HEALTH CARE REIT, INC. S-3ASR
As filed with the Securities and Exchange Commission on May 12, 2006
Registration
No. 333-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
HEALTH CARE REIT, INC.
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE
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34-1096634 |
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(State or Other Jurisdiction of
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(I.R.S. Employer Identification |
Incorporation or Organization)
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Number) |
One SeaGate, Suite 1500
Toledo, Ohio 43604
(419) 247-2800
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)
George L. Chapman
Chairman of the Board and Chief Executive Officer
Health Care REIT, Inc.
One SeaGate, Suite 1500
Toledo, Ohio 43604
(419) 247-2800
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copy to:
Mary Ellen Pisanelli, Esquire
Shumaker, Loop & Kendrick, LLP
North Courthouse Square
1000 Jackson
Toledo, Ohio 43624
(419) 241-9000
Approximate date of commencement of proposed sale to the public: From time to time after the
effective date of this Registration Statement.
If only the securities being registered on this Form are being offered pursuant to dividend or
interest reinvestment plans, please check the following box: o
If any of the securities being registered on this Form are to be offered on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in
connection with dividend or interest reinvestment plans, check the following box: þ
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b)
under the Securities Act, please check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act,
check the following box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. o
If this Form is a registration statement pursuant to General Instruction I.D. or a post-effective
amendment thereto that shall become effective upon filing with the Commission pursuant to Rule
462(e) under the Securities Act, check the following box. þ
If this Form is a post-effective amendment to a registration statement filed pursuant to General
Instruction I.D. filed to register additional securities or additional classes of securities
pursuant to Rule 413(b) under the Securities Act, check the following box. o
CALCULATION OF REGISTRATION FEE
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Title of Each Class of |
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Amount to be Registered/Proposed Maximum Offering Price Per Unit/ |
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Securities to Be Registered |
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Proposed Maximum Aggregate Offering Price/Amount of Registration Fee (1) |
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Debt Securities |
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Common Stock, $1.00 par value |
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Preferred Stock, $1.00 par value |
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Depositary Shares representing Preferred Stock (2) |
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Warrants |
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Units(3) |
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An indeterminate aggregate offering price or number of securities of each identified class
is being registered as may from time to time be offered at indeterminate prices. Separate
consideration may or may not be received for securities that are issuable on exercise, conversion
or exchange of other securities. In accordance with Rules 456(b) and 457(r), the registrant is
deferring payment of all of the registration fee, except for $39,698.13 that has already been paid
with respect to $725,000,000 aggregate initial offering price of securities that were previously
registered pursuant to Registration Statement No. 333-120917 and were not sold thereunder. |
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Each Depositary Share will be issued under a deposit agreement, will represent an interest in a
fractional share of Preferred Stock and will be evidenced by a depositary receipt. |
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Units consist of any combination of one or more Debt Securities or other securities, including
Preferred Stock, Depositary Shares, Common Stock, Warrants or any combination thereof. |
HEALTH CARE REIT, INC.
DEBT SECURITIES
COMMON STOCK
PREFERRED STOCK
DEPOSITARY SHARES
WARRANTS
UNITS
We may periodically offer and sell, in one or more offerings:
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debt securities |
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shares of common stock |
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shares of preferred stock |
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depositary shares |
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warrants to purchase debt securities, preferred stock, depositary shares or common stock |
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units consisting of one or more debt securities or other securities |
We may offer these securities from time to time on terms we will determine at the time of
offering. We will provide the specific terms of the securities being offered in supplements to
this prospectus prepared in connection with each offering. You should read this prospectus and the
supplement for the specific security being offered before you invest.
We may offer these securities directly, through agents we designate periodically, or to or
through underwriters or dealers. If designated agents or underwriters are involved in the sale of
any of the securities, we will disclose in the prospectus supplement their names, any applicable
purchase price, fee, compensation arrangement between or among them, and our net proceeds from such
sale. See Plan of Distribution. No securities may be sold without the delivery of the
applicable prospectus supplement describing the securities and the method and terms of their
offering.
Our shares of common stock are listed on the New York Stock Exchange under the symbol HCN.
Our executive offices are located at One SeaGate, Suite 1500, Toledo, Ohio 43604, telephone number:
419-247-2800, facsimile: 419-247-2826, and Web site: www.hcreit.com. Unless
specifically noted otherwise in this prospectus, all references to we, us, our, or the
Company refer to Health Care REIT, Inc. and its subsidiaries.
The information in this prospectus is not complete and may be changed. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
Neither the Securities and Exchange Commission nor any state securities commission has approved or
disapproved these securities, or passed upon the adequacy or accuracy of this prospectus.
Any representation to the contrary is a criminal offense.
The date of this prospectus is May 12, 2006.
TABLE OF CONTENTS
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2
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement we filed with the SEC using a shelf
registration process. Under this shelf process, we may sell any combination of the securities
described in this prospectus from time to time in one or more offerings. This prospectus provides
you only with a general description of the securities we may offer. Each time we sell securities,
we will provide a prospectus supplement containing specific information about the terms of that
offering. The prospectus supplement may also add to, update or change information contained in
this prospectus. You should read both this prospectus and any prospectus supplement together with
additional information described under the heading Where You Can Find Additional Information and
Documents Incorporated By Reference.
You should rely only on the information contained and incorporated by reference in this
prospectus. Neither we nor the underwriters have authorized any other person to provide you with
different or inconsistent information from that contained in this prospectus and the applicable
prospectus supplement. If anyone provides you with different or inconsistent information, you
should not rely on it. You should assume that the information in this prospectus and the
applicable prospectus supplement, as well as information we previously filed with the SEC and
incorporated by reference, is accurate only as of the date on the front cover of this prospectus
and the applicable prospectus supplement. Our business, financial condition, results of operations
and prospects may have changed since those dates.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
AND RISK FACTORS
This prospectus and the documents incorporated by reference in this prospectus contain
forward-looking statements as that term is defined under federal securities laws. These
forward-looking statements include those regarding:
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the possible expansion of our portfolio; |
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the sale of properties; |
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the performance of our operators and properties; |
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our ability to enter into agreements with new viable tenants for properties that we take back from financially troubled
tenants, if any; |
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our ability to make distributions; |
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our policies and plans regarding investments, financings and other matters; |
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our tax status as a real estate investment trust; |
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our ability to appropriately balance the use of debt and equity; |
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our ability to access capital markets or other sources of funds; and |
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our ability to meet earnings guidance. |
For example, when we use words such as may, will, intend, should, believe, expect,
anticipate, project, estimate or similar expressions, we are making forward-looking
statements. Forward-looking statements are not guarantees of future performance and involve risks
and uncertainties. Our expected results may not be achieved, and actual results may differ
materially from our expectations. This may be a result of various factors, including, but not
limited to:
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the status of the economy; |
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the status of capital markets, including prevailing interest rates; |
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serious issues facing the health care industry, including compliance with, and changes to, regulations and payment
policies and operators difficulty in obtaining and maintaining adequate liability and other insurance; |
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changes in financing terms; |
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competition within the health care and senior housing industries; |
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negative developments in the operating results or financial condition of operators, including, but not limited to, their
ability to pay rent and repay loans; |
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our ability to transition or sell facilities with profitable results; |
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the failure of closings to occur as and when anticipated; |
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acts of God affecting our properties; |
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our ability to reinvest sale proceeds at similar rates to assets sold; |
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operator bankruptcies or insolvencies; |
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government regulations affecting Medicare and Medicaid reimbursement rates; |
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liability claims and insurance costs for our operators; |
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unanticipated difficulties and/or expenditures relating to future acquisitions; |
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environmental laws affecting our properties; |
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delays in reinvestment of sale proceeds; |
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changes in rules or practices governing our financial reporting; and |
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other factors, including REIT qualification, anti-takeover provisions and key management personnel. |
Our business is subject to certain risks, which are discussed in our most recent Annual Report
on Form 10-K under the headings Business, Risk Factors and Managements Discussion and
Analysis of Financial Condition and Results of Operations. Updated information relating to such
risks, as well as additional risks specific to the securities to be offered hereby, will be set
forth in the prospectus supplement relating to such offered securities. We assume no obligation to
update or revise any forward-looking statements or to update the reasons why actual results could
differ from those projected in any forward-looking statements.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
This prospectus is part of a registration statement that we have filed with the SEC covering
the securities that may be offered under this prospectus. The registration statement, including
the attached exhibits and schedules, contains additional relevant information about the securities.
Additionally, we file annual, quarterly and current reports, proxy statements and other
information with the SEC, all of which are made available, free of charge, on our Internet Web site
at www.hcreit.com under the heading Investor Relations and the SEC Filings tab as soon
as reasonably practicable after they are filed with, or furnished to, the SEC. You can review our
SEC filings and the registration statement by accessing the SECs Internet site at
http://www.sec.gov. You also may read and copy the registration statement and any reports,
statements or other information on file at the SECs public reference room at 100 F Street, N.E.,
Washington, D.C. 20549. You can request copies of those documents upon payment of a duplicating
fee to the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the operation of
the public reference rooms. Our filings with the SEC are also available through the New York Stock
Exchange, 20 Broad Street, New York, New York 10005.
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This prospectus does not contain all the information set forth in the registration statement.
We have omitted certain parts consistent with SEC rules. For further information, please see the
registration statement.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference the information we file with the SEC, which
means:
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we consider incorporated documents to be part of the prospectus; |
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we may disclose important information to you by referring you to those documents; and |
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information we subsequently file with the SEC will automatically update and supersede the
information in this prospectus. |
This prospectus incorporates by reference the following documents:
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Annual Report on Form 10-K for the year ended December 31, 2005; |
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Definitive Proxy Statement for our 2006 Annual Meeting of Stockholders filed on March 28, 2006; |
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Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2006; |
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Current Report on Form 8-K filed on January 27, 2006; |
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Current Report on Form 8-K filed on February 21, 2006; |
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Current Report on Form 8-K filed on March 23, 2006; |
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Current Report on Form 8-K filed on April 7, 2006 (except that the information
furnished pursuant to Item 7.01 of Form 8-K and the exhibit relating to such information
are not incorporated into this prospectus by reference); |
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Current Report on Form 8-K filed on May 10, 2006; |
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The description of our common stock as set forth in our registration
statement filed under the Exchange Act on Form 8-A on June 17, 1985,
including any amendment or report for the purpose of updating such
description; |
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The description of our 7 7/8% Series D Cumulative Redeemable Preferred
Stock as set forth in our registration statement filed under the
Exchange Act on Form 8-A/A on July 8, 2003, including any amendment or
report for the purpose of updating such description; |
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The description of our 7 5/8% Series F Cumulative Redeemable Preferred
Stock as set forth in our registration statement filed under the
Exchange Act on Form 8-A on September 10, 2004, including any
amendment or report for the purpose of updating such description; and |
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All subsequent documents filed by us under Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act of 1934 after the date of this prospectus
and before the termination of the offering. |
This prospectus summarizes material provisions of contracts and other documents to which we
refer. Since this prospectus may not contain all the information that you may find important, you
should review the full text of those documents. Upon request, we will provide each person
receiving this prospectus a free copy, without exhibits, of any or all documents incorporated by
reference into this prospectus. You may direct such requests to:
Erin C. Ibele, Senior Vice President-Administration and Corporate Secretary
Health Care REIT, Inc.
One SeaGate, Suite 1500
Toledo, Ohio 43604
(419) 247-2800
www.hcreit.com
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THE COMPANY
Health Care REIT, Inc., a Delaware corporation, is a self-administered, equity real estate
investment trust that invests in health care and senior housing facilities. Founded in 1970, we
were the first real estate investment trust to invest exclusively in health care facilities.
As of March 31, 2006, we had $2,918,764,000 of net real estate investments, inclusive of
credit enhancements, in 457 facilities located in 37 states and managed by 55 different operators.
At that date, the portfolio included 32 independent living/continuing care retirement communities,
201 assisted living facilities, 211 skilled nursing facilities and 13 specialty care facilities.
We seek to increase funds from operations and funds available for distribution and to enhance
stockholder value through relationship investing with public and private regionally focused health
care operators. The primary components of this strategy are set forth below.
Relationship Investing. We establish relationships with, and provide financing to, operators
throughout their growth cycles. We target companies with experienced management teams, regionally
focused operations, substantial inside ownership interests or venture capital backing and
significant growth potential.
By maintaining close ties to operators, we are able to structure investments designed to
support an operators business plan and monitor our investments on an ongoing basis. Our
investments are typically structured as master operating leases for the acquisition and development
of facilities in a geographic region. Economic terms typically include annual rate increasers and
fair market value-based purchase options.
Portfolio Management. Portfolio strength is derived from diversity by operator, property
sector and geographic location. We emphasize long-term investment structures that result in a
predictable asset base with attendant recurring income, funds from operations and funds available
for distribution. Generally, master leases have a 12 to 15 year term and mortgage loans provide
three to eight years of prepayment protection. We also regularly monitor the portfolio with our
proprietary database system.
Depth of Management. Our management team is comprised of eight individuals who have an
aggregate of approximately 153 years of experience in health care and real estate finance. The
management team has successfully implemented our investment strategy of emphasizing relationship
financings with strong, emerging operators.
The Portfolio
The following table summarizes our portfolio as of March 31, 2006:
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Investments(1) |
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Percentage of |
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Percentage of |
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Number of |
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Investment per |
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Type of Facility |
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Investments |
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(in thousands) |
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Revenues |
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Facilities |
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Beds/Units |
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Bed/Unit(3) |
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Operators(4) |
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States(4) |
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Independent Living/CCRCs |
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$ |
426,653 |
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15 |
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$ |
9,300 |
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32 |
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4,494 |
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$ |
104,855 |
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13 |
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Assisted Living Facilities |
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974,154 |
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33 |
% |
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28,483 |
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% |
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201 |
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12,343 |
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88,182 |
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23 |
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33 |
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Skilled Nursing Facilities |
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1,323,447 |
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% |
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35,613 |
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% |
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211 |
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28,632 |
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46,523 |
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Specialty Care Facilities |
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194,510 |
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7 |
% |
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4,691 |
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% |
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13 |
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1,312 |
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148,255 |
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Totals |
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2,918,764 |
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% |
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$ |
78,087 |
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% |
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457 |
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46,781 |
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Investments include real estate investments and credit enhancements which amounted to
$2,916,314,000 and $2,450,000, respectively. |
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Revenues include gross revenues and revenues from discontinued operations for the three
months ended March 31, 2006. |
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Investment per Bed/Unit was computed by using the total investment amount of $3,086,218,000
which includes real estate investments, credit enhancements and unfunded construction commitments
for which initial funding has commenced which amounted to $2,916,314,000, $2,450,000 and
$167,454,000, respectively. |
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We have investments in properties located in 37 states and managed by 55 different operators. |
In determining whether to invest in a facility, we focus on the following: (1) the experience
of the tenants or borrowers management team; (2) the historical and projected financial and
operational performance of the facility; (3) the credit of the tenant or
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borrower; (4) the security for the lease or loan; and (5) the capital committed to the facility by
the tenant or borrower. We conduct market research and analysis for all potential investments. In
addition, we review the value of all facilities, the interest rates and covenant requirements of
any debt to be assumed and the anticipated sources of repayment of any existing debt that is not to
be assumed.
Our investments are primarily real property leased to operators under long-term operating
leases or financed with operators under long-term mortgage loans. Construction financing is
provided, but only as part of a long-term operating lease or mortgage loan. Substantially all of
our investments are designed with escalating rate structures. Depending upon market conditions, we
believe that new investments will be available in the future with spreads over our cost of capital
that will generate appropriate returns to our stockholders. Operating leases and mortgage loans
are normally credit enhanced by guaranties and/or letters of credit. Typically, operating leases
are structured as master leases and mortgage loans are cross-defaulted and cross-collateralized
with other mortgage loans, operating leases or agreements between us and the operator and its
affiliates.
We monitor our investments through a variety of methods determined by the type of facility and
operator. Our asset management process includes review of monthly financial statements and other
operating data for each facility, periodic review of operator creditworthiness, periodic facility
inspections and review of covenant compliance relating to licensure, real estate taxes, letters of
credit and other collateral. In monitoring our portfolio, our personnel use a proprietary database
to collect and analyze facility-specific data. Additionally, we conduct extensive research to
ascertain industry trends and risks.
Additional Information
For additional information regarding our business, please see the information under the
heading Business in our most recent Annual Report on Form 10-K, which is incorporated by
reference in this prospectus.
HOW WE INTEND TO USE THE PROCEEDS
Unless otherwise described in a prospectus supplement, we intend to use the net proceeds from
the sale of any securities under this prospectus for general business purposes, which may include
acquisition of and investment in additional properties and the repayment of borrowings under our
credit facilities or other debt. Until the proceeds from a sale of securities by us are applied to
their intended purposes, they may be invested in short-term, investment grade, interest-bearing
securities, certificates of deposit or direct or guaranteed obligations of the United States.
RATIOS OF EARNINGS TO FIXED CHARGES AND
EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth our ratios of earnings to fixed charges and earnings to
combined fixed charges and preferred stock dividends for the periods indicated. The ratio of
earnings to fixed charges was computed by dividing earnings by our fixed charges. The ratio of
earnings to combined fixed charges and preferred stock dividends was computed by dividing earnings
by our combined fixed charges and preferred stock dividends. For purposes of calculating these
ratios, earnings includes income from continuing operations, excluding the equity earnings in a
less than 50% owned subsidiary, plus fixed charges and reduced by capitalized interest. Fixed
charges consists of interest expensed and capitalized and the amortized premiums, discounts and
capitalized expenses related to indebtedness.
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Three Months Ended |
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Year Ended December 31 |
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March 31 |
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2001 |
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2002 |
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2003 |
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2004 |
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2005 |
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2005 |
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2006 |
Consolidated ratio of earnings to fixed charges |
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2.42 |
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2.28 |
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2.15 |
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2.04 |
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1.90 |
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2.08 |
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1.91 |
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Consolidated ratio of earnings to combined
fixed charges and preferred stock dividends |
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1.74 |
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1.79 |
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1.86 |
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1.75 |
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1.52 |
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1.65 |
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1.58 |
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We issued 3,000,000 shares of 8 7/8% Series B Cumulative Redeemable Preferred Stock in
May 1998, and 3,000,000 shares of 9.0% Series C Cumulative Convertible Preferred Stock in January
1999. We issued 4,000,000 shares of 7 7/8% Series D Cumulative Redeemable Preferred Stock in July
2003 and used the proceeds to redeem our outstanding Series B Preferred Stock. During the year
ended December 31, 2002, the holder of our Series C Preferred Stock converted 900,000 shares into
878,049 shares of
8
our common stock, leaving 2,100,000 of such shares outstanding at December 31, 2002. During the
year ended December 31, 2003, the holder of our Series C Preferred Stock converted 2,100,000 shares
into 2,048,781 shares of our common stock, leaving no such shares outstanding at December 31, 2003.
We issued 1,060,000 shares of 6% Series E Cumulative Convertible and Redeemable Preferred Stock in
September 2003. During the year ended December 31, 2003, certain holders of our Series E Preferred
Stock converted 229,556 shares into 175,714 shares of our common stock, leaving 830,444 of such
shares outstanding at December 31, 2003. During the year ended December 31, 2004, certain holders
of our Series E Preferred Stock converted 480,399 shares into 367,724 shares of our common stock,
leaving 350,045 of such shares outstanding at December 31, 2004. During the year ended December
31, 2005, certain holders of our Series E Preferred Stock converted 275,056 shares into 210,541
shares of our common stock, leaving 74,989 of such shares outstanding at December 31, 2005 and
March 31, 2006. We issued 7,000,000 shares of 7 5/8% Series F Cumulative Redeemable Preferred
Stock in September 2004.
GENERAL DESCRIPTION OF THE OFFERED SECURITIES
We may offer under this prospectus one or more of the following categories of our securities:
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debt securities, in one or more series; |
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shares of our common stock, par value $1.00 per share; |
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shares of our preferred stock, par value $1.00 per share, in one or more series; |
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depositary shares, representing interests in our preferred stock, in one or more series; |
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warrants to purchase any of the foregoing securities; and |
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units consisting of any combination of the foregoing securities. |
The terms of any specific offering of securities, including the terms of any units offered,
will be set forth in a prospectus supplement relating to such offering.
Our certificate of incorporation authorizes us to issue 125,000,000 shares of common stock and
25,000,000 shares of preferred stock. Of our preferred stock:
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13,000 shares have been designated as Junior Participating Preferred Stock, Series A; |
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3,000,000 shares have been designated as Series C Cumulative Convertible Preferred Stock; |
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4,000,000 shares have been designated as 7 7/8% Series D Cumulative Redeemable Preferred Stock; |
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1,060,000 shares have been designated as 6% Series E Cumulative Convertible and Redeemable Preferred Stock; and |
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7,000,000 shares have been designated as 7 5/8% Series F Cumulative Redeemable Preferred Stock. |
As of April 30, 2006, we had issued and outstanding 62,116,551 shares of common stock,
4,000,000 shares of Series D Preferred Stock, 74,989 shares of Series E Preferred Stock and
7,000,000 shares of Series F Preferred Stock.
Our common stock is listed on the New York Stock Exchange under the symbol HCN. We intend
to apply to list any additional shares of common stock that are issued and sold hereunder. Our
Series D Preferred Stock and Series F Preferred Stock are listed on the New York Stock Exchange
under the symbols HCN PrD and HCN PrF, respectively. We may apply to list shares of any series
of preferred stock or any depositary shares which are offered and sold hereunder, as described in
the applicable prospectus supplement relating to such preferred stock or depositary shares.
9
DESCRIPTION OF DEBT SECURITIES
The debt securities sold under this prospectus will be our direct obligations, which may be
secured or unsecured, and which may be senior or subordinated indebtedness. The debt securities
may be guaranteed on a secured or unsecured, senior or subordinated basis, by one or more of our
subsidiaries. The debt securities will be issued under one or more indentures between us and a
specified trustee. Any indenture will be subject to and governed by the Trust Indenture Act of
1939, as amended. The statements made in this prospectus relating to any indentures and the debt
securities to be issued under the indentures are summaries of certain anticipated provisions of the
indentures.
The following is a summary of the material terms of our debt securities. Because it is a
summary, it does not contain all of the information that may be important to you. If you want more
information, you should read the form of indenture for senior debt securities and the forms of
indentures for senior subordinated and junior subordinated debt securities which we have filed as
exhibits to the registration statement of which this prospectus is a part. We will file any final
indentures for senior subordinated and junior subordinated debt securities and supplemental
indentures if we issue debt securities of this type. See Where You Can Find Additional
Information. This summary is also subject to and qualified by reference to the descriptions of
the particular terms of the securities described in the applicable prospectus supplement.
General
We may issue debt securities that rank senior, senior subordinated or junior
subordinated. The debt securities that we refer to as senior will be our direct obligations and
will rank equally and ratably in right of payment with our other indebtedness not subordinated. We
may issue debt securities that will be subordinated in right of payment to the prior payment in
full of senior debt, as defined in the applicable prospectus supplement, and may rank equally and
ratably with the other senior subordinated indebtedness. We refer to these as senior subordinated
securities. We may also issue debt securities that may be subordinated in right of payment to the
senior subordinated securities. These would be junior subordinated securities. We have filed
with the registration statement, of which this prospectus is a part, a form of indenture for senior
debt securities and two separate forms of indenture, one for the senior subordinated securities and
one for the junior subordinated securities. We refer to senior subordinated and junior
subordinated securities as subordinated.
We may issue the debt securities without limit as to aggregate principal amount, in one or
more series, in each case as we establish in one or more supplemental indentures. We need not
issue all debt securities of one series at the same time. Unless we otherwise provide, we may
reopen a series, without the consent of the holders of the series, for issuances of additional
securities of that series.
We anticipate that any indenture will provide that we may, but need not, designate more than
one trustee under an indenture, each with respect to one or more series of debt securities. Any
trustee under any indenture may resign or be removed with respect to one or more series of debt
securities, and we may appoint a successor trustee to act with respect to that series. The
applicable prospectus supplement will describe the specific terms relating to the series of debt
securities we will offer, including, where applicable, the following:
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the title and series designation and whether they are senior securities, senior subordinated securities or subordinated
securities; |
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the aggregate principal amount of the securities; |
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the percentage of the principal amount at which we will issue the debt securities and, if other than the principal amount
of the debt securities, the portion of the principal amount of the debt securities payable upon maturity of the debt
securities; |
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if convertible, the securities into which they are convertible, the initial conversion price, the conversion period and any
other terms governing such conversion; |
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the stated maturity date; |
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any fixed or variable interest rate or rates per annum; |
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if other than at the corporate trust office of the trustee, the place where principal, premium, if any, and interest will
be payable and where the debt securities can be surrendered for transfer, exchange or conversion; |
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the date from which interest may accrue and any interest payment dates; |
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any sinking fund requirements; |
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any provisions for redemption, including the redemption price and any remarketing arrangements; |
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any provisions for denomination or payment of the securities in a foreign currency or units of two or more foreign
currencies; |
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the events of default and covenants of such securities, to the extent different from or in addition to those described in
this prospectus; |
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whether we will issue the debt securities in certificated or book-entry form; |
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whether the debt securities will be in registered or bearer form and, if in registered form, the denominations if other
than in even multiples of $1,000 and, if in bearer form, the denominations and terms and conditions relating thereto; |
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whether we will issue any of the debt securities in permanent global form and, if so, the terms and conditions, if any,
upon which interests in the global security may be exchanged, in whole or in part, for the individual debt securities
represented by the global security; |
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the applicability, if any, of the defeasance and covenant defeasance provisions described in this prospectus or any
prospectus supplement; |
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any provisions for payment of additional amounts on the securities in respect of any tax, assessment or governmental charge
and rights for us to redeem the debt securities instead of making this payment; |
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the subordination provisions, if any, relating to the debt securities; |
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if the debt securities are to be issued upon the exercise of debt warrants, the time, manner and place for them to be
authenticated and delivered; |
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whether any of our subsidiaries will be bound by the terms of the indenture, in particular any restrictive covenants; |
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the provisions relating to any security provided for the debt securities; and |
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the provisions relating to any guarantee of the debt securities. |
We may issue debt securities at less than the principal amount payable at maturity. We refer
to these securities as original issue discount securities. If material or applicable, we will
describe in the applicable prospectus supplement special U.S. federal income tax, accounting and
other considerations applicable to original issue discount securities.
Except as may be described in any prospectus supplement, an indenture will not contain any
provisions that would limit our ability to incur indebtedness or that would afford holders of the
debt securities protection in the event of a highly leveraged or similar transaction involving us
or in the event of a change of control. You should review carefully the applicable prospectus
supplement for information with respect to events of default and covenants applicable to the
securities being offered.
Denominations, Interest, Registration and Transfer
Unless otherwise described in the applicable prospectus supplement, we will issue the debt
securities of any series that are registered securities in denominations that are even multiples of
$1,000, other than global securities, which may be of any denomination.
11
Unless otherwise specified in the applicable prospectus supplement, we will pay the interest,
principal and any premium at the corporate trust office of the trustee. At our option, however, we
may make payment of interest by check mailed to the address of the person entitled to the payment
as it appears in the applicable register or by wire transfer of funds to that person at an account
maintained within the United States.
If we do not punctually pay or otherwise provide for interest on any interest payment date,
the defaulted interest will be paid either:
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to the person in whose name the debt security is registered at the
close of business on a special record date the trustee will fix; or |
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in any other lawful manner, all as the applicable indenture describes. |
You may have your debt securities divided into more debt securities of smaller denominations
or combined into fewer debt securities of larger denominations, as long as the total principal
amount is not changed. We call this an exchange. You may exchange or transfer debt securities
at the office of the applicable trustee. The trustee acts as our agent for registering debt
securities in the names of holders and transferring debt securities. We may change this
appointment to another entity or perform it ourselves.
The entity performing the role of maintaining the list of registered holders is called the
registrar. It will also perform transfers. You will not be required to pay a service charge to
transfer or exchange debt securities, but you may be required to pay for any tax or other
governmental charge associated with the exchange or transfer. The registrar will make the transfer
or exchange only if it is satisfied with your proof of ownership.
Merger, Consolidation or Sale of Assets
Under any indenture, we are generally permitted to consolidate or merge with another company.
We are also permitted to sell substantially all of our assets to another company, or to buy
substantially all of the assets of another company. However, we may not take any of these actions
unless the following conditions are met:
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if we merge out of existence or sell our assets, the other company
must be an entity organized under the laws of one of the states of the
United States or the District of Columbia or under United States
federal law and must agree to be legally responsible for our debt
securities; and |
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immediately after the merger, sale of assets or other transaction, we
may not be in default on the debt securities. A default for this
purpose would include any event that would be an event of default if
the requirements regarding notice of default or continuing default for
a specific period of time were disregarded. |
Certain Covenants
Existence. Except as permitted and described above under Merger, Consolidation or Sale of
Assets, we will agree to do all things necessary to preserve and keep our existence, rights and
franchises, provided that it is in our best interests for the conduct of business.
Provisions of Financial Information. To the extent permitted by law, we will agree to file
all annual, quarterly and other reports and financial statements with the SEC and the trustee on or
before the applicable SEC filing dates whether or not we remain required to do so under the
Exchange Act.
Additional Covenants. Any additional or different covenants or modifications to the foregoing
covenants with respect to any series of debt securities will be described in the applicable
prospectus supplement.
Events of Default and Related Matters
Events of Default. The term event of default for any series of debt securities means any of
the following:
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We do not pay the principal or any premium on a debt security of that series within 30 days after its maturity date. |
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We do not pay interest on a debt security of that series within 30 days after its due date. |
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We do not deposit any sinking fund payment for that series within 30 days after its due date. |
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We remain in breach of any other term of the applicable indenture (other than a term added to the indenture solely for the
benefit of another series) for 60 days after we receive a written notice of default from the trustee or holders of at least
a majority in principal amount of debt securities of the affected series specifying the breach and requiring it to be
remedied. |
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We default under any of our other indebtedness in specified amounts after the expiration of any applicable grace period,
which default results in the acceleration of the maturity of such indebtedness. Such default is not an event of default if
the other indebtedness is discharged, or the acceleration is rescinded or annulled, within a period of 10 days after we
receive a written notice from the trustee or holders of at least a majority in principal amount of debt securities of the
affected series specifying the default and requiring that we discharge the other indebtedness or cause the acceleration to
be rescinded or annulled. |
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We or one of our significant subsidiaries, if any, files for bankruptcy or certain other events in bankruptcy, insolvency
or reorganization occur. The term significant subsidiary means each of our significant subsidiaries, if any, as defined
in Regulation S-X under the Securities Act. |
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Any other event of default described in the applicable prospectus supplement occurs. |
Remedies if an Event of Default Occurs. If an event of default has occurred and has not been
cured, the trustee or the holders of at least a majority in principal amount of the debt securities
of the affected series may declare the entire principal amount of all the debt securities of that
series to be due and immediately payable. If an event of default occurs because of certain events
in bankruptcy, insolvency or reorganization, the principal amount of all the debt securities of
that series will be automatically accelerated, without any action by the trustee or any holder. At
any time after the trustee or the holders have accelerated any series of debt securities, but
before a judgment or decree for payment of the money due has been obtained, the holders of at least
a majority in principal amount of the debt securities of the affected series may, under certain
circumstances, rescind and annul such acceleration.
The trustee will be required to give notice to the holders of debt securities within 90 days
after a default under the applicable indenture unless the default has been cured or waived. The
trustee may withhold notice to the holders of any series of debt securities of any default with
respect to that series, except a default in the payment of the principal of or interest on any debt
security of that series, if specified responsible officers of the trustee in good faith determine
that withholding the notice is in the interest of the holders.
Except in cases of default, where the trustee has some special duties, the trustee is not
required to take any action under the applicable indenture at the request of any holders unless the
holders offer the trustee reasonable protection from expenses and liability. We refer to this as
an indemnity. If reasonable indemnity satisfactory to it is provided, the holders of a majority in principal amount
of the outstanding securities of the relevant series may direct the time, method and place of
conducting any lawsuit or other formal legal action seeking any remedy available to the trustee.
These majority holders may also direct the trustee in performing any other action under the
applicable indenture, subject to certain limitations.
Before you bypass the trustee and bring your own lawsuit or other formal legal action or take
other steps to enforce your rights or protect your interests relating to the debt securities, the
following must occur:
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you must give the trustee written notice that an event of default has occurred and remains uncured; |
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the holders of at least a majority in principal amount of all outstanding securities of the relevant series must make a
written request that the trustee take action because of the default, and must offer reasonable indemnity to the trustee
against the cost and other liabilities of taking that action; and |
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the trustee must have not taken action for 60 days after receipt of the notice and offer of indemnity. |
However, you are entitled at any time to bring a lawsuit for the payment of money due on your
security after its due date.
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Every year we will furnish to the trustee a written statement by certain of our officers
certifying that to their knowledge we are in compliance with the applicable indenture, or else
specifying any default.
Modification of an Indenture
There are three types of changes we can make to the indentures and the debt securities:
Changes Requiring Your Approval. First, there are changes we cannot make to your debt
securities without your specific approval. The following is a list of those types of changes:
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change the stated maturity of the principal or interest on a debt security; |
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reduce any amounts due on a debt security; |
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reduce the amount of principal payable upon acceleration of the maturity of a debt security following a default; |
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change the currency of payment on a debt security; |
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impair your right to sue for payment; |
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modify the subordination provisions, if any, in a manner that is adverse to you; |
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reduce the percentage of holders of debt securities whose consent is needed to modify or amend an indenture or to waive
compliance with certain provisions of an indenture; |
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reduce the percentage of holders of debt securities whose consent is needed to waive past defaults or change certain
provisions of the indenture relating to waivers of default; or |
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waive a default or event of default in the payment of principal, interest, or premium, if any, on the debt securities. |
Changes Requiring A Majority Vote. The second type of change is the kind that requires the
vote of holders of debt securities owning a majority of the principal amount of the particular
series affected. Most changes fall into this category, except for clarifying changes and certain
other changes that would not materially adversely affect holders of the debt securities. We
require the same vote to obtain a waiver of a past default; however, we cannot obtain a waiver of a
payment default or any other aspect of an indenture or the debt securities listed in the first
category described above under Changes Requiring Your Approval unless we obtain your individual
consent to the waiver.
Changes Not Requiring Approval. The third type of change does not require any vote by holders
of debt securities. This type is limited to clarifications and certain other changes that would
not materially adversely affect holders of the debt securities.
Further Details Concerning Voting. Debt securities are not considered outstanding, and
therefore the holders of debt securities are not eligible to vote on matters relating thereto if we
have deposited or set aside in trust for such holders money for payment or redemption of debt
securities or if we or one of our affiliates own the debt securities. The holders of debt
securities are also not eligible to vote if the debt securities have been fully defeased as
described below under Discharge, Defeasance and Covenant DefeasanceFull Defeasance.
Discharge, Defeasance and Covenant Defeasance
Discharge. We may discharge some obligations to holders of any series of debt securities 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 trustee, in trust, funds in the
applicable currency in an amount sufficient to pay the debt securities, including any premium and
interest.
Full Defeasance. We can, under particular circumstances, effect a full defeasance of your
series of debt securities. By this we mean we can legally release ourselves from any payment or
other obligations on the debt securities if, among other things, we put in place the arrangements
described below to repay you and deliver certain certificates and opinions to the trustee:
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we must deposit in trust for your benefit and the benefit of all other direct holders of the debt securities a combination
of money or U.S. government or U.S. government agency notes or bonds or, in some circumstances, depositary receipts
representing these notes or bonds, that will generate enough cash to make interest, principal and any other payments on the
debt securities on their various due dates; |
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under current federal income tax law, the deposit and our legal release from the debt securities would be treated as though
we redeemed your debt securities in exchange for your share of the cash and notes or bonds deposited in trust. This
treatment would result in sale or exchange treatment of your notes, which would cause you to recognize gain or loss equal
to the amount described below in U.S. Federal Income Tax ConsiderationsU.S. Federal Income and Estate Taxation of
Holders of Our Debt SecuritiesU.S. HoldersSale, Exchange or Other Disposition of Notes; and |
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we must deliver to the trustee a legal opinion confirming the tax law change described above. |
If we did accomplish full defeasance, you would have to rely solely on the trust deposit for
repayment on the debt securities. You could not look to us for repayment in the unlikely event of
any shortfall. Conversely, the trust deposit would most likely be protected from claims of our
lenders and other creditors if we ever became bankrupt or insolvent. You would also be released
from any subordination provisions.
Covenant Defeasance. Under current federal income tax law, we can make the same type of
deposit described above and be released from some of the restrictive covenants in the debt
securities. This is called covenant defeasance. In that event, you would lose the protection of
those restrictive covenants but would gain the protection of having money and securities set aside
in trust to repay the securities and you would be released from any subordination provisions.
If we did accomplish covenant defeasance, the following provisions of an indenture and the
debt securities would no longer apply:
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any covenants applicable to the series of debt securities and described in the applicable prospectus supplement; |
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any subordination provisions; and |
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certain events of default relating to breach of covenants and acceleration of the maturity of other debt set forth in any
prospectus supplement. |
If we did accomplish covenant defeasance, you could still look to us for repayment of the debt
securities if a shortfall in the trust deposit occurred. If one of the remaining events of default
occurred, for example, our bankruptcy, and the debt securities became immediately due and payable,
there may be a shortfall. Depending on the event causing the default, you may not be able to
obtain payment of the shortfall.
Subordination
We will describe in the applicable prospectus supplement the terms and conditions, if any,
upon which any series of senior subordinated securities or junior subordinated securities is
subordinated to debt securities of another series or to our other indebtedness. The terms will
include a description of:
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the indebtedness ranking senior to the debt securities being offered; |
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the restrictions, if any, on payments to the holders of the debt
securities being offered while a default with respect to the senior
indebtedness is continuing; |
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the restrictions, if any, on payments to the holders of the debt
securities being offered following an event of default; and |
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provisions requiring holders of the debt securities being offered to
remit some payments to holders of senior indebtedness. |
15
Guarantees
Our payment obligations under any series of our debt securities may be guaranteed by some or
all of our subsidiaries. The guarantees may be secured or unsecured and may be senior or
subordinated obligations. The guarantors will be identified and the terms of the guarantees will
be described in the applicable prospectus supplement.
Global Securities
If so set forth in the applicable prospectus supplement, we may issue the debt securities of a
series in whole or in part in the form of one or more global securities that will be deposited with
a depositary identified in the prospectus supplement. We may issue global securities in either
registered or bearer form and in either temporary or permanent form. The specific terms of the
depositary arrangement with respect to any series of debt securities will be described in the
prospectus supplement.
DESCRIPTION OF OUR COMMON STOCK
The following is a summary of certain terms of our common stock. Because this summary is not
complete, you should refer to our certificate of incorporation and by-laws, which documents provide
additional information regarding our common stock. See also Description of Certain Provisions of
Our Certificate of Incorporation and By-Laws below. Copies of our certificate of incorporation
and by-laws, as amended, are incorporated by reference as exhibits to the registration statement of
which this prospectus is a part. This summary is also subject to and qualified by reference to the
description of the particular terms of the securities described in the applicable prospectus
supplement.
Common stockholders are entitled to receive dividends when declared by the board of directors
and after payment of, or provision for, full cumulative dividends on and any required redemptions
of shares of preferred stock then outstanding. Common stockholders have one vote per share, and
there are no cumulative voting rights. If we are voluntarily or involuntarily liquidated or
dissolved, common stockholders are to share ratably in our distributable assets remaining after the
satisfaction of all of our debts and liabilities and the preferred stockholders prior preferential
rights. Common stockholders do not have preemptive rights. The common stock will be, when issued,
fully paid and nonassessable. The common stock is subject to restrictions on transfer under
certain circumstances described under Restrictions on Transfer of Securities below. The transfer
agent for our common stock is Mellon Investor Services LLC.
The rights, preferences and privileges of holders of our common stock are subject to, and may
be adversely affected by, the rights of the holders of shares of any series of our preferred stock
which are outstanding or which we may designate and issue in the future. See Description of our
Preferred Stock below.
DESCRIPTION OF OUR PREFERRED STOCK
The following is a summary description of the material terms of our shares of preferred stock.
Because it is a summary, it does not contain all of the information that may be important to you.
If you want more information, you should read our certificate of incorporation and by-laws, copies
of which are incorporated by reference as exhibits to the registration statement of which this
prospectus is a part. This summary is also subject to and qualified by reference to the
description of the particular terms of the securities described in the applicable prospectus
supplement.
General
Our board of directors or a duly authorized committee thereof will determine the designations,
preferences, limitations and relative rights of our authorized and unissued preferred shares. These
may include:
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the distinctive designation of each series and the number of shares that will constitute the series; |
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the voting rights, if any, of shares of the series; |
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the distribution rate on the shares of the series, any restriction, limitation or condition upon the payment of the
distribution, whether distributions will be cumulative, and the dates on which distributions are payable; |
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if the shares are redeemable, the prices at which, and the terms and conditions on which, the shares of the series may be
redeemed; |
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the purchase or sinking fund provisions, if any, for the purchase or redemption of shares of the series; |
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any preferential amount payable upon shares of the series upon our liquidation or the distribution of our assets; |
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if the shares are convertible, the price or rates of conversion at which, and the terms and conditions on which, the shares
of the series may be converted into other securities; and |
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whether the series can be exchanged, at our option, into debt securities, and the terms and conditions of any permitted
exchange. |
The issuance of preferred shares, or the issuance of rights to purchase preferred shares,
could discourage an unsolicited acquisition proposal. In addition, the rights of holders of common
shares will be subject to, and may be adversely affected by, the rights of holders of any preferred
shares that we may issue in the future.
The following describes some general terms and provisions of the preferred shares to which a
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
our certificate of incorporation, including any applicable certificate of designation, and our
by-laws.
The prospectus supplement will describe the specific terms as to each issuance of preferred
shares, including:
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the description of the preferred shares; |
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the number of preferred shares offered; |
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the offering price of the preferred shares; |
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the distribution rate, when distributions will be paid, or the method of determining the distribution rate if it is based
on a formula or not otherwise fixed; |
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the date from which distributions on the preferred shares shall accumulate; |
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the voting rights, if any, of the holders of the preferred shares; |
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the provisions for any auctioning or remarketing, if any, of the preferred shares; |
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the provision, if any, for redemption or a sinking fund; |
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the liquidation preference per share; |
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any listing of the preferred shares on a securities exchange; |
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whether the preferred shares will be convertible and, if so, the security into which they are convertible and the terms and
conditions of conversion, including the conversion price or the manner of determining it; |
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whether interests in the shares of preferred stock will be represented by depositary shares as more fully described below
under Description of Depositary Shares; |
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a discussion of federal income tax considerations; |
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the relative ranking and preferences of the preferred shares as to distribution and liquidation rights; |
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any limitations on issuance of any preferred shares ranking senior to or on a parity with the series of preferred shares
being offered as to distribution and liquidation rights; |
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any limitations on direct or beneficial ownership and restrictions on transfer, in each case as may be appropriate to
preserve our status as a real estate investment trust; and |
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any other specific terms, preferences, rights, limitations or restrictions of the preferred shares. |
As described under Description of Depositary Shares, we may, at our option, elect to offer
depositary shares evidenced by depositary receipts. If we elect to do this, each depositary
receipt will represent a fractional interest in a share of the particular series of preferred stock
issued and deposited with a depositary. The applicable prospectus supplement will specify that
fractional interest.
Rank
Unless our board of directors otherwise determines and we so specify in the applicable
prospectus supplement, we expect that the preferred shares will, with respect to distribution
rights and rights upon liquidation or dissolution, rank senior to all of our common shares.
Distributions
Holders of preferred shares of each series will be entitled to receive cash and/or share
distributions at the rates and on the dates shown in the applicable prospectus supplement. Even
though the preferred shares may specify a fixed rate of distribution, our board of directors must
authorize and declare those distributions and they may be paid only out of assets legally available
for payment. We will pay each distribution to holders of record as they appear on our share
transfer books on the record dates fixed by our board of directors. In the case of shares of
preferred stock represented by depositary receipts, the records of the depositary referred to under
Description of Depositary Shares will determine the persons to whom dividends are payable.
Distributions on any series of preferred shares may be cumulative or noncumulative, as
provided in the applicable prospectus supplement. We refer to each particular series, for ease of
reference, as the applicable series. Cumulative distributions will be cumulative from and after the
date shown in the applicable prospectus supplement. If our board of directors fails to authorize a
distribution on any applicable series that is noncumulative, the holders will have no right to
receive, and we will have no obligation to pay, a distribution in respect of the applicable
distribution period, whether or not distributions on that series are declared payable in the
future. If the applicable series is entitled to a cumulative distribution, we may not declare, or
pay or set aside for payment, any full distributions on any other series of preferred shares
ranking, as to distributions, on a parity with or junior to the applicable series, unless we
declare, and either pay or set aside for payment, full cumulative distributions on the applicable
series for all past distribution periods and the then current distribution period. If the
applicable series does not have a cumulative distribution, we must declare, and pay or set aside
for payment, full distributions for the then current distribution period only. When distributions
are not paid, or set aside for payment, in full upon any applicable series and the shares of any
other series ranking on a parity as to distributions with the applicable series, we must declare,
and pay or set aside for payment, all distributions upon the applicable series and any other parity
series proportionately, in accordance with accrued and unpaid distributions of the several series.
For these purposes, accrued and unpaid distributions do not include unpaid distribution periods on
noncumulative preferred shares. No interest will be payable in respect of any distribution payment
that may be in arrears.
Except as provided in the immediately preceding paragraph, unless we declare, and pay or set
aside for payment, full cumulative distributions, including for the then current period, on any
cumulative applicable series, we may not declare, or pay or set aside for payment, any
distributions upon common shares or any other equity securities ranking junior to or on a parity
with the applicable series as to distributions or upon liquidation. The foregoing restriction does
not apply to distributions paid in common shares or other equity securities ranking junior to the
applicable series as to distributions and upon liquidation. If the applicable series is
noncumulative, we need only declare, and pay or set aside for payment, the distribution for the
then current period, before declaring distributions on common shares or junior or parity
securities. In addition, under the circumstances that we could not declare a distribution, we may
not redeem, purchase or otherwise acquire for any consideration any common shares or other parity
or junior equity securities, except upon conversion into or exchange for common shares or other
junior equity securities. We may, however, make purchases and redemptions otherwise prohibited
pursuant to certain redemptions or pro rata offers to purchase the outstanding shares of the
applicable series and any other parity series of preferred shares.
We will credit any distribution payment made on an applicable series first against the
earliest accrued but unpaid distribution due with respect to the series.
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Redemption
We may have the right or may be required to redeem one or more series of preferred shares, as
a whole or in part, in each case upon the terms, if any, and at the times and at the redemption
prices shown in the applicable prospectus supplement.
If a series of preferred shares is subject to mandatory redemption, we will specify in the
applicable prospectus supplement the number of shares we are required to redeem, when those
redemptions start, the redemption price, and any other terms and conditions affecting the
redemption. The redemption price will include all accrued and unpaid distributions, except in the
case of noncumulative preferred shares. 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 our issuance of shares of
capital stock, the terms of the preferred shares may provide that, if no shares of such capital
stock shall have been issued or to the extent the net proceeds from any issuance are insufficient
to pay in full the aggregate redemption price then due, the preferred shares will automatically and
mandatorily be converted into shares of the applicable capital stock pursuant to conversion
provisions specified in the applicable prospectus supplement.
Liquidation Preference
The applicable prospectus supplement will show the liquidation preference of the applicable
series. Upon our voluntary or involuntary liquidation, before any distribution may be made to the
holders of our common shares or any other shares of capital stock ranking junior in the
distribution of assets upon any liquidation to the applicable series, the holders of that series
will be entitled to receive, out of our assets legally available for distribution to stockholders,
liquidating distributions in the amount of the liquidation preference, plus an amount equal to all
distributions accrued and unpaid. In the case of a noncumulative applicable series, accrued and
unpaid distributions include only the then current distribution period. Unless otherwise provided
in the applicable prospectus supplement, 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 our remaining assets. If liquidating distributions shall have been made in full to
all holders of preferred shares, our remaining assets will be distributed among the holders of any
other shares of capital stock ranking junior to the preferred shares upon liquidation, according to
their rights and preferences and in each case according to their number of shares.
If, upon any voluntary or involuntary liquidation, our available assets are insufficient to
pay the amount of the liquidating distributions on all outstanding shares of that series and the
corresponding amounts payable on all shares of capital stock ranking on a parity in the
distribution of assets with that series, then the holders of that series and all other equally
ranking shares of capital stock shall share ratably in the distribution in proportion to the full
liquidating distributions to which they would otherwise be entitled. For these purposes, our
consolidation or merger with or into any other corporation or other entity, or the sale, lease or
conveyance of all or substantially all of our property or business, shall not be deemed to
constitute a liquidation.
Voting Rights
Holders of the preferred shares will not have any voting rights, except as described below or
as otherwise from time to time required by law or as specified in the applicable prospectus
supplement. As more fully described under Description of Depositary Shares below, if we elect to
issue depositary shares, each representing a fraction of a share of a series of preferred stock,
each holder thereof will in effect be entitled to a fraction of a vote per depositary share.
Unless otherwise provided for in an applicable series, so long as any preferred shares are
outstanding, we may not, without the affirmative vote or consent of the holders of a majority of
the shares (or such greater vote or consent as is required by the then current rules of any stock
exchange or trading market on which we shall have listed the applicable series of preferred stock
for trading or as otherwise provided in our organizational documents) of each series of preferred
shares outstanding at that time:
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authorize, create or increase the authorized or issued amount of any
class or series of shares of capital stock ranking senior to that
series of preferred shares with respect to distribution and
liquidation rights; |
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reclassify any authorized shares of capital stock into a series of
shares of capital stock ranking senior to that series of preferred
shares with respect to distribution and liquidation rights; |
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create, authorize or issue any security or obligation convertible into
or evidencing the right to purchase any shares of capital stock
ranking senior to that series of preferred shares with respect to
distribution and liquidation rights; and |
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amend, alter or repeal the provisions of our certificate of
incorporation relating to that series of preferred shares that
materially and adversely affects the series of preferred shares. |
The authorization, creation or increase of the authorized or issued amount of any class or
series of shares of capital stock ranking on parity with or junior to a series of preferred shares
with respect to distribution and liquidation rights will not be deemed to materially and adversely
affect that series.
Conversion Rights
We will describe in the applicable prospectus supplement the terms and conditions, if any,
upon which you may, or we may require you to, convert shares of any series of preferred shares into
common shares or any other class or series of shares of capital stock. The terms will include the
number of common shares or other capital stock into which the preferred shares are convertible, the
conversion price or manner of determining it, the conversion period, provisions as to whether
conversion will be at the option of the holders of the series or at our option, the events
requiring an adjustment of the conversion price, and provisions affecting conversion upon the
redemption of shares of the series.
Our Exchange Rights
We will describe in the applicable prospectus supplement the terms and conditions, if any,
upon which we can require you to exchange shares of any series of preferred shares for debt
securities. If an exchange is required, you will receive debt securities with a principal amount
equal to the liquidation preference of the applicable series of preferred shares. The other terms
and provisions of the debt securities will not be materially less favorable to you than those of
the series of preferred shares being exchanged.
DESCRIPTION OF DEPOSITARY SHARES
This section describes the general terms and provisions of shares of preferred stock
represented by depositary shares. The applicable prospectus supplement will describe the specific
terms of the depositary shares offered through that prospectus supplement and any general terms
outlined in this section that will not apply to those depositary shares.
We have summarized in this section certain terms and provisions of the deposit agreement, the
depositary shares and the receipts representing depositary shares. The summary is not complete.
You should read the forms of deposit agreement and depositary receipt that we will file with the
SEC at or before the time of the offering of the depositary shares for additional information
before you buy any depositary shares.
General
We may, at our option, elect to offer fractional interests in shares of preferred stock,
rather than shares of preferred stock. If we exercise this option, we will appoint a depositary to
issue depositary receipts representing those fractional interests. Shares of preferred stock of
each series represented by depositary shares will be deposited under a separate deposit agreement
between us and the depositary. The prospectus supplement relating to a series of depositary shares
will provide the name and address of the depositary. Subject to the terms of the applicable
deposit agreement, each owner of depositary shares will be entitled to all of the dividend, voting,
conversion, redemption, liquidation and other rights and preferences of the shares of preferred
stock represented by those depositary shares.
Depositary receipts issued pursuant to the applicable deposit agreement will evidence
ownership of depositary shares. Upon surrender of depositary receipts at the office of the
depositary, and upon payment of the charges provided in and subject to the terms of the deposit
agreement, a holder of depositary shares will be entitled to receive the shares of preferred stock
underlying the surrendered depositary receipts.
Distributions
A depositary will be required to distribute all dividends or other cash distributions received
in respect of the applicable shares of preferred stock to the record holders of depositary receipts
evidencing the related depositary shares in proportion to the number of depositary receipts owned
by the holders. Fractions will be rounded down to the nearest whole cent.
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If the distribution is other than in cash, a depositary will be required to distribute
property received by it to the record holders of depositary receipts entitled thereto, unless the
depositary determines that it is not feasible to make the distribution. In that case, the
depositary may, with our approval, sell the property and distribute the net proceeds from the sale
to the holders of depositary shares.
Depositary shares that represent shares of preferred stock converted or exchanged will not be
entitled to distributions. The deposit agreement also will contain provisions relating to the
manner in which any subscription or similar rights we offer to holders of shares of preferred stock
will be made available to holders of depositary shares. All distributions will be subject to
obligations of holders to file proofs, certificates and other information and to pay certain
charges and expenses to the depositary.
Withdrawal of Shares of Preferred Stock
You may receive the number of whole shares of your series of preferred stock and any money or
other property represented by your depositary receipts after surrendering your depositary receipts
at the corporate trust office of the depositary. Partial shares of preferred stock will not be
issued. If the depositary shares that you surrender exceed the number of depositary shares that
represent the number of whole shares of preferred stock you wish to withdraw, then the depositary
will deliver to you at the same time a new depositary receipt evidencing the excess number of
depositary shares. Once you have withdrawn your shares of preferred stock, you will not be
entitled to re-deposit those shares of preferred stock under the deposit agreement in order to
receive depositary shares. We do not expect that there will be any public trading market for
withdrawn shares of preferred stock.
Redemption of Depositary Shares
If we redeem a series of the preferred stock underlying the depositary shares, the depositary
will redeem those shares from the proceeds it receives. The redemption price per depositary share
will be equal to the applicable fraction of the redemption price per share payable with respect to
the series of the preferred stock. The redemption date for depositary shares will be the same as
that of the preferred stock. If we are redeeming less than all of the depositary shares, the
depositary will select the depositary shares we are redeeming by lot or pro rata as the depositary
may determine.
After the date fixed for redemption, the depositary shares called for redemption will no
longer be deemed outstanding. All rights of the holders of the depositary shares and the related
depositary receipts will cease at that time, except the right to receive the money or other
property to which the holders of depositary shares were entitled upon redemption. Receipt of the
money or other property is subject to surrender to the depositary of the depositary receipts
evidencing the redeemed depositary shares.
Voting of the Underlying Shares of Preferred Stock
Upon receipt of notice of any meeting at which the holders of the preferred stock are entitled
to vote, a depositary will be required to mail the information contained in the notice of meeting
to the record holders of the depositary shares representing such preferred stock. Each record
holder of depositary receipts on the record date will be entitled to instruct the depositary as to
how the holders depositary shares will be voted. The record date for the depositary shares will
be the same as the record date for the preferred stock. The depositary will vote the shares as you
instruct. We will agree to take all reasonable action that the depositary deems necessary in order
to enable it to vote the preferred stock in that manner. If you do not instruct the depositary how
to vote your shares, the depositary will abstain from voting those shares. The depositary will not
be responsible for any failure to carry out any voting instruction, or for the manner or effect of
any vote, as long as its action or inaction is in good faith and does not result from its
negligence or willful misconduct.
Liquidation Preference
Upon our liquidation, whether voluntary or involuntary, each holder of depositary shares will
be entitled to the fraction of the liquidation preference accorded each share of preferred stock
represented by the depositary shares, as described in the applicable prospectus supplement.
Conversion or Exchange of Shares of Preferred Stock
The depositary shares will not themselves be convertible into or exchangeable for shares of
common stock or preferred stock or any of our other securities or property. Nevertheless, if so
specified in the applicable prospectus supplement, the depositary receipts may be surrendered by
holders to the applicable depositary with written instructions to it to instruct us to cause the
conversion of the preferred stock represented by the depositary shares. Similarly, if so specified
in the applicable prospectus supplement, we may
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require you to surrender all of your depositary receipts to the applicable depositary upon our
requiring the conversion or exchange of the preferred stock represented by the depositary shares
into our debt securities. We will agree that, upon receipt of the instruction and any amounts
payable in connection with the conversion or exchange, we will cause the conversion or exchange
using the same procedures as those provided for delivery of shares of preferred stock to effect the
conversion or exchange. If you are converting only a part of the depositary shares, the depositary
will issue you a new depositary receipt for any unconverted depositary shares.
Amendment and Termination of a Deposit Agreement
We and the applicable depositary are permitted to amend the provisions of the depositary
receipts and the deposit agreement. However, the holders of at least a majority of the applicable
depositary shares then outstanding (or such greater approval as is required by the then current
rules of any stock exchange or trading market on which we shall have listed the applicable
underlying series of preferred stock for trading or as otherwise provided in our organizational
documents) must approve any amendment that adds or increases fees or charges or prejudices an
important right of holders. Every holder of an outstanding depositary receipt at the time any
amendment becomes effective, by continuing to hold the receipt, will be bound by the applicable
deposit agreement, as amended.
Any deposit agreement may be terminated by us upon not less than 30 days prior written notice
to the applicable depositary if (1) the termination is necessary to preserve our status as a REIT
or (2) a majority of each series of preferred stock affected by the termination consents to the
termination. When either event occurs, the depositary will be required to deliver or make
available to each holder of depositary receipts, upon surrender of the depositary receipts held by
the holder, the number of whole or fractional shares of preferred stock as are represented by the
depositary shares evidenced by the depositary receipts, together with any other property held by
the depositary with respect to the depositary receipts. In addition, a deposit agreement will
automatically terminate if:
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all depositary shares have been redeemed; |
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there shall have been a final distribution in respect of the related
preferred stock in connection with our liquidation and the
distribution has been made to the holders of depositary receipts
evidencing the depositary shares underlying the preferred stock; or |
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each related share of preferred stock shall have been converted or
exchanged into securities not represented by depositary shares. |
Charges of a Depositary
We will pay all transfer and other taxes and governmental charges arising solely from the
existence of a deposit agreement. In addition, we will pay the fees and expenses of a depositary in
connection with the initial deposit of the preferred stock and any redemption of preferred stock.
However, holders of depositary receipts will pay any transfer or other governmental charges and the
fees and expenses of a depositary for any duties the holders request to be performed that are
outside of those expressly provided for in the applicable deposit agreement.
Resignation and Removal of a Depositary
A depositary may resign at any time by providing us notice of its election to resign. In
addition, we may at any time remove a depositary. Any resignation or removal will take effect when
we appoint a successor depositary and it accepts the appointment. We must appoint a successor
depositary within 60 days after delivery of the notice of resignation or removal. A depositary
must be a bank or trust company that has its principal office in the United States and a combined
capital and surplus of at least $50 million.
Miscellaneous
A depositary will be required to forward to holders of depositary receipts any reports and
communications from us that it receives with respect to the related shares of preferred stock.
Holders of depository receipts will be able to inspect the transfer books of the depository and the
list of holders of receipts upon reasonable notice. Neither we nor any depositary will be liable
if either party is prevented from or delayed in performing its obligations under a deposit
agreement by law or any circumstances beyond its control. Our obligations and those of the
depositary under a deposit agreement will be limited to performing duties in good faith and without
gross negligence or willful misconduct.
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Neither we nor any depositary will be obligated to prosecute or defend any legal proceeding in
respect of any depositary receipts, depositary shares or related shares of preferred stock unless
satisfactory indemnity is furnished. We and each depositary will be permitted to rely on written
advice of counsel or accountants, on information provided by persons presenting shares of preferred
stock for deposit, by holders of depositary receipts, or by other persons believed in good faith to
be competent to give the information, and on documents believed in good faith to be genuine and
signed by a proper party.
If a depositary receives conflicting claims, requests or instructions from any holder of
depositary receipts, on the one hand, and us, on the other hand, the depositary shall be entitled
to act on the claims, requests or instructions received from us.
DESCRIPTION OF WARRANTS
This section describes the general terms and provisions of the warrants. The applicable
prospectus supplement will describe the specific terms of the warrants offered through that
prospectus supplement and any general terms outlined in this section that will not apply to those
warrants.
We have summarized in this section certain terms and provisions of the warrant agreement and
the warrants. The summary is not complete. You should read the forms of warrant and warrant
agreement that we will file with the SEC at or before the time of the offering of the applicable
series of warrants for additional information before you buy any warrants.
We may issue, together with any other securities being offered or separately, warrants
entitling the holder to purchase from or sell to us, or to receive from us the cash value of the
right to purchase or sell, debt securities, preferred stock, depositary shares or common stock. We
and a warrant agent will enter into a warrant agreement pursuant to which the warrants will be
issued. The warrant agent will act solely as our agent in connection with the warrants and will
not assume any obligation or relationship of agency or trust for or with any holders or beneficial
owners of warrants.
In the case of each series of warrants, the applicable prospectus supplement will describe the
terms of the warrants being offered thereby. These include the following, if applicable:
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the offering price; |
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the number of warrants offered; |
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the securities underlying the warrants; |
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the exercise price, the procedures for exercise of the warrants and
the circumstances, if any, that will cause the warrants to be
automatically exercised; |
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the date on which the warrants will expire; |
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federal income tax consequences; |
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the rights, if any, we have to redeem the warrants; |
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the name of the warrant agent; and |
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the other terms of the warrants. |
Warrants may be exercised at the appropriate office of the warrant agent or any other office
indicated in the applicable prospectus supplement. Before the exercise of warrants, holders will
not have any of the rights of holders of the securities underlying the warrants and will not be
entitled to payments made to holders of those securities.
The warrant agreements may be amended or supplemented without the consent of the holders of
the warrants to which the amendment or supplement applies to effect changes that are not
inconsistent with the provisions of the warrants and that do not adversely affect the interests of
the holders of the warrants. However, any amendment that materially and adversely alters the
rights of the holders of warrants will not be effective unless the holders of at least a majority
of the applicable warrants then outstanding (or such greater approval as is required by the then
current rules of any stock exchange or trading market on which we shall have listed
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the applicable underlying shares of capital stock for trading or as otherwise provided in our
organizational documents) approve the amendment. Every holder of an outstanding warrant at the
time any amendment becomes effective, by continuing to hold the warrant, will be bound by the
applicable warrant agreement, as amended. The prospectus supplement applicable to a particular
series of warrants may provide that certain provisions of the warrants, including the securities
for which they may be exercisable, the exercise price, and the expiration date, may not be altered
without the consent of the holder of each warrant.
DESCRIPTION OF UNITS
We may, from time to time, issue units comprised of one or more of the other securities
that may be offered under this prospectus, in any combination. Each unit will be issued so that
the holder of the unit is also the holder of each security included in the unit. Thus, the holder
of a unit will have the rights and obligations of a holder of each included security. The unit
agreement under which a unit is issued may provide that the securities included in the unit may not
be held or transferred separately at any time, or at any time before a specified date.
Any applicable prospectus supplement will describe:
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the material terms of the units and of the securities comprising the units, including whether and under what circumstances
those securities may be held or transferred separately; |
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any material provisions relating to the issuance, payment, settlement, transfer or exchange of the units or of the
securities comprising the units; |
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any special federal income tax considerations applicable to the units; and |
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any material provisions of the governing unit agreement that differ from those described above. |
RESTRICTIONS ON TRANSFER OF SECURITIES
For us to qualify as a real estate investment trust, not more than 50% in value of our
outstanding capital stock may be owned, directly or indirectly, by five or fewer individuals at any
time during the last half of our taxable year. In order to ensure that this requirement is
satisfied, our by-laws (with respect to our common stock and preferred stock) and our certificates
of designation (for our preferred stock) provide that no person may acquire securities that would
result in the direct or indirect beneficial ownership of more than 9.8% of our common stock or more
than 9.8% in value of our outstanding capital stock by such person. For purposes of application of
such limitations to any person, all options, warrants, convertible securities or other rights to
acquire our common stock held directly or indirectly by such person will be treated as if all such
rights had been exercised. If any securities in excess of this limit are issued or transferred to
any person, such issuance or transfer shall be valid only with respect to such amount of securities
as does not exceed this limit, and such issuance or transfer will be void with respect to the
excess. The board of directors may grant limited exemptions from the ownership restrictions set
forth in the by-laws to specified persons if the board determines that each such limited exemption
is in the best interests of us and our stockholders.
Our by-laws and certificates of designation further provide that, if the foregoing stock
ownership limitations are determined to be invalid by virtue of any legal decision, statute, rule
or regulation, then the transferee of the shares or other securities will be deemed to have acted
as our agent in acquiring the shares or other securities that are in excess of the limit, and will
be deemed to hold such excess shares or securities on our behalf. As the equivalent of treasury
securities for such purposes, the excess securities will not be entitled to any voting rights, will
not be considered to be outstanding for quorum or voting purposes, and will not be entitled to
receive dividends, interest or any other distribution with respect to such securities. Any person
who receives dividends, interest or any other distribution in respect of the excess securities will
hold the same as our agent and for the transferee of the excess securities following a permitted
transfer.
In addition, under our by-laws and certificates of designation, we may refuse to transfer any
shares, passing either by voluntary transfer, by operation of law, or under the last will and
testament of any stockholder, if such transfer would or might, in the opinion of our board of
directors or counsel, disqualify us as a real estate investment trust.
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DESCRIPTION OF CERTAIN PROVISIONS OF OUR CERTIFICATE OF
INCORPORATION AND BY-LAWS
Anti-Takeover Provisions
Our certificate of incorporation and by-laws contain provisions that may have the effect of
discouraging persons from acquiring large blocks of our stock or delaying or preventing a change in
our control. The material provisions that may have such an effect are:
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Classification of our board of directors into three classes with the term of only one class expiring each year. |
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A provision permitting our board of directors to make, amend or repeal our by-laws. |
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Authorization for our board of directors to issue preferred stock in series and to fix the rights and preferences of the
series, including, among other things, whether and to what extent the shares of any series will have voting rights and the
extent of the preferences of the shares of any series with respect to dividends and other matters (see Description of Our
Preferred Stock above). |
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A prohibition on stockholders taking action by written consent in lieu of a meeting. |
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Advance notice procedures with respect to nominations of directors by stockholders and proposals by stockholders of
business at an annual meeting. |
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The grant only to our board of directors of the right to call special meetings of stockholders. |
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Limitations on the number of shares of our capital stock that may be beneficially owned, directly or indirectly, by any one
stockholder (see Restrictions on Transfer of Securities above). |
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Limitations on transactions that involve us and any stockholder who beneficially owns 5% or more of our voting stock (see
Limitations on Transactions Involving Us and Our Stockholders below). |
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A provision permitting amendment by the stockholders of certain of the provisions listed above only by an affirmative vote
of the holders of at least three-quarters of all of the outstanding shares of our voting stock, voting together as a single
class. |
Limitations on Transactions Involving Us and Our Stockholders
Under our by-laws, in addition to any vote otherwise required by law, our certificate of
incorporation or our by-laws, the following transactions will require the affirmative vote of the
holders of at least seventy-five percent of the voting power of our then outstanding shares of
capital stock entitled to vote generally in the election of directors, voting together as a single
class:
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Our merger or consolidation with or into |
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any stockholder that owns 5% or more of our voting stock; or |
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any other corporation or entity which is, or after such merger or consolidation would
be, an affiliate of a stockholder that owns 5% or more of our voting stock. |
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Any sale, lease, exchange, mortgage, pledge, transfer or other disposition of substantially all of our assets, in one
transaction or a series of transactions, to or with any stockholder that owns 5% or more of our voting stock or an
affiliate of any such stockholder. |
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Any reclassification of our securities, including any reverse stock split, or recapitalization or any other transaction
that has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any
class of our equity securities that is directly or indirectly owned by any stockholder that owns 5% or more of our
voting stock or any affiliate of such a stockholder, whether or not the transaction involves such a stockholder. |
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The adoption of any plan or proposal for our liquidation or dissolution proposed by or on behalf of a stockholder that
owns 5% or more of our voting stock or any affiliate of such a stockholder. |
These provisions will not apply to any of the transactions described above if:
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We are at the time of the consummation of the transaction, and at all times throughout the preceding twelve months have
been, directly or indirectly, the owner of a majority of each class of the outstanding equity securities of the 5%
stockholder that is a party to the transaction; or |
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The transaction has been approved by a majority of the members of our board of directors who, at the time such approval
is given, were not affiliates or nominees of the 5% stockholder; or |
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Both of the following conditions have been met: |
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the aggregate amount of the cash and the fair market value, as determined in good faith
by our board of directors, of the consideration other than cash to be received per share
by holders of our voting stock in such transaction shall be at least equal to the
highest per share price paid by the 5% stockholder for any shares of voting stock
acquired by it: |
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within the two-year period immediately prior to the first public announcement
of the proposal of the transaction, or |
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in the transaction in which it became a 5% stockholder, whichever is higher; and |
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the consideration to be received by holders of a particular class of outstanding voting
stock shall be in cash or in the same form as the 5% stockholder previously paid for
shares of such voting stock. If the 5% stockholder paid for shares of any class of
voting stock with varying forms of consideration, the form of consideration to be paid
by the 5% stockholder for such class of voting stock shall be either cash or the form
used to acquire the largest number of shares of such class of voting stock previously
acquired by the stockholder. |
The foregoing summary of certain provisions of our certificate of incorporation and by-laws
does not purport to be complete or to give effect to provisions of statutory or common law. The
foregoing summary is subject to, and qualified in its entirety by reference to, the provisions of
applicable law and our certificate of incorporation and by-laws, copies of which are incorporated
by reference as exhibits to the registration statement of which this prospectus is a part.
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following summary of the taxation of the Company and the material federal tax consequences
to you as a holder of our common stock and debt securities offered under this prospectus is for
general information only and is not tax advice. The applicable prospectus supplement delivered
with this prospectus will provide any necessary information about additional federal income tax
considerations, if any, related to the particular securities being offered. This summary does not
address all aspects of taxation that may be relevant to certain types of holders of stock or
securities (including, but not limited to, insurance companies, tax-exempt entities, financial
institutions or broker-dealers, persons holding shares of common stock as part of a hedging,
integrated conversion or constructive sale transaction or a straddle, traders in securities that
use a mark-to-market method of accounting for their securities, investors in pass-through entities
and foreign corporations and persons who are not citizens or residents of the United States).
This summary does not discuss all of the aspects of U.S. federal income taxation that may be
relevant to you in light of your particular investment or other circumstances. In addition, this
summary does not discuss any state or local income taxation or foreign income taxation or other tax
consequences. This summary is based on current U.S. federal income tax law. Subsequent
developments in U.S. federal income tax law, including changes in law or differing interpretations,
which may be applied retroactively, could have a material effect on the U.S. federal income tax
consequences of purchasing, owning and disposing of our securities as set forth in this summary.
Before you purchase our securities, you should consult your own tax advisor regarding the
particular U.S. federal, state, local, foreign and other tax consequences of acquiring, owning, and
selling of our securities.
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U.S. Federal Income Taxation of the Company as a REIT
General
We elected to be taxed as a real estate investment trust (or REIT) commencing with our first
taxable year. We intend to continue to operate in such a manner as to qualify as a REIT, but there
is no guarantee that we will qualify or remain qualified as a REIT for subsequent years.
Qualification and taxation as a REIT depends upon our ability to meet a variety of qualification
tests imposed under federal income tax law with respect to our income, assets, distribution level
and diversity of share ownership as discussed below under -Qualification as a REIT. There can be
no assurance that we will be owned and organized and will operate in a manner so as to qualify or
remain qualified.
In any year in which we qualify as a REIT, in general, we will not be subject to federal
income tax on that portion of our REIT taxable income or capital gain that is distributed to
stockholders. We may, however, be subject to tax at normal corporate rates on any taxable income
or capital gain not distributed. If we elect to retain and pay income tax on our net long-term
capital gain, stockholders are required to include their proportionate share of our undistributed
long-term capital gain in income, but they will receive a refundable credit for their share of any
taxes paid by us on such gain.
Despite the REIT election, we may be subject to federal income and excise tax as follows:
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To the extent that we do not distribute all of our net capital gain or
distribute at least 90%, but less than 100%, of our REIT taxable
income, as adjusted, we will be subject to tax on the undistributed
amount at regular corporate tax rates; |
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We may be subject to the alternative minimum tax on certain items of
tax preference to the extent that this tax exceeds our regular tax; |
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If we have net income from the sale or other disposition of
foreclosure property that is held primarily for sale to customers in
the ordinary course of business or other non-qualifying income from
foreclosure property, we will be subject to tax at the highest
corporate rate on this income; |
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Any net income from prohibited transactions (which are, in general,
sales or other dispositions of property held primarily for sale to
customers in the ordinary course of business, other than dispositions
of foreclosure property and dispositions of property due to an
involuntary conversion) will be subject to a 100% tax; |
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If we fail to satisfy either the 75% or 95% gross income tests (as
discussed below), but nonetheless maintain our qualification as a REIT
because certain other requirements are met, we will be subject to a
100% tax on an amount equal to (1) the gross income attributable to
the greater of (i) 75% of our gross income over the amount of
qualifying gross income for purposes of the 75% gross income test
(discussed below) or (ii) 95% of our gross income (90% of our gross
income for taxable years beginning on or before October 22, 2004) over
the amount of qualifying gross income for purposes of the 95% gross
income test (discussed below) multiplied by (2) a fraction intended
to reflect our profitability; |
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If we fail to distribute during each year at least the sum of (1) 85%
of our REIT ordinary income for the year, (2) 95% of our REIT capital
gain net income for such year (other than capital gain that we elect
to retain and pay tax on) and (3) any undistributed taxable income
from preceding periods, we will be subject to a 4% excise tax on the
excess of such required distribution over amounts actually
distributed; and |
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We will also be subject to a tax of 100% on the amount of any rents
from real property, deductions or excess interest paid to us by any of
our taxable REIT subsidiaries that would be reduced through
reallocation under certain federal income tax principles in order to
more clearly reflect income of the taxable REIT subsidiary. See
-Other Tax Considerations-Investments in Taxable REIT Subsidiaries. |
If we acquire any assets from a corporation which is or has been a C corporation in a
carryover basis transaction, we could be liable for specified liabilities that are inherited from
the C corporation. A C corporation is generally defined as a corporation that is required to
pay full corporate level federal income tax. If we recognize gain on the disposition of the assets
during the 10-year period beginning on the date on which the assets were acquired by us, then to
the extent of the assets built-in gain (i.e., the excess
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of the fair market value of the asset over the adjusted tax basis in the asset, in each case
determined as of the beginning of the 10-year period), we will be subject to tax on the gain at the
highest regular corporate rate applicable. The results described in this paragraph with respect to
the recognition of built-in gain assume that the built-in gain assets, at the time the built-in
gain assets were subject to a conversion transaction (either where a C corporation elected REIT
status or a REIT acquired the assets from a C corporation), were not treated as sold to an
unrelated party and gain recognized.
Qualification as a REIT
A REIT is defined as a corporation, trust or association:
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which is managed by one or more trustees or directors; |
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the beneficial ownership of which is evidenced by transferable shares or by
transferable certificates of beneficial interest; |
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which would be taxable as a domestic corporation but for the federal income
tax law relating to REITs; |
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which is neither a financial institution nor an insurance company; |
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the beneficial ownership of which is held by 100 or more persons in each
taxable year of the REIT except for its first taxable year; |
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not more than 50% in value of the outstanding stock of which is owned during
the last half of each taxable year, excluding its first taxable year, directly or
indirectly, by or for five or fewer individuals (which includes certain entities) (the
Five or Fewer Requirement); and |
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which meets certain income and asset tests described below. |
Conditions (1) to (4), inclusive, must be met during the entire taxable year and condition (5)
must be met during at least 335 days of a taxable year of 12 months or during a proportionate part
of a taxable year of less than 12 months. For purposes of conditions (5) and (6), pension funds
and certain other tax-exempt entities are treated as individuals, subject to a look-through
exception in the case of condition (6).
Based on publicly available information, we believe we have satisfied the share ownership
requirements set forth in (5) and (6) above. In addition, Article VI of our Amended and Restated
By-Laws provides for restrictions regarding ownership and transfer of shares. These restrictions
are intended to assist us in continuing to satisfy the share ownership requirements described in
(5) and (6) above. These restrictions, however, may not ensure that we will, in all cases, be able
to satisfy the share ownership requirements described in (5) and (6) above.
We have complied with, and will continue to comply with, regulatory rules to send annual
letters to certain of our stockholders requesting information regarding the actual ownership of our
stock. If despite sending the annual letters, we do not know, or after exercising reasonable
diligence would not have known, whether we failed to meet the Five or Fewer Requirement, we will be
treated as having met the Five or Fewer Requirement. If we fail to comply with these regulatory
rules, we will be subject to a monetary penalty. If our failure to comply were due to intentional
disregard of the requirement, the penalty would be increased. However, if our failure to comply
were due to reasonable cause and not willful neglect, no penalty would be imposed.
We may own a number of properties through wholly owned subsidiaries. A corporation will
qualify as a qualified REIT subsidiary if 100% of its stock is owned by a REIT and the REIT does
not elect to treat the subsidiary as a taxable REIT subsidiary. A qualified REIT subsidiary will
not be treated as a separate corporation, and all assets, liabilities and items of income,
deductions and credits of a qualified REIT subsidiary will be treated as assets, liabilities and
items (as the case may be) of the REIT. A qualified REIT subsidiary is not subject to federal
income tax, and our ownership of the voting stock of a qualified REIT subsidiary will not violate
the restrictions against ownership of securities of any one issuer which constitute more than 10%
of the value or total voting power of such issuer or more than 5% of the value of our total assets,
as described below under Asset Tests.
If we invest in a partnership, a limited liability company or a trust taxed as a partnership
or as a disregarded entity, we will be deemed to own a proportionate share of the partnerships,
limited liability companys or trusts assets. Likewise, we will be treated as receiving our share
of the income and loss of the partnership, limited liability company or trust, and the gross income
will retain the
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same character in our hands as it has in the hands of the partnership, limited liability
company or trust. These look-through rules apply for purposes of the income tests and assets
tests described below.
Income Tests. There are two separate percentage tests relating to our sources of gross income
that we must satisfy for each taxable year.
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At least 75% of our gross income (excluding gross income from certain
sales of property held primarily for sale) must be directly or
indirectly derived each taxable year from rents from real property,
other income from investments relating to real property or mortgages
on real property or certain income from qualified temporary
investments. |
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At least 95% of our gross income (excluding gross income from certain
sales of property held primarily for sale) must be directly or
indirectly derived each taxable year from any of the sources
qualifying for the 75% gross income test and from dividends (including
dividends from taxable REIT subsidiaries) and interest. |
For taxable years beginning on or before October 22, 2004, (i) payments to us under an
interest rate swap or cap agreement, option, futures contract, forward rate agreement or any
similar financial instrument entered into by us to reduce interest rate risk on indebtedness
incurred or to be incurred and (ii) gain from the sale or other disposition of any such investment
are treated as income qualifying under the 95% gross income test. As to transactions entered into
in taxable years beginning after October 22, 2004, any of our income from a clearly identified
hedging transaction that is entered into by us in the normal course of business, directly or
indirectly, to manage the risk of interest rate movements, price changes or currency fluctuations
with respect to borrowings or obligations incurred or to be incurred by us, or such other risks
that are prescribed by the Internal Revenue Service, is excluded from the 95% gross income test.
In general, a hedging transaction is clearly identified if (i) the transaction is identified as a
hedging transaction before the end of the day on which it is entered into and (ii) the items or
risks being hedged are identified substantially contemporaneously with the hedging transaction.
An identification is not substantially contemporaneous if it is made more than 35 days after
entering into the hedging transaction.
Rents received by us will qualify as rents from real property for purposes of satisfying the
gross income tests for a REIT only if several conditions are met:
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The amount of rent must not be based in whole or in part on the income
or profits of any person, although rents generally will not be
excluded merely because they are based on a fixed percentage or
percentages of receipts or sales. |
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Rents received from a tenant will not qualify as rents from real
property if the REIT, or an owner of 10% or more of the REIT, also
directly or constructively owns 10% or more of the tenant, unless the
tenant is our taxable REIT subsidiary and certain other requirements
are met with respect to the real property being rented. |
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If rent attributable to personal property leased in connection with a
lease of real property is greater than 15% of the total rent received
under the lease, then the portion of rent attributable to such
personal property will not qualify as rents from real property. |
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For rents to qualify as rents from real property, we generally must
not furnish or render services to tenants, other than through a
taxable REIT subsidiary or an independent contractor from whom we
derive no income, except that we may directly provide services that
are usually or customarily rendered in the geographic area in which
the property is located in connection with the rental of real property
for occupancy only, or are not otherwise considered rendered to the
occupant for his convenience. |
For taxable years beginning after August 5, 1997, a REIT has been permitted to render a de
minimis amount of impermissible services to tenants and still treat amounts received with respect
to that property as rent from real property. The amount received or accrued by the REIT during the
taxable year for the impermissible services with respect to a property may not exceed 1% of all
amounts received or accrued by the REIT directly or indirectly from the property. The amount
received for any service or management operation for this purpose shall be deemed to be not less
than 150% of the direct cost of the REIT in furnishing or rendering the service or providing the
management or operation. Furthermore, impermissible services may be furnished to tenants by a
taxable REIT subsidiary subject to certain conditions, and we may still treat rents received with
respect to the property as rent from real property.
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The term interest generally does not include any amount if the determination of the amount
depends in whole or in part on the income or profits of any person, although an amount generally
will not be excluded from the term interest solely by reason of being based on a fixed percentage
of receipts or sales.
If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year,
we may nevertheless qualify as a REIT for such year if we are eligible for relief. For taxable
years beginning on or before October 22, 2004, these relief provisions generally will be available
if (a) our failure to meet such tests was due to reasonable cause and not due to willful neglect;
(b) we attach a schedule of the sources of our income to our return; and (c) any incorrect
information on the schedule was not due to fraud with intent to evade tax. For taxable years
beginning after October 22, 2004, these relief provisions generally will be available if (a)
following our identification of the failure, we file a schedule for such taxable year describing
each item of our gross income and (b) the failure to meet such tests was due to reasonable cause
and not due to willful neglect.
It is not now possible to determine the circumstances under which we may be entitled to the
benefit of these relief provisions. If these relief provisions apply, a 100% tax is imposed on an
amount equal to (a) the gross income attributable to (i) 75% of our gross income over the amount of
qualifying gross income for purposes of the 75% income test and (ii) 95% of our gross income (90%
of our gross income for taxable years beginning on or before October 22, 2004) over the amount of
qualifying gross income for purposes of the 95% income test, multiplied by (b) a fraction intended
to reflect our profitability.
Asset Tests. Within 30 days after the close of each quarter of our taxable year, we must also
satisfy several tests relating to the nature and diversification of our assets determined in
accordance with generally accepted accounting principles. At least 75% of the value of our total
assets must be represented by real estate assets, cash, cash items (including receivables arising
in the ordinary course of our operation), government securities and qualified temporary
investments. Although the remaining 25% of our assets generally may be invested without
restriction, we are prohibited from owning securities representing more than 10% of either the vote
(the 10% vote test) or value (the 10% value test) of the outstanding securities of any issuer
other than a qualified REIT subsidiary, another REIT or a taxable REIT subsidiary. Further, no
more than 20% of the total assets may be represented by securities of one or more taxable REIT
subsidiaries (the 20% asset test) and no more than 5% of the value of our total assets may be
represented by securities of any non-governmental issuer other than a qualified REIT subsidiary
(the 5% asset test), another REIT or a taxable REIT subsidiary. Each of the 10% vote test, the
10% value test and the 20% and 5% asset tests must be satisfied at the end of each quarter. There
are special rules which provide relief if the value related tests are not satisfied due to changes
in the value of the assets of a REIT.
For taxable years beginning after December 31, 2000, certain items are excluded from the 10%
value test, including (i) straight debt securities of an issuer (including straight debt that
provides certain contingent payments); (ii) any loan to an individual or an estate; (iii) any
rental agreement described in Section 467 of the Internal Revenue Code, other than with a related
person; (iv) any obligation to pay rents from real property; (v) certain securities issued by a
state or any subdivision thereof, the District of Columbia, a foreign government, or any political
subdivision thereof, or the Commonwealth of Puerto Rico; (vi) any security issued by a REIT; and
(vii) any other arrangement that, as determined by the Secretary of the Treasury, is excepted from
the definition of security (excluded securities). Special rules apply to straight debt
securities issued by corporations and entities taxable as partnerships for federal income tax
purposes. If a REIT, or its taxable REIT subsidiary, holds (i) straight debt securities of a
corporate or partnership issuer and (ii) securities of such issuer that are not excluded securities
and have an aggregate value greater than 1% of such issuers outstanding securities, the straight
debt securities will be included in the 10% value test.
For taxable years beginning after December 31, 2000, a REITs interest as a partner in a
partnership is not treated as a security for purposes of applying the 10% value test to securities
issued by the partnership. Further, any debt instrument issued by a partnership will not be a
security for purposes of applying the 10% value test (i) to the extent of the REITs interest as a
partner in the partnership and (ii) if at least 75% of the partnerships gross income (excluding
gross income from prohibited transactions) would qualify for the 75% gross income test. For
taxable years beginning after October 22, 2004, for purposes of the 10% value test, a REITs
interest in a partnerships assets is the REITs proportionate interest in any securities issued by
the partnership (other than the excluded securities described in the preceding paragraph).
With respect to corrections of failures for which the requirements for corrections are
satisfied after October 22, 2004, regardless of whether such failures occurred in taxable years
beginning on, before or after such date, as to violations of the 10% vote test, the 10% value test
or the 5% asset test, a REIT may avoid disqualification as a REIT by disposing of sufficient assets
to cure a violation that does not exceed the lesser of 1% of the REITs assets at the end of the
relevant quarter or $10,000,000, provided that the disposition occurs within six months following
the last day of the quarter in which the REIT first identified the assets. For violations of any
of the REIT
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asset tests due to reasonable cause and not willful neglect that exceed the thresholds
described in the preceding sentence, a REIT can avoid disqualification as a REIT after the close of
a taxable quarter by taking certain steps, including disposition of sufficient assets within the
six month period described above to meet the applicable asset test, paying a tax equal to the
greater of $50,000 or the highest corporate tax rate multiplied by the net income generated by the
non-qualifying assets during the period of time that the assets were held as non-qualifying assets
and filing a schedule with the Internal Revenue Service that describes the non-qualifying assets.
Investments in Taxable REIT Subsidiaries. For taxable years beginning after December 31,
2000, REITs may own more than 10% of the voting power and value of securities in taxable REIT
subsidiaries. We and any taxable corporate entity in which we own an interest are allowed to
jointly elect to treat such entity as a taxable REIT subsidiary.
Several of our subsidiaries have elected to be treated as a taxable REIT subsidiary. Taxable
REIT subsidiaries are subject to full corporate level federal taxation on their earnings but are
permitted to engage in certain types of activities that cannot be performed directly by REITs
without jeopardizing their REIT status. Our taxable REIT subsidiaries will attempt to minimize the
amount of these taxes, but there can be no assurance whether or the extent to which measures taken
to minimize taxes will be successful. To the extent our taxable REIT subsidiaries are required to
pay federal, state or local taxes, the cash available for distribution as dividends to us from our
taxable REIT subsidiaries will be reduced.
The amount of interest on related-party debt that a taxable REIT subsidiary may deduct is
limited. Further, a 100% tax applies to any interest payments by a taxable REIT subsidiary to its
affiliated REIT to the extent the interest rate is not commercially reasonable. A taxable REIT
subsidiary is permitted to deduct interest payments to unrelated parties without any of these
restrictions.
The Internal Revenue Service may reallocate costs between a REIT and its taxable REIT
subsidiary where there is a lack of arms-length dealing between the parties. Any deductible
expenses allocated away from a taxable REIT subsidiary would increase its tax liability. Further,
any amount by which a REIT understates its deductions and overstates those of its taxable REIT
subsidiary will, subject to certain exceptions, be subject to a 100% tax. Additional taxable REIT
subsidiary elections may be made in the future for additional entities in which we own an interest.
Annual Distribution Requirements. In order to avoid being taxed as a regular corporation, we
are required to make distributions (other than capital gain distributions) to our stockholders
which qualify for the dividends paid deduction in an amount at least equal to (A) the sum of (i)
90% of our REIT taxable income (computed without regard to the dividends paid deduction and our
net capital gain) and (ii) 90% of the after-tax net income, if any, from foreclosure property,
minus (B) a portion of certain items of non-cash income. These distributions must be paid in the
taxable year to which they relate, or in the following taxable year if declared before we timely
file our tax return for that year and if paid on or before the first regular distribution payment
after such declaration. The amount distributed must not be preferential. This means that every
stockholder of the class of stock to which a distribution is made must be treated the same as every
other stockholder of that class, and no class of stock may be treated otherwise than in accordance
with its dividend rights as a class. To the extent that we do not distribute all of our net
capital gain or distribute at least 90%, but less than 100%, of our REIT taxable income, as
adjusted, we will be subject to tax on the undistributed amount at regular corporate tax rates.
Finally, as discussed above, we may be subject to an excise tax if we fail to meet certain other
distribution requirements. We intend to make timely distributions sufficient to satisfy these
annual distribution requirements.
It is possible that, from time to time, we may not have sufficient cash or other liquid assets
to meet the 90% distribution requirement, or to distribute such greater amount as may be necessary
to avoid income and excise taxation, due to, among other things, (a) timing differences between (i)
the actual receipt of income and actual payment of deductible expenses and (ii) the inclusion of
income and deduction of expenses in arriving at our taxable income, or (b) the payment of severance
benefits that may not be deductible to us. In the event that timing differences occur, we may find
it necessary to arrange for borrowings or, if possible, pay dividends in the form of taxable stock
dividends in order to meet the distribution requirement.
Under certain circumstances, in the event of a deficiency determined by the Internal Revenue
Service, we may be able to rectify a resulting failure to meet the distribution requirement for a
year by paying deficiency dividends to stockholders in a later year, which may be included in our
deduction for distributions paid for the earlier year. Thus, we may be able to avoid being taxed
on amounts distributed as deficiency distributions; however, we will be required to pay applicable
penalties and interest based upon the amount of any deduction taken for deficiency distributions.
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Failure to Qualify as a REIT
If we fail to qualify for taxation as a REIT in any taxable year, we will be subject to
federal income tax, including any applicable alternative minimum tax, on our taxable income at
regular corporate rates. Distributions to stockholders in any year in which we fail to qualify as
a REIT will not be deductible nor will any particular amount of distributions be required to be
made in any year. All distributions to stockholders will be taxable as ordinary income to the
extent of current and accumulated earnings and profits allocable to these distributions and,
subject to certain limitations, will be eligible for the dividends received deduction for corporate
stockholders. Unless entitled to relief under specific statutory provisions, we also will be
disqualified from taxation as a REIT for the four taxable years following the year during which
qualification was lost. It is not possible to state whether in all circumstances we would be
entitled to statutory relief. Failure to qualify for even one year could result in our need to
incur indebtedness or liquidate investments in order to pay potentially significant resulting tax
liabilities.
In
addition to the relief described above under Income
Tests and Asset Tests, relief is
available in the event that we violate a provision of the Internal Revenue Code that would result
in our failure to qualify as a REIT if (i) the violation is due to reasonable cause and not due to
willful neglect, (ii) we pay a penalty of $50,000 for each failure to satisfy the provision, and
(iii) the violation does not include a violation described under
Income Tests or Asset Tests
above. It is not now possible to determine the circumstances under which we may be entitled to the
benefit of these relief provisions.
U.S. Federal Income Taxation of Holders of Our Stock
Treatment of Taxable U.S. Stockholders
The following summary applies to you only if you are a U.S. stockholder. A U.S.
stockholder is a stockholder of shares of stock who, for United States federal income tax
purposes, is:
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a citizen or resident of the United States; |
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a corporation, partnership, or other entity classified as a corporation or partnership for these purposes, created or
organized in or under the laws of the United States or of any political subdivision of the United States, including any
state; |
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an estate, the income of which is subject to United States federal income taxation regardless of its source; or |
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a trust, if, in general, a U.S. court is able to exercise primary supervision over the trusts administration and one or
more U.S. persons, within the meaning of the Internal Revenue Code, has the authority to control all of the trusts
substantial decisions. |
So long as we qualify for taxation as a REIT, distributions on shares of our stock made out of
the current or accumulated earnings and profits allocable to these distributions (and not
designated as capital gain dividends) will be includable as ordinary income for federal income tax
purposes. None of these distributions will be eligible for the dividends received deduction for
U.S. corporate stockholders.
Generally, for taxable years ending after May 6, 2003 through December 31, 2008, the maximum
marginal rate of tax payable by individuals on dividends received from corporations that are
subject to a corporate level of tax is 15%. Except in limited circumstances, this tax rate will
not apply to dividends paid to you by us on our shares, because generally we are not subject to
federal income tax on the portion of our REIT taxable income or capital gains distributed to our
stockholders. The reduced maximum federal income tax rate will apply to that portion, if any, of
dividends received by you with respect to our shares that are attributable to: (1) dividends
received by us from non-REIT corporations or other taxable REIT subsidiaries; (2) income from the
prior year with respect to which we were required to pay federal corporate income tax during the
prior year (if, for example, we did not distribute 100% of our REIT taxable income for the prior
year); or (3) the amount of any earnings and profits that were distributed by us and accumulated in
a non-REIT year.
Distributions that are designated as capital gain dividends will be taxed as long-term capital
gains (to the extent they do not exceed our actual net capital gain for the taxable year), without
regard to the period for which you held our stock. However, if you are a corporation, you may be
required to treat a portion of some capital gain dividends as ordinary income.
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If we elect to retain and pay income tax on any net long-term capital gain, you would include
in income, as long-term capital gain, your proportionate share of this net long-term capital gain.
You would also receive a refundable tax credit for your proportionate share of the tax paid by us
on such retained capital gains and you would have an increase in the basis of your shares of our
stock in an amount equal to your includable capital gains less your share of the tax deemed paid.
You may not include in your federal income tax return any of our net operating losses or
capital losses. Federal income tax rules may also require that certain minimum tax adjustments and
preferences be apportioned to you. In addition, any distribution declared by us in October,
November or December of any year on a specified date in any such month shall be treated as both
paid by us and received by you on December 31 of that year, provided that the distribution is
actually paid by us no later than January 31 of the following year.
We will be treated as having sufficient earnings and profits to treat as a dividend any
distribution up to the amount required to be distributed in order to avoid imposition of the 4%
excise tax discussed under General and Qualification as a REITAnnual Distribution
Requirements above. As a result, you may be required to treat as taxable dividends certain
distributions that would otherwise result in a tax-free return of capital. Moreover, any
deficiency dividend will be treated as a dividend (an ordinary dividend or a capital gain
dividend, as the case may be), regardless of our earnings and profits. Any other distributions in
excess of current or accumulated earnings and profits will not be taxable to you to the extent
these distributions do not exceed the adjusted tax basis of your shares of our stock. You will be
required to reduce the tax basis of your shares of our stock by the amount of these distributions
until the basis has been reduced to zero, after which these distributions will be taxable as
capital gain, if the shares of our stock are held as a capital asset. The tax basis as so reduced
will be used in computing the capital gain or loss, if any, realized upon sale of the shares of our
stock. Any loss upon a sale or exchange of shares of our stock which were held for six months or
less (after application of certain holding period rules) will generally be treated as a long-term
capital loss to the extent you previously received capital gain distributions with respect to these
shares of our stock.
Upon the sale or exchange of any shares of our stock to or with a person other than us or a
sale or exchange of all shares of our stock (whether actually or constructively owned) with us, you
will generally recognize capital gain or loss equal to the difference between the amount realized
on the sale or exchange and your adjusted tax basis in these shares of our stock. This gain will
be capital gain if you held these shares of our stock as a capital asset.
If we redeem any of your shares in us, the treatment can only be determined on the basis of
particular facts at the time of redemption. In general, you will recognize gain or loss (as
opposed to dividend income) equal to the difference between the amount received by you in the
redemption and your adjusted tax basis in your shares redeemed if such redemption results in a
complete termination of your interest in all classes of our equity securities, is a
substantially disproportionate redemption or is not essentially equivalent to a dividend with
respect to you. In applying these tests, there must be taken into account your ownership of all
classes of our equity securities (e.g., common stock, preferred stock, depositary shares and
warrants). You also must take into account any equity securities that are considered to be
constructively owned by you.
If, as a result of a redemption by us of your shares, you no longer own (either actually or
constructively) any of our equity securities or only own (actually and constructively) an
insubstantial percentage of our equity securities, then it is probable that the redemption of your
shares would be considered not essentially equivalent to a dividend and, thus, would result in
gain or loss to you. However, whether a distribution is not essentially equivalent to a dividend
depends on all of the facts and circumstances, and if you rely on any of these tests at the time of
redemption, you should consult your tax advisor to determine their application to the particular
situation.
Generally, if the redemption does not meet the tests described above, then the proceeds
received by you from the redemption of your shares will be treated as a distribution taxable as a
dividend to the extent of the allocable portion of current or accumulated earnings and profits. If
the redemption is taxed as a dividend, your adjusted tax basis in the redeemed shares will be
transferred to any other shareholdings in us that you own. If you own no other shareholdings in
us, under certain circumstances, such basis may be transferred to a related person, or it may be
lost entirely.
Gain from the sale or exchange of our shares held for more than one year is taxed at a maximum
long-term capital gain rate, which is currently 15%. Pursuant to Internal Revenue Service
guidance, we may classify portions of our capital gain dividends as gains eligible for the
long-term capital gains rate or as gain taxable to individual stockholders at a maximum rate of
25%.
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Treatment of Tax-Exempt U.S. Stockholders
Tax-exempt entities, including qualified employee pension and profit sharing trusts and
individual retirement accounts (Exempt Organizations), generally are exempt from federal income
taxation. However, they are subject to taxation on their unrelated business taxable income
(UBTI). The Internal Revenue Service has issued a published revenue ruling that dividend
distributions from a REIT to an exempt employee pension trust do not constitute UBTI, provided that
the shares of the REIT are not otherwise used in an unrelated trade or business of the exempt
employee pension trust. Based on this ruling, amounts distributed by us to Exempt Organizations
generally should not constitute UBTI. However, if an Exempt Organization finances its acquisition
of the shares of our stock with debt, a portion of its income from us will constitute UBTI pursuant
to the debt financed property rules. Likewise, a portion of the Exempt Organizations income
from us would constitute UBTI if we held a residual interest in a real estate mortgage investment
conduit.
In addition, in certain circumstances, a pension trust that owns more than 10% of our stock is
required to treat a percentage of our dividends as UBTI. This rule applies to a pension trust
holding more than 10% of our stock only if (i) the percentage of our income that is UBTI
(determined as if we were a pension trust) is at least 5%, (ii) we qualify as a REIT by reason of
the modification of the Five or Fewer Requirement that allows beneficiaries of the pension trust to
be treated as holding shares in proportion to their actuarial interests in the pension trust, and
(iii) either (a) one pension trust owns more than 25% of the value of our stock or (b) a group of
pension trusts individually holding more than 10% of the value of our stock collectively own more
than 50% of the value of our stock.
Backup Withholding and Information Reporting
Under certain circumstances, you may be subject to backup withholding at applicable rates on
payments made with respect to, or cash proceeds of a sale or exchange of, shares of our stock.
Backup withholding will apply only if you: (1) fail to provide a correct taxpayer identification
number, which if you are an individual, is ordinarily your social security number; (2) furnish an
incorrect taxpayer identification number; (3) are notified by the Internal Revenue Service that you
have failed to properly report payments of interest or dividends; or (4) fail to certify, under
penalties of perjury, that you have furnished a correct taxpayer identification number and that the
Internal Revenue Service has not notified you that you are subject to backup withholding.
Backup withholding will not apply with respect to payments made to certain exempt recipients,
such as corporations and tax-exempt organizations. You should consult with a tax advisor regarding
qualification for exemption from backup withholding, and the procedure for obtaining an exemption.
Backup withholding is not an additional tax. Rather, the amount of any backup withholding with
respect to payment to a stockholder will be allowed as a credit against such stockholders United
States federal income tax liability and may entitle such stockholder to a refund, provided that the
required information is provided to the Internal Revenue Service. In addition, withholding a
portion of capital gain distributions made to stockholders may be required for stockholders who
fail to certify their non-foreign status.
Taxation of Foreign Stockholders
The following summary applies to you only if you are a foreign person. The federal taxation
of foreign persons is a highly complex matter that may be affected by many considerations.
Except as discussed below, distributions to you of cash generated by our real estate
operations in the form of ordinary dividends, but not by the sale or exchange of our capital
assets, generally will be subject to U.S. withholding tax at a rate of 30%, unless an applicable
tax treaty reduces that tax and you file with us the required form evidencing the lower rate.
In general, you will be subject to United States federal income tax on a graduated rate basis
rather than withholding with respect to your investment in our stock if the investment is
effectively connected with your conduct of a trade or business in the United States. A corporate
foreign stockholder that receives income that is, or is treated as, effectively connected with a
United States trade or business may also be subject to the branch profits tax, which is payable in
addition to regular United States corporate income tax. The following discussion will apply to
foreign stockholders whose investment in us is not so effectively connected. We expect to withhold
United States income tax, as described below, on the gross amount of any distributions paid to you
unless (i) you file an Internal Revenue Service Form W-8ECI with us claiming that the distribution
is effectively connected or (ii) certain other exceptions apply.
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Distributions by us that are attributable to gain from the sale or exchange of a United States
real property interest will be taxed to you under the Foreign Investment in Real Property Tax Act
of 1980 (FIRPTA) as if these distributions were gains effectively connected with a United
States trade or business. Accordingly, you will be taxed at the normal capital gain rates
applicable to a U.S. stockholder on these amounts, subject to any applicable alternative minimum
tax and a special alternative minimum tax in the case of nonresident alien individuals.
Distributions subject to FIRPTA may also be subject to a branch profits tax in the hands of a
corporate foreign stockholder that is not entitled to treaty exemption.
We will be required to withhold from distributions subject to FIRPTA, and remit to the
Internal Revenue Service, 35% of designated capital gain dividends, or, if greater, 35% of the
amount of any distributions that could be designated as capital gain dividends. In addition, if we
designate prior distributions as capital gain dividends, subsequent distributions, up to the amount
of the prior distributions not withheld against, will be treated as capital gain dividends for
purposes of withholding.
For taxable years beginning after October 22, 2004, any capital gain dividend with respect to
any class of stock that is regularly traded on an established securities market will be treated
as an ordinary dividend if the foreign stockholder did not own more than 5% of such class of stock
at any time during the taxable year. Once this provision takes effect, foreign stockholders
generally will not be required to report distributions received from us on U.S. federal income tax
returns and all distributions treated as dividends for U.S. federal income tax purposes including
any capital gain dividend will be subject to a 30% U.S. withholding tax (unless reduced under an
applicable income tax treaty) as discussed above. In addition, the branch profits tax will no
longer apply to such distributions.
Unless our shares constitute a United States real property interest within the meaning of
FIRPTA or are effectively connected with a U.S. trade or business, a sale of our shares by you
generally will not be subject to United States taxation. Our shares will not constitute a United
States real property interest if we qualify as a domestically controlled REIT. We do, and expect
to continue to, qualify as a domestically controlled REIT. A domestically controlled REIT is a
REIT in which at all times during a specified testing period less than 50% in value of its shares
is held directly or indirectly by foreign stockholders. However, if you are a nonresident alien
individual who is present in the United States for 183 days or more during the taxable year and
certain other conditions apply, you will be subject to a 30% tax on such capital gains. In any
event, a purchaser of our shares from you will not be required under FIRPTA to withhold on the
purchase price if the purchased shares are regularly traded on an established securities market
or if we are a domestically controlled REIT. Otherwise, under FIRPTA, the purchaser may be
required to withhold 10% of the purchase price and remit such amount to the Internal Revenue
Service.
Backup withholding tax and information reporting will generally not apply to distributions
paid to you outside the United States that are treated as (i) dividends to which the 30% or lower
treaty rate withholding tax discussed above applies; (ii) capital gains dividends; or (iii)
distributions attributable to gain from the sale or exchange by us of U.S. real property interests.
Payment of the proceeds of a sale of stock within the United States or conducted through certain
U.S. related financial intermediaries is subject to both backup withholding and information
reporting unless the beneficial owner certifies under penalties of perjury that he or she is not a
U.S. person (and the payor does not have actual knowledge that the beneficial owner is a U.S.
person) or otherwise established an exemption. You may obtain a refund of any amounts withheld
under the backup withholding rules by filing the appropriate claim for refund with the Internal
Revenue Service.
U.S. Federal Income Taxation of Holders of Depositary Shares
Owners of our depositary shares will be treated as if you were owners of the series of
preferred stock represented by the depositary shares. Thus, you will be required to take into
account the income and deductions to which you would be entitled if you were a holder of the
underlying series of preferred stock.
Conversion or Exchange of Shares for Preferred Stock
No gain or loss will be recognized upon the withdrawal of preferred stock in exchange for
depositary shares and the tax basis of each share of preferred stock will, upon exchange, be the
same as the aggregate tax basis of the depositary shares exchanged. If you held your depositary
shares as a capital asset at the time of the exchange for shares of preferred stock, the holding
period for your shares of preferred stock will include the period during which you owned the
depositary shares.
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U.S. Federal Income and Estate Taxation of Holders of Our Debt Securities
The following is a general summary of the United States federal income tax consequences and,
in the case that you are a holder that is a non-U.S. holder, as defined below, the United States
federal estate tax consequences, of purchasing, owning and disposing of debt securities
periodically offered under one or more indentures, the forms of which have been filed as exhibits
to this registration statement (the notes). This summary assumes that you hold the notes as
capital assets. This summary applies to you only if you are the initial holder of the notes and
you acquire the notes for a price equal to the issue price of the notes. The issue price of the
notes is the first price at which a substantial amount of the notes is sold other than to bond
houses, brokers or similar persons or organizations acting in the capacity of underwriters,
placement agents or wholesalers. In addition, this summary does not consider any foreign, state,
local or other tax laws that may be applicable to us or a purchaser of the notes.
U.S. Holders
The following summary applies to you only if you are a U.S. holder, as defined below.
Definition of a U.S. Holder. A U.S. holder is a beneficial owner of a note or notes that is
for United States federal income tax purposes:
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a citizen or resident of the United States; |
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a corporation or partnership, or other entity classified as a corporation or partnership for these purposes, created or
organized in or under the laws of the United States or of any political subdivision of the United States, including any
state; |
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an estate, the income of which is subject to United States federal income taxation regardless of its source; or |
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a trust, if, in general, a U.S. court is able to exercise primary supervision over the trusts administration and one or
more U.S. persons, within the meaning of the Internal Revenue Code, has the authority to control all of the trusts
substantial decisions. |
Payments of Interest. Stated interest on the notes generally will be taxed as ordinary
interest income from domestic sources at the time it is paid or accrues in accordance with your
method of accounting for tax purposes.
Sale, Exchange or Other Disposition of Notes. The adjusted tax basis in your note acquired at
a premium will generally be your cost. You generally will recognize taxable gain or loss when you
sell or otherwise dispose of your notes equal to the difference, if any, between:
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the amount realized on the sale or other disposition, less any amount
attributable to any accrued interest, which will be taxable in the
manner described under Payments of Interest above; and |
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your adjusted tax basis in the notes. |
Your gain or loss generally will be capital gain or loss. This capital gain or loss will be
long-term capital gain or loss if at the time of the sale or other disposition you have held the
notes for more than one year. Subject to limited exceptions, your capital losses cannot be used to
offset your ordinary income.
Backup Withholding and Information Reporting. In general, backup withholding may apply to
any payments made to you of principal and interest on your note, and to payment of the proceeds of
a sale or other disposition of your note before maturity, if you are a non-corporate U.S. holder
and (1) fail to provide a correct taxpayer identification number, which if you are an individual,
is ordinarily your social security number; (2) furnish an incorrect taxpayer identification number;
(3) are notified by the Internal Revenue Service that you have failed to properly report payments
of interest or dividends; or (4) fail to certify, under penalties of perjury, that you have
furnished a correct taxpayer identification number and that the Internal Revenue Service has not
notified you that you are subject to backup withholding.
The amount of any reportable payments, including interest, made to you (unless you are an
exempt recipient) and the amount of tax withheld, if any, with respect to such payments will be
reported to you and to the Internal Revenue Service for each calendar
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year. You should consult your tax advisor regarding your qualification for an exemption from
backup withholding and the procedures for obtaining such an exemption, if applicable. The backup
withholding tax is not an additional tax and will be credited against your U.S. federal income tax
liability, provided that correct information is provided to the Internal Revenue Service.
Non-U.S. Holders
The following summary applies to you if you are a beneficial owner of a note and are not a
U.S. holder, as defined above (a non-U.S. holder).
Special rules may apply to certain non-U.S. holders such as controlled foreign corporations,
passive foreign investment companies and foreign personal holding companies. Such entities are
encouraged to consult their tax advisors to determine the United States federal, state, local and
other tax consequences that may be relevant to them.
U.S. Federal Withholding Tax. Subject to the discussion below, U.S. federal withholding tax
will not apply to payments by us or our paying agent, in its capacity as such, of principal and
interest on your notes under the portfolio interest exception of the Internal Revenue Code,
provided that:
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you do not, directly or indirectly, actually or constructively, own ten percent or more of the total combined
voting power of all classes of our stock entitled to vote; |
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you are not (1) a controlled foreign corporation for U.S. federal income tax purposes that is related,
directly or indirectly, to us through sufficient stock ownership, as provided in the Internal Revenue Code,
or (2) a bank receiving interest described in Section 881(c)(3)(A) of the Internal Revenue Code; |
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such interest is not effectively connected with your conduct of a U.S. trade or business; and |
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you provide a signed written statement, under penalties of perjury, which can reliably be related to you,
certifying that you are not a U.S. person within the meaning of the Internal Revenue Code and providing your
name and address to: |
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us or our paying agent; or |
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a securities clearing organization, bank or other financial institution that holds customers
securities in the ordinary course of its trade or business and holds your notes on your behalf and that
certifies to us or our paying agent under penalties of perjury that it, or the bank or financial institution
between it and you, has received from you your signed, written statement and provides us or our paying agent
with a copy of such statement. |
Treasury regulations provide that:
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if you are a foreign partnership, the certification requirement will generally apply to your partners, and
you will be required to provide certain information; |
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if you are a foreign trust, the certification requirement will generally be applied to you or your beneficial
owners depending on whether you are a foreign complex trust, foreign simple trust, or foreign grantor
trust as defined in the Treasury regulations; and |
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look-through rules will apply for tiered partnerships, foreign simple trusts and foreign grantor trusts. |
If you are a foreign partnership or a foreign trust, you should consult your own tax advisor
regarding your status under these Treasury regulations and the certification requirements
applicable to you.
If you cannot satisfy the portfolio interest requirements described above, payments of
interest will be subject to the 30% United States withholding tax, unless you provide us with a
properly executed (1) Internal Revenue Service Form W-8BEN claiming an exemption from or reduction
in withholding under the benefit of an applicable treaty or (2) Internal Revenue Service Form
W-8ECI
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stating that interest paid on the note is not subject to withholding tax because it is
effectively connected with your conduct of a trade or business in the United States. Alternative
documentation may be applicable in certain circumstances.
If you are engaged in a trade or business in the United States and interest on a note is
effectively connected with the conduct of that trade or business, you will be required to pay
United States federal income tax on that interest on a net income basis (although you will be
exempt from the 30% withholding tax provided the certification requirement described above is met)
in the same manner as if you were a U.S. person, except as otherwise provided by an applicable tax
treaty. If you are a foreign corporation, you may be required to pay a branch profits tax on the
earnings and profits that are effectively connected to the conduct of your trade or business in the
United States.
Sale, Exchange or other Disposition of Notes. You generally will not have to pay U.S. federal
income tax on any gain or income realized from the sale, redemption, retirement at maturity or
other disposition of your notes, unless:
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in the case of gain, you are an individual who is present in the United States for 183 days or more during the taxable year
of the sale or other disposition of your notes, and specific other conditions are met; |
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you are subject to tax provisions applicable to certain United States expatriates; or |
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the gain is effectively connected with your conduct of a U.S. trade or business. |
If you are engaged in a trade or business in the United States and gain with respect to your
notes is effectively connected with the conduct of that trade or business, you generally will be
subject to U.S. income tax on a net basis on the gain. In addition, if you are a foreign
corporation, you may be subject to a branch profits tax on your effectively connected earnings and
profits for the taxable year, as adjusted for certain items.
U.S. Federal Estate Tax. If you are an individual and are not a U.S. citizen or a resident of
the United States, as specially defined for U.S. federal estate tax purposes, at the time of your
death, your notes will generally not be subject to the U.S. federal estate tax, unless, at the time
of your death (1) you owned actually or constructively ten percent or more of the total combined
voting power of all our classes of stock entitled to vote or (2) interest on the notes is
effectively connected with your conduct of a U.S. trade or business.
Backup Withholding and Information Reporting. Backup withholding will not apply to payments
of principal or interest made by us or our paying agent, in its capacity as such, to you if you
have provided the required certification that you are a non-U.S.
holder as described in U.S.
Federal Withholding Tax above, and provided that neither we nor our paying agent have actual
knowledge that you are a U.S. holder, as described in U.S. Holders above. We or our paying
agent may, however, report payments of interest on the notes.
The gross proceeds from the disposition of your notes may be subject to information reporting
and backup withholding tax. If you sell your notes outside the United States through a non-U.S.
office of a non-U.S. broker and the sales proceeds are paid to you outside the United States, then
the U.S. backup withholding and information reporting requirements generally will not apply to that
payment. However, U.S. information reporting, but not backup withholding, will apply to a payment
of sales proceeds, even if that payment is made outside the United States, if you sell your notes
through a non-U.S. office of a broker that:
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is a U.S. person, as defined in the Internal Revenue Code, |
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derives 50% or more of its gross income in specific periods from the conduct of a trade or business in the United States, |
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is a controlled foreign corporation for U.S. federal income tax purposes, or |
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is a foreign partnership, if at any time during its tax year, one or more of its partners are U.S. persons who in the
aggregate hold more than 50% of the income or capital interests in the partnership, or the foreign partnership is engaged
in a U.S. trade or business, unless the broker has documentary evidence in its files that you are a non-U.S. person and
certain other conditions are met or you otherwise establish an exemption. If you receive
payments of the proceeds of a sale of your notes to or through a U.S. |
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office of a broker, the payment is subject to both U.S. backup withholding and information
reporting unless you provide a Form W-8BEN certifying that you are a non-U.S. person or you
otherwise establish an exemption. |
You should consult your own tax advisor regarding application of backup withholding in your
particular circumstance and the availability of and procedure for obtaining an exemption from
backup withholding. Any amounts withheld under the backup withholding rules from a payment to you
will be allowed as a refund or credit against your U.S. federal income tax liability, provided the
required information is furnished to the Internal Revenue Service.
U.S. Federal Income and Estate Taxation of Holders of Our Warrants
Exercise of Warrants
You will not generally recognize gain or loss upon the exercise of a warrant. Your basis in
the debt securities, preferred stock, depositary shares or common stock, as the case may be,
received upon the exercise of the warrant will be equal to the sum of your adjusted tax basis in
the warrant and the exercise price paid. Your holding period in the debt securities, preferred
stock, depositary shares or common stock, as the case may be, received upon the exercise of the
warrant will not include the period during which the warrant was held by you.
Expiration of Warrants
Upon the expiration of a warrant, you will recognize a capital loss in an amount equal to your
adjusted tax basis in the warrant.
Sale or Exchange of Warrants
Upon the sale or exchange of a warrant to a person other than us, you will recognize gain or
loss in an amount equal to the difference between the amount realized on the sale or exchange and
your adjusted tax basis in the warrant. Such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if the warrant was held for more than one year. Upon the sale of
the warrant to us, the Internal Revenue Service may argue that you should recognize ordinary income
on the sale. You are advised to consult your own tax advisors as to the consequences of a sale of
a warrant to us.
Potential Legislation or Other Actions Affecting Tax Consequences
Current and prospective securities holders should recognize that the present federal income
tax treatment of an investment in us may be modified by legislative, judicial or administrative
action at any time and that any action may affect investments and commitments previously made. The
rules dealing with federal income taxation are constantly under review by persons involved in the
legislative process and by the Internal Revenue Service and the Treasury Department, resulting in
revisions of regulations and revised interpretations of established concepts as well as statutory
changes. Revisions in federal tax laws and interpretations of these laws could adversely affect
the tax consequences of an investment in us.
39
PLAN OF DISTRIBUTION
We may sell the securities:
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through underwriters or dealers; |
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- |
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through agents; |
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- |
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directly to purchasers; or |
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- |
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through a combination of any of these methods of sale. |
Any underwriter or agent involved in the offer and sale of the securities will be named in the
applicable prospectus supplement. Direct sales to investors or our stockholders may be
accomplished through subscription offerings or through stockholder purchase rights distributed to
stockholders. In connection with subscription offerings or the distribution of stockholder
purchase rights to stockholders, if all of the underlying securities are not subscribed for, we may
sell any unsubscribed securities to third parties directly or through underwriters or agents. In
addition, whether or not all of the underlying securities are subscribed for, we may concurrently
offer additional securities to third parties directly or through underwriters or agents. If
securities are to be sold through stockholder purchase rights, the stockholder purchase rights will
be distributed as a dividend to the stockholders for which they will pay no separate consideration.
The prospectus supplement with respect to the offer of securities under stockholder purchase
rights will set forth the relevant terms of the stockholder purchase rights, including:
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whether common stock, preferred stock or some other type of capital stock, or warrants for those
securities, will be offered under the stockholder purchase rights; |
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the number of those securities or warrants that will be offered under the stockholder purchase rights; |
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the period during which and the price at which the stockholder purchase rights will be exercisable; |
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the number of stockholder purchase rights then outstanding; |
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any provisions for changes to or adjustments in the exercise price of the stockholder purchase rights; and |
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any other material terms of the stockholder purchase rights. |
Underwriters may offer and sell the securities at:
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fixed prices, which may be changed; |
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prices related to the prevailing market prices at the time of sale; or |
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negotiated prices. |
We also may, from time to time, authorize underwriters acting as our agents to offer and sell
the securities upon the terms and conditions as are set forth in the applicable prospectus
supplement. In connection with the sale of securities, underwriters may be deemed to have received
compensation from us in the form of underwriting discounts or commissions and may also receive
commissions from purchasers of securities for whom they may act as agent. Underwriters may sell
securities to or through dealers, and these dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters or commissions from the purchasers for
whom they may act as agent, or both. The applicable prospectus supplement will disclose:
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any underwriting compensation we pay to underwriters or agents in connection with the offering of securities; and |
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any discounts, concessions or commissions allowed by underwriters to participating dealers. |
Under the Securities Act, underwriters, dealers and agents participating in the distribution
of the securities may be deemed to be underwriters and any discounts and commissions received by
them and any profit realized by them on resale of the securities may
40
be deemed to be underwriting discounts and commissions. We may agree to indemnify underwriters,
dealers and agents against civil liabilities, including liabilities under the Securities Act, and
to make contribution to them in connection with those liabilities.
If indicated in the applicable prospectus supplement, we may also offer and sell securities
through one or more firms that will remarket the securities. These firms may act as principals for
their own account or as our agents. These firms may be deemed to be underwriters in connection
with the securities being remarketed. We may agree to indemnify these firms against liabilities,
including liabilities under the Securities Act.
If indicated in the applicable prospectus supplement, we will authorize dealers acting as our
agents to solicit offers by institutions to purchase securities at the offering price set forth in
that prospectus supplement under delayed delivery contracts providing for payment and delivery on
the dates stated in the prospectus supplement. Each contract will be for an amount not less than,
and the aggregate principal amount of securities sold under contracts will be not less nor more
than, the respective amounts stated in the applicable prospectus supplement. Institutions with
whom contracts, when authorized, may be made include commercial and savings banks, insurance
companies, pension funds, investment companies, educational and charitable institutions, and other
institutions but will in all cases be subject to our approval. Contracts will not be subject to
any conditions except:
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the purchase by an institution of the securities covered by its
contracts will not at the time of delivery be prohibited under the
laws of any jurisdiction in the United States to which the institution
is subject; and |
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if the securities are being sold to underwriters, we will have sold to
them the total principal amount of the securities less the principal
amount of the securities covered by contracts. |
Agents and underwriters will have no responsibility in respect of the delivery or performance
of contracts.
Some of the underwriters and their affiliates may engage in transactions with or perform
services for us in the ordinary course of business.
LEGAL OPINIONS
The validity of the securities offered will be passed upon by Shumaker, Loop & Kendrick, LLP,
Toledo, Ohio. Certain tax matters will be passed upon for us by Arnold & Porter LLP, Washington,
D.C. Any underwriters will be represented by their own legal counsel.
EXPERTS
Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated
financial statements and schedules included in our Current Report on Form 8-K dated May 10, 2006,
for the year ended December 31, 2005, and managements assessment of the effectiveness of our
internal control over financial reporting as of December 31, 2005 included in our Annual Report on
Form 10-K for the year ended December 31, 2005, as set forth in their reports, which are
incorporated by reference in this prospectus and elsewhere in the registration statement. Our
financial statements and schedules and managements assessment are incorporated by reference in
reliance on Ernst & Young LLPs reports, given on their authority as experts in accounting and
auditing.
41
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
Set forth below is a statement of the estimated expenses, other than underwriting discounts
and commissions, to be incurred by the Company in connection with a distribution of an assumed
amount of $1,000,000,000 of securities registered under this Registration Statement. The assumed
amount has been used to demonstrate the expenses of an offering and does not represent an estimate
of the amount of securities that may be offered or sold because such amount is unknown at this
time.
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SEC filing fees |
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$ |
107,000 |
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Legal fees and expenses |
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360,000 |
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Accounting fees and expenses |
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150,000 |
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Trustee fees and expenses |
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120,000 |
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Printing expenses |
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300,000 |
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Miscellaneous |
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30,000 |
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TOTAL |
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$ |
1,067,000 |
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Item 15. Indemnification of Officers and Directors.
Section 7 of our Second Restated Certificate of Incorporation, as amended, provides that our
directors will not be personally liable to us or our stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (1) for any breach of the directors duty of
loyalty to us or our stockholders, (2) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (3) under Section 174 of the General
Corporation Law of Delaware (the GCL), or (4) for any transaction from which the director derived
any improper personal benefit. Section 7 also provides that if the GCL is amended to further
eliminate or limit the personal liability of directors, then the liability of our directors will be
eliminated or limited to the extent permitted by the GCL, as so amended. The Second Restated
Certificate of Incorporation also states that any repeal or modification of the foregoing paragraph
by our stockholders will not adversely affect any right or protection of our directors existing at
the time of such repeal or modification.
Our Amended and Restated By-Laws provide that we will indemnify, to the extent permitted by
the GCL, any current or past director or officer of the Company who was or is a party or is
threatened to be made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact that he or she is
or was a director, officer, employee or agent of the Company, or is or was serving at our request
as a director, officer, employee, trustee, partner, agent or fiduciary of another corporation,
partnership, joint venture, employee benefit plan, trust or other enterprise, against expenses
(including attorneys fees), judgments, fines, penalties and amounts paid in settlement, actually
and reasonably incurred by him or her in connection with such threatened, pending or completed
action, suit or proceeding. Our Amended and Restated By-Laws further obligate us to pay all
expenses incurred by a current or past director or officer in defending or investigating a
threatened or pending action, suit or proceeding of the nature referenced above in advance of the
final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf
of such person to repay such amount if it shall ultimately be determined that he or she is not
entitled to be indemnified by us as provided above. Under these provisions, however, we are not
obligated to indemnify any person in connection with a proceeding initiated by such person unless
such proceeding is in connection with a claim by such person to enforce rights as stated above or
was authorized or consented to by our Board of Directors.
We have entered into indemnification agreements with our directors, executive officers and
officers to assure them that they will be indemnified to the extent permitted by the Second
Restated Certificate of Incorporation, Amended and Restated By-Laws and Delaware law. The
indemnification agreements cover, subject to certain exceptions and limitations, any and all
expenses, judgments, fines, penalties, and amounts paid in settlement, provide for the prompt
advancement of all expenses incurred in connection with any threatened, pending or completed
action, suit or proceeding, or any inquiry or investigation, and obligate the director, executive
officer or officer to reimburse us for all amounts so advanced if it is subsequently determined, as
provided in the indemnification agreements, that the director, executive officer or officer is not
entitled to indemnification.
Delaware law requires indemnification in cases where a director or officer has been successful
in defending any claim or proceeding and permits indemnification, even if a director or officer has
not been successful, in cases where the director or officer acted in good faith and in a manner
that he or she reasonably believed was in, or not opposed to, the best interests of the
corporation. To be indemnified with respect to criminal proceedings, the director or officer must
also have had no reasonable cause to believe that
his or her conduct was unlawful. In the case of a claim by a third party (i.e., a party other than
the corporation), Delaware law permits indemnification for expenses (including attorneys fees),
judgments, fines, and amounts paid in settlement. In the case of a claim by, or in the right of,
the corporation (including stockholder derivative suits), indemnification under the GCL is limited
to expenses (including attorneys fees) and no indemnification of expenses is permitted if the
director or officer is adjudged liable to the corporation unless a court determines that, despite
such adjudication but in view of all of the circumstances, such indemnification is nonetheless
proper. Delaware law also permits the advancement of expenses to directors and officers upon
receipt of an undertaking to repay all amounts so advanced if it is ultimately determined that the
director or officer has not met the applicable standard of conduct and is, therefore, not entitled
to be indemnified.
We maintain indemnification insurance that provides for reimbursement of indemnification
payments properly and lawfully made to our directors and officers and coverage, subject to certain
exceptions and limitations, for directors and officers in situations where we cannot or do not
indemnify them.
Item 16. Exhibits
1 |
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Underwriting Agreement.* |
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3.1 |
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Second Restated Certificate of Incorporation of the Company (filed with the Commission as
Exhibit 3.1 to the Companys Form 10-K filed March 20, 2000, and incorporated herein by
reference thereto). |
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3.2 |
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Certificate of Designation, Preferences and Rights of Junior Participating Preferred Stock,
Series A, of the Company (filed with the Commission as Exhibit 3.1 to the Companys Form 10-K
filed March 20, 2000, and incorporated herein by reference thereto). |
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3.3 |
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Certificate of Designations, Preferences and Rights of Series C Cumulative Convertible
Preferred Stock of the Company (filed with the Commission as Exhibit 3.1 to the Companys Form
10-K filed March 20, 2000, and incorporated herein by reference thereto). |
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3.4 |
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Certificate of Amendment of Second Restated Certificate of Incorporation of the Company
(filed with the Commission as Exhibit 3.1 to the Companys Form 10-K filed March 20, 2000, and
incorporated herein by reference thereto). |
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3.5 |
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Certificate of Amendment of Second Restated Certificate of Incorporation of the Company
(filed with the Commission as Exhibit 3.1 to the Companys Form 8-K filed June 13, 2003, and
incorporated herein by reference thereto). |
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3.6 |
|
Certificate of Designation of 7 7/8% Series D Cumulative Redeemable Preferred Stock of the
Company (filed with the Commission as Exhibit 2.5 to the Companys Form 8-A/A filed July 8,
2003, and incorporated herein by reference thereto). |
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3.7 |
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Certificate of Designation of 6% Series E Cumulative Convertible and Redeemable Preferred
Stock of the Company (filed with the Commission as Exhibit 3.1 to the Companys Form 8-K filed
October 1, 2003, and incorporated herein by reference thereto). |
|
3.8 |
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Certificate of Designation of 7 5/8% Series F Cumulative Redeemable Preferred Stock of the
Company (filed with the Commission as Exhibit 2.5 to the Companys Form 8-A filed September
10, 2004, and incorporated herein by reference thereto). |
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3.9 |
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Amended and Restated By-Laws of the Company (filed with the Commission as Exhibit 3.1 to the
Companys Form 8-K filed September 8, 2004, and incorporated herein by reference thereto). |
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4.1 |
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The Company, by signing this Report, agrees to furnish the Securities and Exchange Commission
upon its request a copy of any instrument which defines the rights of holders of long-term
debt of Company authorizes a total amount of securities not in excess of 10% of the total
assets of the Company. |
II-2
4.2 |
|
Indenture dated as of April 17, 1997 between the Company and Fifth Third Bank (filed with the
Commission as Exhibit 4.1 to the Companys Form 8-K filed April 21, 1997, and incorporated
herein by reference thereto). |
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4.3 |
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First Supplemental Indenture, dated as of April 17, 1997, to Indenture dated as of April 17,
1997, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.2 to
the Companys Form 8-K filed April 21, 1997, and incorporated herein by reference thereto). |
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4.4 |
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Second Supplemental Indenture, dated as of March 13, 1998, to Indenture dated as of April 17,
1997, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.2 to
the Companys Form 8-K filed March 11, 1998, and incorporated herein by reference thereto). |
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4.5 |
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Third Supplemental Indenture, dated as of March 18, 1999, to Indenture dated as of April 17,
1997, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.2 to
the Companys Form 8-K filed March 17, 1999, and incorporated herein by reference thereto). |
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4.6 |
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Fourth Supplemental Indenture, dated as of August 10, 2001, to Indenture dated as of April
17, 1997, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.2
to the Companys Form 8-K filed August 9, 2001, and incorporated herein by reference thereto). |
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4.7 |
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Supplemental Indenture No. 5, dated September 10, 2003, to Indenture dated as of April 17,
1997, between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.1 to
the Companys Form 8-K filed September 24, 2003, and incorporated herein by reference
thereto). |
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4.8 |
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Amendment No. 1, dated September 16, 2003, to Supplemental Indenture No. 5, dated September
10, 2003, to Indenture dated as of April 17, 1997, between the Company and Fifth Third Bank
(filed with the Commission as Exhibit 4.3 to the Companys Form 8-K filed September 24, 2003,
and incorporated herein by reference thereto). |
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4.9 |
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Indenture for Senior Debt Securities, dated as of September 6, 2002, between the Company and
Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Companys Form 8-K filed
September 9, 2002, and incorporated herein by reference thereto). |
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4.10 |
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Supplemental Indenture No. 1, dated as of September 6, 2002, to Indenture for Senior Debt
Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed
with the Commission as Exhibit 4.2 to the Companys Form 8-K filed September 9, 2002, and
incorporated herein by reference thereto). |
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4.11 |
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Amendment No. 1, dated March 12, 2003, to Supplemental Indenture No. 1, dated as of September
6, 2002, to Indenture for Senior Debt Securities, dated as of September 6, 2002, between the
Company and Fifth Third Bank (filed with the Commission as Exhibit 4.1 to the Companys Form
8-K filed March 14, 2003, and incorporated herein by reference thereto). |
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4.12 |
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Supplemental Indenture No. 2, dated as of September 10, 2003, to Indenture for Senior Debt
Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed
with the Commission as Exhibit 4.2 to the Companys Form 8-K filed September 24, 2003, and
incorporated herein by reference thereto). |
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4.13 |
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Amendment No. 1, dated September 16, 2003, to Supplemental Indenture No. 2, dated as of
September 10, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002,
between the Company and Fifth Third Bank (filed with the Commission as Exhibit 4.4 to the
Companys Form 8-K filed September 24, 2003, and incorporated herein by reference thereto). |
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4.14 |
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Supplemental Indenture No. 3, dated as of October 29, 2003, to Indenture for Senior Debt
Securities, dated as of September 6, 2002, between the Company and Fifth Third Bank (filed
with the Commission as Exhibit 4.1 to the Companys Form 8-K filed October 30, 2003, and
incorporated herein by reference thereto). |
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4.15 |
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Amendment No. 1, dated September 13, 2004, to Supplemental Indenture No. 3, dated as of
October 29, 2003, to Indenture for Senior Debt Securities, dated as of September 6, 2002,
between the Company and The Bank of New |
II-3
|
|
York Trust Company, N.A., as successor to Fifth Third Bank (filed with the Commission
as Exhibit 4.1 to the Companys Form 8-K filed September 13, 2004, and incorporated
herein by reference thereto). |
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4.16 |
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Supplemental Indenture No. 4, dated as of April 27, 2005, to Indenture for Senior Debt
Securities, dated as of September 6, 2002, between the Company and The Bank of New York Trust
Company, N.A. (filed with the Commission as Exhibit 4.1 to the Companys Form 8-K filed April
28, 2005, and incorporated herein by reference thereto). |
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4.17 |
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Supplemental Indenture No. 5, dated as of November 30, 2005, to Indenture for Senior Debt
Securities, dated as of September 6, 2002, between the Company and The Bank of New York Trust
Company, N.A. (filed with the Commission as Exhibit 4.1 to the Companys Form 8-K filed
November 30, 2005, and incorporated herein by reference thereto). |
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4.18 |
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Form of Indenture for Senior Subordinated Debt Securities (filed with the Commission as
Exhibit 4.9 to the Companys Form S-3 (File No. 333-73936) filed November 21, 2001, and
incorporated herein by reference thereto). |
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4.19 |
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Form of Indenture for Junior Subordinated Debt Securities (filed with the Commission as
Exhibit 4.10 to the Companys Form S-3 (File No. 333-73936) filed November 21, 2001, and
incorporated herein by reference thereto). |
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4.20 |
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Form of Indenture for Senior Debt Securities. |
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4.21 |
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Form of Warrant Agreement.* |
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4.22 |
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Form of Deposit Agreement, including form of Health Care REIT, Inc. Depositary Receipt for
Health Care REIT, Inc. Depositary Shares.* |
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5 |
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Opinion of Shumaker, Loop & Kendrick, LLP. |
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8 |
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Tax Opinion of Arnold & Porter LLP. |
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12 |
|
Statement Regarding Computation of Ratio of Earnings to Fixed Changes and Ratio of Earnings
to Combined Fixed Charges and Preferred Stock Dividends (filed with the Commission as Exhibit
12 to the Companys Form 10-Q filed May 10, 2006, and incorporated herein by reference
thereto). |
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23.1 |
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Consent of Ernst & Young LLP, independent registered public accounting firm. |
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23.2 |
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Consent of Shumaker, Loop & Kendrick, LLP to the use of their opinion as an exhibit to this
Registration Statement is included in their opinion filed herewith as Exhibit 5. |
|
24 |
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Powers of Attorney. |
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25 |
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Statement of Eligibility of Trustee.* |
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* |
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To be filed as an exhibit to a Form 8-K and incorporated herein by reference or by post-effective
amendment. |
Item 17. Undertakings
(A) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement:
(i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
II-4
information set forth in the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the Calculation of
Registration Fee table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change to such information in
the Registration Statement;
provided, however, that paragraphs (A)(1)(i), (A)(1)(ii) and (A)(1)(iii) of this section do not
apply if the information required to be included in a post-effective amendment by those paragraphs
is contained in reports filed with or furnished to the Commission by the Registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by
reference in the Registration Statement, or is contained in a form of prospectus filed pursuant to
Rule 424(b) that is a part of the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under the Securities Act of 1933 to any
purchaser:
(i) Each prospectus filed by the Registrant pursuant to Rule 424(b)(3) shall be deemed to be
part of the Registration Statement as of the date the filed prospectus was deemed part of and
included in the Registration Statement; and
(ii) Each prospectus required to be filed pursuant to Rule 424(b)(2), (b)(5), or (b)(7) as
part of a registration statement in reliance on Rule 430B relating to an offering made pursuant to
Rule 415(a)(1)(i), (vii), or (x) for the purpose of providing the information required by Section
10(a) of the Securities Act of 1933 shall be deemed to be part of and included in the registration
statement as of the earlier of the date such form of prospectus is first used after effectiveness
or the date of the first contract of sale of securities in the offering described in the
prospectus. As provided in Rule 430B, for liability purposes of the issuer and any person that is
at that date an underwriter, such date shall be deemed to be a new effective date of the
registration statement relating to the securities in the registration statement to which that
prospectus relates, and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a document
incorporated or deemed incorporated by reference into the registration statement or prospectus that
is part of the registration statement will, as to a purchaser with a time of contract of sale prior
to such effective date, supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or made in any such document
immediately prior to such effective date;
(5) That, for the purpose of determining liability of the Registrant under the Securities Act
of 1933 to any purchaser in the initial distribution of the securities, the undersigned Registrant
undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this
Registration Statement, regardless of the underwriting method used to sell the securities to the
purchaser, if the securities are offered or sold to such purchaser by means of any of the following
communications, the undersigned Registrant will be a seller to the purchaser and will be considered
to offer or sell such securities to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned Registrant relating to the
offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the
undersigned Registrant or used or referred to by the undersigned Registrant;
(iii) The portion of any other free writing prospectus relating to the offering containing
material information about the undersigned Registrant or its securities provided by or on behalf of
the undersigned Registrant; and
(iv) Any other communication that is an offer in the offering made by the undersigned
Registrant to the purchaser.
II-5
(B) The undersigned Registrant hereby undertakes that, for purposes of determining any liability
under the Securities Act of 1933, each filing of the Registrants annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in
the Registration Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(C) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions or otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(D) The undersigned Registrant hereby undertakes to file an application for the purpose of
determining the eligibility of the Trustee to act under subsection (a) of Section 310 of the Trust
Indenture Act in accordance with the rules and regulations prescribed by the Commission under
section 305(b)(2) of the Trust Indenture Act.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it
has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and
has duly caused this Registration Statement to be signed on its behalf by the undersigned thereunto
duly authorized in the City of Toledo, State of Ohio, on May 12, 2006.
HEALTH CARE REIT, INC.
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By: |
/s/ George L. Chapman
|
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George L. Chapman |
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Chairman of the Board and Chief
Executive Officer
(Principal Executive Officer) |
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KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints George L. Chapman his or her attorney-in-fact with power of substitution for him in any
and all capacities, to sign any amendments, supplements, subsequent registration statements
relating to the offering to which this Registration Statement relates, or other instruments he or
she deems necessary or appropriate, and to file the same, with exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying
and confirming all that said attorney-in-fact or his substitute may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has
been signed below by the following persons in the capacities and on the dates indicated.
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Signature |
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Title |
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Date |
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/s/ William C. Ballard, Jr.*
William C. Ballard, Jr.
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Director
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May 4, 2006 |
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/s/ Pier C. Borra*
Pier C. Borra
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Director
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May 4, 2006 |
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/s/ Thomas J. DeRosa*
Thomas J. DeRosa
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Director
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May 4, 2006 |
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/s/ Jeffrey H. Donahue*
Jeffrey H. Donahue
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Director
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May 4, 2006 |
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/s/ Peter J. Grua*
Peter J. Grua
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Director
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May 4, 2006 |
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/s/ Sharon M. Oster*
Sharon M. Oster
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Director
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May 4, 2006 |
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/s/ R. Scott Trumbull*
R. Scott Trumbull
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Director
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May 4, 2006 |
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/s/ George L. Chapman
George L. Chapman
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Chairman, Chief Executive Officer and Director
(Principal Executive Officer)
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May 4, 2006 |
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/s/ Scott A. Estes*
Scott A. Estes
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Senior Vice President and Chief Financial Officer
(Principal Financial Officer)
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May 4, 2006 |
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/s/ Paul D. Nungester, Jr.*
Paul D. Nungester, Jr.
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Vice President and Controller
(Principal Accounting Officer)
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May 4, 2006 |
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*
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/s/ George L. Chapman
George L. Chapman
Attorney-in-Fact
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Dated: May 12, 2006 |
II-7