such Defaulted Interest to be fixed by the
applicable Trustee, notice whereof shall be given to each 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 (Section 307 of each Indenture).
Subject to certain limitations imposed upon Debt Securities issued in book-
entry form, the Debt Securities of any series will be exchangeable for other
Debt Securities of the same series and of a like aggregate principal amount
and tenor of different authorized denominations upon surrender of such Debt
Securities at the corporate trust office of the applicable Trustee referred to
above. In addition, subject to certain limitations imposed upon Debt
Securities issued in book-entry form, the Debt Securities of any series may be
surrendered for conversion or registration of transfer thereof at the
corporate trust office of the applicable Trustee referred to above. Every Debt
Security surrendered for conversion, registration of transfer or exchange
shall be duly endorsed or accompanied by a written instrument of transfer. No
service charge will be made for any registration of transfer or exchange of
any Debt Securities, but the Trust may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith
(Section 305 of each Indenture). If the applicable Prospectus Supplement
refers to any transfer agent (in addition to the applicable Trustee) initially
designated by the Trust with respect to any series of Debt Securities, the
Trust 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 Trust will be required to maintain a transfer agent in each
Place of Payment for such series. The Trust may at any time designate
additional transfer agents with respect to any series of Debt Securities
(Section 1002 of each Indenture).
Neither the Trust nor either Trustee shall be required to (i) issue,
register the transfer of or exchange Debt Securities of any series during a
period beginning at the opening of business 15 days before any selection of
Debt Securities of that series to be redeemed and ending at the close of
business on the day of mailing of the relevant notice of redemption; (ii)
register the transfer of or exchange any Debt Security, or portion thereof,
called for redemption, except the unredeemed portion of any Debt Security
being redeemed in part; or (iii) 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
(Section 305 of each Indenture).
MERGER, CONSOLIDATION OR SALE
The Trust may consolidate with, or sell, lease or convey all or
substantially all of its assets to, or merge with or into, any other
corporation or trust or entity provided that (a) either the Trust shall be the
continuing corporation, or the successor corporation (if other than the Trust)
formed by or resulting from any such consolidation or merger or which shall
have received the transfer of such assets shall expressly assume payment
7
of the principal of (and premium, if any) and interest on all of the Debt
Securities and the due and punctual performance and observance of all of the
covenants and conditions contained in each Indenture; (b) immediately after
giving effect to such transaction and treating any indebtedness that becomes
an obligation of the Trust or any Subsidiary as a result thereof as having
been incurred by the Trust or such Subsidiary at the time of such transaction,
no Event of Default under the Indenture, and no event which, after notice or
the lapse of time, or both, would become such an Event of Default, shall have
occurred and be continuing; and (c) an officers' certificate and legal opinion
covering such conditions shall be delivered to each Trustee (Sections 801 and
803 of each Indenture).
CERTAIN COVENANTS
Existence. Except as permitted under "Merger, Consolidation or Sale," the
Trust will do or cause to be done all things necessary to preserve and keep in
full force and effect its corporate existence, rights (charter and statutory)
and franchises; provided, however, that the Trust shall not be required to
preserve any right or franchise if it determines that the preservation thereof
is no longer desirable in the conduct of its business (Section 1004 of each
Indenture).
Maintenance of Properties. The Trust will 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 Trust may be necessary so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times (Section 1005 of each Indenture).
Insurance. The Trust will, and will cause each of its Subsidiaries to, keep
all of its insurable properties insured against loss or damage at least equal
to their then full insurable value with insurers of recognized responsibility
and having a rating of at least A-:XII in Best's Key Rating Guide (Section
1006 of each Indenture).
Payment of Taxes and Other Claims. The Trust will 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 Trust 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 Trust or
any Subsidiary; provided, however, that the Trust 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 (Section 1007 of each Indenture).
Provision of Financial Information. Whether or not the Trust is subject to
Section 13 or 15(d) of the Exchange Act, the Trust will within 15 days of each
of the respective dates by which the Trust would have been required to file
annual reports, quarterly reports and other documents with the Commission if
the Trust were so subject (i) transmit by mail to all Holders of Debt
Securities, as their names and addresses appear in the Security Register,
without cost to such Holders copies of the annual reports, quarterly reports
and other documents that the Trust would have been required to file with the
Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Trust
were subject to such Sections, (ii) file with the applicable Trustee copies of
the annual reports, quarterly reports and other documents that the Trust would
have been required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act if the Trust were subject to such Sections and (iii)
promptly upon written request and payment of the reasonable cost of
duplication and delivery, supply copies of such documents to any prospective
Holder (Section 1008 of each Indenture).
Additional Covenants. Any additional covenants of the Trust with respect to
any series of Debt Securities will be set forth in the Prospectus Supplement
relating thereto.
8
EVENTS OF DEFAULT, NOTICE AND WAIVER
Each Indenture provides that the following events are "Events of Default"
with respect to any series of Debt Securities issued thereunder: (a) default
for 30 days in the payment of any installment of interest on any Debt Security
of such series; (b) default in the payment of the principal of (or premium, if
any, on) any Debt Security of such series at its Maturity; (c) default in
making any sinking fund 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 Trust contained in the Indenture (other than a covenant added
to the Indenture solely for the benefit of a series of Debt Securities issued
thereunder other than such series), continued for 60 days after written notice
as provided in the applicable Indenture; (e) a default under any bond,
debenture, note or other evidence of indebtedness for money borrowed by the
Trust (including obligations under leases required to be capitalized on the
balance sheet of the lessee under generally accepted accounting principles but
not including any indebtedness or obligations for which recourse is limited to
property purchased) in an aggregate principal amount in excess of $5,000,000
or under any 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 Trust (including such leases but not including such
indebtedness or obligations for which recourse is limited to property
purchased) in an aggregate principal amount in excess of $5,000,000 by the
Trust, 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 or such obligations being accelerated, without such
acceleration having been rescinded or annulled; (f) certain events of
bankruptcy, insolvency or reorganization, or court appointment of a receiver,
liquidator or trustee of the Trust or any Significant Subsidiary or either of
its properties; and (g) any other Event of Default provided with respect to a
particular series of Debt Securities (Section 501 of each Indenture). The term
"Significant Subsidiary" means each significant subsidiary (as defined in
Regulation S-X promulgated under the Securities Act) of the Trust.
If an Event of Default under either 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 Outstanding Debt Securities of that series may
declare the principal amount (or, if the Debt Securities of that series are
Original Issue Discount Securities or Indexed Securities, such portion of the
principal amount as may be specified in the terms thereof) of all the Debt
Securities of that series to be due and payable immediately by written notice
thereof to the Trust (and to the applicable Trustee if given by the Holders).
However, at any time after such a declaration of acceleration with respect to
Debt Securities of such series (or of all Debt Securities then Outstanding
under either Indenture, as the case may be) has been made, but before a
judgment or decree for payment of the money due has been obtained by the
applicable Trustee, the Holders of not less than a majority in principal
amount of Outstanding Debt Securities of such series (or of all Debt
Securities then Outstanding under the applicable Indenture, as the case may
be) may rescind and annul such declaration and its consequences if (a) the
Trust shall have deposited with the applicable Trustee all required payments
of the principal of (and premium, if any) and interest on the Debt Securities
of such series (or of all Debt Securities then Outstanding under the
applicable Indenture, as the case may be), plus certain fees, expenses,
disbursements and advances of the applicable Trustee and (b) all Events of
Default, other than the non-payment of accelerated principal (or specified
portion thereof), with respect to Debt Securities of such series (or of all
Debt Securities then Outstanding under the applicable Indenture, as the case
may be) have been cured or waived as provided in each Indenture (Section 502
of each Indenture). Each Indenture also provides that the Holders of not less
than a majority in principal amount of the Outstanding Debt Securities of any
series (or of all Debt Securities then Outstanding under the applicable
Indenture, as the case may be) may waive any past default with respect to such
series and its consequences, except a default (x) in the payment of the
principal of (or premium, if any) or interest on any Debt Security of such
series or (y) in respect of a covenant or provision contained in the
applicable Indenture that cannot be modified or amended without the consent of
the Holder of each Outstanding Debt Security affected thereby (Section 513 of
each Indenture).
Each Trustee is required to give notice to the Holders of Debt Securities
within 90 days of a default under the applicable Indenture unless such default
shall have been cured or waived; provided, however, that such Trustee may
withhold notice to the Holders of any series of Debt Securities of any default
with respect
9
to such series (except a default in the payment of the principal of (or
premium, if any) or interest on any Debt Security of such series or in the
payment of any sinking fund installment in respect of any Debt Security of
such series) if the Responsible Officers of such Trustee consider such
withholding to be in the interest of such Holders (Section 601 of each
Indenture).
Each Indenture provides 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 (Section 507 of each Indenture). This provision will not
prevent, however, any Holder of Debt Securities from instituting suit for the
enforcement of payment of the principal of (and premium, if any) and interest
on such Debt Securities at the respective due dates thereof (Section 508 of
each Indenture).
Subject to provisions in each Indenture relating to its duties in case of
default, neither Trustee is under an obligation to exercise any of its rights
or powers under such Indenture at the request or direction of any Holders of
any series of Debt Securities then Outstanding under such Indenture, unless
such Holders shall have offered to the Trustee thereunder reasonable security
or indemnity (Section 602 of each Indenture). 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 each 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, each
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 (Section 512 of each Indenture).
Within 120 days after the close of each fiscal year, the Trust must deliver
to each Trustee a certificate, signed by one of several specified officers,
stating whether or not such officer has knowledge of any default under the
applicable Indenture and, if so, specifying each such default and the nature
and status thereof (Section 1009 of each Indenture).
MODIFICATION OF THE INDENTURES
Modifications and amendments of either Indenture may 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 which are affected by
such modification or amendment; provided, however, that no such modification
or amendment may, without the consent of the Holder of each such Debt Security
affected thereby, (a) change the Stated Maturity of the principal of, or any
installment of interest (or premium, if any) on, any such Debt Security; (b)
reduce the principal amount of, or the rate or amount of interest on, or any
premium payable on redemption of, any such Debt Security, or reduce the amount
of principal of an Original Issue Discount Security that would be due and
payable upon declaration of acceleration of the maturity thereof or would be
provable in bankruptcy, or adversely affect any right of repayment of the
Holder of any such Debt Security; (c) change the Place of Payment, or the coin
or currency, for payment of principal of, premium, if any, or interest on any
such Debt Security; (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 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; or (f) 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 (Section 902 of each
Indenture).
10
The Holders of not less than a majority in principal amount of Outstanding
Debt Securities issued under either Indenture have the right to waive
compliance by the Trust with certain covenants in such Indenture (Section 1011
of each Indenture).
Modifications and amendments of either Indenture may be made by the Trust
and the respective Trustee thereunder without the consent of any Holder of
Debt Securities for any of the following purposes: (i) to evidence the
succession of another Person to the Trust as obligor under such Indenture;
(ii) to add to the covenants of the Trust for the benefit of the Holders of
all or any series of Debt Securities or to surrender any right or power
conferred upon the Trust in such Indenture; (iii) to add Events of Default for
the benefit of the Holders of all or any series of Debt Securities; (iv) to
add or change any provisions of either 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; (v) to
change or eliminate any provisions of either Indenture, provided that any such
change or elimination shall become effective only when there are no Debt
Securities Outstanding of any series created prior thereto which are entitled
to the benefit of such provision; (vi) to secure the Debt Securities; (vii) to
establish the form or terms of Debt Securities of any series, including the
provisions and procedures, if applicable, for the conversion of such Debt
Securities into Common Shares or Preferred Shares of the Trust; (viii) to
provide for the acceptance of appointment by a successor Trustee or facilitate
the administration of the trusts under either Indenture by more than one
Trustee; (ix) to cure any ambiguity, defect or inconsistency in either
Indenture, provided that such action shall not adversely affect the interests
of Holders of Debt Securities of any series issued under such Indenture; or
(x) to supplement any of the provisions of either Indenture to the extent
necessary to permit or facilitate defeasance and discharge of any series of
such Debt Securities, provided that such action shall not adversely affect the
interests of the Holders of the Debt Securities of any series (Section 901 of
each Indenture).
Each Indenture provides that in determining whether the Holders of the
requisite principal amount of Outstanding Debt Securities of a series have
given any request, demand, authorization, direction, notice, consent or waiver
thereunder or whether a quorum is present at a meeting of Holders of Debt
Securities, (i) the principal amount of an Original Issue Discount Security
that shall be deemed to be outstanding shall be the amount of the principal
thereof that would be due and payable as of the date of such determination
upon declaration of acceleration of the maturity thereof, (ii) the principal
amount of a Debt Security denominated in a Foreign Currency that shall be
deemed outstanding shall be the U.S. dollar equivalent, determined on the
issue date for such Debt Security, of the principal amount (or, in the case of
an Original Issue Discount Security, the U.S. dollar equivalent on the issue
date of such Debt Security of the amount determined as provided in (i) above),
(iii) the principal amount of an Indexed Security that shall be deemed
outstanding shall be the principal face amount of such Indexed Security at
original issuance, unless otherwise provided with respect to such Indexed
Security pursuant to Section 301 of each Indenture, and (iv) Debt Securities
owned by the Trust or any other obligor upon the Debt Securities or any
Affiliate of the Trust or of such other obligor shall be disregarded (Section
101 of each Indenture).
Each Indenture contains provisions for convening meetings of the Holders of
Debt Securities of a series (Section 1501 of each Indenture). A meeting may be
called at any time by the applicable Trustee, and also, upon request, by the
Trust or the Holders of at least 10% in principal amount of the Outstanding
Debt Securities of such series, in any such case upon notice given as provided
in the Indenture (Section 1502 of each Indenture). Except for any consent that
must be given by the Holder of each Debt Security affected by certain
modifications and amendments of either Indenture, any resolution presented at
a meeting or adjourned meeting duly reconvened at which a quorum is present
may be adopted by the affirmative vote of the Holders of a majority in
principal amount of the Outstanding Debt Securities of that series; provided,
however, that, except as referred to above, any resolution with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that may be made, given or taken by the Holders of a specified
percentage, which is less than a majority, in principal amount of the
Outstanding Debt Securities of a series may be adopted at a meeting or
adjourned meeting duly reconvened at which a quorum is present by the
affirmative vote of the Holders of such
11
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 either 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 (Section 1504 of each
Indenture).
Notwithstanding the foregoing provisions, if any action is to be taken at a
meeting of Holders of Debt Securities of any series with respect to any
request, demand, authorization, direction, notice, consent, waiver or other
action that either 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: (i) there shall be no minimum quorum requirement for
such meeting and (ii) the principal amount of the Outstanding Debt Securities
of such series that vote in favor of such request, demand, authorization,
direction, notice, consent, waiver or other action shall be taken into account
in determining whether such request, demand, authorization, direction, notice,
consent, waiver or other action has been made, given or taken under such
Indenture (Section 1504 of each Indenture).
SUBORDINATION
Upon any distribution to creditors of the Trust in a liquidation,
dissolution or reorganization, the payment of the principal of and interest on
the Subordinated Securities will be subordinated to the extent provided in the
Subordinated Indenture in right of payment to the prior payment in full of all
Senior Debt (Sections 1601 and 1602 of the Subordinated Indenture), but the
obligation of the Trust to make payment of the principal and interest on the
Subordinated Securities will not otherwise be affected (Section 1608 of the
Subordinated Indenture). No payment of principal or interest may be made on
the Subordinated Securities at any time if a default on Senior Debt exists
that permits the holders of such Senior Debt to accelerate its maturity and
the default is the subject of judicial proceedings or the Trust receives
notice of the default (Section 1603 of the Subordinated Indenture). After all
Senior Debt is paid in full and until the Subordinated Securities are paid in
full, holders will be subrogated to the rights of holders of Senior Debt to
the extent that distributions otherwise payable to holders have been applied
to the payment of Senior Debt (Section 1607 of the Subordinated Indenture). By
reason of such subordination, in the event of a distribution of assets upon
insolvency, certain general creditors of the Trust may recover more, ratably,
than holders of the Subordinated Securities.
Senior Debt is defined in the Subordinated Indenture as the principal of and
interest on, or substantially similar payments to be made by the Trust in
respect of, the following, whether outstanding at the date of execution of the
Subordinated Indenture or thereafter incurred, created or assumed:
(a) indebtedness of the Trust for money borrowed or represented by purchase-
money obligations, (b) indebtedness of the Trust evidenced by notes,
debentures, or bonds, or other securities issued under the provisions of an
indenture, fiscal agency agreement or other instrument, (c) obligations of the
Trust as lessee under leases of property either made as part of any sale and
leaseback transaction to which the Trust is a party or otherwise,
(d) indebtedness of partnerships and joint ventures which is included in the
consolidated financial statements of the Trust, (e) indebtedness, obligations
and liabilities of others in respect of which the Trust is liable contingently
or otherwise to pay or advance money or property or as guarantor, endorser or
otherwise or which the Trust has agreed to purchase or otherwise acquire, and
(f) any binding commitment of the Trust to fund any real estate investment or
to fund any investment in any entity making such real estate investment, in
each case other than (1) any such indebtedness, obligation or liability
referred to in clauses (a) through (f) above as to which, in the instrument
creating or evidencing the same or pursuant to which the same is outstanding,
it is provided that such indebtedness,
12
obligation or liability is not superior in right of payment to the
Subordinated Securities or ranks pari passu with the Subordinated Securities,
(2) any such indebtedness, obligation or liability which is subordinated to
indebtedness of the Trust to substantially the same extent as or to a greater
extent than the Subordinated Securities are subordinated, and (3) the
Subordinated Securities (Section 101 of the Subordinated Indenture). At June
30, 1995, Senior Debt aggregated approximately $365 million. There are no
restrictions in the Subordinated Indenture upon the creation of additional
Senior Debt.
DISCHARGE, DEFEASANCE AND COVENANT DEFEASANCE
Under each Indenture, the Trust may discharge certain obligations to Holders
of any series of Debt Securities issued thereunder 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, 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
(Section 401 of each Indenture).
Each Indenture provides that, if the provisions of Article Fourteen thereof
are made applicable to the Debt Securities of or within any series pursuant to
Section 301 of such Indenture, the Trust may elect either (a) to defease and
be discharged from any and all obligations with respect to such Debt
Securities (except for the obligation to pay Additional Amounts, if any, upon
the occurrence of certain events of tax, assessment or governmental charge
with respect to payments on such Debt Securities and the obligations to
register the transfer or exchange of such Debt Securities, to replace
temporary or mutilated, destroyed, lost or stolen Debt Securities, to maintain
an office or agency in respect of such Debt Securities and to hold moneys for
payment in trust) ("defeasance") (Section 1402 of each Indenture) or (b) to be
released from its obligations with respect to such Debt Securities under
Sections 1004 to 1008, inclusive, of each Indenture (being the restrictions
described under "Certain Covenants") or, if provided pursuant to Section 301
of each Indenture, its obligations with respect to any other covenant, and any
omission to comply with such obligations shall not constitute a default or an
Event of Default with respect to such Debt Securities ("covenant defeasance")
(Section 1403 of each Indenture), in either case upon the irrevocable deposit
by the Trust 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, if any) and interest on such Debt Securities,
and any mandatory sinking fund or analogous payments thereon, on the scheduled
due dates therefor (Section 1404 of each Indenture).
Such a trust may only be established if, among other things, the Trust has
delivered to the applicable Trustee an Opinion of Counsel (as specified in
each 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, must
refer to and be based upon a ruling of the Internal Revenue Service or a
change in applicable U. S. federal income tax law occurring after the date of
the Indenture (Section 1404 of each Indenture).
"Government Obligations" means securities which are (i) direct obligations
of the United States of America or the government which issued the Foreign
Currency in which the Debt Securities of a particular series are payable, for
the payment of which its full faith and credit is pledged or (ii) obligations
of a Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America or such government which
issued the Foreign Currency in which the Debt Securities of such series are
payable, the payment of which
13
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 (Section 101 of
each Indenture).
Unless otherwise provided in the applicable Prospectus Supplement, if after
the Trust 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 Section 301 of either 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
shall be deemed to have been, and will be, fully discharged and satisfied
through the payment of the principal of (and premium, if any) and interest on
such Debt Security as they become due out of the proceeds yielded by
converting the amount so deposited in respect of such Debt Security into the
currency, currency unit or composite currency in which such Debt Security
becomes payable as a result of such election or such cessation of usage based
on the applicable market exchange rate (Section 1405 of each Indenture).
"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,
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 (Section 101 of each Indenture).
In the event the Trust effects covenant defeasance with respect to any Debt
Securities and such Debt Securities are declared due and payable because of
the occurrence of any Event of Default other than the Event of Default
described in clause (d) under "Events of Default, Notice and Waiver" with
respect to Sections 1004 to 1008, inclusive, of each 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 Event
of Default. However, the Trust 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 Shares or Preferred Shares will be set forth in the
applicable Prospectus Supplement relating thereto. Such terms will include
whether such Debt Securities are convertible into Common Shares or Preferred
Shares, the conversion
14
price (or manner of calculation thereof), the conversion period, provisions as
to whether conversion will be at the option of the Holders or the Trust, the
events requiring an adjustment of the conversion price and provisions
affecting conversion in the event of the redemption of such Debt Securities.
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 (the "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.
DESCRIPTION OF PREFERRED SHARES
GENERAL
The Trust is authorized to issue an unlimited number of preferred shares
(the "Preferred Shares") of which no Preferred Shares are outstanding.
The following description of the Preferred Shares sets forth certain general
terms and provisions of the Preferred Shares to which any Prospectus
Supplement may relate. The statements below describing the Preferred Shares
are in all respects subject to and qualified in their entirety by reference to
the applicable provisions of the Trust's Third Amended and Restated
Declaration of Trust (the "Declaration of Trust") and Bylaws and applicable
statement of designations (the "Statement of Designations").
TERMS
Subject to the limitations prescribed by the Declaration of Trust, the Board
of Trustees is authorized to fix the number of shares constituting each series
of Preferred Shares and the designations and powers, preferences and relative,
participating, optional or other special rights and qualifications,
limitations or restrictions thereof, including such provisions as may be
desired concerning voting, redemption, dividends, dissolution or the
distribution of assets, conversion or exchange, and such other subjects or
matters as may be fixed by resolution of the Board of Trustees. The Preferred
Shares will, when issued, be fully paid and nonassessable by the Trust (except
as described under "Shareholder Liability" below) and will have no preemptive
rights.
Reference is made to the Prospectus Supplement relating to the Preferred
Shares offered thereby for specific terms, including:
(1) The title and stated value of such Preferred Shares;
(2) The number of such Preferred Shares offered, the liquidation
preference per share and the offering price of such Preferred Shares;
(3) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Shares;
(4) The date from which dividends on such Preferred Shares shall
accumulate, if applicable;
(5) The procedures for any auction and remarketing, if any, for such
Preferred Shares;
(6) The provision for a sinking fund, if any, for such Preferred Shares;
(7) The provision for redemption, if applicable, of such Preferred
Shares;
(8) Any listing of such Preferred Shares on any securities exchange;
(9) The terms and conditions, if applicable, upon which such Preferred
Shares will be convertible into Common Shares of the Trust, including the
conversion price (or manner of calculation thereof);
15
(10) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Shares;
(11) A discussion of federal income tax considerations applicable to such
Preferred Shares;
(12) The relative ranking and preferences of such Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Trust;
(13) Any limitations on issuance of any series of Preferred Shares
ranking senior to or on a parity with such series of Preferred Shares as to
dividend rights and rights upon liquidation, dissolution or winding up of
the affairs of the Trust; 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 Trust as a REIT.
RANK
Unless otherwise specified in the Prospectus Supplement, the Preferred
Shares will, with respect to dividend rights and rights upon liquidation,
dissolution or winding up of the Trust, rank (i) senior to all classes or
series of Common Shares or other capital shares of the Trust, and to all
equity securities ranking junior to such Preferred Shares; (ii) on a parity
with all equity securities issued by the Trust the terms of which specifically
provide that such equity securities rank on a parity with the Preferred
Shares; and (iii) junior to all equity securities issued by the Trust the
terms of which specifically provide that such equity securities rank senior to
the Preferred Shares. The term "equity securities" does not include
convertible debt securities.
DIVIDENDS
Holders of the Preferred Shares of each series will be entitled to receive,
when, as and if declared by the Board of Trustees of the Trust, out of assets
of the Trust 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 Trust on such record dates as shall be fixed by
the Board of Trustees of the Trust.
Dividends on any series of the Preferred Shares 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 Trustees of the Trust fails
to declare a dividend payable on a dividend payment date on any series of the
Preferred Shares for which dividends are noncumulative, then the holders of
such series of the Preferred Shares will have no right to receive a dividend
in respect of the dividend period ending on such dividend payment date, and
the Trust will have no obligation to pay the dividend accrued for such period,
whether or not dividends on such series are declared payable on any future
dividend payment date.
If Preferred Shares of any series are outstanding, no dividends will be
declared or paid or set apart for payment on the Preferred Shares of the Trust
of any other series ranking, as to dividends, on a parity with or junior to
the Preferred Shares of such series for any period unless (i) if such series
of Preferred Shares has a cumulative dividend, full cumulative dividends have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the Preferred
Shares of such series for all past dividend periods and the then current
dividend period or (ii) if such series of Preferred Shares does not have a
cumulative dividend, full dividends for the then current dividend period have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for such payment on the Preferred
Shares of such series. When dividends are not paid in full (or a sum
sufficient for such full payment is not so set apart) upon Preferred Shares of
any series and the shares of any other series of Preferred Shares ranking on a
parity as to dividends with the Preferred Shares of such series, all dividends
declared upon Preferred Shares of such series and any other series of
Preferred Shares ranking on a parity as to dividends with such Preferred
Shares shall be declared pro rata so that the amount of dividends declared per
16
Preferred Share of such series and such other series of Preferred Shares shall
in all cases bear to each other the same ratio that accrued dividends per
share on the Preferred Shares of such series (which shall not include any
accumulation in respect of unpaid dividends for prior dividend periods if such
Preferred Shares do not have a cumulative dividend) and such other series of
Preferred Shares bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments on
Preferred Shares of such series which may be in arrears.
Except as provided in the immediately preceding paragraph, unless (i) if
such series of Preferred Shares has a cumulative dividend, full cumulative
dividends on the Preferred Shares of such series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for all past dividend periods and
the then current dividend period and (ii) if such series of Preferred Shares
does not have a cumulative dividend, full dividends on the Preferred Shares of
such series have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for payment for the
then current dividend period, no dividends (other than in Common Shares or
other capital shares ranking junior to the Preferred Shares of such series as
to dividends and upon liquidation) shall be declared or paid or set aside for
payment or other distribution shall be declared or made upon the Common
Shares, or any other capital shares of the Trust ranking junior to or on a
parity with the Preferred Shares of such series as to dividends or upon
liquidation, nor shall any Common Shares, or any other capital shares of the
Trust ranking junior to or on a parity with the Preferred Shares of such
series as to dividends or upon liquidation be redeemed, purchased or otherwise
acquired for any consideration (or any moneys be paid to or made available for
a sinking fund for the redemption of any such shares) by the Trust (except by
conversion into or exchange for other capital shares of the Trust ranking
junior to the Preferred Shares of such series as to dividends and upon
liquidation).
Any dividend payment made on shares of a series of Preferred Shares shall
first be credited against the earliest accrued but unpaid dividend due with
respect to shares of such series which remains payable.
REDEMPTION
If so provided in the applicable Prospectus Supplement, the Preferred Shares
will be subject to mandatory redemption or redemption at the option of the
Trust, as a whole or in part, in each case upon the terms, at the times and at
the redemption prices set forth in such Prospectus Supplement.
The Prospectus Supplement relating to a series of Preferred Shares that is
subject to mandatory redemption will specify the number of such Preferred
Shares that shall be redeemed by the Trust in each year commencing after a
date to be specified, at a redemption price per share to be specified,
together with an amount equal to all accrued and unpaid dividends thereon
(which shall not, if such Preferred Shares do not have a cumulative dividend,
include any accumulation in respect of unpaid dividends for prior dividend
periods) to the date of redemption. The redemption price may be payable in
cash or other property, as specified in the applicable Prospectus Supplement.
If the redemption price for Preferred Shares of any series is payable only
from the net proceeds of the issuance of capital shares of the Trust, the
terms of such Preferred Shares may provide that, if no such capital shares
shall have been issued or to the extent the net proceeds from any issuance are
insufficient to pay in full the aggregate redemption price then due, such
Preferred Shares shall automatically and mandatorily be converted into the
applicable capital shares of the Trust pursuant to conversion provisions
specified in the applicable Prospectus Supplement.
Notwithstanding the foregoing, unless (i) if such series of Preferred Shares
has a cumulative dividend, full cumulative dividends on all shares of any
series of Preferred Shares shall have been or contemporaneously are declared
and paid or declared and a sum sufficient for the payment thereof set apart
for payment for all past dividend periods and the then current dividend period
and (ii) if such series of Preferred Shares does not have a cumulative
dividend, full dividends on the Preferred Shares of any series have been or
contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof set apart for payment for the then current dividend
period, no shares of any series of Preferred Shares shall be redeemed unless
all outstanding
17
Preferred Shares of such series are simultaneously redeemed; provided,
however, that the foregoing shall not prevent the purchase or acquisition of
Preferred Shares of such series to preserve the REIT status of the Trust or
pursuant to a purchase or exchange offer made on the same terms to holders of
all outstanding Preferred Shares of such series, and, unless (i) if such
series of Preferred Shares has a cumulative dividend, full cumulative
dividends on all outstanding shares of any series of Preferred Shares have
been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past dividend
periods and the then current dividend period and (ii) if such series of
Preferred Shares does not have a cumulative dividend, full dividends on the
Preferred Shares of any series have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof set apart for
payment for the then current dividend period, the Trust shall not purchase or
otherwise acquire directly or indirectly any Preferred Shares of such series
(except by conversion into or exchange for capital shares of the Trust ranking
junior to the Preferred Shares of such series as to dividends and upon
liquidation); provided, however, that the foregoing shall not prevent the
purchase or acquisition of Preferred Shares of such series to preserve the
REIT status of the Trust or pursuant to a purchase or exchange offer made on
the same terms to holders of all outstanding Preferred Shares of such series.
If fewer than all of the outstanding shares of Preferred Shares of any
series are to be redeemed, the number of shares to be redeemed will be
determined by the Trust and such shares may be redeemed pro rata from the
holders of record of such shares in proportion to the number of such shares
held by such holders (with adjustments to avoid redemption of fractional
shares) or by lot in a manner determined by the Trust.
Notice of redemption will be mailed at least 30 days but not more than 60
days before the redemption date to each holder of record of Preferred Shares
of any series to be redeemed at the address shown on the share transfer books
of the Trust. Each notice shall state: (i) the redemption date; (ii) the
number of shares and series of the Preferred Shares to be redeemed; (iii) the
redemption price; (iv) the place or places where certificates for such
Preferred Shares are to be surrendered for payment of the redemption price;
(v) that dividends on the shares to be redeemed will cease to accrue on such
redemption date; and (vi) the date upon which the holder's conversion rights,
if any, as to such shares shall terminate. If fewer than all the Preferred
Shares of any series are to be redeemed, the notice mailed to each such holder
thereof shall also specify the number of Preferred Shares to be redeemed from
each such holder. If notice of redemption of any Preferred Shares has been
given and if the funds necessary for such redemption have been set aside by
the Trust in trust for the benefit of the holders of any Preferred Shares so
called for redemption, then from and after the redemption date dividends will
cease to accrue on such Preferred Shares, 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 Trust, then, before any distribution or payment shall be
made to the holders of any Common Shares, excess shares or any other class or
series of capital shares of the Trust ranking junior to the Preferred Shares
in the distribution of assets upon any liquidation, dissolution or winding up
of the Trust, the holders of each series of Preferred Shares shall be entitled
to receive out of assets of the Trust legally available for distribution to
shareholders liquidating distributions in the amount of the liquidation
preference per share (set forth in the applicable Prospectus Supplement), plus
an amount equal to all dividends accrued and unpaid thereon (which shall not
include any accumulation in respect of unpaid dividends for prior dividend
periods if such Preferred Shares do not have a cumulative dividend). After
payment of the full amount of the liquidating distributions to which they are
entitled, the holders of Preferred Shares will have no right or claim to any
of the remaining assets of the Trust. In the event that, upon any such
voluntary or involuntary liquidation, dissolution or winding up, the available
assets of the Trust are insufficient to pay the amount of the liquidating
distributions on all outstanding Preferred Shares and the corresponding
amounts payable on all shares of other classes or series of capital shares of
the Trust
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ranking on a parity with the Preferred Shares in the distribution of assets,
then the holders of the Preferred Shares and all other such classes or series
of capital shares 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 Shares, the remaining assets of the Trust shall be distributed among
the holders of any other classes or series of capital shares ranking junior to
the Preferred Shares upon liquidation, dissolution or winding up, according to
their respective rights and preferences and in each case according to their
respective number of shares. For such purposes, the consolidation or merger of
the Trust 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 Trust, shall not be deemed to constitute a liquidation, dissolution or
winding up of the Trust.
VOTING RIGHTS
Holders of the Preferred Shares will not have any voting rights, except as
set forth below or as otherwise from time to time required by law or as
indicated in the applicable Prospectus Supplement.
Whenever dividends on any Preferred Shares shall be in arrears for six
consecutive quarterly periods, the holders of such Preferred Shares (voting
separately as a class with all other series of Preferred Shares upon which
like voting rights have been conferred and are exercisable) will be entitled
to vote for the election of two additional Trustees of the Trust at the next
annual meeting of shareholders and at each subsequent meeting until (i) if
such series of Preferred Shares has a cumulative dividend, all dividends
accumulated on such shares of Preferred Shares for the past dividend periods
and the then current dividend period shall have been fully paid or declared
and a sum sufficient for the payment thereof set aside for payment or (ii) if
such series of Preferred Shares does not have a cumulative dividend, four
consecutive quarterly dividends shall have been fully paid or declared and a
sum sufficient for the payment thereof set aside for payment. In such case,
the entire Board of Trustees of the Trust will be increased by two Trustees.
Unless provided otherwise for any series of Preferred Shares, so long as any
Preferred Shares remain outstanding, the Trust will not, without the
affirmative vote or consent of the holders of at least two-thirds of the
shares of each series of Preferred Shares outstanding at the time, given in
person or by proxy, either in writing or at a meeting (such series voting
separately as a class), (i) authorize or create, or increase the authorized or
issued amount of, any class or series of capital shares ranking prior to such
series of Preferred Shares with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up or
reclassify any authorized capital shares of the Trust into any such shares, or
create, authorize or issue any obligation or security convertible into or
evidencing the right to purchase any such shares; or (ii) amend, alter or
repeal the provisions of the Trust's Declaration of Trust or the Statement of
Designations for such series of Preferred Shares, 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 Shares 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 Shares remain outstanding with the terms thereof materially
unchanged, taking into account that upon the occurrence of an Event, the Trust
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 Shares and provided further that
(x) any increase in the amount of the authorized Preferred Shares or the
creation or issuance of any other series of Preferred Shares, or (y) any
increase in the amount of authorized shares of such series or any other series
of Preferred Shares, in each case ranking on a parity with or junior to the
Preferred Shares of such series with respect to payment of dividends or the
distribution of assets upon liquidation, dissolution or winding up, shall not
be deemed to materially and adversely affect such rights, preferences,
privileges or voting powers.
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The foregoing voting provisions will not apply if, at or prior to the time
when the act with respect to which such vote would otherwise be required shall
be effected, all outstanding shares of such series of Preferred Shares shall
have been redeemed or called for redemption and sufficient funds shall have
been deposited in trust to effect such redemption.
CONVERSION RIGHTS
The terms and conditions, if any, upon which any series of Preferred Shares
are convertible into Common Shares will be set forth in the applicable
Prospectus Supplement relating thereto. Such terms will include the number of
Common Shares into which the Preferred Shares 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
Shares or the Trust, the events requiring an adjustment of the conversion
price and provisions affecting conversion in the event of the redemption of
such series of Preferred Shares.
SHAREHOLDER LIABILITY
As discussed below under "Description of Common Shares--Shareholder
Liability," the Declaration of Trust provides that no shareholder, including
holders of Preferred Shares, shall be personally liable for the acts and
obligations of the Trust and that the funds and property of the Trust shall be
solely liable for such acts or obligations. The Declaration of Trust provides
that, to the extent practicable, each written instrument creating an
obligation of the Trust shall contain a provision to that effect. The
Declaration of Trust also provides that the Trust shall indemnify and hold
harmless shareholders against all claims and liabilities and related
reasonable expenses to which they may become subject by reason of their being
or having been shareholders. In some jurisdictions, however, with respect to
tort and contract claims where shareholder liability is not so negated, claims
for taxes and certain statutory liability, shareholders may be personally
liable to the extent that such claims are not satisfied by the Trust. The
Trust carries public liability insurance that the Trustees consider adequate.
Thus, any risk of personal liability to shareholders is limited to situations
in which the Trust's assets plus its insurance coverage would be insufficient
to satisfy the claims against the Trust and its shareholders.
RESTRICTIONS ON OWNERSHIP
As discussed below under "Description of Common Shares--REIT Qualification,"
for the Trust 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
shares may be owned, directly or constructively, 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 Trust in meeting this requirement, the Trust may
take certain other actions to limit the beneficial ownership, directly or
indirectly, by a single person of more than 9.8% of the Trust's outstanding
equity securities, including any Preferred Shares of the Trust. Therefore, the
Statement of Designations for each series of Preferred Shares will contain
certain provisions restricting the ownership and transfer of the Preferred
Shares. The applicable Prospectus Supplement will specify any additional
ownership limitation relating to a series of Preferred Shares.
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DESCRIPTION OF COMMON SHARES
GENERAL
The Common Shares are issued pursuant to the Declaration of Trust. The
Common Shares (no par or stated value) are equal with respect to distribution
and liquidation rights, are not convertible, have no preemptive rights to
subscribe for additional Common Shares, are nonassessable (except as described
under "Shareholder Liability" below) and are transferable in the same manner
as shares of a corporation. Each shareholder is entitled to one vote in person
or by proxy for each Common Share registered in his name and has the right to
vote on the election or removal of Trustees, amendments to the Declaration of
Trust, proposals to terminate, reorganize, merge or consolidate the Trust or
to sell or dispose of substantially all of the Trust's property and with
respect to certain business combinations. The Trust will have perpetual
existence unless and until dissolved and terminated. Except with respect to
the foregoing matters, no action taken by the shareholders at any meeting
shall in any way bind the Trustees. The Common Shares offered by the Trust
will be, when issued, fully paid and nonassessable (except as described under
"Shareholder Liability" below).
Without shareholder approval, the Trust may issue an unlimited number of
securities, warrants, rights, or other options to purchase Common Shares and
other securities convertible into Common Shares.
Several provisions in the Declaration of Trust may have the effect of
deterring a takeover of the Trust. These provisions (i) establish the
percentage of outstanding Common Shares required to approve certain matters,
including removal of a Trustee, amendment of any section of the Declaration of
Trust that provides for a shareholder vote, the reorganization, merger,
consolidation, sale or termination of the Trust and a sale of substantially
all of the assets of the Trust, at 80% unless the matter to be acted upon is
approved or recommended by the Board of Trustees in which event the percentage
is 66 2/3%; (ii) restrict ownership of the Trust's outstanding capital shares
by a single person to 9.8% of such capital shares unless otherwise approved by
the Board of Trustees to assist in protecting and preserving the qualification
of the Trust as a real estate investment trust under the Code; and (iii)
include a "fair price" provision that would deter a "two-stage" takeover
transaction by requiring an 80% vote of outstanding Common Shares for certain
defined "business combinations" with shareholders owning more than 9.8% of
Common Shares or their affiliates if the transaction is neither approved by
the Board of Trustees nor meets certain price and procedural conditions.
In addition, the Declaration of Trust includes provisions for (i) the
classification of Trustees into three classes serving three year staggered
terms and (ii) the authorization of Trustees to issue an unlimited number of
Common Shares and to issue additional classes of equity securities in
unlimited numbers with such rights, qualifications, limitations or
restrictions as are stated in the Board of Trustees' resolution establishing
such class of securities.
In 1989, the Trustees adopted a Shareholder Rights Plan (the "Plan"). Under
the Plan, one right was issued for each outstanding Common Share and a right
will be attached to each Share issued in the future. The rights authorize the
holders to purchase Common Shares at a price below market upon the occurrence
of certain events, including, unless approved by the Board of Trustees,
acquisition by a person or group of certain levels of beneficial ownership of
the Trust or a tender offer. The rights are redeemable by the Trust for $.01
and expire in 1999.
REIT QUALIFICATION
The Trust operates in a manner intended to qualify for treatment as a real
estate investment trust under Sections 856 to 860 of the Code. In general, a
REIT that distributes to its shareholders at least 95% of its taxable income
(other than net capital gain) for a taxable year and that meets certain other
conditions will not be taxed on income (including net capital gain)
distributed for that year. If the Trust fails to qualify as a REIT in any
taxable year, it will be taxed as a corporation for that year on all its
income, regardless of whether that income is distributed to shareholders, and
its shareholders will be separately taxed on the amount of any such
distributions.
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Under such circumstances, the Trust also will be disqualified from being
treated as a REIT for the ensuing four taxable years. Failure to qualify as a
REIT could result in the Trust incurring indebtedness and perhaps liquidating
investments in order to pay its taxes.
Among the requirements which must be met in order for the Trust to qualify
as a REIT is that not more than 50% in value of the outstanding capital
shares, including in some circumstances capital shares into which outstanding
securities (including the Securities) might be converted, may be owned
actually or constructively by five or fewer individuals or certain other
entities at any time during the last half of the Trust's taxable year. To
assist the Trust in meeting this requirement, the Trust (a) by lot or other
equitable means, may prevent the transfer of and/or may call for redemption a
number of capital shares sufficient for the continued qualification of the
Trust as a REIT and (b) may refuse to register the transfer of capital shares
and may take certain other actions to limit the beneficial ownership, directly
or indirectly, by a single person of more than 9.8% of the Trust's outstanding
equity securities. Capital shares reserved for issuance upon conversion of any
class of then outstanding convertible securities of the Trust may be
considered outstanding capital shares for purposes of this provision if the
effect thereof would be to cause a single person to own or to be deemed to own
more than 9.8% of the Trust's outstanding capital shares. Without shareholder
approval, the Trust may issue an unlimited number of securities, warrants,
rights or other options to purchase Common Shares and other securities
convertible into Common Shares.
FEDERAL INCOME TAX CONSIDERATIONS
In any year which the Trust qualifies to be taxed as a REIT, distributions
made to its shareholders out of current or accumulated earnings and profits
will be taxed to shareholders as ordinary income except that distributions of
net capital gains designated by the Trust as capital gain dividends will be
taxed as long-term capital gain income to the shareholders. To the extent that
distributions exceed current or accumulated earnings and profits, they will
constitute a return of capital, rather than dividend or capital gain income,
and will reduce the basis for the shareholder's Common Shares with respect to
which the distribution is paid or, to the extent that they exceed such basis,
will be taxed in the same manner as gain from the sale of those Common Shares.
Investors are urged to consult their own tax advisors with respect to the
appropriateness of an investment in the Common Shares and with respect to the
tax consequences arising under the laws of any state, municipality or other
taxing jurisdiction, as well as the Federal tax consequences resulting from
such investor's own tax characteristics. Foreign investors should consult
their own tax advisors concerning the tax consequences to them of an
investment in the Trust, including the possibility of United States income tax
withholding on Trust distributions.
SHAREHOLDER LIABILITY
The Declaration of Trust provides that no shareholder shall be personally
liable in connection with the Trust's property or the affairs of the Trust.
The Declaration of Trust further provides that the Trust shall indemnify and
hold harmless shareholders against all claims and liabilities and related
reasonable expenses to which they may become subject by reason of their being
or having been shareholders. In addition, the Trust is required to, and as a
matter of practice does, insert a clause in its contracts that provides that
shareholders shall not be personally liable thereunder. However, in respect to
tort claims and contract claims where shareholder liability is not so negated,
claims for taxes and certain statutory liability, the shareholders may, in
some jurisdictions, be personally liable to the extent that such claims are
not satisfied by the Trust. The Trust carries public liability insurance that
the Trustees consider adequate. Thus, any risk of personal liability to
shareholders is limited to situations in which the Trust's assets plus its
insurance coverage would be insufficient to satisfy the claims against the
Trust and its shareholders.
REGISTRAR AND TRANSFER AGENT
The Registrar and Transfer Agent for the Common Shares is American Stock
Transfer & Trust Company, New York, New York.
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PLAN OF DISTRIBUTION
The Trust may sell Securities to or through underwriters, and also may sell
Securities directly to other purchasers or through agents.
The distribution of the Securities may be effected from time to time in one
or more transactions at a fixed price or prices, which may be changed, or at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices.
In connection with the sale of Securities, underwriters may receive
compensation from the Trust or from purchasers of Securities, for whom they
may act as agents, in the form of discounts, concessions, or commissions.
Underwriters may sell Securities to or through dealers, and such dealers may
receive compensation in the form of discounts, concessions, or commissions
from the underwriters and/or commissions from the purchasers for whom they may
act as agents. Underwriters, dealers, and agents that participate in the
distribution of Securities may be deemed to be underwriters, and any discounts
or commissions they receive from the Trust, and any profit on the resale of
Securities they realize may be deemed to be underwriting discounts and
commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Trust will be
described, in the Prospectus Supplement.
Unless otherwise specified in the related Prospectus Supplement, each series
of Securities will be a new issue with no established trading market, other
than the Common Shares which are listed on the New York Stock Exchange. Any
Common Shares sold pursuant to a Prospectus Supplement will be listed on such
exchange, subject to official notice of issuance. The Trust may elect to list
any series of Debt Securities or Preferred Shares 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 the trading market for the
Securities.
Under agreements the Trust may enter into, underwriters, dealers, and agents
who participate in the distribution of Securities may be entitled to
indemnification by the Trust against certain liabilities, including
liabilities under the Securities Act.
Underwriters, dealers and agents may engage in transactions with, or perform
services for, or be customers of, the Trust in the ordinary course of
business.
If so indicated in the Prospectus Supplement, the Trust will authorize
underwriters or other persons acting as the Trust's agents to solicit offers
by certain institutions to purchase Securities from the Trust pursuant to
contracts providing for payment and delivery on a future date. Institutions
with which such contracts may be made include commercial and savings banks,
insurance companies, pension funds, investment companies, educational and
charitable institutions and others, but in all cases such institutions must be
approved by the Trust. The obligations of any purchaser under any such
contract will be subject to the condition that the purchase of the Securities
shall not at the time of delivery be prohibited under the laws of the
jurisdiction to which such purchaser is subject. The underwriters and such
other agents will not have any responsibility in respect of the validity or
performance of such contracts.
LEGAL OPINIONS
The legality of the Securities offered hereby is being passed upon for the
Trust by Kirkpatrick & Lockhart LLP, 1800 M Street, N.W., Washington, D.C.
20036. Certain REIT tax matters relating to the Trust are being passed upon by
Goodwin, Procter & Hoar, Exchange Place, Boston, Massachusetts 02109. Brown &
Wood, One World Trade Center, New York, New York 10048-0557 will act as
counsel to any underwriters, dealers or agents.
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EXPERTS
The Consolidated FInancial Statements and Schedules of the Trust as of
December 31, 1994 and 1993 and for each of the years in the three year period
ended December 31, 1994 incorporated herein by reference have been
incorporated herein in reliance on the reports dated February 10, 1995 of
Grant Thornton LLP, independent certified public accountants, also
incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
With respect to the unaudited interim financial information included in the
Trust's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1995
and June 30, 1995 which are incorporated herein by reference, Grant Thornton
LLP has applied limited procedures in accordance with professional standards
for a review of such information. However, as stated in their reports dated
May 5, 1995 and August 8, 1995 included in the Trust's Quarterly Reports on
Form 10-Q for the quarters ended March 31, 1995 and June 30, 1995 and
incorporated by reference herein, they did not audit and they do not express
an opinion on that interim financial information. Accordingly, the degree of
reliance on their reports on such information should be restricted in light of
the limited nature of the review procedures applied. Grant Thornton LLP is not
subject to the liability provisions of Section 11 of the Securities Act of
1933 for their reports on the unaudited interim financial information because
those reports are not "reports" or a "part" of the registration statement
prepared or certified by an accountant within the meaning of Sections 7 and 11
of the Securities Act.
The Statement of Revenue and Certain Expenses of Sidcor Finley Associates
for the year ended December 31, 1994, included in the Trust's Current Report
on Form 8-K filed with the Commission on September 22, 1995, incorporated by
reference herein, has been incorporated herein in reliance on the report dated
June 13, 1995 of Warady & Davis LLP, independent certified public accountants,
also incorporated by reference herein, and upon the authority of said firm as
experts in accounting and auditing.
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